Program to further strengthen market and cost leadership to generate additional operating profit of at least CHF 1.5 billion by end of 2014
To sustainably improve the return on invested capital, Holcim Ltd is launching a program to further strengthen market and cost leadership. The Executive Committee and the management of the Group companies are together starting the "Holcim Leadership Journey" with specific measures to increase operating profit by at least CHF 1.5 billion by the end of 2014. The base line is the financial year 2011 (excluding 2011 one-off charges of CHF 375 million and without fluctuations in currency, changes in scope of consolidation and under similar market conditions). CEO Bernard Fontana: “After intensive discussions at the senior management level and based on close collaboration with the Group companies, I am confident that we will achieve these targets. At least CHF 150 million positive impact will be achieved in 2012.”
The "Holcim Leadership Journey" focuses on the following areas:
- Customer Excellence by improving customer focus and innovation
- Increasing energy efficiency and the use of alternative fuels and raw materials
- Reducing logistics costs
- Streamlining of the procurement process globally
- Increasing fixed costs savings
- Further reduction of net working capital and selective divestments
- Reduction of the investment cost per tonne of new cement capacity
- Further development and generation of talents and leaders as well as strengthening of the social dialogue with all stakeholders
- The realization of this program anticipates one-off costs of less than CHF 200 million.
Customer Excellence by improving customer focus and innovation (additional operating profit by end of 2014: CHF 500 million)
The focus will be on measures to strengthen the management of customer value and loyalty, margin and prices as well as sales force. Furthermore, Holcim will implement standardized performance indicators across the whole Group to measure the progress in marketing and sales.
Customers will benefit from Holcim’s increased understanding of their needs. The Group’s ability to innovate in fields such as integrated market solutions, new materials, or low CO2 solutions will enable it to fully meet those customer needs with improved products and services.
Increasing energy efficiency and the use of alternative fuels and raw materials (additional operating profit by end of 2014: > CHF 300 million)
Holcim will increase its energy efficiency and the use of alternative fuels and raw materials. Various measures are planned: from clinker grinding improvements and kiln burner updates, to optimization of the fuel mix in cement production as well as initiatives in the field of energy procurement. The cost reduction measures will be supported by some "fast return" Capex projects.
Reduction of logistics costs (additional operating profit by end of 2014:
> CHF 250 million)
Transportation of raw materials and transportation of products to customers are significant cost factors. Holcim sees a substantial cost reduction potential through optimized truck cycles, the reduction of the waiting time for trucks and optimization of routes based on real-time GPS equipment, not only to construction sites, but also between plants and distribution units. Furthermore, Holcim will review third party transportation contracts.
Streamlining of the procurement process globally (additional operating profit by end of 2014: > CHF 250 million)
At the forefront are measures to improve processes, standardization, planning and volume pooling of procurement and a diversification of the supplier base in all geographical areas, including China. It is planned to strengthen the sourcing platforms on different levels (regional, global) and to re-negotiate existing contracts.
Increasing fixed costs savings (additional operating profit by end of 2014:
> CHF 200 million)
Holcim will reduce support process costs across all levels of the company and make better use of existing service centers and support units to reduce the use of external services and consultants. Additionally, Holcim will review the entire asset base across all segments with low utilization levels. In this context, the size of the local footprint will also be reviewed.
Further reduction of net working capital and selective divestments
In addition to further reduction of net working capital, also selective divestments may occur.
Reduction of the investment cost per tonne of new cement capacity
For future expansion projects, the total investment cost per tonne of new capacity cement will be reduced by 20 percent, based upon regional reference costs, by reviewing design standards, optimizing equipment procurement and broadening the supplier base.
Further development and generation of talents and leaders as well as strengthening of the social dialogue with all stakeholders
Due to Holcim’s excellent geographic diversification, growth will continue. To support this growth, the Group needs a broad range of talents and experienced leaders in management roles and functions. The "Holcim Leadership Journey" will strengthen the development of talents and managers as well as the social dialogue with all stakeholders. Furthermore, Holcim will continue to give highest priority to occupational health and safety with the goal of "zero harm to people".
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Holcim is one of the world's leading suppliers of cement and aggregates (crushed stone, gravel and sand) as well as further activities such as ready-mix concrete and asphalt including services. The Group holds majority and minority interests in around 70 countries on all continents.
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