holcim strength performance passion holcim leadership journey bernard fontana ceo holcim group

Actions planned and executed to achieve our targets Leverage existing asset base and core competencies Manage product- and service-driven businesses differently De-commoditize and fost

Strength Performance Passion

Holcim Leadership Journey

Bernard Fontana, CEO Holcim Group

Agenda

Holcim Leadership Journey – achieving our targets 19

Safety is our first priority

• Lost-Time Injury Frequency Rate (LTIFR) for own employees has dropped to 1.6 in 2011

• Puts us amongst the top per- formers in the industry for LTIFR

• LTIFR YTD June 2012 was 1.4 which

is within our current target of 1.5

• Aim to improve even further – want to achieve <1 by 2013

Agenda

Holcim Leadership Journey – achieving our targets 19

Building on a proven strategy

People

Better Cost Management

Permanent Marketing Innovation

Human Resources Excellence

Corporate Social Responsibility

Sustainable Environmental Performance

Increased focus on ROIC

Creation of Value

ROIC & HVA

(Holcim Value Added)

Company result after consideration of all costs of capital, incl cost of equity

Key operational indicator focused on cash-generation/

efficiency

TSR

(Total Shareholder Return)

Op EBITDA /

Op EBITDA - Margin

ROIC & EV

(Enterprise Value)

- Credit Rating

Internal view

Holcim’s corporate strategy is based on three pillars

Diversification

Local Management Global Standards

• Two basic resources

• Business – strongly anchored in local markets

• Supported by global standards

know how &

best practices / benchmarking

Asia Pacific Latin America Europe

North America Africa Middle East

Net Sales 2011 Op EBITDA 2011

Customer excellence & cost leadership

Holcim’s strategy is aligned with the five mindsets

Mindsets to guide value creation

Mindsets

Better Cost Management

Permanent Marketing Innovation

Human Resources Excellence

Corporate Social Responsibility

Sustainable Environmental Performance

The human face of our global positioning

• Over 80’000 people in around 70 markets and roughly 2’000 operations are driven by an environment of:

• Multicultural management teams

• Local management and global standards

• Performance and rewards culture

• Talent management

• Succession planning

• Fostering best practice & experience multiplication

• Skilled and motivated workforce

• Continuous training and development

Agenda

Holcim Leadership Journey – achieving our targets 19

Streamlined organizational structure Holcim Group

CEO

Paul Hugentobler

Andreas Leu Roland Köhler Bernard Terver Thomas

Aebischer

CFO

Javier

de Benito Aidan Lynam

Onne van der Weijde

Communications Human

Resources Investor Relations Legal Occupational Health & Safety Strategy & Risk Management

Aggregates and Other Construction Materials Cement Manufacturing Commercial & Marketing Innovation Sustainable Development

Controlling Financing &

Treasury Group Structure & Tax HGRS Accounting &

Administration*

IT Merger &

Acquisitions Procurement

Ian Thackwray

1 Internal Audit reports to the Chairman of the

East Asia 3

Oceania Holcim Trading

Latin America North America

UK

Africa Middle East

Urs Bleisch Jacques Bourgon

Urs Fankhauser Kaspar Wenger Horia Adrian

Streamlined organizational structure Europe

Area Manager - Eastern & Southeastern Europe

Kaspar E.A Wenger

Area Manager - Central Europe

OpCo teams

Holcim Leadership Journey – Project Management Office

organization

Regional EXCOMs

Program Management Office - Holcim Leadership Journey

Holcim Executive Committee

Regional teams

East Asia Oceania

South Asia ASEAN

of new cement capacity

Agenda

Holcim Leadership Journey – achieving our targets 19

Driving ROIC based on strategy, people, execution

< 8%

Building on competencies, focusing on execution

Proven strategy

Leadership Journey

Dedicated people

> 8%

* After tax

Setting objectives to achieve our targets

service-driven businesses

with an aligned compensation

Business portfolio

Business structure

Operating profit drivers

Growth drivers

Actions planned and executed to achieve our targets

Leverage existing asset base and core competencies

Manage product- and service-driven businesses differently

De-commoditize and foster customer value proposition Optimize energy, logistics and procurement

Reduce fixed costs

Business portfolio

Business structure

Operating profit drivers

Growth drivers

People

* After tax

< 8%

> 8%

Agenda

Driving additional growth through customer excellence

Customer focus

Marketing and sales

An increasingly targeted use of push factors to result in pull factors driving both growth and profitability resulting in an increasing return on invested capital

Additional operating profit (CHF m)

Value Proposition:

“Customer Excellence”

- creation

&

capture

of demand through advice &

Differentiation and de-commoditization

Reliable Supplier

Consistent Quality

Customer Care

Solid Quote-to- Cash Processes

Competitive Price

Sustainability

Innovative Solutions

Technical Consulting &

Sales

Range of Products &

Services

Early Supplier Involvement

• Differentiation of product &

service offer in all segments

• Tailor-made solutions for customer segments and single

projects => increase value

Moving towards a service driven company

Implement customer value management

Facts

Enable higher prices through value generation and capture

- creating a win-win position -

Challenge

Action

• We are one of the suppliers of choice in most markets we serve

• We deliver added value to our customers through superior products and services as well as standard products

How can we participate more in the additional value we generate for our customers?

• Managing our performance based on price-, cost- and margin- transparency by customer

• Building people skills in pricing and margin excellence

• Customer value & loyalty management

Value creation through new solutions and innovation

Innovation is paramount to sustain attractive profits and address the increasing

speed of change, customer demand, society and other stakeholders

Combining services with products into a solution in order to optimally satisfy customer needs

A true solution is defined by and designed around customer needs

Value added

Construction Process

* Leadership in Energy and Environmental Design

Customer Excellence - Holcim’s way of differentiation

Customer Excellence

Product:

• Ecological products, e.g cements with low clinker factor,

CO2-reduced concrete, recycled concrete, insulating

concrete

• High durability for special uses like dams, bridges, etc

• High early strength, e.g SpeedCrete

• Cements with low water demand

• Fair-faced and decorative concrete

Customized technical support and training

 Holcim as service provider

Shorter delivery times

etc

Basic Requirements

Composition, e.g in Europe: CEM-I, CEM-II, etc

Strength class – for early and late strength

Chemical and physical requirements

Basic durability, e.g sulfate resistance

IUCN Conservation Centre in Gland:

Built with CO2-reduced concrete, recycled concrete, insulating concrete, etc Reduces energy running costs to

one fifth of that for comparable

buildings

Customer Excellence - Differentiated objectives, offerings and pricing models for specific customer segments

Segment-specific offerings are packaged and priced to best satisfy customers’

needs and maximize profitability

High-end RMX asking for special services &

business improvement

Large-sized RMX requiring guaranteed availability and cost efficiency

RMX (value oriented)

Large-sized RMX (price- oriented)

Mid-sized RMX (value- oriented)

S/M-sized RMX (price- oriented)

Availability Prioritized

Guaranteed Logistics 3 days

24h 12h Quality

Assurance

Technical assistance

QC on site Business

Improvement

Training Innovation Relationship

enhancement

Loyalty program Representation

on site

• Bundle sold

at based price

value-• Base offer at competitive price

• 2 options to

be selected

as «goodies»

• Base offer at premium price

• Additional services offered

at extra charge

• Reduced offer at competitive price

Market: xyz

Commercial initiatives in Emerging Europe

Key customer excellence initiatives

Tools:

Market &

Business Intelligence

Mindset:

Customer Value Management

Customer value management is the key to obtain a visible differentiation in the market by creating value with and for our customers Global replication

potential is ensured through the measurable performance improvements

• Continuous development of new services by cross-functional teams and creation of service packages according to customer needs, such as:

• Technical Competence Center

• Internet Portal

• Complaint resolution within 48 hours

• On-time delivery guarantee

• Behavioral change and strengthening of sales force capabilities

Customer Excellence – Value based pricing at Holcim

Slovakia

Our target

• Customer analysis and segmentation according to their focus and needs

• Analysis of our product and service range to better align and respond to customer needs

• Value propositions per customer segment

• Re-focusing of organization to become customer-centric

What we are

doing

Results

• Unique advantages through Customer Value Management (CVM)

• Value based pricing while retaining all customers

• CVM becomes part of business planning process and daily work

• Customer-centric organization

Customer Excellence – Customer Value Management at

• Focused on levers such as products, logistics, customer loyalty, technological tools, financing possibilities, training, and marketing

• Customer value management allows to successfully position our products and services, thereby strengthening and expanding our customer relationships along the value chain resulting in higher profitability

Driving profit growth through Cost Leadership

A thorough analysis of the asset base, energy and AFR, logistics and procurement reduces costs while increasing efficiency and return on invested capital

Additional operating profit (CHF m)

Value Proposition:

“Cost Leadership”

- Optimization

of cost base

Energy and AFR

Expanding energy and AFR opportunities

Key energy cost reduction levels

Efficiency • Grinding

• Fans and filters

• Burners

Mixture • Increased usage of petcoke,

low rank coal, natural gas

Procurement • Contract management

• Spot market

• Portfolio optimization

Strategic initiatives

• Identified initiatives allow for

a considerable cost reduction

> 12.5% reduction or > CHF 300 m

Energy cost reduction potential*

* Compared to FY 2011 total energy costs

Identified energy and AFR cost saving opportunities amount to at least

CHF 300 m by end 2014

Cost Leadership - The STAAR* program aims at supporting OpCos to identify the full potential of AFR business

Market and regulation

• Fuel Mix optimization

• Heat & mass balance

• Feeding systems

• Skills and competences

• Design & flow sheet

• Cost structure

• Quality requirements

• Operation

• Skills and competences

• Acceptance and control procedures

market system based on CAPEX requirements and implementation complexity

Cost Leadership - AFR activities and their potential

Environmental

footprint

• Reduction of greenhouse gas emissions (CO2) and other pollutants

• Conservation of natural (non-renewable) resources

• Reduction of environmental impact stemming from mining and quarrying, transportation, and processing raw materials

• The gross added value (GAV) is expected to increase by 75% between 2011 and 2014 and growth thereafter

Cost Leadership - Energy & AFR as part of the Fast Return CAPEX program

• 102 projects were submitted of which 47 qualified and were approved with a total CAPEX amount of CHF 144 m and a payback of between 0.7 and 4 years

• Of the approved projects more than 40% are energy related totaling 45% of CAPEX

Moving goods more efficiently and at lower costs

Key logistics efficiency and cost levers

• Identified initiatives allow for further improvements of efficiency and costs

> 5% reduction or > CHF 200 m

Logistics cost reduction potential*

* Compared to FY 2011 ** Road, rail, ship

Identified logistics efficiency and cost saving opportunities amount to at least

CHF 250 m by end 2014

(2011 cement volumes transported)

Cost Leadership – Logistics diagnostics and route

optimization in the U.S

Our target

• Identified large variability in shipping rates

• Conducted diagnostics on the differentials and inconsistencies

in the shipping cost

• Found potential for significant savings within and between means of transportation (e.g., rail vs truck)

• Analyzed root causes and actionable items

• Selectively chose means of transportation (road, rail, ship)

• Optimized routes, means of transport and carriers

• Reduced truck cycle times and waiting time

• Reduced variability in shipping costs

• Annual savings of potential of nearly CHF 12 million

• Reduction in contractor and third party services

Cost Leadership – RMX cycle time reduction through use of GPS in Belgium

Our target

• Diagnosed cycle time through the use of GPS information

• Installed monitoring dashboards in all dispatch offices, showing the performance indicators in comparison with the targets

• Improved driver communication at job sites to avoid idle times for following trucks

• Goal is a reduction in overall cycle time of 8%

• Achievement will result in 5 less trucks to deliver volumes

• Savings are estimated at CHF 100,000 / truck with similar projects underway in Chile and the U.S

Getting more for less through managed procurement

Key procurement levers

Standards / pooling

• Standardized terms and conditions

• Economies of scale

Diversify / concentrate

• Manage supplier network

• Optimize geographical level

of sourcing

• Service provider analysis

Organization • Redefining and adapting the

Cost Leadership – Centralized procurement hub in the U.S

Our target

• Centralized and integrated procurement organization

• Established direct ties between procurement and operational plant levels

• Established one main office with functional specialists in fuels and electricity

What we are

doing

Results

• Established common targets between operations and procurement

• Identified opportunities for fuel switching and consumption practices among other action items

• Standardized terms and conditions on purchases and inbound transportation

• Allowed for fuel switching including use of natural gas

• Improved electrical consumption practices and purchases of asphalt supplies

• Annual operating savings potential of roughly CHF 10 million

• Reduction in contractor and third party service

Tailoring fixed costs to fit requirements

Key fixed cost levers

• Review and adjustment of asset base

• Identified initiatives allow for further improvements of efficiency and costs

Cost Leadership – Fixed cost through restructuring in Spain

Our target

• “Right size” the business to the current cement market

• Demand has contracted by 31% since 2011 standing at third of peak volumes with the contraction to continue in 2012

one-• Structural overcapacity with limited recovery in the short term

• Reduced staff by 350 FTE

• Incurred one-time operating costs included in Q2 2012 results

• Annual operating savings of CHF 25 million

• Implemented the necessary measures in a professional and social way