Annual Report 2018
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LafargeHolcim is the global leader in building
materials and solutions. We are active in
four business segments: Cement, Aggregates,
Ready-Mix Concrete and Solutions & Products.
With leading positions in all regions
of the world and a balanced portfolio
between developing and mature markets,
LafargeHolcim offers a broad range of high-
quality building materials and solutions.
LafargeHolcim experts solve the challenges
that customers face around the world,
whether they are building individual homes
or major infrastructure projects. Demand for
our materials and solutions is driven by global
population growth, urbanization, improved
living standards and sustainable construction.
Around 75,000 people work for the company
in around 80 countries.
Paris, France
Employees at one of our worksites for
the Grand Paris Express, the largest infrastructure
project in Europe (see page 36).
Read the online summary at
www.lafargeholcim.com
The Sustainability Report complements this report.
It presents more detail on our sustainability
achievements as well as progress against our
sustainability strategy.
LafargeHolcim is listed on the SIX Swiss Exchange
and on Euronext Paris, and is a member of
the Dow Jones Sustainability Indices (DJSI)
European Index.
Contents
In this report
Chairman statement 14
CEO letter to shareholders 16
Meet the leadership team 18
Market 20
Strategy 2022 – “Building for Growth” 22
Overview
Business
review
Page
12 —25
Largest footprint in the industry 28
26 — 87
Business segments
Cement 30
Aggregates 34
Ready-Mix Concrete 38
Solutions & Products 42
Delivering sustainable value 46
Innovating for success 54
People 58
Health & Safety 62
Risk and control 66
Capital market information 84
Governance and
Compensation
Corporate governance 90
Compensation report 114
Management
discussion &
analysis
Financial
information
Group performance 142
Regional performance 148
Consolidated financial statements 163
Holding Company Results 266
5-year-review 280
88 —139
140 —159
160 —283
Overview — Contents
01
LafargeHolcim Annual Report 2018 Ewekoro, Nigeria
Our team in the cement plant.
02
Our momentum accelerated
in the second half of 2018
during which we exceeded
our sales targets, while
profitability increased
over-proportionally.
Overview — Introduction
03
LafargeHolcim Annual Report 2018 Manta, Ecuador
At our customer’s site.
04
We are well-positioned and we
expect further acceleration
of our momentum in 2019.
Overview — Introduction
05
LafargeHolcim Annual Report 2018 06
Our strengthened high-
performance culture is
underpinned by values of
trust and integrity.
Ste. Genevieve, Missouri, USA
An employee working in the warehouse.
Overview — Introduction
07
LafargeHolcim Annual Report 2018 Businesses
Cement
From classic masonry cements
to high-performance products
tailored for specialized
settings, we offer an extensive
range of cements and
hydraulic binders.
Read more on
P30–33
Aggregates
We offer aggregates that serve
as raw materials for concrete,
masonry and asphalt as well as
the foundation for buildings,
roads and landfills.
Ready-Mix Concrete
We deliver a wide range of
high-performance, high-quality
ready-mix concrete, flexibly
and reliably.
Read more on
P34–37
Read more on
P38–41
Solutions & Products
The Solutions & Products
segment bundles offers such
as dry mortar, precast
concrete, asphalt, paving and
services that deliver targeted
solutions for our customers’
specific needs.
Read more on
P42–45
221.9
Sales (million tonnes)
2017: 220.2
273.8
Sales (million tonnes)
2017: 278.7
50.9
Sales (million m3)
2017: 50.6
2.4
Net Sales (CHF bn)
2017: 2.3
08
Guayaquil, Ecuador
With our customer at the Santana Lofts site.
Previous page: New York, USA
Loading operations.
LafargeHolcim Annual Report 2018
Overview — Businesses
09
Performance
Net Sales by Region (CHF bn)
North America
Latin America
Europe
Middle East
& Africa
Asia Pacific
5.9
7.6
3.1
7.4
2.7
Key Figures 2018:
CHF 27,466m
Net
Sales
CHF 1,703m
Free
Cash Flow
2017: CHF 27,021m
2017: CHF 1,685m
CHF 6,016m
Recurring
EBITDA
6.5%
Return on
Invested Capital
2017: CHF 5,990m
2017: 5.8%
Notes. Recurring EBITDA excludes restructuring, litigation, implementation and other
non-recurring costs. Free Cash Flow is defined as cash flow from operating activities less net
maintenance and expansion Capex. Return On Invested Capital is defined as Net Operating
Profit After Tax (NOPAT) divided by the average Invested Capital. The average is calculated by
adding the Invested Capital at the beginning of the period to that at the end of the period
and dividing the sum by 2 (based on a rolling 12-month calculation). The non-GAAP
measures used in this report are defined on page 282. Key figures are presented before IFRS 16.
10
Ada, Oklahoma, USA
Job done at the cement plant.
Previous page: Zurich, Switzerland
At our customer's building site.
LafargeHolcim Annual Report 2018
Overview — Performance
11
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Nairobi, Kenya
Safety walk at the grinding plant.
Chairman statement 14
CEO letter to shareholders 16
Meet the leadership team 18
Market 20
Strategy 2022 –
“Building for Growth” 22
Overview — Contents
13
LafargeHolcim Annual Report 2018 Chairman
statement
Your company aims to create value
not only for its shareholders but
also for society as a whole.
Dear shareholders,
The 2018 fiscal year was marked by
significant progress in Strategy 2022 –
“Building for Growth”.
We grew faster than the market and
improved the Recurring EBITDA of the
company through greater efficiency and
cost discipline. After several years of
transition and adjustments to the
organizational structure, our company is
now well-positioned to thrive in a growing
global building materials market. We have
the best assets in the industry and highly
motivated teams all around the world to
further capture opportunities.
While our financial results attest to a
successful strategy, this only tells part of
the story. Your company aims to create
value not only for its shareholders but also
for society as a whole, as we have been
doing for more than one-hundred years.
From the Grand Paris Express in France,
currently the largest infrastructure project
in Europe, to transformative projects in
Ecuador and India, our products and
services help to improve people’s lives and
spur economic growth.
As a global leader in building materials,
we also contribute our expertise to
sheltering families in our communities
– as our colleagues at the Holcim Mexico
Foundation have done for instance in
Puebla, Mexico, by building 120 houses for
families affected by the 2017 earthquake.
In India, we are the industry leader in
reducing CO2 emissions and are known for
extensive community services in the
villages where we operate. It is our vision
to be at the forefront of sustainable
construction solutions and innovation, and
for our stakeholders to see us as a
responsible and ethical company.
Respect and responsibility towards the
needs of all our stakeholders is part of our
culture. In this context, upholding Health
& Safety as a core value is highly
important to us. I am happy to report that
we have made a major step forward in
reaching our goal of a zero-harm culture.
Last year, we have also further
strengthened our corporate governance,
for instance through the creation of the
Ethics, Integrity & Risk Committee (EIRC),
which is now fully part of our governance
structure. We strongly believe that with
our reviewed and strengthened
governance and compliance organization
we have taken all necessary measures to
ensure that LafargeHolcim meets today’s
best corporate governance practices.
I would like to conclude my letter with a
remark on an issue that is personally very
important to me. We must be aware of the
bigger environment for our success and
not only consider our immediate business
context. As a Swiss-based company with
deep commitments to the EU and indeed
to countries around the world, we are
perhaps especially aware of the
interdependencies upon which everyone’s
well-being depends – not just
LafargeHolcim’s. We live up to the
responsibilities that come with our
presence around the world. We aim
to be second-to-none as a steward of
global prosperity.
My sincere thanks go of course also to our
employees around the world. They
embody our spirit of responsibility towards
all stakeholders and their pride in our
company will be the best guarantee of
business success.
I also wish to thank our colleague Dr.
Thomas Schmidheiny, who decided not to
stand for re-election to the Board. In
recognition of his many years of service to
LafargeHolcim, my colleagues and I have
14
Beat Hess
Chairman
Corporate governance
Good governance underlies our approach to
creating long-term value.
Read more on P90–113
decided to appoint him Honorary
Chairman of the Group. His deep
experience and wise counsel will be truly
missed.
Finally, I would like to thank my fellow
Board members for their commitment and
counsel and to the members of the
Executive Committee for further
strengthening LafargeHolcim’s role as the
global leader in building materials and
solutions.
Beat Hess
Chairman
LafargeHolcim Annual Report 2018
Overview — Chairman statement
15
CEO letter to shareholders
Dear shareholders,
In the business year 2018, we made
excellent progress in executing our
Strategy 2022 – “Building for Growth” and
made significant improvements to our
performance. Our momentum
accelerated in the second half of 2018,
during which we exceeded our sales
targets while profitability increased
over-proportionally.
Switching gears to Growth is the most
fundamental principle of Strategy 2022.
First results have been achieved and the
growth momentum accelerated
throughout the year, with a strong Net
Sales increase of 5.1% on a like-for-like
basis. All four business segments
contributed to this growth. Four bolt-on
acquisitions were completed in 2018 in
Europe and North America which drove
growth and added to the company’s
presence in ready-mix concrete and
aggregates. These acquisitions had
immediate impact on profitability and
brought our company closer to our
end-customers. Four more bolt-on
acquisitions have been signed in 2019 in
Europe, Australia and North America.
Zurich and Paris. The associated CHF 400
million SG&A savings program was
executed successfully and is delivering
results ahead of target.
scheme has been implemented in all
countries. All initiatives are supported by
the launch of the new LafargeHolcim
Business School.
We made strong progress towards
closing the gap to best-in-class
performance in the Aggregates and
Ready-Mix Concrete business segments.
Both businesses developed positively in
terms of volumes, pricing and
profitability. These two business
segments will play an important role in
reaching the next level of performance
of LafargeHolcim.
The strategy driver Financial Strength
has led to improvements across all key
performance indicators. More than CHF
1.5 billion was refinanced at attractive
terms, thereby improving our company’s
debt maturity profile and reducing
financing costs. The sale of the
Indonesian business contributes to the
strengthening of our balance sheet.
All measures taken in 2018 have already
led to a successful de-leveraging,
with the Net Financial Debt/Recurring
EBITDA ratio improving to 2.2x
(from 2.4x in 2017).
Our progress and performance in 2018 is
based on the commitment of our 75,000
employees. I thank all LafargeHolcim
leaders and employees for their
contributions, agility and entrepreneurial
spirit in driving Strategy 2022 – “Building
for Growth”.
For 2019, we expect solid global market
demand for our products and we aim to
grow our business profitably. The
execution of our new strategy has
successfully started and I am confident
that we will see a further acceleration of
our momentum.
On behalf of all LafargeHolcim
employees, I thank you for your trust and
support.
Best regards,
In terms of Simplification &
Performance, we have successfully
established a new operating model with
more P&L accountability for the countries
and leaner corporate support functions.
Consequently, we have closed four
corporate offices in Singapore, Miami,
With regard to Vision & People, the new
operating model and leadership team
have been established effectively.
Globally our leaders are empowered and
the simplified performance management
system and corresponding incentive
Jan Jenisch
Chief Executive Officer
16
Jan Jenisch
Chief Executive Officer
5.1%
Net Sales growth (2018, like-for-like)
3.6%
Recurring EBITDA growth (2018, like-for-like)
Overview — CEO letter to shareholders
17
LafargeHolcim Annual Report 2018 Meet the
leadership team
Martin Kriegner
Asia Pacific
Feliciano
González Muñoz
Human Resources
René Thibault
North America
Marcel Cobuz
Europe
Keith Carr
Legal and
Compliance
Nationality: Austrian
Born: 1961
Nationality: Spanish
Born: 1963
Nationality: Canadian
Born: 1966
Nationality: Romanian
and French
Born: 1971
Nationality: British
Born: 1966
18
Denver, Colorado, USA
The Executive Committee
at the Morrison quarry.
Miljan Gutovic
Middle East Africa
Jan Jenisch
CEO
Géraldine Picaud
CFO
Oliver Osswald
Latin America
Nationality: Australian
Born: 1979
Nationality: German
Born: 1966
Nationality: French
Born: 1970
Nationality: Swiss
Born: 1971
Overview — Meet the leadership team
19
LafargeHolcim Annual Report 2018
Market
The global building materials
market is worth CHF 2.5
trillion annually and
it is continuously growing.
Five megatrends
driving market growth
of 2% – 3% per annum
Global population growth and
changing demographics – Population
expected to grow 22% by 2050 from
7.6 billion to 9.7 billion
Urbanization and megacities
– Approx. 2.5 billion more people are
expected to live in cities by 2050
20
A fragmented market – Opportunities for growth and acquisitions
Global building materials market
Building materials market (without China)
CHF ~ 2,500 billion
CHF ~ 1,750 billion
China
Rest of
World
Cement
LH market share of ~ 8%
Aggregates
LH market share of ~ 2%
Ready-Mix Concrete
LH market share of ~ 3%
Other building
materials
CHF 200 billion
CHF 220 billion
CHF 200 billion
CHF 1,130 billion
Increased demand for better living
standards and more efficient
infrastructure
Increased demand for sustainable
construction solutions and
increasing resource scarcity
Digitalization opens new avenues
for growth & innovation
Overview — Market
21
LafargeHolcim Annual Report 2018 Good progress on Strategy 2022 –
“Building for Growth”
OUR FOUR VALUE DRIVERS
2022 Targets
3 – 5%
Net Sales
Growth
2018 Performance
5.1%
Net Sales
Growth
>5%
Recurring
EBITDA
Growth
3.6%
Recurring
EBITDA
Growth
>40%
Free Cash Flow
to Recurring
EBITDA
>8%
Return on
Invested
Capital
28.3%
Free Cash Flow
to Recurring
EBITDA
6.5%
Return on
Invested
Capital
Notes: Recurring EBITDA excludes restructuring, litigation, implementation and other
non-recurring costs. Free cash flow is defined as cash flow from operating activities less net
maintenance and expansion Capex. Recurring EBITDA growth and Net Sales growth are both
presented on a like-for-like basis. Return On Invested Capital is defined as Net Operating
Profit After Tax (NOPAT) divided by the average Invested Capital. The average is calculated by
adding the Invested Capital at the beginning of the period to that at the end of the period
and dividing the sum by 2 (based on a rolling 12-month calculation). The non-GAAP
measures used in this report are defined on page 282. Key figures are presented before IFRS 16.
22
Mumbai, India
With our customer at the Park by Lodha.
LafargeHolcim Annual Report 2018
Overview — Strategy 2022 – Building for Growth
23
Cologne, Germany
Pouring concrete to renovate the cathedral
metro station.
24
Good progress on Strategy 2022 –
“Building for Growth”
continued
Outlook 2019
Solid global market demand is expected
to continue in 2019 with the following
market trends:
• Continued market growth in
North America
• Softer but stabilizing cement demand in
Latin America
• Continued demand growth in Europe
• Challenging but stabilizing market
conditions in Middle East Africa
• Continued strong demand growth
in Asia Pacific
Based on the above trends and the
successful execution of Strategy 2022, we
confirm our previously communicated
targets for 2019:
• Net Sales growth of 3 to 5 percent on a
like-for-like basis
• Recurring EBITDA growth of at least 5
percent on a like-for-like basis
• Ratio of Net Debt to Recurring EBITDA 2
times or less by the end of 2019
The global rollout of the new Strategy
2022 – “Building for Growth” has been
successfully started. Strong progress was
made in all four drivers of the strategy,
delivering results ahead of plan.
Switching gears to Growth is the most
fundamental principle of Strategy 2022.
First results have been achieved and the
growth momentum accelerated
throughout the year, with a strong Net
Sales increase of 5.1% on a like-for-like
basis. All four business segments
contributed to this growth. Four bolt-on
acquisitions were completed in 2018 in
Europe and North America which drove
growth and added to the company’s
presence in ready-mix concrete and
aggregates. These acquisitions had
immediate impact on profitability and
brought the company closer to its
end-customers. Four more bolt-on
acquisitions have been signed in 2019 in
Europe, Australia and North America.
In terms of Simplification &
Performance, the company has
successfully established a new operating
model with more P&L accountability for
the countries and leaner corporate
support functions. Consequently, we have
closed four corporate offices in Singapore,
Miami, Zurich and Paris. The associated
CHF 400 million SG&A savings program
was executed successfully and is
delivering results ahead of target.
Strong progress was made by the
Aggregates and Ready-Mix Concrete
segments towards closing the gap with
best-in-class performers. Both businesses
developed positively in terms of volumes,
pricing and profitability. These two
business segments will play an important
role in reaching the next level of
performance of LafargeHolcim.
The strategy driver Financial Strength
has improved all key performance
indicators. More than CHF 1.5 billion was
refinanced at attractive terms, thereby
improving the company’s debt maturity
profile and reducing financing costs. The
sale of the Indonesian business has
contributed to the strengthening of the
balance sheet. All measures taken in 2018
have already led to a successful de-
leveraging, with the Net Financial Debt/
Recurring EBITDA ratio improving to 2.2x
(from 2.4x in 2017).
In terms of Vision & People, the new
operating model and leadership team has
been successfully established. The
company’s global leaders are empowered
and fully accountable for their P&L. The
simplified performance management
system and the corresponding incentive
scheme have been implemented in all
countries. All initiatives are supported by
the launch of the new LafargeHolcim
business school.
LafargeHolcim Annual Report 2018
Overview — Strategy 2022 – Building for Growth
25
Barcelona, Spain
In the warehouse of the Montcada cement plant.
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Largest footprint in
the industry 28
Business segments
Cement 30
Aggregates 34
Ready-Mix Concrete 38
Solutions & Products 42
Delivering sustainable value 46
Innovating for success 54
People 58
Health & Safety 62
Risk and control 66
Capital market information 84
Business review — Contents
27
LafargeHolcim Annual Report 2018 Largest footprint
in the industry
Grinding plant
Cement plant
North
America
CHFm
5,875
Net Sales
28
Latin
America
CHFm
2,731
Net Sales
Our plants
270
cement and grinding plants
663
aggregates plants
1,448
ready-mix concrete plants
Europe
CHFm
7,554
Net Sales
Asia
Pacific
CHFm
7,446
Net Sales
Middle East
Africa
CHFm
3,080
Net Sales
Business review — Global footprint
29
LafargeHolcim Annual Report 2018
Business segments
Cement
In 2018 the segment showed solid
progress, with Net Sales increase of 6.0%*
and improvement in Recurring EBITDA
of 1.7%*.
For centuries, cement has been essential
to building long-lasting homes, modern
offices and public infrastructure. It is
manufactured through a large-scale,
capital- and energy-intensive process.
Production begins in a rotary kiln, in which
limestone and clay are heated to
approximately 1,450 degrees Celsius.
Under these extreme temperatures it
coalesces into the semi-finished product
called clinker.
To make traditional Portland cement,
gypsum is added to clinker in a cement
mill and the mixture is ground to a fine
powder. Other high-grade materials such
as fly ash, pozzolan and limestone can be
added to modify the cement for special
uses.
Our cements range from Portland
cements and classic masonry cements to
specialized products for different
environments, including those exposed to
seawater, sulfates and other harsh natural
conditions. These products go hand in
hand with complementary services such
as technical support, order and delivery
logistics, documentation, demonstrations
and training.
Our cement customers include
construction and public works
organizations, manufacturers (producers
of ready-mix concrete and prefabricated
products), and, via retailers, the general
public. At a basic level, the market can be
broadly segmented into bag and bulk
cement, with emerging markets generally
the largest consumers of bagged cement.
Industrialized countries are mainly bulk
markets, as cement is mainly consumed
by larger business-to-business customers
such as construction companies or
building products manufacturers.
Cement is costly to transport over land.
Consequently, the radius within which a
typical cement plant is competitive
extends no more than 300 kilometers for
the most common types of cement.
However, cement can be shipped more
economically by sea and inland
waterways. Most LafargeHolcim plants are
located close to customers in highly
populated areas, benefiting from the
ongoing global trend in urbanization.
221.9
Sales
(million tonnes)
2017: 220.2
2018 in review
Solid volume growth of 4.4% on a
like-for-like basis compared to 2017
was driven by favorable conditions
in most regions. In Asia Pacific, solid
demand was driven by infrastructure
and rural housing. In Europe,
growth was supported by higher
construction and residential activity
as well as incremental infrastructure
spending. In Latin America, demand
recovered in Brazil and Columbia
while the North American market
grew strongly in 2018 despite
unfavorable weather. In Middle East
Africa, sales stabilized at prior-year
levels. Net Sales grew 6.0% on a
like-for-like basis, with Recurring
EBITDA growth on a like-for-like
basis of 1.7%, impacted by sharply
higher energy prices.
* Like-for-like.
30
Guayaquil, Ecuador
In the control room of the
cement plant.
Business review — Business segments
31
LafargeHolcim Annual Report 2018 Business segments
Cement
continued
Chandrapur, India
Ready to start cement delivery.
32
Connecting communities in the Himalayas
LafargeHolcim Annual Report 2018
Business review — Business segments
33
Some unique logistical challenges are involved when building a tunnel through the Himalayas. “Working conditions are surely not easy,” observes Sunil Tyagi, Project Manager for STRABAG AG – Afcons JV, lead contractor on the Rohtang Tunnel project. The tunnel, which is nine kilometers long and situated at 3,000 meters above sea level, will be the longest in the world at this altitude. Our Indian affiliate ACC has delivered 138,000 tonnes of cement to help complete it.“ACC has been a trusted partner since the start in 2010,” continued Tyagi. “Team ACC has been performing reliably and safely, navigating through snowfall, avalanche and washed away roads.” The project advanced through agile, opportunistic activity when conditions allowed for safe delivery. The tunnel is expected to open at the end of 2019. It will substantially improve living conditions for people who had previously been isolated from the rest of the country whenever snowfall blocked access. The Rohtang Tunnel will promote economic progress for the region. Business segments
Aggregates
In 2018 we showed excellent progress
in our ambition to close the gap with
best-in-class performers, with growth
in Recurring EBITDA of 15.1%*.
LafargeHolcim operates more than 600
aggregates plants worldwide. This
segment supplies a broad range of
customers that includes concrete and
asphalt producers, manufacturers of
prefabricated products and construction
and public works contractors of all sizes.
Our aggregates are used as raw materials
for concrete, masonry and asphalt and as
base materials for roads, landfills and
buildings. As such, they are a key
component of construction.
Crushed stone, gravel and sand are all
typical aggregates. Most aggregates are
produced by blasting hard rock from
quarries and then extracting and crushing
it. Aggregate production also involves the
extraction of sand and gravel from both
land and marine locations. In both cases,
the aggregates are processed and sorted
to obtain various sizes to meet different
needs, or for other physical characteristics
such as hardness, granularity, shape and
color.
Such characteristics determine the
applications for which the various types of
aggregates are suited. Because of the high
weight of aggregates and cost of
transporting them, aggregates markets
are nearly always local.
LafargeHolcim holds significant reserves
of quality aggregates in our key markets:
at current production rates our average
reserve life in Europe is around 40 years,
in Australia around 50 years, and in North
America we have an average reserve life
of around 100 years. We are also
increasingly supplying recycled
aggregates, which can be made from
construction waste as well as the materials
left over after demolition, especially in
urban areas. These recycled aggregates
replace the need for quarry extraction and
contribute to a truly circular economy in
building.
273.8
Sales of aggregates
(million tonnes)
2017: 278.7
2018 in review
Significant progress was made in
Aggregates performance with
Recurring EBITDA improving by
15.1% on a like-for-like basis
compared to the prior year,
outperforming the Net Sales growth
of 4.5% on a like-for-like basis,
increasing the Recurring EBITDA
margin by 2.3 percentage points.
Volumes grew by 1.2% on a like-for-
like basis versus 2017 driven by
strong demand in Europe and North
America. Net Sales gains combined
with a leaner administrative
structure led to over-proportional
Recurring EBITDA and margin
growth, closing the gap to best-in-
class performance.
* Like-for-like.
34
Untervaz, Switzerland
Quarry operations.
Business review — Business segments
35
LafargeHolcim Annual Report 2018 Business segments
Aggregates
continued
Paris, France
The Grand Paris project includes
circa 200 km of metro lines and 70
stations.
36
Helping keep Paris grand
Business review — Business segments
37
For more than one-hundred years we have supplied aggregates and concrete to the French market. When planning began for the Grand Paris Express (GPE) – France’s largest construction project of the century – we were eager to share our expertise and solutions.The GPE is the largest transport infrastructure project in Europe. It represents an investment of about EUR 38.5 billion. Our building materials and sustainable solutions are helping to make sure the GPE is environmentally friendly and in line with the Universal Climate Agreement signed at COP21.To help realize the GPE’s anticipated 200 kilometers of new railway and 68 new rail stations, we have already agreed to deliver 600,000 tonnes of aggregates and 260,000 tonnes of cement to produce 650,000m³ of ready-mix concrete through 2022, with the goal of working on the GPE over the next 15 years. Aggregates come from our nearby quarries in the Seine valley. These are delivered by barge, which is a more environmentally friendly method than by road (two barges can handle the load of 220 trucks). Most of the earth excavated from the GPE tunnels and stations will be removed the same way – in total the GPE is expected to produce up to 40 million tonnes – travelling as far as Le Havre to re-landscape some of our quarries along the Seine.LafargeHolcim Annual Report 2018 Business segments
Ready-Mix Concrete
Our 2018 Recurring EBITDA grew by
54.1%* as we started to close the gap
with best-in-class performers.
Concrete is the world’s second-most
consumed good by volume after water.
One cubic meter consists of approximately
300 kilograms of cement, 150 liters of
water and two tonnes of aggregates.
Ready-mix concrete is one of the largest
markets for the cement and aggregates
industries.
Buyers of ready-mix concrete are typically
construction and public works contractors,
ranging from major multinational
corporations to small-scale customers.
Customers determine our success. They
value the quality and consistency of our
products, the breadth of our portfolio, our
expertise in large projects, our flexibility
and our reliability. We also offer a range of
innovative concretes including self-filling
and self-leveling concrete, architectural
concrete, insulating concrete and pervious
concrete.
The production of ready-mix concrete is
less capital intensive than the production
of cement. It is also highly decentralized,
since concrete is a heavy product that
must be delivered quickly, requiring
production facilities to be near the place
of use. Only very large and integrated
corporations, such as LafargeHolcim, that
produce both cement and aggregates
have succeeded in establishing an
international presence in this market.
In 2018 we bolstered our capacity in this
segment by acquiring two ready-mix
manufacturers in the US – MetroMix in
Colorado and Tarrant Concrete in Texas.
As with our Aggregates segment, we
are focused on closing the performance
gap with other best-in-class performers
in Ready-Mix Concrete as part of
Strategy 2022 – “Building for Growth”.
50.9
Sales of ready-mix
concrete (million m3)
2017: 50.6
2018 in review
Ready-Mix Concrete performance
made strong progress in 2018. Net
Sales improved 3.8% on a like-for-
like basis compared to 2017 and
Recurring EBITDA grew over-
proportionally by 54.1% on a like-
for-like basis versus the prior year.
Overall sales volumes increased by
0.6% on a like-for-like basis, mainly
driven by demand in Europe, while
average selling prices improved in
most regions. Initial benefits from
the new, leaner administrative
model combined with sales price
gains to lift Recurring EBITDA and
Recurring EBITDA margin in 2018.
* Like-for-like.
38
Marseille, France
Day's end at our ready-mix
concrete plant.
Business review — Business segments
39
LafargeHolcim Annual Report 2018 Business segments
Ready-Mix Concrete
continued
Guayaquil, Ecuador
Pouring ready-mix concrete.
40
Building a new gateway for global trade
Business review — Business segments
41
As a leader in the global building materials industry, we take pride in helping our clients find sustainable, positive solutions to megatrends like population growth and urbanization. Good building – especially of infrastructure – is key to helping societies absorb these trends and to ensure that the benefits are widely shared.In Ecuador we are contributing on a number of fronts. Beginning near Guayaquil, its largest city, we have designed a range of concrete solutions to build the deep water port of Posorja. Posorja will give the country a state-of-the-art link to the world trade system – and with a depth of 16 meters, the port will enable sea trade even for today’s largest (‘Post Panamax’) vessels.And in the capital city of Quito, we have poured another 512,000 cubic meters of concrete to create the city’s first metro system. This World Bank-sponsored project envisions a 22-kilometer rapid transit artery that will connect the city’s 1.6 million people – a number that has grown steadily and will continue to do so into the future.LafargeHolcim Annual Report 2018 Business segments
Solutions & Products
In 2018 we built a fourth business
segment, Solutions & Products, that bundles
a range of offers delivering targeted solutions
to our customers’ specific needs.
In 2018 we built a fourth business
segment, Solutions & Products, that
bundles a range of offers delivering
targeted solutions to our customers’
specific needs.
The Solutions & Products segment gives
us a way to leverage our local construction
market knowledge, extensive customer
base, global key accounts and R&D
capabilities. Solutions & Products also
leverages our strength as a global
company that can develop and scale up
new solutions and products effectively.
This agility is important to this segment
especially as nearly all of its offerings fall
into markets where spending is growing
faster than the general average for
construction.
Today the segment offers asphalt,
contracting services, dry mortars and a
range of application specific solutions. The
mineral foam Airium® improves the energy
performance of buildings through fire
resistant and fully recyclable thermal
insulation materials. Ductal®, one of our
ultra-high performance concretes, can be
applied to bridge decks to extend the
service life of infrastructure investments.
Through the Solutions & Products
segment we also provide a wide range of
precast construction systems that can
solve a host of building and infrastructure
challenges – Basalton, for example
(pictured right), which provides a durable
and cost-effective means to protect
vulnerable landscapes from storm and
rising sea levels.
We view Solutions & Products as a growth
driver under Strategy 2022 – Building for
Growth and expect to substantially
increase our revenue in this segment
over the coming years.
2.4
Net Sales
(CHF billion)
2017: 2.3
2018 in review
Solid Net Sales growth of 2.7% on a
like-for-like basis compared to 2017
was mainly driven by asphalt
operations, a focus on value-added
products, delivering incremental
value and segmented price
increases. Construction and Paving
also saw improved 2018 revenues,
mainly in North America. Profitability
was impacted by significant bitumen
cost increases which mirrored the oil
price development, leading to a
decrease in Recurring EBITDA of
24.3% on a like-for-like basis versus
the prior year.
42
Zeeland, The Netherlands
Our durable Basalton creates a
concrete dyke for long-lasting
protection against storm surge.
Business review — Business segments
43
LafargeHolcim Annual Report 2018 Business segments
Solutions & Products
continued
44
Paving the road for better mobility
In the summer of 2018 Aggregate Industries won the bid to improve 28 miles of State Route 160, a contract worth nearly USD 60 million, as well as a contract for two other roads northwest of Las Vegas.“We needed a partner we could trust to work in mountainous terrain and in a confined space,” says Don Christiansen, Resident Engineer with the Nevada Department of Transportation (NDOT). “And at the same time, they had to do all this while minimizing disruption for nearby homeowners.”The key to success? A long track record of partnership with the NDOT, as well as the proven capacity and expertise to take on big projects.The project will make the roads a safer and more sustainable feature in the community’s life. State Route 160 will be widened to create more travel lanes and a raised median barrier will be added. The side slopes will be flattened to make it safer for motorists to pull over. Plans also include a wildlife undercrossing. Las Vegas, Nevada, USA
Widening State Route 160, commonly
known as the Blue Diamond Road.
Business review — Business segments
45
LafargeHolcim Annual Report 2018 Delivering sustainable value
Our approach: Sustainability creates
value for business and society.
We continuously review this ambition
based on scenarios that take into account
the most recent internal and external
input factors, such as the Carbon
Technology Roadmap of the International
Energy Agency & Cement Sustainability
Initiative and the nationally determined
contributions of the countries in which we
operate. As a consequence of our latest
review we revised our target value to 520
kg CO2/tonne by 2030.
With this, we remain the most ambitious
company in our sector and retain our
commitment to reduce emission levels in
line with a 2 degree scenario.
We will continue to monitor developments
and to update our scenario planning in
line with the recommendations of the Task
Force on Climate-related Financial
Disclosures (TCFD, see also page 68).
Circular Economy
Our cement plants provide an excellent
opportunity to address society’s waste
problem. Waste products can be used
as a substitute for fossil fuels and other
raw materials. This process – called
co-processing – helps lower greenhouse
gas emissions by reducing the quantity
of fossil fuels in cement manufacturing.
This also means less waste in landfills
or incinerators (see “Focus on waste,”
page 50).
We focus on four fields of action: Climate,
Circular Economy, Environment and
Communities.
Climate
Since 1990 we have reduced our net
carbon emissions per tonne of cement by
25 percent. We lead the international
cement companies with the highest
reduction against the 1990 baseline.
LafargeHolcim cement is one of the most
carbon-efficient in the world.
We achieved this mainly through reducing
the clinker-to-cement ratio and consuming
less fossil energy per tonne of cement,
mostly by using alternative fuels.
We measure our climate achievement in
terms of reduction in net CO2 emissions
(measured in kilograms of CO2 per tonne
of cementitious material, or kg CO2/
tonne). Our current 2030 emissions
reduction target of 40% vs. 1990,
translating to net CO2 emissions of around
460 kg CO2/tonne, exceeds the standard
for a 2 degree scenario.
46
Mombasa, Kenya
Haller Park, a former quarry that is
now a UN award winning nature park.
LafargeHolcim Annual Report 2018
Business review — Delivering sustainable value
47
Delivering
sustainable value
continued
48
Cartago, Costa Rica
Collecting waste as an alternative fuel.
We promote the use of recycled materials
in our production value-chain. In our
Aggregates, Ready-Mix Concrete and
Asphalt businesses we use around
11 million tonnes of recycled material per
year (mostly recycled aggregates) to make
our products. At some sites this represents
more than 90% of the material used.
Environment
Over the last four years we have reduced
water withdrawal in our cement plants by
around 19% (or 73 liters per tonne of
cement). Over this period the initiative has
created water awareness in our plants and
we have refined our measurement
methodologies. Today we are shifting our
focus to consider our total impact on
water resources in the communities where
we operate, particularly in water-scarce
areas. In consequence we will revise our
ambitions to reflect water impact, which
we intend to reduce by focusing on the
most vulnerable areas of operation. In
some communities we already have a net
positive water impact, such as those
served by Ambuja Cement, which we have
calculated as being 6x water positive.
Business review — Delivering sustainable value
49
LafargeHolcim Annual Report 2018 Delivering
sustainable value
continued
Focus on waste
50
We are one of the world’s largest waste processing companies. In 2018 we treated over 51 million tonnes of waste, an increase of 4 percent versus 2017. More than 11 millon tonnes was used as fuel and alternative raw materials that we fed into our kilns. We co-process all types of waste, including solid shredded waste from industrial and municipal origin, spent solvents, used tires, waste oils, contaminated soils, industrial and sewage sludges and demolition waste. Depending on the waste regulation in a country and the development of its waste market we can reach a fossil fuel replacement rate of more than 90%. Besides using waste as a fuel substitute, we also use waste streams from the power and steel industries to replacing clinker in our cement, thus saving primary raw material and reducing CO2 emissions. In some of our markets replacement rates reach 50%.Increasingly we are processing plastic. We are making a conscious effort to reduce plastic leakage into the ocean. While plastic waste in our oceans has become a global problem that needs to be addressed by governments, we are part of the solution. In 2018 we promoted these waste management solutions in Egypt, Mexico, Morocco and the Philippines – countries where marine plastic littering is a major concern.Waste and plastics represent a threat to marine ecosystems, the tourism and fishing industries as well as human livelihoods and potentially human health. Marine litter finds its way from human settlements to the sea via illegal dumpsites close to waterways, leakage from waste transports, unsanitary landfills as well as littering directly at the coast.The most effective way to prevent marine litter is to implement sustainable solid waste management practices. We are supporting selected municipalities in our four target countries to improve their solid waste management systems. We follow an integrated approach, respecting the waste management hierarchy: preventing before reducing, recycling materials and recovering waste. Once the waste is recovered, we use it as an alternative to fossil fuels as described. Bulacan, Philippines
Material ready for co-processing
in cement kiln.
LafargeHolcim Annual Report 2018
Business review — Delivering sustainable value
51
Delivering
sustainable value
continued
Communities
In many countries we enlarge the positive
impacts of our operations – such as direct
employment, tax revenues, infrastructure
development and local procurement –
beyond the factory gate. In Ecuador, for
example, we initiated a vocational training
program in which participants are not only
trained in skills such as masonry and
building, but also administration and
workplace safety. Graduates from the
program enjoy increased employment
possibilities in the construction industry.
Over the last four years over 15 million
people have benefitted from our
community programs worldwide.
The LafargeHolcim Foundation
The purpose of the LafargeHolcim
Foundation for Sustainable Construction is
to raise awareness for sustainability in
architecture, engineering, urban planning
and the building industry as a whole.
Its flagship activity is the global
LafargeHolcim Awards, the world’s best
recognized competition for sustainable
design in building and infrastructure.
In 2018, winners from Mexico, Niger and
the USA were awarded from more than
5,000 submissions in 131 countries. Their
sustainable projects excel in social,
environmental and economic performance.
The top prizes of the competition were
handed over in Mexico City to coincide
with the LafargeHolcim Next Generation
Awards Lab. Young professionals
representing 25 countries developed ideas
on the future of sustainable construction
in workshops that were led by Global
Awards winners and experts from the
global network of the Foundation.
The next competition for projects and
concepts in sustainable construction
opens for entries in June 2019.
52
Bulacan, Philippines
CSR school contest to promote vegetable gardens.
Quito, Ecuador
We add social value by building affordable housing.
LafargeHolcim Annual Report 2018
Business review — Delivering sustainable value
53
Innovating
for success
Innovation will become the
differentiator of the building
materials industry.
Dubendorf, Switzerland
We support the NEST facility which
aims to accelerate innovation in the
building sector.
We believe that innovation is emerging
through the collaboration of a network of
actors, outside any single organization. In
2018 we embraced this spirit of open
innovation, connecting people and
organizations from inside and outside
LafargeHolcim to find new solutions and
ways of working. Our aim is to find and
exploit innovations along our entire value
chain, from processes to products, from
quarry to worksite.
The LH Accelerator illustrates how open
innovation is working at LafargeHolcim
today (see box). In this program we put
ten start-ups worldwide together with our
own experts, as well as mentors from
corporate partners China Communications
Construction Company (CCCC) and Sika.
One used 3D drone data analytics for
quarry blasting operations and roads.
Another is developing a BIM-centric
platform for the construction and real
estate industries that covers the entire
building lifecycle. Another is developing a
method for CO2 treatment and the full
reuse of ready-mix production wash water.
Yet another has prototyped an
autonomous robot for rebar tying on
bridge decks. Besides making lasting
connections, the program developed and
showcased solutions that touch all areas
of our industry. We will continue to
support these promising young
entrepreneurs.
LH MAQER was introduced to the digital
start-up community at the end of 2018.
Through this program we are inviting
start-ups, technology providers,
universities and players in other industries
to exploit the potential at the intersection
between heavy industry and the tech
sector – with promising first feedback. The
project leaders bring passion and fresh
perspectives to our business, and in return
we offer our experience, our expertise,
and one of the world’s largest industrial
networks as a test bed for their ideas.
Innovating to lead
Innovation has been the lifeblood of
LafargeHolcim – with the LafargeHolcim
Innovation Center in Lyon, France, as case
in point. The Innovation Center acts as a
hub in a network of local laboratories and
country-level innovation teams. The
innovation organization counts more than
300 researchers within LafargeHolcim.
Thanks to this networked approach,
customers around the world have
benefitted from tailormade solutions to
build more quickly and efficiently, and
even to reduce their impact on the
environment.
54
LH Accelerator: building innovation together
LafargeHolcim Annual Report 2018
Business review — Innovating for success
55
In 2018 we launched the LH Accelerator, together with partners Sika and China Communications Construction Company (CCCC). Start-ups and partners from around the world were invited to work collaboratively and to combine new ideas of start-ups with the proven experience of major players. The ambition: to tackle today’s challenges along the entire construction value chain.Over six months in 2018, the LH Accelerator program at the LafargeHolcim Innovation Center was the hub for ten young, innovative companies to change the way our industry operates. They benefitted from access to LafargeHolcim’s leading facilities and the guidance of industry experts to take their ideas to the next level.The culmination of the six-month LH Accelerator program took place in November: Demo Day. Participants from Europe, Asia, Americas and Africa put forward solutions for areas in which there is a clear need for innovative breakthroughs: Design & Engineering, Material and Logistics, Construction Equipment, Construction Services and Demolition & Waste Management.In 2019, there will be a Season 2 following the success of 2018, with the LH Accelerator once again providing unmatched access to investors and partners in the construction industry.Find out more about the first cycle of the LH Accelerator at lh-accelerator.org Innovating
for success
continued
Our aim is to find and exploit
innovations along our entire value chain,
from processes to products, from quarry
to worksite.
New products per
business segment in 2018
Cement
Ready-Mix Concrete
Solutions & Products
Aggregates
49
28
13
4
Patents
We filed 13 new patent applications in
2018, safeguarding innovation coming
both from countries and the Innovation
center. Overall LafargeHolcim owns about
190 active patent families, representing
approximately 1,300 granted national
patents or patent applications.
About three-quarters of the innovation
pipeline is allocated to the Cement and
Solutions & Products segments. The main
topics are low-carbon binders, ultra-high
performance products and mineral
thermal insulation. Ninety-four new
products were introduced in 2018
(see pie chart for share by segment).
Most of our innovations are made in order
to meet our customers’ needs. For this
reason we keep our country teams fully
empowered to develop new products and
services. In 2018 more than 220 local
innovations have been scaled
transnationally.
56
Holly Hill, South Carolina, USA
Lab technician preparing a sample.
Millau, France
The tallest bridge in the world, which
we helped to build.
LafargeHolcim Annual Report 2018
Business review — Innovating for success
57
People
In 2018 we focused on developing
a stronger performance culture
and investing in developing current
and future leaders.
Our people strategy focuses foremost on
developing a stronger performance
culture.
managers to observe and develop their
teams. Open, timely and constant
feedback is key to a strong performance
culture.
Leadership development
We invest in developing current and future
leaders. In 2018 we focused our leadership
development through the LafargeHolcim
Business School that uses a case study
method based on our actual business
challenges. The program supports our
Strategy 2022 – ‘Building for Growth’ and
will take place every year. In 2018 200 of
our top leaders have been trained.
Our training offer encompasses a range of
training programs for our employees to
build skills in areas including business,
financial, Health & Safety, sales, products
and solutions, operations and compliance.
Performance and talent
management
The performance objectives of our
employees are fully aligned with business
goals. We all have clear areas of
accountability and understand how our
job impacts business results. Regular
checks take place between employees and
their line managers during the year in
order to align execution and to allow
In terms of employee rewards, we
simplified our global bonus scheme and
focused objectives on the results which fit
our Group goals. Our aim is to drive
performance by assuring people are
rewarded based on the performance of
their own P&L. Our long-term incentive
scheme aims at executives. Its
performance metrics have also been
redesigned to better reflect the desired
sustained performance of our business.
See also the Compensation
section on pages 114 –139.
In 2018 we completed our global Talent
Review & Succession Planning process.
This process allowed us to identify talents
in our organization and to better plan the
succession of key roles. It also helped us to
make the right development decisions and
identify where we need to improve our
talent pipeline to ensure we have the right
people for the business. Over 2018 we
doubled our bench strength.
Diversity & Inclusion
LafargeHolcim believes in and values
diversity and promotes a workplace that is
inclusive, fair and which fosters respect for
all employees. In 2018, we:
• Monitored the actions plans in place to
achieve the 2020 targets at country and
regional levels covering gender balance
and inclusion
• Pushed countries and regions to identify
and nominate female employees to the
talent pool through the Talent Review
& Succession Planning process
• Continued our global, multi-functional
task force to support Diversity &
Inclusion programs
• Continued to roll out programs to raise
awareness of unconscious bias
People in our new operating model
Now that we have implemented a
country-focused, corporate-light operating
model, we have put the bulk of our people
strategy at local level. Countries are
empowered and accountable to
implement local best practices to achieve
results.
58
Houston, Texas, USA
Crew at barge terminal.
LafargeHolcim Annual Report 2018
Business review — People
59
People
continued
Almería, Spain
Employees at the Carboneras cement plant.
Davao, Philippines
Meeting held on plant premises.
Countries are empowered
and accountable to
implement local best
practices to achieve results.
60
Group employees
by region (thousands)
North America
Latin America
Europe
Middle East
& Africa
Asia Pacific
Service and trading
companies
20
12
22
1
Group employees
by segment (thousands)
45
Cement
10
Aggregates
13
Ready-Mix Concrete
8
Solutions &
Products
13
9
Composition of
senior management
1,216
Male
2017: 1,175
252
Female
2017: 271
Male
Female
83%
17%
LafargeHolcim Annual Report 2018
Business review — People
61
Health & Safety
In 2018, our Health & Safety
performance improved significantly,
with an 82% reduction in on-site
fatalities compared to 2017.
In 2018 our global lost time injury
frequency rate (LTIFR) for Employees &
Contractors onsite reached 0.79, an
improvement of 13% compared to 2017
(0.91). We are very pleased to see that the
new strategy, combined with years of
dedication and hard work are starting to
have an impact on our H&S performance.
One employee and 18 contractors lost
their lives in 2018. These deaths are
unacceptable. Statistically speaking,
compared to 2017 this represents a 39%
overall improvement and 90%
improvement in employee fatalities (10 in
2017). Seventeen third parties died
compared to 33 in 2017. Everyone in our
organization, beginning with our Board
and Executive Committee, has taken
responsibility to ensure that we live and
practice a culture of zero harm.
Our core value
Health & Safety (H&S) is our core value.
We aim to achieve a zero harm culture
and zero fatalities. Our Ambition “0”
strategy focuses on six areas: Safety
On-site, Zero Harm Culture, Systems &
Processes, Road Safety, Health and
Contractor Partnership. As part of this
strategy we implement standardized
global programs in every country where
we operate. In 2018, we launched 17
revamped H&S Standards and conducted
an organizational transformation called
‘One Team, One Program’ to establish a
leaner and more horizontal H&S structure,
focused on implementation at country
level.
H&S is promoted through engagement
and communication campaigns. In 2018
the theme of our Global H&S Days was “I
improve H&S every day at my workplace.”
Employees were asked to look at incidents
that could happen or had already
occurred at their workplace and describe
how to ensure they do not reoccur. The
purpose was to cascade our ”Key Lessons”,
which have been published for most
on-site fatalities since 2017, reaching all
members of the workforce. Three best
practice challenges were successfully
rolled out in 2018 throughout the
company (with almost 2,000 entries,
140,000 votes and more than 15,000
participants), demonstrating a great
commitment from employees at all levels
of the organization.
Road safety program
We continued driving progress in our road
safety program. In 2018, we maintained
the focus on transforming driver skills and
behaviors. A new driver qualification
program is being delivered and includes
robust in-cab training with a pass/fail
assessment.
Regions that have implemented the
program showed significant
improvements (the Middle East Africa
region, for example, qualified over 50% of
drivers in 2018 and reduced fatalities by
47% compared to 2017). In-vehicle
monitoring systems (IVMS) are mandatory
and being installed in all our trucks. IVMS
is our proactive tool to monitor safe
driving performance and now monitors
over 50% of the kilometers driven. In India
our Transport Analytic Centre (TAC) played
an instrumental role in providing well-
structured and systematic analytics for
drivers’ and transporters’ performance. As
a result, India reduced the number of road
fatalities by 79% from 2017 to 2018. In
2018, more countries are now connected
to the TAC (e.g., Zambia, Lebanon and
Philippines), representing 30% of global
kilometers driven in 2018. The journey
continues in 2019.
62
Ewekoro, Nigeria
Safety check.
LafargeHolcim Annual Report 2018
Business review — Health & Safety
63
Health & Safety
continued
Alcobendas, Spain
Employee at a ready-mix concrete plant.
Monitoring our worksites
Through the continued application of our
Design Safety and Construction Quality
Program (DSCQP), we seek to mitigate
H&S risks linked to the design and
construction of our structures, quarries
and slopes. In 2018 we invested CHF 75.6
million based on DSCQP
recommendations.
Supporting the health of our
workforce
As a continuation of the health program
started in January 2017, we remained
focused in 2018 on medical emergency
response planning and workplace
occupational hygiene programs. A health
program addressing malaria risks is now
fully embedded in the Health Travel
process. This includes both training and an
induction program upon arrival to work in
a malarial area.
employees – more than half of them
coming from operations – participated as
auditors, further contributing to
knowledge-sharing across facilities,
product lines and borders.
Sixty-six audits were conducted in 2018
across 34 countries. In 2018 we also began
revisiting the sites with a significant
number of findings for an action-plan
follow-up.
Auditing our H&S performance
The H&S audit program measures our
ability to implement H&S Standards and
ensure effective H&S Management
Systems (HSMS) across our company. Over
150 audits were conducted since the
program started in 2016, providing an
independent governance process that
aligns with Group Internal Audit. Over 900
64
Fatalities
by personnel category
Fatalities
by location
Lost time injury
frequency rate (LTIFR) 1
1
0
1
8
1
1
2
3
7
1
6
1
4
1
0
9
0
.
4
9
0
.
9
6
0
.
9
8
0
.
9
7
0
.
1
9
0
.
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Employees
Contractors
On-site
Off-site
Employees
Contractors
on-site
Employees and
Contractors on-site
2017 and 2018 indicators refer to units/companies part of the Group as by IFRS reporting standards
2017 indicators reported according to Cement Sustainability Initiative guidelines
2018 indicators reported according to Global Cement and Concrete Association guidelines
See 2018 Sustainability Report for more details
1
Lost time injury frequency rate: number of lost time injuries per million hours worked
LafargeHolcim Annual Report 2018
Business review — Health & Safety
65
Risk and control
Risks
LafargeHolcim operates in a constantly
evolving environment, which exposes the
Group to different external, operational
and financial risks. In order to ensure the
sustainability of our business development
and to meet our targets, we make
continuous efforts to prevent and control
the risks which we are exposed to.
A comprehensive risk management and
Internal Control framework is deployed
throughout the Group, with appropriate
governance and tools. Through this
process we identify, assess, mitigate and
monitor the Group’s overall risk exposure.
Our goal is to incorporate risk thinking
into all strategic decision-making,
reducing the likelihood and impact of
potential adverse events, ensuring
compliance with laws & regulations and
ensuring the deployment of our Internal
Control system in every country where we
operate. Further information is provided in
the Internal Control section on page 79.
Our analyses consider environmental,
sustainability, climate change, market,
industrial, operational, financial, legal,
compliance and reputational risks,
whether under our control or not.
Risk management process
The risk management process is
structured around several coordinated
approaches conducted within the Group
and it is subjected to continuous
improvement. It includes a bottom-up and
top-down risk assessments. These
assessments are used as a basis for the
Group risk matrix, which is updated every
year and submitted to and analyzed by
the Executive Committee and the Audit
Committee.
The top-down assessment is generated
through interviews with Heads of
functions, Board and Executive Committee
members and External Auditors. The
bottom-up assessment includes several
stages:
• Risk identification and analysis:
management assesses and evaluates the
potential impact and likelihood of the
key risks which could have a material
adverse effect on the current or future
operation of the business. The risk
horizon includes long-term strategic risks
and also short- to medium-term business
risks.
The impact and likelihood are assessed
for the current level (i.e., prior to
implementation of mitigation actions/
controls) and for the target level (i.e.,
residual significance and likelihood after
implementing mitigation actions/
controls).
• Risk mitigation: actions and/or controls
are defined by the management to
mitigate the key risks identified. Risk
transfer through insurance solutions and
the Internal Control system form an
integral part of risk management to
mitigate the identified risks. Additionally,
LafargeHolcim has a robust fraud
prevention program in place to prevent,
deter, and detect fraud. It includes the
LafargeHolcim Integrity line, which
enables employees anywhere in the
world to anonymously exercise their
whistleblowing rights and report any
breach of the rules laid down in our Code
of Business Conduct. Further information
is provided in Legal & Compliance risk
(page 72) and Internal Control (page 79).
• Monitor & Reporting: regular progress
on the actions/controls are followed up
by risk leads and reported to Group
through the LafargeHolcim Risk
Management tool. At least twice a year,
progress on mitigating actions, controls
and overall risk exposure is reported to
the Audit Committee and other executive
committees. Additional reports of the
effectiveness of the mandatory controls
standards are submitted to the Group on
a regular basis. Further information is
provided in the Internal Control section
on page 79.
• Verification & Remediation: Group
Internal Audit performs independent
assessments of the effectiveness of
mitigating actions and controls and on
the effectiveness of Internal Control and
on the risk assessment process. The
annual audit plan drawn up by Group
Internal Audit and approved by the Audit
Committee takes into account the
various analyses described above.
Implementation of this plan and the
summary of work presented to the
Group Executive Committee and Audit
Committee lead to more in-depth
analyses in certain areas and contribute
to the continuous risk identification
process.
66
management processes and Internal
controls by operational management.
The objective is to ensure the first line of
defense is properly designed and
operating as intended. The second line of
defense also assists in the development of
policies, processes and controls to
mitigate risks and issues.
The third line of defense is formed by
Group Internal Audit (GIA). As an
independent function, GIA provides
assurance to the Board of Directors and
Executive Committee on the effectiveness
of the first and second lines of defense
and on governance, risk management and
internal controls.
Through the Audit Committee and the
Health, Safety and Sustainability
Committee (HSSC), the Board of Directors
oversees LafargeHolcim risk management,
Internal Control and climate change-
related risks. The Audit Committee
mandate includes the review of
compliance and risk management
processes and review of management’s
and internal audit reports on the
effectiveness of internal control systems
and on the performance of the annual risk
assessment process.
The HSSC mandate is to support and
advise the Board of Directors on the
development and promotion of a healthy
and safe environment for employees and
contractors, as well as on sustainable
development and social responsibility.
More details of the Audit Committee and
HSSC are disclosed in the Corporate
Governance section on pages 94 and 96.
The risks on pages 70 to 78 are considered
material and fundamental to our strategy
for value creation. This list is not
exhaustive and represents the principal
risks and uncertainties faced by
LafargeHolcim at the time of 2018 annual
report preparation. Other risks may
emerge in the future and/or the ones
stated here may become less relevant.
Further information is provided in the
Corporate Governance section (pages 90
to 113), Management Discussion &
Analysis (pages 142 to 157) and note 14.5
of the consolidated Financial Statements
(“Group risk management,” page 227).
Roles & responsibilities
LafargeHolcim established a clear
organization structure to ensure the
implementation of the risk management
and internal control system, following the
governance, policies and framework
defined by the Group. This organization is
built on the concept of three lines of
defense.
Under the first line of defense, operational
management has ownership,
responsibility and accountability for
identifying, assessing, managing and
mitigating risks. They are equally
responsible and accountable for the
deployment of the mandatory controls
standards defined by the Group. Further
information is provided in the Internal
Control section on page 79. A risk lead is
appointed in every country where we
operate to support local management
with the yearly risk assessment process, to
coordinate activities with other assurance
functions, especially the local Internal
Control and Compliance teams, and to
monitor mitigation actions. Country risk
assessment reports are signed off by the
Country CEOs and progress on mitigation
actions is regularly reported to the Group.
The second line of defense consists of
Group corporate functions such as Legal,
Compliance, Sustainable Development,
Internal Control, Risk Management,
Security and Health & Safety. These
functions monitor and facilitate the
implementation of effective risk
Business review — Risk management
67
LafargeHolcim Annual Report 2018 Risk and control
continued
Ethics, Integrity & Risk Committee
The Ethics, Integrity & Risk Committee is
composed of two sub-groups: (i) Ethics &
Integrity and (ii) Risk. The Committee is
responsible for overseeing the risk
assessment process and the activities
performed by assurance functions
including Legal, Compliance, Internal
Control, Risk Management, Internal Audit,
Group Investigations, Health & Safety and
Security. Its mandate includes oversight
regarding the effective investigation
and remediation of Code of Business
Conduct violations and the rigorous
implementation of the new third-party due
diligence and sanctions & export control
programs that were launched in 2017.
The Ethics, Integrity & Risk Committee is
co-chaired by the Group CFO and the
Group General Counsel, who both report to
the Group CEO and are part of the
Executive Committee. The Ethics, Integrity
& Risk Committee reports to the Audit
Committee of the Board of Directors and
meetings are held on a quarterly basis.
Environment and climate change
Our sustainability ambition focuses on
Climate, Circular Economy, Environment
and Communities. The ambition
articulates our efforts to improve the
sustainability performance of our
operations and puts the focus on
developing innovative and sustainable
solutions for better building and
infrastructure. It goes beyond our own
business activities and covers the entire
construction value chain and the life cycle
of buildings.
As a result of past efforts, we are one
of the most carbon-efficient cement
companies among international groups.
We will further decrease our emissions per
tonne of cement by increasing the use of
by-products and waste-derived resources
and through investments in energy
efficiency and innovation. Additionally,
our solutions and products help our
customers avoid CO2 emissions during
the construction and use phase of
buildings and infrastructure.
Task force on Climate-related
Financial Disclosures (TCFD)
As a business leader, we must ensure
transparency and action around
climate-related risks and
opportunities. LafargeHolcim
therefore supports the voluntary
recommendations of the Financial
Stability Board (FSB) Task force on
Climate-related Financial Disclosures.
The identification, assessment and
effective management of climate-
related risks and opportunities are
fully embedded in our risk
management process (as described
on page 66), which is subject to
continuous improvement. Governance
of climate-related risks and
opportunities, including management
and Board roles & responsibilities, are
described on page 98. Our
sustainability ambition is on page 46
and further details, including our
climate strategy, can be found in our
sustainability report. Additional
metrics & targets are detailed in our
submissions to the Carbon Disclosure
Project. Documents are available on
www.cdp.net/en/responses.
Our goal is to incorporate risk thinking into
all strategic decision-making, reducing the
likelihood and impact of potential adverse
events and ensuring compliance with law
and regulations an ensuring the deployment
of our Internal Control system.
68
Experts at work in Switzerland.
Business review — Risk management
69
LafargeHolcim Annual Report 2018 Risk and control
continued
Key external risks
Risk
Potential Impact Our Response
Demand for construction
materials is fundamentally driven
by economic growth (or
contraction) in a given territory.
These changes in underlying
demand may impact sales
volumes, prices and/or industry
structure.
LafargeHolcim maintains a globally diversified portfolio with leading positions in all
regions and a good balance between geographies. We have a top-three position in
80 percent of our markets, with none exceeding 10 percent of total revenues. We also
trade in clinker, cement and other products to take advantage of shifting demand
between countries.
Economic, social and/or political
instability (e.g. changes of
government or increased political
pressure) can impact our
business. That impact may be
direct (e.g. reduce infrastructure
spending) or indirect (e.g.
economy uncertainty).
As with market demand, the best defense against political risk is diversification.
LafargeHolcim’s broad geographic portfolio helps to limit our exposure to any
particular localized risk. When necessary, mitigation measures are taken to adapt the
Group’s activities and organization, and to protect our people and assets in case
political tensions are heightened.
The impact of United Kingdom’s withdrawal from the European Union (“BREXIT”) has
been assessed and preventive measures have been taken. Relevant currency
exposures and counterparty risks were reduced before the BREXIT vote.
Market demand
The risk that
economic
development in a
given country can
significantly change
and have an
influence on demand
for construction and
building materials.
Political risks
LafargeHolcim
operates in many
countries around the
globe and is exposed,
directly or indirectly,
to the effects of
economic, political
and social instability
such as turmoil,
terrorism, civil war
and unrest situations,
particularly in
developing markets.
70
Key operational risks
Risk
Potential Impact Our Response
Climate change
The cement industry
is associated with
high CO2 intensity
and LafargeHolcim is
exposed to a variety
of regulatory
frameworks to
reduce emissions,
some of which may
be under revision.
These frameworks
can affect the
business activities of
LafargeHolcim. In
addition, a
perception of the
sector as a high
emitter could impact
our reputation, thus
reducing our
attractiveness to
investors.
Following the agreement on
climate change at Paris COP21,
signatory countries are required
to communicate national
reduction commitments and pass
implementation regulation.
The likely effect of this increasing
number of frameworks will be to:
i) increase the cost of fossil fuels
by carbon tax mechanisms, ii)
impose more restrictive cap &
trade systems and iii) increase the
cost of CO2.
In Europe, Phase IV of the
European Trading System will
come into force in 2021, bringing
more strict CO2 free credit
allocation systems.
Should regulatory frameworks fail
to incentivize consumption of
low-carbon products, customers
may be unwilling to pay for
additional costs and the cement
sector’s low-carbon roadmap
might be compromised.
Our sustainability ambition includes a commitment to continue to reduce our net
CO2/tonne of cement. More specifically, we have developed two sets of actions, short
and long term, to address the CO2 and climate challenge along the construction
value chain.
• Short-term actions: (i) improved clinker production technology; (ii) higher usage of
alternative fuels and alternative raw materials; (iii) optimization of the cement
portfolio with lower CO2 footprint; (iv) optimization of the concrete product
portfolio; (v) increase share of solutions and products with favorable CO2 impact;
• Long-term actions: Innovation and research and development into (i) carbon
capture solutions and alternative clinker; (ii) decarbonized fuel and energy; (iii)
low-carbon cement; (iv) low-carbon concrete; (v) ultimate construction methods to
reach low-carbon construction.
In addition, a specific short-term response plan to the Phase IV of the new European
Trading System was developed and addresses main focus areas:
• CO2 & energy performance, e.g. increase biomass usage & reduce clinker factor;
• Integrate CO2 in management e.g. include cost in production to incentivize change
management and include CO2 impact in all M&A and CAPEX decisions;
• Scenario planning, e.g. evaluate profitability of exports, manage +/– 15% thresholds
as well as 50%, 25%, 10% limits.
We engage proactively and transparently with external stakeholders on the basis of
positions that are aligned and consistent with the goals of the Paris Agreement. This
is best illustrated through our cooperation with the Carbon Pricing Leadership
Coalition (CPLC), We Mean Business, the Global Alliance for Buildings and
Construction (GABC) and the World Economic Forum’s Corporate Leaders Group on
Climate Change.
Our climate-related advocacy focuses on the following principles:
• We support the use of carbon-pricing mechanisms to incentivize the development
of innovative low-carbon solutions and maintain a level playing field across
industries and countries:
– A simple, clear and stable price signal that supports shifts in long-term
investments.
– A price signal that has relevance across value chains.
– A policy focus on the design of the pricing mechanisms to ensure relevance and
effectiveness.
• We advocate demand-side policies in support of supply-side policies in order to
incentivize market demand for low-carbon materials and solutions.
• We advocate construction norms & standards that are material & technology
neutral and based on the whole lifecycle performance of buildings and
infrastructure:
– Market-pull support mechanisms and lifecycle carbon performance standards.
– Incentives for accelerated value-chain collaboration.
– Adoption of an industrial approach towards breakthrough technologies (incl.
targeted R&D funding and large-scale industry & market demonstrators).
• We support transparency and improved disclosure in carbon-related performance
and risks, including through an incremental implementation of the TCFD
recommendations (see page 68) and additional tools such as Integrated Profit and
Loss Statements that complement traditional financial metrics.
Business review — Risk management
71
LafargeHolcim Annual Report 2018 Risk and control
continued
Key operational risks continued
Risk
Potential Impact Our Response
Investigation costs, financial
penalties, debarment, profit
disgorgement and
reputational damage. The
impact is compounded by the
fact that local violations can
have an effect on the entire
Group.
In connection with disposals
made in the past years, the
Group provided customary
warranties. LafargeHolcim
and its subsidiaries received
or may receive in the future
notice of claims arising from
these warranties.
Legal &
Compliance risks
The risk that the
company is found
to have violated
laws and
regulations
covering business
conduct such as
those that combat
bribery, corruption,
fraud, terrorism
and unfair
competition.
In the ordinary
course of its
business, the
Group is involved
in lawsuits, claims
of various natures,
investigations and
proceedings,
including product
liability,
commercial,
environmental,
health and safety
matters, etc.
The Group maintains a comprehensive risk-based compliance program with dedicated
resources at local, regional and Group level with central steering.
The compliance program is structured over five elements that are aligned to an adequate
procedures defense and approach to reduce compliance risk. The five elements of the
compliance program include:
• Risk Assessment is the starting point for identifying compliance risk in the business. Risk
assessment applies both at a program level (asking, for example, how and where the risk
of bribery arises in the business) and in the development and application of specific
controls, communication, training and monitoring.
• Controls, which are the policies, directives, instructions, workflows and internal control
elements that are designed and implemented to mitigate specific risks. The Third Party
Due Diligence Directive and related processes is an example of a control to mitigate a
specific compliance risk.
• Communication and Training, which speaks to the need to instruct employees on what is
acceptable conduct and how it is delivered, set the tone from the top and, where
necessary, train employees in risk identification and mitigation.
• Monitoring and Reporting, including proactive monitoring of program-related metrics
such as training delivery, closing out internal control and audit deficiencies and risk
reduction activities such as third party due diligence. In addition to proactive monitoring,
the compliance program includes an alert mechanism for possible breaches (a
whistleblower line) and internal auditing.
• Organization is the final element of the compliance program, which is the establishment
of appropriate resources with roles and responsibilities to implement the compliance
program, and the governance arrangements under which these resources perform.
Several specific risk areas are within the scope of the compliance program:
• Bribery, corruption, money laundering and fraud: In 2018, anti-corruption activities
centered on training, management of third party risk through targeted due diligence, and
management of conflicts of interest.
• Fair Competition: as in previous years, the 2018 program focused heavily on training and
the conduct of Fair Competition Reviews (in-depth assessments of risk based on
interviews, document and email reviews). Fair competition controls, along with those of
other risk areas (bribery, sanctions, data privacy) were updated and included in the revised
minimum control standards for Group companies.
• Sanctions & Trade Restrictions: Our sanctions and trade restrictions program was further
strengthened in 2018. The requirements are set through the Sanctions Compliance
Directive, which is implemented through dedicated training, communications and
screening for potentially restricted transactions. We regularly conduct in-country risk
assessments on sanctions risks and potential touchpoints with sanctioned persons in all
exposed operations. In addition we have implemented state-of-the-art procedures for the
screening and continuous monitoring of all suppliers and customers against worldwide
sanctioned party and enforcement lists in those exposed operations.
• Data Privacy: data privacy, and compliance with the European Union General Data
Protection Regulation (GDPR) is also supported with specific training, controls, monitoring
and reporting systems. The GDPR became effective on 25 May 2018. The controls include
website, employee, customer and supplier notifications and consents, data subject
requests and data breach reporting mechanisms among others. Group Internal audit also
conducted a review of our compliance preparations for the GDPR mid-year.
Group Legal manages all competition investigations, information requests and enforcement
cases through a central team of legal specialists. Group Legal also tracks all Group-relevant
commercial litigation cases, and provides support to the relevant operating companies in
defense and dispute resolution. In addition, root cause analysis of disputes and
enforcement cases is taken into account in our continuous improvement cycle.
72
Key operational risks continued
Risk
Potential Impact Our Response
Energy prices
(including
alternative fuels)
The risk that prices
for fuels, electricity or
planned savings from
alternative fuels will
change significantly.
Raw materials
(including mineral
components)
The risk that raw
materials cannot be
supplied at
economical cost or
suitable quality.
Increase in energy prices could
adversely impact our financial
performance, since the increase
may not be passed on (fully or
partially) in the sales price of our
products.
Much of our business depends on
the reliable supply of mineral
resources, e.g. sand and
limestone. Failure to obtain the
raw materials (including mineral
components) at expected cost
and / or quality may adversely
impact variable costs and
financial performance.
Optimizing fuel mix and energy efficiency, as well as the use of alternative fuels, is a
key area of focus at all our plants. At Group level, we use derivative instruments to
hedge part of our exposure and avoid volatility. Derivative instruments are generally
limited to swaps and standard options.
We also develop long-term power purchase agreements/on-site power generation
projects to reduce volatility and seize opportunities offered by renewable power
prices.
In countries where the supply of raw materials is at risk, we apply a range of tactics
including strategic sourcing, changing input mixtures and maintaining minimum
long-term reserve levels. When required, we manage international seaborne
sourcing, which is an import alternative to offset local risks in countries. In addition,
our research and development is devoted to finding ways to mitigate this risk while
lowering our environmental footprint, e.g. by using waste-derived materials.
Business review — Risk management
73
LafargeHolcim Annual Report 2018 Risk and control
continued
Key operational risks continued
Risk
Potential Impact Our Response
Sustainability
The risk that we are
not effectively
managing our
commitments to
sustainability and
corporate social
responsibility.
The nature of our
activities and
geographic footprint
poses inherent
economic,
environmental and
social risks, which are
also subject to an
evolving regulatory
framework and
changing societal
expectations.
Failure to meet our
environmental, social and
governance (ESG) standards and
targets may expose us to a risk of
incurring regulatory sanctions
and lead to conflicts in the
communities where we operate.
This could result in penalties and
increased remediation and
compliance costs. It could also
reduce our ability to access new
resources and impact our
freedom to operate.
Additionally, the failure to
effectively manage and embed
effective sustainability practices
may impact investor confidence
in LafargeHolcim shares.
Innovation
The risk that
innovation does not
secure the
competitive
advantage of the
company by
delivering new
products, solutions
and technologies on
a continuous basis.
Innovation is a key factor for
long-term success of the
company and crucial to maintain
our license to operate,
particularly when it comes to
challenges of our CO2 intensive
industry and the need to mitigate
our impact on climate change.
74
Responsibility for managing these risks is vested with site and country management,
regional management, Executive Committee and the Board of Directors.
Sustainability risks are included in the LafargeHolcim Business Risk Management
(BRM) process conducted by all business units and are consolidated by Group Risk
Management.
Additionally, the most material sustainability and environmental compliance risks are
assessed at Group level by the sustainability team, mainly using external references
such as the Freedom House Index and UN Development Index for Human Rights risks
and the WRI Aqueduct and WBCSD water tool for water risks. The results of these
assessments inform the development of programs, ambitions and targets.
Our sustainability ambition focuses on health and safety, climate change, air
emissions, water use, biodiversity, material reuse, sustainable construction,
workforce diversity, community engagement and supplier qualification. On these
topics we focus as a Group, with articulated ambitions and Group targets.
Performance against these ambitions and targets is monitored and reported on and
we regularly provide details of our ambitions and targets in the annual Sustainability
Report.
Our sustainability ambitions and practices are supported by a robust framework of
mandatory policies and directives which clearly lay down expected practices,
standards and responsibilities. They are additionally supported by the Code of
Business Conduct and Supplier Code of Conduct, both of which contain provisions for
Human Rights (including child labor) and environment.
The framework includes the following policies and directives:
• Environment Policy
• Environment Directive for Cement
• Quarry Rehabilitation and Biodiversity Directive
• Water Directive
• Corporate Citizenship Policy
• Human Rights Directive
• Community and Stakeholder Engagement Directive
• Sustainable Procurement Directive
• Strategic Social Investments,
• Sponsorship and Donations Directive
Country CEOs are ultimately responsible and accountable for the implementation
and compliance of the country with Policies and Directives. Group Internal Audit
provides assurance to the Board of Directors and Executive Committee on the
countries’ compliance with the LafargeHolcim policy landscape.
Our sustainability practices, performance and data as published in our Sustainability
Report are subjected to rigorous external assurance. The assurance statement can be
found in our Sustainability Report.
Innovation is a key factor for long-term success in a competitve environment. Our
approach is to meet customer needs along the whole construction value chain by
developing and delivering products, solutions and technologies and by partnering
with customers, suppliers and start-ups. The company embraces new developments
in the digital environment, anticipates the impact of trends and new processes on the
construction industry. A stronger focus on open innovation not only offers
opportunities but risks that collaboration with third parties does not provide
expected outcomes is to be considered. This risk is mitigated through appropriate
legal frameworks including comprehensive project management. Non-protected and
protected Intellectual Property (IP) is secured by knowledge management and filing
patents and trademarks. Regular market and IP intelligence is done to avoid
infringement of third party IP rights.
We conduct our business in a manner that creates a healthy and safe environment
for all stakeholders – our employees, contractors, communities and customers – built
on a sound health and safety culture. We believe in visible leadership and personal
accountability at all levels and throughout our organization.
We maintain a global Health and Safety Management System designed to
continuously improve our performance and actively minimize risks in our business.
H&S experts are employed in each country we operate to support the
implementation of the LafargeHolcim H&S standards (see page 62 for more details).
The Group H&S team conducts regular audits to ensure the full deployment of our
H&S policy and internal rules in all LafargeHolcim countries. Through the Health,
Safety & Sustainability Committee, the Board of Directors supports the development
of a health and safety culture and oversees the resources and processes to be
employed to minimize or eliminate risks related to health and safety (please refer to
‘Corporate Governance’ section, page 96 for more details).
To prevent major risks related to critical IT infrastructure or applications either
operated by the Group or its service providers, LafargeHolcim has established policies
and procedures for IT security and governance as well as internal control standards
that are followed Group wide for all applicable systems. These for example include
redundantly designed data centers per region, redundant layout of critical IT
systems, backup recovery procedures, virus and access protection as well as the
operation on a Security Operations Center (SOC) that was recently implemented.
Due to the fact that the risk landscape is constantly evolving, the Group’s IT risk
register is regularly assessed and updated. Additionally, the measures to prevent
from new risks or from impacts occurred (e.g. a downtime of a critical IT System in
Latin America due to a human mistake in December 2018) are permanently improved
and updated as well as regularly audited and controlled by the Internal Audit and
Internal Control departments.
In subsidiaries where we have joint control we seek to govern our relationships with
formal agreements to implement LafargeHolcim controls and programs. In these
joint venture arrangements, the Group has traditionally appointed LafargeHolcim
personnel to facilitate integration, best practice transfer and drive performance. In
addition, Group Legal & Compliance function performed a comprehensive risk
assessment during 2018 covering all joint ventures and associates in which
LafargeHolcim does not have a controlling interest in order to identify any potential
deviations from the Group’s compliance program. Mitigation actions were identified
and implementation commenced. This will continue during 2019.
Key operational risks continued
Risk
Potential Impact Our Response
Health & Safety risk
The risk that the
company does not
adequately protect
employees,
contractors and third
parties from injury,
illness or fatality,
during both on-site
and off-site company
related activities.
Injury, illness or fatality,
reputational damage and
possibility of business
interruption, which could impact
our finance and business
performance. The impact is
compounded by the fact that
local incidents can have an effect
on the entire Group.
An information or cybersecurity
event could lead to financial loss,
reputational damage, safety or
environmental impact.
These limitations could impair
the Group’s ability to manage
joint ventures and associates
effectively and/or realize the
strategic goals for these
businesses. In addition this might
impede the ability of
LafargeHolcim to implement
organization efficiencies and its
controls framework, including its
full compliance program. It can
also impede the ability to transfer
cash and assets between
subsidiaries in order to allocate
assets in the most effective way.
Information
technology and cyber
risk
The risk that arise from
the unavailibility of
critical IT systems and
the loss or manipulation
of data resulting from
computer viruses, cyber
attacks, network
outages, natural
disasters or human
mistakes.
Joint ventures and
associates
The Group does not
have a controlling
interest in certain
business entities (i.e.
joint ventures and
associates) in which it
has invested. The
absence of a controlling
interest increases the
governance complexity.
This may restrict the
Group’s ability to
generate adequate
returns and to
implement the
operating standards
and compliance
program.
Talent management
The risk that the
company does not have
a sufficiently robust
talent pipeline given its
growth ambition.
Without the right people,
LafargeHolcim will be unable to
deliver its growth ambition.
We have a global talent review and succession planning process to evaluate current
and future talent. We invest significantly in developing both functional and
management skills. Core human resources processes, like strategic people planning,
performance evaluations, reward strategies and talent management are
implemented in all LafargeHolcim countries and corporate functions. Group HR
oversees the quality of deployment of these processes to ensure we have the right
people in the right places (see page 58).
Business review — Risk management
75
LafargeHolcim Annual Report 2018 Risk and control
continued
Key financial risks
Risk
Potential Impact Our Response
Our Executive Committee establishes our overall funding policies. The aim of these
policies is to safeguard our ability to meet our obligations by maintaining a strong
balance sheet structure. This policy takes into consideration our expectations
concerning the required level of leverage, the average maturity of debt, interest rate
exposure and the level of committed credit lines. These targets are monitored on a
regular basis. As a result of this policy, a significant portion of our debt has long-term
maturity. We constantly maintain unused committed credit lines to cover at least the
next 12 months of debt maturities.
Factors that are significant in the
determination of our credit
ratings or that otherwise could
affect our ability to raise
short-term and long-term
financing include: our level and
volatility of earnings, our relative
positions in the markets in which
we operate, our global and
product diversification, our risk
management policies and our
financial ratios, such as net debt
to Recurring EBITDA and cash
flow from operations to net debt.
We expect credit rating agencies
to focus, in particular, on our
ability to generate sufficient
operating cash flows to cover the
repayment of our debt.
Deterioration in any of the
previously stated factors or a
combination of these factors may
lead rating agencies to
downgrade our credit ratings,
thereby increasing our cost of
obtaining financing. Conversely,
an improvement in these factors
may prompt rating agencies to
upgrade our credit ratings.
Lack of liquidity could impact our
ability to meet our operational
and/or financial obligations.
Individual companies are responsible for their own cash balances and the raising of
internal and external funding to cover the liquidity needs, subject to guidance by the
Group.
The Group monitors its liquidity risk by using a recurring liquidity planning tool and
maintains cash, readily realizable marketable securities and unused committed credit
lines to meet its liquidity requirements. In addition, the strong creditworthiness of the
Group allows it to access international financial markets for financing purposes.
Please refer to Note 14.5 of the Consolidated Financial Statements (page 227) for
details on the contractual maturity analysis and LafargeHolcim maturity profile.
Risk involving credit
ratings
As in the course of
our business we use
external sources to
finance a portion of
our capital
requirements, our
access to global
sources of financing
is important. The cost
and availability of
financing are
generally dependent
on our short-term
and long-term credit
ratings.
Liquidity risk
The risk that the
company will not
generate sufficient
cash flow or will not
have access to
external funding to
meet its obligations.
76
Key financial risks continued
Risk
Potential Impact Our Response
Interest rate risk
The risk that an
investment's value
will change due to a
change in the
absolute level of
interest rates, in the
spread between two
rates, in the shape of
the yield curve or in
any other interest
rate relationship.
Foreign exchange
risk
The Group’s global
footprint exposes it
to foreign exchange
risks.
Movements in interest rates could
affect the Group’s financial result
and market values of its financial
instruments. The Group is
primarily exposed to fluctuations
in interest rates on its financial
liabilities.
The Group is also exposed to the
evolution of interest rates and
credit markets for its future
refinancing, which may result in a
lower or higher cost of financing.
The exposure is mainly addressed through the management of the fixed/floating
ratio of financial liabilities. To manage this mix, the Group may enter into interest rate
swap agreements, in which it exchanges periodic payments based on notional
amounts and agreed-upon fixed and floating interest rates.
The Group constantly monitors credit markets and the aim of its financing strategy is
to achieve a well-balanced maturity profile to reduce both the risk of refinancing and
large fluctuations of its financing cost.
Please refer to Note 14.5 of the Consolidated Financial Statements (“Financial risks
associated with operating activities”, pages 227–237) for additional details.
The translation of foreign
operations into the Group
reporting currency leads to
currency translation effects.
The Group may hedge certain net investments in foreign entities with derivatives or
other instruments. To the extent that the net investment hedge is effective, all
foreign exchange gains or losses are recognized in equity and included in currency
translation adjustments.
Due to the local nature of the construction materials business, foreign exchange risk
is limited. However, for many Group companies, income will be primarily in local
currency, whereas debt servicing and a significant amount of capital expenditures
may be in foreign currencies. As a consequence thereof, the Group may enter into
derivative contracts which are designated as either cash flow hedges or fair value
hedges, as appropriate and also include the hedging of forecasted transactions.
Please refer to Note 14.5 of the Consolidated Financial Statements (“Financial risks
associated with operating activities”, pages 227–237) for additional details.
To manage this risk, the Group periodically assesses the financial reliability of
customers.
Credit risks, or the risk of counterparties defaulting, are constantly monitored.
Counterparties to financial instruments consist of a large number of established
financial institutions. The Group does not expect any counterparty to be unable to
fulfill its obligations under its respective financing agreements. At year-end,
LafargeHolcim had no significant concentration of credit risk with any single
counterparty or group of counterparties.
The maximum exposure to credit risk is represented by the carrying amount of each
financial asset, including derivative financial instruments, in the consolidated
statement of financial position. Please refer to Note 14.5 of the Consolidated
Financial Statements (“Financial risks associated with operating activities”, pages
227–237) for additional details.
We place insurance with international insurers of high repute, together with our
internal captive insurance companies. We continuously monitor our risk environment
to determine whether additional insurances will need to be obtained.
Credit risk
The risk that our
customers default on
payment, resulting in
collection costs and
write-offs.
The failure of counterparties to
comply with their commitments
could adversely impact the
Group's financial performance.
The Group could be impacted by
losses where recovery from
insurance is either not available
or non-reflective of the incurred
loss.
Insurance
Our sector is subject to
a wide range of risks,
not all of which can be
adequately insured. The
Group obtains coverage
as far as possible,
commensurate with the
relevant risks.
LafargeHolcim Annual Report 2018
Business review — Risk management
77
Risk and control
continued
Key financial risks continued
Risk
Potential Impact Our Response
Cash contributions may be
required to fund unrecoverable
deficits. Similarly, the Group's
financial results may be
impacted.
Where possible, defined benefit pension schemes have been closed and frozen.
Significant actions continue to take place to reduce and eliminate those schemes and
related risks. Specifically, active management is in place to mitigate the volatility and
match investment returns with benefit obligations.
The Group has undertaken a review of all these plans with the goal being to fully
understand the plans’ financial circumstances, as well as all options available to
mitigate risks and reduce the Group’s actual and potential financial obligations. As
the Group’s participation in these plans is subject to negotiations with bargaining
unions, the Group’s ability to take action is limited.
There exists material risk that
substantial cash contributions
could be required in the future to
satisfy any outstanding
obligations under these plans.
Moreover, satisfying the Group’s
obligations might have a material
impact on the Group’s reported
financial results. The financial
condition of these plans is not
currently reported in the Group’s
financial reports.
A write-down of goodwill or
assets could have a substantial
impact on the Group’s net income
and equity.
Indicators of goodwill or asset impairment are monitored closely through our
reporting process to ensure that potential impairment issues are addressed on a
timely basis.
Detailed impairment testing for each cash-generating unit within the Group is
performed prior to year-end or at an earlier stage when a triggering event
materializes. The Audit Committee regularly reviews the goodwill impairment
process.
Changes in applicable regulations
and increased scrutiny by
governments and tax authorities
in the countries we operate could
impact our effective tax rate and
trigger additional tax liabilities.
Due to the uncertainty associated
with tax matters, it is possible
that at some future date,
liabilities resulting from audits or
litigations could vary significantly
from the Group’s provisions.
Risks are reviewed and assessed on a regular basis in light of ongoing developments
with respect to tax audits and tax cases, as well as ongoing changes in the legislation
and tax laws.
Intercompany charges within the Group follow Organisation for Economic Co-
operation and Development (OECD) and local arm’s length standards.
The LafargeHolcim Group Tax policy and Transfer pricing directive provide the
binding rules for all countries where we operate.
Group Tax continuously works with Internal Control on aligning, improving and
implementing processes and controls within Group Tax and countries. It is also
continuously developing the right skilled people through training, while insourcing
part of the job currently performed by external tax firms and consultants.
Group’s pension
commitments
The Group operates a
number of defined
benefit pension schemes
and schemes with similar
or contingent obligations
in several of its countries.
The assets and liabilities
of those schemes may
exhibit significant
volatility.
Multi-employer
pension plans (MEPP)
The Group participates
in a number of
union-sponsored
multiemployer pension
plans in the US. These
plans are subject to
substantial deficits due
to market conditions
and business actions,
plan trustee decisions,
plan failure, as well as
actions and decisions of
other contributing
employers. The Group
has essentially no
control on how these
plans are managed.
Goodwill and asset
impairment
Significant
underperformance in
any of the Group’s
major cash generating
units or the divestment
of businesses in the
future may give rise to
a material write-down
of goodwill or assets.
Tax
LafargeHolcim is
exposed to tax risks due
to potential changes in
applicable regulations in
certain countries and
increased scrutiny by
governments and tax
authorities in pursuit of
perceived aggressive tax
structure by
multinational
corporations. In addition,
assumptions have been
made for calculation of
tax provisions and
overall tax charges.
78
Internal Control
In 2018, the Internal Control framework
was enhanced by introducing mandatory
‘Minimum Control Standards’ to clarify and
reinforce the responsibility of the
businesses in the countries as part of
Strategy 2022 – "Building for Growth".
Every country and business in our
organization must follow these standards
with clear guidance and consequence
management should these standards not
be 100% compliant.
These standards encompass controls from
accounting and financial reporting to
Compliance, Health & Safety, security, HR
and IT. They are managed and checked by
our Internal Control team with control
owners in all our businesses across the
globe. Our local CEOs and CFOs certify
through signed letters to the Group that
the Minimum Control Standards are in
place and operating effectively.
In accordance with the Swiss Code of
Obligations and Swiss Code of best
practices for Corporate Governance, the
internal control process consists of
implementing and permanently adopting
appropriate management systems.
LafargeHolcim aims at giving the Directors
and management reasonable assurance
concerning the reliability of financial
reporting, compliance with laws and
internal regulations, and the effectiveness
and efficiency of major company
processes.
Each LafargeHolcim employee has an
important role in running the Internal
Control System to ensure the
implementation and the effectiveness of
internal controls.
The set of Minimum Control Standards that every country and business in our organization must follow.
I T
Governance an
Compliance
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esources
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Treasury
Minimum
Control
Standards
Inventory
s
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s
F i x e d A s
Group Internal Control
Environment
LafargeHolcim aims to have an effective
Internal Control system at each level of
responsibility and promotes a culture of
robust internal control, supported by the
commitment of the Board of Directors and
senior management.
The Group’s internal control environment
is based on key documents such as the
Board functions’ diagram, the Group
Delegated Authorities, the Code of
Business Conduct and the Minimum
Control Standards:
• The Board functions’ diagram defines
responsibilities at Board of Directors and
Executive Committee levels,
• The Group Delegated Authorities defines
approving authorities within the Group
deriving from policies,
• The Code of Business Conduct covers
guidance and provides examples to help
when confronted with challenging
situations,
• The Minimum Control Standards are
used as a baseline for the mandatory
minimum level of compliance within the
Group.
LafargeHolcim Annual Report 2018
Business review — Risk management
79
Risk and control
continued
Risk identification and analysis
The approach implemented by the Group,
relating to the identification and analysis
of risks, is described on page 66.
Tax: Tax risk assessment and reporting,
tax filings & payments, deferred and
income tax calculations, transfer pricing
and non-income (indirect) taxes
HR: Employee management (on-boarding,
transfers, offboarding), payroll,
compliance with local labor laws and
employee pension & benefit plans
Mandatory Minimum Control
Standards
Our mandatory minimum control
standards cover the following core
business processes, going beyond
accounting and finance:
Governance & Compliance: Compliance
with laws, regulations and Code of
Business Conduct, BOD secretarial, Health
& Safety, Risk Assessment and mitigation,
Segregation of duties, delegation of
authorities, review of litigation, disputes,
and Personal data protection.
Accounting & consolidation: Compliance
with accounting principles including best
practices from the reconciliation of
accounts to consolidation of financial
statements and submission of Group
reporting package and statutory financial
statements
Treasury: Bank relations, secure handling
of payments, financial instruments,
borrowings & commitments and forex,
interest rate commodities risks monitoring
and hedging
Fixed Assets: Management of titles,
licenses and permits, rehabilitation and
restoration provisions, classification and
depreciation of property plant &
equipment and physical verification
Inventory: Physical stock take (spare parts
and materials) and inventory provision
and write-offs
Revenue: Master data, price
management, customer credit limits,
accounts receivable
Expenditure: Master data, supplier
qualification, 3 way match and direct
vendor invoices, supplier payments and
accruals for expenditures
IT: Information security management and
IT service management
Internal Control monitoring
throughout the Group
The Group is committed to maintaining
high standards of internal control. It
implements detailed work related to
documentation and testing of mandatory
“minimum internal control” to support its
assessment. All documentation is kept in a
dedicated internal control tool which is
maintained by the Group Internal Control
department. This work is implemented at
country and at Group level and
encompasses:
• a description of key processes affecting
the reliability of the Group’s financial
reporting, and that of the parent
company;
• a detailed description of mandatory
controls defined in the Group's Minimum
Control Standards;
• tests of controls to check the operational
effectiveness of such control. The scope
of such tests being defined based on
materiality and risk level of each entity;
As a global leader in our industry, LafargeHolcim
adheres to the highest of standards when it comes
to how we manage and operate our business day
to day everywhere around the world. We see it as
our ethical duty.
80
• an annual internal certification process
to review the principal action plans in
progress and to confirm management
responsibility at country and Group level
for the quality of both internal control
and financial reporting;
• a formal reporting, analysis and control
process for other published information
included in the Group’s Annual Report.
This work is part of the process of
continuous improvement in internal
control and includes the preparation of
specific action plans, identified through
the activities described above, as well as
through internal and external audits. The
implementation of action plans is followed
up by relevant Senior Management. The
outcome of such procedures is presented
to the Audit Committee.
Internal control is monitored at all levels of
the Group. The roles of key stakeholders
are described below:
Board of Directors and Board
Committees
The Board of Directors through the Audit
Committee ensures the existence and
assesses the design and the effectiveness
of the Internal Control System and risk
management, and forms an impression of
the state of compliance within the Group.
Executive Committee
The Executive Committee steers the
effective implementation of the Group’s
internal control policy, through:
• the monitoring and follow-up of internal
control procedures performed
throughout the Group, and in particular
the follow-up of identified action plans.
Periodic presentations on internal
control are submitted to the Executive
Committee;
• the review of the country mandatory
Minimum Control Standards and
certification twice a year. Countries
confirm their assessments through the
internal control scorecards and signed
certification letters;
• the review of the annual summary of the
Group’s internal audit reports.
Group functions
Group function leaders, including in
particular managers of the Group Finance
function, have been designated at Group
level as “business process owners”, with
the responsibility of:
• documenting their processes at Group
level including product line specifics and
verifying that the “Internal Control
Standards” for such processes are
effectively implemented;
• defining and updating the standards of
internal control applicable to countries.
Countries
In application of the Minimum Control
Standards, internal control is under the
direct responsibility of the Executive
Committee of each country. In each of the
Group’s countries, Internal Control
Managers are appointed. Their role consists
mainly in supporting the identification of
risks by the management, the
implementation of the Minimum Control
Standards and ensuring procedures related
to internal control over financial reporting in
their country are implemented. Their
activities are coordinated by the Group
Internal Control department presented
below.
Countries report their internal control
assessments to the Group twice a year
through the internal control scorecards
and signed certification letters. Any
exception to the mandatory minimum
control standards need to be documented,
mitigated and approved by the Group.
Group Internal Control department
The Group Internal Control department is
in charge of overseeing internal control
and monitoring all procedures related to
internal control over financial reporting.
LafargeHolcim Annual Report 2018
Business review — Risk management
81
Risk and control
continued
This department oversees the definition of
Minimum Control Standards mentioned
above and coordinates the network of
Internal Control Managers within
countries. It supports countries and the
heads of Group functions in the
implementation of such standards as well
as the documentation and tests of
mandatory minimum controls.
Group Internal Control designs and
coordinates the annual certification
process to review the main action plans in
progress and to confirm management
responsibility at each relevant level of the
Group organization on the quality of both
internal control and financial reporting.
The outcome of this certification process is
presented to the Group Chief Financial
Officer and Chief Executive Officer for
validation prior to presenting it to the
Executive Committee and Audit
Committee.
Group Internal Audit
The Group Internal Audit department is
responsible for performing an
independent assessment of the quality of
internal control at all levels of the
organization following the annual audit
plan approved by the Audit Committee.
Reports are issued to audited countries
and to senior management upon
completion of the fieldwork. An annual
summary of such reports is presented to
the Audit Committee, which also receives
the assessment from the Group’s external
auditors on the internal control system.
Furthermore, follow-up assignments are
organized to verify that internal audit
recommendations have been put in place.
82
Canton St. Gallen, Switzerland
The Tamina bridge is one of the
tallest in Europe.
Business review — Risk management
83
LafargeHolcim Annual Report 2018 Capital market information
Against this backdrop, LafargeHolcim’s
share price closed at CHF 40.5, a decrease
of 26.3 percent from the 2017 year-end
closing price on the Swiss market. The
share price contracted by 23.8 percent on
the Paris stock exchange. In comparison,
the SMI decreased by 10.2 percent while
the CAC 40 declined by 11.0 percent.
2018 has been a challenging year for
equity markets, marked by a return of
volatility. Investors have reduced their risk
appetite, notably in the face of slower
than expected growth, a tightening in US
monetary policy, and the trade dispute
between the US and China.
Performance in the building and
construction sector has been influenced
by rising cost inflation and surging
commodity prices. Emerging markets
have lagged in 2018 in a context of tighter
liquidity, signs of moderating economic
growth and political and currency
turbulence.
Performance of LafargeHolcim shares versus
Swiss Market Index (SMI) and the CAC 40 over 5 years1
Swiss Market Index (SMI) in CHF
French Stock Market Index (CAC 40) in EUR
LafargeHolcim SW in CHF
LafargeHolcim FP in EUR
90
80
70
60
50
40
30
20
2014
2015
2016
2017
2018
1 SMI rebased to LafargeHolcim SW share price at January 2, 2013; CAC40 and LafargeHolcim FP rebased to LafargeHolcim
SW share price at July 9, 2015.
84
The average trading volume in 2018
amounted to approximately 2.3 million
shares per day on the SIX Swiss Exchange
and 0.2 million shares per day on the
Euronext Paris.
Listings
LafargeHolcim is listed on the SIX Swiss
Exchange and on Euronext Paris. The
Group is a member of the main large
indices on the SIX Swiss Exchange (SMI
and SLI). As the velocity of the stock has
fallen under the required threshold,
LafargeHolcim has been excluded from
the CAC 40 Index in June 2018 and from
the CAC Next 20 Index in September 2018
on the Euronext Paris. Each LafargeHolcim
share carries one voting right. At year-end
2018, the company’s market capitalization
stood at CHF 24.6 billion.
Distribution of
LafargeHolcim shares
and breakdown of shareholders
The majority of shares held outside
Switzerland and France are owned by
shareholders in the United States and the
United Kingdom.
Weighting of the LafargeHolcim registered share
in selected indices
Index
SMI, Swiss Market Index
SPI, Swiss Performance Index
SLI, Swiss Leader Index
STOXX Europe 600 Construction
STOXX Europe Large 200
STOXX Europe 600
STOXX Global 1800
DJSI World Enlarged Index
FTSE4Good Europe Index
Sources: Bloomberg, FTSE Index Company, as of year-end 2018
Weighting in %
2.50
1.62
3.81
8.15
0.30
0.23
0.05
0.15
0.29
Additional Data
CH0012214059
ISIN
1221405
Security
code
number
LHN
Telekurs
code
LHN:SW
Bloomberg
code
LHN.SW
Thomson
Reuters
code
Business review — Capital market information
85
LafargeHolcim Annual Report 2018 Capital market information
continued
Free float
Free float as defined by the SIX Swiss
Exchange and the Euronext stands at
79 percent.
Dividend policy
Dividends are distributed annually. For the
2018 financial year, the Board is proposing
a payout from the capital contribution
reserves in the amount of CHF 2.00 per
registered share. Subject to approval by
the annual shareholders’ meeting,
shareholders will be given the choice of
having the dividend paid out in cash, in
the form of new LafargeHolcim Ltd shares
or a combination of cash and shares (scrip
dividend). The new shares will be issued at
a discount to the market price.
Significant shareholders
Information on significant shareholders
can be found on page 276 of this report.
Disclosure of shareholdings
Under the Federal Act on Financial Market
Infrastructures and Market Conduct in
Securities and Derivatives Trading
(Financial Market Infrastructure Act, FMIA),
whosoever, directly, indirectly, or acting in
concert with third parties, acquires or
disposes of shares, for his own account, in
a company incorporated in Switzerland
whose equity securities are listed, in whole
or in part, in Switzerland and thereby
attains, falls below, or exceeds the
threshold of 3, 5, 10, 15, 20, 25, 331/3,
50, or 662/3 percent of the voting rights,
whether or not such rights may be
exercised, shall notify the company and
the stock exchanges on which the equity
securities in question are listed.
Key data LafargeHolcim registered shares
Par value CHF 2.00
Number of shares issued
2018
2017
2016
2015
20141
606,909,080
606,909,080
606,909,080
606,909,080
327,086,376
Number of dividend-bearing shares
596,625,426
598,067,626
606,909,080
606,909,080
327,086,376
Number of shares conditional capital 2
Number of treasury shares
1,422,350
10,736,847
1,422,350
9,698,149
1,422,350
1,152,327
1,422,350
1,338,494
1,422,350
1,219,339
Stock market prices in CHF
High
Low
Average
Market capitalization (billion CHF)
Trading volumes (million shares)
Earnings per share (EPS) in CHF
EPS before impairment and divestments in CHF
Cash earnings per share in CHF 4
Consolidated shareholders’ equity per share in CHF 5
Dividend per share in CHF
2018
60
39
50
24.6
625.3
2.52
2.63
5.01
50.41
2.006
2017
60
51
56
33.3
574.6
(2.78)
2.35
5.04
51.87
2.00
2016
57
34
47
32.6
615.0
2.96
2.10
5.44
50.88
2.00
2015
73
48
63
30.5
449.1
(3.11)
–
5.22
51.79
1.50
2014
83
62
73
23.3
266.8
3.633
–
7.01
53.49
1.30
1 Restated due to changes in accounting policies.
2 Shares reserved for convertible bonds.
3 EPS for 2014 was restated due to the distribution of a scrip dividend.
4 Cash EPS calculated based on cash flow from operating activities divided by the weighted-average number of shares outstanding.
5 Based on shareholders’ equity — attributable to shareholders of LafargeHolcim Ltd — and the number of dividend-bearing shares (less treasury shares) as per December 31.
6 Proposed by the Board of Directors for a payout from capital contribution reserves.
86
Registration in the share register
and restrictions on voting rights
On request, purchasers of registered
shares are entered in the share register as
voting shareholders provided that they
expressly declare that they acquired the
shares in their own name and for their
own account. The Board of Directors will
enter individuals whose requests for
registration do not include an express
declaration that they hold the shares for
their own account (nominees) in the share
register as shareholders with voting rights,
provided that such nominees have
concluded an agreement with the
Current rating (March 7, 2019)
Rating Agency
Standard & Poor’s Ratings Services
Moody’s Investors Service
company concerning their status and are
subject to recognized banking or financial
market supervision. The Board of Directors
has issued the applicable Registration
Regulations which can be found on the
LafargeHolcim website.
Information on LafargeHolcim
registered shares
Further information on LafargeHolcim
registered shares can be found at:
lafargeholcim.com/investor-relations
Long-term rating
Short-term rating
BBB, outlook negative
Baa2, outlook negative
A-2
P-2
Financial reporting calendar
May 15, 2019
Trading update
for the first
quarter 2019
May 15, 2019
Annual General
Meeting of
shareholders
Business review — Capital market information
87
LafargeHolcim Annual Report 2018 n
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Nairobi, Kenya
Safety checks at the grinding plant.
Corporate governance 90
Compensation report 114
Governance and Compensation
89
LafargeHolcim Annual Report 2018 Corporate governance
LafargeHolcim applies high standards to corporate
governance. The goal is to assure the long-term
value and success of the company in the interests
of various stakeholder groups: customers,
shareholders, employees, creditors, suppliers, and
the communities where LafargeHolcim operates.
Preliminary remarks
The ultimate goal of effective corporate
governance is long-term value creation
and strengthening of the Group’s
reputation. This includes continuous
improvement to decision-making
processes and management systems
through legal, organizational, and ethical
directives and terms of reference, as well
as measures to enhance transparency.
Compliance with internal and external law
and regulations, early recognition of
business risks, social responsibility for
stakeholder groups, and open
communication on all relevant issues are
among the principles of LafargeHolcim.
The Code of Business Conduct, binding for
the entire Group, is part of our internal
regulations.
LafargeHolcim aims to achieve a balanced
relationship between management and
control by keeping the functions of
Chairman of the Board of Directors and
CEO separate.
The information published in this chapter
conforms to the Directive Corporate
Governance of the SIX Swiss Exchange
(SIX) and the disclosure rules of the Swiss
Code of Obligations. In the interest of
clarity, reference is made to other parts of
the Annual Report or, for example, to the
Group’s website (www.lafargeholcim.com).
Except where otherwise indicated, this
Annual Report reflects the legal situation
as of December 31, 2018.
Group structure and shareholders
The holding company LafargeHolcim Ltd
operates under the laws of Switzerland for
an indefinite period. Its registered office
is in Rapperswil-Jona (Canton of St. Gallen,
Switzerland). It has direct and indirect
interests in all companies listed on pages
176 –180 of this Annual Report.
The Group is organized by geographical
regions. The management structure as
per December 31, 2018, and changes
which occurred in 2018, are described in
this chapter.
LafargeHolcim has no mutual cross-
holdings with any other company. There
are neither shareholders’ agreements nor
other agreements regarding voting or the
holding of LafargeHolcim shares.
More detailed information on the business
review, Group structure, and shareholders
can be found on the pages of the Annual
Report listed on the left.
Topic
Business review in the individual
Group regions P148
Segment information P184
Principal companies P176
Information about LafargeHolcim Ltd &
listed Group companies P180
90
Topic
Articles of incorporation of LafargeHolcim Ltd
lafargeholcim.com/articles-association
Code of business conduct
lafargeholcim.com/corporate-governance
Changes in equity of LafargeHolcim
(information for the year 2016 is included in
the Annual Report 2017, 126 – 127)
166 – 167
Detailed information on conditional capital
lafargeholcim.com/articles-association
Articles of incorporation: Art. 3bis
Key data per share
84 – 87, 256, 276
Rights pertaining to the shares
lafargeholcim.com/articles-association
Articles of incorporation: Art. 6, 9 10
Regulations on transferability of shares and
nominee registration
lafargeholcim.com/articles-association
Articles of incorporation: Art. 4, 5
Warrants/options
247 – 251
the new shares. The acquisition of shares
through the exercise of conversion rights
and/or warrants and each subsequent
transfer of the shares will be subject to the
restrictions set out in the Articles of
Incorporation. As per December 31, 2018,
no bonds or similar debt instruments of
the company or one of its Group
companies were outstanding that would
give rise to conversion rights or warrants
related to the conditional capital;
therefore, in the year under review, no
conversion rights or warrants have been
exercised. Further information on
conversion rights and/or warrants and
applicable conditions may be found in the
Articles of Incorporation of
LafargeHolcim Ltd at:
www.lafargeholcim.com/articles-association
Authorized share capital/Certificates of
participation
As per December 31, 2018, neither
authorized share capital nor certificates
of parti cipation were outstanding.
Capital structure
LafargeHolcim has one uniform type of
registered share in order to comply with
inter national capital market requirements
in terms of an open, transparent, and
modern capital structure and to enhance
attractiveness, particularly for institutional
investors.
Share capital
The share capital is divided into
606,909,080 registered shares of CHF 2.00
nominal value each. As of December 31,
2018, the nominal, fully paid-in share
capital of LafargeHolcim Ltd amounted to
CHF 1,213,818,160.
Conditional share capital
The share capital may be increased by a
nominal amount of CHF 2,844,700
through the issuance of a maximum of
1,422,350 fully paid-in registered shares,
each with a par value of CHF 2.00 (as per
December 31, 2018). The conditional
capital may be used for exercising
conversion rights and/or warrants relating
to bonds or similar debt instruments of
the company or one of its Group
companies. The subscription rights of the
shareholders will be excluded. The current
owners of conversion rights and/or
warrants will be entitled to subscribe for
Governance and Compensation — Corporate governance
91
LafargeHolcim Annual Report 2018 Corporate governance
continued
Board Members
Biographies
Read more on P106 – 108
92
Board of Directors
The Board of Directors consists of 10
members, all of whom are independent,
were not previously members of the
LafargeHolcim management, and have no
important business connections with
LafargeHolcim.
Independence is defined in line with best
corporate governance standards. A
member of the Board of Directors shall be
considered independent, if the member is
not and has not been employed as a
member of the Executive Committee at
the company or any of its principal
subsidiaries or as employee or affiliate of
the auditors of LafargeHolcim Ltd for the
past three years and does not maintain, in
the sole determination of the Board of
Directors, a material direct or indirect
business relationship with the company or
any of its subsidiaries. Members of the
Board of Directors with immediate family
members who would not qualify as
independent shall not be considered
independent, subject to a three-year
cooling-off period.
Please see pages 106 –108 for the
biographical information of the members
of the Board of Directors as per
December 31, 2018.
Mr. Bertrand Collomb and Mr. Thomas
Schmidheiny retired from the Board of
Directors at the Shareholders General
Meeting of May 8, 2018.
In 2018, the shareholders re-elected 10
members of the Board of Directors. Dr.
Beat Hess was re-elected as Chairman of
the Board of Directors. Furthermore, the
shareholders re-elected the five members
of the Nomination, Compensation &
Governance Committee.
The shareholders also re-elected the
auditors and the independent proxy.
New members of the Board of Directors
are introduced in detail to the company’s
areas of business. The Board of Directors
meets as often as business requires, but at
least four times a year. In 2018, five
regular meetings and five additional
meetings were held. One meeting focused
on strategy topics. As a rule, the members
of the Executive Committee attended
those parts of the regular meetings of the
Board of Directors which dealt with
operational issues of areas of their
responsibility. The average duration of the
regular meetings was five hours and thirty
minutes.
Elections and terms of office
All members of the Board of Directors, the
Chairman of the Board of Directors, and
all members of the Nomination,
Compensation & Governance Committee
are elected annually and individually as a
matter of law by the shareholders at the
Shareholders General Meeting. They may
be proposed for re-election by the Board
of Directors upon motion by the
Nomination, Compensation & Governance
Committee. The Nomination,
Compensation & Governance Committee
bases its motion on a review of the overall
performance of each candidate.
Honorary Chairman
In recognition of his many years of service
to LafargeHolcim, the Board of Directors
has decided to name Mr. Thomas
Schmidheiny Honorary Chairman of the
Group.
Board and Committee attendance at scheduled ordinary meetings
Name
Beat Hess
Oscar Fanjul
Bertrand Collomb1
Paul Desmarais, Jr.
Patrick Kron2
Gérard Lamarche
Adrian Loader
Jürg Oleas
Nassef Sawiris
Thomas Schmidheiny3
Hanne B. Sørensen
Dieter Spälti4
Position
Chairman
Vice-Chairman
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
1 Member of the Board and of the AC until Shareholders General Meeting 2018
2 Chairman and member of the AC as of Shareholders General Meeting 2018
3 Member of the Board and of the HSSC until Shareholders General Meeting 2018
4 Member of the HSSC as of Shareholders General Meeting 2018
Board
Audit
Committee
Nomination,
Compensation &
Governance
Committee
Health, Safety &
Sustainability
Committee
5/5
5/5
2/2
4/5
5/5
4/5
5/5
4/5
4/5
2/2
4/5
5/5
–
–
2/3
–
3/3
6/6
–
6/6
–
–
6/6
–
4/4
3/4
–
–
4/4
–
2/4
4/4
–
–
–
–
4/4
–
4/4
–
–
2/2
3/4
2/2
Governance and Compensation — Corporate governance
93
LafargeHolcim Annual Report 2018 The Audit Committee assists and advises
the Board of Directors in conducting its
supervisory duties with respect to the
internal control systems. It examines the
reporting for the attention of the Board of
Directors and evaluates the Group’s
external and internal audit procedures,
reviews the risk management systems of
the Group, and assesses financing issues.
All members are independent in order to
ensure the necessary degree of objectivity
required for an Audit Committee.
In 2018, six regular meetings of the Audit
Committee were held. The external
auditors, the Head of Group Internal Audit
and the Group General Counsel were
present at all meetings for certain agenda
topics. Furthermore, the Chairman of the
Board, the CEO and the CFO attended the
meetings of the Audit Committee as
guests. The average duration of the
regular meetings was three hours and
thirty minutes.
In 2018, the committee reviewed in
particular the financial reporting of the
Group, the releases of the quarterly results
and the findings of the external auditors.
The committee took note of the status of
the Internal Control System (ICS),
discussed the findings of Group Internal
Audit, dealt with compliance and internal
directives, and evaluated financing issues.
The committee also evaluated the
performance of the external auditors and
their fees. The Chairman of the Audit
Committee performed significant work in
preparing and following up the
committee’s meetings given the wide
range of its duties.
The charter of the Audit Committee is
available at:
www.lafargeholcim.com/articles-association
Corporate governance
continued
Our members of the Board of Directors serve on
the following expert committees:
Audit
Committee
Composition of the Audit Committee
Patrick Kron
Chairman 1
Gérard Lamarche
Member
Bertrand Collomb
Member 2
Jürg Oleas
Member
Dieter Spälti
Member
1 Chairman and member as of Shareholders General
Meeting 2018
2 Member until Shareholders General Meeting 2018
94
Nomination, Compensation
& Governance Committee
Composition of the Nomination,
Compensation & Governance Committee
Nassef Sawiris
Member
Paul Desmarais, Jr
Member
Oscar Fanjul
Chairman
Adrian Loader
Member
Hanne B. Sørensen
Member
The charter of the Nomination,
Compensation & Governance Committee
is available at:
www.lafargeholcim.com/articles-association
More details on the activities of the
Nomination, Compensation & Governance
Committee, in particular with regard to
the process of determination of
compensation, can be found in the
Compensation Report, starting on page
114.
The Nomination, Compensation &
Governance Committee supports the
Board of Directors in planning and
preparing succession at the Board of
Directors and senior management level. It
monitors developments with regard to
corporate governance and compensation
for the Board of Directors and Executive
Committee, and briefs the Board of
Directors accordingly. The committee
advises the Board of Directors on the
compensation policy for the Board of
Directors and for the Executive Committee
and on the motion by the Board of
Directors to the Shareholders General
Meeting for the total compensation of the
Board of Directors and of the Executive
Committee.
In 2018, the Nomination, Compensation &
Governance Committee held four regular
meetings and three additional meetings.
The meetings were also attended by the
Chairman of the Board and the CEO as
guests, insofar as they were not
themselves affected by the items on the
agenda. The average duration of the
regular meetings was two hours and thirty
minutes.
Governance and Compensation — Corporate governance
95
LafargeHolcim Annual Report 2018 The Health, Safety and Sustainability
Committee supports and advises the
Board of Directors on the development
and promotion of a healthy and safe
environment for employees and
contractors as well as on sustainable
development and social responsibility. In
2018 the Health, Safety and Sustainability
Committee held four regular meetings.
The Head of Health and Safety and the
Head of Sustainable Development were
present at all meetings. The Chairman of
the Board and the CEO attended the
meetings of the Health, Safety and
Sustainability Committee as guests.
The average duration of the meetings
was two hours.
The charter of the Health, Safety &
Sustainability Committee is available at:
www.lafargeholcim.com/articles-association
Corporate governance
continued
Health, Safety and
Sustainability Committee
Composition of the Health, Safety and
Sustainability Committee
Adrian Loader
Chairman
Patrick Kron
Member
Hanne B. Sørensen
Member
Thomas Schmidheiny
Member 1
Dieter Spälti
Member 2
1 Member until Shareholders General Meeting 2018
2 Member as of Shareholders General Meeting 2018
96
Organizational rules/Areas of
responsibility
The division of responsibilities between
the Board of Directors, the CEO, and the
Executive Committee is set out in detail in
the company’s Organizational Rules.
The Organizational Rules entered into
force on May 24, 2002, and are reviewed
at least every two years and amended as
required. They were last reviewed and
amended in July 2018 and may be found
at: www.lafargeholcim.com/articles-
association.
The Organizational Rules are issued by the
Board of Directors in accordance with the
terms of Art. 716b of the Swiss Code of
Obligations and Art. 18 of the company’s
Articles of Incorporation. They stipulate
the organizational structure of the Board
of Directors and the Executive Committee
and govern the tasks and powers
conferred on the company’s executive
bodies. They regulate the convocation,
execution, and number of meetings to be
held by the Board of Directors and the
Executive Committee. In the event that the
Chairman of the Board of Directors is not
independent, the Organizational Rules
provide for the election of an Independent
Lead Director.
The Board of Directors also has the power
to establish expert committees and, if
required, ad-hoc committees for special
tasks. The Board of Directors can delegate
special tasks or tasks related to specific
functions to a Vice-Chairman on a
temporary or permanent basis.
As part of its non-transferable statutory
responsibilities, the Board of Directors
defines the corporate strategy, approves
the consolidated Group mid-term plan,
including the budget, and the Annual
Report for submission to the Shareholders
General Meeting.
The CEO is responsible for operational
management, preparing a large part of
the business of the Board of Directors –
including corporate strategy proposals
– and executing the latter’s resolutions.
The CEO issues directives and
recommendations with Group-wide
significance in the CEO's own authority
and is also responsible for electing and
dismissing Function Heads and CEOs of
Group companies, as well as for the
nomination of the members of the Board
of Directors and supervisory bodies of the
Group companies.
Within the framework of mid-term plan
approval, the Board of Directors defines
limits for investments and financing.
Within these limits, the Executive
Committee decides on financing
transactions and on one-off investments
and divestments for amounts up to
CHF 400 million. Amounts exceeding this
are subject to approval by the Board of
Directors. The Board of Directors is
regularly informed about important
transactions under the authority of the
Executive Committee.
The Board of Directors determines the
CEO’s objectives upon motion by the
Chairman of the Board and the Executive
Committee members’ Group objectives
upon motion by the Nomination,
Compensation & Governance Committee,
both after advice and assessment with the
CEO.
The CEO assesses the performance of the
members of the Executive Committee and,
after advice and assessment by the
Nomination, Compensation & Governance
Committee, determines their respective
individual objectives.
The Executive Committee oversees risk
management following appraisal by the
Audit Committee. The Board of Directors is
informed annually about the risk situation.
In case of a direct conflict of interest, the
Organizational Rules require each
member of the corporate body concerned
to stand aside voluntarily prior to any
discussion of the matter in question.
Members of the corporate bodies are
required to treat all information and
documentation which they may obtain or
view in the context of their activities in
these bodies as confidential and not to
make such information available to third
parties.
All individuals vested with the powers to
represent the company have joint
signatory power at two.
Information and control
instruments of the Board of
Directors
The Board of Directors determines the
manner in which it is to be informed about
the course of business. Any member of
the Board of Directors may demand
information on all issues relating to the
Group and the company. All members of
the Board of Directors may request
information from the CEO after informing
the Chairman of the Board of Directors. At
meetings of the Board of Directors, any
attending member of the Executive
Committee has a duty to provide
information. All members of the Board of
Governance and Compensation — Corporate governance
97
LafargeHolcim Annual Report 2018 Corporate governance
continued
Directors have a right to inspect books
and files to the extent necessary for the
performance of their tasks.
Financial reporting
The Board of Directors is informed on a
monthly basis about the current course of
business, adopts the quarterly reports,
and releases them for publication. The
Board of Directors discusses the Annual
Report, takes note of the Auditors’
Reports, and submits the Annual Report to
the Shareholders General Meeting for
approval.
With regard to Group strategy
development, a stra tegy plan, a mid-term
plan covering three years and including
the budget are submitted to the Board of
Directors.
Risk Management
LafargeHolcim benefits from many years
of experience with a risk management
process which is structured around several
coordinated approaches and subject to
continuous improvement. A detailed
update and analysis of the Group Risk
map was carried out in 2018 and
submitted to and analyzed by the Audit
Committee and Executive Committee.
Responsibilities concerning risks are
clearly defined at country and corporate
level. The underlying principle is that risk
management is a line management
responsibility. Line managers are
supported by the Group Risk Management
function.
Risks are identified and assessed
according to significance and likelihood.
The full risk spectrum from market,
operations, finance, legal, environmental
and sustainability, to external risk factors
of the business environment is reviewed,
including compliance and reputational
risks. Key risks are analyzed more deeply
regarding their causes, and risk mitigating
actions are defined. Risk transfer through
insurance solutions and the Internal
Control system forms an integral part of
the risk management process. Risks are
monitored and their status reported to
the Audit Committee and the Executive
Committee regularly. Independent
assessments of the effectiveness of
mitigating actions and controls are
performed by Group Internal Audit.
Please see pages 66 to 82 for more details
about the Group’s risk management.
Internal Control
LafargeHolcim aims to have an effective
Internal Control system and culture
supported by the commitment of the
Board of Directors and the Executive
Committee. Group Internal Control (GIC)
primarily aims to provide the Board of
Directors and the Executive Committee
reasonable assurance on the reliability of
the financial reporting and statements,
compliance with laws and regulations and
the protection of assets.
GIC has designed a continuous reporting
system to receive country and function
assessments of the controls and status of
any action plans. Discussions regularly
occur with local management to ensure
controls are properly assessed and issues
are swiftly addressed.
GIC designs and coordinates the annual
assurance process to review the main
action plans in progress and to confirm
management responsibility at each
relevant level of the Group organization
on the quality of both internal control and
financial reporting. The outcome is
presented to the Executive Committee and
the Audit Committee.
Group Internal Audit
The core mission of Group Internal Audit
(GIA) is to provide to the Board of Directors
and the Executive Committee with an
independent, risk-based, and objective
assurance on the effectiveness and
efficiency of the governance, risk
management and internal control system
of LafargeHolcim Group. GIA reports to
the CFO with an additional reporting line
to the Chairman of the Audit Committee.
The members of the Board of Directors
have access to GIA at all times. Each year,
the Internal Audit plan, which defines the
audit focal areas to be addressed by GIA, is
reviewed and approved by the Audit
Committee. Main observations and
findings observed during the audit
assignments are reported periodically to
the Audit Committee and the Executive
Committee.
The Group Internal Audit activity is
governed by adherence to the mandatory
guidance issued by the Institute of Internal
Auditors (“IIA”) including the Definition of
Internal Auditing, the Code of Ethics, and
the International Professional Practices
Framework (IPPF). GIA activities are
certified by IFACI (French Institute of
Audit and Internal Control), which is
affiliated to IIA.
98
Executive Committee
Members of the Executive Committee
(including the CEO) are appointed by the
Board of Directors and are responsible for
the management of the Group.
The tasks of the Executive Committee are
divided into different areas of
responsibility in terms of country and
function, each of these areas being
ultimately supervised and managed by a
member of the Executive Committee.
Further to the situation effective January 1,
2018 reported in the Annual Report 2017
on pages 66 – 67, the following changes
within the Executive Committee during
the year under review have occurred:
Effective May 1, 2018, Caroline Luscombe,
Head of Group Human Resources, has
decided to pursue opportunities outside
the company.
Effective July 1, 2018, Miljan Gutovic,
previously Head of Marketing &
Innovation, has been appointed member
of the Executive Committee as Region
Head of Middle East Africa, succeeding
Saâd Sebbar, who has decided to pursue a
career outside the company.
Effective January 1, 2019, Feliciano
González Muñoz, Head of Group Human
Resources, and Keith Carr, Group General
Counsel, have been appointed members
of the Executive Committee.
Also effective January 1, 2019, Urs Bleisch
has decided to step down from his
Executive Committee position. The
Corporate Growth & Performance function
which was led by Urs Bleisch has been
organized into three centers of excellence
which directly report to the Region Heads.
During the year under review, the
Executive Committee of LafargeHolcim
was comprised of the eight members
reported in the table below.
Please refer to pages 112 – 113 for
biographical information on the members
of the Executive Committee. None of the
members of the Executive Committee has
important functions outside the
LafargeHolcim Group or any other
significant commitments of interest, with
the exception of Jan Jenisch who is a
non-executive Director of the stock-listed
Schweiter Technologies AG as well as of
the privately held Glas Troesch and
Géraldine Picaud who is a non-executive
Director of the stock-listed Infineon
Technologies AG.
Composition of the Executive Committee
Name
Jan Jenisch
Géraldine Picaud
Urs Bleisch
Marcel Cobuz
Miljan Gutovic
Martin Kriegner
Oliver Osswald
René Thibault
Position
CEO
CFO
Member
Member
Member
Member
Member
Member
Responsibility
Growth & Performance
Region Head Europe
Region Head Middle East Africa
Region Head Asia
Region Head Latin America
Region Head North America
Governance and Compensation — Corporate governance
99
LafargeHolcim Annual Report 2018 Corporate governance
continued
Management agreements
LafargeHolcim has no management
agreements in place with companies or
private individuals outside the Group.
Mandates outside LafargeHolcim
Please refer to Art. 27 of the company’s
Articles of Incorporation for information
about the number of permitted mandates
outside of LafargeHolcim for the members
of the Board of Directors and of the
Executive Committee: www.lafargeholcim.
com/articles-association.
Compensation, shareholdings and
loans
Details of Board and management
compensation, shareholdings, and loans
are contained in the Compensation Report
(starting at page 114) and in the Holding
company results (page 266, note 14).
Shareholders’ participation
Voting rights and representation
restrictions
All holders of registered shares who are
registered as shareholders with voting
rights in the share register on the closing
date for the share registry are entitled to
participate in, and vote at, Shareholders
General Meetings. Shares held by trusts
and shares for which no declaration has
been made that the holder requesting
registration is holding the shares in his
own name and for his own account are
entered in the share register as having no
voting rights. Shareholders not
participating in person in the General
Meeting may be represented by another
shareholder or by the independent voting
proxy. In line with the requirements of the
Ordinance against Excessive
Compensation in public corporations, an
electronic voting option is provided for.
Voting rights are not subject to any
restrictions. Each share carries one vote.
Statutory quorums
The Shareholders General Meeting
constitutes a quorum, regardless of the
number of shares represented or
shareholders present; resolutions are
passed by an absolute majority of the
votes allocated to the shares represented,
unless Art. 704 para. 1 of the Swiss Code of
Obligations or the Merger Act provides
otherwise. In such cases, resolutions may
only be passed with the respective
qualified majority of the votes
represented. According to Art. 10 para. 2
of the Articles of Incorporation and in
addition to Art. 704 para. 1 of the Swiss
Code of Obligations, the approval of at
least two-thirds of the votes represented
and the absolute majority of the par value
of shares represented shall be required for
resolutions of the Shareholders General
Meeting with respect to the removal of
restrictions set forth in Art. 5 of the Articles
of Incorporation (entries in the share
register), the removal of the mandatory
bid rule (Art. 125 para 4 of the Financial
Market Infrastructure Act), and the
removal or amendment of para. 2 of Art.
10 of the Articles of Incorporation.
100
Convocation of the Shareholders
General Meeting and agenda rules
The Shareholders General Meeting takes
place each year, at the latest six months
following the conclusion of the financial
year. It is convened by the Board of
Directors, whereby invitations are
published at least twenty days prior to the
meeting and in which details are given of
the agenda and items submitted.
Shareholders representing shares with a
par value of at least one million Swiss
Francs may request the addition of a
particular item for discussion and
resolution. A corresponding application
must be submitted in writing to the Board
of Directors at least forty days prior to the
Shareholders General Meeting. Such
application should indicate the items to be
submitted. The invitations as well as the
minutes of the Shareholders General
Meetings are published on:
www.lafargeholcim.com
Entries in the share register
The company maintains a share register
for registered shares in which the names
and addresses of owners and beneficiaries
are entered. According to the applicable
rules and regulations, only those included
in the share register are deemed
shareholders or beneficial owners of the
registered shares of the company. Upon
request, purchasers of registered shares
shall be included in the share register as
shareholders with voting rights if they
expressly declare that they have acquired
the shares in their own name and for their
own account. Exceptions to this rule apply
for nominees who have signed a nominee
agreement with the company regarding
this position and are subject to a
recognized financial markets supervisory
authority.
The share register is closed approximately
one week prior to the date of the
Shareholders General Meeting (the exact
date is communicated in the invitation to
the Shareholders General Meeting).
Shareholders’ participation and rights of
protection are furthermore governed by
the Swiss Code of Obligations.
This information comprises excerpts from
or references to the content of the Articles
of Incorporation of LafargeHolcim Ltd. The
full version of the Articles of Incorporation
in force as at the date of publication of
this Annual Report can be accessed at:
www.lafargeholcim.com/articles-association
Changes of control and defense
measures
The Articles of Incorporation contain no
waiver of the duty to make a public offer
under the terms of Art. 135 and 163 of the
Financial Market Infrastructure Act
(“opting out”). The result is that a
shareholder who directly, indirectly, or
acting in concert with third parties
acquires shares in the company and,
together with the shares he already
possesses, thereby exceeds the 33¹/3
percent threshold of voting rights in the
company must make an offer for all listed
shares of the company.
There are no clauses relating to changes
of control.
Governance and Compensation — Corporate governance
101
LafargeHolcim Annual Report 2018 Corporate governance
continued
Auditors
As part of their auditing activity, the
auditors inform the Audit Committee and
the Executive Committee regularly about
their findings and make suggestions
for improvement. Taking into account the
reporting and assessments by the Group
companies, the Audit Committee
evaluates the performance of the auditors
and their remuneration in line with market
conditions. The Audit Committee approves
the audit focus area, provides
recommendations to the auditors and
makes suggestions for improvement. In
2018, the auditors participated in all six
regular meetings of the Audit Committee
to discuss individual agenda items.
Deloitte AG, Zurich, was re-elected at the
Shareholders General Meeting 2018 as the
auditors of LafargeHolcim Ltd. David
Quinlin has been responsible for
managing the audit mandate. The rotation
of the lead auditor will be carried out in
accordance with Art. 730a of the Swiss
Code of Obligations. The auditors are
elected for a one-year term by the
Shareholders General Meeting.
The fees shown below were charged for
professional services rendered to the
Group by the auditors in 2018 and 2017:
Million CHF
Audit services related to Deloitte fees 1
Audit services for joint ventures related to Deloitte fees
Total audit services fees related to Deloitte
Audit services related to other audit firms fees
Total audit services fees
Audit-related services fees related to Deloitte 2
Tax services fees related to Deloitte
Other services fees related to Deloitte 3
Total other fees related to Deloitte
2018
16.1
0.8
16.9
0.8
17.7
0.3
0.1
0.0
0.5
2017
14.5
0.3
14.8
1.3
16.1
0.2
0.1
0.0
0.3
1 This amount includes the fees for the individual audits of Group companies carried out by Deloitte as well as their fees for auditing the Group financial statements.
2 Audit-related services comprise, among other things, amounts for comfort letters, accounting advice, information systems reviews and reviews on internal controls.
3 Other services include, among other things, amounts for due diligences and translation services.
102
Corporate Communications
Phone: +41 58 858 83 06
Fax: +41 58 858 87 19
E-Mail: communications@lafargeholcim.com
Investor Relations
Phone: +41 58 858 87 87
Fax: +41 58 858 80 09
E-Mail: investor.relations@lafargeholcim.com
The most important information tools are
the annual and half-year reports,
the website (www.lafargeholcim.com),
media releases, press conferences,
meetings for financial analysts and
investors, and the Annual General
Meeting.
Current information relating to
sustainable development is available at:
www.lafargeholcim.com
A full sustainability report is published
every year.
The financial reporting calendar is shown
on pages 87 and 281 of this Annual
Report.
Should there be any specific queries
regarding LafargeHolcim, please contact:
Information policy
LafargeHolcim Ltd reports to
shareholders, the capital market,
employees, and the public at large in a
transparent and timely manner
concerning its corporate performance,
including achievement of its sustainability
targets. Open dialog is nurtured with the
most important stakeholders, based on
mutual respect and trust. This promotes
knowledge of the company and
understanding of objectives, strategy, and
business activities of the company.
As a listed company, LafargeHolcim Ltd is
under an obligation to disclose facts that
may materially affect the share price
(ad-hoc disclosure, Art. 53 and 54 of the
SIX listing rules as well as Art. 17 and 223-2
of the AMF General Regulations).
LafargeHolcim Ltd is subject to the SIX and
AMF rules on the disclosure of
management trans actions made by the
members of the Board of Directors and
senior management. These can be
accessed on the SIX and AMF websites:
https://www.six-exchange-regulation.com/
en/home/issuer/obligations/management-
transactions.html and
http://www.amf-france.org/en_US/Acteurs-et-
produits/Societes- cotees-et-operations-
financieres/Information-financiere-et-
comptable/Obligations-d- information.
html?#title_ paragraph_1
Governance and Compensation — Corporate governance
103
LafargeHolcim Annual Report 2018 Corporate governance
continued
Our Board of Directors
Beat Hess
Oscar Fanjul
Paul Desmarais, Jr.
• Chairman of the Board of Directors
• Vice-Chairman of the Board of Directors
• Chairman of the Nomination,
• Member of the Board of Directors
• Member of the Nomination,
Compensation & Governance Committee
Compensation & Governance Committee
Patrick Kron
Gérard Lamarche
Adrian Loader
• Member of the Board of Directors
• Chairman of the Audit Committee
• Member of the Health,
Safety and Sustainability Committee
• Member of the Board of Directors
• Member of the Audit Committee
• Member of the Board of Directors
• Chairman of the Health,
Safety and Sustainability Committee
• Member of the Nomination,
Compensation & Governance Committee
104
Jürg Oleas
Nassef Sawiris
• Member of the Board of Directors
• Member of the Audit Committee
• Member of the Board of Directors
• Member of the Nomination,
Compensation & Governance Committee
Hanne Birgitte Breinbjerg Sørensen
Dieter Spälti
• Member of the Board of Directors
• Member of the Health,
Safety and Sustainability Committee
• Member of the Nomination,
Compensation & Governance Committee
• Member of the Board of Directors
• Member of the Audit Committee
• Member of the Health,
Safety and Sustainability Committee
Governance and Compensation — Board of Directors
105
LafargeHolcim Annual Report 2018 Corporate governance
continued
Our Board of Directors
continued
Beat Hess
Chairman of the Board
Paul Desmarais, Jr.
Member
Professional background
Canadian national born in 1954, Paul
Desmarais, Jr. was elected to the Board of
Directors of LafargeHolcim in 2015. He holds a
Bachelor of Commerce from McGill University,
Montréal, Canada, and an MBA from the
European Institute of Business Administration
(INSEAD), Paris, France. He was a Member of the
Board of Directors of Lafarge S.A. from 2008 to
2015 and was also a Member of its Strategy,
Investment and Sustainable Development
Committee until 2015. Paul Desmarais, Jr. is
Chairman and Co-Chief Executive Officer of
Power Corporation of Canada and Executive
Co-Chairman of Power Financial Corporation,
both located in Montréal, Canada. He joined
Power Corporation in 1981 and assumed the
position of Vice-President the following year. In
1984, he led the creation of Power Financial to
consolidate Power Corporation’s major financial
holdings, as well as Pargesa Holding SA,
Geneva, Switzerland, under a single corporate
entity. Paul Desmarais, Jr. served as Vice-
President of Power Financial from 1984 to 1986,
as President and Chief Operating Officer from
1986 to 1989, as Executive Vice-Chairman from
1989 to 1990, as Executive Chairman from 1990
to 2005, as Chairman of the Executive
Committee from 2006 to 2008 and as Executive
Co-Chairman from 2008 until today. He also
served as Vice-Chairman of Power Corporation
from 1991 to 1996. He was named Chairman
and Co-CEO of Power Corporation in 1996.
From 1982 to 1990, he was a member of the
Management Committee of Pargesa Holding SA
and in 1991, Executive Vice Chairman and then
Executive Chairman of the Management
Committee. In 2003, he was appointed Co-Chief
Executive Officer and in 2013 named Chairman
of the Board of Directors.
Other activities and functions
• Member of the Board of Directors of Power
Corporation of Canada, Montréal, Canada
• Member of the Board of Directors of Power
Financial Corporation, Montréal, Canada
• Vice-Chairman of the Board of Directors of
Groupe Bruxelles Lambert, Brussels, Belgium
• Member of the Board of Directors of Great-
West Lifeco Inc., Winnipeg, Canada (including
those of its major subsidiaries)
Professional background
Swiss national born in 1949, Beat Hess was
elected to the Board of Directors of
LafargeHolcim Ltd (then “Holcim Ltd”) in 2010.
He holds a doctorate in law and is admitted to
the bar in Switzerland. From 1977 to 2003, he
was initially Legal Counsel and subsequently
General Counsel for the ABB Group. From 2004
until the end of 2010, he was Legal Director and
a Member of the Executive Committee of the
Royal Dutch Shell Group, London and The
Hague.
Other activities and functions
• Member of the Board, Member of the
Chairman’s and Corporate Governance
Committee, and Chairman of the
Compensation Committee of Nestlé S.A.,
Vevey, Switzerland
• Vice-Chairman of the Board of Directors and
Member of the Nomination and Compensation
Committee of Sonova Holding AG, Stäfa,
Switzerland
• Member of the Curatorium of The Hague
Academy of International Law
Oscar Fanjul
Vice-Chairman
Professional background
Dual Spanish and Chilean national born in 1949,
Oscar Fanjul was elected to the Board of
Directors of LafargeHolcim Ltd in 2015. Oscar
Fanjul holds a PhD in Economics. He was
Vice-Chairman of the Board of Directors of
Lafarge S.A. He began his career working for the
industrial holding INI, Madrid, Spain. He was
Chairman founder and CEO of Repsol, S.A.,
Madrid, Spain. He has been Chairman of
Hidroeléctrica del Cantábrico, S.A., Oviedo,
Spain and of Deoleo S.A., Madrid, Spain. He has
also been a board member of the London Stock
Exchange, Unilever, London/Rotterdam, UK/
Netherlands, Areva, France, and BBVA, Spain.
Other activities and functions
• Vice Chairman of Omega Capital, Madrid,
Spain
• Member of the Board of Directors of Marsh &
McLennan Companies, New York NY, USA
• Member of the Board of Directors of Ferrovial
S.A., Madrid, Spain
106
• Member of the Board of Directors of IGM
Financial Inc., Winnipeg, Canada (including
those of its major subsidiaries)
• Chairman of the Board of Directors of Pargesa
Holding SA, Geneva, Switzerland
• Member of the Board of Directors of SGS SA,
Geneva, Switzerland
Patrick Kron
Member
Professional background
French national born in 1953, Patrick Kron was
elected to the Board of Directors of
LafargeHolcim Ltd in 2017. Patrick Kron is a
graduate of the Ecole Polytechnique and the
Paris Ecole des Mines, France. He began his
career at the French Industry Ministry in 1979
before joining the Pechiney group in 1984,
where he held senior operational responsibilities
in one of the group’s largest factories in Greece
before becoming manager of Pechiney’s Greek
subsidiary in 1988. Between 1988 and 1993,
Patrick Kron held various operational and
financial positions, first managing a group of
activities in aluminium processing, before being
appointed Chairman and CEO of Pechiney
Électrométallurgie. In 1993, he became member
of the executive committee of the Pechiney
group and was Chairman and CEO of Carbone
Lorraine from 1993 to 1997. From 1995 to 1997,
he ran Pechiney’s Food and Health Care
Packaging Sector and held the position of COO
of the American National Can Company in
Chicago (United States). From 1998 to 2002,
Patrick Kron was Chairman of the Executive
Board of Imerys. A director of Alstom since July
2001, he was appointed CEO of Alstom in
January 2003, and then Chairman and CEO in
March 2003, a position he held until January
2016.
Other activities and functions
• Founder of PKC&I (Patrick Kron - Conseils &
Investissements)
• Chairman of the Board of Directors of Truffle
Capital, Paris, France
• Member of the Board of Directors of Sanofi
S.A., Paris, France
• Member of the Board of Directors of Bouygues
S.A., Paris, France
• Member of the Board of Directors of Halcor
Metal Works S. A., Athens, Greece
• Member of the Board of Directors of Segula
Technologies S.A., Nanterre, France
Gérard Lamarche
Member
Adrian Loader
Member
Jürg Oleas
Member
Professional background
Swiss national born in 1957, Jürg Oleas was
elected to the Board of Directors of
LafargeHolcim Ltd (then “Holcim Ltd”) in 2014,
retired from the Holcim Ltd Board in the context
of the LafargeHolcim merger closing effective
10 July, 2015 and was re-elected at the AGM 2016.
He holds an MSc from the mechanical
engineering from the Swiss Federal Institute of
Technology (ETH) in Zurich, Switzerland. He is
CEO of GEA Group Aktiengesellschaft, a
Düsseldorf-based mechanical engineering
company listed on Germany’s MDAX stock index.
Jürg Oleas has been a member of the GEA Group
Executive Board since joining the company in
May 2001. Initially responsible for the Group’s
chemical activities, he was appointed CEO of GEA
Group on November 1, 2004. Before joining the
GEA Group, he spent nearly 20 years with ABB
and the Alstom Group, where he held several
management positions.
Other activities and functions
• Chairman of the Board of Directors of LL Plant
Engineering AG, Ratingen, Germany
• Member of the Board of Directors and
Chairman of the Strategy Committee of RUAG
Holding AG, Bern, Switzerland
Professional background
British national born in 1948, Adrian Loader was
elected to the Board of Directors of
LafargeHolcim Ltd (then “Holcim Ltd”) in 2006.
Adrian Loader holds an Honours Degree in
History from Cambridge University and is a fellow
of the Chartered Institute of Personnel and
Development. He was Chairman of the
Nomination & Compensation Committee of
Holcim Ltd from 2014 to 2015. He began his
professional career at Bowater in 1969 and joined
Shell the following year. Until 1998, he held
various management positions in Latin America,
Asia, and Europe and at the corporate level. In
1998, he was appointed President of Shell Europe
Oil Products and in 2004 became Director for
strategic planning, sustainable development, and
external affairs for the Shell Group. In 2005 he
became Director of the Strategy and Business
Development Directorate of Royal Dutch Shell,
Den Haag, Netherlands; he became President
and CEO of Shell Canada in 2007 and retired from
Shell at the end of the year. In January 2008, he
joined the Board of Directors of Candax Energy
Inc., Toronto, Canada and was Chairman until
June 2010. He then served as Chairman of
Compton Petroleum, Calgary, Canada until
August 2012, and as Chairman of the Board of
Directors of Oracle Coalfields PLC, London, United
Kingdom until April 2016.
Other activities and functions
• Member of the Board of Directors of Sherritt
International Corporation, Toronto, Canada
• Member of the Board of Directors of Alderon
Iron Ore, Montreal, Canada
• Chairman of Resero Gas, London, United
Kingdom
Professional background
Belgian national born in 1961, Gérard Lamarche
was elected to the Board of Directors of
LafargeHolcim Ltd in 2015. He is a graduate in
Economics Sciences from the University of
Louvain-la-Neuve, Belgium, and the INSEAD
Business School, Fontainebleau, France
(Advanced Management Program for Suez Group
Executives). He also trained at Wharton
International Forum in 1998-1999 (Global
Leadership Series). He was a Member of the
Board of Directors of Lafarge S.A. between 2012
and 2016 and also a Member of the Audit
Committee and a Member of the Strategy,
Investment and Sustainable Development
Committee. Gérard Lamarche is Co-CEO of
Groupe Bruxelles Lambert, Brussels, Belgium. He
began his career with Deloitte Haskins & Sells,
Brussels, Belgium, in 1983 and was appointed as
an M&A consultant in the Netherlands in 1987. In
1988, he joined Société Générale de Belgique,
Brussels, Belgium as Investment Manager. He
was promoted to Controller in 1989 before
becoming Advisor to the Strategy and Planning
Department from 1992 to 1995. He joined
Compagnie Financière de Suez as Special Advisor
to the Chairman and Secretary to the Suez
Executive Committee, Paris, France, and was later
appointed Senior Vice President in charge of
Planning, Control and Accounting. In 2000, he
joined NALCO (the US subsidiary of the Suez
Group based in Naperville Il, USA) as General
Managing Director. He was appointed CFO of the
Suez Group in 2003.
Other activities and functions
• Member of the Board of Directors, Member
of the Audit Committee and Chairman of the
Remuneration Committee of Total SA,
Paris, France
• Member of the Board of Directors and
Member of the Audit Committee of SGS,
Geneva, Switzerland
• Member of the Board of Directors of Umicore,
Brussels, Belgium
Governance and Compensation — Board of Directors
107
LafargeHolcim Annual Report 2018 Corporate governance
continued
Our Board of Directors
continued
Nassef Sawiris
Member
Hanne Birgitte Breinbjerg Sørensen
Dieter Spälti
Member
Member
Professional background
Egyptian national born in 1961, Nassef Sawiris
was elected to the Board of Directors of
LafargeHolcim Ltd in 2015. He holds a Bachelor
of Economics from the University of Chicago.
Nassef Sawiris was a Member of the Board of
Directors of Lafarge S.A. from 2008 to 2015 and
was a Member of the equivalent Committees.
Nassef Sawiris is the Chief Executive Officer of
OCI N.V. a role previously held at Orascom
Construction Industries SAE which he joined in
1982. Orascom Construction Industries SAE,
where from 2009 he also held the role of
Chairman, was the predecessor to OCI N.V.
Other activities and functions
• Member of the Board of Directors of Adidas
AG, Herzogenaurach, Germany
• Member of the Cleveland Clinic’s International
Leadership Board Executive Committee,
Cleveland, USA
• Member of the University of Chicago’s Board
of Trustees, Chicago, USA
• Member of the International Council of JP
Morgan
• Member of the EXOR Partners Council
Professional background
Danish national born in 1965, Hanne Birgitte
Breinbjerg Sørensen was elected to the Board of
Directors of LafargeHolcim Ltd (then “Holcim
Ltd”) in 2013. Hanne Birgitte Breinbjerg
Sørensen holds an MSc in Economics and
Management from the University of Aarhus. She
was a Member of the Nomination &
Compensation Committee of Holcim Ltd from
2014 to 2015 and has been re-elected in 2016.
Until the end of 2013, she was the Chief
Executive Officer of Maersk Tankers,
Copenhagen and has been Chief Executive
Officer of Damco, The Hague, Netherlands,
another company of the A.P. Møller-Maersk
Group, Copenhagen, Denmark, from 2014 until
December 31, 2016. She was a Member of the
Board of Directors of Koninklijke Vopak N.V.,
Rotterdam, the Netherlands, until February 16,
2018.
Other activities and functions
• Member of the Board of Directors and
Member of the Nomination and Remuneration
Committee of Ferrovial S.A., Madrid, Spain
• Member of the Board of Directors Chairperson
of the CSR Committee and Member of the NRC
of Delhivery Pvt. Ltd., Gurgaon, India
• Member of the Board of Directors of TCS,
Mumbai, India
• Member of the Board of Directors,
Chairperson of the Risk Committee and
Member of the Stakeholder Relations
Committee of Tata Motors Ltd, Mumbai, India
• Member of the Board of Directors of Jaguar
Land Rover Automotive PLC, Coventry, UK
• Member of the Board of Directors, Member of
the Nomination and Remuneration
Committee, and Chairperson of the Audit
Committee of Sulzer Ltd, Winterthur,
Switzerland
Professional background
Swiss national born in 1961, Dieter Spälti was
elected to the Board of Directors of
LafargeHolcim Ltd (then “Holcim Ltd”) in 2003. He
studied law at the University of Zurich,
Switzerland, where he obtained a doctorate in
1989. He was a Member of the Audit Committee
from 2010 to 2015 and of the Governance &
Strategy Committee of Holcim Ltd from 2013 to
2015. Dieter Spälti began his professional career
as a Credit Officer with Bank of New York in New
York NY, USA, before taking up an appointment
as Chief Financial Officer of Tyrolit (Swarovski
Group), based in Innsbruck, Austria, and Zurich,
Switzerland in 1991. From 1993 until 2001, he was
with McKinsey & Company, ultimately as a
partner, and was involved in numerous projects
with industrial, financial, and technology firms in
Europe, the USA, and Southeast Asia.
In October 2002, he joined Rapperswil-Jona,
Switzerland-based Spectrum Value Management
Ltd as a partner; the firm administers the
industrial and private investments of the family of
Thomas Schmidheiny. Since 2006, he has been
Chief Executive Officer of Spectrum Value
Management Ltd, Rapperswil-Jona, Switzerland.
Other activities and functions
• Member of the Board of Directors of Spectrum
Value Management Ltd, Rapperswil-Jona,
Switzerland
• Member of the Board of Directors of
Schweizerische Cement-Industrie-
Aktiengesellschaft, Rapperswil-Jona,
Switzerland
108
Governance and Compensation — Board of Directors
109
LafargeHolcim Annual Report 2018 Corporate governance
continued
Executive Committee1
Jan Jenisch
CEO
Nationality: German
Born: 1966
Keith Carr
Member
Nationality: British
Born: 1966
Marcel Cobuz
Member
Nationality: Romanian and French
Born: 1971
Feliciano González Muñoz
Member
Nationality: Spanish
Born: 1963
Miljan Gutovic
Member
Nationality: Australian
Born: 1979
Martin Kriegner
Member
Nationality: Austrian
Born: 1961
1 As of 7 March 2019
110
Oliver Osswald
Member
Nationality: Swiss
Born: 1971
Géraldine Picaud
Member
Nationality: French
Born: 1970
René Thibault
Member
Nationality: Canadian
Born: 1966
Governance and Compensation — Executive Committee
111
LafargeHolcim Annual Report 2018 Corporate governance
continued
Executive Committee1
continued
Jan Jenisch
CEO
Jan Jenisch has been CEO of LafargeHolcim
since September 1, 2017. He has studied in
Switzerland and the US and is a graduate of the
University Fribourg, Switzerland with an MBA
(lic. rer. pol.). From 2012 Jan Jenisch served as
Chief Executive Officer of Sika AG which
develops and manufactures systems and
products for the building materials and
automotive sector. Under his leadership, Sika
expanded into new markets and set new
standards of performance in sales and
profitability. Jan Jenisch joined Sika in 1996 and
went on to work in various management
functions and countries. He was appointed to
the Management Board in 2004 as Head of the
Industry Division and he served as President
Asia Pacific from 2007 to 2012. He is a non-
executive Director of the stock-listed Schweiter
Technologies AG and of the privately held Glas
Troesch.
Urs Bleisch
Member
Urs Bleisch has been a member of the Executive
Committee of LafargeHolcim (then “Holcim Ltd”)
since September 30, 2014 and is responsible for
Growth & Performance. He holds a Master’s
degree in Business and Economics from the
University of Basel. Urs Bleisch joined Holcim in
1994 as Head IT of Holcim Switzerland. From
2000 onward, he assumed Group-wide
responsibility for Information Technology and
was instrumental in the development and
implementation of the global IT strategy of the
Holcim Group. Since 2011, he has managed the
Information and Knowledge Management
function at Holcim Group Support Ltd. In 2012
he was appointed CEO of Holcim Group Services
Ltd and of Holcim Technology Ltd. Since July
2015, Urs Bleisch has led the global functions of
Cement Industrial Performance, Project
Management & Engineering, Logistics,
Procurement, Waste Management / Geocycle,
112
Aggregates and Performance Navigation. In
January 2018 he took on additional
responsibility for the commercial area,
development of innovative products and
services as well as the capabilities to bring these
solutions to customers around the world.
Marcel Cobuz
Member
Marcel Cobuz has been a member of
the Executive Committee of LafargeHolcim since
January 2018 and is responsible for the Europe
region. He studied Law and Global Economics
at University of Bucharest and has completed
Executive Education programs at IMD and
INSEAD. Marcel Cobuz joined the company in
2000. At LafargeHolcim, he has held various
operational roles in six different countries
during which time he established a successful
P&L track record. He has been country CEO of
Indonesia, Iraq and Morocco. In his various
country roles, Marcel has delivered results
notably by investing in new offers in building
and infrastructure, constructing and operating
new plants and managing joint ventures and
partnerships in listed companies. In Group roles
between 2012 and 2015, he was instrumental in
leading organizational change in marketing
across Lafarge before heading up the Global
Pre-Merger Integration Project between Lafarge
and Holcim.
Miljan Gutovic
Member
Miljan Gutovic has been a member of the
Executive Committee of LafargeHolcim since
July 2018 and is responsible for the Middle East
Africa region. He holds a Bachelor's degree in
Civil Engineering and a PhD in Engineering from
the University of Technology in Sydney. Initially
joining LafargeHolcim as Head of Marketing &
Innovation, Miljan Gutovic was responsible for
product development and commercial solutions.
With over 13 years of experience in the building
materials sector, Miljan Gutovic has a successful
track record in developing and executing
growth strategies as a General Manager in the
Middle East and Australia.
Martin Kriegner
Member
Martin Kriegner has been a member of the
Executive Committee of LafargeHolcim since
August 2016 and is Region Head for Asia. He is a
graduate of Vienna University with a Doctorate
in Law and he obtained an MBA at the
University of Economics in Vienna. Martin
Kriegner joined the Group in 1990 and became
the CEO of Lafarge Perlmooser AG, Austria in
1998. He moved to India as CEO of the Lafarge
operations in 2002 and later served as Regional
President Cement for Asia, based in Kuala
Lumpur. In 2012, he was appointed CEO of
Lafarge India for Cement, RMX and Aggregates.
In July 2015 he became Area Manager Central
Europe for LafargeHolcim operations and was
appointed Head of India in 2016. Effective
January 2018, Martin Kriegner is Region Head
Asia, including Australia and New Zealand.
Oliver Osswald
Member
Oliver Osswald has been a member of the
Executive Committee of LafargeHolcim since
August 2016 and is responsible for Central and
South America. He is a graduate of the
Technische Hochschule in Ulm and holds an
Executive Education Degree from Harvard
Business School. Oliver Osswald joined Holcim
Apasco in Mexico in 1995. He has been
responsible for a number of plants in
Switzerland and in Germany between 1999 and
2005. From 2005 to 2010, he held management
and marketing positions in Holcim Switzerland.
He was appointed Commercial Director for
Holcim Apasco in Mexico in 2012 before being
appointed Country Head for Argentina in 2014.
Géraldine Picaud
Member
Géraldine Picaud has been Chief Financial
Officer of LafargeHolcim since January 2018.
She holds a Master Degree in Business
Administration from Reims Business School.
Géraldine Picaud joined the Group from CAC
40-listed ophthalmic optics company Essilor
International, where she was Group CFO. Prior
to that she was CFO of Volcafe Holdings, the
Switzerland-based coffee business of ED&F Man.
Géraldine initially joined ED&F Man in London in
2007 as Head of Corporate Finance in charge of
M&A. This followed 13 years as CFO at
international specialty chemicals group, Safic
Alcan as Head of Business Analysis and then as
CFO. Géraldine Picaud started her career with
audit firm Arthur Andersen.
René Thibault
Member
René Thibault has been a member of the
Executive Committee of LafargeHolcim since
January 2018 and is responsible for the North
America region. He is a graduate of Queen’s
University in civil egineering and has completed
the Advanced Management Program at Harvard
Business School. René Thibault joined the
company in 1989 and has built a strong
commercial track record, with a particular
expertise in downstream offerings to customers.
After progressing through leadership roles in
Canada, in 2007 René served as Vice President,
Strategy for Europe, Middle East and Africa
based in France. Returning to Canada in 2009,
he led the Western Canada, aggregates and
concrete businesses. In 2012, adding the
cement business to his control, he was
appointed CEO Western Canada.
The following Executive Committee
members joined after the end
of 2018
Keith Carr
Member
Keith Carr became a member of the Executive
Committee of LafargeHolcim as of January 2019
and is Head of Legal and Compliance. Keith Carr
joined LafargeHolcim in 2017 as Group General
Counsel. In addition to the Legal and
Compliance function, he became responsible for
the Security function during 2018. Prior to
LafargeHolcim Keith Carr was General Counsel
of GE’s Power Division. Before that he held
various roles in Alstom SA, ABB and Rolls Royce,
including Group General Counsel and member
of the Executive Committee of Alstom and
General Counsel of its Power Division. A UK
national, he gained his LLB degree from
Northumbria University, is a qualified solicitor in
England and Wales and is a Chartered Company
Secretary.
Feliciano González Muñoz
Member
Feliciano González Muñoz became a member of
the Executive Committee of LafargeHolcim as of
January 2019 and is Head of Human Resources.
He has worked for more than eleven years in
senior human resources (HR) roles with
LafargeHolcim. Before becoming Head HR in
2018, Feliciano González Muñoz was HR Director
for Europe and interim CEO of Spain from
2013-2015. Feliciano González Muñoz has a PhD
in Law from Universidad Complutense de
Madrid and holds an Executive MBA from
Instituto de Empresas, Madrid. Before joining
LafargeHolcim Feliciano developed his career at
Fujitsu Ltd, BPB Plc and Almirall.
Governance and Compensation — Executive Committee
113
LafargeHolcim Annual Report 2018 Compensation report
Director and executive compensation is
designed to reinforce the LafargeHolcim
strategy by helping the company attract,
motivate and retain talent while aligning
their interests with those of shareholders.
The executive compensation structure is
well-balanced by rewarding short-term
and long-term performance, by combining
absolute and relative as well as financial
and non-financial performance indicators
and by delivering compensation through a
mix of cash and equity. To provide further
alignment with shareholders, executives
are expected to build a minimum level of
LafargeHolcim share ownership over time.
The Compensation report provides
detailed information on the compensation
programs at LafargeHolcim, on the
compensation awarded to the members
of the Board of Directors and the
Executive Committee in 2018 and on the
governance framework around
compensation. It is written in accordance
with the Ordinance against Excessive
Compensation in Listed Stock
Corporations (OaEC), the standard relating
to information on Corporate Governance
of the SIX Swiss Exchange and the
principles of the Swiss Code of Best
Practice for Corporate Governance of
economiesuisse.
114
Dear shareholders,
I am pleased to share with you the
LafargeHolcim Compensation report for
the financial year 2018, which was
prepared in accordance with applicable
laws, rules and regulations.
As the leading global construction
materials and solutions company, we aim
to be an employer of choice for our
employees. This is supported by our
compensation framework that is designed
to attract, motivate and retain the
qualified talent needed to succeed
globally while providing excellent returns
to our shareholders.
In 2018 our momentum accelerated in the
second half of the year, during which we
exceeded our sales targets. Profitability
increased over-proportionally as we
completed a very successful year. There
were also several personnel changes
within the Executive Committee in 2018.
Effective January 2018, Géraldine Picaud
started as the new Chief Financial Officer.
The positions of Head of Performance &
Cost and Head of Growth & Innovation
were combined into one role. Marcel
Cobuz was nominated Head of Europe
and René Thibault was nominated Head of
North America. In May 2018, Caroline
Luscombe left the Group and was not
immediately replaced in the Executive
Committee. Finally, in July 2018, Miljan
Gutovic was promoted to the position of
Head of Middle East & Africa.
In 2018, the Nomination, Compensation
and Governance Committee (NCGC)
appointed a new independent
compensation advisor, engaged with a
number of our large shareholders and
conducted a strategic review of the
compensation programs applicable to the
Executive Committee in order to ensure
their continuous alignment to the
business strategy and to shareholders’
interests. As a result of this review, the
NCGC concluded that while no
fundamental change was necessary to the
design of the compensation plans, certain
governance aspects should be reinforced
from 2019 onwards:
• Revised termination rules in the annual
incentive plan;
• Introduction of clawback and malus
provisions in the annual incentive plan;
• Strengthening of the existing share
ownership guideline.
Furthermore, the overall design of the
incentive plans has been confirmed as
communicated in last year’s
Compensation report:
• Annual incentive: based on financial
performance (85%) including relative
performance of LafargeHolcim
compared to peer companies, as well as
Health & Safety (15%). The Annual
Incentive is paid out half in cash and half
in blocked shares.
• Long-term incentives: combination of
performance shares subject to a three-
year vesting based on earnings per share
(EPS) before impaiment and divestments
and return on invested capital (ROIC)
performance, and performance options
subject to a five-year vesting based on
total shareholder return (TSR) results.
Otherwise, the NCGC performed its
regular activities throughout the year such
as the succession planning for the
positions on the Board of Directors and
the Executive Committee, the
performance goal setting at the beginning
of the year and the performance
assessment at year end, the determination
of the compensation of the members of
the Board of Directors and the Executive
Committee, as well as the preparation of
the Compensation report and of the
say-on-pay vote at the Annual General
Meeting. You will find further details about
the NCGC's activities during the reporting
year and the compensation programs in
Oscar Fanjul
Chairman of the Nomination, Compensation and
Governance Committee (NCGC)
this report. This Compensation report will
be submitted to a consultative
shareholder vote at the Annual General
Meeting 2019.
Looking ahead, we will continue to assess
and review our compensation system to
ensure that it is still fulfilling its purpose in
the evolving context in which the
company operates and is well aligned with
our shareholders’ interests. We will also
maintain an open dialog with our
shareholders and their representatives.
We would like to thank you for sharing
your perspectives on executive
compensation with us and trust that you
will find this report informative.
Oscar Fanjul
Chairman of the Nomination, Compensation and
Governance Committee (NCGC)
Governance and Compensation — Compensation report
115
LafargeHolcim Annual Report 2018 Compensation
at a glance
Summary of compensation of the
Board of Directors in 2018
In order to ensure independence in their
supervisory function, members of the
Board of Directors receive a fixed
compensation only, delivered in the form
of cash and shares blocked for five years.
The compensation system for the Board of
Directors does not contain any
performance-related components.
Annual retainer (gross)
Board chair1
Board vice-chair1
Board member
Cash
(CHF)
825,000
200,000
100,000
Shares
(CHF)
Expense lump sum
(CHF)
Committee fees
825,000
200,000
100,000
70,000 2
AC
10,000
NCGC
10,000
HSSC
Chair
(CHF)
160,000
0 3
125,000
Member
(CHF)
40,000
40,000
40,000
1 Not eligible for committee fees
2 Includes secretarial allowance of CHF 60,000 p.a.
3 The CHF 125,000 payable to the NCGC chair is not paid because the position is held by the Board vice-chair, who is not eligible for committee fees.
Summary of compensation of the
Executive Committee in 2018
Executive compensation is designed to
reinforce the LafargeHolcim strategy by
helping the company attract, motivate
and retain talent, while aligning their
interests with those of shareholders. The
compensation structure is well-balanced
by rewarding short-term and long-term
performance, by combining absolute and
relative as well as financial and non-
financial performance indicators and by
delivering compensation through a mix of
cash and equity.
ambitious and stretched targets. It
consists of short-term and long-term
elements as illustrated below.
The compensation of the Executive
Committee consists of fixed and variable
elements. Base salary and benefits form
the fixed compensation and are based on
prevalent market practice. Variable
compensation drives and rewards Group
and regional performance based on
Share ownership guideline: the CEO must
hold at least 300% of his annual base
salary in shares, other Executive
Committee members 150%.
Clawback and malus provisions apply to
the long-term incentive plan (LTI).
Compensation element
Purpose
CEO
ExCo
Base salary
Reward for the role
Pension and benefits
Protect against risks, attract and retain
Annual incentive
Long-term incentive
Reward annual performance
• Group relative performance (30%)
• Recurring EBITDA (30%)
• Free cash flow (25%)
• Health & safety (15%)
Reward long-term performance (3-5
years) and align with shareholders’
interests:
• Performance shares: EPS and ROIC
• Performance Options: TSR
Target: 150% of salary
Maximum payout: 166.7% of target
(250% of salary)
Target: 75% of salary
Maximum payout: 166.7% of target
(125% of salary)
Performance shares:
Target: 125% of salary
Maximum vesting: 200% of target
(250% of salary)
Performance Options:
Fair value: 52.5% of salary
Performance shares:
Target: 70% of salary
Maximum vesting: 200% of target
(140% of salary)
Performance Options:
Fair value: 26% of salary
116
Compensation reportcontinued Compensation of the Board of
Directors in 2018
The compensation awarded to the Board
of Directors in financial year 2018 is within
the limits approved by the shareholders at
the Annual General Meeting. The
compensation period is not yet
completed, a definitive assessment will be
provided in the 2019 Annual Report.
Compensation of the Executive
Committee for 2018
The compensation awarded to the
Executive Committee in financial year
2018 is within the limits approved by the
shareholders at the Annual General
Meeting 2017.
Summary of performance in 2018
For 2018 the company’s Net Sales
increased by 5.1% on a like-for-like basis,
and Recurring EBITDA increased by 3.6%,
also like-for-like.
• Annual incentive 2018: payout of 81.5%
of target on average for the Executive
Committee
• Long-term incentive: the performance
shares granted in 2015 due to vest in
2018 forfeited, while the vesting level of
the performance options granted in 2015
was 70%.
Compensation period
AGM 2017 – AGM 2018
AGM 2018 – AGM 2019
Approved amount
(CHF)
5,400,000
4,800,000
Effective amount
(CHF)
5,085,662
To be determined 1
1 The compensation period is not yet completed; a definitive assessment will be provided in the Compensation report 2019
Compensation period
Financial year 2018
Approved amount
(CHF)
40,500,000
Effective amount
(CHF)
30,413,194
Changes from 2019 onwards
• Annual incentive: increase of the
Compensation governance
• Authority for decisions related to
maximum payout from 166.7% to 200%
of target bonus, amended termination
rules and introduction of clawback and
malus provisions.
• Long-term incentive: vesting of
performance options based on relative
TSR instead of absolute TSR.
• Share ownership guideline: increase
from 300% to 500% of annual base salary
for the CEO and increase from 150% to
200% for the other Executive Committee
members.
compensation are governed by the
Articles of Incorporation and the
Organizational Regulations of
LafargeHolcim as described in the
Corporate Governance section.
• The prospective maximum aggregate
amounts of compensation of the Board
of Directors and of the Executive
Committee are subject to binding
shareholders’ votes at the Annual
General Meeting.
• The Compensation report is subject to a
consultative vote by the shareholders at
the Annual General Meeting.
• The Board of Directors is supported by
the NCGC for all matters related to
compensation and governance. The
NCGC members are elected annually by
the shareholders at the Annual General
Meeting.
Governance and Compensation — Compensation report
117
LafargeHolcim Annual Report 2018 Compensation system:
Board of Directors
To guarantee their independence in
exercising their supervisory duties, the
members of the Board of Directors receive
fixed compensation only and do not
participate in LafargeHolcim’s employee
benefits plan. Part of the compensation is
paid in shares which are blocked from sale
and pledging for a period of five years in
order to strengthen the alignment with
shareholders’ interests.
The Board compensation consists of an
annual retainer as Board chair, Board
vice-chair or Board member and
additional fees for assignments to the
committees of the Board either as chair or
member. The Board chair and vice-chair
are not eligible for committee fees. The
annual retainer is paid partially in cash
and partially in shares subject to a
five-year restriction period (prohibition of
sale or pledging). The committee fees are
paid in cash. Additionally, a lump sum
expense allowance is paid in cash and the
Board chair receives a secretarial
allowance. The members of the Board of
Directors receive no additional
reimbursements of business expenses
beyond travel costs from abroad.
Cash compensation is paid quarterly for
the Board members and monthly for the
Board chair. The shares are transferred in
March for the current term (year) of office.
In exceptional circumstances, additional
fees are payable to Board members when
an exceptional workload beyond the
regular function of the Board is required.
In the reporting year, no such exceptional
fees were paid.
Compensation model of the Board of Directors
Annual retainer (gross)
Board chair 1
Board vice chair 1
Board member
Committee fees (gross)
Audit Committee chair
Other Committee chairs 1 (NCGC, HSSC)
Committee member 1
Cash compensation
in CHF
825,000
200,000
100,000
Cash compensation
in CHF
160,000
125,000
40,000
1 The Board chair and vice chair are not eligible for committee fees.
2 Converted into shares based on the average share price between 1 January 2019 and 15 February 2019.
Share-based
Compensation 2
in CHF
825,000
200,000
100,000
Expense allowance
in CHF
Secretarial allowance
in CHF
10,000
10,000
10,000
60,000
118
Compensation reportcontinued Compensation system:
Executive Committee
Executive compensation is designed to
reinforce the LafargeHolcim strategy by
helping the company attract, motivate and
retain talent, while aligning their interests
with those of shareholders. The
compensation programs are built around
the following principles:
Principle
Description
Pay-for-performance
Rewards for short-term performance and long-term success, by a balanced combination of absolute and relative performance
criteria, as well as of financial and non-financial performance metrics.
Alignment with
shareholders
Market
competitiveness
Part of compensation is delivered in equity of the company, thus strengthening the alignment with shareholders’ interests.
Further, executives are expected to build a minimum level of LafargeHolcim share ownership over time.
Compensation is competitive with other companies against which LafargeHolcim competes for talent.
Internal equity
Compensation decisions are taken with consideration to internal equity and consistency.
Transparency
Compensation programs are simple and transparent.
The compensation for members of the
Executive Committee includes the
following elements:
• Annual base salary
• Pensions and benefits
• Variable compensation: annual and
long-term incentives
Compensation model of the Executive Committee
Element
Purpose
Structure
Drivers
Performance
measures
Base salary
Attract and retain
Fixed amount paid monthly
in cash
– Role & responsibilities
– Market value
– Experience
Pensions
and insurances
Protect against risks
Pension contributions and
benefits, insurances
– Market practice
– Role
Benefits
Attract and retain
Annual Incentive
Reward for short-term
performance
– Perquisites
– Car or allowance
– Relocation benefits
– Market practice
– Role
Variable amount paid half in
cash and half in shares
blocked for 3 years
Annual financial and
non-financial performance
– Relative sales growth
– Relative EBITDA growth
– Recurring EBITDA
– Free cash flow
– Health & safety
Long-Term
Incentive (LTI)
– Reward long-term
– Performance shares subject
performance
– Align with shareholders
– Retain
to a three-year vesting
– Performance options subject
to a five-year vesting
Long-term financial
performance
– EPS
– ROIC
– TSR
Governance and Compensation — Compensation report
119
LafargeHolcim Annual Report 2018 Base salaries
Annual base salaries are established on
the basis of the following factors:
• Scope, size, and responsibilities of the
role; skills required to perform the role;
• External market value of the role;
• Skills, experience and performance of
the individual in the role.
Executive Committee under foreign
employment contracts are insured
commensurately with market conditions
and with their position. Each plan varies in
line with the local competitive and legal
environment and is, as a minimum, in
accordance with the legal requirements of
the respective country.
capped at 166.7% of target, i.e. 250% of
base salary for the CEO and 125% of the
base salary for the other Executive
Committee members.
The financial performance is measured
both in absolute terms (against own-set
targets) and in relative terms compared to
a peer group of companies that are
exposed to similar market cycles.
• The absolute financial performance
includes Recurring EBITDA as a measure
of Group and regional operational
profitability, as well as Free Cash Flow as
a measure of the company’s ability to
generate cash. For those objectives, the
NCGC determines a target level of
expected performance (corresponding to
a 100% payout), as well as a threshold
level of performance below which there
is no payout, and a maximum level of
performance above which the payout is
capped.
• The relative financial performance
includes Group revenue growth and
Group Recurring EBITDA growth
compared to peer companies. The
intention is to reward the relative
performance of the company to
neutralize factors outside of
management control. The objective is to
reach at least median performance
within the peer group, which
corresponds to a 100% payout factor.
The peer group includes companies that
were chosen for their comparable
products, technologies, customers,
Benefits and perquisites
Members of the Executive Committee may
receive certain executive perquisites such
as a company car or allowances and other
benefits in kind, in line with competitive
market practice in their country of
contract. Executives who are relocating
may also be provided with expatriate
benefits such as housing, schooling and
travel benefits, in line with the
LafargeHolcim International Mobility
policy. These other elements of
compensation are evaluated at fair value
and included in the compensation tables.
Annual incentive
The annual incentive rewards the financial
results as well as the achievement of
health & safety targets at Group and
regional level (depending on the function)
over a time horizon of one year.
The annual incentive target (i.e. incentive
amount at 100% target achievement) is
expressed as percentage of base salary
and amounts to 150% for the CEO and
75% for the other members of the
Executive Committee. The payout is
Cement producers
Building materials
Boral
Buzzi Unicem
Cemex
CRH
Heidelberg Cement
Vicat
Carlisle
James Hardie
RPM
Saint-Gobain
Sika
Construction
Acciona
ACS
Bouygues
Vinci
To ensure market competitiveness, base
salaries of the Executive Committee are
reviewed annually taking into
consideration the company’s affordability,
benchmark information, internal
consistency and individual performance.
The objective is to provide salaries broadly
in line with the competitive market
practice of selected comparable SMI
companies (refer to section
“Compensation Governance” for further
details on the benchmarking peer group).
Pension
The members of the Executive Committee
participate in the benefits plans available
in the country of their employment
contract. Benefits consist mainly of
retirement, insurance and healthcare
plans that are designed to provide a
reasonable level of protection for the
employees and their dependents with
regards to health, retirement, death and
disability. The members of the Executive
Committee with a Swiss employment
contract participate in LafargeHolcim’s
defined benefit pension scheme
applicable to Swiss-based senior
management, which is set up to achieve,
for executives retiring from LafargeHolcim
at age 62 and assuming 10 years of
service in senior management and 20
years of service with the Group, an
amount of 40% of the average of the last 3
years’ base salaries, inclusive of all other
pension incomes participants may benefit
from. Early or deferred retirement
pensions are adjusted based on actuarial
calculations. The members of the
120
Compensation reportcontinued suppliers or investors and are thus
exposed to similar market cycles.
The companies of the peer group are
listed on page 120.
The measurement of the relative
performance is provided by Obermatt, an
independent Swiss financial research firm
focused on indexing company
performance.
The achievement of the health & safety
target is measured as a score reflecting
improvements in the lost-time injury
frequency rate (LTIFR). The NCGC will also
consider the overall related outcomes
during the year when determining the
achievement level of this objective.
The annual incentive is paid half in cash
and half in shares subject to a three-year
blocking period.
The annual incentive design applicable to
the Executive Committee is summarized
below:
Design of the annual incentive 2018
Role
CEO
Other Executive Committee members
Target opportunity
150% of salary
Maximum opportunity
250% of salary
75% of salary
125% of salary
Metrics
Purpose
Definition
Weighting
Payout formula
Relative group performance
Recurring EBITDA
(group or region)*
Free cash flow
(group or region)*
Health & safety factor
(group or region)*
Measures Group’s
performance compared to
peer companies exposed to
similar market cycles
Relative Group revenue
growth (50%) and relative
Group recurring (EBITDA)
growth (50%) expressed as
percentile ranking in the
peer group of companies
Measures Group or regional
operational profitability
Measures the company’s
ability to generate cash
Measure the accident rate
to ensure a safe workplace
Cash flow from operating
activities, adjusted for net
maintenance and
expansion capital
expenditures
Lost-time injury frequency
rate (LTIFR) and overall
health & safety outcomes
as per assessment by the
NCGC
Operating profit before
depreciation, amortization
and impairment of
operating assets and before
restructuring, litigation,
implementation and other
non-recurring costs, at
budget FX rate, adjusted for
changes in scope
30%
167%
100%
42%
0%
30%
167%
100%
42%
0%
25%
167%
100%
42%
0%
15%
167%
100%
42%
0%
25th
percentile
Target
75th
percentile
90%
of target
Target
110%
of target
90%
of target
Target
110%
of target
2017
LTIFR
95% of
2017 LTIFR
90% of
2017 LTIFR
* Group level for corporate Executive Committee roles, regional level for regional Executive Committee roles
Governance and Compensation — Compensation report
121
LafargeHolcim Annual Report 2018 Performance options
In 2018, performance options are subject
to a five-year vesting period based on
LafargeHolcim’s total shareholder return
(TSR) and have a maturity of ten years.
Threshold vesting (25% of maximum) will
be achieved for a TSR of 35%, target
vesting (50% of maximum) will be
achieved for a TSR of 40% and full vesting
will be achieved for a stretch TSR of 50% at
the end of the five-year period. The
vesting level between threshold, target
and stretch TSR will be calculated on a
straight-line basis. Should the stretch 50%
TSR target be achieved before the end of
the five-year period, the options will vest
at that moment but no earlier than three
years from the grant date. The decision to
replace the former relative TSR
performance shares by performance
options was driven by the intention to
further strengthen the link between the
compensation of the Executive Committee
and the shareholders’ interests in the
context of the new, growth-orientated
business strategy.
Long-term incentives
Our compensation philosophy is to align a
significant portion of compensation of the
Executive Committee with long-term
company performance and to strengthen
alignment with shareholders’ interests. In
order to support the Strategy 2022 –
“Building for Growth” business strategy,
the grant awarded under the long-term
incentive consists of both performance
shares and performance options.
Performance shares
Performance shares are subject to a
three-year vesting period based on Group
Earnings per Share (EPS) before
impairment and divestments and Group
Return on Invested Capital (ROIC). These
performance metrics have been chosen as
they reflect the strategic priorities of the
Group to increase profitability through
strong operating leverage (EPS before
impairment and divestments) and to
improve how the company generates
profits relative to the capital it has
invested in its business (ROIC). For both
metrics, the NCGC determines a threshold
performance level (below which there is
no vesting), a target level (vesting of 100%)
and a stretch performance level (vesting
of 200%). Between these levels, vesting is
calculated on a straight-line basis, as for
previous performance share awards.
Changes for 2019
Starting with financial year 2019, the
annual incentive will be amended as
follows:
• Payout curve: the payout maximum
will be increased from 166.7% to 200%
of target bonus as communicated
previously.
• Termination provisions: a member of
the Executive Committee who is
leaving the company and has a
contractual entitlement to the annual
incentive during the notice period
may receive the annual incentive
payment on a pro-rata basis for the
number of months of employment
during the financial year and based
on the effective performance level
(determined after year-end) but not to
exceed the target incentive amount.
Previously, Executive Committee
members who left the company and
had a contractual entitlement to the
annual incentive during the notice
period received a pro-rata payout at
target level at the end of their
employment. Based on shareholders’
feedback, the decision was made to
not accelerate the incentive payout
but to wait for the end of the year so
that effective performance can be
measured.
• Clawback and malus provisions will be
introduced in the annual incentive. In
case of financial restatement due to
non-compliance to the accounting
standards and/or fraud, or in case of
violation of law and/or internal rules by
a participant, the Board of Directors
may deem all or part of the annual
incentive to forfeit (malus) or may seek
reimbursement of all or part of any
paid annual incentive (clawback).
Those provisions apply during three
years of any year subject to a financial
restatement or during which the
fraudulent behavior happened.
122
Compensation reportcontinued The annual grant value is expressed as
percentage of base salary and amounts to
177% for the CEO and 96% for the other
members of the Executive Committee.
The long-term incentive design applicable
to the Executive Committee is summarized
below:
Design of the long-term incentive
Role
CEO
Other Executive Committee members
Grant value in 2018
177% of salary (125% in performance shares,
52.5% in performance options)
96% of salary (70% in performance shares,
26% in performance options)
Metrics
Purpose
Definition
EPS before impairment and divestments
ROIC (Performance Shares)
TSR (Performance Options)
Measures the company’s
profitability to investors
Measures the company’s ability to
generate returns from invested capital
Measures the company’s ability to
provide investors with strong returns
Underlying, fully-diluted EPS adjusted
for after tax gains and losses on
disposals of Group companies and
impairments of goodwill and assets
ROIC improvement at year end 2020,
adjusted for changes in scope between
2018 and 2020
LafargeHolcim’s Annual 3-month
average TSR of 50% at the end of 2022
(or earlier but not before three years
from the grant date)
Weighting
60% of Performance Share grant
40% of Performance Share grant
100% of Performance Option grant
Performance period
2020
Performance vesting
200%
150%
100%
50%
0%
Target
–5.3%
Target
Target
+11.3%
Maximum vesting level
200%
2020
200%
150%
100%
50%
0%
200%
Target
–100bps
Target
Target
+100bps
2018 – 2022
100%
50%
0%
100%
TSR
35%
TSR
40%
TSR
50%
Absolute targets are not disclosed as they could give an unfair
competitive advantage to our competitors. They are in line with the
guidance given to investors and will be disclosed at vesting
Governance and Compensation — Compensation report
123
LafargeHolcim Annual Report 2018 Executive share ownership
guidelines
To reflect the importance the NCGC places
on aligning their interests with
shareholders, Executive Committee
members are required to own at least a
minimum multiple of their annual base
salary in LafargeHolcim shares as set out
below:
• CEO: 300% of annual base salary
• Executive Committee members: 150% of
annual base salary
Employment contracts for the
Executive Committee
The contracts of employment of the
Executive Committee members are
concluded for an indefinite period of time
and may be terminated with one year’s
notice. Contracts of employment do not
include severance compensation or
change of control clauses except the
vesting provisions of the LTI awards as
described above.
Changes for 2019
Following the strategic review of
compensation conducted by the NCGC
in the reporting year, the decision was
made to strengthen the share
ownership guideline as follows,
effective on 1 January 2019:
• CEO: 500% of annual base salary
• Executive Committee members: 200%
of annual base salary
Members of the Executive Committee
will be expected to meet the minimum
shareholding requirements within four
years of their appointment to the
Executive Committee (or within four
years of the implementation of the new
guideline for existing Executive
Committee members). In case of
non-compliance to the minimum
requirements at the required date,
Executive Committee members will be
prohibited to sell any shares held.
Further, their annual incentive (net of
statutory deductions) will be paid
entirely in shares. The compliance to
the share ownership guidelines will be
monitored on an annual basis.
The LTI awards are subject to clawback
and malus provisions for a period of
three-year after vesting, in case of
material financial restatement.
Rules in case of termination: the unvested
LTI awards forfeit upon termination of
employment, except in case of retirement,
ill-health, disability, termination due to a
change of control, or at the discretion of
the Nomination, Compensation and
Governance Committee. In such
circumstances, unvested LTI awards are
subject to a pro-rata vesting (for the
number of full months between grant
date and termination date) at regular
vesting date. In the event of death, vesting
is immediate and performance conditions
are considered met. For the avoidance of
doubt, LTI awards always lapse when
termination is due to voluntary
resignation or gross misconduct.
Changes for 2019
The vesting of performance options will
be based on relative TSR instead of
absolute TSR. The peer group of
companies will be the same as the peer
group used for relative performance
measurement in the annual incentive.
124
Compensation reportcontinued Compensation for
the financial year 2018
The tables on page 125 and 127 were
audited according to Article 17 of the
Ordinance against Excessive
Compensation in Listed Stock
Corporations.
C: Commitee chair
M: Member
AC: Audit Committee
NCGC: Nomination, Compensation and Governance Committee
HSSC: Health, Safety & Sustainability Committee
Board of Directors
Positions as per
31 December
Share-Based
compensation
AC NCGC HSSC
Cash
compensation
CHF
Number
Value
CHF
Other 2
CHF
Subtotal
CHF
Social
Security 3
CHF
783,333
17,096
783,333
70,000
1,636,666
233,333
4,365
200,000
10,000
443,333
41,667
4,167
104,168
100,000
10,000
250,000
2018 Total
CHF
2017 Total
CHF
1,636,666
1,952,275
443,333
415,001
104,168
260,144
250,000
250,000
0
0
0
0
100,000
10,000
360,000
4,336
364,336
175,591
100,000
10,000
302,083
100,000
10,000
375,000
0
0
302,083
375,000
375,000
322,917
100,000
10,000
250,000
12,118
262,118
233,333
100,000
10,000
285,416
41,667
4,167
104,168
100,000
10,000
290,000
0
0
0
285,416
351,667
104,168
242,623
290,000
273,333
100,000
10,000
325,416
4,336
329,752
394,999
Name
Beat Hess
Oscar Fanjul
Bertrand Collomb 1
Paul Desmarais, Jr.
Patrick Kron
Gérard Lamarche
Adrian Loader
Jürg Oleas
Nassef Sawiris
Thomas Schmidheiny 1
Hanne B. Sørensen
Dieter Spälti
Total
C
M
M
M
M
C
M
M
M
M
C
M
M
58,334
140,000
250,000
192,083
265,000
140,000
175,416
58,334
180,000
215,416
909
2,182
2,182
2,182
2,182
2,182
2,182
909
2,182
2,182
2,691,249
40,735
1,866,667
168,334
4,726,250
20,790
4,747,040
5,246,883
1 Board member until May 8, 2018
2 Expense allowances and Secretarial allowance for the Board chair
3 Includes mandatory employer contributions of CHF 8,672 for two members under the Swiss governmental social security system (AHV). This amount is out of total employer
contributions of CHF 125,747 paid for all Board Members, and provides a right to the maximum future insured government pension benefit.
Governance and Compensation — Compensation report
125
LafargeHolcim Annual Report 2018 CHF 5,400,000 for the Board of Directors
for the term until the Annual General
Meeting 2018. The compensation paid to
the Board for this term was CHF 5,085,662
(excluding mandatory social security
payments) and is therefore within the
approved limits.
At the AGM 2018, shareholders approved a
maximum aggregate amount of
compensation of CHF 4,800,000 for the
Board of Directors for the term until the
Annual General Meeting 2019. The
compensation paid to the Board of
Directors for this term is anticipated to be
approx. CHF 4,8 million (excluding
mandatory social security payments). The
final amount will be disclosed in the 2019
Annual Report.
Compensation for
the financial year 2018
In 2018, twelve non-executive members of
the Board of Directors received in total
compensation of CHF 4.7 million including
mandatory social security payments (2017:
CHF 5.2 million) of which CHF 2.7 million
(2017: CHF 3.2 million) was paid in cash,
CHF 0.02 million (2017: CHF 0.1 million) in
the form of social security contributions,
and CHF 1.9 million (2017: CHF 2.0 million)
in shares. Other compensation paid
totaled CHF 0.2 million (2017: CHF 0.2
million).
The compensation of the Board of
Directors was lower in 2018 than in 2017
due to discontinuation of additional fees
and time commitment to organize the
CEO succession in 2017.
At the Annual General Meeting 2017,
shareholders approved a maximum
aggregate amount of compensation of
126
Compensation reportcontinued Executive Committee
Performance
shares 2
Performance
options 3
Replacement
award 6
Executive
Jan Jenisch
01.01.2018
to 31.12.2018
other members
01.01.2018 to
31.12.2018
Base
salary
CHF
Other
fixed pay 1
CHF
Annual
bonus
CHF
Fair value
at grant
CHF
Fair value
at grant
CHF
Fair value
at grant
CHF
Pension
contributions 4
CHF
Total 2018
CHF
Total 2017 5
CHF
1,600,000
26,000
2,542,219
1,976,618
921,752
0
344,954
7,411,543
8,772,977
5,574,312
3,572,254
3,340,898
4,293,108
1,335,308
2,001,332
2,884,439
23,001,651
19,367,058
Total
7,174,312
3,598,254
5,883,117
6,269,726
2,257,060
2,001,332
3,229,393
30,413,194
28,140,035
1 Includes the value of benefits in kind: car allowance and benefits for internationally mobile members (expatriates) such as housing, schooling and tax consulting
2 Performance shares granted under the long-term incentive plan, subject to a three-year performance-based vesting period
3 Performance options granted under the long-term incentive plan, subject to a five-year performance-based vesting period
4 Includes payments to the governmental social security system. For Swiss members, includes the mandatory employer contributions of CHF 30,352 under the Swiss governmental
social security system (AHV). This amount is out of total employer contributions of CHF 479,530 paid of all members, and provides a right to the maximum future insured government
pension benefit.
5 In the period from 1.1.2017 to 15.7.2017, compensation amounting to CHF 4,125,563 was paid to the former CEO (Eric Olsen)
6 The replacement award granted to a new Executive Committee member is a combination of performance shares and restricted shares, matching the equity plans forfeited from her
previous employer on a strict like-for-like basis.
Compensation for
the financial year 2018
The total compensation for Executive
Committee members in 2018 is as follows:
The total annual compensation for the
members of the Executive Committee
amounts to CHF 30.4 million (2017: CHF
32.3 million, including payments made to
the former CEO). This amount comprises
base salaries, other fixed pay and variable
compensation of CHF 16.6 million (2017:
CHF 15.8 million), share-based
compensation of CHF 10.6 million (2017:
CHF 11.7 million), employer contributions
to social security and pension plans of CHF
3.2 million (2017: CHF 4.8 million).
The compensation changes in 2018
compared to 2017 are mainly caused by
the following factors:
• Change in the composition of the
Executive Committee and overall
reduction to eight members. The above
figures includes amounts that were paid
to Sâad Sebbar for his termination under
French law, and the amounts paid to
Caroline Luscombe during her notice
period, which started on 1st May 2018.
Miljan Gutovic was promoted to
Executive Committee on July 1st 2018,
his salary is included in the table from
that date. This compares to previous year
with ten Executive Committee members
which included the compensation of the
former CEO (contractual payments) and
of the new CEO (replacement award).
• As a result of the 2018 compensation
review, it was decided not to increase
base salaries of current Executive
Members and not to change their target
Annual Incentive and the grant of
performance shares. Performance
options where introduced.
• The performance achievement under the
annual bonus was higher in 2018 than in
2017. Further details are provided below.
The compensation awarded to the
Executive Committee members for 2018 is
within the total maximal amount of
compensation for the Executive
Committee for the financial year 2018 of
CHF 40,500,000 approved at the Annual
General Meeting 2017.
Governance and Compensation — Compensation report
127
LafargeHolcim Annual Report 2018 Payout Percentage
Threshold
Target
Stretch
Performance in 2018
The company made good progress on all four value
drivers of Strategy 2022 – “Building for Growth”. Those
results impacted the annual incentive as follows:
Payout of the annual incentive in 2018
Metrics
Results
Relative Group
performance
(30%)
With Net Sales growth of 5.1% on a
like-for-like basis, LafargeHolcim
achieved the 51st percentile in the
peer group. With an EBITDA growth
of 3.6% on a like-for-like basis,
LafargeHolcim achieved the 68th
percentile in the peer group.
Net Sales growth
Recurring EBITDA
growth
Recurring
EBITDA (30%)
(Group or
regional)
The 2018 Group Recurring EBITDA
growth like-for-like was between
threshold and target.
The regional EBITDA performance
was mixed with some regions below
threshold (0% payout) and one region
just below target (90% payout).
Group Recurring
EBITDA
Regional
Recurring EBITDA
Free Cash Flow
(25%)
(Group or
regional)
The Group Free Cash Flow was
between threshold and target. The
regional Free Cash Flow performance
was below threshold for all regions
except for one where the target was
exceeded (120% payout)
Group FCF
Regional FCF
Health & Safety
(15%)
(Group or
regional)
The lost-time injury frequency rate
(LTIFR) of 0.79 per million hours
worked exceeded expectations. Two
regions were below threshold, one
above target and two above stretch.
Group LTIFR
Regional LTIFR
Total
Overall payout of 106% for the CEO and of 78% on average for the other Executive
Committee members
128
Compensation reportcontinued Consequently, the annual incentive for the
CEO was 105.9% of target (158.9% of
salary) and 78.0% on average for other
members of the Executive Committee
(58.5% of salary on average).
The first LafargeHolcim LTI plan, granted
in 2015, vested in 2018. The grant
included performance shares subject to a
vesting conditional upon EPS before
impairment and divestments, ROIC and
relative TSR as well as stock options
subject a vesting conditional upon
synergies achieved from the merger and
cumulative Free Cash Flow. The vesting
of those grants applies to five current
Executive Committee members and is
as follows:
Vesting of the long-term incentive in 2018
Grant
Definition
Metrics
Result and payout
Payout calculation
2015
Performance
shares
EPS (30%)
Underlying, fully-diluted earnings per share adjusted for after
tax impairment and gains and losses on divestments in 2017
EPS of CHF 2.35 lead to
a 0% payout
30% * 0%
ROIC (40%)
Improvement in adjusted ROIC (measured in bps) measured on
a like-for-like basis between financial year ends 2015 and 2017
(excluding impairments)
ROIC improvement of 110
basis points lead to
a 0% payout
Relative
TSR (30%)
Percentile-ranking of LafargeHolcim’s TSR vs TSR of a peer
group of 17 similar sector companies from around the world:
ACS, Bouygues, Buzzi Unicem, Cemex, CRH,
HeidelbergCement, James Hardie Industries, Kingspan, Martin
Marietta Materials, Mitsubishi Materials, NCC, Saint-Gobain,
Sika, Skanska, Vicat, Vinci and Vulcan Materials
Relative TSR at 12th
percentile lead to
a 0% payout
40% * 0%
30% * 0%
Total
Synergies
(70%)
2015
Performance
options
Cumulative EBITDA impact of commercial, procurement,
operational efficiency and synergies initiatives and financing
costs, plus CAPEX optimization synergies, on a like-for-like
perimeter and foreign exchange basis
Target fully achieved,
payout of 100%
= overall vesting of 0%
70% * 100% = 70%
Cumulative
cash flow
(30%)
Sum of cash generated and available for debt repayment,
dividend and share buy-backs over the years 2016 to 2018.
Excluding the impact of proceeds received as a result of the
Group’s CHF 3.5 billion disposal program. Cash flows measured
on a like-for-like perimeter and foreign exchange basis
Target missed,
payout of 0%
30% * 0% = 0%
Total
= overall vesting of 70%
Loans granted to members of
governing bodies
As at December 31, 2018, there was one
loan in the amount of CHF 0.1 million
(2017: CHF 0.0 million) outstanding from
René Thibault, member of the Executive
Committee. There were no loans to
members of the Board of Directors or to
parties closely related to members of
governing bodies.
Other transactions
As part of the employee share purchase
plan, LafargeHolcim manages employees’
shares. It sells and purchases
LafargeHolcim Ltd shares to and from
employees and in the open market.
No shares were purchased from members
of the Executive Committee in 2017
and 2018.
Compensation for former members
of governing bodies
During 2018, payments in the total
amount of CHF 10.6 million were made to
eight former members of the Executive
Committee. This compares to a total
amount of CHF 7.8 million for four former
members in 2017.
Governance and Compensation — Compensation report
129
LafargeHolcim Annual Report 2018 Share ownership
information
Board of Directors
On December 31, 2018, members of the
Board of Directors held a total of
9,658,399 registered shares in
LafargeHolcim Ltd. This number
comprises privately acquired shares and
those allotted under participation and
compensation schemes. As of the end of
2018, one non-executive member of the
Board of Directors held privately acquired
LafargeHolcim share purchase (call)
options. Until the announcement of
market-relevant information or projects
(“Blackout periods”), the Board of
Directors, the Executive Committee and
any employees involved are prohibited
from effecting transactions with equity
securities or other financial instruments of
LafargeHolcim Ltd, exchange-listed Group
companies or potential target companies
(trade restriction period).
Shares and options held
by the Board of Directors
Name
Beat Hess
Position
Chairman
Oscar Fanjul
Vice-Chairman
Bertrand Collomb
Member (until May 8, 2018)
Paul Desmarais Jr
Member
Patrick Kron
Member
Gérard Lamarche
Member
Adrian Loader
Jürg Oleas
Nassef Sawiris
Member
Member
Member
Thomas Schmidheiny Member (until May 8, 2018)
Hanne B. Sørensen
Member
Dieter Spälti
Member
Total
1 further information can be found under: www.six-exchange-regulation.com
Shares held as of
December 31, 2018
Options held as of
December 31, 2018
Shares held as of
December 31, 2017
Options held as of
December 31, 2017
40,109
10,675
n/a
40,693
1,021
5,816
18,489
5,147
9,455,606
16,993,600 1
n/a
8,537
72,306
17,419
7,758
116,065
38,943
0
4,066
16,739
3,397
25,180,203
69,072,527
6,776
65,082
10,000,000
9,658,399
16,993,600
94,528,975
10,000,000
Ownership of shares and options:
Executive Committee
As of December 31, 2018, members of the
Executive Committee held a total of
229,143 registered shares in
LafargeHolcim Ltd. This figure includes
both privately acquired shares and those
allocated under the Group’s compensation
schemes. Furthermore, at the end of 2018,
the Executive Committee held a total of
465,011 stock options and 442,085
performance shares; these arose as a
result of the participation and
compensation schemes of various years.
Options are issued solely on registered
shares in LafargeHolcim Ltd. One option
entitles the holder to buy one registered
share in LafargeHolcim Ltd.
During 2018, Jan Jenisch purchased 16,891
LafargeHolcim shares, for a total value of
CHF 0.7 million as at December 31 2018.
Together with previous grants and
purchases, his current shareholding
amounts to 432% of his base salary and
meets the requirements of the CEO Share
Ownership Guideline of 300% of salary.
130
Compensation reportcontinued Number of shares and options held by
Executive Committee members as of December 31, 2018
Name
Jan Jenisch
Urs Bleisch
Marcel Cobuz
Miljan Gutovic
Martin Kriegner
Géraldine Picaud
Oliver Osswald
René Thibault
Total
Position
CEO
Member
Member
Member
Member
Member
Member
Member
Total number
of shares owned
Total number
of performance
options held (at
target)
Total number
of performance
options held (at full
vesting)
Total number of
performance shares
held (at target)
Total number of
performance shares
held (at full vesting)
170,722
14,775
8,425
0
8,034
15,663
3,868
7,656
229,143
50,314
69,239
20,792
0
34,482
14,151
24,660
18,869
232,507
100,628
138,477
41,584
0
68,963
28,301
49,320
37,738
82,818
25,559
13,784
4,403
26,384
32,381
23,471
12,245
165,636
51,117
27,567
8,805
52,768
64,761
46,941
24,490
465,011
221,043
442,085
Number of shares and options held by
Executive Committee members as of December 31, 2017
Name
Jan Jenisch
Ron Wirahadiraksa
Urs Bleisch
Pascal Casanova
Roland Köhler
Martin Kriegner
Gérard Kuperfarb
Caroline Luscombe
Oliver Osswald
Saâd Sebbar
Total
Position
CEO
Member
Member
Member
Member
Member
Member
Member
Member
Member
Total number
of shares owned
Total number
of performance
options held (at full
vesting)
Total number of
performance shares
held (at full vesting)
120,000
5,649
13,116
8,057
39,288
4,094
11,240
1,474
1,784
4,523
209,225
80,000
113,217
122,115
86,574
195,927
52,353
140,614
36,410
27,308
65,316
919,834
126,868
77,655
49,416
56,351
67,655
38,026
76,760
40,009
27,231
45,401
605,372
Governance and Compensation — Compensation report
131
LafargeHolcim Annual Report 2018 Liquidity mechanism for remaining
rights under the Lafarge long-term
incentive plans
Following the success of the public
exchange offer on Lafarge S.A. and the
completion of the subsequent squeeze-
out of Lafarge shares, LafargeHolcim has
proposed a liquidity mechanism for (i)
Lafarge shares that may be issued
following the exercise on or after October
23, 2015, of stock options that have been
allocated pursuant to the Lafarge stock
option plans; or (ii) Lafarge shares that
may be definitively allotted on or after
October 23, 2015, in accordance with the
Lafarge performance shares plans. Five
members of the LafargeHolcim Executive
Committee, including the former Chief
Executive Officer, have accepted this
mechanism which will translate into an
exchange or a purchase (according to
their country of residence) of their Lafarge
shares for LafargeHolcim shares. The
exchange or purchase will take place at
the end of the holding period (i.e. up to
March 2019) for performance shares or
following the exercise of stock options (all
non-exercised options will lapse at the end
of 2020 at the latest), applying the
relevant exchange ratio to maintain the
initial parity of the public exchange offer
(at the end of December 2018, the
exchange ratio is 0.884 LafargeHolcim
share for 1 Lafarge share). The following
table presents the rights of the Executive
Committee members that are still under
vesting period or holding period under the
Lafarge performance shares plans and the
non-exercised Lafarge stock options as of
December 31, 2018.
Beneficiaries
Marcel Cobuz
All these rights were granted before the merger.
Lafarge
(Performance shares)
Lafarge
(Stock options)
5,682
132
Compensation reportcontinued The share options outstanding held by the
Executive Committee (including former
members) at year-end 2018 have the
following expiry dates and exercise prices:
Option grant date
Issuing Company
Expiry date
Exercise price 1
2018
2017
Number 1
Number 1
2008
2010
2010
2011
2012
2013
2014
2014
2015 (2008 2)
2015 (2009 2)
2015 (2010 2)
2015 (2011 2)
2015 (2012 2)
2015
2015
2015
2016
2018
Total
Holcim
Holcim
Holcim
Holcim
Holcim
Holcim
Holcim
Holcim
Lafarge
Lafarge
Lafarge
Lafarge
Lafarge
Holcim
Holcim
LafargeHolcim
LafargeHolcim
LafargeHolcim
2020
2018
2022
2019
2020
2021
2022
2026
2018
2019
2020
2020
2020
2023
2023
2025
2026
2028
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
62.95
67.66
70.30
63.40
54.85
67.40
64.40
64.40
108.36
34.63
57.80
50.14
40.56
66.85
63.55
50.19
53.83
55.65
33,550
0
33,550
33,550
95,557
33,550
113,957
113,957
165,538
165,538
122,770
122,770
99,532
33,550
0
22,016
22,125
24,675
24,360
99,532
33,550
60,745
25,166
22,125
24,675
24,360
144,970
144,970
47,333
47,333
417,360
417,360
503,120
503,120
246,404
0
2,054,810
1,967,858
1 Adjusted to reflect former share splits and/or capital increases and/or scrip dividend.
2 These options were granted through the Lafarge Stock Options plans. The figures presented in this table are based on the application of the actual exchange ratio of 0.884.
The year specified between brackets is the original option grant date and the exercise price is converted from EUR to CHF at the closing rate of 1.13.
Governance and Compensation — Compensation report
133
LafargeHolcim Annual Report 2018 and design of compensation programs
including incentive plans; planning and
preparation of the targets and
performance assessment of the CEO and
other members of the Executive
Committee;
• Governance: Dealing with all corporate
governance related matters; reviewing
proposals to be made to the Board for
the amendment of the Articles of
Incorporation, the organizational rules,
the committees charter; the code of
conduct, the overall policy landscape and
the policies and directives approved by
the Board; review of the criteria for the
determination of the independence of
directors; approval of external mandates
for the CEO and other Executive
Committee members; review of the
annual assessment of the functioning
and effectiveness of the Board; review of
the corporate governance section of the
Annual Report.
The following table summarizes the
decision authorities between the NCGC,
the Board of Directors, and the Annual
General Meeting on compensation
matters.
Compensation
governance
Rules relating to compensation in
the LafargeHolcim Articles of
Incorporation
The Articles of Incorporation contain
provisions regarding the approval of
compensation of the Board of Directors
and the Executive Management (Art. 23),
the supplementary amount for new
members of the Executive Committee (Art.
24), the general compensation principles
(Art. 25) as well as provisions regarding
the agreements with members of the
Board of Directors and the Executive
Committee (Art. 26). Moreover, the Articles
of Incorporation contain provisions
regarding the roles of the Board of
Directors and the Nomination,
Compensation & Governance Committee
(Art. 16 to 21). The Articles of
Incorporation are approved by the
shareholders and are available at www.
lafargeholcim.com/articles-association
Annual General Meeting –
Shareholder involvement
According to Art. 23 of the Articles of
Incorporation, the Annual General
Meeting approves annually the maximum
aggregate compensation of the Board of
Directors for the period from the Annual
General Meeting to the next Annual
General Meeting as well as the maximum
aggregate compensation of the Executive
Committee for the following financial year.
In addition, the Compensation report is
submitted to the Annual General Meeting
for an advisory vote on a yearly basis.
Art. 24 of the Articles of Incorporation
provides for a supplementary amount for
Executive Committee members who
become members of, or who are
promoted to the Executive Committee
during a compensation period for which
the Annual General Meeting has already
approved the compensation of the
Executive Committee if the compensation
already approved is not sufficient to cover
this compensation. The supplementary
amount per compensation period shall
not exceed 40 percent of the aggregate
amount of compensation last approved by
the Annual General Meeting in total and
does not require further shareholders’
approval.
Nomination, Compensation &
Governance Committee
In accordance with Article 21 of the
Articles of Incorporation, the NCGC
supports the Board of Directors in
establishing and reviewing
LafargeHolcim’s nomination,
compensation and governance strategy
and guidelines as well as in preparing the
motions to the Annual General Meeting
regarding the nomination and
compensation of the members of the
Board of Directors and of the Executive
Committee. In particular, the NCGC
performs the following duties:
• Nomination: Review of the nomination
and size of the Board of Directors to
ensure appropriate expertise, diversity
and independence of the Board;
succession planning for the Board of
Directors and its committee; preparation
of the motions to the Annual General
Meeting for (re-) election of candidates
for positions on the Board of Directors
and in the NCGC; succession planning for
positions on the Executive Committee;
• Compensation: Planning and preparation
of the compensation of the Board of
Directors and the Executive Committee;
preparation of the motions to the Annual
General Meeting regarding
compensation of the Board of Directors
and of the Executive Committee;
determination of compensation strategy
134
Compensation reportcontinued Decision authorities
Compensation strategy
and design
Compensation
report
Maximum aggregate
compensation amount of
the Board of Directors
Individual compensation
of members of the Board
of Directors
Maximum aggregate
compensation amount of
the Executive Committee
Individual compensation of
members of the Executive
Committee
Performance objectives
setting for the purpose of
the incentive plans
NCGC
Proposes
Proposes
Proposes
Proposes
Board of Directors
Annual General Meeting
Approves
Approves
Reviews
Approves (within the budget
approved by the AGM)
Advisory vote
Approves (binding vote)
Proposes
Reviews
Approves (binding vote)
Approves (within the budget
approved by the AGM)
Is informed
Approves
Is informed
The NCGC is composed of five members of
the Board of Directors that are elected
individually by the Annual General
Meeting for a period of one year. Since the
Annual General Meeting 2018, Mr. Oscar
Fanjul (Chair), Mrs. Hanne Birgitte
Breinbjerg Sørensen, Mr. Paul Desmarais,
Jr, Mr. Adrian Loader and Mr. Nassef
Sawiris, are re-elected members of the
NCGC.
The NCGC holds ordinary meetings at least
three times a year. In 2018, the NCGC held
four ordinary meetings according to the
annual schedule below, as well as three
extraordinary meetings.
Governance and Compensation — Compensation report
135
LafargeHolcim Annual Report 2018 Annual NCGC meeting schedule
February
July
October
December
Nomination
• Proposal of Board elections
• Proposal of Board constitution
for coming terms (committees)
• Selection criteria and
• Update succession planning
• Update succession planning
succession planning Board
• Selection criteria and
Board and Executive
Committee
Board and Executive
Committee
• Board compensation current
term
• Proposal AGM motions
(amounts to be submitted to
vote)
• Performance assessment and
incentive payouts previous year
for Executive Committee
• LTI vesting previous year
• Board assessment
• NCGC self-assessment
• Governance report
• Compensation report (final)
• Governance update
Compensation
Governance
succession planning Executive
Committee
• Review of compensation
strategy and programs
• Review of disclosure approach
(feedback from shareholders)
• AGM retrospective:
shareholders feedback
• Governance update
• Incentives plan design for
• Proposal Board compensation
coming year
coming term
• Benchmarking of Board (every
2 – 3 years) and ExCo
compensation (annual)
• Target compensation coming
year Executive Committee
• Performance targets coming
year Executive Committee
(annual incentive, LTI)
• Review of board composition
• Review of independence Board
members
• Review of NCGC members’
independence
• Review of corporate
governance in general
• Review of governance
documents: Articles of
Incorporation, Organizational
rules, committees charters,
Code of Conduct
• Review of external mandates
Executive Committee
• Compensation report (draft)
• Governance update
In 2018 three NCGC members attended all
meetings while two members apologized
for one respectively two meetings, which
represents an attendance rate of 90
percent. Further information on meeting
attendance is provided in the Corporate
Governance Report on page 93.
The NCGC Chair may invite members of
the Executive Committee, other officers of
the Group or third parties to attend the
meetings. They will however not be
present when their own performance or
compensation is discussed or determined.
After each NCGC meeting, the Board of
Directors is informed of the topics
discussed, decisions taken and
recommendations made.
External advisors
The NCGC may decide to consult an
external advisor from time to time for
specific compensation matters. In 2018,
Agnès Blust Consulting was appointed as
independent compensation advisor.
Obermatt was appointed to measure
relative performance of LafargeHolcim for
the purpose of the annual Incentive. These
companies do not have other mandates
with LafargeHolcim. In addition, support
and expertise are provided by internal
experts such as the Head of Human
Resources and the Head of Compensation
& Benefits.
136
Compensation reportcontinued Method for determining
compensation: benchmarking
The compensation of the Board of
Directors is regularly reviewed against
prevalent market practice of other
multinational industrial companies of the
SMI (excluding financial services). No
benchmarking analysis was conducted in
2018 considering that no changes are
planned for the next term of office.
The benchmarking analysis served as
basis for the NCGC to analyze the
compensation of the CEO and the
Executive Committee and to set their
target compensation levels for the
financial year 2019. The policy of
LafargeHolcim is to target market median
compensation for on-target performance,
with significant upside for above target
performance.
For the compensation strategy and the
design of compensation programs for the
Executive Committee, the Swiss peer
group described above is considered, as
well as a secondary international peer
group (same peer group as the one used
for the relative performance measurement
under the annual incentive).
Regarding the compensation of the
Executive Committee, a benchmarking
analysis of the compensation levels was
conducted in 2018 with the support of
Willis Towers Watson. For this purpose, for
Executive Committee members who are
on a Swiss employment contract, a peer
group of selected SMI companies was
determined on the basis of their sector
(exclusion of financial services), market
capitalization, revenue and headcount so
that LafargeHolcim is positioned around
the middle of the peer group: ABB,
Givaudan, Lonza, Nestlé, Novartis,
Richemont, Roche, SGS, Sika and Swatch
Group. For Executive Committee members
who are on a foreign employment
contract, an industrial cut was made to
the general industry data included in the
database of Willis Towers Watson of the
respective countries of employment.
Governance and Compensation — Compensation report
137
LafargeHolcim Annual Report 2018 138
Compensation reportcontinued To the General Meeting of LafargeHolcim Ltd,
Rapperswil-Jona
Zug, March 6, 2019
Report of the statutory auditor on
the Compensation report
We have audited the accompanying
Compensation report of LafargeHolcim Ltd
for the year ended December 31, 2018.
The audit was limited to the information
according to articles 14 – 16 of the
Ordinance against Excessive
Compensation in Listed Stock
Corporations (Ordinance) contained on
pages 125 and 127 of the Compensation
report.
Responsibility of the Board of
Directors
The Board of Directors is responsible for
the preparation and overall fair
presentation of the Compensation report
in accordance with Swiss law and the
Ordinance. The Board of Directors is also
responsible for designing the
compensation system and defining
individual compensation packages.
Auditor’s responsibility
Our responsibility is to express an opinion
on the accompanying Compensation
report. We conducted our audit in
accordance with Swiss Auditing Standards.
These standards require that we comply
with ethical requirements and plan and
perform the audit to obtain reasonable
assurance about whether the
Compensation report complies with Swiss
law and articles 14 – 16 of the Ordinance.
An audit involves performing procedures
to obtain audit evidence on the disclosures
made in the Compensation report with
regard to compensation, loans and credits
in accordance with articles 14 – 16 of the
Ordinance. The procedures selected
depend on the auditor’s judgment,
including the assessment of the risks of
material misstatements in the
Compensation report, whether due to
fraud or error. This audit also includes
evaluating the reasonableness of the
methods applied to value components of
compensation, as well as assessing the
overall presentation of the Compensation
report.
We believe that the audit evidence we
have obtained is sufficient and
appropriate to provide a basis for our
opinion.
Opinion
In our opinion, the Compensation report
for the year ended December 31, 2018 of
LafargeHolcim Ltd. complies with Swiss
law and articles 14 – 16 of the Ordinance.
Deloitte AG
David Quinlin
Licensed Audit Expert
Auditor in charge
Alexandre Dubi
Licensed Audit Expert
Governance and Compensation — Compensation report
139
LafargeHolcim Annual Report 2018
8
1
0
2
A
&
D
M
140
Disensa store
Our retail network includes 1’500 stores
in Latin America.
Management
discussion & analysis 2018 120
Group performance
Region performance
142
148
Management discussion & analysis — Content
141
LafargeHolcim Annual Report 2018 Management
discussion & analysis 2018
This management discussion and analysis
should be read in conjunction with the
shareholders’ letter and the individual reports
for the Group regions.
Group
Sales of cement
Sales of aggregates
Sales of ready-mix concrete
Net sales
Recurring SG&A
Recurring EBITDA
Operating profit (loss)
Operating profit before impairment
Net income (loss)
million t
million t
million m 3
million CHF
million CHF
million CHF
million CHF
million CHF
million CHF
Earnings per share before impairment and divestments
CHF
Cash flow from operating activities
Capex
Free Cash Flow
Return on Invested Capital (ROIC)
Net financial debt
million CHF
million CHF
million CHF
%
million CHF
±%
like-for-like
+4.4%
+1.2%
+0.6%
+5.1%
–6.9%
+3.6%
2018
221.9
273.8
50.9
27,466
2,441
6,016
3,312
3,306
1,719
2.63
2,988
1,285
1,703
+6.5%
13,518
2017
220.2
278.7
50.6
27,021
2,701
5,990
(478)
3,229
(1,716)
2.35
3,040
1,355
1,685
+5.8%
14,346
±%
+0.8%
–1.8%
+0.6%
+1.6%
–9.6%
+0.4%
+2.4%
+11.9%
–1.7%
–5.2%
+1.1%
+0.7%
–5.8%
Recurring SG&A (CHFm)
–6.9%
0
8
)
6
6
2
(
1
0
7
2
,
Inflation
5
1
5
2
,
)
4
7
(
CIS/FX
1
4
4
2
,
Gross
savings
SG&A cost savings ahead of target:
– “Corporate light” completed with closure
of 4 corporate offices
– All countries undergoing restructuring with visible
progess to date
– Restructuring of IT Shared Service Centers
– Optimization of third party spend
2018
Like-for-like
2018
The non-GAAP measures used in this report are defined on page 282.
2017
142
Good progress on Strategy 2022 -
“Building for Growth”
The global rollout of the new Strategy
2022 – “Building for Growth” has been
successfully started. Strong progress was
made in all four drivers of the strategy,
delivering results ahead of plan.
• Switching gears to growth is the most
fundamental principle of Strategy 2022.
First results have been achieved and the
growth momentum accelerated
throughout the year, with a strong Net
Sales increase of 5.1% on a like-for-like
basis. All four business segments
contributed to this growth. Four bolt-on
acquisitions were completed in 2018 in
Europe and North America which drove
growth and added to the company’s
presence in ready-mix concrete and
aggregates. These acquisitions had
immediate impact on profitability and
brought the company closer to its
end-customers. Four more bolt-on
acquisitions have been signed in 2019 in
Europe, Australia and North America;
• In terms of Simplification & Performance,
the company has successfully
established a new operating model with
more P&L accountability for the
countries and leaner corporate support
functions. Consequently, we have closed
four corporate offices in Singapore,
Miami, Zurich and Paris. The associated
CHF 400 million SG&A savings program
was executed successfully and is
delivering results ahead of target;
• Strong progress was made by the
Aggregates and Ready-Mix Concrete
segments towards closing the gap with
best-in-class performers. Both businesses
developed positively in terms of volumes,
pricing and profitability. These two
business segments will play an important
role in reaching the next level of
performance of LafargeHolcim;
Net Income attributable to shareholders
of LafargeHolcim Ltd before impairment
and divestments was 10.8% higher than
in 2017.
Earnings per Share before impairment and
divestments was CHF 2.63 for the full year
compared to CHF 2.35 for 2017.
Free cash flow stood at CHF 1,703 million
versus CHF 1,685 million in the previous
year, benefiting from lower cash payments
for income taxes, tight control of capex
offset by unfavorable timing difference of
cash conversion of our joint ventures'
results.
Net debt amounted to CHF 13,518 million
at year-end, an improvement of CHF 828
million over the prior year, reflecting a
cash conversion of 28.3% and the positive
impact following the classification of
Indonesia local external net debt as
held-for-sale. The Indonesia divestment
closed successfully at the end of January
2019, full effect will be reflected in 2019.
Return on Invested Capital was 6.5%,
compared to 5.8% in 2017, thanks to
continuous improvement in capital
allocation.
The company’s record in Health & Safety
improved significantly as on-site fatalities
were 82% lower than in 2017.
• The strategy driver Financial Strength
has improved all key performance
indicators. More than CHF 1.5 billion was
refinanced at attractive terms, thereby
improving the company’s debt maturity
profile and reducing financing costs. The
sale of the Indonesian business has
contributed to the strengthening of the
balance sheet. All measures taken in
2018 have already led to a successful
de-leveraging, with the Net Financial
Debt/Recurring EBITDA ratio improving
to 2.2x (from 2.4x in 2017); and
• In terms of Vision & People, the new
operating model and leadership team
has been successfully established. The
company’s global leaders are
empowered and fully accountable for
their P&L. The simplified performance
management system and the
corresponding incentive scheme have
been implemented in all countries. All
initiatives are supported by the launch of
the new LafargeHolcim business school.
Year of strong growth, over-
proportional increase of Net
Income and EPS before impairment
and divestments
Net Sales grew 5.1 % on a like-for-like
basis for the full year, largely driven by
higher cement volumes. Net Sales reached
CHF 27,466 million.
Recurring EBITDA reached CHF 6,016
million, up 3.6% on a like-for-like basis for
the full year, with Cement, Aggregates and
Ready-Mix Concrete segments all
contributing to the solid outcome.
143
Management discussion & analysis — Group performanceLafargeHolcim Annual Report 2018 Capital market financing of the Group
as per December 31, 2018
(CHF 14,047 million)
EUR Bonds CHF 5,967 m ....................................42%
USD Bonds CHF 4,412 m ....................................31%
CHF Bonds CHF 1,965 m ....................................14%
AUD Bonds CHF 520 m ......................................... 4%
Others* CHF 1,183 m ........................................... 9%
*
(GBP and MXN bonds, USD and EUR Private Placements,
NGN bonds and commercial paper)
Financing profile
LafargeHolcim has a strong financial
profile. 87 percent of financial liabilities
are financed through various capital
markets and 13 percent through banks
and other lenders. There are no
major positions with individual lenders.
The average maturity of financial liabilities
increased from 6.3 years at December 31,
2017, to 6.5 years at December 31, 2018,
due to several capital market transactions
during 2018. The Group’s maturity profile
is well-balanced with a large share of
mid- to long-term financing.
Maintaining a favorable credit rating
is one of the Group’s objectives and
LafargeHolcim therefore gives priority
to achieving its financial targets and
retaining its solid investment-grade rating
(current rating information is displayed on
page 84). The average nominal interest
rate on LafargeHolcim’s financial liabilities
as at December 31, 2018, was 4.2 percent,
and the proportion of financial liabilities at
fixed rates was at 73 percent. Detailed
information on financial liabilities can be
found in note 14.
Management
discussion & analysis 2018
continued
Financing activity
LafargeHolcim’s investments were funded
from the cash flow from operating
activities. New debt capital issuances were
mainly conducted for refinancing and
general corporate purposes. In the year
under review, capital market issuances of
CHF 1.5 billion equivalent were
undertaken, enabling the Group to lock in
historically low interest rates. The main
capital market transactions were the
following:
CHF 200 million
issued in
November 2018
Subordinated fixed rate
resettable perpetual notes
with a coupon of 3.5%.
CHF 334 million
issued in
November 2018
USD 338 million Private
Placement with coupons
between 4.79% and 5.03%.
CHF 519 million
issued in October
2018
CHF 440 million
issued in August
2018
EUR 205 million Schuldschein
loan with coupons with fixed
and floating rates and
multiple terms.
USD 295.5 million
Schuldschein loan with fixed
and floating rates and
multiple terms.
Bond with a coupon of 1.00%,
term 2018 – 2024.
For more information, please refer to the
note 14.3 from the notes to the consolidated
financial statements.
The group also repurchased a nominal of
CHF 409 million equivalent of outstanding
EUR and USD Schuldschein loans, floating
rate tranches, in the second quarter 2018.
144
Liquidity
To secure liquidity, the Group held cash
and cash equivalents of CHF 2,515 million
at December 31, 2018. This cash is mainly
invested in term deposits held with a large
number of banks on a broadly diversified
basis. The counterparty risk is constantly
monitored on the basis of clearly defined
principles as part of the risk management
process. As of December 31, 2018,
LafargeHolcim had unused committed
credit lines of CHF 6,239 million (see also
note 14).
Current financial liabilities as at
December 31, 2018, of CHF 3,063 million
are comfortably covered by existing cash,
cash equivalents and unused committed
credit lines. LafargeHolcim has USD, EUR
and NGN commercial paper programs.
The aim of these programs is to fund
short-term liquidity needs at attractive
terms. As per December 31, 2018,
commercial papers of CHF 96 million were
outstanding.
Foreign exchange sensitivity
The Group has a global footprint,
generating the majority of its results in
currencies other than the Swiss Franc.
Only about 2 percent of Net Sales are
generated in Swiss Francs.
Foreign currency volatility has little effect
on the Group’s operating profitability. As
the Group produces a very high
proportion of its products locally, most
sales and costs are incurred in the
respective local currencies. The effects of
foreign exchange movements are
therefore largely restricted to the
translation of local financial statements
for the consolidated statement of income.
As a large part of the foreign capital is
financed with matching transactions in
local currency, the effects of foreign
currency translation on local balance
sheets for the consolidated statement of
financial position have not, in general,
resulted in significant distortions in the
consolidated statement of financial
position.
Maturity profile
Million CHF
6000
5000
4000
3000
2000
1000
0
19
20
21
22
23
24
25
25
27
28
>28
Bonds, private placements and commercial paper notes
Loans from financial institutions and other financial liabilities
145
Management discussion & analysis — Group performanceLafargeHolcim Annual Report 2018
Management
discussion & analysis 2018
continued
The following sensitivity analysis presents
the effect of the main currencies on
selected key figures of the consolidated
financial statements. The sensitivity
analysis only factors in effects that result
from the conversion of local financial
statements into Swiss Francs (translation
effect). Currency effects from transactions
conducted locally in foreign currencies are
not included in the analysis.
Sensitivity analysis
The following table shows the effects of a
hypothetical 5 percent depreciation of the
respective foreign currencies against the
Swiss Franc.
Million CHF
2018
EUR
GBP
USD
CAD
Latin Ameri-
can basket
(MXN, BRL,
ARS, COP)
Asian bas-
ket (AUD,
CNY, IDR,
PHP)
Middle East
African bas-
ket (NGN,
DZD, EGP)
INR
Net sales
Recurring EBITDA
Cash flow from operating activities
Net financial debt
Actual
figures
27,466
6,016
2,988
13,518
Assuming a 5% strengthening of the Swiss franc the impact would be as follows:
(191)
(46)
(25)
(295)
(89)
(16)
(8)
(16)
(274)
(105)
(79)
(35)
(236)
(21)
(10)
7
(93)
(27)
(1)
(10)
(185)
(148)
(31)
(13)
37
(31)
(19)
(41)
(75)
(24)
(11)
(18)
146
Reconciliation of non-GAAP measures
Reconciling measures of profit and loss to the consolidated statement
of income of LafargeHolcim
Million CHF
Net sales
Recurring costs excluding SG&A
Recurring SG&A
Share of profit of joint ventures
Recurring EBITDA
Depreciation and amortization
Restructuring, litigation, implementation and other non-recurring costs
Operating profit before impairment
Impairment of operating assets
Operating profit (loss)
Million CHF
Net income (loss)
Impairments
(Loss)/Profit on disposals and other non-operating items
Net income (loss) before impairment and divestments
of which net income before impairment and divestments – shareholders of LafargeHolcim Ltd
Reconciling measures of free cash flow to the consolidated statement
of cash flows of LafargeHolcim
Million CHF
Cash flow from operating activities
Purchase of property, plant and equipment
Disposal of property and equipment
Free Cash Flow
Reconciling measures of net financial debt to the consolidated statement
of financial position of LafargeHolcim
Million CHF
Current financial liabilities
Long-term financial liabilities
Cash and cash equivalents
Short-term derivative assets
Long-term derivative assets
Net financial debt
2018
27,466
(19,511)
(2,441)
502
6,016
(2,235)
(476)
3,306
6
3,312
2018
1,719
22
(74)
1,772
1,569
2018
2,988
(1,411)
126
1,703
2018
3,063
13,061
2,515
66
26
13,518
2017
27,021
(18,615)
(2,701)
286
5,990
(2,300)
(461)
3,229
(3,707)
(478)
2017
(1,716)
(3,501)
226
1,560
1,417
2017
3,040
(1,522)
167
1,685
2017
3,843
14,779
4,217
44
14
14,348
147
Management discussion & analysis — Group performanceLafargeHolcim Annual Report 2018 Management
discussion & analysis 2018
continued
Asia Pacific
Sales of cement
Sales of aggregates
Sales of ready-mix concrete
Net sales to external customers
Like-for-like growth
Recurring EBITDA
Like-for-like growth
The Asia Pacific region benefited from
favorable market conditions in most
countries, leading to strong Net Sales and
continued Recurring EBITDA growth.
China was a key driver of higher
profitability, supported by price
momentum and the vertically-integrated
waste recycling business. India’s solid
demand was driven by infrastructure and
rural housing, whereas demand in the
Philippines was mainly supported by the
public sector. In Indonesia, pricing and
market demand improved while the
Malaysian market continued to remain
challenging.
Net Sales for the Asia Pacific region grew
overall by a strong 8.3% on a like-for-like
basis, mainly driven by India, Indonesia,
the Philippines, Australia and China. All
segments benefited from pricing traction
and contributed to the positive Net Sales
development. Cement volumes sold grew
by 4.7% on a like-for-like basis, notably in
India and Indonesia. Net Sales of
Aggregates were 11.4% on a like-for-like
basis higher than in the prior year,
benefiting from a positive price trend
across the region with high infrastructure
spending along the east coast of Australia,
but lower public investment in Malaysia
148
million t
million t
million m 3
million CHF
%
million CHF
%
2018
89.7
31.4
12.5
7,446
8.3%
1,609
22.5%
117*
Cement & grinding plants
69*
Aggregates plants
347*
Ready-mix concrete plants
* including joint ventures
and China. Net Sales of Ready-Mix
Concrete stood slightly above the prior
year on a like-for-like basis, with large
markets like Australia and India
developing well.
Recurring EBITDA for the Asia Pacific
region showed very strong growth of
22.5% on a like-for-like basis. Strict cost
management and price discipline more
than compensated for the impact of
increasing energy costs across the region.
The share of Huaxin joint-venture profits
in China was recognized in the region’s
2018 result, accounting for CHF 334
million of Recurring EBITDA.
The divestment of our entire shareholding
in PT Holcim Indonesia Tbk to Semen
Indonesia for an enterprise value of CHF
1.75 billion, on a 100% basis, was
successfully closed at the end of January
2019.
Total consolidated cement grinding
capacity (million tonnes per year)
111.4
(211.6 including joint ventures)
Grinding plant
Cement plant
Chandrapur, India
At the ACC Chanda cement plant.
Consolidated cement grinding
capacity (million tonnes per year)
Country
China (joint venture)
India
Indonesia
Malaysia
Philippines
China
Australia (joint venture)
Bangladesh
94.3
64.4
15.1
10.9
9.4
7.7
5.9
3.9
Management discussion & analysis — Region performance
149
LafargeHolcim Annual Report 2018 million t
million t
million m 3
million CHF
%
million CHF
%
2018
45.3
120.4
19.3
7,554
5.0%
1,499
5.0%
The favorable market environment, good
volumes and price management,
combined with improved Ready-Mix
Concrete results and the contribution of
Geocycle with more than 4 million tonnes
of waste treated allowed a year-over-year
Recurring EBITDA increase of 5.0% on
a like-for-like basis. A bolt-on acquisition
finalized in the UK will contribute to
growth in the future.
54
Cement & grinding plants
273
Aggregates plants
578
Ready-mix concrete plants
Management
discussion & analysis 2018
continued
Europe
Sales of cement
Sales of aggregates
Sales of ready-mix concrete
Net sales to external customers
Like-for-like growth
Recurring EBITDA
Like-for-like growth
2018 was a strong year for the Europe
region. Increased public infrastructure
spending in Eastern and Central Europe,
big projects in the UK (high speed 2),
France (Grand Paris), Russia (Great
Moscow), together with the rebound of
the construction and residential segment
across the region paved the way for solid
revenue growth in most countries.
Net sales grew 5.0% on a like-for-like basis
as sales volume gains in all segments
combined with price improvements in the
key markets of Germany, Spain, Poland
and Russia. Regional Cement volumes sold
grew by 5.2% on a like-for-like basis
supported by market drivers in
infrastructure and construction and
residential segments. Aggregates volumes
sold stood at 120 million tonnes,
improving by 2.2% on a like-for-like basis,
notably due to strong growth in Poland,
Switzerland and the UK. The Ready-Mix
Concrete segment delivered double-digit
like-for-like Recurring EBITDA growth after
years of decline, with strong performances
across the region. Net sales in Ready-Mix
Concrete grew by 7.1% on a like-for-like
basis, due especially to France, Romania,
Spain and Switzerland.
150
Total consolidated cement grinding
capacity (million tonnes per year)
73.6
Grinding plant
Cement plant
Untervaz, Switzerland
Employees at the cement plant.
Consolidated cement grinding
capacity (million tonnes per year)
Country
France
Russia
Spain
Germany
Poland
Romania
Greece
Switzerland
Italy
Austria
Belgium
Azerbaijan
United Kingdom
Hungary
Moldova
Serbia
Bulgaria
Czech Republic
Croatia
9.7
9.6
7.6
7.1
7.0
5.7
4.8
3.3
2.4
2.1
2.1
1.9
1.9
1.8
1.6
1.5
1.4
1.2
0.9
LafargeHolcim Annual Report 2018
Management discussion & analysis — Region performance
151
million t
million t
million m 3
million CHF
%
million CHF
%
2018
25.1
3.6
5.5
2,731
9.4%
959
–1.5%
29
Cement & grinding plants
11
Aggregates plants
103
Ready-mix concrete plants
3.5% on a like-for-like basis. Over-
proportional Net Sales growth of 9.4% like
for like reflects price increases to
compensate high cost inflation.
Recurring EBITDA in 2018 is slightly below
the prior year, impacted by a sharp
increase in raw material and energy costs
balanced by price increases and strict cost
control. Inflation in Argentina increased
significantly since early 2018 and the
three-year cumulative inflation rate now
exceeds 100%. Based on consensus
opinion, Argentina is considered to be
hyperinflationary from July 1, 2018.
Accordingly, LafargeHolcim has applied
the accounting standard IAS 29 Financial
reporting in Hyperinflationary economies for
its 2018 accounts, with effect from January
1, 2018, as if the Argentine economy had
always been hyperinflationary.
Management
discussion & analysis 2018
continued
Latin America
Sales of cement
Sales of aggregates
Sales of ready-mix concrete
Net sales to external customers
Like-for-like growth
Recurring EBITDA
Like-for-like growth
After a strong first half of 2018, the Latin
America region suffered an overall
softening of cement demand in the last six
months. The pressure on margins
intensified in a context of high cost
inflation, leading to an annual Recurring
EBITDA slightly below the prior year on a
like-for-like basis.
In the first part of the year, the Cement
and Ready-Mix Concrete segments
delivered double-digit like-for-like growth
in volumes and Net Sales. This strong
performance was boosted by large
infrastructure projects in Mexico, solid
demand in Argentina and economic
acceleration in Brazil. The Disensa network
of construction materials stores
established its 1,500th location in the
region as part of the commercial strategy
to combine Group know-how with the
entrepreneurial spirit of the store owner.
These positive trends reversed in the
second half of the year with decline in
volumes due to the post-election
slowdown in Mexico, Argentina's economic
collapse and generally weaker demand in
Ecuador and Central America. On annual
basis, total cement volumes sold grew by
152
Total consolidated cement grinding
capacity (million tonnes per year)
39.1
Grinding plant
Cement plant
Guayaquil, Ecuador
Employees at the cement plant.
Consolidated cement grinding
capacity (million tonnes per year)
Country
Mexico
Brazil
Ecuador
Argentina
Colombia
El Salvador
Costa Rica
West Indies
Nicaragua
12.2
10.5
5.5
4.8
2.1
1.8
1.1
0.7
0.4
Management discussion & analysis — Region performance
153
LafargeHolcim Annual Report 2018 million t
million t
million m 3
million CHF
%
million CHF
%
2018
35.9
8.7
4.2
3,080
–4.3%
734
–28.2%
These overall headwinds, combined with
rising distribution and energy costs,
resulted in a decrease in Recurring EBITDA
of 28.2% on a like-for-like basis.
44*
Cement & grinding plants
23*
Aggregates plants
172*
Ready-mix concrete plants
* including joint ventures
Management
discussion & analysis 2018
continued
Middle East Africa
Sales of cement
Sales of aggregates
Sales of ready-mix concrete
Net sales to external customers
Like-for-like growth
Recurring EBITDA
Like-for-like growth
Market conditions in the Middle East Africa
remained challenging driven by a
changing competitive profile, shifts in
supply and demand, sluggish economies
in the region, and a rise in energy and
distribution costs.
Consolidated cement volumes grew by
0.4% on a like-for-like basis. Despite the
increase in volumes, Net Sales for the
region were down by 4.3% on a like-for-
like basis. This decrease in Net Sales was
largely driven by price pressure and lower
volumes in oversupplied markets,
particularly Algeria, Iraq and Jordan, and
by the slowdown in Lebanon and Egypt in
the second half of 2018. Net Sales
developed favorably in Nigeria, Egypt and
countries in East Africa.
154
Total consolidated cement grinding
capacity (million tonnes per year)
56.8
(72.8 including joint ventures)
Ewekoro, Nigeria
Employee at the cement plant.
Grinding plant
Cement plant
Consolidated cement grinding
capacity (million tonnes per year)
Country
Algeria
Morocco ( Joint venture)
Nigeria
Egypt
Iraq
Jordan
South Africa
Kenya
Lebanon
Ivory Coast ( Joint venture)
Uganda
Zambia
Tanzania
Cameroon ( Joint venture)
Benin ( Joint venture)
Qatar
Reunion
Zimbabwe
Guinea ( Joint venture)
Malawi
Madagascar
12.4
11.8
10.5
8.9
5.7
3.9
3.2
3.2
2.5
2.2
1.9
1.5
1.1
1.0
0.7
0.6
0.5
0.4
0.3
0.3
0.2
Management discussion & analysis — Region performance
155
LafargeHolcim Annual Report 2018 million t
million t
million m 3
million CHF
%
million CHF
%
2018
19.8
109.6
9.4
5,875
3.0%
1,523
2.7%
Aggregates increased while Ready-Mix
Concrete fell slightly short on lower sales
volumes. Canada showed its highest
growth rates in the west, particularly in
the Solutions & Products downstream
activities of construction, paving and
concrete products, while the US reported
higher Net Sales mainly due to higher
Cement sales volumes. Aggregates and
Ready-Mix Concrete in the US benefited
from stronger pricing.
Recurring EBITDA for North America
showed growth of 2.7% on a like-for-like
basis. Fuel and energy cost inflation across
the region was compensated by good cost
management, including SG&A cost-cutting
programs.
26
Cement & grinding plants
287
Aggregates plants
248
Ready-mix concrete plants
Management
discussion & analysis 2018
continued
North America
Sales of cement
Sales of aggregates
Sales of ready-mix concrete
Net sales to external customers
Like-for-like growth
Recurring EBITDA
Like-for-like growth
In the North America region, we
capitalized on strong market
fundamentals but were negatively
impacted by harsh weather in the first
quarter and an early winter in the fourth
quarter. Our growth strategy coupled with
strong price management and rigorous
cost control laid the basis for solid 2018
results compared to the prior year despite
the challenging conditions. The growth
strategy was further supported by the two
bolt-on acquisitions completed in 2018:
Tarrant Concrete in Texas and Metro Mix in
Colorado; as well as several multi-year
construction contract awards in the
Denver, Las Vegas, Minneapolis, and
Vancouver markets, further bolstering our
Solutions & Products segment.
Sales volumes of Cement and Aggregates
increased over the prior year by 3.1% and
2.4% respectively on a like-for-like basis
while bad weather impacts dragged US
Ready-Mix Concrete volumes below prior
year on a like-for-like basis. Higher
Ready-Mix Concrete sales volumes in
Canada partially offset the US shortfall.
Net Sales grew by 3.0% on a like-for-like
basis supported by both countries. On a
segment view, Net Sales from Cement and
156
Total consolidated cement grinding
capacity (million tonnes per year)
32.0
Grinding plant
Cement plant
Bladensburg, Maryland, USA
Rail transport of aggregates.
Consolidated cement grinding
capacity (million tonnes per year)
Country
United States
Canada
23.6
8.4
Management discussion & analysis — Region performance
157
LafargeHolcim Annual Report 2018 Responsibility statement
We certify that, to the best of our knowledge and having made reasonable inquiries to
that end, the financial statements have been prepared in accordance with applicable
accounting standards and give a true and fair view of the assets and liabilities, and of
the financial position and results of the Company and of its consolidated subsidiaries,
and that this annual report provides a true and fair view of the evolution of the business,
results and financial condition of the Company and of its consolidated subsidiaries, and
a description of the main risks and uncertainties the Company and its consolidated
subsidiaries are subject to.
Zug, March 6, 2019
Jan Jenisch
Chief Executive Officer
Géraldine Picaud
Chief Financial Officer
158
Management discussion & analysis — Responsibility statement
159
LafargeHolcim Annual Report 2018 l
a
i
c
n
a
n
i
F
n
o
i
t
a
m
r
o
f
n
i
160
Almeria, Spain
Cement blocks used to protect our jetty.
14. Net financial debt
15. Leases
16. Employee benefits and share
compensation plans
17. Provisions and contingencies
18. Shareholders' information
19. Related party transactions
20. Cash flow
21. Events after the reporting period
22. Authorization of the
financial statements
Auditors Report
Holding Company Results
5-Year-Review
LafargeHolcim Group
Definitions of non-GAAP measures
219
237
239
252
256
257
258
260
260
261
266
280
282
Financial
information
Consolidated statement of income
Consolidated statement of
Comprehensive earnings
Consolidated statement of
financial position
Consolidated statement of
changes in equity
Consolidated statement of cash flows
Principal exchange rates
Notes to the Consolidated
Financial Statements
1. Accounting policies
2. Fully consolidated companies and
non-controlling interests
3. Segment reporting
4. Operating profit
5. Profit and loss on disposals and other
6.
non-operating items
Investments in associates
and joint ventures
7. Financing items
8.
Income taxes
9. Earnings per share
10. Working capital
11. Property, plant and equipment,
goodwill and intangible assets
12. Long-term financial investments
and other long.term assets
13. Assets and related liabilities
classified as held for sale
and discontinued operations
162
163
164
166
168
169
170
172
183
188
191
192
197
198
203
203
206
214
216
Financial information — Contents
161
LafargeHolcim Annual Report 2018 Consolidated statement of
income of LafargeHolcim
Million CHF
Net sales
Production cost of goods sold 2
Gross profit
Distribution and selling expenses 3
Administration expenses 4
Share of profit of joint ventures
Operating profit (loss)
Profit on disposals and other non-operating income
Loss on disposals and other non-operating expenses
Share of profit of associates
Financial income
Financial expenses
Net income (loss) before taxes
Income taxes
Net income (loss)
Net income (loss) attributable to:
Shareholders of LafargeHolcim Ltd
Non-controlling interest
Earnings per share in CHF
Earnings per share
Fully diluted earnings per share
1 Restated due to change in presentation following IFRS 15, see note 1.2.
2 Includes CHF –106 million of restructuring, litigation, implementation and other non-recurring costs in 2018 (2017: CHF –177 million).
3 Includes CHF –31 million of restructuring, litigation, implementation and other non-recurring costs in 2018 (2017: CHF 62 million).
4 Includes CHF –338 million of restructuring, litigation, implementation and other non-recurring costs in 2018 (2017: CHF –345 million).
The non-GAAP measures used in this report are defined on page 282.
Notes
2018
2017
Restated 1
3.3
4.3
6.3
5.2
5.3
6.7
7.2
7.3
8.2
27,466
27,021
(15,918)
(19,240)
11,548
(6,956)
(1,782)
502
3,312
93
(166)
22
140
(1,025)
2,375
(656)
1,719
7,781
(6,608)
(1,938)
286
(478)
447
(242)
51
153
(1,111)
(1,180)
(536)
(1,716)
1,502
217
(1,675)
(41)
9
9
2.52
2.52
( 2.78)
( 2.78)
162
Consolidated statement of
comprehensive earnings of LafargeHolcim
Million CHF
Net income (loss)
Other comprehensive earnings
Items that will be reclassified to the statement of income in future periods
Notes
2018
1,719
2017
(1,716)
Currency translation effects
– Exchange differences on translation
– Realized through statement of income
– Tax effect
Available-for-sale financial assets
– Change in fair value
– Realized through statement of income
– Tax effect
Cash flow hedges
– Change in fair value
– Realized through statement of income
– Tax effect
Net investment hedges in subsidiaries
– Change in fair value
– Realized through statement of income
– Tax effect
Subtotal
Items that will not be reclassified to the statement of income in future periods
Defined benefit plans
– Remeasurements
– Tax effect
Strategic equity investments at fair value through other comprehensive earnings
– Transfer of gain/loss on disposal of strategic equity investments at fair value through other
comprehensive earnings to retained earnings
16.2
– Change in fair value
– Tax effect
Subtotal
Total other comprehensive earnings
Total comprehensive earnings
Total comprehensive earnings attributable to:
Shareholders of LafargeHolcim Ltd
Non-controlling interest
(1,602)
(302)
4
(16)
n/a
n/a
n/a
(3)
28
(5)
(14)
0
3
95
0
(2)
10
1
(8)
5
0
30
0
0
(1,602)
(172)
75
(50)
4
3
0
27
216
(70)
n/a
n/a
n/a
146
(1,575)
(26)
144
(1,742)
120
25
(1,704)
(39)
163
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Consolidated statement of
financial position of LafargeHolcim
Million CHF
Cash and cash equivalents
Short-term derivative assets
Current financial receivables
Trade accounts receivable
Inventories
Prepaid expenses and other current assets
Assets classified as held for sale
Total current assets
Long-term financial investments and other long-term assets
Investments in associates and joint ventures
Property, plant and equipment
Goodwill
Intangible assets
Deferred tax assets
Pension assets
Long-term derivative assets
Total non-current assets
Total assets
Notes
31.12.2018
31.12.2017
14.2
14.4
12.3
10.2
10.3
10.4
13.2
12.2
6.2
11.2
11.3
11.3
8.4
16.2
14.4
2,515
4,217
66
180
3,229
3,081
1,276
1,311
44
262
3,340
2,870
1,335
550
11,658
12,618
1,111
3,133
27,890
14,045
810
651
371
26
48,037
59,695
1,114
3,120
30,152
14,569
1,026
758
308
14
51,061
63,679
164
Million CHF
Trade accounts payable
Current financial liabilities
Current income tax liabilities
Other current liabilities
Short-term provisions
Liabilities directly associated with assets classified as held for sale
Total current liabilities
Long-term financial liabilities
Defined benefit obligations
Long-term income tax liabilities
Deferred tax liabilities
Long-term provisions
Total non-current liabilities
Total liabilities
Share capital
Capital surplus
Treasury shares
Reserves
Total equity attributable to shareholders of LafargeHolcim Ltd
Non-controlling interest
Total shareholders’ equity
Total liabilities and shareholders’ equity
Notes
31.12.2018
31.12.2017
10.5
14.3
17.2
13.2
14.3
16.2
8.6
8.4
17.2
18.2
18.2
2.5
3,770
3,063
634
2,191
443
627
10,727
13,061
1,603
449
2,259
1,542
18,914
29,642
1,214
3,715
3,843
765
2,444
592
160
11,519
14,779
1,861
398
2,345
1,801
21,185
32,703
1,214
23,157
24,340
(612)
3,166
(554)
2,787
26,925
27,787
3,128
30,053
59,695
3,188
30,975
63,679
165
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Consolidated statement of
Changes in Equity of LafargeHolcim
Million CHF
Equity as at January 1, 2018
Net income
Other comprehensive earnings
Total comprehensive earnings
Payout
Subordinated fixed rate resettable notes 1
Hyperinflation 2
Change in treasury shares
Share-based remuneration
Capital repaid to non-controlling interest
Change in participation in existing Group companies
Equity as at December 31, 2018
Equity as at January 1, 2017
Net loss
Other comprehensive earnings
Total comprehensive earnings
Payout
Change in treasury shares
Share-based remuneration
Capital paid-in by non-controlling interest
Disposal of participation in Group companies
Change in participation in existing Group companies
Share
capital
1,214
1,214
1,214
Capital
surplus
24,340
(1,192)
10
23,157
25,536
(1,212)
16
Treasury
shares
(554)
(76)
18
(612)
(72)
(482)
Equity as at December 31, 2017
1,214
24,340
(554)
1 See more information in the note 18.1.
2 See more information in the note 2.2.
3 Equity as at December 31, 2018 includes CHF –84 million of currency translation adjustment relating to assets and directly associated liabilities classified as held for sale.
Currency
translation
adjustments
(12,606)
(1,411)
(1,411)
(2)
(14,019)
(12,412)
(184)
(184)
(11)
(12,606)
Other reserves
Total equity
attributable to
shareholders
of LafargeHolcim Ltd
Non-controlling
interest
Total
shareholders’
equity
15
26
26
41
10
6
6
15
Retained
earnings
15,378
1,502
4
1,506
200
151
(91)
17,144
16,546
(1,675)
149
(1,526)
(7)
365
15,378
27,787
1,502
(1,382)
120
(1,192)
200
151
(77)
10
(75)
26,925
30,822
(1,675)
(29)
(1,704)
(1,212)
(489)
16
354
27,787
3,188
217
(193)
25
(151)
32
(3)
38
3,128
3,925
(41)
2
(39)
(247)
55
(118)
(388)
3,188
30,975
1,719
(1,575)
145
(1,343)
200
183
(77)
10
(3)
(37)
30,053 3
34,747
(1,716)
(26)
(1,742)
(1,459)
(489)
16
55
(118)
(34)
30,975
166
Equity as at January 1, 2018
Million CHF
Net income
Other comprehensive earnings
Total comprehensive earnings
Payout
Hyperinflation 2
Change in treasury shares
Share-based remuneration
Subordinated fixed rate resettable notes 1
Capital repaid to non-controlling interest
Change in participation in existing Group companies
Equity as at December 31, 2018
Equity as at January 1, 2017
Other comprehensive earnings
Total comprehensive earnings
Net loss
Payout
Change in treasury shares
Share-based remuneration
Capital paid-in by non-controlling interest
Disposal of participation in Group companies
Change in participation in existing Group companies
Equity as at December 31, 2017
1 See more information in the note 18.1.
2 See more information in the note 2.2.
Share
capital
1,214
1,214
1,214
Capital
surplus
24,340
(1,192)
10
23,157
25,536
(1,212)
16
Treasury
shares
(554)
(76)
18
(612)
(72)
(482)
Currency
translation
adjustments
(12,606)
(1,411)
(1,411)
(2)
(14,019)
(12,412)
(184)
(184)
(11)
(12,606)
Other reserves
15
26
26
41
10
6
6
15
Retained
earnings
15,378
1,502
4
1,506
200
151
(91)
17,144
16,546
(1,675)
149
(1,526)
(7)
365
15,378
3 Equity as at December 31, 2018 includes CHF –84 million of currency translation adjustment relating to assets and directly associated liabilities classified as held for sale.
1,214
24,340
(554)
Total equity
attributable to
shareholders
of LafargeHolcim Ltd
Non-controlling
interest
Total
shareholders’
equity
27,787
1,502
(1,382)
120
(1,192)
200
151
(77)
10
(75)
26,925
30,822
(1,675)
(29)
(1,704)
(1,212)
(489)
16
354
27,787
3,188
217
(193)
25
(151)
32
(3)
38
3,128
3,925
(41)
2
(39)
(247)
55
(118)
(388)
3,188
30,975
1,719
(1,575)
145
(1,343)
200
183
(77)
10
(3)
(37)
30,053 3
34,747
(1,716)
(26)
(1,742)
(1,459)
(489)
16
55
(118)
(34)
30,975
167
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Consolidated statement of
Cash Flows of LafargeHolcim
Million CHF
Net income (loss)
Income taxes
Profit on disposals and other non-operating income
Loss on disposals and other non-operating expenses
Share of profit of associates and joint ventures
Financial expenses net
Notes
8.2
5.2
5.3
6.3, 6.7
7.2, 7.3
2018
1,719
656
(93)
166
(524)
886
2017
(1,716)
536
(447)
242
(337)
958
Depreciation, amortization and impairment of operating assets
4.5
2,229
6,007
Other non-cash items 1
Change in net working capital
Cash generated from operations
Dividends received
Interest received
Interest paid
Income taxes paid
Other expenses
Cash flow from operating activities (A)
Purchase of property, plant and equipment
Disposal of property, plant and equipment
Acquisition of participation in Group companies
Disposal of participation in Group companies
Purchase of financial assets, intangible and other assets
Disposal of financial assets, intangible and other assets
Cash flow from investing activities (B)
Payout on ordinary shares
Dividends paid to non-controlling interest
Capital (repaid to) paid-in by non-controlling interest
Movements of treasury shares
Proceeds from subordinated fixed rate resettable notes
Net movement in current financial liabilities
Proceeds from long-term financial liabilities
Repayment of long-term financial liabilities
Increase in participation in existing Group companies
Cash flow from financing activities (C)
Decrease in cash and cash equivalents (A + B + C)
Cash and cash equivalents as at the beginning of the period (net)
Decrease in cash and cash equivalents
Currency translation effects
Cash and cash equivalents as at the end of the period (net)
1 Includes restructuring, litigation costs and other non-cash items.
168
20
8.3
20
9
14.5
14.5
14.5
14.2
199
(826)
4,411
293
131
(932)
(787)
(128)
237
(925)
4,555
303
146
(917)
(871)
(176)
2,988
3,040
(1,411)
(1,522)
126
(176)
172
(209)
112
(1,386)
167
55
858
(347)
113
(675)
(1,192)
(1,212)
(156)
(8)
(73)
200
(223)
1,657
(3,167)
(202)
(3,163)
(237)
63
(489)
0
(163)
2,047
(3,079)
(13)
(3,083)
(1,561)
(718)
3,954
(1,561)
(129)
2,264
4,795
(718)
(122)
3,954
Principal exchange rates
The following table summarizes the
principal exchange rates that have been
used for translation purposes.
1 Euro
1 US Dollar
1 British Pound
1 Australian Dollar
1 Brazilian Real
1 Canadian Dollar
1 Chinese Renminbi
100 Algerian Dinar
1 Egyptian Pound
1,000 Indonesian Rupiah
100 Indian Rupee
100 Mexican Peso
100 Nigerian Naira
100 Philippine Peso
EUR
USD
GBP
AUD
BRL
CAD
CNY
DZD
EGP
IDR
INR
MXN
NGN
PHP
Statement of income
Average exchange rates
in CHF
2018
1.16
0.98
1.31
0.73
0.27
0.75
0.15
0.84
0.05
0.07
1.43
5.09
0.28
1.86
2017
1.11
0.98
1.27
0.75
0.31
0.76
0.15
0.89
0.06
0.07
1.51
5.22
0.32
1.95
Statement of financial position
Closing exchange rates
in CHF
31.12.2018
31.12.2017
1.13
0.98
1.25
0.70
0.25
0.72
0.14
0.84
0.05
0.07
1.41
5.01
0.27
1.88
1.17
0.98
1.32
0.76
0.29
0.78
0.15
0.85
0.05
0.07
1.53
4.96
0.32
1.96
169
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Notes to the consolidated
financial statements
As used herein, the terms “LafargeHolcim” or “Group” refer to
LafargeHolcim Ltd together with the companies included in the scope of consolidation.
The following details the judgments, apart
from those involving estimations, that
management has made in the process of
applying the Group’s accounting policies
and that have the most significant effect
on the amounts recognized in the
financial statements:
• The classification of a subsidiary or a
disposal group as held for sale especially
as to whether the sale is expected to be
completed within one year from the date
of classification as held for sale, and
whether the proceeds expected to be
received will exceed the carrying amount
(note 13).
The following details the assumptions the
Group makes about the future, and other
major sources of estimation uncertainty at
year end, that could have a significant risk
of resulting in a material adjustment to
the carrying amounts of assets and
liabilities within the next financial year:
• Assumptions underlying the estimation
of value in use in respect of cash-
generating units for impairment testing
purposes require the use of estimates
such as long-term discount rates and
growth rates (note 11.3);
pension plans and other post-
employment benefits are determined
using actuarial valuations. The actuarial
valuations involve making assumptions
about discount rates, expected future
salary increases and mortality rates
which are subject to significant
uncertainty due to the long-term nature
of such plans (note 16.2);
• The recognition and measurement of
provisions requires an estimate of the
expenditure and timing of the
settlement. The litigations and claims to
which the Group is exposed are assessed
by management with the assistance of
the legal department and in certain
cases with the support of external
specialized lawyers (note 17.2).
Disclosures related to such provisions, as
well as contingent liabilities, also require
significant judgment (note 17.3);
• The recognition of deferred tax assets
requires assessment of whether it is
probable that sufficient future taxable
profit will be available against which
the unused tax losses can be utilized
(note 8).
1.2 Adoption of new and revised
International Financial Reporting
Standards and interpretations
In 2018, LafargeHolcim adopted the
following new standards, interpretation
and amended standard relevant to the
Group:
IFRS 15
Revenue from
Contracts with
Customers
IFRS 9
Financial Instruments
Amendments to IFRS 2
Classification and
measurement of share-
based payment
transactions
Foreign currency
Transactions and
Advance Consideration
(Clarifications to
IAS 21)
IFRS 15 – Revenue from Contracts
with Customers
IFRS 15, which replaces IAS 11 Construction
Contacts, IAS 18 Revenue and related
interpretations, has been applied on a
retrospective basis from January 1, 2017.
• Liabilities and costs for defined benefit
IFRIC 22
1. Accounting policies
1.1 Basis of preparation
The consolidated financial statements
have been prepared in accordance with
Inter national Financial Reporting
Standards (IFRS).
Due to rounding, numbers presented
throughout this report may not add up
precisely to the totals provided. All ratios
and variances are calculated using the
underlying amount rather than the
presented rounded amount.
Use of estimates
The preparation of financial statements
in conformity with IFRS requires
management to make estimates and
assumptions that affect the reported
amounts of revenues, expenses, assets,
liabilities and related disclosures at the
date of the financial statements. These
estimates are based on management’s
best knowledge of current events and
actions that the Group may undertake in
the future. However, actual results could
differ from those estimates. Management
also uses judgment in applying the
Group’s accounting policies.
Critical estimates and assumptions
Estimates and judgments are continually
evaluated and are based on historical
experience and other factors, including
expectations of future events that are
believed to be reasonable under the
circumstances.
The Group makes estimates and
assumptions concerning the future. The
resulting accounting estimates will, by
definition, seldom equal the related actual
results.
170
IFRIC 23 – Uncertainty over Income
Tax Treatments
As detailed in the 2017 Annual Report, the
IFRIC issued IFRIC 23 Uncertainty over
Income Tax Treatments in June 2017 which
clarifies that an entity will be required to
reflect the effect of uncertainty in
accounting for income taxes. The current
assessment is that the application of IFRIC
23 will not materially impact the Group
financial statements.
IAS 28 – Long-term Interests in
Associates and Joint Ventures
In October 2017, the IASB issued
amendments to IAS 28 Long-term Interests
in Associates and Joint Ventures, which
clarifies that an entity first applies IFRS 9
Financial Instruments to other financial
instruments before taking into account its
share of profit or loss of an associate or
joint venture under IAS 28. Consequently,
in applying IFRS 9, an entity does not take
account of any adjustments to the
carrying amount of long-term interests
that arise from applying IAS 28. The
adoption of the amendment to IAS 28 will
not materially impact the Group financial
statements.
Based on IFRS 15, management concluded
it would be more appropriate to reflect
trading activities as principal rather than
agent. This accounting policy change has
been applied fully retrospectively and its
effect on the comparative information
(restated amounts) presented for each
financial statement line item. Based on
2017 figures, this change in presentation
increased net sales and production cost of
goods sold by CHF 893 million with no
impact on the net income. For further
details, see note 3 in the Half-Year 2018
Report.
The impacts of applying IFRS 15 are
presented in the note 4.2.
IFRS 9 – Financial Instruments
IFRS 9, which replaces IAS 39 Financial
instruments: Recognition and measurement,
was adopted for the period starting
January 1, 2018. Comparative figures have
not been restated. The accounting policies
were changed to comply with IFRS 9 as
issued by the IASB in July 2014.
The impacts of applying IFRS 9 are
presented in the note 14.5.
Amendments to IFRS 2 – Share-based
payment
As detailed in the 2017 Annual Report
(note 2), the adoption of the amendments
to IFRS 2 does not impact the Group
financial statements.
IFRIC 22 – Foreign Currency Transactions
and Advance Consideration
As detailed in the 2017 Annual Report
(note 2), the adoption of IFRIC 22 does not
materially impact the Group financial
statements.
In 2019, LafargeHolcim will adopt the
following new standard, interpretation
and amended standards relevant to the
Group:
IFRS 16
IFRIC 23
Amendments to IAS 28
Amendment to IAS 19
Improvements to IFRS
Leases
Uncertainty over
Income Tax Treatments
Long-term Interests in
Associates and Joint
Ventures
Plan Amendment,
Curtailment or
Settlement
Clarifications of
existing IFRSs (issued
in December 2017)
IFRS 16 – Leases
In January 2016, the IASB issued IFRS 16
Leases, which replaces IAS 17 Leases and
related interpretations. The new standard
will require lessees to adopt a uniform
approach to the presentation of leases.
Correspondingly, assets must be
recognised for the right of use received
and liabilities must be recognised for
payment obligations entered into for all
leases.
The Group will transition to IFRS 16 in
accordance with the modified
retrospective approach. For leases that
have to date been classified as operating
leases in accordance with IAS 17, the lease
liability will be carried at the present value
of the remaining lease payments,
discounted using the lessee’s incremental
borrowing rate at the time the standard
first applied. The right-of-use asset will
generally be measured at the amount of
the lease liability.
The impacts of applying IFRS 16 are
presented in the note 15.1.
171
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018
Amendment to IAS 19 – Plan
Amendment, Curtailment or Settlement
In February 2018, the IASB issued an
amendment to IAS 19 Employee Benefits
titled Plan Amendment, Curtailment or
Settlement, which requires an entity to use
updated actuarial assumptions to
determine current service cost and net
interest for the remainder of the annual
reporting period following a plan
amendment, curtailment or settlement
when the entity remeasures its net
defined benefit liability (asset). Previously,
an entity was not required to use updated
actuarial assumptions when it remeasured
its net defined benefit liability (asset).
The adoption of the amendment to IAS 19
will not materially impact the Group
financial statements.
The adoption of the improvements to
IFRSs will not materially impact the Group
financial statements.
In 2020, LafargeHolcim will adopt the
following amended standards relevant to
the Group:
Amendments to IFRS 3
Business Combinations
Amendments to IAS 1
and IAS 8
Presentation of
Financial Statements
and Acounting Policies,
Changes in Accounting
Estimates and Errors
Amendment to IFRS 3 – Business
Combinations
In October 2018, the IASB issued
amendments to IFRS 3 Business
Combinations by providing additional
guidance as to when an acquisition would
result in a business combination. The new
guidance provides a framework to
evaluate when an input and a substantive
process are present that together
significantly contribute to the ability to
create outputs.
Amendment to IAS 1 and IAS 8 –
Presentation of Financial Statements
and Accounting Policies, Changes in
Accounting Estimates and Errors
In October 2018, the IASB issued
amendments to IAS 1 Presentation of
Financial Statements and IAS 8 Accounting
Policies, Changes in Accounting Estimates
and Errors. The amendments clarify the
definition of material and states that an
entity should assess materiality in the
context of the financial statements as a
whole. The amendments will not
significantly impact the financial
statements of LafargeHolcim.
2. Fully consolidated companies
and non-controlling interests
2.1 Scope of consolidation
The consolidated financial statements
comprise those of LafargeHolcim Ltd and
of its subsidiaries. The list of principal
consolidated companies is presented in
note 2.4.
2.2 Accounting principles
Principles of consolidation
The Group consolidates a subsidiary if it
has an interest of more than one half of
the voting rights or otherwise is able to
exercise control over the operations. The
Group controls an entity when it is
exposed to, or has rights to, variable
returns from its involvement with the
entity and has the ability to affect those
returns through its power over the entity.
Business combinations are accounted for
using the acquisition method. The cost of
an acquisition is measured at the fair
value of the consideration given at the
date of exchange. For each business
combination, the Group measures the
non-controlling interest in the acquiree
either at fair value or at the proportionate
share of the acquiree’s identifiable net
assets. Acquisition costs incurred are
expensed in the statement of
income. Identifiable assets acquired and
liabilities assumed in a business
combination are measured initially at fair
value at the date of acquisition.
When the Group acquires a business, it
assesses the financial assets and liabilities
assumed for appropriate classification and
designation in accordance with the
contractual terms, economic
circumstances and pertinent conditions as
of the acquisition date.
If the business combination is achieved in
stages, the carrying amount of the Group’s
previously held equity interest in the
acquiree is remeasured to fair value as at
the acquisition date with any resulting
gain or loss recognized in the statement of
income.
172
Notes to the consolidated financial statementscontinued Any contingent consideration to be
transferred by the Group is recognized at
fair value at the acquisition date.
Subsequent changes to the fair value of
the contingent consideration are
recognized in the statement of income.
Contingent liabilities assumed in a
business combination are recognized at
fair value and subsequently measured at
the higher of the amount that would be
recognized as a provision and the amount
initially recognized.
Subsidiaries are consolidated from the
date on which control is transferred to the
Group and are no longer consolidated
from the date that control ceases.
All intercompany transactions and
balances between Group companies are
eliminated in full.
Changes in the ownership interest of a
subsidiary that does not result in loss of
control are accounted for as an equity
transaction. Consequently, if
LafargeHolcim acquires or partially
disposes of a non-controlling interest in a
subsidiary, without losing control, any
difference between the amount by which
the non-controlling interest is adjusted
and the fair value of the consideration
paid or received is recognized directly in
retained earnings.
It is common practice for the Group to
write put options and acquire call options
in connection with the remaining shares
held by the non-controlling shareholders,
mainly as part of a business combination.
If the Group has acquired a present
ownership interest as part of a business
combination, the present value of the
redemption amount of the put option is
recognized as a financial liability with any
excess over the carrying amount of the
non-controlling interest recognized as
goodwill. In such a case, the non-
controlling interest is deemed to have
been acquired at the acquisition date and
therefore any excess arising should follow
the accounting treatment as in a business
combination. All subsequent fair value
changes of the financial liability are
recognized in the statement of income
and no earnings are attributed to the
non-controlling interest. However, where
the Group has not acquired a present
ownership interest as part of a business
combination, the non-controlling interest
continues to receive an allocation of profit
or loss and is reclassified as a financial
liability at each reporting date as if the
acquisition took place at that date. Any
excess over the reclassified carrying
amount of the non-controlling interest
and all subsequent fair value changes of
the financial liability are recognized
directly in retained earnings.
Foreign currency translation
The assets and liabilities of each of the
Group’s companies are measured using
the currency of the primary economic
environment in which the entity operates
(“the functional currency”). Statements of
income of foreign entities are translated
into the Group’s reporting currency at
average exchange rates for the year and
statements of financial position are
translated at the exchange rates prevailing
on December 31.
Goodwill arising from the acquisition of a
foreign operation is expressed in the
functional currency of the foreign
operation and is translated at the closing
rate of the reporting period.
Foreign currency transactions translated
into the functional currency are accounted
for at the exchange rate prevailing at the
date of the transactions; gains and losses
resulting from the settlement of such
transactions and from the translation of
monetary assets and liabilities
denominated in foreign currencies are
recognized in the statement of income,
except when deferred outside the
statement of income as qualifying cash
flow hedges or net investment hedges.
Exchange differences arising on monetary
items that form part of a company’s net
investment in a foreign operation are
recognized in other comprehensive
earnings (currency translation adjustment)
and are fully reclassified to the statement
of income should the Group lose control
of a subsidiary, lose joint control over an
interest in a joint arrangement or lose
significant influence in an associate. When
a foreign operation is partially disposed of
or sold, exchange differences that were
recorded in equity are recognized in the
statement of income as part of the net
gain or loss on sale, except for a partial
disposal of a subsidiary without loss of
control, where a proportionate share of
the cumulative currency translation
adjustments are re-attributed to non-
controlling interest and not recognized in
the statement of income.
173
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 For transactions occurring from January
2017 onwards, the IPC national consumer
price index was used.
2.3 Change in the scope of
consolidation
Acquisitions in the current reporting
period
During 2017 and 2018, there were no
individually material business
combinations. Aggregated information of
the acquisitions conducted is disclosed in
note 20. The acquisitions made during
2018 are as listed below:
• on February 23, 2018, the Group
acquired the Kendall Group, a leading
aggregates and ready-mix concrete
manufacturer operating in South
England;
• on July 3, 2018, the Group acquired
Tarrant Concrete, a leading provider of
ready-mix concrete in the Dallas/Fort
Worth area in Texas;
• on July 4, 2018, the Group acquired
Sablière de Vritz in the area of Loire
Atlantique in France; and
• on August 2, 2018, the Group acquired
Metro Mix, LLC, a leading provider of
ready-mix concrete in the Denver
metropolitan area in Colorado.
Hyperinflation in Argentina
In the second quarter of 2018, the
inflation indices of Argentina reflected a
three-year cumulative inflation rate
exceeding 100 percent. The Group applied
IAS 29 Financial Reporting in
Hyperinflationary Economies for Argentina
as of December 31, 2018. In accordance
with IAS 29, the financial statements of
Argentina are expressed in terms of the
measuring unit current as of December
31, 2018, which means that the financial
statements are restated in terms of the
measuring unit current at the end of that
reporting period. Monetary assets and
liabilities are not restated as they are
already expressed in the measuring unit
current at the end of the reporting period,
whereas all non-monetary items such as
inventory, property, plant and equipment
and equity recorded at historical rates are
restated in terms of the measuring unit
current at the end of December 31, 2018.
The resulting gain of CHF 26 million on the
net liability monetary position was
recorded as part of production cost of
goods sold in the income statement. The
restatement of equity by CHF 183 million
was reflected as an increase in retained
earnings, of which CHF 32 million was
attributable to the non-controlling
interest. The restated financial statements
of Argentina are translated into CHF at the
exchange rate applicable as of December
31, 2018. Since the amounts are translated
into the currency of a non-
hyperinflationary economy (i.e. the CHF),
comparative amounts have not been
restated.
Divestments in the current reporting
period
In the second quarter of 2018, the Group
disposed of an operation of Lafarge China
Cement Limited to the Group’s joint
venture Huaxin Cement Co. Ltd for a total
consideration of CHF 38 million.
Also in the second quarter 2018, the
Group has received as planned the
remaining proceeds of CHF 117 million in
connection with the disposal of 73.5
percent of the listed shares in Sichuan
Shuangma Cement Co. Ltd., presented in
the cash flow from investing activities. In
the first quarter 2018, the Group
completed the repurchase of the two
cement companies from Shuangma under
a put and call option for an amount of CHF
214 million presented in the cash flow
from financing activities (see note 13.2).
On November 12, 2018, the Group signed
an agreement with Semen Indonesia for
the disposal of its entire shareholding
of 80.6 percent in Holcim Indonesia and
consequently classified the assets
and related liabilities as held for sale
(see note 13.2).
Divestments in the previous comparative
periods
The streamlining of the Group’s operations
in China started in 2016 and was
completed with final payments in 2018.
The transactions entered included:
• the disposal of the non-listed cement
assets in China to the Group’s joint
venture Huaxin for a total consideration
of CHF 257 million received in the first
quarter 2017; and
174
Notes to the consolidated financial statementscontinued
On February 28, 2017, the Group disposed
of its 65 percent shareholding in
LafargeHolcim Vietnam for a total
consideration of CHF 546 million before
taxes which resulted in a net gain before
taxes of CHF 339 million.
On August 14, 2017, the Group disposed
of its 54 percent shareholding in Cemento
Polpaico S.A. (Chile) for a total
consideration of CHF 114 million before
taxes which resulted in a net loss before
taxes of CHF 40 million.
• the disposal of 73.5 percent of the listed
shares in Sichuan Shuangma together
with a put and call option agreement to
repurchase the underlying Shuangma
cement companies.
From the disposal of 73.5 percent of the
listed shares in Sichuan Shuangma
Cement Co. Ltd. in 2016, CHF 352 million
was received on an escrow account in
December 2016 and released in 2017 of
which CHF 181 million reflecting the value
of the put option was presented as cash
flow from financing activities in the line
“Net movement in current financial
liabilities” and the remainder presented in
the cash flow from investing activities in
the line “Disposal of participation in Group
companies”.
The put and call option agreement
entered into in 2016 resulted in
LafargeHolcim retaining control over four
Shuangma cement companies. The put
and call option agreement expired in
December 2017 and two cement
companies were deconsolidated with a
loss of CHF 40 million recognized in 2017.
As LafargeHolcim signed a share purchase
agreement for the remaining two cement
companies in 2017, the Group continued
to maintain control with a corresponding
net liability of CHF 214 million presented
in the statement of financial position as
current financial liability, which was
released at completion in the first quarter
2018 as described above. The assets and
associated liabilities for these two cement
companies were classified as held for sale
and a write down of CHF 58 million was
recorded in 2017.
175
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 2.4 Principal consolidated companies of the Group
Principal operating Group companies
Region
Company
Country
Municipality
Cement
Aggregates
Effective
participation
(percentage
of interest)
Ready-Mix
Concrete
Listed
company
Asia Pacific
Holcim (Australia) Pty Ltd
Australia
Chatswood
u
l
LafargeHolcim Bangladesh Limited
Bangladesh
Dhaka
Jiangyou LafargeHolcim
Cement company
China
Jiangyou City
Lafarge Dujiangyan Cement Co., Ltd.
China
ACC Limited
Ambuja Cements Ltd.
India
India
Dujiangyan
City
Mumbai
Mumbai
PT Holcim Indonesia Tbk.
Indonesia
Jakarta
PT Lafarge Cement Indonesia
Indonesia
Jakarta
Holcim (Malaysia) Sdn Bhd
Malaysia
Johor Bahru
Lafarge Malaysia Berhad
Malaysia
Petaling Jaya
Holcim (New Zealand) Ltd
New Zealand
Christchurch
Holcim Philippines Inc.
Philippines
Taguig City
Holcim (Singapore) Ltd
Singapore
Singapore
Lafarge Cement Singapore Pte Ltd
Singapore
Singapore
Latin America Holcim (Argentina) S.A.
Argentina
Cordoba
LafargeHolcim (Brasil) S.A.
Brazil
Rio de Janeiro
Holcim (Colombia) S.A.
Colombia
Santafé de
Bogota
Holcim (Costa Rica) S.A.
Costa Rica
San José
Holcim (Ecuador) S.A.
Ecuador
El Caimán
Holcim El Salvador S.A. de C.V.
El Salvador
La Libertad
Société des Ciments Antillais
French Antilles Baie-Mahault
Holcim Mexico S.A. de C.V.
Mexico
Mexico City
Holcim (Nicaragua) S.A.
Nicaragua
Sur Managua
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
l
l
l
l
l
l
l
l
l
l
l
l
l
l
u
u
u
u
u
u
u
u
u
u
X
X
X
X
X
X
X
X
X
100.0%
29.4%
100.0%
75.0%
36.1%
63.1%
80.6%
80.6%
51.0%
51.0%
100.0%
75.3%
90.8%
51.0%
80.0%
100.0%
99.8%
65.2%
92.2%
95.4%
69.7%
100.0%
52.2%
176
Notes to the consolidated financial statementscontinued Region
Europe
Company
Lafarge Zementwerke GmbH
Country
Austria
Vienna
Municipality
Cement
Aggregates
Effective
participation
(percentage
of interest)
Ready-Mix
Concrete
Listed
company
Holcim (Azerbaijan) O.J.S.C.
Azerbaijan
Baku
Holcim (Belgique) S.A.
Belgium
Nivelle
Holcim (Bulgaria) AD
Bulgaria
Beli Izvor
Holcim (Hrvatska) d.o.o.
Croatia
Koromacno
Lafarge Cement a.s.
LafargeHolcim Bétons S.A.S.
LafargeHolcim Ciments S.A.
LafargeHolcim Distribution S.A.S.
LafargeHolcim Granulats S.A.S.
Czech
Republic
France
France
France
France
Cizkovice
Clamart
Clamart
Clamart
Clamart
Holcim (Deutschland) GmbH
Germany
Hamburg
Holcim (Süddeutschland) GmbH
Germany
Dotternhausen
Heracles General Cement Company S.A. Greece
Athens
Lafarge Cement Hungary Ltd
Hungary
Szentlőrinc
Holcim Gruppo (Italia) S.p.A.
Italy
Merone
Lafarge Ciment (Moldova) S.A.
Moldova
Rezina
Lafarge Cement S.A.
Lafarge Kruszywa i Beton
Poland
Poland
Małogoszcz
Warsaw
Holcim (Romania) S.A.
Romania
Bucharest
LLC Holcim (Rus) Construction Materials Russia
Lafarge Beocinska Fabrika Cementa
Serbia
Moscow
Belgrade
Lafarge Cement d.o.o
Slovenia
Trbovlje
Holcim Trading S.A.
LafargeHolcim España S.A.U.
Holcim (Schweiz) AG
LH Trading Ltd
Aggregate Industries Ltd.
Lafarge Ireland Limited
Lafarge Cauldon Limited
Spain
Spain
Madrid
Madrid
Switzerland
Zurich
Switzerland
Zurich
United
Kingdom
United
Kingdom
United
Kingdom
Markfield
Cookstown
Markfield
u
u
u
u
u
u
u
u
u
u
u
l
l
l
l
l
l
l
l
l
l
l
l
l
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
70.0%
90.2%
100.0%
100.0%
99.9%
68.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
70.0%
100.0%
95.3%
100.0%
100.0%
99.7%
97.5%
100.0%
70.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
177
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Munipality
Cement
Aggregates
Effective
participation
(percentage
of interest)
Ready-Mix
Concrete
Listed
company
l
l
l
l
l
l
l
l
l
l
l
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
u
u
u
u
u
u
u
u
u
100.0%
100.0%
100.0%
100.0%
100.0%
99.5%
100.0%
99.5%
49.0%
97.4%
100.0%
70.0%
51.0%
50.3%
58.6%
52.1%
100.0%
58.4%
76.3%
76.3%
100.0%
76.3%
76.3%
76.3%
61.5%
71.0%
75.0%
76.5%
X
X
X
X
X
X
Region
Company
North America Lafarge Canada Inc.
Holcim (US) Inc.
Country
Canada
USA
Aggregate Industries Management Inc. USA
Lafarge North America Inc.
USA
Middle East
Africa
Lafarge Ciment de M’sila “LCM”
Lafarge Béton Algérie “LBA”
Lafarge Ciment d'Oggaz “LCO”
Lafarge Logistique Algérie “LLA”
Cilas Spa
Lafarge Cement Egypt S.A.E.
Lafarge Ready Mix S.A.E.
Bazian Cement Company Limited
Karbala Cement Manufacturing Ltd
Jordan Cement Factories Company
P.S.C.
Bamburi Cement Limited
Algeria
Algeria
Algeria
Algeria
Algeria
Egypt
Egypt
Iraq
Iraq
Jordan
Kenya
Toronto
Chicago
Chicago
Chicago
Algiers
Algiers
Algiers
Algiers
Algiers
Cairo
Cairo
Sulaimaniyah
Baghdad
Amman
Nairobi
Holcim (Liban) S.A.L.
Lebanon
Beirut
Lafarge Cement Malawi Ltd
Malawi
Blantyre
Lafarge (Mauritius) Cement Ltd
Mauritius
Port-Louis
Ashakacem Plc.
Lafarge Africa Plc.
Nigeria
Nigeria
Gombe
Ikoyi
Holcim (Outre-Mer) S.A.S.
Réunion
Le Port
Lafarge Industries South Africa (Pty) Ltd South Africa
Edenvale
Lafarge Mining South Africa (Pty) Ltd
South Africa
Johannesburg
Ash Resources (Pty) Ltd
South Africa
Edenvale
Mbeya Cement Company Limited
Tanzania
Songwe
Hima Cement Ltd.
Lafarge Zambia Plc
Uganda
Zambia
Kampala
Lusaka
Lafarge Cement Zimbabwe Limited
Zimbabwe
Harare
178
Notes to the consolidated financial statementscontinued Principal finance and holding companies
Company
Holcim Finance (Australia) Pty Ltd
Holcim (Australia) Holdings Pty Ltd
Holcibel S.A.
Holcim Finance (Belgium) S.A.
Holcim Capital Corporation Ltd.
Holcim Overseas Finance Ltd.
Holcim Investments (France) S.A.S.
Lafarge S.A.
Financière Lafarge S.A.S.
Société financière immobilière et mobilière “SOFIMO” S.A.S.
Lafarge Centre de recherche (LCR)
Holcim Auslandbeteiligungs GmbH (Deutschland)
Holcim Beteiligungs GmbH (Deutschland)
Holcim Finance (Luxembourg) S.A.
Holcim US Finance S. à r.l. & Cie S.C.S.
Holderind Investments Ltd.
Holcim Capital México, S.A. de C.V.
LafargeHolcim Sterling Finance B.V.
Holchin B.V.
Holderfin B.V.
Caricement B.V.
Cemasco B.V.
Holcim Investments (Spain), S.L.
LafargeHolcim Ltd 1
LafargeHolcim Albion Finance Ltd
LafargeHolcim Continental Finance Ltd
LafargeHolcim Helvetia Finance Ltd
LafargeHolcim International Finance Ltd
Holcim Group Services Ltd
Holcim Technology Ltd
Aggregate Industries Holdings Limited
Holcim Participations (UK) Limited
Lafarge International Holdings Limited
Lafarge Building Materials Limited
Lafarge Minerals Limited
LafargeHolcim Finance US LLC
Holcim Participations (US) Inc.
1 LafargeHolcim Ltd, Zürcherstrasse 156, CH-8645 Rapperswil Jona
Country
Australia
Australia
Belgium
Belgium
Bermuda
Bermuda
France
France
France
France
France
Germany
Germany
Luxembourg
Luxembourg
Mauritius
Mexico
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Spain
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
USA
USA
Municipality
Sydney
Sydney
Brussels
Brussels
Hamilton
Hamilton
Paris
Paris
Paris
Paris
Saint Quentin Fallavier
Hamburg
Hamburg
Luxembourg
Luxembourg
Port-Louis
Mexico City
Amsterdam
Amsterdam
Amsterdam
Amsterdam
Amsterdam
Madrid
Rapperswil-Jona
Rapperswil-Jona
Rapperswil-Jona
Rapperswil-Jona
Rapperswil-Jona
Holderbank
Rapperswil-Jona
Markfield
Markfield
Surry
Surry
Surry
Wilmington
Chicago
Effective
participation
(percentage
of interest)
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
179
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Listed Group companies
Region
Company
Land
Sitz
Place of listing
Asia Pacific
LafargeHolcim Bangladesh Limited
Bangladesh
Dhaka
Chittagong,
Dhaka
ACC Limited
Ambuja Cements Ltd.
India
India
Mumbai
Mumbai
Mumbai
Mumbai
Market capitalization at
December 31, 2018
in local currency
Security
code number
BDT
INR
INR
50,520 million
BD0643LSCL09
283,202 million
INE012A01025
446,969 million
INE079A01024
PT Holcim Indonesia Tbk.
Indonesia
Jakarta
Jakarta
IDR
14,444,567 million
ID1000072309
Lafarge Malaysia Berhad
Malaysia
Petaling Jaya Kuala Lumpur MYR
1,538 million
MYL3794OO004
Holcim Philippines Inc.
Philippines
Taguig City
Manila
Latin America
Holcim (Argentina) S.A.
Argentina
Cordoba
Buenos Aires
Holcim (Costa Rica) S.A.
Costa Rica
San José
San José
PHP
ARS
CRC
37,422 million
PHY3232G1014
20,595 million
ARP6806N1051
137,238 million
CRINC00A0010
Holcim (Ecuador) S.A.
Ecuador
El Caimán
Quito,
Guayaquil
USD
1,475 million
ECP516721068
Middle East
Africa
Jordan Cement Factories
Company P.S.C.
Bamburi Cement Limited
Jordan
Kenya
Amman
Amman
Nairobi
Nairobi
Holcim (Liban) S.A.L.
Lebanon
Beirut
Lafarge Africa Plc.
Lafarge Zambia Plc
Nigeria
Zambia
Ikoyi
Lusaka
Lafarge Cement Zimbabwe Limited
Zimbabwe
Harare
Beirut
Lagos
Lusaka
Harare
JOD
KES
USD
NGN
ZMW
USD
37 million
JO4104211019
48,092 million
KE0000000059
302 million
LB0000012833
107,984 million
NGWAPCO00002
974 million
ZM0000000011
106 million
ZW0009012056
180
Notes to the consolidated financial statementscontinued 2.5 Non-controlling interests
LafargeHolcim has two Group companies
with material non-controlling interests.
Information regarding these subsidiaries
is as follows:
Material non-controlling interest
Company
Million CHF
ACC Limited
Ambuja Cements Ltd.
Country
Non-controlling interest 1
Net income 2
Total equity 2
India
India
2018
2017
63.9%
36.9%
63.9%
36.9%
2018
135
71
2017
87
56
2018
668
948
2017
622
958
Dividends paid to
non-controlling interest
2018
2017
30
16
35
27
1 The non-controlling interest of these companies represents the percentage interest (direct and indirect).
2 Attributable to non-controlling interest.
Set out below is the summarized financial
information relating to ACC Limited and
Ambuja Cements Ltd. before
intercompany eliminations.
181
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Statement of financial position
Million CHF
Current assets
Long-term assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities
Net assets
Statement of income
Million CHF
Net sales
Net income
Statement of cash flows
Million CHF
Cash flow from operating activities
Increase (decrease) in cash and cash equivalents
ACC Limited
Ambuja Cements Ltd.
2017
860
1,738
2,598
660
289
948
2018
810
2,120
2,930
514
179
693
2017
832
2,251
3,082
617
206
823
2018
906
1,634
2,540
584
266
849
1,690
1,650
2,237
2,259
2018
2,096
212
2018
169
54
2017
1,977
136
2017
257
115
2018
1,608
212
2018
112
(23)
2017
1,560
176
2017
301
138
182
Notes to the consolidated financial statementscontinued Transfer prices between segments are set
on at arm’s-length basis in a manner
similar to transactions with third parties.
Segment revenues and segment results
include transfers between segments.
Those transfers are eliminated on
consolidation.
3. Segment reporting
3.1 Accounting principles
The Group is organized by countries.
Countries or regional clusters are the
Group’s operating segments. For purposes
of presentation to the Chief Operating
Decision Maker (i.e. the Group CEO), five
regions corresponding to the aggregation
of countries or regional clusters are
reported:
– Asia Pacific
– Europe
– Latin America
– Middle East Africa
– North America
While each operating segment is reviewed
separately by the Chief Operating Decision
Maker (i.e. the Group CEO), the countries
have been aggregated into five reportable
segments as they have similar long-term
average gross margins and are similar in
respect of products, production processes,
distribution methods and types of
customers.
Each of the above reportable segments
derives its revenues largely from the sale
of cement, aggregates and ready-mix
concrete.
As part of the “Strategy 2022”, the Group
has disclosed a fourth product line,
Solutions & Products as detailed below:
– Cement, which comprises clinker, cement and
other cementitious materials
– Aggregates
– Ready-mix concrete
– Solutions & Products, which comprises
precast, concrete products, asphalts, mortars
and contracting and services
Trading activities, which previously were
included in “Other construction materials
and services”, have been reclassified
largely as “Cement” to better reflect the
nature of the operations to which it
relates.
Group financing (including financing costs
and financing income) and income taxes
are managed on a Group basis and are
not allocated to any reportable segments.
183
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 3.2 Operating segments
Information by reportable segment
Capacity and sales (unaudited)
Annual cement production capacity (Million t)
Sales of cement (Million t)
Sales of aggregates (Million t)
Sales of ready-mix concrete (Million m 3)
Statement of income (Million CHF)
Net sales to external customers
Net sales to other segments
Total Net sales
Recurring EBITDA
Recurring EBITDA margin in %
Operating profit (loss)
Operating profit (loss) margin in %
Statement of financial position (Million CHF)
Invested capital
Investments in associates and joint ventures
Total assets
Total liabilities
Statement of cash flows (Million CHF)
Cash flow from operating activities
Capex 2
Personnel (unaudited)
Number of personnel
Reconciliation of measures of profit and loss to the consolidated statement of income
Recurring EBITDA
Restructuring, litigation, implementation and other non-recurring costs
Depreciation, amortization and impairment of operating assets
of which impairment charge relating to property, plant and equipment and assets
classified as held for sale
of which impairment charge relating to goodwill
of which impairment charge relating to intangible assets
of which impairment charge relating to investments in joint ventures
Operating profit (loss)
Profit on disposals and other non-operating income
Loss on disposals and other non-operating expenses
Share of profit of associates
Financial income
Financial expense
Net income (loss) before taxes
1 Restated due to change in presentation following IFRS 15, see note 1.2.
2 The capex consists of the purchase and disposal of property, plant and equipment.
184
Asia Pacific
2018
2017 1
2018
111.4
117.4
89.7
31.4
12.5
7,446
45
7,491
1,609
21.5
1,200
16.0
92.6
31.8
12.8
7,402
39
7,441
1,418
19.1
7
0.1
73.6
45.3
120.4
19.3
7,554
147
7,701
1,499
19.5
787
10.2
Europe
2017 1
73.4
43.1
125.2
18.2
7,008
159
7,167
1,385
19.3
260
3.6
8,775
1,371
9,297
1,185
11,103
11,738
240
350
13,812
14,438
15,935
17,608
5,623
6,031
7,371
7,921
Latin America
Middle East Africa
North America
Corporate/Eliminations
Total Group
2018
2017 1
2018
2017 1
2018
2017 1
2018
2017 1
2018
2017 1
2,731
2,943
3,080
5,875
5,664
27,466
27,021
39.1
25.1
3.6
5.5
11
2,743
959
35.0
721
26.3
2,957
36
4,563
2,047
39.3
24.9
4.2
5.8
1
2,944
1,055
35.9
568
19.3
2,598
4
4,527
2,879
56.8
35.9
8.7
4.2
43
3,123
734
23.5
313
10.0
6,897
1,364
7,763
3,571
32.0
19.8
109.6
9.4
1
5,877
1,523
25.9
882
15.0
33.0
19.2
107.1
9.1
5,664
1,483
26.2
552
9.7
6.1
4.7
312.9
221.9
273.8
50.9
318.4
220.2
278.7
50.6
779
(248)
532
(307)
652
(220)
431
(436)
(591)
(649)
27,466
27,021
6,016
21.9
3,312
12.1
5,990
22.2
(478)
(1.8)
10,898
11,054
57
15,195
6,853
56
15,311
5,878
965
64
2,427
4,177
1,605
105
3,075
6,105
41,595
43,556
3,133
59,695
29,642
3,120
63,679
32,703
534
323
704
328
853
396
819
313
266
120
483
80
176
175
420
254
656
268
851
370
503
4
(238)
10
2,988
1,285
3,040
1,355
21,979
24,153
20,222
21,317
8,956
9,305
11,856
12,901
12,892
12,697
1,150
1,588
77,055
81,960
1,609
(54)
(354)
123
2
1,200
1,418
(70)
(1,341)
(320)
(545)
(4)
7
1,499
(84)
(627)
(8)
(24)
1,385
(111)
(1,013)
(368)
(40)
(5)
(4)
959
(33)
(205)
(19)
(213)
1,055
(58)
(429)
(11)
734
(76)
(345)
(31)
(27)
(3)
1,523
(73)
(568)
1,483
38
(969)
(371)
(307)
(155)
(129)
(1)
(6)
(436)
(98)
(116)
(1)
787
260
721
568
313
(1,215)
882
552
(591)
(649)
3,312
55.3
35.8
10.4
4.7
3,353
21
3,374
1,085
32.2
(1,215)
(36.0)
7,265
1,421
8,720
3,889
1,085
(162)
(2,138)
(474)
(1,237)
(14)
(103)
6,016
(476)
5,990
(461)
(2,229)
(6,007)
64
(27)
(32)
93
(166)
22
140
(1,025)
2,375
(1,745)
(1,821)
(35)
(107)
(478)
447
(242)
51
153
(1,111)
(1,180)
Notes to the consolidated financial statementscontinued 3.2 Operating segments
Information by reportable segment
Capacity and sales (unaudited)
Annual cement production capacity (Million t)
Sales of cement (Million t)
Sales of aggregates (Million t)
Sales of ready-mix concrete (Million m 3)
Statement of income (Million CHF)
Net sales to external customers
Net sales to other segments
Total Net sales
Recurring EBITDA
Recurring EBITDA margin in %
Operating profit (loss)
Operating profit (loss) margin in %
Statement of financial position (Million CHF)
Investments in associates and joint ventures
Invested capital
Total assets
Total liabilities
Statement of cash flows (Million CHF)
Cash flow from operating activities
Capex 2
Personnel (unaudited)
Number of personnel
Recurring EBITDA
Reconciliation of measures of profit and loss to the consolidated statement of income
Restructuring, litigation, implementation and other non-recurring costs
Depreciation, amortization and impairment of operating assets
of which impairment charge relating to property, plant and equipment and assets
classified as held for sale
of which impairment charge relating to goodwill
of which impairment charge relating to intangible assets
of which impairment charge relating to investments in joint ventures
Operating profit (loss)
Profit on disposals and other non-operating income
Loss on disposals and other non-operating expenses
Share of profit of associates
Financial income
Financial expense
Net income (loss) before taxes
1 Restated due to change in presentation following IFRS 15, see note 1.2.
2 The capex consists of the purchase and disposal of property, plant and equipment.
Asia Pacific
2018
2017 1
2018
111.4
117.4
89.7
31.4
12.5
7,446
45
7,491
1,609
21.5
1,200
16.0
92.6
31.8
12.8
7,402
39
7,441
1,418
19.1
7
0.1
73.6
45.3
120.4
19.3
7,554
147
7,701
1,499
19.5
787
10.2
Europe
2017 1
73.4
43.1
125.2
18.2
7,008
159
7,167
1,385
19.3
260
3.6
8,775
1,371
9,297
1,185
11,103
11,738
240
350
13,812
14,438
15,935
17,608
5,623
6,031
7,371
7,921
1,609
(54)
(354)
123
2
1,200
1,418
(70)
(1,341)
(320)
(545)
(4)
7
1,499
(84)
(627)
(8)
(24)
1,385
(111)
(1,013)
(368)
(40)
(5)
(4)
Latin America
Middle East Africa
North America
Corporate/Eliminations
Total Group
2018
2017 1
2018
2017 1
2018
2017 1
2018
2017 1
2018
2017 1
39.1
25.1
3.6
5.5
39.3
24.9
4.2
5.8
56.8
35.9
8.7
4.2
2,731
2,943
3,080
11
2,743
959
35.0
721
26.3
2,957
36
4,563
2,047
1
2,944
1,055
35.9
568
19.3
2,598
4
4,527
2,879
43
3,123
734
23.5
313
10.0
6,897
1,364
7,763
3,571
55.3
35.8
10.4
4.7
3,353
21
3,374
1,085
32.2
(1,215)
(36.0)
7,265
1,421
8,720
3,889
32.0
19.8
109.6
9.4
33.0
19.2
107.1
9.1
5,875
5,664
1
5,877
1,523
25.9
882
15.0
5,664
1,483
26.2
552
9.7
6.1
4.7
779
(248)
532
(307)
652
(220)
431
(436)
(591)
(649)
312.9
221.9
273.8
50.9
318.4
220.2
278.7
50.6
27,466
27,021
27,466
27,021
6,016
21.9
3,312
12.1
5,990
22.2
(478)
(1.8)
10,898
11,054
57
15,195
6,853
56
15,311
5,878
965
64
2,427
4,177
1,605
105
3,075
6,105
41,595
43,556
3,133
59,695
29,642
3,120
63,679
32,703
534
323
704
328
853
396
819
313
266
120
483
80
176
175
420
254
656
268
851
370
503
4
(238)
10
2,988
1,285
3,040
1,355
21,979
24,153
20,222
21,317
8,956
9,305
11,856
12,901
12,892
12,697
1,150
1,588
77,055
81,960
959
(33)
(205)
1,055
(58)
(429)
(19)
(213)
(11)
734
(76)
(345)
(31)
(27)
(3)
1,085
(162)
(2,138)
(474)
(1,237)
(14)
(103)
1,523
(73)
(568)
1,483
38
(969)
(371)
(307)
(155)
(129)
(1)
(6)
(436)
(98)
(116)
(1)
6,016
(476)
5,990
(461)
(2,229)
(6,007)
64
(27)
(32)
787
260
721
568
313
(1,215)
882
552
(591)
(649)
3,312
93
(166)
22
140
(1,025)
2,375
(1,745)
(1,821)
(35)
(107)
(478)
447
(242)
51
153
(1,111)
(1,180)
185
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 2018
16,802
1,250
18,052
5,731
3,791
2,349
2,752
2,883
546
4,688
1,272
971
909
693
1,044
(201)
26.0
937
Cement 1
2017 2
16,761
1,202
17,964
5,703
3,476
2,572
2,983
2,796
433
4,810
1,141
887
1,031
1,049
1,012
(310)
26.8
1,134
Aggregates
Ready-mix concrete
Corporate/Eliminations
2018
2017 2
2018
2017 2
2018
2018
2017 2
2018
2,880
1,212
4,091
631
1,925
26
94
1,416
893
191
354
1
11
377
(42)
21.8
235
2,768
1,157
3,925
583
1,819
36
112
1,374
1
767
164
317
(2)
12
344
(66)
19.5
167
5,439
42
5,481
1,233
2,060
508
319
1,361
232
108
71
45
10
40
(41)
4.2
73
Solution
& Products 3
2017 2
2,275
38
2,313
329
1,083
21
71
800
7
264
37
125
1
24
75
2
11.4
40
2,345
51
2,396
297
1,087
50
90
876
(3)
203
38
103
4
20
62
(23)
8.5
38
5,218
45
5,263
1,254
1,845
507
348
1,308
1
148
75
56
26
1
53
(63)
2.8
46
Total Group
2017 2
27,466
27,021
27,466
27,021
7,491
7,701
2,743
3,123
5,877
532
6,016
1,609
1,499
959
734
1,523
(307)
21.9
1,285
7,441
7,167
2,944
3,374
5,664
431
5,990
1,418
1,385
1,055
1,085
1,483
(436)
22.2
1,355
(2,555)
(2,555)
(401)
(1,161)
(190)
(133)
(659)
(11)
(2,443)
(2,443)
(430)
(1,056)
(192)
(140)
(615)
(11)
2
(32)
45,194
47,987
9,639
10,777
12,800
13,382
8,327
8,344
1,094
1,470
77,055
81,960
Information by product line
Million CHF
Statement of income and statement of cash flows
Net sales to external customers
Net sales to other segments
Total net sales
– of which Asia Pacific
– of which Europe
– of which Latin America
– of which Middle East Africa
– of which North America
– of which Corporate/Eliminations
Recurring EBITDA
– of which Asia Pacific
– of which Europe
– of which Latin America
– of which Middle East Africa
– of which North America
– of which Corporate
Recurring EBITDA margin in %
Capital expenditure
Personnel (unaudited)
Number of personnel
1 Cement, clinker and other cementitious materials.
2 Restated due to change in presentation following IFRS 15, see note 1.2.
3 Precast, concrete products, asphalt, mortars and contracting and services.
186
Notes to the consolidated financial statementscontinued Information by product line
Million CHF
Statement of income and statement of cash flows
Net sales to external customers
Net sales to other segments
Total net sales
– of which Asia Pacific
– of which Europe
– of which Latin America
– of which Middle East Africa
– of which North America
– of which Corporate/Eliminations
Recurring EBITDA
– of which Asia Pacific
– of which Europe
– of which Latin America
– of which Middle East Africa
– of which North America
– of which Corporate
Recurring EBITDA margin in %
Capital expenditure
Personnel (unaudited)
Number of personnel
1 Cement, clinker and other cementitious materials.
2 Restated due to change in presentation following IFRS 15, see note 1.2.
3 Precast, concrete products, asphalt, mortars and contracting and services.
2018
16,802
1,250
18,052
5,731
3,791
2,349
2,752
2,883
546
4,688
1,272
971
909
693
1,044
(201)
26.0
937
Cement 1
2017 2
16,761
1,202
17,964
5,703
3,476
2,572
2,983
2,796
433
4,810
1,141
887
1,031
1,049
1,012
(310)
26.8
1,134
2,880
1,212
4,091
631
1,925
26
94
1,416
893
191
354
1
11
377
(42)
21.8
235
2,768
1,157
3,925
583
1,819
36
112
1,374
1
767
164
317
(2)
12
344
(66)
19.5
167
5,439
42
5,481
1,233
2,060
508
319
1,361
232
108
71
45
10
40
(41)
4.2
73
Aggregates
Ready-mix concrete
2018
2017 2
2018
2017 2
2018
Solution
& Products 3
2017 2
Corporate/Eliminations
2018
2017 2
2018
Total Group
2017 2
5,218
45
5,263
1,254
1,845
507
348
1,308
1
148
75
56
26
1
53
(63)
2.8
46
2,345
51
2,396
297
1,087
50
90
876
(3)
203
38
103
4
20
62
(23)
8.5
38
2,275
38
2,313
329
1,083
21
71
800
7
264
37
125
1
24
75
2
11.4
40
(2,555)
(2,555)
(401)
(1,161)
(190)
(133)
(659)
(11)
(2,443)
(2,443)
(430)
(1,056)
(192)
(140)
(615)
(11)
2
(32)
27,466
27,021
27,466
27,021
7,491
7,701
2,743
3,123
5,877
532
6,016
1,609
1,499
959
734
1,523
(307)
21.9
1,285
7,441
7,167
2,944
3,374
5,664
431
5,990
1,418
1,385
1,055
1,085
1,483
(436)
22.2
1,355
45,194
47,987
9,639
10,777
12,800
13,382
8,327
8,344
1,094
1,470
77,055
81,960
187
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Net sales
to external customers
Non-current assets
2018
979
3,879
3,697
2,105
1,915
1,790
1,251
984
677
2017 1
968
3,822
3,535
1,950
1,771
1,713
1,242
976
644
2018
1,071
7,990
4,223
4,237
3,921
2,134
1,385
919
965
2017
1,096
7,987
4,598
4,638
4,226
2,139
1,429
925
1,020
10,189
27,466
10,400
15,900
27,021
42,745
17,688
45,747
3.3 Information by country
Million CHF
Switzerland
USA
India
Canada
France
United Kingdom
Australia
Mexico
Germany
Other countries
Total
1 Restated due to change in presentation following IFRS 15, see note 1.2.
Net sales to external customers are based
primarily on the location of assets (origin
of sales). Non-current assets consist of
property, plant and equipment, goodwill
and intangible assets. There is no single
external customer where net sales
amount to 10 percent or more of the
Group net sales.
188
Notes to the consolidated financial statementscontinued 4. Operating profit
4.1 Accounting principles
Operating profit excludes items that are
not directly related to the Group’s normal
operating activities. These primarily relate
to gains or losses on the disposal of
property, plant and equipment, gains or
losses on the sale of Group companies,
associates and joint ventures, revaluation
gains or losses on previously held equity
interests, disputes with minority
shareholders, other major lawsuits, share
of profit or loss of associates and financial
income and expenses.
4.2 Revenue recognition
The Group is applying IFRS 15 on a
retrospective basis from January 1, 2017.
Revenue from the sale of the Group’s core
products cement, aggregates and
ready-mix concrete is recognized when
delivery has taken place and control of the
goods has been transferred to the
customer. The customer obtains control of
the goods when the significant risks and
rewards of products sold are transferred
according to the specific delivery terms
that have been formally agreed with the
customer, generally upon delivery when
the bill of lading is signed by the customer
as evidence that they have obtained
physical possession and accepted the
products delivered to them.
The core products are often sold with
volume discounts. Revenue from these
sales is recognized based on the price
specified on the invoice, net of estimated
discounts. Accumulated experience is
used to estimate and provide for the
discounts, using the most likely amount. A
liability is recognized for expected volume
discounts in relation to sales made until
the end of the reporting period. No
element of financing is deemed present as
the sales are made with credit terms
largely ranging between 30 days and 60
days depending on the specific terms
agreed to with the Group company
concerned, which is consistent with
market practice. Generally, cement,
aggregates and ready-mix concrete are
not returned as a customer will only
accept these products once they have
passed a stringent quality check at
delivery point.
Contract liabilities, which is a Group
company’s obligation to transfer goods or
services to a customer for which the entity
has already received consideration, relate
mainly to advance payments from
customers which are disclosed in note
10.5 and to volume incentive programs. As
at December 31, 2018, contract liabilities
amounted to CHF 555 million (2017: CHF
531 million).
A trade receivable is recognized when the
products are delivered to a customer as
this is the point in time that the
consideration becomes unconditional
because only a passage of time is required
before the payment is due.
Contract assets, which is a Group
company’s right to consideration that is
conditional on something other than the
passage of time, relate mainly to
construction and paving activities and
remain immaterial on Group level at
this stage.
The Group is also involved in providing
services in conjunction with the sale of its
core products and is developing retail
activities in certain markets. However,
both these activities remain immaterial on
Group level at this stage.
Interest is recognized on a time proportion
basis that reflects the effective yield on the
asset.
Dividends are recognized when the
shareholder’s right to receive payment is
established.
189
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 4.3 Production cost of goods sold
Million CHF
Material expenses
Fuel expenses
Electricity expenses
Personnel expenses
Maintenance expenses
Depreciation, amortization and impairment
Other production expenses
Changes in inventory
Total
1 Restated due to change in presentation following IFRS 15, see note 1.2.
4.4 Research and development
Research and development projects are
carried out with a view to generate added
value for customers through end user
oriented products and services.
Additionally, process innovation aims at
environmental protection and production
system improvements. Research and
development costs of CHF 98 million
(2017: CHF 96 million) were charged
directly to the consolidated statement of
income.
4.5 Summary of depreciation,
amortization and impairment
Million CHF
Production facilities
Distribution and sales facilities
Administration facilities
Total depreciation, amortization and impairment of operating assets (a)
of which impairment reversal/charge relating to property, plant and equipment
and assets classified as held for sale (note 11.2)
of which impairment charge relating to goodwill (note 11.3)
of which impairment charge relating to intangible assets (note 11.3)
of which impairment charge relating to investments in joint ventures (note 6.3)
Impairment of long-term financial assets (note 7.3)
Impairment of investments in associates (note 6.7)
Ordinary depreciation of non-operating assets
Unusual write-offs
Total depreciation, amortization and impairment of non-operating assets (b)
Total depreciation, amortization and impairment (a + b)
Of which depreciation of property, plant and equipment (note 11.2)
2018
(5,726)
(1,745)
(1,349)
(2,191)
(1,575)
(1,876)
(1,557)
100
(15,918)
2018
(1,875)
(215)
(139)
(2,229)
64
(27)
(32)
0
(6)
(1)
(10)
(1)
(17)
(2,246)
(2,033)
2017 1
(5,102)
(1,616)
(1,311)
(2,288)
(1,581)
(5,632)
(1,662)
(49)
(19,240)
2017
(5,632)
(250)
(126)
(6,007)
(1,745)
(1,821)
(35)
(107)
(119)
(4)
(5)
(1)
(128)
(6,135)
(2,112)
190
Notes to the consolidated financial statementscontinued non-operating items that are not directly
related to the Group’s normal operating
activities such as revaluation gains or
losses on previously held equity interests,
disputes with non-controlling interests
and other major lawsuits.
Vietnam of CHF 339 million and gains
on property, plant and equipment of
CHF 82 million.
Further information is disclosed in
note 2.3.
5. Profit and loss on disposals and
other non-operating items
5.1 Accounting principles
Profit and loss on disposals and other
non-operating items comprise gains or
losses on the sale of Group companies and
property, plant and equiment and other
5.2 Profit on disposals and other
non-operating income
Million CHF
Dividends earned
Net gain on disposals before taxes
Other
Total
In 2018, the position “Net gain on
disposals before taxes” mainly includes
several gains on disposal of property,
plant and equipment of CHF 62 million.
In 2017, the position “Net gain on
disposals before taxes” mainly included a
gain on the disposal of LafargeHolcim
5.3 Loss on disposals and other
non-operating expenses
Million CHF
Depreciation, amortization and impairment of non-operating assets
Net loss on disposals before taxes
Other
Total
2018
6
69
18
93
2018
(9)
(84)
(73)
(166)
2017
6
441
0
447
2017
(10)
(108)
(124)
(242)
In 2018, the position “Net loss on disposals
before taxes” notably includes the loss on
disposal of one subsidiary in Europe for
CHF 31 million.
In 2018, the position “Other” includes
expenses incurred in connection with
assets, which are not operating anymore,
abandoned or not part of the operating
business cycle.
In 2017, the position “Net loss on disposal
before taxes” related mainly to the loss of
CHF 40 million on the disposal of Cemento
Polpaico S.A. (Chile) and CHF 40 million
from the transactions entered in China
(see note 2.3).
In 2017, the position “Other” included
expenses in relation to ongoing legal
cases (see note 17.3) and expenses
incurred in connection with assets, that
are not operating anymore, abandoned or
not part of the operating business cycle.
191
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 The Group’s share of profit of joint
ventures is classified within operating
profit as these operations form an integral
part of the Group’s financial performance,
reflecting its core business activities. The
Group’s share of profit of associates is
classified below operating profit.
Goodwill arising from an acquisition is
included in the carrying amount of the
investments in joint ventures and
associated companies.
6.2 Main changes during the period
In June 2018, the Group’s long-term
investment in Cuba was reclassified from
an investment in an associate to an
investment in a joint venture following a
change in the Board composition and the
appointment of the CEO nominated by the
Group. All key decisions (capital
expenditures, budget) are taken jointly
with the partner. There is no link to the
Group's US operations or managerial staff.
Equity accounting is discontinued when
the carrying amount of the investment
together with any long-term interest in a
joint venture or in an associate reaches
zero, unless the Group has either incurred
or guaranteed additional obligations in
respect of the joint venture or associate.
In addition, an investment in an associate
in Europe was reclassified to “Financial
investments – third parties” in 2018
following the change in the relationship
and involvement with the main
shareholder.
2018
264
2,869
3,133
2018
2,693
502
(264)
4
28
0
(95)
2,869
2017
426
2,693
3,120
2017
1,932
286
(263)
17
847
(107)
(19)
2,693
6. Investments in associates and
joint ventures
6.1 Accounting principles
The Group, in the course of its business,
may enter into arrangements where it will
exercise joint control over entities
resulting in classifying these operations as
joint ventures or joint operations
depending on the right and obligation
arising from the contractual arrangement.
Alternatively, it may enter into
arrangements where it holds 20 to 50
percent of the voting rights and exercises
significant influence resulting in these
companies being classified as associate
companies.
Such investments are accounted for using
the equity method of accounting.
Million CHF
Investments in associates
Investments in joint ventures
Total
6.3 Movements in investments in
joint ventures
Million CHF
January 1
Share of profit of joint ventures
Dividends earned
Net acquisitions (disposals)
Reclassifications
Impairments
Currency translation effects
December 31
192
Notes to the consolidated financial statementscontinued In 2018, the position “Reclassifications”
mainly relates to the reclassification of the
Group’s investment in Cuba from an
investment in an associate to an
investment in a joint venture.
In 2017, the position “Impairments” mainly
related to the impairment of the Group’s
interest in certain joint ventures in Middle
East and Africa.
In 2017, as a result of the streamlining of
the Chinese operations, the Group had
joint control in Huaxin Cement Co.Ltd.
which was reclassified from an investment
in an associate to an investment in a joint
venture.
Country of incorporation
or residence
Effective participation
(percentage of interest)
6.4 List of principal joint ventures
Principal joint ventures
Region
Asia Pacific
Middle East Africa
Company
Cement Australia Holdings Pty Ltd
Huaxin Cement Co. Ltd.
Lafarge Maroc S.A.S
Readymix Qatar W.L.L.
Australia
China
Morocco
Qatar
Lafarge Emirates Cement LLC
United Arab Emirates
The Group has two material investments
in joint ventures:
• the 41.8 percent interest in Huaxin
Cement Co. Ltd. in China, and
• the 50 percent interest in Lafarge Maroc
S.A.S. in Morocco
+50.0%
+41.8%
+50.0%
+49.0%
+50.0%
193
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 6.5 Huaxin Cement Co. Ltd (China)
As of December 31, 2018, the Group holds
41.8 percent (2017: 41.8 percent) of the
voting rights in the joint venture company
Huaxin Cement Co. Ltd.
The fair value of the investment in
Huaxin Cement Co. Ltd. based on a quoted
market price on December 31, 2018
amounted to CHF 1,342 million (2017:
CHF 1,123 million).
Set out below is the summarized financial
information for the material joint venture
company Huaxin Cement Co. Ltd., which is
accounted for using the equity method.
The summarized financial information
presented below are the amounts
included in the IFRS financial statements
of Huaxin Cement Co. Ltd. as at
December 31, 2018 and as at
December 31, 2017. As of December 31,
2018, dividends of CHF 31 million
(December 31, 2017: CHF 4 million) were
received from Huaxin Cement Co. Ltd.
Huaxin Cement Co. Ltd. – Statement of financial position
Million CHF
Cash and cash equivalents
Other current assets
Non-current assets
Total assets
Current financial liabilities
Other current liabilities
Long-term financial liabilities
Other non-current liabilities
Total liabilities
Net assets
Shareholders’ equity (excluding non-controlling interest)
Huaxin Cement Co. Ltd. – Statement of comprehensive earnings
Million CHF
Net sales
Recurring EBITDA
Depreciation and amortization
Operating profit
Profit on disposals and other non-operating income
Financial income
Financial expenses
Income taxes
Net income
Net income (excluding non-controlling interest)
Other comprehensive earnings
Total comprehensive earnings (excluding non-controlling interest)
194
31.12.2018
31.12.2017
763
757
3,469
4,988
503
969
529
120
2,121
2,867
2,619
Jan-Dec
2018
4,047
1,340
(216)
1,124
33
5
(74)
(213)
875
799
3
802
540
806
3,468
4,815
423
1,009
1,118
69
2,618
2,197
1,993
Jan-Dec
2017
3,036
731
(238)
493
11
6
(102)
(76)
332
302
(3)
299
Notes to the consolidated financial statementscontinued A reconciliation of the summarized
financial information to the carrying
amount of the investment in Huaxin
Cement Co. Ltd. is as follows:
Million CHF
31.12.2018
31.12.2017
Group share of 41.8% (2017: 41.8%)
of shareholders’ equity (excluding non-controlling interest)
Goodwill
Total
1,095
142
1,238
834
149
984
6.6 Lafarge Maroc S.A.S. (Morocco)
As of December 31, 2018, the Group holds
50 percent (2017: 50 percent) of the voting
rights in the joint venture company
Lafarge Maroc S.A.S. Set out below is the
summarized financial information for the
material joint venture Lafarge Maroc
S.A.S., which is accounted for using the
equity method.
Since Lafarge Maroc S.A.S. is the parent
company of LafargeHolcim Maroc S.A., a
publicly listed company in Morocco which
has not yet published its financial
statements for the year 2018, the
disclosed amounts for the investment in
the joint venture Lafarge Maroc are as of
June 30, 2018.
The summarized financial informa tion
presented below are the amounts
included in the IFRS financial statements
of Lafarge Maroc S.A.S. as at June 30, 2018
and as at December 31, 2017. As of
June 30, 2018, dividends of CHF 54 million
(December 31, 2017: CHF 149 million)
were received from Lafarge Maroc S.A.
195
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Lafarge Maroc – Statement of financial position
Million CHF
Cash and cash equivalents
Other current assets
Non-current assets
Total assets
Current financial liabilities
Other current liabilities
Long-term financial liabilities
Other non-current liabilities
Total liabilities
Net assets
Shareholders’ equity (excluding non-controlling interest)
Lafarge Maroc – Statement of comprehensive earnings
Million CHF
Net sales
Recurring EBITDA
Restructuring, litigation, implementation and other non-recurring costs
Depreciation and amortization
Operating profit
Loss on disposals and other non-operating expenses
Financial expenses
Income taxes
Net income
Net income (excluding non-controlling interest)
Other comprehensive earnings
Total comprehensive earnings (excluding non-controlling interest)
A reconciliation of the summarized
financial information to the carrying
amount of the investment in Lafarge
Maroc is as follows:
Lafarge Maroc
Million CHF
Group share of 50% (2017: 50%)
of shareholders’ equity (excluding non-controlling interest)
Goodwill
Total
196
30.6.2018
31.12.2017
39
399
2,398
2,836
274
236
648
296
1,455
1,381
954
Jan – Jun
2018
554
215
0
(49)
166
(8)
(20)
(50)
88
56
(3)
54
25
396
2,386
2,807
161
261
648
287
1,356
1,450
1,007
Jan – Dec
2017
1,074
457
(15)
(94)
347
(31)
(29)
(91)
195
130
6
136
30.6.2018
31.12.2017
476
831
1,307
503
830
1,332
Notes to the consolidated financial statementscontinued The following table summarizes, in
aggregate, the financial information of all
individually immaterial joint ventures that
are accounted for using the equity
method:
Aggregated financial information of LafargeHolcim’s share in joint ventures
Million CHF
Carrying amount of investments in joint ventures
Net income
Other comprehensive earnings
Total comprehensive earnings
The unrecognized share of losses relating
to the above joint ventures amounted to
CHF 13 million in 2018 (2017: nil).
6.7 Movements in investments in
associates
Million CHF
January 1
Share of profit of associates
Dividends earned
Net (disposals) acquisitions
Reclassifications
Impairments
Currency translation effects
December 31
As of December 31, 2018, the Group has
no interests in associates that are
considered as indi vidually material.
In 2017, as a result of the streamlining of
the Chinese operations, the Group had
joint control in Huaxin Cement Co. Ltd.
which was reclassified from an investment
in an associate to an investment in a joint
venture.
There are no unrecognized share of losses
relating to the above associates.
7. Financing items
7.1 Accounting principles
Financial income and expenses exclude
items that are directly related to the
Group's normal operating activities. They
primarily relate to interest earned on cash
and cash equivalents, interest expenses on
borrowings, unwinding of discount on
long-term provisions and foreign
exchange gains and losses.
31.12.2018
31.12.2017
352
114
1
115
2018
426
22
(10)
(8)
(154)
(1)
(10)
264
377
95
0
95
2017
1,309
51
(16)
1
(924)
(4)
9
426
197
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 7.2 Financial income
Million CHF
Interest earned on cash and cash equivalents
Other financial income
Total
The position “Other financial income”
relates primarily to interest income from
loans and receivables.
7.3 Financial expenses
Million CHF
Interest expenses
Fair value changes on financial instruments
Unwinding of discount on long-term provisions
Net interest expense on retirement benefit plans
Impairment of long-term financial assets
Other financial expenses
Foreign exchange gain/(loss) net
Financial expenses capitalized
Total
The position “Interest expenses” relates
primarily to financial liabilities measured
at amortized cost and includes
amortization on bonds and private
placements of CHF 70 million (2017: CHF
99 million). The remaining balance related
to the purchase price allocation on bonds
and private placements amounts to CHF
136 million as at end of December 2018.
The decrease of the interest expenses in
2018 is the result of the continuation of
the financial liabilities reduction especially
due to bonds repayment and the decrease
in the average interest rate (see note 14.3).
The position “Impairment of long-term
financial assets” includes write-offs of third
parties financial investments and long-
term financial receivables.
The position “Other financial expenses”
notably includes accruals for interest
related to ongoing legal and tax cases (see
notes 17.3 and 8 respectively) and bank
charge fees.
The position “Financial expenses
capitalized” comprises interest
expenditures on large-scale projects.
198
2018
85
54
140
2018
(725)
(2)
(38)
(56)
(6)
(143)
(61)
5
2017
92
60
153
2017
(760)
0
(27)
(52)
(119)
(200)
26
21
(1,025)
(1,111)
8. Income taxes
8.1 Accounting principles
Income taxes
The Group is subject to income taxes in
numerous jurisdictions and the calculation
of the Group’s tax charge involves a
degree of estimation and judgement in
respect of certain items. There are many
transactions and calculations where the
ultimate tax determination is uncertain
during the ordinary course of business.
The Group recognises liabilities for
potential tax audit issues and uncertain
tax positions based on management’s
estimate of whether additional taxes will
be due. Where the final tax outcome of
these matters is different from the
Notes to the consolidated financial statementscontinued amounts that were initially recorded,
these differences impact the current and
deferred tax provisions in the period in
which such determination is made.
Deferred taxes
Deferred tax is provided, using the
balance sheet liability method, on
temporary differences arising between the
tax bases of assets and liabilities and their
carrying amounts in the financial
statements. Tax rates enacted or
substantively enacted by the end of the
reporting period are used to determine
the deferred tax expense.
Deferred tax assets are recognized to the
extent that it is probable that future
taxable profit will be available against
which deductible temporary differences or
unused tax losses can be utilized. Deferred
tax liabilities are recognized for taxable
temporary differences arising from
investments in subsidiaries, associates and
interests in joint arrangements except
where the Group is able to control the
distribution of earnings from these
respective entities and where the earnings
are considered permanently reinvested.
Deferred tax is charged or credited in the
statement of income, except when it
relates to items credited or charged
outside the statement of income, in which
case the deferred tax is treated
accordingly.
Long-term income tax liabilities
In the event the Group expects to settle
income taxes payable beyond the next 12
months, they are classified as long-term
income taxes liabilities and are recognized
at the discounted amount.
8.2 Tax expenses
Million CHF
Current taxes
Deferred taxes and non-current taxes
Total
In 2018, CHF 9 million (2017: CHF 131
million) in connection with the divestment
of Group companies are included in the
current taxes in the consolidated
statement of income.
8.3 Reconciliation of tax rate
Reconciliation of tax rate
Net income (loss) before taxes
Group’s expected tax (charge) income/rate
Effect of non-deductible items
Effect of non-taxable items
Effect from unrecognized tax losses and deferred tax asset write-offs
Effect from non tax deductible goodwill impairments
Other effects
Group’s effective tax (charge)/rate
2018
(702)
46
(656)
25%
2018
2,375
(586)
(151)
140
(57)
(4)
2
(656)
28%
2017
(1,180)
14
(134)
70
(53)
(403)
(30)
(536)
2017
(1,042)
507
(536)
1%
–45%
199
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 The expected tax expense at the
applicable tax rate is the result from
applying the domestic statutory tax rates
to net income (loss) before taxes and
non-recoverable withholding tax on
remitted income of each entity in the
country it operates. For the Group, the
applicable tax rate varies from one year to
the other depending on the relative
weight of net income (loss) of each
individual entity in the Group's profit as
well as the changes in statutory and
withholding tax rates.
The difference between the Group’s
effective tax rate in 2017 and 2018, mainly
relates to impairments of assets without
recognition of related deferred taxes.
Excluding impairment and divestments,
the Group’s effective tax rate amounts to
28 percent (2017: 31 percent).
In 2018, the Group’s Effective Tax Rate
includes the recurring positive impacts of
US tax reform, lower effect of non-
recoverable withholding tax on income
remitted from subsidiaries, net increase in
provisions for transfer pricing and other
risks largely offset by the reassessment of
the risk in relation to the tax treatment of
excise duty incentives in India (see note
17.3 for additional information).
8.4 Deferred taxes
Deferred tax in the consolidated statement of financial position as follows:
Million CHF
Deferred tax assets
Deferred tax liabilities
Deferred tax liabilities net
In 2018, total income taxes paid amounts
to CHF 807 million (2017: CHF 1,043
million), of which CHF 9 million (2017: CHF
163 million) related to the divestment of
Group companies and included in the
position “Disposal of participation in
Group companies” in the consolidated
statement of cash flows and CHF 11
million (2017: CHF 9 million) included in
the position “Dividends paid to non-
controlling interest”.
2018
(651)
2,259
1,607
2017
(758)
2,345
1,587
The Group’s recognition of deferred tax
assets amounting to CHF 651 million
reflects that the Group believes that
sufficient taxable income will be
generated to recover these assets in
future periods, although uncertainties
regarding the future realisation of
recorded tax benefits on temporary
differences and tax loss carryforwards
from operations in various jurisdictions
could result in material adjustments to the
deferred tax assets recognised in future
periods.
200
Notes to the consolidated financial statementscontinued Change in deferred tax asset and liabilities
Million CHF
2018
Property,
plant and
equipment
Intangible
and other
long-term
assets
Provisions
Other
Tax losses
carryforward
Total
2018 Deferred tax liabilities net as at January 1, 2018
3,497
48
(616)
(264)
(1,078)
1,587
Charged (credited)
– to the statement of income
– to other comprehensive income
Change in structure
Hyperinflation 1
Currency translation effects
Deferred tax liabilities net as at December 31, 2018
2017
(122)
0
(58)
50
(150)
3,216
(20)
(3)
0
0
(5)
20
99
50
11
0
20
83
5
3
4
9
(44)
0
27
0
61
(4)
52
(17)
54
(66)
(436)
(160)
(1,034)
1,607
2017 Deferred tax liabilities net as at January 1, 2017
4,035
21
(732)
68
(1,064)
2,327
Charged (credited)
– to the statement of income
– to other comprehensive income
Divestments
Reclassification
Currency translation effects
Deferred tax liabilities net as at December 31, 2017
1 See more information in note 2.2.
(566)
0
(72)
63
37
3,497
(4)
0
7
16
9
48
116
(155)
70
10
(80)
(1)
(616)
0
(3)
(120)
(54)
(264)
(157)
0
58
121
(36)
(1,078)
(766)
70
0
0
(43)
1,587
201
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Losses
carry-forward
Tax effect
Losses
carry-forward
Tax effect
2018
11,006
(4,051)
6,955
101
339
6,514
2018
2,768
(1,034)
1,735
28
68
1,639
2017
10,836
(4,141)
6,695
138
550
6,006
2017
2,725
(1,078)
1,647
33
128
1,487
8.5 Tax losses carryforward
Tax losses carryforward
Million CHF
Total tax losses carryforward
Of which reflected in deferred taxes
Total tax losses carryforward not recognized
Expiring as follows:
Within 1 year
Between 2 and 5 years
Thereafter
In 2018, CHF 1,735 million (2017: CHF
1,647 million) of deferred tax assets on tax
losses were not recognized as the Group
considers it will not generate sufficient
taxable income within the carryforward
period to realize these deferred tax
benefits in all juridictions where the Group
operates.
8.6 Long-term income tax liabilities
The long-term income tax liabilities
include the repatriation tax arising from
the US tax reform amounting to CHF 111
million (2017: CHF 130 million).
202
Notes to the consolidated financial statementscontinued 9. Earnings per share
Earnings per share in CHF
From continuing operations
Net income (loss) – shareholders of LafargeHolcim Ltd –
as per statement of income (in million CHF)
From continuing operations
Weighted average number of shares outstanding
Fully diluted earnings per share in CHF
From continuing operations
Net income (loss) used to determine diluted earnings per share (in million CHF)
Weighted average number of shares outstanding
Adjustment for assumed exercise of share options and performance shares
Weighted average number of shares for diluted earnings per share
2018
2.52
2.52
1,502
1,502
2017
( 2.78)
( 2.78)
(1,675)
(1,675)
596,185,128
603,235,216
2.52
2.52
1,502
596,185,128
211,919
596,397,047
( 2.78)
( 2.78)
(1,675)
603,235,216
0
603,235,216
In conformity with the decision taken at
the Annual General Meeting on May 8,
2018, a payout related to 2017 of CHF 2.00
per registered share was paid out of
capital con tribution reserves. This resulted
in a total payment of CHF 1,192 million.
296,752 stock options, which would have
an anti-dilutive impact on the calculation
of the diluted earnings per share, are
excluded from the calculation for the
year 2017.
For the 2018 financial year, the Board is
proposing a payout from the capital
contribution reserves in the amount of
CHF 2.00 per registered share. Subject to
approval by the annual shareholders’
meeting on May 15, 2019, shareholders
will be given the choice of having the
dividend paid out in cash, in the form of
new LafargeHolcim Ltd shares or a
combination of cash and shares (scrip
dividend). The new shares will be issued at
a discount to the market price. The cash
payment out of the capital contribution
reserves in respect of the financial year
2018 will amount to a maximum payment
of CHF 1,193 million but is not reflected in
the consolidated financial statements
since it will only be effective in 2019.
10. Working capital
10.1 Accounting principles
Accounts receivable consist of (a) prepaid
expenses and other current assets and (b)
trade accounts receivable.
Impairment of financial assets
The Group assesses on a forward looking
basis the expected credit losses associated
with its financial assets carried at
amortized cost. The impairment
methodology applied for long-term loans
and receivables considers whether there
has been a significant increase in credit
risk (see note 14.5).
For accounts receivable, the Group applies
the simplified approach with expected
lifetime losses recognized from initial
recognition of the receivables in the
statement of income.
Expected credit losses are a probability-
weighted estimate of the present value of
credit losses. These are measured as the
difference between the cash flows due to
the Group in accordance with the contract
and the cash flows that the Group expects
to receive arising from the weighting of
multiple future economic scenarios,
discounted at the asset’s effective interest
rate.
The carrying amount of accounts
receivable is reduced through use of an
allowance account. Impaired accounts
receivable are derecognized when they
are assessed as uncollectable.
Inventories are stated at the lower of cost
and net realizable value. Cost is
determined by using the weighted
average cost method. The cost of finished
goods and work in progress comprises
raw materials and additives, direct labor,
other direct costs and related production
overheads. Cost of inventories includes
transfers from equity of gains or losses on
qualifying cash flow hedges relating to
inventory purchases.
203
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 10.2 Trade accounts receivable
Million CHF
Trade accounts receivable – associates and joint ventures
Trade accounts receivable – third parties
Total
Overdue accounts receivable
Million CHF
Not overdue
Overdue 1 to 89 days
Overdue 90 to 180 days
Overdue more than 180 days
Allowances for doubtful accounts
Total
Due to the local nature of the business,
specific terms and conditions for trade
accounts receivable exist for local Group
companies.
In some cases, trade accounts receivable
are factored to third parties but the total
amount is not considered material for the
Group.
Allowance for doubtful accounts
Million CHF
January 1
Disposals of Group companies
Allowance recognized
Amounts used
Unused amounts reversed
Currency translation effects
December 31
Loss allowances for expected credit loss
for financial assets measured at amortized
cost are presented as a deduction from
the gross carrying amount of the assets in
the statement of financial position. The
allowance in the table above relates to
accounts receivable for which a lifetime
expected credit loss is recognized. See
note 14.5 for further details.
2018
138
3,091
3,229
2018
2,158
895
105
282
(211)
3,229
2018
(192)
1
(59)
2
31
6
(211)
2017
119
3,221
3,340
2017
1,877
1,249
189
217
(192)
3,340
2017
(183)
0
(81)
6
68
(2)
(192)
204
Notes to the consolidated financial statementscontinued 10.3 Inventories
Million CHF
Raw materials and additives
Semi-finished and finished products
Fuels
Parts and supplies
Total
In 2018, the Group recognized inventory
write-downs to net realizable value of CHF
8 million (2017: CHF 9 million) relating
mainly to semi-finished and finished
products.
10.4 Prepaid expenses and other
current assets
Million CHF
Prepaid expenses and accruals
Other current assets
Other receivables – associates and joint ventures
Other receivables – third parties
Total
2018
450
1,548
401
681
3,081
2018
194
376
20
687
1,276
2017
420
1,444
312
693
2,870
2017
211
406
20
697
1,335
205
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 10.5 Trade accounts payable
Million CHF
Trade accounts payable – associates and joint ventures
Trade accounts payable – third parties
Advance payments from customers - third parties
Total
2018
115
3,338
316
3,770
2017
126
3,307
282
3,715
11. Property, plant and equipment,
goodwill and intangible assets
11.1 Accounting principles
Property, plant and equipment
Property, plant and equipment is valued at
acquisition or construction cost less
depreciation and impairment losses. Cost
includes transfers from equity of any gains
or losses on qualifying cash flow hedges.
Depreciation is charged to amortize the
cost of property, plant and equipment
over their estimated useful lives, using the
straight-line method, on the following
bases:
Land and mineral
reserves
Buildings and
installations
Machinery and
equipment
No depreciation except
on land with raw
material reserves
20 to 40 years
3 to 30 years
Costs are only included in the asset’s
carrying amount when it is probable that
economic benefits associated with the
item will flow to the Group in future
periods and the cost of the item can be
measured reliably. Costs include the initial
estimate of the costs for dismantling and
removing the item and for restoring the
site on which it is located. All other repairs
and maintenance expenses are charged to
the statement of income during the
period in which they are incurred.
Mineral reserves are valued at cost and are
depreciated based on the unit-of-
production method over their estimated
commercial lives.
Costs incurred to gain access to mineral
reserves (typically stripping costs) are
capitalized and depreciated over the life of
the quarry, which is based on the
estimated tonnes of raw material to be
extracted from the reserves.
Interest costs on borrowings to finance
construction projects, which necessarily
take a substantial period of time to get
ready for their intended use, are
capitalized during the period of time that
is required to complete and prepare the
asset for its intended use. All other
borrowing costs are expensed in the
period in which they are incurred.
Government grants received are deducted
from property, plant and equipment and
reduce the depreciation charge
accordingly.
Leases of property, plant and equipment
where the Group has substantially all the
risks and rewards of ownership are
classified as finance leases. Property, plant
and equipment acquired through a
finance lease are capitalized at the date of
the commencement of the lease term at
the present value of the minimum future
lease payments or, if lower, at an amount
equal to the fair value of the leased asset
as determined at the inception of the
lease. The corresponding lease
obligations, excluding finance charges, are
included in either current or long-term
financial liabilities.
For sale-and-lease-back transactions, the
book value of the related property, plant
or equipment remains unchanged.
Proceeds from a sale are included as a
financing liability and the financing costs
are allocated over the term of the lease in
such a manner that the costs are reported
over the relevant periods.
Gains and losses on disposals are
determined by comparing proceeds with
carrying amounts, and are recognized in
the statement of income in “Profit (Loss)
on disposals and other non-operating
income (expenses)”.
Goodwill
Goodwill represents the excess of the
aggregate of the consideration transferred
and the amount recognized for the
non-controlling interest over the fair value
of the net identi fiable assets acquired and
liabilities assumed. Such goodwill is tested
annually for impairment or whenever
there are impairment indicators, and is
carried at cost less accumulated
impairment losses. Goodwill on
acquisitions of associates and joint
ventures is included in the carrying
206
Notes to the consolidated financial statementscontinued amount of the respective investments. If
the consideration transferred is less than
the fair value of the net identifiable assets
of the subsidiary acquired, the difference
is recognized directly in the statement of
income.
On disposal of a subsidiary or joint
operation, the related goodwill is included
in the determination of profit or loss on
disposal.
For the purpose of impairment testing,
goodwill arising from acquisitions of
subsidiaries is allocated to cash
generating units expected to benefit from
the synergies of the business combination.
Impairment losses relating to goodwill
cannot be reversed in future periods.
For further information, refer to note 11.3.
Intangible assets
Expenditure on acquired trademarks,
mining rights, software, patented and
unpatented technology and other
intangible assets are capitalized and
amortized using the straight-line method
over their estimated useful lives, but not
exceeding 20 years, except for mining
rights which are depleted on a volume
basis.
Impairment of non-financial assets
At each reporting date, the Group assesses
whether there is any indication that a
non-financial asset may be impaired. If
any such indication exists, the recoverable
amount of the non-financial asset is
estimated in order to determine the
extent of the impairment loss, if any.
Where it is not possible to estimate the
recoverable amount of an individual
non-financial asset, the Group estimates
the recoverable amount of the smallest
cash generating unit to which the non-
financial asset belongs. The recoverable
amount is the higher of an asset’s or cash
generating unit’s fair value less costs of
disposal and its value in use. If the
recoverable amount of a non-financial
asset or cash generating unit is estimated
to be less than its carrying amount, the
carrying amount of the non-financial asset
or cash generating unit is reduced to its
recoverable amount. Impairment losses
are recognized immediately in the
statement of income.
Where an impairment loss subsequently
reverses, the carrying amount of the
non-financial asset or cash generating unit
is increased to the revised estimate of its
recoverable amount. However, this
increased amount cannot exceed the
carrying amount that would have been
determined if no impairment loss had
been recognized for that non-financial
asset or cash generating unit in prior
periods. A reversal of an impairment loss
is recognized immediately in the
statement of income.
207
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Land and
mineral reserves
Buildings and
installations
Machinery
and equipment
Construction
in progress
7,654
(2,164)
5,489
10
(28)
62
(31)
245
(32)
(186)
75
(3)
(230)
5,372
7,477
(2,106)
5,372
7,576
(1,621)
5,956
63
(12)
10
(41)
100
(191)
(491)
95
5,489
7,654
(2,164)
5,489
11,064
(4,748)
6,317
8
(31)
26
(9)
227
(151)
(347)
45
21
(279)
5,827
10,568
(4,741)
5,827
10,726
(4,130)
6,596
12
(14)
2
(16)
375
(362)
(290)
14
6,317
11,064
(4,748)
6,317
32,003
(14,996)
17,007
34
(40)
164
(25)
771
(442)
(1,501)
94
47
(721)
15,387
30,661
(15,274)
15,387
30,741
(13,001)
17,740
152
(2)
13
(32)
1,424
(1,559)
(794)
65
17,007
32,003
(14,996)
17,007
1,490
(152)
1,339
0
(1)
1,315
(3)
(1,244)
(37)
0
0
0
(65)
1,305
1,395
(90)
1,305
1,794
(33)
1,761
126
0
1,492
(1)
(1,900)
0
(115)
(24)
1,339
1,490
(152)
1,339
Total
52,211
(22,060)
30,152
52
(100)
1,567
(68)
0
(663)
(2,033)
214
65
(1,297)
27,890
50,101
(22,211)
27,890
50,837
(18,784)
32,052
352
(28)
1,517
(90)
0
(2,112)
(1,690)
151
30,152
52,211
(22,060)
30,152
11.2 Property, plant and equipment
Million CHF
2018
At cost of acquisition
Accumulated depreciation/impairment
Net book value as at January 1
Acquisitions
Divestments
Additions
Disposals
Reclassifications
Reclassification to assets classified
as held for sale
Depreciation
Hyperinflation 1
Impairment loss (reversed/charged
to statement of income)
Currency translation effects
Net book value as at December 31
At cost of acquisition
Accumulated depreciation/impairment
Net book value as at December 31
2017
At cost of acquisition
Accumulated depreciation/impairment
Net book value as at January 1
Acquisitions
Divestments
Additions
Disposals
Reclassifications
Depreciation
Impairment loss (charged to statement of
income)
Currency translation effects
Net book value as at December 31
At cost of acquisition
Accumulated depreciation/impairment
Net book value as at December 31
1 See more information in note 2.2.
208
Notes to the consolidated financial statementscontinued The net book value of leased property,
plant and equipment amounts to
CHF 172 million (2017: CHF 61 million) and
mainly relates to buildings and
installations, machinery and equipment.
CHF 13 million of the total net book value
of property, plant and equipment are
pledged or restricted (2017:
CHF 209 million).
Net gains on sale of property, plant and
equipment amounted to CHF 62 million
(2017: CHF 82 million) reported in the line
“Profit on disposals and other non-
operating income” in the consolidated
statement of income (see note 5.2).
In 2017, LafargeHolcim carried out an
extensive portfolio review and assessed
asset impairment indicators which
resulted in an aggregate impairment
charge relating to property, plant and
equipment of CHF 1,690 million, of which
CHF 904 million was impaired as
insufficient goodwill was available to
absorb the full impairment charge (see
note 11.3).
The remaining impairment charge of CHF
786 million mainly consisted of CHF 371
million relating to specific aggregates sites
in North America.
Apart from the assets mentioned above,
no asset impairment was deemed to be
individually material in the other
reportable segments and pertained mostly
to assets in Europe and Middle East and
Africa.
The total impairment charge resulted
primarily from the weaker than
anticipated outlook for the macro-
economic environment, especially in
terms of expected growth rates, cement
demand and export opportunities for
countries such as Malaysia, Spain and
Egypt (see note 11.3).
209
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 11.3 Goodwill and intangible assets
Million CHF
2018
At cost of acquisition
Accumulated amortization/impairment
Net book value as at January 1
Change in structure
Reclassification to assets classified as held for sale
Reclassification
Additions
Disposals
Amortization
Impairment loss (charged to statement of income)
Hyperinflation 1
Currency translation effects
Net book value as at December 31
At cost of acquisition
Accumulated amortization/impairment
Net book value as at December 31
2017
At cost of acquisition
Accumulated amortization/impairment
Net book value as at January 1
Divestments
Reclassification
Additions
Disposals
Amortization
Impairment loss (charged to statement of income)
Currency translation effects
Net book value as at December 31
At cost of acquisition
Accumulated amortization/impairment
Net book value as at December 31
1 See more information in note 2.2.
210
Goodwill
17,603
(3,034)
14,569
125
(55)
0
0
0
0
(27)
22
(588)
14,045
16,783
(2,738)
14,045
17,514
(1,267)
16,247
(3)
(0)
27
0
0
(1,821)
119
14,569
17,603
(3,034)
14,569
Intangible
assets
2,612
(1,586)
1,026
15
4
(16)
104
(34)
(210)
(32)
0
(47)
810
2,283
(1,473)
810
2,325
(1,309)
1,017
(2)
62
135
(4)
(190)
(35)
44
1,026
2,612
(1,586)
1,026
Notes to the consolidated financial statementscontinued Intangible assets
Intangible assets have finite useful lives,
over which the assets are amortized.
The corresponding amortization expense
is recognized largely in administration
expenses and production cost of
goods sold.
Intangible assets mainly consist of mining
rights, trademarks and brands.
During the fourth quarter 2017, the Group
carried out an extensive portfolio review
and identified a number of brands being
in local decline therefore resulting in an
aggregate impairment charge of CHF 35
million. No asset impairment was deemed
to be individually material.
Emission rights
The initial allocation of emission rights
granted is recognized at nominal amount
(nil value). Where a Group company has
emissions in excess of the emission rights
granted, it will recognize a provision for
the shortfall based on the market price at
that date. The emission rights are held for
compliance purposes only and therefore
the Group does not intend to speculate
with these in the open market.
Impairment test of goodwill
For the purpose of impairment testing,
goodwill is allocated to a cash-generating
unit or to a group of cash-generating units
that are expected to benefit, among
others, from the synergies of the business
combination. The Group’s cash-generating
units are defined on the basis of the
geographical market, normally country- or
region-related. The carrying amount of
goodwill allocated to the countries or
regions stated below, is significant in
comparison with the total carrying
amount of goodwill, while the carrying
amount of goodwill allocated to the other
cash-generating units is individually not
significant.
For the impairment test, the recoverable
amount of a cash-generating unit, which
has been determined based on its value in
use or its fair value less costs to sell, is
compared to its carrying amount. An
impairment loss is recognized if the
carrying amount of the cash-generating
unit exceeds its recoverable amount. The
value in use is determined based on future
discounted cash flows using the weighted
average cost of capital (WACC).
The WACC used for the impairment test is
a post-tax discount rate and is applied to
post-tax cash flows. There is no material
difference in the outcome of the
impairment test using the discount rate
applied when compared to using a pre-tax
discount rate for pre-tax cash flows.
The cash flow projections are based on a
three-year financial planning period using
business plans approved by management.
Cash flows beyond the three-year budget
period are extrapolated based on
increasing sustainable cash flows. In any
event, the growth rate used to extrapolate
cash flow projections beyond the three-
year budget period does not exceed the
long-term average growth rate for the
relevant market in which the cash-
generating unit operates.
In respect of the goodwill allocated to
“Others”, the same impairment model and
parameters are used, as is the case with
individually significant goodwill positions,
except that different key assumptions are
used depending on the risks associated
with the respective cash-generating units.
211
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Key assumptions used for value-in-use calculations in respect of goodwill 2018
Cash-generating unit
(Million CHF)
North America
India
France
United Kingdom
Algeria
Switzerland – Italy
Nigeria
Poland
Philippines
Mexico
Others 2
TOTAL
Key assumptions used for value-in-use calculations in respect of goodwill 2017
Cash-generating unit
(Million CHF)
North America
India
France
United Kingdom
Algeria
Central Europe West 1
Nigeria
Poland
Philippines
Mexico
Others 2
TOTAL
1 Of which carrying amount of goodwill in Switzerland – Italy: CHF 568 million.
2 Individually not significant.
Carrying amount
of goodwill
4,724
1,578
1,483
886
699
561
549
515
466
404
2,180
14,045
Currency
USD/CAD
INR
EUR
GBP
DZD
CHF/EUR
NGN
PLN
PHP
MXN
Post-tax
discount rate
Long-term
growth rate
+6.6%
+9.9%
+6.3%
+6.8%
+11.7%
+6.0%
+2.1%
+4.9%
+1.9%
+2.0%
+4.0%
+1.1%
+20.4%
+14.0%
+8.2%
+8.6%
+8.4%
+2.5%
+3.0%
+3.0%
Various 5.7% – 15.9% 1.0% – 8.0%
Carrying amount
of goodwill
Currency
Post-tax
discount rate
Long-term
growth rate
4,750
USD/CAD
1,705
1,521
929
709
682
639
550
484
400
INR
EUR
GBP
DZD
CHF/EUR
NGN
PLN
PHP
MXN
+6.9%
+10.7%
+6.5%
+6.6%
+11.7%
+6.1%
+22.7%
+8.2%
+8.7%
+8.7%
+2.2%
+5.0%
+1.8%
+2.0%
+4.0%
+1.4%
+14.5%
+2.5%
+3.0%
+3.0%
2,200
Various
5.6% – 17.7%
1.0% – 9.1%
14,569
212
Notes to the consolidated financial statementscontinued In 2018, management recognized a
goodwill impairment charge of CHF 27
million relating to the cash-generating
unit “Others” within the reportable
segment Middle East and Africa.
In 2017, management recognized a total
impairment charge of CHF 3,566 million
relating to certain cash-generating units
(country- or region-related), of which CHF
1,821 million was allocated to goodwill.
The total impairment charge resulted
primarily from:
• higher WACC to consider risks and
uncertainties that may materialize in the
coming years and attributable to change
in markets, national economic
circumstances, political complex
situations and governments’ ability to
fund infrastructure projects for countries
such as Algeria, Brazil, Indonesia,
Zambia and Iraq; and
• CHF 371 million in North America
relating to specific aggregates sites; and
• the weaker than anticipated outlook for
• CHF 226 million in Latin America;
the macro-economic environment,
especially in terms of expected growth
rates, cement demand and export
opportunities for countries such as
Malaysia, Spain and Egypt.
A total charge of CHF 3,566 million was
recognized in 2017, of which CHF 1,821
million was allocated to goodwill and to
the following reportable segments:
• CHF 1,724 million in Middle East and
Africa, of which CHF 1,236 million
allocated to goodwill;
• CHF 872 million in Asia Pacific, of which
CHF 545 million allocated to goodwill;
• CHF 373 million in Europe, of which
CHF 40 million allocated to goodwill;
Additional details can be found in the
2017 Annual Report.
The total recoverable amount of
countries that were impaired amounted
to CHF 5,755 million.
Sensitivity to changes in assumptions
For 2018 it is estimated that if the post-tax
discount rate was approximately 7.5% for
the entire portfolio, an increase of 1.75%
for all countries, this would cause the
recoverable amount to be CHF 130 million
below the carrying amount for a
significant cash-generating unit.
213
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 12. Long-term financial
investments and other long-term
assets
12.1 Accounting principles
Long-term financial investments and other
long-term assets consist of (a) financial
investments – third parties, (b) long-term
receivables – associates and joint ventures,
(c) long-term receivables – third parties
and (d) other long-term assets:
a) “Financial investments – third parties”
are strategic equity investments which
are classified at fair value through other
comprehensive earnings.
b) “Long-term receivables – associates and
joint ventures” are classified as
receivables at amortized cost as the
Group intends to hold the assets to
maturity to collect contractual cash
flows.
c) “Long-term receivables – third parties”
are classified as receivables at
amortized cost as the Group intends to
hold the assets to maturity to collect
contractual cash flows.
d) “Other long-term assets” are classified
as receivables at amortized cost and
comprise notably of various deposits in
connection with on-going legal cases.
All purchases and sales of long-term
financial assets are recognized on trade
date, which is the date that the Group
commits to purchase or sell the asset. The
purchase cost includes transaction costs,
except for derivative instruments.
Financial assets at amortized cost are
measured using the effective interest
method.
Investments in equity securities which are
considered strategic investments for the
Group are classified at fair value through
other comprehensive earnings and are
carried at fair value. Strategic equity
investments are investments where the
Group owns less than 20% of the shares
and where the Group does not exercise
control, joint control or significant
influence and which it intends to hold for
long-term strategic purposes. Gains and
losses arising from changes in the fair
value of strategic equity investments at
fair value through other comprehensive
earnings are included in other reserves
until the asset is disposed of, at which
time the cumulative gain or loss previously
recognized in other reserves is transferred
to retained earnings.
Financial assets measurement
At initial recognition, in the case of a
financial asset not at fair value through
profit or loss, the Group measures a
financial asset at its fair value plus
transaction costs that are directly
attributable to the acquisition of the
financial asset. Transaction costs of
financial assets carried at fair value
through profit or loss are expensed in
profit or loss.
Financial assets with embedded
derivatives are considered in their entirety
when determining whether their cash
flows are solely payment of principal and
interest.
a) Debt instruments
Subsequent measurement of debt
instruments depends on the Group’s
business model for managing the asset
and the cash flow characteristics of the
asset. There are two measurement
categories into which the Group classifies
its debt instruments:
• Loans and receivables at amortized cost:
assets that are held for collection of
contractual cash flows where those cash
flows represent solely payments of
principal and interest are measured at
amortized cost. A gain or loss on a debt
investment that is subsequently
measured at amortized cost and is not
part of a hedging relationship is
recognized in profit or loss when the
214
Notes to the consolidated financial statementscontinued b) Equity instruments at fair value
The Group subsequently measures all
equity investments at fair value. Where
the Group’s management has elected to
present fair value gains and losses on
strategic equity investments at fair value
through other reserves, there is no
subsequent reclassification of fair value
gains and losses to profit or loss.
Dividends from such investments continue
to be recognized in profit or loss when the
Group’s right to receive payments is
established.
asset is derecognized or impaired.
Interest income from these financial
assets is included in finance income
using the effective interest rate method.
• Financial assets at fair value through
profit and loss: assets that do not meet
the criteria for amortized cost and are
held for trading are measured at fair
value through profit or loss. Gains and
losses on debt investments that are
subsequently measured at fair value
through profit or loss and are not part of
a hedging relationship are recognized in
profit or loss and presented net in the
profit or loss statement in the period in
which they arise. Interest income from
these financial assets is included in
financial income.
The Group reclassifies debt investments
when and only when its business model
for managing those assets changes.
215
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 12.2 Long-term financial investments and other long-term assets
Million CHF
Financial investments – third parties
Long-term receivables – associates and joint ventures
Long-term receivables – third parties
Deferred charges
Other long-term assets
Total
Of which pledged/restricted
2018
196
138
177
88
513
1,111
12
2017
85
192
240
101
496
1,114
13
Long-term receivables are primarily
denominated in USD, AUD and BRL. The
repayment dates vary between one and
21 years (2017: one and 22 years).
The increase in “Financial investments
– third parties” is mainly due to the
reclassification of an associate in Europe
to long-term financial investments (see
note 6.2).
Other long-term assets include notably
various deposits in connection with
ongoing legal cases (see note 17.3).
12.3 Current financial receivables
Million CHF
Marketable securities
Current financial receivables - associates and joint ventures
Current financial receivables - third parties
Total
Of which pledged/restricted
The “Current financial receivables –
third parties” decreased mainly following
the payment of the deferred part of
the consideration in connection with
the transaction entered in China
(see note 2.3).
The increase in pledged/restricted current
financial receivables mainly relates to
restricted cash in connection with ongoing
legal cases (see note 17.3).
13. Assets and related liabilities
classified as held for sale and
discontinued operations
13.1 Accounting principles
Non-current assets (or disposal groups)
are classified as held for sale and stated at
the lower of carrying amount and fair
value less costs to sell if their carrying
amount is to be recovered principally
through a sale transaction rather than
through continuing use.
Non-current assets (including those that
are part of a disposal group) are not
depreciated or amortized while they are
classified as held for sale.
2018
3
36
141
180
107
2017
1
25
236
262
45
Gains and losses on disposals of non-
current assets (or disposal groups) are
determined by comparing proceeds with
carrying amounts, and are recognized in
the statement of income in “Profit (Loss)
on disposals and other non-operating
income (expenses)”.
A discontinued operation is a component
of an entity that either has been disposed
of or is classified as held for sale, and
represents a separate major line of
business or geographical area of
operations, and is part of a single
coordinated plan to dispose a separate
major line of business or geographical
area of operations or is a subsidiary
acquired exclusively with a view to resale.
216
Notes to the consolidated financial statementscontinued 13.2 Assets and related liabilities
classified as held for sale
The net assets classified as held for sale as
of December 31, 2018 amount to
CHF 684 million (2017: CHF 390 million)
which mainly includes the assets and
liabilities of Holcim Indonesia and its
subsidiaries.
Indonesia
In the fourth quarter, the Group signed an
agreement with Semen Indonesia for the
disposal of its entire shareholding of 80.6
percent in Holcim Indonesia and
consequently classified the assets and the
related liabilities as held for sale. The
transaction was closed end of January
2019. Holcim Indonesia and its
subsidiaries consist of 4 cement plants, 33
ready-mix plants and 2 aggregated
quarries and is presented in the reportable
segment Asia Pacific.
China
In the fourth quarter 2018, the Group
reached an agreement with the local
authorities of Chongqing for the transfer
of land on which a cement plant is
situated. The cement plant was forced to
stop its operation due to its proximity to
an urban area. Consequently, property,
plant and equipment of this cement plant
were classified as held for sale. The
transfer of the assets is expected to be
closed during 2019. The cement plant is
disclosed in the reportable segment Asia
Pacific.
In 2017, two former Shuangma cement
companies in China were classified as held
for sale. The Group reassessed its strategy
with regards to these two cement
companies and consequently ceased to
classify them as held for sale in 2018. The
assets and related liabilities previously
classified as held for sale were reclassified
into their respective balance sheet
accounts, measured on a historical cost
basis and adjusted for any depreciation
and amortization that would have been
recognized had the asset and liabilities not
been classified as held for sale. A write
down of CHF 58 million recorded under
the held for sale classification in 2017 was
reversed during first half of 2018. All
adjustments to the carrying amounts of
the reclassified assets and liabilities were
recorded in the statement of income of
the current year. The two cement
companies are disclosed in the reportable
segment Asia Pacific.
The assets and related liabilities classified
as held for sale are disclosed by major
classes of assets and liabilities in the table
below.
217
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Million CHF
Cash and cash equivalents
Inventories
Other current assets
Property, plant and equipment
Goodwill and intangible assets
Other long term assets
Assets classified as held for sale
Current liabilities
Long-term liabilities
Liabilites directly associated with assets classified as held for sale
Net assets classified as held for sale
2018
25
67
88
1,028
88
15
1,311
345
282
627
684
2017
11
14
78
382
39
26
550
149
11
160
390
218
Notes to the consolidated financial statementscontinued 14. Net financial debt
14.1 Accounting principles
Cash and cash equivalents
Cash and cash equivalents are financial
assets. Cash equivalents are readily
convertible into a known amount of cash
with original maturities of three months or
less. For the purpose of the statement of
cash flows, cash and cash equivalents
comprise cash at banks and on hand,
deposits held on call with banks, monetary
mutual funds and other short-term highly
liquid investments that are readily
convertible to a know amount of cash with
a maturity of three months or less from
the date of acquisition, net of bank
overdrafts.
Derivative instruments and hedging
The Group mainly uses derivative financial
instruments in order to reduce its
exposure to changes in interest rates,
foreign currency exchange rates and
commodity prices. The Group enters into
foreign exchange contracts and interest
rate swaps to hedge certain exposures
relating to debt, foreign exchange
contracts to hedge firm commitments for
the acquisition of certain property, plant
and equipment and into swaps and
options in order to manage its exposure to
commodity risks.
Derivatives are regarded as hedging
instruments under hedge accounting
relationships unless they are not
designated as hedges in which case they
will be classified as held for trading.
Financial derivatives expected to be
settled within 12 months after the end of
the reporting period are classified as
current liabilities or current assets. For
cash flow hedges gains and losses are
recorded in the cash flow hedging reserve,
a separate component of equity, and
recycled to profit or loss or as a basis
adjustment to inventory or property, plant
and equipment as the hedged transaction
occurs.
Derivatives are initially recognized at fair
value on the date a derivative contract is
entered into and are subsequently
remeasured at their fair value. The
method of recognizing the resulting gain
or loss is dependent on the nature of the
item being hedged. On the date a
derivative contract is entered into, the
Group designates certain derivatives as
either (a) a hedge of the fair value of a
recognized asset or liability (fair value
hedge) or (b) a hedge of a particular risk
associated with a recognized asset or
liability, such as future interest payments
on floating rate debt (cash flow hedge) or
(c) a hedge of a foreign currency risk of a
firm commitment or highly probable
forecast (cash flow hedge) or (d) a hedge
of a net investment in a foreign entity
(accounted for similarly to a cash flow
hedge).
Changes in the fair value of derivatives
that are designated and qualify as fair
value hedges and that are highly effective
are recorded in the statement of income,
along with any changes in the fair value of
the hedged asset or liability that is
attributable to the hedged risk.
The effective portion of changes in the fair
value of derivatives that are designated
and qualify as cash flow hedges is
recognized in the cash flow hedging
reserve within equity, limited to the
cumulative change in fair value of the
hedged item on a present value basis from
the inception of the hedge. The gain or
loss relating to the ineffective portion is
recognized immediately in profit or loss.
Where the firm commitment results in the
recognition of an asset, for example,
property, plant and equipment, or a
liability, the gains or losses previously
deferred in the cash flow hedging reserve
are transferred from equity and included
in the initial measurement of the non-
financial asset or liability. Otherwise,
amounts deferred in equity are transferred
to the statement of income and classified
as income or expense in the same periods
during which the cash flows, such as
hedged firm commitments or interest
payments, affect the statement of income.
The Group documents at the inception of
hedging transactions the economic
relationship between hedging instruments
and hedged items, including whether the
hedging instrument is expected to offset
changes in cash flows of hedged items,
and its risk management objective and
strategy.
Long-term financial liabilities
Bank loans acquired and bonds issued are
recognized initially at fair value (i.e. the
proceeds received), net of transaction
costs incurred. Subsequently, bank loans
and bonds are stated at amortized cost,
using the effective interest method, with
any difference between proceeds (net of
transaction costs) and the redemption
value being recognized in the statement
of income over the term of the
borrowings.
Financial liabilities that are due within 12
months after the end of the reporting
period are classified as current liabilities
unless the Group has an unconditional
right to defer settlement of the liability
until more than 12 months after the
reporting period. The repayment of the
current portion of such liabilities is shown
in the statement of cash flows in the line
“Repayment of long-term financial
liabilities”.
219
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 14.2 Cash and cash equivalents
Million CHF
Cash at banks and on hand
Short-term deposits
Total
Bank overdrafts
Cash and cash equivalents classified as held for sale
Cash and cash equivalents for the purpose of the consolidated statement of cash flows
2018
1,527
988
2,515
(275)
25
2,264
2017
2,449
1,768
4,217
(275)
11
3,954
Investments in monetary mutual funds
amounting CHF 139 million (2017: CHF 377
million) are considered cash equivalents
since they are readily convertible to known
amounts of cash and are subject to an
insignificant risk of changes in value.
Bank overdrafts are included in current
financial liabilities.
220
Notes to the consolidated financial statementscontinued 14.3 Financial liabilities
Million CHF
Current financial liabilities – associates and joint ventures
Current financial liabilities – third parties
Current portion of long-term financial liabilities
Derivative liabilities (note 14.4)
Total current financial liabilities
Long-term financial liabilities – associates and joint ventures
Long-term financial liabilities – third parties
Derivative liabilities (note 14.4)
Total long-term financial liabilities
Total
Of which secured
Details of total financial liabilities
Million CHF
Loans from financial institutions
Bonds and private placements
Commercial paper notes
Total loans and bonds
Obligations under finance leases (note 15)
Derivative liabilities (note 14.4)
Total
2018
31
1,056
1,889
87
3,063
0
13,012
49
13,061
16,124
84
2018
1,775
13,951
96
15,822
166
136
16,124
2017
24
1,306
2,403
109
3,843
39
14,727
13
14,779
18,621
83
2017
3,177
15,177
82
18,435
64
122
18,621
“Loans from financial institutions” include
amounts due to banks and other financial
institutions. Repayment dates vary
between one and 11 years (2017: one and
11 years).
As per the loans agreements, the Group is
required to comply with certain provisions
or covenants. As of December 31, 2018,
the Group complied with its debt
covenants in all material respects.
Unused committed credit lines totalled
CHF 6,239 million at year-end 2018 (2017:
CHF 6,794 million).
221
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Million CHF
6,194
5,105
1,995
774
402
392
196
191
875
In %
38.4
31.7
12.4
4.8
2.5
2.4
1.2
1.2
5.4
16,124
100.0
2018
Interest
rate 1
Million CHF
2.4
5.3
2.0
4.1
14.7
2.9
4.2
8.0
7.3
4.2
7,528
5,229
2,009
738
393
396
107
271
1,950
18,621
2018
11,703
4,421
16,124
In %
40.4
28.1
10.8
4.0
2.1
2.1
0.6
1.5
10.5
100.0
2017
Interest
rate 1
2.8
5.1
2.7
3.8
15.8
3.0
3.8
7.6
6.8
4.5
2017
12,910
5,711
18,621
Financial liabilities by currency
Currency
EUR
USD
CHF
AUD
NGN
GBP
PHP
MXN
Others
Total
1 Weighted average nominal interest rate on financial liabilities at December 31.
Interest rate structure of total financial liabilities
Million CHF
Financial liabilities at fixed rates
Financial liabilities at floating rates
Total
Financial liabilities that are hedged to a
fixed or floating rate are disclosed on a
post hedge basis.
Information on the maturity of financial
instruments is disclosed in the note 14.5.
222
Notes to the consolidated financial statementscontinued Bonds and private placements as at December 31
Nominal
interest
rate
Effective
interest
rate
Term
Description 2
Nominal
value
In million
LafargeHolcim Ltd
CHF
CHF
CHF
CHF
CHF
CHF
450
450
250
250
150
440
4.00%
3.00%
2.00%
0.38%
1.00%
1.00%
2.97%
2.03%
0.41%
1.03%
1.00%
2009–2018 Bonds
2012–2022 Bonds
2013–2022 Bonds
2015–2021 Bonds
2015–2025 Bonds
2018-2024
Bonds
Holcim Overseas Finance Ltd.
Net
book
value
in CHF 1
2018
Net
book
value
in CHF 1
2017
0
450
250
250
150
440
449
451
250
250
150
0
CHF
425
3.38%
3.42%
2011–2021
Bonds guaranteed by LafargeHolcim Ltd
425
424
Lafarge S.A.
EUR
EUR
EUR
EUR
USD
175
357
247
371
600
5.00%
5.50%
5.00%
4.75%
7.13%
2012–2018
Private placement
4.74%
2009–2019 Bonds (partially repaid 2016)
4.19%
5.90%
2010–2018 Bonds (partially repaid 2016)
2005–2020 Bonds (partially repaid 2016)
2006–2036 Bonds
EUR
430
5.38%
2010–2018
EUR
198
5.88%
4.29%
2012–2019
Bonds, partly swapped into floating interest rates
(partially repaid 2016)
Bonds, partly swapped into floating interest rates
(partially repaid 2016)
Holcim Capital Corporation Ltd.
USD
USD
USD
50
250
250
7.65%
6.88%
6.50%
7.65%
7.28%
6.85%
Holcim Capital México, S.A. de C.V.
2001–2031
Private placement guaranteed by LafargeHolcim Ltd
2009–2039 Bonds guaranteed by LafargeHolcim Ltd
2013–2043 Bonds guaranteed by LafargeHolcim Ltd
MXN
1,700
7.00%
7.23%
2012–2019
Bonds guaranteed by LafargeHolcim Ltd
MXN
2,000
7.78%
2014–2018
MXN
1,700
8.01%
6.78%
2015-2020
Subtotal
1 Includes adjustments for fair value hedge accounting, where applicable.
2 With fixed rates unless indicated.
Bonds guaranteed by LafargeHolcim Ltd,
with floating interest rates
Bonds guaranteed by LafargeHolcim Ltd,
with floating interest rates
0
418
0
434
691
205
450
292
464
691
0
522
228
247
49
239
239
85
0
85
49
237
237
84
99
84
4,434
5,636
223
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Net
book
value
in CHF 1
2018
4,434
561
37
171
Net
book
value
in CHF 1
2017
5,636
581
38
177
Nominal
interest
rate
Effective
interest
rate
Term
Description 2
Nominal
value
In million
Subtotal
Holcim Finance (Luxembourg) S.A.
EUR
EUR
EUR
EUR
500
33
152
1,150
3.00%
2.00%
1.46%
1.38%
3.11%
2.03%
1.51%
1.43%
2014–2024 Bonds guaranteed by LafargeHolcim Ltd
2016–2026
Schuldschein loan guaranteed by LafargeHolcim Ltd
2016–2023
Schuldschein loan guaranteed by LafargeHolcim Ltd
2016–2023 Bonds guaranteed by LafargeHolcim Ltd
1,293
1,340
EUR
209
0.72%
2016–2021
Schuldschein loan guaranteed by LafargeHolcim Ltd,
with floating interest rates (early repaid in 2018)
EUR
EUR
EUR
EUR
25
413
1,150
750
0.99%
1.04%
2.25%
1.75%
Holcim Finance (Australia) Pty Ltd
AUD
AUD
AUD
200
250
300
5.25%
3.75%
3.50%
Holcim US Finance S. à r.l. & Cie S.C.S.
1.10%
2.23%
1.90%
5.52%
3.90%
3.73%
2016–2023
Schuldschein loan guaranteed by LafargeHolcim Ltd,
with floating interest rates (early repaid in 2018)
2016–2021
Schuldschein loan guaranteed by LafargeHolcim Ltd
2016–2028 Bonds guaranteed by LafargeHolcim Ltd
2017-2029
Bonds guaranteed by LafargeHolcim Ltd
2012–2019
Bonds guaranteed by LafargeHolcim Ltd
2015–2020 Bonds guaranteed by LafargeHolcim Ltd
2017-2022
Bonds guaranteed by LafargeHolcim Ltd
USD
USD
EUR
USD
USD
200
750
500
500
50
6.21%
6.00%
2.63%
5.15%
4.20%
2006–2018 Private placement guaranteed by LafargeHolcim Ltd
6.25%
2009–2019 Bonds guaranteed by LafargeHolcim Ltd
4.62%
5.30%
4.20%
2012–2020
Bonds guaranteed by LafargeHolcim Ltd,
swapped into USD and floating interest rates at inception
2013–2023 Bonds guaranteed by LafargeHolcim Ltd
2013–2033 Bonds guaranteed by LafargeHolcim Ltd
LafargeHolcim International Finance Ltd
USD
40
2.80%
2.88%
2016–2021
Schuldschein loan guaranteed by LafargeHolcim Ltd
USD
USD
121
15
3.01%
3.20%
2016–2021
Schuldschein loan guaranteed by LafargeHolcim Ltd,
with floating interest rates (early repaid in 2018)
3.27%
2016–2023
Schuldschein loan guaranteed by LafargeHolcim Ltd
USD
25
3.21%
2016–2023
Schuldschein loan guaranteed by LafargeHolcim Ltd,
with floating interest rates (early repaid in 2018)
110
38
28
60
60
3.46%
4.38%
3.71%
4.59%
3.64%
4.48%
3.95%
4.68%
2018-2022
Schuldschein loan guaranteed by LafargeHolcim Ltd,
with floating interest rates
2018-2024
Schuldschein loan guaranteed by LafargeHolcim Ltd
2018-2024
Schuldschein loan guaranteed by LafargeHolcim Ltd,
with floating interest rates
2018-2025
Schuldschein loan guaranteed by LafargeHolcim Ltd
3.91%
4.09%
2018-2025
Schuldschein loan guaranteed by LafargeHolcim Ltd,
with floating interest rates
USD
USD
USD
USD
USD
224
0
0
465
1,298
833
139
174
207
0
737
572
489
49
39
0
15
0
108
37
28
59
59
244
29
482
1,347
863
152
190
227
195
729
597
485
49
39
118
15
24
0
0
0
0
0
Notes to the consolidated financial statementscontinued Nominal
value
Nominal
interest
rate
Effective
interest
rate
Term
Description 2
LafargeHolcim Finance US LLC
USD
USD
USD
USD
USD
400
600
180
52
106
3.50%
4.75%
4.79%
4.92%
5.03%
3.59%
5.00%
4.84%
4.98%
5.09%
LafargeHolcim Continental Finance Ltd
2016–2026 Bonds guaranteed by LafargeHolcim Ltd
2016–2046 Bonds guaranteed by LafargeHolcim Ltd
2018–2025
Private placement guaranteed by LafargeHolcim Ltd
2018–2027
Private placement guaranteed by LafargeHolcim Ltd
2018–2030
Private placement guaranteed by LafargeHolcim Ltd
EUR
30
0.88%
0.95%
2018-2022
Schuldschein loan guaranteed by LafargeHolcim Ltd
EUR
EUR
EUR
EUR
60
109
5
2
0.39%
1.32%
1.68%
2.22%
0.46%
1.37%
1.72%
2.24%
2018-2022
Schuldschein loan guaranteed by LafargeHolcim Ltd,
with floating interest rates
2018-2024
Schuldschein loan guaranteed by LafargeHolcim Ltd
2018-2025
Schuldschein loan guaranteed by LafargeHolcim Ltd
2018-2028
Schuldschein loan guaranteed by LafargeHolcim Ltd
LafargeHolcim Sterling Finance (Netherlands) B.V.
Net
book
value
in CHF 1
Net
book
value
in CHF 1
392
575
177
51
104
34
67
122
6
2
389
569
0
0
0
0
0
0
0
0
GBP
300
3.00%
3.16%
2017–2032
Bonds guaranteed by LafargeHolcim Ltd
370
388
Holcim (US) Inc.
USD
USD
USD
33
25
27
Lafarge Africa PLC
1.72%
1.73%
1999–2032
Industrial revenue bonds – Mobile Dock & Wharf,
with floating interest rates
1.79%
1.80%
2003–2033
1.71%
1.72%
2009–2034
Industrial revenue bonds – Holly Hill,
with floating interest rates
Industrial revenue bonds – Midlothian,
with floating interest rates
NGN
NGN
Total
26,386
14.25%
16.08%
2016-2019
Bonds
33,614
14.75%
16.39%
2016-2021
Bonds
1 Includes adjustments for fair value hedge accounting, where applicable.
2 With fixed rates unless indicated.
33
25
26
72
92
33
24
26
84
107
13,951
15,177
225
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 14.4 Derivative financial
instruments
Derivative liabilities are included in
financial liabilities (note 14.3) and
derivative assets are separately disclosed
in the consolidated statement of financial
position.
Derivative assets and liabilities
The Group has assessed the effects of
existing netting arrangements in place for
financial instruments and these were
considered to be immaterial.
Fair value
assets
Fair value
liabilities
Nominal
amount
Fair value
assets
Fair value
liabilities
Nominal
amount
2018
2018
2018
2017
2017
2017
0
0
3
69
71
7
7
10
3
13
91
41
41
4
31
35
0
0
59
1
60
136
618
618
1,061
422
1,483
149
149
3,773
105
3,878
6,128
0
0
18
33
50
6
6
2
0
2
10
10
14
6
19
6
6
86
0
87
613
613
1,690
229
1,919
1,333
1,333
687
30
717
58
122
4,583
Million CHF
Fair value hedges
Cross-currency
Total fair value hedges
Cash flow hedges
Currency
Commodity
Total cash flow hedges
Net investment hedges
Currency
Total net investment hedges
Held for trading
Currency
Cross-currency
Total held for trading
Total
226
Notes to the consolidated financial statementscontinued 14.5 Financial risks associated with
operating activities
Impacts of applying IFRS 9 Financial
Instruments
IFRS 9, which replaces IAS 39 Financial
instruments: Recognition and measurements,
was adopted for the period starting
January 1, 2018. Comparative figures have
not been restated. The accounting policies
were changed to comply with IFRS 9 as
issued by the IASB in July 2014.
a) Changes in classification and
measurement of financial instruments
The total impact on the Group’s retained
earnings due to changes in classification
and measurement of financial instruments
as at January 1, 2018 was not material.
The Group’s management has assessed
which business models apply to the
financial assets held by the Group at the
date of initial application of IFRS 9 and has
classified its financial instruments into the
appropriate IFRS 9 categories.
Available-for-sale financial assets of CHF
86 million included in the opening balance
have been reclassified to strategic equity
investments at fair value through other
comprehensive earnings (CHF 85 million)
and financial assets at fair value through
profit and loss (CHF 1 million).
Except for assets previously classified as
available-for-sale, there have been no
other impacts on financial instruments
under IFRS 9. Loans and receivables
remain to be measured at amortized cost
and derivative financial instruments at fair
value through profit and loss.
The Group elected to present in other
reserves the changes in the fair value of
strategic equity investments which are not
at fair value through profit and loss. The
impact of reclassification from the
available-for-sale equity reserve to the fair
value through other reserves on adopting
IFRS 9 was immaterial for LafargeHolcim’s
financial statements.
credit provision is determined based on
the credit risk standing at each
reporting date.
In connection with the reclassification of
available-for-sale financial assets to
financial assets at fair value through profit
and loss, an amount of CHF 4 million has
been reclassified from the available-for-
sale equity reserve to retained earnings.
The change from IAS 39 to IFRS 9 had no
effect on the measurement of
LafargeHolcim’s financial liabilities.
b) Derivatives and hedging activities
The Group designates the spot component
of foreign currency forward contracts as
hedging instruments in cash flow hedge
and net investment hedge relationships.
For cash flow hedges and net investment
hege, the Group has elected to recognize
the fair value changes of the forward
points in the foreign exchange contracts in
profit and loss.
The foreign exchange forward contract
hedges qualifying as cash flow hedges
under IAS 39 as at December 31, 2017
qualified as cash flow hedges under IFRS
9. The Group’s risk management strategies
and hedge documentation are aligned
with the requirements of IFRS 9 and are
thus treated as continuing hedges.
c) Change in impairment of financial
assets
The Group revised its impairment
methodology under IFRS 9, defining two
types of financial assets subject to IFRS 9’s
expected credit loss model:
i) for accounts receivable, the Group
applies the simplified approach
providing expected credit losses using
the lifetime expected loss provision; and
ii) for long-term loans and receivables
already in place at January 1, 2018, the
There was no material impact relating to
provisions on accounts receivable and
long-term loans and receivables on
conversion to IFRS 9.
Group risk management
Group Risk Management supports the
Board of Directors, the Executive
Committee and the management teams
of the countries in analyzing the overall
risk exposure. Group Risk Management
aims to systematically identify, monitor
and manage major risks the Group
encounters. All types of risks from
industry, operations, finance and legal, up
to the external business environment are
considered including compliance,
sustainable development and reputational
aspects. Risks are understood as the effect
of uncertainty on business objectives
which can be an opportunity or a threat.
The risk horizon includes long-term
strategic risks but also short- to medium-
term business risks. Potential risks are
identified and evaluated at an early stage
and monitored. Mitigating actions are
proposed and implemented at the
appropriate level so that risk management
remains a key responsibility of the line
management. Risk transfer through
insurance solutions forms an integral part
of risk management.
The Group’s risk map is established by
strategic, operational and topical risk
assessments which are combined into a
Group risk report. Besides the Countries,
the Board of Directors, the Executive
Committee and Corporate Function Heads
are involved in the risk assessment during
the Group’s management cycle. The
227
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 results of the annual Group risk process
are presented to the Executive Committee
and the conclusions reported to the Board
of Directors and the Audit Committee.
Country risk
LafargeHolcim’s major presence in
developing markets exposes the Group to
risks such as political, financial and social
uncertainties and turmoil, terrorism, civil
war and unrest.
The impact of United Kingdom’s
withdrawal from the European Union
(“BREXIT”) has been assessed and
preventive measures have been taken.
Relevant currency exposures and
counterparty risks were reduced before
the BREXIT vote.
Financial risk management
The Group’s activities expose it to a variety
of financial risks, including liquidity,
interest rate, foreign exchange,
commodity and credit risk. The Group’s
overall risk management focuses on the
unpredictability of financial markets and
seeks to minimize potential adverse
effects on the financial performance of
the Group. The Group uses derivative
financial instruments such as foreign
exchange contracts, commodity and
interest rate swaps to hedge certain
exposures. The Group does not enter into
derivative or other financial transactions
which are unrelated to its business needs
or for speculative purposes.
Financial risk management within the
Group is governed by policies approved by
key management personnel. It provides
principles for overall risk management as
well as policies covering specific areas
such as interest rate risk, foreign exchange
risk, credit risk, use of derivative financial
instruments and investing of cash.
Liquidity risk
Group companies need liquidity to meet
their obligations. Individual companies are
responsible for their own cash balances
and the raising of internal and external
credit lines to cover the liquidity needs,
subject to guidance by the Group.
The Group monitors its liquidity risk by
using a recurring liquidity planning tool
and maintains cash, readily realizable
marketable securities and unused
committed credit lines to meet its liquidity
requirements. In addition, the strong
creditworthiness of the Group allows it to
access international financial markets for
financing purposes.
228
Notes to the consolidated financial statementscontinued Contractual maturity analysis
Million CHF
2018
Trade accounts payable and others 1
Loans from financial institutions
Bonds, private placements and
commercial paper notes
Interest payments
Finance leases
Derivative financial instruments net 2
Financial guarantees
Total
2017
Trade accounts payable and others 1
Loans from financial institutions
Bonds, private placements and
commercial paper notes
Interest payments
Finance leases
Derivative financial instruments net 2
Financial guarantees
Total
Within
1 year
Within
2 years
Within
3 years
Within
4 years
Within
5 years
Thereafter
Total
Carrying
amount
Contractual undiscounted cash flows
3,717
1,179
1,757
547
33
37
0
0
386
1,241
397
28
49
0
0
147
847
339
26
(5)
0
0
47
0
8
0
15
3,717
1,782
3,717
1,775
1,543
2,102
318
24
0
0
268
20
0
0
6,602
2,320
72
0
25
14,093
14,047
4,189
203
80
25
279
166
45
0
7,269
2,101
1,353
1,932
2,398
9,035
24,089
3,743
1,887
1,822
676
14
(56)
0
0
478
1,703
502
12
15
0
0
497
1,222
379
7
108
0
0
189
1,666
316
6
0
0
0
98
929
270
4
0
0
0
37
7,662
2,519
41
0
11
3,743
3,186
3,743
3,177
15,003
15,258
4,662
340
84
67
11
64
64
0
8,086
2,710
2,213
2,177
1,301
10,270
26,757
1 Trade accounts payable and others include trade accounts payable and payables related to purchase of property, plant and equipment included in other current liabilities.
2 The contractual cash flows include both cash in- and outflows. Additional information is disclosed in note 14.4.
229
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 The maturity profile is based on
contractual undiscounted amounts
including both interest and principal cash
flows and is based on the earliest date
on which LafargeHolcim can be required
to pay.
Contractual interest cash flows relating
to a variable interest rate are calculated
based on the rates prevailing as of
December 31.
Interest rate risk
Interest rate risk arises from movements
in interest rates which could affect the
Group’s financial result and market values
of its financial instruments. The Group is
primarily exposed to fluctuations in
interest rates on its financial liabilities at
floating rates which may cause variations
in the Group’s financial result. The
exposure is mainly addressed through the
management of the fixed/floating ratio of
financial liabilities. To manage this mix,
the Group may enter into interest rate
swap agreements, in which it exchanges
periodic payments based on notional
amounts and agreed-upon fixed and
floating interest rates. The Group is also
exposed to the evolution of interest rates
and credit markets for its future
refinancing, which may result in a lower or
higher cost of financing. The Group
constantly monitors credit markets and
the aim of its financing strategy is to
achieve a well-balanced maturity profile to
reduce both the risk of refinancing and
large fluctuations of its financing cost.
The Group’s risk management policy for
interest rate risk is to maintain interest
rate risk at an acceptable level, whilst
minimizing interest expense over the long
term in accordance with the Group’s
funding strategy. As a consequence
thereof, under the Group’s risk
management policy, the Group may enter
into derivative contracts which are
designated as either cash flow hedges or
fair value hedges, as appropriate and also
include the hedging of forecasted
transactions.
Interest rate sensitivity The Group’s
sensitivity analysis has been determined
based on the interest rate exposure
relating to the Group’s financial liabilities
at a variable rate on a post hedge basis as
at December 31.
A 1 percentage point change is used when
the interest rate risk is reported internally
to key management personnel and
represents management’s assessment
of a reasonably possible change in
interest rates.
At December 31, 2018, a 1 percentage
point shift in interest rates, with all other
assumptions held constant, would result
in approximately CHF 22 million (2017:
CHF 34 million) of annual additional/lower
financial expenses before tax on a post
hedge basis.
The Group’s sensitivity to interest rates is
lower than last year mainly due to the
decrease of current financial liabilities as
well as the decrease of the ratio of
financial liabilities at variable rates to total
financial liabilities from 31 percent to
27 percent.
Foreign exchange risk
The Group’s global footprint exposes it to
foreign exchange risks.
The translation of foreign operations into
the Group reporting currency leads to
currency translation effects. The Group
may hedge certain net investments in
foreign entities with foreign currency
borrowings or other instruments. To the
extent that the net investment hedge is
effective, all foreign exchange gains or
losses are recognized in equity and
included in currency translation
adjustments.
Due to the local nature of the construction
materials business, foreign exchange risk
is limited. However, for many Group
companies, income will be primarily in
local currency, whereas debt servicing and
a significant amount of capital
expenditures may be in foreign currencies.
As a consequence thereof, under the
Group’s risk management policy, the
Group may enter into derivative contracts
which are designated as either cash flow
hedges or fair value hedges, as
appropriate and also include the hedging
of forecasted transactions.
Foreign exchange sensitivity
The Group’s sensitivity analysis has been
determined based on the Group’s net
transaction exposure that arises on
monetary financial assets and liabilities at
December 31 that are denominated in a
foreign currency other than the functional
currency in which they are measured. The
Group’s net foreign currency transaction
risk mainly arises from CHF, USD and EUR
against the respective currencies the
Group operates in.
230
Notes to the consolidated financial statementscontinued A 5 percent change is used when the net
foreign currency transaction risk is
reported internally to key management
personnel and represents management’s
assessment of a reasonably possible
change in foreign exchange rates.
A 5 percent change in CHF, USD and EUR
against the respective currencies the
Group operates in would have an
immaterial impact on foreign exchange
(loss) gains net on a post hedge basis in
both the current and prior year.
Ineffectiveness is recognized on hedges
where the cumulative change in the
designated component value of the
hedging instrument exceeds on an
absolute basis the change in value of the
hedged item attributable to the hedged
risk. Ineffectiveness may arise if there is a
difference in the principal terms of the
hedging instrument and designated
hedged risk, from credit valuation of the
hedging instrument or timing of the
transaction changes from what was
originally estimated.
Impacts on equity due to derivative
instruments are considered as not
material based on the shareholders’ equity
of the Group.
The effects of applying hedge accounting
on the Group’s financial position and
performance are as follows for cash flow,
fair value and net investment hedge
accounting relationships:
Commodity risk
The Group is subject to commodity risk
with respect to price changes mainly in
the electricity, natural gas, petcoke, coal,
oil refined products and sea freight
markets. Under the Group’s risk
management policy, the Group uses
derivative instruments to hedge part of its
exposure to these risks. Derivative
instruments are generally limited to swaps
and standard options.
Effects of hedge accounting
Hedge effectiveness is determined at the
inception of the hedge relationship, and
through periodic prospective effectiveness
assessments to ensure that an economic
relationship exists between the hedged
item and hedging instrument.
a) Cash flow hedge accounting
The change in fair value of hedging
instruments under cash flow hedge
accounting in 2018 was CHF –3 million
(2017: CHF –8 million). The change in
related hedged items was CHF 2 million
(2017: CHF 9 million) and an amount of
CHF –1 million (2017: CHF 1 million) was
recorded as ineffectiveness directly to the
income statement in 2018 for cash flow
hedges.
The maturities for hedging instruments as
of December 31, 2018, ranged between
2019 and 2020 for FX forwards and 2019
and 2021 for commodity swaps (2018 and
2020, 2018 and 2020 in 2017 respectively).
When a hedging instrument expires, or is
sold or terminated, or when a hedge no
longer meets the criteria for hedge
accounting, any cumulative deferred gain
or loss in equity at that time remains in
equity until the forecast transaction
occurs, resulting in the recognition of a
non-financial asset such as property, plant
and equipment and inventory against
which the cumulative gains and losses is
adjusted. When the forecast transaction is
no longer expected to occur, the
cumulative gain or loss that was reported
in equity is immediately reclassified to
profit or loss. No such case has occurred
in 2018.
b) Fair value hedge accounting
The change in fair value of hedging
instruments under fair value hedge
accounting in 2018 was CHF –5 million
(CHF –7 million in 2017). The change in
related hedged items was CHF 5 million
(CHF 7 million in 2017) and no amount
was recorded as ineffectiveness directly to
the income statement in 2018 and 2017
for fair value hedges.
The maturities for hedging instruments as
of December 31, 2018 are in 2020 for
cross-currency swaps (2020 in 2017).
When a hedging instrument expires, or is
sold or terminated, or when a hedge no
longer meets the criteria for hedge
accounting, the cumulative gain or loss
recorded in the carrying value of the
hedged item is amortized over the life of
the hedged item using the effective
interest rate. When the hedged item is
sold or terminated, the cumulative gains
and losses recorded in the carrying value
are recognized in financial income
(expense). No such case has occurred
in 2018.
231
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018
The Group considers the probability of
default upon initial recognition of
accounts receivable based on lifetime
expected credit losses by considering
available reasonable and supportable
historical and forwarding-looking
information.
The Group considers the probability of
default upon initial recognition of long-
term loans and receivables and whether
there has been a significant increase in
credit risk on an ongoing basis throughout
each reporting period by considering
available reasonable and supportable
historical and forwarding-looking
information.
The maximum exposure to credit risk is
represented by the carrying amount of
each financial asset, including derivative
financial instruments, in the consolidated
statement of financial position.
Write-off
b) Long-term loans and receivables
The Group uses three categories for
long-term loans and receivables which
reflect their credit risk and how the loan
loss provision is determined for each of
those categories.
Summary of the assumptions
underpinning the Group’s expected credit
loss model is as follows:
Category
Performing
Non-performing
Definition
Customers have a low
risk of default and a
strong capacity to
meet contractual cash
flows
Interest and/or
principal repayments
are past due and credit
risk level shows an
increase
Based on observable
data the payments will
not be collected
As from January 1, 2018, the following
credit risk modelling applies for financial
assets:
a) Accounts receivable
For accounts receivable, the Group applies
the simplified approach with expected
lifetime losses recognized from initial
recognition of the receivables in the
statement of income.
Each exposure is allocated to a credit risk
category at initial recognition based on
available information about the borrower.
Exposures are subject to ongoing
monitoring which may result in an
exposure being moved to a different credit
risk category.
Over the term of the loans, the Group
accounts for its credit risk by providing for
expected credit losses on a timely basis. In
calculating the expected credit loss rates,
the company considers historical loss rates
for each category of customers, and
adjusts for forward looking
macroeconomic data. No significant
changes to estimation techniques or
assumptions were made during the
reporting period.
c) Net investment hedge accounting
The change in the fair value of hedging
instruments under net investment hedge
accounting in 2018 was CHF –14 million
(2017: CHF 30 million). The change in
related hedged items was CHF 14 million
(2017: CHF –30 million) and no amount
was recorded as ineffectiveness directly to
the income statement in 2018 and 2017
for net investment hedges.
The maturities for hedging instruments as
of December 31, 2018 are in 2019 for
foreign exchange forwards (2018 in 2017).
When a hedging instrument expires, or is
sold or terminated, or when a hedge no
longer meets the criteria for hedge
accounting, any cumulative deferred gain
or loss in equity at that time remains in
equity until the forecast transaction occurs
(i.e. disposal of a subsidiary). No such case
has occurred in 2018.
Credit risk
Credit risks arise, among others, from the
possibility that customers may not be able
to settle their obligations as agreed. To
manage this risk, the Group periodically
assesses the financial reliability of
customers.
Credit risks, or the risk of counterparties
defaulting, are constantly monitored.
Counterparties to financial instruments
consist of a large number of established
financial institutions. The Group does not
expect any counterparty to be unable to
fulfill its obligations under its respective
financing agreements. At year end,
LafargeHolcim has no significant
concentration of credit risk with any single
counterparty or group of counterparties.
232
Notes to the consolidated financial statementscontinued
Funds from operations are calculated as
net income plus depreciation,
amortization and impairment as shown in
the notes to the consolidated statement of
income. Net financial debt is calculated as
financial liabilities less cash and cash
equivalents and derivative assets as shown
in the consolidated statement of financial
position.
Capital structure
The Group’s objectives when managing
capital are to secure the Group’s financial
needs as a going concern as well as to
cater for its growth targets, in order to
provide returns to shareholders and
benefits for other stakeholders and to
maintain a solid investment grade rating.
The Group manages the capital structure
and makes adjustments to it in light of
changes in economic conditions, business
activities, investment and expansion
programs and the risk characteristics of
the underlying assets. In order to maintain
or adjust the capital structure, the Group
may adjust the amount of dividends paid
to shareholders, return capital to
shareholders, issue new shares, increase
debt or sell assets to reduce debt.
The Group monitors capital, among
others, on the basis of the ratio of funds
from operations as a percentage of net
financial debt and the ratio of net financial
debt to Recurring EBITDA.
233
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Million CHF
Current financial liabilities 1
Long-term financial liabilities
Gross financial debt
Derivative assets
Cash and cash equivalents
Net financial debt
1 Including bank overdraft cash movement for CHF 14 million.
Million CHF
Net financial debt as at the beginning of the period
Cash flow from operating activities
Cash flow from investing activities
Payout on ordinary shares
Dividends paid to non-controlling interest
Capital repaid to (paid-in by) non-controlling interest
Movements of treasury shares
Increase in participation in existing Group companies
Proceeds from subordinated fixed rate resettable notes
Total cash effective movements as per statement of cash flows
Cash proceeds reflected in the financing flows
Total cash effective movements as per Net financial debt
Change in scope
Change in fair values
Currency translation effects
Others
Total non cash effective movements
Net financial debt as at the end of the period
Third party Net Financial Debt of Holcim Indonesia classified as held for sale
Net financial debt as at the end of the period – before transactions
The net financial debt to recurring EBITDA
ratio is used as an indicator of financial
risk and shows how many years it would
take the Group to pay back its debt.
Million CHF
Net financial debt
Recurring EBITDA
Net financial debt/recurring EBITDA
234
31.12.2017
Cash flows Non cash flows
31.12.2018
3,843
14,779
18,621
(58)
(4,217)
14,346
(237)
(1,510)
(1,747)
0
1,575
(171)
2018
14,346
(2,988)
1,386
1,192
156
8
73
202
(200)
(171)
0
(171)
(304)
(90)
(345)
81
(657)
13,518
356
13,874
2018
13,518
6,016
2.2
(543)
(208)
(751)
(33)
127
(657)
3,063
13,061
16,124
(91)
(2,515)
13,518
2017
14,724
(3,040)
675
1,212
237
(63)
489
13
0
(477)
(181)
(658)
106
(83)
378
(119)
281
14,346
0
14,346
2017
14,346
5,990
2.4
Notes to the consolidated financial statementscontinued Fair value estimation
The fair value of publicly traded financial
instruments is generally based on quoted
market prices at the end of the reporting
period.
For non-publicly traded financial
instruments, the fair value is determined
by using a variety of methods, such as the
discounted cash flow method and option
pricing models. The valuation methods
seek to maximize the use of observable
market data existing at the end of the
reporting period.
Fair values as of December 31, 2018
The fair value of current financial assets
and liabilities at amortized cost is assessed
to approximate their carrying amounts
due to the short-term nature of these
financial instruments.
Million CHF
IFRS 9 Category
Current financial assets
Cash and cash equivalents
Financial assets
Trade accounts receivable
Receivables at amortized cost
Financial receivables
Receivables at amortized cost
Derivative assets
Derivative assets
Held for hedging at fair value
Held for trading at fair value
Long-term financial assets
Long-term receivables
Loans at amortized cost
Financial investments third parties
Strategic equity investments at fair value
through other comprehensive earnings
Derivative assets
Derivative assets
Held for hedging at fair value
Held for trading at fair value
Current financial liabilities
Trade accounts payable and others 2
Financial liabilities at amortized cost
Current financial liabilities
Financial liabilities at amortized cost
Derivative liabilities
Derivative liabilities
Held for hedging at fair value
Held for trading at fair value
Carrying amount (by measurement basis)
Amortized
cost
Fair value
level 1
Fair value
level 2
Total
Comparison
Fair value
2,515
3,229
180
315
0
3,717
2,976
2,515
3,229
180
55
10
315
315 1
196
23
3
3,717
2,976
27
60
55
10
196
23
3
27
60
Long-term financial liabilities
Long-term financial liabilities
Financial liabilities at amortized cost
13,012
13,012
13,103 3
Derivative liabilities
Held for hedging at fair value
49
49
1 The comparison fair value for long-term receivables consists of level 2 fair value measurements.
2 Trade accounts payable and others include payables related to the purchase of property, plant and equipment included in other liabilities.
3 The comparison fair value for long-term financial liabilities consists of CHF 10,530 million level 1 and CHF 2,573 million level 2 fair value measurements.
235
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Fair values as of December 31, 2017
Million CHF
IAS 39 Category
Current financial assets
Cash and cash equivalents
Financial assets
Trade accounts receivable
Loans and receivables at amortized cost
Financial receivables
Loans and receivables at amortized cost
Derivative assets
Derivative assets
Held for hedging at fair value
Held for trading at fair value
Long-term financial assets
Financial receivables
Loans and receivables at amortized cost
Financial investments third parties
Financial investments at cost
Derivative assets
Held for hedging at fair value
Current financial liabilities
Trade accounts payable and others 2
Financial liabilities at amortized cost
Financial liabilities
Derivative liabilities
Derivative liabilities
Financial liabilities at amortized cost
Held for hedging at fair value
Held for trading at fair value
Carrying amount (by measurement basis)
Amortized
cost
Fair value
level 1
Fair value
level 2
Total
Comparison
Fair value
4,217
3,340
262
432
85
3,743
3,734
4,217
3,340
262
42
2
432
85
14
3,743
3,734
22
86
42
2
14
22
86
432 1
Long-term financial liabilities
Financial liabilities
Derivative liabilities
Financial liabilities at amortized cost
14,766
14,766
15,655 3
Held for hedging at fair value
13
13
1 The comparison fair value for long-term receivables consists of CHF 12 million level 1 and CHF 420 million level 2 fair value measurements.
2 Payables include trade account payables and payables related to the purchase of property, plant and equipment included in other current liabilities.
3 The comparison fair value for long-term financial liabilities consists of CHF 12,760 million level 1 and CHF 2,895 million level 2 fair value measurements.
236
Notes to the consolidated financial statementscontinued The table above shows the carrying
amounts and fair values of financial assets
and liabilities.
The levels of fair value hierarchy used are
defined as follows:
• Level 1 fair value measurements are
those derived from quoted prices
(unadjusted) in active markets for
identical assets or liabilities. The types of
assets carried at level 1 fair value are
equity and debt securities listed in active
markets;
• Level 2 fair value measurements are
those derived from valuation techniques
using inputs for the asset or liability that
are observable market data, either
directly or indirectly. Such valuation
techniques include the discounted cash
flow method and option pricing models.
For example, the fair value of interest
rate and currency swaps is determined
by discounting estimated future cash
flows, and the fair value of forward
foreign exchange contracts is
determined using the forward exchange
market at the end of the reporting
period; and
• Level 3 fair value measurements are
those derived from valuation techniques
using inputs for the asset or liability that
are not based on observable market
data. In 2018 and 2017, there were no
financial assets and liabilities allocated to
level 3.
There have been no transfers between the
different hierarchy levels in 2018 and
2017.
15. Leases
15.1 Impacts of applying IFRS 16
As part of its activities, the Group has
entered into various lease agreements as
lessee, largely for trucks and heavy mobile
equipment, for land and buildings as well
as time charter agreements for vessels.
IFRS 16 Leases will be applied starting
January 1, 2019. The new standard will not
require the distinction between finance
and operating leases for lessees but will
require lessees to recognize a lease
liability for future lease payments and a
corresponding right-of-use asset. In the
income statement, the expenses will
comprise an amortization charge
reflecting the decrease in value of the
right-of-use asset and an interest expense
reflecting the unwinding of the lease
liability which will be accounted for as a
finance cost.
The Group will apply the new standard in
accordance with the modified
retrospective approach without
restatement of the comparative period.
Leases that were accounted for as
operating leases in accordance with IAS 17
Leases, will be recognized at the present
value of the remaining lease payments
starting January 1, 2019, and discounted
using the lessee’s incremental borrowing
rate as at the date of initial application.
For all contracts existing as of January 1,
2019, the Group will apply the practical
expedient to grandfather the assessment
made under IAS 17 Leases and IFRIC 4
Determining whether an Arrangement
contains a Lease. Furthermore, the Group
has chosen the option whereby the
right-of-use asset would equal the lease
liability at the initial application of IFRS 16.
The right-of-use asset will be adjusted for
any prepaid and accrued leases and
provision for onerous contracts relating to
the lease recognized in the statement of
financial position at the date of initial
application.
The Group will apply the practical
expedients for short-term leases, which
are leases with a lease term assessed to be
12 months or less from the
commencement date and leases of low
value assets which are leases of assets
that fall below the capitalization threshold
for property, plant and equipment;
consequently, these lease payments will
be recorded directly in operating profit
and not be capitalized as a right-of-use
asset and a lease liability.
The Group has also elected to separate
lease from non-lease components in
contracts containing a lease.
In the cash flow statement, the portion of
the lease payments reflecting the
repayment of the lease liability will be
presented within financing activities
whereas the interest portion will be
presented in cash flow from operating
activities. Lease payments for short term
leases and leases of low value assets will
remain classified as cash flow from
operating activities.
In the event that the tax base of a right-of-
use asset is not the same as its carrying
amount for IFRS purposes on initial
recognition of a lease contract, the Group
will recognize the deferred tax impact
arising on the temporary difference
between the carrying amount of the
right-of-use asset and its tax base. The
same treatment as above will also be
applied to the initial recognition of the
lease liability.
237
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 As of December 31, 2018, the total
undiscounted future minimum lease
payments for operating leases under IAS
17 amount to CHF 1,955 million as
disclosed in the table below, which
includes approximately CHF 150 million
relating to short-term leases, leases of low
value assets and service components.
LafargeHolcim is currently finalizing the
implementation of the IFRS 16 standard,
which is expected to translate as of
January 1, 2019 into additional lease
liabilities and right-of-use assets in a range
between CHF 1,400 and CHF 1,500 million.
The net adjustment for prepaid and
accrued leases as well as provisions for
onerous contracts is expected to be
immaterial.
15.2 Leases
Future minimum lease payments
Million CHF
Within 1 year
Between 1 and 5 years
Thereafter
Total
Interest
Total finance leases
The future minimum lease payments
disclosed above are not discounted. The
total expense for operating leases
recognized in the consolidated statement
of income in 2018 was CHF 480 million.
The liabilities from finance leases due
within one year are included in current
financial liabilities and liabilities due
thereafter are included in long-term
financial liabilities (note 14.3).
Operating leases
Finance leases
2018
393
883
679
1,955
2018
33
98
72
203
(37)
166
238
Notes to the consolidated financial statementscontinued 16. Employee benefits and share
compensation plans
16.1 Accounting principles
Employee benefits - Defined benefit
plans
Some Group companies provide defined
benefit pension or other post-
employments benefit plans for employees.
Professionally qualified independent
actuaries value the defined benefit
obligations on a regular basis. The
obligation and costs of pension benefits
are determined using the projected unit
credit method. The projected unit credit
method considers each period of service
as giving rise to an additional unit of
benefit entitlement and measures each
unit separately to build up the final
obligation. Past service costs, which
comprise plan amendments and
curtailments and gains or losses on the
settlement of pension benefits, are
recognized immediately in the statement
of income when they occur.
Remeasurements, which comprise
actuarial gains and losses on the pension
and other post-employment obligations,
the return on plan assets and changes in
the effect of the asset ceiling excluding
amounts in net interest, are recognized
directly in other comprehensive earnings
and are not reclassified to the statement
of income in a subsequent period. The
pension and other post-employment
obligations are measured at the present
value of estimated future cash flows using
a discount rate that is determined by
reference to the interest rate on high
quality corporate bonds where the
currency and terms of the corporate
bonds are consistent with the currency
and estimated terms of the defined
benefit and other post-employment
obligations.
A net pension asset is recorded only to the
extent that it does not exceed the present
value of any economic benefits available
in the form of refunds from the plan
or reductions in future contributions to
the plan.
The cost for defined benefit and other
post-employment benefits plans charged
to the statement of income consists of
service cost (current service cost, past
service cost and curtailments as well as
gains or losses on settlements) and the
net interest expense. The service costs are
recorded in “Cost of goods sold”,
“Distribution and selling expenses” or
“Administrative expenses” based on the
beneficiaries of the plan and the net
interest expense is recorded in “Financial
expenses”.
Employee benefits – Defined
contribution plans
In addition to the defined benefit plans
described above, some Group companies
sponsor defined contribution plans based
on local practices and regulations. The
Group’s contributions to defined
contribution plans are charged to the
statement of income in the period to
which the contributions relate.
Employee benefits – Other long-term
employment benefits
Other long-term employment benefits
include long-service leave or sabbatical
leave, medical aid, jubilee or other
long-service benefits, long-term disability
benefits and, if they are not expected to
be settled wholly within twelve months
after the year end, profit sharing, variable
and deferred compensation.
The measurement of these obligations
differs from defined benefit plans in that
all remeasurements are recognized
immediately in the statement of income
and not in other comprehensive earnings.
Employee benefits – Equity
compensation plans
The Group operates various equity-settled
share-based compensation plans. The fair
value of the employee services received in
exchange for the grant of the options or
shares is recognized as an expense. The
total amount to be expensed is
determined by reference to the fair value
of the equity instruments granted. The
amounts are charged to the statement of
income over the relevant vesting periods
and adjusted to reflect actual and
expected levels of vesting.
16.2 Employee benefits
Personnel expenses and number of
personnel
The Group’s total personnel expenses,
including social charges, are recognized in
the relevant expenditure line by function
in the consolidated statement of income
and amounted to CHF 4,810 million (2017:
CHF 4,932 million). As of December 31,
2018, the Group employed 77,055 people
(2017: 81,960 people).
Defined benefit pension plans
The Group oversees the management of
its pension plans through the Pension and
Benefits Governance Team. This
interdisciplinary team including finance,
human resources and legal specialists acts
as a center of expertise in all issues
relating to pension and other post-
employment benefits and makes
recommendations to the Group CEO and
Group CFO. A documented directive is
used as a base for management actions
and decisions.
239
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 The Group’s main defined benefit pension
plans are located in the United Kingdom,
North America and Switzerland. They
respectively represent 52 percent (2017:
52 percent), 22 percent (2017: 22 percent)
and 18 percent (2017: 16 percent) of the
Group’s total defined benefit obligation for
pensions. These main plans are funded
through legally separate trustee managed
funds. The cash funding of these plans,
which may from time to time involve
special payments, is designed to ensure
that past, present and future contributions
should be sufficient to meet future
liabilities.
The Group operates a number of defined
benefit pension schemes and schemes with
similar or contingent obligations in several
of its countries. The assets and liabilities of
those schemes may exhibit significant
volatility.
Where possible, defined benefit pension
schemes have been closed and frozen.
Significant actions continue to take place
to reduce and eliminate those schemes
and related risks. Specifically, active
management is in place to mitigate the
volatility and match investment returns
with benefit obligations.
Unfunded pension plans are mainly plans
outside of tax regimes’ qualification limits,
retirement indemnity schemes, or end of
service benefits where benefits are vested
only if the employee is still employed by
the Group company at the retirement
date. The unfunded pension plans are
located largely in the United States,
Canada and France.
United Kingdom (UK)
The companies operate three defined
benefit pension plans in the UK: the
Lafarge UK pension plan, the Aggregate
Industries pension plan and the Ronez
2000 pension plan. Pensions payable to
employees depend on average final salary
and length of service within the Group.
These plans are registered schemes under
UK tax law and managed by independent
Boards of Trustees. They are closed to new
entrants. The vested rights of the Lafarge
UK pension plan were frozen in 2011,
while those of the Ronez 2000 pension
plan were frozen in 2016. In November
2018, Aggregate Industries Ltd. began
consulting with employees with the intent
of closing the Aggregate Industries
pension plan to future accruals and
changing the escalation formula.
Consultation ended on January 29, 2019
and it has been confirmed that the closure
and changes will become effective as of
March 31, 2019.
These plans are funded by employer
contributions, which are negotiated every
three years based on plan valuations
carried out by independent actuaries.
For the Lafarge UK pension plan, no
contributions were paid in 2018 and 2017.
The June 30, 2018 funding valuation is
currently being conducted and is due to
be completed in 2019. The last funding
valuation for the Aggregate Industries
pension plan was conducted as at April 5,
2015. A revised schedule of contributions
setting out the deficit repayment
contributions payable by the sponsoring
employer was put in place with the aim of
removing the funding deficit in the plan by
April 5, 2027. The April 5, 2018 funding
valuation is currently being conducted
and is due to be completed in 2019. For
the Ronez 2000 pension plan, there are no
contributions currently due to be paid by
the sponsoring employer. The Trustee
completed the December 31, 2015
actuarial valuation during the period
which revealed a small deficit as at
December 31, 2015. The Trustee and
Company agreed this shortfall would be
met by asset returns above those assumed
in the calculation of the liabilities by July
31, 2019.
In relation to risk management and asset
allocation, the Boards of Trustees aim to
ensure that they can meet their
obligations to the beneficiaries of the
plans, both in the short and long terms.
Subject to this primary objective, the
Boards of Trustees target to maximize the
long-term investment return whilst
minimizing the risk of non-compliance
with any statutory funding requirements.
The Boards of Trustees are responsible for
the plans’ long-term investment strategies
but usually delegates strategy design and
monitoring to Investment Committees.
The Lafarge UK Pension Plan entered a
longevity swap during 2018. The swap
hedges the risk of changes in life
expectancy for covered members, which
will reduce longevity related volatility in
the plan’s funding position, resulting in a
more stable balance sheet position. The
swap covers pensioners and dependent
members whose benefits came into
payment on or before December 31, 2016
and who were alive on January 1, 2018,
representing 60% of the plan’s IAS19
liabilities as of December 31, 2018.
The Lafarge UK pension plan and the
Aggregate Industries pension plan both
contain elements of pension called
Guaranteed Minimum Pension (“GMP”).
GMPs were accrued by individuals who
were contracted out of the State Second
Pension prior to April 6, 1997. Historically,
there was an inequality in the benefits
between male and female members who
had GMP. A High Court case concluded on
October 26, 2018 confirmed that all UK
pension plans must equalise GMPs
between men and women. In the light of
these events, a net experience adjustment
of CHF 47 million was recognized in other
comprehensive income.
240
Notes to the consolidated financial statementscontinued In the United States, the companies intend
to pay the minimum required
contributions as prescribed under Internal
Revenue Service (IRS) regulations in
addition to voluntary amounts in order to
achieve and maintain an IRS funded status
of at least 80 percent. In Canada, the
Group companies intend to pay at least
the minimum required contributions
under the applicable pension legislation
for each plan
The companies delegate various
responsibilities to Pension Committees.
These committees define and manage
long-term investment strategies for
reducing risks, including interest rate risks
and longevity risks. The assets in the
United States and Canada include a
certain proportion which hedge the
liability swings against interest rate
movements, with those assets primarily
invested in fixed income investments,
particularly intermediate and longer term
instruments.
In 2017, a pension plan freeze was
announced for all Canadian salaried
employees participating in the defined
benefit plan. From January 1, 2020, active
members will no longer acquire further
rights in this defined benefit plan. Active
members will then participate in a defined
contribution plan. In the United States,
collective bargaining during 2018 resulted
in a freeze of pension benefits for
participants in several locations. These
changes resulted in a combined one-time
minor curtailment gain.
North America (United States and
Canada)
The companies operate defined
contribution plans and a number of
defined benefit pension plans. The
majority of the defined benefit pension
plans are closed to new entrants and
frozen to future accruals. For defined
benefit pension plans, pensions payable to
employees depend on average final salary
and length of service within the Group. For
defined contributions, benefit depend on
accrued contributions with returns at
retirement.
The Group participates in a number of
union-sponsored multi-employer pension
plans in the United States. These plans are
subject to substantial deficits due to
market conditions and business actions,
plan trustee decisions, plan failure as well
as actions and decisions of other
contributing employers. The Group has
essentially no control on how these plans
are managed.
The Group has undertaken a review of all
these plans with the goal being to fully
understand the plans’ financial
circumstances, as well as all options
available to mitigate risks and reduce the
Group’s actual and potential financial
obligations. As the Group’s participation in
these plans is subject to negotiations with
bargaining unions, the Group’s ability to
take action is limited.
The Group companies must contribute a
minimum amount to the defined benefit
pension plans annually which is
determined actuarially and is comprised
of service costs as well as payments
toward any existing deficits. For plans that
are currently closed and frozen, there will
generally be no service component in the
future.
241
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Switzerland
The Swiss pension plans of Swiss
companies contain a cash balance benefit
formula, accounted for as a defined
benefit plan. Employer and employee
contributions are defined in the pension
fund rules in terms of an age related
sliding scale of percentages of salary.
Under Swiss law, the pension fund
guarantees the vested benefit amount as
confirmed annually to members. Interest
above legal requirements may be added
to member balances at the discretion of
the Board of Trustees. At retirement date,
members have the right to take their
retirement benefit as a lump sum, an
annuity or part as a lump sum with the
balance converted to a fixed annuity at
the rates defined in the fund rules. The
Board of Trustees, composed of half
employer and half employees’
representatives, may increase the annuity
at their discretion subject to the plan’s
funded status including sufficient free
funds as determined according to Swiss
statutory valuation rules. The Swiss
pension plans fulfill the requirements of
the regulatory framework which requires a
minimum level of benefits.
Reconciliation of retirement benefit plans to the statement of financial position
Status of the Group's defined benefit
plans
The status of the Group’s defined benefit
plans using actuarial assumptions
determined in accordance with IAS 19
Employee Benefits is summarized below.
The tables provide reconciliations of
defined benefit obligations, plan assets
and the funded status for the defined
benefit pension plans to the amounts
recognized in the statement of financial
position.
Million CHF
Net liability arising from defined benefit pension plans
Net liability arising from other post-employment benefit plans
Net liability
Reflected in the statement of financial position as follows:
Pension assets
Defined benefit obligations
Net liability
2018
993
239
1,232
(371)
1,603
1,232
2017
1,265
288
1,553
(308)
1,861
1,553
242
Notes to the consolidated financial statementscontinued Retirement benefit plans
Million CHF
Present value of funded obligations
Fair value of plan assets
Plan deficit of funded obligations
Present value of unfunded obligations
Effect of asset ceiling
Net liability from funded and unfunded plans
Of which:
United Kingdom
North America (United States and Canada)
Switzerland
Rest of world
Costs recognized in the statement of income are as follows:
Current service costs
Past service costs (including curtailments)
Gains on settlements
Net interest expense
Special termination benefits
Total recorded in the statement of income
Of which:
United Kingdom
North America (United States and Canada)
Switzerland
Rest of world
Amounts recognized in other comprehensive earnings:
Actuarial gains (losses) arising from changes in demographic assumptions
Actuarial gains (losses) arising from changes in financial assumptions
Actuarial gains (losses) arising from experience adjustments
Return on plan assets excluding interest income
Change in effect of asset ceiling excluding interest (income) expense
Total recorded in other comprehensive earnings
Of which:
United Kingdom
North America (United States and Canada)
Switzerland
Rest of world
Defined benefit pension plans
2018
8,122
(7,614)
507
480
5
993
(133)
530
141
455
112
(107)
(3)
46
4
52
0
52
34
(34)
114
487
(141)
(401)
(1)
57
25
4
(78)
105
2017
9,142
(8,596)
546
714
5
1,265
(96)
581
66
714
123
(21)
(11)
41
10
142
1
42
40
59
71
(274)
8
410
(4)
211
46
1
181
(17)
Other post-employment
benefit plans
2018
2017
0
0
0
239
0
239
0
181
0
58
2
(16)
0
10
0
(4)
0
(8)
0
4
2
5
10
0
0
17
0
17
0
(1)
0
0
0
288
0
288
0
226
0
61
2
(5)
0
11
0
9
0
6
0
3
1
(16)
21
0
0
5
0
7
0
(2)
243
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Retirement benefit plans
Million CHF
Present value of funded and unfunded obligations
Opening balance as per January 1
Reclassifications and change in structure
Current service costs
Interest expense
Contribution by the employees
Actuarial (gains) losses
Benefits paid
Past service costs (including curtailments)
Settlements
Special termination benefits
Currency translation effects
Closing balance as per December 31
Of which:
United Kingdom
North America (United States and Canada)
Switzerland
Rest of world
Fair value of plan assets
Opening balance as per January 1
Reclassifications and change in structure
Interest income
Return on plan assets excluding interest income
Contribution by the employer
Contribution by the employees
Benefits paid
Settlements
Currency translation effects
Closing balance as per December 31
Of which:
United Kingdom
North America (United States and Canada)
Switzerland
Rest of world
244
Defined benefit pension plans
Other post-employment
benefit plans
2018
2017
2018
2017
9,857
9,660
288
308
(60)
112
251
20
(460)
(646)
(107)
(46)
4
(324)
8,602
4,497
1,893
1,536
676
16
123
258
20
196
(551)
(21)
(111)
10
257
9,857
5,172
2,161
1,600
924
8,596
8,162
(31)
206
(401)
212
20
(646)
(43)
(299)
6
217
410
198
20
(551)
(101)
234
7,614
8,596
4,636
1,363
1,395
221
5,272
1,580
1,534
210
(3)
2
10
0
(17)
(19)
(16)
0
0
(7)
239
0
181
0
58
0
0
0
0
18
0
(18)
0
0
0
0
0
0
0
(2)
2
11
0
(5)
(18)
(5)
0
0
(4)
288
0
226
0
61
0
0
0
0
18
0
(18)
0
0
0
0
0
0
0
Notes to the consolidated financial statementscontinued Retirement benefit plans
Million CHF
Plan assets:
Equity instruments
Liability-driven investments
Debt instruments
Alternative investments
Insurance policies
Investment in real estate
Investment funds
Cash and cash equivalents
Structured debt
Others
Total plan assets
Defined benefit pension plans
2017
24%
22%
15%
12%
8%
6%
4%
2%
2%
5%
2018
21%
21%
15%
12%
9%
6%
6%
4%
2%
4%
100%
100%
Plan assets based on non-quoted prices
represent 17% (2017: 19%) of the total
plan assets and mainly consist of
insurance policies for 9% (2017: 8%) and
investment funds for 4% (2017: 3%).
The fair value of financial instruments of
LafargeHolcim Ltd or subsidiaries held as
plan assets amount to CHF 78 million
(2017: CHF 7 million).
Liability-driven investment (LDI) is an
investment strategy that is defined
considering the risk profiles of the liability
of the plan. The LDI investment strategy
mainly consists of index-linked
government bonds and swaps and
involves hedging the plan against liquidity
risk and change in interest rates or
inflation yields.
Alternative investments include among
others hedge-funds, multi-asset values
and reinsurance investments.
245
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Principal actuarial assumptions (weighted average) used at the end of the reporting period for defined benefit pension plans
Discount rate in %
Expected salary increases in %
Life expectancy in years
after the age of 65
Total Group
United Kingdom
North America
Switzerland
2018
2.8%
2.2%
2017
2.5%
2.4%
2018
3.0%
3.2%
2017
2.6%
+3.2%
2018
4.0%
2.5%
2017
3.5%
2.9%
2018
0.8%
0.9%
2017
0.6%
0.8%
21.9
22.3
22.7
23.8
23.2
22.8
23.3
22.5
Weighted average duration of defined benefit pension plans
Weighted average duration in years
Total Group
United Kingdom
North America
Switzerland
2018
15.4
2017
15.3
2018
17.5
2017
17.4
2018
13.3
2017
13.3
2018
13.5
2017
13.7
Sensitivity analysis as per December 31, 2018 on defined benefit pension plans
Impact on the defined benefit obligation
Total Group
United Kingdom
North America
Switzerland
Million CHF
Increase
Decrease
Increase
Decrease
Increase
Decrease
Increase
Decrease
Discount rate (±0.5% change in assumption)
(611)
685
(372)
401
(115)
136
(92)
113
Expected salary increases
(±0.5% change in assumption)
Life expectancy in years after the age of 65
(±1 year change in assumption)
47
(46)
8
(8)
343
(350)
231
(229)
9
51
(8)
(56)
9
50
(8)
(58)
Sensitivity analysis as per December 31, 2017 on defined benefit pension plans
Impact on the defined benefit obligation
Total Group
United Kingdom
North America
Switzerland
Million CHF
Increase
Decrease
Increase
Decrease
Increase
Decrease
Increase
Decrease
Discount rate (±0.5% change in assumption)
(705)
766
(420)
459
(134)
144
(105)
113
Expected salary increases
(±0.5% change in assumption)
Life expectancy in years after the age of 65
(±1 year change in assumption)
57
(56)
9
(9)
378
(365)
258
(244)
9
52
(8)
(50)
10
52
(10)
(60)
The sensitivity analysis above may not be
representative of the actual change in the
defined benefit pension plans as it is
unlikely that the change in assumptions
would occur in isolation of one another as
some of the assumptions may be
correlated.
Expected contributions by the employer to
be paid to the post-employment benefit
plans during the annual period beginning
after the end of the reporting period are
CHF 82 million, of which CHF 25 million
related to North America, CHF 31 million
related to Switzerland and CHF 11 million
related to United Kingdom.
246
Notes to the consolidated financial statementscontinued 16.3 Share compensation plans
The total personnel expense arising from
the LafargeHolcim share compensation
plans amounted to CHF 12.9 million in
2018 (2017: CHF 20.5 million) as presented
in the following table:
Million CHF
Employee share purchase plan
LafargeHolcim Performance Share Plan
LafargeHolcim Senior Management Plan
Share option plan
Liquidity mechanism for remaining Lafarge rights
Total
Personnel expenses
2018
Personnel expenses
2017
0.7
5.6
5.8
0.4
0.3
12.9
0.5
15.5
2.9
0.2
1.3
20.5
All shares granted under these plans are
either purchased from the market or
derived from treasury shares.
Description of plans
Employee share purchase plan
LafargeHolcim offers an employee
share-ownership plan for all employees of
Swiss subsidiaries and some executives
from Group companies. This plan entitles
employees to acquire a limited amount of
discounted LafargeHolcim Ltd shares
generally at 70 percent of the market
value based on the prior-month average
share price. The shares cannot be sold for
a period of two years from the date of
purchase.
management and other employees for
their contribution to the continuing
success of the business. These shares and
options will be delivered after a three-to-
five-year vesting period following the
grant date and are subject to internal and
external performance conditions.
LafargeHolcim Performance Share Plan
LafargeHolcim set up a performance share
plan in 2015. Performance shares and/or
options are granted to executives, senior
Information related to awards granted
through the LafargeHolcim Performance
Share Plan is presented below:
January 1
Granted
Forfeited
December 31
2018
2017
Performance
shares
Performance
options
Performance
shares
Performance
options
2,232,190
1,389,745
1,364,703
1,559,468
895,190
283,506
926,203
0
(770,271)
(318,049)
(58,716)
(169,723)
2,357,109
1,355,202
2,232,190
1,389,745
247
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 The fair value of the plan was calculated
by an independent consultant as follows:
• 895,190 performance shares were
granted in 2018 under the Performance
Share Plan (2017: 926,203). These shares
are subject to a three-year vesting
period. 895,190 shares (2017: 648,342)
are subject to internal performance
conditions and the fair value per share is
CHF 55.00 (2017: CHF 57.45). No share
(2017: 277,861) is subject to an external
performance condition, based on the
Total Shareholder Return. In 2017, this
external condition was included in the
fair value per share of CHF 26.27 using a
Monte Carlo simulation;
• 283,506 share options were granted in
2018 under the Performance Share Plan
(2017: nil). These share options are
subject to a five-year vesting period and
an external performance condition
based on the Total Shareholder Return.
The fair value per share option has been
determined using the Black-Scholes
model and amounted to CHF 9.16.
Underlying assumptions for the fair value
of the share options granted in 2018 are
presented below (no grants in 2017):
Grant date
Share price at grant date
Exercise price
Assumed/expected dividend yield 1
Expected volatility of stock 2
Risk-free interest rate
Expected life of the options
1 Based on data market provider estimates.
2 Based on a 2 year at-the-money implied volatility.
March 1,
2018
55.00
55.65
3.3%
22.4%
–0.2%
8 years
248
Notes to the consolidated financial statementscontinued LafargeHolcim Senior Management Plan
Part of the variable, performance-related
compensation for senior management is
paid in LafargeHolcim Ltd shares, which
are granted based on the market price of
the share in the following year. The shares
cannot be sold by the employee for the
next three years.
Restricted share awards are also granted
for Senior Management at hire,
compensating for share awards forfeited
from previous employer. The vesting of
these restricted shares reflect the vesting
dates of forfeited awards.
Share option plans
Two types of share options were granted
to senior management of the Group: the
ones, which were granted as part of the
annual variable compensation and those,
that were allotted to the Executive
Committee upon appointment. In both
cases, each option represented the right
to acquire one registered share of
LafargeHolcim Ltd at the market price of
the shares at the date of grant. These
plans are closed. The last share options
under this plan were granted in 2015.
The contractual term of the first type of
option plan is eight years, with immediate
vesting but exercise restrictions for a
period of three years following the grant
date. The contractual term of the second
type of option plan is twelve years and the
options have a vesting period (service-
related only) of nine years from the date
of grant, with sale and pledge restrictions.
The Group has no legal or constructive
obligation to repurchase or settle the
options in cash.
Liquidity mechanism for remaining
rights under the Lafarge long-term
incentive plans
The Lafarge long-term incentive plans
consisted of stock options (granted up to
2012) and performance share (granted up
to 2014) plans, all subject to performance
conditions.
All Lafarge stock options are vested.
Performance conditions include internal
conditions and a market condition related
to Total Shareholder Return. The market
condition is included in the fair value of
each granted instrument.
Following the success of its public
exchange offer on Lafarge S.A. and the
completion of the subsequent squeeze-
out of Lafarge S.A. shares on October 23,
2015, LafargeHolcim proposed a liquidity
mechanism for:
Lafarge S.A. shares that may be issued
following the exercise on or after the date
of the squeeze-out of stock options that
have been allocated pursuant to the
Lafarge stock option plans; or
Lafarge S.A. shares that may be
definitively allotted on or after the
squeeze-out in accordance with the
Lafarge performance share plans.
In 2018, the liquidity mechanism was
applied as follows:
• 63,895 Lafarge S.A. shares have been
purchased;
• 283,414 Lafarge S.A. shares have been
exchanged for 250,218 LafargeHolcim
shares; and
• 40,802 Lafarge S.A. options have been
exercised in 2018. One Lafarge S.A. stock
options plan ended in June 2018 and
584,013 unexercised Lafarge S.A. options
have lapsed.
Following a distribution of reserves of
Lafarge S.A. and in application of the
definition of “parity” in the liquidity
contract, the exchange ratio was changed
from 0.945 (1 Lafarge S.A. share for 0.945
LafargeHolcim Ltd share) to 0.884 (1
Lafarge S.A. share for 0.884 LafargeHolcim
Ltd share).
249
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Outstanding Share options
Movements in the number of share
options outstanding and their related
weighted average exercise prices are as
follows:
January 1
Granted and under vesting period 2
Change in exchange ratio for Lafarge stock-options plans
Forfeited
Exercised
Lapsed
December 31
Of which exercisable at the end of the year
Number 1
Number 1
Weighted average
exercise price 1
2018
2017
CHF
CHF
CHF
CHF
CHF
CHF
CHF
64.29
3,443,251
4,127,010
55.65
76.36
283,506
(75,088)
0
0
51.82
(318,049)
(169,723)
39.06
(23,240)
(95,923)
102.00
(611,824)
(418,113)
54.95
2,698,556
3,443,251
1,276,254
1,794,103
1 Adjusted to reflect former share splits and/or capital increases and/or scrip dividend.
2 These options will not be delivered before the end of the 5-year vesting period and are subject to the level of achievement of performance conditions.
250
Notes to the consolidated financial statementscontinued The weighted average share price for the
options exercised in 2018 was CHF 50.44
(2017: CHF 54.08). Share options
outstanding at the end of the year have
the following expiry dates and give the
right to acquire one registered share of
LafargeHolcim Ltd at the exercise prices as
listed below:
Option grant date
Expiry date
Exercise price 1
Number 1
Number 1
2008
2010
2010
2011
2012
2013
2014
2014
2015 (2008 2)
2015 (2009 2)
2015 (2010 2)
2015 (2011 2)
2015 (2012 2)
2015
2015
2015
2016
2018
Total
2020
2018
2022
2019
2020
2021
2022
2026
2018
2019
2020
2020
2020
2023
2023
2025
2026
2028
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
62.95
67.66
70.30
63.40
54.85
67.40
64.40
64.40
2018
2017
33,550
33,550
0
95,557
33,550
33,550
113,957
113,957
165,538
165,538
122,770
122,770
99,532
33,550
99,532
33,550
108.36
0
551,892
34.63
57.80
50.14
40.56
66.85
63.55
50.19
53.83
55.65
69,812
85,677
184,481
197,212
127,269
139,000
167,042
189,418
144,970
144,970
47,333
47,333
458,575
652,939
650,223
736,806
246,404
–
2,698,556
3,443,251
1 Adjusted to reflect former share splits and/or capital increases and/or scrip dividend.
2 These options were granted through the Lafarge Stock-Options plans. The figures presented in this table are based on the application of the actual exchange ratio of 0.884. The year
specified between brackets is the original option grant date and the exercise price is converted from EUR to CHF at the closing rate of 1.13.
251
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 17. Provisions and contingencies
17.1 Accounting principles
Site restoration and other
environmental provisions
The Group provides for the costs of
restoring a site where a legal or
constructive obligation exists. The
estimated future costs for known
restoration requirements are determined
on a site-by-site basis and are calculated
based on the present value of estimated
future costs. The cost of raising a provision
before exploitation of the raw materials
has commenced is included in property,
plant and equipment and depreciated
over the life of the site. The effect of any
adjustments to the provision due to
further environmental damage as a result
of exploitation activities is recorded
through operating costs over the life of
the site, in order to reflect the best
estimate of the expenditure required to
settle the obligation at the end of the
reporting period. Changes in the
measurement of a provision that result
from changes in the estimated timing or
amount of cash outflows, or a change in
the discount rate, are added to or
deducted from the cost of the related
asset to the extent that they relate to the
asset’s installation, construction or
acquisition. All provisions are discounted
to their present value.
Restructuring provisions
A provision for restructuring costs is
recognized when the restructuring plans
have been approved by the management,
a detailed formal plan exists and when the
Group has raised a valid expectation with
those affected that it will carry out the
restructuring plan either by announcing
its main features to those affected by it or
starts to implement that plan and
recognize the associated restructuring
costs. The provision for restructuring only
includes direct expenditures arising from
the restructuring, notably severance
payments, early retirement costs, costs for
notice periods not worked and other costs
directly linked largely with the closure of
the facilities.
Other provisions
A provision is recognized when a legal or
constructive obligation arising from past
events exists, it is probable that an outflow
of resources embodying economic
benefits will be required to settle the
obligation and a reliable estimate can be
made of this amount.
Contingent liabilities
Contingent liabilities arise from past
events whose existence will be confirmed
only by the occurrence or non-occurence
of one or more uncertain future events
not wholly within the control of
LafargeHolcim. They are accordingly
disclosed in the notes to the financial
statements.
Site
restoration
and other
environ-
mental
provisions
916
3
(3)
75
(58)
(63)
25
(35)
860
58
802
Specific
business
risks
Restructuring
provisions
Other
provisions
633
279
0
0
98
(174)
(45)
2
(43)
470
153
317
0
0
183
(124)
(31)
0
(8)
300
186
114
564
3
(6)
65
(173)
(75)
2
(24)
356
46
309
Total 2018
Total 2017
2,393
2,580
5
(9)
421
(529)
(214)
29
(111)
1,985
443
1,542
(6)
0
647
(488)
(392)
36
18
2,393
592
1,801
17.2 Provisions
Million CHF
January 1
Change in structure
Reclassification to liabilities directly associated
with assets held for sale
Provisions recognized
Provisions used during the year
Provisions reversed during the year
Unwinding of discount and discount rate changes
Currency translation effects
December 31
Of which short-term provisions
Of which long-term provisions
252
Notes to the consolidated financial statementscontinued Specific business risks
The total provision for specific business
risks amounted to CHF 470 million as of
December 31, 2018 (2017:
CHF 633 million). Specific business risks
comprise litigation provisions and
provisions for contractual risks recorded in
connection with purchase price
allocations. Provisions for litigations
mainly relate to antitrust and commercial
disputes, environmental claims and
product liabilities and are set up to cover
legal and administrative proceedings.
17.3 Contingencies, guarantees,
commitments and contingent
assets
Contingencies
In the ordinary course of its business, the
Group is involved in lawsuits, claims of
various natures, investigations and
proceedings, including product liability,
commercial, environmental, health and
safety matters, etc. The Group operates in
countries where political, economic, social
and legal developments could have an
impact on the Group’s operations.
The timing of cash outflows of provisions
for litigations is uncertain since it will
largely depend upon the outcome of
administrative and legal proceedings.
The sensitivity associated with certain
provisions led management to limit the
extent of the disclosure discussed above
as it believes it could seriously prejudice
the position of the Group.
Restructuring provisions
Provisions for restructuring costs relate to
various restructuring programs and
amounted to CHF 300 million (2017:
CHF 279 million) on December 31, 2018.
These provisions are expected to result in
future cash outflows mainly within the
next one to three years.
Other provisions
Other provisions relate mainly to
provisions that have been set up to cover
other contractual liabilities and amounted
to CHF 356 million (2017: CHF 564 million).
The composition of these items is
manifold and comprised, as of
December 31, 2018, among other things:
severance payments to employees,
provisions for health insurance and
pension schemes, which do not qualify as
benefit obligations and provisions related
to sales and other taxes. The expected
timing of the future cash outflows is
uncertain.
In connection with disposals made in the
past years, the Group provided customary
warranties notably related to accounting,
tax, compliance with laws, litigation, labor
and environmental matters.
LafargeHolcim and its subsidiaries have
received or may receive in the future
notices of claims arising from such
warranties.
The Group is exposed to varying degrees
of uncertainty related to tax matters and
regulatory reviews and audits. The Group
accounts for its income taxes on the basis
of its own internal analyses, supported by
external advice, if appropriate. The Group
continually monitors its global tax
position, and whenever uncertainties
arise, the Group assesses the potential
consequences and either accrues the
liability or discloses a contingent liability in
its financial statements, depending on the
strength of the Group’s position and the
resulting risk of loss.
As of December 31, 2018, the Group’s
contingencies amounted to
CHF 1,637 million (2017:
CHF 1,354 million). The increase is mainly
related to tax contingencies. Except for
what has been provided for as disclosed in
note 17.2, the Group has concluded that
due to the uncertainty with some of the
matters mentioned below, the potential
losses from some of these cases cannot be
reliably estimated. There are no further
single matters pending that the Group
expects to be material in relation to the
Group’s business, financial result or results
of operations.
The following is a description of the
material legal and tax matters currently
ongoing.
Legal and tax matters with new
developments since last reporting
period
The Competition Commission of India
(“CCI”) issued in June 2012 and, after a
successful appeal, again in August 2016
an order imposing a penalty on Ambuja
Cements Ltd. (“ACL”), ACC Limited (“ACC”)
and on the divested subsidiary Lafarge
India for which the Group provided an
indemnification guarantee. The order
found those companies together with
other cement producers in India to have
engaged in price coordination and
imposed penalties on the cement
companies and their trade association.
The total amount of penalties (including
interests) relating to the three companies
is approximately CHF 476 million as of
December 31, 2018. The companies
appealed the order before the
Competition Appellate Tribunal
(“COMPAT”). As per the interim order
passed by COMPAT in 2016, the companies
placed a deposit of 10 percent of the
penalty amounts with a financial
institution with a lien in favor of COMPAT.
In May 2017, all matters pending before
COMPAT were transferred to the National
Company Law Appellate Tribunal
(“NCLAT”). In July 2018, the NCLAT
dismissed the appeal of the companies
against the CCI order and upheld the fines
imposed. The companies filed an appeal
with the Supreme Court which was
admitted on October 5, 2018 and the
253
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 the alleged underlying facts under the
supervision of the Board of Directors. On
April 24, 2017, the Group reported on the
main findings of the investigation and the
remediation measures decided on by the
Board of Directors. On June 28, 2018, the
investigating judges decided to put
Lafarge SA under judicial investigation and
the legal charges put forward against
individual wrongdoings have been
received. In addition, Lafarge SA was
requested by the investigating judges to
deposit a bail guarantee of EUR 30 million.
Bar the qualification of the charges, the
placement of Lafarge SA under judicial
investigation was expected given that
several of its former managers have
previously been placed under judicial
investigation. Lafarge SA has appealed
against those charges in December 2018
which, in its view, do not fairly represent
the responsibilities of Lafarge SA. As a
precaution, LafargeHolcim has decided to
record a provision of CHF 35 million. Based
on the information available as of this
date, there is no indication that the
judicial investigation is likely to result in
any other negative financial impact that is
material to the Group.
There has been litigation in Hungary for a
number of years related to the ownership
of assets and damage compensation in
the context of the privatization of one of
the former Holcim cement plants in
Hungary. The plant was closed a number
of years ago and remains inactive and the
Group believes the plant is illegally
occupied by the counterparty in the
litigation. The litigation is ongoing in a
number of different courts in Hungary but
LafargeHolcim will continue to defend its
legal position in all courts of competent
jurisdiction.
In November and December 2016, the
Indonesian tax authorities issued the final
objection letter in respect of the 2010 PT
Lafarge Cement Indonesia payment of
Corporate Income and Withholding Tax
including associated penalties of a total
amount of CHF 34 million (IDR 500 billion)
related to refinancing transactions. PT
Lafarge Cement Indonesia appealed
against this decision at the tax court to
defend its initial statement. In case of a
negative outcome for PT Lafarge Cement
Indonesia, the total claim amounts to
CHF 68 million (IDR 1 trillion) as of
December 31, 2018 due to additional
penalties charged for the appeal. In
November 2018, the Group entered into
an agreement to sell its shareholding in PT
Holcim Indonesia Tbk, including its
subsidiary PT Lafarge Cement Indonesia,
to Semen Indonesia. The Group will
continue to be liable for such claims due
to an indemnification guarantee provided
by the Group to PT Holcim Indonesia Tbk.
In July 2016, Lafarge Brasil S.A. received an
assessment from the Brazilian Internal
Revenue Service, claiming the reversal of a
deducted Goodwill for the years 2011 and
2012. The amount in dispute is CHF 84
million (BRL 332 million) as of December
31, 2018 and includes any penalty and
interest. After challenging the assessment,
the company received a favorable decision
from the Administrative Tax Appeals
Council in August 2018. The Brazilian
Internal Revenue Service has appealed this
decision before the Superior
Administrative Chamber. Additionally, in
November 2018, LafargeHolcim (Brasil)
S.A. received a similar assessment from
the Brazilian Internal Revenue Service,
again claiming reversal of deducted
Goodwill for the years 2013 and 2014
interim order passed by COMPAT was
directed to be continued. Hearings
before the Supreme Court may take place
in 2019.
On December 31, 2010, in an
extraordinary general meeting, the
merger of Lafarge Brasil S.A. into LACIM
was approved by the majority of
shareholders of Lafarge Brasil S.A. Two
minority shareholders (Maringa and Ponte
Alta) holding a combined ownership of
8.93 percent, dissented from the merger
decision and subsequently exercised their
right to withdraw as provided for by the
Brazilian Corporation law. In application of
such law, an amount of CHF 22 million
(BRL 76 million) was paid by Lafarge Brasil
S.A. to the two dissenting shareholders. In
March 2013, the two shareholders
obtained a ruling from the Court of first
instance ordering Lafarge Brasil S.A. to
pay Maringa and Ponte Alta the difference
between the amount paid for their shares
at the time of the exercise of the
withdrawal rights by the plaintiffs (based
on book value) and the price per share
calculated according to a fair market
value, this value approximates CHF 108
million (BRL 366 million) as at the date of
the order. Following a first unsuccessful
appeal by Lafarge Brasil S.A., in September
2017, the Superior Court of Justice denied
a further appeal filed by LafargeHolcim
(Brasil) S.A. In February 2018, a settlement
agreement was signed with the claimants
and all agreed settlement payments have
been made by June 30, 2018. The related
court cases have been closed.
The criminal proceedings in France related
to the alleged dealings of Lafarge Cement
Syria with terrorist organizations in the
years 2013 and 2014 are currently
pending with the investigating judges in
Paris. The Group has completed its
internal independent investigation into
254
Notes to the consolidated financial statementscontinued 1,303 million) related to the purchase of
various products, inventories and services
and CHF 418 million (2017: CHF 274
million) related to the purchase of
property, plant and equipment.
Contingent assets
A contingent asset is a possible asset that
arises from past events, whose existence
will be confirmed only by the occurrence
or non-occurrence of one or more
uncertain future events not wholly within
the control of the Group. At December 31,
2018, the total contingent assets for
various claims in favor of the Group
amounted to CHF 25 million (2017: CHF
126 million) and are valued at the
maximum potential recoverable amount.
which the company is contesting in the
first instance. The amount in dispute for
this second matter is CHF 65 million (BRL
258 million).
Both Ambuja Cements Ltd. (“ACL”) and
ACC Limited (“ACC”) were entitled to
incentives in the form of excise duty
benefit, in respect of Income Tax
Assessment Years 2006-07 to 2015-16. In
their tax returns, the companies treated
the said incentives as capital in nature and
hence not liable to income tax. For the
years 2006-07 to 2012-13, the Income Tax
Department had not accepted this
position and appeals were filed by the
companies against the orders of the
Assessing officer, with the Commissioner
of Income Tax – Appeals (CIT-A). In prior
fiscal years, ACC and ACL had classified the
risk as probable and provided for a total
amount of CHF 122 million. During the
current year, the CIT-A ruled the issue in
favour of ACC and ACL for several
assessment years. In view of this, the
companies have reassessed the risk and
concluded that the risk of an ultimate
outflow of funds for this matter is no
longer probable; accordingly the ACL and
ACC have reversed the existing provisions
of CHF 122 million. Pending final legal
closure of this matter this amount has
been disclosed as a contingent liability.
Previously disclosed legal matters with
no developments since last reporting
period
On May 28, 2014, the Administrative
Council for Economic Defense (“CADE”)
ruled that Holcim Brazil along with other
cement producers had engaged in price
collusion and other anti- competitive
behavior. The ruling includes behavioral
remedies prohibiting certain greenfield
projects, divestment of a ready-mix plant,
and M&A activities and fines against the
defendants. This order became
enforceable on September 21, 2015 and
applies to Holcim Brazil, which has been
fined CHF 150 million (BRL 508 million) as
at the date of the order. In
September 2015, Holcim Brazil filed an
appeal against the order, offering a
cement plant as guarantee to support its
appeal. The fine and the behavioral
remedies imposed by CADE were
suspended by two decisions of the court
of first instance on September 29, 2016
and October 21, 2016. Unless successfully
appealed by CADE, the suspension will
remain in effect until the completion of
the substantive proceedings against the
CADE ruling. As of December 31, 2018, the
total amount including interests and
monetary adjustment is approximately
CHF 190 million (BRL 750 million).
Guarantees
At December 31, 2018, the Group’s
guarantees issued in the ordinary course
of business amounted to CHF 888 million
(2017: CHF 873 million).
Commitments
In the ordinary course of business, the
Group enters into purchase commitments
for goods and services, buy and sell
investments, associated companies and
Group companies or portions thereof. It is
common practice for the Group to make
offers or receive call or put options in
connection with such acquisitions and
divestitures.
At December 31, 2018, the Group’s
commitments amounted to CHF 1,946
million (2017: CHF 1,577 million) and
included CHF 1,528 million (2017: CHF
255
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 18. Shareholders’ information
18.1 Equity
LafargeHolcim Helvetia Finance Ltd issued
CHF 200 million subordinated fixed rate
resettable perpetual notes on November
28, 2018 with a coupon of 3.5% p.a.
given their characteristics, these
instruments were accounted for in equity
in the Group's consolidated financial
statements for a total amount of CHF 200
million in 2018 and guaranteed by
LafargeHolcim Ltd.
In accordance with the provisions of IAS 32
Financial Instruments – Presentation, and
Incremental costs directly attributable to
the issuance of ordinary shares and share
options are recognized as a deduction
from equity, net of any tax effects.
Treasury shares (own equity instruments
held by the Group) are accounted for as a
reduction of equity at acquisition cost and
are not subsequently remeasured. When
shares are sold out of treasury shares, the
resulting profit or loss is recognized in
equity, net of tax.
18.2 Information on share capital
Number of registered shares December 31
Total oustanding shares
Treasury shares
Share buy-back program
Reserved for share compensation plans
Total treasury shares
Total issued shares
Shares out of conditional share capital
Reserved for convertible bonds
Total shares out of conditional share capital
Total shares
2018
2017
596,172,233
597,210,931
10,283,654
453,193
10,736,847
606,909,080
1,422,350
1,422,350
608,331,430
8,841,454
856,695
9,698,149
606,909,080
1,422,350
1,422,350
608,331,430
The par value per share is CHF 2.00. The
share capital amounts to nominal CHF
1,214 million (2017: CHF 1,214 million)
and the nominal value of the treasury
shares amounts to CHF 612 million (2017:
CHF 554 million).
In 2017, the Group announced the launch
of its share buyback program for capital
reduction purpose of up to CHF 1 billion
over 2017 – 2018. The program was
conducted using a second trading line on
the SIX Swiss Exchange.
On March 2, 2018, the Group announced
the discontinuation of its share buyback
program. The program was completed on
March 2, 2018 and the Group has
repurchased 10,283,654 of its shares for a
toal value of CHF 581 million at an average
price per share of CHF 56.54.
256
Notes to the consolidated financial statementscontinued 19. Related party transactions
19.1 Transactions and relations
with members of the Board of
Directors and Executive Committee
Key management compensation
Board of Directors
In 2018, twelve non-executive members of
the Board of Directors received in total a
remuneration of CHF 4.7 million including
mandatory Social Security payments
(2017: CHF 5.2 million) of which CHF 2.7
million (2017: CHF 3.2 million) was paid in
cash, CHF 0.02 million (2017: CHF 0.1
million) in the form of social security
contributions, and CHF 1.9 million (2017:
CHF 2.0 million) in shares. Other
compensation paid totaled CHF 0.2 million
(2017: CHF 0.2 million).
The compensation of the Board of
Directors was lower in 2018 than in 2017
due to discontinuation of additional fees
and time commitment to organize the
CEO succession in 2017.
Executive Committee
Compensation for the members of the
Executive Committee amounted to
CHF 30.4 million (2017: CHF 32.3 million,
including payments made to the former
CEO). This amount comprises base
salaries, other fixed pay and variable
compensation of CHF 16.6 million
(2017: CHF 15.8 million), share-based
compensation of CHF 10.6 million
(2017: CHF 11.7 million) and employer
contributions to social security and
pension plans of CHF 3.2 million
(2017: CHF 4.8 million).
Compensation for former members
of governing bodies
During 2018, payments in the total
amount of CHF 10.6 million were made to
8 former members of the Executive
Committee (2017: CHF 7.8 million for four
former members).
Loans granted to members of
governing bodies
As at December 31, 2018, there was one
loan in the amount of CHF 0.1 million (no
loan in 2017) outstanding to a member of
the Executive Committee. There were no
loans to members of the Board of
Directors or to parties closely related to
members of governing bodies.
Other transactions
As part of the employee share purchase
plan, LafargeHolcim manages employees’
shares. It sells and purchases
LafargeHolcim Ltd shares to and from
employees and in the open market. In
2017 and 2018, the company did not
purchase any LafargeHolcim Ltd share
from members of the Executive
Committee.
As a result of the merger, LafargeHolcim
has identified the following transactions
with other parties or companies related to
the Group:
Lafarge S.A. has received indemnification
guarantees from, and entered into a
cooperation agreement with, Orascom
Construction Industries S.A.E (OCI) in
relation to an acquisition in 2008. Mr.
Nassef Sawiris is Chief Executive Officer
and Director of Orascom Construction
Industries N.V., parent company of OCI,
former director of Lafarge S.A. and current
director of LafargeHolcim. LafargeHolcim
has one indemnification claim under the
indemnification guarantee. The
cooperation agreement dated December
9, 2007 aims to allow OCI to participate in
tenders in respect of the construction of
new plants in countries where OCI has the
capability to meet certain of
LafargeHolcim’s construction needs. There
are no outstanding balances under this
agreement as at December 31, 2018.
257
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 20. Cash flow
Cash flow from operating activities – analysis of change in net working capital items
Million CHF
Increase in inventories
Increase in trade accounts receivable
Increase in other receivables excluding financial and income tax receivables
Increase in trade accounts payable
Decrease in liabilities excluding financial and income tax liabilities
Change in net working capital
Cash flow information related to investing activities
Million CHF
Purchase of property, plant and equipment net
Replacements
Proceeds from sale of property, plant and equipment
Capital expenditures on property, plant and equipment to maintain productive capacity
and to secure competitiveness
Expansion investments
Total purchase of property, plant and equipment net (a)
Acquisition of participation in group companies (net of cash and cash equivalents acquired)
Disposal of participation in group companies (net of cash and equivalents disposed of)
Purchase of financial assets, intangible and other assets
Increase in financial investments including associates and joint ventures
Increase in other financial assets, intangible and other assets
Total purchase of financial assets, intangible and other assets
Disposal of financial assets, intangible and other assets
Decrease in financial investments including associates and joint ventures
Decrease in other financial assets, intangible and other assets
Total disposal of financial assets, intangible and other assets
Total (purchase) disposal of financial assets, intangible and other assets and businesses net (b)
Total cash flow from investing activities (a + b)
2018
(416)
(38)
(48)
267
(591)
(826)
2017
(272)
(379)
(88)
360
(546)
(925)
2018
2017
(1,008)
(1,048)
126
167
(882)
(403)
(881)
(474)
(1,285)
(1,355)
(176)
172
(5)
(204)
(209)
19
93
112
(100)
(1,386)
55
858
(5)
(341)
(346)
22
91
113
680
(675)
258
Notes to the consolidated financial statementscontinued Cash flow from acquisitions and disposals of Group companies
Acquisitions
Disposals
Million CHF
Cash and cash equivalents
Other current assets
Property, plant and equipment
Other assets
Other current liabilities
Long-term provisions
Other long-term liabilities
Net assets
Non-controlling interest
Net assets (acquired) disposed
Goodwill (acquired) disposed
Fair value of previously held equity interest
Net gain on disposals
Total (purchase) disposal consideration
Acquired (Disposed) cash and cash equivalents
Tax and disposal costs paid
Deferred consideration
Net cash flow
2018
Total
(20)
(20)
(52)
(22)
21
4
24
(65)
0
(65)
(129)
1
0
(193)
20
(3)
0
(176)
2017
Total
(59)
(73)
(353)
(28)
253
10
256
7
(3)
4
(27)
20
0
(3)
59
0
0
55
2018
Total
12
23
100
34
(62)
(1)
(11)
95
0
95
4
0
(49)
50
(12)
(9)
143
172
2017
Total
86
355
868
161
(457)
(40)
(297)
676
(115)
561
88
0
285
934
(86)
(174)
185
858
259
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 22. Authorization of the financial
statements for issuance
The consolidated financial statements
were authorized for issuance by the Board
of Directors of LafargeHolcim Ltd on
March 6, 2019 and are subject to
shareholder approval at the annual
general meeting of shareholders
scheduled for May 15, 2019.
21. Events after the reporting
period
On January 31, 2019, the Group closed the
disposal of its entire shareholding of 80.6
percent of Holcim Indonesia to Semen
Indonesia for an enterprise value of CHF
1.75 billion, on a 100 percent basis.
In January 2019, the Group acquired the
precast and ready-mix concrete
businesses of Alfons Greten Betonwerk in
Northern Germany.
On February 1, 2019, the Group acquired
Transit Mix Concrete Co., a leading
supplier of building materials in Colorado
and subsidiary of Continental Materials
Corporation.
On March 1, 2019, the Group acquired
Colorado River Concrete, comprising of
one ready-mix concrete plant in Fort
Worth, Texas.
On March 1, 2019, the Group acquired the
ready-mix businesses of Donmix in
Australia, comprising of five ready-mix
plants on the Bass Coast, in the State of
Victoria.
260
Notes to the consolidated financial statementscontinued To the General Meeting of LafargeHolcim Ltd,
Rapperswil-Jona
Zug, March 6, 2019
Report on the Audit of the
Consolidated Financial Statements
Opinion
We have audited the consolidated
financial statements of LafargeHolcim Ltd
and its subsidiaries (the Group), which
comprise the consolidated statement of
financial position as at 31 December 2018
and the consolidated statement of
income, consolidated statement of
comprehensive income, consolidated
statement of changes in equity and
consolidated statement of cash flows for
the year then ended, and notes to the
consolidated financial statements,
including a summary of significant
accounting policies.
In our opinion, the consolidated financial
statements (pages 162 to 260) give a true
and fair view of the consolidated financial
position of the Group as at 31 December
2018, and its consolidated financial
performance and its consolidated cash
flows for the year then ended in
accordance with International Financial
Reporting Standards (IFRS) and comply
with Swiss law.
Basis for opinion
We conducted our audit in accordance
with Swiss law, International Standards on
Auditing (ISAs) and Swiss Auditing
Standards. Our responsibilities under
those provisions and standards are further
described in the Auditor’s Responsibilities
for the Audit of the Consolidated Financial
Statements section of our report. We are
independent of the Group in accordance
with the provisions of Swiss law and the
requirements of the Swiss audit
profession, as well as the IESBA Code of
Ethics for Professional Accountants, and
we have fulfilled our other ethical
responsibilities in accordance with these
requirements.
We believe that the audit evidence we
have obtained is sufficient and
appropriate to provide a basis for our
opinion.
A summary of our Audit Approach
Audit scope
• We scoped our audit of component
operations based on the significance of
account balances and significant risks;
• We gained sufficient and appropriate
coverage of the Group;
• Coverage details are provided on page
264.
Group materiality
• CHF 123 million;
• 5% of normalised 3-year average profit
before tax
Key audit matters
• Goodwill;
• Property, plant and equipment;
• Taxation;
• Compliance
Key audit matters
Key audit matters are those matters that,
in our professional judgment, were of
most significance in our audit of the
consolidated financial statements of the
current period. These matters were
addressed in the context of our audit of
the consolidated financial statements as a
whole, and in forming our opinion
thereon, and we do not provide a separate
opinion on these matters.
Goodwill
Key audit matter
The Group’s balance sheet includes CHF
14,045 million of goodwill, representing
23.5% of total Group assets. In accordance
with IFRS, these balances are allocated to
Cash Generating Units (CGUs) which are
tested annually for impairment using
discounted cash flow models to determine
the recoverable amounts of the CGUs,
which are compared with the carrying
amount of the net assets of the CGUs,
including goodwill. A deficit in recoverable
amount compared with the carrying
amount would result in an impairment.
The annual impairment testing of goodwill
for impairment is considered a key audit
matter because the assumptions on which
the tests are based are highly judgemental
and affected by future market conditions,
which are inherently uncertain, and
because of the materiality of the balances
taken as a whole. Refer to note 11.3 for
key assumptions used in goodwill
impairment testing.
In assessing the recoverable amount of
goodwill, management is required to
estimate future cash flows. In determining
future cash flows management is required
to make assumptions relating to future
profitability, including revenue growth and
operating margins, and the determination
of an appropriate discount rate, all of
which are subject to management
override as the outcome of the
impairment assessments could vary
significant if different judgements are
applied.Refer to note 11.3 for Impairment
tests of Goodwill.
In total, impairments amounting to CHF
26 million were recognised against
goodwill – refer to note 11.3.
How the scope of our audit responded
to the key audit matter
We considered the controls implemented
by management in testing for impairment
and the judgements in determining the
CGUs to which goodwill is allocated.
261
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 We focused our audit effort based on
assessing the risk of goodwill being
impaired, which was based on the level
of headroom of the recoverable amount
over carrying amount of the CGUs.
We used Deloitte valuation specialists to
develop independent discount rates and
compared these from external market
data to management estimates for the
discount rate and country risk premium.
For all CGUs selected for detailed testing,
we benchmarked key operating
assumptions in the models to historical
performance and benchmarked demand
growth assumptions to external growth
forecasts and supply growth to industry
reports and recent historical trends,
particularly with respect to export/import
volumes; met with senior management at
the CGU level.
We checked the mathematical accuracy of
the discounted cash flow models and the
extraction of inputs from source
documents.
We challenged management’s sensitivity
analyses and performed our own
sensitivity calculations, where the
headroom was limited, to assess the level
of excess of recoverable amount against
the carrying amount of the CGU.
We considered the adequacy of
management’s disclosures in respect to
impairment testing and whether the
disclosures appropriately disclose the
underlying sensitivities.
Our procedures found the discounted
cash flow models of the CGU’s supported
by appropriate inputs and assumptions.
We concluded that discount rate
assumptions were in line with third party
evidence and our expert’s acceptable
ranges. We reviewed management’s
disclosures on key assumptions and
sensitivities and found them to be
appropriate.
Property, plant and equipment
Key audit matter
Significant judgement is involved in
assessing property, plant and equipment
for impairment. Property plant and
equipment is tested at a CGU level. The
CGUs are tested when a trigger for
impairment is identified. Impairment
testing is undertaken using discounted
cash flow models to determine the
recoverable amount of the CGUs, which is
compared to the carry amount of the
non-current assets of the CGUs. A deficit in
recoverable amount compared with the
carrying amount would result in an
impairment.
As the impairment assessment could vary
significantly due to different assumptions
applied the impairment of property, plant
and equipment is a key audit matter. Refer
to note 11.2.
The key judgements and assumptions
made by management in developing the
discounted cash flows are similar to those
noted above for goodwill impairment
testing.
How the scope of our audit responded
to the key audit matter
We considered the controls implemented
by management in testing for impairment
and the judgements in assessing the
recoverability of property, plant and
equipment.
We tested the key assumptions and inputs
in the discounted cash flow models similar
to those applied above for goodwill
impairment testing.
Our procedures found the discounted
cash flow models of the CGUs were
supported by appropriate inputs and
assumptions.
We concluded that discount rate
assumptions were in line with third party
evidence and our expert’s acceptable
ranges.
We reviewed management’s disclosures
on key assumptions and sensitivities and
found them to be appropriate.
Taxation
Key audit matter
There is significant judgement in
accounting for income taxes, particularly
given the large number of jurisdictions in
which the Group operates and exposures
to numerous different tax laws around the
world. This gives rise to complexity and
uncertainty in respect of the calculation of
income taxes, deferred tax positions, as
well as the assessment of provisions for
uncertain tax positions, including
estimates of interest and penalties where
appropriate.
In the year ended 31 December 2018, the
Group has recorded a tax expense of CHF
656 million, and, at that date, CHF 1,608
million Deferred tax liabilities net (refer to
note 8), CHF 634 million Current income
tax liabilities and CHF 449 million Long-
term income tax liabilities.
Due to their significance to the financial
statements as a whole, combined with the
judgement and estimation required to
determine their values, the evaluation of
current and deferred tax balances is
considered to be a key audit matter.
262
Notes to the consolidated financial statementscontinued How the scope of our audit responded
to the key audit matter
We assessed the adequate implementation
of Group policies and controls regarding
current and deferred tax, as well as
the reporting of uncertain tax positions.
We evaluated the design and
implementation of controls in respect of
provisions for current tax and the
recognition and recoverability of deferred
tax assets. We examined the procedures in
place for the current and deferred tax
calculations for completeness and
valuation and audited the related tax
computations and estimates in the light of
our knowledge of the tax circumstances.
Our work was conducted with the support
of our tax specialists.
We performed an assessment of the
material components impacting the
Group's tax expense, balances and
exposures. We reviewed and challenged
the information reported by components
with the support of our own local tax
specialists, where appropriate. With the
support of our tax specialists at group
level, we verified the consolidation and
analysis of tax balances.
We considered management's assessment
of the validity and adequacy of provisions
for uncertain tax positions, evaluating the
basis of assessment and reviewing
relevant correspondence and legal advice
where available including any information
regarding similar cases with the relevant
tax authorities. In respect of deferred tax
assets and liabilities, we assessed the
appropriateness of management's
assumptions and estimates, including the
likelihood of generating sufficient future
taxable income to support deferred tax
assets for tax losses carried forward as
disclosed in note 8.5 of CHF 1,034 million.
We validated the appropriateness and
completeness of the related disclosures in
note 8 to the consolidated financial
statements.
Based on the procedures performed
above, we obtained sufficient audit
evidence to corroborate management's
estimates regarding current and deferred
tax balances and provisions for uncertain
tax positions.
Compliance
Key audit matter
The Group operates in multiple
jurisdictions, exposing it to a variety of
different laws, regulations and
interpretations thereof. In many
jurisdictions, there are a comparatively
small number of significant competitors
thereby increasing the Group’s exposure
to anti-trust regulation. In this
environment, there is an inherent
litigation risk. In the normal course of
business, provisions and contingent
liabilities may arise from legal
proceedings, including anti-trust,
regulatory and other governmental
proceedings, as well as investigations by
authorities and commercial claims.
At 31 December 2018, the Group held
provisions of CHF 470 million in respect of
legal actions. Given the highly complex
nature of regulatory and legal cases,
management applies significant
judgement when considering whether,
and how much, to provide for the
potential exposure of each matter. These
estimates could change substantially over
time as new facts emerge and each legal
case progresses. Refer to note 17.2.
Given the complexity and magnitude of
potential exposures across the Group,
and the judgement necessary to
determine required disclosures this is
a key audit matter.
How the scope of our audit responded
to the key audit matter
We discussed the status of significant
known actual and potential litigation with
the Chairman of the Board, Audit
Committee, Head of Legal and
Compliance, other management and
directors who have knowledge of these
matters.
We challenged the decisions and rationale
for provisions held or for decisions not to
record provisions or make disclosures. For
the most significant of the matters, we
assessed relevant historical and recent
judgements passed by the court
authorities and considered legal opinion
obtained by management from external
lawyers to challenge the basis used for the
provisions recorded and the disclosures
made by the Group.
We reviewed internal reports and met with
Internal Audit to identify actual and
potential non-compliance with laws and
regulations, both those specific to the
Group’s business and those relating to the
conduct of business generally.
For those matters where management
concluded that no provisions should be
recorded, we also considered the
adequacy and completeness of the
Group’s disclosures made in relation to
contingent liabilities.
Based on the procedures performed
above, we obtained sufficient audit
evidence to corroborate management's
estimates for legal provisions and
disclosures in note 17 relating to
contingencies.
Our application of materiality
We define materiality as the magnitude of
misstatement in the financial statements
that makes it probable that the economic
263
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 EBITDA
19%
17%
64%
Net assets
19%
16%
65%
Net sales
26%
7%
67%
n Full audit scope
n Specified audit procedures
n Review at group level
decisions of a reasonably knowledgeable
person would be changed or influenced.
We use materiality both in planning the
scope of our audit work and in evaluating
the results of our work.
Based on our professional judgement we
determined materiality for the Group as a
whole to be CHF 123 million, based on a
calculation of 5% of normalised three-year
average profit before tax for 2016, 2017
and 2018.
The materiality applied by the component
auditors ranged from CHF 6.5 million to
CHF 62.4 million depending on the scale
of the component’s operations, the
component’s contribution to Group profit
before tax and our assessment of risks
specific to each location.
An overview of the scope
of our audit
Our Group audit was scoped by obtaining
an understanding of the Group and its
environment, including group-wide
controls, and assessing the risks of
material misstatement at the Group level.
Based on our continuing assessment, we
focused our Group audit scope primarily
on the audit work at 26 components,
representing the Group’s most material
country operations, and utilised 26
component audit teams in 19 countries.
There were 15 components subject to full
scope audits and 11 components subject
to specified audit procedures, where the
extent of our testing was based on our
assessment of the risks of material
misstatement and of the materiality of the
Group’s operations at those locations.
We agreed with the Audit Committee that
we would report to the Committee all
audit differences in excess of CHF 6.2
million, as well as differences below that
threshold that, in our view, warranted
reporting on qualitative grounds. We also
report to the Audit Committee on
disclosure matters that we identified when
assessing the overall presentation of the
financial statements.
These 26 components represent the
principal business units and account for
81% of the Group’s net assets, 74% of
the Group’s net sales and 81% of the
Group’s EBITDA.
At the parent entity level we also tested
the consolidation process and carried out
analytical procedures to confirm our
conclusion that there were no significant
risks of material misstatement of the
aggregated financial information of the
remaining components not subject to
audit or audit of specified account
balances.
The Group audit team continued to follow
a programme of planned visits that has
been designed so that a senior member of
the Group audit team visits each of the
locations where the Group audit scope
was focused. Where we have not visited a
significant component we included the
component audit team in our team
briefing, discussed their risk assessment,
and reviewed documentation of the
findings from their work.
Other Information in
the Annual Report
The Board of Directors is responsible for
the other information in the Annual
Report. The other information comprises
all information included in the Annual
Report, but does not include the
consolidated financial statements, the
stand-alone financial statements of the
Company upon which we issue a separate
Statutory Auditor’s report, the
Compensation Report from pages 114 to
137 and our auditor’s reports thereon.
264
Notes to the consolidated financial statementscontinued
Our opinion on the consolidated financial
statements does not cover the other
information in the Annual Report and we
do not express any form of assurance
conclusion thereon.
In connection with our audit of the
consolidated financial statements, our
responsibility is to read the other
information in the Annual Report and, in
doing so, consider whether the other
information is materially inconsistent with
the consolidated financial statements or
our knowledge obtained in the audit, or
otherwise appears to be materially
misstated. If, based on the work we have
performed, we conclude that there is a
material misstatement of this other
information, we are required to report
that fact. We have nothing to report in
this regard.
Responsibility of the Board of
Directors for the Consolidated
Financial Statements
The Board of Directors is responsible for
the preparation of the consolidated
financial statements that give a true and
fair view in accordance with IFRS and the
provisions of Swiss law, and for such
internal control as the Board of Directors
determines is necessary to enable the
preparation of consolidated financial
statements that are free from material
misstatement, whether due to fraud
or error.
In preparing the consolidated financial
statements, the Board of Directors is
responsible for assessing the Group’s
ability to continue as a going concern,
disclosing, as applicable, matters related
to going concern and using the going
concern basis of accounting unless the
Board of Directors either intends to
liquidate the Group or to cease
operations, or has no realistic alternative
but to do so.
Auditor’s responsibilities for the
Audit of the Consolidated Financial
Statements
Our objectives are to obtain reasonable
assurance about whether the consolidated
financial statements as a whole are free
from material misstatement, whether due
to fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that an
audit conducted in accordance with Swiss
law, ISAs and Swiss Auditing Standards will
always detect a material misstatement
when it exists. Misstatements can arise
from fraud or error and are considered
material if, individually or in the
aggregate, they could reasonably be
expected to influence the economic
decisions of users taken on the basis of
these consolidated financial statements.
A further description of our responsibilities
for the audit of the consolidated financial
statements is located at the website of
EXPERTsuisse: http://expertsuisse.ch/en/
audit-report-for-public-companies. This
description forms part of our auditor’s
report.
Report on other legal and
regulatory requirements
In accordance with article 728a paragraph
1 item 3 CO and Swiss Auditing Standard
890, we confirm that an internal control
system exists, which has been designed
for the preparation of consolidated
financial statements according to the
instructions of the Board of Directors.
We recommend that the consolidated
financial statements submitted to you be
approved.
Deloitte AG
David Quinlin
Licensed Audit Expert
Auditor in charge
Alexandre Dubi
Licensed Audit Expert
265
Financial information — Consolidated financial statementsLafargeHolcim Annual Report 2018 Holding
Company Results
Statement of income LafargeHolcim Ltd
Million CHF
Dividend income – Group companies
Financial income – Group companies
Other income
Total income
Financial expenses – Group companies
Financial expenses – Third parties
Other expenses
Impairment of financial investments – Group companies
Direct taxes
Total expenses
Net income
Notes
3
4
5
6
2018
3,999
269
235
4,503
(33)
(49)
(612)
2017
5,736
197
258
6,191
(16)
(51)
(649)
(2,440)
(5,030)
15
(3,119)
1,384
(17)
(5,763)
428
266
Statement of financial position LafargeHolcim Ltd
Million CHF
Cash and cash equivalents
Short-term financial receivables – Group companies
Other current receivables – Group companies
Other current receivables – Third parties
Accrued income and prepaid expenses
Current assets
Long-term financial receivables – Group companies
Financial investments – Group companies
Other financial assets
Long-term assets
Total assets
Interest bearing short-term financial liabilities – Group companies
Interest bearing short-term financial liabilities – Third parties
Other current liabilities – Group companies
Other current liabilities – Third parties
Current liabilities
Interest bearing long-term financial liabilities – Group companies
Interest bearing long-term financial liabilities – Third parties
Other long-term liabilities – Third parties
Long-term liabilities
Total liabilities
Share capital
Statutory capital reserves
– Capital contribution reserves
Statutory retained earnings
– Statutory retained earnings
Voluntary retained earnings
– Retained earnings prior year
– Net income
Treasury Shares
Shareholders’ equity
Total liabilities and shareholders’ equity
Notes
31.12.2018
31.12.2017
104
121
69
17
0
311
3,456
175
234
32
1
1
443
2,732
35,609
36,875
2
39,067
39,378
1,145
0
289
19
1,453
1,004
1,540
1
2,545
3,998
1,214
3
39,610
40,053
1,380
450
598
31
2,459
1,246
1,100
0
2,346
4,805
1,214
19,220
20,412
2,531
2,531
11,650
11,222
1,384
(619)
35,380
39,378
428
(559)
35,248
40,053
7
8
9
10
11
16
12
267
Financial information — Holding Company ResultsLafargeHolcim Annual Report 2018 Notes to the financial statements of LafargeHolcim Ltd
LafargeHolcim Ltd, with registered office in Rapperswil-Jona, is the ultimate holding company of the
LafargeHolcim Group which comprises subsidiaries, associated companies and joint ventures around the
world. During the reporting period, LafargeHolcim Ltd employed fewer than ten employees (previous year:
fewer than ten employees).
1. Accounting Policies
Basis of preparation
The financial statements of LafargeHolcim
Ltd comply with the requirements of the
Swiss accounting legislation of the Swiss
Code of Obligations (SCO). LafargeHolcim
Ltd is presenting consolidated financial
statements according to IFRS. As a result,
these financial statements and notes do
not include additional disclosures, cash
flow statements or a management report.
Due to rounding, numbers presented
throughout this report may not add up
precisely to the totals provided. All ratios
and variances are calculated using the
underlying amount rather than the
presented rounded amount.
Accounting principles applied
Other income and expenses
Current assets and current liabilities
denominated in foreign currencies are
converted at year-end exchange rates.
Realized exchange gains and losses and
all unrealized exchange losses arising
from these as well as those from business
transactions are recorded as other income
or other expenses.
Financial liabilities
Financial liabilities are valued at nominal
value. Any bond premium is accrued over
the duration of the bond so that at
maturity the balance sheet amount will
equal the amount that is due to be paid.
Provisions
Provisions are made to cover general
business risks.
Financial receivables
Financial receivables are valued at
acquisition cost less adjustments for
foreign currency losses and any other
impairment of value.
Treasury shares
Treasury shares are recognised at
acquisition cost and deducted from equity.
Gains and losses on the sale are
recognised in the income statement.
Financial investments
Financial investments are initially
recognized at cost. Investments in
LafargeHolcim Group subsidiaries are
assessed annually and in case of an
impairment adjusted to their recoverable
amount.
Statement of financial position
Closing exchange rates in CHF
31.12.2018
31.12.2017
1.13
0.98
1.25
0.70
0.72
5.01
0.25
0.66
0.26
1.17
0.98
1.32
0.76
0.78
4.96
0.29
0.69
0.28
2. Principal exchange rates
1 Euro
1 US Dollar
1 British Pound
1 Australian Dollar
1 Canadian Dollar
100 Mexican Peso
1 Brazilian Real
1 New Zealand Dollar
1 Polish Zloty
EUR
USD
GBP
AUD
CAD
MXN
BRL
NZD
PLN
268
3. Dividend income – Group companies
Million CHF
LafargeHolcim Continental Finance Ltd
Holcim Finance (Belgium) S.A.
LafargeHolcim International Finance Ltd
Holdertrade Ltd
Holchile S.A.
Holcim Participations (US) Inc.
Holcim Finance (Canada) Inc.
Holderfin B.V.
Lafarge S.A.
Cesi S.A.
Rosyco B.V.
LafargeHolcim Albion Finance Ltd
Total
4. Other income
Million CHF
Foreign exchange gains
Total
5. Other expenses
Million CHF
Board of Director fees
Stewardship, branding and project expenses
Administrative expenses
Foreign exchange losses
Total
2018
0
3
781
0
0
0
0
1,352
1,163
232
366
102
3,999
2018
235
235
2018
(6)
(311)
(11)
(284)
(612)
2017
1,044
0
1,509
65
13
893
1
147
2,064
0
0
0
5,736
2017
258
258
2017
(6)
(369)
(12)
(262)
(649)
269
Financial information — Holding Company ResultsLafargeHolcim Annual Report 2018 Holding Company Results
continued
6. Impairment of financial investments – Group companies
Million CHF
Lafarge S.A.
LafargeHolcim Continental Finance Ltd
LafargeHolcim International Finance Ltd
Cemasco B.V.
Holchil Limited
Fernhoff Ltd
LafargeHolcim Albion Finance Ltd
Total
7. Long-term financial receivables – Group companies
Million CHF
Fernhoff Ltd
LafargeHolcim Continental Finance Ltd
Lafarge North America Inc.
Cemasco B.V.
Heracles General Cement Company S.A.
Lafarge Cement Polska S.A.
Holcim (US) Inc.
Holcim Participations (US) Inc.
Holcim (Schweiz) AG
LafargeHolcim International Finance Ltd
Holdertrade Ltd
Total
8. Financial Investments – Group companies
The principal direct and indirect
subsidiaries and other holdings of
LafargeHolcim Ltd are shown in note 2.4
to the Group’s consolidated financial
statements.
9. Interest bearing short-term financial liabilities – Third parties
Million CHF
4.00% fixed, Bond, 2009 – 2018
Total
270
2018
(1,501)
0
(782)
(23)
0
(32)
(102)
(2,440)
2017
(3,218)
(952)
(840)
(19)
(1)
0
0
(5,030)
31.12.2018
31.12.2017
82
1,352
256
7
60
187
89
44
636
647
96
3,456
62
0
0
10
62
255
117
132
855
1,143
96
2,732
31.12.2018
31.12.2017
0
0
450
450
10. Interest bearing long-term financial liabilities – Group companies
Million CHF
LafargeHolcim International Finance Ltd
LafargeHolcim Helvetia Finance Ltd
LafargeHolcim Espana S.A.U.
LafargeHolcim Continental Finance Ltd
Total
11. Interest bearing long-term financial liabilities – Third parties
Million CHF
3.00% fixed, Bond, 2012 – 2022
2.00% fixed, Bond, 2013 – 2022
1.00% fixed, Bond, 2015 – 2025
0.38% fixed, Bond, 2015 – 2021
1.00% fixed, Bond, 2018 – 2024
Total
12. Movement in treasury shares
31.12.2018
31.12.2017
7
776
221
0
1,004
10
581
0
655
1,246
31.12.2018
31.12.2017
450
250
150
250
440
1,540
450
250
150
250
0
1,100
Number held by
LafargeHolcim Ltd
Million CHF
Average price
per share in
CHF
Number held
by subsidi-
aries
Reserve for
treasury
shares held by
subsidiaries
in Million CHF
Average price
per share in
CHF
01.01.2018
Opening
2018
2018
2018
31.12.2018
01.01.2017
2017
2017
2017
31.12.2017
Purchases share buyback program
Other purchases
Sales
Closing
Opening
Purchases share buyback program
Other purchases
Sales
Closing
9,698,149
1,442,200
440
(403,942)
10,736,847
1,152,327
8,841,454
11
(295,643)
9,698,149
559
81
0
(21)
619
75
500
0
(16)
559
57.6
56.5
43.6
53.2
57.6
64.7
56.6
55.3
53.5
57.6
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
On March 2, 2018, the Group announced
the discontinuation of its share buyback
program. The program was completed on
March 2, 2018 and the Group has
repurchased 10,283,654 of its shares for a
toal value of CHF 581 million at an average
price per share of CHF 56.54.
In 2017, the Group announced the launch
of its share buyback program for capital
reduction purpose of up to CHF 1 billion
over 2017 – 2018. The program was
conducted using a second trading line on
the SIX Swiss Exchange.
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
271
Financial information — Holding Company ResultsLafargeHolcim Annual Report 2018 Holding Company Results
continued
13. Contingent liabilities
Million CHF
Holcim Capital Corporation Ltd. – Guarantees in respect of holders of
7.65% USD 50 million private placement due in 2031
6.88% USD 250 million bonds due in 2039
6.50% USD 250 million bonds due in 2043
Holcim Capital México, S.A. de C.V. – Guarantees in respect of holders of
7.78% MXN 2,000 million bonds due in 2018
7.00% MXN 1,700 million bonds due in 2019
8.01% MXN 1,700 million bonds due in 2020
Holcim Finance (Australia) Pty Ltd – Guarantees in respect of holders of
5.25% AUD 200 million bonds due in 2019
3.75% AUD 250 million bonds due in 2020
3.50% AUD 300 million bonds due in 2022
Holcim Finance (Belgium) S.A.
31.12.2018
31.12.2017
77
271
271
0
94
94
153
191
230
77
269
269
109
93
93
168
210
252
Commercial Paper Program, guarantee based on utilization, EUR 3,500 million maximum
105
0
Holcim Finance (Luxembourg) S.A. – Guarantees in respect of holders of
0.72% EUR 209 million Schuldschein loans due in 2021
1.04% EUR 413 million Schuldschein loans due in 2021
0.99% EUR 25 million Schuldschein loans due in 2023
1.38% EUR 1,150 million bonds due in 2023
1.46% EUR 152 million Schuldschein loans due in 2023
3.00% EUR 500 million bonds due in 2024
2.00% EUR 33 million Schuldschein loans due in 2026
2.25% EUR 1,150 million bonds due in 2028
1.75% EUR 750 million bonds due in 2029
Holcim Overseas Finance Ltd. – Guarantees in respect of holders of
3.38% CHF 425 million bonds due in 2021
259
512
0
269
531
32
1,425
1,478
188
620
41
1,425
929
195
643
42
1,478
964
468
468
272
Million CHF
31.12.2018
31.12.2017
Holcim US Finance S.à r.l. & Cie S.C.S. – Guarantees in respect of holders of
6.21% USD 200 million private placement due in 2018
6.00% USD 750 million bonds due in 2019
2.63% EUR 500 million bonds due in 2020
4.20% USD 50 million bonds due in 2033
5.15% USD 500 million bonds due in 2023
LafargeHolcim Continental Finance Ltd – Guarantees in respect of holders of
0.88%EUR 30 million Schuldschein loans due in 2022
0.39% EUR 60 million Schuldschein loans due in 2022
1.32% EUR 109 million Schuldschein loans due in 2024
1.68% EUR 5 million Schuldschein loans due in 2025
2.22% EUR 2 million Schuldschein loans due in 2028
LafargeHolcim International Finance Ltd – Guarantees in respect of holders of
3.01% USD 121 million Schuldschein loans due in 2021
2.80% USD 40 million Schuldschein loans due in 2021
3.21% USD 25 million Schuldschein loans due in 2023
3.20% USD 15 million Schuldschein loans due in 2023
3.46% USD 110 million Schuldschein loans due in 2022
4.38% USD 38 million Schuldschein loans due in 2024
3.71% USD 28 million Schuldschein loans due in 2024
4.59% USD 60 million Schuldschein loans due in 2025
3.91% USD 60 million Schuldschein loans due in 2025
LafargeHolcim Helvetia Finance Ltd – Perpetual Subordinated Notes (Hybrid Bond)
3.5% CHF 200 million Perpetual subordinated notes (Hybrid Bond)
LafargeHolcim Finance US LLC – Guarantees in respect of holders of
3.50% USD 400 million bonds due in 2026
4.75% USD 600 million bonds due in 2046
4.79% USD 180 million private placement due in 2025
4.92% USD 52 million private placement due in 2027
5.03% USD 106 million private placement due in 2030
LafargeHolcim Sterling Finance (Netherlands) B.VV – Guarantees in respect of holders of
3.00% GBP 300 million bonds due in 2032
Guarantees for committed credit lines, utilization CHF 0 million (2017: CHF 0 million)
Other guarantees
Total
LafargeHolcim Ltd is part of a value added
tax group and therefore jointly liable to
the Swiss Federal Tax Administration for
the value added tax liabilities of the other
members. LafargeHolcim Ltd guarantees
Holcim Finance (Luxembourg) S.A. any
amount needed to fulfill its obligations
from financing agreement.
0
812
620
54
542
37
74
135
6
2
0
43
0
16
119
41
30
65
65
220
433
650
213
61
125
414
5,838
200
195
806
643
54
537
0
0
0
0
0
130
43
27
16
0
0
0
0
0
0
430
645
0
0
0
435
6,229
0
18,168
17,830
273
Financial information — Holding Company ResultsLafargeHolcim Annual Report 2018 Holding Company Results
continued
14. Share interests of Board of
Directors and senior management
Shares and options owned by Board
of Directors
As of December 31, 2018, the members of
the Board of Directors of
LafargeHolcim Ltd held directly and
indirectly in the aggregate 9,658,399
registered shares (2017: 94,528,975
registered shares) and no rights to acquire
further registered shares and 16,993,600
call options on registered shares (2017:
10,000,000 call options on registered
shares).
Name
Beat Hess
Position
Chairman
Oscar Fanjul
Vice-Chairman
Bertrand Collomb
Member (until May 8, 2018)
Paul Desmarais Jr
Member
Patrick Kron
Member
Gérard Lamarche
Member
Adrian Loader
Jürg Oleas
Nassef Sawiris
Member
Member
Member
Thomas Schmidheiny Member (until May 8, 2018)
Hanne B. Sørensen
Member
Dieter Spälti
Member
Total
1 Further information can be found under: www.six-exchange-regulation.com
Shares held as of
December 31, 2018
Options held as of
December 31, 2018
Shares held as of
December 31, 2017
Options held as of
December 31, 2017
40,109
10,675
n/a
40,693
1,021
5,816
18,489
5,147
9,455,606
16,993,600 1
n/a
8,537
72,306
17,419
7,758
116,065
38,943
0
4,066
16,739
3,397
25,180,203
69,072,527
6,776
65,082
10,000,000
9,658,399
16,993,600
94,528,975
10,000,000
Shares and options owned by senior
management
As of December 31, 2018, members of
senior management held a total of
229,143 registered shares (2017: 209,225
registered shares) in LafargeHolcim Ltd.
This figure includes both privately
acquired shares and those allocated under
the Group’s participation and
compensation schemes.
Furthermore, at the end of 2018, senior
management held a total of 465,011 share
options (2017: 919,834 share options) and
442,085 performance shares (2017:
605,372 performance shares); both of
these arose as a result of the participation
and compensation schemes of various
years. Options are issued solely on
registered shares in LafargeHolcim Ltd.
One option entitles the holder to
subscribe to one registered share in
LafargeHolcim Ltd.
274
Number of shares and options held
by Executive Committee Members
as of December 31, 2018
Name
Jan Jenisch
Urs Bleisch
Marcel Cobuz
Miljan Gutovic
Martin Kriegner
Position
CEO
Member
Member
Member
Member
Géraldine Picaud
Member
Oliver Osswald
René Thibault
Total
Member
Member
Total number
of shares owned
Total number
of performance
options held
(at target)
Total number
of performance
options held
(at full vesting)
Total number of
performance shares
held (at target)
Total number of
performance shares held
(at full vesting)
170,722
14,775
8,425
0
8,034
15,663
3,868
7,656
50,314
69,239
20,792
0
34,482
14,151
24,660
18,869
229,143
232,507
100,628
138,477
41,584
0
68,963
28,301
49,320
37,738
465,011
82,818
25,559
13,784
4,403
26,384
32,381
23,471
12,245
165,636
51,117
27,567
8,805
52,768
64,761
46,941
24,490
221,043
442,085
Number of shares and options held
by Executive Committee Members
as of December 31, 2017
Name
Jan Jenisch
Ron Wirahadiraksa
Urs Bleisch
Pascal Casanova
Roland Köhler
Martin Kriegner
Gérard Kuperfarb
Caroline Luscombe
Oliver Osswald
Saâd Sebbar
Total
Position
CEO
Member
Member
Member
Member
Member
Member
Member
Member
Member
Total number
of shares
120,000
5,649
13,116
8,057
39,288
4,094
11,240
1,474
1,784
4,523
209,225
Total number
of options
Total number of
performance shares
80,000
113,217
122,115
86,574
195,927
52,353
140,614
36,410
27,308
65,316
919,834
126,868
77,655
49,416
56,351
67,655
38,026
76,760
40,009
27,231
45,401
605,372
275
Financial information — Holding Company ResultsLafargeHolcim Annual Report 2018 Holding Company Results
continued
15. Significant shareholders
According to the share register and
disclosed through notifications filed with
LafargeHolcim Ltd and the SIX Swiss
Exchange shareholders, owning 3 percent
or more are as follows:
• Thomas Schmidheiny directly and
indirectly holds 69,074,277 shares or 11.4
percent as per December 31, 2018 (2017:
69,072,527 shares or 11.4 percent);
• Groupe Bruxelles Lambert holds
57,238,551 shares or 9.4 percent as per
December 31, 2018 (2017: 57,238,551
shares or 9.4 percent);
• NNS Jersey Trust holds 9,455,606 shares
or 1.6 percent and additionally
16,993,600 options or 2.8 percent, total
of 4.4 percent as per December 31,
2018 (2017: 25,180,203 shares or
4.1 percent and additionally 10,000,000
options or 1.7 percent, total of 5,8
percent) 1 ;
• Harris Associates L.P. declared holdings
of 30,342,087 shares or 4.99 percent
(falling below threshold of 5 percent) on
December 10,2018 (October 25, 2017:
30,446,532 shares or 4.99 percent).
Harris Associates Investment Trust
declared holdings of 18,332,272 shares
or 3.02 percent on December 31, 2018;
• Norges Bank (the Central Bank of
Norway) declared holdings of 18,330,151
shares or 3.02 percent on November 8,
2018;
• BlackRock Inc. declared holdings of
18,725,934 shares or 3.1 percent on May
12, 2017.
1 Included in share interest of Board of Directors, ultimate
beneficial owner Nassef Sawiris.
16. Share capital
Shares
Number
Million CHF
Number
Million CHF
Registered shares of CHF 2.00 par value
Total
606,909,080
606,909,080
1,214
1,214
606,909,080
606,909,080
1,214
1,214
2018
2017
276
Appropriation of retained earnings
Retained earnings brought forward
Net income of the year
Capital contribution reserves
Retained earnings available for annual general
meeting of shareholders
The Board of Directors proposes to the annual
general meeting of shareholders to distribute from
the contribution reserve
Balance to be carried forward
2018
Million CHF
11,650
1,384
19,220
32,254
1,193
31,061
2017
Million CHF
11,222
428
20,412
32,062
1,192
30,870
Payout from capital contribution
reserves
The Board of Directors proposes to the
annual general meeting of shareholders a
distribution from the contribution reserve
of CHF 2.00 (2017: CHF 2.00) per registered
share up to an amount of CHF 1,193
million1. The shareholders will be given
the choice of having the paid out in cash,
in the form of new LafargeHolcim Ltd
shares or a combination of cash and
shares (scrip dividend). The new shares
will be issued at a discount to the market
price.
1 There is no payout on treasury shares held by LafargeHolcim. On January 1, 2019 treasury shares holdings amounted to 10,736,847 registered share of which 10,283,654 shares have
been acquired within the share buyback program.
277
Financial information — Holding Company ResultsLafargeHolcim Annual Report 2018 To the General Meeting of LafargeHolcim Ltd,
Rapperswil-Jona
Zug, March 6, 2019
Report on the Audit of the Financial
Statements
Opinion
We have audited the financial statements
of LafargeHolcim Ltd, which comprise the
income statement and the balance sheet
as at 31 December 2018 and notes for the
year then ended, including a summary of
significant accounting policies.
In our opinion the financial statements as
at 31 December 2018, presented on pages
266 to 277 comply with Swiss law and the
company’s articles of incorporation.
Basis for opinion
We conducted our audit in accordance
with Swiss law and Swiss Auditing
Standards. Our responsibilities under
those provisions and standards are further
described in the Auditor’s Responsibilities
for the Audit of the Financial Statements
section of our report. We are independent
of the entity in accordance with the
provisions of Swiss law and the
requirements of the Swiss audit profession
and we have fulfilled our other ethical
responsibilities in accordance with these
requirements.
We believe that the audit evidence we
have obtained is sufficient and
appropriate to provide a basis for our
opinion
Report on Key audit matters based
on the circular 1/2015 of the
Federal Audit Oversight Authority
Key audit matters are those matters that,
in our professional judgment, were of
most significance in our audit of the
financial statements of the current period.
These matters were addressed in the
context of our audit of the financial
statements as a whole, and in forming our
opinion thereon, and we do not provide a
separate opinion on these matters.
278
Financial investments – Group
companies
Key audit matter
As described in Note 8 to the financial
statements, LafargeHolcim Ltd holds
investments in LafargeHolcim Group
companies with a carrying value of
CHF 35,609 million as of 31 December
2018, representing 90.4% of the total
assets of the company.
In accordance with Article 960 CO, each
investment held is usually valued
individually and reviewed annually for
impairment indicators. Each investment
showing impairment indicators must be
tested for impairment and an impairment
would need to be recorded if the
recoverable amount is lower than the
carrying amount.
The assessment of the carrying value of
each investment is complex and requires
significant judgement. It is related to the
value of the underlying assets held by
each investment which themselves can
depend on the value of other underlying
investments. Management has developed
valuation models which are complex in
order to take into account the value of
assets held by the different layers of the
organization. In addition, the value of
certain assets is highly judgmental and
affected by future market conditions
which are inherently uncertain.
Accordingly, for the purposes of our audit,
we identified the impairment assessment
and judgement applied by management
on the valuation of these investments as
representing a key audit matter.
How the scope of our audit responded
to the key audit matter
We discussed with management the
adequate implementation of accounting
policies and controls regarding the
valuation of investments in group
companies.
We tested the design and implementation
of controls around the valuation of
investments to determine whether
appropriate controls are in place. We have
found these controls to be designed and
implemented appropriately.
We challenged the assessment of
impairment indicators by management.
We tested the valuations by critically
assessing the methodology applied and
the reasonableness of the underlying
assumptions and judgements. We
assessed the impairment testing models
and calculations by:
• Checking the mechanical accuracy of the
impairment models and the extraction of
inputs from source documents; and
• Challenging the significant inputs and
assumptions used in impairment for
investments in LafargeHolcim Group
companies.
We concluded that the applied
methodology and the underlying
assumptions were applied correctly.
Additionally we concluded that the data
inputs as well as the underlying
calculations of the impairment model
were accurate.
We validated the appropriateness and
completeness of the related disclosures in
Note 6 to the statutory financial
statements and found them to be
appropriate.
Responsibility of the Board of
Directors for the Financial
Statements
The Board of Directors is responsible for
the preparation of the financial
statements in accordance with the
provisions of Swiss law and the company’s
articles of incorporation, and for such
internal control as the Board of Directors
determines is necessary to enable the
preparation of financial statements that
are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the
Board of Directors is responsible for
assessing the entity’s ability to continue as
a going concern, disclosing, as applicable,
matters related to going concern and
using the going concern basis of
accounting unless the Board of Directors
either intends to liquidate the entity or to
cease operations, or has no realistic
alternative but to do so.
Auditor’s Responsibilities for the
Audit of the Financial Statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that an
audit conducted in accordance with Swiss
law and Swiss Auditing Standards will
always detect a material misstatement
when it exists. Misstatements can arise
from fraud or error and are considered
material if, individually or in the
aggregate, they could reasonably be
expected to influence the economic
decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities
for the audit of the consolidated financial
statements is located at the website of
EXPERTsuisse:
http://expertsuisse.ch/en/audit-report-for-
public-companies.
This description forms part of our auditor’s
report.
Report on Other Legal and
Regulatory Requirements
In accordance with article 728a paragraph
1 item 3 CO and Swiss Auditing Standard
890, we confirm that an internal control
system exists, which has been designed
for the preparation of financial statements
according to the instructions of the Board
of Directors.
We further confirm that the proposed
appropriation of available earnings
complies with Swiss law and the
company’s articles of incorporation. We
recommend that the financial statements
submitted to you be approved.
Deloitte AG
David Quinlin
Licensed Audit Expert
Auditor in charge
Alexandre Dubi
Licensed Audit Expert
Zurich, 6 March 2019
279
Financial information — Holding Company ResultsLafargeHolcim Annual Report 2018 5-year-review LafargeHolcim Group
5-year-review LafargeHolcim Group
Statement of income
Net sales
Gross profit
Recurring EBITDA
Recurring EBITDA margin
Operating profit (loss)
Operating profit (loss) margin
million CHF
million CHF
million CHF
%
million CHF
%
Depreciation, amortization and impairment of operating assets
million CHF
Income taxes
Tax rate
Net income (loss)
Net income (loss) – shareholders of LafargeHolcim Ltd
Statement of cash flows
million CHF
%
million CHF
million CHF
2018
2017 1
2016 1
2015
2014 1
27,021
26,904
23,584
18,825
11,272
7,093
8,365
27,466
11,548
6,016
21.9
3,312
12.1
2,229
656
28
1,719
1,502
7,781
5,990
22.2
(478)
(1.8)
6,007
536
(45)
(1,716)
(1,675)
5,950
22.1
2,963
11.0
2,405
835
29
2,090
1,791
n/a
n/a
(739)
(3.1)
4,421
781
(114)
(1,361)
(1,469)
2,465
(981)
n/a
n/a
2,244
11.9
1,402
581
26
1,619
1,287
2,484
(732)
(1,007)
(1,005)
Cash flow from operating activities
million CHF
2,988
3,040
3,295
Investments in property, plant and equipment for maintenance net
million CHF
Investments in property, plant and equipment for expansion
million CHF
(882)
(403)
(881)
(474)
(997)
(638)
(Purchase) Disposal of financial assets, intangible and other assets
and businesses net
million CHF
(100)
680
2,342
7,222
35
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total shareholders’ equity
Shareholders’ equity as % of total assets
Non-controlling interest
Net financial debt
Capacity, sales and personnel
Annual production capacity cement
Sales of cement
Sales of aggregates
Sales of ready-mix concrete
Personnel
1 Restated due to changes in presentation or in accounting policies.
million CHF
million CHF
million CHF
million CHF
million CHF
11,658
48,037
59,695
10,727
18,914
12,618
51,061
63,679
11,519
21,185
million CHF
30,053
30,975
%
million CHF
50.3
3,128
48.6
3,188
14,435
55,182
69,617
12,509
22,361
34,747
49.9
3,925
13,331
59,967
73,298
14,832
22,744
35,722
48.7
4,357
million CHF
13,518
14,346
14,724
17,266
million t
million t
million t
million m 3
312.9
221.9
273.8
50.9
318.4
220.2
278.7
50.6
353.3
233.2
282.7
55.0
374.0
193.1
231.5
47.6
7,231
32,259
39,490
6,847
12,531
20,112
50.9
2,682
9,520
208.8
138.2
153.1
37.0
77,055
81,960
90,903
100,956
67,137
280
this document. LafargeHolcim assumes no
obligation to update or alter forward-
looking statements whether as a result of
new information, future events or
otherwise.
Disclaimer
LafargeHolcim Ltd publishes Annual
Reports in English and German. The
English version is legally binding.
Financial reporting calendar
Date
Results for the first
quarter 2019
May 15, 2019
Annual General Meeting
of shareholders
May 15, 2019
Cautionary statement regarding
forward-looking statements
This document may contain certain
forward-looking statements relating to the
Group’s future business, development and
economic performance. Such statements
may be subject to a number of risks,
uncertainties and other important factors,
such as but not limited to (1) competitive
pressures; (2) legislative and regulatory
developments; (3) global, macroeconomic
and political trends; (4) fluctuations in
currency exchange rates and general
financial market conditions; (5) delay or
inability in obtaining ap provals from
authorities; (6) technical developments; (7)
litigation; (8) adverse publicity and news
coverage, which could cause actual
development and results to differ
materially from the statements made in
Financial information — 5-year-review Lafarge Holcim Group
281
LafargeHolcim Annual Report 2018 Definition of Non-GAAP
measures used in this report
Like-for-like
Like-for-like information is information
factoring out changes in the scope of
consolidation (such as divestments and
acquisitions occurring in 2018 and 2017)
and currency translation effects (2018
figures are converted with 2017 exchange
rates in order to calculate the currency
effects).
Recurring SG&A costs
Fixed cost related to Administrative,
Marketing & Sales, Corporate
Manufacturing and Corporate Logistics
costs included in Recurring EBITDA.
Restructuring, litigation,
implementation and other
non-recurring costs
Restructuring, litigation, implementation
and other non-recurring costs comprise
significant items that, because of their
exceptional nature, cannot be viewed as
inherent to the Group’s ongoing
performance, such as strategic
restructuring, major items relating to
antitrust fines and other business-related
litigation cases. In 2017, they also included
costs directly related to the merger such
as legal, banking fees and advisory costs,
employee costs related to redundancy
plans and IT implementation costs.
Profit and Loss on disposals and other
non-operating items
Profit and Loss on disposals and non-
operating items comprise capital gains or
losses on the sale of Group companies and
of property, plant and equipment and
other non-operating items that are not
directly related to the Group’s normal
operating activities such as revaluation
gains or losses on previously held equity
interests, disputes with non-controlling
interests and other major lawsuits.
Recurring EBITDA
The Recurring EBITDA (Earnings before
interest, tax, depreciation and
amortization) is an indicator to measure
the performance of the Group excluding
the impacts of non-recurring items. It is
defined as:
+/– Operating profit;
– depreciation, amortization and
impairment of operating assets; and
– restructuring, litigation, implementation
and other non recurring costs.
Recurring EBITDA margin
The Recurring EBITDA margin is an
indicator to measure the profitability of
the Group excluding the impacts of
non-recurring items. It is defined as the
Recurring EBITDA divided by Net Sales.
Operating profit before impairment
The Operating profit before impairment is
an indicator that measures the profit
earned from the Group's core business
activities excluding impairment charges
which, because of their exceptional
nature, cannot be viewed as inherent to
the Group's ongoing activities. It is defined
as:
+/– Operating profit (loss);
– impairment of goodwill and assets.
Net income before impairment and
divestments
Net income before impairment and
divestments excludes impairment charges
and capital gains and losses arising on
disposals of investments which, because
of their exceptional nature, cannot be
viewed as inherent to the Group’s ongoing
activities. It is defined as:
+/– Net income (loss)
– gains and losses on disposals of Group
EPS (Earnings Per Share) before
impairment and divestments
The Earnings Per Share (EPS) before
impairment and divestments is a indicator
that measures the theoretical profitability
per share of stock outstanding based on a
net income before impairment and
divestments. It is defined as:
– net income before impairment and
divestments attributable to the
shareholders of LafargeHolcim Ltd
divided by the weighted average
number of shares outstanding.
Capex or Capex Net (Net Maintenance
and Expansion Capex)
The Net Maintenance and Expansion
Capex (“Capex” or “Capex Net”) is an
indicator to measure the cash spent to
maintain or expand its asset base. It is
defined as:
+ Expenditure to increase existing or
create additional capacity to produce,
distribute or provide services for existing
products (expansion) or to diversify into
new products or markets
(diversification);
+ Expenditure to sustain the functional
capacity of a particular component,
assembly, equipment, production line or
the whole plant, which may or may not
generate a change of the resulting cash
flow; and
– Proceeds from sale of property, plant
and equipment.
Free Cash Flow
The Free Cash Flow is an indicator to
measure the level of cash generated by
the Group after spending cash to maintain
or expand its asset base. It is defined as:
+/– Cash flow from operating activities;
and
companies; and
– Net Maintenance and Expansion Capex
– impairments of goodwill and assets.
282
Cash conversion
The cash conversion is an indicator that
measures the Group’s ability to convert
profits into available cash. It is defined as
Free Cash Flow divided by Recurring
EBITDA.
This set of definitions can be found on our
website:
www.lafargeholcim.com/non-gaap-measures
Net financial debt (“Net debt”)
The Net financial debt (“Net debt”) is an
indicator to measure the financial debt of
the Group after deduction of the cash. It is
defined as:
+ Financial liabilities (long-term and
short-term) including derivative
liabilities;
– Cash and cash equivalents; and
– Derivative assets.
Invested Capital
The Invested Capital is an indicator that
measures total funds invested by
shareholders, lenders and any other
financing sources. It is defined as:
+ Total shareholders' equity;
+ Net financial debt;
– Assets classified as held for sale;
+ Liabilities classified as held for sale;
– Current financial receivables; and
– Long-term financial investments and
other long-term assets.
NOPAT (Net Operating Profit After Tax)
The Net Operating Profit After Tax
(“NOPAT”) is an indicator that measures
the Group’s potential earnings if it had no
debt. It is defined as:
+/– Net Operating Profit (being the
recurring EBITDA, adjusted for
depreciation and amortization of
operating assets but excluding
impairment of operating assets); and
– Standard Taxes (being the taxes applying
the Group’s tax rate to the Net Operating
Profit as defined above).
ROIC (Return On Invested Capital)
The ROIC (Return On Invested Capital)
measures the Group’s ability to efficiently
use invested capital. It is defined as Net
Operating Profit After Tax (NOPAT) divided
by the average Invested Capital. The
average is calculated by adding the
Invested Capital at the beginning of the
period to that at the end of the period and
dividing the sum by 2 (based on a rolling
12-month calculation).
Financial information — Definition of Non-GAAP measures used in this report
283
LafargeHolcim Annual Report 2018
284
Ruediger Nehmzow
Pages: Cover, 06, 08, 15, 17, 18, 21 left, 26, 36, 59, 60 top, 64,
157, 160
Henrik Spohler
Pages: 15, 17, 18, 44, 104-115
Tea & Water, Witold Riedel
Pages: 12, 20 left, 47, 88
Planet Art, Albert Labrador
Pages: 52 top, 60 bottom
Amit Mehra
Pages: 32 and 149
Vor-Ort-Foto, Peter Jost
Page 24
Unsplash, Rawpixel
Page 65
Unsplash, Chris Barbalis
Page 21
Getty Images
Page 20 right
Anuja Rangnekar
Page 23
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LafargeHolcim Ltd
Zürcherstrasse 156
CH-8645 Jona/Switzerland
Phone +41 58 858 58 58
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www.lafargeholcim.com
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