Lafarge aims to cut debt below 9 bln eur in 2014

Reuters, Friday 26 Jul 2013

French cement maker striving to regain investment grade status after debt from 2008 purchase of Egypt's Orascom led to "junk" ratings from S&P and Moody's

Lafarge confirmed its goal to shrink debt below 10 billion euros ($13 billion) this year and said it would aim to cut it further below 9 billion in 2014 as it seeks to regain its investment grade.

The French cement maker trimmed its forecast for the cement market, however, saying it now expected growth of between 0 and 3 percent this year, instead of between 1 and 4 percent.

The revised forecast reflects bad weather conditions in the period but also assumes more positive trends in the second half of the year, Chief Executive Bruno Lafont told reporters on Friday.

Earnings before interest, taxation, depreciation and amortization declined 8 percent to 922 million euros in the second quarter while sales fell 3 percent to 4.11 billion, as growth in emerging markets only partly offset weak mature markets in North America and Western Europe.

Net profit totalled 201 million euros, compared with 39 million in the same period a year earlier when earnings were hit by exceptional items.

"Soft results but not as bad as some investors feared," Bank Of America Merrill Lynch analysts wrote in a note to clients.

"Full-year volume guidance for the group market was revised ... to account for weaker volume trends in North America, Middle East and Latin America. This should not surprise investors in our view."

Lafarge has been selling assets and cutting costs to reduce its debt pile and regain its investment grade status. The debt reduction goal in 2014 will be achieved through further asset disposals and cost savings, Lafont said.

The size of its debt results mainly from the 2008 purchase of Egypt's Orascom and has led to "junk" ratings from agencies Standard & Poor's and Moody's.

Net debt at the end of June was 11.88 billion euros, a reduction of 700 million compared with a year earlier, Lafarge said.

Shares in Lafarge, which have gained around 5 percent in the last six months, closed at 49.31 euros on Thursday.

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