Lafarge Matters_Mid Year Newsletter_2019

Lafargematters
MID YEAR NEWSLETTER
2019
SHAPE THE FUTURE
CORFIX
THE PROCUREMENT INITIATIVES
HAVE CONTRIBUTED 81% OF THE
IDENTIFIED BENEFIT VALUE.
Shaping
the Future
of Lichtenburg
FINANCE
Health and Safety
Lafarge South Africa has a bold vision to shape the future into something extraordinary.
Our pioneering research enables us to develop advanced materials and innovative
building solutions for the sustainable communities of tomorrow.

2
L a f a r g e m a t t e r s / Q3-2019
MID YEAR REVIEW
L a f a r g e m a t t e r s / Q3-2019
LOCAL DEVELOPMENTS
3
MESSAGE
FROM THE CEO
DEAR COLLEAGUES,
We are already in the third Quarter
of 2019 and our business has come
through challenging times, operating
in a turbulent economic environment
and deteriorating construction
industry. Nevertheless, the efforts
that our teams have invested in
turning the business around have
started to materialise, placing
Lafarge South Africa back on a
profitability path. For the first time
since 2017, our results are positive
in both quarter two and half-year
2019.
This positive momentum came as a
result of the execution of our ‘Fixing
the Core’ turnaround strategy. We
have achieved improved profitability
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in all our businesses thanks to
a margin-focused commercial
strategy. In a declining market, our
Aggregates and Ash businesses have
delivered excellent results, beating
both budget and previous-year
benchmarks. We have strategically
reviewed our Readymix footprint
by targeting profitable operations,
leading to a significant improvement
in performance. We continue to see
tangible progress on the stabilisation
of the Lichtenburg Plant, and have
made strides in rigorous cost and
cash management initiatives across
our business.
The second half of 2019 is likely to
remain challenging, and we cannot
count on any significant tail wind
coming from a shift in economic
and market conditions. We must
therefore remain focused on our key
priorities of being customer centric,
driving margins, cash conversion
and rigorous cost management,
while staying committed to Health
and Safety.
I am aware that these are difficult
times for all of us, and I would like
to thank each and every one of you
for your dedication and continuous
contribution to the turnaround of our
company, Lafarge South Africa.
Best regards,
Rossen
CORFIX
THE CORFIX PROJECT WAS LAUNCHED A YEAR AGO, WITH THE OBJECTIVE TO REDUCE FIXED COSTS BY
R50 MILLION, BY THE END OF 2019.
The CORFIX project focused on
three business areas-Procurement,
Aggregates and Finance.
THE PROCUREMENT INITIATIVES
HAVE CONTRIBUTED 81% OF
THE IDENTIFIED BENEFIT VALUE,
WHILE THE AGGREGATES AND
FINANCE INITIATIVES HAVE
CONTRIBUTED 12% AND 7%
RESPECTIVELY.
The accumulated benefit contribution
at the end of June 2019 was over R20
million from the identified CORFIX
initiatives.
This represents 41% of the
targeted benefit and the significant
improvements in Procurement and
Aggregates will increase the benefit
realisation in the second half of the
year to get closer to the target at the
end of the year.
LEX
Millions
Going back to basics
The LEX project was launched in
September last year, we are now
7 months into the implementation
which will be completed by the end
of this year.
The LEX initiative owners have
worked hard to implement and track
the identified actions. As a result, the
LEX project has achieved a benefits
rate 17% above its target, at just
under R60 million for the first half
of 2019. The improved performance
of the Cement Plants has also
contributed to the positive results.
R Million
R22
R17
R11
R6
R0
60
45
30
15
0
12%
Accumulated Achieved Benefit
Jan Feb Mar Apr May Jun
7%
81%
The business is set to achieve its
target of R134 million by the end of
2019. Overall it is a great success.
LEX Economic Benefit
Benefit Contribution
Procurement
Aggregates
Finance
Jan Feb Mar Apr May Jun YTD
Target
Actual
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L a f a r g e m a t t e r s / Q3-2019
BUSINESS UNITS
L a f a r g e m a t t e r s / Q3-2019
SHAPING THE FUTURE
5
Aggregates
Difficult market conditions have
continued in 2019, and GDP growth
has thus far been negative. Quarrying,
mining, and construction have
experienced a noticeable decline,
which has negatively impacted
aggregate volumes available in the
market. In spite of these challenges,
the Aggregates Product Line has not
only met, but exceeded its targets
for the year to date.
This has been achieved through our
dedication to cost excellence, as
well as strategic pricing, which has
positively impacted revenue. Our
all-round operational efficiency has
been essential in this endeavour.
These will remain our focus areas as
we work towards our budgetary goals
in order to strategically position
ourselves for when the market turns.
None of these results would
have been possible without the
commitment, collaboration and
effectiveness of the team.
Ash Resources
and Randfontein
Ash Resources started the year with
challenges that were presented by
the company restructuring, and a
reduced portfolio. It was a daunting
task, but our response to this
required the production of higher
volumes with reduced resources.
However, the outlook is positive,
and our year to date performance is
on track to achieve EBITDA by the
end of 2019. We await reverts from
a number of prospective business
generators, and continue to strive
for resource optimization throughout
the business.
Our LAMPEES with Marcel Fynn and Michael Rabe, our LAMP Sponsors (on the left)
and Anthony Bowen (on the right) who conducted a Traffic Management Presentation at
the LAMP session In July 2019.
Nelspruit Quarry received an award for the highest Environmental Audit Achievement in
the Industry at the Institute of Quarrying Conference.
Nelspruit Quarry 95.70% Showplace
Tongaat Quarry 95.42% Showplace
Stanger Quarry 95.25% Showplace
Showplace status is reserved for those operations that have excelled and achieved
an audit score in excess of 95%. We have two operations that have yet to be audited:
Richards Bay Quarry and Ninians Quarry that will be audited in September 2019.
Through a collaborative effort, the
Randfontein Plant has been tasked
with contributing towards the
commercial strategy for a turn-around
plan. Throughout the year thus far,
we have taken significant strides
towards the successful execution of
the initiatives we pinpointed. With a
marked improvement in our output,
we have experienced a 35% increase
in sales out of Ash Resources’
operations. Our innovative solutions
will continue to secure our success.
Readymix Turnaround Strategy
The construction industry remains
under severe pressure economically.
In such times, we should heed the
words of late US businessman
Lee Lacocca, who said, “we
are continually faced by great
opportunities brilliantly disguised as
insoluble problems.”
For the Readymix
Product Line, the
challenge is to
identify and exploit
these opportunities.
Focusing on getting
business back to profitability in
a short time frame is the key to
ensuring sustainability.
During 2018, a turnaround strategy
was initiated with the involvement
of the global Lafarge team. We
conducted a critical analysis of the
business portfolio and performance
in order to identify the road map
to profitability. The emphasis was
placed on commercial, operational,
technical and logistical excellence,
the cost structure of the business,
quality, and the reduction of raw
material costs. Some strategic
decisions already executed include
divestitures in certain geographic
locations by selling these sections of
“WE ARE CONTINUALLY FACED BY GREAT
OPPORTUNITIES BRILLIANTLY DISGUISED AS
INSOLUBLE PROBLEMS.”
the business, and the restructuring
of the business to be leaner and
more efficient.
The market continues to be highly
competitive, as evidenced by the
recession of the construction
industry over the past seven quarters.
However, with the dedicated support
of a wonderful team, our profitability
THE 2019
FULTON AWARDS
IN ASSOCIATION WITH
LAFARGE.
has increased by 75% year on year
as we continue to shape the future.
The team is determined to achieve
break-even by 2020 by following
through on identified initiatives and
strategic plans. This includes selling
high volumes at the required profit
margin, target market prospecting,
increasing market share, and an
intense focus on
the most profitable
segments. In a
cooperative effort,
Readymix, Aggregates
and Cement continue
to approach clients and jointly offer
integrated solutions.
Readymix is on a good trajectory
to break-even in 2020, with the
knowledge that dedication and hard
work are imperative to achieve this.
The team remains steadfast and
determined to change these insoluble
problems into great opportunities.
Lafarge Banners for the Fulton Challenge Golf Day
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L a f a r g e m a t t e r s / Q3-2019
OUR INITIATIVES
L a f a r g e m a t t e r s / Q3-2019
OUR MILESTONE
7
Shaping the Future of Lichtenburg
SHAPING TRANSFORMATION
Established in North West Province
in 1949, the factory has enjoyed
many productive years, however it
has also experienced a decline in
recent years, to combat this decline
a course of action was implemented
and improvements were made
through the Lichtenburg Turnaround
Plan.
CURRENT PERFORMANCE
Clinker and Cement production has
risen in comparison to last year,
while more volumes were transferred
to Randfontein for cost optimization
purposes. For South Africa, the
increase in cement production is
considered a good performance
within the contracting nature of the
market.
The kilns had a difficult start to the
year with both shutdowns brought
forward due to refractory failure.
Nevertheless, the situation stabilized
and the kilns had a good run in both
May and June.
The LTP is articulated around 5
pillars and here are some examples
of actions implemented :
• asset management: kiln shutdown
organisation, restore equipment
condition,
• organisation: filling critical
vacancies, review of the
organisational charts, area
management, support of
maintenance team by performing
contractor,
• people: training of key positions,
increase use of Training Center
for technical skills and people
development,
• systems: daily and weekly
alignment meetings,
Technical Information System
implementation,
• culture of performance: The
culture is people motivation,
rewards and recognition. It
is also achievement visibility
14%
18%
and increased continuous
communication.
THE OUTLOOK
The market will remain challenging
and the focus on cost reduction will
be reinforced. The implementation
of the actions aimed at reducing
the cost will be accelerated. The
turnaround plan will be under
constant review, with the Operational
Steering Committee meeting weekly.
Both kilns will need a short shutdown
to maintain the refractory. Major
overhaul of our locomotives, wagons
and rail line between quarry and
plant is needed and will take place in
H2. The project of replacing the ESP
kiln 3 by bag filter is well underway
and the commissioning will take
place early 2020.
Action Status Progress
Completed
LICHTENBURG TURNAROUND
PLAN (LTP)
24%
In Progress
on Time
Lichtenburg turns 70
The turnaround plan implementation
is in full speed and lead to the
improvements we saw in the first
half of the year.
44%
In Progress
on Delayed
Not Started
Priority Actions LTP Progress
REACHING A MILESTONE
Asset Management
Organisation
People
Systems
Performance culture
Average
53%
60%
73%
78%
77%
68%
The Lichtenburg Plant reached a
significant milestone as it turned
70 this year. An event was held to
celebrate the occasion with Reginald
Jordant as the host of the day.
A number of speakers lined up
to grace and commemorate this
event with words of appreciation
and encouragement. The CEO of
Lafarge, Rossen Papazov, delivered
an uplifting speech with reference
to the model FNB stadium of 2010
with the caption: “Remembering
a time of greatness – SA 2010”.
The reference was symbolic of the
Lichtenburg Plant that has seen a
period of decline, but that he hopes
along with many others, will regain
its greatness once more.
The Industrial Director, Abdel-ileh
Chouar, closed the event with a
parting message that the future is
in our hands, but that we need to
adapt to changing situations if we
want to be part of it, resonating with
Lafarge’s slogan, ‘Shape the Future’.
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L a f a r g e m a t t e r s / Q3-2019
FINANCE / LEGAL
L a f a r g e m a t t e r s / Q3-2019
HEALTH AND SAFETY
9
Finance
Health and Safety
It has been a little over a year since
I assumed the role of Chief Financial
Officer for Lafarge South Africa. I am
excited to see the success of our ‘Fixing
the Core’ strategy, which focuses
on the turnaround of operations,
a margin-focused commercial
approach, performance improvement,
and cost management across all the
segments. Although we came in under
budget, it continues to yield positive
results as reflected in the significant
improvement in our half-year financial
performance compared to the same
period in 2018.
Our revenue has grown by 13%
compared to the same period last
year, in spite of the market and
economic headwinds. This is thanks to
Procurement
the top-line pricing actions across all
the segments. Cost reduction actions
related to fixed and variable costs,
and support process costs through
our various initiatives (Corfix, Logistics
Excellence, SG&A reduction), have also
contributed to the improvement in cost
across the business. Consequently,
our H1 EBITDA improved significantly
compared to the prior year’s same
period. Our Strict Net Working Capital
reduction initiatives have also started
gaining momentum with the targets
and actions rolled out. However, we
still have a lot to do to achieve our
2019 financial performance targets.
Continued and sustainable industrial
performance improvement that
captures the volume growth seen in
Q2, as well as strict cost control and
working capital management, will be
critical to the achievement of our Q3
and full-year targets.
We will need to accelerate and
build on our efforts to improve the
operational performance across our
sites. Our aim is to continue growing
the business and strictly control costs,
while focusing on optimising our strict
working capital to generate cash and
address our internal control gaps.
As Lafarge South Africa takes bold
steps towards shaping the future,
I am counting on your continued
commitment and resilience for a
stronger H2 performance.
CURRENT 2019 STATISTICS
Visible Personal Commitment (VPCs)
LEADING INDICATORS
FLEXIBILITY
Sessions may occur as
and when needed
Training
CURRENT STATUS FOR LAGGING INDICATORS
LANGUAGE
Sessions occur in
preferred languages
Continuous implementation of
sustainable cost reductions remains
a key priority for our department at
Lafarge South Africa. Staying in close
touch with our suppliers allows us
to engage with them and regularly
negotiate pricing. Our upcoming
Supplier Week initiative, taking place
from 19-23 August, is one such
example where our team can engage
with suppliers, with the support of our
Group Chief Procurement Officer.
Category Managers are constantly
involved with the implementation
of their planned initiatives, by way
of issuing tenders when contracts
expire. Best Cost Country (BCC) is
also being reviewed, which governs
where we source equipment from,
including mobile equipment, capital
goods and others, from countries
such as China, Turkey and India. As
a department, we have a direct effect
on the organisation’s performance
through cost saving initiatives that
improve our EBDITA.
Optimisation of P2P processes
ensures that the business follows the
defined procure to pay processes,
which in turn helps improve
efficiency in how we deliver our
goods and services to our customers,
while minimising risk in the supply
chain of the organisation. We also
remain focused on Strict Net Working
Capital, where we continue to engage
our suppliers in order to extend
payment terms.
Our department maintains our
regulatory license to operate with DMR
and DTI through BBBEE, and this
promotes the robust activation of small
and medium suppliers, and makes a
critical contribution to the industry.
Lost Time Injuries (LTI)
Fatalities
0% 0%
Legal Department
How does the Legal Department add
value to the business?
• Actively prepare for business
pressures and drivers.
What is Legal’s role?
• Understands the organisation’s
risk possibilities and appetite.
• To provide relevant advise that is
outcome focused.
How does that translate in
day-to-day?
• Take time to understand the
business.
What vision do you have for Lafarge
South Africa Legal Department in 5
years?
• To be a trusted business partner.
• Legal advisor of choice.
How can business help you achieve
this success?
• Provide information from the
beginning not only when in crisis
mode.
• Do NOT be afraid to ask us
questions.
• Trust us, good lawyers know the
law and we are on YOUR side.
Lafarge Security
Our security team ensures that all
Lafarge operations run seamlessly
without any disruption or compromise
to the stakeholders, through policy
management. We have done our
utmost to reach near completion of
the crisis policy.
In the second half of the year we
have been fortunate enough to not
have any grave security breaches or
incidents. Lafarge security requests
that everyone pays particular
attention to - the information that
is shared, how we transact with
stakeholders and lastly to continue
keeping an eye on everyday activities
in our work environment.
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10
COMMERCIAL L a f a r g e m a t t e r s / Q3-2019
/ MARKETING
Commercial
L a f a r g e m a t t e r s / Q3-2019
HUMAN RESOURCES AND COMMUNICATIONS 11
Human Resource and Communication
OUR COMMERCIAL STRATEGY FOCUSES ON IMPROVING CUSTOMER SATISFACTION WHICH IN TURN
ENABLES US TO INCREASE VOLUMES AND IMPROVE COMMERCIAL MARGINS.
Although we started with a
challenging Q1 due to the kiln
shut downs, Q2 has seen a positive
momentum in the execution of our
commercial strategy.
Our Randfontein plant is playing a
critical role in strategy. We firstly
expanded the product range at
the Randfontein plant to include
Buildcrete and furthermore it is also
producing the Builders Warehouse
cement for the tender awarded last
year.
Some of our successes over the last
few months include the return of
the SA Cashbuild outlets, as well
as increased supply to Limpopo
markets. Margin optimisation
continues to be a key focus area and
is being monitored daily to ensure
effective implementation. Lastly, we
have made progress on improving
our customer service levels over
the last few months, however, this
should continue to be a top priority
for all departments as we cannot be
a successful business without our
customers.
At Lafarge South Africa, Human
Resource Management aims
to create sustainable growth
through innovation, integrity, and
accountability. We remain focused
on discovering new ways to improve
our processes, with the goal of
serving our employees as best as
we can. Our continued emphasis on
organisational principles has helped
create proactive and effective
responses to changes in the business
environment. This contributes to
a greater sense of unity within the
company, and encourages employees
to live up to the vision and mission
of Lafarge.
Effectively managing our people
requires robust recruitment
processes, as well as the selection,
development and retention of
talented individuals who are
equipped to adapt and respond to
challenges within the industry. That
means opening channels for two-way
communication with our employees,
and valuing their opinions for
the perspective they provide.
Good communication is essential
throughout the company, and this
includes maintaining our good
standing with labour unions that
represent some of our employees.
A vibrant and high-functioning
team can only be achieved through
effective engagement, diversity, and
a work environment that is conducive
to positive growth. We are currently
working on a wellness programme
that supports our employees in their
work and personal lives. Initiatives
like the Ask Nelson programme are
designed to enable our employees
to productively contribute to shaping
the future with Lafarge.
Human Resource Management
is comprised of the departments
of Remuneration and Benefits,
Employee/Labour Relations, HR
Admin, Talent Management, Learning
& Development, Transformation and
Communications.
Team work makes the dream work,
and we want to hear your suggestions
on current and future employee
engagement initiatives.
Pockets of H1 highlights for the
team include:
• The Employee Assistance Studies
• Children Assistance
• Housing Schemes
• Improved Skills Grant Recovered
• Star Awards
• EXCO Roadshow
• Staff Lekgotla
• Mandela Day
Marketing
ON TOP OF OUR GAME
We are embarking on a journey to
position Lafarge South Africa as
a leader in the arena of high quality
and innovative building materials,
amongst local competitors.
Lafarge South Africa is part of a
global organisation, with a global
presence, and to demonstrate just
how forward-thinking and innovative
our solutions are in this competitive
industry, we have launched the
“Shape the Future” campaign, which
showcases the various industry
sectors our business units supply.
When it comes to media coverage,
our innovative products, such as
our Artevia range of decorative
concretes, have been featured on
the DSTV Home Channel and other
prime time television spots. To
disseminate our ‘Shape the Future”
message to our selected target
audience, radio adverts are currently
airing on 94.7 and KhayaFm, while
channel specific adverts are placed
in print publications.
The launch of the new Lafarge
South Africa website will further
support our corporate branding with
- case studies, product information
and additional features, such as an
online credit application form for our
customers. We are also continuing
our customer experience surveys
through the Net Promoter Scoring
Methodology, to make sure our
BOOMTOWN/BR1/CN/F
innovAtion thAt buiL ds nAtions
For more than 180 years, Lafarge has provided integrated solutions and hightech
materials that build communities. With a refined combination of experience
and innovation, we remain at the forefront of industry by sustainably shaping
environments all over the world. our advanced laboratory enables us to create
the building materials of the future, and our forward-thinking approach is
successfully building the bridges to tomorrow.
Phone: 0860 LAFARG (523274) | www.lafarge.co.za
LoCALLY PRoduCEd PRoduCts
CEMEnt
AGGREGAtEs REAdYMiX FLY Ash
‘customer facing departments’ can
add value to our customers, while
retaining and building customer
loyalty.
Mandela Day Commemoration
Star Awards
Mandela Month Outreach
Participants in the Control Room
Operators certification programme.
Adrian Sidwell from Ridgeview Quarry
obtained a Management Development
Programme from the University of
Stellenbosch Business School.
Malebogo Moremane graduated from the North – West
University in Mafikeng with a BSc in Health Sciences,
with the assistance of Lafarge, she is currently pursuing
an Honours Degree in Health Sciences at the University
of Stellenbosch. In her thank you letter, Malebogo said
“Your support has repeatedly played a key role in what
I have accomplished and opened new opportunities…
Once again, I appreciate the dedication and generosity
of donors like you who answer the call to give”.
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12 L a f a r g e m a t t e r s / Q3-2019
SUSTAINABILITY
Geocycle
The first half of 2019 has been a tough
start for the Geocycle team as the
industrial and plant teams focused
on industrial stability and clinker
production. Sasol provided Geocycle
with an official vendor number after
15 months, a result of collective
team work, especially from our
technical department.
Geocycle submitted two tenders and
were shortlisted for both, if awarded,
we will contribute large volumes of
high calorific value waste. The team’s
focus has shifted to the sourcing of
additional alternative, raw-material
products to substitute alumina, coal,
iron and silica. Many of the initiatives
have delivered fantastic results and
savings in the reported substitution
benefit.
The Lichtenburg Plant reinstated the
Alternative Fuel Resources precinct
over the last 2 months, and assisted
the team in managing the AFR and
waste management activities. This
is the commencement of the waste
management business, with the first
waste truck due to arrive at the end
of August.
I would like to take this opportunity
to thank my team, for their
demonstrated tenacity and personal
sacrifices made over the last couple
of months.
Phone: 0860 LAFARG (523274) | www.lafarge.co.za
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