By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-World’s cement, aggregates and concrete firm, LafargeHolcim on Wednesday said it’s targeting a CHF 10 billion free cash flow generation by 2018.
“On December 1, at the Capital Markets Day, we will present the new company’s first three-year plan, including a clear roadmap on how we plan to achieve our new targets, one of which is a cumulative 2016 to 2018 free cash flow generation of at least CHF 10 billion,” Eric Olsen, CEO of the company said in a statement.
According to him, the plan will come into effect on January 1, 2016 and will become the benchmark against which to measure LafargeHolcim’s performance, including management incentive plans.
The company says the 2016-18 three-year strategic plan is built on five (5) value creating pillars which include synergies and cost leadership, commercial excellence, lean capital spending, dynamic portfolio management and strict capital allocation discipline.
The world’s cement producer says the plan does not rely on a market recovery and assumes only two (2) percent underlying market growth. “In the case of a more rapid and solid recovery of the world markets, the Group stands to benefit from greater operating leverage thanks to its well balanced and geographically diversified portfolio,’ LafargeHolcim affirmed.
It said together with their commitment to a solid investment grade rating, the strategic plan translates into the following medium term Group targets which include cumulative free cash flow 2016 to 2018 to be at least CHF 10 billion with an annual run rate in 2018 of at least CHF 6 per share.
Also, the strategic plan would translate into a cumulative capital expenditure (capex) 2016 to 2017 of maximum CHF 3.5 billion, operating earnings before interest, tax, depreciation and amortisation (EBITDA) of at least CHF 8.0 billion in 2018.
Others are Return On Invested Capital(ROIC) expected to increase by at least 300bps from 2015 levels by 2018 based on operational improvements and returning cash to shareholders by proposing 2015 dividend per share of CHF 1.50, progressively grow dividend and target a pay-out ratio of 50 percent over the cycle and return excess cash to shareholders commensurate with a solid investment grade credit rating.
LafargeHolcim also released its nine-month results 2015, Olsen commenting on the first set of results since the closing of the merger said the quarter, following a thorough integration preparation, the company kick-started the actual integration process to have the right organisational structure, action plans and people in place in order to ensure the success of the merger.
Olsen continued “The first nine months of this year and in particular the third quarter, have been impacted by the difficult economic context in some of our large markets, and considerable negative foreign exchange fluctuations. In addition, the closing of the merger triggered both one-off costs and organizational changes, the benefits of which will start coming through next year. At the same time, we have also seen solid market trends that, combined with our commercial efforts, led to good performance in several countries such as Argentina, Mexico, the Philippines, the United Kingdom and the United States.”
“In short, we have started laying solid foundations for the new company on which we will build the future success of LafargeHolcim. I am confident in our ability to deliver on the announced synergies and thanks to disciplined capital allocation and superior execution we will outperform our sector. We will maximize cash flow and create sustainable value with the focus on returning excess cash to shareholders while continuing to provide our customers with world-leading innovative products and solutions.”
