Results 2012 and outlook holcim ltd switzerland

Ladies and Gentlemen, We welcome you to the presentation of our Annual Results 2012. After my remarks highlighting the most important developments throughout the Group, Thomas Aebischer, our CFO, will explain the Group financial results. Before the discussion, I will comment on the outlook. 1 In 2012, better demand for building materials in the fast growing markets of Asia and Latin America as well as North America was in contrast to the low demand in debt and recession hit Europe. Holcim delivered more cement. However, shipments of aggregates and ready-mix concrete declined due to lower demand in several mature markets, primarily in Europe and the Pacific Rim. Despite the limited volume growth and important restructuring costs, Holcim succeeded in increasing net sales, operating EBITDA and net income. Excluding the restructuring costs of 736 million Swiss francs, operating profit also increased significantly. Thanks to the combined effects of an organic growth and the Holcim Leadership Journey, the Group achieved like-for-like growth of both the operating EBITDA and operating profit of 6.4 percent and 11.4 percent respectively on an adjusted basis. These results are driven by a high degree of cost awareness and the successes achieved in passing on various higher costs to prices. The various streams of the Holcim Leadership Journey, which gained momentum from mid-year on, contributed 158 million Swiss francs on a net basis to the improvements at consolidated operating profit level. The restructuring costs also impacted net income. Nevertheless, it substantially increased by more than 50 percent compared to the previous year. This rise was supported by the sale of stakes in Guatemala and Thailand. More details on our financial performance will follow from our CFO Thomas Aebischer. As the payout potential before write-offs remains intact, the Board of Directors proposes an increased cash payout per registered share of 1.15 Swiss franc from capital contribution reserves, compared to 1.00 Swiss franc in 2012. 2 And now to the Holcim Leadership Journey, which was launched in May last year, and will generate an additional 1.5 billion Swiss francs in operating profit by year-end 2014. A safe and healthy working environment is part of this initiative. Our goal for 2012 was to reduce the lost time injury frequency rate, a goal that was reached. Despite many improvements, we still faced severe accidents. Therefore, our efforts are ongoing and we aspire to be among the best companies worldwide in 2013 with regard to the lost time injury frequency rate. Core elements of the Holcim Leadership Journey are Customer Excellence and Cost Leadership. They quickly gained momentum following the Group-wide announcement, so today I can already report on the first successes. As you know, we set the goal for 2012 to increase the operating profit by at least 150 million Swiss francs, and with a result of 158 million Swiss francs on a net basis, we reached that goal - a fact which, considering the challenging market environment, holds promise for the future. In terms of Cost Leadership, the main contributions on a net basis came from Procurement, with 48 million Swiss francs, and from Energy and AFR, with 40 million Swiss francs. 3 4 In connection with the Holcim Leadership Journey, Holcim has and will streamline its production capacity in several markets according to long-term demand. Primarily in Europe, further capacity adaptions became necessary. For example in the cement segment, Holcim aims to reduce capacity in this Group region by around 10 percent to improve capacity utilization. Substantial capacity adjustments took place in Spain and Hungary and Holcim Germany reorganized its ready-mix concrete business. In Belgium, the intended closure of the Haccourt grinding station, in France – after the closure of the Ebange plant – the intended transformation of the Dannes plant and in Italy the intended transformation of the Merone plant into grinding stations were officially announced. These announcements always occurred within the framework of relevant consultations with the authorities and employee representatives. Holcim also optimized capacities outside of Europe. In the Yocsina plant in Argentina clinker production was stopped, and in Australia, Brazil and Mexico the aggregates and ready-mix concrete businesses were optimized. In the documents provided, you will find a detailed summary of all restructuring measures, including their impact on the annual results 2012. The restructuring initiatives have been accelerated in the fourth quarter, and in 2012 we posted cash expenses of 239 million Swiss francs – largely in the fourth quarter of 2012. As of 2013, most of these restructurings will support earnings. 5 While the non-cash charges during the first nine months of 2012 amounted to 40 million Swiss francs, the fourth quarter also noted a considerable acceleration with an increase of these charges amounting to 457 million Swiss francs. Therefore full year 2012 noted total non-cash costs of 497 million Swiss francs of which the majority, as already elaborated on, was recorded in Group region Europe. The total impact on operating profit amounted to 736 million Swiss francs for 2012, of which cement accounted for some 64 percent, aggregates 19 percent and ready-mix concrete for the remaining 17 percent. Now let me comment on the development in the Group regions. I will start with Asia Pacific, our largest Group region. Here, the favorable economic trend continued. Mainly in South East Asia, the construction industry benefited from increasing government expenditure for the improvement and expansion of infrastructure and additional housing space. The development on the Pacific Rim, on the other hand, was less dynamic. Nevertheless, there were certain impulses: In Australia in regions with strong mining activities, and in New Zealand in connection with reconstruction after the earthquake in Christchurch. Overall, Holcim increased cement deliveries. Mainly due to Australia, aggregates and – less pronounced – ready-mix concrete deliveries decreased. The Indian Group companies recorded below expectations volume growth as the market faced a temporary slow restart after the monsoon. Holcim Philippines and Holcim Indonesia were working at full capacity level. In Vietnam, deliveries decreased due to the fight against inflation and shortages in liquidity. Also, both Australian Group companies sold slightly less products. The operating EBITDA of the Group region improved considerably. Primarily, the Group companies in the Philippines, Indonesia, and India contributed substantially to the success of this Group region. Excluding the one-off restructuring costs in Australia, the like-for-like operating EBITDA rose by 14 percent. To cope with the rising demand in Indonesia, we are currently building a new plant in Java, and we decided, following the dynamic development of demand, to build a second, identical kiln line at the same location. Substantial capacity expansions are also in progress in India. Shortly before year-end we sold 9 percent of Siam City Cement Company in Thailand. However, we remain a strategic partner. 6 And now to Latin America: This Group region remained on a solid growth path, and benefited from large infrastructure projects. Residential, commercial and industrial construction also contributed to this development. The overall solid demand for construction materials led to higher cement sales. The decrease in sales of aggregates can be explained by the closure of two quarries in Colombia, the weak demand in Argentina, and delays in the start of construction of a big mining project in Chile. With regard to ready-mix concrete, the reduction can directly be attributed to the strategic repositioning of our ready-mix concrete business in Brazil. The operating EBITDA increased. Excluding the one-off restructuring costs, the like-for-like operating EBITDA rose by 10.7 percent. Primarily, the Group companies in Ecuador, Colombia and El Salvador contributed to this positive result. However, the weak construction activity in Argentina impacted the financial results of our local Group company. Shortly before year-end, Holcim sold its participation of 20 percent in Cementos Progreso in Guatemala to the local majority shareholder. In two important markets we are expanding our presence in the cement segment: In the Brazilian plant of Barroso a substantial expansion will be realized by 2014, and a new kiln line to increase clinker capacity will be built at the Guayaquil plant in Ecuador by end of 2015. 7 The recession has continued in the EU. After the difficult start to the year caused by bad weather conditions, the European construction industry never gained momentum. The austerity policies of governments and a cautious private sector led to a decline in demand for construction materials. Only in Russia and Azerbaijan, as well as in Switzerland, construction activity remained high. Overall, Holcim sold less volumes in all segments. The aggregates segment was hit hardest. The recession primarily impacted our Group companies in Italy, Spain and UK. However, France, Belgium and the Netherlands also experienced a decrease in sales volumes. In Switzerland, where the construction activity remains high, the weak Euro led to increased imports and thus to a reduced performance of Holcim Switzerland. In Eastern Europe several infrastructure projects were cancelled, resulting in difficult market conditions for the Group companies present in these markets. The reduction in sales volumes, the associated price pressure and the significant restructuring costs had a negative impact on the operating EBITDA, which declined by approximately one third. The cement restructuring initiative will reduce the cement capacity by 10 percent and will allow a significant and sustainable improvement of fixed costs as well as a much better capacity utilization rate. When excluding the one-off restructuring costs, the like-for-like operating EBITDA declined by 13.4 percent. Finally, clearly better operating results were achieved in Russia and Azerbaijan. 8 The US economy gained momentum in the second half of the year, which favorably influenced the construction industry. Canada mastered the economic challenges remarkably well and the economic upturn continued. Holcim US sold considerably more cement and was able to benefit from the increased construction of buildings, which, however, developed differently per region. Aggregate Industries US also profited from the growth trend and increased its deliveries of ready-mix concrete. A reason for this success was the full integration of Ennstone, Inc., and Lattimore Materials with activities in Texas, which was consolidated for the first time for the full year. With regard to aggregate sales, the previous year’s level was not reached due to the completion of a large infrastructure project. The operating EBITDA of the Group region North America improved substantially, and strong organic growth was achieved. Both Group companies in the US improved their performance, the reasons for which were the larger sales volumes and the stable cost development. In the US, price increases also supported the result. 9 Political uncertainty in North Africa, and primarily the civil war in Syria, weighed on the economic development in the Group region. Largely stable was the economic trend in the Indian Ocean and the Arabian Gulf. In most countries in West Africa, the economy improved. We experienced a reduction in sales volumes of cement and ready-mix concrete, but sold more aggregates. The operating EBITDA of this Group region decreased considerably by 11 percent. Primarily, the financial results of Holcim Lebanon reduced the overall performance of this Group region. (Hand-over to Thomas Aebischer) . 10 . explain the Group financial results. Before the discussion, I will comment on the outlook. 1 In 2012, better demand for building materials in the fast growing markets of Asia and Latin America as. contrast to the low demand in debt and recession hit Europe. Holcim delivered more cement. However, shipments of aggregates and ready-mix concrete declined due to lower demand in several mature. 2012. 2 And now to the Holcim Leadership Journey, which was launched in May last year, and will generate an additional 1.5 billion Swiss francs in operating profit by year-end 2014. A safe and