2012 CemWeek Brazil and Americas Cement Sector Sentiment Survey

CW Group CemWee RESEARCH

S: U FOC

GLOBAL CEMENT INDUSTRY. KNOWLEDGE.

SEPTEMBER 2012

L I Z A BR

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CemWeek’s americas Cement Sector Sentiment Survey

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FOREWORD he CW Group is pleased to release the 2012 CemWeek Brazil and Americas Cement Sector Sentiment Survey, part of a series of regional cement sector surveys put out by the CW Group and the second annual for the region. We would like to thank the more than 250 participants across North and South America for their contribution to the survey.

As the second annual survey of its kind, the 2012 survey enables us to analyse fluctuations in industry sentiment over the previous year. Indeed, the survey reflects a change in industry dynamics over the last year, with North America experiencing improved market conditions, while Brazil and the rest of South America are less enthusiastic about the industry compared to last year.

The survey is one in a series of leading annual surveys, including India and the Middle East & Africa, put out by the CW Group that have become an industry benchmark. The CemWeek Cement Sector Sentiment Surveys leverage the CW Group’s research platform and provide leading industry coverage of a global industry, in this case for the continents of the “New World.”

The Brazil and Americas Cement Sector Sentiment Survey divides the region into three important areas—North, South and Central America. As in last year’s survey, we have also dedicated focus on the growing and dynamic Brazilian market. The goal of the survey is not to merely reflect obvious trends in the industry but to ask market participants and professionals a series of questions that enable the CW Group to collect and analyse the collective thoughts, focus and agendas of this region’s industry participants. The survey is therefore able to serve as a starting point for further discussion of the state of the markets from a participant-perspective. To learn more about the survey and its findings, please contact us at inquiries@cwgrp.com.

We would like to thank the sponsors who supported this survey. The following companies warrant special mention for their commitment to the region and to the research presented here:

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Robert Madeira

Managing Director and Head of Research, CW Group E: rm@cwgrp.com | T: +1-702-430-1748

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I. MARKET OVERVIEW Americas in review Data from the CW Group’s 2H2012 Global Cement Volume Forecast Report indicates that growth is likely to continue in the North and Latin American regions through 2014. However, significant variation in the average annual growth rate will be seen in the two regions.

North American Region The CW Group’s analysis of North American cement consumption indicates that consumption has inched slowly upward in the last few years, despite the most recent economic downturn.

Combined, the United States and Canada consumed just over 78 million tons of cement in 2009.

Consumption is projected to hit 90.1 million tons in 2012 and over 100 million tons by 2014.

For these two mature markets, the annual growth rate is estimated to hover just slightly above a quarter of a percent (2009-2014). For these two mature markets, the annual growth rate is estimated to approach an average annual rate of six percent (2009-2014) as the US market is expected to recover.

CEMENT CONSUMPTION (mm tons, 2009-2014E)

350

LATIN AMERICA

NORTH AMERICA

175

0 2009

2010

2011

2012

2013

2014

Extract from the mid-2012 CW Group report "Global Cement Volume Forecast Report" Source: CW Group analysis

Latin American Region Latin American cement consumption, which includes Mexico, has also experienced an increase in consumption but at a more significant clip. Collectively, the region utilized roughly 150 million tons in 2009, a number that is estimated to climb to 180 million tons in 2012 and over 202 million tons in 2014. The region’s average annual growth rate is expected to average roughly six percent.

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Between 2009 and 2014, the average annual consumption in Bolivia, Peru and Brazil is expected to exceed that seen in the Northern American region. Over the last few years, Bolivia’s emerging cement market has struggled to keep up with demand, often having to import from neighboring countries. Import numbers have trended slightly downward this year as more capacity comes online, but manufacturers are still finding it difficult to keep up with ever-rising demand from growth in the construction sector.

In Peru cement demand surged in 2010 and showed strength in 2011 thanks in part to an uptick in demand from commercial and residential construction. Cement sector growth is expected to continue in 2012 as the Peruvian economy continues its upward trajectory.

Factors such as Brazil’s preparation for the 2014 FIFA World Cup and the 2016 Olympics, as well as its ten-year electrical energy plan to triple renewable energy usage by 2020, are expected to contribute to stronger construction activity in the coming years. The cement sector is likely to reap the rewards, and sales—up eight percent in the first seven months of this year—seem to support this premise. CW Group analysis indicates strong levels of cement consumption are likely to persist through 2014.

The outlook for Mexico’s construction sector is promising as the country pulls itself out of recession. New public-private partnership laws are expected to boost sector growth, which in turn can only help cement consumption. However, an expected pullback in government spending on infrastructure following previous check levels will likely work to offset projected annual growth in consumption. With this in mind, the CW Group projects that average annual cement consumption through 2014 will hover around two percent.

Conclusion All individual markets in the North and Latin American markets surveyed in the CW Group’s 2H2012 Global Cement Volume Forecast will see cement consumption rise. However, the developing markets, particularly in South America, will experience the highest jump in consumption.

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II. INTRODUCTION ecent cement market dynamics and the big shifts underway in the sector have increasingly emphasized the multiple market inputs into developing a rich understanding of the market. Complementing the CW Group's extensive market research and quantitative analyses, the sentiment of industry professionals is a crucial variable to have a full perspective on the trends and prospects of a region.

This report captures, for the second year, wide views on the Americas cement industry, integrating results and offering the sector’s pulse based on standpoints from all company types within industry. The respondents belong to companies across the two American continents and are grouped by five distinct regions: North America, Central America, the Caribbean, Brazil and the rest of South America.

Though differences and trends naturally exist across these regions, we note a set of broad common observations: ■■ The last six months’ performance has been evaluated as at least “ok” by 78 percent of the respondents’ base (12% increase compared to 2011). Cement manufacturers and equipment vendors have become more satisfied with results over last year’s survey, as opposed to cement traders and industry analysts.

■■ Almost a quarter of the survey participants said that their expectations for the market have been exceeded or far exceeded (8% increase from 2011). Regionally speaking, North and South America registered the most growth in these categories compared to last year, while Central America and Brazil have noticed a softening in expectations.

■■ For the next twelve months, 50 percent of the survey respondents are confident in obtaining at least somewhat better results. North and Central Americans are more optimistic than in the

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■■

■■

■■ ■■ ■■

2011 survey, while those in the Caribbean somewhat adjusted their expectations. The majority of respondents anticipate the same results.

This year, the bulk of participants predict a constant level for input costs, and another 24 percent anticipate an improvement. These prospects correlate with the forecasted market conditions, as the majority is expecting to benefit from improved profitability in the next twelve months.

Improving domestic sales emerged as the main theme (7% increase YoY), followed by cost control and operational improvements. While all regions placed domestic sales near the top of their lists, the top three themes did vary among the five regions. North America’s top three priorities included finding new export opportunities; Central America was less concerned about environmental and safety and more about finding new export opportunities; South America placed operational improvement and controlling costs first, while almost the majority of Brazil’s respondents (a 20% increase YoY) shared improving domestic sales as the main theme.

Plant efficiency became a main challenge for the next year, almost at the same level with the environment and followed very closely by profitability. Region-wide top challenges vary and, together with the themes, define the industry focus for the next twelve months.

In terms of their own careers, responses overall reflect a fair job security. The main difference is seen in Central America, where 13 percent consider their job at risk and, looking forward, anticipate laying off workers.

Across the regions, there is an emphasis on the importance of meeting emissions standards, but this year’s survey results reflect less engagement in sacrificing profitability in order to support the CO2 reduction (6% decrease compared to 2011)

Overall, this market pulse—a snapshot taken from respondents ranging from senior managers to professional staff—reflects the variety of perceptions on current market conditions and the main priorities for the next year within the cement industry. 2012 has brought with it significant changes. Perhaps one of the biggest differences is an awakening of recovery (or at least finding of a bottom) in North America, allowing for renewed prospects in the future.

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BRAZIL

The world’s fifth largest and most populous country and the sixth largest economy, Brazil enjoys a large and growing cement sector spurred by strong macroeconomic fundamentals.

In the 2012 CW Group Brazil & Americas Cement Sector Sentiment Survey, Brazilian companies account for 34 percent of the firms responding, demonstrating a 17 percent higher participation rate compared to 2011. We share the highlights from this exciting market in this Brazil focus.

Octavio Frias de Oliveira bridge, in SĂŁo Paulo, Brazil.

Special focus: Brasil, Brasil! he 2011 CW Group Brazil & Americas Cement Sector Sentiment Survey captured an optimistic view from companies regarding both last period performance and industry outlook. The majority of companies in Brazil considered the performance has been “well” or “excellent,” with 33 percent declaring their expectations had been “exceeded” or “far exceeded.” Furthermore, 64 percent of Brazilian respondents anticipated smooth sailing for the cement industry, expectations that should have been reflected in much or somewhat better results.

This year, respondents considered the last six months’ industry performance in light of last year's wildly optimistic expectations.

Even if this year the percentage dropped by 17 percent, the majority still saw the performance as “well” or “excellent.”

A quarter of Brazilian firms (13% more than 2011) said performance was ”ok,” while this year three percent expressed their dissatisfaction, with performance going “poorly.” Looking at last year’s expectations for the future state of the industry and the above results regarding recent performance, perhaps it is no

surprise that those who considered their original expectations to have been at least met dropped 14 percent YoY. Compared to 2011, Brazilian optimism for the next 12 months is less intense: participants expecting somewhat or much better results have declined 16 percent, while eight percent more anticipate about the same performance and nine percent more predict somewhat worse results.

SHIFT IN PRIORITIES In 2011, Brazil’s main themes were operational improvement and cost control. In addition, profitability came out as one of their main challenges. Considering that companies have already focused on handling cost control, driving operational improvement and increasing profit margins, the percentage of those forecasting further profitability improvement in the next twelve months dropped by five percent. However, with “improving domestic sales” as the main theme and “plant efficiency” as the main challenge, those who anticipate a decrease in overall profitability rose seven percent over 2011.

How will the next 12 months perform compared to the last 6 months?

100

A lot worse Somewhat worse About the same Somewhat better Much better

0

2011

2012

What will be your company's most important theme for the next 12 months?

100

Other Operational improvement Environmental issues Safety and occupational health Finding new export opportunities Improving domestic sales

0

Controlling costs 2011

2012

The majority of Brazil’s respondents forecast that imput costs will remain the same for the next twelve months.

Still, 29 percent anticipate an improvement in this area, while another 17 percent are prepared for worse variations.

Based on these cumulative results, the majority of respondents indicate the current level of capital investment will be maintained rather than increased for the next year.

In Brazil, the expected migration to new career opportunities has reduced from last year. Fortunately this reduction is correlated with a higher stability in current roles, as 22 percent more respondents anticipate their careers will probably remain the same.

Within Brazil’s cement industry, 52 percent of the base predict their companies will hire “a bit more“ employees (13% decrease from 2011). Those expecting to hire a lot remained at 13 percent, while perception that the current number of employees will remain the same increased ten percent YoY. Compared to last year, when answers about emissions targets and adopted approaches were somewhat contradictory, this year 100 percent of respondents indicated meeting the standards is a “top priority” or “important.” Furthermore, 73 percent would still sacrifice profitability in order to improve emissions and reduce CO2. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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III. SURVEY FINDINGS Demographics The companies that participated in the 2012 Brazil and Americas Cement Sector Sentiment Survey are represented by a wide range of roles within the industry. This enables the CW Group to gauge a closer look at market impact, individual experiences and adopted approaches. For the current survey, the respondents’ structure remained quite similar to the one from 2011, being well-represented by Sales & Marketing, Production & Engineering and Consulting & Research.

FUNCTIONAL AREA

100%

Other Consulting & research Trading & logistics Planning, ďŹ nance & other administrative Production, operations & engineering Sales & marketing

0

2011

2012

Alongside the increase in management and senior management participation in the current survey, professional staff within the industry was strongly represented with over 30 percent participation.

LEVEL

100% Professional staff Management (eg, Regional manager, Director) Senior management (eg,CEO, Head, GM, EVP or SVP)

0

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For both 2011 and 2012, the sample base covered a mix of professionals from all types of companies within the industry, from cement manufacturers and traders to equipment vendors and industry consultants. Overall, the nature of participants registered only small differences compared to 2011; however, the regional results reflect a 25 percent higher participation by Central American equipment vendors and a 14 percent response increase by Caribbean cement traders.

TYPE OF COMPANY 100%

Other Industry analyst, consultant Cement trader Equipment vendor Cement company

0

2011

2012

Participants come from all of the five regional groups. North America is still represented by over 30 percent of the sample, Brazil has registered a 12 percent increase from 2011 and for the current survey accounts for 34 percent of the base, followed by South America with 24 percent participation. The remaining six percent is shared by Central America and the Caribbean.

LOCATION IN THE AMERICAS

100% Brazil South America Central America Caribbean North America

0

2011

2012

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SURVEY FINDINGS

14 percent fewer South Americans saw past performance as “excellent” or “well"

Recent Performance Expressing their opinions about cement industry performance in the last six months, 48 percent of respondents considered the industry has done “excellent” or “well,” which represents a seven percent increase compared to 2011. Those who evaluated the same period as being “ok” account for 31 percent in the base, a six percent increase from last year. These results are also reflected in the 12 percent decrease in respondents who said industry perfromance has done “poorly” or “terrible.”

The results by region have changed significantly and kept their differentiation from one region to another. North Americans have experienced a major improvement, and they saw the performance as “excellent” or “well” in a proportion of 22 percent, a 13 percent increase YoY. By comparison, last year 57 percent of North American repondents ranked the industry as performing “poorly” or “terrible,” but the current percentage is much lower at 31 percent.

On the other hand, 14 percent fewer South Americans saw performance as “excellent” or “well,” while the ones who perceived it “poorly” or “terrible” almost doubled. Brazilians felt more affected, registering a 17 percent decrease in the base of respondents who ranked the last six months’ performance as “excellent” or “well.” However, the number of those evaluating it “ok” has doubled, and only three percent were added to “poorly” category. The drop may be a harbinger of more challenging times ahead and no doubt influenced by a recent softening in market and economic performance.

Cement manufacturers and equipment vendors are the only ones who perceived a better performance, with 16 percent more cement manufacturers and three percent more equiment vendors ranking the last six months’ performance as “excellent” or “well.” These perceptions are in opposition to cement traders and industry consultants.

Similar to the 2011 survey, none of the cement traders considered the performance “excellent,” while the ones who characterized it as “well” decresed from 33 percent to 25 percent. However, the majority ranked it “ok” and another 25 percent “poorly.” The industry analysts’s opinions are quite similar, as 41 percent of them evaluated the performance as “excellent” or “well” (11% less than 2011) and 31 percent said it was “ok,”—close to last year’s results—and the remaining 28 percent ranked it “poorly” (12% increase YoY).

HOW HAS THE CEMENT INDUSTRY PERFORMED IN THE PAST 6 MONTHS? 100%

Terrible Poorly Ok Well Excellent

0 North America

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Brazil

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THe brazilian CeMeNT iNDUsTRY Thanks to its double expertise as Process equipment supplier and Turnkey Contractor, Fives FCB provides sustainable and reliable solutions combining technology, safety and cost-optimization in the production of a high quality product in environmentally friendly conditions.

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Holcim entrusted Fives FCb with a contract for the construction of a new 4,500 tpd clinker production line in october 2011, as part of the capacity increase of its Barroso cement plant, Holcim Brasil (sa) awarded Fives FCB with an order for the engineering and supply of a new 4,500 tpd clinker production line.

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SURVEY FINDINGS

Senior managers are more satisfied with the last six months’ outcome.

At the functional level, with the exception of the Planning, Finance & Other Administrative and Trading & Logistics areas, all the professionals experienced an “excellent” or “well” performance in a higher proportion compared to 2011. While the majority working in the Trading & Logistics department considered the performance “ok” and none of them “poorly” or “terrible,” 42 percent of those working in the Planning, Finance & Other Administrative department ranked industry performance “poorly.” However, this percentage does reflect an improved perception as those ranking the last six months’ performance as “terrible” dropped from 25 percent in 2011 to zero in 2012.

HOW HAS THE CEMENT INDUSTRY PERFORMED IN THE PAST 6 MONTHS? (FUNCTIONAL AREA) 100%

Terrible Poorly Ok Well Excellent

0

Sales & marketing

Production, operations & engineering

Planning, finance & other administrative

Trading and logistics

Consulting and research

Other

Senior managers are more satisfied with the last six months’ outcome. Compared to last year’s results, the percentage of those carrying over a “poorly” or “terrible” performance dropped by 17 percent, while those declaring performance was “ok” raised to 37 percent. Furthermore, 38 percent considered they have experienced an “excellent” or “well” period. A much better perception was shared by management and professional staff: this year, the majority said it was an “excellent” or “well” performance, and about a quarter of them (11% fewer than 2011) ranked it “poorly” or “terrible.”

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SURVEY FINDINGS

HOW HAS THE CEMENT INDUSTRY PERFORMED IN THE PAST 6 MONTHS? (LEVEL)

The last six months’ performance met the expectations of 48 percent of respondents.

100%

Terrible Poorly Ok Well Excellent

0

In Brazil, those who felt their expectations had been at least met decraesed from 93% in 2011 to 79 %.

Senior management (eg,CEO, Head, GM, EVP or SVP)

Management (eg, Regional manager, Director)

Professional staff

The last six months’ performance met the expectations of 48 percent of respondents, one percent more than 2011. Those who have been positively impacted and found their expectations “exceeded” and “far exceeded” increased by eight percent, while those who have been negatively impacted decreased nine percent from 38 percent last year.

Regionally, over 20 percent of the Brazilian, North, Central and South American respondents have declared that their expectations during the last six months have been exceeded and far exceeded. Furthermore, North Americans are getting closer with a significant increase of 12 percent YoY, accounting for 18 percent of those who consider their expectations at least exceeded.

While in North America the result is correlated with a 25 percent reduction in those saying their expectations have not been met, the other regions have quite different perspectives.

In particular, in 2011 the majority of the Caribbean respondents expressed confidence, seeing signs of the industry turnaround. Based on the last six months’ performance, however, a drastic decrease of 42 percent was registered among those who considered their expectations met.

Furthermore, this reduction was reflected in the respondents’ base, who said the performance was below their expectations.

In Brazil, those who felt their expectations had been at least met decreased from 93 percent in 2011 to 79 percent. The remaining 21 percent ranked industry performance as below their expectations, a 14 percent increase YoY. At the type of company level, cement manufacturers, equipment vendors and industry analysts registered improvement among those who before did not consider their expectations met. On the other hand, cement traders and the other professionals within industry have a more dim view of the results.

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LOOKING BACK AT THE PAST 6 MONTHS, HOW DID IT MEET YOUR EXPECTATIONS? 100%

Nowhere near my expectations Below my expectations Met my expectations Exceeded

Majority expect to experience somewhat or much better performance.

Far exceeded

0 North America

Caribbean

Central America South America

Brazil

Expectations for the Future Quite similar to last year’s results, the majority expect to experience somewhat or much better performance. Despite an overall anticipation of good trends, those who are getting prepared for a somewhat worse outcome increased by two percent (from 6% in 2011). This positive perception is shared equally at each level, with the majority of senior managers, managers and professional staff anticipating at least somewhat better results. However, the managers expect somewhat worse results increased nine percent YoY while only one percent more senior managers have the same expectation.

Regionally, North and Central America are optimistic about the industry outlook. Taking into consideration the last six months’s performance, the current market situation and industry forecasts, the Caribbean, Brazil and South America have created more realistic expectations. In these regions, the bulk of respondents anticipated about the same results, with room for facing somewhat worse results.

This year cement manufacturers, equipment vendors and industry analysts predicted, in majority, at least somewhat better results. On the other hand, cement traders and other professionals within industry forecast the next twelve months will bring about the same results.

HOW WILL THE NEXT 12 MONTHS PERFORM COMPARED TO THE LAST 6 MONTHS?

100%

A lot worse Somewhat worse About the same Somewhat better Much better

0

North America

Caribbean

Central America South America

Brazil

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SURVEY FINDINGS

51% of respondents expressed their expectations of profitability improvement.

Building on the last period’s performance and industry forecasts, 51 percent of respondents expressed their expectations of profitability improvement, a majority comparied to 41 percent in 2011. This optimism may be driven by the last period’s main focus on cost controls and operational improvements. The signficant change comes mainly from North and Central America, while in the Caribbean there is a high confidence that profitability will remain the same(perhaps resigning to the tough trading conditions that prevail in much of the Caribbean).

Professionals working in the Production, Operations & Engineering areas expressed higher confidence against decreased profitability (a 16% decrease YoY). On the opposite end, those in Planning, Finance & Other Administrative expect a gnawed profitability with a 36 percent increase YoY. While managers and professional staff became at least ten percent more confident of improved profitability, senior managers who share the same expectation are more reserved, registering a four percent increase YoY. Furthermore, 38 percent anticipate no change in profitability (a 14% decrease) and the remaining 14 percent are preparing for a profitability decrease in the next tewlve months.

HOW WILL PROFITABILITY IMPROVE? 100%

Decrease No change Improve

0 North America

Caribbean

Central America South America

Brazil

Asked about input cost forecasts, the majority of respondents estimate they would stay the same, and the other responses are equally spread between those who expect improving or worsening levels for input costs.

According to our 2011 survey results, respondents said that they would emphasize cost controls and operational improvements. As such, perhaps this focus has born fruit and there is now less room for further improvement. The percentage of senior managers, managers and professional staff who anticipate an improvement for input costs has decreased by 15 percent, 5 percent and 11 percent, respectively, compared to 2011. Simultaneously, their confidence in keeping cost controls and operational improvements at the same levels has increased almost proportionally. However, 30 percent of senior managers continue to predict worse input costs, followed by managers at 19 percent and professional staff at 17 percent.

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SURVEY FINDINGS

All companies have reduced expectations of input cost improvements.

This pattern is reflected regionally as well. The main exeption is the Carribean, where all the respondents anticipated even worse input costs. In particular, the percentage of Brazilians who predict an improvement decresed from 63 percent in 2011 to only 29 percent this year. For the next period, 54 percent of Brazil’s repondents share an expectation of stabilized costs.

Looking further, all the types of companies within the cement industry (except industry analysts) have reduced their expectations of input cost improvements, instead anticipating the same levels as last period.

HOW WILL YOUR INPUT COSTS CHANGE? 100%

Worsen Stay the same Improve

0

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SURVEY FINDINGS

Outlook for the respondents’ careers looks a little bit better than 2011.

The outlook for the respondents’ careers looks a little bit better than 2011, as 56 percent are confident their jobs will see a boost in the next 12 months (up 6% YoY). However, 40 percent of them expect to do the same.

While North and Central America have registered an increase of 16 percent and 58 percent, respectively, in the base of those being fairly and highly confident their careers will see a boost in the next 12 months, participants in Brazil and the rest of South America have started to loose a bit of faith compared to 2011. Overall, this sentiment shift is very important as it is one of the - if fickle - leading sentiment indicators of the future. As professionals reflect on their own careers in the light of overall economic performance, this year's findings represent a material shift in the view of the world in the Americas.

ARE YOU CONFIDENT YOUR CAREER WILL SEE A BOOST IN THE NEXT 12 MONTHS?

100%

At risk Probably the same Fairly confident Highly confident

0

North America

Caribbean

Central America South America

Brazil

In terms of hiring new employees, the major change compared to last year comes from respondents who expect their companies to hire a lot more employees. However, 45 percent predict their number of employees will remain the same and another 40 percent anticipate hiring a bit more.

A slight improvement in the North American unemployment situation is reflected in an 11 percent increase in respondents who anticipate their companies will hire more employees in the next 12 months.

In particular, Central America brought a significant increase of 17 percent YoY among respondents’ anticipating laying off workers in the next period. Deep diving into the captured results, professionals working in the Planning, Finance & Other Administrative area have the highest perception that further employees will be laid-off.

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SURVEY FINDINGS WILL YOUR COMPANY HIRE MORE EMPLOYEES?

Improving domestic sales has become companies’ top priority.

100%

Lay off workers Remain the same A bit more A lot more

0 North America

Caribbean

Central America South America

Brazil

Taking into consideration the last period’s performance and the industry outlook, improving domestic sales has become companies’ top priority. Controlling costs is in second place, followed by operational improvement and finding new export opportunities. These are the main priorities in each region’s results, varying the place taken by each priority in the top four.

In North America, the respondents who thought the focus should be kept on controlling costs decreased 14 percent YoY. However, controlling costs is still ranked as a top priority within the region, with the need to support domestic sales improvement also highlighted (12% increase in comparison to 2011).

After identifying operational improvement as main theme in 2011, this year Brazilians have ranked domestic sales improvement as their top priority for the next twelve months.

The key priority varies among types of companies within the industry, too. Despite a five percent decrease from 42 percent in 2011, cement companies will still keep the focus on cost control. At the same time, equipment vendors and cement traders are looking to find new export opportunities, while industry analysts expect to focus on operational improvements.

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WHAT WILL BE YOUR COMPANY'S MOST IMPORTANT THEME FOR THE NEXT 12 MONTHS? Other

100%

Operational improvement Environmental issues

Plant efficiency became the main issue.

Safety and occupational health Finding new export opportunities Improving domestic sales 0

North America

Caribbean

Central America South America

Brazil

Controlling costs

Respondents were also asked to rank the industry’s key challenges for the next twelve months overall. Registering a five percent increase YoY, plant efficiency became the main issue which should be faced by industry players. Going forward, 19 percent are still concerned about the environment and emissions, 17 percent rank profitability and another 14 percent choose excess capacity as the main challenge.

North American respondents expressed concerns regarding profitability and plant efficiency with eight and four percent increases, repsectively, YoY. In Brazil, a primary focus on plant efficiency has been highlighted again this year with an eight percent increase in the repondents’ base. In addition to plant efficiency, the environment and the shortage of skilled labor are still in the top challenges for Brazil. At almost the same level, there is a clear interest in energy prices.

Cement manufacturers expressed particular worry about plant efficiency (10% increase from 2011), profitability and excess capacity (5% increase) while becoming more confident it would be easier to handle regulatory (11% decrease) and environmental concerns (5% decrease). The equipment market started to gain vendors’ trust in capacity to satisfy environmental requests (a 19% decrease from 2011), but the shortage of skilled labor captured a ten percent increase YoY in the equipment vendors’ perception.

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SURVEY FINDINGS

WHAT IS THE BIGGEST CHALLENGE FACING THE CEMENT SECTOR IN THE NEXT FEW YEARS?

Respondents expect a slight decrease in capital expenditures.

100%

Other Safety & health Energy prices Shortage of skilled labor Regulatory Environment / emissions Plant efficiency Excess capacity Profitability

0 North America

Caribbean

Central America South America

Brazil

Looking ahead, there was a slight change in expectations for capital expenditure with respondents as a group expecting a slight decrease. In North America, six percent more respondents anticipate an increase while the majority expect to keep the current levels. Comparing 2011, 13 percent of Central Americans foresee a reduction in capital budgets, and 12 percent more South Americans plan to increase their investments. In particular, respondents in Brazil became more inclined to expect the current level (23% increase YoY) and reduced their expectations of increasing capital expenditures.

HOW WILL YOUR COMPANY'S CAPITAL BUDGET CHANGE? 100%

Decrease Stay the same Increase

0

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SURVEY FINDINGS

Firms in North and Central America expressed the least interest in sacrificing profitability for CO2 emissions.

In 2011, a clear commitment was expressed to improve emissions and reduce CO2 in the next years even by sacrificing profitability. This year, the percentage of those who shared this vision decreased six percent. Firms in North and Central America expressed the least interest in sacrificing profitability for CO2 emissions.

DO YOU THINK THE CEMENT INDUSTRY SHOULD SACRIFICE PROFITABILITY IN THE NEXT FEW YEARS TO IMPROVE EMISSIONS AND REDUCE CO2?

100%

No Yes

0

North America

Caribbean Central America South America

Brazil

Adjusting production techniques to meet the latest emissions standards lost nine percent of its top priority ranking. However, it is still considered important to 67 percent of respondents, which is an 18% increase compared to 2011.

HOW IMPORTANT IS IT FOR YOUR COMPANY TO MEET THE LATEST EMISSIONS STANDARDS (E.G. CO2, MERCURY ETC.?)

100%

Top priority Important Neutral Not so important Not at all

0

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Six Years Later

Relations with Equipment Suppliers The cement manufacturing companies that participated in the survey had the opportunity to express their perceptions of various equipment manufacturers within industry. Several companies received high accolades as measured by a relative view (the responses add up to 100% for each company, so it is not a comparison across companies, only by the results for each).

Of course this is only one perspective based on our sample, but respondents favorably rated FLSmidth, followed very close by Polysius and Siemens, with KHD also receiving high remarks.1

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The survey asked respondents to reflect on their perceptions of the following companies: FLSmidth, Polysius, KHD, Sinoma, Fives FCB, Siemens, ABB, Loesche, Gebr Pfeiffer, Magotteaux, Claudius Peters, IKN, Aumund, A TEC- Greco (Loesche) and SNEF. Please contact the CW Group should you wish a consultation of industry feedback across the world.

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IV. SUMMARY Summary Overall survey results for the the American cement industry are divided into three large regions: North, Central and South America. North American professionals have seemingly turned a corner in their outlook with a notable improvement in sentiment. On the flip-side, professionals in Brazil and the broader Latin America are getting more cautious as global economic conditions bite.

Caught in the middle, central America and the Caribbean professionals continue to see an uncertain future. But as is human nature, expectations are that the future will be better.

While only a snapshot, the CW Group hopes that the 2012 survey gives pause for reflection, if not of course a full detailed analytical perspective. The purpose is not to predict or forecast here (though we of course do that as Group as well separately), but rather to take the pulse of the professionals of the cement industry professional in the Americas to complement our typically quantitative view of the world.

Please feel free to contact the CW Group if you would like to discuss the findings of this survey more or learn about the covered markets. You can contact us at +1-702-430-1748 or inquiries@cwgrp.com.

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CW Group Research provides highquality and data-centric custom and published market research. Our research and report services help companies conduct and leverage research to provide clear direction for business decision-making. ӹӹ Market and country research ӹӹ Forecast services ӹӹ Due diligence research ӹӹ Competitive benchmarking ӹӹ Opportunity assessments ӹӹ Customized surveys ӹӹ Business intelligence

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