Holcim Ltd · SIX:HOLN
Holcim — LafargeHolcim — Investor Day (November 2016)
47 slides from Holcim's investor day presentation, Nov 18, 2016
Slide 1: Capital Markets Day 2016
Capital Markets Day 2016 LafargeHolcim – one year ahead Eric Olsen, Chief Executive Officer
Slide 2: A diverse and experienced leadership team
A diverse and experienced leadership team Eric Olsen Chief Executive Officer Urs Bleisch Ron Wirahadiraksa Roland Köhler Martin Kriegner Oliver Osswald Performance & Cost Chief Financial Officer Europe & Australia/ India & South East Asia Central & South America New Zealand & Trading Gérard Kuperfar
Slide 3: LafargeHolcim CMD 2016 – November 18
LafargeHolcim CMD 2016 – November 18 Intercontinental O2 London Agenda Speakers Presentation mode 09:15-10:15 LafargeHolcim one year ahead Eric Olsen Plenary 10:15-10:45 Update on financials and capital allocation Ron Wirahadiraksa 10:45-11:00 Coffee break 11:00-11:45 Commercial transformation • Pro
Slide 4: Key messages
Key messages Integration completed and delivering full value On track and delivering Unique platform for growth and value creation Promising outlook in all regions 2018 targets confirming earnings and cash flow generation momentum, notably supported with extended cost reductions Returnin
Slide 5: Contents
Contents LafargeHolcim on track and delivering Our platform for growth and value creation Regional perspectives Our way forward © 2016 LafargeHolcim 5
Slide 6: Integration completed, well positioned for next phase
Integration completed, well positioned for next phase Management team renewed, and aligned organization in place Synergy action plans Organization focused on in place, and delivering; a clear strategic roadmap tracked rigorously Portfolio adjustments and Debt refinancing completed restructuring comp
Slide 7: On track and delivering
On track and delivering Earnings & cash flow growth momentum accelerating • Disciplined price and cost management resulting in solid margin improvement • At least high single-digit like-for-like adjusted operating EBITDA growth confirmed • Rigorous capex management; Capex below CHF 2 bn in 2016 •
Slide 8: Contents
Contents LafargeHolcim on track and delivering Our platform for growth and value creation Regional perspectives Our way forward © 2016 LafargeHolcim 8
Slide 9: Unique platform for growth and value creation
Unique platform for growth and value creation 1 Best-in-class portfolio, with leadership positions, highly diversified and well positioned to deliver above-market growth 2 Upside through differentiation in retail (best go-to-market model), in infrastructure (center of excellence), in new innovative
Slide 10: Best-in-class portfolio along multiple dimensions
Best-in-class portfolio along multiple dimensions Attractive portfolio LEADERSHIP DIVERSIFICATION GROWTH LONG-TERM SEGMENT VIEW MOMENTUM POTENTIAL Among the top 3 Good balance Strong growth Well positioned to 60% of business players in 80% of across markets momentum in benefit from long- in the our
Slide 11: A global footprint, with leadership positions in 80% of our markets
A global footprint, with leadership positions in 80% of our markets Attractive portfolio Cement position Number 11 34% Top 31 80% Other1 20% Europe 19% 2015 market share North X by cement sales America Asia volume2 23% Pacific 21%2 LTM Latin America Net sales (CHF bn) 27.8 20% Middle East Cement vol
Slide 12: Highly diversified portfolio, well balanced across markets
Highly diversified portfolio, well balanced across markets Attractive portfolio Lafarge Holcim Group revenues, (xx%) Share of group revenues LTM 100% = CHF 27.8 bn China United Kingdom Other Indonesia Europe France (26%) Asia Pacific Philippines Germany (28%) Australia Switzerland Poland Other India
Slide 13: Well positioned to capture market growth, both in mature and developing markets
Well positioned to capture market growth, both in mature and developing markets Attractive portfolio ~4,000 Mt CHF 27.8 bn +3-5% Developing 29% 46% +1-3% Mature 16% -2-4% China 55% 51% 3% 2016 cement 2016-20 LH group consumption cement consumption revenues, LTM growth rate, p.a. Market LafargeHolcim
Slide 14: Dense presence in highly populated areas, taking advantage of urbanization
Dense presence in highly populated areas, taking advantage of major ongoing urbanization trend Attractive portfolio World population density map ` LH-integrated cement plants, grinding stations and terminals Note: Map includes plants from joint ventures SOURCE: NASA Earth Observations © 2016 Lafarge
Slide 15: Significant construction headroom in developing countries
Significant construction headroom in developing countries Attractive portfolio Weighted avg. cumulated cement consumption 1966-2016 (ton/capita) XX% Cement consumption per capita (CAGR 2016-2030) Developing countries Mature countries E.g., India, Philippines, Indonesia, Bangladesh, E.g., Germany, Fr
Slide 16: Multiple key markets expected to be at turning point towards recovery
Multiple key markets expected to be at turning point towards recovery Attractive portfolio North America India West Canada Market recovery driven by Oil recovery, US fundamental growth sustained cement momentum market growth, headroom in RMX Malaysia and AGG business Market recovery driven by growth
Slide 17: US focus – strongly positioned to benefit from further market growth
US focus – strongly positioned to benefit from further market growth and from additional demand Attractive portfolio Robust baseline growth LafargeHolcim well positioned to capture growth Baseline market cement consumption, Mt Strong position • No.1 cement player in USA, with >20 Mt capacity • Unriv
Slide 18: Significant upside through differentiation in all market segments
Significant upside through differentiation in all market segments Attractive portfolio Building & small/mid-size projects Retail • Opportunities to optimize • Characteristics of consumer goods commercial approach • Successful differentiation cases in (e.g., green building centers, ~25% several marke
Slide 19: Visible differentiation – impact across all market segments
Visible differentiation – impact across all market segments Upside in differentiation Building & small/ Retail mid-size projects Infrastructure Specialties New retail model Affordable housing Roadworks International key account management • New retail model(s) • JV with British • New integrated busi
Slide 20: Examples of differentiated products and solutions
Examples of differentiated products and solutions Upside in differentiation Airium Solidia Concrete1 • Patented disruptive technology for insulation • CO2 absorbing concrete, in addition to CO2 efficient • Superior fire resistance production (up to 70% less than regular concrete) • Extended durabili
Slide 21: Sustainability, a differentiation factor for the future
Sustainability, a differentiation factor for the future Upside in differentiation Distinctive • Range of environmentally friendly, innovative products (e.g. CO2 cements) solutions with • Energy-efficient solutions like insulating concrete systems enhanced • Promoting and rewarding sustainable constr
Slide 22: Examples of value creation through sustainability
Examples of value creation through sustainability Upside in differentiation Thermal Substitution Rate% Gross Added Value, CHF m1 21.0% • Alternative fuels and raw materials with significant, positive impact on 15.5% EBITDA 14.4% 14.9% • Increasing replacement of traditional fuels and raw materials e
Slide 23: Substantial potential for operational leverage in all regions
Substantial potential for operational leverage in all regions to capture future market growth Growth at current capex Available cement Cement market demand forecast capacity YE 2016 CAGR, 2016-2020 Europe North America 37 +1-3% 8 +2-4% APAC ex-China 45 +4-6% Latin America 17 +1-3% MEA 29 +3-5% Total
Slide 24: Benefitting from 19.5 Mt new cement capacity coming on-stream
Moreover, benefitting from 19.5 Mt new cement capacity coming on-stream (2016-2018) Growth at current capex Incremental Plant Country cement capacity (Mt) 1 Tuban 2 Indonesia 1.6 3 6 2 Jamul India 1.1 Already commissioned 3 Sindri (JL) India 1.4 4 Kanthan1 Malaysia 0.9 5 Biskra Algeria 2.7 6 Kerbala
Slide 25: Systematic drive for asset light approach across our business
Systematic drive for asset light approach across our business Growth at current capex Optimizing use of current asset base Optimizing future investments Capacity utilization increase, benefiting from new capacity Debottlenecking, operational Pursuing new asset light models, coming on-stream improvem
Slide 26: Examples of light capex growth models
Examples of light capex growth models Growth at current capex Retail franchising – Disensa in Ecuador Debottlenecking – Philippines • 540 franchised stores covering 91% of main cities • Additional capacity expansions of 2.3 million tons for and towns CHF ~50 million • Preferred route-to-market to pr
Slide 27: Successful price increase through better pricing management
Successful price increase through better pricing management Margin expansion QoQ cement price development in LafargeHolcim Group 2.1% 1) Sequential QoQ price development calculated at constant geographical mix effect and constant FX © 2016 LafargeHolcim 27
Slide 28: Realizing synergies to sustainably reduce costs
Realizing synergies to sustainably reduce costs Margin expansion CHF m X% Achievement Total synergies realized until Sept. 2016 against target Target run rate 2017 Operational 212 >100% optimization 2001 129 Procurement 38% 3401 157 SG&A 60% 2601 Growth & 89 Innovation 2001 45% 587 Total 59% 1,0001
Slide 29: Tight cost management and operational excellence towards cost leadership
Tight cost management and operational excellence towards cost leadership Margin expansion Share of total cost base, LTM Fixed costs Energy • Preventive maintenance • Increased Fuel flexibility 14% • Increased Alternative Fuel procedures 25% Rate usage • Organizational efficiency Operational 19% Exce
Slide 30: Momentum in margin expansion
Momentum in margin expansion Margin expansion Trailing 12 months adj. Operating EBITDA margin1, 2016 20.0% Adj. Op. EBITDA Margin 19.4% improvement (yoy): Q2 2016: 210 bps 18.9% Q3 2016: 290 bps Mar. 2016 June 2016 Sept. 2016 1) Excluding merger, restructuring and one-offs © 2016 LafargeHolcim 30
Slide 31: Further headroom adding to the growth embedded in our portfolio
Further headroom adding to the growth embedded in our portfolio Further headroom FURTHER HEADROOM GROWTH EMBEDDED IN OUR PORTFOLIO Waste management • Building a global waste management business Expansion throughout the value chain • Optimizing opportunities to go further downstream Best-in-class att
Slide 32: Waste management as a business opportunity
Waste management as a business opportunity Further headroom Waste gaining importance as an energy source Growing and more urban population producing more waste LafargeHolcim uniquely Fuel price volatility and positioned to valorize waste increase to persist in future Focus on developing and
Slide 33: Expansion throughout the value chain
Expansion throughout the value chain Further headroom Cement share: 3% Solutions offering Vertically integrated (e.g., roads, bridge go-to-market Own renovation) distribution model Est. Construction Spend 2020 USD 10.3 tn Ready Mix/ Customers Raw Cement + Asphalt/ Channels (e.g., masons) End users m
Slide 34: Growth opportunities from new business models
Growth opportunities from new business models Further headroom New business models BIM-based business models including service offer for small contractors New digital business models creating new channels to market Providing BIM platform to SMEs E-market place for construction BIM modelling ex
Slide 35: Continuous, proactive portfolio enhancement
Continuous, proactive portfolio enhancement Further headroom Asset swaps e.g., focusing portfolio on key markets Bolt-on-acquisition e.g., consolidation of local markets Selective targeted divestments e.g., pruning portfolio to capture new value opportunities © 2016 LafargeHolcim 35
Slide 36: Contents
Contents LafargeHolcim on track and delivering Our platform for growth and value creation Regional perspectives Our way forward © 2016 LafargeHolcim 36
Slide 37: Asia Pacific, positive outlook supported by improved route-to-market approach
Asia Pacific, positive outlook supported by improved route-to-market approach LTM, CHF bn LafargeHolcim Grinding station Situation/achievements presence Divested asset Integrated plant New capacity • India: Turnaround in business performance with good cost discipline and pricing management • Philipp
Slide 38: Europe, strong margin improvements in stabilizing markets
Europe, strong margin improvements in stabilizing markets LTM, CHF bn LafargeHolcim Grinding station Situation/achievements presence Divested asset Integrated plant New capacity • Overall slow growth economy underlying flat volumes and price competition • Successful cost reductions and synergies gen
Slide 39: North America improved fundamentals
North America improved fundamentals LTM, CHF bn LafargeHolcim Grinding station Situation/achievements presence Divested asset Integrated plant New capacity • Accelerated synergy delivery and pricing development in the US operations • Mixed performance in Canada impacted by economic downturn in oil-p
Slide 40: Middle East & Africa with promising outlook
Middle East & Africa with promising outlook driven by ongoing urbanization and population growth LTM, CHF bn LafargeHolcim Grinding station Situation/achievements presence Divested asset Integrated plant New capacity • Nigeria: Ongoing challenging environment and gas Syria shortages being mitigated
Slide 41: Latin America, with strong performance driven by regional synergies
Latin America, with strong performance driven by regional synergies, Brazil recovering in the mid term LTM, CHF bn LafargeHolcim Grinding station Situation/achievements presence Divested asset Integrated plant Mexico New capacity • Mexico: Robust performance boosted by segmented customer strategy an
Slide 42: Contents
Contents LafargeHolcim on track and delivering Our platform for growth and value creation Regional perspectives Our way forward © 2016 LafargeHolcim 42
Slide 43: Strategic action plan to deliver
Strategic action plan to deliver Active portfolio management and resource allocation Commercial Sustainable Cost leadership Asset light transformation development People, culture & values Generate profitable growth Maximize free cash flow Create sustainable value for our shareholders Note: Cost lead
Slide 44: Experienced management team to drive next phase
Experienced management team to drive next phase Blue Joined ExCo since last CMD Eric Olsen Chief Executive Officer Ron Wirahadiraksa Oliver Osswald Chief financial Officer Central & South America Caroline Luscombe Martin Kriegner Organization India & South East Asia & Human Resources Pascal Casanova
Slide 45: Updated mid term Group targets
Updated mid term Group targets1 Free Cash Flow Capex ROIC • CHF 2.8 bn-3.3 bn run rate by 2018 • Below CHF 2.0bn for 2016 • 300bps improvement • CHF 5.0 per share run rate by 2018 • Below CHF 3.5bn for 2016-2017 from 2015 level by 2018 • CHF 7.5 bn cumulative 2016-2018 • Below CHF 2.0bn run rate by
Slide 46: Following a strict capital allocation policy
Following a strict capital allocation policy Committed to a solid investment grade rating 1 2 3 4 Grow organically Manage actively Sustain an Return excess with selective portfolio attractive cash to and targeted dividend policy shareholders capex © 2016 LafargeHolcim 46
Slide 47: Cash return to shareholders over next two years
Cash return to shareholders over next two years Up to CHF 1 bn share buy-back program over the coming two years Dividend per share of CHF 2 for 2017 to be proposed at next AGM in May 2017 Target of 50% payout ratio through the cycle with CHF 2 per share being the minimum annual recurring divid