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2012 Investor & Analyst Day Paris, June 12th, 2012
Important Disclaimer
Forward-looking statements
This document contains forward-looking statements. Such forward-looking statements do not
constitute forecasts regarding the Company’s results or any other performance indicator, but rather
trends or targets, as the case may be, including with respect to plans, initiatives, events, products,
solutions and services development and potential. Although the Company believes that the
expectations reflected in such forward-looking statements are based on reasonable assumptions
as at the time of publishing this document, investors are cautioned that these statements are not
guarantees of future performance. Actual results may differ materially from the forward-looking
statements as a result of a number of risks and uncertainties, many of which are difficult to predict
and generally beyond the control of the Company, including but not limited to the risks described in
the Company’s annual report available on its Internet website (www.lafarge.com), and uncertainties
related to the market conditions and the implementation of our plans. Accordingly, we caution you
again relying on forward looking statements. The Company does not intend to provide updates of
these forward-looking statements.
More comprehensive information about Lafarge may be obtained on its Internet website
(www.lafarge.com), included under “Regulated Information” section.
This document does not constitute an offer to sell, or a solicitation of an offer to buy Lafarge
shares.
2
Analyst & Investor Day
09:30 – 10:00 Welcome coffee
10:00 – 10:30 Keynote address Bruno Lafont
10:30 – 11:30 Innovation Gérard Kuperfarb
Q&A session
11:30 – 12:00 Break
12:00 – 13:00 Performance Guillaume Roux
Q&A session
13:00 – 14:30 Lunch
14:45 – 15:15 Financial Targets Jean-Jacques Gauthier
15:15 – 16:15 Final Q&A Session and Conclusion Executive Committee
16:30 End of the Day
3
Grow Sales, Grow Cash Generation, Grow Returns
Bruno Lafont
Pro-Actively Managing in a Changing World
The direction of the global economy remains difficult to
predict
We assume a demanding environment and are accelerating
our actions to drive:
These actions will fully support our short-term goals and
strengthen financial structure
Growth of
Sales
Growth of
Cash
generation
Growth of
Returns
on capital
5
Our Actions Over the Past 5 Years Make Lafarge Ready for Today
Started cost reduction early and then accelerated
Completed significant geographic expansion
Reinforced and optimized our portfolio
Prepared ourselves for a new period of focus on sales
growth, cash generation, and returns
6
Lafarge’s Priorities for 2012 to 2015 Grow Cash Generation through Customer Solutions
Extract more value from existing markets
Address customer needs to confront today’s challenges
New innovative products
New construction solutions
Higher level of services
Innovation to drive deeper penetration into existing markets
Actions to generate at least €450M EBITDA from 2012
to 2015
7
Lafarge’s Priorities for 2012 to 2015 Grow Cash Generation through Performance
Building on significant accomplishments and learning
from previous performance actions
New performance function to accelerate initiatives
Increased cost savings
Higher output with existing plants
Less intensive Capex spending levels
Cost savings actions to generate €1,300M EBITDA
from 2012 to 2015
8
Lafarge’s Priorities for 2012 to 2015 Grow Cash Generation through Less Intensive Capital Spending
Increased utilization of existing capacities
Lower sustainable maintenance Capex versus pre-crisis
levels
Moderate growth Capex
No major acquisition
9
A Transformation of the Group’s Portfolio
A Transformed Portfolio Since 2005
Internal development of 40MT strengthened
local positions in growth markets
Entered new high growth, profitable markets
in Middle East Africa
Exited non-core positions
Refocusing on Cement and A&C
Cement
Aggregates and Concrete
Emerging Markets Mature Markets
Split of 2005 Sales
by Market
Split of 2011 Sales
by Market
Split of 2005 Sales
by Division
Split of 2011 Sales
by Division
Gypsum
Roofing
Other
11
Built the Highest EBITDA Margin Returns in the Sector
14
16
18
20
22
24
26
28
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Lafarge
Sector Max
Sector Min
600b
p
200b
p
12-month rolling EBITDA Margin
Lafarge vs sector best and worst levels (% of sales)
Source: Lafarge estimates based on companies Quarterly Reports – all activities included at Lafarge ‘s (i.e. Roofing and Gypsum)
12
Built A Portfolio that will Profit from Long-Term World Macro Trends
World construction to remain strong due to fundamental trends in population growth and urbanization
Our best and largest profitable opportunities for growth in volumes are in Middle East, Africa, Asia and LATAM, where we have over 60% of our cement capacities
*Working Age population is defined as the population between 15 and 60
Source: Lafarge annual report 2011, United Nations, Department of Economic and Social Affairs, Population Division (2012). World
Urban population Growth
CAGR 2010-2030 (total: 1.7%)
Lafarge Group Sales 2011
(total: €15.2Bn)
Population Growth
CAGR 2010-2030 (total: 0.9%)
Working Age population* Growth
CAGR 2011-2030 (total: 0.8%)
Central & Eastern Europe
-0.8% €1.3Bn -0.3% 0.0%
North Asia
0.1% 0.3% 1.9%
South Asia
1.3% 1.0% 2.1%
2.7% 2.3% 2.2%
Sub Saharan Africa
MENA
1.7% 1.5% 2.0%
-0.4% €3.4Bn 0.1% 0.4%
Western Europe
North America
0.3% €3.1Bn 0.8% 1.0%
Latin America
1.0% €1.0Bn 0.9% 1.2%
€2.5Bn
Asia
€3.9Bn
MEA
13
2007-2011 2011-2015
2011
Cement
kg/capita
2011
Revenues
MENA €2.1Bn 6.0% 6.1% 665
Sub
Sahara €1.8Bn 8.5% 11.0% 97
Created a Leadership Position in Middle East Africa Lafarge has well selected positions throughout
the continent
We will benefit from fundamental growth trends
driving significant construction demand from
a low base of cement consumption
Cement Demand
Market Growth
(CAGR)
Highest Urban population Growth
CAGR 2010-2030: 2.1%
Highest Population Growth
CAGR 2010-2030: 2.1%
Highest Working Age population*
Growth CAGR 2011-2030: 2.3%
MEA is the region with:
14
Created a Leadership Position in Middle East Africa
Strong and diverse presence across the African continent:
15 of the 17 countries have Lafarge market shares above 20%
Well established in countries where the environment makes
it demanding for others to enter
Market growth absorbing new supply
Sub-Sahara Africa expected to remain with a cement supply deficit
Supply/demand in MENA is tightening
Significant positions in Oil & Gas countries
Ability of countries to self-finance growth
Cheaper fuel bill, 40% lower than Lafarge cement average
15
GDP Growth and Cement Demand Growth by region, 2011-2015
Sources: IMF World Economic Outlook 2012, Lafarge Supply/Demand Projections
Note: North East Asia includes China, Hong Kong, Taiwan, Japan and Korea. South Asia includes rest of Asia (excl. Middle East)
*Assumes total GDP world growth of 3.4% CAGR per IMF and no world economic shocks
6.7% €1.3Bn 3.0%
Central & Eastern Europe
7.1% 6.3%
South Asia
11.0% 5.5%
Subsaharan Africa
-0.6% €3.4Bn 0.7%
Western Europe
4.1% €3.1Bn 2.6%
North America
5.2% €1.0Bn 4.0%
Latin America
3.8% 5.5%
€2.5Bn
North Asia
Asia
World Market Cement Demand Expected
to Grow 4.6% CAGR through 2015*
6.1%
€3.9Bn
4.0%
MENA
MEA
Real GDP Growth
CAGR 2011-2015
Lafarge Group Sales 2011
(total: €15.2Bn)
Cement Demand Growth
CAGR 2011-2015
16
The Portfolio is Full of Potential Optimizing on a Continuous Basis
No major M&A as today’s portfolio is correctly deployed
for growth potential
The completed 40Mt development program provides headroom
to grow, limiting current Capex needs
Fewer greenfield projects given current portfolio
New output will focus on productivity improvements and lower
capital intensive brownfield development
Will continue asset swaps and divestments to strengthen returns
17
Successful Optimization of Portfolio to Continue
History demonstrates Lafarge as a leader in the sector
to extract value from asset swaps and divestments
Decisions are made based on:
Strategic value
ROCE potential
Impact on network
Over €1Bn divestments confirmed for 2012
18
The Foundation is in Place for Sustainable and Profitable Growth
We are in the right growth locations
We are accelerating actions to extract the most value
Follow market growth through less capital intensity
Maximize cash generation through raising our performance actions
to a higher level
Penetrate markets more deeply with a strong benefit to prices
and margins
We will do it with a much stronger financial structure
Focusing on Cash Generation and Growth
To Generate Higher Returns
19
Extracting the Full Value of Our Assets for Our Shareholders
Drive Performance and Innovation actions
for €1,750M of EBITDA from 2012 to 2015
Apply strict allocation of funds
First reinforce the financial structure
• Net Debt < €10Bn as soon as possible in 2013
Next focus on dividend growth and Capex
Extract the most value from a portfolio weighted for growth
Action to Drive a ROCE after Tax above 8% in 2015,
while Achieving a Strong Financial Structure
20
Innovation Actions Driving More Than €450M
EBITDA Improvement by 2015
Gérard Kuperfarb
A Strong Track Record in Innovation
1864 1887 1921 1950 1995 2006 2011
Wins contract to
provide hydraulic
lime for the Suez
Canal
Gains patent
for white
cement
Launches ready-mix
concrete value added
products
Patent bank
reaches 1,048
Opens a research
center focused on
cement
Develops
specialized
technology for
refractories
Accelerates ready-mix
concrete innovation
program
629 755
863 1048
2008 2009 2010 2011
Cumulative Number of Registered
and Pending Patents
22
A History of Turning Research into Profits
Self-leveling concrete Fast setting concrete Concrete without joints
Insulating concrete Ultra-high performance
23
The Worldwide R&D Network is in Place
An international network of over 1,000 people
worldwide
More than 30 partnerships with Suppliers
and Universities around the world
3 Technical centers and 4 satellite locations
3 Construction Development laboratories ( > 10 by 2015)
+50 concrete labs, located in most our countries
Lafarge
Research
Center Montreal
Rio de Janeiro
Lyon
Vienna
Cairo
Mumbai
Kuala Lumpur
Chongqing
Beijing
24
A Changing World, A Changing Lafarge
From To…
World population more
rural than urban
Rapid urbanization of the world’s population
By 2050, over 6 billion people will be living in
towns and cities
Strong need for affordable housing everywhere
in the world
A construction industry
rather slow in adopting
changes
Rapid pace of regulation and economic factors
forcing development of sustainable construction
solutions
Contracting industry
dominated by a few key
western players
Key contractors now represent 200 international
companies from Turkey, Japan, Korea, China,…
25
A Changing World, A Changing Lafarge
From To…
Innovation =
new products
Innovation = products/solutions and services
designed to provide value to all markets
Lafarge =
a centralized marketing
Marketing organizations in all countries
Accelerating Time-to-market at local level
Lafarge =
centralized research
Decentralized innovation
A good balance between Research and
Development, Central R&D and Local
Development Labs
Commercial
Performance
Commercial performance
Systems and prescriptive selling approach
26
Innovation initiatives EBITDA 2015
Products
& Solutions
Value added concrete
New cement products
Manufactured sand
Specialty aggregates
Construction solutions ~€135M
Market
Segments
Oil and Gas
Road solutions
Affordable housing
Sustainable Construction ~€110M
Services
Recycling
Franchising/
Licensing
Placing & Finishing
Raw materials support
to RMX
Logistics services
~€135M
Commercial
excellence
International key
accounts
Prescriptive selling
Time-to-market
~€70M
TOTAL €450M
Four Levers of Innovation to Drive Over €450M of Additional EBITDA by 2015 500 Initiatives at All Levels
27
Products & Solutions Provide an Advantage to the Customer for a Premium
Bring value to customers by:
Reducing construction contractor costs
Providing architects new possibilities for designs
Meeting regulatory / environmental needs in a more affordable way
Solutions to fit local needs: individual countries to launch 150 new products
in 2012 in cement and concrete
Value added products concrete aiming to increase from 28% of total RMX
Volumes in 2011 to 45% by 2015
Innovation initiatives EBITDA 2015
Products
& Solutions
Value added concrete
New cement products
Manufactured sand
Specialty aggregates
Construction solutions ~€135M
28
Products & Solutions – An example Thermal Solutions in Building
Market potential:
New regulations require new
buildings use thermal solutions
The potential is over 3 billion m2
of walls and floors to be
substituted on 13 markets
analyzed
Business Potential
Increasing constraints
for customers, architects,
engineers to be compliant
with regulations
Market Drivers
Range of innovative concrete
solutions
Cost effective due to speed of
execution
Architectural creativity
Lafarge Differentiation
Structural formwork based
solutions (ex: France)
Column / beam construction
systems where bricks can be
substituted by Lafarge solutions
Key Growth Projects
For Lafarge
Thermal Concrete Wall
29
Energy Efficient Buildings with Thermedia Cergy, France Context:
Pilot project with Thermedia
Partner: Bouygues
~4,000 m² of housing units (59 units)
Prescribed systems/products:
Thermedia 0.6
Schedule:
Construction: 2010-2012
Reduces energy consumption by over 30%
30
Innovation initiatives EBITDA 2015
Market
Segments
Oil and Gas
Road solutions
Affordable housing
Sustainable construction ~€110M
Market Segments Focus Develop Customer Solutions that further Penetrate Unique Segments
Newly Developing Segments
Affordable housing
Sustainable construction
Segments with Further Potential
Oil & Gas
Infrastructure
31
Market Segments – An example Affordable Housing to Match the Local Conditions
Market potential: housing deficits in markets where Lafarge is present estimated at €100~120 Bn, with €20 Bn addressable through construction materials segment
Worldwide population growth
4 billion people around the world are deprived of access to decent accommodations
A wide variety of value propositions
Additional sales in areas not covered by conventional distribution channels
Suited for emerging markets with limited infrastructure and limited qualified labor
Micro-credit as a service to support clients and retailers
Slums rehabilitation (India)
Partnerships with steel forms producers for large housing projects (Cameroon, Brazil, Egypt, Iraq)
Innovation in design - Platform buildings for social housing in mature markets (France)
Micro-credit (Indonesia, Honduras, Nigeria)
Business Potential Market Drivers
Lafarge Differentiation Key Growth Projects
For Lafarge
32
Affordable Housing Oragaddam – Chennai, India Context:
Residential buildings (23-45m² flats)
Affordability issues
Partner: Lafarge
Local climate: subtropical wet
Lafarge Technical support:
Indirect support through a similar previous project
in Bangalore
Prescribed systems/products:
Quick setting concrete for early deshuttering
(MEGA high early strength)
Self Compacting Concrete (MEGA Fluid, MEGA
Fill,MEGA Screed)
Watertight concrete for watertanks
Related selling and benefits:
M25 & M30 ordered: 140,000 m³
Schedule – construction in 2 phases: May – November 2012
December 2012 – December 2015
33
Services Offer Services to Deliver Value Closer to the Customer
A significant part of the value chain Product delivery in emerging markets can represent up to €10/ton of margin
Placing and finishing services versus selling solely the product can add 10€/m3 of
margin
Increases speed to market of new Lafarge products by taking responsibility for the
placing of concrete
Opens possibility of extracting additional value from patents through franchising and
licensing
Lafarge Differentiation Large service offering under development in all countries
Construction development labs – to reach 10 by 2015
Innovation initiatives EBITDA 2015
Services
Recycling
Franchising/Licensing
Placing & Finishing
Raw materials support to RMX
Logistics services
~€135M
34
Services Example: Partnering in the Distribution Chain, to create and capture Value in Emerging Markets
Additional margin of up to 10% of sales
Secondary benefits
Service and brand
Sustaining market shares
Promoting innovation
Retail represent more than >50% of cement sales
Proximity in the distribution
Replication and scalability to local markets
Program already launched in 13 countries
For 2012 launch in an additional 27 countries
Business Potential Market Drivers
Lafarge Differentiation Key Growth Projects
For Lafarge
35
Commercial Excellence
Provide international accounts with a “trusted name” for execution Consistent, quality service
Ability to operate seamlessly in emerging markets
Going beyond concrete products and supplying raw material and plant services
Local and international key account management is being deployed, offer to Top 200
international contractors
Prescriptive selling with a team of local construction specialists already working on
efficient building products and systems
Sales force effectiveness to sell new offers being deployed, aiming at improving
customer loyalty and premiums
Innovation initiatives EBITDA 2015
Commercial
excellence
International key
accounts
Prescriptive selling
Time-to-market
~€70M
36
Market Segments – An example International Key Account Management Addressing the specific needs of top international contractors
International accounts estimated to have 2% market share of the worldwide site batching market
Contractors in need of solutions to speed up execution
Lafarge integrated RMX offer for key accounts
A team of 10 Key Account managers based in Madrid, Paris, Seoul, Hong Kong, Singapore to address Top 200 contractors needs
Priority: 6 geographical areas and ~25 target key accounts
Business Potential Market Drivers
Lafarge Differentiation Key Growth Projects
For Lafarge
37
Innovation Over €450M Additional EBITDA by 2015
Strong track record
EBITDA from both New Revenue and Additional Margin
From Emerging and Mature countries
Innovation focused on products, solutions, services, markets and commercial
excellence
Limited capital spending required
500 initiatives already launched at all levels
Innovation objectives set for all employees
New organization contributes to the acceleration
Driving Higher Sales, Cash and Returns
38
Innovation Q&A Session
Performance Actions Driving €1.3Bn Savings and
Higher Cash Generation and Returns by 2015
Guillaume Roux
Driving Cash Generation and Growth
Accelerate Cost reductions
Extract more value from our existing plants
Less intensive levels of Sustaining Capex
Less intensive levels of Development Capex
Accelerate implementation of Revenue Operating Models
to achieve Best in Class margins
41
Build a Culture of Continuous Improvement to be among the Best industrial companies
Set challenging operational
targets and support in the
execution
Become a benchmark among industrial
companies
Reward performance and change agents
Strengthen operating
models Accelerate value creation and skills
development
Deploy and adapt to fast changing
environments
Maintain and develop
expertise Product line operations and experts
Key strategic sourcing (energy, power,…)
and engineering
Knowledge sharing and collaboration
42
Performance Accelerating Cost Savings, with €1.3Bn on 2012-2015
Accelerate Cost Savings to €1.3Bn through 2015
The success and learning of past cost reduction programs provides
building blocks for further savings
New performance organization puts focus on high impact areas
to accelerate reductions
€1.3Bn cumulative
cost-cutting effort
in 4 years,
from 2012 to 2015
Accelerate
Cost Savings
70 240 420 650
870 1,120
2,420
2006 2007 2008 2009 2010 2011 2015
Cumulative cost-cutting effort (in M€)
//
44
Evolution in our Performance Programs
2006-2011 2012-2015
Cost focus on mature countries Intensification in emerging
countries
Industrial fixed costs / SG&A
represent half of the savings Energy, logistics and other
variable costs will represent
a higher %
Performance focus on “low
hanging fruits”
Design and roll out of our models
Our operating models provide
a significant source of further
optimization
Accelerate
Cost Savings
45
Using All Levers to Drive Cost Reduction Increasing Share of Emerging Markets
46
~40%
~30%
Plant Efficiency Improvement
Industrial Fixed Costs
SG&A
Solid fuels
Alternative Fuels
Power
Logistics
C/K
~30%
2011 Cash Cost Base: €12.1Bn Split of the €1.3Bn cost reduction
program by lever
Accelerate
Cost Savings
1.4
2.4
2.2 1.9
3.6
0.6
Raw materials Fixed costs
Energy Transport
SG&A Other
46
Fuels: Many Opportunities Ahead
Doubling lower cost alternative fuel (AF) usage by 2015
Leverage co-processing expertise and sourcing reach for maximum
fuel flexibility
Innovation in partnerships, handling, logistics and treatment
Moving upstream into collection and sorting to secure sources
and expand delta between fossil fuel and AF cost/unit energy
Innovation in conventional fuels
More AF releases mill capacity to handle lower grade (lower cost) fuels
Logistics mastery
Burning flexibility to switch between lower cost fuels
Accelerate
Cost Savings
47
Power: New Expertise to Achieve Major Savings
Built team using experts from the power industry
Negotiating flexible contracts with industry expertise
Designing and operating captive power plants with partners,
seeking fuel flexibility options
Online power monitoring for value creating demand
management
48
Accelerate
Cost Savings
48
Other Action Plans Are in Motion
Industrial fixed costs savings Plant mastery
Structural changes in countries with low utilization rates
Plant productivity through leaner / multi sites organization
Maintenance • Increased purchasing leverage for spare parts
• Refining predictive maintenance
Sub-contractor optimization
Cement/Clinker ratio, productivity, logistics savings Increase of cement clinker ratio
Optimization of distribution network
SG&A savings Streamlining of back-office functions
Accelerate
Cost Savings
49
Iraq - Kurdistan: An Emerging Market Example of Successful Cost Savings €45M savings between 2008-2011
Industrial Fixed Costs (€14M of savings)
Development of local teams, reduction of expatriates
Development of plant mastery
Power savings (€15M) through good performance
of the power plant and power consumption reduction
Fossil fuels and other cost savings (€16M)
Accelerate
Cost Savings
Cost Savings Actions Ongoing
50
Spain: a Model for Lean Operations
Self managed teams are running workshops
Production / maintenance operations much more
closely integrated
Reduced number of employees by 650 from
pre-crisis levels
Spain used as a benchmark for other Lafarge
Cement operations
Cost Savings Actions Ongoing
Accelerate
Cost Savings
51
Performance Extracting More Value from Existing Plants
Extract the Maximum Value from our Assets
Extract more
value from our
existing plants
* RF = kiln reliability factor
2005 2011 2015
RF* 92.9 % 94.5% 96%
Plants with RF*>96% 22% 51% 75%
2005 2011 2015
Cement/Clinker Ratio 1.21 1.32 1.4
13-15 MT Additional output in areas where needed
Performing Teams are the Key Success Factor
Achieving Best Plant Performance
Continuously improving our cement to clinker ratio
53
Extract the Maximum Value from our Assets through…
Implementing consistently and quickly our operating models
Developing competencies
Finding, developing and retaining a diverse local talent base
Being able to rapidly deploy resources to plants facing
performance issues
Extract more
value from our
existing plants
54
Plant Operating Model (POM) a Key Driver for Higher Plant Performance
Taking best practices from our top plants to turn it into:
The right organization
The right people and succession plan
The right processes
Extract more
value from our
existing plants
Achieving lower cost and higher levels of production
95% of our Cement Plants compliant by the end of 2014
55
Developing Competencies
Lafarge Competency system: formalization of what works
Detailed Competency Profile for each position
Individual assessment and Plant team assessment
Individual Development Plans and Training plans, for ALL
Same competencies in key roles, everywhere, with certification
3 key positions representing 1,230 persons at Group level
End 2012 objective: 100% qualified and 70% certified
Cement Masters for New Cement Plant Managers
New engineers 18 months course, same everywhere
Extract more
value from our
existing plants
56
« Boost » Task Force: Rapid Reaction Force to Address Plants Facing Performance Issues
Draw from worldwide pool of 250 Lafarge certified
technicians and engineers plus technical centers
A proven intervention methodology
Resources stay onsite until issues are resolved
and until know-how is transferred to local teams
6-8 Boost programs running at any one time
Extract more
value from our
existing plants
57
Nigeria – Ewekoro 1st Line Evolving towards plant mastery
Boost mission sent to the Plant in mid 2011
Increase of more than 220 Kt cement in 2012 vs 2010,
with a clear performance improvement
2nd line to benefit from the action plans executed
Extract more
value from our
existing plants
60%
70%
80%
90%
100%
Burning UF
1,0
1,1
1,2
1,3
1,4
C/K
80%
85%
90%
95%
100%
Cement mill RF
2010
2011
2012 (4 months)
58
Actions in Place to Drive Higher Ratio of Cement Output relative to Clinker Production
Systematic implementation of our golden rules
Extensive research
Detailed country mapping
Analysis of customer needs
Structured product development
Extract more
value from our
existing plants
1.21
1.32
1.40
2005 2011 2015
C/K ratio
59
Algeria: C/K Ratio Improvement Driving Higher Volumes with Existing Plants
Extract more
value from our
existing plants
2008 2011
C/K Ratio 1.2 1.41
ROCE Base 100 180
Additional tons from C/K improvement
over the period: 0.8 Mt 60
Performance Managing Sustaining Capex to Stay around 65%
of Depreciation on a Sustainable Basis
Driving a Step Change for Sustaining Capex Structural Change in Plant Network over Past Six Years
Average age of the plant down 27%
More plants located in emerging markets where costs are lower
Average size of our plants increased from 1.1Mt to 1.35Mt between 2005
and 2011
Dry lines now represent 96% in 2011, versus 91% in 2005
Lower Costs
of Sustaining
Capex
24
30
22
6 -8
2005 2011
Average age of plants (years)
Natural
evolution
Gain through
revamping / acquisitions
62
Driving a Step Change for Sustaining Capex
Strict target setting and monitoring of plants
Strict Sustaining Index (SSI) drives best in class maintenance
practices
Best plants in line with SSI objective spend on average 17% less
More efficient sourcing
Use experience of sourcing parts from low cost Chinese or Indian
suppliers
Existing structure in China to insure proper expediting and quality
control (17 years of experience)
Plant reliability has continued to improve
Lower Costs
of Sustaining
Capex
63
2005-2008 2009-2012 2013-2015 Stabilized
Cement 4.4 1.9 2.75 2.5
Aggregates 0.7 0.3 0.75 0.5
Ready-Mix Concrete 1.7 0.7 1.70 1.2
Driving a Step Change for Sustaining Capex
Limited catch-up necessary over 2013 to 2015
For Cement, long-term target of 2.5€/t of production is a relevant basis
to support our business
Lower Costs
of Sustaining
Capex
Sustaining Capex, in € per ton/M3 produced & sold
Overall, around 65% of Depreciation
64
Performance Lower Costs of Development Capex, a Target of 110€/ton
Lower Costs of Development Capex Advantage of Brownfield Development
Market dynamics are well understood as already present
Provides higher economy of scale savings
Fixed costs decline per ton of production
Distribution network already established
Significantly reduces costs per ton of capacity constructed
Infrastructures already in place
Shorter construction time with lower execution risks
Lower Costs
of Development
Capex
Typical structure of a project* Brownfield vs a Greenfield*
Technical scope represents circa 60%
of the total cost of a project
The rest represents quarry, infrastructure,
land,…
A Brownfield is typically 25%-30%
less expensive than a Greenfield
* Cost structure very much depends on the context of each project, and actual cost structure for one specific project can materially differ from the indicative figures
provided above
66
Lower Costs of Development Capex Driving a Step Change in Management
A new streamlined engineering organization
More efficient, more transversal - Keeping the required expertise
An engineering approach focused on standardization
Leveraging our experience with low cost country suppliers
In depth knowledge of the Chinese, other Asian and East-European
sub-suppliers network
Existing inspection structure in China to insure quality
Action to expand our Asian purchasing platform
Dedicated support team to shorten the ramp up time of production
Lower Costs
of Development
Capex
Highly Efficient Development Capex
67
Performance Accelerating Implementation of Revenue Operating Models
to Achieve Best in Class Margins
Accelerate Implementation of Revenue Operating Models to Achieve Best in Class Margins
A key component of our operating models
(Rock, Top, Top line cement)
Customer and geographic mix a key driver, adapted to local
dynamics
Strong product development capabilities
Pricing strategic and tactical actions to maximize price over costs,
margins and returns
Optimize
prices
and margins
Best Margins and Returns
versus our Global and Local Competitors 69
Performance Conclusion
A Strong Management System Reinforced by the New Organization is a Key Element of Delivering our Results
Challenging targets set at the end of strategic exercise
Construction of marketing & performance plans
Key action plans and Capex priorities for budgets
Performance & Innovation resources planned to focus
on key areas
Strict tracking of action plans (tested and audited)
71
Performance Actions Driving Significant Cash Generation and Growth Opportunities
Accelerated actions to drive €1.3Bn of cash savings
Higher plant performance and CK ratios to drive 13-15MT additional
production
Lowers cost of production per ton
Facilitates sales volume growth with minimal Capex
Less intensive capital expenditure spending
Roll-out of sales operating models to optimize prices and margins
Driving Higher Sales, Cash and Returns
72
Performance Q&A Session
Financial Targets Jean-Jacques Gauthier
The Group’s Focus Growth, Cash, Returns
Over €1.75Bn EBITDA Improvement with our
actions by 2015
+
Less Intensive Capex
and Portfolio Management
Upside of Volume Sales Growth Potential
in our Markets
ROCE after Tax above 8% in 2015
Net Debt below €10Bn as soon as possible in 2013
CFFO / Net Debt of 28 to 30% no later than
2015
75
Our Actions to Drive Over €1.75Bn Additional EBITDA
~€500M
~€400M
Plant Efficiency Improvement
Industrial Fixed Costs
SG&A
Solid fuels
Alternative Fuels
Power
Logistics
C/K
~€400M
€1.3Bn*
from Cost Reduction
€0.45Bn from Customer Focus
Products & Solutions
Markets Segments
Services
Commercial excellence
~€135M
~€110M
~€135M
~€70M
* Out of which €400m to be delivered in 2012 and €350m in 2013
76
Capture Growth with Less Intensive Capex
Current utilization rates give headroom for growth
Higher plant performance and C/K ratios will drive 13-15MT additional
production in markets where needed
Selective development projects to capture growth in existing markets
Lower cost per ton of Development Capex
Contain cost of Sustaining Capex at approximately 65% of depreciation
Contributes to Drive Higher Returns
77
Working Capital: a Proven Track Record, Dynamic of Continuous Improvement in Place
Working capital management deeply rooted in our processes
Tools and support available for the Countries and Business Units
Monthly monitoring
52 44
33 31
2008 2009 2010 2011 2015
Evolution of strict WCR (in number of day sales)
Maintain
Low level
78
A High Growth Portfolio
Sources: IMF World Economic Outlook 2012, Lafarge Supply/Demand Projections
Note: North East Asia includes China , Hong Kong, Taiwan, Japan and Korea. South Asia includes rest of Asia (excl. Middle East)
* Assumes total GDP world growth of 3.4% CAGR per IMF and no world economic shocks
6.7% €1.3Bn 3.0%
Central & Eastern Europe
3.8% 5.5%
€2.5Bn
North East Asia
7.1% 6.3%
South East Asia
11.0% 5.5%
Subsaharan Africa
6.1%
€3.9Bn
4.0%
MENA
-0.6% €3.4Bn 0.7%
Western Europe
4.1% €3.1Bn 2.6%
North America
5.2% €1.0Bn 4.0%
Latin America
Real GDP Growth
CAGR 2011-2015
Lafarge Group Sales 2011
(total: €15.2Bn)
Cement Demand Growth
CAGR 2011-2015
Asia
World Market Cement Demand Expected
to Grow 4.6% CAGR through 2015*
MEA
79
EBITDA Levers Sensitivities – Impact on EBITDA/year*
Price over Cost Inflation will Continue to be a Key Focus
* At constant activity/geographical mix, and at constant FX – Cost impact is only cost inflation
Mature Markets
+/- 1% in volumes +/- 1% in prices +/- 1% in costs
+/- €35M +/- €65M +/- €55M
Emerging Markets
+/- 1% in volumes +/- 1% in prices +/- 1% in costs
+/- €45M +/- €90M +/- €65M
80
Cash Allocation Priorities
First priority is to reinforce financial ratios
As financial structure strengthens, progressively allocate
more cash to Capex and dividends
Explore share buy-backs if it makes economic sense
Allocate Cash to Ensure Sustainable Growth
and to Maximize Returns with a Strong Financial Structure
81
Shorter-Term Commitments
Contain Capex
Execute Cost-Saving
Programs
Optimize asset portfofio
~€800M in 2012
At least €400M in 2012
At least €350M in 2013
Achieve at least €1Bn of
divestments in 2012
2012-2013 objectives
Improve our Financial
Structure
Reduce Debt to below €10Bn
as soon as possible in 2013
82
Conclusion
Cost Savings of at least €1,300M over the four years from 2012
to 2015
Sales growth and higher margin products generating EBITDA
improvement of at least €450M from 2012 to 2015 through
innovation program
Net debt targeted to fall below €10Bn in 2013. Mid-term, a ratio
of cash flows from operations to Net Debt of 28%-30%
The above actions drive a Return on Capital Employed after tax
above 8% in 2015
83
Appendix Financial Targets
Actions Support a Return to Investment Grade Ratios Sensitivity Analysis on CFFO/Net Debt Ratio
Estimated impact on Full
Year CFFO / Net Debt*
@Net Debt of €12Bn @Net Debt of €10Bn
€100m additional EBITDA ~ +70bps ~ +85bps
€400m CFFO allocated
to debt reduction ~ +60bps ~ +85bps
+1% in prices ~ +110bps ~ +135bps
€1Bn of divestments ~ +50 to 90bps ~ +90 to 140bps
* Using the 2011 CFFO as a basis, with a theorical tax rate of 28%
85
Q&A Session
Conclusion Bruno Lafont
Appendix ExCom
Bruno Lafont Chairman and Chief Executive
Bruno Lafont began his career in the group Lafarge in 1983, holding numerous
positions, including finance, international development and varying roles on
the Group’s Executive Committee. He has been a Director since May 2005 and
Chief Executive Officer since January 1, 2006. In May 2007 he was appointed
Chairman and Chief Executive Officer of the Group. Bruno Lafont is a graduate
from the business school Hautes Etudes Commerciales (HEC) and studied at the
Ecole Nationale d’Administration (ENA).
Jean-Carlos Angulo Operations Executive Vice-President
Jean-Carlos Angulo joined the Group in 1975. He held various positions both in
France and internationally and notably in Latin America. In 2007, he was appointed
Executive Vice-President (in charge of North America, Latin America, Western
Europe and the technical Organization of the Cement Division). He is a graduate of
the Ecole des Mines of Nancy (France) and the European Institute for Business
Administration.
89
Jean Desazars de Montgailhard Executive Vice-President, Strategy, Business Development
and Public Affairs
Jean Desazars de Montgailhard began his career at the French Ministry of
Foreign Affairs. He joined Lafarge in 1989 and held various positions in France,
Spain and Singapore. He was Regional President for Asia and Africa from 1996 to
2006. In 2008, he became Executive Vice-President, Strategy, Sustainable
Development and Public Affairs and a member of the Executive Committee. He
studied at ENA and is a graduate from the Institut de Sciences Politiques in Paris
and holds a Masters in Economics.
Thomas Farrell Operations Executive Vice-President
Thomas Farrell began his career as an attorney both in New York and in Paris.
He joined Lafarge in 1990 and held various positions in France, India and North
America. Since September 1, 2007, he has been Co-President of the Aggregates
& Concrete Business and a member of the Executive Committee. He is an
American citizen, graduate from Brown University and a doctor in law from
Georgetown University.
90
Jean-Jacques Gauthier Executive Vice-President, Chief Financial Officer
Jean-Jacques Gauthier began his career at Arthur Young in 1983. Between 1986
and 2000, he held several positions within the Matra / EADS Group, both in France
and the United States until 1996, then in its space division as Chief Financial
Officer of Matra Marconi Space, then Astrium. In 2001, he joined Lafarge as Chief
Financial Officer and a member of the Executive Committee. He graduated in law
and economics.
Christian Herrault Operations Executive Vice-President
Christian Herrault joined Lafarge in 1985 after starting his career in the French
administration. He held various positions in the United States and in France. In
1998, he was appointed to the Executive Committee as Executive Vice-President,
Human Resources and Organization. In 2007, he was appointed President of the
Gypsum Business. He is a graduate of Ecole Polytechnique and the Ecole
Normale Supérieure des Mines engineering school of Paris.
91
Gérard Kuperfarb Executive Vice-President,
in charge of Innovation
Gérard Kuperfarb began his career in 1983 as a research engineer at the Ecole des Mines de Paris before holding various functions in sales and marketing of composite materials. He then worked at a consulting firm in strategy. He joined Lafarge in 1992, held various functions in France then in North-America. He was appointed President of the Aggregates & Concrete business for Eastern Canada in 2005. Since 2007, he has been a member of the Executive Committee. He is a civil engineering graduate from the Ecole des Mines de Nancy. He also has a Masters in engineering from the Ecole des Mines de Paris, and an MBA from the HEC international business school.
Eric Olsen Executive Vice-President, Organization
and Human Resources
Eric Olsen started his career at Deloitte & Touche. He then joined Paribas investment bank, then the consulting firm Trinity Associates. He joined Lafarge North America in 1999 and held various functions before being appointed Chief Financial Officer of Lafarge North America in 2004. Since 2007, he has been Executive Vice-President in charge of Organization and Human Resources and a member of the Group Executive Committee. Eric Olsen is an American citizen, holds a Bachelor of Science degree in finance and accounting from the University of Colorado, and an MBA from the HEC international business school in Paris.
92
Alexandra Rocca Senior Vice-President, Communications
Alexandra Rocca joined Lafarge in 2010. After she started her career at
Printemps in 1986, then at Air Liquide from 1990 until 2001, she then took the
Communications Director’s post for Galeries Lafayette. She joined in 2005 the
Crédit Agricole S.A. group, first as Communications Director at LCL, before
becoming the Communications Director of this Group. Alexandra Rocca is a
graduate from the HEC international business school in Paris, the Institut d’Etudes
Politiques in Paris and holds a degree in French literature.
Guillaume Roux Executive Vice-President,
in charge of the Performance
Guillaume Roux joined Lafarge in 1980. He held various management positions in
France and internationally, in particular in the United States, in Turkey, and in
Malaysia. He joined the Executive Committee when he was appointed Executive
Vice-President, co-President of the Cement Business in 2006. He is a graduate
from the Institut d'Etudes Politiques in Paris (France).
93
Appendix List of countries per EVP Operations
June 12, 2012
List of Countries with EVP Operation
Countries EVP Operations
Algeria Christian Herrault
Austria, Slovenia, Czech Republic, Hungary
and Slovakia (Central Europe Cluster) Christian Herrault
Bangladesh Tom Farrell
Brazil Jean-Carlos Angulo
Cameroon Christian Herrault
Canada West Tom Farrell
Canada East Jean-Carlos Angulo
China Christian Herrault
Ecuador Jean-Carlos Angulo
Egypt Jean-Carlos Angulo
France & West Indies Jean-Carlos Angulo
Germany Jean-Carlos Angulo
Greece Christian Herrault
Honduras Jean-Carlos Angulo
India Tom Farrell
Indonesia Christian Herrault
Iraq Christian Herrault
Jordan Christian Herrault
Kenya & Uganda Tom Farrell
Malaysia & Singapore Christian Herrault
Mexico Jean-Carlos Angulo
Countries EVP Operations
Moldova Tom Farrell
Morocco Christian Herrault
Nigeria & Benin Jean-Carlos Angulo
Pakistan Tom Farrell
Philippines Jean-Carlos Angulo
Poland Tom Farrell
Romania Tom Farrell
Russia Tom Farrell
Serbia Christian Herrault
South Africa Christian Herrault
South Korea, Vietnam, North Korea
(Eastern Asia Cluster) Tom Farrell
Spain Jean-Carlos Angulo
Syria Christian Herrault
Tanzania Tom Farrell
U.K. Tom Farrell
UAE, Qatar and other Gulf countries
(GCC Cluster) Tom Farrell
Ukraine Tom Farrell
USA Jean-Carlos Angulo
Zambia/Zimbabwe/Malawi
(East Africa Cluster) Tom Farrell
95
