Excellence 2008 Towards undisputed leadership - · PDF fileconstruction spending in major...

Excellence 2008Towards undisputed leadership

Analyst & Investor DayJune 21, 2007

2

8:00 – 8:30 Welcome coffee

8:30 – 9:00 Keynote address / Safety Bruno Lafont

9:00 – 9:30 Cost Reduction Program John Stull

9:30 – 10:15 Innovation- Introduction Bruno Lafont- Concrete Dyfrig James

10:15 – 10:45 Coffee break

10:45 – 12:30 Visit of Technical Centre and Concrete Laboratorywith short presentation Denis Maitre

12:30 – 14:00 Lunch

14:00 – 16:00 Business Development- Introduction Bruno Lafont- Gypsum Isidoro Miranda- Concrete Didier Riou- Aggregates Bradley Mulroney- Cement Guillaume Roux

16:00 – 16:30 Open discussion / General Q&A Bruno LafontJean-Jacques Gauthier

16:30 Conclusion Bruno Lafont

Analyst & Investor Day Agenda June 21, 2007

3

Disclaimer

Statements made in these presentations that are not historical facts, including statements on our expectations regarding the improvement of our operations, the increase of our existing capacities, the growth of our markets, our product innovation policy and results and our Health & Safety policy as well as statements on our expected sales, margins, EBITDA, cost reductions, cash flows, earnings per share, return on capital employed and divestments are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions ("Factors"), which are difficult to predict. Some of the Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: the cyclical nature of the Company's business; national and regional economic conditions in the countries in which the Group does business; currency fluctuations; seasonal nature of the Company’s operations; levels of construction spending in major markets; supply/demand structure of the industry; competition from new or existing competitors; unfavorable weather conditions during peak construction periods; changes in and implementation of environmental and other governmental regulations; our ability to successfully identify, complete and efficiently integrate acquisitions; our ability to successfully penetrate new markets; and other Factors disclosed in the Company's public filings with the French Autorité des MarchésFinanciers and the US Securities and Exchange Commission including its Reference Document and annual report on Form 20-F. In general, the Company is subject to the risks and uncertainties of the construction industry and of doing business throughout the world. The forward-looking statements are made as of this date and the Company undertakes no obligation to update them, whether as a result of new information, future events or otherwise.



Health & SafetyBruno Lafont

5

Safety Leading to Performance

World class H&S organizations are also among the best performers in their peer groups

Excellence in the processes drives safety performance• Being good at safety Being excellent in overall performance

6

7

What Do World Class H&S Companies Have in Common?

Operational discipline

Motivated work force

Excellent overall communication

Strong corporate image

Full integration of safety in their business processes

Accountability for safety performance

Visible leadership

© Phototèque Lafarge / Alam Beg Imtiaz / Interspeed

8

Safety at Lafarge

Leading with Safety workshops

Serious Event Review Process

Contractor Safety Management

H&S Operational Standards• Done

– Working at Height (Operational)– Personal Protection Equipment (Operational)– Reporting and Investigation (Governance)

• To do– Contractors Safety Management (Governance)– Energy Isolation (Operational)– Confined Space Entry (Operational)

© Phototèque Lafarge / Shaun Browne

9

Our Efforts Deliver Results

Lost Time Injury Frequency Rate (LTIFR)

2002 2003 2004 2005 2006 march-07 T-2008 20090

1

2

3

4

5

6

7

8

9

3.222.51

1.861.55

4.68

6.56

8.35



Cost Reduction ProgramJohn Stull

11

Three Key Questions

What has changed at Lafarge?

How will Lafarge deliver?

Is this change sustainable?

12

Our Target

-(0.7)Inter-Divisions Eliminations

34012.2Total

10 0.1Holding 301.3Gypsum505.0Aggregates & Concrete

2506.5Cement

Targeted savings

(M€)

2005Cost Base

(Bn€)

Raw materials3.3

Fixed costs2.5

Energy1.5

Transport1.5

SG&A1.7

Others1.0Depr

0.7

2005 costs: 12.2 Bn€

13

What Has Changed at Lafarge

Sense of urgency

Evolution • From technical indicators to costs

• From performance to bottom-line

Specific individual commitments / bonus alignment

Regular review of commitments at all levels

OK to ask for help

14

Delivering Savings - Methodology

Top assessment

High quality action plans

Strict, auditable cost tracking capturing positive and negatives

Management review of results at all levels

15 Note: All figures are in $M. Negative numbers indicate savings; positive numbers indicate costs. Totals may not add due to rounding

- PL / country

Total ?2008-05

Cement• BUs• Division

AC&A• BUs• Division

- L1

Gypsum• BU

Corporate

Shared• Finance• HR

Common• IT• Purchasing

Total

$$

$$$$

$

$

$$

$$

-72

$

$

$$

$

$

$ $

$

$

$$$

$

$

$

$

$

$

$

$

$$$$

$

$

$

$

$

$

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$

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$$

$

$

$

$ $

$

$

$$$

$

$$

$

$

$

$

$

$

$

$

$

1 2 3 4 5 6 7 9 10 12 14 16 17158 11 13

$

$

Total 2008-05

Total

$$

$$$$

$

$

$$

$$

- 60

$

$

$$

$

$

$ $

$

$

$$$

$

$

$

$

$

$

$

$

$$$$

$

$

$

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$

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$

$$

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$

$

$

$

$$

$$

$

$

$

$ $

$

$

$$$

$

$$

$

$

$

$

$

$

$

$

$

1 2 3 4 5 6 7 9 10 12 14 16 17158 11 13

$

$

4

Gypsum SG&A cost control9

02C savings14

Mobility and employment administrative cost reduction

5

10

IT Optimization15

BU rationalization1

6

Post tender offer cost reduction11

HR Process streamlining and reorganization16

Sales & marketing2

AC&A reorganization and regional consolidation7

Finance Reorganization12

New generation distribution3

ERP related cost reduction in BUs8

P2P savings13

Non Personnel17

Action plans

Delivering SavingsExample: North America SG&A

Refined initiatives identify 60M$ in savings by 2008

16

Cement

AC&A

Gypsum

CorporateShared / common

Planned

-17

-6

+2

-7

+2

-26

Actual

-23

-19

-

-10

-3

-55

Net FTE changes

Total

All organizations realized more net reductions than planned in action plans

Delivering SavingsExample: North America SG&A Reduction

The 60M$ Savings• BU Rationalization• New generation distribution• Mobility• A&C reorganization /

regional consolidation• France transformation• P2P savings• O2C savings• IT optimization• HR process streamlining• Non personnel costs• Sales and marketing• ERP related

19 M$ improvement Q1 2007 vs. Q1 2006

17

Delivering SavingsExample: Philippines Alternative Fuel

Use rice husks (biomass) as alternative to classical fuels

• Husks systems installed in Republic and Teresa plants

• Republic: working / Teresa: July 2007

Reduce energy cost

Positive environmental impact

Savings 4.8 M€ annually

Investment approved 3.9 M€

18

Delivering SavingsExample: South Africa C/K ratio

Increase cement to clinker ratio in Lichtenburg

• New product launch (Buildcrete), using limestone as extender

• Installed fly ash transportation system

More cement with same quantity of clinker

Savings 4.8 M€ annually

Investment approved 2.5 M€

19

Sustainable

New action plans are being developed continuously

Frequent management review with standard tracking: a fixed base

Commitment integrated into our incentive plan: “Auditable”

Investments have been made and will continue to provide results

Strict attention paid to price over costs factor

20

Conclusion

The culture has changed through priority setting, methods, and strict review

Methods are in place to properly identify, track, and deliver savings

Continuous and sustainable process of benchmarking, tracking and action planning

Our goal is to become better than our competitors in all cost matters



Why Innovation?Bruno Lafont

22

Why Innovation?

Innovation in products and services is no more an option: it is the signature of a leader

• People want better housing and infrastructure• Construction must become sustainable• The best way to differentiate…• …and to elevate barriers of entry

Innovation reinforces customer loyalty• Products that are easier / cheaper to use• Products that give better rendering• Products that are more versatile• Prescriptors to recommend Lafarge

Innovation serves our shareholders’ interests• More sales with higher margins• Increased penetration

A win-win approach• Value added is shared with our customers = “We Gain, They Save”• Vertical integration is reinforced

Engine for growth, leadership and profit improvement



Innovation in RMXDyfrig James

2424

Value Added and Innovative Products

A New Business Model

Unique competitive advantage from technology

Accelerating implementation

2525

Value Added and Innovative ProductsA New Business Model

Strong value generation

Help accelerate return on development investments

Prices not sensitive to cycles

Become a “must have” from a customer’s perspective

Sustainable solutions

A second benefit, on top of vertical integration

Engine for growth and profit improvement

2626

Concrete: A Complex Chemistry

Concrete appears to be a “simple” product …

But reality is different!• Very complex chemistry

– Combining mineral and organic– At nanometric level– With natural / non standard materials

241

244

246

249

252

255

257

260

263

266

268

271

274

277

279

282

0.280.320.370.410.460.500.540.590.630.680.720.760.810.850.900.940.981.031.071.121.161.201.251.291.341.381.421.471.511.561.60

(35

4

ST-Béat

0

0.5

1

1.5

2

0 50 100 150 200 250 300 350Déplacement vertical en nanomètres

Effo

rt e

n N

ewto

n

2727

Lafarge Has a Proprietary Knowledge

Past history explains our Multi disciplinary expertise

More than ten years of scientific approach• From empirical expertise

to scientific understanding of mechanisms

Changing BU’s mindset and resources has been a major shift and a long process

A unique competitive advantage, not easy to replicate

2828

Many different uses…Multiple customer needs…

Meeting new environmental requirements…

Numerous characteristics that can be modified and combined

Housing 40%Commercial building

Non building

Road construction

…

Individual 15%Grouped Individual

Multifamily

High rise

…

Vertical

Horizontal 5%Foundation

Other shapes

…

Large slabs

Small slabs

Decorative slabs

Decks

Screed 1%…

Rheology

Shrinking

Weight

Color

Aspect

Temperature sensitivity

Setting time

Strengthening kinetics

Long term Strength

Longevity

Insulation capacity

Thermal ability

Frost resistance

…..

&

400/600 mix designs per plant

Provide as many opportunities for innovation & differentiation

Hundreds of different applications

2929

X 5

X 10

Standard All VAPs Agilia/Artevia

Average COI/m3

Progress on Innovative and Value Added Products is key!

From Commodity to Value Added ProductsWe Know How to Escape the Commodity Trap

Current Operating Income per m3

After specific costs

3030

“Best in Class” countries well ahead of Division average VAP penetration (16%)

Still room for growth in “Best in Class” countries• France: VAPs represent 28% of total volumes

But regions from 24% to 37%

Agilia represents 8% of total volumesBut regions from 4% to 15%

Also a great potential in growing markets• Malaysia: 5%• Venezuela: 3.5%

A Lot of Potential in both Mature and Growing Markets

Both our existing volumes (43 Mm3) and our developments will benefit from VAP penetration

• China• Emirates

57%22%North America54%

% of total margin

28%France% of total volumes

3131

From Vertical Integration to Value CreationAn example: Value Added Products in the UK

Value Added Products• Agilia (started in 2001)

• Artevia (started in 2006)

• Extensia (starting in 2007)

• Micro-silica, steel fibres, superplasticiser, etc

15.3%14.0%9.4%As a % of total

6.64.32.3Gross contribution16.6%

20.32004

28.513.0Sales

20.7%10.5%As a % of total

20062002In M£

3232

From Vertical Integration to Value Creation

Innovation in Readymix brings value for our customers…– Quality– Aesthetics– Ease of use– Durability– Environment

…and brings value for Lafarge– Better margins– Growth in volumes– Customer loyalty

An example: Agilia in the UK• What it represents for Lafarge

• For the customer– Time saving on job site– Quality, aesthetics– Benefit shared

Win - Win: We Gain, They Save

1.6

6.7

200413.11.1Sales

3.40.3Gross Contribution

20062002In M£

3333

A Unique Branding Strategy to Support our Innovative Approach

Strong product brands with a view to • Build barriers and strengthen our competitive advantage

• Increase visibility and accelerate penetration

A clear brand architecture supporting our positioning• “Inventiveness, Technicality, Reactivity and Passion”

Value Creation = Segmentation + Product Range + Branding

3434

A Unique Branding Strategy to Support our Innovative Approach

4 International Innovative Brands

Endorsed by Lafarge, driving to a mutual reinforcement of positioning

3535

Quality & Consistency

Currentconcretes

Special concretes

2006

84%

16%

Standard High

2012

Quality & Consistency

35%

65%

Standard High

Our Vision of Product Development

A long term ambition: VAPs representing 50% of volumes

3636

Value Added Product

A Highly Profitable Activity

Our Vision of Product Development

Commodity

A Cement Distribution Channel

From To

3737

The TURBO PlanOur Program for Acceleration

A commitment by each BU to accelerate Value Added Products’ penetration

• Commitment formalized by quarterly milestones and action plans monitored every month

Additional resources in people and equipment• Each BU builds up the plan: resources, actions and results

• Keeping our Excellence 2008 cost reduction commitment

A strong ROCE improvement

3838

Two Launches in 2007

Concrete designed for large slabs• From the traditional 25 m² to a stunning 400 m² without joints/saw cut• No steel!• Thinner slabs• Harder surface

Launches • In 2007 in the UK, France, US and Canada• In 2008 South Africa, Chile, Spain,…

Long term potential: 10% of our sales

Value creation for Lafarge: superior margin

Value creation for our customers• No steel• Reduced Thickness• Less joints• Ease of placement

3939

Two Launches in 2007

Concrete range designed to accelerate formwork stripping• Maintain 2 hours workability

Launches • In 2007 in the UK, France, US and Canada• In 2008 South Africa, Chile, Spain,…

Long term potential: 6% of our sales

Value creation for Lafarge: superior margin

Value creation for our customers• Early removal of formwork• Possible double daily rotation• Very high early strength• Faster loading of structural elements• Accelerate construction• Increased productivity

4040

Value Added and Innovative Products

A New Business Model

Unique competitive advantage from technology

Accelerating implementation



Lafarge Research CenterDenis Maitre

42

1mm - 10cm

10µm - 1mm

1µm - 10µm

10nm - 1µm

Concrete: A Very Complex Material

Complex chemistry

Complex physics

Heterogeneity at all levels

Expected properties at different time periods

43

LCR: A Unique Center of Knowledge

200 researchers from 10 countries

Top ranking scientific expertise in key disciplines

State of the art equipment

Partnerships with world renowned universities

44

Agilia

Sensium

Chronolia

Innovation: Optimum Job Site Efficiency

Productivity

Speed of construction

Organization flexibility

Working conditions

Etc…

45

Innovation: The End User’s Benefits

Mechanical properties

Aesthetics

Durability

Thermal efficiency

Etc…



Business DevelopmentBruno Lafont

47

Business Development

Cement • In line with market requirements• Highly profitable, because carefully phased in• Will be implemented despite challenges

Aggregates • Invest at reasonable cost• Invest at the right place, at the right time• Levers: growth, scarcity, consolidation

Ready Mix Concrete• Vertical integration + vector for VAPs• Internal development + acquisitions

Gypsum • Opening new, very promising markets • Profitable growth through capacity development and innovation

Growth and Profitability

What is it about?Need to keep pace with market growth

Cost reduction through modernization and network optimization



Gypsum DevelopmentIsidoro Miranda

4949

A Proven Track Record

705632415Sales volumes (Mm²)

4.0%5.2%

1,0062000

12.1%7.0%Operating margin

20062003

11.3%6.3%ROCE

1,6321,204Sales (M€)

From 49 industrial sites in 22 countries in 2000, to 76 sites in 25 countries in 2006,

most of them through internal growth

5050

Internal Development is Key to our Success

Gypsum wallboard market offers growth opportunities We make them profitable

• In Europe, by reducing our delivered costs, and taking new opportunities in the East

• In the US, by reinforcing our low cost position

• In Asia, by enhancing our market leadership

We plan to extract more value from our customer base• By reducing our time to market: less than two years

from study to good board

• By standardizing and adapting our investment costs to market returns

• By focusing on quality and innovation and increasing the offer to our customers

5151

A Significant Development Program

~320 Mm² (*)

+Plaster / Jointing

+GypsumReserves

Additional capacities

USA BuchananVietnamMexico

RomaniaSouth Africa

USA Silver Grove 2UK

Ukraine

South KoreaTurkeyIndiaChina

ColombiaSpain* Including 50 Mm² built in equity affiliates

2005 2006 2007 2008

Over 450 M€ committed - 200 M€ / year run rate

Tota

l Div

isio

n

5252

Excellent Investment Track Record

We develop our own solutions and processes to implement cheaper and faster investments

Palatka: 84 Mm² plant in Florida• Commissioned in 2001, (100 M$US investment)

• Among lowest cost in South East of USA

• Exceeded all project expectations: – Capacity, maintenance costs, cash costs, 500 days without LTA – Probably world record of single line production in one month: 8 Mm²

Gacki: 38 Mm² plant in Poland • Replacement of old line (10 Mm² capacity) to reduce Fixed Costs

by a factor of 4 and Variable Costs by 30%

• Customer Complaints have disappeared (less than one per Mm²) and we have already produced 2 Mm² of Signa

5353

Impact of Current Development Program

>12%

95

270

250

2012

~10%>7%ROCE after tax on assets started up

50

145

140

2008

70

215

205

2010

Additional EBITDA (€M)

Additional sales (€M)*

Additional sales (Mm²)*

~ 320 Mm² development planincluding ~50 Mm² in equity

* Lafarge share excluding equity affiliates, volumes at 100%, sales at Lafarge share

5454

Innovation Amplifies our Success

Our ambition is around 20% of Gypsum’s turnover

Generating value coming from • Higher margin from innovative products

• Price premium on the total plasterboard sales where Lafarge is perceived as the most innovative group

• Better quality, more efficient services

By 2012, our target is to generate > 400M€ of sales coming from innovation

5555

Internal Development Offers Significant Opportunities

We have a successful internal development model

• Short response time to take market opportunities

• Standard yet modulable equipment, with low investment cost

• Strong focus on innovation and quality

Innovation and Growth



Development in RMXDidier Riou

5757

Why Accelerate Development in RMX?

A proven operating model based on performance and innovation, developed over the last 15 years

A winning strategy• Vertical Integration

• Innovation

Good returns on capital employed

Tremendous profitable growth opportunities

5858

5.4%1.0%

12.7%1.5% +1,120bp

A Proven Operating Model

21.5 Mm3

43.4 Mm3

Sales Volumes

1996 2006

x2

12 M€COI

1.3 Bn€Sales

183 M€

3.4 Bn€

x2.5

x15

Operating Margin

ROCE

+440bp

5959

Developing in Mature Markets

Further improvement of ROCE through• Acceleration of innovation roll-out

– Turbo plan

• Cost reductions and performance action plan implementation

Growth opportunities through• Consolidation

• Networks optimization

6060

A Major Opportunity for Profitable Growth in Growing Markets

Very high market growth rates• Cement growth + Rmx penetration increase

• Allow for fast returns at early stage of market development

Implementing our model • Performance, value added products and innovation

• Allows for faster and higher returns

6161

A Lower Capital Base to Achieve Strong ROCE in Growing Markets

In countries already in our portfolio, most of the growth will be achieved through greenfields

In new countries, depending on the market, first move might be an acquisition, but would then be followed by greenfields

Standardized optimized plants, fit to comply with our operating model request

• IT

• Mix design optimization tools

• VAP

6262

A Selective Strategy in Growing Countries

We want to establish leading positions in high growing areas, at various levels depending on country size

• Can be several cities

• Can be one or several regions

• Can be the whole country

Focus on key markets • Central and Eastern Europe

• Asia

• The Middle East

Taking advantage of our strong presence and growth in cement

6363

7%4%-2%Operating margin

12108 Sales volumes (Mm3)

-2.7%

344

2000

15.6%7.9%ROCE

20062003Growing Markets

685413Sales (M€)

A Radical Transformation in Growing Markets

6464

DevelopmentMature

DevelopmentGrowing

ExistingAssets

DevelopmentMature

DevelopmentGrowing

A Strong Growth Potential

Development• Small acquisitions and greenfields• Value Added Products

0.6 to 0.8 Bn€ investment over 2007-2010

Investment ratio: 6 times EBITDA

RMX COI GrowthRMX Volume Growth

6565

Zoom on Development in Growing Markets

12%-14%

130

1,300

26

2012

8%ROCE after tax on assets started up

30

300

6

2008

Additional EBITDA (M€)

Additional sales (M€)

Additional sales (Mm3)

26 Mm3 development plan: close to 500 M€ investment

6666

An Evolving Portfolio

Growing Markets

17%

-12%

20% 25%33% 36%

2000 2006 2012

% of total Rmx Sales% of total Rmx COI

6767

In Summary

A proven operating model

A win-win strategy

Profitable growth opportunities



Development in AggregatesBradley Mulroney

6969

Why Accelerate Development in Aggregates?

Strong existing reserve base

Solid operating model which drives results

Good growth opportunities

7070

A History of Profitable Development

1,860 MT

10,450 MT

1997 Redland

1999 Texada Island

2000 Warren

2000 Presqu’Isle

2001 Blue Circle

2004 Hupfer

2003-06 Various Central Europe

2006-07 Chicago

Reserves

41 M€

328 M€

1996 2006

x5

COI

84 MTSales

0.5 Bn€Capital

Employed

262 MT

2.7 Bn€

x5

x3

x8

7171

Two Categories of Markets Mature and Growingwith Different Business Models …

In mature markets

• Selecting well located assets with minimal risk of imports

• Implementation of the Lafarge operating model

– Valuing scarcity of reserves through robust pricing model

– Professional practices to minimize costs & increase competitive advantage

• Consolidation

7272

France - Success of our Business Model

• Performance beyond original targets– Cost optimization– Valuing the scarcity factor

6 pp 3.5 pp

ROCEEBITDA/Sales %

An Example

2003 20062003 2006

7373

Developing in Mature Markets

United States of America• Still only 40% consolidated

• Market growth demand varies dramatically by state

• Scarcity is valued

France• Still only 50% consolidated

• Scarcity has started to be valued

Spain • Very limited consolidation to date but starting to accelerate

• Scarcity is valued

UK• > 70% consolidated

• Scarcity has started to be valued

7474

An Example

Chicago - Selective small size acquisitions deliver value

• 3 acquisitions for in excess of 9 MT, within 14 months

– 2006, Rein Schulz and Dahl 3.0 MT

– 2006, Western Conco 3.7 MT

– 2007, Feltes 3.0 MT

• Potential: 12% ROCE within 3 years

7575

Two Categories of Markets Mature and Growing with Different Business Models …

In growing markets

• Stay focused and selective to ensure sufficient critical mass and consolidation achieved

– Selecting best located assets

– Growth driving profitability during consolidation phase

– With low entry price (mixing acquisitions with green fields) and good profitability from the beginning

7676

Developing in Growing Markets

Central Europe / Asia / Africa

• Increase in environmental pressures

– Advantage for corporations focused on sustainable development

– Recognition of scarcity

• Strong market growth of RMX and Asphalt is driving increasing requirements of high quality aggregates

• Leverage our know how and experience by taking key positions in new markets

• Lafarge already has strong positions in Poland, Ukraineand Romania

7777

17.3%10.3%2.5%Operating margin

362116Sales volumes (MT)

2.7%

96

2000 20062003Growing Markets

21.6%10.4%ROCE

272110Sales (M€)

A Solid Performance

7878

8.5 pp 11.5 pp

EBITDA/Sales % ROCE

An Example

Poland• A market with strong growth and consolidation prospects

• Continued investment from 2002 has enabled us to achieve number 1 position in aggregates with 10 MT

– During 2006 we have acquired 11 quarries (3.5 MT)

2003 20062003 2006

7979

Aggregates Growth Levers

Current Operating Income

Profitable Growth

Development: a combination of small acquisitions and greenfields1.0 to 1.2 Bn€ investment over 2007-2010Investment ratio: 7.5 times EBITDA

Existing Assets

DevelopmentMature

DevelopmentFast Growing

ExistingAssets:

Valuing scarcity

DevelopmentMature

DevelopmentFast Growing

Sales Volumes

We have increased our aggregates capacity through acquisitions by 33 MT over the past three years at an average multiple of 7.7 x EBITDA with a target

of > 12% ROCE before the end of the third year

8080

Zoom on Development in Growing Markets

12%-14%

115

500

60

2012

>10%ROCE after tax on assets started up

35

160

25

2008

Additional EBITDA (M€)

Additional sales (M€)

Additional sales (MT)

60 MT development plan: ~ 400 M€ investment

8181

An Evolving Portfolio

Growing Markets

7% 6%

11%14%

22%26%

2000 2006 2012

% of total Aggregates Sales

% of total Aggregates COI

8282

In Summary

Strong existing reserve base

Solid operating model which drives results

Good growth opportunities



Cement DevelopmentGuillaume Roux

8484

Our Internal Development Plan

Lafarge to build 45 MT of new capacities between 2006 and 2010 to generate around 700-800 M€ EBITDA*, 12% to 15% ROCE by 2012

Everything has been put in place to deliver this Plan on time, on budget

In four years, Asia – including China – and also Africa, Central and Eastern Europe to be major contributors to the Group

* Group share

8585

45 MT: 700 to 800 M€ EBITDA*, 12% to 15% ROCE

To keep pace with market growth in more than 20 countries

To reduce costs

At a low cost price: < 100 € per ton in average

Faster than ever• Short construction time

• Fast ramp up

* Group share

8686


MT

4 49

17

30

3

7

10

15

1

2006 2007 2008 2009 2010

ChinaRoW

Total investment : 3.4 Bn€*

* Group share

8787


More than 80% in fast growing markets

China15 MT

South East Asia2 MT

Africa3 MT

Med.Basin4 MT

Europe6 MT

North America4 MT

Latin America2 MT

India +Bangladesh

9 MT

* Group share

8888


12%-15%

700-800

1,800

32

2012

> 11%10%ROCE* after tax on assets started up

100

300

5

2008

450

1,000

20

2010

Additional EBITDA (M€)*

Additional sales (M€)*

Additional sales - net (MT)*

* New Capacity after replacement, Group share

8989

At Less than 100 € per Tonne

Average cost per Tonne• 30 € to 50 € on China

• 70 € to 150 € in the rest of the world except the US

• 150 € to 200 € in the US

This cost includes • Quarries and land

• Infrastructures

• Buildings and plants

• Project team, engineering and technical center fees

• Capitalized financial interests

• Specific costs in some cases– Waste heat recovery– Power plant

9090

Faster than Ever

Shorter construction time• Opportunity study: 2 months

• Feasibility: 5 to 6 months

• Notice to proceed: 4 to 5 months

• First clinker: 13 to 15 months in China

22 to 26 months in the rest of the world

Faster ramp up• Import replacement

• Thorough supply / demand analysis

• Average 85% utilization after 4 years

9191

Everything Has Been Put in Place to Deliver this Plan on Time, on Budget

Our track record is strong

Strong focus on the two main areas• Equipment supply

• Human Resources

9292

Fast Growing Markets are Part of our “Sustainable Profit”

44%

38%

50% 49%

% Sales% Current Operating Income

2000 2006

77.359.438.7Sales volumes (MT)

7%18%

2,1092000

22%21%Operating margin

20062003

11.2%8.5%ROCE

4,8412,969Sales (M€)

9393

Equipment Supply: Differentiation Opportunity

Standardization and globalization of offerings• 2,500 Tpd:2 completed, 5 in construction, 3 to come

• 3,500 Tpd:1 completed, 1 in construction, 2 to 4 to come

• 5,000 Tpd:10 to 12 to come

China Purchasing Platform beginning in September 2005• > 20 people dedicated to suppliers’ relation, negotiations

and quality control

Few Suppliers• Strong mutual knowledge

9494

Human Resources: Our Strength

A dedicated worldwide predictive recruitment process for projects started 18 months ago

• A follow up of projects since opportunity phase

• A separate group handling recruitment of site people

• A unique Operation Preparation Guide (OPG)

• Top managers handling project management

Building bench strength: a personal objectiveof each BU manager

Supported by result oriented training• E.g.: 3 plant schools

• Kiln coaches and certification

9595

A Few ExamplesDoubling the Capacity at our DuJiangYan plant

16%

14

55

1.2

2007

Capacity addition (MT)

@ 100%

ROCE

EBITDA (M€)

Investment (M€)

Clearance Q2 04NTP in Q2 05

First clinker in Q3 06

2007: sold out

9696

A Few ExamplesGreenfield of 0.7 MT in Zambia

12%

19

94

0.7

2009


ROCE

EBITDA (M€)

Investment (M€)

Clearance Q1 06NTP Q2 06


9797

A Few ExamplesNew Line of 0.7 MT in Ecuador

11%

15

83

0.7

2009


ROCE

EBITDA (M€)

Investment (M€)

Clearance Q3 06NTP Q1 07


9898

Asia becoming increasingly contributivewith stronger Africa, Central and Eastern Europe

Growing Markets:

49%

Mature Markets:51%

Growing Markets:

66%

Mature Markets:34%

Western Europe North America

Asia excluding ChinaSub-Saharan AfricaLatin America

Central and Eastern EuropeMediterranean Basin

COI* 2006

COI* 2012

China

* Current Operating Income

9999

Zoom on China

Our vision

• Be the leader in the South Western region of China

• Able to expand into other attractive geographies with a view to generate the best possible return

• Be a top quality producer and a responsible organization environmentally and socially

• Be recognized as a leader of the Chinese Cement Industry

100100

Zoom on China

Our strategy

• Select the best strategic locations

• Invest and produce at competitive cost compared to our local competitors

• Deliver leading quality products and services in a safe environment

101101

Zoom on China

Total investment at 100% of 1 Bn$• JV created with Shui On on August 15, 2005

600 M$ investment for Lafarge (55% share)

24 MT capacity in 2007

Xinjiang

Guangxi

Hunan

Hubei

Hainan

Gansu

QinghaiNingxia

Shaanxi

Jiangxi

Anhui

Fujian

Neimongu

Shanxi Shandong

XizangSichuan

Yunnan

Guizhou

Henan

Heilongjiang

Jilin

Liaoning

Zhejiang

Jiangsu

HebeiBeijing

Shanghai

Guangdong

Gansu

SichuanNo. of plants: 5Capacity: 7 MT p.a.

SichuanNo. of plants: 5Capacity: 7 MT p.a.

YunnanNo. of plants: 3Capacity: 5 MT p.a.

YunnanNo. of plants: 3Capacity: 5 MT p.a. Guizhou

No. of plants: 3Capacity: 3 MT p.a.

GuizhouNo. of plants: 3Capacity: 3 MT p.a.

BeijingNo. of plants: 2Capacity: 1.5 MT p.a.

BeijingNo. of plants: 2Capacity: 1.5 MT p.a.

ChongqingNo. of plants: 4Capacity: 7 MT p.a.

ChongqingNo. of plants: 4Capacity: 7 MT p.a.

Chongqing

102102

Zoom on China

Current projects in the pipeline to bring over 40 MT by 2012

For a total investment of 650 M€ (Lafarge share at 55%)• Out of which 30% for process improvement to reduce production costs

New capacities (net of wet lines closures) coming on stream in:

5 MT

2011

20 MT5 MT3 MT4 MT2 MT1 MT

Total20102009200820072006

2012 Potential: ~ 125 M€ additional EBITDA (Lafarge share)Margin in line with Group’s

Xinjiang

Guangxi

Hunan

Hubei

Hainan

Gansu

QinghaiNingxia

Shaanxi

Jiangxi

Anhui

Fujian

Neimongu

Shanxi Shandong

Xizang Sichuan

YunnanGuizhou

Henan

Heilongjiang

Jilin

Liaoning

Zhejiang

Jiangsu

HebeiBeijing

Shanghai

Guangdong

Gansu

Chongqing

Sichuan:No. of plants: 4Capacity: 11 MT

Sichuan:No. of plants: 4Capacity: 11 MT

Yunnan:No. of plants: 7Capacity: 8 MT

Yunnan:No. of plants: 7Capacity: 8 MT

Guizhou: No. of plants: 5Capacity: 7 MT

Guizhou: No. of plants: 5Capacity: 7 MT

Beijing:No. of plants: 2Capacity: 1.5 MT

Beijing:No. of plants: 2Capacity: 1.5 MT

Chongqing:No. of plants: 7Capacity: 13 MT

Chongqing:No. of plants: 7Capacity: 13 MT

103103

In Summary

Lafarge to build 45 MT of new capacities between 2006 and 2010 to generate around 700-800 M€ EBITDA*, 12% to 15% ROCE by 2012

Everything has been put in place to deliver this Plan on time, on budget

In fours years, Asia – including China – and also Africa, Central and Eastern Europe to be major contributors to the Group

* Group share



ConclusionBruno Lafont



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