2010 full year results Date 02/18/2011Euronext Paris : LG Volumes return to growth in the fourth quarter Group positioned for 2011 earnings growth and substantial deleveraging
Fourth-quarter key figures
Sales up 9% to €3,959m
Current operating income up 7% to €530m Net income Group share increased to €62m Net earnings per share increased to €0.22
Year-to-date key figures
Sales up 2% to €16,169m Current operating income down 1% to €2,441m Net income Group share increased 12% to €827m Net earnings per share increased to €2.89 Dividend of €1per share, subject to AGM approval
Sales increased for the full year and quarter, helped by improved cement and aggregates volume trends, favorable foreign exchange, and new capacities in Brazil. Structural cost savings exceeded target, reaching €220 million for the year, of which €50 million in the fourth quarter. Current operating income slightly down for the year but rose for the quarter as higher sales volumes, favorable foreign exchange and cost cutting offset higher energy costs. Secured over €500m of divestments, meeting target for the year. Significant cash flow generation in 2010 helped by strong results on working capital. Strong cash and liquidity position maintained. Lower cost base, new capacities, and actions to mitigate higher cost inflation are in place to drive earnings growth in 2011 as volumes recover.
Bruno Lafont, Chairman and Chief Executive Officer of Lafarge, said:
"While 2010 was a tough year for the cement sector as a whole, I am encouraged by the return to cement volume growth in the fourth quarter and the successful cash generation accomplishments of our operating teams in the last two years. The steps we have taken in 2010, ranging from structural cost savings to strategic investments in growing markets such as Brazil, will provide the foundation for further improvement and growth as we enter 2011. It will also allow the Group to accelerate deleveraging and reduce its debt by at least two billion euro in 2011. We will get the full benefits from volume growth thanks to our new cement capacities and the overall quality and strength of our portfolio of assets."
The Group estimates cement demand in its markets to grow between 3 to 6 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. For developed markets, the Group expects that demand will continue to slowly recover.
Overall pricing is expected to move higher for the year, although levels of pricing movements will vary by market.
Shares increased in April 2009 due to the rights issue completed by the Group. Basic average number of shares outstanding of 265.5m at end of December 2009 compared to 286.1m at the end of December 2010. (2)Free cash flow for the full year excludes the €338m one-time payment for the Gypsum competition fine paid in the third quarter 2010.
Current operating income
Current operating income (€m) Fourth quarter Full Year 2009 2010 Variation 2009 2010 Variation Cement 507 503 -1% 2,343 2,230 -5% Aggregates & Concrete 46 53 15% 193 216 12% Gypsum (4) 10 38 58 53% Other (55) (36) (97) (63) TOTAL 494 530 7% 2,477 2,441 -1%
Highlights by business
Sales were up 10% in the quarter and up 2% for the year, reflecting the impact of recovering volumes and foreign exchange. Volumes increased 2% in the quarter and were down 4% year-to-date, with volume growth in North America and Latin America helping to partially offset declines in other regions. Pricing remained resilient in the face of difficult market conditions. Costs in the fourth quarter benefited from the reversal of a regulatory fee on past purchases of raw materials in Egypt. Cost reduction program strongly benefited all regions. Current operating income down 1% in the quarter and down 5% year-to-date due to the inflationary impact of energy and other costs.
Aggregates & Concrete
Sales moved up 7% in the quarter and up 1% for the year due to volume growth for aggregates, slower rates of volume decline in the ready mix concrete business, and favorable foreign exchange. Operating income margins improved both year-to-date and in the quarter. Current operating income grew 15% in the quarter and 12% year-to-date, reflecting the impact of improved sales, favorable foreign exchange, and strong cost reduction measures.
Sales were up 10% in the quarter and up 6% year-to-date as volume growth compensated for lower pricing. Current operating income was higher for the quarter and year-to-date as market activity improved.
Investments, divestments and Liquidity
Investments totaled €1.4 billion for 2010, compared to €1.7 billion in 2009. Sustaining capital expenditures decreased by 3% to €359 million in 2010. Internal development capital expenditures were down 23% to €950 million in 2010. Acquisitions were €84 million in 2010, down from last year. Lafarge received €364 million in cash for divestments in 2010 of the €550 million secured as of year-end. As of December 31, 2010, the Group had €3.8 billion in committed credit lines with an average maturity of around 3 years in addition to €3.3 billion of cash on hand. There are no financial covenants on debt at the Lafarge SA level.