LafargeHolcim admits payments to armed groups in Syria

17 March 2017

The world's largest cement maker LafargeHolcim said it was well positioned to profit from substantial US infrastructure spending after confessing the company paid protection money to armed groups in Syria to keep a factory running.

Company chief executive Eric Olsen said the Swiss-French company, which is the leading cement producer in the US, would stand to make significant gains following president Donald Trump’s announcement that he would seek approval from Congress for a $1tn infrastructure bill.

Olsen told CNBC Trump’s plans to boost the country’s infrastructure would also boost the construction industry for years to come.

“We believe we stand to benefit very well from these investments going forward … a trillion dollars of investment in infrastructure is a real commitment,” he said.

“I think the important thing to remember about the US is that, yes there is going to be, we believe, a big commitment and a big increase in infrastructure investment but as well the overall cycle in our industry is on the upswing and we would expect this upswing to continue to be that way at least for the next three, four or even five years.”

According to Reuters, LafargeHolcim’s outlook followed better-than-expected earning figures in the final three months of 2016 with the company reporting adjusted earnings before interest, tax, depreciation and renumeration of 1.61bn Swiss francs ($1.59bn), which beat the average analyst forecast of 1.52bn francs.

Olsen added the company had 6m tonnes of spare capacity to take advantage of the upturn, including a new plant in upstate New York, due to open in the next few weeks, and would be interested in working on Trump’s planned border wall with Mexico.

According to LA Times, analysts have estimated around $1bn worth of concrete and cement would be required to build the wall. More than 600 firms have expressed an interest in bidding for contracts to construct the wall.

The chief executive's comments come in the wake of the company admitting that its staff in Syria paid armed groups in return for being able to operate one of its now-closed cement plants, including ensuring the safety of employees.

Last year the cement maker had rejected suggestions it had financed terrorism in the war-torn country after two human rights groups in Paris filed a legal complaint against Lafarge, claiming that some of its work in Syria may have made it complicit in financing Islamic State and war crimes.

The cement giant responded to the allegations, made in numerous publications on the back of the legal complaint, by launching an internal investigation.

The independent investigation, supervised by its board’s finance and audit committee, found that the then Syrian branch of the then Lafarge company—before its merger with Holcim—had dealt with armed groups in 2013 before evacuating its factory in northern Syria, located 150km northeast of Aleppo in 2014.

“It appears from the investigation that the local company provided funds to third parties to work out arrangements with a number of these armed group, including sanctioned parties, in order to maintain operations and ensure safe passage of employees and supplies to and from the plant,” it said.

LafargeHolcim said the investigation was only able to ascertain that Lafarge Syria had paid a middleman to ensure the security of its plant but failed to identify the armed groups that received the money.

“In hindsight, the measures required to continue operations at the plant were unacceptable … the investigation revealed significant errors of judgement that are inconsistent with the applicable code of conduct,” it said.

Olsen told CNBC that in response to the scandal, LafargeHolcim had approved the creation of a new Ethics, Integrity and Risk Committee; supervised by a member of the Executive Committee, and confirmed it would step up its risk assessment of high-risk third parties and joint venture partners.

“For us at LafargeHolcim, the code of business conduct is absolutely uncompromising,” he said. 

“We will take all the necessary measures to address this situation.”

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