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Contents 2018 OVERVIEW 5 About LafargeHolcim 6 About Bamburi Cement Group 7 Group - Key Financial Highlights 8 Value Added Statement 9 Chairman’s Statement 10 Group Managing Director’s Statement 12 Board of Directors 14 Executive Committee Members 19 BUSINESS REVIEW 21 What We Do 22 Operational Review 24 Our Projects 27 Marketing Highlights 28 Franchise Network Highlights 30 Health and Safety 32 Our People and Systems 34 Risk and Control 36 SUSTAINABILITY REVIEW 39 Our Sustainability Framework 40 People and Communities 41 Climate 45 Water and Nature 47 Circular Economy 49 GOVERNANCE 53 Governance Auditor’s Report 54 Corporate Governance Statement 55 Remuneration Report 60 :OHYLOVSKLY7YVÄSL FINANCIAL REVIEW 65 Corporate information 66 Report of the Directors 67 Statement of Directors’ Responsibilities 68 Independent Auditors’ Report 69 *VUZVSPKH[LK:[H[LTLU[VM7YVÄ[VY3VZZHUKV[OLY Comprehensive Income 73 *VTWHU`:[H[LTLU[VM7YVÄ[VY3VZZHUK other Comprehensive Income 74 Consolidated Statement of Financial Position 75 Company Statement of Financial Position 76 Consolidated Statement of Changes in Equity 77 Company Statement of Changes in Equity 79 Consolidated Statement of Cash Flows 81 Company Statement of Cash Flows 82 Notes to the Financial Statements 83 2018 OVERVIEW About LafargeHolcim 6 About Bamburi Cement Group 7 Group - Key Financial Highlights 8 Value Added Statement 9 Chairman’s Statement 10 Group Managing Director’s Statement 12 Board of Directors 14 Executive Committee Members 19 2018 6=,9=0,>࢝ About LafargeHolcim Our Four Value Drivers Net Sales by Region (CHF bn) North America Latin America Europe Middle East Asia Pacific & Africa 5.9 7.6 3.1 7.4 2.7 6 BAMBURI CEMENT ANNUAL REPORT & FINANCIAL STATEMENTS 2018 About Bamburi Cement Group KENYA Bamburi Cement Ltd Bamburi Special Lafarge Eco Systems Ltd Binastore Ltd Products Ltd A subsidiary of Wholly owned subsidiary A one-stop shop where LafargeHolcim, the world Wholly owned subsidiary of the company, focus on VULJHUÄUKH^PKLYHUNL leader in building materials. of the company and sustainability of land use of construction products, Two Plants located in the largest supplier of and quarry rehabilitation. services and expertise for Mombasa and Athi River Ready Mix Concrete and their construction needs Precast blocks UGANDA Hima Cement Ltd Bonastore Ltd Uganda based subsidiary with A one-stop shop where two plants - Hima Plant in VULJHUÄUKH^PKLYHUNL Kasese and Tororo Grinding of construction products, Station in Tororo – with a total services and expertise for cement production capacity their construction needs of 1.7 million tonnes. RWANDA Hima Cement Rwanda Rwanda based subsidiary of Hima Cement Ltd. It is the preferred supplier of high quality cement solutions to Rwanda and high quality ReadyMix Concrete to Kigali and neighbouring districts. 7 2018 6=,9=0,>࢝ Group - Key Financial Highlights Employees Group Turnover 45,000 947 1000 39,200 38,034 880 40,000 36,029 35,974 37,262 900 802 808 822 35,000 800 383 30,000 16,803 16,773 14,214 700 359 16,165 331 347 352 16,380 600 25,000 500 20,000 400 Shs Million 15,000 300 564 19,864 19,594 521 471 461 470 10,000 19,403 22,397 21,261 Number of Staff Number of Staff 200 100 5,000 0 - 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Uganda Kenya Total Uganda Kenya Total Group Group Profit before tax Group Profit attributable to shareholders 9,000 8,458 8,458 8,000 8,000 7,000 7,000 5,801 6,000 6,000 5,260 5,243 5,000 5,000 4,116 4,000 4,000 3,558 Shs Million 3,000 3,000 Shs million 2,000 1,647 2,000 890 1,000 1,000 680 - 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Group Earnings/ Dividend per Share Group Cash and Cash Equivalents 9000 16.00 8,453 14.47 14.44 8000 7,644 14.00 13.00 6,972 12.00 12 7000 12.00 9.80 6000 10.00 5000 8.00 4000 3,490 Shs Million 6.00 5.1 4.54 3000 4.00 2,366 4.00 2000 2.45 2.00 1000 0.00 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 EPS (Shs per share) DPS (Shs per share) 8 BAMBURI CEMENT ANNUAL REPORT & FINANCIAL STATEMENTS 2018 Value Added Statement (Shs) Customers Banks Payment to 36,234M 103M Governments Customers are at the heart of >LJYLH[L]HS\LMVYV\YÄUHUJPHS 1,470M our business. We understand our services providers through the By working closely with both local markets and strive to exceed ÄUHUJPHSWYVK\J[HUKZLY]PJLZ National and County governments, our customers’ expectations. we access from them enabling ^LIYPUN[OLILULÄ[ZVMWYP]H[L We are concerned with providing \Z[VÄUHUJLV\YVWLYH[PVUZHUK sector operation; providing revenue our customers with the highest investments. for the exchequer through various quality products and respond [H_LZHUKWH`TLU[ZHUKPUÅ\LUJPUN appropriately to their concerns. practices in the construction sector through policy dialogue and sharing of our experience and expertise. Shareholders Suppliers Our Employees (Dividend) 30,172M 3,150M 907M We work collaboratively with Our employees drive our business. We provide shareholders with several strategic suppliers. We We strive to create a diverse open and transparent information cascade our high business and inclusive workplace where and encourage two-way conduct through these all our colleagues can reach communication while observing relationships. We ensure that their full potential while providing the highest standards of corporate we treat our suppliers with the competitive remuneration and governance and ethical business utmost respect and encourage ILULÄ[ZHUKWYPVYP[PaPUN[OLPYOLHS[O practices. co-creation. and safety Communities Capital Expenditure Retained for 40M 5,059M Sustainable Growth 963M We seek to create social, We are consistently improving environmental and economic our productive capacity through Cash retained for sustainable ILULÄ[ZMVYJVTT\UP[PLZ^OLYL^L investments in machinery, operations in our business. operate. equipment, technology and other assets so as to maintain our competitive advantage. 9 2018 6=,9=0,>࢝ Chairman’s Statement “Successful launch of our Capacity Expansion in Kenya and Uganda, will solidify our market leadership position going forward” This statement covers Bamburi CementC Limited (‘the Company’)Company’) and its subsidiaries (together,(to ‘the Group’). IInvestingnvesting for future ggrowthrowth ththroughr the capacity eexpansionxpansion We are ppleasedleased to announce thathatt in the second half of 22018,018, we successfully commissicommissionedo the Shs 7.9 billion ccapacityapacity eexpansionxpansion pprojectsrojects iinn AtAthi River, Kenya and Tororo, UUganda,ganda, on time and within budbudget.g We believe that these wwillill support our “Building for GroGrowth”w ambition and grow our mmarketarket leadership position in the region. OOurur next phase of expansion will enable us to solidify our ccostost ambitions, by matchinmatchingg our clinker capacity to our ccementement grinding capacity. EcoEconomicnomic EnvirEnvironmentonment in ouour main East African mamarketsrkets TThehe KeKenyannyan econoeconomymy rebounreboundedd in 2018 with strong growth at 6%, spurred by favourable weather cconditionsonditions that resulted in rerecoveryc of the agriculture sectorsector,, increased tourismtourism,, ththee stable macroeconomic LLU]PYVUTLU[HUK+PHZWVYHPUÅV^ZU]PYVUTLU[HUK+PHZWVYHPUÅ UUgandaganda also recorded similsimilara growth driven by iincreasedncreased agragricultureiculture output from the favourable weatweatherher conconditions,ditions, macromacroeconomice stability and YLTP[[HUJLÅV^ZMYVT+PHZYLTP[[HUJLÅV^ZMYVT+PHZWVYHW GGDPDP grgrowthowth rate in RwandRwanda remained strong at 7% ddrivenriven by favourable agricagriculturalu output together with sstabletable mmacroeconomicacroeconomic coconditions. EnerEnergygy and Power ppricesric EEnergynergy anandd power costscosts,, remain the biggest cost ccomponentsomponents in the pproductionrodu and distribution of pproducts.roducts. IInn 2018, both our KenyKenyaa and Uganda operations ^^LYLHќLJ[LKI`YPZPUNM\LSJVHSHUKWL[JVRLLYLHќLJ[LKI`YPZPUNM ccostsosts ffollowingollowing ggloballobal mmarket price increases. WhilWhilee power prpricesices iinn UUganda remained stable, wwee experexperiencedienced iincreasedncreas power prices in Kenya, ooverver and above the record high power prices of 2017. GGiveniven ththee ffavourableavourable wweathereath conditions and stable mmacroeconomicacroeconomic conconditionsditions in the year, the variable ffueluel anandd fforexorex component oof power price in Kenya, has YYLK\JLKZPNUPÄJHU[S`ZPUJL1\UL/V^L]LY[OPZLK\JLKZPNUPÄJHU[S`ZPUJL1\ ^^HZVќZL[I`PUJYLHZLPU[OLÄ_LKWV^LY[HYPќZMYVT1\S`HZVќZL[I`PUJYLHZLPU[OLÄ_ 202018.18. 10 BAMBURI CEMENT ANNUAL REPORT & FINANCIAL STATEMENTS 2018 >OPSL^LHWWYLJPH[LNV]LYUTLU[LќVY[ZPUYLK\JPUNWV^LY Uganda GDP is expected to be fuelled by increase in prices by investing in cheaper alternatives like geothermal infrastructure spending, especially to support the oil industry, and wind power, we note with concern that power prices in and agriculture. The cement market is expected to grow in Kenya still remain the highest in the region. We continue to line with the economy. SVII`NV]LYUTLU[MVYTVYLLќVY[Z[VYLK\JLWV^LYWYPJLZ to make Kenyan manufactured products competitive. Beyond 2019, we expect Kenya and Uganda to both achieve cement growth rates above GDP, as is the norm Cement Market & Competition for maturing countries. In addition, we expect growth in the inland export markets of Democratic Republic of Congo, Despite the sound economic growth, the Kenyan cement South Sudan and Rwanda. However, we remain concerned market recorded its second successive decline at 5% in respect