Holcim Ltd - The Group has achieved further organic growth. But the strong Swiss franc and expensive energy are having an impact.

Changes in the scope of consolidation
There are difficulties in making comparisons between the first quarter of 2008 and the previous year's results because of substantial changes in the company. Since the sale of the majority stake in June 2007, Holcim South Africa has been deconsolidated from the Group. Egyptian Cement – in which we maintain a 44 percent interest – has also been deconsolidated. These changes have resulted in total cement capacity being reduced by approximately 8 million tonnes and also substantially decreased volumes of aggregates and ready-mix concrete. The deconsolidations have both affected the region's weighting within the Group and the financial results. In addition, the financial results were impacted by the weakening of most foreign currencies by approximately 7 percent. Nevertheless, Holcim was able to achieve positive organic growth* at operating level in the first quarter of 2008 with contributions from three of the five Group regions.

* Factoring out currency translation effects and changes in the scope of consolidation.

Sales development and financial results
Group-wide deliveries of cement decreased by 1.2 percent to 34.2 million tonnes and consolidated sales of aggregates by 9.7 percent to 32.7 million tonnes. Volumes of ready-mix concrete increased by 11.7 percent to 10.5 million cubic meters. Sales of asphalt fell by 9.5 percent to 1.9 million tonnes.

First quarter results 2008 - Group

Consolidated net sales decreased by 3.8 percent to CHF 5.509 billion. Operating EBITDA fell off by 14.2 percent to CHF 1.151 billion. Factoring out changes in the scope of consolidation totaling CHF 109 million and negative currency translation effects of CHF 90 million, operating EBITDA increased by 0.6 percent. The operating EBITDA margin reached 20.9 percent (first quarter 2007: 23.4). The lower operating EBITDA and a quarterly increase in net current assets pushed cash flow from operating activities into negative territory at CHF -158 million. Due to a better financial result, Group net income was only slightly lower, down 3.2 percent to CHF 513 million. Net income attributable to equity holders of Holcim Ltd increased by 3.9 percent to CHF 370 million.

Regional influences
Group region Europe made a good start at the beginning of 2008. Many Group companies increased sales of construction materials despite the early Easter holiday, which fell in the first quarter this year.

First quarter results 2008 - Group region Europe

Cement sales in northern France and Belgium remained virtually unchanged compared to the previous year's first quarter. In the UK, Aggregate Industries UK almost maintained its deliveries of aggregates. Taking into account the weather-related decline in exports from the quarries in Scotland and Norway bound for markets along the North Sea and the Baltic, sales of aggregates of this Group company decreased. Ready-mix concrete volumes picked up due to brisk construction activity in and around London. Holcim Spain felt the impact of the marked decline in residential construction, which was only partially offset by deliveries to other segments of the construction sector. As a result, volumes of cement and aggregates declined significantly. However, sales of ready-mix concrete rose slightly. Holcim Germany sold more cement both within Germany and in export, while at the same time increasing its deliveries of aggregates. Holcim Switzerland benefited from the favorable weather conditions for construction. Holcim Italy also delivered more cement and ready-mix concrete, but less sand and gravel.

In eastern and southeastern Europe, investment in construction projects increased almost without exception – supported by robust economic conditions. In cement, Holcim Romania reached the highest growth within Group region Europe. The Group companies in Slovakia and Serbia also performed successfully. Sales of aggregates rose above average throughout eastern Europe, the top performers being Croatia, Romania and Slovakia. In ready-mix concrete, Romania and Serbia stood out particularly. Despite some major repair work in the Russian plants – including also for environmental protection measures – Alpha Cement held up well in the domestic market. In Azerbaijan, the Garadagh plant operated at its capacity limit.

Overall in Europe, consolidated cement deliveries only marginally increased by 1.4 percent to 7.3 million tonnes due to Spain and Russia. Sales of aggregates decreased by 4.8 percent to 21.8 million tonnes. However, ready-mix concrete volumes rose by 9.3 percent to 4.7 million cubic meters, reflecting brisk demand in London, France and Italy, as well as in the east European markets. Sales of asphalt decreased by 6.3 percent to 1.5 million tonnes.

The operating EBITDA of Group region Europe declined by 2.5 percent to CHF 424 million. This reflects the weaker construction activity on the Iberian Peninsula and a lower contribution to results from Aggregate Industries UK. Additionally, Holcim France Benelux posted extraordinary expenditures in connection with IT optimization measures. All other Group companies reported improved results. The internal operating EBITDA growth reached 2.3 percent.

In North America, the US real estate crisis persisted without let-up and was exacerbated by the turmoil in the credit markets. The decline in residential construction continued. The government's multi-year infrastructure program provided for some correction. Commercial and industrial construction activity just missed the previous year's level. On balance, however, there was a significant decline in construction activity in the US. In contrast, the majority of the construction companies experienced a good workload in Canada. A large volume of construction work still continues in St. Lawrence Cement's core market of Quebec.

First quarter results 2008 - Group region North America

Consolidated cement deliveries in Group region North America decreased by 6.9 percent to 2.7 million tonnes, with the north eastern United States and the Great Lakes region bearing the brunt of the cyclical decline. Sales in Texas and Oklahoma were more stable. Holcim US responded to the changed economic conditions by halting imports of cement from overseas and reducing local production selectively. As announced, Holcim US took over the cement business of St. Lawrence Cement in the north eastern US at the beginning of the year. Consequently, sales reported by the US Group company declined less than the market average. St. Lawrence Cement saw a slight increase in cement sales in Canada, its newly defined home market. The Group company succeeded in supplying more cement in Quebec, thus offsetting some of the decline in residential and industrial construction activity in Ontario.

Aggregate Industries US, too, was hit by the decline in construction activity and sales of aggregates and asphalt decreased accordingly. Last summer's acquisition of Hardaway Concrete in South Carolina led to a slight increase in sales of ready-mix concrete. St. Lawrence Cement also sold less aggregates, but the volume of ready-mix concrete was significantly higher than the previous year. The Group company is currently supplying a number of concrete-intensive road building sites.

Consolidated deliveries of aggregates in North America decreased by 7.1 percent to 6.5 million tonnes, while sales of ready-mix concrete rose by 22.2 percent to 1.1 million cubic meters.

Intensified by the depreciation of the dollar, consolidated operating EBITDA fell by 182.4 percent to CHF -14 million. Also internal operating EBITDA growth was negative at -182.4 percent. Holcim US was not able to offset the decline in demand by productivity gains. As in the previous year's first quarter, St. Lawrence Cement posted a loss due to seasonal fluctuations. Aggregate Industries US again reported a negative result due to the traditionally weak road building activity at the beginning of the year. However, the operating loss was reduced compared to the first quarter of 2007, confirming the effectiveness of the measures taken to cut costs.

The construction sector in Group region Latin America remained in robust condition. Despite the "Semana Santa" falling into the first quarter this year, cement consumption increased in all of Holcim's markets. Investment once again focused on public and private residential construction. Major transport and utility infrastructure projects were also an important factor.

First quarter results 2008 - Group region Latin America

Holcim Apasco in Mexico posted higher volumes in all segments. The increase was particularly noteworthy in ready-mix concrete, but clinker exports also rose significantly. All Group companies in Central America benefited from the sound order situation, and especially Holcim Costa Rica's cement deliveries picked up significantly.

There was sustained strong demand for cement in Venezuela. In Colombia, Holcim was able to further lift deliveries of cement and ready-mix concrete. Holcim Brazil increased its sales in all segments, focusing more on high-margin products. Business also picked up in Chile. In Argentina, Minetti was operating at its capacity limit. Here, ready-mix concrete deliveries rose by more than one third due to a large highway project.

Consolidated cement deliveries in Latin America grew by 4.8 percent to 6.6 million tonnes. Sales of aggregates remained unchanged at 3 million tonnes, while volumes of ready-mix concrete rose by 16.7 percent to 2.8 million cubic meters.

Despite rising energy costs, most Group companies improved their results in local currency terms. This reflects the positive development in sales volumes and the predominantly favorable pricing environment. A series of measures to streamline operations also helped, as did the increased use of alternative fuels. However, due to unfavorable exchange rates, operating EBITDA decreased by 6.6 percent to CHF 284 million. Internal operating EBITDA growth reached 5.9 percent.

In April, the Venezuelan government informed Holcim Venezuela of its intention to nationalize all foreign cement producers operating in the country, stating that it aimed to take into public ownership a minimum of 60 percent of the share capital of the companies concerned. In the course of the ongoing negotiations, Holcim will defend its interests and those of its employees also within the scope of the existing foreign direct investment treaty between Switzerland and Venezuela. Holcim Venezuela will continue to produce normally and supply the market efficiently for the time being.

Group region Africa Middle East showed solid economic performance in the first quarter of 2008. The construction sector remained an important source of momentum for economic development, particularly on the North African coast and in the Indian Ocean region.

First quarter results 2008 - Group region Africa Middle East

Due to the new Settat cement plant, Holcim Morocco benefited above average from the nationwide construction boom. Sales volumes of cement were up by almost 50 percent. Sales of aggregates and ready-mix concrete also saw double-digit growth rates. In Lebanon, the construction sector lacked urgently needed stimuli. Cement sales also increased in West Africa and the Indian Ocean region; on La Réunion, the ready-mix concrete business benefited from road and residential construction.

Following the transfer of the majority of shares in Egyptian Cement to new owners and the discontinuation of the joint venture agreement, Holcim included previously proportionately consolidated volumes only up to January 23, 2008. Since the sale of the majority stake in Holcim South Africa in June 2007, the remaining 15 percent shareholding has been accounted for using the equity method.

As a result of the sizable changes in the scope of consolidation, cement sales decreased by 37.5 percent to 2.5 million tonnes. Deliveries of aggregates declined by 84 percent to 0.4 million tonnes, and ready-mix concrete volumes fell by 66.7 percent to 0.2 million cubic meters. On a like-for-like basis, cement sales in this Group region rose by 10 percent. Deliveries of aggregates and ready-mix concrete remained unchanged.

Operating EBITDA of this Group region decreased by 46.4 percent to CHF 105 million. Both Holcim Morocco and Holcim Outre-Mer increased their contribution to the result. On a like-for-like basis, the Group region posted an impressive 13.3 percent internal operating EBITDA growth.

Group region Asia Pacific saw further growth in the construction sector in the first quarter of 2008. Cement consumption rose in virtually all the markets supplied by Holcim, with particularly brisk construction activity in India, Vietnam, the Philippines and Indonesia.

First quarter results 2008 - Group region Asia Pacific

Deliveries of cement by the two Indian Group companies were up significantly on the previous year, despite seasonal fluctuations in demand in some regions. Rising demand for building materials was driven mainly by residential and commercial construction activity and major infrastructure projects. There were above average increases in cement deliveries in Malaysia, Bangladesh and Vietnam. In Thailand, the investment climate remained subdued. At the end of 2007, Siam City Cement temporarily shut down two smaller kiln lines at the Saraburi plant to reduce costs. As a consequence, the Group company exported less clinker and cement. The Group companies in Indonesia and the Philippines concentrated on their more attractive domestic markets. Singapore-based Jurong Cement Limited, acquired as of end of May 2007, almost doubled sales of ready-mix concrete in this city state.

Cement Australia and Holcim New Zealand reported cement sales on a par with the previous year's period. In New Zealand, deliveries of aggregates and ready-mix concrete declined.

In Asia Pacific, consolidated cement volumes improved by 5.7 percent to 16.8 million tonnes. The 25 percent increase in sales of aggregates to 1 million tonnes was mainly due to newly consolidated volumes from quarries in Thailand and the encouraging state of the market in Indonesia. Ready-mix concrete enjoyed the strongest growth, rising 41.7 percent to 1.7 million cubic meters. The increase reflects the expanded market presence in Singapore and other major urban centers in the region.

Despite the positive development in sales volumes, operating EBITDA decreased by 9.2 percent to CHF 403 million. Internal growth was also negative at -3.8 percent. Although operational improvements have been achieved in several locations, it proved impossible to pass on the price rises. The main cost increases were due to the higher prices for coal, clinker purchases and the steep increase in freight rates. These factors particularly affected the two Group companies in India. In addition, in parallel with the weakening US dollar, several important currencies in the region significantly lost in value against the Swiss franc. The Group companies in the Philippines, Indonesia and Singapore increased their contributions to profits.

In February 2008, the Chinese company Huaxin Cement completed its capital increase through a private placement. In this context, the Group was able to raise its stake in this major cement manufacturer from 26.1 percent to 39.9 percent. This makes Holcim the largest shareholder of this dynamic company with an annual capacity of currently 32 million tonnes of cement.