The magazine
Transcription
The magazine
Lafarge 2005 exploring moving contributing realizing the world on the move forward in our professions to a sustainable world Lafarge’s unique potential C onvinced that the search for performance goes hand in hand with well-being and harmony, we want to share our conviction with all those with whom we interact on a daily basis, our customers, shareholders, employees and partners, as well as those who participate in and follow economic and social development. Crescendo, to be published biannually, is Lafarge's new magazine. It is the platform for us to present the challenges that we face. Halfway between an annual report and a brand magazine, Crescendo will show Lafarge and its environment as they are today in a perpetual state of change. Each issue will highlight our economic and technical performance, along with our innovations, results, and research. To this end, Crescendo will draw on the foresight of those who help renew our world view and on our ability to build an improved and sustainable vision of everyday life on our planet. The Group is entering a new era. The launch of this magazine reflects that change, and it reminds each of us that our expectations and demands for excellence are the continuous driving forces behind Lafarge. Our role as leader is to explore the world as it evolves, to move our activities ever forward and to contribute to the creation of a more sustainable world. contents 02 Message from the Chairman 04 Interview with the Chief Executive Officer 08 The new management team exploring the world on the move 12 Tomorrow's cities | 16 New needs | 20 New materials | 24 New passions | moving forward in our professions 30 Innovation | 34 Operational excellence | 38 A truly multi-local strategy | 42 Enterprising management | contributing to a sustainable world 48 Banda Aceh, Indonesia | 50 Tetouan, Morocco | 52 Rion-Antirion, Greece | 54 Harbin, China | 56 Woodmead, South Africa | 58 Radauti, Romania | 60 Paris, France | 62 New York, United States | realizing Lafarge’s unique potential 66 The Group | 68 Key figures | 70 Cement | 74 Aggregates & Concrete | 76 Roofing | 78 Gypsum | 80 Organization of the Group | CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 0 1 message from the Chairman A year of change PA G E 0 2 | L A FA R G E | APRIL 2006 | CRESCENDO L BERTRAND COLLOMB, Lafarge Group Chairman afarge Chairman Bertrand Collomb revisits the tremendous developments achieved by the Group over the past few years, and talks about the rapid pace of change at Lafarge and in its environment. Lafarge has undergone a major transfor- I would also like to take the opportunity to applaud the mation in the last five years. From the remarkable achievements of Bernard Kasriel, particularly acquisition of Blue Circle to the more recent his work in formalizing methods, organizing the sharing of move into China, our Group has successfully know-how and laying the foundation for tomorrow's growth. taken on many new challenges. Thanks to his determination, Lafarge became one of the first To accompany this growth, all of our employees – from the newest hires to our longest-serving colleagues – have been mobilized around the Group's values over the past two years. A large effort has gone into establishing the conditions necessary to achieve our aims. Together, we have reaffirmed our priorities: to put the customer at the heart of all our efforts, to deploy European companies to obtain Sarbanes Oxley certification. Today, we can be proud of the quality of our internal controls. Beyond the significant regulatory requirements, this project enabled us to accelerate the standardization of our information systems and to strengthen our internal processes, thereby allowing us to streamline our multi-local organizational structure. our performance culture in order to increase and improve Our environment is in a perpetual state of change. We must what we deliver, and to develop the skills and the sense of not only pay close attention to the world with each passing responsibility of each individual. day, but we must also anticipate and act wisely to contribute I have confidence in Lafarge's ability to tackle the new challenges it has set for itself. For I know that the Group is backed by talented, hard-working and committed teams, a strong brand and quality products. to the creation of a sustainable world. Our Group is deeply convinced that progress is only of real significance when it is shared. Our humanist values are not only in step with our demands for ever greater performance; they are the primary condition for these, Despite a difficult economic context of exceptionally high energy prices and raw material costs, the Group has demonstrated its growth potential, albeit imperfectly, in its our raison d’être. In our Group, the exchange of ideas, debate and openness to the world are considered to be sources of strength in and of themselves. 2005 results. The increase in our share price since the beginning of the year indicates that the stock market has begun to appreciate our true potential. We are now, more than ever, involved in the environmental management of our operations and quarries, accompanying local communities in their efforts. We are equally committed In this context, as planned with Bernard Kasriel, Bruno Lafont took hold of the reins of the Group's management on January 1, 2006. I welcome his arrival and I am pleased with his determination to implement the changes needed at this stage to pursue the Group's development. With the Group's teams, Bruno Lafont will be able to realize Lafarge's enormous potential, to promoting more sustainable methods of construction. Our role as leader is to promote continual progress in our activities and to contribute to the creation of a more sustainable world. I believe in the future, our new management team and the potential of our Group, which, I am certain, will strengthen its role as the world leader in building materials. while reinforcing the focus on growth in earnings per share ■ for the benefit of our shareholders. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 0 3 about us new momentum for Lafarge B runo Lafont became Chief Executive Officer of Lafarge on January 1, 2006, following a long career within the Group. He presents his vision and strategic plan to give the Group new momentum. What did you do to prepare for the position our current organization to make it more responsive and of Chief Executive Officer of Lafarge? responsible. The transformation is ongoing and the new BRUNO LAFONT | Over the past two years, I have spent organization will be 100% efficient by the end of the year. more than 200 days visiting the Group's operations around At the same time, I launched a bid to acquire the shares of the world, assessing our strengths and areas where we Lafarge North America held by minority shareholders. Our could improve, and exchanging ideas with numerous management style is now resolutely results oriented, with employees. I also led the Leader for Tomorrow program tighter cost controls and aimed at achieving operational to mobilize the Group's 80,000 employees. This program, excellence in all areas. which was launched by Bertrand Collomb in 2003, focused on our goals, our values, our performance culture, and In February 2006, you presented a new strategic our customers. It provided me with a very accurate picture plan for the Group. Can you give us brief summary of the Group and a better understanding of the amazing of it? potential of our portfolio of businesses and geographical B. L. positions. I have great faith in the future of our Group transformation the Group has undergone over the past five and a very clear idea of the challenges we must now take years to unlock the considerable potential of our current on to become the undisputed world leader in building portfolio of assets and extract the corresponding value. materials. This means being the most innovative, the best Lafarge, which practically doubled in size with the acquisition in performance, the best in the sector. of Blue Circle, has achieved remarkable international growth | We are going to take advantage of the major in plasterboard, taken significant positions in fast-growing PA G E 0 4 | You put a new organization into place when you were emerging economies, overcome hurdles in its environment, appointed CEO. What impact do you expect it to have? and gained new momentum in China. Today, our strategy B. L. | I decided to form a tighter Executive Committee to consists of extracting the extraordinary potential from accelerate our decision-making process, improve our our portfolio of assets, our geographical positions around efficiency and have a maximum impact. I intend to simplify the globe, and our industrial know-how to create value for L A FA R G E | APRIL 2006 | CRESCENDO BRUNO LAFONT, Chief Executive Officer of Lafarge CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 0 5 about us our company and our shareholders. We are going to extract Furthermore, we are seeking to promote more sustainable the potential from our existing business portfolio to generate construction methods. The focus is on developing new organic sales growth in excess of 5% per annum. To this end, products and new solutions to reduce the ecological footprint we will pursue growth through capacity expansions and of buildings. All of our employees are involved in this effort. acquisitions, in order to strengthen our market share, We are working closely with the entire construction chain, accompany the development of our markets and participate as exemplified by our partnership with architect Jacques in the consolidation of those markets, while respecting strict Ferrier in the design of an environmentally responsible criteria in terms of profitability and maintaining a solid tower building. financial structure. You emphasize safety. Why is Lafarge focusing How important is innovation? on this? B. L. | Innovation has to be one of the engines of our strategy. B. L. | Safety is where our performance culture and our long We are seeking to increase our lead over the competition by humanist tradition cross paths. It is of utmost importance taking greater advantage of the power of our research and in our industry. We are already the best in our field, but of our capacity to launch new products that add value for we have an even more ambitious goal to achieve the level our customers. For example, Agilia® is a range of self-placing of the world’s safest industrial groups. It is a key part of our concretes that is unique in the market. It is a perfect example performance programs and it must remain an absolute of the success of our vertically integrated model and our priority for all the Group employees. Safety is a precondition combined research in Cement, Aggregates & Concrete, of operational excellence and key for a Group which places and Admixtures. It is a product that also contributes to people at the heart of its concerns. progress in construction, because it offers architects new possibilities. Furthermore, its results are promising. What are your main objectives? Launched in 2000, Agilia® currently represents 2% of sales B. L. | Our priority is to extract the full potential from our and 10% of income in our Concrete business. In 2005 alone, current portfolio of assets. I have set a strict cost reduction Agilia® sales increased by more than 25%, and we expect its objective, which by itself should boost operating margin contribution to income to double again by 2008. It is a by one percentage point by 2008. This is a minimum. Beyond tremendous opportunity for growth and an example that that, our performance programs are collectively a should be followed and replicated. considerable asset for achieving greater earnings. “ My priorities are clear: Increase value for the company and enhance returns for our 242,000 shareholders” PA G E 0 6 | L A FA R G E | APRIL 2006 | CRESCENDO “ Lafarge has considerable potential. I have great faith in the future” yearly average growth of 8% in net earnings per share and an increase in return on capital employed. Beyond 2008, we will reexamine how these objectives might be increased. We have also proposed an immediate 6% increase in the dividend to the Board of Directors, as well as an end to scrip dividends to avoid diluting earning per share. I will, of course, be paying close attention to our share price. Our shareholders are right to have high expectations. We need to provide answers quickly and improve the effectiveness of our communications with our stakeholders. We want to be transparent with our shareholders and have decided to inform them more regularly, by issuing quarterly results. This will allow us to measure our progress more often and to keep the market better informed of our actions. This plans are very ambitious for Lafarge, aren’t they? B. L. | Yes, our goals are ambitious. They go well beyond anything we have done up to now. They are also realistic, and I am here to accelerate Lafarge’s existing momentum. Along with building new capacity and marketing our innovations, which should increase organic sales growth at a rate above 5% per year, we will focus on strongly valueenhancing acquisitions to consolidate our markets and local positions. These acquisitions will be subject to two conditions: the return on capital employed must cover the weighted average cost of capital within four years and the acquisitions must be compatible with our objectives in terms of earnings per share, return on capital employed and financial structure. We are going to move forward in a methodical and disciplined way, while reinforcing responsibility at all levels of the Group. My role and the role of my new team is to meet our commitments, continue to aim high and drive the entire organization forward, to produce results year after year that reflect our determination to make the Group the undisputed world leader in building materials. By that I mean the industry's best, a company that delivers maximum value to its shareholders, its employees and its environment. ■ Lastly, I have set a clear objective for our Roofing business: to cover its cost of capital by 2008, which corresponds to Ebitda of €350 million, compared to €222 million today. As our strategic plan is rolled out, I remain wholly committed to implementing our strategic business plan to preserve our financial structure and to ensure that the progress we make is fully reflected in the value of our shareholders' investment. What are your commitments to Lafarge shareholders? B. L. | The priority I have set – which underlies my strategic plan – is to create value for the company and increase returns to our 242,000 shareholders. We are seeking sustainable CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 0 7 about us the new management team PA G E 0 8 | L A FA R G E | APRIL 2006 | MICHEL ROSE | Chief Operating Officer, Co-President of the Cement business ULRICH GLAUNACH | Executive Vice-President, Co-President of the Cement business JEAN-CHRISTOPHE BARBANT | Executive Vice-President, President of the Roofing business ISIDORO MIRANDA | Executive Vice-President, President of the Gypsum business CRESCENDO O ne of the first decisions made by Bruno Lafont, who became CEO of Lafarge on January 1, 2006, was to create a tighter management team to maximize efficiency, speed up the decision-making process, mobilize the entire organization, and make the Group the undisputed leader in building materials. BRUNO LAFONT | Chief Executive Officer GUILLAUME ROUX | Executive Vice-President, Co-President of the Cement business JEAN-CHARLES BLATZ | Executive Vice-President, President of the Aggregates & Concrete business JEAN-JACQUES GAUTHIER | Executive Vice-President, Finance CHRISTIAN HERRAULT | Executive Vice-President, Human Resources and Organization CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 0 9 exp PA G E 1 0 | L A FA R G E | APRIL 2006 | CRESCENDO loring the world on the move L isten, discover, and progress. Listen, in order to act tomorrow in the best interests of the planet. Twice a year, Crescendo will open its pages to all those who explore the future and contribute to re-energizing and moving the world forward through intellectual, scientific, artistic, and social activities. As part of this debate, as people who take initiatives, we make it our priority to constantly look for new ways to contribute to progress in all fields. 12 Tomorrow's cities | 16 New needs | 20 New materials | 24 New passions | CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 1 1 exploring tomorrow's cities the city in permanent (r)evolution T he vast majority of people in developed countries live in cities, which are continuing to grow. Now, more than ever, urban infra- structures are becoming economic engines driven by individuals who are increasingly autonomous and mobile. To gain a better understanding of how cities must evolve in the face of this cultural shock, we interviewed Francois Ascher. FRANCOIS ASCHER is a professor at the French Institute of Urban Planning at the University of Paris VIII, France, and at the University of Geneva, Switzerland. He is also chairman of the City on the Move Institute's research and steering committee and has authored numerous books, including “Metropolis, or the Future of Cities” and the “Hypermodern Society”. PA G E 1 2 | L A FA R G E | APRIL 2006 | CRESCENDO You say that society is moving away from the industrial Are big cities being rethought under such conditions? revolution towards a new modernity. What are the main F. A. | A large majority of people in developed countries characteristics of this new modernity? already lives in cities. However, urbanization is taking on a FRANÇOIS ASCHER | Developed societies appear to be pursing new form: metropolization. To a certain extent, the largest a path to modernity that has three major characteristics: cities are ‘growing externally’, absorbing as a part of their individuals are seeking greater and greater autonomy, giving daily functioning the surrounding towns, boroughs, villages, rise to a society that is increasingly differentiated; science and countryside. Vast metropolitan areas that no longer and technology are playing a growing role in all social resemble the cities of the previous period are rising up. These activities; and a new capitalism appears to be emerging, are distended, discontinuous, heterogeneous, and multi- founded on a knowledge-based economy that will likely also polar urban zones. Urban planning must change under these be based on the environment in the longer term. It won't conditions. sound the death knell for industry any more than industry Long-term planning for cities is becoming increasingly put an end to agriculture, but it does place production difficult to do, and we are seeing the emergence of new and the use of knowledge and information and their approaches, many of which owe their inspiration to the associated technologies at the heart of societal dynamics. strategic and heuristic management methods of the business It's a new phase of modernity that is being sketched out. world. To be able to reassess plans without losing sight of I call it hyper-modernism. This trend has progressively strategic objectives, we need more projects, greater flexibility put operating methods and ways of thinking into a crisis, and more technology. and it has not spared economic players who are confronted with unprecedented diversity, complexity and uncertainty. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 1 3 exploring tomorrow's cities “ Mobility is a major challenge for today's new metropolitan areas” FRANÇOIS ASCHER Urban planners must also take into account a greater variety At the same time, transportation raises energy issues and of demands, the diversity of lifestyles, and habitats. We must contributes significantly to the greenhouse effect. We have be able to build cities that are varied and capable of evolving. to find a successful way to limit the environmental impact It's a cultural shock for many urban planning professionals of transportation without limiting mobility. In this respect, who in the past often had set ideas about what kind of urban planning can play a role. Transport hubs can be built cities needed to be built. near dense population centers, individual homes can be grouped in lots, and transport services can be developed In your opinion, what places or urban features will to serve those areas. But I also believe that environmental be decisive for tomorrow's cities? Where do concerns issues are such today that public authorities will pass about sustainable development factor into the trend? increasingly strict measures, requiring both individuals I think mobility is a major challenge today. In new and businesses to replace goods and equipment that no metropolitan areas, mobility is needed to gain access to longer meet environmental standards. That's why, I think, work, the home, healthcare, education, culture, leisure this era of cognitive capitalism we are entering into will activities, and so on. The right to mobility has become a also be an environmental capitalism. One that will replace kind of generic right that conditions all other rights. Because or change some problems... a significant portion of the population does not have the means to get around or can do so only in poor conditions, we must improve city transit systems and probably renew the public service concept of such systems. PA G E 1 4 | L A FA R G E | APRIL 2006 | CRESCENDO Guangzhou speeds ahead with urban transformation Faced with unprecedented demographic pressures, it is imperative that Chinese cities develop infrastructure to preserve the mobility of their increasingly dense populations. Guangzhou, host of the 2010 Asian Games, is a perfect illustration. July 1, 2004 – the Asian Olympic Committee selects Guangzhou as the host city 21 million for the 16th Asian Games in 2010. The distinction is in keeping with the image of a city that in just a few years has become China’s third largest economic metropolis, and the largest city in South China. “Hosting the Asian Games is a tremendous event for our city, one that will accelerate our urban transformation,” declares Professor Yuan Qifeng, from Sun Yat-sen University and head engineer of Guangzhou’s urbanization project. “The city plans to invest over 20 billion euros between 2005 and 2010.” To facilitate the movements of spectators, transportation will be one of the top investment priorities. Plans include new subway lines, expansion of the international airport, reinforcement of the road network on the outskirts of the city, and construction of a new train station. Yet the project does not stop there, and the local economy as a whole should benefit from this event. A good example is the construction of a 610-meter television tower, which will be the tallest in the world. “Guangzhou is a model of urban development, built to address concrete demand over the long term,” explains The average number Professor Yuan Qifeng. It is a model that China can be proud of as it invents the of new city dwellers in China cities of tomorrow. each year CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 1 5 exploring new needs Designing buildings with low co2 T emissions: A major challenge for the entire industry and for the planet he Earth’s climate has changed during the 20th century, with higher average temperatures, reduced glacier coverage, rising sea levels and more frequent violent meteorological events. The big surprise gleaned from scientific observations over the past fifty years is that human activity is largely responsible for escalating this climate change. According to James P. Leape, Director General of WWF International, there is still time to act, but we must do so quickly if we want to preserve our environment. JAMES P. LEAPE, Director general of WWF International Record-breaking heat waves, droughts, hurricanes, flooding… Do all these events reflect climate change due to global warming? JAMES P. LEAPE | It really does look as if global warming is contributing to the upsurge in violent weather events across the planet. The proportion of category 4 or 5 hurricanes, for example, has doubled since 1970. Atmospheric data recorded daily by thousands of weather stations around the world tell us that the Earth has warmed by about 0.7°C since 1860. We also know that the warmest years occurred during the past two decades and that 2005 PA G E 1 6 | L A FA R G E | APRIL 2006 | CRESCENDO was the warmest year of all. If we do not take drastic measures You say that cement manufacturing affects climate to reverse this trend, the Earth could warm by about 5°C change. Can anything be done to minimize its or even more over the next century – an enormous increase, impact? the risks of which have not been sufficiently measured by J. P. L. | Cement is particularly rich in carbon. Yet it serves our society. to make concrete, the most widely used building material What are the main causes of global warming? J. P. L. | The burning of fossil fuels – coal, oil and natural gas – is the number one cause of climate change attributable to man. Next is deforestation. These two activities emit CO2, which makes up about 80% of the pollutants in the world. The cement industry must strive to develop new cements with low CO2 emissions, as well as new materials using recycled cement. This is a major challenge for the industry as well as for all of humanity. How does WWF help to meet these challenges? responsible for global warming. Other culprits are J. P. L. | We have established numerous partnerships with transportation, construction and industry. Although cement different types of players, including corporations, institutions production is responsible for only about 5% of all CO2 and local communities. Trust, transparency and measurable emissions, its contribution could rise due to growing objectives are the principal factors ensuring the success of demand for new buildings and infrastructure. these partnerships. And if their efforts are deemed credible, Do you think that the targets set by the Kyoto protocol for 2012 are sufficient in the long term? J. P. L. | No. Between now and 2012, the Kyoto protocol calls for the industrialized nations to reduce their CO2 emissions it is because they have combined ambitious targets with independent assessment systems. They have already proven that NGOs and industrial groups can work together to find positive solutions for the environment. by about 5% from their 1990 levels. Yet total greenhouse gas emissions have to be reduced worldwide, not just in the industrialized countries. And they must be cut drastically. European countries should reduce their greenhouse gas emissions by 30% before 2020. WWF has shown this is possible. Much more must be done by all of the signing members of the Kyoto protocol. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 1 7 exploring new needs innovating to meet the needs of the poorest M eeting the needs of the neediest. A market with a future for private companies. Ashoka, an association network that promotes the development of social contracting in more than 60 countries, supports and finances the work of individuals who offer innovative and pragmatic solutions for improving the living conditions of disadvantaged populations. To achieve its aims, Ashoka is seeking to develop new synergies with the business world, among other areas. Today, the association is on the cutting edge of a new low-cost housing concept. So what needs, STÉPHANIE SCHMIDT, Director, Full Economic Citizenship Initiative - Global at Ashoka International OLIVIER KAYSER (right), Vice-President of Ashoka International economic realities, and medium and long-term societal challenges do these new means of construction correspond to? Crescendo thought you might like to know. Olivier Kayser, VicePresident of Ashoka International, and Stéphanie Schmidt, Director, Full Economic Citizenship Initiative – Global, unveil the emergence of this new market and explain the strategy of the “Economic Citizenship for All” program. PA G E 1 8 | L A FA R G E | APRIL 2006 | CRESCENDO How does the concept of social contracting relate to the O. K. | Low-income communities want to become part of solvency of the world's poorest people? the market, as producers and consumers. That's what OLIVIER KAYSER | Contrary to popular opinion, price is economic citizenship is all about. not the main reason why poor people are not able to buy products made by big business. In the same way, access So where do you start? to housing is limited by a lack of access to financing, which S. S. | Business as usual won't do. Companies need to in turn stems from the lack of a steady revenue stream recognize that they don't know much about these markets. and the absence of property rights. Simply lowering the To reach far-flung slums and rural areas, they need to rethink price of building materials won't help much. Imaginative their product ranges and distribution channels and redefine "systemic" solutions are needed to overcome these obstacles, their communication strategies. To that end, social and this is where social contractors excel. contractors make the best partners because of their deep STÉPHANIE SCHMIDT | Ashoka launched a new initiative knowledge of these potential customers. called "Economic Citizenship for All" to help create strategic commercial alliances between private enterprise and social What role can building material companies play? contractors. The goal is to serve low-income markets by S. S. | They can develop new solutions by working with establishing social and economic objectives to guarantee other players in micro-finance, for example. Government- the commitment of the partners over the long term. backed housing programs are insufficient and do not Why should private enterprise get involved in these resolve the problems of poverty and exclusion when they programs? are assistance-based. S. S. | Low-income markets account for 80% of the world's O. K. | Access to housing is one of the primary needs of low- population and constitute an enormous reservoir of growth. income communities and it offers a true springboard to Developing countries are expected to account for 98% of economic and human development. the growth in the world's population through 2025. In Brazil, for example, 29.6 million low-income households, which are considered “bottom of the pyramid”, represent 41% of the overall purchasing power of the country's population. The housing shortage in this country alone is in excess of 7 million units. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 1 9 exploring new materials nanotechnology to serve building materials F or years, scientists specializing in materials have been striving to better understand the forces that control the behavior of construction materials: durability, strengh, ductility, longevity, aesthetics and thermal behaviors, among others. All of these characteristics originate in the microstructure of materials, and to explore them today requires increasingly sophisticated technologies, often at the nanometric level. The goal is to build models of typical interactions and Professor PAULO J. M. MONTEIRO is the Group Head of Structural Engineering, Mechanics and Materials (SEMM) at the University of California – Berkeley. A specialist in the structure of building materials, he has written a thesis on the microstructure of concrete and has published several important books, as well as numerous articles in the specialized press. to reproduce them, first in the laboratory and then in the field. In this way new technology is transferred to industry and new materials are developed to address new needs… providing solutions for the wildest dreams. PA G E 2 0 | L A FA R G E | APRIL 2006 | CRESCENDO Nanometer-scale image of a material. You are a researcher and a world specialist You mention the microstructure of materials. in the structure of building materials. What role does nanotechnology play in your work? Why is it necessary to take a scientific approach P. M. | Today, research is carried out at the nanometric level, to the development of materials? and enormous challenges must be met, such as the sensitivity PAULO MONTEIRO | I am often asked that question. The of materials to changes in temperature or humidity. It was general public does not always associate new materials with long believed that building materials were homogeneous. fundamental research. Even so, the development of new However, we realized after working at the microscopic level building materials presupposes a comprehensive that they are actually highly complex and extremely understanding of the mechanisms responsible for their heterogeneous. We now use leading-edge technology such strength, stiffness and durability. This is why a precise as atomic force microscopy, nano-indentation, scanning understanding of the microstructure of materials is electron microscopy and X-ray microscopy. necessary. How do you go about developing new materials? To be more concrete, what are the benefits P. M. | For years, the development of new materials was a for industrial companies in the sector? bit like alchemy: we used a hit or miss approach, relying on P. M. | There are numerous payoffs. For example, if industrial trial and error to make progress. Today, our approach blends groups want to develop more resistant materials, they first fundamental science with advanced experimental methods. need a better understanding of the binding forces at work in We develop models that are then tested in laboratories. the hydration products. This can be achieved through Moreover, since it is impossible for a single individual to be fundamental research. Other examples: work on chemical an expert in all subjects, we have created truly multi- additives led to the development of self-placing and self- disciplinary scientific networks. leveling concretes; research on the microstructure of steel reinforcement is used to develop new reinforced-concrete structures with a useful life of several hundred years. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 2 1 exploring new materials “ Today, research is carried out at the nanometric level, and enormous challenges must be met” PAULO J. M. MONTEIRO What are the advantages of a multi-disciplinary In parting, could you reveal some of the big approach? research topics that the scientific community P. M. | Working with researchers from a variety of disciplines is currently working on? often sparks new ideas. For example, it was while working P. M. | One of the big themes is material longevity. A useful with biophysics researchers to develop procedures to life of about fifty years is no longer acceptable. study cement using low-temperature scanning electron Consequently, we are working on developing a new microscopy, that I was first led to use soft X-ray microscopy. generation of building materials with a much longer product As a result, I obtained precious information on the life. hydration process. Yet other areas are also being explored through fundamental research. Consider materials that are used to repair engineering works: there is an enormous market for industrial groups in this sector, with the development of advanced building materials. In the United States alone, there are currently about 250,000 bridges that need to be repaired or renovated! PA G E 2 2 | L A FA R G E | APRIL 2006 | CRESCENDO Industrial competitors can share knowledge Setting aside the clichés of cutthroat competition between industrial rivals, cement manufacturers in the European research network Nanocem felt the need to join forces in order to share knowledge and accelerate research, for the greater benefit of all. Professor KAREN SCRIVENER, Swiss Federal Institute of Technology in Lausanne (EPFL), director of the Building Materials department and coordinator of the Nanocem network Nanocem, a European research network created in 2004, has successfully managed to get twelve European cement and related products manufacturers – including Lafarge – and 21 academic institutions to work together. Nanocem’s goal is to associate corporate R&D with academic scientific research to develop a better understanding of construction materials. “Cement and concrete are the most widely used materials in the world, but they are still very poorly understood,” observes Professor Karen Scrivener, coordinator of the Nanocem network. “By combining our efforts and resources we have a range of tools and expertise that is rarely found within any one, single laboratory. It enables us to analyze and understand the fundamental mechanisms behind the behavior of materials.” Nanocem harnesses the latest technology to study the microstructure of materials. “Corporate partners finance the work of scientists, who focus their research on projects that are likely to yield technologies that can be transferred to the cement industry,” explains Professor Scrivener. “Our ambition is to build a knowledge database for developing new materials and to improve existing ones, but also to ensure that cement and concrete are finally recognized as sustainable, high technology materials.” CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 2 3 exploring new passions Rudy Ricciotti’s material dreams F or Rudy Ricciotti, materials evoke past experiences, encounters and childhood emotions, bringing forth a desire to share, to touch, to invent a world where both sensitivity and sensuality have their place. “ You have to start with materials and look at them from a romantic point of view. When I was about 10 years old, there was no school on Thursdays, and I would go to the construction sites where my Italian father, working as a foreman, built low-income housing. I remember wearing plastic sandals, stepping in the freshly poured concrete… On Fridays, my father would meet with the masons, metal workers and carpenters, one by one, to give them their pay. RUDY RICCIOTTI, born in Algiers, Algeria in 1952, is an architect. His agency is based in Bandol, in the south of France. An iconoclast, he is known for diverse array of projects, e.g. the Museum of European and Mediterranean Civilizations, the Potsdam Symphony Concert Hall, the new Palace of Festivals in Venice, the National Choreographic Center in Aix-en-Provence, and the new wing of the Louvre Museum in Paris dedicated to Islamic arts. His unique approach in applying building materials, especially his work with concrete, has led him to collaborate often with the Lafarge Group. PA G E 2 4 | L A FA R G E | APRIL 2006 | CRESCENDO It was a microcosm of the Mediterranean, and he knew them all. Discussions were frank, sometimes heated. The masons were tough. To me they were magicians. That’s where I learned to love the people who work with raw materials, real matter. It was a man’s universe, gung-ho and rugged, but also fraternal…as a child I looked upon the masons with hammers hanging from their belts as if they were gladiators. Computer image of the Mucem project in Marseilles, France. Architect: Rudy Ricciotti. When it comes to materials, there’s no segregation along Today, with ultra-high-performance fiber-reinforced concrete, class lines. In the building industry it’s the same: there we are about to embark on a new industrial adventure. are simply people and their skills, trades and businesses. Architects are like test pilots heading down the runway, As an architect, I’m part of the family: I love being with ready for take-off…they must have total confidence in the engineers, craftsmen and mates. I didn’t learn my trade at calculations and professional skills of mechanics and architecture school; I learned it from the people in the engineers. We are on the verge of switching from propellers building industry. I owe them everything. to jet engines. The Footbridge of Peace in Seoul spans 130 Concrete can be sublime. It can also inspire fear. In intercity zones, it reflects hopelessness. It becomes sublime in great engineering works, in dams and bridges, and in certain meters, yet its platform thickness is just three centimeters for a static end-girder height of 1.3 meters! The concrete melds into a slender stroke. contemporary architectural masterpieces – such as Le With the Museum of European and Mediterranean Corbusier’s Ronchamp church, or the CNIT building in Paris Civilizations in Marseille, France, the materials present a La Defense – where sensible projects take surreal flight. different kind of complexity. The setting, at the foot of To do this job, you have to accept that not everyone will like what you do – particularly the contractor, who is often anxious to cut costs. I fight against cheap hardware, plastic, aluminum, ugliness… My buildings work. The contractors are forgotten, but the memory of the craftsmen lingers on. This is how the tradition of skilled craftsmen is perpetuated, and I’m very proud of that. I don’t use products that fail to meet ethical standards. That’s my traditional, conservative side. I’m a European architect and patriot. In the Saint-Jean fort, facing the sea, offers an absolute mineral essence. Some people say it reminds them of fine latticework, or a distant Orientalism. While it can be seen in this way, there is nothing about the structure that is purely decorative. Like a fish skeleton, everything is structural. We’re moving towards a dematerialization of the concrete structure, which is becoming delicate, gossamer, intricately formed like a cross-section of coral rock. Nobody knows where this new material is taking us. We can reinvent the world. today’s environment, you also have to push for innovation if you want to defend a qualified workforce. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 2 5 exploring new passions Christian de Portzamparc dreams of musical architecture T internationally renowned architect has always given music great importance in his work. Today, he is working on several projects that are particularly demanding in terms of acoustics. “ I love creating architecture for music, spaces where two of our realms of perception – hearing and sight – can freely converse and respond. Space affords us this blessing. The emotion of music lies in the discovery and gradual entry into a different world, a world that reveals itself in time. I also understand space as a phenomenon that one grasps over time, through movement, with its expectations, its surprises, Born in 1944 in Casablanca, Morocco, CHRISTIAN DE PORTZAMPARC studied at the École des Beaux Arts in Paris, France. From simple buildings to the urban re-think, the town is a founding principle of its work dominated by three major lines: large landmark buildings (often dedicated to music and intended for gatherings), urban zones as in the Massena Seine Rive Gauche area in Paris, and sculptural towers such as the Manhattan tour in New York, USA, for LVMH. Based in Paris, he has built structures around the world. Among other prizes, Christian de Portzamparc was awarded the prestigious Pritzker Prize in 1994 and the Urban Planning Grand Prize in 2004. He is an honorary member of the American Institute of Architects and has held the “Artistic Creation” chair at the College de France since February 2006. its concatenations. When sound and light fill this marvelous void existing in the midst of solid structures, then space and music are mutually revealed. I long believed that music had a much greater emotional power than architecture. I now believe that space has an emotional power over people that is just as strong. Our lives are inextricably linked to the numerous places that inhabit our memories, shape our present or cast us into the future – the house we grew up in, our schools, gardens, the apartment we live in today, the places we lived before… If we broaden PA G E 2 6 | L A FA R G E | APRIL 2006 | CRESCENDO The Philharmonic building in Luxembourg, by architect Christian de Portzamparc: inside view of the light-filtering façade. the notion of architecture to encompass space and our relate to each other, to be close, to feel a sense of grandeur environment, architecture is the story of our lives. Places and intimacy. I wanted to free the imagination. As always, I obviously have an emotional power, to the same degree as worked with acoustics expert Xu Ya Ying. I love the contrast music. But music is more like a burn, a sharply felt moment, between the bright, snowy impression of the colonnade and whereas our relation to space is day-to-day and calm. the shade of the hall. The wall between them is a prismatic cliff, etched with acoustic fault lines that play on color. When I was asked to do the new Philharmonic building in Expanding on the idea of colored niches designed 20 years Luxembourg, before visiting the site, I studied photos of the ago for the La Villette auditorium in Paris, the Luxembourg area and felt that the public should be guided to the future Philharmonic’s broad fault lines achieve a chromatic subtlety building through an initiation zone, a circle of tall trees that that is altogether different, their geometry breaking down the one would have to cross to enter the realm of music. But colors across a height of twenty meters. once on the site, I saw that we didn’t have enough space to plant trees. That’s when I got the idea of replacing the ring Finally, the chamber music hall is set in a leaf that unfurls from of trees with a light-filtering façade, one that was neither the ground and rises against the colonnade. This interior shell opaque nor transparent, forming an envelope of light in which is based on another experiment, stemming from our work the auditorium would be the central core. The rhythm of these on the Moebius strip for the Nara competition in Japan in 1993. parallel shafts set in several elliptical rows became both This leaf plays with the filtered light from the outside, masking mathematical and musical. it diagonally, and this game of contrast between opaque and transparent upholds the unity of the project. At the heart of this colonnade of light lies the grand auditorium. An auditorium is a musical instrument of uncommon size and, one could also say, an ‘instrument of space’. Audiences at the Philharmonic ‘inhabit’ the walls of the auditorium, seated in multi-level lodges of concrete and wood around the stage, creating the atmosphere of a public square at night surrounded by buildings. Here, I wanted the musicians and the public to CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 2 7 mov f r A TRULY MULTI-LOCAL STRATEGY INNOVATION OPERATIONAL EXCELLENCE PA G E 2 8 | L A FA R G E | APRIL 2006 | CRESCENDO ing ward ENTERPRISING MANAGEMENT in our professions M oving forward, faster, and farther. Taking inspiration from its experiences around the world, the Group's aim is to achieve excellence and a shared performance culture. Moving forward, driven by a desire to excel, to work together, to satisfy our customers and to reinvent the world, the individuals who comprise the Group are its source of energy. Today it is the exchange of experience taking place everywhere within the Group, coupled with the actions, creativity and perseverance of each individual, that keep Lafarge on the move and always one step ahead. 30 Innovation | 34 Operational excellence | 38 A truly multi-local strategy | 42 Enterprising management | CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 2 9 moving forward innovation innovation is at the heart of our growth strategy A t Lafarge, innovating is synonymous with creating long-term value. It means offering our customers and partners reliable and economical products, systems and solutions. It means meeting new needs. Innovating is improving what already exists and inventing new concepts. To be successful, we innovate at every stage of our activity, not only in our product and service ranges, but also in our organizational structure and our industrial and managerial processes. We are always focused on anchoring our efforts in a given economic, social and geographical environment. Our customers' hopes, the dreams of architects, as well as market expectations, shape our strategy. For us, innovation is a state of mind, a driving force, a culture of progress that allows us to be one step ahead: inventing tomorrow today. PA G E 3 0 | L A FA R G E | APRIL 2006 | CRESCENDO GILLES CHANVILLARD, Research Director in structured materials at the LCR (Lafarge Research Centre), An innovative organization that fosters innovation T o foster innovation, Lafarge has “We combine fundamental research with established high-tech centers development projects to create new dedicated materials as well as new, constructive to fundamental 10 research. solutions.” For example, lightweight A specialist in lightweight concretes and concretes “are easier to use on job sites leader of a team of engineers and than cellular concretes” and offer technicians studying the properties of improved energy performance for hardened materials, Gilles Chanvillard buildings. Specialists in aggregates are applications filed by the heads the ‘mechanics and modeling’ group working on this project, as are experts Lafarge Research Center of the structured materials unit at the LCR in the formulation of binders and air- in 2005, versus 3 in 2004 (Lafarge Research Center), located in entraining admixtures. “Each project is and 2 in 2003. L’Isle-d’Abeau, France. supervised by a scientific steering “Our institute is undoubtedly the only one committee representing the research of its kind in the world. It brings together center’s full spectrum of expertise, to in one location chemists, physicists, facilitate the exchange of information,” powder specialists, blend formulators Gilles Chanvillard adds. “Ideas are and rheologists – all the scientific expertise collected in a knowledge database that needed to develop a solid understanding can be accessed by all, in a spirit of sharing of materials,” says Gilles Chanvillard. innovation.” The number of priority patent ■ CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 3 1 moving forward innovation More than 80 years of competition and Lafarge invents the ideal plasterboard S ince 1922, gypsum companies four plants in competition against each worldwide have been trying to other," Dominique Ribas continues. "Rather, produce plasterboard with four the idea was to promote a collective tapered edges to facilitate installation endeavor, to share the discoveries and and do away with overlap at the joins. accelerate the search for a solution." The "More than 30 patents have been filed method worked. In the end, the Saint- around the world, but none resulted in Loubes plant found the solution, giving industrial production – until now," says rise to Signa™, a plasterboard particularly Dominique Ribas, head of product adapted to ceilings and very high walls. development at the Lafarge Gypsum "It's a simple, reliable, patentable, and easily technique development center in Avignon, transferable process, which represents France. For four years, the Group enlisted a modest investment," Dominique Ribas four of its plants in the project – those in explains. Signa™ has since been launched Saint-Loubès, France, Corfinio, Italy, internationally, and the installers who use Songkhla, Thailand, and Dalsan, Turkey. it have been gaining precious time and "It was never a question of putting these improving quality and aesthetics. DOMINIQUE RIBAS, Gypsum Product Development Director ■ New low pitch roofing system pairs aesthetics with rainproof technology PA G E 3 2 | L A FA R G E | APRIL 2006 | CRESCENDO Avancrete, the cement for saving time I nvented by Lafarge Malayan Cement Senior Manager Product Development. (LMC), Avancrete bagged cement was “These advantages help boost construction designed to meet specific customers’ site productivity.” Moreover, a 40kg bag expectations. “For a year, we worked of Avancrete can produce the same closely with end users, especially masons quantity of concrete as a 50kg bag of who were likely to use the product,” ordinary cement. The product's qualities explains Wai-Siaw Yeow, Senior VP are such that it was launched at a price Marketing. When Avancrete was launched 20% higher than competing products. in August 2005, workshops were Working with Lafarge Asia Technical organized to demonstrate the product to Center, the LMC teams are opening building material distributors and Malaysia up to the development of other construction companies. “Avancrete is new products and transferring Avancrete easy to mix, easier to work and sets more to other countries. ■ quickly,” points out Soo Thong-Phor, O “ ur new Low Pitch system is a quick and easy to install,” Guido Franzini great innovation which we explains. “We developed this comprehensive launched successfully last year”, solution with support from roofing affirms Guido Franzini, Director of prefabricators – it is composed of special Marketing & Sales at Lafarge Roofing in low-pitch tiles, insulation, ventilation Italy. “The key to its success is the Coppo and skylights – and followed it with Big roof tile, which is larger than a normal specific trainings for installers. The result tile and equipped with innovative rainbar is a high-quality roof system with greatly technology. The system’s high deluge improved aesthetics that has been rapidly performance allows it to be used for roofs adopted by the market.” ■ with a pitch of as little as 6° . It is also CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 3 3 moving forward operational excellence Full speed ahead A t Lafarge, operational excellence is not a matter for experts – it is everyone’s concern. It affects every aspect of our business and is based on a single principle: it is the men and women of the Group who allow it to be successfull. Operational excellence includes the safety of individuals – one of the Group’s fundamental values – as well as the reliability of our industrial processes and our ability to build customer loyalty, create value and protect the environment. Performance programs have been launched in each one of our activities to develop a common language, as well as common performance indicators for Business Units in similar activities. This provides our employees with the means to compare their performance with others, and to adopt the best practices. Performance programs are underway in all countries. Today, knowledge transfers are increasing in every area, from manufacturing to marketing, sales and product development. The aim? To lower our costs, boost productivity gains, increase competitiveness, enhance customer service, promote innovation…in nutshell, to achieve excellence! PA G E 3 4 | L A FA R G E | APRIL 2006 | CRESCENDO BRUCE MAJOR, Plant Manager, Silver Grove Employee motivation: the key to performance T he new Silver Grove plant in our competitors are doing and the general the United States produces business environment. Key performance % 20 80 million square meters of indicators for the plant are defined and plasterboard per year. Performance has shared with everyone, and used as daily steadily improved at the plant over the targets for all teams.” last few years with machine efficiency “We have strived to improve performance rising from 82% to 90% and annual in every area, believing that there should productivity increase output from 67 to 80 million square be no compromise. It is our aim to make since 2003. meters since 2003. a quality product, efficiently in a safe and Since the plant’s inauguration in 2000, environmentally sound manner.” the plant team has worked ceaselessly to Having worked over three years without improve performance in all areas of board a lost-time injuries, with a string of manufacture and Environmental awards and a daily environmental issues all the way to productivity increase of 25% since 2003, distribution of the finished product. the mobilization around key performance “We have worked hard at communicating indicators by all employees and partners our targets and results with all employees is clearly paying off. and partners and sharing our successes “We are now ready to meet a new as we try to involve everyone at the plant challenge: doubling production capacity in improving our performance,” explains with the construction of a second high Bruce Major, Plant Manager. speed line, while maintaining our focus “Performance in every area is shared with on continuing to improve results,” our operating teams, and we try to keep concludes Bruce Major. from safety The Silver Grove plant’s ■ everyone informed of market trends, how CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 3 5 moving forward operational excellence In Germany, respecting the environment is profitable L afarge's German plants offer new proof that sustainable development and performance can go hand in hand. The plants have continued to diversify the fuels used in their kilns with increasingly stronger demands. "To reduce our coal consumption, we burn waste, such as plastics, solvents or tires," explains Gilles Bourrain, Industrial Director for Lafarge in Germany. "In a single year, we increased the use of such fuels by 20%, sharply lowering our fossil fuel needs and contributing to limiting our impact on the environment and the greenhouse effect." This new and more ecological production process has no detrimental impact on cement quality. A rigorous control procedure was implemented for the new fuels. "They are checked when they arrive at the plant and we monitor their combustion during the production process. Of course, we constantly test the cement produced." All this also presents an economic interest. "The new fuels saved us €5 million over a year," ■ says Gilles Bourrain. n PA G E 3 6 | L A FA R G E | APRIL 2006 | CRESCENDO Security at the heart of overall performance Quality and more economical cement to meet conditions in East Africa I n Kenya, as in Uganda, cement sales but our production wasn't sufficient," notes rose by 11% from 2004 to 2005. To Henri Nicot, Industrial Director of Lafarge supply this market with equal quality in East Africa. "To meet our market’s needs cement, Lafarge increased the portion of while keeping costs in check and remaining pozzolan used in its cement production competitive, we now use a mix of 35% process, while grinding it more finely to pozzolan and 60% clinker, compared with maintain resistance. These volcanic rocks 27% pozzolan previously." This choice has reduce the portion of clinker* needed in allowed Lafarge to realize significant cement and thereby overcome difficulties savings. Each additional percentage point in procuring ample supplies of limestone, of pozzolan used represents a savings of which is a limited resource in the region. €1.3 million in East Africa. ■ They also help reduce the overall level of greenhouse gas emissions of the related plants. "Until now, we produced all the * Clinker is produced by heating limestone to 1,400°C in cement plant kilns. clinker needed to make cement ourselves, I n Honduras, when Lafarge acquired began working to change attitudes through the Piedras Azules cement plant in to communication and by involving 1998, the plant's new management management. "We launched a poster was faced with an absence of safety campaign, conducted cross-departmental regulations. "The problems arose primarily audits and made safety part of the from the behavior of the employees and supervisors' performance goals," explains the previous management team, who Alvaro Lorenz, former Industrial Director didn't pay much attention to safety," for Honduras. The results were fast in says Xavier Blondot, CEO of Lafarge coming: Since 2003, the number of Honduras. Once infrastructure was lost time injuries has fallen 80%, a brought up to Group standards, Lafarge spectacular performance. ■ CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 3 7 moving forward a truly multi-local strategy benefits the of a multi-local business model O ur business has always been anchored in two areas local and global. It is local, because our products are produced where they are used. Working locally means that we are able to adapt to the characteristics of local construction markets, which by nature have a strong cultural dimension, while developing very close relationships with customers. Global, because the Group’s cohesion guarantees the success of its longterm development strategies. With its shared vision, financial solidity, international image and unique organization and management of human resources, the Group provides us with unparalleled strength in terms of research and innovation, and creates the foundations for sharing experience. As a global leader in very local businesses, we mobilize all our teams around a management style that combines initiatives and reactivity on the ground with global expertise. With the Group’s cohesion accelerating the transfer of experience, we strive on all fronts to realize our full potential to advance and create more value. We mobilize the talents and energies of all our employees with one goal in mind: ensure the Group’s leadership in all its local lines of business, worldwide. This strategy is particularly clear in China, where Lafarge reached a major milestone in 2005. PA G E 3 8 | L A FA R G E | APRIL 2006 | CRESCENDO China's new number two in cement has ambition I n August 2005, Lafarge's development 200 million people and is one of the in China took a major step forward. country's fastest growing regions. By forging an alliance with the Lafarge's development in China illustrates Shui On Group, Lafarge considerably the strength of the Group's multi-local strengthened its positions in a fast model. It combines all of the following: growing market. China now accounts for the boldness of entering a new and 45% of the world cement market in terms unfamiliar market; prepation training of volume, with growth of 9% per year for under fierce competitive conditions; the past 10 years. perseverance regarding costs to achieve The number of Lafarge a cost price of $12 per metric ton of employees in China. This growth has given rise to Lafarge cement; the creativity and energy Shui On Cement, China's second-largest necessary to invent new, very low cost cement producer and the leading investment methods; the transfer of producer in Southwestern China. This experience to train Chinese teams; region, which includes the Sichuan, and, Chongqing, competitors and a development still Yunnan, and Guizhou provinces, is home to more than finally, full of promise. the edge over 9,000 our ■ CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 3 9 moving forward a truly multi-local strategy How do you create real Chinese know-how? I n 2005, nearly 7,000 employees “Our biggest challenge is to transform our joined Lafarge in China. Integrating employees’ frame of mind,” esteems Lu these new Chinese employees requires Liang, head of business activities in the a specially tailored human resources Chongqing Municipality. “This requires policy. “Training and coaching are the keys a lot of time and effort. We need our new to a successful integration, which must employees to trust the company. For this, be carried out quickly and efficiently,” we have to show that our company cares explains Frankie Lim, Integration Director about its employees. We have to do what for Lafarge in China. “First, we must initiate we promise.” these newcomers to Lafarge’s performance Yet it is an effort worth making, given culture, which is based on indicators that the economic stakes at play. “We know are shared by all. We must also get them from experience,” adds Frankie Lim, “that to adopt our values, especially in terms with successful integration, we gain in of safety.” terms of reliability and profitability, while FRANKIE LIM, Integration Director for Lafarge in China retaining our most talented employees.” ■ Chongqing 2, the first 100% Chinese cement plant A PA G E 4 0 | first! The new production line quality, the environment – we respected suppliers. In the end, the investment at Chongqing, inaugurated in all of the Group’s standards,” enthuses came to only 40 dollars a ton, three times November 2005, was entirely the This less than usual. “The low-cost of the plant built using Chinese equipment. Local performance was made possible by the in no way diminishes its performance,” expertise and technology reduced the technological maturity of the Chinese affirms Wang Qing. This model started construction period to sixteen months, cement industry, and by two years of to be exported to other regions. down from the usual twenty-four. “Safety, close collaboration with equipment L A FA R G E | APRIL 2006 | CRESCENDO director, Wang Qing. ■ Roofing China is on the right path O TIFIC (On Time, In Full, Invoiced planning and stock management, offering Correctly) is a quality indicator a shorter response time and a new developed by the Gypsum customer-oriented corporate culture.” Business five years ago and introduced According to Lance Xu, some regions have to Lafarge Roofing Systems in China (LRSC) already made substantial progress in terms in 2005. The Chinese Unit thus benefits of customer service. The current goal, he from the cumulative OTIFIC experience adds, is “to ensure that the best practices of other Business Units of the Group. The that have been identified are circulated introduction of OTIFIC, which measures widely and rapidly in all regions of China.” the overall performance along the customer “In a highly competitive market,” explains chain, the Stephane Lecat, CEO of LRSC, “we expect implementation of customer services “in OTIFIC will contribute to a gain in market each region and at the national level,” says share and a higher price premium, Lance Xu, National Supply Chain Manager demonstrating our ability to create value of Roofing in China. “This service integrates for our customers while increasing our other functions like logistics, production profit at the same time.” was accompanied by LANCE XU, National Supply Chain Manager, Lafarge Roofing Systems China Ltd. ■ CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 4 1 moving forward enterprising management A more effective organization O ver the last few years, Lafarge has undergone a number of major changes that have profoundly transformed the Group and propelled it to the rank of world leader in building materials. The Group has reaffirmed its goal to become the undisputed leader by achieving operational excellence in all four of its businesses and in all its markets. At the heart of this objective are the Group's employees who must rise to the challenges of efficiency, speed and value creation, both on an individual level and collectively. It is a matter of attitude, an attitude that the organization must foster and promote. How can we make the best of the Group's global and local dimensions and its diversity? By promoting the sharing of resources and knowledge at all levels of the organization, by encouraging local initiatives and exchanges of experience, and by accelerating decision-making processes and simplifying our structure. The organizational changes introduced in the first half of 2006 are moving in that direction. The key words are simplicity, reactivity, efficiency, and responsibility. Lafarge has confirmed the fundamental choice of being an integrated group organized by business line. PA G E 4 2 | L A FA R G E | APRIL 2006 | CRESCENDO SARA RAVELLA, Group Vice-President, Development, Organization and Training Train me a manager L afarge University was created in 150 top managers, 90 took a training 2004, as part of the Leader for course that year”. Three week-long Learning Tomorrow (LFT) project. Beyond Expeditions were organized in the U.S., of allowing senior executives to discover the individuals, its main goal is to help evolve practices of other companies, especially the Group's management style. To that in the area of customer orientation. end, Lafarge University offers inter- “Three Learning Forums were also held divisional training through 12 programs so that managers could exchange their that give participants an active role in experiences in improving safety and their training. It focuses on the Group's developing leaders and future leaders, although all employees,” adds Sara Ravella. The managers follow a common path to learn training programs have borne fruit. By the corporate culture. “In 2005, priority the end of 2005, most of the participants was given to developing programs specific said they had launched concrete actions to for senior executives,” says Sara Ravella, at their Business Units, and the results Group should be forthcoming soon. enhancing the development Vice-President, Development, and mobilizing their 2,000 The number of managers trained by Lafarge University in 2005. 48 training sessions were held, doubling the number of participants and sessions in 2004. ■ Organization and Training. “Among our CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 4 3 moving forward enterprising management Knowledge transfer: Europe inspires Chilean managers To optimize deliveries to its customers, we discovered the different transport managed to define our own outsourcing Premix, a readymix Lafarge subsidiary outsourcing practices that had been model. The benefit for Lafarge is a saving in Chile, benefited from the experiences created in France and the UK. A Chilean of 1 euro per m3 produced (meaning a of the Group’s French and British team went to Europe to gauge whether 10% reduction in cost) and higher Business Units. “Historically, our plants the system could be transferred back productivity : drivers bought their own owned their trucks and employed home,” said Erico Zursiedel. Once they trucks and went into business for drivers who were paid by the hour. As were sure it would work, the project was themselves, to become truly independent a result, delivery times were not always set up, and British and French managers transporters respected,” observes Erico Zursiedel, provided their Chilean colleagues with satisfaction,” adds Erico Zursiedel. Today, General Manager of Premix. “When lots of practical advise. “Through delivery delays is a matter of the past. Premix was integrated within the Group, meetings and phone conversations, we PA G E 4 4 | L A FA R G E | APRIL 2006 | CRESCENDO targeting customer Co-processing at Lafarge North America T o reduce supply costs: The more than 13% of its energy from management team at Lafarge alternative sources, significantly reducing North has its fuel bill while rendering a service to developed an especially innovative co- society and the environment in the processing offer, partly replacing its process,” explains Thomas Spannagl, LNA traditional fuels – such as oil, natural gas Vice-President of Resource Recovery. or coal – with alternative energy sources LNA develops co-processing as a full- such as tires, solvents, or solid wastes fledged waste service business. “To get like plastic. Installed in most of the 24 a better understanding of potential plants, this system really came to the fore customers, we are studying the industrial the plants are the key drivers for its in 2005. Fuel purchases account for more sectors that generate the most waste and implementation, supported by the North than 20% of production costs. “Co- will continue to develop direct relations American Technical Center (CTS), the processing of wastes allows us to maintain with them.” waste management subsidiary Systech our competitiveness. We process these To implement this project, LNA relies on and a dedicated Resource Recovery team,” wastes into alternative fuels to be burned its own human resources. “As co-processing notes Thomas Spannagl. in out cement kilns. In 2005, LNA obtained is a core activity of the Cement Business, America (LNA) THOMAS SPANNAGL, LNA Vice President of Resource Recovery ■ Integration, teamwork in progress in Ecuador I “ PIERRE DELEPLANQUE, CEO Lafarge Selva Alegre, Ecuador arrived in Ecuador in early 2005, to force. A year later, I would say that we lead the integration of Cementos have already accomplished 60% of the Selva Alegre. I didn't know this work. The change was carried out without country and found myself confronted interrupting business. In 2005, the with enormous expectations from the number of accidents fell dramatically, teams. It was a blank page waiting to be and we increased sales as well as written on… With an integration team operating income. In the beginning, we of managers from the Cement activity, dedicated a lot of time to meeting with the Latin America region and the technical each team, but today these teams are center, we focused on two areas: mobilized around the same shared performance and corporate culture with objectives." ■ changes in safety practices as the driving CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 4 5 contri T o design and manufacture building materials is to contribute to the legitimate expectations of people everywhere for housing, mobility, health, and education, as well as for infrastructure projects essential to economic growth and social progress. Is there any better profession? Attentive to the ever-changing needs of its clients, Lafarge continuously innovates to ensure that, everywhere in the world, its materials contribute to improving the quality of life and to building a more sustainable world for all. 48 Banda Aceh, Indonesia | 50 Tetouan, Morocco | 52 Rion-Antirion, Greece | 54 Harbin, China | 56 Woodmead, South Africa | 58 Radauti, Romania | 60 Paris, France | 62 New York, U.S.A. | PA G E 4 6 | L A FA R G E | APRIL 2006 | CRESCENDO buting to a sustainable world CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 4 7 contributing to a sustainable world PA G E 4 8 | L A FA R G E | APRIL 2006 | CRESCENDO Indonesia Banda Aceh Rebuilding after the tsunami After meeting emergency needs, Lafarge is undertaking long-term efforts to rebuild homes, clinics, schools and mosques. Every afternoon, a dozen villagers meet in the offices of Dompet Dhuafa, an Indonesian NGO based in Banda Aceh. Most lost everything in the tsunami that ravaged coastlines around the Indian Ocean on December 26, 2004, killing 286,000 people. Dompet Dhuafa is working locally with two other NGOs on a Lafarge project aimed at rebuilding 500 houses in Banda Aceh. “A lot of villagers are still living in tents,” says Ahmad Juwaini, who leads the Dompet Dhuafa programs. “Every day, they inquire about how the work is advancing. At the end of December 2005, 30 houses were completed, 70 were nearly finished, and numerous others were started.” LONG-TERM RECONSTRUCTION EFFORTS The project is part of a vast program led by Lafarge to assist in the rebuilding of the Banda Aceh region, one of the areas hardest hit by the tsunami. The Group has set itself two priorities: restore activity at the Lafarge PT Semen Andalas cement plant, two-thirds of which was destroyed, and help the recovery efforts of local communities. “We have been present in Indonesia for a long time," states Tom Ehrhart, CEO of Lafarge Indonesia. "Beyond emergency assistance, we wanted to support the affected populations and continue to contribute to the economic development of the country, which has enormous reconstruction needs. The Group freed up $2.5 million in emergency aid, in addition to the €650,000 in donations made by Lafarge employees from around the world, and €5 million for reconstruction efforts.” DAILY PROGRESS As the bell rings in the courtyard of a small school, children with brand new school bags lined up under the watchful eyes of their schoolteachers. “To help the youngsters return to 'normal' life, Lafarge renovated four schools and provided 2,500 children with school supplies,” Tom Ehrhart explains. The Group also restored four mosques – a focal point of community life in Indonesia – and is currently renovating three others. Lastly, a mobile clinic financed by employee donations has been making two rounds each week in neighboring villages since July 2005. Some 2,300 persons have already benefited from its care. A second medical team will soon boost the number of rounds. LEARNING A NEW PROFESSION THROUGH JOB TRAINING Since the tsunami, it's no longer possible to practice certain professions such as fishing or farming. At the same time, the reconstruction projects create numerous opportunities, but professional skills are lacking. To help the inhabitants of Banda Aceh find work, Lafarge is financing a €100,000 program to train people in the building, restoration and craftsman trades. Some 300 people took part in the program in 2005. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 4 9 contributing to a sustainable world PA G E 5 0 | L A FA R G E | APRIL 2006 | CRESCENDO Morocco Tetouan Sustainable wind power churns in Morocco In the Tetouan hills in the North of Morocco, a dozen wind turbines spin in the hot Sahara wind. Since the spring of 2005, they have been generating electricity for the new Lafarge cement plant located below. The idea for a new plant dates back to 2000. The old plant, once surrounded by pastures in open country, was now too close to the center of town and too far from the quarries. It had become obsolete and needed to be upgraded to optimize production costs and meet new demand. According to economists, demand in the Moroccan cement market was expected to climb 200% by 2015. At the same time, scientists were alerting the public to global warming, estimating that the Earth's temperature would rise between 1.4°C and 5.6°C in the century ahead. For Lafarge, the Tetouan project was a way to combine of economic development and environmental preservation. GREEN CEMENT AND THE UNITED NATIONS “We allocated 15% of the investment to preserve the environment,” says Amzaï Abdel Ghali, Technical Director of Lafarge Maroc, who coordinated the project. “We were able to take advantage of natural conditions and particularly the site's tremendous exposure to wind, which averages 9 meters per second.” In terms of workforce, a redeployment plan allowed the former plant's employees to find jobs, or even to create new jobs locally. Furthermore, the local populations were directly involved in the project. “We even organized a field trip to a neighboring wind park,” explains Jean-Marie Schmitz, CEO of Lafarge Maroc. “That way, they were able to see for themselves the visual effect and the very low noise impact.” Today, perched on hillcrests and standing 44 meters high, the 12 Tetouan wind turbines generate 10 megawatts of power, providing half of the plant's electricity needs. They also represent a successful marriage of ecology and economy. The Moroccan plant, the first of its kind to possess its own wind farm, was recognized by the United Nations and acknowledged by the Clean Development Mechanism (CDM) Executive Committee in September 2005. The CDM, created by the Kyoto Protocol, allows industrialized countries to offset their greenhouse gas emissions by investing in clean projects in developing countries. The winds blowing over Tetouan have kept 30,000 metric tons of CO 2 from being released into the air. It is almost as if two million trees have been planted. A SUSTAINABLE PARTNERSHIP WITH WWF TO PROTECT THE ENVIRONMENT June 21, 2005 – Lafarge and WWF renewed their partnership for a period of three years. Illustrated by the shared message “Two worlds, one planet”, the new agreement focuses on four areas: favoring biodiversity, combatting global warming, promoting sustainable construction, and controlling persistent pollutants. In addition, everything is in place to develop local partnerships between the activities of Lafarge and WWF, to efficiently materialize the agreement on the ground. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 5 1 contributing to a sustainable world PA G E 5 2 | L A FA R G E | APRIL 2006 | CRESCENDO Greece Rion-Antirion The Harilaos Trikoupis bridge: “Connecting people” 2,800 meters! That’s the length of the Harilaos Trikoupis bridge, the longest suspension bridge ever built. This majestic structure links Peloponnesus with western mainland Greece. Beyond its technical prowess, the bridge symbolizes the openness and fraternity of Rion and Antirion, the two cities it now links together. “This bridge has changed our daily life,” affirms George Kolovos, mayor of Antirion for the past four years, a town of 2,400 inhabitants. “To begin with, it allows the two towns to exchange ideas, practices and experiences. Moreover, by making travel easier, it creates new job opportunities.” His comments were echoed in Rion, a city with 13,000 inhabitants. “We can now anticipate real economic development throughout the entire region,” enthuses Vassilis Zervas, Rion’s mayor for the past 12 years. “The bridge will boost the economy of both cities. It also offers the people living nearby numerous advantages, saving them time and simplifying their lives. I walk across the bridge every evening. It’s good for my health, and what’s more, I meet people and develop new friendships. I find the bridge inspiring… especially in bad weather when the wind is howling!” WHEN DREAMS COME TRUE In Rion and Antirion, everyone agrees that people have dreamed of this bridge for several generations. “We have always hoped for a bridge,” says George Antonakakis, chairman of the Rion cultural association created in 1973. “I hope it will lead to closer ties between the two cities’ associations, and make it easier to organize joint events. We still need to make more of an effort, but I am confident in the future. The bridge already brings people together. It’s a real attraction, and one that inspires artists. Culturally, it represents a wonderful opportunity.” EFFORTS TO MATCH A GREAT PROJECT Lafarge supplied all of the aggregates used in building the bridge. Between September 1999 and August 2004, 750,000 tons of aggregates were transported from the Araxos quarry to the bridge site. High-performance aggregates were required to guarantee an extremely durable structure. As a result, the bridge can withstand 250km/h winds, a collision with an 180,000-ton oil tanker, and an earthquake measuring up to magnitude 7 on the Richter scale! CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 5 3 contributing to a sustainable world PA G E 5 4 | L A FA R G E | APRIL 2006 | CRESCENDO China Harbin With silent walls, students can concentrate The library of Harbin University is a modern complex full of life. Thanks to Lafarge materials, particularly the ExSound Acoustic Plasterboard system, students can devote themselves to their studies without being distracted by exterior noise. “The first of its kind in Northeast China!” exclaims Cao Shihong, an architect in Harbin. The 25,000 m2 library of the Northeast China Agricultural University has reading rooms, an auditorium, multimedia centers, bookstores, coffee shops, and more. The building proudly melds aesthetics with practical considerations, modern conveniences and ecological concerns. “A new symbol of our university,” affirms Wang Xianbin, head of the library. “THE CHOICE OF MATERIALS PLAYS A KEY ROLE.” “I selected materials based on my previous experiences,” explains Cao Shihong. “I looked at quality and technology. I think I made the right choice.” He admits that he is particularly proud of the use of Lafarge sound-reduction materials, especially the ExSound Acoustic Plasterboard system used in the walls and ceiling of the auditorium. Noise was a major issue, and for good reason: the university is located only 30 meters from a train line, 400 meters from a major roadway and close to a warehouse. Trains and trucks circulate 24 hours a day, and the noise is very disruptive for students. In certain study halls, some students wear headphones to try to block out the noise. Wang Yuanyuan, a veterinarian student, appreciates the university’s soundproofing efforts. “I really like the new library. It’s big, modern and chic. The calm, pleasant atmosphere really helps me concentrate on my studies.” Not surprisingly, the new facility is popular with students. “We have to queue in front of the library if we want to find a place to study”, continues Wang Yuanyuan. “If only more classrooms could be built with integrated soundproofing!” EXSOUND ACOUSTIC PLASTERBOARD – A SILENT REVOLUTION Distributed in China by Lafarge Gypsum Shanghai, ExSound Acoustic Plasterboard system is the Chinese version of the Pregybel system developed by Lafarge. Its advantages: high performance acoustics and a perfect finish, for a one-piece ceiling with a hidden support structure. ExSound Acoustic Plasterboard system offers new horizons for Chinese architects. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 5 5 contributing to a sustainable world PA G E 5 6 | L A FA R G E | APRIL 2006 | CRESCENDO South Africa Woodmead Prevention, testing, treatment: Lafarge’s therapy Since the early 1990s, HIV/Aids has ravaged South Africa. With the association Care, Lafarge has developed a complete program of prevention, screening and treatment. Despite some cultural resistance, the results are there. It is essential to continue. Thuli Xaba always carries a pack of condoms in her pocket. Several times a week, she visits colleagues in their offices to talk about HIV/Aids. Thuli is a peer educator, one of 70 volunteers among Lafarge employees in South Africa who provide straight talk about Aids in complete confidentiality to the Group’s 2,400 employees in the country. She uses the national campaign’s ABC slogan: Abstain, Be faithful, Condomize. Yet her task is a hard one. “It takes months of patience before people trust me and understand,” says the educator. TREATING THE DISEASE, RAPIDLY AND DEFINITIVELY Lafarge decided to fight against this pandemic in 2000, when Group executives were alerted to the scope of the country’s devastating human tragedy. In South Africa, over 6 million people are infected with HIV. The country holds the infamous record for the world’s highest number of HIV positive individuals: an estimated 21% of the adult population is HIV positive. Every year, the country loses 5% of its workforce, and in such conditions there is no reason why Lafarge should be spared. The Group had to fight this calamity, rapidly and definitively. In partnership with the NGOs Care and Lifeworks, the Group has set up a complete and ambitious program, including employee awareness, free testing and treatment. To maintain confidentiality, Lafarge outsources the treatments and medical care. “In our country, people have great fear of being dismissed,” explains Thuli Xaba. The Group relies on Lifeworks to provide counseling, testing and management of medical care. “We have three objectives,” explains Sean Jelley of the Lifeworks program: “To offer testing for HIV, to prevent infection, and to extend and improve the lives of our patients.” ENCOURAGING RESULTS Today, thanks to educators like Thuli and the program as a whole, 60% of Lafarge employees in South Africa have accepted to be tested for HIV/Aids. Less than 8% of them are HIV positive, a very encouraging result compared with the prevalence of HIV at national level. 62 patients are receiving medical treatments financed by Lafarge. Although this program is expensive – €1.1 million budget is planned for the next five years – it is much less costly than HIV/Aids’ impacts. Or the priceless value of life. ON ALERT FOR BIRD FLU The Group is taking the threat of H5N1 virus seriously. Actions have been taken to reinforce vigilance and our ability to respond rapidly in the event of a pandemic. The Group regularly reminds its employees of the basic rules to observe. In association with SOS International, Lafarge’s human resources network has been activated in the 76 countries it is implemented in, offering weekly conference calls, a newsletter and a hotline available 24 hours a day, as well as on-site drills. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 5 7 contributing to a sustainable world PA G E 5 8 | L A FA R G E | APRIL 2006 | CRESCENDO Radauti Romania Volunteer builders for Romania Radauti, Northern Romania. A short walk from the town center, a new neighborhood is springing up amidst the fields. Some twenty plain but pleasant houses line a paved street that only yesterday was a simple dirt path. Today, it is a whole new residential area built in the name of solidarity. A closer look… It is April 2005, at the Lafarge Group’s head office in Paris, rue des Belles-Feuilles. An e-mail is blinking in all the inboxes: “As part of our partnership with Habitat for Humanity, we are seeking volunteers to participate in a mission to build houses in Romania.” In Maïta’s office, the appeal was welcomed with open arms: “Between the ages 18 and 20, I participated in several humanitarian missions, so I loved the idea of renewing this experience as part of my work…” INCREASING ACCESS TO DECENT HOUSING A few months later, eleven volunteers left Paris for Radauti. Human resources, marketing, finance…each member of the team worked in a different department in France. Once in Romania, they all donned helmets and coveralls and went to work. “We didn’t really know what we were getting into,” admits Sophie. “We learned on the job.” Marie-Claude was taught how to install fiberglass insulation and finish plasterboard joints. Sylvaine specialized in sanding. Stéphane and Damien, the two men on the team, were given the more strenuous tasks: framing and roofing… Working under the direction of local Lafarge teams, the eleven Group volunteers were also able to meet the future homeowners, who were participating as well in the construction work. In meeting these families, they were able to learn about daily living conditions. “Our previous apartment did not even have hot water. To live in a more comfortable, functional home has always been our dream,” said Danut and Lilian, who are now happy homeowners. Habitat for Humanity specializes in making this kind of dream come true. “Our goal is to help low-income families gain access to decent housing. Since 1976, we have built nearly 200,000 homes in over 100 countries. We would not be able to accomplish our work without solid partners like Lafarge,” insists Don Hasczyn, Vice-President of Habitat for Humanity Europe. Back in France, Maïta says: “We’re delighted to have made a small contribution to the project!” What’s more, the team’s efforts left their mark: one of the houses was given a funny name – Lafarge. A GLOBAL PARTNERSHIP WITH HABITAT FOR HUMANITY INTERNATIONAL January 10, 2005 – Lafarge signed a partnership agreement with Habitat for Humanity International, thus adding a further dimension to the local cooperative efforts already initiated by Business Units over the past several years. Lafarge is committed to working with the NGO in 25 countries through 2010 – providing volunteers to build houses, contributing building materials and offering financial support. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 5 9 contributing to a sustainable world PA G E 6 0 | L A FA R G E | APRIL 2006 | CRESCENDO France Paris Hypergreen: the tower building that captures the sunlight Architect Jacques Ferrier and Lafarge have created Hypergreen, a tower building concept that fully respects the environment. Designed for mega-cities with rampant demographics, Hypergreen generates a large part of the energy necessary to cover its own needs. Jacques Ferrier brought the project to life in his office, in Paris’ 13th arrondissement where he works surrounded by models and screens showing CIG images and 3-D maps. AT THE HEART OF BUILDING MATERIALS LIES MEANING Since 2001, talented engineer and architect Jacques Ferrier has employed a research team fully dedicated to sustainable development issues: “Architecture in the twenty-first century can have no other focus than the environment. We must work to diminish the overall impact of buildings.” Jacques Ferrier draws on existing material, which acquires meaning as it is used in the buildings he designs. He was bound to link up with Lafarge. A shared environmental awareness directed the creation of Hypergreen, an exemplary concept of sustainable development for the world’s mega-cities. For the first time in the history of mankind, half the planet will live in an urban environment in 2006. New-generation high-rises must meet the requirements of highly populated cities where land is scarce and pollution rampant. “Hypergreen is a new architectural approach that is truly focused on sustainable development issues. Positioned to better capture the sunlight, Hypergreen has turned tower buildings into tools of sustainable urban development that are not only additions to a city but also genuine improvements.” A HIGH-VALUE PARTNERSHIP The project started by Lafarge and Jacques Ferrier in late 2004 has involved many technical exchanges among the architect’s teams, the industrial Group’s engineers and consultants specialized in environmental issues. Presented at an architecture symposium in Shanghai, China, in December 2005 and at the MIPIM fair in France in March 2006, Hypergreen has already elicited a great deal of interest. A CHOICE OF INNOVATIVE MATERIAL Positioned to capitalize on its orientation, the Hypergreen tower draws on climate engineering breakthroughs and makes the best of building techniques and components. As a result, it is thrifty, safe and recyclable. Lafarge’s innovative material, such as the ultra-high performance Ductal® concrete used for the grid skin façade, helps save energy and adds to the building's flexibility. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 6 1 contributing to a sustainable world a loft GREEN MAD ARMCHAIR made of Ductal® concrete by Michel Pagliosa and Jérémy Bataillou from l’Atelier du Béton is material for emotions A harmony of lines, colors and materials, here the space is balanced, novel, pleasing to the eye as well as to the ear. The light is soft. The loft is permeated with life… and emotions, too! THE GARDENING TABLE made of Ductal® concrete by Marie-Christine and Mario Silva from the Béton Concept atelier Leaving behind the city streets, the doors to the building swing gently open, revealing a quiet, light-filled hall. The elevator soars silently to the 30th floor. A muffled hallway…a door…and at last the loft in all its splendor, with great glass windows commanding a view of the city below. The door is no sooner closed than silence pervades. The room is spacious, white. Harmony mingles with ingeniousness. The concrete furniture makes no secret of its novelty. In one corner, a sofa with smooth lines and soft cushions inspires THE DANCING BOOK SHELF made of ultra highperformance Ductal® concrete by Francisco Passaniti an irresistible urge to pause…to settle down with a glass, a snack and a book. The eye is drawn to the dancing bookshelf, a centerpiece of pure design fulfilling its function with a whimsical flourish. What will it be – a novel, poetry or a traveler’s tale? Furniture can breathe life into space. The table, streamlined, with warm colors and a sylvan touch, hugs the wall and calls for place settings and a meal, shared round a timeless, miniature garden. From appetizers to dessert, the conversation will circle the table. CUBIC BEDSIDE TABLES made of Ductal® concrete by Jean-Michel Ducancelle of the Compagnie des Arts PA G E 6 2 | L A FA R G E | APRIL 2006 | CRESCENDO New York United States DECORATIVE PLASTERBOARDS with high acoustic insolation properties THE LIGHT BALL made of Ductal® concrete by the Atelier Béton Concept THE BELUGA BATHTUB AND THE BASIN made of Ductal® concrete by the Atelier du Béton On the desk, papers and letters are yearning for a bit of attention. But this evening, it’s the bathroom’s modern yet soothing decor that entices with an invitation to relax. The tub’s graceful curves draw you in…bath oils, bubbles and scents fill the air. The sink plays a quieter role, its pure, balanced lines springing directly from an architect’s drawing board. Down the hallway, the bedroom. Here, a subtle arrangement with plasterboard affords some well-deserved intimacy. A luminous sphere diffuses a filtered light, playing with the cubic forms of the bedside table. Slip into something comfortable before stepping out onto the terrace. Artificial lighting plays against the colorful concrete squares, reflecting red, gray and beige. Honeysuckle and mint perfume the air. Settle for a moment on a broadbacked, lacework bench. The comforting aroma of coffee rises from steaming mugs. Words are spoken in hushed voices, as though reluctant to trouble the bustling crowds in the twinkling lights below. Look down and watch the city’s beating heart. One final sensation, before turning in. WHITE BENCH [ detail ] made of Ductal® by Olivier Chabaud and Laurent Lévêque, partners of la Compagnie CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 6 3 reali PA G E 6 4 | L A FA R G E | APRIL 2006 | CRESCENDO zing Lafarge’s unique potential I n February 2006, Bruno Lafont, CEO of Lafarge since January 1, presented his strategic plan for 66 Key figures of the Group | the Group. What are the main 70 Cement | objectives of the plan? After a major 74 Aggregates & Concrete | transformation that the Group has undergone over the past five years, 76 Roofing | 78 Gypsum | 80 Organization of the Group | which made it the world leader in building materials, it is now time to take full advantage of the considerable potential of our current portfolio of assets, to extract all the corresponding value for our company and our shareholders. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 6 3 realizing Lafarge’s unique potential key figures of the Group RECORD SALES, CURRENT OPERATING INCOME AND NET INCOME We were able to offset sharp increases in energy and transport costs in most of our markets through our competitiveness and capacity to raise sales prices. In 2005, the Group realized solid results, although they do not yet reflect the full extent of Lafarge's potential. Sales increased by 11% to nearly €16 billion. Fuelled by growth in our markets and our innovations, organic growth in sales totalled 8%. Sales rose 11% year on year, while cost of goods sold increased 12%. Energy costs were up 16%, but we were able to offset the impact by 2 percentage points through an improved fuel mix in the Cement business. Our energy bill increased overall by 14%. In addition, the energy crisis had a significant indirect impact on our freight to customer costs and on our Although the first half was disappointing, the Group recovered in the second half, with other variable costs, essentially raw materials, both of which were up 8%. current operating income up 17%. The Roofing business suffered from For the full year, current operating income rose 7%. The Cement, Aggregates & Concrete, and Gypsum businesses all recorded double-digit growth in current operating income. The performance in the persistent softness in the German building market, which has been in a recession for the past 12 years, and great price competition, resulting in a 34% decline in its current operating income. emerging markets was particularly strong, with current operating income up 15%. The Group's net income grew 5% to €1.1 billion. Earnings per share totaled €6.39, up 2%, after dilution arising from scrip dividend reinvestment. PA G E 6 6 | L A FA R G E | APRIL 2006 | CRESCENDO 80,000 EMPLOYEES | €16 BILLION IN SALES | SALES BY BUSINESS PRESENT IN 76 COUNTRIES | 9% 9% 2005 KEY FIGURES MILLIONS OF EUROS Sales 2004 (1) 2005 VARIATION 14,436 15,969 + 11% Current operating income 2,201 2,357 + 7% Net income Group share 1,046 1,096 + 5% Earnings per share in euros (2) €6.26 €6.39 + 2% Cash flow from operations 2,148 2,238 + 4% + 4% Net debt Operating margin 6,958 7,221 15.2% 14.8% 8.8% 8.5% €2.40 €2.55 ROCE (at standardized tax rate) (3) Net dividend in euros (4) 34% ● Cement ● Aggregates & Concrete ● Roofing ● Gypsum SALES BY REGION + 6% IFRS At a 28.6% rate, unchanged since 2003 (3) Average number of shares: 171.5m in 2005, 167.2m in 2004 (4) Subject to AGM approval 48% 2005 (1) (2) 9% 9% 5% 4% 6% A SOLID FINANCIAL STRUCTURE 39% 2005 28% The Group continue to strengthen its financial structure in 2005. Group cash flow from operations advanced 4% to €2,238 million. Growth was particularly strong in the second half, totaling 19%. Gearing improved significantly in 2005, dropping from 70% in 2004 to 59% in 2005, marking the lowest level since 1996. At the same time, the cash flow to net debt ratio was stable at 31%. 2006-2008 STRATEGIC PLAN ● Western Europe ● North America ● Central and Eastern Europe ● Mediterranean Basin ● Latin America ● Africa ● Asia / Pacific We will create value through profitable revenue growth and better cost control. "Together with the Executive team, we will drive our building materials strategy with discipline, lead the race for innovation and unlock the full potential of our operations. We will streamline our organization to improve efficiency. The reduction in costs alone should allow us to increase our It is my priority is to ensure that our improvements translate into enhanced returns for our shareholders. Our strategic plan should translate into a sustainable 8% yearly average growth in earnings per share and an improvement in return on capital employed." operating margin by 1% by 2008. This is a minimum. BRUNO LAFONT, February 23, 2006 CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 6 7 realizing Lafarge’s unique potential INCREASE IN NET DIVIDEND PER SHARE A MAJOR PROGRAM TO BUILD NEW CAPACITY The Board of Directors approved Bruno To accompany the growth of our markets, Lafont's proposed 6% increase in the dividend strengthen our positions and contribute to to €2.55 per share, compared with €2.40 the consolidation of our markets: per share in 2004. No scrip dividend was • New cement production lines are being proposed this year to avoid diluting earnings built in Mexico, Bangladesh, Morocco, and per share. China. The new production is expected to Both resolutions are subject to shareholders’ come on stream during 2006; approval at the Annual General Meeting. • New cement production units have been announced in South Africa, Zambia and SARBANES OXLEY CERTIFICATION Lafarge is one of the first European companies to comply with Section 404 of the Sarbanes-Oxley law relating to internal control. The Group has been in compliance since December 31, 2005, well ahead of the December 31, 2006 deadline. The project involved thousands of employees around the world in a very short deadline. The Group took advantage of this project, which could easily have been viewed as just another new regulation to implement, to maximize operating benefits. Sarbanes Oxley certification attests to the transparency and reliability of our internal control and reporting processes. It's an indication of stronger and more efficient operating processes as well as a solid foundation for accelerating the standardization of those processes. Finally, it represents a real advantage for a group built around a multi-local organizational structure that is decentralized by nature owing to the local markets in which our businesses are active. PA G E 6 8 | L A FA R G E | APRIL 2006 | CRESCENDO Russia. These new capacities are expected to be operational in 2008; • The plasterboard plant in Buchanan, New York, is being upgraded. Furthermore, the construction of new wallboard production units has been announced to boost the Group's total capacity by 25%. These include doubling production capacity at the Silver Grove plant in the U.S., and building new wallboard plants in the U.K., in Shanghai and Chongqing, China, and in South Korea, South Africa, the Ukraine, Turkey, Romania, Mexico, and Algeria; • Clay roofing tile capacity will also be upgraded and expanded. Following the start-up of the Castelleto plant in Italy in 2005, two large projects have been launched in France to better serve our customers, improve the quality of our products and spread our innovations. The Marseille plant is being upgraded, and a new plant is being built in Limoux, to serve customers in the south of France; a new plant is being erected in Signy-l'Abbaye, in the Ardennes region, to supply customers in the north. SEVEN KEY DATES FOR LAFARGE IN 2005 MAY 20 Group is present. In line with the Group’s The wind farm powering the Lafarge cement Principles of action and signature of United plant in Tetouan, Morocco, marks first French Nations' Global Compact, Lafarge has thus project registered to the Clean Development reaffirmed its desire to see fundamental Mechanism (CDM) Executive Board. labor rights – as defined by the conventions Inaugurated in May 2005, the wind farm of the International Labor Organization – is a world first for a cement plant. It supplies respected around the world. 50% of the plant's electricity needs, helping to fight climate change by reducing SEPTEMBER 27 greenhouse gas emissions by 30,000 tonnes The Group announces a new management a year. In terms of environment, that's team. Accompanied by a new team, Bruno Lafont roughly equivalent to planting two million trees a year. JULY 7 became Chief Executive Officer of Lafarge Lafarge confirms its long-term commitment effective January 1, 2006, succeeding to Aceh, Indonesia. Bernard Kasriel. After inaugurating a floating terminal to serve the market, the Group announced its NOVEMBER 10 intention to invest $90 million to rebuild The architecture and urban planning its plant. It is also spearheading a program symposium in Shanghai. to assist employees and local communities, Following the “Liquid Stone"” exhibit in by rebuilding a village, restoring schools Washington and in Princeton symposium and mosques, and teaching building on the future of concrete in architecture, skills to local populations. Lafarge organized a symposium in Shanghai to debate and discuss with Chinese and AUGUST 11 Western architects on the urbanization Lafarge Shui On Cement joint-venture, a trends and the challenges they face in terms major step forward in China. of the urban landscape, infrastructure and Lafarge became China’s second-largest new construction. cement producer with production capacity of 21 million tonnes in the Southwest, one of the country's fastest growing regions. SEPTEMBER 12 JUNE 21 Lafarge strengthens its commitment to social Lafarge and the WWF renew their reponsibility on a global level by signing partnership for another 3-year term. a four-party agreement with international Objectives were renewed to continue trade union federations. reducing CO 2 emissions, measure This international agreement on social biodiversity, promote sustainable responsibility and international labor construction, and develop partnerships relations applies to Lafarge's 80,000 on the ground. employees in the 76 countries where the CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 6 9 realizing Lafarge’s unique potential cement WORLD Leader 40,000 EMPLOYEES | €7,600 MILLION IN SALES | 152 PLANTS IN 43 COUNTRIES* | * Consolidated data at Decembre 31, 2005. 2005 RESULTS In 2005, current operating income in the The slight dip in current operating income in Cement business improved by 11%, buoyed Western Europe was largely offset by the by a 21% increase in the second half of excellent price performance in North the year and a 12% rise in full year sales. America. Operating margin in emerging The operating margin declined slightly to markets made a strong 18% advance. 21.3%, compared with 21.6% in 2004. In 2005, emerging markets contributed 47% The return on capital employed after tax of the operating income in the Cement remained stable at 9.7%* overall. business, compared to 44% in 2004, Our long-term strategy to preserve market and only 29% in 1998. share under difficult conditions led to downward price pressures, which had a negative impact on current operating income in Brazil and South Korea. PA G E 7 0 | L A FA R G E | APRIL 2006 | CRESCENDO * At a 28.6% tax rate, unchanged since 2003. WORLD CEMENT MARKET BY VOLUME 11% 8% BREAKDOWN OF THE PRODUCTION COST OF CEMENT* WORLD CEMENT MARKET BY VALUE 12% 20% 12% 29% 16% 2005 25% 46% 2005 2005 32% 25% 19% 27% 18% ● America ● China ● Rest of Asia ● Europe ● Africa & Mediterranean Basin ● America ● China ● Rest of Asia ● Europe ● Africa & Mediterranean Basin ● Energy ● Raw materials and consumables ● Direct production labor and maintenance ● Depreciation * 2005 estimates The restoration of the exterior of the Romanian Atheneum, one the best known monuments in Bucharest, Romania, was realized with Multibat® cement from Lafarge Cement in Romania. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 7 1 Impact of the sharp rise in energy costs We were able to pass on the steep increase in energy costs in most of our markets thanks to the competitiveness of our products, the success of our value-added products and strong marketing initiatives. A better fuel mix also helped keep higher energy costs in check, particularly through the use of alternative fuels. 2006 STRATEGY AND OUTLOOK A well-balanced portfolio In 2006, we expect to see buoyant demand throughout the Cement business overall with sales prices increasing faster than cost inflation with few exceptions. The growth strategy of the Cement business remains grounded in a well-balanced asset portfolio between developed countries and emerging markets, the latter of which should continue to contribute significantly to earnings during the year. Industrial and commercial performance is targeted Improving our industrial facilities remains a priority. In the commercial realm, we are taking ever stronger measures to ensure the satisfaction of our customers. Segment by segment, we are accelerating our efforts to better meet the increasingly sophisticated needs of our customers. PA G E 7 2 | L A FA R G E | APRIL 2006 | CRESCENDO 2005 HIGHLIGHTS • SAFETY EFFORTS BEEFED UP | review to strenghtened capacity at the • NEW TEAMS SUCCESSFULLY The Group's Cement business pursued Tetouan plant in Morocco and at the site INTEGRATED IN ECUADOR | efforts, as it has for the past three years, near Quito, Ecuador. Realized in early 2005, the acquisition to vastly improve safety at all sites. In New grinding stations are acquired or of Cementos Selva Alegre was a success, 2006, the focus will be on subcontrac- built in Spain, South Korea, France, Chile marking the Group's first entry into tors. and Morocco. Ecuador. Integration focused on two key themes: performance and corporate • LAFARGE BECOMES SECOND-LARGEST • SECOND PRODUCTION LINE SUCCESS- culture, with improvements in safety CEMENT PRODUCER IN CHINA | FULLY LAUNCHED IN CHONGQING, practices used as the driving force. By A joint venture formed in August 2005 CHINA | the end of the first year of operations, the between Lafarge and Socam (Shui On The new Chongqing production line, number of work accidents declined Construction and Materials Limited) has inaugurated in November 2005, was built dramatically, steady growth was achieved given rise to Lafarge Shui On Cement, the completely with Chinese equipment. in sales and operating income, and the leading cement producer in Southwestern Global know-how and local technology acquisition had already created value China with a capacity of 21 million tonnes. reduced the construction deadline to to such a degree that the management Lafarge controls the joint venture with a 16 months, down from 24 months. The team began examining ways to quickly 55% stake and manages it. degree of technological maturity of the double the plant's capacity in an expanding Chinese cement industry and two years market. • PRODUCTION CAPACITY UP SHARPLY | of working closely with Chinese equipment • NEW PRODUCTS LAUNCHED ON EVERY The construction of nearly 5 million tonnes manufacturers made the performance of new capacity continued in 2005, in possible. In the end, the investment CONTINENT | China, Bangladesh, Mexico, Morocco, totaled $40 a tonne, three times less than Launched in 11 countries in 2005, 17 new and Vietnam. The new capacity is expect- the usual amount, and Group standards value-added products will represent ed to come on stream during 2006. were met. This model is currently being volume of two million tonnes in 2006. To further strengthen the positions of the exported elsewhere within the Group. Among the new products are easier-to- Cement business, accompany market use Avancrete in Malaysia, longer-lasting growth and better serve customers, new Reodur in Spain, improved, hermetically investment was announced at the end of sealed plastic-packaging in the U.K., and 2005, to build new production lines near the continued development of bagged Moscow, in Russia, as well as in South masonry cement in Chile and Turkey. Africa and Zambia by 2008. Lastly, new projects are in an advanced stage of CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 7 3 realizing Lafarge’s unique potential concrete aggregates & BREAKDOWN OF THE PRODUCTION COST OF CONCRETE N°2 21,000 EMPLOYEES | €5,400 MILLION IN SALES | 2004 36% * Consolidated data at Decembre 31, 2005. Despite improvements in operational 2005 RESULTS performance and the success of value-added Aggregates & Concrete had a strong 2005, with sales up 13% and current operating income up 12%. concrete products, sharp cost increases strained margins. Operating margin and the return on capital In Western Europe, current operating income increased by 15% thanks to the recovery in employed* remained about stable at 7.4% and 8.1% respectively. Asphalt and Paving businesses in the U.K. and the solid growth in Ready-Mix operations in 2006 STRATEGY AND OUTLOOK France. North America had a moderate improvement, with a strong aggregate pricing In Aggregates & Concrete, we expect overall impact, partly offset by weaknesses in Eastern growth in Aggregates to be rather modest Canada and East US Ready-Mix contribution. in 2006, although growth should be robust All other markets reported strong growth in in emerging markets. In Concrete, markets current operating income. should continue to trend up overall. * At a 28.6% tax rate, unchanged since 2003. | L A FA R G E | APRIL 2006 | CRESCENDO 47% 1,708 PLANTS IN 27 COUNTRIES* | WORLDWIDE PA G E 7 4 10% 3% 4% ● Cement and cement materials ● Aggregates, sand and gravel ● Other raw materials ● Labor ● Other 2005 HIGHLIGHTS • NEW PRODUCTION CAPACITY ACQUIRED and aggregates in Portugal. Furthermore, IN 2005 | the transaction enhanced our vertical In 2005, the Aggregates & Concrete integration strategy in Spain, owing to the business increased its production proximity of these assets with our cement capacity, mainly in growing markets. The plant. Ocho al Cubo (Eight in a Cube) is a real estate project in which eight architects build eight model houses and replicate them eight times. Each of the eight houses must be attractive, white and made of concrete. Group acquired quarries in two emerging markets, Ukraine (Greenfield) and • SUCCESS OF AGILIA® CONFIRMED | Malaysia (Nilai with a 1 million tonne Launched in 2000, Agilia® symbolizes capacity), and expanded its network of the success of our vertically-integrated concrete plants, adding 20 plants in business model and the power of our Chile, Venezuela, Malaysia and South combined research in Cement, Aggregates Africa. & Concrete and Admixtures. This product Profitability was up in Greece, where also contributes to advances in the Lafarge acquired the Atlas quarry, which construction industry, while offering has a 2 million tonne capacity. architects new possibilities. In the U.K., the Group acquired Minimix, Sales of Agilia® grew more than 25% which has a quarry with a capacity of in 2005. Today, it accounts for 2% of 0.4 million tonnes and four concrete our total concrete sales and 10% of our plants. total profits in concrete. Agilia® sales and their contribution to our profits are • LEADERSHIP IN SPAIN AND PORTUGAL | expected to further double by 2008. In November 2005, Cemex disengaged from the joint venture created with Lafarge, propelling the Group to the top of the concrete market in Spain and making it one of the largest producers of concrete Four key themes: safety, satisfaction, new In 2006, the Group will continue to stand products and performance apart from its competitors through new Safety remains a key focus following the value-added products, which offer a strategic encouraging progress made in 2005, when competitive advantage. the number of lost-time injuries declined 25%. At the same time, the implementation of the Employees, at all levels of the Aggregates performance program will be accelerated at & Concrete business, will pursue efforts to all sites to foster far-reaching behavioral strengthen ties to their customers and will changes, leading notably to more responsive continue to enhance customer satisfaction. decision-making and further structural To this end, we have set three objectives for standardization. All these measures are 2006, including improving delivery times, designed to improve profitability. product quality and product returns processing. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 7 5 realizing Lafarge’s unique potential roofing WORLD Leader 12,000 EMPLOYEES | €1,500 MILLION IN SALES | 162 PLANTS IN 35 COUNTRIES* | * Consolidated data at Decembre 31, 2005. 2005 RESULTS The return on capital employed after tax Sales were up a modest 1%, while current operating income decreased 34% over the full year, after a very difficult first half slipped to 3.6%, from 5.5% in 2004.* 2006 STRATEGY AND OUTLOOK and a second half decline limited to 10%. In 2006, we expect the Roofing business to The disappointing results were due largely improve in Western Europe, except in to contraction in Germany, where Germany, where pricing pressures should the building market has been depressed remain in force. Conditions in the U.S. market for 12 years by fierce price competition. should remain favorable with continued As a consequence, the production capacity strong sales growth expected. The expansion utilization rate in Germany fell sharply of the U.S. market will be accompanied despite major restructuring efforts. Efforts to by the construction of two concrete tile improve our competitiveness were pursued plants, including one in Nevada and the during the year, resulting in a 30% increase in other in Florida, representing a $70 million clay tile productivity in Germany, for investment for the MonierLifetile joint example. For the business as a whole, the venture between Lafarge and Boral. production capacity utilization rate grew 5%. Furthermore, growth was strong in the U.S. All in all, the operating margin declined to 6.5%, compared with 10% in 2004. PA G E 7 6 | L A FA R G E | APRIL 2006 | CRESCENDO * At a 28.6% tax rate, unchanged since 2003. A private home near Calicut in Kerala state, India. The home was designed by architect Tony Joseph with red-brown varnished clay tiles produced by Lafarge Roofing India Pvt Ltd. 2005 HIGHLIGHTS • MAJOR INVESTMENT FOR CLAY TILE PLANTS MODERNIZATION | in Signy-l’Abbaye, in the Ardennes region, of the Black Economic Empowerment pro- to serve customers in Northern France. gram. The low cost system is aimed at The Roofing business boosted capacity in 2005 to better meet demand. Investments broadening access to housing in South • INNOVATIVE ROOFING SOLUTIONS | Africa. approved during the year were aimed at In February, a new clay tile, the Die upgrading our existing plants and build- Nieuwe Hollander, was successfully ing new ones. launched in the Dutch market. In July, Safety programs, audits and manager Following the successful startup of the an innovative, low pitch roofing system training have paid off. Several plants Castelleto di Branduzzo plant in Italy, two was introduced in Italy. The comprehen- reported no major accidents and the large projects were launched in France sive system includes large format tiles accident rate declined 30%. to better serve our customers, improve as well as insulation and ventilation com- product quality and roll out innovations ponents, a first in the non-residential over the entire territory. The projects building segment and a springboard to included the upgrading of the Marseille growth opportunities in Italy. Another plant, the construction of a new plant in innovative roofing system was launched Limoux to serve customers in the South in South Africa through the Marulelo of France, and the building of a new plant Roofing Solutions joint venture as part Results recovery is the top priority The Roofing business is on the road to recovery. The objective is for the activity to • WELL-CRAFTED SAFETY PROGRAMS | • Reducing fixed and variable costs and raising sales prices to offset higher energy and raw material costs; cover its cost of capital by 2008 by reaching • Innovative products and systems; an Ebitda target of €350 million by 2008 • Pursuing efforts to modernize clay tile from €222 million in 2005. operations; • Growth in the U.S. and emerging markets. Management has a clear plan for success and will take action in five main areas: • Safety, which is the basis for operational excellence; CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 7 7 realizing Lafarge’s unique potential gypsum WORLD PLASTERBOARD MARKET BY VOLUME N°3 18% 6,000 EMPLOYEES | €1,500 MILLION IN SALES | 5% 2004 54% * Consolidated data at Decembre 31, 2005. continued to pursue its "First" performance 2005 RESULTS Sales increased by 9%, while current operating income rose 14% buoyed by a 24% advance in the second half of the year. In 2006, the Gypsum business posted record operating margin of 10.2%. The return on capital employed after tax* also reached a historical high of 10.2%, compared with 9.3% in 2004. Momentum in the U.S. market, which accounts for half the world's plasterboard market, contributed significantly to these excellent program, which was implemented across all operating units in 2005. By sharing best practices through the program, prices can be successfully managed and fine-tuned, leading to significant performance gains. Continued improvement in quality and innovation with the launch of such products as Signa™, Rapid Deco, Pregymax, and Pregymetal, also played a key role in the results growth. results, thanks to a combination of strong demand, higher selling prices and good 2006 STRATEGY AND OUTLOOK industrial performance. The year should be favorable for the Gypsum business. Sales prices should continue to rise The significant rise in energy, raw materials in North America, albeit at a slower pace than and freight costs was offset by higher sales in 2005. Central European markets are prices. The Group's Gypsum business | L A FA R G E | APRIL 2006 | CRESCENDO 17% 78 PLANTS IN 23 COUNTRIES* | WORLDWIDE PA G E 7 8 1% 5% * At a 28.6% tax rate, unchanged since 2003. ● Middle East ● Asia ● Central and Eastern Europe ● Western Europe ● North America ● Rest of the world PRODUCTION COAST BREAKDOWN IN GYPSUM 12% 24% 27% 2004 18% 19% ● Gypsum ● Paper ● Fuel ● Labor ● Other 2005 HIGHLIGHTS • €400 MILLION IN INVESTMENTS | in Shanghai and Chongqing, China, while • PRIORITY IS GIVEN TO INNOVATING In 2005, Lafarge announced that it would capacity will be doubled at the plant in AND SPREADING INNOVATION | invest €400 million to boost the produc- South Korea. A new plant will be built Following the successful June 2004 launch tion capacity of its Gypsum business by in Istanbul, Turkey. In Romania, produc- of Signa™ in France, this revolutionary 25% by 2007, to become the quality and tion capacity will be tripled. plasterboard with four tapered edges was cost leader in all its markets. By mid-2006, capacity at the New York launched the same year in the Netherlands, • ENTRY INTO NEW, FAST-GROWING and in Thailand in May 2005. It will be plant should double to supply the MARKETS | Northeastern U.S. In Silver Grove, Management also decided to enter the Kentucky, construction of a second pro- new, fast-growing markets of South Africa, duction line got under way and should Ukraine, Algeria, Mexico, and Saudi be operational by mid-2007, doubling Arabia by developing local production its capacity to serve the Central U.S. In instead of importing to take advantage of the U.K., the Group decided to build a these rapidly expanding markets. introduced in Italy in June 2006. new plasterboard plant in the Midlands. In Asia, two additional plants will be built The reception hall at the Hilton in Sydney, Australia renovated by architect Johnson Pitton Walker. Lafarge Plasterboard Australia supplied the Pregyboard Acousticontrol L580 and 13-millimeter Mastaboard plasterboard to contribute to the hall's elegance and superior acoustics. expected to show momentum in 2006. The The third phase of the “First” performance outlook has also improved for Asian markets, program, which concerns plant reliability, which have been depressed in 2005. will be rolled out during the year. Two new As the world's third-largest supplier of standard operating procedures have been gypsum, Lafarge plans to pursue its growth – added to the program, including the safety the industry's fastest over the past 10 years – procedures at the end of 2005 and the while continuing to boost performance. environmental procedure in March 2006. The internal growth investments announced The business is striving for operational in 2005 to increase the production capacity excellence in production. of the Gypsum business by nearly 25% will Efforts to improve safety will be stepped up continue at an accelerated pace in 2006. in 2006. CRESCENDO | L A FA R G E | APRIL 2006 | PA G E 7 9 organization of the group BOARD OF DIRECTORS Bertrand Collomb Bernard Kasriel Philippe Charrier Chairman Vice Chairman Oscar Fanjul Jacques Lefèvre Guilherme Frering Vice Chairman Juan Gallardo Michael Blakenham Alain Joly Jean-Pierre Boisivon Raphaël de Lafarge Michel Bon Michel Pébereau Bruno Lafont Chief Executive Officer Hélène Ploix HONORARY CHAIRMEN Jean Bailly Jean François Olivier Lecerf MEMBERS OF THE EXECUTIVE COMMITTEE Bruno Lafont Guillaume Roux Isidoro Miranda Chief Executive Officer Executive Vice President, Executive Vice President, Co-President of the Cement business President of the Gypsum business Chief Operating Officer, Jean-Charles Blatz Jean-Jacques Gauthier Co-President Executive Vice President, Executive Vice President, of the Cement business President of the Aggregates Finance Michel Rose & Concrete business Ulrich Glaunach PA G E 8 0 | Christian Herrault Executive Vice President, Jean-Christophe Barbant Executive Vice President, Co-President Executive Vice President, Human Resources of the Cement business President of the Roofing business and Organization L A FA R G E | APRIL 2006 | CRESCENDO CONTACTS Senior Vice President, Group Communications Philippe Hardouin | [email protected] Phone: +33 1 44 34 11 71 Fax: +33 1 44 34 12 08 Vice President, Group External Communications Stéphanie Tessier | [email protected] Phone: +33 1 44 34 92 32 Fax: +33 1 44 34 12 23 INTERNATIONAL ADVISORY BOARD Lynda, Baroness Chalker Thierry de Montbrial | of Wallasey | France United Kingdom Founder and President, Chairman, Africa Matters Limited French Institute for International Barbara H. Franklin | Relations United States Alexei A. Mordashov | Chairman and Chief Executive Russia Officer, Barbara Franklin Chairman, Severstal Enterprises | Former US Secretary of Commerce Charles O. Holliday, Jr. | United States Chairman and Chief Executive Officer, DuPont Mohamed Kabbaj | Morocco Hugh M. Morgan | Australia Reserve Bank of Australia Robert W. Murdoch | Canada Director of companies N.R. Narayana Murthy | Chairman, Lafarge Maroc India South Africa Chairman, AKA Capital (Pty) Ltd. Takuzo Kitamura | Japan Special Corporate Advisor, Ajinomoto Co. Inc. David K. P. Li | Registered with the AMF, the French market authorities, the French version of the Lafarge 2005 annual report and 2005 reference document (document de référence), as well as the U.S. version on form 20-F, registered with the Securities and Exchange Commission (SEC), may be downloaded at www.lafarge.com. Managing editor: Stéphanie Tessier Design and production: Lafarge Group Communications Department, Skipper Communication Editorial team: Lafarge, Angie, François Bernheim Graphic design: Production: HMS Publications Director of the Board, Governor of greater Casablanca | Reuel J. Khoza | Vice President, Investor Relations Yvon Brind’Amour | [email protected] Manager, Analyst Relations Danièle Daouphars | [email protected] Manager, Individual Shareholders Aline Pic-Paris | [email protected] Phone (toll free in France): 0 800 235 235 International phone: +33 1 44 34 12 73 Fax: +33 1 44 34 12 37 Chairman and Chief Mentor, Infosys Technologies Limited Henning Schulte-Noelle | Germany Chairman of the Supervisory Board, Allianz AG Photo credits: D.R. Médiathèque Lafarge | Corbis / Bob Krist - Daniel Rousselot - Paul Souders | Gettyimages / Grant Faint - Martin Holtkamp - Johner - Allan Montaine Randy Olson - Justin Pumfrey - Stockbyte - StockTrek | Rapho / Gilles Bassignac - Jean-Christian Bourcart Julien Chatelin - Pascal Dolémieux - Grégoire Korganow Frédéric Neema - Gérard Uferas - Nian Zeng | Eric Tourneret | Philippe Couette | Thierry Mamberti | Images et concepts / Laurence Prat | Arielle Bernheim | Garth Dale | Gustav Knecht | Mauricio Pavon | Augustinus Sidarta Photography | Crystal Commercial Photography Co. Ltd. | Rodrigo Gomez | Annabel Moeller | © Anne de Vandière | © WWF - Canon / Anthony B. Rath | © Olivier Kayser | © Janet Jarman | D.R. Lafarge RomCim | D.R. Lafarge Roofing | D.R. Lafarge Zement GmbH | D.R. Lafarge Dakproducten - NL | D.R. Lafarge Granulats - F. Renoir | D.R. Lafarge Malayan Cement | © Rudy Ricciotti Architecte / Alain Sauvan | © Cabinet Christian de Portzamparc / Philippe Hurlin / Jörg Hejkal | © Hypergreen / Jacques Ferrier Architecte | Synthese Architecture and AIKA Projekt s.c. | l’Atelier du Béton | Francesco Passaniti | la Compagnie des Arts | l’Atelier Béton Concept | la Compagnie. Hong Kong Chairman and Chief Executive Officer, The Bank of East Asia Ltd. This report is printed on mat coated paper, ECF, acid free, fully recyclable and biodegradable, and produced at a mill with ISO 14001 environmental certification. Headquarters 61, rue des Belles Feuilles - BP 40 75782 Paris Cedex 16 - France Phone: + 33 1 44 34 11 11 Fax: + 33 1 44 34 12 00 www.lafarge.com
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