Despite the increase, the growth was not sufficient to offset the declines in the first quarter so the company recorded a decline in both sales and operating income for the first half of 2010, compared to the previous year. Sales for the first six months were down 3% to €7.71billion, while operating income dropped 5% to €1.07billion.
“In a second quarter marked by a mixed economic environment, with volume decreases in a number of markets but with early signs of improvement in some developed countries, Lafarge achieved a solid operational performance and firm margins,” said Lafarge chairman and CEO Bruno Lafont. “Divestments of non-strategic assets continued and we should exceed €500million in 2010, going beyond our initial target.
“Halfway through the year, given the uncertain pace of economic recovery and the contrasted situation from one country to another, we have readjusted our 2010 full year market outlook. In this context, the group is limiting 2011 investments to €1billion to further reduce debt and enhance its flexibility.
“Despite this caution due to the current context, we confirm our confidence in the underlying fundamentals of cement demand, driven by urbanisation, demographics and infrastructure needs, which represents the platform of future growth of the group. Our portfolio, supported by the significant capacities we have added to emerging markets over the past years, is well positioned to capture this growth.”
Based on second quarter activity, Lafarge has said that it has lowered its full year volume estimates for Western and Eastern Europe and increased its volume estimates for North America. Continued market growth is expected in the Asia, Latin America and Middle East Africa regions.
Due to supply-demand evolution in some countries, volume trends for the group may temporarily be impacted and Lafont said that the company is taking action to mitigate the impact of these situations.
“Structural 2010 cost savings should exceed our target of €200million for the year,” he said. “Pricing is expected to remain solid through the year, despite lower prices in some markets. The group will take additional actions for 2011 to further reduce its debt level, including a new target of more than €200million structural cost savings and the reduction of capital expenditures to no more than €1billion.”
