ACC History and Operations

Sumit Banerjee Managing Director, ACC Mumbai, September 27, 2007

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Content
Brief history about ACC Positioning in Indian cement industry Financial performance Cost drivers Expansion projects Financing of expansion projects Conclusion

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ACC: The Indian cement icon a brief history

Established 1936 as a result of a merger of 10 existing companies long and proud history
- 1945 - First CSR initiative Rural Welfare Scheme at Sevalia (Gujarat) - 1947 - Indias first indigenous cement plant, designed and built by ACC at Chaibasa - 1956 - Pioneered bulk cement distribution at Okhla, Delhi - 1961 - First production of slag cement in India at the above plant - 1965 - Central Research Station at Thane opened - 1979 - Award of Management contract: Yanbu (Saudi Arabia) - 1982 - Indias first indigenous 1 mtpa plant built by ACC (Wadi) - 1993 - Pioneered Commercial Ready Mix Concrete in Mumbai - 2004 - ACC named Indias only Super Brand in cement sector - 2004 - ACC raised US$100 mil through GDRs / FCCBs, listed on LSE - 2005 - Holcim acquired major stake in ACC through ACIL - 2006 - ACC restructured into three regional profit centers
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ACCs recent history: diversification and refocus

Timing Early 1980s Partial decontrol of industry Late 80s early 90s Full decontrol Rapid growth of new competitors Mid 90s Favourable demandsupply balance due to economic growth Late 90s Lafarge entry Significant capacity addition Early 00s Entry of MNCs Consolidation Favourable demandsupply balance Innovate Organisational transformation and vision exercise Several new initiatives around brand, service, people development, brown field expansions, plant optimisation, etc Operational strengthening

Critical external factors

Business as usual Started as leading player; gradually lost share Old plants (wet process) with high cost structure

Survive 5 non-performing old plants, mostly wet process, sold off to generate cash and reduce fixed cost

Diversify Growth in profits Several JVs with global companies in diversified areas like tyre, glass, machinery, food processing, casting, soft ferrites, advanced micromaterials

Consolidate Poor financial condition Sell off/shut-down of several unrelated businesses Key operational initiatives launched blended cement, cost reduction etc. Modernization of several plants

ACC direction

Market Share

~ 28 20%

~ 17%

~ 14%

~ 11%

~ 13%

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Content
Brief history about ACC Positioning in Indian cement industry Financial performance Cost drivers Expansion projects Financing of expansion projects Conclusion

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ACC is the largest cement player in India A market share of 12.8%

2006 Market Share of major cement players in India

ACC; 12.80% Others; 41.00% ACL; 10.70%

Madras Cement; 3.20% Lafarge; 3.20% Jaypee; 4.10%

Grasim; 10.40% Ultratech; 9.50% India Cement; 6.00%

Top 5 players have ~50% market share

Source: CMA & Company Reports

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Market share development

1

North market share: 16.1%

5

3 4 8 9

2 6 11 10 29 12 13 68 14 16 22 23 20 65 66 72 71 67 33 34 35 73 15 60 61 21 63 64 70 62 69 74 76 75 7

ACCs current market share is ~12.8%

East market share: 16.5%

26

28 27

25 30

18 17

Cement demand is expected to grow @ 9-10% CAGR over the next five years ACCs intends to increase its market share in the attractive markets

19 45 48 50 51 49 53 52 32 40 41 42 44 37 43 55 46

24 47 31

36

ACCs market share > 15%

54

56 57 38 39 58 59

10-15% 5-10& 0-5% Excluded

South & West market share: 8.9%

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234460-19 ACC BP 12-7 MC Deck-22Jun07-FS-MUM v6.ppt

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ACC pioneered ready mix concrete in India

RMX is a $2.3 billion market in India and is expected to grow at over 30% CAGR over the next five years In 1993 ACC Pioneered Commercial RMX in Mumbai and the current market share is ~4.2% ACC is separating RMX business into a subsidiary company ACC Concrete Limited ACC Concrete to be a significant player in all major urban centers in India in next five years ACC has about 20 RMX plants spread all across India ACC Concrete aspiring to achieve ~13% market share by 2011

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Content
Brief history about ACC Positioning in Indian cement industry Financial performance Cost drivers Expansion projects Financing of expansion projects Conclusion

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ACC financial performance showing improving trajectory

2002-03 ROCE (%) ROE (%)
Sales and EBITDA (USD Million)**

2003-04

2004-05

2005 *

2006

9 10
1600 1400 1200 1000 800 600 400 200 0
91 671 776 14%

12 15

18 24

18 33
35%
30%

38 39

30% 25%
EBITDA Margin (%)

16%

18%

19% 1341

20% 15% 10%

397

904 163

749 143

5% 0%

121

2002-03

2003-04

2004-05
EBITDA

2005 *

2006

Sales Revenue

EBITDA Margin

ACCs EBITDA in FY2006 witnessed an impressive growth

* Figures for 2005 pertain to 9 months period April December 2005 ** 1 USD = INR 44.28 (31/12/2006 Exchange Rate

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EBITDA / ton more than doubled in 2006 and EBITDA margins in cement increased to 32%
Factors contributing towards increased EBITDA / ton
EBITDA Margin (%)

25
EBITDA** / Ton of Cement (USD)***

32%

35% 30%

20
21% 20%

25% 20%

15 10 5
5
13%

17%

21 10 10

15% 10%

Clinker factor improvement Logistics optimization Product mix rationalization Sales realizations

7
2003-04

5% 0%

0
2002-03 2004-05 2005 * EBITDA Margin 2006 EBITDA / Ton

* Figures for 2005 pertain to 9 months period April December 2005 ** EBIDTA pertains to Cement segment *** 1 USD = INR 44.28 (31/12/2006 Exchange Rate)

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Content
Brief history about ACC Positioning in Indian cement industry Financial performance Cost drivers Expansion projects Financing of expansion projects Conclusion

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Cost drivers and mitigation measures

Captive power plants, AFR
Power

AFR / process efficiency

Fuel (coal)

Clinker content

Composite cement Grinding facility close to end user, production close to raw materials Network optimization
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Transport

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Continuous reduction in fuel consumption

790 780 K CAL/Kg of Clinker 770 760 750 740 730 720 710 2002-03 2003-04 2004-05 2005 2006 753 745 736 782 775

Use of imported coal Improving efficiency of kilns Upgrading wet to dry kilns (Chaibasa) Increased share of production from dry kilns

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Content
Brief history about ACC Positioning in Indian cement industry Financial performance Cost drivers Expansion projects Financing of expansion projects Conclusion

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Captive power expansion

Utility supply is unreliable and expensive Captive power generation improves reliability and also brings down the average electrical energy cost by almost 38% from Rs.3.40 to Rs.2.10 per KwH Ash generated from captive power plants is used in cement grinding to improve clinker factor Installing captive power plants requires large capital investments (~ INR 50 million per MW) ACC plans to install captive power plants for all plants to improve reliability and reduce energy cost ACC is also considering alternate energy resources and is installing 9 MW wind power project, which is expected to be fully commissioned by Sept 2007 16
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Captive power generation is keeping pace with cement production

2500 Power Generation/Consumption (Million KwH)

Cement Production CAGR Captive Power Generation CAGR

15.3

8.69% 9.32%

18.7

20 18 Cement Production (MTPA)

2000
13.4 1492

14.7 1602

1950 12.93 1404 1344

16 14 12 10

1620

1500
1199 1215

1000

941

975

8 6

500

4 2

0 2002-03 2003-04 2004-05 2005* 2006

Cement Production

Total Power Consumption

Captive Power Generation

* Figures for 2005 pertain to 9 months period April December 2005

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ACC has national presence in attractive markets

Market attractiveness
1

Asian Cement (0.2 MTPA)

3 5 4 8 9 26 11 10 29 12 13 28 27 25 30 21 23 20 19 45 48 46 24 66 47 31 32 40 41 42 35 44 37 38 39 58 59 43 55 56 57 54 34 33 67 65 22 18 17 14 16 2 6 7

Gagal (4.4 MTPA)

High

Tikaria (2.3 MTPA) Kymore (2.2 MTPA)

68 15 60 61 63 64 62 72 71 73 70 69 74 76 75

Medium Low Very low Excluded

Lakheri (1.5 MTPA)

Sindri (0.9 MTPA) DCSL (0.7 MTPA) Chaibasa (0.9 MTPA) Shiva (0.2 MTPA)

Chanda (1 MTPA) Alcon Cement (0.2 MTPA) Wadi (5.5 MTPA)

50 51

49 53

52

BCL (1.2 MTPA) Jamul (1.6 MTPA)

36

Madukkarai (1 MTPA)

Indicates franchise agreement for cement grinding

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Cement capacity expansion

North
Tikaria (UP) (G)| 0.3 Mtpa | 2007 Lalheri Expansion (RJ) (B) | 0.8 Mtpa | 2007 ACC Kymore (MP) (B) | 0.5 Mtpa | 2007

East
Bargarh (OR) (B)| 1.1 Mtpa | 2009

South & West

New Wadi Clinker Expansion (KA) (B) 1.8 Mtpa | 2009 Grinding unit at Bellary (KA) (G) 1.1 Mtpa | 2009 Grinding unit at Kolar (KA) (G) 1.6 Mtpa | 2009 Madukarai Expansion 0.2 Mtpa | 2008

Market attractiveness3 High Medium Low Very low Excluded Key Metros ACC Plants New ACC Plants

Capacity initiatives would allow ACC to maintain its market share

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Content
Brief history about ACC Positioning in Indian cement industry Financial performance Cost drivers Expansion projects Financing of expansion projects Conclusion

20

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Financial position
2002-03 Cash flow (USD Mn)** Cash flow (%) *** Debt:Equity 100 109 1.46 2003-04 108 90 1.09 2004-05 135 83 0.96 2005 * 145 102 0.55 2006 321 81 0.29

Cash flow from operating activities are growing constantly Cash flow as a % of EBIDTA reduced in 2006 due to high income tax payment ( in 2005 tax was less due to tax carry forward losses) Debt Equity Ratio constantly reducing due to strong operating cash flows

Strong cash flows and low debt equity ensures financial flexibility for new projects
* Figures for 2005 pertain to 9 months period April December 2005 ** indicates Cash flows from Operating activities *** indicates Cash flows from Operating activities as a % of EBIDTA

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Content
Brief history about ACC Positioning in Indian cement industry Financial performance Cost drivers Expansion projects Financing of expansion projects Conclusion

22

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Conclusion
Solid market position with vast footprint in attractive markets Respected player known for efficient production processes and high cement quality Geared up to enter fast growing ready mix concrete in major population centers History of strong operational and financial performance improvements EBITDA margin and active strategies in place for cost management Clear expansion plans to grow within the attractive markets and an internal financing capability to fund expansion projects
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Disclaimer
Cautionary statement regarding forward-looking statements
This presentation may contain certain forward-looking statements relating to the Groups future business, development and economic performance. Such statements may be subject to a number of risks, uncertainties and other important factors, such as but not limited to (1) competitive pressures; (2) legislative and regulatory developments; (3) global, macroeconomic and political trends; (4) fluctuations in currency exchange rates and general financial market conditions; (5) delay or inability in obtaining approvals from authorities; (6) technical developments; (7) litigation; (8) adverse publicity and news coverage, which could cause actual development and results to differ materially from the statements made in this presentation. Holcim assumes no obligation to update or alter forward-looking statements whether as a result of new information, future events or otherwise.
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