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VENTURES AFRICA – French cement manufacturer Lafarge has reported a 61 percent surge in net profit, surpassing market expectations, with initial forecast predicting lower profits as a result of reduced sales.
Net profit increased to 213 million euros ($292 million) in Q3 2013 from 83 million euros ($113.8 million) in 2012. Revenue however dropped slightly by 2 percent to 3.71 billion euros ($5.1 billion), according to a statement by the company on Wednesday.
Factset, a financial information provider had forecast an average profit of EUR194 million and average sales of EUR3.65 billion.
“We saw much more positive operational trends, accelerating compared to the third quarter while exchange rates continued to be adverse,” said CEO Bruno Lafont.
Lafarge, world’s largest cement maker by revenue, has struggled with debts since the 2008 global crisis following a series of acquisitions, including a EUR8.8 billion takeover of Egyptian rival Orascom Cement in 2007, which grew its debt portfolio to EUR17 billion in 2008. It has been able to cut down the debt to EUR10.3 billion as at 2013.
The company said sales had been reduced to EUR259 million as a result of currency swings, making revenue to fall slightly.
Despite the fall, Lafarge was able to raise output in the fourth quarter to meet the increasing demand from emerging markets and also in the U.S. and Canada, offsetting weakness in European sales.
“We will continue to apply the utmost discipline in capital allocation and our aim is to return to an investment grade this year,” Lafont said.
Lafarge forecasts cement growth of 2-5 percent in its global market this year, with emerging market and North American sales expected to underpin growth in 2014. Europe demand is however expected to stabilize.
Lafarge has been facing competition for control of the African market due to the emergence and subsequent expansion of Nigeria-based Dangote Cement, Africa’s largest producer. Dangote has concluded plans to expand to 13 African countries by 2016 and bring production to 50 million tonnes.