Cost reductions lift Lafarge's operating profit nearly a fifth

French cement group Lafarge, which is in the process of merging with Swiss rival Holcim, said it was on track to meet its full year targets after reporting operating profits up by nearly a fifth in the first quarter.

Lafarge said cost reductions over the past year had helped it to report a 17 per cent rise in earnings before interest, taxes, depreciation and amortisation to €403m, beating analysts' expectations.

The figures came in ahead of those from Holcim, which also reported results on Thursday. Its results fell short of analysts' expectations, with operating profits adjusted for merger costs up 3.3 per cent to of SFr44m ($47m).

Over the past year Holcim has performed more strongly than Lafarge, which is more exposed to troubled regions in the Middle East and Africa. This led to turmoil in March as the Swiss group attempted to renegotiate the terms of the €41bn deal in its favour.

The healthy results from Lafarge will come as a relief to shareholders looking to finally seal the deal in the coming months. Holcim shareholders are due to meet on May 8 to approve the deal, with a tender offer by Lafarge to follow.

Shares in Lafarge were up 3.5 per cent in early trading on Thursday, while Holcim shares were up 1 per cent, helped by news on Wednesday night that the second-largest shareholder in Holcim has given its support to the deal.

Eurocement, the cement company owned by Russian Filaret Galchev, with 11 per cent of the shares, said it "realises deeply the situation in the construction materials industry as well as Holcim's position in the global market".

This represented one of the final obstacles to the deal to create the world's largest cement company by revenues.

"The strong start this year confirms that our teams are fully focused on achieving our objectives," said Bruno Lafont, the Lafarge chief executive, who is set to become co-chairman of the new company LafargeHolcim.

"In regards to our planned merger to create LafargeHolcim, we have successfully completed many significant steps. We are now entering the final stage of this transaction, which is on track with our announced ambitious timeline."

Bernard Fontana, chief executive of Holcim, said they had reported "robust" results with an "increase in financial performance despite a different weather pattern and some volume declines compared to a very strong previous year's quarter".

Analysts at Jefferies said that while the first quarter is the least important of the year for cement volumes, the results showed stronger pricing power from Lafarge, with prices up 4 per cent. Holcim prices were up 0.6 per cent over the same period.

Lafarge still reported a net loss of €96m in the quarter, however, compared with a €135m loss last year. Holcim reported a net profit of SFr310m, up from SFr80m a year earlier helped by the sale of its minority stake in Siam City Cement.

Lafarge said its ebitda, excluding the impact of the planned merger with Holcim, will be in a range of €3bn to €3.2bn in 2015. Holcim said it expected 2015 operating profit adjusted for merger-related costs between SFr2.7bn and SFr2.9bn.

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