French cement and building materials giant Lafarge reported stable quarterly earnings below analysts' expectations today, but stood by its targets for operating performance and reducing debt.
The group, a barometer of activity in international construction, backed up its targets by announcing new measures to boost underlying performance and to help it win back an investment grade credit rating.
Net profit in the third quarter was 304 million euros (USD 411 million) from 303 million euros at the same time last year.
Analysts polled by Dow Jones Newswires had broadly expected a rise of 3.8 per cent to 331 million euros.
Sales fell by 4.0 per cent to 4.23 billion euros. The group said that the negative effect of exchange rate movements, an apparent reference to the strength of the euro, had reduced sales by 7.0 per cent.
Analysts had expected sales to total 4.28 billion euros.
The price of shares in the group was showing a gain of 2.21 per cent to 54.68 euros in early trading. The overall French market as measured by the CAC 40 index was ahead by 0.87 per cent.
At brokers Aurel BGC, analyst Eric Lemarie said that the disappointment of the figures was relative since key aspects of performance had held up and the group remained strongly committed to improving performance, by setting new medium-term targets.
Group chairman Bruno Lafont said in a statement that the trend for volume sales was improving despite the adverse effect of exchange rates and that "we continued to progress in the third quarter on our strategic action plan."
The group had reduced net debt by 1.0 billion euros since September of 2012, and "we have accelerated and will complete our 2012-2015 cost reduction and innovation plan one year ahead of our initial objective.
"Building on this momentum, we today announce new cost reduction and innovation targets for 2015-2016, targeting at least 1.1 billion euros of incremental Ebitda (earnings before interest, tax, depreciation and amortisation) over that period."
The group said that it expected demand for cement in its markets to grow by zero to 3.0 per cent this year from the level last year.
"Market recovery is becoming evident in the United States, growth in most emerging markets continues and Europe is showing stabilisation at a low level," it said.
The group said that it intended to reduce debt to less than 10.0 billion euros by the end of the year. At the end of September it had reduced it by 1.3 billion euros to 10.9 billion euros, the lowest level for five years.
Yesterday, another giant in the cement business, Holcim of Switzerland, reported that in the first nine months of the year net profit rose by 16.8 per cent to 1.28 billion Swiss francs, exceeding analysts' forecasts.
But sales fell by 6.1 per cent to 14.94 billion francs owing to disappointing performance in India and Mexico.
