1. Construction & Cement Outlook ACI/APRMCA 2007 Joint AGM February 16, 2007 St. John, NB David E. Czechowski - Sr. Canadian Economist Economic Research Portland Cement Association

2. Key Points of Analysis U.S. Economy Canadian Economy Canadian Cement Demand & Supply Atlantic Provinces Demand & Supply

3. Key Near Term Issues Oil Prices Oil Prices Is the recent rundown sustainable? Where is 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

4. (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

5. 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  Home appreciated reassessment Energy Prices Take a Bite Energy Prices Take a Bite Interest Rates Rising in Context of Record Debt Interest Rates Rising in Context of Record Debt Tapping Home Equity Bank Not as Attractive Tapping Home Equity Bank Not as Attractive Slowdown in Job Creation Slowdown in Job Creation Consumer Confidence Flat Consumer Confidence Flat

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

7. 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

8. Real GDP Growth --------2005------------------2006----------------2007------- 3.5% Qtr-Qtr Annual Growth Rate --------2008-------- 3.1%2.6%2.4% Risks On Downside -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4

9. 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

10. Housing 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 will rise Mortgage rates will rise Inventory Draw Inventory Draw Exotic mortgages losing favor Exotic mortgages losing favor Defaults/delinquencies deteriorate credit quality and tighten conditions Defaults/delinquencies deteriorate credit quality and tighten conditions Speculators reduced/disappear in lower appreciation rate environment Speculators reduced/disappear in lower appreciation rate environment

11. 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

12. 0.5 1.0 1.5 2.0 Million Units 989900010203040506070809 Single Family Starts

13. Nonresidential Construction Underlying nonresidential drivers improving Underlying nonresidential drivers improving Despite gains for 2006, most markets weak from historical perspective Despite 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

14. 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 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

15. Public Construction 120 140 160 180 200 220 Billions 1996$ 939597990103050709

16. U.S. Construction Outlook 500 600 700 800 900 Billions 1996$ 9395979901030506070809

17. Conclusions Residential Easement Modest Residential Easement Modest Mortgage Rate Increases Subdued Mortgage Rate Increases Subdued Affordability Improves Affordability Improves 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

18. U.S. Cement Outlook

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

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

21. 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

22. 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%

23. 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% 2006 1.2%

24. 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

25. Looking Forward Tight market conditions dramatically reduced Tight market conditions dramatically reduced Characterized by high operating rates Characterized by high operating rates Continued growth in Blended Cements Continued growth in Blended Cements Inventories lean and well managed Inventories lean and well managed Major expansion does not materialize until 2008 Major expansion does not materialize until 2008

26. U.S. 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 Add Extra Dose of Conservatism Prepare Contingency Plans Incorporating Downside Risks Prepare Contingency Plans Incorporating Downside Risks

27. Canadian Markets

28. Canadian Outlook Overall Performance Indicators Remain Solid Overall Performance Indicators Remain Solid Employment/Income Growth Supporting Domestic Demand Employment/Income Growth Supporting Domestic Demand The C$ will remain elevated The C$ will remain elevated - Hampering trade But + Keeping Inflation in check + Keeping interest rate increases muted Residential Construction Markets Residential Construction Markets Central provinces already weak Central provinces already weak Western provinces offer balance but also showing fatigue Western provinces offer balance but also showing fatigue Nonresidential Construction Emerging Nonresidential Construction Emerging Vacancy rates declining Vacancy rates declining Central provinces retooling to remain competitive Central provinces retooling to remain competitive Engineering Construction Engineering Construction Profits and revenue provide a means for investment Profits and revenue provide a means for investment

29. Oil Price Assumptions Strong International Demand Strong International Demand Japan/China/India Japan/China/India Supply/Production Disruptions Supply/Production Disruptions Middle East, Nigeria, Venezuela Middle East, Nigeria, Venezuela OPEC OPEC 2006: $65.83 (WTI - $/BBL) 2006: $65.83 (WTI - $/BBL) 2007: $60.30 2007: $60.30 2008: $58.86 2008: $58.86

30. Employment Growth -40 0 40 80 120 Thousands 0304050607

31. Employment Growth -40 0 40 80 120 Thousands 0304050607 Manufacturing Services

32. Economic Profile Canada Dollar Employment Mortgage Rates 2007 1.6% 2006 2009 2008 1.4%1.6%2.0%.862.876.848.882 7.1%6.9%7.2%6.7% Housing Starts 204212 205227 Construction Spending 0.5% -0.2% 1.9% 0.9%

33. Canadian GDP 0 2 4 6 8 Year-Year % Change 989900010203040506070809

34. Canadian Construction

35. Residential Activity Canada

36. Housing Starts 140 170 200 230 260 Thousand Units 9900010203040506070809

37. Nonresidential Activity Canada

38. Construction Spending 0.8 1.0 1.2 1.4 1.6 1.8 2.0 Index 1999=1.0 9900010203040506070809 Residential Nonresidential Engineering

39. Canadian Cement Industry

40. Industry Profile Consumption: 9 mmt Consumption: 9 mmt Clinker Capacity: 16.2 mmt (+1.2%) Clinker Capacity: 16.2 mmt (+1.2%) 16 Plants/8 Companies 16 Plants/8 Companies Production concentrated in Ontario/Quebec Production concentrated in Ontario/Quebec Average Kiln Capacity up 33% in last ten years Average Kiln Capacity up 33% in last ten years Grinding Capacity: 17.5 mmt (-2.6%) Grinding Capacity: 17.5 mmt (-2.6%) Imports - Clinker Imports - Clinker 50-90,000 Over last three years 50-90,000 Over last three years Mostly Turkish into Quebec Mostly Turkish into Quebec Imports - Cement Imports - Cement 650,000/Year Average (9% of Consumption) 650,000/Year Average (9% of Consumption) 90% from the U.S. mostly into Ontario/Alberta/BC 90% from the U.S. mostly into Ontario/Alberta/BC

41. Portland Consumption -10 0 10 20 30 40 Year-Year % Change 0304050607 5.1%5.0% 1.2%1.7%

42. 7 8 9 10 11 9798990001020304050607080910 Portland Consumption Million Metric Tonnes 5.1% 5.0% 1.2%

43. Cement & Clinker Exports 2 4 6 8 Million Metric Tonnes 8285889194970003 05 99% to the U.S. 99% to the U.S. Others Others Middle East Middle East Asia Asia Europe Europe South America South America 06

44. Cement Capacity Utilization 75 80 85 90 95 Percent 9596979899000102030405

45. SCM’s 0.90 1.00 1.10 1.20 1.30 1.40 Million Metric Tonnes 00010203040506

46. Cement Intensity Competitive price position vs. other building materials Competitive price position vs. other building materials Composition of construction Composition of construction Green environment Green environment Product Product 50 55 60 65 Tonnes/ Million 2005$ 9900010203040506070809

47. Competitive Materials

48. Atlantic Region

49. Employment Growth Atlantics -10 -5 0 5 10 15 20 Thousands 04050607 2.0% 0.2% 0.5%

50. Employment Growth Atlantics 1.3% Services 10.4% 0.1%Construction 3.4%2.3% Manufacturing 20042003 1.2% 0.1% - 8.2% 2005 1.1% 5.5% - 1.5% 2006 2.0%1.4%Total 0.2% 0.5%

51. Net Migration Atlantics -50 -25 0 25 Thousands 9900010203040506070809

52. Population Growth Atlantics -0.6 -0.3 0.0 0.3 0.6 Year-Year % Change 91939597990103050709

53. Real Economic Growth Atlantics 0 2 4 6 8 Year-Year % Change 969798990001020304050607080910

54. Housing Starts Atlantics 3 Month Moving Average 7 10 13 16 Thousand Units 0001020304050607

55. Residential Permits Atlantics

56. Housing Starts Atlantics 8 10 12 14 Thousand Units 9900010203040506070809

57. Nonresidential Permits Atlantics

58. Construction Spending Atlantics 20062005 2007 2008 -0.2%6.2%Total -0.6% 0.4% -4.8%3.4%Residential -5.3% - 2.9% 0.5% 12.1%Nonresidential 1.0% 1.5% 5.9%7.1%Engineering 3.1%

59. Atlantic Region Cement

60. Market Profile Atlantics Consumption:.577 mmt (2006) Consumption:.577 mmt (2006) Clinker Capacity:.520 mmt (2004) Clinker Capacity:.520 mmt (2004) 1 Plant (Brookfield) 1 Plant (Brookfield) Grinding Capacity:.616 mmt (2004) Grinding Capacity:.616 mmt (2004) Cement Imports (2003-2005) Cement Imports (2003-2005) 12 - 24,000 t/Y (2006 E = 10,000) 12 - 24,000 t/Y (2006 E = 10,000) Mostly from U.S. into N.B. Mostly from U.S. into N.B. Cement Exports (2003-2005 Average) Cement Exports (2003-2005 Average) 9 - 50,000 t/Y (2006 E = 25,000) 9 - 50,000 t/Y (2006 E = 25,000) From N.S. to Denmark/Venezuela From N.S. to Denmark/Venezuela

61. Key Markets Exposure Atlantics Cement Consumption as % of Total Provincial Cement Consumption Residential: 29% 33% Residential: 29% 33% Nonresidential: 28% 30% Nonresidential: 28% 30% Industrial: 7% 8% Industrial: 7% 8% Commercial: 14% 16% Commercial: 14% 16% Institutional: 7% 6% Institutional: 7% 6% Engineering: 37% 33% Engineering: 37% 33% Transportation: 19% 21% Transportation: 19% 21% Other: 17%12% Other: 17%12% National

62. Portland Cement Consumption Atlantics -40 0 40 80 Year-Year % Change 0304050607 10.3% -4.6% 0.3%6.5%

63. Concrete Products Markets Atlantics 24,56525,872Precast 17,98217,381Concrete Pipe 8,19812,441Brick & Block 20042003 29,346 20,681 7,573 2005 Tonnes 21,976 26,075 7,925 2006 Source: PCA Market Research – Consumption by User Group

64. Imports Atlantics 12,8788,358Portland 3041,283White 00 Clinker 20042003 21,874 642 0 2005 Tonnes Other* 2,5592,667 37,172 15,74112,308 59,688 7,903 303 0 2006YTD 2,044 10,250

65. Residential Cement Atlantics 50 100 150 200 250 Thousand Tonnes 9900010203040506070809

66. Nonresidential Cement Atlantics 100 150 200 250 Thousand Tonnes 9900010203040506070809

67. Engineering Cement Atlantics 140 180 220 260 300 Thousand Tonnes 9900010203040506070809

68. Portland Cement Consumption Atlantics 0.300 0.400 0.500 0.600 0.700 0.800 Million Metric Tonnes 9900010203040506070809 10.3%-4.6%0.3%

69. Provincial Outlook Atlantics Residential Residential Out-migration/interest rates dampen activity Out-migration/interest rates dampen activity Nonresidential Nonresidential Small dollars chasing growth Small dollars chasing growth Health/Education sectors carry upside potential Health/Education sectors carry upside potential Engineering contributes moderately Engineering contributes moderately Fiscal balance sheet softer Fiscal balance sheet softer Mega-projects on the wind down Mega-projects on the wind down Dollar pressing tourism Dollar pressing tourism Tar Ponds project begins to unfold Tar Ponds project begins to unfold

70. Construction & Cement Outlook ACI/APRMCA 2007 Joint AGM February 16, 2007 St. John, NB David E. Czechowski - Sr. Canadian Economist Economic Research Portland Cement Association