2001 results provide a solid foundation for future prospects. Financial Report 2001

MD & A 50 Consolidated Financial Statements Statement of Income 56 Balance Sheet 57 Statement of Changes in Equity 58 Cash Flow Statement 59 Accounting Policies 60 Financial Risk Management 65 Notes to the Financial Statements 68 Auditors’ Report 91 Principal Companies 92 Company Data 95 Holding Company Results Statement of Income 102 Balance Sheet 103 Notes to the Financial Statements 104 Appropriation of Net Earnings 107 Auditors’ Report 109 Capital Market Information 110 5-Year-Review 115 the Group’s performance, where especially the mar- Boosting performance kets in Venezuela and Ecuador returned significant improvements. and cash flow In 2001, the geographic diversification was further is the key objective. strengthened and served to balance the Group’s port- folio. Developing markets continue to increase their share of Group net sales at the expense of the more mature markets. Europe, although still the largest region in the Group, decreased its share to 32.3% The following discussion and analysis of the Group’s (2000: 33.3%) of the Group’s net sales. The Group financial condition and results of operations should be regions in the emerging markets of Africa Middle East read in conjunction with the Group’s financial state- and Asia Pacific increased during the year and ments and notes to the financial statements, which are accounted for 8.7% (2000: 8.2%) and 9.4% (2000: presented on pages 56 to 89 of this annual report. 8.4%) of net sales respectively. Net sales in Latin America stabilized and represent 27.2% (2000: 27.2%), Overview while sales in North America declined and represent Holcim again achieved good financial results in 2001 22.4% (2000: 22.9%) of the Group total. given the economic slowdown in several markets and the strong CHF. The Group’s well-balanced and wide Net Sales 2001 spread geographical positions contributed largely to the maintenance of operating results, with regard to the prior year, in the face of difficult conditions.

Group net sales increased by CHF 113 million (2000: 1,823), or 0.8% (2000: 15.6%), to CHF 13,644 million

(2000: 13,531). The Group benefited from new addi- Europe Latin Latin America

tions to the consolidation structure, but unlike previ- North America

ous years did not enjoy the benefits of a strong USD, Asia Pacific Africa Africa Middle East which weakened during the last quarter of 2001. The internal growth in net sales, which excludes the 8.7% 9.4% 32.3% 22.4% 22.4% 27.2% impact of changes in foreign currencies and the con- Per Group region solidation structure, amounted to CHF 166 million (2000: 523) or 1.2% (2000: 4.5%). The global economic Effect of currencies and inflation on operations growth, which has been evident over the past few The Group operates in more than 70 countries, there- years, did not continue in 2001. This was particularly fore most of the Group’s operations are accounted for evident in the second half of the year where the US in currencies other than the CHF. Income statements economy lost some momentum. This also had a ripple in foreign currencies are translated into CHF at the effect in other regions, where especially the Mexican average exchange rate of the year, whereas balance as well as some Western European markets declined. sheets in foreign currencies are consolidated at year- In addition, the delayed commissioning of the Port- end exchange rates. land plant and the write-off of Fort Collins produc- tion facility in the USA negatively impacted the oper- During 2001, the CHF strengthened in average ating results by CHF 112 million. On the positive side, against most of the major currencies in which the there were improved economic environments in most Group operates. Group results are sensitive to move- of the emerging markets of Africa Middle East, Asia ments affecting the EUR, which was 3.2% weaker Pacific and Eastern Europe in which the Group oper- than the CHF and the USD, which was similar to the ates. Latin America continues to contribute greatly to CHF as a result of movements in the fourth quarter.

50 Management’s Discussion and Analysis of Financial Condition and Results of Operations 2001 In addition, most currencies in emerging markets minority interests were acquired at Beloizvorski weakened during the year. As a consequence, Cement JSCo. (Bulgaria), Apasco S.A. de C.V. (Mexico), exchange rate movements had a negative impact on Minetti S.A. (Argentina), Holcim (Brasil) S.A. (Brazil) the consolidated income statement and the results of and St. Lawrence Cement Inc. (Canada). the Group. Due to the translation into CHF, net sales decreased by CHF 412 million (2000: +779) and oper- In addition, new or further investments have been ating profit by CHF 57 million (2000: +133). made in non-consolidated companies including CHF 50 million in Swiss International Air Lines Ltd. The impact on the Group balance sheet was more (Switzerland). mixed. The EUR lost 2.6% compared to the previous year closing. This was offset by a strengthening of Divestments mainly include operations falling out- the USD that gained 2.4% year-on-year. This led to a side of Group core activities and markets focusing on CHF 70 million (2000: 116) decrease in shareholders’ the development of products and expertise in the equity due to currency translation adjustments. field of clinker and cement. The most significant of these divestments occurred in Alsen AG (Germany) The impact of inflation and devaluation in some and Holcim (Belgique) S.A. emerging market countries is minimized by function- al currency accounting – usually in USD or EUR. The change in Group structure increased net sales by CHF 359 million (2000: 521) and operating profit The Group experienced a smooth introduction of the by CHF 65 million (2000: 65). EUR on January 1, 2002, and will continue to benefit from reduced currency exchange risks and new Results of operations opportunities in the European financial markets. During 2001, cement capacity grew by 7.1% (2000: 21.2%) to 121.2 million tonnes (2000: 113.2). This Change in Group structure reflects the investment activity during the year as Net financial investments amount to CHF 1,949 mil- well as some internal adjustments necessary to lion (2000: 1,929). The most significant investments ensure that the capacity is measured identically in all were in PT Semen Cibinong Tbk. (Indonesia), which operations. The increase would have been higher will be consolidated as of January 1, 2002, and except for the difficulties encountered regarding a Corporación Incem S.A. (Panama), which was propor- commissioning of new production facilities in the tionately consolidated for the first time this year. USA. The new capacity should commence operations St. Lawrence Cement Inc. (Canada) invested in aggre- in the first half 2002 and is expected to reduce pro- gate operations which were immediately included in duction costs in the USA. its consolidated results. In addition, the Group provid- ed financing to the Spanish investor, Cartera Lusita- The percentage of the Group’s net sales represented nia, who acquired a participation in Cimpor – Cimen- by income statement items is set out in the table tos de Portugal, SA (Portugal). below. During the past two years a Group-wide stan- dardized management accounting system was imple- Holcim (Bangladesh) Ltd, Caricement Antilles N.V. mented. The new management information system (Curaçao) and Nicacem S.A. (Nicaragua) were fully and related initiatives will facilitate international, consolidated and Union Cement Corporation (Philip- Group-wide benchmarking, enable Group companies pines) was proportionately consolidated for the first to share services and further strengthen the efficien- time. Egyptian Cement Company S.A.E. (Egypt) was cy and effectiveness of administration. Since the now proportionately consolidated for a full year after beginning of 2001, Group companies report in a uni- only 6 months in 2000. form manner. As a consequence, certain comparative information has been restated . This mainly included The Group continued to strengthen its participation the restatement of revenue where only the margin in subsidiaries. The most significant additional earned from trading activities forms part of net sales,

Management’s Discussion and Analysis of Financial Condition and Results of Operations 2001 51 the transfer of ready-mix concrete transportation helped lower production costs. The comparison of the costs from production costs to distribution costs and gross profit margin with previous years is limited. the separation of administration overheads from pro- Certain Group companies recorded some distribution duction costs. activities, mainly those involving the bagging and shipping of cement, as part of production costs in Income Statement Items in % of Net Sales previous years. This has now been standardized for all 2001 2000 1999 Group companies resulting in a decrease in produc- Net sales 100.0 100.0 100.0 tion costs and an increase in distribution costs. The Production cost of goods sold (52.4) (55.1) (54.6) prior year income statement was not restated for this Gross profit 47.6 44.9 45.4 effect. Distribution and selling expenses (22.1) (20.1) (20.8) Distribution and selling expenses amounted to 22.1% Administration expenses (9.3) (8.2) (8.1) (2000: 20.1%) of net sales. Other depreciation and amortization (1.9) (1.8) (1.9) Administration expenses amounted to 9.3% (2000: Operating profit 14.3 14.8 14.6 8.2%) of net sales. Administration costs are high due Additional ordinary income 1.6 1.2 1.7 to the launch of the global Holcim brand, the intro- EBIT 15.9 16.0 16.3 duction of a procurement initiative as well as the Financial expenses (5.1) (5.0) (4.4) release of a standardized chart of accounts. These ini- Group net income before taxes 10.8 11.0 11.9 tiatives will increase operating results and competi- Income taxes (3.2) (3.4) (3.5) tiveness in the future. In addition, various initiatives, Group net income before including efforts to optimize the Group structure minority interests 7.6 7.6 8.4 continue to be launched to streamline administration and reduce costs. Net sales The increase of net sales by CHF 113 million (2000: Other depreciation and amortization amounted to 1,823) to CHF 13,644 million (2000: 13,531) was 1.9% (2000: 1.8%) of net sales. The slight increase in achieved through growth in the areas of the business this item, which contains amortization and deprecia- that the Group considers part of its core competen- tion on intangible and other operating assets, was cies. Net sales in the segment cementitious materials primarily due to the amortization of goodwill arising increased by CHF 450 million (2000: 1,272) and now from recent investment activities. account for CHF 9,994 million (2000: 9,544) or 68.4% (2000: 64.4%) of total Group turnover. In the seg- Operating profit decreased to 14.3% (2000: 14.8%) of ment aggregates and concrete, net sales increased by net sales. The decrease in operating profit of CHF 56 CHF 137 million (2000: 540) to CHF 3,588 million million (2000: +295) or 2.8% (2000: +17.3%) was due (2000: 3,451), representing a share of 24.5% (2000: partly to negative effects from exchange rate move- 23.3%) of total net sales. Due to continued divest- ments of CHF 57 million (2000: +133). Ignoring the ments of activities in the segment other products impact of currency and changes in the consolidation and services, net sales decreased by CHF 786 million structure of CHF 65 million (2000: 65) operating (2000: +136) to CHF 1,043 million (2000: 1,829), profit decreased by CHF 64 million (2000: +97). This accounting now for 7.1% (2000: 12.3%) of total decrease was impacted by the restructuring costs of turnover. CHF 131 million. Operating profit in North America decreased significantly by 27.7% (2000: 0.2%). The Operating profit lower economic growth levels were compounded by The gross profit margin amounts to 47.6% (2000: difficulties commissioning a new production facility 44.9%). The Group continues to focus on methods to as well as the write-off of the Fort Collins plant and increase its use of alternative fuels and optimize the the related closure costs (CHF 48.5 million). Operating use of mineral components. These initiatives have profit in Europe decreased by 5.0% (2000: +0.2%)

52 Management’s Discussion and Analysis of Financial Condition and Results of Operations 2001 reflecting the weakening EUR and challenging condi- Financial expenses tions in Western Europe where the restructuring Net financial expenses amounted to 5.1% (2000: costs in Alsen AG (Germany) and Holcim (France 5.0%) of net sales. The small increase resulted from Benelux) S.A. lowered operating profits. This was part- the higher levels of net financial debt arising from ly offset by encouraging results in Eastern Europe the investment activity in the last years. The average where especially Holcim in Hungary returned good interest rate on the financial liabilities on hand at results. Although operating profit in Latin America December 31 amounts to 5.2% (2000: 6.4%). decreased by 1.8% (2000: +43.2%) the area accounts for 41.1% (2000: 40.8%) of Group operating profit Income taxes making it the largest contributor to the Group’s oper- The expected income tax rate for the Group remains ating results. Most companies in this area returned at 33.0%. During the year the effective tax rate was improved results – especially Cementos Caribe C.A. 29.6% (2000: 30.2%) and was lower than the expect- (Venezuela), La Cemento Nacional C.A. (Ecuador) and ed rate, primarily due to tax incentives received in Minetti S.A. (Argentina). Only Apasco S.A. de C.V. recently acquired companies and the future tax rate (Mexico) and Holcim in Brazil, both on the back of reductions announced in Mexico. excellent 2000 results, returned lower operating prof- its. The areas of Africa Middle East and Asia Pacific Net income increased their operating profit by 31.6% (2000: Net income after minority interests decreased by 67.0%) and 60.8% (2000: 40.6%) respectively. In the 8.4% (2000: +11.4%). As a result, earnings per area of Africa Middle East Egyptian Cement Company dividend-bearing bearer share (EPS) decreased by S.A.E. (Egypt) was proportionately consolidated 12.1% (2000: +9.6%) to CHF 21.20 (2000: 24.12). and contributed its first full year results after only 6 months in 2000. This, together with good market Cash flow conditions in Holcim (Maroc) S.A. means that this Cash generated from operating activities amounted area now accounts for 10.0% (2000: 7.4%) of Group to CHF 2,402 million (2000: 2,557) a decrease of 6.1% operating profit. Asia Pacific accounts for 7.8% (2000: +34.4%) during the year which reflects the (2000: 4.7%) of Group operating profit due mainly communicated one-time effects in 2000. This reduc- to the first time proportionate consolidation of Union tion is higher than the decrease in EBITDA and arises Cement Corporation (Philippines) and improved mainly from higher working capital requirements. results in Siam City Cement (Public) Company Limited Inventory and trade receivables both increased while (Thailand) and most other companies in this region. operating liabilities remained largely unchanged. The strong and resistant operating results are a confirmation of the successful Group strategy of The emerging markets of Africa Middle East and geographical diversification. Asia Pacific returned the largest increases in cash flow of 38.0% (2000: 55.8%) and 51.8% (2000: 31.7%) Operating Profit 2001 respectively. The strong cash flows in Latin America increased further by 1.0% (2000: 64.4%). These increases were offset by increased working capital requirements in Europe and North America decreas- ing cash flow in these regions by 6.6% (2000: +4.3%) and 18.9% (2000: +30.9%) respectively. Latin Latin America Balance sheet Europe Consolidated shareholders’ equity grew by CHF 542 North America

Africa Africa Middle East million (2000: 670) to CHF 7,642 million (2000: 7,100), Asia Pacific mainly due to the enhancement of equity through 15.4% 15.4% 41.1% 10.0% 7.8% 25.7% 25.7% net income by CHF 812 million (2000: 886) and the Per Group region CHF 650 million capital increase. This was offset by

Management’s Discussion and Analysis of Financial Condition and Results of Operations 2001 53 profit distribution of CHF -188 million (2000: -162), environmental and economic benefit to the Group increase in treasury shares of CHF -372 million (2000: but also to contribute to societies’ future. Invest- +238), effects of adopting IAS 39 on financial instru- ments in environmental protection are clearly a prior- ments of CHF -269 million and currency translation ity in acquired companies in developing countries. adjustments of CHF -70 million (2000: -116). CHF 81 million (2000: 129) was invested to further In July 2001, the Group increased its equity by CHF improve the environmental sustainability of the pro- 650 million through the issue of subscription rights duction facilities. for existing shareholders. This was used to underlay approximately half of the CHF 1,300 million share- Group companies provide for their environmental lia- holdings acquired in new markets over the preceding bilities based on constructive as well as legal and two years with equity. contractual obligations. CHF 279 million (2000: 273) has been set-aside as a provision for recultivation and Interests of minority shareholders increased by CHF other environmental liabilities. The Group does not 841 million (2000: 98) to CHF 2,741 million (2000: anticipate any material adverse effect of environmen- 1,900) due mainly to the issue of preference shares tal liabilities on future results of operations. with a total subscription value of USD 450 million. The Group does not guarantee these preference The section headed “Sustainable Development” on shares for redemption and dividend payments. page 8 contains details of activities and efforts in the Further increases arise from minority interests in the areas of corporate social responsibility and environ- new consolidations, partially offset by the buy-outs of mental protection. minority interests in already consolidated companies. New management structure and The Group’s net financial debt amounts to CHF 9,768 corporate governance million (2000: 9,060) an increase of 7.8% (2000: As a consequence of the strong growth witnessed by 18.7%) largely due to cash requirements for expansion the Group and to satisfy the capital markets new cor- through property, plant and equipment and financial porate governance requirements for publicly listed investment. Standard & Poor’s, London awarded the companies, Holcim has decided to spread manage- Group a credit rating of “BBB+” (long-term; outlook ment responsibilities more broadly. The functions of stable) and “A-2”(short-term). In August 2001, the Chairman of the Board of Directors and Chief Execu- Group issued unsecured notes through a private tive Officer were split effective January 1, 2002. placement in the US of USD 825 million. Gearing (net Markus Akermann has assumed overall executive financial debt divided by shareholders’ equity includ- responsibility as the new Holcim CEO. Chairman ing minority interests) benefited from the higher Dr. h.c. Thomas Schmidheiny will focus more on equity levels and decreased to 94.1% from 100.7%. strategic tasks. He remains the Group’s largest share- holder. The Board of Directors has named Urs Bieri Although net financial debt increased, the portion Deputy CEO. Newly appointed to the Executive Com- relating to cash and marketable securities remained mittee, Paul Hugentobler is now responsible for the high and amounted to CHF 2,242 million (2000: Northern ASEAN and South Asia regions. 2,288). In order to bring the company’s organizational Sustainable development regulations into line with the changed circumstances, The Group is a founding member of the World Business an Audit Committee and a Nomination & Compen- Council for Sustainable Development (WBCSD), rein- sation Committee are to be established at Board forcing its commitment to the environment in a larger level. sense. The use of alternative fuels and raw materials as well as the production of blended cements is being The business risk management concept has now systematically pursued in all regions to bring both an been fully implemented Group-wide.

54 Management’s Discussion and Analysis of Financial Condition and Results of Operations 2001 The internal audit function has been redefined. It is Group interests in that area. Accordingly the carrying to establish guidelines for internal audits at operative value of the assets and liabilities remain unchanged company level. At the Group/finance company level, at their December 31, 2001 values. the function of internal auditor has been transferred to an independent firm of auditors. These measures On February 25, 2002 Siam City Cement (Public) Com- create a basis for professional and efficient internal pany Limited (Thailand), jointly controlled by Holcim auditing throughout the Group. Ltd and the Ratanarak family, signed a subscription agreement with TPI Polene Public Co. Ltd. to acquire a Accounting policies controlling participation through an investment in IAS 39 on financial instruments and IAS 40 on invest- new equity of USD 375 million. The proposed transac- ment properties were implemented in 2001. Whereas tion is subject to the approval of the Scheme Credi- investment properties had no impact on the Group, tors as the company is currently under rehabilitation IAS 39 had a substantial financial and administrative in accordance to the Bankruptcy Law of Thailand. impact. The complexities and demanding disclosure requirement of the standard resulted in considerable Outlook training and system development. In addition, the Management feels confident about the financial per- Group took the opportunity to formalize the Group formance 2002 thanks to the wide spread presence treasury policy over the period. and to the restructuring in several key markets. For further details please refer to the “Shareholders’ As a consequence of IAS 39 shareholders’ equity was Letter” on page 2. reduced by CHF 192 million as of January 1, 2001. The standard does not require restatement of compara- tive information.

There are no International Accounting Standards that affect the Group scheduled for implementation during 2002, however management continues to monitor developments and contribute towards future standards.

Events after the balance sheet date During 2001, the Group increased the shareholding in PT Semen Cibinong Tbk. (Indonesia) to approximately 77% after successful negotiations to restructure the company’s debt. The company will be consolidated from January 1, 2002 the date that management con- trol became effective.

On December 28, 2001 the Serbian government accepted Holcim’s bid that amounts to about CHF 85 million for 70% of the voting shares of Novi Popovac. The final contract is scheduled to be signed in the first half of 2002.

During January 2002, the economic crisis in Argentina resulted in the devaluation of the local currency and in the default of its foreign debt. It is too early to esti- mate the effect of the crisis on the economy and

Management’s Discussion and Analysis of Financial Condition and Results of Operations 2001 55 Consolidated Statement of Income of Group Holcim Million CHF Notes 2001 2000 Net sales 6 13,644 13,531 Production cost of goods sold 7 (7,154) (7,457) Gross profit 6,490 6,074 Distribution and selling expenses 8 (3,017) (2,728) Administration expenses (1,274) (1,104) Other depreciation and amortization 9 (254) (241) Operating profit 1,945 2,001 Additional ordinary income 10 212 165 EBIT 2,157 2,166 Financial expenses 11 (693) (683) Group net income before taxes 1,464 1,483 Income taxes 12 (433) (448) Group net income before minority interests 1,031 1,035 Minority interests (219) (149) Group net income after minority interests 812 886

CHF Earnings per dividend-bearing bearer share 14 21.20 24.12 Fully diluted earnings per bearer share 14 20.85 23.60

56 Consolidated Statement of Income Consolidated Balance Sheet of Group Holcim Million CHF Notes 31.12.2001 31.12.2000 Cash and cash equivalents 15 2,137 1,536 Marketable securities 15 105 752 Accounts receivable 16 2,456 2,486 Inventories 17 1,416 1,423 Prepaid expenses and other current assets 253 204 Total current assets 6,367 6,401

Financial investments 18 3,312 2,386 Property, plant and equipment 19 14,235 13,266 Intangible and other assets 20 3,130 2,936 Total long-term assets 20,677 18,588

Total assets 27,044 24,989

Trade accounts payable 21 1,187 1,114 Current financing liabilities 22 2,729 3,295 Other current liabilities 23 1,342 1,381 Total short-term liabilities 5,258 5,790

Long-term financing liabilities 24 9,281 8,053 Deferred taxes 25 1,213 1,201 Long-term provisions 26 909 945 Total long-term liabilities 11,403 10,199

Total liabilities 16,661 15,989

Interests of minority shareholders 28 2,741 1,900

Authorized capital 402 377 Reserves 7,240 6,723 Total shareholders’ equity 7,642 7,100

Total liabilities and shareholders’ equity 27,044 24,989

Consolidated Balance Sheet 57 Statement of Changes in Consolidated Equity of Group Holcim Million CHF Note 2001 2000 Authorized capital as at January 1 377 377 Capital paid-in 25 0 Authorized capital (A) 402 377

Reserves

Capital surplus as at January 1 1,945 1,945 Capital paid-in 625 0 Capital surplus (B1) 2,570 1,945

Retained earnings as at January 1 4,703 3,818 Transitional effect from adopting IAS 39 3 (192) 0 Retained earnings as at January 1 4,511 3,818 Change in treasury shares (372) 238 Profit distribution (188) (162) Group net income after minority interests 812 886 Effect of increase in participations (21) (77) Gain on cash flow hedges 13 0 Loss on available-for-sale securities (90) 0 Retained earnings (B2) 4,665 4,703

Currency translation adjustments as at January 1 75 191 Currency translation adjustments (70) (116) Currency translation adjustments (B3) 575

Total reserves (B1+B2+B3) 7,240 6,723

Total shareholders’ equity (A+B1+B2+B3) 7,642 7,100

58 Statement of Changes in Consolidated Equity Consolidated Cash Flow Statement of Group Holcim Million CHF Notes 2001 2000 Operating profit 1,945 2,001 Depreciation and amortization of operating assets 9 1,390 1,364 Other non-cash items 119 42 Change in net working capital (148) 243 Cash generated from operations 3,306 3,650 Additional ordinary income 126 97 Interest paid (653) (639) Income taxes paid (377) (551) Cash flow from operating activities (A) 2,402 2,557

Investments in property, plant and equipment net 32 (1,730) (1,640) Financial investments net 32 (1,949) (1,929) Cash flow from investing activities (B) (3,679) (3,569)

Dividends paid (323) (294) Equity capital paid-in 650 0 Equity capital paid-in in minority interests 776 0 Movements of treasury shares net (372) 236 (De)Increase in current financing liabilities (813) 1,373 Proceeds from long-term financing liabilities 3,372 1,822 Repayment of long-term financing liabilities (2,069) (1,469) Decrease marketable securities 660 0 Cash flow from financing activities (C) 1,881 1,668

Increase in cash and cash equivalents (A+B+C) 604 656

Cash and cash equivalents as at January 1 1,536 1,623 Increase in cash and cash equivalents 604 656 Effects of exchange rate movements (3) 9 Cash and cash equivalents as at December 31 as reported 2,137 2,288 Adjustment for change in basis 15 0 (752) Cash and cash equivalents as at December 31 as restated 2,137 1,536

Consolidated Cash Flow Statement 59 Basis of preparation All intercompany transactions and balances between Group The consolidated financial statements have been prepared in companies are eliminated. accordance with International Accounting Standards (IAS) under the historical cost convention, except as disclosed in the The Group’s interest in jointly controlled entities is consolidat- accounting policies below. ed using the proportionate method of consolidation. Under this method the Group combines its share of the joint ven- Adoption of new International Accounting Standards tures’ individual income and expenses, assets and liabilities On January 1, 2001 the Group adopted the following Interna- and cash flows with the equivalent items in the consolidated tional Accounting Standards for the first time: financial statements on a line-by-line basis. All transactions and balances are eliminated to the extent of the Group’s inter- IAS 39 financial instruments: recognition and measurement; est in joint ventures. and IAS 40 investment property. Investment in associated companies are accounted for by the The effect of adopting IAS 39 is summarized in the “Statement equity method of accounting. These are companies over which of Changes in Consolidated Equity of Group Holcim” and fur- the Group generally has between 20% and 50% of the voting ther disclosed in note 3 to the accounts. rights and has significant influence but does not exercise con- trol. Equity accounting is discontinued when the carrying The Group elected to account for investment property at cost amount of the investment in an associated company reaches and as such no adjustment was required under IAS 40 at Janu- zero, unless the Group has either incurred or guaranteed obli- ary 1, 2001. gations in respect of the associated company.

Comparative information has not been restated. Foreign currency translation Income statements of foreign entities are translated into the Use of estimates Group’s reporting currency at average exchange rates for the The preparation of financial statements in conformity with IAS year and balance sheets are translated at exchange rates rul- requires management to make estimates and assumptions ing on December 31. that affect the reported amounts of revenues, expenses, assets, liabilities and related disclosures at the date of the Goodwill arising on the acquisition of a foreign entity is treat- financial statements. These estimates are based on manage- ed as a local currency asset of the acquirer using the exchange ment’s best knowledge of current events and actions that the rate at the date of the transaction. Group may undertake in the future. However, actual results could differ from those estimates. Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions; Scope of consolidation gains and losses resulting from the settlement of such trans- The consolidated accounts comprise those of Holcim Ltd and actions and from the translation of monetary assets and lia- of its affiliated companies, including joint ventures and associ- bilities denominated in foreign currencies are recognized in ated companies. The list of principal companies is given in the the income statement, except when deferred in equity as qual- section “Principal Companies”. ifying cash flow hedges.

Principles of consolidation Certain subsidiaries in high inflation countries or companies Subsidiary companies, which are those entities in which the operating in economies with unstable currency situations con- Group has an interest of more than one half of the voting sider the USD or the EUR to be the more appropriate measure- rights or otherwise has the power to exercise control over the ment currency as it more correctly reflects the economic sub- operations, are consolidated. Subsidiaries are consolidated stance of the underlying events and circumstances relevant to from the date on which control is transferred to the Group that particular enterprise. As a consequence thereof, the USD and are no longer consolidated from the date that control and the EUR have been used as the measurement currency for ceases. these specifically affected companies.

60 Accounting Policies Cash and cash equivalents Loans originated by the Group are measured at amortized Cash and cash equivalents are readily convertible into a known cost. Available-for-sale investments are carried at fair value, amount of cash with original maturities of three months or while held-to-maturity investments are carried at amortized less. Cash and cash equivalents comprise cash at bank and on cost using the effective interest method. Gains and losses aris- hand, deposits held at call with banks, other short-term highly ing from changes in the fair value of available-for-sale invest- liquid investments and bank overdrafts. In the prior year, how- ments are included in equity until the financial asset is either ever, there was no three month limitation and a reclassification impaired or disposed of, at which time the cumulative gain or was therefore made to closing cash and cash equivalents as at loss previously recognized in equity is transferred to net profit December 31, 2000 to conform to the present accounting policy. and loss for the period.

Marketable securities Property, plant and equipment Marketable securities consist primarily of debt and equity Property, plant and equipment is valued at acquisition or con- securities which are traded in liquid markets and are classified struction cost less depreciation and impairment loss. Cost as available-for-sale. They are carried at fair value with all fair includes transfers from equity of any gains or losses on quali- value changes recorded in equity until the financial asset is fying cash flow hedges. Depreciation is charged so as to write either impaired or disposed of at which time the cumulative off the cost of property, plant and equipment over their esti- gain or loss previously recognized in equity is transferred to mated useful lives, using the straight-line method, on the fol- net profit and loss for the period. lowing bases:

Accounts receivable Land No depreciation except on land Trade accounts receivable are carried at original invoice with raw material reserves amount less an estimate made for doubtful debts based on a Buildings and installations 20 to 40 years review of all outstanding amounts at the year end. Machinery 10 to 30 years Furniture, vehicles and tools 3 to 10 years Inventories Construction in progress Written off only if impaired Inventories are stated at the lower of cost and net realizable value. Cost is determined by using the weighted average cost Repairs and renovation expenses are usually charged to the method. The cost of finished goods and work in progress com- income statement but costs incurred are capitalized if one or prises raw materials and additives, direct labor, other direct more of the following conditions are satisfied: the original costs and related production overheads. Cost of inventories useful life of the asset is prolonged, the original production includes transfers from equity of gains or losses on qualifying capacity is increased, the quality of the product is materially cash flow hedges relating to inventory purchases. enhanced or production costs are reduced considerably.

Financial investments Costs incurred to gain access to mineral reserves are capital- At January 1, 2001 the Group adopted IAS 39 and classified its ized and depreciated over the life of the quarry. investments into the following categories: loans originated by the Group, available-for-sale and held-to-maturity invest- Interest cost on borrowings to finance construction projects ments. Loans created by providing money directly to a debtor which last longer than one year are capitalized during the are classified as originated. Investments intended to be held period of time that is required to complete and prepare the for an indefinite period of time are classified as available-for- asset for its intended use. All other borrowing costs are sale. Investments with fixed maturity that management has expensed in the period in which they are incurred. the intent and ability to hold to maturity are classified as held-to-maturity.

All purchases and sales of investments are recognized on trade date, which is the date that the Group commits to purchase or sell the asset. Cost of purchase includes transaction costs.

Accounting Policies 61 Government grants received are deducted from property, extent that negative goodwill relates to expectations of future plant and equipment and reduce the depreciation charge losses and expenses that are identified in the Group’s plan for accordingly. the acquisition and can be measured reliably, but which do not represent identifiable liabilities, that portion of negative Leases of property, plant and equipment where the Group has goodwill is recognized in the income statement when the substantially all the risks and rewards of ownership are classi- future losses and expenses occur. The remaining negative fied as finance leases. Property, plant and equipment acquired goodwill is recognized as income on a straight-line basis over through a finance lease is capitalized at the date of inception the remaining average useful life of the identifiable acquired of the lease at the present value of the minimum future lease depreciable assets. To the extent that such negative goodwill payments. The corresponding lease obligations, excluding exceeds the aggregate fair value of the acquired identifiable finance charges, are included in current or long-term financing non-monetary assets, it is recognized in income immediately. liabilities. Other intangible assets In the case of sale and lease-back transactions, the book Expenditure on acquired patents, trademarks and licenses is value of the related property, plant or equipment remains capitalized and amortized using the straight-line method over unchanged. Gains from a sale are included as a financing lia- their estimated useful lives, but not exceeding 20 years. bility and the financing costs are allocated over the term of the lease in such a manner that the costs are reported over Impairment of assets the relevant periods. At each balance sheet date, the Group assesses whether there is any indication that an asset may be impaired. If any such Investment property indication exists, the recoverable amount of the asset is esti- Investment property is property held to earn rentals and for mated in order to determine the extent of the impairment capital appreciation and is stated at cost. loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recov- Goodwill erable amount of the cash generating unit (defined on the Goodwill represents the excess of the cost of an acquisition basis of regional markets) to which the asset belongs. over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or joint venture If the recoverable amount of an asset or cash generating unit at the date of acquisition. Goodwill is recognized as an intan- is estimated to be less than its carrying amount, the carrying gible asset and amortized on a straight-line basis over its esti- amount of the asset or cash generating unit is reduced to its mated useful life as follows: recoverable amount. Impairment losses are recognized imme- diately in the income statement. Cement and clinker 20 years Aggregates 10 years Where an impairment loss subsequently reverses, the carrying Ready-mix concrete 5 years amount of the asset or cash generating unit is increased to its Other products and services 10 years revised estimate of its recoverable amount. However, this increased amount cannot exceed the carrying amount that Shorter useful lives may be used where appropriate but the would have been determined had no impairment loss been maximum estimated useful life may not exceed 20 years. recognized for that asset or cash generating unit in prior years. A reversal of an impairment loss is recognized immedi- On disposal of a subsidiary, associate or joint venture, the ately in the income statement. attributable amount of unamortized goodwill is included in the determination of profit or loss on disposal. Long-term financing liabilities Bank loans acquired and non-convertible bonds issued are rec- Negative goodwill represents the excess of the fair value of ognized initially at the proceeds received, net of transaction the Group’s share of identifiable assets and liabilities acquired costs incurred. In subsequent periods, bank loans and non-con- over the cost of acquisition. Negative goodwill is presented in vertible bonds are stated at amortized cost using the effective the same balance sheet classification as goodwill. To the interest method with any difference between proceeds (net of

62 Accounting Policies transaction costs) and the redemption value being recognized Other provisions in the income statement over the term of the borrowings. A provision is recognized when there exists a legal or con- structive obligation arising from past events and a reliable On the issue of convertible bonds, the fair value of the liability estimate can be made of the amount that will be required to portion is determined using a market interest rate for an settle that obligation. equivalent non-convertible bond; this amount is carried as a long-term liability on the amortized cost basis using the effec- Employee benefits – Defined benefit plans tive interest method until extinguishment on conversion or Some Group companies provide defined benefit pension plans maturity of the bonds. The remainder of the proceeds is allo- for employees. Professionally qualified independent actuaries cated to the conversion option which is recognized and includ- value the funds on a regular basis (1 to 3 years). The obligation ed in shareholders’ equity; the value of the conversion option and costs of pension benefits are determined using the pro- is not changed in subsequent periods. jected unit credit method. The projected unit credit method considers each period of service as giving rise to an additional Deferred taxes unit of benefit entitlement and measures each unit separately Deferred tax is provided in full, using the liability method, on to build up the final obligation. Past service costs are recog- temporary differences arising between the tax bases of assets nized on a straight-line basis over the average period until the and liabilities and their carrying amounts in the financial amended benefits become vested. Gains or losses on the cur- statements. Tax rates enacted or substantially enacted by the tailment or settlement of pension benefits are recognized balance sheet date are used to determine the deferred tax when the curtailment or settlement occurs. Actuarial gains or expense. losses are amortized based on the expected average remain- ing working lives of the participating employees. The pension Deferred tax assets are recognized to the extent that it is obligation is measured at the present value of estimated probable that future taxable profit will be available against future cash flows using a discount rate that is similar to the which the temporary differences can be utilized. interest rate on government bonds where the currency and terms of the government bonds are consistent with the cur- Deferred tax liabilities are recognized for taxable temporary rency and estimated terms of the defined benefit obligation. differences arising from investments in subsidiaries, associ- The Group records an asset only if there is control over the ates and joint ventures except where the Group is able to con- asset. trol the distribution of earnings from these respective entities and where dividend payments are not expected to occur in the Employee benefits – Defined contribution plans foreseeable future. In addition to the defined benefit plans described above, some Group companies sponsor defined contribution plans based Deferred tax is charged or credited in the income statement, on local practices and regulations. The Group’s contributions except when it relates to items credited or charged directly to to defined contribution plans are charged to the income state- equity, in which case the deferred tax is treated accordingly. ment in the period to which the contributions relate.

Site restoration and other environmental provisions Employee benefits – Other post employment benefit plans The Group provides for the costs of restoring a quarry where a Other post employee benefits include long-service leave legal or constructive obligation exists. The cost of raising a or sabbatical leave, medical aid, jubilee or other long-service provision necessary before exploitation of the raw materials benefits, long-term disability benefits and, if they are not has commenced is included in property, plant and equipment payable wholly within twelve months after the year end, and depreciated over the life of the quarry. Thereafter, the pro- profit sharing, bonuses and deferred compensation. vision is adjusted for through operating costs over the life of the quarry and is based on the best estimate of the expendi- Employee benefits – Equity compensation plans ture required to settle the obligation at balance sheet date. Share options are granted to employees. If the options are Where the effect of the time value of money is material, the granted at the market price of the shares on the date of grant amount of the provision is discounted based on the enter- and are exercisable at that price, no compensation cost is rec- prise’s long-term borrowing rate. ognized. If the options are granted at a discount on the market

Accounting Policies 63 price, a compensation cost is recognized in the income state- ment based on that discount. When the share options are exercised, the proceeds received net of any transaction costs are credited to share capital (nominal value) and share premi- um respectively.

Revenue recognition Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably. Sales are recognized net of sales taxes and discounts when delivery has taken place and the transfer of risks and rewards of ownership has been completed.

Interest is recognized on a time proportion basis that reflects the effective yield on the asset. Dividends are recognized when the shareholder’s right to receive payment is estab- lished.

Contingent liabilities Contingent liabilities arise from conditions or situations where the outcome depends on future events. They are dis- closed in the notes to the accounts.

Financial instruments For a discussion of the effects of IAS 39 on investments, refer to the accounting policies section “Financial investments”. Information about accounting for derivative financial instru- ments and hedging activities is included in the section “Financial Risk Management”.

64 Accounting Policies Financial risk factors – General risk management approach Financial risk factors – Interest rate risk The Group’s activities expose it to a variety of financial risks, The Group is exposed to fluctuations in financing costs and including the effect of changes in debt structure and equity market value movements of its debt portfolio related to market prices, foreign currency exchange rates and interest changes in market interest rates. Given the Group’s substan- rates. The Group’s overall risk management program focuses tial net borrowing position, interest rate exposure is mainly on the unpredictability of financial markets and seeks to mini- addressed through the steering of the fixed/floating ratio of mize potential adverse effects on the financial performance of net debt. To manage this mix, Holcim may enter into interest the Group. The Group uses derivative financial instruments rate swap agreements, in which it exchanges periodic pay- such as foreign exchange contracts and interest rate swaps to ments, based on notional amounts and agreed-upon fixed and hedge certain exposures. Therefore, the Group does not enter variable interest rates. into derivative or other financial transactions which are unre- lated to its operating business. As such, a risk-averse approach Financial risk factors – Foreign exchange risk is pursued. The Group operates internationally and therefore is exposed to foreign exchange risks arising from various currency expo- Financial risk management within the Group is governed by sures primarily in US, European, Asian and Latin American cur- policies approved by Group management. It provides prin- rencies. ciples for overall risk management, as well as policies covering specific areas such as interest rate risk, foreign exchange risk, Due to the local nature of the cement business transaction counterparty risk, use of derivative financial instruments and risk is mitigated. However, for many Group companies, income investing excess liquidity. will be primarily in local currency whereas debt servicing and a significant amount of capital expenditures may be Financial risk factors – Market risk in foreign currencies. As a consequence thereof, subsidiaries Holcim is exposed to market risk, primarily relating to foreign may enter into derivative contracts which are designated exchange and interest rate risk. Management actively moni- as either cash flow hedges or fair value hedges, as appro- tors these exposures. To manage the volatility relating to priate. these exposures, Holcim enters into a variety of derivative financial instruments. The Group’s objective is to reduce, Financial risk factors – Equities and securities risk where appropriate, fluctuations in earnings and cash flows In general, the Group does not hold or acquire any shares or associated with changes in foreign exchange and interest rate options on shares or other equity products, which are not risk. In the case of liquid funds, it writes call options on assets directly related to the business of the Group. it has or it writes put options on positions it wants to acquire and has the liquidity to acquire. Holcim, therefore, expects Financial risk factors – Commodities risk that any loss in value of those instruments generally would be The Group’s industrial production process necessitates the offset by increases in the value of the underlying transactions. purchase of significant volumes of energy, such as electricity coal and fuel. To limit the impact of energy cost increases, Financial risk factors – Liquidity risk certain operating companies enter into derivative commodi- Group companies need a sufficient availability of cash to meet ties contracts. their obligations. Individual companies are responsible for their own cash surpluses and the raising of loans to cover cash As a principal, the Group does not build up risk positions and deficits, subject to guidance by the Group and, in certain does not enter into commodity transactions unrelated to the cases, for approval at Group level. operating business. The use of derivative commodity products, if any, aims solely at reducing prevailing commodity risk expo- The Group maintains sufficient reserves of cash, unused credit sures and not generating a profit contribution through trad- lines and readily realizable marketable securities to meet its ing activities. liquidity requirements at all times. In addition, the strong international creditworthiness of the Group allows it to make efficient use of international financial markets for financing purposes.

Financial Risk Management 65 Financial risk factors – Credit risk such as interest payments, or hedged firm commitments or Credit risks arise from the possibility that customers may not forecasted transactions, such as when a forecasted sale actu- be able to settle their obligations as agreed. To manage this ally takes place, affect the income statement. risk the Group periodically assesses the financial reliability of customers. Certain derivative transactions, while providing effective eco- nomic hedges under the Group’s risk management policies, Credit risks, or the risk of counterparties defaulting, are con- do not qualify for hedge accounting under the specific rules in stantly monitored. Counterparties to financial instruments IAS 39. Changes in the fair value of any derivative instruments consist of a large number of major financial institutions. The that do not qualify for hedge accounting under IAS 39 are Group does not expect any counterparties to fail to meet their recognized immediately in the income statement. obligations, given their high credit ratings. In addition, Holcim has no significant concentration of credit risk with any single When a hedging instrument is sold, or when a hedge no counterparty or group of counterparties. longer meets the criteria for hedge accounting under IAS 39, any cumulative gain or loss existing in equity at that time The maximum exposure to credit risk is represented by the remains in equity and is recognized when the committed or carrying amount of each financial asset, including derivative forecasted transaction ultimately is recognized in the income financial instruments, in the balance sheet. statement. However, if a committed or forecasted transaction is no longer expected to occur, the cumulative gain or loss Accounting for derivative financial instruments and that was reported in equity is immediately transferred to the hedging activities income statement. In the case of a fair value hedge, however, Derivative financial instruments are initially recognized in the the adjustment to the carrying amount of the hedged item is balance sheet at cost and subsequently remeasured to fair amortized to net profit or loss from the moment it ceases to value. The method of recognizing the resulting gain or loss is be adjusted for in changes to fair value, with it being fully dependent on the nature of the item being hedged. On the amortized by maturity date. date a derivative contract is entered into, the Group desig- nates certain derivatives as either (a) a hedge of the fair value The Group documents at the inception of the transaction the of a recognized asset or liability (fair value hedge) or (b) a relationship between hedging instruments and hedged items, hedge of a particular risk associated with a recognized asset as well as its risk management objective and strategy for or liability, such as future interest payments on floating rate undertaking various hedge transactions. This process includes debt (cash flow hedge) or (c) a hedge of a forecasted transac- linking all derivatives designed as hedges to specific assets tion or firm commitment (cash flow hedge). and liabilities or to specific firm commitments or forecasted transactions. The Group also documents its assessment, both Changes in the fair value of derivatives that are designated at hedge inception and on an ongoing basis, of whether the and qualify as fair value hedges and that are highly effective derivatives that are used in hedging transactions are highly are recorded in the income statement, along with any changes effective in offsetting changes in fair values or cash flows of in the fair value of the hedged asset or liability that is attrib- hedged items. utable to the hedged risk. The fair values of various derivative instruments used for Changes in the fair value of derivatives that are designated hedging purposes are disclosed in note 3. Movements in the and qualify as cash flow hedges and that are highly effective cash flow hedging reserve and available-for-sale equity are recognized in equity. Where the forecasted transaction or reserve are shown in note 3. firm commitment results in the recognition of an asset, for example, property, plant and equipment, or a liability, the gains or losses previously deferred in equity are transferred from equity and included in the initial measurement of the asset or liability. Otherwise, amounts deferred in equity are transferred to the income statement and classified as revenue or expense in the same periods during which the cash flows,

66 Financial Risk Management Fair value estimation The fair value of publicly traded derivatives and avail- able-for-sale assets is generally based on quoted mar- ket prices at the balance sheet date. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.

In assessing the fair value of non-traded derivatives and other financial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Other techniques, such as option pricing models and estimated discounted value of future cash flows, are used to determine fair values for the remaining financial instruments.

The amortized cost for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values. The fair values of finan- cial assets and liabilities have not been separately disclosed as they are not considered significantly dif- ferent from their carrying amount.

Financial Risk Management 67 1 Changes in the Scope of Consolidation The scope of consolidation has been affected by additions and dis- posals made in 2001.The principal businesses are detailed below.

Newly included As at Germany: Kieswerk Borsberg GmbH (proportionate consolidation) July 1, 2001 Poland: Wejherovo October 1, 2001 Canada: TCG Asphalt and Construction Inc. October 1, 2001 Canada: TCG Inc. October 1, 2001 Nicaragua: Nicacem S.A. January 1, 2001 Panama: Corporación Incem S.A. (proportionate consolidation) January 1, 2001 Curaçao: Caricement Antilles N.V. January 1, 2001 Philippines: Union Cement Corporation (proportionate consolidation) January 1, 2001 Bangladesh: Holcim (Bangladesh) Ltd January 1, 2001

Disposals Germany: Rollbeton GmbH July 1, 2001

2 Foreign Currencies The following table summarizes the principal exchange rates statement of income was CHF 39 million for both the years that have been used for translation purposes. The net loss on ended December 31, 2001 and 2000 respectively. foreign currency translation included in the consolidated 2 Foreign currencies Statement of income Balance sheet Average exchange rate in CHF Year-end exchange rate in CHF 2001 2000 ±% 2001 2000 ±% 1 EUR 1.51 1.56 –3.2 1.48 1.52 –2.6 1 USD 1.69 1.69 – 1.68 1.64 +2.4 1 CAD 1.09 1.14 –4.4 1.05 1.09 –3.7 100 MXN 18.08 17.88 +1.1 18.33 17.07 +7.4 1 ZAR 0.20 0.24 –16.7 0.14 0.22 –36.4 100 EGP 41.81 47.78 –12.5 36.64 42.08 –12.9 100 THB 3.80 4.21 –9.7 3.80 3.78 +0.5 1 AUD 0.87 0.98 –11.2 0.86 0.91 –5.5 1 NZD 0.71 0.77 –7.8 0.70 0.72 –2.8

3 Adoption of New International Accounting Standards IAS 39 has introduced a comprehensive framework for value, and that derivative financial instruments have been accounting for all financial instruments. The Group’s account- brought on-balance sheet and measured at fair value. The ing policies in respect of such instruments are detailed in the effects of the remeasurement of investments to fair value “Accounting Policies” section as well as in the “Financial Risk and bringing derivative financial instruments on-balance Management” section of this report. The principal effects of sheet at fair value have been recognized effective January 1, the adoption of IAS 39 have been that the majority of the 2001. The effects can be summarized as follows: Group’s investments in equity securities are now carried at fair

68 Notes to the Consolidated Financial Statements Retained Cash flow Available-for-sale Total earnings hedging reserve equity reserve Excess of cost over the fair value of available-for-sale investments (85) (85) Net fair value of derivatives designated as effective hedging instruments (89) (89) Net fair value of derivatives not designated as effective hedging instruments (18) (18) Adjustments as at January 1, 2001 (18) (89) (85) (192)

The effects of adopting IAS 39 are also summarized in the value of derivatives designated as cash flow hedges as at “Statement of Changes in Consolidated Equity of Group Holcim”. December 31, 2001 was negative CHF 79.2 million. There were The fair value of derivatives designated as fair value hedges as no significant impairment losses which were either recog- at December 31, 2001 was negative CHF 4.3 million. The fair nized or reversed during the year.

The cash flow hedging reserve comprises the cumulative net change in the fair value of cash flow hedges where the com- mitted or forecasted transaction has not yet occurred. The movement in the cash flow hedging reserve was as follows:

Transition adjustment as at January 1, 2001 (89) Gain on remeasuring hedging instrument to fair value 13 Balance as at December 31, 2001 (76)

The available-for-sale equity reserve comprises the cumulative net change in the fair value of financial assets classified as available-for-sale. The movement in the available-for-sale equi- ty reserve was as follows:

Transition adjustment as at January 1, 2001 (85) Loss on remeasuring available-for-sale financial assets to fair value (90) Balance as at December 31, 2001 (175)

4 Restatement of Prior Year Figures During the past two years, a Group-wide standardized man- As a consequence, certain comparative information has been agement accounting system was implemented. The new man- restated. This mainly included the restatement of revenue agement information system and related initiatives will facili- where only the margin earned from trading activities forms tate international Group-wide benchmarking, enable Group part of net sales, the transfer of ready-mix concrete trans- companies to share services and further strengthen the effi- portation costs from production costs to distribution costs ciency and effectiveness of administration. Since the begin- and the separation of administration overheads from produc- ning of 2001, Group companies report in a uniform manner. tion costs.

Notes to the Consolidated Financial Statements 69 5 Segment Information Information by region Europe North America Latin America 2001 2000 2001 2000 2001 2000 Statement of income, balance sheet and cash flow statement Million CHF Net sales 4,523 4,590 3,143 3,159 3,805 3,742 Operating profit 513 540 306 423 820 835 Net operating assets 4,282 4,609 2,368 2,368 5,482 5,154 Total financing liabilities 3,617 4,561 1,573 1,319 2,371 2,011 Cash flow from operating activities 747 800 443 546 867 858 Cash flow from investing activities 25 (521) (661) (685) (733) (892) Depreciation and amortization of operating assets 463 471 235 214 404 395 Impairment loss (13)00000 Capacity and sales Million t Production capacity cement 37.3 35.2 19.5 19.3 30.9 28.8 Sales of cement and clinker 24.7 24.2 17.7 17.3 19.1 19.2 Sales of aggregates 47.6 46.5 15.7 14.6 13.3 12.5 Million m3 Sales of ready-mix concrete 12.4 12.5 2.5 2.3 7.6 7.2 Personnel Number of personnel 15,719 16,190 5,494 5,348 12,266 10,499

Information by product Cement / Clinker 2001 2000 Statement of income, balance sheet and cash flow statement Million CHF Net sales 9,994 9,544 Operating profit 1,850 1,862 Net operating assets 13,339 13,017 Cash flow from investing activities (1,690) (1,944) Personnel Number of personnel 29,100 24,278

70 Notes to the Consolidated Financial Statements Africa Middle East Asia Pacific Corporate / Eliminations Total Group 2001 2000 2001 2000 2001 2000 2001 2000

1,213 1,129 1,312 1,159 (352) (248) 13,644 13,531 200 152 156 97 (50) (46) 1,945 2,001 1,180 1,287 2,633 2,319 88 99 16,033 15,836 705 619 1,223 1,260 2,521 1,578 12,010 11,348 258 187 208 137 (121) 29 2,402 2,557 (257) (180) (105) (4) (1,948) (1,287) (3,679) (3,569)

116 114 172 167 0 3 1,390 1,364 (4) 0 (1) (1) 1 0 (17) (1)

12.4 12.6 21.1 17.3 0 0 121.2 113.2 11.3 9.8 14.5 11.7 (3.0) (1.6) 84.3 80.6 8.8 9.2 4.1 3.8 0 0 89.5 86.6

1.5 1.6 1.5 1.3 0 0 25.5 24.9

5,224 4,779 8,659 7,500 0 0 47,362 44,316

Aggregates / Concrete Other products / Services Corporate / Eliminations Total Group 2001 2000 2001 2000 2001 2000 2001 2000

3,588 3,451 1,043 1,829 (981) (1,293) 13,644 13,531 69 113 26 26 0 0 1,945 2,001 2,309 2,063 385 756 0 0 16,033 15,836 (318) (282) (46) (63) (1,625) (1,280) (3,679) (3,569)

14,172 12,198 4,072 7,840 18 0 47,362 44,316

Notes to the Consolidated Financial Statements 71 6 Change in Consolidated Net Sales Million CHF 2001 2000 Volume and price 166 523 Change in structure 359 521 Currency translation (412) 779 Total 113 1,823

7 Production Cost of Goods Sold Million CHF 2001 2000 Material expenses 1,953 2,065 Energy expenses 1,253 1,298 Personnel expenses 1,094 1,493 Depreciation 875 960 Other production expenses 1,933 1,657 Change in inventory 46 1 Capitalized expenses 0 (17) Total 7,154 7,457

8 Distribution and Selling Expenses Million CHF 2001 2000 Distribution expenses 2,479 2,218 Selling expenses 538 510 Total 3,017 2,728

72 Notes to the Consolidated Financial Statements 9 Summary of Depreciation and Amortization Million CHF 2001 2000 Depreciation of property, plant and equipment Production facilities 875 960 Distribution and sales facilities 153 95 Administrative facilities 108 68 Depreciation of property, plant and equipment 1,136 1,123 Other depreciation and amortization of operating assets 254 241 Depreciation and amortization of operating assets (A) 1,390 1,364

Additional depreciation – associates 05 Amortization of goodwill – associates 319 Ordinary depreciation of non-operating property, plant and equipment 16 17 Unusual write-offs 824 Depreciation and amortization of non-operating assets (B) 27 65

Total depreciation and amortization (A+B) 1,417 1,429 Of which depreciation of property, plant and equipment 1,152 1,140

The depreciation charge by function has not been restated to impacted by the implementation of the Group-wide standard- comply with current year presentation since the total depreci- ized management accounting system. ation charge for property, plant and equipment has not been

10 Additional Ordinary Income (Expenses) Million CHF 2001 2000 Dividends earned 88 35 Interest earned 88 62 Other ordinary income 63 133 Depreciation and amortization of non-operating assets (27) (65) Total 212 165

The increase in dividends earned is mainly due to the divi- amortization of non-operating assets is a result of a reduction dends received from Cimpor – Cimentos de Portugal, SA in disposals and, thereof, in income generated from disposals (Portugal) and from investments in associated companies. of operations falling outside the framework of the Group’s The decrease in other ordinary income and depreciation and core activities.

Of which transactions with associates Million CHF 2001 2000 Dividends earned 49 27 Interest earned 84 Undistributed earnings 10 33 Other ordinary income 27 Amortization of goodwill on investments in associates (3) (24) Total 66 47

Notes to the Consolidated Financial Statements 73 11 Financial Expenses Million CHF 2001 2000 Financial expenses 774 766 Interest earned on cash and marketable securities (75) (95) Foreign exchange loss net 39 39 Financial expenses capitalized (45) (27) Total 693 683 Of which to associates 11

Financial expenses capitalized comprises interest expenditure USA and Egyptian Cement Company S.A.E., Egypt. The average on large-scale projects during the year. In 2001, such projects rate of interest of financial liabilities on hand at December 31 included construction of cement plants at Holcim (US) Inc., decreased to 5.2% (2000: 6.4%).

12 Income Taxes Million CHF 2001 2000 Current taxation 434 487 Deferred taxation (1) (39) Total 433 448

Analysis of income tax charge Million CHF 2001 2000 Expected tax expense 483 489 Loss applied during the period (27) (32) Recognition of tax loss carryforwards (73) (145) Other 50 136 Effective income tax charge 433 448

During the year, the effective tax rate was 29.6% (2000: 30.2%) companies and the future tax rate reductions announced in and the effective income tax charge was lower than expected Mexico. The expected income tax rate for the Group remains due primarily to tax incentives received in recently acquired at 33%.

74 Notes to the Consolidated Financial Statements 13 Research and Development Research and development expenses were again confined to dated statement of income. No significant costs were incurred the existing product range and to investigating production for licenses obtained from third parties, nor was any major processes and environmental protection. Basic research costs revenue generated from licenses granted. of CHF 6 million (2000: 5) were charged directly to the consoli-

14 Earnings per Share (EPS) Earnings per share is calculated on the basis of Group net bonds (1999 to 2014), the 1% convertible bonds (1998 to 2004) income after minority interests and the weighted number of and the share option plan be exercised. The fully diluted EPS is dividend-bearing shares after deduction of treasury shares. based on a weighted average number of 29,336,537 (2000: Based on a weighted number of 27,428,205 (2000: 26,247,945) 28,161,560) bearer shares – the two bonds may be converted bearer and 54,304,240 (2000: 52,519,810) registered shares, into 1,908,332 (2000: 1,908,332) bearer shares – and 54,304,240 earnings per bearer share amount to CHF 21.20 (2000: 24.12) (2000: 52,519,810) registered shares. It amounts to CHF 20.85 and per registered share CHF 4.24 (2000: 4.82). The fully dilut- (2000: 23.60) per bearer and CHF 4.17 (2000: 4.72) per regis- ed EPS factor takes into account the potential dilution effects tered share. The prior year figures were restated based on the should the conversion options on the zero coupon convertible 5-for-1 share split which took place in May 2001.

15 Cash and Cash Equivalents Cash and cash equivalents are financial instruments that are included in cash and cash equivalents. As a consequence, cash readily convertible into a known amount of cash with original and cash equivalents reduced by CHF 752 million at December maturities of three months or less. In prior years, there was 31, 2000 and the necessary reclassification was made to clos- a twelve-month limitation and marketable securities were ing cash and cash equivalents in the cash flow statement.

16 Accounts Receivable Million CHF 2001 2000 Accounts receivable – trade 1,995 1,915 Accounts receivable – associates 87 91 Other receivables 589 687 Allowances for doubtful accounts (215) (207) Total 2,456 2,486 Of which pledged / restricted 35 30

Notes to the Consolidated Financial Statements 75 17 Inventories Million CHF 2001 2000 Raw materials and additives 226 216 Semi-finished and finished products 630 612 Fuels 158 132 Parts and supplies 384 437 Unbilled services 18 26 Total 1,416 1,423 Of which pledged / restricted 60

18 Financial Investments Million CHF 2001 2000 Financial investments – associates 790 993 Financial investments – third parties 1,524 849 Long-term receivables – associates 84 158 Long-term receivables – third parties 914 386 Total 3,312 2,386 Of which pledged / restricted 40 31

The valuation of financial investments in associates is based on the equity accounted carrying value that resulted in a CHF 10 million (2000: 33) increase in investments in associates.

During 2001, the Group increased the shareholding in PT Semen Cibinong Tbk. (Indonesia) to approximately 77% after successful negotiations to restructure the company’s debt. The company will be consolidated from January 1, 2002 the date that management control became effective.

76 Notes to the Consolidated Financial Statements 19 Property, Plant and Equipment At cost of acquisition Land Buildings, Machines Furniture, Construction Total Total installations vehicles, in progress 2001 2000 tools Million CHF January 1 2,297 5,663 14,705 2,399 1,301 26,365 23,441 Change in structure (16) (227) (326) 94 37 (438) 2,288 Additions 24 53 233 93 1,415 1,818 1,771 Disposals (14) (59) (146) (135) (4) (358) (532) Transferred from construction in progress 46 244 683 120 (1,093) 0 0 Currency translation adjustments 0 38 (179) 5 (5) (141) (603) December 31 2,337 5,712 14,970 2,576 1,651 27,246 26,365 Purchase value of leased property, plant and equipment 203 142

Accumulated depreciation

January 1 554 2,883 8,058 1,598 6 13,099 11,694 Change in structure (102) (292) (444) (23) 0 (861) 998 Additions 36 181 699 236 0 1,152 1,140 Disposals (4) (53) (132) (117) 0 (306) (406) Impairment loss 11 2 3 0 1 17 1 Currency translation adjustments (10) 18 (107) 9 0 (90) (328) December 31 485 2,739 8,077 1,703 7 13,011 13,099 Accumulated depreciation of leased property, plant and equipment 23 36

Net book value as at December 31 1,852 2,973 6,893 873 1,644 14,235 13,266 Net asset value of leased property, plant and equipment 180 106 Of which pledged / restricted 23 69 112 3 0 207 156

Included in the above is investment property with a net book value of CHF 141 million. The net book value of CHF 14,235 mil- lion (2000: 13,266) represents 52.2% (2000: 50.3%) of the origi- nal cost of all assets. Pledged/restricted assets increased by CHF 51 million to CHF 207 million (2000: –167). At December 31, the fire insurance value of property, plant and equipment amounted to CHF 25,158 million (2000: 26,178).

Notes to the Consolidated Financial Statements 77 20 Intangible and Other Assets At cost of acquisition Goodwill Negative Goodwill Other Total Total goodwill net intangible 2001 2000 assets Million CHF January 1 3,458 (223) 3,235 238 3,473 2,884 Additions 166 0 166 46 212 516 Disposals 00000(44) Additions of subsidiaries 186 (18) 168 62 230 179 Disposals of subsidiaries 00000(62) December 31 3,810 (241) 3,569 346 3,915 3,473

Accumulated depreciation

January 1 1,023 (90) 933 48 981 796 Additions 228 (17) 211 41 252 226 Disposals 00000(40) Disposals of subsidiaries 00000(52) Currency translation effects 21 (2) 19 4 23 51 December 31 1,272 (109) 1,163 93 1,256 981

Net book value as at December 31 2,538 (132) 2,406 253 2,659 2,492

Other assets (net) 471 444

Total 3,130 2,936

78 Notes to the Consolidated Financial Statements 21 Trade Accounts Payable Million CHF 2001 2000 Trade accounts payable – third parties 1,109 1,064 Trade accounts payable – associates 11 12 Advance payments for customers 67 38 Total 1,187 1,114

22 Current Financing Liabilities Million CHF 2001 2000 Associates 418 Third parties 1,833 2,643 Current portion of long-term financing 892 634 Total 2,729 3,295 Of which secured 35 37

23 Other Current Liabilities Million CHF 2001 2000 Other non interest-bearing liabilities 1,165 1,207 Provisions for income taxes payable 177 174 Total 1,342 1,381

Notes to the Consolidated Financial Statements 79 24 Long-Term Financing Liabilities Million CHF 2001 2000 Long-term financing liabilities Associates 16 9 Third parties 9,265 8,044 Total 9,281 8,053 Of which secured 702 812

Maturity schedule of long-term financing liabilities (including current portion) Million CHF 2001 2000 Within 1 year 892 634 Within 2 years 1,383 1,131 Within 3 years 1,340 1,648 Within 4 years 1,379 1,096 Within 5 years 1,648 1,371 Thereafter 3,531 2,807 Total 10,173 8,687

Maturity of rental / lease commitments Operating Finance leases leases Million CHF Within 1 year 25 35 Within 2 years 17 31 Within 3 years 12 32 Within 4 years 10 26 Within 5 years 724 Thereafter 27 155 Total 98 303 Interest (103) Total finance leases 200

The total amount recognized in the statement of income for operating leases in 2001 was CHF 45 million (2000: 54).

Long-term financing liabilities, including those repayable dur- ing 2001, comprise loans and advances of CHF 5,399 million (2000: 5,502), publicly traded loans amounting to CHF 4,574 million (2000: 3,057) and rental and lease commitments total- ing CHF 200 million (2000: 128). All loans and advances were obtained from banks and financial institutions. Unutilized credit lines totaled CHF 2,572 million (2000: 1,790) as at December 31.

80 Notes to the Consolidated Financial Statements Outstanding bonds and private placements as at December 31, 2001 Company Currency Amount in Term Callable Interest millions rate Holcim Ltd CHF 100 1995–2002 5.0% Holcim Ltd CHF 500 2000–2005 4.5% Holcim Ltd CHF 500 1998–2009 4.0% Holcim Capital Corporation Ltd. 1 USD 200 1998–2003 5.5% Holcim Capital Corporation Ltd. 1/2 CHF 125 1995–2005 5.125% Holcim Capital Corporation Ltd. 1/2 CHF 150 1996–2006 5.0% Holcim Capital Corporation Ltd. (private placement) 1 USD 249 2001–2006 6.35% Holcim Capital Corporation Ltd. 1/2 CHF 200 1997–2007 3.75% Holcim Capital Corporation Ltd. (private placement) 1 USD 168 2001–2008 6.6% Holcim Capital Corporation Ltd. (private placement) 1 USD 358 2001–2011 7.05% Holcim Capital Corporation Ltd. (private placement) 1 USD 50 2001–2031 7.65% Holcim Overseas Finance Ltd. 1/3 CHF 419 1998–2004 1.0% Holcim Overseas Finance Ltd. 1/4 CHF 448 1999–2014 2002 1.0% Holcim (US) Inc. (private placement) USD 45 1998–2003 6.33% Holcim (US) Inc. (private placement) USD 60 1998–2005 6.52% Holcim (US) Inc. (private placement) USD 95 1998–2008 6.8% Holcim (US) Inc. (industrial revenue bond) USD 27 1984–2009 1.6% Holcim (US) Inc. (industrial revenue bond) USD 1 1999–2009 1.75% Holcim (US) Inc. (industrial revenue bond) USD 22 1997–2027 1.74% Holcim (US) Inc. (industrial revenue bond) USD 5 1996–2031 1.82% Holcim (US) Inc. (industrial revenue bond) USD 15 1999–2031 1.74% Holcim (US) Inc. (industrial revenue bond) USD 67 1999–2032 1.57% St. Lawrence Cement Inc. (industrial revenue bond) USD 18 1988–2020 2.81% Holcim (Liban) S.A.L. USD 77 1999–2006 10.0%

1 Issues are guaranteed by Holcim Ltd. 2 The bonds were converted into USD by currency swaps at the date of issue. 3 Each bond with a par value of CHF 5,000 may be converted into 11.6279 bearer shares of Holcim Ltd during the period May 14, 1998 to May 14, 2004. 4 Zero coupon convertible bond. The bonds were issued at par and have a redemption price at maturity of 116.0969%. One debenture of CHF 5,000 at par value may be converted into 10.41665 bearer shares of Holcim Ltd during the period July 28, 1999 to July 21, 2014.

Notes to the Consolidated Financial Statements 81 25 Deferred Taxes Million CHF 2001 2000 Balance at January 1 1,201 1,162 Change in structure 27 93 Income statement (credit) charge (1) (39) Currency translation adjustments (14) (15) Balance at December 31 1,213 1,201

Deferred taxes Million CHF 2001 2000 Calculation based on comprehensive liability method Analysis of temporary differences Current assets 22 35 Long-term assets 3,968 4,493 Liabilities 410 (45) Total temporary differences 4,400 4,483 Provision for short and long-term deferred taxes 1,213 1,201

Tax loss carryforwards Loss carry- Tax Loss carry- Tax forwards effect forwards effect 2001 2001 2000 2000 Million CHF Loss applied during the period to reduce the income tax expense 59 27 108 32 Total tax loss carryforwards 961 314 1,280 408 Of which reflected in deferred income tax (548) (180) (754) (261) Total tax loss not recognized 413 134 526 147 To be recognized as follows 1 year 47 15 70 23 2 years 60 19 45 13 3 years 83 28 97 25 4 years 107 36 98 28 5 years 111 35 116 26 Thereafter 5 1 100 32

82 Notes to the Consolidated Financial Statements 26 Long-Term Provisions Retirement Site restoration Other Total Total benefits and other environ- provisions 2001 2000 mental liabilities Million CHF Balance at January 1 303 273 369 945 992 Change in structure 28 1 (24) 5 55 Provisions made 13 29 56 98 128 Provisions used during the year (15) (11) (63) (89) (125) Provisions reversed during the year (2) (16) (28) (46) (82) Currency translation adjustments 2 3 (9) (4) (23) Balance at December 31 329 279 301 909 945

27 Employee Benefits Obligations Defined benefit plan: Some Group companies provide pension The obligation resulting from defined benefit pension plans is plans which under IAS are considered as defined benefit pen- determined using the projected unit credit method. Unrecog- sion plans for their employees. Provisions for pension obliga- nized gains and losses resulting from changes in actuarial tions are established for benefits payable in the form of retire- assumptions are recognized as income (expense) over the ment, disability and surviving dependent’s pensions. The bene- expected average remaining working lives of the participating fits offered vary according to the legal, fiscal and economic employees. There were no plan terminations, curtailments or conditions of each country. Benefits are dependent on years of settlements for the years ended December 31, 2001 and 2000. service and the respective employee’s compensation and con- tribution. The following table reconciles the funded status of defined benefit plans to the amounts recognized in the balance sheet The Group records an asset only if there is control over the including the movement in the balance sheet. asset. For Swiss plans Holcim does not consider the net asset to be under its full control and therefore no asset is recorded.

Notes to the Consolidated Financial Statements 83 Employee benefits obligations Defined benefit plans Defined benefit plans Other post employment benefits underfunded overfunded underfunded Million CHF 2001 2000 2001 2000 2001 2000 Present value of funded defined benefit obligations 360 282 1,306 1,279 4 0 Fair value of plan assets (210) (207) (1,524) (1,567) 0 0 Present value of unfunded obligations 115 119 2 0 116 122 Unrecognized actuarial gains and losses 23 9 (14) 38 7 7 Unrecognized past service cost (74) (16) (1) 0 (2) (3) Present value of unrecognized refunds 0 0 0 12 0 0 Net liability (asset) from funded and unfunded plans 214 187 (231) (238) 125 126

Benefits costs (included in personnel expenses) Current service cost 23 12 20 50 1 1 Interest expense on obligations 25 24 20 59 7 7 Expected return on plan assets (18) (18) (34) (91) 0 0 Net actuarial losses (gains) recognized (1) 2 3 (1) 0 0 Past service cost (1) 0 (6) (2) 0 0 Others 0 0 1 (9) 1 3 Total 28 20 4 6 9 11

Net liability (asset) in balance sheet January 1 187 152 (73) (32) 126 128 Net expense recognized in the income statement 24 14 8 20 8 9 Contributions (15) (7) (14) (38) (12) (1) Change in structure 0 22 2 (15) 0 0 Currency translation adjustments (2) (2) 1 1 (1) 1 Others 20 8 15 (9) 4 (11) December 31 214 187 (61) (73) 125 126

Principal actuarial assumptions Discount rate at 31 December 5.71 6.57 4.75 4.44 6.89 7.70 Expected return on plan assets 6.17 7.72 5.98 5.46 0 0 Wage and salary increases 3.82 4.41 3.17 3.38 3.84 4.89

Equity compensation plans Holcim established an employee share ownership plan for all Holcim shares valued at market price and with disposal employees of Swiss subsidiaries and some executives from restrictions. All shares are purchased from the market and the Group companies. This entitles employees to acquire discount- cost is charged to the statement of income as personnel ed Holcim shares, however, with disposal restrictions. In addi- expenses. Therefore, no dilution effect of Holcim shares tion, part of the compensation of key executives is paid in occurs.

84 Notes to the Consolidated Financial Statements Share option plan Share options are granted to employees. Movements in the number of share options outstanding giving the rights to pur- chase Holcim shares are as follows:

Number 2001 2000 January 1 6,930 0 Granted 7,920 6,930 Exercised 00 Lapsed 00 December 31 14,850 6,930

The above-mentioned 7,920 share options were granted on for grant under the employee share option plan in the open March 26, 2001 at the market share price on that date of CHF market at the date of granting. The prior year figures were 348.60 and expire on March 26, 2009. The options cannot be restated based on the 5-for-1 share split which took place in exercised for the first three years from the date of grant but May 2001. may be exercised thereafter. The Group purchased the shares

The terms of the options outstanding at December 31, 2001 are as follows:

Expiry date Exercise price Number 2008 CHF 356.25 6,930 2009 CHF 341.34 7,920

28 Interests of Minority Shareholders Million CHF 2001 2000 January 1 1,900 1,778 Transitional effect from adopting IAS 39 (2) 0 January 1 restated 1,898 1,778 New minorities acquired 87 291 Buy-out of minorities (129) (188) Capital paid-in 776 3 Profit distribution (100) (124) Minority interests in income 219 149 Loss on cash flow hedges (1) 0 Currency translation adjustments (9) (9) December 31 2,741 1,900

Included in “Capital paid-in” are preference shares issued by a fixed dividend to the Investor which is included in “Profit the Group through one of its Group companies (hereafter distribution”. The payment of such dividend is subject to the “Group Company”) to an independent third party investor Group Company distributing dividends on its ordinary shares. (hereafter “Investor”). The total subscription value of the pref- The Group has the right but not the obligation to redeem the erence shares was USD 450 million. The Group Company pays preference shares to the Investor at any time.

Notes to the Consolidated Financial Statements 85 29 Purchase Commitments, Contingencies and Guarantees Million CHF 2001 2000 Purchase commitments 493 1,020 Contingencies and guarantees 354 334 Total 847 1,354

Purchase and capital commitments include commitments to that will occur at a future date and at a price or value agreed purchase goods and services, investments in property, plant in advance. and equipment as well as the acquisition of participations

Contingencies In the ordinary course of business, the Group is involved in the Group operates in countries where political, economic, lawsuits, claims, investigations and proceedings, including social and legal developments could have an impact on the product liability, commercial, environment and health and Group’s operations. The effects of such risks which arise in the safety matters. There are no such matters pending that the normal course of business are not foreseeable and are there- Group expects to be material in relation to the Group’s busi- fore not included in the accompanying financial statements. ness, financial position or results of operations. Furthermore,

Call and put options for acquisitions and divestitures In the ordinary course of business, the Group buys and sells As (a) no active market exists for these options and (b) it investments, associate companies and Group companies or appears highly unlikely that these options could be sold to portions thereof. It is common practice that the Group makes third parties as they represent only minority interests, it is offers or receives call or put options in connection with such considered by management that the fair value of both call and acquisitions and divestitures. Respective contractual capital put options cannot therefore be reliably estimated. In conse- commitments are included in the table above. The Group does quence thereof, these options have not been recognized in the not expect to incur losses as a result of these offers and balance sheet at year end. options.

86 Notes to the Consolidated Financial Statements 30 Monetary Net Current Assets by Currency Cash and Accounts Trade Current Other Total Total marketable receivables accounts financing current 2001 2000 securities payable liabilities liabilities Million CHF CHF 206 138 82 433 141 (312) 548 EUR 199 945 455 1,175 323 (809) (514) BEF 0 (365) FRF 4 3 5 5 0 (4) 82 ESP 0 (96) DEM 110002(334) USD 1,666 475 132 805 381 823 (201) CAD 1 101 104 0 80 (83) (88) MXN 79 190 94 0 85 89 60 ZAR 51 45 12 90 27 (33) (33) THB 54 24 12 2 17 47 0 AUD 4 52 10 21 20 4 0 Others (23) 482 281 198 268 (284) (75) Total 2,242 2,456 1,187 2,729 1,342 (560) (1,016)

31 Total Financial Liabilities by Currency Currency 2001 2000 Million CHF In % Interest Rate Million CHF In % Interest Rate CHF 2,491 20.7 3.5 2,621 23.1 3.4 EUR 2,668 22.2 4.2 844 7.4 5.3 BEF 0 0 0 1,263 11.1 5.1 FRF 0 0 0 270 2.4 4.8 ESP 0 0 0 288 2.5 5.4 DEM 0 0 0 491 4.3 5.3 USD 5,489 45.7 5.7 4,626 40.8 7.4 ZAR 155 1.3 10.6 137 1.2 12.7 EGP 189 1.6 10.0 199 1.8 12.6 THB 123 1.0 7.2 145 1.3 7.3 AUD 121 1.0 5.5 124 1.1 7.1 NZD 294 2.4 5.2 202 1.8 7.5 Others 480 4.1 9.3 138 1.2 9.7 Total 12,010 100.0 5.2 11,348 100.0 6.4

Notes to the Consolidated Financial Statements 87 32 Cash Flow from Investing Activities Million CHF 2001 2000 Investments in property, plant and equipment net Replacements 941 946 Proceeds from sale of property, plant and equipment (86) (130) Capital expenditures on property, plant and equipment to maintain productive capacity and to secure competitiveness 855 816 Expansion investments 875 824 Total investments in property, plant and equipment net (A) 1,730 1,640

Financial investments Acquisition of Group companies (net of cash and cash equivalents acquired) 211 (42) Increase in participation in Group companies 109 273 Financial investments 1,749 1,345 Increase in other assets (mainly goodwill) 417 595 Total 2,486 2,171

Financial divestments Disposal of Group companies (net of cash and cash equivalents disposed of) 9 50 Decrease in participation in Group companies 37 Financial divestments 461 175 Decrease in other assets (mainly goodwill) 64 10 Total 537 242

Total financial investments net (B) 1,949 1,929

Total cash flow from investing activities (A+B) 3,679 3,569

During 2001, the Group provided financing to a third party resulted in the transaction being classified as a “Financial equity investor (hereafter “Equity Investor”) who acquired investment” due to the fact that the Group is bearing part about 10% of the shares of Cimpor – Cimentos de Portugal SA. of the economic risk of the said shares. The Swap Contract The Group then entered into a total return swap agreement terminates in 2005. (hereafter “Swap Contract”) with the Equity Investor which

88 Notes to the Consolidated Financial Statements Cash flow from acquisitions and divestments of Group companies Acquisitions Divestments Million CHF 2001 2000 2001 2000 Cash and cash equivalents (9) (109) 7 3 Other current assets (100) (33) 10 8 Long-term assets (358) (88) 26 72 Other current liabilities 38 37 (20) (12) Long-term financing liabilities and long-term provisions 121 30 (5) (22)

Fair value of (purchased) disposed Group companies (308) (163) 18 49 Acquired (disposed) cash and cash equivalents 9 109 (7) (3) Fair value net (299) (54) 11 46

Fair value net Holcim’s share (211) 42 9 30 Goodwill (30) (34) 0 0 Net income from divestments 020 Net cash flow (241) 8 9 50

33 Post–Balance Sheet Events On December 28, 2001, the Serbian government accepted Since Minetti’s business is USD-related, the company applies Holcim’s bid which amounts to about CHF 85 million for 70% the hard currency accounting concept and keeps its books of the voting shares of Novi Popovac. The final contract is accordingly in USD. The majority of the company’s debt is also scheduled to be signed in the first half of 2002. denominated in USD. Depending on the devaluation, monetary assets and liabilities in Argentine Peso may be subject to a On February 3, 2002, the Argentine government issued, based revaluation. on events in January 2002, a decree that (1) eliminated the fixed exchange rate; (2) established one free floating exchange Until further definitive facts emerge, the Group is at present rate for the Argentine Peso; and (3) requires USD-denominated unable to estimate the potential impact the Argentine Peso obligations to be converted to Peso-denominated obligations devaluation could have on the equity of the Group. using mandated conversion rates depending on the type of obligation. The market for the floating exchange rate was On February 25, 2002, Siam City Cement (Public) Company opened on February 11, 2002. Limited, jointly controlled by Holcim Ltd and the Ratanarak family, agreed it would acquire 77% of the voting shares of In 2001, Holcim Group’s Argentinian subsidiary Minetti S.A. TPI Polene Public Co. Ltd. for USD 375 million, as part of the contributed 2.5% to the Group’s total net sales. Group’s Asian expansion program.

34 Transactions with Major Shareholders and Members of the Board of Directors Total remuneration to members of the Board of Directors of In 2001 and 2000, there were no material transactions either Holcim Ltd was CHF 0.9 million (2000: 0.8). with major shareholders or members of the Board of Directors of Holcim Ltd; however related party transactions were made at arm’s length.

35 Authorization of the Financial Statements for Issue The financial statements are authorized for issuance by the subject to shareholder approval at the Annual General Meet- Board of Directors of Holcim Ltd on March 22, 2002 and are ing of Shareholders scheduled for May 24, 2002.

Notes to the Consolidated Financial Statements 89

Report of the Group auditors to the General Meeting of Holcim Ltd, Jona

As auditors of the Group, we have audited the consolidated financial statements (statement of income, balance sheet, statement of changes in equity, cash flow statement and notes on pages 56 to 89) of Holcim Ltd for the year ended December 31, 2001.

These consolidated financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.

Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession and the International Standards on Auditing (ISA) issued by the International Federation of Accountants (IFAC), which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements give a true and fair view of the finan- cial position, the results of operations and the cash flows in accordance with International Accounting Standards (IAS) as adopted by the International Accounting Standards Board (IASB) and comply with the Swiss law.

We recommend that the consolidated financial statements submitted to you be approved.

Arthur Andersen AG

Thomas Stenz Markus Schweizer

Zurich, March 22, 2002

Auditors’ Report Group 91 Principal Companies of the Holcim Group Region Company Country of incorporation Consolidated or residence interest Europe Holcim (Belgique) S.A. Belgium 100% Holcim (France) S.A. France 100% Holcim (España), S.A. Spain 99.9% Holcim Trading SASpain 100% Alsen AG Germany 84.3% 96.9%1 Holcim (Baden-Württemberg) GmbH Germany 100% Eternit AG Switzerland 100% Holcim (Schweiz) AG Switzerland 100% Holcim Commerce Ltd Switzerland 100% Holcim Group Support Ltd Switzerland 100% Merone S.p.A. Italy 100% Wejherovo Poland 50.5% Holcim (Cesko)ˇ a.s. Czech Republic 96.1% Holcim (Slovensko) a.s. Slovakia 96.6% Holcim Hungária Rt. Hungary 70.4% Tvornica Cementa Koromaˇcno d.o.o. Croatia 99.7% Holcim (Romania) S.A. Romania 99.5% Beloizvorski Cement JSCo. Bulgaria 94.4% North America Holcim (US) Inc. USA100% St. Lawrence Cement Inc. Canada 64.3% Latin America Apasco S.A. de C.V. Mexico 67.2% Nicacem/Cemenic Nicaragua 42.0% Grupo Incsa-PC Costa Rica 55.6% Corporación Incem S.A.2 Panama 40.8% Caricement Antilles N.V. Curaçao 100% Cementos Boyacá S.A. Colombia 99.8% Cementos Caribe C.A. Venezuela 99.9% La Cemento Nacional C.A. Ecuador 73.8% Holcim (Brasil) S.A. Brazil 99.9% Minetti S.A. Argentina 57.9% Cemento Polpaico S.A. Chile 54.3% Africa Middle East Holcim (Maroc) S.A. Morocco 51.0% Alpha (Pty) Limited South Africa 54.4% Egyptian Cement Company S.A.E.2 Egypt 43.7% Holcim (Liban) S.A.L. Lebanon 55.4% Holcim (Outre-Mer) La Réunion 100%

1 Consolidated interest in voting rights. 2 Proportionate consolidation.

92 Principal Companies Asia Pacific Garadagh Cement J.S.C. Azerbaijan 86.0% Holcim (Lanka) Ltd Sri Lanka 94.4% Holcim (Bangladesh) Ltd Bangladesh 82.7% Siam City Cement (Public) Company Limited2 Thailand 33.7% Tenggara Cement Manufacturing Sdn Bhd Malaysia 100% Holcim Trading Pte Ltd Singapore 100% Holcim (Vietnam) Ltd Vietnam 65.0% Alsons Cement Corporation Philippines 40.0%1 Union Cement Corporation2 Philippines 40.0%1 Queensland Cement Ltd. Australia 100% Milburn New Zealand Ltd. New Zealand 100%

Associated Companies Region Company Country of incorporation or residence Europe A.D. Cementarnica Usje Macedonia Sharr Cement Kosovo The Cyprus Cement Company Ltd. Cyprus AS Kunda Nordic Tsement Estonia Novorosscement Russia Shurovo Russia Volskcement Russia Latin America Cementos Progreso S.A. Guatemala Cemento de El Salvador S.A. de C.V. El Salvador Cementos del Norte S.A. de C.V. Honduras Cementos Colón S.A. Dominican Republic Cementos Norte Pacasmayo S.A. Peru Africa Middle East Eastern Bulkcem Co. Ltd. Nigeria Asia Pacific Ardebil Iran AO Akhangarancement Uzbekistan Kalyanpur India PT Semen Cibinong Tbk. Indonesia Huaxin Cement Company Ltd. China Suzhou Golden Cat Cement Ltd. China

Principal Companies 93

Cement Holcim (España), S.A., Spain Aggregates Chief executive: Saverio A. Banchini Ready-mix concrete Personnel: 1,450 Other products and services Production capacity: 4.3 million t of cement Carboneras plant Gádor plant Jerez plant Holcim (Belgique) S.A., Belgium Lorca plant Chief executive: Bernard Kueng Torredonjimeno plant Personnel: 2,176 Shareholdings: Production capacity: 2.8 million t of cement Holcim Aridos S.L. Shareholdings: Holcim Hormigones S.A. Gralex SA Holcim Morteros S.A. Hellings N.V. Holcim Ciments Obourg plant Holcim Trading SA, Spain Haccourt grinding plant Chief executive: Joaquín Villanueva Holcim Granulats Personnel: 47 Holcim Mortiers Inter-Béton SA Scoribel SA Alsen AG, Germany Holcim (Nederland) B.V. Chief executive: Karl Gernandt Personnel: 1,368 Production capacity: 5.1 million t of cement Holcim (France) S.A., France Höver plant Chief executive: Bernard Kueng Lägerdorf plant Personnel: 1,853 Rostock plant (terminal) Production capacity: 4.2 million t of cement Salzgitter plant Altkirch plant Hansa grinding plant Dannes plant Hardegsen grinding plant Héming plant Shareholdings: Lumbres plant Baustoff-Kontor GmbH Rochefort plant Dresdner Beton-Union GmbH Ebange grinding plant Dresdner Speditions- und Shareholdings: Abfertigungsgesellschaft mbH Holcim Bétons Hannoversche Silo-Gesellschaft mbH Holcim Granulats SBU Sandwerke Dresden GmbH & Co. KG TBG Nord-Beton GmbH & Co. KG Zuhr & Köllner GmbH

Company Data 95 Cement Holcim (Schweiz) AG, Switzerland Aggregates Chief executive: Leo Mittelholzer Ready-mix concrete Personnel: 1,592 Other products and services Production capacity: 4.3 million t of cement Brunnen plant Eclépens plant Siggenthal plant Holcim (Baden-Württemberg) GmbH, Germany Thayngen plant Chief executive: Urs Kern Untervaz plant Personnel: 157 Morbio grinding plant Production capacity: 0.6 million t of cement Lorüns grinding plant, Austria Geisingen plant Shareholdings: Shareholdings: AG Hunziker & Cie Geisinger Kalkstein Schotterwerk BBH Baubedarf Holding AG HM Transportbeton GmbH & Co. KG BFGS SA Hupfer GmbH Georoc AG SUL Siloumschlag + Logistik GmbH Kieswerk Hauser AG TBM-Transportbeton Mittelbaden Kieswerk Hüntwangen AG Niederberger AG VKW AG Eternit AG, Switzerland Chief executive: Anders Holte Personnel: 597 Holcim Commerce Ltd, Switzerland Niederurnen plant Chief executive: Alois Zwinggi Payerne plant Personnel: 60 Shareholdings: Etertub AG Promat AG Holcim Group Support Ltd, Switzerland ESAL d.o.o., Slovenia Personnel: 651 Sector company: Holcim Group Support (Canada) Ltd.

Merone S.p.A., Italy Chief executive: Carlo Gervasoni Personnel: 540 Production capacity: 3.6 million t of cement Merone plant Ternate plant Morano grinding plant Shareholdings: Eurofuels Finbeton S.p.A. Inerti Holding Srl

96 Company Data Holcim (Cesko)ˇ a.s., Czech Republic Holcim (Romania) S.A., Romania Chief executive: Jan Hamr Chief executive: Kurt Habersatter Personnel: 526 Personnel: 1,982 Production capacity: 1.4 million t of cement Production capacity: 3.8 million t of cement Prachovice plant Alesd plant Shareholdings: Campulung plant Ekocem Praha s.r.o Turda plant Holcim Beton Pardubice a.s. KAPO Prachovice s.r.o Lom Klecany s.r.o Bulgarcem Holding GmbH, Austria Pískovna Dobˇríˇn a.s. Chief executive: Todor Kostov Transbeton IPS s.r.o Personnel: 687 Transportcement Prachovice s.r.o Production capacity: 2.1 million t of cement Shareholdings: Beloizvorski Cement JSCo., Bulgaria Holcim (Slovensko) a.s., Slovakia Beloizvorski plant Chief executive: Jan Hamr Pit Material AD, Bulgaria Personnel: 994 Quarries AD, Bulgaria Production capacity: 2.4 million t of cement Rohoˇzník plant Banská Bystrica grinding plant Holcim (US) Inc., USA Shareholdings: Chief executive: Paul A. Yhouse ASO Spol s.r.o Personnel: 2,469 B & W Auslandsbeteiligung GmbH Production capacity: 16.4 million t of cement Hirostavbet s.r.o Ada plant Holcim Beton s.r.o Artesia plant Transportcement Bratislava Clarksville plant Holcim (Wien) GmbH, Austria Devil’s Slide plant Dundee plant Fort Collins plant Holcim Hungária Rt., Hungary Holly Hill plant Chief executive: Lászlo Panyi Mason City plant Personnel: 837 Portland plant Production capacity: 2.1 million t of cement Theodore plant Hejöcsaba plant Trident plant Lábatlan plant GranCem Chicago Shareholding: GranCem Weirton Transbeton AG Shareholding: Holnam Texas Limited Partnership Midlothian plant Tvornica Cementa Koromaˇcno d.o.o., Croatia Chief executive: Walter Fischer Personnel: 275 Production capacity: 0.6 million t of cement Koromaˇcno plant Shareholdings: Beton Lucko Transport Beton Korobeton d.o.o. Resnik Beton

Company Data 97 Cement Grupo Incsa-PC, Costa Rica Aggregates Chief executive: Jean Pierre Ratton Ready-mix concrete Personnel: 1,121 Other products and services Production capacity: 0.8 million t of cement Shareholdings: Concretera Nacional S.A. Hidroeléctrica Aguas Zarcas S.A. St. Lawrence Cement Inc., Canada Industria Nacional de Cemento S.A. Chief executive: Patrick Dolberg Cartago plant Personnel: 2,844 Productos de Concreto S.A. Production capacity: 4.3 million t of cement Quebradores Cerro Minas S.A. Joliette plant Quebradores Ochomogo S.A. Mississauga plant Shareholdings: Boehmers group Corporación Incem S.A., Panama Demix group Chief executive: José Agustin Moscoso Dufferin group Personnel: 560 Euclid Admixture Canada Inc. Production capacity: 0.9 million t of cement Pozzolanic International Inc., USA Shareholdings: St. Lawrence Cement, USA Cementos Panamá S.A. Catskill plant Quebrancha grinding plant Hagerstown plant Concreto S.A. Grava S.A. Procosa Apasco S.A. de C.V., Mexico Chief executive: Pierre A. Froidevaux Personnel: 3,738 Nicacem/Cemenic, Nicaragua Production capacity: 9.0 million t of cement Chief executive: Pablo Hidalgo Shareholdings: Personnel: 148 Cementos Apasco S.A. de C.V. Production capacity: 0.4 million t of cement Acapulco plant Nagarote grinding plant Apaxco plant San Carlos grinding plant Macuspana plant Orizaba plant Ramos Arizpe plant Cementos Boyacá S.A., Colombia Tecomán plant Chief executive: Bernard Terver Concretos Apasco S.A. de C.V. Personnel: 777 Gravasa S.A. de C.V. Production capacity: 1.5 million t of cement Nobsa plant Shareholdings: Concretos Premezclados S.A. Ingeniesa S.A.

98 Company Data Cementos Caribe C.A., Venezuela Minetti S.A., Argentina Chief executive: Bernard Terver Chief executive: Carlos Bühler Personnel: 671 Personnel: 1,042 Production capacity: 2.4 million t of cement Production capacity: 4.9 million t of cement Cumarebo plant Capdeville plant San Sebastián plant Malagueño plant Shareholdings: Puerto Viejo plant Agregados Caribe C.A. Yocsina plant Premezclados Caribe C.A. Campana grinding plant Yesos del Golfo C.A. Panquehua grinding plant Shareholdings: Canteras Malagueño S.A. La Cemento Nacional C.A., Ecuador Hormix / Hormigonera Central Chief executive: Patrick Bredthauer Transmix / Hormex Personnel: 1,206 Production capacity: 2.8 million t of cement Shareholdings: Cemento Polpaico S.A., Chile Agregados Rocafuerte S.A. Chief executive: Andreas K. Heusler Distribuidora Rocafuerte (Disensa) SA Personnel: 1,128 Hormigones Rocafuerte S.A. Production capacity: 2.7 million t of cement Industria Rocacem S.A. Cerro Blanco plant Cerro Blanco plant Coronel grinding plant San Eduardo plant Mejillones grinding plant Productos Rocafuerte S.A. Shareholdings: Cementos Pacasmayo S.A., Peru Multicret S.A. Pacasmayo plant Pétreos S.A. Transportes Cerro Blanco Ltda.

Holcim (Brasil) S.A., Brazil Chief executive: Martin F. Altorfer Holcim (Maroc) S.A., Morocco Personnel: 2,096 Chief executive: Youssef Ennadifi Production capacity: 5.9 million t of cement Personnel: 662 Barroso plant Production capacity: 2.7 million t of cement Cantagalo plant Oujda plant Pedro Leopoldo plant Ras El Ma plant Sorocaba grinding plant Doukkarat grinding plant Vitória grinding plant Nador grinding plant Concretex Shareholdings: Pedreiras Cantareira Holcim Bétons Holcim Granulats

Company Data 99 Cement Holcim (Lanka) Ltd, Sri Lanka Aggregates Chief executive: Tim Mackay Ready-mix concrete Personnel: 911 Other products and services Production capacity: 1.1 million t of cement Shareholdings: Galle Cement Company Ltd. Lanka Quarries Ltd. Alpha (Pty) Limited, South Africa Puttalam Cement Company Ltd. Chief executive: Mike M. Doyle Puttalam plant Personnel: 2,307 Ruhunu Cement Company Ltd. Production capacity: 3.3 million t of cement Galle grinding plant Dudfield plant Ulco plant Roodepoort grinding plant Holcim (Bangladesh) Ltd, Bangladesh Alpha Stone and Readymix Chief executive: Ramit Budhraja Shareholdings: Personnel: 232 Natal Portland Cement (Pty) Ltd. Production capacity: 0.9 million t of cement Simuma plant Bangladesh grinding plant Omnia Holdings Ltd. Shareholdings: Tanga Cement Company Ltd., Tanzania Cemcor Limited Tanga plant United Cement Industries Limited

Egyptian Cement Company S.A.E., Egypt Siam City Cement (Public) Company Limited, Thailand Chief executive: Nassef Sawiris Chief executive: Vincent Bichet Personnel: 1,148 Personnel: 6,096 Production capacity: 5.3 million t of cement Production capacity: 14.8 million t of cement El Sukhna plant Saraburi plant Shareholdings: Diamond Roofing Tiles Co. Ltd. Holcim (Liban) S.A.L., Lebanon Karat Faucet Co. Ltd. Chief executive: Dominique Drouet Royal Porcelain Co. Ltd. Personnel: 221 Siam City Concrete Co. Ltd. Production capacity: 1.6 million t of cement Chekka plant Shareholdings: Tenggara Cement Manufacturing Sdn Bhd, Société Libanaise des Ciments Blancs Malaysia Société Libanaise pour le Béton (SOLIBE) Chief executive: Joe Khor Personnel: 89 Production capacity: 1.2 million t of cement Garadagh Cement J.S.C., Azerbaijan Pasir Gudang grinding plant Chief executive: David Stone Personnel: 569 Production capacity: 1.2 million t of cement Garadagh plant

100 Company Data Holcim (Vietnam) Ltd, Vietnam Milburn New Zealand Ltd., New Zealand Chief executive: Martin Foreman Chief executive: Rex Williams Personnel: 696 Personnel: 751 Production capacity: 1.7 million t of cement Production capacity: 0.6 million t of cement Hon Chong plant Westport plant Cat Lai pozzolanic grinding plant Shareholdings: and terminal Allied Milburn Ltd. Coastal Resources Ltd. McDonald’s Lime Ltd. Alsons Cement Corporation, Philippines Milburn Aggregates Chief executive: Tomas I. Alcantara Readymix Concrete Personnel: 653 Taylors Lime Co. Production capacity: 2.6 million t of cement Suzhou Golden Cat Cement Ltd., China Luga-It plant Suzhou plant Shareholdings: Bulkcem Calamba Aggregates Co. Inc. Northern Mindanao Transport Company

Union Cement Corporation, Philippines Chief executive: Magdaleno B. Albarracin Personnel: 1,156 Production capacity: 4.8 million t of cement Bulacan plant Davao plant La Union plant

Queensland Cement Ltd., Australia Chief executive: Philippe Arto Personnel: 1,091 Production capacity: 1.9 million t of cement Gladstone plant Rockhampton plant Bulwer Island grinding plant Cairns terminal Townsville terminal Shareholdings: Australian Steel Mill Services Pty Ltd. Excel Concrete Excel Quarries Pozzolanic Industries Ltd. Queensland Cement Distributors Pty Ltd. PT Wahana Pozzolanic, Indonesia Umar Pacific Pte Ltd., Singapore

Company Data 101 Statement of Income Holcim Ltd 2001 2000 Million CHF Financial income 297.7 293.9 Other ordinary income 1.5 1.8 Extraordinary income 212.5 8.2 Total income 511.7 303.9

Financial expenses (87.3) (64.9) Other ordinary expenses (23.7) (16.2) Change in provisions and valuation adjustments on financial investments (197.3) (24.4) Taxes 0.5 (8.7) Total expenses (307.8) (114.2)

Net income 203.9 189.7

102 Statement of Income Holcim Ltd Balance Sheet Holcim Ltd as at December 31 2001 2000 Million CHF Cash and cash equivalents 198.8 478.9 Accounts receivable – Group companies 286.1 520.4 Accounts receivable – third parties 6.6 8.8 Prepaid expenses and other current assets 2.6 0.5 Total current assets 494.1 1,008.6

Loans – Group companies 1,524.5 1,291.7 Financial investments – Group companies 4,604.8 4,120.1 Other financial investments 6.0 39.5 Total long-term assets 6,135.3 5,451.3

Total assets 6,629.46,459.9

Current financing liabilities – Group companies 109.1 66.2 Current financing liabilities – third parties 10.9 770.6 Other current liabilities 16.1 23.7 Total short-term liabilities 136.1 860.5

Long-term financing liabilities – Group companies 649.8 609.5 Long-term financing liabilities – third parties 130.0 130.0 Debentures 1,100.0 1,100.0 Long-term provisions 696.0 508.3 Total long-term liabilities 2,575.8 2,347.8

Total liabilities 2,711.9 3,208.3

Authorized capital 402.4 377.2 Legal reserves Ordinary reserve 2,593.6 2,335.2 Reserve for treasury shares 448.3 82.3 Free reserve 262.8 262.8 Retained earnings 210.4 194.1 Total shareholders’ equity 3,917.5 3,251.6

Total liabilities and shareholders’ equity 6,629.46,459.9

Balance Sheet Holcim Ltd 103 Data as Required under Articles 663b and c of the Swiss Code of Obligations Contingent liabilities 31.12.2001 31.12.2000 Million CHF Holcim Capital Corporation Ltd. Guarantees in respect of holders of 5.5% USD 200 million notes due in 2003 3731 363 5.125% CHF 125 million bonds due in 2005 140 140 5% CHF 150 million bonds due in 2006 165 165 6.35% USD 249 million private placement due in 2006 4532 0 3.75% CHF 200 million bonds due in 2007 215 215 6.6% USD 168 million private placement due in 2008 3082 0 7.05% USD 358 million private placement due in 2011 6832 0 7.65% USD 50 million private placement due in 2031 1102 0

Guarantees in respect of financial institutions Swaps for above-mentioned bonds 110 97

Holcim Overseas Finance Ltd. Guarantees in respect of holders of 1% CHF 419.25 million convertible bonds due in 2004 428 428 Zero coupon CHF 448 million convertible bonds due in 2014 459 454

Issued bonds The outstanding bonds and private placements as at December 31, 2001 are listed on page 81.

Principal investments The principal direct and indirect investments of Holcim Ltd are listed under the heading “Principal Companies of the Holcim Group” on pages 92 and 93.

1 USD 222 million at CHF 1.6783. 2 Exchange rate: CHF 1.6783.

104 Notes to the Financial Statements Holcim Ltd Treasury bearer shares Number Price per share in CHF Million CHF 01.01.00 Treasury shares 843,125 341.46 287.9 01.01. to 31.12.00 Movement (608,970)1 n.a. (205.6) 31.12.00 Treasury shares 234,155 351.49 82.3

01.01.01 Treasury shares 234,155 351.49 82.3 01.01. to 31.12.01 Movement 970,445 n.a. 366.0 31.12.01 Treasury shares 1,204,600 372.16 448.3

Treasury registered shares Number Price per share in CHF Million CHF 01.01.00 Treasury shares 210 52.14 0 01.01. to 31.12.00 Movement (210) 99.00 0 31.12.00 Treasury shares 0 0 0

Conditional bearer share capital Number Price per share in CHF Million CHF 01.01.00 Conditional shares par value 1,801,575 10.00 18.0 01.01. to 31.12.00 Movement 0 0 0 31.12.00 Conditional shares par value 1,801,575 10.00 18.0

01.01.01 Conditional shares par value 1,801,575 10.00 18.0 01.01. to 31.12.01 Movement 0 0 0 31.12.01 Conditional shares par value 1,801,575 10.00 18.0

Share interests of directors and officers As at December 31, 2001, the members of the Board of Direc- registered shares and no rights to acquire further registered tors and the Executive Committee of Holcim held directly and shares and 1,544,495 (2000: 1,812,580) bearer shares and indirectly in the aggregate 47,459,989 (2000: 45,017,620) 14,850 (2000: 6,930) call options on bearer shares.

Important shareholders2 As at December 31, 2001, Dr. h.c. Thomas Schmidheiny, Chair- (2000: 1,788,335) bearer shares.3 Capital Group Companies Inc. man of the Board of Directors, directly and indirectly held held 1,806,110 registered shares and 3,230,980 bearer shares. 47,339,148 (2000: 44,960,505) registered shares and 1,513,670

1 During 2000, the Group sold 970,445 treasury shares with a right to repurchase them. 2 Shareholding of more than 5%. 3 Included in share interests of directors and officers.

Notes to the Financial Statements Holcim Ltd 105 Information on Main Activities of Board of Directors Board of Directors Main activities Position Dr. h.c. Thomas Schmidheiny, Schweizerische Cement-Industrie-Gesellschaft, Glaris Chairman Chairman Think Tools AG, Zurich Director Thermalbäder und Grand Hotels, Bad Ragaz Director Dr. Anton E. Schrafl, Deputy Chairman Schweizerische Cement-Industrie-Gesellschaft, Glaris Director Franke Holding AG, Aarburg Director Organogenesis Inc., Canton (USA) Director Apogee Technology Inc., Norwood (USA) Director Dr. Erich Hunziker, Director Schweizerische Cement-Industrie-Gesellschaft, Glaris Director F. Hoffmann-La Roche Ltd, Basel CFO Dr. Willy Kissling, Director Unaxis Holding AG, Zurich Chairman and CEO Forbo Holding SA, Eglisau Deputy Chairman Esec Holding AG, Cham Chairman SIG Holding AG, Neuhausen am Rheinfall Director Dr. Peter Kurer, Director UBS AG, Zurich Group General Counsel Prof. Dr. Angelo Pozzi, Director Pozzi & Partner AG, Baden Chairman Prof. Dr. Gilbert Probst, Director University of Geneva Professor HEC Kuoni Travel Holding Ltd., Zurich Director Dr. h.c. Wolfgang Schürer, Director MS Management Service AG, St. Gallen Chairman and Managing Director Danzas Holding Ltd., Basel Director Dr. Rolf Soiron, Director Jungbunzlauer AG, Basel Director, CEO University of Basel President University Council Bellevue Holding AG, Zurich Director Synthes-Stratec Inc., Paoli (USA) Director Metalor Technologies International S.A., Neuchâtel Director Peter G. Wodtke, Director Schweizerische Cement-Industrie-Gesellschaft, Glaris Director Aquila International Fund, Tortola (British Virgin Islands) Director C.A.T. Holding, Luxemburg (Luxemburg) Director Wingate Partners, Dallas (USA) Advisory Director Eurorient China Infrastructure Fund Limited, Cayman Director

The information disclosed complies with all Swiss legal requirements.

106 Notes to the Financial Statements Holcim Ltd Dividend-bearing share capital 2001 2000 Shares Number Million CHF Number Million CHF Bearer shares of CHF 10 par value 29,032,699 290.3 27,218,155 272.2 Registered shares of CHF 2 par value 56,021,334 112.1 52,520,000 105.0 Total 402.4 377.2

Appropriation of retained earnings CHF Retained earnings brought forward 6,438,804 4,365,967 Net income of the year 203,929,620 189,696,987 Retained earnings 210,368,424 194,062,954 The Board of Directors proposes to the Annual General Meeting of Shareholders of May 24, 2002 in Zurich the following appropriation: Gross dividend1 (195,161,829) (187,624,150) Balance to be carried forward 15,206,595 6,438,804

This results in the following dividend per share:

Dividend Gross Net2 Bearer share CHF 5.00 CHF 3.25 Registered share CHF 1.00 CHF 0.65

As from May 29, 2002, the dividend will be paid by any of the banks designated by the company (UBS AG, Credit Suisse First Boston, Bank Leu) upon presentation of Coupon No. 2 from Holcim bearer shares. The dividend on registered shares will be paid in accordance with shareholders’ instructions.

1 No dividend is paid on treasury shares held by Holcim. On January 1, 2002, treasury holdings amounted to 1,204,600 bearer shares. 2 After deduction of 35% withholding tax.

Appropriation of Net Earnings Holcim Ltd 107

Report of the statutory auditors to the General Meeting of Holcim Ltd, Jona

As statutory auditors, we have audited the accounting records and the financial statements (statement of income, balance sheet and notes on pages 102 to 107) of Holcim Ltd for the year ended December 31, 2001.

These financial statements are the responsibility of the Board of Directors. Our responsibili- ty is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independ- ence.

Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession, which require that an audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accounting records and financial statements and the proposed appropri- ation of the retained earnings comply with Swiss law and the company’s articles of incorpo- ration.

We recommend that the financial statements submitted to you be approved.

Arthur Andersen AG

Thomas Stenz Markus Schweizer

Zurich, March 22, 2002

Auditors’ Report Holding Company 109 Holcim stock an attractive blue chip investment.

Credit rating increases international appeal and In 2001, Holcim completed the biggest ever private reduces capital costs placement (USD 825 million) made by a foreign issuer Further enhancing the attractiveness of Holcim stock in the US. Around 26 institutional investors from on the international financial markets and widening America provided funding with maturities running the Group’s base of non-Swiss investors, Standard & between 5 and 30 years. The mean maturity is Poor’s, London has given Holcim a credit rating. The approximately 9 years, and the average rate of inter- present long-term credit rating is “BBB+” (outlook est 6.8 percent. stable), and the short-term rating was put at “A-2”. Dividend on high level Shareholders Our shareholders also profited from the Group’s con- As at December 31, 2001, Dr. h.c. Thomas Schmidheiny, tinuous growth and the ensuing increase in profit. Chairman of the Board of Directors of Holcim Ltd, Holcim is aiming for a distribution rate of approxi- directly and indirectly held 27.3 percent of share mately 25 percent. On the basis of retained earnings capital, or 57.4 percent of total voting rights. Capital of CHF 210.4 million (2000: 194.1) reported by the Group Companies Inc. held 8.9 percent of share capi- holding company, the Board of Directors proposes to tal, or 5.9 percent of total voting rights, as at Decem- the General Meeting that an unchanged gross divi- ber 31, 2001. dend of CHF 5.00 per bearer share and CHF 1.00 per registered share be paid. As a consequence of the Share split and successful capital increase capital increase, the total dividend amount has risen The 5-for-1 split tabled by the Board of Directors to CHF 195.2 million (2000: 187.6). was designed to increase the appeal and liquidity of Holcim bearer and registered shares. The author- ized share capital created at the same time by the General Meeting of Shareholders of May 18, 2001 was used to increase the company’s capital stock. The capital increase with subscription rights for existing shareholders was carried out as follows: in the period from June 13 to 22, 2001, 15 old bearer shares entitled holders to subscribe one new bearer share with a par value of CHF 10 at an issue price of CHF 270 and 15 old registered shares entitled holders to subscribe one new registered share with a par value of CHF 2 at an issue price of CHF 54. Through the issue of 1,814,544 new bearer and 3,501,334 new registered shares, some CHF 650 million in new equity accrued to the company from the capital increase. The inflow of new capital was used to underpin with equity approximately half of the CHF 1,300 million share- holdings acquired in the emerging markets over the past two years.

110 Capital Market Information Widely represented in share indices The Holcim bearer share is represented in 18 share indices, including the SMI, the virt-x Composite and the Dow Jones Building Materials Index.

Weighting of Holcim Bearer Share in Selected Share Indices Index Weighting in % SMI 1.245 SPI 1.128 BEBULDM, BE500 Building Materials Index 10.673 SXOP, Dow Jones STOXX 600 Construction 7.857 VIRTX, virt-x Composite 0.126 Source: Bloomberg. End-December 2001.

The Holcim registered share is represented in 9 share indices, including the SPI and the Bloomberg Building Index.

Weighting of Holcim Registered Share in Selected Share Indices Index Weighting in % SPI 0.384 BEBULDM, BE500 Building Materials Index 4.256 Source: Bloomberg. End-December 2001.

Additional Data Bearer Share Registered Share Security code no. 1221406 1221405 Telekurs code HOL HOLN Reuters code HOLZ HOLZn Bloomberg code HOL VX HOLN SW

The shares are listed on SWX Swiss Exchange and Every share, regardless of whether bearer or regis- virt-x in London. They are also traded on the Frank- tered, carries one voting right. The market capitaliza- furt Stock Exchange and in the form of ADRs tion of Holcim Ltd amounted to CHF 14,461 million (HCMLY) in the USA. (2000: 16,182) at December 31, 2001.

Financial Reporting Calendar Annual report 2001 available in German and English May 17, 2002 First quarter 2002 results May 23, 2002 General Meeting of Shareholders May 24, 2002 Dividend payment May 29, 2002 First half 2002 results August 29, 2002 Third quarter 2002 results conference for press and analysts November 11, 2002 2002 annual results conference for press and analysts March 19, 2003

Capital Market Information 111 Performance of Holcim Bearer Share vs. Swiss Market Index (SMI) 210 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 1996 1997 1998 1999 2000 2001

Performance of Holcim Registered Share vs. Swiss Performance Index (SPI) 210 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 1996 1997 1998 1999 2000 2001

SMI/SPI

112 Capital Market Information Key Data Bearer Share Par value CHF 10 2001 2000 1999 1998 1997 Number of shares issued 29,032,699 21,633,155 21,633,155 26,131,300 26,131,300 Number of dividend-bearing shares 29,032,699 21,633,155 21,633,155 26,131,300 25,645,730 Number of shares conditional capital 1,801,5751 1,801,575 1,801,575 801,575 826,575 Number of treasury shares 1,204,6002 234,155 843,125 903,575 366,800 Stock market prices in CHF, adjusted High 403 455 439 430 294 Low 265 326 281 221 191 Consolidated earnings per dividend-bearing share in CHF3 21.20 24.12 22.01 19.22 17.48 Consolidated shareholders’ equity per share in CHF3 195.80 189.44 174.36 141.17 143.80 Gross dividend per share in CHF 5.004 5.00 4.40 4.00 4.00

Key Data Registered Share Par value CHF 2 2001 2000 1999 1998 1997 Number of shares issued 56,021,334 52,520,000 52,520,000 50,500,000 50,500,000 Number of dividend-bearing shares 56,021,334 52,520,000 52,520,000 50,500,000 50,500,000 Number of treasury shares 0 0 210 0 0 Stock market prices in CHF, adjusted High 109 120 114 87 59 Low 61 87 60 45 39 Consolidated earnings per dividend-bearing share in CHF3 4.24 4.82 4.40 3.84 3.50 Consolidated shareholders’ equity per share in CHF3 39.16 37.89 34.87 28.23 28.76 Gross dividend per share in CHF 1.004 1.00 0.88 0.80 0.80

1 801,575 shares reserved for the 1% convertible bond issued in 1998. 2 Of which, 1,121,610 shares reserved for zero coupon and 1% convertible bond and options. 3 After interests of minority shareholders; adjusted. 4 Proposal of the Board of Directors.

Capital Market Information 113

Group 2001 2000 1999 1998 1997 Net sales1 Million CHF 13,644 13,531 11,708 10,921 10,980 Gross profit1 Million CHF 6,490 6,074 5,318 4,788 4,521 Operating profit Million CHF 1,945 2,001 1,706 1,567 1,435 Depreciation and amortization Million CHF 1,417 1,429 1,201 1,124 1,143 Income taxesMillion CHF 433 448 415 366 301 Group net income before minority interests Million CHF 1,031 1,035 978 837 755 Group net income after minority interests Million CHF 812 886 795 682 618 Cash flow from operating activities Million CHF 2,402 2,557 1,902 1,887 1,630 Investments in property, plant and equipment net Million CHF 1,730 1,640 1,111 967 1,400 Financial investments net Million CHF 1,949 1,929 710 1,751 441 Current assets Million CHF 6,367 6,401 5,501 4,140 4,187 Long-term assets Million CHF 20,677 18,588 16,201 13,969 13,150 Short-term liabilitiesMillion CHF 5,258 5,790 4,167 3,337 3,873 Long-term liabilitiesMillion CHF 11,403 10,199 9,303 8,356 6,500 Shareholders' equity2 Million CHF 10,383 9,000 8,232 6,416 6,964 Shareholders' equity as % of total assets2 % 38.4 36.0 37.9 35.4 40.2 Interests of minority shareholders Million CHF 2,741 1,900 1,802 1,423 1,877 Total assets Million CHF 27,044 24,989 21,702 18,109 17,337 Production capacity cement1 Million t 121.2 113.2 93.4 86.6 80.8 Sales of cement and clinker3 Million t 84.3 80.6 74.6 68.4 64.3 Sales of aggregates Million t 89.5 86.6 84.9 83.9 81.1 Sales of ready-mix concrete Million m3 25.5 24.9 21.8 20.8 19.4 Personnel Number 47,362 44,316 39,327 40,520 40,779

Holding Company 2001 2000 1999 1998 1997 Net income Million CHF 203.9 189.7 160.6 141.9 143.2 Total assets Million CHF 6,629 6,460 5,411 4,663 3,782 Share capital Million CHF 402 377 377 363 363 Gross dividend Million CHF 195.24 187.6 161.9 141.7 141.0

1 1997 to 2000 restated figures. 2 Includes interests of minority shareholders. 3 2000 restated figure. 4 Proposed by the Board of Directors.

5-Year Review 115 Group Personnel per Region Group Personnel per Product

2001 2000 1999 1998 1997 2001 2000 1999 1998 1997 Europe 15,719 16,190 14,249 14,229 14,793 Cement/Clinker 29,100 24,278 21,846 22,089 20,373 North America 5,494 5,348 5,271 5,114 5,228 Aggregates/Concrete 14,172 12,198 11,203 11,684 10,472 Latin America 12,266 10,499 10,676 11,098 9,972 Others4,090 7,840 6,278 6,747 9,934 Africa Middle East 5,224 4,779 4,999 5,967 6,831 Total Group 47,362 44,316 39,327 40,520 40,779 Asia Pacific 8,659 7,500 4,132 4,112 3,955 Total Group 47,362 44,316 39,327 40,520 40,779 Average Personnel per Function and Region 2001

Production and distribution Sales Administration and others Total Europe 12,386 1,294 2,275 15,955 North America 4,441 341 639 5,421 Latin America 8,896 1,118 1,369 11,383 Africa Middle East 3,918 415668 5,001 Asia Pacific 6,758 508 813 8,079 Total Group 36,399 3,676 5,764 45,839 Personnel Expenses per Function and Region 2001

In million CHF Production and distribution Sales Administration and others Total Europe 589 117 291 997 North America 389 57 96 542 Latin America 33584 143 562 Africa Middle East 9516 49 160 Asia Pacific 111 13 34 158 Total Group 1,519 287 613 2,419

© 2002 Holcim Ltd Concept: Kirchhoff (Schweiz)AG, Lucerne Helmut W. Rodenhausen, Lucerne Design: Ernst Schadegg, Zurich-Gockhausen Photos: Andreas Schwaiger, Zurich Thomas Cugini, Zurich (pages 3, 4, 7 left) Alf Dietrich, Zurich (page 7 right) Printed by: Stäubli Ltd, Zurich Holcim Board of Directors

Markus Akermann CEO CEO Office and Secretary of EXCO

Markus Akermann Benoît-H. Koch Dr. Hansueli Heé Urs Bieri Paul Hugentobler Theophil H. Schlatter (ad interim) Deputy CEO CFO

Latin America North America Central and Southern ASEAN South Asia Finance and Western Europe Eastern Europe East Asia and Pacific Northern ASEAN Controlling Mediterranean South and East Africa International Trade

Dr. Thomas Knöpfel Jean Guillot Urs Böhlen Jerry C.R. Maycock Martin F. Altorfer

Area Management Area Management Area Management Area Management

Corporate Strategy and Business Development Manufacturing Services Holcim Corporate Controlling Corporate Legal and Internal Audit Commercial Services Commerce Ltd Corporate Financing Corporate Human Resources Management Industrial Ecology and Treasury Corporate Communications Training and Learning Financial Holdings Investor Relations Information Technology Special Projects Administration Group Support

Situation as of April 1, 2002. Executive Committee (EXCO) í

Management Structure

Holcim Ltd Zürcherstrasse 156 CH-8645 Jona Phone +41 58 858 86 00 Fax +41 58 858 86 09 [email protected] www.holcim.com

Corporate Communications Roland Walker Phone +41 58 858 87 10 Fax +41 58 858 87 19 [email protected]

Investor Relations Bernhard A. Fuchs Phone +41 58 858 87 20 Fax +41 58 858 86 69 [email protected] The Katse dam in Lesotho brings drinking water to South Africa. By delivering cement, aggregates, concrete and know-how, Holcim creates value which transcends borders and brings regions together. With Strength. Performance. Passion.