PARIS - Lafarge, the biggest cement maker in the world, reported on Friday a near one-third drop in net profit last year and announced a programme of asset sales exceeding a billion euros ($1.3 billion) to reduce debt.

The group gave a gloom forecast for growth of demand for cement, a basic material for the home, property and infrastructure markets, and was particularly pessimistic for western Europe.

Net profit fell by 28.0% to 593 million euros, below analysts' expectations of 783.8 million euros as polled by Bloomberg, but sales rose by 3.0% to 15.28 billion euros.

At constant exchange rates and on a comparable asset base, sales rose by 5.0%.

The price of Lafarge shares surged by 5.06% to 33.44 euros in early trading. The overall CAC 40 index was showing a gain of 0.98%.

Lafarge said that profits had been set back by 285 million euros on an accounting, but not cash, basis by exceptional charges of 285 million euros, of which 180 million euros was in respect of problems in Greece.

"The fall, which began in 2009, is continuing in Greece and in Spain," Lafont said.

The group was cautious about the outlook for 2012, saying the overall growth of demand for cement would be weak at 1.0-4.0 percent.

"We want to go into 2012 with caution as demand on our cement markets is likely to be between one and four percent," chief executive Bruno Lafont told a telephone press conference.

Demand in developed countries would continue to be weak contracting by 1.0 percent or growing by 2.0 percent in North America and shrinking by 5.0 to 8.0 percent in western Europe.

Demand in developing countries would continue to grow, by three to 7%, he said.

Lafarge has long targeted emerging markets and last year it achieved 57.0% of sales in these countries from 52.0 percent in 2010 and 32.0% in 2005.

In the fourth quarter, sales rose by 5.0% to 3.813 billion euros, or by 7.0% on a basis of constant exchange rates and comparable asset base.

At brokers CM-CIC Securities, analyst Jean-Christophe Lefevre-Mouleng said that the net profit figure had fallen as expected but at a reduced rate and the outcome for the fourth quarter was 119 million euros better than the consensus forecast.

This year, the analyst noted, Lafarge intended to achieve at least 400 million euros in cost savings under a programme to save 500 million euros.

And it intended to raise more than one billion euros from asset sales to reduce debt.

These "drastic measures" could lead to a rising profit trend even though some markets were stabilising, he said.

Lafont also reported that the group has been successful in refocusing its business on cement, granulates and concrete by withdrawing from the market for plaster products.

The group had debt of 11.97 billion euros at the end of 2011, following the purchase of the cement activities of Egyptian group Orascom.

Last year the group had achieved its target of reducing debt by 2.0 billion euros despite an unfavourable economic environment, Lafont said.

The debt would be reduced "significantly" in 2012 by means of maximising operating cash flow.

To this end, the group intended to make the asset sales, he said, but did not provide details.

The group would also try to reduce investment this year and would recommend a halving of the dividend to 50 euro cents.

Under the programme to save 500 million euros, the group would close one factory in the United States and one in France.

Source: AFP