PARIS: France's Lafarge, the world's largest cement maker, posted a drop in quarterly revenue on Tuesday after foreign exchange headwinds offset a rise in cement volumes and prices.
The Paris-listed company, which is preparing to merge with Swiss rival Holcim, confirmed its full-year forecasts, saying it was supported by strong growth in fast-urbanising emerging markets, solid trends in North America and improved market conditions in most of Europe excluding France.
Weak demand, soaring energy prices and tough competition have hindered the cement industry since the financial crisis.
The company and rival Holcim agreed last month to the industry's biggest-ever merger, which should bring further savings.
Chief Executive Bruno Lafont said little about the merger, which is expected to close in the first half of 2015 and create a global cement player with $44 billion in annual sales.
Competition watchdogs worldwide are expected to examine the deal, which will create a group with a market value close to $60 billion. To appease regulators, Lafarge and Holcim expect to sell assets worth 5 billion euros in annual sales, mainly in Western Europe.
"We can't talk about these, but there is progress," Lafont told reporters on a call.
He said both companies had worked on the regulatory aspect of the merger ahead of its announcement.
"The first results of this work will be for competition regulators, staff representatives and the board of directors," he said, adding these were in the meantime kept confidential.
Lafarge is already in the process of selling assets to focus on cement and concrete.
It also aims to bring net debt below 9 billion euros versus 9.95 billion in the first quarter and return to an investment grade rating by the end of the year. Lafarge said cement volumes had risen 11 percent in the first quarter, driven by the Middle East and Africa and the startup of a new plant in India.
But adverse foreign exchange rates slashed 8 percentage points off sales growth and 10 points off EBITDA growth.
These currency headwinds are expected to be felt mostly in the first half, Lafont said. Lafarge is one of the French listed companies most exposed to emerging markets.
These account for close to 60 percent of its sales, chiefly in the Middle East and Africa, where political instability and volatile currencies can crimp revenue.
First-quarter sales dipped 2 percent to 2.63 billion euros ($3.65 billion), while earnings before interest, tax, depreciation and amortisation (EBITDA) were stable at 343 million.
Analysts polled by Reuters had expected sales of 2.7 billion euros and EBITDA of 347 million.
The company aims to squeeze at least 600 million euros of EBITDA this year from cost reduction and innovation measures.
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