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Author: vtpete Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 40  
Subject: Looking at Lafarge Date: 7/21/2003 8:48 PM
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This company looks interesting. Trading at book value. PE of 10. Price to cash flow ~ 6 with a 2% dividend. Looks like they haven't increased the dividend in some time. Price to free cash flow of about 24 based on 2003 estimates. Based on 2002 performance, price to free cash flow looks better ~ about 13.

I'm having trouble remembering which book I read that used the example of buying a rock pit. The part I remember was that a rock pit has a natural moat in its local area because of the substantial cost of transporting rock from other areas. Higher fuel prices certainly can't hurt the moat.

Profit margins have been running about 7% for the past few years. Looking further back, margins peaked at about 10%. They have some long-term debt but it seems pretty manageable. There is about $9/share long-term debt and $5/share cash.

This company looks they have a substantial amount of maintenance cap ex. Depreciation is very high. Over the past 10 years (1993-2002), depreciation averaged about $141 million annually while the company's cap ex was about $208 million annually on average. Think I will read through the last few annual reports and see if they have purchased any new rock pits the last few years or if the cap ex is just being devoted to replacing old equipment.

Really not much insider activity or short interest to speak of. Lafarge S.A. still owns about 54% of the shares according to valueline. Valueline says the book value includes about $6.50/share of intangibles which I suppose makes it slightly less attractive. Valueline's estiguess for 2004 earnings is $3.75/share

pete
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