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Lafarge Releases Fourth-Quarter Results


Lafarge reported a net loss $51.1 million in the fourth quarter of 2010, but the news was not all bad for the cement and aggregates producer. Sales increased for the full year and quarter, helped by improved cement and aggregates volume trends, favorable foreign exchange, and new capacities in Brazil, according to the company.

Bruno Lafont, chairman and chief executive officer of Lafarge, said: “While 2010 was a tough year for the cement sector as a whole, I am encouraged by the return to cement volume growth in the fourth quarter and the successful cash generation accomplishments of our operating teams in the last two years. The steps we have taken in 2010, ranging from structural cost savings to strategic investments in growing markets such as Brazil, will provide the foundation for further improvement and growth as we enter 2011. It will also allow the Group to accelerate deleveraging and reduce its debt by at least two billion euro in 2011. We will get the full benefits from volume growth thanks to our new cement capacities and the overall quality and strength of our portfolio of assets."

By industry sector, Lafarge reported:

Cement

  • Sales were up 10 percent in the quarter and up 2 percent for the year, reflecting the impact of recovering volumes and foreign exchange.
  • Volumes increased 2 percent in the quarter and were down 4 percent year-to-date, with volume growth in North America and Latin America helping to partially offset declines in other regions.
  • Pricing remained resilient in the face of difficult market conditions.
  • Costs in the fourth quarter benefited from the reversal of a regulatory fee on past purchases of raw materials in Egypt.
  • Cost reduction program strongly benefited all regions.
  • Current operating income was down 1 percent in the quarter and down 5 percent year-to-date due to the inflationary impact of energy and other costs.

Aggregates and Concrete

  • Sales moved up 7 percent in the quarter and up 1 percent for the year due to volume growth for aggregates, slower rates of volume decline in the ready mix concrete business, and favorable foreign exchange.
  • Operating income margins improved both year-to-date and in the quarter.
  • Current operating income grew 15 percent in the quarter and 12 percent year-to-date, reflecting the impact of improved sales, favorable foreign exchange, and strong cost reduction measures.

Gypsum

  • Sales were up 10 percent in the quarter and up 6 percent year-to-date as volume growth compensated for lower pricing.
  • Current operating income was higher for the quarter and year-to-date as market activity improved.

The Group estimates cement demand in its markets to grow between 3 to 6 percent in 2011 versus 2010. Emerging markets continue to be the main driver of demand and Lafarge benefits from its well-balanced geographic spread of high quality assets. For developed markets, the Group expects that demand will continue to slowly recover.

Overall pricing is expected to move higher for the year, although levels of pricing movements will vary by market.