14_04_01_Exane_BM Seminar ITC

Italcementi Group Exane BNPP – 1 April 2014

“New Decouplings”

Giovanni Ferrario, C.O.O.

Giovanni Maggiora, C.F.O.

9th Exane BNPP Basic Material Seminar London, 1 April 2014


The Group at the end of 2013

2

51%

10%

21%

13%

5%

Rec. Ebitda by Geography: 631M€ Revenues by Geography

After eliminations

Revenues by Business: 4.2B€

64%30%

6%

Ready-Mix &

Aggregates

Others

Cement

&

Clinker

Central

Western

Europe

Emerging

Europe,

North Africa,

Middle East

Asia

North America

38%

9%

41%

12%

Central

Western

Europe

Emerging

Europe,

North Africa,

Middle East

Asia

North

America

Central

Western

Europe

Emerging

Europe,

North Africa,

Middle East

Asia

North

America

14.5

13.2 4.3

10.5

Cement & Clinker Sales Volumes: 43mt/y

(*) Excludes ~5mt/y capacity through companies consolidated at equity method

Trading & Others

Central

Western

Europe

Emerging

Europe,

North Africa,

Middle East

Asia

North

America

22

18

7

13

Cement Capacity: 60 mt/y (*)

Trading &

Elim.

0.6

Italcementi Group Exane BNPP – 1 April 2014 3

131

9274

142

167182

2007 2010 2013

Developed Markets Emerging Markets

CAGR-1.7% CAGR

-0.4%

“Decouplings” in Italcementi Group “core” markets: two

distinct phases since 2007

273 259 256

5.7%

-11.1% -6.9%

2.9%

Italcementi Group Markets (*), mt

* Estimated domestic cement consumption

From

a “perfect” Developed

vs. Emerging markets

decoupling in the

2007-10 period

to

a more mixed trend

inside the two clusters

in 2010-13


Increase in volatility requires more granular view inside each

cluster

2007 2009/10 2009/10 → 2013 2014 onwards

Developed markets

entering downturn

Higher speed in

construction -bubble

countries (US/Spain)

4

Developed markets

differentiating:

• GDP recovery

dynamics (US vs.

Europe)

• Euro-driven N/S

divide in Europe

• Market-specific

competition factors

• Industry restructuring

initiated (Italy, Spain)

Emerging markets not a

“one size fits all” game

• Volatility – D/S

balance and

margin pressure

• Increasing socio-

political turmoil

• China: a game of its

own

Emerging markets still

riding uniform growth

wave

Ongoing wave of

capacity increases

undermining future

profitability


2013 vs. 2007 Group volumes and Rec. Ebitda

in Developed Markets

5

Rec. EBITDA in key countries – M€

Domestic market refers to Italcementi market area

(*) Industrial operations, excluding trading and other activities

310

866

(704) (159)

(58) 105

258

2

RecurringEBITDA

2007

Volume Price VariableCosts

Fixed Costs OtherOperating

Costs

Scope & FX RecurringEBITDA

2013

Rec. Ebitda var. by driver – M€ (*)

CAGR 07-10 -5.9% -9.9% -22.7% -11.3%

CAGR 10-13 -0.3% -13.8% -22.7% +3.7%

North America already past cyclical trough

France resilient with lower volume volatility

Italy at Rec. Ebitda breakeven after strong

network restructuring

Volume effect key driver of mature markets

contribution to Group EBITDA

Pricing power resilient to volume drop but

insufficient to offset variable cost inflation

Strong reaction over the years targeting fixed

and variable cost base

-18%

-60%

-39%-31%

-53%

-79%

-22%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

France /Belg. Italy S./N. Spain North America

Δ ITC Sales

Δ Domestic Mkt

2013 vs.‘07 cement volumes %Δ: key markets

398

192

89128

266

-15 -355

-50

50

150

250

350

450

France /Belgium

Italy Spain North America

2007 2013

Trough in 2009

13M€


231

104

6443

110

143

28

52

0

100

200

300

Egypt Morocco India Thailand

2007 2013

2013 vs. 2007 Group volumes and Rec. Ebitda

in Emerging Markets

6

Rec. EBITDA in key countries – M€

Domestic market refers to Italcementi market area

(*) Industrial operations, excluding trading and other activities

Rec. Ebitda var. by driver – M€ (*)

564

348

(134) (337)

(73) (75)

392

11

RecurringEBITDA

2007

Volume Price VariableCosts

Fixed Costs OtherOperating

Costs

Scope & FX RecurringEBITDA

2013

Of which:

Turkey (47)

Peak in 2010

271M€

CAGR 07-10 +12.8% +4.4% +7.1% +1.6%

CAGR 10-13 +0.7% +0.7% +1.4% +8.5%

Volume contraction mainly in Egypt (new

entrants) and Bulgaria

Price actions compensate strong cost base

pressure driven by political climate (Egypt)

and by energy cost inflation (Asia)

New plant drives strong improvement in

results in Morocco, despite new entrant

Significant impact from scope (divestiture of

Turkey activities) and FX

-33%

5%

30%

-3%

47% 16%

28%

34%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Egypt Morocco S. India Thailand

Δ ITC Sales Δ Domestic Mkt

2013 vs.‘07 cement volumes %Δ: key markets


“Decouplings” to continue as markets seek new equilibria

2007 2009/10 2009/10 → 2013 2014 onwards

Developed markets

entering downturn

Higher speed in

construction -bubble

countries (US/Spain)

Emerging markets still

riding uniform growth

wave

Ongoing wave of

capacity increases

undermining future

profitability

7

Developed markets

differentiating:

• GDP recovery

dynamics (US vs.

Europe)

• Euro-driven N/S

divide in Europe

• Market-specific

competition factors

• Industry restructuring

initiated (Italy, Spain)

Emerging markets not a

“one size fits all” game

• Volatility – D/S

balance and

margin pressure

• Increasing socio-

political turmoil

• China: a game of its

own

“New normal” for each

Developed market:

Infrastructural needs

vs. financing (Public /

Private)

Renovation vs. new

build

Industry restructuring

to continue?

Emerging markets growth

moderating and more

volatile

Country specific

dynamics to dominate


Developed markets: domestic cement consumption North America vs. other “core” ITC

Index number 2007 = 100

Steady, yet moderate,

recovery pace in

North East North

America (ITC area)

Resilient demand in

France/Belgium, with

positive medium term

growth prospects

Italy recovery to be

driven by

infrastructure and

public works

8

10

20

30

40

50

60

70

80

90

100

110

2007 2008 2009 2010 2011 2012 2013 2014 F 2015-17F 2018 F

N. America (ITC Area)

France & Belgium

Italy

Spain (South and North)


North America

Mkt chg vs. 2012

>+10%

+5 to+10%

-5 to +5%

-5 to -10%

<-10%

9

15

17

19

21

23

25

27

29

2007 2008 2009 2010 2011 2012 2013 2014F 2015-17F 2018F

Cement consumption – mt, Italcementi area

Strong annual gains in overall home

sales to translate in new home

construction, given very lean inventories

Infrastructure / road refurbishment

spending, enabled by improving State

finances and TIFIA funding

Continuous focus on improving

operating leverage and KPIs

Consolidate “close to plants”

market shares to ensure logistic

efficiency

Leverage product innovation and

service excellence

Consumption per

capita 185 KG

Italcementi

Area

Key actions


France/Belgium – Resilient overall, with growth potential from

projects

10

15

17

19

21

23

25

27

29

31

33

2007 2008 2009 2010 2011 2012 2013 2014F 2015-17F 2018F

Cement consumption - mt

Public rail transport network (205

km of new lines, 72 new stations,

tunnels...)

Residential (35,000 additional new

units per year, 35,000/y

refurbishment)

New university campus

Expected cement additional

average yearly consumption:

up to 1 mt/y

over 2015-2030 period

An example: “Grand Paris” project

Consumption per

capita 330 KG

Key actions

Push product and service innovation

through ready-mix

Strongly positioned in

Ile-de-France to exploit Grand Paris

development

Continue fixed costs efficiency


Italy: accumulated infrastructural needs to sustain

medium-term recovery

11

15

20

25

30

35

40

45

50

2007 2008 2009 2010 2011 2012 2013 2014F 2015-17F 2018F

Cement consumption - mt

Railways

Highways

Subways

Major strategic infrastructure projects (2014-20)

TORINO /

LIONE

GENOVA

MILANO

PEDEMONTANA

LOMBARDA

VERONA-

BRENNERO

PEDEMONTANA

VENETA

LIVORNO /

CIVITAVECCHIA

SASSARI /

OLBIA

BOLOGNA /

FIRENZE

ROMA /

LATINA

SS106

CT-RG

AG-CL

SA-RC

Consumption per

capita 365 KG

Key actions

Long term sustainable and cost

competitive “core plants” network (new

Rezzato operating by end of 2014)

Significant overhead reduction

Product / service innovation to serve

changing end user markets mix


Emerging markets: domestic cement consumption Volatility in troubled political scenarios, but favorable medium term perspectives

Egypt to resume growth

pattern thanks to

stabilized political

scenario and sustained

Foreign Direct

Investment support

Morocco to recover after

2012-13 slowdown

Medium long term

growth fundamentals in

Thailand/India despite

current political

uncertainties

Index number 2007 = 100

12

80

100

120

140

160

180

200

2007 2008 2009 2010 2011 2012 2013 2014F 2015-17F 2018F

Egypt

South India

Thailand

Morocco


North Africa

13

Egypt Cement consumption - mt Morocco Cement consumption - mt

5

7

9

11

13

15

17

19

2007 2008 2009 2010 2011 2012 2013 2014F 2015-17F 2018F15

25

35

45

55

65

75

2007 2008 2009 2010 2011 2012 2013 2014F 2015-17F 2018F

New

Capacity

Political

uncertainty

New

Entrant

“National”

Market

Model

Fuel

Shortages

Massive

new

capacity /

New

Entrants

Leverage strong and sustainable cost

position

Improve central market presence with

Jorf grinding center (operational early

2015)

Expand geographical presence with

entry into the North (TBD)

Renewable energy projects development

New Coal grinding + alternative

fuels to diversify fuel mix from gas

Wind Farm project to secure long

term power availability (Gulf El Zeit)

Consumption per

capita 595 KG

Consumption per

capita 455 KG

Key actions Key actions


Asia

14

Thailand Cement consumption - mt South India Cement consumption - mt

15

25

35

45

55

65

75

85

95

105

2007 2008 2009 2010 2011 2012 2013 2014F 2018F15

20

25

30

35

40

45

2007 2008 2009 2010 2011 2012 2013 2014F 2015-17F 2018F

Massive new capacity /

New Entrants

South Market

Slowdown

Political

uncertainty

Market

Recovery

Strengthen cost competitiveness

(WHRS)

Develop premium brand positioning

(i.nova) and product service

innovation

Current capacity: all “fundamentals” to

compete secured (e.g. reserves,

technology, logistics, brand innovation,

low capacity saturation to reach break-

even at Rec. Ebitda level)

Enlarge market footprint (Solapur

grinding, Cochin terminal)

Secured future organic development

(Gulbarga land)

Consumption per

capita 510 KG

Consumption per

capita 265 KG

Key actions Key actions


6

150

116

92

107

140

2013

2012

2011

2010

2009

2008

2007-2013 Cost saving results, M€

156

272

364

610

NB: does not include price variation (*) Net of 15M€ maintenance cost increase in Egypt

Self help: actions to reduce break-even Constantly exceeded announced targets through industrial efficiencies, labor,

maintenance and other fixed costs reduction

470

Steady-state

savings vs. 2007

15

65*

2014 Target


Capital allocation priorities 2014 focused on efficiency projects (key revampings, coal grinding capacity) and

“asset-light” market coverage initiatives (cement grinding units, terminals).

Greenfield expansion to restart in 2015-16 according to cash generation

Devnya

1.5mt/y

~ 160M€

Rezzato

1.3mt/y

~ 150M€

Gulbarga

3.0mt/y

Solapur

Grinding

~ 35M€ Full Cycle Plant Revamping

Greenfield Full Cycle Plant

Light Investments

Efficiency Projects

Cochin

Terminal

~ 8M€

2015

2015

2

0

1

5

T

B

D

T

B

D

Jorf Lasfar

Grinding

~15M€

2015

Operational availability Expected 2014 Capex spending: ~460 M€

Morocco

TBD

2014

Kattameya

and Suez

Coal Plants

~40M€

Shymkent

1.2mt/y

~ 45M€

2015

16


Capacity management Ready to leverage available efficient capacity after recent investment cycle and

continue to focus on strengthening our industrial network

54%

54%

(*) Excludes ~5mt/y capacity through companies consolidated at equity method

17

22

718

13

14

413

10

CWE NA EENAME Asia

Leverage existing

capacity through cycle

recovery

Reorganize excess

capacity where

necessary

Concentrate on core

plants, revamping

where necessary

Leverage available

capacity

Address legacy wet

capacity

Expand state-of-the-

art clinker capacity to

selectively follow

market growth

Emerging Markets Mature Markets

Available capacity:

~17mt

2013 Cement Capacity: ~60mt *

Outer circle: 2013 Cement and Clinker sales volumes: 43mt


In a nutshell – short/medium term results improvement drivers More “granular” view and specific approach

18

Industrial

Leadership Growth

Sustainable Development

Innovation

Self help initiatives to

continue lowering

break-even point

Benefits from “core”

markets consumption

evolution,

including innovation

in products/services

Disciplined expansion

in selected markets

maintaining solid

financial profile


Disclaimer This presentation contains forward-looking statements regarding future events and future results of Italcementi and its

affiliate Ciments Français that are based on the current expectations, estimates, forecasts and projections about the

industries in which Italcementi and Ciments Français operate, and on the beliefs and assumptions of the management

of Italcementi and Ciments Français. In particular, among other statements, certain statements with regard to

management objectives, trends in results of operations, margins, costs, return on equity, risk management,

competition, changes in business strategy and the acquisition and disposition of assets are forward-looking in nature.

Words such as ‘expects’, ‘anticipates’, ‘scenario’, ‘outlook’, ‘targets’, ‘goals’, ‘projects’, ‘intends’, ‘plans’, ‘believes’,

‘seeks’, ‘estimates’, as well as any variation of such words and similar expressions, are intended to identify such

forward-looking statements. Those forward-looking statements are only assumptions and are subject to risks,

uncertainties and assumptions that are difficult to predict because they relate to events and depend upon

circumstances that will occur in the future. Therefore, actual results of Italcementi or of its affiliate Ciments Français

may differ materially and adversely from those expressed or implied in any forward-looking statement and neither

Italcementi nor Ciments Français does assume any liability with respect thereto. Factors that might cause or

contribute to such differences include, but are not limited to, global economic conditions, the impact of competition, or

political and economic developments in the countries in which Italcementi and Ciments Français operate. Any

forward-looking statements made by or on behalf of Italcementi or of Ciments Français speak only as of the date they

are made. Neither Italcementi nor Ciments Français does undertake to update forward-looking statements to reflect

any change in their expectations with regard thereto, or any change in events, conditions or circumstances which any

such statement is based on. The reader is advised to consult any further disclosure that may be made in documents

filed by Italcementi with Borsa Italiana S.p.A (Italy) and by Ciments Français with the Autorité des Marchés Financiers

(France).

The Manager in Charge of preparing Italcementi S.p.A financial reports, Carlo Bianchini, hereby certifies pursuant to

paragraph 2 of art. 154-bis of the Consolidated Law on Finance (Testo Unico della Finanza), that the accounting

disclosures of this document are consistent with the accounting documents, ledgers and entries.

This presentation has been prepared solely for the use at the meeting/Analyst Meeting with investors and analysts at

the date shown below. Under no circumstances may this presentation be deemed to be an offer to sell, a solicitation

to buy or a solicitation of an offer to buy securities of any kind in any jurisdiction where such an offer, solicitation or

sale should follow any registration, qualification, notice, disclosure or application under the securities laws and

regulations of any such jurisdiction.

19

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14_04_01_Exane_BM Seminar ITC