2016 was the year we hit our stride and delivered accelerating earnings momentum, demonstrating the potential of LafargeHolcim to create value. Our focus on synergies, costs and pricing drove higher margins and, as a result, significant improvements in EBITDA, cash flow and earnings per share.
We have achieved a great deal since the creation of LafargeHolcim in July 2015 and have built a company equipped with the resources and capabilities to be successful over the medium to long term. The diverse talents and experience of our 90,000 employees around the world enable us to anticipate and meet our customers’ requirements, whether that is affordable housing, building a family home or construction of a large and complex infrastructure project. This is supported by LafargeHolcim’s industry-leading capability in research and development which allows us to provide innovative solutions to existing and evolving construction needs.
Our global best-in-class portfolio has a good balance between mature and developing countries and we enjoy leadership positions in 80 per cent of our markets. This positions us well to benefit from overall growth in the sector and, notably, from the positive trajectory of several markets we have identified as important drivers of growth in 2017 and beyond. We also have to contend with increasing volatility, which can present opportunities as well as challenges.
Thanks to the strength of our diversified portfolio and the hard work of our employees – who, for example, responded decisively to the economic crisis in Brazil and interruption of gas supplies in Nigeria – we were able to mitigate the effect on our earnings in 2016.
We have built our strategy around four pillars: cost leadership, an asset light approach, commercial transformation and sustainability. Cost leadership means systematically and rigorously managing our costs, implementing best practice across the Group and taking advantage of our scale. By adopting an asset light approach we optimize and leverage our current asset base, spending less on capital and unlocking growth opportunities with lower capital outlay. Cost leadership and an asset light approach together enable the business to grow returns through disciplined management and allocation of capital.
Commercial transformation and sustainability are focused on differentiating us from our competitors. We want to develop our commercial expertise to anticipate the needs of our customers, getting involved earlier in projects to co-develop solutions, while promoting sustainability through our solutions and the way we run our business. Our strategy of adding value for our customers through differentiation will be an increasing contributor to earnings growth into the future.
Our commitment to sustainable development also speaks to the kind of company we are and want to be. We see sustainability as both a responsibility and an opportunity. We are proud to lead the industry in reducing CO2 per tonne of cement and, more widely, we continue to advocate mechanisms such as carbon pricing that can act as a lever to cut the causes of global warming. Equally, our leading research and development capability enables us to address the growing demand for sustainable construction solutions. One example is the 2016 launch of Airium, our fully recyclable, mineral foam insulation product that meets a growing need for more efficient buildings. Another is Geocycle, our worldwide waste management business, which utilizes alternative fuels to fire our kilns thereby reducing CO2 and energy costs while providing a sustainable solution to waste that would otherwise be disposed of in landfill sites. These innovative approaches, and more, will help us achieve our 2030 ambition of generating one third of our turnover from solutions with enhanced sustainability performance.
The Group’s unique capabilities, combined with our ability to execute – exemplified by our over-delivery of synergies in 2016 – put us in a strong position to create value for all our stakeholders including you, our shareholders. In line with our commitment to return cash to shareholders, we are proposing a recurring dividend of CHF 2.00 per share, an increase of CHF 0.50 on the previous year. This demonstrates our confidence in the momentum of our business and financial performance and our strict capital allocation discipline. Commensurate with maintaining a solid investment grade rating, we expect to grow our dividend from that level while achieving a 50 percent payout ratio through the cycle. In November 2016, we also announced a share buyback program of up to CHF 1 billion to be conducted in 2017 and 2018.
Since the creation of LafargeHolcim, we have worked hard to build a distinctive culture based around a set of guiding values. This provides a framework for how we expect our employees to behave.
Our overarching value is health and safety. It is embedded in everything we do. We are committed to ensure that the health and safety of our employees, contractors and members of the public are not put at risk by our operations. It’s a cause of deep regret, therefore, that we recorded an increase in the number of fatalities and injuries in 2016, chiefly as a result of road traffic incidents. We have a concerted plan in place to improve this record and move us towards our ambition of zero harm.
We would like to take this opportunity to thank you, our shareholders, for your continued support during 2016. We would also like to express our gratitude to our Board members for their continuing dedication and wise counsel and the members of the Executive Committee who have played a critical leadership role in driving the transformation of the Group. Finally, it is important that we recognize the commitment of our employees who continued to deliver for our customers across the world each and every day. The achievements we are able to report are made possible by their hard work, dedication and expertise.
In 2016, LafargeHolcim demonstrated that it is on track and delivering. As we look forward, we are confident that all our stakeholders will benefit from the unique platform we have built to drive growth and value creation.
Chairman of the Board of Directors
Chief Executive Officer