Lafarge Q2 profits decline on high material costs

Bruno-Lafont

 

Lafarge posted weaker Q2 results of US$1.01 billion, a drop of 16 per cent versus 2010 earnings of US$1.2 billion due to higher raw material costs.

Sales increased on a like for like basis in all product lines for the quarter thanks to strong cement volume growth driven by continued strength in emerging markets. Volumes increased 9 per cent in the quarter, up 6 per cent like for like, “with growth driven by the Middle East Africa region and other emerging markets,” Lafarge said in a statement.

Cement prices moved progressively higher from the fourth quarter 2010 to second quarter 2011, but were slightly down compared to the first-half last year.

In the Middle East and Africa sales feel by 2 per cent from Q2 2010 and current income dropped by 15 per cent from US$378.68mn Q2 last year with the year's quarter totaling US$321.09mn.

Bruno Lafont, Chairman and Chief Executive Officer of Lafarge, commented: "While I am encouraged by the return to cement volume growth for the last several quarters, the impact of high inflation and a slow recovery of mature markets weighed on the cement sector. The business will continue to benefit from volume growth thanks to our continued development in emerging markets."

In the Middle East and Africa region, domestic sales of cement increased 8 per cent in the second quarter. Solid market trends continued with our volumes up in most countries.

Prices were at 2010 year-end level, but lower than the first half 2010 level, mostly due to Egypt. Current operating income decreased 4 per cent in the second quarter, hindered by rising costs and prices below last year levels.

Higher production levels in Algeria, our new plant in Syria allowed us to further capture the market growth opportunities. In Iraq, volumes returned to double digit volume growth in the second quarter, rebounding from the flat volumes experienced in first quarter.

In Egypt, residential construction continued to be active while the political context continued to slow down infrastructure projects. Jordan continued to be affected by new capacities

Lafarge statement concluded: “continues to see cement demand moving higher and estimates market growth of between 2 to 5 percent in 2011 versus 2010. Emerging markets continue to be the main driver of demand and Lafarge benefits from its well balanced geographic spread of high quality assets.”

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