Reflection of Economic Hit on Construction & Cement markets in GCC & Middle East

Average of 45 $ /b, instead of 100 $/b

Dropping more than half

? ? Followin g the falling revenues Using the reserves to keep spending plans

RECESSION

Past Years Surplus Strong Spending Plan maintained Banks Secured Debt Obligations to be met

US $ bn

Real Growth %GDP (US $ bn) Inflation % Fiscal Balance (% GDP )

Cement Consumption Million Tons -Arabian Gulf Cement Co. -Imported Clinker -New License faced problems

Real Growth %GDP (US $ bn) Inflation % Fiscal Balance (% GDP )

-Kuwait Cement company to reach about 4.5m Mt by Clinker production about 2m Mt Million Tons

Real Growth %GDP (US $ bn) Inflation % Fiscal Balance (% GDP )

-Oman Cement Co. reached produced about 1.9 m Mt -Raysut Cement reached about 3 m Mt and adding about 1.4 m Mt in Q4 2009

Real Growth %GDP (US $ bn) Inflation % Fiscal Balance (% GDP )

-QNCC producing 1.5 m Mt, will increase about 1,2 m Mt -Gulf Cement adding a new production line 1.4 m Mt -Clinker production about 900,000 Mt Million Tons

Real Growth %GDP (US $ bn) Inflation % Fiscal Balance (% GDP )

-12 domestic producers, 4 of them started production in Exports reached 3.4 m Mt in Severe overcapacity problem.

Real Growth %GDP (US $ bn) Inflation % Fiscal Balance (% GDP )

-9 listed companies, producing 60% of local production -Annual consumption growth rate is likely to fall from 24 % to 10% -Overcapacity in clinker production and grinding facilities

Producers Actions Government Actions

Merges & Acquisitions Synergies Increased Market Share Economies of scale Geographical Diversification Resources transfer

Vertical Integration Canceling double marginalizationCanceling double marginalization Vertical Integration form higher entry barriers.Vertical Integration form higher entry barriers. Ready-Mix plants do provide an avenue for entry and expansion for overseas competitors.Ready-Mix plants do provide an avenue for entry and expansion for overseas competitors. Required investments in Fleet and Ports infrastructures to handle the possible expected export volumes.Required investments in Fleet and Ports infrastructures to handle the possible expected export volumes. Decreases the probability of exiting the market.Decreases the probability of exiting the market.

Cost Reductions Turning to Alternative Fuels.Turning to Alternative Fuels. Increasing the local raw material being used.Increasing the local raw material being used. Locally manufacturing the packing materials.Locally manufacturing the packing materials.

Regulating Role Close study to the country’s industry future.Close study to the country’s industry future. Encouraging investments in related service industries ( Ports, Fleets, etc… ).Encouraging investments in related service industries ( Ports, Fleets, etc… ).

Incentives to the Building Materials Industry Revising Energy pricing strategiesRevising Energy pricing strategies Well studied dynamic import duty taxes to protect the local industry against import floods.Well studied dynamic import duty taxes to protect the local industry against import floods. Revising taxes tariffs, allowing temporary reductions and extension of tax exemption periods.Revising taxes tariffs, allowing temporary reductions and extension of tax exemption periods.

Keeping Public Spending levels Some countries have already announced their plans to keep the annual increase in the Public spending programs, which will minimize the reduction in the GDP growth rate, which is vital at this stage.Some countries have already announced their plans to keep the annual increase in the Public spending programs, which will minimize the reduction in the GDP growth rate, which is vital at this stage. Some countries, without enough reserves will face problems to maintain the public spending at required levels, dramatically destroying its presence in the investment attraction struggle.Some countries, without enough reserves will face problems to maintain the public spending at required levels, dramatically destroying its presence in the investment attraction struggle.

Creating Cement Export Opportunities Activate existing trading agreements & exploring possibilities of signing more trading agreements with possible export market countries, to creative preference over competitorsActivate existing trading agreements & exploring possibilities of signing more trading agreements with possible export market countries, to creative preference over competitors Increasing the role of Barter deals, securing more ability to export.Increasing the role of Barter deals, securing more ability to export.

- Oil Prices expectations in 2006

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