Lafarge document

E X C E R P T F R O M T H E 2 0 1 1 A N N U A L R E P O R T - D O C U M E N T D E R É F É R E N C E INFORMATION ON LAFARGE
3.4.2 Aggregates
& Concrete
Products
Aggregates and concrete, like cement, are AGGREGATES
READY- MIX CONCRETE
key components of the building industry. Aggregates are used as raw materials for Concrete is a mix of aggregates, cement, Based on internal and external analysis, in concrete, masonry, asphalt, and other admixtures, and water that hardens to form the 2011 Lafarge was the world’s second largest industrial processes, and as base materials world’s most used building material. Tensile producer of aggregates and the world’s fourth for roads, landfil s, and buildings. The primary strength, resistance to pressure, durability, set largest producer of ready-mix concrete. On aggregates we produce and sel are hard rock times, ease of placing, aesthetics, workability December 31, 2011, we had production (usual y limestone and granite), but we also under various weather and construction facilities and sales offices in 35 countries. produce natural sand and gravel. Additional y, conditions as wel as environmental impact are In the year ending December 31, 2011, depending on the market, we process and sell the main characteristics that our customers our consolidated businesses operated recycled asphalt and concrete. Aggregates consider when buying concrete. From the very 392 aggregates industrial sites, which differ in their physical and chemical properties, basic to the cutting edge, we produce and sell sold approximately 193 million tonnes of granularity and hardness. Local geology a wide range of concrete and masonry mixes aggregates, and 1,046 concrete plants, which determines the type of aggregates available in to meet our customers’ diverse needs.
sold approximately 34 mil ion cubic meters of a given market, and not al types of aggregates Through our internal Research center we concrete. We also produce pre-cast concrete are available in every market. Through our have introduced innovative products such Research & Development (Lafarge Research as: Agilia® which offers superior coverage and We are vertically integrated to varying Center, LCR) we have greatly increased our fil ing abilities and self-level ing capability, with degrees with our Cement Division which understanding of the impact that the various enhanced durability and aspect; Extensia®, supplies substantial volumes to our concrete properties of aggregates have in their final flooring concrete which significantly reduces operations in several markets. Also within applications. Consequently, we have been saw joints; Chronolia® whose drying speed our Aggregates & Concrete Division, our able to refine our product offerings and step allows to remove formworks four hours aggregates operations supply a substantial up innovation in our downstream products.
after placing. In addition, we continue to volume of aggregates required for our concrete See Section 3.3 (Innovation ) for more successful y develop in al our markets our information on the R&D in the Group. Artevia® range of decorative concretes.
E X C E R P T F R O M T H E 2 0 1 1 A N N U A L R E P O R T - D O C U M E N T D E R É F É R E N C E 3INFORMATION ON LAFARGE
Demand for new products and for a broader use of loaders, haul trucks, crushers and other setting time, pumpability, placeability, range of products is accelerating due to equipment at our quarries. After mineral weather conditions, shrinkage and structural sustainability initiatives and new customer extraction, we restore our sites to a high strength. Through our extensive Research & needs. In association with a leading partner, standard so that they may be used for other Development activities, we focus on supplying Bouygues Construction, we launched in purposes: agricultural, commercial or natural.
concrete that meets these various needs.
2009 a new generation of concrete to In a world of growing environmental Because of concrete’s limited setting time, boost buildings’ energy performance: the pressures, where it is increasingly difficult to logistics is key to ensure timely delivery of our Thermedia® range. In 2011, the Group has obtain extraction permits, and where mineral product.
introduced Hydromedia™, a new generation resources are becoming more scarce, mineral pervious concrete, the result of 2 years’ Raw material prices account for approximately reserve management is a key to success in research in collaboration with university 70% of the cost to supply concrete and may the aggregate business. Consequently, we laboratories, civil engineering companies and vary considerably across the many markets in project owners. This fast-draining concrete which we operate. Given the significantly high in our activity. Across our existing markets, pavement solution limits the urban impact on percentage of raw materials costs, we strive to we regularly search for new material reserves the natural water cycle and reduces the risk adjust concrete mix designs to optimize our to replace depleting deposits wel in advance of flooding. We believe our strong Research & raw material usage. Delivery represents the of their exhaustion, and we work to obtain second largest cost component, accounting necessary government permits al owing the for approximately 20% of the costs to supply See Section 3.3 (Innovation) for more We seek to position new reserves as close to information on the R&D in the Group. PRE-CAST CONCRETE PIPES, WALL PANELS AND
OTHER PRODUCTS
See Section 3.4.4 (Mineral reserves and These products are manufactured by pouring In North America and the United Kingdom, quarries) for more information. the proper type of concrete into molds and we produce asphalt which we sel either as compacting the concrete through pressure a stand-alone product, or in conjunction READY-MIX CONCRETE
or vibration, or a combination of both. In with contracted paving. Asphalt consists of Ready-mix concrete is produced by mixing order to limit the transport costs ,the pre-cast 90-95% dried aggregates mixed with 5-10% aggregates, cement, chemical admixtures plants are usual y located close to aggregates heated liquid bitumen, a by-product of oil and water in varying proportions at concrete production plants and placing the resulting principal markets.
mixture in concrete trucks where it is usual y In Asphalt, we are using our internal Research mixed further and delivered to our customers. We obtain most of our concrete raw materials the Durapave® with enhanced appearance, As described above, asphalt is produced by (e.g. cement and aggregates) from internal placing and energy efficiency properties. blending aggregates with liquid bitumen at sources. Concrete is produced with equipment Demand for new products and for a broader asphalt production plants. We obtain much that mixes raw materials in desired ratios, range of products is accelerating due to of the aggregates needed to produce asphalt checks the quality of the product obtained, environmental initiatives and new customer and places the mixture into concrete trucks. bitumen from third party suppliers. Bitumen Concrete plants can be either fixed permanent is a by-product of petroleum refining, the sites or portable facilities, which may be price of which is tied to oil prices. Asphalt Production and Facilities
located at our customers’ construction sites.
is produced at low capital-intensive plants Information
Many concrete mixes are designed to achieve consisting of raw material storage facilities and various performance characteristics desired equipment for combining raw materials in the AGGREGATES
by our customers. Cement and aggregate proper proportions at a high temperature. Our Aggregates production involves primarily chemistries may be varied, chemical asphalt plants range in output from 5,000 to blasting hard rock from quarries and then admixtures may be added (such as retarding 500,000 tonnes per year and are located in crushing and screening it to various sizes or accelerating agents) and other cementitious North America and the United Kingdom.
to meet our customer’s needs. Aggregates materials (such as fly ash or slag) may be production also involves the extraction of substituted for portions of cement to adjust the Customers
sand and gravel from both land and marine concrete performance characteristics desired locations, which generally requires less by the customer. Consequently, significant We sel our aggregates, concrete and asphalt crushing but stil needs screening to different technical expertise and quality control are to thousands of unaffiliated customers in local sizes. The production of aggregates involves required to address the many construction markets throughout the world. intensive use of heavy equipment and regular issues our customers face, such as concrete E X C E R P T F R O M T H E 2 0 1 1 A N N U A L R E P O R T - D O C U M E N T D E R É F É R E N C E INFORMATION ON LAFARGE
We sell aggregates primarily to concrete have implemented standards for the design rises too high. We developed our use of mobile producers, manufacturers of pre-cast and construction of our plants.
plants in a number of markets to improve our concrete products, asphalt producers, road We believe we have a strong competitive flexibility in redeploying plants in response contractors, and construction companies of position in aggregates through our well to market changes and to meet customers’ al sizes. In some markets, we sel aggregates located reserves in key markets and our needs.
for use in various industrial processes, such logistic networks. Our worldwide experience Like concrete, asphalt must be delivered as steel manufacturing. We sell concrete allows us to develop, employ, and refine quickly after it is produced. Thus, asphalt primarily to construction and road contractors business models through which we share and markets tend to be very local. Generally ranging from major international construction implement best practices relating to strategy, speaking, asphalt is sold directly by the companies to small residential builders, sales and marketing, manufacturing and land asphalt producer to the customer, with only farmers, and do-it-yourself individuals. We management; this gives us a superior quality very limited use of intermediate distributors sel asphalt primarily to road contractors for product to offer the market. In addition, we or agents since prompt and reliable delivery the construction of roads, driveways, and have a strong understanding of the needs of in insulated vehicles is essential.
parking lots, as wel as directly to state and most of our aggregates customers since we are vertical y integrated in their predominant lines LOCATION OF OUR MARKETS
Our customers general y purchase aggregates, of business. Final y, we believe that we have Shipping aggregates over long distances is concrete, and asphalt in quantities sufficient a reputation for responsible environmental costly, and concrete and asphalt cannot be to meet their immediate requirements. stewardship and land restoration, which transported over distances that involve more Occasional y, we enter into agreements to assists us in obtaining new permits more easily than about one hour of transportation time. supply aggregates to certain plants which and encourages landowners to deal with us as Consequently, markets for these products produce concrete, asphalt, or pre-cast the operator of choice.
tend to be local in nature. However, where concrete products. These contracts tend to our quarries have access to shipping lanes Consolidation in the global concrete industry is be renegotiated annual y. Backlog orders for or railroads, we may ship aggregates over less pronounced and, as with aggregates, we our aggregates, concrete, and asphalt are significant distances. W hile brand recognition face competition from numerous independent and loyalty play a role in sales of these products, operators throughout our markets. However, local customers tend to choose producers we often compete with multinational groups based on location, quality of product, reliability such as Cemex, CRH, HeidelbergCement, of service, and price. Furthermore, demand Holcim and Italcementi depending on their for aggregates, concrete, and asphalt depends DESCRIPTION OF MARKETS AND OF OUR POSITION geographical portfolio.
IN THESE MARKETS
mostly on local market conditions, which can Most local aggregates, concrete, and asphalt An essential element of our strategy is vary dramatical y within and across a broader markets are highly fragmented and are served innovation. We have developed substantial regional or national market.
by a number of multinational, regional, and technical expertise relating to concrete. The majority of our aggregates, concrete, Consequently, we can provide significant and asphalt operations are located in Global y, the aggregates industry is in the early customers to differentiate us from competitors. stages of consolidation, mainly in developed markets. We face competition in our local with the country’s level of infrastructure and technical expertise, we recently developed markets from independent operators, regional construction spending. In these countries producers (such as Martin Marietta Materials the nature and enforcement of applicable Artevia®, Chronolia®, Extensia®, Thermedia® and Vulcan Materials in the United States) regulations provide a balanced playing field. and the new Hydromedia® lines. Again, our However, during the recent years, we have worldwide experience permits us to further differentiate ourselves based on product penetrate fast growing markets in emerging Environmental and planning laws in many quality and capability.
countries, to the extent that rules of the game countries restrict new quarry development. To improve our competitive position in local al owing us to operate soundly are established. In addition, excluding the cost of land and concrete markets, we situate our plants to mineral rights, the plant and equipment optimize our delivery flexibility, production PORTFOLIO MANAGEMENT
costs for a new quarry range from around 2 capacity and backup capability. We evaluate In line with the Group’s strategy, we continued to 4 mil ion euros for a smal quarry to several each local market periodical y and may realign this year our selective divestment policy with tens of mil ion euros for a very large quarry. We our plant positioning to maximize profitability the sale of the Aggregates & Concrete activity when market demand declines or capacity in Portugal as wel as our Concrete assets the E X C E R P T F R O M T H E 2 0 1 1 A N N U A L R E P O R T - D O C U M E N T D E R É F É R E N C E 3INFORMATION ON LAFARGE
South East United States. We also started to Ready-mix Concrete, Asphalt and Paving the number of industrial sites we operated operate in a few countries that we believe businesses in the United Kingdom. The latter on December 31, 2011 and the volume are offering growing opportunities: Iraq and stil requires regulatory approval. Ku wa it for Concrete and for Aggregates Russia in partnership with the EBRD. We also BREAKDOWN BY REGION
announced in February 2011, the formation of We produce and sel aggregates and concrete volumes from ful y consolidated subsidiaries a 50/50 joint venture with Anglo American plc in the regions and countries of the world and the consolidated percentage of volumes which wil combine our Cement, Aggregates, listed in the table below. The table shows for proportionately consolidated subsidiaries.
NUMBER OF INDUSTRIAL SITES
VOLUMES SOLD
REGION/COUNTRY
AGGREGATES*
CONCRETE
AGGREGATES
CONCRETE
WESTERN EUROPE
NORTH AMERICA
CENTRAL & EASTERN EUROPE
MIDDLE EAST & AFRICA
Industrial sites for the production of aggregates from one or more quarries. In 2011, our asphalt operations produced and sold a total of 5.1 mil ion tonnes in the United States, Canada and the United Kingdom.
E X C E R P T F R O M T H E 2 0 1 1 A N N U A L R E P O R T - D O C U M E N T D E R É F É R E N C E INFORMATION ON LAFARGE
3.4.3 Gypsum
Customers
During 2011, most of the Group gypsum Production also includes gypsum plaster, Gypsum wal board products are mostly sold activities were disposed of (Asia, Europe and plaster blocks, joint compounds, metal to general building materials distributors, South America, Australia). studs, anhydrite binders for self-level ing floor- plasterboard instal ers, wal board specialty screeds and industrial plasters, which are also See Section 3.2.2 (Recent acquisitions, dealers, do-it-yourself home centers and intended for the construction and decorating partnerships and divestitures) and Note transforming industries. In some markets, industries. Sales of such products accounted 3 (Significant events) to our consolidated prescribers (such as architects) may influence for approximately one third of our Gypsum financial statements for more information on which products are to be used to construct Gypsum wallboard (also known as Production and facilities
“plasterboard”) and other gypsum-based information
products (e.g. plaster, joint compounds, plaster blocks) and related products (such as metal Gypsum manufacturing uses the crystal ine POSITION IN THESE MARKETS studs and accessories) are used primarily structure of gypsum (calcium sulfate dihydrate We believe that at the end of 2010, before the to offer gypsum-based building solutions – a natural y occurring mineral common in sales, we shared approximately 75% of today’s for constructing, finishing, or decorating sedimentary environments), within which worldwide wal board market with six other interior walls and ceilings in residential, water molecules are physical y retained. Plaster producers in a sector which is increasingly commercial and institutional construction is made by grinding and heating gypsum concentrated (Saint-Gobain, Knauf, US projects throughout the world, as wel as for to release the trapped water molecules, Gypsum, Yoshino, National Gypsum, BNBM). sound and thermal insulating partitions. Other wal board is made by mixing the plaster with These companies operate gypsum wal board gypsum-based products include industrial water to form a slurry, extruding the slurry plants and usual y own the gypsum reserves plaster (used for special applications such as between two continuous sheets of paper, and they use to produce their wal board.
mouldings or sculptures), medical plasters, then drying and cutting the resulting board and self-level ing floor-screeds.
into proper sizes. When recombining with In the gypsum wal board market, companies water, the slurry is transformed into gypsum compete, on a regional basis, on price, We believe that, before the disposal of crystals which interlock with each other and product quality, product range, solution these activities, we were among the three “grow” into the liner paper, giving the board design, efficiency, flexibility, and customer largest manufacturers of gypsum wal board its strength. Both natural y occurring gypsum service. Our largest competitors in Western worldwide. At the end of 2010, we had and synthetic gypsum are used to produce Europe are Knauf and Saint-Gobain, and in production facilities in 30 countries. Our wal board. Synthetic gypsum is a by-product the United States National Gypsum, Saint- consolidated businesses operated 41 of certain chemical manufacturing and fossil Gobain, and US Gypsum.
wal board plants (with an annual production fuels power production operations.
capacity of over 1 bil ion square meters) and This sector is highly competitive in Western 36 other plants which produced primarily At the end of 2010, our businesses operated Europe and North America with production plaster, plaster blocks, joint compounds, or and owned 21 gypsum quarries worldwide, mostly concentrated among several national metal studs as wel as paper (2 wal board including 16 in Europe. Some of our plants and international players.
paper plants).
have entered into long-term supply contracts Western Europe
with third parties to supply natural gypsum. Western Europe is the world’s third largest Products
The plants using synthetic gypsum are supplied through long-term contracts, most regional wallboard market. The technical of which contain one or more options to renew. performance of products and systems plays We believe our current supply of gypsum, both a critical role in this market. The region as a The principal gypsum product is wal board. natural and synthetic, is adequate for current whole consumed close to one bil ion square Wallboard is produced in a number of and foreseeable operating levels.
meters of wallboard in 2010, based on our standard lengths, widths and thicknesses and estimates. We sold over 250 mil ion square with a variety of characteristics depending on Paper and gypsum account for approximately meters of wallboard in Western Europe in the intended use of the board. We offered a 25% and 15% of wal board production costs, 2010. Additional y, we had a minority interest ful line of wal board and finishing products: respectively. Before the sales, we produced in Yesos Ibericos (Grupo Uralita) in Spain.
“standard” wallboard; and technical approximately half of our wal board paper
wal boards – e.g. fire retardant, water-resistant, requirements at our own mil s in France and North America
sag-resistant, resistant to mold, high humidity, at a joint venture the United States. Al of our North America is the world’s largest regional
“design and decoration” and very high traffic paper production is based on recycled waste wallboard market. The region as a whole areas. Some of these wal boards combine two paper fibers.
consumed close to 2 bil ion square meters of wal board in 2009, based on our estimates. We sold over 150 mil ion square meters of wal board in North America in 2010.
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Asia
In Asia, the world’s second largest regional
wallboard market, we conducted gypsum
wallboard and related operations through
a 50/50 joint venture managed jointly with
the Australian company Boral Limited.
The joint venture operates three wal board
plants in South Korea, four in China, one in
Malaysia, two in Thailand, two in Indonesia,
one in Vietnam, and one in India. It also has
several plaster and metal stud plants in these
countries.
At December 31, 2011, Lafarge was present in Gypsum actitvies in Algeria, Canada, Mexico, Morocco, South Africa, Turkey and USA.
See Note 3 (Significant events) to our consolidated financial statements for more information.

Source: http://www.lafarge.ru/04112012-customers_activities-GandB_market_2011-uk.pdf