Strategic pillars
Cost leadership – Egypt
Asset light – Mexico
Sustainability – Malawi
Commercial transformation – Philippines / USA
Saltillo, Mexico

A Win-Win Alliance
Making assets work.

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“Through this alliance, we – all the Allied Partners – can become the best concrete producers of this country,” says Omar Martinez, Head of Operations for Inca Concretos in Coahuila, Mexico. LafargeHolcim is right there with them and shares their ambition. Yelena Santiago, Strategic Marketing Leader – Industrial Segment for LafargeHolcim in Mexico, says of the relationship: “We support their growth. We really want them to be successful.”

Creating risk-free market access

LafargeHolcim’s divestment of 50 ready-mix concrete plants in Mexico in recent years has led to a fruitful relationship with the new owners. This has been the strategy since 2012 and it is exceeding initial expectations. Not only has the new Allied Partner Network increased brand awareness in markets that otherwise would not be accessed, allowing LafargeHolcim to have a stronger market position without significant capital outlay, it’s created an opportunity to benchmark and improve ready-mix operations. Santiago says of the relationship: “We’re giving them the location, the manual and the technical services. But they are helping us evolve our business model to serve our customers better.”Allied Partners – 24 in total at the end of 2016 – operate 60 active plants. Together with LafargeHolcim’s 40 existing plants, they form a network of 100 ready-mix sites in Mexico.

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

Yelena Santiago, Strategic Marketing Leader, Industrial Segment for LafargeHolcim in Mexico

By 2018, Inca Concretos plans to grow to 10 plants.

Inca Concretos operates seven ready-mix plants 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 timing for us. We had been working on a structure to support growth, so this was an interesting opportunity to get closer to LafargeHolcim. We were very excited about the potential.”

Inca Concretos bought four LafargeHolcim ready-mix plants. It now has a total of seven and is on track to meet its 2018 goal of ten, operating mainly in the northern part of the country. Membership in the Allied Partner Network has helped strengthen the relationship between Inca Concretos and LafargeHolcim. “Our commercial relationship has improved. There is more of a commitment to stick together and improve communication. There’s just a lot more trust,” says Martinez.

Being an Allied Partner means that LafargeHolcim provides technical support, IT systems, training, a purchasing club and access to market data, among other benefits. Santiago notes: “The size of LafargeHolcim together with the Allied Partner Network means the sum is much stronger than any of its parts.” Being able to share technical advice and IT systems across sites means cost savings for all the partners. The purchasing club allows LafargeHolcim to negotiate discounts on everything from insurance to equipment, benefiting all involved. And the access to market data on construction permits, financial and economic indicators, and sharing of sales leads makes LafargeHolcim a valuable business partner, acting as far more than just a supplier.

In 2016, LafargeHolcim implemented a third-party certification process offering the Allied Partners Certification for Quality 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.”

Asset light

Summary

  • 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 CHF 3.5 billion.
  • Thereafter, we target a capital expenditure run rate of less than CHF 2 billion per year.

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 capacity 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 targets of a cumulative capital expenditure of below CHF 3.5 billion for 2016 – 2017 and of a run rate of less than CHF 2 billion per year from 2018 onwards.

A focus on optimization

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 enables 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 business models. For example, we are implementing franchise models in the ready-mix and retail segments, enabling us to reach customers in a differentiated way while keeping capital expenditure low.

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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 to grow to ten plants by 2018 and sets its sights beyond that: “We also think we can grow into other markets. LafargeHolcim has the necessary scale and we expect to get technical support to help us become a better supplier,” says Dario Martinez, CEO of Inca Concretos.

The relationship with Allied Partners goes beyond the transactional. Creating an ongoing two-way dialog helps the Allied Partners be more successful while also giving LafargeHolcim valuable information about local markets. Looking to the future, Dario Martinez says: “First, I expect our relationship to grow, as it has for the past three years. And I think loyalty will grow. I think the loyalty is there because of the alliance.”