Holcim said on Monday it was launching a targeted cost-cutting programme aimed at increasing operating profit by at least CHF1.5bn (EUR1.2bn) by the end of 2014.

CEO Bernard Fontana: “After intensive discussions at the senior management level and based on close collaboration with the Group companies, I am confident that we will achieve these targets. At least CHF150m positive impact will be achieved in 2012.”

Under the name, the "Holcim Leadership Journey 2012-2014" the programme focuses on the following areas as outlined by the group in a statement released today:

Customer Excellence (additional operating profit by end of 2014: CHF500m)

The focus will be on measures to strengthen the management of customer value and loyalty, margin and prices as well as sales force. Furthermore, Holcim will implement standardised performance indicators across the whole Group to measure the progress in marketing and sales.

Increasing energy efficiency and AF raw materials (additional operating profit by end-2014: >CHF300m)

Various measures are planned: from clinker grinding improvements and kiln burner updates, to optimization of the fuel mix in cement production as well as initiatives in the field of energy procurement. The cost reduction measures will be supported by some "fast return" Capex projects.

Reduction of logistics costs (additional operating profit by end-2014: >CHF250m)

Holcim sees a substantial cost reduction potential through optimised truck cycles, the reduction of the waiting time for trucks and optimisation of routes based on real-time GPS equipment, not only to construction sites, but also between plants and distribution units. Furthermore, Holcim will review third party transportation contracts.

Streamlining procurement process globally (additional operating profit by end-2014: > CHF250m)

These include measures to improve processes, standardisation, planning and volume pooling of procurement and a diversification of the supplier base in all geographical areas, including China. It is planned to strengthen the sourcing platforms on different levels (regional, global) and to re-negotiate existing contracts.

Increasing fixed costs savings (additional operating profit by end-2014: >CHF200m)

Holcim will reduce support process costs across all levels of the company and make better use of existing service centers and support units to reduce the use of external services and consultants.

Additionally, Holcim will review the entire asset base across all segments with low utilisation levels. In this context, the size of the local footprint will also be reviewed.

Further reduction of net working capital and selective divestments

In addition to further reduction of net working capital, also selective divestments may occur.

Reduction of the investment cost per tonne of new cement capacity

For future expansion projects, the total investment cost per tonne of new capacity cement will be reduced by 20 per cent, based upon regional reference costs, by reviewing design standards, optimising equipment procurement and broadening the supplier base.

Further development and generation of talents and leaders

Due to Holcim’s excellent geographic diversification, growth will continue. To support this growth, the Group needs a broad range of talents and experienced leaders in management roles and functions. The "Holcim Leadership Journey" will strengthen the development of talents and managers as well as the social dialogue with all stakeholders. Furthermore, Holcim will continue to give highest priority to occupational health and safety with the goal of "zero harm to people".

Published under Cement News