The Board of Directors of Lafarge, chaired by Bertrand Collomb, meeting on September 3, 2003, closed the accounts for the half year ending June 30, 2003.
Negative currency impact due to the strong appreciation of the euro
Operating income on ordinary activities was down by 23% to €670 million, with the strong appreciation of the euro in the first half of the year reducing operating income on ordinary activities by 10%.
Operating income on ordinary activities at constant scope and foreign exchange dropped by 14% or €105 million, € 44 million of which are attributable to increased pension costs.
Decrease in operating income on ordinary activitites entirely attributable to the first quarter
All the decrease in operating income is attributable to the first quarter 2003 - results for the second quarter 2003 are in fact in line compared with the second quarter 2002, despite an increase in pension costs.
The significant decrease in operating income in the first quarter 2003 was mainly due to an exceptionally harsh winter, especially in North America, while the winter in the first quarter 2002 was unusually mild.
Negative price effect in some difficult markets
The first half of 2003 was also impacted by the full absorption of a sharp price decrease in cement in Germany and the Philippines, which occurred during 2002. Both markets are now showing evidence of a positive price trend.
Lower net income mainly due to exceptional items
Net income in the first half 2003 is affected by an €86m drop in net exceptional items. Since July 1st we have announced further €110m in capital gains from disposals, thus erasing the distortions between June 30, 2002 and June 30, 2003.
Encouraging recent activity levels and improvement in overall pricing environment
Operational performance continues to improve. The cost of fuel per ton of cement continued to decrease despite an unfavorable energy environment.
The encouraging activity levels recently observed and an overall more favorable pricing environment allow us to confirm our expectations of stable full year operating income on ordinary activities before currency fluctuations and barring unusual weather conditions at the end of the year.
June 30, 2003
June 30, 2002
|Operating income on ordinary activities||670||868||-23%|
|Net income, Group share before goodwill amortization||208||368||-43%|
|Net income per share in €||1.1*||2.3||-52%|
|Cash flow from operations||616||900||-32%|
|Group net debt||10,111*||11,603||-13%|
* These figures do not reflect the use of proceeds from the rights issue, which closed after the end of the period on July 15, nor the new shares issued.
(Excluding foreign exchange, depreciation and scope effects)
Low prices led to a swing in profitability in Germany, where significant losses were reported, and in the Philippines, which recorded a near breakeven position. The difficult situation in Venezuela resulted in reduced operating income. Operating income decreased significantly in the United States due to the unfavorable weather conditions and the overall softening of the market. Strong increases in operating income were reported in Spain, Romania, Morocco, Brazil and Nigeria. Blue Circle incremental synergies are on track for 2003.
Aggregates & Concrete:
North American operations reported a strong decrease in operating income due to the poor weather conditions and a weak market in several regions. Western Europe was slightly down with a strong UK performance not making up for the weaker aggregates market in France.
Results were down, mainly due to Germany and France. Restructuring of the German roofing business continued in the first half.
Results were marginally down, mainly due to increased gas costs and difficult weather conditions at the start of the year in some of our main markets.
June 30, 2003
June 30, 2002
|Variation||Excluding foreign exchange, depreciation and scope effects|
|Aggregates and Concrete||52||85*||-39%||-37%|
Bernard Kasriel, Chief Executive Officer of Lafarge, said:
“The contrast between a particularly harsh winter in the first quarter of 2003 and an exceptionally mild one in 2002 has distorted our half year results. In an overall favorable pricing environment, we are pursuing our improvement in operational performance and our debt reduction program and are maintaining our selective allocation of capital expenditure and our asset disposal program of €400 to €600 million. We are on track with these objectives and we reiterate our expectation of stable full year operating income before currency fluctuations and barring unusual weather conditions at the end of the year.”
Lafarge is the world leader in building materials, and employs 77,000 people in 75 countries. The Group holds top-ranking positions in all four of its Divisions: Cement, Aggregates & Concrete, Roofing and Gypsum. Lafarge posted sales of €14.6 billion in 2002.
Statements made in this press release that are not historical facts, including statements regarding our debt reduction target, our capital expenditure target, our plans for divestitures and our expected operating income are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions ("Factors"), which are difficult to predict. Some of the Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: the cyclical nature of the Company's business; national and regional economic conditions in the countries in which the Group does business; currency fluctuations; seasonal nature of the Company's operations; levels of construction spending in major markets; supply/demand structure of the industry; competition from new or existing competitors; unfavorable weather conditions during peak construction periods; changes in and implementation of environmental and other governmental regulations; our ability to successfully identify, complete and efficiently integrate acquisitions; our ability to successfully penetrate new markets; and other Factors disclosed in the Company's public filings with the French Commission des Opérations de Bourse and the US Securities and Exchange Commission including its Reference Document COB number D03-0375 as updated on June 5, 2003 and annual report on Form 20-F. In general, the Company is subject to the risks and uncertainties of the construction industry and of doing business throughout the world. The forward-looking statements are made as of this date and the Company undertakes no obligation to update them, whether as a result of new information, future events or otherwise.