O

UR 17

S TR ATEG Y
L A F A R G E H O L C I M H A S E S TA B L I S H E D A S E T O F
S T R AT E G I C P R I O R I T I E S T O G E N E R AT E G R O W T H , M A X I M I Z E
R E T U R N S A N D C R E AT E S U S TA I N A B L E VA L U E F O R A L L O U R
S TA K E H O L D E R S . I N 2 0 1 6 , W E M A D E S I G N I F I C A N T P R O G R E S S
IN EACH OF THESE PRIORITY AREAS.

S T R AT E G Y
Page 18

A S T R AT E G Y T O D R I V E
SHAREHOLDER RETURNS COST
Page 20 LEADERSHIP

S T R AT E G I C P I L L A R
We will continue to
systematically and rigorously
manage our costs, leveraging
scale and best practice.

CASE STUDY#1
Fueling Ingenuity
Reducing costs through
fuelflexibility
Page 22

COMMERCIAL
T R A N S F O R M AT I O N

S T R AT E G I C P I L L A R
We want to be the partner of
choice for our customers,
anticipating their needs and
inventing with them the solutions
to build the future. This will
further drive differentiation,
growth and value.

CASE STUDY#3
Theres No Place Like Home
Helping small builders achieve
their dreams
Page 34 ASSET LIGHT S U S TA I N A B I L I T Y
CASE STUDY#4
A Rock Solid Relationship S T R AT E G I C P I L L A R S T R AT E G I C P I L L A R
We will optimize our current We want to run our business
Partnering every step
asset base, better leveraging in a sustainable way to limit
of the way
our industrial footprint, our impact on the environment
Page 40
reducing our capital expen and improve the lives of our
ditures and exploring new stakeholders. We also want
growth opportunities with to differentiate LafargeHolcim
lower capital intensity. by leading the way in addressing
the growing demand for
CASE STUDY#2 sustainable solutions.
A Win-Win Alliance
Making assets work CASE STUDY#5
Page 28 Brick By Brick
The recipe for affordable
housingand nature
preservationin Malawi
Page 46
 LAFARGEHOLCIM
18 Annual Report 2016

S TR ATEG Y

Worldwide spending on construction is U N M AT C H E D S T R E N G T H S

estimated to have reached US$10,000bil- LafargeHolcim is particularly well posi-
lion in 2015 and is expected to increase tioned to take advantage of the oppor-
further, driven by a continued rise in tunities that arise, with a combination
population, economic growth and urba ofstrengths that are unmatched in our
nization. The number of people living in industry. We have:
urban environments is predicted to rise
by 2.5billion over the next 15 years. More a global footprint, with leadership posi-
than 80percent of global consumption tions in the vast majority of our markets.
will occur in cities by 2030. We are the number one player in a third
of our markets and feature in the top
Building these cities which will need to three in 80percent of the countries in
be denser and more sustainable and the which we operate
infrastructure needed to connect them
andmake them function, represents an a balanced and well diversified portfolio
outstanding opportunity for LafargeHolcim that offers significant room for growth
which is uniquely placed to address the in developing markets (52 percent of 2016
challenges of urbanization. net sales) and r ecovery potential in m
ature
markets (48 percent of 2016 net sales)
In addition to these trends, the construc- a portfolio positioned in highly populated
tion industry is entering a period of areas, geographically well placed to take
transformation characterized by a more advantage of the global trend towards
dynamic environment with increased urbanization
demand for sustainable solutions, expand-
ing influence of digital technologies, and industry-leading product innovation
abroader range of construction solutions, capability, enabling us to anticipate
notably in affordable housing. and meet the changing needs of our
customers. Wehave around 2,000 grant-
ed patents orpatent applications for
cutting-edge construction technologies

a global pool of highly talented, experi-

enced and motivated people from diverse
backgrounds
Our strategy
19

F O U R S T R AT E G I C P I L L A R S T O solutions and the way we run our busi-

DRIVE RETURNS AND GROWTH ness. With the objective to increase the
LafargeHolcim has developed a strategy value we bring to our stakeholders and
that aims to further strengthen the open new and less capital-intensive
companys leadership position in the growth avenues, we will drive growth
construction industry and establish and returns through differentiation.
the Group as the partner of choice for
our customers involved early in the UNDERPINNING
design phase of projects to address O U R S T R AT E G Y :
the dual challenges of urbanisation and Health & Safety the wellbeing and
sustainability. safety of our employees, those who work
with us, and the communities we interact
Building on our world-class innovation with every day
and global production capabilities,
People we are committed to engage,
LafargeHolcim provides a comprehensive
motivate and develop our people, pro-
set of innovative and sustainable solutions
viding diverse and international career
across a wide range of projects: from the
paths. We believe people are central to
single-storey family home to the most
the success of the company and the value
complex large-scale infrastructure project.
it creates for its stakeholders

Our strategy is built on four pillars: Digital developing and adopting the
Cost Leadership, Asset Light, Commercial digital solutions that support innovation,
Transformation and Sustainability. interconnectedness and bringing better
solutions to more customers in more
Cost Leadership(Page 22) and an places is a key component of success in
Asset Light(Page 28) approach are two the future
essential factors that enable the business
to grow returns through disciplined cost
management and allocation of capital.

Commercial Transformation(Page34 and 40)

and Sustainability(Page 46) will differentiate
LafargeHolcim from competitors. We seek
to anticipate the needs of our customers
and address their challenges while pro-
moting sustainability, both through our
 LAFARGEHOLCIM
20 Annual Report 2016

A S TR ATEG Y
TO DR I V E SH A R EHOLDER
R E T UR N S

At LafargeHolcim, our commitment is to 2018 OBJECTIVES

create and return value to shareholders. We will generate a run rate operating
Execution of our strategy will enable us free cash flow of between CHF2.8 and
toachieve that objective. We have estab- 3.3billion, or CHF5.00 per share, in 2018.
lished mid-term targets with a focus on
We will keep run rate capital expenditure
maximizing free cash flow, generating
below CHF2billion in 2018.
profitable growth, driving strict capital
allocation discipline and creating We will generate CHF7billion in Adjusted
sustainable value for our shareholders. Operating EBITDA in 2018.

We will increase our return on i nvested

capital by 2018 by 300 basis points from
the 2015 level, thanks to o
perational im-
provements.

We are committed to maintaining a solid

investment grade rating and, commen
surate with this goal, return cash to
shareholders through an attractive divi-
dend policy and a share buyback program
of up to CHF1billion in 2017 and 2018 as
well as the potential for special dividends.

1
Targets assume current scope adjusted for the entire CHF 5.0bn disposal
program and FX @ November 1, 2016.
Our strategy
21

The Group is on track and is building on

the momentum of earnings and cash flow
growth in 2016. We reaffirm our commit-
ment to asolid investment grade rating.
Our potential to grow benefiting from
our best-in-class portfolio, operational lev-
erage, ability to differentiate our offer,
and optimization of our cost base under-
pins our 2018 targets. The result for
shareholders is that, within our strict
capital allocation discipline, we will deliver
significant cash returns.
 LAFARGEHOLCIM
22 Annual Report 2016

KHALED GHAREIB, INDUSTRIAL DIRECTOR

OF LAFARGE CEMENT EGYPT
S T R AT E G I C P I L L A R COST LEADERSHIP

COS T
LE A DER SHI P
W E W I L L C O N T I N U E T O S Y S T E M AT I C A L LY
A N D R I G O R O U S LY M A N A G E O U R C O S T S ,
LEVERAGING SCALE AND BEST PRACTICE.

Significant cost saving potential has been uncovered

through the process of realizing synergies.

Cost excellence is in the DNA of our organization

and is essential to success in our industry.

Driven by our performance organization,

we will use all the available levers to control
and reduce our costs.

OBJECTIVES
We will deliver the total run rate synergies
of more than CHF1billion by the end of 2017,
ahead of schedule.

We will leverage expertise, best practice and

scale benefits throughout the countries in
which we operate.

We will target all cost levers, including fuel

mix o
ptimization and energy efficiency to
address rising energy prices.
S T R AT E G I C P I L L A R COST LEADERSHIP

Our synergy targets for 2016 have been exceeded and are fully
visible in our bottom line. This has been achieved thanks to the
systematic approach we took to identify integration-related
savings across our business and to the full mobilization of our
teams to achieve those targets.

Maintaining a tight rein on costs is a key element ofour strategy.

The work done on synergies and standard cost improvements
allowed us to explore new avenues for cost reductions. We ad-
dressed new opportunities in SG&A and industrial fixed costs
while trimming variable costs in addition to our focus on procure-
ment and logistics. Initiatives totalling CHF200million have been
identified in a
ddition to on-going cost plans and will contribute
positively to our 2018 EBITDA target.

Beyond this, we continue to rigorously screen all cost categories

to drive optimization and cost reduction.

TIGHT COST MANAGEMENT

As we combine the skills and know-how of the best professionals
in the business, we are able to reduce our costs and operate
efficiently anywhere in the world. Flexibility, agility, internal and
external benchmarking and expertise close to our operations are
key success factors to drive cost leadership.

On fuel and energy costs, for example, in countries where petcoke

wasnt being used, we were able make the conversion from coal to
petcoke quickly and efficiently during 2016. This was achieved by
mobilising global sourcing experts to work closely with local teams.

In 2017, where we anticipate energy prices will b e up by some

10percent, addressing fuel mix optimization and energy efficiency
as well as the use of alternative fuels, will be a key area of focus
when mitigating energy costs.
#1 S T R AT E G I C P I L L A R COST LEADERSHIP
23
L O C AT I O N SOKHNA, EGYPT

CASE
STUDY

#1

FUE LI N G INGENUITY
Reducing costs through
fuel flexibility

During the last couple years, the Sokhna

plant in Egypt developed and implemented
an innovation change to drastically lower
itsenergy costs. The experience prepared
the team to weather future shifts in
fuelcosts, inevitable as they are. We have
increased our resilience and our immunity
to cost shifts, says Khaled Ghareib,
I ndustrial D irector of Lafarge Cement Egypt.
 LAFARGEHOLCIM
24 Annual Report 2016

Khaled Ghareib and his c olleagues

at the Sokhna plant.

CHF 60 million
savings
in fuel costs

Applying asset light thinking, they decided to take one

of the eight cement mills and convert it to a mill for
processing petcoke. By modifying this existing asset, they
would be able to save about CHF30million compared to
building a new mill. But this was challenging there was
no blueprint for such a conversion as it was the first of its
kind in the industry.

The Group empowered us, trusted us, to develop a

solution through collaboration, says Ghareib. When
people believe in a dream, theyll make it happen.
Working with the regional Cement Industrial Perfor-
A FIRST-OF-ITS-KIND CONVERSION mance project management and engineering teams,
Fuel is an essential cost driver in the energy-intensive wefound a way to do it. By May2014 the mill was
cement industry, representing about 14percent of total converted.
costs. To stay competitive, managing costs is critical.
GETTING THE OPTIMAL PERFORMANCE
Since the Arab Spring in 2011, natural gas has been In 2016, the team faced its second challenge: improving
inshort supply and, as such, much more expensive. productivity of the converted mill. Again relying on their
Because of this, the plant began looking at alternate expansive expertise and the power of collaboration, the
fuel sources. The prices of lower quality solid fuel were team succeeded in fully optimizing the plant, doubling
attractive. But how best to utilize them? In 2014, the productivity from under 40 tonnes per hour to above
team in Egypt launched a project to switch a significant 80tonnes per hour. This allowed them to significantly
percentage of the fuel mix to petcoke, a byproduct of increase the percentage of petcoke used in the mix,
theoil refining process. taking advantage of this new fuel.
Our strategy
Case Study #1 25

The Sokhna plant plans to

increase the share of alternative
fuels to 20percent in 2017.

KHALED GHAREIB

The Group empowered us, trusted

us, to develop a solution through
collaboration. When people believe
in a dream, theyll make it happen.
Working with the regional Cement
Industrial Performance project
m anagement and engineering teams,
we found a way to do it.
 LAFARGEHOLCIM
26 Annual Report 2016
Our strategy
Case Study #1 27

A N I N I T I AT I V E T O
DECREASE ENERGY COSTS

The Egypt project was part of the global

Fuel Mix Optimization Initiative, FMOI,
started in early 2016. The initiativeembod-
ies the Groups priorities of fostering
innovation, making asset light decisions
and promoting sustainability. The objec-
tive is to optimize the fuel mix used by not
only reducing costs, but also improving
product quality and lowering emissions. Petcoke, a byproduct of the oil
Fuel mix optimization will vary, of course, refining process, is used as fuel
incement production.
by location and external circumstances.

FMOI is a collaborative initiative, involving

know-how from Sustainable Development,
Geocycle, CIP (Cement Industrial Perfor-
mance) and Procurement. By using inter-
disciplinary expert know-how, a global
library of knowledge about optimized fuel
mixes is being built to be used by plants
as needed.

The day we had commissioned the inaugural run of

thefully optimized mill, I was there with the plant
management team. We were in the control room for
thelaunch, but things didnt go as expected, says
Ghareib. At night, it was suggested that the team sleep
inshifts, as the plant staff worked around the clock to
getit started. But no one did, Ghareib remembers.
When we got the mill started for the first time
36hours later, we were all there, thrilled to see the
dream become reality.

S TAY I N G F L E X I B L E A N D A G I L E
The impact on plant costs was significant. In two years
weve gone from zero to 80 percent petcoke. Our agility
allowed us to shift from one fuel to another, capitalizing
on the lower costs, notes Ghareib. As a result, the fuel
bill for the plant was reduced by CHF 60 million in 2016
compared with 2015.

The experience of shifting fuel sources in the past couple

of years has prepared the team for similar exercises in
the future. The market is characterized by movement,
says Ghareib. Its a question of being ready when the
opportunity comes.

As for the next move? Ghareib says, The name of the

The Sokhna plant, LafargeHolcims
game next year is to shift to 20 percent alternative fuel,
biggest cement plant. using processed waste. The team is ready.
 LAFARGEHOLCIM
28 Annual Report 2016

YELENA SANTIAGO, LAFARGEHOLCIM

OMAR AND DARIO MARTINEZ, INCA C
ONCRETOS
S T R AT E G I C P I L L A R ASSET LIGHT

A S SE T
L IGHT
WE WILL OPTIMIZE OUR CURRENT ASSET BASE,
B E T T E R L E V E R A G I N G O U R I N D U S T R I A L F O O T P R I N T,
R E D U C I N G O U R C A P I TA L E X P E N D I T U R E S
AND EXPLORING NEW GROWTH OPPORTUNITIES
W I T H L O W E R C A P I TA L I N T E N S I T Y.

Optimizing our current asset base is resulting in

lower capital expenditure needs while supporting
growth of our business.

Future growth will also be focused on low-capital

intensive business models that enable us to access
more of the value chain.

Our expansion is driven by operational excellence

and capital-light asset models.

OBJECTIVES
Since 2015, we have limited capital expenditures.
For 2016 to 2017, our goal is a cumulative capital
expenditure of below CHF3.5billion.

Thereafter, we target a capital expenditure

run rate of less than CHF2billion per year.
S T R AT E G I C P I L L A R ASSET LIGHT

LafargeHolcim is operating in a traditionally capital-intensive

industry. Thanks to our global footprint with the already-installed
capacity and our know-how in preventive maintenance and c apacity
optimization, we are successfully pursuing a lean capital spending
strategy, significantly reducing our capital investment without
hindering our ability to grow our business.

By optimizing our current assets, we are using the capacity we

already have or are developing. We are on track to meet our tar-
gets of a cumulative capital expenditure of below CHF3.5billion
for 20162017 and of a run rate of less than CHF2billion per year
from 2018 onwards.

A F O C U S O N O P T I M I Z AT I O N
We actively optimize our current asset base and promote an
asset light mindset across our business. We outsource our fleet
management whenever possible and develop alternative logistics
offers to reduce capital expenditure. Systematic debottlenecking
and operational improvements at our plants are also delivering
significant benefits.

The leveraging of our global trading platform e

nables us to serve
some markets without the need to invest in local clinker capacity.

Our asset light approach is also focused on optimizing future

growth, developing innovative and less capital-intensive b usiness
models. For example, we are implementing franchise models in
the ready-mix and retail segments, enabling us to reach custom-
ers in a differentiated way while keeping capital expenditure low.
#2 S T R AT E G I C P I L L A R ASSET LIGHT
29
L O C AT I O N SALTILLO, MEXICO

CASE
STUDY

#2

A WI N -WIN ALLIANCE
Making assets work

Through this alliance, we all the Allied

Partners can become the best concrete
producers of this country, says Omar Mar-
tinez, Head of Operations for Inca Concretos
in C oahuila, Mexico. LafargeHolcim is right
there with them and shares their ambi-
tion.Yelena Santiago, Strategic Marketing
Leader Industrial Segment for LafargeHolcim
in Mexico, says of the relationship: We
s upport their growth. We really want them
to be successful.
 LAFARGEHOLCIM
30 Annual Report 2016

Y E L E N A S A N T I A G O , S T R AT E G I C M A R K E T I N G L E A D E R ,
INDUSTRIAL SEGMENT FOR LAFARGEHOLCIM IN MEXICO

The size of LafargeHolcim together

with the Allied Partner Network
means the sum is much stronger
than any of its parts.

by 2018
Inca Concretos
plans to
grow to 10 plants

Allied Partners 24 in total at the end of 2016 operate

60 active plants. Together with LafargeHolcims
40existing plants, they form a network of 100 ready-mix
sites in Mexico.

BENEFITING FROM SHARING

Inca Concretos has been a customer of LafargeHolcim
since its inception in 2004. Martinez explains how they
became part of the Allied Partner Network: In 2012, we
created a growth plan with the goal of having ten plants
by 2018 at the time we were just opening the third. In
2013, LafargeHolcim came to talk to us about their plants
for sale and the Allied Partner Network. It was the perfect
C R E AT I N G R I S K - F R E E M A R K E T A C C E S S timing for us. We had been working on a structure to
LafargeHolcims divestment of 50 ready-mix concrete support growth, so this was an interesting opportunity
plants in Mexico in recent years has led to a fruitful toget closer to LafargeHolcim. We were very excited
relationship with the new owners. This has been the about the potential.
strategy since 2012 and it is exceeding initial expecta-
tions. Not only has the new Allied Partner Network Inca Concretos bought four LafargeHolcim ready-mix
increased brand awareness in markets that otherwise plants. It now has a total of seven and is on track to meet
would not be accessed, allowing LafargeHolcim to have its 2018 goal of ten, operating mainly in the northern
astronger market position without significant capital part of the country. Membership in the Allied Partner
outlay, its created an opportunity to benchmark and Network has helped strengthen the relationship between
improve ready-mix operations. Santiago says of the Inca Concretos and LafargeHolcim. Our commercial
relationship: Were giving them the location, the manual relationship has improved. There is more of a commit-
and the technical services. But they are helping us evolve ment to stick together and improve communication.
our business model to serve our customers better. Theres just a lot more trust, says Martinez.
Our strategy
Case Study #2 31

Omar Martinez and Yelena Santiago

at Inca Concretos headquarters and
ready-mix plant in Saltillo.

Samples for testing

the mechanical strength
of concrete.
 LAFARGEHOLCIM
32 Annual Report 2016

Inca Concretos operates seven

ready-mix plants in Mexico.

Dario Martinez founded

Inca Concretos in 2014.
Our strategy
Case Study #2 33

DARIO MARTINEZ, CEO OF INCA CONCRETOS

We think we can grow into other

markets. LafargeHolcim has
the necessary scale and weexpect
to get technical support to
help us become a better supplier.

60 plants
are operated
by Allied Partners
in Mexico In 2016, LafargeHolcim implemented a third-partycerti
fication process offering the Allied Partners Certification
forQuality Ready-Mix Production. The certification process
provides training and improves quality control. In exchange,
LafargeHolcim offers brand support, access to specialized
products and endorsement. Inca Concretos certified its
first plant in 2016 and plans to certify the rest in 2017.
Martinez says: The certification process has shown us a
different way to work. It has helped not only with quality,
but also with how we structure our company. I think
certification has increased commitment to quality and
service throughout the company. And I think it will help
us sell more.

IN IT FOR THE LONG HAUL

The LafargeHolcim ready-mix footprint in Mexico supplies
about 10 percent of the national demand the Allied
Partners supply another 10 percent. Inca Concretos plans
Being an Allied Partner means that LafargeHolcim pro- to grow to ten plants by 2018 and sets its sights beyond
vides technical support, IT systems, training, a purchasing that: We also think we can grow into other markets.
club and access to market data, among other benefits. LafargeHolcim has the necessary scale and we expect
Santiago notes: The size of LafargeHolcim together toget technical support to help us become a better
withthe Allied Partner Network means the sum is much supplier, says Dario Martinez, CEO of Inca Concretos.
stronger than any of its parts. Being able to share tech-
nical advice and IT systems across sites means cost The relationship with Allied Partners goes beyond the
savings for all the partners. The purchasing club allows transactional. Creating an ongoing two-way dialog helps
LafargeHolcim to negotiate discounts on everything from the Allied Partners be more successful while also giving
insurance to equipment, benefiting all involved. And the LafargeHolcim valuable information about local markets.
access to market data on construction permits, financial Looking to the future, Dario Martinez says: First, I expect
and economic indicators, and sharing of sales leads our relationship to grow, as it has for the past three
makes LafargeHolcim a valuable business partner, acting years. And I think loyalty will grow. I think the loyalty is
as far more than just a supplier. there because of the alliance.
 LAFARGEHOLCIM
34 Annual Report 2016

HUB STORE CUSTOMER

N I D A S A N TA R O M A N A
S T R AT E G I C P I L L A R C O M M E R C I A L T R A N S F O R M AT I O N

COMMERC I A L
TR ANSFORMAT ION
W E WA N T T O B E T H E PA R T N E R O F C H O I C E F O R
O U R C U S T O M E R S , A N T I C I PAT I N G T H E I R N E E D S
A N D J O I N T LY I N V E N T I N G T H E S O LU T I O N S TO
BUILD THE FUTURE. THIS WILL FURTHER DRIVE
D I F F E R E N T I AT I O N , G R O W T H A N D VA L U E .

Getting closer to our customers allows us to meet

their needs with increased speed, precision and
creativity.

Our goal is to be leaders, recognized as the p

artner
of choice in construction, whether for an individual
home, a commercial building or the largest infra-
structure project.

We will use our scale and expertise to continue

to innovate, co-creating solutions with our
customers and nurturing long-term relationships.

OBJECTIVES
We will deliver our growth targets thanks to our
focus on providing innovative and sustainable
solutions to our customers and capturing the full
value of our differentiated products and services
in our pricing.
S T R AT E G I C P I L L A R C O M M E R C I A L T R A N S F O R M AT I O N

Commercial excellence begins with differentiated products and

services. With our industry-leading expertise and R&D resources,
we expect to maintain our position as the leading innovator in
our industry. We have an extensive innovation pipeline, and are
working on a number of significant and distinctive developments
focusing on sustainable construction.

To successfully differentiate and create a competitive advantage,

we are strengthening collaboration with our partners. This is
particularly relevant in infrastructure where we are building
partnerships using our sectoral expertise, access to innovative
solutions and world-class execution.

With retail representing more than 60percent of our volumes, a

critical additional differentiating factor is our ability to promote
innovative retail models, leveraging digital solutions, the strength
of our brands and the quality of our products and services.

R E A L I Z I N G T H E B E N E F I T S O F D I F F E R E N T I AT I O N
The benefits of our focus on commercial transformation, which
differentiates our products and services in a competitive market,
are increasingly evident across our business.

In retail, we are building on our existing knowledge to define new

models, evidenced by our retail transformation across 3050 coun-
tries by 2020. We are also pioneering digital marketplaces our
e-commerce platform for the Disensa brand (www.disensa.com)
was launched in October2016 in Ecuador. Further countries will
go live using a common technology platform.

In the small to mid-sized building segment, we are increasing

our presence in affordable housing, addressing the acute need in
AsiaPacific, Middle East & Africa and Latin America. Globally, it is
estimated that four billion people live without adequate housing.

In infrastructure, we have worked with external experts to co-

develop an integrated business approach to road construction
that can be delivered in a wide range of countries. In the past
12months we have increased our pipeline of work in this segment
by 25percent, leveraging significant incremental earnings poten-
tial that is hard for our competitors to access.

In our growing specialties segment, the establishment of an

international key account management capability is enabling us
to work with the largest global contractors whose requirements
and models are quite different to local or regional players. One
example is our partnership with Chinese company CCCC which is
already delivering results, not least because of our ability to pro-
vide Mandarin-speaking account managers on the ground.
#3 S T R AT E G I C P I L L A R C O M M E R C I A L T R A N S F O R M AT I O N
35
L O C AT I O N TA R L A C , P H I L I P P I N E S

CASE
STUDY

#3

THE RE S NO P LACE
LI KE HO M E
Helping small
b uildersachieve their
dreams

I am confident that my home will stand the

test of time because I used quality mate-
rials to build it, says Nida Santa Romana,
customer of one of LafargeHolcims Helps U
Build, or HUB, franchise stores in the Philip-
pines. The LafargeHolcim retail model goes
beyond simply selling cement by offering
individual homeowners and home improvers
advice, a wide range of quality products at
reasonable prices, logistics and partnership
with a trusted brand.
 LAFARGEHOLCIM
36 Annual Report 2016

Nida Santa Romana receives advice

on construction materials from
HUB associate Michael Beltran.

Nida Santa Romana built

herhome with cement and
other materials from her
localHUB store.
Our strategy
Case Study #3 37

L A FA R G E H O L C I M S R E TA I L S T R AT E G Y

The HUB franchise model in the Philippines

is an example of LafargeHolcims a mbition
of getting closer to the end user by devel
oping its presence in the retail market.
The Group is currently exploring different
retail concepts to find the best solution
for each market, and is also looking at
breakthrough digital solutions to better
serve end users. The objective is to imple-
ment successful retail models in 3050
countries by 2020.

THE PULL OF A BETTER PRODUCT

Santa Romana is in the finishing stages of building her Ed Pineda, who runs the
home where she now lives with her family. When she TarlacCity HUB store, a
cquired two
HUB franchises in 2016 and
firststarted construction, she was using cement and isplanning to open two more.
supplies from a LafargeHolcim competitor. During that
time she met an account executive of one of the HUB
stores, who introduced her to the benefits of using
LafargeHolcim products. My husband and I are in the
electrical business, says Santa Romana, so we know
thevalue of choosing products that will last. Santa
Romana decided to make a trial purchase of cement
andsteel bars from her local HUB store in Tarlac.

Her contractor tried out LafargeHolcims Wallright

masonry cement and was pleased at how easy it was to
apply and how it didnt crack upon drying. He was also Since most HUB stores are strategically located in areas
impressed with the quality of the steel bars sold at the where LafargeHolcim is not the leading cement player,
HUB. The quality is what first brought her over to the franchisees like Pineda help build market share by
HUB store the additional advice she received helped her educating small contractors and homeowners about the
finish her home, using building materials from the store. advantages of LafargeHolcim products. This is exactly
what happened when Pinedas account executives first
A WIN-WIN FRANCHISE MODEL met Santa Romana. Because Pinedas stores are part of a
LafargeHolcim officially started franchising retailout network of branches serviced by the HUBs supply chain
letsin the Philippines in 2015 and now has 22 stores group, Pineda is able to offer reasonable prices and
spread across key cities of Luzon, the largest and most service a wider area than most competitor stores. He is
populous island. Ed Pineda acquired two HUB franchises able to share these efficiencies with his contractor
in 2016 Tarlac in April and Cabanatuan in October. customers who have widespread project sites. For
Pineda, a former contractor, knows the construction individual homeowners like Santa Romana, he offers the
industry well and has a large network of contacts working convenience of small-scale deliveries. In our business,
on government projects in the Tarlac and Cabanatuan there is a lot of competition. We offer a high standard of
areas. In the future, he is looking to further expand by quality and our associates are experts on construction
opening franchise stores in Dagupan and Aurora, where materials we deliver what the customer wants, within
he also has wide networks. the day, Pineda says.
 LAFARGEHOLCIM
38 Annual Report 2016

N I D A S A N TA R O M A N A , H U B S T O R E C U S T O M E R

All of the products I bought

were of good quality.
If I ever build another house,
theres no doubt Id use
LafargeHolcim products and
mylocal HUB store.

Holcim Skim Coat is used to

correct surface imperfections and
unevenness of concrete walls.

ON TIME AND WITHIN BUDGET

What did Santa Romana like best about buying her
building materials at Pinedas HUB? Their personnel
were very helpful. And doing business with them was
soconvenient and easy. Because she was working on
abudget, her building material requirements came in
smallquantities over the course of a year, allowing her
tomanage her funds. The small, mixed-merchandise
deliveries were no problem for her HUB store, which has
the logistical support to service small-scale deliveries.

Pinedas account executives were able to help Santa

Romana in planning delivery schedules. This gave her
peace of mind in being able to place the orders and not
worry about the rest. And the stores proximity made
iteasy for her to make those last-minute purchases
needed by her contractor.

Santa Romana sleeps easy now knowing, all of the prod-

ucts I bought were of good quality. Though starting a
new project is the last thing on her mind now, she did
say, If I ever build another house, theres no doubt Id
use LafargeHolcim products and my local HUB store.
Our strategy
Case Study #3 39

Nida Santa Romanas house

isin the finishing stages of
construction.

22HUB stores
are today
spread across the
Philippines
 LAFARGEHOLCIM
40 Annual Report 2016

J O N AT H A N P E A S E , O W N E R O F
R O C K S O L I D S TA B I L I Z AT I O N A N D R E C L A M AT I O N , I N C .
#4 S T R AT E G I C P I L L A R C O M M E R C I A L T R A N S F O R M AT I O N
41
L O C AT I O N CHANNAHON, ILLINOIS, USA

CASE
STUDY

#4

A ROCK SOLID
RE LATI O NSHIP
Partnering every
step of the way

Weve been working with Rock Solid Stabi

lization and Reclamation for over a decade.
Theyre one of our best customers, says
Tom Kiernan, Geotechnical Product Specialist
for the Midwest Region for LafargeHolcim
inthe US. The partnership with Rock Solid
embodies how LafargeHolcim differentiates
itself from competitors, creating relation-
ships that go way beyond selling construction
materials.
 LAFARGEHOLCIM
42 Annual Report 2016

Altering soils and enhancing

their properties results in
greater elasticity and resist-
ance to wear.

Jonathan Pease of Rock Solid and

Tom Kiernan of LafargeHolcim
at the job site in Channahon, Illinois.
Our strategy
Case Study # 4 43

GETTING TO KNOW THE ROAD

Road infrastructures are significant investments with In 2014, Kiernan developed a special blend, consisting
economic, environmental and social challenges. Like ofClass C fly ash and Type 1 cement. The creation of
hisother colleagues who are all experts in their fields, thisproduct illustrates LafargeHolcims commitment to
Kiernans expertise is soil stabilization and full depth innovation: it solved a local problem of cement shortage
reclamation savvy about the process and not just the and tanker availability, while offering a solution for clients
sale. Being an expert in the field means that Kiernan that could save them money through the beneficial
speaks the same language as his customers and is able reuse of fly ash. The product was affectionately named
to adapt the products to real needs. inrecognition of the two plants where the ingredients
came from: the Joliet plant in Illinois and the Alpena plant
Early on in any road project comes the need to optimize in New York.
the soil on site. For decades, LafargeHolcim has offered
products to help stabilize soil. Along the way, it has Pease says: Kiernan introduced us to the fly ash market
been the collaborative relationships with customers and taught us how to use it correctly LafargeHolcim
that have driven the development of new innovations. was our mentor. Theyve always helped us out if a
Itwas this type of innovation that laid the foundation different material was better for the job, they recom-
for the relationship with Rock Solid. mend it. Theyre always ultimately interested in our good
job performance.
Rock Solid Stabilization and Reclamation, Inc. got into
the soil stabilization business a little over a decade ago.
Owner Jonathan Pease remembers how it all started:
In2005, I was working with my dad at our excavation
company. Hed gotten a call about a live demo forfly ash
stabilization put on by Chip Coulter from LafargeHolcim.
Class C fly ash a coal combustion byproduct is an
alternative to Portland cement and can be used to dry
wet soils on site, stabilizing unsuitable soil for roads and
Tom Kiernan, LafargeHolcims geotech-
other structures. Using fly ash isa less expensive nical product specialist, enjoys helping
alternative to cement and uses a material that would Rock Solid find optimal materials and
solutions for their projects.
otherwise go to landfill.

A week later, Pease was going out to bid a job building

anew parking lot. I called Chip and asked him if he
thought the fly ash would work to stabilize the wet clay
soil on site rather than taking the engineers recommen-
dation to undercut unsuitable soil and import aggregate
and clay to build up the site. He said it would, and that
was the first job we got with no import or export of any
materials, utilizing only onsite soils. It made me a
believer in the process. I still drive by that parking lot
today and it looks great. In 2007, Pease went into the
soil stabilization business full time, launching Rock Solid.

Kiernan has been working with Rock Solid since the early
days. He knows that the best material for soil stabiliza-
tion is local material with the right binder: this keeps
costs down. So, rather than bringing in new soil or even
bringing in up to 10 percent Portland cement, hes always
on the lookout for an alternative that uses less material
and less transport, generates less CO2 and ultimately,
costs less.
 LAFARGEHOLCIM
44 Annual Report 2016

WORKING TOGETHER, ON AND OFF THE ROAD

The relationship with Rock Solid goes beyond soil
stabilization with other road techniques. Both companies
are active in ARRA (Asphalt Recycling & Reclaiming
Association) Kiernan was director of the ARRA Board
from 2008 to 2015 until Pease took his spot. Over the
past decade, Rock Solid and LafargeHolcim have teamed
up to promote in-place recycling disciplines through
ARRA regional seminars and local brown-bag lunches.
Their joint promotional efforts have resulted in many
successful projects.

Rock Solid recently completed a soil stabilization project

in Channahon, Illinois, using more than 200 loads of
Class C fly ash and Type 1 cement from LafargeHolcim
totreat the wet subgrade soil under the building pad
andthe truck staging areas. Pease says: Its an ongoing
relationship. We have projects all over the country. Weve
probably worked in 25states now. LafargeHolcim covers
a big area, too, so were looking to work with them on
anational level.

TA I L O R E D S O L U T I O N S

With infrastructure, theres no such thing

as one size fits all. LafargeHolcim t akes
asegment approach with the end userin
mind, creating a partnership early on by
encouraging dialogue with our customers.
What sets us apart is our in-depthknowl-
edge of each business sector. Our people
speak the same language as our customers,
which makes them able to adapt our
p roducts to real needs. Our material and
sourcing expertise is center stage, with
afocus on optimizing the cost, schedule
and durability of construction. In addition,
we have the support of the research center
in Lyon, France to solve our customers
most challenging problems.

Tom Kiernan and Jonathan Pease

have been partnering
on projects for over a decade.
Our strategy
Case Study # 4 45
 LAFARGEHOLCIM
46 Annual Report 2016

B E N J A M I N K AT O L A ,
MANAGING DIRECTOR OF BUILT ENVIRONS
S T R AT E G I C P I L L A R S U S TA I N A B I L I T Y

SUS TA I N A BI L I T Y
W E W A N T T O R U N O U R B U S I N E S S I N A S U S TA I N A B L E
W AY T O L I M I T O U R I M PA C T O N T H E E N V I R O N M E N T,
O P E R AT E S A F E L Y A N D I M P R O V E T H E L I V E S O F O U R
S TA K E H O L D E R S . W E A L S O W A N T T O D I F F E R E N T I AT E
L A F A R G E H O L C I M B Y L E A D I N G T H E WAY I N A D D R E S S I N G
T H E G R O W I N G D E M A N D F O R S U S TA I N A B L E S O L U T I O N S .

Our commitment to sustainability is a differentiating

factor. We see it as a growing opportunity as well as
a responsibility.

Our development of new products and services is

driven by our commitment to sustainability.

OBJECTIVES
We aim to reach a zero fatality target
in Health & Safety.

We aim to generate one-third of our turnover from

solutions with enhanced sustainability performance
by 2030.

We are committed to leading the way on CO2

reduction through the way we do business.
S T R AT E G I C P I L L A R S U S TA I N A B I L I T Y

We regard sustainability as both a responsibility and an oppor

tunity. Concrete is the second most used material in the world
after water. Where there is a need to build there is a need for
concrete.

It is estimated that one-third of total worldwide greenhouse gas

emissions is generated by buildings over the course of their life
cycle. We already have many innovative solutions to address CO2
emissions in buildings and we need more. Building our business
around sustainability will increasingly differentiate us in our
sector, as future carbon pricing and cost of waste management
become real issues for our customers.

A N O P P O R T U N I T Y T O L E A D T H E W AY
Were already making great strides in developing innovative build-
ing products that promote sustainability. Responding to a request
from the Malawi government, we developed DURABRIC, a build-
ing block technology that uses locally sourced earth combined
with cement and prevents deforestation by avoiding the need for
traditional wood-fired brick kilns. In 2016 we launched A
irium, a
high performance mineral foam insulation, that is fully recyclable
and fire resistant, with a lower CO2 impact compared toother
solutions.

Working in partnership with Solidia Technologies, we have devel-

oped a new binder that is produced at lower temperatures and
through a chemical reaction that generates less CO2. Solidia
CementTM hardens through the addition and absorption of CO2
ina patented curing process that reduces the overall carbon foot-
print by up to 70percent. Solidia Concrete reaches full strength
inless than a day, offering considerable energy savings and cost
reductions compared to precast concrete manufacturers.

Our worldwide waste management brand, Geocycle, is allowing

us to step up our use of alternative fuels by utilizing processed
municipal and industrial waste to fire our clinker kilns. This solu-
tion reduces CO2 emissions and cuts energy costs, while providing
a sustainable solution to waste that would typically otherwise be
disposed of in environmentally damaging landfill sites.

More broadly, in 2016 we launched our sustainability strategy

which we call the 2030 Plan. The 2030 Plan is the most far-reach-
ing sustainability roadmap in our sector. It sets targets for our
operations and drives positive impacts beyond our fence line,
while highlighting the difference we can make for customers
withour innovative products and services. We have set ourselves
a transformational overall target: we want to generate one-third
ofour turnover from solutions with enhanced sustainability
performance by 2030.
#5 S T R AT E G I C P I L L A R S U S TA I N A B I L I T Y
47
L O C AT I O N LILONGWE, MALAWI

CASE
STUDY

#5

B RI CK BY BR ICK
The recipe for
a ffordable housing
andenvironmental
p reservation in Malawi

The way to go now is SSBs, says Malawian

contractor Benjamin Katola, Managing
D irector for Built Environs, speaking of soil
stabilized bricks (SSB). Katola builds houses,
schools, banks and hospitals in Central
andSouthern Malawi. In the past, common
fired bricks were the norm for building.
Butthats all changing with the optimiza-
tion of SSBs, the technical term for bricks
like DURABRIC, which offer acost-effective,
quality alternative with e nvironmental
b enefits.
 LAFARGEHOLCIM
48 Annual Report 2016

THE SEARCH FOR A BETTER BRICK A P O W E R F U L C O L L A B O R AT I O N

Like many other countries in Africa, Malawi is grappling In order to scale up sustainable building and economic
with the effects of climate change caused, in part, by growth in the region, LafargeHolcim teamed up with CDC
widespread deforestation. Deforestation is driven by (the UK government development finance institution) in
demand for wood, some of which is used to fire the kilns 2016 to create 14Trees, a joint venture company, named
to make common fired bricks. It wasnt until recently after one key benefit of DURABRIC. The partnership aims
that the soil stabilized brick became a superior alterna- to accelerate the production and commercialization
tive for construction in Malawi. ofDURABRIC in Sub-Saharan Africa. LafargeHolcim and
CDChave jointly invested CHF10million into 14Trees
Back in 2013, LafargeHolcim reacted to a nationwide operations and are eager to support the companys
call for a solution that would not only stem the tide of future growth collaboratively. At the end of 2016, 14Trees
deforestation by not requiring the use of wood-fired opened a new brick factory in Lilongwe to provide Central
kilns, but would also be affordable and locally made. Malawi with DURABRIC for a variety of building needs.
Theresult is DURABRIC, a brick made with the perfect
mixture of soil, sand, cement and water. It is compressed
in a mould and left to cure naturally, without firing. As a
result, it can save 14 trees for each house built, compared
to fired bricks. DURABRICs are three times stronger than
traditional bricks, result in one-tenth the CO2 emissions
compared to common bricks, are 20 percent cheaper per
square meter of wall, and are more resistant to heavy
rainfall.

Katola is optimistic about the impact of DURABRIC: Once

we can start building with SSBs like DURABRIC through-
out thecountry, we can preserve our natural resources,
stopsoil erosion and improve air quality. And he thinks
the time is right: People are starting to see the benefits
in the long run.

14 trees
can be saved
for each
house built with
DURABRIC

B E N J A M I N K AT O L A ,
MANAGING DIRECTOR OF BUILT ENVIRONS

Once we can start building with SSBs

like DURABRIC throughout the country,
we can preserve our natural resources,
stop soil erosion and improve air
quality. People are starting to see
the benefits in the long run.
Our strategy
Case Study #5 49

The Teacher Training College

in Lilongwe was built in 2016
with DURABRIC.

The college hosts a secondary

school and a tertiary college.
 LAFARGEHOLCIM
50 Annual Report 2016

Benjamin Katola, a customer

of 14Trees, uses DURABRIC
for building houses, schools,
B E N J A M I N K AT O L A , hospitals etc.
MANAGING DIRECTOR OF BUILT ENVIRONS
The new DURABRIC factory was

There wont be a need

commissioned in September2016.
The plant employs 30 people.

to use anything but SSBs

like DURABRIC.

CHF10million
LafargeHolcim and
CDC have invested
into 14Trees and are
eager to support the
companys future
growth.
Our strategy
Case Study #5 51
 LAFARGEHOLCIM
52 Annual Report 2016

A S U S TA I N A B LY B U I L T F U T U R E

LafargeHolcim is confident about the

commercial prospects of ventures such
as14Trees, which accelerate its four
a ffordable housing offers: microfinance,
distribution solutions for slums, mass
housing, and earth-cement buildingsolu
tions. These offers are implemented in
25countries and aim to positively impact
up to 25 million people by 2030.DURABRIC
is a cornerstone of L
afargeHolcimsearth-
cement building solutions, particularly in
Africa where 14Trees will enableDURABRIC
to be commercialized in other countries,
particularly in Sub-Saharan Africa.
DURABRIC also hits many points of the
2030 Plan, LafargeHolcims sustainability
strategy: its reduced CO2 impact supportsa
key climate target, and the way DURABRIC
offers affordable housing while advancing
business opportunities furthers the goal
of positively impacting people and
communities.

A nationwide advertising campaign

for DURABRIC, One Brick Saves
More, was launched in Malawi in
December 2016.

Whats great about DURABRIC is that it can be made

manually on any site, just like traditional clay bricks.
Katola has been making SSBs for years. But having to
make the bricks on site is not always an attractive option.
With the old methods of production you need a really
bigteam on site to excavate the soil and use the manual
moulds, says Katola. Hes looking forward to being able
Daudi Lelijveld, Director and Head of the Impact Accele to purchase DURABRIC from the Lilongwe factory for
rator at CDC sees three objectives to the partnership: building projects in Central Malawi. By working with
First, the aim is to eliminate the use of trees for fired thecompany 14Trees, the bricks are already made.
bricks in order to halt rapid deforestation. Theres a
huge environmental impact made by eliminating the use More than 3 million DURABRICs have already been
of wood-fired bricks, notes Lelijveld, and with that an produced in Malawi since 2013, and have been used in
improvement in the social environment. Second, the around 500 buildings. The opening of the Lilongwe
goal is to bring a building material to the village level that factory should rapidly increase their use in Central
is strong, durable and has an attractive finish without Malawi. Katola says that there are many health centers
plastering, thereby making SSBs the aspirational brick of and schools to be built in the region this year. There
choice. Third, the project aims to create microeconomies won't be a need to use anything but SSBs. If theyre close
and microentrepreneurs at the local level in the building to Lilongwe, theyll probably get them from the factory
industry and beyond. rather than struggle to make them on site.