Lafarge to slash debt further in 2012

Lafarge, the world's largest cement maker, plans to cut its €12 billion ($15.7bn) debt pile further in 2012 through more asset sales and cost cutting as it seeks to regain its investment grade credit rating.

In another move to further lighten its debt burden, Lafarge is also halving its 2011 dividend to €0.50, the company said on Friday after reporting a 28 per cent slide in 2011 profits, hit by write-offs mainly linked to Greece.

The company said that in 2012 it would divest assets worth more than €1bn, cut capital expenditure to no more than 800 million and make at least €400 million of savings under a previously announced €500m cost-cutting plan.

"All we can say is that debt will be significantly reduced in 2012," Chief Executive Bruno Lafont told reporters, without giving a specific target.

Lafarge's current debt-to-EBITDA ratio of 3.7 compares with a sector average of 2.51, according to Thomson Reuters data, and is down from 4 in November 2011.

Debt at the end of 2011 was €11.97bn, down 14 per cent from €14bn in the previous year.

At 1000 GMT Lafarge was the best-performing stock on the CAC40 index, up 5.56 per cent at 33.60, outperforming the CAC 40.

CM-CIC analysts in a note praised the "drastic" measures Lafarge was taking, saying they could have a positive impact on profitability.

Credit rating agency Moody's cut its rating on Lafarge to non-investment grade in August 2011, five months after a similar move by Standard & Poor's.

Last year, Lafarge sold off several gypsum and concrete assets which raised €2.2bn in cash proceeds to help cut debt.

It is rumoured to be ready to sell its gypsum business in North America and its cement unit in South Africa.

Lafont declined to comment on these rumours, but said that "any divestments would have to make strategic sense and achieve a good value."

The company also announced earlier this month that it would cut 460 jobs, including 90 in France, as part of a reorganisation of its business.

Turning to its outlook for 2012, Lafarge expects cement demand to increase and estimates a market growth of between 1 and 4 per cent compared with the previous year, with emerging markets continuing to drive growth.

The company also sees higher pricing for the year.

Net profit in 2011 declined to €593m ($773.39m), reflecting a non-cash goodwill write-off of €285m, mainly in Greece, while sales rose 3 per cent to €15.28bn.

In the three months to December 2011, sales rose 5 per cent to €3.8bn.

Analysts, on average, had a consensus of €688.47m for net profit and €15.17bn for sales, according to a Reuters poll of 20 analysts.