"Policy Maker Meets the Engineer" Workshop

Energy Efficiency at LafargeHolcim

Bernard Mathieu
Head Sustainable Development
UN ECE, 18 January 2017
Energy spend in 2015
MCHF

Group : 4 290

2017-01-16 © 2017
LafargeHolcim
2
Our Sustainability Strategy
Strong focus on CO2 emissions, over the life cycle

2017-01-16 © 2017 LafargeHolcim 3

 LafargeHolcim’s improvements since 1990
Energy efficiency clinker and cement production

MJ/t clinker kWh/t cement

-9,5%
4’600 -22,2% 105

4’400

4’200
100
4’000

105
4’542

3’800
95
3’600

95
3’533

0 0
Group Group

Average improvement rate: Average improvement rate:

-1.0 % per year -0.4 % per year

1990 2010 2011 2012 2013 2014 2015

2017-01-16 © 2017 LafargeHolcim 4

Mainly driven by new plant projects as well as
continuous process improvement

Group Average Average

2015 New plants*
Specific Thermal Energy [MJ/t clinker] 3533 3223
Consumption
Specific Electrical Energy [kWh/t 95 90
Consumption cement]
* Average of new plants built since 2007

Keep in Mind:
the theoretical energy required for clinker production can be calculated based
on standard enthalpies of formation of the input and output materials and is
around 1719 MJ/t clinker.

Further Energy Efficiency improvement can be expected, but it gets more and
more challenging.

2017-01-16 © 2017 LafargeHolcim 5

 CO2 performance per region at LafargeHolcim

Net CO2 [kg/tcement]

900 -26,2%
-28,8%
850
800 -26,1%
-24,5% -31,1%
-25,7%
750
-24,2%
700
650
600
550

585

573
643

601

500

551
531

533
0
North Asia Latin Europe Africa India Group
America Pacific America

1990 2010 2015

2017-01-16 © 2017 LafargeHolcim 6

Global Cement Database on CO₂ and Energy Information

The Cement Sustainability Initiative (CSI) is a

global effort by 24 major cement producers with
operations in more than 100 countries.

• The "Getting the Numbers Right" (GNR) is a voluntary, independently-

managed database of CO2 and energy performance information on the
global cement industry.

• 934 individual facilities producing 889 million tonnes of cement = 21% of

global cement production.

2017-01-16 © 2017 LafargeHolcim 7

CSI figures
Improvements in Thermal Energy Consumption

Average
improvement rate
since 1990:
-0.8% per year

2017-01-16 © 2017 LafargeHolcim 8

CSI figures
Improvements in Electrical Energy Consumption

Average
improvement rate
since 1990:
-0.5% per year

2017-01-16 © 2017 LafargeHolcim 9

Our four strategic pillars: cost leadership and asset light are essential.
Sustainable development and commercial transformation are great
opportunities.

1 2 3 4
Commercial Cost Asset light Sustainable
transformation leadership approach development

2017-01-16 © 2017
LafargeHolcim
10
Focus on Return On Invested Capital

Free Cash Flow Capex ROIC AT

› At least CHF 10.0bn › Max CHF 3.5bn › At least 300bps improvement
cumulative 2016 – 2018 cumulative 2016 – 2017 from 2015 level by 2018
› CHF 3.5-4.0bn run rate by 2018
from operational improvement

› At least CHF 6 per share

run rate by 2018

Operating EBITDA Credit Rating Cash Returns to

› At least CHF 8.0bn in 2018 › Maintain solid investment Shareholders
grade rating › Progressively grow DPS
and 50% pay-out over cycle
› Return excess cash to
shareholders commensurate
with a solid investment grade
credit rating

Targets assume constant scope (except for India) and FX. FCF after maintenance and expansion capex. Capex target excluding capitalized merger implementation costs. Operating
EBITDA before restructuring costs.
Asset Light Growth
Asset
Light

Strategic Positioning Retail Franchising

• Positioning in strategic advantageous locations, markets • Branded Networks
• Leverage on trading • Sales Service and support
• Focus on supply chain • Protect Volume and Premium Price
• Building grinding stations, terminals instead of integrated
cement plants

Smart Building of plants RMX, AGG Partnership –Franchising -

• Build pre-fabricated modular plants Licensing
• „Mobile“ plants to enter and exit profitable markets quickly • Offer product expertise, IT systems, technical equipment,
spare and wear part suppliers, brand and sales training
• Turn-key solutions
• Extend footprint
• Small plants for small reserves
• Long-term supplier relationship
• Production Joint Ventures
2017-01-16 © 2017 LafargeHolcim 13
Waste management as a business opportunity

 Waste as an energy
source gaining
importance
 Growing and more LafargeHolcim uniquely
urban population positioned to valorize
producing more waste waste
 Fuel price volatility and  Focus on developing
increase to persist in and fast urbanizing
future markets
 Strong demand for Multiple business models
energy emerging

 Broad cement plant  Waste to Fuel:

network Full treatment solution
 Waste to Raw material
Full fledge Construction &
Demolition Waste offer
2017-01-16 © 2017 LafargeHolcim 14
 Geocycle Investment Roadmap
530 Mio CHF CAPEX till 2020

FC2016 B2017 2018 2019 2020

3.7 7.4 6.9 2.2 7.5 2.4
6.6 4.0
10.5
CAPEX 2.9 29.2
56.3 38.4
Market 44.9
15.9 44.5
Segment 5.1 25.8 85.8 8.4
(mCHF) 11.7 91.8
2.2 11.5 15.9

CAPEX
8.3 29.3
Value 40.3 55.6 50.9
Chain 59.9 89.9 85.0
(mCHF) 21.6 100.7

Total CAPEX
(mCHF) 30 100 130 150 (146*) 150 (136*)

TSR (%) 17.8 30.0

2017-01-16 © 2017 LafargeHolcim

15
Investments in energy efficiency and alternative energy reduces our
CO2 exposure

Positive EBITDA impact using alternative fuel Reduced exposure to CO2 costs in Europe

Thermal Substitution Rate%

Carbon cost exposure, CHF m
Gross Added Value, CHF m1 122
21.0% -18.0%
100

14.9% 15.5%
14.4%

303 310 332

2014 15 16 17 2018 19902 2015

• Alternative fuels reduces energy costs and thereby adding value
• Increasing replacement of traditional fuels and raw materials
• Improved carbon efficiency in EU since 1990, overall
exposure to CO2 ETS reduced by CHF 22 m
• In the future, carbon trading will expand to further
geographies rewarding carbon efficiency even further

1 Measures the positive impact on EBITDA from use of alternative fuels and raw materials
2 Theoretical cost in the EU ETS with carbon efficiency levels in 1990 vs 2015 using 2015 production volume.
3 Based on a price of CHF 5 per ton Excluding free allowances

2017-01-16 © 2017 LafargeHolcim 16

LafargeHolcim develops low carbon solutions for the
construction sector

Up to 70% lower CO2 Green Building Centres

emissions

Reduced energy
consumption Integrated affordable
during production housing solutions for rural
and semi-urban India
Carbon uptake during
concrete curing
2017-01-16 © 2017 LafargeHolcim 18