Lafarge improvement in third-quarter earnings
The company recorded net income of $131.4 million, or $1.80 per diluted share, for the three-month period ending September 30, 2001. In the same period last year, the company reported net income of $127.3 million ($1.72 per diluted share). Due to a decline in value of the Canadian dollar this year, the conversion of Lafarge's Canadian results to U.S. dollars resulted in a negative exchange rate impact in the most recent quarter of U.S. $3.4 million, net of tax, or $0.05 per share. Net sales in the most recent quarter rose 23 percent to $1,140.1 million from $924.6 million in 2000 primarily as a result of recent acquisitions.
Total income from operations after corporate and other expenses (EBIT) reached $218.9 million in the most recent quarter, compared with $214.1 million in the third quarter of 2000.
Operating results improved by 27 percent in Lafarge's construction materials segment while in the company's other segments, cement and gypsum, operating results trailed last year. Most of the improvement in the construction materials segment was due to the profit contribution from the Warren Paving & Materials Group, which became part of Lafarge North America in December 2000. In the cement operations, the decline in operating profit was largely due to the impact of the weaker Canadian dollar.
Corporate and other expenses were $11.7 million higher than the third quarter of last year, when Lafarge booked income of approximately $9 million resulting from a one-time pension income adjustment and the sale of surplus property. In addition, the financing cost of the company's accounts receivable securitization program is included in this category of expenses in 2001.
Philippe Rollier, president and CEO of Lafarge North America, said third-quarter sales volumes were up from last year in all of the company's main lines, but that business tapered off at the end of the quarter. "The period started out well for us, though demand was already weakening when the events of September 11th took place. Consequently, sales volumes in most of our markets fell sharply in September," Rollier said. "Nonetheless, indications are that demand for our products remains at relatively high levels and we are encouraged by the fact that market activity in early October is in line with last year."
Summarizing Lafarge North America's third-quarter performance by operating segment:
Construction MaterialsConstruction materials operating profit in the third quarter rose $26.9 million to $125.6 million. Revenues for the period increased 40 percent from last year to $749.1 million. The Warren Paving & Materials Group, which became part of Lafarge North America last December, accounted for $162.4 million of the sales increase and $23.6 million of the improvement in operating profit. The decline in the value of the Canadian dollar had a $3.0 million negative impact on the reported operating profit of the construction materials business in the quarter. Sales volumes remained strong in the quarter. Aggregate shipments of 42.1 million tons were 29 percent higher than last year, with all geographic regions in the U.S. and Canada showing gains. Warren and other acquisitions accounted for approximately 9 million tons of the increase, leaving sales volumes from heritage operations up 1 percent. Ready-mix concrete shipments in the quarter totaled 3.5 million cubic yards, 7 percent higher than last year, with improvements recorded in eastern Canada and most of the company's U.S. markets. Asphalt sales volumes and paving volumes ran 74 percent and 84 percent ahead of last year, respectively, again due primarily to the additional business generated by the Warren Paving & Materials Group. Average selling prices for ready-mixed concrete and aggregates in the quarter rose slightly from the same period last year.
CementLafarge North America's cement operations saw operating profit decline 2 percent to $130.0 million from $132.8 million in the third quarter of 2000. The impact of the decline in the Canadian dollar was $2.4 million in the quarter. Cement shipments, although lower in September, totaled 4.7 million tons, 2 percent better than the third quarter of 2000. Volumes in the U.S. were 2 percent higher than the comparable period last year while cement shipments from Canadian operations were up one percent. Revenue for the cement segment in the most recent three-month period reached $397.0 million, a 1.7 percent decline from last year. Average cement selling prices in Canada were up 2.6 percent in the quarter while prices in the company's principal U.S. markets were down 1.4 percent in the quarter due to competitive situations in several markets. The company has recently made price increase announcements ranging from $2 to $5 per ton in virtually all of its markets, scheduled to become effective between January and April of 2002.
GypsumThe gypsum business posted an operating loss of $16.1 million in the third quarter, although recent price increases lessened the rate of profit erosion seen in the first two quarters of this year. By comparison, the gypsum segment posted a loss of $8.5 million in the third quarter of 2000. Revenue totaled $39.5 million for the most recent three months, up 21 percent from the previous year. Since reaching a low in June, drywall prices have recovered about 50 percent as three increases have been implemented and demand has been buoyed by better-than-expected residential building activity. The average selling price in the quarter was $68 per thousand square feet. The company now expects that fourth-quarter results in the gypsum business will be stronger than both the most recent quarter and the fourth quarter of last year. Sales volumes for the most recent quarter totaled 423 million square feet (msf) of drywall, compared with 236 msf in the same period last year. Not including the additional sales volume from a new plant in Palatka, Fla., which went on line at the beginning of 2001, sales volumes were up 32 percent from last year.
Consolidated nine month resultsThrough September 30, 2001, Lafarge North America recorded net income of $152.1 million ($2.09 per diluted share), compared with net income of $198.5 million ($2.69 per diluted share) in the first nine months of 2000. Total income from operations (EBIT) of $257.8 million was down $85.1 million from last year due primarily to the gypsum business, where results were down $60.1 million as a result of the sharp decline in gypsum drywall prices that began last year. Construction materials operating profit through the first nine months of 2001 was $7.3 million better than last year while cement operating profit was $15.7 million worse than last year. The decline in the value of the Canadian dollar reduced income from operations by $6.3 million for the period.
Lafarge North America will broadcast its third-quarter earnings conference call over the Internet beginning at 11:00 a.m. EST on Wednesday, October 24. Investors interested in listening to the call may log on to the company's Web site (www.lafargenorthamerica.com) for further instructions on how to participate in the call. The conference call will also be archived on the company's Web site after the event.