Holcim Ltd

Bernard Fontana – CEO Thomas Aebischer – CFO

Mike Betts – Jefferies Patrick Winters – Bloomberg News Paul Roger – Exane BNP Paribas Ian Osburn – Cantor Fitzgerald Robert Muir – Berenberg Bank Harry Goad – Credit Suisse Arnaud Lehmann – Bank of America Merrill Lynch Julie Andrews – Raymond James Yuri Serov – Morgan Stanley Gregor Kuglitsch – UBS John Fraser-Andrews – HSBC Muriel Fellous – Societe Generale Martin Huesler – Zurcher Kantonalbank Yulia Veselova – Credit Suisse

Thank you ladies and gentlemen and good morning, and welcome to the conference call. It’s a pleasure for me to provide you with a short review of Holcim’s performance during the first six months of this year, and to share the outlook for the current year with you.

I am sure that by now, you have obtained our press release, the report, and the supporting slide presentation from our website. I will therefore focus on the key developments, thus leaving sufficient time for your questions.

As explained also after the first quarter results, please note the following. Due to the changes in accounting policies explained in note 2 of Interim Financial Statements, the comparative information for the first half year of 2013 has been restated for each financial segment line item.

Let’s turn now to the half year results. Global economic growth in the first six months of 2013 was weaker than foreseen.

Construction activity was hurt by the severe winter, as well as the bad weather encountered in many regions. Demand fell short of expectations in India, Canada, Mexico and Morocco in particular.

By contrast, the economic climate was significantly better in the Philippines and Ecuador, among other markets. Holcim succeeded in increasing Group net income and cash flow from operating activities.

Europe, where results from our restructuring efforts become visible, and Latin America achieved better operating results, leading on balance to a higher operating EBITDA margin. It was primarily on account of India that Holcim was unable to exceed the previous year’s operating EBITDA growth on a like-for-like basis.

However, in the second quarter, the Group achieved organic growth in both operating EBITDA and operating profit. Thanks to the Holcim Leadership Journey, which is making progress above all on the cost fronts, the return on invested capital before taxes continued to increase.

Over 12 months, net financial debt decreased by CHF1.2 billion to CHF11 billion. In the same period gearing decreased from 62.6% to 57.1%.

Consolidated cement sales were down 3.7% to 68.6 million tonnes. Deliveries of aggregates declined by 7.2% to 69.4 million tonnes, and ready-mix concrete volumes decreased by 15% to 18.8 million cubic meters.

Asphalt sales were down by 8.3% to 3.3 million tonnes because of North America. The Group companies in Ecuador, Azerbaijan and Russia reported significant increases in cement sales, while deliveries of aggregates were at Holcim Switzerland and Aggregate Industries UK.

Upturns in ready-mix concrete sales were recorded by Holcim Indonesia, Holcim Malaysia, and Holcim Ecuador. Price developments in all regions continued to be positive with the exception of Europe.

On a sequential basis, domestic cement prices increased by 2.3% compared to the first quarter of 2013. Consolidated net sales decreased by 5.1% to CHF9.6 billion.

The 3.4% decline in operating EBITDA to CHF1.8 billion was largely attributable to the two Indian Group companies and also to Holcim Canada, Holcim Mexico, Holcim Morocco, and Holcim France. Group regions Europe and Latin America achieved better results.

On the positive news front, fixed costs were lower. The price environment was in many cases stable or slightly better.

Proceeds from the sales of CO2 emission certificates were down by CHF10.3 million in Europe. Consolidated operating profit fell by 3.3% to CHF 1billion, but on a like-for-like basis moderate growth of 0.1% was recorded in H1 2013, compared with H1 2012, with a growth of 5.4% in Q2.

Group net income increased by 23.8% to CHF760 million, and the share of net income attributable to shareholders of Holcim Ltd. rose by 47.4% to CHF571 million.

Although construction activities have slowed visibly in a number of markets since the Holcim Leadership Journey was launched, the program is on track. Thanks mainly to progress on the cost fronts, we are saving in logistics as well in fixed costs and in early gains.

The program contributed CHF376 million to consolidated operating profit in the first half of 2013, with CHF47 million stemming from the Customer Excellence stream. Let us now turn to the outlook.

Holcim anticipates an increase in sales of cement in 2013, but the Group doesn’t expect to reach the previous year’s levels in the aggregates and ready-mix concrete businesses. While Group regions Asia Pacific and Latin America are expected to witness higher cement sales volumes, Holcim is somewhat less optimistic with regard to Europe and Africa Middle East.

In North America, cement sales are expected to reach similar levels to the previous year. Turning to operating EBITDA and operating profit, the Board of Directors and the Executive Committee expect a further improvement in margins.

The Holcim Leadership Journey, which gains further momentum, will contribute to this development. Under similar market conditions, organic growth in operating EBITDA and operating profit should be achieved in 2013.

I will now propose you to go through the Q&A session.

Thank you very much. I had two questions please.

First one was a bit more detail to understand what’s happened in North America, particularly in Canada and with volumes down 7% in the first half, the confidence to go get back to even for the year, and I guess on that just kind of some indications of seasonality H1 versus H2 in North America in terms of volume? And then just secondly on slide 2, on the Leadership Journey, the procurement number looks a bit ferny compared with what we saw in – I guess which is mainly Q4, it’s down in H1, maybe a bit more explanation about what’s going on in those procurement savings?

Thank you very much.

Maybe Thomas will go on North America and I will continue on the Leadership Journey, yes.

Okay. So, thanks for the question, Mike.

To address the first question with respect to Canada, you know our footprint. I don’t think I have to explain you that we are on the Eastern side on Canada not on the Western side.

Clearly when you look at the volume development, some negative impacts on the slowdown of the building activities in the first half in the Toronto, Greater Toronto area, that’s where there is the condo market, but it’s still on a pretty interesting levels of activity and then we have some issues with construction-related workers’ strikes in the Montreal area, that impacts it to some extent the volumes. When you look at second half, clearly the second half traditionally have seasonalities weather volume-wise, it depends a little bit when winter schedules in this area in Canada, but we are actually pretty confident about Canada.

We have directed result last year on operating EBITDA level, and you may remember a part of it was because of a release of a pension fund provision in Canada. So, taking that out of the equation, our expectation is that we finished the year in Canada at very similar levels to last year on operating EBITDA performance.

With respect to North America, I don’t – maybe if I don’t answer your question, you’ll just ask me again. With respect to North America – sorry, with respect to the United States, the market has grown in cement nationwide, roughly 1.1%.

We show a negative development on volumes. So, if you look at our relevant markets, our markets we are present in, and you look at the statistics which we have until end of May, then these markets contracted roughly at 11.2%.

And we are down somewhere in the neighborhood of 6%. So clearly, we are pretty satisfied where we are.

We’re just not exposed to California. We’re not exposed to Florida.

So, overall the performance is in line with expectation. Actually, a little bit better than we thought.

I know when you compare it to the entire United States, it kind of falls off, but we have to compare footprint with footprint, pricing developed very nicely and we expect actually very sound result now in the second half of ‘13 as well.

Okay.

And the second question was – yes.

Just to follow-up, the minus 15%, how much of that was drag caused by the strike?

I do not have that information. It’s clearly an impact, but as you know how it works.

In the second half some of that work which was delayed will be picked back-up. So, we assume end of the year it should not have any significant impact.

Okay.

Before going to the procurement, maybe just one comment, the teams in the U.S. since a few weeks report strong activity now.

So, there is also this pattern that you can find on the geography in the U.S.

Right.

Okay. Back to the Holcim Leadership Journey in the procurement, the figure you see in procurement just reflects that there is a very strong regard between in the way we make sure, because Leadership Journey is measures to report effective operating profit gains in similar market conditions.

In the procurements, a lot of actions have been put in place. Teams have been staffed.

Processes have been put in place, and nature has been identified and teams who are there and I am confident that this work stream of the Holcim Leadership Journey should overachieve its tasks. So that’s where we are.

Maybe one more comment, Mike, what we are reporting here are achieved savings. What we are measuring internally within the organization is locked-in savings.

And the difference is what you see here is really realized in the income statement, and partially also of course on capital expenditure, because that also is a responsibility of procurement, but then on the other hand we are measuring what contracts have we signed and what have we locked-in, so we are pretty confident looking forward now that we are on track delivering based on the targets we have set out to achieve.

Understood. Thank you very much to all of you.

Thank you.

Thank you, Mike.

Hello, good morning. It looks like the Leadership Journey is on track or even better than expectations in some areas, but the wording or the statement today sounded slightly less optimistic on operating profit improvement overall this year.

So what’s making you a little bit less optimistic?

So first to recall, I think it’s clear for everybody that we take the EBITDA of last year, if you remember last year we had restructuring costs.

Right.

So our base line in the adjusted EBITDA is the EBITDA of last year plus the CHF239 million we have in the restructuring costs, and then of course like-for-like activities. So we’re confident that there is growth.

The fact is that in H1, we faced adverse market condition in India. And if I just take the EBITDA level of the Indian companies in H1 compared with last year, they are a bit more than minus CHF130 million under last year performance.

So you’ve seen we could compensate with other measures here and there, but this is a fact that makes that our expectation of growth, is not the same because this CHF130 million is there, and now we’re in monsoon periods and we need to wait after the monsoon. And it just reflects the difference that we acknowledged that this one, which is significant of CHF130 million is there and – but we are confident of course on the growth of our operating profit and EBITDA, and that’s what I could say.

And what are your thoughts about the Indian market, and for the rest of this year, you said there was a slightly negative impact in the first half, as you said impacted by Asia Pacific sales a bit. What are your expectations for the rest of the year?

So, if you take the photo of India market, we finished the total market last was 233 million tonne growing by 6% compared with the previous year. The REIT GDP in India now is at 4.9%, so it’s growing but at a lower growth.

And what happens is that market digests the differential of growth, and it’s digested with different patterns according to the regions. For example, in East region, where ACC is strong, they reported more than 6% increase on their volume, more than 1% in north, but in Southwest both ACC and Ambuja add on by 2% and 4.5% on their volumes.

And in this environment, we started the year with an average price of 200 rupee per bag. We pushed it up to 220 rupees, but we’re still two or five rupees per bag in average as under last year prices.

Then the monsoon came, early monsoon which is more difficult when you calculate the result of the – consider fair, but maybe not that bad if the monsoon is good. So now the indication I have is the monsoon is quite good quality, which is positive for the informal housing which is major market in India, and we’re coming at pre-election period which tends to be very good for activity on the roads and the infrastructure.

And now we are in the monsoon, and I think we need to see how the monsoon – how we are digesting with this differential approach.

Great. Thank you very much.

Next question?

Hi. Good morning.

So, just two questions, the first one on the outlook for price and volumes in Mexico. Obviously, the first half is little bit weak.

Do you expect a turnaround in the second half, and can you give us a bit more color on the outlook? And then the second one is on European price.

It looks like prices were down in a few countries in the second quarter, maybe including France and Russia. Can you say a bit more about what’s actually going on in pricing front and what the outlook is for European pricing generally?

Well maybe Thomas will start with Mexico and I will continue with Europe.

So Mexico, looking at the numbers we are currently roughly 5.1% as we have – I am sure you may have seen the slides already in detail, 5.1% down in price. And roughly – what is it?

8.7%, the number, 8.7% exactly on volumes. So, on the volumes side until year-end, we expect slightly negative volume trend, so we will remain negative.

We should pick our expectation, as we should pick something of what we have lost in the first six months, we should pick that up. So, single-digits negative on the volume side.

And on price, clear expectations now in the second half that we will improve the price performance, very difficult because of the certain – of the unstable environment, very difficult to predict whether we can come to a positive result. Our expectation more or less is that we will remain flat for the year on the price side with volume unfortunately slightly negative.

Now, as for Europe, the slightly negative evolution in price will affect mostly two countries; one in Belgium where you tend to have pressure of some imports, and that impact the price. And here, the initiative on costs that has helped us to compensate to mitigate these effects.

And the development of price in Russia. In Russia, the volume continued to increase.

There is a good level of activity in the Moscow area. If you remember where we’re reporting plus 30% plus 9% to 10% increase there quarter-after-after, here you have new entrants capacity that started, so there is a – it’s kind adjustment of the price.

And what I would say is that when there is an increase, it’s real increase and its decreased a bit intense than in other countries where we can see this kind of pattern in the countries, but the volumes are positive, and even in the current weeks, there are some record sales. As for France, the price continues to be resilient even slightly positive.

We report negative volume development during the first half of the year. I think it’s minus 30% in volume.

And I was certainly worried on the evolution of France, also there was a harsh winter. And I can see that since the spring, there is some more activity, and the volumes are higher – quite correct in the recent months and weeks.

So, there is a kind of a good resistance on the markets where we are. As for in Europe, for us one important state is restructuring of Europe.

So, it seems relevant. In France, the unit in Dannes has been stopped, effectively stopped a few weeks ago.

In Merone, the mills are now stopped. So with exception of Belgium, we need to continue some activities.

Most of the major initiatives we were planning are now in place. So, we can count on the effects, positive effects for us of those initiated in the coming quarters.

Okay, thank you gentlemen. I just have a follow-up just on Mexico.

I think in the first quarter you mentioned that there was a bit of slowdown in the infrastructure side after the presidential election, and there one of your competitors have been talking about that as well. Is that really the cause of what’s actually going on in that geography [ph], is there something more profound in terms of massive economic slowdown on the housing side?

No, I think you’re on the right track. Here it has a lot to do with slowdown in infrastructure looking at the detailed markets in Mexico much less on the housing market.

Actually, our expectation is as the – I mean we have various segments in Mexico and still it’s very important segment. It’s the bank market, it’s more residential housing and as the remittance from the – as the U.S.

recovers and more money is flowing back in, that actually should – that market would be better. That’s a pretty profitable marketplace but it’s mainly driven by infrastructure.

Excellent. Thank you very much.

Thank you, Paul. Next question?

Good morning, gentlemen. It seems that Holcim moved away from some ready-mix concrete and indeed aggregates business in the second quarter with a focus on cost leadership and margins.

Firstly, is that correct? And if so, which countries was that in, I presume mainly in Southern Europe?

Thanks.

So first, I would answer on ready-mix products. We have closed growth more than 100 RM mix unit.

It’s not a move away. We said though we had units with negative operating profit and negative EBITDA.

And without the ready-mix activity and but when there is a negative profit we want to understand, if we really need for the good flow of our cement products. And why we need this vision and so we have made a move.

It’s not the move out of ready-mix profit it’s to have the right movement on the ready-mix. In the aggregates, we faced negative developments in volumes.

And for example, in Australia which is the large country where we have the negative development of 10% of the volume. It’s not at all willingness to withdraw.

It’s just that the combination of an economy where the GDP went from 3.6% to 2.6% with the replace strength in the mining infrastructure activities plus negative weather condition which saw the negative volume development. We expect that to finish the year in Australia with a negative volume development, but much as pronounced as the one we faced in H1 because the weather pattern that was negative in H1 is no longer present.

So, in those countries we also deploy some cost measures, so we happen to deliver, even if we see those volume decrease, better results than last year or similar result than last year. And we see an improvement in the profitability in those activities.

So not at all withdrawal, but it’s another vision to the market condition and the willingness to generate much more profits from them.

Right, if I may – yes, we talked about in the Holcim Leadership Journey when we announced the program that we may sell selected assets, and so that footprint analysis is an ongoing process. I’ll give you an example, in the aggregates space, now we sold a quarry in the southern part of Texas in a market where we – that was the only activity we had, very difficult or almost impossible to network, and we sold it to someone else who could extract more value.

And so the base value proposition for Holcim was to sale that quarry. So these are very, very small transactions, and as Bernard had said, we are absolutely convinced that aggregates and ready-mix is a good business and you have seen now in the first half compared to the first half 2012, how we were able to actually improve the performance of both of these business segments.

And I would conclude these comments by a comment on U.K., where we could see now positive development of our volume there. And if even take the like-for-like we would see a growth of 8%.

So, here the combination of the efforts on costs, on marketing and sale has been done, that allow us to see a quite interesting turnaround of our results there. So, while we’re encouraged to continue in this way, we see that portion of costs, detail management of the business that we will continue and we are quite confident of those activities.

Excellent. Thank you very much.

And just then on the cement business. Obviously, we saw your margins struggle a bit more in that business.

Do you think that cost leadership or price increases would deliver an increased margin generally in the second half in the cement business, which seems to not show the obvious improvement from cost leadership with the other business? And actually just a very quick question, as well on Indian restructuring.

I think the fairly emotional reaction from the Indian press took a few people by surprise. Do you have any update you can tell us on that or any latest information?

Thanks.

I think there is a lot of underlying improvement being done in the cements activities. If you just take for example the energy work stream, we saw accelerations and reported gains, and maybe you see the high guidance of energy is also reduced.

So, it’s also linked with some market price. Just to give you an example, our substitution rate has increased by 2 percentage points compared with last year, six months, with most impact in Q2.

So many things are happening there and we are confident just as we carry what I was talking in the beginning in the impact of India where we have a negative development with the digestion of differential of growth in India that impacted our margins. But yes, we are confident to continue to improve that.

Okay, with respect – sorry.

There was a second question.

With respect to India, the second question.

Yes, so yes, just one comment before going to this, in India, so this was – in fact this is a bit more difficult market condition. We’re also continued to mobilize the teams to extract those synergies that are there and that have been extracted to their own through co-branding between the two activities and for common procurement activity there.

Just to give you an indication, in India, in most of the case we face logistic and distribution costs as high as the production costs. So the impact of our co-branding and optimization between the two companies is mature and that is what’s triggered.

And on the structure of the project, Thomas?

So, we were also surprised with the emotional reaction because when you look at the fact, and when you look at the detail of what was proposed, what we want to do in India, it makes absolute sense, market valuation, market prices are being paid for ACC respectively for a share. We have today a whole horizontal structure.

So, from that horizontal structure we go into a vertical structure. We increase slightly our holdings in what was proposed in Ambuja Cement.

And of course when you then look through it on a consolidated fashion, then we dilute some of our shareholdings indirectly in ACC. And of course for this dilution for the sale of ACC into Ambuja, the seller is getting paid a fair price.

So, we believe this transaction is in the interest of all stakeholders, definitely with all shareholders. You have seen that the independent directors in India are very reputable board members we have in India, well-known within the country have supported enormously the transactions.

And we believe as time passes now and as we talk to people, that this emotion will disappear and people are getting back to facts and we are very confident that we will get the necessary support. Now to create a structure, and to extract the synergies, what Bernard has talked to a little bit earlier.

Thank you. Thanks very much.

Thank you. Next question.

Yes, good morning Mr. Fontana.

I have a question. Which markets could you raise prices and what you expect in this return?

So in Latin America, I’m starting with this one, we could register on average 3.4% of increase on the price compared with Q2 last year. In Asia Pacific, there is a positive amount to, knowing that as I was mentioning at the beginning, we had a slightly negative development in India.

One important market for us in Latin America is Indonesia, where our prices could be increased in the context with some new capacities where we are on-stream. So, it slightly impacted our volume development, but the price level is satisfaction and it’s a good condition for us to start of our units of Tuban 1, the cement unit in September [ph].

Europe, I was mentioning the slight negative development in Belgium and Russia. The main impact of price increase is the continuous positive development that we face in cement in USA where the price increased (inaudible).

We had a bit sharp volume development that is explained by the weather pattern and the geography of our footprint, but now we see that the weather pattern is much better, very robust supply from the recent days. Finally, I would in my message say that if we take a sequential view, we see our Group level with 2.8% positive price development in cement on a sequential basis.

Now if I am back to aggregates, as local activity was small, the pricing for Europe, we saw a positive price develop of 2%, in Latin America of 8.8%, and in Asia Pacific of 3.9%. And even in North America we could see a positive development of 3% mostly, thanks to a 5% plus in the USA.

So up and downs but there are opportunities to improve the situation.

Next question?

Must have been answered, let’s take the next one.

Hi, good morning. I just wanted to ask a question really now understanding more of the dynamics between cost inflation or maybe…

Robert, we can’t hear you.

Can you hear me now?

Yes.

Okay. Yes, I just wanted to ask a question about the dynamics between cost inflation before the savings that you’ve announced and pricing.

Are you – obviously, you’ve got a negative volume impact. We see negative volume impact for the quarter given what you reported, and I just wondered are you – with your pricing moment, are you managing to offset cost inflation for the savings, and what’s your outlook for this going forward?

Yes, so we report out cost and our top line our global figure, so you can put in one line or the other, but if we go to the cost saving for example, the fixed cost saving, we report absolute cost savings, so it means that we are more than offsetting inflation.

So a different way to look at it, we have not really coming to – first of all as we talked about earlier, when you look at the cement – concentrating for a moment at the cement performance. Now we had, as you can see in the documentations price is up 1.8% volumes down 2.9%.

So, creating a pretty decent amount of inflow in a pretty difficult environment with respect with volumes, we were able to increase the price, lot of it has to do with all the initiatives we are doing, also with the Holcim Leadership Journey, and Customer Excellence, but at the aim – we are not really focusing on inflation or cost and then try to put that on to the price and capture it. We are trying to understand the value of our product in the marketplace, and have value based pricing in place.

That’s what we are pushing. It should be somehow independent from what actually happens on the cost base respectively on the inflation base.

We have – in the cement industry, it’s a little bit different in aggregates and ready-mix, but we have a very significant fixed cost book, and as volumes are contracting, as we have seen in the first half of 2.9% with the absorption of fixed costs we have a pretty big issue to compensate on price. And when I look at the different markets I think we were very successful doing this, maybe another or – with the exception of India clearly a contraction of price, with such a large organization i.e.

inflation environment of 2.6% is clearly not satisfactory, but we are working on it and we are very confident with the initiatives we are ongoing in India that we will get back to a positive development as well. Does that answer your question?

Yes, it does. That answered the question.

Just to know how you think about it.

And if you take India, even in the difficult environment take a company like Ambuja, they are able to have their production cost lower than the one of 2012. And so the (inaudible) all the measures that are in balance sheet now are extremely healthy, because when this digestion is over then we’ll be able to reset the win based on those measures that have been deployed there.

Okay, great. Okay, thanks very much.

Thank you. Next question.

Yes, hi good morning. I have two questions please.

Firstly, with regards to the underlying activity in the U.S. operations, is there any indication of improved demand coming from commercial and industrial build at the moment?

And the second question is with regard to your CapEx there. And obviously you’ve given us the guidance this year, but let me think about that CapEx bill going into next year.

Is it right to think that the CapEx bill is a percentage of sales actually begins to come down even if it increases slightly than absolute sense. How should we think about that dynamic for next year?

So Thomas, first take the U.S. and I will go to the CapEx.

I think if I understood your question right is, do we see activity on commercial construction? I think that was your question.

Yes, it is.

Clearly when you look at the drivers of construction at the moment and you look at the volume and the segmentation, it is really mainly driven by residential, that is pushing it pretty hard in certain areas. And then you have pockets where such as Texas for example, where you also see a commercial construction really taking up, but I would not call this that this is the national phenomena in the United States.

That’s really just pockets. The main driver now of the positive sentiments and volumes is really the recuperation of pricing – of prices in the housing markets, and the additional constructional of residential property, that drives it.

And as it normally happens in these cycles, the rest will follow commercial and infrastructure.

And as for – thank you Thomas, and as for the CapEx. We have two kind of CapEx; the maintenance and the expansion CapEx.

In the maintenance CapEx we are conscious on the particular maintenance CapEx, but our maintenance CapEx also include the end of some measures we have launched to support the Holcim Leadership Journey in particular in the energy to have some nice steep recovery, continue to increase our usage of alternative fuel and we’ll be finished then. Once this wave of measures is there, then of course we may report a lower value of maintenance CapEx.

And then we have the expansion CapEx, that refers to the pipeline of 14 million tonnes and 2.7 billion which mostly channeled in the East of India with 5.2 million tonnes and there as was mentioned in the beginning, we had 50 crores [ph] of our market and we need those capacity to continue to supply the market. We have an investment in Barroso, an investment in Guayaquil where we have cement capacity, but we need more clinker capacity to support a quarter or otherwise we will like to import, so which is something we want to continue.

Tuban is a big piece of our CapEx and here we’ve started and we see positive development in Indonesia. And finally for us to strengthen our position in the Volga Region, where we have good market developments.

So, we have no reasons to change view on the CapEx. Of course, we monitor all our financial metrics that may impact the speed of our CapEx, but there is no reason to change it today.

Thank you.

Next question?

Thank you. Good morning.

My first question if I may, just coming back on your guidance, I am trying to get a clear view on your potential EBITDA figure for the full year. You said we should restate for the structuring charges, so the CHF4.2 million would be your baseline, but should – I guess we should also restate for the big consolidation of Thailand and Cement Australia to about CHF170 million and then maybe some negative current effect, and then do you have gross profits for the year.

Do we understand correctly that you mean the big is actually like a little bit above CHF4 billion then some plus on the organic and potential I guess some negative on the currency effect in the second half?

Your calculation is very close to mine.

All right, makes sense.

Exactly, doesn’t it make sense? You cannot hold us accountable for an asset we no longer consolidate.

I of course agree with your proposal, and I will follow it. We will eliminate and take out of the equation Thailand which is disclosed in the half year report, and of course will be disclosed also in the next two quarters since this is a change in accounting policies.

And then we have to – we will of course transparently talk about the impact of Cement Australia where since 1st of April or to be very exact, since 28th of March, we no longer consolidating 100%, we are consolidating only the 50% joint operations, and then of course we have to adjust for any currency movements. And then it would be unfair to take out restructuring charges last year and not also this year as we compare ourselves to last year, so we will of course do this as well.

And you are right, then you will end up with a number currently depending on effects of the currency of course, which is somewhere in the neighborhood of slightly above CHF4 billion from operating EBITDA level.

Okay. And just on the actual organic growth for this EBITDA, I guess previously you were hoping maybe double-digit because of India in particular and few European markets.

Your qualitative guidance means something between low single-digit and middle-single digit growth. Do I understand it correctly?

We don’t enter in debate on the double digits or not double digits. We think we have knowledge that we had more than CHF130 million less just in India, with this digestion of the differential of growth of the market during the first half.

And in fairness, it’s not – we cannot compensate this one with all the other measures. It’s not exactly the same outlook because the fact is same.

And it’s no more like that.

Okay.

And if you take that into account, and I am assure you’ll realize all this, we lost for the first half compared to the first half ‘12 in India more than a CHF130 million on operating EBITDA level and we lost about 5 percentage points on the margin. So India is clearly our largest operation we have on a global scale, as a massive impact.

And then you look at the numbers now, and we are at very similar levels despite this very negative impact, so we are compensated that all with other businesses that are out in the world. And when it then comes to the outlook what Bernard had said based on the number and the calculation you have presented to me just a few minutes earlier, we still expect organic growth.

Okay. And if I could just, if you don’t mind just following up on Europe, because you mentioned the U.K.

which I suspect that some sort of rebound in the second quarter, but your margin overall for Europe was fairly strong despite the soft top line. So, could you give us a little bit more color about which countries are seeing the significant rebound in margin in the second quarter please?

We have works, our restructuring work a bit everywhere. So restructuring were conducted in Spain, in Italy, in France, even in Switzerland will have the cost, in Germany, in Hungary, in Czech Republic, in U.K.

in Belgium. So every country is really – of course Romania gives a support to that.

So every country is contributing. And in spite of the volumes that are still at one notch under we can show these improvements.

And so it confirms that the efficiency of the cost effort that are there, and they will continue. I have also often commented I think that Europe should be better if we – there can be some better consolidation in this industry with the swap or whatever but I think before being in the position together, you need to restructure on own activity, and we are well advanced in our homework and I think this opens opportunity to go through next stage of further consolidation if this is possible in our industry.

All right. That’s very clear.

Thank you very much.

Thank you.

Yes, hi. I had a question on Morocco.

Is it possible to have an update on the current situation? Maybe have the have level of price increase and volumes?

Thank you.

Yes, Morocco we faced a negative volume developments compared with last year on the first six months of minus 24%. If I just take the market, I think globally the market in fact went down by minus 21.7%, if I am correct, I don’t have the figure on my fingers but I had this one in mind.

And when a new producer came in to streamer with a capacity of close to 3 million tonnes. So we had a significant base effects compared with last year in the first quarter.

The market is difficult, but the teams are supported by all the efforts on the Customer Excellence they are launching, have managed to increase the price so that we are able to recall 5% price increase for the first six months compared with last year. And we could see in Q1 and even in the recent week, stabilization plus compared with last year performance.

So, hopefully we are behind the base effect of July, but it still needs to be confirmed, because it was a significant market decrease and we stabilized by new capacity coming on stream, but what I see today is a good control of the capability to increase price and very important for us to reduce the cost by Holcim in Morocco.

Okay, thank you.

Thank you.

Hi, good morning gentlemen. I have two questions, both of them on the Leadership Journey.

So the one thing, the first one, it may be a bit detailed so apologies for that. In the first half of this year, your revenue was about CHF9.6 billion and the operating profit CHF1.46 billion.

So, I calculate the margin about 11% slightly higher than last year. And then you reported for Holcim Leadership Journey, an improvement in operating profit of CHF376 million, okay.

So, if I try to calculate what your position would have been without those savings, so I subtract that from the operating profit, I get the operating profits of about CHF670 billion which means that the margin is about 7%. That feels a bit too drastic to me.

I mean you never achieved such a low margin even in the dusk of the financial crisis. Am I doing this calculation incorrectly or is this exactly what it implies?

And actually subsidiary, clarification to that, you report this obviously as operating profit. If I were to ask you what the impact on EBITDA was, would it be the same numbers or do you have some depreciation improvements here as well.

So that’s number one. The second part of the question also on Leadership Journey, so the biggest uplift in your cost delivery I can see is on the energy front, right?

You already mentioned that you increased the substitution rates across the business by 2% much of that happening in the second quarter. Could you give us a bit more details as to what exactly you did, where the substitution rates went up?

Maybe some reasons didn’t go up much further than this, maybe you did some other projects. Just to be curious here, what exactly you did to deliver such a big increase in the energy savings?

Thank you.

Yes, I would start by the second question on energy. That we have also to understand the answer to the first question.

So in energy we have numerous activities. The most impactful one we have as being the better use of the petcoke and this has been in India.

This also has been in Lebanon where we were suffering from high energy costs and now the introduction of petcoke has been deployed. Second was initiative on the optimization of the energy translate through that process.

We have some more works in recovery, some coming up stream, and some being still under construction. We have also an important increase in the substitution rate in the Lat-Am countries, however considerable improvement that has happened.

So it’s a combination of process activity, of substitution, of optimization and energy management in the ground, as well as on procurements and contracting activities. That’s the lowest we deliver those results.

Now you can make all the calculation on what happened. We have a very rigorous methodology to follow the development.

If there is negative development, as was my question in procurement we just show them. But if you just take India, we lost more than CHF130 million, and we didn’t do nothing in India at the same time.

So just having in mind that, Europe one notch under and some markets where we suffered like Morocco and Mexico was mentioned at the beginning of the year is quite significant, but those are not conditioned that would be forever. And that’s why we are confident in our figures of Leadership Journey and the methodology going forward.

I don’t know. Of course, I have no calculated your 7% number which you came up with, we may have to have a discussion a little bit in more detail in order to understand your calculation, but I think you’re on the right track.

However, when you take Holcim Leadership Journey impact into the income statement, we can now have a long debate what would we have done if we not have the Holcim Leadership Journey, we would clearly also have taken activity in order to compensate for the difficulties in certain of the markets, and we would not just have done absolutely nothing. The Holcim Leadership Journey and its benefit is a very, very structured approach in a few work streams which we diligently collect what impact it has in the organization, and we can now have a long debate what would have been without it, but it’s not that we would have done nothing.

It’s just that we are now reporting externally and internally diligently on all these different initiatives. And I would like to stress what Bernard has said about India, but I am not sure how you took that into account into your calculation.

We clearly have markets, which are dissimilar as we call them because we always talked about similar market conditions. When you talk about India and when you talk about Morocco and when you talk about Mexico, then clearly it’s not – the these markets are not at the point we thought the markets are going to develop when we were back in – when we set the targets back in 2012.

And that needs to be of course taken into account.

No, Thomas I agree with that. And if I take India into account which I didn’t initially, and if I add back the CHF130 million that you lost in India then the margin becomes not 7% but 8.5% and 8.5% is still very low but I hear you.

I mean we may need to take a deeper look into this, but on just quickly on energy, you said that largest or the most important initiatives that you took was this substitution of petcoke. Of the gains that you delivered in this stream, how much would you reckon petcoke delivered?

Was it half a bit or I mean what’s the percentage, just roughly?

We have in energy I think close to 150 initiatives in the different units. So, I had mentioned those one that are bigger, but what is characteristic of energy and there are initiatives that are spread everywhere.

We have also for a number of programs to optimize the energy between blasting and electricity when we grind the raw materials which is a systematic plan and that we followed. So do we find everywhere?

So, each specific initiative will not show you a considerable impact, but what I see in the value in this program with the systematic sustainable and structural approach of the product that delivers gain that are here not for one day or for one quarter of that year to stay. I’ll give you another example on the fixed costs.

When you close one factory, then you eliminate these fixed costs. It’s what I call a sustainable gain.

And that’s the spirit of this Journey.

We do not have the detailed information today on the fuel mix but as we do this every year, I am sure we will disclose the fuel mix at the year-end and then we can have a very detailed debate about what has changed in petcoke usage and other fuel exchanges in order to get these savings, but I think at mid-year with the seasonality and outages and whatever have you, I don’t think it’s very helpful to go into that level of detail.

No, I understand. I was just reacting to the statement that this was more important phase of the delivery, but that’s fine I mean if you don’t have the information, you don’t have it.

It’s the most spectacular that surfaces on the top of 150 initiatives.

Okay, thanks.

Thank you.

Thank you.

Hi. A few questions as well please.

First question is just on your – the cost settlement of the Leadership Journey. I think in the slides it has disclosed three-thirds which I understand is this year’s numbers, and last year you delivered roughly 1.30.

So roughly you’re cumulatively running at 4.50, so you’re sort of 45% done. Suppose the question really is, are you basically – you’re guided range implies you’re not going to deliver any incremental savings in the second half, am I right in understanding?

And there is a follow-on from that, it just seems the Customer Excellence part of the equation is sort of running significantly slower on the cost side just perhaps not entirely unexpected, but can you just maybe update us on the confidence that that will actually accelerate into the second half? That would be the first question.

The second question which really just maybe going back to the question on capacity and CapEx, and you obviously gave I think five projects totaling 14 million tonnes. And I think there was few rumors, I’m not sure whether you mentioned the Philippines for example within that, but just maybe sort of digging a little bit again on the CapEx, that Harry was asking earlier, whether you expect this CHF1.5 billion that you’re talking about this year to be sort of a high point?

So would you believe that that’s sort of your ongoing CapEx also into the sort of future years as best as you can see it today of course, to any further capacity expansions? Thank you.

Well thank you. So first I’ll touch up on the cost.

So we report cost plus Customer Excellence initiatives. And you mentioned that the work stream on Customer Excellence was lower, it was CHF47 million which is true.

We think with the metallurgy, with the previous question, we had metallurgy which is externally rigorous because we want to see those gains in the operating profits. And when you have some adverse market condition or whatever is the market or whether, it’s manageable to materialize those elements.

But we are committed to global figures, so that’s why we intensify the cost measures, which is easier in a way in more trickled market conditions. So the cost work stream is there, most stuff [ph] there I think we are on good track on fixed costs, but we can do more domestic spend that’s in procurement we measure what we get and also what we look, and we know that we should deliver much more.

Energy and AFR is on good track and will continue because we have some of the best returns on CapEx that are now ongoing and to support the next phase of improvement. And what I monitor carefully is logistics, it has much more issues.

There where the gains more difficult to grab that’s where the stake is probably the highest because our logistic deal is close to CHF5 billion and it’s something we did not naturally optimized but when you are in this type of industry, focus more on your factories and tend to be less focused on your distribution. So, this should continue, and there is no reason to stop because there is a target as we can do better, everywhere we can do better, we would do better and this needs to compensate a bit of negative margins that could develop on the Customer Excellence is there, but if the market and when the market grows not favorable the Customer Excellence will also have more wind over there.

As for the investments, you mentioned Philippine, it’s true that we have some authorization there in Bulacan, so it was mentioned already. It’s one of the projects we generally consider to continue to follow the costs we have in this area.

And in Philippine in the first six months of the year, we have more than 9% volume increase and the positive development on price. And Philippine is a good news for us, and we continue to see a positive development over the year.

So with respect to the question about whether you can use the CHF1.5 billion, this will very much depend also on the profitability of the organization. We have clear targets, and you know this remaining investment grades – staying in investment grade.

We are investment grade. Moody’s changed earlier in the year the outlook from negative to stable.

And this will be a very important measure in order to take decisions how much we are going to invest. So there is the market on one hand and there is the financial feasibility on the other hand.

So, it will not remain at one level, it will definitely be changed based on project, based on markets and the based on affordability to stay within that times or within that frame of BBB investment grade rating.

Okay. Can I have one follow-on on the cost cutting.

On the mathematics suggests there is not much left for 2013. Now clearly your answer, I sort of detected that maybe perhaps not the case because you still have logistics savings coming through and so on and so forth.

So, effectively are you saying you are pulling some of the cost savings that you were initially considering for 2014 to this year, or are you doing something incremental? There as a follow-on to that, can you maybe give us – you announced some synergies for India as part of the restructuring.

Can you maybe give us an idea of facing – I presume it would only starts next year with US$150 million I believe.

So, on the cost, it’s not that there is not much room, that’s why I call it the journey, because when you start to cut costs, you can continue, right. But once you have done this, the more you do, the more organization is trying to do it and the more you can do.

We still have to get the benefit of some of the restructuring measures. I was mentioning that we stopped the a unit [ph] in France, in Italy and it was just a few weeks ago.

So we didn’t see yet the impact of those initiatives in our costs. So, we have initiates that are there.

We have initiatives on SG&A and so on. So there was another...

And the facing for India. The projects has been announced now to have impact, I think after the Leadership Journey that is the impact, but once you know gain is there, I will wait.

And we have put out in place in organization which is now in place in India, and you can count on us not to wait and to do the things we can do.

Sure, I mean this remains the same what we have said in our press release on – I think it was on July 24, when we announced it. And nothing has changed in stand.

We are now focused on getting the emotions out of the transaction and getting back to facts that the first fit realizing it as quickly as possible, so our expectation is that everything will be certainly done sometime in the first half of 2014, and then of course we can start focusing on realizing on what we are trying to realize in order to achieve this US$150 million of synergies between these two entities. And we also talked about these US$150 million will be realized in a phased manner over a period of two years for the two companies.

Thank you.

Whatever we can do, we’ll do of course. I was in India two weeks ago to launch the procurement initiative there, and there was good traction.

So, it’s also a trigger for our local teams and there is a good answers by the team to do those challenges.

Thank you very much.

Thank you.

Thank you.

Thank you. Good morning, gentlemen.

First question is some clarity on the cost price equation on the cement side please. It seems that your cement price growth, if you strip that India was well over 2%, I’ll make it 2.3%.

So can you give an indication of where your global cost inflation was in cement please, versus that price evolution? And particularly with respect to energy, where your guidance is unchanged but you were CHF0.16 in Q1.

Can you say what that was in the second quarter? And then the second question is regarding the countries where you’ve been struggling in the first half, in India, Mexico, Canada, and even in the U.S.

We are now half way into the third quarter. Can you comment on the evolution of pricing and volume in those countries please to-date in the first quarter?

Thank you.

So I will start with the energy then Thomas will continue with the cost price question and then I will continue with the Mexico, U.S. and Canada.

As for the energy, our cost of energy in Q2 was over CHF0.147 per tonne down compared with CHF0.16 per tonne in Q1. So we finished the first half at CHF0.154 per tonne.

Last year we finished H1 at CHF0.164 per tonne. This year the gap between CHF0.16 to CHF0.147 is not linked to currency effects, so they are neutralized with – linked to the price and the specific consumption of energy.

Our initial guidance was of less than CHF0.17 per tonne and in this quarter while we’ve added to around CHF0.16 per tonne because now we are at CHF0.154, quite of the visibility and we believe we can reduce the guidance on our of cost of energy.

So, with respect to inflation, I answered earlier a question that it is not something really we track very closely, and tried to move price in line with inflation. We are trying to generate value for our customers, stakeholders and that’s how we drive value based pricing, but however just to give you a few implications, we calculate for many different reasons and also of course to trace costs.

We calculate the inflation for the Holcim Group, we had calculation weighted by net sales per country, and so if we look at this number by end of June, then we have an inflation somewhere of around 3.8% for the Holcim Group, where we do business. So these are old countries.

We have a few countries where we are only in aggregates, but they are of course included in my calculation here. So, we have price improvement in cement of – if you take out India, as you said somewhere around 2.3%, and if you take now my inflation number of 3.8% then you take India out which is by far the largest entity with the largest net sales contribution and then inflation rate of somewhere I don’t know exactly what the number is, I don’t have it in front of me, 5.5%, 6% most probably, then in the scale of the big numbers, I think we are back to the pricing.

But when you then on a global scale, but of course when you go then market by market we have significant deviations between inflation and price improvements. Look in the United States inflation rates and then you look at the price improvements in the U.S.

which is very, very positive, way above inflation which is a good thing. And then unfortunately, we have of course markets where we were unable if you want to take inflation as a measure to capture at least inflation.

So, long story short, I think we are virtually on par for the first six months of 2013.

As far the volumes development, as I was mentioning a bit earlier in the U.S. now we see a good level of activities that we reported recently, so there is a positive development on the volumes.

In Canada, (inaudible) country because here you do – you’re projecting limited number of months. And we were more impacted by labor strike, and so we have good pick up, but it showed time to deliver, so we are bit cautious, that’s why we guided the similar volume in North America.

Mexico, do you want to comment Thomas on the volumes?

I think that’s what I mentioned earlier on volumes. So, I don’t have anything to add.

Thank you. Next question.

Yes, good morning gentlemen. I have just one question really left.

Just wanted to make sure that I understand on the pricing, if you have any price increase schedule already passed in H2 really, and in which country?

Yes.

Thank you.

We have different price increases that are being developed. The main impact is currently in Indonesia where the price has been passed successfully, and now we will take advantage of this price increase.

We have the positive development of price increase in the U.S. Now the business is running with taking advantages of the more favorable volumes that comes from the activity.

We have this price evolution that we described in Morocco that is favorable now, and now we want to consolidate it and take advantage of it. And we have now in Columbia, a positive price development now, on cement of 3% that has been achieved and want to take advantage of it.

This being said we have also price increase happening in U.K and that if there is activity stick [ph] which is very possible would allow us to combine impact of the cost development with the favorable price development.

So, like as you understand when we talk about price, it’s not all markets like the United States where we put out price increase announcements and duly manage that in a very deliberate way across the U.S. or in market in the U.S.

But this is a bulk market, and Bernard has mentioned it, that’s clearly something where in the second half of this year we are trying to move price further in the right direction. We talked about Mexico.

And when we then about the country like Mexico or India which is another country where we clearly try to improve the pricing environment, there is not going to be price announcements, that is a retail market and it’s very, very dynamic, and it will be based on opportunities that we were pretty confident in the second half that we will the see price moving continuously in the right direction also in connection with the activities of the Holcim Leadership Journey.

All right, thank you very much.

Next question.

Yes, good morning. I’d like to come back to India, and the first, I guess very general question is while when the economy is growing at about 5%, cement market is doing so much worse, so that’s the generation question?

And then a question to your outlook for Asia, did you say that you say that you expect for the full year cement volumes to increase? Now you are at about minus 2% in the first half so it implies a higher growth rate in the second half of the year.

It is mainly due to expectation that India is going to recover, or where this increase in volumes coming from? And then maybe if you could give us again your view on the supply and demand balance in the India cement sector as you did the last couple of quarters?

Thank you.

Yes. So, to answer, you asked the question of why we have this (inaudible) in countries like India.

Although, extremely different country, extremely different pattern. I just give you the example of China last year.

China, you had a bit of slowdown of logistics growth and our growth was only – we don’t consolidate, it was actually 8% to 10% and as people are geared to the growth of capacity in place, so have an adjustment and immediately – you have some adjustments and the EBITDA went down by 25%. And as these adjustments is digested then this year, now back to volume growth and EBITDA up by 16%.

So, I don’t tell you it is a scenario for India, but it is the digestion of a differential of growth in a country where there is different ideas for growth, and this is what happened. In India, we had last year we were approaching an overcapacity of roughly 70 million tonnes mostly (inaudible) now we estimate that the overcapacity situation it would be pretty close to 90 million tonnes.

Most of it in the south where we’re almost not present and roughly 20 in the north where its less than 15 [ph] in a certain way and we reported an volume of 1.3% for the first half. Because here you have logistic area and the geography and the logistics are more difficult, we don’t see now pipeline of refocus coming, but these are in the process of being digested.

As far the guidance, yes, but we are – because this area is growing we’re also starting with digestion down when we look at retrospectively the digestion in India started in fact plus the previous monsoon and we started to have more difficulties in volume if you see the part of Q3 and Q4 last year and this is behind us. So all of those combined, yes, the guidance is clearly for growth in Asia, and other countries are delivering.

And would you say that for India in the second half, you expect above average growth compared to other countries in Asia or below average growth?

It would be really a different story than we were. I think Philippine is doing well, Indonesia is growing country.

In India, globally last year the growth was 6% in the cement market. This year with the beginning of the year, our teams did a bit less than 5% so that’s where we are I think right now.

But relatively it will be above average growth of course.

Yes. Okay.

Otherwise But the numbers wouldn’t add up.

Thank you.

Thank you. Maybe a last question?

Good morning. Just two quick questions on Morocco, and one on the U.S., if I may.

So, on Morocco, just to clarity the base, the overall market was down 2% in Morocco in 2012 according to the local cement association, so how that does that compare to your own market estimates? And then second related to this one, but more forward looking, if you could please comment on the informal housing in the country, and what you are seeing in this particular segment?

And then finally just on the U.S., if you could please give some flavor on the current trading in northern part of U.S.? Thank you.

So in Morocco, we want to be a bit careful because the company is listed now and we published the results I think in September. So, but basically yes, last year there was a slight move on the market that the major difference was the introduction of a new actor with 3 million tonnes on a market that is roughly less than 10 million tonnes.

So it was significant impact. Then the market itself went down in Q1, and we see it mostly by the fact that in Q1, 2012 there was a move of lot of not always authorized construction before taking opportunity to build now in the different environment that has stopped and that’s created a significant base effect this year compared with the last year.

And so I think – I saw some publication of statistic of minus 21% of the market. And now we see a kind of a stability, but I think our teams will give more details as they produce their results.

Thank you. And on the U.S.

if I may?

Thomas?

What was your question about the U.S. exactly?

Just the current trading in the northern part if you could give some color, assumption in the U.S. for instance?

You mean the cement situation?

Yes.

Okay. It’s actually very good, very strong.

You were specifically asking if I understood you right about the northern part of the U.S., and clearly I don’t want to sound like a weather forecaster or a weatherman but the weather you saw that in other publications, the weather was not easy in the first half in the northern part in certain parts of the United States are very strong. Ste.

Genevieve, if you particularly mentioned the plant. Ste.

Genevieve is by far the lowest production costs of all our plants in the United States, I would assume one of the lowest if not the lowest across the industry, significantly below $30 a tonne. So it all looks good.

Now we just have to capture the operational leverage in the U.S. when markets recover.

Thank you. Thank you, Thomas.

Thank you.

Thank you. Now we would like to close this conference.

I thank you very much for your presence and your questions. And if you have any further questions, please do not hesitate to contact our Investor Relations or Communications team.

Our next results event will take place on November 5 for the release of our nine months results. Thank you and have a nice day.