A CHALLENGING BET Future concrete Lebanon 2014 Adib El Hachem Sales and Marketing director
Presentation PLAN: 3 parts (A,B and C) Part A Lebanon: 2014 -Facts and figures -Economical situation -Political challenges -Demographical projection -Oil and Gas -Cement Players Capacity Market Import / Export Part B Syria: 2014 -Facts and figures -Economical situation -Political challenges -Demographical projection -Oil and Gas -Cement Players Capacity Market Import / Export Part C : C.N new 2 Mt project 2014-2017 Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 2
Part A: Lebanon: Introduction, facts and figures Geography Surface (km2) 10452 Coast Length (km) 210 Maximum Altitude (m) 3083 Average Coastal rain (mm/y) 883 Demography Population (millions) 4.1 Population growth rate 1.2% Population density (per km²) 392 Urban population/total population 87% Active labor force (millions) 1.53 Life expectancy at birth 72 Education Adult literacy rate 87% Male 92% Female 81% Breakdown of economic activity Agriculture 14% Industry 25% Services 61% Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 3
Part A : Lebanon: Economical situation Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 4
31-01-2004 30-04-2004 31-07-2004 31-10-2004 31-01-2005 30-04-2005 31-07-2005 31-10-2005 31-01-2006 30-04-2006 31-07-2006 31-10-2006 31-01-2007 30-04-2007 31-07-2007 31-10-2007 31-01-2008 30-04-2008 31-07-2008 31-10-2008 31-01-2009 30-04-2009 31-07-2009 31-10-2009 31-01-2010 30-04-2010 31-07-2010 31-10-2010 31-01-2011 30-04-2011 31-07-2011 31-10-2011 31-01-2012 30-04-2012 31-07-2012 31-10-2012 31-01-2013 30-04-2013 31-07-2013 31-10-2013 Part A: Lebanon: Economical situation 180 160 140 120 100 80 60 40 20 0 Lebanese banks : Total balance sheets in billions of $ World financial crises Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 5
Part A: Lebanon: Political challenges Political Milestones in Lebanon: New Government: P.M Salam appointed (April 2013) new prime minister and cabinet formed Feb 2014. End of President Sleiman mandate May 2014 Presidential elections:???? New Government: New prime minister and ministers to be nominated after presidential election???. Parliament elections in Lebanon in Nov. 2014 Huge fear from the spill out of the Syrian crisis to Lebanon Lebanon has to accommodate over 1.5 million Syrian refugees and 0.5 million Palestinian refugees on top of his 4.5 million inhabitants. International fear from a 3 to 4 millions refugees by end of 2015 Huge stress on the infrastructure already outdated: telecom, road, water, schools. hospitals Conclusion: A tense Scenario Can Lebanon cope with these challenges? Will the international community help? Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 6
Part A: Lebanon : Demographical situation A steady demography Lebanon Demography Due to low population growth rate: below 1% and a traditional expatriation mood, over 10 million Lebanese expats Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 7
Part A: Lebanon: Oil and gas reserves : Estimated at over 600 Billion $ After the announcement of Lebanese ministry of power, stating that Lebanese coast contains considerable resources of Oil and Gas 52 international oil firms have submitted applications to the Petroleum Administration Committee. Proceeds from oil and gas exploration could reach 600 billion dollars The current estimate, under a probability of 50 percent, for almost 45 percent of our waters has reached 95.9 trillion cubic feet of gas and 865 million barrels of oil. The figures are the first estimates by the government for such a large area of Lebanon's 10 exploration blocs, which range from 1,500 to 2,500 square kilometers, and appear to imply higher reserves than several previous estimates. An analyst at survey firm Spectrum estimated in May that the country's total deep water gas reserves could be up to 80 trillion cubic feet. Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 8
Part B:LEBANON CEMENT MARKET 3 cement manufacturers in Lebanon: C.N: Production capacity: 3MT Holcim: 2.2MT Sibline : 1.3MT 6,000,000 5,000,000 Total Lebanese cement market Total Lebanese cement production is around 6.5MT 4,000,000 3,000,000 Total Lebanese Market is increasing 10% if we compare apple to apple the first 5 months of 2013 Vs 2014, although we are expecting an increase not exceeding 5% by year end. Total of around 6.1Mt in 2014 (5.8Mt in 2013) 2,000,000 1,000,000 0 2008 2009 2010 2011 2012 2013 2014 till May Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 9
Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Part A: Lebanon :Local Market: 2004 2013 6000000 5000000 construction permits m2 4000000 3000000 2000000 1000000 0 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 CN HOLCIM SIBLINE CMO* HOLCIM SIBLINE CMO* TOTAL 1,000,000 0 Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 10
Part A: C.N local deliveries and exports C.N has over 42% of the local market share. Since 2010 C.N is the only Lebanese cement exporter 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2008 2009 2010 2011 2012 2013 2014 till May On top of the cement C.N sold 155,523T of clinker to the local market in 2013 In 2014 till may, the local C.N clinker sales are 82,423T C.N local deliveries are expected to reach around 2.6Mt by end 2014. (around 5% increase compared to 2013) 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 2008 2009 2010 2011 2012 2013 2014 till May C.N exports are expected to reach 100,000T by end 2014 (even though we are at 6000T till May) (52% decrease compared to 2013) Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 11
Part A: CN Export by Country 2010 till May 2014 (in 000 mts) 2013 2012 2011 2010 Cement Clinker TOTAL Cement Clinker TOTAL Cement Clinker TOTAL Cement Clinker TOTAL Syria Iraq Egypt Lybia Spain Cyprus Portugal Italy Greece Georgia 38 38 367 367 186 186 425 425 - - 1 1 15 15 36 36-35 35 94 34 128 64 64 19 19 7 7 14 24 24-63 63 48 48 104 104 47 47 - - 16 16-19 19-5 5 24 24 TOTAL 102 142 244 374 80 454 222 144 366 534 81 615 42% 58% 100% 82% 18% 100% 61% 39% 100% 87% 13% 100% Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 12
Conclusion for Lebanon We consider that the cement market in Lebanon : 2014 it is at the peak, (5.75Mt/year) It will drop on the medium term, it could reach 4Mt /year depending on the political and economical situation in the country, unless locally sold smuggling into Syria resumes. On the long run, the market could peak up again especially after : 1-Beginning of Oil and Gas exploitation 2- Settlement in Syria 3-Launching of major infrastructure projects needed in the country like dams, power stations, highways etc 2014 2019 2023 Page 13
Part B: Syria facts and figures Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 14
Part B: Syria: Economy $ Vs Syrian Pound? Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 15
Part B: Syria: Political challenges Political Milestones in Syria: Presidential elections in 2014. New Government: New prime minister and ministers to be nominated after presidential election. On going war, with several parties involved 140,000 people killed 2 million houses destroyed. Severe damage to the infrastructure. Millions of refugees. Conclusion: Very difficult and unstable situation Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 16
Part B: The Levant ethnic composition: What a challenge Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 17
Part B: Syria: Demographical situation A fast growing population Syria Demography Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 18
Part B: Syrian Oil And Gas: Little-Known Facts on Syria s Energy Resources Syria possessed 2.5 billion barrels of crude oil as of January 2013, which makes it the largest proved reserve of crude oil in the eastern Mediterranean according to the Oil & Gas Journal estimate. But after two and a half years of war, exploration is at a standstill since international oil companies once operating in Syria have abandoned their operations as the violence escalates and sanctions target Syria s energy sector. Russia, is the only remaining international partner still helping develop Syria s oil and gas resources in the past year. International Business times :Saturday, March 01, 2014 As of 4:34 AM EST Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 19
Part B: Syria: Cement players Total cement capacity in Syria (estimated): Nominated capacity (e) 10.5Mt : / Real production (e) : 4.2Mt in 2013 Private Plant Nominated Capacity Avg Sales 2013 (production) Lafarge 3Mt 1Mt Al Badya 1.5Mt 0.7Mt TOTAL 4.5Mt 1.7Mt UCC : under construction (very slow due to the war) Public Plant Nominated Capacity Avg Sales 2013 (Production) Tartous 2Mt 0.7Mt to 1Mt Hama 2Mt 1.5Mt Halab 1.5Mt 0Mt Adra 0.5Mt 0.3Mt TOTAL 6Mt 2.5Mt Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 20
Part C : Lebanon and Syria : Actual and future Consumption per capita 20 Our projection for cement consumption in Syria (Mt/year) 2023 8 2008 2014 2019 4 Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 21
Part C: C.N new project announcement The CEO of Cimenterie Nationale announced 2MT increase in production line by 2017 New Two Million Ton Cement Production Line Announced in Chekka The Chairman and CEO of Cimenterie Nationale SAL, Pierre J. Doumet, announced today that the Board of Directors of the Company has authorized the launch of detailed engineering work on a new state-of-the art, energy efficient five thousand ton per day clinker production line in Chekka, translating into approximately two million tons per year of cement, to complement and, in the future, replace some of its oldest existing production facilities. 'The local market remains strong', Doumet said,'and export to neighboring countries will surge sooner or later'. We want to be ready with a facility that exceeds all current worldwide emission, CO2 and energy-saving norms. Cement has been our trade for 60 years and represents a promising field of excellence for Lebanese industry in the future. Our banks have already agreed to back this new line and we are ready to move in a fast yet professional fashion, Doumet added. Cimenterie Nationale was founded in 1953, and has grown to become a leader in the cement sector. Throughout its years of activity, the company has sought to preserve high standards of ethics and integrity which are clearly reflected in the role that Cimenterie Nationale is playing as a community member. This role is expressed in numerous ways: being a factor of economic development by providing job opportunities and developing the industry, safeguarding the environment by continuously investing in its ISO-certified production facilities to keep them environmentally friendly and contributing to the well-being of the community by undertaking various social and socio-economic efforts. Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 22
Part C: C.N new project announcement Quantities: 10 years forecast 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 C.N Clinker Production(Mt) 2.4 2.4 2.4 3.8 3.8 3.8 3.8 3.8 3.8 3.8 C.N cement production capacity (Mt) 2.8 2.8 2.8 4.4 4.4 4.4 4.4 4.4 4.4 4.4 Price Lebanon: Prices shall probably remain the same with a slight tendency to increase When the demand was around 10Mt in Syria, our FOT prices were as follows: ($/t) 100 80 Prices in Syria ($/t) 60 40 20 Bags Bulk 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Above prices are subject to a considerable increase when the demand goes up International prices might be subject to change if US demand increase. Cost Cost efficient due to newest technology. Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 23
Part C: C.N new project announcement Projections : Several Scenarios can happen in the local market and the region (especially Syria) each one will have its weight on the C.N 2MT increase in production. Several Scenarios 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Cement production (Mt) 6.3 6.3 6.3 8 8 8 8 8 8 8 Holcim +Sibline cement capacities 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3 scenarios for the local demand might occur for the coming years: Sustained demand : Average 5.5Mt /year Soft landing then recovery :Average 5. Mt /year Hard landing then slow recovery: Average 4.5Mt /year Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 24
Part C: C.N new project announcement Projections : Impact on the Lebanese cement exports to Syria Strong Syrian Market recovery: over 13Mt / year Smuggling + Land export Between 1.5 and 2.5Mt /year Average Syrian Market recovery: around 10Mt / year Smuggling + Land export Between 1Mt /year and 2.5Mt/year Weak Syrian Market recovery: around 8Mt/ year Smuggling + Land export Between 0.5Mt /year and 2.5Mt/year The capacity in Lebanon will increase from 6.3 to 8 Mt Local market +Sales from lebanon to Syria (Mt) Sustained Soft landing Hard landing Syrian market (Smuggling + land export) 5.5 5 4.5 Strong Syrian recovery 2.5 8 7.5 7 Avg Syrian recovery 2 7.5 7 6.5 Weak Syrian recovery 1.5 7 6.5 6 Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 25
Part C: C.N new project announcement: excess cement for sea export Several combinations, leading to several scenarios can take place, if we consider, the local market drop (Sustained, soft landing, hard landing) Vs the effect of Syrian market recovery (Hard, Average or weak) Hereunder we will expose the soft landing of local market Vs each Syrian market scenario. Excess for sea export: 2.5 2 1.5 1 0.5 (Soft landing+strong recovery) (Soft landing+average recovery) (Soft landing+weak recovery) 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 26
Part C : C.N new project announcement Export challenges : C.N should invest in both bulk and bags fleet (around 100 trucks), to smoothly lift over 1 Mt /year to Syria by land. Export by sea might not be cost efficient compared to export by land (trucks), consequently C.N should invest in state of the art loading logistics at its own Chekka port. The combination of the above scenarios shows that excess quantities could remain, and consequently we should look at import markets around the Med (Egypt, Lybia ), the US, or Southern EU. C.N can also stop the less cost efficient Kilns during the hard years (when the excess for sea export is above 0.7Mt). Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 27
Part C: 2004-2013: Clinker Production (in Mt) Kiln V nominal capacity to be 1.4Mt. KII & III KIV Total 2004 910,408 678,957 1,589,365 2005 921,763 666,542 1,588,305 2006 916,425 674,170 1,590,595 2007 916,274 764,069 1,680,343 2008 926,611 1,316,430 2,243,041 2009 1,008,908 1,378,392 2,387,300 2010 1,000,140 1,383,868 2,384,008 2011 923,333 1,439,168 2,364,501 2012 971,613 1,406,467 2,378,080 2013 974,462 1,430,915 2,405,377 Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 28
Conclusion C.N is ready to take the challenge and go for the 2 Mt production increase from 3 to 5Mt despite the risk of : The situation in Syria taking time before recovery The tough situation in Lebanon Copyright 2011 Cimenterie Nationale. All rights reserved. No part of this presentation in all its property may be used or reproduced in any form without a written permission Page 29
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