HOW DO WE GET THERE?
Core operating principles
CORE PRINCIPLES
RATIONALE
BUSINESS MODEL
1.
We own quarries and lime, as their fixed costs are manageable and barriers to entry are high
THIS GIVES US PRICING POWER
-> WE CALL THIS 'INVEST'
2.
We help and empower local managers to become best in class operators
THIS GIVES US COST CONTROL
WE CALL THIS 'IMPROVE'
3.
We seek to sell everything we quarry and add downstream activities only locally
THIS GIVES US MARGIN EXPANSION
WE CALL THIS 'INTEGRATE'
4.
We confront industrial challenges be it footprint or product related
THIS GIVES US A COMPETITIVE EDGE
WE CALL THIS 'INNOVATE'
Business Model
Core operating principles
CORE PRINCIPLES
CONVENTIONAL ANSWERS
CONVENTIONAL STRATEGY
1st
Construction materials, and industrial minerals evolve with GDP
MAXIMISE VALUE CHAIN EXPOSURE
VERTICAL INTEGRATION
2nd
Always aim to have revenue growth ahead of GDP growth
WE NEED PRICING POWER
WE FIGHT FOR MARKET SHARE
3rd
Always aim to have cost growth lag GDP growth
WE FIND COST SYNERGIES
CENTRALISE TO CUT HEADCOUNT
Business Model
Key Deductions
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CASE FOR INTEGRATED BUSINESS ACROSS ECONOMIC CYCLE
1st
Fighting for market share naturally implies a Volume driven strategy
PRIORITISE VOLUMES OVER PRICE AND OVER COST
2nd
If you have a Volume driven strategy you cannot have real sustained Pricing Power
WHICH WILL LIMIT ITS PRICE RISES TO GDP GROWTH AT BEST
3rd
In a trade-off between Cost and Volume, Volume wins to protect Market Share
WHILE ITS COST BASE RISES FASTER, TO PROTECT VOLUMES
→ MARGIN EROSION AND SHAREHOLDER VALUE DESTRUCTION
Business Model
Conclusions
KEY DEDUCTIONS
1.
Quarries are the asset that drive the strategy, not RMX, not cement…
Therefore, you work using platforms of locally compatible assets/businesses
2.
Therefore, you integrate horizontally across the spectrum of products
You integrate along the value chain only when it generates the right returns
3.
You compete locally where proximity and service matter
You have pricing power and cost synergies that are not secondary to volumes