Paris - French cement maker Lafarge stuck to its cost savings and debt reduction targets on Wednesday, betting on continued growth in emerging markets and a recovery in North America and Europe.
A strong euro and volatile currencies in emerging markets slashed 6 percentage points off sales growth last year and profits fell, but the group said its geographic spread and solid demand for cement 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 percent of its sales, chiefly in the Middle East and Africa, where political instability and volatile currencies can crimp revenue.
Lafarge expects the cement market to grow between 2 and 5 percent this year.
“Cement is a product of first necessity,” chief executive Bruno Lafont told reporters on a call.
“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.
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 slightly dip in France this year but forecast a “rather positive market” in the UK.
The group kept its dividend stable at 1 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 below 9 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, which is trying to cut debts built up from an acquisition spree, is in the process of selling non-core assets to focus on cement and concrete.
It is also limiting spending, looking for energy savings and aiming to introduce higher-margin specialist products, as well as reducing the time it takes to get them to market.
The debt pile results mainly from Lafarge's 2008 purchase of Egypt's Orascom and has led to “junk” ratings from credit rating agencies Standard & Poor's and Moody's.
Lafarge said it aimed to return to an investment grade rating by the end of this year.
Quarterly earnings before interest, tax, depreciation and amortisation (EBITDA) fell 6 percent to 793 million euros ($1.09 billion), while sales dipped 2 percent to 3.71 billion. - Reuters