analyst & investor meeting

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Analyst & Investor Meeting

June 22, 2006

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© Copyright 2006, Lafarge SAAll rights reserved. No part of this document may be reproduced, stored in a retrieval system, translated, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Lafarge SA.

EXCELLENCE 2008

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EXCELLENCE 2008

Bruno LafontChief Executive Officer

4

Organization of our day

Cost reduction programBy Jean-Jacques Gauthier, Executive Vice-President, Finance

Transforming the organizationBy Christian Herrault, Executive Vice-President, Organization & HR

Growth and value creation at LafargeBy Jean Desazars, Executive Vice-President, Strategy & Development

The Roofing turnaround planBy Jean-Christophe Barbant, Executive Vice-President, Roofing

Gypsum: fast, robust and profitable growthBy Isidoro Miranda, Executive Vice-President, Gypsum

Cement By Michel Rose, COO, CementUlrich Glaunach, Executive Vice-President , CementGuillaume Roux, Executive Vice-President , Cement

Aggregates & Concrete: our global ambitionBy Jean-Charles Blatz, Executive Vice President, Aggregates & Concrete

5

"Excellence 2008"

Growth strategy focused primarily onCement, especially in growing markets Innovation in all businesses, mainly in Concrete

Acceleration and accountability

Cost cutting program of €400 M

€1.5 bn additional cash flow

Annual EPS growth of 10% on averageROCE after tax at 10% in 2008

Our road towards becoming the best of the sector

6

Transformation of our organization: Acceleration and accountability

AccelerationAlready achieved

> Reorganization of our cement technical centers > Reorganization of our Aggregates & Concrete Division> Reorganization of the Group and Division functions> Simplification of the executive team > Alignment of our organization in North America

Launch of the second step: standardization of our systems and development of synergies at country & region levels

AccountabilityStandardization of our systems and management methodsBonus systems aligned on our financial objectives: EPS, ROCE

More efficientMore focused on delivering More cost consciousMore agile

7

A €400 M cost cutting program by 2008

Increased target arising from

Increase of the levers identified in February

Benefits of a fast responding organization

Incorporation of North America in the program

Incorporation of Roofing

Centralization of purchasing

Control of SG&A

February 23rd: 1 point margin (= €160 M)Roofing turnaround plan (= €60 M)

June 22nd: Raising the bar to €400 M

8

Generate additional cash of €1.5 bn

Acceleration of working capital improvement plan

Better control of our sustaining investment costs

Divestment program over €1 bn by the end of 2008

9

A possible divestment of the Roofing business under certain conditions

Confirmation and reiterated confidence in the Roofing turnaround plan

To reach €350 M Ebitda in 2008

Exploring new strategic options, provided that we willEnsure the best future to this businessSelect an industrial or financial partner Keep a lasting and significant minority stake in the business Obtain the full value for our assets Maximize value for our shareholders

10

More flexibility for a focused growth strategy

Priority given to Cement, especially in growing markets Construction of new capacitiesAcquisitions

Accelerated innovation in all businesses, mainly in Concrete

While maintaining a solid financial structure

11

Committed to our values

Our values are an integral part of our result-oriented culture

Commitment to being ranked amongst the world's best industrial groups in

Health and safety

Protection of the environment

Social responsibility

Corporate governance

To achieve long-term leadership

12

"Excellence 2008"

Growth strategy focused primarily onCement, especially in growing markets Innovation in all businesses, mainly in Concrete

Acceleration and accountability

Cost cutting program of €400 M


Annual EPS growth of 10% on averageROCE at 10% in 2008

Sustainable and undisputed leadership

13


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EXCELLENCE 2008

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EXCELLENCE 2008

Cost Reduction Program

Jean-Jacques GauthierExecutive Vice-President, Finance

15

Five areas of cost reduction

1. Cost of operations

2. Working capital requirements

3. Investment cost of new production facilities

4. Sustaining CAPEX

5. Income taxes

Enabled by

•A simpler organization•A structure for delivering

•A bonus system aligned with our main objectives

16

Cost of operations: February 23 Announcement (1)

(1) Excluding the announced €20 M after tax savings in North America(2) Target is €350 M of EBITDA. €60 M of the €128 M improvement is generated by cost reduction

SG&A

Energy / Fuel

Logistics

Productivity / Maintenance

Debottl. / Cementitious /Plant reliability 60

20

15

35

30

Roofing 60

One point of margin160

60

Cost cutting part of the €350 M EBITDA

target (2)

€M

17

Cost of operations: Target (1)

Debottl. / Cementitious /Plant reliability

SG&A

Productivity / Maintenance

Logistics

Energy / Fuel

160

Roofing 6060 Roofing 60

Levers

Purchasingprogram

Acceleratingimplementation

SG&A

400Debottlenecking / Cementitious /Plant reliability

Energy / Fuel

Productivity/ Maintenance

Logistics

NorthAmerica

(1) Excluding the announced €20 M after tax savings in North America

SG&A

340

€M

18

Cost of operations

Cement

Roofing

A&C 50

Gypsum 30

400

250

60

Corporate functions 10

All divisions to contribute …

€M

19

Cost of operations

Debottlenecking

Capacity expansions with a quick return

Cementitious

Slag grinding stations

Plant reliability

Blue Circle plants now fixedUS gypsum plants at the helm of the industry

Measure

Number of tonnes freed up x cost differential (purchase vs production cost)

Debottlenecking, cementitious and reliability

20

Cost of operations

Alternative energies

Fuel mix

Consumption per unit produced

Purchase prices

Measure

Cost of fuels 2008 vs. inflated cost of fuel at 2005 mix (at constant scope)

Four areas of improvement

Energy, fuels

21

Cost of operations

Standardization of maintenance

Headcount optimization

Impact mainly on fixed costs

Measure

2008 costs vs. inflated 2005 costs (at constant scope)

Productivity and maintenance

22

Cost of operations

Reengineering of product flows

Reassessment of our import/export plansStart-up of new facilities

Optimization of transport flows

Measure

2008 costs vs. 2005 costs adjusted for inflation and volume(at constant scope)

Logistics

23

Cost of operations

Streamline processes

De-layer organization

Group functions

Shared services, competency centers

Business Units

Divisions

Group

Measure

2008 costs vs. inflated 2005 costs (at constant scope)

SG&A

24

Cost of operations

Senior project manager at Group level

In depth review of costs and use of our strong technicalbenchmarking

3 Directions of actionIndustrialSG&APurchasing

Key action plans with rigorous follow-up

Specific incentives system for cost reduction focus

A structure for delivering

25

73

6764 64

58

50

55

60

65

70

75

2002 2003 2004 2005 2008

Working Capital

Number of days of turnover

= Approx. €300 M savings in 2008

Target

26

Investment cost of new production facilities

Examples of new cement facilities

2000: Around 150 $/t of cement capacity> 120 $/t in Dujianyang (China)> 200 $/t in the USA

2005: < 50 $/t in Chongqing (China)

2006 - 2008: Target: 100-120 $/t in emerging countries excluding China

A reduction of ~20% in emerging countries

27

Sustaining capex

Average2001-2006

82%

Target

Target 2008: 85% of depreciation

= Approx. €200 M savings by 2008

88% 87%

97%

85%

73%

60%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005 2008

28

Income Taxes

34%

23%

17%

30% 30% 30%29%

15%

20%

25%

30%

35%

2002 2003 2004 2005 2006 2007 2008

Tax rate

“Natural”tax rate32%

29

Enhanced financial flexibility

€400 M cost reduction


Divestments over €1 bn

Working capital: €300 M

Sustaining capex: €200 M

A substantially enhanced cash inflow to

Sustain dividend growth

Finance sustaining and internal development capex

Resume value creating acquisitions

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EXCELLENCE 2008

Transforming our organization:Acceleration and Accountability

Christian HerraultExecutive Vice-President, Organization & HR

31

2003 - 2005: Setting the stage for change

Launch and deployment of “Leader For Tomorrow”throughout the entire organization

New Principles of Action to shape our future and build our performance culture

Reinforced management cycle with a 3-year performance plan

Defined agenda for a More Effective Organization

Creation of Lafarge University

Engagement of 77,000 employees through LFT days

32

2006: Accelerate to strengthen our result-oriented culture (1)

Assessment of Business Unit General Managers’ ability to meet new challenges

Simplification of the organizationGroup functionsLNA alignment to Group’s organization principles Ready for the next move: shared services & competency centers in countries/regions

33

2006: Accelerate to strengthen our result-oriented culture (2)

New bonus scheme1/3 on personal objectives1/3 on financial criteria (EVA)1/3 on collective Key Performance Indicators

> 50% on Group’s relative performance> 50% on business specific performance

Quarterly business review by Division

34

In support of “Excellence 2008” and beyond

Safety organization fully implemented in H2 2006

Implement effectively shared services & competency centers in selected countries by end 2007

North America by end 2006France, Germany, UK, Malaysia, South Africa by end 2007While ensuring the right level of standardization

Focus on accountability and trust to stretch the organization and demonstrate the performance of our values at work

Continue to develop our global diversified talent pool to meet the challenges of future growth

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EXCELLENCE 2008

Growth and value creation at Lafarge

Jean DesazarsExecutive Vice-President, Strategy & Development

36

Agenda

Given the main trends in our markets…

…Our strength is to be well positioned to

Respond to tomorrow's demand> A solid growth potential

> Anchored in emerging countries

> Pricing leadership

> Leading the race in innovation

Meet the supply challenge

Meet the competitive challenge

Conclusion

37

The trends in our markets

Demand Growing needs of a growing world populationValue-added products and differentiationShift to the East

Supply Investment costs and new projectsInnovation and new substitutes

CostsEnergy Environment regulationsRestructuring

Competition Vertical integrationMore consolidation to comePricing leadership of the fittest

38

Agenda









Conclusion

39

2006 - 2008 volume outlook by product line -excluding acquisitions

10%10%Ready Mix

~ 5%~ 4%Total

4%2%Roofing

8%4%Gypsum plasterboard

2%2%Aggregates

Above 5%5 - 6%Cement

Lafarge volumes sold

World marketAverage annual growth

rates in volumes

A solid growth potential

40

Agenda









Conclusion

41

Emerging countries (1)A key driver in our growth strategy

33%

35%

30%

2003

34%25%Net capital employed

39%17%Operating income

32%20%Sales

20051998% of Lafarge Group

42

Emerging countries (2)A good geographical spread of assets

2005Capital employed

2005Operating income

AsiaPacific: 9%

Africa: 31%

EuroMed: 23%

Latin America: 15%

Central & EasternEurope: 22%

AsiaPacific: 42%

Africa: 14%

EuroMed: 12%

Latin America: 15%

Central & EasternEurope: 17%

43

Emerging countries (3)Strong regional networks, notably in the East

The example of Cement: China, Africa

The example of Gypsum

44

Lafarge Cement networks: some examples

45

Cement China

Lafarge Shui On Cement operations

Xinjiang

Guangxi

Hunan

Hubei

Hainan

Gansu

Qinghai

Ningxia

Shaanxi

Anhui

Fujian

Neimongu

Shanxi Shandong

Xizang

Sichuan

Yunnan

Guizhou

Henan

Heilongjiang

Jilin

Liaoning

Zhejiang

Jiangsu

Hebei

Beijing

Shanghai

Guangdong

Gansu

Chongqing

SichuanNo. of plants: 2Capacity: 2.3 MT

ShuangmaNo. of plants: 3Capacity: 3.3 MT

YunnanNo. of plants: 3Capacity: 4.5 MT

GuizhouNo. of plants: 3Capacity: 2.1 MT

BeijingNo. of plants: 2Capacity: 1.5 MT

ChongqingNo. of plants: 4Capacity: 7 MT

Total no. of plants: 17 Combined capacity:

21 million tonnes

Jiangxi

46

Cement Africa

Lafarge enters Kenya in 1989

Lafarge enters South Africa 1998 and Uganda in 1999

Lafarge enters Southeast Africa(Zimbabwe, Zambia, Malawi and Tanzania) in 2001

Kasese

Nairobi

Mombasa

Mbeya

Blantyre

Ndola

Chilanga

Manresa

Lichtenburg

Richards Bay

EAPC

Lafarge export marketsKey Lafarge export zone

OtherLafarge domestic markets

Grinding station (GS)Import terminalCement plant (CP)

47

Gypsum network in Asia

A powerful industrial network built in South East Asiaand South Korea in the last 6 years

Existing plant

Planned investment

Ulsan(from Dongbu, 1998)

Yosu(from Byuksan, 1998)

Dangjin(new plant, 2003)

2nd line(new plant, 2008)

Saraburi(from Siam Group, 2001)

Chonburi(Lafarge PrestiaThailand, 1993)

Ho Chi Minh City(new plant, 2006)

Gresik(Ex Boral, 2000)

Cilegon(Ex Boral, 2000)

Parit Buntar(Ex Boral, 2000)

Songkhla(from Siam Group, 2001)

Navanakorn(from Siam Group, 2001)

48

Agenda









Conclusion

49

Pricing leadership

Last 2 years: prices have grown above inflation

We will offset cost increases

With the help of vertical integration and innovation

50

Agenda









Conclusion

51

Innovation

30% of total demand in developed markets will switchto innovative products in the 10 years to come

Innovation allows us toDifferentiateGrow the value per unitEscape the commodity trap

52

A definitive lead in innovation

Unique research capacities

Portfolio of innovative products

RMX > Agilia®, Weathermix® super accelerated concrete, Ductal®

Plasterboards> Deco® range, Signa®, Pregymix®

Roofing systems> Cisar®, lowpitch, components

Cement> Naidust®, workability, durability, setting time, strength, water

demand, packaging, colour, anti-ageing

53

Accelerate our market penetrationwith new products (less than 5 years old)

12 - 15%Gypsum

20%Roofing

4%Aggregates

> 20%Cement / Concrete

Objective 2008*

Division

* % of total turnover

54

Agenda









Conclusion

55

Ready to meet the supply challenge

New capacities: a large portfolio of internal development projects, in all our businesses

The importance of an optimal phasing in

The mastery of low cost equipment suppliers

Value creative and financially sound

56

The example of internal developmentsin Cement

> 12%

+ 1.2

530

1,500

26

2012

12%12%ROCE after tax on assets started up

+ 0.2

100

240

6

2008

+ 0.6

360

900

17

2010

EPS (€/share)

Additional EBITDA (€M)

Additional sales (€M)

Additional sales (Mt)

Scenario where all today identifiedopportunities are implemented

57

Agenda









Conclusion

58

Ready to meet the competitive challenge

Primary focus on organic development …

… but resuming acquisitions as well

Pruning our portfolio, risk approach, capex discipline

59

Capex discipline

Sustaining capex are governed by a very strict maintenance index

Priority is given to low risk, faster value creating internaldevelopments, aimed at following market share growthand consolidating existing positions

External developments are scrutinised through verystrict procedures, aiming at risk containment and value acceleration

Risks are country-related but also project-related: execution and time to value creation

60

New capex procedure

Any investment > €25 M, either internal or external

Is subject to a centralized, phased, decision process, based on a Project Evaluation Report

Decision is dependant upon

Evaluation of project per se

Evaluation of project within group portfolio

Systematic post investment audit

61

Agenda









Conclusion

62

Conclusion

Widespread portfolio of competitive assets, innovative products, loyal customers and dedicated human resources

In a position to reap the benefits

Strong organic growth potential: above 5%/year

Cost reduction program of €400 M by 2008

Financial flexibility: steady internal development and acquisitions

Guaranteed growth + distinct cycles + enhanced profitability

A long lasting leadership

63


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EXCELLENCE 2008

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EXCELLENCE 2008

The Roofing turnaround plan

Jean-Christophe BarbantExecutive Vice-President, Roofing

Our 2008 objective:ROCE after tax 8%

€350 M EBITDA

65

Agenda

Our Business Model

Our market opportunities

Our €350 M EBITDA plan

66

Agenda

Our Business Model



67

Safety: our first priority

Target 2006 – reduction of 25%

Target 2007-2010 – reduction of 20% per year

Frequency rate target Roofing Division

0

5

10

15

20

25

2002 2003 2004 2005 2006 2007 2008 2009 2010

FR

Actual FR Targeted FR

68

A balanced portfolio of businesses and geographical positions

Business lines

Concrete tiles

Clay tiles

Roofing components

Chimneys

Contribution to Division EBITDA 2005

7%

10%

13%

7%

6%

6%

13%

19%

14%

5%

RoW

Chimneys

USA

Eastern Europe

UK

Nordic

Italy

France

Germany

Benelux

69

Our business model

3 reasons for our customers to give us their preference

1. Highest quality

2. Lowest delivered costs

3. System offers

70

1. Highest quality:Roofing materials

++

+++

+

Functional values (1)

+++

++

+

Aesthetic values (2)

+High quality clay tiles

++Concrete tiles

+++Low quality products

Installed price (3)

Covering materials

(1) Functional valuesLong term contribution to roof function (water + wind tightness, insulation, ventilation…) Laying properties (labor intensity & competence, head lap flexibility…)

(2) Aesthetic valuesNew tile aspect (color/profile, surface roughness, gloss, scuffs, nose cut…)Aging behavior on the roof (color/gloss fading, surface durability, dirt pick up…)

(3) Installed priceMaterial costsLabor costs

71

1. Highest quality:Product metrics

11-12 €/m²4-5 €/m²2 €/m²20 €/m²Clay tiles (H-cassette)

6-7 €/m²3-4 €/m²1-1.5 €/m²5 €/m²Concrete tiles

Price for EVA=0 at 8.0% CoC

Variable costs

Fixed costsInvestment costs: main

tiles + fittings

Covering materials

(W. Europe)

72

1. Highest quality:Clay/Concrete Substitution in Western Europe stabilising

Price difference clay/concrete in Germany should increase again

Up-grading of clay tiles in Italy will not increase substitution of concrete significantly

No short term investment in clay capacities in Nordic and UK

No significant substitution trend in South Eastern Europe

73

1. Highest quality:Accelerating innovation in Clay materials

New S, Flat Interlocking2Cambridge1USA

Burnt Blend (2) Craftsman2Burnt Blend (1)1UK

New double tile Old OVH1Tuile Plat, New Hollander2Benelux

New Gammel Dansk 1Nortegl1Nordic

F10, F20, New Postel 20, New Plate de Pays, Galleane 12,

5Galleane 10, Plate des Pays, New Abeille

3France

New Portuguese, GL Italia2(antique surfaces)0Italy

Neptun Max1Sirius 131Poland

Rubin 9, Granat 11 V2Rubin 11, Rubin 11 V2Germany

18

2

Launch2006-2007

12

1

Launch2003-2005

Biber

Details

Total

Occitane, GlasurenThailand

DetailsNumber of new products

74

2. Lowest delivered costsA track record in past cost reductions

SG&A Reduction (€M)

Labour Productivity in German Clay Tile plants (Index)

325-26+55-70+39327

2005ProductivityInflation of 2.5%

RestructuringScope effect

1999

7175100Headcount

200620052004

75

2. Lowest delivered costsAchieve lowest delivered costs with specific leversin each business line

High market shares

Plants close to markets

High rate of direct deliveries

Product/plant standardization

Optimizing concrete mixes

European supply network

Optimizing

Plant capacities

Capacity utilization

Labour productivity

Energy consumption

Concrete tiles Clay tiles

76

3. System offers

Components worldwide market estimated above €10 bn(€5 bn in Europe)

12 product lines, four make 85% of our sales (Underlays, Ridge/Hip, Roof Outlets, Abutments)

77

3. System offers

Provide more value to our customers…

“Open systems”, with components that are compatible with our tiles but sold separately

“Closed systems”, with components that are sold together with tiles to answer specific customer needs, with support of services, system guarantees or complete deliveries

> “Cool roofs”, “Low pitch” systems…

…and more value to us, making us unique in our industry

Additional margins with little additional fixed costs

> 10% additional CM directly from components

> Price premium on tiles of 5%

Additional growth with low capital requirements

78

0

50

100

150

200

250

300

1999 2001 2003 2005

3. System offersOur development in components

Components Net Sales (€M)

Significant growth despite strong decrease of German businessLeadership in Europe to be extended in Asia and North America

9074 62

50

181

245 251 255

Germany only

79

Agenda

Our Business Model



80

2005: A difficult year in Germany for Roofing, not representativeof our global potential

Market Growth2004/2005

Net Sales Growth2004/2005

-16

-12

-8

-4

0

4

8

-16

-12

-8

-4

0

4

8

Germany Restof World

Germany Restof World

% %

81

Pitched roof markets: robust growth expected in the next five years

2005 - 20102000 - 2005

4%4%1,100Asia

4%5%1,910North America

2%1.5%260Eastern Europe

4%3%4,100Total world

+ 2%/+ 2%/

- 1%/- 6%/

530/90/

Western Europe/Germany/

Average annual growth rateVolumes demand

in Mm² (2005)Countries

82

Major growth opportunities for Lafarge Roofing

Clay tiles (and Chimneys) in Europe

Capacity utilisation and margins increase (products/plants)

Consolidation in Germany and a few other markets

Concrete tiles in “emerging markets”

Bolt on acquisitions

Low Capex plants

Components worldwide

Innovation in 3 product lines (Underlays, Ridge/hips, Outlets)

System sales ratios in Europe, US and Asia

US (all product lines)

Developing our positions in the stronger growing South Belt regions

Important substitution potential for concrete and clay tiles, and some components and chimney products

83

Agenda

Our Business Model



84


Costs performance

SG&A costs reduction (€30 M)

Concrete/Clay variable costs performance (€30 M)

Sales performance (net of inflation)

Modernize Clay product ranges and plants (€40 M)

Ramp up new Concrete capacities (€15 M)

Develop Components sales (€15 M, half through new products)

Two levers

85

Costs performance

SG&A reductions (€30 of 280 M)

Division and TC costs (€10 M full year impact already in 2007)

BU’s costs (€20 M full year impact half in 2007, half in 2008)

> IT standardization and centralization

> Shared services in Germany

Clay/Concrete variable costs reductions (€30 of 500 M)

Energy/materials consumption

Plants productivity

Cement

Roofing

A&C 50

Gypsum 30

250

60

Corporate functions10

€M

86

Modernize Clay product ranges and plants

Start modernized capacities in Southern France (Marseille, Limoux)

Develop penetration of Northern France and Belgium

Develop in under-served high end markets of USA

Cover growth potential in NL/Nordic/UK

Up-grade clay range in Italy

Gain market share in Germany in big tile segment

All projects approved (€140 M investments) and in implementation

87

Ramp up new Concrete capacities

USA (fully automatized plants)

Texas

Florida

Nevada

Eastern Europe (low cost plants)

Russia/Ukraine

Rumania/Bulgaria

Turkey

Asia (low cost plants)

China

India

All projects approved (€70 M) and in implementation

88

22 Players

2000 2006 2008/2010

Germany Clay industrial consolidation: an upside potential

Top 5 Players:60%

Others (17):40%

12 Players

Top 5 Players:85%

Others (7):15%

4-6 Players

Top 5 Players:90% +

Others (0-3):10% -

89

Roofing division: key metrics

3.5%

0

222

525

49%

1,500

2005

€350 M in 2008EBITDA

+ 1.4% / yearFixed costs + SG&A

8%ROCE after tax

Positive over the periodFree cash flow

49 – 50%Contribution margin

+ 7% / yearNet sales

2005 - 2008M€

90

2006: our turnaround well underway

Forecasted 2006 EBITDA above budget and 2005 levels

May year to date above budget and last year

Good overall outlook

91


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EXCELLENCE 2008

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EXCELLENCE 2008

GypsumFast, robust and profitable growth

Isidoro MirandaExecutive Vice-President, Gypsum

93

Our business model

Safety

Fast growth

Robustness

Best performer

Highly profitable

94

Our business model

Safety

Fast growth

Robustness

Best performer

Highly profitable

95

Safety

0

2

4

6

8

10

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

LTA

Freq

uenc

y ra

te

Actual progression curveTargeted progession curve

Evolution to Lost Time Accidents (LTA) frequency rate target

96

Our business model

Safety

Fast growth

Robustness

Best performer

Highly profitable

97

The future of interiors is plasterboard systems

Economic growthand plasterboard consumption

Construction productivity

Plasterboard solution

62%56%

40%

20%

38%44%

60%

80%

84%

63%51%

36%

39%

42%

39%

40%

Traditional solution

123%

105%

90%

76%

100% 100% 100% 100%

France Korea Thailand Ukraine France Korea

Labor cost Materials cost

Thailand Ukraine

Australia

North America

Thailand

Mexico

TurkeyChina

Philippines

Indonesia Romania

Brasil Malaysia

South Africa

ChilePoland

Singapore

Italy

UK & Ireland

Japan

France

Korea

Netherlands & GermanySpain

TaiwanArgentina

0

2

4

6

8

10

12

14

2 000 12 000 22 000 32 000 42 000

M²/capita

GDP/Cap 2005 ($)

98

North America

Western Europe

Eastern Europe

Japan

Latin America Middle East and Africa

+9%

+2%

+10%

+3%

+11%

Lafarge Gypsum has a worldwide footprint with strongholds in Europe, Asia and Latin America

12%

25%

6%

18% 16% 12% 11% 28%9% 6%

BPB USG Lafarge NG Knauf GP Other

World Market Share Breakdown (Mm²)

Average annual growth rate2006-2010 in volume:

Market: 4% Lafarge: 8%

27%

Size of market and Lafarge share (100%)

CAGR volume growth 2006-2010

23%

Asia and Oceania

+9%

28%

+2.0%

99

“Low risk-high return”Investments in markets we already know

TOTAL: €360 M by 2008

Reduce costsin existing markets €150 M42%

Enter new markets€40 M11%

Reinforce positions in existing markets

€170 M47%

100

Our business model

Safety

Fast growth

Robustness

Best performer

Highly profitable

101

Our organic growth strategy should leadto robust profit

Organic growth is lower risk and higher return

We expect to double the market growth rate

Our low cost investments, particularly in the US, should result in profits that resist through the cycle

102

2002 2004 2008

5%

7%

12%

2006

>8%

% sales generatedby innovative products

TargetStretch

SignaWet area boardRapid DécoOther projects

Innovation and differentiated value propositions 2008 target: 12% of sales from innovative products

103

Innovation and differentiated value propositions

Our focus on “critical to Customers” factors provides us with differentiation

Korea: total cash expenses for claim payments reduced by factor of 8 since 2003

France: time to solve a claim divided by 3 since 2000; +23% highly satisfied customers since 1999

North America: reduction of claims and their costs

37.2

58.169.8

20.927.9

100.0

0,0

20,0

40,0

60,0

80,0

100,0

120,0

2001 2002 2003 2004 2005 2006YTD

Focus on quality improves Differentiationand Customer Satisfaction

Index

of

Cla

ims

(Bas

e 1

00

in 2

00

1)

104

Our business model

Safety

Fast growth

Robustness

Best performer

Highly profitable

105

Reinforce strong local positions:the North American case

Note: BPB estimates based on annual and interim reports

2005 ex works prices per msf

Behind a strong price performance…

$40

$60

$80

$100

$120

$140

$160

2001 2002 2003 2004 2005

EXP USG (US Only) Lafarge BPB (US Only)

Lafarge: $150

USG (US only): $144

Eagle: $128

BPB (US only): $134

106

The North American case

ME* %

* ME: Machine efficiency line production time / available production time** BC: Saleable board index measure the m2 of boards sold against m2 of boards produced

BC** %

84.3%85.0%

86.8%87.5%

2002 2003 2004 2005

Behind a strong price performance……. lies a strong industrial performance turnaround

Increasing production efficiency

Increasing production quality95.4%

94.2%93.8%

93.1%

2002 2003 2004 2005

107

A €30 M cost reduction program by 2008

Productivity

Reduce Plant Fixed and Variable Costs

Yield 30 Mm² of additional capacity without investment

Transport costs savings

Improve our European logistics

SG&A

Standardize processesthroughout the Division

Cement

Roofing

A&C 50

Gypsum 30

250

60


€M

108

Our business model

Safety

Fast growth

Robustness

Best performer

Highly profitable

109

Lafarge Gypsum Division: a proven track-record

10.2%9.3%

6.3%

3.5%

0.1%

4.6%

2000 2001 2002 2003 2004 2005

Source : Lafarge

447

601 659756 811 841

2000 2001 2002 2003 2004 2005

CAGR = 13%(Consolidation 100%)

10.2%9.6%

7.0%

4.4%

0.1%

5.1%

2000 2001 2002 2003 2004 2005

1,8481,679

1,4981,4211,3231,152

2000 2001 2002 2003 2004 2005

(Consolidation 100%)CAGR = 10%

Sales [€M]

ROCE after tax

Board Volumes [Mm²]

COI/Sales

110

Lafarge growth in Gypsum division is self financed

Cost reduction, innovation and growth are the main levers to deliver results

Our current and future investment plans will be financedwith our robust profit

111


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EXCELLENCE 2008

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EXCELLENCE 2008

Cement

Michel RoseChief Operating Officer, Cement

113

Agenda

Our Business Model

Lafarge in North America

114

Agenda

Our Business Model


115

Our business model

1. Safety

2. A careful selection of markets

3. Priority to organic growth

4. Consolidation of our markets (key role of Vertical Integration)

5. Globalization (Trading, equipment suppliers)

6. Performance (cost mastery, integration, prices offsetting costs, specific offer to our customers)

7. Human Resources: an increasingly important success factor

116

1. Safety (cement division)

01234567

2002 2003 2004 2005 2006 2007 2008 2009 2010

LTAFrequency

Rate

Cement division still ahead of the competition (WBCSD report)

Slower progress in 2006: a further breakthrough expected with the Group Safety Initiative

Targeted progression curve

Actual progression curve

Lost Time Accidents (LTA) frequency rate

Objective is to reduce LTA by 20% a year to reach 1 in 2010

117

2. A careful selection of attractive markets(1/2)

A powerful tool

A dynamic approach

2%

Competitive structure

Growth potential

118

8%

2. A careful selection of attractive markets(2/2)

Evolution towards a profitable, sustainable and dynamicportfolio

2002

23% 39%

25%13% 23%

46%22%

9%

2005

19%

52%21%

2008

Evolution from existing offerings

Market growth Market growth Market growth

Mar

ket

attr

acti

venes

s an

d c

om

pet

itiv

enes

s Turnover segmentation

119

3. Primary focus on organic growth

Why?

Organic growth more profitable and less risky

Keeping well balanced portfolio between mature and emerging countries

Above 5%3.6%Organic growth(in volumes)

2005-20082002-2005

120

0

30

60

90

2002 2005

0

30

60

90

2002 2005

0

30

60

90

2002 2005

0

30

60

90

2002 2005

4. Consolidation of our marketsA. The key to price leadership

€/T€/T

€/T€/T

121

4. Consolidation of our markets

What makes Lafarge specific

Ready Mix Concrete: more than a mere distribution channel for Cement

3 different businesses (Cement, Ready Mix Concrete, Aggregates) but a fully integrated strategy(ex: France)

Ready Mix Concrete: a key channel for researchand innovation

As a result, a win-win approach

Specific performance programs

Common interest to reach higher prices

More intimate knowledge of our customers

B. The crucial role of Vertical Integration

122

5. Globalization

Leadership position

A strategic lever

A stabilizing effect on supply / demand regional balances (ex: Asian crisis in late 90's)

A. Trading

2002 2003 2004 2005 2006(e)

Source Desti-nation

Source Desti-nation

Source Desti-nation

Source Desti-nation

Source Desti-nation

Group Non-Group

8.5

2.5

7.0

4.0

9.5

2.0

5.0

6.5

9.0

3.0

6.0

6.0

8.0

6.0

9.0

5.0

8.0

8.0

11.0

5.011.0 11.5 12.0

14.016.0MT

123

5. Globalization

Lafarge: a pioneer in China

We have started transferring this model elsewhere(- 20% in investment cost)

B. Equipment suppliers

124

6. Performance

A comprehensive performance program since 2002

4 technical centers - 600 technical experts worldwide

Aggressive technical training program

A. Cost mastery

125

6. Performance

Strong track record in integrating new operations

India

China

South Africa

Jordan

Nigeria (ex: BCI)

Philippines (ex: BCI)

Ecuador

B. Integration

126

6. Performance

Strong market position and customer relations allow us to assure price leadership

Strong performance in the last 2 years thanks to efficient segmentation and marketing plans

Price increase to exceed the impact of our cost increases

C. Pricing

127

6. Performance

ROCE** 6.0% 6.5% 7.5%1.5% 3.5% 8.1%

0

5

10

15

20

25

30

35

1998 1999 2000 2001 2002 2003 2004 2004IFRS

2005

(1) Current Operating income over sales

(2) After tax return on capital employed

In %

ROCE (2)

Operating margin (1)

The example of Central Europe:More than 7 years of continuous improvement

128

6. Performance

Our real margin is above 23% despite strong energy costinflation

Cement and clinker purchased to prepare our capacityextensions program

21.2%21.6%

21.3%

23.5%23.4%

22.7%

2003 2004 2005

Operating margin Adjusted operating margin*

* Operating margin adjusted for cement and clinker purchased

129

7. Human Resources: an increasingly important success factor

To meet our performance ambition and to conductour development

Technical training (+ 50% between 2004 and 2006)

"Talent pool" (40 people / year)

International technical forces

130

Agenda

Our Business Model


131

1. North America: a very attractive market

Average annual 3% long-term growth

Favourable market structure

Ready-mix consolidation continuing

Vertical integration accelerating

132

2. Lafarge 2002-2005 achievements

Medical Incident Rate decreased by 40%

COI increased by 35%

Operating margin increased by 2.4% on a like for likebasis*

US$720 M cumulated free cash-flow over the period

EVA expected to be slightly positive in 2006 (2 years ahead of target)

A robust increase in safety and financial results

* Excluding pensions, import mix and cementitious mix

133

3. Lafarge strategy

Increase performance and reliability

Increase our import capacity (West, North-East) and distribution network (River)

Increase our exposure to fastergrowing markets

Double the size of Harleyville

Increase capacity in Exshaw

1.2 Mt Greenfield plant in Salt Lake City

Modernize / Restructure our plant network in the Great Lakes, North-East and River

Maintain the structural attractivenessof our markets (vertical integration, cementitious, customer orientation, innovation…)

Harleyville

Exshaw

Salt Lake City

Capacity expansion

Greenfield plant

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EXCELLENCE 2008

CementCost Control

Ulrich GlaunachExecutive Vice-President, Cement

135

Cement Division contribute €250 M to Group cost reduction program

SG&A expenses and fixed costs control

Variable cost control

Increased volumes to replace external sourcing

Cement

Roofing

A&C 50

Gypsum 30

250

60


€M

136

SG&A reductionKey success factors

BenchmarkingBest practice transfer actively developed

Upfront objective set-up at country level and division center

Disciplined project organisation and tracking process

137

Manufacturing fixed costs

2 main levers

Productivity

Maintenance

A proven track record but still room for improvement

138

ProductivityCement Plants

60%

65%

70%

75%

80%

85%

90%

95%

100%

2001 2002 2003 2004 2005 2008

hours/t cem

Base 100 - 2001

139

68%

72%

76%

80%

84%

88%

92%

96%

100%

2001 2002 2003 2004 2005 2008

Maintenance Cost Index

Target68

Base 100 - 2001

140

Agenda




141


Context of high energy prices

Unique variety of initiatives to reduce our energy bill

Maintain flexibility in fuel mix

Mainly fuel and power

142

Alternative fuels

Continue to progress in developedand developing countries

5

6

7

8

9

10

11

12

13

14

2001 2002 2003 2004 2005 2008

%

AF including other fossil fuel wastes

100%

150%

200%

250%

300%

350%

2001 2002 2003 2004 2005 2008

Base 100 - 2001

Alternative fuel

Alternative raw materials

Gross savings

143

Examples of Biomass projects

Coffee husks in UgandaMore than 25% in 2005Target 40% in 2006

Rice husks in PhilippinesUsage from 4 400 T/yr in 2002 to 14 000T/yr in 2005Achieve more than 25% in one plant ytdin 2006Target to use more than 100 000T in 2006

Palm kernel shells in MalaysiaUsed since 2000More than 10% energy requirements of one plantClean Development Mechanism credit obtained in 2005 will boost usage

0

10

20

30

40

2002 2003 2004 2005 2006

Uganda : % Coffee Husks

144

… and beyond fuel mix

WindmillsFirst experience in Morocco

> 50% of plant power consumption

New study in Europe

Captive power plantsProjects underway

> One new plant starting this year> 3 plants ordered: Indonesia, India, Ecuador> A few more under study

A side benefit: direct recycling of fly-ash

Coal mine control or long-term supply agreement under studyTo get reliable source of coal close to plants

> Africa, India

Many others projects underway

145

A new purchasing organisation to deliverresults

From a regional coordination to a fully centralisedorganization

Structured by key purchasing families

First focus on power and fuels

Key professionals to make the change successfull

Immediate savings already identifed

146

Agenda




147

Increased volumes to replace externalsourcing and reduce logistics costs

Kiln reliability

Debottlenecking with immediate pay back

Cementitious

Logistics

148

85

87

89

91

93

95

97

2001 2002 2003 2004 2005 2008

Pursue excellence in reliability

Will reach 95% in 2008

Focus resources on highstakes plants

Plant mastery program in place

149

Actively pursuing every opportunityto increase C/K ratio

Optimize product range to increase use of cementitious

Work on better value proposition for each customersegment

Lobby to change local cement standards and regulationsto increase cementitious usage

Not a technical challenge

A new marketing challenge requiring a new mindset

150

We will deliver €250 M by 2008

Continous monitoring of results

A formalised process

6 "high stake units"

> Focus resources

20 units

> Formal quarterly meetings

Personal commitment of cement top management

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EXCELLENCE 2008

Cement

Guillaume RouxExecutive Vice-President, Cement

152

Agenda

Emerging markets are the foundation of our growth

Internal developments are yielding more positive returnsthan ever

Chinese leader with strong regional positions

Investments will reinforce our existing portfolio

153

Agenda





154

Emerging markets are the foundationof our growth

RoW China

1985 - 2005 2005 - 2010

2.7%

10.5%

5.0%

7.0%

Lafarge's Domestic Market

2005 - 2010

Above 5%

World Cement Demand Growth

155

Emerging markets are the foundationof our growth

41%45%

49% 51%

29%

39%

47%52%

1998 2002 2005 2008 e

% Sales % Operating Income

156

NorzagarayTeresa

FortuneManila

Republic

Pacificocean

SouthChinasea

More & more emerging countries are now part of our "sustainable profit"

20052002

20%3%Operating margin

1.161.05C/K ratio

94%< 85%Kiln reliability

3.7 mt3.7 mtSales volumes

11.812.9 mtMarket

The Philippines

Cement plant

Office

Iligan

157

More & more emerging countries are now part of our "sustainable profit"

20052002

25%-Operating margin

1.161.07C/K ratio

94%< 85%Kiln reliability

1.51.1Sales volumes

9.57.0Market

Nigeria

Cement plant

Office

Ashaka

EwekoroShagamu

Lagos

158

Agenda





159

Internal developments are yielding more positive returns than ever

Market penetration is key to our development model

Investment costs per tonne were loweredby more than 20% in the past 3 years

And faster implementation

IRR > 20%IRR > 15%

20082008

€95 m€85 m

0.7 mt0.7 mt

ZambiaEcuador

But also

€75 m

€40 m

Capex

2006

2006

Start up Roce 08Capacity

> 25%0.9 mtBouskoura (line 2)

> 25%1.2 mtDujianyang (2)

160


Additional capacities (100%) outside China

3 47 10 10

6

15

2006 2007 2008 2009 2010

Existing projects will bring €100 M additionalEBITDA by 2008, with a ROCE > 12%

Potential projects pending approval

Mt

161

Agenda





162


Xinjiang

Guangxi

Hunan

Hubei

Hainan

Gansu

Qinghai

Ningxia

Shaanxi

Anhui

Fujian

Neimongu

Shanxi Shandong

Xizang

Sichuan

Yunnan

Guizhou

Henan

Heilongjiang

Jilin

Liaoning

Zhejiang

Jiangsu

Hebei

Beijing

Shanghai

Guangdong

Gansu

Chongqing

SichuanNo. of plants: 5Capacity: 5.6 MT

YunnanNo. of plants: 3Capacity: 4.5 MT

GuizhouNo. of plants: 3Capacity: 2.1 MT

BeijingNo. of plants: 2Capacity: 1.5 MT

ChongqingNo. of plants: 4Capacity: 7 MT

Total no. of plants: 17 Combined capacity:

21 million tonnes

Jiangxi

163


Integration progressing well, ahead of 2006 budget

Lafarge plants already creating value in Sichuan and Chongqing

8 million tonnes additional dry capacity to strengthenour positions by 2010

Overall China creating value by 2008 with conservative price assumptions

164

Agenda





165


Med. Basin+ 4.0 Mt

Latin America+ 2.0 Mt Africa

+ 4.0 Mt

NorthAmerica+ 2.5 Mt

China+ 10.0 Mt

South East Asia+ 2.0 Mt

Europe+ 1.5 Mt

India +Bangladesh

+ 7.5 Mt

11 Mt approved24 Mt pending approval

166


> 12%

+ 1.2

530

1,500

26

2012

12%12%ROCE after tax on assets started up

+ 0.2

100

240

6

2008

+ 0.6

360

900

17

2010

EPS (€/share)

Additional EBITDA (€M)

Additional sales (€M)*

Additional sales (Mt)*

Scenario where all today identifiedopportunities are implemented

* Assumed

167

These investments will be focused on reinforcing our existing portfolio

Portfolio turnover segmentation

Mkt

attr

acti

venes

s &

com

pet

itiv

enes

s

23%

46%22%

9%

Market growth

8% 19%

52%21%

Market growth

2005 2008

168


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EXCELLENCE 2008

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EXCELLENCE 2008

Aggregates & ConcreteOur global ambition

Jean-Charles BlatzExecutive Vice President, Aggregates & Concrete

170

Agenda

Introduction

Aggregates

Ready Mix Concrete

171

Agenda

Introduction

Aggregates

Ready Mix Concrete

172

Introduction

Two very different businesses with different drivers of profitability

Aggregates is a structurally attractive business

Ready Mix Concrete is less so

> Lafarge makes it more attractive

Enhanced by

A specific dedicated organisation by product line

Combined research (cement, aggregates, concrete, admixtures)

173

Safety

Targeted progression curve represents 20% reduction in LTA per year

2008 LTA target equivalent to < 80 accidents in 48 million working hours

Targeted progression curve

Actual progression curve

Lost Time Accidents (LTA)frequency rate

174

Agenda

Introduction

Aggregates

Ready Mix Concrete

175

Aggregates business characteristics

Local business with low import risk

Increasingly strong barriers to entry

Mineral reserves management is key

Increasing levels of consolidation

Robust profitability when prime positions are combined with strong performance tools

176

Aggregates Business Model

1. Extracting the value from increasing scarcity through better pricing and segmentation

2. Reducing costs by accelerating our performance program

3. Developing the right mix of assets in both mature and transitional/emerging markets

Supported by Asphalt and Paving, only where needed

177

Aggregates Business Model1. Valuing scarcity

Accelerate the recent trend of price increase

90

95

100

105

110

115

120

déc-02

avr-03

août-03

déc-03

avr-04

août-04

déc-04

avr-05

août-05

déc-05

Dec. 02

Apr. 03

Aug. 03

Dec. 03

Apr. 04

Aug. 04

Dec. 04

Apr. 05

Aug. 05

Dec. 05

World price index(Lafarge sales)

178


2. Reducing costs

Operating performance

Improved productivity

Improved plant reliability

Replace subcontracting by own production

SG&A savings

€35 M over the period 2006-2008

Cement

Roofing

A&C 50

Gypsum 30

250

60


Aggregates 35Concrete 15

€M

179


3. Developing the right mix of assets

… Nr. 1 worldwide …

Malaysia1 MT

S. Africa6 MTChile

4 MT

N. America135 MT

Poland9MT

UK19 MT

France48 MT

Spain /Portugal

10 MT

A strong coverage of mature markets combined with an increasingpresence in growing countries…

180

Remarkable results in emerging markets

Sales 2002 Sales 2005

6%

Transitional / Emerging

Mature

9%

COI 2002 COI 2005

3% 12%

+ 50%

X 4

181

Considerable further development potential

Invest in highly profitable organic growth

Develop externally through various entry options

Trading, as a low risk entry strategy

Highly selective acquisitions in growth markets

Sharing Cement assets

182

Agenda

Introduction

Aggregates

Ready Mix Concrete

183

Ready Mix Concrete business characteristics

A business with low barriers to entry in many markets

Mostly seen as distribution channel for cement producers

Many different local markets

Many different customer segments and applications

184

Two fold Business Model: optimise vertical integration and differentiate through innovation

Key distribution channel for Cement, traditionally resulting in low profitability

To reach a superior level of profitability, we have

Been the first to develop a robust vertical integration model

Transformed our Ready Mix Concrete business through product innovation and revenue levers

Carefully selected the attractive markets in whichto develop

A double win strategy

The new organisation will accelerate performance program implementation driving operational excellence and further reducing costs

185

Maximising profitability through product innovation

Increase share of Value Added Products (VAPs) in total RMX volumes

% of VAPs Additional Contribution

% of VAPs

€6 M

€0.2 M

Example of ChileGlobally

3%8%2001

14%15%2005

186

New organization will accelerate our “Top” performance program

Delivery (outsourcing and optimisation)

Mix design optimisation(raw material savings)

Savings in SG&A

€15 M over the period 2006 - 2008

Cement

Roofing

A&C 50

Gypsum 30

250

60


Aggregates 35Concrete 15

€M

Reducing costs

187

Conclusion

Credible cost reduction program

Aggressive revenue enhancement

Further development in highly profitable growing markets

Strong improvement in marginsand return on capital employed

188


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EXCELLENCE 2008

analyst & investor meeting

Documents