LAFARGE, THE world’s biggest cement-maker, unveiled plans to cut costs by €1.3 billion and boost profits over the next four years as it seeks to slash its debt and regain an investment-grade rating.
Lafarge wants to bring its net debt below €10 billion as early as possible next year, down from €12.4 billion at the end of March.
Lafarge has been cutting costs and selling assets in an effort to offset stagnating construction markets hit by the economic slowdown. It has also cut its dividend in half for 2011.
The group is now targeting savings of at least €400 million this year, and at least €350 million in 2013. It also plans to shun major acquisitions in the period through 2015, and tighten the reins on capital expenditure.
“After several years of geographic expansion, reshaping the group’s businesses, Lafarge is starting a new stage in its development that will allow it to fully extract the value of its assets by focusing on its existing assets,” said chief executive Bruno Lafont.
He added that Lafarge would again find “room for manoeuvre in terms of dividend growth and the resumption of investments” once its financial structure stabilised.
The company expects earnings before interest, tax, depreciation and amortisation (EBITDA) to improve by at least €450 million over the four years of its new strategic plan through sales growth and higher margins, helping EBITDA rise by €1.75 billion overall by 2015.
Lafarge sees continuing growth in demand for cement, driven mainly by emerging markets, and like German peer HeidelbergCement and Mexico’s Cemex it is raising prices to cover the growing cost of the energy needed to produce the substance.
The company’s debt, inflated by the purchase of Egypt’s Orascom in 2008, was downgraded to junk status last year by rating agencies Standard Poor’s and Moody’s.
Lafarge hopes its cash flow to debt ratio target will enable it to have a BBB investment-grade rating from Standard Poor’s.
Mr Lafont said he was confident the group would achieve its goal of €1 billion of disposals this year, adding that the process would start this month to sell assets to win UK clearance for a building materials tie-up with Anglo American there. – (Reuters)
