Philippe Rollier joined the Lafarge Group at its Paris headquarters in 1969 and has since served in senior executive positions for the company in Canada, the United Kingdom, and the United States. He has headed major Lafarge businesses, including the company's sanitaryware and biotechnology units, as well as its Central Europe and CIS region for cement, aggregates, and concrete. In 1999, he was appointed a Lafarge Group Executive Vice President.

Since his 2001 appointment as President and CEO of Lafarge North America — the largest producer of cement and concrete in the U.S. and Canada — Rollier has concentrated on the development of a performance- and market-driven culture within the company. In 2002, the company dedicated a state-of-the-art cement plant in Sugar Creek, Mo., and reorganized its cement and construction materials operations. Rollier also manages the North American Blue Circle assets, which in 2003 accounted for $718 million in sales. Last year, net sales for Lafarge North America exceeded $3.3 billion. The company employes approximately 15,000 people in nearly 1,000 locations.

Cement Americas: How is business for Lafarge North America right now? Are you where you want to be, and where do you see the company in the next year?

Philippe Rollier: 2003 was a mixed year. We had a slow start due to poor weather conditions, but a very good second half when the weather was a lot better and demand began to pick up. This positive trend has been continuing into 2004. Our first quarter was good, but it's still too early to extrapolate for the year because the first quarter only represents about 15% of our total annual sales. We're very seasonal, so we can't tell yet. There are a lot of signs indicating that the economy is doing better, especially in the markets in which we are doing business. As I said, this is just the beginning of the year.

CA: As last year proved, anything can happen.

PR: That's right. It would be a bit difficult to say at this point whether volumes will be good later this year. But, things are looking better than they have been for quite a while.

CA: Have any of your operations experienced shortages recently?

PR: Well, we're very tight. The whole North American cement market's pretty tight. This is the result of a very strong fourth quarter last year. You have to understand the cement industry in terms of balancing fixed capacity with seasonal demands. Usually you build up storage in the winter. However, there is limited storage capacity, so you can only store up so much inventory to handle increases in demand when the better weather begins. The best scenario is to have an even year — that means to have a mild winter as well as a mild fourth and first quarter. Then you have a chance to use your total capacity quite well.

When you have such an unexpected spike, then it becomes difficult. I think that's what happened in the beginning of this year. There was a strong fourth quarter last year and a very strong first quarter this year. The statistics we got from PCA for the month of March 2004 showed 30% or 40% more demand than 2003. Even though last March wasn't good, that's very difficult for our industry to cope with.

CA: How are you coping with it? What is Lafarge doing to offset these shortages?

PR: Traditionally, the first quarter is the time when we perform maintenance on our plants. This year, we tried to reduce the time we take to do that as much as possible. The other part of the shortage, as you probably are aware, is due to the import situation. Because of the Chinese economic boom, a lot of ships are tied up in Asia, so the freight rates have been shooting up. When you have import prices increasing as much as 15% to 20% and $15 to $20 per ton, that's a huge jump.

There's no way overall demand in the cement market will increase 10% in one year. That's never happened. The PCA economist in the last forecast, which is not very old, forecasted something like 2% growth for 2004. If things go full out, we might see 4% growth. Normally, a 4% increase for the cement industry is not a major problem. But, when you have a short-term spike like this, it's more difficult to cope. I think the remainder of the year will show improvement. Even though imports will be more expensive, people will find them.

CA: In the longer term, is Lafarge looking to expand capacity at some of its plants, or build new lines anywhere?

PR: What we do is called “brownfield.” That means we modernize and expand our plants. The last one we did was Sugar Creek near Kansas City. We have plans to continue to do more, but nothing in the immediate future, that is, nothing that will start in the next three or four months. The cement plant permitting process can be a very long process. We have some plans that are fairly well advanced, but we have not announced anything yet.

CA: I know you still have a couple of wet process plants running. I thought maybe those would be candidates for overhauls.

PR: Yes and no. One of the things about the wet process plants is that they are using alternative fuels, which means their energy cost is extremely low. So, sometimes people think of wet process as not being very efficient; in fact, it can be. They are not likely to run long-term, but who knows. Long-term can be a lot of years.

CA: With the exception of pulling out of Florida, it looked to me like you have been buying terminals on the East coast, as if to build up some distribution network. Didn't you pick up one in Mobile, Ala. recently?

PR: In April of this year, the Lafarge Group, our majority shareholder, acquired a ready-mix and cement business in the Southeast, which included the terminal in Mobile that you mentioned. Those assets have been integrated with existing assets of the Group, and are managed by Lafarge North America. This acquisition was a good opportunity to expand the ready-mix operations in Georgia and Alabama and to further strengthen the cement distribution network from the cement plant in Calera, Alabama. This market has been a bit unstable over the last few years, and this move should help.

CA: You mentioned before the use of alternative fuels. One of the things I did want to talk to you about is Lafarge's approach to environmental issues in general, including sustainability, but also in terms of alternative fuels and recycled fuels. What is the Lafarge North America approach toward environmental stewardship?

PR: We believe we will succeed only if activities that impact the environment respect sustainable development principles. We are an industry which has to look out for the long-term. When you set up a cement plant or quarry, it's going to be around for many, many years. So, for us, it's been a long-term commitment. I think we've been the pioneers in this area. As you know, we belong to the Lafarge Group, which has been pioneering this sustainable growth concept for many years now. So, it's not a recent fad for us, but something we've been working hard at. We have many programs, and we are on the forefront of the sustainable growth concept, which means that we are very conscious of the footprint that we create wherever we put factories and plants. We always look for ways to preserve the landscape and biological diversity.

We're very conscious of our environmental impact and reduce emissions and water discharges as much as we can. We restore all our quarries to leave them in as good condition as they were before, if not better. We do some development, including lakes, wherever we operate.

In terms of alternative fuels, that's a way of using somebody else's waste and burning it to diminish the cost to the environment. We use cementitious products, which are by-products of other industries, like slag or fly ash. Slag is produced by the steel and iron industry and fly ash by the power industry; both have cementitious properties. So, when we use them, though I wouldn't say they are equivalent ton per ton, we produce less in our kilns and reduce air emissions proportionately.

CA: Lafarge has been one of the most aggressive in terms of marketing its cementitious materials, i.e., non-cement cementitious materials, and embracing them as supplemental, rather than competitive, products.

PR: We are in the market to supply cementitious products. You know the term ‘cementitious’ does not offer much in the way of marketing cachet, but it does provide solutions to our customers. Having those products, besides minimizing the environmental impact, allows us also to produce specialty products. When you blend slag with cement, you can make all sorts of different blends and adapt the properties of the cement to different uses. So, it's a good way for us to improve on the environmental side and also, we believe, on the market side.

A very simple calculation also shows that it's much less expensive: Consider the capacity, say, of a million tons of slag versus a million tons of cement. It's cheaper, and it gives you about the same results. It's less capital-intensive to use somebody else's waste than to start from scratch — that's the whole reasoning. I don't know if you're familiar with our pledge with the World Wildlife Fund. Lafarge Group has committed to reduce CO2 levels over 20 years, and one way of doing it is to use more cementitious materials.

CA: It's my understanding that your sales staff is selling all of the company's cementitious products?

PR: Yes, under one organization now. We restructured our sales group to take responsibility of all the products. Before that we had different organizations, and now we believe that its better under the same umbrella.

CA: How is that working?

PR: It is working well. We are now motivating our sales force not on volumes, but on margins, which we are working hard to improve. The challenge that we have is to move an industry that has been very production-minded and cost-conscious (and which needs to remain so) towards also having a much stronger marketing approach. It's not yet very much in the genes of the industry.

I think it will slowly evolve, because there's no other way to improve business. Now, we're competing on value-added, competing on service and competing on quality of the products. What our customer wants is consistency in quality first, not necessarily the lowest cost all the time. And, it will change the approach to competition in the cement industry.

CA: Back to the issue of environmental concerns, I'm guessing you've discovered that it's also become good business to be more environmentally conscious, especially in the cement industry.

PR: Well, it is a necessity. And, the fact is that whatever improves our image is certainly beneficial. But, you must be a responsible citizen, and you want to leave the earth to your children and grandchildren the way that you found it. That's basically the approach. It is a core philosophy and ecological approach on a long-term basis. If you do things right, and I'd say we are doing it right, you can use it for improving your image.

CA: Are there particular areas in North America where you're seeing business improve or even slow down a bit? Are there particular geographical trends?

PR: I'm not aware of any slowing down for the time being. I wouldn't say the markets that had been weak are booming, but they are starting to show some strengthening signs — like Colorado, which has been an area of weakness. I think Atlanta, which also used to be a bit down, seems to be doing a lot better, at least at the beginning of the year

Western Canada, Vancouver, and British Columbia seem to be in very good shape. At the beginning of the year, Washington, Oregon, and the Northwest were performing well, too. Even around the Great Lakes, which for us, because of the underperformance of the steel industry had shown some weakness last year and the year before, has had a better start this year. I wouldn't say it's great, but I'm not aware of a real depressed market, at least where we are.

CA: Are there particular types of projects for which you're seeing an increase in business lately, e.g., highway, residential, commercial?

PR: Residential has been holding very well. As you may know, over the last few years when the overall economy was not very strong, we saw a sharp fall in commercial construction, but housing has been holding very well — and it's still doing well. The question that everybody has is what happens when interest rates start to go up and how much of an effect and at which speed it will impact housing. Conversely, the state budget deficits seem to be improving quite a bit, so we anticipate a boost from governmental spending. In our business — excluding gypsum — 50%-plus of our business leans toward public works. Public works are looking better. The finances of the various states are starting to look better as the economy grows again. The best configuration would be if the commercial business would grow and compensate for the slowdown in housing. That's not an impossible scenario.

CA: Are there areas in North America where Lafarge doesn't have as much of a presence that you're looking at?

PR: Our strategy is very simple, actually. It's performance: we work very hard to improve our results with performance improvement programs, which we have been developing not only in North America, but also throughout the world.

The other strategy is growth: we have two businesses we want to grow — cement and aggregates. When you ask ‘where?’, the question is really ‘what?’ In order to grow, you have to have development opportunities with companies that are on the market. When I talk about growth, I'm talking mostly about external growth.

If you look at Lafarge North America, our volumes of 2% to 3% and price increases of 2% to 3% represent an organic or intrinsic growth of 4% to 6% annually. On average, our growth in sales for the past eight years has been tracking at about 11% per year. In order to maintain that rate, we will need to continue to make-up the difference through acquisitions, and, again, that depends on what comes on the market. So, it's not so much that we're focused on particular geographic areas. In the areas where we are located, we regularly buy small- and medium-sized businesses that tuck in pretty well into our existing network. I'm speaking primarily of aggregates here.

And, as for the cement business, 70% of the industry is in the hands of seven large groups, so it gets more difficult now to grow in that area. Of course, we're always looking for opportunities to expand and build upon our existing platform.

CA: We're on the eve of the opening of the exhibit that you're sponsoring at the National Building Museum [set to open June 19]. How did Lafarge get involved in that initially? Did they approach you, or did you go to them?

PR: For the past three years, Lafarge has been the exclusive sponsor of the museum's ‘Spotlight on Design’ lecture series, which offers lectures from national and international leaders in architecture and design. Two years ago, the museum approached Lafarge about sponsoring an exhibition about concrete — the oldest and most widely used building material in the world that has largely been taken for granted or just ignored by most people. It seemed like a perfect fit and natural extension of our commitment to the museum. I don't think any museum, anywhere, has ever mounted such a display. As a leader in high-quality, innovative concrete technologies, we felt we could truly make a valuable contribution to the exhibition, not only financially, but with our products and expertise. So, we agreed to be the exclusive sponsor and the end result — ‘Liquid Stone: New Architecture in Concrete’ will open to the public on June 19.

I think the National Building Museum is an extraordinary building and museum. It's unique among its kind in North America, for sure, and I don't think anything like that exists in the rest of the world. The architecture is quite out of the ordinary. It's very special and most impressive. And, the people who work there are first class.

‘Liquid Stone’ is an important milestone. It's going to be a great show. It took a lot of time and work to plan, I'll tell you that. Our communications department has been working very hard on it.

CA: You had mentioned high performance concrete earlier. Where is that business for you right now? How do you see it developing?

PR: Lafarge has some of the most innovative new construction materials in the industry, but I would like to take the opportunity to talk about two, in particular. One is Ductal, which is an extraordinary, patented, high-performance, fiber-reinforced concrete. Typically, concrete has strong compressive strength, but weak flexural strength. Ductal can tolerate very high flexural weight or loads. The thickness or the weight of the structure that we can build now with Ductal is much lower than you could do before, and you can do things that you cannot do in steel. It's a real innovation.

In a recent project in Canada, thin-shelled canopies of Ductal cover the Shawnessy light rail transit station in Calgary. You could never imagine it was built with concrete. You can make bridges that you wouldn't have dreamed of before. It has caught the interest of the Department of Transportation and is being tested for other projects. It's not something that will grow very rapidly, but it does demonstrate our know-how in concrete. And, it's eye-catching; it's good for our image because it's so unique.

The other innovative product is Agilia, which in terms of volume has significant potential. It's a self-compacting, self-placing concrete. Today, concrete requires leveling, vibrating and leveling again once placed. With Agilia, you don't have to take all those steps, provided you have the right kind of formwork. It's self-placing, self-compacting, so you just pour it, and that's it. That can save a lot of manpower cost. This is a product where you don't talk about price per cubic yard or cubic meter, but you look at the job in place cost. You discuss the project with the contractor and say, ‘This is the way this should be done, and in the end, we both share the savings.’ This is a marketing approach that's much better and more sophisticated than that for traditional concrete.

But, of course, innovation requires a know-how that is unique, and I think it is important to understand that. Lafarge has a central research facility in Lyons, the only one in the world for construction materials, to understand and define at a very sophisticated level the effect between aggregate, cement and chemical admixtures. There aren't identical concrete mixes or identical aggregates, though they can be similar, and the idea is to make the right blend, the right recipe. Adapting the blends to local markets is something unique and something that Lafarge has mastered.

CA: Have you had to take a different approach to marketing these products than you would just your traditional line?

PR: We have a strong marketing department in cement now, which was unheard of here before. We also have a marketing department in our concrete division. And, we do have product managers for each of the lines. We're going into an area of product specialties and higher value-added products.

CA: Are you going to be marketing a line of colored concrete? If so, when will that debut?

PR: Lafarge has recently launched a marketing initiative to increase sales of colored concrete in nine markets in the U.S. and Canada. Given our experience with other specialty products, we plan to become leaders in color in the markets that we serve. To insure that our products have the highest quality we have installed nearly 20 state-of-the art, liquid color-dispensing units. Our plans are to expand beyond these initial nine markets in 2005 to cover the balance of our medium and large markets. Lafarge also makes colored cement for masonry applications and can match just about any palette.

CA: One of the big issues in the industry of late concerns the programs that companies implement to recruit new employees as well as efforts they make to retain employees. What is Lafarge doing specifically to address those two issues?

PR: It's a very interesting story. We have very limited turnover. People enjoy working for Lafarge, because we offer exciting opportunities for personal and professional growth in a range of disciplines across the U.S. and Canada. Let me give you a few statistics: Last year, we hired 360 professionals. We hired about 15 engineers in training (EIT), which we do about every year, as that is what we regularly require. We hired 15 to 20 what we call high-potential MBAs, people coming from Yale, Kellogg (Northwestern University), University of Chicago, Harvard, and MIT. We recruit regularly, and I think due to the size of our business, which comprises a number of small and middle-sized companies, if people have talent they have a chance to grow rapidly. Young people with talent are given opportunities quite quickly.

We also provide all sorts of training to develop people. I think the rest of it is really the atmosphere within Lafarge where we put great emphasis on the individuals and the way we care about each individual, the way we listen to people, and the way we create the right environment where work and development are at the core. There are no politics. People like that.

CA: Does that include employees at the plant level?

PR: Oh, yes. The EITs usually start at the plant level. Some of the high-potential graduates are geared more at the corporate or regional level, but the rest are definitely at the plant level. We keep saying it, but our mission is to be a step ahead of the profession, and to do that, we need to have the best talent. We're working hard to attract and recruit world-class candidates and then train them when they're with us. I think you're right when you say that our industry needs to work harder to recruit and retain talent. Traditionally, we've had very competent engineers geared toward running our plants. Now, I think we need more people open to marketing and management.

CA: What is the Advance Performance Program?

PR: Earlier, when we discussed growth strategy, I talked about performance improvement programs. Advance is the name of our proprietary program specifically focused on the cement division. While performance improvements initiatives are not new to the division, Advance takes a global, targeted approach to performance. It comprises all aspects of the business and introduces common operating methods as well as tools in sharing best practices, using a common language and benchmarking for continuous improvement.

Advance grew from a similar worldwide program in ready-mixed concrete. In these programs, we are focused primarily on delivering higher performance and expanding the company through disciplined growth and development, and intensified customer orientation. We look to leverage key strategic, operational, cost and revenue drivers in each product segment to improve the quality of our products and services. At the same time, we are looking to alleviate cost impacts and market pressures on our financial results.

Advance is a very powerful tool and a massive worldwide project for cement. As I said earlier, these performance programs are mobilizing the whole organization with shared concepts and shared measurements, so that we can track ourselves from year to year or from month to month, whatever is the scale. Everybody's working on performance, and I don't know of any other company, at least in our area, which does it in such a sophisticated, organized and disciplined manner.

CA: Is this a relatively new program?

PR: Advance was launched almost two years ago. But the model was not new. The program for ready-mix launched in 1997; in aggregates, 1999; and for asphalt and paving, 2001.

CA: Was that around the time of the restructuring?

PR: No. This was not a result of the restructuring of Blue Circle. But the basic practices of our performance-improvement programs in standardizing a common language for each product line, sharing best practices and setting up standards by which to be measured certainly facilitate the integration of new businesses. In the case of Blue Circle in North America, we had set standards, set benchmarking and a set language in place, so the process of integration was much easier to achieve.

CA: Is there anything in terms of customer service that separates you from some of your competitors?

PR: We're proud of what we're doing. We spent much of last year expanding the use of market segmentation analyses to increase our understanding of our customers. This knowledge will enable us to tailor our product and technical service offerings to meet specific client situations and create additional value for our customers.

I think our industry needs to move from the traditional, so-called commodity orientation, which is a volume-type strategy where people compete on price, and move towards a world of superior service and quality solutions. That's happening in other industries and will happen in ours. We want to be the leader in doing that.