1. National & Regional Construction & Cement Outlook David E. Czechowski - Manager, Sr. Economist Economic Research Portland Cement Association March 3, 2006 La Crosse, WI

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

3. U.S. Economic Outlook

4. Consumer Confidence 40 70 100 130 160 Index 1985=100 000102030405 Consumer 70% of Overall Economy

5. (Change from prior month) Nonfarm Employment -400 -200 0 200 400 600 Thousands 00010203040506 Job Growth 2004: +2.2 Million 2005: +2.0 Million 2006: +2.2 Million

6. Construction Employment -60 -40 -20 0 20 40 60 80 100 Thousands 00010203040506 (Change from Prior Month)

7. Consumer Spending Outlook Job Creation Affordability Income Gains Consumer Confidence Inflation Moderate Favorable Factors No Tax Stimulus Less Home Refinancing Activity High Energy Prices Rising Interest Rates Growth in ARM’s Slower Automotive Spending Unfavorable Factors Strong, But Slower Consumer Spending Growth

8. Corporate Profit Recovery 200 500 800 1100 1400 $ Billion 929394959697989900010203040506

9. Real Investment Nonresidential Structures & Equipment -20 -10 0 10 20 30 40 Qtr/Qtr % Change 909294969800020406 Shaking off Skittishness! Pent Up Demand

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

11. Federal Funds Rate Outlook 0.0 2.0 4.0 6.0 Percent 030405 Fed Gradualism Restrictive Stance Accommodative Stance 06

12. GDP Growth -2 0 2 4 6 8 10 Qtr-Qtr % Change 00010203040506 2.7%1.6%4.2% Inflationary Pressures Auto/Housing/Consumer survived 2006: 3.3% 2007: 2.9% 3.5%

13. Economic Outlook: Summary Economic Growth Will Be Sustained Economic Growth Will Be Sustained and Prevents Recession Consumers Maintain Spending at Slower Pace Consumers Maintain Spending at Slower Pace Investment Spending Contributes Investment Spending Contributes Labor Markets Keep Pace Labor Markets Keep Pace Risks are Distant Risks are Distant High Energy Costs Lower Spending Activity High Energy Costs Lower Spending Activity Rapid Rise in Interest Rates Rapid Rise in Interest Rates

14. U.S. Construction Outlook

15. 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 2006-2009 Low Interest Rates Weak Economy Rising Interest Rates Steady Economy US Construction Markets Do Not Lose Momentum With Rising Mortgage Rates and Slowdown in Housing

16. Residential Construction

17. New Home Sales 0.70 0.90 1.10 1.30 1.50 Million Units 989900010203040506 Existing Home Sales + 4.2% (2005)

18. Single-Family Housing Starts 3 Month Moving Average 1.0 1.2 1.4 1.6 1.8 Million Units 989900010203040506 Multi-Family has benefited from condo activity! Seeking a Peak!

19. 4 5 6 7 8 9 Percent 00010203040506 Mortgage Rate Tripping Rate = 6.5% Year 2006 6.5% 2007 7.0% Gradual & Modest Increases in Mortgage Rates Prevent a Bubble Burst

20. Inventory Draw Required Homes on Market/Monthly Selling Rate Ten Year Average Inventory Build Required 3.0 3.5 4.0 4.5 5.0 5.5 6.0 00010203040506 Ten Year Average Inventory Build Required New Home Order Cancellations on the Rise!

21. 0.5 1.0 1.5 2.0 Million Units 989900010203040506070809 Single Family Starts Year 2005 1.71 2006 1.63 2007 1.52

22. Nonresidential Construction

23. 100 130 160 190 220 Billions 1996$ 939597990103050709 Nonresidential Construction Year 2004 - 1% 2005 2% 2006 7% 2007 10%

24. Nonresidential Construction 200320042005 2006 2007 Lodging-10% 8%-4%6%13% Health Care-2%-3% 5%9%4% Religious-3%-12%-11%-1%3% Educational-3%-12%-4%4%9%

25. Public Construction

26. -80 -40 0 40 80 $Billion 899193959799010305 State & Local Government Surplus

27. Public Construction 200320042005 2006 2007 Buildings-3%-4%-2%4%5% Highway-5%-5% 5%5%5% Sewer 1% -1% 8%6%4% Water-1%-8% 6%8%7%

28. Public Construction 120 140 160 180 200 220 Billions 1996$ 939597990103050709 Year 2004 -5% 2005 2% 2006 4% 2007 5% Maybe Recession Proof but Not Budget Proof

29. 500 600 700 800 900 Billions 1996$ 939597990103050709 U.S. Construction Outlook Year 2004 3.2% 2005 3.3% 2006 1.3% 2007 1.2% Overall construction Activity will not recede even in the face of rising interest rates and declining residential even in the face of rising interest rates and declining residential

30. Construction: Conclusions Residential Easement Modest Residential Easement Modest Mortgage Rate Increases Subdued Mortgage Rate Increases Subdued 6.5% Threshold Does Not Materialize Until 2006 6.5% Threshold Does Not Materialize Until 2006 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 Amplified by Intensity Gains Amplified by Intensity Gains Recovery within Sectors Differ Recovery within Sectors Differ Retail/Hotel/Industrial Lead Retail/Hotel/Industrial Lead Institutional/Office Lag Institutional/Office Lag By End of 2006... All segments in Growth By End of 2006... All segments in Growth Public Waiting In Wings Public Waiting In Wings State Fiscal Recovery State Fiscal Recovery Pent-up Demand Pent-up Demand SAFETEA SAFETEA

31. Cement Intensity Favorable Relative Price Conditions Favorable Relative Price Conditions Concrete prices relative to steel Concrete prices relative to steel 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

32. Portland Cement Consumption 60 70 80 90 100 110 120 130 140 Million Metric Tons 8991939597990103050709 Year 2003 3.6% 2004 6.8% 2005 5.2% 2006 3.7% 2007 2.7% 2008 2.5% 2009 2.4%

33. Cement Supply In Perspective

34. Cement Supply Dynamics 92.291.5Clinker Capacity 21.3%22.3%Import Share % 23.924.1Total Imports 21.922.2Cement Imports 2.01.9Clinker Imports 88.686.1Domestic Shipments 112.3108.2Cement Consumption 20032002 93.4 22.8% 27.3 25.6 1.7 120.1 2004 90.2

35. No ShortageTight Supplies Pre-Katrina Cement Supply Survey Spot Tight Supplies

36. No ShortageTight Supplies Current Cement Supply Survey Spot Tight Supplies

37. Demand Pressures

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

39. Residential Exposure Residential Cement Consumption as % of Total State Cement Consumption 1DELAWARE43.0% 2MAINE42.4% 3FLORIDA42.1% 4GEORGIA40.8% 5NEW HAMPSHIRE35.6% 6MARYLAND35.1% 7VIRGINIA32.4% 8ARIZONA32.1% 9TENNESSEE30.3% 10KENTUCKY30.2% NATIONAL24.7%

40. Portland Cement Consumption -20 -15 -10 -5 0 5 10 15 20 25 Year-Year % Change 02030405 Harsh Winter Mild Winter

41. Require Import Support

42. Cement and Clinker Imports (Thousand Metric Tons) Country of Origin 5,753 2,808 3,215 2,123 1,729 27,305 2003 2004 +44% +20% -16% +3% -1% +17% 5,601 3,344 2,228 1,766 1,745 23,241 -2% +12% -21% +8% +7% -4% Canada Columbia Korea U.S. Total China/Taiwan Thailand Mexico +62% (2004) +52% (2005) +104% -13% +3% -6% +55% +23% 2005 33,652

43. Import Composition 2005 Increasers 0100200300400500 Switzerland Thailand Indonesia Norway Middle East Yugoslavia Mexico Peru/Ecuador China/Taiwan Greece Korea 3,348 944 775 746 403 Tonnage Change (000)

44. Import Compositional Shift 5.3%3.8%Mexico 20.9%17.9%Latin America 19.7%20.6%Europe 21.1%24.1%Canada 29.5%33.3%Asia 20042003 3.6%0.3%Other 6.5% 17.6% 18.5% 16.1% 37.0% 2005 4.3%

45. U.S. Cement & Clinker Imports (Percent Change) 2005 Great Lakes South Atlantic District of Columbia New England Middle Atlantic 13 % 25 % 17 % 43 % 25 % 2%2% - 5 % 3%3% Florida California Northwest Canadian Border Gulf Coast Mexican Border 41 % U.S. + 23.2 % 48%

46. Cement and Clinker Imports New Orleans 0 200 400 600 800 Thousand Metric Tons 0405 Katrina

47. Cement and Clinker Imports 0 10 20 30 40 50 Million Metric Tons 8991939597990103050709 Year 2003 23.2 2004 27.3 2005 33.6 2006 35.2 2007 35.7 2008 32.1 2009 32.5

48. And Flowed Despite Constraints

49. Dry Bulk Carrier Fleet Cement Carrier Fleet Worldwide: 260 @ 2.4 MMT (DWT) Average Age: 23 Cement Carriers over 15,000 DWT: 40 Average Age: 28 Source: Belden Shipping Worldwide Fleet Size 5,800 Ships

50. Freight Rates Europe Asia Freight Rate $ Per Ton, to Gulf 0 20 40 60 0102030405 Slack Markets Easy Availability

51. Market Economics at Work

52. How Is The Industry Responding?

53. Cement Inventories 2 4 6 8 10 Million Metric Tons 939597990103 Inventory Days Industry Average: 20 2005 e : 17 04

54. Blended Cement Consumption 0.5 1.0 1.5 2.0 2.5 Million Metric Tons 9899000102030405 Nov 2005 YTD 2.24 MMT

55. Blended Cement Consumption Wisconsin MissouriWisconsin 0 5 10 15 20 Thousand Metric Tons 989900010203040506 Nov 2005 YTD 60,000 MT

56. Announced Capacity Increases (Million Metric Tons) 0 1 2 3 4 5 6 7 8 9597990103040506070809 Net Expansion 2006-2009 16.1 MMT $3.21 Billion Industry Investment (1994-2004) $7.4 Billion

57. Mexican Cement - No Silver Bullet 2005200620072008 Portland Cement Consumption120,693125,138128,512131,709 Market Growth 3.7%2.7%2.5% Total Mexican Imports3,2003,3103,394 Hurricane Relief200 Total Mexican Quota3,0003,1103,194 California150156160 Arizona1,2501,2961,331 New Mexico/El Paso725752772 Rest of Texas215223229 Louisiana280290298 Mississippi/Alabama555759 Florida200207213 Rest of United States125130133

58. Supply Conclusions Domestic Supply Increases Face Limited Growth Domestic Supply Increases Face Limited Growth Characterized by high operating rates Characterized by high operating rates Equipment stretched to their limits Equipment stretched to their limits Persistently lean inventory position Persistently lean inventory position Major expansion does not materialize until 2008 Major expansion does not materialize until 2008 Murphy’s Law (Katrina!) Murphy’s Law (Katrina!) Market Growth Dependent On Imports Market Growth Dependent On Imports Source Availability Source Availability Ship Availability Ship Availability Freight Rates Freight Rates Truck/Rail/Waterway Disruptions Truck/Rail/Waterway Disruptions Congested Ports & Terminal Limitations Congested Ports & Terminal Limitations Cement not a favored commodity Cement not a favored commodity Supply Constrained Market Supply Constrained Market No Near Term Relief from Current Conditions No Near Term Relief from Current Conditions

59. The Bottom Line Economy’s Growth Rate Slows Economy’s Growth Rate Slows Foundations for Growth Firm Foundations for Growth Firm Employment Employment Consumer/Investment Slowdown Consumer/Investment Slowdown Threats to Scenario are Distant Threats to Scenario are Distant Construction Sector Sustained Growth Construction Sector Sustained Growth Housing Strong Housing Strong Nonresidential Recovery Already Underway Nonresidential Recovery Already Underway Public Turnaround Near Public Turnaround Near Cement Industry Conditions Sustained Cement Industry Conditions Sustained Construction Growth Amplified By “Intensity” Gains Construction Growth Amplified By “Intensity” Gains Plant Capacity Utilization Remains Stretched Plant Capacity Utilization Remains Stretched No Near Term Relief for Tight Inventory Conditions No Near Term Relief for Tight Inventory Conditions Imports Remain Key Supply Feed to Market Imports Remain Key Supply Feed to Market

60. Regional Perspective

61. Regional Portland Cement Consumption (Million Metric Tons) 2002200320042005YTD Wisconsin 2.052.232.33 % Change -11%9%4%2% Illinois 4.113.99 % Change -1%-3%0%4% Indiana 2.082.182.24 % Change -8%5%3%-3% Iowa 1.731.721.84 % Change 2%-1%7%8% Michigan 0.080.130.23 % Change -12%-3%4%-7% Minnesota 0.060.090.14 % Change 1%4%0%-1% U.S.-4%4%7% 6% 6%

62. Real GSP - Wisconsin Annual % Change U.S.

63. Net Migration - Wisconsin (000) Persons

64. Population Growth - Wisconsin Annual Growth Rate U.S.

65. Single Family Permits - Wisconsin # of units

66. Multi-Family Permits - Wisconsin # of units

67. Key Markets Exposure - Wisconsin Cement Consumption as % of Total State Cement Consumption Residential: 29% National: 30% Residential: 29% National: 30% Nonresidential: 17% National: 16% Nonresidential: 17% National: 16% Commercial: 14% National: 13% Commercial: 14% National: 13% Industrial: 1% National: 1% Industrial: 1% National: 1% Office: 2% National: 2% Office: 2% National: 2% Public: 55% National: 46% Public: 55% National: 46% Highway: 40% National: 32% Highway: 40% National: 32% Cement per Capita U.S.:.368 Cement per Capita Wisconsin:.407

68. Clinker Capacity (000 Metric Tons) 19952004 Wisconsin 0 0 Illinois 2,544 2,770 Iowa 2,409 2,672 Indiana 2,610 3,191 Michigan 4,877 4,243 Minnesota 0 0 Region12,440 12,876+ 4% MMT Year Regional Expansions Monarch – Humboldt, KS.330 ’06 Eagle Materials – LaSalle, IL.430‘07 Buzzi – Festus, MO.900 ’08 Continental – Hannibal, MO.600 ’08 Holcim – St. Gen, MO 4.4‘08

69. Residential Cement Consumption Wisconsin Metric Tons

70. Nonresidential Cement Consumption Wisconsin Metric Tons

71. Public Cement Consumption Wisconsin Metric Tons SAFETEA-LU 2005-2009 3.56 $Bill (+30%)

72. Cement Outlook - Wisconsin Metric Tons

73. National & Regional Construction & Cement Outlook David E. Czechowski - Manager, Sr. Economist Economic Research Portland Cement Association March 3, 2006 La Crosse, WI