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Lafarge keeps savings, debt goals despite currency hit

February 19, 2014

Reuters -1

French cement maker Lafarge stuck to its cost savings and debt reduction targets on Wednesday, betting on continued growth in emerging markets, a recovery in North America and stabilisation in Europe.

A strong euro and volatile currencies in emerging markets slashed nearly six percentage points off sales and profit growth last year, but the group said its geographic spread and solid underlying demand for cement, driven by urbanisation, would help counterbalance that impact this year.

According to MSCI data, Lafarge is the French blue-chip company with the highest exposure to emerging markets. These account for close to 60 per cent of its sales, chiefly in the Middle East and Africa, where political instability and volatile currencies can crimp revenue.

Shares in Lafarge were 3.1 per cent higher at 54.24 euros, outperforming a flat STOXX Europe 600 construction and materials sector index.

Rival Holcim, which will release results on February 26, was little changed. "Fourth-quarter results are slightly below expectations, hit by the currency effect, but guidance sounds reassuring," wrote Natixis analysts, who have a "buy" recommendation on the stock.

Lafarge expects the cement market to expand between two and five per cent this year, led by four to seven per cent growth in North America, Middle East and Africa.

It said it planned to expand existing production capacity in sub-Saharan Africa, mainly Nigeria, Tanzania and Zambia, to address rising demand.

"Cement is a product of first necessity," chief executive Bruno Lafont said. "I'm very confident in how things are going in emerging markets," he added, noting that demographics and urbanisation trends supported Lafarge's businesses in emerging markets despite "hiccups" now and then.

Mr Lafont also said he saw market conditions stabilising in Europe this year, thanks to signs of improvement in Spain and Greece. He said he expected sales to dip slightly in France this year but forecast a "rather positive market" in the UK.

The group kept its dividend stable at one euro per share and reaffirmed its target to achieve at least 600 million euros of EBITDA this year from cost reduction and innovation measures, and to reduce net debt to below nine billion.

Net debt stood at 10.3 billion euros as of December 31 and, since then, the group has already secured 380 million euros from divestments.

The group is in the process of selling non-core assets to focus on cement and concrete.

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Source: Business Daily (Kenya)

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