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.
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
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
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
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
$$
$$$$
$
$
$$
$$
-72
$
$
$$
$
$
$ $
$
$
$$$
$
$
$
$
$
$
$
$
$$$$
$
$
$
$
$
$
$
$$
$$$$
$
$
$
$
$$
$$
$
$
$
$ $
$
$
$$$
$
$$
$
$
$
$
$
$
$
$
$
1 2 3 4 5 6 7 9 10 12 14 16 17158 11 13
$
$
Total 2008-05
Total
$$
$$$$
$
$
$$
$$
- 60
$
$
$$
$
$
$ $
$
$
$$$
$
$
$
$
$
$
$
$
$$$$
$
$
$
$
$
$
$
$$
$$$$
$
$
$
$
$$
$$
$
$
$
$ $
$
$
$$$
$
$$
$
$
$
$
$
$
$
$
$
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
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
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
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
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
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
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…
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
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
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
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
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
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
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
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
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
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
45 MT: 700 to 800 M€ EBITDA*, 12% to 15% ROCE
MT
4 49
17
30
3
7
10
15
1
2006 2007 2008 2009 2010
ChinaRoW
Total investment : 3.4 Bn€*
* Group share
8787
45 MT: 700 to 800 M€ EBITDA*, 12% to 15% ROCE
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
45 MT: 700 to 800 M€ EBITDA*, 12% to 15% ROCE
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
Capacity addition (MT)
ROCE
EBITDA (M€)
Investment (M€)
Clearance Q1 06NTP Q2 06
First clinker in Q2 08
9797
A Few ExamplesNew Line of 0.7 MT in Ecuador
11%
15
83
0.7
2009
Capacity addition (MT)
ROCE
EBITDA (M€)
Investment (M€)
Clearance Q3 06NTP Q1 07
First clinker in Q4 08
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
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007
ConclusionBruno Lafont
Excellence 2008Towards undisputed leadership
Analyst & Investor DayJune 21, 2007