UPDATE 2-Lafarge rules out capital hike to cut debt

* CEO says determined to cut debt

* Q3 EBIT down 10 pct to 839 mln eur vs forecasts 872.8 mln

* Keeps global cement demand forecast for 2010

(Adds detail, shares, comment)

By Matthias Blamont and Gilles Guillaume

PARIS, Nov 5 (BestGrowthStock) – French cement group Lafarge brushed
aside the possibility of a capital increase to slash debt and
said it would stick with plans to improve its finances through
other measures such as asset sales and cost cuts.

Lafarge’s debt rocketed when it bought Egyptian rival
Orascom in 2007 for 8.8 billion euros ($12.44 billion),
triggering concern among rating agencies. At the end of
September, the group’s net debt stood at 14.66 billion.

Analysts have speculated over the possibility of a rights
issue in the past weeks.

“We are not considering a capital hike, it is not our
intention to raise capital to reduce debt, we are determined to
cut our debt and to improve our financial structure through
various means”, Chief Executive Bruno Lafont told Reuters in an
interview on Friday. [ID:nWEA7404]

He said Lafarge was aiming for a cash flow to debt ratio of
28 percent “as soon as possible”. This would compare with 15.3
percent as of Sept. 30 and 32 percent before the Orascom deal.

The world’s largest cement maker cut costs by 300 million
euros by the end of the third quarter and will continue to keep
a tight rein on spending in the coming months, Lafont said.

Non-strategic asset sales should top 500 million euros in
2010, while divestments may exceed this next year, he added.

Lafarge manufactures cement products and other building
materials such as aggregates, concrete and gypsum. It competes
with Switzerland’s Holcim (HOLN.VX: ) and Cemex of Mexico.

MARGIN DISAPPOINTMENT

The company posted lower-than-expected third-quarter results
on Friday due to rising production costs, sending its shares
down 2.5 percent by 1058 GMT.

“The publication is a little bit disappointing in terms of
margin and regarding the financial structure where we don’t see
any improvement,” said a Paris-based analyst, who declined to be
identified.

Lafarge said underlying earnings before interest and tax
(EBIT) fell 10 percent on a like-for-like basis to 839 million
euros, while sales were down 2 percent to 4.5 billion.

Like-for-like changes exclude the effect of currency
movements, acquisitions and divestments.

Analysts polled by Reuters had on average expected
third-quarter EBIT of 872.6 million euros and sales of 4.5
billion. [ID:nLDE6A31CF]

Smaller rival HeidelbergCement (HEIG.DE: ) reported higher
than expected third-quarter results on Thursday. [ID:nLDE6A304K]
Italian cement group Italcementi (ITAI.MI: ) reports third-quarter
earnings later on Friday.
Lafarge stuck to its sales outlook for 2010 and said cement
demand in its markets would range between a decline of 1 percent
and a rise of 3 percent in 2010.

“Due to supply-demand evolution, volume trends may vary from
local market trends in some countries. Pricing is expected to
remain solid through the year,” it said in a statement.
($1=.7071 Euro)
(Editing by Hans Peters and Jane Merriman)

UPDATE 2-Lafarge rules out capital hike to cut debt