Fisher College of Business – Student Investment Management Materials Sector Analysis Kyle Shaner Josh Carter

Fisher College of Business – Student Investment Management Agenda Sector Analysis Business Analysis Economic Conditions Financial Analysis Valuation Recommendation

Fisher College of Business – Student Investment Management Sector Analysis – Materials Sector Companies that are involved in the discovery, development and processing of raw materials Includes companies that are involved with mining and refining metals, chemical production and oil and gas infrastructure development

Fisher College of Business – Student Investment Management Sector Analysis – Industries Chemicals – Producers of commodity, diversified, fertilizers, agricultural, and specialty chemicals – Producers of industrial gases Construction Materials – Manufacturers of construction materials including sand, clay, gypsum, lime, aggregates, cement, concrete and bricks Containers and Packaging – Manufacturers of metal, glass, plastic, paper and cardboard containers

Fisher College of Business – Student Investment Management Sector Analysis - Industries Metals and Mining – Producers of aluminum and related products – Companies engaged in diversified metals and mining production or extraction of gold, precious metals, minerals and related products – Producers of iron, steel and related products Paper & Forest Products – Manufacturers of timber, related wood products and all grades of paper. – Manufacturers of lumber for the building industry but excludes companies specializing in paper packaging

Fisher College of Business – Student Investment Management Sector Analysis-Industry Performance

Fisher College of Business – Student Investment Management Sector Analysis-Industry Performance

Fisher College of Business – Student Investment Management Sector Analysis-Industry Performance

Fisher College of Business – Student Investment Management Sector Analysis - Major Companies SymbolCompanyPrice (1) Market Cap (Billions) (1) MONMonsanto Co.$79.41$43.46 PXPraxair Inc.$67.46$20.75 DDDu Pont (E.I.)$22.40$20.21 NEMNewmont Mining Corp. (Hldg. Co.) $41.58$18.89 NUENucor Corp.$43.83$13.77 (1) Price and market cap as of 2/13/2008

Fisher College of Business – Student Investment Management Sector Analysis - SIM Weights Current SIM Weight = 1.79% Current S&P Weight = 3.04% Underweight by 1.25%

Fisher College of Business – Student Investment Management Sector Analysis - Current Holdings Posco ADR (PKX) – Manufactures and sells various steel products primarily in Korea Unit Cost Total Cost Market Price (1) Market Value (1) Unrealized Gain/(Loss) Loss $468, $254,080.00($214,146)-45.74% (1) Price and market cap as of 2/13/2008

Fisher College of Business – Student Investment Management Business Analysis Mature Sector Cyclical Growth through acquisition International Exposure Increased Environmental Regulation

Fisher College of Business – Student Investment Management Business Analysis – M&A Activity Trend towards industry consolidation Notable transactions – Failed BHP acquisition of Rio Tinto-$120 billion – Chinalco minority investment in Rio - $20 billion – Proposed DOW acquisition of Rohm & Haas - $15 billion M&A activity trends In 2007, M&A volume reached all time high of $4.7 trillion Led by unprecedented financial sponsor activity - $870 billion Materials represented ~$650 billion in announced deals Q M&A volume decreased dramatically – down 73% Data provided by Thompson Reuters

Fisher College of Business – Student Investment Management Business Analysis – M&A Activity Data provided by Thompson Reuters

Fisher College of Business – Student Investment Management Economic Analysis – Global Demand `GDP Y-o-Y Growth Brazil4.80%4.00% Russia6.80%5.70% India7.90%7.10% China9.30%6.70% Euro zone GDP fell 5.6% annualized in Q Japan fell 12.7% annualized

Fisher College of Business – Student Investment Management Economic Analysis - Performance S&P %-38.49%-8.57% Materials19.98%-47.05%-7.24%

Fisher College of Business – Student Investment Management Economic Analysis – Metal Prices

Fisher College of Business – Student Investment Management Economic Analysis – Metal Prices

Fisher College of Business – Student Investment Management Economic Analysis - Regression Analysis

Fisher College of Business – Student Investment Management Economic Analysis - Stimulus Package US passes $789 billion Economic Stimulus Package ~65% spending and ~35% tax cuts Obama administration has focus on infrastructure spending to spark economy ~$62 billion in highway construction – spending may have 19 month lag time In November, China announced $586 billion stimulus package China faces growth issues as global trade declines Exports down 17% in January 2009 Package focuses on upgrading infrastructure, particularly railways, roads, and aiports

Fisher College of Business – Student Investment Management Financial Analysis - Financials

Fisher College of Business – Student Investment Management Financial Analysis - Financials

Fisher College of Business – Student Investment Management Financial Analysis Continued…

Fisher College of Business – Student Investment Management Financial Analysis Continued…

Fisher College of Business – Student Investment Management Financial Analysis Continued…

Fisher College of Business – Student Investment Management Financial Analysis Continued…

Fisher College of Business – Student Investment Management Financial Analysis-Relative Valuation HighLowMeanCurrent P/Forward E P/S P/B P/EBITDA P/CF P/E/G ratio ROE ratio

Fisher College of Business – Student Investment Management Recommendation Sector will struggle until economy rebounds Continue to underweight at 1.25% Bright spot – Chemicals