Press release

At a meeting yesterday chaired by Giampiero Pesenti, the Board of Directors of Italcementi S.p.A. examined and approved the consolidated quarterly report at September 30, 2007.
Sales volumes in the third quarter of 2007 showed a slight improvement (+1.3% on the year-earlier period) in the cement business, where, including the newly acquired Fuping Cement in China, they reached 16.6 million metric tons. Ready mixed concrete sales volumes rose by 8.1% to 5.7 million cubic meters, in part as a result of the recent acquisitions in North America and Egypt. Performance in aggregates slackened (-5.9%), to 14 million metric tons. At constant size, sales volumes were slightly lower in cement and ready mixed concrete, although the trend was stronger than in the previous quarter.
Performance in the third quarter enabled the Group to report a small increase in cement sales volumes for the January-September period (+1.4%) to 49 million metric tons, with positive contributions in the Med Rim countries and Western Europe offsetting the downturn in Italy and the reduction in North America, which in any case was significantly smaller than the reduction at the beginning of the year. The slowdown in aggregates sales volumes (-0.9%) to 44 million metric tons reflected declines in Spain, Greece and Italy set against positive performance in France, Belgium, Thailand and North America. In ready mixed concrete, sales volumes gained 6.6% to 17.1 million cubic meters, due in part to the enlargement of the consolidation area.
Italcementi Group business performance in the third quarter of 2007 saw consolidated revenues rise to 1,540 million euro (+3.9% on the year-earlier period); this growth was supported by higher revenues per unit, which produced turnover growth in all countries except Italy and Greece. Higher operating expenses led, however, to a reduction in recurring gross operating profit to 385.6 million euro (-3.2%) and in operating profit to 278.2 million euro (-4.7%).
In the first nine months, when the enlargement of the consolidation area more than made up for the negative exchange-rate effect, the Italcementi Group reported revenue growth to 4,613.1 million euro (+5%), with positive performance achieved in all geographical macro-areas with the exception of North America. At constant size and exchange rates the increase would have been 4.2%.
During the same period, the trend in revenues per unit failed to absorb the full increase in operating expenses (especially for energy, transport and personnel): this generated a contraction in recurring gross operating profit to 1,105.6 million euro (-2.3%) and in operating profit to 786.3 million euro (-5%) largely as a result of the slackening in North America and Egypt—also affected by an unfavorable exchange rate—and in Italy, counterbalanced in part by positive operating results especially in France, India, Bulgaria and Kazakhstan. The slowdown in operating profit was also caused by higher depreciation and amortization to 330 million euro (+6.6%).
Consolidated net profit for January-September 2007, after higher finance costs and tax expense—the latter as a result of non-recurring expense counterbalanced by non-recurring income relating to 2006—, reflected a downturn to 466 million euro, -11.2% in respect of the record levels posted last year. Group net profit was 315 million euro (-10.7%).
Net debt at September 30, 2007, was 2,408 million euro (2,210.3 million euro at December 31, 2006) after a significant increase in investments in fixed assets to a total of 763 million euro (590 million euro in the first 9 months of 2006). Investments in property, plant and equipment were mainly for modernization and upgrades to Group industrial facilities. The completion of the important investment program will provide the Group with greater capacity and more efficient plant in the coming years, which, together with the measures being planned to contain costs, will improve industrial margins. During the nine months, investments in financial fixed assets included the purchase of Ciments Français shares by Société Internationale Italcementi France, which raised its stake to 77.24%, while Ciments Français increased its treasury stock to 2.93%. In the first nine months Italcementi S.p.A. purchased 1,003,071 treasury shares; at September 30 its treasury shares represented 2.14% of share capital.
At the end of September, gearing (net debt/equity) rose to 51% from 47.4% at December 31, 2006.
After closure of the third quarter, a preliminary agreement was signed with Cementilce srl for the purchase of a cement grinding center in Ravenna, with an annual production capacity of approximately 500,000 metric tons. The acquisition will strengthen Group operations in Italy, enhancing its industrial installations with a flexible, modern plant. Execution of the agreement, with closing expected by the end of January 2008 on a valuation of approximately 50 million euro, is subject to approval by the Antitrust Authority.

With regard to the full-year outlook, persisting turbulence in the economic scenario will continue to affect the international situation, with direct and indirect consequences on the construction industry. In light of the results for the first nine months of the current year and a probable fourth quarter in line with the year-earlier period, at the present time the Group expects operating results to be close to the very positive results reported in 2006, subject to unforeseeable events and meteorological conditions. As noted, consolidated net profit will be adversely affected by non-recurring tax expense set against non-recurring tax income relating to 2006.

In the third quarter of 2007, Group aggregate sales volumes at constant size were down on sales volumes in the year-earlier period; the trend slowed compared with the second quarter, and varied from one market to another.
In cement and clinker, healthy performance in Trading and in the emerging countries as a whole, primarily Morocco, virtually counterbalanced the downturn in the mature countries, notably Italy and North America.
Performance in aggregates reflected a slackening in Central Western Europe due to the decline reported in Spain and, to a lesser extent, in Greece, offset only in part by lively performance on the French market.
The limited reduction in ready mixed concrete arose from contrasting market trends, with growth in Egypt, France and North America, and a decline in Turkey, Italy and Thailand.

In the year to September 30, Group aggregate sales volumes at constant size were slightly down on the first nine months of 2006.
A small decrease was reported in cement and clinker, where the lively performance of the emerging countries (especially Morocco, Egypt and, on the strength of the first quarter, Turkey) made up almost in full for the sharp reduction in North America and the more limited slowdowns in Central Western Europe and Trading.
The slackening in the aggregates business originated in Central Western Europe (a decline in Spain, Greece and Italy, not fully offset by growth in France and Belgium), where the majority of Group operations are located. The positive performance in North America and Thailand counterbalanced the downturn on the other markets.

The slight improvement in ready mixed concrete was largely due to the progress reported in Egypt and Morocco, set against the reductions, albeit contained in value terms, in Central Western Europe (slowdowns in Italy and Greece, growth in other markets), Turkey and Thailand.

Revenues in the third quarter of 2007 gained 3.9%, an increase driven largely by sales prices and the enlargement of the consolidation area, given the reduction in sales volumes from the year-earlier period and the negative exchange-rate effect.All the macro-areas contributed to third-quarter revenue improvement; high growth rates were reported (even at constant size and exchange rates) in the emerging countries, where only Thailand posted a decrease in revenues in local currency. The improvement in North America was determined by the enlargement of the consolidation area and a healthy sales price trend, which had a stronger impact than the reduction in sales volumes and the unfavorable exchange rate. In Central Western Europe, the slowdown in Italy and Greece was more than made up by the progress achieved on the other markets, especially France.
In the year to September 30, revenue growth was 5.0%, of which 4.2% from business performance (a positive sales price effect net of a negative sales volumes effect), 2.2% from the enlargement of the consolidation area, chiefly line-by-line consolidation of the Indian companies and the acquisitions in North America and Egypt. The exchange-rate effect had a negative impact of 1.4%, arising mainly from the depreciation of the US dollar and the Egyptian lira against the euro, net of the appreciation of the Thai baht. At constant size and exchange rates, all the macro-areas contributed to growth, with the sole exception of North America, affected by a downturn in sales volumes. In absolute terms, the largest contribution came from France. Smaller contributions came from Morocco, India and Bulgaria, which nonetheless reported significant growth rates.
2007 third-quarter recurring gross operating profit and operating profit decreased by 3.2% and 4.7% respectively compared with the year-earlier period.
The reductions were largely due to the negative trend in operating expenses that had already affected the half-year results, counterbalanced only in part by the rise in average sales prices. The effect of the downturn in sales volumes was far less significant, and was largely offset by the positive impact of the enlarged consolidation area, while the exchange rates continued to have a negative effect.
The slowdown reported in Italy was a particularly significant factor in the third-quarter results. In value terms, the most important progress was reported in India, thanks to the improvement in prices, and in North America, where the positive price effect and the reduction in variable costs more than made up for the negative sales-volume and exchange-rate effects.
For the year to September 30, 2007, recurring gross operating profit and operating profit decreased by 2.3% (-2.8% at constant size and exchange rates) and 5.0% respectively compared with the year-earlier period.
Given a modest but still positive sales volume effect, generated by a more remunerative sales mix, the downturn in operating results was essentially due to the unfavorable sales price/cost dynamic. This stemmed in particular from rising fuel prices and significant recourse to cement and clinker purchases to meet high demand in many countries where production capacity reached saturation level.Operating results in the first nine months benefited nonetheless from the enlargement of the consolidation area (specifically, India, Egypt and North America), which more than offset the negative net effect of the euro exchange with the other currencies. The country-by-country breakdown of results reflects a strong positive contribution from France and India, even excluding the significant consolidation effect in India. Elsewhere, notably in Italy and North America, downturns were reported, although a recovery was seen in the third quarter. In Egypt, the decline was principally due to the effect of the exchange rate on the translation of results into euro, whose negative impact was significantly greater than the benefit of enlargement of the consolidation area.
Net profit for the year to September 30, 2007, after income tax expense of 232.8 million euro (222.3 million euro in the nine months to September 30, 2006), was 465.8 million euro, a decrease of 11.2 % on net profit in the year-earlier period (524.4 million euro). The result reflects the downturn in operating results, as well as the rise in finance costs (+11.7%) and income tax expense (+4.7%). More specifically, net finance costs were affected by higher interest rates and, above all, by first-quarter charges relating to the debt restructuring operations at Ciments Français. The increase in income tax expense, while operating results decreased, was due to developments in prior-year tax disputes, which generated non-recurring costs (11.3 million euro) in the period under review, set against non-recurring income (14.0 million euro) in the first nine months of 2006.
Net debt at September 30, 2007, stood at 2,408.0 million euro, an increase of 197.7 million euro from December 31, 2006, and 71.0 million euro from June 30, 2007. Given high cash flows on operating activities, the rise in net debt compared with the end of 2006 was due to large investments in fixed assets (763.0 million euro), dividend payouts (172.9 million euro) and the net debt of companies included in the consolidation for the first time (40.5 million euro).
During the third quarter, Société Internationale Italcementi France S.a.s. purchased 442,882 Ciments Français shares on the market, for an outlay of approximately 62.5 million euro, raising its equity investment to 77.24% (88.39% of voting rights).
Also in the third quarter, under the program approved by the Shareholders' Meeting of April 16, 2007, Ciments Français S.A. purchased treasury shares for a value of approximately 112.9 million euro. Including the purchases made as from the second quarter, the overall value of the 845,354 treasury shares purchased in the year to September 30, 2007, was 125.6 million euro. At the same date, Ciments Français S.A. held 1,124,850 treasury shares, equivalent to approximately 2.93% of total share capital.

After closure of the third quarter, at the end of October a preliminary agreement was signed with Cementilce S.r.l. for the purchase, subject to approval by the Competition & Market Authority, of a cement grinding center in Ravenna, with a production capacity of approximately 500,000 metric tons/year. The purchase of this modern, flexible plant will enhance Group industrial facilities in northern Italy. Closing is expected by the end of January 2008 on an evaluation of approximately 50 million euro.

ITALCEMENTI GROUP – PERFORMANCE BY GEOGRAPHICAL AREA

CENTRAL WESTERN EUROPE (Italy, France, Belgium, Spain, Greece)
In Italy cement consumption decreased in the first nine months of 2007, largely due to the third-quarter slowdown, leading to a reduction in Group sales. The decline in demand, despite an improvement in revenues per unit, led to a decrease in revenues and results for the period, exacerbated by higher costs. A similar trend emerged in ready mixed concrete and aggregates.
In France, Group cement sales volumes benefited from a favorable market in the third quarter. The positive trend, associated with a significant rise in prices since the beginning of the year, produced an improvement in operating results for the nine months. Aggregates and ready mixed concrete also reported higher sales volumes and sales prices.

In Belgium, where imports were a major factor on the market, Group cement and clinker sales volumes decreased in the third quarter. Overall operating results improved, thanks to a strong trend in prices and the excellent performance in aggregates, despite the rise in variable costs (clinker purchases).
In Spain, where demand slackened, Group cement volumes were down in the third quarter. Ready mixed concrete sales volumes decreased in the third quarter, but were slightly higher in the nine months compared with the year-earlier period. Aggregates showed a significant downturn in sales volumes in the third quarter.
In Greece, the market slowed from the high demand of 2006. Despite higher prices in all three lines of business, the decrease in sales volumes together with the rise in some operating expenses (fuel) led to a reduction in operating results.

NORTH AMERICA (USA, Canada, Puerto Rico)
On a market where residential demand dropped sharply, cement and clinker consumption was down on the 2006 levels. Due to the crisis on the real estate market, cement consumption projections for financial years 2007 and 2008 have been downgraded. Group sale volumes showed a much more limited decrease in the third quarter compared with the first half of the year. Revenues in local currency improved in the period thanks to higher prices and the enlargement of the consolidation area; similarly, third-quarter operating profit showed an improvement with respect to the year-earlier period, in part as a result of containment of costs.

EASTERN EUROPE AND SOUTHERN MED RIM (Egypt, Morocco, Turkey, Bulgaria)
In Egypt, the market trend stayed positive, supported by demand in the residential and tourism sectors. Group sales volumes were in line with the market trend.
The acquisition of DECOM, consolidated as from July 1, 2007, allowed the Group to strengthen its position in ready mixed concrete.Despite the rise in sales volumes and sales prices, operating results were affected to a significant degree by a large increase in operating expenses (especially energy and personnel management) and by a negative exchange-rate effect.
In Morocco, Group cement/clinker and ready mixed concrete sales were in line with the strong growth in demand. In aggregates, sales slowed in the third quarter after a first half in line with 2006. The rise in turnover during the period under review did not offset the rise in costs (in particular, fuel and clinker purchases), while the trend in results for the first nine months remained positive.
In Bulgaria, increased activity in infrastructure (power stations) and in the residential sector continued in the third quarter, at a slower rate than in the first half. Strong local demand produced a reduction in cement exports to support sales prices, and led to a rise in operating results.
In Turkey, where market demand slowed compared with the beginning of the year, Group cement and clinker sales were stable in the third quarter and higher in the first nine months compared with the year-earlier periods. Ready mixed concrete sales decreased from 2006, both in the third quarter and in the nine months. Despite higher prices, the significant rise in some costs (fuel and purchases of clinker and raw materials) generated a reduction in operating results.

ASIA (Thailand, India, Kazakhstan, China)
In Thailand, where political instability continued in the run-up to the elections at the end of the year, Group domestic cement sales were down in the third quarter and in the nine months. The decrease was offset in part by exports. Average sales prices decreased in the third quarter, due to competitive pressures. In this situation, third-quarter recurring gross operating profit stated in euro was stable.
In India, third-quarter cement sales were slightly down due to poor meteorological conditions and plant saturation, but improved in the first nine months of 2007 compared with the year-earlier period. Third-quarter results improved significantly, thanks to a positive price trend.
In Kazakhstan, the third quarter confirmed the healthy growth of the construction sector and demand for cement. Group cement sales volumes increased from 2006. As in the first half, the rise in sales volumes and the positive price trend assisted an improvement in third-quarter operating results, despite the rise in some operating expenses (energy and maintenance).
In China, the recently acquired Fuping Cement company was consolidated line-by-line as from July 1, 2007. The company has more than 300 employees and owns a lime quarry and a modern dry-process plant, which commenced operations in June 2006; current production capacity is 1.7 Mt clinker/year. During the third quarter Fuping Cement sold 311,000 metric tons of cement and clinker, for revenues of 6.3 million euro and a recurring gross operating profit of 1 million euro.

CEMENT TRADING
After the slowdown in the first half, cement and clinker sales volumes rose 13% in the third quarter compared with the year-earlier period, as a result of third-party sales. The shortage of materials inside the Group was made up by purchases from third parties, especially in the Middle East.

OUTLOOK 
With regard to the full-year outlook, a number of sources of turbulence will continue to affect the international economy, with direct and indirect consequences for the construction industry.In the USA is confirmed the current recession in residential building, while in various European countries, including Italy, Spain and Greece, the signs of a slowdown that have already emerged could gather strength.
In the emerging countries where the Group operates, the robust growth trend is expected to continue, with the exception, mentioned earlier, of Thailand.In this context, given the results for the first nine months of the current year and a probable fourth quarter in line with the year-earlier period, at the present time the Group expects operating results to be close to the very positive results reported in 2006, subject to unforeseeable events and meteorological conditions.
As noted, consolidated net profit will be adversely affected by non-recurring tax expense set against significant non-recurring tax income relating to 2006.

The manager in charge of preparing the company’s financial reports, Mr Dario Massi, declares, pursuant to paragraph 2 article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the document results, books and accounting entries.

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