The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).
34. Contingencies, guarantees and commitments
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, employees, product quality, litigation, competition, and environmental matters. LafargeHolcim and its subsidiaries received or may receive in the future notice of claims arising from said warranties.
At December 31, 2015, the Group’s contingencies amounted to CHF 545 million (2014: CHF 1,037 million). Except for what has been provided for as disclosed in Note 29, the Group has concluded that due to the uncertainty with some of the matters mentioned below, the potential losses for 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 most material legal matters currently ongoing.
Previously disclosed legal matters with new developments since last reporting period
The Competition Commission of India (CCI) issued in June 2012, an order imposing a penalty in the aggregate amount of CHF 418 million (INR 27,919 million) on Ambuja Cements Ltd., ACC Limited and Lafarge India Pvt. Ltd. The order found those companies together with other cement producers in India to have engaged in price cartelisation. The companies filed appeals along with other cement producers against the order before the Competition Appellate Tribunal (Compat). On December 11, 2015, Compat set aside the order of the CCI for violation of due process and remanded the matter back to the CCI for new adjudication within a period of three months. CCI also allowed the parties in the meantime to recover the 10 percent of the penalty previously deposited with the CCI. Hearings before the CCI are ongoing.
On May 28, 2014, the Administrative Council for Economic Defense (CADE) ruled that Holcim Brazil along with other cement producers had engaged in price collusion and other anti-competitive behavior. The ruling includes behavioral remedies and fines against the defendants. This order became enforceable on September 21, 2015 and applies to Holcim Brazil, which has been fined BRL 508 million (CHF 127 million) as at the date of the order. In September 2015, Holcim Brazil filed an appeal against the order and filed a motion for interim relief related to the modalities of the collateral to be provided in support of its appeal.
The Korea Fair Trade Commission (KFTC) started an investigation into alleged price-fixing in the South Korean cement industry in April 2013. Following its investigation, the KFTC published a preliminary report which concluded that Lafarge Halla Cement Corporation along with other cement producers had participated in the alleged price-fixing and recommended a maximum fine of CHF 136 million (KRW 161,480 million). In January 2016, the KFTC announced that, whilst it had decided to fine six cement producers, the charges against Lafarge Halla Cement Corporation were dropped due to lack of evidence.
Previously disclosed legal matters with no developments since last reporting period
On December 31, 2010, in an extraordinary general meeting (“EGM”), the merger of our subsidiary Lafarge Brasil S.A. into LACIM was approved by the majority of shareholders of Lafarge Brasil S.A. Two minority shareholders (Maringa and Ponte Alta) holding a combined ownership of 8.93 percent, dissented from the merger decision and subsequently exercised their right to withdraw as provided for by the Brazilian Corporation law. In application of such law, an amount of CHF 19 million (BRL 76 million) was paid by Lafarge Brasil S.A. to the two shareholders. In March 2013, the two shareholders obtained a ruling from the Court of first instance ordering Lafarge Brasil S.A. to pay to Maringa and Ponte Alta the amount of approximately CHF 91 million (BRL 366 million) as at the date of the order. Following the unsuccessful appeal by Lafarge Brasil S.A. filed in June 2013, the Rio de Janeiro Tribunal denied admittance of a further appeal by the company before the Superior Court of Justice and to the Supreme Court in July 2015. The company appealed this latest decision directly to both the Superior Court of Justice and to the Supreme Court.
In late 2005, several class actions and individual lawsuits were filed in the United States District Court for the Eastern District of Louisiana. In their complaints, plaintiffs allege that Lafarge North America Inc. (LNA), and/or several other defendants including the federal government, are liable for death, bodily and personal injury and property and environmental damage to people and property in and around New Orleans, Louisiana. Some of the referenced complaints claim that these damages resulted from a barge under contract to LNA that allegedly breached the Inner Harbor Navigational Canal levee in New Orleans during or after Hurricane Katrina. The judge trail involving the first few plaintiffs ruled in favor of LNA in January 2011. In October 2011, LNA obtained summary judgement against all remaining plaintiffs with claims in Federal Court. A new case was filed against LNA in September 2011 by the Parish of Saint Bernard in Louisiana State Court. The case was moved to Federal Court which granted LNA’s motion for summary judgment against the Parish of Saint Bernard in January 2013. In a Decision in December 2013, a three judge panel of the Court of Appeals reversed and remanded the case back to the Trial Court for a Jury Trial (with no official timetable at this stage). LNA vigorously defends itself in this ongoing action.
At December 31, 2015, the Group’s guarantees issued in the ordinary course of business amounted to CHF 814 million (2014: CHF 380 million).
In the ordinary course of business, the Group enters into purchase commitments for goods and services, buys and sells investments, associated companies and Group companies or portions thereof. It is common practice for the Group to make offers or receive call or put options in connection with such acquisitions and divestitures.
At December 31, 2015, the Group’s commitments amounted to CHF 2,230 million (2014: CHF 1,350 million).