Concrete Products covers the issues that attract producers of ready mixed and manufactured concrete focusing on equipment and material technology, market development and management topics.
Issue link: http://concrete.epubxp.com/i/551927
www.concreteproducts.com August 2015 • 11 NEWS SCOPE BY DON MARSH LafargeHolcim CEO plan: Integration, innovation and "growth in the right places" In less than four weeks after its creation, LafargeHolcim Ltd. executed major asset sales per agreements with regulators in North America and overseas markets. Dublin-based CRH Plc closed on a portfolio of Lafarge S.A. and Hol- cim Ltd. cement, concrete and aggregate production assets in 10 coun- tries across the Americas and Europe. At a $7.2 billion enterprise value, the transaction was among the largest to date involving publicly trad- ed, global heavy building materials companies—trailing Cemex-Rinker and HeidelbergCement-Hanson ($15 billion–$16 billion; 2007) and Lafarge-Orascom ($12 billion, 2008). The acquired assets span nearly 700 sites, approximately 10 percent of which are cement, ready mixed concrete and aggregate plants, plus 18 terminals, under or tied to Holcim (Canada) Inc. They extend to the north a solid footprint CRH's Oldcastle Materials business enjoys throughout Great Lakes markets in the U.S. Globally, the transaction doubles CRH cement output; strengthens its ready mixed production profile; and, posi- tions the company as the number two and three player, respectively, in aggregates (behind HeidelbergCement) and overall heavy building mate- rials shipments (LafargeHolcim, Cemex). In a nod to 15,000 new colleagues bringing CRH worldwide headcount just past 90,000, Chief Executive Albert Manifold noted in a statement, "With their expertise and talent on board, combined with the strength of our existing employee base, CRH is a step closer to achieving our aim of becoming the world's leading building materials company. The businesses we are acquiring, which represent an excellent geographic fit with exist- ing operations, are all strong performers." Two weeks prior to the CRH transaction, Denver-based Summit Mate- rials Inc.—headed by a longtime Oldcastle Materials executive—closed on Lafarge North America's Davenport, Iowa cement plant, along with a West Des Moines, Iowa, and six Mississippi River terminals. In addition to cash payments—$370 million upfront, $80 million by year's end— Summit transferred a Bettendorf, Iowa, terminal to LafargeHolcim. That property is part of its largest holding, Continental Cement Co. LLC, into which the Davenport mill and New Orleans to St. Paul–Minneapolis termi- nal network are being integrated. The newly acquired operations complement Continental Cement's Hannibal, Mo., plant and St. Louis terminal. Following the transaction, Summit owns 2.4 million short tons of cement production capacity across the two mills, plus eight cement distribution terminals along the Missis- sippi River system. Notes Summit CEO Tom Hill, the acquisition "roughly doubles our cement capacity and firmly establishes our position as a top three cement producer on the Mississippi River." Lafarge S.A. and Holcim Ltd. executives unveiled a new global leader in heavy building materials in mid July, presenting the merged business—LafargeHolcim Ltd., based in Zurich with major administrative office in Paris—as an operator of 2,500-plus cement, con- crete and aggregate plants in 90 countries. "This day marks our entry into a new era," affirmed LafargeHolcim CEO Eric Olsen against the backdrop of an LH logo and "A new leader for a new world" tagline. To live up to the promise of a merged business, he outlined an immediate five- point action plan, plus key timelines through 2018 that investors, customers and employees will see from LafargeHolcim: Synergies. Delivery of €1.4 billion ($1.54 bil- lion) in savings over a three-year period, identi- fying best practices from both companies and tap- ping the "huge value creation case embedded in LafargeHolcim." Capital allocation. With presence in all relevant markets across the globe, management sees no need for significant capital investment. The LafargeHol- cim model will be one of low capital investment and very selective outlays. Underscoring such discipline is a chief LafargeHolcim metric: The company has about 400 million metric tons of cement production capacity, and in 2014 reported utilization at about 70 percent, or 270 million tons. The goal will be "growth in the right places." Commercial transformation. Earnings growth through product and service differentiation; leveraging research & development and market- ing & sales capabilities; and, an overall mindset of innovation. Integration. Creation of one new group with the same sets of belonging that existed within Lafarge S.A. and Holcim Ltd.—both companies sharing a deep passion for health, safety and sus- tainability, and possessing a high level of integrity. Health & safety. An overarching Lafarge S.A. and Holcim Ltd. value and "the center of our new company." The bulk of the savings in the synergies over a three-year horizon will be realized through reduc- tions in target areas including capital expendi- tures, €400 million ($440 million); procurement, €340 million ($374 million); selling, general and administrative, €250 million ($275 million); and, operations, €200 million ($220 million). With- in the 1,000-day synergies window, Olsen cites shorter term goals: structuring activities for each of the five points, 100 days; consummating all reg- ulator-driven asset sales and related transactions, 300 days; and, completing integration process and exhibiting tangible merger results, 500 days. The executive committee has a clear vision for LafargeHolcim, Olsen notes: A good corporate cit- izen; one that embraces diversity, values inven- tiveness and creativity, and is performance driven. Announcements on merger and integration related activities by country or region will be part of a Cap- ital Markets Day for investors in December. Real- ization of synergies he outlined suggests certain review of the LafargeHolcim North American orga- nization, owing to Holcim (US) Inc. and Lafarge North America headquarters offices in Waltham, Mass., and Chicago, respectively, and Lafarge Can- ada offices in Montreal and Calgary. OLDCASTLE PARENT, SUMMIT MATERIALS CLOSE ON OVERSEAS, NORTH AMERICAN ASSETS Eric Olsen's route to LafargeHolcim Ltd. chief executive offcer went through Lafarge North America and Lafarge Group assignments.