EuroBusiness Media (EBM): LafargeHolcim, the world leader in the building materials industry, reports earnings for 2016. Eric Olsen welcome, you are the CEO of LafargeHolcim. You posted a strong set of results for 2016 despite a challenging first quarter, what are your main takeaways from these 2016 results?
Eric Olsen: Yes, these are a strong set of results. The teams have done a fantastic job delivering a great 2016. If you look at our results, you’ll see that all the elements of what we committed to do, we are delivering. We are exceeding our synergies: we had committed to delivering €450m in synergies, we came in at almost €640m of synergies for the year. We said we were going to change the game in pricing, and we increased our pricing strongly during the year, resulting in a strong increase in margins for the year. We said we were going to deleverage, we have significantly improved our balance sheet during the year. You’ve got a Group hitting its stride, delivering results and demonstrating the potential of value creation.
EBM: Now, you mentioned that your margins have increased on the back of improved pricing and cost reductions. Nonetheless, volumes are down. How sustainable is your earnings momentum?
Eric Olsen: We’re really confident in the sustainability. It is true that in a handful of markets we had unique situations in Q4. For instance, in India, in the early part of November they decided to replace currency and there was somewhat of a disruption in the market, which impacted our volumes in the quarter. And there was some weather issues that we encountered in North America in Q4 as well. But none of them are things that are recurring volume issues going forward. We are looking for volume growth in our markets of 2% to 4% in 2017.
EBM: You also mentioned synergies. You’ve reached – you’ve actually exceeded – your target for the full year. How did you do that and how much more is there to come?
Eric Olsen: Back in the beginning of the merger, we committed to €1b of synergies in EBIDTA by the end of 2018. And already here, at the end of 2016, we’ve delivered €770m of synergies. We’re way ahead of pace and we’re expecting to be at at least €400m of additional synergies in 2017. So, we’re on pace to outperform, certainly, the amount of synergies that we’ve committed to.
EBM: What does the future hold for 2017 and beyond?
Eric Olsen: In 2017, we’ve said that we expect operating EBIDTA to grow in double-digit percentage terms and we expect EPS to grow more than 20% in the year. So where’s that growth coming from? I would segment it into 3 areas.
First of all, we have a handful of markets where we expect a significant improvement in performance. And it’s performance coming from restructuring efforts that we put in place, as well as our commercial transformation efforts going on, and positive underlying dynamics. And I would cite the US, Nigeria, several markets in Europe and India as part of that.
Secondly, underlying volume growth in our markets thorough the world. We expect volumes to grow in our markets somewhere between 2% and 4 % in the year. And that’ll be another contributor to our improved results.
And lastly, the ongoing synergies. We expect at least €400m of additional synergies in 2017, plus additional ongoing cost savings actions. You add those three things together and we expect 2017 to be a very strong year.
EBM: And beyond 2017?
Eric Olsen: Beyond 2017, it really comes back to the quality of our portfolio. We have leading positions in all regions of the world, and we’ve restructured our portfolio in the last year.
So, first of all, what is going to drive our growth going forward is the best portfolio in the industry. Secondly, underlying growth in our markets. There is a need for our products, and the ongoing building construction in the world will drive growth in development that we’ll certainly benefit from for many years to come. And lastly, we’ve put in place a commercial transformation strategy. We’re focused on extending our offers, extending the value that we deliver to our customers, going deeper into the retail segment and that’s going to continue to drive growth and profitability for us going forward.
What you see in 2016 and what you see in the prospects for us in 2017 is really the potential for growth and value creation for LafargeHolcim.
EBM: Eric Olsen, CEO of LafargeHolcim, thank you.
Eric Olsen: Thank you.
