LafargeHolcim said one of its cement plants probably paid protection money to armed groups in Syria to keep the factory running in the war-torn country, speculated to be Daesh by French newspaper Le Monde.
The embarrassing disclosure follows an internal investigation and highlights the dilemmas companies face when working in conflict zones, and their moral culpability for potentially financing extremist groups. French prosecutors are also investigating the cement group's activities in Syria.
"It appears from the investigation that the local company provided funds to third parties to work out arrangements with a number of these armed groups, including sanctioned parties, in order to maintain operations and ensure safe passage of employees and supplies to and from the plant," the world's biggest cement maker said in a statement.
It said it could not establish the ultimate recipients of the money and declined to say how much money had been paid in 2013 and 2014.
"In hindsight, the measures required to continue operations at the plant were unacceptable," the Swiss company said. It is setting up a new ethics and risk panel and further steps designed to boost regulatory compliance.
A judicial source in France told Reuters that prosecutors were looking into the company's comments and could widen their investigation, but no decisions had been taken yet.
The inquiry was launched last year after allegations appeared in the French media.
French newspaper Le Monde reported in June that Lafarge, which merged with Switzerland's Holcim in 2015, had paid taxes to Daesh in order to continue operating.
Two human rights group said in November they had filed a legal complaint in Paris against Lafarge, saying some of its work in Syria may have made it complicit in financing Daesh terrorism and in war crimes committed by the group.
LafargeHolcim had issued a statement in November denying it had financed "designated terrorist organisations".
Lafarge owned a cement factory in Jallabiya in northern Syria, between the Daesh stronghold of Raqqa and the town of Manbij. The company repatriated its expatriate staff in 2012 due to fighting in the region, which came under Daesh control in 2013.
Fewer than 30 employees from the original workforce of 240 were on site when the plant eventually closed in September 2014.
LafargeHolcim said today that the deteriorating political situation in Syria had posed "very difficult challenges for the security and operations of the plant and its employees."
It said the site was an important source of employment in the region and played a vital role in supplying Syria with essential building materials.
"Shutting down the operations while we were providing basic goods to civilians and had several hundred people making a living from our operations was a difficult decision and one that we considered very seriously," a LafargeHolcim spokesman said.
"Once the decision to close had been taken in 2014, we acted responsibly to remove our personnel from the site as quickly as possible."
LafargeHolcim said it did not expect the case to have a material financial impact on the company.