CEMEX

PESTEL ANALYSIS

PESTEL ANALYSIS

Industry Analysis
Low barriers entry, capital intense Limited FDI by government Highly regulated
Threat of New Entrants Threat of Substitutes

MODERA TE

LOW

Decrease the use of cement in construction Proportion to use other material in construction but more expensive Consumer is price taker because the demand of cement is high

Company can own raw materials Concentrate supplier especially in China

ATTRACTIVE INDUSTRY

Strong multinational company, and many regional and national company Pace of acquisition

CEMENT INDUSTRY

Source: International Energy Agency, Cement Technology Roadmap

The Cement Product

Cement

Aggregates

Ready Mix

Concrete

Market needs by construction stages development

Source: Lafarge AR 2009

World cement production and consumption

Source: Global Research: Egypt Cement Sector, Global Investment

World Cement 2008 by Region

Source: Global Research: Egypt Cement Sector, Global Investment Hose, July 2009

Growth in World cement consumption

Source: Global Research: Egypt Cement Sector, Global Investment Hose, July 2009

World expected cement demand by region

Source: Global Research: Egypt Cement Sector, Global Investment Hose, July 2009

Facts
Emerging markets (notably China, India, Latin America, Central and Eastern Europe, Middle East and Africa) represent 77% of the worldwide market The cement demand in a country is generally driven by the growth in per capita income. Demographic growth, industrialization and urbanization progress tend to trigger a rapid growth in housing and infrastructure needs, leading to increased cement consumption Cement is a product that is costly to transport over land. Consequently, the radius within which a typical cement plant is competitive extends for no more than 300kilometers for the most common types of cement. However, cement can be shipped economically by sea and inland waterway over great distances, significantly extending the competitive radius of cement plants with access to waterborne shipping lanes.

Cost Of Cement
the cost of imported cement may be considered low, but the operating expenses make the final price 50% more costly. This follows from the cost of fuel, freight, manpower, the dependence on transport (logistics) and the electric power used in the Source: Philippe Lasserre- Globalisation Cement Industry-2007 operational process.

FINANCIAL STATISTICS FOR THE LEADING GLOBAL CEMENT COMPANIES FOR 2009

Source: Cementing the foundations of growth, International Finance Corporation,

Cemex (million US) 2008 ROE EBITDA Net Income Debt Ratio Free Cash Flow Sales Ebitda Margin Cement Sales # of Country 2.600 20.131 20.3% 1.215 14.544 18.3% 65 Mt 25 4080 1.409 2657 2.278 2009

Lafarge (million Holcim (million euros) US) 2008 2009 2008 10.4% 3.542 1.939 2.477 1.046 4.938 1.650 2009 8.6% 4.248 1.350

2.113 19.033 18.6%

2.834 15.844 15.6% 141 Mt 45

3.429 23.294 21.19%

3.567 19.387 21.9% 132 Mt 44

Source: Annual Report 2009

 Cemex
Overvalued Rinker Acquisition that sale again to Holcim Nationalization Cemex Venezuela Lack presence in Emerging Market Debt maturity Focus to increase market in maturity country where low growth in cement demand

 Holcim
Plants in Europe and North America in particular were shut down permanently The successful acquisition of Cemex Australia now Holcim Australia is a significant achievement. The transaction also included the increase in the shareholding in Cement Australia from 50 to 75 percent. capacity expansion program targeted at strategically important areas such as the plant expansions and new facilities in the cement sector were concentrated on growth markets, in particular the

 Lafarge
strategy focuses on opportunities in emerging markets. 69% of the 2009 consolidated sales of Lafarge Cement Division came from these markets 3.1billion euro reduction in net debt in 2009 Significant acquisitions
acquired several small-to-medium sized businesses (India, Middle East and Greece)

Significant divestitures in maturity and low growth market

Source: Cemex 2009 SUSTAINABLE DEVELOPMENT REPORT

Source: Holcim, AR 2009

Source: Cemex 2009 SUSTAINABLE DEVELOPMENT REPORT

Source: Holcim, AR 2009

Source: Lafarge AR 2009

Cemex Globalization Strategy

PRA-Merger Integration

Post Merger Integration

Cemex Way

Source: www.cemex.com/MediaCenter/Files/Winning_Globally.pd

Parenting Advantage in Cemex ACQUIRED

COMPANY CORPORATE PARENT e- groups CEMEX WAY Parenting Proposition
20% Retained practices

80% Best CORPORATE practice PARENT (benchmark ed again local practices)

Learning Organization (Culture)

Source Of The Problem

Rinker Acquisition overvalued Debt Maturity in 2008 & 2009 Homogenous BOD Not focus in cement but chase aggregate market Lack presence in emerging market Too many different systems, practices, and technologies, company risked becoming

Goals globally
Have more operations and more customers in more countries. A single platform of operation, and standardized business processes around the world. Aggressively share best practices throughout a well-integrated, global network. Develop an even stronger global brand, supplemented by a portfolio of product brands that are based in local markets. Increasingly flexible, increasingly capable, and increasingly diverse in management team

Expantion Strategy

High Production and Demand Opportunity to acquired local companies

World expected cement demand by region

Source: Global Research: Egypt Cement Sector, Global Investment Hose, July 2009

Geographic Location
L 2 H 2 C 1 L 6 H 6 C 6 L 8 H 9 C 5 L 15 H 6 C 2 L 9 H 10 C 2

L 5 H 9 C 6

L : Lafarge H: Holcim C: Cemex

Geographic Location
LAFARGE
France UK Greece Spain Germany Austria US Canada Poland Romania Russia Moldavia Ukraine Serbia Slovenia Czech Republic Brazil Mexico Ecuador Honduras French West Indies/Guyana

HOLCIM
France UK Spain Germany Switzerland Italy US Canada

CEMEX
France UK Spain Germany Austria Ireland US

Europe

North America

Central and Eastern Europe

Czech Republic Slovakia Hungary Croatia Serbia Romania Bulgaria Russia Azerbaijan Brazil Mexico Ecuador El Savador Nicaragua Costa Rica Columbia Argentina Chile

Poland Croatia Czech Republic Hungary Latvia

Latin America

Mexico Costa Rica Columbia Panama Dominican Republic Puerto Rico

Geographic Location
LAFARGE
Africa and Middle East Morocco Algeria Nigeria Iraq Jordan Zambia Egypt UAE South Africa Tanzania Kenya Uganda Cameroon Benin Malawi China Philippines Malaysia South Korea India Indonesia Pakistan Bangladesh Vietnam

HOLCIM
Morocco Guinea Ivory Coast Lebanon La Reunion Republic of Yemen

CEMEX
Israel UEA

Asia

India Sri Lanka Indonesia Bangladesh Thailand Singapore Vietnam Philippines Australia New Zealand

Philippines Thailand

Source: http://setis.ec.europa.eu/newsroom-items-folder/world-cement-production-2009/image

CURRENT SHARE OF CAPACITY OF THE MULTINATIONAL CEMENT MAJORS BY REGION

Opportunit y to entry

Source: FINANCIAL COMPETITIVENESS OF CEMENT COMPARED WITH OTHER BUILDING MATERIALS, Cementing the foundations of growth, J.P. Morgan, Estimates, Michel Folliet

FINANCIAL COMPETITIVENESS OF CEMENT COMPARED WITH OTHER BUILDING MATERIALS cement remaining the most protable compare to di erent building material segments

Source: FINANCIAL COMPETITIVENESS OF CEMENT COMPARED WITH OTHER BUILDING MATERIALS, Cementing the foundations of growth, J.P. Morgan, Estimates, Michel Folliet

CEMENT PRICE RANGE BY COUNTRY IN 2009

AVERAGE PRICE
lower absolute cost and a lower opportunity cost

Source: CEMENT PRICE RANGE BY COUNTRY IN 2009, Cementing the foundations of growth, J.P. Morgan, Estimates, Michel Folliet

Recommendation:
Restructurisation of debt maturity (divestiture asset, financial agreement with stockholders) Presence in BRIC and other emerging countries Flexible PMI to handle cultural and language barriers