Management discussion & analysis 2015

2015 was a landmark year for the Group, with the creation of the world’s leading building materials company through the merger of Lafarge and Holcim. While local and global resources were successfully mobilized to realize this transformation, the global economy experienced a slower than expected recovery and a number of the Group’s key markets witnessed economic distress. Despite these headwinds, LafargeHolcim managed to increase cement sales volumes and realized merger-related synergies of CHF 130 million, exceeding its target for the year. However on a like-for-like basis operating EBITDA adjusted for merger, restructuring and other one-offs declined 4.6 percent versus last year.

This management discussion and analysis of the Group’s financial situation and results of the operations has been elaborated using unaudited pro forma financial information in order to provide meaningful comparisons and a more accurate view of the Group’s performance in 2015. Pro forma financial information includes, in addition to the merger: the latest changes in the scope of the divestments achieved in the context of the merger, the impact of merger, restructuring and other one-offs, the deconsolidation of the Australian business operated under a joint-venture and the effect of the divestments achieved over the course of 2014 and 2015. A detailed overview on the major differences between the financial statement view and the pro forma view is included in this management discussion and analysis.

The pro forma financial information does not take into consideration any purchase price accounting impact on operating EBITDA which mainly relates to inventory revaluation.

This management discussion and analysis should be read in conjunction with the shareholders’ letter and the individual reports for the Group regions.


In 2015, the global economy grew at a slower pace than expected. The recovery in some developed markets such as the United States and the United Kingdom gained momentum while developing markets witnessed mixed trends. It was a turbulent year as markets grappled with the challenges presented by declining commodity and oil prices, reduced capital flows, pressure on currencies and political upheavals. Spillovers from regional conflicts, increased insecurity and social tensions continued to weigh on confidence in the Middle East. Against the backdrop of subdued growth in India and economic slowdown in China and Brazil, the global economy took further toll. The appreciation of the Swiss Franc against a number of currencies, resulting from the Swiss National Bank’s decision in January 2015 to abandon its three-year old peg against the Euro, combined with the devaluation of several emerging market currencies over the period, led to a significant negative impact on the Group’s results reported in Swiss Francs.

Despite these challenges, the Group managed to mitigate the impact of a contracting economy in many of its key markets, thanks to merger-related synergies delivered in 2015. Synergies generated by the merger on the operating EBITDA level, amounted to CHF 130 million in 2015, exceeding the target of CHF 100 million, a target that will gradually increase to CHF 1,100 million by the end of 2017.

In 2015, on a pro forma basis, cement volumes sold were above the prior year by 0.2 percent or 0.5 million tonnes, whereas volumes of aggregates and ready-mix concrete declined. Aggregates volumes were down 0.5 percent or 1.5 million tonnes and ready-mix concrete shipments declined by 1.4 percent, or 0.8 million cubic meters versus the prior year.

The Group achieved net sales of CHF 29,483 million, increasing by 0.1 percent or CHF 27 million on a like-for-like basis. Unfavorable currency translation effect impacted the Group’s net sales by minus 6.3 percent or CHF 1,981 million, led by Europe (CHF 807 million, mainly in France and Russia), Middle East Africa (CHF 525 million, mainly in Algeria and Nigeria), Latin America (CHF 399 million, mainly in Brazil and Mexico) and Asia Pacific (CHF 301 million, mainly in Australia and Malaysia).

The Group incurred merger, restructuring and other one-offs of CHF 1,106 million in the year, which included merger related implementation costs of CHF 502 million, transaction and integration costs of CHF 278 million and items not related to the merger of CHF 326 million. In the following discussion, adjusted figures of operating EBITDA, operating EBITDA margin and cash flow from operating activities refer to the figures adjusted for merger, restructuring and other one-offs. On a like-for-like basis, the Group generated an adjusted operating EBITDA of CHF 5,751 million, 4.6 percent below the prior year, while the Group’s operating EBITDA margin decreased by 1.0 percentage point to 19.5 percent.

Cash flow from operating activities decreased by 19.2 percent or CHF 602 million on a like-for-like basis. The decline was primarily driven by the material impact of the cash effective merger, restructuring and other one-offs (CHF 784 million) and lower operating EBITDA in Brazil, China, and Switzerland. The adjusted cash flow from operating activities of CHF 3,334 million reduced by 1.6 percent or CHF 55 million.

The Group’s year-end net financial debt stood at CHF 17,266 million, below the CHF 17,500 million target communicated for the year.