Market Performance Cement consumption grew by 9% in 2012. 43 states recorded growth. Up 6.3 million metric tons. Construction activity grew 6.0%. First time construction growth achieved in seven years. Consumption gains have been achieved in the context of sluggish economic growth.

Portland Cement Consumption Thousand Metric Tons = 2011 2012 2013 2014 2015 2016 2.7% 9.0% 6.2% 9.2% 10.6% 11.1%

Bottom Line PCA has been among the most pessimistic construction forecasters Broke away from herd mentality in 2006/2007 – among the first to call for a downturn - Wall Street Journal Based on assessments of underlying fundamentals New Optimism

Economic Outlook Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Slow First Half: GDP Growth Fiscal cliff hangover and sequestration debate will hinder consumer confidence & spending gains. Tax increases Spending cuts Employment gains expected to remain near 150K monthly. With policy clarity, businesses & banks re-evaluate past investment & lending strategies.

Tax & Spending Adjustments: 2013 Percentage of GDP Fiscal Cliff Current

Sequestration: Direct Construction Impacts Millions of Dollars

Sequester Impact On Construction Billions $

Sequester Impact On Construction Billions $

Ingredients for Real GDP Strengthening Ability to Increase Spending Activity Willingness to Increase Spending Activity Trigger Point Consumer debt service: very favorable. Pent-up demand: very favorable. Employment gains: stable & improving. Corporate Profits: very favorable. Bank Profits: very favorable. External Conditions: stabilizing. Fiscal Uncertainty must subside at federal & state level. Focus must shift away from political uncertainty and towards economic fundamentals.

Waiting for the Trigger Past Recession was worst economic downturn since the great depression 8.5 Million job loss Reinforced by huge declines in other economic metrics Construction activity declined 38% Housing starts declined 73% Cement consumption decline 44%.

Waiting for the Trigger Recession has been so harsh, expectations for future growth have been distorted “New Normal” Prolonged period of 2% growth – Deal with it! Some merit to these arguments Structural changes have materialized But…complete dismissal of business cycles and how they work.

Waiting for the Trigger Recessions correct imbalances created during the previous boom period. The larger the imbalance, the longer the period of cleansing. Sustained hardship has shaken confidence and unrealistically led some to believe that hardship is the new reality. Politics has amplified shaken confidence.

Worrisome Federal Debt Percentage of GDP Federal debt presently at highest levels in post WWII Era

Household Debt as a Percentage of GDP Percent Household Debt as a Share of GDP

Household Debt Service Percent Cost of Debt Relative to Income Record high debt service burden signaled a decline in consumer spending Near lowest level in 30 year horizon

Waiting for the Trigger Prolonged hardship creates powerful positive forces waiting to be unleashed. Huge pent-up demand waiting on the sidelines. Consumer, business, housing & public Consumers, business, government and banks were forced to fix their fiscal order and stand ready/able to spend. Consumers deleveraged debt, business improved efficiency, government shed excesses, banks restored their strength and credit quality.

Pent-Up Demand Magnitude: Light Vehicles Thousand Sales Car & Light Truck Light Vehicle Pent-up demand: 24 million Light Vehicle Pent-up demand: 6.4 million Light Vehicle Pent-up demand: 4.9 million

Total Housing Starts Thousand Starts 1.1 Million Home Overbuild 4.2 Million Home Under build =

Waiting for the Trigger A trigger is needed to unleash these powerful forces. Renewed confidence . Timing is difficult to forecast. Two camps: New Normal (it never fully returns) Versus Business Cycle It may be coming sooner than many believe and unleash more economic vigor than most expect.

Strong Second Half: GDP Growth = Plus 3% Consumer, business & banking confidence improves significantly as the focus shifts to underlying economic fundamentals and away from politics. Delayed business investment due to political uncertainty begin to be released – adding 0.3% to real GDP growth. Improved confidence & political clarity consumer & business investment increases. Employment gains accelerate to an average of 175K to 200K monthly,

Housing Outlook Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Ingredients for a Starts Recovery Homebuilders Expected ROI Inventory no higher than 5 months supply Price stability Weaker the price environment…lowers the months’ supply trigger point. Carry costs erode expected ROI.

SF Home Prices Annual Y-O-Y Percent Change Median Price, National Association of Realtors Prior to good July (168K) numbers = 876K annualized 3 month moving average Standard & Poors’ Case-Shiller

Months Supply Inventory Inventory/Monthly Selling Rate Existing Homes Prior to good July (168K) numbers = 876K annualized 3 month moving average New Home

% of loans in foreclosure, SA Source: Mortgage Bankers Association Foreclosure Pipeline 28% 51% / % of loans in foreclosure, SA % of loans 90 days past due Source: Mortgage Bankers Association

Housing Starts Outlook Thousand of Starts

Nonresidential Outlook Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Nonresidential Cement Outlook Thousand of Starts

Public Outlook Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Composition of Highway Spending Millions of Real $

State Deficits: Recessions & Recoveries Billion Real $ Crash-Boom Cycle Increased Volatility

State Fiscal Conditions Billions, Net Surplus

State & Local Roadway Spending As a % of Total State Spending

Local Tax Revenue Sources 4% 17% 6%

Single Family Price Changes: Local Revenue Proxy Property tax revenues have been hurt by home price declines. Home prices are rising, but long lags may exist between property values and local revenues

Changes in Property Tax Rates Estimated Percent Changes

Local Employment & Home Prices Based on Three Year Lag Between Home Prices and Employment, the ongoing improvement in prices implies a significant upturn in local spending beginning in 2015 Home Prices Lagged Three Years

Summary Presentation Summary of Results Comparative Life Cycle Analysis Research Building Materials Single Family, Multi Family, and Commercial Structures Done By MIT Concrete Sustainability HUB

Portland Cement Consumption Thousand Metric Tons = 2011 2012 2013 2014 2015 2016 2.7% 9.0% 6.2% 9.2% 10.6% 11.1%

Nonresidential Intensity : Trends & Forecast 80% Recovery 100% Recovery Boosts Nonresidential Cement Consumption by 4 MMT

Public Intensity : Trends & Forecast 84% Recovery 100% Recovery Boosts Public Cement Consumption by 3 MMT

Portland Cement Consumption Thousand Metric Tons =

Ed Sullivan Chief Economist, Group VP IEEE - Orlando Cement Outlook Ed Sullivan Chief Economist, Group VP IEEE - Orlando