Sales of the Aggregates and Concrete Division Slipped by 0.8%

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THE YEAR 2002 WAS ONE OF MIXED PERFORMANCES. SALES ROSE 7% AND OPERATING INCOME WAS UP 10% AS WE INCREASED OUR OPERATING MARGINS. THE SYNERGIES GLEANED FROM INTEGRATING BLUE CIRCLE EXCEEDED OUR PREVIOUSLY ANNOUNCED OBJECTIVES. WE REDUCED OUR DEBT BY A SUBSTANTIAL 1 1.5 BILLION AND CONTINUED TO FOCUS ON PROGRAMS TO IMPROVE PERFORMANCE.”

BERTRAND COLLOMB | CHAIRMAN AND CHIEF EXECUTIVE OFFICER

he Group’s sales recorded a gross increase of 7%, sustained PRESENTATION by a 16% growth of the Cement Division’s sales. The scope OF EARNINGS FROM T effect of former Blue Circle operations, consolidated since EQUITY AFFILIATES July 11, 2001, amounts to 1 1,558 million. Starting on January 1, 2002, the portion of earnings of companies accounted for by the equity method is SALES PERFORMANCE disclosed in the Group’s income statement under a specific line, “Equity in

Sales report excluding foreign quarter. In Latin America, sales income from companies accounted for exchange and scope of were generally up, despite by the equity method”. Before this consolidation effects is explained difficulties in Venezuela,with change in presentation, the Group allo- as follows. growth in Brazil and Chile driven cated its share in income from equity affiliates among “Operating income “ by strong price increases. In the CEMENT | Up 1.2% African and Indian Ocean from ordinary activities”, Capital gains Sales of Cement posted a limited regions, sales increased in most (losses) from asset disposals”, “Other increase of 1.2% reflecting a 3.2% countries with the exception income and expenses”, “Net financial drop in sales in the fourth of Nigeria. In Asia, sales grew expenses” and “Taxes”. The data from quarter. despite a drop in the Philippines, December 31, 2001 was revised to Sales rose in Western Europe, in where prices decreased, and in make it comparable with that of spite of the decline in the fourth Malaysia where the construction December 31, 2002. quarter, particularly in Germany market was destabilized by where prices have fallen workforce availability problems. significantly throughout the Sales were up in the year. In Central and Eastern Mediterranean Basin. Europe, sales advanced strongly, noticeably in Romania. In North America, total sales fell, due to a slowing of demand and bad SALES BY DIVISION weather conditions in the fourth DECEMBER 31, DECEMBER 31, % VARIATION* EXCLUDING 2002 2001 EXCHANGE AND in million euros in million euros SCOPE EFFECTS Cement 6,948 5,995 +16% +1.2% Aggregates 4,768 4,806 -1% -1.2% and Concrete Roofing 1,538 1,585 -3% -5.9% Gypsum 1,146 1,072 +7% +7.2% Others 210 240 -12% -15.3% Total 14,610 13,698 +7% -0.3% * At current consolidation scope and exchange rates.

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Scope changes consolidation, resulted in a Changes in the scope of reduction in sales consolidation had a net effect of 1 119 million. of 1 1,493 million (+11.4%). Acquisitions had a positive Foreign exchange effect impact on sales of 1 1,772 The foreign exchange impact million (primarily reflecting the on the 2002 sales amounted fullyear consolidation of the to 1 540 million (-4.4%). AGGREGATES AND former Foreign exchange losses CONCRETE | down 1.2% Blue Circle operations.) while weighed heavily on sales The sales in 2002 were down by disposals had a negative impact principally in the following 1.2% in comparison with the of 1 160 million. The change in currencies: US and Canadian previous year (down 0.7% in the accounting treatment of dollars (1 272 million), Brazilian fourth quarter). Aggregates sales Lafarge Morocco, from global real (1 79 million) and South posted a decline of 3.1%, largely consolidation to proportional African rand (1 40 million). due to North American market trends. Concrete sales increased slightly (0.8%), with a solid growth in France and a decline in North America. MOROCCO ROOFING | down 5.9% Roofing sales were 5.9% lower Beginning on January 1, 2002, a new accounting method was applied to our than in 2001 (down 8% in the Moroccan activities. They are now consolidated using the proportional method fourth quarter). Sales in Europe and no longer the global consolidation method. declined, particularly in Germany, while they continued DEPRECIATION to increase in Asia.

Beginning on January 1, 2002, the cement plants are depreciated by component. GYPSUM | up 7.2% Before January 1, 2002, they were all depreciated over the same useful life The 7.2% increase in sales without any distinction among the various components. (up 3.8% in the fourth quarter) The new treatment has resulted in an extension of the average depreciable life is mainly due to volume from 20 years to 28 years for a new factory to better reflect the actual useful and price increases in North life of the equipment. America, and to a significant increase in sales in the Asia Pacific region. In Europe, sales were stable in a mixed economic environment; weaknesses in SALES BY GEOGRAPHIC AREA Germany and Poland were offset (by destination) DECEMBER 31, DECEMBER 31, % by growth in the rest 2002 2001 VARIATION* of Europe. in million euros in million euros Western Europe 6,005 5,490 +9% North America 4,405 4,431 -1% Central and Eastern Europe 661 514 +29% Mediterranean Basin 562 637 -12% Asia / Pacific 1,388 1,101 +26% Latin America and the Caribbean 720 760 -5% Sub-Saharan Africa, Indian Ocean, Others 869 765 +14% Total 14,610 13,698 +7% *At current consolidation scope and exchange rates.

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OPERATING INCOME FROM ORDINARY ACTIVITIES BY DIVISION DECEMBER 31, DECEMBER 31, DECEMBER 31, % VARIATION 2002 2001 REVISED* 2001 REVISED* in million euros in million euros in million euros Cement 1,606 1,434 1,507 +12% Aggregates and Concrete 336 378 381 -11% Roofing 132 128 142 +3% Gypsum 51 3 9 - Others 7 (9) 26 - Total 2,132 1,934 2,065 +10%

OPERATING INCOME FROM ORDINARY ACTIVITIES BY GEOGRAPHIC AREA DECEMBER 31, DECEMBER 31, DECEMBER 31, % VARIATION 2002 2001 REVISED* 2001 REVISED* in million euros in million euros in million euros Western Europe 980 802 892 +22% North America 479 515 506 -7% Central and Eastern Europe 86 71 71 +21% Mediterranean Basin 111 113 116 -2% Asia / Pacific 138 104 106 +33% Latin America and the Caribbean 205 208 246 -1% Sub-Saharan Africa, Indian Ocean, Others 133 123 130 +8% Central costs (2) (2) Total 2,132 1,934 2,065 +10% * Revised for the change in presentation of equity affiliates.

BREAKDOWN OF OPERATING INCOME BY DIVISION

perating income on ordinary activities rose by 10% to € 2,132 million versus € 1,934 million as at December 31, 2001. OOperating income rose 2% excluding the effect of exchange rates, change in depreciable lives of cement assets and scope effects.

By Division, operating income in operations. Western Europe scope, depreciable lives and 2002 breaks down as follows. remains the Group’s largest exchange rates, operating cement market with 31% of income on ordinary activities CEMENT | 75% of volumes sold, followed by Asia rose by 3%. The change in the consolidated operating with 20%. estimated life of cement plant income Operating income on ordinary assets had a favorable impact Volumes sold by Lafarge in 2002 activities of the Cement Division of 1 83 million on operating totaled 106 million tons increased by 12% to 1 1,606 income. The change in the of cement, up 21% compared to million at the end of 2002 treatment of Lafarge Morocco 2001, reflecting the consolidation compared to 1 1,434 million from the global to proportional of the former Blue Circle at the end of 2001. At constant consolidation method reduced

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CEMENT DECEMBER 31, DECEMBER 31, % VARIANCE EXCLUDING FOREIGN 2002 2001 EXCHANGE, DEPRECIATION CHANGE in million euros in million euros AND SCOPE EFFECTS Sales 6,948 5,995 +16% +1.2%

Operating income on 1,606 1,434 +12% +3% ordinary activities* * Revised for the change in presentation of equity affiliates in 2001.

operating income in the • North America Operating income at constant Mediterranean Basin by Operating income in North scope, depreciable lives and 1 41 million. Currency America declined by 6% exchange rates grew by 21%, fluctuations had a negative to 1 330 million (compared to with strong growth in Romania impact of 5% being 1 73 million. 1 350 million at December, 2001). where both margins and As a percentage of the Division’s Currency fluctuations had a operating income grew gross sales (Note 3(a) on page negative impact on operating substantially due to favorable 104), operating income on income of 1 20 million. market conditions coupled with ordinary activities represented The scope effect of Blue Circle reductions in variable costs. 21.4% in 2002, compared to 21%* North America amounted to Operating income in Poland in 2001. The after tax return** 1 12 million. At constant scope, increased as operating margins on capital employed amounted depreciable lives and exchange improved due to cost reductions. to 8.4%. rates, operating income in In the Czech Republic, the level North America was down by 7%. prices of exports sales to • Western Europe Germany resulted in lower Operating income on ordinary • Emerging countries operating income. Margins activities in Western Europe Operating income in emerging improved in Russia and the grew by 27% to 1 656 million countries grew to 1 620 million Ukraine with both countries compared to 1 517 million (compared to 1 567 million increasing their operating at December, 2001. The scope at December, 2001). income. impact of the former Blue Circle The scope effect of the former operations in the United Blue Circle operations in Chile, In the Mediterranean Basin, Kingdom and Greece contributed Egypt, Malaysia, Nigeria, operating income for the region 1 111 million. Operating income Zimbabwe and the Philippines decreased by 10% to at constant scope, depreciable amounted to 1 56 million and 1 112 million from 1 125 million at lives and exchange rates the negative foreign exchange the end of 2001 due to the increased by 1.5% compared to impact totaled 1 52 million. change in accounting treatment 2001 due to the improved of our Moroccan operations from margins in France, Spain and In Central and Eastern Europe, global to proportional Italy. In Germany, the economic operating income rose 39% consolidation. Operating income slowdown and highly to 1 86 million from 1 62 million at constant scope, depreciable competitive pricing situation in 2001. The impact of negative lives and exchange rates, and have led the operating income currency fluctuations on the excluding the impact of the to fall to one-fourth of the 2001 region’s operating income change in accounting treatment level. amounted to 1 2 million. of our Morrocan operations grew

* 2001 with full-year accounting of Blue Circle (non-audited information), at comparable consolidation method: Morocco (50%), and new economic life of assets. **The after tax return on capital employed corresponds to the sum of the operating income on ordinary activities (at 28% in 2002, being the annual effective rate excluding the impact of the contingency provision for competition litigation risks) and the share of net income of equity affiliates, related to the average capital invested.

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by 21%. The impact of negative the improvement in operating operating income grew by 22%. currency fluctuations on the income in reals. The Brumado Existing operations in Kenya, region’s operating income divestment also impacted Cameroon and South Africa all amounted to 1 7 million. Strong operating income. In Venezuela achieved higher operating growth in income was realized in the local turmoil and bolivar margins. The operations in Morocco and Jordan due to the devaluation have resulted in Nigeria however recorded a favorable market conditions in operating income being down significant decline in operating these two countries. The small by 21%. A small decline was income due to a market loss incurred in Turkey in 2001 recorded in Honduras. Both decrease and to cost and turned into an operating profit Chile and Mexico increased production issues relating to on lower doubtful receivables. their operating income. delays with the start up of the Egypt saw operating income new plant at Ewekoro. decline in the context of the poor In Africa and the Indian Ocean, price trends partly offset by the operating income on ordinary In Asia, operating income rose positive impact on variable costs activities increased by 8% to by 56% to 1 100 million. of the new production line at 1 120 million. The scope effect of The scope effect of the former Alexandria. the former Blue Circle Blue Circle operations in operations in Nigeria and Malaysia and the Philippines In Latin America, operating Zimbabwe contributed contributed 1 30 million of income was slightly down from 1 5 million of additional additional operating income. 1 205 million at December 31, operating income. The negative The negative foreign exchange 2001 to 1 202 million a year later. foreign exchange impact on impact on the region’s operating The scope effect of the former the region’s operating income income amounted to 1 3 million. Blue Circle operations in Chile amounted to 1 10 million. At constant scope, depreciable was 1 22 million of additional At constant scope, depreciable lives and exchange rates, operating income. The negative lives and exchange rates operating income fell by 11%. foreign exchange impact on the region’s operating income amounted to 1 30 million. At constant scope, depreciable lives and exchange rates, operating income grew by 5% . Operating income was down in Brazil due AGGREGATES AND CONCRETE to the unfavorable foreign DECEMBER 31 DECEMBER 31 % VARIANCE EXCLUDING FOREIGN 2002 2001 EXCHANGE exchange impact which offset in million euros in million euros AND SCOPE EFFECTS Sales 4,768 4,806 - 0.8% -1.2%

Operating income 336 378 -11% -10% on ordinary activities* * Revised for the change in presentation of equity affiliates in 2001.

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South Korea delivered a strong compared to 7.9% in 2001. The effect on the operating income growth in operating income after tax return* on capital from former Blue Circle mainly due to the favorable employed amounted to 6.7%. operations and divestments was market conditions. India 1 3 million. The impact on improved operating income as • The operating income for operating income of the a consequence of continued Aggregates totaled 1 246 million weakening dollar against the production performance down 9% from 1 270 million euro amounted to 1 12 million or improvement. Operating in 2001. While currency 5%. An important share of the income in the Philippines was fluctuations had a negative decline in the operating income weak due to deteriorated impact of 1 10 million the is due to a reduction of the pricing. In Indonesia a small remainder of the decline was Aggregates and Concrete activity, operating loss was incurred, due to the weaker North especially in Ontario. Income though much reduced from the American results. dropped in Western USA and loss incurred in 2001. specifically in Southeastern USA • The operating income for due to a weaker market. AGGREGATES AND Concrete totaled 1 90 million Elsewhere in the world, CONCRETE | 16% down 17% from 1 108 million operating income continued to of consolidated in 2001. Currency fluctuations improve up to 1 10 million from operating income had a negative impact of 1 2 million in 2001. In South Operating income on ordinary 1 4 million with the remainder Africa, operating income activities of the Aggregates of the decline also due to the continued to grow strongly and and Concrete Division declined weaker North American results. in Turkey, while the market by 11% between 2001 and remains very unstable and 2002, from 1 378 million to • Western Europe competitive, the operating loss 1 336 million. The scope effect Operating income on ordinary was reduced significantly. of the former Blue Circle activities grew by 3% to operations was 1 16 million. 1 148 million. Operating income ROOFING | 6% of At constant scope and exchange in France was at a similar level to consolidated operating rates, operating income on 2001. In the UK operating income income ordinary activities declined grew as operating margins The Division’s operating income by 10%. Currency fluctuations improved in the concrete activity. was up 3% to 1 132 million from had a negative impact of 4%. 1 128 million in 2001 largely as Operating income on ordinary • North America a result of the cost management activities represented 7% Operating income on ordinary efforts and extensive of the Division’s gross sales activities was down by 25% restructuring carried out across (Note 3(a) on page 104) in 2002 to 1 178 million. The net scope the operations, particularly in

* The after tax return on capital employed corresponds to the sum of the operating income on ordinary activities (at 28% in 2002, being the annual effective rate excluding the impact of the contingency provision for competition litigation risks) and the share of net income of equity affiliates, related to the average capital invested.

ROOFING

DECEMBER 31 DECEMBER 31 % VARIANCE EXCLUDING FOREIGN 2002 2001 EXCHANGE in million euros in million euros AND SCOPE EFFECTS Sales 1,538 1,585 -3% -5.9%

Operating income 132 128 + 3 % + 4 % on ordinary activities* * Revised for the change in presentation of equity affiliates in 2001.

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France/Concrete, the Autoroutes du Sud de la France building, in Orange. An Agilia® construction.

1 6 million or 7% was a result of weaker markets in France and in the Netherlands, that could not be entirely compensated by the improvement recorded in Scandinavia and further growth in Italy.

• North America and other countries Operating income was down marginally to 1 29 million in 2002 from 1 31 million in 2001, also due to the same cost allocation change. At constant scope and exchange rates, underlying operating income was up 1 9 million, excluding Germany where the sales forces from 6% to 1 103 million. In change in central allocation of the two leading brands Germany, following the costs. Major contributors were were merged in 2002. Germany extensive restructuring the Eastern Europe, Malaysia and now accounts for 25% of operating income increased North America. operating profits, all other from 1 15 million to 1 33 million, European markets for 61% and including the change in GYPSUM | 2% of non-European operations for the central cost allocation consolidated operating 14%. Operating income on method within the Division. income ordinary activities represented The underlying increase in Operating income on ordinary 8.6% of the Division’s gross sales German operating income activities grew strongly after (Note 3(a) on page 104) in 2002, amounted to 1 2 million or 13%, the very difficult year in 2001, compared to 8.1% in 2001. The excluding change in cost and was up from 1 3 million to after-tax return* on capital allocation method. In other 1 51 million. This was mainly as a employed amounted to 4.2%. Western European countries result of reduced losses in North operating income declined from America, helped by better • Western Europe 1 82 million in 2001 to pricing coupled with our Operating income on ordinary 1 70 million in 2002. The Division-wide performance activities in Western Europe rose underlying decrease of plans, particularly in the area of

GYPSUM

DECEMBER 31 DECEMBER 31 % VARIANCE EXCLUDING FOREIGN 2002 2001 EXCHANGE in million euros in million euros AND SCOPE EFFECTS Sales 1,146 1,072 +6.9% +7.2%

Operating income 51 3 N/A N/A on ordinary activities* * Revised for the change in presentation of equity affiliates in 2001.

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purchasing and manufacturing efficiency. Operating income on ordinary activities represented 4.4% of the Division’s gross sales (Note 3(a) on page 104) in 2002, Australia/Gypsum, The Sydney compared to 0.3% in 2001. The Olympic Stadium. after tax return* on capital employed amounted to 3.6%.

• Western Europe: Operating income on ordinary activities in Western Europe improved strongly to 1 59 million from 1 44 million including the effect of a change in the central cost allocation method and reducing our cost base. losses. However, mid-term within the Division. The The level of demand for prospects remain excellent for underlying increase in wallboard remained stable this market: a new plant started operating income amounted to during the year with a sound in the fourth quarter in Gacki 1 2 million or 5%. France and the residential construction after the previous plant at this UK continued to increase market. At the end of 2002 site had been closed. Our operating margins as a the decision was taken to operating income on ordinary consequence of their operating mothball the Wilmington plant activities in the Asia Pacific performance plans, however in the North East region region was stable, but with Germany continued to make allowing us to concentrate our good performances seen in losses reflecting the difficult production at lower cost Australia and continuing market conditions. facilities. The idling of this plant benefits of our joint venture in will save 10 million US dollars Asia. In particular, in 2002 the • North America: per annum. joint venture benefited from The operating loss in 2002 the successful integration of was significantly reduced to • Other countries: Siam Gypsum Industry, which 1 28 million, compared to Operating income on ordinary was acquired in June 2001, and a loss of 1 76 million in 2001. activities fell to 1 20 million the construction of a new This reduction in losses was compared to 1 32 million in facility in South Korea using due to the increase in prices 2001. This decline was mainly equipment transferred from the and also to the improvement in attributable to Poland where Chinese operations following production performance the very poor market conditions the restructuring of the two benefiting sales volumes led to a significant increase in businesses in Shanghai.

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OTHER INCOME STATEMENT ITEMS

• Non-recurring items our Gypsum activities in • Net interest charges These amounted to a Europe, which Lafarge has These amounted to 1 521 million, 1 - 309 million charge, as appealed against, as well as the down from 1 544 million at compared to a 1 122 million current German Cartel the end of December 2001. contribution at the end of authority investigation into the The average interest rate on December 2001. cement industry in Germany. the debt was 5.2% at the end The capital gains on disposals Other non recurring charges of December 2002. In were 1 216 million of which relate to restructuring charges connection with the major the sale of cement operations in and write offs. plant modernizations that Southern Spain, Brazil and South Restructuring and closure occured in 2002, an amount of Africa generated a gain charges for our businesses in 1 40 million of financial of 1 148 million. The sale of Germany and Poland amounted expenses was capitalized property in Paris, namely our to 1 69 million, split between compared to 1 16 million headquarters building which we Roofing at 1 39 million, Concrete in 2001. Dividends amounted now lease, generated a at 1 17 million and Gypsum at to 1 14 million, compared 1 51 million capital gain. 1 13 million. An amount of to 1 47 million in 2001. Other non-recurring charges 1 27 million was accounted for The dividends received of 1 525 million included as a charge in relation to the in 2001 included those received a provision of 1 300 million. idling of the Wilmington plant in from Blue Circle. This provision has been made Delaware, USA. Other non- out of prudence to cover the recurring items relating to the • Income tax risks related to the European reorganization of our businesses Income tax totaled 1 448 million Commission’s decision against amounted to 1 60 million. (1 368 million at the end of

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December 2001). The effective • Share of minority interests • Net income, Group share tax rate when compared to 2001 The share of minority interests It amounted to 1 456 million equals 34.4%. This increase is in in net Group income totaled (1 750 million at the end of part due to the exceptional 1 273 million (1 270 million December 2001) due to the provision for risks relating to at the end of December 2001). exceptional provision of competition issues, which is not 1 300 million. tax deductible. • Amortization of goodwill Goodwill amortization • Net income per share • Income from equity amounted to 1 158 million, up This item was consequently affiliates from 1 142 million at the end 1 3.52 (1 5.97 at the end of They totaled 1 33 million of December 2001. The increase December 2001). The average (1 18 million at the end of is due to the scope impact number of shares outstanding December 2001). The share of net resulting from the acquisition increased by 3% to income of equity affiliates of Blue Circle. 1 129.6 million. contributed 1 49 million, of which Molins accounted for • Net income, Group share, 1 37 million. The share of net before extraordinary income of equity affiliates in the provision and goodwill Roofing and Gypsum Divisions amortizations amounted to 1 18 million. The It amounted to 1 914 million, a share of the loss of Carmeuse 2.5% increase from 1 892 North America amounted to million at the end of December 1 28 million. 2001.

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CASH FLOW STATEMENT

NET CASH FROM •Capital expenditures for Gypsum: OPERATING ACTIVITIES internal developments Continental Gypsum in Newark, BEFORE CHANGE IN 1 380 million, representing a USA for 1 30 million. WORKING CAPITAL number of cement projects such It totaled 1 1,956 million as the new dry line at Kujawy in DISPOSALS (1 1,668 million at the end of Poland, Ewekoro in Nigeria, and They totaled 1 725 million December 2001), a significant Tétouan in Morocco. The start- (1 1,537 million at the end of increase of 17%. up of new plants went well at December 2001). This includes Sugar Creek and Roberta in the the sale of cement assets in INVESTMENTS* USA and Dujiangyan in China. Southern Spain for 1 225 million. Capital expenditures and •Acquisitions totaled Other divestments included the investments totaled € 429 million, of which grinding station at Brumado in 1 1,513 million (1 6,073 million Cement: Beocinska Fabrika Brazil, the shareholding in Natal at the end of December 2001), Cementa (BFC), in Serbia for Portland Cement in South Africa and include: 1 60 million; Cementama and concrete product businesses • Sustaining capital Trbrovlje, in Slovenia for in Canada, as well as certain expenditure 1 40 million; Tong Yang Cement, property. 1 704 million, relating to the in South Korea for 1 48 million; ongoing upgrading and Cementia Holding AG’s minority modernization of existing shareholders for 1 49 million; industrial plants around the Kedah Cement’s minority world. shareholders for 1 61 million.

BALANCE SHEET STATEMENT France/Gypsum, The Conservatory in Le Havre. SHAREHOLDER’S EQUITY NET CONSOLIDATED DEBT Total equity as at December 31, This item totaled 1 10,216 2002 stood at 1 9,270 million million, down 1 1,487 million (1 10,596 million at the end of from the 1 11,703 million report- December 2001). The reduction ed at the end of December 31, from December 31, 2001, results 2001. It includes the effects from the translation effect of of changes in exchange rates converting foreign currency which contributed 1 572 million denominated assets into euros. to the decline.

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CEMENT

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IN 2002, THE CEMENT DIVISION GREW SHARPLY AS A RESULT OF THE FULL YEAR CONSOLIDATION OF THE OPERATIONS OF THE FORMER BLUE CIRCLE AND A NEW INCREASE IN ITS OPERATING MARGINS. WE ALSO GAVE RENEWED IMPETUS TO OUR PERFORMANCE PLANS BY PREPARING FOR THE DEPLOYMENT OF OUR NEW PROGRAM “ADVANCE” FOR 2003.”

ISIDORO MIRANDA | EXECUTIVE VICE PRESIDENT, CEMENT

o make them comparable to the 2002 figures, all the figures SALES 2002 of the current operating income at December 31, 2001 are 3 6,948 million Tpresented after correction for equity-affiliates that are no longer accounted for in the operating income. All the comments WORKFORCE 2002 37,521 employees relating to the performance of the former Blue Circle operations in 2001 concern the period following its addition to the scope INTERNATIONAL SCOPE of consolidation, as from July 11, 2001. All the changes expressed • Consolidated companies (global and proportional methods): active in 42 as a percentage of sales are by destination. countries, 115 cement and clinker plants, 27 grinding plants.*

Sales of the Cement Division by 1.2%. The slower growth in United States, grew by 15.9% between 2001 and 2002 reflects the mixed trends in “ The Joppa cement 2002, to 1 6,948 million up from some of our markets. Overall plant in Illinois has the first long- 1 5,995 million in 2001. This large changes in the scope of span roof system increase primarily reflects the consolidation at constant constructed in Ductal®. full year consolidation of the exchange rates increased sales former Blue Circle operations for by 20.5% contributing an the first time. In 2001, these additional 1 1,174 million. operations had only been Currency fluctuations had a consolidated from July 11, 2001 negative impact on sales of 5.8% (the effective date of the which amounted to acquisition). The contribution 1 286 million and resulted of the former Blue Circle cement mostly from the decline in operations amounted to strength of the US dollar and the 1 2,240 million in 2002, Brazilian real against the euro. compared to 1 1,205 million in Volumes sold increased by 21% 2001. At constant scope and in 2002 to 106 million tons of exchange rates, our sales grew cement.

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PERFORMANCE IMPROVEMENT AND DEVELOPMENT

Following the major Blue Circle Two new production lines were of the largest cement plants acquisition in 2001 the priority inaugurated in North America, in the world. The Group increased for the Cement Division Sugar Creek II near Kansas City its presence in the Balkans, with has been the roll-out of the and Roberta at Calera in Alabama. the acquisition of Beocinska performance improvement In China, the greenfield plant Fabrika Cementa in Serbia with action plans. The Cement with a 1.4 million tons capacity at a 1.5 million tons capacity and Division performance program is Dujiangyan near Chengdu was the full ownership of Cementarna presented on page 8 on this successfully completed and a Trbovlje in Slovenia, instead of Annual Report. Moreover clinker plant with 0.4 million 22.9% previously. Cementarna the Cement Division continued tons clinker capacity was also Trbovlje has a capacity of to pursue its development acquired in Beijing market. 0.5 million tons. A number of program. A significant number of Lafarge Halla Cement acquired divestments were realized major plant refurbishments or a 25% stake in Tong Yang Cement during the year being the sale of greenfield projects were in South Korea. Tong Yang’s businesses with limited strategic completed during the year. 11 million tons plant is one potential for the Group.

CEMENT

Sales Volumes (in million euros) 2002 2001 (in million tons) CONSOLIDATED VOLUMES AT 100 % VOLUMES 1 FOR INFORMATION 2 Western Europe 2,274 1,725 2002 2001 2002 2001 North America 1,579 1,469 Western Europe 32.8 26.0 33.1 26.3 Central and Eastern Europe 401 301 North America 17.5 16 17.5 16 Mediterranean Basin 455 550 Central and Eastern Europe 8.1 6.2 8.1 6.2 Asia / Pacific 981 753 Mediterranean Basin 9.5 11.4 12.5 12.3 Latin America and Caribbean 502 547 Asia / Pacific 21.1 14.4 25.0 18.4 Sub-Saharan Africa and Indian Ocean 756 650 Latin America and Total 6,948 5,995 Caribbean 6.5 6.4 6.8 6.7 Sales by geographic aera of destination and after eliminations Sub-Saharan Africa of consolidation. and Indian Ocean 10.2 7. 2 11.0 8.1 Total 105.7 87.6 114.1 94 Operating income on ordinary activities 1 | Volumes excluding intra-Divisions transactions by destination / Adjusted (in million euros) 2002 2001 2001 for the contribution of subsidiaries consolidated according to the REVISED* PUBLISHED proportionate method. 2 | Volumes at 100% by destination for all companies in scope of consolidation. Western Europe 656 517 544 North America 330 350 351 Investments Central and Eastern Europe 86 62 62 (in million euros) 2002 2001 Mediterranean Basin 112 125 125 966 1,456 Asia / Pacific 100 64 64 Latin America and Caribbean 202 205 243 Sub-Saharan Africa and Indian Ocean 120 111 118 Employees 2002 2001 Total 1,606 1,434 1,507 37,521 41,832 * Revised for the change in presentation of equity affiliates.

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They included: in Southern At constant scope, depreciable impact of 5% or 1 73 million. Spain, two cement plants, a lives and exchange rates, As a percentage of the grinding plant and a terminal, in operating income on ordinary Division’s gross sales (Note 3(a), Brazil, a grinding unit and three activities rose by 3%. The on page 104), operating income distribution terminals change in the estimated useful on ordinary activities (Brumado) situated in the state life of cement plant assets had a represented 21.4% in 2002, of Bahia. Furthermore, we also favorable impact of 1 83 million compared to 21%* in 2001. divested a number of on operating income. The The after tax return** on capital shareholdings in companies in change in the treatment of employed stood at 8.4% (in South Africa and in Italy. Morocco from the global to 2001, it was 13.5% before the Operating income on ordinary proportional consolidation operations of Blue Circle were activities of the Cement Division method reduced operating taken into account). increased by 12% to 1 1,606 income in the Mediterranean million in 2002 compared to Basin by 1 41 million. Currency 1 1,434 million in 2001. fluctuations had a negative

SYNERGIES RESULTING FROM United Kingdom, the Cauldon cement plant. THE ACQUISITION OF BLUE CIRCLE

We achieved synergies of (due to downturn and poor 1 117 million in 2002 as operating performance), a result of the integration of the the Philippines (due to price operations of Blue Circle war), Malaysia (due to Industries, of which one third governmental measures related to overhead synergies against illegal immigrants in and two thirds related to the construction industry) and operational synergies. the United States (due to sharp Unfortunately, the effect decline in infrastructure of these synergies was only projects in the Boston area, partly evident at the operating lower prices in the southeast, income level due to specific kiln failure at the Ravena plant negative circumstances and start-up costs at the new in countries such as Nigeria Roberta facility).

* 2001 with full-year accounting of Blue Circle (non-audited information), at comparable consolidation method: Morocco (50%), and new economic life of assets.

**The after tax return on capital employed corresponds to the sum of the operating income on ordinary activities (at 28% in 2002, being the annual effective rate excluding the impact of the contingency provision for competition litigation risks) and the share of net income of equity affiliates, related to the average capital invested.

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REGIONAL ANALYSIS

Western Europe increase in sales. Spain and Italy activities in Western Europe Sales totaled 1 2,274 million, an realized solid growth in volumes grew by 27% to 1 656 million increase of 32% over 2001. The and positive price trends. The compared to 1 517 million in 2001. contribution of the former Blue buoyant construction markets The scope impact resulting Circle operations, chiefly in the in Spain led to another year of from the full year consolidation United Kingdom and in Greece, strong sales growth which of the former Blue Circle amounted to 1 986 million in increased by 8%. In Italy sales operations amounted to 2002, compared to 1 476 million grew by 13%. The social 1 111 million. Operating income in 2001. Currency fluctuations relations issues which impacted on ordinary activities at had no material effect on sales. production at the Halkis plant in constant scope, depreciable The volumes sold in the region Greece did not impact our sales in lives and exchange rates increased by 26% to 32.8 million this country and our sales increased by 1.5% compared tons, of which the former Blue in Greece were up by 130%, to 2001 due to improved Circle operations accounted for resulting primarily from the margins in France, Spain and 13.2 million tons compared to full year consolidation of the Italy. Operating income on 6.7 million tons in 2001. Volumes former Blue Circle operations but ordinary activities in the in France remained flat, but also from favorable volumes and United Kingdom was favorably favorable pricing trends resulted pricing trends. In Germany, the impacted by the improvement in our sales increasing by 5%. impact of a highly competitive of operational performance. Sales in the United Kingdom pricing environment in the In Germany, as a direct result more than doubled, reflecting context of the very weak of the economic slowdown mainly the full year consolidation construction market was and highly competitive pricing of the former Blue Circle significant. Sales were down with environment, operating operations. Favorable pricing prices falling significantly. income fell to one fourth of the trends also contributed to the Operating income on ordinary 2001 level.

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Korea, the Seonyu footbridge, a Ductal building®.

North America and some slowing of demand activities in North America In North America,we achieved from public works and highway declined by 6% to 1 330 million. sales of 1 1,579 million, an projects was felt particularly Currency fluctuations had a increase of 8%. The contribution from the third quarter. negative impact on operating of the Blue Circle North The impact of the weaker income on ordinary activities of America operations amounted construction market varied 1 20 million. The scope effect to 1 441 million in 2002, from region to region. resulting from the full year compared to 1 257 million in The Western region saw an consolidation of Blue Circle 2001. The weaker US and increase in demand in the North America amounted Canadian dollars against the mining and oil sectors whereas to 1 12 million. At constant euro in 2002 had a negative the North East was negatively scope, depreciable lives and impact. Our sales volumes in affected by the decline in exchange rates operating the region increased by 9% to demand in the Baltimore and income in North America was 17.5 million tons, of which Blue Boston markets. Prices overall down by 7%. Circle North America accounted showed some increase in the for 4.9 million tons compared year with the notable exception Emerging countries to 3.0 million tons in 2001. of the South East, where In emerging markets we Sales in North America held aggressive competition was experienced a positive up well overall in an experienced in the weak Atlanta growth in sales of 10% to increasingly difficult market. Sales in the fourth 1 3,092 million, and these construction market. While quarter are sensitive to weather markets accounted for 45% of residential construction has and the return to more normal the Division’s sales in 2002, remained robust throughout winter conditions in the last compared to 47% in 2001. the year, activity in the quarter reduced the volumes Sales in 2002 varied greatly commercial sector has sold in comparison to the last not only from region to region continued to weaken. The quarter of 2001 when the very but also within regions. pressure on individual States mild weather helped to stimulate The contribution of the former budgets impacted the level the construction activity. Blue Circle operations in the of infrastructure spending Operating income on ordinary emerging markets amounted

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France, the Havas Group headquarters near Paris, a Ductal® frontage element.

to 1 813 million in 2002, compared to 1 472 million in 2001. The currency fluctuations had a negative impact on sales. In emerging markets, operating income on ordinary activities rose by 9% to 1 620 million compared to 1 567 million in 2001, representing 39% of the Cement Division’s signs of improvement towards impact on the year of the operating income, compared the end of the year. reduction in headcount following to 40% in 2001. The scope In the Czech Republic our sales the closure of one plant in 2001. impact resulting from the full were up by 6%, due to a In the Czech Republic, the year consolidation of the favourable foreign exchange level of prices of export sales former Blue Circle operations impact. In both Russia and the to Germany resulted in lower in emerging markets amounted Ukraine sales increased operating income. Margins to 1 56 million. Operating significantly. improved in Russia and income on ordinary activities at In Central and Eastern Europe, the Ukraine with both constant scope, depreciable operating income on ordinary countries increasing their lives and exchange rates grew activities continued to improve operating income. by 10%. with an increase of 39% to 1 86 million. The impact of • Mediterranean Basin • Central and Eastern Europe negative currency fluctuations In the Mediterranean Basin Our sales in Central and Eastern on the region’s operating we saw a 17% decline in sales Europe rose by 33% to income amounted to to 1 455 million primarily 1 401 million. The operations 1 2 million. Operating income at reflecting the change in in Serbia and Slovenia constant scope, depreciable accounting treatment of our generated additional sales of lives and exchange rates grew Moroccan operations from 1 74 million. Our sales volumes by 21%, with strong growth global to proportionate in the region increased by in Romania where both margins consolidation. The contribution 2 million tons to 8 million tons. and operating income grew of the former Blue Circle Sales grew by 20% in Romania, substantially thanks to favorable operations in the region in a context of high demand market conditions coupled amounted to 1 26 million in and increased prices. In Poland with reductions in variable 2002, compared to sales were down by 3% as the costs. Operating income in 1 25 million in 2001. Our sales recession in the building Poland increased as operating volumes in the region were industry continued to affect margins improved due to cost down by 17% to 9.5 million tons, volumes; the situation showed reductions, partly due to the full compared to 11.4 million tons in

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2001, primarily reflecting the operations grew by 21%. up 14%, prices were down in change in accounting The impact of negative currency euros which resulted in our treatment of our Moroccan fluctuations on the region’s sales falling by 21% overall. In operations. operating income amounted the context of the political and In Morocco, the construction to 1 7 million. Strong growth in economic turmoil in Venezuela market was healthy throughout income was realized in Morocco sales fell significantly by 28%, the year and without the and Jordan due to the favorable with volumes down by 17% impact of the change in market conditions. The small and prices by 6%. Honduras accounting treatment, our sales loss incurred in Turkey in 2001 ended the year with sales down increased by 5%. Jordan was reversed to record an 11%. The operations in Chile delivered solid sales in the year, operating profit. Egypt saw a showed some favorable pricing up 6%, thanks to a buoyant decline in operating income in evolution. In Mexico sales were residential sector. In Egypt, the context of the poor price up by 10%. over supply in the markets trends partly offset by the The operating income on continued to create highly positive impact on variable ordinary activities from Latin competitive market conditions costs of the new production America was slightly down with significant price erosion; line at Alexandria. from 1 205 million our sales were down by 20%. in 2001 to 1 202 million The economic crisis in Turkey • Latin America in 2002. The positive scope continues to severely impact Our sales in Latin America were effect resulting from the full the market, but an improvement down by 8% to 1 502 million. year consolidation of the in selling prices resulted in an This primarily reflects the former Blue Circle operations increase of our sales by 4%. impact on sales in the region in Chile amounted to The operating income on of the devaluation of the 1 22 million. The negative foreign ordinary activities from the various regional currencies in exchange impact on the region’s Mediterranean Basin countries the year against the euro. operating income amounted decreased by 10% to 1 112 The contribution of the former to 1 30 million. At constant million due to the change Blue Circle operations in Chile scope, depreciable lives and in accounting treatment of amounted to 1 79 million exchange rates operating our Moroccan operations from in 2002, compared to income grew by 5%. Operating global to proportionate 1 32 million in 2001. Our sales income was down in Brazil due consolidation. Operating volumes in the region rose to the foreign exchange impact income on ordinary activities by 1.6% to 6.5 million tons which offset the improvement at constant scope, depreciable of cement of which former in operating income in reals lives and exchange rates, and Blue Circle accounted for and to the scope effect resulting excluding the impact of the 1.3 million tons. from the divestment of change in the accounting Volumes held up well in Brazil. Brumado. In Venezuela the local treatment of our Moroccan Despite price increases in reals, turmoil and bolivar devaluation

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have resulted in operating In South Africa our sales were market conditions partly due to income being down by 21%, down by 16% primarily the pre-election situation with in spite of drastic cost control reflecting the significant flat volumes and weaker prices measures taken internally. devaluation of the rand against overall. A small decline was recorded the euro. The business recorded Operating income on ordinary in Honduras. Both Chile higher volumes and improved activities in Sub-Saharan Africa and Mexico increased their prices in local currency terms. and the Indian Ocean increased operating income. Our operations in Kenya and by 8% to 1 120 million. The Uganda saw sales improve 10% scope effect resulting from the • Africa and Indian Ocean and 17%, respectively with full year consolidation of the In the Sub-Saharan Africa strong domestic market former Blue Circle operations in and Indian Ocean region our conditions and prices. Sales in Nigeria and Zimbabwe sales grew by 16% to 1 756 Cameroon increased by 5% in amounted to 1 5 million. The million. The contribution of the the context of solid local negative foreign exchange former Blue Circle operations in demand and improved prices. impact on the region’s this region amounted to 1 265 South East Africa, which covers operating income amounted to million in 2002, compared to Zambia, Malawi, Tanzania and 1 10 million. At constant scope, 1 173 million in 2001. Our sales Zimbabwe contributed sales of depreciable lives and exchange volumes in the area increased 1 72 million. Sales volumes have rates operating income grew by by 42% to 10.2 million tons of generally followed a favorable 22%. Existing operations in cement, of which former Blue trend during the year however Kenya, Cameroon and South Circle accounted for 4 million prices have been negatively Africa achieved higher tons, compared to 1.6 million affected by exchange rate operating margins. The tons in 2001. Currency depreciation. The market trends operations in Nigeria however fluctuations had a negative in Nigeria have been poor, recorded a significant decline in impact on sales in the region. partly due to a downturn in operating income, and had

Nigeria, employee in the Saghamu cement plant.

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significant cost and production In the Philippines our sales foreign workers. issues relating to delays with increased by 42%, primarily The Asia Pacific region saw the start up of the new plant at reflecting the full year operating income on ordinary Ewekoro. consolidation of the former activities grow by 56% to Blue Circle operations, with 1 100 million. The scope effect • Asia Pacific volumes increasing strongly resulting from the full year Our operations in the Asia in the context of severe price consolidation of the former Pacific region saw sales increase competition where prices have Blue Circle operations in by 30% to 1 981 million. The fallen by 21% in the year. Malaysia and the Philippines contribution of the former Blue In India sales volumes showed amounted to 1 30 million. Circle operations in this region, a satisfactory level of growth, The negative foreign exchange mainly in Malaysia and however prices have remained impact on the region’s the Philippines, amounted to at a low level; sales were up by operating income on ordinary 1 432 million in 2002, compared 5%. China has continued to activities amounted to to 1 231 million in 2001. deliver a strong growth in sales 1 3 million. At constant scope, Our sales volumes in the region of 63% benefiting from the start depreciable lives and exchange increased by 46% to 21.1 million up of the Dujiangyan plant and rates operating income fell by tons of cement, of which the strong demand on the Beijing 11%. South Korea delivered a former Blue Circle operations market. In Indonesia, sales strong growth in operating accounted for 8.9 million tons, grew by 28% as prices started to income mainly due to the compared to 4.3 million tons show some signs of favorable market conditions. in 2001. In South Korea, sales improvement. In Malaysia, India improved operating continued to show strong sales increased by 79%, income as a consequence of growth up by 13%. Domestic primarily reflecting the full continued production sales volumes were strong as year consolidation of the performance improvement. construction spending former Blue Circle operations. Operating income in the continued to increase and However, our operations were Philippines was weak due to prices developed favorably over negatively impacted by the deteriorated pricing. In the year. The impact of the slow down in the second half, Indonesia a slighter operating typhoon that has affected the due to the impact of loss was incurred, compared to country was limited mainly to governmental measures last year, announcing the the month of September. relating to the employment of beginning of a recovery.

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A GGREGATES AND CONCRETE

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IN 2002, OUR PERFORMANCE PROGRAMS, CENTERED ON THE IMPROVEMENT OF SALES AND COST CONTROL, ENABLED US TO MAINTAIN OUR RESULTS ON ALL OUR MARKETS, DESPITE A FALL IN DEMAND, AT THE SAME LEVEL AS 2001, EXCEPT IN NORTH AMERICA WHICH WAS AFFECTED BY MORE SEVERE WEATHER CONDITIONS AND THE STRIKES BY THE PUBLIC WORKS ADMINISTRATION IN ONTARIO.”

CHARLES DE LIEDEKERKE | EXECUTIVE VICE PRESIDENT, AGGREGATES AND CONCRETE

SALES 2002 3 4,768 million WORKFORCE 2002 21,069 employees ales of the Aggregates and Concrete Division slipped by 0.8% INTERNATIONAL SCOPE to € 4,768 million in 2002 from € 4,806 million in 2001. At Consolidated companies (global Sconstant scope and exchange rates, our sales were down and proportional methods): by 1.2%. Changes in the scope of consolidation at constant exchange active in 23 countries, 674 quarries rates increased sales by 4.9% reflecting the effect of the full year Blue and 1,078 concrete plants Circle’s aggregates and concrete operations and the divestment of concrete product businesses in Canada. Currency fluctuations had a negative impact on sales of 4.5%. In Western Europe our sales increased by 5% to € 1,856 million. In North America, our sales fell by “7% to € 2,405 million.

AGGREGATES

Sales of our aggregates down by 1% to 207 million tons prices. In the UK, the subdued operations, which also include in 2002. readymix market and the effect our asphalt and road contracting of the aggregates levy from businesses, were down by 6% Western Europe April 1 led to a weak aggregates between 2001 and 2002, to Our aggregates sales in Western market. Several delays in 1 2,196 million. At constant scope Europe increased by 4% to roadbuilding contracts slowed and exchange rates our sales 1 789 million. In France sales the paving operations, although declined by 3%. Currency declined as a result of lower these picked up in the last fluctuations had a negative activity in the road building quarter. Sales increased impact of 4% on sales. Our sales sector, however this decline was however with buoyant prices volumes of aggregates were limited by the rise in average and an increase in recycled

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products sales. Sales were up by North America constant scope and exchange 11%, including the effect of the In North America, sales fell by rates declined by 7% with much aggregates levy. With the 10% to 1 1,336 million. Changes of the weakness seen in our road healthy construction market in in the scope of consolidation paving activities. In Canada, the Spain sales continued to grow (mainly consisting of the full residential sector saw a good in 2002. year consolidation of the Blue level of growth but the industrial Circle North America operations) and commercial construction generated 1 50 million of activity was weaker. In the West additional sales. Currency we benefited from favorable fluctuations had a 6% negative residential construction activity impact on sales in euros. Sales at in Alberta, although the paving

AGGREGATES AND CONCRETE

Sales Volumes (in million euros) 2002 2001 CONSOLIDATED VOLUMES AT 100% VOLUMES 1 FOR INFORMATION 2 Aggregates and related products 2,196 2,325 2002 2001 2002 2001 Ready-mix concrete and concrete products 2,572 2,481 Aggregates Total Aggregates and Concrete 4,768 4,806 (in million tons) Western Europe 1,856 1,770 Western Europe 71.7 76.0 80.4 84.6 North America 2,405 2,594 North America 117.9 116.1 117.9 116.1 Other countries 507 442 Other countries 17.3 16.7 26.5 19.7 Sales by geographic aera of destination and after eliminations Total 206.9 208.8 224.7 220.4 of consolidation. Concrete (millions of m3) Western Europe 14.8 14.6 18.4 18.5 Operating income on ordinary activities North America 10.7 10.2 10.7 10.2 (in million euros) 2002 2001 2001 REVISED* PUBLISHED Other countries 9.9 7.6 11.6 8.9 Aggregates and related products 246 270 270 Total 35.4 32.4 40.6 37.6 Ready-mix concrete 1 | Volumes excluding intra-Divisions transactions by destination / Adjusted 90 108 111 and concrete products for the contribution of subsidiaries consolidated according to the proportionate method. Total Aggregates and Concrete 336 378 381 2 | Volumes at 100% by destination for all companies in scope of consolidation. Western Europe 148 144 144 North America 178 237 237 Investments Other countries 10 2 5 (in million euros) 2002 2001 Overheads - (5) (5) 216 359 * Revised for the change in presentation of equity affiliates. Employees 2002 2001 21,069 21,852

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PAGE 59 Canada, Agilia® site.

sector sales were down, as in brought about by a civil 2001 they had benefited from servants strike early in the year. the second runway project at In the United States we Vancouver airport. Sales in experienced weak market Eastern Canada were favorable conditions. A significant in Western Quebec and Ottawa, softening in activity was seen in but softer in Central Ontario. New Mexico, Colorado, Missouri, Our road paving operations Georgia, and in the Great Lakes. experienced a significant Average prices saw some decline in the year due to delays increase in both countries in in road building projects 2002.

and Malaysia. Currency Spain and Portugal were CONCRETE fluctuations had a negative marginally down in 2002 as impact on sales of 5%. Our sales the rate of growth in the Sales of our concrete operations volumes of ready mix concrete Spanish market was not which include ready mix increased by 9.5% to 35 million m3. sufficient to offset the concrete and our pre-cast slowdown in Portugal were concrete products, increased Western Europe both volumes and prices were by 4% between 2001 and 2002, In Western Europe concrete under pressure. 1 from 2,481 million to sales improved 6% to 1 1,067 Net changes in the scope of 1 2,572 million. At constant million. In France, sales grew consolidation in Western Europe scope and exchange rates our favorably due to the strong level had a positive impact sales increased by 0.8%. Changes of activity in the first half, on our sales. These additional in the scope of consolidation at despite a softening in demand sales result primarily from the constant exchange rates had a levels in the second half of the full year consolidation of the positive impact of 7% on sales year. In the United Kingdom former Blue Circle operations with the consolidation of the sales grew favorably with in Greece, partially offset with Blue Circle concrete operations overall market demand being the divestiture of our operations in Greece, North America, Chile positive in the year. Sales in in Germany and Italy.

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North America sharp decline in commercial Rest of the world In North America, sales were construction in Toronto and the In the rest of the world, sales down by 4% from 1 1,116 million overcapacity in the industry led grew significantly due mainly in 2001 to 1 1,069 million in to a difficult pricing to the scope effect of the full year 2002. Changes in the scope of environment. In Montreal, the consolidation of the former consolidation impacted sales by market suffered from a five- Blue Circle operations in Chile, 1 63 million with the additional month strike. In the USA, weak Malaysia and Singapore. sales primarily from the full markets conditions were Sales grew strongly in Turkey year consolidation of Blue Circle experienced in the West with due to increased volumes North America operations more declining economic conditions and prices, and held up well, than offsetting the impact of in Colorado and New Mexico. at constant scope and exchange the divestment of concrete In the Eastern US, most of the rates, in Brazil. product businesses in Canada. shortfall occurred in the fourth Currency fluctuations had a quarter with wintry weather negative impact on sales of 6%. and slowing activity in In Canada, we experienced a Maryland and New York state.

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OPERATING INCOME

Operating income on ordinary Concrete totaled 1 90 million The impact on operating income activities of the Aggregates and down 17% from 1 108 million in of the weakening dollar against Concrete Division declined by 2001. Currency fluctuations had a the euro amounted to 1 12 11 % between 2001 and 2002, negative impact of 1 4 million million or 5%. The decline in from 1 378 million to with the remainder of the operating income occurred 1 336 million. At constant scope decline also due to the weaker primarily in three markets: the and exchange rates, operating North American results. Western USA where the weak income on ordinary activities market conditions prevailed declined by 10%. Currency Western Europe throughout the second half of fluctuations had a negative In Western Europe, operating the year, the South Eastern USA impact of 4%. As a percentage of income on ordinary activities and Canada with the difficult the Division’s gross sales (Note grew by 3% to 1 148 million. year experienced in Toronto and 3(a), on page 104), operating Operating income on ordinary Montreal. income on ordinary activities activities in France was at a represented 7% in 2002, similar level to 2001. In the UK Rest of the world compared to 7.8% in 2001. The operating income grew as Elsewhere in the world, after tax return* on capital operating margins improved operating income continued employed stood at 6.7% against in the concrete activity. to improve up to 1 10 million 7.9% at the end of 2001. The from 1 2 million in 2001. The operating income on ordinary North America effect of changes in the scope activities for Aggregates totaled In North America, operating of consolidation of the former 1 246 million down 9% from income on ordinary activities Blue Circle operations was 1 270 million in 2001. While was down by 25% to 1 16 million. In South Africa, currency fluctuations had a 1 178 million. The net effect of operating income continued negative impact of 1 10 million changes in the scope of to grow strongly and in Turkey, the remainder of the decline was consolidation on the operating while the market remains very due to the weaker North income from the former Blue unstable and competitive, the American results. The operating Circle operations and operating loss was reduced income on ordinary activities for divestments was 1 3 million. significantly.

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R OOFING

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IN 2002, THE ROOFING DIVISION CONTINUED ITS EFFORTS TO IMPROVE INDUSTRIAL AND COMMERCIAL PERFORMANCE, BY IMPLEMENTING SEVERAL PROGRAMS WITHIN THE DIVISION. AT THE SAME TIME, WE STEPPED UP OUR BUSINESS IN THE ROOFING COMPONENT SECTOR, WHICH ENABLED US TO STABILIZE OUR RESULTS DESPITE THE ECONOMIC DOWNTURN.”

ULRICH GLAUNACH | EXECUTIVE VICE PRESIDENT, ROOFING

SALES 2002 3 1,538 million

he Roofing Division experienced another year of difficult WORKFORCE 2002 12,106 employees market conditions. Sales declined by 3% between 2001 and T 2002, from € 1,585 million to € 1,538 million. At constant scope INTERNATIONAL SCOPE and exchange rates sales fell by 5.9%. Currency fluctuations had Consolidated companies (global a negative impact on sales of 1.2%. Sales of concrete tiles were down and proportional methods): active 7.5% to € 792 million and clay tiles down 5.9% to € 255 million. in 32 countries, 159 plants*. Roof System Components continued to expand by 20% to € 246 million primarily reflecting the impact of full year consolidation of Kloeber. Chimney sales decreased by 2% to “€ 166 million.

The Division’s operating income ordinary activities represented was up 3% to 1 132 million from 8.6% in 2002, compared to 8.1% 1 128 million in 2001 largely as a in 2001. The after tax return** on result of the cost management capital employed stood at 4.2% as efforts and extensive compared with 3.8% at the end of restructuring carried out across 2001. the operations, particularly in In 2002, new operations included Germany where the sales forces the acquisition of a concrete tile of the two leading brands were producer in Scotland and the merged in 2002. Germany construction of a new concrete accounted for 25% of operating tile plant in Denver, Colorado. profits in 2002, all other New clay tile activities European markets for 61% and comprised of a production line non-European operations for for a “Nordic”clay tile and the 14%. As a percentage of the entry into the prosperous Thai Division’s gross sales (Note 3(a) on market. We have expanded the page 104), operating income on business of the roofing

* All companies: active in 38 countries, 208 plants.

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accessories producer Kloeber mainly due to a further decline in the central cost allocation which was acquired in 2001 and in Germany, where overall sales method within the Division. it is now active in six countries. were down 9% and France, where The underlying increase in In the chimneys segment sales sales dropped by 4% in a weake- German operating income offices in Eastern and Northern ning market. In Scandinavia sales amounted to 1 2 million or 13%. Europe have been opened. Kami were up but were marginally In other Western European metal roof tiles, a business which down in the UK and were stable countries operating income was acquired in 2001, begun in Italy. declined from 1 82 million to operations in the United Operating income in Western 1 70 million due to the same Kingdom. Europe rose 6% to 1 103 million. change in the central cost In Germany, following allocation method. The Western Europe the extensive restructuring, the underlying decrease of In Western Europe sales (including operating income increased from 1 6 million or 7% was a result of chimneys) were down by 8% 1 15 million to 1 33 million weaker markets in France and in to 1 1,162 million which was including the effect of a change the Netherlands that could not

ROOFING

Sales by activity Sales by geographic area (in million euros) 2002 2001 (in million euros) 2002 2001 Concrete tiles 792 856 Western Europe 1,162 1,261 Clay tiles 255 271 Germany 448 495 Chimneys 166 169 Other countries 714 766 Other roofing products 325 289 Others 376 324 Total 1,538 1,585 Total 1,538 1,585

Sales after elimination of intra-Group transactions Sales by geographic aera of destination and after eliminations of consolidation

Volumes Operating income on ordinary activities CONSOLIDATED VOLUMES AT 100% (in million euros) 2002 2001 2001 VOLUMES 1 FOR INFORMATION 2 REVISED* PUBLISHED 2002 2001 2002 2001 Western Europe 103 97 117 Concrete tiles 127.3 131.6 171.9 166.3 Germany ** 33 15 15 (in millions of m2) Other countries ** 70 82 102 Clay tiles 2 24.7 25.8 38.7 25.8 Others ** 29 31 25 (in millions of m ) Total 132 128 142 Chimneys (km) 2,715 2,823 2,715 2,823 1 | Volumes excluding intra-Divisions transactions by destination / * Revised for the change in presentation of equity affiliates Adjusted for the contribution of subsidiaries consolidated according to ** Taking into account the change in the central cost allocation method within the proportionate method. the Division 2 | Volumes at 100% by destination for all companies in scope of consolidation

Investments (in million euros) 2002 2001 100 183

Employees 2002 2001 12,106 12,620

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be entirely compensated by the increased to 1 128 million in in China and in Japan. improvement recorded in 2002 which in part reflects the Operating income was down Scandinavia and further growth growth in sales in the Czech marginally to 1 29 million from in Italy. Republic and Hungary. Sales of 1 31 million which also reflects concrete roof tiles continued to the change in the central cost North America and decline in Poland, but chimney allocation. Underlying operating other countries sales improved. After several income was up 1 9 million. In North America, emphasis years of growth Poland saw a Major contributors were Eastern was given to price increases declining market in which Europe, Malaysia and North which improved results, sales of clay tiles continued to America. excluding the impact of central increase, but concrete tiles cost allocations. However, the sales declined. decrease in volumes led to a In Asia sales remained stable decrease in our sales of 7%. with strong growth in In Eastern Europe, sales Malaysia but with lower sales

Germany, Apartment building in Postdam near Berlin.

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G YPSUM

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IN 2002, THE GYPSUM DIVISION CONSIDERABLY CUT DOWN ON ITS LOSSES IN NORTH AMERICA AS PRICES RECOVERED. IT PERFORMED WELL IN EUROPE, EXCEPT IN GERMANY AND POLAND, AND ALSO CONTINUED ITS EXPANSION IN ASIA.”

BRUNO LAFONT | EXECUTIVE VICE PRESIDENT, GYPSUM

SALES 2002 3 1,146 million

n 2002, sales of the Gypsum Division grew by 6.9% from WORKFORCE 2002 € 1,072 million in 2001 to € 1,146 million. At constant exchange 5,319 employees Irates and scope sales grew by 7.2%. Changes in the scope of INTERNATIONAL SCOPE consolidation at constant exchange rates increased sales by 2%. Consolidated companies (global Currency fluctuations had a negative impact on sales of 2%. and proportional methods): active 2 The volumes of wallboard grew by 10% to 560 million m helped in 22 countries, 67 plants* by the increased production efficiency of the recently built plants in the United States, the acquisition of the Continental plant in Newark, “New Jersey and growth in many of our markets.

Operating income on ordinary represented 4.4% in 2002, favorable and sales were up in activities grew strongly after compared to 0.3% in 2001. 2002. In Germany, the weak the very difficult year in 2001, The after tax return** on capital construction market continued and was up from 1 3 million to employed climbed 3.6% as to affect sales with significantly 1 51 million. This was mainly compared with 0.5% in 2001. lower volumes, however prices a result of the reduction of did improve from the low of losses in North America, helped Western Europe December 2001. by better pricing coupled with In Western Europe, the Division Operating income on ordinary our Division wide performance performed relatively well, given activities in Western Europe plans, particularly in the area of the continued weakness in the improved strongly to purchasing and manufacturing German construction market, 1 59 million from 1 44 million efficiency. As a percentage of with sales up by 0.3% to including the effect of a change the Division’s gross sales (Note 1 604 million. In France and the in the central cost allocation 3(a) on page 104), operating United Kingdom, market method within the Division. income on ordinary activities conditions were generally The underlying increase in

* All companies: active in 23 countries, 75 plants

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FINANCIAL GROUP OPERATIONS S TATEMENTS PAGE 68 G YPSUM

operating income amounted to significantly in the year to an France, employee 1 of the 2 million or 5%. France and the average $96 per thousand Gypsum Division United Kingdom continued to square feet (1,000 square feet Headquarter in Avignon. increase operating margins as is roughly 93 square meters), a consequence of their in comparison with an average operating performance plans, price of $72 per thousand however Germany continued to square feet in 2001. make losses reflecting the In North America, the difficult market conditions. operating loss in 2002 was significantly reduced to North America 1 28 million, compared to a loss Sales grew to 1 245 million, up of 1 76 million in 2001. This by 45% compared to 2001, due reduction in losses was due to mainly to the recovery in the increase in prices and prices. The acquisition of also due to the improvement Continental in Newark in the in production performance first quarter increased sales by benefiting sales volumes and 1 31 million. Prices improved reducing our cost base.

GYPSUM

Sales Volumes (in million euros) 2002 2001 CONSOLIDATED VOLUMES AT 100% VOLUMES 1 FOR INFORMATION 2 Western Europe 604 602 2 2002 2001 2002 2001 North America 245 169 (in million m ) Total 560 509 658 574 Other countries 297 301 Total 1,146 1,072 1 | Volumes excluding intra-Divisions transactions by destination / Adjusted for the contribution of subsidiaries consolidated according to Sales by destination after elimination of intra-Group transactions. the proportionate method. 2 | Volumes at 100% by destination for all companies in scope of consolidation.

Operating income on ordinary activities (in million euros) 2002 2001 2001 Investments REVISED* PUBLISHED (in million euros) 2002 2001 Western Europe** 59 44 53 123 127 North America ** (28) (76) (79) Other countries ** 20 32 32 Overheads ** -33Employees 2002 2001 Total 51 3 9 5,319 4,949 * Revised for the change in presentation of equity affiliates. ** Taking into account the change in the central cost allocation method within the Division.

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The level of demand for markets in Latin America. a significant improvement in wallboard remained stable However, in the Asia Pacific profits at constant scope. In during the year with a sound region, sales grew as a result particular, in 2002 the joint residential construction of generally good market venture benefited from the market. conditions across the region. successful integration of Siam At the end of 2002 the decision In these regions operating Gypsum Industry, which was was taken to mothball the income on ordinary activities acquired in June 2001, and the Wilmington plant in the North fell to 1 20 million, compared to construction of our new facility East region allowing us to 1 32 million in 2001. This decline in Korea using equipment concentrate our production at was mainly attributable to transferred from our Chinese lower cost facilities. The idling Poland where the very poor operations following the of this plant is expected to save market conditions led to a restructuring of the two USD 10 million per annum significant increase in losses. businesses in Shanghai. and contribute significantly However the old Gacki plant to returning the operations was closed and a more efficient to profitability. production facility, also at Gacki, started operations in the fourth Other countries quarter. Our operating income In our other zones our sales in in the Asia Pacific region the Division were down slightly benefited from good to 1 297 million. This decline performances seen in Australia reflects the difficult market and continuing benefits of our conditions in Poland and weak joint venture in Asia resulting in

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OUTLOOK FOR 2003

he prospects for 2003 do not point towards overall if the macroeconomic situation does not a return to growth in countries with mature worsen with good growth in much of Asia. With Tmarkets, given the slowing down of many regard to prices, we see the outlook as generally of our markets in the second half of 2002 and the positive albeit with a few difficult markets, in uncertain macroeconomic situation. particular for cement in Germany and the In Western Europe we anticipate that the major Philippines. markets are likely to be soft, but with a further In this context we will concentrate on performance deterioration in Germany. In North America, we improvement,with particular attention on building expect a slight decline in cement and aggregates on the progress made with the former Blue Circle volumes as commercial construction remains weak operations.Further synergies will be generated and and infrastructure spending is held back by state the Group as a whole will continue to benefit from budgetary constraints. However the solid housing this acquisition. We will continue to improve the market will support the demand for gypsum operational performance of these operations after wallboard.In emerging markets we expect growth the results in 2002 were impacted by deteriorating

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market conditions and short term production issues. 2002, if we exclude from this comparison the A major challenge at the beginning of the year has exceptional contribution of 1 39 million made in been the impact of the Venezuelan and Middle Spain in 2002. Eastern crises on oil prices. While we use gas in Our objective of returning to a financial structure our gypsum wallboard plants, we use very little similar to the structure we had prior to the Blue Circle oil and gas in our cement plants, with our main acquisition remains our primary goal.Our capacity sources of fuel being coal and petcoke as well as to generate strong cash flows, our particular focus alternative fuels. Petcoke prices have seen a in 2003 on working capital management associated significant increase, much of which is due to the with a strict monitoring of capital expenditures and shortfall in supply resulting from the Venezuelan further selective divestments will contribute to situation,while coal prices have declined.Therefore, another significant reduction in the level of debt we do not expect this situation to have a material at year-end 2003. effect on our cement costs unless prices remain at The new organization of senior management - exceptionally high levels for a prolonged period. consisting in the separation in the duties of Chairman The underperformance of pension plan assets in and Chief Executive Officer effective upon our recent years as compared to expectations will result Annual General Meeting in May 2003 - will ensure in the need to increase our pension expense by continuity and continue to play on the strengths approximately 1 100 million in 2003,with an effect and the traditions of the Group. of some 1 55 million at the net income,Group share level. This will also result in a moderate increase of around 1 25 million in the amount contributed in cash to the pension plans in 2003 as compared to

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DESCRIPTION OF OUR ACTIVITIES IN EACH OF OUR MARKETS

n each of our four Divisions, we have strived to operated 115 cement plants, 22 clinker grinding plants create a global presence. We believe that because and 5 slag grinding stations in 42 countries. If all I demand in our markets is closely related to the the companies in which we have an equity participation business cycle, particularly of the construction sector, are included (with the exception of Cimpor) our geographical diversification is the best way to cement operations consisted of 127 cement plants ensure stability of returns. We believe that growth and 26 grinding plants and 6 slag grinding stations in in the construction sector in emerging markets will in 47 countries. due course exceed growth in developed countries In 2002, the companies we consolidated (global and in North America and Western Europe and we have proportionate) had sales volumes of 105.7 million steadily increased our presence in emerging tons of cement. Taking into account 100% of the economies. In Cement we already achieve almost half sales volumes of the companies we consolidate of our sales in emerging markets and our Gypsum proportionally and the sales volumes of our equity and Roofing Divisions achieved 20.5% and 14.8% of affiliates total volumes sold would have been their respective sales in emerging markets. 114.1 million tons. However, we have been selective in our expansion in emerging markets and, for example, in our Aggregates We operate throughout the world. We believe that and Concrete division we have restricted our because cement demand is closely related to the business expansion to geographic areas where, as a global cycle and the level of infrastructure spending, particularly Company with a commitment to the environment and of the construction sector, geographical diversification fair labor standards, we can still be competitive. is the best way to ensure stability of returns.

Our goals for the coming years in cement are to further CEMENT enhance our operating performance in our various geographic markets by improving the upstream On the basis of tons of cement capacity in 2002, our operations through benchmarking and transfer of best cement business is ranked by the International Cement practices. We also wish to continue to participate in the Review’s Global Cement Report (fifth edition, completed consolidation of the industry worldwide. in January 2003) (“Global Cement Report”) as the world’s largest producer of cement. At the end of 2002, the The table below indicates the breakdown of our sales companies we consolidated (global and proportionate) by destination in 2002, 2001 and 2000:

Cement sales by destination Year ended December 31,

(in million euros, except percentages) 2002 2001* 2000

GEOGRAPHIC AREA Western Europe 2,274 32.7% 1,725 28.8% 1,169 26.4%

North America 1,579 22.7% 1,469 24.5% 1,171 26.5%

Central and Eastern Europe 401 5.8% 301 5.0% 265 6%

Mediterranean Basin 455 6.6% 550 9.2% 512 11.6%

Latin America 502 7.1% 547 9.1% 497 11.2%

Sub-Saharan Africa and Indian Ocean 756 10.9% 650 10.8% 376 8.6%

Asia/Pacific 981 14.2% 753 12.6% 430 9.7%

Total 6,948 100% 5,995 100% 4,420 100%

* including the former Blue Circle operations from July 11, 2001

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We believe emerging markets represent the best Most cement markets in Western Europe are mature prospects for long-term growth in the cement industry. and according to Cembureau, the European Cement We classify all countries outside of our Western Europe Producers Association, the total consumption for the and North America geographic sectors, with the European Union as a whole in 2002 was close to exception of Japan, Australia and New Zealand, as 190 million tons or approximately 500 kg per capita. emerging markets. We had sales of 1 3,092 million in However consumption varies dramatically within the countries in emerging markets in 2002 compared to region, Greece, Spain and Italy having for instance a 1 2,799 million in 2001 and 1 2,078 million in 2000. much higher per capita consumption of cement than The overall percentage of our sales coming from these France. The cement industry in Europe is competitive markets was 44.5% in 2002 compared to 46.7% in 2001 in all major markets, with production generally and 47.1% in 2000. concentrated within the hands of the major international groups. Cement is a competitive industry in all of our markets. We consider our major global competitors to be: Holcim The table below indicates the number of plants and our (Switzerland), Cemex (Mexico), HeidelbergCement production capacity by country at December 31, 2002: (Germany) and Italcementi (Italy). Country / Company Number Total of plants cement Our geographic markets production In the discussion that follows, we describe market capacity Cement Clinker (in million conditions and our competitive position in the principal Grinding tons) geographic areas in which we operate. The sales volume France figures we have provided for each country or geographic Lafarge Ciments 10 2 9.6 zone are the total volumes sold in each particular United Kingdom country or zone by our consolidated cement subsidiaries Blue Circle 8 N/A 7.5 (including the former Blue Circle operations from July Greece 11, 2001), including volumes sold to our other divisions Heracles General Cement 3 N/A 10 and adjusted to reflect our percentage of interest in Spain our proportionally consolidated subsidiaries. The Lafarge Asland 4 N/A 4.1 information as to the rated annual cement production Germany capacity of our operating cement manufacturing plants Lafarge Zement 3 N/A 3.5 is based on management’s estimates at December 31, Austria 2002. The production of a cement plant might be less Lafarge Perlmooser 2 N/A 1.5 than its rated capacity due to product demand, plant Italy failures and seasonal factors. The information as to the Lafarge Adriasebina 2 N/A 1.5 total industry capacity is, unless mentioned otherwise, Total Western Europe 32 2 37.7 as estimated by The International Cement Review’s Global Cement Report (fifth edition, completed in France January 2003) (“Global Cement Report”). The Global Through our wholly owned subsidiary Lafarge Ciments Cement Report’s estimate of our production capacity we are the leading cement producer in France. In 2002, differs in some respects to our management’s estimates, France represented approximately 26.6% of our cement however we have retained the figures in the Global sales in Western Europe. The most recent edition Cement Report for our production capacity when available of the Global Cement Report estimated that calculating total industry capacity. our total installed capacity represented approximately 36% of the total rated capacity in France. • Western Europe Our ten cement plants and two seaboard clinker Western Europe represented approximately 32.7% grinding plants in France are located to serve all of the of our cement sales in 2002. We have significant major urban areas in the country and are dependent operations in France, the United Kingdom, Greece, upon our five separate sales offices covering each of the Spain, Germany and Austria. We sold 32.8 million tons major regions of the country. We also operate a slag of cement in Western Europe in 2002 compared to grinding plant and a lime plant. 26 million tons in 2001 and 18.7 million tons in 2000.

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Based on figures provided by the Global Cement is very much concrete based. The domestic market Report, cement consumption in France fell rapidly in progressed in 2002. We sold 5.5 million tons of cement the mid 1990s to reach a low of 18.7 million tons in 1996 in Greece in 2002 compared to 2.4 million tons in and 1997 but has partially recovered since the beginning 2001 (sales of former Blue Circle operations were only of 1999 and in 2002 amounted to 20.4 million tons consolidated from July 11, 2001). compared to 20.7 million tons in 2001. We sold 7.4 Our major competitors in Greece are Titan Cement Co million tons of cement in metropolitan France in 2002, and Halyps Cement Co (which is controlled by the same level as in 2001 and 2000. Italcementi through the 94% equity interest held by Our major competitors in France are Ciments Français Ciments Français). (which is 68% owned by Italcementi), Vicat (in which Spain HeidelbergCement has a 35% interest) and Origny Our operations in Spain are conducted through our (which is a wholly-owned subsidiary of Holcim). majority owned subsidiary Lafarge Asland, which United Kingdom we acquired in 1989. In 2002, Spain represented We acquired our operations in the United Kingdom approximately 16.8% of our cement sales in Western with our acquisition of Blue Circle. Through our wholly Europe. We are currently the third largest cement owned subsidiary, Blue Circle Industries, we are now producer in Spain based on capacity as reported by the leading cement producer in the United Kingdom. the most recent edition of the Global Cement Report. In 2002, the United Kingdom contributed approximately We sold 6.8 million tons of cement in Spain in 2002 25.8% of our cement sales in Western Europe. The most compared to 6.7 million in 2001 and 5.5 million tons recent edition of the Global Cement Report estimated in 2000. that our total installed capacity, taking into account the Our four plants are located primarily in the growth closure of the Weardale plant at the end of 2002, regions of the Mediterranean coast and of the region represented approximately 48% of the total rated of central Spain surrounding Madrid. We also operate capacity in the United Kingdom. a network of distribution centers and 3 seaboard Our eight cement plants in the United Kingdom are terminals. In November 2002, we announced the located to serve the whole of the country including conclusion of an agreement for the sale of cement Northern Ireland. The domestic market remained assets to Cimentos de Portugal SGPS, SA (“Cimpor”) stable in 2002. We sold 7.1 million tons in the UK in 2002 for 1 225 million. Located in Southern Spain, these compared to 3.5 million tons in 2001 (in 2001 sales of assets consist of two cement plants at Cordoba and former Blue Circle operations were only consolidated Niebla, representing a total annual capacity of from July 11, 2001). 0.8 million tons of clinker and 1.4 million tons of cement, a grinding plant at Huelva (which we had Greece acquired in September 2001), with an annual capacity We acquired our operations in Greece with our of 0.6 million tons of cement, and a terminal in Seville. acquisition of Blue Circle. Through our majority owned According to the Global Cement report, Spain is among subsidiary, Heracles General Cement, we are the leading the leading countries in Europe in terms of cement cement producer in Greece. In 2002, Greece contributed consumption per capita due to the high level of approximately 16.6% of our cement sales in Western infrastructure and construction spending and the Europe. The most recent edition of the Global Cement market continued to expand in 2002 growing 5% Report estimated that our total installed capacity to reach 44.2 million tons. However, imports have represented approximately 56% of the total rated continued to have a significant impact on prices in capacity in Greece. Spain especially in the coastal regions and according Our three cement plants in Greece are located to serve to the Global Cement Report, imports of cement and the domestic Greek market through seven separate clinker represented approximately 17% of the market’s distribution terminals. In 2002 exports accounted for consumption in 2002. approximately 33% of our production.

According to the latest figures available from Cembureau, Greece had the fourth highest per capita cement consumption rate in the European Union in 2002. This reflects the fact that the construction market

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Our major competitors in Spain are Valenciana (which cement producer in Austria based on capacity as is 99.5% owned by Cemex), Cementos Portland (which reported by the most recent edition of the Global is 55% owned by Valderrivas), Hisalba (which is 99.9% Cement Report. We operate two cement plants in hold by Holcim), Financiera y Minera (which is Austria, one near Vienna and one in the Styria region. controlled by Italcementi through Ciments Français), We sold 1.4 million tons of cement in Austria in 2002, Uniland and Cimpor. compared to 1.5 million tons in 2001 and 2000. Our major competitors in Austria are Wietersdorfer, Schretter, We also hold a 40.75% interest in Cementos Molins since Leube, SPZ and Gmundner. 1997, which operates a plant located near Barcelona with a rated capacity of 1.5 million tons according to We also hold a 50% interest in Kirchdorfer Zement, the most recent edition of the Global Cement Report, which operates a plant with a rated capacity of 0.55 and has equity interests in cement operations in million tons, according to the most recent edition of Mexico, Argentina and Uruguay. the Global Cement Report.

Germany Italy Our operations are conducted through our wholly- Our cement business in Italy is conducted through our owned subsidiary Lafarge Zement GmbH. In 2002, wholly owned subsidiary, Lafarge Adriasebina which Germany represented approximately 5.5% of our we acquired in 1996. In 2002, Italy represented cement sales in Western Europe. We are the sixth largest approximately 3.8% of our cement sales in Western cement producer in Germany based on capacity as Europe. We sold 1.4 million tons of cement in Italy in reported by the most recent edition of the Global 2002, compared to 1.3 million tons in 2001 and 1.2 million Cement Report. tons in 2000.

We have three plants in Germany: the Wössingen plant Our 20% interest in the cement producer Sacci was sold near Karlsruhe, in which we initially acquired an at the end of 2002 for approximately 1 20 million. interest in 1976, Karsdorf in Sachsen Anhalt, in Eastern Germany, which we acquired in 1991 and the Sötenich plant in Nord Rhein-Westphalia near the Belgian border, which we acquired in 1998. Our Wössingen plant serves Southern Germany including Stuttgart and Munich. Our Karsdorf plant serves Central and North Eastern Germany. Sötenich serves South West Germany including Cologne and Dusseldorf. We also serve Dresden and South Eastern Germany from our Cizkovice plant in the Czech Republic.

The construction industry in Germany has suffered a downturn since 1999 and, according to the Global Cement Report, the overall cement market in Germany amounted to 28.7 million tons in 2002 a decline of 6% compared to 2001 and a decline of approximately 14% compared to 2000. We sold 2.7 million tons in 2002 compared to 2.5 million tons in 2001 and 2.9 million tons in 2000. Our major competitors in Germany are Dyckerhoff, HeidelbergCement, Schwenk, Readymix Zement (a subsidiary of RMC Plc) and Holcim.

Austria Our cement business in Austria is conducted through our wholly owned subsidiary, Lafarge Perlmooser AG, in which we acquired our initial interest through our acquisition of Cementia in 1989. In 2002, Austria represented approximately 4% of our cement sales in Western Europe. Lafarge Perlmooser AG is the largest

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• North America replacing our prior capacities at Sugar Creek, near North America represented approximately 22.7% of Kansas City, and Roberta, Alabama. We are expanding our cement sales in 2002. We are represented in North our use of cementitious products and we already have America through our majority owned subsidiary, two slag grinding facilities, one being in Florida and Lafarge North America Inc., a New York Stock Exchange the other one close to Chicago, where operations started listed Company and through our wholly owned in April 2002. subsidiary Blue Circle North America Inc. which we Our major competitors in the United States are Holnam acquired as part of the Blue Circle acquisition. The assets (which is a subsidiary of Holcim), Southdown (which of Blue Circle North America Inc. are currently managed is a subsidiary of Cemex), Ash Grove Cement and by Lafarge North America, which has an option to HeidelbergCement’s U.S. subsidiaries. purchase such assets anytime between July 1, 2002 and December 31, 2004 at a fixed call price of USD 1.4 billion, We sold 14.6 million tons of cement in the United States subject to certain adjustments at the time of the in 2002 compared to 12.9 million tons in 2001 (which exercise. North America is a mature cement market included the former Blue Circle operations only from and sales are seasonal in Canada and much of the East July 11, 2001 onwards) and 9.9 million tons in 2000. Coast and Mid West as temperatures in winter fall Our most significant markets in 2002 were Illinois, below minimum setting temperatures for concrete. We Michigan, Wisconsin and Florida. sold 17.5 million tons of cement in North America in Canada 2002 compared to 16 million tons of cement in 2001 In 2002, Canada represented approximately 12.7% of and 12.8 million tons of cement in 2000. our cement sales in North America. We are the leading The table below indicates the number of plants and our cement producer in Canada according to the Portland production capacity by country at December 31, 2002: Cement Association’s “Plant Information Summary”

Country / Company Number Total report which was prepared at December 31, 2001, of plants cement with approximately 33.8% of the total active industry production capacity clinker production capacity in Canada. We are the Cement Clinker (in million Grinding tons) only cement producer serving all regions of Canada. Our major competitors in Canada are St. Lawrence United States Cement (a subsidiary of Holcim) and St Marys Lafarge North America 8 2 8.7 Blue Circle North America 5 N/A 5.6 Cement (a subsidiary of Votorantim). Canada We sold 3 million tons of cement in Canada in 2002 Lafarge Canada Inc. 7 N/A 5.9 compared to 3.1 million tons in 2001 and 3 million tons Total North America 20 2 20.2 in 2000. We made our most significant sales in Canada United States in Ontario, which accounted for approximately 37% In 2002, the United States represented approximately of our total Canadian cement shipments in 2002. Other 87.3% of our cement sales in North America. On the provinces in which we had significant sales included basis of the figures provided by the Portland Cement Alberta and Quebec. Approximately 40% of our cement Association’s “Plant Information Summary” report shipments in Canada were made to our Aggregates which was prepared at December 31, 2001, we are the and Concrete division. second largest cement producer based on rated annual In addition to the plants shown in the table above we active clinker production capacity, with an estimated also own clinker-producing plants that have been shut 12.7% of the rated annual active clinker production down in Havelock, New Brunswick and Fort Whyte, capacity of all U.S. cement plants. The acquisition of Manitoba. We also have two slag grinding plants. Blue Circle brought us operations in the South Eastern According to the Portland Cement Association, our United States that complemented our existing plants largest competitor accounted for approximately 17.6% which are primarily concentrated in the central and of rated annual active clinker production capacity Midwestern states, extending from the Northern Great in Canada. Lakes southward along the Mississippi River system. Two new production lines became operational in 2002

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• Central and Eastern Europe Poland In 2002, Central and Eastern Europe represented In 2002, Poland represented approximately 35.4% of our approximately 5.8% of our cement sales. We have cement sales in Central and Eastern Europe. We operate actively sought to take advantage of the opportunities through our majority owned subsidiary Lafarge Cement offered in the emerging markets of Central and Eastern Polska which, we believe, based on our experience in Europe and are present in Poland, the Czech Republic, this industry, is the second largest producer in terms of Romania, Serbia, Slovenia and the Commonwealth of capacity. We acquired our plants in Poland in a series Independent States. We also have an equity interest in of acquisitions in 1995 and 1996. The European Bank a plant located in Moldavia. Many of the countries in for Reconstruction and Development has taken a Central and Eastern Europe currently suffer from minority interest in Lafarge Polska, the holding Company chronic excess capacity as a result of central planning. of Lafarge Cement Polska, as well as providing debt However, we believe that the expansion of the financing. We sold 2.2 million tons of cement in European Union eastward makes the long-term growth Poland in 2002, compared to 2.3 million tons in 2001 prospects good and our operations in Poland and and 3.3 million tons in 2000. We have replaced one of Romania are already making significant contributions our old wet process kilns in the Kujawy plant in to our earnings. The companies we consolidated northern Poland with a new dry process kiln, which sold 8.1 million tons of cement in Central and Eastern became operational early in 2003. Our major competitors Europe in 2002 compared to 6.2 million tons in 2001 in Poland are CRH, HeidelbergCement, and Dyckerhoff. and 2000. Romania The table below indicates the number of plants and our In 2002, Romania represented approximately 22.4% of production capacity by country at December 31, 2002: our cement sales in Central and Eastern Europe. We

Country / Company Number Total operate two cement plants and one clinker grinding of plants cement station in Romania, through our majority owned production capacity subsidiary Lafarge Romcim which we acquired in 1997. Cement Clinker (in million Grinding tons) Following the acquisition of Lafarge Romcim we sold an indirect minority interest to the European Bank for Poland Reconstruction and Development. In July 2000 we Lafarge Cement Polska 2 N/A 3.8 disposed of our Alesd plant in Transylvania to Holcim. Romania Lafarge Romcim 2 1 4.4 We believe, based on our experience in this industry, Czech Republic we are the largest cement producer in Romania in Lafarge Cement AS 1 N/A 1.0 terms of capacity. Our main competitors are Holcim, CIS HeidelbergCement and Romcif Fieni. Voskresenskcement 1 N/A 1.9 Mykolaivcement 1 N/A 1.6 Cement consumption in Romania dropped after the Serbia fall of the communist regime in 1989 when state- Beocinska Fabrika Cementa 1 N/A 1.5 financed dwelling construction almost ceased. As Slovenia a result, cement producers in Romania have large Cementarna Trbovlje 1 N/A 0.5 underutilized capacities. The Global Cement Report Total Central and Eastern Europe 9 1 14.7 estimates the total market for cement in Romania at 4.6 million tons in 2002, and a total industry production capacity of 10.7 million tons in 2002. We exported approximately 44% of production in 2002. We produced 2.9 million tons of cement in Romania in 2002 compared to 2.7 million tons in 2001 and 2.8 million tons in 2000.

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Czech Republic Recent developments - Slovenia In 2002, the Czech Republic represented approximately In April 2002, our wholly owned Austrian subsidiary, 8.2% of our cement sales in Central and Eastern Europe. Lafarge Perlmooser, completed a tender offer for the Our operations in the Czech Republic are conducted Slovenian cement company Cementarna Trbovlje, through our majority owned subsidiary Lafarge Cement which was followed in November 2002 by the acquisition AS. We exported approximately 48% of production of an additional stake in the capital of this company, in 2002. We sold 0.3 million tons of cement in the Czech bringing its ownership to 99.8% of the capital, compared Republic in 2002, compared to 0.4 million tons in 2001 to its previous stake of 22.9% as of December 31, 2001. and 2000. Our major competitors in the Czech Republic The total cost of those acquisitions in 2002 amounted are HeidelbergCement, Holcim and Dyckerhoff. to 1 40 million. Cementarna Trbovlje is the second largest cement producer on the Slovenian market, with an Commonwealth of Independent States annual production capacity of 0.5 million tons. The plant We have plants in the Commonwealth of Independent is located close to the two major cities of the country States in Russia and the Ukraine. (Ljubljana and Maribor) and close to Austria. We sold We acquired our majority interest in JSC Voskresenskcement 0.4 million tons of cement in Slovenia in 2002. which operates a cement plant in Voskresensk, near Mediterranean Basin Moscow, in 1996. According to the most recent edition In 2002, the Mediterranean Basin represented of the Global Cement Report, the total market for approximately 6.5% of our cement sales. We believe the cement in Russia was 35 million tons in 2002, compared emerging countries of the Mediterranean Basin have to a total industry production capacity of 77.3 million high growth potential in the medium to long-term as tons. We sold 1.5 million tons of cement in Russia in they industrialize and urbanize. Many of the cement 2002 compared to 1.3 million tons in 2001 and 1.2 million markets in the region have only been recently opened tons in 2000. up to competition after years of state ownership. We acquired a majority interest in Mykolaivcement Following the consolidation of Lafarge Maroc using the which operates a cement plant in Mykolaiv, near the proportionate consolidation method in 2002, the Black Sea, in 1999 after initially acquiring a minority companies we consolidated sold 9.5 million tons of stake in 1998. We sold 0.7 million tons of cement in the cement in the region in 2002 compared to 11.4 million Ukraine in 2002 compared to 0.6 million tons in 2001. tons in 2001 and 10.9 million tons in 2000.

Recent developments - Serbia The table below indicates the number of plants and our In April 2002, we completed the acquisition of a 69.4% production capacity by country at December 31, 2002:

interest in the Beocinska Fabrika Cementa cement plant Country / Company Number Total in Serbia for 1 60 million as part of the new Serbian of plants cement production government’s privatization policy. With a total annual capacity Cement Clinker (in million production capacity of 1.5 million tons, Beocinska Grinding tons) Fabrika Cementa is the market leader in Serbia- Morocco Montenegro. The plant is located on the Danube close Lafarge Maroc 4 N/A 4.2 to Novi Sad and Belgrade. Subsequent to the acquisition, Jordan we sold 49.98% of our interest and our indirect Jordan Cement Factories 2 N/A 4.5 ownership interest was 34.72%. We sold 0.8 million tons Turkey of cement in Serbia-Montenegro in 2002. Lafarge Aslan 1 1 2.1 Yibitas Lafarge 3 3 2.1 Eregli Cimento 0 1 0.2 Total Turkey 4 5 4.4 Egypt Beni Suef Cement Company 1 N/A 1.5 Alexandria Portland Cement 1 N/A 2 Total Egypt 2 N/A 3.5 Total Mediterranean Basin 12 5 16.6

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Morocco Turkey In 2002, Morocco represented approximately 25.5% In 2002, Turkey represented approximately 18.9% of of our cement sales in the Mediterranean Basin. We our cement sales in the Mediterranean Basin. Through operate four cement plants in Morocco through our our majority owned subsidiary, Lafarge Aslan Cimento subsidiary Lafarge Maroc and its operating subsidiaries. AS, we operate a plant in Darica in Marmara and Our partner in Lafarge Maroc is ONA, the largest through our wholly-owned subsidiary, Agretas Agrega Moroccan company. On the basis of the figures Insaat San.ve Tic.AS, we own a 49.9% interest in Yibitas produced by the most recent edition of the Global Lafarge, a joint venture with Yibitas Holding which we Cement Report we are the largest cement producer and manage. Yibitas Lafarge operates plants in Central have approximately 45% of the production capacity in Anatolia and the Black Sea region. the country. We sold 1.8 million tons of cement in The Turkish cement market has been adversely affected Morocco in 2002 compared to 3.4 million tons in 2001 by an economic downturn for the past three years, and 3.1 million tons in 2000 (the reduction in 2002 which has bloomed into a financial crisis. However, we reflects the consolidation of Lafarge Maroc using the believe that in the long term Turkey represents a proportionate consolidation method in 2002 as growing market for cement with high consumption compared to full consolidation in 2001 and 2000). The per capita. The market is highly competitive with market consists of international players and our ownership fragmented and the Turkish economy and competitors, Italcementi, Holcim and Cimpor, operate cement markets were greatly affected by the six cement plants and two grinding plants in Morocco. earthquakes in 1999. Excess supply from the regional The Moroccan economy is vulnerable to sharp declines clinker capacity has been around 20% for the past few in agriculture resulting from lack of rainfall and is in years, resulting in significant export volumes. We the process of recovering from an economic recession. exported approximately 13% of production in 2002. Cement consumption is growing but the growth We sold 2.8 million tons of cement in Turkey in 2002 pattern is heavily influenced by the state of agriculture. compared to 3.1 million tons in 2001 and 3.6 million tons We are currently in the process of constructing a new in 2000. Our major competitors are Akçansa (a subsidiary greenfield cement plant close to Tetouan on the of HeildelbergCement and Sabançi), Italcementi, Nuh Mediterranean coast and when construction is Cimento, BURSA, Vicat and OYAK. completed, the plant is expected to add an additional Egypt capacity of 0.7 million tons per year. We commenced Our operations in Egypt are conducted through Lafarge the construction of the new plant in 2001 and expect Titan Egyptian Investments Ltd., a 50/50 joint venture the plant to start operations in September 2003. The with the Greek cement group Titan SA. We initially construction of the plant is being financed through the joined with Titan to buy 76% of Beni Suef in 1999 and internal cash flow of Lafarge Maroc. this joint interest was raised to 95% in 2000. We Jordan included Alexandria Portland Cement which we In 2002, Jordan represented approximately 33.6% of acquired as part of the Blue Circle acquisition within our cement sales in the Mediterranean Basin. Our the structure of the joint venture in 2002. Beni Suef has operations in Jordan are conducted through Jordan a single dry kiln plant located 120 kilometers south of Cement Factories, a listed Company. In 1998, Jordan Cairo and is the seventh largest producer in Egypt. Cement Factories was privatized and we purchased a Alexandria serves Egypt’s second city, Alexandria, and 43.3% interest and became the largest shareholder. The is the tenth largest producer in Egypt. It has a single Jordanian government is the second largest shareholder plant with several wet kilns and we commenced in Jordan Cement Factories with a 16% interest. operation of a dry kiln line in mid 2002. We sold 1.3 million tons of cement in Egypt in 2002 compared to Cement consumption has increased over the past few 1.6 million tons in 2001 and 1.3 million tons in 2000. Our years in Jordan despite socio-economic difficulties and major competitors are Egyptian Cement (a subsidiary of the ongoing uncertainty in the Middle East. We sold Holcim), Assiut (a subsidiary of Cemex) and Suez (a 2.7 million tons of cement in Jordan in 2002 compared subsidiary of Italcementi). to 2.4 million tons in 2001 and 2.2 million tons in 2000. In addition, we exported 0.9 million tons of cement and clinker.

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• Latin America The cement industry in Brazil slowed in 2002 due to In 2002, Latin America represented approximately 7.2% economic and political uncertainties caused by the of our cement sales. We first entered the Latin American anticipation of the 2003 presidential election. We sold market in the 1950s when we started our operations in 2.9 million tons of cement in Brazil in 2002 compared Brazil. Following a long period of stagnation in the 1970s to 3.2 million tons of cement in 2001 and 3.3 million tons and 1980s the economies in Latin America grew in 2000. Retail sales, mainly for individual construction strongly in the 1990s and despite the temporary use, account for most of the demand. downturn at the end of the decade we expect the trend We also own a 20% interest in Cimento Tupi. to continue. The companies we consolidated sold 6.5 million tons of cement in Latin America in 2002 Venezuela compared to 6.4 million tons in 2001 and 5.9 million In 2002, Venezuela represented approximately 17.5% tons in 2000. of our cement sales in Latin America. We conduct our operations in Venezuela through our majority owned The table below indicates the number of plants and our subsidiary, Fabrica Nacional de Cementos. Our major production capacity by country at December 31, 2002: competitors in Venezuela are Cemex and Holcim. On Country / Company Number Total the basis of figures published by the most recent edition of plants cement production of the Global Cement Report, we estimate we are the capacity Cement Clinker (in million third largest cement manufacturer in Venezuela in Grinding tons) terms of rated capacity.

Brazil Our plants in Venezuela are located in the northern CNCP and CMS 6 N/A 4.3 part of the country where 80% of the population is Venezuela FNC 2 N/A 1.7 concentrated. We sold 0.8 million tons of cement in Chile Venezuela in 2002 compared to 0.9 million tons in each Empresas Melon 1 N/A 2 of 2001 and 2000. Honduras Industriana Cementera 1 N/A 0.7 We also own a 23% interest in Cementos Catatumbo. Hondurena Chile French West Indies Ciments Antillais N/A 3 0.9 We operate in Chile through our majority owned and Ciments Guyanais subsidiary, Empresas Melon, which we acquired with Mexico our acquisition of Blue Circle. In 2002, Chile contributed CPBM 1 N/A 0.3 approximately 15.7% of our cement sales in South Total Latin America 11 3 9.9 America. Empresas Melon operates a single plant located near the capital Santiago. Our total installed Brazil capacity represented approximately 24% of the total In 2002, Brazil represented approximately 36.7% of rated capacity in Chile, based on the estimates contained our cement sales in Latin America. We conduct our in the most recent edition of the Global Cement Report. operations in Brazil though our wholly-owned We sold 1.3 million tons of cement in Chile in 2002, subsidiary Companhia Nacional de Cimento Portland compared to 0.6 million tons in 2001 (as with the rest (“CNCP”) and our subsidiary Companhia de Materiais of the former Blue Circle operations, this only represents Sulfurosos (“CMS”). Our cement plants in Brazil are sales in 2001 consolidated from July 11, 2001 onwards). located mainly in the southeast of the country in the states of Rio de Janeiro, Minas Gerais and São Paolo. Our major competitors in Chile are Polpaico (which is In April 2002, we announced the sale of cement assets 54% owned by Holcim) and Cementos Bio-Bio (including to Cimpor for 1 67 million. Located in the Bahia state, Industria Nacional de Cemento). these assets consist of the Brumado grinding plant, Honduras representing a total annual capacity of 0.6 million tons, In 2002, Honduras represented approximately 10.8% of and its distribution network of three cement terminals. our cement sales in Latin America. We acquired our We estimate we are the fourth largest cement majority owned subsidiary Industria Cementera manufacturer in Brazil in terms of rated capacity. Our Hondurena, which has a plant located near the capital major competitors in Brazil are Votorantim, Joa Santos, Tegucigalpa in March 1998. Our only competitor is Holcim and Cimpor. Cementos del Norte which is controlled by Holcim and which has a plant located near the Guatemalan border.

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Mexico Nigeria We operate a single plant in Mexico through our We acquired our operations in Nigeria through our subsidiary Lafarge Cementos SA de CV which we acquisition of Blue Circle. Our operations are conducted acquired in November 1999. Our plant in Mexico is through our subsidiaries West African Portland Cement located near Mexico City. Our major competitors are Company which serves the Lagos market and Ashakacem Cemex and Holcim. Plc which serves Northern Nigeria. Our total installed capacity represented approximately 46% of the total • Sub-Saharan Africa and Indian Ocean rated capacity in Nigeria, as estimated by the most We substantially expanded our operations in Sub- recent edition of the Global Cement Report. In 2002, Saharan Africa and the Indian Ocean with the Blue Nigeria contributed approximately 36.4% of our cement Circle acquisition, adding operations in Nigeria and sales in Sub-Saharan Africa and Indian Ocean. Zimbabwe to our existing operations which were The domestic market dropped sharply in 2002, prior to primarily concentrated in South Africa and Kenya. In the 2003 presidential election. We sold 3.3 million tons 2002, the region represented approximately 10.9% of of cement in Nigeria in 2002 compared to 1.3 million our cement sales. The companies we consolidated sold tons in 2001 (as with the rest of the former Blue Circle 10.2 million tons of cement in the region in 2002 operations, sales in 2001 only represent the period compared to 7.2 million tons in 2001 and 5 million tons consolidated from July 11, 2001 onwards). Our competitors in 2000. in Nigeria are Benue Cement, Nigerian Cement, The table below indicates the number of plants and our Cement Co Northern Nigeria (which is 40% owned production capacity by country at December 31, 2002: by HeidelbergCement), Bendel Cement, Calabar Cement

Country / Company Number Total and various importers. of plants cement production South Africa capacity Cement Clinker (in million In 2002, South Africa represented approximately 9.8% Grinding tons) of our cement sales in Sub-Saharan Africa and Indian Nigeria Ocean. We acquired our wholly owned subsidiary, WAPCo 2 N/A 2 Lafarge South Africa Ltd., in 1998. Our operations consist Ashakacem 1 N/A 0.9 of a cement plant which serves the Johannesburg Total Nigeria 3 N/A 2.9 market and a grinding plant near Durban. Over the past South Africa ten years most producers have been operating at less Lafarge South Africa Ltd. 1 1 2.4 than 60% of their rated capacity. Kenya Bamburi Cement 1 1 2.3 The domestic market improved in 2002 to 8.4 million

Cameroon tons and we sold 1.6 million tons of cement in South Cimencam 1 1 1.1 Africa in 2002 compared to 1.5 million tons in 2001

Benin and 1.4 million tons in 2000. Our major competitors in SCB-Lafarge 1 N/A 0.6 South Africa are Pretoria Portland Cement and Alpha

Zimbabwe (a subsidiary of Holcim). In November 2002, we Circle Cement 1 N/A 0.5 announced the sale of the 33% interest held by our

Uganda wholly owned subsidiary Lafarge South Africa in Natal Hima Cement Ltd. 1 N/A 0.3 Portland Cement (“NPC”) to Cimpor for approximately Zambia 1 32 million. NPC operates mainly in the Kwazulu Chilanga Cement 2 N/A 0.7 Natal region (Eastern part of the country). It has a main Malawi facility located near Durban. Portland Cement 1 1 0.2

Tanzania Mbeya Cement 1 N/A 0.3

Madagascar Sanca 1 N/A 0.1

Total Sub-Saharan Africa 14 4 11.4

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Kenya • Asia Pacific In 2002, Kenya represented approximately 9.9% of our In 2002, the Asia Pacific region represented approximately cement sales in Sub-Saharan Africa and Indian Ocean. 14.1% of our cement sales. The Asia Pacific region suffered Our operations in Kenya are conducted through our a major downturn in cement sales in 1997, from which subsidiary Bamburi Cement Ltd., which was operated the region is only gradually recovering. We have taken as a joint venture with Blue Circle prior to our advantage of the downturn to substantially boost our acquisition of Blue Circle in 2001. Bamburi Cement presence in the region, since we believe that long-term has an integrated cement plant in Mombasa and a growth prospects for the region remain very favorable. grinding unit in Nairobi. The market picked up in 2002 The companies we consolidated sold 21.1 million tons after a few years of stagnation due to the condition of of cement in the region in 2002 compared to 14.4 million the economy and the lack of government and tons in 2001 and 8.1 million tons in 2000. development funding. Our major competitors in this The table below indicates the number of plants and our market are Athi River Mining and East African Portland production capacity by country at December 31, 2002: Cement, a state-controlled company in which Lafarge and Bamburi have a combined minority interest of Country / Company Number Total of plants cement approximately 40%. production capacity Cement Clinker (in million Cameroon, Benin, Zimbabwe, Madagascar and Uganda Grinding tons) Our subsidiary, Cimenteries du Cameroun, known as Malaysia Cimencam, is the sole cement producer in Cameroon. Malayan Cement Berhad 31 12 In Benin, we have a 50% interest in SCB-Lafarge which India operates a cement plant in Onigbolo. We acquired our Lafarge India Ltd 21 5 majority owned subsidiary in Zimbabwe, Circle Cement, South Korea with the acquisition of Blue Circle. Circle Cement has a Lafarge Halla Cement 2 1 7.5 single plant that serves the capital Harare. Through Philippines Bamburi Cement Ltd., we acquired an interest in Hima Lafarge Philippines 6 2 9.4 Cement Ltd. in 1999, a Company which operates a Indonesia cement plant in Uganda. We also have a majority P.T. Semen Andalas 1 N/A 1.3 interest in Nouvelle Cimenterie d’Amboanio (“Sanca”) China in Madagascar. Beijing Chinefarge Cement 1 N/A 0.7

Zambia, Malawi and Tanzania Shunfa Lafarge Cement 1 N/A 0.4 In 2001 we acquired Pan African Cement Ltd., which Lafarge Dujiangyan Cement 1 N/A 1.4

holds controlling stakes in Chilanga Cement Plc (Zambia), Total China 3 N/A 2.5 Portland Cement Company (Malawi) and Mbeya Total Asia 17 5 37.7 Cement Company (Tanzania). Pan African Cement was consolidated from May 2001. The business was purchased from CDC Capital Partners, formerly the Commonwealth Development Corporation, which acquired the shareholdings as part of each respective government’s privatization program.

Marine Cement Marine Cement acts mainly as an importer and distributor of cement in Mauritius, Sri Lanka, the Maldives, Reunion and the Seychelles. Marine Cement sold 1.5 million tons of cement in 2002, the same volumes as in 2001 and 2000. Marine Cement purchases its cement from our own subsidiaries, including Bamburi Cement in Kenya and Semen Andalas in Indonesia, and from third party suppliers.

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Malaysia South Korea We operate in Malaysia through our majority owned In 2002, South Korea represented approximately 15.5% subsidiary, Malayan Cement Berhad, which we acquired of our cement sales in Asia Pacific. We acquired our with our acquisition of Blue Circle. Malayan Cement 39.9% interest in Lafarge Halla Cement in January 2000. Berhad is the leading cement producer in Malaysia. Our partners in Lafarge Halla Cement include the Halla In 2002, Malaysia contributed approximately 30% of Group and The State of Wisconsin Investment Board. our cement sales in Asia Pacific. Our total installed We operate a cement plant located in the North East of capacity represented approximately 45% of the total the country on the Sea of Japan, and since May 2002, a rated clinker capacity in Malaysia, as estimated by the clinker plant at Samchok , also in the North East of most recent edition of the Global Cement Report. Our the country, which was acquired from KDB (Korea three cement plants and our grinding plant in Malaysia Development Bank). After a severe downturn in 1998 are located to serve the whole of Malaysia and the and 1999 that saw consumption drop by almost a third, export market. We exported approximately 29% of our the cement market recovered in 2000 and stabilized in production in 2002. We sold 5.5 million tons of cement 2001. In 2002, the overall improvement of economic in Malaysia in 2002 compared to 2.9 million tons of conditions translated into an increase of 8% of the cement in 2001 (as with the rest of the former Blue cement consumption. In March 2002 we formed a joint- Circle operations, sales in 2001 only represent the period venture between our 39.9% owned subsidiary Lafarge consolidated from July 11, 2001 onwards). In 2002, the Halla Cement and Tong Yang Major Corporation, a market remained positively oriented in the first half of Korean-based cement company. Under the terms of the the year, but it slowed slightly in the second half of the joint-venture, Lafarge Halla Cement indirectly owns year due to the impact on the construction industry of 24% of the equity of a new company called Tong Yang the deportation of illegal foreign construction workers. Cement Co. Ltd. Tong Yang Major Corporation holds 75% of the equity and has transferred its existing cement Our major competitors in Malaysia are Tasek Corporation, business, a single plant with a cement production Renong, CMS Cement, Perak Hanjoong and Tenggara capacity of 11 million tons per year as well as related (which is 100% owned by Holcim). indebtedness limited to USD 710 million, to the new India company. Our share of the investment in Tong Yang In 2002, India represented approximately 20.2% of our Cement in 2002 amounted to 1 48 million. cement sales in Asia Pacific. We initially entered the Lafarge Halla Cement sold 7.2 million tons of cement Indian market when we acquired the cement plants of in South Korea in 2002 compared to 6.5 million tons the Tata Iron and Steel Co. cement division in November in 2001 and 5.8 million tons in 2000 (2.9, 2.6 and 1999. In January 2001 we further expanded our 2.3 million tons in 2002, 2001 and 2000 respectively on operations when we paid approximately 1 112 million the basis of our percentage on interest). Our major for the cement division of Raymond Ltd. which has a competitors in the country are Ssanyong, Sungshin, 2.2 million tons capacity cement plant located in Hyundai and Hanil. Chattisgarh state. Following the Raymond acquisition we believe, based on our experience in this industry, we are the market leader in the Eastern region of India. Currently, there are no cement imports in India. We sold 3.9 million tons of cement in the region in 2002. Our major competitors in the region are Associated Cement Company, Gujarat Ambura Cement Ltd., Larsen & Toubro, Grasim and Century.

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Philippines Indonesia In 2002, the Philippines represented approximately We operate in Indonesia through P.T. Semen Andalas of 16.8% of our cement sales in Asia Pacific. We operate in which we acquired control in 1994. Our plant is located the Philippines through our wholly owned subsidiary in Aceh at the Northern tip of Sumatra. Our major Lafarge Philippines and its holdings including those competitors are Gresik (in which Cemex has a 25.5% acquired with the acquisition of Blue Circle. We believe, interest), Indocement and Cibinong (in which Holcim based on our experience in this industry, that our holdings has an equity interest of about 77%). We sold 1.2 million constitute together the largest producer of cement in tons of cement in Indonesia in 2002 compared to the Philippines. We first entered the Philippines in 1998 1.1 million tons in 2001 and 0,9 million tons in 2000. when we acquired interests in both Continental China Operating Corporation and South East Asia Cement We currently have two cement plants serving the Beijing Holdings Inc. (Seacem) whose principal plants are market which we operate through our majority owned located on the island of Luzon near Manila. The four subsidiaries Beijing Chinefarge Cement Ltd. and Beijing cement plants in which we acquired interests through Shunfa Lafarge Cement. We acquired our Shunfa plant the Blue Circle acquisition are located to serve in early 2002. The Chinese state development investment metropolitan Manila, northern and southern Luzon, Company and a Chinese cement Company respectively Visayas and Mindanao. hold 15% and 20% of Beijing Chinefarge Cement, and a Cement consumption in the Philippines is low by Asian local chinese partner holds 30% of Beijing Shunfa standards, however, we estimate cement consumption Lafarge Cement. We have just completed the has been growing at an average rate of over 7% per construction of a 1.4 million tons integrated cement annum over the last decade and according to Global plant in Chengdu in the Sichuan province and Cement Report estimates, the total cement market commenced commercial operations in mid 2002. The amounted to approximately 10.9 million tons in 2002. plant was financed, in part, through project financing In 2002, the domestic market grew significantly. We arrangements with the World Bank. sold 3.7 million tons of cement in the Philippines in 2002 We have also announced the signature of an agreement compared to 2.0 million tons in 2001 (as with the rest to purchase a 70% stake in the share capital of a cement of the former Blue Circle operations, sales in 2001 only plant in Chongqing, a town also situated in the Sichuan represent the period consolidated from July 11, 2001 Province. In addition to the acquisition cost of USD 30 onwards) and 1.6 million tons in 2000. Our major million Lafarge is to invest USD 20 million in 2003 and competitors in the country are Holcim and Cemex. 2004 in order to modernise the plant and double its Bangladesh annual production capacity to 1.2 million tons. In Bangladesh we conduct our operations through our Japan majority owned subsidiary, Lafarge Surma Cement. In September 2001, our majority owned subsidiary, After completing the initial site work in 2001, we are Lafarge Japan Holding, paid 1 70 million for a 39.4% currently finalizing turnkey contracts for the construction of the equity of a new Company, Aso Cement, Co. Ltd., of a 1.2 million tons greenfield plant on the Surma which took over Aso Corporation’s cement related river for a total estimated project cost of 1 260 million. business assets, including two plants in Kyushu with We expect the new plant to be financed, in part, a combined cement capacity of 3 million tons. We through project financing arrangements with a account for our 22.45% ownership interest in Aso syndicate organized by the World Bank and the Asian Cement, Co. Ltd. using the equity method. Development Bank.

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Trading activities addition, we also produce asphalt and pre-cast concrete In order to increase our international sales and explore products and we are active in road contracting and new markets without the necessity of immediately surfacing in North America and the United Kingdom. making investments in new production facilities, we In 2002, the companies we consolidated (global and created our Cementia Trading subsidiary, a separate proportionate) had sales volumes of 206.9 million tons entity within Lafarge that focuses on cement trading. of aggregates and 35.4 million m3 of ready mix concrete. Through Cementia Trading we purchased and sold Taking into account 100% of the sales volumes of the approximately 7.1 million tons of cement and clinker in companies we consolidate proportionally and the 2002 (these volumes are included in the volumes sales volumes of our equity affiliates, total volumes reported sold by geographic zone above). Approximately sold would have been 224,7 million tons and 40,6 55% of this amount consisted of exports from our million m3 respectively in 27 countries. operations, including those in Greece, Malaysia and Romania, and the rest was purchased from third parties We manage our aggregates, concrete and asphalt in Thailand, Indonesia,Venezuela and Saudi Arabia. Our businesses in the same division because: trading network also enables us to distribute cement the customer bases for these three product lines are from countries where we have excess capacity to similar, regions around the world where it is in demand. This logistical constraints inherent to these businesses helps us to maximize the capacity utilization of our require the service of local markets through large facilities worldwide while reducing our exposure to the numbers of operational units, and inherent cyclical nature of the cement industry. Our it is generally most efficient to produce ready mix trading activities constitute a fundamental part of our concrete and asphalt at our aggregate quarries as this strategic goals by allowing international development co-location allows us to share management, equipment, through careful, calculated steps, while at the same services and marketing and reduces our logistic costs, time satisfying worldwide demand where required. thus reducing our overall production costs. Reserves We initially entered the ready mix concrete business The raw materials required for this process (calcium as part of our strategy to vertically integrate our cement carbonate, silica, alumina and iron ore) are usually operations and subsequently expanded upstream into present in limestone, chalk, marl, shale and clay and aggregates. Ready mix concrete producers are the are generally readily available in most countries of the largest consumers of cement in some of the major world. Based on historic trends we do not consider the markets in which we are present. Vertical integration prices of these raw materials to be volatile. Cement was pursued to better manage distribution channels, plants are normally built beside large deposits of and to give us direct contact with the end-users of these raw materials. We currently estimate we have cement. We expanded into aggregates to secure the approximately 5 billion tons of proven and authorized supply of raw materials and to profitably exploit our reserves of raw materials. We believe that the quantities core competences in the geological, operational, of authorized reserves at each of our existing cement environmental and regulatory aspects of quarrying plants is adequate for sustainable operating levels for operations which we had acquired through our cement the planned life of each of our plants. operations. We have now expanded into asphalt in North America and the United Kingdom and this provides further outlets for our aggregates resources AGGREGATES AND CONCRETE in a less cyclical business. Our goals for the coming years are to pursue a growth strategy in aggregates in Lafarge is a leading international supplier of aggregates, developed countries and to improve our operational asphalt and ready mix concrete. On the basis of the performance. volumes of concrete and aggregates sold in 2002, we estimate we are the world’s second largest producer of aggregates and ready mix concrete with significant market positions in Western Europe and North America. At December 31, 2002 the companies we consolidated (global and proportionate) operated 674 quarries and 1,078 ready mix concrete plants in 23 countries. In

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The table below indicates the breakdown of our sales by destination in 2002, 2001 and 2000:

Aggregates and Concrete sales (1) by destination

(in million euros, except percentages) Year ended December 31, Geographic area 2002 2001(2) 2000 Western Europe 1,856 38.9% 1,770 36.8% 1,661 44.6%

North America 2,405 50.4% 2,594 54% 1,664 44.7%

Other zones 507 10.6% 442 9.2% 400 10.7%

Total 4,768 100% 4,806 100% 3,725 100%

(1) Including sales of our asphalt, road contracting and pre-cast concrete products (2) Including the former Blue Circle operations from July 11, 2001

Our geographic markets In aggregates and ready mix concrete we regularly Our major markets in Western Europe are France and acquire small independent operators. From time to time the United Kingdom, which represented approximately we acquire larger operations when the opportunity 48.7% and 32.5%, respectively, of our Aggregates & arises and, additionally, assume control of aggregates Concrete sales in this area in 2002. We are also present and concrete assets which have been acquired via in Germany, Austria, Greece and Italy and through a larger cement acquisitions. For example, the Blue Circle joint venture with RMC in Spain and Portugal. In North acquisition in 2001 brought not only significant America our primary markets are in Eastern and Western aggregates and ready mix positions in Georgia and Canada, Colorado, New Mexico, Kansas, Louisiana, Alabama in North America, but also positions in Greece, Missouri, Ohio, Maryland, Pennsylvania, West Virginia, Malaysia, Singapore and Chile. Wisconsin, Georgia and Alabama. We also have In 2002 we disposed or shutdown most of our ready operations in Turkey, South Africa, Poland, Romania, mix concrete plants in Germany in reaction to several Hungary, the Middle East, Morocco, China, Malaysia years of market shrinkage. We also downsized our ready and Singapore. In Central and Southern America we mix concrete presence in Brazil and Greece. have operations in Brazil, Venezuela and Chile.

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The following table shows our volumes and number of particular country or zone by all of our consolidated sites, broken down by geographic area, for 2002. The subsidiaries, including volumes sold to our other sales volume figures we have provided for each country divisions and adjusted to reflect our percentage of or geographic zone are the total volumes sold in each interest in our proportionally consolidated subsidiaries.

At December 31, 2002 Volumes sold in 2002 Geographic area Aggregates Ready mix concrete Aggregates Ready mix concrete Number of sites (in million tons) (in million m3)

Western Europe 216 560 71.7 14.8

France 133 252 43.2 6.5

United Kingdom 57 105 17.7 2.2

Spain/Portugal* 20 159 8.9 3.6

Greece 3 27 1.5 1.6

Other 3 17 0.5 0.9

North America 385 294 117.9 10.7

Canada 283 157

United States 102 137

Other zones 73 224 17.3 9.9

South Africa 20 40 4.4 1.3

Brazil 4 43 2.3 0.7

Chile 2 33 2.1 1.7

Malaysia/Singapore 1 42 - 3.2

Turkey 4 26 2.4 2

Other 42 40 6.1 1

Total 674 1,078 206.9 35.4

*Our Spanish and Portuguese operations are conducted through a joint venture with RMC Plc.

In North America, Western Europe and in emerging Reserves (Aggregates) markets, we face competition from numerous indepen- We currently estimate that we have control of dent operators. However, the aggregates industry in approximately 9,2 billion tons of proven and authorized particular has started to consolidate and we face aggregates reserves in 2002. We have sustained the competition from regional and international producers level of our reserves through various acquisitions and such as Vulcan Materials and Martin Marietta Materials successful permit applications. We believe that the in the United States and Hanson and CRH internationally. quantities of proven and authorized reserves at our In the United Kingdom this process of consolidation aggregates facilities are sufficient to result in an average has reached the stage where the five major producers life in excess of 35 years at present operating levels. We control approximately 75% of the market. also have access to considerable aggregate reserves for which we have either not yet requested or not yet In ready mix concrete the tendency towards consolidation received an extraction permit. We expect to gain the is less pronounced but we still face competition from necessary permits for a significant portion of these in firms such as RMC, HeidelbergCement, Holcim, Hanson, due course. CRH and CSR both in North America and internationally. Our strategy of vertical integration of concrete and cement operations has also been followed by our major competitors in the cement markets such as Holcim, Cemex and CRH and in the other direction by RMC.

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ROOFING We estimate we provide enough roofs tiles to cover around 1.6 million buildings per year and the companies We acquired our roofing business in December 1997 as we consolidated (global and proportionate) sold part of our acquisition of Redland and we believe, based 127.3 million m2 of concrete roof tiles, 24.7 million m2 on our experience in this industry, we are the world’s of clay roof tiles and 2.7 million meters of chimneys in largest producer of concrete and clay roof tiles. At the 2002. Taking into account 100% of the sales of the end of 2002, the companies we consolidated (global companies we consolidate proportionally and the sales and proportionate) operated 159 production sites in of our equity affiliates, total volumes sold in 2002 at 32 countries. Including the companies we account for 100% would have been 171.9 million m2 of concrete roof by the equity method, our roofing operations consisted tiles, 38.7 million m2 of clay roof tiles and 2.7 million of 208 production sites in 38 countries. We are principally meters of chimneys, respectively. based in Western Europe (which represented 75.6% of our sales in 2002) but we are also present in North Our goals for the coming years are to consolidate our America, through a joint venture with Boral, which positions in Europe in concrete roof tiles, clay roof tiles represents 7.9% of our total roofing sales, and are and roofing components and to develop progressively expanding into other regions including Asia Pacific, in emerging countries. which currently represent 16.5% of our sales. The table below indicates the breakdown of our sales by destination in 2002, 2001 and 2000:

Roofing sales by geographic area

(in million euros, except percentages) Year ended December 31, Geographic area 2002 2001 2000

Western Europe 1,162 75.6% 1,261 79.4% 1,341 79.6%

North America 121 7.9% 131 8.3% 121 7.2%

Other zones 255 16.5% 193 12.2% 222 13.2%

Total 1,538 100% 1,585 100% 1,684 100%

We have a significant presence in emerging markets in North America. Asphalt shingles represent over (we define emerging markets as our other zones 85% of the total pitched roofing market in North excluding Japan, Australia and New Zealand). America and the primary manufacturers are Owens Corning, GAF and Certain Teed (Saint-Gobain). We are According to our own internal estimates, we believe, currently not present in the North American market based on our experience in this industry, we are the clear for chimneys. market leader in Europe in pitched roofing products. Our principal competitors in Europe for pitched roofing Our geographic markets products are Etex, Imerys, Terreal (Saint-Gobain), Uralita, In the discussion that follows, we describe market Koramic (the tile business of which will be acquired by conditions and our competitive position in the principal Wienerberger in 2003) and Creaton. In the European geographic areas in which we operate. The sales market for chimneys, we believe, based on our volume figures we have provided for each country or experience in this industry, we are also the market geographic zone are the total volumes sold in each leader, followed by Selkirk, Poujoulat, and Plewa. particular country or zone by our consolidated subsidiaries, including volumes sold to our other We believe, based on our experience in this industry, divisions and adjusted to reflect our percentage of that our Monier Lifetile joint venture has more than interest in our proportionally consolidated subsidiaries. 50% of the North American market for concrete tiles. However, we estimate that concrete and clay tiles represent only around 6% of the pitched roofing market

Lafarge 2002 | Annual Report PAGE 89

The following table illustrates our business operations by geographic zone at December 31, 2002:

At December 31,2002 Geographic area Concrete tiles Clay tiles Chimneys Others Number of plants

Western Europe 46 19 11 11

Germany 12565

United Kingdom 9111

France 5400

Italy 9411

Other Western Europe 11534

North America 13000 Other zones 43484

Eastern Europe 13181

Asia/Pacific 20203

Latin America 3100

Africa /Indian Ocean 6000

Mediterranean Basin 1000

Total 102 23 19 15

Concrete and Clay Tiles and Roofing Components We have restructured our operations in France, Italy and the Netherlands by closing down older small-scale • Western Europe plants while expanding capacity at our more modern We believe, based on our experience in this industry, operations and constructing a new clay tile plant in we are the market leader in Western Europe, which Southern Italy, that became operational in June 2001. represented approximately 75.6% of our total roofing In 2001, we acquired the metal roof tile producer Kami products sales worldwide, and which is the first market with operations in Scandinavia and Eastern Europe and, where we established our presence. We sold 71.2 million since 2002, in the United Kingdom. We are also present m2 of concrete tiles and 23 million m2 of clay tiles in the in Austria, Belgium, Denmark, Finland, Norway, region in 2002. Our four principal markets in this region Portugal, Spain, Sweden and Switzerland. are Germany, the United Kingdom, France and Italy.

In Germany, which represented in 2002 approximately • North America 38.6% of our roofing products sales in Western Europe, North America is our second most important regional we have been facing declining volumes in concrete tiles market, after Europe, for pitched roofing products. In and we have closed down three of our older plants in 2002, our sales of concrete roofing tiles and roofing the past three years. These plant closures have allowed accessories in North America accounted for 7.9% of our us to focus our operations on our most efficient plants total sales in roofing products worldwide. We operate and reduce our surplus capacity. We have also in North America through our jointly controlled introduced new products such as our Star surface, a American subsidiary, Monier Lifetile Llc which was concrete tile with a smoother surface. In 2001, we formed in 1997 as a 50/50 joint venture between restructured our German roofing business by merging Redland’s subsidiary Monier Inc., which it had acquired our concrete and clay tile activities in a single in 1987 and Boral Lifetile Inc. a subsidiary of Boral Limited organizational structure while retaining Braas and of Australia. The Company is the largest manufacturer RuppKeramik as product brands. We have also of premium-quality concrete roof tiles in the United expanded our roofing components activities with the States. Currently, Monier Lifetile has 13 active concrete acquisition of Kloeber, a large roofing accessories tile manufacturing plants in the continental United producer. States, located principally in the Sunbelt states. A new plant in Denver was opened in 2002.

Annual Report | Lafarge 2002 FINANCIAL GROUP OPERATIONS STATEMENTS PAGE 90 DESCRIPTION OF OUR ACTIVITIES IN EACH OF OUR MARKETS

• Other zones we are Europe’s leading chimney producer and we are Our most substantial presence is in Asia where we are four times the size of our closest competitor. We have present in Malaysia, Japan, China, Indonesia, Cambodia, production plants in 12 European countries and sales Philippines, India and Thailand. We have been expanding offices in 18 countries. We are the technical leader in our presence in Asia and we now have six concrete tile ceramic chimneys in Europe. plants in China and we opened a new clay tile plant in Malaysia in 2002. In 2002, we and Cementhai Building GYPSUM Products (member of the Siam Cement Group) set up a joint venture for the manufacturing of clay roof tiles in On the basis of square meters of wallboard produced Thailand. We have also been expanding into Eastern in 2002, we believe, based on our experience in this and Central Europe. In 2002, we opened a clay roof industry, we are the third largest manufacturer tile plant in Hungary. This is one of our main markets worldwide. We first entered into the market for gypsum in this region beside Czech Republic, Poland and Russia. products in 1931, with production of powdered plaster. We also have operations in Bulgaria, Croatia, Estonia, We have since extended our product lines, and currently Macedonia, Slovakia and Slovenia. We have a presence manufacture gypsum wallboard, gypsum plasters, through sales/administrative offices in Bosnia- plaster block, industrial plasters and anhydrite binders Herzegovina, Latvia, Lithuania, Romania, Ukraine and for self-leveling floor screeds. Yugoslavia. We are present in South and Central At December 31, 2002, the companies we consolidated America where we have started operating four new (global and proportionate) operated 67 industrial plants in Brazil in the last three years including our sites in 22 countries. Of these, 33 were wallboard plants acquisitions in 2001 of the clay roofing tile business of with a total production capacity of approximately Ceramica Laranjal Paulista and of a concrete plant. In 888 million m2, 31 were plants where we produced other total, we operate three concrete roof tile plants and one plaster products, such as plaster, plaster block and clay roof tile plant in Brazil. We also have extended our jointing compound, and 3 were plants which produced operations in Mexico through our investment in local paper. If all of the plants in which we have an equity companies. We have substantial operations in South interest are included, our gypsum operations include Africa where we sold 5.6 million m2 of tiles in 2002. We 75 industrial sites in 23 countries. began operations in Turkey in 1998 with the construction of a single concrete tile plant and we intend to expand Our goals for the coming years are to develop our our operations in Turkey in the future. presence in strong growth markets, to consolidate our position in the U.S. market, reduce costs and improve Chimneys our marketing. Our Schiedel chimney business accounted for 10.8% of our total sales in the Roofing Division worldwide. The table below indicates the breakdown of our sales We believe, based on our experience in this industry, by destination in 2002, 2001 and 2000:

Gypsum sales by geographic area

(in million euros, except percentages) Year ended December 31,

Geographic area 2002 2001 2000

Western Europe 604 52.7% 602 56.2% 585 58.5%

North America 245 21.4% 169 15.8% 150 15.0%

Other zones 297 25.9% 301 28.1% 265 26.5%

Total 1,146 100% 1,072 100% 1,000 100%

Lafarge 2002 | Annual Report PAGE 91

We have been actively expanding our gypsum operations United Kingdom in emerging markets. We define emerging markets as We operate in the United Kingdom through our wholly those countries in our other geographical zones, owned subsidiary, Lafarge Plasterboard Ltd. We have a excluding Japan, Australia and New Zealand. In 2002, single major plant in the United Kingdom located in we generated revenues of 1 235 million in emerging Bristol, with two wallboard production lines designed markets compared to 1 248 million in 2001 and 1 203 to primarily use natural gypsum. Our plant is supplied million in 2000. Emerging markets amounted to 20.5% with gypsum from our quarry in Spain. We also have a of our total revenues in gypsum worldwide in 2002 jointing compound plant in Frampton. compared to 23.1% in 2001 and 20.3% in 2000. Germany and Netherlands Our largest competitors in Europe are BPB of the United We operate in Germany through our wholly owned Kingdom and Knauf of Germany, and in the United subsidiary, Lafarge Gips GmbH. We have two wallboard States, U.S. Gypsum Corporation, National Gypsum, BPB plants in Germany, and a wallboard plant in the and Georgia Pacific. After having acquired James Netherlands which are primarily designed to use Hardie’s Gypsum assets in the United States in March synthetic gypsum. We also import wallboard products 2002, BPB is now the same size as USG, the world’s from a plant in France. In October 2002, we announced largest manufacturer of gypsum and wallboard, on the that we had agreed to acquire the wallboard businesses wallboard market worldwide. of Gyproc in Germany and Poland from the British building materials company BPB. The acquisition was Our geographic markets completed in 2003. We are in the process of integrating In the discussion that follows, we describe market Gyproc’s two German wallboard plants located in Peitz conditions and our competitive position in the principal and Steinsfeld with a combined ultimate capacity of geographic areas in which we operate. The sales 53 million m3. volume figures we have provided for each country or geographic zone are the total volumes sold in each Other particular country or zone by our consolidated We also have a wallboard production plant and a plaster subsidiaries, including volumes sold to our other plant in Italy through our wholly owned subsidiary, Divisions and adjusted to reflect our percentage interest Lafarge Gessi SA. In 2002 we consolidated for the first in our proportionally consolidated subsidiaries. time Lafarge Profili, a metal studs business. We also operate a paper mill in Sweden. In addition, we have • Western Europe a minority interest in Yesos Ibericos which operates a In 2002, our sales in Western Europe accounted for 52.7% wallboard plant and three plaster plants in Spain. of our total sales in gypsum world-wide. Western Europe is the second largest regional market worldwide • North America for wallboard, after North America. Our three principal In 2002, our sales in North America accounted for 21.4% markets in this region are France, the United Kingdom of our total sales in gypsum worldwide. Our total and Germany. Our total production capacity for production capacity for wallboard in North America wallboard in Western Europe was approximately was approximately 238 million m2 at December 31, 2002 271 million m2 as of December 31, 2002 and we sold and we sold 184 million m2 in 2002. 206 million m2 in Western Europe in 2002. We first entered the North American gypsum market France in 1996 and we estimate, based on our experience in We operate in France through our wholly owned the industry, we are now one of the six largest producers subsidiary, Lafarge Plâtres. We have four wallboard in this region. We operate in North America through plants in France, one of which is designed to use our majority owned subsidiary Lafarge North America, primarily synthetic gypsum and the rest natural Inc. At December 31, 2002 we operated four wallboard gypsum. We have a paper mill and 15 other production manufacturing plants in the United States, two of sites for the rest of our gypsum product lines, which which use natural gypsum, located in Newark, New include plaster blocks, industrial plaster, insulation and Jersey and Buchanan, New York. In 2000, we opened other materials. a new state-of-the-art plant using 100 percent recycled materials, including synthetic gypsum generated from scrubbers of a nearby power plant in Silver Grove, Kentucky. In early 2001, our second new state-of-the- art plant in Palatka, Florida, based on the same design

Annual Report | Lafarge 2002 FINANCIAL GROUP OPERATIONS STATEMENTS PAGE 92 DESCRIPTION OF OUR ACTIVITIES IN EACH OF OUR MARKETS

as our Silver Grove, Kentucky plant, became operational A new wallboard plant at Dangjin started up in with a capacity of 80 million m2. We also commenced September 2002. This plant has a production capacity operations at a new joint venture paper mill in of 28 million m2. In China we have one main plant near Lynchburg, Virginia in late 2001. In Canada, we operate Shanghai and a smaller plant in the Chengdu region. one gypsum wallboard manufacturing plant in Corner In addition, the joint venture also has two wallboard Brook, Newfoundland, with a capacity of approximately plants in Indonesia, which use natural gypsum, as well 10 million m3, and a joint compound plant in Quebec. as a metal stud plant in Indonesia and a wallboard plant We acquired our Newark, New Jersey plant in January, in Malaysia. 2002 with the acquisition of Continental Gypsum an The joint venture conducts its operations in Thailand independent drywall manufacturer for approximately through Siam Gypsum Industry (SGI) with three plants 1 30 million. The plant has an annual capacity of and a combined capacity of 77 million m3 of wallboards approximately 28 million m3. In order to rationalize our at December 31, 2002. Siam Gypsum Industry announced capacity, our subsidiary Lafarge North America the idling of its Navanakorn plant during the first announced the idling of its Wilmington plant at the quarter 2003. end of 2002. Outside of the joint venture we have two plants in • Other zones Australia located in Melbourne and Sydney which Central and Eastern Europe and the Mediterranean exclusively manufacture wallboard from natural Basin gypsum. We entered into the Australian market in 1988 We currently have operations in Poland, Ukraine and through a joint venture with the Pioneer Group, which Romania. We acquired our operations in Poland in 2000 we fully acquired in 1999. with the acquisition of Dolina Nidy and Nida Gips. Nida Latin America Gips had an old wallboard plant in Gacki. This plant Our principal markets in this region are Chile, Brazil was closed at the end of 2002. We have completed the and Argentina. In these countries, we operate through construction of a new wallboard plant at the same site, companies we control jointly with the Etex Group. We which began operations at the end of the year 2002. have one wallboard plant in each of Argentina, Brazil At the end of 2002, we entered into an agreement to and Chile and two plaster plants, one in each of Brazil increase our stake in Lafarge Arcom Gips in Romania. and Chile.

We also have operations in Ukraine: a plaster business, Reserves Stromgips, and a commercial office in Kiev to sell Our policy is to secure both our own natural reserves and imported wallboard. In Turkey, we operate two long-term supply contracts for synthetic and natural companies through joint ventures. One comprises of a gypsum in order to diversify our supply risk. At wallboard production plant and a construction plaster December 31, 2002, our consolidated companies operated facility near Ankara.The other has a quarry and 17 gypsum quarries worldwide including 11 in Western production facilities near Istanbul. Europe. We currently estimate we have approximately 115 million tons of proven and authorized reserves of Asia Pacific gypsum worldwide. We estimate that we have an In June 2001 we formed a joint venture in the Asia additional 170 million tons of identified reserves for which Pacific Region with the Australian Company Boral we expect to obtain authorization. In general, we obtain Limited. Boral currently holds a minority interest of 48% synthetic gypsum through long-term contracts that last in the joint venture, but it may, in the future, increase approximately 20 years, most of which contain an option its shareholding to up to 50%, mainly by financing to renew. In certain cases, as a function of our supply development projects until June 2003 in the region. needs and local market practices, we contract over shorter At the end of 2002, our wallboard capacity in the region periods. We have contracts outstanding for the supply increased to 255 millions m3. The joint venture is of over 55 million tons of synthetic gypsum over the life managed jointly with Boral. of the contracts. We believe our current supply of gypsum, The joint venture has three plants in South Korea which both natural and synthetic, is adequate for present mainly manufacture wallboard from synthetic gypsum. operating levels.

Lafarge 2002 | Annual Report PAGE 93

CONTENTS

CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL STATEMENTS OF THE LAFARGE COMPANY

REPORT ON THE SOCIAL AND ENVIRONMENTAL CONSEQUENCES OF THE LAFARGE COMPANY’S OPERATIONS

141 | Social information 141 | Information on the environmental consequences of the operations

RISK FACTORS

142 | Industrial and environment-related risks 143 | Country-related risks 143 | Energy costs 143 | Insurance

LEGAL AND FINANCIAL INFORMATION

Annual Report | Lafarge 2002