Investors presentation 30 January 2009
Disclaimer 2 This document may contain forward-looking statements. Such forward-looking statements do not constitute forecasts regarding results or any other performance indicator, but rather trends or targets. These statements are by their nature subject to risks and uncertainties as described in the Company s annual report available on its website (www.vicat.fr). These statements do not reflect the future performance of the Company, which may differ significantly. The Company does not undertake to provide updates of these statements. Further information about Vicat is available from its website (www.vicat.fr)
Contents 3 Vicat in brief Growth strategy and the "Performance 2010" plan A complementary cost reduction plan: Performance Plus 2008 full year sales
More than 150 years of experience 4 In 1817 Louis Vicat discovered artificial cement His son Joseph created the Vicat Company in 1853 From the 1970 s, on the spur of Jacques Merceron-Vicat, strong internationalization of the Group 2006 / 2007: launch of the Performance 2010 Plan leading to a 50% increase in production capacity over 4 years In June 2007, Vicat significantly increased its free-float following the sale of the HeidelbergCement stake in the Group s capital (from 5% to 35%) In 2007 / 2008, Vicat moved into Kazakhstan, India and Mauritania
Vicat, a solid Cement Group 5 A track record of operational excellence and profitable growth An integrated international Group with strong regional positions Innovative, first-class industrial facilities thanks to steady investment A solid long term growth outlook supported by significant investment Strong Cash flow generation allowing growth through the Group s own resources and creating shareholder value Family shareholders deeply involved in the Group s success
Facts & figures 6 3 activities: Cement / 45% of total 2008 operating sales Ready-mix concrete / 41% of total 2008 operating sales Other Product and Services / 14% of total 2008 operating sales 6,850 employees in 2008 Solid financial position (at 30/06/08) EBITDA margin : 25.5% Cash flow: 216m Gearing: 38%
Local presence in 11 countries 7 An International Group France Switzerland Italy United States Turkey Egypt Senegal Mali Mauritania Kazakhstan India 50% of the Group s sales generated outside France
8 Contents Vicat in brief Growth strategy and the "Performance 2010" plan A complementary cost reduction plan: Performance Plus 2008 full year sales
Founding principles of Group strategy 9 Preferential development of historic businesses Priority to the Cement business, the Group's core activity Strong regional positions Reinforced vertical integration strategy Ambitious, tightly managed growth model Organic growth supported by industrial investment and new products Selective acquisition policy implemented as opportunities arise Targeting markets with high organic growth potential in the short term
Main operational objectives of the Performance 2010 plan 10 Take advantage of the expansion of markets on which the Group is present More than 7 million tons of additional cement production capacity in 2010, compared to 2007 Total capacity of 21* million tons end 2010 Main leverage for improvements linked to the Plan: Business growth, especially in emerging countries Optimization of energy costs/ "multi-fuel" production facilities Reduction of maintenance levels of the new facilities Elimination of external procurement and internal transportation of clinker and cement *Excluding India and Kazakhstan
Performance 2010: 50% production capacity increase over the period 11 Kiln replacement: +2,000 tons of clinker per day 2007-2008 Increased capacity at Montalieu plant: +900 tons of clinker per day (2 phases) 2009 Increase in kiln capacity: + 600 tons of clinker per day End 2007 New Baştaş kiln: +4 500t of clinker per day Mill at Konya: +110 tons per hour 2007 New power plant: 23 MW 2008 Mill: 120 tons per hour Mid 2009 New kiln: +3,500 tons of clinker per day 2008 Capacity of Sinai Cement plant doubled: +5,000 tons of clinker per day)
Performance 2010 plan : update 12 In 2008, the Performance 2010 plan has been realized as scheduled : Egypt: Sinaï Cement's new kiln has started production in June 2008 France: new cement mill at the Montalieu site has started Senegal: new cement mill to be commissioned in the fourth quarter of 2008 and new 1.4m-tonne-capacity kiln is ongoing, and it should come into operation in mid-2009 Some aspects of the Performance 2010 plan will be adjusted to take account of the changing economic situation: Switzerland: Investment is being stepped up to respond to strong demand and to the lack of clinker capacity at Vicat's plant The project to increase cement capacity by 200,000 tonnes per year has been brought forward to the second half of 2009 (vs late 2010) United States: Vicat has decided to postpone investments in the Southeast region, as a result of the worsening market environment The new kiln was initially planned for 2010, but will now be commissioned when required by the market demand No financial commitments with suppliers
New kiln in Egypt 13
New Cement mill in France 14
New Cement mill in Senegal 15
External growth strategy 16 Targets compatible with the Group's size and own financial resources Valuation of targets in keeping with the Group's ROCE targets The Group expects a positive contribution of acquisition in the first year, or at the latest in specific situation in the third year Offering a leverage effect through: Ability to improve the target's operating performance thanks to the Group's business line expertise (e.g. Egypt) Existence of short and medium-term organic growth potential Meeting the Group acquisition criteria: Targeting strong regional markets with development potential Important and secured raw material reserves
External growth : 3 additional countries in 2008 17 Kazakhstan : Greenfield project Total investment of approx. $150 million Cement plant with annual capacity of 1.1m tons being brought into service in late 2010 Vicat is the majority shareholder : 60% IFC (World Bank) : 10% Kazkommerts Invest (local partner) : 30% Vicat's investment was financed on very good terms India: Greenfield project Total investment of approx : $625 million Cement plant with annual capacity of 5.5m tons (2 phases) The first kiln is expected to start production in late 2011 Vicat is the majority shareholder : 51% Sagar Cement : 49% Mauritania: acquisition of a 65% stake in BSA Ciment Cement mill with capacity of 450,000 tons per year This move into the fast-growing Mauritanian market strengthens Vicat's position in Western Africa
Cement mill in Mauritania 18
Contents 19 Vicat in brief Growth strategy and the "Performance 2010" plan A complementary cost reduction plan: Performance Plus 2008 full year sales
A complementary cost reduction plan: Performance Plus 20 Improvement and optimisation of cost-structure to respond to the current macroeconomic situation Credit crunch Reduction in visibility Targeted savings are currently being estimated in each country and will be announced early 2009 A three-pronged approach 1. Increase in effectiveness of industrial performance Reinforcement of purchasing policy Energy performance plan to maximise use of alternative fuels 2. Adaptation of cost structure to levels of activity Modulation of production rhythms of plants Reduction in maintenance costs, through an optimisation of scheduled plant shutdowns to reflect production levels Wage bill (interims and overtime) G&A Reduction objectives in Working Capital in all Group entities 3. Postponement of non strategic investments i.e. all investments except Those with short-term ROI such as alternative fuels External growth (India, Kazakhstan) When devoted to security, the environment
21 Contents Vicat in brief Growth strategy and the "Performance 2010" plan A complementary cost reduction plan: Performance Plus 2008 full year sales
Full-year outstanding points 22 Full-year sales down 3.0% at constant scope and exchange rates Solid performance, particularly in the Cement business, in view of severe deterioration in economic conditions Very strong financial position Vicat has pro-actively implemented a cost-cutting plan, called the "Performance Plus" plan and has leveraged its Performance 2010 investment plan whose objectives are the reduction of production costs and the reinforcement of its positions in its main markets NB: sales figures of the different businesses are here commented in terms of "constant scope of consolidation and exchange rates", or in other words, on a "like-for-like" basis, so as to reflect the real performance of the Group s activity.
Breakdown of consolidated sales by business 23 (millions of euros) 31 December 2008 31 December 2007 Reported Change (%) At constant scope and exchange rates Cement 929 929 0.0% +1.5% Concrete & Aggregate 845 914-7.5% -7.8% Other Products & Services 283 293-3.7% -2.4% Total 2,057 2,136-3.7% -3.0% The breakdown of sales between Vicat's various businesses was relatively stable The Cement business accounted for 45% of total consolidated sales, versus 44% at 31 December 2007 The Concrete & Aggregates' share was 41%, down 2 percentage points from 43% in the year-earlier period
Geographical breakdown of sales (1) France & Europe 24 France (millions of euros) 31 December 2008 31 December 2007 Reported Variation (%) At constant scope Consolidated sales 1,017 1,027-1.0% -1.4% The French market deteriorated gradually from July 2008. This trend gained pace in the fourth quarter, affected by : Severe deterioration in economic conditions Particularly unfavourable weather conditions Europe (excl. France) (millions of euros) 31 December 2008 31 December 2007 Reported Variation (%) At constant scope and exchange rates Consolidated sales 283 285-0.6% +0.6% In Switzerland, the construction market remained brisk in 2008 In Italy, market was affected by severe deterioration in economic and financial conditions in 2008, which gained momentum in H2
Geographical breakdown of sales (2) United States & Turkey 25 (millions of euros)1 31 December 2008 31 December 2007 Reported Variation (%) At constant scope and exchange rates US Consolidated sales 268 364-26.3% -25.8% Deterioration in economic conditions in the United States gained momentum throughout 2008 The construction sector continued the severe decline that began in the second half of 2007 Turkey & Kazakhstan (millions of euros) 31 December 2008 31 December 2007 Reported Variation (%) At constant scope and exchange rates Consolidated sales 187 201-7.2% -0.9% Economic conditions in Turkey deteriorated significantly in 2008, particularly at the end of the year The construction sector saw a decline in activity over the full year
Geographical breakdown of sales (3) Africa & Middle-East 26 Africa & Middle East (millions of euros) 31 December 2008 31 December 2007 Reported Variation (%) At constant scope and exchange rates Consolidated sales 302 259 +16.5% +17.1% In Egypt, sales were fuelled by continuing major infrastructure works and a buoyant domestic construction market Vicat capitalized on the commissioning of new production capacity in the Sinaï Cement plant Gains of market share In West Africa Sales in the region increased despite exceptionally heavy rainfall in the second half of the year Acquisition in Mauritania reinforces the Group s position in Western Africa Contribution to the Group s consolidated sales in this region has remained marginal
2008 financial outlook 27 Despite very severe deterioration in the global economic climate and unfavourable weather conditions at the end of the year in some of its major markets, the Group expects a solid performance: Stable EBITDA margin in the second half of 2008, or very slight improvement compared with the first half of 2008 (25.5%) A decrease in 2008 EBITDA margin relative to 2007 (27.8%) Gearing at 31 December 2008 symbolising the Group's solid financial position, expected to be lower than at 30 June 2008 (38%)
2009 outlook 28 As regards 2009, Vicat believes that given the lack of visibility as a result of recent changes in global economic and financial conditions, as well as the impossibility of being able to assess the potential impact of the various bailout plans in certain countries in which the Group operates, it is unable at this stage to formulate a precise and documented outlook on its potential financial performance for the current year
2009 outlook 29 Against the evolution of the current economic environment, Vicat is determined to continue with its growth strategy, capitalizing on: A financial position that the Group considers as particularly healthy, with one of the lowest gearings in the sector The effects of the implementation of the "Performance Plus" cost-cutting plan, which should gradually become evident over the course of the year in 2009. The Group confirms that details of the plan - in particular figures - will be announced when it publishes the 2008 full-year financial statements The effects of the "Performance 2010" investment plan, relating in particular to the reduction in production costs as a result of the modernizing of production facilities and the increase in the Group's production capacity. In 2009, Vicat should benefit fully from investments already made within the framework of this plan, particularly in France, Turkey and Egypt. In addition, from the second half of 2009, the Group should gradually benefit from the increases in capacity and improved production performance resulting from investments in Switzerland and Senegal
Appendix 30
2009 outlook - France, Switzerland 31 As regards 2009, Vicat believes that given the lack of visibility as a result of recent changes in global economic and financial conditions, as well as the impossibility of being able to assess the potential impact of the various bailout plans in certain countries in which the Group operates, it is unable at this stage to formulate a precise and documented outlook on its potential financial performance for the current year In France, the Group's performance is likely to be impacted at the begining of the year by very unfavourable weather conditions compared with 2008. Over the full year in 2009, the current economic crisis - in particular the credit crisis - is expected to affect the construction sector as a whole in France. Furthermore, it is unlikely that the initial effects of the bailout plan announced by the French government will enable the sector to make a significant rebound by the end of the year. The Group therefore expects volumes to fall sharply over the full year, particularly in cement. This should be partly offset by the expected increase in selling prices In Switzerland, conditions should remain positive overall, with the residential property market remaining healthy, major works programmes should continue in line with expectations and with favourable development in selling prices
2009 outlook - Italy, United States, Turkey 32 As regards 2009, Vicat believes that given the lack of visibility as a result of recent changes in global economic and financial conditions, as well as the impossibility of being able to assess the potential impact of the various bailout plans in certain countries in which the Group operates, it is unable at this stage to formulate a precise and documented outlook on its potential financial performance for the current year In Italy, the Group's performance is likely to be impacted at the start of the year by very unfavourable weather conditions. Over the full year, Vicat expects a further decline in the construction sector in general and pricing pressures relating to competitive conditions In the United States, the Group expects further deterioration in market conditions. In California, the evolution in the situation will depend in particular on potential investment by the State of California which - faced with major budgetary difficulties - is still waiting for Federal aid. The implementation of the national rescue plan could have a substantial impact on our markets. However, the location, nature and timing of investment are still uncertain In Turkey, the Group's performance is likely to be impacted at the start of the year by very unfavourable weather conditions compared with 2008. Over the full year, cement consumption is expected to continue to decline and current and future production overcapacity is likely to result in further pricing pressures
2009 outlook - Egypt, West Africa 33 As regards 2009, Vicat believes that given the lack of visibility as a result of recent changes in global economic and financial conditions, as well as the impossibility of being able to assess the potential impact of the various bailout plans in certain countries in which the Group operates, it is unable at this stage to formulate a precise and documented outlook on its potential financial performance for the current year In Egypt, while the Egyptian market does not seem to have been particularly affected by global economic and financial conditions as yet, its development in 2009 is still uncertain, particularly in the second half of the year. Growth in the domestic market and the Group's performance are likely to depend chiefly on government investment programmes and means of financing that could be made available. Meanwhile, exports are likely to be affected by competition resulting from overcapacity caused by the global decline in demand, accentuated by lower shipping costs. However, some regions should continue to offer interesting potential for growth in exports from this region In West Africa, market conditions are likely to continue to relate to public authorities' investment in major infrastructure projects and therefore their financing capacity. Furthermore, the residential construction market is likely to remain closely correlated to the development of financial transfers from the West African diaspora