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.
We have introduced a new set of performance indicators designed to focus our business on creating value for our shareholders. At LafargeHolcim, free cash flow (FCF) generation and operating EBITDA are the central financial measures for success. Our aim is to combine superior cash flow generation with a strict capital allocation policy as this is a critical determinant of value creation in our industry.
The Group aims to have a run rate of free cash flow of at least CHF 3.5 to 4.0 billion per year. At the same time, we have committed to achieve at least CHF 6 per share free cash flow by 2018. We have identified a number of levers that are key to driving the cash flow increase including an improved operating EBITDA, the reduction of capital expenditure and the benefits of lower financial expenses and tax optimization.
This marks a significant inflexion point, as we move to our new model of delivering free cash flow, increasing our return on invested capital, and generating value for shareholders.
Our strategy is underpinned by five value-creating pillars including targets that are tangible and achievable.
- Strict Capital Allocation discipline: This is a key driver of value creation that results from our merger. We are committed to a solid investment grade rating, a progressive dividend policy and to returning excess cash to shareholders through dividends or share buy-backs (see chapter Create Shareholder Value);
- Commercial excellence: This transformation is about differentiation and capturing the full value of our products and services. We have already implemented concrete actions that will increase our targeted, customer-centric solutions, cross-selling, early project involvement and integrated offerings (see chapter Commercial Excellence);
- Synergy delivery and cost excellence: We will generate synergies of CHF 1.5 billion by the end of 2017 and at a faster rate than originally announced. We will also continuously improve our cost structure with a particular focus on fixed cost (see chapter Synergy Delivery and Cost Leadership);
- Lean capital spending: With our new asset base we are in a position to reduce capital expenditure well below the levels historically invested in our industry. We will change the mindset in the organization to grow and leverage business opportunities with a lean capex approach and will tightly manage working capital requirements (see chapter Lean Capital Spending); and
- Dynamic portfolio management to extract the full value of our portfolio: As part of our ongoing strategic review we are continuously examining where we want to focus our activities. We have committed ourselves to CHF 3.5 billion in divestments in 2016 (see chapter Portfolio Optimization).