Strong growth in emerging markets strong cost reductions excellence 2008 targets will be reached.

• 
• 2nd December 2007
• Materials Handling
 

The Board of Directors of Lafarge, chaired by Bruno Lafont, met on November 7, 2007 to approve the accounts for the period to September 30, 2007.

INCREASE IN KEY FIGURES FOR THE FIRST NINE MONTHS

• Sales up 4% to €13,279 million
• Current operating income up 18% to €2,442 million
• Net income Group share up 40% to €1,534 million
• Earnings per share up 41% to €8.86

CONTINUING IMPROVEMENT DURING THE THIRD QUARTER

• Sales up 5% to €4,894 million
• Current operating income up 15% to €1,082 million
• Net income Group share up 9% to €600 million
• Earnings per share up 11% to €3.48

BRUNO LAFONT, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF LAFARGE, DECLARED:

"The contribution of emerging markets to our earnings has increased remarkably, with results taking off in Eastern Europe and Asia in particular. Simultaneously, the Group is posting higher results in North America.
Our strategic plan is delivering the expected results. We will have achieved 60% of our 2006-2008 cost reduction target at the end of this year.
Our Group is in good form to move on to 2008, reach all our targets and make the difference."

GROUP HIGHLIGHTS FOR THE FIRST NINE MONTHS OF 2007
• Strong organic growth driven by the dynamism of emerging markets and positive pricing trends: +8% in sales (+7% in the 3rd quarter); up 22% in current operating income (+20% in the 3rd quarter).
• Strong contribution from emerging markets, which posted an 11% increase in sales and a 30% increase in current operating income. During the first nine months of the year, emerging markets accounted for 45% of the Group's current operating income.
• Excellent performance of our Cement and Aggregates & Concrete operations in North America, in spite of the slowdown in the US residential market: current operating income was up 21% and 31% respectively in USD over the first nine months, in spite of lower volumes.
• Strong increase in the Group's operating margin: from 16.3% to 18.4%.
• Pursuit of the program to construct 45 million tonnes of new cement capacity, 80% of which is located in emerging markets: progress made with the building of new plants in Indonesia, China, India, South Africa, Zambia and Ecuador; launch of the construction of new plants in Uganda, Egypt, China, and India.
• €500 million share buyback program completed through the acquisition of 4.4 million shares.

CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2007

 

In M€	9 months				Q3
	2006	2007	Variation		2006	2007	Variation
Sales	12,710	13,279	+4%		4,656	4,894	+5%
Current operating income	2,075	2,442	+18%		941	1,082	+15%
Operating margin in %	16,3%	18,4%	+210 bp		20.2%	22.1%	+190 bp
Net income Group share	1,096	1,534	+40%		548	600	+9%
Earnings per share in €	6.28€	8.86€	+41%		3.14€	3.48€	+11%
Cash flow from operations* Excluding exceptionals	2,150 2,090	2,311 2,440	+7% +17%		986 926	1,001 1,001	+2% +8%
Group net debt	10,261	9,103	-11%

* Cash flow from operations includes an exceptional contribution of €129 million to the UK pension fund in Q1 2007 and 60m€ one-off litigation settlements in Q3 2006.

CURRENT OPERATING INCOME AT SEPTEMBER 30, 2007

 

In M€	9 months				Q3
	2006	2007	Variation		2006	2007	Variation
Cement	1,546	1,860	+20%		675	790	+17%
Aggregates & Concrete	423	531	+26%		235	287	+22%
Gypsum	158	97	-39%		62	15	-69%
Other	(52)	(46)			(17)	(10)
TOTAL	2,075	2,442	+18%		941	1,082	+15%

HIGHLIGHTS BY BUSINESS FOR THE FIRST NINE MONTHS OF 2007

CEMENT
• Sales up: +7% to €7,744 million in the first nine months; +6% to €2,770 million in the 3rd quarter.
• Current operating income up: +20% to €1,860 million in the first nine months; +17% to €790 million in the 3rd quarter.
• Positive impact of the cost reduction program across all regions.
• Very strong increase in operating margin: 24.0% compared to 21.3% for the same period in 2006.
• Positive pricing and volume trends in most of our markets, against a backdrop of higher energy and transportation costs.
• Strong contribution from emerging markets, with a 28% increase in current operating income over the period, primarily driven by Eastern Europe and Asia. At September 30, emerging markets represented 52% of the Cement business's earnings (i.e. close to €1 billion).
• 14% increase in current operating income at our operations in North America, in spite of the decline in the residential market. The increase came to 21% in USD, reflecting the positive effects of the streamlining of our organization following the buyout of the minority interests, the implementation of the cost reduction plan and lower imports. The operating margin in North America is up 360 basis points to 20.8%.

AGGREGATES & CONCRETE
• Sales up: +3% to €4,966 million in the first nine months; +6% to €1,964 million in the 3rd quarter.
• Current operating income up: +26% to €531 million in the first nine months; +22% to €287 million in the 3rd quarter.
• Positive impact of the cost reduction program.
• Strong increase in operating margin, to 10.7% from 8.8% over the same period of 2006.
• Favorable pricing trends.
• Strong increase of 48% in the contribution made by emerging markets to the current operating income of the Aggregates & Concrete business, driven by the solid performance posted in Central and Eastern Europe and in South Africa. Emerging markets represented 20% of the business's earnings.
• Higher contribution from value-added concrete products, which accounted for 20% of volumes, compared to 18% over the same period in 2006.
• In spite of a decline in volumes in the United States, the current operating income posted in North America increased by 31% in USD, reflecting the solid pricing environment and the impact of the cost reduction program.

GYPSUM
• Sales down: -2% to €1,208 million in the first nine months; -4% to €382 million in the 3rd quarter.
• Current operating income down: -39% to €97 million in the first nine months; -69% to €15 million in the 3rd quarter.
• Decrease in operating margin, to 8% from 12.9% over the same period in 2006 owing to the slowdown in the US residential market.
• The other markets posted a solid improvement, with current operating income moving up 23% over the period, driven in particular by strong performance in Western and Central Europe.

NEW INTERNAL DEVELOPMENT PROJECTS
• Lafarge has launched the construction of a new production line at its Hima cement plant in Uganda. This project, which represents a total investment of around €77 million, will increase the plant's capacity from 350,000 tonnes to 830,000 tonnes. The new line will start up in the first quarter of 2010.
• In Egypt, the Group has received the authorization to build a new production line of 1.3 million tonnes per year. This project, which is being carried out as a joint venture with Titan, represents an investment of around €75 million for Lafarge.
• Lafarge announces the launch of a project to modernize its Joppa (Illinois) cement plant in the United States. This 2 million tonne plant, which will start up at the end of 2010, is part of the Group's major emphasis on cost reductions and should generate an additional $75M in Ebitda per year. This modernization will also help to enhance the plant's environmental performance significantly in terms of alternative fuels and emission control. The project represents an investment of around €285 million.

OUTLOOK FOR 2007
• The trends observed in the first 9 months confirm our positive outlook for 2007.
• The fundamentals of our industry are good and Lafarge is well armed to make the difference in 2008.
• We should exceed the objectives of an average annual increase in earnings per share of 10% between 2005 and 2008 and an improvement in ROCE to 10% by 2008.

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