Sources: LafargeHolcim Ltd., Zurich; CP staff
Coupled with the release of 2017 financials showing moderate year-over-year sales and EBITDA (earnings before interest, taxes, depreciation and amortization) gains, LafargeHolcim outlined a five-year plan to drive profitable growth and simplify the business to deliver resilient returns and attractive value to stakeholders. Strategy 2022 – Building for Growth targets annual net sales growth of 3 to 5 percent and recurring EBITDA of at least 5 percent, and is based on four value drivers:
• Growth through capitalizing on the global construction market, projected to expand at 2 to 3 percent annual rate. Management will execute more aggressive strategies for Aggregates and Ready Mixed Concrete alongside the strong Cement business, and build a fourth segment, Solutions & Products, to take advantage of deliverables that are closer to the customer. Currently spanning precast, concrete products, asphalt, mortars plus contracting and services, the segment presently generates annual sales of $2.2 billion. Agile, country-based growth strategies will target value-enhancing bolt-on acquisitions to leverage scale and margins.
• Simplification & Performance will create a cost disciplined operating model and corporate-light structure. The 35 biggest markets will report directly to LafargeHolcim management and local profit and loss leaders will be assigned for all four business segments. As previously announced, Performance & Cost and Growth & Innovation corporate business functions have been merged and Group management reduced to nine members.
• Financial Strength will ensure disciplined value creation through maintaining an investment grade credit rating. Growth will be funded through divestment of $2 billion-plus in selected assets during the course of 2019. Capital expenditure levels will be kept below $2.1 billion annually and excess free cash flow used to pay an attractive dividend.
• Vision & People further develops the values of trust and integrity, commitment to health & safety, and desire to be at the forefront of sustainable construction solutions and innovation. Management seeks to foster an entrepreneurial leadership style and a focus on long-term success.
“Strategy 2022 – ‘Building for Growth’ will allow us to more vigorously capture market opportunities, capitalizing on the best assets in a growing building materials market,” says LafargeHolcim CEO Jan Jenisch. “We have already started to create a leaner more agile organization, moving considerably closer to our customers through the empowerment of country management. Our vision is to be a global blue chip company in the attractive and growing building materials market.”