Media Release Business Year 2008



  • In the fourth quarter of 2008, the contracting construction industry worsened rapidly in a number of markets
  • Higher costs for energy and other inputs as well as unfavorable currency effects impacted the income statement negatively
  • Swift capacity adjustments based on demand development; two additional plants mothballed in the US
  • Decisive cutback of fixed costs at Group and Group company level
  • Balance sheet remains strong with a high level of liquidity
  • Payout ratio remains unchanged; dividend will be distributed in shares which are entitled to a dividend for the full year 2009
  • Stimulus programs will support the construction industry and the sector will particularly benefit from an economic upswing

Holcim is holding its own in a difficult environment
The sharp economic slowdown has led to a recession both in North America and in parts of Europe, with the construction sectors of the US, Spain and the UK badly affected. Even though the global economy further lost momentum in the second half of the year, trends in the growth markets of Latin America, Africa, Asia and eastern Europe were predominantly positive.

Even under these more difficult conditions, Holcim has held up well in 2008 with a full-year operating EBITDA of CHF 5.3 billion. Europe once again made the largest contribution to the results. The Group companies in central and eastern Europe made progress compared with the previous year, as did Azerbaijan. In contrast, Holcim saw marked declines in its business in Russia and France, particularly in the fourth quarter. As a result of market conditions, Holcim suffered its biggest setback in North America, where operating EBITDA was halved in comparison with 2007. Latin America posted good results, despite some deterioration in performance during the last three months of 2008, partly because of currency factors. Group region Africa Middle East also fared well thanks to strong construction activity in Morocco and Lebanon. The second-largest EBITDA contribution was made by Asia Pacific, due in large part to the results coming from the two Indian Group companies. Holcim Indonesia also experienced substantial growth.

Holcim's solidity is accentuated by the fact that the Group generated free cash flow of some CHF 2.6 billion in 2008. Thanks to a cautious financial policy, strong cash flow and strict management of net current assets, Holcim's liquidity at the end of 2008 remained at a high level of CHF 5.6 billion. In combination with a strong balance sheet, this has served to maintain a solid rating.

Regional facts
In Europe, consolidated deliveries of cement dropped by 1.7 percent to 33.7 million tonnes. Sales of aggregates decreased by 10.3 percent to 97.6 million tonnes. In contrast, after adjustment for market conditions and acquisitions, sales of ready-mix concrete increased by 6.1 percent to 21 million cubic meters. Operating EBITDA decreased by 16.5 percent to CHF 2 billion. The main reason for the weaker result was a heavy decline in demand in the UK and Spain throughout the year, as well as one-off costs in connection with the restructuring and the announced plant closure in Spain. Additionally, economic conditions deteriorated strikingly during the fourth quarter 2008. In particular, the Group companies in Russia, France and Italy were financially hit. Most eastern European companies as well as Azerbaijan posted higher contributions. It was possible to offset a substantial proportion of the increase in energy costs by means of price adjustments and improvements in efficiency. Overall, internal operating EBITDA development was negative at -10.6 percent.

In North America, cement deliveries declined by 12.2 percent to 14.4 million tonnes. Consolidated sales of aggregates fell by 13.4 percent to 49.3 million tonnes. As a result of acquisitions, sales of ready-mix concrete were the same as the previous year at 7.3 million cubic meters. The operating result in Swiss francs was depressed by a combination of the unsatisfactory sales, higher input costs for energy and raw materials, one-off costs for plant closures and the weak US dollar. Operating EBITDA for Group region North America decreased by 51.4 percent to CHF 486 million. At -46.2 percent, internal operating EBITDA development was also negative. Especially, the US Group companies were unable to match the previous year's performance. At Holcim US, prices decreased slightly and the decline in sales volumes and higher input costs were only partially offset by efficiency gains. With its products, Aggregate Industries US was operating in a more stable price environment. However, the result was affected by the decline in sales of aggregates and ready-mix concrete and the general surge in costs. On a like-for-like basis and in local currency, St. Lawrence Cement almost matched the prior-year result.

In Latin America, most Group companies were able to achieve increases in sales of cement. On a consolidated basis, deliveries rose by 2.3 percent to 27.2 million tonnes. Sales of aggregates increased by 7.2 percent to 13.4 million tonnes, while sales of ready-mix concrete advanced by 10.4 percent to 11.7 million cubic meters. Despite the massive rise in energy prices and more price control by the authorities, Group region Latin America reported a significant increase in operating EBITDA in local currency terms. Due to the deterioration in the exchange rate versus the Swiss franc - in the case of Mexico, Colombia, Argentina and Chile - operating EBITDA declined by 4.9 percent to CHF 1.2 billion. The Group region result also reflects the tougher business conditions in some markets during the fourth quarter. The Group region posted internal operating EBITDA growth of 6 percent. Almost all Group companies increased their contributions in local currency, with the key exception being Cemento Polpaico in Chile, where increasingly fierce competition had a negative impact. Holcim Apasco in Mexico was not quite able to match its previous-year results. Holcim Costa Rica and Cemento Panama posted clear improvements in their results. Holcim also fared better in local currency terms in Venezuela, Colombia, Ecuador and Brazil.

In Group region Africa Middle East, sales volumes declined substantially in all segments as a consequence of the deconsolidations in South Africa and Egypt. On a like-for-like basis, Holcim's deliveries increased: 9.7 percent for cement, 1.8 percent for aggregates and 11.8 percent for ready-mix concrete. The changes in the scope of consolidation also affected the Group region's financial results, but on a like-for-like basis operating EBITDA increased by 6.9 percent to CHF 368 million.

In Asia Pacific, cement sales grew by 1.1 percent to 65.6 million tonnes. Deliveries of aggregates rose by 17.5 percent to 4.7 million tonnes. Ready-mix concrete enjoyed the strongest growth, rising 25.9 percent to 7.3 million cubic meters. This reflects progressive vertical integration in the region's main urban centers. The consolidated operating EBITDA decreased by 18.9 percent to CHF 1.5 billion. At -6.2 percent, internal operating EBITDA development was negative. The positive volumes contrasted with massive increases in the cost of energy, raw materials and transportation. Efficiency gains and price adjustments only partially compensated for the additional expense. Government anti-inflation measures limited in particular the two Indian Group companies' ability to pass on the sharp rise in purchasing costs. Finally, the deterioration in the exchange rate situation put pressure on the results in Swiss francs. Only Holcim Indonesia and Holcim Vietnam increased their contributions to the result of this Group region.

Holcim has reacted quickly to a changing environment
The crisis in the construction sector has made plant closures and cost-cutting programs unavoidable. Throughout the Holcim Group, fixed costs were proactively adjusted in response to declining demand. In the markets most critically affected, more than 100 production locations across all segments were shut down. These include the three cement plants in the US and Spain that were permanently closed. To minimize the impact on its people, Holcim is seeking where possible to achieve the job cuts by means of palliative measures such as natural attrition or early retirement.

Well prepared for the future
It is uncertain for how long the weakness in demand will last. Nevertheless, Holcim remains confident based on a worldwide market presence, a portfolio of proven and innovative products and a low-impact and cost-conscious management of resources and energy. Above all, the Group can rely on a management which has been crisis-proven.

Holcim will constantly review capacities in all segments and close more operations, if only temporarily, as demand should necessitate. Thus, the plants of Artesia and Mason City in North America will be additionally mothballed.

With the exception of strategically important expansions in growth markets and the completion of the plant on the Mississippi - in total approximately 25 million tonnes of cement capacity - no further new capital investments will be made to increase capacity. Additionally, spending on replacement and rationalization is presently being reduced to a minimum. A focused adjustment of fixed costs is in progress in all areas at the Group and Group company level.

This lower investment activity combined with financing measures both at the Group and the Group company level in the last few months, Holcim has succeeded in maintaining a high level of liquidity. Holcim will continue the systematic implementation of this strategy and expect that, by year end, Group debt will remain at the previous year's level on a like-for-like basis.

Environmental and social responsibility
Even amid the current turmoil, Holcim is standing by the principles of environmental and social responsibility.

In the 2008 Dow Jones Sustainability Index, Holcim was designated "Leader of the Industry" for the fourth year in succession and received, for the second time, the "Sector Leader" and "SAM Gold Class" accolades of the Sustainable Asset Management Group (SAM) in cooperation with PricewaterhouseCoopers. The partnership with the International Union for Conservation of Nature (IUCN) on the preservation of ecosystems has proven valuable and represents another step to sustainable economic activity. Holcim also makes a contribution toward sustainable construction through the Holcim Foundation for Sustainable Construction. In the current 2007 to 2009 competition cycle, 5,000 construction projects from around the world were submitted. This spring, an independent jury will award prizes to the three best sustainable construction projects selected from15 regional winners.

Health and safety at work were systematically pursued under the slogan "Passion for Safety". There are clear indications of improvements. The Board of Directors and the Executive Committee are making every effort to ensure that a comprehensive safety culture is effectively practiced throughout the Group.

Standing by the established dividend policy
Holcim has a policy of distributing one third of consolidated profit attributable to the shareholders of Holcim Ltd (CHF 1.8 billion in 2008) as a dividend. The Board of Directors has decided to leave the payout ratio at this level. However, because of the difficult economic situation, the uncertainty over the future trend of the economy and to preserve liquidity, the proposal at the General Meeting will be to pay the dividend in shares rather than in cash. Each shareholder will receive one tradable subscription right for every registered share held. 20 subscription rights will entitle the holder to one free share, which will be entitled to the full dividend for the 2009 financial year. Hence, the shareholder has the opportunity to draw up new shares or to sell the subscription rights and therewith realize a cash return. The Board of Directors is convinced that this proposal is in the best interests of the company and its shareholders.

Post-balance sheet events
Due to the continuing unfavorable demand situation in the US, the Group company has decided to mothball the plants of Artesia and Mason City with a combined annual capacity of 1.4 million tonnes.

In a memorandum of understanding, Holcim and the state of Venezuela stipulated that Holcim Venezuela will be nationalized. Holcim will sell the company to the government and keep a remaining stake of 15 percent. In the meantime, the state has taken control of Holcim Venezuela without payment of the agreed compensation of USD 550 million. Holcim considers to appeal to the International Center for Settlement of Investment Disputes in Washington D.C.

Outlook 2009
2009 will be another difficult year for the construction and building materials sectors. Although government support programs have been announced, Holcim has to expect a further decline in demand.

In the final months of 2008, the economy of Europe declined more sharply than expected, and the business environment will remain difficult in 2009. Holcim expects sales of building materials in western Europe to decline further in line with the general economic development. In the east and southeast of the continent as well, construction activity will lose momentum. All Group companies have launched programs to cut costs and adjust capacity.

In North America, the US construction sector appears set for a further slowdown in 2009. The economic aid package announced by the new US administration should provide some stimulus for the infrastructure sector toward the end of the year. In Canada, Holcim expects the market to weaken, particularly in Ontario and Quebec.

In Latin America, the change in the global economic environment and falling commodity prices will have a negative impact on economic activity. Demand volumes in the construction sector are therefore expected to decline. The downturn can be expected to be more acute in Mexico and Central America because of their proximity to the US markets. Market conditions should be more stable in South America and particularly in Brazil.

Group region Africa Middle East should for the most part continue to make progress in 2009. Morocco is expected to see more moderate growth. The construction materials markets of Lebanon, West Africa and the Indian Ocean should also positively develop under stable political conditions. The Group region as a whole is expected to see satisfactory sales volumes and operating results.

In line with the global economic trend for 2009, Asia Pacific can be expected to see a further slowdown in growth. The development of the Chinese and Indian economy will be important for the region. Demand in the construction sector is expected to progress due to an increasing demand for affordable housing and major infrastructure projects. Sales of cement and ready-mix concrete should therefore increase overall.

Holcim offers the right products and services, and its corporate culture is customer-oriented. The Group is well positioned in all important markets. A high priority is given to a solid balance sheet and a high level of liquidity. Holcim is convinced that the Group can emerge from the current economic cycle stronger than before, and that the "post-crisis Holcim" will be a better company than the "pre-crisis Holcim".In the absence of key forecast data on the trend of the global economy, the Board of Directors and the Executive Committee refrain from communicating any predictions about the Group's performance in 2009. The focus will be on rigorous cost management and maximizing cash flow generation. Holcim's main objective is to preserve the financial stability of the Group.

Key figures (extended)

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Holcim also refers to the detailed comments in the presentation of the annual results.
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Holcim is one of the world's leading suppliers of cement and aggregates (crushed stone, gravel and sand) as well as further activities such as ready-mix concrete and asphalt including services. The Group holds majority and minority interests in more than 70 countries on all continents.
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Corporate Communications: Tel. +41 58 858 87 10
Investor Relations: Tel. +41 58 858 87 87
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The Annual Report 2008 is available at
Annual Report - Presentation 2008
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Holcim is one of the world's leading suppliers of cement and aggregates (crushed stone, gravel and sand) as well as further activities such as ready-mix concrete and asphalt including services. The Group holds majority and minority interests in more than 70 countries on all continents.
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Corporate Communications: Tel. +41 58 858 87 10
Investor Relations: Tel. +41 58 858 87 87
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Press conference: 
Wednesday, March 4, 2009, 9:30 a.m., Holcim, Hagenholzstrasse 85, 8050 Zurich
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Webcast, March 4, 12:00 noon (CET), presentation in English,