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**As filed with the Securities and Exchange Commission on March 25, 2005**

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**SECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549**

**FORM 20-F**

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
or
ANNUAL REPORT PURSUANT          TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2004

or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
**LAFARGE**(Exact name of Registrant as specified in its charter)   **N/A** **Republic of France**(Translation of Registrant’s (Jurisdiction of incorporationname into English) or organization)
**61, rue des Belles Feuilles, 75116 Paris, France**(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
  Name of each exchangeTitle of each class: on which registered:**American Depositary Shares,****each representing one-fourth of an ordinary share,****par value 4 euros per share.** **The New York Stock Exchange****Ordinary Shares, par value 4 euros per share ***      *listed, not for trading or quotation purposes, but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission
Securities registered or to be registered pursuant to Section 12(g) of the Act: **None**

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: **None**

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
   **At December 31, 2004**     **Ordinary Shares**  **170,919,078** 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

Yes             No 

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17             Item 18 

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**TABLE OF CONTENTS**
    **Page**    **PRESENTATION OF INFORMATION**  5     **CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS** 5       **PART I**       **Item 1 -** **Identity of Directors, Senior Management and Advisers** **6**     **Item 2 -** **Offer Statistics and Expected Timetable** **6**     **Item 3 -** **Key Information** **6**  Selected Consolidated Financial Data 6  Exchange Rate Information 8  Risk Factors 9     **Item 4 -** **Information on Lafarge** **15**  Business Overview 15  Corporate Information and History and Development of Lafarge 16  Recent Events 16  Our Organizational Structure 20  Cement 21  Aggregates and Concrete 35  Roofing 41  Gypsum 47     **Item 5 -** **Operating and Financial Review and Prospects** **59**  Overview 59  Results of Operations for the Fiscal Years ended December 31, 2004 and 2003 64  Results of Operations for the Fiscal Years ended December 31, 2003 and 2002 76  Liquidity and Capital Resources 89  Forward Looking Discussion of Available Trend Information 96  Transition to IFRS 97     **Item 6 -** **Directors, Senior Management and Employees** **112**  Board of Directors 112  Executive Officers 117  Employees 124  Employee Share Ownership 125     **Item 7 -** **Major Shareholders and Related Party Transactions** **128**  Major Shareholders 128  Related Party Transactions 129     **Item 8 -** **Financial Information** **131**     **Item 9 -** **The Listing** **131**  Listing Details 131  Markets 133     **Item 10 -** **Additional Information** **134**  Description of Share Capital 134  By-laws (statuts) 134  Form, Holding and transfer of shares 137  Material contracts 141  Taxation 142
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    **Page**    **Item 11 -** **Quantitative and Qualitative Disclosures About Market Risk** **150**     **Item 12 -** **Description of Securities other than Equity Securities** **153**       **PART II**       **Item 13 -** **Defaults, Dividend Arrearages and Delinquencies** **154**     **Item 14 -** **Material Modifications to the Rights of Security Holders and Use of Proceeds** **154**     **Item 15 -** **Controls and Procedures** **154**     **Item 16 -** **[Reserved]** **155**     **Item 16A -** **Audit Committee Financial Expert** **155**     **Item 16B -** **Code of Ethics** **155**     **Item 16C -** **Principal Accountant Fees and Services** **155**     **Item 16D -** **Exemptions from the Listing Standards for Audit Committees** **156**     **Item 16E -** **Purchases of Equity Securities by the Issuer and Affiliated Purchasers** **156**       **PART III**       **Item 17 -** **Financial Statements** **157**     **Item 18 -** **Financial Statements** **157**     **Item 19 -** **Exhibits** **158**
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**PRESENTATION OF INFORMATION**

Throughout this discussion, when we refer to the “Company” or “Lafarge S.A.”, we mean our parent company Lafarge, a *société anonyme* organized under French law, and when we refer to the “Group” or “Lafarge”, we mean Lafarge S.A. and its consolidatedsubsidiaries.

All references herein to “United States”, the “U.S.” or the “U.S.A.” are to the United States of America, references to the “E.U.” are to the European Union and references to “France” are to the Republic of France.

All references herein to “U.S. dollars” or “$” are to the currency of the United States, unless otherwise indicated; references to “euro” or “€” are to the currency of the European Union member states participating in the European Monetary Union.

We maintain and publish statistical information relating to our business in metric tons or “tonnes”; one “tonne” equals 1,000 kilograms or 2,204 pounds.

Various amounts and percentages in this annual report have been rounded and, accordingly, may not total 100%.

We publish our consolidated financial statements in euro. Solely for the convenience of the reader, this annual report contains certain translations into U.S. dollars of amounts in euros at the December 31, 2004 Noon Buying Rate of 1 euro = $1.3538. As used in thisreport, the term “Noon Buying Rate” refers to the rate of exchange for the euro, expressed in U.S. dollars per euro, as announced by the Federal Reserve Bank of New York for customs purposes as the rate in the City of New York for cable transfers in foreign currencies.Such rate is not necessarily the rate we used in the preparation of our consolidated financial statements included elsewhere in this registration statement. No representation is made that the euro amounts have been, could have been or could be converted into U.S. dollars at therates indicated or at any other rates.

As of March 23, 2005, the Noon Buying    Rate was 1 euro = $1.3005.

For a summary of differences between accounting principles we have adopted and U.S. generally accepted accounting principles (“U.S. GAAP”), see Note 30 to our consolidated financial statements included elsewhere in this annual report.

**CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**

This annual report contains forward-looking statements regarding prices and demand for the Group’s products, the Group’s financial results, the Group’s plans for divestitures and geographic expansion and certain other matters. When used in this report, the words“aim(s),” “expect(s),” “intend(s),” “will,” “may,” “believe(s),” “anticipate(s)”,“seeks” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materiallyfrom those projected. Specifically, statements herein regarding our future strategy, plans, product and process developments, facility expansion and improvements, synergies, acquisitions, partnerships and general business prospects are subject to uncertainty arising fromnumerous factors outside our control, including market conditions, raw material prices, currency fluctuations, customer demand, the actions of competitors and regulators, technological developments and other factors. Readers are cautioned not to place undue reliance on theseforward-looking statements, which speak only as of the date of this annual report. We do not intend, except as required by law, to update any forward-looking statements set forth in this annual report to reflect new information or subsequent events or circumstances.

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**PART I**
**ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**
Not applicable.
**ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE**
Not applicable.
**ITEM 3. KEY INFORMATION** **Selected Consolidated Financial Data**
You should read the following selected consolidated financial data together with the section entitled “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements.

The table below sets forth selected consolidated financial data at and for each of the five years ended December 31, 2004, 2003, 2002, 2001 and 2000. The financial information presented in this summary is derived from our consolidated financial statements, which havebeen audited by Deloitte & Associés. The audited consolidated financial statements at December 31, 2004, 2003 and 2002 appear in Item 18 of this report.

The consolidated financial statements and the notes thereto have been prepared in accordance with the provisions of French accounting legislation and standards (“French GAAP”), which differs from accounting principles generally accepted in the United States (“U.S.GAAP”) in certain significant respects. For a discussion of significant differences between U.S. GAAP and French GAAP as they relate to our consolidated financial statements and a reconciliation to U.S. GAAP of net income and shareholders’ equity, please refer to Notes 30through 33 to our consolidated financial statements.

As of January 1, 2002, the share of net income of equity affiliates determined in accordance with equity method consolidation principles is shown in the Group consolidated statement of income on a specific line “share of net income of equity affiliates”. Prior to theadoption of this presentation, the company’s share of net income of equity affiliates was presented in the following line-items: “Operating income on ordinary activities”, “Gains on disposals, net”, “Other income (expenses), net”, “Financial expenses, net” and “Income tax”.The presentation of the consolidated financial statements of income for 2000 and 2001 has been revised for comparative purposes in the table below.

Beginning January 1, 2002, the historical cost of cement plant assets have been reclassified into specific cost categories based upon their distinct characteristics. Each cost category represents cement plant components with specific useful lives. This new definition wasbased on a detailed technical study performed by the company. Prior to January 1, 2002, cement plant assets had been depreciated over their estimated useful lives, using a broader definition of cost classification. The new system of classifying costs has been appliedprospectively as of January 1, 2002. On average, for a new cement plant, this change in estimate has resulted in increasing the depreciable useful life from 20 years to 28 years, which more closely reflects actual experience with modern cement plants.

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  **At          or for the year ended December 31,**   **2004** **2003** **2002** **2001** **2000**   **(in          millions, except per share and share data)**   **$          (a)** **€**** ****€**** ****€**** ****€**** ****€** **STATEMENTS            OF INCOME**                   **French            GAAP**                   Sales  19,543  14,436  13,658  14,610  13,698  12,216 Operating          income on ordinary activities  2,875  2,124  1,934  2,132  1,934  1,804 Operating          income  2,647  1,955  2,056  1,823  2,056  1,833 Income          before share of net income of equity affiliates, amortization of goodwill          and minority interests  1,612  1,191  1,063  854  1,144  1,009 Share          of net income of equity affiliates (b)  100  74  37  33  18  50 Amortization          of goodwill  (180) (133) (135) (158) (142) (120)Minority          interests  (357) (264) (237) (273) (270) (213)Net          income  1,175  868  728  456  750  726 Earnings          per share — basic  6.98  5.16  4.92  3.52  5.97  6.78 Earnings          per share — diluted  6.77  5.00  4.77  3.49  5.85  6.69 Average          number of shares (in thousands)  168,253  168,253  147,949  129,629  125,616  107,098 **U.S.            GAAP**                   Sales  18,102  13,371  12,468  13,406  12,434  10,857 Operating          income  2,452  1,811  1,854  1,580  1,403  1,312 Net          income  1,336  987  831  436  702  482 Earnings          per share — basic  7.99  5.90  5.66  3.36  5.57  4.43 Earnings          per share — diluted  7.72  5.70  5.45  3.34  5.47  4.36 Average          number of shares (in thousands)  167,217  167,217  146,891  129,629  125,974  108,779                     **BALANCE            SHEETS**                                       **French            GAAP**                   Long-term          assets  25,252  18,653  19,048  21,168  23,562  15,454 Current          assets  8,284  6,119  5,787  5,471  6,340  5,443 **Total            assets**  **33,536**  **24,772**  **24,835**  **26,639**  **29,902**  **20,897** Shareholders’ equity  11,476  8,477  8,185  6,981  7,882  6,043 Long-term          liabilities  16,522  12,204  12,406  15,461  16,380  11,397 Current          liabilities  5,538  4,091  4,244  4,197  5,640  3,457 **Total            shareholders’ equity and liabilities**  **33,536**  **24,772**  **24,835**  **26,639**  **29,902**  **20,897** **U.S.            GAAP**                   Current          assets  7,443  5,498  5,252  5,096  5,817  4,735 Long-term          assets  25,826  19,077  19,046  21,302  23,872  15,742 **Total            assets**  **33,269**  **24,575**  **24,298**  **26,398**  **29,689**  **20,477** Current          liabilities  5,056  3,735  3,968  3,864  5,345  3,370 Long-term          liabilities  13,992  10,335  10,767  14,204  14,332  9,474 Minority          Interests  3,038  2,244  2,063  1,936  2,201  1,324 Shareholders’ equity  11,183  8,261  7,500  6,394  7,811  6,309 **Total            liabilities and shareholders’ equity**  **33,269**  **24,575**  **24,298**  **26,398**  **29,689**  **20,477**                     **STATEMENTS            OF CASH FLOWS**                   **French            GAAP**                   Net          cash provided by operating activities  2,350  1,736  2,089  1,791  1,842  1,484 Net          cash used in investing activities  (1,209) (893) (673) (774) (4,679) (2,417)Net          cash (used in) provided by financing activities  (1,074) (793) (866) (926) 2,310  1,602 Increase          (decrease) in cash and cash equivalents  67  50  550  91  (527) 669 **U.S.            GAAP**                   Net          cash provided by operating activities  2,004  1,480  1,763  1,555  1,602  1,155 Net          cash used in investing activities  (899) (664) (511) (490) (3,927) (2,698)Net          cash (used in) provided by financing activities  (1,094) (808) (775) (953) 2,372  1,517 Net          effect of foreign currency translation on cash and cash equivalents  (28) (21) (79) (170) (6) 10 (Decrease)          increase in cash and cash equivalents  (17) (13) 398  (58) 41  (16)                     (a)Amounts in $ presented          in the table have been translated solely for the convenience of the          reader using the Noon Buying Rate on December 31, 2004, of 1 euro =          $1.3538.(b)As of January 1, 2002,          the share of net income of equity affiliates determined in accordance          with equity method consolidation principles is shown in “Share          of net income of equity affiliates”. The presentation of the consolidated          financial statements of income for 2000 and 2001 has been revised for          comparative purposes in the table above.
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The following table indicates the      dividend amount per share we paid for the years 2003, 2002, 2001 and 2000.      The table also discloses the dividend amount per share for 2004 proposed      by our Board of Directors for approval at the annual general meeting of      shareholders to be held on May 25, 2005. The table shows dividend amounts      in euros, together with their U.S. dollar equivalents translated for convenience      at the December 31, 2004 Noon Buying Rate of 1 euro = $1.3538, for each      of the years indicated. Shareholders who are U.S. residents should be aware      that they will be subject to French withholding tax on dividends received.      See “Item 10. Additional Information — Taxation”. Dividends      paid on fully paid-up shares that have been held by the same shareholders      in registered form for at least two years are increased by 10% over dividends      paid on other shares. The number of shares eligible to such increased dividend      that can be held by one shareholder is limited to 0.5% of all outstanding      shares, at the end of the fiscal year for which the dividend is paid.

 
  **2004*** **2003** **2002** **2001** **2000**   **€**** ****$**** ****€**** ****$**** ****€**** ****$**** ****€**** ****$**** ****€**** ****$** Total          Dividend Payment (in millions) 408 552 383 519 303 410 297 402 273 370 Base          Dividend per Share 2.40 3.25 2.30 3.11 2.30 3.11 2.30 3.11 2.20 2.98 Tax          Credit on Base Dividend per Share** — — 1.15 1.56 1.15 1.56 1.15 1.56 1.10 1.49 Increased          Dividend per Share 2.64 3.57 2.53 3.43 2.53 3.43 2.53 3.43 2.42 3.28 Tax          Credit on Increased Dividend        per Share** — — 1.27 1.72 1.27 1.72 1.27 1.72 1.21 1.64  *Proposed dividend.**For information regarding          recent changes in French tax law concerning the tax credit on base          dividend *(avoir fiscal)*, see “Item 10. Additionnal Information — Taxation — French          Taxation — *Avoir fiscal”.* **Exchange            Rate Information**
The following table sets forth,      for the periods and dates indicated, certain information concerning the      Noon Buying Rate in New York City as defined by the Federal Reserve Bank      of New York.
  **$           per €1.00**   **Year/period****Closing****Rate** **Average****Rate(1)** **High** **Low**       **Yearly            rates**             2000  0.94  0.92  1.03  0.83 2001  0.89  0.89  0.95  0.84 2002  1.05  0.95  1.05  0.86 2003  1.26  1,13  1.17  1.08 2004  1.35  1.24  1.36  1.18 **Monthly            rates**             September          2004  1.24  1.22  1.24  1.21 October          2004  1.27  1.25  1.28  1.23 November          2004  1.33  1.30  1.33  1.27 December          2004  1.35  1.34  1.36  1.32 January          2005  1.30  1.31  1.35  1.30 February          2005  1.32  1.30  1.32  1.28 March          2005 (through March 23)  1.30  1.33  1.35  1.30                (1)In the case of a year or          partial year, the average of the Noon Buying Rates on the last business          day of each month during such year or partial year; in the case of          a month or partial month, the average of the Noon Buying Rates on the          business days occurring during such month or partial month.
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**Risk Factors** **Our results are dependent            on the level of activity in the construction sector. The construction            sector tends to be cyclical.**
In each of our operating Divisions      our business activity is dependent on the level of activity in the construction      sector in each of the geographic markets in which we operate. The construction      industry in a given geographic market tends to be cyclical, especially      in mature economies, and dependent on the level of residential and commercial      construction and the level of infrastructure spending. The construction      industry is sensitive to factors such as interest rates, and a downturn      in economic activity in a particular economy may lead to a recession in      the construction industry. In addition, the level of construction activity      can fall even if the economy in general is growing. While we believe that      our geographical diversification is the best way to ensure stability of      returns, our results of operations and profitability could be adversely      affected by a downturn in construction activity on a global scale or in      a significant market in which we operate.
**Demand for our products            is seasonal because climatic conditions affect the level of activity            in the construction sector. Abnormal climatic conditions can adversely            affect our results.**
Adverse climatic conditions, such      as cold weather, snow and heavy or sustained rainfall generally reduce      the level of construction activity and result in a reduction in demand      for our products. Thus, demand for our products is seasonal and tends to      be lower in the winter months in temperate countries and in the rainy season      in tropical countries. We usually experience a reduction in sales during      the first quarter reflecting the effect of the winter season in our principal      markets in Western Europe and North America and an increase in sales in      the second and third quarters reflecting the effect of the summer season.

If these adverse climatic conditions      present unusual intensity, occur at abnormal periods or last longer than      usual in major geographic markets, especially during peak construction      periods, this could have a material adverse effect on our results of operations      and profitability.
**We operate in competitive            markets, which could adversely affect our results of operations and            profitability.**
The competitive environment in      which we operate can be significantly affected by regional factors, such      as the number of competitors and production capacity in the regional market,      the proximity of natural resources to the regional market and economic      conditions and product demand in the regional market. In addition, the      pricing policies of competitors and the entry of new competitors into the      regional markets in which we operate can have an adverse effect on demand      for our products and on our results of operations and profitability.
**Our growth strategy            exposes us to risks in emerging markets.**
We classify all countries outside      of our Western Europe and North America geographic sectors, with the exception      of Japan, Australia and New Zealand, as emerging markets. In 2004, we generated      approximately 30% of our revenues in emerging markets. The emerging markets      in which we operate, in order of revenues generated in 2004 include: South      Africa, South Korea, Nigeria, Malaysia, Poland, Chile, India, Brazil, Jordan,      the Philippines, Romania, Turkey, Morocco, China, Cameroon, Russia, Kenya,      Venezuela, the Czech Republic, Indonesia, Serbia, Uganda, Sri Lanka, Slovenia,      Singapore, Honduras, Egypt, Zambia, Ukraine, Mexico, Mauritus, Zimbabwe,      Hungary, Tanzania, Thailand, Benin, Slovakia, Malawi, Croatia, and Moldavia.      We believe that in the long term growth in the construction sector in emerging      markets will substantially exceed growth in developed countries. We have      steadily increased our presence in emerging economies and expect to continue      to generate an increasing portion of our revenues in emerging markets.

Our expansion in emerging markets      exposes us to risks which we do not face in North America or Western Europe.      In many of these markets, the legal system is less certain than the legal      systems in North America and Western Europe, and when acquiring interests      in or purchasing companies in emerging markets, we can become exposed to      risks with regard to the enforceability of our acquisition contracts and      the presence of liabilities, such as liens and mortgages, which are not      necessarily recorded in the public records.

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In addition, in some countries, particularly    in the former U.S.S.R. and its former satellite countries, the establishment    of accounts compatible with generally accepted accounting practices in developed    countries may take time.

Once we have established ourselves      in emerging markets we face additional risks. Emerging markets are more      likely to suffer from high volatility in gross domestic product and interest      rates, which may negatively affect the level of construction activity and      our results of operations in a given market. Emerging markets may also      suffer from factors such as high inflation and unstable exchange rates      and interest rates, which may negatively affect the financial results of      our operating subsidiaries in a given market as reported in euros. Instability      in an emerging market can lead to restrictions on currency movements which      may adversely affect our emerging market operating subsidiaries’ ability      to pay dividends and restrictions on imports of raw materials and machinery,      which may adversely affect our emerging market operating subsidiaries’ ongoing      maintenance and capital expenditure programs.

Recent examples of problems in      the past few years include the political, economic and financial crisis      in Venezuela, high volatility in gross domestic product in many emerging      Asian countries, such as Indonesia and the Philippines, extremely high      inflation rates in Turkey and unstable exchange rates with respect to the      Brazilian real, Venezuelan bolivar, Egyptian pound and Turkish lira. Other      risks presented by emerging markets include civil disturbances, nationalization      and expropriation of private assets, the imposition of taxes or other payments      by foreign governments or agencies and other adverse actions or restrictions      imposed by foreign governments.

Any one of these developments in      an emerging market in which we have a significant presence could result      in lower profits and/or a loss in value of our assets. This could lead      to a reduction in dividends and also adversely affect our stock price.      There can be no assurance that our financial condition and results of operations      will not also be materially adversely affected in other ways through our      exposure to emerging markets.
**Changes in exchange            rates could have a material adverse effect on our financial condition            and results of operations.**
In the year ended December 31,      2004, approximately 70% of our revenues were earned in currencies other      than the euro and a significant portion of our revenues were denominated      in U.S. dollars (18%). In addition, 68% of our assets are located outside      the member states of the European Monetary Union.

Since our results are reported      in euros, exchange rate movements may affect our reported profits, assets,      equity and debt. This effect may be positive or negative depending on the      nature of the actual exchange rate movement and the nature of any currency      hedging instruments that we have put in place. Fluctuations in exchange      rates could have a material adverse effect on our financial condition and      results of operations. As an example, the appreciation of the euro against      the majority of other currencies in 2004 had a significant impact on our      reported results of operations. See “Item 5. Operating and Financial      Review and Prospects”.
**Our acquisition strategy            may be unsuccessful due to an inability to identify suitable acquisition            targets and to integrate acquired companies into our business, which            could have a material adverse effect on our business, financial condition,            results of operations and cash flows.**
We plan to continue making selective      acquisitions to strengthen and develop our existing activities. The successful      implementation of our acquisition strategy depends on a range of factors,      including our ability to:
 •identify appropriate opportunities;    •complete acquisitions at          an appropriate cost; and    •achieve an acceptable rate          of return from our acquisitions, including past acquisitions.
There may also be substantial challenges      or delays in integrating and adding value to the businesses we acquire.      In addition, the costs of integration, which are difficult to predict with      precision, could be material and the projected synergies resulting from      such acquisitions may not be realized. Material costs or delays in connection      with the integration of the operations that we acquire or the inability      to realize synergies from

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those acquisitions could have a material    adverse effect on our business, financial condition and results of operations.
 **Our share price may            react negatively to future acquisitions and investments.**
As part of our business strategy,      we intend to continue to acquire or make strategic investments in additional      companies to complement and expand our activities and accelerate our growth.      Announcements concerning potential acquisitions and investments could be      made at any time. We may pay for part of these acquisitions and investments      with our shares. These acquisitions and investments, if they occur, may      have a dilutive effect for existing shareholders and, whether they are      paid for in cash or shares, may cause our share price to fall.
**We do not have a controlling            interest in certain of the businesses in which we have invested and            in the future we may invest in businesses in which we will not have            a controlling interest. In addition, we are subject to restrictions            due to minority interests in certain of our consolidated subsidiaries.**
In certain of our operations, we      have a significant but not controlling interest. Under the governing documents      for certain of these partnerships and corporations, certain key matters      such as the approval of business plans and decisions as to the timing and      amount of cash distributions may require the consent of our partners or      may be approved without our consent. These limitations could make it difficult      for us to pursue our Group objectives for these investments.

We conduct our business through      subsidiaries. In some cases, minority shareholders hold significant interests      in our subsidiaries. Various disadvantages may result from the participation      of minority shareholders whose interests may not always coincide with ours.      The presence of minority interests may, among other things, impede our      ability to implement organizational efficiencies and transfer cash and      assets from one subsidiary to another in order to allocate assets most      effectively.
**Increases in our leverage            and level of debt could have a material adverse effect on our operating            and financial flexibility.**
We have entered into a number of      debt agreements, which have been used to help finance the capital expenditures      and the implementation of our acquisition strategy (see “Item 5. Operating      and Financial Review and Prospects — Liquidity and Capital Resources”).      At December 31, 2004, we had consolidated debt of 8,152 million euros and      shareholders equity of 8,477 million euros, and net cash provided by operating      activities amounted to 1,736 million euros for the year ended December      31, 2004. Interest expense for the year ended December 31, 2004 amounted      to about 434 million euros or approximately 25% of our net cash provided      by operating activities during the year.

Our total debt has decreased by      543 million euros as of December 31, 2004 compared to December 31, 2003,      as a result of actions taken to improve our financial flexibility. However      to the extent our total debt materially increases, the possible negative      consequences would include:
 •Increased financial charges,          which entails, for example higher debt service costs that adversely          affect our results of operations, and allocations of increasing amounts          of cash flow for debt service;    •Possible increased costs          of future financing due to the downgrading of credit ratings issued          by rating agencies in respect of our debt, and higher exposure to interest          and exchange rate fluctuations;    •Potential restrictions          on our capital resources and/or operations imposed by lenders;
In the event any or all of the      above occur, we would have reduced flexibility to take advantage of, or      pursue, other business opportunities.

In the past, some of our debt agreements      have contained and in the future they may contain financial, operating      and other obligations that limit our operating and financial flexibility.      Our ability to comply with these obligations depends on the future performance      of our businesses. There can be no assurances that the obligations under      our debt agreements will not materially adversely affect our ability to      finance our future operations, or that they will not prevent us from engaging      in other business activities that may be in our best

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interest. See “Item 5. Operating    and Financial Review and Prospects — Liquidity and Capital Resources — Net    cash (used in) provided by financing activities” and Note 23 (e) to    our consolidated financial statements.
**Our ability to pay dividends            and repay debt depends on our ability to transfer income and dividends            from our subsidiaries.**
Lafarge S.A. is a holding company      with no significant assets other than the shares of our wholly owned and      non-wholly-owned subsidiaries. In addition, a certain number of our subsidiaries      are located in countries that have had in the recent past, or may have      in the future, regulations restricting the payment of dividends outside      of the country as a result of exchange control regulations. While in the      recent past, a very small number of subsidiaries, representing less than      5% of our revenues, were operating in countries presenting a legal risk      for repatriation of dividends, as at the date of this document, we have      not identified countries in which we operate that present such a risk.      However, there is no assurance that such risk may not exist in the future.

In addition, the dividend payments      or other transfers made by our subsidiaries to us may also be limited by      covenants in our subsidiaries’ debt agreements or be subject to various      contractual and/or tax constraints in the countries in which they operate,      which could make such payments difficult or costly. We do not believe that      any of these covenants or restrictions will have any material impact on      our ability to meet our financial obligations. However, if in the future      these restrictions are increased and we are unable to ensure the continued      transfer of dividends and other income to us from these subsidiaries, this      will impair our ability to pay dividends and make debt payments.
**Increases in energy            and fuel costs could have a material adverse effect on our results            of operations and profitability.**
Energy is a significant cost factor      in most of our operations. We protect ourselves, to a certain extent, against      the risk of energy price inflation through the ability of many of our cement      plants to switch fuel sources or to use alternative fuels, such as used      oil or tire recycling, in some of our cement plants and through the use      of long-term supply contracts for certain of our energy needs. For example,      from time to time, we contract for electricity and gas using forward contracts.      Despite these measures, recent increases or significant fluctuations in      energy and fuel costs have affected and may in the future affect our results      of operations and profitability. See subsection of Item 4 entitled “Information      on the Company — Cement — General Information Regarding Our Products,      Markets and Industry — Production and facilities information” and “Item      11. Quantitative and Qualitative Disclosures about Market Risk”.
**We are dependent on            third-party suppliers for some raw materials used in our manufacturing            processes and changes in the quantity or conditions for obtaining            these raw materials could increase our costs, which may adversely            affect our financial performance.**
Although we maintain our own reserves      of limestone, gypsum, aggregates and other materials used in our manufacturing      operations, we have increasingly turned to synthetic alternatives generated      as by-products of other industrial processes such as synthetic gypsum and      slag and fly ash which we obtain from third-party suppliers. We generally      secure our supply of these materials through long-term contracts most of      which are renewable; however, in certain cases, legal constraints require      us to contract over shorter periods. Should our existing suppliers cease      operations or stop producing these by-products, we may be obliged to secure      these materials at higher costs, which could adversely affect our profitability.
**Changes in government            policy or legislation, notably regarding zoning and the environment,            could have a material adverse effect on our business, financial condition            and results of operations.**
Our performance is affected significantly      by national and/or local government policy and legislation in the regions      and territories in which we have operations.

Many products manufactured by our      operating units are subject to government regulation in various jurisdictions      regarding their production and sale and our operating units are subject      to extensive regulation by national and local agencies concerning such      matters as zoning and environmental compliance. In addition,

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numerous governmental permits and    approvals are required for our operations. We believe that our operating    units are currently operating in substantial compliance with, or under approved    variances from, various national and local regulations in all applicable    jurisdictions. In the past, our subsidiaries have made significant capital    and maintenance expenditures to comply with zoning, water, air and solid    and hazardous waste regulations and they may be required to do so in the    future.

In addition, national governments’ policies      with regard to the development of public infrastructure and housing have      a significant effect on demand for our products and, as a result, our profitability.      Delays in the implementation of infrastructure and housing projects, due      to budgetary constraints or problems with implementation of projects, could      have a material adverse effect on our business, financial condition and      results of operations.

Changes in governmental regulations      could increase our operating costs and could have a material adverse effect      on our business, financial condition and results of operations. For example,      the European Union recently passed a directive implementing the Kyoto Protocol      on climate change that concerns our operations in Western Europe (see “Item      4. Information on the Company — Environment”).
**The price of our ADSs            and the U.S. dollar value of any dividends will be affected by fluctuations            in the U.S. dollar/euro exchange rate.**
The ADSs trade in U.S. dollars.      As the principal trading market for the shares underlying the ADSs is the      Eurolist of Euronext Paris, where the shares trade in euro, the value of      the ADSs will likely fluctuate as the U.S. dollar/euro exchange rate fluctuates.      If the value of the euro decreases against the U.S. dollar, the price at      which our ADSs trade will decrease. In addition, since any dividends that      we may declare will be denominated in euro, exchange rate fluctuations      will affect the U.S. dollar equivalent of dividends received by holders      of ADSs. See “Exchange Rate Information”, above. If the value      of the euro decreases against the U.S. dollar, the value of the U.S. dollar      equivalent of any dividend will decrease comparatively.
**You may not be able            to exercise preemptive rights for shares underlying your ADSs.**
Under French law, shareholders      have preemptive rights (“*droits préférentiels de      souscription*”) to subscribe for cash for issuances of new shares      or other securities giving rights, directly or indirectly, to acquire additional      shares on a pro rata basis. Shareholders may waive their preemptive rights      specifically in respect of any offering, either individually or collectively,      at an extraordinary general meeting. Preemptive rights, if not previously      waived, are transferable during the subscription period relating to a particular      offering of shares and may be quoted on the *Eurolist*. U.S. holders      of ADSs may not be able to exercise preemptive rights for the shares underlying      their ADSs unless a registration statement under the U.S. Securities Act      of 1933, as amended, is effective with respect to such rights or an exemption      from the registration requirements thereunder is available. We intend to      evaluate at the time of any rights offering the costs and potential liabilities      associated with any such registration statement, as well as the indirect      benefits of enabling the exercise by the holders of ADSs of the preemptive      rights associated with the shares underlying their ADSs, and any other      factors we consider appropriate at the time, and then to make a decision      as to whether to file such a registration statement. We cannot guarantee      that any registration statement would be filed, or, if filed, that it would      be declared effective. If preemptive rights cannot be exercised by an ADS      holder, JPMorgan Chase Bank, as depositary, will, if possible, sell such      holder’s preemptive rights and distribute the net proceeds of the      sale to the holder. If the depositary determines, in its discretion, that      such rights cannot be sold, the depositary may allow such rights to lapse.      In either case, ADS holders’ interest in us will be diluted and, if      the depositary allows rights to lapse, holders of ADSs will not realize      any value from the granting of preemptive rights.
**Holders of ADSs may            be subject to additional risks related to holding ADSs rather than            shares.**
Because holders of ADSs do not      hold their shares directly, they are subject to the following additional      risks:

In the event of a dividend or other      distribution, if exchange rates fluctuate during any period of time when      the depositary cannot convert a foreign currency into dollars, the ADS      holder may lose some or all of

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the value of the distribution. There    can be no assurances that the depositary will be able to convert any currency    at a specified exchange rate or sell any property, rights, shares or other    securities at a specified price, nor that any of such transactions can be    completed within a specified time period.

There can be no guarantee that      ADS holders will receive voting materials in time to instruct the depositary      to vote. It is possible that ADS holders, or persons who hold their ADSs      through brokers, dealers or other third parties, will not have the opportunity      to exercise a right to vote at all.

ADS holders may not receive copies      of all reports from us or the depositary. You may have to go to the depositary’s      offices to inspect any reports issued.

We and the depositary may amend      or terminate the deposit agreement without ADS holders’ consent in      a manner that could prejudice ADS holders.

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**ITEM 4. INFORMATION            ON LAFARGE** **Business Overview**
We believe, based on our experience      in this industry that we are the world leader in construction materials      and one of France’s major corporations in terms of sales. In the financial      year 2004, under French GAAP, we achieved sales of 14,436 million euros,      operating income on ordinary activities of 2,124 million euros and net      income of 868 million euros, and at year end had total assets amounting      to 24,772 million euros. We currently employ approximately 77,000 people      in 75 countries. Our expertise in efficient industrial production, conservation      of natural resources and respect for both society and the environment has      been implemented around the world.

Our operations are organized into      four Divisions, each of which holds a leading position in its respective      market: Cement, Aggregates & Concrete, Roofing and Gypsum. We believe,      based on our experience in these industries, that we are the largest cement      producer worldwide, with annual sales of 6,810 million euros and industrial      operations in 43 countries. We believe that we are the world’s second      largest producer of aggregates and ready mix concrete. In 2004, our Aggregates & Concrete      Division achieved annual sales of 4,747 million euros. We believe that      our Roofing Division is the world’s leading producer of concrete and      clay roofing tiles with annual sales in 2004 of 1,493 million euros, and      that our Gypsum Division is the third-largest manufacturer of gypsum wallboard      worldwide with annual sales of 1,340 million euros in 2004.

Contributions to our sales by segment      for the years ended December 31, 2004 and 2003 and the related percentage      changes between the two periods were as follows:
  **Year          ended****December 31, 2004** **%          Var.** **Year          ended****December 31, 2003** **Sales** **(in          million €)** **%** **2004/2003** **(in          million €)** **%**       Cement  6,810  47.2  6.7  6,383  46.7 Aggregates & Concrete  4,747  32.9  6.3  4,465  32.7 Roofing  1,493  10.3  (1.1) 1,510  11.1 Gypsum  1,340  9.3  12.2  1,194  8.7 Other  46  0.3  (56.6) 106  0.8 **Total**  **14,436**  **100.0**  **5.7**  **13,658**  **100.0** 
Sales by geographic area for the      years ended December 31, 2004, 2003 and 2002 were as follows:
  **Total          Sales by Geographic Area****Year ended December 31,** **Geographic            Area** **2004** **2003** **2002**     Western          Europe  6,020  5,776  6,005 North          America  3,938  3,840  4,405 Mediterranean          Basin  534  530  562 Central & Eastern          Europe  746  696  661 Latin          America  579  613  720 Africa  1,190  921  869 Asia/Pacific  1,429  1,282  1,388 **Total**  **14,436**  **13,658**  **14,610** 
Our operating structure grants      each of our Divisions responsibility for strategy and performance management      in its area of business, in the context of our strategic guidelines. The      Division-based organization allows greater decentralization and initiative,      while maintaining overall coherence with respect to policies and product      standards and allowing synergies between Divisions.

Our shares have been traded on      the Paris stock exchange since 1923 and are a component of the French CAC-40      market index since its creation. On March 23, 2005 our market capitalization      (including our treasury shares) was 12,879 million euros (based on the      closing price). Our shares are also included in the SBF 250 index and the      Dow Jones Eurostoxx 50 index.

Our shares have traded on the New      York Stock Exchange (“NYSE”) in the form of American Depositary      Shares, or ADSs under the symbol “LR” since July 23, 2001. Each      ADS represents one-fourth of one share.

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**Corporate Information            and History and Development of the Company**
We are a French limited liability      company (*société anonyme*) governed by French law.      Our commercial name is “Lafarge”. We were incorporated in 1884      under the name “J et A Pavin de Lafarge”. Currently, our by-laws      state that the duration of our company is until December 31, 2066, and      may be amended to extend our corporate life. Our registered office is located      at 61 rue des Belles Feuilles, 75116 Paris, France. We are registered under      the number “542 105 572 RCS Paris” with the registrar of the      Paris Commercial Court (*Tribunal de Commerce de Paris).*

We originated in the first half      of the nineteenth century in France as a lime exploitation enterprise founded      by Auguste Pavin de Lafarge. We have been operating internationally since      the 1860s, when we supplied lime for the building of the Suez Canal. After      growing to be France’s largest cement producer during the first part      of the twentieth century, we further developed our international profile      by expanding in North America and South America. We became one of the largest      cement manufacturers in North America after acquiring General Portland      Inc. in 1981. Today, our North American operations are conducted principally      through our 53% owned subsidiary, Lafarge North America Inc., a New York      Stock Exchange (“NYSE”) listed company.

After further external developments      namely in Western Europe, Eastern Europe around the Mediterranean Basin      and in Asia Pacific and following the acquisition of Blue Circle Industries      plc in 2001, which was then the sixth largest cement manufacturer in the      world, we became the world’s largest cement manufacturer with operations      in 39 countries.

While expanding our cement operations      internationally, we have broadened our other longstanding product lines,      aggregates (sand, gravel, calcareous and igneous materials), concrete and      gypsum. The development of the Aggregates & Concrete business progressed      significantly in 1997 with the acquisition of Redland plc, then one of      the principal manufacturer of aggregates and concrete worldwide. This acquisition      also brought us our roofing business.
**Recent            Events**        **Division** **Geographic area** **Timing** **Description**     Cement Asia-South Korea January 2004 Lafarge increased its holding        in Lafarge Halla from 39.9% up to 50.1% for a value of 57 million euros.         Cement Asia-China June 2004 Lafarge announced plans to double by 2006        the capacity of its Dujiangyan cement plant located to serve the market        of Chengdu (South West of China) for a total investment of $58 million.               In addition, Lafarge has signed an exclusive        partnership agreement for cooperation with Shui On Construction and Materials        Limited (“SOCAM”), a major player in the construction sector.        SOCAM is setting up a joint venture for a total investment of about 160        million euros to acquire two cement plants in Yunnan. Lafarge has also        an option to purchase from SOCAM, subject to certain conditions, until        July 8, 2005 a 40% interest in a joint venture to be formed between SOCAM        (80% stake) and the Yunnan Provincial Government (20% stake) which will        control assets representing 4.5 million tonnes cement capacity in the        Yunnan Province. 
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**Division** **Geographic area** **Timing** **Description**     Cement Western Europe-Spain and Portugal January and September 2004 The sale of our 40.9% participation        in Cementos Molins took the form of a limited tender offer that Cementos        Molins launched for its own shares. The transaction amounted to 265 million        euros.         Cement Asia-Vietnam October 2004 Lafarge announced the construction of a grinding        plant close to Ho Chi Minh City in Vietnam to enter service during late        2005. The investment, which will cost a total of almost $30 million for        2 years, is being made by DonaFrance, a joint venture in which Lafarge        owns a 70% interest with the remainder held by a Vietnamese building        materials company.         Cement Latin America-Honduras October 2004 A 50% owned subsidiary of Lafarge Incehsa        S.A. de CV, a majority owned subsidiary of Lafarge, acquired a cement        grinding unit in San Lorenzo for a total amount close to $15 million        (11 million euros).         Cement Latin America-Ecuador December 2004 Lafarge acquired a German capital investment        company, Finlatam V GmbH, Germany, which owns nearly 99% of the shares        of Cementos Selva Alegre, a major cement producer in Ecuador. The company        was acquired at a price of about $130 million (98 million euros) and        is free of debt.               Cementos Selva Alegre, a cement manufacturer        ranked number two in the Ecuadorean market with a 20% market share, owns        a cement plant with an annual production capacity of 640,000 tonnes.        The plant is located some 110 km north of the capital, Quito.         Cement Asia-South Korea-India- Japan January 2005 Lafarge announced the buyout of minority        interests held by the State of Wisconsin Investment Board (“SWIB”)        in its cement activities in South Korea, India and Japan, in accordance        with the partnership agreements concluded five years ago.               The transaction is worth $141 million (104        million euros) and included:               •a 20.3%        stake in Lafarge Halla Cement in South Korea, taking our total stake        to 71.4%. Lafarge Halla Cement is South Korea’s fourth-largest cement        producer, with three industrial sites and the capacity to produce 7.5    million tonnes of cement per year.               •a 23.6% stake in Lafarge India Private        Ltd, taking our total stake to 94.4%. Lafarge India Private Ltd is the        leading player in Eastern India. With total annual cement production        capacity of 5 million tonnes across two cement plants and a grinding    station. This unit supplies the Eastern Indian market.               •  a 43% stake in Lafarge Japan Holdings,        taking its total stake to 100%. Lafarge Japan Holdings owns 39.4% of        Lafarge Aso Cement Ltd, which has two cement plants and total annual    cement production capacity of 3 million tonnes. 
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**Division** **Geographic area** **Timing** **Description**     Cement,          Aggregates & Concrete North America April 2004 Lafarge Building Materials Inc.,        a wholly-owned subsidiary of Lafarge S.A. which holds the cement and        ready-mix assets formerly owned by Blue Circle in the United States,        has completed the acquisition of the assets of the Ready-Mix Concrete        and Cement Divisions of The Concrete Company of Columbus, Georgia for        a total amount 87 million euros. The Concrete Company is a major cement        importer and producer of ready-mix concrete, precast concrete and concrete        pipe, and construction aggregates in the southeastern United States.        The purchased assets include a cement import terminal with an annual        capacity of 0.9 million metric tonnes, two distribution terminals, 46        ready-mix plants with annual sales of approximately 1.2 million cubic        meters of concrete, and related equipment. Subsequently at the end of        December 2004, we divested 17 of the acquired plants for an amount of        17 million euros.         Aggregates & Concrete Western Europe-France and Switzerland May 2004 Financière Granulats, a wholly owned        subsidiary of Lafarge, acquired Hupfer Holding, a major aggregates and        ready-mix concrete producer located in the east and the center of France        and in Switzerland, for a price of 92.6 million euros, including debt        of 23.5 million euros. The assets of Hupfer Holding include 9 quarries        with a total annual capacity of 4.7 million tonnes of aggregates and        7 ready-mix plants (with a total capacity of approximately 0.3 million        cubic meters).         Aggregates & Concrete Western Europe-Spain July 2004 Readymix Asland, a 50% owned subsidiary of        Lafarge, acquired for 38.5 million euros, including debt of 6.5 million        euros, Hormigones Ciudad Real S.A. (“HORCISA”), a major aggregates        and ready-mix concrete producer. The HORCISA assets include 6 aggregates        quarries, providing important reserves of aggregates, and 6 ready mix        concrete manufacturing plants.         Roofing Central and Eastern Europe-Romania September 2004 Our 50% owned subsidiary Bramac opened its        first concrete roof tile plant in Romania.         Roofing Western Europe-United Kingdom and Belgium November 2004 Our 100% subsidiary Schiedel, Europe’s        leading manufacturer of chimney systems, acquired the British Rite-Vent        Group. The Rite-Vent take-over will enable Schiedel to double its sales        in Europe for stainless steel chimneys. At the same time Schiedel acquired        Bemal NV in Belgium to expand its market position in that country.         Gypsum Asia May 2004 Lafarge Gypsum International purchased 14%        of Lafarge Gypsum in Asia for a total amount of 34 million euros.        As a subsidiary of Lafarge Gypsum in Asia, Lafarge Boral Gypsum in Asia        is now owned 50% by Lafarge and 50% by Boral. 
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**Division** **Geographic area** **Timing** **Description**     Gypsum Western Europe-United Kingdom February 2005 Lafarge announced that it will        invest approximately 45 million euros in a new plasterboard plant        in the Midlands, which will increase its capacity by 50% in the United        Kingdom with an additional 25 million square meters. Construction will        start in 2005.         Other          operations-Lime North America December 2004 Lafarge announced that it had completed the        sale of its 40% stake in Carmeuse North America BV to Carmeuse, for $140        million (98 million euros). Lafarge had been a minority shareholder within        Carmeuse North America since 1998. **Capital expenditures,            acquisitions and divestitures in 2004**
Our acquisitions in consolidated      and non-consolidated companies represented an aggregate cash cost of 420      million euros in 2004. The most significant acquisitions included (monetary      amounts below have been converted into euros using the average yearly exchange      rates for 2004):
 •the acquisition in Ecuador          of Cementos Selva Alegre for 98 million euros. Cementos Selva Alegre          acquired at the end of 2004 will be consolidated starting January 1,          2005;    •the acquisition of The          Concrete Company of Columbus, Georgia, United States for 87 million          euros with operations in both cement and concrete;    •the acquisition of Hupfer          Holdings for 69 million euros with operations in France and Switzerland          in aggregates activities;    •the acquisition for 57          million euros of an additional 10.2% stake in Lafarge Halla Cement,          in South Korea; and    •the acquisition for 34          million euros of an additional 14% stake in the holding company Lafarge          Gypsum in Asia which controls our gypsum operations in Asia, in a joint          venture with Boral.
In addition, in 2004 we spent 783      million euros on the ongoing upgrading and modernization of our existing      industrial plants and 350 million euros in additional production capacity,      including capital expenditures on major projects such as:
 •the new plant in Bangladesh          for 32 million euros;    •the kiln in Tula, Mexico          for 22 million euros;    •the second line in Chongqing,          China for 15 million euros; and    •the kiln in Ewekoro, Nigeria          for 10 million euros,
and a variety of smaller projects    which amounted to 149 million euros in cement, 63 million euros in aggregates    and concrete, 48 million euros in roofing and 11 million euros in gypsum.

Divestitures of non industrial      and financial strategic assets in 2004 yielded 574 million euros in cash.      The most significant included:
 •the disposal of the 40.9%          stake in Cementos Molins in Spain for 265 million euros; and    •the disposal of the 40%          stake in Carmeuse North America BV for 98 million euros.
On a year to year basis, we generally      finance our capital expenditures with operating cash flows    and, to some extent, with the proceeds from divestitures.

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**Our Organizational Structure**
For details of our principal subsidiaries,      including their full legal name and country of incorporation, see Note      33 to our consolidated financial statements.

Our group comprises over 1,240      majority owned subsidiaries and approximately 230 companies in which we      have an equity participation. The large number of subsidiaries is essentially      due to the local nature of our business, our multiple installations in      75 countries and the organization of our activities into four Divisions.

The relations between Lafarge S.A.,      our group’s holding company, and our subsidiaries include a financial      component and a services component.

The financial component covers      the repatriation of dividends from our subsidiaries and the financing by      Lafarge S.A. of the activities of our subsidiaries. At December 31, 2004,      approximately 74% of the Group’s financial debt was carried by Lafarge      S.A. The Company has access to short-term and long-term financial markets      and to large banking networks for its financing and provides financing      to its subsidiaries through intercompany loans. For this purpose, the Company      uses in particular its Euro Medium Term Note program for medium to long-term      financings and its Commercial Paper program for short-term financings.      There are, however, a few exceptions to this general rule. When our subsidiaries      operate in local currencies that cannot be obtained by Lafarge S.A., local      financing is sought so as to ensure that local operations are financed      in the relevant local currency. Another situation is when there are minority      shareholders in our consolidated subsidiaries, such as our subsidiary Lafarge      North America Inc., which has access to financial markets in North America      and carries its own financings.

We also promote the cash pooling      by Lafarge S.A. of the cash generated within the Group whenever it is possible      to implement such arrangements. Lafarge S.A. is therefore in charge of      the daily consolidation of the cash located in most of our subsidiaries      located in the euro zone and the financing of their activities.

The services component covers the      provision by Lafarge S.A. of management support and technical assistance      to our operating subsidiaries. Lafarge S.A. also licences its trademarks,      patents and know-how to its subsidiaries. Technical assistance is provided      through the Central Research Laboratory and the group’s different      technical centers that are directly linked to Lafarge S.A. See the sections      of this item entitled “Research and Development” and “Intellectual      Property” for a more detailed discussion of these aspects.

While some of our listed subsidiaries      have a broadly dispersed public shareholder base, certain majority owned      subsidiaries have minority shareholders that may be industrial or financial      partners, governmental entities, employees or shareholders of the subsidiary      before its acquisition by the Group. The presence of these minority shareholders      is sometimes mandatory under local law or regulations (namely in case of      a partial privatization) or is intended to share the business risk. The      presence of these minority shareholders often leads to the implementation      of shareholder agreements that contain board membership or other similar      provisions, shareholders’ information rights and control provisions.      Our subsidiaries that are subject to these shareholder agreements represent      approximately 20% of our consolidated revenues and 23% of our consolidated      operating income on ordinary activities. We do not currently experience      any difficulties in the management of these subsidiaries vis-à-vis      our partners which could present a risk to our financial structure.

Finally, certain of our shareholder      agreements contain exit provisions to the benefit of our minority shareholders      that can be exercised at any time or at certain fixed times (See Note 26      to our consolidated financial statements) or in specific situations, namely      in case of a continuing disagreement or change of control of the relevant      subsidiary or the Group. In particular, the shareholder agreements entered      into in relation to our Cement business in Morocco and Egypt, our Gypsum      business in Asia and our Roofing business in North America (the last two      being our joint ventures with the Boral group) contain provisions that      enable our partners to buy back our shareholding in these businesses in      case of a change of control of Lafarge S.A.

*The discussion that follows        provides, with respect to each Division, the after tax return on capital        employed, which is one of the measures of profitability of our operations        used by the management. The after tax return on capital employed is the        sum of the operating income on ordinary activities after tax (which is        calculated by applying the effective tax rate for the year in question        to the Division’s operating income on*

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*ordinary activities) and the share      of net income of equity affiliates divided by the average capital invested      per Division. The calculation of the after tax return on capital employed      for year 2004 is based on the effective tax rate for the year 2003 — 28.6% — because      the effective tax rate for the year 2004 is not representative for the      purposes of this calculation. (See Notes 3(a) and 8 (b) to our consolidated      financial statements).*
**Cement**
Our Cement Division covers operations      throughout the world. In the year 2004, the companies we consolidated (global      and proportionate) had industrial operations in 43 countries. We believe      that as cement demand is closely related to the business cycle and the      level of infrastructure and construction spending, geographical diversification      is the best way to ensure growth of returns. We believe emerging markets      represent the best prospects for long-term growth in the cement industry.

Our goals for the coming years      in cement are to further enhance our operating performance in our various      geographic markets by improving operating performance through benchmarking      and transfer of best practices. We also intend to continue to participate      in the consolidation of the industry worldwide.

With sales of 6,810 million euros,      our Cement Division contributed 47.2% of our sales in 2004 and 73.8% of      our operating income on ordinary activities. The Cement Division’s      after tax return on capital employed in 2004 was 9.5%. At December 31,      2004, we had 38,202 employees in the Cement Division.

On the basis of tonnes of cement      capacity in 2004, we believe, based on our experience in this industry,      that our cement business is the world’s largest producer of cement.      At the end of 2004, the companies we consolidated (global and proportionate)      operated 114 cement plants, 20 clinker grinding plants and 6 slag grinding      stations.

In 2004, the companies we consolidated      (global and proportionate) had sales volumes of 119.4 million tonnes of      cement.
  **Cement          Sales by Destination****Year ended December 31,** **Geographic            Area** **2004** **2003** **2002**   **(in          million € except percentages)** Western          Europe  2,204  32.4% 2,099  32.9% 2,274  32.7%North          America  1,338  19.6  1,345  21.1  1,579  22.7 Central          and Eastern Europe  457  6.7  409  6.4  401  5.8 Mediterranean          Basin  430  6.3  441  6.9  455  6.6 Latin          America  372  5.5  416  6.5  502  7.2 Sub-Saharan          Africa  944  13.9  766  12.0  756  10.9 Asia  1,065  15.6  907  14.2  981  14.1      **Total**  **6,810**  **100.0****%** **6,383**  **100.0****%** **6,948**  **100.0****%**
We had sales of 3,267 million euros      in emerging markets in 2004, compared to 2,938 million euros in 2003 and      3,092 million euros in 2002. The overall percentage of our sales to emerging      markets was 48.0% in 2004 compared to 46.0% in 2003 and 44.5% in 2002.
***General information              regarding our products, markets and industry*** *Products*
Our major products are a wide range      of cements and hydraulic binders for the construction industry. Cement      is a fine powder that is the principal strength-giving and property-controlling      component of concrete. We have developed a broad-based product offering      for construction industry professionals:
 •a range of cements adapted          for use in all conditions (including cements adapted to exposure to          seawater, sulfates and hostile natural environments);    •special cements: white          cement, oil-well cements, blended silica fume, fly-ash, pozzolana and          slag cements; road surfacing hydraulic binders;    •natural lime hydraulic          binders for construction;
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 •masonry cements; and    •ground slag.
All these products are referred to as “cement” in this report.

Together with this range of products, we provide a series of associated services, such as technical support, ordering and delivery logistics, documentation, demonstrations and training.
*Production and facilities information*
The production of cement can be separated into three main stages.
 •The first step is to mix calcium carbonate, silica, alumina and iron ore in the correct proportions and grind them to produce the “raw meal”;    •This “raw meal” is then heated and calcined in a kiln at a temperature of around 1500oC, and then cooled down quickly to obtain an intermediate product in the form of a hard pellet, called “clinker”; and    •The clinker is then mixed with gypsum and finely ground to produce cement. Other cementitious materials can also be added at this stage such as slag, fly ash and pozzolana, naturally occurring volcanic cement.
There are two main processes used to produce clinker: the older, less fuel efficient, wet process and the modern dry process. In the wet process, the raw materials are mixed and ground with water to produce “slurry,” which is then heated in the kiln to produce clinker.In the dry process, the raw materials are mixed and ground without water (hence “dry”) to produce a very fine powder, which is then heated in the kiln. The dry process consumes less heat, since there is no need to eliminate the water added in the wet process. Thissubstantially reduces fuel costs. Over 85% of our cement plants use the dry process.

The raw materials required for this process (calcium carbonate, silica, alumina and iron ore) are usually present in limestone, chalk, marl, shale and clay and are generally readily available in most countries of the world. Based on historic trends we do not consider theprices of these raw materials to be volatile. Cement plants are normally built beside large deposits of these raw materials. We currently estimate we have approximately 5 billion tonnes of proven and authorized reserves of raw materials. We believe that the quantities ofauthorized reserves at each of our existing cement plants is adequate for sustainable operating levels for the planned life of each of our plants.

In addition to naturally occurring raw materials, it is sometimes possible to substitute them partially with other cementitious materials produced as by-products from other industrial processes, such as blast-furnace slag and fly ash from coal-fired power plants. The use ofslag and fly ash can improve some characteristics of cement and can also help us lower our use of capital. The amounts that can be substituted depend on the particular characteristics of the slag or fly ash and on the standards and regulations applicable to the particular type ofcement. The use of these substitute products is part of our environmental objectives of pursuing environmentally friendly solutions. We use slag and fly ash principally in our plants in North America, France, Spain, Turkey, Austria, Poland, Romania, Brazil, South Korea, India,South Africa, Greece, United Kingdom, Chile, Kenya, the Philippines and Malaysia. In 2004, the cementitious addition ratio rose to 13.2% compared to 12.0% in 2003. The use of cementitious products remains a part of our long-term development strategy.

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Cement production is capital intensive. The construction of a new dry process cement production line with a production capacity of 1 million tonnes per year (buildings, machinery and equipment) represents an investment of 50 to 160 million euros depending on the country inwhich it is located. The following table sets forth our estimate of a typical structure of grey cement production:
**Item** **Percentage of Total Cost** Raw Materials and consumables  23%Energy  28 Direct production labor  14 Maintenance  14 Other fixed or general costs  7 Depreciation  14    Total Cost including depreciation  100%   
We have placed special emphasis on becoming, and have become, more efficient in our sourcing and use of fuel. Fuel-efficiencies have been gained through improved plant design to include techniques such as using air exiting the kiln to preheat the blended rawmaterials as well as through the use of alternate fuels for firing the kiln, such as used oil or tire recycling, as a partial substitute for the oil, natural gas, coke or coal otherwise used. As an additional means of reducing energy costs, many of our cement plants are equipped toconvert from one form of fuel to another with very little interruption in production, thus avoiding dependence on a single fuel and permitting us to take advantage of price variations between fuels. We have 71 plants that use some form of alternate fuel and operate with morethan 4 different kinds of fuel. Approximately 70% of our cement plants are equipped to switch between fuel sources i.e. pet coke and coal. In 2004, alternative fuel accounted for close to 9% of the total fuel consumption in our worldwide operations. Our definition ofalternative fuels only includes combustible wastes. The availability of wastes varies widely from region to region, and in particular between developed and emerging countries. Highly degraded fossil fuels are not included in our definition of alternative fuels and we also have avery aggressive strategy to increase our use of these as well.
*Customers*
In each of our markets we sell our cement, either bulk or bagged, to several thousand unaffiliated customers. Our products are used in three major segments of the construction industry: major civil engineering products, residential and commercial construction andrenovation. Our primary customers are:
 •ready mix concrete producers;    •precast manufacturers;    •building materials wholesalers;    •construction, civil engineering, road building and excavation work contractors.
We also sell to our other Divisions, including our Aggregates & Concrete Division, but we eliminate inter-company sales in reporting sales for the Division. In 2004, sales of our Cement Division to our other Divisions represented 593 million euros, compared to 562million euros in 2003 and 573 million euros in 2002. Sales of cement are made generally pursuant to current orders from customers who purchase quantities sufficient for their immediate requirements. Our sales of cement do not typically involve long-term contractualcommitments. The amount of backlog orders, as measured by written contracts, is normally not significant.
*Market and competitive factors*
The world’s major cement markets are Asia, Western Europe and North America, and the highest growth is expected to be in emerging markets. Historically, cement consumption in a given country has been correlated to growth of per-capita income. As emergingcountries become industrialized, consumption tends to grow rapidly as a percentage of per capita income with increased expenditures on public works and housing. After a certain point of development, consumption per capita tends to taper off and may actually fall

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if the focus of development turns away from residential and commercial construction and infrastructure projects.

Demand for cement is seasonal and tends to be lower in the winter months in temperate countries and in the rainy season in tropical countries. In each country it is also closely linked to the level of public and private construction and infrastructure spending and issensitive to interest rates and business cycles. Demand for cement in specific markets also depends on local considerations such as climate, natural resources and consumer tastes (demand for cement is far more seasonal in areas with cold winters such as Canada and the mid-western United States and, for example, U.S. residential construction uses more wood and less cement and concrete than much European residential construction).

Due to its nature, cement cannot normally be transported economically on land farther than about 300 km, although by sea and inland waterway it becomes economical to transport over great distances. Price is an important factor in competition. Nonetheless, demandfor cement in any particular market is inelastic downwards in that lower prices do not typically increase market demand. Differentiation from competitors can be achieved through consistent quality over time and regular services as well as through the marketing of specialpurpose cements.

The capital-intensive nature of the cement industry together with over-capacity after the oil shocks of the 1970s led to the consolidation of the cement industry in Europe. In the 1980s, the major European cement manufacturers expanded into the United States andacquired approximately 70% of U.S. cement production. After the Asian crises, the consolidation of production into the hands of multinationals was then mirrored in Asia’s cement industry, with the multinationals having a stake in an estimated 60% of Asian cement capacityoutside of China. Cement is a competitive industry in all of our markets. We consider our major global competitors to be: Holcim (Switzerland), Cemex (Mexico), HeidelbergCement (Germany) and Italcementi (Italy).
***Our geographic markets***
*In the discussion that follows, we describe market conditions and our competitive position in the principal geographic areas in which we operate. The sales volume figures we have provided for each country or region are the total volumes sold in each particular countryor region by our consolidated cement subsidiaries including volumes sold to our other Divisions and adjusted to reflect our percentage of interest in our proportionately consolidated subsidiaries. The information as to the rated annual cement production capacity of ouroperating cement manufacturing plants is based on management’s estimates at December* *31,* *2004. The production of a cement plant might be less than its rated capacity due to product demand, plant failures and seasonal factors. The information as to the total industrycapacity is, unless mentioned otherwise, as estimated by JP Morgan in their report Construction & Building Materials Sector published in August 2004. In the following pages we will refer to this document as the “JP Morgan Report”. The JP Morgan Report estimate of ourproduction capacity differs in some respects from our management’s estimates. However, we have retained the figures in the JP* *Morgan* *Report for our production capacity when calculating total industry capacity.*
*Western Europe*
Western Europe represented approximately 32.4% of our cement sales in 2004. We have significant operations in France, the United Kingdom, Greece, Spain, Germany and Austria. We sold 32.0 million tonnes of cement in Western Europe in 2004 compared to 30.6million tonnes in 2003 and 32.8 million tonnes in 2002.

Most cement markets in this region are mature and based on the JP Morgan Report, the total consumption for Western Europe as a whole in 2004 was close to 202.4 million tonnes or approximately 530 kg per capita. However, consumption varies dramatically withinthe region, with Greece and Spain having for instance a much higher per capita consumption of cement than France. The cement industry in Europe is competitive in all major markets, with production generally concentrated among the major international groups.

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**Number of cement plants and production capacity by country at December 31, 2004**
    **Number of Plants** **Total Cement****Production Capacity** **Country** **Company** **Cement** **Clinker Grinding** **(in million tonnes)**      France Lafarge Ciments  10  2  9.2 United Kingdom Lafarge Cement UK (1)  8  —  7.8 Greece Heracles General Cement  3  —  10.0 Spain Lafarge Asland  3  —  4.6 Germany Lafarge Zement  3  —  3.5 Austria Lafarge Perlmooser  2  —  1.5 Italy Lafarge Adriasebina  2  —  1.2      **Total Western Europe**  **31**  **2**  **37.8**    (1)Lafarge Cement UK designates our cement operations in the UK.
*France.*Through our wholly owned subsidiary, Lafarge Ciments, we are the leading cement producer in France with a total market share of approximately 35%, according to the JP Morgan report. Our ten cement plants and two-seaboard clinker grinding plants arelocated to serve all of the major urban areas and regions in the country. We also operate a slag grinding plant and a lime plant. In 2004, France represented approximately 31.2% of our cement sales in Western Europe.

Based on figures provided by the JP Morgan Report, annual cement consumption in France fell rapidly in the mid-1990s to reach a low of 18.7 million tonnes in 1996 and 1997, but has partially recovered since the beginning of 1999 and has since stabilized withconsumption in 2004 of 21.1 million tonnes compared to 20.7 million tonnes in 2003 and 2002. We sold 8.2 million tonnes of cement in metropolitan France in 2004, compared to 7.2 million tonnes in 2003 and 7.4 million tonnes in 2002.

Our major competitors in France are Ciments Français (72% owned by Italcementi), Vicat (in which HeidelbergCement holds an interest) and Holcim France (a wholly-owned subsidiary of Holcim).

*United Kingdom.*We established our operations in the United Kingdom through our acquisition of Blue Circle. Through Lafarge Cement UK, we are the leading cement producer in the United Kingdom. In 2004, the United Kingdom contributed approximately 22.2% ofour cement sales in Western Europe. The JP Morgan Report estimated that our total installed capacity represented approximately 48% of the total rated capacity.

Our eight cement plants are located to serve the whole of the country, including Northern Ireland. The domestic market remained stable in 2004. We sold 6.3 million tonnes in 2004 compared to 6.4 million tonnes in 2003 and 7.1 million tonnes in 2002.

Our competitors in the United Kingdom are Castle Cement (wholly owned by HeidelbergCement), Rugby Cement (now an indirect subsidiary of Cemex) and Tarmac (controlled by Anglo American).

*Greece.*We established our operations in Greece with our acquisition of Blue Circle. Through our majority owned subsidiary, Heracles General Cement, we are the leading cement producer. In 2004, Greece contributed approximately 19.0% of our cement sales inWestern Europe. According to our estimates we have a market share of 53%.

Our three cement plants are located to serve the domestic Greek market through seven separate distribution terminals. In 2004, exports from our operations accounted for approximately 37% of our volumes sold from Greece.

According to the JP Morgan Report, Greece had the fourth highest per capita cement consumption rate in the European Union in 2004. This reflects the fact that the construction market is very much concrete based. We sold 5.6 million tonnes of cement in Greece in2004 compared to 6.0 million tonnes in 2003 and 5.5 million tonnes in 2002.

Our major competitors are Titan Cement Co and Halyps Cement Co (indirectly controlled by Italcementi).

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*Spain.*Our operations are conducted through our majority owned subsidiary Lafarge Asland, which we acquired in 1989. In 2004, Spain represented approximately 13.5% of our cement sales in Western Europe. We are currently the fourth largest cement producer inSpain with 9% of market share as reported by the JP Morgan Report. We sold 5.0 million tonnes of cement in 2004 compared to 4.9 million in 2003 and 6.8 million tonnes in 2002, which included sales of discontinued operations in Andalusia.

Our three plants are located primarily in the growth regions of the Mediterranean coast and of the region of central Spain surrounding Madrid. We also operate a network of distribution centers and 3 seaboard terminals. According to the JP Morgan Report, Spain isamong the leading countries in Europe in terms of cement consumption per capita due to the high level of infrastructure and buildings spending and the market continued to expand in 2004 reaching 47 million tonnes. However, imports have continued to have a significantimpact on prices especially in the coastal regions and, according to the JP Morgan Report, imports of cement and clinker represented approximately 19% of the market’s consumption estimated for 2004.

Our major competitors in Spain are Valenciana (99.5% owned by Cemex), Cementos Portland (55% owned by Valderrivas), Hisalba (99.9% held by Holcim), Financiera y Minera (indirectly controlled by Italcementi), Cimpor, Cementos Molins and Uniland.

*Germany.*Our operations are conducted through our wholly owned subsidiary Lafarge Zement GmbH. In 2004, Germany represented approximately 5.4% of our cement sales in Western Europe. We are the sixth largest cement producer with a 7% market share asreported by the JP Morgan Report.

We have three plants: the Wössingen plant near Karlsruhe, in which we initially acquired an interest in 1976, Karsdorf in Sachsen Anhalt, in Eastern Germany, which we acquired in 1991 and the Sötenich plant in Nord Rhein-Westphalia near the Belgian border, whichwe acquired in 1998. Our Wössingen plant serves Southern Germany including Stuttgart and Munich. Our Karsdorf plant serves Central and North Eastern Germany. Sötenich serves South West Germany including Cologne and Düsseldorf. We also serve Dresden and SouthEastern Germany from our Cizkovice plant in the Czech Republic.

The construction industry has suffered a downturn since 1999 and, according to the JP Morgan Report, the overall cement market in Germany amounted to 28.3 million tonnes in 2004 a decline of 2% compared to 2003 and a decline of approximately 10% compared to2002. We sold 3.0 million tonnes in 2004 compared to 3.1 million tonnes in 2003 and 2.7 million tonnes in 2002. Our major competitors in Germany are Dyckerhoff, HeidelbergCement, Schwenk, Readymix Zement (now an indirect subsidiary of Cemex) and Holcim.

*Austria.*Our cement business is conducted through our wholly owned subsidiary, Lafarge Perlmooser AG, in which we acquired our initial interest through our acquisition of Cementia in 1989. In 2004, Austria represented approximately 4.2% of our cement sales inWestern Europe. Lafarge Perlmooser AG is the largest cement producer based on capacity according to our estimates. We operate two cement plants, one near Vienna and one in the Styria region. We sold 1.6 million tonnes of cement in 2004, compared to 1.4 million tonnesin both 2003 and 2002. Our major competitors are Lasselsberger, Wietersdorfer, Schretterand Leube.

We also hold a 50% interest in Kirchdorfer Zement, which operates a plant with a rated capacity of 0.55 million tonnes, according to our estimates.

*Italy.*Our cement business is conducted through our wholly owned subsidiary, Lafarge Adriasebina that we acquired in 1996. In 2004, Italy represented approximately 3.8% of our cement sales in Western Europe. We sold 1.4 million tonnes of cement in 2004 as well asin 2003 and 2002. We operate two cement plants and a number or import terminals.
*North America*
North America represented approximately 19.6% of our cement sales in 2004. We are represented in North America through our majority owned subsidiary, Lafarge North America Inc., a New York Stock Exchange (“NYSE”) listed company and through our whollyowned subsidiary Blue Circle North America Inc. which we acquired as part of the Blue Circle acquisition. The assets of Blue Circle North America Inc. are currently managed by Lafarge North America Inc., which had an option to purchase such assets anytime

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between July 1, 2002 and December 31, 2004, at a fixed call price of $1,400 million, subject to certain adjustments at the time of the exercise. On November 2, 2004, Lafarge North AmericaInc. decided not to exercise the option to purchase the Blue Circle North America’s assets.

North America is a mature cement market. Sales are seasonal in Canada and much of the East Coast and Mid West as temperatures in the winter fall below minimum setting temperatures for concrete. We sold 21.0 million tonnes of cement in North America in 2004compared to 18.0 million tonnes of cement in 2003 and 17.5 million tonnes of cement in 2002. Approximately 14% of our cement shipments in North America were made to our Aggregates & Concrete Division.

**Number of cement plants and production capacity by country at December 31, 2004**
    **Number of Plants** **Total Cement****Production Capacity** **Country** **Company** **Cement** **Clinker Grinding** **(in million tonnes)**      United          States Lafarge North America Inc.  8  —  7.6   Blue Circle North America  5  —  6.0 Canada Lafarge Canada Inc.  7  —  7.0      **Total North America**  **20**  **—**  **20.6** 
*United States.*In 2004, the United States represented approximately 83.3% of our cement sales in North America. On the basis of the figures provided by the JP Morgan Report, we are the second largest cement producer with a 13% of market share, marginally less thanHolcim. The acquisition of Blue Circle brought us operations in the southeastern United States that complemented our existing plants, which are primarily concentrated in the central and midwestern states, extending from the northern Great Lakes southward along theMississippi River system. Two new production lines became operational in 2002 replacing our prior capacities at Sugar Creek, near Kansas City, and Roberta, Alabama. In 2003, we divested our operations in Florida, which consisted primarily of two cement grinding andimport facilities, for approximately 142 million euros. We have expanded our use of cementitious products and already have two slag grinding facilities, one in Baltimore, Maryland, and the other close to Chicago, Illinois.

We sold 17.4 million tonnes of cement in 2004 compared to 14.8 million tonnes in 2003 and 14.6 million tonnes in 2002. Our most significant U.S. markets in 2004 were Illinois, Michigan and Wisconsin.

Our major competitors in the United States are Holnam (a subsidiary of Holcim), Southdown (a subsidiary of Cemex), Ash Grove Cement and HeidelbergCement’s U.S. subsidiaries.

*Canada.*In 2004, Canada represented approximately 16.7% of our cement sales in North America. We are the leading cement producer in Canada according to the JP Morgan Report, with approximately 34% of the total active industry clinker production capacity inCanada. We are the only cement producer serving all regions of Canada. We sold 3.7 million tonnes of cement in 2004 compared to 3.2 million tonnes in 2003 and 3.0 million tonnes in 2002. We had a significant increase in market consumption in British Columbia. Inaddition to the plants shown in the table above we also have two slag grinding plants in Ontario.

Our major competitors are St. Lawrence Cement (a subsidiary of Holcim) and St Marys Cement (a subsidiary of Votorantim).
*Central and Eastern Europe*
In 2004, Central and Eastern Europe represented approximately 6.7% of our cement sales. We have actively sought to take advantage of the opportunities offered in the emerging markets of Central and Eastern Europe and are present in Poland, the Czech Republic,Romania, Serbia-Montenegro, Slovenia and the Commonwealth of Independent States. Many of the countries in Central and Eastern Europe currently suffer from chronic excess capacity as a result of the inheritance from former central planning. However, we believe that theentry into the European Union of a number of Central and Eastern European countries will influence positively their long-term growth prospects. The companies we consolidated sold 10.2 million tonnes of cement in Central and Eastern Europe in 2004 compared to 9.0 milliontonnes in 2003 and 8.1 million tonnes in 2002.

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**Number of cement plants and production capacity by country at December 31, 2004**
    **Number of Plants** **Total Cement****Production****Capacity** **Country** **Company** **Cement** **Clinker Grinding** **(in million tonnes)**      Poland Lafarge Cement Polska  2  —  3.3 Romania Lafarge Romcim  2  1  4.4 **     Total CIS**    **4**  **—**  **6.4** Commonwealth of Independent States Voskresenskcement  1  —  1.9   Mykolaivcement  1  —  1.6   Uralcement  1  —  1.7   Rezina  1  —  1.2              Serbia-Montenegro Lafarge Beocinska Fabrika Cementa  1  —  1.5 Slovenia Lafarge Cement D.D.  1  —  0.6 Czech Republic Lafarge Cement a.s.  1  —  1.0      **Total Central and Eastern Europe**  **11**  **1**  **17.2** 
*Poland.*In 2004, Poland represented approximately 25.6% of our cement sales in Central and Eastern Europe. We operate through our wholly owned subsidiary Lafarge Cement Polska which, we believe, based on our experience in this industry, is the second largest producerin terms of capacity. We acquired our plants in a series of acquisitions in 1995 and 1996. We sold 2.3 million tonnes of cement in 2004, compared to 2.2 million tonnes in each of 2003 and 2002. Our major competitors are CRH, HeidelbergCement, and Dyckerhoff.

*Romania.*In 2004, Romania represented approximately 24.5% of our cement sales in Central and Eastern Europe. We operate two cement plants and one clinker grinding station, through our majority owned subsidiary, Lafarge Romcim, which we acquired in 1997. TheJP Morgan Report estimates the total market for cement in Romania at 5.2 million tonnes in 2004. We sold 1.8 million tonnes in 2004, compared to 1.9 million tonnes in 2003 and 1.6 million tonnes in 2002. In 2004, exports from our operations in Romania accounted forapproximately 43% of our total volumes sold from Romania.

*Commonwealth of Independent States.*We have plants in Russia, Ukraine and Moldavia.

In 1996, we acquired our majority interest in JSC Voskresenskcement, which operates a cement plant in Voskresensk, near Moscow. In October 2003, we acquired a 75% interest in Uralcement, which operates a plant in the Urals with a capacity of 1.7 million tonnes.According to the JP Morgan Report, the total market for cement in Russia was 44.9 million tonnes in 2004. We sold 2.4 million tonnes of cement in Russia in 2004 compared to 1.6 million tonnes in 2003 and 1.5 million tonnes in 2002.

In 1999 after initially acquiring a minority stake in 1998, we acquired a majority interest in Mykolaivcement, which operates a cement plant in Mykolaiv, near the Black Sea. We sold 0.9 million tonnes of cement in Ukraine in 2004 compared to 0.8 million tonnes in2003 and 0.7 million tonnes in 2002.

In Moldavia, where we acquired our first holding in 1998, our wholly owned subsidiary, Cement Rezina, operates a cement plant located in Rezina with a capacity of 1.2 million tonnes. We sold 0.4 million tonnes in 2004.

*Serbia-Montenegro.*Our subsidiary Beocinska Fabrika Cementa, which we acquired in 2002, is the market leader in Serbia-Montenegro, with a total annual production capacity of 1.5 million tonnes. The plant is located on the Danube close to Novi Sad and Belgrade.Our indirect ownership interest as at December 31, 2004 is 42.04%. We sold 0.9 million tonnes of cement in 2004 compared to 1.0 million tonnes in 2003 and 0.8 million tonnes in 2002.

*Slovenia.*Our subsidiary Lafarge Cement D.D., which we acquired in 2002, is the second largest cement producer on the Slovenian market, with an annual production capacity of 0.6 million tonnes. The plant is located close to the two major cities of the country(Ljubljana and Maribor) and close to Austria. We sold 0.5 million tonnes of cement in 2004 and in 2003 and 0.4 million tonnes in 2002.

*Czech Republic.*In 2004, the Czech Republic represented approximately 5.5% of our cement sales in Central and Eastern Europe. Our operations are conducted through our majority owned subsidiary

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Lafarge Cement AS. We sold 0.3 million tonnes of cement in 2004, 2003 and 2002. In 2004, exports from our operations in the Czech Republic accounted for 51% of our total volumes. Ourmajor competitors are HeidelbergCement, Holcim and Dyckerhoff.
 *Mediterranean Basin*
In 2004, the Mediterranean Basin represented approximately 6.3% of our cement sales. We believe that the emerging countries of the Mediterranean Basin have high growth potential in the medium to long-term as they industrialize and urbanize. Many of the cementmarkets in the region have only been recently opened up to competition after years of state ownership. The companies we consolidated sold 9.7 million tonnes of cement in the region in 2004 compared to 9.9 million tonnes in 2003 and 9.5 million tonnes in 2002.

**Number of cement plants and production capacity by country at December 31, 2004**
    **Number of Plants** **Total Cement****Production****Capacity** **Country** **Company** **Cement** **Clinker Grinding** **(in million tonnes)**      Jordan Jordan Cement Factories  2  —  4.5 Morocco Lafarge Maroc(1)  4  —  4.2      **Total Turkey**    **4**  **4**  **4.4** Turkey Lafarge Aslan  1  —  2.1   Yibitas Lafarge(1)  3  3  2.1   Eregli Cimento  0  1  0.2      **Total Egypt**    **2**  **—**  **3.1** Egypt Beni Suef Cement(1)  1  —  1.4   Alexandria Portland Cement(1)  1  —  1.7      **Total Mediterranean Basin**  **12**  **4**  **16.2**  (1)companies consolidated using the proportionate consolidation method
*Jordan.*In 2004, Jordan represented approximately 38.6% of our cement sales in the Mediterranean Basin. Our operations in Jordan are conducted through Jordan Cement Factories, a listed company. In 1998, Jordan Cement Factories was privatized and we purchased a33.3% interest. We are currently the largest shareholder of the company with 48% participation. The Jordanian social security is the second largest shareholder in Jordan Cement Factories with a 23% interest.

Cement consumption has increased over the past few years. We sold 3.3 million tonnes of cement in 2004 compared to 2.8 million tonnes in 2003 and 2.7 million tonnes in 2002. In 2004, exports from our operations represented 14% of our total volumes sold fromJordan.

*Morocco.*In 2004, Morocco represented approximately 27.9% of our cement sales in the Mediterranean Basin. We operate four cement plants through our subsidiary Lafarge Maroc and its operating subsidiaries. Our partner in Lafarge Maroc is ONA, the largestMoroccan group. According to our estimates, we are the largest cement producer and have approximately 41.5% of the production capacity in the country. We sold 2.1 million tonnes in 2004 compared to 1.9 million tonnes in 2003 and 1.8 million tonnes in 2002. The marketconsists of international players and our competitors include Italcementi, Holcim and Cimpor.

Cement consumption is growing but the growth pattern is heavily influenced by the level of earnings in the agriculture sector, which drives the economy as a whole. In March 2004, Lafarge announced the decision by Lafarge Ciments (Morocco) to build a newproduction line in Bouskoura, to increase the cement capacity by over 900,000 tonnes. In May 2004, Lafarge Maroc inaugurated a new cement plant in Tetouan. With a production capacity of one million tonnes, the new plant was designed to meet fast-growing demand inMorocco’s northern provinces. The total investment in the new plant amounted to 120 million euros.

*Turkey.*In 2004, Turkey represented approximately 16.5% of our cement sales in the Mediterranean Basin. Through our majority owned subsidiary, Lafarge Aslan Cimento AS, we operate a plant in Darica, in the Marmara region, and through our wholly ownedsubsidiary, Agretas Agrega Insaat San.ve Tic.AS, we own a 49.9% interest in Yibitas Lafarge, a joint venture with Yibitas Holding, which we manage. Yibitas Lafarge operates plants in Central Anatolia and the Black Sea region.

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 We sold 2.1 million tonnes of cement in Turkey compared to 1.9 million tonnes in 2003 and 2.8 million tonnes in 2002 (Ybitas Lafarge is consolidated using the proportionate consolidation method since 2003).

Our major competitors are Akçansa (a subsidiary of Heildelberger Cement and Sabançi), Italcementi, Nuh Cimento, BURSA, Vicat and OYAK.

*Egypt.*Our operations in Egypt are conducted through Lafarge Titan Egyptian Investments Ltd., a 50/50 joint venture with the Greek cement group Titan S.A. We initially joined with Titan to buy 76% of Beni Suef in 1999 and this joint interest was raised to 95% in2000. We included Alexandria Portland Cement, which we acquired as part of the Blue Circle acquisition within the structure of the joint venture in 2002. Beni Suef has a single dry kiln plant located 120 kilometers south of Cairo and is the tenth largest producer. AlexandriaPortland Cement serves Egypt’s second city, Alexandria, and is the seventh largest producer. It has a single plant with a dry line, which has been in operation since mid-2002. In 2003, the last wet kiln was closed so as to optimize the use of our assets in the country. We sold1.2 million tonnes of cement in 2004 and in 2003. Our major competitors are Egyptian Cement (a subsidiary of Orascom and Holcim), Assiut (a subsidiary of Cemex) and Suez (in which Italcementi holds a large participation).
*Latin America*
In 2004, Latin America represented approximately 5.5% of our cement sales. We first entered the Latin-American market in the 1950s when we started our operations in Brazil. The companies we consolidated sold 6.0 million tonnes of cement in Latin America in 2004compared to 6.2 million tonnes in 2003 and 6.5 million tonnes in 2002.

**Number of cement and clinker plants and production capacity by country at December 31, 2004**
    **Number of Plants** **Total Cement****Production** **Country** **Company** **Cement****and clinker** **Clinker****Grinding** **Capacity****(in million tonnes)**      Brazil Companhia Nacional de Cimento Portland (“CNCP”)  5  —  4.2   Companhia de Materiais Sulfurosos (“CMS”)          Chile Empresas Melon  1  —  2.0 Venezuela Fabrica Nacional de Cementos  2  —  1.6 Honduras Lafarge Incehsa S.A. de C.V.  1  1  1.3 Mexico Lafarge Cementos S.A. de C.V.  1  —  0.4 French Antilles Ciments Antillais and Ciments Guyanais  —  3  1.0      **Total Latin America**  **10**  **4**  **10.5** 
*Brazil.*In 2004, Brazil represented approximately 35.5% of our cement sales in Latin America. Our cement plants in Brazil are located mainly in the southeast of the country in the states of Rio de Janeiro, Minas Gerais and Sao Paolo. On the basis of figures published by theJP Morgan Report, we estimate we are the fourth largest cement manufacturer in terms of rated capacity. Our major competitors are Votorantim, Joao Santos, Camargo Correa, Holcim and Cimpor.

In 2004, the cement activity was slow due to both political and economical uncertainties. Retail sales, mainly for individual construction use, account for most of the demand.

We sold 2.4 million tonnes of cement in 2004 compared to 2.6 million tonnes of cement in 2003 and 2.9 million tonnes in 2002.

*Chile.*We operate through our majority owned subsidiary, Empresas Melon, a holding established with our acquisition of Blue Circle. In 2004, Chile contributed 21.5% of our cement sales in Latin America. Empresas Melon operates a single plant located near thecapital Santiago. We believe, based on our experience in this industry, that we are market leader with 34.8% of market share. We sold 1.4 million tonnes of cement in 2004, 1.3 million tonnes in 2003 and in 2002.

Our major competitors are Polpaico (which is 54% owned by Holcim) and Cementos Bio-Bio.

*Venezuela.*In 2004, Venezuela represented approximately 15.9% of our cement sales in Latin America. We conduct our operations in Venezuela through our majority owned subsidiary, Fabrica Nacional de

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Cementos. Our major competitors are Cemex and Holcim. On the basis of figures published by the JP Morgan Report, we estimate we are the third largest cement manufacturer in terms ofrated capacity.

Our plants are located in the northern part of Venezuela where 80% of the population is concentrated. We sold 0.8 million tonnes of cement in 2004 compared to 0.6 million tonnes in 2003 and 0.8 million tonnes in 2002.

*Honduras.*In 2004, Honduras represented approximately 10.5% of our cement sales in Latin America. In 1998, we acquired our majority owned subsidiary Lafarge Incehsa S.A. de C.V., which has a plant located near the capital Tegucigalpa. We have increased thecapacity of the plant by 400,000 tonnes. In October 2004, one of Incehsa’s 50% subsidiaries acquired from Cemar the assets of a grinding station, located in South Honduras with an annual grinding capacity of 0.3 million tonnes. Our competitor is Cementos del Norte whichhas a plant located near the Guatemalan border.

*Mexico.*We operate a single plant in Mexico through our subsidiary Lafarge Cementos S.A. de C.V. which we acquired in 1999. Our plant in Mexico is located in Hidalgo State near Mexico City. Our major competitors are Cemex, Holcim, Cruz Azul and Moctezuma.

We decided in 2003 to start the construction of a new cement plant close to our existing plant near Mexico City. This new plant will have an annual production capacity of 600,000 tonnes and will replace the existing plant, which has a capacity 350,000 tonnes per year.The plant is expected to start operations in 2006. The total investment cost including additional reserves should be close to $120 million.
*Sub-Saharan Africa*
We substantially expanded our operations in the region with the Blue Circle acquisition, adding operations in Nigeria and Zimbabwe to our existing operations, which were primarily concentrated in South Africa and Kenya. In 2004, the region represented approximately13.9% of our cement sales. The companies we consolidated sold 12.4 million tonnes of cement in the region in 2004 compared to 11.2 million tonnes in 2003 and 10.2 million tonnes in 2002.

**Number of cement plants and production capacity by country at December 31, 2004**
    **Number of Plants** **Total****Cement****Production** **Country** **Company** **Cement** **Clinker****Grinding** **Capacity****(in million tonnes)**           **Total Nigeria**  **3**  **—**  **3.0** Nigeria West African Portland Cement Company (“WAPCO”)  2  —  2.1   Ashakacem  1  —  0.9              South Africa Lafarge South Africa Ltd.  1  1  2.4 Cameroon Cimenteries du Cameroun (“Cimencam”)  1  1  1.0 Benin SCB-Lafarge  1  —  0.7 Kenya Bamburi Cement  1  1  2.0 Uganda Hima Cement Ltd.  1  —  0.3 Zambia Chilanga Cement  2  —  0.7 Malawi Portland Cement  —  1  0.2 Tanzania Mbeya Cement  1  —  0.3 Zimbabwe Circle Cement  1  —  0.4      **Total Sub-Saharan Africa**  **12**  **4**  **11.0** 
*Nigeria.*In 2004, the Division sales in Nigeria contributed approximately 35.3% of our cement sales in Sub-Saharan Africa. We established our industrial operations in Nigeria through our acquisition of Blue Circle. They are conducted through our subsidiaries WestAfrican Portland Cement Company which serves the Lagos market and Ashakacem plc, which serves Northern Nigeria. In August 2003, we inaugurated a new cement plant in Ewekoro with a capacity of 1 million tonnes per year. According to our estimates, we are the firstcement producer in the country and our two subsidiaries serve 26% of the market.

The domestic market dropped sharply in 2002, prior to the 2003 presidential election. The market subsequently expanded and reached 10.1 million tonnes in 2004 compared to 9.2 million tonnes in 2003, as

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reported in the JP Morgan Report.    Wapco and Ashakacem sold 2.1 million tonnes of cement in 2004 compared to    1.8 million tonnes in 2003 and 1.8 million tonnes in 2002. Our competitors    are Dangote, Flour Mills, Cement Co of Northern Nigeria (controlled by HeidelbergCement),    Bendel Cement, Calabar Cement and Unicem.

*South Africa.*In 2004, South      Africa represented approximately 16.4% of our cement sales in Sub-Saharan      Africa. In 1998, we acquired our wholly owned subsidiary, Lafarge South      Africa Ltd. Our operations consist of one cement plant, which serves the      Johannesburg market, and one grinding plant near Durban.

The domestic market continued to      improve in 2004 with a 15% growth in volumes, according to our estimates.      We sold 2.0 million tonnes of cement in 2004 compared to 1.7 million tonnes      in 2003 and 1.6 million tonnes in 2002. Our major competitors are      Pretoria Portland Cement and Alpha (a subsidiary of Holcim).

*Cameroon, Benin.*Our subsidiary,      Cimenteries du Cameroun, known as Cimencam, is the sole cement producer      in Cameroon. In Benin, we have a 50% interest in SCB-Lafarge, which operates      a cement plant in Onigbolo.

*Kenya and Uganda.*In 2004,      Kenya represented approximately 7.8% of our cement sales in Sub-Saharan      Africa. Our operations in Kenya are conducted through our subsidiary Bamburi      Cement Ltd., which was operated as a joint venture with Blue Circle prior      to our acquisition of Blue Circle in 2001. Bamburi Cement has an integrated      cement plant in Mombasa and a grinding unit in Nairobi. The market recovered      in 2002 after a few years of stagnation due to the condition of the economy      and the lack of government and development funding. The market continued      to grow in 2004 to reach 2.2 million tonnes, according to our estimates.      Our major competitors in this market are Athi River Mining and East African      Portland Cement, a state-controlled company in which Lafarge and Bamburi      have a combined minority interest of approximately 40%. In 1999, through      Bamburi Cement Ltd., we acquired an interest in Hima Cement Ltd., a company      which operates a cement plant in Uganda.

*Zambia, Malawi, Tanzania and        Zimbabwe.*In 2001, we acquired the operations in Zambia, Malawi,        and Tanzania from CDC Partners. At the beginning of 2003, we decided        to close the kiln of our cement plant in Malawi. We entered in our majority        owned subsidiary in Zimbabwe, Circle Cement, with the acquisition of        Blue Circle. Circle Cement has a single plant that serves the capital        Harare.
*Asia*
In 2004, Asia represented approximately      15.6% of our cement sales. We believe that long-term growth prospects for      the region remain very favorable. The companies we consolidated sold 28.2      million tonnes of cement in the region in 2004 compared to 23.1 million      tonnes in 2003 and 21.1 million tonnes in 2002. In 2004, our operations      in South Korea were fully consolidated, whereas they had previously been      consolidated on a proportionate basis.

**Number of cement and clinker      plants and our production capacity by country at December 31, 2004**
    **Number          of Plants** **Total Cement****Production** **Country** **Company** **Cement          and clinker** **Clinker          Grinding** **Capacity****(in million tonnes)**      South          Korea Lafarge Halla        Cement 2 — 9.1 Malaysia Malayan Cement Berhad 3 1 13.0 India Lafarge India Ltd. 2 1 5.0 Philippines Lafarge Philippines 6 3 10.0      **Total          China** **4** **—** **3.8** China Beijing Chinefarge Cement 1 — 1.1   Shunfa Lafarge Cement 1 — 0.5   Lafarge Dujiangyan Cement 1 — 1.4   Lafarge Chongqing Cement 1 — 0.8        Indonesia P.T. Semen Andalas 1 — 1.5      **Total          Asia** **18** **5** **42.4** 
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*South Korea.* In 2004, South      Korea represented approximately 26.8% of our cement sales in Asia. We acquired      a 39.9% interest in Lafarge Halla Cement in January 2000 and in January      2004, we increased our holding in Lafarge Halla up to 51.17%. Our subsidiary      Lafarge Halla has been fully consolidated as a result of our increased      equity interest. We operate a cement plant and a clinker plant both located      in the North East of the country. We also operate a slag grinding plant      at Kwangyang. In 2004, the cement market was of 57.7 million of tonnes      according to the JP Morgan Report.

We sold 6.9 million tonnes of cement      in 2004 compared to 3.2 million tonnes in 2003 and 2.9 million tonnes in      2002. Our major competitors in the country are TongYang, Ssangyong, Sungshin,      Hyundai and Hanil.

*Malaysia.*In 2004, Malaysia      contributed approximately 21.8% of our cement sales in Asia. We established      our operations in Malaysia with our acquisition of Blue Circle. According      to our estimates, our majority owned subsidiary, Malayan Cement Berhad      is the leading cement producer. Our total installed capacity represented      approximately 41% of the total rated clinker capacity, according to our      estimates. Our three cement plants and our grinding plant are located to      serve the whole of Malaysia and the export market. We sold 6.1 million      tonnes of cement in 2004 compared to 6.4 million tonnes of cement in 2003      and 5.5 million tonnes in 2002. In 2004, exports from our operations      represented 27% of the total volumes sold from Malaysia. The market remained      relatively stable in 2004 with 12.3 million tonnes, as reported in the      JP Morgan Report.

Our major competitors are Tasek      Corporation, Renong, CMS Cement, Perak Hanjoong and Tenggara (100% owned      by Holcim).

*India.*In 2004, India represented      approximately 18.3% of our cement sales in Asia. We operate since November      1999 and we believe, based on our experience in this industry, we are the      market leader in the eastern region of India. We sold 4.2 million tonnes      of cement in 2004 compared to 3.6 million tonnes in 2003 and 3.9 million      tonnes in 2002. Our major competitors in the Eastern region are Associated      Cement Company, Gujarat Ambura Cement Ltd., Larsen & Toubro, Grasim/Ultratech      and Century.

*Philippines.*In 2004, the      Philippines represented 15.0% of our cement sales in Asia. We operate through      our wholly owned subsidiary, Lafarge Philippines, and its subsidiaries.      We believe, based on our experience in this industry, that our holdings      constitute together the largest producer of cement with 32% of market share.      We first entered the market in 1998.

Cement consumption in the Philippines      is low by Asian standards. However, we estimate cement consumption has      been growing at an average rate of over 7% per annum over the last decade      and according to the JP Morgan Report, the total cement market amounted      to approximately 12.1 million tonnes in 2003. In 2004, demand remained      stable.

We sold 4.1 million tonnes of cement      in 2004 compared to 4.2 million tonnes in 2003 and 3.7 million tonnes in      2002. Our major competitors in the country are Holcim and Cemex.

*China*. We are present in      three areas.

Our majority owned subsidiaries,      Beijing Chinefarge Cement Ltd. and Beijing Shunfa Lafarge Cement, serve      the Beijing market. The Chinese state development investment company and      a Chinese cement company respectively hold 15% and 20% of Beijing Chinefarge      Cement, and a local Chinese partner holds 30% of Beijing Shunfa Lafarge      Cement.

In the Sichuan province, near Chengdu,      we completed the construction of the Dujiangyan plant with a 1.4 million      tonnes cement capacity and launched commercial operations in mid 2002.      We announced in June 2004 our intention to build a second production line.      This $58 million investment will double the plant’s existing cement      capacity, to reach 2.8 million tonnes. Production is expected to start      mid-2006.

At the cement plant of Chongqing      we are currently building a second production line to meet the very strong      growth in the local cement market. This $40 million investment will increase      the plant’s capacity by 1 million tonnes, thereafter reaching      1.8 million tonnes. The new line is expected to start in the second half      of 2005. We hold a 63.7% interest in Lafarge Chongqing Cement.

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Lafarge has also an option to purchase      from Shui On Construction And Materials Limited (SOCAM), subject to certain      conditions, until July 8, 2005 a 40% interest in a joint venture to be      formed between SOCAM (80% stake) and the Yunnan Provincial Government (20%      stake) which will control assets representing 4.5 million tonnes cement      capacity in the Yunnan Province.

*Indonesia*. We operate in      Indonesia through P.T. Semen Andalas, which we have controlled since 1994.      Our plant is located in the Aceh province at the northern tip of Sumatra.      Our major competitors are Gresik (in which Cemex has a 25.5% interest),      Indocement and Cibinong (in which Holcim has an equity interest of about      77%). We sold 1.2 million tonnes of cement in 2004 compared to 1.1 million      tonnes in 2003 and 1.2 million tonnes in 2002.

On December 26, 2004, a tsunami      struck the Banda Aceh area where our plant was located. Many employees      and contractors lost their lives that day. Our plant was severely damaged,      and has been stopped for a number of months. Our local team organizes cement      supplies from other countries in Asia to serve the market and help reconstruction.

*Bangladesh*. In Bangladesh,      our subsidiary, Lafarge Surma Cement, started the construction of a 1.2 million      tonnes greenfield plant in the north east part of the country for a total      estimated project cost of $255 million. The new plant is financed in part      through project financing arrangements with a syndicate organized by the      World Bank and the Asian Development Bank. Our majority interest in Lafarge      Surma Cement is held though a 50/50 joint venture established with Cementos      Molins.

*Japan*. Our majority owned      subsidiary, Lafarge Japan Holding, holds 39.4% of Lafarge Aso Cement Ltd.      with two plants in Kyushu with a combined cement capacity of 3 million      tonnes. We account for our 22.45% indirect ownership interest in Lafarge      Aso Cement Ltd. using the equity method.
***Trading activities***
In order to increase our international      sales and explore new markets without the necessity of immediately making      investments in new production facilities, we created our Cementia Trading      subsidiary, a separate entity within Lafarge that focuses on cement trading.      Through Cementia Trading we purchased and sold approximately 7.9 million      tonnes of cement and clinker in 2004 (these volumes are included in the      volumes reported sold by geographic zone above). Approximately 60% of this      amount consisted of exports from our operations, including those in Greece,      Malaysia and Romania, and the rest was purchased from third parties in      Indonesia, Japan, Venezuela and Colombia. Our trading network also enables      us to distribute cement from countries where we have excess capacity to      regions around the world where it is in demand. This helps us to maximize      the capacity utilization of our facilities worldwide while reducing our      exposure to the inherent cyclical nature of the cement industry. Our trading      activities constitute a fundamental part of our strategic goals by allowing      international development through careful, calculated steps, while at the      same time satisfying worldwide demand where required.

*Marine Cement*. Marine Cement      acts mainly as an importer and distributor of cement in Reunion, the Seychelles      and the Red Sea countries. Marine Cement sold 2.4 million tonnes of cement      in 2004 compared to 2.2 million tonnes in 2003 and 1.5 million tonnes in      2002. Marine Cement purchases its cement from our own subsidiaries, including      Malayan Cement in Malaysia, Bamburi Cement in Kenya and from third-party      suppliers.
***Capital expenditures***
Cement is a capital-intensive business.      In the periods ended December 31, 2004, 2003 and 2002 our capital expenditures      in the Cement Division totaled 557 million euros, and 397 and 656 million      euros, respectively. They related to the on-going upgrading and modernization      of existing industrial operations around the world and on organic growth      through the building of new production facilities. Our capital expenditures      in the Cement Division accounted for approximately 56% of our overall capital      expenditures in the three-year period.

The principal capital expenditures      (in excess of 20 million euros) in the three-year period from 2002 to 2004      for the modernization or replacing of existing plants and equipment included:

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 •North America: increased          capacity at the former Blue Circle Roberta plant (Alabama) (2002),          increased capacity at the Sugar Creek plant (Missouri) (2002) and construction          of slag production and grinding facilities in Chicago (2002);    •Central and Eastern Europe:          construction of a new production line (dry process) in Kujawy, Poland          (2002 and 2003), the upgrading of our Voskressensk plant in Russia          and of Beocin in Serbia-Montenegro (2004);    •Mediterranean Basin: construction          of a new line in Tetouan (2002, 2003 and 2004) and a new line at our          plant in Alexandria, Egypt (2002);    •Latin America: construction          of a new cement plant near Mexico City, Mexico (2003 and 2004);    •Sub-Saharan Africa: increased          capacity at the former Blue Circle plant at Ewekoro in Nigeria (2002,          2003 and 2004); and    •Asia: construction of a          greenfield plant in Dujiangyan, China (2002), in Bangladesh (2004)          and of a grinding plant in Vietnam (2004).
The Group also invested approximately      869 million euros in the three-year period on various acquisitions that      expanded our market and geographical presence.

In 2005, the level of our capital      expenditures will depend on general market conditions. We expect capital      expenditures in the Division to exceed 800 million euros, excluding new      acquisitions. We intend to invest in projects that maintain or improve      the performance of our plants. We also intend to take advantage of selected      acquisition opportunities in both mature and emerging markets.

The ongoing increases in capacity    of cement plants in Morocco, China, as well as the construction of new plants    in Mexico and Bangladesh and a grinding plant in Vietnam are included in    the 2005 capital expenditures.
**Aggregates & Concrete**
With sales of 4,747 million euros,      Aggregates & Concrete contributed 32.9% of our sales in 2004 and 15.9%      of our operating income on ordinary activities. The Aggregates & Concrete      Division’s after-tax return on capital employed in 2004 was 7.9%.      At December 31, 2004, we had 20,096 employees in the Aggregates & Concrete      Division.

Lafarge is a leading international      supplier of aggregates, ready mix concrete and asphalt. On the basis of      the volumes of concrete and aggregates sold in 2004, we estimate we are      the world’s second largest producer of aggregates and ready mix concrete      with significant market positions in Western Europe and North America.      At December 31, 2004 the companies we consolidated (global and proportionate)      operated 609 quarries and 1,105 ready mix concrete plants in 25 countries.      In addition, we also produce asphalt and pre-cast concrete products and      we are active in road contracting and surfacing in North America where      we have leading positions in certain regions and in the United Kingdom.

In 2004, the companies we consolidated      (global and proportionate) had sales volumes of 234.2 million tonnes of      aggregates and 37.0 million cubic meters of ready mix concrete.

We manage our aggregates, concrete      and asphalt businesses in the same Division because:
 •the final users of these          three product lines are similar,    •logistical constraints          inherent to these businesses make it necessary to serve local markets          through large numbers of operational units, and    •it is generally most efficient          to produce ready mix concrete and asphalt at or close to our aggregate          quarries as this proximity allows us to share management, equipment,          services and marketing and reduces our logistic costs, thus reducing          our overall production costs.
We initially entered the ready      mix concrete business as part of our strategy to vertically integrate our      cement operations and subsequently expanded upstream into aggregates. Ready      mix concrete producers are

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the largest consumers of cement in    some of the major markets in which we are present. Vertical integration was    pursued to better manage distribution channels, and to give us direct contact    with the end-users of cement. We expanded into aggregates to secure the supply    of raw materials and to profitably exploit our core competences in the geological,    operational, environmental and regulatory aspects of quarrying operations    which we had acquired through our cement operations. We also expanded into    asphalt and road paving in North America and the United Kingdom, markets    which provide further outlets for our aggregates resources. Our goals for    the coming years are to pursue a growth strategy in aggregates in developed    and selected emerging markets and to improve our operational performance.

The table below indicates the breakdown      of our sales by destination in 2004, 2003 and 2002:
  **Aggregates & Concrete          Sales by Destination****Year ended December 31,** **Geographic            Area** **2004** **2003** **2002**       **(in          million**€**, except percentages)** Western          Europe  1,958    41.2%      1,845  41.3%      1,856  38.9%North          America  2,220  46.8  2,130  47.7  2,405  50.5 Other          Regions  569  12.0  490  11.0  507   10.6 **Total**  **4,747**  **100****%** **4,465**  **100.0****%** **4,768**  **100.0****%*****General information              regarding our products, industry and markets*** *Products*
Aggregate (sand, gravel and crushed      rock) is used as a base material in roads, landfill and buildings and as      raw material for concrete, masonry, asphalt and many industrial processes.      In North America and the United Kingdom we also produce asphalt, which      consists of dried aggregate mixed with a binder of 5-10% of heated liquid      bitumen, a by-product of the oil refining process. Asphalt is used for      road surfacing and paving and we also act as road contractors in some geographies.

Ready mix concrete (a blend of      aggregate, water, cement and chemical admixtures) is used for a variety      of applications from curbs and sidewalks to foundations, highways and buildings.      Currently, we market a wide range of concrete mixes from industry standard      mixes, with good tensile strength and durability, to specialty concretes      which, for example, offer customers ease of placement under various weather      or construction conditions, cost efficient/fit for purpose products and      products with specific technical qualities. We have research and development      resources dedicated to providing differentiated concrete mixes for specific      purposes, and have recently developed two new products; Agilia®, which      offers clients such qualities as superior coverage and filling abilities,      self-leveling surfaces and enhanced durability and appearance, and Ductal® which      is a self-placing ductile concrete, that can “bend” without breaking,      and which has ten times the compressive strength of traditional concrete.      In North America and the United Kingdom we also produce pre-cast concrete      products. Our pre-cast concrete products include pavers and paving slabs      used in sidewalks and driveways and concrete building blocks for residential      and commercial construction.
*Production & facility            information*   *Aggregates*
There are essentially three primary      sources of aggregates: land-won sand and gravel, hard rock and marine sand      and gravel. The production of recycled (recycled concrete or asphalt) and      secondary (such as iron and steel or mine waste) aggregates is also increasing.      In 2004, approximately 61% of our production was hard rock and 39% was      sand and gravel.

The different types of aggregate      are generally substitutable, depending on their uses and the corresponding      physical specification requirements (granularity, hardness, etc). The choice      of aggregate for a particular purpose also depends largely on the local      geology or availability. In certain areas only one or two types of aggregate      will be readily available. As aggregates are expensive to transport relative      to their price, the cost of transport will generally limit the availability      of aggregates to what is readily accessible in the local area.

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The aggregate manufacturing process varies slightly depending on whether crushed rock or sand and gravel are used. The rock (usually either limestone or granite) is blasted from quarries and then crushed, ground and screened to meet end user specifications. Sand andgravel requires less crushing but as with rock also requires grading and screening to different sizes (generally 8mm to 80mm). Rock particularly can have different hardness and crushing characteristics which makes it suitable for higher specification uses (e.g. road building).

We currently estimate that we have control of approximately 10.1 billion tonnes of proven and authorized aggregates reserves at year-end 2004. We have sustained the level of our reserves through various acquisitions and successful permit applications. We believe thatthe quantities of proven and authorized reserves at our aggregates facilities are sufficient to result in an average life in excess of 35 years at present operating levels. We also have access to aggregate reserves for which we have either not yet requested or not yet received anextraction permit. We expect to gain the necessary permits for a significant portion of these in due course.
 *Ready mix concrete*
Ready mix concrete generally consists of approximately 85% to 90% of dried aggregate which is combined with water and with 10% to 15% of cement and other cementitious substitutes that acts as a binder. Ready mix concrete is produced at low capital intensiveindustrial plants. The plants comprise storage facilities for the main raw materials and equipment for combining the dry materials to the required specification. The concrete is either mixed at the plant or in special mixer trucks. One cubic meter in volume of ready mix concretecan be mixed utilizing standard machinery in about three minutes.

Special additives may be included to give concrete a particular quality. Computerized systems add required quantities of additives such as retarding or accelerating agents plus water during the mixing process. For example, one of the key ingredients of our patentedDuctal® concrete is its reinforcement made of metallic or organic fibers, which are a key component in its outstanding compression and traction strength.

Ready mix concrete also has a service aspect involving the on-time delivery of the quantity and quality of product ordered at the location specified by the customer. This aspect of the business requires significant logistical know-how. In a typical ready mix concrete plantraw materials will comprise about 85% of total production costs. Raw material prices can vary considerably between the various markets in which we operate. Over half of the raw material costs relate to cement and in our ready mix concrete operations we are expendingsubstantial efforts to adjust our formulations to optimize raw material usage for a given standard of concrete. In order to achieve greater flexibility and better control over our transportation costs, we have increasingly moved toward subcontracting our transport operations andwe now subcontract approximately 90% of our ready mix concrete transportation outside of North America.

In the manufacture of pre-cast block paving and concrete blocks, the concrete is normally manufactured on site near a source of aggregates and both the paving units and the blocks are formed using mould boxes. The material is compacted either by pressure or vibrationor a combination of the two. The paving and blocks are sold in standard sizes, which can vary between markets and the types of block are further differentiated according to their end use primarily by the materials from which they are manufactured: naturally occurringaggregates in the case of dense aggregate blocks, blast furnace slag/clinker or artificial aggregates in the case of light aggregate blocks and pulverized fly ash or sand in the case of autoclaved aerated blocks.
 *Asphalt and Paving*
Asphalt, like ready mix concrete, is produced at low capital intensive industrial plants. The plants comprise storage facilities for the main raw materials (bitumen and different grades of aggregates), equipment for combining and hot mixing the materials to the requiredspecification and computerized systems for the addition of the requisite quantities of bitumen while the ingredients are mixed. Our asphalt plants range in output from 5,000 to 500,000 tonnes per year. Generally, asphalt consists of approximately 90% to 95% of dried aggregatewith 5% to 10% of heated liquid bitumen that acts as a binder. Bitumen is a by-product of the petroleum refining process, the price of which is tied to oil prices.

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We are also active in paving where we have leading positions based on sales in certain regions in North America and in the United Kingdom.
*Customers*
Our products are generally supplied at a local level directly to the end user and we sell to thousands of unaffiliated customers. Our customers for aggregates include ready mix concrete producers, manufacturers of pre-cast concrete products (pipes, curbs, building blocks,block pavers), asphalt producers, road contractors, masons and construction companies of all sizes. Aggregates also have numerous industrial applications and specialty aggregates are used, for example, by the steel industry and by numerous industrial, agricultural andmanufacturing sectors. The primary customers for ready mix concrete and pre-cast concrete products are construction and road contractors of all sizes from major international construction companies to small residential builders, farmers or do-it-yourself enthusiasts. Asphalt issold to road contractors for the construction of highways, driveways and parking lots and directly to state and local authorities.

We have no exclusive distribution or long-term supply contracts for ready mix concrete, pre-cast concrete products or asphalt, other than supply contracts to specific jobs which have been the subject of competitive tender. These are generally made on the basis ofcompetitive prices in each market area, pursuant to current orders from customers on short notice who purchase quantities sufficient for their requirements. With regard to aggregates, we do have some supply contracts for specific production plants manufacturing ready mixconcrete, asphalt and pre-cast concrete products. These contracts tend to be negotiated annually. The amount of backlog orders, as measured by written contracts, is normally not significant.
*Market & competitive factors*
*General*. We have built up our aggregates and ready mix concrete businesses over a number of years but the two most significant developments came with our acquisition of Redland in 1997 which almost doubled the size of our business and to a lesser extent from theacquisition of Blue Circle in 2001. In addition, we often acquire new concrete and aggregate operations in connection with a cement acquisition. We endeavor to restrict our concrete and aggregate operations to countries where the nature and enforcement of regulations ensurethat we are operating on a “level playing field”. We seek to avoid operating in countries where regulations are not enforced or non-existent and where local operators are not obliged to follow the same environmental and labor standards thus giving them an unfair competitiveadvantage.

In the Western European and North American markets, where we have the bulk of our operations, the levels of aggregates, asphalt and ready mix concrete demand at a national level generally move in line with the consumption of cement. Demand is seasonal and tendsto be less in the winter months in temperate countries and in the rainy season in tropical countries.

As with cement, the aggregates, asphalt and concrete industries are cyclical and dependent on the level of activity in the construction industry and level of public infrastructure spending. However, it is not economical to ship aggregates over large distances and readymix concrete and asphalt cannot be transported over distances that involve more than about one hour of traveling time. Brand recognition and loyalty start playing a role in sales of our products. But the determining factors in the selection of an aggregate, ready mix or asphaltproducer are still location, quality, reliability of service and price. Demand for all of these products is very fragmented as choice of provider and supply takes place within a local market. Demand for aggregates, concrete and asphalt thus depends on micro-market conditionsand can vary dramatically within a national market.

*Aggregates*. The competitive situation in aggregates is favorable to incumbent producers, as the opening of new aggregate sources is constrained by environmental and planning laws in many countries. Aggregate producers do frequently have a competitive advantage inthose local markets where there are limited aggregate reserves. Nevertheless, substantial aggregates capacity is already in operation in most markets. Additionally, to the extent that new permits can be obtained and deposits are available, moderate capital investment is requiredto bring additional aggregate sources into production.

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We estimate that the cost of a new plant and equipment to extract and process industrial minerals for a typical small quarry with an output of 250,000 to 500,000 tonnes per annum would be of the order of 2 to 4 million euros. With a large quarry with an output inexcess of 1 million tonnes per annum costs would rise to 7 to 25 million euros while a super quarry may cost in excess of 45 million euros. These figures exclude costs for the land and minerals.

We believe we have a strong competitive position in aggregates. Our market positions and operational expertise assist us in optimizing returns from our investments. We are continuously seeking to improve our operational performance through performance improvementprograms. We believe our knowledge of the construction markets assists us in ensuring that we acquire only well located reserves and businesses, and we believe that our environmental reputation for responsible land restoration assists us in obtaining new permits more easilyand encourages landowners to deal with us as the operator of choice.

*Ready mix concrete*. Ready mix production has relatively few barriers to entry because of the low capital outlay required and the fact that the raw materials are generally plentiful and competitively priced. The concrete business in each micro market thus tends to beprice constrained by the ability of competitors to quickly bring new capacity to market.

In each country in which we operate we aim to place our ready mix concrete plants in clusters in each micro market in which we operate in order to optimize our delivery flexibility, capacity and backup capability. The capacity of our plants varies depending uponmarket circumstance from 5 thousand to 300 thousand cubic meters. We evaluate each micro market in which we operate periodically and dismantle and move plants to locations where they can be used more profitably if we find a micro market is suffering from overcapacityor is a declining market. Recently we have increased the number of mobile plants we operate since these plants can be moved more easily and have the flexibility to be placed on temporary sites (including our clients’ sites) to meet local customers needs.

We believe that developing new ready mix concrete products, such as Ductal® and Agilia®, will enable us to increasingly compete on the basis of quality and product differentiation. We also believe that by providing superior technical support and service we candifferentiate ourselves from our competitors and charge a corresponding premium. The ongoing implementation of our readymix concrete performance program has continued to deliver performance improvement.

*Asphalt*. As with ready mix concrete, it is essential to deliver asphalt in usable form to the customer within a short period of mixing and customer sites are thus generally located within relatively short distances of the asphalt plant. The asphalt will usually be mixedfrom early morning and throughout the day for delivery to the road construction site at intervals to enable the contractor to maintain a steady flow of work. Sales are, on the whole, made directly between the asphalt producer and the customer, with only very limited use ofintermediate distributors or agents since prompt and reliable delivery in insulated vehicles is a key element of the service provided by asphalt companies to their customers. Asphalt has a higher entry cost requirement than ready mix concrete as the capital cost of a typicalasphalt plant is around 1.2 million euros in comparison to 400,000 euros for a ready mix concrete plant.
***Our geographic markets***
Our major markets in Western Europe are France and the United Kingdom, which represented approximately 51.1% and 30.1% respectively, of our Aggregates & Concrete sales in this area in 2004. We are also present to a lesser extent in Greece, Austria and Italy andthrough two joint ventures with RMC Group plc (which was acquired by Cemex in March 2005) in Spain and Portugal. In North America our primary markets are in Eastern and Western Canada, Colorado, New Mexico, Kansas, Louisiana, Missouri, Ohio, Maryland,Pennsylvania, West Virginia, Wisconsin, Georgia, Alabama and Florida. Our main other markets are South Africa, Brazil, Chile, Malaysia and Singapore and Turkey. In 2004, we increased our aggregates and/or ready mix concrete presence in North America, France, Ukraineand Switzerland.

In aggregates and ready mix concrete we regularly acquire small independent operators. From time to time we acquire larger operations when the opportunity arises and, additionally, assume control of aggregates and concrete assets which have been acquired via largercement acquisitions. For example, the Blue Circle

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acquisition in 2001 brought not only significant aggregates and ready mix positions in Georgia and Alabama in North America, but also positions in Greece, Malaysia, Singapore and Chile.

The following table shows our volumes and number of sites, broken down by geographic area, for 2004. The sales volume figures we have provided for each country or geographic zone are the total volumes sold in each particular country or zone by all of our consolidatedsubsidiaries, including volumes sold to our other Divisions and adjusted to reflect our percentage interest in our proportionately consolidated subsidiaries.
  **Number of Sites****At December 31, 2004** **Volumes Sold in 2004**   **Aggregates** **Ready mix concrete** **Aggregates** **Ready mix concrete** **Geographic Area**   **(in million tonnes)** **(in million m3)** **Western Europe**  **215**  **559**  **77.1**  **14.7** France  130  258  46.1  6.8 United Kingdom  56  110  19.3  2.4 Spain/Portugal (1)  21  148  8.4  3.4 Greece  3  21  1.5  1.4 Other  5  22  1.8  0.7 **North America**  **342**  **308**  **134.9**  **12.1** Canada  256  141  63.2  5.1 United States  86  167  71.7  7.0 **Other Regions**  **52**  **238**  **22.2**  **10.2** South Africa  20  44  5.8  1.7 Brazil  4  44  2.2  0.7 Chile  3  40  3.2  2.0 Malaysia/Singapore  1  46  0.7  3.0 Turkey  5  18  2.1  1.3 Other  19  46  8.2  1.5 **Total**  **609**  **1,105**  **234.2**  **37.0**  (1)Our Spanish and Portuguese operations are conducted through two joint ventures with RMC Group plc (which was acquired by Cemex in March 2005).
In 2004, our asphalt operations produced and sold 10 million tonnes in the United States, Canada and also in the United Kingdom.

In aggregates in North America, Western Europe and in emerging markets, we face competition from numerous independent operators. However, the aggregates industry in particular is in the early stages of consolidation and we face competition from regional andinternational producers such as Vulcan Materials and Martin Marietta Materials in the United States and Hanson and CRH internationally. In the United Kingdom, this process of consolidation has reached the stage where the five major producers sales account approximatelyfor 75% of the market.

In ready mix concrete the tendency towards consolidation is less pronounced but we still face competition from firms such as RMC Group plc (Cemex), HeidelbergCement, Holcim, Hanson, CRH and Rinker both in North America and internationally. Our strategy ofvertical integration of concrete with cement operations has also been followed by our major competitors in the cement markets such as Holcim, Cemex and CRH.
***Capital expenditures***
Capital expenditures in the years ended December 31, 2004, 2003 and 2002 amounted to 261 million euros, 168 million euros and 204 million euros, respectively. These capital expenditures related to the on-going upgrading and modernization of existing industrialoperations around the world and to organic growth through the building of new production facilities. Our capital expenditures accounted for approximately 22% of our total capital expenditures in the three-year period.

The Group also invested approximately 240 million euros in the three-year period on various acquisitions that expanded our market and geographical presence.

In 2005, the level of our capital expenditures will depend on general market conditions. We expect capital expenditures to total approximately 180 to 250 million euros, excluding new acquisitions. We intend

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to invest in projects that maintain or improve the performance of our plants. We also intend to take advantage in 2005 of selected acquisition opportunities in Europe and North America and inselected emerging markets.
 **Roofing**
In 2004, sales of the Roofing Division amounted to 1,493 million euros. Roofing represented 10.3% of our consolidated sales in 2004 and 7.1% of our consolidated operating income on ordinary activities. The Roofing Division’s after tax return on capital employed in2004 was 5.5%. At December 31, 2004 we had 11,683 employees in the Roofing Division.

We acquired our roofing business in December 1997 as part of our acquisition of Redland plc and we believe, based on our experience in this industry that we are the world’s largest producer of concrete and clay roof tiles by annual sales and volumes. At the end of2004, the companies which we consolidated (global and proportionate) operated 158 production sites in 34 countries. We are principally based in Western Europe (which represented 74.1% of our sales in 2004) but we are also present in North America, through a joint venturewith Boral, which represented 7.5% of our total roofing sales in 2004, and are expanding into other regions including Asia Pacific, which represented 18.4% of our sales in 2004.

The companies we consolidated (global and proportionate) sold 127.8 million square meters of concrete roof tiles, 26.0 million square meters of clay roof tiles and 3.1 million meters of chimneys in 2004.

Our goals are to consolidate our positions in Western Europe in concrete roof tiles, clay roof tiles and roofing components and to develop progressively in emerging markets.

The table below indicates the breakdown of our sales by destination in 2004, 2003 and 2002:
  **Roofing Sales by Geographic Area****Year ended December 31,** **Geographic Area** **2004** **2003** **2002**       **(in million €, except percentages)** Western Europe  1,107  74.1% 1,138  75.4% 1,162  75.6%North America  112  7.5  109  7.2  121  7.9 Other Regions  274  18.4  263  17.4  255  16.5 **Total**  **1,493**  **100.0****%** **1,510**  **100.0****%** **1,538**  **100.0****%**                     ***General information regarding our products, industry and markets*** *Products*
Our roofing products are designed for pitched roofs. Pitched roofs are the traditional form of European roofing and predominate in the residential market in Western Europe and North America. Pitched roofs are generally covered with tiles, shingles, metal sheets, metaltiles or fiber cement. Flat roofs are most commonly used in commercial buildings, but are also used in some residential structures, such as the row houses of the U.S. Eastern seaboard cities. Flat roofs are normally covered with roofing felt and tar, and products designed forpitched roofs are not commonly used on flat roofs.

A pitched roof is generally far more expensive to install than a flat roof both in terms of materials and labor costs but has a longer life expectancy, with clay or concrete tile roofs lasting up to 50 years as compared to the 10 to15 year average for a flat roof.

Roofing material markets are characterized by regional needs and traditions. Climatic conditions and historic availability of building materials have led to a diversity of building traditions between regions. Depending on the region, not only do the pitch and constructionof the roofs vary, but also the profile, material and color of the roofing materials. In Europe, concrete and clay tiles dominate the pitched roof market, but the style of tile varies considerably between each country. In North America the market has traditionally favored low-cost,easily installed cladding materials such as asphalt shingles for pitched roofs, which have a shorter life span.

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*Roofing Products*. In 2004, our roofing products represented approximately 87.3% of our total sales in the Roofing Division worldwide. We offer a line of products that comprise entire roofing systems providing complete solutions for pitched roofs including:
 •*Roof tiles*. In 2004, sales of roof tiles represented approximately 67.1% of our overall sales in roofing. Through innovation in production and coating technology, we offer a wide spectrum of shapes, profiles, surfaces and colors, to meet varying aesthetic, quality anddurability demands. Recent innovations include improved dirt-repellant surfaces, longer color durability, expanded color offerings, as well as larger sizes of tiles to achieve greater construction efficiencies on-site. There are generally two varieties of materials for rooftiles: concrete and clay.      •*Concrete tiles*. Concrete tiles represented approximately 49.6% of our overall sales in the Division in 2004. Our concrete tiles range from uncoated tiles and classic red monocolored polymer coated tiles to premium tiles, which have the same appearance astraditional clay designs, wood shingles and slates. The principal advantages of concrete are its durability, its general cost-effectiveness and the widespread availability of raw materials for its manufacture. Concrete roof tiles are used worldwide, particularly byresidential building contractors. Usually, ten concrete tiles are laid per square meter, but there can be as few as 5.5 tiles per square meter for larger sizes or as many as 60 in the case of small format plain tiles.      •*Clay tiles*. Clay tiles represented approximately 17.5% of our overall sales in the Division in 2004. We offer a variety of sizes and surfaces of clay tiles, ranging from large format tiles (10-13 tiles per square meter) and medium-size and light profile tiles (13-17pieces per square meter) to small format tiles (20-60 pieces per square meter). In addition, we offer a variety of surface finishes, ranging from mono-colored to multi-colored tiles that simulate the effect of old tiles, as well as premium-glazed tiles.    •*Roofing Components, Metal and Other Products*. In 2004, sales of roofing components, metal and other products represented approximately 20.2% of our overall sales in the Division. In order to provide complete roofing solutions, we also offer a range of complementaryproducts and services to our customers. Roofing Components include a large number of components and accessories that cover all functional aspects of roof construction, such as safety gratings, snow guard tiles, ventilation underlays, skylights, and prefabricated roofelements. In addition, we also offer photovoltaic and solar thermal installations that generate electricity and warm water, respectively.
*Chimneys*. Sales of chimneys represented approximately 12.7% of our overall sales in the Division in 2004. Based on our experience in this industry, we believe that we are currently the leading manufacturer of chimney systems in Europe, offering both ceramic andsteel models, by annual sales and volumes. We believe that we are the technological leader in ceramic chimneys in Europe based on product developments.

Our chimney products can be divided into two principal categories: mineral-based, or ceramic, systems and metal-based, or steel, systems. Our product range in ceramic chimneys comprises ready-to-install insulated chimneys (comprising flue liner, insulation andblockstones) and ventilation systems as well as a fully developed range of complementary accessories. We also offer restoration products for chimneys and steel chimney systems in Italy, Austria and other European countries. We manufacture approximately 90% of ourchimney products in our own factories.

Our innovations include multi-wall insulated chimneys with cavity ventilation that prevent moisture damage, and isostatic ceramic liners that are more resistant to temperature variations.
*Production & facility information*
*Concrete tiles*. Concrete tiles are manufactured out of sand-based concrete mix by extrusion onto individual molds or pallets. Several layers may be added, by extrusion or other means, to obtain a variety of surface textures and colors on the weather side of the tiles.Once dried, the tiles are removed from the molds and after two to four weeks of curing are ready for installation. Our simple tiles are made out of a single layer of concrete whereas several layers of concrete may be used in our most expensive tiles. Raw materials amount toapproximately 45% of our total production costs and we have spent a great deal of effort on

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improving our formulations to optimize our use of raw materials as well as introducing practices to improve the quality of our finished products. Based on historic trends we do not consider theprices of these raw materials to be volatile. Depreciation, direct labor and fixed costs represent about 52% of our total production costs. Energy represents approximately 3% of our totalproduction costs.

At December 31, 2004, the companies we consolidated (global and proportionate) operated 102 production sites devoted to the manufacture of concrete tiles, with a total maximum annual capacity based on full shifts of 557 million square meters. The annual averagecapacity of our plants is 5.5 million square meters. We depreciate our new plants on a straight line basis over 20 years. The average capital investment for a new plant today would be between 4 and 20 million euros depending on the location, capacity, degree of automationand product range. Because of freight costs and design differences, most of our concrete tile plants are designed to supply a regional market.

*Clay tiles*. Clay tiles are manufactured out of a mix of natural clays, molded under pressure and fired in a tunnel kiln at high temperatures. Various types of finishes can be achieved for different applications through surface coatings. The newer production processes (socalled “H Cassette”) require significant capital investments, but result in higher quality tiles that can be produced in larger sizes. The quality and delivered cost (from the quarry to the plant) of clay is critical to the quality of end-product and cost performance of the plant.Ownership or control of high-quality clay deposits near the plant is determinative of the plant’s overall performance. However, raw materials costs are a smaller proportion of our costs than in concrete tiles, representing approximately 15% of our total production costs. Basedon historic trends we do not consider the prices of these raw materials to be volatile. We either extract clay from our own reserves or have secured long-term supply contracts that endure over the expected life of the relevant plants. Depreciation, direct labor and fixed costsrepresent approximately 70% of our total production costs. Due to the use of kilns in manufacturing, energy costs are significant, amounting to about 15% of our total costs.

At December 31, 2004, the companies we consolidated (global and proportionate) operated 23 plants devoted to the manufacture of clay tiles, with a total maximum annual capacity based on full shifts of 38 million square meters. The average annual capacity of ourplants is 1.7 million square meters. Depending on the technology used, the average capital investment for a new clay tile plant today would vary from 40 to 50 million euros for an annual capacity of 2 million square meters. We depreciate our new plants on a straight linebasis over 20 years. The geographic reach of sales from a given plant is usually restricted by the design of tile which it produces and the geographic market for that design. Freight costs have less of an influence because of the higher prices charged for clay tiles.

*Roofing Components*. We manufacture or purchase from manufacturers a variety of roofing components. Each production process is specific to the type of accessory.

*Chimneys*. We have 22 production sites devoted to manufacturing chimneys, 6 of which are in Germany and the remainder of which are located in Europe. The total maximum annual capacity based on full shifts of our chimney plants is 7.5 million meters. Most of ourmineral-based chimney products consist of a simple blockstone reinforced with a three-layered product comprising a ceramic flue liner, a mineral wool insulation and a light weight concrete blockstone. Our mineral-based chimney products are delivered either as single parts tobe assembled by the mason on site or as prefabricated story-high chimneys which can be mounted on the site without specialists. Our metal-based chimneys are constructed mainly from stainless steel and small amounts of aluminum. The basic construction principles are thesame as those used in the manufacture of mineral-based chimney systems.

In addition, we offer all the accessories necessary to assemble a chimney on the building site, including a flue gas connection to the boiler, cleaning doors, condensate handling, chimney coverage, glue, mortar and top cover plate. These accessories are provided to thecustomer as prepackaged kits.
*Customers*
We believe in establishing long-term relationships with our ultimate customers, the building owners, as well as the professionals who cater to them:
 •roofing contractors;
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 •architects;    •house builders and developers;    •housing associations;    •local government and planners;    •retailers and merchants; and    •chimney constructors.
In general, we distribute our products through building products merchants or specialized merchants based on current orders. Thus, we do not have a significant backlog. In the ordinary course of our business, we usually keep an inventory of finished products in constantturnover that represents on average slightly more than one month of sales, which is mostly due to the curing time of two to four weeks to achieve the required strength of the tiles depending on the region and climatic conditions.
*Market & competitive factors*
Producers of roofing products compete primarily on a regional basis and based on factors such as price, product quality and customer service. Concrete and clay tiles compete against a variety of products in different markets: asphalt shingles in the U.S. residentialmarket, fiber cement and corrugated steel in the low-end residential segment of developing countries, fiber cement and metal in the non-residential sector worldwide, slate in the high-end residential segment in Western Europe and in the Northeastern United States. We envisionmarket growth potential in developing countries in Asia, South America and Eastern Europe where construction activity is expected to increase and to a lesser extent also in North America.

The demand for roofing products is linked to overall construction activity within a given region, population (measured by the number of households) and demographic growth, economic development and growth in average household income, climatic conditions,governmental regulations (such as change of added value tax rates for building materials in Poland, reduction of the home owner credit in Germany and the new requirement in Spain that all new buildings be equiped with solar technology on the roof), insurance regulations(e.g. fire protection), and availability and affordability of land for new construction. In general, demand in developing countries tends to be driven in large part by utility and durability, whereas aesthetics tends to be a more significant factor in more developed countries.

Western European markets are seeing a relatively stable market for renovation while the new-built markets are declining in many countries. Also there is a growing trend towards the utilization of clay tiles. While clay is generally more expensive than concrete, it isperceived as having greater decorative value. Clay roof tiles are increasingly being used in Northern Europe, mostly for upscale renovations of individual houses. Clay roof tiles are also the traditional roofing material in Southern Europe, especially in the Mediterranean Basin,and Asia. They are selected mainly for aesthetic reasons and to preserve architectural traditions.

In the emerging markets where we operate, we have benefited from the substitution of tiles for less expensive corrugated metal and cement fiber products. Developing long-term solutions to improve appearance is critical if we want to maintain the competitiveness of ourconcrete tiles in these emerging markets.

The seasonality of demand for roofing products parallels that of the construction industry at large. Demand is far more seasonal in areas with cold winters than in areas with more temperate climates. In our primary markets in Western Europe our sales are lower inwinter than during the rest of the year.

According to our own internal estimates, we believe, based on our experience in this industry, that we are the market leader in Europe in pitched roofing products by sales and volumes. Our principal competitors in Europe for pitched roofing products are Etex, Imerys,Terreal, Uralita, Koramic and Creaton. In the European market for chimneys, we believe, based on our experience in this industry, we are also the market leader by sales and volumes, followed by Poujoulat, Raab and Plewa.

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We believe, based on our experience in this industry, that our MonierLifetile joint venture is the largest manufacturer of premium-quality concrete roof tile in the North American market by annual sales and volumes. However, we estimate that concrete and clay tilesrepresent only around 6% of the pitched roofing market in North America. We estimate that asphalt shingles represent approximately 84% of the total pitched roofing market in North America, and the primary manufacturers are Owens Corning, GAF and Certain Teed (Saint-Gobain). We are currently not present in the North American market for chimneys.
***Our geographic markets***
*In the discussion that follows, we describe market conditions and our competitive position in the principal geographic areas in which we operate. The sales volume figures we have provided for each country or geographic region are the total volumes sold in eachparticular country or region by our consolidated subsidiaries, including volumes sold to our other Divisions and adjusted to reflect our percentage of interest in our proportionately consolidated subsidiaries.*

The following table illustrates the business operations of our consolidated subsidiaries by geographic region at December 31, 2004:
  **Number of plants**   **Concrete Tiles** **Clay Tiles** **Chimneys** **Roofing components,****Metal and other****Products** **Geographic Area** **At December 31, 2004** **Western Europe**  **44**  **18**  **13**  **9** Germany  11  5  6  4 United Kingdom  9  1  2  1 France  5  4  —  — Italy  9  3  1  — Other  10  5  4  4 **North America**  **13**  **0**  **0**  **0**               **Other Regions**  **45**  **5**  **9**  **2** Central & Eastern Europe  14  1  9  1 Mediterranean Basin  1  —  —  — Latin America  3  1  —  — Sub-Saharan Africa  6  —  —  1 Asia/Pacific  21  3  —  — **Total**  **102**  **23**  **22**  **11**  ***Concrete and clay tiles and roofing components*** *Western Europe*
We believe, based on our experience in this industry, we are the market leader in Western Europe based on annual sales and volumes. Western Europe represented approximately 74.1% of our total roofing products sales worldwide, and is the first market where weestablished our presence. We sold 61.2 million square meters of concrete tiles and 23.2 million square meters of clay tiles in the region in 2004. Our four principal markets in this region are Germany, the United Kingdom, France and Italy.

In Germany, which represented in 2004 approximately 34.8% of our roofing products sales in Western Europe, we have been facing declining volumes in concrete tiles and we have closed down two of our older plants in the past three years. These plant closures haveallowed us to focus our operations on our most efficient plants and reduce our surplus capacity. We have also introduced new products such as our Star surface, a concrete tile with a smoother surface. We have also expanded our roofing components activities with theacquisition of Kloeber, a large roofing accessories producer.

We have restructured our operations in France, Italy and the Netherlands by closing down older small-scale plants while expanding capacity at our more modern operations and constructing a clay tile plant in southern Italy that became operational in 2001. We are alsopresent in Austria, Belgium, Denmark, Finland, Norway, Sweden and Switzerland.

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*North America*
North America is our second most important regional market, after Europe, for pitched roofing products. In 2004, our sales of concrete roofing tiles and roofing accessories in North America accounted for 7.5% of our total sales in roofing products worldwide. Weoperate in North America through our jointly controlled American subsidiary, MonierLifetile which was formed in 1997 as a 50/50 joint venture between Redland’s subsidiary Monier Inc., which it had acquired in 1987, and Boral Lifetile Inc., a subsidiary of Boral Limited ofAustralia. MonierLifetile is the largest manufacturer of premium-quality concrete roof tiles in the United States based on sales and volumes. Currently, the company has 13 active concrete tile manufacturing plants in the United States, located principally in the southern states.
*Other Regions*
*Central & Eastern Europe:* We are continuing to expand into Eastern and Central Europe. Our main markets in this region are Poland, the Czech Republic, Hungary, Slovakia and Russia. We also have operations in Bulgaria, Croatia, Estonia, Slovenia and Romaniawhere in 2004 a new concrete tile plant opened. We have a presence through sales/administrative offices in Bosnia-Herzegovina, Latvia, Lithuania, Serbia-Montenegro and Ukraine.

*Asia Pacific:* Our most substantial presence in other regions is in Asia where we are present in Malaysia, Japan, China, Indonesia, Philippines, India and Thailand. We have been in other regions expanding our presence in Asia and we now have six concrete tile plants inChina, a new concrete tile plant in India and eight concrete tile plants and one clay tile plant in Malaysia. In 2002, we set up a joint venture with Cementhai Building Products, (a member of the Siam Cement Group), Lafarge Siam Roofing, for the manufacturing of clay rooftiles in Thailand. We opened our first clay tile plant in Rayong, Thailand in 2003.

*Other countries:* We are present in Turkey with a concrete tile plant. In Brazil, we operate three concrete roof tile plants and one clay roof tile plant. We also operate a joint venture with Boral in Mexico. We have substantial operations in South Africa where we sold6.4 million square meters of tiles in 2004.
***Chimneys***
We have production plants in 13 European countries. Including sales offices, we are present in 23 countries.

In 2004, we acquired a new plant in Belgium (Bemal), we opened also a sales office in Russia and acquired Rite-Vent Group including one plant in the United Kingdom and 3 sales offices (United Kingdom, Italy and Germany).
***Capital expenditures***
Capital expenditures for the years ended December 31, 2004, 2003 and 2002 in the Roofing Division amounted to 111 million euros, 86 million euros and 88 million euros, respectively. These capital expenditures related to the on-going upgrading and modernization ofexisting industrial operations around the world and on organic growth through the building of new production facilities. The Roofing Division’s capital expenditures accounted for approximately 10 % of our total capital expenditures in the three-year period.

There were no individual investments in the three-year period from 2002 to 2004 for the modernization or replacing of existing facilities and equipment which exceeded 20 million euros.

The Group also invested 40 million euros on various acquisitions over the three-year period to expand our geographical presence and strengthen our product range.

In 2005, the level of our capital expenditures will depend on general market conditions. We expect capital expenditures to total approximately 130 to 160 million euros, excluding new acquisitions. We intend to invest in projects that maintain or improve the performanceof our plants. We also intend to take advantage in 2005 of selected acquisition opportunities.

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**Gypsum**
In 2004, with sales of 1,340 million euros, the Gypsum Division represented 9.3% of our consolidated sales and 6.1% of our consolidated operating income on ordinary activities. The Gypsum Division’s after tax return on capital employed in 2004 was 9.5%. AtDecember 31, 2004 we had 6,012 employees in the Gypsum Division.

On the basis of square meters of wallboard produced in 2004, we believe, based on our experience in this industry, that we are the third largest manufacturer worldwide. We first entered the market for gypsum products in 1931, with the production of powdered plaster.We have since extended our product lines, and currently manufacture and offer several gypsum-based building solutions including gypsum wallboard, gypsum plaster, plaster block, jointing compounds, metal studs, anhydrite binders for self-leveling floor screeds, sound andthermal insulating partitions, and industrial plasters.

At December 31, 2004 the companies we consolidated (global and proportionate) operated 83 industrial sites in 24 countries. Of these, 36 were wallboard plants with a total production capacity of approximately 1,039 million square meters, 44 were plants where weproduced other plaster and related products such as plaster, plaster block and jointing compounds and three were plants which produced paper.

Our goals are to develop our presence in strong growth markets, strengthen our position in the existing markets, innovate in our system and product offer, reduce costs and improve our marketing.

The table below indicates the breakdown of our sales by destination in 2004, 2003 and 2002:
  **Gypsum Sales          by Geographic Area****Year ended December 31,**    **Geographic Area** **2004** **2003** **2002**       **(in          million €, except percentages)** Western Europe  723  54.0% 657  55.0% 604  52.7%North America  263  19.6  226  18.9  245  21.4 Other Regions  354  26.4  311  26.1  297  25.9 **Total**  **1,340**  **100.0****%** **1,194**  **100.0****%** **1,146**  **100.0****%**
We have been actively expanding our gypsum operations in emerging markets. We define emerging markets as those countries in our other geographical regions, excluding Japan, Australia and New Zealand. In 2004, we generated revenues of 286 million euros inemerging markets compared to 247 million euros in 2003 and 235 million euros in 2002. Emerging markets accounted for 21.3% of our total revenues in gypsum worldwide in 2004 compared to 20.7% in 2003 and 20.5% in 2002.
***General information regarding our products, industry and markets*** *Products*
The predominant gypsum product sold in the global market is gypsum wallboard (also called plasterboard). Gypsum wallboard, which in 2004 represented approximately 70% of our sales of gypsum products, is used primarily for both new residential and commercialconstruction and for repair and remodeling of:
 •partitions;    •paneling;    •ceilings; and    •linings.
We believe that in our main markets renovation activities accounted for approximately 40% of our gypsum wallboard sales in 2004, with some differences from one country to another.

Gypsum wallboard was invented in the United States in the early 1900s, but its widespread adoption in construction in North America and Europe has largely been a phenomenon of the last fifty years. It is available in standard sized sheets in a variety of thickness andquality including special sheets for high

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humidity areas such as bathrooms. Due to its naturally low thermal conductivity, wallboard is an ideal insulating material, which is why it is used in interior walls. It also acts as a flameretardant and absorbs ambient sound. New technologies are being exploited to make boards stronger and more flexible. These changes mean that for the first time gypsum wallboard is competingwith such materials as bricks for commercial usage.

We manufacture over a thousand different types of gypsum wallboard worldwide. We regularly introduce innovations to our product range to improve their ease of use and range of applications. In 2004, in France, we made an important step into the mobile partitionsystems business with our acquisition of a stake in the Clips group. The Gypsum Division is also progressively launching worldwide a new generation of four tapered edge plaster boards under the name SIGNATM. These products, with their four tapered edges made on line atlow cost, represent a major innovation for the plasterboard industry. They considerably help installers to achieve a top quality finish in various applications.

In previous years, several new products and systems were launched in various countries, such as new jointing compounds to facilitate the application of our patented Deco line systems (wallboard made with paper having received a suitable coating associated with aspecific jointing compound of identical whiteness, eliminating the need for a primer coat on job sites), new fire-proofing plasters and new ceiling tiles. 2003 was also the first full year of PLA-tec® operations in France (consisting of tailor made gypsum board architecturalcomponents) which proved to be successful with large installers who, as a result of PLA-tec®, saved time on the site and were able to increase the quality of complex architectural parts.

Our other gypsum-based products, such as plaster, industrial plaster, gypsum blocks and related products such as metal studs and accessories, which together in 2004 comprised the remaining 30% of our activity in this sector, are adaptable to a wide variety of uses andare targeted at the construction and decorating industry.

We tailor our marketing efforts in gypsum products to the specialized needs of each market. This marketing effort involves exchanging products or adapting our products to various technical specifications unique to each market and to differences in American andEuropean fitting habits and production standards.
*Production & facility information*
Gypsum is the common term for calcium sulfate dihydrate, a naturally occurring industrial mineral that is common in sedimentary environments. Gypsum can also be obtained as a by-product from chemical manufacturing and from the scrubbers of certain coal-firedpower plants. This so-called “synthetic” gypsum is increasingly being used in wallboard manufacture.

Water molecules are physically locked inside the crystal structure of gypsum. When calcined, gypsum becomes a fine powder that, mixed with water, can be applied in a plastic state which then sets and hardens by the chemical recombination of the water with theplaster. Gypsum is unique because it is the only industrial mineral that can be calcined, and yet go back to its original state when rehydrated. It is this property which is exploited in the manufacturing process.

In the manufacture of wallboard:
 •gypsum is calcined and ground to a flour like consistency known as stucco;    •the stucco is blended with water and other ingredients in a mixer to form a slurry;    •this slurry is extruded between two continuous sheets of paper at the forming station;    •the product travels down a long line in order to give the stucco molecules time to rehydrate and recrystallize into gypsum;    •as it travels, the gypsum crystals grow into each other and into the liner paper, giving the product three-dimensional strength;    •when the product has achieved initial “set” or firmness (approximately three minutes), it is cut into lengths;
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 •the individual boards are then dried in a kiln to remove excess water; and    •the boards are packaged face to face and stored until ready for shipment.
Gypsum is a key raw material for wallboard production. To produce one square meter of wallboard, we need on average approximately nine kilograms of gypsum. In 2004, we sold 675 million square meters of wallboard which used approximately six million tonnes ofgypsum. We use both naturally occurring gypsum from our own quarries and synthetic gypsum. Based on historic trends we do not consider the prices of these raw materials to be volatile. We use synthetic gypsum principally in some of our plants in the United States, SouthKorea, France, Germany and the Netherlands. We generally aim to locate our production sites as close as possible to gypsum supply sources to minimize transport costs, but in certain circumstances it is economical to transport natural gypsum long distances.

Our policy is to secure both our own natural reserves and long-term supply contracts for synthetic and natural gypsum in order to diversify our supply risk. At year-end 2004, our consolidated companies operated 16 gypsum quarries worldwide including 12 in WesternEurope. We currently estimate that we have approximately 113 million tonnes of proven and authorized reserves of gypsum worldwide. We estimate that we have an additional 175 million tonnes of identified reserves for which we expect to obtain authorization. In general, weobtain synthetic gypsum through long-term contracts that last approximately 20 years, most of which contain an option to renew. In certain cases, as a function of our supply needs and local market practices, we contract over shorter periods. We have contracts outstanding forthe supply of over 42 million tonnes of synthetic gypsum over the life of the contracts. We believe our current supply of gypsum, both natural and synthetic, is adequate for present and foreseeable operating levels.

Gypsum represents approximately 12% of our production costs and is a less significant input than paper in the manufacture of wallboard, which represents approximately 28% of our production costs. We primarily use recycled paper in our manufacturing process, andproduce 50% of the paper we use in wallboard production through our own paper mills in Sweden, France and in a joint venture in the United States. The major raw material for paper is recycled fibers whose prices are volatile as they are influenced by worldwide trading.Energy costs make up approximately 13% of the delivered paper cost. We depreciate our wallboard plants on a straight line basis over 20 years.
*Customers*
Our gypsum wallboard products are mostly sold through wholesalers, including:
 •general building material distributors;    •specialist dealers;    •lumber yards in the United States;    •decorating companies in emerging markets; and    •do-it-yourself home centers.
Specifiers, like architects, also have a significant impact on the choice of the best partition or ceiling systems. Depending on the specificity of each country, each business unit develops dedicated promotion efforts.

Sales of gypsum are made generally pursuant to current orders from customers who purchase quantities sufficient for their immediate requirements. Our sales of gypsum do not typically involve long-term contractual commitments. The amount of backlog orders, asmeasured by written contracts, is normally not significant.

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*Market & competitive factors*
We believe, based on our experience in this industry, that the total world gypsum wallboard market exceeds 6,000 million square meters per year, with North America accounting for about half of the world’s demand and industrialized countries more than 80%.

The gypsum industry is an integrated industry worldwide in which a few large companies, including our own, predominate. Today seven producers hold approximately 80% of the total market in a consolidating industry. These companies operate gypsum wallboardplants and usually own the gypsum reserves used in manufacturing the wallboard. They also sell gypsum for use in Portland cement production, other manufactured gypsum products and agriculture.

Our largest competitors in Europe are BPB and Knauf and in the United States, U.S. Gypsum Corporation, National Gypsum, BPB and Georgia Pacific.

The gypsum wallboard industry is highly competitive. Producers compete on a regional basis and primarily on factors such as price, product range and quality and customer service. Producers whose customers are located close to their wallboard plants benefit from lowertransportation costs, which is an important advantage.

The demand for gypsum wallboard is closely linked to the gross national product of each market and to the construction methods employed. Wallboard penetration is higher in markets that employ advanced construction methods. In markets that use so-called “dry”construction processes (i.e. steel or wood materials), such as the United States, Japan and Australia, wallboard is used for fire protection, to keep installation costs down and for ease of assembly. The average annual consumption of gypsum wallboard in these countries isbetween four and ten square meters per person. In Western Europe, where “wet” construction processes are more commonly used (i.e. construction using masonry, stone and brick materials), the average annual consumption of wallboard is between two and four square metersper person.

We envisage significant market growth potential in developing countries where construction methods are expected to evolve. Factors that stimulate market demand for gypsum products are the need to increase construction speed and labor cost increases, necessitatingsimpler and less labor-intensive assembly methods. In most countries in Asia, Eastern Europe and South America wallboard consumption is currently at modest levels (less than one square meters per person per year), but growing rapidly at rates ranging from 8% to 15% andmore. Gypsum wallboard demand is seasonal in North America, as it is tied to the level of construction activity which tends to be seasonal.
***Our geographic regions***
*In the discussion that follows, we describe market conditions and our competitive position in the principal geographic regions in which we operate. The sales volume figures we have provided for each country or geographic regions are the total volumes sold in eachparticular country or region by our consolidated subsidiaries, including volumes sold to our other Divisions and adjusted to reflect our percentage interest in our proportionately consolidated subsidiaries.*
*Western Europe*
In 2004, our sales in Western Europe accounted for 54% of our total sales in gypsum worldwide. Western Europe is the second largest regional market worldwide for wallboard, after North America. Our three principal markets in this region are France, the UnitedKingdom and Germany. Our total annual production capacity for wallboard in Western Europe was approximately 331 million square meters as of December 31, 2004 and we sold 266 million square meters in Western Europe in 2004.

*France.* We operate in France through our wholly owned subsidiary, Lafarge Plâtres. We have four wallboard plants in France, one of which is designed to use primarily synthetic gypsum and the others natural gypsum. We also have a paper mill and 16 otherproduction sites for the rest of our gypsum product lines, which include plaster, plaster blocks, industrial plaster, insulation and other materials.

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In 2004, we purchased a 25.5% stake in the Clips group, a recognized specialist in moveable partitions and interior design elements. Clips operates throughout France and, through subsidiaries, in China and Germany.

*United Kingdom.* We operate in the United Kingdom through our wholly owned subsidiary, Lafarge Plasterboard Ltd. We have a single plant in the United Kingdom, located in Bristol, with two wallboard production lines designed to primarily use natural gypsum. Ourplant is supplied with gypsum from Spain. We also have a jointing compound plant in Frampton.

In February 2005, we announced an investment of approximately 45 million euros to build a new wallboard plant in the United Kingdom. This plant, located in the Midlands region will use synthetic gypsum and have an annual capacity of 25 million square meters.

*Germany and the Netherlands.* We operate in Germany through our wholly owned subsidiary, Lafarge Gips GmbH. In February 2003, we completed the acquisition of the wallboard businesses of Gyproc in Germany and Poland for 42 million euros (net of cashacquired). The two acquired plants, located in Peitz and in Hartershofen with a combined annual capacity of 53 million square meters, were fully integrated with our other operations. We now operate four wallboard plants in Germany and a wallboard plant in the Netherlandswhich are primarily designed to use synthetic gypsum, except for the plant in Hartershofen, Germany, which is primarily designed to use a mix of natural gypsum and synthetic gypsum.

*Other regions.* We own a wallboard production plant and a plaster plant in Italy through our wholly owned subsidiary, Lafarge Gessi S.A. as well as a metal studs business though our subsidiary, Lafarge Profili. We also operate a paper mill in Sweden. In addition, wehave a minority interest in Yesos Ibericos which operates a wallboard plant and three plaster plants in Spain.
*North America*
In 2004, our sales in North America accounted for 19.6% of our total sales in gypsum worldwide. Our total annual production capacity for wallboard in North America was approximately 233 million square meters at December 31, 2004 and we sold 202 million squaremeters in 2004. We first entered the North American gypsum market in 1996 and we estimate, based on volumes sold and our experience in the industry, that we are now the sixth largest producer in this region.

We operate in North America through our majority owned subsidiary Lafarge North America, Inc. At December 31, 2004 we operated four wallboard manufacturing plants in the United States, two of which use natural gypsum, located in Newark, New Jersey andBuchanan, New York. Two state-of-the-art wallboard manufacturing plants using 100 percent recycled materials, including synthetic gypsum generated from nearby power plants are located in Silver Grove, Kentucky and in Palatka, Florida. We are also party to a joint venturepaper mill in Lynchburg with Rock-Tenn company, Virginia. In Canada, we operate one gypsum wallboard manufacturing plant in Corner Brook, Newfoundland, and a jointing compound plant in Quebec. Our subsidiary Lafarge North America Inc. ceased operations at itsWilmington plant, Delaware, at the end of 2002 as part of an ongoing strategy to service customers predominantly from newer, more efficient plants.

In November 2004, Lafarge North America Inc. announced plans to invest $75 million to substantially upgrade and double the capacity of its Buchanan, New York, wallboard plant. The improved facility is being built to produce 60 million square meters of gypsumwallboard annually to meet the growing demands of our residential and commercial customers in the northeast United States. The renovation is expected to begin mid-2005 and to be completed in mid-2006.
*Other regions*
*Central and Eastern Europe and the Mediterranean Basin.* We currently have operations in Poland, Ukraine, Romania and Morocco. We acquired our operations in Poland in 2000 with the acquisition of Dolina Nidy and Nida Gips. Nida Gips had an old wallboard plantin Gacki which was closed at the end of 2002. We have completed the construction of a new wallboard plant at the same site, which began operations at the end of 2002. We also operate a metal stud plant in Poland. In 2003, we increased our stake in Lafarge Arcom Gips inRomania and consolidated Lafarge Aghirès, our gypsum business in Romania, for the first time.

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We have operations in Ukraine: a plaster business, Stromgips and a commercial office in Kiev selling imported wallboard. In Turkey, we operate two companies through joint ventures which comprise a wallboard production plant and a construction plaster facility nearAnkara and a quarry and production facilities near Istanbul.

*Asia Pacific.* We operate in the Asia Pacific region through a joint venture with the Australian company Boral Limited which held 50% of the joint venture at the end of 2003. In 2004, we purchased the shareholding of our minority financial partners who helped tofinance our investment in our Asian joint venture and our interest in the joint venture is now 50%. At the end of 2004, our wallboard capacity in the region was 281 million square meters. The joint venture, Lafarge Boral Gypsum in Asia (“LBGA”), is managed jointly withBoral in accordance with our management policies.

The joint venture has three plants in South Korea which manufacture wallboard from synthetic gypsum. In China we have one main plant near Shanghai and a smaller one in Chongqing. The joint venture also has two wallboard plants in Indonesia, a metal stud plant inIndonesia and a wallboard plant in Malaysia.

The joint venture conducts its operations in Thailand through Siam Gypsum Industry with two plants and a combined capacity of 92 million square meters of wallboard at December 31, 2004. Siam Gypsum Industry announced the idling of a third facility in Navanakornduring the first quarter of 2003.

In February 2005, we announced that LBGA, with a total investment of approximately $30 million will double its production capacity of plasterboard in China to more than 70 million square meters per annum in order to keep up with sustained market growth. Two newplants will be built — as government approvals have been received — one in Shanghai and one in Chongqing which will complement LBGA’s existing manufacturing facilities in both cities. The Chongqing plant is expected to be operational in the third quarter of 2005 andthe Shanghai plant in the first quarter of 2006.

Outside of the joint venture we have two plants in Australia located in Melbourne and Sydney which exclusively manufacture wallboard from natural gypsum. We entered the Australian market in 1988 through a joint venture with the Pioneer Group. The joint venturewas fully acquired in 1999.

*Latin America.* Our principal markets in this region are Chile, Brazil and Argentina. In these countries, we operate through companies we control jointly with the Etex Group. We have one wallboard plant in each of Argentina, Brazil and Chile and two plaster plants,one in Brazil and one in Chile.

*Africa.* In 2003, we entered the South African market through the acquisition of 40% of MacSteel Interior Systems, a leading producer and distributor of interior systems, including plasterboard systems. In 2004 we acquired the remaining 60% interest in the companywhich changed its name to Lafarge Gypsum South Africa.
***Capital expenditures***
Capital expenditures in the years ended December 31, 2004, 2003 and 2002 in the Gypsum Division amounted to 46 million euros, 54 million euros and 79 million euros, respectively. These expenditures related to the on-going upgrading and modernization of existingoperations around the world and to organic growth through the building of new production facilities. The Gypsum Division’s capital expenditures accounted for 6.3% of our total capital expenditures in the three-year period.

The Group also invested 135 million euros in the three-year period on various acquisitions to expand our capacity and our geographic presence.

The principal investments (in excess of 20 million euros) in the three-year period from 2002 to 2004 for modernizing or replacing existing plants and equipment included:
 •Eastern Europe: construction of a new wallboard plant in Gacki, Poland (completed end of 2002); and    •Asia: construction of a new wallboard plant in Dangjin, Korea (completed September 2002)
In 2005, the level of our capital expenditures will depend on general market conditions. We expect capital expenditures to total approximately 140 to 170 million euros, excluding new acquisitions. We intend

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to invest in projects that maintain or improve the performanceof our plants. We also plan to pursue external growth opportunities that will enhance our ability to compete.
**Other Operations**
The sale of the operations of our former Specialty Products Division was initiated in 2000 with the disposal of our European road marking business which was sold to the Burelle group and the sale to three investment funds of our majority stake in Materis Participationswhich included our former operations in admixtures, aluminates, mortars, paints and refractories. In 2003, following the sale by these three investment funds of their stake in Materis Participations to a new investment fund, LBO France, our share in Materis decreased from33.36% to 7.27%. We entered into agreements with Materis allowing Materis to continue to use the Lafarge trademark and establishing a partnership in research and development until 2006.

In 2004, we sold our remaining lime business in the United Kingdom and our 40% equity interest in Carmeuse North America BV for 98 million euros.

Our other operations generated sales of 28 million euros in 2004, representing approximately 0.2% of our consolidated sales, compared to 87 million euros in 2003 and 191 million euros in 2002.
***Capital expenditures***
In the years ended December 31, 2004, 2003 and 2002, we made no material capital expenditure in our other operations.
**Environment**
We are subject to a broad range of environmental laws and regulations in each of the jurisdictions in which we operate. These laws and regulations impose increasingly stringent environmental protection standards regarding, among other things, air emissions, wastewaterdischarges, the use and handling of hazardous waste or materials, waste disposal practices and the remediation of environmental damage or contamination. These standards expose us to the risk of substantial environmental costs and liabilities, including liabilities associated withdivested assets and past activities, even where conducted by prior owners or operators and, in some jurisdictions, without regard to fault or the lawfulness of the original activity. We are also subject to regulations regarding the control and removal of asbestos-containingmaterial and the identification of potential exposure of employees to asbestos.

To prevent, control and remediate environmental problems and maintain compliance with regulatory requirements, we maintain an environmental policy designed to monitor and control environmental matters. Because of the wide variety of environmental regulations weface, our policy is decentralized with the group environmental department providing advice on environmental compliance, assisting in the recruitment, training and retention of personnel experienced in environmental matters and ensuring the interchange of ideas between oursubsidiaries.

Our policy requires each subsidiary to respect local laws and meet our own internal standards to minimize the use of non-renewable resources and the generation of hazardous and other wastes. Our subsidiaries are encouraged to take a proactive role with respect to theenvironment and cooperate with the regulatory authorities to evaluate the costs and benefits of proposed regulations. In each of our plants, our policy requires that each operational unit implement programs:
 •preventing accidental releases; and    •providing for emergency action plans.
Our environmental policy also requires environmental audits to be performed periodically at all of our properties to ensure environmental compliance and to assess whether improvements to the site are required to meet environmental laws or our own internal standards.

In 2000, we entered into a voluntary environmental conservation partnership with the World Wildlife Fund (“WWF”) and became a founding member of its Conservation Partner program and lent our support to

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the Forest Reborn program. In 2001, we worked with theWWF on a number of areas including environmental performance indictors (audits, CO2 emissions, energy consumption and the contribution of recycling), biodiversity and the restoration of quarries and the development of a voluntary CO2 reduction program. On November 6,2001, we announced, in conjunction with the WWF, that we had entered into a voluntary worldwide CO2 reduction commitment. We agreed with the WWF to a reduction of 20% in CO2 emissions per tonne of cement produced worldwide over the period 1990-2010. Thiscorresponds to a reduction of our CO2 emissions in industrialized countries of 15% in comparison to 1990 if alternative fuels are considered CO2 neutral, and 10% using WWF methodology. We estimate that Group wide we produced 672 kg of CO2 emissions per tonne ofcement produced in 2004, a reduction of 11.2% in comparison to 1990, and that in industrialized countries our CO2 emissions amounted to 47.6 million tonnes, a reduction of 11.6% in comparison to 1990. In calculating our CO2 emissions, we follow the requirements of theWBCSD/WRI Carbon Dioxide Protocol and consider alternative fuels, (where in general we incinerate waste and recover the energy), to be CO2 neutral.

We are currently involved in the remediation of contamination of certain properties. We believe, based on current information, that these activities will not have a material adverse effect on our financial condition or results of operations. It should be noted, in additionand as evidence of our dedication to a strict environmental policy, that most of these situations arose from alleged events or practices that took place before we acquired the relevant properties or subsidiaries.

Environmental matters cannot be predicted with certainty and there can be no assurance that the amounts we have budgeted and reserved will be adequate. In addition, future developments, such as the discovery of new facts or conditions or future changes inenvironmental laws, regulations or case law, could result in increased environmental costs and liabilities that could have a material adverse effect on our financial condition or results of operations. We are not currently aware of any environmental liabilities or of any non-compliance with environmental regulations that we expect will have a material adverse effect on our financial condition or results of operations.

We regularly incur capital expenditures that have an environmental component or that are impacted by environmental regulations. However, we do not keep separate accounts for such mixed expenditures. Environmental expenditures that extend the life, increase thecapacity, improve the safety or efficiency of assets or are incurred to mitigate or prevent future environmental contamination may be capitalized. Other environmental costs are expensed when incurred. For the years ended December 31, 2004, 2003 and 2002, environmentalcapital expenditures and remediation expenses were not material. However, our environmental expenditures may increase in the future.

In 2003, the European Union adopted a directive implementing the Kyoto Protocol on climate change and establishing a greenhouse gas emissions allowance trading scheme within the European Union. The directive came into force on October 25, 2003 and requiresEuropean Member States to impose binding caps on CO2 and from installations involved in energy activities, the production and processing of ferrous metals, the mineral industry (including cement production) and the pulp, paper or board production business. Under thisscheme, companies with operations in these sectors receive from the relevant Member States allowances that set limitations on the levels of greenhouse gas emissions from their installations. These allowances are tradable so as to enable companies that manage to reduce theiremissions to sell their excess allowances to companies that are not reaching their emissions objectives. Companies can also use credits issued from the use of the flexibility mechanisms under the Kyoto protocol to fulfill their European obligations. These flexibility mechanismsprovide that credits (equivalent to allowances) can be obtained by companies for projects that reduce greenhouse gas emissions in emerging markets. These projects are referred to Clean Development Mechanisms (“CDM”) or joint implementation projects depending on thecountries where they take place. Failure to meet the emissions caps is subject to heavy penalties.

Most of the Member States have established    in 2004 a national allocation plan that sets out the allowance allocations    for the initial period of three years, from 2005 to 2007. The European Commission    has approved most of them. On January 1, 2005, four national allocations    plans were still not yet approved by the Commission namely those of the following    countries: Greece, Italy, Poland and the    Czech Republic.

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The directive provides that the Member States have to issue the allowances for the year 2005 before February 28, 2005 while the operators will have to surrender a number of allowances equal to the total emissions from the installations during the year before March 31,2006. We forecast that the level of allocations that the national allocation plans will apply to our operations in Europe should be aligned with the levels of emissions we have targeted in our agreement with the WWF, provided that the production forecasts fit with the reality.These plans will mainly apply to our Cement operations and to a much lesser extent to our Roofing and Gypsum operations. Even if we are confident in our ability to achieve our reduction targets as planned in our WWF commitment, we are in a position to mitigate possibleimpacts of the national allocation plans on our operations in some European Countries by relying on other production sites and namely by using possible credits derived from the implementation of Kyoto flexibility mechanisms. Three CDM projects are currently in the approvalprocess by the United Nations Framework Convention on Climate Change (“UNFCCC”) bodies (methodology panel and CDM executive board), they are developed respectively in Malaysia, Philippines and Morocco.
**Research and Development**
Central research has focused over recent years on comprehension studies of the physical and chemical mechanisms that should improve the performance levels of our materials. These were studied in various aspects: easy implementation, mechanical strengths, aestheticsand overall quality of the environment. These research axes correspond to long-term requirements from our customers and are the heart of the Lafarge strategy for growth and differentiation. These axes were at the root of two main innovations in the Group within the ConcreteDivision: Ductal® and more recently Agilia®.

A new phase began in 2002 when research programs for new concretes were actively accelerated and are now showing results. The research teams at the Lafarge Centre de Recherche (“LCR”) have come up with at least three new prototypes in 2004; these should putnew products on the market in 2005. The concrete accelerating systems and the possibility of making slabs in large dimensions without joints are two examples. On another score, the range of Agilia® self-placing concretes is being deployed on a large scale thanks to thesupport of the research teams. In the field of sustainable development requirements, (particularly the goal to reduce cement-released CO2 by 20%), the priority to find substitution products within the cement family (“cementitious” materials) has been reinforced. This researchgave encouraging results in 2004 both in terms of characterization of available raw materials and optimization of mixes made with cement.

Organization of the Research Center was set up in 2002 in a Project and Competence Pole matrix that has now proved to be efficient. Project management has deepened relationships between each Division’s research teams and their operational units. This has made iteasier to better identify and focus on the most pertinent research subjects thus significantly reduce industrialization delays for these research results. LCR is currently managing a well-balanced research project portfolio on the short, mid and long-terms as well as discontinuedprojects. This state of affairs is very encouraging for the future.

The Divisions and operational units have increased their budget allotments for the activities of LCR. The staff at LCR has increased by 30% in the last three years reaching a total of 200 employees at the end of 2004. More than 15 application and developmentlaboratories also work for the Divisions and operational units throughout the world and the LCR research teams collaborate closely with them. Total Lafarge Research and Development expenditure in 2004 was 54 millions euros compared to 56 millions euros in 2003 and 55millions euros in 2002.

Due to this increase in demand, LCR has developed more and more partnerships with leading universities and research centers around the world. The Massachusetts Institute of Technology (“MIT”) and Princeton University in the U.S.A., Laval and Sherbrooke inCanada as well as the CNRS (“Centre National de la Recherche Scientifique” — the most important fundamental research center in Europe) are a few examples.

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Among the new products launched in 2004, the following can be mentioned:
 •**Cement Division:** launching *Concreto* in India and *Cemento Ultra* in Venezuela; *Blockset* in North America (a composite cement for block-making) and *Maxcem* (slag cement); *FluamixC*® in Austria as well as special binders for civil engineering.    •**Concrete and Aggregates Division:***Artevia* — a range of ornamental concretes; solutions using fiber concretes for slabs and floors; development of the *Agilia*® products has been continued.    •**Roofing Division:***Plate de pays* — a clay tile that completes the highest quality product line for Lafarge Roofing in France; *Galléane* — the first lipped channel tile that is easy to lay and also offers aesthetic qualities.    •**Gypsum Division:***Signa* — a board with four tapered edges. This is an important market innovation as it improves both productivity and aesthetics. *Rapid Deco* (USA) is a pre-coated board offering unequalled finished quality. **Intellectual Property**
We currently own or have licenses to use various trademarks, patents and other intellectual property rights that are of value in the conduct of our business, but no such intellectual property right is, by itself, material to our activities. We own or otherwise have rights tothe trademarks and trade names, including those mentioned in this document, used in conjunction with the marketing and sale of our products.

Our Protection of Industrial Property (“PIP”) Corporate Department aims to enhance the value of this intellectual property by coordinating, centralizing and establishing our title through patents, trademarks, copyright and other relevant laws and conventions and by usinglegal and regulatory recourse in the event of infringement. Each of our Divisions also has either a corresponding PIP Department or representatives linked in a network with the PIP Corporate Department, in order to coordinate our efforts to protect our intellectual propertyposition in building materials.

The use of or access to our intellectual property is governed by the terms of royalty agreements signed with our subsidiaries. In 2004, a certain number of Industrial Franchise agreements have been implemented to progressively substitute former royalty agreements. TheIndustrial franchise agreements are made of a bundle of licenses concerning Lafarge intangibles developed by the Group (Know-how, Trademark, Trade Name, patents, Best practices, etc.).

 In 2004, the content of the Lafarge intellectual property was enriched in terms of know-how and best practices derived from the results of the various development programs initiated by Lafarge and aimed at improving performance levels.

 Our PIP Corporate Department is in charge of monitoring the consistency of the Group Royalty policy and Group Trade Name policy.
**Insurance Management Policy**
The Group’s general policy in insurance matters is predicated on two principles: i) cover under Group-wide policies subsidiaries in which the Group owns a majority shareholding, subject to local regulatory constraints and specific geographical exclusions, and ii) retainexposure to frequency risks through self-insurance and captive insurance techniques and transfer only severity risks to the insurance and reinsurance markets. Special attention is paid to the financial strength of these market participants.

Two insurance programs have been implemented within the Group, one covering North America and the other covering operations in the rest of the world.
*Insurance policies excluding Lafarge North America Inc.*
The main insurance programs in Europe, Africa, Latin America and Asia primarily cover property risks (fire, explosion, natural disasters, etc.), machinery breakdown and ensuing business interruption. Assets are insured at their actual cash value. The largest sites areassessed in advance by independent appraisers to

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establish the asset values covered.    They vary significantly depending on the Division: Cement, Aggregates and    Concrete, Roofing, and Gypsum. Total insurance coverage amounts to 16 billion    euros. Loss control engineers evaluate potential losses for the largest sites.    The highest Probable Maximum Loss (PML) stands at 112 million euros, an amount    for which we are covered.

Different sub-limits on coverage      have been introduced into the insurance market, particularly for natural      events. The Property Damage Group’s policy carries a limit of 75 million      euros per year and per event for earthquakes. A specific sub-limit applies      in certain higher- risk countries, including Australia, China, Greece,      Indonesia, Italy, Japan, Kenya, Malawi, Mexico, the Philippines, Serbia,      Slovenia, Tanzania, Turkey, the U.S., Venezuela and Zambia. In Indonesia,      this sub-limit stands at 50 million euros per event. The Group policy was      effective from July 1, 2004. Following the earthquake and tsunami on December      26, 2004, which very seriously affected our plant located in the Aceh province      (Indonesia), the Group renewed the earthquake coverage for the period from      January to June 2005 inclusive, on the same terms and conditions as prior      to the disaster.

The risk of business interruption      caused by damage to insured property is generally considered to be low.      Given the size of our manufacturing network in most countries and within      each business activity, our plants are generally in a position to help      each other out. Business interruption risk is generally insured by our      subsidiaries, with a deductible of five days following a direct damage      and fifteen days following a machinery breakdown and a maximum coverage      period of 12 months. Furthermore, the continued operation of our plants      is not dependent on any particular supplier or sub-contractor.

Lastly, the loss control program      continued along the same lines as in previous years. A total of 86 site      inspections were carried out during 2004 by engineers specializing in prevention.

Civil liability, product liability,      directors and officers liability and environmental damage policies are      the main casualty-related policies. They cover amounts commensurate with      the nature of our business activities, the countries in which we operate,      our loss experience and the available capacity of the insurance market.      Given the sensitivity of this information, the coverage provided by these      various policies remains confidential.

The Group has two reinsurance captives.      One, which was set up in 2000, covers the frequency risk of the Group’s      subsidiaries. The risk retained by this captive stands at 2 million euros      per casualty claim and 5 million euros per property damage claim.      The other originated from the acquisition of the Redland and Blue Circle      groups and mainly handles the past risks incurred by these Groups.

An insurance captive was set up      during 2004 to cover property risks affecting the Group’s principal      subsidiaries in the European Union, as well as the U.S. assets inherited      from Blue Circle.

The Group benefited from the more      favorable conditions prevailing in the insurance market upon the annual      renewal of its property damage program from July 1, 2004. The total cost      of the Group’s insurance programs, including the risks self-insured      via the captives, amounted to 3.56 per thousand of the insured turnover,      representing a reduction of 9% compared with the previous year.
*Lafarge North America            Inc. Insurance Policies*
We maintain a comprehensive insurance      program to protect the company from certain types of property and casualty      losses, which utilizes commercial insurance and two captive insurance companies.      Commercial property insurance with replacement coverage is purchased to      insure against losses to plants and equipment. Additionally, the property      policy provides business interruption coverage for the cement manufacturing      plants and the gypsum manufacturing plants. We also purchase commercial      insurance for our risks associated with workers compensation, auto liability      and general liability exposures. The deductibles on this coverages range      from $1 million to $5 million per claim. The captive insurance companies      are used to fund losses below these amounts. We maintain other insurance      programs as appropriate. We believe the insurance programs, policy limits      and deductibles are appropriate for the risks associated with our business      and in line with coverage available in the market.

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**Litigation**
We are involved in several legal      proceedings, including contract disputes, product liability cases, environmental      inquiries and remediation actions (see the subsection entitled “Environment”)      and fair competition proceedings, that have arisen in the ordinary course      of business. We believe that we have made adequate provisions to cover      both current or contemplated general and specific litigation risks and      we believe that these matters will be resolved without any significant      impact on our activity levels, financial position or results of operations.

On December 3, 2002, the European      Commission imposed a fine on us in the amount of 250 million euros on the      grounds that some of our subsidiaries had allegedly colluded on market      shares and prices with their competitors between 1992 and 1998 for wallboard,      essentially in the United Kingdom and Germany. We vigorously challenged      this decision and have brought the case before the Court of First Instance      (CFI) in Luxembourg, which has jurisdiction over such matters, on February      14, 2003. The proceedings are currently taking place before the court.      The resolution procedure usually takes several years based on comparable      cases. As a bank guarantee was given on our behalf, no payment will have      to be made before the decision of the court.

Following investigations on the      German cement market, the German competition authority, the Bundeskartellamt,      announced on April 14, 2003, that it was imposing fines on German cement      companies, including one in the amount of 86 million euros on Lafarge Zement,      our German cement subsidiary for its alleged anti-competitive practices      in Germany. Lafarge Zement believes that the amount of the fine is disproportionate      in light of the actual facts and has brought the case before the Higher      Regional Court, the Oberlandesgericht, in Düsseldorf. The court’s      decision is not expected before several years. No payment nor any guarantee      is required to be made or given prior to the court’s decision. A provision      of 300 million euros was recorded in our financial statements for the year      ended December 31, 2002 in connection with the two matters above and we      recorded additional provisions in 2003 and 2004 for a total amount of 20      million euros in relation to interest on the amount of the fines since      2002.

On November 12, 2004, our subsidiary      Lafarge North America Inc. settled the arbitration proceeding which the      Dunn Industrial Group, Inc. (“Dunn Industrial”) initiated as      a lawsuit against us in 2001 in the Circuit Court of Jackson County, Missouri      in connection with the construction of our new cement plant in Sugar Creek,      Missouri. In full satisfaction of all of Dunn Industrial’s claims,      i) Dunn Industrial retained a $6.5 million advance payment previously made      by Lafarge North America Inc., ii) $3.8 million previously paid by Lafarge      North America Inc. to an escrow agent was released to Dunn Industrial,      and iii) Lafarge North America Inc. paid Dunn Industrial an additional      $29.7 million. These amounts have been capitalized as additional costs      of constructing the cement plant.

In the Netherlands, a former subsidiary      of the group, Tollens Coatings B.V., is one of the defendants in an action      brought in 1990 by the government in connection with the discharge of certain      waste in the Lekkerker canal between 1968 and 1971. At that time, Tollens      Coatings B.V. operated a paint manufacturing plant and had hired another      company to carry and dispose of waste produced by the plant. The government      is seeking 160 million Dutch guilders (approximately 72.6 million euros)      in damages, plus interest. Tollens Coatings B.V. contends that it did not      instruct the disposal company to dump the waste in the Lekkerker canal      and that it had no knowledge of the disposal company’s conduct. With      the consent of the parties, the proceedings, which are still at the level      of first instance, have been postponed several times by the court and since      late 1993 no proceedings on the merits have taken place. In July 2001,      the Dutch government took sufficient action to delay the running of the      statute of limitations, without any other consequence. As a result, the      case is still pending. Tollens Coating B.V. was disposed of with the Specialty      Products Division. However, pursuant to the disposition arrangements, including      the subsequent sale of Materis Participations to LBO France, the group      has agreed to indemnify the acquirers for any damages incurred in connection      with this litigation.

Finally, certain of our subsidiaries      have litigation and claims pending in the normal course of business. Management      is of the opinion that these matters will be settled without any material      adverse effect on the company’s financial statements.

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**ITEM 5. OPERATING AND            FINANCIAL REVIEW AND PROSPECTS**
The following discussion should      be read in conjunction with our consolidated financial statements which      are included elsewhere in this Form 20-F. Our consolidated financial statements      have been prepared in accordance with the provisions of French accounting      legislation and standards (“French GAAP”), which differ in significant      respects from generally accepted accounting principles in the United States      (“U.S. GAAP”). See Note 30 to Note 33 to our consolidated financial      statements for a description of the principal differences between French      GAAP and U.S. GAAP as they relate to Lafarge.

Our functional and reporting currency      has been the euro since the introduction of the euro on January 1, 1999.      The consolidated financial statements for the years ended December 31,      2004, 2003 and 2002 have been prepared in euros.
**Overview**
2004 was a year of significant      growth in the markets served by Lafarge, as well as a year of improving      results. Sales, at constant scope and exchange rates, increased by 7.7%.      We also benefitted from steps taken during the last few years to expand      our geographical coverage and product offer. Operating income on ordinary      activities, at constant scope and exchange rates, increased by 12.8% due      to a generally favorable pricing environment and our continuous efforts      to improve performance, despite rising energy costs. Also, after the important      developments completed during recent years, and particularly in 2001 with      the Blue Circle acquisition, we made several acquisitions of small and      medium size, as well as a number of divestments.

At the end of 2004, we had recovered      a solid financial structure with strengthened financial ratios. At December      31, 2004 our net debt to equity ratio was, at 59% and our cash flow from      operations to net debt ratio was 32.5%. This return to a position of financial      strength was achieved, over the past three years, through our improved      operational performance, tight control of capital expenditures and use      of working capital, a sizeable program of divestments of non-strategic      assets and a successful rights issue of 1,262 million euros during      2003. Favorable market conditions, which helped foster the growth in our      operating income on ordinary activities and corresponding cash flow generation      in 2004, have further improved our financial position. At year-end 2004,      our total debt amounted to 8,152 million euros, a reduction of 543 million      euros compared to December 31, 2003, while our cash and cash equivalents      increased by 19 million euros to 1,653 million euros.

In the Cement Division, our strategy      of geographical diversification has helped us to balance out the contrasting      evolutions of our different regional markets. In 2004 in particular, the      progressive improvement in pricing in Germany and the Philippines, well-oriented      markets in North America, France, Spain, much of Eastern Europe and the      Mediterranean Basin, Sub-Saharan Africa and India have largely compensated      the weaknesses of South Korea, Malaysia and Brazil. In 2004, the sharp      increase in energy costs proved a new challenge for the Division. Our longstanding      experience and know how in the flexible use of different sources of fuel      and the improvement of our industrial performance have helped to mitigate      the impact of increased energy costs in many operations.

 In Aggregates & Concrete,      our operations, mainly concentrated in Western Europe and North America,      have faced contrasting markets conditions up until 2004 when renewed growth      was recorded in much of North America and in France. The United Kingdom      weakened in 2004 as a result of a low level of infrastructure spending      compared to 2002 and 2003. In certain emerging markets where the development      of environmental regulations is gradually creating the conditions for satisfactory      financial returns, our operations have continued, for the third year in      a row, to significantly increase their contribution. Performance improvement      programs have also continued to deliver sizeable benefits.

Throughout the three-year period      we have continued to restructure our Roofing operations in particular in      Germany where the market has shown renewed weakness in 2004 after some      signs of stability in 2003. This restructuring effort has allowed us to      show ongoing improvement in our operating income on ordinary activities      over the period.

For the Gypsum Division, the three-year      period 2002 to 2004 has been a period of steady improvement in performance.      In particular in the United States, a steady turnaround was achieved during      the second half of

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2003 and confirmed in 2004 with a    return to positive operating income on ordinary activities driven by the    significant improvement in prices as well as better industrial performance.    A positive market environment in the majority of the Gypsum Division’s    other markets has supported the overall improvement in performance.

The growing contribution of our      operating income from emerging markets in 2004 once again confirmed our      long-term strategy of significantly expanding our presence in emerging      markets. We continue to believe emerging markets represent the best prospects      for the sustained long-term growth. of our activities. We classify all      countries outside of Western Europe and North America, with the exception      of Japan, Australia and New Zealand, as emerging markets.

Since the acquisition of Blue Circle      Industries, our external growth strategy has been to pursue small and medium      sized acquisitions, with attractive returns, primarily in Cement worldwide      and in Aggregates in Europe and North America. Over the last three years,      we have expanded our cement positions in China, Russia, Serbia, Slovenia      and Ecuador and our aggregates and concrete operations in North America,      France and Switzerland.
**Significant acquisitions            and divestitures**   *Significant acquisitions*
Over the past three year period,      as a consequence of our strategy to pursue small and medium size acquisitions,      we did not make any individual acquisition that would qualify as significant      on a consolidated basis. Nevertheless, in the aggregate, our small to medium      size acquisitions had a positive scope effect on revenues amounting to      392 million euros for 2004 compared to 2003 and to 156 million euros for      2003 compared to 2002.
 *Significant divestitures*
*Materis.* In September 2003,      we sold our 33.36% stake in Materis Participations to LBO France, a French      investment fund. This transaction was valued at a total of approximately      210 million euros including a fee related to the three-year license of      the Lafarge trademark. We invested approximately 20 million euros, from      the proceeds of the sale, in Materis (equivalent to a 7.27% equity stake),      the holding company that currently owns the businesses of our former Specialty      Products Division.

*Cementos Molins.* In September      2004, we sold our 40.9% stake in Cementos Molins in Spain for 265 million      euros.

Total negative scope effects on      revenues resulting from divestitures amounted to 411 million euros for      2003 compared to 2002, and to 178 million euros for 2004 compared to 2003

See “Item 4. Information on      Lafarge — Recent Events” for a list of the principal acquisitions      and divestitures.
**Seasonality**
Demand for our cement, aggregate      and concrete and roofing products is seasonal and tends to be lower in      the winter months in temperate countries and in the rainy season in tropical      countries. We usually experience a reduction in sales on a consolidated      basis during the first quarter reflecting the effect of the winter season      in our principal markets in Western Europe and North America and an increase      in sales in the second and third quarters reflecting the summer construction      season.
**Critical accounting            policies**
We prepare the consolidated financial      statements of Lafarge in conformity with French GAAP. We also prepare a      reconciliation of our consolidated financial statements to U.S. GAAP. The      notes to our consolidated financial statements summarize the significant      accounting policies which we believe are the most critical to aid in fully      understanding and evaluating our reported financial results. See Note 2      to our consolidated financial statements regarding the significant accounting      policies we apply under French GAAP and Note 30 

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to Note 33 for a description of the    principal differences between French GAAP and the U.S. GAAP as they relate    to Lafarge.

Certain of our critical accounting      policies require the use of judgment in their application or require estimates      of inherently uncertain matters. Although our accounting policies are in      compliance with generally accepted accounting principles, a change in the      facts and circumstances of the underlying transactions could significantly      change the implication of the accounting policy and the resulting financial      statement impact. Listed below are those policies that we believe are critical      and require the use of complex judgment in their application.

*Impairment of Goodwill and Market Shares.*The    net book value of goodwill and market shares is reviewed annually to take    into consideration factors that may have affected the assets’ valueand recoverability.

Our four Divisions have been considered      as the four segments of the Group including reporting units, defined as      being in general the activity of a segment in a country. In some specific      cases, a reporting unit may be composed of different activities in one      or several countries, or similar activities in several countries. The reporting      unit is the level used by the Group to organize activities and results      in its internal reporting.

In our goodwill and market shares      impairment test, we use a combination of a market approach and an income      approach. In the market approach, we compare the carrying value of our      reporting units with multiples of their Gross Operating Income. For reporting      units presenting an impairment risk according to the market approach we      then use the income approach. In the income approach, we estimate the discounted      value of the sum of the expected future cash flows. If the carrying value      of the reporting unit is higher than the measured fair value of the related      assets and liabilities, the company records extraordinary amortization      of goodwill and market shares to reduce the carrying value of the reporting      unit to its determined fair value.

Evaluations for impairment are      significantly impacted by estimates of future prices for our products,      the evolution of expenses, economic trends in the local and international      construction sector, the expectations on long-term development of emerging      markets and other factors. This also depends on the discount rates and      perpetual growth rates used. We have defined country specific discount      rates for each of our reporting units based on their Weighted Average Cost      of Capital. In some cases, we use a third party valuation as part of our      impairment test.

The discount rates and perpetual      growth rates in hard currency used for the valuation of the main reporting      units presenting an impairment risk are as follows:
  **At          December 31, 2004** **At          December 31, 2003** **Reporting            units** **Discount****rate** **Perpetual****growth****rate** **Discount****rate** **Perpetual****growth****rate**      Cement          United Kingdom  7.8%  2.0%  7.8%  1.5% Cement          Greece  7.3%  2.0%  7.4%  1.5% Cement          Malaysia  8.1%  2.0%  8.4%  1.5% Cement          Chile  7.8%  2.0%  N/A  N/A 
As of December 31, 2004 the sensitivity      of the fair values to an independent change of one point in the discount      rate or the perpetual growth rate is as follows:
  **Excess          of estimated** **Impact          of one point increase / decrease in the**   **fair          value over**     **Perpetual          growth** **Reporting            units** **carrying          value** **Discount          rate** **rate**       **(in          million €)** **(in          million €)**     **+          1 pt** **– 1          pt** **+          1 pt** **– 1          pt** Cement          United Kingdom  166  –244  +345  +67  –48 Cement          Greece  134  –148  +216  +52  –37 Cement          Malaysia  172  –98  +136  +33  –24 Cement          Chile  22  –41  +58  +5  –4                  
The total of goodwill and market      shares related to these reporting units is 1,885 million euros.

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*Pension Plans and Other Postretirement Benefits.* The accounting for pension plans and other postretirement benefits requires us to make certain assumptions that have a significant impact on the expenses and liabilities that we record for pension plans, end of serviceindemnities, and other post employment benefits.

The main defined pension plans and other postretirement benefits provided to employees by the Group are in the United Kingdom and North America (the United States of America and Canada). The related projected benefit obligations as of December 31, 2004represent 61% and 22%, respectively, of the company’s total obligations in respect of pension plans, end of service indemnities and other post employment benefits.

The primary assumptions made to account for pension plans, end of service indemnities and other post employment benefits are disclosed in Note 22(b) to our consolidated financial statements.

The expected long-term rate of investment return on pension plan assets is based on historical performance, current and long-term outlook and the asset mix in the pension trust funds. The discount rates reflect the rate of long-term high-grade corporate bonds.

The 2004 pension plans, end of service indemnities and other post employment benefits expenses are impacted by the year-end 2003 assumptions for the discount rate and the expected return rate on assets (pension plans only). For North America and the UnitedKingdom, if the 2003 discount rate assumption had been lowered by one percent, the 2004 pension plan and other postretirement benefit expenses would have increased by approximately 46 million euros, partially offset by an increase in the value of bonds held by pensiontrust funds. If the 2003 return rate on assets assumption had been lowered by one percent, the 2004 pension and other benefit plans expenses would have increased by approximately 30 million euros.

Because of the typically long term nature of the Group’s obligations in respect of its main post employment benefit schemes, and the short term volatility of financial markets, which has an impact on both the discount rate used and actual investment returns obtained,group accounting standards require to recognize any difference between expected and actual investment returns, as well as any impact of a modification of discount rates used, over the expected remaining active life of beneficiaries.

*Environmental costs.* Costs that result in future economic benefits such as extending useful lives, increased capacity, safety or, those costs incurred to mitigate or prevent future environmental contamination are capitalized. When we determine that it is probable that aliability for environmental costs exists, an undiscounted estimate of the future remediation is recorded as a provision without the offset of potential insurance recoveries. Environmental costs, which are not included above, are expensed as incurred.

*Site restoration.* Where we are legally, contractually or constructively required to restore a quarry site, the estimated costs of site restoration are accrued and amortized to cost of goods sold ratably, on a unit-of-production basis, over the operating life of the quarry. Theestimated future costs for known restoration requirements are determined on a site-by-site basis and are calculated based on the present value of estimated future costs.

*Revenue Recognition.* Consolidated revenues represent the value before sales tax of goods, products and services sold by consolidated enterprises in ordinary activities and after the elimination of intra-group sales. We record our revenues from the sales of our goods andproducts when ownership is transferred. Amounts billed to a customer in a sales transaction related to shipping and handling are included in “Sales”, and costs incurred by the seller for shipping and handling are classified as “Cost of goods sold”. Revenues are shown net ofcommercial rebates and discounts. Financial discounts are accounted for as financial expenses.

*Deferred taxes.* Deferred income taxes are accounted for using the balance-sheet liability method on temporary differences between the tax basis of assets and liabilities and their carrying amounts in the balance sheet (including tax losses available for carry forward).Deferred taxes are measured by applying currently enacted tax laws. Deferred tax assets are recognized when it is reasonably certain that they will be recovered in future years.

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**Reconciliation of non-GAAP financial measures utilized — Net debt, total equity and cash flow from operations**
We use net debt to measure the evolution of our financial ratios in particular the net-debt-to-equity ratio and the cash flow from operations to net debt ratio (see the subsection entitled “Net cash (used in) provided by financing activities”). Our senior managementfollows these two ratios to assess the financial strength of the Group. We believe that these ratios are useful to investors as they provide a view of the Group level of debt as compared to its total equity and its cash flow from operations.

Our net debt is defined as the total of our long-term debt, current portion of long-term debt and our short-term bank borrowings less our cash and cash equivalents.
  **At December 31,**   **2004** **2003** **2002**   **(in million €)** Long-term debt  6,948  7,370  10,271 Current portion of long-term debt  991  985  524 Short-term bank borrowings  213  340  530 Cash and cash equivalents  (1,653) (1,634) (1,109)           **Net debt**  **6,499**  **7,061**  **10,216**            
We calculate the net-debt-to-equity ratio by dividing the amount of our net debt as computed above by our total equity, which we define as the sum of shareholder’s equity, minority interests and other equity as set out in our consolidated balance sheet.
  **At December 31,**   **2004** **2003** **2002**   **(in million €)** Shareholder’s equity  8,477  8,185  6,981 Minority interests  2,479  2,191  2,155 Other equity  116  118  134            **Total equity**  **11,072**  **10,494**  **9,270**            
We calculate the cash flow from operations to net debt ratio by dividing our cash flow from operations by our net debt as computed above. Cash flow from operations is defined as net cash provided by operating activities after deduction of changes in operating workingcapital items.
  **Year ended December 31,**   **2004** **2003** **2002**   **(in million €)** Net cash provided by operating activities  1,736  2,089  1,791 Changes in operating working capital items  (377) 290  (165)           **Cash flow from operations**  **2,113**  **1,799**  **1,956** 
 
**Origin of sales and operating income on ordinary activities**
We have provided an analysis of our sales by segment. Our reported segments correspond to our operating Divisions. For the purposes of discussion in this Item 5 we present our sales by country or region of destination of the sale.

We have also provided an analysis by segment of operating income on ordinary activities. This item corresponds to our total sales, less cost of goods sold and selling and administrative expenses and depreciation. We do not calculate operating income on ordinaryactivities on the basis of sales by destination.

Sales and operating income on ordinary activities of entities over which we have direct or indirect control of more than 50% of the outstanding voting shares, or over which we exercise effective control, are fully consolidated. Control exists where Lafarge has the powerdirectly or indirectly to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Sales and operating income

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on ordinary activities in companies in which we and third party investors have agreed to exercise joint control are consolidated by the proportionate consolidation method. Revenues andexpenses of subsidiaries acquired or disposed of during the year are recognized in the consolidated financial statements of income as from the date of control or up to the date of transfer ofcontrol, respectively.
**Effects of changes in the scope of our operations and currency fluctuations**
Variations in the scope of our operations, such as acquisitions and divestitures, together with changes in how we account for our business units, such as a change from proportionate to global consolidation, may increase or decrease our consolidated sales and operatingresults in comparison to a prior year and thus make it difficult to discern the evolution of the underlying performance of our operations. In order to provide a meaningful analysis between any two years (referred to below as the “current” year and the “prior” year), sales andoperating income on ordinary activities are adjusted in order to compare the two years at a constant scope of consolidation. With respect to businesses entering the scope of consolidation at any time during the two years under comparison, current year sales and operatingincome on ordinary activities are adjusted in order to take into account the contribution of these businesses during the current year only for a period of time identical to the period of their consolidation in the prior year. With respect to businesses leaving the scope ofconsolidation at any time during the two years under comparison, prior year sales and operating income on ordinary activities are adjusted in order to take into account the contribution of these businesses during the prior year only for a period of time identical to the period oftheir consolidation in the current year.

Similarly, as a global business operating in numerous currencies, changes in exchange rates against our reporting currency, the euro, may result in an increase or a decrease in the sales and operating income on ordinary activities reported in euros, which are not linked tothe evolution of underlying performance. Except as otherwise noted, we calculate the impact of currency variances by measuring the difference between the prior year’s figures as published (adjusted if necessary for the effects of businesses leaving the scope of consolidation)and the result of converting the prior year’s figures (adjusted if necessary for the effects of businesses leaving the scope of consolidation) using the current year’s exchange rates.
**Results of Operations for the Fiscal Years ended December 31, 2004 and 2003**
*In the discussion of our results for the years ended December 31, 2004 and 2003 that follows, the sales figures, unless noted otherwise, are consolidated sales by destination and include the contributions of our proportionately consolidated subsidiaries. The gross salesvolumes figures we have provided for each Division or geographic zone are the total volumes sold by destination, including the volumes sold to our other Divisions and adjusted for the contributions of our proportionately consolidated subsidiaries.*
***Sales***
*Overview.* Sales increased by 5.7% between 2003 and 2004, from 13,658 million euros to 14,436 million euros. Currency fluctuations had a negative impact of 442 million euros or 3.5% reflecting in particular the strong appreciation of the euro against the majority ofother currencies. Changes in the scope of consolidation had a net positive impact of 214 million euros, or 1.5%. Positive scope changes amounted to 392 million euros, including in particular the effect of the increase in the ownership of Lafarge Halla Cement in South Korea,of the acquisition of The Concrete Company (TCC) in the United States with operations both in cement and concrete and of the acquisition of Hupfer Holdings in the aggregate activity in France and Switzerland. Negative scope changes amounted to 178 million eurosprimarily reflecting the impact of divestments of cement operations in Florida in 2003, as well as various aggregates and concrete activities in North America and the disposal of the remaining lime operations in Europe and road marking activities in the United States. Our salesfrom continuing operations at constant scope and exchange rates grew by 7.7% benefiting from good weather conditions and strong demand in a number of our markets.

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Contributions to our sales by segment for the years ended December 31, 2004 and 2003 and the related percentage changes between the two periods were as follows:
  **Year ended****December 31, 2004** **% Var.** **Year ended****December 31, 2003** **Sales** **(in million €)** **%** **2004/2003** **(in million €)** **%**       Cement  6,810  47.2  6.7  6,383  46.7 Aggregates & Concrete  4,747  32.9  6.3  4,465  32.7 Roofing  1,493  10.3  (1.1) 1,510  11.1 Gypsum  1,340  9.3  12.2  1,194  8.7 Other  46  0.3  (56.6) 106  0.8 **Total**  **14,436**  **100.0**  **5.7**  **13,658**  **100.0** 
The percentage of gross variation as well as variation at constant, scope and exchange rates between December 31, 2004 and 2003 were as follows:
**(in million €)** **2003**   **2003**   **2003** **2004**   **2004** **2003 vs 2004**                 **Actual** **Scope****effect of****disposals** **At constant****scope** **Currency****fluctuations****effects** **On a****comparable****basis** **Actual** **Scope effect****of****acquisitions** **On a****comparable****basis** **% Gross****change****Actual** **% Change at****constant****scope and****exchange****rates**   **(a)** **(b)** **(c) = (a)+(b)** **(d)** **(e) = (c)+(d)** **(f)** **(g)** **(h) = (f)+(g)** **(i) = (f–a)/(a)** **(j) = (h–e)/(e)**             Cement **6,383** (54)**6,329** (286)**6,043** **6,810** (209)**6,601** 6.7 9.2 Aggregates & Concrete **4,465** (68)**4,397** (113)**4,284** **4,747** (137)**4,610** 6.3 7.6 Roofing **1,510** (1)**1,509** (13)**1,496** **1,493** (12)**1,481** –1.1 –1.0 Gypsum **1,194** — **1,194** (29)**1,165** **1,340** (34)**1,306** 12.2 12.0 Other **106** (55)**51** (1)**50** **46** — **46** (56.6)–8.1 **Total** **13,658** **(178****)****13,480** **(442****)****13,038** **14,436** **(392****)****14,044** **5.7** **7.7** 
 
 *Cement*
Contributions to our sales by geographic regions for the years ended December 31, 2004 and 2003 and the related percentage changes between the two periods were as follows:
  **Year ended****December 31, 2004** **% Var.** **Year ended****December 31, 2003** **Sales** **(in million €)** **%** **2004/2003** **(in million €)** **%**       Western Europe  2,204  32.4  5.0  2,099  32.9 North America  1,338  19.6  (0.5) 1,345  21.1 Central & Eastern Europe  457  6.7  11.7  409  6.4 Mediterranean Basin  430  6.3  (2.5) 441  6.9 Latin America  372  5.5  (10.6) 416  6.5 Sub-Saharan Africa  944  13.9  23.2  766  12.0 Asia  1,065  15.6  17.4  907  14.2 **Total**  **6,810**  **100.0**  **6.7**  **6,383**  **100.0** 
Sales of the Cement Division increased by 6.7% between 2003 and 2004 to 6,810 million euros, up from 6,383 million euros in 2003. Currency fluctuations had a negative impact on sales of 4.9% and amounted to 286 million euros. Positive scope changes amounted to209 million euros, including in particular the effect of the increase in our ownership of Lafarge Halla Cement and the acquisition of the cement operations of The Concrete Company (TCC), while negative scope changes amounted to 54 million euros primarily reflecting theimpact of divestments of cement operations in Florida in 2003. Overall changes in the scope of consolidation increased sales by 2.4 %. At constant scope and exchange rates, our sales grew by 9.2%.

The total volumes sold by the Division in 2004 increased by 11% to 119.4 million tonnes (including 2.4 million tonnes of special products such as road binders, special cements and ground slag reported for the first time in 2004).

In Western Europe, sales totaled 2,204 million euros, an increase of 5.0% compared to 2003. The volumes sold in the region increased by 5% to 32.0 million tonnes (including 0.7 million tonnes of special products such as road binders, special cements and ground slagreported for the first time in 2004). France delivered a 14% sales growth, with sustained volume increase throughout the year coupled with a favorable

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pricing environment. In the United Kingdom, volumes were slightly down in a market that saw slower construction growth overall and increased imports. Despite this environment, sales were upby 1%, benefiting from the slight appreciation of the British pound versus the euro. In Spain, sales were up by 8% with positive trends in construction spending allowing for good priceincreases. In Germany, the construction market and cement volumes weakened once again in 2004, but this was more than offset by the steady recovery in prices from the low level of 2003, andsales were up by 10%. In Greece, sales were down by 4%, adversely affected by the slowdown in volumes after the completion of Olympics’ related building projects, although pricing showedgood levels of increase. In Italy sales were marginally down.

In North America, we achieved sales of 1,338 million euros, a decrease of 0.5% compared to 2003. The strengthening of the euro versus the U.S. dollar and the Canadian dollar adversely affected the evolution of our sales in the region as reported in euros. Changes inthe scope of consolidation had an overall unfavorable impact, the negative scope effect resulting from the divestment of our cement operations in Florida in 2003, being partly compensated by the positive scope effect resulting from the acquisition in 2004 of the cement activityof The Concrete Company (TCC). Our sales volumes in the region increased by 17% to 21.0 million tonnes (including 1.5 million tonnes of special products such as road binders, special cements and ground slag reported for the first time in 2004). Favorable economicconditions supported strong levels of demand across markets throughout the year, and we also benefited from more favorable weather conditions at both the start and the end of the year. High levels of demand particularly in the first half of the year, led to increased imports tomeet customer demand. Pricing trends continued to be positive, with successful price increases achieved in the majority of markets during the first half. In several US markets, a second price increase was also realized later in the year.

In emerging markets, our sales increased by 11.2% to 3,267 million euros, with these markets accounting for 48% of the Division’s sales in 2004, compared to 46% in 2003. The strengthening of the euro against the majority of other currencies adversely affected theevolution of our sales in these regions as reported in euros. Conversely, the scope changes, in particular the increase of the ownership in Lafarge Halla Cement and to a lesser extent the full year effect of the acquisition in 2003 of Ural Cement in Russia and of the newChongqing plant in China had a favorable impact.

Our sales in Central and Eastern Europe rose by 11.7% to 457 million euros, but this progression was held back by the negative impact of foreign currency fluctuations on currencies of the region. Our sales volumes in the region increased by 12% to 10.1 million tonnes.Sales grew by 11% in Romania, in a favorable market environment where residential, commercial and infrastructure building continued to develop. In Poland, sales remained stable, despite negative foreign exchange impacts, with volumes particularly strong in the first part ofthe year in anticipation of the large increase in the value added tax. In Russia, Slovenia and Ukraine, sales progressed in spite of the negative foreign exchange impact. In Russia, sales were favorably affected by the scope effect resulting from the acquisition of Ural Cement.

In the Mediterranean Basin, we saw a 2.5% decline in sales to 430 million euros. Our reported sales were adversely affected by foreign currency fluctuations. Our sales volumes in the region decreased by 2% to 9.7 million tonnes. In Morocco, sales were down by 4%despite good volumes with prices adversely affected by the new cement tax imposed on cement manufacturers. In Jordan, where public sector projects and the buoyant construction market for residential housing translated into booming volumes, sales were up by 14%. InEgypt, despite a very positive price variance, sales growth was limited by lower volume and adverse foreign exchange impact. In Turkey where the market grew strongly, sales were up although the progression was held back by the negative exchange rate impact. Export salesto Algeria were strongly reduced.

Our sales in Latin America were down by 10.6% to 372 million euros. This primarily reflects the impact of the appreciation of the euro against the various regional currencies. Our sales volumes in the region fell by 3% to 6.0 million tonnes. In Brazil, demand wasweak and prices were lower in the face of increased competition and also were adversely affected by the recent implementation of a value added type sales tax. This unfavourable environment combined with the fall in the Brazilian real led to sales being down by 18%. Cementdemand has been strong in Venezuela due to a high level of public spending and sales grew by 13% despite the adverse foreign currency impact. Our sales in Chile increased by 19% with positive volume trends

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and appreciation of the Chilean peso    versus the euro. In Mexico, sales were down by 3% as a result of the foreign    exchange impact, but otherwise sales grew strongly.

In the Sub-Saharan Africa region,      our sales grew by 23.2% to 944 million euros. Our sales volumes in the      area increased by 11% to 12.4 million tonnes of cement. Currency fluctuations      had a negative impact on sales generated in many countries in the region      but with the significant exception of South Africa where the rand’s      appreciation against the euro combined with a buoyant residential building      sector delivered sales growth of 41%. In Nigeria, the local dynamics of      the market were further improved by a significant reduction in imports      as a result of the sharp rise in shipping costs. Good pricing conditions      and volume growth supported by increased local production output led to      a 32% sales growth despite the negative currency impact. In Kenya, with      strong domestic market conditions, sales increased by 14% and in Uganda      sales decreased marginally after the negative currency impact. Sales in      Cameroon grew by 14% with particularly strong volumes. South East Africa,      which covers Zambia, Malawi, Tanzania and Zimbabwe contributed a 24% increase      in sales with strong volume increases in Zambia and Tanzania and good pricing      conditions in all countries.

Our operations in Asia saw sales      grow by 17.4% to 1,065 million euros benefiting from the positive scope      changes affecting our operations in South Korea and China. Sales volumes      in the region increased by 22% to 28.2 million tonnes. In the Philippines,      significant price increases were successfully implemented throughout the      year but with volumes slightly lower and a negative currency impact, sales      growth was limited to 14%. In Malaysia sales, which fell by 15%, suffered      from the depreciation of the ringgit against the euro and were also affected      by lower volumes and prices. Public sector spending especially in infrastructure      and the steel bar scarcity in the beginning of the year led to reduced      demand and price weakness. In South Korea, sales increased as the result      of the change in consolidation method, from proportionate to full, of Lafarge      Halla Cement following the acquisition of an additional 10.2% equity interest      in January 2004. This positive scope effect was partly offset by the won’s      depreciation against the euro and by lower sales volumes and declining      prices in a difficult market. The construction industry was badly affected      by government initiatives to dampen property price inflation, which led      to a sharp fall in construction orders and increased competition between      domestic producers and importers. In India, markets were well oriented      and sales increased by 17% despite the negative currency impact. Sales      growth in China at 20% benefited from the positive scope effect resulting      from the full-year operation of the Chongqing plant. In Indonesia, sales      were down 6%, due to the negative currency impact while they progressed      in local monetary units, due to positive market conditions. After the tsunami      in December 2004, we continued to supply local market needs from other      countries in Asia.
 *Aggregates & Concrete*
Contributions to our sales by activity      and by main geographic regions for the years ended December 31, 2004 and      2003 and the related percentage changes between the two periods were as      follows:
  **Year          ended****December 31, 2004** **%          Var.** **Year          ended****December 31, 2003** **Sales** **(in          million €)** **%** **2004/2003** **(in          million €)** **%**       Aggregates  2,179  45.9  6.3  2,050  45.9 Concrete  2,568  54.1  6.3  2,415  54.1 **Total            Aggregates & Concrete**  **4,747**  **100**  **6.3**  **4,465**  **100** Western          Europe  1,958  41.2  6.1  1,845  41.3 North          America  2,220  46.8  4.2  2,130  47.7 Other          regions  569  12.0  16.1  490  11.0 **Total**  **4,747**  **100.0**  **6.3**  **4,465**  **100.0** 
Sales of the Aggregates & Concrete      Division increased by 6.3% to 4,747 million euros in 2004 from 4,465 million      euros in 2003. Currency fluctuations had a negative impact on sales of      2.7% and amounted to 113 million euros. Positive scope changes amounted      to 137 million euros, including in particular the effect of the acquisition      of The Concrete Company (TCC), in Alabama, in the United States and the      acquisition of Hupfer Holdings with operations in France and Switzerland.      Negative scope effects amounted to 68 million euros primarily reflecting      the impact of various divestments in North America. Overall changes in      the scope of consolidation increased sales by 1.4 %. At constant scope      and exchange rates, our sales grew by 7.6%.

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Sales of our aggregates operations      were up by 6.3% between 2003 and 2004, to 2,179 million euros. The negative      impact of currency fluctuations was partly offset by overall favorable      scope effects. Our sales volumes of aggregates rose by 9% to 234.2 million      tonnes in 2004.

Our aggregates sales in Western      Europe grew by 8% to 855 million euros, benefiting from the positive scope      effect of the Hupfer Holdings acquisition. In addition at constant scope,      France recorded good volume growth particularly in Southern regions with      good pricing conditions. In the United Kingdom, sales were slightly up      due to the appreciation of the British pound against the euro. Excluding      this favorable currency effect sales were down, suffering from the decline      in infrastructure spending which strongly affected our asphalt and paving      activities. In Spain, sales were down affected more specifically by the      closure of a quarry in Catalunia and by difficult market conditions around      Madrid.

In North America, sales rose by      3% to 1,214 million euros, despite the negative impact of the decline of      the U.S. dollar and the Canadian dollar versus the euro. In all product      lines pure aggregates, asphalt and paving, sales at constant scope and      exchange rates delivered solid growth under the combined effect of relatively      strong economics and good weather conditions.

 Sales of our concrete operations,      were up by 6.3% between 2003 and 2004, from 2,415 million euros to 2,568      million euros. The negative impact of currency fluctuations was partly      offset by overall favorable scope effects. Our sales volumes of concrete      increased by 8% to 37 million cubic meters.

In Western Europe concrete sales      increased by 5% to 1,103 million euros. In France, sales grew strongly      due to the combination of high levels of residential housing in most regions      and favorable pricing trends supported by increased sales of special quality      concretes. In the United Kingdom, concrete sales delivered a robust growth      with improved pricing trends supported also by improved product mix. In      Portugal, volumes improved, while in Spain they declined, affected by the      difficult market conditions in the Madrid area. Sales in Greece were down      affected by the construction activity slowdown after the completion of      the Olympic games projects.

In North America, sales increased      by 5% from 955 million euros in 2003 to 1,006 million euros in 2004. The      overall positive scope effect resulting primarily from the acquisition      of The Concrete Company (TCC) was almost entirely offset by the negative      impact of currency fluctuations. Sales at constant scope and exchange rate      benefited from sustained volume growth, and overall positive pricing conditions.      Demand was particularly strong in Western Canada and in the eastern part      of the United States.

In the rest of the world, concrete      sales were up by 13%. Sales growth was strong in South Africa, helped by      the rand’s appreciation against the euro and in Latin America, particularly      in Brazil and Chile. Sales were down in Malaysia suffering from the depreciation      of the ringgit against the euro.
 *Roofing*
Contributions to our sales by markets      for the years ended December 31, 2004 and 2003 and the related percentage      changes between the two periods were as follows:
  **Year          ended****December 31, 2004** **%          Var.** **Year          ended****December 31, 2003** **Sales** **(in          million €)** **%** **2004/2003** **(in          million €)** **%** **Western            Europe**  **1,107**  **74.1**  **(2.7****)** **1,138**  **75.4** Germany  385  25.8  (12.3) 439  29.1 Other countries          in Western Europe  722  48.3  3.3  699  46.3 **Other            regions**  **386**  **25.9**  **3.8**  **372**  **24.6**                  **Total**  **1,493**  **100.0**  **(1.1****)** **1,510**  **100.0** 
The Roofing Division saw sales      decline by 1.1% between 2003 and 2004, from 1,510 million euros to 1,493      million euros. At constant scope and exchange rates sales dropped by 1.0%.

Sales of concrete tiles were down      3% to 741 million euros, and clay tiles sales decreased by 2% to 261 million      euros. Roof system components grew by 1% to 253 million euros. Chimney      sales increased by 9% to 189 million euros. Other sales decreased by 9%      to 49 million euros.

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In Western Europe, sales were down      by 2.7% to 1,107 million euros. Sales of both concrete and clay tiles were      down. In Germany, where sales decreased by 12.3%, the third and fourth      quarter were particularly difficult, both in the concrete and clay tile      activities. High demand was generated at the end of 2003 and in the first      half of 2004, following the announcement of the end of public subsidies      to private house builders. A counter effect was recorded in the second      half of 2004 and demand overall weakened. Prices remained under pressure.      In the Benelux (the Belgium-Netherlands-Luxembourg region), increased competition      led to a sharp decline in sales particularly pronounced in concrete tiles.      In the United Kingdom, sales benefited from the positive impact of currency      fluctuations. Soft market trends particularly in the second part of the      year affected negatively volumes of concrete tiles. Clay tile sales performed      better due to successful commercial efforts and chimneys sales remained      strong despite tough competition in Ireland. In France, the market recovery      compared to 2003 and successful commercial efforts led to good growth in      volumes and prices, both in concrete and clay tiles. Italy delivered solid      sales growth with particularly strong volumes in concrete tiles, and strong      chimneys sales.

In North America, sales increased      by 3%, the negative effect of the U.S. dollar’s depreciation against      the euro being more than offset by the sales growth in local monetary units.      Strong growth was recorded in all markets, with the largest increases being      observed in Southern California and Nevada.

In other regions sales were up      by 4%. Good growth was recorded in South Africa. In Central and Eastern      Europe sales were slightly up. In Asia, the level of sales was impacted      by the negative currency fluctuations, but also by difficult market conditions      in Japan and Malaysia.
 *Gypsum*
Contributions to our sales by main      geographic regions for the years ended December 31, 2004 and 2003 and the      related percentage changes between the two periods were as follows:
  **Year          ended****December 31, 2004** **%          Var.** **Year          ended****December 31, 2003** **Sales** **(in          million €)** **%** **2004/2003** **(in          million €)** **%** **Western            Europe**  **723**  **54.0**  **10.0**  **657**  **55.0** North          America  263  19.6  16.4  226  18.9 **Other            regions**  **354**  **26.4**  **13.8**  **311**  **26.1**                  **Total**  **1,340**  **100.0**  **12.2**  **1,194**  **100.0** 
Sales of the Gypsum Division increased      by 12.2% from 1,194 million euros in 2003 to 1,340 million euros in 2004.      At constant exchange rates and scope of consolidation, sales grew by 12.0%.      Changes in the scope of consolidation increased sales by 2.9% and currency      fluctuations had a negative impact on sales of 2.7%. The volumes of wallboard      grew by 7% to 675 million square meters.

In Western Europe, sales grew by      10.0% to 723 million euros with solid sales growth in France driven by      better construction environment with favorable pricing. In the United Kingdom      volumes were strong, driven by high demand. In Germany, pricing continued      to be negative but sales levels were strong in the fourth quarter in anticipation      of price increases in 2005.

In North America, sales grew by      16.4% to 263 million euros from 226 million euros despite the negative      effect of the exchange rate variation. The continued strong activity in      residential housing and renovation work allowed our plants to run at full      capacity. Price increases were implemented in all of our markets throughout      the year.

In our other zones our sales rose      overall by 13.8% to 354 million euros benefiting from a positive scope      effect. In Asia, sales were down affected by the decline in the South Korean      construction market, but good levels of activity were recorded in Poland,      Romania, Turkey and China.
 *Other*
Sales of our other operations fell      by 56.6% between 2003 and 2004, from 106 million euros to 46 million euros      following further divestments made in the lime and road marking activities.

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***Operating income              on ordinary activities***
Operating income on ordinary activities      takes into account Sales, Cost of Goods Sold, Selling and Administrative      Expenses and Depreciation. We do not report Cost of Goods Sold, Selling      and Administrative Expenses and Depreciation by segment.

Cost of Goods Sold increased by      6% between 2003 and 2004, from 9,088 million euros to 9,633 million      euros. The net changes in the scope of consolidation increased Cost of      Goods Sold by 259 million euros while currency fluctuations accounted for      a net decrease of 276 million euros. At constant scope and exchange rates      Cost of Goods Sold increased by 562 million euros. Selling and Administrative      Expenses increased by 1.4% between 2003 and 2004, from 1,750 million euros      in 2003 to 1,775 million euros in 2004. The net changes in the scope of      consolidation increased Selling and Administrative Expenses by 17 million      euros while currency fluctuations accounted for a net decrease of 45 million      euros. At constant scope and exchange rates Selling and Administrative      Expenses increased by 53 million euros.

Depreciation increased by 2.0%      between 2003 and 2004, from 886 million euros to 904 million euros. Net      changes in the scope of consolidation increased Depreciation by 35 million      euros, while currency fluctuations accounted for a net decrease of 26 million      euros. At constant scope and exchange rates, Depreciation increased by      9 million euros.

Operating income on ordinary activities      grew by 9.8% between 2003 and 2004, from 1,934 million euros to 2,124 million      euros. The appreciation of the euro against the majority of other currencies      had a negative impact of 57 million euros. Changes in the scope of consolidation      accounted for a net increase of 9 million euros and are essentially due      to the additional interest acquired in Lafarge Halla in South Korea and      the acquisition of Hupfer Holdings in the Aggregates and Concrete Division,      being offset by the divestment of cement operations in 2003 in Florida.      At constant scope and exchange rates, operating income on ordinary activities      from our ongoing operations recorded an increase of 12.8%. As a percentage      of our sales, operating income on ordinary activities represented 14.7%      in 2004, compared to 14.2% in 2003.

Contributions to our operating      income on ordinary activities by segment for the years ended December 31,      2004 and 2003, and the related percentage changes between the periods were      as follows:
  **Year          ended****December 31, 2004** **%          Var.** **Year          ended****December 31, 2003** **Operating            income on ordinary activities** **(in          million €)** **%** **2004/2003** **(in          million €)** **%**       Cement  1,567  73.8  6.9  1,466  75.8 Aggregates & Concrete  337  15.9  19.1  283  14.6 Roofing  150  7.0  5.6  142  7.3 Gypsum  129  6.1  53.6  84  4.3 Other  (59) –2.8  —  (41) –2.0 **Total**  **2,124**  **100.0**  **9.8%**  **1,934**  **100.0** 
The percentage of gross variation      as well as variation at constant scope and exchange rates between December      31, 2003 and 2004 were as follows:
**(in            million €)** **2003**   **2003**   **2003** **2004**   **2004** **2003          vs 2004**                 **Actual** **Scope****effect of****disposals** **At          constant****scope** **Currency****fluctuations****effects** **On          a****comparable****basis** **Actual** **Scope          effect****of****Acquisitions** **On          a****comparable****basis** **%****Gross****change****Actual** **%          Change****at constant****scope and****exchange****rates**   **(a)** **(b)** **(c)          = (a)+(b)** **(d)** **(e)          = (c)+(d)** **(f)** **(g)** **(h)          = (f)+(g)** **(i)          = (f–a)/(a)** **(j)          = (h–e)/(e)**             Cement **1,466** (11)**1,455** (49)**1,406** **1,567** (12)**1,555** 6.9 10.6 Aggregates & Concrete **283** 3 **286** (7)**279** **337** (7)**330** 19.1 18.3 Roofing **142** — **142** (1)**141** **150** (1)**149** 5.6 5.7 Gypsum **84** — **84** — **84** **129** (3)**126** 53.6 50.0 Other **(41****)**(3)**(44****)**— **(44****)****(59****)**+3 **(56****)**— — **Total** **1,934** **(11****)****1,923** **(57****)****1,866** **2,124** **(20****)****2,104** **9.8** **12.8** 
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 *Cement*
Contributions to our Cement operating      income on ordinary activities by geographic regions for the years ended      December 31, 2004 and 2003, and the related percentage changes between      the periods were as follows:
  **Year          ended****December 31, 2004** **%          Var.** **Year          ended****December 31, 2003** **Operating            income on ordinary activities** **(in          million €)** **%** **2004/2003** **(in          million €)** **%**       Western          Europe  624  39.8  3.0  606  41.4 North          America  260  16.6  5.3  247  16.8 Central & Eastern          Europe  104  6.6  15.6  90  6.1 Mediterranean          Basin  152  9.7  25.6  121  8.3 Latin          America  144  9.2  (12.2) 164  11.2 Sub-Saharan          Africa  184  11.8  36.3  135  9.2 Asia  99  6.3  (3.9) 103  7.0 **Total**  **1,567**  **100.0**  **6.9**  **1,466**  **100.0** 
Operating income on ordinary activities      of the Cement Division grew by 6.9% to 1,567 million euros in 2004 compared      to 1,466 million euros in 2003. At constant scope of consolidation and      exchange rates, operating income on ordinary activities rose by 10.6%.      Currency fluctuations had a negative impact of 3.7% or 49 million euros.      Changes in the scope of consolidation had almost no net impact on operating      income on ordinary activities with negative scope effects, in particular      the divestment of cement operations in Florida in 2003, being offset by      positive scope effects, primarily the increased shareholding in Lafarge      Halla in South Korea. As a percentage of the Division’s gross sales      (see Note 3(a) to our consolidated financial statements), operating income      on ordinary activities remained stable at 21.2%. Overall, 2004 benefited      from a favorable environment with good weather conditions, strong economics      and favorable pricing trends in some of our main markets. These positive      factors were however mitigated by a sharp rise in energy costs and in certain      areas by additional transportation and purchase costs to absorb the surge      in demand.

Operating income on ordinary activities      in Western Europe increased by 3.0% to 624 million euros compared to 606      million euros in 2003. The strengthening of the British Pound versus the      euro had a favorable impact of 2 million euros. Operating income on ordinary      activities at constant scope of consolidation and exchange rates rose by      2.6% compared to 2003. The evolution of operating income on ordinary activities      was mixed across the region. The strong construction market led to robust      growth in operating income on ordinary activities in France and in Spain,      despite higher energy expenses. The steady improvement in prices in Germany      allowed for losses incurred in 2003 to be greatly reduced in 2004. In the      United Kingdom, a soft market environment and the pressure of imports did      not allow sufficient price rises to cover the increase in energy costs.      In Greece, operating income on ordinary activities was down as a result      of the decline in volumes following the Olympic games and the increase      in energy costs.

 Operating income on ordinary activities      in North America grew by 5.3% to 260 million euros compared to 247 million      euros in 2003. Currency fluctuations had a negative impact on operating      income on ordinary activities of 12 million euros. The net scope effect      including the divestment of our operations in Florida and the acquisition      of the cement operations of The Concrete Company (TCC) had a negative effect      of 14 million euros. At constant scope and exchange rates, operating income      on ordinary activities in North America grew by 17.5%. The growth in results      reflects the strong general economic conditions and sustained construction      activity which led to increased volumes, allowed for higher prices albeit      partially offset by additional imports, increased fuel, raw material and      distribution costs. Plant fixed costs was kept flat. Several of our plants      achieved record production levels for the year.

In emerging markets, operating      income on ordinary activities rose by 11.4% to 683 million euros compared      to 613 million euros in 2003, representing 44% of the Cement Division’s      operating income on ordinary activities, compared to 42% in 2003. Currency      fluctuations had a negative impact on operating income on ordinary activities      of 39 million euros. Changes in the scope of consolidation arising primarily      from the increase in ownership of Lafarge Halla Cement in South Korea,      from the acquisition of Ural Cement in Russia and from the full-year operation      of the Chongqing plant in China had a positive impact of 14 million euros.      Operating income on ordinary activities at constant scope and exchange      rates grew by 16.3%.

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In Central and Eastern Europe, operating income on ordinary activities grew by 15.6% to 104 million euros compared to 90 million euros in 2003. The negative impact of currency fluctuations on the region’s operating income on ordinary activities amounted to 4 millioneuros. Operating income on ordinary activities at constant scope and exchange rates improved by 20.9%, with strong growth in Romania and to a lesser extent in Poland, the Czech Republic and Slovenia. Favorable market trends allowed for price increases to compensate forthe increase in energy costs that could not be offset by performance improvement initiatives. In Serbia, delays to the modernization of the production line had a negative impact on operating income on ordinary activities, which was down on 2003. In Russia, despite thefavorable effect of the Ural Cement acquisition, operating income on ordinary activities decreased.

Operating income on ordinary activities from the Mediterranean Basin countries increased by 25.6% to 152 million euros compared to 121 million euros in 2003. The negative impact of currency fluctuations on the region’s operating income on ordinary activitiesamounted to 8 million euros. Operating income on ordinary activities at constant scope and exchange rates grew by 34.5% with strong growth in operating income on ordinary activities in Jordan and Turkey in well-oriented markets. In Egypt, operating income on ordinaryactivities increased strongly driven by higher prices. Operating income on ordinary activities in Morocco was slightly down due to margins being impacted by the need to absorb the implementation of a cement sales tax in early 2004.

The operating income on ordinary activities from Latin America declined by 12.2% from 164 million euros in 2003 to 144 million euros in 2004. The negative impact of currency fluctuations on the region’s operating income on ordinary activities amounted to 11million euros. At constant scope and exchange rates, operating income on ordinary activities was down 6.5%. In Brazil, lower volumes and the decline in prices led to a significant reduction in operating income on ordinary activities. Part of this decline was however mitigatedby reductions in production costs. In Venezuela, the strong market recovery allowed for an improvement in operating income on ordinary activities. In Chile operating income on ordinary activities was largely unchanged on 2003. Weak prices in the first half of 2004 inHonduras and higher fuel costs in Mexico led to some slippage in operating income on ordinary activities compared to 2003.

Operating income on ordinary activities in Sub-Saharan Africa increased by 36.3% to 184 million euros in 2004 from 135 million euros in 2003. The negative impact of currency fluctuations on the region’s operating income on ordinary activities amounted to 7 millioneuros. At constant scope of consolidation and exchange rates, operating income on ordinary activities grew by 41.9% with strong growth in Nigeria and South Africa. In Nigeria, where the ramp up of the new Ewekoro plant continued in 2004 we benefited from high volumegrowth and favorable pricing conditions which helped to pass on to customers the rise of energy costs. In South Africa, the buoyant construction market continued to drive margin growth. Operating income on ordinary activities in Kenya was at a similar level to 2003 despitethe unfavorable effect of currency fluctuations. Cameroon and Uganda both increased their operating income on ordinary activities.

Operating income on ordinary activities in Asia declined by 3.9% from 103 million euros in 2003 to 99 million euros in 2004. The negative impact of currency fluctuations on the region’s operating income on ordinary activities amounted to 9 million euros. Thepositive impact of changes in the scope of consolidation as a consequence of the increase in ownership of Lafarge Halla Cement in South Korea and of the full-year operation of the Chongqing plant in China amounted to 13 million euros. At constant scope of consolidationand exchange rates, operating income on ordinary activities declined by 7.4% as a result of the sharp fall in South Korea and Malaysia. Operating income on ordinary activities in the region was favorably impacted by a significant recovery in prices in the Philippines, whichled to a strong increase in margins despite unfavorable energy costs. In India also, margin continued to improve, supported by the solid sales growth. Significant weakness was however recorded in South Korea where operating income on ordinary activities collapsed fromprevious levels as a result of the sharp fall in the construction market and higher energy expenses. In Malaysia also, the disappointingly weak construction market and higher energy costs led to a drop in operating income on ordinary activities. In China, operating income onordinary activities rose as a result of good performance seen in recent acquisitions. The operating income on ordinary activities generated in Indonesia was marginally down on 2003.

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 *Aggregates & Concrete*
Contributions to our operating income on ordinary activities by activity and by main geographic regions for the years ended December 31, 2004 and 2003, and the related percentage changes between the periods were as follows:
  **Year ended****December 31, 2004** **% Var.** **Year ended****December 31, 2003** **Operating income on ordinary activities** **(in million €)** **%** **2004/2003** **(in million €)** **%**       Aggregates  225  66.8  17.8  191  67.5 Concrete  112  33.2  21.7  92  32.5 **Total Aggregates & Concrete**  **337**  **100.0**  **19.1**  **283**  **100.0** Western Europe  156  46.3  17.3  133  47.0 North America  135  40.1  7.1  126  44.5 Other regions  46  13.6  91.7  24  8.5 **Total**  **337**  **100.0**  **19.1**  **283**  **100.0** 
Operating income on ordinary activities of the Aggregates & Concrete Division increased by 19.1% between 2003 and 2004, from 283 million euros to 337 million euros. Currency fluctuations had a negative impact of 2.9% or 7 million euros. Increases in the scope ofconsolidation, the most significant being the operations of Hupfer Holdings in France and Switzerland and the operations of The Concrete Company in Alabama in the United States had a positive effect of 7 million euros. At constant scope of consolidation and exchange rates,operating income on ordinary activities grew by 18.3%. As a percentage of the Division’s gross sales (see Note 3(a) to our consolidated financial statements), operating income on ordinary activities represented 7.1% in 2004, compared to 6.3% in 2003. Operating income onordinary activities for Aggregates Division totaled 225 million euros up 17.8% from 191 million euros in 2003. Currency fluctuations had a negative impact of 7 million euros. Operating income on ordinary activities for Concrete Division totaled 112 million euros up 21.7%from 92 million euros in 2003. The Division as a whole experienced in 2004 a strong increase in its operating income on ordinary activities under the combined effect of well-oriented markets in most of our countries, more favorable weather patterns, good pricing conditionsin the aggregates activities and the development of special quality products in concrete. The overall improvement was however partly mitigated by the pressure on margins in a few competitive markets in North America in the ready-mix and paving activities.

 In Western Europe, operating income on ordinary activities grew by 17.3% to 156 million euros. The net positive effect of changes in the scope of consolidation arose to 8 million euros. In France, significant improvements were recorded in both concrete and aggregatesactivities. In the United Kingdom, operating income on ordinary activities was down. The significant decline in infrastructure spending led to a decrease in operating income on ordinary activities in both the asphalt and paving and the aggregates activities as a result of theweak level of orders received.

 In North America, operating income on ordinary activities grew by 7.1% to 135 million euros. The weakening of the dollar against the euro had a negative impact of 9 million euros. Changes in the scope of consolidation had a net positive impact of 2 million euros.Although sales delivered solid growth, operating income on ordinary activities improvement was dampened by the increase in pension costs which totaled 7 million euros, higher fuel costs across all product lines and increased maintenance costs with higher plant activity. Theincrease in operating income on ordinary activities was driven by the aggregates activity due to strong volumes and solid pricing gains across all regions. This improvement was however partly mitigated by less favorable trends in a few markets in the ready mix and pavingactivities.

Elsewhere in the world, operating income on ordinary activities continued to grow reaching 46 million euros in 2004 compared to 24 million euros in 2003. In South Africa, operating income on ordinary activities continued to grow significantly driven by the strongconstruction market, under the combined effect of improved performance and the rand’s appreciation against the euro. In Poland and Turkey the operating income on ordinary activities continued to improve.

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 *Roofing*
Contributions to our operating income on ordinary activities by main markets for the years ended December 31, 2004 and 2003, and the related percentage changes between the periods were as follows:
  **Year ended****December 31, 2004** **% Var.** **Year ended****December 31, 2003** **Operating income on ordinary activities** **(in million €)** **%** **2004/2003** **(in million €)** **%** **Western Europe**  **114**  **76.0**  **8.6**  **105**  **73.9** Germany  39  26.0  (11.4) 44  31.0 Other countries in Western Europe  75  50.0  23.0  61  42.9 **Other regions**  **36**  **24.0**  **(2.7****)** **37**  **26.1**                  **Total**  **150**  **100.0**  **5.6**  **142**  **100.0** 
The Division’s operating income on ordinary activities was up 5.6% to 150 million euros from 142 million euros in 2003. Currency fluctuations had a negative impact of 1 million euros. As a percentage of the Division’s gross sales (see Note 3(a) to our consolidatedfinancial statements), operating income on ordinary activities represented 10.0% in 2004, compared to 9.4% in 2003. Further margin improvement was hampered by continued weakness in Germany.

Operating income on ordinary activities in Western Europe rose by 8.6% to 114 million euros. In Germany, however, the weakness in the construction market pushed volumes lower and as a consequence operating income on ordinary activities declined by 11.4% to 39million euros. In other Western European countries operating income on ordinary activities rose strongly from 61 million euros in 2003 to 75 million euros in 2004. In France, the operating income on ordinary activities benefited from the strong sales development and loweroverhead costs. In the United Kingdom, operating income on ordinary activities rose as a result of reduced costs of sales. All other countries recorded improved operating income on ordinary activities with the exception of the Netherlands where increased competition led to asharp decline.

Outside Western Europe, operating income on ordinary activities declined slightly to 36 million euros in 2004 from 37 million euros in 2003 due to a lower operating income on ordinary activities in Malaysia in the context of the disappointing construction market. Thisdecline was partly offset by improved results in North America. In Central Europe and Eastern Europe operating income on ordinary activities was slightly down.
 *Gypsum*
Contributions to our operating income on ordinary activities by main geographic regions for the years ended December 31, 2004 and 2003, and the related percentage changes between the periods were as follows:
  **Year ended****December 31, 2004** **% Var.** **Year ended****December 31, 2003** **Operating income on ordinary activities** **(in million €)** **%** **2004/2003** **(in million €)** **%**       Western Europe  73  56.6  10.6  66  78.6 North America  18  13.9  —  (14) (16.7)Other regions  38  29.5  18.7  32  38.1 **Total**  **129**  **100.0**  **53.6**  **84**  **100.0** 
Operating income on ordinary activities grew by 53.6% from 84 million in 2003 to 129 million in 2004, following the significant improvement achieved in 2003. Currency fluctuations had no impact on our operating income on ordinary activities. At constant scope,operating income on ordinary activities increased by 50%. As a percentage of the Division’s gross sales (see Note 3(a) to our consolidated financial statements), operating income on ordinary activities increased to 9.6% in 2004, from 7.0% in 2003.

Operating income on ordinary activities in Western Europe improved by 10.6% to 73 million euros up from 66 million in 2003. In France, it grew largely as a result of favorable pricing trends and product mix. In the United Kingdom, it fell sharply due to the additionalcosts associated with the need to import boards from continental Europe to meet high levels of demand. In Germany, stability in the market and increased exports helped offset the effect of lower prices, however losses continued to be incurred.

In North America, the significant increase in market prices and good plant performance ensured that the operations recorded a positive operating income on ordinary activities of 18 million euros, compared to a loss

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of 14 million euros in 2003. Prices recovered steadily throughout the year to levels not seen since 2000, but this favorable effect was partly offset by higher paper costs and increased energyexpenses. The two high-speed plants at Silver Grove and Palatka performed well running at high levels of output.

In our other regions operating income on ordinary activities rose to 38 million euros in 2004, compared to 32 million euros in 2003. A significant turnaround was recorded in Poland, where after the loss incurred in 2003, break even operating income on ordinaryactivities was reached due to increased domestic prices and export volumes. Our operating income on ordinary activities in the Asia Pacific region decreased overall due to the weaker market conditions experienced in South Korea and increased competition in Thailandresulting in lower prices in these countries.
 *Other (including holdings)*
The Operating loss on ordinary activities of our other operations rose to a negative 59 million euros in 2004 compared to a negative 41 million euros in 2003 being adversely affected by an increase in pension costs, a decline in the contribution of our propertiesactivities, and a net unfavorable scope effect resulting primarily from the disposal of the remaining lime operations in Europe.
***Operating income and net income***
Operating income takes into account operating income on ordinary activities, gains (losses) on disposals and other revenues (expenses). The table below shows the evolution of our operating income and net income:
  **Year ended****December 31, 2004****(in million €)** **% Var.****2004/2003** **Year ended****December 31, 2003****(in million €)** **Operating income on ordinary activities**  **2,124**  **9.8**  **1,934** Gains (losses) on disposals, net  41  (85.3) 299 Other income (expenses), net  (210) 20.3  (177)**Operating income**  **1,955**  **(4.9****)** **2,056** Financial expenses, net  (517) (9.0) (568)Income tax  (247) (41.9) (425)Share of net income in equity affiliates  74  100.0  37 Amortization of goodwill  (133) (1.5) (135)Minority interests  (264) 11.4  (237)**Net income**  **868**  **19.2**  **728** 
Gains (losses) on disposals, net represented a net gain of 41 million euros in 2004, compared to 299 million euros in 2003. The most significant capital gains were earned on the sale of the 40% stake in Carmeuse North America BV. In 2003, gain (losses) on disposals,net included the gains on the sale of certain cement assets in North America for 111 million euros and on the sale of the stake in Materis Participations for 122 million euros.

Other income (expenses), net, represented a net expense of 210 million euros in 2004, compared to a net expense of 177 million euros in 2003. In 2004, the most significant expense items arose from exceptional amortization and depreciation for 109 million euros,including an intangible asset write off of 45 million euros related to real estate development rights, from restructuring charges for 35 million euros split between Cement at 9 million euros, Aggregates & Concrete at 6 million euros, Roofing at 15 million euros and otheractivities at 5 million euros and from litigation expenses of 27 million euros.

Operating income decreased by 4.9% between 2003 and 2004, from 2,056 million euros to 1,955 million euros. Operating income represented 13.5% of sales in 2004, compared to 15.1% in 2003.

Financial expenses, net decreased by 9.0% between 2003 and 2004, from 568 million euros to 517 million euros. Financial expenses, net are comprised of financial expenses on net debt and other financial income and expenses including foreign exchange gains andlosses. Financial expenses on net debt decreased by 12% between 2003 and 2004, from 505 million euros to 443 million euros as the result of the decrease of our net average debt. The average interest rate on our debt was 5.3% on December 31, 2004 as compared to 5.8% onDecember 31, 2003. Other financial income and expenses was a net loss in 2004 of 74 million euros compared to a net loss of 63 million euros in 2003. Foreign exchange losses amounted to 41 million euros in 2004 and to 75 million euros in 2003.

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Income tax decreased by 41.9% between    2003 and 2004, from 425 million euros to 247 million euros. The effective    tax rate for 2004 of 17.2% compared to the effective tax rate for 2003 of    28.6%. This reduction resulted principally from 193 million euros of non-recurring    tax savings. These tax savings arose from tax efficient restructurings, from    asset re-evaluation allowed in several countries and from the enactment of    lower tax rates notably in Greece. Excluding these non-recurring tax savings,    our effective tax rate would have been30.6% in 2004.

Share of net income in equity affiliates doubled between 2003 and 2004, from 37 million euros to 74 million euros. The share of net income in equity affiliates in our Cement Division amounted to 40 million euros, of which Cementos Molins accounted for 25 millioneuros. The share of net income in equity affiliates in our Roofing and Gypsum Divisions amounted to 24 million euros. The share of the net income of Carmeuse North America BV, divested in December 2004, was positive in 2004 at 6 million euros and compared favorablyto the share of net loss of 33 million euros recorded in 2003.

Amortization of goodwill declined by 1.5% between 2003 and 2004, from 135 million euros to 133 million euros.

Minority interests increased by 11.4% between 2003 and 2004, from 237 million euros to 264 million euros, reflecting primarily improved net results in Greece, Jordan and Nigeria.

Net income increased by 19.2% between 2003 and 2004, from 728 million euros to 868 million euros. Net income represented 6% of sales in 2004, compared to 5.3% in 2003.
***Earnings per Share***
Earnings per share were up 4.9% at 5.16 euros compared to 4.92 euros in 2003. The average number of shares outstanding during the year was 168.3 million (170.9 million shares at December 31, 2004), as compared to 147.9 million in 2003 (167.2 million at December31, 2003). Between December 31, 2003 and December 31, 2004 the increase in the number of shares was essentially due to the 3.5 million shares issued to shareholders opting to reinvest dividends distributed in June 2004. The diluted earnings per share were up 4.8% at 5.00euros compared to 4.77 euros in 2003.
**Results of Operations for the Fiscal Years ended December 31, 2003 and 2002**
*In the discussion of our results for the years ended December 31, 2003 and 2002 that follows, the sales figures, unless noted otherwise, are consolidated sales by destination and include the contributions of our proportionately consolidated subsidiaries. The gross salesvolumes figures we have provided for each Division or geographic zone are the total volumes sold by destination, including the volumes sold to our other Divisions and adjusted for the contributions of our proportionately consolidated subsidiaries.*
***Sales***
*Overview.*Sales declined by 6.5% between 2002 and 2003, from 14,610 million euros to 13,658 million euros. Currency fluctuations had a significant negative impact of 9.0% reflecting in particular the strong appreciation of the euro against the majority of othercurrencies. Changes in the scope of consolidation had a net negative impact of 255 million euros, or 2.1%. Positive scope changes amounted to 156 million euros, while negative scope changes amounted to 411 million euros primarily reflecting the impact of divestments ofcertain cement operations in Spain in 2002 and Florida in 2003, as well as various aggregates & concrete activities in North America. Our sales from continuing operations at constant exchange rates grew by 4.6% after a significant recovery in North America in the second halfand sustained levels of growth throughout the year in many emerging markets.

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Contributions to our sales by segment for the years ended December 31, 2003 and 2002 and the percentage variation between the two periods were as follows:
  **Year ended****December** **31, 2003** **% Var.** **Year ended****December** **31, 2002** **Sales** **(in** **million €)** **%** **2003/2002** **(in** **million €)** **%**       Cement  6,383  46.7  (8.1) 6,948  47.6 Aggregates & Concrete  4,465  32.7  (6.3) 4,768  32.6 Roofing  1,510  11.1  (1.8) 1,538  10.5 Gypsum  1,194  8.7  4.2  1,146  7.8 Other  106  0.8  (49.5) 210  1.4 **Total**  **13,658**  **100.0**  **(6.5****)** **14,610**  **100.0** 
The percentage of gross variation as well as variation at constant, scope and exchange rates between December 31, 2003 and 2002 were as follows:

 
**(in million €)****2002**   **2002**   **2002** **2003**   **2003** **2002 vs 2003**               **Actual** **Scope****effect of****disposals** **At constant****scope** **Currency****fluctuations****effects** **On a****comparable****basis** **Actual** **Scope****effect of****acquisitions** **On a****comparable****basis** **% Gross****change****Actual** **% Change****at constant****scope and****exchange****rates**  **(a)** **(b)** **(c) = (a)+(b)** **(d)** **(e) = (c)+(d)** **(f)** **(g)** **(h) = (f)+(g)** **(i) = (f–a)/(a)** **(j) = (h–e)/(e)**                                 Cement**6,948** (181)**6,767** (743)**6,024** **6,383** (54)**6,329** (8.1)5.1 Aggregates & Concrete**4,768** (108)**4,660** (393)**4,267** **4,465** (36)**4,429** (6.3)3.8 Roofing**1,538** (22)**1,516** (56)**1,460** **1,510** (6)**1,504** (1.8)3.0 Gypsum**1,146** (5)**1,141** (77)**1,064** **1,194** (61)**1,133** 4.2 6.4 Other**210** (95)**115** (18)**97** **106** 1 **107** (49.5)9.3 **Total****14,610** **(411****)****14,196** **(1,287****)****12,909** **13,658** **(156****)****13,500** **(6.5****)****4.6**    *Cement*
Contributions to our sales by geographic regions for the years ended December 31, 2003 and 2002 and the percentage variation between the two periods were as follows:

 
  **Year ended****December** **31, 2003** **% Var.** **Year ended****December** **31, 2002** **Sales** **(in million €)** **%** **2003/2002** **(in million €)** **%**       Western Europe  2,099  32.9  (7.7) 2,274  32.7 North America  1,345  21.1  (14.8) 1,579  22.7 Central & Eastern Europe  409  6.4  2.0  401  5.8 Mediterranean Basin  441  6.9  (3.1) 455  6.6 Latin America  416  6.5  (17.1) 502  7.2 Sub-Saharan Africa  766  12.0  1.3  756  10.9 Asia  907  14.2  (7.5) 981  14.1 **Total**  **6,383**  **100.0**  **(8.1****)** **6,948**  **100.0** 
Sales of the Cement Division declined by 8.1% between 2002 and 2003, to 6,383 million euros, down from 6,948 million euros in 2002. This decline was in large part due to the appreciation of the euro against the majority of other currencies. Currency fluctuations hada negative impact on sales of 11.0% which amounted to 743 million euros. Overall changes in the scope of consolidation at constant exchange rates decreased sales by 2.2% representing 127 million euros. At constant scope and exchange rates, our sales grew by 5.1%.

The total volumes sold by the Division in 2003 increased by 2% to 108 million tonnes of cement.

In Western Europe sales totaled 2,099 million euros, a decrease of 7.7% compared to 2002. The divestment in 2002 of certain operations in Spain decreased sales by 115 million euros. The volumes sold in the region decreased by 7% to 30.6 million tonnes reflecting theimpact of the divestment in Spain. Volumes in France were down due to contrasting regional markets, but favorable pricing trends resulted in sales being stable for the year. Volumes in the United Kingdom declined in a rather weak market. In addition imports put somepressure on volumes and prices. However the majority of the 17% decline in sales resulted from the translation impact of the appreciation of the euro against the British pound. Sales in Spain were down by 28% reflecting the divestment of the cement operations in Andalusiain 2002. The remaining operations in

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Spain recorded another year of solid growth in a buoyant construction market. In Italy sales were marginally up from the previous year. Greece showed strong levels of growth in sales, up 15%,in the run up to the Olympic Games and due to a very buoyant residential housing market. In Germany, sales were negatively impacted by a severe price war throughout the year and were downby 15%. The situation finally stabilized towards year end.

In North America, we achieved sales of 1,345 million euros, a decrease by 14.8%. The strengthening of the euro versus the U.S. dollar and the Canadian dollar adversely affected the evolution of our sales in the region. In addition the negative scope effect resulting fromthe divestment of our cement operations in Florida in 2003 had an unfavorable impact. Our sales volumes in the region increased by 3% to 18.0 million tonnes. The construction market in the United States in 2003 was mixed. While residential construction remained robustthroughout the year, activity in the non-residential sector was weak and the many individual State budget deficits impacted the level of infrastructure spending. The strong recovery in the second half compensated for the shortfall in volumes experienced in the first half beset byunfavorable weather conditions. Exceptionally strong gains in sales were recorded across the United States in the last quarter with particularly strong growth in the Great Lakes, the Mississippi River region, the West and the North East. Prices however remained under somepressure and declined for the year as a whole particularly in the Southeast, Northeast and Mississippi River districts. In Canada demand was strong for the year overall, with the Western provinces showing the most favorable trends. A solid increase in prices was achieved inCanada in the year.

In emerging markets we experienced a decline of 5.0% to 2,938 million euros, with these markets accounting for 46% of the Division’s sales in 2003, compared to 45% in 2002. The drop in sales was almost entirely derived from the appreciation of the euro against themajority of local currencies.

Our sales in Central and Eastern Europe rose by 2.0% to 409 million euros, but this progression was held back by the negative impact of foreign currency fluctuations on all currencies in the region. Our sales volumes in the region increased by 11% to 9 million tonnes.Sales grew by 12% in Romania, in a context of high demand and increased prices. In Poland sales were down by 18% as a result of foreign exchange impact and as the recession in the building industry continued to affect volumes and prices. In Serbia, Russia, Slovenia andUkraine, sales progressed favorably in spite of the negative foreign exchange impact.

In the Mediterranean Basin we saw a 3.1% decline in sales to 441 million euros. Our reported sales were adversely affected by foreign exchange fluctuation. Our sales volumes in the region increased by 4% to 9.9 million tonnes. In Morocco, the construction market washealthy throughout the year and despite a negative foreign exchange impact, sales increased by 8%. In Jordan the construction market for residential housing was very buoyant in the year and sales which were down by 5% would have risen strongly before the negative foreignexchange impact. In Egypt, market conditions and prices in local currency improved gradually in the year. However the devaluation of the Egyptian pound resulted in our sales being down by 30%. In Turkey where the market improved in the second part of the year, our saleswere up at constant scope of consolidation and exchange rates.

Our sales in Latin America were down by 17.1% to 416 million euros. This primarily reflects the impact on sales in the region of the appreciation of the euro against the various regional currencies in the year. Our sales volumes in the region fell by 5% to 6.2 milliontonnes of cement. Volumes were down in Brazil due to slower demand in the South and South-East, but despite the favorable impact of price increases put in place in the second half of 2002, the fall in the real led to sales being down by 13%. In the context of the politicaland economic turmoil and the collapse of the bolivar, sales in Venezuela fell by 41%. The operations in Chile performed well with both positive volume and price trends, but the negative foreign exchange impact led to a drop in sales of 15%. In Mexico sales were down by9% as a result of the foreign exchange impact, otherwise sales grew strongly.

In the Sub-Saharan Africa region our sales grew by 1.3% to 766 million euros. Our sales volumes in the area increased by 10% to 11.2 million tonnes of cement. Currency fluctuations had a negative impact on sales generated in many countries in the region but with thesignificant exception of South Africa where the rand’s strong appreciation against the euro and buoyant market conditions delivered sales growth of 49%. In Nigeria, sales grew strongly on the back of improved prices and some volume growth, but after negative currency

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impacts were down by 8%. In Kenya and Uganda, sales fell by 13% in each country due to negative currency impacts, although strong domestic market conditions and prices allowed for goodgrowth in sales in local currency. Sales in Cameroon remained stable. South East Africa, which covers Zambia, Malawi, Tanzania and Zimbabwe contributed a 3% increase in sales.

Our operations in the Asia region saw sales fall by 7.5% to 907 million euros as a consequence of negative foreign currency fluctuations. Our sales volumes in the region increased by 9% to 23.1 million tonnes. In South Korea, sales continued to show strong growth inlocal currency which was offset by the won’s depreciation against the euro. Domestic sales volumes were strong as construction spending continued to increase and prices developed favorably over the year. In Malaysia, sales decreased by 7% primarily as a result of thedevaluation of the ringgit against the euro. Volumes improved on increased domestic demand, thanks to the resolution of the foreign construction labor issue in 2002 and continued economic development. Intense competition had a negative impact on selling prices. In thePhilippines sales fell by 15% in large part as a consequence of the devaluation of the peso. Sales were also adversely affected by severe price competition in the first half of the year, but improved along with volumes during the second half. In India sales dropped by 16%largely due to negative currency fluctuations. Favorable pricing trends helped to offset lower volumes on sales. China has continued to deliver a strong growth in sales of 69% benefiting from the full-year operation of the Dujiangyan plant into the Greater Chengdu market andof the acquisition of the Chongqing plant in 2003. In Indonesia, sales were down 4%, due to currency fluctuations while they progressed in local monetary units, due to positive market conditions.
 *Aggregates & Concrete*
Contributions to our sales by activity and by main geographic regions for the years ended December 31, 2003 and 2002 and the percentage variation between the two periods were as follows:
  **Year ended****December** **31, 2003** **% Var.** **Year ended****December** **31, 2002** **Sales** **(in million €)** **%** **2003/2002** **(in million €)** **%**       Aggregates  2,050  45.9  (6.6) 2,196  46.1 Concrete  2,415  54.1  (6.1) 2,572  53.9      **Total Aggregates & Concrete**  **4,465**  **100.0**  **(6.3****)** **4,768**  **100.0** Western Europe  1,845  41.3  (0.6) 1,856  38.9 North America  2,130  47.7  (11.4) 2,405  50.5 Other regions  490  11.0  (3.4) 507  10.6      **Total**  **4,465**  **100.0**  **(6.3****)** **4,768**  **100.0** 
Sales of the Aggregates & Concrete Division dropped by 6.3% to 4,465 million euros in 2003 from 4,768 million euros in 2002. This decline was primarily due to the appreciation of the euro against other currencies. At constant scope and exchange rates, our sales roseby 3.8%. Changes in the scope of consolidation decreased sales by 1.7%. In Western Europe our sales declined by 0.6% to 1,845 million euros. In North America, our sales fell by 11.4% to 2,130 million euros.

Sales of our aggregates operations, which also include our asphalt and road contracting businesses, were down by 6.6% between 2002 and 2003, to 2,050 million euros. At constant scope and exchange rates our sales from our operations rose by 2.8%. Currencyfluctuations had a negative impact of 8.9% on sales. Our sales volumes of aggregates rose by 3% to 214 million tonnes in 2003.

Our aggregates sales in Western Europe were stable at 791 million euros. In France sales rose as a consequence of a number of small acquisitions in the Western and South Western regions. Excluding these acquisitions, sales were at a similar level to the previous year,but with Northern France showing a marked decline compared to a growing South-West market. Volumes were down but prices however followed a favorable trend across all regions. In the United Kingdom, sales were down by 3% as a consequence of the depreciation ofBritish pound against the euro. Excluding this factor sales grew on the back of good pricing in aggregates and asphalt and paving operations benefiting from major road contracts. With the healthy construction market in Spain, sales continued to grow in 2003.

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In North America, sales fell by 12% to 1,175 million euros. Currency fluctuations were behind this decline with an 11% negative impact on sales in euros. Sales at constant scope and exchange rates were almost flat but with contrasting markets. After a slow first half,due to poor weather conditions and slower construction activity in some markets, the second half brought stronger sales driven by a recovery in the United States. The Southern and Eastern United States showed strong sales growth by the end of the year. Eastern Canada alsogrew favorably, but the Western United States suffered from a declining activity in paving projects. Pricing improved with increases recorded in most markets and particularly in Canada.

Sales of our concrete operations which include ready mix concrete and our pre-cast concrete products, declined by 6.1% between 2002 and 2003, from 2,572 million euros to 2,415 million euros. At constant scope and exchange rates our sales increased by 4.7%.Currency fluctuations had a negative impact on sales of 8.0%. Our sales volumes of concrete decreased by 3% to 34 million cubic meters.

In Western Europe concrete sales dropped slightly by 1% to 1,054 million euros. In France, sales grew despite a decline in volumes, due to good pricing resulting from an increase in sales of higher value products and improved client mix. In the United Kingdom, atconstant exchange rates, sales grew favorably in a number of markets and prices were sustained by sales of high value products. The favorable construction sector in Spain more than offset the impact of reduced public spending in Portugal. Sales in Greece were down mainlydue to the poor weather in the first quarter. Sales in Germany decreased to 3 million euros from 21 million euros following our withdrawal and the closure of our operations in that country.

In North America, sales were down by 11% from 1,069 million euros in 2002 to 955 million euros in 2003. Currency fluctuations had a negative impact on sales of 12%. In the United States, sales suffered from weak demand in Colorado but were helped by growth inLouisiana driven by a large project work. In Canada sustained residential demand and increased project work in the energy and minerals sector led to strong levels of sales growth in local currency.

In the rest of the world, sales declined largely as a result of the negative foreign exchange impact. Sales at constant scope of consolidation and exchange rates grew strongly in Latin America, particularly in Chile. In South Africa sales grew strongly, however sales weredown in Malaysia following the completion of a major project.
 *Roofing*
Contributions to our sales by markets for the years ended December 31, 2003 and 2002 and the percentage variation between the two periods were as follows:
  **Year ended****December** **31, 2003** **% Var.** **Year ended****December** **31, 2002** **Sales** **(in million €)** **%** **2003/2002** **(in million €)** **%** **Western Europe**  **1,138**  **75.4**  **(2.1****)** **1,162**  **75.6** Germany  439  29.1  (2.0) 448  29.1 Other countries in Western Europe  699  46.3  (2.1) 714  46.5 **Other regions**  **372**  **24.6**  **(1.1****)** **376**  **24.4**                  **Total**  **1,510**  **100.0**  **(1.8****)** **1,538**  **100.0** 
The Roofing Division saw sales decline by 1.8% between 2002 and 2003, from 1,538 million euros to 1,510 million euros. At constant scope and exchange rates sales rose by 3.0%. Currency fluctuations had a negative impact on sales of 3.7%.

Sales of concrete tiles were down 4% to 764 million euros, but clay tiles were up by 5% to 267 million euros. Roof System Components grew by 2% to 251 million euros. Chimney sales increased by 5% to 174 million euros.

In Western Europe sales (including chimneys) were down by 2.1% to 1,138 million euros. In Germany sales declined overall with a further drop in concrete tiles but with an increase in clay tiles. Furthermore the favorable trends in the second half of the year resultingfrom the acceleration of the construction of private houses, in anticipation of an abolition of subsidies for home building had a positive impact. Sales grew strongly in the United Kingdom, excluding the foreign exchange impact. In France sales were down overall

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as demand for concrete tiles dropped not only due to a weaker market but also in the face of growing preference for clay tiles for which sales rose. In Italy, sales of concrete tiles and of claytiles were well above last year, but overall sales decreased as the result of the reduction of the sales of the other activities.

In North America, sales were down by 10% as a result of the negative impact of the U.S. dollar’s depreciation against the euro. Otherwise sales grew strongly in the context of the favorable residential housing market.

In other regions sales were up by 3%. Good growth was recorded in Eastern European countries overall. In Asia, the level of sales was impacted by the negative currency fluctuations, but improved in local currency terms.
 *Gypsum*
Contributions to our sales by main geographic regions for the years ended December 31, 2003 and 2002 and the percentage variation between the two periods were as follows:
  **Year ended****December** **31, 2003** **% Var.** **Year ended****December** **31, 2002** **Sales** **(in** **million €)** **%** **2003/2002** **(in** **million €)** **%**       Western Europe  657  55.0  8.8  604  52.7 North America  226  18.9  (7.8) 245  21.4 Other regions  311  26.1  4.7  297  25.9 **Total**  **1,194**  **100.0**  **4.2**  **1,146**  **100.0** 
In 2003, sales of the Gypsum Division continued to recover growing by 4.2% from 1,146 million euros in 2002 to 1,194 million euros in 2003. At constant exchange rates and scope of consolidation sales grew by 6.4%. Changes in the scope of consolidation at constantexchange rates increased sales by 5.2% as a result of the acquisition in February 2003 of the plasterboard businesses of Gyproc in Germany and Poland from the British building materials company BPB. Currency fluctuations had a negative impact on sales of 7.4%. Thevolumes of wallboard grew by 13% to 632 million square meters with strong rises in the United Kingdom, in Germany due to the integration of Gyproc, in the United States and in Asia.

In Western Europe, sales grew by 8.8% to 657 million euros with strong sales growth in the United Kingdom reflecting a very buoyant wallboard market throughout the year. The integration of Gyproc resulted in a significant improvement in Germany despite adeclining market.

In North America, sales dropped by 7.8% to 226 million euros from 245 million euros as a result of a 39 million euros negative foreign exchange impact offsetting a good recovery. Volumes sold rose as the efficiency of our plants increased and at the same time a solidrecovery in prices was realized, particularly in the second half of the year. Prices reached 105 U.S. dollars per thousand square feet (1,000 square feet is roughly 93 square meters) in December, the highest level since 2000 although annual average prices were only up to 97U.S. dollars per thousand square feet in the United States compared to 96 U.S. dollars in 2002.

In our other zones our sales in the Division rose 4.7% to 311 million euros. In Asia all markets showed sustained growth but the full impact was held back due to the negative impact of currency fluctuations. Eastern Europe grew as a result of the increase in sales inRomania where our operations were expanded. We increased our stake from 50% to 90% in Lafarge Arcom Gips in Romania.
 *Other*
Sales of our other operations fell by 50% between 2002 and 2003, from 210 million euros to 106 million euros following further divestments made, principally being construction operations in Spain as we continue to divest and wind down these non-strategic operations.
***Operating income on ordinary activities***
Operating income on ordinary activities takes into account Sales, Cost of Goods Sold, Selling and Administrative Expenses and Depreciation. We do not report Cost of Goods Sold, Selling and Administrative Expenses and Depreciation by segment.

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Cost of Goods Sold declined by 6.6% between 2002 and 2003, from 9,734 million euros to 9,088 million euros. Currency fluctuations and changes in the scope of consolidation decreased Cost of Goods Sold by 826 and 204 million euros, respectively. Cost of GoodsSold was adversely affected by an increase in pension cost of 28 million euros. At constant scope and exchange rates Cost of Goods Sold increased by 4.3%.

Selling and Administrative Expenses remained almost stable, amounting to 1,750 million euros in 2003 compared to 1,775 million euros in 2002. Currency fluctuations and changes in the scope of consolidation decreased Selling and Administrative Expenses by 137 and8 million euros, respectively. At constant scope and exchange rates Selling and Administrative Expenses increased by 7.4%, adversely affected by a significant increase of pension costs in the United Kingdom and North America, which amounted to 71 million euros. Atconstant scope and exchange rates Selling and Administrative Expenses, excluding the pension increase effect, increased by 3.0%.

Depreciation decreased by 8.6% between 2002 and 2003, from 969 million euros to 886 million euros. Currency fluctuations and changes in the scope of consolidation decreased Depreciation by 84 and 6 million euros, respectively. At constant scope and exchange rates,Depreciation remained almost constant.

Operating income on ordinary activities declined by 9.3% between 2002 and 2003, from 2,132 million euros to 1,934 million euros. The appreciation of the euro against the majority of other currencies had a negative impact of 185 million euros. Changes in the scope ofconsolidation accounted for a net decrease of 46 million euros and are essentially due to the divestments of cement operations in 2002 in Spain and in 2003 in Florida. At constant scope and exchange rates, operating income on ordinary activities from our ongoing operationsrecorded a limited increase of 1.7%. As a percentage of our sales, operating income on ordinary activities represented 14.2% in 2003, compared to 14.6% in 2002. Excluding the effect of the 99 million euros increase in pension cost, our operating income on ordinaryactivities, expressed as a percentage of sales, would have been 14.9% in 2003.

Contributions to our operating income on ordinary activities by segment for the years ended December 31, 2003 and 2002, and the percentage change between the periods were as follows:
  **Year ended****December** **31, 2003** **% Var.** **Year ended****December** **31, 2002** **Operating income on ordinary activities** **(in** **million €)** **%** **2003/2002** **(in** **million €)** **%**       Cement  1,466  75.8  (8.7) 1,606  75.3 Aggregates & Concrete  283  14.6  (15.8) 336  15.8 Roofing  142  7.3  7.6  132  6.2 Gypsum  84  4.3  64.7  51  2.4 Others  (41) -2.0  —  7  0.3 **Total**  **1,934**  **100.0**  **(9.3****)** **2,132**  **100.0** 
The percentage of gross variation as well as variation at constant, scope and exchange rates between December 31, 2003 and 2002 were as follows:

 
**(in million €)** **2002**   **2002**   **2002** **2003**   **2003** **2002 vs 2003**                 **Actual** **Scope****effect of****disposals** **At constant****scope** **Currency****fluctuations****effects** **On a****comparable****basis** **Actual** **Scope****effect of****acquisitions** **On a****comparable****basis** **% Gross****change****Actual** **% Change****at constant****scope and****exchange****rates**   **(a)** **(b)** **(c) = (a)+(b)** **(d)** **(e) = (c)+(d)** **(f)** **(g)** **(h) = (f)+(g)** **(i) = (f–a)/(a)** **(j) = (h–e)/(e)**                                   Cement **1,606** (45)**1,561** (149)**1,412** **1,466** 3 **1,469** (8.7)4.0 Aggregates & Concrete **336** 2 **338** (27)**311** **283** (1)**282** (15.8)(9.3)Roofing **132** (1)**131** (6)**125** **142** 1 **143** 7.6 14.4 Gypsum **51** 1 **52** — **52** **84** (3)**81** 64.7 55.8 Other **7** (3)**4** (3)**1** **(41****)**— **(41****)**— — **Total** **2,132** **(46****)****2,086** **(185****)****1,901** **1,934** **—** **1,934** **(9.3****)****1.7** 
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 *Cement*
Contributions to our Cement operating income on ordinary activities by geographic regions for the years ended December 31, 2003 and 2002, and the percentage change between the periods were as follows:
  **Year ended****December** **31, 2003** **% Var.** **Year ended****December** **31, 2002** **Operating income on ordinary activities** **(in** **million €)** **%** **2003/2002** **(in** **million €)** **%**       Western Europe  606  41.4  (7.6) 656  40.8 North America  247  16.8  (25.2) 330  20.5 Central & Eastern Europe  90  6.1  4.7  86  5.4 Mediterranean Basin  121  8.3  8.0  112  7.0 Latin America  164  11.2  (18.8) 202  12.6 Sub-Saharan Africa  135  9.2  12.5  120  7.5 Asia  103  7.0  3.0  100  6.2 **Total**  **1,466**  **100.0**  **(8.7****)** **1,606**  **100.0** 
Operating income on ordinary activities of the Cement Division declined by 8.7% to 1,466 million euros in 2003 compared to 1,606 million euros in 2002. At constant scope of consolidation and exchange rates, operating income on ordinary activities rose by 4.0%.Currency fluctuations had a negative impact of 9.3% or 149 million euros. Changes in the scope of consolidation had a negative impact of 3.4% or 48 million euros. As a percentage of the Division’s gross sales (see Note 3(a) to our consolidated financial statements), operatingincome on ordinary activities represented 21.2% in 2003, compared to 21.4% in 2002.

We estimate that the synergy programs launched after the acquisition of Blue Circle Industries are on target. They contributed to the improvement of our operating income on ordinary activities, but were partially offset by adverse market effects such as the price war inthe Philippines and the unfavorable environment in the Northeast and Southeast regions in the United States.

Operating income on ordinary activities in Western Europe declined by 7.6% to 606 million euros compared to 656 million euros in 2002. Currency fluctuations had a negative impact of 12 million euros. The effect of changes in the scope of consolidation resulting fromthe divestment of the Cement operations in Andalusia in 2002 amounted to 30 million euros. Operating income on ordinary activities at constant scope of consolidation and exchange rates declined by 1% compared to 2002, primarily reflecting the impact of a highlycompetitive pricing environment in Germany and the weak market environment in the United Kingdom. In the United Kingdom operating income on ordinary activities was further impacted by a 7 million euros increase in pension costs. These adverse effects were partlycompensated by the strong level of domestic sales in Greece, in the run up to the Olympic Games, improved margins in France and solid sales growth in Spain. Improved industrial performance throughout the region contributed positively.

Operating income on ordinary activities in North America declined by 25.2% to 247 million euros compared to 330 million euros in 2002. Currency fluctuations had a negative impact on operating income on ordinary activities of 40 million euros. The scope effectresulting from the divestment of our operations in Florida amounted to 7 million euros. At constant scope and exchange rates, operating income in North America was down by 13%. Higher volumes and higher prices in Canada were offset by an increase in pension costs of 14million euros, weaker U.S. prices, particularly in the Southeast, Northeast and Mississippi River regions and an unfavorable inventory variation effect. Manufacturing costs improved year-on-year due to a reduction in maintenance costs, as well as to the absence of theexceptional costs incurred in 2002 for the startup of the Sugar Creek, Missouri, and Roberta, Alabama, plants, and the strike at the Bath plant in Ontario.

In emerging markets, operating income on ordinary activities declined by 1.1% to 613 million euros compared to 620 million euros in 2002, representing 42% of the Cement Division’s operating income on ordinary activities, compared to 39% in 2002. Currencyfluctuations and changes in the scope of consolidation had a negative impact of respectively 97 and 11 million euros. Operating income on ordinary activities at constant scope and exchange rates grew by 20%.

In Central and Eastern Europe operating income on ordinary activities grew by 4.7% to 90 million euros compared to 86 million euros in 2002. The negative impact of currency fluctuations and of changes in the scope of consolidation on the region’s operating incomeon ordinary activities amounted, respectively, to 11

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and 6 million euros. Operating income on ordinary activities at constant scope and exchange rates grew by 28%, with strong margin improvement in Romania and to a lesser extent in Russia,Serbia and Slovenia. In Poland, where we opened a new production line at the Kujawy plant in the Summer of 2003, the adverse volume and price effects were entirely offset by reductions inmanufacturing costs. In the Czech Republic operating income on ordinary activities was unfavorably affected by the decline in volumes and deterioration in prices which occurred both on thedomestic market and in Germany, the main export market.

Operating income on ordinary activities from the Mediterranean Basin countries increased by 8.0% to 121 million euros compared to 112 million euros in 2002. The negative impact of currency fluctuations and of changes in the scope of consolidation on the region’soperating income on ordinary activities amounted, respectively, to 14 and 4 million euros. Operating income on ordinary activities at constant scope and exchange rates grew by 29% with well oriented markets in Jordan and in Morocco. In Egypt and in Turkey operatingincome on ordinary activities was favorably affected by a progressive improvement in prices.

The operating income on ordinary activities from Latin America declined by 18.8% from 202 million euros in 2002 to 164 million euros in 2003. The negative impact of currency fluctuations and of changes in the scope of consolidation on the region’s operating incomeon ordinary activities amounted, respectively, to 45 and 4 million euros. At constant scope and exchange rates, operating income on ordinary activities grew by 7% with improved margins in Brazil despite slower demand. In Venezuela, the local turmoil and bolivar devaluationresulted in operating income on ordinary activities being down by 42%. In Honduras, a weak local market and unfavorable foreign exchange impact resulted in operating income on ordinary activities declining by 35%. A decline was recorded in Chile as the result of thenegative foreign exchange impact. In Mexico, operating income on ordinary activities remained stable compared to 2002.

Operating income on ordinary activities in Sub-Saharan Africa region increased by 12.5% from 120 million euros in 2002 to 135 million euros in 2003. The negative impact of currency fluctuations and changes in the scope of consolidation on the region’s operatingincome on ordinary activities amounted, respectively, to 9 and 1 million euros. At constant scope of consolidation and exchange rates, operating income on ordinary activities grew by 23% with improvements particularly noticeable in Nigeria and South Africa. In Nigeria wherethe new Ewekoro plant started in the second part of the year we benefited from favorable pricing conditions, but our operations were penalized by a general strike and the poor performance of the Sagamu plant. In South Africa the strengthening of the rand and increasedmargins have resulted in operating income on ordinary activities being up by 39%. Operating income on ordinary activities in Kenya was down primarily as a result of the negative currency fluctuation. Cameroon increased its operating income on ordinary activities.

Operating income on ordinary activities in the Asia region increased by 3.0% from 100 million euros in 2002 to 103 million euros in 2003. The negative impact of currency fluctuations on the region’s operating income on ordinary activities amounted to 18 millioneuros. The positive impact of changes in the scope of consolidation amounted to 4 million euros. At constant scope of consolidation and exchange rates, operating income on ordinary activities increased by 21% with strong growth in Malaysia, South Korea and Indonesia.Operating income on ordinary activities benefited from the significant volume growth in Malaysia, from favorable market conditions in South Korea, improved margins in Indonesia and plant performance improvements with improved kiln reliability in Indonesia and in thePhilippines in particular. The small loss incurred in Indonesia in 2002 was reversed to record an operating profit. In India, improved industrial performance had a positive effect on margins, but operating income on ordinary activities was adversely affected by higher localtaxes, while the impact of the fall in volumes was entirely compensated by improved pricing. Despite plant performance improvements, operating income on ordinary activities in the Philippines was weak due to deteriorated pricing. In China operating income on ordinaryactivities benefited from the favorable effect of changes in the scope of consolidation with the full-year operation of the Dujiangyan plant and the acquisition in 2003 of the Chongqing plant.

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 *Aggregates & Concrete*
Contributions to our Aggregates & Concrete operating income on ordinary activities by activity and by main geographic regions for the years ended December 31, 2003 and 2002, and the percentage change between the periods were as follows:
  **Year ended****December** **31, 2003** **% Var.** **Year ended****December** **31, 2002** **Operating income on ordinary activities** **(in** **million €)** **%** **2003/2002** **(in** **million €)** **%**       Aggregates and related products  191  67.5  (22.4) 246  73.2 Ready mix concrete and concrete products  92  32.5  2.2  90  26.8 **Total Aggregates & Concrete**  **283**  **100.0**  **(15.8****)** **336**  **100.0** Western Europe  133  47.0  (10.1) 148  44.0 North America  126  44.5  (29.2) 178  53.0 Other regions  24  8.5  140.0  10  3.0 **Total**  **283**  **100.0**  **(15.8****)** **336**  **100.0** 
Operating income on ordinary activities of the Aggregates & Concrete Division declined by 15.8% between 2002 and 2003, from 336 million euros to 283 million euros. Currency fluctuations had a negative impact of 7% or 27 million euros. The net effect of changes inthe scope of consolidation, primarily resulting from divestments in North America and from the withdrawal from Germany, amounted to 3 million euros. At constant scope of consolidation and exchange rates, operating income on ordinary activities declined by 9%. As apercentage of the Division’s gross sales (see Note 3(a) to our consolidated financial statements), operating income on ordinary activities represented 6.3% in 2003, compared to 7.0% in 2002. Operating income on ordinary activities for aggregates totaled 191 million euros down22.4% from 246 million euros in 2002. Currency fluctuations had a negative impact of 8% being 23 million euros. Operating income on ordinary activities for Concrete totaled 92 million euros up 2.2% from 90 million euros in 2002. Currency fluctuations had a negativeimpact of 4 million euros.

In Western Europe, operating income on ordinary activities dropped by 10.1% to 133 million euros with the decline occurring essentially in France where operating income on ordinary activities was impacted by the weaker market and an increase in production costs. Inthe United Kingdom operating income on ordinary activities was down as a result of the negative currency fluctuation; otherwise operating income on ordinary activities grew as operating margins improved in the concrete activities.

In North America, operating income on ordinary activities was down by 29.2% to 126 million euros. The impact on operating income on ordinary activities of the weakening of the dollar against the euro amounted to 24 million euros or 11%. The net effect of changesin the scope of consolidation on operating income on ordinary activities was 2 million euros. The increase in pension costs which totaled 15 million euros contributed to the decline in operating income on ordinary activities. The remainder of the decline in operating income onordinary activities resulted in particular from weak business conditions during the first half of the year as well as the exit cost of our highway paving business in New Mexico. All regions, with the exception of the Western United States, saw a significant improvement in thelast quarter.

Elsewhere in the world, operating income on ordinary activities continued to improve to 24 million euros in 2003 compared to 10 million euros in 2002. In South Africa, operating income continued to grow strongly under the combined effect of improved performanceand of the rand’s appreciation against the euro. In Turkey, the operating loss was reduced, with margins favorably affected by the continued improvements in performance.

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 *Roofing*
Contributions to our operating income on ordinary activities in our Roofing Division by main markets for the years ended December 31, 2003 and 2002, and the percentage change between the periods were as follows:
  **Year ended****December 31, 2003** **% Var.** **Year ended****December 31, 2002** **Operating income on ordinary activities** **(in million €)** **%** **2003/2002** **(in million €)** **%** **Western Europe**  **105**  **73.9**  **1.9**  **103**  **78.0** Germany  44  31.0  33.3  33  25.0 Other countries in Western Europe  61  42.9  (12.9) 70  53.0 **Other regions**  **37**  **26.1**  **27.6**  **29**  **22.0**                  **Total**  **142**  **100.0**  **7.6**  **132**  **100.0** 
The Division’s operating income on ordinary activities was up 7.6% to 142 million euros from 132 million euros in 2002 as a result of the cost management efforts and extensive restructuring carried out across the operations, particularly in Germany. Currencyfluctuations had a negative impact of 6 million euros. As a percentage of the Division’s gross sales (see Note 3(a) to our consolidated financial statements), operating income on ordinary activities represented 9.4% in 2003, compared to 8.6% in 2002.

Operating income on ordinary activities in Western Europe rose by 1.9% to 105 million euros. In Germany, following the extensive restructuring, operating income on ordinary activities increased by 33.3% from 33 million euros to 44 million euros despite a persistentweak market. In other Western European countries operating income on ordinary activities declined from 70 million euros in 2002 to 61 million euros in 2003. In the United Kingdom operating income on ordinary activities benefited from strong sales development. Howeverthis was more than offset by the impact of unfavorable market trends in France and in the Netherlands. In addition, higher pressure on prices in Austria and Benelux hampered improvements in margins.

Outside Western Europe, operating income on ordinary activities increased to 37 million euros in 2003 from 29 million euros in 2002. Major contributors were Central and Eastern Europe, and in particular the Czech Republic, and North America.
 *Gypsum*
Contributions to our Gypsum operating income on ordinary activities by main geographic regions for the years ended December 31, 2003 and 2002, and the percentage change between the periods were as follows:
  **Year ended****December 31, 2003** **% Var.** **Year ended****December 31, 2002** **Operating income on ordinary activities** **(in million €)** **%** **2003/2002** **(in million €)** **%**       Western Europe  66  78.6  11.9  59  115.7 North America  (14) (16.7) N/A  (28) (54.9)Other regions  32  38.1  60.0  20  39.2 **Total**  **84**  **100.0**  **64.7**  **51**  **100.0** 
Operating income on ordinary activities grew by 64.7% from 51 million in 2002 to 84 million in 2003. This remarkable growth follows the significant improvement achieved in 2002, after the very difficult year in 2001. Currency fluctuations had no impact on ouroperating income on ordinary activity. The positive scope effect resulting from the acquisition of Gyproc in Germany amounted to 3 million euros. At constant scope, operating income on ordinary activities increased by 56%. This was primarily due to the reduction of losses inNorth America, helped by better pricing and a better operational performance from our factories. As a percentage of the Division’s gross sales (see Note 3(a) to our consolidated financial statements), operating income on ordinary activities represented 7.0% in 2003, comparedto 4.4% in 2002.

Operating income on ordinary activities in Western Europe improved by 11.9% to 66 million euros up from 59 million in 2002. At constant scope of consolidation and exchange rates, operating income on ordinary activities increased by 7%. Benefiting from bettervolumes and improved industrial performance, operating income on ordinary activities in France improved despite an increase in energy costs, while, in the United Kingdom, operating income on ordinary activities recorded a noticeable increase due to the buoyant

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market and a better performance.    In Germany, we benefited from the action plan launched in 2002 together with    the acquisition of Gyproc. Operating losses were reduced despite difficult    market conditions.

In North America, a combination      of manufacturing performance improvements, the closure of the Wilmington      plant and price increases reduced the operating loss in 2003 to 14 million      euros, compared to a loss of 28 million euros in 2002. With improved plant      performance we were able to supply the increased demand for wallboard,      despite having ceased operations at the Wilmington plant. Prices recovered      by the end of the year to levels not seen since 2000, but this favorable      effect was partly offset by higher natural gas prices and fuel costs. The      two high speed plants at Silver Grove and Palatka performed well, allowing      a significant decrease in operating costs.

In our other regions operating      income on ordinary activities rose to 32 million euros in 2003, compared      to 20 million euros in 2002. Most of this improvement was attributable      to Poland, which benefited from the combined effects of increased volumes      following the Gyproc acquisition, the recovery of prices and lower selling      and administrative expenses. After a few months of ramp-up and after the      closure of the old Gacki plant, the new Gacki plant performed well. Our      operating income on ordinary activities in the Asia Pacific region increased      slightly with increased volumes and improved profitability in most countries      offset by currency fluctuations.
 *Other (including holdings)*
Operating income on ordinary activities      of our other operations decreased by 48 million euros between 2002 and      2003, from a profit of 7 million euros to a loss of 41 million euros. In      the United Kingdom our holdings were adversely affected by an increase      in pension costs of 62 million euros.
***Operating income              and net income***
Operating income takes into account      operating income on ordinary activities, gains (losses) on disposals and      other revenues (expenses). The table below shows the evolution of our operating      income and net income:
  **Year          ended****December** **31, 2003****(in** **million €)** **%          Var.****2003/2002** **Year          ended****December** **31, 2002****(in** **million €)** **Operating            income on ordinary activities**  **1,934**  **(9.3****)** **2,132** Gains          on disposals, net  299  38.4  216 Other          income (expenses), net  (177) —  (525)**Operating            income**  **2,056**  **12.8**  **1,823** Financial          expenses, net  (568) 9.0  (521)Income          tax  (425) (5.1) (448)Share          of net income in equity affiliates  37  12.1  33 Amortization          of goodwill  (135) (14.6) (158)Minority          interests  (237) (13.2) (273)**Net            income**  **728**  **59.6**  **456** 
Gains on disposals, net represented      a net gain of 299 million euros in 2003, compared to 216 million euros      in 2002. The most significant capital gains were earned on the sale of      certain cement assets in North America which generated capital gains of      111 million euros and the sale of our stake in Materis Participations which      generated capital gains of 122 million euros.

Other income (expenses), net, represented      a net loss of 177 million euros in 2003, compared to a net loss of 525      million euros in 2002. The most significant expense items were the costs      relating to exceptional amortization of 35 million euros and to restructuring      charges of 65 million euros split between Roofing at 29 million euros,      Cement at 24 million euros, Aggregates & Concrete at 11 million euros      and Gypsum at 1 million euros. In 2002, Other income (expenses), net      included a provision of 300 million euros recorded to cover the risks related      to the European Commission decision against our Gypsum activities in Europe,      and in anticipation of the German competition authority’s (*Bundeskartellamt*)      decision to fine our subsidiary Lafarge Zement for its Cement activities      in Germany, both of which Lafarge has appealed against.

Operating income increased by 12.8%      between 2002 and 2003, from 1,823 million euros to 2,056 million euros.      Operating income represented 15.1% of sales in 2003, compared to 12.5%      in 2002.

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Financial expenses, net increased      by 9.0% between 2002 and 2003, from 521 million euros to 568 million      euros. Financial expenses, net is comprised of financial expenses on net      debt and other financial income and expenses including in particular foreign      exchange gains and losses. Financial expenses on net debt decreased by      12% between 2002 and 2003, from 577 million euros to 505 million euros      as the result of the significant decrease of our net debt. The average      interest rate on our debt was 5.8% on December 31, 2003 as compared      to 5.2% on December 31, 2002. Other financial income and expenses was a      net loss in 2003 of 63 million euros compared to a net gain of 56 million      euros in 2002. In 2003, we were adversely affected by a 75 million      euros foreign exchange loss, while in 2002, we benefited from a foreign      exchange gain of 66 million euros.

Income tax decreased by 5.1% between      2002 and 2003, from 448 million euros to 425 million euros. The effective      tax rate for 2003 of 28.6% decreased by 5.8 points compared to the effective      tax rate for 2002 of 34.4%. This is mainly due to the exceptional provision      of 300 million euros that was recorded in 2002 (in connection with      the competition law issues discussed above) and which is not tax deductible.      Our world wide tax agreement with the French Tax Authorities,which had      been renewed for three years in 2001, expired on December 31, 2003. We      decided not to renew this agreement beyond December 31, 2003 (see Note      8 to our consolidated financial statements).

Share of net income in equity affiliates      grew by 12.1% between 2002 and 2003, from 33 million euros to 37 million      euros. The share of net income in equity affiliates in our Cement Division      amounted to 42 million euros, of which Cementos Molins accounted for 27      million euros. The share of net income in equity affiliates in our Roofing      and Gypsum Divisions amounted to 20 million euros. The share of the net      loss of Carmeuse North America amounted to 33 million euros.

Amortization of goodwill declined      by 14.6% between 2002 and 2003, from 158 million euros to 135 million      euros. This decrease primarily reflects the impact of currency fluctuations.

Minority interests decreased by      13.2% between 2002 and 2003, from 273 million euros to 237 million euros,      reflecting primarily the negative impact of currency fluctuations on our      reported results.

Net income increased by 59.6% between      2002 and 2003, from 456 million euros to 728 million euros, reflecting      primarily the impact of the 2002 exceptional provision of 300 million euros.      Net income represented 5.3% of sales in 2003, compared to 3.1% in 2002.
***Earnings per Share***
Earnings per share were up 39.8%      at 4.92 euros compared to 3.52 euros in 2002. The average number of share      outstanding during the year was 147.9 million, as compared to 129.6 million      in 2002.

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**Liquidity and Capital            Resources**
During the three-year period ended      December 31, 2004, our main sources of liquidity have been:
 •Cash provided by operating          activities;    •Cash provided by the divestment          of non strategic assets; and    •Cash provided by the issuance          of debt and the increase of the amount of our share capital.
These funds have been mainly used      to finance a significant investment program (capital expenditures and acquisitions)      and to reduce further the level of our net debt.

Components of our cash flows are      set forth below:
  **Year          ended****December 31,**      **2004** **2003** **2002**        **(in          million €)** Net          cash provided by operating activities  1,736  2,089  1,791 Net          cash used in investing activities  (893) (673) (774)Net          cash (used in) provided by financing activities  (793) (866) (926)Net          increase (decrease) in cash and cash equivalents  50  550  91 
We believe, based on our current      financial projections, that we have sufficient resources for our ongoing      operations in both the near term and the long term.
***Net cash provided              by operating activities***
Net cash provided by operating      activities decreased by 353 million euros in 2004 to 1,736 million euros.      This compares to 2,089 million euros in 2003 and 1,791 million euros in      2002. The decrease arose from additional working capital requirements of      377 million euros between December 31, 2003 and December 31, 2004,      as opposed to a reduction of working capital requirements of 290 million      euros between December 31, 2002 and December 31, 2003. Between December      31, 2003 and December 31, 2004, the increase in working capital needs was      primarily due to the absence of any securization activity at year-end 2004      in North America and to a net increase of other receivables over other      payables related to the payment of acquisitions and divestitures. Excluding      working capital variations, net cash provided by operating activities rose      strongly by 17.5%.
***Net cash used in              investing activities***
Funds used in investing activities      amounted to 893 million euros in 2004 (compared to 673 million euros and      774 million euros in 2003 and 2002, respectively). Investing activities      is comprised of investment in consolidated companies, investment in non-consolidated      companies, disposals, capital expenditures and the net variation in long-term      receivables.

In 2004, investment in consolidated      companies amounted to 309 million euros, including cash acquired. The most      significant acquisitions included (amounts are converted using the average      yearly exchange rates):
 •The acquisition for 57          million euros of an additional 10.2% stake in Lafarge Halla Cement,          in South Korea. Cash acquired amounted to 41 million euros and debt          acquired amounted to 54 million euros;    •The acquisition of the          cement and concrete operations of The Concrete Company of Columbus,          Georgia, United States for 87 million euros;    •The acquisition of Hupfer          Holdings for 69 million euros with operations in France and Switzerland          in aggregates activities;    •The acquisition for 34          million euros of an additional 14% stake in the holding company Lafarge          Gypsum in Asia which controls our gypsum operations in Asia.
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Investment in non-consolidated      companies includes investments accounted for using the cost method. In      2004, these investments amounted to 111 million euros and included the      acquisition on December 29, 2004 of Cementos Selva Alegre for 98 million      euros (Ecuador) which will be consolidated starting January 1st, 2005.

Our disposals in 2004 amounted      to 574 million euros. The most significant disposals included:
 •The disposal of our 40.9%          stake in Cementos Molins in Spain for 265 million euros.    • The disposal of our 40%          stake in Carmeuse North America BV for 98 million euros.
Capital expenditures totaled 1,133      million euros in 2004, compared to 864 million euros in 2003 and 1,149      million euros in 2002. Of these capital expenditures 56% were in the Cement      Division, 25% were in the Aggregates & Concrete Division, 11% were      in the Roofing Division, 4% were in the Gypsum Division and 4% were for      holdings and other activities.

Our capital expenditures for the      ongoing upgrading and modernization of our existing facilities totaled      783 million euros in 2004, compared to 536 million euros in 2003 and 704      million euros in 2002. In 2004, 51% of these capital expenditures were      in the Cement Division, 28% were for Aggregates & Concrete, 10% were      for Roofing, 5% were for Gypsum, with the rest for holding companies and      other activities.

In 2004, we also invested 350 million      euros in capital expenditures for additional production capacity, including      major projects such as:
 •the second line in Chongqing,          China, for 15 million euros;    •the new plant in Bangladesh,          for 32 million euros;    •the kiln in Tula, Mexico,          for 22 million euros;    •the kiln in Ewekoro, Nigeria,          for 10 million euros;
and a variety of smaller projects    which amounted to 149 million euros in cement, 63 million euros in aggregates    and concrete, 48 million euros in roofing and 11 million euros in gypsum.

Long-term receivables, which include,      in particular, prepaid pension assets, subordinated deposits for our securitization      agreements and loans to our equity affiliates and to companies consolidated      proportionately decreased by 86 million euros.
***Net cash (used in)              provided by financing activities***
Net cash used in financing activities      (in particular debt reimbursement) amounted to 793 million euros in 2004      (compared to cash used in financing activities of respectively 866 million      euros and 926 million euros in 2003 and 2002).

 We emphasize diversification of      funding sources. In general, we meet our long-term financing needs through      bond issuances and the use of long-term instruments such as our Euro Medium-Term      Note program and bank loans. We currently have a Euro Medium-Term Notes      program with a maximum available amount of 7,000 million euros, with approximately      2,790 million euros of debt outstanding at December 31, 2004. In addition,      we issued the following debt securities in 2004, 2003, 2002:
 •On July 16, 2004, 612 million          euros of bonds in partial exchange for outstanding bonds with 2008          maturity. The new bonds bear a fixed interest rate of 5% with a 10-year          maturity;    •On December 4, 2003, 500          million euros in partial exchange for existing bonds with maturities          ranging from 2005 to 2007. The new bonds bear a fixed interest rate          of 5.448% with a 10-year maturity;    •On November 29, 2002, 200          million in British pound bonds bearing a fixed interest rate of 6.625%          with a 15-year maturity.
In 2004, two bond issues totaling      652 million euros were reimbursed at maturity (respectively 152 million      euros in April 2004 and 500 million euros in July 2004).

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Short-term needs are mainly met      through the issuance of domestic commercial paper as well as the use of      credit lines. We currently have two commercial paper programs:
 •A euro denominated Commercial          Paper program, with a maximum available amount of 3,000 million euros.          At the end of 2004, 494 million euros of commercial paper were outstanding          under this program;    •A U.S. dollar denominated          Commercial Paper program, set up by our subsidiary Lafarge North America          Inc., for a maximum amount of 300 million dollars (220 million euros).          At year end 2004, there were 90 million dollars (66 million euros)          of commercial paper outstanding under this program.
We also maintain committed long-and-medium-term      credit lines with various banks at the parent and subsidiary level to ensure      the availability of funding on an as-needed basis. At December 31, 2004,      these committed credit lines on a consolidated basis amounted to 3,802      million euros (compared to approximately 3,400 million euros and 4,000      million euros, respectively, at December 31, 2003 and 2002). Of this amount,      3,682 million euros were available at December 31, 2004 (compared to approximately      3,380 million and 3,800 million respectively, at December 31, 2003      and 2002). The average maturity of these credit facilities was approximately      3.5 years at the end of 2004 versus 3.6 years at the end of 2003. The stabilization      in the maturity of our credit facilities reflects the signing during 2004      of a 1,850 million euro syndicated credit facility with a 5-year maturity.

We have also increased our equity      over the last three years. In July 2003 we raised 1,305 million euros (1,262      million euros net of issuance expenses), through the issuance of 31,831,528      new shares at a price of 41 euros a share in a 4 for 17 underwritten rights      offering to our shareholders. In 2002, 2003 and 2004, we also raised a      total of 460 million euros, through the issuance of 7,275,010 shares, as      a result of the exercise by shareholders of their option to reinvest their      dividends in shares.

Because we use external sources      to finance a significant portion of our capital requirements, our access      to global sources of financing is important. The cost and availability      of unsecured financing are generally dependent on our short term and long-term      credit rating. Factors that are significant in the determination of our      credit ratings or that otherwise could affect our ability to raise short-term      and long-term financing include: our level and volatility of earnings,      our relative positions in the markets in which we operate, our global and      product diversification, our risk management policies, and our financial      ratios such as net debt to total equity and cash flow from operations to      net debt. We expect credit rating agencies will focus, in particular, on      our ability to generate sufficient operating cash flows to provide for      the repayment and possibly for future reductions in our debt. A deterioration      in any of the previously mentioned factors or combination of these factors      may lead rating agencies to downgrade our credit ratings, thereby increasing      our costs in obtaining unsecured financing. See “Item 3. Risk Factors”.      Conversely, an improvement of these factors may lead rating agencies to      upgrade our credit ratings.

As of the date of filing of this      report, the credit ratings for our short and long-term debt were as follows:

 
  **Short-term** **Long-term**     Standard & Poor’s  A-2  BBB        (stable) Moody’s  NR  Baa2 (stable)  ***Level of debt at              December 31, 2004 and related covenants***
Our senior management establishes      our overall funding policies. The intent of these policies is to ensure      our capability to meet our obligations by maintaining a strong financial      structure. This policy takes into consideration, our expectations on the      required level of leverage, coverage ratios, the average maturity of debt,      and the acceptable sensitivity of our results to interest rate fluctuations.      These targets are monitored on a regular basis. As a consequence of this      policy a significant portion of our debt is issued on a long-term basis.      Most of this debt has been raised at fixed rates or has been converted      into fixed rates using interest rate derivatives. We constantly maintain      a significant amount of unused long-term committed credit lines.

We are subject to limited foreign      exchange risks as a result of our subsidiaries’ transactions in currencies      other than their operating currencies. Our general policy is for subsidiaries      to borrow and invest excess cash in the same currency as their functional      currency. We, however, promote the investment of excess cash

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balances in U.S. dollars or euros in emerging markets. Typically, a portion of our subsidiaries’ debt funding is borrowed in euros at the parent company level then converted into foreigncurrencies through currency swaps.

At December 31, 2004, our total debt amounted to 8,152 million euros (compared to 8,695 million euros and to 11,325 million euros respectively, in 2003 and 2002). At the end of 2004, we reclassified 600 million euros of short-term debt (89 million euros and 1,664million euros respectively at the end of 2003 and 2002) into long-term debt, on the basis of our ability to refinance this obligation using the available funding provided by medium and long-term committed credit lines. Long-term debt (excluding current portion) totaled 6,948million euros compared with 7,370 million euros and 10,271 million euros respectively, at year-end 2003 and year-end 2002. Approximately 35% of the 2004 long-term debt (excluding current portion) will mature after 2009. Long-term debt largely comprises fixed rate debt(after taking into account interest rate swaps). Most of this debt is denominated in euros, partially converted into foreign currencies through currency swaps (see “Item 11. Quantitative and Qualitative Disclosures About Market Risk” and Notes 23 and 24 to our consolidatedfinancial statements for further discussion of our financial debt).

Our net financial debt totaled 6,499 million euros at December 31, 2004 (7,061 million euros and 10,216 million euros at December 31, 2003 and 2002 respectively). Our cash and cash equivalents amounted to 1,653 million euros at year-end and are mainlydenominated in euros, U.S. dollars and Canadian dollars. At December 31, 2004, the average interest rate on our debt was 5.3% compared to 5.8% and 5.2% at December 31, 2003 and 2002, respectively.

Our net-debt-to-equity ratio stood at 59% at December 31, 2004 (compared to 67% and 110% at December 31, 2003 and 2002 respectively). Our cash flow from operations to net debt ratio increased from 25.5% at December 31, 2003 to 32.5% at December 31, 2004.For a reconciliation of our net debt, see “Item 5. Reconciliation of non-GAAP Financial Measures Utilized — Net Debt — Total Equity and Cashflow from Operations”.

At December 31, 2004, our short-term debt (including the current portion of long-term debt) amounted to 1,204 million euros. We are subject to fluctuation of our short-term debt due to the significant seasonality of our operations. We usually experience a slowdown inbuilding activity during winter season in our principal markets in Western Europe and North America, while working capital requirements tend to increase during the first semester.

Some of our loan agreements contain restrictions on the ability of subsidiaries to transfer funds to the parent company in certain specific situations. The nature of these restrictions can be either regulatory, when the transfers of funds are subject to approval of localauthorities, or contractual, when the loan agreements include restrictive provisions such as negative covenants on the payment of dividends. However, we do not believe that any of these covenants or restrictions will have any material impact on our ability to meet ourobligations. See “Item 3. Risk Factors.”

As at December 31, 2004, certain of our subsidiaries had financing contracts with provisions requiring on-going compliance with financial covenants. These subsidiaries are located in Brazil, Great Britain, India, Malaysia, Philippines, United States, Vietnam and SouthAfrica, and the debt associated with such covenants represented approximately 6% of the Group’s total debt. Given the dispersal of these contracts among various subsidiaries and the quality of the Group’s liquidity protection through its access to committed credit facilities, webelieve that such covenants do not have a material impact on the Group financial situation. See Note 23 (e) to our consolidated financial statements.
***Cash surpluses***
We do not operate a full worldwide    centralized cash management program, and each unit within the Group manages    its own cash surpluses in accordance with policies set by senior management,    including a provision to maximize cash recycling within the Group. In  order    to ensure that cash surpluses are used efficiently we have adopted in a number    of cases cash pooling structures on a country-by-country basis. Moreover,    with the introduction of the euro, we have established a centralized cash    management process for most of the euro-zone countries.

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As a general policy, cash surpluses are to be invested in liquid short-term instruments with at least two-thirds of any cash surplus being invested in instruments with a maturity of less than 3 months.
***Effect of currency fluctuations on our results and balance sheet***
We publish our consolidated financial statements in euros. In 2004, approximately 30% of our sales were realized in euro-zone countries. The principal portion of our assets, liabilities, sales and earnings are denominated in currencies other than the euro, particularly theU.S. dollar and U.S. dollar-influenced currencies, such as certain South American and Asian currencies as well as the British pound. As a result, we are exposed to fluctuations in the values of such currencies against the euro, with respect to the translation into euros ofamounts to be reflected in our consolidated financial statements. See “Item 11. Quantitative And Qualitative Disclosures About Market Risk — Foreign Currency Risk”.
***Disclosure about contractual and contingent commitments including tabular disclosure***
The following table sets forth an estimate of our exposure to significant contractual obligations with respect to repayment of debt, payments under capital lease obligations and operating leases, exercisable purchase obligations held by third party shareholders and otherpurchase obligations and payments under other commitments.
  **Payment due per period** **At December 31,**   **Less than****1 year** **1-5****years** **More than****5 years** **2004** **2003** **2002**           **(in million €)** Debt (1)  1,204  4,492  2,456  8,152  8,695  11,325 *Of which Capital lease obligations*  *5*  *10*  *19*  *34*  *32*  *14* Operating leases  145  335  244  724  723  735 Capital expenditures and other purchase obligations  491  296  191  978  782  613 Other commitments  75  114  30  219  92  138 **TOTAL**  **1,915**  **5,237**  **2,921**  **10,073**  **10,292**  **12,811**    (1)Excludes accrued interest and includes convertible debt. See Note 23(a) to our consolidated financial statements.
We expect to have the ability to refinance our debt obligations as they fall due. Our short-term debt commitments due in 2005 amounted to 1,204 million euros at December 31, 2004 (including the current portion of long-term debt).

Capital expenditures and other purchase commitments amounted to 978 million euros at December 31, 2004 (compared to 782 million euros and 613 million euros at December 31, 2003 and 2002 respectively). For more information about expected capital expenditures,please see the subsections entitled “Capital Expenditures” in the description of each of our Divisions in “Item 4. Information on Lafarge”.

As part of the acquisition process of certain entities, we have granted third party shareholders the option to require us to purchase their shares at a predetermined price, according to fair market value. These shareholders are either international institutions, such as theEuropean Bank for Reconstruction and Development, or private investors, which are essentially financial or industrial investors or the former shareholders of the relevant companies. In the event these shareholders exercise these options, our percentage ownership interest in therelevant company would increase. Assuming that all of these options were exercised, the purchase price to be paid by the Group, including net debt acquired, would amount to 328 million euros as of December 31, 2004. Based upon the terms of these agreements, a portion ofthe total amount could be exercised in 2005 and 2006 for 215 million euros and 39 million euros, respectively. The residual 74 million euros can be exercised commencing in 2007.

Subsequent to the 2004 closing of our financial statements, we purchased minority interests held by State of Wisconsin Investment Board (“SWIB”) in our cement activities in South Korea, India and Japan, in accordance with the partnership agreements concluded fiveyears ago. The transaction worth $141million (104 million euros) included a 20.3% stake in Lafarge Halla Cement in South Korea, taking our total stake to 71.5%, a 23.6% stake in Lafarge India Private Ltd, taking our total stake to 94.4% and a 43% stake in

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Lafarge Japan Holdings, taking our total stake to 100%. Lafarge Japan Holdings owns 39.4% of Lafarge Aso Cement Ltd. After taking this acquisition into consideration and assuming that all ofthe options were exercised, the purchase price to be paid by the company, including net debt acquired, would amount to 224 million euros of which 111 million euros would be payable pursuantto options exercisable in 2005.

We do not expect all of these options to be exercised as soon as they become exercisable. Some of these options have expiry dates. It is likely that those options will be exercised by such dates.

At December 31, 2004, we had outstanding collateral and other guarantees amounting to 659 million euros, comprised of 5 million euros of pledged assets and other assets, 446 million euros of mortgages over property and 208 million euros of other guaranteesprovided.

Finally, the Group has granted indemnification commitments in relation to disposals of assets. Its exposure under these commitments is considered remote. The total amount of capped indemnification commitments still in force at December 31, 2004 was 369 millioneuros.
***Off Balance sheet arrangements***
We have no commitments or contingent liabilities which meet the definition of off-balance sheet arrangements under Item 5 of Form 20-F.
***Derivative instruments***
Our policy is in general to use derivative instruments to hedge against our exposure to exchange rates, interest rates, and from time to time commodity risks. With the prior authorization of our senior management, we have occasionally entered into agreements to reduceour or another party’s exposure to equity risk.

We have defined strict policies and procedures to measure, manage and monitor our market risk exposures. Our policies do not permit any speculative market position. We have instituted management rules based on a segregation of operations, financial andadministrative control and risk measurement. We have also instituted, for all operations managed at corporate level, an integrated system that permits real time monitoring of hedging strategies. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk”, andNote 24 of our consolidated financial statements.
**Discussion of differences in Operating income under French GAAP and U.S. GAAP**
We prepare our financial statements in accordance with French GAAP, which differs in certain significant respects from U.S. GAAP, as discussed in Note 30 to Note 33 to the consolidated financial statements. The individual differences discussed in Notes 30 and 31describe the main adjustments to the French GAAP consolidated financial statements.
***Reclassification between French GAAP and U.S. GAAP of fully consolidated and proportionately consolidated entities***
We account for various entities as either proportionately consolidated or fully consolidated for purposes of French GAAP and as equity method investees for U.S. GAAP. The statement of income and balance sheet effects of these and other U.S. GAAP reclassificationsand adjustments are included in the condensed U.S. GAAP financial statements presented in Note 31 to the consolidated financial statements.

If the above noted entities were accounted for under the equity method in our French GAAP financial statements, we would have reported revenues of 13,371 million euros (1,065 million euros less than under French GAAP) for the year ended December 31, 2004,12,468 million euros (1,190 million euros less than under French GAAP) for the year ended December 31, 2003 and 13,406 million euros (1,204 million euros less than under French GAAP) for the year ended December 31, 2002.

Our operating income after reflecting our proportionately consolidated and fully consolidated entities as equity method investees would have been 1,784 million euros (171 million euros less than under French GAAP), 1,835 million euros (221 million euros less thanunder French GAAP) and 1,624 million euros (199 million euros less than under French GAAP) for the years ended December 31, 2004, 2003 and 2002, respectively.

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***Adjustments on operating income related to differences in accounting principles between French GAAP and U.S. GAAP***
The variation between French and U.S. GAAP operating income, apart from the effect of the proportionately consolidated and fully consolidated entities discussed above was primarily due to the following items:
 *Adjustments related to differences in accounting for business combinations under French GAAP and U.S.* *GAAP*
We present the impact of negative goodwill amortization as non-operating in French GAAP, whereas under U.S. GAAP, negative goodwill is offset against long-lived assets, which in turn impacts depreciation expense recorded as operating expense. The impact of thisadjustment is an increase in operating income of 20 million euros, 20 million euros and 23 million euros, for the years ended December 31, 2004, 2003 and 2002 respectively.
 *Adjustments resulting from accounting for stock based compensation and employee stock plans under U.S.* *GAAP*
We do not record compensation expense under French GAAP for our employee stock compensation plans. Under U.S. GAAP we record the change in intrinsic value for the period as compensation expense or recovery of prior period expense. Besides, under FrenchGAAP, no compensation expense is recorded for the discount offered on shares to employees, related to the plan “Lafarge in Action”. Under U.S. GAAP, such discount must be recorded as compensation expense pursuant to APB 25 with a corresponding increase in additionalpaid-in capital. The effect upon operating income under U.S. GAAP was a decrease of 2 million euros, a decrease of 2 million euros and an increase of 35 million euros, for the years ended December 31, 2004, 2003 and 2002 respectively.
 *Adjustments related to differences in accounting for restructuring provisions under French GAAP and U.S.* *GAAP*
Differences between French and U.S. GAAP with respect to accounting for restructuring provisions results in a decrease to French GAAP operating income of 4 million euros, 7 million euros and 87 million euros, for the years ended December 31, 2004, 2003 and 2002respectively.
 *Adjustments related to differences in accounting for derivative instruments under French GAAP and U.S.* *GAAP*
French GAAP does not require the recognition of the fair value of derivatives instruments in the financial statements. Under U.S. GAAP, derivative instruments are marked to market. As a result of the application of SFAS 133, “Accounting for Derivative Instrumentsand Hedging Activities”, we recorded as an increase of the operating income 12 million euros and 17 million euros, for the years ended December 31, 2004 and 2003 respectively, which relate to the fair value of embedded derivatives on forward purchase contracts forelectricity.
 *Other adjustments between French GAAP and U.S. GAAP*
The net impact on operating income of other adjustments is an increase of 1 million euros, a decrease of 9 million euros and a decrease of 15 million euros, for the years ended December 31, 2004, 2003 and 2002 respectively.
***Summary***
Our operating income under U.S. GAAP taking into consideration the above effects, totaled 1,811 million euros (144 million euros lower than under French GAAP), 1,854 million euros (202 million euros lower than under French GAAP), 1,580 million euros (243million euros lower than under French GAAP), for the years ended December 31, 2004, 2003 and 2002, respectively.

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**Forward Looking Discussion of Available Trend Information**
We are confident that most of our markets should continue to show favorable trends, in both volumes and pricing, in 2005.

In Cement, we are confident that these favorable trends will continue in most of our markets in 2005, with clearly once again the benefit of our well-spread and well-balanced geographical portfolio being key to sustained organic growth. We expect in Western Europemarkets to remain broadly stable, with the exception of post Olympic Greece and Germany where the construction market looks like it is entering a further year of weakness. However, we believe that cement prices should continue to improve progressively in Germany.Elsewhere pricing conditions should remain favorable across the region with price increases being implemented in most countries during the first quarter. With regard to North America, the level of demand in 2004 was high and weather conditions favorable and following astrong year-end, we expect a continuation of solid demand and positive pricing trends. Around the rest of the world we expect the good levels of growth to continue in 2005. The only countries of concern will continue to be Brazil where the difficult competitive environmentwill bring further pressure on prices, and South Korea where difficult market conditions should remain in 2005.

For Aggregates and Concrete, we expect to see further growth overall in 2005, with good pricing trends continuing in most of our markets.

In Roofing, many markets with the exception of Germany are expected to show favorable market trends, with further growth in the share of roofing components.

In Gypsum, 2005 should bring another year of sustained growth and well oriented prices overall.

As far as costs are concerned, after the record increases of 2004, we expect our energy and ocean freight costs to increase again in 2005. Both solid fuel and ocean freight markets should remain strong in 2005 as the consequence of the Chinese economic boom. Dieseland gas oil 2005 prices should also stay at high level. As in previous years, risk management policies and performance programs should help to mitigate the impact of these increases.

With respect to income taxes, our majority owned subsidiary Lafarge North America Inc. has announced that it will take advantage of new legislation reducing among other things the tax rate on foreign earnings repatriated to the United States, and intends to repatriatein 2005 around 1 billion U.S. dollars in cash from Canada to the United Sates. This money represents accumulated after-tax earnings associated with normal operations in Canada. Lafarge North America Inc. will record a one-time charge associated with the repatriation ofbetween $100 million to $120 million during the first quarter of 2005. This adverse effect should however be compensated at Group level by the favorable tax effect resulting from asset re-evaluation allowed in some countries and certain tax efficient restructurings.

*The paragraphs above contain forward-looking statements regarding, among other matters, our expectations for future volume and pricing trends, demand for our products and other market developments, energy and ocean freight costs and the tax consequences of anticipatedasset re-evaluations allowed in some countries and tax restructurings. These forward-looking statements reflect management’s estimates and beliefs based on currently available information and historical trends. However, actual results may differ significantly from theexpectations expressed. Our business and financial results are exposed to the cyclical activity of the construction sector, the effects of weather and other climactic conditions, competition, developments in emerging markets and other risks and uncertainties described under Item3. Key Information — Risk Factors.*

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**TRANSITION TO IFRS*(1)***
European Regulation no 1606/2002      issued July 19, 2002, requires all European companies listed on a      regulated market to use International Accounting Standards endorsed at      the European level (IAS or IFRS *(1)* standards) to prepare their      consolidated financial statements, effective 2005. Accordingly, the 2005      consolidated financial statements of the Group will be prepared in accordance      with this set of standards, which requires 2004 comparative data to be      presented on the same basis.

In order to provide this comparative      data, the Group established an opening balance sheet as of January 1,      2004, the starting date for application of the IFRS standards as published      as of March 31, 2004. The effects of the transition are recorded in      the opening IFRS equity.

In accordance with the recommendation      issued by the AMF related to the guidance regarding the transition to IFRS,      Lafarge decided to present the quantitative impacts of the transition on      its 2004 financial statements in this document.

Nevertheless, the Group could have      to review some accounting treatments used for the purpose of this publication      if the IASB was to publish new positions on existing standards until the      Group’s first IFRS publication (2005’ interim reporting). Such      positions would concern a very limited number of issues.

The information enclosed has been      examined by the Board of Directors on February 23, 2005. Our auditors      have audited the IFRS accompanying financial statements and related narrative      disclosures and have issued an unqualified opinion on this information      in their Special Purpose Auditor’s report on this preliminary IFRS      financial information.
**Basis for preparation            of Group’s first IFRS financial statements**
For the purpose of the transition      to IFRS the Group elected an early application for part of the standards      issued as at end of March 2004 as detailed:
 •Revised IAS 32 & IAS          39, *Financial Instruments*: for the purpose of the transition          the Group applies these revised standards starting January 1,          2004;    •IFRS 2, *Share Based            Payments*: the Group applies this standard starting January 1,            2004 to instruments granted after November 7, 2002 and not vested            as at January 1, 2004;    •IFRS 3, *Business Combinations*,          revised IAS 36, *Impairment of assets* and revised IAS 38, *Intangible          assets*: the Group applies these standards starting January 1,          2004. **Exemptions from other            IFRSs**
IFRS 1, *First-time adoption        of International Financial and Reporting Standards* allows First Time        adopters to elect to use exemptions from other IFRSs (mainly to avoid        retrospective application of some standards). The Group examined the        treatments available and elected to use the following exemptions:
**(a)****Business Combinations**
Business Combinations prior to      January 1, 2004 are not restated retrospectively for compliance with      IFRS 3. For information, the Group has applied the purchase method to all      its business combinations since January 1, 1989.
**(b)****Employee Benefits**
For all gains and losses arising      from a change in actuarial assumptions for pension commitments measurement      subsequent to January 1, 2004, the Group will maintain the current “corridor” accounting      method. Furthermore, the Group used the exemption permitted by IFRS 1 to      include all actuarial differences not recognized as of December 31,      2003 in equity as of January 1, 2004. Quantitative impacts of this      election are presented in the reconciliation note below (see *Summary      of differences between Accounting Principles followed by the Group (French      GAAP) and International Accounting Standards* — 1.).
 *(1)*International Financial          Reporting Standards (“IFRS”) is the new label of IAS effective          May 2002.
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**(c)****Cumulative translation            differences**
The Group elected to “reset      to zero” previous cumulative translation differences arising from      translation into euros of foreign subsidiaries’ financial statements      denominated in foreign currency. Quantitative impacts of this election      are presented in the reconciliation note below (see *Summary of differences      between Accounting Principles followed by the Group (French GAAP) and International      Accounting Standards* — 5.(a)).

The Group did not elect to use      other exemptions available. Among other, the Group has elected to not adopt      the option which consists in measuring at their fair value some tangible      or intangible assets in the opening balance sheet.
**Impact of the transition            on the consolidated Financial Statements**
The following is a summary reconciliation      of Shareholders’ equity and Net income as reported under French GAAP      to Shareholders’ equity and Net income as adjusted for the effects      of the application of International Accounting Standards starting January 1,      2004.
    **January 1,****2004** **Net****income****2004** **Other****2004** **Transl****adjustment****2004** **December 31,****2004** **Shareholders’ equity            as reported** **Note** **8,185** **868** **(166****)****(410****)****8,477** Pension          and other employee benefits 1. (1,234)83 (5)16 (1,140)Investments          available for sale 2.(c)(44)— 9 — (35)Compound          instruments 2.(a)58 (27)— — 31 Derivative          instruments 2.(b)(79)4 61 (1)(15)Treasury          shares 2.(f)(64)— 2 — (62)Effective          interest method on debts 2.(f)2 4 — — 6 Goodwill          depreciation & impairment 3.(a)— 117 (2)(4)111 Business          combinations 3. — — 1 — 1 Share          based payments 4. — (15)15 — — Disposal          of investments 5.(a)— 50 2 (52)— Goodwill          related to the acquisition of foreign subsidiaries 5.(b)(289)— — 289 — Deferred          tax hyperinflation Turkey 6.(b)(9)1 — 1 (7)Deferred          charges 7.(a)(12)3 — — (9)Investment          subsidies 7.(b)(26)2 — — (24)Provision          for unrealized foreign exchange losses 7.(e)(28)1 — 2 (25)Severe          currency devaluations capitalized 7.(f)(7)— — (1)(8)Total          IAS adjustments before income tax and minority interests — (1,732)223 83 250 (1,176)Tax          effect of the above IAS adjustments — 439 (21)(22)(10)386               Minority          Interests — 132 (24)(1)(12)95 **Shareholders’ equity            according to IFRS** **—** **7,024** **1,046** **(106****)****(182****)****7,782** 
A summary reconciliation of the      Group’s Consolidated financial statements as reported under French      GAAP to its Consolidated financial statements under IFRSs are presented      for:
 (i)Consolidated Balance sheet          as at the date of transition to IFRS, that is January 1, 2004;    (ii)Consolidated Balance sheet          as at the end of December 2004; and    (iii)Consolidated Income Statement          for the year ended December 31, 2004.
Narrative disclosures are presented      after this reconciliation (***Summary of differences between Accounting      Principles followed by the Group (French GAAP) and International Accounting      Standards***).

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**(i)****Summary reconciliation            of Balance Sheets**     **At          January** **1, 2004**    **French          GAAP****under IFRS****format** IAS 19      Employee      benefits IAS 32&39      Financial      Instruments IFRS 3 Business      Combinations,      IAS 36 & 38 IAS 21 Effects      of Changes in      For. Ex. Rates IAS 12      Income      Taxes Others **Total impact          of****transition****to IFRS** **Restated****under IFRS** *Narrative disclosure reference*   ***(1)*** ***(2)*** ***(3)*** ***(5)*** ***(6)*** ***(7)***                    **(in** **million €)** **Non-current            assets**  **19,048** **(561****)****(134****)****—** **(289****)****251** **(160****)****(893****)****18,155** Goodwill  4,149 — 13 2,421 (271)— (233)1,930 6,079 Intangible          assets  2,823 — — (2,421)— — (102)(2,523)300 Property,          plant and equipment  10,402 — — — — — (96)(96)10,306 Investment          in associates  383 — — — (18)— 234 216 599 Other          financial assets(a) 730 — (147)— — — 1 (146)584 Pension          asset(a) 561 (561)— — — — — (561)— Deferred          income tax asset, net  — — — — — 251 — 251 251 Restricted          cash  — — — — — — 36 36 36 **Current            assets**  **5,787** **—** **183** **—** **—** **—** **(64****)****119** **5,906** Inventories  1,422 — — — — — — — 1,422 Trade          receivables  1,754 — 351 — — — — 351 2,105 Other          receivables  977 — (243)— — — (28)(271)706 Derivative          instruments  — — 146 — — — — 146 146 Cash          and cash equivalents  1,634 — (71)— — — (36)(107)1,527 **TOTAL            ASSETS**  **24,835** **(561****)****49** **—** **(289****)****251** **(224****)****(774****)****24,061** **Capital            and reserves**  **—** **—** **—** **—** **—** **—** **—** **—** **—** Common          stock  669 — — — — — — — 669 Additional          paid-in-capital  5,798 — — — — — — — 5,798 Treasury          shares(b) (33)— (71)— — — — (71)(104)Retained          earnings(b) 4,086 (1,036)(41)— (2,614)352 (72)(3,411)675 Other          reserves  — — (20)— — 6 — (14)(14)Foreign          currency translation  (2,335)— — — 2,335 — — 2,335 — **Shareholders’ equity**  **8,185** **(1,036****)****(132****)****—** **(279****)****358** **(72****)****(1,161****)****7,024** Minority          interests  2,191 (198)(204)— (10)72 (1)(341)1,850 Other          equity  118 — — — — — (118)(118)— **Total            equity**  **10,494** **(1,234****)****(336****)****—** **(289****)****430** **(191****)****(1,620****)****8,874** **Non-current            liabilities**  **9,859** **673** **18** **—** **—** **(179****)****(33****)****479** **10,338** Deferred          income tax liability  870 — — — — (179)1 (178)692 Pensions          and other employee benefits provisions(c) 622 673 — — — — 1 674 1,296 Other          provisions(c) 997 — (86)— — — (1)(87)910 Long-term          debt  7,370 — 8 — — — (34)(26)7,344 Derivative          instruments  — — 96 — — — — 96 96 **Put            options on shares of subsidiaries**  **—** **—** **222** **—** **—** **—** **—** **222** **222** **Current            liabilities**  **4,482** **—** **145** **—** **—** **—** **—** **145** **4,627** Pensions          and other employee benefits provisions, current portion(c) 117 — — — — — — — 117 Other          provisions, current portion(c) 121 — — — — — — — 121 Trade          payables  1,234 — — — — — — — 1,234 Other          payables(d) 1,560 — (120)— — — — (120)1,440 Income          tax payable(d) 125 — — — — — — — 125 ST          debt & current portion of LT debt(e) 1,325 — 248 — — — — 248 1,573 Derivative          instruments  — — 17 — — — — 17 17 **TOTAL            EQUITY AND LIABILITIES**  **24,835** **(561****)****49** **—** **(289****)****251** **(224****)****(774****)****24,061** **Reclassifications between            French GAAP published Balance sheet and French GAAP balances presented            under the IFRS format may be summarized as follows :**(a)Lines “Other Investments” (481 million          euros) and “Other LT assets” (810 million euros) have          been merged in line “Other financial assets” except for the          pension prepaid asset (561 million euros) that is presented under          IFRS on a separate line(b)Treasury shares that are          deducted from equity under French GAAP were presented within “Retained          earnings” in the French GAAP Balance Sheet. They are isolated          in the IFRS format on the line “Treasury shares”(c)“Provisions” (1,857 million          euros) have been split between “Pension & other employee benefits          provision” (739 million euros) and “Other provisions” (1,118 million          euros) and the part that will be reversed within twelve months is presented          in the Current liabilities section (117 million euros for Pension & Other          Employment Benefit provision and 121 million euros for Other Provisions)(d)“Income Tax Payable” (125 million          euros) is shown separately from “Other Payables” in the IFRS          format(e)French GAAP “Current          portion of LT debt” (985 million euros) and “Short-term          bank borrowings” (340 million euros) have been merged into          IFRS line “ST debt & current portion of LT debt”
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**(i)****Summary reconciliation            of Balance Sheets**     **At          December 31, 2004**    **French GAAP****under****IFRS format** IAS 19      Employee      benefits IAS 32&39      Financial      Instruments IFRS 3      Business      Combinations,      IAS 36 & 38 IFRS 2      Share      Based      Payments IAS 21      Effects of      Changes in      For. Ex. Rates IAS 12      Income      Taxes Others **Total impact****of transition****to IFRS** **Restated****under****IFRS** *Narrative disclosure reference*   ***(1)*** ***(2)*** ***(3)*** ***(4)*** ***(5)*** ***(6)*** ***(7)*******                    **(in          million €)** **Non-current            assets**  **18,653** **(573****)****(28****)****112** **—** **—** **280** **(203****)****(412****)****18,241** Goodwill  3,718 — 34 2,377 — — — (131)2,280 5,998 Intangible          assets  2,760 — — (2,270)— — — (182)(2,452)308 Property,          plant and equipment  10,641 — — — — — — (54)(54)10,587 Investment          in associates  236 — — 5 — — — 131 136 372 Other          financial assets(a) 722 — (62)— — — — (1)(63)659 Pension          asset(a) 576 (573)— — — — — — (573)3 Deferred          income tax asset, net  — — — — — — 280 — 280 280 Restricted          cash  — — — — — — — 34 34 34 **Current            assets**  **6,119** **—** **198** **—** **—** **—** **—** **(58****)****140** **6,259** Inventories  1,509 — — — — — — — — 1,509 Trade          receivables  2,054 — 210 — — — — — 210 2,264 Other          receivables  903 — (152)— — — — (24)(176)727 Derivative          instruments  — — 209 — — — — — 209 209 Cash          and cash equivalents  1,653 — (69)— — — — (34)(103)1,550 **TOTAL            ASSETS**  **24,772** **(573****)****170** **112** **—** **—** **280** **(261****)****(272****)****24,500** **Capital            and reserves**                      Common          stock  684 — — — — — — — — 684 Additional          paid-in-capital  6,000 — — — 13 — — — 13 6,013 Treasury          shares(b) (33)— (69)— — — — — (69)(102)Retained          earnings(b) 4,571 (979)(67)105 (13)(2,559)346 (67)(3,234)1,337 Other          reserves  — — 51 — — — (19)— 32 32 Foreign          currency translation  (2,745)16 (1)(3)— 2,559 (9)1 2,563 (182)**Shareholders’ equity**  **8,477** **(963****)****(86****)****102** **—** **—** **318** **(66****)****(695****)****7,782** Minority          interests  2,479 (177)(254)10 — — 61 — (360)2,119 Other          equity  116 — — — — — — (116)(116)— **Total            equity**  **11,072** **(1,140****)****(340****)****112** **—** **—** **379** **(182****)****(1,171****)****9,901** **Non-current            liabilities**  **9,370** **567** **15** **—** **—** **—** **(99****)****(79****)****404** **9,774** Deferred          income tax liability  731 — — — — — (99)— (99)632 Pensions          and other employee benefits provisions(c) 667 567 — — — — — — 567 1,234 Other          provisions(c) 1,024 — (104)— — — — — (104)920 Long-term          debt  6,948 — 90 — — — — (79)11 6,959 Derivative          instruments  — — 29 — — — — — 29 29 **Put            options on shares of subsidiaries**  **—** **—** **299** **—** **—** **—** **—** **—** **299** **299** **Current            liabilities**  **4,330** **—** **196** **—** **—** **—** **—** **—** **196** **4,526** Pensions          and other employee benefits provisions, current portion(c) 121 — — — — — — — — 121 Other          provisions, current portion(c) 118 — — — — — — — — 118 Trade          payables  1,424 — — — — — — — — 1,424 Other          payables(d) 1,417 — (30)— — — — — (30)1,387 Income          tax payable(d) 46 — — — — — — — — 46 ST          debt & current portion of LT debt(e) 1,204 — 183 — — — — — 183 1,387 Derivative          Instruments  — — 43 — — — — — 43 43 **TOTAL            EQUITY AND LIABILITIES**  **24,772** **(573****)****170** **112** **—** **—** **280** **(261****)****(272****)****24,500** **Reclassifications between            French GAAP published Balance sheet and French GAAP balances presented            under the IFRS format may be summarized as follows :**(a)Lines “Other Investments” (560 million          euros) and “Other LT assets” (738 million euros) have          been merged in line “Other financial assets” except for the          pension prepaid asset (576 million euros) that is presented under          IFRS on a separate line(b)Treasury shares that are          deducted from equity under French GAAP were presented within “Retained          earnings” in the French GAAP Balance Sheet. They are isolated          in the IFRS format on the line “Treasury shares”(c)“Provisions” (1,930 million          euros) have been split between “Pension & other employee benefits          provision” (788 million euros) and “Other provisions” (1,142 million          euros) and the part that will be reversed within twelve months is presented          in the Current liabilities section (121 million euros for Pension & Other          Employment Benefit provision and 118 million euros for Other Provisions)(d)“Income Tax Payable” (46 million          euros) is shown separately from “Other Payables” in the IFRS          format(e)French GAAP “Current          portion of LT debt” (991 million euros) and “Short-term          bank borrowings” (213 million euros) have been merged into          IFRS line “ST debt & current portion of LT debt”
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**(ii)****Summary reconciliation            of Consolidated Income Statements**     **For          the year ended December** **31, 2004**    **French GAAP****under IFRS****format** IAS 19      Employee      benefits IAS 32/39      Financial      Instruments IFRS 3 Business      Combinations,      IAS 36 & 38 IFRS 2      Share Based      Payments IAS 21 Effects      of Changes in      For. Ex. Rates IAS 12      Income Taxes Others **Total impact of****transition to****IFRS** **Restated under****IFRS** *Narrative            disclosure reference*    ***(1)*** ***(2)*** ***(3)*** ***(4)*** ***(5)*** ***(6)*** ***(7)***                   **(in** **million €)**   **Revenues**  **14,436** **—** **—** **—** **—** **—** **—** **—** **—** **14,436** Cost          of sales(a) (10,432)16 12 — (3)— — 5 30 (10,402)Selling & administrative          expenses(a) (1,880)59 — — (12)— — — 47 (1,833)**Operating            Margin**  **2,124** **75** **12** **—** **(15****)****—** **—** **5** **77** **2,201** Gains          on disposal, net  41 — — — — 52 — (2)50 91 Other          operating income (expenses)(b) (343)8 — 117 — — — — 125 (218)**Operating            income****(c)** **1,822** **83** **12** **117** **(15****)****52** **—** **3** **252** **2,074** Finance          (costs) / income  (517)— (31)— — — — 1 (30)(547)Income          from associates  74 — — — — — — — — 74 **Income            before income tax and min. int.**  **1,379** **83** **(19****)****117** **(15****)****52** **—** **4** **222** **1,601** Income          tax  (247)— — — — — (21)1 (20)(267)**Income            after tax**  **1,132** **83** **(19****)****117** **(15****)****52** **(21****)****5** **202** **1,334** Minority          interests  (264)(20)(5)(10)2 — 8 1 (24)(288)**Net            income****—** **868** **63** **(24****)****107** **(13****)****52** **(13****)****6** **178** **1,046** **Reclassifications between            French GAAP published Statement of income and French GAAP balances            presented under the IFRS format may be summarized as follows :**(a)The line “Depreciation” presented          on the face of the French GAAP Income statement has been allocated          to “Cost of Sales” (799 million euros) and “Selling & administrative          expenses” in the IFRS format (105 million euros) based on          the nature of the underlying assets(b)“Goodwill depreciation” is          reclassified within the “Operating Income” on the line “Other          operating income (expenses)” in the IFRS formats. Most of this          depreciation is then reversed as part of IFRS adjustments(c)Previously denominated          as “Operating income on Ordinary Activities” under French          GAAP
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**Summary of differences between Accounting Principles followed by the Group (French GAAP) and International Accounting Standards**
All figures presented in the narrative disclosures hereafter are before tax and minority interests, unless specified.
**1. IAS 19 — *Employee benefits***
Lafarge has elected to use the option available in IFRS 1 under which any difference existing as at January 1, 2004 between defined benefit plans liabilities and the fair value of dedicated assets can be recognized through equity, except the non vested portion ofunrecognized past service costs. The impact of this election is the main source of difference between French GAAP and IFRS financial statements in the area of employee benefits (1,183 million euros negative impact on January 1, 2004 equity, 73 million euros positiveimpact on 2004 earnings and 1,132 million euros negative impact on December 31, 2004 equity).

Group valuation and accounting principles in respect of pension and other commitments have been almost fully aligned with existing U.S. GAAP in this area (SFAS 87-88, SFAS 106 and SFAS 112) since the group flotation on the New York Stock Exchange (“NYSE”).IAS 19 is the corresponding standard applicable to employee benefits under IAS / IFRS. A limited number of discrepancies between these two sets of standards have been identified. They concern:
 •the valuation of dedicated plans assets (U.S. GAAP authorize the smoothing of the fair value of plans assets over time, whereby IAS 19 requires the use of year end fair value for assets);    •measurement dates for liabilities and dedicated assets (under U.S. GAAP, valuation dates can be set before year end, whereby IAS 19 requires the use of year end measurement dates);    •transitional provisions which are specific to each set of standards;    •the recognition of past / prior service costs (under U.S. GAAP, the effects of plan amendments can be recognized over the average remaining active life of plans participants, whereby IAS 19 requires the immediate recognition, in the profit and loss account, of any effectof plan amendments on benefits already vested);    •the limitations applicable, under IAS 19 (asset ceiling), to prepaid pension cost amount to be recognized on the employer’s balance sheet in respect of the overfunding of a plan’s liabilities by its dedicated assets, which have no direct equivalent under U.S. GAAP;    •the allocation method for defined benefit costs over the periods of services rendered by beneficiaries (under certain circumstances, U.S. GAAP allow for an allocation of costs over the entire expected active career of beneficiaries, whereby IAS 19 requires the recognitionof these costs over the periods of service over which benefits become vested, occasionally shorter than the entire expected active career);    •the valuation of death and disability benefits covering active employees (IAS 19 does not require to provide for this type of benefits as long as they do not relate to services rendered by beneficiaries: costs are then expensed as incurred);    •the valuation of « constructive » obligations which is explicitly required by IAS 19, whereby U.S. GAAP valuation requirements are limited to the obligations in respect of formal benefit plans.
Based on this list of potential discrepancies, Lafarge has carried out, with the support of its actuaries, a specific review of the necessary restatements of the existing U.S. GAAP information in respect of the most significant benefit plans of the Group (95% of groupobligations have been covered).

Following this review, the Group has recorded a net decrease in equity as at January 1, 2004 of 51 million euros, an increase in earnings of 10 million euros and a net decrease in equity as at December 31, 2004 of 8 million euros.

The results of this review have been integrated into Group valuation and accounting processes.

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The total impact of the application of IAS 19 revised for the Group is respectively a decrease in equity of 1,234 million euros and 1,140 million euros as at January 1, 2004 and December 31, 2004 and an increase in 2004 earnings of 83 million euros.
**2. IAS 32 / 39 — *Financial instruments***
The impact of the application of IAS 32 / 39 on the Group’s Balance sheets can be summarized as follows:
 **At January** **1, 2004** **At December** **31, 2004**  **Total****impact** **OCEANE** **Deriv.****Instr.** **Avail.****for sale****invest.** **Securiti-****zation** **Put****options** **Others** **Total****impact** **OCEANE** **Deriv.****Instr.** **Avail.****for sale****invest.** **Securiti-****zation** **Put****options** **Others**                 **(in** **million €)** **Non-current assets** **(134****)** **—**  **—**  **(44****)** **(103****)** **13**  **—**  **(28****)** **—**  **—**  **(35****)** **(27****)** **34**  **—** Goodwill 13  —  —  —  —  13  —  34  —  —  —  —  34  — Other financial assets (147) —  —  (44) (103) —  —  (62) —  —  (35) (27) —  — **Current assets** **183**  **—**  **(97****)** **—**  **352**  **—**  **(72****)** **198**  **—**  **57**  **—**  **210**  **—**  **(69****)**Trade receivables 351  —  —  —  352  —  (1) 210  —  —  —  210  —  — Other receivables (243) —  (243) —  —  —  —  (152) —  (152) —  —  —  — Derivative instruments 146  —  146  —  —  —  —  209  —  209  —  —  —  — Cash and cash equivalents (71) —  —  —  —  —  (71) (69) —  —  —  —  —  (69)**TOTAL ASSETS** **49**  **—**  **(97****)** **(44****)** **249**  **13**  **(72****)** **170**  **—**  **57**  **(35****)** **183**  **34**  **(69****)**Treasury shares (71) —  —  —  —  —  (71) (69) —  —  —  —  —  (69)Retained earnings (41) (55) 5  —  —  —  9  (67) (82) 2  —  —  —  13 Other reserves (20) 113  (89) (44) —  —  —  51  113  (27) (35) —  —  — Foreign currency transl.    —  —  —  —  —  —  (1) —  (1) —  —  —  — **Shareholders’ equity** **(132****)** **58**  **(84****)** **(44****)** **—**  **—**  **(62****)** **(86****)** **31**  **(26****)** **(35****)** **—**  **—**  **(56****)**Minority interests (204) —  5  —  —  (209) —  (254) —  11  —  —  (265) — **Total equity** **(336****)** **58**  **(79****)** **(44****)** **—**  **(209****)** **(62****)** **(340****)** **31**  **(15****)** **(35****)** **—**  **(265****)** **(56****)****Non-current liabilities** **18**  **(58****)** **86**  **—**  **—**  **—**  **(10****)** **15**  **(31****)** **59**  **—**  **—**  **—**  **(13****)**Other provisions (86) (69) (10) —  —  —  (7) (104) (97) —  —  —  —  (7)Long-term debt 8  11  —  —  —  —  (3) 90  66  30  —  —  —  (6)Derivative instruments 96  —  96  —  —  —  —  29  —  29  —  —  —  — **Put opt. on shares ofsubs.** **222**  **—**  **—**  **—**  **—**  **222**  **—**  **299**  **—**  **—**  **—**  **—**  **299**  **—** **Current liabilities** **145**  **—**  **(104****)** **—**  **249**  **—**  **—**  **196**  **—**  **13**  **—**  **183**  **—**  **—** Other payables (120) —  (121) —  —  —  1  (30) —  (30) —  —  —  — ST debt & cur. port of LTdebt 248  —  —  —  249  —  (1) 183  —  —  —  183  —  — Derivative instruments 17  —  17  —  —  —  —  43  —  43  —  —  —  — **TOTAL EQUITY &**                                          **  LIABILITIES** **49**  **—**  **(97****)** **(44****)** **249**  **13**  **(72****)** **170**  **—**  **57**  **(35****)** **183**  **34**  **(69****)**  **(a)****Compound Instruments : OCEANE**
Under IAS 32, *Financial Instruments: Disclosure and Presentation*, if a financial instrument contains components with characteristics of both liabilities and equity elements, the issuer shall classify the component parts separately according to the definitions for thevarious considered items. Therefore, a separate presentation of liability and equity created by a single financial instrument is required.

This category includes financial instruments that creates a debt for the issuer and grants an option to its holder to convert it into an equity instrument of the issuer

When the initial carrying amount of a compound instrument is allocated to its equity and liability elements, the equity component is assigned the residual carrying amount after deducting from the instrument as a whole the amount separately determined for the liabilitycomponent. This liability component is determined by measuring the fair value of a similar liability, without associated equity component.

As at June 29, 2001 the Group issued 10,236,221 bonds convertible into common shares for a total nominal amount of 1,300,000,067 euros, bearing interest at an annual rate of 1.5% (“OCEANEs”). The maturity of this convertible bonds is January 1, 2006.

As part of the transition, the Group calculated retrospectively the liability and equity component of this instrument at inception and determined the liability value that shall be recognized as at January 1, 2004. The equity component that would have been recognized atinception directly in equity amounts to 113 million

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euros. Under the effective interest rate method, the cumulative interest expense that would have been recognized on the liability component as at January 1, 2004 amounts to 181 million euros.Under French GAAP, the Group recorded a cumulative interest expense (including linear amortization for redemption premium and transaction costs) of 126 million euros. The cumulativedifference is a decrease in retained earnings of 55 million euros. For the year ended 2004, the Group recorded in its IFRS earnings an additional financial expense amounting to 27 millioneuros.

The combined effect of the recognition of the equity component and the cumulative difference on financial expenses is respectively an increase of 58 million euros in equity as at January 1, 2004, a decrease of 27 million euros in 2004 earnings and an increase of31 million euros in equity as at December 31, 2004.
**(b)****Derivative Instruments and hedge relationships**
Under French GAAP, the fair value of derivative instruments is recorded in the Group’s accounting records when the assets and liabilities of an acquiree are fair valued as the result of a business combination. In all other situations, French GAAP does not require therecognition of the fair value of derivative instruments.

For the purpose of the transition, pursuant to the guidance in revised IAS 39 and IAS 32 that the Group applies starting January 1, 2004 as described in paragraph *Basis for preparation of Group’s first IFRS financial statements* above, the Group records in its IASfinancial statements financial instruments which meet the criteria for recognition as derivatives. Derivative instruments are marked to market and recorded on the balance sheet. The accounting for changes in fair value of a derivative depends on the intended use of thederivative and the resulting designation. The Group designates its derivative based on the criteria established by IAS 39. For a derivative designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gainon the hedged item attributed to the risk being hedged. For a derivative designated as a cash flow hedge, the effective portion of the derivatives gain or loss is initially recognized directly in equity and subsequently reclassified into earnings when the hedged exposure affectsearnings. The ineffective portion of the gain or loss is reported in earnings immediately. For embedded derivatives, the gain or loss is recognized in earnings in the period of the change in fair value.

As a result of the application of hedge accounting pursuant to the guidance included in revised IAS 39, as at January 1, 2004, the Group recorded a net decrease in equity of 79 million euros (of which 84 million euros affects negatively the Shareholders’ equity and5 million euros positively the Minority interests). As a result, the Group recorded current derivative assets for 146 million euros, non-current derivative liabilities for 96 million euros and current derivative liabilities for 17 million euros.

For the year ended 2004, accounting for the change in fair value of derivatives resulted in an increase recorded directly in equity of 61 million euros and an increase in earnings for the period of 4 million euros. As at end of December 31, 2004, derivative instrumentsset on the balance sheet of the Group in current assets for an amount of 209 million euros, in non-current liabilities for 29 million euros and in current liabilities for 43 million euros.
**(c)****Investments in marketable securities**
In accordance with French GAAP, as described in the Notes to the Consolidated Financial Statements, the Group’s policy is to value marketable securities and other equity securities at the lower of historical cost or net realizable value with any resulting unrealizedlosses recorded in the statement of income. French GAAP does not permit upward adjustments in the value of these securities to reflect their fair market value.

Under revised IAS 39, that the Group applies for the purpose of the transition starting January 1, 2004, investments in marketable securities shall be classified in three categories: trading (securities that are bought and held principally for the purpose of selling them inthe near term), held to maturity (securities with fixed or determinable payments and fixed maturity that the Group has a positive intent and ability to hold to maturity), and securities available for sale (all other securities). Most of the marketable debt and equity securities of theGroup are classified as available for sale with unrealized gains and losses excluded from

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earnings and reported as a component of Shareholders’ equity (cumulated changes in fair value of financial instruments).

In 2000, the Group acquired 9.99 % of the common shares of the Portuguese cement producer Cimpor for 319 million euros, which represented an average 4.75 per share. In December 2003, the Group purchased an additional 2.65% of the common shares of Cimporcommon stock at 4.06 euro per share. The market value of all shares was 348 million euros at December 31, 2003, and 353 million euros at December 31, 2004.

Until 2004, the Group has not recorded an other-than-temporary impairment on this investment as it has the intent and ability to retain its investment for a period of time sufficient for the recovery in market value. The Group has viewed, and continues to view, itsinvestment in Cimpor as a strategic investment. The Group derives certain benefits from its investment that are not reflected in Cimpor’s share price. These benefits include an industrial and technical cooperation agreement with Cimpor management to enhance the efficiencyand create operating synergies for both operations. The Group monitors the value of its investment in Cimpor and evaluate it for possible impairment on a regular basis. This review has led the Group to book in its French GAAP 2004 profit and loss an impairment loss of4 million euros.

This impairment has been kept in IFRS profit and loss and the difference between the market value and the carrying value after impairment has been recorded in a separate component of equity.

The unrealized gains and losses on securities available for sale included in this separate component of equity relate to the investment in Cimpor and represent an unrealized loss of 44 million euros and 35 million euros respectively as at January 1, 2004 and December,31 2004.
**(d)****Securitization agreements**
The Group was involved in two major receivables securitization programs (in France and in the United States) as at January 1, 2004 to provide a cost-effective source of working capital and short-term financing. Under the programs, the subsidiaries agree to sell on arevolving basis, certain of their accounts receivable. Under the terms of the arrangements, the subsidiaries involved in these programs do not maintain control over the assets sold and there is no entitlement nor obligation to repurchase the sold receivables. In these agreements,the purchaser of receivables holds a subordinated retained interest in the receivables not sold to third parties as usually granted in similar commercial transactions. Consequently, the receivables securitization transactions have been accounted for under French GAAP as sales(with the subordinated interest being classified as long-term financial asset) and as a result, the related receivables and debt have been excluded from the Balance Sheet.

Under revised IAS 39, that the Group applies for the purpose of its transition starting January 1, 2004, financial assets could be derecognized only if substantially all risks and rewards attached to the assets have been transferred. The subordinated retained interest heldby the purchaser in the receivables not sold to third parties represents a breach in the transfer of all risks and rewards. As a consequence, these accounts receivable should not be derecognized in the Balance Sheet and these operations should be treated as a secured financing.

This restatement results in a decrease in LT financial assets of respectively 103 million euros and 27 million euros as at January 1, 2004 and December 31, 2004, an increase in Accounts receivable-trade of respectively 352 million euros and 210 million euros as atJanuary 1, 2004 and December 31, 2004 , and an increase in short-term debt of respectively 249 million euros and 183 million euros as at January 1, 2004 and December 31, 2004.
**(e)****Put options on shares of subsidiaries**
As part of the acquisition process of certain entities, the Group has granted third party shareholders the option to require the Group to purchase their shares at predetermined conditions. Assuming that all of these options were exercised, the purchase price to be paid bythe Group, including net debt acquired, would amount to respectively 448 million euros and 328 million euros as at January 1, 2004 and December 31, 2004.

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Under IAS 32, put option granted to minority interests of subsidiaries shall be considered as a debt. Out of the total options granted by the Group, the options granted to minority interests amounted to respectively 222 million euros and 299 million euros as atJanuary 1, 2004 and December 31, 2004, the remaining options being granted on shares of equity affiliates or joint ventures.

As a consequence, until the IFRIC issues specific guidance, the Group recorded a specific debt in the IFRS balance sheet by reclassifying the underlying minority interests and recording a goodwill for any difference between the carrying value of minority interests andthe value of the debt. No impact has been recorded in the IFRS Statement of income.

The result of this treatment is a debt related to put options granted to minority interests of respectively 222 million euros and 299 million euros, a decrease in minority interests of respectively 209 million euros and 265 million euros and an increase in goodwill ofrespectively 13 million euros and 34 million euros as at January 1, 2004 and December 31, 2004.

Out of the outstanding debt at 2004 year end (299 million euros), 210 million can be exercised in 2005 based upon the terms of these agreements and 99 million have already been exercised in January 2005 (put options on Lafarge Halla Cement and Lafarge IndiaLtd).
**(f)****Others**  **i.****Treasury shares**
As required by French GAAP, cost of treasury shares that are intended for distribution to the employees is classified in investments in marketable securities (included in “Cash & cash equivalents”), and accounted for as described in the Notes to the ConsolidatedFinancial Statements. Remaining treasury shares are recorded as a reduction of shareholders’ equity at acquisition cost.

For French GAAP purposes, a provision is recorded for unrealized losses on shares which are classified as investments in marketable securities. Changes in the provision, including any subsequent recovery in value, if any, are recorded as financial income or expense.

As at December 31, 2003, the Company was carrying 1,856,266 of its own shares out of which (i) 1,058,296 were classified as investments in marketable securities at a cost of 71 million euros and (ii) 797,970 were classified as a reduction of the Shareholders’ equityfor 33 million euros. A charge of 7 million euros was recognized in the Group’s French GAAP consolidated financial statements to account for unrealized losses on the Group’s own shares accounted for as investments in marketable securities.

As of December 31, 2004, the Company carries 1,834,396 of its own shares out of which 1,036,426 are classified as investments in marketable securities at a cost of 69 million euros.

Under IAS, treasury shares are accounted for as a reduction of Shareholders’ equity at acquisition cost and no further recognition is given for changes in fair value. When treasury shares are resold, any difference between the cost and fair value are generally recordeddirectly to Shareholders’ equity. As at January 1, 2004, the impact on Shareholders’ equity would have been an increase of 7 million euros related to the cancellation of the provision and a decrease of 71 million euros related to the reclassification of treasury shares classifiedin investments in marketable securities under French GAAP.

For the year ended December 31, 2004, the impact on Shareholders’ equity is an increase of 7 million euros related to the cancellation of the provision and a decrease of 69 million euros related to the reclassification of treasury shares classified in investments inmarketable securities under French GAAP.
**ii.****Effective interest rate method**
IAS 39, *Financial Instruments: Recognition and Measurement* requires to measure a financial liability after initial recognition at amortized cost using the effective interest method. That computation includes all fees and points paid between parties to the contract.

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Under this method, the costs directly attributable to the acquisition of the financial liability are recognized in net income according to the effective interest rate method. Under French GAAP, they are mainly recognized on a linear basis over the life of the debt.

The cumulative impact of measuring financial debt (excluding OCEANE detailed above) at amortized cost using the effective interest rate method is a reduction of respectively 2 million euros and 6 million euros in Long-term debt as at January 1, 2004 andDecember 31, 2004 and a corresponding increase in equity. The impact of this difference on the 2004 earnings is an increase of 4 million euros.
**3.****IFRS 3, IAS 36 & IAS 38 — *Business Combinations, Impairment of assets & Intangible assets***
The impact of the application of these standards on the Group’s Balance sheets can be summarized as follows:
  **At January** **1, 2004** **At December** **31, 2004**   **Total****impact** **Goodwill****deprec.** **Business****Combin.** **Market****Shares** **Total****impact** **Goodwill****deprec.** **Business****Combin.** **Market****Shares**             **(in** **million €)** **Non-current assets**  **—**  **—**  **—**  **—**  **112**  **111**  **1**  **—** Goodwill  2,421  —  —  2,421  2,377  106  1  2,270 Intangible assets  (2,421) —  —  (2,421) (2,270) —  —  (2,270)Investments in associates  —  —  —  —  5  5  —  — **TOTAL ASSETS**  **—**  **—**  **—**  **—**  **112**  **111**  **1**  **—** **Capital and reserves**                         Retained earnings  —  —  —  —  105  104  1  — Foreign currency translation  —  —  —  —  (3) (3) —  — **Shareholders’ equity**  **—**  **—**  **—**  **—**  **102**  **101**  **1**  **—** Minority interests  —  —  —  —  10  10  —  — **Total equity**  **—**  **—**  **—**  **—**  **112**  **111**  **1**  **—** **TOTAL EQUITY AND LIABILITIES**  **—**  **—**  **—**  **—**  **112**  **111**  **1**  **—**                           **(a)****Goodwill amortization**   Under French GAAP, acquired goodwill is amortized over the expected period of benefit, which does not exceed forty years. In the context of the transition to IFRS, Lafarge decided to apply revised IAS 36 and IFRS 3 starting January 1, 2004. As required by IFRS 3 and therevised IAS 36, subsequent to January 1, 2004, all previously recorded goodwill is no longer amortized but is tested for impairment at least annually. All goodwill acquired in a purchase combination completed after January 1, 2004 is not to be amortized. The French GAAPamortization of goodwill is reduced by 117 million euros for the year ended December 31, 2004 in IFRS earnings.  **(b)****Market Shares on acquisition**   Under French GAAP, market shares have been separately identified on the acquisition of cement subsidiaries. Under revised IAS 38, that the Group applies starting January 1, 2004, market shares are not considered as a separately identifiable intangible asset, but as a componentof goodwill. These market shares have been reclassified for their carrying value to goodwill as at January 1, 2004 and December 31, 2004 (respectively 2,421 and 2,270 million euros) and accounted for based upon the provisions of revised IAS 36, as described above.  **4.****IFRS 2 — *Share Based Payments***
Under French GAAP, compensation cost is not recorded for stock option and stock purchase plans.

Under IFRS 2 *Share Based Payments*, a company shall record in its financial statements a compensation expense for all share based compensation granted to its employee.

In the Group, stock option plans are maintained in Lafarge SA and in Lafarge North America Inc, a 53 %-owned subsidiary of the Group.

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The options granted after November 2002 and not vested at January 1, 2004 have been valued at the grant date using the Black-Scholes option — pricing model and the compensation expense is to be recognized ratably over the vesting period.

As a result, for the year ended December 31, 2004, a compensation cost of 15 million euros has been expensed in the IFRS earnings (out of which 2 million euros impact Minority interests). The equity has been increased accordingly.
**5.****IAS 21 — *The Effects of Changes in Foreign Exchange Rates***
The impact of the application of this standard on the Group’s Balance sheets can be summarized as follows:
  **At January** **1, 2004** **At December** **31, 2004**   **Total****impact** **Cumulative****transl.****adjustment** **Goodwill on****Foreign subs** **Total****impact** **Cumulative****transl.****adjustment** **Goodwill on****Foreign subs**           **(in** **million €)** **Non-current assets**  **(289****)** **—**  **(289****)** **—**  **—**  **—** Goodwill  (271) —  (271) —  —  — Investments in associates  (18) —  (18) —  —  — **TOTAL ASSETS**  **(289****)** **—**  **(289****)** **—**  **—**  **—** **Capital and reserves**                   Retained earnings  (2,614) (2,335) (279) (2,559) (2,559) — Foreign currency translation  2,335  2,335  —  2,559  2,559  — **Shareholders’ equity**  **(279****)** **—**  **(279****)** **—**  **—**  **—** Minority interests  (10) —  (10) —  —  — **Total equity**  **(289****)** **—**  **(289****)** **—**  **—**  **—** **TOTAL EQUITY AND LIABILITIES**  **(289****)** **—**  **(289****)** **—**  **—**  **—**                       **(a)****Cumulative translation adjustment**   The Group applies the IFRS 1 option allowing companies to “reset to zero” previous cumulative translation differences arising from the translation into euros of foreign subsidiaries. An amount of 2,614 million euros (including 279 million euros for Group shareretrospectively calculated on goodwill previously recorded in the currency of the acquirer — see (b) below) has been reclassified in retained earnings as at January 1, 2004. This reclassification has no impact on Shareholder’s equity.   In 2004, the Group sold some foreign operations and transferred in its French GAAP profit & loss the cumulative translation difference related to these operations. The part of this difference existing as at January 1, 2004 (a loss amounting to 52 million euros) is excluded fromthe IFRS earnings.  **(b)****Goodwill relating to the acquisition of foreign subsidiaries**   The Group recorded goodwill relating to the acquisition of part of its foreign subsidiaries, joint ventures and equity affiliates in the currency of the acquirer. Under IAS, such goodwill is recorded in the currency of the acquiree. The French GAAP Goodwill on subsidiaries andjoint ventures was reduced by 271 million euros as at January 1, 2004 (out of which 10 million euros impacted the minority interests) and on equity affiliates by 18 million euros. In 2004, the Group transferred all such goodwill in its French GAAP accounts in the currency ofthe acquiree, creating a reversal of the opening difference.
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**6. IAS 12 — *Deferred taxes***  **At January** **1, 2004** **At December** **31, 2004**  **Total****impact** **Gross****up of****deferred****tax** **Hyperinfl****countries** **Tax effect****of all IAS****adjustments** **Total****impact** **Gross****up of****deferred****tax** **Hyperinfl****countries** **Tax effect****of all IAS****adjustments**           **(in** **million €)** **Non-current assets** **251**  **251**  **—**  **—**  **280**  **280**  **—**  **—** Deferred tax asset, net 251  251  —  —  280  280  —  — **TOTAL ASSETS** **251**  **251**  **—**  **—**  **280**  **280**  **—**  **—** **Capital and reserves**                        Retained earnings 352  —  (9) 361  346  —  (8) 354 Other reserves 6  —  —  6  (19) —  —  (19)Foreign currency translation —  —  —  —  (9) —  1  (10)**Shareholders’ equity** **358**  **—**  **(9****)** **367**  **318**  **—**  **(7****)** **325** Minority interests 72  —  —  72  61  —  —  61 **Total equity** **430**  **—**  **(9****)** **439**  **379**  **—**  **(7****)** **386** Deferred tax liability (179) 251  9  (439) (99) 280  7  (386)**TOTAL EQUITY AND LIABILITIES** **251**  **251**  **—**  **—**  **280**  **280**  **—**  **—**   **(a)****Gross up of deferred tax assets and liabilities**
IAS 12 revised permits to offset deferred tax assets and liabilities if the entity has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxationauthority. Based on this criteria, the Group reclassified respectively 251 million euros and 280 million euros as at January 1, 2004 and December 31, 2004 as deferred tax assets that were previously offset against deferred tax liabilities.
**(b)****Deferred taxes in hyperinflationary countries**
Under French GAAP, the Group recorded a deferred tax liability only to the extent of the basis differences created as a result of allocating the excess of the purchase price over the carrying value of non-monetary assets acquired in highly inflationary economies(essentially fixed assets). IAS 12 revised requires to recognize deferred tax assets and liabilities for temporary differences related to assets and liabilities that are remeasured at each balance sheet date in accordance with the provisions of IAS 29, *Financial Reporting inHyperinflationary Economy*. Deferred taxes have been calculated accordingly, resulting in the recognition of a deferred tax liability of respectively 9 million euros and 7 million euros as at January 1, 2004 and December 31, 2004. The effect of this difference on 2004earnings is an increase of 1 million euros.
**(c)****Tax effect of all IAS adjustments**
The Group recorded deferred taxes on all adjustments to IFRS that create a temporary difference between taxable basis and carrying value of assets and liabilities.

It mainly led to the recognition of a deferred tax asset on the pension adjustment amounting to respectively 403 million euros and 369 million euros as at January 1, 2004 and December 31, 2004.

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**7.****Other differences**
The impact of other differences may be detailed as follows:
  **At January** **1, 2004** **At December** **31, 2004**   **Total****impact** **Deferred****charges** **Investm.****subsidies** **Restrict****Cash** **GW on****affiliat.** **Prov for****forex****losses** **Severe****deval****capital** **Total****impact** **Deferred****charges** **Investm.****subsidies** **Restrict****Cash** **GW on****affiliat** **Prov for****forex****losses** **Severe****deval****capital**                   **(in** **million €)** **Non-current assets**  **(160****)** **(47****)** **(144****)** **36**  **—**  **—**  **(7****)** **(203****)** **(88****)** **(140****)** **34**  **—**  **—**  **(8****)**Goodwill  (233) —  —  —  (233) —  —  (131) —  —  —  (131) —  — Intangible assets  (102) (102) —  —  —  —  —  (182) (181) —  —  —  —  — Property, plant & equip.  (96) 55  (144) —  —  —  (7) (54) 93  (140) —  —  —  (8)Investments in associates  234  —  —  —  233  —  —  131  —  —  —  131  —  — Other financial assets  1  —  —  —  —  —  —  (1) —  —  —  —  —  — Restricted cash  36  —  —  36  —  —  —  34  —  —  34  —  —  — **Current assets**  **(64****)** **—**  **—**  **(36****)** **—**  **(28****)** **—**  **(58****)** **—**  **—**  **(34****)** **—**  **(25****)** **—** Other receivables  (28) —  —  —  —  (28) —  (24) —  —  —  —  (25) — Cash & cash equiv.  (36) —  —  (36) —  —  —  (34) —  —  (34) —  —  — **TOTAL ASSETS**  **(224****)** **(47****)** **(144****)** **—**  **—**  **(28****)** **(7****)** **(261****)** **(88****)** **(140****)** **—**  **—**  **(25****)** **(8****)**                                            **Capital and reserves**                                           Retained earnings  (72) (11) (26) —  —  (28) —  (67) (9) (24) —  —  (26) (8)Foreign curr. Transl.  —  —  —  —  —  —  —  1  —  —  —  —  1  — **Shareholders’ equity**  **(72****)** **(11****)** **(26****)** **—**  **—**  **(28****)** **(7****)** **(66****)** **(9****)** **(24****)** **—**  **—**  **(25****)** **(8****)**Minority interests  (1) (1) —  —  —  —  —  —  —  —  —  —  —  — Other equity  (118) —  (118) —  —  —  —  (116) —  (116) —  —  —  — **Total equity**  **(191****)** **(12****)** **(144****)** **—**  **—**  **(28****)** **(7****)** **(182****)** **(9****)** **(140****)** **—**  **—**  **(25****)** **(8****)****Non-current liabilities**  **(33****)** **(35****)** **—**  **—**  **—**  **—**  **—**  **(79****)** **(79****)** **—**  **—**  **—**  **—**  **—** Deferred tax liabilities  1  —  —  —  —  —  —  —  —  —  —  —  —  — Pension provisions  1  —  —  —  —  —  —  —  —  —  —  —  —  — Other provisions  (1) —  —  —  —  —  —  —  —  —  —  —  —  — Long-term debt  (34) (35) —  —  —  —  —  (79) (79) —  —  —  —  — **TOTAL EQUITY ANDLIABILITIES**  **(224****)** **(47****)** **(144****)** **—**  **—**  **(28****)** **(7****)** **(261****)** **(88****)** **(140****)** **—**  **—**  **(25****)** **(8****)**  **(a)****Deferred charges**
Under French GAAP certain expenses were to be classified in intangible assets as “deferred charges”. Based on their natures these expenses have been reclassified or written off.

55 million euros as at January 1, 2004 and 93 million euros as at December 31, 2004 have been reclassified in Property, plant & equipment because they were costs directly attributable to fixed assets (mainly quarry stripping costs — 52 million euros as atJanuary 1, 2004 and 76 million euros as at December 31, 2004).

35 million euros as at January 1, 2004 and 79 million euros as at December 31, 2004 have been accounted for under IAS as a reduction of long-term debt as they were redemption premiums (representing the difference between the instruments’ issue price and futureredemption amount) resulting from debenture loans (except OCEANE).

12 million euros as at January 1, 2004 and 9 million euros as at December 31, 2004 have been written off against equity as they were not meeting the definition of an asset (mainly start-up costs capitalized under French GAAP). The net effect of new capitalizationexpensed and reversal of depreciation of previously written off assets is an increase in earnings of 3 million euros in 2004.
**(b)****Investment subsidies**   **(i)  Reclassification of French GAAP investment subsidies**
Under French GAAP, the Group classifies its investment subsidies in the liabilities as “Other equity”. Under IAS, the Group presents such subsidies as a reduction of the Property, plant & equipment. This reclassification decreases the value of Property, plant &equipment by 118 million euros as at January 1, 2004 and 116 million euros as at December 31, 2004.

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 **(ii)  Depreciation of investment subsidies**
Under French GAAP, certain government investment subsidies were recorded in income when received, or were deferred and amortized over the remaining service periods of the employees at the related facilities. Under IAS, investment subsidies are deferred andamortized over the useful lives of the property, plant & equipment in which the funds were invested.
**(c)****Restricted cash**
IAS 1 requires to classify in Non-current assets cash & cash equivalents that are restricted from being exchanged or used to settle a liability for at least twelve months after the balance sheet date. The Group holds cash in bank balances that are secured from use in itsinsurance subsidiaries for twelve months or more. This balances, representing a cumulated amount of respectively 36 million euros and 34 million euros as at January 1, 2004 and December 31, 2004, are reclassified to Non-current assets (under Restricted cash).
**(d)****Goodwill on equity affiliates**
Under IAS 28, under the equity method, the investment in an associate is initially recognized at cost. Under French GAAP, the Group, when acquiring an investment in an associate recorded the difference between the share in net equity and the purchase price in the lineGoodwill. These amounts are reclassified into the Investment in associates resulting in an increase by respectively 233 million euros and 131 million euros as at January 1, 2004 and December 31, 2004.
**(e)****Provisions for unrealized foreign exchange losses**
French GAAP allows for the limitation of foreign currency exchange losses on debt negotiated in foreign currencies where the interest rate on the foreign debt is less than that available on the local currency. In such situations, the loss is limited to the difference betweenthe actual interest expense recorded and the amount of interest expense that would have been recorded if the debt was originally negotiated in the local currency.

IAS requires to include the foreign currency translation gain or loss on the foreign denominated debt in income for the period. The decrease in equity amounts to 28 million euros and 25 million euros as at January 1, 2004 and December 31, 2004 respectively. Theimpact on 2004 earnings is insignificant.
**(f)****Severe devaluation of foreign currency capitalized in PP&E**
Under French GAAP and in accordance with criteria set in SIC 11, the Group recorded in the past in the cost of certain assets foreign exchange losses on liabilities denominated in a foreign currency that resulted from the acquisition of the related assets. Under revisedIAS 21, such a capitalization is not permitted anymore.

Consequently, the Group reversed the effect of this treatment for the purpose of the transition. The effect of this reversal is a decrease in Property, plant & equipment of 7 million euros as at January 1, 2004. Opening IAS equity is decreased accordingly. The impact on2004 earnings is insignificant.
**8.****Impacts of IFRS adjustments on cash-flow statement**
Most of the IFRS adjustments do not have any impact on the Group’s cash-flows (adjustments to record non-cash changes in fair values of assets and liabilities).

The only one that have a material impact on the cash flow statement presentation relates to the securitization programs. Actually, the reconsolidation of the securitized receivables neutralizes the implied changes in working capital requirement and generates a mirrorchange in short-term debt. The change in cash & cash equivalents is not impacted by this adjustment.

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**ITEM 6. DIRECTORS, SENIOR            MANAGEMENT AND EMPLOYEES**
In accordance with French law governing      a société anonyme, as amended on May 15, 2001, and our by-laws      (statuts), our affairs are managed by the Board of Directors, the Chairman      of the board (*président*) and the Chief Executive Officer      (*directeur général*), with the Chairman and the Chief      Executive Officer being the same person or different persons, as may be      decided from time to time by the Board of Directors.

The Board of Directors sets forth      our business strategy and monitors its implementation. Within the limits      of our corporate purpose and subject to the powers expressly reserved to      our shareholders by law and by our *statuts*, it can make decisions      on any matter regarding our company. Under French law, the Board of Directors      presents the year-end accounts for the approval of the shareholders and      convenes shareholders’ meetings. The Board of Directors reviews and      monitors the economic, financial and technical strategies of the company.      In addition, the Board of Directors has the power to appoint and remove      the Chairman and/or the Chief Executive Officer at any time.

The Chairman organizes and presides      over the Board of Directors’ proceedings and ensures that the directors      are capable of fulfilling their tasks, and reports on these proceedings      to the meetings of shareholders, monitors the compliance with our corporate      governance principles and presides over general meetings of shareholders.      Our Chairman is Bertrand Collomb.

The Chief Executive Officer has      full executive authority to manage the affairs of our company and has broad      powers to act on behalf of our company and to represent Lafarge in dealings      with third parties, subject only to the powers expressly reserved to its      Board of Directors or its shareholders by law, by our *statuts*, by      decision of the Board of Directors or by decision of the shareholders.      Our Chief Executive Officer is Bernard Kasriel.

Our *statuts* also include      provisions providing for the possibility of the appointment of up to five      Chief Operating Officers (*directeurs généraux délégués*)      by the Board, pursuant to a proposal by the Chief Executive Officer. We      currently have two Chief Operating Officers, Michel Rose and Bruno Lafont,      that were appointed by the Board of Directors on February 27, 2002 and      May 20, 2003, respectively.
**Board            of Directors**
Presently, the Board of Directors      consists of fourteen members. Our statuts currently provide that there      must be at least three directors and no more than 18 directors elected      by the general meeting of shareholders, that the term of office of directors      elected in 2002 and in subsequent years shall be four years, that the term      of office of directors elected in 2001 is five years and that directors      elected prior to 2001 have a term of office of six years.

Only the shareholders can increase      the actual number of members serving on the Board. Each director must hold      such number of shares of the company in registered form as represent in      the aggregate a nominal value of at least 4,572 euros, which, at the current      par value of 4 euros, amounts to 1,143 shares per director. Under French      law, a director may be an individual or a legal entity, but the Chairman      and/or the Chief Executive Officer must be an individual or individuals.

Directors are elected by the shareholders      and serve until the expiry of their respective term, upon reaching the      age of 70, or until their resignation, death or removal, with or without      cause by the shareholders. Under certain conditions, the Board of Directors      may fill vacancies on the Board of Directors, pending the next shareholders’ meeting.

In consideration for their services      on the board, directors are entitled to receive directors’ fees. The      total annual amount of directors’ fees (*jetons de presence*)      is fixed by the shareholders’ meeting, but the Board of Directors      determines their allocation among the directors. In addition, remuneration      may be granted to directors who serve as members of committees formed from      among board members or who are entrusted with specific tasks or duties.      In such event, such remuneration is charged to operating costs, notified      to the auditors, submitted for prior authorization of the Board of Directors      and subsequently submitted for approval at the shareholders’ meeting.      A director may not vote for his or her own remuneration. The board may      also

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authorize the reimbursement of travel    and accommodation expenses as well as other expenses incurred by directors    in the corporate interest.

Meetings of the Board of Directors      are held at least four times a year and are normally convened by the Chairman.      A quorum consists of one-half of the members of the Board of Directors      and decisions are made by a vote of the majority of the members present      or represented by other members of the Board of Directors. Members of the      Board of Directors represented by another member at meetings do not count      for purposes of determining the existence of a quorum. A director may not      vote for an arrangement or contract in which he or she is materially interested.

Under French law, the directors      and the Chief Executive Officer are liable for violations of French legal      and regulatory requirements applicable to *sociétés anonymes*,      violations of our by-laws and negligent mismanagement. A director or the      Chief Executive Officer may be held liable for such actions both individually      and jointly with the other directors.

French law prohibits us from making,      directly or indirectly, any type of loan, including in the form of an open      account or guaranty, to our directors (including permanent representatives      of companies on the Board of Directors) and their close family. This provision      also applies to our Chief Executive Officer and Chief Operating Officers.

The table below sets forth key      information regarding our directors.
**Director** **Age**   **Principal Business          Activities Performed Outside Lafarge S.A.** **Initial Year          of Appointment** **Expiration of          Term of Office**       Bertrand Collomb (1) 62 Chairman of the Board of the        company –Chairman of Lafarge North America Inc. 1987 2005      –Director of Total, Atco, Vivendi Universal        and Unilever          –Chairman of the World Business Council for        Sustainable Development (“WBCSD”)      Bernard Kasriel 58 Vice-Chairman of the Board and        Chief Executive Officer of the company –Vice Chairman of Lafarge North America Inc. 1989 2006      –Director of L’Oreal and Sonoco Products        Company      Jacques Lefèvre 66 Vice-Chairman of the Board of        the company –Chairman of the Supervisory Board of Compagnie        de Fives Lille         –Director of Société Nationale        d’Investissement (Morocco), Cimentos de Portugal and Petrokazakhstan        Inc. (Canada). 1989 2006  Michael          Blakenham 67   –President of the British Trust for Ornithology 1997 2007            –Director of Sotheby’s Holdings Inc.           Michel Bon (1) 61   –President of the Institut Pasteur 1993 2005       –Chairman of the Supervisory Board of Editions        du Cerf           –Director of Sonepar and of the Banque Transatlantique          –Senior adviser of Dôme Close Brothers        and of Permira      Guilherme          Frering 46   –President of the Instituto Desiderata    (Brazil) 1997 2007  Juan Gallardo (1) 57   –Chairman of Grupo Embotelladoras Unidas S.A.        de C.V. (Mexico) 2003 2005       –Director of Nacional Drogas, Grupo Mexico        and Caterpillar Inc.           –Member of the International Advisory Council        of Textron Inc.           –Member of the Mexican Business Roundtable      
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**Director** **Age**   **Principal Business          Activities Performed Outside Lafarge S.A.** **Initial Year          of Appointment** **Expiration of          Term of Office**       Patrice le Hodey 60   –Vice Chairman of Libre Belgique Dernière        Heure (IPM), 1987 2005       –Chairman of Audiopresse          –Director of RTL-TVI and the Belga press agency      Alain Joly (1) 66   –Chairman of the Supervisory Board of Air        Liquide (France) 1993 2005      –Director of BNP Paribas      Jean Keller 70   –Member of the Standards Advisory Council        of the International Accounting Standards Board 1998 2005             Raphaël          de Lafarge 62      1982 2007  Robert W. Murdoch 63   –Director of Lafarge North America Inc., Lafarge        Canada, Sierra Systems Group Inc., Lallmand Inc., A.P. Plasman, Inc.        and Timber West Forest Corp. (Canada) 1993 2005  Michel Pébereau 63   –Chairman of BNP Paribas 1991 2007       –Director of Total and Saint-Gobain (France)           –Member of the Supervisory Board of Axa and        Galeries Lafayette (France)           –Président de l’Institut de l’Entreprise      Hélène Ploix (1) 60   –Chairman of Pechel Industries S.A.S. (France) 1999 2005       –Chairman of the Supervisory Board of CDC        Gestion (France)           –Director of Publicis Groupe, BNP Paribas,        Ferring S.A. (Switzerland) and the Boots Group Plc. (Great Britain)      (1)Director whose term of          office is expected to be renewed for an additional period of four years          by the shareholders’ meeting to be held on May 25, 2005.
In addition to the renewal of the term of office of certain    directors as described above, the election of four new directors will be    proposed to our next shareholders’ meeting to be held on May 25, 2005.    The new directors that are being proposed for election are Messrs Jean-Pierre    Boisivon, Philippe Charrier and Oscar Fanjul as well as Mr. Bruno Lafont,    currently one of our two Chief operating officers. These new directors would    be replacing respectively Messrs Isautier, Jean Keller, Patrice Le Hodey    and Robert Murdoch. Mr Isautier resigned as a director effective December    31, 2004 and the term of office of the other directors will be expiring following    the meeting.
***Corporate governance              and Board committees***
Our Board of Directors has spent a considerable amount of time    beginning in 2003 evaluating corporate governance issues and particularly    those raised by the report of the working group set up by the French employers’ associations,    the MEDEF and AFEP-AGREF, which was chaired by Daniel Bouton, President of    Société Générale, and entitled “Promoting    Better Corporate Governance In Listed Companies” and by the changes    to the New York Stock Exchange (the “NYSE”) listing rules which    adopted new corporate governance standards (which primarily apply to U.S.    domestic issuers). As the Bouton report and NYSE listing standards highlight,    the approach to corporate governance in France and the United States differs    in some respects.

With respect to director independence, our Board of Directors    has determined, following the approach recommended by the Bouton report but    without applying the recommended 12-year limitation on length of service    as a director, that a majority of its members qualify as “independent” directors.    These “independent” directors are currently Mrs. Hélène    Ploix and Messrs. Michael Blakenham, Michel Bon, Juan Gallardo, Alain Joly,    Jean Keller, Raphaël de Lafarge and Patrice Le Hodey. Following the    partial renewal of our Board of

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Directors by the Shareholders’ meeting to be held on May  25, 2005, we expect that nine of our directors (out of fifteen) will qualify  as “independent directors”.

Although the criteria for the determination of director independence    under the Bouton report differ from those found in the rules and regulations    of the U.S. Securities and Exchange Committee (the “SEC”) and the    NYSE, a majority of the members of our Board of Directors may also be deemed    independent under the SEC and NYSE criteria. As prescribed by our internal    charter, all of the members of our Audit Committee are “independent” directors    under the criteria set by the Board of Directors and all meet the standards    for director independence of the SEC and the NYSE. Two thirds of the members    of our Nomination and Remunerations Committee qualify as “independent” directors,    in accordance with our internal charter, which provides that a majority of    its members must qualify as “independent”, whereas NYSE rules establish    for U.S. domestic issuers that all the members of nominating and compensation    committees should be independent. We do not have a separate corporate governance    committee composed exclusively of independent directors, as provided for    under the NYSE rules for U.S. domestic issuers, this function being performed    collectively by the Board of Directors and its committees, as described below.

With respect to the corporate governance responsibilities of    the Board of Directors, our Board has adopted an internal charter and a code    of conduct, as further described below, which set guidelines both on an individual    basis for directors and for the work of the Board and its committees.

*Board of Directors*. The Board approved a charter governing    board and committee practices as well as a code of conduct for directors    that sets out certain standards that our directors must abide by in relation    to qualification, conflicts of interest, training, insider trading and access    to company information and to management. Our Board’s internal charter    establishes the responsibilities of the Board and its committees and requires    the Board to hold a meeting at least once a year to discuss its performance    with the goal of improving its functioning efficiency. Our *statuts* provide    that our Board of Directors meets at least four times a year, in France or    abroad. The Board held five regular meetings in 2004: on February 25, May    25 (2 meetings, held before and after the annual shareholders’ meeting),    September 8 and December 14. The directors’ attendance rate was 92%    in 2004.

The Board of Directors is supported by the following committees:

*Audit Committee*. The Audit Committee (*comité des      comptes et des questions financières*) performs a preliminary      review of the semi-annual and annual financial statements, reviews accounting      methods used to establish such financial statements and the scope of consolidated      companies and performs an assessment of material liabilities, off balance      sheet commitments and financial reporting. The Committee holds meetings      with, the statutory auditors and with general and financial management      including the head of the internal audit department. Our management provides      the Audit Committee with regular updates on our financial position, on      the main thrust of current financial policy and advises the committee on      the terms of major financial transactions prior to their completion. The      Committee also receives copies of all earnings press releases prior to      their issue. The Committee oversees the work of, and reviews the report      prepared by, the statutory auditors and can ask to hear directly from members      of our internal audit department without the presence of our management,      provided our Chairman so agrees. More generally, the Audit Committee may      be consulted by our management in relation to various other issues. Certain      procedures have been established by the Company under the supervision of      the Audit Committee for the receipt, retention and treatment of complaints      which may be received regarding accounting, internal accounting controls      or auditing matters, and for the confidential, anonymous submission by      employees of concerns regarding accounting matters. The Audit Committee      has the authority to engage independent advisors, as it may deem necessary.

The Audit Committee usually meets at least twice a year, in    February to review our annual financial statements and in September to review    our semi-annual financial statements. The Committee met three times in 2004:    on February 25, on September 8 to perform respectively a preliminary review    of our 2003 annual and 2004 semi-annual financial statements, and on December    13 to review internal controls procedures put in place by our Group and receive    a report of our internal audit director. The Audit Committee also proposed    to the Board the terms of engagement of auditors and their budget for 2004    in accordance with U.S. regulations. See the section entitled “Principal    Accountant Fees and Services” under Item 16. Since the renewal of the    Audit Committee by the Board of Directors on February 23, 2004, the member’s    attendance rate was 100% in

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2004. The following directors are members of the Audit Committee:  Michel Bon, Juan Gallardo, Patrice le Hodey, Jean Keller and Hélène  Ploix, who is the Chairman of the Committee.

*Nominations and Remunerations Committee*. The Nominations    and Remunerations Committee (*comité des nominations et des rémunérations*)    assists the Chairman and the Board of Directors with decisions concerning    the composition of the Board of Directors and its remuneration, management    remuneration policy, the allocation of stock subscription and purchase options    and the organizational structure of management. The Committee also issues    recommendations to the Board of Directors concerning the remuneration of    senior management and the nomination of new directors and executive officers    when appropriate. The Committee has responsibility for the periodic assessment    of the Board of Directors.

The Committee normally meets twice a year in February and in    December to review the remuneration of senior management and decide on the    allocation of stock options, respectively. It may also be convened at other    dates to discuss specific matters depending on the evolution of the composition    of the Board of Directors or management. In 2004, the Nominations and Remunerations    Committee met three times: on February 25 and April 2 to review the remuneration    of our senior management and the employment contracts of our Chief Operating    Officers, and on December 14 to review the allocation of the directors’ fees    and stock options. The member’s attendance rate was 100% in 2004. In    2005, the Committee met on February 23 to discuss the the performance-based    remuneration of senior management as well as their fixed remuneration for    2005. The Committee also considered the proposals to renew the appointment    of certain directors and to nominate some new directors that will be submitted    to the next shareholders’ meeting. The following directors are currently    members of the Nominations and Remunerations Committee: Michel Pébereau,    Michael Blakenham and Alain Joly, who is the Chairman of the Committee.

*Strategy and Investment Committee*. The Strategy and    Investment Committee (*comité stratégie et développement*)    examines in detail important strategic issues and major investment and divestment    projects. The Strategy and Investment Committee meets usually twice a year    during in May and September. It met three times in 2004: on May 25, September    9 and December 14, and reviewed our performance as compared to our competitors.    The following directors are currently members of the Strategy and Investment    Committee: Michel Bon, Guilherme Frering, Alain Joly, Raphaël de Lafarge,    Jacques Lefèvre, Robert Murdoch and Michel Pébereau, who is    the Chairman of the Committee.
***Directors’ fees*** *Policy regarding directors’ fees*
The combined ordinary and extraordinary general meeting of    May 28, 2001 established the maximum amount of directors fees to be paid    in 2001 and in subsequent years at 609,796 euros.

Each of our directors is entitled to receive a fixed fee of    15,245 euros per year (increased by 25% for the chairmen of our committees).    A director who is appointed or whose office terminates in the course of the    year is entitled to 50% of the fixed fee.

In 2004, an additional fee of 1,857 euros was payable to each    director who attended a meeting of our Board of Directors or one of its committees.

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*Fees paid*
The following table presents the fees paid to our directors in 2005 with respect to the 2004 fiscal year:
**Director** **Fees for 2004**(amounts in euros)   Bertrand Collomb  24,531 Bernard Kasriel  24,531 Jacques Lefèvre  31,960 Michael Blakenham  28,246 Michel Bon  35,675 Guilherme Frering  30,103 Juan Gallardo  28,245 Patrice le Hodey  30,103 Bernard Isautier (1)  17,102 Alain Joly  39,487 Jean Keller  30,103 Raphaël de Lafarge  31,960 Robert W. Murdoch  31,960 Michel Pébereau  39,487 Hélène Ploix  33,915 **TOTAL**  **457,408**  (1)Mr Bernard Isautier resigned as a director effective as at December 31, 2004.
In comparison, in 2004 we paid 457,393 euros in directors’ fees with respect to the 2003 fiscal year.
***Directors’ Share Ownership***
The following table presents share ownership information for each current member of our Board of Directors at December 31, 2004:
**Director** **Number of shares held at****December 31, 2004***   Bertrand Collomb  28,845 Bernard Kasriel  17,488 Jacques Lefèvre  13,630 Michael Blakenham  1,806 Michel Bon  3,567 Guilherme Frering  2,298 Juan Gallardo  1,500 Patrice le Hodey  3,255 Alain Joly  2,628 Jean Keller  1,432 Raphaël de Lafarge  45,951 Robert W. Murdoch  1,651 Michel Pébereau  2,018 Hélène Ploix  1,896       *Collectively our directors held approximately 0.07% of our share capital as at December 31, 2004 and 0,11% of our voting rights. **Executive officers**
French law governing a *société anonyme* permit the Board of Directors to appoint up to five Chief Operating Officers proposed by the Chief Executive Officer. The Board of Directors, upon the recommendation by the Chief Executive Officer, determines the extent andthe duration of the powers of the Chief Operating Officers. Currently, Bernard Kasriel is our Chief Executive Officer and Michel Rose and Bruno Lafont are our Chief Operating Officers. Under French law, a Chief Operating Officer, like the Chief Executive Officer, has broadpowers to represent and bind the company in dealing with third parties. A Chief Operating Officer may be held responsible individually for actions he takes that are contrary to the company’s interests.

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The table below shows, the names and ages of our current executive officers and their responsibilities at Lafarge.
**Name**  **Age**  **Position with Lafarge**    Bertrand Collomb  62  Chairman         *Executive Committee*       Bernard Kasriel  58  Chief Executive Officer Michel Rose  62  Chief Operating Officer Bruno Lafont  48  Chief Operating Officer Jean-Charles Blatz  61  Executive Vice President, Aggregates & Concrete* Jean-Jacques Gauthier  45  Executive Vice President and Chief Financial Officer Ulrich Glaunach  48  Executive Vice President, Roofing Christian Herrault  54  Executive Vice President, Human Resources & Organization Isidoro Miranda  46  Executive Vice President, Gypsum         *Other Executive Officers*       Jean Carlos Angulo  55  Executive Vice President, Regional President, Western Europe Yves de Clerck  62  Executive Vice President, Regional President, Central Europe Philippe Rollier  62  Executive Vice President, Regional President, North America Jean-Marie Schmitz  61  Executive Vice President, Morocco  *since April 12, 2004
The following is a brief biography of each of our executive officers:

*Bertrand Collomb*, Chairman of the Board of Directors of Lafarge. Mr Collomb was appointed to the Board of Directors in 1987 and served as Chairman and Chief Executive Officer from 1989 to 2003. Prior to his appointment as Chairman and Chief Executive Officer,he held various executive positions within the Group, namely in North America, from 1975 to 1989 and in the French Ministry of Industry and governmental cabinets from 1966 to 1975. He is also Chairman of Lafarge North America Inc. and a company officer of severalgroup subsidiaries. He is a Director of Total, Atco, Vivendi Universal and Unilever. He is a member of the French Institute (Academy of moral and political sciences), the Chairman of the French Association of Private Companies (“AFEP”) and the Chairman of the WorldBusiness Council for Sustainable Development (“WBCSD”).
*Executive Committee*
*Bernard Kasriel*, Chief Executive Officer of Lafarge since 2003. He was appointed as director of Lafarge in 1989. Prior to his current position, Mr. Kasriel was Vice Chairman since 1995 and Chief Operating Officer between 1989 and 2003. He served as SeniorExecutive Vice President from 1982 to 1989, President and Chief Operating Officer of National Gypsum in Dallas, Texas, from 1987 to 1989 and held various executive positions within the Group since he joined Lafarge in 1977. From 1975 to 1977, he served as SeniorExecutive Vice President of the Société Phocéenne de Métallurgie, and from 1972 to 1974 he served as Chief Executive Officer of Braud. Mr. Kasriel began his career in 1970 at the Institut du Développement Industriel. He is Vice Chairman of Lafarge North America Inc. andholds various executive positions in the subsidiaries of Lafarge. He is a Director of L’Oréal and Sonocco Products Company.

*Michel Rose*, Chief Operating Officer since February 2003. He was named Senior Executive Vice President in 1989, served as Senior Executive Vice President in charge of emerging countries from 1996 to 2002 and was President and Chief Executive Officer of LafargeNorth America Inc. from 1992 to 1996. He has held various positions within the Group, including Chairman and Chief Executive Officer of Orsan, which has since been divested, Executive Vice President in charge of Human Resources and Internal Communications and ChiefExecutive Officer of our activities in Brazil. He first joined Lafarge in 1970, as a plant engineer.

*Bruno Lafont*, Chief Operating Officer since May 2003. He was named Executive Vice President in 1995 and served as Executive Vice President, Gypsum, from October 1998 to May 2003 and Executive Vice President and CFO, from 1995 to 1998. Mr. Lafontpreviously served in a variety of financial and managerial positions with Lafarge, including in Turkey and the Eastern Mediterranean and with our former German

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sanitary ware subsidiary, Allia. Mr. Lafont joined Lafarge in January 1983 as an internal auditor within the finance department.

*Jean-Charles Blatz*, Executive Vice President, Aggregates & Concrete, since April 2004. Prior to his current position, Mr. Blatz was President for the Mediterranean basin and Trading activities in the Cement Division and performance director of the Aggregates andConcrete Division from 1993 to 1995. He previously served in a variety of positions within Lafarge and namely at Cementia, in the Group Finance Department and in our former sanitary ware subsidiary Allia. Mr Blatz first joined Lafarge in 1970 as organization and methodsmanager with Ciments Lafarge.

*Jean-Jacques Gauthier*, Executive Vice President and Chief Financial Officer, since March 2001. Prior to joining Lafarge in March 2001, Mr. Gauthier had been serving as Executive Vice President, Finance since 2000 for the Astrium group, which resulted from themerger of Matra Marconi Space with the space activities of Daimler Benz. From 1996 to 2000, he served as Executive Vice President, Finance of Matra Marconi Space. Prior to this appointment, he held various financial positions both in France and the United States with theMatra group from 1986.

*Ulrich Glaunach*, Executive Vice President, Roofing, and member of the executive committee since May 2000. Prior to holding his current position, Mr. Glaunach was Chief Operating Officer of the Roofing Division in charge of concrete tiles from July 1998 to May2000, after holding the position of President and Chief Executive Officer of Lafarge Perlmooser, our Austrian subsidiary, from June 1995 to July 1998.

*Christian Herrault*, Executive Vice President, Human Resources and Organization, since October 1998. Prior to holding his current position, Mr. Herrault was General Manager of the Aluminates and Admixtures business area from 1995. From 1985 until 1995, heassumed successive managerial responsibilities in our bioactivities sector. Prior to joining Lafarge in 1985, he occupied several positions in French Ministries.

*Isidoro Miranda*, Executive Vice President, Gypsum since May 2003 and member of the executive committee since March 2001. Prior to holding his current position, Mr. Miranda served as Executive Vice President, Cement between March 2001 and May 2003. Hepreviously served as Chief Executive Officer of Lafarge Asland, our cement subsidiary in Spain. He joined Lafarge in 1995 as group Director of Group Strategic Studies. Prior to this, he worked in London and in Paris in a strategic consulting firm.
*Other Executive Officers*
*Jean Carlos Angulo*, Executive Vice President and Regional President of Western Europe and Morocco since 2000. From 1997 to 2000, he was Chief Executive Officer of Lafarge Ciments, our French cement subsidiary. Mr. Angulo joined Lafarge in 1975, andsubsequently held various positions including Managing Director of our Brazilian operations between 1990 and 1996. He is a member of the Board of Cimentos de Portugal.

*Yves de Clerck*, Executive Vice President and Regional President of Central Europe since March 2001. From February 1997 to March 2001, Mr. De Clerck served as Executive Vice President in charge of the Cement Division. Prior to this, he was Chief ExecutiveOfficer of Lafarge Ciments, our French cement subsidiary, from September 1988 to February 1997. From September 1983 until September 1988, he was responsible for social development at our headquarters.

*Philippe Rollier*, Executive Vice President and Regional President of North America since May 2001. He is President and Chief Executive Officer of Lafarge North America Inc. Prior to holding his current position, Mr. Rollier served as Executive Vice President incharge of Central Europe and CIS between January 1999 and May 2001, before which he served as Regional President of Central Europe and CIS from January 1995 to December 1998. From 1989 to 1994, he was President and Chief Executive Officer of Orsan, which hassince been divested.

*Jean-Marie Schmitz*, Executive Vice President and Chief-Executive Officer of Lafarge Maroc since December 1998. Prior to holding his current position, Mr. Schmitz was Executive Vice President in charge of Human Resources and Communication and member of theexecutive committee from 1988 to September 1998, before which he served as O&HR director from 1986 to 1988. Prior to joining the group in 1978, he

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served as head of the cabinet of François Ceyrac, President of the CNPF (the French national employers’ union).
 **Compensation of Executive Officers** ***Global remuneration paid to executive officers in 2004***
The aggregate amount of compensation paid to our Chairman and other executive officers for the fiscal year 2004 (14 persons, one of whom left and one of whom was appointed in 2004) for services in all capacities was approximately 9.004 million euros. This amount:
 •includes the fixed share of executive officers’ salaries in 2004 as well as the bonuses paid in 2004 in respect of 2003;    •includes a long-term bonus relating to the 2003 financial results benefiting our executive officers excluding our senior management;    •concerns all those who were executive officers in 2004, for the time during that year during which they were executive officers;    •does not include the directors’ fees paid by Lafarge S.A. to Messrs. Bertrand Collomb and Bernard Kasriel (see the subsectionabove entitled “Directors’ Fees”).
The aggregate amount of compensation paid to our Chairman and other executive officers for the fiscal year 2003 (14 persons, one of whom left in 2003) was approximately 9.103 million euros and for the fiscal year 2002 (14 persons) was approximately 7.404 millioneuros.
***Remuneration of senior management***
Our Nominations and Remunerations Committee is responsible for recommending to our Board of Directors a remuneration policy for our Chairman, Chief Executive Officer and our Chief Operating Officers (our “senior management”). The Nominations andRemunerations Committee, in establishing the remuneration policy, seeks guidance from outside consultants on the market practices of comparable companies.

The remuneration of senior management is composed of a fixed portion and a performance-based portion, which may be up to 80% of the fixed remuneration for our Chairman, 160% of the fixed remuneration of our Chief Executive Officer and 120% of the fixedremuneration for our Chief Operating Officers. All remuneration received by the officers with respect to the various offices they hold within our consolidated subsidiaries is imputed with respect to the fixed portion.

Two-thirds of the performance related pay of the Chairman and three-fourths of the performance pay of the Chief Executive Officer and Chief Operating Officers is based on of the financial results of the Group in comparison to the objectives established at the beginningof the year and for one third for the Chairman and one fourth for the Chief Executive Officer and Chief Operating Officers on the basis of their individual performance over the course of the year.

For 2004, the financial criteria used to determine the performance related pay were the increase in economic value added, which reflects the return on capital employed, the increase of the net income per share, the relative return on investment of Lafarge assets ascompared to its competitors and the reduction of our group’s debt. The portion based on individual performance is determined in part by reference to the personal targets set at the beginning of the year with respect to the major tasks to be undertaken.

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In 2004, the outcome in relation to the increase in economic value added was average. The performance of senior management was good with respect to the increase of the net income per share, very good in relation to the reduction of Group debt and good as regardsthe relative return on investment of Lafarge assets as compared to its competitors. Taking into consideration the appointments and change of remunerations decided by the Board on May 20, 2003, the compensation we paid to our Chairman, Chief Executive Officer and to ourChief Operating Officers for the fiscal year 2004 was the following:
  **B. Collomb** **B. Kasriel** **M. Rose** **B. Lafont(1)**         **(in thousands of €)** Fixed remuneration paid in 2004 (2)  875  750  460  440 2004 Variable remuneration paid in 2005  553  997  413  395 2004 Lafarge S.A. directors’ fees paid in 2005  24.5  24.5  N/A(3)  N/A(3) **Total 2004**  **1,452.5**  **1,771.5**  **873**  **835** Fixed remuneration paid in 2003 (2)  875  662  437  370 2003 Variable remuneration paid in 2004  733  700  361  262 2003 Lafarge S.A. directors’ fees paid in 2004  24.6  24.6  N/A(3)  N/A(3) **Total 2003**  **1,632.6**  **1,386.6**  **798**  **632** Fixed remuneration paid in 2002 (1)  875  500  400  N/A 2002 Variable remuneration paid in 2003  889  325  260  N/A 2002 Lafarge S.A. directors’ fees paid in 2003  24.6  24.6  N/A(3)  N/A(3) **Total 2002**  **1,788.6**  **849.6**  **660**  **N/A**  (1)Prior to 2003, Bruno Lafont was not a member of senior management and therefore we did not separately report his compensation.(2)Including directors’ fees for directorships in our subsidiaries (but excluding directors’ fees for Lafarge S.A.).(3)Not a director. ***Severance arrangements benefiting our Chief Operating Officers***
Our Board of Directors, in approving the employment contracts of Messrs. Michel Rose and Bruno Lafont on May 25, 2004 decided to grant to each of them a severance pay in case of termination of their employment other than for gross negligence or willfulmisconduct. The cancellation of their current position or the reduction of their level of responsibity would amount to termination under these provisions. The amount of this severance pay would be equal to (i) their statutory severance entitlement plus the equivalent of sixmonths pay (based on their most recent fixed and variable remuneration) or (ii) their statutory severance entitlement plus the equivalent of 18 months pay (based on their most recent fixed and variable remuneration) in case of termination of their employment within 24 monthsof a change of control of Lafarge. Their employment contract defines a change of control as the acquisition of a significant portion of the share capital of Lafarge which is followed by the replacement of more than half of the members of the Board of Directors or by theappointment of a new Chief Executive Officer or a new Chairman.
***Pensions and other retirement benefits***
Each member of senior management and of the Executive Committee are beneficiaries of a supplemental retirement plan the terms of which vary depending on his position and age as at December 10, 2003, which is the date of the meeting of the Board of Directors thatset the terms of the plan.

Members of senior management over 55 years of age at December 10, 2003 who have the benefit of a supplemental retirement plan that currently applies to officers of the cement Division (that is Messrs. Bertrand Collomb, Bernard Kasriel and Michel Rose) benefitfrom a guaranteed retirement pension amount equal to 60% of their total remuneration (fixed and variable, with a variable remuneration capped at 100% of the fixed remuneration) with an overall floor and cap set respectively at 1 and 1.2 times their average fixedremunerations in 2001, 2002 and 2003.

Members of senior management below 55 years of age at December 10, 2003 (currently Mr. Bruno Lafont) and members of the Executive Committee, have the benefit of a supplemental retirement plan which, according to its terms, aims at providing a retirementpension amount equal to 40% of their last fixed remuneration and of the average of their variable remuneration over the last three years.

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In addition, the aggregate amount set aside or accrued to provide pension, retirement or similar benefits for persons who were executive officers at December 31, 2004 (13 persons in all) and former executive officers (9 persons in all), was 56.04 million euros atDecember 31, 2004.
**Executive officers stock options and share ownership** ***Stock options granted to executive officers***
In the financial year ended December 31, 2004, 12 of our executive officers were granted 261,500 subscription stock options at an exercise price of 70.79 euros per share. The tables showing the number of subscription or purchase stock options held by our executiveofficers (13 persons) at December 31, 2004 are presented under a separate line item in the tables under the subsection below entitled “Subscription and purchase stock options at December 31, 2004”.

In order to align more closely the interests of the members of our Executive Committee with those of our shareholders, our Board of Directors decided on December 10, 2003, upon the proposal of the Nominations and Remunerations Committee, to require all membersof the Executive Committee to hold the equivalent of their fixed annual remuneration for value in Lafarge shares. In order to achieve that objective, each member of the Executive Committee must invest one third of the net theoretical after tax gain realized upon the exerciseof his stock purchase or subscription options in Lafarge shares each year until he reaches that objective.

None of our executive officers owns 1% or more of our outstanding shares.

At December 31, 2004, four of our executive officers held a total of 282,500 subscription options in our subsidiary Lafarge North America Inc. In 2004, 29,500 options in Lafarge North America Inc. were exercised, at an average price of $28.55 per share.

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***Stock options granted to our senior management***
The following table sets forth the options granted to our senior management, Messrs. Collomb, Kasriel, Rose and Lafont, by all of our consolidated subsidiaries and all options exercised by them in 2004.
  **Total number of shares****covered/exercised** **Exercise****Price** **Option****Period Lapses** **Plan****number** **Options            Granted:**     **B.            Collomb:**             Lafarge  28,000  €70.79  12/14/2014  M14    12,000* €70.79  12/14/2014  M14 Lafarge North          America Inc.  30,000  $41.86  02/04/2014    **B.            Kasriel:**             Lafarge  49,000  €70.79  12/14/2014  M14    21,000* €70.79  12/14/2014  M14 Lafarge North          America Inc.  25,000  $41.86  02/04/2014    **M.            Rose:**             Lafarge  21,000  €70.79  12/14/2014  M14    9,000* €70.79  12/14/2014  M14 Lafarge North          America Inc.  1,000  $41.86  02/04/2014    **B.            Lafont:**             Lafarge  21,000  €70.79  12/14/2014  M14    9,000* €70.79  12/14/2014  M14 Lafarge North          America Inc.  1,000  $41.86  02/04/2014                  **Options            Exercised:**             **B.            Collomb:**             Lafarge  14,041  €48.42  —  N9 Lafarge North          America Inc.  15,000  $18.00  —  — **B.            Kasriel:**             Lafarge North          America Inc.  10,000  $21.37  —  — **M.            Rose**             Lafarge North          America Inc.  1,000  $23.00  —  —    1,000  $29.97  —  —    1,000  $29.81  —  — **B.            Lafont**             Lafarge  6,964  €43.10  —  M2    118  €43.10  —  M3    2,000  €50.19  —  M6 Lafarge North          America Inc.  697  $32.20  —  —    553  $32.20  —  —    250  $41.86  —  —  *The exercise of these options is subject to the performance of our share price. See the subsection below entitled “Stock Options” under “Employees”.
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Options granted by us and our consolidated subsidiaries to each of Messrs. Collomb, Kasriel, Rose and Lafont outstanding as of December 31, 2004.
  **Options exercisable as of December** **31, 2004** **Options not exercisable as of December** **31, 2004** **Total number of****options held**      **B. Collomb:**          Lafarge  171,028  247,533* 418,561 Lafarge North America Inc.  132,500  37,500  170,000 **B. Kasriel:**          Lafarge  75,854  253,767* 329,621 Lafarge North America Inc.  75,000  30,000  105,000 **M. Rose:**          Lafarge  39,705  102,619* 142,324 Lafarge North America Inc.  3,000  0  3,000 **B. Lafont:**          Lafarge  32,189  76,363* 108,552 Lafarge North America Inc.  250  4,250  4,500             *Includes options the exercise of which is subject to the performance of our shares. ***Ten highest options grants to our employees other than our senior management and our directors***
The following table shows the total of the ten highest option grants made by us and our consolidated subsidiaries to our employees, other than Messrs. Collomb, Kasriel, Rose and Lafont, and the total of the ten highest option exercises.
  **Total number of shares****covered/exercised** **Weighted Average Price**     **Options Granted:**       Lafarge  109,500  €70.79 Lafarge North America Inc.  265,000  $41.86 **Options Exercised:**       Lafarge  38,488  €48.45 Lafarge North America Inc.  532,375  $30.17 
 
**Employees**
The following tables set forth our number of employees at December 31, 2004, 2003 and 2002 by area of primary activity and our number of employees at December 31, 2004, 2003 and 2002 by geographical region:
*Employees by Division*   **Year ended****December** **31, 2004** **% Var.****2004/2003** **Year ended****December** **31, 2003** **% Var.****2003/2002** **Year ended****December** **31, 2002**   **Number** **%** **in %** **Number** **%** **in %** **Number** **%**           Cement  38,202  49.6  6.20  35,984  47.8  (4.1) 37,521  48.4 Aggregates & Concrete  20,096  26.1  (2.2) 20,547  27.3  (2.5) 21,069  27.2 Roofing  11,683  15.2  (1.8) 11,901  15.8  (1.7) 12,106  15.6 Gypsum  6,012  7.8  8.7  5,530  7.3  4.0  5,319  6.9 Specialty Products*  66  0.1  (82.9) 387  0.5  (7.2) 417  0.5 Others**  1,016  1.2  2.8  988  1.3  (11.3) 1,114  1.4 **Total**  **77,075**  **100.0**  **2.3**  **75,338**  **100.0**  **(2.8)**  **77,547**  **100.0**   *Figures for the 2002 and          2003 fiscal years reflect the unsold units of our Specialty Products          Division.**Including employees at our corporate office and in research and development.
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*Employees by Geographical Zone*   **Year ended****December** **31, 2004** **% Var.****2004/2003** **Year ended****December** **31, 2003** **% Var.****2003/2002** **Year ended****December** **31, 2002**   **Number** **%** **in %** **Number** **%** **in %** **Number** **%**           Western Europe  24,710  32.1  (0.4) 24,814  32.9  (3.4) 25,676  33.1 North America  15,828  20.5  3.2  15,343  20.7  (1.5) 15,573  20.1 Mediterranean Basin  3,391  4.4  (12.4) 3,873  5.1  (9.4) 4,277  5.5 Central and Eastern Europe  10,304  13.4  19.6  8,616  11.4  (7.3) 9,301  12.0 Sub-Saharan Africa  7,502  9.7  (0.4) 7,536  10.0  (1.3) 7,632  9.8 Latin America  4,336  5.6  (1.4) 4,398  5.8  (5.0) 4,626  6.0 Asia/Pacific  11,005  14.3  2.3  10,758  14.3  2.8  10,463  13.5 **Total**  **77,075**  **100.0**  **2.3**  **75,338**  **100.0**  **(2.8****)** **77,547**  **100.0**  ***Labor Policy***
A significant percentage of our non-managerial employees in Europe and the United States are members of labor unions. As required by French and European law, our management holds annual meetings with a delegation of French union representatives and a delegationof the employees of our other European companies in order to respond to questions regarding our economic and employment situation. While we have experienced some strikes in the past five years, we have not experienced any strikes, walkouts or work stoppages which havehad a material negative impact on our financial condition, results of operations or cash flows. We believe that we enjoy good relations with our employees.

In accordance with the regulation (*ordonnance*) No. 86-1134 of October 21, 1986 concerning employee profit-sharing schemes, almost every one of our French subsidiaries has, over the past few years, renewed profit sharing agreements with their employees. Sucharrangements allocate a portion of the profits to employees based partly on financial results and partly on specific performance criteria, such as cost reduction and quality of products or services provided to the customer. The employees’ share of the profits may be invested inthe different mutual funds of the savings scheme of Lafarge. The employees’ share of the profits that is invested in the savings scheme of our company, as well as personal investments of French and foreign employees, benefit from an additional contribution by us.
**Employee Share Ownership**
Employee shareholding, through wide ranging reserved share offerings and stock option plans, is an important part of our strategy for motivating our employees. At December 31, 2004, 16% of our individual shareholders were employees of Lafarge. As at December 31,2004, our employees owned 1.7% of our shares and 2.9% of our voting rights. Our long-term goal is to raise employee ownership to 3% of our outstanding shares.
***Employee Reserved Share Offerings***
On April 15, 2002, we launched *Lafarge en action 2002*, an employee stock ownership program reserved for our employees outside the United States and Canada and certain other countries. The *Lafarge en action* *2002* program was adopted pursuant to theauthorization given by our shareholders at the extraordinary general meeting held on May 28, 2001.

Under *Lafarge en action 2002*, our eligible employees were able to subscribe for 1 to 110 shares, with every share from the eleventh purchased, giving the right to receive one option. The maximum number of shares offered directly under the program was 3,425,000shares at a price of 81.84 euros per share (a 20% discount from the market price over the reference period of the twenty trading days prior to March 29, 2002). In accordance with French laws governing a *Plan d’Epargne Groupe* (group Savings Scheme), except in certainspecific circumstances, employees who subscribed for shares in the program will be required to hold them for at least five years. The price at which the options can be exercised was set at 108.15 per share on May 28, 2002 by reference to the price over the reference period ofthe twenty trading days preceding this date without any discount. The options will be exercisable from the fifth anniversary of the date they are granted and will expire on the tenth anniversary.

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We subsidized each of our eligible employees purchase of up to ten shares under the program. The amount of the subsidy depended on the gross national product of the country in which the employee in question was domiciled for tax purposes. The subsidy was 30% incountries in which the gross national product per capita was more than $10,000 and 60% in countries in which the gross national product per capita was less than $10,000. We also agreed to provide, where legally permitted, to each eligible employee who requested it, aninterest free loan to purchase shares in the program, repayable over 24 months. The associated capital increase was completed in June 2002.

On February 23, 2005, our Board of Directors approved a share capital increase reserved for our employees outside the United States and Canada to be carried out during the course of 2005. According to the terms set by the Board, eligible employees would be able tosubscribe up to 110 Lafarge shares with a 20% discount from the market price and benefit from a subsidy for the first ten shares purchased. The level of the subsidy will depend on the gross national product per capita of the relevant country.
***Stock Options***
The allotment of stock options is recommended to the Board of Directors each year by the Nominations and Remunerations Committee. Stock options are allotted to the executive officers, as well as to middle management and other employees who have contributedsignificantly to our performance.

Over the last two fiscal years, the average number of stock options allocated annually represented approximately 980,738 shares, or, on average, 0.57% of our outstanding shares as at December 31, 2004. A total of 1,732 employees received options in 2003 and 479 in2004.

A total of 7,256,947 allotted stock options had still to be exercised at the end of December 2004, representing approximately 4.25% of our outstanding shares. Executive Officers (13 persons in all) held 20.67% of these options.

The Board of Directors decided on December 10, 2003 to subject the exercise of part of the stock options (up to 30%) granted since 2003 to our Chairman and to the members of the Executive committee to the performance of our share price.

According to the terms of these stock options, part of the options granted to our Chairman and to the members of the Executive Committee can only be exercised if the trading price of our share has reached on average during a continuous period of 60 trading days,during the first four years after the date of grant, an amount equal to the issue price increased by 20% or, failing which, during the following two years an amount equal to the issue price increased by 30%.

If our share fails to perform as stated above during the first four years after the date of grant or the following two years, these stock options would no longer be exercisable and would be cancelled accordingly.
***Subscription and purchase stock options at December 31, 2004***
The table below shows the number and price of subscription or purchase stock options granted to our employees, including our executive officers (13 persons) at December 31, 2004. The number of stock options featured in this table have been readjusted since theirallotment each time that we have entered into financial transactions which have had an effect on the value of the shares, such as certain increases in share capital or the issue of bonus shares, so as to maintain a constant total option value for each beneficiary. The number ofoptions granted to our employees and executive officers outstanding as at December 31, 2004 is, therefore, not equal to the difference between the number outstanding on December 31, 2003 and the number exercised in 2004.

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**Stock options granted from January 1, 1994 to December 18, 1996**
  **Plan noN9** **Plan noM1** **Plan noM2** **Plan noM3(1)** **Plan noM4**        Allotment authorized by the shareholders’ meeting of  06/15/1992  05/22/1995  05/22/1995  05/22/1995  05/21/1996 Date of allotment by the Board of Directors  09/27/1994  05/22/1995  12/13/1995  12/13/1995  12/18/1996 Type of options  subscription  subscription  subscription  Subscription  subscription Stock options initially granted (total)  269,550  27,200  593,840  331,060  71,400 of which to executive officers(2)  37,600  2,000  83,500  800  4,500 Initial beneficiaries (total)  772  52  1,039  8,368  127 of which executive officers(2)  10  2  11  8  3 Available for exercise from  09/27/1994  05/22/1995  12/13/1999  12/13/1999  12/18/2000 Options exercise period lapses  09/27/2004  05/22/2005  12/13/2005  12/13/2005  12/18/2006 Options outstanding at December 31, 2003(3)  127,880  17,170  368,301  176,751  57,543 Options purchased or subscribed between January 1st, 2004 and December 31, 2004  120,571  1,355  40,246  16,261  4,216 Options cancelled (4)  7,309  1,790  37  468  — Options outstanding at December 31, 2004  0  14,025  328,018  160,022  53,327 Exercise price in euro  48.62  44.20  43.10  43.10  42.57 
**Stock options granted from December 19, 1996 to December 13, 2000**
  **Plan noM5** **Plan noM6** **Plan noM7** **Plan noM8** **Plan noM9** **Plan noA1**         Allotment authorized by the shareholders’ meeting of  05/21/1997  05/21/1997  05/21/1997  05/21/1997  05/27/1999  05/27/1999 Date of allotment by the Board of Directors  12/17/1997  12/17/1997  05/26/1998  12/10/1998  12/15/1999  12/13/2000 Type of options  subscription  purchase  subscription  purchase  subscription  purchase Stock options initially granted (total)  346,650  402,550  122,775  98,450  918,200  461,900 of which to executive officers(2)  10,000  144,500  0  9,000  146,000  93,000 Initial beneficiaries (total)  999  127  108  150  1,552  438 of which executive officers(2)  1  9  0  4  11  11 Available for exercise from  12/17/2002  12/17/2002  05/26/2003  12/10/2003  12/15/2004  12/13/2005 Options exercise period lapses  12/17/2007  12/17/2007  05/26/2008  12/10/2008  12/15/2009  12/13/2010 Options outstanding at December 31, 2003(3)  368,869  436,138  134,484  110,119  1,046,514  499,285 Options purchased or subscribed between January 1st, 2004 and December 31, 2004  35,139  21,870  0  0  0  0 Options cancelled (4)  2,336  —  19,198  576  13,113  5,625 Options outstanding at December 31, 2004  331,394  414,268  115,286  109,543  1,033,401  493,660 Exercise price in euro  50.19  50.19  74.72  74.18  82.70  79.74 
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 **Stock options granted fromDecember 14, 2000 to December 14, 2004**
  **Plan noA2** **Plan noM10** **Plan noM11(5)** **Plan noM12** **Plan noM13** **Plan noM14**         Allotment authorized by the shareholders’ meeting of  05/27/1999  05/28/2001  05/28/2001  05/28/2001  05/20/2003  05/20/2003 Date of allotment by the Board of Directors  05/28/2001  12/13/2001  05/28/2002  12/11/2002  12/10/2003  12/14/2004 Type of options  purchase  subscription  subscription  subscription  subscription  Subscription Stock options initially granted (total)  12,000  1,188,825  437,373  472,390  1,273,925  687,550 of which to executive officers(2)  12,000  277,000  1,100  98,000  350,000  261,500 Initial beneficiaries (total)  1  1,703  14,364  421  1,732  479 of which executive officers(2)  1  13  11  11  13  12 Available for exercise from  05/28/2006  12/13/2005  05/28/2006  12/11/2006  12/10/2007  12/14/2008 Options exercise period lapses  05/28/2011  12/13/2011  05/28/2012  12/11/2012  12/10/2013  12/14/2014 Options outstanding at December 31, 2003(3)  12,754  1,264,338  472,985  502,263  1,273,925  — Options purchased or subscribed between January 1st, 2004 and December 31, 2004  0  0  0  0  0  0 Options cancelled (4)     4,438  5,374  —  —  — Options outstanding at December 31, 2004  12,754  1,259,900  467,611  502,263  1,273,925  687,550 Exercise price in euro  102.12  96.16  101.79  74.48  65.95  70.79                      (1)Lafarge en action 1995 employee stock ownership plan.(2)Including senior management (see the subsection entitled “Senior Management and Executive Officers”).(3)After readjustments due to financial transactions.(4)In accordance with the terms of the plan(5)Lafarge en action 2002 employee stock ownership plan.
Our Board of Directors has not granted any further options since December 14, 2004.
**ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS** **Major Shareholders**
The following table sets out to the best of our knowledge the principal holders of Lafarge’s share capital at December 31, 2004 as well as the percentage ownership over the past three years:
  **At December 31, 2004** **At December****31, 2003** **At December****31, 2002** **Group of Shareholders** **Number of****Shares Held** **Number of****Votes Held** **% of Total****Issued Shares** **% of Total****Voting Rights** **% of Total****Issued Shares** **% of Total****Issued Shares**        Individual shareholders  25,229,595  29,802,429  14.8%  16.6%  13.0%  13.1% Resident institutional investors (France)  57,636,368  62,186,515  33.7%  34.6%  34.4%  30.6% Non-resident institutional investors (outside France) *  86,218,719  87,726,140  50.4%  48.8%  51.5%  54.9% Treasury shares  1,834,396  0  1.1%  0%  1.1%  1.4% **Total**  **170,919,078**  **179,715,084**  **100.0%**  **100.0%**  **100.0%**  **100.0%** *including 49,994 Lafarge S.A. shares currently held by Cementia Holding AG for the benefit of shareholders who not have yet requested the delivery of their Lafarge S.A. shares following the squeeze out procedure carried out by Lafarge S.A. in 2002 with respect to the CementiaHolding AG shares.
For share ownership information for members of the Board of Directors, see “Item 6. Directors, Senior Management and Employees — Board of Directors — Director’s Share Ownership”.

To our knowledge no individual or entity or group of individuals or entities acting together in concert held more than 5% of the outstanding shares or total voting rights. To our knowledge however, 11 institutional shareholders held more than 1% of our outstandingshares at December 31, 2004, 1% being the threshold for the notification requirement set out in our *statuts*, (see the subsection under Item 10 entitled “Required Holdings Exceeding Certain Percentages”). Of these institutional shareholders, eight held between 1% and 2% ofour shares, one held between 2% and 3% of our shares and two held between 3% and 4% of our shares.

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All of our shares bear the same conditions as to voting rights, except for our treasury shares, which bear no voting rights and except for shares held in registered form for over two years which have double voting rights (see “Item 10. Additional Information —Attendance and Voting at Shareholders’ Meetings”).

To our knowledge, we are not directly or indirectly owned or controlled by another corporation, any government or any other natural or legal person severally or jointly. There is no arrangement known to us the operation of which may at any subsequent date result in achange in control of Lafarge.

To our knowledge, at December 31, 2004, (i) the number of record holders of our shares in the United States was 26 and (ii) the number of our ADRs outstanding was 15,395,032 representing approximately 2.25% of our share capital. We have no reason to believe thatsuch information has changed substantially at the date hereof.
***Potential Shares — Dilution***
At December 31, 2004, the number of our outstanding shares could be increased by up to 16,995,226 new shares as a consequence of:
 •The exercise of subscription stock options granted to our employees. At December 31, 2004, the maximum number of shares issuable under currently exercisable subscription options was 2,035,473 shares. In addition, there were subscription options covering 4,191,249shares that were issued after 2001 and not currently exercisable (see “ Item 6. Directors, Senior Management And Employees — Employee Share Ownership”).    •The exercise of the conversion rights attached to the OCEANE bonds issued in June 2001. The maximum number of shares issuable under the OCEANE bonds is 10,768,504 shares. Pursuant to the terms of the OCEANE bonds, upon a bondholder’s exercise of hisconversion right, we have the option of converting the bond into new shares or exchanging the bonds for existing treasury shares.
At December 31, 2004, there were no other securities convertible, redeemable or otherwise exchangeable in newly issued shares.
**Related Party Transactions**
Agreements between Lafarge and one of our directors, the Chairman of the Board and Chief Executive Officer or the Vice Chairman of the Board and Chief Operating Officer or a company in which our directors or these executive officers hold directorships or seniorexecutive positions are, pursuant to the applicable laws and regulations in force, subject to the prior approval of the Board of Directors and then, on a special report from the statutory auditors, to the approval of the ordinary shareholders’ meeting. The director or executiveofficer concerned is required to inform the Board of all agreements covered by the law. The same prior approval requirement applies to agreements between Lafarge and a shareholder holding more than 10% of the voting rights or, if such shareholder is a corporation, with thecorporation controlling such shareholder.

These procedures do not apply to agreements concerning the day-to-day business of the company entered into in the ordinary course of business and with terms and conditions that are not out of the ordinary course.

In accordance with French law on related party transactions, the Board of Directors, during its September 3, 2001 meeting, authorized the execution of the agreements with Lafarge North America Inc. as described below, the execution of which was continuing orrenewed in 2004. At the same time, the Board of Directors also authorized an indemnification agreement with Lafarge North America Inc. pursuant to which we agree to indemnify Lafarge North America Inc. and its employees for any loss suffered by any of them as a resultof any claim made in relation to the management of Blue Circle’s assets in North America.

In 2004, the Board of Directors approved:
 •the employment contracts of Messrs. Michel Rose and Bruno Lafont in their position as Chief Operating Officers of the Group. The purpose of these contracts was to bring together in a single document employment terms that were previously contained in separatedocuments;
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 •a services agreement with BNP Paribas Securities Services, a wholly owned subsidiary of BNP Paribas relating to the administration of our share register, employee stock option plans and employee share plans, as well as the management of our general shareholdermeetings.
Our director, Mr. Pébereau, is chairman of BNP Paribas, and our directors, Mrs. Ploix and Mr. Joly, are directors of BNP Paribas. We have had and we will continue to have an arm length business relationship with BNP Paribas, including for the conclusion offinancings, credit facilities and agreements relating to securities offerings. These agreements were and will be, when applicable, approved by our Board of Directors and communicated to our auditors and our shareholders in compliance with French law on related partytransactions.

Following the acquisition of Blue Circle, we entered into an agreement with Lafarge North America Inc., our majority owned North American subsidiary, with respect to Blue Circle’s assets in North America. The agreement’s initial term expired on December 31, 2002,and has since been renewed annually. It was renewed for 2005. The agreement provides that Lafarge North America Inc. will manage the Blue Circle assets for a fixed annual management fee plus incentives for improving operating results. Lafarge North America Inc. is alsoentitled to be reimbursed for the costs incurred on behalf of the Blue Circle operations in North America. In 2004, Lafarge North America Inc. charged $16.3 million (approximately 13.1 million euros) in management fees and $228.0 million (approximately 183.4 millioneuros) in cost reimbursement pursuant to the management agreement. In accordance with the terms of the agreement, Lafarge North America Inc. paid $2.8 million (approximately 2.3 million euros) to Blue Circle North America as compensation for actions taken to optimizethe profitability of the combined assets.

At the time we entered into the management agreement, we granted Lafarge North America Inc. an option to purchase the Blue Circle assets anytime between July 1, 2002 and December 31, 2004 at a fixed call price of $1,400 million, subject to certain adjustments asof the date of acquisition. Lafarge North America Inc. then decided on November 2, 2004 not to exercise the option which therefore lapsed. The terms of the agreement under which Lafarge North America Inc manages the U.S. based assets owned by Blue Circle remainunchanged following this decision.

The assets of Blue Circle covered under the management agreement include:

5 cement manufacturing plants with a combined capacity of 5.7 million tonnes of cement;

15 cement terminals;

1 slag grinding plant outside Baltimore, Maryland;

15 aggregate-producing pits and quarries in Georgia and Alabama;

100 ready-mixed concrete plants; and

10 concrete block plants in Georgia.

We have entered into a mutual technical cooperation agreement with Cimentos de Portugal SGPS, S.A. (Cimpor), in which we hold a 12.6% interest, in the field of industrial performance, namely productivity, safety and environmental protection. The agreement wasentered into on July 12, 2002 with an initial term expiring on March 31, 2005. The agreement is renewable for one-year periods thereafter. The first stage of the implementation of the agreement was the identification by us of areas of industrial improvements for Cimpor andwas completed on March 31, 2003. A fee of 750,000 euros was paid to us by Cimpor upon completion of this first stage in 2003. The second stage relating to the optimization of industrial performance was initiated in September 2003 and involved technical work performed byus regarding the equipment of certain Cimpor plants to use alternative fuels. We received another fee of 1 million euros from Cimpor for such work performed in 2003. We currently have one common director with Cimpor who is Mr. Jacques Lefèvre. One of our executiveofficers, Jean-Carlos Angulo, also serves on the Board of Directors of Cimpor.

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**ITEM 8. FINANCIAL INFORMATION** **Consolidated Statements and Other Financial Information**
See “Item 18. Financial Statements” for a list of financial statements filed with this registration statement.
**Legal Proceedings**
See “Item 4. Information on Lafarge — Litigation”.
**Dividend Policy**
We have no stated dividend policy. For historical information with respect to our dividend distributions, see “Item 3. Key Information — Selected Financial Data”.
**Significant Changes**
No significant change has occurred in our overall business or financial situation since the date of our most recent annual financial statements. For information on recent events see “Item 4. Information on Lafarge — Recent Events”.
**ITEM 9. THE LISTING** **Listing Details**
The primary market for trading in our shares is Euronext (Paris). Our shares are included in the CAC40 index the SBF 250 100 index and the Dow Jones Eurostoxx 50 index. Our shares have traded on the New York Stock Exchange in the form of American DepositaryShares, or ADSs under the symbol “LR” since July 23, 2001. Each ADS represents one-fourth of one share. The ADSs are evidenced by American Depositary Receipts, or ADRs, which are issued by Morgan Guaranty Trust Company of New York, as Depositary, under aDeposit Agreement dated at July 18, 2001, among us, the Depositary and the registered holders of the ADRs from time to time. The following tables set forth the volume and high and low last sales prices of our shares of common stock as reported on Euronext Paris S.A.:

**Trading Prices for our shares of common stock on Euronext Paris S.A. for the five most recent full financial years.**
  **High** **Low** **Average Daily****Volume** **Average Monthly****Volume**   **(€)** **(in shares)** **(in millions of shares)**      2000  118.40  73.75  521,670  11.00 2001  114.00  74.00  667,518  14.05 2002  111.20  67.00  772,173  16.40 2003  76.25  43.26  1,175,809  24.99 2004  74.50  62.30  924,038  19.94  Source: Euronext
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**Trading Prices for our shares of common stock on Euronext Paris S.A. for each full financial quarter for the two most recent full financial years.**   **High** **Low** **Average Daily****Volume** **Average Monthly****Volume**   **(€)** **(in shares)** **(in millions of shares)**      2003     1st quarter  76.25  43.26  1,026,549  21.56              2nd quarter  64.80  49.26  1,517,404  31.36              3rd quarter  65.70  50.50  1,211,254  26.64              4th quarter  70.90  54.95  955,265  20.38 2004     1st quarter  71.90  62.30  970,474  20.70              2nd quarter  73.90  65.70  1,071,888  22.51              3rd quarter  74.50  66.25  810,247  17.83              4th quarter  74.00  68.55  851,670  18.74  Source: Euronext
**Trading Prices for our shares of common stock on Euronext Paris S.A. for each month for the most recent six months.**
  **High** **Low** **Average Daily****Volume** **Average Monthly****Volume**   **(€)** **(in shares)** **(in millions of shares)**      2004     September  74.50  69.75  1,011,697  22.26              October  74.00  69.35  816,236  17.14              November  73.50  69.70  785,598  17.28              December  72.25  68.55  947,222  21.79 2005     January  79.80  71.00  1,116,478  23.45              February  81.40  75.50  837,122  16.74  Source: Euronext
The following tables set forth the volume and high and low last sales prices of our shares of American Depositary Shares as reported on the NYSE.

**Trading Prices for our American Depositary Shares on the NYSE for each full financial quarter for the two most recent full financial years.**
  **High** **Low** **Average Daily****Volume** **Average Monthly****Volume**   **($)** **(in ADSs(1))** **(in ADSs(1))**      2003     1st quarter  20.05  12.10  13,400  272,467              2nd quarter  18.82  13.60  22,495  472,400              3rd quarter  18.02  15.50  21,313  454,667              4th quarter  22.45  16.29  23,778  507,267 2004     1st quarter  22.75  19.12  29,729  614,400              2nd quarter  22.53  19.82  28,227  583,367              3rd quarter  22.78  20.45  34,631  738,800              4th quarter  24.41  22.08  27,059  577,267  Source: NYSE(1)Each ADS represents one-fourth of one share.
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**Trading Prices for our American Depositary Shares on the NYSE for each month for the most recent six months.**   **High** **Low** **Average Daily****Volume** **Average Monthly****Volume**   **($)** **(in ADSs(1))** **(in ADSs(1))**      2004     September  22.78  21.40  36,819  773,200              October  23.15  22.08  28,343  595,200              November  23.65  22.69  24,386  512,100              December  24.41  22.71  28,386  624,500 2005     January  25.98  23.96  35,430  708,600              February  26.35  25.06  32,170  611,300  Source: NYSE(1)Each ADS represents one-fourth of one share. **Markets**
Our shares of common stock have been listed on the Eurolist of Euronext Paris S.A. (“Euronext Paris”) since July 4, 1923 (Code ISIN: FR000120537). Lafarge has been included in the SBF 250 index since its creation in December 1990, in the CAC 40 index since itscreation in December 31, 1987 and in the Dow Jones Eurostoxx 50 index since September 2002. The SBF 250 is an index of shares of 250 companies selected by Euronext Paris as the most representative of the French equities listed on Euronext Paris from twelve economicsectors. The CAC 40 index is an index of shares of the 40 largest companies traded on Euronext Paris in terms of market capitalization. The Dow Jones Eurostoxx 50 index is an index of shares of market sector leading companies in the European Euro zone (covers Austria,Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain).

Securities listed on the Eurolist of Euronext Paris are officially traded through authorized financial institutions that are members of the Paris Stock Exchange. Securities are traded continuously on each business day from 9:00 a.m. to 5:25 p.m. (Paris time), with a pre-opening session from 7:15 a.m. to 9:00 a.m. and, for some securities, a pre-closing session from 5:25 p.m. to 5:30 p.m. during which transactions are recorded but not executed, a closing auction at 5:30 p.m. and a “trading at loss” from 5:30 p.m. to 5:40 p.m. Any trade of asecurity that occurs after a stock exchange session closes is recorded on the next Euronext Paris trading day at the previous session’s closing price for that security. Euronext Paris has introduced continuous electronic trading during trading hours for most actively listedsecurities.

Euronext Paris may temporarily reserve trading in a security listed in *Continu* on the Eurolist if purchases and sales recorded in the system would inevitably result in a price beyond a certain threshold, determined on a basis of a percentage fluctuation from a referencebase. The duration of the so-called reservation period and the relevant thresholds vary depending on whether the price fluctuation occurs when trading commences or during the trading session. Euronext Paris may display an indicative trading price during such reservationperiod. Euronext Paris also may suspend trading of a security listed on the Eurolist in other limited circumstances, including, for example, where there is unusual trading activity in the security. In addition, in exceptional cases, the *Autorité des Marchés Financiers* may alsorequest a suspension in trading.

Trades of securities listed on the Eurolist are settled on a cash basis on the third trading day following the trade. Market intermediaries are also permitted to offer investors a deferred settlement service (*ordre stipulé à règlement différé*) for a fee. The deferred settlementservice is only available for trades in securities that have both a total market capitalization of at least 1 billion euros and a daily average volume of trades of at least 1 million euros. Our shares are eligible for the deferred settlement service. Investors can elect on thedetermination date (*date de liquidation*), which is the fifth trading day before the end of the month, either to settle by the last trading day of the month or to pay an additional fee and postpone the settlement decision to the determination date of the following month.

Equity securities traded on a deferred settlement basis are considered to have been transferred only after they have been registered in the purchaser’s account. Under French securities regulations, any sale of a security traded on a deferred settlement basis during themonth of a dividend payment date is deemed to

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occur after the dividend has been paid. If the sale takes place before, but during the month of, a dividend payment date, the purchaser’s account will be credited with an amount equal to thedividend paid and the seller’s account will be debited by the same amount.

Prior to any transfer of securities held in registered form on the Eurolist, the securities must be converted into bearer form and accordingly placed in an account maintained by an accredited intermediary with Euroclear France S.A., a registered clearing agency.Transactions in securities are initiated by the owner giving instructions (through an agent, if appropriate) to the relevant accredited intermediary. Trades of securities listed on the Eurolist are cleared through Clearing 21 and settled through Euroclear France S.A. using acontinuous net settlement system. A fee or a commission is payable to the broker-dealer or other agent involved the transaction.
**ITEM 10. ADDITIONAL INFORMATION** **Description of Share Capital**
Not applicable
**By-laws (*statuts*)**
Information concerning material provisions of our by-laws (*statuts*) and applicable French law were summarized in Item 10 on pages 116 to 126 of our Registration Statement on Form 20-F filed with the U.S. Securities and Exchange Commission on July 19, 2001,which information is hereby incorporated by reference herein. The information below updates and complements, and to the extent inconsistent therewith replaces, the information set forth in the summary previously provided. An unofficial English translation of our *statuts* isincluded as an exhibit to this report. Only the official French version of our *statuts*governs our affairs. You may obtain copies of our *statuts*in French from the Lafarge Legal Department, Siège social: 61, rue des Belles Feuilles 75116 Paris, France.
***Corporate Purpose***
We are registered under the number 542 105 572 with Registrar of Commerce and Companies of Paris. Our corporate purpose is described in Article 2 of our *statuts*.
***Directors***
The following is a summary of provisions in our *statuts* pertaining to directors:
***Directors’ power to vote compensation***
Our by-laws authorize the Board of Directors to distribute such remuneration among its members as it sees fit, within the limits established by our shareholders. Our shareholders decided on May 28, 2001, to set the maximum amount of directors’ fees payable in fiscalyear 2001 and in subsequent fiscal years at 0.610 million euros. The Board of Directors may also authorize the reimbursement of traveling expenses and expenses incurred by directors in the interests of Lafarge.

The remuneration of the Chairman of the Board of Directors, the Chief Executive Officer and the executive officers is set by the Board of Directors. Such remuneration may be fixed and/or proportional.

The Board of Directors may award exceptional remuneration to directors who are members of committees formed from among its members or who are entrusted with specific tasks or duties. In this case, such remuneration is charged to operating costs, indicated to thestatutory auditors, submitted for prior authorization of the Board of Directors and subsequently approved by the shareholders’ meeting.
***Borrowing powers exercisable by directors***
Our *statuts* authorize the Board of Directors to accomplish all financial transactions, open all accounts with banking institutions, make and receive all payments, subscribe all negotiable instruments and notes, agree to all credits and request all loans.

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The Board of Directors may not contract loans in the form of bonds except with the authorization of the ordinary shareholders’ meeting, nor may it issue convertible bonds, bonds exchangeable for shares or bonds with share warrants except with the authorization of theextraordinary shareholders’ meeting.
***Age requirement for retirement of directors***
Our *statuts* provide that the directors may be dismissed at any time by a duly convened shareholders’ meeting. Otherwise our *statuts* provide that our directors shall serve a multi-year term of office and each director’s term of office may be renewed subject to thecondition that directors may not be more than 70 years of age. Our shareholders at our general shareholders’ meeting convened on May 28, 2001 approved a resolution which amended our *statuts* and progressively reduced the duration of our directors’ terms of office. Underthis resolution, directors currently serving and originally appointed for six-year terms will serve out the remainder of their six-year mandate; directors appointed or renewed in office in 2001 shall serve five-year terms; and those appointed or renewed in years subsequent shallserve four-year terms. Each director’s term of office expires at the end of the ordinary shareholders’ meeting called to approve the previous year’s accounts held in the year during which the director’s term of office normally expires or during which the director reaches the agelimit of 70 years.

The Chairman of the Board and the Chief Executive Officer may not be more than 65 years of age. The term of office of each expires automatically on December 31 of the year in which he reaches the age of 65.

However, the Board of Directors may decide to extend the term of office of the Chairman of the Board beyond the above-mentioned age limit for successive one-year periods provided that his term of office as director continues for such periods. In this case, the term ofoffice of the Chairman of the Board shall expire definitively on December 31 of the year in which he reaches the age of 67.
***Number of shares required for a director’s qualification***
All members of the Board of Directors must hold, in registered form, a number of shares representing a total nominal value of at least 4,572 euros (i.e. 1,143 shares). The par value of our shares is 4 euros.
***Attendance and Voting at Shareholders’ Meetings***
Each share confers on the shareholder the right to one vote. Fully paid-up shares that have been held by the same shareholder in registered form for at least two years have a double voting right.

Shareholders may attend ordinary general meetings and extraordinary general meetings and exercise their voting rights subject to the conditions specified in the French company law and our *statuts*. There is no requirement that a shareholder have a minimum number ofshares in order to attend or to be represented at an ordinary or extraordinary general meeting.

Access to the meeting is open to such shareholders, as well as to their proxies and registered intermediaries who have provided evidence of their entitlement to attend no later than 3:00 p.m. (Paris time) the day before the date of the assembly, including an attestationthat their shares are registered in a share account. The Board of Directors may shorten or eliminate such time limit. Since 2002, the Board of Directors has decided not to require shareholders to block their shares prior to the general meetings, as provided by French law.Shareholders only had to present a certificate evidencing their share ownership to participate in the meetings in person or by proxy. The Board intends to continue to follow this approach in the future.

In addition, the Board may, where deemed appropriate, provide shareholders with personal admission cards bearing the name of the shareholder and require the production of such cards at the meeting. Shareholders’ meetings may also be attended by videoconferencingor other telecommunications means, as may be decided by the Board of Directors. In organizing attendance of shareholders by videoconferencing or other telecommunications means, the Board of Directors needs to provide for a site entirely dedicated to this end and ensure theeffectiveness of means enabling the identification of shareholders and guaranteeing their effective participation at the meeting.

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The total voting rights of one shareholder during a shareholders’ meeting, including voting rights held by other shareholders with whom this shareholder is acting in concert, is limited to 1% of the total number of existing voting rights calculated and, for the balance,according to the quorum obtained, by application of the percentage exceeding 1% to the number of voting rights corresponding to such quorum (calculated taking into account the restriction resulting from this provision). This limitation is meant to prevent theover-representation of a given shareholder at a general meeting as a result of the low level of participation at such meetings and ensuring that the voting rights of each shareholder are at least equal to their share in the overall share capital.
**Changes in Share Capital** ***Increases in Share Capital***
As provided by the French company law, our share capital may be increased only with the shareholders’ approval at an extraordinary general meeting following a recommendation of the Board of Directors.

Increases in our share capital may be effected by:
 •issuing additional shares;    •increasing the nominal value of existing shares; or    •creating a new class of equity securities.
Increases in share capital by issuing additional securities may be effected by issuing such securities:
 •for cash;    •for assets contributed in kind;    •for securities contributed through a tender offer;    •by conversion, exchange or redemption of debt securities previously issued;    •upon the exercise of stock options, warrants or other similar securities comprising rights to subscribe to our shares;    •by capitalization of profits, reserves or share premiums;    •subject to various conditions, in satisfaction of debt incurred by our company; or    •by any combination of the above.
Decisions to increase the share capital through the capitalization of reserves, profits and/or share premiums require the approval of an extraordinary general meeting, acting under the quorum and majority requirements applicable to shareholders’ meetings. Increaseseffected by an increase in the nominal value of shares require unanimous approval of the shareholders, unless effected by capitalization of reserves, profits or share premiums. All other capital increases require the approval of an extraordinary general meeting. See“Shareholders’ Meetings and Voting Rights”.

The shareholders may delegate the right to carry out certain types of capital increases to the Board of Directors, with a maximum amount and for a certain period of time. The Board of Directors may further delegate this right to the Chairman and/or Chief ExecutiveOfficer.

Each time the shareholders decide to carry out a capital increase or decide to delegate to the Board of Directors the right to carry out a capital increase (except for a contribution in kind), they must also decide whether to proceed with a capital increase reserved toemployees of our company and its subsidiaries, or whether or not to delegate to the Board of Directors the right to carry out such a reserved capital increase.

Our Board of Directors has received from our shareholders’ meeting held on May 20, 2003, the right to carry out share capital increases through the issue of shares or other equity securities with or without shareholders’ preemptive    subscription rights, through the capitalization of reserves, through the    issue of employee stock subscription options and through the issue of shares  reserved for our employees.

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As of the date of this report, our Board of Directors may carry out the following share capital increases pursuant to the delegations granted to it by our shareholders’ meeting held on May 20, 2003:
**Type of share capital increase** **Maximum nominal amount****(in €)** **Expiration date of****delegations**    Issue of shares or other equity securities with shareholders’ preemptive subscription rights  72,673,888* July 20, 2005 Issue of shares or other equity securities without shareholders’ preemptive subscription rights  72,673,888* July 20, 2005 Capitalization of reserves  100,000,000  July 20, 2005 Issue of employee stock subscription options  12,664,389** July 20, 2005 Issue of shares reserved for our employees  14,000,000  July 20, 2005  *the cap on these issues applies to both delegations.**based on the share capital as of December 31, 2004. ***Decreases in Share Capital***
According to the French company law, any decrease in our share capital requires approval by the shareholders entitled to vote at an extraordinary general meeting. In the case of a capital reduction, other than a reduction to absorb losses or a reduction as part of aprogram to purchase our own shares, all holders of shares must be offered the possibility to participate in such a reduction. The share capital may be reduced either by decreasing the nominal value of the outstanding share capital or by reducing the number of outstandingshares. The number of outstanding shares may be reduced either by an exchange of shares or by the repurchase and cancellation of shares. Holders of each class of shares must be treated equally unless each affected shareholder agrees otherwise.
***Preemptive Subscription Rights***
According to the French company law, if we issue specific kinds of additional securities, current shareholders will have preemptive subscription rights to these securities on a pro rata basis. These preemptive rights require us to give priority treatment to thoseshareholders. These rights entitle the individual or entity that holds them to subscribe to an issue of any securities that may increase the share capital of our company by means of a cash payment or a settling of cash debts. Preemptive subscription rights are transferable duringthe subscription period relating to a particular offering. These rights may also be listed on Euronext Paris.

A two-thirds majority of the shares entitled to vote at an extraordinary general meeting may vote to waive preemptive subscription rights with respect to any particular offering. French law requires that the Board of Directors and our independent auditors present reportsthat specifically address any proposal to waive preemptive subscription rights. In the event of a waiver, the issue of securities must be completed within the period prescribed by law. The shareholders may also decide at an extraordinary general meeting to give the existingshareholders a non-transferable priority right to subscribe to the new securities, during a limited period of time. Individual shareholders may also notify us that they wish to waive their own preemptive subscription rights with respect to any particular offering of shares if theyso choose.
**Form, Holding and Transfer of Shares** ***Form of Shares***
Our statuts provide that the shares may be held in registered or bearer form.
***Holding of Shares***
In accordance with French law concerning dematerialization of securities, shareholders’ ownership rights are represented by book entries instead of share certificates. We maintain a share account with Euroclear France for all shares in registered form, which isadministered by BNP Paribas. In addition, we maintain separate accounts in the name of each shareholder either directly or, at a shareholder’s request, through the shareholder’s accredited intermediary. Each shareholder account shows the name of the holder and the numberof shares held and, in the case of shares held through an accredited intermediary, the shareholder

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account shows that the shares are held through such intermediary. BNP Paribas, as a matter of course, issues confirmations to each registered shareholder as to shares registered in theshareholder’s account, but these confirmations are not documents of title.

Shares held in bearer form are held on the shareholder’s behalf in an account maintained by an accredited intermediary and are registered in an account which the accredited intermediary maintains with Euroclear France. That account is separate from our company’sshare account with Euroclear France. Each accredited intermediary maintains a record of shares held through it and will issue certificates of registration for the shares that it holds. Shares held in bearer form may only be transferred through accredited intermediaries andEuroclear France. Our *statuts* permit us to request that Euroclear France provide us at any time with the identity of the holders of our shares or other securities, held in bearer form, granting immediate or future voting rights, with the number of shares or other securities so heldand any restrictions on such securities.

In addition, shares held, in registered form or bearer form, by non-French residents may be held on the shareholder’s behalf in a collective account or in several individual accounts by an intermediary. This intermediary must declare that it is acting as an intermediaryand may be requested by us to provide the identity of the shareholders on whose behalf it is acting. Failure to declare that it is acting as an intermediary or the provision of inaccurate or incomplete information about the shareholders can result in the deprivation of both theright to vote and the right to receive dividends.
***Transfer of Shares***
Our *statuts* do not contain any restrictions relating to the transfer of shares, other than those provided for by law, regulation or statute.

Registered shares must be converted into bearer form before being transferred on Euronext Paris and, accordingly, must be registered in an account maintained by an accredited intermediary. A shareholder may initiate a transfer by giving instructions to the relevantaccredited intermediary. A fee or commission is payable to the broker involved in the transaction, regardless of whether the transaction occurs inside or outside of France. Normally, no registration duty is payable in France, unless a transfer instrument has been executed inFrance.
***Liquidation Rights***
In the event of a liquidation, any assets remaining after payment of our debts, liquidation expenses and all of our remaining obligations would first be distributed to repay in full the nominal value of our shares. Any surplus would then be distributed pro rata amongshareholders in proportion to the nominal value of their shareholdings.
***Requirements for Holdings Exceeding Certain Percentages***
The French company law provides that any individual or entity, acting alone or in concert with others, that becomes the owner, directly or indirectly, of more than 5%, 10%, 20%, 33 1/3%, 50% or 66 2/3% of the outstanding shares or voting rights of a listed companyin France, such as our company, or that increases or decreases its shareholding or voting rights above or below any of those percentages, must notify the company within five trading days of the date it crosses the threshold of the number of shares and ADSs it holds and theirvoting rights. The individual or entity must also notify the *Autorité des Marchés Financiers*(the “AMF”), within five trading days of the date it crosses the threshold.

French law and the AMF regulations impose additional reporting requirements on persons who acquire more than 10% or 20% of the outstanding shares or voting rights of a listed company. These persons must file a report with the company and the AMF within 10trading days of the date they cross the threshold. In the report, the acquirer must specify its intentions for the following 12-month period, including whether or not it intends to continue its purchases, to acquire control of the company in question or to seek nomination to theBoard of Directors. The AMF must make the notice public. The acquirer must also publish a press release stating its intentions in a financial newspaper of national circulation in France. The acquirer may

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amend its stated intentions, provided that it does so on the basis of significant changes in its own situation or shareholders. Upon any change of intention, it must file a new report. Theserequirements also apply to registered intermediaries who hold stock on behalf of non-resident shareholders.

Under French regulations, and subject to limited exemptions granted by the AMF, any person or persons acting in concert who come to own in excess of 33 1/3% of the share capital or voting rights of a French listed company must initiate a public tender offer for thebalance of the share capital of such company. In addition, our *statuts* provide that any person acting alone or in concert who becomes, directly or indirectly, the owner of more than 1% of our share capital or voting rights must notify us within 15 days, by registered mail withreturn receipt requested, fax or telex, of the number of shares or voting rights it holds. The same notification requirement applies to each subsequent increase or decrease in ownership of 1% or whole multiples of 1%. If a person does not comply with this notificationrequirement, one or more shareholders holding 1% or more of our share capital or voting rights may require a shareholders’ meeting to deprive the shares in excess of the relevant threshold of voting rights for all shareholders’ meetings for two years following the date onwhich the owner complies with the notification requirements. Such sanction is independent of any legal sanction which may be issued by a court upon the request of the Chairman, a shareholder or the AMF.

In order to permit holders or intermediaries to give the required notice, we must publish in the *Bulletin des Annonces Légales Obligatoires* (“BALO”), not later than 15 calendar days after the annual ordinary general meeting of shareholders, information with respect tothe total number of voting rights outstanding as of the date of such meeting. In addition, if the number of outstanding voting rights changes by 5% or more between two annual ordinary general meetings, we must publish in the BALO, within 15 calendar days of such change,the number of voting rights outstanding and provide the AMF with a written notice. The AMF publishes the total number of voting rights so notified by all listed companies in a weekly notice (*avis*), including the date each such number was last updated. In order to facilitatecompliance with the notification requirements, a holder of ADSs may deliver any such notification to the depositary and the depositary shall, as soon as practicable, forward such notification to us and to the AMF.

If any person fails to comply with the legal notification requirement, the shares or voting rights in excess of the relevant threshold will be deprived of voting rights for all shareholders’ meetings until the end of a two-year period following the date on which the ownerthereof complies with the notification requirements. In addition, any shareholder who fails to comply with these requirements may have all or part of its voting rights suspended for up to five years by the Commercial Court at the request of our Chairman of the Board, anyshareholder or the AMF. In addition, individuals who are shareholders, the Chairman, members of the Board, managers and managing directors of corporate shareholders may be subject to a fine of 18,000 euros.

There have been no public takeover offers by third parties for our shares during the last or the current financial year.
***Purchase of Our Own Shares***
Under French law, our company may not issue shares to itself. However, we may, either directly or through a financial intermediary acting on our behalf, purchase our shares for one of three purposes:
 (1)to reduce our share capital by canceling the shares we purchase, with our shareholders’ approval at an extraordinary general meeting,    (2)to provide shares to our employees under a profit-sharing plan or stock option plan, with our shareholders’ approval at an extraordinary general meeting, or    (3)to acquire up to 10% of our share capital in connection with a corporate share repurchase program, with our shareholders’ approval at an ordinary general meeting and the publication, either at the latest 15 days before such general shareholders’ meeting or right after theBoard of Directors implements the share repurchase program, of a notice (*note d’information*) approved by the AMF.
On May 25, 2004, the shareholders authorized a share repurchase program as described in clause (3) above for up to 10% of our outstanding shares. The purchase price may not exceed 120 euros per share and

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the selling price must be at least 50 euros per share. Pursuant to the program authorized by our shareholders, the shares purchased could be used to:
 •stabilize the price of our shares on the market;    •provide shares for distribution to employees under a profit sharing, employee offering or stock option plan;    •provide consideration in the context of an acquisition or of the issuance of securities exchangeable, redeemable or otherwise convertible into our shares; and    •be kept as treasury shares or cancelled pursuant to a specific resolution approved by the extraordinary general shareholders’ meeting of May 20, 2003.
This authorization to repurchase our own shares will expire on November 25, 2005.

Since October 13, 2004, which is the date on which the European Regulation no2273/2003 came into force in France, all share repurchases by a company are deemed to be illegitimate and subject to the scrutiny of the AMF under market abuse rules unless they fallunder the safe harbor framework set by the European Regulation as supplemented by the AMF from time to time. The safe harbor framework provides that repurchases for distribution of shares to (i) employees under stock option plans or other share plans, (ii) to holders ofsecurities exchangeable, redeemable or otherwise convertible into shares or (iii) to be cancelled each constitute legitimate repurchases. The framework also provides that shares can be purchased on behalf of a company by a financial intermediary acting pursuant to a liquidityagreement (*contrat de liquidité*) complying with a charter of ethics approved by the AMF or by the company directly in order to provide consideration in the context of acquisitions.

We have not acquired any of our shares in 2004 and have not entered into a liquidity agreement with any financial intermediary. In the same period we sold 21,870 shares pursuant to the exercise of outstanding purchase stock options at an average price of 50.19 eurosper share.

At December 31, 2004, we held directly in treasury 1,834,396 shares purchased pursuant to prior authorizations from our shareholders. Under French law these shares are considered outstanding but have no voting rights. These treasury shares represented 1.07% of ouroutstanding shares for a total book value of approximately 109 million euros as of December 31, 2004. 1,030,225 of these shares are reserved to be attributed to our employees upon exercise of purchase stock options granted in December 1997, 1998, 2000 and 2001.

In addition, at the shareholders’ meeting of May 20, 2003, the shareholders granted the Board of Directors the authorization to cancel some or all of the shares purchased under the share repurchase program up to a limit of 10% of our share capital in any 24-monthperiod. This authorization is valid for a 26-month period from the date of this shareholders’ meeting.

In addition, we may not repurchase under either clause (2) or (3) above an amount of shares that would result in our company holding, directly or through a person acting on our behalf, more than 10% of our outstanding share capital, or, if we have different classes ofshares, 10% of the shares in each class.

We must hold any shares we repurchase in registered form. These shares also must be fully paid up. Shares repurchased by us are deemed outstanding under French law but are not entitled to dividends or voting rights, and we may not exercise the preemptivesubscription rights attached to them.

The shareholders, at an extraordinary general meeting, may decide not to take these shares into account in determining the preemptive subscription rights attached to the other shares. However, if the shareholders do decide to take them into account, we must either sellthe rights attached to the shares we hold on the market before the end of the subscription period or distribute them to the other shareholders on a pro rata basis.

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**Material Contracts**
On August 1, 2000, we transferred our interests in Lafarge North America Inc., our U.S. subsidiary and Fabrica Nacional de Cementos, our Venezuelan subsidiary, to voting trusts set up under the laws of the State of New York. These trusts are designed to makeavailable to the public shareholders of these subsidiaries, for a period of ten years, an opportunity comparable to that presently enjoyed under French law and regulations by public shareholders of French subsidiaries of French corporations to receive a tender offer for theirshares in the event of a tender or exchange offer under French law for the shares of Lafarge S.A., if at the time of commencement of such offer Lafarge S.A.’s beneficial interest in these subsidiaries comprises 20% or more of the voting power represented by the outstandingvoting securities of the relevant subsidiary.

The minority shareholders of Lafarge North America Inc. benefited from a similar protection from July 31, 1990 until July 31, 2000.

The common shares of Lafarge North America Inc. are listed on the NYSE. The exchangeable preference shares of Lafarge Canada Inc., a subsidiary of Lafarge North America Inc., are listed on the Toronto stock exchange and are exchangeable, at any time at theoption of the holder, into common shares of Lafarge North America Inc.. The common shares of Fabrica Nacional de Cementos are listed on the Caracas stock exchange.

Each of the trust agreements provides, among other things, that in the event of a tender offer for the shares of Lafarge S.A., we will ensure that the person making the offer extends to the public shareholders of the relevant subsidiaries an opportunity to receive acomparable tender offer for their shares or failing which, we will extend this opportunity to such public shareholders ourselves. Unless an acquirer of Lafarge S.A., or Lafarge S.A. itself consummates a comparable tender offer for all publicly held voting securities, or securitiesconvertible, redeemable or otherwise exchangeable into voting securities, of the relevant subsidiary, the trustees will, for a five year protective period, exercise our voting rights with respect to the voting securities held in the trust, in general, by voting those securities in favorof any resolution proposed by the subsidiary’s Board of Directors and in opposition to any resolutions opposed by the subsidiary’s Board of Directors.

Before an acquirer commences a tender or exchange offer for Lafarge S.A., we have the power to direct the trustees how to vote all of the voting securities held in the trust.

A “comparable tender offer” is defined in each trust agreement to be a tender offer for any or all of the outstanding voting securities, or securities convertible, redeemable or otherwise exchangeable into voting securities, held by public shareholders of the relevantsubsidiary upon specified terms and conditions, including, but not limited to, the requirement that the price offered to the holders of such securities reflect a premium to the current market price for such securities at least equal to the highest premium publicly offered or paid bythe acquirer (or publicly offered by any other person making a tender or exchange offer for Lafarge S.A. after the acquirer commences a tender or exchange offer for Lafarge S.A.) in making its tender or exchange offer to acquire a controlling interest in Lafarge S.A. Thetender offer may be conditioned only on the acquirer’s acquisition of more than 50% of Lafarge S.A.’s voting shares (which condition is not waivable).

Pursuant to each trust agreement, until a potential acquirer commences an offer for Lafarge S.A., we (i) are permitted to transfer the voting securities held by the relevant trust to establish another comparable trust and (ii), through the trust, are permitted to sell all orsome of the voting securities held by the trust to a person or an entity who or which is not affiliated with us. Other than as specifically provided in the trust agreement, we shall not have the right to withdraw, sell, assign, transfer or otherwise dispose of the whole or any partof the corpus of the trust. In the event that we beneficially own less than 20% of the voting power represented by the then outstanding voting shares of the relevant subsidiary, we may revoke the trust agreement.

Each trust agreement also provides that, unless otherwise directed by us, all income received by the relevant trust shall be distributed to us, provided that, during a protective period, the trustees shall be permitted to use income from the trust to pay certain expenses.

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On May 23, 2003, we amended the trust agreements pertaining to Lafarge North America Inc. in order to (i) make Lafarge North America Inc. a direct beneficiary of the trusts and (ii) to change the law applicable to the trusts from New York law to Maryland law, thestate of incorporation of Lafarge North America Inc.

On May 23, 2003, we amended the trust agreement, pertaining to Fabrica Nacional de Cementos SACA to (i) make Fabrica Nacional de Cementos SACA a direct beneficiary of the trust, and (ii) to change the law applicable to the trusts from New York law to Englishlaw.
**Exchange Controls and Other Limitations Affecting Security Holders**
Under current French exchange control regulations, there are no limitations on the amount of payments that may be remitted by us to non-residents of France. Laws and regulations concerning foreign exchange controls do require, however, that all payments or transfersof funds made by a French resident to a non-resident be handled by an authorized intermediary bank. All credit establishments in France, including all registered banks, are accredited intermediaries.

Neither French law nor our *statuts* presently impose any restrictions on the ability of non-French holders to hold or vote the Shares.

For other limitations affecting shareholders, see “Requirements for Holdings Exceeding Certain Percentages” above.
**Taxation** ***French Taxation***
The following is a general summary of the material French tax consequences of owning and disposing of the shares of our company. This summary may only be relevant to you if you are not a resident of France and you do not hold your shares in connection with apermanent establishment or a fixed base in France through which you carry on a business or perform personal services.

This discussion is intended only as a descriptive summary. It does not address all aspects of French tax laws that may be relevant to you in light of your particular circumstances. It is based on the laws, conventions and treaties in force as of the date of this prospectus,all of which are subject to change, possibly with retroactive effect, or different interpretations.

In particular, holders of shares should be aware that the French Budget Law for 2004 (n Ê 2003-1311 dated December 30, 2003) has abolished the *avoir fiscal* and the *précompte* with respect to dividends to be paid to French individual shareholders as of January 1, 2005.
*Précompte*
As of January 1, 2005, dividend distributions by French companies subject to corporate income tax will no longer be subject to the *précompte*. An exceptional 25% tax (*quasi-précompte*) shall be due on distributions realized in 2005 paid out of profits that have not beensubject to corporate income tax at the ordinary rate or that are paid out of profits realized during financial years closed since more than five years. This exceptional 25% tax is paid by the Company and will be creditable against the corporate income tax liability of the threesubsequent years (for a maximum of one-third of its amount per year). Any excess that cannot be credited is refundable to the company.

As no *précompte* was paid by us on the 2004 dividend distributions, shareholders are not entitled to any refund.
*Avoir fiscal*
As of January 1, 2005, no *avoir fiscal* is attached to dividends paid by French companies.

Although yet unclear, non-resident individual shareholders that are entitled to and that comply with the procedures for claiming benefits under an applicable tax treaty should be entitled to the refund of the *avoir fiscal* with respect to distributions paid until December 31,2004. On the contrary, corporate shareholders

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should no longer be entitled to use the *avoir fiscal* as of January 1, 2005 unless under very limited circumstances. This matter should be confirmed by the French Tax Authorities in an expectedbut not yet released Tax Regulation.

If you are considering buying shares of our company, you should consult your own tax adviser about the potential tax effects of owning or disposing of shares in your particular situation.
*Taxation on Sale or Disposal of Shares*
Generally, you will not be subject to any French income tax or capital gains tax when you sell or dispose of shares of our company if both of the following apply to you:
 (1)you are not a French resident for French tax purposes, and    (2)you have held not more than 25% of our company’s dividend rights, known as *droits aux bénéfices sociaux,*at any time during the preceding five years, either directly or indirectly, alone or with relatives.
Subject to specific conditions, foreign states, international organizations and a number of foreign public bodies are not considered French residents for these purposes.

If a double tax treaty between France and your country contains more favorable provisions, you may not be subject to any French income tax or capital gains tax when you sell or dispose of any shares of our company, even if one or both of the above statements applyto you.

If you transfer listed shares using a written agreement, that agreement must generally be registered. You will be required to pay a registration duty of 1% (to be increased to 1.1% at the beginning of 2006) of either the purchase price or the market value of the sharestransferred, whichever is higher. The maximum duty is 4,000 euros per transfer. However, in some circumstances, if the agreement is executed outside France, you will not be required to pay this duty.
*Taxation of Dividends*
Under French domestic law, French companies must generally deduct a 25% French withholding tax from dividends paid to non-residents and shareholders who are not resident in France. Under most tax treaties between France and other countries, the rate of thiswithholding tax may be reduced in specific circumstances. Generally, a holder who is a non-French resident is subsequently entitled to a tax credit in his or her country of residence for the amount of tax actually withheld. Under some tax treaties, the withholding tax iseliminated altogether. Certain tax treaties further provide for a refund of the *avoir fiscal* to such non-residents.

Certain tax treaties further provide for a refund of the *avoir fiscal* to non-residents. Even though the *avoir fiscal* regime was repealed in 2004, non resident individuals located in a country with a tax treaty providing for the refund of the *avoir fiscal* should still benefitfrom such refund for dividends paid in 2004. This should be clarified by the French Tax Authorities in early 2005.

The following countries, French overseas territories, known as *Territoires d’Outre-Mer,*and other territories have entered into income tax treaties with France that provide for the arrangements summarized below:

 
AustraliaAustriaBelgiumBoliviaBrazilBurkina FasoCanadaEstoniaFinlandGabon  GhanaIcelandIndiaIsraelItalyIvory CoastJapanLatviaLithuaniaLuxembourg  MalaysiaMaliMaltaMauritiusMexicoNamibiaNetherlandsNew ZealandNigerNorway  PakistanSenegalSingaporeSouth KoreaSpainSwedenSwitzerlandTogoTurkeyUkraine  United KingdomUnited StatesVenezuela*French Territoires**d’Outre-Mer and**Other:*MayotteNew CaledoniaSaint-Pierre et Miquelon 
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Under these treaties, a shareholder who fulfills specific conditions may generally apply to the French tax authorities for the following:
 (1)a lower rate of withholding tax, generally 15%, and    (2)a refund equal to the *avoir fiscal*, after deduction of withholding tax payable on the *avoir fiscal*, to the extent, however, that the *avoir fiscal* is still available.
Some of the countries and territories listed above impose additional conditions for corporate entities wishing to receive the *avoir fiscal*. In other countries and territories, individual residents may receive the *avoir fiscal* but corporate entities may not.

Except for the United States, none of the countries or territories listed above has a treaty granting benefits to holders of ADSs, as opposed to shares. Accordingly, this discussion of treaty benefits does not apply to ADS holders.

If the arrangements provided for by any of the above-listed treaties apply to a shareholder, we will withhold tax from the dividend at the lower rate, provided that the shareholder has established, before the date of payment of the dividend, that he or she is entitled to thelower rate and has complied with the filing formalities. Otherwise, we must withhold tax at the full rate of 25%, and the shareholder may subsequently claim the excess tax paid.
***Estate and Gift Tax***
France imposes estate and gift tax where an individual or entity acquires shares of a French company from a non-resident of France by way of inheritance or gift. France has entered into estate and gift tax treaties with a number of countries. Under these treaties,residents of those countries may be exempt from this tax or obtain a tax credit, assuming specific conditions are met. You should consult your own tax adviser about whether French estate and gift tax will apply to you and whether you may claim an exemption or tax credit.
***Wealth Tax***
You will not be subject to French wealth tax, known as *impôt de solidarité sur la fortune,*on your shares if both of the following apply to you:
 (1)you are not a French resident for the purpose of French taxation, and    (2)you own less than 10% of our company’s capital stock, either directly or indirectly, provided that your shares do not enable you to exercise influence on our company.
If a double tax treaty between France and your country of residence contains more favorable provisions, you may not be subject to French wealth tax even if one or both of the above statements applies to you.
***Taxation of U.S. Investors***
The following is a general summary of the material U.S. federal income tax and French tax consequences of owning and disposing of our shares or ADSs. This discussion applies only to U.S. holders. You will be a U.S. holder if you are the beneficial owner of shares orADSs and all of the following five points apply to you:
 (1)You own, directly, indirectly or by attribution, less than 10% of our share capital or voting stock;    (2)You are any one of the following:      (a)an individual who is a citizen or resident of the United States for U.S. federal income tax purposes,      (b)a corporation or certain other entities (taxable as corporations for U.S. federal income tax purposes) created in or organized under the laws of the United States or any state thereof,
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  (c)an estate the income of which is subject to U.S. federal income taxation regardless of its source, or      (d)a trust if a court within the United States is able to exercise primary supervision over the administration of the trust, and if one or more U.S. persons have the authority to control all substantial decisions of the trust;    (3)You are entitled to the benefits of the “Convention between the Government of the United States of America and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income andCapital”, signed August 31, 1994 (the “U.S.-France income tax treaty”) under the “Limitation on Benefits” article of that treaty;    (4)You hold your shares or ADSs in the company as capital assets; and    (5)Your functional currency is the U.S. dollar.
If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) holds shares or ADSs, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If you are apartner in a partnership that holds shares or ADSs, you are urged to consult your own tax adviser regarding the specific tax consequences of owning and disposing of such shares or ADSs.

Special rules may apply to U.S. expatriates, insurance companies, tax-exempt entities, banks, financial institutions, persons subject to the alternative minimum tax, securities broker-dealers, persons holding shares or ADS as part of a hedging transaction, straddle orconversion transaction, persons who acquired their shares or ADSs pursuant to the exercise of employee stock options or otherwise as compensation, among others. Those special rules, except certain rules applicable to certain tax-exempt investors, are not discussed in thisannual report. Furthermore, this discussion is based upon current U.S. and French law and practice, including the U.S. Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), the Treasury regulations promulgated thereunder, rulings, judicial decisions andadministrative pronouncements. This summary is subject to any changes to (or changes in the interpretation of) U.S. or French law or practice occurring after the date hereof, which may have retroactive effect. In addition, this summary is based, in part, upon representationsmade by the depositary to us and assumes that the Deposit Agreement, and all other related agreements, will be performed in accordance with its terms. Holders should consult their own tax advisers concerning the U.S. federal, state and local tax consequences of theownership or disposition of our shares or ADSs in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction.
***Taxation of Dividends*** *Withholding Tax and Avoir Fiscal*
As indicated under “French Taxation” above, under French domestic law, French companies must normally deduct a 25% French withholding tax from dividends paid to non-residents, and shareholders who are not resident in France are not eligible for the *avoir fiscal*.

Under the U.S.-France income tax treaty, this withholding tax is reduced to 15% if your ownership of the shares or ADSs is not effectively connected with a permanent establishment or a fixed base that you have in France and certain other requirements are satisfied.

As regards distributions made by us in 2004, additional provisions of the U.S.-France income tax treaty apply to you if you are considered an “eligible” U.S. holder of shares or ADSs.

As regards distributions that were made in 2004, you are considered “eligible” if your ownership of the shares or ADSs is not effectively connected with a permanent establishment or a fixed base that you have in France and any one of the following four points appliesto you:
 (1)You are an individual or other non-corporate holder that is a resident of the United States for purposes of the U.S.-France income tax treaty;
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 (2)You are a U.S. corporation, other than a regulated investment company, and do not own, directly or indirectly 10% or more of the capital of the company paying the dividends;    (3)You are a U.S. corporation which is a regulated investment company, and do not own, directly or indirectly 10% or more of the capital of the company paying the dividends, provided that less than 20% of your shares are beneficially owned by persons who are neithercitizens nor residents of the United States; or    (4)You are a partnership, estate or trust that is a resident of the United States for purposes of the U.S.-France income tax treaty, but only to the extent that your partners, beneficiaries or grantors would qualify as “eligible” under point (1) or point (2) above.
Assuming that non-resident individual shareholders will remain entitled to the transfer of the *avoir fiscal* for distributions made in 2004, an individual holder that is a resident of the United States as defined pursuant to the provisions of the treaty and whose ownership ofour shares is not connected with a permanent establishment in France should remain an “eligible” U.S. holder with respect to distributions to be made by our company in 2004. A U.S. holder other than an individual will no longer be “eligible” with respect to distributions tobe made in 2004.

If you are and so long as you will remain an eligible U.S. holder, we shall withhold tax from your dividend at the reduced rate of 15%, provided that you have previously established that you are a resident of the United States under the U.S.-France income tax treaty inaccordance with the following procedures:
 (1)You complete French Treasury Form RF I A EU-No. 5052 and send it to the French tax authorities before the date of payment of the dividend. If you are not an individual, you will also have to send to the French tax authorities an affidavit attesting that you are thebeneficial owner of all the rights attached to the full ownership of the shares or ADSs, including, among other things, the dividend rights.    (2)If you are not able to complete Form RF I A EU-No. 5052 before the date of payment of the dividend, you may complete a simplified certificate and send it to the French tax authorities. This certificate must state all of the following five points:      (a)You are a resident of the United States for purposes of the U.S.-France income tax treaty;      (b)Your ownership of our shares or ADSs is not effectively connected with a permanent establishment or a fixed base in France;      (c)You own all the rights attached to the full ownership of the shares or ADSs, including, among other things, the dividend rights;      (d)You fulfill all the requirements under the U.S.-France income tax treaty to be entitled to the reduced rate of withholding tax and to be entitled to receive the *avoir fiscal* should this remain applicable; and      (e)You claim the reduced rate of withholding tax and, so long as it exists, the payment of the *avoir fiscal* (if still applicable).
If you are not an eligible U.S. holder, but you are entitled to the reduced rate of withholding tax, French withholding tax will be levied at the reduced rate of 15%, provided, however, that you file French tax Form RF I B EU-No. 5053 (or any other form that mayreplace it in the future) with the paying agent before the date of payment of the dividend.

If you complete the applicable form or, where applicable, the five-point certificate before the dividend payment date, we shall deduct French withholding tax at the rate of 25%. In that case, you may claim a refund from the French tax authorities of the excesswithholding tax.

Assuming that non-resident individual shareholders will remain entitled to the transfer of the *avoir fiscal* for distributions made in 2004, and if you are an eligible U.S. holder, you may also be entitled to a payment from the French Treasury equal to the *avoir fiscal*,which you may claim by completing Form RF I A EU-No. 5052 and sending it to the French tax authorities before December 31 of the second year following

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the year during which the dividend was paid. You will be entitled to a payment equal to the *avoir fiscal*, less a 15% withholding tax on the *avoir fiscal*. As noted below, you will not receive thispayment until after the close of the calendar year in which the dividend was paid. To receive the payment, you must submit a claim to the French tax authorities and attest that you are subjectto U.S. federal income taxes on the payment of the *avoir fiscal* and the related dividend. For partnerships, estates or trusts, the partners, beneficiaries or grantors must make the attestation.

The *avoir fiscal* and any French withholding tax refund are generally expected to be paid within 12 months after the holder of shares or ADSs files Form RF I A EU-No. 5052. However, they will not be paid before January 15 following the end of the calendar year inwhich the dividend is paid.

The form or, where applicable, the certificate, together with its respective instructions, are provided by the depositary to all U.S. Holders of ADSs registered with the depositary and is also available from the United States Internal Revenue Service. The depositary willarrange for the filing with the French tax authorities of all forms or certificates completed by U.S. Holders of ADSs that are returned to the depositary in sufficient time.

For U.S. federal income tax purposes, the gross amount of any distribution and any related *avoir fiscal*, including any French tax withheld thereon, will be included in your gross income as ordinary dividend income when any such payment is actually or constructivelyreceived by you if you hold shares (or received by the depositary, if you hold ADSs), to the extent it is paid or deemed paid out of our current or accumulated earnings and profits as calculated for U.S. federal income tax purposes. To the extent that the amount of anydistribution exceeds our current and accumulated earnings and profits as calculated for U.S. federal income tax purposes, it will be treated first as a tax-free return of capital and thereafter any balance in excess of your adjusted tax basis will be taxable as capital gain.Dividends paid by us will not give rise to the dividends received deduction generally allowed to U.S. corporations with respect to dividends received from other U.S. corporations. Such dividends generally will constitute foreign source “passive” income for foreign tax creditpurposes (or, for some holders, foreign source “financial services” income).

Further, for U.S. federal income tax purposes, the amount of any dividend paid in euros including any French tax withheld will be equal to the U.S. dollar value of the euro amount received calculated by reference to the exchange rate in effect on the date the dividend isactually or constructively received by you, in the case of shares, or received by the depositary, in the case of ADSs, regardless of whether the payment is in fact converted into U.S. dollar. If you do not convert any such foreign currency that is distributed to you into U.S.dollars on the date you receive it, you generally will have a basis in that foreign currency equal to its U.S. dollar value on the date of receipt. You generally may be required to recognize U.S. ordinary income or loss resulting from currency exchange fluctuations upon asubsequent conversion or other disposition of the foreign currency. You also may be required to recognize foreign currency gain or loss if you receive a refund under the U.S.-France income tax treaty of tax withheld in excess of the treaty rate. This foreign currency gain orloss generally will be U.S. source ordinary income or loss.

French withholding tax imposed on the dividends you receive and on any *avoir fiscal* at 15% under the U.S.-France income tax treaty is treated as payment of a foreign income tax. You may take this amount as a credit against your U.S. federal income tax liability,subject to complex conditions and limitations, or alternatively you may choose to deduct all foreign taxes paid by you in a particular year as an itemized deduction. The United States Treasury has expressed concerns that parties to whom ADSs are released may be takingactions that are inconsistent with the claiming of foreign tax credits for U.S. holders of ADSs. Accordingly, the discussion above regarding the creditability of French withholding tax on dividends could be affected by future actions that may be taken by the United StatesTreasury.
***Recent U.S. Tax Law Changes Applicable to Individuals***
Under 2003 U.S. tax legislation, some U.S. holders (including individuals) are eligible for reduced rates of U.S. federal income tax (currently a maximum of 15%, but lower in some cases, depending on the individual’s general income tax bracket) in respect of “qualifieddividend income” received in taxable years beginning after December 31, 2002 and beginning before January 1,2009. The 2003 tax legislation did not specifically address the situation where a trust is recipient of qualified dividend income, but did preserve the

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normal trust pass-through provisions, so that beneficiaries should benefit from the reduced rates. It also appears that trusts themselves may benefit from the reduced rates (in cases where thequalified dividend income is not distributed, but retained within the trust). For this purpose, “qualified dividend income generally” includes dividends paid by non-U.S. corporations if, amongother things, certain minimum holding periods are met and either (i) the shares (or “ADSs”) with respect to which the dividend has been paid are readily tradable on an established securitiesmarkets in the United States, or (ii) the non-U.S. corporation is eligible for the benefits of a comprehensive U.S. income tax treaty (such as the U.S.-France income tax treaty) which contains an“exchange of information” provision. We currently believe that dividends paid with respect to our shares and ADSs will constitute qualified dividend income for U.S. federal income taxpurposes, provided that the individual U.S. holders of our shares and ADSs meet certain requirements. Some of the eligibility requirements for non-U.S. corporations are not entirely certain,however, and further guidance from the Internal Revenue Service is anticipated. In addition, the Internal Revenue Service is expected to issue certification procedures in the form of an annualinformation return whereby a non-U.S. corporation will state the basis for its position that its dividends are eligible for the reduced U.S. federal income tax rates.
*Taxation of Capital Gains*
If you are a resident of the United States for purposes of the U.S.-France income tax treaty, you will not be subject to French tax on any capital gain if you sell or dispose of your shares or ADSs, unless you have a permanent establishment or fixed base in France andthe shares or ADSs you sold or disposed of were part of the business property of that permanent establishment or fixed base. Special treaty “tie-breaker” rules apply to individuals who may be considered residents of both countries under the tax laws of each country.

In general, for U.S. federal income tax purposes, you will recognize capital gain or loss if you sell or dispose of your shares or ADSs in an amount equal to the U.S. dollar value (on date of sale) of the difference between the amount realized for the share or ADS andyour basis (determined in U.S. dollars, on the date of purchase) in the share or ADS. Such gain or loss generally will be U.S. source gain or loss and will be treated as long-term capital gain or loss if your holding period in the shares or ADSs exceeds one year at the time ofdisposition. The deductibility of capital losses is subject to significant limitations. If you are an individual, any capital gain generally will be subject to U.S. federal income tax at preferential rates if you meet specified minimum holding periods.

Deposits or withdrawals of shares by you of ADSs are not considered taxable events and therefore will not be subject to U.S. federal income tax.
*Passive Foreign Investment Company Status*
A non-U.S. corporation will be classified as a Passive Foreign Investment Company (a “PFIC”) for any taxable year if (1) 75% or more of the gross income of the corporation for the taxable year is “passive income”, or (2) the average percentage of assets held by thecorporation during the taxable year which produced passive income or which are held for the production of passive income is at least 50%. “Passive income” includes dividends, interest, rents or royalties except when such income is related directly or indirectly (i.e., through a“related person”, as that term is defined in the U.S. Internal Revenue Code) to the conduct of an active trade business, or from the conduct of an insurance business or the banking business. We believe that we did not qualify as a PFIC for our taxable year ending December31, 2004. However, if we were characterized as a PFIC for any taxable year, you would suffer adverse tax consequences. These consequences may include having gains realized on the disposition of our shares or ADSs treated for tax purposes as ordinary income rather thancapital gains and, further, being subject to cumulative interest charges based on the period that you held our stock. Furthermore, dividends paid by us during any period in which we are classified as a PFIC would not be “qualified dividend income” and would therefore betaxed at the higher rates applicable to other items of ordinary income. You should consult your own tax adviser regarding the potential application of the PFIC rules to your ownership of our shares or ADSs.

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*French Estate and Gift Taxes*
Under the “Convention between the United States of America and the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Estates, Inheritance and Gifts of November 24, 1978,” if you transfer yourshares or ADSs by gift, or if they are transferred by reason of your death, that transfer will only be subject to French gift or inheritance tax if one of the following applies:
 (1)you are domiciled in France at the time of making the gift or at the time of your death, or    (2)you used the shares or ADSs in conducting a business through a permanent establishment or fixed base in France, or you held the shares or ADSs for that use. *French Wealth Tax*
The French wealth tax does not generally apply to shares or ADSs if the holder is a “resident” of the United States for purposes of the U.S.-France income tax treaty (except the case where substantial participations are held by a U.S. resident individual).
*U.S. Information Reporting and Backup Withholding*
Dividend payments made to you and proceeds paid from the sale, exchange, redemption or disposal of your shares or ADSs may be subject to information reporting to the Internal Revenue Service and possible U.S. federal backup withholding imposed at a current rateof 30%. Backup withholding will not apply to a holder who furnishes a correct taxpayer identification number or certificate of foreign status and makes any other required certification, or who is otherwise exempt from backup withholding. U.S. persons who are required toestablish their exempt status generally must provide Internal Revenue Service Form W-9 (Request for Taxpayer Identification Number and Certification). Non-U.S. holders generally are not subject to U.S. information reporting or backup withholding. However, such holdersmay be required to provide certification of non-U.S. status (generally on Internal Revenue Service Form W-8BEN) in connection with payments received in the United States or through U.S.-related financial intermediaries. Backup withholding is not an additional tax. Amountswithheld as backup withholding may be credited against your U.S. federal income tax liability. You may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the Internal Revenue Service in a timelymanner and furnishing any required information.
**Dividends and Paying Agents**
Not applicable.
**Experts**
Not applicable.
**Documents on Display**
The documents referred to in this annual report can be read at the U.S. Securities and Exchange Commission’s public reference facilities at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Investors can obtain information on the operationof the public reference facilities by calling the Commission at 1-800-SEC-0330 or 1-202-942-8090. In addition, the SEC maintains an Internet site athttp://www.sec.gov that contains reports and other information regarding issues that file electronically with the SEC. These SEC filings are also available to the public from commercial document retrieval services. Material filed by the Company with the SEC can also beinspected at the offices of the NYSE at 20 Broad Street, New York, New York 10005.

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**ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
We are exposed to foreign currency risk and interest rate risk. Other market risk exposures are generated by our equity investments, commodity prices changes and counterparty risk.

We have defined strict policies and procedures to measure, manage and monitor our market risk exposures. Our policies do not permit any speculative market position. We have instituted management rules based on a segregation of operations, financial andadministrative control and risk measurement. We have also instituted, for all operations managed at corporate level, an integrated system that permits real time monitoring of hedging strategies.

Our policy is to use derivative instruments to hedge against our exposure to exchange rate and interest rate risks. However, to manage our exposure to commodity risks we enter into long-term contracts and, from time to time, we also use derivative instruments. Withthe prior authorization of our senior management, we have occasionally entered into agreements to limit our or another party’s exposure to equity risk.

We are subject to commodity risk with respect to price changes principally in the coal, pet coke, gas, electricity, fuel, gasoline and freight markets. We attempt to limit our exposure to changes in commodity prices by entering into long-term contracts and increasing ouruse of alternative fuels. For further information on our use of alternative fuels please see “Item 4 — Information About the Company”. From time to time, we use forward contracts to manage our exposure to these commodity risks. These contracts are not normally required tobe accounted for as derivative instruments as they are subject to the normal purchases or sales exception, as contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to beused or sold by us over a reasonable period in the normal course of business. When the normal purchases or sales exception is not applied, the derivatives are recognized for the purposes of the U.S. GAAP reconciliation at their fair value. Under French GAAP, these contractsare considered off-balance sheet commitments (*engagements hors bilan*) and are included in Note 26 to our consolidated financial statements. At December 31, 2004, such commitments included mainly forward purchase contracts and options for fuel oil, gas oil and coal andthe amount of our exposure under such contracts was not significant.

We are subject to equity risk with respect to our minority holdings in certain public companies. We occasionally enter into transactions with respect to our equity investments with financial institutions. We account for such instruments by taking the fair value at periodend in accordance with applicable valuation rules, and in accordance with French GAAP we record any negative variation between the fair value and the book value under the line item “Financial expenses, net.” For the year ended December 31, 2004, the variation waspositive in the amount of 1 million euros with respect to contracts limiting our exposure to equity risk.We believe we had no additional material exposure to such contracts. In addition, in respect of certain joint ventures and other acquisitions we have also entered intoshareholders agreements which have written call and put options with respect to our and our partners’ interests. For a discussion of our exposure to these options see “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources — Disclosuresabout Contractual Obligations and Contingent Commitments including tabular disclosure”, as well as Note 26 to our consolidated financial statements.
**Derivative Instruments**
In order to reduce our exposure to the risks of currency and interest rate fluctuations, we manage our exposure both on a central basis through our treasury department and in conjunction with some of our subsidiaries. We use various standard derivative financialinstruments, such as forward exchange contracts, interest rate and currency swaps and forward rate agreements, to hedge currency and interest rate fluctuations on assets, liabilities and future commitments, in accordance with guidelines established by our senior management.

We use financial instruments only to hedge existing or anticipated financial and commercial exposures. We undertake this hedging in the over-the-counter market with a limited number of highly rated counterparties. Our positions in derivative financial instruments aremonitored using various techniques, including the fair value approach.

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***Foreign Currency Risk***
*Translation Risk*. The assets, liabilities, income and expenses of our operating entities are denominated in various currencies. Our financial statements are presented in euros. Thus, assets, liabilities, income and expenses denominated in currencies other than the euro mustbe translated into euros at the applicable exchange rate to be included in our financial statements.

If the euro increases in value against a currency, the value in euros of assets, liabilities, income and expenses originally recorded in such other currency will decrease. Conversely, if the euro decreases in value against a currency, the value in euros of assets, liabilities,income and expenses originally recorded in such other currency will increase. Thus, increases and decreases in the value of the euro can have an impact on the value in euros of our non-euro assets, liabilities, income and expenses, even if the value of these items has notchanged in their original currency.

In 2004, approximately 13% of our net income was contributed by subsidiaries which prepare their financial statements in U.S. dollars and Canadian dollars. As such, a 10% change in the U.S. dollars/euro exchange rate and in the Canadian dollar/euro exchange ratewould have an impact on our net income of approximately 11 million euros, net of any other impact.

*Transaction Risk*. We are subject to foreign exchange risks as a result of our subsidiaries purchase and sale transactions in currencies other than their operating currencies.

With regard to transactional foreign currency exposures, our policy is to hedge all material foreign currency exposures through derivative instruments at the latest when a firm commitment is entered into or known. These derivative instruments are generally limited toforward contracts and standard foreign currency options, with terms generally less than one year. We also from time to time hedge future cash flows in foreign currencies, when such flows are highly probable. We do not enter into foreign currency exchange contracts for otherthan hedging purposes.

Each subsidiary is responsible for managing the foreign exchange positions arising as a result of commercial and financial transactions performed in currencies other than its domestic currency. Exposures are hedged with banks using foreign currency forward contractsand occasionally foreign currency options. However, our corporate treasury department attempts, when possible, to act as a direct counterparty of the Group subsidiaries and immediately return its position in the market. It also attempts to reduce our overall exposure by nettingpurchases and sales in each currency on a global basis when feasible.

As far as financing is concerned, our general policy is for subsidiaries to borrow and invest excess cash in the same currency as their functional currency. A significant portion of our financing is in U.S. dollars, British pounds and U.S. dollars related currencies,reflecting our significant operations in these countries. Part of this debt was initially borrowed in euros at the parent company level then converted into foreign currencies through currency swaps. At December 31, 2004, before these currency swaps, 10% of our total debt wasdenominated in U.S. dollars and 13% was denominated in British pounds. After taking into account the swaps, our U.S. dollar denominated debt amounted to 26% of our total debt, while our British pound denominated debt represented 20%.

For a further discussion of the financial instruments we use, see notes 23 and 24 to our consolidated financial statements.
***Interest Rate Risk***
We are exposed to interest rate risk through our debt and cash. Our interest rate exposure can besub-divided into the following risks:

*Price risk for fixed-rate financial assets and liabilities*. By contracting a fixed-rate liability, for example, we are exposed to an opportunity cost in the event of a fall in interest rates. Changes in interest rates impact the market value of fixed-rate assets and liabilities,leaving the associated financial income or expense unchanged.

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*Cash-flow risk for floating rate assets and liabilities*. Changes in interest rates have little impact on the market value of floating-rate assets and liabilities, but directly influence the future income or expense flows of the company.

In accordance with the general policy established by our senior management we seek to manage these two types of risks, including by using interest rate swaps and forward rate agreements. Our corporate treasury department manages our financing and hedges interestrate risk exposure in accordance with rules defined by our senior management in order to keep a balance between fixed rate and floating rate exposure.

Before taking into account the interest rate swaps, at December 31, 2004, 80% of our total debt was at fixed rate. After taking into account these swaps, the portion of fixed debt in our total debt amounted to 76%.

For a further discussion of our financial policy and interest rate exposure, see Notes 23 and 24 to our consolidated financial statements.
***Interest Rate Sensitivity***
The table below provides information about our interest rate swaps and debt obligations that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows by expected maturity dates and related weighted average interest ratesbefore swaps. For interest rate swaps, the table presents notional amounts by contractual maturity dates and related weighted average fixed interest rates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted averagefloating rates are based on effective rates at year-end.
  **At December** **31, 2004****Maturities of notional contract values**   **Average****Rate** **2005** **2006** **2007** **2008** **2009** **5 years** **Total** **Fair Value**              **(in million €)** **Liabilities**                            Long-term debt*  5.3  991  1,977  1,052  868  595  2,456  7,939  8,363 Fixed rate portion  5.5  837  1,778  765  719  54  2,405  6,558  6,982 Floating rate portion  4.3  154  199  287  149  541  51  1,381  1,381 Short-term borrowing  5.9  213  —  —  —  —  —  213  213 **Interest rate derivatives**                            Interest Rate swaps                            Pay Fixed                            Euro  8.4  865  100  62  70  89  —  1,186  -29 Other currencies  6.1  —  4  8  —  8  —  20  1 Receive Fixed                            Euro  2.2  48  —  —  —  —  600  648  30 Other currencies  5.1  —  —  —  —  —  147  147  -1  *including the current portion of long-term debt ***Exchange Rate Sensitivity***
The table below provides information about our debt and foreign exchange derivative financial instruments that are sensitive to exchange rates. For debt obligations, the table presents principal cash flows in foreign currencies by expected maturity dates. For foreignexchange forward agreements, the table presents the notional amounts by contractual maturity dates. These notional amounts are generally used to calculate the contractual payments to be exchanged under the contract.

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  **At December** **31, 2004****Maturities of notional contract values**   **2005** **2006** **2007** **2008** **2009** 4**5 years** **Total** **Fair Value**             **(in** **million €)** **Liabilities**                         **Debt in foreign currencies**  **585**  **186**  **208**  **248**  **100**  **1,318**  **2,645**  **2,761** U.S. dollar  224  30  82  147  66  234  783  815 British pound  21  34  8  8  8  1,022  1,101  1,169 Other currencies  340  122  118  93  26  62  761  777                           **Foreign Exchange Derivatives**                         ***Forward purchase agreements and currency swaps***                         U.S. dollar  130  —  —  —  —  —  130  -3 British pound  465  —  —  —  —  —  465  -4 Other currencies  156  —  —  —  —  —  156  -3 **Total**  **751**  **—**  **—**  **—**  **—**  **—**  **751**  **–10**                           ***Forward sales agreements and currency swaps***                         U.S. dollar  1,430  —  —  —  —  —  1,430  103 British pound  1,008  —  —  —  —  —  1,008  16 Other currencies  257  11  —  —  —  —  268  4 **Total**  **2,695**  **11**  **—**  **—**  **—**  **—**  **2,706**  **123**  ***Assumptions***
*Debt:*The fair values of long-term debt were determined by estimating future cash flows on a borrowing-by-borrowing basis, and discounting these future cash flows using an interest rate which takes into consideration the Company’s incremental borrowing rate at year-end for similar types of debt arrangements. Market price is used to determine the fair value of publicly traded instruments.

*Off balance sheet financial instruments:* The fair values of forward exchange contracts and interest and currency swaps have been calculated using market prices that the Company would pay or receive to settle the related agreements. Primarily, dealer quotes have beenused to estimate the fair values of these instruments at the reporting dates.
***Counterparty risk***
We are exposed to credit risk in the event of a counterparty’s default. We attempt to limit our exposure to counterparty risk by rigorously selecting the counterparties with which we trade, by regularly monitoring the ratings assigned by credit rating agencies and bytaking into account the nature and maturity of our exposed transactions. We establish counterparty limits which are regularly reviewed. We believe we have no material concentration of risk with any counterparty. We do not anticipate any third party default that might have asignificant impact on our financial condition and results of operations. See Note 24 to our consolidated financial statements.
**ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES**
Not applicable.

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**PART II**
**ITEM 13. DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES**
To our knowledge, there has been no material default in the payment of principal or interest or any other material default not cured within 30 days relating to debt of Lafarge or any of its subsidiaries.
**ITEM 14. MATERIAL MODIFICATIONS OF THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**
Other than set forth herein (including the financial statements and notes thereto), there have been no material modifications in the rights of our security holders and there are no specific assets securing any class of our securities.
**ITEM 15. CONTROLS AND PROCEDURES**
Bernard Kasriel, our Chief Executive Officer, and Jean-Jacques Gauthier, our Executive Vice President for Finance (Chief Financial Officer), have carried out an evaluation of the effectiveness of the Lafarge’s disclosure controls and procedures pursuant to Exchange Actrequirements as of the end of the period covered by of this annual report on Form 20-F. Based upon such evaluation and as of its date, both Mr. Kasriel and Mr. Gauthier have concluded that our disclosure controls and procedures are effective in ensuring that all materialinformation relating to Lafarge and its consolidated subsidiaries, and which is required to be filed in the annual report, has been made known to them by others within those entities, particularly during the period in which this annual report was being prepared.

There have been no significant changes in Lafarge’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Pursuant to the French act of August 1, 2003 (*Loi de sécurité financière*), the Chairman of our Board of Director is required to deliver a special report to the ordinary shareholders’ meeting regarding our Board’s governance practices, the status of the internal controlprocedures implemented by our company and on the restrictions that our Board of Directors has placed on the powers granted to the Chief Executive Officer. In general, this report describes our overall framework in terms of internal control, the internal control procedures overfinancial reporting we currently have in place and the evaluation carried out to comply with Section 302 of the Sarbanes-Oxley Act.

Regarding our overall framework in terms of internal control, the report for 2004 describes the objectives of our internal controls: our internal control policy — which states that internal control monitoring is under the responsibility of the general management of eachlegal or operational unit — and the formal methodology developed to analyze and manage risks, which includes the definition of internal control standards for operational and corporate processes. It also describes the role of the different stakeholders regarding internal control,and in particular the role of our Internal Audit department, which comprises 45 auditors, 15 of whom are attached to our subsidiary Lafarge North America Inc., and the role of the project team in charge of the implementation of the internal control requirements enforced bythe Sarbanes-Oxley Act and the *French Loi de sécurité financière*.

The report also describes the identification of key processes having an impact on financial reporting, as well as the detailed work carried out to assess our internal control over financial reporting. This includes documentation and testing of our internal control overfinancial reporting, as well as implementation of corrective action plans when needed. This work will lead to an evaluation of the operating effectiveness of our internal control over financial reporting, in compliance with Section 404 of the Sarbanes-Oxley Act.

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**ITEM 16. [RESERVED]** **ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT**
The Board of Directors, after having reviewed the composition of its Audit Committee, has determined that Mrs. Hélène Ploix qualifies as the committee’s financial expert in accordance with the audit committee financial expert requirements set by the Securities andExchange Commission.

Mrs. Hélène Ploix is an independent director pursuant to Rule 10A-3. She is currently the Chairman of Pechel Industries S.A.S., a French private investment fund and was previously deputy chief operating officer of the Caisse des Dépôts et Consignations, a Frenchpublic sector financial institution, and chairman of the Supervisory Board of CDC Participations, the institution’s investment fund, from 1989 to 1995. She served as special advisor for the single currency at KPMG Peat Marwick from 1995 to 1996.
**ITEM 16B. CODE OF ETHICS**
We adopted at the beginning of 2004 a code of business conduct that applies to all our officers and employees. This code promotes:
 •compliance with applicable laws and regulations;    •the prevention of conflicts of interests;    •the fact that proper attention be given to people and the environment;    •the protection of the group’s assets;    •fairness in financial reporting; and    •internal controls.
Training sessions are organized in relation to the principles set out in the code throughout the Group. The full text of the code is available on our website at www.lafarge.com. Amendments to, or waivers from one or more provisions of, the code will be disclosed on ourwebsite.
**ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
This table sets out the amount of fees billed for each of the last two fiscal years by our auditors, Deloitte & Associés, in relation to audit services, audit-related services, tax and other services provided to us.

 
  **2004** **2003** **2002**   **$** **€** **$** **€** **$** **€**           **(in** **millions)** Audit Fees  16.1  11.9  13.4  10.6  12.5  9.9 Audit-Related Fees  3.9  2.9  3.5  2.8  4.3  3.4 Tax Fees  2.6  1.9  1.0  0.8  0.6  0.5 Other Fees  —  —  —  —  1.4  1.1 **Total Fees**  **22.6**  **16.7**  **17.9**  **14.2**  **18.8**  **14.9** 
Deloitte & Associés has responsibility for the audit of the accounts of all of our French and foreign subsidiaries (except for the accounts of Lafarge North America Inc., which are audited by Ernst & Young).

Fees billed by Deloitte & Associés in 2004 were pre-approved by the Audit Committee and by our Board of Directors.

Auditors’ pre-approval policies and procedures were approved by our Board of Directors in 2004 and are contained in its charter. These policies and procedures provide that the Audit Committee shall:
 •update every year the list of services that can be provided by the auditors in light of new rules and regulations in this area and insure that the fees paid by the group to its auditors for services other than audit services (due diligence prior to an acquisition or disposal ofcompanies in the scope of consolidation, accounting advice and advice on control procedures prior to an acquisition, audit or advisory services for the benefit of third parties, specific procedures relating to the consolidation
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  process, the review of information systems and internal control procedures, the provision of attestations, etc.) do not exceed 60% of the total amount of audit fees paid,    •pre-approve audit fees relating to (i) the audit of Group’s financial statements (including Lafarge S.A. and its subsidiaries), (ii) the issuance of attestation or comfort letters in relation to the filing of a report or prospectus with a securities commission or another regulator,(iii) assistance in responding to the request of regulatory authorities, (iv) the issuance of an attestation relating to the Chairman’s report on internal controls required by French law and (v) advising on certain accounting treatments, the actual or potential impact of newlaws and regulations, the interpretation of French GAAP, IASB, FASB pronouncements, rules of the Securities and Exchange Commission and any other rules published by a regulatory body,    •pre-approve engagements relating to tax services (compliance with local tax laws, preparation and review of tax filings in accordance with applicable rules) and the corresponding fees,    •ensure that auditors do not engage in prohibited services for the group, and    •report the same to the Board of Directors for ratification.
The charter of the Board and its committees provides that the scope of audit services are to be pre-approved for each year. Any amendment to the list of audit services or any fees in excess of those that have been pre-approved (other than by reason of exchange ratevariations) shall be pre-approved by the Audit Committee and the Board.

Auditors shall confirm every year to the Audit Committee that the services pre-approved are in compliance with applicable rules and regulations relating to auditor’s independence.

The charter also provides that any engagement letter or service proposal prepared by the auditors shall be submitted to the Control and Consolidation Department which will verify whether the relevant services are within the scope of services that have been pre-approvedby the Audit Committee, failing which such services shall be presented to the Audit Committee for approval. Such services may only be initiated when confirmation has been received that they fall within the scope of services pre-approved by the Audit Committee or that theyhave been approved by the Audit Committee.

This table set outs the percentage of fees paid in 2004 for audit-related, tax or other services that have been pre-approved.
  **Percentage of fees pre-approved****versus total fees paid in 2004**    Audit-Related Fees  100% Tax Fees  100% Other  N/A  **ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES**
Not applicable.
**ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS**
Neither we nor any “affiliated purchaser”, as defined in Rule 10b-18 (a) under the Securities Exchange Act of 1934, as amended, made any purchase of the equity securities of Lafarge S.A. during the period covered by this report.

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**PART III**
**ITEM 17. FINANCIAL STATEMENTS**
Not applicable.
**ITEM 18. FINANCIAL STATEMENTS**
The following financial statements    are filed as part of this registration statement from pages F-1 through F-96,  incorporated herein by reference:
**Lafarge Financial Statements**  **Page**   Report            of Independent Registered Public Accounting Firm  F-1      Report            of Independent Registered Public Accounting Firm (Ernst & Young            LLP)  F-2      Consolidated Financial Statements of Income for the years endedDecember 31, 2004, 2003 and 2002  F-3      Consolidated Balance Sheets at December 31, 2004, 2003 and 2002  F-4      Consolidated Financial Statements of Cash Flows for the years endedDecember 31, 2004, 2003 and 2002  F-5      Consolidated            Financial Statements of Changes in Shareholders’ Equity for    the years ended December 31, 2004, 2003 and 2002  F-6      Notes to the Consolidated Financial Statements  F-7 
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**ITEM 19. EXHIBITS** **Exhibits**  1By-laws (*statuts*), as amended, of Lafarge S.A. (English translation).*  2Deposit Agreement, dated July 18, 2001 among Lafarge S.A., Morgan Guaranty Trust Company of New York, as depositary, and the holders of American Depositary Receipts.**  3Instruments with respect to long-term debt which do not exceed 10 percent of the total assets of the company and its consolidated subsidiaries have not been filed. The company agrees to furnish a copy of such instruments to the Commission upon request.  4.1Merger Agreement, dated January 2001, between Lafarge S.A. and Blue Circle Industries.**  4.2Lafarge (U.S.) Holdings Agreement and Articles of Trust, dated August 1, 2000, among Lafarge S.A. and Alfred J. Ross, John H.F. Haskell and The United States Trust Company, as trustees.**  4.2.1First Amendment to the Lafarge (U.S.) Holdings Agreement and Articles of Trust, dated May 23, 2003, among Lafarge S.A. and Alfred J. Ross of New York, New York, John H.F. Haskell, Jr. of New York, The Bank of New York, a New York banking corporation, astrustees.***  4.3Lafarge Paris-Zurich Holdings Agreement and Articles of Trust, dated August 1, 2000, among Lafarge (U.S.) Holdings, Lafarge (Swiss) Holdings and Alfred J. Ross, John H.F. Haskell and The United States Trust Company, as trustees.**  4.3.1Lafarge Paris-Zurich Holdings Agreement and Articles of Trust, dated May 23, 2003, among Lafarge S.A. and Alfred J. Ross of New York, New York, John H.F. Haskell, Jr. of New York, The Bank of New York, a New York banking corporation, as trustees.***  4.4Lafarge (Swiss) Holdings Agreement and Articles of Trust, dated August 1, 2000, among Financière Lafarge and Alfred J. Ross, John H.F. Haskell and The United States Trust Company, as trustees.**  4.5Lafarge (Venezuela) Holdings Agreement and Articles of Trust, dated August 1, 2000, among Lafarge Asland S.A. and Alfred J. Ross, John H.F. Haskell and The United States Trust Company, as trustees.**  4.5.1Lafarge (Venezuela) Holdings Agreement and Articles of Trust, dated May 23, 2003, among Lafarge S.A. and Alfred J. Ross of New York, New York, John H.F. Haskell, Jr. of New York, The Bank of New York, a New York banking corporation, as trustees.***  8List of significant subsidiaries.*  10.1Certification            of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley            Act of 2002 (10 U.S.C. § 1350).*  10.2Certification            of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley            Act of 2002 (10 U.S.C. § 1350).*  11.1Certification of Chief Executive Officer pursuant to Rule 13a-14(a).*  11.2Certification of Chief Financial Officer pursuant to Rule 13a-14(a).* *Provided herewith.**Incorporated by reference to the Registration Statement on Form 20-F filed by Lafarge with the Securities and Exchange Commission on July 19, 2001.***Incorporated by reference to Exhibits 4.2.1, 4.3.1 and 4.5.1, respectively, to the Annual Report on Form 20-F for the year ended December 31, 2003, filed with the Securities and Exchange Commission on March 26, 2004.
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**SIGNATURE**

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

     

LAFARGEBy:/s/ BERNARD KASRIELBernard KasrielChief Executive Officer

Date: March 25, 2005

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**REPORT OF INDEPENDENT REGISTERED      PUBLIC ACCOUNTING FIRM**
**To the Board of Directors            and Shareholders of Lafarge Paris, France:**
We have audited the accompanying      consolidated balance sheets of Lafarge S.A. and subsidiaries (“the      Group”) as of December 31, 2004, 2003 and 2002 and the related      consolidated statements of income, changes in shareholders’ equity,      and cash flows for each of the three years in the period ended December 31,      2004 (all expressed in euros). These consolidated financial statements      are the responsibility of the Group’s management. Our responsibility      is to express an opinion on these financial statements based on our audits.      We did not audit the consolidated financial statements of Lafarge North      America Inc. (a consolidated subsidiary), which statements reflect total      assets constituting 14%, 13% and 14% of consolidated total assets at December 31,      2004, 2003 and 2002 respectively, and total sales constituting 21%, 22%      and 24% of consolidated total sales for each of the three years in the      period ended December 31, 2004 respectively. Such financial statements,      prepared in accordance with accounting principles generally accepted in      the United States of America, were audited by other auditors whose report      has been furnished to us, and our opinion, insofar as it relates to the      amounts included for Lafarge North America Inc., is based solely on the      report of such other auditors.

We conducted our audits in accordance      with the standards of the Public Company Accounting Oversight Board (United      States). Those standards require that we plan and perform the audit to      obtain reasonable assurance about whether the consolidated financial statements      are free of material misstatement. Our audits included consideration of      internal control over financial reporting as a basis for designing audit      procedures that are appropriate in the circumstances but not for the purpose      of expressing an opinion on the effectiveness of the Group’s internal      control over financial reporting. Accordingly, we express no such opinion.      An audit also includes examining, on a test basis, evidence supporting      the amounts and disclosures in the financial statements, assessing the      accounting principles used and significant estimates made by management,      as well as evaluating the overall financial statement presentation. We      believe that our audits and the report of the other auditors provide a      reasonable basis for our opinion.

In our opinion, based on our audits      and the report of the other auditors, such consolidated financial statements      present fairly, in all material respects, the financial position of Lafarge      S.A. and subsidiaries as of December 31, 2004, 2003 and 2002, and      the results of their operations and their cash flows for each of the three      years in the period ended December 31, 2004, in conformity with accounting      principles generally accepted in France.

Our audits also included auditing      the adjustments to convert the consolidated financial statements of Lafarge      North America Inc. into accounting principles generally accepted in France      for the purpose of consolidation.

Accounting principles generally      accepted in France vary in certain significant respects from accounting      principles generally accepted in the United States of America. The application      of the latter would have affected the determination of net income for each      of the three years in the period ended December 31, 2004, and the      determination of shareholders’ equity and financial position at December 31,      2004, 2003 and 2002, to the extent summarized in Notes 30, 31, 32 and 33.

Our audits also comprehended the      translation of the euro amounts into United States dollar amounts and,      in our opinion, such translation has been made in conformity with the basis      stated in Note 2 (v). Such United States dollar amounts are presented solely      for the convenience of the readers in the United States of America.

**Deloitte & Associés**  Paris, France  March 25, 2005

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**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

The Board of Directors and Shareholders  Lafarge North America Inc.: 

We have audited the consolidated    balance sheets of Lafarge North America Inc. (a Maryland corporation and    a majority-owned subsidiary of Lafarge) and subsidiaries as of December 31,    2004, 2003 and 2002, and the related consolidated statements of income, shareholders’ equity,    comprehensive income and cash flows for each of the three years in the period    ended December 31, 2004 (not presented separately herein). Our audits    also included the financial statement schedule listed in the Index at Item 15(a)    (not presented separately herein). These financial statements and financial    statement schedule are the responsibility of the Company’s management.    Our responsibility is to express an opinion on these financial statements    and financial statement schedule based on our audits. 

We conducted our audits in accordance    with the standards of the Public Company Accounting Oversight Board (United    States). Those standards require that we plan and perform the audit to obtain    reasonable assurance about whether the financial statements are free of material    misstatement. An audit includes examining, on a test basis, evidence supporting    the amounts and disclosures in the financial statements. An audit also includes    assessing the accounting principles used and significant estimates made by    management, as well as evaluating the overall financial statement presentation.    We believe that our audits provide a reasonable basis for our opinion 

In our opinion, the financial statements    referred to above present fairly, in all material respects, the consolidated    financial position of Lafarge North America Inc. and subsidiaries at December 31,    2004, 2003 and 2002, and the consolidated results of their operations and    their cash flows for each of the three years in the period ended December 31,    2004, in conformity with U.S. generally accepted accounting principles. Also,    in our opinion, the related financial statement schedule, when considered    in relation to the basic financial statements taken as a whole, presents    fairly in all material respects the information set forth therein. 

As discussed in Note 1    to the consolidated financial statements, in 2003 the Company changed its    method of accounting for asset retirement obligations. Also, as discussed    in Note 19 to the consolidated financial statements, the Company changed    the date used to measure pension and other postretirement benefit plan assets    and obligations. 

We also have audited, in accordance    with the standards of the Public Company Accounting Oversight Board (United    States), the effectiveness of Lafarge North America Inc.’s internal    control over financial reporting as of December 31, 2004, based on criteria    established in Internal Control – Integrated Framework issued by the    Committee of Sponsoring Organizations of the Treadway Commission and our    report dated February 4, 2005 expressed an unqualified opinion thereon. 

/s/ Ernst & Young LLP

McLean, Virginia  February 4, 2005 

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**LAFARGE****CONSOLIDATED FINANCIAL STATEMENTS OF INCOME**
    **Years          ended December 31,**   **Notes** **2004****(Note 2 v)** **2004** **2003** **2002**            **(in          million $****except per****share data)** **(in          million €, except per share data)** **Sales**  (3)  **19,543**  **14,436**  **13,658**  **14,610** Cost          of goods sold     (13,041) (9,633) (9,088) (9,734)Selling          and administrative expenses     (2,403) (1,775) (1,750) (1,775)         **Gross            operating income**     **4,099**  **3,028**  **2,820**  **3,101** Depreciation  (3)  (1,224) (904) (886) (969)         **Operating            income on ordinary activities**  **(3)**  **2,875**  **2,124**  **1,934**  **2,132** Gains          on disposals, net  (5)  56  41  299  216 Other          income (expenses), net  (6)  (284) (210) (177) (525)**Operating            income**  **(3)**  **2,647**  **1,955**  **2,056**  **1,823** Financial          expenses, net  (7)  (700) (517) (568) (521)         **Income            before income tax, share of net income of equity affiliates, amortization            of goodwill and minority interests**     **1,947**  **1,438**  **1,488**  **1,302** Income          tax  (8)  (335) (247) (425) (448)         **Income            before share of net income of equity affiliates, amortization of            goodwill and minority interests**     **1,612**  **1,191**  **1,063**  **854** Share          of net income of equity affiliates  (4)  100  74  37  33 Amortization          of goodwill  (10)  (180) (133) (135) (158)Minority          interests  (20)  (357) (264) (237) (273)         **Net            income**     **1,175**  **868**  **728**  **456**          **Earnings            per share (euros)**  (9)  **6.98**  **5.16**  **4.92**  **3.52** **Diluted            earnings per share (euros)**  (9)  **6.77**  **5.00**  **4.77**  **3.49** Average          number of outstanding shares (in thousands)  (9)  168,253  168,253  147,949  129,629          
The accompanying notes are an integral    part of these consolidated financial statements

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**LAFARGE****CONSOLIDATED BALANCE SHEETS**
    **At          December 31,**   **Notes** **2004****(Note 2 v)** **2004** **2003** **2002**            **(in          million $)** **(in          million €)** **ASSETS**                Goodwill,          net  (10) 5,033  3,718  4,149  4,633 Intangible          assets, net  (10) 3,736  2,760  2,823  2,835 Property,          plant and equipment, net  (11) 14,407  10,641  10,402  11,667 Investments          in equity affiliates  (12) 319  236  383  652 Other          investments  (13) 758  560  481  462 Other          long-term assets  (14) 999  738  810  919          **Long-term            assets**     **25,252**  **18,653**  **19,048**  **21,168**          Inventories,          net  (15) 2,043  1,509  1,422  1,591 Accounts          receivable-trade, net  (16) 2,781  2,054  1,754  1,816 Other          receivables  (17) 1,222  903  977  955 Cash          and cash equivalents *  (18) 2,238  1,653  1,634  1,109          **Current            assets**     **8,284**  **6,119**  **5,787**  **5,471**          **Total            assets**  **(3****)** **33,536**  **24,772**  **24,835**  **26,639**                           **SHAREHOLDERS’ EQUITY            AND LIABILITIES**                Common          stock  (19) 926  684  669  532 Additional          paid-in capital  (19) 8,123  6,000  5,798  4,546 Retained          earnings     6,143  4,538  4,053  3,548 Cumulative          translation adjustments     (3,716) (2,745) (2,335) (1,645)         **Shareholders’ equity**     **11,476**  **8,477**  **8,185**  **6,981**          Minority          interests  (20) 3,356  2,479  2,191  2,155 Other          equity  (21) 157  116  118  134 Deferred          taxes  (8) 990  731  870  979 Provisions  (22) 2,613  1,930  1,857  1,922 Long-term          debt  (23) 9,406  6,948  7,370  10,271          **Long-term            liabilities**     **16,522**  **12,204**  **12,406**  **15,461**          Accounts          payable, trade     1,928  1,424  1,234  1,205 Other          payables  (25) 1,980  1,463  1,685  1,938 Current          portion of long-term debt  (23) 1,342  991  985  524 Short-term          bank borrowings  (23) 288  213  340  530          **Current            liabilities**     **5,538**  **4,091**  **4,244**  **4,197**          **Total            shareholders’ equity and liabilities**     **33,536**  **24,772**  **24,835**  **26,639**                        *At December 31, 2004 and          2003 “Cash and cash equivalents” includes treasury shares          for 69 million euros and 71 million euros respectively, which aim at          covering employee stock purchase option plans.
The accompanying notes are an integral    part of these consolidated financial statements

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**LAFARGE****CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS**
    **Years          ended December 31,**   **Notes** **2004****(Note 2 v)** **2004** **2003** **2002**            **(in          million $)** **(in          million €)** **NET            CASH PROVIDED BY OPERATING ACTIVITIES**                Net          income     1,175  868  728  456 *Adjustments            to reconcile net income to net cash provided by operating activities:*                Minority          interests  (20) 357  264  237  273 Depreciation          and amortization of assets and goodwill     1,404  1,037  1,021  1,127 Share          of net income of equity affiliates less dividends received     (73) (54) (11) (17)Gains          on disposals, net  (5) (56) (41) (299) (216)Deferred          income taxes and tax provisions     (253) (187) 15  92 Other,          net     306  226  108  241 Changes          in operating working capital items (see analysis below)     (510) (377) 290  (165)         **Net            cash provided by operating activities**     **2,350**  **1,736**  **2,089**  **1,791**          **NET            CASH USED IN INVESTING ACTIVITIES**                Capital          expenditures  (3) (1,534) (1,133) (864) (1,149)Investment          in consolidated companies (1)     (418) (309) (218) (337)Investment          in non-consolidated companies     (150) (111) (102) (27)Disposals          (2)     777  574  603  725 Net          (increase) decrease in other long-term assets     116  86  (92) 14          **Net            cash used in investing activities**     **(1,209****)** **(893****)** **(673****)** **(774****)**         **NET            CASH PROVIDED BY FINANCING ACTIVITIES**                Proceeds          from issuance of common stock     340  251  1,438  260 (Increase)          decrease in treasury shares     —  —  —  (4)Increase          (decrease) in other equity     1  1  —  — Dividends          paid (including those paid to minority interests in subsidiaries)     (682) (504) (395) (388)Proceeds          from long-term debt     1,297  958  173  642 Repayment          of long-term debt     (2,414) (1,783) (2,042) (751)Increase          (decrease) in short-term debt     384  284  (40) (685)         **Net            cash (used in) provided by financing activities**     **(1,074****)** **(793****)** **(866****)** **(926****)**         **Increase            (Decrease) in cash and cash equivalents**     **67**  **50**  **550**  **91** Net          effect of foreign currency translation on cash and cash equivalents     (41) (31) (105) (183)Treasury          shares reclassification     —  —  80  — Cash          and cash equivalents at beginning of year     2,212  1,634  1,109  1,201          **Cash            and cash equivalents at end of year**  (18**)** **2,238**  **1,653**  **1,634**  **1,109**          (1)          Net of cash and cash equivalents of companies acquired     66  49  25  — (2)          Net of cash and cash equivalents of companies disposed of     9  7  4  1                  **SUPPLEMENTAL            DISCLOSURES**                **Analysis            of changes in operating working capital items**                (Increase)          decrease in inventories     (146) (108) 34  (40)(Increase)          decrease in accounts receivable-trade     (329) (243) (38) 446 (Increase)          decrease in other receivables     22  16  (71) 11 Increase          (decrease) in accounts payable-trade     192  142  86  (532)Increase          (decrease) in other payables     (249) (184) 279  (50)**Cash            payments during the period for**                Interest          expense     539  398  470  604 Income          taxes     615  454  399  442 
The accompanying notes are an integral    part of these consolidated financial statements

 

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**LAFARGE****CONSOLIDATED FINANCIAL STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**
  **Outstanding****shares** **Treasury****shares** **Common****stock** **Additional****paid-in****capital** **Retained****earnings** **Cumulative****translation****adjustments** **Shareholders’****equity** **Comprehensive****income**             **(in          number of shares)**   **(in          million €)** **Balance            at January 1, 2002** **130,145,800** **1,864,372** **521** **4,324** **3,389** **(352****)****7,882** **724** Net          income — — — — 460 (4)456 456 Dividends          paid — — — — (297)— (297)— Issuance          of common stock (dividend reinvestment plan) 1,400,494 — 5 127 — — 132 — Exercise          of stock options 171,583 — 1 7 — — 8 — Employee          stock purchase plan 708,718 — 3 42 — — 45 — Issuance          of common stock (Cementia exchange offer) 453,838 — 2 46 — — 48 — Purchase          of treasury shares — 56,587 — — (4)— (4)— Change          in translation adjustments — — — — — (1,289)(1,289)(1,289)          **Balance            at December 31, 2002** **132,880,433** **1,920,959** **532** **4,546** **3,548** **(1,645****)****6,981** **(833****)**          Net          income — — — — 728 — 728 728 Dividends          paid — — — — (303)— (303)— Issuance          of common stock 31,831,528 — 127 1,135 — — 1,262 — Issuance          of common stock (dividend reinvestment plan) 2,391,039 — 10 111 — — 121 — Exercise          of stock options 114,813 — — 6 — — 6 — Treasury          shares* — (1,122,989)— — 80 — 80 — Change          in translation adjustments — — — — — (690)(690)(690)          **Balance            at December 31, 2003** **167,217,813** **797,970** **669** **5,798** **4,053** **(2,335****)****8,185** **38**           Net          income — — — — 868 — 868 868 Dividends          paid — — — — (383)— (383)— Issuance          of common stock (dividend reinvestment plan) 3,483,477 — 14 193 — — 207 — Exercise          of stock options 217,788 — 1 9 — — 10 — Change          in translation adjustments** — — — — — (410)(410)(410)          **Balance            at December 31, 2004** **170,919,078** **797,970** **684** **6,000** **4,538** **(2,745****)****8,477** **496**            *As of December 31, 2003,          treasury shares, which aim at covering employee stock purchase option          plans, were classified as short-term investments.**Of which (279) million          euros related to the accounting for goodwill and market shares on foreign          subsidiaries (Note 2(e) — Accounting for business combinations).
The accompanying notes are an integral    part of these consolidated financial statements

 

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**Note 1 — Business            Description**
As used herein, the terms “Lafarge      S.A.” or “the parent company” refer to Lafarge, a *société anonyme*organized      under French law, without its consolidated subsidiaries. The terms the “Group” or “Lafarge” refer      to Lafarge S.A. together with its consolidated subsidiaries.

The Group is headquartered in France      and specializes in the production of materials for the construction industry      in all the world’s major markets. At December 31, 2004, the Group      operated in the following business segments: Cement, Aggregates and Concrete,      Roofing and Gypsum. The Group’s customers are from both the private      and public sectors.

Lafarge is listed on the “Eurolist” (Euronext      Paris S.A) and since July 23, 2001, on the New York Stock Exchange (“NYSE”).
**Note 2 — Summary            of Significant Accounting Policies**  ***(a)******Basis of preparation***
The consolidated financial statements      of the Group have been prepared in accordance with the provisions of French      accounting legislation and standards (“French GAAP”).

French GAAP differs in certain      respects from accounting principles generally accepted in the United States      of America (“U.S. GAAP”). A description of the main differences      is set forth in Notes 30, 31 and 32.
***(b)******Principles of consolidation***
Investments over which the Group      has direct or indirect control of more than 50% of the outstanding voting      shares, or over which it exercises effective control, are fully consolidated.      Control exists when the Group has the power directly or indirectly, to      govern the financial and operating policies of an enterprise so as to obtain      benefits from its activities.

Investments in companies in which      the Group and third party investors have agreed to exercise joint control      are consolidated by the proportionate consolidation method with the Group’s      share of the joint ventures results of operations, assets and liabilities      recorded in the consolidated financial statements.

Investments in which the Group      has an equity interest representing a voting right of more than 20% and      over which the Group exercises significant influence, but not control,      are accounted for under the equity method.

All other investments in affiliates,      which are not consolidated, are accounted for at cost.

Revenues and expenses of subsidiaries      acquired or disposed of during the year are recognized in the consolidated      financial statements of income from the initial date of control or up to      the date control was transferred, respectively.

All significant intercompany balances      and transactions have been eliminated in consolidation. With respect to      proportionately consolidated companies, intercompany transactions are eliminated      on the basis of the Group’s interest in the entity involved.
***(c)******Use of estimates***
The preparation of financial statements      in conformity with French GAAP requires the use of estimates and assumptions      that affect the reported amounts of assets and liabilities, such as depreciation      and provisions, the disclosure of contingent assets and liabilities at      the date of the financial statements and the reported amounts of revenues      and expenses. Management reviews its estimates on an ongoing basis using      currently available information. Changes in facts and circumstances may      result in revised estimates, and actual results

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

could differ from the estimates.    Significant estimates made by the management in the preparation of these    financial statements include assumptions used for pension liabilities, deferred    taxes, valuation estimates for long-lived assets and other investments, reserves    as well as recorded and disclosed amounts for certain financial instruments.
  ***(d)******Translation of financial              statements denominated in foreign currencies***
The functional currency of the      Group’s foreign subsidiaries is the applicable foreign currency except      for enterprises operating in hyper-inflationary economies. The accounts      of foreign subsidiaries outside the Euro zone are translated into the Euro      using the year end closing rate of exchange for all balance sheet accounts      and the average annual rate of exchange is applied to revenues, expenses      and amounts presented on the statements of cash flows. The resulting translation      adjustments are included as a separate component of shareholders’ equity.

For companies that operate in countries,      which have been designated as hyper-inflationary, fixed assets, investments      and operating supplies are not revalued and the original values are translated      to U.S. dollar, which is considered by the Group as the functional currency      in these countries, at historical rates of exchange. Revenues and expenses      are translated to this functional currency using the exchange rates of      the month of the transaction date. Translation gains and losses arising      from the translation of revenues and expenses are included in income. In      defining hyper-inflationary, the Group employs criteria, which include      characteristics of the economic environment, such as inflation and foreign      currency exchange rate fluctuations, and evaluates this information in      relation to its economic exposure in the subsidiaries’ operations.

As at December 31, 2004, Turkey      is the only country for which this treatment is applied.

The exchange rates for the translation      of main currencies were as follows:
**1            for euro monetary unit** **2004** **2003** **2002**   **Average****rate** **Year          end****rate** **Average****rate** **Year          end****rate** **Average****rate** **Year          end****rate**         Brazilian          real (BRL)  0.2748  0.2763  0.2871  0.2727  0.3619  0.2690 Canadian          dollar (CAD)  0.6184  0.6092  0.6320  0.6160  0.6743  0.6065 Chilean          peso (CLP)  0.0013  0.0013  0.0013  0.0013  0.0015  0.0013 Chinese          yuan (CNY)  0.0972  0.0887  0.1068  0.0957  0.1279  0.1152 Egyptian          pound (EGP)  0.1295  0.1186  0.1499  0.1277  0.2290  0.2062 British          pound (GBP)  1.4736  1.4183  1.4452  1.4188  1.5903  1.5373 Moroccan          dirham (MAD)  0.0905  0.0889  0.0922  0.0902  0.0961  0.0937 Malaysian          ringitt (MYR)  0.2116  0.1932  0.2326  0.2083  0.2784  0.2509 Nigerian          naira (NGN)  0.0060  0.0055  0.0068  0.0057  0.0088  0.0075 Philippine          peso (PHP)  0.0143  0.0131  0.0163  0.0143  0.0205  0.0178 Polish          zloty (PLN)  0.2206  0.2448  0.2273  0.2127  0.2595  0.2487 U.S.          dollar (USD)  0.8043  0.7342  0.8842  0.7918  1.0582  0.9536 Venezuelan          bolivar (VEB)  0.0004  0.0004  0.0006  0.0005  0.0009  0.0007 South          African rand (ZAR)  0.1247  0.1300  0.1172  0.1201  0.1010  0.1110   ***(e)******Business combinations***
Since January 1, 1989, all business      combinations have been accounted for using the purchase method of accounting.      Under this method, assets and liabilities acquired by the Group are recorded      at their fair value. Under the purchase method, the excess of the purchase      price over the fair value of the net assets acquired, if any, is allocated      to goodwill. Before January 1, 1989, positive and negative goodwill were      written off against retained earnings.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

When the Group initially acquires      a controlling interest in a business, any portion of the assets and liabilities      retained by minority shareholders is also recorded at its fair value.

Accordingly, if the Group subsequently      acquires the assets and liabilities considered held by minority shareholders,      no additional fair value adjustment is recorded at that time.

Initial estimates of fair values      are finalized within a one-year allocation period. Subsequent to this period,      releases of estimated provisions in excess of the actual costs incurred      related to the purchase price allocation are applied to goodwill.

Non-amortizable intangible assets,      such as market share, are recognized through the purchase price allocation      to the extent that they can be valued using a sufficiently accurate and      objective method based on economic benefits. This value is reviewed periodically      on the same basis.

The Group amortizes goodwill on      a straight-line basis over the estimated period of benefit, up to 40 years,      which reflects the long-term nature of our business.

Negative goodwill is amortized      into income on a rational, systematic basis, based upon estimates of future      operating results of the acquiree at the date of the acquisition.

Prior to January 1, 2004, the Group      recorded goodwill and market shares relating to the acquisition of foreign      subsidiaries, joint ventures and equity investments prior to January 1,      2001, in the currency of the acquirer. Starting January 1, 2004, such goodwill      and market shares are recorded in the currency of the acquiree. This accounting      method reduces the net value of goodwill by 176 million euros and the value      of market shares by 113 million euros against cumulative translation adjustments.
***(f)******Revenue recognition***
Consolidated revenues represent      the value, before sales tax, of goods, products and services sold by consolidated      enterprises in the ordinary activities and after elimination of intra-group      sales.

Revenues from the sale of goods      and products are recorded when ownership is transferred.

Amounts billed to a customer in      a sales transaction related to shipping and handling are included in “Sales”,      and costs incurred by the seller for shipping and handling are classified      as “Cost of goods sold.”
***(g)******Other income (expenses)***
Other income (expenses) results      from operations and includes net restructuring costs, depreciation, provisions      for litigation and other non-recurring items.
***(h)******Intangible assets***
Intangible assets include software,      mineral rights, and real estate development rights. Market shares, which      are valued as described in Note 2 (e), are not amortized.

Intangible assets are amortized      using the straight-line method over their useful lives ranging from 3 to      5 years, except for mineral rights, which are amortized based upon      tonnes extracted, and real estate development rights, which are amortized      over the estimated life of the development program.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(i)******Property, plant and              equipment***
Property, plant and equipment is      recorded at historical cost. The Group capitalizes assets financed through      capital leases where the lease arrangement transfers to the Group substantially      all the benefits and risks of ownership. Lease arrangement are evaluated      upon the following criteria:
 •leased assets expected          period of future benefit in relation to the assets’ useful lives,    •the total future payments          in relation to the fair value of the financed assets,    •existence of transfer of          ownership,    •existence of a favorable          purchase option.
Interest on borrowings directly      related to the financing of construction projects and incurred during development      activities is capitalized to project costs.

Depreciation on property, plant      and equipment is calculated as follows:
 •Land is not depreciated.    •Mineral reserves consisting          of proven and probable limestone, gypsum and aggregates reserves are          depleted using the units-of-production method,    •Buildings are depreciated          using the straight-line method over estimated useful lives varying          from 20 years for industrial buildings to 50 years for offices          or residential properties.    •Plant, machinery, equipment          and installation costs are depreciated using the straight-line method          over their estimated useful lives, ranging from 8 to 30 years.
The historical cost of assets are      classified into specific cost categories based upon their distinct characteristics.      Each cost category represents components with specific useful lives.
***(j)******Other investments***
Other investments, which consist      either of shares held in non consolidated companies or shares in listed      companies treated as long-term equity investments are recorded at the lower      of historical cost or net realizable value, assessed on an individual investment      basis. The net realizable value is measured according to such criteria      as the Group share of net assets, the stock price or expected future profitability,      weighted by the effects of holding these investments in terms of the Group’s      strategy, or synergy with existing businesses.
***(k)******Impairment of long-lived              assets*** *Goodwill and market            share*
The net book value of goodwill      and market share is reviewed annually to take into consideration factors      that may have affected the assets value and recoverability. Our four Divisions      have been considered as the four segments of the Group including reporting      units, defined as being in general the activity of a segment in a country.      In some specific cases, a reporting unit may be composed of different activities      in one or several countries, or similar activities in several countries.      The reporting unit is the level used by the Group to organize and present      activities and results in its internal reporting.

In its goodwill and market share      impairment test, the Group uses a combination of a market approach and      an income approach. In the market approach, we compare the carrying value      of our reporting units with multiples of their Gross Operating Income.      For reporting units presenting an impairment risk according to the market      approach we then use the income approach. In the income approach, we estimate      the discounted value of the sum of the expected future cash flows. If the      carrying value of the reporting unit is higher than the 

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

measured fair value of the related    assets and liabilities, the Group records extraordinary amortization of goodwill    and market share to reduce the carrying value of the reporting unit to its    determined fair value.

Evaluations for impairment are      significantly impacted by estimates of future prices for our products,      the evolution of expenses, economic trends in the local and international      construction sector, the expectations on long-term development of emerging      markets and other factors. This also depends on the discount rates and      perpetual growth rates used. The Group has defined country specific discount      rates for each of its reporting units based on their Weighted Average Cost      of Capital. In some cases, the Group uses a third party valuation as part      of its impairment test.

The Group early adopted the regulation      CRC 2002-10 relative to depreciation of assets.
*Property, plant and            equipment*
Whenever events or changes in circumstances      indicate that the carrying amount of property, plant and equipment may      not be recoverable, the carrying value is compared with the estimated undiscounted      future cash flows expected to result from the use of the assets and their      possible disposition. If the sum of expected future cash flows is less      than the carrying amount of these assets, an impairment loss is recognized,      based on the fair value of these assets, derived from the present value      of expected future cash flows.

In case of revisions in depreciable      lives to reflect changes in operating lives of assets including changes      due to restructuring or planned replacements of assets, a depreciation      charge is recorded in the line item “other income and expenses”.
***(l)******Inventories***
Inventories are stated at the lower      of cost or market. Cost is determined using the weighted-average method.
***(m)******Cash and cash equivalents***
Cash and cash equivalents consist      of cash and highly liquid investments with an original maturity date of      generally less than three months from the time of purchase.

Starting January 1, 2003, cash      equivalents include treasury shares owned to cover employee stock purchase      option plan. They are accounted for at their historical cost and impaired      when the market value is less than the carrying amount of these stocks.
***(n)******Financial instruments***
The Group enters into financial      derivative contracts for hedging purposes only. These transactions are      executed in order to reduce its exposure to changes in interest rates and      foreign currency exchange rates on firm or highly probable commitments.

Forward exchange contracts and      foreign currency swaps are used to hedge foreign currency exchange rate      exposures. Unrealized gains and losses on these investments are recorded      in the carrying amount of the hedged asset or liability on firm commitments.      Contract premiums are amortized ratably over the term of the hedge arrangement.

The Group enters into various interest      rate swaps to manage its interest rate exposure. The objective of the swaps      is, depending on the circumstances, to modify instruments from fixed rate      to floating and floating rate to fixed. The difference between interest      payable and receivable is recognized as interest expense or interest income.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(o)******Pensions, end of              service benefits and other post retirement benefits*** *Defined contribution            plans*
The Group accounts for pension      costs related to defined contribution pension plans as they are incurred.
*Defined benefit plans*
Estimates of the Group’s pension      and end of service benefit obligations are calculated annually with the      assistance of independent actuaries, using the projected unit credit method.      This method considers best estimate actuarial assumptions including, the      probable future length of the employees’ service, the employees’ final      pay, the expected average life span and probable turn-over of beneficiaries.

The Group’s obligations are      discounted by country based upon discount rates appropriate in the circumstances.      The obligations are recognized based upon the proportion of benefits earned      by employees as services are rendered.

Assets held by external entities      to fund future benefit payments are valued at fair value.

For most defined benefit plans,      changes in actuarial assumptions which affect the value of the obligations      and the differences between expected and actual long-term return on plan      assets are accounted for as actuarial gains and losses.

Current period pension expense      is comprised of the increase in the obligation, which results from the      additional benefit earned by employees in the period, and interest expense,      which results from the outstanding pension obligation. The amounts described      above are reduced by the expected return on plan assets. Actuarial gains      and losses which exceed a corridor corresponding to 10% of the greater      of the fair value of plans assets or plan obligations are amortized to      income over future periods.

Modifications of pension plans      are, in general, amortized over the expected average remaining service      lives of the related employees.
*Other post-retirement            benefits*
Certain of the Group’s subsidiaries      grant to their employees and dependants post-retirement medical coverage      or other types of post-employment benefits. These costs are calculated      based upon actuarial determinations and are recorded over the expected      average remaining service lives of the employees.
***(p)******Restructuring***
Reserves for restructuring costs      are provided when the restructuring plans have been finalized and approved      by the Group’s management, have been announced before the balance      sheet date and result in an obligation to third parties. Such costs may      include estimated facility closing costs and employees’ severance      and termination benefits.

Where a business combination has      occurred, restructuring costs related to capacity reductions of the acquirer      which are a consequence of overcapacity and costs related to capacity reductions      of the acquiree are included in the cost of the acquisition.
***(q)******Site restoration***
Where the Group is legally, contractually      or constructively required to restore a quarry site, the estimated costs      of site restoration are accrued and amortized to cost of goods sold ratably,      on a unit-of-production basis, over the operating life of the quarry. The      estimated future costs for known restoration requirements are determined      on a site by site basis and, are calculated based on the present value      of estimated future costs.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(r)******Environmental costs***
Costs that result in future economic      benefits such as extending useful lives, increased capacity, safety or,      those costs incurred to mitigate or prevent future environmental contamination      are capitalized. When the Group determines that it is probable that a liability      for environmental costs exists, an undiscounted estimate of the future      remediation is recorded as a provision without the offset of potential      insurance recoveries. Environmental costs, which are not included above,      are expensed as incurred.
***(s)******Product warranties***
The Group’s warranty policy      generally provides a 30-year coverage for roofing tile. The Group’s      policy is to accrue the undiscounted estimated cost of warranty coverage      at the time the sale is recorded.
***(t)******Deferred income taxes***
Deferred income taxes are accounted      for using the balance-sheet liability method on temporary differences between      the tax basis of assets and liabilities and their carrying amounts in the      balance sheet (including tax losses available for carry forward). Deferred      taxes are measured by applying currently enacted tax laws. Deferred tax      assets are recognized when it is reasonably certain that they will be recovered      in future years.
***(u)******Research and development***
The Group is committed to improving      its manufacturing process, maintaining product quality and meeting existing      and future customer needs. These objectives are pursued through various      programs. Research and development costs which are expensed as incurred,      were 54 million euros, 56 million euros and 55 million euros for 2004,      2003 and 2002, respectively.
***(v)******Convenience translation***
The consolidated balance sheet      and consolidated financial statements of income and cash flows include      the presentations of amounts as of and for the year ended December 31,      2004 denominated in U.S. dollars (“$” or “U.S. dollar”).      These amounts are presented for the convenience of the reader and have      been prepared using an exchange rate of 1.00 euro to $1.3538, which was      the Noon Buying Rate on December 31, 2004. Such translation should      not be construed as representation that the Euro amount has been, could      have been, or could in the future be, converted into U.S. dollar at that      or any other exchange rate.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 3 — Business            Segment and Geographic Area Information**
Operating segments are defined      as components of an enterprise for which separate financial information      is available and is evaluated regularly by the enterprise’s chief      operating decision makers in order to allocate resources and assess performance.

Group operates in the following      four business segments: Cement, Aggregates and Concrete, Roofing and Gypsum,      each of which represent separately managed strategic business units that      have different capital requirements and marketing strategies. Each of the      business segments is managed separately because each business segment develops,      manufactures and sells distinct products.

Group management internally evaluates      its performance based upon operating income on ordinary activities (defined      as operating income before net gains on disposals and other expenses, net)      and capital employed (defined as the total of goodwill, intangible and      tangible assets, investments in equity affiliates and working capital)      as disclosed in its business segment and geographic area information.
 •The Cement segment produces          and sells a wide range of cement and hydraulic binders adapted to the          needs of the construction industry.    •The Aggregates and Concrete          segment produces and sells aggregates, ready mix concrete, other concrete          products and other products and services related to paving activities.    •The Roofing segment produces          and sells roof tiles, roofing accessories and chimney systems.    •The Gypsum segment mainly          produces and sells drywall for the commercial and residential construction          sectors.
The accounting policies applied      to the segment earnings are in agreement with those described in Note 2.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(a)******Business segment              information***    **Cement** **Aggregates****and****Concrete** **Roofing** **Gypsum** **Other** **Total**           **(in          million €)** **2004**                   Gross          sales  7,403  4,761  1,493  1,353  51  15,061 Less:          intersegment  (593) (14) —  (13) (5) (625)        **Sales**  **6,810**  **4,747**  **1,493**  **1,340**  **46**  **14,436** Depreciation  (511) (187) (114) (67) (25) (904)Operating          income on ordinary activities  1,567  337  150  129  (59) 2,124 Operating          income  1,489  346  112  129  (121) 1,955 Share          of net income of equity affiliates  40  4  11  13  6  74 Investments          in equity affiliates  70  19  81  48  18  236 Goodwill,          net  2,072  722  720  203  1  3,718 Capital          employed  12,122  3,313  2,104  1,090  305  18,934 Total          assets  14,020  4,797  2,536  1,436  1,983  24,772 Capital          expenditures  631  285  124  48  45  1,133                     **2003**                   Gross          sales  6,945  4,483  1,510  1,204  106  14,248 Less:          intersegment  (562) (18) —  (10) —  (590)        **Sales**  **6,383**  **4,465**  **1,510**  **1,194**  **106**  **13,658** Depreciation  (491) (192) (116) (66) (21) (886)Operating          income on ordinary activities  1,466  283  142  84  (41) 1,934 Operating          income  1,431  309  88  74  154  2,056 Share          of net income of equity affiliates  42  5  8  12  (30) 37 Investments          in equity affiliates  218  15  75  42  33  383 Goodwill,          net  2,400  715  798  188  48  4,149 Capital          employed  12,324  3,080  2,180  1,123  284  18,991 Total          assets  14,365  4,617  2,592  1,381  1,880  24,835 Capital          expenditures  502  172  88  58  44  864                     **2002**                   Gross          sales  7,520  4,787  1,538  1,155  210  15,210 Less:          intersegment  (572) (19) —  (9) —  (600)        **Sales**  **6,948**  **4,768**  **1,538**  **1,146**  **210**  **14,610** Depreciation  (545) (216) (116) (69) (23) (969)Operating          income on ordinary activities  1,606  336  132  51  7  2,132 Operating          income  1,694  349  72  8  (300) 1,823 Share          of net income of equity affiliates  49  3  10  8  (37) 33 Investments          in equity affiliates  248  15  72  33  284  652 Goodwill,          net  2,704  796  888  183  62  4,633 Capital          employed  13,584  3,220  2,415  1,177  610  21,006 Total          assets  15,417  4,835  2,856  1,423  2,108  26,639 Capital          expenditures  707  212  90  83  57  1,149 
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(b)******Geographic area information***    **2004** **2003** **2002**        **Sales** **Property,****plant and****equipment,****net** **Capital****employed** **Sales** **Property,****plant and****equipment,****net** **Capital****employed** **Sales** **Property,****plant and****equipment,****net** **Capital****employed**              **(in          million €)** Western          Europe  6,020  4,316  8,440  5,776  4,309  8,532  6,005  4,455  9,113 Of          which:                            France  2,238  1,140  1,686  2,036  1,074  1,611  2,007  1,052  1,587 Germany  583  807  1,101  624  841  1,137  642  846  1,529 Spain  464  279  753  464  270  938  616  271  1,074 United Kingdom  1,391  1,000  2,425  1,376  1,039  2,460  1,483  1,166  2,513 North          America  3,938  2,550  4,203  3,840  2,621  4,230  4,405  3,077  4,955 Of          which:                            United States  2,552  1,850  3,122  2,549  1,931  3,160  3,071  2,373  3,883 Canada  1,386  700  1,081  1,291  690  1,070  1,334  704  1,072 Mediterranean          Basin  534  477  788  530  501  861  562  628  1,031 Central          and Eastern Europe  746  712  1,182  696  644  1,098  661  713  1,124 Latin          America  579  409  792  613  384  861  720  416  892 Africa  1,190  477  827  921  468  913  869  580  969 Asia          / Pacific  1,429  1,700  2,702  1,282  1,475  2,496  1,388  1,798  2,922            **Total**  **14,436**  **10,641**  **18,934**  **13,658**  **10,402**  **18,991**  **14,610**  **11,667**  **21,006**             **Note 4 — Share            of Net Income of Equity Affiliates**
The share of net income of equity      affiliates determined in accordance with equity method consolidation principles      is shown in the Group’s consolidated statement of income on a specific      line “share of net income of equity affiliates”.

The following details the Group’s      share of the operations of equity affiliates:
  **Years          ended December 31,**   **2004** **2003** **2002**        **(in          million €)** Operating          income on ordinary activities  116  164  146 Gain          on disposals, net  —  —  — Other          expenses, net  (2) (46) (21)Financial          expenses, net  (8) (34) (41)Income          tax  (32) (47) (51)     **Share            of net income of equity affiliates**  **74**  **37**  **33**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 5 — Gains            on Disposals, Net**
Components of gains on disposals,      net are as follows:
  **Years          ended December 31,**   **2004** **2003** **2002**        **(in          million €)** Gain          on disposals of consolidated subsidiaries, net  13  139  24 Gain          on sale of other long-term assets, net  28  160  192      **Gains            on disposals, net**  **41**  **299**  **216**      
The tax effect on capital gains      and losses is mentioned in the reconciliation of effective tax rate (Note      8(b) – Income tax and Deferred income taxes).
**Note 6 — Other            Income (Expenses), Net**
Components of other income (expenses),      net are as follows:
  **Years          ended December 31,**   **2004** **2003** **2002**        **(in          million €)** Restructuring          costs  (35) (65) (89)Depreciation  (109) (35) (47)Litigations  (27) (20) (313)Other          expenses, net  (39) (57) (76)     **Other            income (expenses), net**  **(210****)** **(177****)** **(525****)**     
In 2004, “Depreciation” includes      a real estate development rights depreciation for an amount of 45 million      of euros (estimate based on a third-party valuation).

In 2004, this line also includes      a write-off of our Indonesian assets (Cement business) of 38 million euros      related to the tsunami damages that occurred on December 26, 2004. In addition, “Other      expenses, net” includes expected insurance proceeds to be received      for 33 million euros related to the above mentioned damages.

In 2002, “Litigations” includes      a provision of 300 million euros related to the risk arising from the “competition” litigation      risk (Note 27 — Litigations).

The related tax effect is mentioned      in the reconciliation of effective tax rate (Note 8(b) — Income tax      and Deferred income taxes).
**Note 7 — Financial            Expenses, Net**
Components of financial expenses,      net are as follows:
  **Years          ended December 31,**   **2004** **2003** **2002**        **(in          million €)** Interest          income  51  78  103 Interest          expense  (434) (518) (571)     **Net            interest income (expenses)**  **(383****)** **(440****)** **(468****)**Exchange          gains (losses), net  (41) (75) 66 Other          financial expenses, net  (93) (53) (119)     **Financial            expenses, net**  **(517****)** **(568****)** **(521****)**     
Interest expense is reported net      of capitalized interest costs for construction projects of 2 million euros      in 2004 (7 million euros in 2003 and 40 million euros in 2002).

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 8 — Income            Tax and Deferred Income Taxes**
Pursuant to the provisions of the      French Tax Code (Article 209 quinquies), and in accordance with a tax agreement      from the French Tax Authorities, the parent company has filed a world-wide      consolidated tax return till December 31, 2003. This regime provides that      the basis for income tax computation of the parent company is not limited      to French consolidated subsidiaries but also applies to foreign entities      in which Lafarge owns more than 50%. Under this provision, the parent company’s      consolidated taxable income is calculated based upon the rules of French      Tax Law for its operations in France as well as those of its greater than      50% owned foreign subsidiaries.

Within certain limits, the French      Tax Code allows for the reduction of the taxable income of profitable companies      by the offsetting of taxable losses of other entities. French income tax      payable, as determined by the method described above, allows for the application      of foreign taxes, due in local jurisdictions and related to greater than      50% owned foreign entities, to be applied as a credit to income taxes due      in France. This tax agreement covered the December 2002 and 2003 periods,      detailed in this report, and expired on December 31, 2003.

The income tax expense for each      period prior fiscal 2004 is equal to the amount paid or payable in the      short term to the tax authorities for the respective year, in accordance      with the tax rules and rates that were applicable in the various countries,      taking into account the taxation regime described above.

The Group decided not to renew      the agreement beyond December 31, 2003.

The Group computes income tax for      fiscal year 2004, in accordance with the prevailing tax legislation in      the countries where the income is earned.
***(a)******Income tax***
Components of the income tax are      as follows:
  **Years          ended December 31,**   **2004** **2003** **2002**        **(in          million €)** **Current            income tax**  **439**  **432**  **346**      French companies  42  7  34 Foreign companies  397  425  312            **Deferred            income tax**  **(192****)** **(7****)** **102**      French companies  (100) (9) 15 Foreign companies  (92) 2  87      **Income            tax**  **247**  **425**  **448**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(b)******Effective tax rate***
For the years ended December 31,      2003 and 2002, the Group’s effective tax rate was reconciled to the      world-wide tax consolidation rate i.e. 33.33%. For the year ended December      31, 2004, the Group’s effective tax rate is reconciled to the statutory      tax rate applicable in France i.e. 35.43%.

A reconciliation of the statutory      tax rate to the Group’s effective tax rate is as follows:
  **Years          ended December 31,**   **2004** **2003** **2002**   **%** **%** **%**      Statutory          tax rate  35.4  33.3  33.3 Reevaluations          *  (2.5) —  — Changes          in enacted tax rates notably in Greece (2004) and in Canada (2003)          *  (2.0) 0.3  — Restructuring          *  (8.9) —  — Capital          gains taxed at a reduced rate  (1.0) (2.4) (1.3)Provision          for “Competition” litigation risk  —  —  7.6 Effect          of foreign tax rate differentials  (3.8) —  — Changes          in valuation allowance on deferred tax assets  1.0  0.3  (1.8)Other  (1.0) (2.9) (3.4)     **Effective            tax rate**  **17.2**  **28.6**  **34.4**       *These items give rise to          an effect of (13.4)% on the effective tax rate 2004, and result to          non-recurring tax savings for an amount of 193 million euros. These          tax savings arose from tax efficient restructurings, from assets reevaluation          allowed in several countries and from the enactment of lower tax rates          notably in Greece. Excluding these non-recurring tax savings, effective          tax rate would be 30.6% in 2004.  ***(c)******Deferred tax assets              and liabilities***
Components of the deferred tax      balances are as follows:
  **At          December 31,**   **2004** **2003** **2002**        **(in          million €)** Pensions          and other post-retirement benefits  140  186  177 Property,          plant and equipment  229  210  361 Provisions          and other current liabilities  171  180  195 Restructuring          provisions  13  17  61 Net          operating loss and tax credit carry forwards  568  471  553 Net          capital loss carry forwards  373  569  225      **Deferred            tax assets**  **1,494**  **1,633**  **1,572**      Valuation          allowance  (523) (716) (582)     **Net            deferred tax assets**  **971**  **917**  **990**      Property,          plant and equipment  1,399  1,504  1,522 Prepaid          pension assets  135  169  205 Other,          net  168  114  242      **Deferred            tax liabilities**  **1,702**  **1,787**  **1,969**      **Net            deferred tax liabilities**  **731**  **870**  **979**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(d)******Tax credit and capital              loss carry forwards***
At December 31, 2004, the Group      has net operating loss and tax credit carry forwards and capital loss carry      forwards of approximately 1,719 million euros and 1,362 million euros respectively,      which will expire as follows:
  **NOL’s          and****tax credits****carry****forwards** **Capital          loss****carry****forwards** **Total**        **(in          million €)** 2005  236  1  237 2006  64  55  119 2007  157  26  183 2008  44  102  146 2009  73  3  76 2010          and thereafter  1,145  1,175  2,320      **Total**  **1,719**  **1,362**  **3,081**      **Note 9 — Earnings            Per Share**
Basic earnings per share is computed      by dividing income available to common shareholders by the weighted average      number of common shares outstanding during the year.

Diluted earnings per share is computed      by dividing income available to common shareholders by the weighted average      number of common shares outstanding during the year adjusted to include      any dilutive potential common shares.

Potential common shares include      share options and convertible securities issued by the Group on its own      common shares.

The computation and reconciliation      of basic and diluted earnings per share for the years ended December 31, 2004,      2003 and 2002 are as follows:
  **Years          ended December 31,**   **2004** **2003** **2002**      **Numerator              (in million €)**          **Net            income**  **868**  **728**  **456**      Interest          expense on convertible debt (“OCEANE”)  30  30  —      **Adjusted            net income**  **898**  **758**  **456**      **Denominator              (in thousands of shares)**          **Weighted            average number of shares outstanding**  **168,253**  **147,949**  **129,629**      Effect          of dilutive securities – stock options  575  310  918 Effect          of dilutive securities – convertible debt (“OCEANE”)  10,769  10,769  —      Total          potential dilutive shares  11,344  11,079  918      **Weighted            average number of shares outstanding – fully diluted**  **179,597**  **159,028**  **130,547**      **Basic            earnings per share (euros)**  **5.16**  **4.92**  **3.52**      **Diluted            earnings per share (euros)**  **5.00**  **4.77**  **3.49**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 10 — Goodwill            and Intangible Assets, Net**  ***(a)******Changes in goodwill,              net***    **2004** **2003** **2002**        **(in          million €)** **Goodwill,            net, at January 1**  **4,149**  **4,633**  **4,974** Amortization  (133) (135) (158)Additions  132  135  145 Disposals  (85) (19) (35)Acquisition          adjustments  (26) (125) 134 Translation          adjustments *  (319) (340) (427)     **Goodwill,            net, at December 31**  **3,718**  **4,149**  **4,633**       *Prior to January 1, 2004,          the Group recorded goodwill relating to the acquisition of foreign          subsidiaries, joint ventures and equity investments prior to January          1, 2001, in the currency of the acquirer. Starting January 1, 2004,          such goodwill is recorded in the currency of the acquiree. This accounting          method reduces the net value of goodwill by 176 million euros.
Amortization includes impairment      charges for 14 million euros and 18 million euros at December 31, 2004      and 2003 respectively.

The acquisition adjustments include      adjustments, which arise from the finalization of the purchase price allocation      to the fair value of acquired assets and liabilities assumed on business      combinations.

Goodwill recognized before January      1, 1989 was written off against retained earnings. The analysis of the      residual net amount of this goodwill had it been recorded in the balance      sheet and subsequently amortized is as follows:
  **2004** **2003** **2002**        **(in          million €)** **Goodwill,            net, at January 1**  **57**  **60**  **63** Amortization  (3) (3) (3)Disposals  —  —  —      **Goodwill,            net, at December 31**  **54**  **57**  **60**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(b)******Changes in intangible              assets, net***    **Market          share** **Other** **Total**        **(in          million €)** **At            January 1, 2002**  **2,949**  **486**  **3,435** Additions  6  52  58 Disposals  (58) (56) (114)Other          changes  (42) 6  (36)Translation          adjustments  (252) (33) (285)     **At            December 31, 2002**  **2,603**  **455**  **3,058** Accumulated          depreciation  —  (223) (223)     **Net            book value at December 31, 2002**  **2,603**  **232**  **2,835**      **At            January 1, 2003**  **2,603**  **455**  **3,058** Additions  4  66  70 Disposals  —  (34) (34)Other          changes  (4) 191  187 Translation          adjustments  (182) (44) (226)     **At            December 31, 2003**  **2,421**  **634**  **3,055** Accumulated          depreciation  —  (232) (232)     **Net            book value at December 31, 2003**  **2,421**  **402**  **2,823**      **At            January 1, 2004**  **2,421**  **634**  **3,055** Additions  —  130  130 Disposals  —  (12) (12)Other          changes  —  78  78 Translation          adjustments *  (150) (15) (165)     **At            December 31, 2004**  **2,271**  **815**  **3,086** Accumulated          depreciation  (1) (325) (326)     **Net            book value at December 31, 2004**  **2,270**  **490**  **2,760**       *Prior to January 1, 2004,          the Group recorded market shares relating to the acquisition of foreign          subsidiaries, joint ventures and equity investments prior to January          1, 2001, in the currency of the acquirer. Starting January 1, 2004,          such market shares are recorded in the currency of the acquiree. This          accounting method reduces the value of market shares by 113 million          euros.
The following table presents details      of other intangible assets:
  **At          December 31, 2004**   **Gross****carrying****amount** **Accumulated****amortization** **Net**        **(in          million €)** Software  263  158  105 Real          estate development rights  103  56  47 Mineral          rights  117  31  86 Other          intangible assets  332  80  252      **Other            intangible assets**  **815**  **325**  **490**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)** 
***(c)******Acquisitions***  •*Acquisition of Hupfer            Holding AG*
In May 2004, Financière      Granulats acquired a 100% interest in the shares of Hupfer Holding AG for      69 million euros. Hupfer Group operates in Aggregates and Ready-Mix      businesses mainly in Switzerland and in France.

This transaction has been accounted      for using the purchase method of accounting. The resulting goodwill arising      from this transaction was 31 million euros.
•*Acquisition of Lafarge            Gypsum in Asia minorities*
In May 2004, Lafarge Gypsum International      (“LGI”) purchased the residual 14.21% minority interests in Lafarge      Gypsum in Asia for a total amount of 34 million euros. Lafarge Boral Gypsum      in Asia is now owned 50% by Lafarge.

This transaction has been accounted      for using the purchase method of accounting. The resulting goodwill arising      from the transaction was 15 million euros.
•*Acquisition of The Concrete            Company*
In April 2004, Lafarge Building      Materials Inc, a wholly owned subsidiary of Blue Circle North America,      completed the acquisition of the ready-mixed concrete and cement assets      of The Concrete Company located in the southeastern United States for a      total amount of 87 million euros.

This transaction has been accounted      for using the purchase method of accounting. The resulting goodwill arising      from the transaction was 34 million euros.
•*Acquisition of Halla            Cement minorities*
In January 2004, Lafarge acquired      an additional 10.2% interest in Lafarge Halla Cement, a company based in      South Korea and engaged in the production of cement, for 57 million euros      (before net cash acquired of 41 million euros).

Lafarge Halla Cement was accounted      for using the proportionate method for the years 2002 and 2003 and is fully      consolidated in 2004. This change in consolidation method has no material      impact on the consolidated financial statements.

This transaction has been accounted      for using the purchase method of accounting. No goodwill resulted from      this operation.
•*Acquisition Lafarge            Polska*
In November 2003, Sodil (Société de      Développement Industriel Lafarge) acquired the residual 23% interest      in the shares of its subsidiary Lafarge Polska for approximately 84 million      euros. Lafarge Polska is a cement company located in Poland already fully      consolidated in the Lafarge Group.

This transaction has been accounted      for using the purchase method of accounting. The resulting goodwill arising      from this transaction was 38 million euros.
•*Acquisition of Ural            Cement*
In October 2003, Lafarge acquired      a 75% interest in the shares of Ural Cement for approximately 14 million      euros. Ural cement is a cement company located in Russia.

This transaction has been accounted      for using the purchase method of accounting.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

On December 31, 2004, the Group      has finalized the goodwill calculation. The final goodwill amounts to 5      million euros.
•*Acquisition of Gyproc*
In February 2003, the Group acquired      the gypsum boards operations of Gyproc group for approximately 63 million      euros. Gyproc has a business of Gypsum in Germany, Poland and Central Europe.

Moreover cash acquired amounts      to 21 million euros, which means the net investment amounts to 42 million      euros.

This transaction has been accounted      for using the purchase method of accounting. The purchase price, at December      31, 2003, has been allocated as follows (in million euros):
**Purchase            price**  **63** Fair          value of the net assets acquired  (41)   **Goodwill,            net**  **22**    •*Acquisition of Limay            Grinding Mill Corporation*
In August 2003, Lafarge acquired      a 100% interest in the shares of Limay Grinding Mill Corporation in the      Philippines for 22 million euros. This transaction has been accounted for      using the purchase method of accounting. The resulting goodwill arising      from this transaction was 18 million euros.
•*Acquisition of Kedah            Cement Group*
In December 2002, the Group through      its 60.83%-owned subsidiary Malayan Cement Berhad (MCB), acquired the remaining      22.59% equity interest in the Kedah Cement group not already owned by MCB,      for approximately 57 million euros. Kedah Cement is a group based in Malaysia      and engaged in the production of cement.

This transaction has been accounted      for using the purchase method of accounting. The resulting goodwill arising      from this transaction was 37 million euros.
•*Acquisition of Cementia            Holding AG minorities*
In May 2002, Lafarge proposed to      acquire the residual 2.95% interest in the shares of its subsidiary Cementia      Holding AG, a Swiss publicly-traded company, pursuant to an offer to exchange      shares and a minority interest buy-out as required by Swiss law. The Group      issued 453,838 new shares, with a fair value of 49 million euros for all      the outstanding shares. As a consequence, the Group owns 100% of Cementia      Holding AG’ shares as of December, 31 2002.

This transaction has been accounted      for using the purchase method of accounting. The resulting goodwill arising      from this transaction was 19 million euros.
•*Acquisition of Cementarna            Trbovlje*
In April and November 2002, our      wholly-owned Austrian subsidiary, Lafarge Perlmooser acquired an additional      76.9% of Cementarna Trbovlje, increasing its interest to 99.8%. The purchase      price totaled 40 million euros.

This transaction has been accounted      for using the purchase method of accounting. The purchase price, at December      31, 2002, has been allocated as follows (in million euros):
**Purchase            price**  **40** Fair          value of the net assets acquired  (39)   **Goodwill,            net**  **1**    
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
•*Acquisition of Beocinska            Fabrika Cementa*
In April 2002, in connection with      the Serbian government’s privatization policy, the Group acquired      a 69.4% interest in the Beocinska Fabrika Cementa company for 60 million      euros.

This transaction has been accounted      for using the purchase method of accounting. The purchase price, at December      31, 2002, has been allocated as follows (in million euros):
**Purchase            price**  **60** Fair          value of the net assets acquired  (12)   **Goodwill,            net**  **48**    
Subsequent to the acquisition,      the Group sold 49.98% of its interest in 2002. The Group’s indirect      ownership interest at December 31, 2002 is 34.72%.

On December 31, 2004, the Group      has increased its interests in Beocinska Fabrika Cementa assets to 42.04%.      This additional acquisition resulted in a goodwill of 4 million euros.
•*Acquisition of PT Semen            Andalas Indonesia*
In January 2002, the Group acquired      for approximately 11 million euros, an additional 12.33% interest in PT      Semen Andalas Indonesia, a company based in Indonesia and engaged in the      production of cement. Previously, the Group held an 87.66% interest in      PT Semen Andalas Indonesia. Following the transaction, the Group’s      interest increased to 99.99%.

This transaction has been accounted      for using the purchase method of accounting. The resulting goodwill arising      from this transaction was 7 million euros.
•*Acquisition of Continental            Gypsum*
In January 2002, Lafarge North      America Inc. acquired Continental Gypsum. Continental Gypsum was an independent      drywall manufacturer, based in Newark, New Jersey with an annual production      capacity of 28 million square meters. The purchase price for the Continental      Gypsum plant and other assets was approximately 32 million euros.

This transaction has been accounted      for using the purchase method of accounting. The purchase price, at December      31, 2002, has been allocated as follows (in million euros):
**Purchase            price**  **32** Fair          value of the net assets acquired  (20)   **Goodwill,            net**  **12**      •*Other acquisitions*
In addition to the acquisitions      described separately in this note, several other relatively minor acquisitions      in all of the Group’s segments were consummated in 2004, 2003 and      2002. All such acquisitions were accounted for using the purchase method      of accounting. The aggregate cost of these acquisitions was 104 million      euros, 60 million euros and 88 million euros in 2004, 2003 and 2002, respectively.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(d)******Pro forma information***
The table below reflects unaudited      pro forma combined results of the Group as if acquisitions had taken place      at the beginning of each period presented:
  **Years          ended December 31,**   **2004** **2003** **2002**      Sales  14,482  13,668  14,617 Net          income  870  726  455 Earnings          per share  5.17  4.91  3.51 Diluted          earning per share  5.01  4.75  3.49 
The pro-forma results are for illustrative      purposes only and are not necessarily indicative of the operating results      that would have occurred had the business acquisitions been consummated      at that date, nor are they necessarily indicative of future operating results.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 11 — Property,            Plant and Equipment, Net**  ***(a)******Changes in property,              plant and equipment***    **Mineral****reserves and****land** **Buildings** **Machinery,****equipment,****fixtures and****fittings** **Construction****in progress** **Total**          **(in          million €)** **At            January 1, 2002**  **2,244**  **3,255**  **15,033**  **1,655**  **22,187** Additions  17  39  240  801  1,097 Disposals  (90) (133) (496) (3) (722)Change          in scope of consolidation  (9) 10  (148) (1) (148)Other          changes  84  206  1,089  (1,263) 116 Translation          adjustments  (276) (311) (1,504) (211) (2,302)       **At            December 31, 2002**  **1,970**  **3,066**  **14,214**  **978**  **20,228** Accumulated          depreciation  (280) (1,486) (6,776) (19) (8,561)       **Net            book value at December** **31, 2002**  **1,690**  **1,580**  **7,438**  **959**  **11,667**        **At            January 1, 2003**  **1,970**  **3,066**  **14,214**  **978**  **20,228** Additions  12  23  183  580  798 Disposals  (35) (62) (449) (4) (550)Change          in scope of consolidation  8  29  4  (6) 35 Other          changes  26  136  517  (792) (113)Translation          adjustments  (151) (231) (1,129) (115) (1,626)       **At            December 31, 2003**  **1,830**  **2,961**  **13,340**  **641**  **18,772** Accumulated          depreciation  (289) (1,511) (6,556) (14) (8,370)       **Net            book value at December 31, 2003**  **1,541**  **1,450**  **6,784**  **627**  **10,402**        **At            January 1, 2004**  **1,830**  **2,961**  **13,340**  **641**  **18,772** Additions  23  42  206  788  1,059 Disposals  (23) (61) (364) (14) (462)Change          in scope of consolidation  67  87  391  3  548 Other          changes  4  31  652  (755) (68)Translation          adjustments  (39) (35) (281) (19) (374)       **At            December 31, 2004**  **1,862**  **3,025**  **13,944**  **644**  **19,475** Accumulated          depreciation  (309) (1,585) (6,930) (10) (8,834)       **Net            book value at December 31, 2004**  **1,553**  **1,440**  **7,014**  **634**  **10,641**          ***(b)******Depreciation of property,              plant and equipment***
Depreciation on property plant      and equipment is as follows:
  **Years          ended December 31,**   **2004** **2003** **2002**        **(in          million €)** Depreciation  854  823  897 Impairment          charges  54  35  48      **Total**  **908**  **858**  **945**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(c)******Capital leases***
The gross value of property, plant      and equipment includes 59 million euros, 54 million euros and 21 million      euros of assets under capital leases for the years ended December 31, 2004,      2003 and 2002, respectively. The remaining obligations on such assets total      34 million euros, 32 million euros and 14 million euros for the years ended      December 31, 2004, 2003 and 2002, respectively.

 
**Note 12 — Investments            in Equity Affiliates**  ***(a)******Changes in the balance              of equity affiliates***  **2004** **2003** **2002**        **(in          million €)** **Balance            of equity affiliates at January 1**  **383**  **652**  **439** Share          of net income of equity affiliates  74  37  33 Dividends          received from equity affiliates  (20) (26) (16)New          investments or share capital increases  6  69  88 Disposals          and reduction in ownership percentage  (212) (100) (22)Change          from equity method to consolidation  —  —  (20)Change          from equity method to proportionate consolidation method  —  (240) — Other          changes* (including translation adjustments)  5  (9) 150      **Balance            of equity affiliates at December 31**  **236**  **383**  **652**       *Includes 240 million euros          generated by Blue Circle Industries opening balance sheet finalization          in 2002.  ***(b)******Summarized combined              balance sheet and income statement information of equity affiliates*** *Combined balance sheet            information at 100%*   **At          December 31,**   **2004** **2003** **Of          which****Cementos Molins** **2002** **Of          which****Cementos Molins** **Of          which****Materis** **Of          which****Tong****Yang**            **(in          million €)** Long-term          assets  896  1,441  316  3,802  318  565  1,159 Current          assets  553  1,051  396  1,656  367  477  189          **Total            assets**  **1,449**  **2,492**  **712**  **5,458**  **685**  **1,042**  **1,348**          Total          equity  691  1,158  376  2,182  338  173  488 Long-term          liabilities  211  510  102  2,061  164  614  765 Current          liabilities  547  824  234  1,215  183  255  95          **Total            shareholders’ equity and liabilities**  **1,449**  **2,492**  **712**  **5,458**  **685**  **1,042**  **1,348**          
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
*Combined income statement            information at 100%*   **Years          ended December 31,**      **2004** **2003** **2002**        **(in          million €)** Sales  1,830  2,858  3,504 Operating          income on ordinary activities  321  564  452 Operating          income  318  449  405 Net          income  203  172  86   ***(c)******Information on main              equity affiliates***  **At          December 31,**      **2004** **2003** **2002**        **Share          of****Equity** **Share          of****Net income** **Share          of****Equity** **Share          of****Net income** **Share          of****Equity** **Share          of****Net income**           **(in          million €)** Cementos          Molins(1)  —  25  154  27  147  37 Tong          Yang(2)  —  —  —  5  48  5 Carmeuse          North America(1)  —  6  44  (33) 31  (28)Matéris(3)  —  —  —  12  58  1 BC          Ebbsfleet Ltd(4)  —  —  —  —  240  (10)Other  236  43  185  26  128  28         **Total**  **236**  **74**  **383**  **37**  **652**  **33**          (1)Cementos Molins and Carmeuse          North America shares were fully disposed of in 2004.(2)Tong Yang shares were fully          disposed of in 2003.(3)In 2003, Lafarge disposed          of its investment in Materis Participations and acquired a 7.27% interest          in the new company Matéris Holding Luxembourg (see Note 13 below).(4)BC Ebbsfleet Ltd has been          accounted for using the proportionate consolidation method since 2003. **Note 13 — Other            Investments**
Components of other investments      are as follows:
  **At          December 31,**      **2004** **2003** **2002**        **(in          million €)** Cimpor(a)  388  392  319 Matéris(b)  11  11  — Other          investments in non-consolidated companies (c)  161  78  143      **Total**  **560**  **481**  **462**        ***(a)******Cimpor***
At December 31, 2004 Lafarge owns      a 12.64% interest in the shares of the Portuguese cement producer Cimpor      for a net value of 388 million euros. At December 31, 2004, the market      value of these shares amounted to 353 million euros, based upon the stock      market price at December 31.

The Group considers that Cimpor      market price does not represent the fair value of this investment, regarding      its strategic importance. The Group booked a depreciation of 4 million      euros based on Cimpor estimated fair value as at December 31, 2004.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

The Cimpor shareholders’ equity and net income amounted respectively to 961 million euros and 186 million euros as at December 31, 2003 (figures as of December 31, 2004 being not available at filing date of Form 20-F).
***(b)******Matéris***
Since 2003, the Group owns a 7.27% interest in Matéris.
***(c)******Other investments***
At December 31, 2004 the “Other investments in non-consolidated companies” includes the acquisition of Cementos Selva Alegre, important producer of cement in Ecuador. Cementos Selva Alegre acquired for 98 million euros will be consolidated starting January 1,2005.

Some investments, which were not consolidated in past years, have been consolidated in 2003 and 2004. The consolidation of these investments has no significant impact on the Group’s financial statements.
**Note 14 — Other long-term assets**
Components of other long-term assets are as follows:
  **At December 31,**   **2004** **2003** **2002**        **(in million €)** Prepaid pension expenses  576  561  617 Other  162  249  302      **Other long-term assets**    **738**    **810**    **919**       **Note 15 — Inventories, net**
Components of inventories, net are as follows:
  **At December 31,**   **2004** **2003** **2002**        **(in million €)** Raw materials  310  280  327 Work-in-progress  11  139  178 Finished and semi-finished goods  742  579  632 Maintenance and operating supplies  586  567  611      Inventories, gross  1,649  1,565  1,748 Valuation allowance  (140) (143) (157)     **Inventories, net**  **1,509**  **1,422**  **1,591**       **Note 16 — Accounts Receivable-Trade, Net**
Components of accounts receivable-trade, net are as follows:
  **At December 31,**   **2004** **2003** **2002**        **(in million €)** Accounts receivable-trade  2,244  1,950  2,019 Valuation allowance  (190) (196) (203)     **Accounts receivable-trade, net**  **2,054**  **1,754**  **1,816**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

 

The change in the valuation allowance for doubtful receivables is as follows:
  **2004** **2003** **2002**        **(in million €)** **At January 1**  **(196****)** **(203****)** **(221****)**Current year addition  (58) (73) (105)Current year release  43  55  77 Cancellation  17  15  22 Other changes  2  (6) — Translation adjustments  2  16  24      **At December 31**  **(190****)** **(196****)** **(203****)**     
In January 2000, the Group entered into multi-year securitization agreements with respect to trade receivables, without recourse. Such agreements expired on December 31, 2004. The Group decided in early 2005 to renew the agreement for the next five years for Frenchsubsidiaries. At year-end 2004, no amount was outstanding under securitization program in the United States.

Accounts receivable is presented net of securitized receivables of 210 million euros, 352 million euros and 399 million euros at December 31, 2004, 2003 and 2002, respectively. The agreements are guaranteed by subordinated deposits classified in long-term deposits of27 million euros, 103 million euros and 85 million euros at December 31, 2004, 2003 and 2002, respectively. The Group owns no equity share in the special purpose entities.
**Note 17 — Other Receivables**
Components of other receivables are as follows:
  **At December 31,**   **2004** **2003** **2002**        **(in million €)** Other taxes  169  119  202 Prepaid expenses  106  90  93 Interest receivables  18  13  10 Other current receivables  610  755  650      **Other receivables**  **903**  **977**  **955**       **Note 18 — Cash and Cash Equivalents**
Cash and cash equivalents, amounting to 1,653 million euros at December 31, 2004, include short-term investments of 694 million euros.

The market value of short-term securities is at least equal to the net book value.

At December 31, 2004 short-term investments include treasury shares, which are intended to cover employee stock purchase option plans, of 69 million euros. Treasury shares recorded as a deduction of shareholder’s equity at December 31, 2004 is 33 million euros.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

 

Number of shares as well as value and movements of treasury shares are as follows:
  **2004** **2003** **2002***        **(in          million € except share data)** **At January 1**  **104**  **113**  **109** Changes of the period  (2) (9) 4      **At December 31**  **102**  **104**  **113**      Number of shares  1,834,396  1,856,266  1,920,959  *The treasury shares, which are intended to cover employee stock purchase option plans, were recorded as a deduction of shareholders’ equity until December 31, 2002. The reclassification to cash and cash equivalents in 2003 did not have a significant impact on the Group’sfinancial statements. **Note 19 — Shareholders’ Equity**  ***(a)******Common stock***
At December 31, 2004, Lafarge common stock consisted of 170,919,078 shares with a nominal value of 4 euros per share. At December 31, 2004, voting rights attributable to the outstanding shares totaled 179,715,084, after inclusion of the double voting rights attachedto registered shares held at least two years and cancellation of the voting rights associated with treasury shares.
***(b)******Stock rights issue***
On July 15, 2003, the Group issued stock rights to shareholders. These rights were subsequently exercised and the Group issued 31,831,528 shares of common stock. The total proceeds from this offering, net of issuance costs, were approximately 1,262 million euros.

On June 11, 2002, the Group issued 708,718 shares pursuant to its employee stock purchase plan. Proceeds totaled approximately 45 million euros, net of issuance costs.
***(c)******Public exchange offer Cementia***
On May 14, 2002, the Group tendered a public exchange offer for all of the outstanding shares of its Swiss publicly-traded subsidiary, Cementia Holding AG. The offer consisted of exchange of 1 share or 1 warrant for 11 shares of the Group with a nominal value of 4euros per share.

The offer resulted in the issuance of 401,775 Lafarge shares at 104.94 euros each, approximated 42.2 million euros. Following the public exchange offer and in accordance with the Swiss law, the Group initiated a minority interest buyout to acquire the remainingoutstanding shares. As a result, 52,063 additional shares were issued with a total market value of approximately 5.5 million euros.
**Note 20 — Minority Interests**   **2004** **2003** **2002**        **(in million €)** **At January 1**  **2,191**  **2,155**  **2,551** Share of net income  264  237  273 Translation adjustments  (64) (126) (368)Dividends paid  (121) (92) (91)Other changes  209  17  (210)     **At December 31**  **2,479**  **2,191**  **2,155**      
The Group’s significant minority interests are Lafarge North America Inc., Heracles General Cement, Associated Pan Malaysia Cement Sdn Bhd, Jordan Cement Factories and Lafarge Halla Cement.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 21 — Other Equity**
Other equity includes investment subsidies.
**Note 22 — Provisions**  ***(a)******Changes in the balance of provisions***    **Pensions and****other post-****retirement****benefits** **Restructuring****provisions** **Site restoration****and****environmental****provisions** **Other****provisions *** **Total**          **(in million €)** **At January 1, 2002**  **778**  **211**  **184**  **515**  **1,688** Current year addition, net  105  45  46  395  591 Current year release  (95) (179) (37) (86) (397)Other changes  8  94  28  61  191 Translation adjustments  (74) (17) (16) (44) (151)       **At December 31, 2002**  **722**  **154**  **205**  **841**  **1,922**        Current year addition, net  151  21  35  85  292 Current year release  (98) (66) (32) (71) (267)Other changes  (4) (36) 24  26  10 Translation adjustments  (32) (10) (14) (44) (100)       **At December 31, 2003**  **739**  **63**  **218**  **837**  **1,857**        Current year addition, net  82  21  40  117  260 Current year release  (60) (36) (40) (72) (208)Other changes  42  —  16  (9) 49 Translation adjustments  (15) —  (3) (10) (28)       **At December 31, 2004**  **788**  **48**  **231**  **863**  **1,930**                          *As of December 31 2004, other provisions includes a provision of 320 million euros (including 20 million euros of late-payment interest) related to the risk arising from the “competition” litigation risk, OCEANE redemption premiums for 97 million euros, provisions for warrantyfor roofing tile for 31 million euros and self insurance reserves for 79 million euros.  ***(b)******Pension plans, end of service benefits and other post retirement benefits***
The Group sponsors both defined benefit and defined contribution plans, in accordance with local legal requirements and each specific subsidiaries benefit policies.

For defined contribution plans, the Group’s obligations are limited to periodic payments to third party organizations, which are responsible for the financial and administrative management of the funds.

Only defined benefit plans create future obligations for the Group. Defined benefit pension plans and end of service benefits constitute 94% of the Group’s post-retirement obligations the remaining 6% relates to other post retirement benefits mainly post employmentmedical plans. For these plans, the Group’s obligations are estimated with the assistance of independent actuaries using assumptions, which may vary overtime. The obligations related to these plans are often funded through Group and employee contributions to third party legalentities and are then invested in equity and bond portfolios, which are subject to fluctuations in the financial markets. These entities are usually administered by trustees representing both employees and employer. Each board of trustees determines an appropriate investmentstrategy, typically designed to maximize assets and liabilities matching, and limit investment risks by an appropriate diversification, based

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

on external expert advice. The implementation of this investment strategy is usually conducted by external asset managers selected by trustees. Assets are mostly invested in listed instruments(shares, bonds), and the use of derivatives or alternative asset classes is limited. The investment in financial instruments issued by the Group (shares, bonds) is in most cases prohibited.

The following table shows the target asset allocation elected by the administration bodies of the most significant funded plans of the group, compared with current asset allocation:
  **Target asset****allocation** **Current asset****allocation**     Shares  64% 66%Bonds  32% 31%Other  4% 3%       **100****%** **100****%**    
The following schedule shows the accounting treatment for defined benefit pension plans and end of service benefits under the column “pension benefits” and the accounting treatment for other post retirement benefits under the column “other benefits”.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
  **At          December 31,**   **Pension          benefits** **Other          Benefits** **Total**   **2004** **2003** **2002** **2004** **2003** **2002** **2004** **2003** **2002**              **(in          million €)** **AMOUNTS            RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION CONSIST OF**                   Prepaid          pension asset 576 561 617 — — — 576 561 617 Accrued          pension liability (563)(517)(478)(225)(222)(244)(788)(739)(722)**Net            amount recognized at end period** **13** **44** **139** **(225****)****(222****)****(244****)****(212****)****(178****)****(105****)**           **COMPONENTS            OF NET PERIODIC PENSION COST**                   Service          cost 87 86 98 8 9 8 95 95 106 Interest          cost 232 215 226 17 18 19 249 233 245 Expected          return on plan assets (234)(212)(281)— — — (234)(212)(281)Amortization          of prior service cost 4 3 3 — 1 (1)4 4 2 Amortization          of transition asset obligation 2 1 1 — — — 2 1 1 Amortization          of actuarial (gain) loss 70 52 7 2 2 1 72 54 8 Actuarial          (gain) loss (8)4 10 10 1 1 2 5 11 Special          termination benefits 5 1 1   1 — 5 2 1 Curtailment          (gain) loss (5)— — (1)— — (6)— — Settlement          (gain) loss 2 — (5)— — — 2 — (5)Divestitures — — — — — (1)— — (1)**Net            periodic pension cost** **155** **150** **60** **36** **32** **27** **191** **182** **87**            **CHANGE            IN PROJECTED BENEFIT OBLIGATION**                   **Projected            benefit obligation at January 1** **3,992** **3,892** **4,206** **312** **297** **291** **4,304** **4,189** **4,497** Foreign          currency translations (26)(290)(324)(18)(41)(43)(44)(331)(367)Service          cost 87 86 98 8 9 8 95 95 106 Interest          cost 232 215 226 17 18 19 249 233 245 Employee          contributions 9 12 11 — — — 9 12 11 Plan          amendments 2 10 15 (13)12 (1)(11)22 14 Curtailments (7)— — — — — (7)— — Settlements — (3)(21)— — — — (3)(21)Business          combinations 65 1 3 (2)— 5 63 1 8 Divestitures — (2)— — — — — (2)— Special          termination benefits 5 — 1 — 1 — 5 1 1 Benefits          paid (225)(212)(236)(18)(22)(19)(243)(234)(255)Actuarial          (gain) loss 237 283 (87)(28)38 37 209 321 (50)**Projected            benefit obligation at December 31** **4,371** **3,992** **3,892** **258** **312** **297** **4,629** **4,304** **4,189**            **CHANGE            IN PLAN ASSETS**                   **Fair            value of plan assets at January 1** **2,907** **2,991** **3,842** **2** **2** **2** **2,909** **2,993** **3,844** Foreign          currency translations (32)(243)(309)— — — (32)(243)(309)Actual          return on plan assets 355 277 (396)— — — 355 277 (396)Employer          contributions 147(b)95 105(a)18 22 19 165 117 124 Employee          contributions 9 12 11 — — — 9 12 11 Benefits          paid (225)(212)(236)(18)(22)(19)(243)(234)(255)Settlements — (3)(21)— — — — (3)(21)Business          combinations 51 — — (2)— — 49 — — Divestitures — (2)— — — — — (2)— Administrative          expenses (4)(8)(5)— — — (4)(8)(5)**Fair            value of plan assets at December 31** **3,208** **2,907** **2,991** **—** **2** **2** **3,208** **2,909** **2,993**            **RECONCILIATION            OF PREPAID (ACCRUED) BENEFIT COST**                   **Funded            status of the plan** **(1,163****)****(1,085****)****(901****)****(258****)****(310****)****(295****)****(1,421****)****(1,395****)****(1,196****)**Unrecognized          actuarial (gain) loss 1,147 1,103 1,019 46 80 52 1,193 1,183 1,071 Unrecognized          actuarial transition (asset) obligation — — 1 — — — — — 1 Unrecognized          actuarial prior service cost 29 26 20 (13)8 (1)16 34 19            **Prepaid            (accrued) pension cost at December 31** **13** **44** **139** **(225****)****(222****)****(244****)****(212****)****(178****)****(105****)**            (a)Including contributions          paid in 2002 for the establishment of a separate legal entity pension          fund and annuity contracts in Spain for 39 million euros;(b)Including exceptional contributions          made in 2004 to North American pension funds for 48 million U.S. dollars.
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

The following table indicates the      amount of benefit payments expected to be made over the next 10 years      in respect of the defined benefit plans of the Group (in million euros)      :
2005  226 2006  229 2007  238 2008  246 2009  254 2010-2014  1,420 
These benefit payments will be      mostly made out of existing external funds established by the group, and      will therefore have a limited impact on its future cash outflows.

The primary assumptions made to      account for pensions and end of service benefits are as follows:
  **United****States** **Canada** **United****Kingdom** **France** **Spain** **Greece** **Euro          zone****(others)**            **%** **2004**                      Discount          rate  5.90  5.90  5.30  4.85  4.85  5.10  4.85 Expected          return rate on assets  8.50  8.50  7.30  5.50  4.85  *  6.00 Salary          increase  4.00  3.50  4.80  2.00 to 3.50  2.65  4.00  2.00 to 3.50                        **2003**                      Discount          rate  6.00  6.00  5.60  5.50  5.50  5.75  5.50 Expected          return rate on assets  8.50  8.50  7.00  5.82  4.85  *  7.00 Salary          increase  4.00  3.50  4.75  2.00 to 3.50  2.40  4.00  2.00 to 3.50                        **2002**                      Discount          rate  6.80  6.35  5.75  5.50  5.50  5.75  5.50 Expected          return rate on assets  9.00  9.00  7.50  5.82  4.85  *  7.00 Salary          increase  4.00  3.50  4.25  2.00 to 3.50  2.40  4.25  2.00 to 3.50  *not applicable
For fiscal 2005, the expected return      rates on assets are as follows:

 
USA  8.25% Canada  8.25% UK  7.10% Euro          zone  6.00% France  4.85% Spain  4.60% 
The expected rates of investment      return on pension assets and the discount rates used to calculate the Group’s      pension related obligations are established in close consultation with      independent advisors.
•*Pension Plans*
The main defined benefit pension      plans provided to employees by the Group are in the United Kingdom, North      America (The United States of America and Canada) and Germany. The related      pension obligations represent 64%, 19% and 5%, respectively, of the Group’s      total defined benefit plan obligations.

In the United Kingdom, pension      related obligations result primarily from three pension plans. Two of these      plans result from the acquisition of Blue Circle Industries in 2001. These      plans were merged at the end

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

of September 2003. Pension benefits    generally incorporate linear formulas and are based upon employee’s    final career pay and the length of employment with the Group. The resulting    pension obligations are funded through employee and employer contributions    to legally separate entities managed by representatives of both management    of the Group and its employees. The contribution rate of both the Group and    its employees are revised every three years by independent actuarial consultants.    Funding of the obligation is based upon both local minimum funding requirements    as well as long term funding objectives to settle the future statutory pension    obligations. The latest revision of annual contribution needs has led to    call for exceptional employer’s contribution of 18 million pounds per    year between 2005 and 2007. At the end of 2004, approximately 65% of the    pension fund assets are invested in equity instruments, which is consistent    with the long-term nature of the pension obligations, approximately 31% are    invested in bond portfolios and 4% in real estate.

In the United States and Canada,      defined pension benefits are granted through various plans. Contributions      are based upon required amounts to fund the various plans as well as tax-deductible      minimum and maximum amounts. At the end of 2004, 68% of the pension fund      assets were invested in equity instruments, 32% in bond portfolios. Required      employer’s contributions in 2005 are expected to increase slightly      to 42 million U.S. dollars. The Group chose for tax and financial purposes      to make a discretionary specific contributions of 48 million U.S. dollars      during 2004 to the North American pension fund.

In Germany, defined benefit pension      plans are based upon the employees’ final career pay and the length      of employment with the Group. German law does not require that pension      obligations be funded through employer contributions to external third      party funds. In case of corporate insolvency by an employer the employees’ vested      benefits are guaranteed by an insurance fund sponsored by German companies      with defined benefit pension plans. These defined benefit plans in Germany      have been closed to new entrants since 2001. The Group now provides defined      contribution pension arrangements to new employees who will be entitled      to future pension benefits. Accordingly, the Group believes that the future      amount of pension expense in Germany will progressively decline.

In conformity with the Group’s      accounting policies, (Note 2 (o)) the difference between actual and expected      returns on fund assets is treated as actuarial gains and losses. At the      end of 2004, unrecognized net actuarial losses have increased slightly      due to changes in assumptions related to long-term interest rates. Actuarial      losses generated during the year were compensated by actuarial gains generated      on plans assets (actual return higher than assumed), as well as on certain      liabilities (reduction of future post-employment healthcare costs of the      group following the Medicare reform in the United States), and by exchange      rates evolutions.

The adoption of IFRS will lead      to the immediate recognition through equity of all accumulated unrecognized      actuarial losses until January 1, 2004 (see specific comments in Item 5 – “Transition      to IFRS”).

As a consequence, the pension expense      to be recorded by the Group in 2005 will be significantly decreased, as      unrecognized actuarial losses remaining at year end 2004 after transition      are, for most plans, below the “10% corridor” and will not give      rise to significant amortization in the profit and loss account for 2005.
•*End of service benefits*
End of service benefits are generally      lump sum payments based upon an individual’s years of credited service      and annual salary at retirement or termination of employment. The primary      obligations for end of service benefits are in France, Italy, Greece and      Chile.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
•*Other post retirement            benefits*
In the United States and to some      extent in France, certain subsidiaries provide healthcare and insurance      benefits to retired employees. These obligations are not funded.
**Note 23 — Debt**  ***(a)******Analysis of debt              by type***    **At          December 31,**   **2004** **2003** **2002**        **(in          million €)** Debenture          loans  5,863  6,480  6,640 Bank          loans and credit lines  1,111  1,263  1,929 Commercial          paper  562  114  1,681 Other          notes  270  372  483 Other  346  466  592      **Total            debt**  **8,152**  **8,695**  **11,325**      Current          portion of long-term debt  (991) (985) (524)Short-term          bank borrowings  (213) (340) (530)     **Total            long-term debt**  **6,948**  **7,370**  **10,271**          •*Debenture loans*
At December 31, 2004, debenture      loans consist of bonds issued mainly in euros, U.S. dollars and British      pounds with a weighted average interest rate of 5.3%. Their maturities      range from 2005 to 2017, with the average maturity being 2009. In July      2004 the Group issued a debenture loan of 612 million euros by exchanging      an existing debenture loan maturing in 2008. The new debenture loan has      a 5% coupon and a 10-year maturity.

The Group has a Euro Medium-Term      Note program (“EMTN”), which allows for a maximum issuable amount      of 7,000 million euros. As of December 31, 2004, 2,790 million euros had      been issued under the EMTN program, including 2,670 million euros of debenture      loans and 120 million euros of private placements included under “Other      Notes”. The weighted average interest rate of EMTN issues is 5.3%      with maturities ranging from 2005 to 2017.
 •*Bank loans*
At December 31, 2004, bank loans      total 991 million euros and are primarily comprised of amounts in local      currencies lent to Group subsidiaries.

The weighted average interest rate      on these bank loans is approximately 5.8%.
 •*Committed long and medium            term credit lines*
Drawdowns on long and medium term      committed credit lines amount to 120 million euros out of a maximum amount      available of 3,802 million euros. The average interest rate of the amounts      drawn is approximately 17.6% as of December 31, 2004. This rate results      from amounts drawn in local currencies by the Group’s subsidiaries      (notably the Nigerian naira which represents the bulk of the amounts drawn      on credit lines).

The credit lines are used primarily      as a back-up for the short-term financings of the Group and contribute      to the Group’s liquidity.

The average non-utilization fee      of these credit lines stands at 13 basis points at December 31, 2004.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
 •*Commercial paper*
The Group’s euro denominated      commercial paper program at December 31, 2004 allows for a maximum issuable      amount of 3,000 million euros. Commercial paper can be issued in euros,      U.S. dollars, Canadian dollars, Swiss francs and British pounds. At December      31, 2004, commercial paper issued under this program totaled 494 million      euros (out of which 43 million euros were issued in U.S. dollars). This      commercial paper bears an average interest rate based mainly upon the European      inter-bank offer rate (“Euribor”) plus an average margin of 1      to 4 basis points depending on maturities, and has maturities ranging from      1 to 11 months. As of December 31, 2004, the weighted average interest      rate of the euro denominated commercial paper is 2.2%.

The Group also has a U.S. dollars      commercial paper program through its subsidiary, Lafarge North America      Inc.. This program allows for a maximum issuable amount of 300 million      U.S. dollars (220 million euros). At December 31, 2004, the outstanding      commercial paper issued under this program amounts to 90 million U.S. dollars      (66 million euros) and bears a weighted average interest rate of 2.5%
 •*Other notes*
Other notes principally consist      of Euro notes with a weighted average interest rate of 5.5%.
***(b)******Analysis of debt              by maturity***
At December 31, 2004, 600 million      euros of short-term debt (mainly commercial paper) have been classified      as long-term based upon the Group’s ability to refinance these obligations      on a long-term basis through its committed credit facilities.
  **At          December 31,2004**   **(in          million €)** 2005  1,204 2006  1,977 2007  1,052 2008  868 2009  595 Beyond          5 years  2,456       **8,152**    
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(c)******Analysis of debt by currency***    **At December 31,**   **2004** **2003** **2002**   **Before****swaps** **After****swaps** **Before****swaps** **After****swaps** **Before****swaps** **After****swaps**           **(in million €)** Euro (EUR)  5,507  3,516  5,872  3,621  7,714  5,275 U.S. dollar (USD)  783  2,146  805  2,278  1,048  3,062 British pound (GBP)  1,101  1,635  1,111  1,803  1,391  1,670 Malaysian ringitt (MYR)  127  127  168  168  259  259 Japanese yen (JPY)  70  75  77  84  94  111 Other  564  653  662  741  819  948         **Total**  **8,152**  **8,152**  **8,695**  **8,695**  **11,325**  **11,325**           ***(d)******Analysis of debt by category***    **At December 31,**   **2004** **2003** **2002**   **Before****swaps** **After****swaps** **Before****swaps** **After****swaps** **Before****swaps** **After****swaps**           **(in million €)** Floating rate  1,594  1,942  1,296  793  3,523  2,891 Fixed rate below 6%  4,220  3,706  5,028  5,127  4,726  4,917 Fixed rate between 6% and 10%  1,993  2,155  2,085  2,459  2,641  3,054 Fixed rate 10% and over  345  349  286  316  435  463         **Total**  **8,152**  **8,152**  **8,695**  **8,695**  **11,325**  **11,325**         
The average spot interest rate of the debt, as at December 31, 2004, is 5.3% (5.8% as at December 31, 2003 and 5.2% as at December 31, 2002).
***(e)******Particular clauses in financing contracts***    •*Financial covenants*
Loan contracts which include provisions, which require compliance with certain financial covenants are located in subsidiaries in the following countries: South Africa, Brazil, United States, Great Britain, India, Malaysia, Philippines and Vietnam. Debt with suchfinancial covenants represents approximately 6% of the total Group debt.

The above financial covenants have a low probability of being activated. Given the split of these contracts on various subsidiaries and the quality of the Group liquidity protection through its access to committed credit facilities, the existence of such clauses cannotmaterially affect the Group financial situation.
 •*Change of control clauses*
Change of control clauses are included in several of the Group’s committed credit facilities contracts, which amount to 2,214 million euros, i.e. 58% of the total outstanding committed credit facilities. As a consequence, in case of change of control, these committedcredit facilities will be automatically cancelled if undrawn or, in case of drawing, will have to be repaid.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 24 — Financial Instruments**
The Group uses derivative financial instruments with off-balance sheet risk to manage market risk exposures. Financial instruments are entered into by the Group solely to hedge such exposures on anticipated transactions or firm commitments. The Group does not enterinto derivative contracts for speculative purposes.
***(a)******Foreign currency risk***
In the course of its operations, the Group’s policy is to hedge all material foreign currency exposures arising from its transactions using derivative instruments as soon as a firm or highly probable commitment is entered into or known. These derivative instruments arelimited to forward contracts and foreign currency options, with a term generally less than one year.

This policy is implemented in all of the Group’s subsidiaries, which are required to, when allowed by local regulations and when necessary, hedge their exposures with the corporate treasury department.

The Group’s operating policies tend to reduce potential foreign currency exposures by requiring all liabilities and assets of controlled companies to be denominated in the same currency as the cash flows generated from operating activities, the functional currency. TheGroup may amend this general rule under special circumstances in order to take into account specific economic conditions in a specific country such as, inflation rates, interest rates, and currency related issues such as convertibility and liquidity. When needed, currency swapsare used to convert debts most often raised in euros, into foreign currencies.
*Foreign currency hedging activity*
At December 31, 2004, most forward contracts have a maturity date of less than one year. The nominal value of hedging instruments outstanding at year-end is as follows:
  **At December 31,**   **2004** **2003** **2002**        **(in million €)** **Forward contract purchases and currency swaps**          U.S. dollar (USD)  130  125  47 British pound (GBP)  465  9  74 Other currencies  156  93  13      **Total**  **751**  **227**  **134**                   **At December 31,**   **2004** **2003** **2002**        **(in million €)** **Forward contract sales and currency swaps**          U.S. dollar (USD)  1,430  1,420  2,040 British pound (GBP)  1,008  803  443 Other currencies  268  184  172      **Total**  **2,706**  **2,407**  **2,655**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(b)******Interest rate risk***
The Group is primarily exposed to fluctuations in interest rates based upon the following:
 –Price risk with respect to fixed-rate financial assets and liabilities. Interest rate fluctuations impact the market value of fixed-rate assets and liabilities.    –Cash flow risk for floating rate assets and liabilities. Interest rate fluctuations have a direct effect on the financial income or expense of the Group.
In accordance with established policies, the Group seeks to mitigate these risks, using to a certain extent interest rate swaps, when necessary.
*Interest rate hedging activity*   **At December 31, 2004**   **Less than one year** **One to 5 years** **More than 5 years** **Total**   **Fixed****rate** **Floating****rate** **Fixed****rate** **Floating****rate** **Fixed****rate** **Floating****rate** **Fixed****rate** **Floating****rate**             **(in million €)** Debt  837  367  3,316  1,176  2,405  51  6,558  1,594 Cash and cash equivalent  —  (1,653) —  —  —  —  —  (1,653)          **Net position before hedging**  **837**  **(1,286****)** **3,316**  **1,176**  **2,405**  **51**  **6,558**  **(59****)**          Hedging instruments  63  (63) 336  (336) (747) 747  (348) 348           **Net position after hedging**  **900**  **(1,349****)** **3,652**  **840**  **1,658**  **798**  **6,210**  **289**           
The notional value of interest rate financial instruments at year-end is as follows:
    **At December 31, 2004**     **Maturities of notional contract values (a)**     **2005** **2006** **2007** **2008** **2009** **More than****5 years** **Total**              **(in million €)**                          Pay fixed; euro  8.4%  865  100  62  70  89  —  1186 Pay floating; euro  2.2%  48  —  —  —  —  600  648 Other interest rate swaps  —  —  4  8  —  8  147  167           **Total**  **—**  **913**  **104**  **70**  **70**  **97**  **747**  **2001**           
 
    **At December 31, 2003**     **Maturities of notional contract values (a)**                              **2004** **2005** **2006** **2007** **2008** **More than****5 years** **Total**              **(in million €)** Pay fixed; euro  8.4% —  865  117  151  70  —  1,203 Other interest rate swaps  —  7  51  19  16  —  4  97           **Total**  **—**  **7**  **916**  **136**  **167**  **70**  **4**  **1,300**            (a)The notional amounts of derivatives represent the face value of financial instruments negotiated with counter parties. Notional amounts in foreign currency are expressed in euros at the year-end exchange rate.
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
    **At December 31, 2002**                              **Maturities of notional contract values (a)**                              **2003** **2004** **2005** **2006** **2007** **More than****5 years** **Total**              **(in million €)** Pay fixed; euro  8.1%  77  —  865  119  151  70  1,282 Other interest rate swaps  —  77  5  54  12  11  —  159           **Total**  **—**  **154**  **5**  **919**  **131**  **162**  **70**  **1,441**            (a)The notional amounts of derivatives represent the face value of financial instruments negotiated with counter parties. Notional amounts in foreign currency are expressed in euros at the year-end exchange rate.
A 1% change in short-term interest rates calculated on the net indebtedness, and taking into account derivative instruments, would have a maximum impact on the pre-tax consolidated income of 3 million euros.

A 1% change in the yield curves related to the currencies in which the Group has significant fixed rate debts would have an estimated maximum impact on the fixed rate debt fair value (calculated after swaps impact) of 215 million euros.
***(c)******Commodity risk***
The Group uses various raw materials and other supplies — such as coal, petcoke, gas, electricity, fuel, gasoline, freight — for which financial instruments to manage price risk exist. The Group uses, from time to time, these financial instruments to manage its exposureto these risks. At December 31, 2004, such commitments were mostly limited to forward purchase contracts for electricity, fuel, gas oil and coal and were not significant.
***(d)******Counterparty risk for financial operations***
The Group is exposed to credit risk in the event of a counterparty’s default. The Group implemented policies to limit its exposure to counterparty risk by rigorously selecting the counterparties with which it executes financial agreements. These policies take into accountseveral criteria (rating assigned by rating agencies, assets, equity base) as well as transaction maturities. The Group’s exposure to credit risk is limited and the Group believes that there is no material concentration of risk with any single counterparty. The Group does notanticipate any third party default that might have a significant impact on the Group’s financial statements.
***(e)******Share risk***
The Group owns an equity swap contract, which relates to common shares of an unrelated entity held by an independent third party for development strategy purposes. At December 31, 2004, this equity swap was for 123 million euros with a fair value of (1) millioneuros, which is fully provided for.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(f)******Fair values***
The following details the cost and fair values of recorded and unrecorded financial instruments:
  **At December 31,**   **2004** **2003** **2002**   **Carrying****Amount** **Net Fair****Value** **Carrying****Amount** **Net Fair****Value** **Carrying****Amount** **Net Fair****Value**           **(in million €)** **Balance sheet financial instruments**          **Assets**                   Cash and cash equivalents  1,653  1,653  1,634  1,634  1,109  1,109 Accounts receivable-trade, net  2,054  2,054  1,754  1,754  1,816  1,816 Other investments  560  560  481  481  462  462 **Liabilities**                   Short-term bank borrowings  213  213  340  340  530  530 Accounts payable, trade  1,424  1,424  1,234  1,234  1,205  1,205 Debenture loans  5,863  6,264  6,480  6,807  6,640  6,908 Other long-term financial debt  2,076  2,099  1,875  1,898  4,155  4,189 **Derivative instruments**                   Interest rate swaps and forward rate agreements  —  1  —  (90) —  (200)Forward exchange contracts  —  113  —  133  —  91 
The fair values of financial instruments have been estimated on the basis of available market quotation, or the use of various valuation techniques, such as present value of future cash flows. However, the methods and assumptions followed to disclose fair values areinherently judgmental. Thus, estimated fair values do not necessarily reflect amounts that would be received or paid in case of immediate settlement of these instruments. The use of different estimations, methodologies and assumptions could have a material effect on theestimated fair value amounts. The methodologies used are as follows:

*Cash and cash equivalents, accounts receivables, accounts payable, short-term bank borrowings:*due to the short-term nature of these balances, the recorded amounts approximate fair value.

*Other investments (Marketable securities and investment securities):*For other investments for which there is no quoted price, a reasonable estimate of fair value could not be made without incurring excessive costs. The Group considers that the net book value ofCimpor reflects the fair value.

*Debenture loans:*the fair values of the debenture loans were estimated at the quoted value for borrowings listed on a sufficiently liquid market.

*Other long-term financial debt:*the fair values of long-term debt were determined by estimating future cash flow on a borrowing-by-borrowing basis, and discounting these future cash flows using an interest rate which takes into consideration the Group’s incrementalborrowing rate at year end for similar types of debt arrangements.

*Derivative instruments:* the fair values of forward exchange contracts and interest and currency swaps were calculated using market prices that the Group would pay or receive to settle the related agreements. Primarily, dealer quotes have been used to estimate the fairvalues of these instruments at the reporting dates.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 25 — Other            Payables**
Components of other payables are      as follows:
  **At          December 31,**   **2004** **2003** **2002**        **(in          million €)** Accrued          payroll expenses  379  356  365 Accrued          interest  198  202  223 Corporate          income tax  46  125  332 Other          taxes  168  146  230 Customer          rebates and discounts  71  31  61 Payables          to suppliers of fixed assets  63  127  39 Other          accrued liabilities  538  698  688      **Other            payables**  **1,463**  **1,685**  **1,938**       **Note 26 — Commitments            and Contingencies**  ***(a)******Collateral guarantees              and other guarantees***
The following details collateral      guarantees and other guarantees provided by the Group.
  **At          December 31,**   **2004** **2003** **2002**        **(in          million €)** Securities          and assets pledged  5  18  77 Property          collateralizing debt  446  603  766 Guarantees          given  208  191  166      **Total**  **659**  **812**  **1,009**      
The principal collateral guarantees      and other assets pledged by the Group at December 2004 are as follows.
  **Amount          of****assets****pledged** **Total****balance sheet** **%          pledged**        **(in          million €)** **Tangible            assets**  **446**  **10,641**  **4.2%**      Less than one          year  190  —  — Between one and          five years  159  —  — More than 5 years  97  —  — **Financial            assets**  **5**  **1,534**  **0.3%**      Less than one          year  —  —  — Between one and          five years  —  —  — More than 5 years  5  —  —      **Total**  **451**  **12,175**  **3.7%**      
Finally, the Group has granted      indemnification commitments in relation to disposals of assets. Its exposure      under these commitments is considered remote. The total amount of capped      indemnification commitments still in force at December 31, 2004 is 369      million euros.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(b)******Commitments***
The following details the Group’s      significant commitments.
  **Payments          due per period** **At          December 31,**   **Less          than****one year** **One          to 5****years** **More          than****5 years** **2004** **2003** **2002**           **(in          million €)** **(in          million €)** Debt*  1,204  4,492  2,456  8,152  8,695  11,325 *Of which capital            lease obligations*  *5*  *10*  *19*  *34*  *32*  *14* Operating          leases  145  335  244  724  723  735 Capital          expenditures and other purchase obligations  491  296  191  978  782  613 Other          commitments  75  114  30  219  92  138         **Total**  **1,915**  **5,237**  **2,921**  **10,073**  **10,292**  **12,811**                              *see Note 23 (a) – Debt
The Group leases certain land,      quarries, building and equipment. Total rental expense under operating      leases was 142 million euros, 133 million euros and 84 million euros for      each of the three years ended December 31, 2004, 2003 and 2002, respectively.
***(c)******Other contractual              obligations***
The following details the other      contractual obligations of the Group.
  **At          December 31,**   **2004** **2003** **2002**        **(in          million €)** Unused          confirmed credit lines  3,682  3,381  3,843 Put          option to purchase shares  328  448  745      **Total**  **4,010**  **3,829**  **4,588**      
As part of the acquisition process      of certain entities, we have granted third party shareholders the option      to require us to purchase their shares at a price based on fair market      value. These shareholders are either international institutions, such as      the European Bank for Reconstruction and Development, or private investors,      which are essentially financial or industrial investors or the former shareholders      of the relevant companies. In the event these shareholders exercise these      options, our ownership percentage in the relevant company would increase.      Assuming that all of these options were exercised, the purchase price to      be paid by the Group, including net debt acquired, would amount to 328      million euros as of December 31, 2004. Based upon the terms of these agreements,      a portion of the total amount could be exercised in 2005 and 2006 for 215      million euros and 39 million euros, respectively. The residual 74 million      euros can be exercised commencing in 2007.

Subsequent to the closing, the      Group purchased for 141 million U.S. dollars (104 million euros) from the      State of Wisconsin Investment Board (“SWIB”) :
 —an additional 20.3% equity          interest in its South Korean subsidiary Lafarge Halla Cement,    —an additional 23.6% equity          interest in its Indian subsidiary Lafarge Private India Ltd,    —an additional 43% equity          interest in Lafarge Japan Holdings, which owns 39.4% of Lafarge Aso          Cement.
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

After taking these acquisitions      into consideration and assuming that all of the options were exercised,      the purchase price to be paid by the Company, including net debt acquired,      would amount to 224 million euros of which 111 million euros would be payable      pursuant to options exercisable in 2005.

With respect to the acquisition      of Blue Circle on July 11, 2001, Lafarge S.A. granted Lafarge North America      Inc. (formerly Lafarge Corporation) the right to buy certain cement and      construction material activities in North America formerly owned by Blue      Circle. The option to purchase these assets could have been exercised between      July 1, 2002 and December 31, 2004 at a purchase price of 1,400 million      U.S. dollars, subject to certain adjustments as of the date of acquisition.      Lafarge North America Inc. decided not to exercise the option to purchase      the Blue Circle North America assets during the exercise period expiring      December 31, 2004.
**Note 27 — Litigation**
On December 3, 2002, the European      Commission imposed a fine on us in the amount of 250 million euros on the      grounds that some of our subsidiaries had allegedly colluded on market      shares and prices with their competitors between 1992 and 1998 for wallboard,      essentially in the United Kingdom and Germany. We vigorously challenge      this decision and have brought the case before the Court of First Instance      (CFI) in Luxembourg, which has jurisdiction over such matters, on February      14, 2003. The proceedings are currently taking place before the court.      The resolution procedure usually takes several years based on comparable      cases. As a bank guarantee was given on our behalf, no payment will have      to be made before the decision of the court.

Following investigations on the      German cement market, the German competition authority, the Bundeskartellamt,      announced on April 14, 2003, that it was imposing fines on German cement      companies, including one in the amount of 86 million euros on Lafarge Zement,      our German cement subsidiary for its alleged anti-competitive practices      in Germany. Lafarge Zement believes that the amount of the fine is disproportionate      in light of the actual facts and has brought the case before the Higher      Regional Court, the Oberlandesgericht, in DŠsseldorf. The court’s      decision is not expected before several years. No payment nor any guarantee      is required to be made or given prior to the court’s decision. A provision      of 300 million euros was recorded in our financial statements for the year      ended December 31, 2002 in connection with the two matters above and we      recorded additional provisions in 2003 and 2004 in relation to interest      on the amount of the fines since 2002 for 20 million euros.

On November 12, 2004, our subsidiary      Lafarge North America Inc. settled the arbitration proceeding which the      Dunn Industrial Group, Inc. (“Dunn Industrial”) initiated as      a lawsuit against us in 2001 in the Circuit Court of Jackson County, Missouri      in connection with the construction of our new cement plant in Sugar Creek,      Missouri. In full satisfaction of all of Dunn Industrial’s claims,      i) Dunn Industrial retained a $6.5 million advance payment previously      made by Lafarge North America Inc., ii) $3.8 million previously paid by      Lafarge North America Inc. to an escrow agent was released to Dunn Industrial,      and iii) Lafarge North America Inc. paid Dunn Industrial an additional      $29.7 million. These amounts have been capitalized as additional costs      of constructing the cement plant.

In The Netherlands, a former subsidiary      of the Group, Tollens Coatings B.V., is one of the defendants in an action      brought in 1990 by the government in connection with the discharge of certain      waste in the Lekkerker canal between 1968 and 1971. At that time, Tollens      Coatings B.V. operated a paint manufacturing plant and had hired another      company to carry and dispose of waste produced by the plant. The government      is seeking Dutch guilders 160 million (approximately 72.6 million euros)      in damages, plus interest. Tollens Coatings B.V. contends that it did not      instruct the disposal company to dump the waste in the Lekkerker canal      and that it had no knowledge of the disposal company’s conduct. With      the consent of the parties, the proceedings, which are still at the level      of first instance, have been postponed several times by the court and since      late 1993 no proceedings on the merits have taken place. In July 2001,      the Dutch government took

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

sufficient action to delay the running    of the statute of limitations, without any other consequence. As a result,    the case is still pending. Tollens Coating B.V. was disposed of with the    Specialty Products Division. However, pursuant to the disposition arrangements,    including the subsequent sale of Materis Participations to LBO France, the    Group has agreed to indemnify the acquirers for any damages incurred in connection    with this litigation.

Finally, certain of our subsidiaries      have litigation and claims pending in the normal course of business. Management      is of the opinion that these matters will be settled without any material      adverse effect on the company’s financial statements.
**Note 28 — Related            Party Transactions**
Transactions with equity affiliates      were not material in 2004. The transactions entered into with other related      parties were made under normal terms and conditions, similar to those normally      granted to comparable groups.

Pursuant to an agreement signed      between Lafarge North America Inc. and Blue Circle North America, Lafarge      North America Inc. managed in exchange for a management fee, the assets      mentioned in note 26(c) from July 11, 2001 to December 31, 2002. Subsequent      to December 31, 2002, the agreement has been renewed tacitly every year.
**Note 29 — Employees            Costs and Directors’ and Executive Officers’ Compensation            for Services**  ***(a)******Employees and employees              costs***  **2004** **2003** **2002**      Management          staff  11,411  10,976  11,647 Non-management          staff  65,664  64,362  65,900      **Total            number of employees**  **77,075**  **75,338**  **77,547**      *Of            which:*          *companies            accounted for using the proportionate method*  *5,155*  *5,829*  *5,055*         **Years ended          December 31,**       **2004**  **2003**  **2002**                **(in          million €)** **Total            employees costs**  **2,407**  **2,380**  **2,749**      *Of            which:*          *companies            accounted for using the proportionate method*  *113*  *124*  *129*            ***(b)***     ***Directors’ and          executive officers’ compensation for services***               **Years ended          December 31,**       **2004**  **2003**  **2002**         **(in million €)** Board          of Directors*  0.5  0.5  0.5 Senior          Executives  9.0  9.1  7.4      **Total**  **9.5**  **9.6**  **7.9**       *Directors’ fees
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 30 — Summary            of Differences Between Accounting Principles Followed by the Group            and U.S. GAAP**
The accompanying consolidated financial      statements of the Group have been prepared in accordance with the accounting      principles described in Note 2 above (“French GAAP”) which differ      in certain significant respects from those applicable in the United States      of America (“U.S. GAAP”). These differences relate mainly to      the items which are described below and which are summarized in the following      tables.
**1.****Differences in accounting            for business combinations under French GAAP and U.S. GAAP**  ***(a)******Goodwill recorded              as a reduction of shareholders’ equity before January 1, 1989***
Before January 1, 1989, as described      in Note 2 (e), under French GAAP, the excess of the purchase price over      the fair value of the net assets acquired was written off directly to shareholders’ equity      upon acquisition. This goodwill is tracked from that date through memo      accounts as disclosed in Note 10 (a) where it is amortized over the estimated      period of benefit. The net amortized value of such goodwill is subsequently      deducted when and if the related underlying business is sold, for purposes      of calculating the gain (loss) on the disposal. Under U.S. GAAP, these      goodwill amounts have been recognized as an asset, and as of January 1,      2002 are no longer amortized based upon the provisions of SFAS 142, *Goodwill      and other Intangible Assets* (“SFAS 142”) (Note 30-12).
***(b)******Determination of              the purchase price in case of share consideration***
Under French GAAP and U.S. GAAP,      the purchase price of a transaction accounted for as an acquisition is      based on the fair value of the consideration exchanged. In the case of      acquisitions involving the issuance of the Group’s shares, under French      GAAP the fair value of such consideration is based on the agreed-upon share      price at completion of the acquisition or at the date when the transaction      becomes unconditional. Under U.S. GAAP, the fair value of the share consideration      is based on the average share price on the two trading days prior to and      subsequent to the announcement of the proposed acquisition. This difference      in valuation of the shares results in a difference in the fair value of      consideration and consequently in the amount of goodwill capitalized and      amortized. As described above, as of January 1, 2002, goodwill is no longer      amortized under U.S. GAAP.
***(c)******Negative goodwill              arising on acquisitions***
As described in Note 2 (e), negative      goodwill is amortized into income on a rational systematic basis based      upon estimates of future operating results of the acquiree. Negative goodwill      is presented as a liability on the balance sheet. Under U.S. GAAP, negative      goodwill has been recorded as a reduction in the fair value of long-lived      assets acquired and the related depreciation expense is adjusted accordingly.
***(d)******Fair value adjustments              related to minority interests***
Under French GAAP, when the Group      initially acquires a controlling interest in a business, any portion of      the assets and liabilities considered retained by minority shareholders      is recorded at their fair value. Under U.S. GAAP, only the portion of the      assets and liabilities acquired by the Group is recorded at its fair value.      This gives rise to two differences:
 (i)Operating income is different          under French GAAP than it would be under U.S. GAAP, because of the          difference in basis of assets that are amortized. This difference is          offset entirely by a difference in the minority interest’s participation          in the income of the subsidiary.    (ii)After an initial acquisition          of a subsidiary, if an additional portion of that subsidiary is subsequently          acquired, under French GAAP, the purchase consideration in excess of          the net assets acquired is recorded as goodwill. Under U.S. GAAP, the          incremental portion of the assets and liabilities is recorded at fair          value, with any excess being allocated to goodwill.
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(e)******Goodwill and market              share amortization***  •*Goodwill amortization*
Under French GAAP, acquired goodwill      is amortized over the expected period of benefit, which does not exceed      forty years, as described in Note 2(e). SFAS 142 requires that goodwill      acquired in a purchase business combination completed after June 30, 2001      is not to be amortized. Subsequent to January 1, 2002, all previously recorded      goodwill is no longer amortized but is tested for impairment at least annually.      The French GAAP amortization of goodwill for the year ended December 31,      2004, 2003 and 2002 is reduced by 119 million euros, 117 million euros      and 158 million euros, respectively (Note 30-12).

Under French GAAP, the Group recorded      in 2004 an impairment charge of 14 million euros mainly related to its      reporting unit Lafarge Roofing Benelux B.V. for 8 million euros and P.T.      Semen Andalas Indonesia for 5 million euros and in 2003 an impairment charge      of 18 million euros related to its reporting unit Lafarge Roofing Brasil      Ltda. As described in Note 2 (k), in our goodwill and market share impairment      test methodology, the impairment charge was based on a valuation resulting      from analysis of discounted cash-flows.

Under U.S. GAAP, an additional      10 million euros impairment charge has been recorded in 2004 related to      its reporting unit Lafarge Roofing Benelux B.V and no additional impairment      charge has been recorded in 2003. The 2004 additional impairment charge      corresponds to the different goodwill net value under U.S. GAAP, for being      no longer amortized since January 1, 2002 (as described above).
•*Market share amortization*
Under French GAAP as described      in Note 2 (e), market share, which have been separately identified on the      acquisition of subsidiaries, are not amortized. Under U.S. GAAP, market      share would not be considered as a separately identifiable intangible asset,      but as a component of goodwill and is accounted for based upon the provisions      of SFAS 142, as described above.
***(f)******Restructuring costs              related to business combinations***
French GAAP provides that where      a business combination results in regional over capacity, costs associated      with restructuring the acquirer’s operations should be included as      a cost of the acquisition. As a result of certain acquisitions, the Group      has closed certain of its own operations in regions where it has determined      that over capacity will result from the duplication of its operations with      those of the acquired operations. U.S. GAAP specifically excludes from      costs of an acquisition those costs associated with closing duplicate facilities      and restructuring operations of the acquirer, such costs are charged to      income as a period cost under U.S. GAAP.
***(g)******Goodwill relating              to the acquisition of foreign subsidiaries before January 1, 2004***
Prior to January 1, 2004, the Group      recorded goodwill relating to the acquisition of foreign subsidiaries,      joint ventures and equity investments prior to January 1, 2001 in the currency      of the acquirer. Under U.S. GAAP, such goodwill was recorded in the currency      of the acquiree. Beginning January 1, 2004, under French GAAP all goodwill      was recorded in the currency of the acquiree, consistent with U.S. GAAP.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(h)******Depreciation period              for goodwill related to the aggregates businesses prior to January              1, 2002***
The difference between the purchase      price of the aggregates businesses and the underlying fair value of net      assets is mainly allocated to mineral reserves acquired based on their      fair values at the time of acquisition. Under French GAAP, the remaining      goodwill is generally amortized over 40 years whereas under U.S. GAAP,      this goodwill is accounted for based upon the provisions of SFAS 142, as      described above. Prior to January 1, 2002, under U.S. GAAP, this goodwill      was amortized over the residual lives of the quarries acquired, which approximated      the expected future benefit of the goodwill.
**2.****Deferred income taxes**  ***(a)******Accounting for deferred              income taxes before January 1, 2000***
Before January 1, 2000, the Group’s      deferred tax provision was calculated using the partial allocation method.      Effective January 1, 2000, as required under French GAAP, the Group adopted      the balance sheet liability method, which among other changes, requires      that deferred taxes be recorded on all temporary differences between the      tax basis of assets and liabilities and their carrying amount in the balance      sheet. The adoption of this methodology required that all deferred tax      assets or liabilities be accounted for with the off setting amount recorded      as an adjustment to equity. Under U.S. GAAP, which also applies the balance      sheet liability method, temporary differences arising in connection with      fair value adjustments on business combinations typically result in deferred      taxes and a corresponding adjustment to goodwill. Consequently, an adjustment      is required in the reconciliation to U.S. GAAP to record goodwill arising      from deferred tax liabilities related to past business combinations and      charged to equity under French GAAP on adoption of the balance sheet liability      method.
***(b)******Accounting for deferred              tax assets***
The Group recognizes deferred tax      on tax loss carry-forwards and on temporary differences when it is reasonably      certain that the assets will be recovered in future years. Realization      is dependent on generating sufficient taxable income in order to recover      the deferred tax balances. The amount of the net deferred tax assets considered      realizable could be reduced in the near term if estimates of future taxable      income in the related taxing jurisdiction are reduced. Under U.S. GAAP,      such deferred tax assets are recognized when it is “more likely than      not” that the related tax assets will be recovered, a lower threshold      than under French GAAP. This conceptual difference between French and U.S.      GAAP did not give rise to a significant reconciling difference in either      2004, 2003 or 2002.

Up to December 31, 2002, under      French GAAP, some deferred tax assets are disclosed based on the net estimated      recoverable amount. Pursuant to Statement of Financial Accounting Standards      109, *Accounting for Income Taxes* (“SFAS 109”), U.S. GAAP      requires all deferred tax assets to be disclosed at the gross amount and      reduced by the appropriate valuation allowance. Disclosures of the gross      deferred tax assets and related valuation allowance based on U.S. GAAP      amounts are presented in Note 32-3 (a). At December 31, 2004 and 2003,      under French GAAP, all deferred tax assets are disclosed at the gross amount      and reduced by the appropriate valuation allowance.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(c)******Accounting for business              combinations in highly inflationary economies***
Pursuant to SFAS 109, U.S. GAAP      prohibits recognition of a deferred tax liability or asset for differences      related to assets and liabilities that under Statement of Financial Accounting      Standards 52, *Foreign Currency Translation* (“SFAS 52”),      are remeasured from the local currency into the functional currency using      historical rates and that result from changes in exchange rates or indexing      for tax purposes.

Under French GAAP, the Group recorded      a deferred tax liability on the basis differences created as a result of      allocating the excess of the purchase price over the carrying value of      non monetary assets acquired in highly inflationary economies (essentially      fixed assets).
***(d)******Accounting for deferred              tax on tax-free reserves***
Under French GAAP, the Greek subsidiaries      of the Group have a potential tax liability relating to the tax-free reserve      component of their equity.

Under Greek tax legislation, non-taxed      or specially-taxed income may be transferred to special reserves under      various tax incentive laws. The amounts transferred to these reserves are      taxable upon their distribution, capitalization, offsetting of losses carried      forward or ultimately upon the dissolution of the company. Under U.S. GAAP,      a deferred tax liability should be recognized for the entire balance of      the above reserves at the current prevailing tax rate, in the case of tax-free      income, or at the difference between the general tax rate and privileged      tax rates in each case for the specially-taxed income.
**3.****Pension obligations**
Under U.S. GAAP, pension costs      are accounted for in accordance with Statement of Financial Accounting      Standards 87, *Employers’ Accounting for Pensions* (“SFAS      87”). SFAS 87 requires that companies located outside the United States      adopt the provisions of SFAS 87 for fiscal years beginning after December      15, 1988. Due to the significant period of time that has elapsed from the      date when SFAS 87 would have been required to be adopted, the Group, as      permitted, has adopted SFAS 87 on January 1, 1999. At the date of adoption,      the Group’s net transition obligation was 15.5 million euros. Such      transition obligation is being amortized over a five-year period, which      represents the remaining amortization period between the required adoption      date of January 1, 1989 and January 1, 1999. Accordingly, approximately      11 million euros of the transition obligation was recorded as an adjustment      to shareholders’ equity at January 1, 1999 as this amount would be      recognized under SFAS 87. The residual amount of the transition obligation      is being amortized systematically over the period to January 1, 2004.

The Group applies the second approach      of Emerging Issues Task Force Abstract 88-1, *Determination of Vested      Benefit Obligation to a Defined Benefit Pension Plan* (“EITF 88-1”)      for those pension arrangements in countries where the statutes require      severance payments on accrued service benefits immediately upon separation.      Under this methodology, the vested benefit obligation is determined based      upon the expected date of separation or retirement rather than the measurement      date.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**4.****Restructuring provisions**
Restructuring plans are subject      to social and legal obligations in addition to administrative authorizations      in certain circumstances. Consequently, the implementation of restructuring      plans is typically spread over several months. In this environment all      the U.S. GAAP criteria for recognizing restructuring liabilities may not      be fulfilled in the same period as required under French GAAP. The table      below reconciles the income statement expense for restructuring costs as      determined under French GAAP and U.S. GAAP, prior to the effects of income      taxes and minority interests.
  **Years          ended December 31,**   **2004** **2003** **2002**        **(in          million €)** **French            GAAP restructuring expense (Note 6)**  **35**  **65**  **89** Adjustments          required for U.S. GAAP purposes:          –     New          plan provision and adjustments to prior year estimates(1)  4  1  5 –     Costs          charged against goodwill under French GAAP(2)  —  6  82 **U.S.            GAAP restructuring expense**  **39**  **72**  **176** –     Reclassifications  (2) (6) (20)     **Total            effect on U.S. GAAP income statement**  **37**  **66**  **156**       (1)Under French GAAP, prior          to January 1, 2002, the Group recorded restructuring liabilities during          the period when the appropriate level of management has approved decisions.          Commencing January 1, 2002, except for the recognition of restructuring          charges related to business combinations, there is no longer a difference          in the recognition of restructuring liabilities between French and          U.S. GAAP (Note 2(p)). Under U.S. GAAP, the Group has applied the provisions          of Statement of Financial Accounting Standards 112, *Employer’s          Accounting for Postemployment Benefits*(“SFAS 112”) and          Emerging Issues Task Force 94-3,*Liability Recognition for Certain          Employee Termination Benefits and Other Costs to Exit an Activity* (“EITF          94-3”), in accounting for its employee layoffs and restructuring          costs. Under EITF 94-3, a provision for restructuring can only be recorded          during the period when certain conditions are satisfied, including          the specific identification and approval by the appropriate level of          management of the operations and activities to be restructured, and          notification to the employees of the benefit arrangement. In addition,          costs associated with an exit plan are recognized as restructuring          provisions only if the related costs are not associated with or do          not benefit continuing activities of the Group. The foregoing creates          a timing difference between (i) the recording of provisions of new          French GAAP charges to the extent that such provisions are not accrued          for U.S. GAAP purposes, (ii) restructuring charges accrued under U.S.          GAAP that were expensed for French GAAP purposes in a prior period,          and (iii) changes in estimates on prior year French GAAP provisions          that did not qualify for accrual under U.S. GAAP. Starting January          1, 2003, the Group applied prospectively and for all new plans initiated          after this date SFAS 146, *Accounting for Costs Associated with Exit          or Disposal Activities.* This statement requires that a liability          for costs associated with exit or disposal activities to be recognized          at fair value when the liability is incurred rather than at the date          an entity commits to a plan of restructuring. Adoption of these provisions          did not have a material impact on our financial positions or results          of operations.(2)For the purpose of the          U.S. GAAP reconciliation, the Group has applied Emerging Issues Task          Force 95-3, *Recognition of Liabilities in Connection with a Purchase          Business Combination* (“EITF 95-3”), in accounting for          restructuring costs associated with businesses it has acquired. As          discussed in (1) above, the requirements for recording restructuring          costs and liabilities are more specific under U.S. GAAP. Therefore,          certain restructuring provisions included in the fair value of businesses          acquired under French GAAP are not accruable under U.S. GAAP, generating          a difference in goodwill, and liabilities acquired for restructuring          costs charged against goodwill under French GAAP. Those restructuring          charges originally charged to goodwill under French GAAP are subsequently          expensed under U.S. GAAP once the U.S. GAAP criteria have been satisfied          for recording the costs. For the years prior to January 1, 2002, reduction          in amortization of goodwill is created between the French and U.S.          GAAP treatment (Note 30.12).
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

Under the French GAAP presentation,      all costs classified as restructuring are presented under the caption other      income (expenses) net. For U.S. GAAP purposes, those costs that qualify      for expense treatment under U.S. GAAP are presented as operating costs      (cost of goods sold or selling and administrative expenses).

The table below details the impact      of restructuring adjustments on shareholders’ equity pursuant to U.S.      GAAP, prior to the effects of income taxes and minority interests.
  **At          December 31,**   **2004** **2003** **2002**        **(in          million €)** **Provision            per French GAAP (Note 22 (a))**  **48**  **63**  **154** Provision          per U.S. GAAP  (44) (50) (95)Impact          of reclassifications  (1) (6) (26)     Difference          between US and French GAAP provisions  3  7  33 Restructuring          costs charged against goodwill under French GAAP and which do not qualify          under EITF 95-3 (2)  —  (8) (31)     Cumulative          adjustment on new plan provisions and adjustment on prior estimates          (1)  3  (1) 2 Cumulative          costs originally charged against goodwill (French GAAP) and subsequently          expensed under U.S. GAAP (2)  (219) (219) (235)Cumulative          amortization of goodwill (2)  13  13  13      **Impact            on shareholders’ equity of U.S. GAAP restructuring restatement**  **(203****)** **(207****)** **(220****)**      (1)See footnote (1) above(2)See footnote (2) above
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

The table below reconciles the balance sheet movements in the restructuring provision as determined under U.S. GAAP for the year ended December 31, 2004. The column entitled “Currency translation adjustments and others” includes translation adjustments generated byforeign subsidiaries on the variation of the provisions and reclassification of provisions. All amounts indicated in the table below are expressed in million euros, unless otherwise stated:
  **January 1,****2004** **Current****year****expense,****net** **Cash****payments** **Recognition****upon****business****combination** **Removal****upon****business****disposals** **Currency****translation****adjustments****and others** **December 31,****2004**          – Restructuring provisions 63 21 (36)— — — 48 – Costs incurred under both French and U.S. GAAP, and paid in the same year — 14 (14)— — — —          **Total French GAAP** **63** **35** **(50****)****—** **—** **—** **48**          – Voluntary termination offer not accepted at balance sheet date (2)3 — — — (1)— – Plans not announced at balance sheet date (1)3 — — — (2)— – Cost to train or relocate employees to another site — — — — — — — – Cost to move inventory or tangible assets to another location — — — — — — — – Reengineering and consulting costs — — — — — — — – Other exit costs that do not qualify for accrual (4)(2)— — — 3 (3)         **U.S. GAAP adjustments** **(7****)****4** **—** **—** **—** **—** **(3****)**         **U.S. GAAP reclassification** **(6****)****(2****)****3** **—** **—** **4** **(1****)**         **U.S. GAAP provisions** **50** **37** **(47****)****—** **—** **4** **44**          – Employee termination benefits 3 10 (11)— — 3 5 – Other costs 19 3 (8)— — — 14          **Total Cement** **22** **13** **(19****)****—** **—** **3** **19**          – Employee termination benefits 2 5 (3)— — (1)3 – Other costs 3 4 (3)— — (1)3          **Total Aggregates & Concrete** **5** **9** **(6****)****—** **—** **(2****)****6**          – Employee termination benefits 18 11 (15)— — 3 17 – Other costs 2 1 (2)— — — 1          **Total Roofing** **20** **12** **(17****)****—** **—** **3** **18**          – Employee termination benefits 2 3 (3)— — (1)1 – Other costs 1 — (2)— — 1 —          **Total Gypsum** **3** **3** **(5****)****—** **—** **—** **1**          **U.S. GAAP provisions** **50** **37** **(47****)****—** **—** **4** **44**          
Restructuring provisions under U.S. GAAP consist of the following at December 31, 2004: long-term portion for 17 million euros, and current portion for 27 million euros. Cash payments for the long-term portion of restructuring costs, at December 31, 2004, under U.S.GAAP are expected to be mostly incurred in 2006.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

 

The 44 million euros restructuring provisions determined in accordance with U.S. GAAP at December 31, 2004, includes 26 million euros for employee termination benefits, which can be analyzed, as follows:
  **Number of****employees**    German plans  136 Romanian plans  63 Russian plans  55 United Kingdom plans  41 French plans  35 Other plans  107    **Total**  **437**    
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

During the year ended December 31, 2004, the U.S. GAAP restructuring expense was approximately 37 million euros. Such restructuring expense included the following major actions:
  **Year ended****December 31,****2004**      **(in million €)** **CEMENT**    **United Kingdom**    – Involuntary termination benefits for 11 employees and other exit costs related to Head Office reorganization  3 – Involuntary termination benefits for 8 employees related to Head Office, Hope, Northfleet and Wesbury reorganization  1 **France**    – Involuntary termination benefits for 28 employees and exit costs related to Head Office, plants and commercial agencies reorganization  2 **Romania**    – Exit costs related to downsizing Lafarge Romcim.  2 – Voluntary and Involuntary termination benefits for 63 employees related to the integration of the new company Sicim  1 **Serbia**    – Voluntary termination benefits for 145 employees related to Beocin reorganization  1      **AGGREGATES & CONCRETE**    **United Kingdom**    – Involuntary termination benefits and other exit costs related to Watermead Park and Mothballing reorganization  5 **France**    – Involuntary termination benefits for 21 employees related to Vallée de la Seine and South West region reorganization  2 **Venezuela**    – Contract termination costs related to La Yaguara y Cagua and Araguita plants closure  1      **ROOFING**    **Germany**    – Involuntary termination benefits for 60 employees with respect to Lafarge Dachsysteme GmbH downsizing plans  9 – Involuntary termination benefits and exit costs related to downsizing plans at Lafarge Roofing Components GmbH  1 – Voluntary and Involuntary termination benefits for 7 people at Schiedel GmbH and Co with respect to the downsizing program implemented in these companies  1 **South Africa**    – Involuntary termination benefits related to ceasing activity at Spunchem  1      **GYPSUM**    **Germany**    – Involuntary termination benefits and other exit costs related to Gyproc integration  2      Other plans less than 1 million euros  5    **Current year restructuring expense**  **37**    
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

The table below reconciles the balance sheet movements in the restructuring provision as determined under U.S. GAAP for the year ended December 31, 2003. The column entitled “Currency translation adjustments and others” includes translation adjustments generated byforeign subsidiaries on the variation of the provisions and reclassification of provisions. All amounts indicated in the table below are expressed in million euros, unless otherwise stated:
  **January 1,****2003** **Current year****expense, net** **Cash****payments** **Recognition****upon business****combination** **Removal****upon****business****disposals** **Currency****translation****adjustments****and others** **December 31,****2003**          – Restructuring provisions 154 21 (66)(14)— (32)63 – Costs incurred under both French and U.S. GAAP, and paid in the same year — 44 (44)— — — —          **Total French GAAP** **154** **65** **(110****)****(14****)****—** **(32****)****63**          – Voluntary termination offer not accepted at balance sheet date (8)2 — 2 — 2 (2)– Plans not announced at balance sheet date (21)4 — 14 — 2 (1)– Cost to train or relocate employees to another site — — — — — — — – Cost to move inventory or tangible assets to another location — — — — — — — – Reengineering and consulting costs — — — — — —   – Other exit costs that do not qualify for accrual (4)1 — — — (1)(4)         **U.S. GAAP adjustments** **(33****)****7** **—** **16** **—** **3** **(7****)**                **U.S. GAAP reclassification** **(26****)****(6****)****8** **—** **—** **18** **(6****)**         **U.S. GAAP provisions** **95** **66** **(102****)****2** **—** **(11****)****50**          – Employee termination benefits 9 19 (23)4 — (6)3 – Other costs 37 6 (20)(1)— (3)19          **Total Cement** **46** **25** **(43****)****3** **—** **(9****)****22**          – Employee termination benefits 7 6 (7)— — (4)2 – Other costs 5 4 (4)— — (2)3          **Total Aggregates & Concrete** **12** **10** **(11****)****—** **—** **(6****)****5**          – Employee termination benefits 23 25 (36)— — 6 18 – Other costs 10 3 (9)— — (2)2          **Total Roofing** **33** **28** **(45****)****—** **—** **4** **20**          – Employee termination benefits 4 3 (3)(2)— — 2 – Other costs — — — 1 — — 1          **Total Gypsum** **4** **3** **(3****)****(1****)****—** **—** **3**          **U.S. GAAP provisions** **95** **66** **(102****)****2** **—** **(11****)****50**          
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

Restructuring provisions under U.S. GAAP consist of the following at December 31, 2003: long-term portion for 4 million euros, and current portion for 46 million euros. Cash payments for the long-term portion of restructuring costs, at December 31, 2003, under U.S.GAAP are expected to be mostly incurred in 2005.

The 50 million euros restructuring provisions determined in accordance with U.S. GAAP at December 31, 2003, includes 25 million euros for employee termination benefits, which can be analyzed, as follows:
 **Number of****employees**  German plans267 United Kingdom plans39 Polish plans32 Other plans28   **Total****366**   
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

During the year ended December      31, 2003, the U.S. GAAP restructuring expense was approximately 66 million      euros. Such restructuring expense included the following major actions:
  **Year ended****December 31,****2003**      **(in million €)**     **CEMENT**   **United            Kingdom**   — Involuntary          termination benefits for 38 employees at Lafarge UK Cement 3 **France**   — Involuntary          termination benefits for 40 employees and exit costs related to commercial          agencies reorganization 3 **North            America**   — Sugar          Creek plant closure and Roberta plant restructuring plan 2 **Kenya**   — Involuntary          termination benefits for 35 employees at Mombasa plant, Nairobi and          headquarters 2 **Honduras**   — Involuntary          termination benefits for 80 employees at headquarters of Industria          Cementerna Hondurena 2 **Romania**   — Termination          benefits and other exit costs related to downsizing Lafarge Romcim. 2 **Poland**   — Wierzbica          plant liquidation costs – Involuntary termination benefits for          171 employees 1 **Greece**   — Involuntary          termination benefits for 20 employees at Blue Circle Greece headquarters 1     **AGGREGATES & CONCRETE**   **United            Kingdom**   — Termination          benefits and other exit costs related to Watermead Park reorganization 7 **France**   — Mainly          involuntary termination benefits for 17 employees at Vallée          de la Seine 3     **ROOFING**   **Germany**   — Involuntary          termination benefits for 291 employees with respect to Lafarge Dachsysteme          GmbH downsizing plans 14 — Exit          costs related to downsizing plans at Lafarge Roofing Components GmbH 3 — Involuntary          termination benefits for 20 people and other exit costs at Lafarge          Technical Centers GmbH 3 — Atectia          closure – Involuntary termination benefits and consulting costs 2 — Involuntary          termination benefits at Schiedel GmbH and Co with respect to the downsizing          program implemented in these companies 2 **France**   — Involuntary          termination benefits for employees related to industrial and administrative          reorganization at Lafarge Couverture SA 1     **GYPSUM**   **France**   — Santes          plant closure — Involuntary termination benefits for 6 people          and exit costs 1 **Germany**   — Gyproc          integration — Voluntary termination benefits for 46 employees          and other costs 2     Other          plans less than 1 million euros 12    **Current            year restructuring expense** **66**    
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

The table below reconciles the      balance sheet movements in the restructuring provision as determined under      U.S. GAAP for the year ended December 31, 2002. The column entitled “Currency      translation adjustments and others” includes translation adjustments      generated by foreign subsidiaries on the variation of the provisions and      reclassification of provisions. All amounts indicated in the table below      are expressed in million euros, unless otherwise stated:
  **January          1,****2002** **Current          year****expense, net** **Cash****payments** **Recognition****upon****business****combination** **Removal****upon****business****disposals** **Currency****translation****adjustments****and others** **December          31,****2002**          — Restructuring          provisions 211 45 (179)94 — (17)154 — Costs          incurred under both French and U.S. GAAP, and paid in the same year — 44 (44)— — — —          **Total            French GAAP** **211** **89** **(223****)****94** **—** **(17****)****154**          — Voluntary          termination offer not accepted at balance sheet date (36)66 — (41)— 3 (8) — Plans          not announced at balance sheet date (8)17 — (31)— 1 (21)— Cost          to train or relocate employees to another site (1)1 — — — — —  — Cost          to move inventory or tangible assets to another location — — — — — — — — Reengineering          and consulting costs (2)2 — — — — — — Other          exit costs that do not qualify for accrual (2)1 — (4)— 1 (4)         **U.S.            GAAP adjustments** **(49****)****87** **—** **(76****)****—** **5** **(33****)**         **U.S.            GAAP reclassifications** **(4****)****(20****)****(8****)****4** **—** **2** **(26****)**         **U.S.            GAAP provisions** **158** **156** **(231****)****22** **—** **(10****)****95**          — Employee          termination benefits 87 78 (146)(6)— (4)9 — Other          costs 24 4 (28)39 — (2)37          **Total            Cement** **111** **82** **(174****)****33** **—** **(6****)****46**          — Employee          termination benefits 10 5 (5)(1)— (2)7 — Other          costs 7 6 (7)— — (1)5          **Total            Aggregates & Concrete** **17** **11** **(12****)****(1****)****—** **(3****)****12**          — Employee          termination benefits 16 35 (21)(7)— — 23 — Other          costs 13 17 (16)(3)— (1)10          **Total            Roofing** **29** **52** **(37****)****(10****)****—** **(1****)****33**          — Employee          termination benefits — 12 (8)— — — 4 — Other          costs — — — — — — —          **Total            Gypsum** **—** **12** **(8****)****—** **—** **—** **4**          — Employee          termination benefits — — — — — — — — Other          costs 1 (1)— — — — —          **Total            Specialty Products** **1** **(1****)****—** **—** **—** **—** **—**          **U.S.            GAAP provisions** **158** **156** **(231****)****22** **—** **(10****)****95**          
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

Restructuring provisions under      U.S. GAAP consist of the following at December 31, 2002: long-term portion      for 23 million euros, and current portion for 72 million euros. Cash payments      for the long-term portion of restructuring costs, at December 31, 2002,      under U.S. GAAP are expected to be incurred in 2004.

The 95 million euros restructuring      provisions determined in accordance with U.S. GAAP at December 31, 2002,      includes 43 million euros for employee termination benefits, which can      be analyzed, as follows:
  **Number          of****employees**    German          plans  407 United          States plans  90 United          Kingdom plans  40 Other          plans  4    **Total**  **541**    
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

During the year ended December      31, 2002, the U.S. GAAP restructuring expense was approximately 156 million      euros. Such restructuring expense included the following major actions:
  **Year          ended****December 31,****2002**   **(in          million €)** **CEMENT**    **Greece**    —  Voluntary          termination benefits for 174 employees at Blue Circle Greece cement          companies  30 **Serbia**    —  Voluntary          termination benefits for 1009 employees  14 **Spain**    —  Early          retirement benefits in Lafarge Asland for 31 employees  8 **Nigeria**    —  Voluntary          termination benefits for 790 employees in Ashaka and other redundancy          costs in Ewekoro  6 **Romania**    —  Termination          benefits and other exit costs related to the downsizing of Lafarge          Romcim  4      **AGGREGATES & CONCRETE**    **United            Kingdom**    —  Involuntary          termination benefits for 12 employees in Thirslington quarry and other          costs related to Watermead Park restructuring  4 **Germany**    —  Involuntary          termination benefits for 33 employees and other plant closure costs  2 **Greece**    —  Voluntary          termination benefits for 11 employees at Blue Circle Greece concrete          companies  1      **ROOFING**    **Germany**    —  Involuntary          termination benefits for 175 employees with respect to Lafarge Dachsysteme          GmbH and Ruppkeramik GmbH downsizing plans  10 —  Involuntary          termination benefits related to Kloeber acquisition  8 —  Involuntary          termination benefits at Schiedel GmbH & Co with respect to the          downsizing program implemented in these companies  4 —  Termination          benefits for 48 employees with respect to the downsizing program implemented          at Lafarge Roofing Technical Centers GmbH  3 **Benelux**    —  Termination          benefits for 30 employees and other exit costs at Lafarge Roofing Benelux          B.V. with respect to the closure of production sites  2 **France**    —  Involuntary          termination benefits at Lafarge Couverture SA with respect to the downsizing          program implemented in these companies  1      **GYPSUM**    **Poland**    —  Termination          benefits in Lafarge Gyps Polska  4 **United            States**    —  Welmington          plant closure – Involuntary termination benefits for 99 employees  4      Other          plans less than 1 million euros  51    **Current            year restructuring expense**  **156**    
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**5.****Other provisions**  ***(a)******Accounting for provisions              for unrealized foreign exchange losses***
French GAAP allows for the limitation      of foreign currency exchange losses on debt negotiated in foreign currencies      where the interest rate on the foreign debt is less than that available      on the local currency. In such situations, the loss is limited to the difference      between the actual interest expense recorded and the amount of interest      expense that would have been recorded if the debt was originally negotiated      in the local currency.

U.S. GAAP requires that the foreign      currency translation gain or loss on the foreign denominated debt be included      in income for the period.
***(b)******Accounting for environmental              liabilities and site restoration provisions***
French GAAP allows provisions for      site restoration and environmental liabilities to be determined on a discounted      basis if the effect of the time value of money is material. Under U.S.      GAAP, based on American Institute of Certified Public Accountants Statement      of Position 96-1, *Environmental Remediation Liabilities*, (“SOP      96-1”), a company can elect to discount environmental liabilities      only when the timing and amounts of payments are fixed and reliably determinable.      Under U.S. GAAP, the Group does not discount these liabilities. In June      2001, the Financial Accounting Standards Board (“FASB”) issued      SFAS No. 143, “Accounting for Asset Retirement Obligations.” This      statement addresses financial accounting and reporting for obligations      associated with the retirement of tangible long-lived assets and the associated      asset retirement costs. The purpose of this statement is to develop consistent      accounting for asset retirement obligations and related costs in financial      statements and provide more information about future cash outflows, leverage      and liquidity regarding retirement obligations and the gross investment      in long-lived assets. The Group implemented SFAS No. 143 on January 1,      2003. Prior to adoption, the Group provided for its estimated quarry reclamation      obligation over the life of the quarry based on the units of production.      Adoption of the provisions of SFAS No. 143 did not have a material impact      on the Group’s financial positions or results of operations.
**6.****Stock based compensation            and employee stock plans**  ***(a)******Employee stock option              plans***
Under French GAAP, compensation      cost is not recorded for stock options and stock purchase plans. Under      U.S. GAAP, the Group accounts for stock based compensation awards pursuant      to Accounting Principles Board Opinion 25, *Accounting for Stock Issued      to Employees* (“APB 25”) which requires that compensation      expense be recorded when the market price of the stock at the measurement      date exceeds the amount the employee is required to pay upon exercise of      the option. The stock options granted to employees have been repriced in      situations where there would be a theoretical dilution of the option holder’s      percentage interest in the Group. Typically, these repricing events arise      from the Group’s issuance of common stock or warrants. Under U.S.      GAAP, the repricing of the Group’s stock option plan causes the plan      to be considered a variable plan under APB 25. As a result, the Group has      recorded a compensation expense of 2 million euros in the year ended December      31, 2004, a compensation expense of 2 million euros in the year ended December      31, 2003 and a recovery of previously recognized compensation expense of      60 million euros in the year ended December 31, 2002.

Additional disclosures in accordance      with APB 25 and Statement of Financial Accounting Standards 123, *Accounting      for Stock Issued to Employees* (“SFAS 123”) are presented      in Note 32-2.

In accordance with SFAS 123, the      Group discloses compensation cost based on the estimated fair value of      the options on the grant dates. Compensation cost was estimated to be the      fair value of all options granted based on the binomial option-pricing      model for the Lafarge S.A. options through December 31, 2003.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

Effective January 1, 2004, Lafarge S.A. began using the Black-Scholes model. The change in models did not have a material impact on the determination of fair value. For all periods presented,the Black-Scholes model was utilized for the Lafarge North America Inc. options.

As of December 31, 2002, the Group adopted the disclosure requirements of SFAS 148, *Accounting for Stock-Based Compensation — Transition and Disclosure*. The costs associated with options granted in each of the three years ended December 31, 2004, 2003 and 2002 are46 million euros, 47 million euros and 35.7 million euros, respectively. The pro-forma amounts below reflect the fair value effect as if the options granted had been charged to income for the years presented.

 
  **Years ended December 31,**   **2004** **2003** **2002**        **(in million € except per share amounts)** **Numerator**          **U.S. GAAP (Note 31 (c))**          Net earnings for purposes of:          —  basic earnings per share  987  831  436 —  diluted earnings per share  1,017  861  436      Stock-based employee compensation (recovery) expense included in net earnings, net of tax  2  2  (53)Stock-based employee compensation expense determined under fair value based method for all awards, net of tax  (46) (47) (36)     Net effect on basic and diluted earnings  (44) (45) (89)     **Pro forma**          Net earnings for purposes of:          —  basic earnings per share  943  786  347 —  diluted earnings per share  973  816  347                 **Earnings per share**          **U.S. GAAP**          Basic  5.90  5.66  3.36      Diluted  5.70  5.45  3.34      **Pro forma**          Basic  5.64  5.35  2.68      Diluted  5.45  5.17  2.66      **Number of shares (thousands)**          U.S. GAAP: basic  167,217  146,891  129,629      U.S. GAAP: diluted  178,561  157,970  130,547      
The pro forma compensation cost may not be representative of that to be expected in future years.
***(b)******Employee stock plans***
The Group’s shares are offered to employees, as determined by management, at a maximum discount of 20% under the plan “Lafarge in Action”. Under French GAAP, no compensation expense is recorded for the discount. Under U.S. GAAP, such discount must berecorded as compensation expense pursuant to APB 25 with a corresponding increase in additional paid-in capital. An amount of 25 million euros has been charged

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

to income for U.S. GAAP purposes in 2002. There were no such shares issued to employees in 2004 and 2003.

In conjunction with the Group’s stock purchase plan described above, the Group has granted a two-year loan to employees for the purpose of subscribing to the offered shares. Pursuant to APB 25, such loans are recorded as a reduction of shareholders’ equity. For theyears ended December 31, 2003 and 2002, amounts of 7 million euros and 21 million euros, respectively, remain outstanding on these loans. As of December 31, 2004, these loans have been fully reimbursed.
**7.****Investments in marketable securities**
In accordance with French GAAP, as described in Note 2 (j), the Group’s policy is to value marketable securities and other equity securities at the lower of historical cost or net realizable value with any resulting unrealized losses recorded in the statement of income.French GAAP does not permit upward adjustments in the value of these securities to reflect their fair market value.

Under U.S. GAAP, Financial Statement of Accounting Standards 115, *Accounting for Certain Investments in Debt and Equity Securities* (“SFAS 115”), requires that investments in marketable securities be divided into three categories: trading (securities that are boughtand held principally for the purpose of selling them in the near term), held to maturity (securities that the Group has a positive intent and ability to hold to maturity), and securities available for sale (all other securities). Most of the marketable debt and equity securities of theGroup are classified as available for sale with unrealized gains and losses excluded from earnings and reported as a component of shareholders’ equity (accumulated other comprehensive income). Unrealized losses that are other than temporary are charged to income.
***Available-for-sale securities***
The following table provides the summary of information related to the Group’s available-for-sale securities:
  **At December 31,**   **2004** **2003** **2002**        **(in million €)** **Cost**  **388**  **392**  **319**      Gross unrealized gains  —  —  — Gross unrealized losses  35  44  105      **Market value**  **353**  **348**  **214**      
The change in the net unrealized gains or losses on available for sale securities that have been included in a separate component of shareholders’ equity for 2004, 2003 and 2002 is an increase of 9 million euros, an increase of 61 million euros and a decrease of 52million euros, respectively.

In 2000, the Group acquired 9.99% of the common shares of the Portuguese cement producer Cimpor for 319 million Euros, which represented an average 4.75 euros per share. The market value of the shares then declined and, at December 31, 2002, was 214 millioneuros. In December 2003, the Group purchased an additional 2.65% of the common shares of Cimpor common stock at 4.06 euro per share, increasing their ownership position to 12.64%. The market value of all shares at December 31, 2003 was 348 million euros, 44 millioneuros below the carrying value of the investment of 392 million euros. The market value of all shares at December 31, 2004 was 353 million euros, 35 million euros below the carrying value of the investment of 388 million euros, as disclosed in Note 13.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

As at December 31, 2004, the Group has booked a depreciation of 4 million euros based on an internal valuation of its investment. The Group has treated the remaining unrealized losses on this investment as a temporary impairment as it has the intent and ability toretain its investment for a period of time sufficient for the recovery in market value. The Group has viewed, and continues to view, its investment in Cimpor as a strategic investment The Group also notes that Cimpor’s share price has increased since early 2003. In addition,the Group derives certain benefits from its investment that are not reflected in Cimpor’s share price. These benefits include an industrial and technical cooperation agreement with Cimpor that provides an annual revenue stream and opportunities for collaboration with Cimpormanagement to enhance the efficiency and create operating synergies for both operations, as evidenced, for example, by certain asset sales transactions. The Group will continue to monitor the value of its investment in Cimpor and evaluate it for possible impairment, asappropriate.

Gross realized gains and losses on marketable securities classified as available-for-sale are included in the Group’s consolidated financial statements of income. Realized gains and losses for securities held by the Group are determined using the average cost method.There was no gross realized gains and losses for the years ended December 31, 2004, 2003 and 2002.
**8.****Derivative instruments**  ***(a)******Accounting for derivative instruments***
Under French GAAP, the fair value of derivative instruments is recorded in the Group’s accounting records when the assets and liabilities of an acquiree are fair valued as the result of a business combination. In all other situations, French GAAP does not require therecognition of the fair value of derivative instruments. As of January 1, 2001 pursuant to the guidance in Statement of Financial Accounting Standards 133 *Accounting for Derivative Instruments and Hedging Activities* (“SFAS 133”), as interpreted and amended, the Grouprecords financial instruments, which meet the criteria for recognition as derivatives. Derivative instruments are marked to market and recorded on the balance sheet. The accounting for changes in fair value of a derivative depends on the intended use of the derivative and theresulting designation. The Group designates its derivatives based upon the criteria established by SFAS 133. For a derivative designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on thehedged item attributed to the risk being hedged. For a derivative designated as a cash flow hedge, the effective portion of the derivatives gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently reclassified into earnings when thehedged exposure affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. For embedded derivatives, the gain or loss is recognized in earnings in the period of the change in fair value.

As a result of the application of SFAS 133, for the year ended December 31, 2004, 2003 and 2002 the Group has recognized the net amount of 4 million euros recorded as an increase in income and 61 million euros recorded as an increase in other comprehensiveincome, a net amount of 26 million euros recorded as an increase in income and 48 million euros recorded as an increase in other comprehensive income and a net amount of 5 million euros recorded as a decrease in income and 3 million euros recorded as an increase in othercomprehensive income, respectively.
***(b)******Options on shares of investees***
In connection with the Group’s acquisitions of shares in certain investees, the related shareholder agreements contain call options and written put options on shares owned by other co-investors. French GAAP does not require the valuation and recording of these optionsin the Group’s accounts. For the year ended December 31, 2000 under U.S. GAAP, specifically the 1986 AICPA issues paper, *Accounting for Options*, (since superseded by SFAS 133 as interpreted and amended) upon acquisition of the shares in each of these investees, thewritten put options would be recorded at their fair market values and recorded as liabilities, and

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

a portion of the acquisition price would be allocated to the related call options. Subsequent to acquisition, the options would be marked to market, with gains and losses recorded in net income.The application of SFAS 133 did not change the method of accounting for these options. The market value of options are as follows:
  **At December 31,**  **2004** **2003** **2002**   **(in million €)** Put options  —  —  3.1 Call options  —  —  — 
 
**9.****Investment subsidies**
Under French GAAP, certain government investment subsidies were recorded in income when received, or were deferred and amortized over the remaining service periods of the employees at the related facilities. Under U.S. GAAP, investment subsidies are deferred andamortized over the useful lives of the property plant and equipment in which the funds were invested.
**10.****Treasury shares**
Until December 31, 2002, in the French GAAP consolidated financial statements, treasury shares repurchases were accounted for by the Group as a reduction of the shareholders’ equity at acquisition cost and no further recognition was given for subsequent changes infair value. Starting January 1, 2003, the cost of treasury shares repurchases that are intended for distribution to the employees is classified in investments in marketable securities (included in Cash and cash equivalents), and accounted for as described inNote 2 (m). Remaining treasury shares that are purchased with no specific intent to be distributed to employees are recorded as a reduction of shareholders’ equity at acquisition cost. All of these shares have been excluded in the earnings per share computation in accordancewith French GAAP.

For French GAAP purposes, a provision is recorded for unrealized losses on shares, which are classified as investments in marketable securities. Changes in the provision, including any subsequent recovery in value, if any, are recorded as financial income or expense.Increases or decreases in the fair value of shares, which are classified as a reduction of shareholders’ equity, are recorded directly as a component of shareholders’ equity.

As of December 31, 2004, the Group was carrying 1,834,396 of its own shares of which (i) 1,036,426 were classified as investments in marketable securities at a cost of 69 million euros and (ii) 797,970 were classified as a reduction of the Group shareholders’ equityfor 33 million euros. As of December 31, 2003, the Group was carrying 1,856,266 of its own shares of which (i) 1,058,296 were classified as investments in marketable securities at a cost of 71 million euros and (ii) 797,970 were classified as a reduction of the Groupshareholders’ equity for 33 million euros. A charge of 7 million euros was recognized in the Group’s French GAAP consolidated financial statements to account for unrealized losses on the Group’s own shares accounted for as investments in marketable securities.

Under U.S. GAAP, treasury shares are accounted for as a reduction of shareholders’ equity at acquisition cost, and no further recognition is given for subsequent changes in fair value. When treasury shares are resold, any differences between cost and fair value aregenerally recorded directly to shareholders’ equity. Accordingly, the 7 million euros expense recognized for the year ended December 31, 2003 under French GAAP has been reversed for purposes of determining the U.S GAAP net income. At December 31, 2004 and 2003, theimpact on shareholders’ equity would have been an increase of 7 million euros and an increase of 7 million euros, respectively, related to the cancellation of the provision and a decrease of 69 million euros and a decrease of 71 million euros, respectively, related to thereclassification of treasury shares classified in investments in marketable securities under French GAAP.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

Furthermore, these shares are not considered as outstanding for purposes of the U.S. GAAP earnings per share computation.
**11.****Other items**
Other differences between accounting principles followed by the Group and U.S. GAAP are not individually significant, and are presented in the aggregate in the reconciliation of net income and shareholders’ equity.
**11.1.**  **Equity method investments**  ***(a)******U.S. GAAP reconciliation***
Under French GAAP, the Group accounts for its investments on the equity method using the investees local GAAP adjusted as necessary to be in accordance with French GAAP. Under U.S. GAAP, the results of operations and financial position of these investees mustbe accounted for in accordance with U.S. GAAP prior to the Group’s recognition of its share in income of companies accounted for under equity method. The adjustments to present investees under U.S. GAAP relate primarily to accounting for business combinations, deferredincome taxes, marketable securities, derivative instruments, provisions for restructuring, pensions, general provisions, maintenance and other provisions, start-up costs and fixed asset revaluations.
***(b)******Amortization of goodwill***
Under French GAAP, the excess of the purchase price of equity method investments over the historical net book value of the investment is generally considered as goodwill, and is amortized over 40 years. Under U.S. GAAP, such excess purchase price is allocated tothe corresponding underlying assets of the investee and amortized over their respective useful lives. Any remaining difference is considered goodwill, which was amortized over 40 years through December 31, 2001. Effective on January 1, 2002, this goodwill is no longeramortized in accordance with SFAS 142.
**11.2.**  **Start-up costs**
Start-up costs capitalized by the Group under French GAAP have been expensed under U.S. GAAP following the requirements of American Institute of Certified Public Accountants Statement of Position 98-5, Reporting of Costs of Start-Up Activities (“SOP 98-5”). Asa result, there is a timing difference in the expense recognition between French and U.S. GAAP.
**11.3.**  **Lafarge Roofing GmbH (formerly Lafarge Braas) minority interests acquisition in 1999 and 2000**
The acquisition by the Group of the 43.5% minority interests in Lafarge Braas through a share for share exchange was accounted for under French GAAP from the date of the contract signing which was December 22, 1999. Approximately 44% of the total shareconsideration for this transaction was issued in December 1999. The remainder, approximately 286 million euros, was issued on June 20, 2000 after an authorized increase in share capital. For purposes of U.S. GAAP, the transaction is to be accounted for as a two-stepacquisition based upon the dates the shares were exchanged with the minority shareholders. Consequently, an additional 82 million euros of goodwill was recorded under U.S. GAAP based upon the different methodologies used to determine the purchase price under French andU.S. GAAP (Note 30-1 (b)).

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**11.4.**  **Accounting for hyper-inflationary economies**
For the period from December 31, 1997 to January 1, 2001 for French GAAP, Indonesia was designated as hyper-inflationary by the Group and accounted for as described in Note 2 (d). The expectation, during that period, was that the worsening economic and politicalsituation along with the strong devaluation of the Indonesian rupiah would lead to a hyper-inflationary economic environment.

The U.S. GAAP criteria used to determine    hyperinflation is an inflation rate of 100% or greater for the three years    prior to the year of conversion. Based upon various indices, the Indonesian    economy did not exceed the 100% inflation threshold in the three years prior    to  1997. Accordingly, for U.S. GAAP purposes, Indonesia should not have    been considered highly inflationary. Amounts related to the differences in    accounting policies between French and U.S. GAAP are included in the reconciliation    line item “Other items”. As discussed inNote 6, the Group recorded an impairment loss associated with the Tsunami damages    that occurred on December 26, 2004. The U.S. GAAP adjustments related to    accounting for hyper-inflationary economies, amounting for 12 million euros    at December 31, 2003, were written-off in the U.S. GAAP net income as the    underlying assets were written-off for both French GAAP and U.S. GAAP. As    a result, at December 31, 2004, there is no longer a difference in shareholders’ equity    between U.S. GAAP and French GAAP. The effects on U.S. GAAP  net income for    the years ended December 31, 2004, 2003 and 2002 are an increase of 12 million    euros, an increase of 4 million euros and an increase of 4 million euros,    respectively. The effects on U.S. GAAP equity at December 31, 2003 and 2002    are a decrease of 12million euros and a decrease of 22 million euros, respectively.
**12.****Adoption of SFAS 141 and SFAS 142 as of January 1, 2002**
Under French GAAP, acquired goodwill is amortized over the expected period of benefit, which does not exceed forty years. In July 2001, The Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, “*Business Combinations*” and SFAS No. 142,“*Goodwill and Other Intangible Assets*.” These statements establish new accounting and reporting standards for business combinations and associated goodwill and intangible assets. They require, among other things, elimination of the pooling of interests method of accounting,no amortization of acquired goodwill, and a periodic assessment for impairment of all goodwill and intangible assets acquired in a business combination. SFAS 141 and SFAS 142 supersede APB Opinions No. 16 “*Business Combinations*” and No. 17 “*Intangible Assets*”,respectively. As required by these new standards, the Group adopted SFAS 141 for all acquisitions subsequent to June 30, 2001, SFAS 142 was adopted as of January 1, 2002.

In the year of adoption, SFAS 142 required that the Group performs a transitional goodwill impairment evaluation. In its goodwill and market share impairment test, the Group uses a combination of a market approach and an income approach. In the market approach,we compare the carrying value of our reporting units with multiples of their Gross Operating Income. For reporting units presenting an impairment risk according to the market approach we then use the income approach. In the income approach, we estimate the discountedvalue of the sum of the expected future cash flows. If the carrying value of the reporting unit is higher than the measured fair value of the related assets and liabilities, the Group records extraordinary amortization of goodwill and market share to reduce the carrying value ofthe reporting unit to its determined fair value.

Evaluations for impairment are significantly impacted by estimates of future prices for our products, the evolution of expenses, economic trends in the local and international construction sector, the expectations on long-term development of emerging markets and otherfactors. This also depends on the discount rates used. The Group has defined country specific discount rates for each of its reporting units based on their Weighted Average Cost of Capital. In some cases, the Group uses a third party valuation as part of its impairment test.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

Completion of the initial evaluation indicated that goodwill recorded on the Roofing reporting segment was impaired for purposes of U.S. GAAP as of January 1, 2002. The circumstances leading to the goodwill impairments for reporting units of the Roofing segment,include in mature markets an overcapacity, and weaker demand for roofing products, due to worsening global economic trends. These circumstances caused lower than expected operating profits, cash flows, and are evidence that initial growth expectations assumed when thereporting units were acquired have changed.

In 2002, as a consequence of the above, the Group has recognized a goodwill impairment charge of 160 million euros as a cumulative effect of a change in accounting principle. For purposes of French GAAP, a goodwill impairment charge was not required based uponthe fact that the carrying amount of Roofing segment goodwill is substantially less under French GAAP due to the U.S. GAAP application of the balance sheet liability method of accounting for deferred taxes prior to January 1, 2000 (Notes 30-2 (a)), and the different methodsused to determine the purchase price (Notes 30-1 (b), 30-11.3).

The following table presents details of intangible assets:
  **At December 31, 2004** **At December 31, 2003** **At December 31, 2002**   **Gross****carrying****amount** **Accumulated****amortization** **Net** **Gross****carrying****amount** **Accumulated****amortization** **Net** **Gross****carrying****amount** **Accumulated****amortization** **Net**              **(in million €)** Customer lists  20  (11) 9  20  (9) 11  15  (5) 10 Non-compete contracts  14  (10) 4  14  (11) 3  13  (11) 2 Other intangible assets  85  (44) 41  66  (29) 37  59  (37) 22            **Intangible assets**  **119**  **(65****)** **54**  **100**  **(49****)** **51**  **87**  **(53****)** **34**            
For all periods presented, the Group has reclassified mineral rights previously recorded as intangible assets to tangible assets in accordance with Emerging Issues Task Force No. 04-2, “*Whether Mineral Rights Are Tangible or Intangible Assets*”.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

The following table displays the changes in the carrying amount of goodwill by reportable segment.
  **Cement** **Aggregates****& Concrete** **Roofing** **Gypsum** **Specialty****Products** **Unallocated** **Total**            **(in million €)** **At January 1, 2002**  **4,796**  **851**  **1,099**  **107**  **4**  **761**  **7,618** Reclassifications  —  110  (110) —  —  —  — Additions  92  6  7  17  —  —  122 Disposals  (111) —  —  —  (1) —  (112)Purchase accounting adjustments  686  31  (42) (5) 6  (737) (61)Impairment charges  —  —  (160) —  —  —  (160)Translation adjustments  (604) (99) (34) (4) (4) (24) (769)         **At December 31, 2002**  **4,859**  **899**  **760**  **115**  **5**  **—**  **6,638**          Additions  43  16  2  22  —  —  83 Disposals  (11) (1) —  (1) (5) —  (18)Purchase accounting adjustments  (53) —  (34) —  —  —  (87)Impairment charges  —  —  (18) —  —  —  (18)Translation adjustments  (472) (82) 3  (6) —  —  (557)         **At December 31, 2003**  **4,366**  **832**  **713**  **130**  **—**  **—**  **6,041**          Additions  37  50  8  16  —  —  111 Disposals  —  —  1  2  —  —  3 Purchase accounting adjustments  (23) —  (3) —  —  —  (26)Impairment charges  (5) —  (19) —  —  —  (24)Translation adjustments  (131) (35) (31) 1  —  —  (196)         **At December 31, 2004**  **4,244**  **847**  **669**  **149**  **—**  **—**  **5,909**          
Goodwill is recorded as of the date of acquisition based upon a preliminary purchase price allocation. The Group typically makes adjustments to the preliminary purchase price allocation during the allocation period (generally not exceeding one year) as the Groupfinalizes the fair value of certain assets and liabilities such as property, plant and equipment, intangible assets, pension and other post-retirement benefit obligations, contingent liabilities, and deferred and current tax balances.

The purchase accounting adjustments reflected in the carrying value of goodwill for the year ended December 31, 2004, 2003 and 2002 include adjustments to the opening balance sheets of acquired entities made after twelve months of the respective acquisition. Whenwe make acquisitions, certain tax contingencies and valuation allowances, may not have been finalized within the twelve-month period. We adjusted goodwill to reflect revisions in estimates and/or the ultimate disposition of these contingencies and valuation allowances inaccordance with the provisions of SFAS No. 109 “*Accounting for Income Taxes*” and EITF 93-7, “*Uncertainties Related to Income Taxes in a Purchase Business Combination*”.
**13.****Items affecting the presentation of consolidated financial statements**  ***(a)******Consolidation of less than majority owned entities***
Under U.S. GAAP, control is normally defined as voting control (over 50%) although there may be facts and circumstances that permit consolidation in other cases. In the case of the companies indicated by (1) in Note 33, full consolidation is considered appropriateunder French GAAP while under U.S. GAAP equity accounting is considered appropriate because the criteria in Statement of Financial Accounting Standards 94, *Consolidation of all Majority Owned Subsidiaries,*(“SFAS 94”) and Emerging Issues Task Force 97-2,*Application of FASB Statement No 94 and APB Opinion No16 to Physician Practice Management Entities*

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

*and Certain Other Entities withContractual Management Arrangements* (“EITF 97-2”), are not satisfied to justify consolidation under U.S. GAAP.

This difference in accounting policy has no effect on net income or shareholders’ equity. However, this difference would reduce sales by 200 million euros, 179 million euros and 253 million euros for the years ended December 31, 2004, 2003 and 2002, respectivelyand reduce operating income by 62 million euros, 51 million euros and 37 million euros for the same periods, respectively.
***(b)******Accounting for joint venture investments and use of proportionate consolidation method***
Companies indicated by (2) in Note 33, that are accounted for using the proportionate consolidation method under French GAAP are accounted for by the equity method for U.S. GAAP purposes.

This difference in accounting policy has no effect on net income or shareholders’ equity. However, this difference would reduce sales by 865 million euros, 1,011 million euros and 950 million euros for the years ended December 31, 2004, 2003 and 2002, respectivelyand reduce operating income by 109 million euros, 170 million euros and 166 million euros for the same periods, respectively.
***(c)******Reclassification to operating income under U.S. GAAP***
Under U.S. GAAP, certain items such as restructuring expenses, non recurring pension costs, net gains on disposals of fixed assets, other non recurring provisions and costs classified as other income (expense) would be classified as part of operating income. Under U.S.GAAP, capital gains or losses on sales of consolidated entities are also classified as operating income (loss). Under French GAAP the items mentioned in this paragraph are not included in operating income on ordinary activities.
***(d)******Reclassification to non-operating income (loss) under U.S. GAAP***
Gains and losses from disposals of    long-term equity investments are classified as gains on disposals under French    GAAP. Under U.S. GAAP, they would be considered gains and losses from the    sale of marketable securities and therefore classified as part of non-operating    income. Additionally, dividends received, classified as financial expenses,    net under French GAAP, would also be classified as part of non-operating    income under U.S. GAAP.
***(e)******Impairment charges***
As described in Note 2 (k), under French GAAP, the Group evaluates the recoverability of long-lived assets, including goodwill and records a charge if the assets are considered impaired.

In 2004, the Group recorded an impairment charge of 14 million euros mainly related to its reporting unit Lafarge Roofing Benelux BV for 8 million euros and P.T. Semen Andalas Indonesia for 5 million euros. In 2003, the Group recorded an impairment charge of 18million euros related to its reporting unit Lafarge Roofing Brasil Ltda. In 2002, under French GAAP, the Group did not record any significant impairment charge.

The impairment charges were based on a valuation resulting from analysis of discounted cash flows. Under French GAAP impairment charges are recorded in the line item “amortization of goodwill” and such charges are included in other operating expenses for U.S.GAAP purposes.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(f)******Reclassification of preferred shares issued by consolidated subsidiaries in the caption redeemable preferred shares (U.S. GAAP)***
French GAAP requires that preferred shares issued by consolidated subsidiaries be presented as debt on the parent Group’s balance sheet where the shares are redeemable by the shareholders and where the related dividends are not based upon profits. Accordingly, thedividend applicable to the preferred shareholders is presented in interest expense on the statement of income. U.S. GAAP requires that equity interests in consolidated subsidiaries owned by third parties be classified as minority interests on the balance sheet. The Group hasreclassified from current portion of long-term debt to minority interests 101 million euros at December 31, 2004, and from long-term debt to minority interests 103 million euros and 102 million euros at December 31, 2003 and 2002, respectively. The amount reclassifiedrelates to preferred shares issued by a subsidiary of Lafarge North America Inc. on December 29, 2000, in conjunction with the Warren merger. Therefore, minority interests under U.S. GAAP include 166.4 million shares of no par value preferred stock (the “PreferredShares”). The holder of the Preferred Shares is entitled to receive cumulative, preferential cash dividends at the annual rate of 6.0 percent of the issue price (of 166.4 million Canadian dollars or approximately 129 million U.S. dollars) from 2001 to 2003, 5.5 percent of theissue price from 2004 to 2005 and 5 percent of the issue price thereafter.

The Preferred Shares are redeemable at the original issue price, in whole or in part, on or after December 29, 2005 at the option of the holder thereof. Further, at any time following December 29, 2015, Lafarge North America Inc. may redeem all or a portion of thethen outstanding preferred shares at an amount equal to the issuance price.

The preferred shares are entitled to a preference over the common stock and exchangeable shares of Lafarge North America Inc. with respect to the payment of dividends and to the distribution of assets of Lafarge North America Inc. in the event of Lafarge NorthAmerica Inc.’s liquidation or dissolution.

For the years ended December 31, 2004, 2003 and 2002, the Group recorded interest expenses of 7 million euros, 6 million euros and 9 million euros, respectively associated with preferred shares. These amounts have been included in the line item “interest expense”.
***(g)******Gross up of deferred tax assets and liabilities***
At December 31, 2002, as discussed in Note 8, the parent Group’s tax liability was determined on a world-wide basis in accordance with a tax agreement with the French Tax Authorities. The tax agreement covers 2003 and 2002 and expired on December 31, 2003.

As required per this agreement, the book and tax basis differences that exist in various foreign subsidiaries are in certain circumstances adjusted at the parent Group level when preparing the world-wide tax return. Such basis adjustments create additional deferred taxassets and liabilities, which under French GAAP were offset and reflected as a net amount in the caption “other, net” in Note 8 (c) for 2002. Under U.S. GAAP, those additional deferred tax assets and liabilities are disclosed separately at their gross amounts in Note 32-3 (a)for 2002. The Group decided not to renew the agreement beyond December 31, 2003. As a result, at December 31, 2003 and 2004, there is no such difference between French and U.S. GAAP disclosures.
***(h)******Redemption premiums***
Under French GAAP, redemption premiums (representing the difference between the instruments’ issue price and future redemption amount) resulting from debenture loans (except OCEANE) are reported in the balance sheet as a direct addition to the face amount of thebonds and as an intangible asset amortized over the life of the bonds.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

Under U.S. GAAP, the net amount of redemption premiums is recorded as a reduction of long-term debt in accordance with the provisions of APB 21 “*Statement presentation of discount and premium*.” At December 31, 2004, 2003 and 2002, the amount of redemptionpremiums recorded as a reduction of long-term debt was 79 million euros, 34 million euros and12 million euros, respectively.

Under French GAAP, the OCEANE redemption premiums are recorded as a component of the “Provision” line item in the accompanying consolidated balance sheets. This classification is based upon the Group’s belief that it is unlikely the bonds will be converted intothe Group’s shares at maturity.

Under U.S. GAAP, the redemption premiums have been reclassified to the line item “Long-term debt” in the amount of 97 million euros, 69 million euros and 42 million euros at December 31, 2004, 2003 and 2002, respectively.
***(i)******Intangible assets***
Under French GAAP certain amounts are included in the balance sheet caption “Intangible assets” which do not meet the definition of an intangible asset under SFAS 141 and SFAS 142. Accordingly, these amounts are reclassified for purposes of U.S. GAAP (Note 30-12).
**14.****Other items related to U.S. GAAP accounting**  ***(a)******Revenue recognition***
The following revenue recognition policy disclosure is provided to supplement the disclosure in the French GAAP footnotes, to comply with the requirements of Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin 101, “*Revenue Recognition inFinancial Statements*” (“SAB 101”).
•*Accounting for sales returns*   Under both U.S. GAAP and French GAAP, provisions for returns are recorded in the same period as the related sales.  •*Accounting for rebates*
The Group offers certain rebates to its customers. Under U.S. GAAP the Group applies the provisions of Emerging Issue Task Force 01-9 (“EITF 01-9”), “*Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products*)”,which requires the recognition of the cost of a sales incentive, such as a rebate, at the date at which the related revenue is recorded, or at the date at which the incentive is offered, if later. The Group also offers certain volume-based sales incentives to its customers. The valueof such awards historically has been insignificant in relation to the value of the transactions necessary to earn the awards. The Group records a liability for the estimated cost of such awards when the incentive is offered. All sales incentives are classified as a reduction ofrevenue. There is no material difference in the Group’s accounting for sales incentives between French and U.S. GAAP.
***(b)******Securitization arrangement***
Lafarge North America Inc. (“LNA”) has a receivables securitization program to provide a cost-effective source of working capital and short-term financing. Under the program, LNA agrees to sell, on a revolving basis, certain of its accounts receivable to a wholly-owned, special purpose subsidiary (the “SPS”). The SPS in turn enters into an agreement to transfer, on a revolving basis, an undivided percentage ownership interest in a designated pool of accounts receivable to unrelated third-party purchasers, through the use of a qualifiedspecial purpose entity, up to a maximum of 200 million U.S. dollars. Under the agreements, new receivables are added to the pool as collections reduce previously sold receivables. LNA services, administers and collects the receivables sold.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

Under the terms of Lafarge North America Inc.’s securitization arrangement, Lafarge North America Inc. does not maintain control over the assets sold and there is no entitlement nor obligation to repurchase the sold receivables. In accordance with SFAS No. 140, thereceivables securitization transactions have been accounted for as sales and, as a result, the related receivables and debt have been excluded from the accompanying Consolidated Balance Sheets.

The SPS holds a subordinated retained interest in the receivables not sold to third parties. The subordinated interest in receivables is recorded at fair value, which is determined based on the present value of future expected cash flows estimated using management’s bestestimates of credit losses and discount rates commensurate with the risks involved. Due to the short-term nature of those trade receivables, their carrying amount, less allowances, approximates fair value. Variations in the credit and discount assumptions would not significantlyimpact fair value. Key figures related to the securitization program are as follows:

 
  **Year Ended December 31,** **Year Ended December 31,**   **2004** **2003** **2002** **2004** **2003** **2002**           **(in million U.S.$)** **(in million €)** Proceeds from the sale of trade receivables  1,057.5  1,545.0  1,889.2  776.3  1,223.2  1,801.5 Fees and discounting expense  1.8  2.3  3.4  1.3  2.0  3.6                       **At December 31,** **At December 31,**   **2004** **2003** **2002** **2004** **2003** **2002**           **(in million U.S.$)** **(in million €)** Outstanding receivables sold under arrangement  —  82.0  143.4  —  64.9  136.7 Subordinated interest  —  96.3  54.6  —  76.2  52.1   ***(c)******Related party transactions***
As disclosed in Note 28, transactions with companies accounted for under the equity method of accounting in French GAAP are not significant. Transactions in the ordinary course of business, with companies accounted for under the equity method of accounting in U.S.GAAP are as follows:
  **At December 31,**   **2004**  **2003**  **2002**        **(in million €)** **Assets**          Accounts receivable-trade, net  36  34  47 Other current receivables  55  35  37 Long-term receivables  15  52  114      **Total Assets**  **106**  **121**  **198**      **Liabilities**          Accounts payable, trade  9  8  8 Other current payables  5  15  2 Long-term liabilities  —  —  —      **Total Liabilities**  **14**  **23**  **10**                   **Years ended December 31,**   **2004**  **2003**  **2002**        **(in million €)** Sales  122  137  142 Cost of goods sold  90  56  22 
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 31 — Reconciliation of French GAAP to U.S. GAAP and Presentation of Condensed Financial Statements**
The following is a summary reconciliation of net income as reported in the consolidated financial statements of income to net income as adjusted for the approximate effects of the application of U.S. GAAP for the years ended December 31, 2004, 2003 and 2002 andshareholders’ equity, as reported in the consolidated balance sheets to shareholders’ equity as adjusted for the approximate effects of the application of U.S. GAAP at December 31 2004, 2003 and 2002.
***(a)******Reconciliation of net income***  **Years ended December 31,**   **2004** **2003** **2002**        **(in million €)** **Net income as reported in the consolidated Statements of income**  **868**  **728**  **456** 1 — Business combinations  127  128  168 2 — Deferred income taxes  (10) (9) (2)3 — Pension obligations  —  (4) 1 4 — Restructuring provisions  (4) (7) (87)5 — Other provisions  3  (24) (15)6 — Stock based compensation and employee stock plans  (2) (2) 35 7 — Investments in marketable securities  —  —  — 8 — Derivative instruments  4  29  (8)9 — Investment subsidies  2  (1) — 10 — Treasury shares  2  7  — 11 — Other items  14  (14) 6      **Total U.S. GAAP adjustments before income tax, minority interests and cumulative effect of change in accounting principles**  **136**  **103**  **98**      Tax effects of the above U.S. GAAP adjustments  2  18  35 Minority interests  (19) (18) 7      **Net income before cumulative effect of change in accounting principle according to U.S. GAAP**  **987**  **831**  **596**      Goodwill impairment on adoption of SFAS 142 (Note 30-12)  —  —  (160)     **Net income according to U.S. GAAP**  **987**  **831**  **436**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(b)******Statements of income according to U.S. GAAP***
For purposes of presenting consolidated financial statements of income for the years ended December 31, 2004, 2003 and 2002 consistent with U.S. GAAP, the Group has reflected the financial statement impact of the above reconciling items between French GAAP andU.S. GAAP presented in the above mentioned notes.
  **Years ended December 31,**   **2004** **2003** **2002**        **(in million €)** **Sales**  **13,371**  **12,468**  **13,406** Cost of goods sold  (9,778) (9,159) (9,820)Selling and administrative expenses  (1,782) (1,734) (1,711)Other operating income (expenses), net  —  279  (295)**Operating income**  **1,811**  **1,854**  **1,580** Interest expense  (453) (520) (565)Interest income  51  78  103 Foreign currency exchange gains (losses), net  (35) (67) 83 Non operating income (expenses), net  (95) (64) (117)     **Income before income tax, share of net income (loss) of equity affiliates, minority interests and cumulative effect of change in accounting principle**  **1,279**  **1,281**  **1,084** Income tax  (216) (353) (370)Share of net income (loss) of equity affiliates  165  134  122 Minority interests  (241) (231) (240)     **Income before cumulative effect of change in accounting principle**  **987**  **831**  **596** Goodwill impairment on adoption of SFAS 142 (Note 30-12)  —  —  (160)     **Net income**  **987**  **831**  **436**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(c)******Earnings per share according to U.S. GAAP***
In accordance with Statement of Financial Accounting Standards 128, *Earnings per Share* (“SFAS 128”), basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding. Thecomputation of diluted earnings per share is adjusted to include any potential common shares. Potential common shares include stock options, warrants, and convertible securities issued by the Group on its own stock.

The computation and reconciliation of basic and diluted earnings per share for the years ended December 31, 2004, 2003 and 2002 prepared in accordance with U.S. GAAP are as follows:
  **Years ended December 31,**   **2004** **2003** **2002**        **(in million €, except share and per share data)** **Numerator**          Earnings before cumulative effect of adoption of SFAS 142 (Note 30-12)  987  831  596 Cumulative effect of adoption of SFAS 142 (Note 30-12)  —  —  (160)     **Net earnings — basic earnings per share**  **987**  **831**  **436** Interest expense on convertible debt (“OCEANE”)  30  30  —      **Net earnings — diluted earnings per share**  **1,017**  **861**  **436**      **Denominator (in thousands)**          Weighted average number of shares outstanding  167,217  146,891  129,629      **Weighted average number of shares outstanding – basic**  **167,217**  **146,891**  **129,629** Weighed average of dilutive effect of:          — Stock options  575  310  918 — Assumed conversion of convertible debt (“OCEANE”)  10,769  10,769  —      Total potential dilutive shares  11,344  11,079  918      **Weighed average number of shares outstanding – fully diluted**  **178,561**  **157,970**  **130,547**      **Basic earnings per share**          — Earnings before cumulative effect of adoption of SFAS 142  5.90  5.66  4.59 — Cumulative effect of adoption of SFAS 142  —  —  (1.23)     **— Net earnings**  **5.90**  **5.66**  **3.36**      **Diluted earnings per share**          — Earnings before cumulative effect of adoption of SFAS 142  5.70  5.45  4.56 — Cumulative effect of adoption of SFAS 142  —  —  (1.22)     **— Net earnings**  **5.70**  **5.45**  **3.34**      
For purposes of computing diluted earnings per share, 4,727 thousand, 5,313 thousand and 1,638 thousand stock options were excluded from the calculation, for 2004, 2003 and 2002 respectively, as the effect of including such options would have been antidilutive. In2002, convertible debt with a carrying value of 1,342 million euros was also excluded as inclusion would have been antidilutive.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(d)******Reconciliation of shareholders’ equity***    **At December 31,**   **2004** **2003** **2002**        **(in    million €)** **Shareholders’ equity as reported in the consolidated balance sheets**  **8,477**  **8,185**  **6,981** 1 — Business combinations  396  162  118 2 — Deferred income taxes  (22) (15) 15 3 — Pension obligations  (662) (767) (536)4 — Restructuring provisions  3  7  33 5 — Other provisions  (26) (31) (15)6 — Employee stock purchase loans  —  (7) (21)7 — Investments in marketable securities  (35) (44) (105)8 — Derivative instruments  (15) (79) (154)9 — Investment subsidies  (24) (26) (27)     10 — Treasury          shares  (62) (64) —      11 — Other          items  (20) (38) (35)     **Total U.S. GAAP adjustments before income tax, minority interests and cumulative effect of change in accounting principles**  **(467****)** **(902****)** **(727****)**     Tax effects of the above U.S. GAAP adjustments  284  308  236 Minority interests  127  69  64      **Shareholders’ equity according to U.S. GAAP before cumulative effect of change in accounting principles**  **8,421**  **7,660**  **6,554**      Goodwill impairment on adoption of SFAS 142 (Note 30-12)  (160) (160) (160)     **Shareholders’ equity according to U.S. GAAP**  **8,261**  **7,500**  **6,394**      
The information below discloses the items affecting shareholders’ equity under U.S. GAAP.
  **2004** **2003** **2002**        **(in million €)** **Balance at January 1,**  **7,500**  **6,394**  **7,811** Net income  987  831  436 Dividends paid  (383) (303) (297)Issuance of common stock (dividend reinvestment plan)  207  121  132 Issuance of common stock  —  1,262  — Issuance of common stock (Cementia exchange offer)  —  —  50 Exercise of stock options  10  6  8 Employee stock purchase plan  —  —  45 Purchase (sale) of treasury shares  2  9  (4)Deferred stock based compensation  4  2  (35)Employee stock purchase loans  7  14  (21)Changes in other comprehensive income  85  (83) (328)Changes in translation adjustments  (158) (753) (1,403)     **Balance at December 31,**  **8,261**  **7,500**  **6,394**      
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(e)******Comprehensive income for the years ended December 31, 2004, 2003 and 2002 under U.S. GAAP***
Comprehensive income is a concept that is not addressed by French GAAP. Under U.S. GAAP, comprehensive income is the term used to define all non-owner changes in shareholders’ equity. Comprehensive income includes, in addition to net income, net unrealizedgains and losses arising during the period on available for sale securities, movements in cumulative translation adjustments and additional minimum pension liability.
  **2004** **2003** **2002**        **(in million €)** Net income  987  831  436 Net unrealized gain (loss) on available for sale securities, net of income taxes  5  82  (55)Net unrealized gain (loss) on derivative instruments, net of income taxes  39  31  2 Additional minimum pension liability adjustment, net of income taxes  41  (196) (275)Changes in cumulative translation adjustments  (158) (753) (1,403)     **Comprehensive income (loss) for the year ended December 31**  **914**  **(5****)** **(1,295****)**     
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
***(f)******Balance sheets according to U.S. GAAP***
For purposes of presenting consolidated balance sheets at December 31, 2004, 2003 and 2002 in a format consistent with U.S. GAAP, the Group has reflected the financial statement impact of the reconciling items between French GAAP and U.S. GAAP presented in theabove mentioned notes.

Certain reclassifications have been made to the prior periods to conform the 2004 presentation.

 
    **At December 31,**      **2004**  **2003**  **2002**          **Notes** **(in million €)** **ASSETS**             Cash and cash equivalents     1,344  1,357  959 Accounts receivable-trade, net     1,878  1,626  1,644 Other receivables     836  899  974 Inventories     1,395  1,315  1,459 Deferred taxes  32-3 (a) 45  55  60         **Current assets**     **5,498**  **5,252**  **5,096**         Goodwill  30-12  5,909  6,041  6,638 Intangible assets, net  30-12  54  51  34 Property, plant and equipment, net     9,861  9,494  10,418 Investments in equity affiliates     1,436  1,822  1,979 Other investments     504  415  245 Deferred taxes  32-3 (a) 1,002  971  1,307 Other long-term assets     311  252  681         **Long-term assets**     **19,077**  **19,046**  **21,302**         **Total assets**     **24,575**  **24,298**  **26,398**         **LIABILITIES AND SHAREHOLDERS’ EQUITY**             Accounts payable-trade     1,284  1,087  1,083 Other payables     1,398  1,615  1,864 Current portion of long-term debt     860  958  467 Short-term bank borrowings     193  308  450         **Current liabilities**     **3,735**  **3,968**  **3,864**         Deferred taxes  32-3 (a) 1,448  1,496  2,046 Pension liability  32-1  1,023  1,013  988 Provisions  32-4  988  983  1,005 Long-term debt     6,876  7,275  10,165         **Long-term liabilities**     **10,335**  **10,767**  **14,204**         **Minority interests**     **2,244**  **2,063**  **1,936** Common stock (par value: 4 euros; authorized: 170,919,078)     684  669  532 Outstanding (2004: 170,919,078; 2003: 167,217,813; 2002: 132,880,433 )             Additional paid-in capital     6,325  6,121  4,805 Retained earnings     4,263  3,659  3,193 Cumulative translation adjustments     (2,408) (2,250) (1,497)Accumulated other comprehensive income (loss)     (499) (584) (501)Employee loans receivables     —  (7) (21)Treasury shares (2004: 1,834,396; 2003: 1,856,266; 2002: 1,920,959)     (104) (108) (117)        **Total shareholders’ equity**     **8,261**  **7,500**  **6,394**         **Total liabilities and shareholders’ equity**     **24,575**  **24,298**  **26,398**         
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)** 
***(g)******Consolidated statements of cash flows according to U.S. GAAP***
For purposes of presenting consolidated financial statements of cash flows for the years ended December 31, 2004, 2003 and 2002 in a format consistent with U.S. GAAP, the Group has reflected the financial statement impact of the reconciling items between FrenchGAAP and U.S. GAAP presented in the above mentioned notes.
  **Years ended December 31,**   **2004** **2003** **2002**        **(in million €)** **NET CASH PROVIDED BY OPERATING ACTIVITIES**          Net income  987  831  436 *Adjustments to reconcile net income to net cash provided by operating activities:*          Minority interests  241  231  240 Depreciation and amortization  858  814  851 Cumulative effect of adoption of SFAS 142 (Note 30-12)  —  —  160 Share of net income of equity affiliates  (165) (134) (122)Gains on disposals, net  (46) (294) (212)Deferred income taxes and tax provisions  (160) (10) 70 Stock based compensation  2  2  (35)Other, net  136  97  359            Changes in operating assets and liabilities, net of effects from acquisitions of businesses          Decrease (increase) in inventories  (91) 35  (39)Decrease (increase) in accounts receivable-trade  (252) (80) 460 Decrease (increase) in other receivables  21  (58) (51)Increase (decrease) in accounts payable-trade  153  58  (517)Increase (decrease) in other payables  (204) 271  (45)     **Net cash provided by operating activities**  **1,480**  **1,763**  **1,555**      **NET CASH USED IN INVESTING ACTIVITIES**          Capital expenditures  (1,029) (764) (1,010)Acquisitions of subsidiaries  (376) (318) (263)Investments in equity affiliates  (1) 6  (32)Dividends received from equity affiliates  74  70  57 Proceeds from sale of property plant and equipment  128  175  514 Proceeds from sale of companies  437  370  247 Net increase (decrease) in other long-term assets  103  (50) (3)     **Net cash used in investing activities**  **(664****)** **(511****)** **(490****)**     **NET CASH PROVIDED BY FINANCING ACTIVITIES**          Proceeds from issuance of common stock  217  1,389  185 Proceeds from issuance of common stock — minority interests subscription  34  34  48 Issuance of warrants  1  —  — (Increase) Decrease treasury shares  2  9  (4)Dividends paid  (383) (303) (297)Dividends paid by subsidiaries to minority interests  (104) (78) (69)Proceeds from issuance of long-term debt  893  133  582 Repayment of long-term debt  (1,769) (1,943) (734)Increase (decrease) in short-term debt  301  (16) (664)     **Net cash provided (used in) by financing activities**  **(808****)** **(775****)** **(953****)**Net effect of foreign currency translation on cash and cash equivalents  (21) (79) (170)     **(Decrease) Increase in cash and cash equivalents**  **(13****)** **398**  **(58****)**Cash and cash equivalents at beginning of year  1,357  959  1,017      **Cash and cash equivalents at end of year**  **1,344**  **1,357**  **959**      **SUPPLEMENTAL DISCLOSURES**          **Cash payments during the period for**          Interest  395  458  574 Income taxes  412  354  409 **Non-cash transactions:**          Issuance of shares in connection with the acquisition of Cementia  —  —  50 
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)** 
**Note 32 — Additional U.S. GAAP Disclosure Information**  **1.****Pensions and employee benefits**
The liability with respect to defined benefit pension plans is in substantially all instances the defined benefit obligation calculated annually by independent actuaries using the projected unit credit method and applying, when relevant, all provisions of Statement ofFinancial Accounting Standards No 87, Employers’ Accounting for Pensions (“SFAS 87”), Statement of Financial Accounting Standards No 88, Employers Accounting for Settlements and Curtailments of Defined Pension Plans and for Termination Benefits (“SFAS 88”),Statement of Financial Accounting Standards No 106, Employers Accounting for Post-retirement Benefits Other than Pensions (“SFAS 106”) and Employers Accounting for Post-employment Benefits (“SFAS 112”), Statement of Financial Accounting Standard No 112.

As of December 31,2004, 2003 and 2002, the accumulated benefit obligation in respect of pension plans was 3,858 million euros, 3,564 million euros and 3,416 million euros respectively and the company recorded:
 –a minimum pension liability of 659 million euros, 772 million euros and 538 million euros respectively related to the accumulated benefit obligation in excess of the fair value of the plan assets    –an intangible asset of 14 million euros, 22 million euros and 17 million euros respectively reflecting the portion of minimum pension liability generated from unamortized prior service costs and transition obligation. The remaining 645 million euros, 750 million euros and521 million euros was recorded as “Accumulated other comprehensive loss” in the Consolidated Balance Sheets and in the Consolidated Statements of Shareholders’ Equity as of December 31, 2004, 2003 and 2002, net of tax and minority interests of 398 million euros,437 million euros and 275 million euros.
The Group has recorded additional minimum liability adjustments as reductions (increases) in other comprehensive income of (41) million euros, 196 million euros and 275 million euros, net of tax and minority interests, for the years ended December 31, 2004, 2003 and2002 respectively. Accounting for pension costs under French GAAP does not require the recording of a minimum liability adjustment.

As requested by SFAS 132 (revised 2003), the following table provides:

 
  **At December 31,**   **2004** **2003** **2002**        **(in million €)** **Projected benefit obligation, accumulated benefit obligation and fair value of assets information in respect of pension plans with accumulated benefit obligations in excess of the fair value of plan assets:**          Projected benefit obligation  3,850  3,824  2,853 Fair value of plan assets  2,758  2,773  2,046 Accumulated benefit obligation  3,467  3,448  2,619 **Projected benefit obligation and fair value of assets information in respect of pension plans with projected benefit obligations in excess of the fair value of plan assets:**          Projected benefit obligation  4,310  3,936  3,806 Fair value of plan assets  3,109  2,817  2,873 
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

The difference between the net      amount accrued for under U.S. GAAP and the net amount accrued for under      French GAAP can be summarized as follows:
  **Pension benefits** **Other benefits** **Total**        **2004** **2003** **2002** **2004** **2003** **2002** **2004** **2003** **2002**              **(in million €)**                     **Net            amount recognized under U.S. GAAP** **18.4** **57.1** **140.2** **(213.8****)****(217.9****)****(243.3****)****(195.4****)****(160.8****)****(103.1****)**Minimum          liability adjustment (MLA) (659.0)(772.2)(538.4)— — — (659.0)(772.2)(538.4)           **Net            amount accrued for under U.S. GAAP** **(640.6****)****(715.1****)****(398.2****)****(213.8****)****(217.9****)****(243.3****)****(854.4****)****(933.0****)****(641.5****)**           **Accrued            benefit liability (including MLA)** **(808.9****)****(795.3****)****(745.0****)****(213.8****)****(217.9****)****(243.3****)****(1,022.7****)****(1,013.2****)****(988.3****)****Prepaid            benefit cost (including MLA)** **168.3** **80.2** **346.8** **—** **—** **—** **168.3** **80.2** **346.8**            U.S.          GAAP adjustments, see Note 31(d)(3)* 662.4 768.5 536.1 — (1.3)(0.6)662.4 767.2 535.5 Change          in scope of consolidation (8.8)(12.5)(13.6)(11.4)(2.8)— (20.2)(15.3)(13.6)Reclassifications** — 2.6 14.5 — — — — 2.6 14.5 **Net            amount accrued in consolidated financial statements under French            GAAP** **13.0** **43.5** **138.8** **(225.2****)****(222.0****)****(243.9****)****(212.2****)****(178.5****)****(105.1****)**           **Accrued** **(563.0****)****(517.1****)****(478.1****)****(225.2****)****(222.0****)****(243.9****)****(788.2****)****(739.1****)****(722.0****)****Prepaid** **576.0** **560.6** **616.9** **—** **—** **—** **576.0** **560.6** **616.9**  *Adjustments include impacts          of transition obligation, prior service cost, actuarial gains recognized          with a different timing under local regulations and minimum liability          adjustment.**Reclassifications include          amounts recorded for French GAAP within other payables ***Specific comments              for North-American employee benefits other than pension plans***
The company provides certain retiree      health and life insurance benefits to eligible employees who retire in      the U.S. or Canada. Salaried participants generally become eligible for      retiree health care benefits when they retire from active service at age      55 or later, although there are some variances by plan or unit in the U.S.      and Canada. Benefits, eligibility and cost-sharing provisions for hourly      employees vary by location and/or bargaining unit. Generally, the health      care plans pay a stated percentage of most medical and dental expenses      reduced for any deductible, copayment and payments made by government programs      and other group coverage. These plans are unfunded. An eligible retiree’s      health care benefit coverage is coordinated in Canada with provincial health      and insurance plans and in the U.S., after attaining age 65, with Medicare.      Certain retired employees of businesses acquired by the company are covered      under other health care plans that differ from current plans in coverage,      deductibles and retiree contributions.

In the U.S., salaried retirees      and dependents under age 65 have a 2.0 million U.S. dollars (approximately      1.5 million euros) health care maximum benefit. At age 65 or over, a new      lifetime maximum benefit of 50,000 U.S. dollars (approximately 37,000 euros)      becomes effective. Lifetime maximums for hourly retirees are governed by      the location and/or bargaining agreement in effect at the time of retirement.      In Canada, salaried retirees and their dependants have medical coverage      without a lifetime maximum benefit. The majority of our hourly retirees      in Canada do not have medical coverage. Only certain cement hourly retirees      and dependents are offered medical coverage without a lifetime maximum      benefit.

In Canada, both salaried and nonsalaried      employees are generally eligible for postretirement life insurance benefits.      In the U.S., postretirement life insurance is provided for a number of      hourly employees as stipulated in their hourly bargaining agreements, but      it is not provided for salaried employees, except those of certain acquired      companies.

The assumed health care cost trend      rate used in measuring the accumulated postretirement benefit obligation      differs between U.S. and Canadian plans. In 2004, the pre-65 and post-65      assumed rate was 11.0 percent in the U.S. plan, decreasing to 5.0 percent      in 2011, and 9.1 percent in the Canadian plan, decreasing to 4.7 percent      in 2011. In 2003, the pre-65 and post-65 assumed rate was 12.0 percent      in the U.S. plan,

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

decreasing to 5.5 percent in 2011,    and 9.8 percent in the Canadian plan, decreasing to 4.7 percent in 2011.    In 2002, the pre-65 and post-65 assumed rate was 13.0 percent in the U.S.    plan, decreasing to 5.5 percent over nine years, and 9.8 percent in the Canadian    plan, decreasing to 4.7 percent over six years. The assumed rate for Medicare    health cost trends was the same as for the company’s U.S. plan.

Assumed health care cost trend      rates have a significant effect on the amounts reported for the health      care plans. A one-percentage-point increase or decrease in assumed health      care cost trend rates would have the following effects:

 
  **One-percentage-point**      **Increase** **Decrease**       **(in          million U.S.$)**         Increase          (decrease) in postretirement benefit obligation at December 31, 2004  26.2  (22.7)Increase          (decrease) in the total of service and interest cost components for          2004  2.9  (2.9)  **2.****Accounting for stock-based            compensation**
Lafarge S.A. maintains a variable      stock option plan and an employee stock purchase plan. The stock option      plan grants options to purchase or subscribe shares of the Group’s      common stock to executives, senior management, and other employees who      have contributed significantly to the performance of the Group. The option      exercise price approximates market value on the grant date. The options      expire ten years from the grant date. The vesting period of the options      range from immediate, to five years. The Group accounts for employee stock      options using the intrinsic value method prescribed by APB 25.

Information relating to the Lafarge      S.A. stock options granted during 2004, 2003 and 2002 is summarized as      follows:
  **2004** **2003** **2002**        **Shares** **Average****option price** **Shares** **Average****option price** **Shares** **Average****option price**           **(in €)** **(in €)** **(in €)**                     **At            January 1**  **6,866,077**  **74.29**  **5,379,723**  **81.22**  **4,653,256**  **77.34** Options          granted  690,792  70.81  1,616,572* 68.15  909,763  93.11 Options          exercised  (239,658) 47.56  (127,443) 47.51  (181,359) 42.66 Options          canceled  (7,309) 48.62  (2,775) 47.97  (1,937) 32.43         **At            December 31**  **7,309,902**  **74.87**  **6,866,077**  **74.29**  **5,379,723**  **81.22**         **Options            exercisable at December 31**  **2,596,802**  **64.05**  **1,797,255**  **50.93**  **1,585,453**  **50.22**         **Weighted            average fair value of options granted during the year**     **19.23**     **28.07**     **31.38**                                 *including readjustments          due to financial transactions in 2003
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

Information relating to the Lafarge      S.A. stock options outstanding at December 31, 2004 is summarized as follows:
**Exercise            price (in €)** **Number of          options****outstanding** **Weighted average****remaining life in months** **Number of          options****exercisable**       44.20  15,815  5  15,815   43.10  328,055  12  328,055   43.10  160,490  12  160,490   42.57  53,327  24  53,327   50.19  333,730  36  333,730   50.19  414,268  36  414,268   74.72  134,484  41  134,484   74.18  110,119  46  110,119   82.70  1,046,514  60  1,046,514   79.74  499,285  72  — 102.12  12,754  77  —   96.16  1,264,338  84  — 101.79  472,985  89  —   74.48  502,263  95  —   65.95  1,273,925  107  —   70.79  687,550  120  —           **7,309,902**     **2,596,802**        
In addition to the Lafarge S.A.      plan described above, the following information describes the stock-based      compensation plans of Lafarge North America Inc., a 52.95%-owned subsidiary      of Lafarge S.A. The stock-based compensation plans of Lafarge North America      Inc. are denominated in its own stock.
***Lafarge North America              Inc. and its subsidiaries stock option and purchase plans***
Lafarge North America Inc. stock      option plans and employee stock purchase plans are originally denominated      in U.S. dollars and this information has been translated to euros for the      convenience of the reader using exchange rates of 0.73416, 0.7918 and 0.9536      applicable at December 31 2004, 2003, and 2002 respectively.

Lafarge North America Inc. maintains      fixed stock option plans and an employee stock purchase plans. Under the      fixed stock option plans, directors and key employees of Lafarge North      America Inc, may be granted stock options that entitle the holder to receive      shares of Lafarge North America Inc.’s common stock based on the market      price of the securities at the date of grant. Director’s options are      exercisable based on the length of a director’s service on the Board      of Directors and become fully exercisable when a director has served on      the Board for over four years. Employee options vest in annual 25 percent      increments beginning one year after the grant date.

The employee stock purchase plan      allows substantially all employees to purchase common stock of Lafarge      North America Inc., through payroll deductions, at 90 percent of the lower      of the beginning or end of the plan year market prices. During 2004, 142,237      shares were issued at a price of 20.80 euros, in 2003, 139,380 shares were      issued at a price of 22.36 euros and in 2002, 95,299 shares were issued      at a price of 28.09 euros. At December 31, 2004, 2003 and 2002, 1.9 million      euros, 1.7 million euros and 1.9 million euros, respectively, were allocated      for future share purchases.

The Group accounts for the Lafarge      North America Inc.’s stock option plans under APB 25 and the associated      interpretations. No compensation expense was recognized for these plans.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

Information relating to Lafarge      North America Inc.’s stock options granted during 2004, 2003 and 2002      is summarized as follows:
  **2004** **2003** **2002**   **Shares** **Average****option price** **Shares** **Average****option price** **Shares** **Average****option price**           **(in €)** **(in €)** **(in €)** **At            January 1**  **5,137,304**  **25.52**  **4,260,293**  **31.08**  **3,978,950**  **33.05** Options          granted  1,264,500  30.75  1,279,750  23.61  1,167,500  39.20 Options          exercised  (1,426,913) 22.23  (256,426) 20.03  (762,720) 26.60 Options          canceled  (93,625) 26.51  (146,313) 26.83  (123,437) 29.71         **At            December 31**  **4,881,266**  **25.87**  **5,137,304**  **25.52**  **4,260,293**  **31.08**         **Options            exercisable at December 31**  **2,005,585**  **23.93**  **2,391,104**  **23.60**  **1,775,593**  **28.55**         **Weighted            average fair value of options granted during the year**     **8.86**     **6.86**     **14.37**               
Information relating to the Lafarge      North America Inc. stock options outstanding at December 31, 2004 is summarized      as follows:
**Range            of exercise price****(in €)** **Number of options****outstanding** **Weighted average****remaining contractual****life in years** **Number of options****exercisable**     13.21 – 16.89  418,550  3.83  418,550 17.72 – 22.00  1,658,678  7.41  552,247 24.37 – 27.99  603,188  3.94  589,438 30.14 – 32.30  2,200,850  8.24  445,350           **4,881,266**  **7.04**  **2,005,585**        
The Group estimates the fair value      of the options granted in 2004, 2003 and 2002 based on the following assumptions:
  **Lafarge          S.A. options** **Lafarge          North America Inc. options**   **Years          ended December 31,** **Years          ended December 31,**   **2004** **2003** **2002** **2004** **2003** **2002**         Expected          dividend yield  2.7% 2.7% 2.5% 1.9% 2.0% 1.5%Expected          volatility of stock  30.0% 37.2% 36.2% 32.0% 34.0% 38.0%Risk-free          interest rate  3.5% 4.1% 4.0% 4.1% 3.6% 4.9%Expected          life of the options (in years)  8.0  8.0  8.0  5.1  5.1  5.4                     
The Group assumes that the equivalent      risk-free interest rate is the closing market rate, on the last trading      day of the year, for treasury bills with maturity similar to the expected      life of the options.

The Lafarge S.A. stock incentive      plan was introduced on November 29, 1989. The Group assumes the estimated      life of the outstanding option agreements based upon the number of options      historically exercised and cancelled since the plan inception.

The Group uses the treasury shares      method for purposes of determining the number of shares to be issued in      conjunction with the Group’s stock incentive plan. Based upon the      number and amounts of vested

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

and unvested options outstanding,    the dilutive effect on the Group’s outstanding shares for the years    ended December 31, 2004, 2003 and 2002 was 575, 310 and 918 thousand shares    respectively.
**3.****Income taxes (SFAS 109)**  ***(a)******Deferred tax assets              and liabilities***
The net deferred tax liabilities      under U.S. GAAP are as follows:
  **At          December 31,**   **2004** **2003** **2002**        **(in          million €)** Net          capital loss carry forwards  373  569  245 Net          operating loss and tax credit carry forwards  565  463  815 Net          world-wide consolidation foreign tax credit carry forwards  —  —  75 Pensions          and other post-retirement benefits  225  288  333 Property,          plant and equipment  202  177  374 Provisions          and other current liabilities other  183  215  259 Restructuring          provisions  18  20  56      **Deferred            tax assets**  **1,566**  **1,732**  **2,157** Valuation          allowance  (519) (706) (790)     **Net            deferred tax assets**  **1,047**  **1,026**  **1,367**      Property,          plant and equipment  (1,263) (1,354) (1,611)Prepaid          pension assets  (7) (17) (117)Other  (181) (130) (324)     **Deferred            tax liabilities**  **(1,451****)** **(1,501****)** **(2,052****)**     **Net            deferred tax liabilities**  **(404****)** **(475****)** **(685****)**     
Deferred income taxes under U.S.      GAAP are summarized as follows:
  **At          December 31,**   **2004** **2003** **2002**        **(in          million €)** Current          deferred tax assets  45  55  60 Long-term          deferred tax assets  1,002  971  1,307 Current          deferred tax liabilities  (3) (5) (6)Long-term          deferred tax liabilities  (1,448) (1,496) (2,046)     **Net            deferred tax liabilities**  **(404****)** **(475****)** **(685****)**     ***(b)******Taxes not accrued              on undistributed earnings***
The Group has not provided any      deferred income taxes on the undistributed earnings of its foreign subsidiaries      based upon its determination that such earnings will be indefinitely reinvested.      At December 31, 2004, the cumulative undistributed earnings of these subsidiaries      were approximately 11,565 million euros. Group management has decided that      the determination of the amount of any unrecognized deferred tax liability      for the cumulative undistributed earnings of the foreign subsidiaries is      not practical since it would depend on a number of factors that cannot      be known until such time as a decision to repatriate the earnings might      be made. In addition, no provision for income taxes has been made for approximately      1,094 million euros of unremitted earnings of the Group’s French subsidiaries      since the remittance of such earnings would be tax exempt for 95% or more      owned subsidiaries.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

During the first quarter of 2005, Lafarge North America Inc. decided to repatriate almost $1.1 billion of Canadian earnings under the repatriation provisions of the Jobs Act. These earnings will also be subject to Canadian withholding tax, which will result in a totaleffective tax rate of approximately 9 to 11 percent on the repatriated earnings including the special 5.25 percent legislation rate. Repatriation of these earnings will result in recognition of additional income tax expense in the first quarter of 2005, which Lafarge North AmericaInc. currently estimates to be between $100 million and $120 million. The status of pending technical correction legislation and expected guidance that will clarify certain provisions will determine the ultimate amount recognized. Lafarge North America Inc. intends to reinvestthe remaining undistributed Canadian earnings indefinitely in Canada and, therefore, no provision for U.S. income taxes or Canadian withholding taxes has been provided against these undistributed earnings.
**4.****Provisions** ***Changes in the balance of provisions***   **Restructuring****provisions** **Site****restoration****and****environmental****provisions** **Other****provisions** **Total****provisions**         **(in million €)** **Balance at January 1, 2002**  **158**  **174**  **395**  **727**       Current year addition, net  156  52  393  601 Current year release  (231) (43) (106) (380)Other changes  22  34  60  116 Translation adjustments  (10) (16) (33) (59)      **Balance at December 31, 2002**  **95**  **201**  **709**  **1,005**       Current year addition, net  66  35  188  209 Current year release  (102) (38) (200) (340)Changes in scope and other changes  (4) 22  61  79 Translation adjustments  (5) (14) (31) (50)      **Balance at December 31, 2003**  **50**  **206**  **727**  **983**       Current year addition, net  37  45  94  176 Current year release  (47) (44) (94) (185)Changes in scope and other changes  —  17  4  21 Translation adjustments  4  (3) (8) (7)      **Balance at December 31, 2004**  **44**  **221**  **723**  **988**       
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**5.****Summarized Combined Balance Sheet and Income Statement Information of Equity Affiliates**
The following tables present balance sheet and income statement information, on a combined basis, for those entities that are accounted for using the equity method under U.S. GAAP. The combined information for those entities that are proportionately consolidatedunder French GAAP is separately presented.
***(a)******Combined balance sheet information at 100%***    **Equity affiliates** **Proportionately consolidated**   **At December 31,** **At December 31,**   **2004** **2003** **2002** **2004** **2003** **2002**           **(in million €)** **(in million €)** Current assets  662  1,085  1,721  1,055  1,269  1,109 Long-term assets  1,061  1,655  4,154  2,497  3,047  3,180         **Total assets**  **1,723**  **2,740**  **5,875**  **3,552**  **4,316**  **4,289**         Current liabilities  536  833  1,277  489  560  597 Long-term liabilities  287  563  2.117  633  871  963 Total equity  900  1,344  2,481  2,430  2,885  2,729         **Total shareholders’ equity and liabilities**  **1,723**  **2,740**  **5,875**  **3,552**  **4,316**  **4,289**           ***(b)******Combined income statement information at 100%***    **Equity affiliates** **Proportionately consolidated**   **Years ended December 31,** **Years ended December 31,**   **2004** **2003** **2002** **2004** **2003** **2002**           **(in million €)** **(in million €)** Sales  2,065  3,057  3,804  1,983  2,379  2,177 Operating income  381  511  446  210  359  346 Net income  255  222  116  348  217  245   **6.****FIN 45 disclosure about the Group’s obligations under guarantees**
As part of the operations of the roofing Division, the Group generally promises the end-user — often for 30 years — the delivery of replacement material free of charge, where products lack defined basic features. The installers typically are promised replacementmaterial and reimbursement of labor costs associated with the replacement of defective material. The promise typically expires with the installer’s duty to repair free of charge. The Group’s policy is to accrue the undiscounted estimated cost of warranty coverage at the time thesale is recorded. The foreseeable expense calculation is based on sales under warranty and the amount is estimated by weighting all possible outcomes by their associated probabilities determined based on past experience and future expectations. The provision for productwarranty amounts to 31 million euros and 28 million euros at December 31, 2004 and 2003 respectively.
**7.****Recently issued accounting pronouncements**    •**SFAS No. 123(R) “Share-Based Payment”**
In December 2004, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 123 (revised 2004), “*Share-Based Payment*” (“SFAS No. 123(R)”), which is a revision of SFAS No. 123, “*Accounting for Stock-Based Compensation.*” SFAS No. 123(R)supersedes APB Opinion No. 25, “*Accounting for Stock Issued to Employees,*” and amends FASB Statement No. 95, “*Statement of Cash Flows.*” Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R)requires all share-based payments to employees, including grants of employee

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**

stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

The Group expects to adopt SFAS No. 123(R) on July 1, 2005 for U.S. GAAP purposes. The Group also expects to adopt its requirements using the “modified prospective” method described in SFAS No. 123(R). Under this method, compensation cost is recognizedbeginning with the effective date (a) based on the requirements of SFAS No. 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of Statement No. 123 for all awards granted to employees prior to the effective date ofStatement No. 123(R) that remain unvested on the effective date.

The impact of adoption of Statement No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123(R) in prior periods, the impact of that standard would haveapproximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income and earnings per share above.
 •**SFAS No. 109-2 “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004”**
In December 2004, the FASB issued FASB Staff Position No. 109-2, “*Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004*” (“FSP 109-2”), which provides guidance under SFAS No. 109,“*Accounting for Income Taxes,*” with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (the “Jobs Act”) on enterprises’ income tax expense and deferred tax liability. The Jobs Act was enacted on October 22,2004. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109. Lafarge North AmericaInc. concluded to repatriate its Canadian earnings subsequent to December 31, 2004. Accordingly, as provided for in FSP 109-2, Lafarge North America Inc. did not adjust its 2004 tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act. Asrequired by FSP 109-2, the Group has disclosed in Note 32-3(b), the amount of unremitted earnings we will repatriate in 2005.
 •**SFAS No. 151, “Inventory Costs an amendment of ARB No. 43, Chapter 4.”**
In November 2004, the FASB issued SFAS No. 151, “*Inventory Costs an amendment of ARB No. 43, Chapter 4.*” SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized ascurrent-period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. The Group does not expect the adoption of SFASNo. 151 to have a material effect on our consolidated financial position or results of operations.
 •**FASB Interpretation No. 46 “Consolidation of Variable Interest Entities”**
In January 2003, the FASB issued FASB Interpretation No. 46, “*Consolidation of Variable Interest Entities*” (“FIN 46”). Under FIN 46, a variable interest entity (“VIE”) is an entity in which the equity investment holders have not contributed sufficient capital tofinance its activities or the equity investment holders lack adequate decision making ability. FIN 46 requires consolidation of a VIE by the enterprise that has the majority of the risks and rewards of ownership, referred to as the primary beneficiary.

In December 2003, the FASB issued FASB Interpretation No. 46, “*Consolidation of Variable Interest Entities (revised December 2003)*” (“FIN 46(R)”), clarifying FIN 46 and exempting certain entities from the provisions of FIN 46. Generally, application of FIN 46(R)is required in financial statements of public entities that have interests in structures commonly referred to as special-purpose entities for periods ending after December 15, 2003, and, for other types of VIEs, for periods ending after March 15, 2004. The adoption of FIN 46 andFIN 46(R) did not have a material impact on our consolidated financial position or results of operations.

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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
**Note 33 — Scope of Consolidation – Major Companies**       **Aggreg.**         **Owner-** **Consolidation method** **Companies** **Countries** **Cement** **and Concrete** **Roofing** **Gypsum** **Others** **Control %** **ship %** **French GAAP** **U.S. GAAP**            Colpa Algeria       •   100.00 57.15 Full Full Durlock S.A. (2) Argentina       •   40.00 40.00 Proportionate Equity Lafarge Australia (Pty) Ltd Australia       •   100.00 100.00 Full Full Lafarge Plasterboard (Pty) Ltd Australia       •   100.00 100.00 Full Full Lafarge Perlmooser AG Austria • •       100.00 100.00 Full Full Schiedel Kaminwerke GmbH Austria     •     100.00 100.00 Full Full Bramac Dachsysteme International GmbH (2) Austria     •     50.00 50.00 Proportionate Equity Tondach Gleinstðtten AG Austria     •     25.00 25.00 Equity Equity Lafarge Surma Cement Limited (2) Bangladesh •         50.00 29.44 Proportionate Equity Lafarge Roof Products Belgium N.V. Belgium     •     100.00 100.00 Full Full SCB Lafarge (2) Benin •         50.00 50.00 Proportionate Equity Schiedel Sistemi dimnjaka d.o.o. Bosnia     •     100.00 100.00 Full Full Bramac krovni sistemi d.o.o (2) Bosnia     •     50.00 50.00 Proportionate Equity Companhia Nacional de Cimento Portland Brazil •         99.82 99.82 Full Full Cimento Maua Brazil •         99.90 90.84 Full Full Lafarge Brazil S.A Brazil • •       99.15 90.12 Full Full Centralbeton Ltda Brazil   •       99.99 90.11 Full Full Cimento Tupi S.A. Brazil •         20.00 19.96 Equity Equity Gipsita SA MineraÓÁo, Industria E commercio (2) Brazil       •   60.00 60.00 Proportionate Equity Lafarge Roofing Brazil Ltda Brazil     •     100.00 100.00 Full Full Bramac Prokrovni Sistemi EOOD (2) Bulgaria     •     50.00 50.00 Proportionate Equity CPAC Monier (Cambodia) Ltd Cambodia     •     25.00 25.00 Equity Equity Cimenteries du Cameroun Cameroon •         56.73 56.73 Full Full Lafarge Canada Canada • •   •   52.95 52.95 Full Full Sociedad Industrial Romeral S.A. (2) Chile       •   40.00 40.00 Proportionate Equity Empresas Melon SA Chile • •     Mortars 84.21 84.14 Full Full Beijing Chinefarge Cement Limited Liability Company China •         65.00 58.62 Full Full Beijing Ycheng Lafarge Concrete China   •       76.72 69.20 Full Full Lafarge Dujiangyan China •     •   75.00 67.64 Full Full Lafarge Onoda Gypsum Shangaï (2) China •         50.00 48.29 Proportionate Equity Lafarge Roofing Systems (China) Ltd China     •     100.00 100.00 Full Full Lafarge Chongqing Cement Company China •         70.59 63.67 Full Full Bramac pokrovni sistemi d.o.o. (2) Croatia     •     50.00 50.00 Proportionate Equity Lafarge Cement AS Czech Rep. • •       96.37 96.36 Full Full Bramac spol s.r.o. (2) Czech Rep.     •     50.00 50.00 Proportionate Equity Lafarge Tekkin A/S Denmark     •     100.00 100.00 Full Full Alexandria Portland Cement Company(2) Egypt •         44.50 44.50 Proportionate Equity Beni Suef Cement Company (2) Egypt •         50.00 50.00 Proportionate Equity Lafarge Roofing OÉ Estonia     •     100.00 100.00 Full Full Lafarge Tekkin OY Finland     •     100.00 100.00 Full Full Schiedel Savuhormistot OY Finland     •     100.00 100.00 Full Full Lafarge Ciments France •         100.00 100.00 Full Full Société des Ciments Antillais France • •       69.44 69.44 Full Full Lafarge Bétons France   •       100.00 100.00 Full Full Lafarge Granulats France   •       100.00 100.00 Full Full Lafarge Plâtres France       •   100.00 100.00 Full Full Lafarge Couverture SA France     •     100.00 100.00 Full Full Cie Réunionaise d’importation France •         100.00 82.88 Full Full Sobex France   •       100.00 93.30 Full Full  (2)These companies are proportionately consolidated under French GAAP, but accounted for under the equity method under U.S. GAAP [see Note 30-13 (b)]
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
      **Aggreg.**         **Owner-** **Consolidation method** **Companies** **Countries** **Cement** **and Concrete** **Roofing** **Gypsum** **Others** **Control %** **ship %** **French GAAP** **U.S. GAAP**            Lafarge Zement GmbH Germany • •       100.00 100.00 Full Full Wössinger Lafarge Zement GmbH Germany •         100.00 100.00 Full Full Karsdorfer Zement GmbH Germany   •       100.00 100.00 Full Full Lafarge Beton GmbH Germany •         100.00 100.00 Full Full Lafarge Gips GmbH Germany       •   100.00 100.00 Full Full Lafarge Roofing GmbH Germany     •     100.00 100.00 Full Full Lafarge Dachsysteme GmbH Germany     •     100.00 100.00 Full Full Lafarge Roofing Components GmbH & Co KG * Germany     •     100.00 100.00 Full Full RuppKeramik GmbH Germany     •     100.00 100.00 Full Full Schiedel GmbH & Co * Germany     •     100.00 100.00 Full Full btg schornsteintechnik GmbH Germany     •     100.00 100.00 Full Full Klöber GmbH & Co KG * Germany     •     100.00 100.00 Full Full Lafarge Beton Industrial Commercial SA Greece   •       53.17 53.12 Full Full Heracles General Cement Greece • •       53.17 53.12 Full Full Lafarge Incehsa S.A. de CV Honduras •         53.00 52.80 Full Full Leier BCM-KFT Hungary •         40.00 40.00 Equity Equity Lafarge Roofing Component Hungary Kft Hungary     •     100.00 100.00 Full Full Lafarge Private India Ltd India •         70.78 70.78 Full Full P.T. Semen Andalas Indonesia Indonesia •         100.00 100.00 Full Full P.T. Lafarge Roofing Indonesia Indonesia     •     100.00 100.00 Full Full P.T. Petrojaya Boral Plasterboard Indonesia (2) Indonesia       •   50.00 50.00 Proportionate Equity Lafarge Plasterboard Ireland Ltd Ireland       •   100.00 100.00 Full Full Redland Tile & Brick Ltd Ireland     •     100.00 100.00 Full Full Schiedel Chimney Systems Ireland Ltd Ireland     •     100.00 100.00 Full Full Lafarge Adriasebina Italy • •       100.00 99.62 Full Full Lafarge Gessi SpA Italy       •   100.00 100.00 Full Full Lafarge Roofing Italia SpA Italy     •     100.00 100.00 Full Full Lafarge Braas Roofing Japan Co Ltd Japan     •     85.20 85.20 Full Full Lafarge Aso Cement Japan • •       39.40 22.45 Equity Equity Jordan Cement Factories (1) Jordan •         48.15 48.15 Full Equity Bamburi Cement Ltd Kenya •         73.31 58.64 Full Full Lafarge Buycksan Gypsum (2) Korea       •   50.00 57.93 Proportionate Equity Lafarge Halla Cement (2) Korea •         51.17 51.17 Full Full Lafarge Roofing (Korea) Ltd Korea     •     100.00 75.00 Full Full Lafarge Tekkin UAB Lithuania     •     100.00 100.00 Full Full Nouvelle Cimenterie d’Amboanio SA (Sanca) Madagascar •         100.00 65.97 Full Full Portland Malawi Malawi •         75.17 75.17 Full Full Lafarge Roofing Holdings Sdn Bhd Malaysia     •     100.00 100.00 Full Full Associated Pan Malaysia Cement Sdn Bhd Malaysia •         100.00 61.13 Full Full Malayan Cement Industries Sdn Bhd Malaysia •         100.00 61.13 Full Full Supermix concrete Malaysia Sdn Bhd Malaysia   •       61.74 37.74 Full Full Boral Plasterboard (Malaysia) Sdn Bhd (2) Malaysia       •   50.00 35.00 Proportionate Equity CCalifornia Clay Tile de Mexico S.A. de C.V. Mexico     •     50.00 50.00 Equity Equity Comex Lafarge Mexico Mexico       •   40.00 40.00 Equity Equity Lafarge Cementos S.A. de C.V. Mexico •         100.00 90.12 Full Full Lafarge Maroc (2) Morocco • •       50.00 49.99 Proportionate Equity Lafarge Ciments (2) Morocco •         50.00 34.93 Proportionate Equity Lafarge Cementos (2) Morocco •         50.00 34.19 Proportionate Equity Lafarge Béton (2) Morocco   •       50.00 34.58 Proportionate Equity  (1)This company is consolidated under French GAAP, but accounted for under the equity method under U.S. GAAP [see Note 30-13 (a)](2)These companies are proportionately consolidated under French GAAP, but accounted for under the equity method under U.S. GAAP [see Note 30-13 (b)]*The following subsidiaries having fulfilled the relevant legal exemption requirements have elected to be exempt from disclosing their annual financial statements.
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
      **Aggreg.**         **Owner-** **Consolidation method** **Companies** **Countries** **Cement** **and Concrete** **Roofing** **Gypsum** **Others** **Control %** **ship %** **French GAAP** **U.S. GAAP**            Gyvlon BV Netherlands       •   100.00 100.00 Full Full Lafarge Gips BV Netherlands       •   100.00 100.00 Full Full Lafarge Roofing Benelux BV Netherlands     •     100.00 100.00 Full Full West African Portland Cement Company Nigeria •         50.01 49.96 Full Full Ashakacem Plc. Nigeria •         50.16 50.11 Full Full Lafarge Tekkin AS Norway     •     100.00 100.00 Full Full Schiedel Skorsteiner AS Norway     •     100.00 100.00 Full Full Lafarge Philippines Philippines •         100.00 100.00 Full Full CPAC Monier Philippines Inc. (2) Philippines     •     50.00 50.00 Proportionate Equity PT. Petrojaya Boral Plasterboard (Phlippines Branch) (2) Philippines       •   50.00 50.00 Proportionate Equity Lafarge Polska Spolka Akcyja Poland • •       100.00 100.00 Full Full Lafarge Cement Polska Poland • •       100.00 100.00 Full Full Lafarge Beton Polska Poland   •       100.00 100.00 Full Full Lafarge Kruszywa sp z.o.o Poland   •       100.00 100.00 Full Full Rupp Ceramika Sp z.o.o. Poland       •   100.00 100.00 Full Full Lafarge Gips Polska Poland       •   100.00 100.00 Full Full Dolina Nidy Poland       •   100.00 96.10 Full Full Nida Gips Poland       •   100.00 97.66 Full Full Betecna Betao Pronto (2) Portugal   •       50.00 49.81 Proportionate Equity Britas do Alenquer (2) Portugal   •       50.00 49.81 Proportionate Equity Thomas Eurobetao (2) Portugal   •       50.00 49.81 Proportionate Equity Lafarge Romcim SA Romania • •       98.56 77.81 Full Full Lafarge Arcom Gips Romania       •   94.00 73.14 Full Full OAO Voskresenskcement Russia •         83.85 83.85 Full Full OOO Braas DSK 1 Russia     •     67.10 67.10 Full Full Ural Cement Russia •         75.00 75.00 Full Full Beocinska Fabrika Cementa Serbia-Montenegro •         69.41 42.04 Full Full Schiedel dimnjacki sistemi d.o.o. Serbia-Montenegro     •     100.00 100.00 Full Full Blue Circle Materials Singapore Singapore •         100.00 61.13 Full Full Supermix Singapore Singapore   •       51.00 34.00 Full Full Boral Singapore (2) Singapore       •   50.00 35.00 Proportionate Equity Lafarge South Africa Limited South Africa • •       100.00 100.00 Full Full Lafarge Roofing (Pty) Ltd South Africa     •     100.00 100.00 Full Full Lafarge Gypsum South Africa Pty Ltd South Africa       •   100.00 100.00 Full Full Lafarge Asland SA Spain • •       99.62 99.62 Full Full Readymix Asland (2) Spain   •       50.00 49.81 Proportionate Equity Yesos Ibericos Spain       •   40.69 40.69 Equity Equity Redland Ibérica SA Spain     •     47.00 47.00 Equity Equity Povazska Cementaren a.s Slovakia •         27.00 27.00 Equity Equity Schiedel Slovensko sr.o Slovakia     •     100.00 100.00 Full Full Bramac Stresni Sistemi d.o.o. (2) Slovenia     •     50.00 50.00 Proportionate Equity Schiedel d.o.o. Slovenia     •     100.00 100.00 Full Full Lafarge Cement D.D.* Slovenia •         55.92 55.92 Full Full Mahawelhi Marine Cement Co Sri Lanka •         90.00 84.96 Full Full Orebrö Kartongbruck AB Sweden       •   100.00 100.00 Full Full Lafarge Tekkin AB Sweden     •     100.00 100.00 Full Full Cementia Trading Ltd AG Switzerland •         100.00 100.00 Full Full Marine Cement Ltd Switzerland •         100.00 99.96 Full Full Hupfer Holding AG Switzerland   •       100.00 100.00 Full Full Braas Schweiz AG Switzerland     •     100.00 100.00 Full Full  (2)These companies are proportionately consolidated under French GAAP, but accounted for under the equity method under U.S. GAAP [see Note 30-13 (b)]*Cementarna Trbovlje changed its legal name in 2003 and became Lafarge Cement D.D.
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**LAFARGE****NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)**
      **Aggreg.**         **Owner-** **Consolidation method** **Companies** **Countries** **Cement** **and Concrete** **Roofing** **Gypsum** **Others** **Control %** **ship %** **French GAAP** **U.S. GAAP**            Mbeya Tanzania •         62.76 62.76 Full Full Lafarge Prestia Co Ltd (2) Thailand       •   50.00 50.00 Proportionate Equity CPAC Roof Tiles Co. Ltd Thailand     •     24.90 24.90 Equity Equity Siam Gypsum Industry (2) Thailand       •   50.00 35.50 Proportionate Equity Lafarge Roofing (Thailand) Co. Ltd Thailand     •     100.00 100.00 Full Full Lafarge Siam Roofing Co. Ltd Thailand     •     100.00 75.00 Full Full Lafarge Aslan Cimento AS Turkey • •       96.84 96.72 Full Full Agretas Agrega Insaat San. Ve Tic. AS Turkey • •       100.00 99.85 Full Full Dalsan Alçy AS (2) Turkey       •   50.00 50.00 Proportionate Equity Yloac Cement (2) Turkey •         50.00 49.92 Proportionate Equity Yloac AS (2) Turkey • •       50.00 49.92 Proportionate Equity Lafarge Ybitas (2) Turkey   •       50.00 49.92 Proportionate Equity Lafarge Entegre Harç Sanayi ve Ticaret AS (2) Turkey         Mortars/Lime 50.00 50.00 Proportionate Equity Lafarge          Cati Cözümleri Sanayi VE Ticaret A.S. Turkey     •     100.00 100.00 Full Full Hima Cement Ltd Uganda •         100.00 71.01 Full Full Mykolaivcement Ukraine •         98.10 98.10 Full Full Lafarge Gypsum Ukraine Ukraine       •   100.00 100.00 Full Full Stromgips Ukraine       •   100.00 86.02 Full Full Braas Ukraine GmbH Ukraine     •     100.00 100.00 Full Full KKNK Technobud Holding Ukraine   •       100.00 100.00 Full Full Lafarge Redland Aggregates Ltd UK   •       100.00 100.00 Full Full Lafarge Plasterboard Ltd UK       •   100.00 100.00 Full Full Lafarge Roofing Limited UK     •     100.00 100.00 Full Full Blue Circle Industries Plc UK •         99.91 99.91 Full Full Britannia Aggregates Limited (2) UK   •       50.00 25.00 Proportionate Equity Bluewater Concrete Ltd (2) UK   •       50.00 50.00 Proportionate Equity Redland Westminster Aggregates Ltd(2) UK   •       50.00 50.00 Proportionate Equity Scotcem Roof Tiles Ltd UK     •     100.00 100.00 Full Full BC Ebbsfleet Ltd (2) UK         Realestate 50.00 49.96 Proportionate Equity Lafarge North America Inc. USA • •   •   52.95 52.95 Full Full Monier Inc. USA     •     100.00 100.00 Full Full MonierLifetile LLC (2) USA     •     50.00 50.00 Proportionate Equity Blue Circle North America USA • •       99.91 99.91 Full Full Bulk Materials Inc USA •         48.24 48.24 Equity Equity Fabrica Nacional de Cementos Venezuela • •       62.21 62.00 Full Full Cementos Catatumbo CA Venezuela •         23.32 23.32 Equity Equity Tachira Cementos Venezuela •         99.73 76.10 Full Full Donafrance Vietnam •         70.00 70.00 Full Full Supermix concrete Co Ltd Vietnam   •       70.00 23.80 Full Full Chilanga Zambia •         84.00 84.00 Full Full Circle Cement Zimbabwe •         76.45 76.39 Full Full  (2)These companies are proportionately consolidated under French GAAP, but accounted for under the equity method under U.S. GAAP [see Note 30-13 (b)]
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