Lafarge sees first signs of recovery in Europe

725 Lafarge has posted another drop in quarterly sales and profit, saying this is mainly due to adverse exchange rates and its shrinking scale as it divests assets to trim its debt.

Lafarge's earnings before interest, taxation, depreciation and amortisation (EBITDA) fell 2% to €812 million in the second quarter as sales fell 5% to €3.37 billion.

The Paris, France-based global group, which is preparing to merge with Swiss company 680 Holcim, is said to have stuck to its full-year targets while seeing the first signs of recovery in Europe.

Deleveraging actions continued with €1.1 billion of divestments proceeds secured since the beginning of the year, of which €400 million were received in the first half. Net debt at the end of June 2014 decreased €1.1 billion compared to Q2 last year.

This is reported in Lafarge’s Q2 results, with the company saying its planned tie-up with Holcim is well on track and that its banks would give detailed information “in the coming days”" to potential buyers regarding the assets it plans to sell to appease competition regulators' concern over the mega-merger.

Lafarge and Holcim are working on a merger that would create the world’s top cement group with $44 billion (€33 billion) in annual sales and would be the industry's biggest tie-up.

According to 6393 Reuters: “The move would help the pair slash costs, trim debt and better cope with the rising energy prices and sluggish demand that have hurt the sector since the 2008 economic crisis. The pair hope to close the deal by the first half of 2015 and have kicked off a multi-billion series of asset sales to win approval from competition regulators.”

Bruno Lafont, chairman and chief executive officer of Lafarge, says: “We have experienced another quarter of solid organic growth. Our margin improvement reflects our success in reducing costs and promoting our innovative products and solutions,” says “We remain fully mobilised on achieving our 2014 objective to generate more than €600 million thanks to our cost cutting and innovation actions and aim at reducing our net debt below €9 billion by the end of the year.

“We confirm our outlook of cement demand growth in our markets of between 2-5% in 2014: North America is improving, growth continues in emerging markets, and we see the first signs of recovery in Europe.

“At the same time, our planned merger to create LafargeHolcim is well on track and we confirm our expectation to complete it in the first half of 2015.”

Lafont pointed to Poland, Britain and Greece as countries showing improvement, although the construction sector remains subdued in France, weighing on aggregates and ready-mix volumes.