2007 results and outlook presentation of february 27 2008 markus akermann ceo theophil h schlatter cfo

©2008 Holcim Ltd/Switze rland 2007 results and outlook Presentation of February 27, 2008 Markus Akermann, CEO Theophil H. Schlatter, CFO The spoken word prevails. 2 1 2007 results©2008 H olcim Ltd/Switzerland 2007: Another record year for Holcim  Excellent operating results  Solid construction activity in most markets  Excellent geographical positioning  Strategy is strengthening Group growth  Proposal for substantial dividend increase 1) Holcim had another record year in 2007. In a favorable, but increasingly challenging economic environment, the Group's fundamental strengths were in full view. This gratifying development is confirmed by strong internal operating EBITDA growth of 10.8 percent and a remarkable improvement in net income. Holcim is excellently positioned in the emerging markets with high development potential, especially given that some three quarters of our cement capacity is located there. We succeeded in largely offsetting the decrease in demand experienced in a few markets. Once again, we could reap the fruits of a strategy which has been consistently implemented over the years. And we will continue to focus on our goals in order to remain just as successful going forward. Based on the good results, the Board of Directors will be proposing to the annual general meeting on May 7 that the gross dividend be increased from 2 Swiss francs to 3 Swiss francs 30 per share. We are thus meeting the target we set in 2003 of achieving in the medium term a payout ratio of one third of net income attributable to equity holders of Holcim Ltd. 2 2007 results©2008 Holcim Ltd/Switzerland Europe: Rise in earnings from eastern Europe  Construction activity and capacity utilization good  Eastern Europe, Russia and Azerbaijan on the up  Foster Yeoman bolsters aggregates sales in UK  High level of efficiency, stable sales, attractive prices  Europe making biggest contribution to Group result 2) I now turn to the key facts in the individual Group regions: The robust global economy also provided numerous stimuli for the European building industry. In most countries of eastern Europe as well as in Russia and Azerbaijan cement deliveries increased. We also lifted sales volumes in France. However, demand was lower in Central Europe and Spain. Our sales of aggregates also increased – bolstered by the full-year inclusion of Foster Yeoman in the UK. By contrast, sales of ready-mix concrete showed a moderate decline. That said, lower sales volumes in Spain and Switzerland were virtually offset by the excellent sales trends seen in other markets. Thanks to greater operational efficiency, generally stable sales patterns and largely attractive prices, practically all 3 Group companies improved their financial results. Good results were achieved above all by Holcim France Benelux and Aggregate Industries UK as well as the Group companies in eastern Europe, including Russia and Azerbaijan. Overall, Europe made the biggest contribution to the Group result. 3 2007 results©2008 Holcim Ltd/Switzerland North America: Cement production at record level  Weak US housing construction straining building industry  Higher cement output and fewer imports  Meyer Material bolsters Aggregate Industries US  Stable earnings despite weak US dollar  Optimized market organization from 2008 3) The US economy cooled considerably in the second half. Housing construction saw a sharp decline, contrasted with a renewed increase in infrastructure and industrial building activity. Canada turned in a generally solid performance. The high plant capacity utilization resulted in a new production record at Holcim US. Cement imports were virtually halted. In Canada, cement sales remained at a high level. But in northeastern US, St. Lawrence Cement sold less cement. Aggregate Industries US felt the impact of a tougher market coupled with some poor building weather. Deliveries of aggregates were down throughout the market. Higher sales volumes in Canada and the first-time full-year consolidation of Meyer Material absorbed the decline to some extent. Ready-mix concrete sales increased thanks to new consolidations. Holcim US and St. Lawrence Cement virtually matched their good previous-year performance. Aggregate Industries US, on the other hand, reported weaker results. Cost-cutting measures, temporary plant closures and a sound price situation meant that the decline in operating EBITDA was considerably smaller than the decrease in volumes. Following the buyout of minority interests at St. Lawrence Cement, the latter's activities in the northeastern US were integrated into Holcim US at the start of 2008, leading to an improvement in customer service and market development. 4 2007 results©2008 Holcim Ltd/Switzerland Latin America: Solid organic growth  Economy positive and building activity increasing  Cement and ready-mix concrete sales up  Higher volumes and somewhat better prices in Brazil  Sharp increase in raw material and energy prices  Alternative fuels ease energy outlays 4) Turning to Latin America: 2007 was a successful year for this Group region. Practically all Group companies increased or maintained their sales levels. Remarkable volume increases were achieved in Costa Rica, Colombia and Ecuador. In Brazil too, significantly more cement was sold. While in this country sales prices picked up a little in 4 the second half, they are still insufficient. Although consolidated cement and ready-mix concrete sales increased in this Group region, sales of aggregates saw a moderate decline owing to project delays. The sharp increase in raw material and energy prices had a negative impact on the financial results of several Group companies. However, thanks to extensive operational improvements and the increased use of alternative fuels, the higher expenditure could be partly offset. Virtually all Group companies contributed to the region's improved financial result and the solid organic growth. After roughly 15 years' management responsibility for Holcim Apasco in Mexico, I have decided to hand this task over to Thomas Knöpfel with effect from April 1 this year. As of this date, he will be the Executive Committee member responsible for the whole of Latin America. 5 2007 results©2008 Holcim Ltd/Switzerland Africa Middle East: High capacity utilization  Construction sector bolsters economic development  Higher sales volumes in all segments and markets  South Africa deconsolidated  Better operating results across the board  Equity accounting for Egyptian Cement 5) The general economic situation remained good in Group region Africa Middle East. All Group companies lifted cement sales. Capacity utilization rates were very good at Holcim Morocco, and Egyptian Cement posted a new sales record. In Lebanon, we benefited from booming demand for cement in adjoining areas of neighboring countries. Domestic construction activity remained muted. The Group companies in the Indian Ocean enjoyed a dynamic sales environment. Under the South African Black Economic Empowerment program, the Group has sold the bulk of its majority stake in Holcim South Africa. The company was deconsolidated with effect from June 2007. This also had an impact on the Group region's sales volumes and financial results. On a like-for- like basis, however, sales increased in all segments. All Group companies posted better results. Like-for-like, operating EBITDA showed an impressive year-on-year increase, confirming the robust state of the market and the good market positioning of our Group companies. Orascom Cement, a joint venture partner of Holcim at Egyptian Cement, was taken over by Lafarge at the beginning of 2008. Egyptian Cement – in which Holcim continues to hold a 44 percent stake – is therefore being accounted for according to the equity method with effect from January 23. 6 2007 results©2008 Holcim Ltd/Switzerland Asia Pacific: Results significantly higher  Economy on strong growth path  Housing and infrastructure deficit boosts building volumes  Sharp rise in sales across all segments  ACC and Ambuja Cements consolidated for full year  Stake in Huaxin Cement raised to 40 percent 5 6) And now to Group region Asia Pacific. The region grew in 2007. Construction activity was higher than average, and cement consumption rose virtually across the board. Building activity saw a strong increase above all in India, Bangladesh, Vietnam, the Philippines and Indonesia. Holcim achieved impressive growth in volumes of cement sold. This increase is attributable mainly to the first-time full-year consolidation of ACC and Ambuja Cements in India. Malaysia was the only country where we delivered less cement. Sales of aggregates were also significantly higher. New aggregates plants in Thailand and the solid market trend in Indonesia had a positive impact. The increase in sales of ready-mix concrete reflects the stronger market presence in Singapore and other important regional metropolises. Practically all Group companies contributed to the substantial improvement in the Group region's operating results. In the Philippines, we benefited from rising domestic demand and a solid price environment. The full-year consolidation of the Indian Group companies also had a very positive effect. Just over a week ago, Huaxin Cement concluded a capital increase through a private placement. We now hold just under 40 percent of one of China's most important cement manu- facturers. We are also the biggest shareholder of this dynamically expanding group. 7 2007 results©2008 Holcim Ltd/Switzerland Sustainable development: Broad recognition  Innovative and sustainable construction solutions  Concrete: an efficient building material much in demand  Composite cements gaining in significance  Growing use of alternative fuels  “Leader of the Industry” in the DJSI 7) Sustainability is part of our strategy. I would like to remind you of the main thrusts of our efforts in this area: buildings are responsible for some 40 percent of global energy consumption. New approaches to construction are therefore of major ecological significance. Together with the Holcim Foundation for Sustainable Construction, we thus support research and development for innovative solutions in the construction industry. Globally, concrete is the second most used commodity by volume after water. It is of enormous significance for economic development. A functioning infrastructure would be inconceivable without it. Given its long life cycle, concrete is one of the most energy-efficient and eco-friendly building materials. We also invest in process and product optimization at the semi-finished clinker and cement stages. For instance, by using alternative fuels and developing new types of cement. Holcim is thus making a major contribution to reducing the level of CO2 per tonne of cement produced. What is more, we are on course to meet our voluntary reduction target. Sustainable development also embraces measures in the social area. The annual report contains more information on innovation and sustainable development. Last year, we were named "Leader of the Industry" in the Dow Jones Sustainability Index for the third time in succession. And at the World Economic Forum in Davos, the Sustainable Asset Management Group (SAM) and PricewaterhouseCoopers presented us with the "Sector Leader" prize and a "Gold Class" distinction. Such recognition strengthens us in our resolve. 6 8 2007 results©2008 Holcim Ltd/Switzerland Cement capacity in million tonnes * 2008 2009 2010 2011 Total Europe 1.8 1.2 2.5 1.7 7.2 North America 4.0 4.0 Latin America 0.2 1.6 1.8 Africa Middle East 1.2 1.2 Asia Pacific 0.9 11.7 2.1 14.7 Total Group 3.9 17.1 6.2 1.7 28.9 * Approved Gro up company projects; some under construction  7 million tonnes cement capacity already commissioned in 2007  By 2011 there will follow a further 29 million tonnes for around CHF 6.5 billion  Additional contribution of CHF 1.1 billion to EBITDA from 2012; CHF 550 million already from 2010 Capacity expansion: Growing with the market 8) In the year under review, Holcim commissioned just under 7 million tonnes of cement capacity worldwide – including almost 5 million tonnes in India alone. In Morocco, we successfully commissioned the Settat plant, which already produces at full capacity. A further 29 million tonnes are to be added by the end of 2011. The Group is creating a strong foundation for future growth. The new facilities will make Holcim more cost-efficient and strengthen its environmental profile. The investment costs for this extensive capacity expansion are estimated at around 6.5 billion Swiss francs. At all locations, we have the necessary permits and capacity is built, where we already have guaranteed reserves of raw materials and robust market positions. Holcim expects this extra capacity to produce an additional contribution of around 1.1 billion Swiss francs per year to EBITDA from 2012, with around half of this figure generated already from 2010. Investments are also being made in the aggregates segment. Projects and acquisitions are focusing mainly on Europe and North America. In the ready-mix concrete sector, new capacity is being created in practically all markets along the entire value chain. 9 2007 results©2008 Holcim Ltd/Switzerland Key financial figures 1 Adju ste d in li ne wi th rev ised I FRS 2 Including a ca pital g ain on the sal e of a stake i n Hol cim Sout h Afr ica of CHF 1,110 million and a spe cial dividend of CHF 15 0 m ill ion , net 3 Calcul ated on the weighted a verag e number of sha res outstandi ng 4 Excluding the non-re currin g capital g ain o n the sa le of a sta ke i n Holcim South Africa 5 Proposal of th e B oard of Dire cto rs L FL CIS FX in CH F Net sales 18,468 23,969 27,052 8.1% 3.2% 1.6% 12.9% Operating EBITDA 4,627 6,086 6,930 10.8% 1.8% 1.3% 13.9% Operating profit 3,316 4,385 5,024 13.0% 0.5% 1.1% 14.6% Net income 1,789 2,719 4,545 2 62.8% 3.2% 1.2% 67.2% Cash flow from operating activities 3,405 4,423 5,323 16.0% 3.1% 1.2% 20.3% 6.61 8.64 14.86 72.0% 10.02 4 Dividend per share in CHF 1.65 2.00 3.30 5 65.0% Dividend payment 382 522 868 5 66.3% EPS in CHF 3 Million CHF +/- 2005 1 2006 2007 9) Net sales increased by 13 percent and operating EBITDA by 14 percent. Operating profit improved by 15 percent and cash flow from operating activities advanced 20 percent. In 2007, we have had only a few changes in the scope of consolidation and foreign exchange rates only had a minor impact. However, on June 5, 2007, we have sold a stake in Holcim South Africa which led to a non- recurring gain of 1,260 million Swiss francs and to the deconsolidation of the South African Group. The remaining participation in Holcim South Africa amounts 7 to 15 percent and is equity accounted. The income statement and balance sheet were affected by a mixture of strengthening and weakening currencies against the Swiss franc. The US dollar in particular continued to weaken. 10 2007 results©2008 Holcim Ltd/Switzerland Major changes in the scope of consolidation Effective as at + ACC, India January 24, 2006 + Ambuja Cements, India May 3, 2006 + Meyer Material, US July 21, 2006 + Foster Yeoman, UK September 7, 2006 - Holcim South Africa June 5, 2007 +/- Various smaller companies 11 2007 results©2008 Holcim Ltd/Switzerland Exchange rates Statement of income average exchange rates in CHF 2005 2006 2007 +/- 1 EUR 1.55 1.58 1.65 4.4% 1 GBP 2.27 2.31 2.40 3.9% 1 USD 1.25 1.25 1.20 -4.0% 1 LATAM Basket (MXN, BRL, ARS, CLP) 1 0.98 1.00 0.97 -3.0% 1 African Basket (EGP, ZAR, MAD) 1 1.03 1.00 0.95 -5.0% 1 Asian Basket (AUD, IDR, INR, THB, PHP) 1 1.00 1.00 1.05 5.0% Balance sheet exchange rates in CHF 31/12/05 31/12/06 31/12/07 +/- 1 EUR 1.56 1.61 1.66 3.1% 1 GBP 2.26 2.40 2.25 -6.3% 1 USD 1.32 1.22 1.13 -7.4% 1 LATAM Basket (MXN, BRL, ARS, CLP) 1 1.08 1.00 0.95 -5.0% 1 African Basket (EGP, ZAR, MAD) 1 1.13 1.00 0.96 -4.0% 1 Asian Basket (AUD, IDR, INR, THB, PHP) 1 1.03 1.00 1.03 3.0% 1 Weighte d by net sales full year 200 6 12 2007 results©2008 Holcim Ltd/Switzerland Exchange rates – Translation gains / losses Million CHF 2005 1 2006 2007 Net sales 189 246 391 Operating EBITDA 55 39 74 Operating profit 42 22 47 Net income - equity holders of Holcim Ltd 25 16 17 Cash flow from operating activities 38 30 53 Total shareholders' equity 1,474 -619 -450 Net financial debt 1,070 11 -342 1 Adju ste d in li ne wi th rev ised I FRS 8 13 2007 results©2008 Holcim Ltd/Switzerland Currency sensitivity USD sensitivity Million CHF USD/CHF at 1.20 USD/CHF at 1.19 +/- Net sales 27,052 27,013 -39 Operating EBITDA 6,930 6,919 -11 Net income 4,545 4,531 -14 Cash flow from operating activities 5,323 5,314 -9 Euro sensitivity Million CHF Euro/CHF at 1.65 Euro/CHF at 1.64 +/- Net sales 27,052 27,025 -27 Operating EBITDA 6,930 6,924 -6 Net income 4,545 4,542 -3 Cash flow from operating activities 5,323 5,319 -4 14 2007 results©2008 Holcim Ltd/Switzerland Cement – Sales volumes by region  2006/2007 LFL Change in structure Total Europe 0.3% 4.0% 4.3% North America -7.3% 0.0% -7.3% Latin America 2.7% 0.0% 2.7% Africa Middle East 13.7% -18.9% -5.2% Asia Pacif ic 8.2% 9.8% 18.0% Total 3.6% 2.7% 6.3% 16.4 17.7 18.2 34.3 31.8 32.9 64.9 55.0 28.9 14.5 15.3 14.8 26.6 23.7 25.9 Total Group 2005 110.6 2006 140.7 2007 149.6 Million t 14) Consolidated cement sales volumes increased 6 percent to 150 million tonnes with all regions attaining positive internal growth with the exception of North America. 15 2007 results©2008 Holcim Ltd/Switzerland Aggregates – Sales volumes by region ° 2006/2007 LFL Change in structure Total Europe 4.7% 9.3% 14.0% North America -15.8% 3.2% -12.6% Latin America -1.6% 0.0% -1.6% Africa Middle East 0.9% -50.0% -49.1% Asia Pacific 25.0% 0.0% 25.0% Total -2.7% 2.9% 0.2% 56.9 65.1 65.0 4.0 3.23.2 5.7 11.2 9.7 12.5 11.7 12.7 Total Group 2005 169.3 2006 187.6 2007 187.9 Million t 108.8 79.7 95.4 15) Aggregates sales volumes reached 188 million tonnes and remained stable compared to the previous year despite the sluggish US construction market. 9 16 2007 results©2008 Holcim Ltd/Switzerland 15.3 14.8 38.2 44.2 45.2 13.3 2005 2006 2007 Ready-mix concrete and asphalt – Sales volumes -3.3% +15.7% Ready-mix concrete in million m 3 Asphalt in million t +2.3% +30.4% +15 .0%n.a. 16) Shipments of ready-mix concrete increased by 2 percent to 45 million cubic meters. Total asphalt volumes sold decreased by 3 percent to 15 million tonnes mainly due to lower deliveries in the US and the UK. 17 2007 results©2008 Holcim Ltd/Switzerland 27,052 23,969 18,468 2005 2006 2007 Net sales Like-for-Like (LFL) 1,329 10.1% 1,647 9.0% 1,933 8.1% Change in structure 3,735 28.2% 3,608 19.5% 759 3.2% Forex movements 189 1.5% 246 1.3% 391 1.6% Total change 5,253 39.8% 5,501 29.8% 3,083 12.9% Million CHF 17) Total consolidated net sales amounted to 27 billion Swiss francs resulting in a growth of 13 percent on an overall basis and 8 percent like-for-like. 18 2007 results©2008 Holcim Ltd/Switzerland Net sales by region ° 2006/2007 LFL Change in structure Currency Total Europe 8.2% 6.8% 4.9% 19.9% North America -3.6% 3.3% -2.5% -2.8% Latin America 11.3% 0.4% -2.6% 9.1% Africa Middle East 16.9% -26.6% -2.5% -12.2% Asia Pacific 16.6% 11.0% 5.0% 32.6% Total 8.1% 3.2% 1.6% 12.9 % 5365 55 20 4704 4010 3675 3158 1 87 3 20 86 1831 6292 47 4 5 2288 Million CHF 2005 2006 2007 10401 7037 86 7 3 10 19 2007 results©2008 Holcim Ltd/Switzerland North America 19.2% Europe 37.3% Asia Pacific 22.5% Africa Middle East 6.6% Latin America 14.4% Net sales by region Net sales 2007 19) Europe’s share in net sales increased to 37 percent of Group total while North America contributed 19 percent. 14 percent of net sales were generated in Latin America and 7 percent in Africa Middle East. The region Asia Pacific gained importance by expanding its share from 19 percent to 23 percent. 20 2007 results©2008 Holcim Ltd/Switzerland 4, 627 6,086 6,930 25.1% 25.4% 25.6% 26.0% 2005 2006 2007 Operating EBITDA Margin Like-for-Like (LFL) 377 10.5% 611 13.2% 660 10.8% Change in structure 607 16.9% 809 17.5% 110 1.8% Forex movements 55 1.6% 39 0.8% 74 1.3% Total change 1,039 29.0% 1,459 31.5% 844 13.9% Million CHF 1 1 Margin on a like-f or-like basi s 20) Operating EBITDA grew from 6.1 billion Swiss francs to 7 billion Swiss francs. It increased by 14 percent on an overall basis or by 11 percent excluding changes in structure and currency effects. The overall EBITDA margin improved further to 25.6 percent or to 26 percent on a like-for-like basis thanks to performance improvements despite energy cost rises and a slowdown in construction activity in some of the markets. 21 2007 results©2008 Holcim Ltd/Switzerland Operating EBITDA by region π 2006/2007 LFL Change in structure Currency Total Europe 11.5% 5.5% 5.0% 22.0% North America -1.9% 1.5% -2.9% -3.3% Latin America 4.7% 0.0% -3.7% 1.0% Africa Middle East 25.1% -27.5% -3.2% -5.6% Asia Pacific 16.5% 12.9% 5.6% 35.0% Total 10.8 % 1.8% 1.3% 13.9 % 999 928 1033 1256 1244 1126 653 692 614 1844 1366 570 Million CHF 2005 2006 2007 2399 1605 1966 [...]... BBB + BBB + Fi tch Rating 1 15.1 RONOA ( %) B BB+ BBB + BBB + Adju ste d in li ne wi th rev ised IFRS 2008 H olcim Ltd/Switze rland 30 2007 results Outlook for 2008: Further growth Holcim enjoys excellent geographical diversification and in 2008 is expected to again reach its long-term growth target of five percent in internal operating EBITDA 31 2008 H olcim Ltd/Switze rland 2007 results 31) Before... on the sal e of a stake i n Hol cim South Afr ica of CHF 1 ,110 mil lio n and a spe cial divid end o f CH F 15 0 m ill ion , net 2008 H olcim Ltd/Switze rland 25 2007 results 25) The strong operating performance and earnings from the sale of a stake in Holcim South Africa resulted in Group net income increasing by 67 percent to 4.6 billion Swiss francs Net income attributable to equity holders of Holcim... the scope of consolidation, we should again see an increase in delivery volumes and operating results Asia Pacific will witness further growth With the exception of Thailand, we are expecting robust growth in all emerging markets of Asia Overall, cement deliveries and ready-mix concrete volumes are likely to increase in this Group region The operating results will also continue to improve This brings... out of five Group regions posted positive internal growth in operating EBITDA In Europe, operating EBITDA reached 2.4 billion Swiss francs In North America, operating EBITDA of 1 billion Swiss francs just fell short of the previous year’s level This was despite significantly lower volumes and higher energy prices in the US which could be compensated by favorable market prices, productivity gains, high... 3.1% 1.2% 20.3% 2007 26 2008 H olcim Ltd/Switze rland 2007 results 26) Cash flow from operating activities moved up by 20 percent to 5.3 billion Swiss francs This increase is mainly attributable to the rise in operating EBITDA due to better pricing, higher cement volumes, efficiency gains and good management of net working capital Taxes paid increased due to higher operating results while financial... ngla desh Tha iland Vie tna m Malaysia Indonesi a2 2 Phi li ppi nes Austr alia Ne w Zea land * If no t otherw ise in dica te d calcu latio n b ased o n local currenc ies Twelv e m onths ACEL, ele ven mon th s AC C, ei ght months ACL 2 Loca ll y no t pu bli shed ye t; wil l be up dated as soon a s l ocal r esults are pu bli c 1 35 2008 H olcim Ltd/Switze rland 2007 results Contact information and event... Phone +41 58 858 87 10 May 6, 2008 Fax +41 58 858 87 19 c ommunic ations@holcim.com Firs t quarter res ults 2008 May 7, 2008 Annual G eneral Meeting May 13, 2008 Dividend payment August 21, 2008 Half-year res ults 2008 Inv estor Relations November 12, 2008 Phone +41 58 858 87 87 Fax +41 58 858 80 09 investor.relations@holc im com Third quarter results 2008 Conferences for press and analysts Marc h. .. western Europe should be offset by the favorable economic climate in eastern and southeastern Europe We are therefore looking for stable sales volumes and improved operating margins In North America, the tight situation on the real estate market will affect conditions in the US construction sector in 2008 as well However, we are expecting positive stimuli from infrastructure projects The outlook for Canada... first-time consolidation of the traditionally weak first quarters of Foster Yeoman and Meyer Material Internal growth impacted the margin positively by 0.5 percentage points and the margin trend shows for Q4 a further improvement In the Other Construction Materials and Services segment we experienced a margin increase of 1 percentage point to 7 percent Operating profit Margin Million CHF 18.0% 18.3% 18.6%... high capacity utilization and lower imports In Latin America, operating EBITDA was 1.3 billion Swiss francs and internal growth stood at 4.7 percent Lower volumes and higher energy prices impacted negatively our Mexican operations Brazil showed improvement in terms of prices and volumes Thanks to better sales volumes and prices throughout the region, operating EBITDA reached 653 million Swiss francs . 2008 Holcim Ltd/Switze rland 2007 results and outlook Presentation of February 27, 2008 Markus Akermann, CEO Theophil H. Schlatter, CFO . are thus meeting the target we set in 2003 of achieving in the medium term a payout ratio of one third of net income attributable to equity holders of Holcim Ltd. 2 2007 results 2008 Holcim. 31 2007 results 2008 Holcim Ltd/Switzerland Outlook for 2008: Further growth Holcim enjoys excellent geographical diversification and in 2008 is expected to again reach its long-term growth target