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Friday, November 07, 2008
Lafarge Beats Expectations, Drops Earnings Target
Simon Kennedy
MarketWatch Pulse
LONDON -- French cement maker Lafarge said Friday that its third-quarter net profit rose 8% to 647 million euros ($836 million) as sales grew 9% to 5.32 billion euros. Analysts had been expecting a profit of 611 million euros, according to a Dow Jones Newswires poll. The group said its priority in the short term is to focus on cash flow generate and cost cutting as it also dropped its 2010 earnings targets citing uncertainty in the current markets. Lafarge said it will cut costs by 400 million euros over three years, including 120 million euros of cuts by the end of 2009. Total capital expenditure will also be limited to around 2 billion euros in 2009 and the group's divestment program will be expanded beyond the current 1 billion euro target.
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Most folks judge the health of a business by the revenue that comes in through sales. But not all revenue is equal. Companies can grow their sales by buying other companies, which means you don't get a clear view of how the real sales trends are moving.
So, many analysts, particularly those who look at retail, try to gauge what¿s known as "organic" growth, by looking at same-store sales. These are sales only at outlets open more than a year, so the metric can exclude any sales jump that comes from opening new locations. Retailers release same-store sales (which are frequently called "comps" since they're a true comparison from the previous period) every month.
Retail, incidentally, isn't the only industry to look at same-store sales. Hospital companies, also use the metric, to gauge how existing hospitals are performing compared to ones they just built or acquired.
