Shareholders’ Letter

Dear shareholder,

Prof. Dr.-Ing. Wolfgang Reitzle and Bernard Fontana

In the financial year 2014 Holcim achieved solid like-for-like performance. Like-for-like net sales and operating profit increased, although in many places the economic situation presented difficult waters to navigate again in 2014.

The economies of the individual Group regions developed heterogeneously over the year. The economic climate in Asia Pacific was marked by solid growth in most of the key markets. In contrast, growth in Latin America was affected by a challenging economic climate with significant uncertainties, primarily in the form of lower raw materials prices and more difficult financing conditions. The recovery of the European economy stalled during the course of 2014, as chief markets failed to meet growth expectations and political insecurity mounted. On the other hand, the USA, after a weak first quarter of 2014, saw a solid upturn. Economic development in the Group region Africa Middle East was extremely heterogeneous.

Within this economic environment, the Group managed to increase cement volumes by 1.0 percent to 140.3 million tonnes. Significant contributions to this increase were made especially by the Group companies in the USA, the Philippines, and Mexico as well as by Ambuja Cements in India and Holcim Indonesia. Aggregates sales decreased by 0.9 percent to 153.1 million tonnes. Causes for this were the restructuring implemented in Latin America in the previous year and the tense market environment in France, Australia, Belgium, and Switzerland. Ready-mix concrete sales were also lower than the year before, dropping by 6.3 percent to 37.0 million cubic meters. Here too, results were affected by the restructuring in Latin America in 2013 as well as by less market demand in Singapore, Belgium, and France. On the other hand, asphalt volume increased by 12.4 percent to 10.0 million tonnes.

On a like-for-like basis, net sales rose 3.0 percent over the previous year. Consolidated net sales dropped by 3.1 percent to CHF 19.11 billion, mainly due to negative currency effects amounting to CHF 1,030 million. Through improved commercial excellence prices could be adapted in many Group regions. Like-for-like operating profit increased by 4.2 percent to CHF 2,317 million. On a like-for-like basis and adjusted for merger and restructuring costs, operating profit was up 10.6 percent. Holcim also managed to improve its operating profit margin, measured on a like-for-like basis and adjusted for merger and restructuring costs.

Holcim Leadership Journey continues beyond 2014

The Holcim Leadership Journey, launched Group-wide in 2012, has proven a great success for Holcim, especially since the two core aspects – cost reduction and a shift of mindset toward stronger customer focus – have become firmly anchored within the organization. Overall, a contribution of CHF 1.848 billion was achieved, surpassing by far the originally envisaged contribution to operating profit of CHF 1.5 billion. Holcim launched over 6,000 initiatives at all levels of the Group, all of which enhanced the positive financial contribution. Thus, the Holcim Leadership Journey is a broad-based success in which all cost initiatives exceeded our original target. Customer Excellence is now strongly anchored in our corporate culture and is a foundation for the Group’s future success. This is concretely documented as part of three representative stories in this report explaining the value added that Holcim has generated for customers in Switzerland, Mexico, and Vietnam.

The Holcim Leadership Journey will be continued on several levels beyond 2014, as continuous performance improvement is embedded in the Holcim culture and proves particularly useful in these times of cost inflation and a challenging market environment.

Portfolio optimization

The Group’s overall presence in Europe was considerably strengthened through a series of transactions with Cemex, closed in early 2015. On one hand, the Group significantly expanded its presence in western Germany by connecting the companies in northern Germany with those in France and Benelux. On the other, by selling parts of the business in Spain and restructuring the aggregates segment, the necessary flexibility was created to remain successful in the future. Holcim also sold its activities in the Czech Republic.

Merger with Lafarge promises benefits for all stakeholders

Since April of last year, the interest of all stakeholders has been centered on the planned merger with Lafarge – a bold and decisive step through which we will combine the best of the two renowned Groups and create a unique basis for growth. The new company with European roots will offer all shareholders decisive benefits. It will be instrumental in providing solutions to the great challenges of urbanization: affordable housing, urban sprawl, and transportation. The Group’s offerings for its customers will expand significantly, based on strong innovation capabilities, the highest level of research and development, and a consolidated portfolio of solutions and products. Both companies are pioneers in terms of sustainability and limiting the effects of climate change, and both are determined to strengthen this commitment even more in the future. The position as global market leader in cement, concrete, and aggregates offers the company new opportunities to optimize production and strengthen commercial partnerships. This places us perfectly to tackle the economic challenges of the future.

Outlook for 2015

Holcim expects for 2015 that the global economy continues its gradual recovery. Key construction markets of Holcim in countries like the USA, India, Indonesia, Mexico, Colombia, the UK, and the Philippines are expected to be the main growth drivers. Europe overall should have a flat development. Latin America will continue to face uncertainties in countries such as Argentina and Brazil but should overall show slight growth in 2015. The Asia Pacific region is expected to grow although at a still modest pace. Africa Middle East is expected gradually to improve.

In this environment cement volumes should increase in all Group regions in 2015 with the exception of Europe. Aggregate and ready-mix concrete volumes are expected to increase. On a stand-alone basis and unconnected to the proposed merger with Lafarge, the Board of Directors and Executive Committee of Holcim expect like-for-like operating profit adjusted for merger-related costs to be between CHF 2.7 billion and 2.9 billion in 2015. Higher pricing and ongoing cost savings are anticipated to offset cost inflation, leading to a further expansion in operating margins in 2015.

Payout to shareholders

Against this backdrop of generally positive development, the Group is continuing its consistently practiced dividend policy and distributing one third of the Group’s net income attributable to shareholders of Holcim Ltd. At the annual general meeting to be held mid-April, we will propose a payout of CHF 1.30.

Our thanks to shareholders, customers, partners, and employees

We would like to thank you, our shareholders, for your loyalty and your trust during the past twelve months. Our special thanks also go to our customers, business partners, and suppliers – as well as our employees around the world. With competence and commitment, everyone has helped to make Holcim what it is today: a world leading company – one that operates sustainably, is well positioned globally, and offers excellent future perspectives.

Zurich, February 2015

Prof. Dr.-Ing. Wolfgang Reitzle
Chairman of the Board of Directors

Bernard Fontana
Chief Executive Officer