Holcim Ltd

Bernard Fontana - CEO Thomas Aebischer - CFO

Paul Roger - Exane BNP Paribas Julie-Anna Needham - Dealreporter Ian Forster - Bloomberg Jean-Christophe Lefevre-Moulenq - CM-CIC Securities Aynsley Lammin - Citigroup Mike Betts - Jefferies Yuri Serov - Morgan Stanley Robert Gardiner - Davy Research Glynis Johnson - Deutsche Bank Arnaud Lehmann - BofA Merrill Lynch John Messenger - Redburn Partners Gregor Kuglitsch - UBS Josep Pujal - Kepler Cheuvreux Arnaud Palliez - Raymond James Muriel Fellous - Societe Generale

Thank you. Ladies and gentlemen, 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 three month of this year and to share with you the outlook for 2015. I am sure that by now you have obtained our media release, issued earlier today, the report and the supporting slide presentation from our website.

Before I am going to elaborate on the results in more detail, let me please summarize the first-quarter highlights. Following the exceptionally strong first quarter 2014, like-for-like sales declined in all business segments.

However, based on its strong geographic footprint and its focus on prices, on disciplined cost management and previous restructuring, Holcim was able to improve its adjusted operating profit by 2.2%. Operating profit margin adjusted for merger cost expanded from 7.2% last year to 7.7% in the first three months of 2015.

Holcim continued to actively optimize its operational footprint in the first quarter of the year. The Group sold its entire remaining shareholding of 27.5% in Siam City Cement in Thailand via a private placement in capital markets.

For the sale of its entire remaining stake, Holcim received a total consideration of CHF651 million, which resulted in a gain before taxes of CHF371 million. Of the 27.5%, 24.9% were required by a member of the Jardine Matheson Group, a Hong Kong-based conglomerate, while the remaining 2.6% were purchased by a number of high-quality institutional investors.

Early in January 2015, Holcim also closed a series of transactions in Europe with Cemex. In India, Holcim received from the Foreign Investment Promotion Board, FIPB, the approval for the planned simplification of the Group's structure in India.

They have [in turn] sent the case with a recommendation for approval to the Cabinet Committee for the Foreign Affairs, the CCFA. Now, Holcim is awaiting final approval by the [CCA] in the coming weeks.

In March 2015, Holcim and Lafarge reached an agreement on the revised terms for their merger, taking another important step forward towards becoming the most advanced company in their industry. The boards of directors of both companies agreed on the new exchange ratio of nine Holcim shares for 10 Lafarge shares.

Eric Olsen was appointed future Chief Executive Officer of Lafarge Holcim, to take office as of the closing of the merger project. In February, Holcim and Lafarge announced that CRH plans to acquire the majority of the assets that were identified during the divestment process for an enterprise value of CHF6.8 billion.

These assets are mainly in Europe, Canada, Brazil and the Philippines. Following these important milestones, both companies are continuing to work intensively on preparing the closing of the transaction and the subsequent post-merger integration.

The transaction is expected to be closed in July of this year. Now, the operational results for the first three months of this year and they're summarized as follows.

Consolidated [peak] cement volumes decreased 5.5% to 31.2 million tonnes in the first three months of the year. While North America and Latin America increased cement volumes, the other Group regions reported declines.

Aggregate volumes increased 1.2% to 29.5 million tonnes, as the volume growth in Europe and North America was able to make up for the negative development in other Group regions. Ready-mix concrete deliveries reached 8 million cubic meters, a decline of 2%, which was mainly attributable to less overall development in Latin America, where the focus remained on high-margin applications and North America.

Asphalt sales were up markedly, by 14.9% to 1.6 million tonnes. Group cement prices increased by 4% in Q1 2015 period with Q4 -- Q1 2014, while aggregate prices were up by 4.2%.

Like-for-like net sales across the group decreased 1.6% during the first quarter of the year. Reported net sales were down 2.8% to CHF3.972 billion, and increases in North America could not compensate for lower sales in other Group regions.

Operating EBITDA adjusted for merger cost of CHF44 million was 3.3% higher than last year. The adjusted operating EBITDA margin increased to 16.0%.

Reported operating EBITDA decreased 3.9% to CHF593 million, impacted by merger cost and lower financial performance of Group regions Europe and Africa-Middle East. Operating profit adjusted for merger cost of CHF44 million was up 3.5%, while the adjusted operating profit margin increased to 7.7%.

Reported operating profit decreased by 11.5% to CHF261 million, and increases in the Group regions Asia-Pacific and Latin America were not able to compensate for merger costs and lower performance in Europe and Canada, where a harsher winter than in 2014 was noted. Net income significantly increased by 111.8% to CHF378 million, supported by the divestment of Holcim's minority shareholding in Siam City Cement.

Net income attributable to shareholders of Holcim was also markedly up, by 289.3% to CHF310 million. Cash flow from operating activities improved 12.1% to minus CHF214 million in the first quarter, which is traditionally lower than the others.

Net financial debt decreased compared to the first quarter of 2014 by CHF370 million and stood at CHF9.67 billion. Return on invested capital after tax stood at 8.1% and increased by 1.2 percentage points versus the first quarter of 2014.

This improvement was supported by a divestment of Holcim's minority shareholding in Siam City Cement. In the first quarter of 2015, the contribution of the Holcim Leadership Journey to the Group's operating profit amounted to CHF85 million.

The customer excellence [journey] contributed CHF21 million and the cost initiatives, CHF64 million to these results, this being on the good traction in the procurement and logistics sales. In addition, in our interim report, we show our results converted in euros compared with Q1 2014, and expressed in euro, group net sales adjusted operating EBITDA and adjusted operating profit increased significantly by 10.7%, 17.6% and 18%, respectively.

Let's now turn to the outlook for the business for 2015. Holcim expects for 2015 that the global economy continues its gradual recovery.

Key construction markets of Holcim in countries like the USA, India, Indonesia, Mexico, Colombia, the UK and the Philippines are expected to be main growth drivers. Europe overall should have a flat development.

Latin America will continue to face uncertainties in countries such as Argentina and Brazil but should overall show slight growth in 2015. The Asia-Pacific region is expected to grow, although at a still-modest pace.

Africa-Middle East is expected gradually to improve. In this environment, cement volumes should increase in all Group regions in 2015, with the exception of Europe.

Aggregate and ready-mix concrete volumes are expected to increase on a standalone basis and connected to the proposed merger with Lafarge. The Board of Directors and Executive Committee of Holcim expect like-for-like operating profit adjusted for merger-related costs to be between CHF2.7 billion and CHF2.9 billion in 2015.

Higher pricing and ongoing cost savings are anticipated to offset cost inflation, leading to a further expansion in operating margins in 2015. With this, I now propose to answer the question-and-answer session.

May I ask you to limit yourself to two questions each? Thank you.

Operator, you may please open the Q&A session.

Yes, good morning, gentlemen. So just two questions, then.

On the first one, it looks like your volumes at the start of the year were a little bit weaker than peers in Canada, Indonesia and France. I wonder if it's possible to comment on what's going on in those countries and also maybe say a bit about the outlook.

And then on the second one, just looking at the operating profit bridge, if you take out costs pertaining to merger cost, it looks as if the underlying price cost [on it] was broadly neutral. Am I reading that right, and what were the regional dynamics behind that?

So in Canada, first question on volume, and then -- good morning, Paul -- and then Thomas will go with the bridge. In Canada, we are a bit impacted by the winter in where we operate.

The activity is good in Ontario. It was traditionally a bit lower in the East Coast, but the activity has now been [favorable] since the last weeks of March, so there is no specific issue there for us.

In France, we had an exceptionally high Q1 in 2014, and you might remember, we are really out of the record with specific contracts. So our volumes this quarter, compared with past year, where on top of this there is a market decrease and a normal winter are down by 23%.

So more -- we lose more than the market compared with Q1, but basically, we expect to be in the Q1 on the global year. Finally, Indonesia, I think we will publish soon the financial results.

In Q1 in Indonesia, I think the market was slightly down by 3.5%. There is an expectation by the association that the market goes up by between 3% and 4%, roughly 3.5% in this year.

We were probably a bit under in volume in Q1, but there is -- we are confident to be there with the market and to enjoy the growth of this market. As for the bridge, Thomas?

Okay, morning, Paul. With respect to the bridge, if I don't answer your question, you will please follow up, but you were asking me about fixed cost.

Well, no, sorry. I was just basically looking at fixed cost, variable costs and other and then adding in your cost cutting, as well, but taking out the merger cost.

It looks as if the net of all that is about CHF130 million, which is exactly the same as your pricing dynamic, which is a bit of a change from what we've seen in previous quarters.

So let me try to answer it. So on the pricing, I think you're absolutely right.

I think we have shown in the first quarter very strong pricing dynamics. Bernard has mentioned it, in cement, 4%, and in aggregates, 4.2%.

If you compare this to inflation, we normally measure inflation based on net sales we are weighing in our different markets. So inflation was running around 3.6%, so if you take it globally, pricing is actually better than inflation.

We talked in the past about that we are not meeting inflation, so the first quarter is not a year, obviously, so we don't celebrate. We still work hard on this.

But with respect to pricing in aggregates and in ready-mix on a global scale, we are better than inflation. When you then look at fixed costs and the CHF44 million, merger-related costs are in fixed costs.

So when you look at fixed costs, you take the CHF44 million out. Then you have a growth in fixed cost of 1.1%, so negative growth.

So we are reducing, actually, fixed costs by roughly CHF16 million. With respect to variable costs, on variable costs, if you break that down into distribution and production, you have a distribution cost inflation of 0.4%.

You may remember, last year we really suffered from a lot of inflationary pressure on distribution, so virtually flat on distribution costs and 1.8% inflation on production costs. So we are clearly doing better, than in significantly better than inflation.

And you're also looking at others, and I think that's in the footnote under others, the main driver there of being negative is the additional depreciation. We are taking plants on-stream in Indonesia and in Ecuador, and in New Zealand, we have accelerated depreciation in anticipation of the closure of the plant in 2016.

Yes. That's [good].

Is it too early in the year, therefore, to say that now you believe that price increases will offset underlying cost inflation?

It's too early in the year, but what I can tell you, the trends, when I look at markets like the US, when I look at markets like Mexico, when I look at markets like India, the trend clearly is positive. And last but not least, when I look at the Holcim Leadership Journey, all these initiatives which we started back in 2012, they don't get traction overnight, and what I see in logistics, in procurement, but also in fixed costs and in other areas, we are getting more and more traction, and that's a very positive to not only beat inflation but virtually be -- our target is at the end of the day nominal savings in procurement.

And on the other hand is the customer excellence journey, focusing really on the cost, value-added product solutions, to get a better price and actually to beat inflation. But coming back to your question, I think it's too early in the year to celebrate.

Okay, that's very clear. Thank you very much.

Thank you, Paul, and I share with you it's early, but still, it's the main outcome of this quarter is this pricing development that we did not experience for a longer time a higher pricing than the inflation.

Yes, great.

Thank you. Next question?

Hi. Are you able to say how the competition approval is progressing in Canada and the US, and when those are likely to be approved?

And also, Eurocement has now come out that it supports the merger with Lafarge. Would you be able to say how -- what changed that kind of won over Eurocement?

Okay, with respect to FTC approval, that should actually come now any day. We are still expecting FTC approval before the AGM on May 8, so that's our expectation.

With respect to Eurocement, all I can say is that we had obviously a dialogue, like we had with all other shareholders, as well, and as you have seen in their statement, they I think now after having done their own analysis, they have understood that this merger is in the interest of all shareholders and that the merit of the merger is to create value. And under this premise, they have now come out with the conclusion to support it.

I was on the road show with Eric Olsen the last 1.5 weeks. We have been asked many times, or virtually in every single discussion about what's Eurocement's position, and we said the same.

We cannot talk for shareholders, but with our current knowledge, we expect them to support the merger, and that's now what they have confirmed this morning, which we obviously very much appreciate.

Okay, great. And are you able to say about the Canadian approval, please?

The Canadian approval, in principle, we have agreed to do what the Competition Bureau wanted, which is to divest the Trident plant, which has been acquired by CRH, which allows the supply of the West Coast of Canada. But as the Trident plant is in Montana, so in the US, I think the Canadian Bureau wants to synchronize their approval with the US competition authority.

That's why you should expect them to come at the same time.

Good morning, gentlemen. I have two questions.

You're still cautious on the cement outlook for Europe. So first question would be how long would it take for the cement demand in Europe to pick up again.

And then, a simple question, could you give us a bit of color how the oil price and strong dollar is affecting your business? Thanks.

So I will give the oil price to Thomas. As for the Europe, we are a bit cautious for two reasons.

One is that we expect the market to be down in France this year, and of course, not with the magnitude we faced in Q1, because last year was a year without winter, and the construction season started already in January, when it started only somewhere in March this year. And second is that we are cautious on the volume developments in Russia, because in our definition of Europe, there is Russia.

Now, if we take Europe, we compare with the Q1 2013, where the winter pattern was more or less the same, we registered plus 8% in our volumes. So, yes, we are cautious on the volumes on Europe, but we should not be over-pessimistic for this continent.

Thomas?

Yes, and with respect to the oil price, the oil price obviously has a direct and indirect impact in the business. The direct impact is obviously in the economies like India, for example, which are importing energy, so with every day the oil price stays low, obviously for domestic budget means more cash flow, a more positive cash flow and therefore more cash available for investments into infrastructure, so it's very positive for these countries.

And on the indirect impact, obviously, it is in logistics with diesel costs having an impact. We are using a lot of diesel.

The diesel bill in Holcim on an annual basis is somewhere around CHF1.2 billion, CHF1.3 billion. You take 50% of that being taxes, and then so obviously, if the diesel price, which is connected to oil, moves 10% up or down on CHF600 million, if it reduces by 10%, you have CHF60 million right there.

It's a little bit more difficult to answer the question in some oil-based economies, no? If you take one of our countries, Ecuador, for example, is one of these oil-based countries.

If oil price stays low, obviously, there is a slight impact in the cash available for infrastructure, but overall, from an input cost point of view, we are not depending direct on oil. Our input cost in our kilns is coal, is petcoke and alternative fuels, and there is only a relative impact, obviously, with respect to oil price.

So it's hard to give you any numbers. I think we have to understand the circumstances overall in the industry.

Yes, good morning. Bonjour.

I have two questions, if I might. First, Australia, the numbers are bad in volumes -- both in volumes and prices in aggregates and slightly negative in the volume and price for cement.

Where do we stand with the full-year guidance for this country and where do we stand with the EBITDA margin? Second issue, coming back to the Cemex -- to the operation with Cemex, what is first the impact of divestment in sales and EBITDA in Spain and the new consolidation of Cemex [West] in Germany, both in sales and EBITDA?

Thank you so much.

Thank you. Bonjour, Jean-Christophe.

Post our [efforts], yes, we report a bit less volume in Q1. There is also some rain that may happen, heavy rains from time to time in this time of the year in Australia.

But for us, the big news is that we have restructured last year, and if I just read the EBITDA of Holcim Australia in Q1, the improvement is over 50%.

Okay.

So it's a good story. It's just a shift of the business from the natural resource to some good activity in housing and infrastructure, so positive.

We expect a global financial -- positive financial development in absolute terms in margin, and even in volumes, but they are not exactly the same. So this is the first point, Australia.

Now, we closed the deal with Cemex, and this brings us a bit of different pattern. It brings us more aggregate activity in Germany.

More than 10 million tonnes more of aggregates will come there and less exposure to activity in the south of Spain. Globally during the year, we expect a positive contribution in the EBITDA, but de facto, it brings us higher exposure to seasonal patterns, to winter patterns, because we have less sensitivity in the south of Spain than what you get in Germany, and I evaluate this weight in Q1 to close to CHF70 million at the operating profit level.

So when I link it with the difference we have with the constant [sales of the distributive] change of seasonal patterns we have in Q1 with this change of mix of our activity.

Okay. If I just can add to this, this is absolutely correct, so that's very important to understand when you look at the result, CHF70 million negative impact due to the scope change in Spain, Czech and Germany, and Bernard has explained it, why this is.

So that's CHF70 million negative. On the other hand, on the sale of our assets to Cemex, this is obviously below operating EBITDA and below operating profit.

It's the gain on the transaction, and the gain on the transaction recorded in the first quarter is CHF61 million.

Hi, good morning. Just first question on Indonesia, wondered if you could just provide a bit more color on the margin outlook for Indonesia this year, obviously in the context of what prices and cost have recently been doing and what you expect them to do.

And secondly, just on Mexico, obviously a good performance there on volumes and pricing. Just wondered what's driving that recovery and how robust the underlying trends are in Mexico for this year.

Thank you.

So Thomas will go on Indonesia. Good morning.

And I will follow with Mexico.

Okay, so on Indonesia, I think it was a slow start into the year. I have to be very careful, or I can actually not say too much -- not that I don't want to -- but Indonesia is a public held company.

They will come out with the results today, and so I'm very happy to talk about Indonesia in much more detail after they have come out with their result. But we are expecting, volume wise, to recover for the rest of the year, but if we want to go into more detail on pricing and volumes, then we would have to wait until they have been out with their numbers in Indonesia.

So thank you, Thomas. As for our Mexico, so we continued the positive development in the country.

It was already mentioned in the past quarter. In Q1, the volumes increased by 8.2% compared with past year, and the prices increased by 5.2%.

So we also worked hard on the cost in the previous quarter, so we enjoy a favorable situation, and we expect this to continue. Our teams plan a growth of cement consumption in the country around 5%, even a bit more, so a good story there, with a good development on both volumes and price.

Yes, thank you very much. My two questions, please.

The first one, back to the waterfall chart, the minus CHF30 million. It looks to me that about 10% -- sorry, CHF10 million of that is depreciation.

The other CHF20 million, how much of that is kind of timing issues that might reverse later on in the year, because I guess inventory management might reverse later on the year? So that would be my first question.

And then the second one, on India, congratulations on finally getting the approval for merging the two businesses. I remember back in August I think it was 2013 you were talking about $150 million of savings.

Is that still the correct number, or in the last 18 months, have you either implemented some of those measures, or have you made any changes on that estimate? Thank you.

So thank you, Mike. Good morning.

So first, yes, the impact on inventory. Thomas?

I will [tell] the others.

Okay, so the depreciation of the CHF30 million is about CHF13 million give or take. Then you have an inventory movement, which you're absolutely right, that obviously then will turn, depending how we consume inventory, on how it's managed towards year end, is about CHF5 million.

And then you have cost of goods sold impact of, again -- of capitalized assets of CHF9 million. So CHF13 million depreciation, the inventory impact, CHF5 million, and Group cost of goods sold, CHF9 million.

And will that cost of goods sold change, or is that just there for the rest of the year, or is there any chance that that would change or reverse as we go through the rest of the year?

No, that will definitively change. That's all I know.

How much it will be, it will be obviously very difficult to say, but I think a good benchmark is to look into history. These others normally at year end are pretty small, the total amounts.

Obviously, what will stay is the depreciation of the new assets now, but as you know, Tuban, for example, we took into effect sometime last year. So that as we then go into the year that Tuban depreciation was already in there.

Understood, thank you.

Thank you, Thomas, and as for India, yes, it's true that the teams didn't do nothing during the past 18 months. And they grabbed some opportunities that could be done, but it has been relatively limited, and as we did in November, when we were guiding the future, we here confirm that those $150 million come on top from the formal approval.

Yes, morning, a couple of questions. First, on Brazil.

So you're saying you expect a slight decrease for the year. Could you quantify that a bit?

A slight increase, is that minus 5% or minus 1%? And price increase should be weak, as well.

If you could just tell us what your expectation is and what's happening on the market? And then secondly, turning to aggregates, you had some pretty good price increases or reported very high price increases in a number of markets, and I go UK, Germany very high, Switzerland, the US, Mexico.

Could you just tell us what's driving that, whether there is any common theme, or is it all different drivers, and whether there is much mix impact in those numbers? Thank you.

Yes, thank you. Good morning, Yuri.

So as for the pricing in Brazil, we experienced a price decrease of minus 3.9% in Q1, so we expect to be slightly negative, close to zero, because there is not a very good momentum in the markets. You see many constructions companies are also facing consequence of the corruption scandal that was there.

And we have never been -- not been optimistic already since a few quarters on the development on the year in Brazil, and we confirm this kind of trend. Still, Brazil is a strong country with lots of opportunities, and we believe in the future of the country.

As for the development of the price of the aggregates, you are right, it's a strong story. In the US, there have been continuous price increase, step by step, and it means that for the aggregates, in the first quarter, for example, we improved the price by more than 12% compared with the past year.

UK had strong activity. It was also step-by-step price increase, and now in Q1, they report plus 9.2% price increase.

In Germany, it's a bit different because now one of the businesses that was in the US, a [Yeoman] business in the UK has been acquired by a German company, and we I think report plus 44% price increase. This is more a shift of portfolio between two countries, and I think this is the special grades we produce in Glensanda that are potentially sold in Germany.

So it's a bit more of an internal shift. But maybe they would have also improved even better in the UK.

So globally, there is a good trend, and that is linked with the message we gave at the beginning of this year, at this meeting, which is we report an average price increase by at least 4% in aggregate compared with past year, and this is combined with sequential price increase also on the product.

So if I may add, Germany obviously is very small volume wise, so what you have to look at are virtually a few countries. You have to look into the US, 12.1% positive pricing.

This is very high volumes. Then, Canada is a big aggregates market, but obviously very small in the first quarter.

There we have virtually flat on pricing. Then you have the UK, 9.2% increase, also a very big aggregates market for us, and the last one is Australia, the negative 3.1%.

So if you add these all up, these are really the drivers who make the 4.2% positive pricing.

Good morning. Robert Gardiner from Davy here.

I was wondering, could you comment maybe a bit more on the market situation in India? So you've commented on you've received the approval.

So we've seen the result from ACC and Ambuja, where the volumes are well down, and that's put pressure, especially on Ambuja. So maybe if you'd just comment on what's happening there in the first quarter.

And second, maybe, would you give us an indication of sequential price moves, so you obviously have very strong pricing year over year. But sequentially, from Q4, where prices have moved and maybe in what countries specifically?

Thank you.

So I will start with India. We estimate that last year the market was at 247 million tonnes, with an increase of something like 6%.

There is of course overcapacity in India close to 120 million, 130 million tonnes, 70% in the south, close to 28 million tonnes is enough, which is a bit more new development, with more capacity in the north. In Q1, we saw a flat market, and our teams explained it by the fact that Q1 is the last quarter of the budget, federal budget, in India, and that the government was careful to manage the deficit, so they didn't launch infrastructure work.

The federal budget now gives a stronger push on infrastructure in the next two quarters, and they expect the steep development in this area. And they confirm growth of the estimate of the market this year by 5% to 6%.

Now, in Q1, we had again a price before volume policy, so we lost more than the market. There was also some new capacity that were coming on-stream next to some of ours, and roughly, ACC and Ambuja lost 9% of volume compared with past year.

But the importance for us is that they were able to increase the prices. So the price per bag in ACC on average at the end of March was at INR229 per bag, which is plus INR15 per bag compared with last year.

And in Ambuja, it was at INR225 apiece, so an increase of only INR3 per bag. So you see there is heterogeneity, original heterogeneity.

In the north, where there is a bit more pressure, the price went down by INR9 to INR10 per bag. In the south, the price surprisingly increased by more than INR60 per bag.

And east was relatively flat, and west showed an increase between INR20 and INR30 per bag. So things go in the right direction, not in the uniform way, but the company makes also a lot of effort on the cost.

One important thing I am looking at is also the EBITDA margin in India. This quarter in India, the EBITDA margin of Holcim was above our famous 20% that we were mentioning in different conference calls.

And this was achieved by both companies. So we expect we are positive on India.

We don't see much the impact yet, but now the petcoke in the country has reduced by 12%, which is a good indication, and for the first time, also, the [DSL] bill goes down by 1%, which is an additional good first indication for the further developments. Now, if we take globally the second [short] price development in cement at Holcim, which I think was also potentially one of your questions, there was a positive news, because quarter on quarter, Q4 on Q1, in cement, we see good weakness, the continued price increase of 1.8% in cement.

In aggregates, we show you a double-digit figure, so we must also be careful on the mix, because we are in winter, and I'm sure double digit is not really representative, but it's also a good direction.

Okay, and just -- sorry, one quick follow up. On India, previously, you'd given a kind of a guidance around EBITDA or EBIT margins for the full year.

Would you do the same for 2015, or do you have any indication as yet?

No, I don't give -- also, already, wanting to come back to above 20% already last year, so we have to wait one quarter more to confirm this one. But for me, India is a country where it should run at more than 25%, 30% EBITDA margin.

It might take a couple of years to go to such a high level of 30% plus, because here, we still have a relatively high overcapacity in the country, but clearly, things go into the right direction.

Right. And if I may add, clearly, our focus is not margin.

Our focus is return, and it's a little bit -- we are trying to be careful. We will talk about margin.

Obviously, margin is a very good operational indicator, but at the end of the day, we are there to create returns for our business. And at the moment, when I look at returns in some of the businesses, in India, we are talking after-tax return on invested capital of 6% to 8%.

That's clearly not -- with current levels of performance, that's clearly not what our expectations is. Returns is the focus.

Therefore, we have to work on costs, on structure and obviously also on price.

Hello. I just have one, actually, if I may.

This morning, we've heard from Lafarge that they've seen a strong pickup in sales in March, and I'm just wondering what Holcim may have seen. Have you seen anything that surprised you in terms of the March sales numbers relative to what you may have expected?

I know some of it may be related to the weak January-February, but I'm just wondering what kind of momentum is there.

Yes, and if we take you up, there was a winter in January, February, and we had -- and the season started only in March, and we made our results in March. Thomas, any comment?

No. I'm not sure whether your question is specific for Europe, but if it's specific for Europe, I think Bernard has given the explanation.

Obviously, we saw a pickup in March in Europe due to the winter patterns, but one month is not going to make a trend. We are -- when we look at our markets, we are positive about the US, very positive.

We are very positive about Mexico. We are positive about -- despite the difficult start -- of Indonesia.

We are very positive in the Philippines. We are positive in the UK, obviously positive in India.

We just talked about it. So the next months, obviously, we will make the result in the next six months, in the second quarter and in the third quarter.

Thank you very much. Good morning.

I have two questions. I guess the first one is related to some comments you just made, Thomas.

Regarding your guidance for operating profit of CHF2.7 billion to CHF2.9 billion, if I take the middle of the guidance, CHF2.8 billion, if my estimates are correct, that implies about 15% year-on-year growth compared to the base, which I believe to be CHF2.466 billion for 2014. Considering that in the first quarter, I think you delivered 2% growth, which market would you expect to improve, let's say more meaningfully?

Because when I look at the mix in Q1, I guess it's fair to say Mexico, US, UK, Philippines were quite strong. On the other hand, a bit of a slow start for India and Indonesia, and also some weakness in Brazil, France, maybe Morocco.

I would assume so. Which part of your portfolio do you expect to accelerate in the coming quarters?

That's my first question. And my second question, if I may, is a bit more personal for Mr.

Fontana. To my knowledge, I haven't seen your name on the future management of Lafarge-Holcim.

Does this mean it's potentially your last conference call as Holcim's CEO, and what could be your project for the future?

So I will answer this one. I like the Holcim Leadership Journey.

We work day after day. I focus on the performance of the Company and making sure the Company [enters] strong and is successful in this merger.

You will hear about me in due time. As for the year, I think Thomas will answer your question, but part of the answer is in the pricing situation we get out of the winter.

You should just take the US. We have increased the price by $11 per tonne.

So we don't get the full effect, but we know that the pricing sticks, and this would bring a strong development of our performance. But, Thomas, you might want to be more specific.

So I will not really go into the details about your calculation of the CHF2.8 billion average operating profit. That's a pretty obvious one, but when I compare with the first quarter, and looking at growth rates and where the growth is coming from for the rest of the year, I think that was your question.

Then, clearly, we expect an acceleration in Mexico. We expect a further acceleration in the United States.

We expect better results going forward, improved results, I better say, is in India. We talked about earlier Indonesia had a difficult start in the year.

We expect clearly a better performance now for the months to come. Very important also to understand is that we had a disappointing performance in the first three months in Canada.

This is partially due with the winter, obviously, in Canada, which happens there, as well. But when you compare the numbers for 2014 to 2015, the drag, really, on the North American performance, the US did very well and Canada was lagging.

We expect a significant improvement in Canada for the remainder of the year, and last but not least, we talked about Brazil. Brazil is not a huge market for us, but also in Brazil, we had a negative start, with very negative pricing, almost 5% negative volumes, and we actually expect the volumes situation in Brazil really to improve in the market we are.

We don't have a national footprint, as you know, and we also expect the pricing situation as compared to the first quarter to improve. So these would be the few markets I would expect better performance.

Hi, good morning. Two if I could.

One just follows on from the commentary there on Mexico and improvement expected. Could you just flesh out what has been happening there?

Because, obviously, cement, consistent volume and pricing growth. The aggregate numbers just seem very strange in terms of the big volume drop and the dramatic increase in price.

Could you just give us a little bit of flavor on Mexico in that regard? And the second question was a financial one.

Just when we look at the bottom line for the Group for the quarter, obviously, you had the gain on Siam. You had the gain on Cemex, so CHF432 million.

Can you just give us an idea of what that was post-tax, so we can look at the underlying net income for Holcim? Those are the two, thank you.

Thank you, John. So I will start with Mexico.

If you remember 18 months ago, we faced a decline of volume and price by 9% on the market, and also for Holcim. And since the middle of last year, we have a kind of comeback on pricing.

Volumes have stabilized, and pricing are starting to come back, and this trend continues on the pricing. There are some -- so what was explaining this was the fact that the government was announcing, yes, a lot of infrastructure, oil development and so on, but also was saying that they would change the tax law to finance all those programs.

And there was uncertainty, and this uncertainty has implied a drop in the housing market. Now, the tax law has been fixed, and confidence is back again.

Also, you have a lot of remittance coming from the US, and this drives the volumes and the price up, and we expect the market to continue with the price-volume development probably of 5% plus, and that the positive pricing dynamics will continue. That's how I read what's happening in Mexico.

And sorry, the aggregates kind of volatility in terms of the strange movements, are they particular to some projects or to different product mix.

No. In aggregates, it's also linked with our management of quarry.

We restructure. We have in depth work -- the same in [our mix] -- in depth work to rationalize, to keep the business profitable, and it's also a driver of improved profitability in Mexico.

Fantastic. Thank you.

And maybe if I can add, John, on aggregates, let's also understand, we are talking about extremely small volumes. Now, we're talking about 92,000 tonnes in Mexico in the first quarter.

So there it has to do with -- Bernard has explained, but let's not exaggerate it. It is 92,000 tonnes, because we restructured the whole aggregates business in Mexico in the past.

For your first question I guess you had is the after-tax number of the Siam City, and obviously, there is also an accounting impact, as you may appreciate, so there is on one hand the transaction, which we have fully disclosed, and there is also a release of accumulated translation adjustment, so but when you take the net profit out of this, it's roughly CHF270 -- CHF270 million, and then on Wellington, Wellington is CHF61 million, so it's roughly CHF50 million. Sorry, Cemex is about CHF50 million.

Fantastic, and sorry, just one supplementary, just because I think for people out there, particularly around the interest line, Thomas, there was obviously a big foreign exchange loss in this quarter. For us all, when we're thinking about the full-year interest bill, has the volatility around the Swiss Bank move, effectively, is that recognized in that 42, or do we all need to think of an ongoing impact in terms of the remainder of the year?

I know this complicated by hedging or lack of it in some of the countries where the debt sits, but just for us all to have an idea on the interest line, possibly.

John, that's right. You're asking me a very difficult question, and if I could project exchange rates, then maybe I would not sit here.

But let me try to answer the question differently. First and foremost, our interest expense, as you have seen, the interest rate has further declined.

We have now a cost of debt of 4.6%. That's in my view a very positive news.

The foreign exchange losses we have mainly in Brazil. As you know, in Brazil, we are building a new plant, Barroso plant, and partially of it is financed in local currency, and part of it is financed in US dollars.

So the main impact, we have about a CHF30 million loss, foreign exchange loss, in Brazil on this US dollar financing on the Brazilian balance sheet. Now, you asked me about what do you expect.

I'm sure you have better assumptions than I have, but I would guess -- I just was sitting yesterday together with one of the currency specialists, external party, and they seemed to believe that the devaluation is virtually done in the first quarter, and we should see stable to slightly improved situations in Brazil. I mean, your guess, I'm sure, is as good as mine.

Okay, but it's quite localized, Thomas, so it's not something that we need to be thinking around as an ongoing [conflict]. It happened.

No, no, no. Let's be very specific now.

There's nothing to read into this. This is Brazil, where we cannot finance all of it in local currency, and we didn't want to finance it in local currency for cost regions, looking at interest rates differential.

And the other one is Indonesia, the financing of the Tuban plant, which is the same story. Not everything in Indian rupees -- sorry, in Indonesian [rupees].

We did also there some financing in US dollars.

Good morning. I've got a few questions.

One is a technical. I read in your disclosures that you will be deconsolidating Cement Australia.

Maybe you could provide us with the perhaps full-year sales and EBITDA and EBIT numbers. I think there's only a quarterly disclosure.

Wanted to get a sense there. And then can you confirm on the asset swap.

I understand quarterly it had a negative impact, but can you just give us perhaps pre any synergy factors the impact on net sales and EBITDA? So for the full year, if you just took 2014 as a sort of benchmark, if you had applied it last year?

And then so those are the technical questions. The more underlying question I've got is on two countries specifically, which obviously came under pressure, which was Ecuador and Azerbaijan.

Obviously, those are oil-exporting countries. Can you give us a sense what you expect there going forward and whether you think the declines you've seen reflect a slowdown in oil and gas-related activity, or is it perhaps a little bit of an aberration in the first quarter?

Thank you.

So I will give to Thomas the deconsolidation of Cement Australia. First, the impact of Cemex, I don't remember it, because we had two other [indiscernible] slightly positive before synergies on the other line.

Just the CHF70 million I was mentioning was a seasonal effect, with a very muted production in January-February, and we already see a significant reverse, positive reverse, in March. As for Ecuador, so Ecuador, yes, there is a bit less volume, even more than a bit, minus 14%.

We believe it should be in the range of minus 10%, something like that, in the year. The prices are slight here, but still now we have started our unique Guayaquil 3, which is a kiln that allows us to avoid to import clinker.

And in fact, in Ecuador, our EBITDA and margin have improved in Q1, and I should continue to confirm its improvement in the rest of the year. In Azerbaijan, there, the market is also facing some competition by two new competitors who entered the market.

There, we saw a reduction of volume by minus 15%, 16%, and I think we expect to be in this range. The depreciation of the currency also is the kind of protection against the imports, and what I would see is not further depreciation, but possibly an upside because of reduction of the import of the country.

Here, we reduced our EBITDA and our margin in this environment.

Thank you.

Deconsolidation?

Well, the deconsolidation, maybe one more word, and maybe it has already been said. But on Ecuador, we clearly expect an improved performance in 2015 versus 2014.

We no longer have to import clinker. We now have our own clinker facility in Ecuador, and that's also already taken into account the volatility in the market.

With respect to Australia, the deconsolidation of Australia, I will give you the numbers in Swiss francs, so I will give you ranges, because obviously it depends what the currency exchange rate would be. So on net sales, the impact is somewhere between CHF370 million and CHF390 million.

Our participation and an operating profit, somewhere between CHF70 million and CHF80 million, the impact. Maybe you've also asked why there was an IFRIC decision, IFRS change, which we have to implement starting April 1, 2015.

We then will obviously have to restate the numbers. It is no longer looked at as a joint operation.

You know the situation in Australia. We have a joint operation, together with Heidelberg, where Heidelberg and Holcim, we are 50%, 50% owners of the cement operation, and then both of us have independently a large downstream aggregate and ready-mix operation.

And the more than 50% of our output in cement goes into the downstream business. This is no longer considered to be a joint operation.

This has to be now considered technically as a joint venture, and therefore equity accounting will have to be done. So, bottom line, we'll zero impact, but obviously, we'll have an impact on net sales and operating profit.

And as an estimate of about CHF100 million EBITDA Swiss franc about correct, as well?

That's about correct, yes. That's a good number.

Yes, good morning, gentlemen. Two questions.

The first one is on the gap between selling prices and cost inflation, which is overall positive. But specifically on Europe and India, was it also the case?

And my second question is on India, on the volumes. You said the market probably flat in Q1.

You did minus 9%. Just to understand, what was exceptional and that you believe that will disappear about that underperformance in the next quarters compared to the market performance?

Thank you.

So thank you. If I take India, ACC improved the price compared with past year by about 6.6%, and Ambuja improved by 3.8%.

We see an increase of manufacturing cost between 3% and 4% according to the Company, and the SG&A is a slightly negative development in Ambuja and a bit positive development. So they go in the right direction.

The key thing for us to follow is the evolution of the distribution cost, and in some cases, we have the right way. We don't control, because we have some price hikes, so that's why I was commenting also that I was starting to see a good trend with the [DSL], having the [DSL] going down by minus 1%, because that's a big piece of our cost.

But step by step, we for the moment see the thing going in the right direction. So what happened in Q1, our team really played more price before volumes, so when you do that, sometimes you push a bit more, a bit less, so we lost a bit more volume, but we expect -- ultimately, to go with the market.

There was another?

Well, I think the other part of the question, if I understood it right, was Europe, whether inflation and pricing -- whether we have a positive delta. On Europe, as you see in the material we have made available to you, we have in Europe a negative price development of virtually flat, of 0.5%.

This is only Europe which is negative, slightly, and Africa-Middle East. So I take 0.5%.

I don't have really the numbers on a regional basis on the cost side. We have almost a deflationary-type environment when I look at some of the cost structure, so I would -- I really cannot give you the details, because I don't have them in front of me.

But if I just look at the number, I would assume that there it's a negative delta, so we have a little bit more cost than we have obviously a price.

Okay, thank you.

And in Europe, the effort continues. Our teams are currently implementing a shared service to rationalize the SG&A cost, and so they will continue the dynamics, too, as long as the price momentum is not that strong to mitigate this barrier of cost effort.

Yes, good morning. Just on the German market, what is basically the outlook?

Q1 last year was very high. Q2 and Q3 were very depressed.

You have now bigger position on these markets following the deal with Cemex, so can you elaborate a bit about what kind of trend you expect on these markets?

So, globally, our team expects the domestic cement demand to remain flat, which is a quite good development for us. We expect possibly a higher domestic sales volume for Holcim Germany in 2015 on the back on infrastructure projects in northern Germany.

We expect them to start in spring, early summer, so you should see at that time. And of course, we have this introduction of a new portfolio, and here there's a work to extract further synergy for us.

So, globally, it would be in a relatively stable market a positive financial development.

And regarding the prices, and can you also maybe quantify a bit the synergies you're expecting?

So I think we're focused on the synergies we expect.

Sorry, I forgot.

From our deal. It's between EUR10 million and EUR20 million, if I remember well.

And as for the prices, relatively flat, and then you could see we had a general effort on aggregates, which is more local business and usually, here we tend to have a bit more pricing power.

So if you look at cement now in Germany, if you talk about pricing, obviously, we have a change in footprint, as you know. You referred to it.

So in pricing, we would expect slight positive momentum. In our old footprint in Germany, we are slightly -- we are virtually flat, if you really look at what we have published after the first quarter.

But for the full year, we should see improvements in our old footprint, and obviously we will show like-for-like numbers, and then we just started with the new organization what we took over from Cemex, so we will then give you more details. But in the old footprint, you can expect slight price improvements.

Yes, good morning, gentlemen. So I had two questions.

My first question was on the Philippines. I wanted to understand why you had a lower number in volumes than, for instance, Lafarge, because I see you have a 4.8% growth in volumes, when Lafarge was about 12%.

And my second question will be on the Africa contribution to the Africa-Middle East contribution to EBITDA. I wanted to -- I was trying to understand what happened, exactly, why it was down on a like-for-like basis.

Thank you very much.

Good morning, Muriel. So in the Philippines, we are virtually full, so we have -- starting in Mabini a grinding station that we are -- by the way, bought to Lafarge before the development of the merger with a potential of 1.1 million tonnes.

So here, the tradeoff with the margin and activity with low margin trading that we have, but the market is good and things go in the right direction now. In Africa-Middle East --

Would you be able -- sorry, Bernard. Would you be able to grow further your volume now with the grinding station in Philippines.

Obviously, with the merger it will be a different story, but how would it work now as a standalone?

Yes, yes, we could go further, because it's on the jetty, and it is a kind of isolated place, where we can have access to further volume in better economical conditions. So yes, there is a positive momentum in the market.

Thomas?

Yes, we also have -- Muriel, we also have a de-bottlenecking project running at the Bulacan plant, so it should increase, which will increase the clinker capacity as well. So we will -- clearly, this is a very important market, a very interesting market, a growing market, and with the terminal, with the de-bottlenecking, we will be able to clearly grow very profitably.

The aim is not growing with the market. The aim is profitable growth, and with the de-bottlenecking program and with the Mabini Terminal on a standalone basis, obviously, we will have that capability.

Okay.

And as for Africa-Middle East, the main impact we got comes from Lebanon. I see Lebanon as a nice country with nice weather, but in fact, they had a very tough weather in January.

I think the market was down by 38% to 40%, so that a little bit obviously put pressure on volumes and to some extent on price. And I think that this is behind us, and this market is now recovering.

As for Morocco, we have to be a bit careful, also, because it's a listed company. The market is not growing, so there is a bit adjustment here and there.

You may have a quarter a bit lower, a quarter a bit higher, but it seems they are accustomed to have stable if not always improving performance hereafter, and that's what I see for the full year.

Thank you, Muriel. So with this, I would like to close this conference call now.

If you have any further questions, please do not hesitate to contact our investor relations or communications team. Our next reporting event will take place on July 29, when we release our second-quarter results.

Thank you again for your active participation, and goodbye.