Holcim Ltd · SIX:HOLN
Holcim — LafargeHolcim — Investor Day (December 2015)
44 slides from Holcim's investor day presentation, Dec 1, 2015
Slide 1: LafargeHolcim Capital Markets Day
LafargeHolcim Capital Markets Day Building a new leader for a new world Eric Olsen | Group CEO | December 1st, 2015
Slide 2: Disclaimer
Disclaimer These materials are being provided to you on a confidential basis, may not be distributed to the press or to any other persons, may not be redistributed or passed on, directly or indirectly, to any person, or published or reproduced, in whole or in part, by any medium or for any purpose.
Slide 3: Our leadership team
Our leadership team Jean-Jacques Gauthier Eric Olsen Ron Wirahadiraksa Integration, Organization CEO CFO & Human Resources Alain Bourguignon Roland Köhler Urs Bleisch North America Europe Performance & Cost Ian Thackwray Asia Pacific Gérard Kuperfarb Pascal Casanova Saâd Sebbar Growth & Innovation L
Slide 4: CMD: agenda of the day
CMD: agenda of the day Agenda Speakers Presentation mode 09:00-10:30 Building a new leader for a new world Eric Olsen • Plenary presentation • Strategic plan • Financials 10:30-10:45 Coffee Break 10:45-12:15 Regional perspectives: Break-outs • Asia Pacific Ian Thackwray • Break-outs (all Regions • E
Slide 5: Building a new leader for a new world
Building a new leader for a new world CAPITAL MARKETS DAY 2015 © LafargeHolcim 2015 5
Slide 6: Medium term Group targets
Medium term Group targets¹ Free Cash Flow Capex ROIC • At least CHF 10.0bn • Max CHF 3.5bn • At least 300bps improvement cumulative 2016-2018 cumulative 2016-2017 from 2015 level by 2018 from operational improvement • CHF 3.5-4.0bn run rate by 2018 • At least CHF 6 per share run rate by 2018 Operati
Slide 7: Contents
Contents LafargeHolcim – a best-in-class portfolio Our value-enhancing strategy – five main pillars Delivering superior cash to our shareholders Cornerstones for success – shaping a winning company CAPITAL MARKETS DAY 2015 © LafargeHolcim 2015 7
Slide 8: LafargeHolcim – A best-in-class portfolio
LafargeHolcim – A best-in-class portfolio Developing Segment view Global Mix, momentum Mature markets markets Substantial value Highly diversified Good balance between Leading positions in Substantial mid-/long- creation through portfolio, with strong mature and developing markets poised for term po
Slide 9: Upside through differentiation in all market segments
Upside through differentiation in all market segments Building & small/mid size Retail projects • Differentiation advantage over ~25% competitors • Opportunities to optimize commercial approach • Characteristics of consumer goods • Capture the value of consistent Percent of • Successful cases in sev
Slide 10: A global footprint, highly diversified, with strong position in all regions
A global footprint, highly diversified, with strong position in all regions Europe North 22% America Asia Pacific 30% 19%2 LTM Latin India Net sales (CHF bn), after elimin. 30 America Number 1 Middle East 19% Cement capacity (mt) 374 Top 3 19% & Africa LH present Cement volume sold (mt) 253 25% Aggr
Slide 11: Leadership positions in over 80% of our markets
Leadership positions in over 80% of our markets China Other Developing USA Morocco Argentina Canada South Africa Ecuador Egypt Developing Brazil UK Mature markets Algeria markets Philippines Indonesia France Mexico Australia Nigeria Germany Group revenue Malaysia 100% = CHF 30.0bn Switzerland India
Slide 12: Good balance between developing and mature markets
Good balance between developing and mature markets LTM 100% = 30.0 6.1 Developing markets 45% 26% 55% China 3% 1% 8% Mature markets 52% 44% 18% Net sales Operating Operating EBITDA CHF bn EBITDA adjusted margin adjusted CHF bn Percent Note: Mature markets defined based on the three criteria of GDP (
Slide 13: Mature markets – poised for strong growth/recovery
Mature markets – poised for strong growth/recovery Mature markets (LTM) • Clear leadership position in North America (~30% capacity share) with solid value generation and upside • 52% of total revenue • Well positioned in other recovery markets • 44% of total EBITDA adjusted • Significant commercial
Slide 14: Developing markets – strong positions with long-term growth potential
Developing markets – strong positions with long-term growth potential Developing markets • Solid short-term growth of our developing markets (LTM) portfolio • 48% of total revenue • Many high performing markets in Asia, Africa and Latin America • 56% of total EBITDA adjusted • 70-80% of business in
Slide 15: Large exposure to markets with superior growth outlook
Large exposure to markets with superior growth outlook Cement volumes 100% = ~4,100 374 253 27% 5.4% Developing markets 57% 59% China 58% - 0.5% 10% 10% 33% 31% Mature markets 2.7% 15% Market cement Growth forecasts LH cement LH volume sold consumption for global markets capacity LTM, mt 2015, mt 20
Slide 16: Significant construction headroom in developing countries
Significant construction headroom in developing countries Weighted avg. cumulated cement consumption 1964-2014 (ton/capita) Developing countries Mature countries E.g., India, Philippines, Indonesia, Bangladesh, E.g., Germany, France, UK, Switzerland, Australia, Nigeria, Egypt, Morocco, Ecuador USA,
Slide 17: Dense presence in highly populated areas, taking advantage of urbanization
Dense presence in highly populated areas, taking advantage of the major on-going urbanization trend World population density map ` LH integrated cement plants and grinding stations Note: Map includes plants from joint ventures Source: NASA Earth Observations CAPITAL MARKETS DAY 2015 © LafargeHolcim
Slide 18: Contents
Contents LafargeHolcim – A best-in-class portfolio Our value-enhancing strategy – five main pillars Delivering superior cash to our shareholders Cornerstones for success – shaping a winning company CAPITAL MARKETS DAY 2015 © LafargeHolcim 2015 18
Slide 19: Our strategic plan – five value creation pillars
Our strategic plan – five value creation pillars Synergy delivery Active Commercial Lean capital and cost portfolio excellence spending leadership management Strict capital allocation discipline Maximize free cash flow Create sustainable value for our shareholders CAPITAL MARKETS DAY 2015 © LafargeH
Slide 20: Synergy potential confirmed; accelerated delivery
Synergy potential confirmed; accelerated delivery CHF m EBITDA synergies Procurement Operational SG&A Growth & Total performance Innovation run-rate 380 220 280 220 pre-tax cash flow 880 synergies Ramp-up 1,100 800 of EBITDA 550 synergies 100 ~ 1,500 2015 2016 2017 Run-rate end 2017 Financing / cash
Slide 21: Overall synergy target confirmed
Overall synergy target confirmed EBITDA synergies, CHF m run rate end 2017 Levers identified and taken over by countries Operational • 6 cement productivity best-practices deployed 220 • Network optimization in overlapping countries performance • ~2% reduction of external spending by: ü Renegotiatin
Slide 22: Going beyond synergies for cost leadership
Going beyond synergies for cost leadership Full delivery of cost synergies CHF ~880m Mindset of continuous SG&A toward ~7% productivity gain and of sales operational leverage Cost leadership Operational excellence to be deployed at scale Continuous optimization (Logistics, Energy, Clinker, of fixed
Slide 23: SG&A target of 7% of net sales
SG&A target of 7% of net sales Percentage of net sales Synergies CHF 280m Further SG&A optimization Levers to contribute to our SG&A ambition • Headquarters combination and right-sizing ~9% ~8% • Streamlining in overlapping countries, with ~7% headquarters and sites consolidation • Non-overlapping c
Slide 24: Commercial excellence: drive margin and growth
Commercial excellence: drive margin and growth 1. Delivering growth / margin synergies (CHF 220m) 2. Enhancing go-to-market models and differentiated offerings ~ share of total sales Retail Building & Infrastructure Specialty small/mid size solutions projects i.e., bag market e.g., bulk market e.g.,
Slide 25: Significantly lower capex
Significantly lower capex CHF bn • Historical Plan looking forward 2.8 - 2.9 3.5 < 2.0 (run-rate) New 2.0 Development development 1.5 è Completion of on-going projects Maintenance Maintenance Average 2016 2017 2018 2010-14 Note: Excluding integration related IT implementation costs CAPITAL MARKETS D
Slide 26: Growing with less capital going forward
Growing with less capital going forward è Operational leverage of è Bringing on-stream current capacities, our on-going projects increasing the utilization (about 13mt capacity) of our asset base 68% Utilization è Debottlenecking, è Pursuing new capital- operational improve- light asset models, ment
Slide 27: Active portfolio management
Active portfolio management APPLYING A SYSTEMATIC SET OF CRITERIA Macroeconomic Macroeconomic risks Industry-specific market LafargeHolcim position attractiveness attractiveness • Size and growth of the • GDP, FX and forecast volatility • Supply and demand • Cost competitiveness economy development
Slide 28: Contents
Contents LafargeHolcim – A best-in-class portfolio Our value-enhancing strategy – five main pillars Delivering superior cash to our shareholders Cornerstones for success – shaping a winning company CAPITAL MARKETS DAY 2015 © LafargeHolcim 2015 28
Slide 29: Our strategic plan – five value creation pillars
Our strategic plan – five value creation pillars Synergy delivery Active Commercial Lean capital and cost portfolio excellence spending leadership management Strict capital allocation discipline Maximize free cash flow Create sustainable value for our shareholders CAPITAL MARKETS DAY 2015 © LafargeH
Slide 30: Strict capital allocation policy
Strict capital allocation policy Cumulative 1 FCF Target è Maintain a solid investment grade rating through the cycle > CHF Maintain credit ratios commensurate with BBB / Baa2 credit ratings 10bn 2 è Strict management of capex and dynamic portfolio management 3 è Progressive dividend policy Grow DPS
Slide 31: Run rate free cash flow improvement to 2018
Run rate free cash flow1 improvement to 2018 CHF bn > CHF 6 per share > 0.4 c. 3.5-4.0 > 0.6 > 1.5 1 2 3 FCF Operating EBITDA Capex Reduction Financing, Tax Run Rate 2015 Improvement and others FCF (Post Tax) 2018 Note: At constant scope (excluding India) and FX 1 Free cash flow after maintenance an
Slide 32: Substantial financing synergies and tax to be further optimized
Substantial financing synergies and tax to be further optimized • Financing synergies of CHF200m target confirmed - Successful execution of Lafarge SA bond buyback programme already allowed for capture of significant synergies and optimization of average cost of debt - Cash-flow generation and furth
Slide 33: Working capital optimization part of 'asset-light' business model
Working capital optimization part of ‘asset-light’ business model • Net working capital saving target of CHF450m confirmed with 7 countries identified representing 70% of the potential target with implementation of action plan starting in Q1 2016 • New bonus scheme implemented with strict focus on f
Slide 34: Rigorous review of investment projects to create financial value
Rigorous review of investment projects to create financial value 30% 50% 20% Project Risks Expected returns Strategic considerations • Time-to-market: buy vs. build • ROIC impact • Relevance to the Group • Operational risks • Free Cash Flow generation and • Networking effect and potential • Project
Slide 35: Medium term Group targets
Medium term Group targets¹ Free Cash Flow Capex ROIC • At least CHF 10.0bn • Max CHF 3.5bn • At least 300bps improvement cumulative 2016-2018 cumulative 2016-2017 from 2015 level by 2018 from operational improvement • CHF 3.5-4.0bn run rate by 2018 • At least CHF 6 per share run rate by 2018 Operati
Slide 36: Contents
Contents LafargeHolcim – A best-in-class portfolio Our value-enhancing strategy – five main pillars Delivering superior cash to our shareholders Cornerstones for success – shaping a winning company CAPITAL MARKETS DAY 2015 © LafargeHolcim 2015 36
Slide 37: New operating model with clear accountability
New operating model with clear accountability è Country • Center of the organization • Full accountability for results • Lean organization è Above country • World class expertise in global functions • Selected resources close to countries (regional support) • Capital allocation controlled strictly •
Slide 38: Leadership team fully engaged, driving a new culture and mindset
Leadership team fully engaged, driving a new culture and mindset Jean-Jacques Gauthier Eric Olsen Ron Wirahadiraksa Integration, Organization CEO CFO & Human Resources Alain Bourguignon Roland Köhler Urs Bleisch North America Europe Performance & Cost Ian Thackwray Asia Pacific Gérard Kuperfarb Pasc
Slide 39: Our values at the core of the new company
Our values at the core of the new company Health and Safety is our overarching value and embedded in everything we do Customers Results Integrity Sustainability People, Openness and Inclusion Build an Passion to achieve Create an Demonstrate Truly care organization goals and deliver environment wher
Slide 40: Management incentive system aligned with our objectives
Management incentive system aligned with our objectives Weight of performance measures in incentive plans, Percent ANNUAL BONUS PLAN Long-term incentive plans (3 years) Normal award Integration award Strategic/Personal (end 2016/18) objectives 30 30 EBITDA CEO 40 Cumulative Free cash flow free cash
Slide 41: Conclusion
Conclusion CAPITAL MARKETS DAY 2015 © LafargeHolcim 2015 41
Slide 42: An inflexion point for LafargeHolcim
An inflexion point for LafargeHolcim Traditional industry approach … … our approach for the future EBITDA margin focus Geographic expansion Value creation Focused portfolio • Inefficient use of capital • Resources spread too • Free cash flow focus • Most attractive markets • Defensive investments br
Slide 43: Drive free cash flow generation and shareholder value
Drive free cash flow generation and shareholder value Free Cash Flow Generation: the central measure of success • Synergies • Commercial • Lower Capex • Ongoing cost improvements Capital allocation discipline • Commitment to a solid Investment Grade rating • Return excess cash to shareholders è - Di
Slide 44: Building a new leader for a new world
Building a new leader for a new world CAPITAL MARKETS DAY 2015 © LafargeHolcim 2015 44