PARIS (Reuters) - French cement-maker Lafarge LAFP.PA has set a new target to boost core earnings by at least 1.1 billion euros ($1.5 billion) over 2015 and 2016 partly through additional cost cuts of 600 million euros.
The group, which is trying to cut debts built up from an acquisition spree, also confirmed its debt reduction targets for this year and next as it reported 4 percent like-for-like growth in third-quarter sales and core profit.
“We have accelerated and will complete our 2012-2015 cost reduction and innovation plan one year ahead of our initial objective,” Chief Executive Bruno Lafont said on Wednesday. “Building on this momentum, we today announce new cost reduction and innovation targets.”
The new plans will include 600 million through cost cuts and 500 million from innovation, Lafarge said, split over the two years.
Lafarge is in the process of selling non-core assets to focus on cement and concrete. It is also limiting spending, looking for energy savings and aiming to introduce higher-margin specialist products, as well as reducing the time it takes to get them to market.
Shares in Lafarge rose as much as 3.2 percent to a five-month high. They are up about 13 percent so far this year, compared with a 21 percent rise in the STOXX Europe 600 construction and materials sector index .SXOP.
“A new cost programme was expected, but the 1.1 billion euros planned for 2015/2016 should be well received,” Davy Research analyst Robert Gardiner wrote. “These (measures) are substantial.”
Lafarge wants to reduce its debt pile - which results mainly from its 2008 purchase of Egypt’s Orascom and has led to “junk” ratings from credit rating agencies Standard & Poor’s and Moody’s - below 10 billion euros this year and 9 billion in 2014. Net debt was 10.94 billion euros as of September 30, down 10 percent from a year ago, it said.
Its efforts to regain its investment grade have been helped by disposals. “We will continue to divest,” Lafont told analysts, declining to specify which assets. “We have still a large portfolio of assets.”
In the quarter, Lafarge received 900 million euros from divestments, including the sale of its gypsum operations in the U.S. for 500 million and cement operations in Ukraine for 100 million, taking the total to 1.7 billion since the start of 2012.
In September, Lafarge agreed to sell its cement business in Honduras to Cementos Argos CCB.CN for 232 million euros. It has also sold other gypsum operations, as well as U.S. quarries.
Lafarge confirmed its forecast for the cement market to grow up to 3 percent this year, with stronger trends in the second half, thanks to a recovery in the United States, growth in most emerging markets and stabilization at a low level in Europe.
Lafarge saw like-for-like growth in volumes of cement, aggregates and ready-mix concrete in the quarter, following declines in the first six months of the year.
Swiss rival Holcim HOLN.VX, the world’s biggest cement maker by market value, said on Tuesday it did not expect 2013 sales volumes to reach last year’s levels, partly due to sluggish demand in the key emerging markets of India, Brazil and Mexico.
The company posted third-quarter earnings before interest, tax, depreciation and amortization (EBITDA) of 1.01 billion euros on sales of 4.24 billion. This compared with the average of analyst estimates in a Thomson Reuters I/B/E/S poll of 1.05 billion and 4.28 billion.
Lafarge said its Lafarge Tarmac venture with Anglo American (AAL.L) had appealed against the UK Competition Commission’s move to force it to sell a cement plant to a new entrant to boost competition as part of an investigation into Britain’s cement industry.
($1 = 0.7421 euros)
Reporting by James Regan; Additional reporting by Blaise Robinson and Natalie Huet; Editing by Mark John and Jane Merriman