Not for release, publication or distribution in or into the United States, Canada, Australia or Japan. For your information, this press release has been issued by Lafarge in the United Kingdom late this afternoon.
Lafarge considers that Blue Circle's document on Asia, published today, serves only to confirm that Lafarge's offer is generous.
Blue Circle has reiterated the theme of relying on promises of future growth and price stability, factors outside its control, while ignoring the operational and organisational difficulties which it faces.
In Malaysia, cement demand currently remains at less than half total capacity. This imbalance will remain for the foreseeable future. Yet Blue Circle persists in its assertion – on the basis of just two months' activity - that prices can remain stable for several years at close to the official rate and that it can secure substantial volume improvements.
Blue Circle should answer these questions:
.for how long can Blue Circle "withhold" over half of its total capacity from the Malaysian market in order to support prices and volumes? To whom can production from this capacity be sold and at what price?
. for how long will the other participants in the Malaysian cement market refrain from the price cutting which was characteristic of the 1998-99 period and which has damaged profitability in the past?
. how – other than by reducing prices or its own market share and hence in either case its own profitability – can Blue Circle procure continued stability in the Malaysian market?
Overall, in Asia, Blue Circle believes that, even on its optimistic analysis, it will achieve operating profit of only £89.5 million in 2002 after achieving all the cost savings identified prior to Lafarge's bid. This represents an inadequate after tax return on capital employed as at 31 December 1999 of below 7 per cent., demonstrating that Blue Circle has overpaid for these assets.
When – if ever – will Blue Circle's Asian assets generate an adequate return on capital employed?
Bertrand Collomb, Chairman and Chief Executive Officer of Lafarge, said today :
"Blue Circle's indications of the future profitability of its Asian operations rely on some very optimistic assumptions. Blue Circle's difficulties in Malaysia typify the problems the company will continue to face as it strives to regain its lost position in the world cement market by pursuing transactions in difficult and complex markets."
Dresdner Kleinwort Benson, which is regulated in the United Kingdom by The Securities and Futures Authority Limited, is acting for Lafarge and Lafarge Minerals and no one else in connection with the Offer and will not be responsible to anyone other than Lafarge and Lafarge Minerals for providing the protections afforded to customers of Dresdner Kleinwort Benson or for giving advice in relation to the Offer.
BNP UK Corporate Finance, a division of BNP London Branch which is a branch of Banque Nationale de Paris S.A., and Paribas, the London branch of Paribas S.A., (together "BNP Paribas") which are regulated in the United Kingdom by The Securities and Futures Authority Limited, are acting for Lafarge and Lafarge Minerals and no one else in connection with the Offer and will not be responsible to anyone other than Lafarge and Lafarge Minerals for providing the protections afforded to customers of BNP Paribas or for giving advice in relation to the Offer.