Press release

At a meeting today, the Italcementi Board of Directors examined and approved the consolidated half-year report as at June 30, 2009.
The first six months of 2009 were the most difficult period experienced by the world economy for many decades, even though the recession eased somewhat in the second quarter but without showing any clear signs of a turnaround. The repercussions on the construction market caused sharp declines in activity in the industrialized countries, mitigated only in part by better performance in some emerging countries where the Group operates, notably Egypt and China.
Group performance contracted significantly in all core businesses in the first half of the year: sales volumes totaled 27.8 million metric tons in cement and clinker (-12.8%), 20 million metric tons in aggregates
(-19.9%) and 5.6 million cubic meters in ready mixed concrete (-22.4%). The price dynamic that accompanied the downturn in volumes differed from one market to another but overall was substantially positive, although it slowed toward the end of the first half.
In these conditions the Group reported first-half consolidated revenues of 2,585.8 million euro, a reduction of 11.6% from the year-earlier period. At constant size and exchange rates, the decrease was 13.9%.
Operating results were penalized by the strong volume effect, but benefited from the measures introduced as from the end of 2008 to contain fixed costs and rationalize production and distribution operations in order to boost efficiency. Management of variable costs also had positive effects, helped by the decrease in energy costs in many countries. Consequently, profit margins improved in the second quarter to the levels of the year-earlier period, reflecting a reversal in the trend with respect to the first-quarter YoY comparison. Given slacker business performance, in absolute value results were down: recurring EBITDA was 497.4 million euro (-16.2%); EBIT was 237.9 million euro (-37.1%) after impairment losses on industrial assets, mainly in Thailand where the residual economic life of some plants was shortened.
Half-year profit before tax was 185.0 million euro (-39.7%), while net profit for the period was 127.3 million euro (-42.3%). Group net profit, at 55.1 million euro, showed a larger reduction (-58.0%) due to the decrease in results in companies with few or no minority interests.
Investments in fixed assets in the first half totaled 394.3 million euro (484.5 million euro in the first half of 2008). Investments in property, plant and equipment and intangible assets totaled 370.7 million euro and referred mainly to strategic investments in North America (Martinsburg), Morocco (Ait Baha), India /Yerraguntla) and Italy (Matera).
At the end of June 2009, Group net debt was 2,784.8 million euro, while shareholders’ equity was 4,579.9 million euro. The gearing ratio (net debt/shareholders’ equity) was 60.8% (58.0% at the end of 2008).
The Group’s financial situation was recently reviewed by the ratings agencies, which, despite the worsening international situation, confirmed Italcementi’s ratings (BBB for Standard & Poor’s and Baa2 for Moody’s, with outlook reviewed to ‘negative’); these are among the best standings for the main players in the worldwide construction materials industry.

Outlook – Trends in the construction industry are expected to remain negative in the second half of the year, in line with the situation in the first half. The spending and fiscal stimulus measures introduced by various governments over the last few months are not in fact expected to produce effects this year, while the growing volatility experienced by some emerging countries over recent months could generate further uncertainty.
The action plan already introduced with regard to fixed costs, employment and efficiency will have an obvious impact on the Group cost structure over the short and medium term. Given the negative volume effect, operating results in the second half are expected to be down on the second half of 2008, although margins will be comparable with those of the first half of 2009.

SECOND QUARTER 2009

Overall sales volumes in the second quarter in cement and ready mixed concrete declined at a rate similar to the first quarter. In aggregates, the slowdown of the first three months eased in the second quarter.
In cement and clinker, the decrease in volumes arose mainly in the mature countries, with the largest reductions in absolute terms in Italy, North America and France. The decline was slower in the emerging countries as a whole, where trends varied significantly: Egypt, China and Kazakhstan reported progress (Kazakhstan was affected by a halt in operations in 2008), while contractions occurred on the other markets and in Trading. Given an overall percentage reduction in line with the first quarter, the decrease in the second quarter was smaller on the mature markets, and intensified in the Med Rim countries.
In aggregates, at constant size, sales volumes were affected by the heavy decline on all the Central Western European markets where the majority of Group sales are concentrated.
In ready mixed concrete, sales volumes fell heavily on all markets, at constant size.

2009 second-quarter revenues, at 1,384.6 million euro, were down 12.1% (-14.4% at constant size and exchange rates) from the year-earlier period. The reduction arose largely as a result of performance on the mature markets, in Central Western Europe and North America, and in Trading. In Asia the decline was contained, arising in Thailand and India, despite growth in China and Kazakhstan, while performance in Eastern Europe and Southern Med Rim was substantially stable, with the small improvement in Morocco and, above all, the progress in Egypt absorbing the significant fall in the other countries.
Second-quarter recurring EBITDA, at 308.5 million euro, fell by 7.8% from the year-earlier period, while the decrease in EBIT, which totaled 173.3 million euro, was 23.5%. EBIT reflected impairment losses of 24.2 million euro on property, plant and equipment (not present in the first half of 2008), referring mainly to operations in Thailand. The decline in operating results was smaller than in the first quarter. In addition to the benefits for variable costs of the gradual reduction in energy prices, operating results reflected the effects of the action taken to improve efficiency.

BUSINESS PERFORMANCE IN THE FIRST HALF OF 2009

In cement and clinker, the reduction in sales volumes arose mainly on the mature markets, notably Italy, North America and France. Performance in the emerging countries slackened overall, but presented varying trends: higher sales volumes in Egypt, China and Kazakhstan, substantial stability in Morocco (an improvement in the first quarter, a decrease in the second quarter) and declines in the other countries (especially Turkey, Thailand and Bulgaria) and in Trading.
In aggregates, at constant size, sales volumes were affected above all by the strong decline in Central Western Europe (France and Spain in particular).
In ready mixed concrete, also at constant size, performance declined everywhere; the largest reductions were in France, Turkey and Spain.

CENTRAL WESTERN EUROPE (Italy, France, Belgium, Spain, Greece)

In the euro zone countries, demand in the construction industry fell sharply and Group cement and ready mixed concrete sales volumes consequently declined, although the reductions in France, Belgium and Spain were below the market average.
In Italy revenues and operating results were significantly down on the year-earlier period. To limit the fall in operating results, in addition to structural measures to contain fixed costs, which have already generated important savings, temporary stoppages were effected at a number of plants and two grinding centers were closed. At the Bergamo offices, a mobility procedure was introduced to reduce personnel through retirement incentives. Non-recurring charges for 6.9 million euro were provided for these measures.
In France, despite the healthy sales price trend, Group revenues were pushed down by the negative volume effect. Operating results in cement were slightly stronger than in the first half of 2008, thanks to implementation of a series of cost-containment measures. In ready mixed concrete, revenues and results fell significantly due to the negative volume effect, counterbalanced only in part by a positive price/variable cost dynamic and containment of fixed costs.
In Belgium the decrease in volumes in all three core businesses led to a reduction in revenues from the first half of 2008. Operating results improved, however, owing to the price effect and containment of operating expenses, primarily fixed costs.
In Spain overall revenues fell, due largely to the volume effect, but also to the negative impact of sales prices in cement and ready mixed concrete. This trend, counterbalanced only in part by the containment of fixed costs and lower clinker purchases, also produced a significant reduction in operating results.
In Greece, despite the positive overall performance of sales prices in the three sectors, the decrease in volumes led to lower revenues and operating results.

NORTH AMERICA (USA, Canada, Puerto Rico)

In North America, activity continued to slow at a very intense pace in the construction industry, despite the fact that the sector is now in its fourth year of recession.
In these difficult conditions, Group cement sales volumes dropped, with average sales prices remaining substantially steady with the first half of 2008, thanks to a favorable territorial mix.
The sharp fall in sales volumes was the main cause of the YoY decline in revenues and operating results, despite the fact that operating results benefited from a significant reduction in fixed costs and greater overall industrial efficiency, achieved in part through stoppages at a number of low-performing plants.

EASTERN EUROPE AND SOUTHERN MED RIM (Egypt, Morocco, Bulgaria, Turkey)

Trends varied in the emerging Med Rim countries, with business growth reported in Egypt and Morocco and heavy declines in construction operations in Bulgaria and Turkey.
In Egypt the persistent strong domestic demand for cement enabled the Group to fully absorb production capacity. On the other hand, ready mixed concrete sales volumes decreased, due to completion of activity at a number of important infrastructure worksites. Overall, revenues made healthy progress, thanks above all to a positive price effect, which counterbalanced in part the significant rise in operating expenses. Operating results, affected by higher costs, benefited from a very positive exchange-rate effect upon translation into euro.
In Morocco Group sales volumes improved slightly in cement, but fell in ready mixed concrete and aggregates. Overall, revenues in local currency increased thanks to the positive price dynamic, enabling the Group to recover higher production costs, especially for energy. The significant increase in operating results was also achieved through action to improve procurement efficiency.
In Bulgaria the sharp fall in cement demand had a severe impact on Group cement sales volumes. Operating results fell heavily.
In Turkey Group cement sales volumes were significantly lower and prices fell. Sales also declined in ready mixed concrete, with a slight reduction in prices. As a whole, operating results decreased.

ASIA (Thailand, India, China, Kazakhstan)

Among the emerging Asian countries, India and China continued to report growth, while performance in Thailand was negative.
In Thailand, where the economy continued to weaken, operating results fell due to the heavy reduction in revenues and higher fuel costs. During the first half the Group completed the re-organization of its industrial operations (use of the Takli and Cha-am plants as grinding centers using clinker from the Pukrang plant); this produced significant non-recurring expenses in the first half, but has already brought important savings in fixed costs.
In India growing cement demand continued to fully absorb Group production (which in the first half of 2008 was supplemented with volumes produced with clinker acquired from third parties), with average sales prices at last year’s levels. Operating results made good progress, thanks especially to a favorable price/cost ratio, offset only in part by lower sales volumes and the devaluation of the rupee against the euro.
In China Group cement sales volumes were significantly up on the first half of 2008, a period affected by particularly adverse weather conditions. Revenues made strong progress thanks to the growth in volumes and the favorable price dynamic. Operating results improved despite the rise in some operating expenses.
In Kazakhstan, where the market slumped due to the absence of public funding for infrastructure construction projects, Group operations were slower as a whole; although sales volumes rose with respect to the first half of 2008, when there was a long halt in operations, prices decreased .

CEMENT/CLINKER TRADING
Cement and clinker first-half sales volumes declined as a result of the general contraction on the markets and sharper competitive pressures, with slowdowns reported by all Group terminals with the exception of Albania, where operations were buoyed by public investments. Operating results decreased significantly due to the reduction in volumes and sales margins.

FINANCIAL PERFORMANCE
First-half revenues totaled 2,585.8 million euro, a reduction of 11.6% from the first half of 2008 reflecting the sharp contraction in business performance (-13.9%), offset in part by the positive exchange-rate effect (2.3%); the consolidation effect was immaterial.
Revenues grew in the emerging countries as a whole, thanks to favorable first-quarter trends in the Southern Med Rim produced by Egypt and Morocco.
This increase, given stable values for Asia, was not sufficient to counterbalance the continuing heavy fall in Central Western Europe, North America and Trading.
The positive exchange-rate effect arose largely from the appreciation of the Egyptian pound and, to a lesser extent, the US dollar against the euro.

Operating results reflected the decline in sales volumes. Nevertheless, this situation was counterbalanced, if only in part, by the action already introduced in 2008 to contain fixed costs, which had a noticeable impact estimated at approximately 48 million euro. The largest reduction was in employee and payroll expenses in most countries, and in Italy, North America, France and Spain in particular.
Recurring EBITDA (497.4 million euro) fell by 16.2%, mainly due to the sharp drop in Central Western Europe and North America, offset only in part by the positive contribution of Eastern Europe and Southern Med Rim; the contribution from Asia was slightly down overall. EBIT, at 237.9 million euro, fell by 37.1% as a result of net non-recurring expense of 9.2 million euro and impairment losses on industrial assets (24.2 million euro), of which the most significant were in Thailand, where tests indicated the need to shorten the economic life of some production plants.
Finance costs, net of finance income, were 56.4 million euro, down 18.3% from the year-earlier period (69.1 million euro), computed using the same criteria, as a result of a slight decrease in net interest expense on net debt and an increase in capitalized finance costs on the Group’s main investment projects, following the introduction of IAS 23.
The share of results of associates decreased from 13.1 million euro to 3.5 million euro reflecting decreases in earnings at Vassiliko (Cyprus) and Ciment Quebec (Canada), despite growth at Asment (Morocco).

Profit before tax, at 185.0 million euro (-39.7% from the first half of 2008), was penalized mainly by the fall in operating results, while tax had a significantly smaller impact compared with the first half of 2008 (-33.3%), due to the greater weight of the results of countries with lower tax charges and to tax income (deferred tax assets) in some mature countries.
Net profit for the period was 127.3 million euro, down by 42.3% from the first half of 2008. The decrease in net profit in companies with low or no minority interests and the greater weight of the results of companies with significant minority interests (specifically the Egyptian companies) produced a larger reduction in net profit attributable to the Group (-58.0%, from 131.0 million euro to 55.1 million euro) and a smaller decrease in net profit attributable to minority interests (-19.2%, from 89.4 million euro to 72.2 million euro).
In compliance with the revised version of IAS 1, the Group has decided to present its comprehensive income results using two schedules. The first schedule reflects traditional income statement components and the net result for the period, while the second schedule, beginning with the net result for the period, presents other components of comprehensive income previously reflected only in the statement of movements in consolidated shareholders' equity: fair value gains and losses on available-for-sale financial assets and financial derivatives, translation gains and losses.
In the first half of 2009, the components of other comprehensive income showed a negative balance of 51.7 million euro (a negative balance of 368.1 million euro in the year-earlier period, due to translation gains and losses and fair value losses on available-for-sale financial assets). Considering these components and the above-mentioned net profit for the period, total comprehensive income for the first half of 2009 was 75.6 million euro (a total of 28.0 million euro attributable to the Group and a total of 47.6 million euro attributable to minorities). This compares with total comprehensive income of -147.7 million euro in the first half of 2008 (a total of -144.5 million euro attributable to the Group and a total of -3.2 million euro attributable to minorities).
Total investments in fixed assets in the first half of 2009 were 394.3 million euro (484.5 million euro in the first half of 2008). Investments in property, plant and equipment and intangible assets totaled 370.7 million euro (315.3 million euro in the first half of 2008) and referred mainly to projects in North America (Martinsburg), Morocco (Ait Baha), India (Yerraguntla) and Italy (Matera).
The focus on completing the above strategic investments and the containment of other initiatives meant that strategic investments accounted for a high proportion (75%) of total investments for the structural enhancement of Group industrial facilities and operating efficiency.
Investments in financial assets totaled 23.6 million euro (169.2 million euro in the first half of 2008) and referred mainly to ready mixed concrete acquisitions in France and Kuwait.
Net debt at June 30, 2009, was 2,784.8 million euro, compared with 2,679.3 million euro at December 31, 2008, an increase of 105.5 million euro. First-half cash flows reflected an improvement in operating working capital, which benefited cash flows from operating activities (408.8 million euro, 236.8 million euro in the first half of 2008), despite lower revenues. The net debt trend was also affected by the high level of investments in fixed assets in the first half (394.3 million euro), referring in the main to the Group’s current important industrial projects, and by dividends paid (115.9 million euro).
Total shareholders' equity at June 30, 2009, was 4,579.9 million euro, a decrease of 41.7 million euro from December 31, 2008 (4,621.6 million euro) of which 18.3 million euro attributable to the Group and 23.4 million euro to minorities.
At June 30, 2009, Italcementi S.p.A. held 3,793,029 ordinary treasury shares, representing 2.14% of ordinary share capital, and 105,500 savings treasury shares (0.1% of savings share capital).
The gearing ratio (net debt/consolidated shareholders' equity) was 60.8% at June 30, 2009 (58.0% at December 31, 2008).

OUTLOOK
Trends in the construction industry are expected to remain negative in the second half of the year, in line with the situation in the first half. The spending and fiscal stimulus measures introduced by various governments over the last few months are not in fact expected to produce effects this year, while the growing volatility experienced by some emerging countries over recent months could generate further uncertainty.
The action plan already introduced with regard to fixed costs, employment and efficiency will have an obvious impact on the Group cost structure over the short and medium term. Given the negative volume effect, operating results in the second half are expected to be down on the second half of 2008, although margins will be comparable with those of the first half of 2009.

DEBENTURE ISSUES AND MATURITIES
The Italcementi Group issued no debentures during the 12 months preceding June 30, 2009. Issues due to mature in the 18 months after June 30, 2009, total 209.3 million euro: on July 10, 2009, debentures for 159.3 million euro (under the original EMTN program for 350 million euro issued by the subsidiary Ciments Français on July 10, 2002, and due in 2009) and on March 3, 2010, the 50 million euro Ciments Français International issue.

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The manager in charge of preparing the company’s financial reports, Carlo Bianchini, 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.