1. National & Regional Construction & Cement Outlook Florida Independent Concrete and Associated Products Association January 30, 2007 David E. Czechowski - Manager, Sr. Economist Economic Research Portland Cement Association

2. Key Points of Analysis The Economy Construction Spending Cement Outlook Residential Nonresidential Public Demand & Supply Florida Overview

3. U.S. Economic Outlook

4. Key Near Term Issues Oil Prices Oil Prices Is the recent rundown sustainable? International Demand/Disruptions/OPEC Inflation Inflation Will it subside enough to satisfy the Fed? Interest Rates Interest Rates Resumption in increases? Housing Decline Housing Decline Hard or Soft landing? Job Creation Job Creation

5. Federal Funds Rate 0.0 2.0 4.0 6.0 Percent 0304050607 Fed Gradualism Restrictive Accommodative Overall Economy & Job Growth Slowing Overall Economy & Job Growth Slowing Dilemma: Dilemma: Inflation or Growth? Don’t discount further Fed Tightening Don’t discount further Fed Tightening Risk of Over-reaction Risk of Over-reaction

6. (Change from prior month) Nonfarm Employment Job Growth 2005: +2.03 Million 2006: +1.91 Million 2007: +1.60 Million -400 -200 0 200 400 600 Thousands 0001020304050607

7. Consumer Confidence 40 70 100 130 160 Index 1985=100 0001020304050607

8. Consumer Under Pressure Pay Increase Averages 3.5%. Pay Increase Averages 3.5%.  Health Insurance Premiums Rise 7%-11%.  State and Local Property Taxes Rise.  Reassessments based on high home appreciation Energy Prices Take a Large Bite. Energy Prices Take a Large Bite.  Even in context of recent improvement Interest Rates Rising in Context of Record Consumer Debt Interest Rates Rising in Context of Record Consumer Debt Tapping Home Equity Bank Not as Viable As In the Past Tapping Home Equity Bank Not as Viable As In the Past Slowdown in Job Creation Slowdown in Job Creation

9. Real Investment Nonresidential Structures & Equipment -20 -10 0 10 20 30 40 Qtr/Qtr % Change 909294969800020406

10. Investment Spending Higher Expected ROI Pent Up Demand Corporate Profits = Internal Funds Low Interest Rates = External Funds Unfavorable Factors Favorable Factors Strong, But Slower Investment Spending Growth Construction Costs Energy Prices

11. Real GDP Growth ----------2005-----------------2006--------------2007------ 3.5% Real GDP Annual Growth Rate -------2008------- 3.1%2.6%2.4% Risks On Downside

12. Economic Outlook: Summary Economic Growth Will Be Sustained Economic Growth Will Be Sustained but Slowed Consumers Maintain Spending at Slower Pace Consumers Maintain Spending at Slower Pace Investment Spending Slow and Steady Investment Spending Slow and Steady Labor Market growth Slowing Labor Market growth Slowing Risks Risks Exotic Mortgage Resets Retrenches Consumers Exotic Mortgage Resets Retrenches Consumers

13. U.S. Construction Markets

14. Changing Composition of Construction Spending Growth Leader: Residential Growth Leader: Residential Low Interest Rates Low Interest Rates Public Public State Tax Revenues Hurt by Anemic Economic Growth State Tax Revenues Hurt by Anemic Economic Growth Growth Laggard: Nonresidential Growth Laggard: Nonresidential Weak Economy Weak Economy Growth Leader : Nonresidential Steady Economy Public State Tax Revenues Recovery Due to Economic Growth Growth Laggard : Residential Rising Interest Rates 2001-2005 2006-2010 Low Interest Rates Weak Economy Rising Interest Rates Steady Economy

15. Starts Activity More Than Low Rates… The Cyclical Upside: 2001 - 2005 Low mortgage rates Low mortgage rates Emergence of exotic mortgages Emergence of exotic mortgages Easy credit conditions Easy credit conditions Speculators add froth to the market Speculators add froth to the market The Cyclical Downside: 2006 - 2009 Mortgage rates rising Mortgage rates rising Inventory Draw Inventory Draw Exotic mortgages losing favor Exotic mortgages losing favor Defaults/delinquencies deteriorate credit quality and tighten credit conditions Defaults/delinquencies deteriorate credit quality and tighten credit conditions Speculators reduced/disappear in lower appreciation rate environment Speculators reduced/disappear in lower appreciation rate environment

16. Mortgage Rate 4 5 6 7 8 9 Percent 0001020304050607 Peak to Trough 294 Basis Point Decline Tripping Rate = 6.5% Last 12 Months Reflect a 100 Basis Point Increase Year 2006 6.41% 2007 6.90% 20086.92% 20096.88%

17. Sub-Prime Mortgage Resets Total Loans Scheduled for Reset 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 200020012002200320042005200620072008 Period of Emerging Trouble

18. Inventory Draw Required Homes on Market/Monthly Selling Rate Ten Year Average Inventory Build Required Inventory Draw Required Highest Level Since 1997 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2000200120022003200420052006

19. Affordability Squeeze Annual Growth Home Prices Household Income -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 19901992199419961998200020022004 2005

20. Affordability Index Most Affordable Pacific Mountain West North Central East North Central South Atlantic East South Central West South Central New England Middle Atlantic Affordability Ratio 2 nd Tier3 rd Tier4 th TierLeast Affordable

21. 0.5 1.0 1.5 2.0 Million Units 989900010203040506070809 Single Family Starts Year 2005 1.72 2006 1.49 2007 1.29 20081.30

22. Nonresidential Construction Underlying nonresidential drivers improving Underlying nonresidential drivers improving Despite large percentage gains for 2006, most markets weak from historical perspective Despite large percentage gains for 2006, most markets weak from historical perspective Slower growth outlook depresses expected ROI and tempers recovery Slower growth outlook depresses expected ROI and tempers recovery High material costs reduce growth High material costs reduce growth 100 130 160 190 220 Billions 1996$ 95979901030506070809 Year 2005 3% 2006 12% 2007 8% 20084% 20095%

23. Nonresidential Construction 200420052006 2007 2008 Lodging9% 4%38%11%5% Health Care-5%2% 23%5%1% Religious-12%-10%1%4%6% Educational-12%-6%1%2%4%

24. Public Construction 93% of public construction performed at state/local level 93% of public construction performed at state/local level State/Local fiscal problems fading State/Local fiscal problems fading Revenue growth improves with economy and job growth Revenue growth improves with economy and job growth Surpluses will re-emerge. Surpluses will re-emerge. Pent-up demand released Pent-up demand released Highway Bill adds strength Highway Bill adds strength -80 -40 0 40 80 $Billion 899193959799010305 07 State & Local Government Surplus

25. MA RI NH State Deficit Estimates FY 2005 0-9%20-29% 30-39% Pacific Mountain West North Central East North Central South Atlantic East South Central District of Columbia West South Central New England Middle Atlantic 10-19% Deficit as percentage of budget $0 $.3 $1.1 $.17 $15 $0 $2 $.5 $.34 $.71 $.19 $.0 $.6 $.62 $.17 $.9 $0 $5.1 $5 $.14 $0 $1.5 $.19 $.74 NJ $.2CT MD $.93 $.8 Secondary Source: National Association of Budget Officers Dollar figures, in billions, indicate amount states had to save to balance 2005 budget. KEY No available data DE$0 $.9 $0 $.6 $.2 $.9 $0 $.21 $0 $.3 $0 $.5 $0 VT$0 $.12 $0 Primary Source: Center on Budget Policy and Priorities Feb / 04

26. Public Construction 120 140 160 180 200 220 Billions 1996$ 939597990103050709 Year 2005 0.7% 2006 4.7% 2007 3.7% 2008 3.9% 2009 3.6% Improving State Fiscal Picture Improving State Fiscal Picture Release of Pent-Up, Postponed Projects Release of Pent-Up, Postponed Projects Infusion of SAFETEA ($286Billion) Infusion of SAFETEA ($286Billion)

27. Public Construction 200420052006 2007 2008 Buildings-6% 1%2%3%4% Highway-6%3% 10%6%5% Sewer-4%2%11%4%5% Water-8%-2%8%4%4%

28. U.S. Construction Outlook 500 600 700 800 900 Billions 1996$ 9395979901030506070809 Year 2005 3.7% 2006 1.1% 2007 -1.8% 2008 1.2% 2009 2.9% YTD 1.0%

29. Construction: Conclusions Residential Easement Modest Residential Easement Modest Mortgage Rate Increases Subdued Mortgage Rate Increases Subdued Cement Intensity Gains Cement Intensity Gains Nonresidential Recovery Nonresidential Recovery Turning Points Already Achieved Turning Points Already Achieved Still Weak from a Historical Perspective Still Weak from a Historical Perspective Recovery within Sectors Differ Recovery within Sectors Differ Retail/Hotel/Industrial Lead Retail/Hotel/Industrial Lead Institutional/Office Lag Institutional/Office Lag Public Waiting In Wings Public Waiting In Wings State Fiscal Recovery State Fiscal Recovery Pent-up Demand Pent-up Demand SAFETEA SAFETEA

30. Portland Cement Consumption 60 70 80 90 100 110 120 130 140 Million Metric Tons 8991939597990103050709 Year 2004 6.8% 2005 5.6% 2006 0.6% 2007 0.3% 2008 2.9% 2009 3.6%

31. Cement Supply Update

32. No ShortageTight Supplies Cement Supply Survey Summer 2005 Spot Tight Supplies

33. No ShortageTight Supplies Cement Supply Survey Summer 2006 Spot Tight Supplies

34. Ratio of Cement Consumption to Construction 120 130 140 150 160 170 180 Thousand Tons per $Billion 939597990103050709 Demand Pressures

35. Cement Intensity Favorable Relative Price Conditions Favorable Relative Price Conditions Concrete prices relative to steel/asphalt Concrete prices relative to steel/asphalt Material substitution in design Material substitution in design Cyclical Recovery Cyclical Recovery Larger, more cement intensive projects typically associated with economic recovery Larger, more cement intensive projects typically associated with economic recovery Construction Mix Construction Mix Outlook favors nonresidential and public construction with typically higher cement intensity Outlook favors nonresidential and public construction with typically higher cement intensity Code Changes/Green Building Code Changes/Green Building Fiscal Healing Fiscal Healing

36. Competitive Materials Producer Price Indexes

37. Residential Exposure Residential Cement Consumption as % of Total State Cement Consumption 1DELAWARE68.0% 2MAINE67.7% 3FLORIDA64.0% 4NEW HAMPSHIRE63.3% 5IDAHO46.6% 6NORTH CAROLINA46.0% 7VERMONT45.9% 8NEW JERSEY45.8% 9N. CALIFORNIA45.3% 10HAWAII44.7% NATIONAL37.8%

38. Portland Cement Consumption -20 -10 0 10 20 30 Year-Year % Change 020304050607 Harsh Winter Mild Winter YTD 0.9%

39. 15 25 35 45 $/Ton Asia-Gulf 10 20 30 40 50 60 010203040506 Imports Freight Rates Metric Tons SAAR Imports Flowed Despite Constraints

40. Import Mix Shift 5.3%Mexico 20.9%Latin America 19.7%Europe 21.1%Canada 29.5%Asia 2004 3.6%Other 6.5% 17.4% 18.5% 16.0% 36.0% 2005 5.5% 6.3% 11.1% 13.0% 13.1% 55.3% 2006YTD 1.2%

41. U.S. Cement & Clinker Imports (Percent Change) October 2006 YTD Great Lakes South Atlantic District of Columbia New England Middle Atlantic -21 % 12 % 3%3% 20 % 18 % - 13 % - 38 % Florida California Northwest Canadian Border Gulf Coast Mexican Border 6%6% U.S. + 9.6 % 10%

42. Cement and Clinker Imports 0 10 20 30 40 50 Million Metric Tons 8991939597990103050709 Year 2004 27.3 2005 33.6 2006 35.4 2007 34.7 2008 32.1 2009 32.1

43. Blended Cement Consumption 1.0 1.5 2.0 2.5 3.0 3.5 Million Metric Tons 989900010203040506

44. Mexican Support 2005200620072008 Portland Cement Consumption120,693125,138128,512131,709 Market Growth -----3.7%2.7%2.5% Total Mexican Imports-----3,2003,3103,394 Hurricane Relief-----200 Total Mexican Quota3,0003,1103,194 California-----150156160 Arizona-----1,2501,2961,331 New Mexico/El Paso-----725752772 Rest of Texas-----215223229 Louisiana-----280290298 Mississippi/Alabama-----555759 Florida-----200207213 Rest of United States-----125130133

45. Announced Capacity Increases (Million Metric Tons) 0 1 2 3 4 5 6 7 8 9698000204050607080910 Net Expansion 2006-2010 22.5 MMT $5.0 Billion

46. Looking Forward Tight market conditions dramatically reduced Tight market conditions dramatically reduced Characterized by high operating rates Characterized by high operating rates Inventories lean and well managed Inventories lean and well managed Major expansion does not materialize until 2008. Major expansion does not materialize until 2008.

47. Regional Perspective

48. Real GSP - Florida Annual % Change U.S.

49. (Change from prior month) Nonfarm Employment Job Growth - Florida -40 -20 0 20 40 60 80 Thousands 0001020304050607

50. Net Migration - Florida (000) Persons 0 50 100 150 200 250 300 350 400 19911993199519971999200120032005

51. Population Growth - Florida Growth Rate U.S.

52. Key Markets Exposure - Florida Cement Consumption as % of Total State Cement Consumption Residential - 64% National - 30% Residential - 64% National - 30% Nonresidential - 10% National - 16% Nonresidential - 10% National - 16% Commercial – 3% National - 13% Commercial – 3% National - 13% Industrial – 1% National - 1% Industrial – 1% National - 1% Office – 5% National - 2% Office – 5% National - 2% Public – 23% National - 46% Public – 23% National - 46% Highway – 16% National - 32% Highway – 16% National - 32% Cement per Capita U.S. -.409 Cement per Capita Florida -.632

53. Construction Permits - Florida 0 5,000 10,000 15,000 20,000 25,000 Units (NSA) 0001020304050607 Single Family Multifamily 3 Month Moving Average

54. Single Family Permits - Florida Units

55. Multi-Family Permits - Florida Units

56. Contract Awards - Florida 200320042005 2006 Buildings17%23%21%-15% Public 3% -3% 3% 30% Commercial-1%20% 4% -2% Public Works13%-10%13%10% Highway 9% 8% 9% 4% Water/Waste-22% 3%16%35% Utilities336%-78%140%-50% Other -6% 9% -8% 26% Total17%18%20%-12%

57. 200320042005 2006Ytd Florida8.599.7011.23 %Change 9.7%12.9%15.8% 3.8% %Change 9.7%12.9%15.8% 3.8% Georgia3.454.114.39 % Change11.6%19.2%7.0%3.9% Alabama1.601.641.74 %Change 8.1%2.8%5.7%3.9% %Change 8.1%2.8%5.7%3.9% South Carolina1.501.741.78 %Change 9.6% 16.2%2.1%6.0% %Change 9.6% 16.2%2.1%6.0%U.S. %Change 3.6 % 6.8 % 5.6 % 0.9 % Regional Portland Cement Consumption (Million Metric Tons)

58. 200320042005 2006Ytd Florida.766.8791.052 %Change 12.5%14.6%19.7%2.0% %Change 12.5%14.6%19.7%2.0% Georgia.321.354.357 % Change9.8%10.3%0.8%13.0% Alabama.162.172.183 %Change 11.6%6.1%6.4%8.7% %Change 11.6%6.1%6.4%8.7% South Carolina.138.147.166 %Change 2.0% 6.6%12.9%11.5% %Change 2.0% 6.6%12.9%11.5%U.S. %Change 7.0 % 9.0 % 6.1 % 1.6 % Regional Masonry Cement Consumption (Million Metric Tons) Region accounts for 32% of U.S. masonry consumption

59. Residential Cement Consumption Florida MMT 0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2000200120022003200420052006200720082009

60. Nonresidential Cement Consumption Florida MMT 0.2.4.6.8 1.0 1.2 1.4 1.6 1.8 2.0 2000200120022003200420052006200720082009

61. Public Cement Consumption Florida MMT 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2000200120022003200420052006200720082009

62. Cement Outlook - Florida 0 5 10 15 Million Metric Tons 9092949698000204060810 Year 2004 12.9% 2005 15.8% 2006 2.0% 2007 -0.9% 2008 1.2% 2009 2.5% YTD 3.8% Downside Risk For 2007

63. Blended Cement Consumption Florida Nebraska Florida 0 300 600 900 1200 Thousand Metric Tons 989900010203040506 693 (Est.)

64. Florida Cement & Clinker Imports 0.0 0.7 1.4 2.1 2.8 3.5 Million Metric Tons 8991939597990103050709 Tampa Sources China/Thailand Brazil/Columbia Miami Sources China/Sweden Greece/Mexico

65. Regional Cement & Clinker Imports 0.00 0.20 0.40 0.60 0.80 1.00 Million Metric Tons 8991939597990103050709 Mobile Sources Greece /China/Thailand Savannah Sources Columbia

66. Florida Cement & Clinker Imports 0 100 200 300 400 Thousand Metric Tons 01030507 Tampa Miami 3 Month Moving Average 06 Miami YTD 0.3% Tampa YTD 4.6%

67. Clinker Capacity – Southeast Region (000 Metric Tons) 2000 2004 2000 2004 Florida 4,653 5,489 Georgia 1,316 1,020 Alabama 4,366 5,375 South Carolina 2,732 3,480 Region13,06715,364+ 18% Regional Expansions Suwannee – Branford, FL.675 ’03 Giant – Harleysville, SC.113 ’04 Holcim – Holly Hill, SC.765 ’04 Titan – Medley, FL.675’04 American – Sumterville, FL.990‘08 Florida Rock – Newberry, FL.675‘08 Rinker – Brooksville, FL.900’08 Lafarge – Harleysville, SC.972’09 National – Ragland, AL1.17’09 Sumter – Center Hill, FL1.35’09 MMT Year

68. Outlook Summary Slowing Economic Growth Slowing Economic Growth Rising Inflation, Interest Rates, Energy Prices, Slower Job Creation Rising Inflation, Interest Rates, Energy Prices, Slower Job Creation Construction Market Flattening Construction Market Flattening Residential Weak Residential Weak Slower Nonresidential & Public Recoveries Slower Nonresidential & Public Recoveries Higher Material Costs Higher Material Costs Potential for Market Contraction in 2007 Potential for Market Contraction in 2007 Cement Supply Cement Supply Tight Market Conditions Dramatically Reduced Tight Market Conditions Dramatically Reduced Add Extra Dose of Conservatism to Forward Plans Add Extra Dose of Conservatism to Forward Plans Florida’s sensitivity to the Housing cycle Florida’s sensitivity to the Housing cycle Prepare Contingency Plans Incorporating Downside Risks. Prepare Contingency Plans Incorporating Downside Risks.

69. National & Regional Construction & Cement Outlook Florida Independent Concrete and Associated Products Association January 30, 2007 David E. Czechowski - Manager, Sr. Economist Economic Research Portland Cement Association Go Bears