Concentrate on what we can influence: The financial dimension and what's in the cards Theophil H Schlatter – CFO Holcim Group St Louis, September 15, 2010 © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 Executive Summary • Thanks to swift operational measures Holcim’s profitability preserved at 9.1% ROIC despite Global Financial Crisis • Financial profile strengthened: Liquidity increased, maturities extended, bank financing reduced, rating maintained • Capacity expansion program pursued, acquisition opportunities seized • We are stronger than before the crisis, thanks to our Highly passionate people committed to perform Modern asset base Sound financing and High liquidity • Holcim will benefit from the upswing and has the strength for value creating acquisitions © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 What happened since 2007? • Mumbai, 26 – 28 September 2007 22 Sept 2007 26 Jan 2008 20 Sept 2008 04 Oct 2008 The world experienced an unprecedented crisis © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 Since 2009, the world economy is in the trough… 1) World GDP growth Emerging markets 12% 9% Mature markets 6% 3% 0% -3% 2000 2001 2002 2003 2004 • However not without hope … 15 Aug 2009 1) 11 Nov 2009 2005 2006 2007 2009 • but … 22 Nov 2008 at PPP, current international dollar, based on IMF data per April 2010 (including China) © Holcim Ltd 2010 2008 Investor / Analyst Capital Markets Event 2010 Agenda How did we manage in the crisis? Look forward "We give a high priority to a solid balance sheet and a high level of liquidity We are convinced that we can emerge from the current economic cycle stronger than before, and that the 'post-crisis Holcim' will be a better company than the 'precrisis Holcim'." Excerpt of the Shareholder's letter of the annual report 2008, Rolf Soiron, Chairman of the Board of Holcim Ltd, Markus Akermann, Chief Executive Officer of Holcim Ltd, March 4, 2009 © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 Holcim could not escape the crisis but profitability maintained on high level – targets confirmed Group Net Sales, operating EBITDA (million CHF) 27'000 GDP growth1) Net Sales 12% 24'000 21'000 9% 18'000 15'000 12'000 6% op EBITDA GDP growth: Emerging Mature 9'000 6'000 3% 3'000 - 0% -3'000 -6'000 -3% 2005 2006 2007 2008 2009 2010 • Operating EBITDA margin target Cementitious materials Aggregates Other construction materials and services • Holcim Value Added target > 33% 27% 8% defined as (EBIT – WACCbefore tax x invested capital) WACCbefore tax = 11.76% Equivalent to ROICbefore tax > WACCbefore tax 1) GDP at PPP in dollar (IMF April 2010), weighted by Sales Volumes of Holcim © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 Holcim improved its efficiency in a difficult environment Robust cost management makes up for falling volumes Op EBITDA in million CHF Op EBITDA Operating EBITDA target margin cementitious materials: 33% Op EBITDA in million CHF Operating EBITDA target Aggregates: 27% Op EBITDA margin 36% 6'000 36% 30% 5'000 30% 4'000 24% 4'000 3'000 18% 3'000 18% 2'000 12% 2'000 12% 1'000 6% 1'000 6% 0% 0% 6'000 31.4% 32.6% 32.6% 27.3% 5'000 2005 2006 2007 28.4% 2008 2009 Op EBITDA Operating EBITDA target in million CHF Other Construction Materials 2005 Op EBITDA margin and Services: 8% 6'000 36% 5'000 30% 4'000 24% 3'000 18% 2'000 7.5% 6.0% 12% 7.0% 4.3% 1'000 3.7% 6% 0% 2005 © Holcim Ltd 2010 2006 2007 2008 2009 21.1% HVABT 20.7% 2006 20.3% 2007 19.5% 2008 19.7% 2009 Return targets Holcim Value Added (HVA)>0 and ROICBT>11.76% in million CHF 1'200 1'000 800 600 400 200 -200 -400 -600 -800 -1'000 -1'200 14.2% 14.3% 14.6% 10.2% 9.1% 2005 2006 2007 2008 24% 2009 ROICBT 23.5% 21.6% 19.6% 17.6% 15.7% 13.7% 11.8% 9.8% 7.8% 5.9% 3.9% 2.0% 0.0% Investor / Analyst Capital Markets Event 2010 Holcim stabilized the overall entrepreneurial risk by actively lowering the financial risk Entrepreneurial Risk definition1): Holcim assessment ER = MR + PR + FR Global financial crisis increased entrepreneurial risks ER = Entrepreneurial risk MR = Market risk PR = Production risk FR = Financial risk 1) Holcim risk mitigation Volkart, Rudolf, Finanzmanagement, Zürich 1998 © Holcim Ltd 2010 Operational measures Financial measures Investor / Analyst Capital Markets Event 2010 Operational measures: Cement, aggregates and ready-mix concrete are price inelastic, right sizing has top priority +13% +23% +10% 4‘630 +8% Variable costs -5% Fixed costs - 5% 24.1% 23.7% • Operating EBITDA sensitivity (million CHF) AY 2009 op EBITDA margin 21.9% Sales Sales price volume +5% +5% 23.6% 25.6% • Holcim people highly committed to performance management Focus on price stability Fixed cost reduction and efficiency improvements Capacity optimization Capex projects review and execution © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 Financial measures: Liquidity secured, maturities extended, dependency on bank financing reduced, rating maintained Focus on Cash flows • • • September 2008: CHF 1bn credit lines drawn to test the banks abilities (mio CHF) 2008 2009 2010 Net working capital (as of 30.6.) 2'341 2'089 1'968 Capex to maintain minimized (full year) 1'104 376 500est CHF m 8'000 Financing activities 2009 mio CHF Bank financings Capital markets (CM) Equity (incl stock dividend) Total financing 2'294 5'108 2'707 10'109 Maturity profile as of 30.06.2010 7'000 6'000 • • • • Committed credit lines Liquidity II 5'000 4'000 Loans Capital markets 3'000 2'000 1'000 10y CHF m Banks Capital markets Equity incl minorities 30.6.08 © Holcim Ltd 2010 Banks Capital markets 47% of total Equity fin incl liabilities minorities 30.6.10 62% of total fin liabilities 10 Investor / Analyst Capital Markets Event 2010 Reducing financial leverage while seizing investment opportunities • Developments since January 1, 2009 Capex to maintain 3'888 Business portfolio in Australia completed 14.3 million tons of cement capacities commissioned until June 30, 2010 Strengthened balance sheet Dividend policy maintained Reduced debt by CHF billion Goodwill 40% of equity BBB rating maintained Funds from operations / Net financial debt 1) Capital increase 1'929 Financial investments Cash flow from operating activities 2'707 Capex to expand 2'285 Dividends paid 858 2009 Gearing 50% 100% 40% 80% 30% 60% 20% 40% 10% 20% 0% Group target range 0% 2005 1) 376 2006 2007 2008 2009 2005 2006 Funds from operations/ Net financial debt per 2007 adjusted for gain of sale of Holcim South Africa © Holcim Ltd 2010 2007 2008 2009 H1 2010 11 Investor / Analyst Capital Markets Event 2010 Holcim tops Euromoney best borrowers poll 2010 • Investors were asked to General Industries 2010 2009 Entity Holcim General Electric ArcelorMittal 10 Linde 5 BASF 19 Lafarge 13 ThyssenKrupp AG Alstom Roche Strengthened financial 10 16 Glencore to capital markets Source: Euromoney, June 4, 2010 © Holcim Ltd 2010 nominate their top three borrowers in each category based on issuance strategy, credit quality and investor Score 76 • In total 1’739 investors took 71 part in the poll, which included 57 individual nominations for 775 52 separate borrowers 49 44 34 26 25 profile recognized – great access 22 12 Investor / Analyst Capital Markets Event 2010 Agenda How did we manage in the crisis? Look forward “Emerging market dynamics and recovery of construction activity in mature markets drive demand." Markus Akermann, Chief Executive Officer of Holcim Ltd, September 14, 2010 13 © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 Mature Europe set to recover from recession Well established brand and products assure benefits in upswing Mature Europe Net Sales, operating EBITDA (million CHF) 9'000 GDP growth today 8'000 7'000 12% Net S ales op E BIT DA 6'000 5'000 9% 4'000 3'000 6% 2'000 1'000 3% -1'000 GDP growth 0% -2'000 -3% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Mature Europe • • • • • 1) 2) Investment in Aggregate Industries UK in 2005 old plants with 0.8 million tons of clinker capacity closed/mothballed Fixed cost savings of CHF 242 million 2009 clinker capacity utilization 71%2) Sustainable solution provider: Olympics 2010 (UK), Nord Stream (Baltic Sea), Alptransit (CH), Liefkenshoektunnel (NL) GDP at PPP in dollar (IMF April 2010), weighted by Sales Volumes of Holcim Excluding mothballed plant © Holcim Ltd 2010 14 Investor / Analyst Capital Markets Event 2010 Emerging Europe strong recovery forecasted; efficient capacity in place Emerging Europe Net Sales, operating EBITDA (million CHF) 9'000 GDP growth today 8'000 12% Net Sales op EBITDA 7'000 6'000 9% GDP growth 5'000 4'000 3'000 6% 2'000 3% 1'000 - 0% -1'000 -2'000 -3% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Emerging Europe • 0.9 million tons new clinker capacity commissioned (Romania in 2008, Bulgaria in 2009) Further capacity of 3.8 million tons coming on stream in Russia (2010) and Azerbaijan (2011) • old plants with 1.4 million tons of clinker capacity closed/mothballed • Fixed cost savings of CHF 84 million • 2009 clinker capacity utilization 73%2) 1) 2) GDP at PPP in dollar (IMF April 2010), weighted by Sales Volumes of Holcim Excluding mothballed plants © Holcim Ltd 2010 15 Investor / Analyst Capital Markets Event 2010 North America GDP growth expected to recover faster than mature Europe; new asset base with lower production costs North America Net Sales, operating EBITDA (million CHF) 9'000 GDP growth today 8'000 12% Net Sales op EBITDA 7'000 6'000 9% GDP growth 5'000 4'000 3'000 6% 2'000 3% 1'000 - 0% -1'000 -2'000 -3% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 North America • Investment in Aggregate Industries in 2005 and St Geneviève plant with a clinker capacity of million tons commissioned in 2009 • old plants with overall 3.4 million tons of clinker capacity mothballed/closed • Fixed cost savings of CHF 256 million • 2009 clinker capacity utilization 53%2) 1) 2) GDP at PPP in dollar (IMF April 2010), weighted by Sales Volumes of Holcim Excluding mothballed plants © Holcim Ltd 2010 16 Investor / Analyst Capital Markets Event 2010 Latin America maintained its op EBITDA contribution; GDP growth expected to recover to 6% Latin America Net Sales, operating EBITDA (million CHF) 9'000 GDP growth today 8'000 12% Net Sales op EBITDA 7'000 6'000 9% GDP growth 5'000 4'000 6% 3'000 2'000 3% 1'000 - 0% -1'000 -2'000 -3% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Latin America • Deconsolidation of Venezuela reduced capacity by 2.4 million tons in 2009 • New capacities of 4.1 million tons will be realized in 2010/2012 (Mexico, Colombia in 2010 and Ecuador in 2012) • Fixed cost savings of CHF 148 million • 2009 clinker capacity utilization 73%2) 1) 2) GDP at PPP in dollar (IMF April 2010), weighted by Sales Volumes of Holcim Excluding mothballed plants © Holcim Ltd 2010 17 Investor / Analyst Capital Markets Event 2010 Africa Middle East crisis resistant & remaining at high level; Reduction in Net Sales due to deconsolidations Africa Middle East Net Sales, operating EBITDA (million CHF) 9'000 GDP growth today 8'000 12% Net Sales op EBITDA 7'000 6'000 9% GDP growth 5'000 4'000 6% 3'000 2'000 3% 1'000 - 0% -1'000 -2'000 -3% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Africa Middle East • Deconsolidation of Holcim South Africa (2007) and Egyptian Cement Company (2008) reduced clinker capacity by overall 7.2 million tons • New plant in Morocco commissioned 2007 (1.5 million tons) • 2009 clinker capacity utilization 92% 1) GDP at PPP in dollar (IMF April 2010), weighted by Sales Volumes of Holcim © Holcim Ltd 2010 18 Investor / Analyst Capital Markets Event 2010 Foresight investment in Asia Pacific paid off: Strong op EBITDA contribution; further dynamic growth expected Emerging Asia Pacific Net Sales, operating EBITDA (million CHF) 9'000 GDP growth today 8'000 12% Net Sales op EBITDA 7'000 9% 6'000 GDP growth 5'000 6% 4'000 3'000 3% 2'000 1'000 0% -1'000 -3% -2'000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Emerging Asia Pacific • In 2005/2006, Holcim acquired ACC Ltd and Ambuja Cement Ltd in India • Cement capacity in India increased since 2005/06 by 20 million tons Further capacity increases in India and Indonesia of overall 5.2 million tons coming on stream in 2010/2013 • 2009 clinker capacity utilization 91%2) • Huaxin platform in China not yet consolidated, offers additional potential 1) 2) GDP at PPP in dollar (IMF April 2010), weighted by Sales Volumes of Holcim Excluding mothballed plants © Holcim Ltd 2010 19 Investor / Analyst Capital Markets Event 2010 Well integrated business in Australia and New Zealand achieved; GDP growth expected >5% Mature Asia Pacific Net Sales, operating EBITDA (million CHF) 9'000 8'000 7'000 6'000 5'000 4'000 GDP growth today 12% 9% 6% 3'000 2'000 1'000 -1'000 -2'000 3% Net Sales op EBITDA GDP growth Proforma full year figures for Australia businesses 0% -3% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Mature Asia Pacific • Acquisition of Holcim Australia and additional 25% stake in Cement Australia in Q3 2009 will boost sales and operating EBITDA in this region from 2010 onwards • 2009 clinker capacity utilization 59%2) 1) 2) GDP at PPP in dollar (IMF April 2010), weighted by Sales Volumes of Holcim Excluding mothballed plant © Holcim Ltd 2010 20 Investor / Analyst Capital Markets Event 2010 Geographical diversification mitigated mature market slump Great potential due to strong global market position Group Net Sales, operating EBITDA (million CHF) 27'000 GDP growth Net Sales today 24'000 12% 21'000 18'000 9% 15'000 12'000 6% op EBITDA GDP growth: Emerging Mature 9'000 6'000 3% 3'000 - 0% -3'000 -6'000 -3% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Holcim Group • 2005/2006 expansion of Aggregates and Other Construction Materials and Services business through acquisition of Aggregate Industries Ltd UK and US, Foster Yeoman Limited UK • 2005/2006 acquisition of ACC Ltd and Ambuja Cement Ltd in India • 2009 acquisition of Holcim Australia • Deconsolidation of South Africa (2007), Egypt (2008) and Venezuela (2008) • Modern high efficient cement production facilities due to ongoing investment 2008 – 2013 (overall 26 million tons of capacity) 21 © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 Strength Performance Passion 22 © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 Entrepreneurial Risk formula Revenue − total cost ⎛ debt ⎞ debt Return on equity = interest ⎜1 + ⎟− invested capital ⎝ equity ⎠ equity ER MR PR FR Leading to the simplified formula1): ER MR + PR + FR ER MR PR FR 1) = = = = = Entrepreneurial risk Market risk Production risk Financial risk Assuming no correlation between MR, PR and FR © Holcim Ltd 2010 23 Investor / Analyst Capital Markets Event 2010 ... financing and High liquidity • Holcim will benefit from the upswing and has the strength for value creating acquisitions © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 What happened... forward "We give a high priority to a solid balance sheet and a high level of liquidity We are convinced that we can emerge from the current economic cycle stronger than before, and that the ''post-crisis... Akermann, Chief Executive Officer of Holcim Ltd, March 4, 2009 © Holcim Ltd 2010 Investor / Analyst Capital Markets Event 2010 Holcim could not escape the crisis but profitability maintained on high level