Acquisition of Orascom Cement
A Decisive Move Towards Highly Profitable Growth
Acquisition of Orascom Cement
A Decisive Move Towards Highly Profitable Growth
December 10, 2007December 10, 2007
Bruno LAFONTBruno LAFONTChairman and CEOChairman and CEO
3
Accelerating our Strategy of Profitable Growth
� Excellence 2008 is delivering the expected results
• €340 million of cost savings in 2008
• Our Group is in very good form and ready to accelerate
� Focus on development in Cement in emerging markets
• Growing markets accounting for 45% of the Group’s results in 2007
� Focus on innovation in Concrete
Acquisition of 100% of Orascom Construction Industries Cement business
4
Orascom Cement, a Strong Strategic Fit
� 100% Cement
� 100% emerging markets
� Oil and gas economies growth
� Excellent build and buy combination
� Transaction immediately value creative
� Strong positive impact on Group‘s margin and cash flows
� Smooth execution expected
A Decisive Acceleration in the Implementation of our Profitable Growth Strategy
5
Orascom Cement Overview
� Pure cement player with a portfolio of leading positions in highly profitable and emerging markets
� A powerful business and entrepreneurial model
• “On-time / On-cost” development model
• Excellent operational performance
� Outstanding track record of Greenfield/Brownfield developments in emerging markets and attractive pipeline of new projects
• Capacity will reach 45MT by 2010, from 21MT end of 2006 and 1.5MT in 1999
6
Market Leader Positions in attractive markets…
Operating plants
Plants under construction
EgyptCapacity 10MTMarket Leader –23% market share
Syria2MT under constructionStart up in 2010
IraqCapacity 5MT*Market Leader –28% market share* 3 MT to start up in 12/07
South Africa2MT under construction
Start up in 2009
AlgeriaCapacity 5.5MTMarket Leader –28% market share5.5 MT under constr.
Nigeria2.5MT under construction
Start up in 2008
TurkeyCapacity 1MT
(+3MT- equity affiliate)
Spain5MT Agg. pa
Cement grinding
stations3.5Mm3 RMX
North KoreaCapacity 3MT
PakistanCapacity 2MT
UAECapacity 3MTMarket Leader –15% market share
Saudi Arabia2MT under construction
Start up in 2010
7
New Assets in Countries with Superior Growth Potential Backed by Oil and Gas Economies
� GDP and population growth
� Fast urbanization and huge infrastructure needs
� Cement consumption bound to grow
0 5000 10000 15000 20000 25000 30000 35000 40000 45000
0
200
400
600
800
1 000
1 200
1 400
0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000
Cement cons. (kg/ cap)
Iraq
Morocco
Egypt
Syria Hungary
Iran
Libya
Algeria
TunisiaTurkey
UK
France
Saudi Arabia
Taiwan
Portugal
Germany
Italy
Greece
GNI ($/ cap)
United States
8
Orascom Cement: A Superior Growth, Profitability & Cash Generation
� Superior growth• 2007-2010 CAGR Sales : 30%
• 2007-2010 CAGR EBITDA : 33%
� Superior profitability• Very favorable supply / demand balance in Orascom Cement’s
regions
• Full capacity utilization on the back of strong domestic demand and trading flows
• Solid price levels
• Low production costs (energy and labor)
• > 40% Operating Margin expected in 2008
� Superior cash generation • Strong profitability
• Low maintenance Capex (recent industrial assets)
• Low working capital requirement
• Favorable tax regime
• > 90% cash conversion rate
9
Orascom Cement: Highly profitable, with Great Potential
* Out of which 7 new countries for Lafarge
$1.5 bn> $1 bnFree Cash Flow
> 90 %> 90 %Cash Flow after Tax / EBITDA
$1.7 bn$1.3 bn EBITDA
> 40 %> 40 %Operating Margin
$3.4 bn $2.6 bnSales
45 MT35 MTTotal Cement Capacity
1310Number of plants
12*9Number of countries
2010e2008e
Jean-Jacques GAUTHIERJean-Jacques GAUTHIERVice-President, FinanceVice-President, Finance
11
Transaction Overview
� Lafarge to acquire 100% of Orascom Construction Industries Cement and Aggregates assets from for €8.8 bn
• Orascom Construction Industries market capitalization: €13.6 bn
• Orascom Construction Industries: 60%-controlled by NassefSawiris and his family
� Transaction financed through
• €6.0 bn debt
• 22.5 million Lafarge new shares issued at a price of €125 per share
> through a €2.8 bn reserved capital increase subscribed by NS
� Orascom Cement Net debt assumed: €1.4bn
12
Transaction strengthened by Nassef Sawiris’ investment
� Nassef Sawiris’ commitment to Lafarge’s success and development
• €2.8 bn investment and 11.4% interest in Lafarge
• Long-term investment
> 10-year shareholder agreement with Lafarge
> Representation on Lafarge’s Board of Directors
> 4-year lock-up
> 4-year standstill
• Cooperation agreement between Lafarge and OrascomConstruction Industries
Long Term Aligned Interests
13
A Transaction Meeting Lafarge Investment Criteria
� Accretive from year 1
� Value creative
• ROCE exceeding cost of capital in year 1
� Exceptional Free Cash Flow generation
� Solid financial structure
14
Anticipated Transaction Process and Timing
� The proposed transaction is subject to
• Shareholder approval of transaction
> Orascom Construction Industries shareholder approval of transaction
expected early January 2008
> Lafarge shareholder approval of 22.5m shares reserved capital
increase to Nassef Sawiris expected mid January 2008
• Customary antitrust and other regulatory approvals
� Transaction expected to close in Q1 2008
Bruno LAFONTBruno LAFONTChairman and CEOChairman and CEO
16
Accelerating our Strategy
� A major breakthrough in our cement strategy
• Most attractive geographical spread with the best growth prospects
• Strong positions in all emerging markets
• Further potential for network optimization
• Increased emerging markets contribution to Group’s results, from 45% in 2007 to 55% in 2008 and 65% in 2010
� 260 million tons of cement capacity in 2010
• 50% increase in cement capacity with brand new assets
� An excellent mix of build and buy
17
An Excellent Mix of Build and Buy
260 MT in 2010
45mt
21mt
24mt
170mt
52
9 11
189
2
8
5
2006 2007 2008 2009 2010
Lafarge internal development program of 45MT
Orascom Cement capex program 24MT
1114 13
26
MTLafarge 2006
Lafarge capex
program 06-10
Orascom
Cement Dec 06
Orascom Cement
capex program 07-10 Optimal phasing
of new capacities 90 MT
18
Substantial Synergies: in Excess of €150 M / Year by 2010
� Already identified
• Capacity increase
• Plants technical performance
• Procurement, logistics & trading optimization
• SG&A savings
� Additional local and regional synergies
• Network optimization
• Highly valuable human resources to accelerate our development model
• Platform for Aggregates and Concrete development in the region
19
Significant Opportunity for Synergies
Lafarge’s positions in Mature Markets
Lafarge’s positions in Growth Markets
Orascom Cement’s positions
Network
20
India
Nigeria
Malaysia
Poland
Romania
Iraq
Egypt Algeria
South Africa
Other Growth
< 2% each
Others Mature
France
US
Greece
Spain
UK
Canada
Other Mature
Markets
Other Growth (less
than 2%)
A Well Spread Combined Portfolio
Mature markets
45%
Emerging markets
55%
EBITDA 2008e
� No growth country to represent more than 6% of EBITDA
Contribution of Emerging Markets to Lafarge’s EBITDA to Reach 65% by 2010
21
Smooth Execution
� Perfect geographic complementarity
� High quality of management
� Strong commitment to best standards and practices
� Focusing on mobilizing existing teams on Excellence 2008 objectives
� Focusing on start up of new plants
� Creation of a powerful regional center in Egypt
22
An Enhanced Financial Profile
� A major boost to profitable growth strategy
• Accelerated Growth
> 2007-2010 Sales CAGR: + 3 percentage pts vs. standalone
• Improved profitability
> 2008 Operating margin: + 250 bp pts vs. standalone
• Increased cash flow generation
> Combined 2008-2010 free cash flow generation: + 25% vs. standalone
� While keeping a solid financial structure
23
A Strengthened Group: Raised Financial Targets
� EPS > €15 in 2010
• vs. €7.86 in 2006
� ROCE exceeding 12% in 2010
• vs. 9.4% in 2006
� Free Cash Flow > €3.5 bn in 2010
• vs. €1.4 bn in 2006
24
Accelerating the Transformation of the Group
� A decisive acceleration to our Cement strategy in emerging markets:
• outstanding exposure and potential: the world leader, leader in emerging markets
• 65% of our results generated in emerging markets by 2010
� High profitability and cash generation
� A strong financial structure
� EPS exceeding €15 by 2010
A High Growth, Highly Profitable and Highly Focused Group
Acquisition of Orascom Cement
A Decisive Move Towards Highly Profitable Growth
Acquisition of Orascom Cement
A Decisive Move Towards Highly Profitable Growth
December 10, 2007December 10, 2007
AppendicesAppendices
27
New Projects Underpinning OrascomCement’s Growth
� Algeria
+0.5 Mt Blanc
� Iraq
+2.9 Mt (Dec. 07)
� Turkey
+0.2 Mt
� Emirates
+3.0 Mt
� North Korea
+2.5 Mt
� Algeria
+2.5 Mt Gris
� Nigeria
+2.5 Mt
� Saudi Arabia
+1.8 Mt
� Algeria
+0.5 Mt Blanc
+2.5 Mt Gris
� Syria
+3.0 Mt
� South Africa
+2.0 Mt
MT
2005A 2006A 2007E 2008F 2009F 2010F
14.0
20.7
29.8
34.836.6
44.6
9.1
5.0
1.8
8.0
28
164 168147 151 160
171 176195
225
304284
265246
332
300278
257236
217208
175186
2000 2001 2002 2003 2004 2005 2006 2007E 2008F 2009F 2010F
Cement Domestic Demand Growth in Middle East / Mediterranean Basin *in Line with Capacity Expansions
Domestic Demand / Capacity ratio: ≥ 90%
Cement domestic demand Capacity 100 % (MT)
* Morocco, Algeria, Tunisia, Libya, Egypt, Saudi Arabia, Yemen, UAE, Kuwait, Israel, Lebanon, Syria, Jordan, Iraq, Turkey, Afghanistan, Iran
MTonnes
29
Disclaimer
Statements made in this presentation that are not historical facts, including statements regarding
expectations on the improvement in operations, the increase of capacities, market trends as well as
statements on expected sales, cost reductions, synergies, EBITDA, margins, cash flows, earnings per share and return on capital employed, are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions ("Factors"), which are difficult to
predict. Some of the Factors that could cause actual results to differ materially from those expressed in the
forward-looking statements include, but are not limited to: the cyclical nature of the Company's business; national and regional economic conditions in the countries in which the Group does business; currency
fluctuations; seasonal nature of the Company’s operations; levels of construction spending in major
markets; supply/demand structure of the industry; competition from new or existing competitors;
unfavorable weather conditions during peak construction periods; changes in and implementation of
environmental and other governmental regulations; our ability to successfully identify, complete and efficiently integrate acquisitions; our ability to successfully penetrate new markets; and other Factors
disclosed in the Company's public filings with the French Autorité des Marchés Financiers. In general, the
Company is subject to the risks and uncertainties of the construction industry and of doing business
throughout the world. The forward-looking statements are made as of this date and the Company undertakes no obligation to update them, whether as a result of new information, future events or otherwise.
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