Adjusted Operating EBITDA

Operating EBITDA adjusted by region

Million CHF

Jan–Dec 2015

Jan–Dec 2014

±%

±% like-for-like

Asia Pacific

1,565

1,769

(11.5)

(8.6)

Europe

1,264

1,537

(17.8)

(8.7)

Latin America

907

964

(5.9)

0.1

Middle East Africa

1,362

1,611

(15.4)

(4.6)

North America

1,183

1,065

11.1

12.0

Corporate/Eliminations

(531)

(508)

(4.7)

13.2

Total

5,751

6,438

(10.7)

(4.6)

Adjusted operating EBITDA in 2015 was CHF 5,751 and, on a like-for-like basis, operating EBITDA decreased by CHF 298 million or 4.6 percent. In North America, higher operating EBITDA was achieved compared to last year. In Latin America, operating EBITDA remained flat and the remaining regions recorded lower operating EBITDA. The foreign exchange effect also weighed heavily, reducing adjusted operating EBITDA by CHF 390 million or 6.1 percent. In 2015, the Group sold less CO2 certificates. The impact on operating EBITDA was minus CHF 70 million (mainly in Europe). The unadjusted operating EBITDA in 2015 decreased by 22.4 percent and amounted to CHF 4,645 million. The merger, restructuring and other one-offs of CHF 1,106 million significantly impacted operating EBITDA. In the second half of the year, the Group realized a total of CHF 130 million in merger related synergies which positively impacted operating EBITDA. In the discussion which follows, all comments about operating EBITDA refer to the adjusted operating EBITDA.

In Asia Pacific, operating EBITDA decreased by CHF 152 million or 8.6 percent on a like-for-like basis. The largest declines were recorded in China, Indonesia and India. In China, operations benefited from lower fuel costs, lower selling, general and administration expenses, as well as procurement benefits. However, China’s reduced real estate investment led to a decrease of operating EBITDA in 2015. Indonesia’s operating EBITDA lagged as prices declined due to delays in major projects and government interventions in pricing. Volume improvement was further slowed by the subdued performance of the real estate market and overall market contraction in 2015. In India, lower cement prices and subdued demand were the major causes of a drop in operating EBITDA. Partially offsetting these results, the Philippines reached its highest ever operating EBITDA thanks to strong volume growth and variable cost savings despite lower margins on imported cement and clinker compared to domestic production. In Vietnam, good sales performance and cost savings translated to an increase in operating EBITDA. Australia attained a higher operating EBITDA thanks to restructuring initiatives from the previous year even though lower net sales were recorded in 2015.

In Europe, operating EBITDA decreased by CHF 134 million or 8.7 percent on a like-for-like basis mainly due to Switzerland, France and Azerbaijan. Besides negative top line development, Switzerland also recorded less gains from the sale of CO2 certificates which amounted to CHF 22 million. In France, volume and price declines especially in cement and aggregate segments coupled with an increase in fixed costs, were the main causes for the operating EBITDA decline. Azerbaijan suffered from lower volumes and prices while costs remained stable. Positive operating EBITDA development was achieved in the United Kingdom, Romania, Greece and Russia. In the United Kingdom, the good economic environment and the robust demand in the housing market supported profitable growth. In Romania, the impact from higher volumes and lower variable and fixed costs were able to compensate for the lower sales of CO2 certificates. In Greece, operating EBITDA increased thanks to higher export prices and an optimized cost structure. Russia achieved higher operating EBITDA through cost savings and selling price initiatives while volumes were reduced due to competitive pressure.

Mixed performance amongst countries in Latin America resulted in a flat operating EBITDA for the region on a like-for-like basis. While most countries achieved higher operating EBITDA, Brazil, Ecuador and Chile remained below their prior year’s levels. In Brazil, lower volumes and prices coupled with higher electricity costs and high cost inflation led to a decrease in operating EBITDA. In Ecuador, the negative volume development outweighed the positive effects from the cost saving initiatives and higher prices. In Chile, the negative operating EBITDA development was mainly due to higher variable costs. All other countries in the region, in particular Mexico, Argentina and El Salvador, recorded an improvement. In Mexico, positive volume and price impacts were partially offset by higher maintenance and distribution costs resulting from larger transportation distances. Despite higher inflation driven costs, Argentina attained better operating EBITDA thanks to good top line performance. El Salvador improved its operating EBITDA thanks to higher volumes and lower fuel costs.

In Middle East Africa, operating EBITDA declined by CHF 74 million or 4.6 percent on a like-for-like basis. Iraq, Zambia, South Africa and Syria had negative developments in their operating EBITDA. In Iraq, domestic instability pushed both prices and volumes downward. This was partially mitigated by cost reduction initiatives. In Zambia, results were negatively impacted by lower volumes and prices coupled with higher costs due to an increase in power tariffs and strong inflation of fuel and raw material prices. In South Africa, new players in the cement market added pressure on prices while industrial performance negatively affected costs. No operation was possible in Syria in the full year of 2015. Operating EBITDA improved in Kenya, Algeria, Jordan and Uganda and other countries in the region. In Kenya, the volume increases more than offset higher maintenance costs. Algeria benefited from higher prices supported by the distribution optimization program, price improvements of specific products and a successful product mix strategy implemented during the year. In Jordan, good performance in ready-mix concrete combined with a cost reduction program in cement largely contributed to the improved results. Positive price and volume development supported increased operating EBITDA in Uganda.

The North America region improved its operating EBITDA by CHF 128 million or 12.0 percent on a like-for-like basis. Higher prices and volumes led to strong performance in the United States despite higher maintenance costs due to repairs and cost of an unplanned outage. The decline in operating EBITDA in Canada was caused by lower demand from oil dependent provinces in West Canada. East Canada recorded higher operating EBITDA driven by higher volumes altough higher fixed costs were recorded.

The shift in the regional weighting of operating EBITDA was most prominent in North America where it increased to 20.6 percent (2014: 16.5). The weighting of operating EBITDA in Latin America increased to 15.8 percent (2014: 15.0). The weighting of Asia Pacific decreased slightly to 27.2 percent (2014: 27.5). Middle East Africa represented 23.7 percent of Group operating EBITDA (2014: 25.0). The relative importance of Europe decreased to 22.0 percent (2014: 23.9). In 2015, the weighting of developing markets in the Group’s operating EBITDA decreased to 61 percent (2014: 63).