10.00 ankur agarwal, nomura international plc

7/18/2019 10.00 Ankur Agarwal, Nomura International Plc

http://slidepdf.com/reader/full/1000-ankur-agarwal-nomura-international-plc 1/11

1

An Overview of the Global Cement Industry

Ankur Agarwal (+44 (0) 207 102 9138)[email protected]

Nomura International plc

March 2011

ANY AUTHORS NAMED ON THIS REPORT ARE RESEARCH ANALYSTS UNLESS OTHERWISE INDICATED

PLEASE SEE ANALYST(S) CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON SLIDE 25.

2

Agenda

1. Overview of 2010

2. 2011 Outlook

3. Long term prospects

Continued decline in developed markets as the expected recovery, especially in the US,

was delayed

Robust volumes in most emerging markets, but margin pressure in some key markets

like India and Egypt driven by a combination of demand-supply dynamics and rising

energy prices

Focus on de-leveraging the balance sheet driven by a combination of cost cutting and

scaling back capital expenditure

Capacity rationalisation in developed markets with steps like mothballing and closures

Relatively muted year in terms of M&A activity

3



> 20% 10% to 15% 5% to 10% 0% to 5% 0% to -5% -5% to -10% -10% to -15% <-20%

3

US

Mexico

Brazil

Egypt

Morocco

Spain

France

UKGerman

yItaly

Turkey

Poland

Russia

China

India

Indonesia

Snapshot of volumes trends in 2010

Western Europe -5% to 0%Eastern Europe -5% to 0%Global 0% to 5%

Source: Nomura estimates

> 20% 10% to 15% 5% to 10% 0% to 5% 0% to -5% -5% to -10% -10% to -15% <-20%

4

US

Mexico

Brazil

Egypt

Morocco

Spain

France

UK

Germany

Turkey

Poland

Russia

China

India

Italy

Indonesia

Snapshot of pricing trends in 2010

WesternEurope -5% to0%

Eastern Europe -5%to -10%

Global -5% to 0%

Source: Nomura Estimates

Country grid representing the price volume trend for 2010

6Source: Company data, Nomura research

Range of Price/VolumeChange

Rank assigned

> 10%

5% to 10%

0% to 5%

-5% to 0%

-10% to -5%

< -10%

US

France

Germany

UK

Spain

Italy

Poland

Russia Brazil

Mexico

Turkey

Egypt

Morocco

China

IndonesiaIndia

Australia

Czech

Saudi Arabia

Algeria

Nigeria

UAE-3

-2

-1

0

1

2

3

-3 -2 -1 0 1 2 3

R a n k o f V o l u m e T r e n d s

Rank of Pricing Trends

I n c r e a s i n g V o l u m e s

Increasing Prices

D e c

r e a s i n g V o l u m e

Decreasing Prices



Reflected in the margin performance in 2010

Margins remained close to trough levels in 2010, driven by lack of volume recovery in

most mature markets and adverse demand-supply dynamics in some emerging

markets in a backdrop of rising energy prices

In parts of Europe, operating performance was supported by the sale of carbon

credits (carbon credit sales contributed 10.5% and 6.8% to Buzzi and

9M10 EBITDA, respectively. For the full year, the contribution to Lafarge

and 2010 EBITDA was 4.3% and 2.1%, respectively)

7

Source: Company data, Factset, Nomura estimates

15%

17%

19%

21%

23%

25%

27%

2005 2006 2007 2008 2009 2010E 2011E 2012E

EBITDA Margin Trend

Holcim Ltd. Lafarge S.A. Heidelberg Cement AG Avg of three (Cons)

Avg of three (Hist & NOM) Mean last 5yr (Avg of three) Peak last 5yr (Avg of three) Trough last 5yr (Avg of three)

Focus on deleveraging the balance sheet

Companies continued to focus on de-leveraging their balance sheets through a

combination of disposals, cost cutting and scaling back capital expenditure

Lafarge and Heidelberg Cement specifically in focus from a balance sheet

perspective given that they acquired Orascom Cement and Hanson at the peak of the

cycle

8Source: Company data, Factset, Nomura estimates

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

220%

2005 2006 2007 2008 2009 2010E 2011E 2012E

Net Debt/Equity Trend



Driven by scaling back capital expenditure

9Source: Company data, Factset, Nomura estimates

Capital expenditure as a percentage of sales peaked in 2008

After 2008, the focus of the companies has been to minimise capital expenditure - not

only growth but maintenance as well

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2005 2006 2007 2008 2009 2010E 2011E 2012E

Capex/Sales Trend





Majority of the capacity addition in emerging markets

10

Source: FLSmidth

FLSmidth expects new global contracted kiln

capaci ty of c65MT in 2011, which is in l ine

with the expected annualaverage additions

In 2010, the majority of capacity addit ions

were in emerging markets ( 48% in Asia, ex

China, and 29%in MiddleEast andAfrica

Africa

13%

Middle East

16%

Latin

America15%

North

America0%

Europe

8%

Russia

0%

India

35%

Rest Asia

13%

2010 Capacity Addition breakup (excl China)

0

20

40

60

80

100

120

140

160

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

Capacity Additions breakup excl China (mta)

Rest Asia India Europe North America

South America Middle East Africa

0

20

40

60

80

100

120

140

160

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1 E

Total Capacity Additions excl China (mta)

Capacity closures driven by market conditions

11

Source:, Company Reports (highlights approx imate closures indicated in 2008-09) Nomura estimates, China also phased out 101MT of vertical kiln capacity in 2008-09(c7% of

2008 consumption) and , according to the Chinese government, will phase another 30MT in 2010 and 65MT in 2011

Significant capacity closures in Europe and North America dictated by weak

market conditions

Capacity closures in some markets in Europe like Italy, Spain, delayed because

companies continue to benefit from carbon credits allotted on production volumes

based on pre-crisis levels

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

5

10

15

20

25

Rest of Europe Russia US Mexico Italy Spain Turkey UK

Capacity Closure in MT (LHS) Closure as a % of 2008 consumption (RHS)

12

Europe

16%

North America

6%

Latin America

5%

Asia Pacific ex

China19%

China

46%

Middle East

4%

Africa

4%

Source: CEMBUREAU, Nomura estimates, 2005 absolute consumption of 2253MT and 2010 estimate of c3009MY

Cement consumption by region in 2005 Cement consumption by region in 2010

Snapshot of cement consumption by region

Centre of gravity of cement consumption moving towards the east

China was the driver in the past f ive years; in the next f ive years India, Indonesia

likely to be the fastest growing countries in Asia

Europe

10%

North America

2%

Latin America

5%

Asia Pacific ex

China14%

China

60%

Middle East

5% Africa

4%



Snapshot of utilisation rates

13

0%

20%

40%

60%

80%

100%

120%

W estern Europe North America Eastern Europe Middle East As ia Latin America Af rica

Source: Company data, Cemnet, PCA, Nomura research

In spite of capacity closures in Europe and North America, utilisation rates

remained low

In the case of emerging markets (ex Eastern Europe), while utilisation

rates were lower than the peak in 2008 driven by new capacity additions,

they were still at a reasonable level

14

Agenda

1. Overview of 2010

2. 2011 Outlook


15

Source: Euroconstruct, PCA, Nomura Global Economics, Company data, Datastream, IMF, Nomura research

Outlook for 2011

Price Vol Marg in

Asia-Pacific

China Holcim, Lafarge, CRH, Heidelberg, Cimpor, Italcementi = 9.8% 4.9%

India Holcim, Italcementi, Laf arge, Heidelberg, CRH, Vicat, Cimpor = 8.5% 8.1%

Indonesia Holcim, Lafarge, Heidelberg = 6.5% 7.2%

Australia Holcim, Heidelberg + 3.3% 3.4%

America

USA Buzzi, Holcim, Laf arge, Heidelberg, Cemex, Vicat, Italcementi + 3.0% 2.3%

Brazil Holcim, Lafarge, Cimpor + 4.4% 5.5%

Mexico Buzzi, Holcim, Lafarge, Cemex - 4.0% 3.9%

Europe

Russia Buzzi, Holcim, Lafarge + 4.1% 9.6%

Spain Italcementi, Cemex, Cimpor, Lafarge, Holcim - 0.6% 2.9%

Italy Buzzi, Italcementi, Cementir, Holcim + 1.0% 2.3%

Germany Buzzi, Heidelberg, Cemex, Lafarge, Holcim = 3.0% 2.1%

France Italcementi, Lafarge, Vicat, Holcim + 1.6% 2.1%

Poland CRH, Buzzi, Heidelberg, Cemex, Lafarge + 4.5% 3.8%

UK Holcim, Lafarge, Heidelberg, Cemex + 1.9% 4.1%

Czech Buzzi, Heidelberg, Holcim, Lafarge - 1.4% 2.5%

MENA

Saudi Arabia Lafarge's likely exposure of c1% starting 2011 - 5.0% 5.6%

Egy pt Laf arge,Italc ementi, Heidelber g, Cemex , Cementir, Vic at, Cimpor - 1.2% 12.1%

Algeria Lafarge, Buzzi - 5.1% 3.3%

Morocco Italcementi, Lafarge, Holcim, Cimpor - 5.9% 2.6%

Nigeria Lafarge - 7.4% 8.5%

2011

Real GDP

growth

forecast

2011

Wholesale

Price

Index

(% y-o-y)

2011 Outlook ##

RegionGlobal companies with their cement business exposure

in major markets



16

Emerging markets margin concerns in near term

Source: Nomura research

17

Food inflation to affect prospects in EM in the near term

Headwinds from higher energy prices in 2011E

Variable impact of food price inflation on companiesFood share vs GDP per capita (USD) in 2008

Energy costs (electricity + fuel) as % of sales Energy price impact (y-o-y)

Source: Company data, Nomura research

30

32

34

36

38

40

42

44

46

48

50

Lafarge Holcim Italcementi Buzzi

Vulnerability to fo od priceinflation increases

China

India

Indonesia

Brazil

Mexico

Russia

Poland Czech

Saudi Arabia

Egypt

Algeria

Morocco

Nigeria

0

10

20

30

40

50

60

70

80

1000 6000 11000 16000 21000

S h a r e o f f o o d i n h o u s e h o l d s p e n d i n g ( % )

Nominal GDP per capita -US$ at market exch rates

% c ha ng e WT I C ru de Fu tr

Global Coal Spot

Prices SA Rds Bay

2010

1Q10 32.9% 26.6%

2Q10 15.5% 57.3%

3Q10 3.9% 39.5%

4Q10E -0.6% 44.7%

FY10E 11.5% 41.8%

2011

1Q11E 19.9% 24.4%

2Q11E 19.3% 10.7%

3Q11E 23.9% 18.2%

4Q11E 17.6% 2.3%

FY11E 20.3% 13.3%

Estimates of WTI crude for 201 1 are of Nomura Global Oil and

Gas Teamand all other are by extrapolating the current prices

Source: Bloomberg, Nomura estimates

Note: y axi s rep resents a wei gh ted ave rage (of capac ity) o f a food vulnerability index of countries in whichcompanies haveinstalledcapacity Source: Company data, Nomura strategy, Nomura research Source: FAO, Seale, USDC, World Bank and Nomura Global Economics

We estimate that for a

10% increase in energy

prices, a c2-3% price

increase is required (all

else being equal) for the

EBITDA margin to stay

stable in the cement

business0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Italcementi Buzzi Lafarge Holcim

18

Agenda

1. Overview of 2010

2. 2011 Outlook




19

Robust long-term prospects of EM markets

Source: Company data, UN for population growth 2010E-20E and Global ConstructionPerspectives and Oxford Economics for GDP 2009E-20E and construction 2009E-20E

2.0%

4.8%

5.7%

1.0%

6.1%

7.7%

-0.3%

5.2%

6.7%

0.9%

7.1%

5.0%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Population GDP Construction

Af rica & Middle East Asia Pacific - Emerging markets

Eastern Europe South & Central America

11401200 1250 1300 1350

1420 1470 14951570 1620

17001800

1900

2100

2300

2500

27402800

2990

Emergingmarkets55%

Developedmarkets45%

Emergingmarkets90%

Developedmarkets10%

Source: Company data

Increasing population, urbanisation and economic

growth will drive construction material demand in

emerging markets. A strong footprint in Asia and

Africa/Middle East will be a critical growth driver

for transnational European companies, in our

view.

European majors like Holcim, Lafarge, Heidelberg

Cement and Italcementi have built a solid platformin di fferent emerging markets (CRH has also

made initial forays in India and China, apart from

its presence in eastern Europe, whi le Buzzi 's

emerging market exposure is concentrated in

eastern Europe) and can play the role of a

consolidatorin some of these markets.

Global cement consumption (million tons)

Drivers of emerging market construction demand

20

Longer-term cement consumption growth rates by region

Note (1): China cement consumption per capita kept at 2009 level, but growing with population.

Note (2): Western Europe = FR, DE, IT, GR, ES, UK / Eastern Europe = BU, CZ, HU, RO, RU, / North America = CA, USA / South America = AG, BR, CL, CO /

Asia Pacific (developed) = AU, JP / Asia Pacific (developing) = ID, PH, KR, TH, VN / Africa-Middle East = EG, MA, NG, SA, ZA, AE

Source: Construction Perspectives and Oxford Economics, United Nations World Population Prospects, Company Reports

Implications of differential regional growth rates: A casestudy of Holcim

The faster pace of growth in emerging markets means that international cement companiesare likely to direct the majority of their capital (either in the form of capital

expenditure/acquisitions) to these markets. It will also mean these dependence on

some of these markets will increase significantly in the next 10 years

On our estimates, Holcim wil l be required to add c60MT (assuming that uti lisation rates stay

below 100%) in 2011-20, 80% of which will be added in Asia (of which c56% will need tobe added in India), but no further additions in North America

On our estimates, Holcim in 2020 may have c52% of its consolidated capacity in Asia, out of

which 33% wi ll be in India alone. Holcim, potentially, will have higher capacity in Indiaalone (close to 90MT) than Europe and North America (close to 78MT) put together in2020

If international majors keep pace with growth in emerging markets they risk losing marketshare in these regions. They also may face increased competi tion global ly f rom a l ikely

transformation of domestic operators to an international one (something similar to what Cemex

achieved in the 1990s)

21



Scenario analysis for

Holcim

22Source: Company data, Oxford Construction Economics, Nomura estimates .

Holcim's consolidated capacity [mt] 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Europe 53 53 53 53 53 53 53 53 54 57

North America 2 0. 6 2 0. 6 2 0. 6 2 0. 6 2 0. 6 2 0. 6 2 0. 6 20 .6 2 0. 6 20 .6

Latin America 3 5. 1 3 5. 1 3 5. 1 3 5. 1 3 5. 1 3 5. 1 3 5. 1 35 .1 3 6. 1 38 .1

Africa Middle East 1 1. 2 1 1. 2 1 1. 2 1 1. 2 1 2. 2 1 3. 2 1 4 .2 1 5. 2 1 6. 2 1 6. 2

Asia Pacific 96 9 6 96 98 103 111 119 127 136 145

India ACC 3 0. 7 3 0. 7 3 0. 7 3 1. 7 3 3. 7 3 6. 7 3 9 .7 4 2. 7 4 5. 7 4 8. 7

India Ambuja 2 6. 9 2 6. 9 2 6. 9 2 7. 9 2 9. 9 3 1. 9 3 4 .9 3 6. 9 3 9. 9 4 2. 9

Rest of Asia (excludes China which is not

consolidated) 3 8. 4 3 8. 4 3 8. 4 3 8. 4 3 9. 4 4 2. 4 4 4 .4 4 7. 4 5 0. 4 5 3. 4

Total consolidated capacity 216 2 16 216 218 2 24 2 33 242 251 263 277

Asia (ex China) as %of group capacity 4 4% 4 4% 4 4% 4 5% 4 6% 4 8% 4 9% 5 1% 5 2% 5 2%

India as a %of gr oup capacity 2 7% 2 7% 27 % 2 7% 2 8% 2 9% 31 % 3 2% 3 3% 3 3%

Holcim's cement sold across regions based

on construction growth CAGR 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Europe 34 35 36 37 38 39 40 40 41 42

North America 12 13 13 13 14 14 15 15 16 16

Latin America 26 27 28 30 31 32 33 34 36 37

Africa Middle East 10 10 11 11 12 13 13 14 15 16

Asia Pacific 77 8 2 88 94 101 108 116 124 133 143

India ACC 25 26 29 31 33 36 39 42 45 48

India Ambuja 22 23 25 27 29 31 34 36 39 42

Rest of Asia (excludes China which is notconsolidated) 31 33 35 37 39 41 44 46 49 52

Total cement sold 159 168 176 186 19 5 206 217 228 241 254

Asia (ex China) as %of group cement

volumes sold 4 8% 4 9% 5 0% 5 1% 5 2% 5 3% 5 4% 54 % 5 5% 56 %

India as a %of group cement volumes sold 29% 30% 30% 31% 32% 33% 33% 34% 35% 36%

Cement Volume sold by Holcim based on

construction growth CAGR 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Europe (assuming 1/3rd Eastern Europe) 65% 67 % 6 8% 7 0 % 7 1% 7 3% 7 5 % 7 6% 7 7% 7 4%

North America 60% 62 % 6 4% 6 5 % 6 7% 6 9% 7 1 % 7 3% 7 5% 7 8%

Latin America 75% 78% 81% 84% 87% 91% 94% 98% 99.0% 97.5%

Africa Middle East 85% 9 0% 9 5% 1 00 % 9 7% 9 5% 9 3% 9 2% 9 2% 9 7%

Asia Pacific 80% 86 % 9 2% 9 6 % 9 8% 9 8% 9 8 % 9 8% 9 8% 9 9%

India ACC 80% 86 % 9 3% 9 7 % 9 8% 9 7% 9 7 % 9 7% 9 8% 9 9%

India Ambuja 80% 86 % 9 3% 9 7 % 9 7% 9 8% 9 7 % 9 9% 9 8% 9 9%


consolidated) 80% 85 % 9 0% 9 6 % 9 9% 9 7% 9 9 % 9 8% 9 8% 9 8%

Europe 2.3%

North America 2.9%

Latin America 3.9%

Africa Middle East 5.7%

Asia Pacific

India ACC 7.8%

India Ambuja 7.8%


consolidated) 6.1%

Cement Consumption CAGRassumption through 2020 (based on Oxford Construction Economics)

Analysis assumes growth atannualised CAGR estimates till 2020while in realit y the growth may bemore volatile

Also, for simplicity it does not modelin the lead t ime for the construct ionof a cement plant of 2-3 years, andincludes only consolidated capacity(fully or proportionate). Therefore itexcludes China, Egypt and Nigeria

Does not assume any st ructuralcapacity closures in Europe or in theUS (because of NESHAP, whichmay entail replacement /or morecapex to replace old capacity)

Scope for further consolidation

23

0% 20% 40% 60% 80% 100%

Asia including China

Middle East

Asia ex China

Eastern Europe

North America

Western Europe

Latin America

Africa

Internat ional cement operators have the

opportunity to further consolidate/expand

their footprint in markets like China, Russia,India, Indonesia, Brazil, South Africa and

Nigeria

Otherwise they risk the transformat ion of

some of the domestic operators l ike Anhui

Conch, China National Building Material

(China), Eurocement (Russia), Grasim

(India), Semen Gresik(Indonesia),

Votorantim (Brazil), Pretoria Cement

Company (South Africa), Dangote Cement

(Nigeria) into international contenders.

It has happened before when CEMEXtransformed itself from a domestic Mexican

operator in the 1990s to an in ternat ional

company

Source: Company reports, CEMBUREAU, Nomura estimates

*International operators include Buzzi Unicem, Cemex, Cimpor, CRH, Heidelberg Cement, Holcim, Italcementi, Lafarge Titan and Votorantim.

Capacity controlled by international operators byregion

24

Thank You



25

Appendix

26

Price volume trends (y/y) for Cement in 2010


CemexVolume 3Q10 4Q10 2010

Mexico 2% 0% -4%

U.S. 0% 3% 0%

Spain -21% -12% -22%

UK 9% -3% 1%

France N/A N/A N/A

Germany 7% -5% -2%

Poland -1% 14% -1%

Colombia -1% 0% 5 %

Egypt 1% 0% 2%

Philippines 2% - 11% 8%

Total -1% -2% -3%

Pr ice s (USD) 3Q10 4Q10 2010

Mexico 4% 9% 8%

U.S. -7% -8% -8%

Spain -16% -16% -12%

UK -7% -6% -6%

France N/A N/A N/A

Ger many - 12% - 11% - 8 %

Poland -8% -6% -4%Colombia 6% 2% 7%

Egypt 0% -3% 3%

Philippines 12% 8% 8%

Total -2% 0% 0%

Prices (LC) 3Q10 4Q10 2010

Mexico 0% 4% 0%

U.S. -7% -8% -8%

Spain -8% -8% -7%

UK -3% -2% -4%

France N/A N/A N/A

Germany -4% -3% -1%

Poland -3% -2% -4%

Colombia -3% -4% - 6%

Egypt 3% 2% 5%

Philippines 5% 0% 2%

Total -2% -1% -2%

Prices 1H10 9M10 2010

Europe -4. 4% -4 .4% -4. 4%

Belgium - 4.0% - 3.5% - 3.5%

France -2.0% - 1.0% 1.2%

Germany -1.6%

Swi tzer land -3. 1% -2. 1% -1. 1%

Italy - 20.9% - 23.5% - 23.6%

Hungar y - 7.8% - 8.0% - 8.4%

Czech Republ ic -6.1% -6.5% -7.0%

Slo va kia - 11 .8% - 7 .5% - 3.9%

Cr oa tia - 10 .9% -9 .3% - 9.5%

Romania -10 .7% -11. 0% -10 .9%

Bulgar ia -23 .3% -22 .6% -21. 4%

Serbia 8.7% 1 0.6% 11.8%

Rus sia -6.5% - 7.8% -6.5%

Azerbaijan -11.6% -6.6% -4.7%

Spain -6.8% -6.0% -5.5%

North America -3. 7% -4. 3% -5. 0%

Canada -1.1% 0.2% 1.1%

USA -5.7% -6.4% -6.9%

Latin America 0.4% 1.0% 1.6%

Mexico -0.9% 0.5% 0.7%

Cos ta Ric a 6.9 % 1 0. 8% 9.7 %

Nic ar agu a - 0. 3% - 0.1% 0.2 %

Colombia -14 .4% -9 .8% -9. 3%

Ec uador 3.0% 2.1% 1.8%

Braz il -4.1% -2.2% -0.6%

Argentina 12.2% 12.3% 13.0%

Africa Middle Eas -2. 0% -1. 4% -1. 0%

Morocco -0.3%

Indian Ocean -9. 8% -4. 4% 0 .0%

Asia Pacific 1.1 % - 1.6% - 1.8%

India 1.5% -3.8% - 3.9%

Sr i L an ka - 10 .6% - 8.7% - 7.2%

Ban glad es h 0.2 % 0.5 % 0.9 %

V ietnam - 5.9% - 5.4% - 4.6%

Malays ia 0.4% 3.2% 3.4%

In do ne sia 0.6 % 1.4 %

Australia 7.0% 7.1% 3.2%

New Zea land -0. 3% 1 .2% 1 .9%

HolcimVolumes 1H10 9M10 2010

Europe -8. 5% -4 .8% -3. 3%

Belgium -6.4% -4.5% - 4.0%

France 7.7% 6.9% 4.3%

Germany -4.2%

Sw it zer lan d - 0.1 % 1 .1% 1 .5%

Italy -4.4% -1.2% -0.9%

Hungary -16 .7% -13 .4% -14. 0%

Czech Republ ic 4.0% 0.8% -2.8%

Slov akia 1.2% 45.7% - 1.1%

Croa tia -36 .2% -31 .1% -27 .6%

Romania -30 .0% -18. 8% -14 .5%

B ulgari a -48 .5% -33 .5% -27 .7%

Ser bia - 14.2% -7.3% - 5.7%

Rus sia - 18.5 % - 11.0 % - 5.1 %

Azerbaijan 4.9% 1.5% 1.7%

Spain -8.1% -1.2% -0.5%

North America 0.0% 1.2% 3.7%

Canada 21.9% 11.9% 7.9%

USA -3.9% -1.8% 2.2%

Latin America -0. 9% -1. 8% -0. 4%

Mex ic o -7.3% - 9.3% - 7.0%

Costa Rica -12.5% -20.6% -24.4%

Nic ar agua 5.0% 3.9% 4.5%

Colo mbia 13 .5% 8 .1% 10 .9%

Ec uador - 6.8% - 4.5% - 3.5%

Braz il 20.9% 20.3% 19.2%

Argentina 9.7% 8.4% 7.6%

Africa Middle Eas 11 .1% 7 .6% 4 .5%

Morocco 1.6%

Indian Ocean -0. 5% -1. 4% 0 .2%

Asia Pacific 3.8% 3.2% 3.6%

India 3.2% 2.9% 3.5%

Sr i L an ka 34 .3% 30 .9% 28 .3 %

B angladesh 13. 3% 15. 7% 15. 3%

Vietnam 5.2% 3.1% 2.4%

Malaysia 6.3% 3.3% 4.1%

Indonesia 19. 7% 11 .3%

Australia -5.1% -5.0% -2.0%

New Zea land -9. 6% -6. 7% -5. 3%

Holcim

27

2011 Outlook as suggested by companies

Lafarge


Cemex

Volumes

Gray

Cement

Ready -

mix

Aggreg

ates

Mexico 3% 3% 3%

US 5% 6% 2%*

Spain -10% -13% -9%

UK 2% 2% 1%

France N/A 2% 1%

Germany 5% 6% 2%

Poland 6% 12% 0%

Colombia 5% 17% 50%

Philippines 6% N/A N/A

*on like for like basis for the ongoing operations

Volum es Pr ice

Western Europe -5 to -2% =/+

North America 1 to 4% +

Middle Eas t and Af ric a* 4 to 7% =/+

CEE 3 to 6% +

Latin America 7 to 10% +

Asia 5 to 8% +

Overall 3 to 6% +

(*) Relative to year-end pricing; down at average pricing

Region

Lafarge

Country/Re gion Volum e Grow th (%)

North America 1 to 4

United States 1 to 4

Canada 3 to 6

Western Europe -5 to -2

France 1 to 4

United Kingdom -1 to 2

Spain -15 to -12

Greece -10 to -7

Ce ntr al and Eas te rn Eur ope 3 to 6

Poland 7 to 10

Romania -7 to -4

Russia (1) 8 to 11

Serbia 0 to 3

Latin America 7 to 10

Brazil 8 to 11

Honduras 4 to 7

Ecuador 4 to 7

Middle East and Africa 4 to 7

Algeria 5 to 8

Egypt 3 to 6

Iraq 10 to 13

Jordan 0 to 3Kenya 3 to 6

Morocco 1 to 4

Nigeria 8 to 11

South Africa 0 to 3

Syria 3 to 6

Asia 5 to 8

China (1) 6 to 9

India (1) 7 to 10

Indonesia 6 to 9

Malaysia 3 to 6

Philippines 5 to 8

South Korea -6 to -3

Overall 3 to 6

(1) Market grow th forecast at national level except for

China, India and Russia for w hich only relevant markets



Any Authors named on this report are Research Analysts unless otherwise indicated

Analyst Certification

I, Ankur Agarwal, hereby certif y (1) that the views expressed in this Research report accurat ely reflect my personal views about any or all of the subject securities or issuers referred to in

this Research report, (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no

part of my compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group

company.

Important Disclosures

Conflict-of-interest disclosures

Important disclosures may be accessed through the following website: http://www.nomura.com/research/pages/disclosures/disclosures.aspx . If you have difficulty with this site or you do

not have a password, please contact your Nomura Securities International, Inc. salesperson (1-877-865-5752) or email [email protected] for assistance.

Online availability of research and additional conflict-of-interest disclosures

Nomura Japanese Equity Research is available electronically for clients in the US on NOMURA.COM, REUTERS, BLOOMBERG and THOMSON ONE ANALYTICS. For clients in Europe,

Japan and elsewhere in Asia it is available on NOMURA.COM, REUTERS and BLOOMBERG.

Important disclosures may be accessed through the left hand side of the Nomura Disclosure web page http://www.nomura.com/research or requested from Nomura Securities

International, Inc., on 1-877-865-5752. If you have any difficulties with the website, please email [email protected] for technical assistance.

The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated byInvestment Banking activities.

Industry Specialists identified in some Nomura International plc research reports are employees within the Firm who are responsible for the sales and trading effort in the sector for which

they have coverage. Industry Specialists do not contribute in any manner to the content of research reports in which their names appear.

Distribution of ratings (Global)

Nomura Global Equity Research has 1937 companies under coverage.

48% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 41% of companies with this rating are investment banking clients of the

Nomura Group*.

38% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 50% of companies with this rating are investment banking clients of

the Nomura Group*.

12% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 13% of companies with this rating are investment banking clients of

the Nomura Group*.

As at 31 December 2010.

*The Nomura Group as defined in the Disclaimer section at the end of this report.

Explanation of Nomura's equity research rating system in Europe, Middle East and Africa, US and Latin America for ratings published from 27 October 2008

The rating system is a relative system indicating expected performance against a specific benchmark identified for each individual stock. Analysts may also indicate absolute upside to

price target defined as (fair value - current price)/current price, subject to limited management discretion. In most cases, the fair value will equal the analyst's assessment of the c urrent

intrinsic fair value of the stock using an appropriate valuation methodology such as discounted cash flow or multiple analysis, etc. 28

STOCKS

A rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months.

A rating of 'Neutral' , indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months.

A rating of 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months.

A rating of 'Suspended', indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances

including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the company.

Benchmarks are as follows: United States/Europe: Please see valuation methodologies for explanations of relevant benchmarks for stocks (accessible through the left hand side of the

Nomura Disclosure web page: http://www.nomura.com/research);Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia, unless otherwise stated in the valuation

methodology.

SECTORS

A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months.

A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months.

A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next 12 months.

Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia.

Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published from 30 October 2008 and in Japan from 6 January 2009

STOCKS

Stock recommendations are based on absolute valuation upside (downside), which is defined as (Price Target - Current Price) / Current Price, subject to limited management discretion. In

most cases, the Price Target will equal the analyst's 12-month intrinsic valuation of the stock, based on an appropriate valuation methodology such as discounted cash flow, multiple

analysis, etc.

A 'Buy' recommendation indicates that potential upside is 15% or more. A 'Neutral' recommendation indicates that potential upside is less than 15% or downside is less than 5%.

A 'Reduce' recommendation indicates that potential downside is 5% or more.

A rating of 'Suspended' indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances

including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subject company.

Securities and/or companies that are labelled as ' Not rated' or shown as 'No rating' are not in regular research coverage of the Nomura entity identified in the top banner. Investors

should not expect continuing or additional information from Nomura relating to such securities and/or companies.

SECTORS

A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation.

A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation.

A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.

29

Explanation of Nomura's equity research rating system in Japan published prior to 6 January 2009 (and ratings in Europe, Middle East and Africa, US and Latin Americapublished prior to 27 October 2008)

STOCKS

A rating of '1' or 'Strong buy', indicates that the analyst expects the stock to outperform the Benchmark by 15% or more over the next six months.

A rating of '2' or 'Buy', indicates that the analyst expects the stock to outperform the Benchmark by 5% or more but less than 15% over the next six months.

A rating of '3' or 'Neutral' , indicates that the analyst expects the stock to either outperform or underperform the Benchmark by less than 5% over the next six months.

A rating of '4' or 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark by 5% or more but less than 15% over the next six months.

A rating of '5' or 'Sell', indicates that the analyst expects the stock to underperform the Benchmark by 15% or more over the next six months.

Stocks labeled 'Not rated' or shown as 'No rating' are not in Nomura's regular research coverage. Nomura might not publish additional research reports concerning this company, and it

undertakes no obligation to update the analysis, estimates, projections, conclusions or other information contained herein.

SECTORS

A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next six months.

A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next six months.

A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next six months.

Benchmarks are as follows: Japan: TOPIX; United States: S&P 500, MSCI World Technology Hardware & Equipment; Europe, by sector - Hardware/Semiconductors : FTSE W Europe IT

Hardware; Telecoms : FTSE W Europe Business Services; Business Services : FTSE W Europe; Auto & Components : FTSE W Europe Auto & Parts; Communications equipment : FTSE W

Europe IT Hardware; Ecology Focus: Bloomberg W orld Energy Alternate Sources; Global Emerging Markets: MSCI Emerging Markets ex-Asia.

Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published prior to 30 October 2008

STOCKS

Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price)/Current Price, subject to limited management discretion. In

most cases, the Fair Value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or

Multiple analysis etc. However, if the analyst doesn't think the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ

from the intrinsic fair value. In most cases, therefore, our recommendation is an assessment of the difference between current market price and our estimate of current intrinsic fair value.

Recommendati ons are set with a 6-12 month horizon unless specified otherwis e. Accordingly, withi n this horizon, price volatility may cause the actual upside or downside based on the

prevailing market price to differ from the upside or downside implied by the recommendation. A 'Strong buy' recommendation indicates that upside is more than 20%.

A 'Buy' recommendation indicates that upside is between 10% and 20%.

A 'Neutral' recommendation indicates that upside or downside is less than 10%.

A 'Reduce' recommendation indicates that downside is between 10% and 20%.

A 'Sell' recommendation indicates that downside is more than 20%.

SECTORS

A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation.

A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation.

A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.

30



Price targets

Price targets, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any price target may be impeded by general market and macroeconomic

trends, and by other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.

Disclaimers

This publication contain s material that has been prepared by the Nomura entity identified on the banner at the top or the bottom of page 1 herein and, if applicable, with the contributi ons

of one or more Nomura entities whose employees and their respective affiliations are specified on page 1 herein or elsewhere identified in the publication. Affiliates and subsidiaries of

Nomura Holdings, Inc. (collectively, the 'Nomura Group'), include: Nomura Securities Co., Ltd. ('NSC') Tokyo, Japan; Nomura International plc, United Kingdom; Nomura Securities

International, Inc. ('NSI'), New York, NY; Nomura International (Hong Kong) Ltd., Hong Kong; Nomura Financial Investment (Korea) Co., Ltd., Korea (Information on Nomura analysts

registered with the Korea Financial Investment Association ('KOFIA') can be found on the KOFIA Intranet at http://dis.kofia.or.kr ); Nomura Singapore Ltd., Singapore (Registration number

197201440E, regulated by the Monetary Authority of Singapore); Nomura Securities Singapore Pte Ltd., Singapore (Registration number 198702521E, regulated by the Monetary

Authority of Singapore); Capital Nomura Securities Public Company Limited; Nomura Australia Ltd., Australia (ABN 48 003 032 513), regulated by the Australian Securities and Investment

Commission and holder of an Australian financial services licence number 246412; P.T. Nomura Indonesia, Indonesia; Nomura Securities Malaysia Sdn. Bhd., Malaysia; Nomura

Internatio nal (Hong Kong) Ltd., Taipei Branch, Taiwan; Nomura Financial Advisory and Securities (Indi a) Private Limited, Mumbai, India (Registered Address: Ceejay House, Level 11,

Plot F, Shivsagar Estate, Dr. Annie Besant Road, Worli, Mumbai- 400 018, India; SEBI Registration No: BSE INB011299030, NSE INB231299034, INF231299034, INE 231299034).

THIS MATERIAL IS: (I) FOR YOUR PRIVATE INFORMATION, AND WE ARE NOT SOLICITING ANY ACTION BASED UPON IT; (II) NOT TO BE CONSTRUED AS AN OFFER TO SELL

OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE ILLEGAL; AND (III) BASED UPON

INFORMATION THAT WE CONSIDER RELIABLE.

NOMURA GROUP DOES NOT WARRANT OR REPRESENT THAT THE PUBLICATION IS ACCURATE, COMPLETE, RELIABLE, FIT FOR ANY PARTICULAR PURPOSE OR

MERCHANTABLE AND DOES NOT ACCEPT LIABILITY FOR ANY ACT (OR DECISION NOT TO ACT) RESULTING FROM USE OF THIS PUBLICATION AND RELATED DATA. TO

THE MAXIMUM EXTENT PERMISSIBLE ALL WARRANTIES AND OTHER ASSURANCES BY NOMURA GROUP ARE HEREBY EXCLUDED AND NOMURA GROUP SHALL HAVE NO

LIABILITY FOR THE USE, MISUSE, OR DISTRIBUTION OF THIS INFORMATION.

Opinions expressed are current opinions as of the original publication date appearing on this material only and the information, including the opinions contained herein, are subject to

change without notice. Nomura is under no duty to update this publication. If and as applicable, NSI's investment banking relationships, investment banking and non-investment banking

compensation and securities ownership (identified in this report as 'Disclosures Required in the United States'), if any, are specified in disclaimers and related disclosures in this report. In

addition, other members of the Nomura Group may from time to time perform invest ment banking or other services (inc luding acting as advisor, manager or lender) for, or solicit

investment banking or other business from, companies mentioned herein. Further, the Nomura Group, and/or its officers, directors and employees, including persons, without limitation,

involved in the preparation or issuance of this material may, to the extent permitted by applicable law and/or regulation, have long or short positions in, and buy or sell, the securities

(including ownership by NSI, referenced above), or derivatives (including options) thereof, of companies mentioned herein, or related securities or derivatives. In addition, the Nomura

Group, excluding NSI , may act as a market maker and principal, willing to buy and sell certain of the securities of companies mentioned herein. F urther, the Nomura Group may buy and

sell certain of the securities of companies mentioned herein, as agent for its clients.

Investors should consider this report as only a single factor in making their investment decision and, as such, the report should not be viewed as identifying or suggesting all risks, direct or

indirect, that may be associated with any investment decision. Please see the further disclaimers in the disclosure information on companies covered by Nomura analysts available at

www.nomura.com/research under the 'Disclosure' tab. Nomura Group produces a number of different types of research product including, among others, fundamental analysis,

quantitative analysis and short term trading ideas; recommendations contained in one type of research product may differ from recommendations contained in other types of research

product, whether as a result of differing time horizons, methodologies or otherwise; it is possible that individual employees of Nomura may have different perspectives to this publication.

NSC and other non-US members of the Nomura Group (i.e. excluding NSI), their officers, directors and employees may, to the extent it relates to non-US issuers and is permitted by

applicable law, have acted upon or used this material prior to, or immediately following, its publication.

Foreign-currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of, or income derived from, the investment.

In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume currency risk.

31

The securities described herein may not have been registered under the US Securities Act of 1933, and, in such case, may not be offered or sold in the United States or to US persons

unless they have been registered under such Act, or except in compliance with an exemption from the registration requirements of such Act. Unless governing law permits otherwise, you

must contact a Nomura entity in your home jurisdiction if you want to use our services in effecting a transaction in the securities mentioned in this material.

This publication has been approved for distribution in the United Kingdom and European Union as investment research by Nomura International plc ('NIPlc'), which is authorized and

regulated by the UK Financial Services Authority ('FSA') and is a member of the London Stock Exchange. It does not constitute a personal recommendation, as defined by the FSA, or

take into account the particular investment objectives, financial situations, or needs of individual investors. It is intended only for investors who are 'eligible counterparties' or 'professional

clients' as defined by the FSA, and may not, therefore, be redistributed to retail clients as defined by the FSA. This publication may be distributed in Germany via Nomura Bank

(Deutschland) GmbH, which is authorized and regulated in Germany by the Federal Financial Supervisory Authority ('BaFin'). This publication has been approved by Nomura International

(Hong Kong) Ltd. ('NIHK'), which is regulated by the Hong Kong Securities and Futures Commission, for distribution in Hong Kong by NIHK. This publication has been approved for

distribution in Australia by Nomura Australia Ltd, which is authorized and regulated in Australia by the Australian Securities and Investment Commission ('ASIC'). This publication has also

been approved for distribution in Malaysia by Nomura Securities Malaysia Sdn Bhd. In Singapore, this publication has been distributed by Nomura Singapore Limited ('NSL') and/or

Nomura Securities Singapore Pte Ltd ('NSS'). NSL and NSS accepts legal responsibility for the content of this publication, where it concerns securities, futures and foreign exchange,

issued by their foreign affiliates in respect of recipients who are not accredited, expert or institutional investors as defined by the Securities and Futures Act (Chapter 289). Recipients of

this publication should contact NSL or NSS (as the case may be) in respect of matters arising from, or in connection with, this publication. Unless prohibited by the provisions of Regulation

S of the U.S. Securities Act of 1933, this material is distributed in the United States, by Nomura Securities International, Inc., a US-registered broker-dealer, which accepts responsibility

for its contents in accordance with the provisions of Rule 15a-6, under the US Securities Exchange Act of 1934.

This publication has not been approved for distributi on in the Kingdom of Saudi Arabia or to clients other than 'professional clients' in the United Arab Emirates by Nomura Saudi Arabia,

Nomura International plc or any other member of the Nomura Group, as the case may be. Neither this publication nor any copy thereof may be taken or transmitted or distributed, directly

or indirectly, by any person other than those authorised to do so into the Kingdom of Saudi Arabia or in the United Arab Emirates or to any person located in the Kingdom of Saudi Arabia

or to clients other than 'professional clients' in the United Arab Emirates. By accepting to receive this publication, you represent that you are not located in the Kingdom of Saudi Arabia or

that you are a 'professional client' in the United Arab Emirates and agree to comply with these restrictions. Any failure to comply with these restrictions may constitute a violation of the

laws of the Kingdom of Saudi Arabia or the United Arab Emirates.

No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means; or (ii) redistributed without the prior written consent of the Nomura Group member

identified in the banner on page 1 of this report. Further inform ation on any of the securities mentio ned herein may be obtained upon request. If this publicatio n has been distributed by

electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late

or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this publication, which may arise as a result of electronic

transmission. If verification is required, please request a hard-copy version.

Additional information available upon request

NIPlc and other Nomura Group entities manage conflicts identified through the following: their Chinese Wall, confidentiality and independence policies, maintenance of a Restricted List

and a Watch List, personal account dealing rules, policies and procedures for managing conflicts of interest arising from the allocation and pricing of securities and impartial investment

research and disclosure to clients via client documentation.

Disclosure information is available at the Nomura Disclosure web page:

http://www.nomura.com/research/pages/disclosures/disclosures.aspx

32

10.00 ankur agarwal, nomura international plc

Documents