UPDATE 2-Lafarge oper profit below view; confirms forecast

(Adds details from analyst conference call, share rise)

By Marie Maitre

PARIS, July 31 (Reuters) - Lafarge (LAFP.PA) posted a first-half operating profit that missed market expectations but was up 18.5 percent year on year as cost cuts and acquisitions helped the world's biggest cement maker cushion the blow of slowing U.S. and European construction activity.

Lafarge, which supplies cement, aggregates, concrete and gypsum, stood by its forecast for higher earnings this year and confirmed 2010 targets for earnings per share of at least 15 euros and free cash flow of more than 3.5 billion euros.

The French group, which competes with Holcim (HOLN.VX) and Cemex (CX.N)(CMXCPO.MX), generated a recurring operating profit of 1.611 billion euros ($2.52 billion) for the first half, up from 1.36 billion a year earlier. Sales rose 8 percent to 9.069 billion euros.

Both figures were below the average forecasts in a Reuters poll of nine analysts: underlying operating profit of 1.671 billion euros and sales of 9.09 billion euros.

But Chairman Bruno Lafont expressed confidence in the future, saying the sector's fundamentals remained sound despite a stronger-than-expected volume slowdown in some developed markets like the United States, Spain and Britain.

"There are considerable construction and infrastructure needs in emerging markets. We anticipate further growth in the world demand for cement," he said.

Operating margin rose to 17.8 percent from 16.2 percent in the first half of 2007 thanks to cost cuts and the company's ability to increase its prices.

Net profit fell as expected, to 911 million euros from 934 million in the first half of 2007, which had been boosted by capital gains from the sale of a roofing unit and assets in Turkey. Analysts had expected a bigger fall, to 888 million euros.

The company slightly raised its savings target, saying it now expects to cut costs by more than 400 million euros by the end of the year. Its previous goal was 400 million euros.

EMERGING MARKETS DRIVER

The acquisition of Egypt's Orascom Cement in December and a cost-cutting drive fueled Lafarge's earnings growth, helping it become resilient in a business environment marked by a housing crisis in the United States, signs of slowing activity in Western Europe, a weaker dollar and surging fuel costs.

Last week, Cemex said it expected volumes in the U.S. industrial, commercial, residential and public sectors to fall this year as foreclosures increase.

On Wednesday, President George W. Bush signed into law a sweeping housing rescue package.

Lafarge's core cement business posted a first-half operating profit of 1.38 billion euros, up 29 percent year on year, driven by demand in Asia and Central and Eastern Europe.

But aggregates and concrete saw operating profit fall 3 percent to 237 million euros, while income in the gypsum business dived 62 percent to 31 million euros as the downturn in the U.S. housing market dried up demand for these products.

Lafarge shares closed 0.3 percent higher at 87.80 euros in Paris, making a market capitalisation of 17 billion euros.

The stock has fallen nearly 30 percent this year, roughly in line with the rest of the European construction and building materials .SXOP sector, amid global worries that the U.S. housing downturn will hurt business. (Reporting by Marie Maitre; editing by John Wallace)