«Our Business is Much More Resistant to Economic Fluctuations»

Holcim CEO Jan Jenisch explains why the cement business is less cyclical today, why the valuation of Holcim's shares remains depressed, and how long he intends to stay at the helm of the company.

Giorgio Müller

Deutsche Version

Following the ill-fated merger of Lafarge and Holcim, the Swiss cement group has undergone fundamental changes under the leadership of former Sika CEO Jan Jenisch. The pure cement manufacturer has become a broadly diversified building materials group. In a few years, the cement business will be just one of three equally large pillars, the Group CEO tells The Market NZZ in an in-depth interview.

Proceeds from the divestment of cement activities in developing and emerging markets will be used for acquisitions in industrialized countries, mainly in North America. This week alone, the company has bought an aggregates company in the USA with 13 quarries as well as a manufacturer of fiberglass mats. The Holcim CEO can well imagine that half of the group’s revenue will soon come from North America.

The reorganization is slowly bearing fruit: Last year, when the Swiss Market Index fell by 16%, Holcim’s share price advanced by 3%; since the beginning of 2023, it has gained another 10%. Nevertheless, Holcim shares 📈 continue to trade with a discount. «Without the ESG downrating, the share price would have to be significantly higher», Jenisch is convinced. He says it is of great importance that the entire management holds Holcim shares.

After 21 years at Sika and now five years at Holcim, he has no ambitions to switch to another company, says the 56-year-old. «At Holcim I will stay as long as it is desired». Jenisch is also a member of the Board of Directors since 2021. The age of the current chairman of the board is above the statutory limit. Internal candidates for Jenisch’s successor as Group CEO apparently exist: «We have good talents who could do the job,» he says.

Jan Jenisch: «The share price is not yet there where it should be.»

Jan Jenisch: «The share price is not yet there where it should be.»


Mr. Jenisch, Holcim has been undergoing restructuring for years. How far has this process progressed?

In 2022, we successfully drove forward the transformation of Holcim. We have decisively strengthened the Solutions & Products segment and our business in North America.

When you moved from Sika to Holcim in the fall of 2017, Holcim was a pure-play cement producer, heavily involved in emerging markets and highly indebted. Now, less than half of revenues come from the cement business, more than three quarters are generated in industrialized countries, and debt has largely been repaid thanks to divestments.

And yet, we said in the third quarter that we expect 2022 to be a record year. The acquisition of Lafarge is now behind us. The company’s performance is now at a new level.

So you’re strategically at the finish line?

We are continuing. The North American business now accounts for 40% of group sales. In the coming years it could go to 50%. The Solutions & Products division is expected to account for around 30% by 2025. We’re well on track there, and it can grow further. I hope we get one or two more good acquisition opportunities. In a few years, the three equally important pillars of Cement, Aggregates/Concrete, and Solutions & Products should each account for one third of revenues.

Especially in North America, you’re going full throttle.

In our biggest market, the United States, Solutions & Products is already the largest operating line. In the roofing business alone, we generate over $3 billion in sales there.

Which areas of the construction business are you interested in? With Firestone Building Products, Holcim has entered the roofing segment, and you recently bought a flooring specialist in France. Are there other areas that would be a good fit for you?

The roofing, facade and mortar systems segments are huge markets. The roofing business alone has a market volume of $30 billion in the US, and together with Europe and Latin America it’s $50 billion. This market is enormously attractive, allowing good growth and high margins. Because we also have insulation plants, we can even go into the facade sector later on. So if we get the chance to buy facade manufacturers, we could go one step further and increase our adressable market.

And what about Europe?

We have bought four mortar companies there. With this platform, we already generate about 600 million Swiss francs in sales, in a market that is about 10 billion francs in size.

So you don’t necessarily have to venture into new market segments?

No. With the two platforms roof and facade/mortar, we can build up a segment with a size of 10 billion francs.

Why should a cement manufacturer like Holcim be the right owner for such differently structured businesses? As the former CEO of Sika, you are familiar with the different requirements of these businesses.

We are the best owner for these businesses, I have no doubt about that. Unlike many of our more broadly based competitors, we are active exclusively in the construction sector. As the largest building materials manufacturer in the world, we have the same customers, talk to civil engineers, architects, the construction specialists and contractors. Our broad network is a huge advantage, especially in these volatile times. On this basis, we create great synergies.

Can you give specific examples?

We bought the roofing systems manufacturer Firestone Building Products from the Japanese tire manufacturer Bridgestone in April 2021. The initial synergies alone have brought us 10 margin points at Firestone. EBITDA more than doubled thanks to our synergies in purchasing management and improved price management based on our expertise in construction marketing.

What were the targets for the Firestone team when Holcim took over?

They were to double sales and triple profits, but they had to tell us what they needed from us. In the first phase, the results have to be right and the customers have to be satisfied. Next come synergies and geographic expansion.

What does that mean for Firestone Europe?

Holcim operates many production sites in Europe, some of which Firestone can use. But the final synergy step in an acquisition should come last. We would like to sell the outer casing of buildings to our major customers, for example building a warehouse of an online retailer with green Ecopact concrete and adding a Firestone roof. Both fit into a sustainable building solution.

Because cement as a building material is a product that is harmful to the climate, Holcim has been pilloried for years. The company has even been accused of being a cause of global warming. On the other hand, concrete will continue to be the most widely used building material for a long time to come. How do you deal with this dilemma?

We have to be part of the solution. In the first phase of decarbonization, the focus is on us as CO2 emitters. But two-thirds of the emissions come from the operation of a building, and only one-third from the building materials and construction. The way we build is critical. Building materials such as glass, steel and aluminum have a larger carbon footprint than concrete, and we continue to reduce our emissions step by step.

Have these changes, in terms of environmental impact, also been noticed by investors?

It has already gotten much better. In the past, the reflex was: our fund is green, we’re reducing CO2, and to do that we exclude all CO2-emitting industries. Now there is a change in thinking. The funds do not want to exclude any sectors, but as one large investor says: «We want to invest in the most greening companies».

But for investors acting according to ESG criteria, Holcim is still a red flag, isn’t it?

Existing investors are engaged in Holcim because they believe in our strategy and are satisfied with our results. Over the past five years, the operating figures have been steadily going up because we have done a great job.

Prices of CO2 emission certificates are rising. Therefore, it must also be in your interest to produce fewer emissions, right?

The emission allowances are an excellent incentive to reduce CO2. Even when prices per ton were €20, I said €100 would be better. We’ve been at that level before, and now we’re at €80, which is great. With a CO2 price like that, emissions are greatly reduced. When we launched our 50 investment projects to reduce emissions three years ago, the price was €20, but they paid off even then because they were mostly linked to energy savings.

On one hand, you reduce CO2 intensity through more ecological processes. On the other, you get rid of energy-intensive cement activities. In effect, you do climate protection via divestments. Although this reduces your CO2 footprint, it does nothing to reduce CO2 emissions overall.

For our Solutions & Products body segment, we are looking for businesses that are extremely sustainable. Roofing systems, for example, play an important role in the energy efficiency of a building. We are not greenwashing. In our target markets of Europe and North America and Latin America, we continue to produce cement and decarbonize it step by step.

Holcim describes itself as a pioneer in the cement industry when it comes to sustainability. The goal is to achieve climate neutrality by 2050. So if I care about the climate, I want Holcim to produce cement because it's done most environmental friendly. The new owners of your cement businesses in Indonesia, Brazil and India are unlikely to be that ambitious, are they?

We have found good buyers for our cement businesses in developing and emerging countries. The biggest problem with decarbonization is geopolitics.

You were able to sell the cement business in Indonesia, but another deal fell through in the Philippines. Does the sale of the Philippine cement business remain pending?

We have reduced our share of sales in developing countries to 20% from 50%. But there are still regions that no longer are a good fit, although I don’t see the Philippines as a priority. At the time, a sale of that business was important because it had a transaction value of $2.1 billion and we needed money to pay down debt. That pressure no longer exists. In the Philippines, we are the market leader and we are making money.

Cement production is cyclical but lucrative. Despite the strategy shift, the segment continues to deliver an above-average profit contribution; 69% in the first nine months of 2022.

The business used to be cyclical. In the cement business, we came through the pandemic with record cash flows, and things continued at this pace.

Why is the cement business not as cyclical as it once was?

Because there is no additional capacity in the markets where we are present. In the US, we were sold out in 2022. We even had to import cement. So we have a buffer if the US market should decline. However, we assume that demand will continue to grow.

And in Europe?

There is no new capacity there either. Because of decarbonization, rising prices for energy and for CO2 certificates, we could raise prices in 2021 and 2022. In the cement industry, every manufacturer has too few certificates. From a price level of €80, no one can afford additional production if they have to buy certificates. Because our cement contains less CO2, we benefit greatly from higher CO2 prices. This effect makes our business much more resistant to economic fluctuations.

If the profitability of the cement business is so good, it must be lower in Solutions & Products.

The margins are good. And the businesses require less capital than in cement. In the roofing business, we have EBITDA margins of over 20%. Even at the EBIT level, after depreciation and amortization, we generate double-digit margins in this segment, which now has sales of 5.5 billion francs.

If things are going so well, why aren't you aiming for higher return targets? Since 2019, Holcim has been earning its cost of capital. But the return on invested capital, ROIC, is not expected to exceed 10% until 2025. Isn’t that a bit modest?

You have to look at where we are coming from. In 2017, our ROIC was 5.6%. In the first step, we were aiming for 8%, now we're going for 10%. But with ROIC as a measure of performance, you have to know that every time you make an acquisition, the value drops temporarily. In the case of Firestone, the ROIC was also only 5% at the time of purchase, but now we are already at 10%.

Holcim is doing everything possible to get rid of its reputation as a climate killer. Operating results are good and the portfolio restructuring makes good progress. But so far, this has no positive effect on the valuation of Holcim shares. Doesn’t that frustrate you?

Because of the ESG penalty, our valuation has been set back significantly. This does not frustrate us, but motivates us to continue the decarbonization of our business. Without the ESG downrating, in purely financial terms the share price would have to be significantly higher thanks to the debt reduction and the high cash flow we generate.

This must annoy you because your entire personal fortune is determined by the performance of Holcim's share price. Your salary, bonus and pension fund are also at the mercy of the company's financial and operational health. You carry a huge lump-sum risk.

That’s true, but I’m invested in Holcim with conviction. What’s more, I’m not underpaid. I have the luxury of being well off, so I can be bold. And I enjoy a good dividend. I remain fully invested because I believe the share price is not yet where it should be.

Does the entire management think like you?

I attach great importance to that. When I joined Holcim, the management owned almost no shares. I held 170,000 shares, the rest of the management together about 70,000. Now the management holds a total of around 900,000 shares. It is very important to me that the entire management holds Holcim shares. After all, if you earn a lot, you should also invest in the company. That leads to greater commitment.

You have been Group CEO since 2017 and joined the Board of Directors in 2021. The next logical step would be to become Chairman.

Being elected to the Board of Directors was a sign of continuity, of successfully continuing the transformation of the company. I was pleased about that. I was with Sika for 21 years. At Holcim, I will stay as long as it is desired.

At Holcim, there is an statutory age limit of 72 for members of the Board of Directors. This year, Chairman Beat Hess will be 74.

For me, it’s «Holcim first». I have no ambitions to go to another company or to become a multi-board member. And we have already established that the share price is not yet where it should be.

Does Holcim already have an internal successor for you?

My main concern is to fill key positions internally. At the beginning, it wasn’t easy because we were in this integration process. That’s why I brought in some people from outside. But for the past two years, we have been focusing on internal appointments. Ideally, a new CEO would come from within the company. We have good talents who can do the job.

Jan Jenisch

Jan Jenisch (born 1966) has been Group CEO of Holcim since September 2017. Born in Germany, he previously spent most of his career, from 1996 to 2017, at the Swiss construction chemicals group Sika: from 2012 until his transition to Holcim, he was CEO; before that, he was responsible for the business in the Asia Pacific region for six years. Jenisch studied in the US and Switzerland, obtaining his MBA from the University of Fribourg in 1993.
Jan Jenisch (born 1966) has been Group CEO of Holcim since September 2017. Born in Germany, he previously spent most of his career, from 1996 to 2017, at the Swiss construction chemicals group Sika: from 2012 until his transition to Holcim, he was CEO; before that, he was responsible for the business in the Asia Pacific region for six years. Jenisch studied in the US and Switzerland, obtaining his MBA from the University of Fribourg in 1993.