2005 - 5th Us Analyst And Investor Meeting Corporate Aircraft Market
Analyst & Investor Meeting
Transcript of Analyst & Investor Meeting
1
Analyst & Investor Meeting
June 22, 2006
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© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
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ect)
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© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
Bruno LafontChief Executive Officer
4
Organization of our day
Cost reduction programBy Jean-Jacques Gauthier, Executive Vice-President, Finance
Transforming the organizationBy Christian Herrault, Executive Vice-President, Organization & HR
Growth and value creation at LafargeBy Jean Desazars, Executive Vice-President, Strategy & Development
The Roofing turnaround planBy Jean-Christophe Barbant, Executive Vice-President, Roofing
Gypsum: fast, robust and profitable growthBy Isidoro Miranda, Executive Vice-President, Gypsum
Cement By Michel Rose, COO, CementUlrich Glaunach, Executive Vice-President , CementGuillaume Roux, Executive Vice-President , Cement
Aggregates & Concrete: our global ambitionBy Jean-Charles Blatz, Executive Vice President, Aggregates & Concrete
5
"Excellence 2008"
Growth strategy focused primarily onCement, especially in growing markets Innovation in all businesses, mainly in Concrete
Acceleration and accountability
Cost cutting program of €400 M
€1.5 bn additional cash flow
Annual EPS growth of 10% on averageROCE after tax at 10% in 2008
Our road towards becoming the best of the sector
6
Transformation of our organization: Acceleration and accountability
AccelerationAlready achieved
> Reorganization of our cement technical centers > Reorganization of our Aggregates & Concrete Division> Reorganization of the Group and Division functions> Simplification of the executive team > Alignment of our organization in North America
Launch of the second step: standardization of our systems and development of synergies at country & region levels
AccountabilityStandardization of our systems and management methodsBonus systems aligned on our financial objectives: EPS, ROCE
More efficientMore focused on delivering More cost consciousMore agile
7
A €400 M cost cutting program by 2008
Increased target arising from
Increase of the levers identified in February
Benefits of a fast responding organization
Incorporation of North America in the program
Incorporation of Roofing
Centralization of purchasing
Control of SG&A
February 23rd: 1 point margin (= €160 M)Roofing turnaround plan (= €60 M)
June 22nd: Raising the bar to €400 M
8
Generate additional cash of €1.5 bn
Acceleration of working capital improvement plan
Better control of our sustaining investment costs
Divestment program over €1 bn by the end of 2008
9
A possible divestment of the Roofing business under certain conditions
Confirmation and reiterated confidence in the Roofing turnaround plan
To reach €350 M Ebitda in 2008
Exploring new strategic options, provided that we willEnsure the best future to this businessSelect an industrial or financial partner Keep a lasting and significant minority stake in the business Obtain the full value for our assets Maximize value for our shareholders
10
More flexibility for a focused growth strategy
Priority given to Cement, especially in growing markets Construction of new capacitiesAcquisitions
Accelerated innovation in all businesses, mainly in Concrete
While maintaining a solid financial structure
11
Committed to our values
Our values are an integral part of our result-oriented culture
Commitment to being ranked amongst the world's best industrial groups in
Health and safety
Protection of the environment
Social responsibility
Corporate governance
To achieve long-term leadership
12
"Excellence 2008"
Growth strategy focused primarily onCement, especially in growing markets Innovation in all businesses, mainly in Concrete
Acceleration and accountability
Cost cutting program of €400 M
€1.5 bn additional cash flow
Annual EPS growth of 10% on averageROCE at 10% in 2008
Sustainable and undisputed leadership
13
Analyst & Investor Meeting
June 22, 2006
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© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
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© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
Cost Reduction Program
Jean-Jacques GauthierExecutive Vice-President, Finance
15
Five areas of cost reduction
1. Cost of operations
2. Working capital requirements
3. Investment cost of new production facilities
4. Sustaining CAPEX
5. Income taxes
Enabled by
•A simpler organization•A structure for delivering
•A bonus system aligned with our main objectives
16
Cost of operations: February 23 Announcement (1)
(1) Excluding the announced €20 M after tax savings in North America(2) Target is €350 M of EBITDA. €60 M of the €128 M improvement is generated by cost reduction
SG&A
Energy / Fuel
Logistics
Productivity / Maintenance
Debottl. / Cementitious /Plant reliability 60
20
15
35
30
Roofing 60
One point of margin160
60
Cost cutting part of the €350 M EBITDA
target (2)
€M
17
Cost of operations: Target (1)
Debottl. / Cementitious /Plant reliability
SG&A
Productivity / Maintenance
Logistics
Energy / Fuel
160
Roofing 6060 Roofing 60
Levers
Purchasingprogram
Acceleratingimplementation
SG&A
400Debottlenecking / Cementitious /Plant reliability
Energy / Fuel
Productivity/ Maintenance
Logistics
NorthAmerica
(1) Excluding the announced €20 M after tax savings in North America
SG&A
340
€M
18
Cost of operations
Cement
Roofing
A&C 50
Gypsum 30
400
250
60
Corporate functions 10
All divisions to contribute …
€M
19
Cost of operations
Debottlenecking
Capacity expansions with a quick return
Cementitious
Slag grinding stations
Plant reliability
Blue Circle plants now fixedUS gypsum plants at the helm of the industry
Measure
Number of tonnes freed up x cost differential (purchase vs production cost)
Debottlenecking, cementitious and reliability
20
Cost of operations
Alternative energies
Fuel mix
Consumption per unit produced
Purchase prices
Measure
Cost of fuels 2008 vs. inflated cost of fuel at 2005 mix (at constant scope)
Four areas of improvement
Energy, fuels
21
Cost of operations
Standardization of maintenance
Headcount optimization
Impact mainly on fixed costs
Measure
2008 costs vs. inflated 2005 costs (at constant scope)
Productivity and maintenance
22
Cost of operations
Reengineering of product flows
Reassessment of our import/export plansStart-up of new facilities
Optimization of transport flows
Measure
2008 costs vs. 2005 costs adjusted for inflation and volume(at constant scope)
Logistics
23
Cost of operations
Streamline processes
De-layer organization
Group functions
Shared services, competency centers
Business Units
Divisions
Group
Measure
2008 costs vs. inflated 2005 costs (at constant scope)
SG&A
24
Cost of operations
Senior project manager at Group level
In depth review of costs and use of our strong technicalbenchmarking
3 Directions of actionIndustrialSG&APurchasing
Key action plans with rigorous follow-up
Specific incentives system for cost reduction focus
A structure for delivering
25
73
6764 64
58
50
55
60
65
70
75
2002 2003 2004 2005 2008
Working Capital
Number of days of turnover
= Approx. €300 M savings in 2008
Target
26
Investment cost of new production facilities
Examples of new cement facilities
2000: Around 150 $/t of cement capacity> 120 $/t in Dujianyang (China)> 200 $/t in the USA
2005: < 50 $/t in Chongqing (China)
2006 - 2008: Target: 100-120 $/t in emerging countries excluding China
A reduction of ~20% in emerging countries
27
Sustaining capex
Average2001-2006
82%
Target
Target 2008: 85% of depreciation
= Approx. €200 M savings by 2008
88% 87%
97%
85%
73%
60%
50%
60%
70%
80%
90%
100%
2001 2002 2003 2004 2005 2008
28
Income Taxes
34%
23%
17%
30% 30% 30%29%
15%
20%
25%
30%
35%
2002 2003 2004 2005 2006 2007 2008
Tax rate
“Natural”tax rate32%
29
Enhanced financial flexibility
€400 M cost reduction
€1.5 bn additional cash flow
Divestments over €1 bn
Working capital: €300 M
Sustaining capex: €200 M
A substantially enhanced cash inflow to
Sustain dividend growth
Finance sustaining and internal development capex
Resume value creating acquisitions
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© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
Transforming our organization:Acceleration and Accountability
Christian HerraultExecutive Vice-President, Organization & HR
31
2003 - 2005: Setting the stage for change
Launch and deployment of “Leader For Tomorrow”throughout the entire organization
New Principles of Action to shape our future and build our performance culture
Reinforced management cycle with a 3-year performance plan
Defined agenda for a More Effective Organization
Creation of Lafarge University
Engagement of 77,000 employees through LFT days
32
2006: Accelerate to strengthen our result-oriented culture (1)
Assessment of Business Unit General Managers’ ability to meet new challenges
Simplification of the organizationGroup functionsLNA alignment to Group’s organization principles Ready for the next move: shared services & competency centers in countries/regions
33
2006: Accelerate to strengthen our result-oriented culture (2)
New bonus scheme1/3 on personal objectives1/3 on financial criteria (EVA)1/3 on collective Key Performance Indicators
> 50% on Group’s relative performance> 50% on business specific performance
Quarterly business review by Division
34
In support of “Excellence 2008” and beyond
Safety organization fully implemented in H2 2006
Implement effectively shared services & competency centers in selected countries by end 2007
North America by end 2006France, Germany, UK, Malaysia, South Africa by end 2007While ensuring the right level of standardization
Focus on accountability and trust to stretch the organization and demonstrate the performance of our values at work
Continue to develop our global diversified talent pool to meet the challenges of future growth
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© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
Growth and value creation at Lafarge
Jean DesazarsExecutive Vice-President, Strategy & Development
36
Agenda
Given the main trends in our markets…
…Our strength is to be well positioned to
Respond to tomorrow's demand> A solid growth potential
> Anchored in emerging countries
> Pricing leadership
> Leading the race in innovation
Meet the supply challenge
Meet the competitive challenge
Conclusion
37
The trends in our markets
Demand Growing needs of a growing world populationValue-added products and differentiationShift to the East
Supply Investment costs and new projectsInnovation and new substitutes
CostsEnergy Environment regulationsRestructuring
Competition Vertical integrationMore consolidation to comePricing leadership of the fittest
38
Agenda
Given the main trends in our markets…
…Our strength is to be well positioned to
Respond to tomorrow's demand> A solid growth potential
> Anchored in emerging countries
> Pricing leadership
> Leading the race in innovation
Meet the supply challenge
Meet the competitive challenge
Conclusion
39
2006 - 2008 volume outlook by product line -excluding acquisitions
10%10%Ready Mix
~ 5%~ 4%Total
4%2%Roofing
8%4%Gypsum plasterboard
2%2%Aggregates
Above 5%5 - 6%Cement
Lafarge volumes sold
World marketAverage annual growth
rates in volumes
A solid growth potential
40
Agenda
Given the main trends in our markets…
…Our strength is to be well positioned to
Respond to tomorrow's demand> A solid growth potential
> Anchored in emerging countries
> Pricing leadership
> Leading the race in innovation
Meet the supply challenge
Meet the competitive challenge
Conclusion
41
Emerging countries (1)A key driver in our growth strategy
33%
35%
30%
2003
34%25%Net capital employed
39%17%Operating income
32%20%Sales
20051998% of Lafarge Group
42
Emerging countries (2)A good geographical spread of assets
2005Capital employed
2005Operating income
AsiaPacific: 9%
Africa: 31%
EuroMed: 23%
Latin America: 15%
Central & EasternEurope: 22%
AsiaPacific: 42%
Africa: 14%
EuroMed: 12%
Latin America: 15%
Central & EasternEurope: 17%
43
Emerging countries (3)Strong regional networks, notably in the East
The example of Cement: China, Africa
The example of Gypsum
44
Lafarge Cement networks: some examples
45
Cement China
Lafarge Shui On Cement operations
Xinjiang
Guangxi
Hunan
Hubei
Hainan
Gansu
Qinghai
Ningxia
Shaanxi
Anhui
Fujian
Neimongu
Shanxi Shandong
Xizang
Sichuan
Yunnan
Guizhou
Henan
Heilongjiang
Jilin
Liaoning
Zhejiang
Jiangsu
Hebei
Beijing
Shanghai
Guangdong
Gansu
Chongqing
SichuanNo. of plants: 2Capacity: 2.3 MT
ShuangmaNo. of plants: 3Capacity: 3.3 MT
YunnanNo. of plants: 3Capacity: 4.5 MT
GuizhouNo. of plants: 3Capacity: 2.1 MT
BeijingNo. of plants: 2Capacity: 1.5 MT
ChongqingNo. of plants: 4Capacity: 7 MT
Total no. of plants: 17 Combined capacity:
21 million tonnes
Jiangxi
46
Cement Africa
Lafarge enters Kenya in 1989
Lafarge enters South Africa 1998 and Uganda in 1999
Lafarge enters Southeast Africa(Zimbabwe, Zambia, Malawi and Tanzania) in 2001
Kasese
Nairobi
Mombasa
Mbeya
Blantyre
Ndola
Chilanga
Manresa
Lichtenburg
Richards Bay
EAPC
Lafarge export marketsKey Lafarge export zone
OtherLafarge domestic markets
Grinding station (GS)Import terminalCement plant (CP)
47
Gypsum network in Asia
A powerful industrial network built in South East Asiaand South Korea in the last 6 years
Existing plant
Planned investment
Ulsan(from Dongbu, 1998)
Yosu(from Byuksan, 1998)
Dangjin(new plant, 2003)
2nd line(new plant, 2008)
Saraburi(from Siam Group, 2001)
Chonburi(Lafarge PrestiaThailand, 1993)
Ho Chi Minh City(new plant, 2006)
Gresik(Ex Boral, 2000)
Cilegon(Ex Boral, 2000)
Parit Buntar(Ex Boral, 2000)
Songkhla(from Siam Group, 2001)
Navanakorn(from Siam Group, 2001)
48
Agenda
Given the main trends in our markets…
…Our strength is to be well positioned to
Respond to tomorrow's demand> A solid growth potential
> Anchored in emerging countries
> Pricing leadership
> Leading the race in innovation
Meet the supply challenge
Meet the competitive challenge
Conclusion
49
Pricing leadership
Last 2 years: prices have grown above inflation
We will offset cost increases
With the help of vertical integration and innovation
50
Agenda
Given the main trends in our markets…
…Our strength is to be well positioned to
Respond to tomorrow's demand> A solid growth potential
> Anchored in emerging countries
> Pricing leadership
> Leading the race in innovation
Meet the supply challenge
Meet the competitive challenge
Conclusion
51
Innovation
30% of total demand in developed markets will switchto innovative products in the 10 years to come
Innovation allows us toDifferentiateGrow the value per unitEscape the commodity trap
52
A definitive lead in innovation
Unique research capacities
Portfolio of innovative products
RMX > Agilia®, Weathermix® super accelerated concrete, Ductal®
Plasterboards> Deco® range, Signa®, Pregymix®
Roofing systems> Cisar®, lowpitch, components
Cement> Naidust®, workability, durability, setting time, strength, water
demand, packaging, colour, anti-ageing
53
Accelerate our market penetrationwith new products (less than 5 years old)
12 - 15%Gypsum
20%Roofing
4%Aggregates
> 20%Cement / Concrete
Objective 2008*
Division
* % of total turnover
54
Agenda
Given the main trends in our markets…
…Our strength is to be well positioned to
Respond to tomorrow's demand> A solid growth potential
> Anchored in emerging countries
> Pricing leadership
> Leading the race in innovation
Meet the supply challenge
Meet the competitive challenge
Conclusion
55
Ready to meet the supply challenge
New capacities: a large portfolio of internal development projects, in all our businesses
The importance of an optimal phasing in
The mastery of low cost equipment suppliers
Value creative and financially sound
56
The example of internal developmentsin Cement
> 12%
+ 1.2
530
1,500
26
2012
12%12%ROCE after tax on assets started up
+ 0.2
100
240
6
2008
+ 0.6
360
900
17
2010
EPS (€/share)
Additional EBITDA (€M)
Additional sales (€M)
Additional sales (Mt)
Scenario where all today identifiedopportunities are implemented
57
Agenda
Given the main trends in our markets…
…Our strength is to be well positioned to
Respond to tomorrow's demand> A solid growth potential
> Anchored in emerging countries
> Pricing leadership
> Leading the race in innovation
Meet the supply challenge
Meet the competitive challenge
Conclusion
58
Ready to meet the competitive challenge
Primary focus on organic development …
… but resuming acquisitions as well
Pruning our portfolio, risk approach, capex discipline
59
Capex discipline
Sustaining capex are governed by a very strict maintenance index
Priority is given to low risk, faster value creating internaldevelopments, aimed at following market share growthand consolidating existing positions
External developments are scrutinised through verystrict procedures, aiming at risk containment and value acceleration
Risks are country-related but also project-related: execution and time to value creation
60
New capex procedure
Any investment > €25 M, either internal or external
Is subject to a centralized, phased, decision process, based on a Project Evaluation Report
Decision is dependant upon
Evaluation of project per se
Evaluation of project within group portfolio
Systematic post investment audit
61
Agenda
Given the main trends in our markets…
…Our strength is to be well positioned to
Respond to tomorrow's demand> A solid growth potential
> Anchored in emerging countries
> Pricing leadership
> Leading the race in innovation
Meet the supply challenge
Meet the competitive challenge
Conclusion
62
Conclusion
Widespread portfolio of competitive assets, innovative products, loyal customers and dedicated human resources
In a position to reap the benefits
Strong organic growth potential: above 5%/year
Cost reduction program of €400 M by 2008
Financial flexibility: steady internal development and acquisitions
Guaranteed growth + distinct cycles + enhanced profitability
A long lasting leadership
63
Analyst & Investor Meeting
June 22, 2006
Cre
dit
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udy
Ric
ciott
i(A
rchit
ect)
/ Jae
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ng
E. (
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)
© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
Cre
dit
: R
udy
Ric
ciott
i(A
rchit
ect)
/ Jae
-Seo
ng
E. (
Photo
gra
ph
)
© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
The Roofing turnaround plan
Jean-Christophe BarbantExecutive Vice-President, Roofing
Our 2008 objective:ROCE after tax 8%
€350 M EBITDA
65
Agenda
Our Business Model
Our market opportunities
Our €350 M EBITDA plan
66
Agenda
Our Business Model
Our market opportunities
Our €350 M EBITDA plan
67
Safety: our first priority
Target 2006 – reduction of 25%
Target 2007-2010 – reduction of 20% per year
Frequency rate target Roofing Division
0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010
FR
Actual FR Targeted FR
68
A balanced portfolio of businesses and geographical positions
Business lines
Concrete tiles
Clay tiles
Roofing components
Chimneys
Contribution to Division EBITDA 2005
7%
10%
13%
7%
6%
6%
13%
19%
14%
5%
RoW
Chimneys
USA
Eastern Europe
UK
Nordic
Italy
France
Germany
Benelux
69
Our business model
3 reasons for our customers to give us their preference
1. Highest quality
2. Lowest delivered costs
3. System offers
70
1. Highest quality:Roofing materials
++
+++
+
Functional values (1)
+++
++
+
Aesthetic values (2)
+High quality clay tiles
++Concrete tiles
+++Low quality products
Installed price (3)
Covering materials
(1) Functional valuesLong term contribution to roof function (water + wind tightness, insulation, ventilation…) Laying properties (labor intensity & competence, head lap flexibility…)
(2) Aesthetic valuesNew tile aspect (color/profile, surface roughness, gloss, scuffs, nose cut…)Aging behavior on the roof (color/gloss fading, surface durability, dirt pick up…)
(3) Installed priceMaterial costsLabor costs
71
1. Highest quality:Product metrics
11-12 €/m²4-5 €/m²2 €/m²20 €/m²Clay tiles (H-cassette)
6-7 €/m²3-4 €/m²1-1.5 €/m²5 €/m²Concrete tiles
Price for EVA=0 at 8.0% CoC
Variable costs
Fixed costsInvestment costs: main
tiles + fittings
Covering materials
(W. Europe)
72
1. Highest quality:Clay/Concrete Substitution in Western Europe stabilising
Price difference clay/concrete in Germany should increase again
Up-grading of clay tiles in Italy will not increase substitution of concrete significantly
No short term investment in clay capacities in Nordic and UK
No significant substitution trend in South Eastern Europe
73
1. Highest quality:Accelerating innovation in Clay materials
New S, Flat Interlocking2Cambridge1USA
Burnt Blend (2) Craftsman2Burnt Blend (1)1UK
New double tile Old OVH1Tuile Plat, New Hollander2Benelux
New Gammel Dansk 1Nortegl1Nordic
F10, F20, New Postel 20, New Plate de Pays, Galleane 12,
5Galleane 10, Plate des Pays, New Abeille
3France
New Portuguese, GL Italia2(antique surfaces)0Italy
Neptun Max1Sirius 131Poland
Rubin 9, Granat 11 V2Rubin 11, Rubin 11 V2Germany
18
2
Launch2006-2007
12
1
Launch2003-2005
Biber
Details
Total
Occitane, GlasurenThailand
DetailsNumber of new products
74
2. Lowest delivered costsA track record in past cost reductions
SG&A Reduction (€M)
Labour Productivity in German Clay Tile plants (Index)
325-26+55-70+39327
2005ProductivityInflation of 2.5%
RestructuringScope effect
1999
7175100Headcount
200620052004
75
2. Lowest delivered costsAchieve lowest delivered costs with specific leversin each business line
High market shares
Plants close to markets
High rate of direct deliveries
Product/plant standardization
Optimizing concrete mixes
European supply network
Optimizing
Plant capacities
Capacity utilization
Labour productivity
Energy consumption
Concrete tiles Clay tiles
76
3. System offers
Components worldwide market estimated above €10 bn(€5 bn in Europe)
12 product lines, four make 85% of our sales (Underlays, Ridge/Hip, Roof Outlets, Abutments)
77
3. System offers
Provide more value to our customers…
“Open systems”, with components that are compatible with our tiles but sold separately
“Closed systems”, with components that are sold together with tiles to answer specific customer needs, with support of services, system guarantees or complete deliveries
> “Cool roofs”, “Low pitch” systems…
…and more value to us, making us unique in our industry
Additional margins with little additional fixed costs
> 10% additional CM directly from components
> Price premium on tiles of 5%
Additional growth with low capital requirements
78
0
50
100
150
200
250
300
1999 2001 2003 2005
3. System offersOur development in components
Components Net Sales (€M)
Significant growth despite strong decrease of German businessLeadership in Europe to be extended in Asia and North America
9074 62
50
181
245 251 255
Germany only
79
Agenda
Our Business Model
Our market opportunities
Our €350 M EBITDA plan
80
2005: A difficult year in Germany for Roofing, not representativeof our global potential
Market Growth2004/2005
Net Sales Growth2004/2005
-16
-12
-8
-4
0
4
8
-16
-12
-8
-4
0
4
8
Germany Restof World
Germany Restof World
% %
81
Pitched roof markets: robust growth expected in the next five years
2005 - 20102000 - 2005
4%4%1,100Asia
4%5%1,910North America
2%1.5%260Eastern Europe
4%3%4,100Total world
+ 2%/+ 2%/
- 1%/- 6%/
530/90/
Western Europe/Germany/
Average annual growth rateVolumes demand
in Mm² (2005)Countries
82
Major growth opportunities for Lafarge Roofing
Clay tiles (and Chimneys) in Europe
Capacity utilisation and margins increase (products/plants)
Consolidation in Germany and a few other markets
Concrete tiles in “emerging markets”
Bolt on acquisitions
Low Capex plants
Components worldwide
Innovation in 3 product lines (Underlays, Ridge/hips, Outlets)
System sales ratios in Europe, US and Asia
US (all product lines)
Developing our positions in the stronger growing South Belt regions
Important substitution potential for concrete and clay tiles, and some components and chimney products
83
Agenda
Our Business Model
Our market opportunities
Our €350 M EBITDA plan
84
Our €350 M EBITDA plan
Costs performance
SG&A costs reduction (€30 M)
Concrete/Clay variable costs performance (€30 M)
Sales performance (net of inflation)
Modernize Clay product ranges and plants (€40 M)
Ramp up new Concrete capacities (€15 M)
Develop Components sales (€15 M, half through new products)
Two levers
85
Costs performance
SG&A reductions (€30 of 280 M)
Division and TC costs (€10 M full year impact already in 2007)
BU’s costs (€20 M full year impact half in 2007, half in 2008)
> IT standardization and centralization
> Shared services in Germany
Clay/Concrete variable costs reductions (€30 of 500 M)
Energy/materials consumption
Plants productivity
Cement
Roofing
A&C 50
Gypsum 30
250
60
Corporate functions10
€M
86
Modernize Clay product ranges and plants
Start modernized capacities in Southern France (Marseille, Limoux)
Develop penetration of Northern France and Belgium
Develop in under-served high end markets of USA
Cover growth potential in NL/Nordic/UK
Up-grade clay range in Italy
Gain market share in Germany in big tile segment
All projects approved (€140 M investments) and in implementation
87
Ramp up new Concrete capacities
USA (fully automatized plants)
Texas
Florida
Nevada
Eastern Europe (low cost plants)
Russia/Ukraine
Rumania/Bulgaria
Turkey
Asia (low cost plants)
China
India
All projects approved (€70 M) and in implementation
88
22 Players
2000 2006 2008/2010
Germany Clay industrial consolidation: an upside potential
Top 5 Players:60%
Others (17):40%
12 Players
Top 5 Players:85%
Others (7):15%
4-6 Players
Top 5 Players:90% +
Others (0-3):10% -
89
Roofing division: key metrics
3.5%
0
222
525
49%
1,500
2005
€350 M in 2008EBITDA
+ 1.4% / yearFixed costs + SG&A
8%ROCE after tax
Positive over the periodFree cash flow
49 – 50%Contribution margin
+ 7% / yearNet sales
2005 - 2008M€
90
2006: our turnaround well underway
Forecasted 2006 EBITDA above budget and 2005 levels
May year to date above budget and last year
Good overall outlook
91
Analyst & Investor Meeting
June 22, 2006
Cre
dit
: R
udy
Ric
ciott
i(A
rchit
ect)
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EXCELLENCE 2008
Cre
dit
: R
udy
Ric
ciott
i(A
rchit
ect)
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ng
E. (
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© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
GypsumFast, robust and profitable growth
Isidoro MirandaExecutive Vice-President, Gypsum
93
Our business model
Safety
Fast growth
Robustness
Best performer
Highly profitable
94
Our business model
Safety
Fast growth
Robustness
Best performer
Highly profitable
95
Safety
0
2
4
6
8
10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
LTA
Freq
uenc
y ra
te
Actual progression curveTargeted progession curve
Evolution to Lost Time Accidents (LTA) frequency rate target
96
Our business model
Safety
Fast growth
Robustness
Best performer
Highly profitable
97
The future of interiors is plasterboard systems
Economic growthand plasterboard consumption
Construction productivity
Plasterboard solution
62%56%
40%
20%
38%44%
60%
80%
84%
63%51%
36%
39%
42%
39%
40%
Traditional solution
123%
105%
90%
76%
100% 100% 100% 100%
France Korea Thailand Ukraine France Korea
Labor cost Materials cost
Thailand Ukraine
Australia
North America
Thailand
Mexico
TurkeyChina
Philippines
Indonesia Romania
Brasil Malaysia
South Africa
ChilePoland
Singapore
Italy
UK & Ireland
Japan
France
Korea
Netherlands & GermanySpain
TaiwanArgentina
0
2
4
6
8
10
12
14
2 000 12 000 22 000 32 000 42 000
M²/capita
GDP/Cap 2005 ($)
98
North America
Western Europe
Eastern Europe
Japan
Latin America Middle East and Africa
+9%
+2%
+10%
+3%
+11%
Lafarge Gypsum has a worldwide footprint with strongholds in Europe, Asia and Latin America
12%
25%
6%
18% 16% 12% 11% 28%9% 6%
BPB USG Lafarge NG Knauf GP Other
World Market Share Breakdown (Mm²)
Average annual growth rate2006-2010 in volume:
Market: 4% Lafarge: 8%
27%
Size of market and Lafarge share (100%)
CAGR volume growth 2006-2010
23%
Asia and Oceania
+9%
28%
+2.0%
99
“Low risk-high return”Investments in markets we already know
TOTAL: €360 M by 2008
Reduce costsin existing markets €150 M42%
Enter new markets€40 M11%
Reinforce positions in existing markets
€170 M47%
100
Our business model
Safety
Fast growth
Robustness
Best performer
Highly profitable
101
Our organic growth strategy should leadto robust profit
Organic growth is lower risk and higher return
We expect to double the market growth rate
Our low cost investments, particularly in the US, should result in profits that resist through the cycle
102
2002 2004 2008
5%
7%
12%
2006
>8%
% sales generatedby innovative products
TargetStretch
SignaWet area boardRapid DécoOther projects
Innovation and differentiated value propositions 2008 target: 12% of sales from innovative products
103
Innovation and differentiated value propositions
Our focus on “critical to Customers” factors provides us with differentiation
Korea: total cash expenses for claim payments reduced by factor of 8 since 2003
France: time to solve a claim divided by 3 since 2000; +23% highly satisfied customers since 1999
North America: reduction of claims and their costs
37.2
58.169.8
20.927.9
100.0
0,0
20,0
40,0
60,0
80,0
100,0
120,0
2001 2002 2003 2004 2005 2006YTD
Focus on quality improves Differentiationand Customer Satisfaction
Index
of
Cla
ims
(Bas
e 1
00
in 2
00
1)
104
Our business model
Safety
Fast growth
Robustness
Best performer
Highly profitable
105
Reinforce strong local positions:the North American case
Note: BPB estimates based on annual and interim reports
2005 ex works prices per msf
Behind a strong price performance…
$40
$60
$80
$100
$120
$140
$160
2001 2002 2003 2004 2005
EXP USG (US Only) Lafarge BPB (US Only)
Lafarge: $150
USG (US only): $144
Eagle: $128
BPB (US only): $134
106
The North American case
ME* %
* ME: Machine efficiency line production time / available production time** BC: Saleable board index measure the m2 of boards sold against m2 of boards produced
BC** %
84.3%85.0%
86.8%87.5%
2002 2003 2004 2005
Behind a strong price performance……. lies a strong industrial performance turnaround
Increasing production efficiency
Increasing production quality95.4%
94.2%93.8%
93.1%
2002 2003 2004 2005
107
A €30 M cost reduction program by 2008
Productivity
Reduce Plant Fixed and Variable Costs
Yield 30 Mm² of additional capacity without investment
Transport costs savings
Improve our European logistics
SG&A
Standardize processesthroughout the Division
Cement
Roofing
A&C 50
Gypsum 30
250
60
Corporate functions10
€M
108
Our business model
Safety
Fast growth
Robustness
Best performer
Highly profitable
109
Lafarge Gypsum Division: a proven track-record
10.2%9.3%
6.3%
3.5%
0.1%
4.6%
2000 2001 2002 2003 2004 2005
Source : Lafarge
447
601 659756 811 841
2000 2001 2002 2003 2004 2005
CAGR = 13%(Consolidation 100%)
10.2%9.6%
7.0%
4.4%
0.1%
5.1%
2000 2001 2002 2003 2004 2005
1,8481,679
1,4981,4211,3231,152
2000 2001 2002 2003 2004 2005
(Consolidation 100%)CAGR = 10%
Sales [€M]
ROCE after tax
Board Volumes [Mm²]
COI/Sales
110
Lafarge growth in Gypsum division is self financed
Cost reduction, innovation and growth are the main levers to deliver results
Our current and future investment plans will be financedwith our robust profit
111
Analyst & Investor Meeting
June 22, 2006
Cre
dit
: R
udy
Ric
ciott
i(A
rchit
ect)
/ Jae
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ng
E. (
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ph
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EXCELLENCE 2008
Cre
dit
: R
udy
Ric
ciott
i(A
rchit
ect)
/ Jae
-Seo
ng
E. (
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© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
Cement
Michel RoseChief Operating Officer, Cement
113
Agenda
Our Business Model
Lafarge in North America
114
Agenda
Our Business Model
Lafarge in North America
115
Our business model
1. Safety
2. A careful selection of markets
3. Priority to organic growth
4. Consolidation of our markets (key role of Vertical Integration)
5. Globalization (Trading, equipment suppliers)
6. Performance (cost mastery, integration, prices offsetting costs, specific offer to our customers)
7. Human Resources: an increasingly important success factor
116
1. Safety (cement division)
01234567
2002 2003 2004 2005 2006 2007 2008 2009 2010
LTAFrequency
Rate
Cement division still ahead of the competition (WBCSD report)
Slower progress in 2006: a further breakthrough expected with the Group Safety Initiative
Targeted progression curve
Actual progression curve
Lost Time Accidents (LTA) frequency rate
Objective is to reduce LTA by 20% a year to reach 1 in 2010
117
2. A careful selection of attractive markets(1/2)
A powerful tool
A dynamic approach
2%
Competitive structure
Growth potential
118
8%
2. A careful selection of attractive markets(2/2)
Evolution towards a profitable, sustainable and dynamicportfolio
2002
23% 39%
25%13% 23%
46%22%
9%
2005
19%
52%21%
2008
Evolution from existing offerings
Market growth Market growth Market growth
Mar
ket
attr
acti
venes
s an
d c
om
pet
itiv
enes
s Turnover segmentation
119
3. Primary focus on organic growth
Why?
Organic growth more profitable and less risky
Keeping well balanced portfolio between mature and emerging countries
Above 5%3.6%Organic growth(in volumes)
2005-20082002-2005
120
0
30
60
90
2002 2005
0
30
60
90
2002 2005
0
30
60
90
2002 2005
0
30
60
90
2002 2005
4. Consolidation of our marketsA. The key to price leadership
€/T€/T
€/T€/T
121
4. Consolidation of our markets
What makes Lafarge specific
Ready Mix Concrete: more than a mere distribution channel for Cement
3 different businesses (Cement, Ready Mix Concrete, Aggregates) but a fully integrated strategy(ex: France)
Ready Mix Concrete: a key channel for researchand innovation
As a result, a win-win approach
Specific performance programs
Common interest to reach higher prices
More intimate knowledge of our customers
B. The crucial role of Vertical Integration
122
5. Globalization
Leadership position
A strategic lever
A stabilizing effect on supply / demand regional balances (ex: Asian crisis in late 90's)
A. Trading
2002 2003 2004 2005 2006(e)
Source Desti-nation
Source Desti-nation
Source Desti-nation
Source Desti-nation
Source Desti-nation
Group Non-Group
8.5
2.5
7.0
4.0
9.5
2.0
5.0
6.5
9.0
3.0
6.0
6.0
8.0
6.0
9.0
5.0
8.0
8.0
11.0
5.011.0 11.5 12.0
14.016.0MT
123
5. Globalization
Lafarge: a pioneer in China
We have started transferring this model elsewhere(- 20% in investment cost)
B. Equipment suppliers
124
6. Performance
A comprehensive performance program since 2002
4 technical centers - 600 technical experts worldwide
Aggressive technical training program
A. Cost mastery
125
6. Performance
Strong track record in integrating new operations
India
China
South Africa
Jordan
Nigeria (ex: BCI)
Philippines (ex: BCI)
Ecuador
B. Integration
126
6. Performance
Strong market position and customer relations allow us to assure price leadership
Strong performance in the last 2 years thanks to efficient segmentation and marketing plans
Price increase to exceed the impact of our cost increases
C. Pricing
127
6. Performance
ROCE** 6.0% 6.5% 7.5%1.5% 3.5% 8.1%
0
5
10
15
20
25
30
35
1998 1999 2000 2001 2002 2003 2004 2004IFRS
2005
(1) Current Operating income over sales
(2) After tax return on capital employed
In %
ROCE (2)
Operating margin (1)
The example of Central Europe:More than 7 years of continuous improvement
128
6. Performance
Our real margin is above 23% despite strong energy costinflation
Cement and clinker purchased to prepare our capacityextensions program
21.2%21.6%
21.3%
23.5%23.4%
22.7%
2003 2004 2005
Operating margin Adjusted operating margin*
* Operating margin adjusted for cement and clinker purchased
129
7. Human Resources: an increasingly important success factor
To meet our performance ambition and to conductour development
Technical training (+ 50% between 2004 and 2006)
"Talent pool" (40 people / year)
International technical forces
130
Agenda
Our Business Model
Lafarge in North America
131
1. North America: a very attractive market
Average annual 3% long-term growth
Favourable market structure
Ready-mix consolidation continuing
Vertical integration accelerating
132
2. Lafarge 2002-2005 achievements
Medical Incident Rate decreased by 40%
COI increased by 35%
Operating margin increased by 2.4% on a like for likebasis*
US$720 M cumulated free cash-flow over the period
EVA expected to be slightly positive in 2006 (2 years ahead of target)
A robust increase in safety and financial results
* Excluding pensions, import mix and cementitious mix
133
3. Lafarge strategy
Increase performance and reliability
Increase our import capacity (West, North-East) and distribution network (River)
Increase our exposure to fastergrowing markets
Double the size of Harleyville
Increase capacity in Exshaw
1.2 Mt Greenfield plant in Salt Lake City
Modernize / Restructure our plant network in the Great Lakes, North-East and River
Maintain the structural attractivenessof our markets (vertical integration, cementitious, customer orientation, innovation…)
Harleyville
Exshaw
Salt Lake City
Capacity expansion
Greenfield plant
Cre
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udy
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EXCELLENCE 2008
CementCost Control
Ulrich GlaunachExecutive Vice-President, Cement
135
Cement Division contribute €250 M to Group cost reduction program
SG&A expenses and fixed costs control
Variable cost control
Increased volumes to replace external sourcing
Cement
Roofing
A&C 50
Gypsum 30
250
60
Corporate functions10
€M
136
SG&A reductionKey success factors
BenchmarkingBest practice transfer actively developed
Upfront objective set-up at country level and division center
Disciplined project organisation and tracking process
137
Manufacturing fixed costs
2 main levers
Productivity
Maintenance
A proven track record but still room for improvement
138
ProductivityCement Plants
60%
65%
70%
75%
80%
85%
90%
95%
100%
2001 2002 2003 2004 2005 2008
hours/t cem
Base 100 - 2001
139
68%
72%
76%
80%
84%
88%
92%
96%
100%
2001 2002 2003 2004 2005 2008
Maintenance Cost Index
Target68
Base 100 - 2001
140
Agenda
SG&A expenses and fixed costs control
Variable cost control
Increased volumes to replace external sourcing
141
Variable cost control
Context of high energy prices
Unique variety of initiatives to reduce our energy bill
Maintain flexibility in fuel mix
Mainly fuel and power
142
Alternative fuels
Continue to progress in developedand developing countries
5
6
7
8
9
10
11
12
13
14
2001 2002 2003 2004 2005 2008
%
AF including other fossil fuel wastes
100%
150%
200%
250%
300%
350%
2001 2002 2003 2004 2005 2008
Base 100 - 2001
Alternative fuel
Alternative raw materials
Gross savings
143
Examples of Biomass projects
Coffee husks in UgandaMore than 25% in 2005Target 40% in 2006
Rice husks in PhilippinesUsage from 4 400 T/yr in 2002 to 14 000T/yr in 2005Achieve more than 25% in one plant ytdin 2006Target to use more than 100 000T in 2006
Palm kernel shells in MalaysiaUsed since 2000More than 10% energy requirements of one plantClean Development Mechanism credit obtained in 2005 will boost usage
0
10
20
30
40
2002 2003 2004 2005 2006
Uganda : % Coffee Husks
144
… and beyond fuel mix
WindmillsFirst experience in Morocco
> 50% of plant power consumption
New study in Europe
Captive power plantsProjects underway
> One new plant starting this year> 3 plants ordered: Indonesia, India, Ecuador> A few more under study
A side benefit: direct recycling of fly-ash
Coal mine control or long-term supply agreement under studyTo get reliable source of coal close to plants
> Africa, India
Many others projects underway
145
A new purchasing organisation to deliverresults
From a regional coordination to a fully centralisedorganization
Structured by key purchasing families
First focus on power and fuels
Key professionals to make the change successfull
Immediate savings already identifed
146
Agenda
SG&A expenses and fixed costs control
Variable cost control
Increased volumes to replace external sourcing
147
Increased volumes to replace externalsourcing and reduce logistics costs
Kiln reliability
Debottlenecking with immediate pay back
Cementitious
Logistics
148
85
87
89
91
93
95
97
2001 2002 2003 2004 2005 2008
Pursue excellence in reliability
Will reach 95% in 2008
Focus resources on highstakes plants
Plant mastery program in place
149
Actively pursuing every opportunityto increase C/K ratio
Optimize product range to increase use of cementitious
Work on better value proposition for each customersegment
Lobby to change local cement standards and regulationsto increase cementitious usage
Not a technical challenge
A new marketing challenge requiring a new mindset
150
We will deliver €250 M by 2008
Continous monitoring of results
A formalised process
6 "high stake units"
> Focus resources
20 units
> Formal quarterly meetings
Personal commitment of cement top management
Cre
dit
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udy
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rchit
ect)
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EXCELLENCE 2008
Cement
Guillaume RouxExecutive Vice-President, Cement
152
Agenda
Emerging markets are the foundation of our growth
Internal developments are yielding more positive returnsthan ever
Chinese leader with strong regional positions
Investments will reinforce our existing portfolio
153
Agenda
Emerging markets are the foundation of our growth
Internal developments are yielding more positive returnsthan ever
Chinese leader with strong regional positions
Investments will reinforce our existing portfolio
154
Emerging markets are the foundationof our growth
RoW China
1985 - 2005 2005 - 2010
2.7%
10.5%
5.0%
7.0%
Lafarge's Domestic Market
2005 - 2010
Above 5%
World Cement Demand Growth
155
Emerging markets are the foundationof our growth
41%45%
49% 51%
29%
39%
47%52%
1998 2002 2005 2008 e
% Sales % Operating Income
156
NorzagarayTeresa
FortuneManila
Republic
Pacificocean
SouthChinasea
More & more emerging countries are now part of our "sustainable profit"
20052002
20%3%Operating margin
1.161.05C/K ratio
94%< 85%Kiln reliability
3.7 mt3.7 mtSales volumes
11.812.9 mtMarket
The Philippines
Cement plant
Office
Iligan
157
More & more emerging countries are now part of our "sustainable profit"
20052002
25%-Operating margin
1.161.07C/K ratio
94%< 85%Kiln reliability
1.51.1Sales volumes
9.57.0Market
Nigeria
Cement plant
Office
Ashaka
EwekoroShagamu
Lagos
158
Agenda
Emerging markets are the foundation of our growth
Internal developments are yielding more positive returnsthan ever
Chinese leader with strong regional positions
Investments will reinforce our existing portfolio
159
Internal developments are yielding more positive returns than ever
Market penetration is key to our development model
Investment costs per tonne were loweredby more than 20% in the past 3 years
And faster implementation
IRR > 20%IRR > 15%
20082008
€95 m€85 m
0.7 mt0.7 mt
ZambiaEcuador
But also
€75 m
€40 m
Capex
2006
2006
Start up Roce 08Capacity
> 25%0.9 mtBouskoura (line 2)
> 25%1.2 mtDujianyang (2)
160
Internal developments are yielding more positive returns than ever
Additional capacities (100%) outside China
3 47 10 10
6
15
2006 2007 2008 2009 2010
Existing projects will bring €100 M additionalEBITDA by 2008, with a ROCE > 12%
Potential projects pending approval
Mt
161
Agenda
Emerging markets are the foundation of our growth
Internal developments are yielding more positive returnsthan ever
Chinese leader with strong regional positions
Investments will reinforce our existing portfolio
162
Chinese leader with strong regional positions
Xinjiang
Guangxi
Hunan
Hubei
Hainan
Gansu
Qinghai
Ningxia
Shaanxi
Anhui
Fujian
Neimongu
Shanxi Shandong
Xizang
Sichuan
Yunnan
Guizhou
Henan
Heilongjiang
Jilin
Liaoning
Zhejiang
Jiangsu
Hebei
Beijing
Shanghai
Guangdong
Gansu
Chongqing
SichuanNo. of plants: 5Capacity: 5.6 MT
YunnanNo. of plants: 3Capacity: 4.5 MT
GuizhouNo. of plants: 3Capacity: 2.1 MT
BeijingNo. of plants: 2Capacity: 1.5 MT
ChongqingNo. of plants: 4Capacity: 7 MT
Total no. of plants: 17 Combined capacity:
21 million tonnes
Jiangxi
163
Chinese leader with strong regional positions
Integration progressing well, ahead of 2006 budget
Lafarge plants already creating value in Sichuan and Chongqing
8 million tonnes additional dry capacity to strengthenour positions by 2010
Overall China creating value by 2008 with conservative price assumptions
164
Agenda
Emerging markets are the foundation of our growth
Internal developments are yielding more positive returnsthan ever
Chinese leader with strong regional positions
Investments will reinforce our existing portfolio
165
Internal developments are yielding more positive returns than ever
Med. Basin+ 4.0 Mt
Latin America+ 2.0 Mt Africa
+ 4.0 Mt
NorthAmerica+ 2.5 Mt
China+ 10.0 Mt
South East Asia+ 2.0 Mt
Europe+ 1.5 Mt
India +Bangladesh
+ 7.5 Mt
11 Mt approved24 Mt pending approval
166
Internal developments are yielding more positive returns than ever
> 12%
+ 1.2
530
1,500
26
2012
12%12%ROCE after tax on assets started up
+ 0.2
100
240
6
2008
+ 0.6
360
900
17
2010
EPS (€/share)
Additional EBITDA (€M)
Additional sales (€M)*
Additional sales (Mt)*
Scenario where all today identifiedopportunities are implemented
* Assumed
167
These investments will be focused on reinforcing our existing portfolio
Portfolio turnover segmentation
Mkt
attr
acti
venes
s &
com
pet
itiv
enes
s
23%
46%22%
9%
Market growth
8% 19%
52%21%
Market growth
2005 2008
168
Analyst & Investor Meeting
June 22, 2006
Cre
dit
: R
udy
Ric
ciott
i(A
rchit
ect)
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ng
E. (
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gra
ph
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© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
Cre
dit
: R
udy
Ric
ciott
i(A
rchit
ect)
/ Jae
-Seo
ng
E. (
Photo
gra
ph
)
© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.
EXCELLENCE 2008
Aggregates & ConcreteOur global ambition
Jean-Charles BlatzExecutive Vice President, Aggregates & Concrete
170
Agenda
Introduction
Aggregates
Ready Mix Concrete
171
Agenda
Introduction
Aggregates
Ready Mix Concrete
172
Introduction
Two very different businesses with different drivers of profitability
Aggregates is a structurally attractive business
Ready Mix Concrete is less so
> Lafarge makes it more attractive
Enhanced by
A specific dedicated organisation by product line
Combined research (cement, aggregates, concrete, admixtures)
173
Safety
Targeted progression curve represents 20% reduction in LTA per year
2008 LTA target equivalent to < 80 accidents in 48 million working hours
Targeted progression curve
Actual progression curve
Lost Time Accidents (LTA)frequency rate
174
Agenda
Introduction
Aggregates
Ready Mix Concrete
175
Aggregates business characteristics
Local business with low import risk
Increasingly strong barriers to entry
Mineral reserves management is key
Increasing levels of consolidation
Robust profitability when prime positions are combined with strong performance tools
176
Aggregates Business Model
1. Extracting the value from increasing scarcity through better pricing and segmentation
2. Reducing costs by accelerating our performance program
3. Developing the right mix of assets in both mature and transitional/emerging markets
Supported by Asphalt and Paving, only where needed
177
Aggregates Business Model1. Valuing scarcity
Accelerate the recent trend of price increase
90
95
100
105
110
115
120
déc-02
avr-03
août-03
déc-03
avr-04
août-04
déc-04
avr-05
août-05
déc-05
Dec. 02
Apr. 03
Aug. 03
Dec. 03
Apr. 04
Aug. 04
Dec. 04
Apr. 05
Aug. 05
Dec. 05
World price index(Lafarge sales)
178
Aggregates Business Model
2. Reducing costs
Operating performance
Improved productivity
Improved plant reliability
Replace subcontracting by own production
SG&A savings
€35 M over the period 2006-2008
Cement
Roofing
A&C 50
Gypsum 30
250
60
Corporate functions 10
Aggregates 35Concrete 15
€M
179
Aggregates Business Model
3. Developing the right mix of assets
… Nr. 1 worldwide …
Malaysia1 MT
S. Africa6 MTChile
4 MT
N. America135 MT
Poland9MT
UK19 MT
France48 MT
Spain /Portugal
10 MT
A strong coverage of mature markets combined with an increasingpresence in growing countries…
180
Remarkable results in emerging markets
Sales 2002 Sales 2005
6%
Transitional / Emerging
Mature
9%
COI 2002 COI 2005
3% 12%
+ 50%
X 4
181
Considerable further development potential
Invest in highly profitable organic growth
Develop externally through various entry options
Trading, as a low risk entry strategy
Highly selective acquisitions in growth markets
Sharing Cement assets
182
Agenda
Introduction
Aggregates
Ready Mix Concrete
183
Ready Mix Concrete business characteristics
A business with low barriers to entry in many markets
Mostly seen as distribution channel for cement producers
Many different local markets
Many different customer segments and applications
184
Two fold Business Model: optimise vertical integration and differentiate through innovation
Key distribution channel for Cement, traditionally resulting in low profitability
To reach a superior level of profitability, we have
Been the first to develop a robust vertical integration model
Transformed our Ready Mix Concrete business through product innovation and revenue levers
Carefully selected the attractive markets in whichto develop
A double win strategy
The new organisation will accelerate performance program implementation driving operational excellence and further reducing costs
185
Maximising profitability through product innovation
Increase share of Value Added Products (VAPs) in total RMX volumes
% of VAPs Additional Contribution
% of VAPs
€6 M
€0.2 M
Example of ChileGlobally
3%8%2001
14%15%2005
186
New organization will accelerate our “Top” performance program
Delivery (outsourcing and optimisation)
Mix design optimisation(raw material savings)
Savings in SG&A
€15 M over the period 2006 - 2008
Cement
Roofing
A&C 50
Gypsum 30
250
60
Corporate functions 10
Aggregates 35Concrete 15
€M
Reducing costs
187
Conclusion
Credible cost reduction program
Aggressive revenue enhancement
Further development in highly profitable growing markets
Strong improvement in marginsand return on capital employed
188
Analyst & Investor Meeting
June 22, 2006
Cre
dit
: R
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Ric
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i(A
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/ Jae
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E. (
Photo
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)
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