1. Cement Outlook Ed Sullivan, Chief Economist PCA IFEBP February 2012 Named Most Accurate Forecaster By Chicago Federal Reserve, 2009

2. Economic Outlook

3. Synchronized Recovery Theory Incremental Demand Gains Job Gains Sentiment Gains Lending Standards Ease & Hiring Accelerates Heals Structural Restraints In the context of moderating productivity Gains Leads to: Sentiment includes Consumer, Business & Banks: Defaults & perceived lending risks decline Job creation determines how quickly the recovery cycle spins.

4. False Hopes: Net Job Creation Annualized Net Job Creation 2.7 Million Annualized 3 month Moving Average

5. Employment Outlook Annual Change, Thousands Employed Source: BLS Recession Recoveries: 3 Years Following, Annual Average 1991: 3.08 Million, 2001: 2.22 Million, Current: 1.35 Million Potential Upside Risk

6. Real GDP Outlook Annualized Growth

7. Housing Recovery

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

9. Foreclosures Accelerate Foreclosure Impacts Add to Inventory Depress Prices 2.5-3.0 Million Foreclosures in 2009- 2011 annually. Nearly 1 Million Bank possessions annually. Depressed Homebuilder ROI Adds supply. Bank owned properties discounted. Pressures new home prices. Longer carry costs. Lower revenues. Erodes expected ROI. Delays recovery in starts.

10. The Residential Recovery Process Mortgage Resets Working Through Structural Repair of Housing Market Will Take Time Before Impacting Housing Starts. Foreclosures Bank Possessions Shadow Inventories Heightened Inventories Inventory Burn Off Price Stability Starts Recovery

11. Single Family Sales Outlook Thousands of Units

12. Single Family Months Supply Thousands of Units

13. Single Family Home Price Outlook Y-O-Y Percent Change

14. Single Family Upside Risk? Single Family Starts Projections Comparison Thousand Starts 201120122013 PCA421443567 Mortgage Bankers Association420474619 NAHB424495723 National Association of Realtors416480---- Other Associations’ Average420483671 Tons Per Start19.2 Upside Risk (000 Tons)---7681,997 429

15. Nonresidential Drag

16. Nonresidential Construction Real 1996 PIP $ -50% Source: Dept of Commerce, PCA Upside: Public Utilities, Farm, Retail, Industrial

17. Nonresidential Conclusions No longer a significant drag on construction activity. Large imbalances exist in before a positive NOI materializes  Slow job growth implies slow healing process Credit environment hostile. Conditions for positive ROI years off. Not a significant contributor to cement consumption growth near term.

18. Office Buildings: Recovery Process New Office Hiring Vacancy Rates Decline Leasing Rates Stabilize Credit Troubles Ease Asset Prices Firm 1/5 of all jobs in the office. After reaching threshold of roughly 14% vacancy rate Defaults & perceived lending risks decline Leads to a recovery in office construction.

19. Office Employment Thousands Employed Vacancy Rate: 12.7% Vacancy Rate: 18.3% Vacancy Rate: 11.3% Source: BLS

20. Office Building Valuation Property Value Index, 2000=100 Source: Moody’s -36%

21. REIT Office Dow Jones REIT Index, Total Return, 1990=100 Source: Dow Jones REIT Index Recaptured 70%

22. Public Recovery

23. State Deficits $ Real National Estimates: States Do Not Heal in a Synchronized Fashion

24. ARRA Sterilization: State Spending Change in Spending, Real Million 1996$ ARRA $ State $ 76% Sterilization 43% Sterilization

25. ARRA Sterilization: State Spending Change in Spending, Real Million 1996$ ARRA $ State $ Increase In State Spending Reduces Adverse Impact ARRA $ State $

26. Discretionary State Highway Cement Consumption Thousand Metric Tons

27. Highway Bill Cement Consumption Projections Spring Versus Summer Assumptions Spring Forecast Fall Forecast

28. The Outlook

29. Portland Cement Consumption Thousand Metric Tons

30. Portland Cement Capacity Utilization Production as Percent of Capacity

31. Beyond the Crisis

32. Economic Outlook: Medium Term Turbulence Unintended Consequences: Past policies have a payback.  Fiscal/Monetary Inflation takes hold as capacity excesses are diminished.  Weak dollar sustained  Global Synchronized Growth: Commodity prices rise. Improves concrete’s competitive position. Interest rates rise.  Inflation premiums, weaker dollar, high foreign ownership of debt Taxes Rise  Deficits must be paid for and in context of weaker dollar.

33.  American consumer, the engine of US economic growth  May distance from debt spending patterns (lowering GDP).  Baby boomers may not re-capture wealth  Higher inflation erodes spending.  Debt  Stimulus spending must be paid.  resulting in either higher interest rates, higher taxes, and potentially higher inflation – or all three  High debt in context of weak dollar, heightens issue  Fiscal austerity?  Impacts  Slower growth – Is 50 basis point enough? After the Crisis: “New Normal”: Economics

34.  Not a typical recession recovery.  Amplified by structural corrections.  Amplified by possible policy errors.  Long impacts  Pent-Up Demand  Being generated across all sectors.  Longer period of distress, more pent-up demand  Timing and magnitude of release impacted by economy.  Regional impacts from resulting growth.  Residential, nonresidential & public synchronized – 2013 & Beyond.  Typically suggests strong cement consumption growth rates. After the Crisis: “New Normal”: Construction

35. US Population Thousands of Persons US Population Adds Roughly 65 Million People by 2030 …. a 22% Increase.

36. Licensed Drivers On the Road Millions of Licensed Drivers Source: FHWA & PCA Estimates

37. Emerging economies, led by China/India, account for key growth drivers. Accounts for larger share of world GDP than OECD by 2014 (IMF). Exerts “new” potent demand on world markets “Synchronized” world growth returns 2013-2020. Commodity prices (oil), freight rates, trading patterns subject to change. Impacts concrete competitiveness (oil prices = paving position, residential ICF) Impacts sourcing decisions – high freight rates raising import costs. New challenges could lead to potentially new economic/political tensions. After the Crisis: “New Normal”: Global

38. Initial Bid Concrete Vs Asphalt Paving Costs Dollars Per Two Lane Road Mile - Urban Source: PCA estimates using Wispave (Wisconsin DOT paving cost software) Concrete Asphalt Oman Data US Average: 15.3% 15% Advantage 18% Disadvantage 42% Advantage

39.  Activist EPA  Plant shut downs  High compliance costs.  New Source regulations!  Resumption of demand growth  Import Dependence Grows  In context of weak dollar  In context of emerging economy demand growth  Higher freight rates.  Sourcing strategies  Near term, import dependence – longer term? After the Crisis: “New Normal”: Regulation

40. U.S. Supply Balance: EPA NESHAP Million Metric Tons Cement Consumption Imports: 54 MMT Cement Production EPA: NESHAP Impact Fly Ash Rule Could Add 20 MMT to Cement Consumption

41. Cement Consumption: Long Term Million Metric Tons Growth in Context of Population Changes, Slower US Economic Growth, Strong Global Growth, Climate Change Legislation and the “Green” Revolution.

42. Cement Outlook Ed Sullivan, Chief Economist PCA IFEBP February 2012 Named Most Accurate Forecaster By Chicago Federal Reserve, 2009