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Lafarge – some 2010 optimism after 2009 earnings fall


February 19, 2010
By Andy Bateman

NEWS HIGHLIGHT

Lafarge – some 2010 optimism
after 2009 earnings fall

Lafarge expects global demand to rise up to five per cent in 2010 after posting a fall in 2009 earnings.

February 19, 2010 – Lafarge expects global demand to
rise up to five per cent in 2010 after posting a fall in 2009 earnings.

Today’s Reuters report adds that economic
decline in the United States and Europe in 2009 led to a drop in construction
projects and a subsequent fall in cement demand, while building activities in
emerging markets remained strong.

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The French group on Friday reported a 30 per cent
fall in profit from continuing operations to 2.447 billion euros (US$ 3.36
billion on sales down 17 per cent to 15.884 billion euros.

"2010 is presenting itself more favourably
than 2009 for Lafarge," Chief Executive Bruno Lafont told a conference
call with reporters.

"This year, we will have a more balanced
growth, with a stabilisation in developed countries compared to the decline (in
2009), and also the continuing growth in all emerging countries."

Lafarge shares have lost 12 per cent since January
1st after gaining more than 53 per cent in 2009.

Lafarge said after what had been a
"challenging year", it expected global cement demand in its markets
to increase between 0 percent and 5 per cent in 2010.

In 2009, global cement demand rose some 6
percent, thanks to an infrastructure boom in China,
which offset the slump in the construction sector in Europe and the United States.

Emerging Market Strength

"Emerging markets continue to show strength
and Lafarge forecasts that cement volumes in these markets will continue to
drive demand in 2010," the group said.

"For developed markets, the group expects
that demand will start to recover slowly during the second half of the
year."

In November, Chief Executive Bruno Lafont warned
that a recovery would have to wait till the second half of 2010, especially in
mature markets like the United States,
although emerging markets like China
could come back sooner.

The group's 2009 net income fell 54 percent to
736 million euros while its current operating margin was down to 15.6 percent
from 18.6 percent.

In the fourth quarter, the group had a net loss
of 38 million euros after one-off items, which included impairment losses on
some cements assets in western Europe and the settlement of the USG litigation.
In 2008, the group had a net profit before one-off items of 40 million euros.

Under an agreement announced last December,
Lafarge agreed to pay American building group USG some $80 million in 2009 and
another $25 million before the end of 2010.

Without these one-off elements, Lafarge's net
income fell 67 percent to 98 million euros during the last three months of 2009
compared with 293 million euros the previous year.

Lafarge said it would sell assets in the range
of 300 million to 500 million euros this year.

The company’s net debt was reduced to 3.09
billion euros at the end of 2009.


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