berenberg european conference thomas aebischer cfo holcim group london december 4 2013

Berenberg European Conference
Thomas Aebischer, CFO Holcim Group
London, December 4, 2013

© 2013 Holcim Ltd


Agenda
Holcim Strategy and Positioning - base for value creation
Holcim Leadership Journey
Proactive Asset Management - recently announced transactions
Regional overview
Conclusions

European Conference 2013 - Berenberg

© 2013 Holcim Ltd

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Global construction growth is driven by emerging markets
and recovery in Europe and US
Construction Industry Value Outlook until 2017E (USD bn)
Share of market

2008

2017E

- Emerging markets

- Developed markets

6'000

29%
71%

48%
52%
CAGR
‘13-’17: 7%

5'000

CAGR
‘08-’12: 3%

Asia Pacific (emerging)

4'000

10%

Asia Pacific (mature)
3'000

16%

Latin America

6%

8%

Africa / Middle East

8%
7%

2'000

1%

11%

North America
3%

-1%
0%

0
2008

2009

2010

Europe (emerging)

12%

-6%

1'000

4%
2011

2012

2013E

2014E

2015E

Europe (mature)

2016E

2017E

Source: BMI Market Outlook, 2013
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Holcim’s Strategy House – base for value creation

Goal

Creation of Value
Geographic
Diversification

Strategy

Product Focus

Mindsets

Sustainable
Better
Permanent
Environmental Cost
Marketing
Performance Management Innovation

Local Management
Global Standards
Human
Resources
Excellence

Corporate
Social

Responsibility

People

Base

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Positioning – Holcim’s cement market portfolio
Cumulated population
Growth 2012 - 2017E
12%

Mature markets

Emerging markets

Asia Pacific excl.
Size of circles represents influenced capacity 2012
India, Oceania, China
43.5 Mt
Africa
Oceania
India
Middle East

4.8 Mt
60.5 Mt

10%
8%

Demand
growth

23.2 Mt

6%

North
America
22.0 Mt

4%

Latin
America
35.5 Mt

Western
Europe
25.9 Mt

2%
0%

China
60.0 Mt

Eastern
Europe
23.3 Mt

-2%
-4%
2%

3%

4%

5%
6%
7%
8%
9%
GDP per capita (at PPP) CAGR 2012 - 2017E

10%

11%

12%

Sources: Holcim, US Census Bureau, Datastream – IMF: World Economic Outlook, January 2013
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Positioning – Holcim’s aggregates market portfolio
Cumulated population
Growth 2012 - 2017E
12%

Mature markets

Emerging markets

Size of circles represents consolidated sales volumes 2012

10%

Asia excl.
Oceania
3.8 Mt
Oceania
23.9 Mt

8%
6%

North
America

41.3 Mt

4%
2%

Demand
growth

Africa Middle East
2.3 Mt

Latin
America
14.0 Mt

Western Europe
64.8 Mt
Eastern
Europe
9.5 Mt

0%
-2%
-4%
2%

3%

4%

5%
6%
7%
8%
9%
GDP per capita (at PPP) CAGR 2012 - 2017E

10%

11%

12%

Sources: Holcim, US Census Bureau, Datastream – IMF: World Economic Outlook, January 2013
European Conference 2013 - Berenberg

© 2013 Holcim Ltd

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Agenda
Holcim Strategy and Positioning - base for value creation
Holcim Leadership Journey
Proactive Asset Management - recently announced transactions
Regional overview
Conclusions

European Conference 2013 - Berenberg

© 2013 Holcim Ltd

7


The Holcim Leadership Journey and a focused capital
allocation to increase short and long term returns
Holcim Leadership Journey
Customer Excellence

Cost Leadership

Customer focus

Energy and AFR

Value management

Logistics

Pricing policies

Procurement

Marketing and sales

Fixed cost

Capture demand through advice & service

Optimization of cost base

CHF 500 m

> CHF 1 bn

Operating profit increase of at least CHF 1.5 bn and ROICAT > 8%* by 2014
* In similar markets conditions. Corresponds to a ROICBT of > 11.8%
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Holcim Leadership Journey is on track
All figures in million CHF

2012
Target

Customer Excellence (operating profit impact)

2013
achieved

Target

2014
9M

50-100

31

150-200

95

500

100-200

127

400-500

531

> 1,000

146
104
131
151

> 300
> 250
> 250
> 200

626

> 1,500

-Customer focus
-Value management
-Pricing policies
-Marketing and sales forces skills and motivation

Cost Leadership (operating profit impact)
-Energy and AFR
-Logistics
-Procurement
-Fixed cost

40
0
48
39

Total increase in operating profit 1)

150-300

158

Cash cost to achieve the savings (one-off)

< 80

239

Additional CAPEX net 2)

0-40

48

1)
2)
3)

550-700

3)

0

100-180

3)

0

105

100-180

The base line is the financial year 2011 amounting to CHF 2,308 million (excluding one-off charges 2011 of CHF 375 m and without fluctuations in currency, changes in scope of

consolidation and similar market conditions)
Additional CAPEX net will come from prioritization of CAPEX based on the speed of the returns (ROIC).
Current energy fund of CHF 100 million will be maintained through the period 2012 – 2014
Original amount was projected < CHF 120 million for 2013; having spent already CHF 239 million, no additional restructuring cash costs are foreseen at this stage

European Conference 2013 - Berenberg

© 2013 Holcim Ltd

9


Agenda
Holcim Strategy and Positioning - base for value creation
Holcim Leadership Journey
Proactive Asset Management - recently announced transactions
Regional overview
Conclusions

European Conference 2013 - Berenberg

© 2013 Holcim Ltd

10


Value creative portfolio adjustments in Europe


• Acquisition of Cemex’s operations in

North-Western Germany




Laegerdorf
Ruedersdorf



• Sale of Holcim Česko to Cemex

Hoever




• Business combination of Holcim and
Cemex in Spain where Holcim will hold
a 25% shareholding





+






Beckum-Kollenbach





Prachovice



• One time cash payment of EUR 70
million by Holcim to Cemex







Dotternhausen



 



• Closing expected in H1 2014, subject

to due diligence, regulatory and other
approvals















Morata de Jalón
Alcanar
Lloseta



Bol

Castillejo

Integrated Cement Plant
Grinding Station
+ Slag Granulator


Jerez

European Conference 2013 - Berenberg

Gador

Alican te

Carboneras

© 2013 Holcim Ltd

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Transaction with synergies and strategic relevance driven
by strong geographical focus
• Holcim to optimize its portfolio in Europe through a series of interlinked
transactions with Cemex in Germany, Spain and the Czech Republic
• Strengthen European footprint for the future and adjust to new economic
reality
• Create value through stronger geographic footprint in North-Western
Germany and connect current Northern Germany and France Benelux
operations
• Additional operating EBITDA and synergies expected to be at least
EUR 20 million p.a.
• Combine operations in Spain to add value and benefit from expected
synergies

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Recent developments / Next steps
Recent developments
• European Union antitrust regulators to further investigate series of
transactions with Cemex




EU Commission opened a Phase II investigation of the German transaction on
October 22nd, 2013. Phase II could take until end of April 2014 (90 to max. 125
working days).
EU Commission issued a formal decision on November 14th, 2013 to submit
extensive economic data. Due to this formal decision, Phase II is on hold
until November 29th, 2013.

Next steps
• Decision of the European Commission by March / April, 2014
• Transaction expected to be closed in Q2 2014

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ACL acquires Holcim’s 50.01% equity stake in ACC
Evolution of current to target shareholder structure
Interlinked transaction steps
Step I: Acquire 24% in Holcim India
40.79%

0.29%

Holcim

Step II: Merge Holcim India into ACL
40.79%

76%
24%

76%
24%

Holcim India
9.76%

ACL

0.29%

Holcim

ACC

ACL

Holcim

0.29%

61.39%

Holcim India
9.76%

50.01%

Target Structure

ACL

50.01%

ACC

50.01%
ACC

• Holcim India value of INR 14,584 crore (USD ~2.4 bn) consists of 50.01% stake in ACC for INR
11,727 crore (USD ~2.0 bn) and 9.76% stake in ACL for INR 2,857 crore (USD ~0.4 bn)

• Two step transaction for a total deal value of INR 11,727 crore (USD ~2 bn)
 Step I: ACL acquires 24% of Holcim India for INR 3,500 core (USD ~0.6 bn)
 Step II: ACL issues net 434 mio equity shares for a total value of INR 8,226 crore (USD ~1.4
bn) to Holcim post cancellation of Holcim India’s 9.76% stake in ACL upon merger
• The transaction steps are inter-linked and subject to requisite approvals
European Conference 2013 - Berenberg

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Value creation opportunity
Improve
Structure

• More efficient capital structure & EPS accretive
• Re-investment of cash into business
• Collaboration under ‘India Management’ structure

Unlock
Synergies

• Synergy potential of approximately INR 900 crore (USD 150 mio)
through supply chain and fixed cost optimisation

Get
Scale

• Consolidated pan-India footprint with 58 mio tpa capacity

• Confirmed >10 mio tpa capacity expansion underway in both
companies; additional projects in planning (e.g. ACC Ametha)
• Strong and debt free balance sheet; cash flow diversification

Maintain
Front-end

• Complementary premium brands will continue to exist
• Independent go-to-market strategy with strong dealer networks /
distribution in respective markets

Commit to
India Group

• Investment in Marwar Mundwa
• Intent to increase economic ownership in ACC over time
• ACC is a perfect fit, being a Holcim Group company already

European Conference 2013 - Berenberg

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Recent developments / Next steps
Recent developments
• November 19th - closure of postal ballot for ACL minority shareholders
• November 21st – voting results announcement: 68.5% of ACL’s minority
shareholders voted in favor of the deal

• November 23rd – Court Convened Extraordinary General Meeting – ACL
received approval from 90.4% of shareholders for the proposed
restructuring

Next steps
• High Court approval (Delhi and Gujarat) on the scheme of amalgamation
under Sec 391-394 of the Companies Act, 1956 (regulatory process)
• Clearance from Foreign Investment Promotion Board (FIPB)
• Transaction expected to be closed in Q2 / Q3 2014

European Conference 2013 - Berenberg

© 2013 Holcim Ltd

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Agenda
Holcim Strategy and Positioning - base for value creation
Holcim Leadership Journey
Proactive Asset Management - recently announced transactions
Regional overview
Conclusions

European Conference 2013 - Berenberg

© 2013 Holcim Ltd

17

Asia Pacific affected by fall in demand in India
• Growth in the construction industry
remained solid
• Drop in sales in all segments: in
cement primarily due to harsher
economic situation in India and in
aggregates due to Holcim Australia
• Holcim Philippines benefitted from
strong demand and better prices
• Despite progress on the cost front,
weaker results in India and negative
currency translation effects led to a
decrease in operating EBITDA

1

European Conference 2013 - Berenberg

Restated due to changes in accounting policies.

© 2013 Holcim Ltd

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Latin America still on growth track
• Construction industry built on last
year’s solid performance
• Higher cement deliveries in Ecuador,

Argentina and Costa Rica
• Divestments and temporary market
exits lowered aggregates sales
volumes significantly; ready-mix
concrete shipments also decreased
• Major efforts to keep costs in check led
to higher operating EBITDA
• Chile, Colombia and Ecuador posted
significantly better results

1

Restated due to changes in accounting policies.

2 The percentage change like-for-like adjusted for internal trading volumes eliminated in
“Corporate/Eliminations” amounts to -0.6%.

European Conference 2013 - Berenberg

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Europe making further headway
• European construction markets still
lacked economic stimuli
• Shipments of cement increased
primarily due to the CIS/Caspian
region

• Sales volumes of aggregates as well
as ready-mix concrete decreased
• Capacity adjustments and cost-cutting
measures led to significantly better
operating EBITDA and strong organic
growth

1

European Conference 2013 - Berenberg

Restated due to changes in accounting policies

© 2013 Holcim Ltd

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North America continues its recovery
• The US construction industry became
slightly more dynamic, but in Canada
economic growth slowed down
• Holcim US recorded slight decrease in
cement sales and Aggregate Industries
US sold more aggregates and readymix concrete
• Holcim Canada was unable to
compensate weather-related setbacks
• Improved performances in the US led
to solid organic growth

1

European Conference 2013 - Berenberg

Restated due to changes in accounting policies

© 2013 Holcim Ltd

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Subdued economic situation in Africa Middle East
• Demand remained strong in Lebanon
despite the turmoil in Syria
• Reduction in sales volumes in all
segments, primarily due to Morocco
• Grinding stations in West Africa and
Gulf region delivered less cement
• Declining sales volumes in Indian
Ocean region
• Operating EBITDA was down mainly
due to the weaker performance in
Morocco

1

European Conference 2013 - Berenberg

Restated due to changes in accounting policies

© 2013 Holcim Ltd

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Agenda
Holcim Strategy and Positioning - base for value creation
Holcim Leadership Journey
Proactive Asset Management - recently announced transactions
Regional overview
Conclusions

European Conference 2013 - Berenberg

© 2013 Holcim Ltd

23


Conclusions
• Medium term construction industry growth of 7% is driven by emerging
markets and the recovery in Europe and the US – Holcim is well positioned to
participate
• Self help measures remain an important part of earnings improvement;
Holcim Leadership Journey well on track and with increasing momentum
• Proactive portfolio management in selected markets offer opportunities to
create more value from the existing asset base
• Balanced use of cash for both organic and inorganic growth to deliver
appropriate returns to shareholders resulting in a ROICAT of at least of 8%
• Short-term, for 2013 Holcim expects on a like-for-like basis growth in

operating EBITDA and operating profit coupled with a further improvement in
margins

European Conference 2013 - Berenberg

© 2013 Holcim Ltd

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Contact information and event calendar
Contact information

Event calendar

Bernhard A. Fuchs
Michel R. Gerber
Swetlana Iodko

February 26, 2014

Press and analyst conference on
annual results for 2013

April, 28, 2014

Results for the first quarter 2014

April 29, 2014

General meeting of shareholders

July 30, 2014

Half-year results for 2014

Investor Relations
Phone
+41 58 858 87 87
Fax
+41 58 858 80 09

www.holcim.com/investors
Mailing list:
www.holcim.com/subscribe

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