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LafargeHolcim shares 2019 financial overview

Published by , Deputy Editor
World Cement,

At the midway point in Strategy 2022 ‘Building for Growth’, LafargeHolcim has achieved almost all 2022 targets. The company significantly strengthened its balance sheet and is now well positioned to continue growing profitably with strong market positions in all regions. On top, eight bolt-on acquisitions in the attractive Ready-Mix and Aggregates markets have been accomplished in 2019.

Net sales of CHF 26 722 million grew 3.1% on a like-for-like basis compared to the prior year, driven by good growth in Europe and North America, good price dynamics across all business segments and higher prices in most markets.

Recurring EBITDA reached CHF 6 153 million, up 6.5% like-for-like for the full year, driven by good pricing, improvement in efficiencies and a CHF 400 million SG&A cost savings programme. The recurring EBITDA margin increased from 21.9% in 2018 to 23% in 2019.

Record Net income of CHF 2 072 million increased by 32% compared to 2018 (CHF 1 569 million), driven by less restructuring costs, lower financial expenses as well as a decrease in the tax rate. Earnings per share were up by 29% accordingly to reach CHF 3.40 for the full year 2019 versus CHF 2.63 for 2018.

Record free cash flow generation of CHF 3 047 million (+79%) and strong improvement of cash conversion reached 49.5%, well above the target of 40%, as defined in Strategy 2022 – ‘Building for Growth’. This achievement reflects reduced cash paid for tax, financial and restructuring costs as well as improved net working capital.

Net debt was substantially reduced by CHF 4.7 billion (-35%) to CHF 8.8 billion at year-end 2019, reflecting the strong free cash flow and the positive impact following the sale of Indonesia and Malaysia. This resulted in a significant deleveraging with a ratio of Net debt to Recurring EBITDA of 1.4x1 (2.2x in 2018).

Return on Invested Capital (ROIC) was a strong 7.6% for 2019, close to the 2022 target of above 8% and compared to 6.5% in the previous year. ROIC is now above cost of capital thanks to higher profitability, lower tax rate and disciplined Capex.

In 2019, LafargeHolcim delivered a record performance and reached a new level of financial strength which puts the company in a good position for further profitable growth for the second half of Strategy 2022 and beyond.

In 2019, LafargeHolcim also made significant progress in reducing its carbon footprint. Compared to 2018 the company reduced its net CO2 scope emissions per t of cementitious material by 1.4%5 to 561 kg/t in 2019, nearly meeting its 2022 target of 560 kg/t.

Given this strong progress, the company has revised its 2022 target to reducing its carbon footprint to 520 kg/t by 2030. In 2019, the Science-Based Targets initiative (SBTi) has validated the targets to reduce the company’s global carbon footprint as adequate and consistent with the effort to keep temperatures below the ‘2°C’ threshold agreed at the COP21 world climate conference in Paris. Compared to 1990, the company had already reduced its directly attributable (‘scope 1’) net CO2 emissions per t of cementitious material by 27%, by far the leader among international cement groups.

In October 2019, Chief Sustainability Officer, Magali Anderson, was appointed as a member of the Group Executive Committee, underlining LafargeHolcim’s industry leadership in regard to social and ecological responsibility.

Recently LafargeHolcim introduced its first fully carbon-neutral concrete in Switzerland and Germany, demonstrating the company’s move toward building a global family of carbon-neutral products.

To keep up this momentum, the company has also revised its incentive scheme so that one-third of the Executive Committee’s performance share rewards is based on progress in carbon emissions, waste recycling and freshwater withdrawal. The health and safety component of the annual incentive scheme will also include a scorecard including both leading and lagging performance metrics. Both changes to the incentives scheme begin in 2020.

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