The Pro Forma Financial Information for the year ended December 31, 2015 reflects the merger of Holcim and Lafarge as if the Merger had occurred on January 1, 2015.
It reflects a hypothetical situation and is presented exclusively for illustrative purposes, as such it does not provide an indication of the results of operating activities that would have been obtained for the period ended on December 31, 2015.
With the completion of the merger of Lafarge and Holcim in July and the creation of our new company, LafargeHolcim, 2015 was certainly an historic year. We are pleased to introduce the company’s first annual report and provide you with a review of the progress we have made since July. We will also highlight operational performance over the past year, and reflect on the outlook for the company and our industry more broadly.
Looking back on this year, our share price has been significantly affected, mainly by the volatility associated with emerging markets. More challenging conditions in some large economies like China or Brazil and a declining oil price environment fed investor fears about companies considered to be closely linked to these markets. We have taken decisive actions to further adjust and streamline our costs, notably in the most difficult markets. Recent developments show that despite challenges in selected countries, the demand for our products continues to be strong and to grow overall.
In LafargeHolcim, we have created a company that is the leader in its sector and we believe that we have everything we need to be successful. We have a best-in-class portfolio and our global footprint ensures that we are positioned in the top three companies in the sector in 80 percent of the countries in which we operate. We have a balanced portfolio of activities in mature and developing economies. We have leading positions in countries poised for solid growth in the short term, as well as those with a mid- and longer term growth potential.
In December 2015, we presented our plan for the new company at a Capital Markets Day in London. This plan reflects our commitment to change the game in our industry and shift our focus to maximizing free cash flow generation – which will be our key measure of success – based on delivering the merger synergies; driving commercial excellence across our operations; deploying strict capital allocation discipline; and optimizing our portfolio.
In 2015, our results were impacted by challenging conditions in selected markets, including China, Brazil, Switzerland, France, Azerbaijan, Iraq, Indonesia, and India. We also experienced lower CO2 revenues and a negative impact from foreign exchange movements during the year. At the same time, we saw encouraging growth in other markets including the US, UK, Mexico, Argentina and the Philippines and we experienced solid volume growth in the last quarter of the year which gives us confidence in the strength of our business.
We have clearly defined action plans to deliver the synergies, address our cost base in the most challenging markets and ensure we maximize the value we get for our products and solutions everywhere in the world. These plans are being rolled out with pace and we saw the first visible results in the fourth quarter of the year. With CHF 130 million of synergies achieved by the year end, we are ahead of schedule, and we are confident that we will further accelerate in 2016 and deliver the overall synergies ahead of our initial plan.
We also committed to undertake a review of our portfolio and launch a plan to divest up to CHF 3.5 billion of assets during 2016. This process is already well underway.
Leveraging the unique strengths of our new Group, we are confident that we will deliver value to our customers, employees, shareholders and stakeholders alike. With this in mind, we are proposing a dividend of CHF 1.50 for 2015 which we expect to grow progressively in the coming years. We are committed to maintaining a sound financial structure, in line with a solid investment grade rating. We are also committed to then returning cash to shareholders, leveraging cash flow maximization measures and strict capital allocation discipline.
Eight months after the merger, the integration is largely behind us and we now have the platform on which we are building our new Group. Our organization is in place and mobilized around clear targets and we have ensured that the interests of employees and shareholders are fully aligned, with a new best-in-class incentive scheme. We have defined the values of our new company which are the foundation for our company culture and provide a framework for the way we expect our employees to behave. Our foremost value is our absolute commitment to Health & Safety. We are committed to ensuring that both our employees and contractors can work safely on our sites and in the community. This commitment is embedded in the personal objectives of every employee in the company.
Sustainable development, another of our values, sits at the heart of the way we operate and is central to the future of the company. We are proud to lead the industry in CO2 reduction per tonne of cement and through Geocycle we offer sustainable waste management solutions in more than 60 countries which contribute to a cleaner environment, reduce the need for landfills and eliminate toxins. Managing waste is a problem for every community so we are able to add value to society while addressing an environmental challenge.
As the sector leader, we take seriously our responsibility to contribute to the evolution of building standards for tomorrow’s cities and infrastructure to ensure that they will meet the needs of an increasingly urban population. Our leading research and development capability means that we can develop new sustainable products and services, together with our customers and academic institutions around the world, to help us to play our part in shaping the future of sustainable construction.
Turning to 2016, we anticipate that it will be a year of solid progress towards our 2018 targets. We expect the markets in which LafargeHolcim operate to see demand growth of between 2 and 4 percent during 2016 and – with the majority of the integration behind us – we are well-positioned to take advantage of the opportunities ahead.
In closing, we made significant demands on our Board members last year and we would like to take this opportunity to record our thanks for their time and wise counsel throughout the merger process. We are also very grateful for the support of you, our shareholders, throughout a year of enormous change. Finally, we would like to recognize the employees of our company who continued to deliver our products and services to customers all over the world despite the changes that were taking place around them. Without their commitment, we would not have achieved the progress that we are reporting.
LafargeHolcim is now positioned to generate attractive cash returns to shareholders, and we are confident that we are building a company that offers exciting long-term prospects for all stakeholders.