LafargeHolcim Ltd. Chief Executive Officer Eric Olsen has resigned amid an investigation into payments the company made to keep a cement plant operating in war-torn Syria, funds that may have ended up in the hands of Islamic State.
“The role and potential implication of Eric Olsen has been a point of attention,” the Jona, Switzerland-based company said in a statement Monday, adding that the board has concluded the CEO was not responsible nor thought to be aware of any wrongdoings. In a separate statement, the company said Olsen will leave on July 15, with Chairman Beat Hess named interim CEO during the search for a successor.
“This is another setback in a long series of bad decisions for Holcim,” Bernstein analyst Phil Roseberg wrote in a note, adding that further changes could be made to the board. The resulting “management vacuum at this time is likely to set back their already ambitious goals.”
Shares rose 0.5 percent to 58.25 francs at 09:06 a.m. in Zurich.
The departure of Olsen comes after LafargeHolcim said an internal investigation found “significant errors of judgement” after money was paid to armed Syrian groups to keep a cement plant operating in the country. While local and regional managers made the decisions, “selected members of group management were aware,” the company said.
The payments were made by Lafarge SA, the French company that merged with Switzerland’s Holcim in July 2015 to become the world’s biggest cement maker. Olsen took the helm when the companies combined, moving from Lafarge where he was executive vice president of operations.
The controversy over the Syria dealings escalated when France’s Economy Ministry confirmed in January it had filed a complaint with prosecutors the previous September against LafargeHolcim activities in Syria. The company confirmed Monday legal proceedings continue in France.
An internal company probe found funds were given to third parties who then made arrangements with a number of groups, including “sanctioned parties.” The company said the payments were unacceptable. Islamic State fighters seized the plant in September 2014.
On Monday, LafargeHolcim said operating a plant in a war zone and the “can-do” approach to maintain operations led those involved in the running of the plant to “seriously misjudge” the situation.
A change at the helm at LafargeHolcim was decided just as Olsen was working to capture promised benefits of the merger. Last month he signaled optimism about growth in some markets including the U.S. and said the company is expecting double-digit like-for-like increase in a key measure of profit. The perceived improvement came after he had struggled to convince investors of the benefits of the merger.
“It is extremely disappointing that Eric Olsen has to leave at a time, when the company is gaining traction and delivering on targeted synergies,” Vontobel analyst Bernd Pomrehn wrote in a note. The cement maker’s decision to create an ethics, integrity and risks committee after the Syria issue arose “came probably too late.”
‘Strong Tensions’
Olsen, who has both French and U.S. nationality, joined Lafarge in 1999. He was a compromise candidate after Holcim demanded changes to an initial merger agreement that would have installed Lafarge chief Bruno Lafont as head of the new entity. LafargeHolcim said in March that Lafont won’t stand for re-election to the board.
The resignation “is driven by my conviction that it will contribute to addressing strong tensions that have recently arisen around the Syria case,” Olsen said in the statement. “While I was absolutely not involved in, nor even aware of, any wrongdoing I believe my departure will contribute to bringing back serenity to a company that has been exposed for months on this case.”
By: Alice Baghdjian (Bloomberg News).
Photo: LafargeHolcim Foundation.
Review: Emerging Market Formulations & Research Unit, Flagship Records.