2005 annual results and outlook for 2006 presentation of march 1 2006 holcim ltd

Presentation of March 1, 2006 Markus Akermann, CEO Theophil H. Schlatter, CFO The spoken word prevails. 2005 annual results and outlook for 2006 2 1 2005 annual results Dynamic development of the Group  Dynamic growth marks Group results  Internal operating EBITDA growth of 10.5 percent  Acquisitions totaling CHF 5.2 billion  Foundations laid for creation of value in the future  Solid Group net income permits dividend increase 1) For Holcim, last financial year was exceptionally dynamic, setting new standards in terms of both organic and acquisition-based growth. Within its existing portfolio, the Group generated organic growth of about 10 percent in terms of sales, operating EBITDA and cash flow. The acquisitions came to a total of 5.2 billion Swiss francs. Extrapolated to the year as a whole these companies represent sales of 5.5 billion Swiss francs. This is equivalent to just under a third of consolidated net sales and results in an additional contribution to operating EBITDA of nearly one billion Swiss francs. The fundamentally solid positioning and swift integration of the newly acquired companies provide an excellent basis for continuing to generate substantial added value going forward. In light of a marked rise in net income, this year the Board of Directors once again proposes that the General Meeting adopt an increase in dividend from 1 franc 25 to 1 franc 65 per share. This corresponds to an increase of 32 percent. 2 2005 annual results Pleasing development of existing portfolio  Group profited fully from its strengths in a favorable economic environment  Predominantly friendly price environment and good capacity utilization  Impressive performance in all Group regions  Stringent cost management and price increases absorb higher energy costs  Foreign currency effects negligible 2) In a favorable economic environment, Holcim applied the Group's strengths to the full. The consolidated financial statements are based on a solid regional business development and confirm our leading position as a global building materials group. With a few exceptions, we were able to positively influence results with targeted price adjustments. Good capacity utilization also had an impact. In operating terms, the main focus of our efforts was on the cost side, as we wished to offset the massive rise in energy costs as much as possible. These efforts were successful thanks to a range of measures, but in particular thanks to greater use of alternative fuels and an improvement in the marketing of composite cements. In contrast with previous years, the impact of foreign currency effects on the income statement in Swiss francs was only negligible. 3 3 2005 annual results Group strengthened by significant acquisitions  Holcim makes the largest acquisitions in the company’s history  Thanks to a strong balance sheet, the acquisitions could be financed almost exclusively from borrowed capital  With India and El Salvador the focus of investment in cement is in growth markets  Takeover of Aggregate Industries marks a major step towards implementing a dual product strategy  All companies making a positive contribution to the Group result since day one  Integration of the new companies is going according to plan and synergy potentials are to be exploited step-by-step 3) Last financial year Holcim made the largest acquisitions in its history, financed – thanks to a strong balance sheet – almost exclusively from borrowed capital. The main areas of investment were the takeover of Aggregate Industries, the acquisition of a majority stake in Cemento de El Salvador, and the entry into the Indian market. The decision to step up our presence in emerging market India as announced in January 2006 rounds out the picture. In the emerging markets we intend to continue to focus primarily on the fast-growing cement sector. However, in the mature markets we shall be continuing to open up our range of products and services and shall be presenting ourselves as a solution-oriented partner. We expect this dual product strategy, based on cement and aggregates, to generate key stimuli in the future. With the new acquisitions, Holcim is investing in quality. All companies boast good market positioning, modern plants, long-term reserves of raw materials, competent management teams and capable employees. The new acquisitions have been making a positive contribution to the Group result since day one. The integration of these companies into the Holcim Group has got off to a very good start and we shall be exploiting the full potential for synergies and savings on a step-by-step basis. I shall be returning to certain points concerning these acquisitions in the context of the regional reports. 4 2005 annual results Europe  Construction industry largely solid  Housebuilding and infrastructure projects trigger strong demand  Strong increase in consumption widespread, especially in Switzerland 4) Developments in Group region Europe: Gratifying global economic conditions also gave a boost to the European economy. Against this background, the construction sector was predominantly solid and cement demand continued to rise. 4 5 2005 a nnual res ults Operations in Europe Cement plant Grinding plant/ terminal Aggregates Participation: Cement plant 5) You immediately see that Holcim has strengthened its presence in Europe. With Aggregate Industries, we now also have operations in the UK, an attractive building materials market with traditionally stable cash flows. Here, Aggregate Industries holds a strong market position. As a result of this acquisition, the Group has gained 87 aggregates plants, 83 ready-mix concrete facilities, 58 asphalt plants and 4 cement import terminals. Expansion of capacity at the Beli Izvor plant in Bulgaria has progressed according to plan. In Romania, we are building a new kiln line at the Campulung plant which is due to commence operations in 2008. In Italy and Spain in particular, but also in Central and Eastern Europe, we expanded our distribution network by purchasing or constructing ready-mix concrete facilities. 6 2005 a nnual res ults Facts on Europe  Marked increase in deliveries of aggregates and ready-mix concrete; cement sales gratifying  Thanks to its excellent market positions, Aggregate Industries UK lifts sales of aggregates, concrete and asphalt  All Group companies see improvement in operating result, in particular in Spain, France, Central and Southeastern Europe  Price recovery and more differentiated product range lead to better operating margins in Germany  In Europe operating EBITDA is up by 34 percent to CHF 1.6 billion  Internal operating EBITDA grows by 11 percent  Integration of Aggregate Industries well advanced; potential for synergies and savings clearly identified 6) There was a marked increase in deliveries of aggregates and ready-mix concrete. Within this result, Aggregate Industries UK accounted for a total of 21 million tonnes of aggregates and 2 million cubic meters of ready-mix concrete. The company also sold 5 million tonnes of asphalt. However, sales in our core cement business also increased in most markets. We recorded a substantial increase in volume in Switzerland, while the recession in the German construction sector continued to depress deliveries. In Spain and France, we were very satisfied with the business development. Despite a decline in the market as a whole, our Italian Group company exceeded its previous years' sales volume. We achieved the greatest percentage volume growth in Russia and Romania. All European Group companies improved their financial results, some of them significantly. The inclusion of the UK company Aggregate Industries also had a favorable impact on performance. Operating EBITDA increased by 34 percent despite higher energy costs in Europe. Internal operating EBITDA growth came to 11 percent. The integration of Aggregate Industries is proceeding according to plan. This also applies to the synergies of 100 million Swiss francs announced at the time of the acquisition. The synergies and savings potential identified now amount to more than 5 this figure – two thirds being applied in the operating segment and around one third being realized through fiscal and financial measures. A systematic Group-wide efficiency program in the segments "Aggregates" and "Other construction materials and services" is playing a key part in this. A proportion of the operating synergies were taken to the income statement in 2005. The bulk of the savings at Aggregate Industries and in the Group as a whole will be realized from 2006 onward as planned. 7 2005 a nnual results North America  Robust market development in North America  US cement capacity fully utilized and cement imports at record level  Construction activity solid in Canada, but second half weaker 7) The US economy continued to expand in 2005 and demand for building materials reached new peaks. Capacity bottlenecks led to an above-average rise in clinker and cement imports. In Canada, the construction sector experienced a slight pause in growth in the second half of the year, with a slowdown in residential construction activity in particular. 8 2005 annual results Operations in North America Cement plant ( 1 under construction) Grinding plant/terminal Aggregates 1 8) On the North American continent, the acquisition of Aggregate Industries resulted in Holcim gaining 77 aggregates plants, 95 ready-mix concrete facilities and 43 asphalt operations. This means that in the US too we took a major step towards expansion. The Group companies Holcim US and Aggregate Industries US are managed independently. However, various synergies can be realized, e.g. in logistics and through the combination of procurement activities in the "North America Purchasing Organization". Holcim US did its outmost to meet the higher demand for cement. Despite an increase in production capacity more had to be imported. A start was made on the construction of the Ste. Genevieve cement plant on the Mississippi. Work began on the port facilities. In addition, earth works and preparations commenced for the plant construction. The investment costs for this state-of-the-art plant and the related logistics infrastructure are assessed to be 1 billion US dollar, 130 million US dollar of which are for harbor facilities and logistics. The contract with the main supplier of machinery was recently signed. The plant is due to be commissioned in 2009 and 6 should strengthen our market and cost leadership. Several US plants have also expanded their capacity for alternative fuels. On the basis of the positive experience gained, our plants in Canada have now also received permission to step up the use of alternative energy sources. 9 2005 annual results Facts on North America  Major expansion in aggregates, ready-mix concrete and asphalt operations thanks to Aggregate Industries US  Further increase in cement sales and very good capacity utilization  Earnings at St. Lawrence Cement nearly offset weaker demand on US East Coast  Holcim US is profiting from increased plant efficiency and improved prices  In North America, operating EBITDA rises by 68 percent to CHF 928 million  Internal operating EBITDA grows by 21 percent despite higher energy and raw material expense  US Group companies benefit from various synergies, despite separate operational management 9) Since being consolidated for the first time, Aggregate Industries US has sold a total of 44 million tonnes of aggregates, 4 million cubic meters of ready-mix concrete and 8 million tonnes of asphalt. In an improved price environment, Holcim US increased its cement deliveries significantly to over 14 million tonnes. In Canada, St. Lawrence Cement felt the impact of the slowdown in the construction sector in Ontario and Quebec in the second half of the year. Despite maintenance work carried out at the Catskill and Joliette cement plants St. Lawrence still almost matched last year’s result. The improvement in income from sales, coupled with further efficiency gains, made it possible to offset the rising cost of electricity and thermal energy. The sharp 68 percent increase in operating EBITDA is attributable both to the first-time consolidation of Aggregate Industries and to the particularly positive business development at Holcim US. Internal operating EBITDA growth came to a pleasing 21 percent. 10 2005 annual results Latin America  Economy firms in year under review  Construction activity remained at a generally high level  Housebuilding, infrastructure projects and tourism stimulate demand for building materials 10) 2005 saw growth in Latin America continue, in some cases gaining momentum in the second half of the year. Overall, cement consumption continued to rise. In many Group countries there was a significant increase in residential construction activity and in several markets, we benefited from public construction projects and the expansion of tourist infrastructure. 7 11 2005 annual results Operations in Latin America Cement plant Grinding plant/terminal Aggregates Participation: Cement plant Grinding plant/terminal 11) In Latin America, Cemento de El Salvador was consolidated for the first time. Substantial funds were once again invested in plant efficiency and measures to streamline cost structures. In several countries we increased our truck fleet in the ready-mix concrete sector so as to be in a better position to serve our customers. Another focus of investment activity was the creation of additional storage and processing capacity for alternative fuels and raw materials. Holcim Apasco increased the proportion of petcoke at all plants. The other Group companies also made substantial progress in increasing the use of alternative fuels and mineral components. 12 2005 annual results Facts on Latin America  Higher sales volumes of cement and ready-mix concrete  Strong improvements in sales and results at almost all Group companies  Mexico, Ecuador, Argentina and first-time consolidated Cemento de El Salvador all make sizable contributions  Pressure on prices impairs financial results in Brazil and Colombia  Progress made in use of alternative fuels  Operating EBITDA up 3 percent to CHF 1.1 billion  Slight decrease in internal operating EBITDA growth of 4 percent 12) In this Group region, we significantly increased deliveries of cement and ready-mix concrete. Shipments of aggregates decreased slightly owing to temporary fluctuations in demand. Practically all Group companies contributed to the solid performance. The increased replacement of conventional fuels went at least some way towards offsetting the sharp rise in energy costs. The participation in Cemento de El Salvador was increased to 64.2 percent in the year under review. The previously associated company has been fully integrated into the regional network. Holcim Apasco increased its sales of cement and ready-mix concrete. In the context of restructuring measures in Ecuador, we significantly increased our profitability in the aggregates and ready-mix concrete segments. The operating EBITDA of Group region Latin America increased by 3 percent. However, adjusted for consolidation effects, regional EBITDA growth decreased by 4 percent due to the ongoing erosion of prices in Brazil and Colombia. 8 13 2005 annual results Africa Middle East  Generally positive economic climate  Private and public investments boost demand for construction materials  Very robust development in South Africa and Morocco 13) In Africa and the Middle East, economic developments in the construction sector were generally positive, however driven very much by local factors. Cement consumption increased primarily as a result of the construction of housing developments in urban areas and the expansion of tourist infrastructure. In South Africa, demand for cement has now been increasing for five years without interruption. 14 2005 annual results Operations in Africa Middle East Cement plant Grinding plant/terminal Aggregates Participation: Grinding plant/terminal Under construction 1 1 1 14) In Morocco, we are building a new cement plant with Chinese technology. The packaging and dispatch facility at the site of the new plant is yet in operation, enabling us to serve the fast-growing Casablanca market already today. The fully equipped cement plant with an annual capacity of 1.7 million tonnes will commence operations in mid-2007. 15 2005 annual results Facts on Africa Middle East  All Group companies profiting from friendly market  Sales increases across all segments; strong rise in deliveries of ready-mix concrete in South Africa  Improved market prices and higher capacity utilization underpinned local results  Holcim Lebanon profits from additional export opportunities  Operating EBITDA increases by 27 percent to CHF 614 million  Supported by all Group companies, internal operating EBITDA grows 22 percent 9 15) All Group companies in this region took advantage of the good market situation. As a result, deliveries increased in all segments, in some cases markedly. Holcim South Africa posted a higher contribution to results, not least owing to the brisk demand for aggregates and ready-mix concrete. Thanks to the favorable price situation and higher delivery volumes, Egyptian Cement and Holcim Lebanon also significantly improved their financial performance. The results of the Group companies in Morocco and the Indian Ocean were substantially better than the previous year. Overall, Group region Africa, Middle East made remarkable progress. Operating EBITDA increased by 27 percent and internal operating EBITDA growth reached 22 percent. 16 2005 annual results Asia Pacific  Growing construction activity  Main stimuli coming from housebuilding and infrastructure projects  Strong increase in cement consumption 16) Asia Pacific: The economy continued to perform well. However, in the second half of the year the pace of growth was dampened by higher energy prices and rising interest rates. Demand for construction increased in all regional Holcim markets, with the main stimuli coming from private and public sector residential construction and from the expansion of energy supplies and transport networks. 17 2005 annual results Operations in Asia Pacific Cement plant Grinding plant/terminal Aggregates Participation: Cement plant Grinding plant/terminal 17) With our entry into the Indian market we have massively expanded our industrial base and ideally positioned ourselves strategically in an sustainable growth market. Group company Ambuja Cement Eastern has started building a grinding station in West Bengal and The Associated Cement Companies – ACC for short – is planning an extensive productivity enhancement program. I shall come back to India and the status of our acquisitions. In Vietnam, we advanced with planning for the construction of an additional kiln line. 10 18 2005 annual results Facts on Asia Pacific  All big Group companies post increase in cement sales  Significantly higher volumes of ready-mix concrete delivered  Substantial contributions to results from the Philippines, Thailand, Vietnam and Indonesia  A sound market plus efficiency increases produce attractive results in Australia too  Operating EBITDA up 23 percent to CHF 570 million  Internal operating EBITDA increases 16 percent  Ambuja Cement Eastern consolidated since April 2005 and The Associated Cement Companies since February 2006  In India acquisitions of 34 million tonnes of cement capacity within 12 months, including Gujarat Ambuja Cements  Platform to expand network in the Indian Ocean 18) Almost all Group companies increased their cement sales. In some urban centers, our Group companies sold significantly more ready-mix concrete. Siam City Cement in Thailand and Holcim Indonesia recorded the strongest increases in terms of volume. Both companies benefited from increasing domestic demand for cement and from a rise in exports. We sold significantly larger volumes in Sri Lanka and Bangladesh. Holcim Vietnam saw a sharp rise in deliveries. Practically all companies turned in a stronger performance. For the first time, India also made a contribution to earnings. The operating EBITDA of Group region Asia Pacific rose by 23 percent. Internal operating EBITDA growth came to 16 percent. I would like to point out that the new acquisitions in India have yet only had a minor impact on the 2005 income statement. Ambuja Cement Eastern has been consolidated since April 2005, but ACC, which is of greater significance, will only be consolidated as of this February. This means that we shall only be reporting India's full contribution during the current year. Within a very short space of time, we have established a unique strategic foothold in India with substantial shareholdings. Furthermore, the two companies acquired last year have already been successfully integrated into the Holcim Group. To sum up in note form:  Clear understanding and agreement on the strategic focus as well as operational priorities between Holcim and local Board and management.  Continuity on the top management level.  Positioning Holcim representatives in key positions such as CFO and CIO.  Focusing on core business through already realized sales of non-strategic participations.  Short-term measures to increase production capacity.  Structured approach to develop services in alternative fuels and raw materials.  And finally, on January 24, Holcim assumed the majority on the Board of ACC. We were able to expand our partnership with the founding families of Gujarat Ambuja Cements and this year we acquired a significant share package in India's third-biggest domestic cement producer. Today, Holcim holds participations in 34 million tonnes of cement capacity in India. We have already provided detailed information on these developments and today, I merely propose to take stock of the current situation. We are confident that the Foreign Investment & Promotion Board and the Securities & Exchange Board of India will soon give its approval for the takeover of Gujarat Ambuja Cements. We intend to launch the public purchase offer for an additional 20 percent of the share capital immediately afterwards. India is set to enjoy growth rates between 8 and 10 percent over the coming years. We intend to exploit these opportunities, while at the same time strengthening our network in the Indian Ocean. An initial step in this direction came with February's announcement of our market entry into the United Arab Emirates. [...]... figures 1 1 +/- Million CHF 2003 Net sales 12 ,600 13 , 215 Operating EBITDA 3, 311 3,588 4,627 10 .5% 16 .9% 1. 6% 29.0% Operating profit 1, 925 2,2 51 3, 316 29.4% 16 .1% 1. 8% 47.3% Net income Cash flow from operating activities 928 1, 120 1, 818 2.3% 62.3% 2, 619 2,622 3,405 9.3% 19 .2% 1. 4% 29.9% 2004 2005 LFL FX in CHF 10 .1% 18 ,468 CIS 28.2% 1. 5% 39.8% EPS in CHF 2 3 4 .17 6.73 2.4% 61. 4% 4.93 5.79 7.02 1. 9% 21. 2% 1. 15... 1 Asian Basket (AUD, NZD, THB, PHP) * 1. 02 1. 00 1. 03 3.0% 31/ 12/03 31/ 12/04 31/ 12/05 +/- 1. 56 1. 55 1. 56 0.6% 1 USD 1. 24 1. 14 1. 32 15 .8% 1 African Basket (EGP, ZAR, MAD) * 0.95 1. 00 1. 04 4.0% 1 Asian Basket (AUD, NZD, THB, PHP) * 1. 05 1. 00 1. 12 12 .0% Balance sheet exchange rates in CHF 1 EUR 21 * weighted by net sales full year 2004 2005 annual res ults 21) In 2005, exchange rate movements only marginally... Operating profit Margin Million CHF 18 .2%* 18 .0% 17 .0% 15 .3% 3' 316 2'2 51 1'925 15 1 7.9% 388 20.2% 33 1. 7% -16 2 -8.5% 22 1. 2% Like -for- Like (LFL) Goodwill amortization Change in structure Forex movements Total change 20 1. 0% -82 -4.3% 326 16 .9% 2003 * 4 01 260 362 42 1, 065 2004 17 .8% 11 .6% 16 .1% 1. 8% 47.3% 2005 33 operating profit margin on a like -for- like basis 2005 annual res ults 33) Operating profit was... 21 Movements of treasury shares net 4 -40 435 In(De)crease in financial liabilities -676 74 2'424 Decrease in marketable securities 30 20 9 -99 1' 340 -603 In(De)crease in cash and cash equivalents -14 5.0% 38 2005 annual res ults Financial position Million CHF 11 1.7% 11 1.9% 98.5% 89 .1% 13 ,027 10 ,6 61 64.2% 11 ,659 14 ,365 12 ,835 13 ,669 13 ,466 14 ,250 12 ,693 6,846 31/ 12/2004 * 31/ 03 /2005 30/06 /2005 Total shareholders'... sales Million CHF 18 '468 12 '600 Like -for- Like (LFL) Change in structure Forex movements Total change 270 2 .1% 47 0.3% -727 -5.6% - 410 -3.2% 2003 13 ' 215 908 7.2% 99 0.8% -392 -3 .1% 615 4.9% 2004 1, 329 10 .1% 3,735 28.2% 18 9 1. 5% 5,253 39.8% 2005 26 2005 annual res ults 13 Net sales by region Million CHF 44 41 2507 2003 2004 2005 7037 4704 4744 2630 12 80 ∆ 2004 /2005 2842 2785 17 60 18 73 15 40 19 45 2288 LFL Change... January 2006 after our announcement of the purchase of 34.8% in Gujarat Ambuja Cements Ltd Holcim Value Added (HVA) HVA CHF million (pre-tax) ROE 800 20% 600 15 % 400 10 % 200 5% 0 0% -200 -5% -400 -10 % -600 -15 % -800 -20% 19 92 19 93 19 94 19 95 19 96* 19 97 19 98 19 99 2000 20 01 2002 2003 2004 2005 Strong ROE and HVA trend reversed after 2002 * before extraordinary restructuring charges 41 2005 annual res ults 41) ... average of 5 percent 21 Contact information and event calendar Contact inf ormation Ev ent calendar Corporate Communications Phone + 41 58 858 87 10 March 1, 2006 Fax + 41 58 858 87 19 communications @holcim. com Annual results 2005 Conf erences f or press and analy sts Phone + 41 58 858 87 87 Fax + 41 58 858 80 09 inv estor.relations @holcim. com First quarter results 2006 May 12 , 2006 Inv estor Relations May 11 ,... Chile Argentina 1. 5% 1 7.2% 1 5 .1% 1 3.8% 1 -3.4% 1 -46.7% 1 1.5% 1 -16 .0% 1 4.3% 1 -0.5% 1 4.9% 4.2% -3.2% 2.4% 12 .9% 34.4% 11 .1% 2.5% 5.0% 22.3% * if not otherwise indicated calculation based on local currencies 1 calculation in 43 USD 2005 annual res ults Price/volume variances per region Domestic cement prices Africa Middle East Morocco 1 Egypt Lebanon 1 Indian Ocean South Africa * 1 2 Domestic cement... * 2004 * 2005 16 05 928 12 02 10 52 5 51 485 384 11 24 11 26 10 95 614 483 449 ∆ 2004 /2005 LFL Change in Currency structure 22.5% 0.4% 43.6% 3.4% 6.3% 0.5% 2.5% 2.4% 4 .1% 2.8% 16 .9% 1. 6% Europe North America Latin America Africa Middle East Asia Pacific Total * 570 465 Total 10 .6% 21. 4% -4.0% 22.2% 15 .7% 10 .5% 33.5% 68.4% 2.8% 27 .1% 22.6% 29.0% 32 adjusted to ex clude certain Group charges 2005 annual res... 4' 618 -9 Net income 1' 818 1' 815 -3 3'405 3'400 -5 Euro/CHF at 1. 55 18 '468 Euro/CHF at 1. 54 18 '444 +/-24 Cash flow from operating activities Euro sensitivity Million CHF Net sales Operating EBITDA 4'627 4'6 21 -6 Net income 1' 818 1' 815 -3 Cash flow from operating activities 3'405 3'402 -3 23 2005 annual res ults 12 Sales volumes cement by region Million t 31. 8 30.8 Total Group 2003 94.3 2004 10 2 .1 2005 . 31/ 12/04 31/ 12/05 +/- 1 EUR 1. 56 1. 55 1. 56 0.6% 1 USD 1. 24 1. 14 1. 32 15 .8% 1 African Basket (EGP, ZAR, MAD) * 0.95 1. 00 1. 04 4.0% 1 Asian Basket (AUD, NZD, THB, PHP) * 1. 05 1. 00 1. 12 12 .0%. 33 2005 annual results 3' 316 2'2 51 1'925 18 .0% 17 .0% 15 .3% 18 .2% 2003 2004 2005 Operating profit Margin Like -for- Like (LFL) 15 1 7.9% 388 20.2% 4 01 17.8% Goodwill amortization 260 11 .6% Change. cash and cash e q uivalents -99 1& apos;340 -603 -14 5.0% +/-2003 2004 2005Million CHF 39 2005 annual results Financial position 13 ,669 14 ,250 13 ,466 12 ,693 10 ,6 61 11, 659 12 ,835 6,846 13 ,027 14 ,365 89 .1% 98.5% 11 1.9 %11 1.7% 64.2% 31/ 12/2004