holcim us an overview bernard terver area manager st louis september 14 2010 holcim

Genevieve provides cost leadership in ~80% of the river markets • Our culture is ‘performance driven’, doing our ‘homework’ well with passion • Our response to the crisis was quick and d

Holcim US – an overview

Bernard Terver – Area Manager

St Louis, September 14, 2010

Executive Summary Holcim US (HUS)

• Ste Genevieve start-up was successful

• HUS has the most modern assets in the industry as well as one of the

broadest geographical coverage due to its large distribution network

Ste Genevieve provides cost leadership in ~80% of the river markets

• Our culture is ‘performance driven’, doing our ‘homework’ well with passion

• Our response to the crisis was quick and decisive

 Reorganization was carried out in the spirit of “Speed and Simplicity”

 Cost reductions of ~$150M were achieved in 2009

 Operational performance improved

• We have world class safety results and a standard setting plant for energy efficiency and environmental performance

• HUS strategy is to “grow the pie” through promotion and being closer to

customers by providing solutions

• HUS is well set up for recovery and will achieve its 33% EBITDA margin target

Agenda

1 Our US portfolio – broad geographic reach

2 Our response to the crisis – quick and decisive

3 Our performance – empowered employees delivering

4 Our value creation – targets achieved with recovery

North Region South Region

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5.6 million tons

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Our integrated positions strengthen cement sales in select integrated markets and provide opportunities for cross selling

Birmingham Camden

Expansion

of Portland plant

Expansion

of Devil's Slide plant

Chicago Skyway

Expansion

of Midlothian plant

Expansion

of Holly Hill plant

Box Crow Cement (Midlothian plant) under Holnam Texas LP

Acquisitions and Expansions

• HUS has invested the most of all the cement players resulting in average kiln age of ~15 years

• As more stringent environmental regulations are passed, HUS’ newer asset base is anticipated to have a competitive advantage

HUS and main competitors average kiln age

Barge is cheaper, cleaner and safer

Ste Genevieve provides cost leadership in ~80% of river areas which account for 32% of US cement consumption

155 22.7

1 Equivalent

Fatalities (indexed

to barge)

71.6 26.9

19.3

CO2(tons of CO2per million ton- miles)

26.61 2.24

0.72 Cost per ton-mile

(cents)

70 16

1 Equivalent Units

(Indexed to barge)

Trucks Rail

Agenda

1 Our US portfolio – broad geographic reach

2 Our response to the crisis – quick and decisive

3 Our performance – empowered employees delivering

4 Our value creation – targets achieved with recovery

Actual Consumption and PCA Forecast (M tons)

Supply Demand Balance (M tons)

0 20 40 60 80 100 120 140

72 75 78 81 84 87 90 93 96 99 '02 '05 '08

Cement Consumption by Segment (M tons)

F i g ur es ab o ve i nclud e M aso nr y F i g ur es ab o ve excl ud e M aso nr y

F i g ur es ab o ve i nclud e M aso nr y

Holcim (US) realized early that the crisis was deep – the market

trough was elusive (-57M tons since 2005)

• Since the 2005 peak, the residential sector declined by 30M tons (~52% of total decline)

• Infrastructure declined by 19M tons since 2006 as fiscally challenged states struggled to match Federal funding

Holcim US quickly mobilized in response to the demand drop and

reorganized in the spirit of “Speed and Simplicity”

Four business units with

complex corporate

One central organization

to business units

Why did we do this?

• Support process to facilitate operations in the most efficient manner Speed and Simplify

The reorganization drove headcount reduction at all levels and capacity was rationalized (3.6M tons)

Support Mftg

EXCO

11

Support Mftg

EXCO 7

• Dundee and Clarksville closures announced Nov 2008, Mason City and Artesia

mothballing announced March 2009

• Dec 2008 - Manufacturing reports to one Head Smaller logistics working seamlessly with Sales and Manufacturing

• Mar 2009 – Two sales organizations with three levels for more transparency, accountability and closer to customer Field shipping stations report to Sales

9 Oct

09Dec

09Feb

10

May

10 Ju 0

Closed/mothballed plants

DSO (Days sales outstanding)

2008 Highest Monthly Sales 2009 Highest Monthly Sales

Cost reductions and cash flow initiatives have not hindered

manufacturing performance improvement

• Excellent Ste Genevieve start-up

• Proper organization with the right people in the right positions

• Efficiency – “do it right” from the first time

• Preventive Maintenance: right work at right time

• Explained key performance indicators to the whole organization – we can’t improve what

we can’t measure -

Net Availaibility (12 month rolling)

Kiln MTBF 12 month rolling August 2010

0100

Agenda

1 Our US portfolio – broad geographic reach

2 Our response to the crisis – quick and decisive

3 Our performance – empowered employees delivering

4 Our value creation – targets achieved with recovery

• EBITDA% improved from 22% to 31% from

2002 to 2007 before declining during the recession

• The significant reduction in fixed cost of

~$150M has resulted in lower break-even point for HUS, stabilized the margins and set

up HUS very well for the eventual recovery

We have reenergized innovation in our employees with systems that allow ideas to be brought forward

employees trained as coaches

 An initiative for hourly and salaried employees

 One idea = one person

 Innovation team evaluates feasibility and benefit of the idea as well as the implementation of it

 Increased commitment to skill development with over 400 courses

available

 ~1000 equivalent course enrollment with 50k man-hours of training

annually (~25 full time personnel)

 Changed our delivery mix to have more e-learning, Webinars and

on-site courses

 Over 90% of courses cost less than $100 (direct cost) with no travel and

no lost productivity

Our employees have continued to bring ideas forward resulting

improved costs and efficiency

Provides leverage with Power Companies

Midlothian Lighting ($48k savings)

Portland Idle Time Power Consumption ($135k savings)

20,000 22,000 24,000 26,000 28,000 30,000 32,000 34,000 36,000

• Closure/idling of wet kilns has helped reduce energy consumption

• Current 2010 trend is to achieve another ~5% increase in Petcoke consumption

Specific Heat Consumption (MJ/ton of clinker)

• The dramatically improved environmental performance comes from state of the art design of the plant

Gross CO2 Net CO2 Landfill CKD

4 Closed/mothball plant (2008) Ste Gen May 2010 YTD

SO2 NOx THC CO Dust

4 Closed/mothball plant (2008) Ste Gen May 2010 YTD

Ste Gen vs 4 closed/mothballed plants (kg/t clk)

Landfill CKD Assumes Ste Gen replaces 4 closed/mothballed plants in 2008

The transformation to world class safety results

time incident reduction by seeking out unsafe conditions and acts and

managing them

Focusing on restricted-duty reportable reduction via observation and case management

Lost time frequency rate = No of LTI cases*1,000,000/actual hours worked

Holcim Experience Mod Rate % improvement

HUS Experience Modifier Rate (Work Comp Insurance)

Lost Time Cases Lost time frequency rate

EMR (insurance rating) rating of less than 1.0 indicates that the company’s claim

history company is performing better than would be expected

Holcim is anticipated to have a competitive advantage on NESHAP due

to its modern asset base

• EPA has issued final National Emissions Standards on August 9th for

Hazardous Air Pollutants (NESHAP) for Mercury (Hg), Hydrochloric Acid

(HCl), Total Hydrocarbons (THC), and Particulate Matter (PM, i.e dust)

• We believe HUS is well positioned to comply with reasonable NESHAP

regulations based on historic investments in new and existing cement

plants, which in turn, should provide HUS with a competitive advantage

• While it is true that the current NESHAP regulations could change, it is

likely that the final rule will require additional investments in US

• HUS believes that the industry must strive to improve emissions

performance HUS continues to do so For example, HUS voluntarily

installed continuous emissions monitors, the only major cement player to

do so

• EPA will ensure a level playing field and we remain hopeful that reasonable regulations can be achieved

HUS strategy is to ‘Grow the Pie’ through promotion and being closer

to customers through providing solutions

by Regional Promotion Groups

content of material – essential for obtaining LEED (Leadership in Energy and Environmental Design) projects

Specifications

Agenda

1 Our US portfolio – broad geographic reach

2 Our response to the crisis – quick and decisive

3 Our performance – empowered employees delivering

4 Our value creation – targets achieved with recovery

PCA is forecasting a relatively sharp recovery

• Before the current downturn, infrastructure had seen a steady increase based on highway programs authorized by Congress PCA is forecasting a rebound of infrastructure segment based on a new highway bill and improved fiscal condition of states

• Residential also saw a big and sustained increase especially from early 2000’s

However, the downturn has resulted in an

‘over correction’ of residential segment PCA

is forecasting a significant rebound

• The non-residential and other segments have also seen similar reduction in spending in the current downturn

• The long-term per capita consumption has hovered around 300 kg/capita till 1990

Per Capita Consumption (kg/capita)

US Cement Consumption by Segment (M tons)

• Given the severity of recession, it is likely that

we would see above normal growth rates in volume for a few years with the recovery

However, the pace of this recovery is unclear

at this time

• The three scenarios of volume and price increases (from 2010 levels) required to achieve 33% EBITDA margin are presented below

 Volume +15%, Price +$19/ton

 Volume +20%, Price +$16/ton

 Volume +37% (PCA 2013), Price +$9/ton

• HUS prices are down by $14/ton since its peak

EBITDA Margin Impact

Volume and Price Development

Disclaimer

Cautionary statement regarding forward-looking statements

This presentation may contain certain forward-looking statements relating to the Group’s future business, development and economic performance

Such statements may be subject to a number of risks, uncertainties and

other important factors, such as but not limited to (1) competitive pressures; (2) legislative and regulatory developments; (3) global, macroeconomic and political trends; (4) fluctuations in currency exchange rates and general

financial market conditions; (5) delay or inability in obtaining approvals from authorities; (6) technical developments; (7) litigation; (8) adverse publicity

and news coverage, which could cause actual development and results to

differ materially from the statements made in this presentation Holcim

assumes no obligation to update or alter forward-looking statements whether

as a result of new information, future events or otherwise

As part of Holcim's global commitment to compliance with competition laws, please note that this presentation has been comprehensively reviewed by

counsel in both the United States and Switzerland

Strength Performance Passion.