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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Reduction in freshwater withdrawn per ton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.
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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.
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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.
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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
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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.
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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.
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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,
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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
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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.
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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
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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.
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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.
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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.
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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.
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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).
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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.
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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.
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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.
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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
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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.
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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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F I N A N C I A L S TAT E M E N T S
CO N T I N U ED
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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F I N A N C I A L S TAT E M E N T S
CO N T I N U ED
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
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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
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
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
6.6 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
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
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
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
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
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 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
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
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
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
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
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
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
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED
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
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
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
F I N A N C I A L S TAT E M E N T S
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.
222
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.
223
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
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.
225
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
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.
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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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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.
228
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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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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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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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.
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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
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
• 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
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 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
F I N A N C I A L S TAT E M E N T S
CO N T I N U ED
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
248
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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