© 2014 Holcim
Holcim in Azerbaijan Investing successfully in Azerbaijan, Holcim’s perspective
Holcim Emerging Europe, 2014-10-16
Holcim Azerbaijan, Commercial Team
Winners of the “Holcim Customer Excellence Award for Europe , CIS and CAS”
© 2014 Holcim
Agenda
The Holcim Group at a glance
History of Holcim Azerbaijan
Holcim Azerbaijan today
Lessons Learned
Holcim Emerging Europe, 2014-10-16 2
© 2014 Holcim
Holcim at a glance
130 cement plants around 200 limestone quarries /
450 aggregates operations
1’150 RMX plants in the world
> 70’000 employees
over 5’000 own RMX trucks / more
than 3’000 subcontracted over 1’600’000’000 cement bags sold
Presence on all five continents and in around 70 countries
2013 Net sales of CHF 19.7 bn and operating EBITDA of CHF 3.9 bn
Holcim Emerging Europe, 2014-10-16 3
© 2014 Holcim
5
60
17
26
26
11
19
3
5
68*
4
12
7
11
Holcim annual cement capacity as of December 31, 2013: 206 Mt * China not consolidated
Over the past 10 years Holcim invested about CHF 28 billion to establish a
global footprint unmatched in the industry
Well positioned to address growth in cement demand
4 Holcim Emerging Europe, 2014-10-16
© 2014 Holcim
Agenda
The Holcim Group at a glance
History of Holcim Azerbaijan
Holcim Azerbaijan today
Lessons Learned
Holcim Emerging Europe, 2014-10-16 5
© 2014 Holcim
• Until 1999: Cement as State Company
State owned Garadagh Cement is the only local
cement manufacturer in Azerbaijan
• September 1999: Holcim Enters Azerbaijan
Holcim wins the tender to acquire 86% of the
share capital of Garadagh Cement
• 1999 – 2007: Optimizing Existing Assets
Holcim invests in Azerbaijan approx. EUR 60 mio
to enhance the acquired production facility
• 2007: Privatization completed
Privatization is fully endorsed by the State
Property Committee
• 2008 – 2012: Major upgrade of Garadagh plant
Hocim embarks on a 300-mio-EUR project to
upgrade the local cement manufacturing plant
• Today: Established, trusted cement supplier
Holcim Azerbaijan with a solid position as cement
supplier; relied upon for complex large
construction projects as much as for do-it-yourself
masonry applications
A short history of Holcim in Azerbaijan
Garadagh plant, prior to upgrade
Holcim Emerging Europe, 2014-10-16 6
© 2014 Holcim
• Strong economic growth
during the first 8 years of
Holcim in Azerbaijan
• Solid prospects for further
growth in the future
• Increasing cement
demand, limited capacity
by the local manufacturer
Holcim to cover it
• Need for further
construction in all sectors:
infrastructure, commercial
and residential
• Holcim decides to
upgrade its cement plant
in Azerbaijan
In 2007, the economic development and the trends in the
construction industry encouraged Holcim to further invest
25 %
35 %
26 %
10 %11 %11 %10 %11 %7 %
0
10
20
30
40
2007 2006 2005 2004 2003 2002 2001 2000 1999
*Annual percentage growth rate of GDP at market prices based on constant local currency
Source: World Bank statistics, Own estimations, Customs and Railway
Holcim Emerging Europe, 2014-10-16 7
GDP growth, annual [%]*
Market demand [mt]
0
1
2
3
4
70
80
90
100
110
2000
2,6
2007 2006
3,2
2005
2,5
2004
2,3
2003
2,1
2002 2001 1999
1,9
Market demand [mio t pa.a.] Holcim AZ apacity utlization [%]
Holcim AZ capacity utilization [%]
© 2014 Holcim
• Project scope: New kiln, limestone extraction and processing equipment, new
mills, silos, storage halls
• Cement production capacity increased from 1.3 mio t to 1.7 mio t cement p.a.
• Result: a new plant, energy efficient and clean, producing top quality cement
Holcim’s bet on Azerbaijan’s development: The upgrade of
the Garadagh plant, an investment of EUR 300 mio
Cement plant Garadagh in 2007 After modernization & expansion
Dark grey = Demolished
Light grey = Preserved structures
Blue = New structures
Light grey = Preserved structures
Holcim Emerging Europe, 2014-10-16 8
© 2014 Holcim
Agenda
The Holcim Group at a glance
History of Holcim Azerbaijan
Holcim Azerbaijan today
Lessons Learned
Holcim Emerging Europe, 2014-10-16 9
© 2014 Holcim
Holcim Azerbaijan’s organization:
An international team of motivated professionals
Rossen Papazov
CEO
Oliver Wilke
CFO
Ruslan Aghabayli
HR
Carlos Terres
CEO
Ali Huseynov
Plant manager
4 Azerbaijani nationals working for Holcim abroad, e.g.
• Commercial performance team Holcim Europe
• Corporate Internal Audit
+
Holcim Azerbaijan led by an international management team
Young talents from the pool of highly qualified employees were selected for
high-profile international assignments, to prepare the leaders of tomorrow
“Global standards - local management”
Holcim Azerbaijan
> 400 FTEs
Holcim Emerging Europe, 2014-10-16 10
© 2014 Holcim
• Supporting
European norms &
standards
• Providing high
quality products
responding to
consumer needs
• Advising in all type
of cement
applications
• Offering solutions
for the fast-growing
construction
industry
Holcim’s role in the Azerbaijani Construction industry:
Bringing the sector to the next level
“Heydar Aliyev Cultural Center“, Baku
Holcim Emerging Europe, 2014-10-16 11
© 2014 Holcim
Our business today: 2013 was a year of exceptional
performance...
6%2%0%5%
9%11%
25%
35%26%
10%11%11%10%11%7%
0
20
40
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999
• Azerbaijan
continued on a path
of growth despite
the economic crisis
• Cement demand
hike restarted from
2011
• Holcim Azerbaijan
with a record result
in 2013:
Net sales:
Approx.
170 mio EUR
Holcim Emerging Europe, 2014-10-16 12
*Annual percentage growth rate of GDP at market prices based on constant local currency
Source: World Bank statistics, Own estimations, Customs and Railway,
0
1
2
3
4
5
70
80
90
100
110
1,9
2,6
2005 1999 2003
2,1
2010 2011 2009 2008 2002 2012
4,3
2013
3,7 3,1
2,7 3,0
3,7
2001 2007
3,2
2,3
2006 2000
2,5
2004
Market demand [mio t pa.a.] Holcim AZ apacity utlization [%]
Market demand [mt] Holcim AZ capacity utilization [%]
GDP growth, annual [%]*
© 2014 Holcim 13 Holcim Emerging Europe, 2014-10-16
... but in 2014 we were already confronted with a series of
tough challenges
Challenges
• New entrants with local manufacturing
facilities: Akkord and Norm
• Growing cement imports fueled by
attractive import price parity at IR-AZ
border > 30 EUR/t below local price level
Immediate results
• Holcim cement sales volumes lower by
approx. 20% vs. last year, price pressure
Our response
• Strengthen customer focus through
special services and products
• Optimize production processes to retain
cost leadership amongst local producers
• Insist on enforcement of a level playing
field with subsidized Iranian cement
Source: Own estimations, Customs and Railway, public announcements by Norm and Akkord,
We are fully confident that we will meet these challenges, and
Azerbaijan will remain a highly successful company in Holcim’s portfolio
Baku
50 km
Armenia
Georgia Russia
Iran
Plant
Grinding Station
Holcim
Garadagh
Clinker Flows
Cement Flows
Akkord
New entrant
Turkey
Norm Sement
New entrant
© 2014 Holcim
Agenda
The Holcim Group at a glance
History of Holcim Azerbaijan
Holcim Azerbaijan today
Lessons Learned
Holcim Emerging Europe, 2014-10-16 14
© 2014 Holcim
Healthy fundamentals in natural resources
Sufficient oil and gas resources to fuel the
future development of the economy
Not only oil and gas
Clear strategy, fully endorsed by the highest
authorities in the country, to diversify
progressively the Azerbaijani economy in new
sectors and across regions
An attractive place to live and invest
Very safe living and working environment
Good infrastructure, being constantly
developed
Manageable, ever reducing bureaucracy
Conveniently located, to become a future
regional business hub
People
Young, qualified, motivated and eager to
learn local work force
Why investing in Azerbaijan?
Some of the main reasons, based on our experience
“The Crescent” project, Baku
Holcim Emerging Europe, 2014-10-16 15
© 2014 Holcim
• Tap into the local talent pool Good command of English, solid technical preparation
and precision distinguish the young Azeri workforce:
Use this resource from onset to minimize ramp up
time and gain local knowledge
• Work closely and proactively with local
authorities Be transparent and open with your plans and projects,
involve local authorities proactively to foster a good
working relationship
• Establish a strong corporate governance Establish a robust corporate governance comprising
local experts as advisors (e.g. boards, committees) to
best guide you in the investment and to capitalize on
the continuously improving, more and more business-
friendly regulatory environment
Lessons learned
“The flame towers”, Baku
Holcim Emerging Europe, 2014-10-16 16
Strength, Performance, Passion