Investor Document Investor Relations Jay Bachmann jay.bachmann@lafarge.com +33 1 44 34 93 71 Danièle Daouphars daniele.daouphars@lafarge.com +33 1 44 34 11 51 Analyst Relations Laurence Le Gouguec laurence.legouguec@lafarge.com +33 1 44 34 94 59 December 2009
Disclaimer This presentation may contain forward-looking statements. Such forward-looking statements do not constitute forecasts regarding the Company s results or any other performance indicator, but rather trends or targets, as the case may be. These statements are by their nature subject to risks and uncertainties as described in the Company s annual report available on its Internet website (www.lafarge.com). These statements do not reflect future performance of the Company, which may materially differ. The Company does not undertake to provide updates of these statements. This document does not constitute an offer to sell, or a solicitation of an offer to buy, Lafarge shares. More comprehensive information about Lafarge may be obtained in its annual report and on its Internet website (www.lafarge.com), under Regulated Information. 22
Lafarge Leader in Construction Materials Sales (1) Cement 57% Concrete & Aggregates 35% Gypsum 8% Current Operating Income (1) Concrete & Aggregates 17% Cement 82% Gypsum 1% 33 (1) For the year ended December 31,2008
A Well Balanced Geographic Portfolio : A Presence in 79 Countries Throughout the World North America 22% / 12 % Latin America 5% / 5% Western Europe 32% / 28 % Central and Eastern Europe 9% / 18% Africa 12% / 17 % Middle East 9% / 12% Asia 11% / 8% 44 * Sales / Current Operating Income 2008
Lafarge s Key Strengths Strategically diversified portfolio of assets to capture growth Development of cement positions in high growth emerging markets Emerging markets contributed 60% of operating results in 2008 Asia, Africa and Middle East cement earnings significantly rose in 2009 Capacity development continues in key emerging markets Solid base in mature markets for both cement and aggregates & concrete Strong operational focus on cost cutting and cash flow generation Structural cost savings of 200 million targeted for 2009 Reacting to market slowdowns through reduced capacities Developing innovative products, particularly in concrete Strong Cash Flow Generation To Manage Through the Economic Slowdown and Beyond 55
Solid Performance in a Challenging Environment m 2008 9 Months 2009 Variation Sales 14,386 12,243-15% EBITDA 3,579 2,832-21% Current Operating Income 2,789 1,983-29% Of which: Emerging Markets 1,629 1,530 Developed Markets 1,160 453 Operating Margin 19.4% 16.2% - 320bp Free cash flow 1,091 1,711 + 57% Net debt 17,802 14,613-18% 66 Solid market trends in most of our emerging markets Emerging markets operating income grew 20% excluding Eastern Europe Rate of volume decline slowed in the third quarter Strong margin resilience with prices remaining solid overall On-going cost reduction delivering results Strong cash flow focus increasing FCF and reducing debt
Cement Margins Remain Resilient Solid Emerging Markets Mitigate Declines in Europe and North America 9 Months 3 rd Quarter MT 2008 2009 Variation 2008 2009 Variation Volumes 118.8 107.6-9% 40.9 37.6-8% m Sales (1) 8,926 7,817-12% 3,196 2,672-16% EBITDA 2,819 2,393-15% 1,112 931-16% Current Operating Income 2,302 1,836-20% 922 746-19% EBITDA margin - YTD (2) EBITDA margin Q3 (2) 31.6% 30.6% 34.8% 34.8% 9 months, 2008 9 months, 2009 3rd Quarter, 2008 3rd Quarter, 2009 77 (1) Before elimination of inter divisional sales (2) EBITDA / Sales
Strong Liquidity and Balanced Debt Maturities at Sept. 30, 2009 m 2 500 2 000 Reduced to 1.8bn as of Oct 28th (1) 1 500 1 000 500 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 After 2018 Lafarge SA Commercial paper Subsidiaries debt instruments Lafarge SA Bonds & other MLT instruments Orascom acquisition facility (drawings) 88 (1) Reduced by 800 m in September 2009 using the proceeds of divestments and cash received from Securitization agreements implemented in September 2009
2009 Outlook
2009 Outlook Market * Overview Volumes (%) Price Highlights Western Europe -23 to -21 =/+ Market slowdown; Prices solid overall North America -25 to -23 =/+ Market slowdown continued; Prices solid Middle East 9 to 11 =/- Solid volume trends in most countries Central and Eastern Europe -24 to -22 - Slowdown in Russia and Romania Latin America -1 to 1 + Volume stable overall; Prices improving Africa 5 to 7 + Solid market trends in most countries Asia 2 to 5 =/+ Positive market trends overall Overall -8 to -6 + Contrasted volume trends. Prices solid overall, despite declines in a limited number of markets. 10 10 * Market growth forecast at national level
2009 Outlook Other Elements Volume declines reducing fixed cost absorption, pressuring operating margins Net energy cost per tonne of cement stable Structural cost reduction of 200 m in 2009 Cost of debt (gross): circa 5% Tax rate: 20% Capital expenditures: - Sustaining: 0.4 Bn - Development: 1.3 Bn 11 11
Beyond 2009
Our Fundamentals Remain Sound We produce indispensable materials Demographic trends and need for housing and infrastructure will continue to drive demand for our products Our geographic portfolio represents a real competitive advantage to capture this growth We will benefit from government stimulus plans, which are mainly focused on the building industry and infrastructure projects The growth of volumes for value-added products in developed markets confirms we are right to focus on innovation Geographical diversity and product innovation will continue to drive superior performance 13 13
Global Cement Demand Driven by Emerging Markets Million tonnes 3,000 2,740 2,840 2,500 5% / year 2,100 2,300 2,500 2,000 1,500 1,140 1,200 1,250 1,300 1,350 1,420 1,470 1,495 1,570 1,620 1,700 1,800 1,900 1,000 500 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Global cement demand Source : Cembureau, Lafarge estimates, JP Morgan 14 14
Announced Stimulus Programs Over $ 2 trillion C$40 Bn Tax cuts, unemployment benefits, infrastructure, low cost loans and other housing $787 Bn Tax Rebates, higher unemployment benefits, infrastructure 25 Bn Investment spending, tax cuts 11 Bn Tax cuts, employment, household benefits, support to municipalites construction financing 26 Bn Infrastructure, public works, housing support 30 Bn Loan program, renewable energy sources, construction 20 Bn Cut export tax, property purchases, lower tax rate for companies $585 Bn Railways, highways, airports and power grids, disaster relief, other projects $18 Bn Infrastructure, tax cuts, company support $5 Bn Infrastructure, tax cuts, custom duty $18 Bn Infrastructure, reduction in excise duties, aid for home loan borrowers Lafarge to benefit from worldwide government actions 15 15 * Source: The Economist, Oxford Business Group, Analyst reports, Portland Cement Association
United States Stimulus Program Where the Additional Cement Will Go Impact of stimulus program on cement consumption Source: PCA estimates State benefiting from <1% State benefiting from 1-2% State benefiting from 2-3% State benefiting from 3-10% State benefiting from > 10% Lafarge Cement terminal Lafarge Cement plant Lafarge operates in states benefiting from 60% of the estimated increased cement demand from the stimulus plan 16 16
Chinese Stimulus Plan Benefits Lafarge Lafarge capacities concentrated in Southwest China Sichuan: Capacity: 6 MT Yunnan: Capacity:6 MT Xinjiang Xizang Gansu Heilongjiang Jilin Liaoning Hebei NeimonguBeijing Ningxia Shanxi Shandong Qinghai Gansu Jian Shaanxi Henan gsu Hubei Shanghai Sichuan Anhui Chongqing Zhejiang Jiangxi Hunan Guizhou Fujian Yunnan GuangxiGuangdong Hainan Beijing: Capacity: 1.5 MT Chongqing: Capacity: 6 MT Guizhou: Capacity: 3 MT Summary of the Chinese stimulus plan Disaster Relief 25% $ 150 Bn Other projects 30% $ 185 Bn Railways, highways, airports and power grids 45% $ 250 Bn Lafarge operates in the most attractive region in China 17 17 * Source: The Economist, Analyst reports
Conclusion
Conclusion Lafarge delivering solid performance in a challenging environment Margin resilience with pricing remaining solid overall Strong cash flow generation and cost control Strengthened financial structure due to lower debt and successful refinancings The fundamentals of our industry and business model remain sound Demographic trends and need for infrastructure will continue to drive demand for our products Lafarge s well balanced portfolio leaves the Group well placed to meet these needs Innovation as a powerful lever, especially in Concrete Actions best position Lafarge both to weather the global economic downturn and for the economic recovery 19 19
Appendix
2008 Key Figures 4 th Quarter m 2007 2008 Variation 2007 2008 Variation Sales 17,614 19,033 + 8% 4,335 4,647 + 7% Current Operating Income 3,242 3,542 + 9% 800 753-6% Operating Margin 18.4% 18.6% + 20bp 18.5% 16.2% - 230bp Net income Group share 1,909 1,598 nm 375 40 nm Excluding one-off items (1) 1,662 1,713 + 3% 389 293-25% Earnings per share (in ) (2) 11.05 8.27 nm 2.19 0.19 nm Excluding one-off items (1) 9.62 8.87-8% 2.27 1.50-34% Net dividend (in ) 4.00 2.00 (3) ROCE (4) 11.0% 8.8% Free cash flow (5) 1,726 2,113 + 22% 864 1,022 + 18% Net debt 8,685 16,884 + 94% 21 21 (1) Excluding net capital gains on sale of Turkish assets and Roofing in 2007, of Egypt-Titan JV in Q2 2008, the legal provision adjustment for the 2002 Gypsum case in Q2 2008 and impairment loss on goodwill in Q4 2008 (2) Average number of shares: 172.7m in 2007, 193.2m in 2008 (3) Subject to approval of Annual General Meeting (4) Using the effective tax rate, excluding the impact of impairment losses in 2008 (5) Defined as the net operating cash generated by continuing operations less sustaining capital expenditures
2008 Cash Flow Free Cash Flow Up Over 22% for Full Year Net Debt Reflects Orascom Cement Acquisition m Cash flow from operations Change in working capital Sustaining capex Free cash flow Development investments Divestments Cash flow after investments Dividends Equity issuance (repurchase) Currency fluctuation impact Change in fair value Others (1) Net debt reduction (increase) Net debt at the beginning of period Net debt at period end 2007 2,781 (79) (976) 1,726 (2,194) 2,492 2,024 (652) (452) 498 (227) (31) 1,160 9,845 8,685 2008 3,154 (154) (887) 2,113 (11,180) 615 (8,452) (1,051) 2,593 135 214 (1,638) (8,199) 8,685 16,884 4 th Quarter 2007 470 773 (379) 864 (543) 74 395 (29) (3) 234 (184) 5 418 9,103 8,685 2008 598 758 (334) 1,022 (894) 273 401 (158) 76 245 176 178 918 17,802 16,884 22 22 (1) Including 1,747 million euros for Orascom assumed net debt
Cash Flow Year-to-Date 2009 Substantial Free Cash Flow Generation m Cash flow from operations Change in working capital Sustaining capex Free cash flow Development investments Divestments Cash flow after investments Dividends Equity issuance (repurchase) Currency fluctuation impact Change in fair value Others (1) 2008 2,556 (912) (553) 1,091 (10,286) 342 (8,853) (893) 2,517 (110) 38 (1,816) 9 Months 2009 1,772 138 (199) 1,711 (1,009) 588 1,290 (510) 1,445 144 (74) (24) 3 rd Quarter 2008 1,094 68 (200) 962 (911) 21 72 (36) 5 (470) 24 (74) 2009 857 43 (64) 836 (260) 409 985 (407) (2) 225 (70) 44 Net debt reduction (increase) (9,117) 2,271 (479) 775 Net debt at the beginning of period 8,685 16,884 17,323 15,388 Net debt at period end 17,802 14,613 17,802 14,613 23 23 (1) Including : 2009 45 million of debt disposed of, mainly related to Chile disposal 2008 (1,747) million euros for Orascom assumed net debt
YTD Sales at September 30, 2009 Cement Like for Like Sales Variance Analysis by Region and in Major Markets (1) Cement Volume effect Other effects (2) Activity variation vs. 2008 Western Europe France United Kingdom Spain Germany Greece -26.4% -19.7% -35.0% -36.8% -13.5% -24.9% 3.7% 2.7% 9.5% -6.9% 6.2% 2.4% -22.7% -17.0% -25.5% -43.7% -7.3% -22.5% North America -27.2% (3) 0.0% -27.2% Middle East Egypt Iraq Jordan Turkey 9.6% 18.8% 4.0% 5.6% -13.2% -2.3% 18.0% -14.0% -11.2% -16.6% 7.3% 36.8% -10.0% -5.6% -29.8% Central and Eastern Europe Poland Romania Serbia Russia -25.3% -14.0% -34.4% -23.3% -24.2% -6.1% -0.6% 0.1% 19.8% -28.3% -31.4% -14.6% -34.3% -3.5% -52.5% Latin America Brazil Chile -4.6% 0.0% -24.1% 7.7% 17.8% 4.8% 3.1% 17.8% -19.3% Africa Algeria Kenya Morocco Nigeria South Africa 4.5% 17.8% 14.0% 1.8% -4.8% -15.2% 5.6% 3.7% 11.7% 5.6% 11.8% 17.0% 10.1% 21.5% 25.7% 7.4% 7.0% 1.8% Asia China South Korea India Malaysia Philippines Cement (all markets) 10.5% 31.2% 9.1% 14.3% -14.5% 8.2% -8.6% (1) 4.7% -4.8% 15.8% 9.9% 9.3% 11.1% -1.4% 15.2% 26.4% 24.9% 24.2% -5.2% 19.3% -10.0% 24 24 Pure Price Effect +3.0% Country and product mix -4.4% (1) Variance on like for like sales on domestic markets before elimination of sales between Divisions; gross variation on volumes : -9% in the first nine months (2) Other effects: including price effects, product and customer mix effects (3) Volumes in the United States: -28.3%; in Canada: -23.3%
YTD Sales at September 30, 2009 Aggregates & Concrete and Gypsum Like for Like Sales Variance Analysis by Region and in Major Markets Aggregates & Concrete Volume effect Other effects (1) Activity variation vs. 2008 Pure Aggregates France United Kingdom North America Ready-mix Concrete France Spain United Kingdom North America -24.1% -19.1% -25.5% -28.5% -26.0% -16.7% -33.7% -28.2% -31.4% 3.3% 6.3% 3.0% 0.0% (2) 3.1% 2.3% -1.5% 2.3% 2.5% -20.8% -12.8% -22.5% -28.5% -22.9% -14.4% -35.2% -25.9% -28.9% Gypsum Volume effect Other effects (1) Activity variation vs. 2008 Boards Western Europe North America Asia, Pacific -12.3% -13.9% -17.6% -5.4% 3.3% 2.7% 5.0% 2.8% -9.0% -11.2% -12.6% -2.6% 25 25 (1) Other effects: including price effects, product and customer mix effects (2) Price effect +2.0%
Composition of Cement Energy Costs Total Energy Electricity 41% Fuel 59% Fuel Mix Components Petcoke 19% Fuel Oil 8% Gas 18% Coal 44% Alernative Fuels 11% 26 26 Note> Based on 2008 costs
Cement Internal Development Plan An Example in China Doubling the Capacity at our DuJiangYan plant with a scheduled start in 2010 DJY 3 DJY 2 2007: sold out Clearance Q1 08 NTP in Q4 08 First clinker in Q4 10 Clearance Q2 04 NTP in Q2 05 First clinker in Q3 06 @ 100% 2007 2012 Capacity addition (MT) 1.4 2.3 Investment (M ) 30 89 EBITDA (M ) 7 16 ROCE 16% 12% 27 27
The Benefit of Innovation in Concrete Example of 3 countries facing reduced demand: UK, US, Spain Total volumes declined by 20% in 2008 The 4 international brands grew by 26% Their market penetration grew from 3.3% to 4.8% UK Spain US East US West Total volume (21)% (24)% (18)% (17)% Agilia+ Artevia+ Chronolia+ Extensia Volumes stable up 103% up 28% up 30% International Brands Reinforce our Leadership 28 28