LafargeHolcim
Annual Report 2019

Plain-text annual report

L a f a r g e H o l c i m L t d I n t e g r a t e d A n n u a l R e p o r t 2 0 1 9 – S u m m a r y INTEGR ATED ANNUAL REPORT 2019 RECORD PERFORMANCE CHF 26,722 m +3.1% Net sales¹ 2018: CHF 27,466 m CHF 3,047 m +79% Free Cash Flow (pre-IFRS16) 2018: CHF 1,703 m CHF 8,811 m –35% Net Debt (pre-IFRS16) 2018: CHF 13,518 m 561kg Net CO₂ emitted per ton of cementitious material (scope 1)⁴ 2019: -1.4%⁴,⁵ 4.3% Increase in waste reused in operations ⁴,⁵ 2019: 48 million tons CHF 6,153 m +6.5% Recurring EBITDA (pre-IFRS 16)¹ 2018: CHF 6,016 m CHF 2,072m +32 % Net income (pre-IFRS 16)² 2018: CHF 1,569 m CHF 3.40 +29 % Earnings per share (pre-IFRS 16)³ 2018: CHF 2.63 –5.7% Reduction in freshwater withdrawn per ton of cementitious material ⁴,⁵ 2019: 299 l –15.2% Reduction in long-term injury frequency rate (LTIFR) ⁴,⁵ 2019: 0.67 ¹ Percentage change figures compare 2019 and 2018 on a like-for-like basis. ² Group share before impairment and divestments ³ Before impairment and divestments ⁴ Information on scope and methodology of data collection, as well as assurance on 2019 reported figures, can be found in the Sustainability Performance Report on our website at www.lafargeholcim.com/sustainability. ⁵ At constant 2019 scope For more details on any of the topics in this report, please visit: www.lafargeholcim.com R E T U R N O N I N V E S T E D C A P I TA L (%)¹ E A R N I N G S P E R S H A R E (C H F ) ² Before impairment and divestments N E T I N CO M E (C H FM ) Group share, before impairment and divestments 7.6 ¹ 6.5 5.8 8.0 7.25 6.5 5.75 5.0 3.5 3.0 2.5 2.0 1.5 2.63 2.35 3.40 ² 2,500 1,875 1,250 625 0 2,072 1,569 1,417 2017 2018 2019 2017 2018 2019 2017 2018 2019 ¹ Return on invested capital for 2019 post-IFRS 16 is 7.4%. ² Earnings per share before impairment and divestments for 2019 post-IFRS 16 is CHF 3.37. R E C U R R I N G E B I T DA (C H FM ) ³ FR E E C A S H FLO W (C H FM ) N E T F I N A N C I A L D E B T (C H FM ) 6.5% 6,153 6.1% 5,990 3.6% 6,016 6,500 6,250 6,000 5,750 5,500 3,500 2,875 2,250 1,625 1,000 1,685 1,703 15,000 14,346 3,047 13,518 13,000 11,000 9,000 7,000 8,811 2017 2018 2019 2017 2018 2019 2017 2018 2019 ³ Percentage shows like-for-like growth from previous year. Notes Figures are pre-IFRS 16. Figures for 2017 have been restated due to changes in presentation or in accounting policies. Earnings per share is net income attributable to the shareholder of LafargeHolcim Ltd, before impairment and divestments. Recurring EBITDA excludes restructuring, litigation, implementation and other non-recurring costs. Return On Invested Capital is Net Operating Profit After Tax (NOPAT) divided by the average Invested Capital. The average is calculated by adding 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 271. LafargeHolcim Integrated Annual Report 2019Innovative and sustainable building materials and solutions for the world LafargeHolcim Integrated Annual Report 2019Bogota, Colombia Employee with a customer on top of the American Business Center. CONTENT S OVERVIEW 04 Record Performance 08 Chairman’s Statement 10 CEO Letter to Shareholders 12 Meet the Leadership Team 14 A Growing Market 16 Material Priorities 18 Building for Growth 20 Largest Footprint in Building Materials BUSINESS REVIEW 24 Cement 28 Aggregates 32 Ready-Mix Concrete 36 Solutions & Products DELIVERING SUSTAINABLE VALUE 42 Sustainability 54 Innovation 58 People 60 Health & Safety 62 Risk and Control 72 Capital Market Information 78 Corporate governance 100 Risk and control 116 Compensation report 142 Group performance 148 Regional performance 160 Financial information Towards Integrated Reporting This report applies the principles of Integrated Reporting. Besides the financial results, the report includes more information on our sustainability performance. Sustainability is central to the strategy and principles of our company. 03 LafargeHolcim Integrated Annual Report 2019OV E R V I E W RECORD PERFORMANCE 2019 was a year of record performance ahead of 2022 targets. 2019 was a very successful year for us and we achieved record results in operating profit, net income, earnings per share and free cash flow. Our sharp decrease in net debt has significantly strengthened our balance sheet. We have achieved all our targets for 2019 and have moved our company to a new level of performance. On top of these very strong financial results, we strengthened our leadership in sustainability by setting more ambitious targets for carbon emissions. We introduced our first carbon-neutral concrete in key markets and will further focus on expanding our range of low-carbon building solutions. Find out more online: www.lafargeholcim.com 0404 2 019 PE R FO R M A N CE¹: 2 02 2 TA RG E T S¹: 3.1% Net sales growth 6.5% 3–5% Net sales growth >5% Recurring EBITDA growth Recurring EBITDA growth² 49.5% >40% Free Cash Flow to Recurring EBITDA Free Cash Flow to Recurring EBITDA 7.6% >8% Return on Invested Capital Return on Invested Capital ¹ All figures are like-for-like, pre-IFRS 16 ² LafargeHolcim announces Recurring EBIT as its new key performance indicator starting in 2020, replacing Recurring EBITDA. The new indicator provides full transparency and accountability under IFRS 16 as it fully captures operational achievements and better reflects financial discipline on investments. The key performance indicator changes from the previously used Recurring EBITDA growth of at least 5% like-for-like to Recurring EBIT growth of at least 7% like-for-like. LafargeHolcim Integrated Annual Report 2019OUR FOUR VALUE DRIVERS OV E R- PRO P O R T I O N A L R ECU R R IN G E B I T DA G ROW T H • Net Sales up 3.1% and over-proportional Recurring EBITDA growth of 6.5% like-for-like • Eight bolt-on acquisitions in 2019 • Disciplined investments for future growth OV E R ACHIE V ING OU R A M B I T IOU S TA RG E T S • SG&A cost savings program over-achieved with total net savings¹ of CHF 421 million • Profitability growing in all four business segments • Recurring EBITDA margin increase from 21.9% in 2018 to 23.0% in 2019 R ECO R D FR E E C A S H FLOW G E N E R AT I O N • Record free cash flow of CHF 3,047m (+79%), cash conversion of 49.5% • Net debt reduced by CHF 4.7 billion, deleveraging target over-delivered • New level of financial strength achieved E M P OW E R IN G PEO PLE TO DE LI V E R R E S U LT S • Full accountability established with more than 400 P&L leaders • Strengthening our leadership in sustainability • New Business School successfully rolled out, all P&L leaders trained ¹ At 2017 FX rate and scope 0505 LafargeHolcim Integrated Annual Report 2019Building for growth Villavicencio, Colombia Concrete delivery to a key infrastructure project. LafargeHolcim Integrated Annual Report 2019CONTENT S OVERVIEW 08 Chairman’s Statement 10 CEO Letter to Shareholders 12 Meet the Leadership Team 14 A Growing Market 16 Material Priorities 18 Building for Growth 20 Largest Footprint in Building Materials 07 LafargeHolcim Integrated Annual Report 2019OV E R V I E W CHAIRMAN ’ S S TATEMENT DE A R S H A R E H O LDE R S Your company had a very successful 2019. We have managed to increase Recurring EBITDA by 6.5 percent like-for-like, which significantly exceeds the target of at least 5 percent that we set for ourselves in our Strategy 2022 –“Building for Growth”. Earnings per share grew by 29.1 percent to CHF 3.40 against CHF 2.63 in the previous year. Two years after the launch of Strategy 2022, we are also seeing a much higher Free Cash Flow. Cash conversion (cash flow to Recurring EBITDA) rose to nearly 50 percent in the past year and is a clear indicator of the increased financial health of your company. This strength is further supported by a significantly lower debt burden. We are also getting near our 2022 target return on invested capital above 8 percent; in 2019, this figure was 7.6 percent. In view of this positive result, the Board of Directors is very satisfied with the financial results for 2019 and is confident about the current financial year 2020. S T R E N G T H E N IN G S U S TA IN A B ILI T Y We are also optimistic about the progress made in the area of sustain- ability. We are among the most ambitious companies in our sector in terms of emissions reductions. In 2019 the Science-Based Targets initiative (SBTi) validated our targets to reduce our global carbon emissions: they are adequate and consistent with the global effort to keep global warming below the ’2°C’ threshold. The appointment of a Chief Sustainability Officer to the Group Executive Committee in autumn 2019 is representative of our intensified efforts to even better fulfil our leading role as a provider of sustainably produced construction materials and construction solutions. Finally the Board decided that one-third of the Executive Committee’s performance share rewards will be based on progress in carbon emissions, waste recycling and freshwater withdrawal as of 2020. To more strongly link our sustainability performance with our compensation demonstrates that sustainability is a central part to the strategy and principles of our company. As you know, health and safety is one of our most important values. We set ourselves the target of zero occupational accidents. Unfortunately we did not meet this goal – in 2019, to our great regret, four employees and fifteen contractors lost their lives while performing their jobs. This is of great concern to us, even though we have made significant progress in reducing the Lost Time Incident Frequency Rate (LTIFR) compared to previous years. It makes us all the more determined to put our efforts into pressing ahead with our safety program “Ambition 0” which aims to completely prevent all fatal accidents. IN T EG R AT E D R E P O R T IN G This report aims to provide you with more comprehensive and, in particular, more holistic information about our sustainability activities. For this reason, we have modified the report this year and, for the first time, have structured it in accordance with the logic of integrated reporting. 0808 In 2019, LafargeHolcim was again involved in numerous iconic projects around the world. Our unique global presence enables us to conduct global projects for the benefit of whole societies. I express my sincere thanks to all employees around the world for their great work and commitment. I would also like to thank the members of the Executive Committee under the guidance of our CEO, Jan Jenisch. In 2019, they have further strengthened LafargeHolcim as a leading international company for construction materials and construction solutions, and through their commitment have helped us to further expand our leading position in the changing market for construction materials. Finally, I would like to thank my colleagues on the Board of Directors. Today the Board is broader and more diverse than ever and, with three highly competent women, is one of the leading Boards of Directors in Switzerland in terms of gender diversity. Beat Hess Chairman LafargeHolcim Integrated Annual Report 2019“ We had a very successful 2019 – we are showing that sustainable business is a central component of our strategy.” Beat Hess Chairman 0909 LafargeHolcim Integrated Annual Report 2019OV E R V I E W CEO LE T TER TO SHAREHOLDER S DE A R S H A R E H O LDE R S 2019 was a very successful year for us and we achieved record results in operating profit, net income, earnings per share and free cash flow. Our sharp decrease in net debt has significantly strengthened our balance sheet. We have achieved all our targets for 2019 and have moved our company to a new level of performance. Midway through Strategy 2022 “Building for Growth” LafargeHolcim has achieved almost all 2022 targets. The company significantly strengthened its balance sheet and is now well-positioned to continue growing profitably with strong market positions in all regions. On top, eight bolt-on acquisitions in the attractive ready-mix and aggregates markets have been accomplished in 2019. Net sales of CHF 26,722 million grew 3.1 percent on a like-for-like basis compared to the prior year, driven by good growth in Europe and North America and good price dynamics across all business segments and higher prices in most markets. Recurring EBITDA (pre-IFRS16) reached CHF 6,153 million, up 6.5 percent on a like-for-like basis for the full year, driven by our CHF 400 million SG&A cost savings program, good pricing and improvements in efficiencies. The Recurring EBITDA margin increased from 21.9 percent in 2018 to 23.0 percent in 2019. Record net income¹ of CHF 2,072 million increased by 32 percent compared to 2018 (CHF 1,569 million), driven by less restructuring costs and financial ¹ pre-IFRS16, before impairment & divestments, Group share ² pre-IFRS16, before impairment & divestments 1010 expenses as well as a decrease in the tax rate. Earnings per share² were up by 29 percent accordingly to reach CHF 3.40 for the full year 2019 versus CHF 2.63 for 2018. Record Free Cash Flow generation (pre-IFRS 16) of CHF 3,047 million (+79 percent) and strong improvement of cash conversion (pre-IFRS 16) reached 49.5 percent, well above the target of 40 percent as defined in Strategy 2022 - “Building for Growth”. This achievement reflects reduced cash paid for tax, financial and restructuring costs as well as improved working capital. Net debt (pre-IFRS16) was substantially reduced by CHF 4.7 billion (-35 percent) to CHF 8.8 billion at year-end 2019, reflecting the strong Free Cash Flow and the positive impact following the sale of Indonesia and Malaysia. This resulted in a significant deleveraging with a ratio of net debt to Recurring EBITDA (pre-IFRS16) of 1.4x (2.2x in 2018). Return on Invested Capital (pre-IFRS 16) was at a strong 7.6 percent in 2019, close to the 2022 target of above 8 percent and compares to 6.5 percent in the previous year. ROIC is now above cost of capital thanks to higher profitability, lower tax rate and disciplined Capex. On top of these record financial results, we strengthened our leadership in sustainability by setting even more ambitious targets for carbon emissions. In 2019 we made significant progress in reducing our carbon footprint. Compared to 2018 we reduced our carbon emissions by 1.4 percent to 561 kg in 2019, nearly meeting our 2022 target of 560 kg. Given this strong progress, we have revised our 2022 target to 550 kg as we move to reduce our carbon footprint to 520 kg by 2030. In 2019 the Science-Based Targets initiative (SBTi) validated our targets to reduce our global carbon footprint as adequate and consistent with the effort to keep temperatures below the ’2°C’ threshold agreed at the COP21 world climate conference in Paris. Compared to 1990 we have already reduced our directly attributable (’scope 1’) CO2 emissions per ton of cementitious material by 27 percent, by far the leader among international cement groups. In October 2019, Chief Sustainability Officer Magali Anderson was appointed as a member of the Group Executive Committee, underlining our industry leadership with regard to social and ecological responsibility. In January 2020, we introduced our first fully carbon-neutral concrete in Switzerland and Germany, demonstrating our move toward building a global family of carbon- neutral products. I congratulate all our employees and teams on these impressive results and would like to thank them for their dedication and efforts in making this possible. Jan Jenisch Chief Executive Officer LafargeHolcim Integrated Annual Report 2019“ On top of these record financial results, we strengthened our leadership in sustainability.” Jan Jenisch Chief Executive Officer 1111 LafargeHolcim Integrated Annual Report 20192 3 1 4 5 6 MEE T THE LE ADER SHIP TE AM 1 Feliciano González Muñoz Human Resources 3 Martin Kriegner Asia Pacific 5 René Thibault North America 2 Oliver Osswald Latin America 4 Magali Anderson Chief Sustainability Officer 6 Marcel Cobuz Europe 1212 LafargeHolcim Integrated Annual Report 20198 7 9 10 7 8 Jan Jenisch CEO 9 Keith Carr Legal and Compliance Géraldine Picaud CFO 10 Miljan Gutovic Middle East Africa Basel, Switzerland. The Executive Committee at SwissBau, the leading trade fair for the construction and real estate industry in Switzerland. 1313 LafargeHolcim Integrated Annual Report 2019OV E R V I E W A GROWING MARKE T 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 The building materials market is a fragmented, CHF 2,500 billion global market. It is forecast to grow 2 to 3 percent per annum, faster than GDP in most countries. While these markets are fundamentally local, they are all being driven by global megatrends such as population growth, urbanization, better living standards, sustainable construction and digitalization. Find out more online: www.lafargeholcim.com 1414 1 POPULATION GROWTH 2 URBANIZATION 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 LafargeHolcim Integrated Annual Report 2019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 3 LIVING STANDARDS 4 SUSTAINABLE CONSTRUCTION 5 DIGITALIZATION Increased demand for better living standards and more efficient infrastructure Increased demand for sustainable construction solutions and increasing resource scarcity Digitalization is opening new avenues for growth & innovation 1515 LafargeHolcim Integrated Annual Report 2019 OV E R V I E W MATERIAL PRIORITIES We care about long-term value creation for all stakeholders. In 2019 we conducted a comprehensive review of our material issues, asking external and internal stakeholders which topics were most relevant for future value creation, consistent with our commitment to integrated reporting and accounting for financial and non-financial value in our strategic thinking. The results have largely validated our focus and Strategy 2022 – “Building for Growth”. WHY MATERIALITY MAT TERS WHAT IS NEW IN 2019 • Stakeholder engagement • Risk management • Identify opportunities METHODOLOGY of issues and stakeholder groups 1 IDENTIFIC ATION 2 S TR ATEGIC A LIGNMENT of survey/questions using clear criteria, on business strategy and sustainability pillars, aligned to our risk management approach 3 IS SUE R ATING of internal and external stakeholders scored the issues against the defined criteria 4 VA LIDATION of the materiality matrix by senior management 1616 In this assessment, the scope of issues was expanded to include financial and non-financial issues. A selection of internal senior leaders representing a cross section of business functions and regions were surveyed. Additionally, in depth interviews were conducted with investors, and a range of external stakeholders including customers, suppliers, NGOs, regulators and academia were also surveyed. Respondents were asked to score issues based on how it would impact the success of the company, or on their relationship with the company, rather than a generic assessment of how important an issue is. The results of the comprehensive materiality assessment are summarized and shown on the following page. The matrix depicts the relevance of the topics from the external stakeholder point of view on the vertical axis and relevance for value creation by LafargeHolcim senior management on the horizontal axis. The results of this exercise have largely validated our focus and strategy. For more on how these material issues are governed, and how they relate to our key risk and control measures, please see the Corporate Governance and Risk and Control section of our annual report, beginning on page 78. Find out more about our method and definitions: www.lafargeholcim.com/sustainability LafargeHolcim Integrated Annual Report 2019MATERIALITY MATRIX The issues that we will focus on in the next 3–5 years in order to create value for all stakeholders. * Issues within a materiality threshold box are arranged in alphabetical order. For full details on how the assessment was conducted, please visit www.lafargeholcim.com/sustainability. • Energy costs, efficiency and sourcing • Impact of climate change on our operations • Waste derived resources and circular economy • Business ethics and compliance • Corporate governance • Greenhouse gas emissions • Health and safety • Sustainable products, innovation and technology • Biodiversity management and quarry rehabilitation • Water management • Cash conversion • Customer relations and satisfaction • Pricing integrity and anti-trust compliance • Air emissions • Cyber threat and data protection • Employee diversity and inclusion • Employee development and engagement • Human rights • Industry and market changes • Local community engagement, impact and value creation • Supply chain management • Transport and logistics • Return on invested capital • External hazards (non-climate related) • Internal waste management • Financial related risk V E R Y H I G H H I G H M E D I U M S R E D L O H E K A T S L A N R E T X E O T E C N A T R O P M I L O W M ED I U M H I G H V ER Y H I G H I M P O R TA N C E F O R T H E FU T U R E VA LU E O F L A FA RG E H O LC I M A S R AT E D B Y I N T E R N A L S TA K E H O L D E R S K E Y Focus Monitor and manage Maintain 1717 LafargeHolcim Integrated Annual Report 2019 OV E R V I E W BUILDING FOR GROW TH RESOURCES BUSINESS SEGMENTS CE M E N T From classic masonry cements to high performance products tailored for specialized settings, we offer an extensive line of sustainable and innovative cements and hydraulic binders. AGG R EG AT E S Our aggregates serve as raw materials for concrete, masonry and asphalt as well as base materials for buildings, roads and landfills. Our recycled aggregates use crushed concrete and asphalt from deconstruction. R E A DY- M I X Concrete is the world’s second most consumed substance by volume after water. In this highly competitive and decentralized market, we stand apart through the quality and consistency of our products, the breadth of our portfolio and our innovative solutions. S O LU T I O N S & PRO DUC T S Supported by technical expertise and decades of experience, we deliver targeted solutions to customers’ specific needs. Our local market knowledge combined with R&D capabilities allows us to develop and scale up new solutions and products effectively. ~72,000 Employees 264 Cement and grinding plants 649 Aggregates plants 1,402 Ready-mix concrete plants 170 Patent families in our patent portfolio, balanced across our value chain 40% Of these patents relate to low-carbon solutions, the most recent focusing on low-carbon products and carbon capture and use from our cement plants 1818 LafargeHolcim Integrated Annual Report 2019OUR FOUR VALUE DRIVERS VALUE CREATED IN 2019 F I N A N C I A L S 3.1% Net sales growth (like-for-like) 6.5% Recurring EBITDA growth (pre-IFRS 16, like-for-like) 49.5% Free cash flow to Recurring EBITDA (pre-IFRS 16) 7.6% Return on invested capital (pre-IFRS 16) N O N - F I N A N C I A L S 561 kg CO2 emitted per ton of cementitious material 48 m Tons of waste reused in operations 299 l Freshwater withdrawn per ton of cementitious material 5.9 m People benefiting from our community investments 1919 LafargeHolcim Integrated Annual Report 2019OV E R V I E W L ARGES T FOOTPRINT IN BUILDING MATERIAL S Grinding plant Cement plant NORTH AMERICA CHFm 6,311 Net sales LATIN AMERICA CHFm 2,620 Net sales K E Y F I G U R E S 72,452 Employees 264 Cement and grinding plants 649 Aggregates plants 1,402 Ready-mix concrete plants 20 LafargeHolcim Integrated Annual Report 2019 EUROPE CHFm 7,670 Net sales MIDDLE EAST AFRICA CHFm 2,903 Net sales ASIA PACIFIC CHFm 6,491 Net sales 21 LafargeHolcim Integrated Annual Report 2019 Close to our customers LafargeHolcim Integrated Annual Report 2019CONTENT S BUSINESS REVIEW 24 Cement 28 Aggregates 32 Ready-Mix Concrete 36 Solutions & Products Minneapolis, Minnesota, USA Employee facilitating the digital delivery of concrete to a customer. 23 LafargeHolcim Integrated Annual Report 2019B U S I N E S S S E G M E N T S CEMENT In 2019, the segment continued its excellent performance, with net sales climbing by 4.0 percent* and over- proportional growth in Recurring EBITDA of 6.1 percent*. Customers increasingly choose from our range of next-generation cements for specialized characteristics, as well as our ability to tailor them for specific uses. Our innovative cement mixes are pushing the boundaries of what can be expected from buildings. These cement solutions resist harsh environmental conditions, set more quickly for maximized productivity or use less water for a more economical and sustainable structure. 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. We make cement 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, limestone and chemical admixtures can be added to modify the cement for special uses. These products go hand in hand with complementary services such as technical support, order and delivery logistics, documentation, demonstrations and training. 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. Since cement is costly to transport over land, a cement plant is generally uncompetitive outside of a 300-kilometer radius, though cement can also be shipped economically by sea and inland waterways. Most of our plants are located in highly populated areas, benefiting from the ongoing global trend in urbanization. 207.9 Sales of cement (million tons) 2018: 221.9 Recurring EBITDA for Cement grew* by 6.1 percent while net sales grew by 4.0 percent on a like-for-like basis. Volumes grew 0.5 percent on a like-for-like basis compared with 2018. The North American market grew strongly despite flooding in the Mississippi river system. Eastern and Central European markets were strong with ongoing public infrastructure spending across the region. Volumes for the Asia Pacific region were slightly lower than in 2018 on a like-for-like basis, while in Latin America, demand recovered in Brazil and in Middle East Africa, net sales held close to prior-year levels. * Like-for-like, pre-IFRS16 24 LafargeHolcim Integrated Annual Report 2019Câmpulung, Romania Employee at our cement plant. Loading operations at our cement plant. 25 LafargeHolcim Integrated Annual Report 2019B U S I N E S S S E G M E N T S C EM EN T CO N T I N U ED A VISION FOR SUS TAINABLE URBAN LIVING IN ITALY Buildings and infrastructure are fundamental to society. 26 CityLife, a new business and residential district in Milan, shows one way forward. To make optimal use of the land available, CityLife was built vertically – while at the same time creating a spacious, beautiful and sustainable urban environment. A N OA S I S FO R M IL A N CityLife covers an area of just 336,000 square meters. Its apartments are home to 4,500 residents. Ten thousand more work in its business towers. Another 700,000 live in the surrounding area. The shopping district is the largest of its kind in Italy and already a destination in its own right. One of its attractions is that it’s one of the largest car-free zones in Europe. Residents and other occupants of CityLife buildings can reach shops, and other public amenities by public transport rather than car. The M5 metro line connects the neighborhood to popular destinations such as Bicocca University and the San Siro football stadium. The project has drawn on the talents of world-class architectural firms such as the Studio Daniel Liebeskind and Arata Isozaki and Associates, many of whose projects we supplied. In the section designed by Zaha Hadid Architects, Holcim Italy helped to create an environment of great beauty, fluidity and lightness by integrating the buildings with surrounding gardens, most famously at the building affectionately known as Lo Storto (’the twisted one’ - pictured on page 70). LafargeHolcim Integrated Annual Report 2019Milan, Italy The CityLife district is one of the largest car-free zones in Europe. R E A DY TO M E E T A CH A LLE N G E Holcim Italy has been a trusted partner for many spectacular buildings in the area, including Milan’s famous Bosco Verticale (pictured on page 40). The cement that went into Lo Storto came from our Ternate and Merone plants, where the high proportion of recycled materials and renewable fuels helped the building to obtain the Leadership in Energy and Environmental Design (LEED) Gold standard, the world’s leading green building rating system. LEED judges also acknowledged the reduced impact of our construction site operations, our management of construction waste and the low emission levels of our products. Holcim Italy is one of the few companies that could deliver the kind of high- strength concrete that such projects require. Buildings such as Lo Storto demand structural rigidity to allow for more floor area and leaner elements like pillars, beams and walls. The products supplied for Lo Storto are more than twice as strong as normal concrete products. “Our customers appreciate the quality of our products and our high level of service. This type of project requires excellence in every aspect – from production to logistics to organization to customer relations. I am proud to work with the people who made this project possible,” says Calogero Santamaria, one of our colleagues and a key member of the CityLife team. “ This type of project requires excellence in every aspect.” Calogero Santamaria Holcim Italy www.lafargeholcim.com/ major-construction-projects 27 LafargeHolcim Integrated Annual Report 2019B U S I N E S S S E G M E N T S AGGREG ATES The segment continued to deliver in 2019, with net sales growth and improved Recurring EBITDA*. 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. 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. 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. 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. 269.9 Sales of aggregates (million tons) 2018: 273.8 Recurring EBITDA* improved by 3.0 percent compared to the prior year, in line with net sales growth of 3.5 percent on a like-for-like basis. Volumes were healthy in the United States and Eastern Canada, offset by weakness in Australia and Western Canada. * Like-for-like, pre-IFRS16 28 LafargeHolcim Integrated Annual Report 2019Houston, Texas, USA Employee with a customer on site. 29 LafargeHolcim Integrated Annual Report 2019B U S I N E S S S E G M E N T S AG G R E G AT E S CO N T I N U ED Montreal, Canada The Champlain Bridge is an achievement in sustainable material sourcing. DELIVERING SUS TAINABLE INFR A S TRUC TURE IN C ANADA Bridges have been crucially important for societies for centuries. Bridges allow safe passage where previously it was not possible or much more difficult. To see how bridges have been changing societies and have changed over the last sixty years, take a boat up the St. Lawrence River. Over time the bridge has demanded ever more frequent maintenance. For this reason, authorities started planning to build its replacement in 2013. As downtown Montreal approaches on the western shore and the suburbs of La Prairie and Brossard appear to the east, the 3,400 meter Champlain Bridge spans the river to connect the two shores. R E PL ACIN G A N AT I O N A L I CO N Conceived in 1955, the Champlain Bridge soon became the country’s busiest. The rugged truss design – with the bridge deck enclosed in a triangular arrangement of steel girders – is strong, simple and characteristic of its era. Fifty million cars, buses and trucks cross the bridge each year. Over nearly sixty years of service, this has led to considerable wear and tear, compounded by the road salt that keeps roads clear through Montreal’s long winters. S T R E N G T H A N D S U S TA IN A B ILI T Y The towers of the New Champlain Bridge rise 170 meters above the St. Lawrence River. The bridge deck is suspended from cables which are attached to the towers, following the bridge’s elegant twin cable-stayed design. The bridge was built in less than four years and opened to traffic in June 2019. In addition to the six vehicle traffic lanes, the bridge offers different transit options, such as a multi-use corridor for pedestrians and cyclists and a two-lane rail corridor for the electric train, which will come into operation in the next two years. 30 LafargeHolcim Integrated Annual Report 2019Its more modern design helped assure quicker construction and a more economical use of materials. The design also promises lower maintenance as well as an expected service life that’s more than twice as long as its predecessor. An additional 700,000 tons were delivered by barge for the central jetty, minimizing greenhouse gas emissions related to the transportation of aggregates and reducing traffic on local roads and highways. H I G H L I G H T S 1.5mt aggregates The Institute for Sustainable Infrastructure has designated the New Champlain Bridge as ENVISION-certified, the prominent North American standard. H I G H PE R FO R M A N CE , LOW IM PAC T LafargeCanada played a big part in reaching this new level of sustainability. More than 1.5 million tons of sustainably-sourced aggregates were delivered by truck from a nearby quarry to construct the piers and surrounding road infrastructure. More than 165,000 m3 of ultra-high performance concrete, or 22,000 truckloads, were delivered throughout the project. Concrete of these specifications had never been used before in North America, meeting criteria of low heat release and high compressive strength, sufficient for its intended 125-year lifespan. 165,000m3 ready-mix concrete www.lafargeholcim.com/ major-construction-projects Employee at our quarry. 31 LafargeHolcim Integrated Annual Report 2019B U S I N E S S S E G M E N T S RE ADY-MIX CONCRE TE Strong performance and development of value- added products drove over-proportional growth in Recurring EBITDA of 18 percent*, representing a margin gain of 1 percentage point. 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 tons of aggregates. 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. 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”. Customers value the quality and consistency of our ready-mix concrete products, the breadth of our portfolio, our expertise in large projects, and our flexibility and reliability. We also offer a range of innovative concretes including self-filling and self-leveling concrete, architectural concrete, insulating concrete and pervious concrete. We also innovate for sustainable materials and are increasing our portfolio of carbon-neutral concrete solutions. In 2019, we launched Evopact in Switzerland while in Germany we launched Ecopact, both fully carbon- neutral concretes (Find out more on page 56). 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. 47.7 Sales of ready-mix concrete (million m3) 2018: 50.9 Recurring EBITDA* grew by 18 percent compared to the prior year. Net sales declined by 0.2 percent compared to 2018 and volumes declined by 2.0 percent, both on a like-for-like basis. Good demand in North America was offset by softer markets in Mexico and Middle East Africa. * Like-for-like, pre-IFRS16 32 LafargeHolcim Integrated Annual Report 2019Switzerland Creative exchange between our application expert and architects: Holcim Ammocret concrete is being used for a family home. 33 LafargeHolcim Integrated Annual Report 2019B U S I N E S S S E G M E N T S R E A DY- M I X CO N C R E T E CO N T I N U ED KEEPING INDIA ON THE MOVE Infrastructure is critical to keep a growing city functioning and metros play a key role. Nowhere does this have more of an impact than in India. The country’s first metro was opened in Kolkata in 1984. However, high cost and long delays kept subsequent metro projects out of consideration for almost 20 years. When the metro option was revived the population of Delhi had doubled and the number of vehicles on its roads quintupled. The Delhi metro system, opened in 2002, provides for over 1 billion trips per year. That means around 580,000 less vehicles on the roads – and around 855,000 tons of pollutants out of the air. ACC A N D A M B UJ A CE M E N T, PA R T N E R S FO R G ROW T H Today several new metro systems are under construction and old ones are being expanded all over India. By 2021, Delhi’s metro network will be bigger than the London Underground. Mumbai, Bengaluru, Chennai, Kolkata, Ahmedabad, to name just a few, are also upgrading their urban infrastructure extensively. Nagpur, India The city is now home to India’s greenest metro. 34 LafargeHolcim Integrated Annual Report 2019Mumbai, India An employee at one of our retail stores completes a transaction with a customer. For many, a journey by metro will mean more comfort. “It’s better for the city than road transport because there’s no traffic or pollution,” says Toussef, a resident of the greater Delhi area. “I don’t have the troubles of the road, and can be in an environment that is air-conditioned and clean.” It also means that India’s rich history can be preserved. Delhi metro’s “Heritage Line,” for example, carries more than 90,000 people per day beneath iconic sites such as the Delhi gate, Jama Masjid and Red Fort, as well as one of the country’s most prominent cricket grounds. The same could not be achieved with roads. H I G H L I G H T 70m Lives transformed by ACC and Ambuja metro projects www.lafargeholcim.com/ major-construction-projects LafargeHolcim, through its subsidiaries ACC and Ambuja Cement, is a key enabler of this expansion. In Delhi alone, ACC has already delivered 300,000 cubic meters of concrete, along with other specially developed materials. Ambuja Cement’s contribution has also been very important, supplying innovative high-performance materials that enhance the durability of the structures. The lives of more than 70 million city dwellers are being transformed by projects supplied with ACC or Ambuja concrete. Through ACC and Ambuja, LafargeHolcim has both the capacity and the presence to supply materials for the largest and most demanding projects in India – and at a pace to accommodate what will soon be the most populous country in the world with more cities with over one million residents than all of Europe put together and overtaking China as the world’s most populous country by 2030. 35 LafargeHolcim Integrated Annual Report 2019B U S I N E S S S E G M E N T S SOLUTIONS & PRODUC TS In 2019 the segment showed strong, over-proportional growth, with Recurring EBITDA up 20 percent* from the previous year. 2,248 m Net sales (CHF) 2018: 2,396 m Recurring EBITDA* for the segment grew by 20 percent compared to 2018, mainly driven by strong growth in the concrete products business in Australia. Net sales for the segment overall grew by 0.2 percent on a like-for-like basis. Our fourth business segment, Solutions & Products, bundles a range of offers delivering targeted solutions to our customers’ specific needs. 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, which provides a durable and cost-effective means to protect vulnerable landscapes from storm and rising sea levels. 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. 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. * Like-for-like, pre-IFRS16 36 LafargeHolcim Integrated Annual Report 2019Sydney, Australia An employee inspects precast elements. 37 LafargeHolcim Integrated Annual Report 2019B U S I N E S S S E G M E N T S S O LU T I O N S & PR O D U C T S CO N T I N U ED Galápagos, Ecuador Soil stabilization ensures sustainable roads at a UNESCO World Heritage Site. HELPING FARMER S RE ACH THE GLOBAL MARKE TPL ACE Over a quarter of the bananas traded globally are grown in Ecuador, representing the country’s second-largest export after oil. Compared to oil, however, the banana industry involves far more people. Hundreds of thousands of Ecuadorians are involved in planting, harvesting, washing, packaging and loading bananas for export. The industry is composed largely of small- and medium- sized growers who often sell through cooperatives – a complex arrangement that allows consumers practically anywhere in the world to enjoy this once-exotic commodity. W H E N T H E FIR S T M ILE I S T H E H A R DE S T In the rural areas of Ecuador where bananas are grown, around half the roads are built with gravel. These roads are typically vulnerable to both rain and traffic, lasting no more than six months. Poor rural roads are more than just an inconvenience – they can have devastating effects on rural incomes. A far greater share of produce is vulnerable to damage en route, or products may even be cut off from the market altogether. A S O LU T I O N FO R A LL S E A S O N S The provincial government of Santa Elena is making a big difference to its farmers with our Agrovial solution. Agrovial is a specially developed hydraulic binder for stabilization of soils and rural roads that is both cost-effective and innovative, allowing roads to be more resistant and durable for pedestrian, animal and vehicular use. 38 LafargeHolcim Integrated Annual Report 2019Testing the soil at a major highway project. Road construction and maintenance costs are up to 40% lower compared to conventionally built roads. They also last three times longer. They avoid the formation of potholes and are far more resistant to heavy rains, so that farmers can continue to produce the whole year round while also spending less time on road repairs. More stable roads mean that farmers’ effective yields are an average of 30% higher. Such reliability is not only critical to the individual farmer but to the reputation of the industry overall. M IN IM I Z IN G E N V IRO N M E N TA L IM PAC T The benefits of Agrovial go beyond economics. Agrovial combines cement with locally-sourced soils. Since those base materials are 100% local, there’s no need to transport quarried rocks or gravel over long distances. For this reason, the solution was also applied in the recent road refurbishments on Ecuador’s Galápagos Islands, where having a sustainable, local solution was an absolute priority. The Agrovial solution has been well received in Ecuador since its debut in 2017, and continuously growing in popularity for rural areas. It is now expanding to Argentina as well – another South American agricultural heavyweight. www.lafargeholcim.com/ major-construction-projects 39 LafargeHolcim Integrated Annual Report 2019Creating sustainable value 40 LafargeHolcim Integrated Annual Report 2019Milan, Italy The Bosco Verticale forms an iconic part of the Milanese skyline. CONTENT S CREATING SUSTAINABLE VALUE 42 Sustainability 54 Innovation 58 People 60 Health & Safety 62 Risk and control 4141 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E SUS TAINABILIT Y We are committed to living up to the responsibilities that come with being the global leader in building materials and solutions. We spearhead the transition towards low-carbon construction and are the leader in promoting a circular economy, from alternative fuels to concrete recycling. With construction and building representing a significant share of CO2 emissions, our commitment to sustainability leadership begins with carbon. We are leading the transition towards more low-carbon construction by introducing more low-carbon products and solutions to our customers worldwide and by being at the forefront of innovation in building materials. Our business also puts us in a leading position to address society’s waste problem and to promote a circular economy. As building materials draw on natural resources, protecting our environment is also a strategic priority. And finally, as our business is fundamentally local, we make sure to create value for the communities in which we live and work. These four strategic pillars of sustainability – Climate & Energy, Circular Economy, Environment and Communities – create value for our business and shareholders and underpin Strategy 2022. FOU R S T R AT EG I C S U S TA IN A B ILI T Y PILL A R S¹ CLIMATE AND ENERGY CIRCULAR ECONOMY ENVIRONMENT COMMUNITY Find out more on page 44 Find out more on page 48 Find out more on page 50 Find out more on page 52 561kg Net CO2 emissions per ton of cementitious material (scope 1) (Scope 2: 37kg) +4.3% Tons waste reused in operations (48m) –5.7% +5.4% Freshwater withdrawn per ton of cementitious material (299l) Beneficiaries of our community investments (5.9m) ¹ Percentage change compares 2019 results to 2018 results at the same consolidation scope. Information on scope and methodology of data collection, as well as assurance on 2019 reported figures, can be found in the Sustainability Performance Report on our website at www.lafargeholcim.com/sustainability. 42 LafargeHolcim Integrated Annual Report 2019Boyaca, Colombia The Holcim school at Nobsa has provided low income children an education for over 20 years. 43 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E CLIMATE AND ENERGY LafargeHolcim cement is one of the most carbon-efficient in the world. With our target of 520kg of CO2/ton of cementitious by 2030, we are among the most ambitious companies in our sector. We are committed to reducing emission levels in line with a 2-degree scenario as agreed at the COP21 world climate conference in Paris. “We at SBTi are delighted that LafargeHolcim, a global leader in building materials and solutions, has recently joined the group of over 300 industry leaders whose ambitious emissions reductions targets we have approved. By setting goals to reduce absolute scope 1 and 2 emissions, LafargeHolcim has taken a bold step towards building the net-zero economy of the future. With their ambitious targets LafargeHolcim is an industry leader in reducing CO2." Alberto Carrillo Pineda Director Science Based Targets & Renewable Energy at CDP & Co-founder and Steering Committee member of the Science Based Targets initiative 2 019 PE R FO R M A N CE In 2019 our net CO2 scope 1 emissions (i.e., emissions directly under our control) decreased to 561 kilograms per ton of cementitious (kg CO2 /ton), or 1.4 percent lower than in 2018. Given this very strong progress we have revised our 2022 target to be more ambitious in the near term, from 560kg to 550kg, as we move toward our 2030 carbon targets of 520kg. We also aim to reduce our scope 2 emissions (indirect emissions from our electricity consumption) by 65% in the same timeframe. In 2019 both targets were validated by the Science Based Targets Initiative (SBTi), a leading organization which mobilizes companies to set science- based targets in the transition to the low-carbon economy. We were also recognized by the CDP, a non-profit organization that enables organizations to manage their environmental impacts. In their latest assessment our score improved from B in 2018 to A minus for 2019, placing us in the CDP’s Leadership band. LE A DING T HE T R A N S I T IO N We are not just committed to reducing carbon emissions from our own activities. We aim to lead the transition towards low-carbon and circular construction by introducing more low-carbon products and solutions to our customers worldwide and by being at the forefront of innovation in construction materials and solutions (see “low-carbon solutions” on page 54). We engage proactively and transparently with our external stakeholders, including regional and national governments, international organizations and civil society. In particular we advocate: • Preserving a level playing field where carbon pricing mechanisms are in place, thereby fostering investment in low-carbon technologies and innovation; • Developing mechanisms that incentivize carbon efficiency across the construction value chain and strengthen demand for low-carbon products and solutions; • Building standards that are material- neutral and take lifecycle performance into account. 44 LafargeHolcim Integrated Annual Report 2019O U R C A R B O N E M I S S I O N S 800 700 600 500 400 2022 target 2030 target 616 585 Target of 520kg of CO₂ of cementitious material (net)/ton 561 550 520 1990 2006 2016 2019 2022 2030 LafargeHolcim performance Sector average INVES TING IN LOWER C ARBON In 2019 we allocated CHF 160 million for capital expenditure to reduce our carbon footprint in Europe, increasing our efforts to further improve the carbon efficiency of our products and solutions. The objective is to reduce annual CO2 emissions in Europe by a further 15 percent, representing 3 million tons, by 2022. The investment will draw on advanced equipment and technologies that can help increase our use of low- carbon fuels and recycled materials in our processes and products. Further funds are earmarked for the introduction of new carbon-efficient materials and services. Over the next three years, we will work on more than 80 projects across 19 European countries. In all countries, we are working on products and services to help customers improve the carbon efficiency of buildings and infrastructure across their lifecycle. In France, for example, the company has recently launched Lafarge360, an integrated offer that includes scoring and carbon footprint modelling, enabling customers to make informed decisions around the environmental impact of their project. Such low-carbon products are a strategic priority of our innovation agenda. Find out more on page 54 CO M M I T T E D TO T R A N S PA R E N C Y On page 63 we summarize our 2019 alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The identification, assessment and effective management of climate- related risks and opportunities are fully embedded in our risk management process and subject to continuous improvement. We will continue to monitor developments and to update our scenario planning in line with the TCFD’s recommendations. DID YOU K NOW ? LafargeHolcim has reduced its CO2 intensity by 27% since 1990. This is equivalent to over 40 million tons of CO2 avoided in 2019 compared to 1990 performance levels, or 8.6 million cars taken off the road. CHF 160m Investments in low-carbon solutions in Europe 3m tons Reduction in European carbon emissions by 2022 45 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E CO2 EFFICIENC Y ROADMAP L AFARGEHOLCIM C ARBON ROADMAP Largest contribution in next decade expected from construction value chain 5 4 3 2 1 Carbon capture & storage or use Enhancement of cement efficiency in concrete Differentiated use of concrete in construction including new binders based on alternative clinkers Renewable energy Power purchase agreements Alternative fuels Optimization of clinker intensity in cement Upgrade of cement plants including waste heat recovery, automation technologies and robotics, artificial intelligence, etc. 1990 1990 2000 2000 2010 2010 2020 2020 2030 2030 2040 2040 2050 2050 U P G R A DE O F CE M E N T PL A N T S A N D E N E RG Y E FFI CIE N C Y Cement production is an energy- intensive process. We have modernized our plants and improved our energy efficiency to reduce the carbon intensity of our products and lower our production costs, driving energy consumption per ton of clinker from 4,623 megajoules in 1990 to 3,526 megajoules in 2019, making us among the most efficient in the sector. DID YOU K NOW ? Our energy consumption has increased three times less than our cement production since 1990. A LT E R N AT I V E FU E L S A N D O P T IM I Z AT I O N O F CLIN K E R IN T E N S I T Y IN CE M E N T We also reduce the carbon intensity of our cement by replacing fossil fuels with pretreated waste and low-carbon fuels to operate our cement kilns. We currently source 20 percent of our energy from alternative fuels, low carbon fuels and biomass. In some of our operations, we’ve met over 90 percent of our energy requirements with alternative fuels (further information on our Geocycle operations is on page 48). These alternative energy sources not only help reduce our CO2 emissions – they also divert waste from incineration or landfill. Our primary carbon reduction lever is to lower the clinker-to-cement ratio. It is during the production of clinker, the main component of cement, when most CO2 emissions associated with cement occur. The majority of these emissions are unavoidable, as they result from the chemical reaction that occurs when the raw material (limestone) calcinates into clinker in the kiln. This decarbonation process is our largest source of CO2 emissions, accounting for 65 percent of our total scope 1 emissions in cement production. Replacing the clinker in our final cement products with alternative mineral components (a significant portion of which comes from waste or byproducts from other industries) reduces the carbon intensity. Our products currently use an average of 29 percent of constituents to replace clinker, resulting in one of the lowest levels of clinker content (or ’clinker factor’) in the sector. 46 LafargeHolcim Integrated Annual Report 2019R E N E WA B LE E N E RG Y In 2019, we continued to expand our renewable energy portfolio, adding close to 250 MW equivalent of clean power to our global electricity mix. We also optimized our power-producing assets (for example by installing waste heat recovery units) across our production plant portfolio. We currently operate 5 waste heat recovery units in 4 countries and plan to increase this to 13 units by 2021, with a larger pipeline to be implemented in phases. We are also taking advantage of opportunities to generate renewable energy on our land by installing wind turbines and solar panel farms. In October 2019, for example, three wind turbines built on our site in Paulding, OH (US) began delivering 12 million kilowatt hours per year to the plant, eliminating the emission of at least 9,000 tons of CO2 annually. In India Ambuja Cement has recently commissioned an onsite solar plant at its Rabriyawas plant. The plant will have a capacity of 11.5 Gigawatt hours per year and will avoid 8,900 tons of CO2 emissions per year. LOW - C A R B O N S O LU T I O N S We have made significant investments in low-carbon solutions, much of it through our Innovation Center in Lyon, France. Today we have a broad portfolio of low-carbon projects including low-carbon clinker, cement, concrete, and binders. We take it as our responsibility as a global leader in building materials to pave the way to low-carbon construction. For more information on our innovation program and products, please see page 54. C A R B O N C A P T U R E Apart from our ongoing activities to reduce CO2 emissions, reducing CO2 emissions from cement production to zero will require carbon capture and usage or storage (CCUS). The IEA Roadmap for the cement sector projects CCUS to begin at scale from 2030 onwards. LafargeHolcim is currently working with a number of partners on five projects in four countries, and plans to increase that number in the coming years. The potential carbon capture capacity from these projects is approximately 2 million tons of CO2 per year (see below). DID YOU K NOW ? One-third of our 2019 net sales comes from our portfolio of sustainable solutions. PARTNERING TO C AP TURE AND USE C ARBON We’re assessing the viability and design of a commercial-scale carbon-capture facility at our cement plants in North America. This study, undertaken with Svante, Inc and Oxy Low Carbon Ventures, will evaluate the cost of capturing up to 725,000 tons of carbon dioxide per year directly from the plant using Svante’s technology, which captures carbon directly from industrial sources at half the cost of existing solutions. Occidental, the industry leader in CO2 management and storage, would permanently sequester the captured CO2 underground. Pairing carbon capture from a cement plant with CO2 sequestration is a significant step forward for our industry. This joint initiative follows the recently- launched Project CO2MENT between Svante, LafargeHolcim and Total in Canada at the Lafarge Richmond cement plant, where progress has been made towards re-injecting captured CO2 into concrete. 47 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E CIRCUL AR ECONOMY The volume of waste materials used in our operations rose by 4.3 percent, outpacing our production volume growth as we head toward our 2030 target of 80 million tons. Waste products can be used as a substitute for fossil fuels and other raw materials, providing us with an excellent opportunity to address society’s waste problem. 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. We promote the use of recycled materials in our production value chain. In our Aggregates, Ready-Mix Concrete and asphalt businesses we use around 16 million tons of recycled material per year (mostly recycled aggregates) to make our products. At some sites recycled aggregates represent more than 50 percent of the material used. We are especially interested in targeting this aspect of our business to issues of broad social relevance, such as marine litter (see below). In 2019 around two million tons of plastic waste were co-processed in our cement kilns and we remain committed to increasing these volumes by actively growing the processing of plastic waste. DID YOU K NOW ? LafargeHolcim’s global waste management business, Geocycle, transformed 10.2 million tons of waste into energy in 2019, or the equivalent amount of waste from 2 million garbage collection trucks. REDUCING MARINE LIT TER The rise in ocean plastics is a global environmental policy challenge. Without significant action, plastic marine litter could outweigh all the fish in the ocean by 2050. Geocycle, our sustainable waste management solutions business, has taken a lead in addressing this challenge by partnering with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) on a project to stem marine litter. Initiated in key urban areas in Egypt, Mexico, Morocco and the Philippines, the project works in a number of ways to stem marine pollution including reducing waste generation, improving waste management and raising public awareness. Key actions are already underway in the selected countries. Geocycle México, for example, has launched the OLAS clean ocean initiative to play a lead role in fighting marine pollution. Geocycle and other key stakeholders have developed a focused communication plan for building awareness about this issue and are meeting with government representatives at federal, regional and municipal levels to increase awareness and gain support. Geocycle has also partnered with GIZ and the Fachhochschule Nordwestschweiz (FHNW) to update the 2006 Guidelines on Co-processing Waste Materials in Cement Production to support further development of environmentally safe pre- and co- processing. 48 LafargeHolcim Integrated Annual Report 2019Almeria, Spain Collecting waste plastics at their source is essential to keeping the ocean clean. 49 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E ENVIRONMENT Freshwater withdrawal per ton of cementitious material decreased by 5.7 percent in 2019 due to strong efforts across our cement plants. 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. We optimize and prevent the use of freshwater as well as reduce the risk of depletion or pollution by measuring our operational water footprint, reducing freshwater withdrawal, assessing water risks, engaging with stakeholders on sharing water and providing more water to communities (see below). A IR E M I S S I O N S Air emissions are a key environmental aspect of cement production. We expect that all our cement sites measure and manage air emissions. In 2019, we monitored dust, NOx and SO2 emissions from 94 percent of the clinker we produced; 86 percent of clinker production is monitored continuously. E N V IRO N M E N TA L M A N AG E M E N T S Y S T E M S To ensure compliance with stringent company requirements we expect all our cement plants to have an environmental management system in place. In 2019, 86 percent of our cement plants had an environmental management system equivalent to ISO 14001 in place. The majority of LafargeHolcim plants operate within best practice emission ranges and some are among the best in the sector. In 2019 Group dust emissions reduced by around 5 percent year on year. WATER MANAGEMENT IN INDIA Whether it’s the communities in the hills of the Himalayas, the deserts in Rajasthan or the coastal areas in Gujarat, water is a critical issue. On the coastline of Gujarat salinity was seeping almost ten kilometers inland. Groundwater in Rajasthan was being overexploited, resulting in high salinity and fluoride content, making it unfit for human consumption. People in the hills of Himachal Pradesh had poor water quality for cultivation, animal rearing and domestic use. There was heavy erosion of the rich and fertile topsoil, making it difficult to grow produce. For over 25 years the Ambuja Cement Foundation has worked hard to provide solutions and resolve the issues of these communities. In Gujarat, check dams were built, wells for ground water were recharged and channels were dug to link ponds which help around 200,000 people. In Rajasthan, traditional water harvesting structures like community ponds and tanks were revived, and dykes were constructed for groundwater recharge, increasing soil moisture for crop production in the villages. In Himachal, interventions began with a watershed project and awareness- raising for harvesting and managing rainwater. The community has taken ownership of water resource development programs, making water available for both domestic and agricultural uses. By partnering with the government and other development agencies, the Ambuja Cement Foundation has built 426 check dams and over 7000 roof rainwater harvesting structures which, when full, supply close to 55 million cubic meters of water back to the community. In the community of Kodinar, Gujarat, every 1 rupee invested by Ambuja has resulted in 13 rupees of value back for the community. Today the region is water positive and has seen a drastic decline in soil erosion, with an increase in groundwater recharge and more natural vegetation, and more water available for all uses. 50 LafargeHolcim Integrated Annual Report 2019Gujarat, India Every 1 rupee invested in water projects results in 13 rupees of value back into local communities. 51 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E COMMUNIT Y We are proud to support the communities where we live and work, with our investments delivering benefits to more than 28 million people over the last five years. We regularly interact with stakeholders at all levels – customers, employees, investors and financial institutions, suppliers, regulators, media, NGOs / development agencies, and academia – to preserve our standing as good members of our communities. R E S P O N S IB LE S OU RCIN G We have short and predominantly local supply chains. With our large geographic footprint, this poses challenges, particularly in countries where business practices are not well regulated. We therefore identify high environmental, social and governance (ESG) impact suppliers and ensure they are qualified to work with us. PRO M OT IN G H U M A N R I G H T S Our approach to managing human rights is fully aligned with the UN Guiding Principles on Business and Human Rights. In February 2020, CEO Jan Jenisch signed the Call to Action for Business Leadership on Human Rights by the World Business Council for Sustainable Development (WBCSD), joining forty other leaders in sending a clear message on the need to elevate companies’ ambitions concerning human rights. Together our vision is to make human rights more than just a risk and compliance issue for companies – they should be actively promoted as part of a commitment to social responsibility. At LafargeHolcim we promote transformative change in the human rights dimension through such longstanding policies as our Supplier Code of Conduct and our Human Rights due diligence methodology. At the same time we champion human rights internally, for example by setting concrete targets for diversity and inclusion across our operations. We make significant investments to support community development around the world, for example by providing education and medical care in line with our human rights agenda (see box, right). DID YOU K NOW ? Over the last five years LafargeHolcim has invested CHF 240 million in community projects. LAFARGEHOLCIM FOUNDATION FOR SUSTAINABLE CONSTRUCTION The LafargeHolcim Foundation for Sustainable Construction encourages sustainable responses to the technological, environmental, socioeconomic and cultural issues affecting building and construction. The Foundation stimulates exchange among all players in the construction industry to contribute proactively to tomorrow’s built environment. The Foundation conducted the 6th LafargeHolcim Forum in 2019, where more than 350 experts from 55 countries met at the American University in Cairo, Egypt. Experts from architecture, materials management, engineering, urban planning and related fields addressed the theme of “Re-materializing Construction” and discussed innovative solutions and progressive approaches related to new materials, the optimization of circular material flows, and the potential of digitalization in the construction industry. Participants were inspired by presentations and best-practice examples, including keynote speeches from thought leaders such as Lord Norman Foster. Michael Braungart presented his “cradle-to-cradle” concept, which provides important insights for a circular economy. In recognition of his achievements, LafargeHolcim CEO Jan Jenisch presented the first LafargeHolcim Foundation Catalyst Award to Prof. Dr. Braungart, an accolade conferred to experts who made a substantial, outstanding, and lasting contribution to the advancement of sustainable construction. Advancing sustainable construction is also the purpose of the international LafargeHolcim Award competition, which the Foundation is currently holding for the sixth time. The award is recognized as the world’s most significant competition for sustainable design. 52 LafargeHolcim Integrated Annual Report 2019MEDIC AL C ARE FOR 250,0 0 0 PEOPLE In 2019 we offered health services to a quarter-million people in addition to our employees and contractors. With many of our employees living closer to our facilities than to the nearest hospital, we’re fulfilling our duty to support the health of our communities. In other words, nearly 250,000 of our employee’s dependents and other community members were served by the 66 health clinics we own and manage across 18 countries. “The Health & Safety of our employees is a core value of our company – and we are proud to extend that commitment to our communities,” comments Magali Anderson, Chief Sustainability Officer. In addition to health clinics, we provide access to education for more than 15,000 people at the 22 schools that we manage. These benefits come on top of the inherent advantages we already offer (e.g., direct employment, infrastructure development and local procurement) to the communities where we live and work. These social investments are based on long-term strategies and implemented together with specialized partners. In 2019 we invested CHF 42 million in community projects. Ambuja Nagar, India An instructor trains nurses at one of our clinics. 53 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E INNOVATION We are committed to creating new and value- added solutions, with fully half of our innovation projects aimed at finding low-carbon solutions. Over the next forty years, the world will need 230 billion square meters in new construction – adding the equivalent of Paris every week. TOWA R D C A R B O N - N E U T R A L CO N S T RUC T I O N With the strongest innovation organization in the industry and an extended global network of regional labs, reducing carbon emissions is a key priority of our innovation agenda. Half of our innovation projects are aimed at finding low-carbon solutions, whether they are digital tools to empower greener building, breakthroughs in the chemical processes underlying our cement or shaping the construction industry of the future through our contributions to 3D-printed buildings. Today, around 40 percent of our patents have a positive impact on our carbon footprint along the value chain. In addition to providing more low- carbon solutions, we seek to further differentiate our products offering for improved performance and growth and to develop 300 new products per year by 2022, meeting regional needs with custom-tailored products – more than triple the amount we delivered in 2018. B E IN G A LE A DE R M E A N S O FFE R IN G M O R E All our customers – whether they buy from ACC, Aggregate Industries, Ambuja, Bamburi, Holcim or Lafarge; or they use one of our global brands such as Airium or Ductal; or even the retail customers of our Disensa or Binastore franchisees – know they are buying from a market leader. We maintain this position by developing products such as water-resistant materials for houses in rainy or humid regions, for example, or creating tools to literally take concrete pumping to new heights. We develop innovative concrete mixes for optimal flowability and workability, or others that gain strength quickly after pouring. Such innovations create a differentiated customer experience that sets us apart. Mike Curtis, president of G&C Concrete (US), worked on Boston’s One Dalton, which is now New England’s tallest residential building at 226 meters. The project required delivery of 70,000 cubic meters of concrete in congested downtown Boston. To make things even more challenging, the demanding timeline called for the completion of two floors each week. “One of our greatest challenges was finding the ideal high-performance concrete solutions that would help us improve productivity and accelerate placement schedules,” he said. “We needed high-strength, self-consolidating concrete mixes that would flow easily through and consolidate around congested reinforcement in the core 54 walls and the uniquely tapered perimeter columns, as well as an advanced high-early strength concrete for the floor slabs that would allow us to remove the formwork in a short amount of time.” G&C Concrete relied on high-strength Agileflow® self-consolidating concrete mixes, which are custom-designed to achieve optimal flowability and workability, as well as the various strength requirements of the project without the need for vibration. To achieve the accelerated construction goals of each floor’s 11,500-square-foot slab, they also used RAPIDFORCE®. RAPIDFORCE is a proprietary blended cement mix containing silica fume and fly ash, and achieves a rapid specified strength gain of 3,500 psi in only 24 hours. The customized mixes were ideal solutions for the project’s demanding requirements. “Both products delivered huge benefits in terms of labor requirements and time savings,” Curtis said. LafargeHolcim Integrated Annual Report 2019Untervaz, Switzerland Local innovation labs are key to delivering high- performance materials. Malaga, Colombia Two employees inspect a newly completed bridge 55 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E I N N OVAT I O N CO N T I N U ED Basel, Switzerland Products like Evopact will be key to a more sustainable built environment. ADVANCING CLIMATE- NEUTR AL BUILDING IN S WIT ZERL AND We’re promoting sustainable building with EvopactZERO, a resource-saving and climate-neutral concrete. Holcim Schweiz has taken recycled demolition waste and used it to create EvopactZERO, a climate-neutral concrete that makes an important contribution to sustainable construction. EvopactZERO uses both the fine and coarse elements of demolition waste, closing the material cycle completely. The fine materials go into the cement, while the coarse materials serve as aggregates for the concrete mix. This product is one of our pioneers in showing how innovation and sustainability drive growth. Our aim is to reduce net CO2 emissions per ton of cement sold in Switzerland to 400 kilograms by 2030, and to produce climate-neutral and fully recyclable building materials exclusively by 2050. EvopactZERO is just another step along that path. Besides reducing carbon emissions, using recycled building materials conserves landfill space and shortens transport routes. 56 LafargeHolcim Integrated Annual Report 2019A DI G I TA L A PPROACH TO B U ILDIN G In addition to innovative materials, we are increasingly developing tools to enhance the customer experience and engender customer loyalty. ConcreteDirect, for example, is a digital platform that optimizes ordering and delivery of ready-mix concrete. Customers use the ConcreteDirect app to place, amend and confirm orders in just a few taps. They can view upcoming orders and receive important notifications at their fingertips as well as track the progress of their ongoing deliveries so they always know where their concrete is and when it will arrive. A CO LL A B O R AT I V E A PPROACH Many challenges in our industry can be solved with digital business models, which is why we launched the Maqer platform in 2018. Through Maqer we connect with digital startups who are pioneering solutions that apply to our value chain. Maqer has entered into pilot projects with more than 50 innovative technology providers and startups since its launch, in areas like digital backhauling platforms to reduce empty loads, leveraging internal and external data for demand forecasting, predictive maintenance to avoid unplanned shutdowns or financial solutions for our retailers and end- customers in underbanked markets. Maqer also helps us to drive our “Plants of Tomorrow” initiative, one of the largest roll-outs of Industry 4.0 technologies in the building materials industry. The initiative covers automation and robotics, AI and predictive maintenance and a host of other technologies. In one pilot, for example, we are testing a tool that assesses the final strength of cement while it is being manufactured, which could shorten customer waiting times by 28 days. Our open innovation takes a collaborative approach in other ways, too. Through the LH Accelerator program we work with companies that bring cutting-edge technologies to the construction industry and pair them with the extensive experience of LafargeHolcim, China Communications Construction Company (CCCC) and Sika. This approach already has proven potential. At our cement plant in Richmond, Canada, we are working on implementing the world’s first full-cycle carbon capture solution (see page 47). CarbonCure – a participant of the LH Accelerator in 2018 – is the partner on that project helping us to sequester the gas indefinitely. CE N T E R E D O N IN N OVAT I O N Innovation in building materials has been in our DNA for over 132 years. Today, this is captured by our innovation centers in Lyon, France, and Holderbank, Switzerland, which have pioneered innovative materials for over 30 years. Our network of labs accounts for more than 300 researchers worldwide. Through this research network we deliver locally- tailored solutions backed by global expertise. Bogota, Colombia Finding innovative digital solutions has benefits along the entire value chain, from operations to retail. 57 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E PEOPLE Our employees drive excellence in all our operations. They represent LafargeHolcim to our customers, our communities and other key stakeholders. Our employees are required to demonstrate the highest integrity, in alignment with our code of conduct, and to perform at a consistently high level. Sustaining this robust performance culture is the key goal of our people strategy. T H E K E Y S O F A PE R FO R M A N CE CU LT U R E Performance requires clear accountability, which we promote for instance by naming ’owners’ of profit & loss (’P&L’) accounts. In 2019 we Nationality nominated more than 300 P&L leaders, the majority of whom came from within the company. This outcome reflects another key value of our people approach: promoting from within. CO M M I T T E D TO DE V E LO PIN G TA LE N T To maintain a robust talent pipeline and ensure that our employees have the capabilities to succeed, we make development a top priority. One of the key elements in this respect is the LafargeHolcim Business School. Each year, around 200 top senior leaders and more than 150 emerging leaders gather in different cohorts to attend the LafargeHolcim Business School, thus ensuring momentum and alignment across the company. Launched in 2018, the LafargeHolcim Business School prepares senior leaders for sustained success in implementing Strategy 2022 – “Building for Growth”. The school cultivates effective leadership styles, enhances the dynamic among the senior leader community and provides overarching support to an aligned high-performance culture. In 2019, we focused on supporting market-facing colleagues by launching the Global Sales Academy with additional learning modules. The Global Sales Academy supports the development of a high-performance sales organization worldwide. The COMPOSITION OF SENIOR MANAGEMENT TOTAL NUMBER OF EMPLOYEES: 1,105 Male 2018: 1,216 Gender 224 Female 2018: 252 Male 83% Female 17% 58 72,452 EMPLOYEES BY REGION: Asia Pacific: 17,505 Latin America 8,871 North America 12,614 Europe 20,880 Middle East Africa 11,277 Other 1,306 program is designed for professionals in both mature and emerging markets, supporting global business as well as specific country needs. LI V IN G OU R VA LU E S O F DI V E R S I T Y A N D FA IR N E S S It is equally important that Diversity & Inclusion is embedded in our work environment as a focus topic. In 2019, we focused especially on diversity among our engineers and salespeople and on identifying and sharing good practices. In 2020, Diversity & Inclusion will be added as a specific topic to our learning strategy. All our country operations undertake thorough assessments of our employment practices (including those concerning contractors and suppliers) and develop detailed local action plans when needed. As in previous years, we worked closely with our European Works Council and global unions as well as with diverse local unions and social stakeholders to ensure that the voices of our people are heard and their concerns are properly addressed. IN CE N T I V I Z IN G B ROA D VA LU E CR E AT I O N Our compensation policy is designed to attract, motivate and retain talent. We use benchmarking to determine compensation for employees at all levels. Our top 200 leaders participate in a long-term incentive (LTI) compensation scheme that aligns their interests with the long-term success of the company and with shareholders’ interests. In 2019 we made an important step by tying the LTI directly to non-financial performance. For more details on our compensation approach, see the Compensation Report beginning on page 116. Expertise Tenure LafargeHolcim Integrated Annual Report 2019Ewekoro, Nigeria Oluwafunmi Taiwo, quarry manager. 59 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E HE ALTH & SAFE T Y In 2019 LafargeHolcim continued to improve its Health & Safety performance in all regions, with strong improvement in the long-term injury frequency rate. We have reduced our road fatalities by 58% vs 2016 and a reduction of 11% since 2018. We also see a clear improvement in the Lost Time Incident Frequency Rate (LTIFR) of 15.2 percent, with a decreased injury rate of 26% since Ambition “0” was launched in 2017. In 2019, 4 employees and 15 contractors lost their lives, compared to 19 in 2018. Additionally, 18 third parties died in relation to our operations. We had 7 fatal on-site incidents with three contractors that lost their lives in one incident. We have maintained our overall improve- ment of 55% vs. 2016; however, between 2018 and 2019 our progress plateaued. Our on-site fatalities are now limited to three countries in which we have a focused intervention to drive proactive prevention. Throughout the year, we have rigorously analyzed the remaining risks and are simultaneously addressing the specific actions that will bring us to zero. These deaths are unacceptable and run counter to our Zero-Harm culture – our vision of running our operations with zero harm to people – which is a core value of our organization. We reinforced the implementation of our strategy with the full deployment and expansion of “One Team, One Program” and launched several others. Additional program developments include a new human factors investigation system to ensure we learn from all incidents and drive improvement in all sites. We undertook a cultural assessment with over 20,000 employees and contractors to establish the baseline of our mindset change journey. Our new global H&S training team developed 13 e-learnings covering our main standards and will work on developing programs to further standardize the way we work. Our mission to drive cultural change culminates in our annual Global H&S Days. Over this period we mobilize our stakeholders and build the attitudes and behaviors that will help us achieve zero harm. In 2019 we focused on our Minimum Safe Behaviors so that everyone learns and understands the rules that prevent injury. G LO B A L PRO G R A M S TO S AV E LI V E S The road safety program completed its third year in 2019, increasing the number of kilometers driven with trained drivers from 10% in 2018 to 40% in 2019. Kilometers driven with in-vehicle monitoring systems (iVMS) rose from 47% in 2018 to 57% in 2019. To accelerate iVMS implementation, the Middle East Africa region was connected to our Transport Analytics Center in India, with full deployment expected in 2020. We recruited six colleagues to assist our countries in targeting the main risks and identifying the highest priority interventions. Our new Process Safety Management (PSM) program covered hot material management, grinding and handling of traditional solid fuels, management of alternative fuels, electrical safety, slope stability in quarries and structural integrity. In our Design Safety and Construction Quality Program (DSCQP), we invested CHF 76.9 million in safety, including in our Design Safety and Construction Quality Program to eliminate H&S risks linked to the structural integrity of our facilities. CO N S O LIDAT IN G OU R A PPROACH O N CO N S T RUC T IO N S A FE T Y In 2019 we marked our third year with no fatalities on large capex projects due to consistent H&S support on project preparation and closely reviewing execution. Our approach for construction and demolition projects has been strengthened by launching a new standard and creating visual materials and tools that give clear guidance on H&S requirements. We deployed a broad communication plan with more than 500 employees joining the training webinars globally. T H E N E X T G E N E R AT I O N O F S A FE T Y PR AC T I CE S Robotics and drones are now integrated into our day-to-day activities. A global challenge on "New Technologies in Health & Safety" revealed 265 good practices from 38 countries. We will continue exploring opportunities and testing them in pilot projects. AU DI T ING OU R H& S PE R FO R M A N CE The H&S audit program measures our ability to implement H&S Standards and ensures effective H&S management 60 LafargeHolcim Integrated Annual Report 2019LO S T T I M E I N J U RY FR E Q U E N C Y R AT E (LTIFR) 1 1.20 0.90 0.60 0.30 0 0.91 0.79 0.67 Employees Contractors on-site 2017 0.94 0.89 2018 0.9 0.69 2019¹ 0.76 0.58 2017 2018 2019 ¹ Assurance on 2019 figures for LTIFR and fatalities can be found in the Sustainability Performance Report on our website at www.lafargeholcim.com/sustainability. Jamul, India The Boots on Ground initiative improves operational discipline and drives safe behaviours. Employees and Contractors on-site across our company. Over 200 audits were conducted since the program started, providing an independent governance process that aligns with Group Internal Audit. In 2019, 72 audits were conducted across 37 countries. This year’s focus was on the training and coaching of auditors. We now have a pool of 65 qualified lead auditors. Over 400 employees – more than half of them from operations – have participated as auditors in 2019, further contributing to knowledge-sharing across facilities, product lines and borders. R E PLI C AT IN G W I T H PR IDE After the tragic incidents in India from earlier in 2019, it was critical to implement a program that would change behaviors. India proudly copied Mexico’s ’More Boots- Less Pants’ program and enhanced its effectiveness through a digital tool. Boots on Ground (BOG), as the localized initiative is called, has been implemented in all plants in less than three months with the objective of putting more leaders in the field to improve operational discipline and empowerment, drive safe frontline behaviors and improve compliance with H&S rules. Since the program started in July (ACL) and September (ACC), 246,752 hours of plant tours were made by the plant management, with an average of 2,903 hours per day in December. The digital tool helps ensure that all parts of the plant are visited, observations are recorded and actions are closed according to a fixed timeline. 61 LafargeHolcim Integrated Annual Report 2019C R E AT I N G S U S TA I N A B L E VA LU E RISK AND CONTROL 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. Compliance, Internal Control, Risk Management, Security and Resilience, IT, Sustainability and Health & Safety. These functions monitor and facilitate the implementation of effective risk management processes and internal controls by operational management to ensure the first line of defense is 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 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. More details of the Audit Committee and HSSC are disclosed in the Corporate Governance section on page 82. R I S K S LafargeHolcim operates in a constantly evolving environment which exposes the company to different external, operational and financial risks. We make continuous efforts to prevent and mitigate those risks. A comprehensive risk management process and Internal Control framework is deployed throughout the company (see page 68 for further information), with appropriate governance and tools. Through this process we identify, assess, mitigate and monitor the company’s overall risk exposure to all types of risks, whether under our control or not. R I S K M A N AG E M E N T PRO CE S S The risk management process is structured around several coordinated approaches conducted within the company (both bottom-up and top- down risk assessments) and addresses all strategic pillars, financial and non-financial targets. These risk assessments are used as a basis for the Group risk map, which is updated every year and submitted to the approval of the Executive Committee and the Audit Committee. The risk management includes several stages: • Risk identification and assessment • Risk mitigation • Verification & Remediation • Monitoring & Reporting 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 64) and Internal Control (page 68). The risks on pages 64 to 67 are considered material to our strategy and our value creation. This list is not exhaustive and represents the main risks and uncertainties faced by LafargeHolcim at the time of 2019 integrated report preparation. Other risks may emerge in the future and/or the ones stated here may become less relevant. More details on the potential impact and on our response to mitigate these risks are on pages 100 to 114. RO LE S & R E S P O N S IB ILI T IE S LafargeHolcim has a clear organizational 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 ’three lines of defense’ model. 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. The second line of defense consists of Group corporate functions such as Legal, 62 LafargeHolcim Integrated Annual Report 2019E T H IC S , IN T EG R I T Y & R I S K CO M M I T T E E 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, activities performed by assurance functions, oversight on the effective investigation and remediation of Code of Business Conduct violations and the rigorous implementation of third-party due diligence and sanctions & export control programs. E N V IRO N M E N T A N D CLIM AT E CH A N G E Our sustainability ambition focuses on Climate & Energy, 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. 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 (TCFD). The identification, assessment and effective management of climate-related risks and opportunities are fully embedded in our risk management process. In the table below we map where the recommended TCFD disclosures can be found in our report. TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES ALIGNMENT GOV E R N A N CE S T R AT EG Y R I S K M A N AG E M E N T M E T R I C S A N D TA RG E T S Disclose the organization’s governance around climate related risks and opportunities. Disclose the actual and potential impacts of climate- related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material. Disclose how the organization identifies, assesses, and manages climate-related risks. Disclose the metrics and targets used to assess and manage relevant climate- related risks and opportunities where such information is material. Board oversight Page 83, 101 Risks and opportunities CO2 risk identification Reporting CO2 metrics Page: 44-47, 103–4 Page: 100, 103–4 Page: 44–47, SPR* Management’s role Link to financial planning CO2 risk management Details Scope 1, 2 and 3 Page 83, 101 Page: 103–4 Page: 101, 103–4 Page: 44–47, SPR* Scenario planning Integration into overall risk CO2 targets Page: 103–4 Page: 85 Page: 44–47 * SPR refers to the 2019 Sustainability Performance Report, available on www.lafargeholcim.com/sustainability 63 LafargeHolcim Integrated Annual Report 2019KEY EXTERNAL RISKS R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Market changes Drop in market demand may impact sales volumes, prices and/or industry structure. Political risk Operating in many countries around the globe expose us, directly or indirectly, to the effects of economic, political and social instability. LafargeHolcim maintains a globally diversified portfolio with leading positions in all regions and a good balance between geographies which helps limit our exposure to any particular market. Mitigation measures are taken to adapt the Group’s activities and to protect our people and assets. Dedicated directives enforced across the Group as well as country-specific action plans have been implemented to enhance crisis management process, security of people and assets and business resilience. KEY OPERATIONAL RISKS R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Greenhouse gas emissions & Climate change LafargeHolcim is exposed to a variety of regulatory frameworks to reduce emissions. In addition, a perception of the sector as a high emitter could impact our reputation, thus reducing our attractiveness to investors, employees and potential employees. Based on TCFD framework and risk categorization, LafargeHolcim assesses all climate-related risks. See page 67 the most relevant risks associated with our business. Legal & Compliance risks Violation of laws and regulations covering business conduct (bribery, corruption, fraud, unfair competition, breach of trade sanctions or export controls, unauthorized use of personal data) could lead to investigation costs, financial penalties, debarment, profit disgorgement and reputational damage. Energy prices (including alternative fuels) 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. Raw materials (including mineral components) Failure to secure long-term reserves or licences and permits as well as to obtain raw materials (including mineral components) from third parties at the expected cost and / or quality may adversely impact variable costs and financial performance and impair our long-term growth outlook. LafargeHolcim has already reduced its net carbon scope 1 emissions per ton of cementitious material by 27% compared to 1990 and remains the best performer among international peers. LafargeHolcim cement is one of the most carbon- efficient in the world. With our target of 520 Kg of CO2/ ton cementitious by 2030, we are among the most ambitious companies in our sector. This target is aligned with the 2° scenario (Paris Agreement, United Nations) and has been validated by the Science Based Targets Initiative (SBTi). The Group maintains a comprehensive risk-based compliance program which aligns with the legal requirements expressed through national legislation such as the US FCPA, UK Bribery Act and French Sapin II laws. The compliance program has dedicated resources at local, regional and Group level with central steering. It covers several risk areas: Business Integrity and Compliance, Pricing Integrity and Anti-Trust Compliance, Sanctions & Trade Restrictions, Data Protection and Privacy. Group Legal manages all competition investigations and enforcement cases, tracks all Group-relevant commercial litigation cases and provides support to operating companies in dispute resolution. 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. We apply a range of tactics including monitoring of permitting process, strategic sourcing, changing input mixtures and maintaining minimum long-term reserve levels. International seaborne sourcing is used as an import alternative to offset local risks. In addition, our research is devoted to finding ways to mitigate this risk while lowering our environmental footprint, e.g. by using waste-derived materials. 64 LafargeHolcim Integrated Annual Report 2019 KEY OPERATIONAL RISKS R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Sustainability Failure to meet our environmental, social and governance (ESG) standards may expose us to regulatory sanctions and conflicts in the communities where we operate resulting in penalties. It could also reduce our ability to access new resources and impact our social licence to operate. Additionally, the failure to effectively manage and embed effective sustainability practices may impact investor confidence in LafargeHolcim. Sustainability risks are fully embedded in our risk assessment process and response to the most material risks include close monitoring of targets at the country level and a clearly articulated set of mandatory policies and standards. Sustainable products, innovation and technology Innovation is a key factor for long-term success of the company and crucial to maintain our competitive position and fulfill future customer needs, particularly low carbon performance and circular economy. LafargeHolcim has an important range of products and brands considered as sustainable low carbon products and solutions. The Group is continuously developing new products with higher CO₂ savings potential. Health and Safety risk Injury, illness or fatality could lead to reputational damage and the possibility of business interruption. 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 with a robust Health and Safety Management System, dedicated resources in each Country we operate and regular audits. In early 2020, due to the Coronavirus (Covid 19) outbreak, the priority in the Group’s Chinese operations including the joint venture company Huaxin Cement Co. Ltd. has been given to implement all necessary measures to protect the safety of all employees and their families. The outbreak, which has delayed the development of infrastructure projects, notably in the province of Hubei which represents one-third of the Group’s total capacities in China, may have implications on operating results. It is however too early to quantify the risk.. Information technology and cyber threats risk An information or cybersecurity event could lead to unavailability of critical IT systems and the loss or manipulation of data, financial loss, reputational damage, safety or environmental impact. We established policies and procedures for IT security and governance as well as internal control standards that are followed Group-wide for all applicable systems. S T R AT EG Y DR I V E R S G RO W T H F I N A N C I A L S T R E N G T H C L I M AT E & E N E RG Y E N V I RO N M E N T S I M P L I F I C AT I O N & P E R F O R M A N C E V I S I O N & P E O PL E C I RC U L A R E CO N O M Y CO M M U N I T Y 65 LafargeHolcim Integrated Annual Report 2019 KEY OPERATIONAL RISKS R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Joint ventures and associates Participation in joint ventures or associates without controlling interest could impair the Group’s ability to manage joint ventures and associates effectively, implement organization efficiencies and its controls framework, including its full compliance program. Talent management Without the right people, LafargeHolcim will be unable to deliver its growth ambition. In subsidiaries where we have joint control we seek to govern our relationships with formal agreements to implement LafargeHolcim controls and programs. A Group subsidiary has an investment in a joint venture which owns a cement plant in Cuba. The Trump Administration allowed the waiver of Title III of the Helms-Burton Act (formally known as Cuban Liberty and Democratic Solidarity Act of 1996) to lapse as of 2 May 2019. Previously, Title III had been waived by every Administration since President Clinton waived it shortly after the Act became effective. Title III allows certain persons to file lawsuits in U.S. courts relating to certain property allegedly confiscated by the Cuban government since 1959. To date, no Title III lawsuits have been filed against the Company. 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 across all LafargeHolcim countries and corporate functions. KEY FINANCIAL RISKS R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Credit rating risk 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. Our Executive Committee establishes our overall funding policies aiming to safeguard our ability to meet our obligations by maintaining a strong balance sheet. Liquidity risk 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. Interest rate risk Movements in interest rates could affect the Group’s financial results and market values of its financial instruments. The exposure is mainly addressed through the management of the fixed/floating ratio of financial liabilities. Foreign exchange risk 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. Credit risk Insurance Failure of counterparties to comply with their commitments could adversely impact the Group’s financial performance. The Group periodically assesses the financial reliability of customers. Credit risks, or the risk of counterparty default, are constantly monitored. The Group could be impacted by losses where recovery from insurance is either not available or non-reflective of the incurred loss. 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. Where possible, defined benefit pension schemes have been closed and frozen. Significant actions continue to take place to further reduce and eliminate those schemes and related risks. Group’s pension commitments Cash contributions may be required to fund unrecoverable deficits. External factors might cause these contributions to increase materially from year-to-year. Similarly, the Group’s financial results may be impacted. 66 LafargeHolcim Integrated Annual Report 2019 KEY FINANCIAL RISKS R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E 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 over how these plans are managed. Therefore, cash contributions could be required in the future to satisfy any outstanding obligations under these plans which might have a material impact on the Group’s reported financial results. Goodwill and asset impairment A write-down of goodwill or assets could have a substantial impact on the Group’s net income and equity. Tax Due to the uncertainty associated with tax matters (e.g. potential changes in applicable regulations in certain countries and increased scrutiny by governments and tax authorities in response to perceived aggressive tax strategies of multinational corporations), it is possible that, at some future date, liabilities resulting from audits or litigations could vary significantly from the Group’s liabilities. 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 the options available to mitigate risks and reduce the Group’s actual and potential financial obligations. 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. 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 legislation and tax laws. Intercompany charges within the Group follow Organisation for Economic Cooperation 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. Based on TCFD framework and risk categorization, LafargeHolcim assesses all climate-related risks. The most relevant risks associated with our business are summarized in the table below: CLIMATE-RELATED RISKS T R A N S I T I O N R I S K Policy and legal • Increased pricing of GHG emissions Technology • Unsuccessful investment in new technologies Market • Changing customer behavior Reputation • Stigmatization of sector PH Y S IC A L R I S K Chronic Acute • Increased severity of extreme weather events such as cyclones and floods • Changes in precipitation patterns and extreme variability in weather patterns 67 LafargeHolcim Integrated Annual Report 2019 C R E AT I N G S U S TA I N A B L E VA LU E R I S K A N D CO N T R O L INTERNAL CONTROL As part of Strategy 2022 – “Building for Growth”, LafargeHolcim’s Internal Control framework defines mandatory ’Minimum Control Standards’ to clarify and reinforce the responsibility of businesses in the countries. Every country and business in our organization must follow these standards with clear guidance and consequence management should these standards not be met completely. These standards encompass controls on Governance and Compliance, Accounting and Consolidation, Tax, Treasury, Fixed Assets, Inventory, Revenue, Expenditure, Human Resources, IT and Sustainability. 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. LafargeHolcim Internal Control system aims at giving the Board of 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. G ROU P IN T E R N A L CO N T RO L E N V IRO N M E N T 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 management. The Minimum Control Standards are used as a baseline for the mandatory compliance within the Group and the main reference for LafargeHolcim Corporate Governance Framework. The following key documents are part of the Minimum Control Standards and supports the internal control environment: • The Group Delegated Authorities defines approving authorities within the Group. • The Code of Business Conduct covers guidance and provides examples to help when confronted with challenging situations. IN T E R N A L CO N T RO L M O N I TO R IN G T HRO UG HOU T T HE G ROU P The Group is committed to maintaining high standards of internal control. It tests and documents adherence to mandatory “minimum internal control” standards. This work is implemented at country and at Group levels 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 • an annual internal certification process to review the main action plans and to confirm management responsibility for the quality of both internal control and financial reporting • a formal reporting, analysis and control process for the information included in the Group’s Integrated Report. The implementation of action plans identified through the activities described above, as well as through internal and external audits are followed up by relevant Senior Management. The outcome of such procedures is presented to the Audit Committee. 68 LafargeHolcim Integrated Annual Report 2019MINIMUM CONTROL STANDARDS THAT EVERY COUNTRY AND BUSINESS IN OUR ORGANIZATION MUST FOLLOW 69 LafargeHolcim Integrated Annual Report 2019Delivering returns to shareholders 70 LafargeHolcim Integrated Annual Report 2019CONTENT S 72 Capital market information Milan, Italy Lo Storto was the first tower completed as part of the iconic CityLife project. 7171 LafargeHolcim Integrated Annual Report 2019C APITAL MARKE T INFORMATION 2019 has been a very successful year for LafargeHolcim. The share price rose by 33%, outperforming the Swiss Market Index. The average trading volume amounted to approximately 2.4 million shares per day on the SIX Swiss Exchange while trading volumes significantly reduced on the Euronext Paris. The LafargeHolcim share closed at CHF 53.7 at the end of the year, representing an improvement of 32.6 percent over 2018. This was well above the performance recorded by the Swiss Market Index, which was up 26.0 percent over the same period. LafargeHolcim’s share price increased by 36.6 percent on the Paris stock exchange, while in comparison, the CAC 40 increased by 26.4 percent. P E R F O R M A N C E O F L A FA RG E H O LC I M S H A R E S V E R S U S T H E S W I S S M A R K E T I N D E X (S M I ) I N 2 0 19 2 , 3 CHF 53.7 Closing price at 31 December 2019 +33%³ CHF 33.1 billion Market capitalization at 31 December 2019 2018: CHF 24.6 billion CHF 2.00 Dividend 20191 55 50 45 40 35 1/19 2/19 3/19 4/19 5/19 6/19 7/19 8/19 9/19 10/19 11/19 12/19 LafargeHolcim SW in CHF Swiss Market Index (SMI) in CHF 1 For the 2019 financial year, the Board of Directors is proposing a cash dividend of CHF 2.00 per registered share, subject to approval by the shareholders at the Annual General Meeting on 12 May 2020. The dividend will be fully paid out of the foreign capital contribution reserves and is not subject to Swiss withholding tax. The dividend will be paid as from 20 May 2020 (ex-dividend date on 15 May 2020). 2 SMI rebased to LafargeHolcim SW share price at 1 January 2019. 3 Prices adjusted to reflect: spin-offs, stock splits/consolidations, stock dividend/bonus, rights offerings/entitlement. 72 LafargeHolcim Integrated Annual Report 2019A diversified shareholder base – (31 December 2019, in % of shares outstanding) S H A R E H O L D E R B A S E B Y G E O G R A P H Y S H A R E H O L D E R B A S E B Y I N V E S T O R C AT E G O RY Anchor shareholders 17% Switzerland 28% Continental Europe 10% North America 26% UK and Ireland 9% Rest of the world 3% Others¹ 7% ¹ Includes employee shares, treasury shares and trading accounts ² Includes employee shares, pension fund and treasury shares W E I G H T I N G O F T H E L A FA RG E H O LC I M R E G I S T E R E D S H A R E I N S E L E C T E D I N D I C E S 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 FTSE4Good Europe Index SXI Swiss Sustainability 25 PR Sources: SIX, STOXX, FTSE as of year-end 2019 Anchor shareholders 17% Institutional investors 59% Retail shareholders 11% Others² 13% Weighting in % 2.72 1.80 3.79 9.14 0.36 0.28 0.06 0.10 3.26 Additional data ISIN Security code number Telekurs code Bloomberg code Thomson Reuters code SIX, Zurich Euronext, Paris CH0012214059 CH0012214059 1221405 1221405 LHN LHN LHN:SW LHN:FP LHN.S LHN.PA 73 LafargeHolcim Integrated Annual Report 2019C A P I TA L M A R K E T I N F O R M AT I O N CO N T I N U ED LI S T IN G S LafargeHolcim is listed on the SIX Swiss Exchange and on Euronext Paris. The Group is a member of the main large indexes on the SIX Swiss Exchange (SMI, SLI and SPI). The LafargeHolcim share is also included in the socially responsible investment index, SXI Switzerland Sustainability 25. FR E E FLOAT Free float as defined by the SIX Swiss Exchange and the Euronext stands at 83 percent. Dividend policy Dividends are distributed annually. For the 2019 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 shareholders’ at the annual general meeting. The payout is scheduled for 20 May 2020, to be paid out of foreign capital contribution reserves not subject to Swiss withholding tax. S I G NIFIC A N T S H A R E HO LDE R S Information on significant shareholders can be found on page 265 of this report. DI S CLO S U R E O F S H A R E HO LDING S 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 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. K E Y DATA L A FA RG E H O LC I M R E G I S T E R E D S H A R E S Par value CHF 2.00 Number of shares issued 2019 2018 2017 2016 2015 615,929,059 606,909,080 606,909,080 606,909,080 606,909,080 Number of dividend-bearing shares 613,693,581 596,625,426 598,067,626 606,909,080 606,909,080 Number of treasury shares 2,235,478 10,736,847 9,698,149 1,152,327 1,338,494 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 CHF1 Consolidated shareholders’ equity per share in CHF 2 Dividend per share in CHF 2019 54 40 49 33.1 602.8 3.69 3.40 7.97 51.33 2.003 2018 60 39 50 24.6 625.3 2.52 2.63 5.01 50.41 2.00 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 1 Cash EPS calculated based on cash flow from operating activities divided by the weighted-average number of shares outstanding. 2 Based on shareholders’ equity — attributable to shareholders of LafargeHolcim Ltd — and the number of dividend-bearing shares (less treasury shares) as per 31 December. 3 Proposed by the Board of Directors to be paid out of foreign capital contribution reserves not subject to Swiss withholding tax. 74 LafargeHolcim Integrated Annual Report 2019 R EG I S T R AT I O N IN T H E S H A R E R EG I S T E R A N D R E S T R I C T I O N S O N VOT IN G R IG H T S 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 C U R R E N T R AT I N G (2 7 FE B RUA RY 2 02 0) 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. Each LafargeHolcim share carries one voting right. 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 stable Baa2, outlook stable A-2 P-2 Financial reporting calendar Trading update for the  first quarter 2020 30 April 2020 Annual General Meeting of Shareholders Capital Markets Day 12 May 2020 27 May 2020 75 LafargeHolcim Integrated Annual Report 2019 Governance, Risk and Compensation LafargeHolcim Integrated Annual Report 2019Bucharest, Romania Employees at a metro project. CONTENT S 78 Corporate governance 100 Risk and control 116 Compensation report 7777 LafargeHolcim Integrated Annual Report 2019CORPOR ATE 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. PR E LIM IN A RY R E M A R K S 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 on Information relating to 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 31 December 2019. G ROU P S T RUC T U R E A N D S H A R E H O LDE R S The holding company LafargeHolcim Ltd was established 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 31 December 2019, and changes which occurred in 2019, are described in this chapter. To the knowledge of LafargeHolcim, it 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 following pages of the Annual Report: Topic Business review of the Group regions p. 148 Segment information p. 181 Principal companies p. 176 Information about LafargeHolcim Ltd & listed Group companies p. 180 78 LafargeHolcim Integrated Annual Report 2019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 31 December 2019, 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 at: www.lafargeholcim.com/articles-association Authorized share capital/Certificates of participation As per 31 December 2019, Article 3ter of the Articles of Incorporation authorizes the Board of Directors, at any time until 15 May 2021, to increase the share capital by a maximum of CHF 41,392,734 through the issuance of a maximum of 20,696,367 registered shares, to be fully paid-in, with a par value of CHF 2.00 each, which are reserved exclusively for issuance to shareholders in connection with a scrip dividend. Further information can be found under: www.lafargeholcim.com/investor-relations More detailed information on the capital structure can be found as follows: Topic Articles of incorporation of LafargeHolcim Ltd www.lafargeholcim.com/articles-association Code of business conduct www.lafargeholcim.com/corporate-governance Changes in equity of LafargeHolcim 166 – 167 (information for the year 2017 is included in the  Annual Report 2018, 162 – 163) Detailed information on conditional capital www.lafargeholcim.com/articles-association Articles of incorporation: Art. 3bis Detailed information on authorized capital www.lafargeholcim.com/articles-association Articles of incorporation: Art. 3ter Key data per share 72 – 75, 237, 245 Rights pertaining to the shares www.lafargeholcim.com/articles-association Articles of incorporation: Art. 6, 9 10 Regulations on transferability of shares and nominee registration www.lafargeholcim.com/articles-association Articles of incorporation: Art. 4, 5 Warrants/options 237 – 240 C A PI TA L S T RUC T U R E LafargeHolcim has one uniform type of registered share in order to comply with international capital market requirements in terms of an open, transparent, and modern capital structure and to enhance attractiveness, particularly for institutional investors. Share capital As a consequence of the creation of authorized capital in connection with the scrip dividend approved at the Shareholders General Meeting 2019 which resulted in 19,303,633 newly issued shares, and the cancellation of 10,283,654 shares repurchased under the share buyback program which was completed in March 2018, as of 31 December 2019, the nominal, fully paid-in share capital of LafargeHolcim amounted to CHF 1,231,858,118. The share capital is divided into 615,929,059 registered shares of CHF 2.00 nominal value each. 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 31 December 2019). 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 the new shares. The acquisition of shares 79 LafargeHolcim Integrated Annual Report 2019 CO R P O R AT E G OV E R N A N C E CO N T I N U ED From left to right: Colin Hall, Member; Patrick Kron, Member; Jürg Oleas, Member; Claudia Sender Ramirez, Member; Hanne Birgitte Breinbjerg Sørensen, Member; Dieter Spälti, Member; Beat Hess, Chairman; Paul Desmarais Jr., Member; Oscar Fanjul, Vice-Chairman; Adrian Loader, Member; Naina Lal Kidwai, Member B OA R D O F DIR EC TO R S A N D CO M M I T T E E S The Board of Directors currently consists of 11 members, all of whom are independent, were not previously members of the LafargeHolcim management, and have no important business connections with LafargeHolcim. 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. Claudia Sender Ramirez as new members of the Board of Directors. The shareholders re-elected eight members of the Board of Directors. Dr. Beat Hess was re-elected as Chairman of the Board of Directors. Furthermore, the shareholders re-elected four members of the Nomination, Compensation & Governance Committee. Independence is defined in line with Swiss 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 for the past three years and does not maintain, Please see pages 92 – 95 for the biographical information of the members of the Board of Directors as per 31 December 2019. Mr. Gérard Lamarche and Mr. Nassef Sawiris retired from the Board of Directors at the Shareholders General Meeting of 15 May 2019. In 2019, the shareholders elected Mr. Colin Hall, Ms. Naina Lal Kidwai and Ms. New members of the Board of Directors are required to participate in an induction program where they are introduced in detail to the company’s areas of business and where they become familiar with the organizational structure, strategic plans and other important matters relating to the governance of the company. The Board of Directors meets as often as business requires, but at least four times 80 LafargeHolcim Integrated Annual Report 2019a year. In 2019, five regular meetings and four additional meetings were held. One meeting focused on strategy topics. In October 2019 the Board of Directors together with the Executive Committee visited operating sites in the USA and Canada. The CEO regularly attends the meetings of the Board of Directors. 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. In addition selected members of the senior management have been invited by the respective Chairmen to attend the meetings of the Board of Directors or its Committees. The average duration of the regular meetings of the Board of Directors 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 composition and succession planning Succession planning is of high relevance to the Board of Directors. The Nomination, Compensation & Governance Committee regularly considers the composition of the Board as a whole and in light of staffing for the Committees. With regard to the composition of the Board of Directors, the Nomination, Compensation & Governance Committee considers diversity (including but not limited to: origin, domicile, gender, age and professional background) as well as such other factors necessary to address needs of the Board to fulfill its responsibilities. The Nomination, Compensation & Governance Committee also considers other activities and commitments of an individual in order to ensure that a proposed member of the Board of Directors will have sufficient time to dedicate to his role as member of the Board of Directors of LafargeHolcim. Board and Committee performance and effectiveness evaluation According to Paragraph 4 of the Expertise company’s Organizational Rules, the Board of Directors annually conducts self-assessments to evaluate the Expertise Expertise Expertise performance and operational effectiveness of the Board of Directors and its Committees. This includes confidential feedback on the basis of anonymous questionnaires and individual interviews with each member of the Board of Directors conducted by the Chairman of the Nomination, Compensation & Governance Committee. This assessment covers topics including size/composition of the Board of Directors, qualifications, meeting cycle, allocation of tasks between the Board of Directors and its Committees, processes, governance, meetings, pre-reading materials, effectiveness, leadership and culture. In addition each Committee reviews the adequacy of its composition, organization and processes as well as the scope of its responsibilities and evaluates its performance. The main Nationality issues identified are then presented and discussed to ensure continued Nationality effectiveness of the Board of Directors and its Committees. Nationality Nationality E X P E R T I S E N AT I O N A L I T Y Finance/Investment Logistics/ Transportation Legal/Regulatory/ Governance HR/Remuneration Construction Engineering Technology Sustainablility American British Brazilian Canadian Danish French Indian Spanish/Chilean Swiss T E N U R E Tenure Tenure ( I N C L . AT L A FA R G E S . A . A N D H O LC I M LT D) G E N D E R Gender Gender Tenure Tenure < 5 5 to 10 > 10 Gender Gender Male Female 81 LafargeHolcim Integrated Annual Report 2019CO R P O R AT E G OV E R N A N C E CO N T I N U ED As of 31 December 2019 our members of the Board of Directors serve on the following expert Committees: AU DI T CO M M I T T E E N O M IN AT I O N , CO M PE N S AT I O N & GOV E R N A N CE CO M M I T T E E H E A LT H , S A FE T Y & S U S TA IN A B ILI T Y CO M M I T T E E Patrick Kron (Chairman) Oscar Fanjul (Chairman) Adrian Loader (Chairman) Naina Lal Kidwai Patrick Kron Hanne B. Sørensen Dieter Spälti 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. For information on the role of the Health, Safety and Sustainability Committee with regard to governing the risks and opportunities around climate change, please see the chart on the opposite page. In 2019 the Health, Safety and Sustainability Committee held four regular meetings. 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 Colin Hall Jürg Oleas Dieter Spälti Paul Desmarais, Jr. Adrian Loader Hanne B. Sørensen 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 2019, five regular meetings of the Audit Committee were held. The average duration of the regular meetings was three hours and thirty minutes. In 2019, the Audit Committee reviewed in particular the financial reporting of the Group, the releases of the quarterly results and the findings of the external auditors. The Audit 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 Audit Committee also evaluated the performance of the external auditors and their fees. The charter of the Audit Committee is available at: www.lafargeholcim.com/ articles-association 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 Nomination, Compensation & Governance 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 2019, the Nomination, Compensation & Governance Committee held four regular meetings and one additional meeting. The average duration of the regular meetings was two hours and thirty minutes. 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 116. The charter of the Nomination, Compensation & Governance Committee is available at: www.lafargeholcim.com/ articles-association 82 LafargeHolcim Integrated Annual Report 2019B OA R D A N D CO M M I T T E E AT T E N DA N CE AT S CH E DU LE D O R DIN A RY M E E T IN G S Name Beat Hess¹ Oscar Fanjul² Paul Desmarais, Jr. Colin Hall³ Naina Lal Kidwai⁴ Gérard Lamarche⁵ Patrick Kron Adrian Loader Jürg Oleas Nassef Sawiris⁶ Claudia Sender Ramirez⁷ Hanne B. Sørensen Dieter Spälti Position Chairman Vice-Chairman Member Member Member Member Member Member Member Member Member Member Member Board Audit Committee Nomination, Compensation & Governance Committee Health, Safety & Sustainability Committee 5/5 4/5 1/5 3/3 3/3 2/2 5/5 5/5 5/5 2/2 3/3 4/5 5/5 – – – 1/2 – 2/3 5/5 – 5/5 – – – 5/5 – 4/4 1/4 – – – – 4/4 – 0/1 – 4/4 – – – – – 1/2 – 4/4 4/4 – – – 3/4 4/4 1 Although the Chairman is not formally a member of the Committees he attends as a guest ² Although the Vice-Chairman is not formally a member of the Audit Committee and the Health, Safety & Sustainability Committee he attends as a guest ³ Member of the Board and of the AC as of Shareholders General Meeting 2019 4 Member of the Board and of the HSSC as of Shareholders General Meeting 2019 5 Member of the Board and of the AC until Shareholders General Meeting 2019 6 Member of the Board and of the NCGC until Shareholders General Meeting 2019 7 Member of the Board as of Shareholders General Meeting 2019 L A FA RG E H O LCIM GOV E R N A N CE A PPROACH FO R CLIM AT E - R E L AT E D R I S K S A N D O PP O R T U N I T IE S Board of Directors The Board of Directors bears ultimate responsibility for strategy and overall governance of the company. Health, Safety & Sustainability Committee (HSSC) Executive Committee (including Chief Sustainability Officer) The HSSC advises the Board on all matters related to sustainable development, including those related to climate and energy. The HSSC reviews and approves the company’s climate-related plans and targets. The Executive Committee is ultimately responsible for execution of the climate and energy strategy, and climate-related issues are managed on an operational level by the Chief Sustainability Officer (CSO), an Executive Committee-level position that was created in 2019. The CSO is supported by a sustainability core team. Research and development Sustainability core team Fully half of Research and Development projects are aimed at finding low-carbon solutions. Around 40 percent of our patents have a positive impact on our carbon footprint along the value chain. 83 LafargeHolcim Integrated Annual Report 2019 CO R P O R AT E G OV E R N A N C E CO N T I N U ED CO R P O R AT E GOV E R N A N CE FR A M E WO R K 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 24 May 2002, and are reviewed at least every two years and amended as required. They were last reviewed and amended in May 2019 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. 84 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 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. 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 of Group companies 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. LafargeHolcim Integrated Annual Report 2019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 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 strategy 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 2019 and submitted to and analyzed by the Audit Committee and Executive Committee. Responsibilities concerning risks are clearly defined at country, region 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 page 100 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 reports to the Head of Group Internal Audit. 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. 85 LafargeHolcim Integrated Annual Report 2019CO R P O R AT E G OV E R N A N C E CO N T I N U ED E X ECU T I V E CO M M I T T E E 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 1 January 2019 reported in the Annual Report 2018 on page 99, the following changes within the Executive Committee during the year under review have occurred: Effective 1 October 2019, Magali Anderson has been appointed as Chief Sustainability Officer and member of the Executive Committee. With this, LafargeHolcim has accelerated its efforts to be the industry leader on decarbonization, circular economy, health and safety and corporate social responsibility. Committees have 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 privately held Glas Troesch Holding AG and Géraldine Picaud who is a non-executive Director of the stock- listed Infineon Technologies AG. During the year under review, the Executive Committee of LafargeHolcim was comprised of the ten members reported in the table below. Please refer to pages 98 – 99 for biographical information on the members of the Executive Committee. None of the members of the Executive CO M P O S I T I O N O F T H E E X ECU T I V E CO M M I T T E E Name Jan Jenisch Géraldine Picaud Magali Anderson Keith Carr Marcel Cobuz Feliciano González Muñoz Miljan Gutovic Martin Kriegner Oliver Osswald René Thibault Position CEO CFO Member Member Member Member Member Member Member Member Responsibility Chief Sustainability Officer Group General Counsel Region Head Europe Group Head of Human Resources Region Head Middle East Africa Region Head Asia Region Head Latin America Region Head North America 86 LafargeHolcim Integrated Annual Report 2019S H A R E H O LDE R ’ S PA R T I CIPAT I O N 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. 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/corporate-governance 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. 87 LafargeHolcim Integrated Annual Report 2019CO R P O R AT E G OV E R N A N C E CO N T I N U ED AU DI TO R S 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 2019, the auditors participated in all five regular meetings of the Audit Committee to discuss individual agenda items. Deloitte AG, Zurich, was re-elected at the Shareholders General Meeting 2019 as the auditors of LafargeHolcim. 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 2019 and 2018: 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 2019 11.8 0.9 12.6 2.1 14.7 0.2 0.1 0.1 0.4 2018 16.1 0.8 16.9 0.8 17.7 0.3 0.1 0.5 0.9 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. 88 LafargeHolcim Integrated Annual Report 2019the company and understanding of objectives, strategy, and business activities of the company. The financial reporting calendar is shown on pages 75 and 270 of this Annual Report. Should there be any specific queries regarding LafargeHolcim, please contact: 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 As a listed company, LafargeHolcim 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 is subject to the SIX and AMF rules on the disclosure of management transactions 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 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 Shareholders General Meeting. Current information relating to sustainable development is available at: www.lafargeholcim.com/sustainability In keeping with our commitment to integrated reporting, we have published the main indicators of our non-financial performance in this report. We have stopped publishing the Sustainability Report as a separate publication. However we will continue to disclose the full (i.e. unchanged) range of non- financial performance indicators in the Sustainability Performance Report document on www.lafargeholcim.com/sustainability. OT H E R GOV E R N A N CE IN FO R M AT I O N 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 116) and in the Holding company results (note 14, page 265). 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. Information policy LafargeHolcim 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 89 LafargeHolcim Integrated Annual Report 2019CO R P O R AT E G OV E R N A N C E CO N T I N U ED OUR BOARD OF DIREC TOR S Beat Hess • Chairman of the Board of Directors Oscar Fanjul • Vice-Chairman of the Board of Directors • Chairman of the Nomination, Compensation & Governance Committee Biography on page 92 Biography on page 92 Patrick Kron • Member of the Board of Directors • Chairman of the Audit Committee • Member of the Health, Safety & Sustainability Committee Adrian Loader • Member of the Board of Directors Jürg Oleas • Member of the Board of Directors • Chairman of the Health, Safety • Member of the Audit Committee & Sustainability Committee • Member of the Nomination, Compensation & Governance Committee Biography on page 93 Biography on page 93 Biography on page 94 90 LafargeHolcim Integrated Annual Report 2019Paul Desmarais, Jr. • Member of the Board of Directors • Member of the Nomination, Compensation & Governance Committee Colin Hall • Member of the Board of Directors Naina Lal Kidwai • Member of the Board of Directors • Member of the Audit Committee • Member of the Health, Safety & Sustainability Committee Biography on page 92 Biography on page 92 Biography on page 93 Claudia Sender Ramirez • Member of the Board of Directors Hanne Birgitte Breinbjerg Sørensen • Member of the Board of Directors • Member of the Health, Safety & Sustainability Committee • Member of the Nomination, Compensation & Governance Committee Dieter Spälti • Member of the Board of Directors • Member of the Audit Committee • Member of the Health, Safety & Sustainability Committee Biography on page 94 Biography on page 94 Biography on page 95 91 LafargeHolcim Integrated Annual Report 2019CO R P O R AT E G OV E R N A N C E O U R B OA R D O F D I R E C T O R S CO N T I N U ED Beat Hess Chairman of the Board Paul Desmarais, Jr. Member Colin Hall Member PROFESSIONAL BACKGROUND American national born in 1970, is a Member of the Board of Directors and a Member of the Audit Committee of LafargeHolcim. He was elected to the Board of Directors of LafargeHolcim in 2019. He holds a Bachelor of Arts from Amherst College, Massachusetts, USA and an MBA from the Stanford University Graduate School of Business, California, USA. He joined Groupe Bruxelles Lambert (“GBL”) in 2012 and was appointed CEO of GBL’s wholly-owned subsidiary Sienna Capital the following year. In 2016, he was additionally appointed the Head of Investments of GBL. He began his career working for the Merchant Banking Division of Morgan Stanley in 1995. Between 1997 and 2008, Colin Hall held various positions with the private equity firm Rhône Group in New York and London. From 2009 to 2011, Colin Hall was a partner in a hedge fund sponsored by Tiger Management. OTHER ACTIVITIES AND FUNCTIONS • Member of the Board of Directors and Member of the Presiding Committee of GEA Group AG (Düsseldorf, Germany) • Member of the Board of Directors and a Member of the Audit Committee and of the Strategy Committee of Imerys SA (Paris, France) PROFESSIONAL BACKGROUND Swiss national born in 1949, Beat Hess was elected to the Board of Directors of LafargeHolcim (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 in 2015. Oscar Fanjul holds a PhD in Economics. 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 92 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. 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 • 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) • 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 LafargeHolcim Integrated Annual Report 2019Naina Lal Kidwai Member Patrick Kron Member Adrian Loader Member PROFESSIONAL BACKGROUND French national born in 1953, Patrick Kron was elected to the Board of Directors of LafargeHolcim 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. PROFESSIONAL BACKGROUND British national born in 1948, Adrian Loader was elected to the Board of Directors of LafargeHolcim (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 • Founder of PKC&I (Patrick Kron – Conseils & Investissements) • Chairman of the Board of Directors of Imerys, Paris, France 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 the Board of Directors of Truffle • Chairman of Resero Gas, London, United Capital, Paris, France Kingdom • Member of the Board of Directors of Sanofi S.A., Paris, France • Permanent Representative of PKC&I on the Supervisory Board of Directors of Segula Technologies S.A., Nanterre, France PROFESSIONAL BACKGROUND Indian national born in 1957, Naina Lal Kidwai is a Member of the Board of Directors and a Member of the Health, Safety & Sustainability Committee of LafargeHolcim. She was elected to the Board of Directors of LafargeHolcim in 2019. Naina Lal Kidwai holds an MBA from the Harvard Business School, Boston, USA. She has made regular appearances on listings by Fortune and others of international women in business and is the recipient of awards and honors in India including the Padma Shri for her contribution to Trade and Industry, from the Government of India. Naina Lal Kidwai started her career in 1982 and until 1994 was at ANZ Grindleys Bank Plc. From 1994 to 2002, she was Vice Chairman and Head of Investment Banking at Morgan Stanley India before moving to HSBC, where she was Chairperson of the HSBC Group of Companies in India and on the Board of HSBC Asia Pacific, until her retirement in December 2015. She was President of the Federation of Indian Chambers of Commerce & Industry (FICCI). She also served for 12 years until 2018 as Non- Executive Director of Nestlé S.A., Vevey, Switzerland. Her interests in water and the environment are reflected in her engagements with The Shakti Sustainable Energy Foundation, Global Commission on Economy & Climate, and Chair of the FICCI Sustainability, Energy and Water Council as well as Chair of the India Sanitation Coalition. She has authored three books including the bestsellers “30 Women in Power: Their Voices, Their Stories” and “Survive Or Sink: An Action Agenda for Sanitation, Water, Pollution, and Green Finance.” OTHER ACTIVITIES AND FUNCTIONS • Non-Executive Member of the Board of Directors of Max Financial Services, New Delhi, India • Non-Executive Member of the Board of Directors of CIPLA, Mumbai, India • Non-Executive Member of the Board of Directors of Larsen & Toubro, Mumbai, India • Non-Executive Member of the Board of Directors of Nayara Energy Ltd, Mumbai, India (including of its subsidiary Vadinar Oil Terminal Ltd) • Chairperson of the India Advisory Board Advent International Private Equity, Mumbai, India 93 LafargeHolcim Integrated Annual Report 2019CO R P O R AT E G OV E R N A N C E O U R B OA R D O F D I R E C T O R S CO N T I N U ED Jürg Oleas Member Claudia Sender Ramirez Member Hanne Birgitte Breinbjerg Sørensen Member PROFESSIONAL BACKGROUND Swiss national born in 1957, Jürg Oleas was elected to the Board of Directors of LafargeHolcim (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 for 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 1 January 2005. 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 • Member of the Board of Directors and Chairman of the Strategy Committee of RUAG Holding AG, Bern, Switzerland PROFESSIONAL BACKGROUND Brazilian national born in 1974, Claudia Sender Ramirez was elected to the Board of Directors of LafargeHolcim in 2019. She holds a BS in Chemical Engineering from the Polytechnic School, University of Sao Paulo, Brazil and an MBA from the Harvard Business School, Boston, USA. Claudia Sender Ramirez was Senior Vice President for Clients at LATAM Airlines Group until May 2019. Before that, she was CEO for LATAM Airlines Brazil since 2013. She joined TAM Airlines in 2011 as Commercial and Marketing Vice President and in 2012, once the association between LAN and TAM happened, she became responsible for the Brazil Domestic Business Unit. Claudia Sender Ramirez has also worked for several years in the Consumer Goods industry, focusing on Marketing and Strategic Planning. Prior to joining LATAM, she was Marketing Vice President at Whirlpool Latin America, where she worked for seven years. She has also worked as a consultant at Bain&Company, in projects ranging from telecommunications to airlines. OTHER ACTIVITIES AND FUNCTIONS • Member of the Board of Directors of Telefonica S.A., Madrid, Spain • Member of the Board of Directors of Gerdau S.A., São Paulo, Brazil • Member of the Board of Directors of Estacio Participações S.A., Rio De Janeiro, Brazil 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 31 December 2016. 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 and Member of the Nomination and Remuneration Committee and Chair of the CSR Committee of Delhivery Pvt. Ltd., Gurgaon, India • Member of the Board of Directors, Member of the Audit Committee, Member of the Nomination and Remuneration Committee, and Chairperson of the Safety, Health and Sustainability Committee and of the Risk Committee of Tata Motors Ltd, Mumbai, India • Member of the Board of Directors of Jaguar Land Rover Automotive PLC, Coventry, UK (including those of its subsidiaries Jaguar Landrover Holdings Ltd. and Jaguar Landrover Ltd.) • Member of the Board of Directors, Member of the Nomination and Remuneration Committee, and Chairperson of the Audit Committee of Sulzer Ltd, Winterthur, Switzerland • Member of the Board of Directors, Member of the Remuneration and Nomination Committee and the Audit Committee of Tata Consultancy Services Ltd, Mumbai, India 94 LafargeHolcim Integrated Annual Report 2019Dieter Spälti Member PROFESSIONAL BACKGROUND Swiss national born in 1961, Dieter Spälti was elected to the Board of Directors of LafargeHolcim (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. He was Chairman of the Strategy Committee of LafargeHolcim from 2015 to 2018. 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 • Member of the Board of Directors and Member of the Audit Committee of Alcon, Fort Worth, Texas, USA 95 LafargeHolcim Integrated Annual Report 2019CO R P O R AT E G OV E R N A N C E CO N T I N U ED E XECUTIVE COMMIT TEE Jan Jenisch CEO Géraldine Picaud CFO Biography on page 98 Biography on page 98 Magali Anderson Keith Carr Feliciano González Muñoz Chief Sustainability Officer Legal and Compliance Member Biography on page 98 Biography on page 98 Biography on page 98 96 LafargeHolcim Integrated Annual Report 2019Marcel Cobuz Europe Miljan Gutovic Middle East Africa Biography on page 98 Biography on page 99 Martin Kriegner Asia Pacific Oliver Osswald Latin America René Thibault North America Biography on page 99 Biography on page 99 Biography on page 99 97 LafargeHolcim Integrated Annual Report 2019CO R P O R AT E G OV E R N A N C E E X E C U T I V E CO M M I T T E E1 CO N T I N U ED Jan Jenisch CEO Magali Anderson Member Marcel Cobuz Member Jan Jenisch, German national, 1966, was appointed Chief Executive Officer of LafargeHolcim in September 2017. From 2012 Jan served as Chief Executive Officer of Sika AG, the Swiss manufacturer of products and systems for the building materials and automotive sector. Jan 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 also a non-executive Director of the privately held Glas Troesch Holding AG. Jan did his studies in Switzerland and the US and is a graduate of the University of Fribourg, Switzerland, and holds an MBA (lic.rer.pol.). Magali Anderson, French national, 1967, was appointed as a member of the Group Executive Committee of LafargeHolcim in October 2019. She joined LafargeHolcim as Group Head of Health & Safety in October 2016. Magali started her career as a field engineer on offshore oil rigs in Nigeria. She spent 27 years in the Oil and Gas industry, mainly with Schlumberger, holding operational line management positions like CEO Angola and Region Head Europe. During her career she also held several functional roles, including Vice President Marketing & Sales, Vice President Shared Services Organization for the Europe and Africa region and Global Head of Maintenance. Magali graduated as a Mechanical Engineer from INSA Lyon, France. Marcel Cobuz, Romanian and French national, 1971, was appointed as Head of Europe and member of the Group Executive Committee of LafargeHolcim in January 2018. Since 2019 he has also been responsible for the Group Innovation team. Marcel joined LafargeHolcim in 2000 and has held various senior leadership roles in six different countries in Europe, the Middle East, Africa and Asia. From 2012 to 2015 he held Group roles leading organizational change projects in marketing across Lafarge and subsequently led the Global Pre-Merger Integration Project between Lafarge and Holcim. He studied Law and Global Economics and is a graduate of the University of Bucharest. Géraldine Picaud Member Keith Carr Member Géraldine Picaud, French national, 1970, was appointed as Chief Financial Officer of LafargeHolcim since January 2018. Géraldine joined the Group from Essilor International, a CAC 40-listed ophthalmic optics company, 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 thirteen years at international specialty chemicals group Safic Alcan, first as Head of Business Analysis and then as CFO. She started her career with audit firm Arthur Andersen. She is also a non-executive Director of the stock-listed Infineon Technologies AG. Géraldine graduated from the Superior School of Commerce of Reims and holds an MBA. Keith Carr, British national, 1966, was appointed as Group Head of Legal and Compliance and a member of the Group Executive Committee of LafargeHolcim as of January 2019. Keith joined LafargeHolcim in 2017 as Group General Counsel. In addition to the Legal and Compliance function, he became responsible for the Security department during 2018. Prior to LafargeHolcim Keith 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. Keith gained his LLB degree from Northumbria University and is a qualified solicitor in England and Wales as well as a Chartered Company Secretary. Feliciano González Muñoz Member Feliciano González Muñoz, Spanish national, 1963, was appointed as Group Head of Human Resources in May 2018, and as member of the Group Executive Committee of LafargeHolcim as of January 2019. He has developed his career for more than thirteen years in senior Human Resources roles in LafargeHolcim. Before his current role he was Human Resources Director for Europe, Group Head of Labor Relations, and also interim CEO of Spain from 2013 to 2015. Before joining LafargeHolcim Feliciano developed his career at Fujitsu Ltd, building materials company BPB Plc and the pharmaceutical company Almirall. Feliciano holds a PhD in Labor Law from Universidad Complutense de Madrid and an Executive MBA from IE, Madrid. 98 LafargeHolcim Integrated Annual Report 2019Miljan Gutovic Member Oliver Osswald Member Miljan Gutovic, Australian national, 1979, was appointed as Head of Middle East Africa and member of the Group Executive Committee of LafargeHolcim in July 2018. Initially joining LafargeHolcim as Head of Marketing & Innovation, Miljan was responsible for product development and commercial solutions. Since 2005 he worked for specialty chemical company Sika as Head of Middle East and TM Waterproofing EMEA as General Manager Australia and as a Business Unit Manager. Miljan holds a Bachelor’s degree in Civil Engineering and a PhD in Engineering from the University of Technology in Sydney. Martin Kriegner Member Martin Kriegner, Austrian national, 1961, was appointed as Head of Asia Pacific and member of the Group Executive Committee of LafargeHolcim in August 2016. Since 2019 he has also been responsible for the Group Cement Excellence team. Martin joined the Group in 1990 and has held various senior leadership roles within Europe and Asia. 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 in 2016 he was appointed Head of India. Martin is a graduate of Vienna University and holds a Doctorate in Law. He also obtained an MBA at the University of Economics in Vienna. Oliver Osswald, Swiss national, 1971, was appointed as Head of Latin America and member of the Group Executive Committee of LafargeHolcim in August 2016. Since 2019 he has also been responsible for LafargeHolcim Trading. Oliver joined Holcim Apasco in Mexico in 1995. He has been responsible for various cement plants in Switzerland and 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, Mexico, in 2012, before being appointed Country Head for Argentina in 2014. Oliver is a graduate of the Technische Hochschüle in Ulm and holds an Executive Education Degree from Harvard Business School. René Thibault Member René Thibault, Canadian national, 1966, was appointed as Head of North America and member of the Group Executive Committee of LafargeHolcim in January 2018. René joined the company in 1989 and has held various senior leadership roles in Europe, the Middle East, Africa and Canada. From 2009 he was in charge of the Aggregates and Concrete businesses in Western Canada and in 2012 he was appointed CEO Western Canada. René is a graduate of Queen’s University in Civil Engineering and has completed the Advanced Management Program at Harvard Business School. 99 LafargeHolcim Integrated Annual Report 2019RISK AND CONTROL 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. R I S K S LafargeHolcim operates in a constantly evolving environment which exposes the company to different external, operational and financial risks, whether under our control or not. 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 company, with appropriate governance and tools. Through this process we identify, assess, mitigate and monitor the company’s overall risk exposure. To this end, we incorporate risk thinking into all strategic decision-making, reducing the likelihood and impact of potential adverse events and ensuring compliance with laws & regulations through the deployment of our Internal Control system in every country where we operate. Further information is provided in the Internal Control section on page 113. R I S K M A N AG E M E N T PRO CE S S The risk management process is structured around several coordinated approaches conducted within the company. It includes bottom-up and top-down risk assessments and addresses all strategic pillars, financial and non-financial targets. These assessments are used as a basis for the Group risk map, which is updated every year and submitted to the approval of the Executive Committee and the Audit Committee. The risk management process includes several stages: • Risk identification and assessment Management at the country and at the Group level assesses and evaluates the potential impact and likelihood of the key risks which could have a material adverse effect on the current or future operations of the business, typically within a three-year period, in alignment with Strategy 2022 - ’Building for Growth’. For the sustainability and climate-related risks, the horizon has been extended to a ten-year period in order to consider all impacts pertaining to the various possible scenarios that might occur (acceleration of trends or significant changes in stakeholders expectations as well as regulatory discontinuity) and impair the achievement of our sustainability ambitions which are set for 2030 in accordance with the Paris agreement targets. Our comprehensive risk assessment process includes the assessment of external risks among which the physical impact of climate change, which is monitored at the Group level. • Risk mitigation Management defines actions and/or controls to mitigate the key risks. Risk transfer through insurance solutions and the Internal Control system form an integral part of our risk management approach. 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. 100 Further information is provided in Legal & Compliance risk (page 105) and Internal Control (page 113). • Verification & Remediation Group Internal Audit performs independent assessments of the effectiveness of mitigating actions and controls. It also assesses the effectiveness of Internal Control and 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. • Monitoring & Reporting Regular progress on the actions/ controls are followed up by risk leads at the country level and reported to Group through the LafargeHolcim Risk Management tool. 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 control standards are submitted to the Group on a regular basis. Further information is provided in the Internal Control section on page 113. LafargeHolcim Integrated Annual Report 2019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 (TCFD). The identification, assessment and effective management of climate- related risks and opportunities are fully embedded in our risk management process (as described on page 100), which is subject to continuous improvement. In the table on page 104 we map where the recommended TCFD disclosures can be found in our report. Additional metrics & targets as well as the complete risk assessment are detailed in our submissions to the Carbon Disclosure Project. Documents are available on www.cdp.net/en/responses. As part of this commitment in 2019 LafargeHolcim participated in the TCFD Preparer Forum for the Construction sector and contributed to the promotion of TCFD recommendations for better communication on climate change- related risks and opportunities. RO LE S & R E S P O N S IB ILI T IE S LafargeHolcim has a clear organizational 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 ’three lines of defense’ model. 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. The second line of defense consists of Group corporate functions such as Legal, Compliance, Internal Control, Risk Management, Security and Resilience, IT, Sustainability and Health & Safety. These functions monitor and facilitate the implementation of effective risk management processes and internal controls by operational management to ensure the first line of defense is 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 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 oversight of compliance and risk management processes and the review of management 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 promoting a healthy and safe environment for employees and contractors, as well as on sustainable development and social responsibility. The HSSC approves LafargeHolcim’s climate strategy framework, reviews performance against key indicators and authorizes major climate-related capital expenditures, acquisitions and /or divestitures. More details of the Audit Committee and HSSC are disclosed in the Corporate Governance section on page 82. E T H IC S , IN T EG R I T Y & R I S K CO M M I T T E E 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 such as Legal and Compliance, Internal Control, Risk Management, Internal Audit, Group Investigations, Health & Safety, IT and Security and Resilience. Its mandate includes oversight regarding the effective investigation and remediation of Code of Business Conduct violations and the rigorous implementation of third-party due diligence and sanctions & export control programs that were launched in 2017. The Ethics, Integrity & Risk Committee includes the Group CFO, the Group General Counsel and Chief Sustainability Officer who report to the Group CEO and are members of the Executive Committee. The Ethics, Integrity & Risk Committee reports to the Audit Committee of the Board of Directors. It meets quarterly. E N V IRO N M E N T A N D CLIM AT E CH A N G E Our sustainability ambition focuses on Climate & Energy, 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 ton of cement by increasing the use of by- products and waste-derived resources and through investments in energy efficiency and innovation. Additionally, 101 LafargeHolcim Integrated Annual Report 2019R I S K A N D CO N T RO L CO N T I N U ED The risks on pages 102 to 112 are considered material to our strategy and our value creation. This list is not exhaustive and represents the principal risks and uncertainties faced by LafargeHolcim at the time of 2019 integrated 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 78 to 89), Management Discussion & Analysis (pages 142 to 157) and note 14.6 of the consolidated Financial Statements (“Group risk management,” page 220). KEY EXTERNAL RISKS R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Market changes The risk that the economic environment in a given country can significantly change and have an influence on demand for construction and building materials. Strategic pillars impacted: 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 which helps limit our exposure to any particular market. 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. 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 trade protectionism, turmoil, terrorism, civil war and unrest, particularly in developing markets. Strategic pillars impacted: Economic, social and/or political instability (e.g. changes of government or increased political pressure) can impact our people, assets and business. That impact may be direct (e.g. security matters) or indirect (e.g. economic uncertainty). When necessary, mitigation measures are taken to adapt the Group’s activities and to protect our people and assets. Dedicated directives enforced across the Group as well as country-specific action plans have been implemented to enhance crisis management, security of people and assets and business resilience. In the mid-to-long term, 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 market. 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. S T R AT EG I C O B JEC T I V E S Growth Financial strength Simplification and performance Vision and people Climate and energy Circular economy Environment Community 102 LafargeHolcim Integrated Annual Report 2019 KEY OPERATIONAL RISKS R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Greenhouse gas emissions & 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, employees and potential employees. Strategic pillars impacted: Based on TCFD recommendations, LafargeHolcim assesses in a systematic way all potential impacts of climate-related risks: T R A N S I T I O N R I S K S : P O L I C Y A N D R E G U L ATO R Y: Following the agreement on climate change at Paris COP21, signatory countries are required to communicate 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 price mechanisms, ii) impose more restrictive cap & trade systems and iii) increase the cost to firms of emitting CO2. In Europe, Phase IV of the European Trading System (ETS) will come into force in 2021, reducing CO2 allowances. In the absence of efficient border adjustment mechanisms, imports of clinker and cement from outside the EU might bring more competition. T E C H N O LO G Y: We are currently engaged in several initiatives which require large investments, especially carbon capture and storage technologies. The risk of the cost of technology being significantly higher than existing carbon pricing mechanisms and the lack of integrated deployment of carbon capture in the supply chain ecosystems (transportation, sequestration, etc.), could prevent LafargeHolcim from its successful implementation. M A R K E T: As the carbon debate intensifies, cement and concrete could be challenged by our customers as the building material of first choice because of perceived high embodied CO2. In the long term, 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. LafargeHolcim has already reduced its net carbon scope one emissions per ton of cementitious material by 27% compared to 1990 and remains the best performer among international peers. LafargeHolcim cement is one of the most carbon-efficient in the world. With our target of 520 Kg of CO2/ton cementitious by 2030, we are among the most ambitious companies in our sector. This target is aligned with the 2° scenario (Paris Agreement, United Nations) and has been validated by the Science Based Targets Initiative (SBTi). More specifically, we have developed two comprehensive sets of actions, short and long terms, to address greenhouse gas emissions and climate challenges along the construction value chain. Short-term actions: focused on existing levers to reduce CO2 emissions (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. In addition and as a response to policy and regulatory risks and opportunities in Europe, 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 of historical activity levels). As result, over the next years, LafargeHolcim will invest CHF 160m and work on more than 80 projects across 19 European countries with a focus on low-carbon fuels, recycled materials and carbon-efficient solutions, reducing annual CO2 emissions in Europe by a further 15% representing 3 millions tons by 2022 With regards to physical risk, LafargeHolcim has introduced a new, risk-based Security and Resilience Management System (SRMS) to plan for, respond and recover from all kinds of unwanted events through integrated emergency response, crisis management and business continuity activities. The process is continuously improved by structured self-assessment and implementation of lessons learnt, and assured through a formal audit and performance evaluation programme. Long-term actions: Innovation and research and development into (i) Breakthrough technologies such as carbon capture utilization and storage (CCUS) ; (ii) decarbonized fuel and energy; (iii) the development of low-carbon products and solutions (iv) ultimate construction methods to reach low-carbon construction. In addition, initiatives such as our Plants of Tomorrow initiative is the industry’s largest roll out of 4.0 technologies; and our open innovation, where we are collaborating with numerous startups. Advocacy positions: 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. At the global level this is best illustrated through our cooperation with the World Bank’s Carbon Pricing Leadership Coalition (CPLC) or the Global Alliance for Buildings and Construction (GABC). Our climate-related advocacy focuses on two main topics: 1. Carbon pricing mechanisms: A stable and reliable carbon price is fundamental to accelerate the low-carbon transition. This requires associated policy frameworks that: • Respond dynamically to unforeseen macroeconomic evolutions; • Provide an unconditional level playing field across regions and industries; • Target entire value chains by tackling both supply and demand sides; • Enable carbon cost pass-through, thereby creating financial incentives for carbon-efficient solutions Ultimately, carbon pricing mechanisms must lead to an integration of carbon costs across the entire value chain, thereby creating competitive advantages for carbon-efficient products and solutions. 103 LafargeHolcim Integrated Annual Report 2019 R I S K A N D CO N T RO L CO N T I N U ED KEY OPERATIONAL RISKS CONTINUED R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E 2. Construction and building standards: progressive standards are key to ensure customer acceptance and creating a market demand for low-carbon solutions. In order to drive changes across the construction sector and ensure an adequate focus on the carbon and energy performance of buildings and infrastructure, standards must be based on the principles of material-neutrality and lifecycle performance. It must not be about one material versus another. The focus must be on the overall carbon and energy performance of our buildings and infrastructure. Greenhouse gas emissions & Climate change continued Strategic pillars impacted: R EP U TAT I O N: The risk of being perceived as a large carbon emitter could reduce our attractiveness to stakeholders such as customers, investors, and potential employees. P H Y S I C A L R I S K S : Impact of climate change (such as flooding, changes in precipitation patterns or extreme variability in weather patterns) on our operations might lead to higher logistics and transportation costs and reduced production capacities (e.g., delayed planning approval, supply chain interruptions). TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES ALIGNMENT G OV E R N A N C E S T R AT E G Y R I S K M A N AG E M E N T M E T R I C S A N D TA RG E T S Disclose the organization’s governance around climate related risks and opportunities. Disclose the actual and potential impacts of climate- related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material. Disclose how the organization identifies, assesses, and manages climate-related risks. Disclose the metrics and targets used to assess and manage relevant climate- related risks and opportunities where such information is material. Board oversight Page: 83, 101 Risk and opportunities CO2 risk identification Reporting CO2 metrics Page: 44 – 47, 103-4 Page: 100, 103 – 4 Page: 44 – 47, SPR* Management’s role Link to financial planning CO2 risk management Details Scope 1, 2 and 3 Page: 83, 101 Page: 103 – 4 Page: 101, 103 – 4 Page: 44 – 47, SPR* Scenario planning Integration into overall risk CO2 targets Page: 103 – 4 Page: 85 Page: 44 – 47 * SPR refers to the 2019 Sustainability Performance Report, available on www.lafargeholcim.com/sustainability 104 LafargeHolcim Integrated Annual Report 2019 KEY OPERATIONAL RISKS CONTINUED R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E 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 may receive claims arising from these warranties. Legal and 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, unfair competition, breach of trade sanctions or export controls, and unauthorized use of personal data. 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. Strategic pillars impacted: The Group maintains a comprehensive risk-based compliance program which aligns with the legal requirements expressed through national legislation such as the US FCPA, UK Bribery Act and French Sapin II laws. The compliance program has 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. It 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 at the top and, where necessary, train employees in risk identification and mitigation. The training also aims to raise awareness and reinforce commercial contract management practices by helping people to better understand the risks, how to enforce strict due diligence and the definition of thresholds which require the support and review of the Legal teams. • 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 the third party due diligence program. In addition to proactive monitoring, the compliance program includes a whistleblower line and internal auditing. • Organization, which establishes 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 2019 compliance program. • Business Integrity and Compliance: anti-corruption activities centered on training, management of third party risk through targeted due diligence, and management of conflicts of interest. • Pricing Integrity and Anti-Trust Compliance: as in previous years, the program focused heavily on training and the conduct of Fair Competition Reviews (in-depth assessments of risk based on interviews, document and email reviews). In addition, specific actions (trainings, instructions) have been implemented to address four risks drivers: participation in trade associations, pricing decisions, market intelligence and contacts with competitors. 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 2019. 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 Protection and 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 controls include website, employee, customer and supplier notifications and consents, data subject requests and data breach reporting mechanisms among others. Group Legal manages all competition investigations, information requests and enforcement cases through a central team. 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. 105 LafargeHolcim Integrated Annual Report 2019 R I S K A N D CO N T RO L CO N T I N U ED KEY OPERATIONAL RISKS CONTINUED R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Energy prices (including alternative fuels) The risk that the increase in prices for fuels, electricity or the inability to accomplish planned savings from alternative fuels will impact our production costs. Strategic pillars impacted: Raw materials (including mineral components) The risk that raw materials cannot be supplied at economical cost or suitable quality. Strategic pillars impacted: 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. 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 increase consumption of renewable energy at competitive prices. In locations where the supply of raw materials is at risk (due to own reserve depletion, permitting issues, poor quality, lack of suppliers and scarcity of certain raw materials resulting in increased costs), we apply a range of tactics including monitoring of permitting process, 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 addition, our research is devoted to finding ways to mitigate this risk while lowering our environmental footprint, e.g. by using waste-derived materials. Much of our business depends on the reliable supply of mineral resources, e.g. sand and limestone, as well as mineral additives such as slag and fly ash. Failure to secure long-term reserves or licences and permits as well as to obtain raw materials (including mineral components) from third parties at the expected cost and / or quality may adversely impact variable costs and financial performance and impair our long-term growth outlook. 106 LafargeHolcim Integrated Annual Report 2019 KEY OPERATIONAL RISKS CONTINUED R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E 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. Strategic pillars impacted: Failure to meet our environmental, social and governance (ESG) standards and targets may expose us to regulatory sanctions and 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 social licence to operate. Additionally, the failure to effectively manage and embed effective sustainability practices may impact investor confidence in LafargeHolcim. Responsibility for managing these risks is vested with site and country management, regional management, the Executive Committee and the Board of Directors. Sustainability risks are fully embedded in the risk assessment process conducted with all business units and stakeholders at the Group level and are reflected in the Group risk map. The range of sustainability risks includes: • Local community engagement, impact and value creation • Human Rights management (including responsible sourcing) • Employee diversity and inclusion • Waste-derived resources and circular economy • Air emissions • Water management • Biodiversity management and quarry rehabilitation • Internal waste management The risk assessment uses external references such as the Freedom House Index and UN Development Index for Human Rights risks and the WRI Aqueduct and WBCSD tool for water risks. The most material sustainability risks are subject to a close monitoring at the country level, supported at Group level by the sustainability team. A robust framework for mitigating those risks is as follows: • Articulated ambitions and Group targets set at the Group level, while performance against these ambitions and targets is monitored and reported on regularly. We provide details of our ambitions and targets in the Integrated Report and further information is published on our website. • 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. Country CEOs are ultimately responsible and accountable for 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 the Integrated Report and available on our website are subjected to external assurance. The assurance statement can be found in the Sustainability Performance Report published on our website. 107 LafargeHolcim Integrated Annual Report 2019 R I S K A N D CO N T RO L CO N T I N U ED KEY OPERATIONAL RISKS CONTINUED R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Sustainable products, innovation and technology 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 competitive position and fulfill future customer needs, particularly when it comes to low carbon performance and circular economy. Strategic pillars impacted: Health and 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. Strategic pillars impacted: Injury, illness or fatality, reputational damage and the 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. Information technology and cyber threats risk The risk that arises from the unavailability of critical IT systems and the loss or manipulation of data resulting from computer malware, cyber attacks, network outages, natural disasters or human mistakes. Strategic pillars impacted: 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. LafargeHolcim has an important range of products and brands, which can be considered as sustainable low carbon products and solutions. The Group is continuously developing and introducing new products with higher CO2 savings, realizing opportunities of circular economy and related sustainability performance of products and solutions. The company embraces new developments in the digital environment and anticipates trends in the construction industry. A stronger focus on open innovation offers opportunities as well as risks that collaboration with third parties does not provide the expected outcomes. This risk is mitigated through appropriate legal frameworks and comprehensive project management. Non-protected and protected Intellectual Property (IP) is secured by knowledge management, 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 60 for more details). The Group H&S team conducts regular audits to ensure the full deployment of our H&S policy and internal standards 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 see page 82 for more details). In early 2020, due to the Coronavirus (Covid 19) outbreak, the priority in the Group’s Chinese operations including the joint venture company Huaxin Cement Co. Ltd. has been given to implement all necessary measures to protect the safety of all employees and their families. The outbreak, which has delayed the development of infrastructure projects, notably in the province of Hubei which represents one-third of the Group’s total capacities in China, may have implications on operating results. It is however too early to quantify the risk. 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 include redundant data centers per region, redundant layout of critical IT systems, backup recovery procedures, computer malware and access protection as well as 24/7 operations in a Security Operations Center (SOC) to detect unusual traffic in our networks. Our personnel is constantly trained to detect and mitigate cyber risks and counter attacks like Phishing or Ransomware. 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 new risks and impacts from occurring are permanently improved and updated as well as regularly audited and controlled by the Internal Audit and Internal Control departments. 108 LafargeHolcim Integrated Annual Report 2019 KEY OPERATIONAL RISKS CONTINUED R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Joint ventures and associates The Group does not always have a controlling interest in joint ventures and associates in which it has invested. This may restrict the Group’s ability to generate adequate returns and to implement the operating standards and compliance program. Strategic pillars impacted: Talent management The risk that the company does not have a sufficiently robust talent pipeline. Strategic pillars impacted: 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 hamper 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. Without the right people, LafargeHolcim will be unable to deliver its growth ambition. 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, the Group Legal & Compliance function performed a comprehensive risk assessment 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 is ongoing. A Group subsidiary has an investment in a joint venture which owns a cement plant in Cuba. The Trump Administration allowed the waiver of Title III of the Helms-Burton Act (formally known as Cuban Liberty and Democratic Solidarity Act of 1996) to lapse as of 2 May 2019. Previously, Title III had been waived by every Administration since President Clinton waived it shortly after the Act became effective. Title III allows certain persons to file lawsuits in U.S. courts relating to certain property allegedly confiscated by the Cuban government since 1959. To date, no Title III lawsuits have been filed against the Company. 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). 109 LafargeHolcim Integrated Annual Report 2019 R I S K A N D CO N T RO L CO N T I N U ED KEY FINANCIAL RISKS R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E 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. 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, a significant portion of our debt has long-term maturity. We constantly maintain unused credit lines to cover at least the next 12 months of debt maturities. 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. Please refer to Note 14.5 of the Consolidated Financial Statements (page 219) for details on the contractual maturity analysis and LafargeHolcim maturity profile. 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 14.6 of the Consolidated Financial Statements (“Financial risks associated with operating activities”, page 220) for additional details. 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. Strategic pillars impacted: Liquidity risk The risk that the company will not generate sufficient cash and/or will not have access to external funding to meet its obligations. Strategic pillars impacted: 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. Strategic pillars impacted: 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 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. Movements in interest rates could affect the Group’s financial results 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. 110 LafargeHolcim Integrated Annual Report 2019 KEY FINANCIAL RISKS CONTINUED R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E Foreign exchange risk The Group’s global footprint exposes it to foreign exchange risks. Strategic pillars impacted: Credit risk The risk that our customers default on payment, resulting in collection costs and write-offs. Strategic pillars impacted: Insurance Our sector is subject to a wide range of risks, not all of which can be adequately insured. The Group obtains insurance cover for a broad range of risks to protect its assets and itself against third party liabilities, commensurate with the risk exposure. Strategic pillars impacted: 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. Strategic pillars impacted: Movements in exchange rates could have an influence on the Group’s business, results of operations and financial condition. Such translation into the Group’s reporting currency leads to currency translation effects, which the Group does not actively hedge in the financial markets. In addition, the statement of financial position is only partially hedged by debt in foreign currencies and therefore a significant decrease in the aggregate value of such local currencies against the reporting currency may have a material effect on the Group’s shareholders’ equity. Currency fluctuations can also result in the recognition of foreign exchange losses on transactions, which are reflected in the Group’s consolidated statement of income. 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. With regard to transaction-based foreign currency exposures, the Group’s policy is to hedge material foreign currency exposures through derivative instruments. The Group seeks to reduce the overall exposure by hedging such positions in the market with derivative instruments. These derivative instruments are generally limited to forward contracts or swaps and the Group does not enter into foreign currency exchange contracts other than for hedging purposes. Each subsidiary is responsible for managing the foreign exchange positions arising as a result of commercial and financial transactions performed in currencies other than its domestic currency with the support of the treasury department. The Group periodically assesses the financial reliability of customers. Credit risks, or the risk of counterparty default, 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 credit risk exposure 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 14.6 of the Consolidated Financial Statements (“Financial risks associated with operating activities”, page 220 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. Cash contributions may be required to fund unrecoverable deficits. External factors might cause these contributions to increase materially from year-to-year. 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 further reduce and eliminate those schemes and related risks. Specifically, actions focusing on deploying scheme-appropriate asset allocation in order to mitigate volatility and optimize investment returns, those intended to reduce and simplify plans’ liabilities and exposure, and finally those intended to provide cash funding flexibility, were or are being implemented. 111 LafargeHolcim Integrated Annual Report 2019 R I S K A N D CO N T RO L CO N T I N U ED KEY FINANCIAL RISKS CONTINUED R I S K P OT E N T I A L IM PAC T OU R R E S P O N S E 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 over how these plans are managed. Strategic pillars impacted: 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. Strategic pillars impacted: Tax The Group is exposed to tax risks due to potential changes in applicable regulations in certain countries and increased scrutiny by governments and tax authorities in response to perceived aggressive tax strategies of multinational corporations such as LafargeHolcim. Strategic pillars impacted: 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 the 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 and asset impairment process. 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 liabilities. 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 legislation and tax laws. Intercompany charges within the Group follow Organisation for Economic Cooperation 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 in-house skills. 112 LafargeHolcim Integrated Annual Report 2019 IN T E R N A L CO N T RO L As part of Strategy 2022 – “Building for Growth”, LafargeHolcim’s Internal Control framework defines mandatory ’Minimum Control Standards’ to clarify and reinforce the responsibility of businesses in the countries. Every country and business in our organization must follow these standards; there is clear guidance and consequence management if they are not met completely. The following key documents are part of the Minimum Control Standards and supports the internal control environment: • The Group Delegated Authorities defines approving authorities within the Group. • The Code of Business Conduct covers guidance and provides examples to help when confronted with challenging situations, These standards encompass controls on Governance and Compliance, Accounting and Consolidation, Tax, Treasury, Fixed Assets, Inventory, Revenue, Expenditure, Human Resources, IT and Sustainability. 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. Our internal control process is in accordance with the Swiss Code of Obligations and Swiss Code of Best Practices for Corporate Governance. LafargeHolcim Internal Control system aims at giving the Board of 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. 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 management. The Minimum Control Standards are used as a baseline for the mandatory compliance within the Group and the main reference for LafargeHolcim Corporate Governance Framework. Risk identification and analysis The approach implemented by the Group relating to identification and analysis of risks is described on page 100. 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 requirements and statutory financial statements. Tax: Tax risk assessment and reporting, tax filings & payments, deferred and income tax calculations, transfer pricing and non-income (indirect) taxes. 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. HR: Employee management (on- boarding, transfers, offboarding), payroll, compliance with local labor laws and employee pension & benefit plans. IT: Information security management and IT service management Sustainability: Environmental impact and Social impact. Internal Control monitoring throughout the Group The Group is committed to maintaining high standards of internal control. It tests and documents adherence to mandatory “minimum internal control” standards. 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. Group Internal Control provides each entity with clear guidance and testing methodology. • An annual internal certification process to review the main 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 the information included in the Group’s Integrated Report. 113 LafargeHolcim Integrated Annual Report 2019R I S K A N D CO N T RO L CO N T I N U ED The implementation of action plans identified through the activities described above, as well as through internal and external audits are 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 reviews management’s and the internal auditor’s reports on the effectiveness of the systems for internal control. The Audit Committee shall form its own opinion on the internal control system, risk management and on the state of compliance within the Company. Executive Committee The Executive Committee steers the effective implementation of the Group’s internal control system, 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. 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 Internal control is under the direct responsibility of the Executive Committee of each country. Internal Control Managers are appointed in each 114 Minimum Control Standards that every country and business in our organization must follow 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. Main observations and findings observed during the audit assignments are reported periodically to the Audit Committee and the Executive Committee. For more information, please refer to Corporate Governance on page 82. country to support the identification of risks, the implementation of the Minimum Control Standards and to ensure procedures related to internal control over financial reporting are implemented. Their activities are coordinated by the Group Internal Control department. Countries report their internal control assessments to the Group twice a year through the internal control system and sign 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. This department manages the definition of Minimum Control Standards mentioned above and coordinates the network of Internal Control Managers within countries. It supports countries and the 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 confirm management responsibility at LafargeHolcim Integrated Annual Report 2019This page intentionally left blank 115 LafargeHolcim Integrated Annual Report 2019COMPENSATION REPORT 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 balances rewards for short-term and long-term performance by combining absolute and relative as well as financial and non-financial performance objectives, 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 compensation programs at LafargeHolcim, on the compensation awarded to the members of the Board of Directors and the Executive Committee in 2019 and on the governance framework around compensation. It is written in accordance with the Ordinance against Excessive Compensation in Listed Stock Corporations (OaEC), the directive on information relating to Corporate Governance of the SIX Swiss Exchange and the principles of the Swiss Code of Best Practice for Corporate Governance of economiesuisse. 116 LafargeHolcim Integrated Annual Report 2019DE A R S H A R E H O LDE R S , I am pleased to share with you the LafargeHolcim Compensation Report for the financial year 2019, 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. This is supported by a compensation framework that is designed to attract, motivate and retain the qualified talent needed to succeed globally and provide excellent returns to our shareholders. 2019 was a very successful year for us and we achieved record results. We will explain in this report how our performance in 2019 impacted the payments awarded to the members of the Executive Committee under the incentive plans. There were also several personnel changes within the Executive Committee. Effective January 2019, Urs Bleisch, Head of Corporate Growth & Performance, stepped down from the Executive Committee. His function has been organized into three Centers of Excellence reporting directly to the Region Heads and was thus not replaced in the Executive Committee. Feliciano González Muñoz, Head of Human Resources, Keith Carr, Head Legal and Compliance, and Magali Anderson, Chief Sustainability Officer were appointed members of the Executive Committee. During 2019, the Nomination, Compensation and Governance Committee (NCGC) intensively discussed matters raised at last year’s Annual General Meeting. While our shareholders welcomed most of the announced changes to the compensation framework applicable to the Executive Committee for 2019 onwards, they also expressed concerns about ongoing amendments to the compensation plans and potential lack of continuity. The NCGC engaged with shareholders and thoroughly reviewed their feedback. On this basis, the NCGC reconfirmed the overall compensation framework and the incentive plan design as communicated last year. However, considering the importance and the increasing focus on sustainability matters, the NCGC decided to strengthen the performance measurement in the incentive plans and to enhance sustainability objectives as follows: • The annual incentive is based on financial performance (85%) and on Health & Safety (15%). Effective as of 2020, the definition of the Health & Safety objective will go beyond the Lost-Time Injury Frequency Rate (LTIFR) used so far and will include a scorecard. In addition, the financial objective EBITDA will be replaced by EBIT, in alignment with the change in financial reporting (IFRS 16). • The long-term incentive consists of a combination of performance shares subject to a three-year vesting based on earnings per share (EPS) before impairment and divestments and on return on invested capital (ROIC), and performance options subject to a five-year vesting based on relative total shareholder return (TSR). Effective in 2020, the NCGC decided to introduce a sustainability objective for the performance shares. This decision was made in order to recognize the importance of mitigating our impact on the environment and to encompass a broader stakeholder group in the measurement of the performance and the compensation of the Executive Committee. • Regarding the compensation levels, the NCGC decided that the target compensation of the members of the Executive Committee should remain unchanged compared to previous year. For the CEO, the annual incentive target was decreased from 150% to 125% of annual base salary (-11.5%). In order to keep the total target compensation unchanged, the annual base salary and the LTI grant were increased by 6.3%. Further details and the rationale for this decision are provided in this report. In parallel to those amendments, the NCGC decided to improve the pay-for- performance disclosure and to publish the Group performance targets for the annual incentive (ex-post) and the LTI (ex-ante). With regards to the compensation of the Board of Directors, the NCGC conducted a benchmarking analysis in 2019. As a result, the compensation structure and levels of the Board of Directors were confirmed and will remain unchanged for the upcoming term. Oscar Fanjul Chairman of the NCGC Finally, the NCGC performed its regular activities throughout the year such as succession planning for the Board of Directors and Executive Committee, performance objective setting at the beginning of the year and performance assessment at year end, determination of compensation for members of the Board of Directors and the Executive Committee, as well as preparation of this 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 decisions in this report. You will have the opportunity to express your opinion about this Compensation Report in a consultative shareholder vote at the Annual General Meeting 2020. Looking ahead, we will continue to assess and review our compensation framework to ensure that it supports our commitment to creating both financial and non-financial value over the long term and that it is well-aligned with our shareholders’ interests. We will also maintain an open dialog with our shareholders and their representatives. Thank you for sharing your perspectives on executive compensation with us. We trust that you will find this report informative. Oscar Fanjul Chairman of the Nomination, Compensation and Governance Committee (NCGC) 117 LafargeHolcim Integrated Annual Report 2019CO M P E N S AT I O N R E P O R T CO N T I N U ED Compensation at a glance S U M M A RY O F CO M PE N S AT I O N O F T H E B OA R D O F DIR EC TO R S IN 2 019 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 allowance (CHF) Committee fees (gross) 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 a secretarial allowance of CHF 60,000 p.a. 3 The committee chair fee of CHF 125,000 is not paid out considering that this function is currently held by the Board vice-chair who is not eligible for committee fees. S U M M A RY O F CO M PE N S AT I O N O F T H E E X ECU T I V E CO M M I T T E E IN 2 019 The executive compensation framework is designed to reinforce the LafargeHolcim strategy by helping the company attract, motivate and retain talent while aligning their interests with those of the shareholders. The compensation structure is well- balanced: it rewards short-term and long-term performance, it combines absolute and relative as well as financial and non-financial performance objectives and it delivers compensation through a mix of cash and equity. The compensation of the Executive Committee consists of fixed and variable elements. Fixed compensation includes base salary and benefits based on prevalent market practice. Variable compensation comprises short-term and long-term elements as described below. It is based on ambitious and stretched performance objectives and it rewards Group and regional results. Clawback and malus provisions apply to the short-term (STI) and the long-term (LTI) incentive plans. Executive Committee members are subject to a share ownership guideline: the CEO must hold at least 500% of his annual base salary in shares, other Executive Committee members 200%. Compensation element Purpose CEO Executive Committee 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 pre-IFRS 16 (30%) • Free Cash Flow pre-IFRS 16 (25%) • Health & Safety (15%) Target: 125% of salary Maximum payout: 200% of target (250% of salary) Target: 75% of salary Maximum payout: 200% of target (150% of salary) Reward long-term performance (3–5 years) and align with shareholders’ interests: • Performance shares: EPS before impairment and divestments and ROIC • Performance Options: relative TSR Performance shares: Grant value: 125% of salary Maximum vesting: 200% of target Performance Options: Grant value: 52.4% of salary Maximum vesting: 100% of target Performance shares: Grant value: 70% of salary Maximum vesting: 200% of target Performance Options: Grant value: 26.3% of salary Maximum vesting: 100% of target 118 LafargeHolcim Integrated Annual Report 2019CO M PE N S AT I O N O F T H E B OA R D O F DIR EC TO R S IN 2 019 The compensation awarded to the Board of Directors in financial year 2019 is within the limits approved by the shareholders at the Annual General Meeting. Since the compensation period is not yet completed, a definitive assessment will be provided in the 2020 Annual Report. CO M PE N S AT I O N O F T H E E X ECU T I V E CO M M I T T E E FO R 2 019 The compensation awarded to the Executive Committee in financial year 2019 is within the limits approved by the shareholders at the Annual General Meeting 2018. S U M M A RY O F PE R FO R M A N CE IN 2 019 For 2019 the company’s net sales increased by 3.1% on a like-for-like basis, and Recurring EBITDA pre-IFRS 16 increased by 6.5%, also on a like-for-like basis. • Annual incentive 2019: payout of 154% of target on average for the Executive Committee • Long-term incentive: the vesting level for the performance shares granted in 2016 was 24%, while the vesting level of the performance options granted in 2016 was 0%. Compensation period AGM 2018 – AGM 2019 AGM 2019 – AGM 2020 Approved amount (CHF) 4,800,000 5,100,000 Effective amount (CHF) 4,514,555 To be determined 1 1 The compensation period is not yet completed; a definitive assessment will be provided in the Compensation Report 2020 Compensation period Financial year 2019 Approved amount (CHF) 39,500,000 Effective amount (CHF) 30,087,952 CH A N G E S FRO M 2 02 0 O N WA R DS: IN T RO DUC T I O N O F S U S TA IN A B ILI T Y O B JEC T I V E S IN T H E IN CE N T I V E PL A N S To strengthen the alignment between compensation and the strategic priorities of the company, new sustainability objectives will be introduced in the incentive plans: • Annual incentive: the definition of the Health & Safety objective will go beyond the Lost-Time Injury Frequency Rate (LTIFR) used so far and will include a scorecard. In addition, the financial objective EBITDA will be replaced by EBIT, in alignment with the change in financial reporting (IFRS 16). • Long-term incentive: in recognition of the importance of the company’s impact on the environment, the NCGC decided to introduce a sustainability objective for the performance shares in addition to the existing EPS and ROIC performance conditions. CO M PE N S AT I O N GOV E R N A N CE • Authority for decisions related to compensation are governed by the Articles of Incorporation and the Organizational Regulations of LafargeHolcim Ltd 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. 119 LafargeHolcim Integrated Annual Report 2019CO M P E N S AT I O N R E P O R T CO N T I N U ED 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 blocked shares in order to strengthen the alignment with shareholders’ interests. Board compensation consists of an annual retainer for the Board chair, Board vice-chair and Board members plus additional fees for assignments to the committees of the Board of Directors either as chair or member. The Board chair and vice-chair are not eligible for committee fees. The annual retainer is paid half in cash and half in shares subject to a five-year restriction period (prohibition of sale or pledging). 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 of Directors is required. No such fees were paid in the reporting year. 2020 onwards A benchmarking analysis of the compensation of the Board of Directors was conducted in 2019 based on the Board compensation of other industrial SMI companies including ABB, Givaudan, Lonza, Nestle, Novartis, Richemont, Roche, SGS, Sika and Swatch Group (refer to section “Compensation Governance” for further details on the benchmarking peer group). The analysis showed that the compensation structure is aligned with prevalent market practice. In terms of compensation levels, the annual retainer and the committee fees for the chair functions are above market median, while they are below market for the Board and committee members without chair function. Considering the complexity of the work of the Board of Directors and its committees, as well as the substantial additional requirements on the Board and committee chairs, the NCGC decided not to make any change to the compensation system. Share-based compensation 2 in CHF 825,000 200,000 100,000 Expense allowance in CHF Secretarial allowance in CHF 60,000 10,000 10,000 10,000 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 2020 and 15 February 2020. 120 LafargeHolcim Integrated Annual Report 2019Compensation system: Executive Committee Compensation principles 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 objectives, as well as of financial and non-financial performance objectives. 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 straightforward and transparent. Compensation model of the Executive Committee The compensation for members of the Executive Committee includes the following elements: • Annual base salary • Pensions and benefits 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 • Variable compensation: annual and the individual in the role. long-term incentives 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). Compensation model of the Executive Committee Element Base salary Purpose Structure Drivers 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 Performance objectives Benefits Attract and retain Annual Incentive Reward for short-term performance – Perquisites – Car or allowance – Relocation benefits Variable amount paid half in cash and half in shares blocked for 3 years – Market practice – Role Annual financial and non-financial performance – Relative sales growth – Relative EBITDA pre-IFRS 16 Long-Term Incentive (LTI) – Reward for 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 growth – Recurring EBITDA pre-IFRS 16 – Free Cash Flow pre-IFRS 16 – Health & Safety – EPS before impairment and divestments – ROIC – Relative TSR 121 LafargeHolcim Integrated Annual Report 2019CO M P E N S AT I O N R E P O R T CO N T I N U ED Pension Executive Committee members participate in the benefits plans available in the country of their employment. 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 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. 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 employment. Executives who are relocating may also be provided with expatriate benefits such as housing, schooling, travel benefits and tax advice, in line with the LafargeHolcim International Mobility policy. These other compensation elements are evaluated at fair value and included in the compensation tables. 122 Annual incentive The annual incentive rewards the financial results as well as the achievement of a Health & Safety objective 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 a percentage of base salary and amounts to 125% for the CEO and 75% for the other members of the Executive Committee. The payout is capped at 200% of target, i.e. 250% of base salary for the CEO and 150% 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 pre-IFRS 16 as a measure of Group and regional operational profitability, as well as Free Cash Flow pre-IFRS 16 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 pre-IFRS 16 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, suppliers or investors and are thus exposed to similar market cycles. The companies of the peer group are listed below (unchanged from the previous year). The measurement of the relative Group performance is provided by Obermatt, an independent Swiss financial research firm focused on indexing company performance. The achievement of the Health & Safety objective is measured as a score reflecting improvements in the Lost- Time Injury Frequency Rate (LTIFR). The NCGC also considers the overall related outcomes during the year, including fatalities and their causes, when determining the achievement level of this objective and may exercise downwards discretion. 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 on page 123. The annual incentive is subject to clawback and malus provisions. In case Cement producers Building materials Construction Boral Buzzi Unicem Cemex CRH Heidelberg Cement Vicat Carlisle James Hardie RPM Saint-Gobain Sika Acciona ACS Bouygues Vinci LafargeHolcim Integrated Annual Report 2019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, 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 may be enforced within three years of any year subject to a financial restatement or during which the fraudulent behavior happened. In case of termination of employment, any potential payment of the annual incentive is paid pro-rata and based on the effective performance (determined after year end) capped at the target amount (pro-rata). 2020 onwards: stronger focus on sustainability matters The definition of the Health & Safety objective will consist of a scorecard including both leading and lagging performance objectives and is based on three elements that are equally weighted: • Health & Safety Improvement Plan (HSIP). The HSIP is determined at country level and includes strategic objectives such as key risk control and process safety management, health & well-being, industrial hygiene, road safety and fatality elimination control. For the regions and the Group, an average of the HSIP scores of the countries, respectively the regions, is used to determine the achievement level. • Critical Risk Elimination (CRE). CRE objectives include action closure based on the findings of Health & Safety audit and of the safety management process for each country. For the regions and the Group, an average of the CRE scores of the countries, respectively the regions, is used to determine the achievement level. • Lost-Time Injury Frequency Rate (LTIFR). This is the Health & Safety objective currently used in the annual incentive. Targets are defined at country, regional and Group level. Further details on the Health & Safety scorecard will be provided in the 2020 Compensation Report. In addition, the Recurring EBITDA objective will be replaced by Recurring EBIT, in alignment with the change in financial reporting in 2020 in the context of IFRS 16. Design of the annual incentive 2019 Role CEO Target opportunity 125% of salary Maximum opportunity 250% of salary Other Executive Committee members 75% of salary 150% of salary Performance objectives Relative Group performance Recurring EBITDA pre-IFRS 16 (Group or region)* Free Cash Flow pre-IFRS 16 (Group or region)* Health & Safety (Group or region)* Purpose Definition Measures Group’s performance compared to peer companies exposed to similar market cycles Relative Group revenue growth (50%) and relative Group Recurring EBITDA pre-IFRS 16 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 Measures the accident rate to ensure a safe workplace Cash flow from operating activities pre-IFRS 16, 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 pre-IFRS 16 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 Weighting Payout formula (threshold, target and cap for the Group) 30% 200% 150% 100% 50% 0% 30% 200% 150% 100% 50% 0% 25% 200% 150% 100% 50% 0% 15% 200% 150% 100% 50% 0% 25th percentile Median 75th percentile +2% +5% +8% CHF 1.6 B CHF 2B CHF 2.4B 0.9 0.85 0.8 * Group level for corporate Executive Committee roles, regional level for regional Executive Committee roles 123 LafargeHolcim Integrated Annual Report 20192020 onwards: introduction of sustainability objectives in the LTI plan In recognition of the importance of mitigating the company’s impact on the environment, the NCGC decided to introduce a sustainability objective for the performance shares. The sustainability objective will account for one-third of the performance share award and will encompass three pillars of the sustainability strategy: • Climate and energy: reduction of CO2 emissions with a 50% weight • Circular economy: increased re-use of waste derived resources with a 25% weight • Environment: reduction of freshwater withdrawal with a 25% weight The specific targets will be determined based on the mid-term objectives communicated in the context of the sustainability strategy and reporting. Further details will be provided in the 2020 Compensation Report. CO M P E N S AT I O N R E P O R T CO N T I N U ED LO N G -T E R M IN CE N T I V E S 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. To support the Strategy 2022 – “Building for Growth” the grant awarded under the long-term incentive consists of both performance shares and performance options. PE R FO R M A N CE S H A R E S 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 objectives have been chosen as they reflect the strategic priorities of the Group to increase profitability through strong operating leverage (EPS) and to improve how the company generates profits relative to the capital it has invested in its business (ROIC). For both objectives, 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. PE R FO R M A N CE O P T I O N S In 2019, performance options are subject to a five-year vesting period based on LafargeHolcim’s relative total shareholder return (TSR) compared to a group of peer companies, and have a maturity of ten years. Threshold vesting (25% of maximum) will be achieved if the median of the peer group is reached, target vesting (50% of maximum) will be achieved if the 60th percentile is reached and full vesting will be achieved if the 75th percentile is reached on average during the five-year vesting period. There will be no vesting for performance below the median of the peer group. The vesting level between threshold, target and full vesting is calculated on a straight-line basis. The companies of the peer group are the same as for the annual incentive and are listed on page 122. The decision to replace the absolute TSR objective by a relative TSR objective 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-oriented business strategy. The LTI awards are subject to clawback and malus provisions for a period of three years after vesting in case of financial restatement, error or inaccurate or misleading information to assess the fulfillment of performance conditions or a termination for cause. The unvested LTI awards forfeit upon termination of employment, except in case of retirement, ill-health, disability, by reason of the employment being with a company/business which ceases to be a group member, termination by the employer within 18 months from a relevant M&A transaction or any other cases at the discretion of the NCGC. 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), though without acceleration, i.e. vesting of the prorated number of awards will continue to occur at the regular vesting date, subject to performance measurement, over the entire performance period. In the event of death and change of control (unless the unvested LTI awards are replaced by an equivalent award following the change of control) unvested LTI awards vest immediately on a pro-rata basis considering performance conditions are met. For the avoidance of doubt, LTI awards always lapse when termination is due to voluntary resignation or gross misconduct. The long-term incentive design applicable to the Executive Committee is summarized on the next page. 124 LafargeHolcim Integrated Annual Report 2019Design of the long-term incentive Role CEO Other Executive Committee members Grant size in 2019 177.4% of salary (125% in performance shares, 52.4% in performance options) 96.3% of salary (70% in performance shares, 26.3% in performance options) Performance objectives EPS before impairment and divestments (Performance Shares) ROIC (Performance Shares) Relative TSR (Performance Options) Purpose Definition 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 EPS adjusted for after tax gains and losses on disposals of Group companies and impairments of goodwill and long-term assets ROIC at year end 2021, adjusted for changes in scope between 2019 and 2021 LafargeHolcim’s TSR over the five-year performance period, starting on January 1st, 2019, and ending on December 31st, 2023 expressed as a percentile ranking in a peer group of companies Weighting 60% of Performance Share grant 40% of Performance Share grant 100% of Performance Option grant Performance period 2021 Performance vesting 200% 150% 100% 50% 0% 2021 200% 150% 100% 50% 0% +6% +8% +10% +6.5% +8% +9% Maximum vesting level 200% 200% 2019 – 2023 100% 75% 50% 25% 0% 100% Median 60th percentile 75th percentile 125 LafargeHolcim Integrated Annual Report 2019E M PLOY M E N T CO N T R AC T S FO R T H E E X ECU T I V E CO M M I T T E E 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. They may include non-competition provisions that are limited in time to a maximum of one year and which may allow compensation up to a maximum of one year. CO M P E N S AT I O N R E P O R T CO N T I N U ED E X ECU T I V E S H A R E OW N E R S H IP GU IDE LIN E S 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: 500% of annual base salary • Executive Committee members: 200% of annual base salary Members of the Executive Committee are 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, i.e. until end of December 2022 for existing Executive Committee members). In case of non-compliance to the minimum requirements at the required date, Executive Committee members are 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 is monitored on an annual basis. 126 LafargeHolcim Integrated Annual Report 2019Compensation for the financial year 2019 The tables on page 127 and 128 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 Name AC NCGC HSSC Cash compensation CHF Number Value CHF Other 4 CHF Subtotal CHF Social Security 5 CHF 2019 Total CHF 2018 Total CHF Beat Hess, Chairman Oscar Fanjul Bertrand Collomb 3 Paul Desmarais, Jr. Colin Hall 1 Patrick Kron Naina Lal Kidwai 1 Gérard Lamarche 2 Adrian Loader Jürg Oleas Nassef Sawiris 2 Thomas Schmidheiny 3 Claudia Sender Ramirez 1 Hanne B. Sørensen Dieter Spälti Total C M M M M C M M M M C M M 825,000 16,110 825,000 70,000 1,720,000 1,720,000 1,636,666 200,000 3,905 200,000 10,000 410,000 410,000 443,333 0 140,000 81,667 300,000 81,667 58,333 265,000 140,000 58,333 0 58,333 180,000 180,000 0 1,953 1,139 1,953 1,139 814 1,953 1,953 814 0 1,139 1,953 1,953 0 0 0 0 104,168 100,000 10,000 250,000 250,000 250,000 58,333 5,833 145,833 145,833 0 100,000 10,000 410,000 410,000 364,336 58,333 41,667 5,833 145,833 4,167 104,167 145,833 0 104,167 302,083 100,000 10,000 375,000 375,000 375,000 100,000 10,000 250,000 4,336 254,336 262,118 41,667 4,167 104,167 104,167 285,416 0 0 0 0 104,168 58,333 5,833 122,499 122,499 0 100,000 10,000 290,000 290,000 290,000 100,000 10,000 290,000 4,336 294,336 329,752 2,568,333 36,778 1,883,333 165,833 4,617,499 8,672 4,626,171 4,747,040 1 Board member since May 15, 2019 2 Board member until May 15, 2019 3 Board member until May 8, 2018 4 Expense allowances and secretarial allowance for the Board chair. 5 Includes mandatory employer contributions of CHF 8,672 for two members under the Swiss governmental social security system (AHV). This amout is out of total employer contribu- tions of CH 95,479 paid for all Board members, and provides a right to the maximum future insured government pension benefit. 127 LafargeHolcim Integrated Annual Report 2019 CO M P E N S AT I O N R E P O R T CO N T I N U ED E X PL A N AT I O N S In 2019, thirteen non-executive members of the Board of Directors received in total compensation of CHF 4.6 million including mandatory social security payments (2018: CHF 4.7 million) of which CHF 2.6 million (2018: CHF 2.7 million) was paid in cash, CHF 0.01 million (2018: CHF 0.02 million) in the form of social security contributions, and CHF 1.9 million (2018: CHF 1.9 million) in shares. Other compensation paid totaled CHF 0.2 million (2018: CHF 0.2 million). The compensation of the Board of Directors decreased by 3% compared to previous year, which is due to changes in the composition of the Board of Directors. The compensation structure and level was unchanged from previous year. At the Annual General Meeting 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 was CHF 4,514,555 and is therefore within the approved limits. At the Annual General Meeting 2019, shareholders approved a maximum aggregate amount of compensation of CHF 5,100,000 for the Board of Directors for the term until the Annual General Meeting 2020. The compensation paid to the Board of Directors for this term is anticipated to be approximately CHF 4.7 million. The final amount will be disclosed in the 2020 Annual Report. Executive Committee Executive Jan Jenisch 01.01.2019 until 31.12.2019 other members 01.01.2019 until 31.12.2019 Performance shares 2 Performance options 3 Base salary CHF Other fixed pay 1 CHF Annual incentive CHF Fair value at grant CHF Fair value at grant CHF Social/pension contributions 4 CHF Total 2019 CHF Total 2018 CHF 1,700,000 26,000 3,574,250 2,089,712 890,001 353,995 8,633,958 7,411,543 5,832,060 1,060,988 6,668,670 3,900,446 1,490,189 2,501,641 21,453,994 23,001,651 Total 7,532,060 1,086,988 10,242,920 5,990,158 2,380,190 2,855,636 30,087,952 30,413,194 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 contributions to social security and occupational pension plans. Contributions to occupational pension plans are the contributions effectively paid in the reporting year. Contributions to social security plans for members employed in Switzerland include the payment to the Swiss old age, survivors and disability insurance (“OASI”/“AHV/IV/EO”) to the extent that they result in a pension entitlement. Contributions to social security plans for members employed outside of Switzerland include the contributions effectively paid in the reporting year. 128 LafargeHolcim Integrated Annual Report 2019Explanations The total annual compensation for the members of the Executive Committee in 2019 amounts to CHF 30.1 million (2018: CHF 30.4 million). This amount comprises base salaries, other fixed pay and annual incentive of CHF 18.9 million (2018: CHF 16.6 million), share-based compensation of CHF 8.4 million (2018: CHF 10.6 million), employer contributions to social security and pension plans of CHF 2.9 million (2018: CHF 3.2 million). The compensation changes in 2019 compared to 2018 are mainly caused by the following factors: • Changes in the composition of the Executive Committee, including the resignation of one member and appointment of three new members, bringing the overall number of executive committee members to ten compared with eight members in the previous year. • As a result of the 2019 compensation review, it was decided to increase the maximum payout potential under the annual incentive from 167% to 200%. For the CEO, this would have led to a maximum payout potential equivalent to 300% of annual base salary. The NCGC felt that this was not appropriate and decided to decrease the annual incentive target of the CEO from 150% to 125% of the annual base salary, thus keeping the maximum annual incentive at 250% of annual base salary. However, this reduction of the annual incentive target would have led to a lower target compensation level overall. The NCGC decided that it was not appropriate to decrease the total target compensation of the CEO considering the challenging targets in the incentive plans overall and his strong performance. In order to keep the target compensation and the proportion between annual base salary and LTI unchanged, the salary and the LTI grant size have been increased by 6.3% (respectively 6% for the performance options). The annual incentive target was decreased by 11.5%. The total target compensation was unchanged and is in line with the market compensation in the peer group. For the other members of the Executive Committee, the annual base salary, the annual incentive target and the size of the long-term incentive grant (performance shares and option) remained unchanged. • The performance achievement under the annual incentive was higher in 2019 than in 2018. Further details are provided on the next page. • The other payments decreased substantially considering that no replacement award was paid out in the reporting year. Overview of CEO compensation at target in 2019 (versus 2018) CHF Annual base salary Annual Incentive target LTI performance shares (grant value) LTI performance options (grant value) Total CEO 2019 1,700,000 2,125,000 2,125,000 890,000 6,840,000 In % of annual salary 125% 125% 52.4% CEO 2018 1,600,000 2,400,000 2,000,000 840,000 6,840,000 In % of annual salary 150% 125% 52.5% % change + 6.3% – 11.5% + 6.3% + 6.0% 0% 129 LafargeHolcim Integrated Annual Report 2019CO M P E N S AT I O N R E P O R T CO N T I N U ED The compensation awarded to the Executive Committee members for 2019 is within the total maximal amount of compensation for the Executive Committee for the financial year 2019 of CHF 39,500,000 approved at the Annual General Meeting 2018. Payout of the annual incentive in 2019 Performance objectives Results PE R FO R M A N CE IN 2 019 The company made good progress on all four value drivers of Strategy 2022 – “Building for Growth”. Those results impacted the annual incentive as follows: Consequently, the annual incentive for the CEO was 168% of target (210% of salary) and 152% on average for other members of the Executive Committee (114% of salary on average). Payout Percentage Threshold Target Stretch Relative Group performance (30%)¹ Recurring EBITDA pre-IFRS 16 (30%) (Group or regional) Free Cash Flow pre-IFRS 16 (25%) (Group or regional) Health & Safety (15%) (Group or regional) With a Net Sales growth of 1.8% (adjusted basis), LafargeHolcim achieved the 67th percentile in the peer group (168% payout). With a Recurring EBITDA pre-IFRS 16 growth of 1.2% (adjusted basis), LafargeHolcim achieved the 65th percentile in the peer group (160% payout). The 2019 Group Recurring EBITDA pre-IFRS 16 growth like-for-like was 6.5% compared to a target of 5%, which corresponds to a payout factor of 150%. The regional EBITDA pre-IFRS 16 performance was mixed with two regions below the threshold (0% payout), one region slighly below target and two regions exceeding the target (200% payout). Net Sales growth Recurring EBITDA pre-IFRS 16 growth Group Recurring EBITDA pre-IFRS 16 Regional Recurring EBITDA pre-IFRS 16 The Group Free Cash Flow pre-IFRS 16 was CHF 3 billion compared to a target of CHF 2 billion, which corresponds to a payout factor of 200%. The Free Cash Flow pre-IFRS 16 performance of all regions exceeded the target (174% payout on average). Group FCF pre-IFRS 16 Regional FCF pre-IFRS 16 At Group level, the Lost-Time Injury Frequency Rate (LTIFR) of 0.65 per million hours worked exceeded both the target of 0.85 and the maximum of 0.80 (200% payout). While North America was below the threshold (0% payout), the other regions reached the maximum (200% payout). However, the NCGC decided to cap the LTIFR payout at target level for two regions due to the number and circumstances of fatalities (100% payout), which led to a reduced payout of 160% for the Group. Group LTIFR Regional LTIFR Total Overall payout of 168% for the CEO and of 152% on average for the other Executive Committee members ¹ The relative Group performance assessment is based on a best estimate at time of publication (i.e. includes an estimate for companies that did not yet published their annual results). The final achievement level will be calculated by Obermatt before the payout date in March 2020 based on the annual report publications of the peer companies. 130 LafargeHolcim Integrated Annual Report 2019Result and payout Payout calculation EPS pre-IFRS 16 below the threshold of CHF 3.86 lead to a 0% payout 30% * 0% ROIC pre-IFRS 16 below the threshold of 7.5% lead to a 0% payout 40% * 0% Relative TSR at 55th percentile lead to a 79.9% payout 30% * 79.9% The LafargeHolcim LTI plan granted in 2016 and vested in 2019 included performance shares subject to a vesting conditional upon EPS before impairment and divestments pre-IFRS 16, ROIC pre-IFRS 16 and relative TSR as well as stock options subject to a vesting conditional upon cumulative Free Cash Flow pre-IFRS 16. The vesting of those grants applies to five current Executive Committee members and is as follows: Vesting of the long-term incentive in 2019 Grant Performance objectives Definition 2016 Performance shares EPS pre-IFRS 16 (30%) Earnings per share adjusted for after tax impairment and gains and losses on divestments in 2018 Return on invested capital measured as net operating profit after tax divided by the average invested capital in 2018 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 ROIC pre-IFRS 16 (40%) Relative TSR (30%) Total Cumulative Free Cash Flow pre-IFRS 16 (100%) Total 2016 Performance options Sum of cash generated and available for debt repayment, dividend and share buy-backs over the years 2017 to 2019, excluding the impact of proceeds from the divestment program Target missed, payout of 0% = overall vesting of 24% 100% * 0% = 0% = overall vesting of 0% LOA N S G R A N T E D TO M E M B E R S O F GOV E R N ING B O DIE S As at 31 December 2019, there was one loan in the amount of CHF 0.1 million (2018: CHF 0.1 million) outstanding from René Thibault, member of the Executive Committee. There were no loans to other members of the Executive Committee, members of the Board of Directors or to parties closely related to members of governing bodies outstanding at 31 December 2019. CO M PE N S AT I O N FO R FO R M E R M E M B E R S O F GOV E R N IN G B O DIE S During 2019, payments in the total amount of CHF 4.0 million were made to six former members of the Executive Committee. This compares to a total amount of CHF 10.6 million for eight former members in 2018. 131 LafargeHolcim Integrated Annual Report 2019CO M P E N S AT I O N R E P O R T CO N T I N U ED Share ownership information B OA R D O F DIR EC TO R S On 31 December 2019, members of the Board of Directors held a total of 239,097 registered shares in LafargeHolcim Ltd. This number comprises privately acquired shares and those allotted under participation and compensation schemes. Until the announcement of market-relevant information or projects to the public, the Board of Directors, the Executive Committee and any employees possessing such market-relevant information 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 Oscar Fanjul Position Chairman Vice-Chairman Paul Desmarais Jr Member Colin Hall Patrick Kron Naina Lal Kidwai Gérard Lamarche Adrian Loader Jürg Oleas Nassef Sawiris Member (since 15 May 2019) Member Member (since 15 May 2019) Member (until 15 May 2019) Member Member Member (until 15 May 2019) Claudia Sender Ramirez Member (since 15 May 2019) Hanne B. Sørensen Dieter Spälti Total Member Member 1 Further information can be found under: www.six-exchange-regulation.com Shares held as of 31 December 2019 Options held as of 31 December 2019 Shares held as of 31 December 2018 Options held as of 31 December 2018 57,205 15,707 44,469 0 3,345 0 n/a 21,587 7,654 n/a 0 11,184 77,946 239,097 40,109 10,675 40,693 n/a 1,021 n/a 5,816 18,489 5,147 n/a n/a n/a n/a 9,455,606 16,993,600 1 n/a 8,537 72,306 n/a 0 9,658,399 16,993,600 OW N E R S H IP O F S H A R E S A N D O P T IO N S: E X ECU T I V E CO M M I T T E E As of 31 December 2019, members of the Executive Committee held a total of 365,542 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 2019, the Executive Committee held a total of 756,549 performance options and 292,586 performance shares (at target); 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. 132 LafargeHolcim Integrated Annual Report 2019Number of shares and options held by Executive Committee members as of 31 December 2019 Name Jan Jenisch Magali Anderson Keith Carr Marcel Cobuz Position CEO Member Member Member Feliciano González Muñoz Member Miljan Gutovic Martin Kriegner Géraldine Picaud Oliver Osswald René Thibault Total Member Member Member Member Member Total number of shares owned Total number of performance op- tions 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) 260,000 268,452 536,903 113,719 227,437 281 5,000 15,091 2,660 8,389 16,271 39,604 5,852 12,394 0 41,900 75,438 41,900 42,545 78,031 72,166 69,783 66,334 0 83,800 135,576 83,800 85,089 158,761 144,331 139,566 117,368 5,900 13,715 22,251 13,815 13,855 28,318 34,472 25,091 21,450 11,800 27,430 44,501 27,630 27,710 56,636 68,943 50,182 38,300 365,542 756,549 1,485,194 292,586 580,569 Number of shares and options held by Executive Committee members as of 31 December 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 op- tions 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 24,490 465,011 221,043 442,085 133 LafargeHolcim Integrated Annual Report 2019CO M P E N S AT I O N R E P O R T CO N T I N U ED The share options outstanding held by the Executive Committee (including former members) at year end 2019 have the following expiry dates and exercise prices: Option grant date Issuing Company Expiry date Exercise price 1 2019 2018 Number 1 Number 1 2008 2010 2011 2012 2013 2014 2014 2015 (2009 2) 2015 (2010 2) 2015 (2011 2) 2015 (2012 2) 2015 2015 2015 2016 2018 2019 Total Holcim Ltd Holcim Ltd Holcim Ltd Holcim Ltd Holcim Ltd Holcim Ltd Holcim Ltd Lafarge S.A. Lafarge S.A. Lafarge S.A. Lafarge S.A. Holcim Ltd Holcim Ltd LafargeHolcim Ltd LafargeHolcim Ltd LafargeHolcim Ltd LafargeHolcim Ltd 2020 2022 2019 2020 2021 2022 2026 2019 2020 2020 2020 2023 2023 2025 2026 2028 2029 CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF 62.95 70.30 63.40 54.85 67.40 64.40 64.40 33.38 55.71 48.32 39.09 66.85 63.55 50.19 53.83 55.65 33,550 33,550 33,550 33,550 0 113,957 165,538 165,538 122,770 122,770 99,532 0 0 22,125 24,675 24,360 99,532 33,550 22,016 22,125 24,675 24,360 144,970 144,970 47,333 47,333 24,946 417,360 503,120 503,120 246,404 246,404 49.92 1,166,760 0 2,659,633 2,054,810 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 1.09. EQU I T Y OV E R H A N G A N D DILU T IO N A S O F DECE M B E R 31, 2 019 In total as of 31 December 2019, the equity overhang, defined as the total number of unvested share units and options divided by the total number of outstanding shares (613,693,581 dividend-bearing shares) amounts to 0.49%. The company’s gross burn rate defined as the total number of equities (shares, share units and options) granted in 2019 divided by the total number of outstanding shares (613,693,581 dividend-bearing shares) amounts to 0.26%. 134 LafargeHolcim Integrated Annual Report 2019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 of Directors 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 of Directors; 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 of Directors; 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 RU LE S R E L AT IN G TO CO M PE N S AT I O N IN T H E L A FA RG E H O LCIM A R T I CLE S O F IN CO R P O R AT I O N 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 NCGC (Art. 16 to 21). The Articles of Incorporation are approved by the shareholders and are available at www. lafargeholcim.com/articles-association. A N N UA L G E N E R A L M E E T IN G – S H A R E H O LDE R IN VO LV E M E N T 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. 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. N O M IN AT I O N , CO M PE N S AT I O N & GOV E R N A N CE CO M M I T T E E 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 of Directors; succession planning for the Board of Directors and its committees; 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; 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: 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 and design of 135 LafargeHolcim Integrated Annual Report 2019CO M P E N S AT I O N R E P O R T CO N T I N U ED 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 four 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 2019, Mr. Oscar Fanjul (Chair), Mrs. Hanne Birgitte Breinbjerg Sørensen, Mr. Paul Desmarais, Jr and Mr. Adrian Loader were re-elected members of the NCGC. The NCGC holds ordinary meetings at least three times a year. In 2019, the NCGC held four ordinary meetings according to the annual schedule below and one telephone conference on the appointment of the Chief Sustainability Officer. 136 LafargeHolcim Integrated Annual Report 2019Annual NCGC meeting schedule February July October December • Proposal of elections to the • Selection criteria and • Update succession planning • Update succession planning Nomination Board of Directors • Proposal of the Board of Directors constitution for coming terms (committees) succession planning Board of Directors Board of Directors and Executive Committee Board of Directors and Executive Committee • Selection criteria and succession planning Executive Committee • Board compensation • Review of compensation current term system • Review of disclosure approach (feedback from shareholders) Compensation • Proposal AGM motions (amounts to be submitted to vote) • Performance assessment and incentive payouts previous year for Executive Committee • LTI vesting previous year • LTI grant approval current year • Benchmarking of Board of Directors (every 2 – 3 years) and Executive Committee compensation (annual) • Incentive plan design for coming year • Forecast expected incentive payouts current year • Proposal Board compensation coming term • Target compensation coming year Executive Committee • Performance targets coming year Executive Committee (annual incentive, LTI) • Forecast expected incentive payouts current year • Board assessment • NCGC self-assessment • Governance Report • Compensation Report (final) • Proposal AGM motions • AGM retrospective: shareholders feedback • Review of Board composition • Review of independence of Board members • Review of corporate governance in general Governance (other than compensation) • Review of NCGC members’ • Governance update independence • Governance update • Review of governance documents: Articles of Incorporation, Organizational rules, committees charters, Code of Conduct • Review of external mandates Executive Committee • Compensation Report (draft) • NCGC schedule for coming year • Governance update In 2019, three NCGC members attended all meetings while one member apologized for three meetings, which represents an attendance rate of 81 percent. Further information on meeting attendance is provided in the Corporate Governance Report on page 83. 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. E X T E R N A L A DV I S O R S The NCGC may decide to consult an external advisor from time to time for specific compensation matters. In 2019, 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. 137 LafargeHolcim Integrated Annual Report 2019The benchmarking analyses serve as basis for the NCGC to regularly analyze the compensation of the CEO and the Executive Committee and to set their target compensation levels. 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). CO M P E N S AT I O N R E P O R T CO N T I N U ED M E T H O D FO R DE T E R M IN IN G CO M PE N S AT I O N : B E N CH M A R K IN G The compensation of the Board of Directors is regularly reviewed against prevalent market practice. In 2019, a benchmarking analysis was conducted on the basis of other multinational industrial companies of the SMI: ABB, Givaudan, Lonza, Nestle, Novartis, Richemont, Roche, SGS, Sika and Swatch Group. This peer group of SMI companies was selected 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. The compensation of the Executive Committee is also regularly benchmarked against market practice. In 2019, a benchmarking analysis of the compensation levels was conducted again with the support of Willis Towers Watson. For this purpose, Executive Committee members who are on a Swiss employment contract were benchmarked against the same peer group as the Board of Directors, described above. 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 country of employment. 138 LafargeHolcim Integrated Annual Report 2019 TO THE GENER AL MEE TING OF L AFARGEHOLCIM LTD Zurich, 26 February 2020 R E P O R T O F T H E S TAT U TO RY AU DI TO R O N T H E CO M PE N S AT I O N R E P O R T We have audited the compensation report of LafargeHolcim Ltd for the year ended December 31, 2019. The audit was limited to the information according to articles 14-16 of the Ordinance against Excessive Compensation in Listed Stock Corporations (Ordinance) contained in tables labeled “audited” on pages 127 and 128 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 compen- sation 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, 2019 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 Dübi Licensed Audit Expert 139 LafargeHolcim Integrated Annual Report 2019Management discussion & analysis 140 LafargeHolcim Integrated Annual Report 2019Duitama, Colombia Employees at a construction site. CONTENT S MANAGEMENT DISCUSSION & ANALYSIS 2019 142 Group performance 148 Regional performance 141 LafargeHolcim Integrated Annual Report 2019MANAGEMENT DISCUSSION & ANALYSIS 2019 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 pre-IFRS 16 Operating profit (EBIT) Net income Group share Net income before impairment and divestments Group share 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 pre-IFRS 16 CHF Cash flow from operating activities Capex Free Cash Flow pre-IFRS 16 Return on Invested Capital (ROIC) pre-IFRS 16 Net financial debt pre-IFRS 16 million CHF million CHF million CHF % million CHF ±% like-for-like 0.5% –0.3% –2.0% 3.1% 9.5% 6.5% 2019 207.9 269.9 47.7 26,722 (2,011) 6,153 3,833 2,246 2,072 3.40 4,825 1,397 3,047 7.6% 8,811 2018 221.9 273.8 50.9 27,466 (2,441) 6,016 3,312 1,502 1,569 2.63 2,988 1,285 1,703 6.5% ±% –6.3% –1.4% –6.3% –2.7% –17.6% 2.3% 15.7% 49.5% 32.1% 29.3% 61.5% 8.7% 78.9% 1.1% 13,518 –34.8% R E T U R N O N I N V E S T E D C A P I TA L (%) E A R N I N G S P E R S H A R E (C H F ) Before impairment and divestments 3.40 ² 2.63 2.35 7.6 ¹ 6.5 5.8 8.0 7.25 6.5 5.75 5.0 3.5 3.0 2.5 2.0 1.5 2017 2018 2019 2017 2018 2019 ¹ Return on invested capital for 2019 post-IFRS 16 is 7.4%. ² Earnings per share before impairment and divestments for 2019 post-IFRS 16 is CHF 3.37. 142 Figures are pre-IFRS 16. LafargeHolcim Integrated Annual Report 2019SUSTAINABILITY S T R AT EG Y K PIs 561 kg Net CO2 emitted per ton of cementitious material (scope 1) (–1.4 % at 2019 constant scope) + 4.3% Increase in waste reused in operations (2019: 48 million tons) – 5.7% Reduction in freshwater withdrawn per ton of cementitious material (2019: 299 l) + 5.4% Increase in people benefited from our community investments (2019: 5.9 m) – 15.2% Reduction in long-term injury frequency rate (LTIFR) (2019: 0.67) S T R E N G T H E N IN G S U S TA IN A B ILI T Y In 2019, LafargeHolcim made significant progress in reducing its carbon footprint. Compared to 2018 the company reduced its carbon emissions by 1.4 percent at constant 2019 scope to 561 kg in 2019, nearly meeting its 2022 target of 560 kg. Given this strong progress the company has revised its 2022 target to 550kg as it moves to reduce its carbon footprint to 520 kg by 2030. In 2019, the Science- Based Targets initiative (SBTi) had validated the targets to reduce its global carbon footprint as adequate and consistent with the effort to keep temperatures below the ’2°C’ threshold agreed at the COP21 world climate conference in Paris.Compared to 1990 the company had already reduced its directly attributable (’scope 1’) CO2 emissions per ton of cementitious material by 27 percent, by far the leader among international cement groups. In October 2019, Chief Sustainability Officer Magali Anderson was appointed as a member of the Group Executive Committee, underlining LafargeHolcim’s industry leadership in regard to social and ecological responsibility. In January 2020, LafargeHolcim introduced its first fully carbon-neutral concrete in Switzerland and Germany, demonstrating the company’s move toward building a global family of carbon-neutral products. To keep up this momentum, the company has also revised its incentive scheme so that one-third of the Executive Committee’s performance share rewards is based on progress in carbon emissions, waste recycling and freshwater withdrawal. The health and safety component of the annual incentive scheme will also include a scorecard including both leading and lagging performance metrics. Both changes to the incentives scheme begin in 2020. R ECO R D N E T IN CO M E A N D FR E E C A S H FLOW Net sales of CHF 26,722 million grew 3.1 percent on a like-for-like basis compared to the prior year, driven by good growth in Europe and North America and good price dynamics across all business segments and higher prices in most markets. Recurring EBITDA pre-IFRS 16 reached CHF 6,153 million, up 6.5 percent like-for-like for the full year driven by good pricing improvement in efficiencies and our CHF 400 million SG&A cost savings program. The Recurring EBITDA margin pre-IFRS 16 increased from 21.9 percent in 2018 to 23.0 percent in 2019. Record Net Income pre-IFRS 16, before impairment and divestments, group share of CHF 2,072 million increased by 32.1 percent compared to 2018 (CHF 1,569 million), driven by less restructuring costs, lower financial expenses as well as a decrease in the tax rate. Earnings per Share pre-IFRS 16, before impairment and divestments were up by 29.1 percent to reach CHF 3.40 for 2019 versus CHF 2.63 for 2018. Record Free Cash Flow pre-IFRS 16 generation of CHF 3,047 million (+79%) and strong improvement of cash conversion pre-IFRS 16 reaching 49.5 percent, well above the targets of 40 percent, as defined in the Strategy 2022– “Building for Growth”. This achievement reflects reduced cash paid for tax, financial and restructuring costs as well as improved working capital. Net debt pre-IFRS 16 was substantilly reduced by CHF 4.7 billion (–35%) to CHF 8.8 billion at year-end 2019, reflecting the strong Free Cash Flow and the positive impact following the sale of Indonesia and Malaysia. This resulted in a significant deleveraging with a ratio of Net Debt to Recurring EBITDA of 1.4x. (2.2x in 2018). Return on Invested Capital (ROIC) pre-IFRS 16 was at a strong 7.6 percent in 2019, close to the 2022 target of above 8 percent and compared to 6.5 percent in the previous year. ROIC is now above cost of capital thanks to higher profitability, lower tax rate and disciplined Capex. 143 LafargeHolcim Integrated Annual Report 2019M A N AG E M E N T D I S C U S S I O N & A N A LY S I S 2 0 19 CO N T I N U ED 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 1.1 billion equivalent were undertaken, enabling the Group to lock in historically low interest rates. The main capital market transactions were the following: EUR 500 million issued in April 2019 EUR 500 million issued in November 2019 EUR 500 million subordinated fixed rate resettable perpetual notes with a coupon of 3.0%. EUR 500 million bond with a coupon of 0.5%, term 2019 – 2026 as part of an intermediated exchange offer against EUR 462 million of existing bonds. For more information, please refer to note 14.4 from the notes to the consolidated financial statements. During the course of 2019, the Group also repurchased a nominal of EUR 329 million and USD 76 million of Lafarge S.A. outstanding bonds. Financing profile LafargeHolcim has a strong financing profile. 82 percent of financial liabilities are financed through various capital markets and 18 percent through banks and other lenders. There are no major positions with individual lenders. The average maturity of financial liabilities increased from 6.5 years at 31 December 2018 to 6.8 years (excluding leases) at 31 December 2019, mainly due to several capital market and liability management transactions in 2019. The Group’s maturity profile is well-balanced with a large share of mid- to long-term financing. C A P I TA L M A R K E T F I N A N C I N G O F T H E G RO U P A S P E R 31 D E C E M B E R 2 0 19 (CHF 11,695 million) EUR Bonds CHF 4,919 m ~ 42% USD Bonds CHF 3,510 m ~ 30% CHF Bonds CHF 1,965 m ~ 17% AUD Bonds CHF 373 m ~ 3% Others* CHF 928 m ~ 8% * (GBP, MXN and NGN bonds, USD private placements) FR E E C A S H FLO W (C H FM ) N E T F I N A N C I A L D E B T (C H FM ) 3,500 2,875 2,250 1,625 1,000 1,685 1,703 15,000 14,346 3,047 13,518 13,000 11,000 9,000 7,000 8,811 2017 2018 2019 2017 2018 2019 144 Figures are pre-IFRS 16. LafargeHolcim Integrated Annual Report 2019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 75). The average nominal interest rate on LafargeHolcim’s financial liabilities as at 31 December 2019 was 3.3 percent, and the proportion of financial liabilities at fixed interest rates was at 75 percent. Detailed information on financial liabilities can be found in note 14. Liquidity To secure liquidity, the Group held cash and cash equivalents of CHF 4,148 million at 31 December 2019. This cash is mainly invested in term deposits held with a large number of banks on a broadly diversified basis and in short- term money-market funds. The counterparty risk is constantly monitored on the basis of clearly defined principles as part of the risk management process. As of 31 December 2019, LafargeHolcim had unused committed credit lines of CHF 5,776 million (see note 14). Current financial liabilities as at 31 December 2019, of CHF 2,089 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 of 31 December 2019, no commercial papers 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 M AT U R I T Y P RO F I L E Million CHF 3000 2000 1,761 1000 0 2,283 1,611 1,335 1,398 974 904 452 1,253 804 20 21 22 23 24 25 26 Bonds, private placements and commercial paper notes Loans from financial institutions and other financial liabilities 51 27 28 29 >29 145 LafargeHolcim Integrated Annual Report 2019M A N AG E M E N T D I S C U S S I O N & A N A LY S I S 2 0 19 CO N T I N U ED 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. 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. The following table shows the effects of a hypothetical 5 percent depreciation of the respective foreign currencies against the Swiss Franc. S E N S I T I V I T Y A N A LY S I S Million CHF Net sales Recurring EBITDA pre-IFRS 16 Cash flow from operating activities Net Financial Debt 2019 EUR GBP USD CAD Latin American basket (MXN, BRL, ARS, COP) Asian basket (AUD, CNY, PHP) Middle East African basket (NGN, DZD, EGP) INR Assuming a 5% strengthening of the Swiss Franc the impact would be as follows: 26,722 (193) 6,153 4,825 (52) (31) 10,110 (240) (88) (16) (6) (24) (285) (81) (56) (165) (106) (21) (16) (15) (90) (24) (13) (3) (190) (35) (33) 52 (111) (27) (19) (22) (70) (20) (16) (6) 146 LafargeHolcim Integrated Annual Report 2019147 LafargeHolcim Integrated Annual Report 2019M A N AG E M E N T D I S C U S S I O N & A N A LY S I S 2 0 19 CO N T I N U ED A SIA PACIFIC Sales of cement Sales of aggregates Sales of ready-mix concrete Net sales to external customers Like-for-like growth million t million t million m3 million CHF % Recurring EBITDA pre-IFRS 16 million CHF Like-for-like growth % 2019 73.5 27.3 9.6 6,491 2.5% 1,694 14.2% The Asia Pacific region continued to generate strong Recurring EBITDA pre-IFRS 16 growth. China strongly contributed again, still benefiting from price momentum and from the effects of more stringent emissions and permitting regulations, supporting our plants with a vertically integrated waste processing business. The Indian market grew, but experienced a moderation of its economic growth with delayed infrastructure projects, limiting deliveries to a moderate increase compared with the prior year. Competition in the Philippines led to a decline in volumes while Australia’s volumes faced headwinds from the economic slowdown. Net sales for the Asia Pacific region grew overall by 2.5 percent on a like-for-like basis, mainly driven by India and China. Cement saw growth across the region on a like-for-like basis, as did Aggregates, which also benefited from a major contribution from China. The performance of Ready-Mix Concrete was impacted by Australia’s challenging market situation. Recurring EBITDA pre-IFRS 16 for the Asia Pacific region showed strong growth of 14.2 percent on a like-for-like basis. Strict cost management and restructuring efforts drove this profitability increase. India largely contributed to the margin improvement of the region despite soft cement demand growth with improved pricing and cost saving initiatives supporting the performance. The share of the Huaxin joint-venture profits in China was recognized in the region’s result and the total contribution to Recurring EBITDA pre-IFRS 16 by China (including wholly owned operations) was CHF 551 million. The divestments of Indonesia, Malaysia and Singapore were successfully closed during 2019. The agreement to sell the Philippines has been signed and the closing remains subject to customary and regulatory approval. 148 LafargeHolcim Integrated Annual Report 2019 Grinding plant Cement plant CO N S O L I DAT E D C E M E N T G R I N D I N G C A PAC I T Y ( M I L L I O N T O N S P E R Y E A R ) Countries China (joint venture)* India Philippines China Australia (joint venture) Bangladesh * of which 37.2 mt in the Hubei province 2019 97.6 64.4 9.4 7.7 5.5 3.9 T O TA L CO N S O L I DAT E D C E M E N T G R I N D I N G C A PAC I T Y ( M I L L I O N T O N S P E R Y E A R ) 85.4 (188.5 including joint ventures) 149 LafargeHolcim Integrated Annual Report 2019M A N AG E M E N T D I S C U S S I O N & A N A LY S I S 2 0 19 CO N T I N U ED EUROPE Sales of cement Sales of aggregates Sales of ready-mix concrete Net sales to external customers Like-for-like growth million t million t million m3 million CHF % Recurring EBITDA pre-IFRS 16 million CHF Like-for-like growth % 2019 46.3 118.7 19.3 7,670 4.9% 1,596 10.2% 2019 was a very strong year for the Europe region. Good markets were observed in Eastern and Central Europe with ongoing public infrastructure spending across Europe in addition to the large projects in France (Grand Paris) and Russia (Great Moscow). Recovery of the Mediterranean region, with strong demand in the residential sector and a resilient market in the UK contributed to the solid revenue growth. Net sales grew by 4.9 percent on a like-for-like basis for the second consecutive year. Successful price increases were implemented in all segments and in the key markets of France, Germany, Poland and Russia, further amplified by continuous improvements to products and client portfolios. Cement volumes sold grew by 2.3 percent on a like-for-like basis supported by market drivers in the infrastructure, construction and residential segments. Aggregates volumes sold stood at 118.7 million tons, slightly below 2018 due to the end of large projects in France and Poland. Landfill activity in France and Switzerland contributed to the revenue growth of the segment. The Ready-Mix Concrete segment showed another year of growth, thanks to strict cost control and effective price management, mainly in France, Poland and Switzerland. The positive development of net sales, the good industrial performance, cost discipline and lower administrative costs with the achievement of the SG&A savings program together with lower costs of fuel due to an increase of the thermal substitution rate pushed the Europe region to double digit growth of Recurring EBITDA pre-IFRS 16 at 10.2 percent on a like-for-like basis. Three bolt-on acquisitions were concluded in 2019 and will contribute to growth in the future. 150 LafargeHolcim Integrated Annual Report 2019 Grinding plant Cement plant CO N S O L I DAT E D C E M E N T G R I N D I N G C A PAC I T Y ( M I L L I O N T O N S P E R Y E A R ) Countries France Russia Spain Germany Poland Romania Greece Switzerland Italy Austria Belgium Azerbaijan United Kingdom Hungary Moldova Serbia Bulgaria Czech Republic Croatia 2019 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 1.7 1.5 1.3 1.2 0.9 T O TA L CO N S O L I DAT E D C E M E N T G R I N D I N G C A PAC I T Y ( M I L L I O N T O N S P E R Y E A R ) 73.6 151 LafargeHolcim Integrated Annual Report 2019M A N AG E M E N T D I S C U S S I O N & A N A LY S I S 2 0 19 CO N T I N U ED L ATIN AMERIC A Sales of cement Sales of aggregates Sales of ready-mix concrete Net sales to external customers Like-for-like growth million t million t million m3 million CHF % Recurring EBITDA pre-IFRS 16 million CHF Like-for-like growth % 2019 24.7 4.1 4.9 2,620 3.6% 887 –1.7% After a mixed first half of 2019 with improving demand in Brazil and Colombia and large infrastructure project demand in El Salvador, balanced by the postponement of public projects in Mexico after the presidential change in 2018, the Latin America region continued to see soft but stabilizing cement demand. The pressure on margins intensified in a context of high cost inflation and increased competition, leading to annual Recurring EBITDA pre-IFRS 16 below the prior year on a like-for-like basis. Total cement volumes sold declined by 1.5 percent on a like-for-like basis. Soft demand was seen in Argentina and Ecuador as part of the transition after the presidential elections. Mexico remained challenging but is stabilizing and the cancellation of some Mexican lighthouse projects were partly compensated by good volumes in Colombia, Brazil and El Salvador. Over-proportional net sales growth of 3.6 percent like-for-like reflects price increases to compensate high cost inflation. Volumes in the Ready-Mix Concrete segment declined 10.7 percent compared to the prior year on a like-for- like basis, mainly due to a halt of major infrastructure projects in Mexico. The Disensa network of construction materials stores continues to expand in the region and established its 2,000th location as part of the commercial strategy to combine LafargeHolcim resources with the entrepreneurial spirit of the store owners. The product portfolio has expanded in selected countries to support the Group’s growth strategy. Recurring EBITDA pre-IFRS 16 in 2019 is 1.7 percent below the prior year, impacted by lower volumes, higher energy costs and distribution expenses partly offset by price increases, strong operational performance and cost savings initiatives including a substantial improvement in the usage of alternative fuels. Argentina has been considered to be hyperinflationary since 1 July 2018. Accordingly, LafargeHolcim has applied the accounting standard IAS 29 Financial Reporting in Hyperinflationary Economies with effect from 1 January 2018. 152 LafargeHolcim Integrated Annual Report 2019 Grinding plant Cement plant CO N S O L I DAT E D C E M E N T G R I N D I N G C A PAC I T Y ( M I L L I O N T O N S P E R Y E A R ) Countries Mexico Brazil Ecuador Argentina Colombia El Salvador Costa Rica French West Indies Nicaragua 2019 12.2 10.1 5.5 4.7 2.1 1.8 1.1 0.7 0.4 T O TA L CO N S O L I DAT E D C E M E N T G R I N D I N G C A PAC I T Y ( M I L L I O N T O N S P E R Y E A R ) 38.6 153 LafargeHolcim Integrated Annual Report 2019M A N AG E M E N T D I S C U S S I O N & A N A LY S I S 2 0 19 CO N T I N U ED MIDDLE E A S T AFRIC A Sales of cement Sales of aggregates Sales of ready-mix concrete Net sales to external customers Like-for-like growth million t million t million m3 million CHF % Recurring EBITDA pre-IFRS 16 million CHF Like-for-like growth % 2019 35.6 6.3 3.8 2,903 –0.8% 656 –5.1% recorded in Iraq, Qatar and several of the countries in the East African region. These overall headwinds were partially softened by strong cost control in distribution, production and overhead costs and continued focus on pricing strategies, but resulted in a decrease in Recurring EBITDA pre-IFRS 16 of 5.1 percent on a like-for-like basis. In the Middle East Africa region, our core markets continued to be challenging due to increased cement capacities, changes in the competitive profile and economic slowdown in the region. Cement volumes were maintained just below the prior year’s level, while net sales decreased by 0.8 percent on a like-for-like basis. This decrease in net sales was mainly caused by price pressure and lower volumes in oversupplied markets, particularly Algeria, Egypt and Nigeria and by the slowdown in Lebanon, Zambia and Kenya. Robust cement demand was 154 LafargeHolcim Integrated Annual Report 2019 Grinding plant Cement plant CO N S O L I DAT E D C E M E N T G R I N D I N G C A PAC I T Y ( M I L L I O N T O N S P E R Y E A R ) Countries 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 2019 11.7 11.8 10.6 8.9 5.7 3.9 3.2 3.2 2.5 2.2 2.0 1.5 1.1 1.1 0.7 0.6 0.5 0.4 0.3 0.3 0.2 T O TA L CO N S O L I DAT E D C E M E N T G R I N D I N G C A PAC I T Y ( M I L L I O N T O N S P E R Y E A R ) 56.3 (72.4 including joint ventures) 155 LafargeHolcim Integrated Annual Report 2019M A N AG E M E N T D I S C U S S I O N & A N A LY S I S 2 0 19 CO N T I N U ED NORTH AMERIC A Sales of cement Sales of aggregates Sales of ready-mix concrete Net sales to external customers Like-for-like growth million t million t million m3 million CHF % Recurring EBITDA pre-IFRS 16 million CHF Like-for-like growth % 2019 20.8 113.5 10.2 6,311 4.9% 1,621 4.4% The macroeconomic environment remained favorable in the US and Eastern Canada with a strong order backlog and several large projects already captured. In contrast, Western Canada experienced some challenges arising from the economic downturn triggered by the oil and gas dependent provinces of the Prairies. The positive trend in the US was partially offset by the prolonged flooding of the Mississippi river system in the second quarter, which hindered product shipments and increased operating costs temporarily. The continuing growth strategy coupled with strong price management and rigorous cost control resulted in strong results compared to the prior year. The growth strategy was further supported by additional bolt-on acquisitions completed in 2019, as well as several multi-year construction contract awards, which bolstered our Solutions & Products segment. Volumes of cement and aggregates sold increased over the prior year by 5.3 percent and 3.0 percent respectively, on a like-for-like basis, with the US driving the growth. Ready-Mix Concrete sales volume grew 1.6 percent on a like-for- like basis with Eastern Canada driving the increase. Net sales to external customers improved to CHF 6,311 million, a like-for-like increase of 4.9 percent over the prior year, driven by sales volume growth and price gains. Recurring EBITDA pre-IFRS 16 for North America showed growth of 4.4 percent on a like-for-like basis: revenue growth and overachievement in the SG&A cost reduction plan, offset by some pressure on distribution costs and the impact of the Mississippi flooding. 156 LafargeHolcim Integrated Annual Report 2019 Grinding plant Cement plant CO N S O L I DAT E D C E M E N T G R I N D I N G C A PAC I T Y ( M I L L I O N T O N S P E R Y E A R ) T O TA L CO N S O L I DAT E D C E M E N T G R I N D I N G C A PAC I T Y ( M I L L I O N T O N S P E R Y E A R ) Countries United States Canada 2019 23.6 8.4 32.0 157 LafargeHolcim Integrated Annual Report 2019RESPONSIBILIT Y S TATEMENT 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, 27 February 2020 Jan Jenisch Chief Executive Officer Géraldine Picaud Chief Financial Officer 158 LafargeHolcim Integrated Annual Report 2019159 LafargeHolcim Integrated Annual Report 2019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 213 227 229 241 244 246 247 249 249 250 255 269 271 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 162 163 164 166 168 169 170 173 181 186 189 190 195 196 201 201 204 210 212 CONSOLIDATED STATEMENT OF INCOME OF LAFARGEHOLCIM Million CHF Net sales Production cost of goods sold Gross profit Distribution and selling expenses Administration expenses Share of profit of joint ventures Operating profit 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 before taxes Income taxes Net income Net income attributable to: Shareholders of LafargeHolcim Ltd Non-controlling interest Earnings per share in CHF Earnings per share Fully diluted earnings per share The non-GAAP measures used in this report are defined on page 271. Notes 2019 2018 3.3 4.3 6.4 5.2 5.3 6.8 7.2 7.3 8.2 26,722 27,466 (15,441) (15,918) 11,281 (6,657) (1,340) 548 3,833 302 (117) 12 158 (870) 3,319 (806) 2,513 11,548 (6,956) (1,782) 502 3,312 93 (166) 22 140 (1,025) 2,375 (656) 1,719 2,246 267 1,502 217 9 9 3.69 3.68 2.52 2.52 162 LafargeHolcim Integrated Annual Report 2019 CONSOLIDATED STATEMENT OF COMPREHENSIVE EARNINGS OF LAFARGEHOLCIM Million CHF Net income Notes 2019 2,513 2018 1,719 Items that will be reclassified to the statement of income in future periods Currency translation effects – Exchange differences on translation – 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 (524) (1,602) 65 (4) (32) (25) 9 (3) 6 0 4 (16) (3) 28 (5) (14) 0 3 (507) (1,602) (311) 61 0 0 3 (246) 75 (50) 4 3 0 27 (753) (1,575) 1,759 144 1,522 237 120 25 163 LafargeHolcim Integrated Annual Report 2019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 31.12.2019 31.12.2018 14.3 14.5 12.3 10.2 10.3 10.4 13.2 12.2 6.4, 6.8 11.2 11.3 11.3 8.4 16.2 14.5 4,148 2,515 28 124 2,871 2,494 1,175 1,370 66 180 3,229 3,081 1,276 1,311 12,210 11,658 1,092 3,337 27,189 13,039 644 649 145 5 46,100 58,310 1,111 3,133 27,890 14,045 810 651 371 26 48,037 59,695 164 LafargeHolcim Integrated Annual Report 2019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 31.12.2019 31.12.2018 10.5 14.4 17.2 13.2 14.4 16.2 8.6 8.4 17.2 18.2 18.2 2.5 3,535 2,089 585 2,286 376 272 9,144 12,202 1,413 385 2,090 1,578 17,667 26,811 1,232 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 22,811 23,157 (121) 4,644 28,566 2,933 31,499 58,310 (612) 3,166 26,925 3,128 30,053 59,695 165 LafargeHolcim Integrated Annual Report 2019CONSOLIDATED STATEMENT OF CHANGES IN EQUITY OF LAFARGEHOLCIM Million CHF Equity as at 31 December 2018 Impact of change in accounting policies 1 Restated equity as at 1 January 2019 Net income Other comprehensive earnings Total comprehensive earnings Payout Scrip dividend 2 Transaction costs relating to scrip dividend Share buyback and cancellation of shares Subordinated fixed rate resettable notes 3 Remuneration on subordinated fixed rate resettable notes Hyperinflation 4 Change in treasury shares Share-based remuneration (Disposal) Acquisition of participation in Group companies Change in participation in existing Group companies Equity as at 31 December 2019 Equity as at 1 January 2018 Net income Other comprehensive earnings Total comprehensive earnings Payout Subordinated fixed rate resettable notes Hyperinflation Change in treasury shares Share-based remuneration Capital repaid to non-controlling interest Change in participation in existing Group companies Share capital 1,214 1,214 39 (21) 1,232 1,214 Capital surplus 23,157 23,157 (322) (39) (1) 16 22,811 24,340 (1,192) 10 Equity as at 31 December 31 2018 1,214 23,157 1 See more information in note 15. 2 See more information in note 9. 3 See more information in note 18.1. 4 See more information in note 2.2. 5 Equity as at 31 December 2019 includes CHF –103 million of currency translation adjustment relating to assets and directly associated liabilities classified as held for sale (2018: CHF –84 million). Treasury shares (612) (612) 581 (91) (121) (554) (76) 18 (612) 166 Currency translation adjustments (14,019) (14,019) (444) (444) (64) (14,527) (12,606) (1,411) (1,411) (2) (14,019) Other reserves Total equity attributable to shareholders of LafargeHolcim Ltd Non-controlling interest Total shareholders’ equity 41 41 (45) (45) (4) 15 26 26 41 Retained earnings 17,144 (36) 17,108 2,246 (235) 2,011 (561) 550 (20) 70 (8) 26 19,176 15,378 1,502 4 1,506 200 151 (91) 17,144 26,925 (36) 26,889 2,246 (724) 1,522 (322) (1) 550 (20) 70 (99) 16 (38) 28,566 27,787 1,502 (1,382) 120 (1,192) 200 151 (77) 10 (75) 26,925 3,128 (2) 3,126 267 (29) 237 (118) 15 (405) 77 2,933 3,188 217 (193) 25 (151) 32 (3) 38 3,128 30,053 (38) 30,015 2,513 (753) 1,759 (440) (1) 550 (20) 85 (99) 16 (405) 40 31,499 5 30,975 1,719 (1,575) 145 (1,343) 200 183 (77) 10 (3) (37) 30,053 5 LafargeHolcim Integrated Annual Report 2019Million CHF Equity as at 31 December 2018 Impact of change in accounting policies 1 Restated equity as at 1 January 2019 Net income Other comprehensive earnings Total comprehensive earnings Payout Scrip dividend 2 Transaction costs relating to scrip dividend Share buyback and cancellation of shares Subordinated fixed rate resettable notes 3 Hyperinflation 4 Change in treasury shares Share-based remuneration Remuneration on subordinated fixed rate resettable notes (Disposal) Acquisition of participation in Group companies Change in participation in existing Group companies Equity as at 31 December 2019 Equity as at 1 January 2018 Net income Other comprehensive earnings Total comprehensive earnings Payout Subordinated fixed rate resettable notes Hyperinflation Change in treasury shares Share-based remuneration Capital repaid to non-controlling interest Change in participation in existing Group companies Equity as at 31 December 31 2018 1 See more information in note 15. 2 See more information in note 9. 3 See more information in note 18.1. 4 See more information in note 2.2. (2018: CHF –84 million). Share capital 1,214 1,214 39 (21) 1,232 1,214 Capital surplus 23,157 23,157 (322) (39) (1) 16 22,811 24,340 (1,192) 10 Treasury shares (612) (612) 581 (91) (121) (554) (76) 18 (612) Currency translation adjustments (14,019) (14,019) (444) (444) (64) (14,527) (12,606) (1,411) (1,411) (2) (14,019) Other reserves 41 41 (45) (45) (4) 15 26 26 41 Retained earnings 17,144 (36) 17,108 2,246 (235) 2,011 (561) 550 (20) 70 (8) 26 19,176 15,378 1,502 4 1,506 200 151 (91) 17,144 5 Equity as at 31 December 2019 includes CHF –103 million of currency translation adjustment relating to assets and directly associated liabilities classified as held for sale 1,214 23,157 Total equity attributable to shareholders of LafargeHolcim Ltd Non-controlling interest Total shareholders’ equity 26,925 (36) 26,889 2,246 (724) 1,522 (322) (1) 550 (20) 70 (99) 16 (38) 28,566 27,787 1,502 (1,382) 120 (1,192) 200 151 (77) 10 (75) 26,925 3,128 (2) 3,126 267 (29) 237 (118) 15 (405) 77 2,933 3,188 217 (193) 25 (151) 32 (3) 38 3,128 30,053 (38) 30,015 2,513 (753) 1,759 (440) (1) 550 (20) 85 (99) 16 (405) 40 31,499 5 30,975 1,719 (1,575) 145 (1,343) 200 183 (77) 10 (3) (37) 30,053 5 167 LafargeHolcim Integrated Annual Report 2019CONSOLIDATED STATEMENT OF CASH FLOWS OF LAFARGEHOLCIM Million CHF Net income Income taxes (Profit)/loss on disposals and other non operating items Share of profit of associates and joint ventures Financial expenses net Depreciation, amortization and impairment of operating assets Employee benefits and other operating items Change in inventories Change in trade accounts receivables Change in trade accounts payable Change in other receivables and liabilities Cash generated from operations Dividends received Interest received Interest paid Income taxes paid 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 Coupon paid on subordinated fixed rate resettable notes Net movement in current financial liabilities Proceeds from long-term financial liabilities Repayment of long-term financial liabilities Repayment of long-term lease liabilities Increase in participation in existing Group companies Cash flow from financing activities (C) Increase/(Decrease) in cash and cash equivalents (A + B + C) Cash and cash equivalents as at the beginning of the period (net) Increase/(Decrease) in cash and cash equivalents Currency translation effects Cash and cash equivalents as at the end of the period (net) 1 2018 numbers have been restated following the information in note 1.3. 168 Notes 8.2 1.2, 1.3 6.3, 6.7 7.2, 7.3 4.5 1.2, 1.3 1.2, 1.3 1.2, 1.3 1.2, 1.3 1.2, 1.3 8.3 20 9 14.3 2019 2,513 806 (234) (560) 712 2,559 (231) 357 144 48 (259) 5,854 234 171 (723) (711) 4,825 2018 1 1,719 656 8 (524) 886 2,229 (154) (444) 7 267 (366) 4,283 293 131 (932) (787) 2,988 (1,534) (1,411) 137 (142) 1,335 (131) 116 (219) (322) (114) 76 (108) 550 (6) (198) 515 126 (176) 172 (209) 112 (1,386) (1,192) (156) (8) (73) 200 0 (223) 1,657 (2,531) (3,140) (409) (82) (27) (202) (2,630) (3,163) 1,975 (1,561) 2,264 1,975 (224) 4,014 3,954 (1,561) (129) 2,264 LafargeHolcim Integrated Annual Report 2019PRINCIPAL EXCHANGE RATES The following table summarizes the principal exchange rates that have been used for translation purposes. 1 Argentinian Peso 1 1 Australian Dollar 1 Brazilian Real 1 Canadian Dollar 1 Chinese Renminbi 100 Algerian Dinar 1 Egyptian Pound 1 Euro 1 British Pound 100 Indian Rupee 100 Mexican Peso 100 Nigerian Naira 100 Philippine Peso 1 US Dollar 1 See more information in note 2.2. ARS AUD BRL CAD CNY DZD EGP EUR GBP INR MXN NGN PHP USD Statement of income Average exchange rates in CHF 2019 0.02 0.69 0.25 0.75 0.14 0.83 0.06 1.11 1.27 1.41 5.16 0.27 1.92 0.99 2018 0.03 0.73 0.27 0.75 0.15 0.84 0.05 1.16 1.31 1.43 5.09 0.28 1.86 0.98 Statement of financial position Closing exchange rates in CHF 31.12.2019 31.12.2018 0.02 0.68 0.24 0.74 0.14 0.81 0.06 1.09 1.27 1.36 5.12 0.27 1.91 0.97 0.03 0.70 0.25 0.72 0.14 0.84 0.05 1.13 1.25 1.41 5.01 0.27 1.88 0.98 169 LafargeHolcim Integrated Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL S TATEMENT S 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 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). • Liabilities and costs for defined benefit 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 measurement of site restoration and other environmental provisions requires long-term assumptions regarding the completion of raw material extraction and the phasing of the restoration work to be carried out (note 17.2). • The recognition and measurement of provisions such as litigation 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 from tax losses carryforward requires an 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). • 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 recognizes liabilities for potential tax audit issues and uncertain tax positions based on management’s estimate of whether additional taxes will be due and on the requirements of IFRIC 23 Uncertainty over Income Tax Treatments. 1. ACCOU N T ING P O LICIE S 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 judgements 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. 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). • Certain lease contracts entered into by the Group include extension options which require an assessment of whether such options will be exercised. If it is reasonably certain that an extension option will be exercised, the period covered by the extension option is included in the lease liability. As part of its judgment, the Group considers all relevant facts and circumstances that create an economic incentive for it to exercise an extension option, including any expected changes in facts and circumstances from the commencement date until the exercise date of the option. Note 15 includes additional information about future payments covered by an extension option not included in the lease term. 170 LafargeHolcim Integrated Annual Report 20191.2 Adoption of new and revised International Financial Reporting Standards and interpretations In 2019, LafargeHolcim adopted 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 IFRS 16 Leases which replaces IAS 17 Leases and related interpretations was adopted for the period starting 1 January 2019. The new standard no longer requires a distinction between finance and operating leases for lessees but requires lessees to recognize a lease liability for future lease payments and a corresponding right-of-use asset. In the consolidated statement of income, the expenses comprise a depreciation charge reflecting the consumption of economic benefits and an interest expense reflecting the unwinding of the lease liability which is accounted for as a finance cost. In the cash flow statement, the portion of the lease payments reflecting the repayment of the lease liability is presented within financing activities whereas the interest portion is presented in the cash flow from operating activities in accordance with the Group’s accounting policy. The Group applied the new standard in accordance with the modified retrospective approach without restatement of 2018 in accordance with the transitional provisions of IFRS 16 leases that previously were accounted for as operating leases under IAS 17 were recognized at the present value of the remaining lease payments as of 1 January 2019 and discounted with the incremental borrowing rate as of that date. Consequently, in 2019, for better comparability, certain indicators are calculated

 and  IFRS 16.

The right-of-use assets were in general measured at the amount 
of the lease liability, adjusted for any prepayments or accruals 
as well as provision for onerous contracts relating to the lease 
recognized in the statement of financial position immediately 
before the date of initial application. For certain leases, the 
right-of-use asset was measured at its carrying amount as if the 
standard had been applied since the commencement date, 
discounted with the incremental borrowing rate at the date of 
initial application. LafargeHolcim does not capitalize as right-of-
use asset and record as lease liability the payments for short-

term leases, that is, leases with a lease term assessed to be 12 
months or less from the commencement date, and for leases of 
low value assets, that is, assets which fall below the 
capitalization threshold for property, plant and equipment as 
the impact is immaterial. These payments are included in 
operating profit on a cost incurred basis and reported in the 
cash flow from operating activities. For all contracts existing as 
of the date of initial application, the Group applied the practical 
expedient to grandfather the assessment made under IAS 17 
and related interpretations in terms whether the contracts meet 
the definition of a lease. 

Following the first year of implementation of IFRS 16, several 
lines of the cash flow statement are impacted notably, the cash 
flow from operations. The depreciation of the right-of use asset 
is a non cash item reflected in the line “Depreciation, 
amortization and impairment of operating assets”, while the 
unwinding of the lease liability is reflected as a cash expense in 
the line “interest paid”. As the Group applied the modified 
retrospective approach under IFRS 16, the comparative period 
has not been restated. In addition to this change, Management 
has decided to review the presentation of the other lines in the 
cash flow from operations as explained in note 1.3.
Information regarding the financial impacts of the initial 
application of IFRS 16 is found in note 15.

IFRIC 23 – Uncertainty over Income  
Tax Treatments 
The IFRIC issued IFRIC 23 Uncertainty over Income Tax Treatments 
in June 2017 which clarifies that an entity is required to reflect 
the effect of uncertainty in accounting for income taxes. The 
application of IFRIC 23 did not materially impact the Group 
financial statements.

Amendments to IAS 28 – Long-term Interests in Associates 
and Joint Ventures
The IASB issued amendments to IAS 28 Long-term Interests in 
Associates and Joint Ventures in October 2017, 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 adjustment to the carrying amount of long-term 
interests that arise from applying IAS 28. The adoption of the 
amendments to IAS 28 did not materially impact the Group 
financial statements.

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Amendment to IAS 19 – Plan Amendment, Curtailment or 
Settlement
The IASB issued an amendment to IAS 19 Employee Benefits Plan 
Amendment, Curtailment or Settlement in February 2018, 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 did not materially impact 
the Group financial statements.

Improvements to IFRS
The adoption of the improvements to IFRSs did 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

Amendments to IFRS 9,  
IAS 39 and IFRS 7

Presentation of Financial Statements 
and Accounting Policies, Changes in 
Accounting Estimates and Errors

Interest Rate Benchmark Reform

Amendment to IFRS 3 – Business Combinations
The IASB issued amendments to IFRS 3 Business Combinations in 
October 2018 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. 
The amendment will not significantly impact the financial 
statements of LafargeHolcim.

Amendment to IAS 1 and IAS 8 – Presentation of Financial 
Statements and Accounting Policies, Changes in Accounting 
Estimates and Errors
The IASB issued amendments to IAS 1 Presentation of Financial 
Statements and IAS 8 Accounting Policies, Changes in Accounting 
Estimates and Errors in October 2018. The amendments do not 
only clarify the definition of material but also have changed the 
threshold without altering the underlying concept of 
materiality. 

The amendments will not significantly impact the financial 
statements of LafargeHolcim.

172

Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate 
Benchmark Reform
In September 2019, the IASB issued amendments to IFRS 9, IAS 
39 and IFRS 7 providing relief to enable entities to continue to 
use hedge accounting for LIBOR related hedges that might 
otherwise need to be discontinued due to uncertainties arising 
from the LIBOR reform. The Group has assessed that the 
amendments will not materially impact the financial statements 
but LafargeHolcim will monitor closely any changes in the 
future.

In 2022, LafargeHolcim will adopt the following amended 
standard relevant to the Group:

Amendments to IAS 1

Classification of Liabilities as Current 
or Non-current

In January 2020, the IASB issued amendments to IAS 1 
Classification of Liabilities as Current or Non-current, which 
clarify that the classification of liabilities as current or non-
current is based on rights that are in existence at the end of the 
reporting period. Furthermore, the amendment also clarifies 
that the classification is unaffected by expectations about 
whether an entity will exercise its right to defer settlement of a 
liability and makes clear that settlement refers to the transfer to 
the counterparty of cash, own equity instruments, goods or 
services. The Group is in the process of evaluating the impact 
this amendment might have on its consolidated financial 
statements.

1.3  Application of the directive Alternative Performance 
Measures (non-GAAP measures)
Effective 1 January 2019, the SIX issued the directive Alternative 
Performance Measures. The purpose of this Directive is to 
promote the clear and transparent use of alternative 
performance measures and it requires notably that non-GAAP 
measures are reconciled to the IFRS financial statements unless 
they are directly apparent from the financial statements 
prepared according to recognized accounting standards. In 
order to comply with this Directive and to provide more 
transparency, several lines of the Cash Flow from operations 
have been amended, added or removed on the face of the cash 
flow statement. 

The following lines have been amended:
• (Profit)/loss on disposals and other non-operating items: this 
line item has been amended to bring more transparency and 
reflects the non-cash portion of the non-operating items 
recorded in the Consolidated Statement of income.

The following lines have been added:
• Change in inventories: this line item corresponds to the cash 

impact in the line item “Inventories” as reflected in the 
consolidated statement of financial position 

• Change in trade accounts receivable: this line item 

corresponds to the cash impact in the line item “Trade 
accounts receivable” as reflected in the consolidated 
statement of financial position

LafargeHolcim Integrated Annual Report 2019• Change in trade accounts payable: this line item corresponds 

to the cash impact in the line item “Trade accounts payable” as 
reflected in the consolidated statement of financial position
• Change in other receivables & liabilities: this line item includes 
the net change of other receivables and liabilities that are not 
already disclosed separately in the consolidated statement of 
cash flows or that are not of a tax or of a financial nature
• Employee benefits & other operating items: this line item 

reflects the non-cash impact on the operating profit of the 
employee benefits schemes net of any cash payments, the 
non- cash impact of the specific business risks provisions net 
of any cash payments, the non-cash share based 
compensation expenses and any other non-cash operating 
expenses.

The following lines have been removed: 
• Other non-cash items
• Loss on disposals and non operating expenses
• Change in net working capital
• Other expenses and income

2 . FU LLY CO N S O LIDAT E D CO M PA N IE S A N D N O N -
CO N T RO LLIN G IN T E R E S T S
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, for example through 
substantive potential voting rights such as a call option that if 
exercised, would result in the Group having an interest of more 
than one half of the voting rights in a subsidiary. 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.

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 fully eliminated.

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 
changing 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. However, if the Group loses control of a subsidiary, it 
derecognizes all the assets (plus goodwill) and liabilities of the 
subsidiary including the carrying amount of any non-controlling 
interests. Additionally, it reclassifies the currency translation 
adjustments relating to that subsidiary recognised in equity and 
records the resulting difference as a gain or loss on disposal in 
the statement of income.

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 

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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 31 December.

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 (for 
more information see note 11.3).

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.

Hyperinflation
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 since 31 December 
2018. In accordance with IAS 29, the financial statements of 
Argentina are expressed in terms of the measuring unit current 
as of 31 December 2018 and 2019. 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 31 
December 2018 and 2019. The gain of CHF 25 million (2018: 
CHF 26 million) on the net liability monetary position was 
recorded as part of production cost of goods sold in the 
consolidated statement of income. The restatement of equity 
by CHF 85 million (2018: CHF 183 million) was reflected as an 
increase in retained earnings, of which CHF 15 million (2018: 
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 31 December 
2018 and 2019. Since the amounts are translated into the 
currency of a non-hyperinflationary economy (i.e. CHF), 
comparative amounts have not been adjusted for subsequent 
changes in the price level or subsequent changes in exchange 
rates.

In Zimbabwe, inflation has increased significantly since the 
return to a national currency in February 2019 and cumulative 
inflation has exceeded 100 percent. Qualitative indicators also 
support the conclusion that Zimbabwe is now a 
hyperinflationary economy for accounting purposes, for periods 
ending after 1 July 2019. No hyperinflation accounting was 
applied for the consolidated financial statements as of 31 
December 2019, as the impact is immaterial.

174

LafargeHolcim Integrated Annual Report 2019 
Divestments in the previous comparative periods
In 2018, LafargeHolcim pursued its streamlining strategy in 
China initiated in 2016 with:
• The disposal 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 in the second quarter 

• The remaining proceeds of CHF 117 million received in May for 

the disposal of 73.5 percent of the listed shares in Sichuan 
Shuangma Cement Co. Ltd

• 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

2.3  Change in the scope of consolidation
As part of its strategy, LafargeHolcim has completed several 
acquisitions and disposals during the past two years.
Aggregated information of the acquisitions and disposals 
conducted is disclosed in note 20. 

Acquisitions in the current reporting period
In 2019, LafargeHolcim closed acquisitions of several 
businesses:
• Alfons Greten Betonwerk in Northern Germany (January 2019) 
• Transit Mix Concrete Co., a leading supplier of building 

materials in Colorado and subsidiary of Continental Materials 
Corporation (February 2019) 

• Colorado River Concrete in Fort Worth, Texas (March 2019)  
• Donmix in Australia, comprising of five ready-mix concrete 

plants on the Bass Coast, in the State of Victoria (March 2019) 

• Bedrock Redi-Mix comprising two ready-mix concrete plants 

on Vancouver Island, British Columbia (September 2019)

• Maxi Readymix Concrete comprising one ready-mix concrete 
plant in the Leicester area in the United Kingdom (September 
2019)

• Somaco comprising five precast plants and one bricks plant in 

Romania (October 2019)

Acquisitions in the previous comparative period
In 2018, LafargeHolcim acquired several businesses:
• The Kendall Group, a leading aggregates and ready-mix 

concrete manufacturer operating in South England (February 
2018)

• Tarrant Concrete, a leading provider of ready-mix concrete in 

the Dallas/Fort Worth area in Texas (July 2018)

• Sablière de Vritz in the area of Loire Atlantique in France (July 

2018)

• Metro Mix, LLC, a leading provider of ready-mix concrete in the 

Denver metropolitan area in Colorado (August 2018)

Divestments in the current reporting period
In 2019, LafargeHolcim finalized its divestments in South East 
Asia region:
• 80.6 percent shareholding in Holcim Indonesia for a total 

consideration of CHF 911 million which resulted in a net gain 
of CHF 179 million

• 51 percent shareholding in Lafarge Malaysia Berhard for a 

total consideration of CHF 387 million which resulted in a net 
gain of CHF 47 million

• 91 percent shareholding in Holcim Singapore for a 

consideration of CHF 48 million, which resulted in a net gain 
on disposal of CHF 20 million 

175

LafargeHolcim Integrated Annual Report 2019 
N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

2.4  Principal consolidated companies of the Group

Principal operating Group companies

Region

Company

Country

Municipality

Cement

Aggregates

Effective  
participation  
(percentage 
of interest)

Listed  
company

Ready-Mix 
Concrete

Asia Pacific Holcim (Australia) Pty Ltd

Australia 

Chatswood

u

l

Latin 
America

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

Holcim (New Zealand) Ltd

New Zealand 

Christchurch

Holcim Philippines Inc.

Philippines 

Taguig City

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 

Guayaquil

Holcim El Salvador S.A. de C.V. 

El Salvador 

Antiguo 
Cuscatlán

Société des Ciments Antillais

French West 
Indies

Baie-Mahault

Holcim México Operaciones S.A. de C.V. Mexico

Mexico City

Holcim (Nicaragua) S.A. 

Nicaragua 

Managua

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

l

l

l

l

l

l

l

l

l

l

X

X

X

X

X

X

X

100.0%

29.4%

100.0%

75.0%

36.1%

63.1%

100.0%

85.7%

80.0%

100.0%

100.0%

65.2%

92.2%

95.4%

69.7%

100.0%

52.2%

176

LafargeHolcim Integrated Annual Report 2019Region

Company

Europe

Lafarge Zementwerke GmbH

Country

Austria

Vienna

Municipality

Cement

Aggregates

Effective  
participation  
(percentage 
of interest)

Listed  
company

Ready-Mix 
Concrete

Holcim (Azerbaijan) O.J.S.C. 

Azerbaijan 

Baku

Holcim (Belgique) S.A.

Belgium

Nivelles

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

Beocin

Lafarge Cement d.o.o

Slovenia

Trbovlje

LafargeHolcim España S.A.U.

Spain 

Madrid

Holcim (Schweiz) AG

LH Trading Ltd

Switzerland 

Zurich

Switzerland 

Zurich

Aggregate Industries UK Ltd.

Lafarge Ireland Limited

Lafarge Cauldon Limited

United 
Kingdom 

United 
Kingdom

United  
Kingdom

Markfield

Cookstown

Markfield

u

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%

100.0%

100.0%

70.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

177

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

Region

Company

Country

Municipality

Cement

Aggregates

Effective  
participation  
(percentage 
of interest)

Listed  
company

Ready-Mix 
Concrete

North 
America

Middle East 
Africa

Lafarge Canada Inc.

Holcim (US) Inc. 

Canada

USA

Aggregate Industries Management Inc.  USA 

Lafarge Ciment de M’sila “LCM”

Lafarge Béton Algérie “LBA”

Lafarge Ciment d’Oggaz “LCO”

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

Egypt

Egypt

Iraq

Iraq

Jordan

Kenya

Toronto

Chicago

Chicago

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 Réunion S.A.

Reunion 

Le Port

Lafarge Industries South Africa (Pty) Ltd South Africa

Edenvale

Lafarge Mining South Africa (Pty) Ltd

South Africa

Johannesburg

Mbeya Cement Company Limited

Tanzania

Songwe

Hima Cement Ltd.

Lafarge Cement Zambia Plc

Uganda

Zambia

Kampala

Lusaka

Lafarge Cement Zimbabwe Limited

Zimbabwe

Harare

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

l

l

l

l

l

l

l

l

l

l

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

49.0%

97.4%

100.0%

70.0%

51.0%

50.3%

58.6%

52.1%

100.0%

58.4%

83.8%

83.8%

83.3%

100.0%

100.0%

61.5%

71.0%

75.0%

76.5%

X

X

X

X

X

X

178

LafargeHolcim Integrated Annual Report 2019Principal finance and holding companies

Company

Holcim Finance (Australia) Pty Ltd

Holcim (Australia) Holdings Pty Ltd

Holcibel 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 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

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

United Kingdom

United Kingdom

United Kingdom

United Kingdom

United Kingdom

USA

USA

Municipality

Sydney

Sydney

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

Holderbank

Rapperswil-Jona

Markfield

Markfield

Dorking

Dorking

Dorking

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%

179

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

Listed Group companies

Region

Company 

Country

Municipality

Place of listing

Market capitalization at 31 Decem-
ber 2019 in local currency

Security 
code number

Asia Pacific

LafargeHolcim Bangladesh Limited Bangladesh

Dhaka

Chittagong, 
Dhaka

ACC Limited

Ambuja Cements Ltd. 

India

India

Mumbai

Mumbai

Mumbai

Mumbai 

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

BDT

INR

INR 

PHP 

ARS

CRC

39,022  million

BD0643LSCL09

271,475  million

INE012A01025

389,683  million

INE079A01024 

87,749  million

PHY3232G1014 

33,481  million

ARP6806N1051 

120,083  million

CRINC00A0010 

Holcim (Ecuador) S.A.

Ecuador

Guayaquil

Quito, 
Guayaquil

USD

1,147  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

24  million

JO4104211019

29,037  million

KE0000000059

190  million

LB0000012833 

246,499  million

NGWAPCO00002

390  million

ZM0000000011

 144  million

ZW0009012056

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 interest1

Net income2

Total equity 2

India

India

2019

2018

63.9%

36.9%

63.9%

36.9%

2019

 109 

 80 

2018

 135 

 71 

2019

 864 

 862 

2018

 668 

 948 

Dividends paid to 
non-controlling interest

2019

2018

 27 

 10 

 30 

 16 

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.

180

LafargeHolcim Integrated Annual Report 2019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

3 . S EG M E N T R E P O R T IN G
3.1  Accounting principles
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

Each region is reviewed separately by the Chief Operating 
Decision Maker (i.e. the Group CEO). The countries have been 
aggregated into five operating 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 operating segments derives its revenues 
largely from the sale of cement, aggregates and ready-mix 
concrete. 

ACC Limited

Ambuja Cements Ltd.

2019

 982 

1,584 

2,566 

 542 

 279 

 821 

2018

 906 

1,634 

2,540 

 584 

 266 

 849 

2019

 930 

2,153 

3,083 

 598 

 148 

 746 

2018

 810 

2,120 

2,930 

 514 

 179 

 693 

1,745 

1,690 

2,337 

2,237 

2019

2,190 

 171 

2019

 298 

 214 

2018

2,096 

 212 

2018

 169 

 54 

2019

1,627 

 235 

2019

 379 

 192 

2018

1,608 

 212 

2018

 112 

(23)

The four product lines are as follows:

–  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

Group financing (including financing costs and financing 
income) and income taxes are managed on a Group basis and 
are not allocated to any operating segments.

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.

181

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

3.2  Operating segments
Information by operating segment

Capacity and volumes sold (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 pre-IFRS 16

Recurring EBITDA pre-IFRS 16 margin in %

Recurring EBITDA

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)

Capex 1

Income taxes paid

Personnel (unaudited)

Number of personnel

Reconciliation of measures of profit and loss to the consolidated statement of income

Recurring EBITDA pre-IFRS 16

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 expenses

Net income before taxes

1   The capex consists of the purchase and disposal of property, plant and equipment. 

182

Asia Pacific

2019

2018

2019

 85.4 

 73.5 

 27.3 

 9.6 

6,491 

 5 

6,497 

1,694 

 26.1 

1,740.

1,354 

 20.8 

 111.4 

 89.7 

 31.4 

 12.5 

7,446 

 45 

7,491 

1,609 

 21.5 

n.a.

1,200 

 16.0 

 73.6 

 46.3 

 118.7 

 19.3 

7,670 

 117 

7,787 

1,596 

 20.5 

1,720 

 971 

 12.5 

6,854 

1,607 

10,722 

4,109 

8,775 

1,371 

13,812 

5,623 

11,311 

 219 

16,777 

7,741 

Europe

2018

 73.6 

 45.3 

 120.4 

 19.3 

7,554 

 147 

7,701 

1,499 

 19.5 

n.a.

 787 

 10.2 

11,103 

 240 

15,935 

7,371 

 371 

 207 

 323 

 226 

 437 

 101 

 396 

 80 

 145 

 164 

 120 

 295 

 141 

 60 

 175 

 96 

 301 

 123 

 268 

 37 

 56 

 4 

 54 

1,396 

 711 

1,285 

 788 

17,505 

21,979 

20,880 

20,222 

8,871 

8,956 

11,277 

11,856 

12,614 

12,892 

1,306 

1,150 

72,452 

77,055 

1,694 

(13)

(372)

1,609 

(54)

(354)

1,596 

(32)

(718)

 3 

 123 

 13 

 2 

1,499 

(84)

(627)

(8)

(24)

 887 

(16)

(203)

 959 

(33)

(205)

 1 

(19)

(73)

1,523 

(73)

(568)

(301)

(45)

(104)

1,621 

(22)

(740)

(13)

1,354 

1,200 

 971 

 787 

 700 

 721 

 244 

 313 

1,001 

 882 

(437)

(591)

3,833 

3,312 

Latin America

Middle East Africa

North America

Corporate/Eliminations

Total Group

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

 38.6 

 24.7 

 4.1 

 4.9 

2,620 

 9 

2,629 

 887 

 33.7

 919.

 700 

 26.6 

2,814 

 33 

4,508 

1,841 

 39.1 

 25.1 

 3.6 

 5.5 

2,731 

 11 

2,743 

 959 

 35.0 

n.a.

 721 

 26.3 

2,957 

 36 

4,563 

2,047 

 56.3 

 35.6 

 6.3 

 3.8 

2,903 

 37 

2,939 

 656 

 22.3 

 728 

 244 

 8.3 

6,559 

1,360 

7,370 

2,929 

 656 

(61)

(422)

(2)

(9)

 56.8 

 35.9 

 8.7 

 4.2 

3,080 

 43 

3,123 

 734 

 23.5 

n.a.

 313 

 10.0 

6,897 

1,364 

7,763 

3,571 

 734 

(76)

(345)

(31)

(27)

(3)

 32.0 

 20.8 

 113.5 

 10.2 

6,311 

6,311 

1,621 

 25.7 

1,763.

1,001 

 15.9 

 32.0 

 19.8 

 109.6 

 9.4 

5,875 

 1 

5,877 

1,523 

 25.9 

n.a.

 882 

 15.0 

11,032 

10,898 

 54 

15,198 

6,532 

 57 

15,195 

6,853 

 727 

(168)

 559 

(301)

(288)

(437)

 726 

 64 

3,735 

3,659 

 6.9 

 6.1 

 285.9 

 207.9 

 269.9 

 47.7 

 312.9 

 221.9 

 273.8 

 50.9 

26,722 

27,466 

26,722 

27,466 

 779 

(248)

 532 

(307)

n.a.

(591)

 965 

 64 

2,427 

4,177 

(307)

(155)

(129)

(1)

(6)

6,153 

 23.0 

6,581 

3,833 

 14.3 

39,296 

3,337 

58,310 

26,811 

6,153 

(190)

(2,559)

(68)

(2)

(9)

 302 

(117)

 12 

 158 

(870)

3,319 

6,016 

 21.9 

n.a.

3,312 

 12.1 

41,595 

3,133 

59,695 

29,642 

6,016 

(476)

(2,229)

 64 

(27)

(32)

 93 

(166)

 22 

 140 

(1,025)

2,375 

LafargeHolcim Integrated Annual Report 20193.2  Operating segments

Information by operating segment

Capacity and volumes sold (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 pre-IFRS 16

Recurring EBITDA pre-IFRS 16 margin in %

Recurring EBITDA

Operating profit (loss)

Operating profit (loss) margin in %

Statement of financial position (Million CHF)

Investments in associates and joint ventures

Statement of cash flows (Million CHF)

Invested capital

Total assets

Total liabilities

Capex 1

Income taxes paid

Personnel (unaudited)

Number of personnel

Reconciliation of measures of profit and loss to the consolidated statement of income

Recurring EBITDA pre-IFRS 16

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 

     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 expenses

Net income before taxes

1   The capex consists of the purchase and disposal of property, plant and equipment. 

 85.4 

 73.5 

 27.3 

 9.6 

6,491 

 5 

6,497 

1,694 

 26.1 

1,740.

1,354 

 20.8 

 111.4 

 89.7 

 31.4 

 12.5 

7,446 

 45 

7,491 

1,609 

 21.5 

n.a.

1,200 

 16.0 

 73.6 

 46.3 

 118.7 

 19.3 

7,670 

 117 

7,787 

1,596 

 20.5 

1,720 

 971 

 12.5 

6,854 

1,607 

10,722 

4,109 

8,775 

1,371 

13,812 

5,623 

11,311 

 219 

16,777 

7,741 

1,694 

(13)

(372)

1,609 

(54)

(354)

1,596 

(32)

(718)

 2 

Europe

2018

 73.6 

 45.3 

 120.4 

 19.3 

7,554 

 147 

7,701 

1,499 

 19.5 

n.a.

 787 

 10.2 

11,103 

 240 

15,935 

7,371 

1,499 

(84)

(627)

(8)

(24)

Asia Pacific

2019

2018

2019

Latin America

Middle East Africa

North America

Corporate/Eliminations

Total Group

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

 38.6 

 24.7 

 4.1 

 4.9 

2,620 

 9 

2,629 

 887 

 33.7

 919.

 700 

 26.6 

2,814 

 33 

4,508 

1,841 

 39.1 

 25.1 

 3.6 

 5.5 

2,731 

 11 

2,743 

 959 

 35.0 

n.a.

 721 

 26.3 

2,957 

 36 

4,563 

2,047 

 56.3 

 35.6 

 6.3 

 3.8 

2,903 

 37 

2,939 

 656 

 22.3 

 728 

 244 

 8.3 

6,559 

1,360 

7,370 

2,929 

 56.8 

 35.9 

 8.7 

 4.2 

3,080 

 43 

3,123 

 734 

 23.5 

n.a.

 313 

 10.0 

6,897 

1,364 

7,763 

3,571 

 32.0 

 20.8 

 113.5 

 10.2 

6,311 

6,311 

1,621 

 25.7 

1,763.

1,001 

 15.9 

 32.0 

 19.8 

 109.6 

 9.4 

5,875 

 1 

5,877 

1,523 

 25.9 

n.a.

 882 

 15.0 

11,032 

10,898 

 54 

15,198 

6,532 

 57 

15,195 

6,853 

 6.9 

 6.1 

 727 

(168)

 559 

(301)

(288)

(437)

 726 

 64 

3,735 

3,659 

 779 

(248)

 532 

(307)

n.a.

(591)

 965 

 64 

2,427 

4,177 

 285.9 

 207.9 

 269.9 

 47.7 

 312.9 

 221.9 

 273.8 

 50.9 

26,722 

27,466 

26,722 

27,466 

6,153 

 23.0 

6,581 

3,833 

 14.3 

39,296 

3,337 

58,310 

26,811 

6,016 

 21.9 

n.a.

3,312 

 12.1 

41,595 

3,133 

59,695 

29,642 

 371 

 207 

 323 

 226 

 437 

 101 

 396 

 80 

 145 

 164 

 120 

 295 

 141 

 60 

 175 

 96 

 301 

 123 

 268 

 37 

 56 

 4 

 54 

1,396 

 711 

1,285 

 788 

17,505 

21,979 

20,880 

20,222 

8,871 

8,956 

11,277 

11,856 

12,614 

12,892 

1,306 

1,150 

72,452 

77,055 

classified as held for sale

 3 

 123 

 13 

 1 

(19)

(73)

(2)

(9)

 887 

(16)

(203)

 959 

(33)

(205)

 656 

(61)

(422)

1,523 

(73)

(568)

(301)

(45)

(104)

1,621 

(22)

(740)

(13)

 734 

(76)

(345)

(31)

(27)

(3)

(307)

(155)

(129)

(1)

(6)

6,153 

(190)

(2,559)

(68)

(2)

(9)

6,016 

(476)

(2,229)

 64 

(27)

(32)

1,354 

1,200 

 971 

 787 

 700 

 721 

 244 

 313 

1,001 

 882 

(437)

(591)

3,833 

3,312 

 302 

(117)

 12 

 158 

(870)

3,319 

 93 

(166)

 22 

 140 

(1,025)

2,375 

183

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

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 3

– 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

2019

16,261 

1,238 

17,498 

5,009 

3,889 

2,290 

2,621 

3,093 

 597 

4,972 

1,389 

1,092 

 878 

 670 

1,183 

(240)

 28.4 

1,056 

Cement 1

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 

Aggregates

Ready-Mix Concrete

Corporate/Eliminations

Solutions  

& Products 2

2019

2018

2019

2018

2019

2018

2019

2018

2019

2,997 

1,129 

4,125 

 548 

1,948 

 25 

 71 

1,532 

 978 

 187 

 403 

 5 

 17 

 392 

(25)

 23.7 

 217 

2,880 

1,212 

4,091 

 631 

1,925 

 26 

 94 

1,416 

 893 

 191 

 354 

 1 

 11 

 377 

(42)

 21.8 

 235 

5,254 

 35 

5,289 

1,012 

2,070 

 432 

 294 

1,482 

 372 

 117 

 124 

 27 

 18 

 110 

(23)

 7.0 

 82 

5,439 

 42 

5,481 

1,233 

2,060 

 508 

 319 

1,361 

 232 

 108 

 71 

 45 

 10 

 40 

(41)

 4.2 

 73 

2,210 

 38 

2,248 

 223 

1,003 

 54 

 81 

 887 

 259 

 48 

 101 

 10 

 22 

 78 

 11.5 

 36 

2,345 

 51 

2,396 

 297 

1,087 

 50 

 90 

 876 

(3)

 203 

 38 

 103 

 4 

 20 

 62 

(23)

 8.5 

 38 

(2,439)

(2,439)

(295)

(1,124)

(172)

(128)

(683)

(38)

(2,555)

(2,555)

(401)

(1,161)

(190)

(133)

(659)

(11)

 5 

 2 

Total Group

2018

26,722 

27,466 

26,722 

27,466 

6,497 

7,787 

2,629 

2,939 

6,311 

 559 

6,581 

1,740 

1,720 

 919 

 728 

1,763 

(288)

 24.6 

1,396 

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 

41,205 

45,194 

9,150 

9,639 

11,752 

12,800 

9,015 

8,327 

1,331 

1,094 

72,452 

77,055 

1   Cement, clinker and other cementitious materials
2   Precast, concrete products, asphalts, mortars and contracting and services
3   Including CHF 213 million for Cement, CHF 76 million for Aggregates, CHF 96 million for Ready-Mix Concrete and CHF 42 million for Solution & Products of IFRS 16  

lease impact in 2019.

184

LafargeHolcim Integrated Annual Report 2019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 3

– 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

2019

16,261 

1,238 

17,498 

5,009 

3,889 

2,290 

2,621 

3,093 

 597 

4,972 

1,389 

1,092 

 878 

 670 

1,183 

(240)

 28.4 

1,056 

Cement 1

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 

2,997 

1,129 

4,125 

 548 

1,948 

 25 

 71 

1,532 

 978 

 187 

 403 

 5 

 17 

 392 

(25)

 23.7 

 217 

2,880 

1,212 

4,091 

 631 

1,925 

 26 

 94 

1,416 

 893 

 191 

 354 

 1 

 11 

 377 

(42)

 21.8 

 235 

5,254 

 35 

5,289 

1,012 

2,070 

 432 

 294 

1,482 

 372 

 117 

 124 

 27 

 18 

 110 

(23)

 7.0 

 82 

Aggregates

Ready-Mix Concrete

Solutions  
& Products 2

Corporate/Eliminations

2019

2018

2019

2018

2019

2018

2019

2018

2019

Total Group

2018

5,439 

 42 

5,481 

1,233 

2,060 

 508 

 319 

1,361 

 232 

 108 

 71 

 45 

 10 

 40 

(41)

 4.2 

 73 

2,210 

 38 

2,248 

 223 

1,003 

 54 

 81 

 887 

 259 

 48 

 101 

 10 

 22 

 78 

 11.5 

 36 

2,345 

 51 

2,396 

 297 

1,087 

 50 

 90 

 876 

(3)

 203 

 38 

 103 

 4 

 20 

 62 

(23)

 8.5 

 38 

(2,439)

(2,439)

(295)

(1,124)

(172)

(128)

(683)

(38)

(2,555)

(2,555)

(401)

(1,161)

(190)

(133)

(659)

(11)

 5 

 2 

26,722 

27,466 

26,722 

27,466 

6,497 

7,787 

2,629 

2,939 

6,311 

 559 

6,581 

1,740 

1,720 

 919 

 728 

1,763 

(288)

 24.6 

1,396 

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 

1   Cement, clinker and other cementitious materials

2   Precast, concrete products, asphalts, mortars and contracting and services

lease impact in 2019.

3   Including CHF 213 million for Cement, CHF 76 million for Aggregates, CHF 96 million for Ready-Mix Concrete and CHF 42 million for Solution & Products of IFRS 16  

41,205 

45,194 

9,150 

9,639 

11,752 

12,800 

9,015 

8,327 

1,331 

1,094 

72,452 

77,055 

185

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

3.3  Information by country

Million CHF

Switzerland

USA

India

Canada

France

United Kingdom

Australia

Mexico

Germany

Others

Total

Net sales 
to external customers

Property, plant and equip-
ment and intangible assets

2019

 929 

4,312 

3,793 

2,118 

1,929 

1,764 

1,173 

 917 

 844 

2018

 979 

3,879 

3,697 

2,105 

1,915 

1,790 

1,251 

 984 

 677 

2019

 717 

5,170 

2,627 

2,545 

2,448 

1,412 

1,054 

 555 

 683 

2018

 698 

5,146 

2,645 

2,349 

2,413 

1,247 

1,035 

 517 

 647 

8,943 

26,722 

10,189 

27,466 

10,622 

27,833 

12,002 

28,699 

Net sales to external customers are based primarily on the 
location of assets (origin of sales). 
There is no single external customer where net sales amount to 
10 percent or more of the Group net sales.

4 . O PE R AT IN G PRO FI T
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 material 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
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 of 31 December 2019, 
contract liabilities amounted to CHF 509 million (2018: CHF 555 
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.

186

LafargeHolcim Integrated Annual Report 2019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.

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

Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers.

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 83 

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.

2019

(5,569)

(1,510)

(1,218)

(2,128)

(1,538)

(2,050)

(1,317)

(112)

(15,441)

2018

(5,726)

(1,745)

(1,349)

(2,191)

(1,575)

(1,876)

(1,557)

 100 

(15,918)

million (2018: CHF 98 million) were charged directly to the 
consolidated statement of income. 

187

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

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 6.4)

Impairment of long-term financial assets (note 7.3)

Impairment of investments in associates (note 6.8)

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)

Of which depreciation of right-of-use assets

2019

(2,050)

(356)

(153)

(2,559)

(68)

0

(2)

(9)

(13)

(1)

(12)

(6)

(32)

(2,591)

(1,916)

(404)

2018

(1,875)

(215)

(139)

(2,229)

 64 

(27)

(32)

0

(6)

(1)

(10)

(1)

(17)

(2,246)

(2,033)

0

188

LafargeHolcim Integrated Annual Report 20195 . PRO FI T A N D LO S S O N DI S P O S A L S A N D OT H E R 
NO N - O PE R AT ING I T E M S
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 
material property, plant and equiment 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.

5.2  Profit on disposals and other non-operating income

Million CHF

Dividends earned

Net gain on disposals before taxes

Other

Total

In 2019, the position “Net gain on disposal before taxes”, mainly 
includes gain on disposal of :
• Holcim Indonesia of CHF 179 million;
• Lafarge Malaysia Berhad of CHF 47 million;
• Holcim Singapore Ltd of CHF 20 million; and
• several gains on disposal of property, plant and equipment of 

CHF 26 million.

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

In 2019 and in 2018, the position “Other” includes expenses 
incurred in connection with assets, which are non-operating, 
abandoned or not part of the operating business cycle.

2019

 4 

 293 

 5 

 302 

2018

 6 

 69 

 18 

 93 

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.

Further information is disclosed in note 2.3. 

2019

(20)

(5)

(92)

(117)

2018

(9)

(84)

(73)

(166)

189

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

6 . IN V E S T M E N T S IN A S S O CI AT E S A N D JO IN T 
V E N T U R E S
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.

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.

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.

6.2  Main changes during the current period
During 2019, there were no individually material changes in the 
scope of investments in associates and joint ventures.

6.3  Main changes during the comparative 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. 

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.

2019

 258 

3,079 

3,337 

2019

2,869 

 548 

(226)

(12)

(3)

(9)

(87)

3,079 

2018

 264 

2,869 

3,133 

2018

2,693 

 502 

(264)

 4 

 28 

0

(95)

2,869 

Million CHF

Investments in associates

Investments in joint ventures

Total

6.4  Movements in investments in joint ventures

Million CHF

1 January 

Share of profit of joint ventures

Dividends earned

Net (disposals) acquisitions

Reclassifications

Impairments

Currency translation effects

31 December

190

LafargeHolcim Integrated Annual Report 2019In 2019, the position “Reclassifications” mainly relates to the 
swap of the Group’s stake in an associate in Europe for the 
non-controlled interest in a joint venture in Europe. This led to 
the Group gaining control over the joint venture and to its 
subsequent full consolidation . 

The position “Net (disposals) acquisitions” mainly relates to the 
sale of the Group’s interest in a joint venture in Canada. The 

position “Impairments” mainly relates to the impairment of the 
Group’s interest in certain joint ventures in Middle East Africa. 

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.

6.5  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 L.L.C

Australia

China

Morocco

Qatar

Lafarge Emirates Cement LLC

United Arab Emirates

Country of incorporation 
or residence

Effective participation  
(percentage of interest)

50.0%

41.8%

50.0%

49.0%

50.0%

Listed joint ventures companies

Region

Company 

Country

Municipality

Place of listing

Market capitalization at  
31 December 2019 in local currency

Security 
code number

Asia Pacific

Middle East 
Africa

Huaxin Cement Co. Ltd. –  
cement A shares

Huaxin Cement Co. Ltd. –  
cement B shares

China

Wuhan

Shanghai

CNY

35,994 million

CNE000000DC6

China

Wuhan

Shanghai

USD

1,526  million

CNE000000HL8

LafargeHolcim Maroc S.A.

Morocco

Casablanca

Casablanca

MAD

43,348  million

MA0000012320

191

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6.6  Huaxin Cement Co. Ltd (China)
As of 30 September 2019, the Group holds 41.8 percent (2018: 
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 30 September 2019 
amounted to CHF 2,014 million (2018: CHF 1,342 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. 

Huaxin Cement Co. Ltd. – Statement of financial position

Since Huaxin Cement Co. Ltd. is a publicly listed company in 
China and has not yet published its financial statements for the 
year 2019, the disclosed amounts for the investments in the 
joint venture Huaxin Cement Co. Ltd. are as of 30 September 
2019.

The summarized  financial information presented below are the 
amounts included in the IFRS financial statements of Huaxin 
Cement Co. Ltd. as at 30 September 2019 and as at 31 
December 2018. As of 30 September 2019, dividends of 
CHF 107 million (31 December 2018: CHF 31 million) were 
received from Huaxin Cement Co. Ltd.

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)

192

30.09.2019

31.12.2018

 814 

 758 

3,369 

4,941 

 296 

1,021 

 442 

 154 

1,912 

3,029 

2,759 

Jan-Sep 
2019

3,259 

1,192 

(199)

 993 

0

 7 

(36)

(186)

 779 

 702 

 3 

 705 

 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 

LafargeHolcim Integrated Annual Report 2019A reconciliation of the summarized financial information to the 
carrying amount of the investment in Huaxin Cement Co. Ltd. is 
as follows:

Million CHF

30.09.2019

31.12.2018

Group share of 41.8% (2018: 41.8%) 
of shareholders’ equity (excluding non-controlling interest)

Goodwill

Total

1,154 

 220 

1,374 

1,095 

 142 

1,238 

6.7  Lafarge Maroc S.A.S. (Morocco)
As of 31 December 2019, the Group holds 50 percent (2018: 
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 

Lafarge Maroc S.A.S. – Statement of financial position

2019, the disclosed amounts for the investment in the joint 
venture Lafarge Maroc are as of 30 June 2019.

The summarized financial informa tion presented below are the 
amounts included in the IFRS financial statements of Lafarge 
Maroc S.A.S. as at 30 June 2019 and as at 31 December 2018.  
As of 30 June 2019,  dividends of CHF 18 million  
(31 December 2018: CHF 54 million) were received from  
Lafarge Maroc S.A.

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)

30.06.2019

31.12.2018

 15 

 361 

2,455 

2,831 

 254 

 235 

 706 

 288 

1,483 

1,348 

 931 

 20 

 348 

2,421 

2,789 

 247 

 255 

 639 

 287 

1,428 

1,361 

 916 

193

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Lafarge Maroc S.A.S.  – Statement of comprehensive earnings

Million CHF

Net sales

Recurring EBITDA

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:

Jan-Jun 
2019

 549 

 234 

(51)

 183 

(6)

(21)

(58)

 98 

 63 

 1 

 63 

Jan-Dec 
2018

1,110 

 422 

(101)

 321 

(12)

(48)

(103)

 158 

 103 

(5)

 98 

Million CHF

30.06.2019

31.12.2018

Group share of 50% (2018: 50%) 
of shareholders’ equity (excluding non-controlling interest)

Goodwill

Total

 465 

 810 

1,275 

 458 

 820 

1,278 

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 2019 (2018: CHF 13 
million).

31.12.2019

31.12.2018

 321 

 107 

0

 107 

 352 

 114 

 1 

 115 

194

LafargeHolcim Integrated Annual Report 20196.8  Movements in investments in associates

Million CHF

1 January

Share of profit of associates

Dividends earned

Net acquisitions (disposals) 

Reclassifications

Impairments

Currency translation effects

31 December

2019

 264 

 12 

(9)

 1 

(3)

(1)

(6)

 258 

2018

 426 

 22 

(10)

(8)

(154)

(1)

(10)

 264 

As of 31 December 2019, the Group has no interests in 
associates that are considered as indi vidually material. The 
following table summarizes, in aggregate, the financial 

information of all individually immaterial aasociates that are 
accounted for using the equity method:

Aggregated financial information of LafargeHolcim’s share in associates

31.12.2019

31.12.2018

 258 

 12 

(1)

 11 

 264 

 22 

0

 22 

Million CHF

Carrying amount of investments in associates

Net income

Other comprehensive earnings

Total comprehensive earnings

There are no unrecognized share of losses relating to the above 
associates.

7. FIN A N CIN G I T E M S
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, net interest expense on retirement benefit 
plans, foreign exchange gains and losses and since 1 January 
2019, interest expenses on lease liabilities.

195

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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

Interest expenses on lease liabilities

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 loss net

Financial expenses capitalized

Total

2019

 100 

 58 

 158 

2019

(541)

(80)

0

(51)

(49)

(13)

(147)

(1)

 11 

(870)

2018

 85 

 54 

 140 

2018

(725)

(7)

(2)

(38)

(56)

(6)

(136)

(61)

 5 

(1,025)

The position “Interest expenses” relates primarily to financial 
liabilities measured at amortized cost and includes amortization 
on bonds and private placements of CHF 52 million (2018: CHF 
70 million). The remaining balance related to the purchase price 
allocation on bonds and private placements amounts to CHF 82 
million as at end of December 2019 (2018: CHF 136 million). The 
decrease of interest expenses in 2019 is due to the continued 
reduction of financial liabilities, in particular due to bond 
repayments, as well as a decrease in the average interest rate 
(see note 14.4).

The position “Interest expenses on lease liabilities” includes 
interest expenses related to ongoing lease contracts (see note 15).

The position “Impairment of long-term financial assets” includes 
write-offs of third parties financial investments and long-term 
financial receivables (see note 12.2). 

As part of ongoing legal and tax cases (see notes 17.3 and 8 
respectively), interest may be accrued or incurred and is 
reflected in the position “Other financial expenses”. 

Commissions or fees paid to a financial institution for normal 
specific financing arrangements are also reflected in “Other 
financial expenses”.

The Group, as part of its activities, invests in large scale projects 
for which interest expense is incurred. In accordance with IAS 
23, such interest expense incurred during the project is 
capitalized.

8 . IN CO M E TA X E S
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 recognizes liabilities for potential tax audit 
issues and uncertain tax positions based on management’s 
estimate of whether additional taxes will be due and on the 
requirements of IFRIC 23 Uncertainty over Income Tax Treatments. 

196

LafargeHolcim Integrated Annual Report 2019Where the final tax outcome of these matters is different from 
the amounts that were initially recorded, these differences 
impact the current and deferred tax provisions in the period in 
which such determination is made.

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 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 

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 after 
twelve months from the balance sheet date, they are 
accordingly classified as long-term income tax liabilities and 
recognized at their discounted amount.

8.2  Tax expenses

Million CHF

Current taxes

Deferred taxes and non-current taxes

Total

In 2019, CHF 7 million (2018: CHF 9 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

Net income before taxes

Group’s expected tax charge /rate

Effect of non-deductible items

Effect of non-taxable items 1

Effect of unrecognized tax losses and deferred tax asset write-offs

Effect of non tax deductible goodwill impairments

Other effects

Group’s effective tax charge /rate

1   The line Effect of non-taxable items includes non-taxable gains on divestments.

2019

(808)

 2 

(806)

 +26%

2018

(702)

 46 

(656)

 +25%

2018

2,375 

(586)

(151)

 140 

(57)

(4)

 2 

 +24%

(656)

 +28%

2019

3,319

(876)

(151)

247

(9)

0

(17)

(806)

197

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
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CO N T I N U ED

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. 

Excluding impairment and divestments, the Group’s effective 
tax rate amounts to 26 percent (2018: 28 percent) and includes 
the impact of the reduction in tax rates in India impacting 

8.4  Deferred taxes

Ambuja Cement. ACC has not adopted the new tax regime for 
2019. 

In 2019, total income taxes paid amounts to CHF 722 million 
(2018: CHF 807 million), of which CHF 6 million (2018: CHF 9 
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 5 million (2018: CHF 11 million) included in the position 
“Dividends paid to non-controlling interest”.

Deferred tax in the consolidated statement of financial position as follows:

Million CHF

Deferred tax assets

Deferred tax liabilities

Deferred tax liabilities net

2019

(649)

2,090 

1,442 

2018

(651)

2,259 

1,607 

The Group’s recognition of deferred tax assets amounting to 
CHF 649 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.

198

LafargeHolcim Integrated Annual Report 2019Change in deferred tax assets and liabilities

Million CHF

2019

Property, 
plant and 
equipment

Intangible 
and other 
long-term 
assets

Provisions

Other

Tax losses 
carryforward

Total

Deferred tax liabilities net as at 1 January 2019

3,216 

 20 

(436)

(160)

(1,034)

1,607 

Charged (credited)

     – to the statement of income

     – to other comprehensive income

Change in structure

Hyperinflation 1

Impact of change in accounting policies

Currency translation effects

Deferred tax liabilities net as at 31 December 2019

2018

(128)

(57)

0

(95)

 4 

(8)

(58)

2,931 

 1 

(1)

0

0

(4)

(41)

 83 

(61)

 23 

0

0

(2)

(393)

(86)

(8)

(39)

 18 

0

 20 

 186 

0

 39 

0

0

 8 

(2)

(69)

(73)

 22 

(8)

(35)

(255)

(801)

1,442 

Deferred tax liabilities net as at 1 January 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 31 December 2018

1   See more information in note 2.2.

(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 

199

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8.5  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 2019, CHF 1,622 million (2018: CHF 1,735 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 jurisdictions where the Group operates.

8.6  Long-term income tax liabilities
The long-term income tax liabilities of CHF 385 million (2018: 
CHF 449 million) no longer include the provision in relation to 
PT Lafarge Cement Indonesia (see note 17.3 for further 
information) and include the repatriation tax arising from the 
US tax reform amounting to CHF 66 million (2018: CHF 111 
million).

 Tax losses  
carry-forward

Tax effect

Tax losses  
carry-forward

Tax effect

2019

9,766 

(3,213)

6,553 

 54 

 486 

6,013 

2019

2,423 

(801)

1,622 

 11 

 94 

1,518 

2018

11,006 

(4,051)

6,955 

 101 

 339 

6,514 

2018

2,768 

(1,034)

1,735 

 28 

 68 

1,639 

200

LafargeHolcim Integrated Annual Report 20199. E A R N IN G S PE R S H A R E

Earnings per share in CHF

Net income  – shareholders of LafargeHolcim Ltd –  
as per statement of income (in million CHF)

Coupon relating to the subordinated fixed rate resettable notes 1

Adjusted net income – shareholders of LafargeHolcim Ltd

2019

 3.69

 2,246 

(16)

 2,231 

2018

 2.52

 1,502 

0

 1,502 

Weighted average number of shares outstanding

605,208,200 

596,185,128 

Fully diluted earnings per share in CHF

Adjusted net income - shareholders of LafargeHolcim Ltd

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

 3.68

 2,231 

605,208,200 

1,330,440 

606,538,640 

 2.52

 1,502 

596,185,128 

 211,919 

596,397,047 

1   LafargeHolcim issued two perpetual subortinated notes: EUR 500 million at an initial fixed coupon of 3 percent in April 2019 and CHF 200 million at an initial fixed coupon of 3.5 

percent in November 2018.

accounts receivable over the entire holding period of the 
receivable. This provision represents the difference between the 
trade accounts receivable’s carrying amount in the consolidated 
statement of financial position and the estimated collectible 
amount. 

The carrying amount of trade accounts receivable is reduced 
through use of an allowance account. Impaired trade accounts 
receivables are derecognized when they are assessed as 
uncollectable.

The impairment methodology applied for long-term loans and 
receivables considers whether there has been a significant 
increase in credit risk (see note 14.6).

Inventories
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.

The number of shares was impacted in conformity with two 
decisions taken at the Annual General Meeting on 15 May 2019:
• a dividend of CHF 2.00 per registered share for the financial 
year 2018 was paid out of capital surplus on 25 June 2019. 
LafargeHolcim offered to its shareholders the option of 
receiving the distribution in the form of new LafargeHolcim 
shares, cash or a combination thereof. 72.98 percent of the 
distribution was paid in the form of new LafargeHolcim Ltd 
shares. This resulted in a total payment of CHF 322 million. 
19,303,633 new shares were issued out of authorized capital 
for the scrip dividend.

• the annual general meeting also approved the cancellation of 

shares repurchased under the share buyback program 
announced in June 2017 and completed in March 2018. 
10,283,654 shares have been cancelled in the third quarter 
2019.

In 2019, the Board of Directors proposes to the Annual General 
Meeting of shareholders a distribution from the foreign capital 
contribution reserve and payout of CHF 2.00 (2018: CHF 2.00) 
per registered share up to an amount of CHF 1,228 million.

10. WO R K IN G C A PI TA L
10.1  Accounting principles
Trade accounts receivable
Trade accounts receivable are initially recognized at their 
invoiced amounts less any deductions such as trade discounts. 

For trade accounts receivable, the Group applies the simplified 
approach with expected lifetime losses recognized from initial 
recognition of the receivables in the statement of income. The 
provision for doubtful debts is established using an expected 
credit loss model (ECL). The provision is based on a forward-
looking ECL, which includes possible default events on the trade 

201

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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

2019

 84 

2,787 

2,871 

2019

1,773 

 848 

 132 

 323 

(205)

2,871 

2018

 138 

3,091 

3,229 

2018

2,158 

 895 

 105 

 282 

(211)

3,229 

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

1 January

Disposals of Group companies

Allowance recognized

Amounts used

Unused amounts reversed

Currency translation effects

31 December

2019

(211)

 1 

(50)

 17 

 33 

 5 

(205)

2018

(192)

 1 

(59)

 2 

 31 

 6 

(211)

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 14.6 for further details.

202

LafargeHolcim Integrated Annual Report 201910.3  Inventories

Million CHF

Raw materials and additives

Semi-finished and finished products

Fuels

Parts and supplies

Total

In 2019, the Group recognized inventory write-downs to net 
realizable value of CHF 3 million (2018: CHF 8 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

2019

 340 

1,358 

 224 

 572 

2,494 

2019

 177 

 276 

 11 

 711 

1,175 

2018

 450 

1,548 

 401 

 681 

3,081 

2018

 194 

 376 

 20 

 687 

1,276 

203

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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

2019

 108 

3,166 

 261 

3,535 

2018

 115 

3,338 

 316 

3,770 

11. PRO PE R T Y, PL A N T A N D EQU IPM E N T, GO O DW ILL 
A N D IN TA N G IB LE A S S E T S
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

No depreciation except on land with 
raw material reserves

Buildings and installations

20 to 40 years

Machinery and equipment

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 tons 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.

Goodwill and impairment testing
Goodwill arises in a business combination and is the excess of 
the consideration transferred to acquire a business over the 
underlying fair value of the net identified assets acquired. 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 amount 
of the respective investments. 

As a result of evolving market dynamics in the building 
materials industry, starting 1 January 2019, the Group CEO (i.e. 
chief operating decision maker) regularly reviews operating 
results and assesses its performance based on operating 
segment level. As a consequence, LafargeHolcim changed the 
level of goodwill impairment testing from country or regional 
cluster level to operating segment level. Such a change is 
considered as a change in accounting estimate and therefore 
will not impact prior years. At the date of changing the level of 
monitoring goodwill for impairment testing purposes, 
LafargeHolcim performed an assessment and concluded that 
there was no material impairment before changing the 
assessment at an operating segment level. At the 2019 year 
end, a similar assessment was performed to confirm that no 
material impairment of goodwill would have arisen in 2019 if 
testing had continued to be performed on the previous basis.

Following a business combination, 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 
continue to be defined on the basis of the geographical market 
normally country- or region-related. For the purpose of 
impairment testing, the Group’s cash-generating units are 
aggregated into an operating segment, which is the level 
reviewed by the Group CEO (i.e. chief operating decision maker). 
The discount rate is determined on country or regional cluster 
level, and therefore disclosed as a range on the operating 
segment level. The aggregated carrying amount of goodwill 
that is being monitored at the operating segment level is 
detailed in note 11.3.

204

LafargeHolcim Integrated Annual Report 2019For the goodwill impairment test, the recoverable amount of a 
cash-generating unit is determined at the higher of its value in 
use or its fair value less costs of disposal. Management has used 
the value in use approach to calculate the recoverable amount 
of the cash-generating unit. The aggregated recoverable 
amount of the operating segment is then compared to its 
aggregated carrying amount. An impairment loss is recognized 
if the aggregated carrying amount of the operating segment 
exceeds its aggregated 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 planning 
period are extrapolated based on increasing sustainable cash 
flows. The business plans include among others, management’s 
latest view on market size and pricing. In any event, the growth 
rate used to extrapolate cash flow projections beyond the 
three-year planning period does not exceed the long-term 
average growth rate for the relevant market in which the 
cash-generating unit operates. The long-term average growth 
rate is based on the long-term inflation rate for the relevant 
market concerned as published by the International Monetary 
Fund (IMF). Management believes that no reasonably possible 
change in any of the above key assumptions would cause the 
carrying amount of aggregated cash-generating units to 
materially exceed its recoverable amount. For further details, 
see note 11.3.
On disposal of a subsidiary or joint operation, the portion of the 
goodwill from the related operating segment is allocated to the 
subsidiary disposed of and is included in the determination of 
profit or loss on disposal.

Impairment losses relating to goodwill cannot be reversed in 
future periods.

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.

205

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
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11.2  Property, plant and equipment

Million CHF

2019

At cost of acquisition

Accumulated depreciation/impairment

Net book value as at 1 January

Impact of change in accounting policies 1

Restated net book value as at 1 January

Acquisitions

Divestments

Additions

Disposals

Modifications and reassessments of leases

Reclassifications

Reclassification to held for sale

Depreciation

Hyperinflation 2

Impairment loss reversed/(charged) to 
statement of income

Currency translation effects

Net book value as at 31 December

At cost of acquisition

Accumulated depreciation/impairment

Net book value as at 31 December

2018

At cost of acquisition

Accumulated depreciation/impairment

Net book value as at 1 January

Acquisitions

Divestments

Additions

Disposals

Reclassifications

Reclassification to  held for sale

Depreciation

Hyperinflation 2

Impairment loss reversed/(charged) to 
statement of income

Currency translation effects

Net book value as at 31 December

At cost of acquisition

Accumulated depreciation/impairment

Net book value as at 31 December

1   See more information in note 15.
2   See more information in note 2.2.

206

Land and 
mineral reserves

Buildings and  
installations

Machinery and equip-
ment

Construction  
in progress

7,477 

(2,106)

5,372 

 460 

5,832 

 36 

(53)

 108 

(32)

(4)

 186 

(65)

(251)

 28 

(15)

(101)

5,670 

7,906 

(2,237)

5,670 

7,654 

(2,164)

5,489 

 10 

(28)

 62 

(31)

 245 

(32)

(186)

 75 

(3)

(230)

5,372 

7,477 

(2,106)

5,372 

10,568 

(4,741)

 5,827 

 270 

 6,098 

 29 

(55)

 47 

(8)

(13)

 199 

(94)

(388)

 16 

 6 

(102)

5,734 

10,443 

(4,709)

5,734 

11,064 

(4,748)

6,317 

 8 

(31)

 26 

(9)

 227 

(151)

(347)

 45 

 21 

(279)

5,827 

10,568 

(4,741)

5,827 

30,661 

(15,274)

15,387 

 682 

16,069 

 47 

(659)

 287 

0

(25)

 779 

(163)

(1,681)

 42 

(72)

(263)

14,361 

29,747 

(15,386)

14,361 

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 

1,395 

(90)

1,305 

0

1,305 

 3 

(28)

1,487 

(15)

0

(1,138)

(177)

0

 21 

 13 

(47)

1,424 

1,510 

(86)

1,424 

1,490 

(152)

1,339 

0

(1)

1,315 

(3)

(1,244)

(37)

0

0

0

(65)

1,305 

1,395 

(90)

1,305 

Total

50,101 

(22,211)

27,890 

1,412 

29,302 

 115 

(794)

1,930 

(56)

(42)

 27 

(499)

(2,321)

 108 

(68)

(513)

27,189 

49,607 

(22,418)

27,189 

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 

LafargeHolcim Integrated Annual Report 2019The position “Property, plant and equipment” includes owned 
property, plant and equipment and right-of-use assets for lease 
contracts, as described below: 
• Land: Land is leased for production sites and distribution 

• Machinery, equipment and vehicles: Machinery and 

equipment are used in the manufacturing and distribution 
processes. Heavy mobile equipment, trucks and vehicles are 
leased for production and transportation purposes.

facilities;

• Buildings and installations: Buildings and installations include 
buildings and installations for production purposes as well as 
office rent;

Through its negotiations with external lenders, some property, 
plant and equipment are pledged or restricted. The amount 
pledged or restricted is CHF 8 million (2018: CHF 13 million).

Right-of-use assets

Million CHF

Net book value

Right-of-use assets as of 1 January 20191

Divestments

Lease additions

Depreciation expense

Impairment expense

Classification as held for sale

Modifications and reassessments

Currency translation effects

Land

Buildings and 
installations

Machinery, 
equipment and 
vehicles

Total right-of-
use assets

 463 

(19)

 44 

(60)

0

0

(4)

(4)

 283 

0

 37 

(60)

(6)

(6)

(13)

0

Right-of-use assets as of 31 December 2019

 420 

 235 

1   Including capitalized assets of former IAS 17 finance leases amounting to CHF 172 million as of 1 January 2019, see more information in note 15.2.

 838 

(3)

 268 

(285)

(2)

(14)

(25)

(14)

 763 

1,584 

(23)

 349 

(404)

(8)

(19)

(42)

(18)

1,419 

207

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CO N T I N U ED

11.3  Goodwill and intangible assets

Million CHF

2019

At cost of acquisition

Accumulated amortization/impairment

Net book value as at 1 January

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 31 December

At cost of acquisition

Accumulated amortization/impairment

Net book value as at 31 December

2018

At cost of acquisition

Accumulated amortization/impairment

Net book value as at 1 January

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 31 December

At cost of acquisition

Accumulated amortization/impairment

Net book value as at 31 December

1   See more information in note 2.2.

208

Goodwill

Intangible assets

16,783 

(2,738)

14,045 

(368)

(444)

0

0

0

0

0

 14 

(207)

13,039 

15,405 

(2,366)

13,039 

17,603 

(3,034)

14,569 

 125 

(55)

0

0

0

0

(27)

 22 

(588)

14,045 

16,783 

(2,738)

14,045 

2,283 

(1,473)

 810 

(9)

(8)

(15)

 48 

(5)

(159)

(2)

0

(18)

 644 

2,171 

(1,527)

 644 

2,612 

(1,586)

1,026 

 15 

 4 

(16)

 104 

(34)

(210)

(32)

0

(47)

 810 

2,283 

(1,473)

 810 

LafargeHolcim Integrated Annual Report 2019Intangible assets
Intangible assets mainly consist of mining rights, trademarks, 
brands, and software. 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.

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 testing of goodwill

Key assumptions used for value-in-use calculations in respect of goodwill 2019

Operating segments 
(Million CHF)

North America

Europe

Asia Pacific (excluding China)

Middle East  Africa

Latin America

Others

Total

Carrying amount 
of goodwill

4,746

4,083

1,500

1,524

1,162

24

13,039

Currency

USD/CAD

Post-tax 
discount rate 1

Long-term 
growth rate

6.6%

2.2%

Various

5.6%–12.7%

1.0%–5.0%

Various

6.7%–12.3%

2.5%–5.5%

Various

7.8%–18.3%

2.0%–11.0%

Various

8.2%–34.7%

1.0%–30.0%

Various

5.6%–8.4%

1.0%–3.0%

1   The discount rate is detemined on country or regional cluster level, and therefore disclosed as a range on the operating segment level.

To allow comparability with the current year, the countries 
previously reported have been aggregated into operating 
segment level as above.

Key assumptions used for value-in-use calculations in respect of goodwill 2018

Operating segments 
(Million CHF)

North America

Europe

Asia Pacific (excluding China)

Middle East  Africa

Latin America

Others

Total

Carrying amount 
of goodwill

4,724 

4,125 

2,436 

1,568 

1,167 

 25 

14,045

Currency

USD/CAD

Post-tax 
discount rate1

Long-term 
growth rate

6.6%

2.1%

Various

6.0%–10.6%

1.1%–4.0%

Various

6.9%–12.4%

2.5%–5.5%

Various

8.2%–20.4%

2.0%–14.0%

Various

8.3%–15.2%

1.8%–8.1%

Various

5.7%–8.5%

1.0%–3.0%

1   The discount rate is detemined on country or regional cluster level, and therefore disclosed as a range on the operating segment level.

In 2019, no goodwill impairment charge was recognized.

In 2018, management recognized a goodwill impairment 
charge of CHF 27 million relating to the operating segment 
Middle East Africa.

209

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
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CO N T I N U ED

12 . LO N G -T E R M FIN A N CI A L IN V E S T M E N T S A N D 
OT H E R LO N G -T E R M A S S E T S
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 and tax cases.

Financial assets at amortized cost are measured using the 
effective interest method.

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. 
Strategic equity investments are investments where the Group 
owns less than 20 percent 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 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.

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.

210

LafargeHolcim Integrated Annual Report 2019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

2019

 187 

 125 

 166 

 87 

 527 

1,092 

0

2018

 196 

 138 

 177 

 88 

 513 

1,111 

 12 

Long-term receivables are primarily denominated in BRL, USD 
and AUD. The repayment dates vary between one and 20 years 
(2018: one and 21 years).

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

2019

 4 

 30 

 90 

 124 

 39 

2018

 3 

 36 

 141 

 180 

 107 

211

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

13 . A S S E T S A N D R E L AT E D LI A B ILI T IE S CL A S S IFIE D A S 
H E LD FO R S A LE
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.

13.2  Assets and related liabilities classified as held for sale
The net assets classified as held for sale as of 31 December 31 
2019 amount to CHF 1,098 million (2018: CHF 684 million) and 
mainly includes the assets and liabilities of Holcim Philippines 
and its subsidiaries.

Philippines
In the second quarter 2019, the Group signed an agreement 
with San Miguel Corporation for the disposal of its entire 
interest of 85.7 percent in Holcim Philippines Inc. for an 
enterprise value of USD 2.15 billion, on a 100 percent basis and 
consequently classified the assets and the related liabilities as 
held for sale. Closing of the transaction is expected in the first 
quarter 2020 and is subject to customary and regulatory 
approvals. Holcim Philippines and its susbsidiaries consist of 
four integrated cement plants and one grinding plant and are 
presented in the operating segment Asia Pacific. 

The assets and related liabilities classified as held for sale as of 
31 December 2018, included mainly the assets and liabilities of 
Holcim Indonesia and its subsidiaries which were disposed of in 
the first quarter 2019, as disclosed in note 2.

The assets classified as held for sale also included property, 
plant and equipment related to a cement plant in China, as 
disclosed in note 13.2 of the 2018 Annual Report.

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

2019

 62 

 63 

 125 

 564 

 478 

 78 

1,370 

 189 

 83 

 272 

1,098 

2018

 25 

 67 

 88 

1,028 

 88 

 15 

1,311 

 345 

 282 

 627 

 684 

212

LafargeHolcim Integrated Annual Report 2019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 twelve 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 twelve 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”. 

14 . N E T FIN A N CI A L DE B T
14.1  Accounting principles
Cash and cash equivalents
Cash and cash equivalents are financial assets. Cash equivalents 
are short-term, highly liquid investments that are readily 
convertible to known amounts of cash with maturities of three 
months or less from the date of acquisition and are subject to 
an insignificant risk of changes in value. For the purpose of the 
statement of cash flows, cash and cash equivalents is presented 
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 twelve 
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.

213

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

14.2  Net Financial Debt

Details of the net financial debt

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 45 million.

Million CHF

Net Financial Debt as at the beginning of the period

Impact of changes in accounting policies 1

Restated Net Financial Debt as at 1 January 2019

Cash flow from operating activities

Cash flow from investing activities

Payout on ordinary shares

Dividends paid to non-controlling interest

Coupon paid on subordinated fixed rate resettable notes

Capital (paid-in by) repaid to 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

Change in scope

Change in fair values

Currency translation effects

Increase in long-term lease liabilities

Others

Total non cash effective movements

Net Financial Debt as at the end of the period

1   See more information in note 15.

14.3  Cash and cash equivalents

Million CHF

Cash at banks and on hand

Short-term deposits 1

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

1   Of which CHF 663 million (2018: CHF 139 million) are investments in monetary mutual funds.

214

31.12.2018

Cash flows

Non cash flows

31.12.2019

3,063 

13,061 

16,124 

(91)

(2,515)

13,518 

(242)

(2,425)

(2,667)

0

(1,930)

(4,597)

(732)

1,566 

 835 

 58 

 297 

1,189 

2019

13,518 

1,451 

14,969 

(4,825)

 219 

 322 

 114 

 6 

(76)

 108 

 82 

(550)

(4,598)

(492)

(7)

(165)

 350 

 52 

(261)

2,089 

12,202 

14,291 

(33)

(4,148)

10,110 

2018

14,346 

0

n.a

(2,988)

1,386 

1,192 

 156 

0

 8 

 73 

 202 

(200)

(171)

(304)

(90)

(345)

0

 81 

(657)

10,110 

13,518 

2019

2,315 

1,833 

4,148 

(195)

 62 

4,014 

2018

1,527 

 988 

2,515 

(275)

 25 

2,264 

LafargeHolcim Integrated Annual Report 201914.4  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 14.5)

Total current financial liabilities

Long-term financial liabilities – third parties

Derivative liabilities (note 14.5)

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 leases (note 15)

Derivative liabilities (note 14.5)

Total

2019

 31 

 511 

1,443 

 104 

2,089 

12,183 

 19 

12,202 

14,291 

 83 

2019

1,009 

11,695 

0

12,704 

1,465 

 123 

14,291 

2018

 31 

1,056 

1,889 

 87 

3,063 

13,012 

 49 

13,061 

16,124 

 84 

2018

1,775 

13,951 

 96 

15,822 

 166 

 136 

16,124 

215

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

“Loans from financial institutions” include amounts due to 
banks and other financial institutions. Repayment dates vary 
between one and ten years (2018: one and eleven years).
As per the loans agreements, the Group is required to comply 
with certain provisions or covenants. As of 31 December 2019, 
the Group complied with its debt covenants in all material 
respects.

Financial liabilities by currency

Unused committed credit lines totalled CHF 5,776 million at 
year-end 2019 (2018: CHF 6,239 million).

Currency

EUR

USD

CHF

GBP

AUD

CAD

INR

NGN

Others

Total

Million CHF

5,414 

4,645 

2,030 

 522 

 517 

 204 

 199 

 178 

 583 

In %

37.9

32.5

14.2

3.7

3.6

1.4

1.4

1.2

4.1

14,291 

100.0

1   Weighted average nominal interest rate on financial liabilities at 31 December

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 note 14.6.

2019

Interest  
rate 1

Million CHF

1.7

4.8

2.0

2.2

3.7

3.9

6.7

14.0

6.4

3.3

6,194 

5,105 

1,995 

 392 

 774 

 53 

 137 

 402 

1,072 

16,124 

2019

10,677 

3,614 

14,291 

In %

38.4

31.7

12.4

2.4

4.8

0.3

0.8

2.5

6.6

100.0

2018

Interest  
rate1

2.4

5.3

2.0

2.9

4.1

3.9

6.7

14.7

6.0

4.2

2018

11,703 

4,421 

16,124 

216

LafargeHolcim Integrated Annual Report 2019Bonds and private placements as at 31 December

Nominal 
interest 
rate

Effective 
interest 
rate

Term

Description1

Nominal 
value

Million

LafargeHolcim Ltd

CHF

CHF

CHF

CHF

CHF

 450 

 250 

 250 

 150 

 440 

3.00%

2.00%

0.38%

1.00%

1.00%

2.97%

2.03%

0.41%

1.03%

0.98%

2012–2022 Bonds

2013–2022 Bonds

2015–2021 Bonds

2015–2025 Bonds

2018–2024 Bonds

Holcim Overseas Finance Ltd.

Net 
book 
value 
in CHF 2

2019

 450 

 250 

 250 

 150 

 440 

Net 
book 
value  
in CHF2

2018

 450 

 250 

 250 

 150 

 440 

CHF

 425 

3.38%

3.42%

2011–2021

Bonds guaranteed by LafargeHolcim Ltd

 425 

 425 

Lafarge S.A.

EUR

EUR

USD

EUR

 357 

 217 

 524 

 198 

5.50%

4.75%

7.13%

5.88%

Holcim Capital Corporation Ltd.

USD

USD

USD

 50 

 250 

 250 

7.65%

6.88%

6.50%

Holcim Capital México, S.A. de C.V.

4.19%

5.90%

7.65%

7.28%

6.85%

2009–2019 Bonds

2005–2020 Bonds (partially repaid 2016 and 2019)

2006–2036 Bonds (partially repaid 2019)

2012–2019

Bonds

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%

2012–2019

Bonds guaranteed by LafargeHolcim Ltd

MXN

1,700 

8.12%

7.02%

2015-2020

Holcim Finance (Luxembourg) S.A.

Bonds guaranteed by LafargeHolcim Ltd, with floating 
interest rates

EUR

EUR

EUR

EUR

EUR

EUR

EUR

EUR

 320 

 33 

 152 

 869 

 413 

1,150 

 750 

 500 

3.00%

2.00%

1.46%

1.38%

1.04%

2.25%

1.75%

0.50%

Holcim Finance (Australia) Pty Ltd

AUD

AUD

AUD

Subtotal

 200 

 250 

 300 

5.25%

3.75%

3.50%

3.11%

2.03%

1.51%

1.43%

1.10%

1.89%

1.90%

2.25%

3.90%

3.73%

2014–2024

Bonds guaranteed by LafargeHolcim Ltd (partially 
exchanged 2019)

2016–2026

Schuldschein loan guaranteed by LafargeHolcim Ltd

2016–2023

Schuldschein loan guaranteed by LafargeHolcim Ltd

2016–2023

Bonds guaranteed by LafargeHolcim Ltd (partially 
exchanged 2019)

2016–2021

Schuldschein loan guaranteed by LafargeHolcim Ltd

2016–2028

Bonds guaranteed by LafargeHolcim Ltd, swapped into 
floating interest rates in 2019

2017–2029

Bonds guaranteed by LafargeHolcim Ltd

2019–2026 Bonds guaranteed by LafargeHolcim Ltd (bond exchange)

2012–2019

Bonds guaranteed by LafargeHolcim Ltd

2015–2020 Bonds guaranteed by LafargeHolcim Ltd

2017–2022 Bonds guaranteed by LafargeHolcim Ltd

1   With fixed rates unless indicated.
2   Includes adjustments for fair value hedge accounting, where applicable.  

0

 237 

 589 

0

 48 

 235 

 236 

0

 87 

 346 

 35 

 165 

 941 

 448 

1,237 

 804 

 483 

0

 170 

 203 

 418 

 434 

 691 

 228 

 49 

 239 

 239 

 85 

 85 

 561 

 37 

 171 

1,293 

 465 

1,298 

 833 

 139 

 174 

 207 

8,230 

9,612 

217

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

Nominal 
interest 
rate

Effective 
interest 
rate

Term

Description1

Nominal 
value

Million

Subtotal

Net 
book 
value  
in CHF 2

2019

8,230 

Net 
book 
value  
in CHF2

2018

9,612 

Holcim US Finance S. à r.l. & Cie S.C.S.

USD

 750 

6.00%

2009–2019 Bonds guaranteed by LafargeHolcim Ltd

0

 737 

EUR

USD

USD

 500 

 500 

 50 

2.63%

5.15%

4.20%

3.66%

5.30%

4.20%

LafargeHolcim International Finance Ltd

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

USD

USD

USD

USD

USD

USD

USD

 40 

 15 

 110 

 38 

 28 

 60 

 60 

2.80%

3.20%

2.88%

4.38%

3.13%

4.59%

2.88%

3.27%

3.19%

4.48%

3.40%

4.68%

2016–2021

Schuldschein loan guaranteed by LafargeHolcim Ltd

2016–2023

Schuldschein loan guaranteed by LafargeHolcim Ltd

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

3.33%

3.58%

2018–2025

Schuldschein loan guaranteed by LafargeHolcim Ltd, with 
floating interest rates

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

 546 

 482 

 48 

 39 

 15 

 106 

 36 

 27 

 58 

 58 

 386 

 567 

 174 

 50 

 103 

 572 

 489 

 49 

 39 

 15 

 108 

 37 

 28 

 59 

 59 

 392 

 575 

 177 

 51 

 104 

EUR

 30 

0.88%

0.95%

2018–2022

Schuldschein loan guaranteed by LafargeHolcim Ltd

 33 

 34 

EUR

EUR

EUR

EUR

 60 

 109 

 5 

 2 

0.30%

1.32%

1.68%

2.22%

0.39%

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

 65 

 117 

 5 

 2 

 67 

 122 

 6 

 2 

LafargeHolcim Sterling Finance (Netherlands) B.V.

GBP

 300 

3.00%

3.16%

2017–2032

Bonds guaranteed by LafargeHolcim Ltd

 376 

 370 

Holcim (US) Inc.

USD

USD

USD

 33 

 25 

 27 

Lafarge Africa PLC

1.69%

1.70%

1999–2032

Industrial revenue bonds – Mobile Dock & Wharf, with 
floating interest rates

1.74%

1.75%

2003–2033

Industrial revenue bonds – Holly Hill, with floating interest 
rates

1.68%

1.69%

2009–2034

Industrial revenue bonds – Midlothian, with floating interest 
rates

NGN

NGN

Total

26,386 

14.25%

2016–2019 Bonds

33,614 

14.75%

16.39%

2016–2021 Bonds

1   With fixed rates unless indicated.
2   Includes adjustments for fair value hedge accounting, where applicable.  

218

 32 

 24 

 26 

0

 90 

 33 

 25 

 26 

 72 

 92 

11,695 

13,951 

LafargeHolcim Integrated Annual Report 201914.5  Derivative financial instruments
Derivative liabilities are included in financial liabilities (note 
14.4) and derivative assets are separately disclosed in the 
consolidated statement of financial position.
The Group has assessed the effects of existing netting 
arrangements in place for financial instruments and these were 
considered to be immaterial.

Derivative assets and liabilities

Million CHF

Fair value hedges

Interest rate

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

Fair value 
assets

Fair value 
liabilities

Nominal  
amount

Fair value  
assets

Fair value  
liabilities

Nominal  
amount

2019

2019

2019

2018

2018

2018

0

0

0

0

 15 

 16 

 1 

 1 

 15 

 1 

 16 

 33 

 14 

 57 

 71 

 2 

 22 

 24 

 5 

 5 

 23 

0

 23 

 123 

1,249 

 608 

1,857 

 168 

 285 

 454 

 453 

 453 

2,814 

 19 

2,833 

5,597 

0

0

0

 3 

 69 

 71 

 7 

 7 

 10 

 3 

 13 

 91 

0

 41 

 41 

 4 

 31 

 35 

0

0

 59 

 1 

 60 

 136 

0

 618 

 618 

1,061 

 422 

1,483 

 149 

 149 

3,773 

 105 

3,878 

6,128 

219

LafargeHolcim Integrated Annual Report 2019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.

N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

14.6  Financial risks associated with operating activities
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 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. 

In early 2020, due to the Coronavirus (Covid 19) outbreak, the 
priority in the Group’s Chinese operations including the joint 
venture company Huaxin Cement Co. Ltd. has been given to 
implement all necessary measures to protect the safety of all 
employees and their families. The outbreak, which has delayed 
the development of infrastructure projects, notably in the 
province of Hubei which represents one-third of the Group’s 
total capacities in China, may have implications on operating 
results. It is however too early to quantify the risk.

220

LafargeHolcim Integrated Annual Report 2019Contractual maturity analysis

Million CHF

2019

Trade accounts payable and others 1

Loans from financial institutions

Bonds, private placements and 
commercial paper notes

Interest payments

Lease liability payments

Derivative financial instruments net 2

Financial guarantees

Total

2018

Trade accounts payable and others 1

Loans from financial institutions

Bonds, private placements and 
commercial paper notes

Interest payments

Finance leases

Operating lease commitments

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

3,499 

 625 

0

 79 

0

 290 

0

 8 

1,039 

1,255 

1,107 

1,609 

 368 

 383 

 95 

 12 

 319 

 212 

(5)

0

 289 

 160 

(4)

0

 250 

 147 

(5)

0

0

 7 

 965 

 214 

 134 

(5)

0

0

 8 

3,499 

1,017 

3,499 

1,009 

5,765 

1,988 

 642 

(30)

0

11,740 

11,695 

3,428 

1,678 

 46 

 12 

 287 

1,465 

 90 

0

6,021 

1,860 

1,843 

2,009 

1,316 

8,373 

21,422 

3,717 

1,179 

0

 386 

1,757 

1,241 

 547 

 33 

 393 

 37 

0

 397 

 28 

 313 

 49 

0

0

 147 

 847 

 339 

 26 

 241 

(5)

0

0

 47 

0

 8 

1,543 

2,102 

 318 

 24 

 181 

0

0

 268 

 20 

 149 

0

0

0

 15 

6,602 

2,320 

 72 

 679 

0

 25 

3,717 

1,782 

3,717 

1,775 

14,093 

14,047 

4,189 

 203 

1,955 

 80 

 25 

 279 

 166 

0

 45 

0

7,662 

2,414 

1,594 

2,113 

2,547 

9,714 

26,045 

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 14.5.

221

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

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 could be 
required to pay.

Foreign exchange risk
The Group’s global footprint exposes it to foreign exchange 
risks.

Contractual interest cash flows relating to a variable interest 
rate are calculated based on the rates prevailing as of 31 
December.

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 of 31 
December.

A one 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.

On 31 December 2019, a one percentage point shift in interest 
rates, with all other assumptions held constant, would result in 
approximately CHF 24 million (2018: CHF 22 million) of annual 
additional/lower financial expenses before tax on a post hedge 
basis.

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 performed based on 
the Group’s net transaction exposure that arises on monetary 
financial assets and liabilities at 31 December that are 
denominated in a foreign currency. The Group’s net foreign 
currency transaction risk mainly arises from CHF, USD and EUR 
against the respective currencies the Group operates in.

A five 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 five 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.

Impacts on equity due to derivative instruments are considered 
as not material based on the shareholders’ equity of the Group.

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.

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LafargeHolcim Integrated Annual Report 2019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. 

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.

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:

a)  Cash flow hedge accounting
The change in fair value of hedging instruments under cash 
flow hedge accounting in 2019 was CHF –32 million (2018: CHF 
–3 million). The change in related hedged items was CHF 32 
million (2018: CHF 2 million) and no amount (2018: CHF -1 
million) was recorded as ineffectiveness directly to the 
consolidated statement of income in 2019 for cash flow hedges.

The maturities for hedging instruments as of 31 December 2019 
are 2020 for foreign exchange forwards and ranged between 
2020 and 2022 for commodity swaps (2019 and 2020, 2019 and 
2021 in 2018 respectively).

When a hedging instrument expires, is sold or terminated, or 
when a hedge no longer meets the criteria for hedge 
accounting, the cumulative gain or loss deferred 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 or 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 2019 nor in 2018.

b)  Fair value hedge accounting
The change in fair value of hedging instruments under fair 
value hedge accounting in 2019 was CHF -19 million (2018: CHF 
–5 million). The change in related hedged items was CHF 19 
million (2018: CHF 5 million) and no amount was recorded as 
ineffectiveness directly to the consolidated statement of income 
in 2019 and 2018 for fair value hedges.

The maturities for hedging instruments as of 31 December 2019 
are in 2020 and 2028 (2020 in 2018). 

When a hedging instrument expires, 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 2019 nor in 
2018.

c)  Net investment hedge accounting
The change in the fair value of hedging instruments under net 
investment hedge accounting in 2019 was CHF -3 million (2018: 
CHF -14 million). The change in related hedged items was CHF 3 
million (2018: CHF 14 million) and no amount was recorded as 
ineffectiveness directly to the consolidated statement of income 
in 2019 and 2018 for net investment hedges.

The maturities for hedging instruments as of 31 December 2019 
are in 2020 for foreign exchange forwards (2019 in 2018).

When a hedging instrument expires, is sold or terminated, or 
when a hedge no longer meets the criteria for hedge 
accounting, the cumulative gain or loss deferred 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 2019 
nor 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 its customers.

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CO N T I N U ED

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.

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 forward-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 forward-
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.

Since 1 January 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. 

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

Write-off

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

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.  

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.

224

LafargeHolcim Integrated Annual Report 2019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 

Fair values as of 31 December 2019

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

valuation methods seek to maximize the use of observable 
market data existing at the end of the reporting period.
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.

Carrying amount (by measurement basis)

Amortized  
cost

Fair value 
level 1

Fair value  
level 2

Total

Comparison 
fair value

4,148 

2,871 

 124 

4,148 

2,871 

 124 

 12 

 16 

 12 

 16 

Long-term receivables

Loans at amortized cost

 291 

 291 

 291 1

Financial investments third parties

Derivative assets

Derivative assets

Current financial liabilities

Strategic equity investments at fair 
value through other comprehensive 
earnings

Held for hedging at fair value

Held for trading at fair value

Trade accounts payable and others 2

Financial liabilities at amortized cost

Current financial liabilities

Financial liabilities at amortized cost

3,499 

1,985 

Derivative liabilities

Derivative liabilities

Held for hedging at fair value

Held for trading at fair value

 187 

 187 

 5 

0

 81 

 23 

 5 

0

3,499 

1,985 

 81 

 23 

Long-term financial liabilities

Long-term financial liabilities

Financial liabilities at amortized cost

12,183 

12,183 

13,142 3

Derivative liabilities

Held for hedging at fair value

 18 

 18 

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 9,734 million level 1 and CHF 3,408 million level 2 fair value measurements.

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N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

Fair values as of 31 December 2018

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

Carrying amount (by measurement basis)

Amortized  
cost

Fair value 
level 1

Fair value  
level 2

Total

Comparison 
fair value

2,515 

3,229 

 180 

2,515 

3,229 

 180 

 55 

 10 

 55 

 10 

Long-term receivables

Loans at amortized cost

 315 

 315 

 315 1

Financial investments third parties

Derivative assets

Derivative assets

Current financial liabilities

Strategic equity investments at fair 
value through other comprehensive 
earnings

Held for hedging at fair value

Held for trading at fair value

Trade accounts payable and others 2

Financial liabilities at amortized cost

Current financial liabilities

Financial liabilities at amortized cost

3,717 

2,976 

Derivative liabilities

Derivative liabilities

Held for hedging at fair value

Held for trading at fair value

 196 

 23 

 3 

 27 

 60 

 196 

 23 

 3 

3,717 

2,976 

 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 current 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.

The table above shows the carrying amounts and fair values of 
financial assets and  liabilities.

226

LafargeHolcim Integrated Annual Report 2019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 2019 and 2018, 
there were no financial assets and liabilities allocated to level 3.

There have been no transfers between the different hierarchy 
levels in 2019 and 2018.

15 . LE A S E S
15.1  Accounting principles
Since 1 January 2019, the Group assesses at inception of a 
contract whether it contains a lease under IFRS 16 and 
accordingly recognizes a right-of-use asset and a lease liability if 
it meets the definition of a lease, with the exception of short-
term leases and leases of low value assets.

The lease liability is measured at commencement date at the 
present value of the future lease payments, discounted with the 
interest rate implicit in the lease or, if not readily determinable, 
with the lessee’s respective incremental borrowing rate. Future 
lease payments include in-substance fixed payments, variable 
lease payments depending on an index or rate and payments 
under termination and extension options when these are 
reflected in the lease term. The lease term comprises the 
non-cancellable lease term together with the period covered by 
extension options, if assessed as reasonably certain to be 
exercised, and termination options, if assessed as reasonably 
certain not to be exercised. Non-lease components in contracts 
are separated from lease components and accordingly 
accounted for in operating profit on a cost incurred basis.

The right-of-use asset is recognized at the commencement date 
at cost, which includes the amount of the lease liability 
recognized, any lease payments made at or before the 
commencement date of the lease, initial direct costs incurred 
and an estimate of costs to be incurred in dismantling and 
removing the underlying asset or restoring the asset to the 
condition agreed with the lessor. Unless the Group is reasonably 
certain to exercise a purchase option, the right-of-use assets are 
depreciated on a straight-line basis over the shorter of its 
estimated useful life and lease term. Right-of-use assets are 
subject to the impairment requirements under IAS 36 
Impairments of Assets.

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 recognizes 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 also applies to the initial 
recognition of the lease liability.

Note 1.2 explains the accounting policy changes and the initial 
application of IFRS 16 as of 1 January 2019.

15.2  Transition adjustments recognized as of  
1 January 2019 on initial application of IFRS 16
The lease liability as of 1 January 2019 amounted to CHF 1,617 
million, of which CHF 358 million was recorded in “Current 
financial liabilities” and CHF 1,258 million in “Long-term 
financial liabilities”. The table below presents a reconciliation of 
the undiscounted operating lease commitments presented in 
the 2018 Annual Report in note 15 to the capitalized amount as 
of 1 January 2019. The weighted average incremental 
borrowing rate at the date of initial application of IFRS 16 used 
for the discounting as of 1 January 2019 is based on the Group’s 
portfolio of leases and equals 5.4 percent.

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LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
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CO N T I N U ED

Reconciliation of undiscounted operating lease commitments as of 31 December 2018 to the recognized lease liability as of 1 January 2019

Million CHF

Operating lease commitments as of 31 December 2018

Exemption of commitments for non-lease components 

Exemption of commitments for short-term leases

Exemption of commitments for leases of low value assets

Onerous lease contracts

Undiscounted future lease payments from operating leases

Effect of discounting

Addition of Lease liability as of 1 January 2019

Former IAS 17 finance lease liability as of 1 January 2019

Total lease liability as of 1 January 2019

1,955 

(157)

(13)

(10)

 16 

1,791 

(341)

1,451 

 166 

1,617 

Onerous lease contracts were not included in the operating 
lease commitments as they were accounted for as provisions 
and accordingly have been reclassified to the right-of-use assets 
as of 1 January 2019 with an associated lease liability also 
recognized. The Group relied on its assessment as to whether 
leases are onerous by applying IAS 37 immediately before the 
date of initial recognition as an alternative to performing an 

impairment review. The table above does not include lease 
liabilities of CHF 108 million relating to disposal groups since 
such liabilities are included in “liabilities directly associated with 
assets classified as held for sale”.

The right-of-use assets as of 1 January 2019 amounted to CHF 
1,584 million, which is comprised of as follows:

Million CHF

Discounted former operating lease commitments as of 1 January 2019

Impact due to the measurement of certain right-of-use assets at commencement date of the lease

1,451 

(46)

 28 

(21)

1,412 

 172 

1,584 

Various contracts entered into by the Group include extension 
options, which provide the Group with greater flexibility in 
terms of future procurement of assets and services. Extension 
options are included in the lease liability only if they are 
assessed by management as being reasonably certain to be 
exercised. The undiscounted future lease payments relating to 
periods covered by extension options not included in the lease 
liability at year end amount to CHF 83 million.

Net amount accrued and prepaid lease expenses

Provision for onerous contracts and other reclassifications

Capitalized Right-of-use assets of former operating leases

Capitalized assets of former IAS 17 finance leases as of 1 January 2019

Right-of-use assets as of 1 January 2019

The measurement of certain right-of-use assets at the lease 
commencement date resulted in a negative impact in equity of 
CHF 38 million and in the recognition of a deferred tax asset of 
CHF 8 million.

15.3  Lease liability 
As of 31 December 2019 the current portion of the long-term 
lease liability included in the position “current financial 
liabilities” amounts to CHF 328 million and the long-term lease 
liabilities included in the position “long-term financial liabilities” 
amounted to CHF 1,137 million.

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LafargeHolcim Integrated Annual Report 2019Additional information related to leases not included in the lease liability

Million CHF

Statement of income

Expenses for short-term lease payments

Expenses for variable lease payments

Cash outflow for leases

Cash outflow for short-term, low value and variable leases 1

Payment of interest 2

Payment of lease liabilities 3

Total

2019

(98)

(88)

(193)

(76)

(409)

(677)

1   Cash flows from short-term, low value and variable leases are included within cash flow from operating activities.
2   Included within cash flow from operating activities thereof CHF 7 million coming from leases previously disclosed as finance leases under IAS 17.
3   Included within cash flow from financing activities.

In certain lease agreements of machinery, equipment and 
vehicles, variable lease payments are included based on 
operating hours used, kilometers travelled or output. These 
leases provide greater flexibility in terms of usage, such as for 
certain types of trucks and vehicles where operating levels 
depend on production capacity and demand.

The contractual undiscounted future cash outflows for leases 
included in lease liabilities as at 31 December 2019 is found in 
note 14.6.

16 . E M PLOY E E B E N E FI T S A N D S H A R E   
CO M PE N S AT I O N PL A N S
16.1  Accounting principles
Employee benefits - Defined benefit plans
Some Group companies provide defined benefit pension or 
other post-employments benefit plans for employees. The 
Group uses professionally qualified independent actuaries to 
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”.

229

LafargeHolcim Integrated Annual Report 2019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 and Canada.

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 and 
those of the Aggregate Industries Ltd. as of 31 March 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, the 30 June 2018 funding 
valuation was completed and no contributions were paid in 
2019. 

For the Aggregate Industries Pension Plan, the April 5, 2018 
funding valuation was completed and a revised schedule of 
contributions intended to address deficit repayment by the 
sponsoring employer was put in place with the aim of 
eliminating the funding deficit for the plan by 5 April 2027.

For the Ronez 2000 pension plan, the December 31, 2018 
funding valuation was completed in 2019. As at 30 September 
2019, the plan was in surplus and it was therefore agreed no 
deficit repayment contributions are required.

N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

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.

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 4,451 million (2018: CHF 4,810 million). As of 31 December  
2019, the Group employed 72,452 people (2018: 77,055 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. 

The Group’s main defined benefit pension plans are located in 
the United Kingdom, North America and Switzerland. They 
respectively represent 53 percent (2018: 52 percent), 22 percent 
(2018: 22 percent) and 17 percent (2018: 18 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.

230

LafargeHolcim Integrated Annual Report 2019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.

In the United States, the Group companies generally 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 generally 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.

As announced in 2017, effective 1 January 2020, the Canadian 
pension plan was frozen and active members will no longer 
acquire further rights in this defined benefit plan. Active 
members will then participate in a defined contribution plan.

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 
delegate 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 31 
December 2016 and who were alive on 1 January 2018, 
representing 60 percent of the plan’s IAS 19 liabilities as of 31 
December 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 6 April 1997. Historically, there was an 
inequality in the benefits between male and female members 
who had GMP. A High Court case concluded on 26 October 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 in 2018.

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, benefits 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, accounted 
for as defined contribution plan, 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 

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CO N T I N U ED

Switzerland
The  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.

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.

Reconciliation of retirement benefit plans to 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

2019

1,023 

 245 

1,268 

(145)

1,413 

1,268 

2018

 993 

 239 

1,232 

(371)

1,603 

1,232 

232

LafargeHolcim Integrated Annual Report 2019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 

Others

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 

Others 

Amounts recognized in other comprehensive earnings:

Actuarial gains (losses) arising from changes in demographic assumptions

Actuarial (losses) gains arising from changes in financial assumptions

Actuarial (losses) gains 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 

Others

Defined benefit pension plans

2019

8,762 

(8,375)

 387 

 630 

 5 

1,023 

(4)

 388 

 140 

 499 

 79 

(67)

(7)

 39 

 2 

 45 

(27)

 45 

 37 

(10)

 67 

(1,006)

(10)

 648 

0

(301)

(191)

(22)

 8 

(95)

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 

Other post-employment benefit 
plans

2019

2018

0

0

0

 245 

0

 245 

0

 173 

0

 72 

 2 

 1 

0

 10 

0

 13 

0

 5 

0

 7 

(9)

(12)

 11 

0

0

(11)

0

 1 

0

(12)

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)

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Retirement benefit plans

Million CHF

Present value of funded and unfunded obligations

Opening balance as per 1 January

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 31 December

Of which: 

United Kingdom

North America (United States and Canada) 

Switzerland 

Others

Fair value of plan assets

Opening balance as per 1 January

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 31 December

Of which: 

United Kingdom

North America (United States and Canada) 

Switzerland 

Others

234

Defined benefit pension plans

Other post-employment benefit 
plans

2019

2018

2019

2018

8,602 

9,857 

 239 

 288 

 84 

 79 

 244 

 25 

 950 

(545)

(67)

(30)

 2 

 50 

9,393 

4,970 

2,086 

1,573 

 764 

(60)

 112 

 251 

 20 

(460)

(646)

(107)

(46)

 4 

(324)

8,602 

4,497 

1,893 

1,536 

 676 

7,614 

8,596 

 57 

 205 

 648 

 328 

 25 

(545)

(23)

 65 

(31)

 206 

(401)

 212 

 20 

(646)

(43)

(299)

8,375 

7,614 

4,979 

1,697 

1,434 

 265 

4,636 

1,363 

1,395 

 221 

0

 2 

 10 

0

 11 

(17)

 1 

0

0

0

 245 

0

 173 

0

 72 

0

0

0

0

 17 

0

(17)

0

0

0

0

0

0

0

(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

LafargeHolcim Integrated Annual Report 2019Retirement benefit plans

Million CHF

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

2018

21%

21%

15%

12%

9%

6%

6%

4%

2%

4%

2019

22%

19%

16%

9%

9%

7%

8%

6%

1%

3%

100%

100%

Plan assets based on non-quoted prices represent 27 percent 
(2018: 17 percent) of the total plan assets and mainly consist of 
insurance policies for 9 percent (2018: 9 percent) and 
investment funds for 8 percent (2018: 6 percent).

The fair value of financial instruments of LafargeHolcim Ltd or 
subsidiaries held as plan assets amount to CHF 7 million (2018: 
CHF 78 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.

235

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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

2019

2.0%

1.9%

 22.1

2018

2.8%

2.2%

 21.9

2019

2.0%

n/a

 23.1

2018

3.0%

3.2%

 22.7

2019

3.1%

2.5%

 23.2

2018

4.0%

2.5%

 23.2

2019

0.2%

0.9%

 23.4

2018

0.8%

0.9%

 23.3

Weighted average duration of defined benefit pension plans

Weighted average duration in years

Total Group

United Kingdom

North America 

Switzerland

2019

 14.7

2018

 15.4

2019

 16.3

2018

 17.5

2019

 13.6

2018

 13.3

2019

 13.7

2018

 13.5

Sensitivity analysis as per 31 December 2019 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) 

(646)

 729 

(375)

 429 

(130)

 154 

(109)

 109 

Expected salary increases (±0.5% change in 
assumption) 

Life expectancy in years after the age of 65  
(±1 year change in assumption) 

 50 

(31)

0

0

 405 

(405)

 282 

(281)

 10 

 63 

(9)

(65)

 5 

 52 

(5)

(52)

Sensitivity analysis as per 31  December 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)

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 66 million (2018: CHF 82 million), of which CHF 2 million 

(2018: CHF 25 million) related to North America, CHF 28 million 
(2018: CHF 31 million) related to Switzerland and CHF 26 million 
(2018: CHF 11 million) related to United Kingdom.

236

LafargeHolcim Integrated Annual Report 201916.3  Share compensation plans
The total personnel expense arising from the LafargeHolcim 
share compensation plans amounted to CHF 28.8 million in 
2019 (2018: CHF 12.9 million) as presented in the following 
table:

Million CHF

Employee share purchase plan

Performance Share Plan

Restricted shares

Share option plans (Ex-Holcim)

Liquidity mechanism for remaining Lafarge rights

Total

Personnel expenses 
2019

Personnel expenses 
2018

0.6

20.7

7.4

0.1

0.0

28.8

0.7

5.6

5.8

0.4

0.3

12.9

All shares granted under these plans are either purchased from 
the market or derived from treasury shares.
The increase of the Performance Shares Plan in 2019 relates 
primarily to the performance shares granted in 2019 and a 
better outlook on the Group Financial objectives, hence a 
higher level of achievement of the performance conditions on 
the other outstanding performance shares plans.

Description of plans
Employee share purchase plan
LafargeHolcim offers an employee share-ownership plan. This 
plan entitles employees to acquire a limited amount of 
discounted LafargeHolcim Ltd shares, i.e. 50 shares at 50 
percent of the market value and further shares 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.

Performance Share Plan
Performance shares and/or options are granted to executives, 
senior 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.

Information related to awards granted through the 
Performance Share Plan is presented below:

1 January

Granted

Forfeited

Delivered

31 December

2019

2018

Performance 
shares

Performance 
options

Performance 
shares

Performance 
options

2,357,109

1,355,202

2,232,190

1,389,745

622,048

1,166,760

895,190

283,506

(877,359)

(42,843)

 (770,271) 

(318,049)

(77,294)

(456,332)

0

0

2,024,504

2,022,787

2,357,109

1,355,202

237

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CO N T I N U ED

• 622’048 (2018: 895,190) performance shares at a fair value of 
CHF 49.09 per share (2018: CHF 55.00) were granted in 2019. 
Performance shares are subject to a three-year vesting period. 
Internal performance conditions are attached to the shares 
and are based on Group Earnings per Share (EPS) before 
impairment and divestments, pre-IFRS 16 and Group Return 
on Invested Capital (ROIC) pre-IFRS 16

• 1’166’760 (2018: 283,506) performance options at a fair value 
of CHF 2.04 (2018: CHF 9.16) were granted in 2019. In 2019, 
performance options are subject to a five-year vesting period. 

External conditions are attached to the options and are based 
on LafargeHolcim’s relative total shareholder return (TSR) 
compared to a group of peer companies. The valuation of the 
performance options is based on the Enhanced American 
Model (calculation of the fair value  without considering the 
performance condition) and a Monte Carlo simulation 
(estimation of the expected achievement factor).

Underlying assumptions for the fair value of the performance 
options granted in 2019 and 2018 are presented below:

Grant date

Share price at grant date

Exercise price

Expected dividend yield (continious) 1

Expected volatility of stock 2

Risk-free interest rate

Expected life of the options

1   Continuously compounded dividend yield based on expected future dividend payments according to Thomson Reuters.
2   Based on a historical volatility over the most recent period that is commensurate with the expected term of the options.

Grant date

Share price at grant date

Exercise price

Expected dividend yield (continious) 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.

30 July 2019

49.09

49.92

+4.3%

+25.0%

–0.5%

7 years

1 March 
2018

55.00

55.65

3.3%

22.4%

–0.2%

8 years

Restricted shares
Half of the annual incentive amount for the Executive 
Committee is paid in blocked LafargeHolcim Ltd shares during 
the first quarter of the following financial year. The share price 
used to convert the annual incentive amount into a number of 
shares is the average of the three closing share prices preceding  
the award date. The shares are blocked for a period of three 
years from the award date. 

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 
reflects the vesting dates of forfeited awards.

Board compensation consists of an annual retainer which is 
paid half in shares subject to a five-year restriction period.

Share option plans (Ex-Holcim)
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 share market price at grant 
date. 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.

238

LafargeHolcim Integrated Annual Report 2019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 2015) and performance share (granted 
up to 2014) plans, all subject to performance conditions.

All Lafarge stock options are vested.

Performance conditions included internal conditions and a 
market condition related to Total Shareholder Return. The 
market condition is included in the fair value of each granted 
instrument.

In 2019, the liquidity mechanism was applied as follows:
• No Lafarge S.A. shares have been purchased (2018: 63,895);
• 179,820 Lafarge S.A. shares have been exchanged for 158,861 
LafargeHolcim shares (2018: 283,414 Lafarge S.A. shares for 
250,218 LafargeHolcim shares); 

• 113,760 Lafarge S.A. options have been exercised in 2019 

(2018: 40,802 options). One Lafarge S.A. stock options plan 
ended in March 2019 and 20,640 Lafarge S.A. options have 
expired (2018: 584,013 options).

In 2019, the exchange ratio of the liquidity mechanism remains 
stable compared to last year at 0.884 (1 Lafarge S.A.
share for 0.884 LafargeHolcim Ltd share).

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 23 October 2015, LafargeHolcim 
proposed a liquidity mechanism for:

Outstanding share options
Movements in the number of share options outstanding and 
their related weighted average exercise prices are as follows:

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.

1 January

Granted and under vesting period 2

Change in exchange ratio for Lafarge stock-options plans

Forfeited

Exercised

Expired

31 December

Of which exercisable at the end of the year

Number 1

Number1

Weighted average 
exercise price1

2019

2018

CHF

CHF

CHF

CHF

CHF

CHF

CHF

54.60

2,698,556 

3,443,251 

49.92

1,166,760 

283,506 

0.00

58.61

35.46

53.23

0

(75,088)

(74,150)

(318,049)

(94,886)

(23,240)

(465,791)

(611,824)

53.31

3,230,489 

2,698,556 

1,207,702 

1,276,254 

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.

239

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CO N T I N U ED

The weighted average share price for the options exercised in 
2019 was CHF 35.46 (2018: CHF 39.06). 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

Issuing company

Expiry date

Exercise price1

Number 1

Number1

2008

2010

2011

2012

2013

2014

2014

2015 (2009 ²)

2015 (2010 ²)

2015 (2011 ²)

2015 (2012 ²)

2015

2015

2015

2016

2018

2019

Total

Holcim Ltd

Holcim Ltd

Holcim Ltd

Holcim Ltd

Holcim Ltd

Holcim Ltd

Holcim Ltd

Lafarge S.A.

Lafarge S.A.

Lafarge S.A.

Lafarge S.A.

Holcim Ltd

Holcim Ltd

LafargeHolcim Ltd

LafargeHolcim Ltd

LafargeHolcim Ltd

LafargeHolcim Ltd

LafargeHolcim Ltd

2020

2022

2019

2020

2021

2022

2026

2019

2020

2020

2020

2023

2023

2025

2026

2028

2029

CHF

CHF

CHF

CHF

CHF

CHF

CHF

CHF

CHF

CHF

CHF

CHF

CHF

CHF

CHF

CHF

CHF

62.95

70.30

63.40

54.85

67.40

64.40

64.40

33.38

55.71

48.32

39.09

66.85

63.55

50.19

53.83

55.65

49.92

2019

33,550

33,550 

0

165,538

122,770

99,532

0

0

184,481

127,269

138,644

144,970

47,333

110,065

609,623

246,404

1,166,760

2018

33,550

33,550

113,957

165,538

122,770

99,532

33,550

69,812

184,481

127,269

167,042

144,970

47,333

458,575

650,223

246,404

0

3,230,489

2,698,556

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 1.086.

240

LafargeHolcim Integrated Annual Report 201917. PROV I S IO N S A ND CO N T IN G E N CIE S
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
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.

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.

17.2  Provisions 

Million CHF

1 January

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

31 December

Of which short-term provisions

Of which long-term provisions

Site  
restoration 
and other 
environ- 
mental  
provisions

Specific 
business 
risks

Restructuring 
provisions

Other 
provisions

Total 2019

Total 2018

 860 

 470 

 300 

 356 

1,986 

2,393 

(1)

(3)

 118 

(67)

(22)

 38 

(15)

 908 

 64 

 845 

0

(1)

 115 

(56)

(31)

 2 

(14)

 485 

 126 

 359 

0

0

 67 

(160)

(40)

0

(4)

 162

 117 

 45 

(1)

0

 135 

(63)

(23)

 1 

(8)

 398 

 69 

 329 

(2)

(4)

 436 

(345)

(116)

 41 

(41)

1,954

 376 

1,578 

 5 

(9)

 421 

(529)

(214)

 29 

(111)

1,985 

 443 

1,542 

241

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

Specific business risks 
The total provision for specific business risks amounted to 
CHF 485 million as of  31 December 2019 (2018: 
CHF 470 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. 

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.

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
The total provision for restructuring amounted to CHF 162 
million decreasing from 2018 (CHF 300 million) notably due to 
cash payments during the year for CHF 160 million. The 
remaining provisions are expected to result in future cash 
outflows mainly within the next two years.

Other provisions
Other provisions relate mainly to provisions that have been set 
up to cover other  contractual liabilities and amounted to CHF 
398 million (2018: CHF 356 million). The composition of these 
items is manifold and  comprised, as of 31 December 2019, 
among other things: 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.

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.

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.

As of 31 December 2019, the Group’s contingencies amounted 
to CHF 1,835 million (2018:  CHF 1,637 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 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 the alleged underlying 
facts under the supervision of the Board of Directors. On 24 
April 2017, the Group reported on the main findings of the 
investigation and the remediation measures decided on by the 
Board of Directors. On 28 June 2018, the investigating judges 
decided to put Lafarge S.A. under judicial investigation and the 
legal charges put forward against individual wrongdoings have 
been received. In addition, Lafarge S.A. 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 S.A. under judicial investigation was expected given 
that several of its former managers have previously been placed 
under judicial investigation. Lafarge S.A. has appealed against 
those charges in December 2018 which, in its view, do not fairly 
represent the responsibilities of Lafarge S.A. The Court of 
Appeal decided on 7 November 2019 to drop one of the 
charges, complicity in crimes against humanity. In December 
2019, Lafarge SA replaced the bail guarantee with a payment to 
the court in the same amount. 

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 83 million (BRL 346 million) as of 31 December 
2019 and includes any penalty and interest. After challenging 

242

LafargeHolcim Integrated Annual Report 2019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, still 
pending of judgement. In November 2018, LafargeHolcim 
(Brasil) S.A. received an equal assessment from the Brazilian 
Internal Revenue Service, again claiming reversal of deducted 
Goodwill for the years 2013 and 2014. The company challenged 
it and received a favourable decision at the 1st Administrative 
Level, and now the case awaits the judgement before 
Administrative Tax Appeals Council. The amount in dispute for 
this second matter is CHF 65 million (BRL 271 million). 
Additionally, in December 2019, LafargeHolcim (Brasil) S.A. 
received a third equal assessment, referring to the year 2015. 
The company challenged it at 1st Administrative Level, and the 
amount in dispute is CHF 5 million (BRL 21 million).

In 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 and 
associated penalties of a total amount of CHF 34 million (IDR 
500 billion) related to certain refinancing transactions. PT 
Lafarge Cement Indonesia appealed against this decision at the 
tax court. In case of a negative outcome, the total claim 
amounts to CHF 68 million (IDR 1 trillion) due to additional 
penalties charged for the appeal. In January 2019, the Group 
sold its shareholding in PT Holcim Indonesia Tbk, including its 
subsidiary PT Lafarge Cement Indonesia, to Semen Indonesia, 
but will continue to be liable for such claims due to an 
indemnification guarantee provided by the Group to PT Holcim 
Indonesia Tbk.

On 28 May 2014, the Administrative Council for Economic 
Defense (“CADE”) ruled that Holcim Brazil (today LafargeHolcim 
(Brasil) S.A.) 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 21 September  2015 and applies to 
LafargeHolcim Brazil, which has been fined CHF 122 million 
(BRL 508 million) as at the date of the order. In September 2015, 
LafargeHolcim 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 29 September 
2016 and 21 October  2016. This suspension will remain in 
effect until the completion of the substantive proceedings 
against the CADE ruling. During 2019, CADE unsuccessfully 
challenged the guarantee offered, as well as the venue of the 
proceedings. As of 31 December 2019, the total amount 
including interests and monetary adjustment is approximately 
CHF 188 million (BRL 780 million).

Previously disclosed legal matters with no 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 505 million as of 31 December 2019.  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 5 October 2018 and the interim 
order passed by COMPAT was directed to be continued. The 
matter may be listed for hearings in the future when the entire 
pleadings are complete.

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. During the 
financial year 2018, the Commissioner of Income Tax - Appeals 
(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 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.

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.

Guarantees
At 31 December 2019, the Group’s guarantees issued in the 
ordinary course of business amounted to CHF 919 million (2018: 
CHF 888 million).

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LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

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 31 December 2019, the Group’s commitments amounted to 
CHF 2,034 million (2018: CHF 1,946 million) and included CHF 
1,614 million (2018: CHF 1,528 million) related to the purchase 
of various products, inventories and services and CHF 420 
million (2018: CHF 418 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 31 
December 2019, the total contingent assets for various claims 
in favor of the Group are estimated at CHF 26 million (2018: CHF 
25 million).

18 . S H A R E H O LDE R S ’ IN FO R M AT I O N
18.1  Equity
Holcim Finance (Luxembourg) S.A. issued EUR 500 million (CHF 
550 million) subordinated fixed rate resettable perpetual notes 
on 5 April 2019 with a coupon of 3.0 percent p.a. and 
guaranteed by LafargeHolcim Ltd.

LafargeHolcim Helvetia Finance Ltd issued CHF 200 million 
subordinated fixed rate resettable perpetual notes on 28 
November 2018 with a coupon of 3.5percent p.a.

In accordance with the provisions of IAS 32 Financial Instruments 
– Presentation, and given their characteristics, these instruments 
were accounted for in equity in the Group’s consolidated 
financial statements for a total amount of CHF 750 million of 
which CHF 550 million (EUR 500 million) in 2019 and CHF 200 
million in 2018.

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.

244

LafargeHolcim Integrated Annual Report 201918.2  Information on share capital

Number of registered shares 31 December

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

2019

2018

613,693,581

596,172,233

0

2,235,478

2,235,478

615,929,059

1,422,350

1,422,350

617,351,409

10,283,654

453,193

10,736,847

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 1,232 million (2018: CHF 1,214 million) and the 
carrying amount of the treasury shares amounts to CHF 121 
million (2018: CHF 612 million).

In July 2019, the Group has cancelled 10,283,654 of its shares, 
which were previously repurchased under the share buyback 
program at an average price per share of CHF 56.55 for a total 
of CHF 581 million.

On 25 June 2019, 19,303,633 new shares were issued out of 
authorized capital for the scrip dividend.

The following table reconciles the movement of the total issued 
shares for the period:

Million CHF

Total issued shares as per 1 January

New shares issued

Share buy-back program

Total issued shares as per 31 December

2019

606,909,080 

19,303,633 

(10,283,654)

615,929,059 

2018

606,909,080 

0

0

606,909,080 

245

LafargeHolcim Integrated Annual Report 2019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 2018 and 2019, the company did not purchase 
any LafargeHolcim Ltd share from members of the Executive 
Committee.

As at 31 December 2019, LafargeHolcim has one 
indemnification claim under the indemnification guarantee 
from 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 of 
LafargeHolcim Ltd (until 15 May 2019). 

In addition, the Group entered into a cooperation agreement 
dated 9 December 2007 allowing 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 31 December 2019. 

N O T E S T O T H E CO N S O L I DAT E D 
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED

19.  R E L AT E D PA R T Y T R A N S AC T I O N S
Key management compensation
Board of Directors
In 2019, 13 non-executive members of the Board of Directors 
received in total a remuneration of CHF 4.6 million including 
mandatory Social Security payments (2018: CHF 4.7 million) of 
which CHF 2.6 million (2018: CHF 2.7 million) was paid in cash, 
CHF 0.01 million (2018: CHF 0.02 million) in the form of social 
security contributions, and CHF 1.9 million (2018: CHF 1.9 
million) in shares. Other compensation paid totaled CHF 0.2 
million (2018: CHF 0.2 million).

The compensation of the Board of Directors decreased by 3% 
compared to previous year, which is due to changes in the 
composition of the Board of Directors. The compensation 
structure and level was unchanged from the previous year.

Executive Committee
The total annual compensation for the members of the 
Executive Committee amounted to CHF 30.2 million (2018: CHF 
30.4 million). This amount comprises base salaries, other fixed 
pay and annual bonus of CHF 18.9 million (2018: CHF 16.6 
million), share-based compensation of CHF 8.4 million (2018: 
CHF 10.6 million), employer contributions to social security and 
pension plans of CHF 2.9 million (2018: CHF 3.2 million).

Compensation for former members of governing bodies 
During 2019, payments in the total amount of CHF 4.0 million 
were made to six former members of the Executive Committee 
(2018: CHF 10.6 million for eight former members).

Loans granted to members of governing bodies
As at 31 December 2019, there was one loan in the amount of 
CHF 0.1 million (2018: CHF 0.1 million for one loan) outstanding 
from a member of the Executive Committee. There were  
no loans to other members of the Executive Committee, 
members of the Board of Directors or to parties closely  
related to members of governing bodies outstanding at  
31 December 2019.

246

LafargeHolcim Integrated Annual Report 20192 0. C A S H FLOW

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 businesses net (b)

Total cash flow from investing activities (a + b)

2019

2018

(1,048)

 137 

(911)

(486)

(1,397)

(142)

1,335 

(3)

(128)

(131)

 10 

 106 

 116 

1,177 

(219)

(1,008)

 126 

(882)

(403)

(1,285)

(176)

 172 

(5)

(204)

(209)

 19 

 93 

 112 

(100)

(1,386)

247

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E CO N S O L I DAT E D 
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Cash flow from acquisitions and disposals of Group companies

Acquisitions

Disposals

2019

Total

(12)

0

(41)

(115)

(7)

0

 68 

 6 

 18 

(83)

3

(79)

(69)

0

0

(148)

 12 

(6)

(142)

2018

Total

(20)

0

(20)

(52)

(22)

0

 21 

 4 

 24 

(65)

(65)

(129)

 1 

0

(193)

 20 

(3)

0

2019

Total

 28 

1,397

 207 

 794 

 21 

(16)

(1,031)

(24)

(402)

 974 

(322)

 652 

 424 

0

 279 

1,355 

(35)

(9)

 24 

(176)

1,335 

2018

Total

 12 

0

 23 

 100 

 34 

0

(62)

(1)

(11)

 95 

 95 

 4 

0

(49)

 50 

(12)

(9)

 143 

 172 

Million CHF

Cash and cash equivalents

Assets classified as held for sale

Other current assets

Property, plant and equipment

Other assets

Bank overdrafts

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

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LafargeHolcim Integrated Annual Report 201921. E V E N T S A F T E R T H E R E P O R T IN G PE R I O D
There are no significant events after the reporting period.

2 2 . AU T H O R I Z AT I O N O F T H E FIN A N CI A L 
S TAT E M E N T S FO R I S S UA N CE
The consolidated financial statements were authorized for 
issuance by the Board of Directors of LafargeHolcim Ltd on  
26 February 2020 and are subject to shareholder approval at 
the Annual General Meeting of shareholders scheduled for  
12 May 2020.

249

LafargeHolcim Integrated Annual Report 2019TO THE GENER AL MEE TING OF 
L AFARGEHOLCIM LTD,   

Zurich, 26 February 2020

R E P O R T O N T H E AU DI T O F T H E CO N S O LIDAT E D 
FIN A N CI A L S TAT E M E N T S
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 2019 and the consolidated statement of income, 
consolidated statement of comprehensive earnings, 
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 249) give a true and fair view of the consolidated 
financial position of the Group as at 31 December 2019, 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
Key audit matters
The key audit matters that we identified in the current year are 
as follows:
• Impairment of property, plant and equipment assets; 
• Goodwill; and
• Taxation.

Group materiality
We have set materiality for the current year at CHF 141 million 
(2018: CHF 123 million), based on 5% of normalised three-year 
average profit before tax.

Audit scope
Our scope covered 29 components. Of these, 15 were full scope 
audits and the remaining 14 were subject to specific procedures 
on certain balances by component audit teams or the group 
audit team. These covered 75% (2018: 74%) of Group net sales, 
80% (2018: 81%) of Group EBITDA and 83% (2018: 81%) of Group 
net assets.

Key audit matters
Key audit matters are those matters that, in our professional 
judgement, 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.

Impairment of property, plant and equipment
Key audit matter
The Group’s balance sheet includes property, plant and 
equipment (PP&E) of CHF 27’189 million (2018: CHF 27’890 
million) – refer to note 11.
PP&E impairment is tested at the Cash Generating Unit (CGU) 
level when an indicator of impairment is identified and is tested 
using discounted cash flow models to determine the 
recoverable amount of the CGU, which is compared with the 
carrying amount of the CGU. A deficit in the recoverable 
amount when compared with the carrying amount would result 
in an impairment.

We identified and focused on certain individual CGUs with a 
total carrying amount of CHF 1’440 million, which we 
determined would be most at risk of a material impairment as a 
result of reasonably possible changes in the key assumptions.

In assessing the recoverable amount of a CGU, management is 
required to estimate future cash flows. The determination of 
future cash flows requires management 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 
significantly if different judgements are applied.

Through our risk assessment procedures, we determined that 
for the CGUs where we focused our testing the following 
estimates used in management’s determination of the level of 
impairment to record were key assumptions (particularly the 
market size and discount rate assumptions), that we identified 
as a significant audit risk:
a. Market size – the Group’s short-term and long-term estimates 
of the level of cement demand have a significant impact on 
PP&E impairment assessments and are inherently uncertain. 
There is a risk that management’s market demand assumptions 
are not reasonable, leading to a material misstatement.
b.  Cement prices – A key input into PP&E impairment 
assessments is the forecasting of cement prices over the three 
year forecast period. Forecast cement prices are closely related 
to the level of cement demand, available market production 
capacity and inflation. Supply and demand factors are subject 
to significant estimation uncertainty. There is a risk that 
management’s cement price assumptions are not reasonable, 
leading to a material misstatement.

250

LafargeHolcim Integrated Annual Report 2019c.  Discount rates – Given the long timeframes involved, 
recoverable amounts of the CGUs are sensitive to the discount 
rate applied. There is a risk that discount rates do not reflect the 
risks inherent in the cash flows being discounted, leading to a 
material misstatement. 

Based on the audit procedures performed, we consider the 
judgements applied in the determination of CGUs and the 
assumptions included in the impairment testing models, 
together with the disclosures set out in the consolidated 
financial statements, to be appropriate.

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 setting of forecasts used in the 
impairment valuation tests. In addition, we performed the 
following substantive procedures for those CGUs selected for 
testing:

Market size
We benchmarked demand growth assumptions to industry 
reports on demand and supply growth and recent historical 
trends.
We used Deloitte economic specialists to assist in the challenge 
of the economic models used by management to forecast 
long-term cement market size, including comparing key inputs 
to the economic models to independently sourced external 
market data.

Cement Prices
We reviewed management’s estimates of cement prices over 
the three year forecast period by benchmarking prices to 
industry reports, evaluating recent historical price trends 
against inflation. We considered the impact of potential 
additional cement capacity identified from industry reports and 
public commentary. Additionally, we held discussions with 
regional and country management to understand their views of 
market developments.

Discount rates
We used Deloitte valuation specialists to develop independent 
discount rates and compared these from external market data 
to management estimates for the discount rate, country risk 
premium and tax rates.

Other procedures
We challenged management’s CGU determination and 
considered whether there existed any contradictory evidence.
We validated that the Group’s asset impairment methodology 
was appropriate and tested the integrity of the impairment 
models.
We assessed management’s historical forecasting accuracy, 
whether estimates have been determined on a consistent basis 
across the Group and where relevant, compared management’s 
prior year models for testing impairment with the current year 
models.
We considered the adequacy of management’s disclosures in 
respect of PP&E impairment testing.

Goodwill
Key audit matter
The Group’s balance sheet includes goodwill of CHF 13,039 
million (2018: CHF 14,045 million).

As disclosed in note 11 from 1 January 2019, the level at which 
goodwill is monitored and tested for impairment has changed 
to the operating segment from a country or cluster level.

The level at which the CEO (chief operating decision maker) 
reviews operating results and monitors performance and the 
level at which goodwill impairment testing is required to be 
performed is a matter of fact. The Group amended its 
organisational structure in response to changes in the dynamics 
in the building materials industry to focus on the regional 
performance of its operations. Key metrics used by the CEO in 
assessing performance are measured at the operating segment 
level.

The principal risk we have identified is obtaining audit evidence 
to support the fact that the CEO has changed the level at which 
he reviews operating results and monitors performance to the 
operating segments.

In assessing the recoverable amount of goodwill, management 
is required to estimate future cash flows. The determination of 
future cash flows requires management to make assumptions 
relating to future profitability, including revenue growth and 
operating margins, and the determination of an appropriate 
discount rate – refer to note 11.3.

Through our risk assessment procedures, we have determined 
that there are two key estimates in management’s 
determination of the level of impairment to record. These are:
a)  Market size – the Group’s short-term and long-term 
estimates of the level of cement demand have a significant 
impact on the goodwill impairment assessments and are 
inherently uncertain. There is a risk that management’s market 
demand assumptions are not reasonable, leading to a material 
misstatement.
b)  Discount rates – Given the long timeframes involved, 
recoverable amounts of the operating segments are sensitive to 
the discount rate applied. There is a risk that discount rates do 
not reflect the risks inherent in the cash flows being discounted, 
leading to a material misstatement.

251

LafargeHolcim Integrated Annual Report 2019T O T H E G E N E R A L M E E T I N G O F L A FA RG E H O LC I M LT D,   
R A PPE R S W I L - J O N A
CO N T I N U ED

We identified and focused on certain individual CGUs with a 
total carrying amount of CHF 2’511 million which we 
determined would be most at risk of a material impairment of 
goodwill as a result of significant changes in key assumptions, 
particularly discount rates and market size. This was based on 
the level of headroom of the aggregated recoverable amount of 
their operating segment over the operating segments 
aggregated carrying amount. We identified these as a high 
audit risk. In addition, we also focused on individual CGUs with 
a further CHF 11’721 million of combined CGU carrying amount, 
which were less sensitive based on the level of headroom of the 
aggregated recoverable amount of their operating segment 
over the operating segments aggregated carrying amount. We 
identified these as a lower audit risk.

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 
allocation of goodwill to the operating segments. In addition we 
performed the following substantive procedures for those CGUs 
with a higher risk selected for testing:

Market size
We benchmarked demand growth assumptions to industry 
reports on demand and supply growth and recent historical 
trends.
We used Deloitte economic specialists to assist in challenging 
economic models used by management to forecast long-term 
cement market size, including comparing key inputs to the 
economic models to independently sourced external market 
data.

Discount rates
We used Deloitte valuation specialists to develop independent 
discount rates and compared these from external market data 
to management estimates for the discount rate, country risk 
premium and tax rates.
Substantive procedures were performed in respect of discount 
rates for those CGUs selected with a lower risk.

Other procedures
We challenged management’s determination that goodwill is 
monitored at the operating segment level by reviewing internal 
financial reporting presented to the Board of Directors, CEO 
and executive committee, held discussions with the CEO and 
Regional Executives to understand both the process of 
evaluating results, monitoring performance and how decisions 
are made on the allocation of capital. 

In addition, we obtained an understanding of how the 
performance of members of the Group’s Executive is monitored 
and bonuses determined.

We evaluated that LafargeHolcim’s goodwill impairment 
methodology was appropriate and tested the integrity of the 
impairment models.

We considered the adequacy of management’s disclosures in 
respect of goodwill impairment testing and whether the 
disclosures appropriately discloses the sensitivities and the 
impacts of the change in the level at which goodwill impairment 
testing is undertaken.

Based on the audit procedures performed, we consider the 
judgements applied in the determination of the level of 
goodwill impairment testing and the assumptions included in 
the impairment testing models, together with the disclosures 
set out in the consolidated financial statements, 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 2019, the Group has recorded a 
tax expense of CHF 806 million (2018: CHF 656 million), and, at 
that date, CHF 1,442 million Deferred tax liabilities net (2018: 
CHF 1’607 million) (refer to Note 8), CHF 585 million Current 
income tax liabilities (2018: CHF 634 million) and CHF 385 
million (2018: CHF 449 million) Long-term income tax liabilities.

The high level of judgement and complexity of the estimations 
combined with the significance of the above amounts to the 
financial statements as a whole, we assessed management’s 
estimates for taxation to be an area of significant audit risk.

How the scope of our audit responded to the key audit matter
We discussed with management 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.

252

LafargeHolcim Integrated Annual Report 2019Net assets

Net assets

Net sales
N E T S A L E S 

Net sales

EBITA

EBITA
E B I TA

Net assets

N E T A S S E T S

   Full audit scope 69%

   Speciefied audit procedures 6%

   Review at group level 25% 

   Full audit scope 68%

   Full audit scope 53%

   Speciefied audit procedures 12%

   Speciefied audit procedures 30%

   Review at group level 20% 

   Review at group level 17% 

Net sales

EBITA

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 8.4 of CHF 801 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.

Based on the audit procedures performed, we consider the 
judgements applied in the calculation of income taxes, deferred 
tax positions and assessment of uncertain tax positions, 
together with the disclosures set out in the consolidated 
financial statements, to be appropriate. 

Our application of materiality
We define materiality as the magnitude of misstatement in the 
financial statements that makes it probable that the economic 
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 141 million, 
based on a calculation of 5% of normalised three-year average 
profit before tax for 2017, 2018 and 2019.

The materiality applied by the component auditors ranged from 
CHF 38.7 million to CHF 46.4 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.

We agreed with the Audit Committee that we would report to 
the Committee all audit differences in excess of CHF 7.0 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.

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 29 
components, representing the Group’s most material country 
operations, and utilised 25 component audit teams in 20 
countries. There were 15 components (2018: 15) subject to full 
scope audits and 14 components (2018: 11) subject to audit 
procedures on specified balances and specified procedures, 
where the extent of audit testing was based on our assessment 
of the risks of material misstatement and of the materiality of 
the Group’s operations at those locations.

These 29 components represent the principal business units 
and account for 83% of the Group’s net assets, 75% of the 
Group’s net sales and 83% 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 
balances.

253

LafargeHolcim Integrated Annual Report 2019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 Dübi
Licensed Audit Expert

T O T H E G E N E R A L M E E T I N G O F L A FA RG E H O LC I M LT D,   
R A PPE R S W I L - J O N A
CO N T I N U ED

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 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 116 to 138 and our Auditor’s reports thereon.

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.

254

LafargeHolcim Integrated Annual Report 2019HOLDING 
COMPANY RESULT S 

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

2

3

4

5

2019

1,334 

 226 

 132 

1,692 

(33)

(36)

(302)

(450)

(1)

(822)

 870 

2018

3,999 

 269 

 235 

4,503 

(33)

(49)

(612)

(2,440)

 15 

(3,119)

1,384 

255

LafargeHolcim Integrated Annual Report 2019Notes

31.12.2019

31.12.2018

 150 

 543 

 66 

 0 

 759 

3,493 

 104 

 121 

 69 

 17 

 311 

3,456 

36,454 

35,609 

 74 

40,021 

40,780 

1,099 

 292 

 23 

1,414 

1,984 

1,540 

 1 

3,525 

4,939 

1,232 

 2 

39,067 

39,378 

1,145 

 289 

 19 

1,453 

1,004 

1,540 

 1 

2,545 

3,998 

1,214 

1,514 

1,877 

17,343 

17,343 

2,531 

2,531 

12,473 

11,650 

 870 

(122)

35,841 

40,780 

1,384 

(619)

35,380 

39,378 

6

7

8

9

14

10

Statement of financial position LafargeHolcim Ltd

Million CHF

Cash and cash equivalents

Current financial receivables – Group companies

Other current receivables – Group companies

Other current receivables – Third parties

Current assets

Non-current financial receivables - Group companies

Financial investments – Group companies

Other assets

Non-current assets

Total assets

Current financial liabilities –  Group companies

Other current liabilities –  Group companies

Other current liabilities –  Third parties

Current liabilities

Non-current financial liabilities – Group companies

Non-current financial liabilities – Third parties

Other non-current liabilities - Third parties 

Non-current liabilities

Total liabilities

Share capital

Statutory capital reserves

Capital reserves from tax capital contributions

– Domestic

– Foreign

Statutory retained earnings

– Statutory retained earnings

Voluntary retained earnings

– Retained earnings prior year

– Net income

Treasury Shares

Shareholders’ equity

Total liabilities and shareholders’ equity

256

LafargeHolcim Integrated Annual Report 2019NOTES TO THE FINANCIAL S TATEMENTS OF 
L AFARGEHOLCIM 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. ACCOU N T ING P O LICIE S
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.

Financial statements presentation
Due to the amalgamation of LafargeHolcim Albion Finance Ltd 
as of 1 January 2019 the prior year figures are only comparable 
to a limited extent with those of the reporting period.

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 receivables
Financial receivables are valued at acquisition cost less 
adjustments for foreign currency losses and any other 
impairment of value. 

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. 

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.

Other assets
Other assets contain Goodwill and other intangible assets, 
which are capitalized and amortized over a period between 
three and five years.

Provisions
Provisions are made to cover general business risks. 

Treasury shares
Treasury shares are recognised at acquisition cost and deducted 
from equity. Gains and losses on the sale are recognised in the 
statement of income.

257

LafargeHolcim Integrated Annual Report 2019 
2019

 32 

 1 

0

 40 

 6 

 72 

 25 

 543 

 615 

0

0

0

1,334 

2019

 22 

 110 

0

 132 

2019

(5)

(256)

(13)

(28)

(302)

2018

0

 3 

 781 

0

0

0

0

1,352 

1,163 

 232 

 366 

 102 

3,999 

2018

0

0

 235 

 235 

2018

(6)

(311)

(11)

(284)

(612)

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S O F 
L A FA RG E H O LC I M LT D
CO N T I N U ED

2 . DI V IDE N D IN CO M E – G ROU P CO M PA N IE S

Million CHF

Holcim Reinsurance Limited

Holcim Finance (Belgium) S.A. 

LafargeHolcim International Finance Ltd

Holdertrade Ltd

Holcim (Colombia) S.A.

Holcim Participations (Australia) Pty Ltd

Holmin Limited

Holderfin B.V.

Lafarge S.A.

Cesi S.A.

Rosyco B.V. 

LafargeHolcim Albion Finance Ltd

Total

3 . OT H E R IN CO M E

Million CHF

Branding and trademark fees

CO2 trading income

Foreign exchange gains

Total

4 . OT H E R E X PE N S E S

Million CHF

Board of Director fees

Stewardship and project expenses

Administrative expenses

Foreign exchange losses

Total

258

LafargeHolcim Integrated Annual Report 20195 . IM PA IR M E N T O F FIN A N CI A L IN V E S T M E N T S – G ROU P CO M PA N IE S

Million CHF

Lafarge S.A.

Vennor Investments Pty Ltd

Holmin Limited

LafargeHolcim International Finance Ltd

Cemasco B.V.

Fernhoff Ltd

LafargeHolcim Albion Finance Ltd

Total

6 . N O N - CU R R E N T FIN A N CI A L R ECE I VA B LE S – G ROU P CO M PA N IE S

Million CHF

Fernhoff Ltd

Cementia Holding Inc.

LafargeHolcim Continental Finance Ltd

Holcim Participations (UK) Limited

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

7. FIN A N CI A L IN V E S T M E N T S – G ROU P CO M PA N IE S
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.

2019

0

(16)

(39)

(395)

0

0

0

(450)

2018

(1,501)

0

0

(782)

(23)

(32)

(102)

(2,440)

31.12.2019

31.12.2018

 104 

 9 

1,303 

 740 

0

 5 

0

 144 

 58 

0

 626 

 408 

 96 

3,493 

 82 

0

1,352 

0

 256 

 7 

 60 

 187 

 89 

 44 

 636 

 647 

 96 

3,456 

259

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S O F 
L A FA RG E H O LC I M LT D
CO N T I N U ED

8 . N O N - CU R R E N T FIN A N CI A L LI A B ILI T IE S – G ROU P CO M PA N IE S

Million CHF

LafargeHolcim International Finance Ltd

Atlantic RE

Holcim Overseas Finance Ltd.

LafargeHolcim Helvetia Finance Ltd

Marine Cement Ltd

LafargeHolcim Espana S.A.U. 

Holcim Capital Corporation Ltd.

Total

9. N O N - CU R R E N T FIN A N CI A L LI A B ILI T IE S – T H IR D PA R T IE S

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

31.12.2019

31.12.2018

 6 

 88 

 455 

 659 

 9 

 221 

 546 

1,984 

 7 

0

0

 776 

0

 221 

0

1,004 

31.12.2019

31.12.2018

 450 

 250 

 150 

 250 

 440 

1,540 

450

250

150

250

440

1,540

10. M OV E M E N T IN T R E A S U RY S H A R E S

Number held by 
LafargeHolcim Ltd

Million CHF

Average price 
per share in 
CHF

Number  
held by  
subsidiaries

Reserve for 
treasury 
shares held by 
subsidiaries 
in Million CHF

Average price per 
share in CHF

01.01.2019

Opening

 10,736,847 

 619 

57.6

2019

2019

2019

31.12.2019

Cancellation of shares – share 
buyback program

Purchases

Sales

Closing

(10,283,654)

2,259,105 

(476,820)

 2,235,478 

(581)

 108 

(24)

 122 

56.5

47.9

49.6

54.5

01.01.2018

Opening

 9,698,149 

 559 

57.6

2018

2018

2018

31.12.2018

Purchases share buyback 
program

Other purchases

Sales

Closing

 1,442,200 

 440 

 (403,942)

 10,736,847 

 81 

0

(21)

 619 

56.5

43.6

53.2

57.6

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

The Annual General Meeting approved on May 15, 2019 the 
cancellation of 10,283,654 LafargeHolcim shares with a nominal 
value of CHF 2.00 each which were bought back by 

LafargeHolcim under the share buyback program announced in 
June 2017 and completed in March 2018.

260

LafargeHolcim Integrated Annual Report 201911. CO N T IN G E N T LI A B ILI T IE S

Million CHF

31.12.2019

31.12.2018

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

7.00% MXN 1,700 million bonds due in 2019

8.12% 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.

Commercial Paper Program, guarantee based on utilization, EUR 3,500 million maximum

Holcim Finance (Luxembourg) S.A. – Guarantees in respect of holders of

1.04% EUR 413 million Schuldschein loans due in 2021

2.25% EUR 1,150 million bonds due in 2028

1.46% EUR 152 million Schuldschein loans due in 2023

3.00% EUR 320 million bonds due in 2024

2.00% EUR 33 million Schuldschein loans due in 2026

1.38% EUR 869 million bonds due in 2023

1.75% EUR 750 million bonds due in 2029

0.50% EUR 500 million bonds due in 2026

3.00% EUR 500 million Perpetual subordinated notes (Hybrid Bond)

Holcim Overseas Finance Ltd. – Guarantees in respect of holders of

3.38% CHF 425 million bonds due in 2021

 73 

 266 

 266 

0

 96 

0

 187 

 224 

0

 493 

1,374 

 182 

 382 

 39 

1,038 

 896 

 597 

 597 

 468 

 77 

 271 

 271 

 94 

 94 

 153 

 191 

 230 

 105 

 512 

1,425 

 188 

 620 

 41 

1,425 

 929 

0

0

 468 

261

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S O F 
L A FA RG E H O LC I M LT D
CO N T I N U ED

Million CHF

31.12.2019

31.12.2018

Holcim US Finance S.à r.l. & Cie S.C.S. – Guarantees in respect of holders of

0

 597 

 53 

 533 

 36 

 72 

 130 

 6 

 2 

 43 

 16 

 117 

 41 

 30 

 64 

 64 

 220 

 426 

 640 

 209 

 60 

 123 

 420 

5,280 

 74 

 82 

16,516 

 812 

 620 

 54 

 542 

 37 

 74 

 135 

 6 

 2 

 43 

 16 

 119 

 41 

 30 

 65 

 65 

 220 

 433 

 650 

 213 

 61 

 125 

 414 

5,838 

 200 

0

17,909 

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

0.30% 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

2.80% USD 40 million Schuldschein loans due in 2021

3.20% USD 15 million Schuldschein loans due in 2023

2.88% USD 110 million Schuldschein loans due in 2022

4.38% USD 38 million Schuldschein loans due in 2024

3.13% USD 28 million Schuldschein loans due in 2024

4.59% USD 60 million Schuldschein loans due in 2025

3.33% 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 (2018: CHF 0 million)

Other guarantees

Other commitments

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.

262

LafargeHolcim Integrated Annual Report 201912 . S H A R E IN T E R E S T S O F B OA R D O F DIR EC TO R S A N D 
E X ECU T I V E CO M M I T T E E
Shares and options owned by Board of Directors
As of 31 December 2019, the members of the Board of Directors 
of LafargeHolcim Ltd held directly and indirectly in the 
aggregate 239,097 registered shares (2018: 9,658,399 

registered shares) and no rights to acquire further registered 
shares and no call options on registered shares (2018: 
16,993,600 call options on registered shares).

Name

Beat Hess

Oscar Fanjul

Position

Chairman

Vice-Chairman

Paul Desmarais Jr

Member

Colin Hall

Patrick Kron

Naina Lal Kidwai

Gérard Lamarche

Adrian Loader

Jürg Oleas

Nassef Sawiris

Member (since May 15, 2019)

Member

Member (since May 15, 2019)

Member (until May 15, 2019)

Member

Member

Member (until May 15, 2019)

Claudia Sender Ramirez

Member (since May 15, 2019)

Hanne B. Sørensen

Dieter Spälti

Total

Member

Member

1   Further information can be found under: www.six-exchange-regulation.com.

Shares held as of  
December 31, 2019

Options held as of  
December 31, 2019

Shares held as of  
December 31, 2018

Options held as of  
December 31, 2018

57,205

15,707

44,469

0

3,345

0

n/a

21,587

7,654

n/a

0

11,184

77,946

239,097

40,109

10,675

40,693

n/a

1,021

n/a

5,816

18,489

5,147

n/a

n/a

n/a

n/a

9,455,606

16,993,600 1

n/a

8,537

72,306

0

9,658,399

16,993,600

Ownership of shares: Executive Committee
As of 31 December 2019, members of the Executive Committee 
held a total of 365,542 registered shares (2018: 229,143 
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 2019, the Executive Committee 
helds a total of 756,549 performance options at target (2018: 
232,507 performance options) and 292,586 performance shares 
at target (2018: 221,043 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.

263

LafargeHolcim Integrated Annual Report 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S O F 
L A FA RG E H O LC I M LT D
CO N T I N U ED

Number of shares and options held by Executive Committee 
Members as of 31 December 2019

Name

Jan Jenisch

Magali Anderson

Keith Carr

Marcel Cobuz

Position

CEO

Member 

Member 

Member 

Feliciano González Muñoz

Member 

Miljan Gutovic

Martin Kriegner

Géraldine Picaud

Oliver Osswald

René Thibault

Total

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)

260,000

268,452

536,903

113,719

227,437

281

5,000

15,091

2,660

8,389

16,271

39,604

5,852

12,394

0

41,900

75,438

41,900

42,545

78,031

72,166

69,783

66,334

0

83,800

135,576

83,800

85,089

158,761

144,331

139,566

117,368

5,900

13,715

22,251

13,815

13,855

28,318

34,472

25,091

21,450

11,800

27,430

44,501

27,630

27,710

56,636

68,943

50,182

38,300

365,542

756,549

1,485,194

292,586

580,569

Number of shares and options held by Executive Committee 
Members as of 31 December 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

264

LafargeHolcim Integrated Annual Report 201913 . S IG N IFIC A N T S H A R E H O LDE R S
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 45,804,388 

shares or 7.4 percent and additionally 6,178,080 options or 1.0 
percent, total of 8.4 percent as per 31 December 2019 1 (2018: 
69,074,277 shares or 11.4 percent) ;

• Groupe Bruxelles Lambert holds 57,238,551 shares or 

9.3 percent as per  31 December 2019 (2018: 57,238,551 shares 
or 9.4 percent);

• Harris Associates L.P. declared holdings of 17,972,238 shares 
or 2.96 percent (falling below threshold of 3 percent) on 20 
June 2019 (10 December 2018: 30,342,087 shares or 4.99 
percent). Harris Associates Investment Trust declared holdings 
of 18,085,045 shares or 2.98 percent (falling below threshold 
of 3 percent) as per 29 January 2019 (2018: 18,332,272 shares 
or 3.0 percent);

• Norges Bank (the Central Bank of Norway) declared holdings 

of 18,330,151 shares or 3.0 percent on 8 November 2018;
• BlackRock Inc. declared holdings of 18,725,934 shares or 

3.1 percent on 12 May 2017.

1 Excluding the shares of the family members

14 . S H A R E C A PI TA L

Shares

January 1

Share capital increased during the  
period/Scrip dividend

Number of shares cancelled/capital  
reduced during the period

December 31

2019

2018

Number

Million CHF

Number

Million CHF

606,909,080

1,214

606,909,080

1,214

19,303,633

(10,283,654)

615,929,059

39

(21)

1,232

0

0

0

0

606,909,080

1,214

As of 31 December 2019, LafargeHolcim share capital consists 
of 615,929,059 registered shares with a nominal value of CHF 
2.00 each.

19,303,633 new shares were issued out of authorized capital for 
the scrip dividend and the total share capital increase by CHF 
38.6 million.

In 2019, LafargeHolcim offered to its shareholders the option of 
receiving the distribution in the form of new LafargeHolcim 
shares, cash or a combination thereof. 72.98 percent of the 
distribution was paid in the form of new LafargeHolcim Ltd 
shares. This resulted in a total payment of CHF 322 million. 

The total share capital decreased by CHF 20.6 million at 24 July 
2019 as a result of the cancellation of 10,283,654 million 
repurchased treasury shares under the share buyback program 
that was completed in March 2018.

265

LafargeHolcim Integrated Annual Report 2019Appropriation of retained earnings

Million CHF

Retained earnings brought forward

Net income of the year

Capital reserves from capital contributions:

– Domestic

– Foreign

Amount available for annual general meeting of shareholders

The Board of Directors proposes to the annual general meeting of shareholders to distribute 
from the foreign contribution reserve

Balance to be carried forward

Payout from capital contribution reserves
The Board of Directors proposes to the annual general meeting 
of shareholders a distribution from the foreign capital 
contribution reserve and payout of CHF 2.00 (2018: CHF 2.00) 
per registered share up to an amount of CHF 1,228 million 1.

¹   There is no payout on treasury shares held by LafargeHolcim. On January 1, 2020 

treasury shares holdings amounted to 2,235,478 registered shares.

2019

12,473

870

1,514

17,343

32,200

(1,228)

30,972

2018

11,650

1,384

1,877

17,343

32,254

 (1,193)

31,061

266

LafargeHolcim Integrated Annual Report 2019TO THE GENER AL MEE TING OF L AFARGEHOLCIM LTD

Zurich, 26 February 2020

R E P O R T O N T H E AU DI T O F T H E FIN A N CI A L 
S TAT E M E N T S
Opinion
We have audited the financial statements of LafargeHolcim Ltd, 
which comprise the statement of income and the statement of 
financial position as at as at 31 December 2019 and notes for 
the year then ended, including a summary of significant 
accounting policies.
In our opinion the financial statements as at 31 December 2019, 
presented on pages 255 to 266 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.

Financial investments – Group companies
Key audit matter
As described in note 5 to the financial statements, 
LafargeHolcim Ltd holds investments in LafargeHolcim Group 
companies with a carrying value of CHF 36’454 million as of 31 
December 2019, representing 89.4% of the total statutory 
assets.

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 contains a lot of judgement. It is related to the 
value of the underlying assets held by each investment which 
themselves depends on the value of other underlying assets. 
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 challenged the assessment of impairment indicators by the 
Company.

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 validated the appropriateness and completeness of the 
related disclosures in note 7 to the statutory financial 
statements. 

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.

267

LafargeHolcim Integrated Annual Report 2019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 Dübi
Licensed Audit Expert

268

LafargeHolcim Integrated Annual Report 20195 -YE AR- RE VIE W L AFARGEHOLCIM GROUP

5 -Y E A R- R E V IE W L A FA RG E H O LCIM G ROU P

Statement of income

Net sales

Gross profit

Recurring EBITDA pre-IFRS 16

Recurring EBITDA margin pre-IFRS 16

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

2019

2018

2017 1

2016 1

2015

26,722 

11,281 

27,466 

11,548 

6,153 

 23.0 

3,833 

 14.3 

2,559 

 806 

 24 

2,513 

2,246 

6,016 

 21.9 

3,312 

 12.1 

2,229 

 656 

 28 

1,719 

1,502 

27,021 

26,904 

23,584 

7,781 

5,990 

 22.2 

(478)

(1.8)

6,007 

 536 

(45)

(1,716)

(1,675)

11,272 

7,093 

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)

Cash flow from operating activities

million CHF

4,825 

2,988 

3,040 

3,295 

2,465 

Investments in property, plant and equipment for maintenance 
net

million CHF

Investments in property, plant and equipment for expansion

million CHF

(911)

(486)

(882)

(403)

(881)

(474)

(997)

(638)

(981)

(1,007)

(Purchase) Disposal of financial assets, intangible and other 
assets and businesses net

million CHF

1,178 

(100)

 680 

2,342 

7,222 

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

12,210 

46,100 

58,310 

9,144 

million CHF

17,667 

11,658 

48,037 

59,695 

10,727 

18,914 

12,618 

51,061 

63,679 

11,519 

21,185 

million CHF

31,499 

30,053 

30,975 

%

million CHF

 54.0 

2,933 

 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

10,110 

13,518 

14,346 

14,724 

17,266 

million t

million t

million t

million m 3

 285.9 

 207.9 

 269.9 

 47.7 

 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 

72,452 

77,055 

81,960 

90,903 

100,956 

269

LafargeHolcim Integrated Annual Report 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 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
The complete annual report for LafargeHolcim Ltd is published 
in English and is available on www.lafargeholcim.com. A printed 
extract of the annual report is available in English and German. 
The English version is legally binding.

Financial reporting calendar

Date

Results for the first quarter 2020

30 April 2020

Annual General Meeting of 
shareholders

12 May 2020

270

LafargeHolcim Integrated Annual Report 2019DEFINITION OF NON - GA AP   
ME A SURES 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 2019 and 2018) and currency 
translation effects (2019 figures are converted with 2018 
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.
Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

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. 

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 
material 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/loss (EBIT);
–  depreciation, amortization and impairment of operating 

assets; and

–  restructuring, litigation, implementation and other non 

recurring costs.

Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

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.
Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

Recurring EBITDA after leases
The Recurring EBITDA after leases is defined as Recurring 
EBITDA less the depreciation of right-of-use assets.

Recurring EBIT
The Recurring EBIT is defined as Operating profit (EBIT) 
adjusted for restructuring, litigation and other non-recurring 
costs and for impairment of operating assets.
Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

Operating profit/loss (EBIT) 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 (EBIT);
–   impairment of goodwill and long-term assets.
Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

Net income before impairment and divestments
Net income before impairment and divestments excludes 
impairment charges and capital gains and losses arising on 
disposals of Group companies 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 companies; and
–  impairments of goodwill and long-term assets.
Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

271

LafargeHolcim Integrated Annual Report 2019D E F I N I T I O N O F N O N - G A A P   
M E A S U R E S U S E D I N T H I S R E P O R T
CO N T I N U ED

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.
Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

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.

Employee benefits and other operating items
Employee benefits and other operating items reflect the 
non-cash impact on the operating profit of the employee 
benefits schemes net of any cash payments, the non- cash 
impact of the specific business risks provisions net of any cash 
payments, the non-cash share based compensation expenses 
and any other non-cash operating expenses.

Change in other receivables and liabilities
Change in other receivables and liabilities includes the net 
change of other receivables and liabilities that are not already 
disclosed separately in the consolidated statement of cash flows 
or that are not of a tax or of a financial nature.

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. 
Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

272

Free Cash Flow pre-IFRS 16 is defined as:
+/–   Cash flow from operating activities adjusted for IFRS 16 

impacts; and

–   net Maintenance and Expansion Capex

Free Cash Flow post-IFRS 16 is defined as:
+/–   Cash flow from operating activities; and
–   net Maintenance and Expansion Capex
–  repayment of long-term lease liabilities

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 (short-term and long-term) including 

derivative liabilities;

–  cash and cash equivalents; and
–  derivative assets (short-term and long-term).
Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

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.
Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

NOPAT (Net Operating Profit/loss 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/Loss (being the Recurring EBITDA and 
share of profits of associates, 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).

Following the implementation of IFRS 16 Leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

LafargeHolcim Integrated Annual Report 2019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).
Following the implementation of IFRS 16 leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

Cash conversion
The cash conversion is an indicator that measures the Group’s 
ability to convert profits into available cash. 
Following the implementation of IFRS 16 leases, effective 1 
January 2019, the Group has elected the modified retrospective 
approach which does not require restatement of 2018 numbers. 
Consequently, in 2019, for better comparability this indicator is 
calculated 
 and  IFRS 16.

Cash conversion pre-IFRS 16 is defined as Free Cash Flow 
pre-IFRS 16 divided by Recurring EBITDA pre-IFRS 16.

Cash conversion post-IFRS 16 is defined as Free Cash Flow post 
IFRS 16 divided by Recurring EBITDA after leases.

Net CO2 emissions (kg per ton of cementitious material)
Net CO2 emissions are CO2 emissions from the calcination 
process of the raw materials and the combustion of traditional 
kiln and non-kiln fuels. Cementitious materials refer to clinker 
production volumes, mineral components consumed in cement 
production and mineral components processed and sold 
externally. 

Waste reused in operations (million tons)
The total volume of waste derived resources includes the 
following components: alternative fuels, alternative raw 
materials, industrial mineral components consumed and/or 
processed and sold externally, industrial gypsum, alternative 
aggregate produced and/or consumed and returned asphalt 
recycled.

Freshwater withdrawal (liter per ton of cementitious material)
Total volume of freshwater withdrawn by the cement plant 
divided by the total production of cementitious material.

Lost time injury frequency rate (LTIFR)
Number of lost-time injury divided by million hours worked.

This set of definitions can be found on our website: 
www.lafargeholcim.com/non-gaap-measures

273

LafargeHolcim Integrated Annual Report 2019D E F I N I T I O N O F N O N - G A A P   
M E A S U R E S U S E D I N T H I S R E P O R T
CO N T I N U ED

R ECO N CILI AT I O N O F N O N - G A A P M E A S U R E S
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

Recurring EBIT

Impairment of operating assets

Restructuring, litigation, implementation and other non-recurring costs

Operating profit (EBIT)

Profit (loss) on disposal and other non-operating items

Net financial expenses

Share of profit of associates

Net Profit before tax

Income tax

Net income

Million CHF

Net income 

Impairment

Profit/(loss) on divestments

Net  income before impairment and divestments

Net income before impairment and divestments Group share

Million CHF

Cash flow from operating activities

Purchase of property, plant and equipment

Disposal of property, plant and equipment

Repayment of Long-term lease liabilities

Free Cash Flow

2019 
post-IFRS 16

IFRS 16 
impact

2019 
pre-IFRS 16

2018

26,722 

27,466 

(19,042)

(19,511)

(2,075)

(2,441)

 548 

6,153 

 502 

6,016 

(2,096)

(2,235)

26,722 

(18,678)

(2,011)

 548 

6,581 

(2,479)

4,102 

(80)

(190)

3,833 

 186 

(712)

 12 

3,319 

(806)

2,513 

 364 

 64 

 428 

(383)

 45 

 45 

 4 

(74)

(25)

 7 

(18)

4,057 

(80)

(190)

3,787 

 182 

(638)

 12 

3,344 

(813)

2,531 

2019 
post-IFRS 16

IFRS 16 
impact

2019 
pre-IFRS 16

2,513 

(66)

 255 

2,323 

(18)

2,531 

(66)

 255 

2,341 

2,072 

(18)

2019 
post-IFRS 16

IFRS 16 
impact

2019 
pre-IFRS 16

4,825 

(1,534)

 137 

(409)

3,019 

 381 

(409)

(28)

4,444 

(1,534)

 137 

0

3,047 

1,703 

3,781 

 6 

(476)

3,312 

(73)

(886)

 22 

2,375 

(656)

1,719 

2018

1,719 

 22 

(74)

1,772 

1,569 

2018

2,988 

(1,411)

 126 

Reconciling measures of free cash flow to the consolidated statement of cash flows of LafargeHolcim

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

274

2019 
post-IFRS 16

IFRS 16 
impact

2019 
pre-IFRS 16

 304 

 995

2,089 

12,202 

4,148 

 28 

 5 

1,785

2018

3,063 

11,207 

13,061 

4,148 

2,515 

 28 

 5 

 66 

 26 

10,110 

1,299 

8,811 

13,518 

LafargeHolcim Integrated Annual Report 2019R ECO N CILI AT I O N O F N O N - G A A P M E A S U R E S 2 02 0 N E W IN DI C ATO R S

Million CHF

Recurring EBITDA

Depreciation of right-of-use assets

Recurring EBITDA after leases

Depreciation and amortization property, plant & equipment, intangible and long-term assets

Recurring EBIT

2019 

post-IFRS16 IFRS16 impact

2019 
pre-IFRS16

6,581 

(404)

6,177 

(2,075)

4,102 

 428 

(383)

 45 

 45 

6,153 

(21)

n/a

(2,075)

4,057 

275

LafargeHolcim Integrated Annual Report 2019276

LafargeHolcim Integrated Annual Report 2019PH OTO CR E DI T S:
Page: (Cover, 09, 11, 13, 56, 80, 160): Elisabeth Real

Page: (02, 06, 22, 25, 29, 30, 31, 39, 43, 49, 55, 57, 76, 140): Rüdiger Nehmzow

Page: (26, 35, 40, 51, 53, 61, 70): David Kuenzi

Page: (33): Anina Lehmann

Page: (59): Highbrow Studios

All other images copyright LafargeHolcim

A B OU T L A FA RG E H O LCIM
LafargeHolcim is the global leader in 
building materials and solutions and 
active in four business segments: 
Cement, Aggregates, Ready-Mix 
Concrete and Solutions & Products. It is 
our ambition to lead the industry in 
reducing carbon emissions and 
accelerating the transition towards 
low-carbon construction. With the 
strongest R&D organization in the 
industry and by being at the forefront of 
innovation in building materials we seek 
to constantly introduce and promote 
high-quality and sustainable building 
materials and solutions to our customers 
worldwide - whether they are building 
individual homes or major infrastructure 
projects. LafargeHolcim employs over 
70,000 employees in over 70 countries 
and has a portfolio that is equally 
balanced between developing and 
mature markets. 

More information is available on  
www.lafargeholcim.com

Ranked in the leadership  

band for 2019 for best practice  

in carbon disclosure

Carbon emissions targets 

validated as science-based  

in 2019

For TCFD-guided disclosures on  

our climate-related risks and 

opportunities, see page 63

 
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LafargeHolcim Ltd
Zürcherstrasse 156
CH-8645 Jona/Switzerland
Phone +41 58 858 58 58
communications@lafargeholcim.com
www.lafargeholcim.com

© 2020 LafargeHolcim Ltd

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