Excellent 2004 performance drives net income increase of 19%

24 February 2005

Euronext: LG, NYSE: LR



The Board of Directors of Lafarge, meeting on February 23, 2005, approved the accounts for the year ending December 31, 2004. A full report was given to the directors of the Board on the dramatic consequences of the Tsunami on our Aceh cement plant in Indonesia. They were informed about all measures taken by both local and corporate teams and they expressed their deep sympathy for all affected employees.


  • Like for like sales up 7.7
  • Operating income on a like-for-like basis up 12.8%
  • Gearing down to 59% from 67% at the end of 2003
  • Cash flow from operations up 17.5%
  • Cash flow to net debt ratio increased to 32.5% from 25.5% in 2003
  • Dividend up to €2.40 per share (+4.3% from €2.30 in 2003), subject to Annual General Meeting approval


  • Solid organic growth and strong increase in operating income.
  • Improvement across all divisions.
  • Clear benefits of the Group's unique business mix and geographical spread.
  • Balance sheet strengthened ahead of schedule, giving financial flexibility to pursue the strategy of the Group.
  • Operational improvements, particularly in plant performance, pricing and cost management, have driven up margins and Return on capital employed after tax.
  • The Group is carrying out a large number of capacity expansions, with 6 plants under construction in Cement, 4 in Gypsum and 3 in Roofing, that will support organic growth going forward.

“We are delighted with the widespread upturn in our results during 2004, reflecting healthy demand and strong performance management across all our divisions. We are particularly pleased with the strong increase of the return on capital employed and the net income, reflecting this strong performance.
We enter 2005 well placed to leverage the overall favorable market environment and to increase prices. We will also benefit from the continuous performance improvement in all our businesses and from our unique business mix and geographical portfolio. Furthermore, our financial flexibility will enable us to pursue our growth strategy. We will have to manage some challenges: high energy and energy related cost increases as well as the expected weakness of the German, South Korean markets and of Brazil. In this context, we expect a 6 to 8% like for like growth of our operating income on ordinary activities for 2005.”

Consolidated financial statements as of 31 December 2004
December 31, 2004
€ Million 
December 31, 2003
€ Million 
Sales 14,436 13,658 + 5.7%
Operating income on ordinary activities 2,124 1,934 + 9.8%
Net income 868 728 + 19.2%
Net income per share in € €5.16 €4.92 + 4.9%
Cash flow from operations 2,113 1,799 + 17.5%
Group net debt 6,499 7,061 -8%

Current operating income as of 31 December 2004
Operating income on ordinary activities
€ Million
December 31, 2004 December 31, 2003 Variation Like for like
Cement 1,567 1,466 +6.9% +10.6%
Aggregates and Concrete 337 283 +19.1% +18.3%
Roofing 150 142 +5.6% +5.7%
Gypsum 129 84 +53.6% 50%
Other (59) (41) NA NA
TOTAL 2,124 1,934 +9.8% +12.8%

(In the text below, all % variances are expressed on a like-for-like basis)


  • Sales up 9.2%. Operating income up 10.6%
  • The Cement division's operating income growth has been driven by good pricing trends in the context of sharp increases in energy and freight costs, good volume growth overall and strong performance management.
  • Overall, the operating margin for the division was stable at 21.2%, illustrating the ability of our cement operations to contain the impact of sharp rises in energy and freight costs. Return on capital employed after tax went up to 9.5% from 8.4% in 2003.
  • The increase of Cement operating income was driven by a growth of 17.5% in North America, 2.6% in Western Europe reflecting mixed performance across the region, and 16.3% in growth markets. Among these, Central and Eastern Europe reported a 20.9% increase, the Mediterranean Basin a 34.5% increase, and Africa and the Indian Ocean a 41.9% increase. These results were mitigated by a slight decline in Latin America due to Brazil and in Asia, due to a slowdown in the South Korean and Malaysian markets.

Aggregates and Concrete

  • Sales up 7.6%. Operating income up 18.3%.
  • The Aggregates and Concrete division's operating income growth was essentially driven by strong volumes in North America, in France and in growth markets, overall solid pricing gains and increased volumes of value-added concrete products in France, the UK and North America. Difficult trading conditions were experienced in Asphalt and Paving activities in the UK.
  • The operating margin increased to 7.1% from 6.3%. Return on capital employed after tax increased to 7.9% from 6.8%.
  • The division carried out two significant acquisitions: The Concrete Company (TCC) in Georgia, USA, and Hupfer Holdings in France and Switzerland.


  • Sales down 1%. Operating income up 5.7%
  • The operating income rose by 7.5% in Western Europe, driven by strong sales in France and the UK, despite another fall in Germany. Improved results were also reported in North America, driven by a buoyant housing market.
  • Operating margin increased to 10% from 9.4%, partly thanks to further cost reductions in Germany. Return on capital employed after tax increased to 5.5% from 4.8%.


  • Sales up 12.2%. Operating income up 50%.
  • The significant growth in operating income was largely due to the sharp improvement in North America, where our Gypsum US strategy is delivering. The US residential housing and renovation work remained buoyant. Outputs from our high-speed plants, Silver Grove and Palatka, increased during the year, plant performance improved and prices were successfully raised. Western Europe also contributed to the upturn in the Gypsum division results, largely driven by performance in France.
  • Operating margin for the division sharply increased to 9.6% from 7.0%. Return on capital employed after tax strongly increased to 9.5% from 6.3%.


Further progress in strengthening the Group's financial structure was achieved. Capital expenditures increased to about €1.5 billion in 2004. The debt reduction came from strong cash flow from operations and sizeable disposals.

€783 million in sustaining capital expenditure

  • Sustaining capital expenditure totaled €783 million, focused on continuous upgrading of existing industrial operations around the world.

    €350 million investments in organic growth aimed at capacity increases and performance improvements

  • Selective capacity expansion projects continued, mostly in cement with the building of a new production line in Tula, Mexico, in Ewekoro, Nigeria, in Bouskoura, Morocco and in Chongqing, China, to meet the very strong growth of the local market, and the building of a new plant in Bangladesh.

    €420 million on high potential acquisitions

  • Main acquisitions were Cementos Selva Alegre in Ecuador for €98 million, the cement and ready-mix concrete assets of The Concrete Company (TCC) in Georgia, USA, for €87 million; Hupfer Holdings, an aggregate and concrete ready-mix producer in France and Switzerland for €69 million; a 10.2% stake in Lafarge Halla Cement in South Korea; and a 14% stake in Lafarge Boral Gypsum in Asia for €34 million.
  • All acquisitions were selected for their synergies with existing operations or for their potential as platforms for further growth in attractive and profitable markets.

    €574 million disposals of non-core assets

  • The Group realized €574 million from disposals, the most significant ones being the disposal of a 40.9% stake in Molins, Spain, for €265 million and a 40% stake in Carmeuse North America BV for €98 million.


  • The main impact of the transition to IFRS on the 2004 financial statements is due to the accounting treatment of pension plans and goodwill.
  • Net Income increases to €1,046 million mainly as a consequence of the end to the amortization of goodwill and of pension related prior actuarial losses.
  • Total equity at year end is reduced to €9,901 million, principally as a result of the charge to equity of €766 million of after tax prior actuarial losses on pension plans.
  • Net debt at year end increases to €6,958 million, mainly as a consequence of the inclusion of the amount of the receivable securitization programme and of the sale options of subsidiary shares granted to minority shareholders.
  • Our financial ratios under IFRS at the end of 2004 remain solid, with gearing at 70% and cashflow to net debt at 30.4%.

Lafarge, the world leader in building materials, holds top-ranking positions in all four of its divisions: Cement, Aggregates & Concrete, Roofing and Gypsum. Lafarge employs 77,000 people in 75 countries and posted sales of €14.4 billion in 2004.

An interview with Bernard Kasriel, Chief Executive Officer, will be available in video, audio and text from 7.00am CET on www.lafarge.com.

Lafarge's next financial publication -Quarter1 2005 sales- will be on May 4, 2005 (before the Euronext stock market opens).

For release worldwide with simultaneous release in the United States.

Press Contacts Investor Relations
Stéphanie Tessier
33-1 44-34-92-32 stephanie.tessier@lafarge.com
James Palmer
33-1 44 34 11 26
Amanda Jones
33-1 44-34-19-47
Danièle Daouphars
33-1 44 34 11 51

Practical information:

There will be a French press conference at 09.00 CET at Lafarge (61 rue des Belles Feuilles – 75016 Paris).

There will be an analyst presentation at 11.30 CET at Lafarge at 61 rue des Belles Feuilles, 75116 Paris. The presentation will be in made in English with simultaneous French translation. This presentation (including the slides) will also be available through a webcast facility on Lafarge website (www.lafarge.com) or at the following numbers:
- Dial in from France: +33 (0)1 70 99 35 16
- Dial in from the UK: +44(0) 208 515 2309
- Toll free from the UK: 0 800 358 23 43
- Dial in from the US: +1 (0) 303 262 2211
- Toll free from the US: 800 240 5318

Playback available online through www.lafarge.com or by phone from February 24, 2005 to March 3rd, 2005 at the following numbers:
- France playback number: +33(0)1 70 99 32 94 (pin code 132970#)
- UK playback number: +44(0)208 515 2499 (pin code 638828#)
- UK toll free number : 0 800 026 0020 (pin code 638828#)
- US toll free number: + 800 405 2236 (pin code 11023676#)

There will be a question and answer session at 17.00 UK time at The Lincoln Center, 18 Lincoln's Inn Fields, London WC2A 3ED which may also be available through a webcast facility on Lafarge website (www.lafarge.com) or at the following numbers:
- Dial in number from UK: +44(0)208 515 23 12
- Toll free (from the UK only): 0 800 358 0857
- Dial in number from US: +1(0) 303 262 2137
- Toll free (from the US only): 800 240 6709

Playback facility available online through www.lafarge.com or by phone from February 24, 2005 to March 3rd, 2005 at the following numbers:
UK playback number: +44(0) 208 515 2499 (code 638941#)
Toll free from the UK only: 0 800 026 0020 (code 638941#)
US playback number: +1 (0) 303 590 3000 (code 11023678#)
Toll free from the US only: +800 405 2236 (code 11023678#)

Statements made in this press release that are not historical facts, including statements regarding our expected operating income, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions ("Factors"), which are difficult to predict. Some of the Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: the cyclical nature of the Company's business; national and regional economic conditions in the countries in which the Group does business; currency fluctuations; seasonal nature of the Company's operations; levels of construction spending in major markets; supply/demand structure of the industry; competition from new or existing competitors; unfavorable weather conditions during peak construction periods; changes in and implementation of environmental and other governmental regulations; our ability to successfully identify, complete and efficiently integrate acquisitions; our ability to successfully penetrate new markets; and other Factors disclosed in the Company's public filings with the French Autorité des Marchés Financiers and the US Securities and Exchange Commission including its Reference Document and annual report on Form 20-F. In general, the Company is subject to the risks and uncertainties of the construction industry and of doing business throughout the world. The forward-looking statements are made as of this date and the Company undertakes no obligation to update them, whether as a result of new information, future events or otherwise.

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