CemWeek Magazine, Issue 10

CemWeek EDITOR'S NOTE CemWeek CemWeek CemWeek BMWeek BMWeek BMWeek MAGAZINE

Letter from the publisher and editor

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A WORLD ON FIRE Conversations in our industry regarding cement fuels have often started with, “What if…” The ongoing economic downturn that has affected much of the world and volatile energy input costs, particularly related to fuel usage, has accelerated and changed the scope of the conversation. The industry, in a relatively short time, has traveled from the hypothetical to the practical—the necessary.

The discussion around fuel usage is now more definitive, and the dialogue reflects this. Time, simple economic survival and, in some regions, legislation has changed the conversation and ramped up the need to not only implement cost-saving, sustainable energy strategies now but has also framed these in a strategic context.

The CW Group will therefore continue to highlight these and related issues, doing so in our first in a series of articles related to fuel strategies. We share our views on this topic in “Fuel: Forward Pricing & Strategy” (p 5).

The CW Group Analytics team’s mantra that you can’t improve what you can’t measure forms the basis for a series of highlights from our cement consulting and business intelligence team. At the center, we take stock of the direction of the cement market around the world in our leading mid-year 2012 Global Cement Volume Forecast Report, a twice-yearly report published by the CW Group. In this benchmark forecast, the group has further refined its outlook for 2012 and looks forward through 2014 to help the global cement sector gain a grounding in what tonnages for global key markets are expected to look like. We also highlight analysis from the CW Group cement price monitoring research and round it up with a view on how 1H 2012 has performed for some of the major global cement groups.

In the Leader’s Comment, the CW Group talks with Per Mejnert Kristensen, Executive Vice President of Cement for FLSmidth. Mr. Kristensen discusses staying competitive in the global marketplace and new technologies from FLSmidth R&D. As we say, “the mistake is not in revising the outlook as you gather more inputs and events change, it is in maintaining a static view of the world.”

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CW Group CW Group ROBERT MADEIRA STAFFBOX

cemweek publisher head of cw group research

CW Group

JENNIFER RIDGEWAY project editor

DAMIR HRNJICIC art director

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Robert Madeira publisher and head of research

Jennifer Ridgeway project editor

The publishers regret that they cannot accept liability for error or omissions contained in this publication, however caused. The opinions and views contained in this publication are not necessarily those of the publishers. Readers are advised to seek specialist advice before acting on information contained in this publication which is provided for general use and may not be appropriate for the reader's particular circumstances.

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CONTENTS FEATURES 5 THE FORWARD CURVE Fuel Price Stability and Options 8 LEADERS COMMENT Staying Competitive, a conversation with Per Mejnert Kristensen, EVP FLSmidth 14 GLOBAL CEMENT VOLUME FORECAST Global outlook for 2012 reaffirmed by mid-year report, and 2013 expected to reach 3.991 billion tons

5 14

8 DEPARTMENTS NUMBERS IN BRIEF 2 Cement Equipment Order Intake Index RESEARCH 18 T echnical Analysis: 2Q2012 Global Cement Prices 20 Market Update: Companies Post Financial Results 43 Highlights from the 2012 India Cement Sector Sentiment Survey REGIONAL FOCUS 24 Turmoil in Egypt Affects Cement Sector

REGIONAL REPORTS 28 Europe, Middle East & Africa 32 Asia Pacific 33 South Asia 34 America FROM OUR INDUSTRY PARTNER 36 Building materials update PROJECTS & PEOPLE 39 E quipment and notable projects 41 People on the move

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ase Ple r . w mo no le m.co om* b a il .c ru ava ifo um nt @gm mifor u o isc o ac w.g d d ails t e ww r i b m lin e rly Ea end er on s ist reg

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NUMBERS

IN BRIEF

CW GROUP RESEARCH:

THE CW GROUP CEMENT PLANT EQUIPMENT TRACKING INDICES CLIMB OUT OF THE TROUGH IN THE FIRST HALF OF 2012 CEMENT EQUIPMENT ORDER INTAKE INDEX In the first quarter of 2012, the CW Group cement equipment order intake index (CEOI) almost entirely reversed the sharp decline seen in Q4 2011. The index was then largely unchanged, in the second quarter of 2012, settling at 157.8, a decrease of 3.2 percent from the previous quarter. The positive evolution registered in the first half of 2012 is even more evident when compared with the corresponding period of 2011, as CEOI expanded over 92.3 percent in 1H 2012.

The recovery has largely been fueled by a strong activity coming from Latin America, Africa and South East Asia.

However, the awarding and completion of orders is still hampered by the difficult financing conditions and the current surplus in cement capacity generated by diminished consumption. The several domestic demand pockets maintain equipment companies in a fairly fragile state of stability with uncertainty waiting around the corner.

CEMENT EQUIPMENT ORDER BACKLOG INDEX As a consequence of the encouraging evolution of CEOI, the cement equipment order backlog index (CEOB) rose in the two first quarters of 2012. The momentum resulted in the CEOB index reaching an all-time maximum at the end of 1H 2012 at 110.3. The elevated level was also 9.4 percent above the 100.8 registered in the first three months of the year.

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CEMENT EQUIPMENT ORDER INTAKE INDEX (CEOI) 180 180 118.9 118.9

111.3 111.3

100.0 100.0

90 90

00

163.0 163.0

166.2 166.2 114.9 114.9

109.3 109.3

76.6 76.6

64.3 64.3

Q4 Q4 ’09 ’09

Q1 Q1 ‘10 ‘10

Q2 Q2 ‘10 ‘10

Q3 Q3 ‘10 ‘10

157.8 157.8

Q4 Q4 ‘10 ‘10

51.8 51.8

Q1 Q1 ‘11 ‘11

Q2 Q2 ‘11 ‘11

Q3 Q3 ‘11 ‘11

Q4 Q4 ‘11 ‘11

Q1 Q1 ‘12 ‘12

Q2 Q2 ‘12 ‘12

Source: CW Group Analysis

CEMENT EQUIPMENT ORDER BACKLOG INDEX (CEOB) 120 120

101.6 101.6

100.0 100.0

101.4 101.4

96.4 96.4

94.2 94.2

87.3 87.3

91.2 91.2

101.6 101.6

91.9 91.9

100.8 100.8

110.3 110.3

60 60

00

Q4 Q4 ’09 ’09

Q1 Q1 ‘10 ‘10

Source: CW Group Analysis

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Q2 Q2 ‘10 ‘10

Q3 Q3 ‘10 ‘10

Q4 Q4 ‘10 ‘10

Q1 Q1 ‘11 ‘11

Q2 Q2 ‘11 ‘11

Q3 Q3 ‘11 ‘11

Q4 Q4 ‘11 ‘11

Q1 Q1 ‘12 ‘12

Q2 Q2 ‘12 ‘12

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FEATURE THE FORWARD CURVE:

FUEL PRICE STABILITY AND OPTIONS

BY ROBERT MADEIRA, MANAGING DIRECTOR AND HEAD OF RESEARCH, CW GROUP

Fuel typically accounts for about 40 percent of cement company total operating costs.

Fluctuations directly impact margins, profitability, and the ongoing success of the enterprise as a whole. Robert Madeira addresses unstable predictors, price stability and options for cement companies in the first of a CemWeek series on cement fuel strategies and management. he science of predicting future fuel prices is more of an imperfect art than a science. Buyers are kept on their toes in their attempts to forecast future costs, unsure about the best approaches for optimization over time. It is no small challenge, as cement companies need to stay laser-focused on a fuel strategy that manages intense pressures in terms of fuel cost minimization and price (or budget) volatility.

But in a well-established and liquid market such as fossil fuels (or at least for those cement operations using coal), there is no shortage of financial instruments, in theory,

to help manage prices. At the heart of the matter is the forward curve and, in this case particularly, the coal price forward curve. In this article, we will discuss some of the concepts around forward prices, their limitations, options for managing price volatility and establish a link to the cement company corporate energy strategy.

FORWARD CURVE: NOT A FORECAST Starting with the basics, the forward curve reflects the price today for buying or selling a specific good (in this case coal) at a date in the future (that is, what you need today to pay to exchange goods, such as Richards Bay coal, at a certain point in the future).

Central Appalachian (QL)

HISTORICAL COAL PRICES (ILLUSTRATIVE)

$ 85 $ 77 $ 69 $ 61 $ 53

NYMEX Central Appalachian Coal Futures Near-Month Contract Final Settlement Price History Source: Nymex, CW Group analysis

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Dec '11

Jul '11

Dec '10

Jul '10

Jan '10

$ 45

Settlement Date

The forward curve is a composite of the price points of different future settlement dates, for example one, three and six months out. When you plot these against time, a curve forms when you connect the dots.

Forward curve patterns typically slope up, indicating that buyers today are willing to pay higher prices for the same product one year from today than, say, in three months.

But, when it comes to actual spot prices, coal prices have recently been in a broad decline. What's going on with this paradox?

First, we need to highlight that, as much academic work has shown, forward curves, while useful financial and hedging tools, are typically weak predictors of actual spot price values. Not that there is a fundamental flaw in forward contracts, but they seem simply to not be a great predictor of future supply and demand balances for the underlying product—in this case coal.

One underlying motivator for an upward sloping curve is that the forward contract is theoretically based on some factors in addition to the current price of the product, including interest rates, storage costs, etc. As these elements naturally tend to be positive, they intrinsically motivate an expectation of future prices being higher than today (a so called contango price structure), but naturally the expected forward supply-demand expectations can

"Prediction is very difficult, especially if it's about the future." ~Niels Bohr, Nobel Prize in Physics (1922)

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NYMEX COAL FORWARD PRICES (ILLUSTRATIVE)

90

80

70

60

Dec'15

Aug'15

Mar'15

Oct'14

May'14

Dec'13

Jul'13

Feb'13

Sep'12

50

Source: Nymex, CW Group Analaysis

also override this effect and result in a downward sloping curve at points as well (backwardated price structure).

OPTIONS FOR PRICING STABILITY In the quest for stability, cement firms have several options beyond employing the forward curve to manage fuel prices.

Some of the more common options are simply attempting to time the market with spot purchases, negotiated pay-or-take agreements or, on the more complex side, investing in physical production through vertical integration programs. Each system has its risks and rewards.

Timing the market pits the fuel buying function at the cement company against the dips in the fuel market to load up on energy supplies. This strategy also naturally places firms at risk of being caught in a market upswing with no inventory on hand to smooth over higher price points. Though the ongoing financial commitment is bound to only the supplies purchased, there may be a high level of capital risk over the long term as prices fluctuate and firms are stuck at the mercy of the market. If nothing else, the company is likely to face a high degree of volatility in its fuel budget.

A particular risk at a tactical level is seen when global fuel buyers go on a spending

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spree that is opportunistic in the international markets and act as marginal swing buyers. For example, a large player like China can come into the coal market and within a short period materially move the demand up or down and send spot prices soaring or reeling. This large potential for volatility makes it hard for smaller and regional players to avoid being swept up in market movements driven by bigger market forces.

One step up from spot buying is customized contracts, either at fixed prices (with or without modifiers) or pay-or-take agreements. To control some of the fuel buying factors, custom contracts are a logical vehicle. With these idiosyncratic arrangements, cement

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firms can attempt to control one or more of the fuel procurement factors, such as price, shipping, guaranteed volumes, etc. Different fuel markets have different propensities to lend themselves to being more or less inclusive of the procurement parameters, with coal tending to more contractual price contracts and petcoke to more volume, costplus oriented frameworks.

A complex but more controllable option for cement makers is to integrate vertically and acquire the fuel source directly, such as a coal mine. It's capital intensive and, for some, a non-core option to be sure, but it brings with it the benefit of fuel assurance and the prospect of less fuel volatility (depending on accounting

treatment as well)—a physical hedging strategy. Though the upfront investment of buying a coal mine or building an electric power plant is a big proposition, if the right asset has been identified and the right logistics support is in place, the long-term payoff can be huge, especially if shortages play a part in the equation as there are few worse things for a cement company than running out of fuel.

Integration is also not limited to major players (e.g., India’s UltraTech acquiring coal mines as far away as Colombia).

Smaller players in the right market environment can take equal advantage of vertical integration plays (e.g., AshakaCem, a single plant Lafarge affiliate in interior Nigeria, developing its own coal deposits), and making those plays in regions with extreme resource volatility could be a make-or-break decision. This is certainly not an everyday consideration for a cement company but one that must be informed not only by a corporate strategy, but also a financial, operational and, last but not least, a comprehensive corporate energy strategy.

WHAT ABOUT HEDGING? In an attempt to avoid such volatility, companies can turn to price hedging using forward contracts. In reality, few cement companies employ financial hedging in a big way, given the perceived complexity, speculative nature and, on an individual level, asymmetric risk in being caught on the wrong side of a trade (and thus out of a job). Moreover, only a subset of your typical cement fuel options are in fact hedgeable (e.g., coal) and some still cannot be hedged (e.g., petcoke), though many have tried.

Ultimately, financial hedging requires indepth study and capabilities that may be outside the expertise and comfort zone of many cement producers. However, we believe that, depending on the company’s motivations behind a fuel strategy, it is an important tool in managing price risk, if used properly.

THE NEXT PLAY FOR CEMENT COMPANIES Many cement firms are looking at the options and pursuing more than one avenue at a time. They may hedge opportunistically or partially integrate elements of their operations rather than aiming for total vertical integration. At every turn, the business case for each decision has to be considered and balanced against the risks, as well as considering the options within the framework of an integrated fuel strategy.

As the industry moves towards nonstandard sorts of fuel, alternative fuel options are broadening the discussion and making it more complex. But this rather heightens the importance of considering a proper fuel management strategy from a business and strategic perspective, rather than the typical techno-centric, bottom-up view of fuels, especially alternatives.

All in all, there are multiple options available to cement companies looking to manage their fuel costs. Forward fuel price contracts do provide somewhat of a guide for spot buyers, but the issue of managing fuel cost is bigger than merely the price of the input

commodities. As tough conditions prevail in some markets and fuel prices have demonstrated unusual volatility recently, companies must also look internally to assess how fuels become a properly managed core function, much beyond mere procurement.

On the other hand, it also can’t be the CEOs pet project for smaller firms.

We see huge opportunities for the cement sector to critically review their operations around fuels, starting at the board and CEO level, building into dedicated energy management functions processes and analytical management beyond the basic operational and production orientation of cement companies. Only when fuels become a recurring CEO agenda item can the cement enterprise really start tackling what is normally the largest direct cost element for a cement company. BMWeek CemWeek CemWeek CemWeek

BMWeek BMWeek

This article is the first in a series of cement fuel strategy and management articles

by Robert Madeira, Managing Director and Head of Research at the CW Group.

You can reach him at rm@cwgrp.com or +1-702-430-1748 to discuss further.

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LEADERS

COMMENT

STAYING COMPETITIVE Per Mejnert Kristensen EVP FLSmidth

Five years ago, FLSmidth decided to refocus on the company’s development. Per Mejnert Kristensen, EVP of FLSmidth’s global cement division, recently spoke to CemWeek about the company’s hundred-year history, staying competitive in the global marketplace, and new technologies from FLSmidth R&D.

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CemWeek: How would you describe FLSmidth's focus with regard to the cement industry?

Formerly the Vice President, Head of Project Division EMEA/APAC for FLSmidth from 2009 to early 2012, Per Mejnert Kristensen is now the company’s Group Executive Vice President of cement. He has been with FLSmidth since 1992.

Kristensen: The cement industry is critical to our future. Our new strategy has not revolutionized our approach.

But rather, it provides a framework to ensure that we continue our current success and also evolve to best meet our customers’ future requirements. With the new strategy, we will continue to make the needed investments to remain the market leader.

FLSmidth is global, and in cement, we believe that we can best align with our customers’ needs by being organized into four regions. Our global headquarters in Copenhagen, Denmark has the leadership and technical expertise to serve customers throughout the entire world with staff who have experiences and knowledge of the Middle East, Africa, Asia, Europe, Australia, etc. The Americas are served from the Project Office in the USA which is adept at managing the nuances and cultures of that area. India, a very critical and growing market, is served by its own project office located in Chennai and more recently a “fourth leg” has been added to focus on China.

CemWeek: Currently, the three or four major equipment turnkey providers are European, with the rest being Chinese, but many believe the future of the equipment world will be Chinese. How do you respond to the questions of European versus Chinese cost structures, and how does FLSmidth remain competitive?

Kristensen: Years ago, the Chinese suppliers tended to be focused solely on the Chinese market. Then, they began to pursue projects in select markets outside of China, primarily in the Middle East. Their approach was to compete on minimizing costs. They accomplished this by both sourcing equipment from China and even providing Chinese labor to build cement plants. This was an attractive solution for some producers

in some markets, but a poor investment choice for others. In contrast, our extensive global experience and presence allows us to very comfortably execute a project in any area of the world according to local preferences. Our customers value that. Then, when you consider the prospect of owning and operating a plant over a reasonable period of time, you must then compare the benefits from the competing technologies and customer support offered. We perceive these areas to represent our strongest competitive advantage. Consequently, we are aggressively pursuing efforts to strengthen this advantage.

The cement industry is critical to our future For example, we have expanded our local support over the last several years and now have representation in more than 50 countries around the world.

Going forward, that will only increase.

In many places, we have large offices and manufacturing facilities and new super centers that can service our customers.

So, I would say our global footprint is certainly helping us remain strong and competitive in all parts of the world.

Regarding technologies, our focus is on developing products and capabilities to produce cement as cleanly and as efficiently as possible. For that, we pursue an active research and development program.

One area of current emphasis has been to advance emission technology and these efforts have yielded some notable achievements. For example, our emissions capabilities was a leading factor in winning our most recently announced project, a major plant modernization in the USA.

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Nevertheless, we acknowledge that we must also be competitive with regard to costs. For this, we have tried to look at how and where we do our engineering.

Costs are significantly higher in Western Europe than in other parts of the world, so we have built up a huge engineering organization in India, especially in Chennai. There we have more than 4,000 engineers doing a fantastic job not only serving the local market, but also being the back office supporting our other project centers. We are very careful to balance this with our goal of being close to our customer. Therefore, specialized capabilities and customer facing technical experts are present in the project offices and throughout each region.

We are also focusing on being competitive in our supply. Needless to say, the equipment in a cement plant represents the largest cost component, and we are continually engaged in various initiatives to find savings. However, we will not compromise quality. That is why we take a cautious approach: qualifying a new vendor requires a significant investment of our resources. We must be fully confident that each can follow our requirements. Consequently, there are certainly components that we will not source in some countries. But, overall, our supply chain has grown more diverse with suppliers in countries like China, but also India and other parts of the 10

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world where we probably wouldn't have previously looked so much before.

I think all these things combined have sharpened FLSmidth and represent a sustained competitive advantage, even in an environment where the Chinese have become strong.

CemWeek: A couple years ago, when the Chinese entered the market, they were able to significantly undercut on price to grab market share, but they were often

Our approach to creating value is to fully understandour customers discounted on quality. Now their quality is improving. With FLSmidth able to produce hardware more cost-effectively, are we going to have a convergence where there isn't going to be much difference between FLSmidth and lower-cost producers, or will you be able to turn this into a cost advantage?

Kristensen: I believe this convergence has already happened in terms of price differences, particularly if we are talking

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overall project costs. We expected it to happen when we saw the differences in prices five to seven years ago. It varies from project to project and supplier to supplier, and in some cases it is surprisingly small.

CemWeek: FLSmidth appears to have a more customer-centric business approach, with an emphasis on working with clients to understand business problems and to define their goals with regard to operating, expansion, etc. versus just pushing the cheapest products available. Has FLSmidth worked consciously to develop this strategy?

Kristensen: Yes, we are very customer focused and that is explicitly stated in our strategy. But, this is nothing new.

Rather, in this regard, our strategy simply formalizes the culture that has been fostered since our beginnings.

Our approach to creating value is to fully understand our customers and can service them in all their needs.

This means developing plants that are custom designed, whether it’s regarding upgrading, environmental considerations, energy efficiency, or using alternative fuels. This remains a clear differentiator even though we know others are moving this way.

CemWeek: Buyers who are interested in more customized plants tend to work with

independent consulting engineers. Do you see that as helpful in this industry, or does working with basically another layer of decision makers impede FLSmidth's ability to work directly with customers?

Kristensen: In cement, unlike segments such as minerals, we sell directly to producers and not through large engineering firms. This provides a direct dialogue with the owners and operators of our equipment. Such feedback enables us to continually evolve and ensure that our offerings remain aligned with their needs.

However, as a new cement plant represents a very significant investment, it is reasonable to expect some producers, especially new entrants to the market, to seek additional guidance from a third party. We are happy to work with every customer and every consultant in the manner which they choose. Sometimes it can lend to a more professional discussion, and we welcome that.

CemWeek: FLSmidth appears to be involved in more M&A than other companies in this space. Is this activity a question of footprint, getting access to the market, or is it part of the R&D strategy with regard to looking for new technologies outside the company?

Kristensen: Our stated vision is that we will be our customers’ preferred full-

service provider of sustainable minerals and cement technologies. Consequently, we must be able to offer leading products in virtually all categories across the flow sheets of the industries we serve. In cement, we have long had the capabilities to supply from the quarry through the

We see our technical expertise to be a competitive advantage, and product development efforts are a way to leverage that packing plant. In contrast, our offerings in some of the minerals industries are not as mature and most of our recent acquisitions have been to strengthen those flow sheets.

I think the advantage for FLSmidth is that we have the financial model to really make the right decisions in terms of whether we should go the acquisitions or in-house development route. For cement, inhouse development is often the preferred method. As discussed, we see our technical expertise to be a competitive advantage and product development efforts are a way to leverage that. Roughly five years

ago, we decided to refocus on our own development. We have increased our R&D budget and have been taking out more patents. There are many interesting things on the drawing board.

With that said, we have done some acquisitions recently related to cement— such as Phillips Kiln Services—and there could be other service companies.

A company such has Phillips not only reinforces our expertise in servicing rotary equipment, but also expands our network of specialists dispersed in some of the local markets. Partnerships and licensing agreements are also ways to gain access to innovative technologies.

For us, it is a rather a holistic approach to look at all the possibilities and carefully evaluate what is the best route to go for any particular piece of technology or equipment.

CemWeek: Traditionally, FLSmidth has not been one of the main players in the waste heat recovery segment, which seems to be a dynamic segment particularly in the Western markets. Is this an area you are looking to build up further?

Kristensen: Yes, there are many well – established competitors in this area who provide standardized solutions. Rather than join the fray, we believe, going forward, that if you really want to get as much energy recuperation as you can,

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LEADERS COMMENT

you need more high efficiency solutions.

That is why we have chosen the path we have. We signed a licensing agreement for the exclusive rights to use Kalina Cycle waste heat recovery technology.

Due to a highly efficient heat transfer rate, the patented ammonia water process of the Kalina Cycle can achieve 10 to 40 percent thermal efficiency improvement over the conventional approach. Furthermore, when we sell such a project, we have the perspective to oversee the integration of the complete WHR solution into the cement plant.

CemWeek: Different markets often have different needs. There is no question that the American and Western European markets likely have a very different dynamic and need structure than, say, Africa or China. How do you develop solutions to address the different needs of these very diverse markets?

Kristensen: For cement plants, every customer and every project has at least some uniqueness. As mentioned previously, we decided to organize ourselves into four regional divisions to ensure that we can be as close as possible to our customers. These are large regions, but our people in these 12

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regions know the habits and the customs of the customers there.

which this happens is a bit different in different parts of the world.

It’s true that there are some economies that are very focused on expansion.

They need to develop. They need to cater to an increasing middle-class, to urbanization and to population growth, so they prioritize new capacity and may give less emphasis than other regions on CSR and environmental considerations.

CemWeek: With all the environmental regulations coming into effect in this space, you mentioned several upgrades. Are these upgrades simply a natural evolution of products already developed, or is FLSmidth's R&D department working on groundbreaking technologies that can help address these environmental issues?

For cement plants, every customer and every project has at least some uniqueness Meanwhile, there are other parts of the world very focused on the environmental agenda and operational efficiencies—that, to them, is most important. Our business model is not delivering a “standard plant.”

Rather, our product line is quite extensive such that we can definitely address both of those needs. Eventually, I think as countries develop, standards converge and the requirements will become more or less the same. Although, the speed at

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Kristensen: I think some people may say that the cement industry is not developing as fast as certain other industries, and it is certainly a mature industry. But, if you review trends in efficiencies over time, the improvements are quite impressive and the expectation is that will continue.

In many cases these huge results are the culmination of many small improvements.

Many of our customers have increasingly aggressive environmental and efficiency requirements. We, in turn, are working diligently to help them stay ahead. For example, our R&D has a strong focus on emissions technologies and ways to effectively burn greater quantities and varieties of alternative fuels. There are some very interesting project developments going on and we look forward to their eventual announcements. BMWeek CemWeek BMWeek BMWeek

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RESEARCH

CW GROUP UPDATE:

MID-YEAR GLOBAL CEMENT VOLUME FORECAST REPORT (GCVFR) In its mid-2012 update of global cement volumes, the CW Group lowers its global outlook to 5.3 percent percent year-on-year and 5.8 percent year-on-year for 2012 and 2013, respectively. The mix of regional growth patterns changes with material upgrades and downgrades.

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Global Cement Consumption Forecast (1H vs 2H 2012 CW Group views)

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek AUGUST / SEPTEMBER CW Group

1H12

CW Revision

3,778.5

3900 3800

0.007

0.005 0.004

3,563.4

3600

0.008

0.006

3,778.9

0.7

4000

3700

3,998.4

4100

3,991.3

2H12

3,587.4

n what has rapidly become an industry benchmark, our latest mid-2012 forecast shows an increased bifurcation in growths across regions. We see prolonged challenges in the developed world, led by more dramatic than anticipated declines in Western Europe. We also lower our view on the Eastern Europe-CIS, Middle East, Latin America and China regions, partially on spill-over effects.

This said, we see hope in Africa and, encouragingly, in North America. No doubt we are setting the stage for what we expect to be a global shift in strategic dynamics and emerging corporate champions,� said Robert Madeira, CW Group Managing Director and Head of Research.

0.003 0.2

3500

0.002 0.001

3400

0

0.0

3300

-0.001 2011

2012E

2013E

Source: CW Group Analysis Coal Week Coal Week 2012 Coal Week

Global Ex-China Cement Consumption Forecast (1H vs 2H 2012 CW Group views) 2H12

1H12

CW Revision

0.01

1,500

1643.8

0.008 0.006 0.004

0.002

1,493.7

1,505.4

1,561.2

1,600

1,564.2

0.008

1,650

1,550

1648.0

1,700

0.002 0

1,450

- 0.002

-0.002

- 0.004

1,400 2011

2012E

2013E

Source: CW Group Analysis

The latest benchmark Global Cement Volume Forecast Report (GCVFR) by the CW Group—the leading global cement industry advisory and analytics firm—shows global cement consumption, ex-China, expanding at 3.7 percent in 2012 to reach 1.561 billion tons. The increase is a decline from the four percent consumption volume growth in 2011 when worldwide cement demand exChina reached 1.494 billion tons.

“The CW Analytics team derives the latest forecast using a combination of countrylevel, bottom-up statistical, qualitative and external perspectives. We feel this provides a great balance of quantitative rigor combined with practitioners’ perspectives that we gather through what we believe to be the global cement sector’s most comprehensive, global and extensive information platform, CemWeek,” explained Claudia Stefanoiu, CW Group Senior Analyst and lead on the GCVFR initiative.

Stefanoiu added, “In our mid-year 2012 update, we have also further refined our data baseline models to provide better views on capacity and historical data as well as provide a review of recent market dynamics for the key forecast countries.

Many of the data sources that are widely

Source: CW Group Analysis

AUGUST / SEPTEMBER 2012

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RESEARCH used by the industry were simply of insufficient quality or too erroneous to be relied on. As such, we will continuously maintain and work to refine our in-house data views so that our clients can expect to continue receiving improved baselines as we refine our models and inputs.”

REGIONAL DIVERGENCE On a regional basis, economic forces in Western Europe turned from headwinds into gale-force. Cement volumes, even though they looked in late 2011 to stabilize in some core markets, have frayed, with volumes turning negative and plunging in markets across Southern Europe. In the region, only parts of Northern Europe have shown a surprising resilience, with Norway showing exceptionally strong growth.

We do not expect this pattern to evolve materially in the near term. To make matters worse, the deterioration is spreading: Eastern Europe and CIS are starting to struggle in many places, albeit with pockets of robust growth, such as Russia and some ex-Soviet states.

Overall, we see the region growing at a slightly lower pace than in our 1H2012 update. Africa remains an exciting cement market, particularly the Sub-Saharan region, and we are revising our forecast upwards by over four percent for 2012, driven by strength across many of the frontier markets, notably in Nigeria.

“We see hope in Africa and, encouragingly, in North America”

Regional Cement Consumption Breakdown North America

Latin America

Western Europe

E Europe & CIS

Middle East

Africa

Asia ex-China

China

100%

50%

25%

0%

Latin America largely remains robust, offset by weakness in Mexico and the Caribbean.

2009

2010

2011

2012

2013

2014 Source: CW Group Analysis

Regional Cement Consumption Growth Rates North America

Latin America

Western Europe

Central & Eastern Europe

Middle East

Africa

Asia ex-China

China

GLOBAL

0.15%

0%

-0.15%

2011

2012

2013

2014

Source: CW Group Analysis

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IN BRIEF:

THE GLOBAL CEMENT VOLUME FORECAST REPORT (GCVFR) Provides an outlook from 2009-2014: • Cement consumption (tons) • Cement production capacity (tons) • Utilization rates (%) The GCVFR is developed using the CW Group’s leading data baseline and proprietary forecast models: • Leverages a unique and continuously maintained global cement data framework • Uses a country-by-country bottom-up model • Incorporates qualitative inputs from the global cement sector’s most advanced and extensive information platform, CemWeek • Derives from quantitative inputs, including statistical models, with thirdparty perspectives overlaid by the CW Group’s market views

Growth '12-'13 YoY

Includes key world cement markets • Global and global ex-China perspectives with regional and country break-downs • Data for 58 important cement markets (additional markets available from CW Analytics on a consulting basis) • Mid-year review provides an executive perspective on key developments for the covered cement markets Unique forecast report published twice per year by the analytics team of CW Group, the leading global cement sector analytics, market insight and business intelligence platform.

Growth '13-'14 YoY

Asia ex-China also remains strong, and we expect an uptick in volumes compared to our view in 1H2012, accelerating into 2013 and 2014. In particular, several countries in Maritime Southeast Asia are showing strong recoveries, lead by the Philippines and Indonesia with 2012 YoY growth in the double digits. South Asia has faced a bit of a

bumpy ride, but we remain positive on the outlook for India as well as Pakistan.

China continues to perform, and some of the worst fears of falling off the cliff seem to have abated. We have lowered our outlook somewhat for the country but believe growth is likely to continue in the near-to-mediumSource: term.CW Group Analysis

On the capacity side, we see only limited countries being able to improve utilization rates in the near-to-medium term. Though the operating environment in some countries will improve relative to their volume troughs, the set of countries that will operate flat out, such as Algeria and Saudi Arabia, is small.

>>> Continued on page 50 AUGUST / SEPTEMBER 2012

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TECHNICAL

ANALYSIS 2Q2012 GLOBAL CEMENT PRICES:

MIXED BAG, BUT TREND STILL POSITIVE Global cement prices hang on to the positive, continuing an interrupted series of growth since January 2011 through July 2012. he official retail cement price index launched by the CW Group within the Global Cement Retail Price Report (GCRPR) is calculated based on a total of 37 countries, with the median value for June 2011 – July 2012 from a set of 35 countries. The country set coverage is continuously updated and evolved in order to provide the most accurate view on cement prices at a global level.

Based on the CW Group methodology, global cement prices have increased 0.8 percent over the preceding three months (May to July 2012). Monthly global prices have steadily increased, but at a more moderate level, since the twelve month high of just over one percent noted in April 2012.

On a global level, prices increased by 7.9 percent between June 2011 and July 2012.

Global cement prices rose just over one percent, on average, in the month of April and stabilized with near zero growth in May before showing signs of inching up in June 2012. Early CW Group preliminary index calculations for July estimate prices rose steadily, increasing roughly 0.58 percent. Year-over-year (YoY) data shows global growth rates for cement prices slowed down, with the growth rate for June 2012 representing only 16 percent of the growth rate of last year’s respective month, while July 2012 reached 56.9 percent of its corresponding 2011 month level.

PRICES DECLINE On the weakening side, Brazil’s cement prices marked the fourth consecutive month of price softness in June 2012 when prices declined. In the first half of 2012, cement prices decreased over ten percent in Brazil. With domestic sales 9.8 percent higher for 1H 2012 when compared to 1H 2011, new production capacity continues to come on line as the industry, largely dominated by a handful of companies that control around 80 percent of the market, struggles with the potential fallout from a CADE investigation into alleged price collusion and cartelization. Economic softness may also start showing through on the margins, creating headwinds for pricing.

MoM average cement price evolution (%)

1.2 %

0.8 %

0.4 %

0% Jun-11

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Feb-12

Apr-12

Jun-12p

Several European countries, such as Germany, Greece and France, experienced a bump in cement prices in May – a “dead cat bounce”—but by June prices had adjusted downward, resulting in an average net decline of between 0.16 and 0.26 percent.

MIXED NUMBERS Although ongoing unrest plagued cement operations throughout Egypt, the industry was able to manage production by 12.2 percent in the first half of 2012 versus 40% the corresponding period of last year, supporting the supply of local consumption that grew by 7.8 percent within the same time frame. Cement prices followed a similar growth path.

After trending flat in April 2012, prices spiked almost 15 percent in May before 20% flattening once again in June. Indian cement prices are also set for growth.

In May, prices declined three percent before rebounding and climbing roughly 5.11 percent over June and July. In comparison, prices in June and July 2011 0% over 7.6 percent. At the level had decline

August 2011 - July 2012 Growth Rate (%)

of volume growth, cement production closed the first quarter of FY 20122013 with ten percent growth, while the volume of sales rose 19 percent.

Neighboring Pakistan also noted a slight decline in May prices but also saw a slight increase in June and July of 0.83 percent and 0.42 percent, respectively.

Higher fuel and interest costs coupled with lower priced cement on the international marketplace and declining export numbers have determined many Pakistani manufacturers to turn to the government for help. Finding a viable price band in the coming months will likely prove challenging.

UAE cement manufacturers, still dealing with the after-effects of a slowdown in the UAE property and construction sector, are keeping a close eye on rising operating costs and shrinking profits.

After a big jump in pricing in April, UAE cement prices dropped somewhat in May along with several other building material indices. By June, prices were creeping

up again, increasing 0.80 percent. On an annual basis, cement prices have increased by close to four percent.

Meanwhile in the U.S., cement prices rose only slightly by 0.20 percent in May and 0.06 percent in June, followed by a decrease of 0.09 percent in July 2012.

The U.S. cement industry is set to grow consistently in the next years, as annual forecasts have been revised upward given the strong construction activity and cement intensity. The United States’ northern neighbor, Canada, saw prices stabilize in May, with only a slight bump of 0.08 percent in June.

Overall, the CW Group Global Cement Retail Price Index rose 2.3 percent between January and July of 2012. Prices are likely to remain on the growth pattern going further, especially fueled by the projected increase in regions where public infrastructure spending is booming. A similar scenario is likely in countries where production output remains limited and demand is rising.

August 2011 - July 2012 Growth Rate (%) 40%

-20% 20%

-40%

AUGUST / SEPTEMBER 2012

Ukraine Ukraine UnitedUnited Arab Emirates Arab Emirates United Kingdom United Kingdom United States* United States*

-20%

Mexico Mexico Nicaragua Nicaragua Oman Oman Pakistan* Pakistan* Philippines Philippines Poland Poland Romania Romania Russia Russia Serbia Serbia Singapore Singapore Slovakia Slovakia South Africa South Africa Sweden Sweden Thailand Thailand Tunisia Tunisia Turkey* Turkey*

-40%

Australia* Australia* Belgium* Belgium* Brazil Brazil Canada Canada Czech Republic Czech Republic Dominican Dominican Republic Republic Egypt Egypt France France Germany Germany Greece Greece Guatemala Guatemala Hungary Hungary India* India* Indonesia Indonesia Japan Japan Malaysia Malaysia

0%

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MARKET

UPDATE

1H 2012:

COMPANIES POST FINANCIAL RESULTS

Amid volatility in the construction industry and impending financial crisis in Europe, the majority of the top cement companies scored positive results in the first half of the year. Total volume of cement sales is comparable to last year’s first half record, while volumes in aggregates and concrete slumped by seven percent and nine percent, respectively.

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%

-3.30%

-6 %

-12 % Buzzi Unicem

Several factors have been identified as affecting performance indicators in the first half of 2012, including the economic meltdown in Europe, coupled with social and political instability in some Middle Eastern countries, including Egypt, and with uncertainty in U.S. budgetary policy. High inflation and monetary policy changes, increasing electricity costs, reduction in carbon credits, and seasonal constraints (severely cold weather) in a number of European countries and North America during 1Q 2012 completed the scenario.

Some companies, based on their covering market segments, dealt with some of the above factors effectively and proactively by taking appropriate mitigation measures like cost cutting, efficiency improvement, improved pricing schemes and others.

Holcim

-10.98% Italcementi

Lafarge

Vicat

Building Materials: 1H 2012 Volumes 3.7

Vicat

15.7

Lafarge 6.6

Italcementi

22.8

Holcim

18.6

Heidelberg Cement

25.6

Cemex 6.6

Buzzi Unicem 0

20

40

1H 2012 Concrete Volume

60

80

1H 2012 Aggregate Volume

100

120

Cement 1H 2012

Source: CW Group Analysis

6%

% Change

The total Euro turnover recorded for the first half of 2012 increased by 6.6 percent, while turnover expressed in US dollar terms dropped sharply by 6.9 percent. The total volume of cement sales just surpassed last year’s figure of 264.4 million tons, as 264.5 million tons were sold this year. In contrast, both aggregates and concrete sales volumes declined by 7.3 percent and 9.3 percent, respectively. Aggregates sold during 1H 2012 stand at 374.2 million tons, compared to 403.7 million tons in 1H 2011. Concrete volume also plunged to 98.8 million tons, compared to 108.9 million tons recorded for the same period last year.

Heidelberg Cement

3.33% 4.95%

Buzzi Unicem

12.35%

0%

26.35%

-2.24% -6 %

4.37%

4.15% Cemex

Heidelberg Cement

-1.00%

-1.27%

Holcim

16.15%

-3.30%

Italcementi

8.89%

Lafarge

-12 %

Vicat

27.98%

Buzzi Unicem

Cemex

Heidelberg Cement

Holcim

-10.98% Italcementi

Lafarge

Vicat

For turnover expressed in other currencies than EUR the half year average exchange rate was used.

12 %

9.74%

7.90% HOLCIM ON TOP AGAIN OVER LAFARGE Lafarge, on the other hand, has been 3.7 Holcim againVicatsecured the number more heavily impacted by the European 4.88% 4.65% a ten percent one slot over Lafarge during a keenly economic turmoil with 5% 15.7 contested first six months of the year, as revenue decline in Europe, their largest Lafarge 0.86% reached 0.77% their market share to 28 percent market. In contrast, the company leveraged 0 % compared to Lafarge’s 6.6 26.4 percent. its European losses by tapping its major Italcementi Compared to 1H 2011, a rise in revenue revenue drivers, especially Asia and North -1.48% of 5.8 percent, net income of 22.8 14.1 America, which increased by 14 percent Holcim percent-6and cash flow of 244.1 percent -4.91% and 13 percent, respectively, contributing % are signs of satisfactory 1H 2012 results to a total revenue growth of five percent.

Buzzi Cemex Heidelberg 18.6 Holcim Italcementi Lafarge Vicat Total Heidelberg Cement for Holcim.

The also sold 4.4 The company’s successful pricing actions Unicemcompany Cement percent more cement in the first half of had a positive impact on revenue growth 25.6 the year, while suffering a slight decline regardless of cost inflation, poor weather Cemex in the aggregates and concrete markets conditions in Europe and America in the 6.6 percent and first quarter, and lower sales of carbon as volumes declined by 7.1 Buzzi Unicem 1.3 percent, respectively. credits. In terms of sales volume, the % Change

s capital investments in the private sector slowed down in several regions this year, including major parts of Europe and Asia, the global building materials market is not yet showing any sign of a major upturn.

This has been reflected in the first half results of all the major companies (Lafarge, Holcim, Cemex, Heidelberg, Buzzi Unicem, Italcementi, and Vicat) published so far. In Euro terms, most of the companies gained slightly in regards to revenue generation.

However, in US dollars the majority of them have slipped towards the negative pole when compared with last year.

Cemex

0 1H 2012 Concrete Volume

20

40

60

1H 2012 Aggregate Volume

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80

100

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Heidelberg Cement

MARKET UPDATE

Cemex

0

Vicat’s revenue slipped by about 1.5 percent during this half with the recorded sales volumes—8.8 million tons (cement), 10.7 million tons (aggregates) and 3.7 million tons (concrete)—slightly down compared to last year’s figures. Political instability in one of the company’s major markets, Egypt, and the rise in electricity costs in some countries are identified by the company as major reasons for setbacks.

Favorable price effects in all major market segments helped Buzzi Unicem 22

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20

40

60

80

1H 2012 Aggregate Volume

Heidelberg Cement 16.15%

Cemex

26.35% 16.15%

27.98%

8.89%

Holcim

Heidelberg Cement

Italcementi

Holcim

Lafarge

Italcementi

Vicat

Lafarge Vicat

27.98%

12 %

Source: CW Group Analysis

9.74%

9.74%

7.90%

7.90%

4.88%

% Change

120

Cemex

Buzzi Unicem

12.35%

8.89%

100

Buzzi Unicem

3.33% 4.95%

% Change

Cemen

Cement 1H 2012

3.33% 4.95%

26.35%

5%

80

1H 2012 Aggregate Volume

12.35%

12 %

60

6.6

1H 2012 Concrete Volume

HeidelbergCement enjoyed the highest revenue growth in 1H 2012 at 9.7 percent. Asia Pacific and North America were the premiere growth regions for the company, reaching double digit growths assisted by increases in operational efficiency and prices. The company’s cement and clinker sales volume increased by 4.1 percent, while sales volume for aggregates and ready-mix concrete slipped slightly by one percent and 0.5 percent, respectively. Excluding Northern and Western Europe, the company experienced moderate to good growth in terms of revenue generation in all the other territories.

Cemex was able to capture over 12 percent of the global market share among majors in terms of cement sales in the first half of 2012. Positive results came from the United States, South and Central America and Asia, while challenges were brought by activities in Mexico, Northern Europe and the Mediterranean. The company’s total turnover has slightly fallen by about two percent versus 1H 2011. In terms of sales volume, Cemex registered all around declines in its cement (-1%), aggregates (-5%) and concrete businesses (-3%).

40

1H 2012 Concrete Volume 25.6

Buzzi Unicem

company faced declines of one percent, two percent and seven percent in cement, aggregates and ready-mix concrete, respectively. A sign of concern comes from the concrete segment, for which the decline looks to be more generalized among the affected regions, namely North America (-9% ), Western Europe (-21%), and Central and Eastern Europe (-13%).

20

18.6

4.65%4.88%

4.

5% 0.86%

0.77%

0.86%

0%

0.77%

0%

-1.48% -4.91%

-6 % Buzzi Unicem

-6 %

Cemex

Heidelberg Cement

Holcim Italcementi Lafarge

-1.48% Vicat

-4.91%

Total

Source: CW Group Analysis

Buzzi Cemex Heidelberg Holcim Italcementi Lafarge Vicat T Unicem Cement to score a revenue growth of 0.9 percent. and 11%, respectively). Part of the losses The company’s cement sales declined were counterbalanced by the positive 2.24 percent at only 13.1 million evolution in most of the Asian countries tons, while concrete sales declined 11 as well as in the U.S. market. percent. Sluggish economic conditions in Europe and slowing construction While the interim financial reports for 1H growth in China, India and Brazil 2012 are not very encouraging for most of largely contributed to Buzzi Unicem’s the major companies, challenging market first half performance. conditions will continue to dominate the industry in the second half of 2012.

Italcementi closed the first half of the With most of the regions expected to year in the red. Its turnover plunged by close 2012 with a hike, one of the most 4.9 percent due to sluggish construction important markets for the major cement business in France, Belgium, Egypt, companies—Western Europe—is set Spain and Italy. Cement, aggregates, and to deteriorate sharply, declining by 13 concrete sales all declined (by 11%, 14% percent in 2012 over 2011 BMWeek CemWeek CW Group

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UPDATE

EGYPT’S CEMENT SECTOR:

UNREST PROLONGS UNCERTAINTY The return of civil and political unrest has tempered Egypt’s recently thriving cement sector.

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As a result, some 80 percent of cement plants open before the 2011 uprisings have faced production interruptions to varying degrees. Large international producers such as Lafarge are using temporary suspensions to bridge the unrest. Producers of all stripes are struggling to find a balance between their current capacity—built to

Cement Consumption

6,000,000

4,000,000

2,000,000

Jun-12

May-12

Apr-12

Mar-12

Feb-12

Jan-12

Dec-11

Nov-11

Oct-11

Sep-11

Jul-11

Aug-11

Jun-11

May-11

Apr-11

Mar-11

Feb-11

Jan-11

0

Source: CW Group Analysis

Egyptian Cement Prices (LE/ton) 600

400

200

Jun-12

May-12

Apr-12

Mar-12

Feb-12

Jan-12

Dec-11

Nov-11

Oct-11

Sep-11

Jul-11

Aug-11

Jun-11

May-11

Apr-11

0 Mar-11

LOCAL STABILITY AND CEMENT DEMAND One major obstacle to profitability for Egyptian cement producers is the current lack of local stability. Over the past six months, civil unrest has erupted following the relative lull the country experienced in the second half of 2011.

As a result, many construction projects around the country are delayed, on hiatus or flat-out canceled. International development money has also dried up as both local and international agencies wait out the situation.

Cement Production

Feb-11

It’s not an easy journey. While domestic supply/demand regulations have shifted to again allow cement exports, power subsidies for heavy manufacturers are no longer guaranteed by the government.

Egyptian cement producers are finding that they must be nimble and extremely efficient to maximize their opportunities in a market rife with pitfalls, accusations of monopolistic behavior, and a roiling political climate.

Production and Consumption Levels (2011 - present, tons)

Jan-11

n the summer of 2009, the outlook for Egypt’s cement sector seemed firmly on a rosy path. Growth predictions for the area’s third-largest cement producer were strong as analysts anticipated nothing more than recovery from the global economic slump of 2007 – 2008. Three years later, the unanticipated events of the Arab Spring, the ousting of President Hosni Mubarak, and continuing political turmoil have changed the landscape. Amid pricing pressures, fluctuating demand and political uncertainty, Egypt’s cement producers are trying to rise above their market surroundings and maintain healthy margins.

Source: CW Group Analysis

come online in a period of peace and growth—with the current market demand conditions.

with each producer trying to get itself in a good position for when regular operations resume.

No doubt there will be robust demand from Egyptian consumers for good quality cement—repair work alone could consume much of the domestic supply in the fourth quarter if peace is established. However, demand for large and small scale projects will not stabilize until the current bursts of violence definitively die down. In the meantime, the industry lives in limbo,

SUBSIDY SHIFTS & PRICING PRESSURES Along with an unstable local business environment, Egyptian cement producers must also navigate an ongoing series of subsidy shifts and pricing pressures.

Some are a result of the government trying to balance the budget in the face of new realities, while others stem from perceptions of price fixing by Egyptian producers.

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UPDATE

When it comes to price setting, producers and consumers have sharp differences.

Consumers allege that because a relatively small number of foreign-owned firms account for the bulk of the cement produced in Egypt, prices are set by a monopolistic oligarchy. Building groups, such as the Cairo Building Materials Chamber, also accuse cement makers of reducing production to keep prices high. As evidence, they cite sharp price increases for bags of finished cement and large mark-ups between factory and endconsumers over the last two years.

Producers maintain that they can no longer swallow dramatic increases in raw materials or survive power outages for weeks without raising prices, pointing out that it is difficult to maintain steady output when plants are idle due to violent outbreaks or fuel shortages. According to cement producers, production drops relate

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directly to shortages, worker protests and closures. As evidence, they cite public records of raw materials volatility and point to strikes, worker kidnappings and site attacks, and list off closed locations around the nation.

“80% of cement plants have faced production interruptions to varying degrees�

Amidst the swirl of pricing debates, the government stance is that lower cement prices would be better for the Egyptian economy as a whole. Various agencies are attempting to fix the prices of raw materials and dictate to the market what finished goods should cost, levying fines at firms whose prices rise above set numbers. At the same time as one part of the government is trying to hold down prices with mandates, however, other government groups are eliminating raw materials and energy subsidies to heavy manufacturing firms, including cement plants, making lower prices all but impossible.

Producers also note that, in Egypt, they have limited control over final retail prices in individual stores due to government interventions in the market and the ongoing country-wide turmoil wrecking havoc on delivery systems.

At the moment, there is no clear winner in the fight. Cement prices in Egypt are on the rise, as are raw materials and energy prices.

Neither consumers nor the government are happy about the increasing price of finished goods, while cement makers are miserable over input costs. And so the dance continues ‌ with all sides hoping for

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a return to general stability and therefore a return to lower pricing.

MARKET OUTLOOK While the country remains in turmoil, the outlook for the Egyptian cement market is stagnant. Firms will work to maintain profitability and market share while

patiently waiting out the unrest. When things do settle down, the rosy outlook of three years ago could return. Still, the government is set to close in on the approval of a whole new set of production licenses.

Prior to the current troubles, March and April saw new rules from the government

“When things settle down, the rosy outlook of three years ago could return”

that would stabilize fuel supply, give hiring incentives to local producers and allow for strategic capacity expansion.

The government had also announced intentions to build 75,000 new residential units in a bid to stabilize the economy and offset the decline in international development funds for large projects that cement makers felt in 2011.

If peace and stability can be re-established in Egypt, cement makers could come back strong. Pent-up domestic demand would be felt throughout the country, and the opportunity for export stability would return. Egypt once reigned as North Africa’s largest cement producer.

When peace returns, cement makers will be eager to reclaim their status. BMWeek CemWeek BMWeek BMWeek

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REGIONAL REPORT: In France, Kercim and Holcim will start up new units in the next two years.

Kercim’s St. Nazane, a 600,000-ton facility, will begin production in 2013. Holcim’s La Rochelle, a 500,000-ton plant, will commence production in the following year. Both operations have indicated that they will not produce clinker onsite but instead import from overseas plants to take advantage of cheaper production costs. Most recent data indicates cement production in France has dropped seven percent, coming in at under 20 million tons due to excess capacity.

A new report confirms what UK cement industry officials have been saying for some time now: the country’s cement manufacturers are significantly disadvantaged by the cost of energy and climate change policies compared to European and global competitors.

The industry asserts that the new report further underscores the need for additional help and programs for cement manufacturers in order to stay globally competitive.

HeidelbergCement

EUROPE Swiss Holcim says it will implement changes to its management structure as part of its efforts to streamline its business and deal with flagging demand in Europe.

Chief Executive Officer Bernard Fontana says it will introduce a “leaner and more efficient” structure, including a new head of Europe. The cement maker also cut its outlook for the region as it reported second-quarter earnings, predicting a contraction for 2012 after previously anticipating a stable development. In the second quarter, the company’s cost cutting measures, combined with raising prices for its cement and other building materials to meet financial targets, appeared to be working, as profits climbed over nine percent.

Germany’s housing market has been on the rise since 2009, a trend that is forecast to continue this year thanks to still low

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interest rates and a focus on property as an investment vehicle. This is potentially good news for HeidelbergCement, which announced that it wants to cut debt by roughly EUR 6.5 million to increase its credit rating and share price. The company had already cut EUR 7.7 billion in the four years ending 2011.

Acquisitions have been near and dear to the heart of Irish-based CRH. The company has spent EUR 250 million in the first half of the year on 18 acquisitions and investment initiatives. Roughly EUR 155 million involved five transactions in Europe, and about EUR 89 million went to 13 acquisitions in the Americas. CRH has indicated more acquisition may be in its future; however, with sales in the second quarter projected to fall due to uncertainty in the European markets, these plans may be subject to change.

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Grupo Cementos Portland Valderrivas warned it would be a “blow” to cement firms if the government eliminated currently charged payments for interruptibility of supply. Interruptibility premiums are payments received by large electricity consumers willing to “disconnect” when the system needs it, either by excess demand or a sudden drop in production. The price of energy is “very high” in Spain, and represents between 35 and 40 percent of the cost of cement, so the possibility of eliminating this bonus “would be an egregious blow” for companies that are going through a period of low demand.

Cement demand in Poland is projected to fall ten percent in 2012 with consumption estimated at roughly 17 million tons.

The decline in consumption is a rude awakening from the almost 21 percent increase seen in 2011. Belt tightening may be in the future for many cement manufacturers, and Polish-based Goradze Cement is looking ahead to implementing cost-saving measures.

COMPANY (LOCATION) SINAI CEMENT (EGYPT)

PLANT

OVERVIEW

Mount Sinai

ADDOHA (CAMEROON)

A new cement plant has opened in a four square kilometer area near Mount Sinai. Production is estimated at 10,500 tpd.

Morocco based Addoha will build a 500,000 tpy cement plant in Cameroon for US$25.9 mm. The plant will begin production in December.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

SAUDI CEMENT (SAUDI ARABIA)

Saudi Cement has decided to restart four of its kilns, which are capable of producing 4,000 tons of clinker per day, in the third quarter of 2012. Recently, the kilns were shut down as the company sought to refurbish them to be more environmentally friendly.

NDOLA (ZAMBIA)

Zambia-based NDOLA Lime Company says it will go into cement production and has commenced discussions with potential partners for a JV project to establish a plant on the Copperbelt. A feasibility study is underway.

TCC (SAUDI ARABIA)

TCC says it will construct a new cement production line to expand capacity by

5,000 tpd. The expansion may also include construction of a power plant. www.cemweek.com/subscribe

SONOCC (CONGO)

Loutété

Loutété cement plant is earmarking US$30 million to expand its production by 100,000 tons this year. The China Road and Bridge Corporation will build the line for SONOCC based on a JV established in 2004

SOUTHERN CEMENT (SAUDI ARABIA)

Tihama

Southern Cement has inked a contract for the construction of its third production line, Tihama. Design capacity for clinker will stand at 5,000 tpd and completion is scheduled in two years. COST: SAR 707 million

The company plans to substitute up to 40 percent of its coal needs with tires, generating a projected EUR 25 million in annual savings while reducing CO2 emissions.

RUSSIA & THE BALTIC COUNTRIES Cement production in Russia was up 14.4 percent in the first six months to 27.8 million tons. Higher production levels are likely, as several new units are either up and running or in the works. Among those are Eurocement’s Voronezh unit, set to open in November. According to company officials, the plant is expected to be one of the most modern in Russia, employing technologies not seen in use before in Russia or Europe. A new 1.8 mtpy plant is also planned for the limestone-rich St. Michel’s region of Ryazan. The new facility, to be named Serebryansky, will cost roughly 1.3 billion rubles.

been able to collect 276.2 million rubles, but a large deficit remains.

In Kazakhstan, a new plant with an installed capacity of 900,000 tons will begin production this year. The Mynaralsky plant, built for 35 billion tenge, will be the largest dry cement plant in the country.

Plans to modernize three cement plants in Belarus are expected to increase

production capacity significantly.

Government officials estimate that by 2014, the country will be able to increase production to ten million tons. Currently, the country’s facilities produce roughly 4.63 million tons.

AFRICA Unrest continued to plague cement operations throughout Egypt. Reports of kidnapped cement managers, plant closings due to labor strikes, threatened hunger strikes and armed group attacks on facilities filled the news. Surprisingly against this backdrop, production rose 7.5 percent in June over May and 9.1 percent over the previous year. The government has indicated that it would move forward with issuing up to 14 cement licenses once the political situation has stabilized.

The government isn’t the only one taking a wait and see attitude as Suez Cement announced it would put off its LE 1.5 billion expansion of Ein El Sokhna for one to two years until the current unrest has settled.

REGIONAL REPORT: EUROPE, MIDDLE EAST, AFRICA

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Ramadan is cited as the reason why cement demand and subsequently prices were down in Algeria. Tonnage prices in early August ranged from JD 1,000 to 1,200—significantly down from the high of 1,600 per ton seen at the start of the year. Prices are projected to fall even further before stabilizing. The leveling BaselCement Pikalevo

BaselCement Pikalevo has acknowledged it cannot pay its creditors. This includes Eurocement, who won a recent court judgment regarding a botched 2009 deal between the two companies.

BaselCement Pikalevo has asked the government for a reprieve. Of the total 290 million rubles in claims, the court has

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REGIONAL REPORT: EUROPE, MIDDLE EAST, AFRICA

out of prices should have a positive effect on the construction sector and ultimately the economy.

Gica announced plans to develop two new cement units in Bechar and Relizane. Combined, the two locations would provide an additional three million tons annually for the company.

There is a cement market shortage which Gica is currently subsidizing with imports. It intends to accept tenders to supply 450,000 tons annually to cover the country’s cement needs of roughly 2.5 million tons annually.

Ghana Cement denies a World Bank report suggesting the company is enjoying a market monopoly. The report contends that HeidelbergCement local unit Ghacem and Diamond Cement are suppressing competition in construction as well as the sale of cement. Ghacem asserts that there are other players in the country, like Savanna Cement and Fortress International, and that the World Bank is incorrect in its assertions.

The country’s cement growth rate in 2011 was over 22 percent. Ghacem produced roughly 2.55 million tons at two production units during that time.

The company hopes to produce even

more and has commissioned another mill at Tema in November that will produce one million tons and another in 2013 at its Takioradi location.

cement manufacturers should benefit from lower production costs when supply levels improve and energy prices stabilize over the short- to mid-term.

Dangote, controlling 71 percent of Nigeria’s market share, continues to do well. Not only were its profits in the first half of the year up 24 percent, it dramatically increased both its domestic and regional capacity. For instance, in Nigeria it increased capacity from eight million tons in 2011 to 19 million tons in the first half of 2012. The push for expansion hasn’t stopped Dangote from taking on one of their chief rivals, Ibeto, back home in Nigeria. Dangote filed suit against Ibeto to void government compensation for closure of a unit in 2005.

Government officials in South Africa have confirmed that cement imports are up to local standards. The affirmation comes after Lafarge, who suggested regulators were allowing substandard cement to be imported from Asia (specifically Pakistan), raised complaints.

Critics contend Lafarge is likely having a knee jerk reaction to rising input costs (up 8% in 2011) and cheaper inputs entering the market.

Tanzania is working diligently to expand production lines and to decrease its dependency on imports that come primarily from Kenya, India and Pakistan. Imports are expected to drop from ten to four percent by 2014. The country’s current capacity sits at 3.25 million tons, but three new entrants should assist in doubling cement production to 6.75 million tons by 2015.

Consumption is also projected to climb from 2.25 to 3.75 million tons. Overall,

Mozambique’s cement industry is seeing a lot of movement as new plant projects either get underway or head for the drawing board. A new 240,000-ton plant is now operating in the Boane district in the Maputo province, and the building of a new 500,000-ton plant in the Changana district of the Tete province starts in the second half of 2012. The town of Catandica has chosen a spot for a new cement plant, but the Chinese-backed project in Magude is currently stalled over soil quality issues.

After a lull that followed the launch of the high-denomination Congolese franc, the government thinks it may be time to lift the exemption on VAT for some products, including cement. Last June, the government extended the waiver for strategic goods, but the government does not exclude the option to waive in its current measure.

MIDDLE EAST The GCC area cement market is expected to rise in the short term thanks in large part to increases in infrastructure spending; however, challenges remain for many of the GCC countries. Financial results for the major GCC cement companies were mixed in the first half of the year. Kuwait Cement Company achieved a profit of 8.8 million dinars in the first half of this year, while Ras Al Khaimah White Cement announced its financial results for the second quarter of 2012, saying profits

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Higher growth in Oman’s construction sector led to higher off-takes in cement.

This is good news for an industry that has struggled through the UAE’s dumping of cheap cement in its market. Over the next three to four years, the cement industry is expected to grow annually at six percent, and industry value is projected to climb from US$4 billion to $5 billion. dipped 64.4 percent. Financial results for Fujairah Cement Industries Company during 2Q 2012 showed a net profit of about 15 million dirhams, compared to a nearly AED 6 million net loss during the same period last year.

In Saudi Arabia, demand fell by 30 percent in July because of high temperatures that led to the postponement of some infrastructure projects.

Fortunately, the situation appears temporary, with demand projected to rise rapidly after Eid Al Fitr.

Output reached 48 million tons in 2011, and 2012 was expected to surpass that.

Considering sales in the first five months

of 2012 amounted to 24 million tons, that scenario is likely.

Saudi Arabia holds the distinction of being one of the highest per capita consumers of cement in the world, thanks in large part to the high level of production activity. In 2011, per capita consumption sat at 1.621 kg. The country’s eastern regions accounted for roughly 20 percent of all cement consumption. Eastern Province Cement and Saudi Cement Company are the region’s producers, but they are struggling to keep up with demand. A shortage in the region is pushing prices upwards, compounded by a lack of fuel throughout Saudi Arabia and especially in the eastern region.

SELECT PROJECTS IN THE WORKS: EUROPE & RUSSIA COMPANY (LOCATION)

PLANT

GOVERNMENT PROJECT (BELARUS)

OVERVIEW The Belarusian government announced the opening of a new cement plant that will both produce cement and facilitate cement exports. Cement exports from Belarus are expected to grow by ten times in 2013.

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

SANKO (TURKEY)

Bartin

KERCIM CEMENT (FRANCE)

Montoir-de-Bretagne

POLIMEKS (TURKEY)

Turkmenistan

Sanko has set aside US$150 million to upgrade a cement unit in Bartin, where it plans to increase capacity as demand for cement in neighboring countries grows.

French Kercim Cement is building a 600,000 ton plant in the Montoir-deBretagne area in Loire-Atlantique. The plant will be completed in late 2012 and production will begin in early 2013. COST: EUR 44 million Polimeks is in the process of constructing a 1 mtpy cement plant in

Turkmenistan. The plant will also produce backfill cement required for the oil www.cemweek.com/subscribe

and gas industry, and sulphate resistant cement used in hydraulic structures.

DYCKERHOFF (RUSSIA)

Dyckerhoff will build a plant in Russia's Omsk in partnership with a local firm, sourcing slag waste from local plants for cement production. The first stage of construction begins this summer.

REGIONAL REPORT: EUROPE, MIDDLE EAST, AFRICA

A recent report found that the UAE produced 23.85 million tons of cement in 2011. Ras Al Khaimah accounted for 33 percent of total cement production.

Following Ras Al Khaimah was the emirate of Fujairah in second position with 20.4 percent, and Dubai rounded off the top three with 17.3 percent.

In Jordan, Arab Company for White Cement is mulling over whether to reduce production and stop exporting to Syria given the current unrest. The company is also concerned with the possibility that the market could soon be flooded with cheap white cement imports and has warned against the effects on the local market. The warning comes on the heels of Lafarge Jordan’s formal request to the government at the end of June to begin importing white cement.

Ramadan also affected Jordan’s cement market, with demand shrinking 30 to 40 percent. Prices did, however, remain stable. With production at the country’s four plants sitting at 12 million tons and consumption at 3.4 million tons, the government has announced that it would not grant any licenses to set up new plants over the next 17 months. The only exception it would consider was if the plant intended to export 75 percent of its production.

Iranian cement production is expected to increase by 6.8 million tons to 82 million tons. Exports are also projected to surpass the 2011 total of 10.4 million tons. With exports on the rise in the first four months, and Iraq, the UAE and Afghanistan targeted as strong export markets, the industry is likely to meet its goal. BMWeek CemWeek CW Group BMWeek BMWeek

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REGIONAL REPORT:

As many as five foreign cement firms are contemplating setting up plants in Myanmar, according to news reports.

These include Lafarge, France, Germany, HeidelbergCement, Holcim, Huaxin, and India’s Birla cement enterprises. Earlier this year, Siam Cement of Thailand (SCG) had also expressed interest in establishing a cement plant in Myanmar.

Recently, Indonesia’s Gresik announced that it would shift focus to meet domestic demand rather than filling the export market. The high cost of shipping and higher domestic demand warranted the shift. The company noted that since 2009 the amount of cement exported to foreign countries was much smaller, now roughly 33,000 tons. Later this year, Gresik also plans to change its name to Semen Indonesia or Cement Indonesia to reflect the company’s growing influence in the region. Its influence is seen in its plans to build four new cement plants with a capacity of two to three million tons over the next few years.

Thailand’s domestic cement market will maintain an upward trend in the second half of the year as demand boosts prospects. Demand comes from the maintenance of flood damage to public utilities, infrastructure, factories and housing needs, and government and civil construction. From January to May 2012, domestic cement consumption was 4.3 percent, and the value of imports jumped 28.6 percent. In 2012, annual domestic consumption of cement is forecast to climb between 4.5 and 6.5 percent.

Cement prices are also likely to rise an average of three percent.

In July, the Vietnamese cement sector output reached more than four million tons, and the total output of the first

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seven months reached 27.61 million tons, equal to 50 percent of the plan. Cement consumption reached 27.6 million tons, equal to 50 percent of the plan and 97 percent over the same period last year.

The country’s Ministry of Construction reported that cement consumption remained slow due to the gloomy real estate market, even though July is usually the most favorable month for construction.

Government officials continue to defend its cement development program, amid an oversupply in the market. According to one report, Vietnam may have an excess of six million tons of cement in 2012, but officials assert economists anticipated this situation.

To reduce the current pressure on excess capacity, businesses have stepped up to find export markets. However, the Ministry of Construction contends that there is little cooperation among cement exporters, pointing out that while the Viet Nam Cement Association (VCA) recommended a common export price for members, some still export at lower prices, negatively affecting the rest.

Many in Malaysia were caught off guard by a recent hike in cement prices, not that

there was even a probability of oversupply in the market. Cement prices rose by RM1 per 50 kg bag and RM20 per metric ton. The rise in prices also attracted the government’s attention. While Malaysian officials say they will not probe a recent spike in cement prices there, noting an investigation would only be launched if there were evidence of collusion among manufacturers, the MyCC did intend to put the cement industry on its watch list.

In the first quarter of 2012, profits for Chinese cement companies were less than stellar. Weak demand and sharply falling selling prices, with raw materials and fuel costs continuing to increase, created a tough operating environment. Almost all listed companies incurred losses in the first quarter. However, most companies remained optimistic that a gradual easing of banking policy rates and an increase in infrastructure investment would boost the construction sector in the country in the second half of the year. BMWeek CemWeek BMWeek BMWeek

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PLANT

OVERVIEW

HOLCIM (PHILIPPINES)

Batangas

BOSOWA (INDONESIA)

Banyunwangi

GRESIK (MYANMAR) GRESIK (INDONESIA)

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Holcim is planning a P 400 million upgrade at its Batangas unit in response to rising demand. 500,000 tons of grinding capacity will be added to the existing 7.7 mtpy capacity at the Mabini, Batangas grinding unit.

The Bosowa business group has commenced construction of a 1.2 mtpy plant for US$83.82 million.

Gresik plans to invest as much as Rp 1 trillion to build a cement unit in Myanmar.

A feasibility study for development of the 600,000 tpy plant is underway.

Sumatra

Gresikwill spend Rp 7 trillion to build new units in Sumatra and Java. Cement

companies in the area are rushing to add production in order take advantage www.cemweek.com/subscribe

of the country’s expanding economy and government plans to pour money into updating and expanding infrastructure.

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Pakistani cement sales were up 1.47 percent in July over the previous year but were offset by a 9.23 percent decline in exports. The notable decline in exports had the Islamabad Chamber of Commerce and Industry (ICCI) requesting that the government do more for cement manufacturers, insisting that the industry was in direct need of more government assistance in dealing with higher fuel and interest costs and lower priced cement in the international marketplace.

One company wanting to expand its export base is Lucky Cement. The manufacturer exports roughly 1.65 million tons to 22 countries, and it is exploring new export opportunities. One such opportunity may lie with African Portland Cement in South Africa that has indicated it would like to import more from Lucky Cement. Lafarge in South Africa had raised concerns regarding the quality of cement, leading to product tests confirming Lucky Cement’s product did met all required standards for import.

INDIA In the first quarter of FY 2012 – 2013, Indian cement volume growth was close to ten percent, and the volume of sales rose 19 percent. This in turn pushed profits for cement manufacturers up an average of ten to 15 percent. However, rising freight and fuel costs largely offset these profits. Cement prices also showed signs of easing in early August as demand slacked because of rains.

Average cement prices declined by two percent from Rs 310 to Rs 304 for a 50 kg bag.

Indian-based cement makers are likely to temper their expansion initiatives in

The Board for Industrial and Financial Reconstruction (BIFR), which looks into sick public sector units, has reconvened an asset sale committee to arrive at a valuation for six cement plants, including a cement-grinding unit in Delhi, which have not functioned for close to a decade and that it intends to offer up for sale.

Collectively, the production capacity of the six Cement Corporation plants is 2.65 mtpy. One industry analyst estimates the six defunct plants could be worth over Rs 1,700 crore.

One official confirmed that an attempt was made to revive the plants in 2006, but the decision was ultimately made to sell them.

Another official said the original plan was to sell seven Cement Corporation plants, but the proposed sale of the Adilabad plant in Andhra Pradesh was on hold pending litigation with workers.

According to Cement Corporation, the process of fixing the reserve price and

finding buyers will be done in about two months. The government had asked for bids as early as 2008, but the quoted prices were too low and none of the bids were accepted. This time around, bidding will be done electronically.

India’s CCI announced in early August that those cement firms found engaging in cartelization had 90 days to comply with its final order. In a separate order, ACC, Ambuja Cement, Ultratech, Grasim, JK Cements, India Cements, Madras Cements, Century Cements, Binani Cements, Lafarge India, Jaypee Cements, and Shree Cements must deposit the penalties assessed within 90 days.

REGIONAL REPORT: ASIA PACIFIC & SOUTH ASIA

REGIONAL REPORT:

the coming years, as weaker demand and regulatory hurdles hamper growth, according to a working group’s report on the cement industry. Land acquisition is seen as a major issue as many state governments are not providing land for setting up units, and securing clearances from the various authorities are taking longer; thus Greenfield projects are getting harder. Due to low demand and the fact that opportunities for expansion through brownfields are almost exhausted, additional capacity becomes unnecessary.

NEPAL Cement producers in Nepal lowered the price of cement by Rs 25-30 per sack (50 kg) due to lower demand. Nepali cement is now available in the range of Rs 711 to Rs 725 per sack. Manufacturers reduced the price of cement as of midJuly and are expected to continue doing so through mid-October, the off-season for construction in the country.

Meanwhile, the Nepalese Ministry of Energy is intent on proposing that an additional Rs 1 tax, earmarked for rural electrification, be assessed on every packet of cement sold in the market. The Community Electrification Department at the Nepal Electricity Authority was scrapped two years ago because of a lack of funds, and since then there has been no investment in rural electrification. BMWeek BMWeek BMWeek

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PLANT

TNPL (INDIA)

Alangulam

CHETTINAD CEMENT (INDIA)

Karnataka

JK CEMENT (INDIA)

Chittapur Taluk

SHIVASHANKAR MINERALS (INDIA)

Chincholi Taluk

OVERVIEW units in the state.AVAILABLE Orders have also been issued to appoint a project management TABLE consultant to increase production at the Ariyalur cement plant to 1.5 mtpy from the current 500,000 tons.

IN THE CEMWEEK Chettinad Cement has commissioned a new 2.5 mtpy plant in Karnataka, paving the way for its entry into the western markets North Karnataka and Maharashtra.

MAGAZINE The next phase of expansionPRINT will be in in Dachepalle, Guntur District, Andhra Pradesh, where a 3.5 mtpy greenfield plant is planned.

EDITION. The SHLC has cleared a proposal by JK Cements to establish a cement plant Tamil Nadu in India has okayed an Rs 515 crore plan to upgrade two cement

at Chittapur Taluk in Gulbarga district. The company would invest Rs. 2,326.65 www.cemweek.com/subscribe crore and provide employment to 350 people.

Shivashankar Minerals is planning to establish a 3.5 mtpy cement plant in Chincholi Taluk, Gulbarga, with an investment of Rs. 2,250 crore.

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REGIONAL REPORT:

NORTH AMERICA Lafarge Canada announced plans to expand its Exshaw unit. The expansion, if undertaken, would increase capacity by 62 percent over the next three years.

The US$500 million project has received the unanimous approval of the Bighorn planning commission and is moving through the required administrative clearances.

In August, the Portland Cement Association (PCA) revised its spring forecast upward for the U.S. cement market. It is now anticipating a 6.9 percent increase in 2012 growth levels from 2011. It is also projecting a rise of 5.8 percent in 2013 and a 10.9 percent jump in 2014. Changes in construction activity and cement intensity were key factors in the revised projections.

Other uplifting news for the industry included the Environmental Protection Agency’s (EPA) decision to delay more stringent air toxicity standards for cement plants until 2015. The move gained the support of several lead cement manufacturers, including Holcim and Cemex, as well as the industry’s PCA. The announcement followed a December court ruling that blocked part of the 2010 Portland cement rules, returning it to the EPA for further revision of particulate emissions limits for existing and new kilns.

Skyonics plans to build a US$125 million carbon-capture facility at Capitol Aggregates in San Antonio, Texas. The plant will recycle its emissions into less harmful by-products, like bicarbonate

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Mizu Baraúna RN, Brazil

soda. When finished in 2014, the unit will cut emissions by about 15 percent, or an estimated 83,000 tons of CO2 annually.

Mexican-based global provider Cemex confirmed a ten-year outsourcing deal with IBM that is expected to save the company US$1 billion over the course of the contract. Cemex intends to outsource its business processes and IT services.

Savings are expected to begin in 2013 at around US$50 million. Thereafter, annual savings are forecast at an average of US$100 million. Cemex also announced that it had reached a debt holding swap agreement with creditors for US$421 million in new high-yield notes.

CENTRAL AMERICA & CARIBBEAN Officials at Cuba’s Nuevitas facility confirmed that the plant has exceeded cement production plans by more than

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eight percent. In an effort to cut costs, the bulk of production is being carried out at night to save on energy, and the mills are using domestically manufactured castings in favor of import substitutions.

In the Dominican Republic, a strong export market may provide a light at the end of the tunnel with regard to dwindling domestic sales. Cement exports jumped 34.2 percent over last year, but only time will tell if higher exports will continue and effectively offset declining domestic sales.

Jamaica’s Carib Cement is also expressing optimism, expecting that the company will be able to affect a turnaround and be operating back in the black by January 2013. The company has expressed three years of significant losses, with much of the company’s woes

SOUTH AMERICA Colombian gray cement production declined 1.5 percent in May, but sales were up four percent. May marked the fifth consecutive month that sales had increased. One company particularly pleased with the increase was Mexicanbased Cemex. The company reported double-digit sales growth for cement, concrete and aggregates sales in the first half of the year in Colombia, which contributed a nine percent increase in total cement volumes for the global cement company.

Local cement companies in Peru are ramping up production, with plans to invest more than US$510 million to meet increased demand brought on by stronger real estate activity. Demand in Peru was up eight percent from January to May of this year. Companies with expansion or upgrade plans in the works include Cementos Lima, Cemex and Portland Cement.

Shareholders for Cementos Lima and Cementos Andino unanimously approved the merger of the two Peruvian companies. Lima will absorb Andino, and the new company will be called the Union Andina de Cementos Sociedad Anonima Abierta, or UNACEM.

from neighboring Paraguay. Bolivia is estimated to have cut its imports by 30,000 bags per month.

Cement consumption in Argentina dropped 1.9 percent in June over the previous year. However, the news did not prove as worrisome as a decision by the country’s highest court. Judicial and legal scholars throughout the country were stumped by the Supreme Court’s decision to suspend the enforcement of 310 million pesos in fines against Loma Negra, Minetti, Cementos Avellaneda, Petrochemical Cement, Comodoro Rivadavia and San Martin. The National Commission on Competition previously indicted all companies for cartelization and anti-competitive practices. No clear reason for the suspension of fines was provided.

Traders, contractors, and other industry watchers in Paraguay are worried about the INC’s inability to meet growing demand. While two private companies, including Tasser, have either started production or will by the end of the year, lags in production are still common. News that the INC was asking the government for US$10 million to fund the advanced purchase of cement stocks in order to ramp up production and expand its Itaipu unit did little to appease those concerns.

Instead, many in the business sector have been vocal in expressing their opinion

that the INC should have confined their borrowing to the business sector.

Standard & Poor’s lowered Cimpor’s rating after the recent acquisition by Camargo. For its part, Comargo plans to halt investments in Portugal and focus efforts on Brazil once the deal is solidified.

In contrast, Brazil’s Votorantim Cement is electing to broaden its focus even more. The company, which expanded to six countries this year, may make further acquisitions in South America, the United States, Africa and some European countries.

REGIONAL REPORT: AMERICAS

beginning when its planned US$177 million expansion project concluded just as Jamaica and much of the world entered a recession.

Cement sales in Brazil were down 2.8 percent in June, year-over-year (YoY), and down 4.6 percent from the previous month. However, sales rebounded in July, climbing six percent YoY, according to preliminary data from the National Union of the Cement Industry (SNIC).

Cement production in Venezuela jumped 19.48 percent in June YoY. Sales were up 16.27 percent for the same period. The government recently announced it had invested more than US$155 million in the sector, and President Chavez stressed that four more projects were in development— projects that were expected to increase cement production by 40 percent in three years. In the first half of 2012, cement production climbed 13 percent and, since nationalization, 20 percent. BMWeek CemWeek BMWeek BMWeek

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Chile’s Hurtado Vicuna announced plans to invest roughly US$300 million over the next five years in comprehensive projects in cement, concrete and aggregates.

Through its company Cementos BSA, it plans to capture significant market share from established players Melon, Polpaico and Bio-Bio, who have dominated the market to date. Up until this point, BSA had confined itself to becoming the country’s largest cement importer.

Sales in Bolivia rose seven percent in the first half of the year. Interestingly, the increase in sales came amidst news that the country was importing less cement

Venezuela cement bags

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SECTOR COVERAGE:

Construction Group and China Metallurgical Group—also ranked in the top ten. They were joined by Vinci, ACS, Bouygues and Hochtief from Europe, while Bechtel was the only U.S. contractor in the top ten. The highest placed Japanese construction company was Daiwa House at number 12.

The United States is boldly pushing its infrastructure development efforts. U.S. transportation secretary Ray LaHood announced up to US$50 billion in fresh investment, and he announced the availability of up to US$17 billion in loans for critical infrastructure projects across the country as a result of the recently enacted surface transportation bill. “Americans have always done big things—not in spite of hard times, but as a means of overcoming them,” Ray LaHood said.

Builders in the Persian Gulf region are also in for a strong market this year, as governments there are expected to roll out big projects. The UAE continues to enjoy nearly half of the total regional building construction market, followed by Saudi Arabia at 33 percent.

Construction projects worth US$65.5 billion are expected to be awarded across all building sectors by the end of 2012, a 13 percent increase over last year’s projects.

The sovereign debt crisis continues to hamper the construction sector in Europe. While the United States is pushing up investment, Chinese firms are confirmed as top global contractors, and Africa emerges as a huge market for infrastructure development.

CONSTRUCTION & BUILDING MATERIALS Euroconstruct, a network of 19 institutes of economic forecasting, recently announced a sharp aggravation of the construction situation in Europe.

Construction sector decline is estimated at 2.1 percent for this year with a weak 0.4 percent rise next year. The market could return to a healthier growth of 1.7 percent in 2014.

Chinese firms, on the other hand, have emerged as the world’s largest contractors, according to the International

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SLOW GROWTH IN EUROPEAN CONSTRUCTION OUTPUT

UK

6.3

TABLE AVAILABLE 3.6 3.4 IN THE CEMWEEK 3.1 MAGAZINE PRINT …

-1.4 EDITION. -3.3

Construction’s 2012 ranking of the world’s 200-largest construction companies.

Contractors from China claimed 23.2 percent, or US$344 billion, of the US$1.148 trillion revenue for the top 200 contractors, followed by Japanese contractors at US$211 billion (14.2%) and U.S. contractors at US$179 billion (12.1%) of total revenue.

ROMANIA

China State Construction Engineering Corporation claimed the top spot in the ranking, with two other Chinese contractors—China Communications

SLOVENIA

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Coal Week Coal Week 2012 Coal Week

5.0

PORTUGAL SLOVAKIA

GERMANY …

ITALY SPAIN

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HUNGARY

EU27

Source: Latest Eurostat data - May 2012 (% evolution over April)

-17.5 1.6

CONCRETE In Japan, the shortage of ready mixed concrete in areas hit by last year’s earthquake and tsunami is delaying much needed reconstruction work.

The shortage is caused by high demand for ready mixed concrete for constructing dikes, rebuilding houses and other construction projects, and the problem has been exacerbated by difficulties in storing and transporting the material.

Shay Murtagh Precast has opened a new concrete plant in Ireland and says it will invest three million euro into new technology. The company, which makes precast concrete tunnel segments for

the construction industry, credited the governmental agency Enterprise Ireland for supporting the project.

In another Irish initiative, Ireland’s CRH, has acquired through its Rudus unit the Finnish concrete maker Lemminkäinen for Euro 55 million. The company is part of Lemminkäinen’s Infrastructure Construction business sector and has a total of 24 plants across three business areas: precast concrete elements, landscaping concrete products and ready mixed concrete. Its key strategic growth areas are Nordic infrastructure construction and residential construction in the St. Petersburg area of Russia.

Meanwhile, scientists in the former Soviet republic of Georgia are working on new concrete types that promise to be more durable. The scientists claim that the new concrete will not have the tendency to form cracks. The new product will be used for construction of buildings and power plants, bridges, tunnels and roads.

GYPSUM AND LIME Nordkalk Corporation said it has received approval from the Swedish

authorities to start the construction of a new limestone quarry in Bunge Ducker on Northern Gotland. The county board had previously asked Nordkalk to submit inspection reports before proceeding with its mining operations.

In Spain, a research team based at Universidad Politécnica de Madrid has patented a new gypsum board variant that promises energy savings because it can store thermal energy. The team says the boards can reduce a building’s energy consumption. Combined with passive strategies (sunlight, natural airing), they can reduce energy consumption in a building by up to 40 percent. The breakthrough is particularly important in Spain, where 80 percent of energy is imported.

SECTOR COVERAGE: CONSTRUCTION MATERIALS

Meanwhile, Africa announced the 2012 to 2040 Programme for Infrastructure Development (Pida). The multi-billion dollar initiative—led by the African Development Bank, the African Union and Nepad—aims to develop a web of 37,200 km of highways, 30,200 km of railways and 16,500 km of interconnected power lines. Africa’s current infrastructure deficit is costing the continent about two percent gross domestic product (GDP) growth per year.

Meanwhile, Tajikistan has opened new limestone and gravel quarries in the country, which have created 200 to 250 new jobs. The quarries include two deposits of limestone and six fields of sand and gravel.

AGGREGATES Amid shrinking construction output, aggregates, asphalt and concrete sales decreased in the second quarter in the

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CONSTRUCTION & MATERIALS BY BMWEEK.COM

VALUE OF CONSTRUCTION PUT IN PLACE IN THE U.S. ($ MIL.)

JUNE 2012

YEAR TO JUNE 2012

YEAR TO JUNE 2011

TABLE AVAILABLE IN THE CEMWEEK MAGAZINE PRINT EDITION.

PERCENT CHANGE

24,917

122,338

114,483

6.9

50,991

264,717

240,626

10.0

PRIVATE CONSTRUCTION

50,355

262,289

226,369

15.9

PUBLIC CONSTRUCTION

25,553

124,766

128,739

-3.1

75,908

387,055

355,108

9.0

RESIDENTIAL NONRESIDENTIAL

TOTAL CONSTRUCTION

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Source: U.S. Census Bureau Department, published August 1, 2012

United Kingdom. Sales of crushed rock, sand and gravel aggregates declined by 10 to 15 percent, and sales of the value added products of ready mixed concrete and asphalt fell by 13 and 16 percent, respectively.

The fundamental problem on the British market is that, with some exceptions, private sector construction has declined this year, and the impacts of the reductions in public investment in construction are now being felt in full.

On the other hand, Russia’s building stone exports rose 20 percent yearon-year in 2011, according to recently published data. This is a reversal of a trend between 2008 and 2010, when volumes fell year after year. Despite the rise, last year’s results did not reach the pre-crisis exports of 2008.

In Croatia, the authorities are making efforts to recycle asphalt. Croatia would be one of the few countries in Europe to do so, along with Germany, Switzerland and the Nordic countries. Croatia recently

became the only nation in Eastern Europe to recycle stone. In the past, stone was purchased, often at inflated prices, from various sub-contractors. “That now is gone. From now on all the roads that we walk and drive on will be built exclusively with recycled stone,” said Alen Gospocic, director of Zagreb Roads.

GREEN AND INNOVATIVE BUILDING The Saudi Green Building Forum is expected to ink an agreement with the US-Saudi Arabian Business Council (USSABC) for a set of protocols on green building policies. In other words, the alliance is looking for ways to develop more responsible building and promote an all-inclusive set of standards and systems for green buildings in the Kingdom of Saudi Arabia.

The use of fly ash in construction applications is on the rise on India. In the state of Tamil Nadu, more home construction projects are seeing the value of using the material as a green substitute to traditional building blocks.

Nearly ten percent of structures that are

coming up in the city are green buildings.

In the next five years, local authorities estimate the percentage may rise to 35 percent. Fly ash bricks are considered

by Indian contractors to be five times stronger and also less water absorbent than clay bricks.

Also in India, two researchers have come up with energy efficient materials from industrial and agro waste, like sugarcane bagasse and construction waste. They have used these materials to make false ceilings and in interior designing as well as demonstration houses.

“After the newspaper waste bricks, we have made similar thermally insulated bricks from agro-waste or sugarcane bagasse and also a mixture of waste material generated commonly at any construction site,” said one of the researchers, Associate Professor of Civil Engineering Rahul Ralegaonkar.

Six Chinese ministries, including the Ministry of Science and Technology, as well as several commissions collaborated to release a five-year plan for waste recycling technology. The plan involves major areas of recycling, such as recycling resource utilization, industrial solid waste recycling, energy regeneration of waste and sludge, disposal and regeneration of domestic waste in urban areas, as well as recycling of construction waste and industrial sludge and sewage sludge.

In Italy, a new generation of ‘green’ concrete, with an ingredient called TX Active, was developed by Italcementi. The material has already found many practical applications, from the Vodafone Center in Milan to the headquarters of Air France at Paris Charles de Gaulle Airport, as well as being used at Italcementi’s research center near Bergamo.

According to Italcementi, test results have shown that after only three minutes in sunlight, the new concrete achieved a pollutant reduction of up to 75 percent, as well as increased efficiency in the degradation of organic and inorganic substances present on the illuminated surface. BMWeek CemWeek CW Group Coal Week

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EQUIPMENT

AND NOTABLE PROJECTS

FLSMIDTH LANDS EGYPTIAN CONTRACT FLSmidth has been awarded a contract by the Egyptian National Cement Company for operation and maintenance of two of their production lines located in Cairo, Egypt. The contract, which is the largest operation and maintenance contract awarded to FLSmidth to date, includes supply of spare parts and consumables, development of a full operation and maintenance organization, knowledge transfer to local employees and implementation of industry best practice.

installation and commissioning and is scheduled to be started up in November 2013. ABB is part of the team installing the system. Marcel Bieri, production manager at Jura Cement, says: “We will be able to generate 14,400 MWh of

FLSmidth is currently carrying out an upgrade of the two production lines, which were originally supplied by German KHD and have been in operation since the mid 1980’s. When the upgrade is completed in early 2014, each line will have a capacity of 5,200 tpd, as opposed to the current 3,800 tpd capacity.

electric power using ABB’s waste heat recovery system. That’s enough to satisfy the power demand of about 3,600 Swiss households.”

The parties have agreed not to disclose the value of the contract, which covers a period of seven years. The order will contribute beneficially to FLSmidth’s earnings until 2019.

NATIONAL CEMENT GEARS UP GRINDING On 1st June 2012, Dubai’s National Cement finished commissioning of a coal mill as part of the company’s “Project Dubai Coal.”

JURA TO INSTALL WHR SYSTEM Switzerland's Jura Cement has signed an agreement to install an ABB system at the Wildegg cement plant, which generates power from waste heat. The advanced solution is based on ORC (Organic Rankine Cycle), a thermodynamic process that enables waste heat to be converted to ecologically sound electricity. Once the system is in operation, the plant energy costs at the Wildegg plant are reduced dramatically. Jura Cement will have to purchase about twenty percent less electricity. EKZ Getec is financing the system. It is also supported by the Swiss Federal Department of Energy within its program “EnergySwitzerland” as a strategic energy project.

National Cement ordered a Loesche Vertical Roller Mill Type LM 28.2 D for the capacity of 40 t/h Coal, 12 % R 0.09 mm.

The mill motor is designed for a capacity of 600 kW. With the new equipment, the client intended to substitute HFO used for firing the rotary kiln.

The turnkey power station order includes design, project management, delivery,

In addition to the Loesche vertical roller mill, the complete import portion of the grinding plant was delivered by Loesche, including motors and mill dedusting system, fan and CO2 inerting system, and gas analyzing unit. Project management, mechanical and electrical basic engineering were also part of the contract.

FIVES FCB AWARDED CIMAR PROJECT The Queiroz Galvao and Cornelio Brennand JV has ordered a slag cement

grinding plant located in Sao Luis, state of Maranhão, in Brazil. This order concerns the supply of process equipment of the grinding plant and includes one Fives FCB ball mill with two compartments fitted with predrying chamber (installed power 3,400 kW), one third generation Fives FCB TSV classifier 3200 HF, and one Sonair type Fives FCB process filter (2,000 m²).These facilities will produce 80 tph of CEM II-E (cement with 30% slag) at 3800 Blaine.

CEMEX UK ACQUIRES NEW VOLVO TRUCKS Cemex UK Cement Logistics has added ten new Volvo FM 12 440 6 x 2 Tractor Units to its fleet of 120 bulk powder trucks. According to the company, the fleet currently covers around 1.5 million km per month, and the decision to buy Volvo was dependent on the vehicle’s whole life cost covering maintenance, ad-blue usage if required, and miles per gallon.

The average improvement to existing Volvos in the fleet has been around 0.5 mpg and represents significant fuel savings and operational efficiencies.

Additionally, all units are fitted with the Gardner Denver XK12 blower unit, a compressor required for discharging the cement, Cemex said.

CHINA NATIONAL MACHINE CORP SECURES THAILAND DEAL The National Machine Group, China Power Engineering, has signed a 60MW waste incineration and 30MW cement kiln waste heat power station project in Thailand worth US$102 million.

The project is the world’s first waste incineration and cement kiln waste heat power station combination, according to the firm.

The project will use trash burning power generation and cement kiln waste heat (WHR) to generate electricity in two parts: waste incineration power generation equipped with two 130 tph circulating fluidized bed boiler and a 60MW turbine generator, and cement

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EQUIPMENT AND NOTABLE PROJECTS kiln waste heat power generation configuration to a waste heat boiler and a 30MW turbine generator.

This acquisition will also indirectly create 105 new jobs.

Implementation of the project will reduce the local landfill. The project is expected to have far-reaching significance to local energy saving and environmental protection in Thailand.

The new fleet consists of 20 mixer trucks (2013 model) and three new pumping equipment. The units are intended for general use, and the addition will meet with the promptness and quality required by customers.

MIXTO LISTO UPGRADES FLEET Guatemalan company Mixto Listo has spent US$3 million to purchase a new fleet of trucks that comply with US safety standards. With the implementation of

The new fleet units have high-tech engines that meet the United States’ 2004 EPA standards, reducing exhaust gas emissions of CO2 between 13 and 15 percent.

CORPORATE NEWS FEARS OF CHINA SLOWDOWN DRAG FLSMIDTH SHARES Danish engineering firm FLSmidth has seen its shares bracketed by expectations that China’s economic expansion will cool; shares fell as much as four percent, its biggest decline since June 1. Growth in the world’s second-largest economy may slow for a seventh straight quarter to 7.4 percent in the three months to September, said Song Guoqing, a member of the People’s Bank of China monetary policy committee.

“Investors are fearing lower Chinese growth, as well as a slowdown elsewhere in Asia, will cool demand for metals and minerals, thus cooling demand for mining equipment,” said Jacob Pedersen, an analyst at Sydbank A/S in Aabenraa, Denmark. European stocks also slid the most in two days since April as Der Spiegel reported the International Monetary Fund may stop paying further rescue aid to Greece, citing unidentified European Union officials.

FLSMIDTH TRIMS OPERATING MARGIN Danish equipment maker FLSmidth has trimmed its operating margin guidance after turning in weaker than expected quarterly operating profits. The firm says it was hit by a writedown and weak results in the bulk materials business,

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these units, there will be 35 new direct employment opportunities ranging from drivers, production and maintenance. noting that the company had put its fibrecement products unit Cembrit up for sale and had potential buyers on the radar.

“Expectations to bulk materials have been downgraded and risk associated with the margin guidance has increased due to short-term macroeconomic uncertainty,” FLSmidth said.

According to the report, its bulk materials division has had problems executing projects in 2012. Second-quarter earnings before interest and tax (EBIT) fell 14 percent to 349 million crowns, missing all estimates in a Reuters poll in which the average forecast was 505 million.

Because of the write-down, FLSmidth cut guidance for its 2012 EBIT margin to eight to nine percent, down from from nine to ten percent.

KHD SALES SLOW, BUT ORDER INTAKE UP According to KHD Humboldt Wedag’s revenue and EBIT growth, the company was successful in winning new orders with its strategic partners during the first six months of 2012. Weakened economic growth in industrialized and emerging countries had a negative impact on global cement markets and pushed customers to delay awarding and executing projects.

The result was a 3.8 percent fall in revenue to EUR 102.5 million, but KHD’s gross profit remained at 19.9 percent, compared to 22.3 percent last year.

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On the cost side, an increase in tendering activities for new cement plants and intensified product development costs left their mark. Sales expenses rose 11.5 percent, while research and development expenditures increased 26 percent YoY. Along with the decline in revenue, this led to an EBIT reduction of EUR 5 million, leaving an EBIT margin of 2.1 percent vs 6.7 percent in the previous year, the company said.

At EUR 248.4 million, KHD has almost tripled the HY 2011 order intake amount of EUR 87.4 million and has actually surpassed the 2011 full year figure. Aside from key projects in Malaysia, Russia, and Venezuela, orders also came in from the minerals industry in Canada and Peru.

At the same time, good progress has been made in developing the service business, especially in India. KHD’s order backlog of EUR 439.6 million is now at one of the highest levels reached in recent years.

The new orders are expected to have a positive impact on the liquidity situation during the current year but will not yet have a material impact on operational results. KHD therefore confirms the revenue and earnings targets solidified a few weeks ago. For the financial year 2012, the company expects group revenue of between EUR 230 million and EUR 250 million, with an EBIT margin of between two and four percent. BMWeek CemWeek CW Group BMWeek BMWeek

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Coa Coa Co

PEOPLE HOLCIM MANAGEMENT SHAKEUP Swiss Holcim will implement changes to its management structure effective September 1, 2012 as part of its efforts to streamline its business and deal with flagging demand in Europe. Chief Executive Officer Bernard Fontana says the changes will introduce a “leaner and more efficient” structure, including a new head of Europe.

As part of the changes, three managers will leave the executive committee, and Urs Bleisch has been promoted to head Fontana’s “Holcim Leadership Journey.”

Holcim will bundle several European divisions into one unit led by Roland Koehler, who is now CEO of Holcim Group Support.

Koehler will be supported by three Area Managers: Urs Frankhauser (Western Europe, ex-UK), Kaspar E.A. Wenger (Switzerland, Southern Germany, Italy) and Horia Adrian (Eastern and Southeastern Europe, including the CIS/Caspian region).

Bernard Terver, who leads Holcim’s U.S. businesses, will join the executive committee

TXI ADDS 3 BOARD MEMBERS Effective as of July 11, 2012, TXI has appointed three new directors to its board.

Sean P. Foley, age 54, was Senior Vice President — Investment Management of AT&T from October 2006 until his retirement in January 2012. He was Vice President & Treasurer of Cingular Wireless from 2000 until it was acquired

by AT&T in 2005. He was Vice President and Treasurer of U.S. West from 1995 until 2000. Mr. Foley is a former member of the Board of Trustees of Presbyterian College in South Carolina.

Bernard Lanigan, Jr., age 64, is a certified public accountant. He founded and has served as Chairman and Chief Executive Officer of Southeast Asset Advisors, Inc. since 1991. He also founded and has served as Chairman and Chief Executive Officer of public accounting

Roland Koehler

Bernard Terver

and will assume overall responsibility for the Group’s new North America and UK region.

Javier de Benito will directly lead the Africa Middle East region, which now includes West Africa and the Arabian Gulf.

Ian Thackwray, in addition to his responsibility for East Asia, China, the Philippines and Oceania, will take on Holcim Trading, Madrid.

and consulting firm Lanigan & Associates since 1974. He also directs and oversees Conifer Advisors and Conifer Partners (private equity, real estate and special situations investments).

Thomas L. Ryan, age 47, has been Chief

Bernard Lanigan, Jr.

Executive Committee members Benoit-H. Koch, responsible for North America, the UK, Norway and the Mediterranean, and Patrick Dolberg, responsible for Western and central Europe, will leave the company.

According to the report, Urs Boehlen, member of the executive Committee and currently responsible for Eastern and Southeastern Europe, CIS, will step down and act as an adviser to Fontana until his retirement in 2013.

Executive Officer of Service Corporation International since February 2005 and has served as President of SCI since July 2002. From July 2002 until February 2005, Mr. Ryan was Chief Operating Officer of SCI, and from November 2000 until July 2002 he was Chief Executive Officer of European operations. From the time he joined SCI in 1996 until November 2000, Mr. Ryan served in a variety of financial management roles. Before joining SCI, Mr. Ryan was a certified public accountant with Coopers & Lybrand for eight years. Mr. Ryan serves as Chairman of the Board of Trustees of the United Way of Greater Houston. He also serves on the University of Texas McCombs Business School Advisory Council.

HEIDELBERGCEMENT BOARD ADDITION The Local Court (Amtsgericht) of Mannheim, Germany supplemented the Supervisory Board of HeidelbergCement

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PEOPLE

Prof. Dr. Marion Weissenberger-Eibl

by appointing Prof. Dr. Marion Weissenberger-Eibl as a member in the capacity of shareholder representative.

She succeeds Dr.-Ing. Herbert Lütkestratkötter, who had resigned from his position for personal reasons.

Her term of appointment will expire on the occasion of the by-election held at the next Annual General Meeting of HeidelbergCement AG on 8 May 2013.

“We are pleased that, in Prof. Dr. Marion Weissenberger-Eibl, we have succeeded in attracting a well-respected German top engineer as a new member of our Supervisory Board”, stated Fritz-Jürgen Heckmann, Chairman of the Supervisory Board. “Prof. Dr. Weissenberger-Eibl is very well-connected in the fields of business, science, and politics. Her extensive experience and expertise … will be a valuable addition to the Supervisory Board. By appointing Prof. Dr. Weissenberger-Eibl, HeidelbergCement is also strengthening its links to science and research in view of future technological and social challenges.”

General Electric Europe in Brussels between September 2000 and November 2007, following a distinguished legal career.

“I will ensure that the voice of our industry sector is heard in the major

NEW CEO FOR CEMBUREAU Cembureau is pleased to welcome Koen Coppenholle as the new Chief Executive of the Association. He takes over from Jean-Marie Chandelle, who retired at the end of June.

Koen Coppenholle has been Head of European Affairs for ArcelorMittal in Brussels since November 2007 and was Senior Counsel European Affairs with

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Koen Coppenholle Coal Week Coal Week 2012 Coal Week

ongoing policy debates, ranging from the future design of European climate change and energy legislation to the reflection on a resource efficient society.

In order to remain successful in Europe, the cement industry needs a competitive environment with an appropriate legal framework that ensures a level playing field and provides legal certainty and predictability for investments,” states Koen Coppenholle.

SAUDI ARABIA: NARJAN CEO RESIGNS Dr. Ahmed bin Abdu Ezkil will step down from his position as CEO of Najran Cement Company as of the end of August.

The company did not explain the reasons for the resignation. Najran said in a brief statement that it will announce its new Chief Executive when the appointment takes place. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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RESEARCH

HIGHLIGHTS FROM THE 2012 INDIA CEMENT SECTOR SENTIMENT SURVEY

This summer, the CW Group released the 3rd Annual India Cement Sector Sentiment Survey. In three short years, the CW Group has established what has become an industry-standard survey, not only for India but for other regions worldwide.

SURVEY OVERVIEW The cement industry occupies an important place in the Indian economy with its strong linkages to the construction, transportation, coal and power sectors. The sample base for the 3rd Annual India Cement Sector Sentiment Survey comprised a mix of Indian industry professionals, and companies that participated in the survey represent a variety of roles within the industry— from sales and marketing, production

and engineering, to research, logistics and planning. In addition, the sample corresponds to the five regions that comprise the Indian cement industry.

The 3rd Annual Survey reveals that, despite a currently more challenging environment for the cement industry, the last six months’ performance was considered satisfactory, as both bottom and top-line growth were mostly achieved. An upward trend in absolute

costs had been anticipated, and the increase was partially absorbed by operational efficiency exercises and partially transferred to customers. Due to rising input costs, cost control measures will remain a key theme for next year also.

MIXED OPTIMISM Perceptions for the next twelve months are optimistic. Although only 13 percent of those surveyed believe performance will be “much better” in the coming

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RESEARCH Expectations for the next year

A lot worse

We thank the following corporate sponsors for showing their support for the India cement sector and the survey: About the same

Somewhat worse Much better

Somewhat better

1% 11%

1% 11%

35%

32%

india CemWeek

43%

33%

20%

13%

2011

2012

Source: CW Group Analysis

Key issue of the industry Environmental issues

Alternative fuels

Other

Safety and occupational health

Finding new export opportunities

Capacity expansion

Operational improvement

Controlling costs

Improving domestic sales

2%

3%

3% 5% 7%

5% 5% 5% 6% 7% 10%

14%

30%

29%

2011

2012

Source: CW Group Analysis

year, compared to 20 percent last year, those who anticipate a “somewhat better” performance increased.

Overall, a majority expect an improved

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performance, followed by 32 percent who believe the current level will remain the same, while 12 percent are preparing for worse results.

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& CONSTRUCTION MATERIALS

CBI

In terms of expectations by segment, the most optimistic are cement traders, as 73 percent believe in a “somewhat” or “much better” outlook. This view is further supported by industry consultants and cement companies, at 59 and 58 percent optimism, respectively. Being directly influenced by the next period’s slowdown in capital expenditure, optimism among equipment vendors dropped significantly from 87 percent to 45 percent.

In terms of profitability over the next twelve months, a majority 57 percent believes profitability will register an improvement, and 32 percent expect stagnant levels. This may be the result of the last period’s focus on cost controls and cumulative operational improvements.

The remaining 11 percent are preparing to handle a profitability decrease.

KEY INDUSTRY CONCERNS Compared to 2011 results, the cement industry’s three main themes registered slight decreases of two to eight percent.

For 30 percent, “controlling costs” is now considered the industry’s main issue.

After dropping eight percent, “improving domestic sales” is now ranked as the second theme at 29 percent.

32%

37%

CEMENT

Following operational improvement (10%), capacity expansion proved to be an important issue and a key focus area for the next twelve months. Capacity expansion’s seven percent showing comes mainly from respondents in the northern and western regions.

Furthermore, the majority of survey respondents considered it either a top priority or an important focus for the Indian cement industry to meet emerging US and EU emissions standards. In fact, 79 percent of survey respondents revealed their companies’ dispositions to reduce CO2 emissions by trading off profits. The current result is two percent higher than in 2011.

CONCLUSION On the whole, the last six months’ industry performance was considered reasonable

and met over 70 percent of the sample’s expectations. Although the level of optimism was higher in the second annual survey, the majority of respondents expect to register the same or just somewhat better performance in the next twelve months. The survey respondents have clearly pointed out the next period’s challenges, the dominant ones being excess capacity, energy prices, CO2 emissions and profitability.

As a whole picture, it is interesting to remark that the above issues are not

specific to the Indian cement market.

In fact, these same issues are applicable to many other geographical markets (Europe for example). We have noticed that, post-crisis, there is a convergence of strategic issues in the global cement sector. There really is no place to hide following the catastrophic collapse of demand in the Western World.

In order to support healthy business growth, the Indian cement industry’s main three focus areas will be controlling costs, improving domestic sales, and operational improvements.

These are mainly driven by the majority’s expectations of the same level or worsening prices for input costs and at least the same results in profitability. BMWeek BMWeek BMWeek

CemW CemW CemW

The full text of the CW Group and CemWeek’s 3rd Annual India Cement Sector Business Sentiment survey offers additional insights about sentiments held among industry participants and professionals, its main sectors and regions.

Please contact the CW Group at inquiries@ cwgrp.com to arrange for a more detailed discussion of this survey and its findings.

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FLASHBACK NEWS FLOW ON CEMWEEK.COM LAST TWO MONTHS (darker red shows higher news volume)

China and the United States are in the news, but India takes the spotlight on CemWeek.com. Economic upheaval keeps Spain in the headlines.

>>> Continued from page 17:

MID-YEAR GLOBAL CEMENT VOLUME FORECAST REPORT (GCVFR) Overall, although we expect slow growth to continue at a global level, the outlook is cloudier than ever, leaving room for a higher degree of uncertainty than usual in our forecast. Competing macroeconomic forces, led by a persistent drag from Europe alongside robust (albeit fraying at the margins) growth in emerging markets, create a tug-of-war between cement market fundamentals and global economic linkages. The CW Group recognizes the challenges ahead, and we advise our clients to more than usual keep revisiting market assumptions and outlook based on changing conditions.

With the current market, the biggest error is not in revising forecasts but rather in relying on static models.Ë? BMWeek CemWeek BMWeek BMWeek

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CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek AUGUST / SEPTEMBER CW Group

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The 2H 2012 update to the benchmark Global Cement Volume Forecast Report (GCVFR) by the CW Group uses a unique bottom-up approach to provide a global, regional and country-level 3-year forecast of cement consumption, capacity and utilization rates for 58 individual countries. The authoritative GCVFR is available in subscription hardcopy format for US$1,750 per year for a single user license (plus shipping and handling). Two annual updates (in February and September) provide detailed information on cement consumption, production, utilization and manufacturing capacity.

The report is available directly from the CW Group by contacting sales@cwgrp. com or by visiting our website at: http:// www.cwgrp.com/research/20-globalmonitor-reports/306032-global-cementvolume-forecast-report-gcvfr.html CW Group CW Group CW Group

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BUZZ TOP 15 STORIES Cement prices rise and fall, new orders and record consumption. Here’s what you’re reading on CemWeek.com 1.

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Turkey’s Nuryol Cimento orders Europe’s largest mill China cement prices tumble anew Report: Egypt cement prices rise anew Cement firms express support for EPA policy revisions Saudi per capita cement consumption at record level Sinoma secures project with Saudi’s Southern Cement Cemex UK acquires new Volvo trucks Titan banking on overseas units to drive growth Algeria moves to improve energy consumption in cement Russian state wants Kuznetsk plant shuttered Argentina upholds fines for cement firms for cartel behavior UAE production rises in 2011 Italcementi seals deal with West China Cement Fitch downgrades issuer ratings for Camargo Correa Madras Cement chief sees salary almost double last year

TOP 15 STORIES A mix of layoffs and expansions overtake the headlines on BMWeek.com.

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Fletcher to shutter laminate plant in Spain Russian firm completes work on new concrete variant India: Wienerberger announces expansion plan CRH acquires Finnish concrete firm Lafarge defends mining plan in UK quarry Ontario quarry projects faced with setbacks XCMG launches four new facilities Temporary layoffs at Nordkalk facility Weber sets up mortar plant in Nantes Qatar builders piling up supplies Report: Saudi construction sector to grow General Shale launches new product Moody’s downgrades Martin Marrieta to junk territory Voyskovitsy lines up expansion program IMI acquires quarry assets from Rock Industries

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AUGUST / SEPTEMBER 2012

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