Third quarter results and outlook for 2006 Presentation of November 8, 2006 Markus Akermann, CEO Theophil H. Schlatter, CFO The spoken word prevails. 1 3 rd Quarter 2006 Key facts at a glance  Hig  Price  Hig  Inter  Holc her sales in all Group regions and segments increases, efficiency gains and expanded scope of consolidation strengthen results her energy costs and competitive pressure in some markets have been largely offset nal and external growth produce record results im again "Leader of the Industry" in the Dow Jones Sustainability Index 2006/07 1) In the first nine months of the year, Holcim succeeded to further increase sales in all Group regions and segments. This also confirms the success of Holcim's global business portfolio and the dual product strategy based on cement and aggregates. Both, Aggregate Industries, acquired in 2005, and our entry into the Indian market had a positive impact on the Group. Higher sales volumes, price adjustments and efficiency gains were key to the encouraging result helping to counter higher energy costs and strong pressure on prices in some markets. We were able to partly offset the increase in thermal energy costs thanks to comprehensive programs to increase the use of alternative fuels and raw materials. The solid earnings reported by our Group companies, coupled with external growth, translated into record results. We are delighted to have been named Dow Jones Sustainability Index "Leader of the Industry" two years in succession. 2 3 rd Quarter 2006 Million t * 2007 2008 2009 Total Europe 1.2 1.5 2.7 North America 0.5 4.0 4.5 Latin America Africa Middle East 1.7 0.6 2.3 Asia Pacific 5.6 3.7 9.3 Total Group 9.0 5.8 4.0 18.8 * Approved projects of Group companies; partly under construction Dynamic growth in key Group markets enables capacity expansion in cement 2) The acquisitions made in recent years have created a platform to give the Group an excellent geographic positioning, in particular in the emerging markets. Building on this basis and working from established market positions, Holcim can participate fully in the dynamic growth and selectively expand cement capacity. By 2009 alone, Group cement capacity will be increased by 19 million tonnes, which, with the exception of the major Ste. Genevieve plant in the USA, will be achieved mainly in the emerging markets. This figure relates to projects authorized and announced to date, some of which are already under construction. The fact that these projects can be implemented fast and cost-effectively drawing on existing structures will have a positive impact on future profitability. I will comment on the individual expansion projects when I come to report on the Group regions. 2 3 3 rd Quarter 2006   Robust economy supports construction industry Encouraging order situation in western and southeastern Europe Europe 3) The robust economic environment impacted positively on the European building industry. The level of new orders was particularly strong in France and the Benelux countries, but also in Spain and Switzerland. In the UK, demand held up thanks to residential and commercial projects, and in Germany, the general improvement in the economy contributed to greater construction activity. The southeastern European economies continued to expand, the building materials industry benefiting from huge demand for housing and increased investment in infrastructure. 4 3 rd Quarter 2006 Positions in Europe Cement plant Grinding plant/terminal Aggregates Participation: Cement plant 1 Under construction 1 1 1 4) In September 2006, Aggregate Industries UK took over building materials group Foster Yeoman. This company operates attractive quarries in southern England and in Scotland. Foster Yeoman is also active in the asphalt business and operates a network of sales centers for aggregates in important ports along the coast of northern and eastern Europe. Holcim will be building a grinding plant with an annual capacity of 0.6 million tonnes near Rouen, to the west of Paris. The new plant will also serve the Paris market directly via the Seine. We are also increasing the capacity in the Swiss plants of Siggenthal and Eclépens. Dynamic market growth in southeastern Europe results in increasing demand for building materials. Holcim Bulgaria has modernized its Beli Izvor plant in an initial phase and substantially expanded the kiln line's clinker capacity. In 2007, we will increase the plant's capacity by a further 0.3 million tonnes to a total of 1.4 million tonnes. We are also increasing our cement capacity in Romania. Reaching an annual capacity of 1.5 million tonnes, the country's largest kiln line is currently under construction at the Campulung plant. 3 5 3 rd Quarter 2006 Facts on Europe       I Higher volumes in all segments Cement sales rising, in particular in France, Benelux, and southeastern Europe Aggregate Industries UK lifts sales of aggregates and ready- mix concrete Group companies showed significant improvement in results Operating EBITDA up by 16.8 percent to CHF 1.464 billion nternal operating EBITDA growth at 9.5 percent 5) In Europe, we increased deliveries in all segments. We reported higher sales volumes in particular in France, the Benelux countries, and southeastern Europe. Holcim Spain posted record sales of ready-mix concrete. Romania, Serbia and Bulgaria were the leading performers among the Group’s eastern European operations; Holcim posted its largest percentage sales increases in these three states. Aggregate Industries UK lifted sales of aggregates and ready-mix concrete, but reported a minor decline in volumes in the heavily cyclical asphalt and concrete products segment. Holcim Germany reported higher volumes in all segments. The performance of all Group companies in Europe improved, in some cases significantly. Operating EBITDA increased by 16.8 percent to approximately 1.5 billion Swiss francs, and internal operating EBITDA growth reached 9.5 percent. 6 3 rd Quarter 2006   Economic environment largely sound Housing construction cooling visibly North America 6) While the US real estate market has cooled noticeably in the third quarter, commercial construction and infrastructure expansion projects witnessed gratifying growth. The situation in the Canadian provinces of Quebec and Ontario, the principal markets for St. Lawrence Cement, was subdued in recent months. 4 7 3 rd Quarter 2006 Positions in North America 1 Cement plant Grinding plant/terminal Aggregates 1 Under construction 1 7) Acquired this July, Meyer Material Company was fully integrated into Aggregate Industries US. The Chicago-based building materials firm strengthens Aggregate Industries’ aggregates and related businesses in the Great Lakes region, and opens up a further area of growth potential for the group. Construction of the 4 million tonne Ste. Genevieve plant on the Mississippi is progressing to schedule and from the second half of 2009 will allow Holcim US to efficiently supply the large market of the river system. In addition, St. Lawrence Cement is building a 0.5 million tonne grinding station at its Mississauga plant for the manufacture of GranCem® products based on granulated blast furnace slag. 8 3 rd Quarter 2006 Facts on North America       I Slight increase in cement sales Cement, clinker and granulated blast furnace slag again had to be imported to cover demand Sales of aggregates and ready-mix concrete higher thanks to additions to the scope of consolidation Better prices in all market regions Operating EBITDA up by 15.1 percent to CHF 776 million nternal operating EBITDA growth at 14.6 percent 8) North America saw a slight increase in consolidated cement deliveries. Owing to a continuing demand overhang, again large quantities of cement and clinker had to be imported. Aggregate Industries US succeeded in maintaining market share. Several regions faced decreases in sales of aggregates, ready-mix concrete and asphalt owing both to bad weather conditions and to the economic situation. St. Lawrence also reported setbacks in these segments. Thanks to the first-time nine-month consolidation of sales of Aggregate Industries US and the inclusion of Meyer Material Company's volumes effective July, deliveries nevertheless rose noticeably. Operating EBITDA increased by 15.1 percent to 776 million Swiss francs. In a positive price environment, internal operating EBITDA grew by 14.6 percent. 5 9 3 rd Quarter 2006   Economic upswing continues unbroken Housing construction robust and infrastructure expanded further Latin America 9) The economic upswing in Latin America continued unbroken. Compared with the first nine months of 2005, demand for cement and other building materials increased in all countries. Once again, this market growth was driven by investment in private and public housing and public-sector infrastructure projects. 10 3 rd Quarter 2006 Positions in Latin America Cement plant Grinding plant/terminal Aggregates Participation: Cement plant Grinding plant/terminal 10) There have been no fundamental changes in cement capacity in Latin America this year. However, in a number of markets we have expanded aggregates and ready-mix concrete operations and strengthened our position in the area of alternative fuels and raw materials. 11 3 rd Quarter 2006 Facts on Latin America      I Higher sales in all segments Strong volume increases at Holcim Apasco in Mexico and Holcim Brazil Strong results increase in Mexico, El Salvador, Ecuador and Colombia/Venezuela Operating EBITDA up by 13 percent to CHF 955 million nternal operating EBITDA growth at 10.5 percent 6 11) Holcim reported higher sales volumes in all segments. Holcim Apasco in Mexico and Holcim Brazil both posted substantial sales increases. Cemento de El Salvador and Panamá Cement turned in very strong sales performances. In Ecuador, we again achieved record sales. Deliveries also held up well in Colombia, although the still low cement prices are recovering only very slowly. To meet the steady growth in domestic demand, Holcim Venezuela has slightly reduced exports of cement. Deliveries by Cemento Polpaico in Chile and, above all, Minetti in Argentina were significantly higher year-on-year. With the exception of Brazil, all Group companies in this region contributed to the pleasing result. With prices still too low, Holcim Brazil reported an operating loss. A sharp increase in energy costs and government-regulated prices pressured the results of Minetti in Argentina. In Group region Latin America, operating EBITDA increased by 13 percent to 955 million Swiss francs. Internal operating EBITDA growth came to 10.5 percent. 12 3 rd Quarter 2006 Africa Middle East Construction activity robust in Morocco and South Africa Building activity recovered fast in Lebanon after end of hostilities   12) Economic development in Group region Africa Middle East was generally satisfactory, despite regional differences in growth. In Lebanon, on the other hand, the economy was hit by the events of war. Construction activity remained robust in Morocco and South Africa. 13 3 rd Quarter 2006 Positions in Africa Middle East 1 1 1 Cement plant Grinding plant/terminal Aggregates Participation: Grinding plant/terminal Under construction 1 13) In Morocco, work on the new cement plant near Casablanca is progressing very well. The fully equipped cement plant with an annual capacity of 1.7 million tonnes will commence operations on schedule at the middle of next year. In the 1st quarter of 2007, a grinding plant with a capacity of 2 million tonnes of cement will be commissioned in Abu Dhabi. Holcim holds a minority stake in this company. The capacity of the grinding plant in Roodepoort, South Africa, will be increased by 0.6 million tonnes of cement by 2008. At the end of August, we signed a conditional agreement to dispose of a substantial share of our majority interest in Holcim South Africa. By doing so, Holcim seeks to act in accordance with the statutory obligations under Black Economic Empowerment and 7 ensure Holcim South Africa an optimal market positioning. If all preconditions are satisfied, we expect the transaction to close sometime next year. Until that point, Holcim South Africa will remain part of the Group. 14 3 rd Quarter 2006 Facts on Africa Middle East  W  Mo  W  Sig  Int ith the exception of Holcim Lebanon, all Group companies lifted domestic sales rocco and South Africa reported very good sales trend ith the exception of Holcim Lebanon, all Group companies contributed to the improved financial result nificant 8 percent increase in operating EBITDA to CHF 512 million ernal operating EBITDA growth at 10.5 percent 14) With the exception of Lebanon, all Group companies succeeded in further lifting domestic deliveries. Although Holcim Lebanon maintained clinker and cement production at its plant in Chekka almost until the end of hostilities, cement deliveries practically dried up for a while, but have in the meantime recovered. Holcim Morocco reported an impressive increase in sales in all segments. The unbroken sales growth achieved by Holcim South Africa was driven by an upturn in construction activity. Domestic sales remained quite stable at Egyptian Cement, and cement deliveries in the Indian Ocean region matched the previous year's level. All Group companies contributed to this solid result, with the exception of Holcim Lebanon. Results in Egypt, Morocco and South Africa were sharply higher. Operating EBITDA of Group region Africa Middle East rose by 8 percent to CHF 512 million. Internal operating EBITDA growth came to 10.5 percent. 15 3 rd Quarter 2006   Strong growth of Indian construction industry Restrained building activity in Thailand, the Philippines and Indonesia Asia Pacific 15) The majority of construction markets in Group region Asia Pacific have continued to make good progress. India showed a very dynamic development of the construction industry. In Thailand, political uncertainty dampened economic activity, and in the Philippines, budget constraints negatively affected the investment climate. In Indonesia, business activity in the construction sector has not yet picked-up. 8 16 3 rd Quarter 2006 Positions in Asia Pacific 1 1 1 Cement plant Grinding plant/terminal Aggregates Participation: Grinding plant/terminal Under construction 1 16) ACC has been consolidated since the end of January 2006, and Gujarat Ambuja Cements since this May. Group companies in the fast growing market of India are continually adapting production capacity to rising cement demand. By the end of 2007, we will have commissioned an additional 5.6 million tonnes of capacity. Capacity will be expanded partly at existing plants, and partly by the construction of new grinding plants. In order to catch market growth, our Group companies in India will commission additional 3.7 million tonnes in 2008, and thus increase total capacity to 44 million tonnes. The merger of Gujarat Ambuja Cements with Ambuja Cement Eastern will be concluded this year. We have intensified vertical integration in this Group region by investing in ready-mix concrete operations in major urban centers. In China, where we want to increase our holding in Huaxin Cement to a majority interest, the authorization process has not yet been entirely completed, with the approval of the Chinese Securities Exchange Commission still pending. We assume that we will obtain a capital majority in this company by the beginning of 2007. Huaxin Cement will also be further growing in its markets in the coming years and expand production capacity. 17 3 rd Quarter 2006 Facts on Asia Pacific Group region strengthened by acquisitions in India Cement sales volumes increasing in India, Sri Lanka, Bangladesh, Malaysia and Singapore Sales down in Vietnam and Indonesia The inclusion of India and a stronger presence in major urban centers bolsters ready-mix concrete sales Operating EBITDA up by 121.6 percent to CHF 933 million on generally stable prices Internal operating EBITDA growth at 0.2 percent       17) Despite a very heavy monsoon season, the Indian Group companies significantly increased deliveries of cement. We also sold more cement in Sri Lanka, Bangladesh, Malaysia and Singapore. Our Group company in Thailand virtually compensated for weaker domestic demand with exports. In Vietnam and Indonesia volumes decreased. Domestic sales were stable at Holcim Philippines. However, a production bottleneck at the Davao plant led to a reduction in exports. Holcim New Zealand succeeded in largely offsetting the weather-related decline in deliveries in the first half. The region also saw an increase in sales of ready-mix concrete. The marked improvement in the 9 financial result reflects the expanded scope of consolidation, rigorous cost controls and generally stable sales prices. In this Group region, operating EBITDA rose sharply by 121.6 percent to 933 million Swiss francs. Since economic and political developments have dampened construction activity in some markets and cement prices are still unsatisfactory, internal operating EBITDA growth came to only 0.2 percent. 18 3 rd Quarter 2006 2005 2005 1 2006 LFL CIS FX in CHF Net sales 18,468 13,425 17,514 9.0% 18.9% 2.6% 30.5% Operatin g EBITD A 4,627 3,501 4,489 10.9% 15.1% 2.2% 28.2% Operatin g profit 3,316 2,576 3,281 13.0% 12.3% 2.1% 27.4% Net income 1,818 1,362 1,950 4.4% 43.2% Cash flow from operating activities 3,405 1,864 2,348 20.3% 4.8% 0.9% 26.0% EPS in CHF 6.73 5.04 6.28 4.7% 24.6% Cash EPS 2 in CHF 7.02 5.23 6.64 4.5% 27.0% Million CHF 9 Months +/-Full Year 1 adjusted in line with IAS 21 amended 2 excludes the amortization of other intangible assets Key financial figures 18) As Markus Akermann already mentioned, we are once again able to present record results: In the first nine months of the year, sales continued to increase in all Group regions and segments. Overall, net sales increased by 31 percent and operating EBITDA by 28 percent. Operating profit improved by 27 percent and cash flow from operating activities advanced 26 percent. 19 3 rd Quarter 2006 Major changes in the scope of consolidation Effective as at + A + A + A + G + M + F +/– V ggregate Industries, UK/US March 21, 2005 mbuja Cement Eastern, India April 11, 2005 CC Limited, India January 24, 2006 ujarat Ambuja Cements, India May 3, 2006 eyer Material Company, US July 21, 2006 oster Yeoman, UK September 7, 2006 arious smaller companies 19) The major changes in the scope of consolidation in the first nine months of 2006 were the first-time consolidation of ACC, Gujarat Ambuja Cements, Meyer Material Company and Foster Yeoman. The annual cement capacity of newly consolidated companies in India accounts for 33.4 million tonnes, whereas Meyer Materials’ and Foster Yeoman’s businesses are aggregates, ready-mix concrete, asphalt and other building materials and services with a total turnover of approximately 770 million Swiss francs. 10 [...]... +41 58 8 58 87 10 Fax +41 58 8 58 87 19 communications @holcim. com February 28, 2007 Annual results 2006 Conferences for press and analysts First quarter results 2007 May 4, 2007 Investor Relations Phone +41 58 8 58 87 87 Fax +41 58 8 58 80 09 investor.relations @holcim. com www .holcim. com/investors May 3, 2007 Annual General Meeting May 9, 2007 Dividend payment August 23, 2007 Half-year results 2007 November. .. targeted training should make the most of the potential for efficiency gains across all sectors and segments Outlook for 2006 In the 2006 business year, internal operating EBITDA growth will substantially exceed the long-term average of 5 percent 38 3rd Quarter 2006 38) Thanks to new consolidations, excellent geographic diversification and a strong performance by the Group companies, and despite a cyclical... factor here Higher output in western and southeastern Europe and South Africa also had a positive impact on sales volumes Group region North America reported negative internal growth of 11 percent, which is attributable to unfavorable weather conditions this summer and to the slowdown in the residential housing market Sales of ready-mix concrete and asphalt Ready-mix concrete in million m3 Asphalt in... 37 3rd Quarter 2006 37) Over the past few years we have achieved the greatest progress in the segment cement and mineral components, despite massive increases in energy prices We are aiming for a further improvement in this segment, for which we have set an average operating EBITDA margin target of 33 percent We attach a high priority to the increased use of alternative fuels, as well as to the wider... improvement along the entire value chain, right up to the construction site We will continue to move ahead with product innovation and expanding the range of services we offer, thereby generating greater benefit for the customer The development of new and the multiplication of existing efficiency programs cover the entire value chain, including administration, the IT service centers and central procurement Finally,... certain Group charges 3rd Quarter 2006 Group net income Million CHF Net income Net income - equity holders of Holcim Ltd 1,950 +43.2% 1,505 1,362 1,153 +56.2% 87 2 +30.5% + 68. 1% 686 +21.0% +33.0% 1, 2 2 9M 2004 1 9M 2005 restated in line with new and revised IFRS, effective January 1, 2005 2 9M 2006 31 adjusted in line with IAS 21 amended 3rd Quarter 2006 31) As a result of the strong operating performance,... average costs of capital (WACC) of 8 percent after tax The new operating EBITDA margin targets are: 33 percent for Cement and Mineral Components 27 percent for the Aggregates segment 8 percent for Other Construction Materials and Services These margin targets are to be reached by 2010 36 3rd Quarter 2006 36) Having significantly strengthened our business portfolio by means of acquisitions in the Asian region... deliveries, the majority of which was related to the newly consolidated Indian companies Negative internal growth in Group region Asia Pacific is mainly due to a production bottleneck at the Davao plant in the Philippines and a drop in sales volumes in Indonesia Sales of aggregates by region Million t 69.6 58. 8 44.9 48. 0 43.9 Total Group 9M 2004 78. 5 9M 2005 122.3 9M 2006 1 38. 0 15.3 6 .8 7.3 8. 4 3.3 Δ... 2.1% 705 27.4% 9M 2006 29 3rd Quarter 2006 29) Operating profit increased 27 percent to 3.3 billion Swiss francs Growth on a likefor-like basis reached 13 percent and changes in the scope of consolidation added 12 percent Overall, the operating profit margin decreased from 19.2 percent to 18. 7 percent mainly due to the change in product mix On a like -for- like basis the operating profit margin increased... Change in structure 0.0% 0.0% 0.0% -2.9% 85 .0% 22.1% 2.9% 1.5% 10 .8% 3 .8% -5.1% 3.0% Total 2.9% 1.5% 10 .8% 0.9% 79.9% 25.1% 21 3rd Quarter 2006 21) Consolidated cement sales volumes increased 25 percent to 104 million tonnes in the first nine months of the year The largest volume increases were achieved in Group regions Asia Pacific and Latin America Internal growth was 3 percent and changes in the . Communications Phone +41 58 8 58 87 10 Fax +41 58 8 58 87 19 communications @holcim. com Investor Relations Phone +41 58 8 58 87 87 Fax +41 58 8 58 80 09 investor.relations @holcim. com www .holcim. com/investors Mailing. Third quarter results and outlook for 2006 Presentation of November 8, 2006 Markus Akermann, CEO Theophil H. Schlatter, CFO The. Finally, targeted training should make the most of the potential for efficiency gains across all sectors and segments. 38 3 rd Quarter 2006 Outlook for 2006 In the 2006 business year, internal