Press release

At a meeting yesterday chaired by Giampiero Pesenti, the Italcementi S.p.A. Board of Directors examined and approved the consolidated quarterly report at March 31, 2008.
In structural terms, the first quarter of the year is heavily influenced by seasonal factors and by the concentration of plant maintenance work in the first three months. Consequently, it is not significantly representative of full-year trends.
Compared with the year-earlier period—which also enjoyed particularly favorable meteorological conditions—the first quarter of 2008 had fewer days worked, in part due to strikes in the construction materials sector in Western Europe. Furthermore, in the first quarter of the current year the consolidation excludes operations at the Calcestruzzi group, but includes the companies acquired in North America, the Middle East and China. In compliance with accounting principles, operations in Turkey are now shown under a single income statement line item “operations intended for sale”. At the end of March, as previously reported, an agreement was signed with Sibiriskiy Cement, Russia’s second-largest cement producer, which is to acquire the Turkish operations for a cash payment of 400 million euro and a 5.4% share in the Russian company’s capital, valued at 200 million euro.

The first three months of 2008 saw a slowdown in Group performance on mature markets, due to the slackening in demand in North America, Italy and Spain, in contrast with growth in the emerging countries (especially Egypt, Morocco and India). In Kazakhstan, the Group was forced to call a temporary halt to its operations due to difficulties in renewing quarrying licenses (production resumed at the beginning of April). Against this background, the generalized rise in sales prices did not offset the combined impact of trends in operating expenses, the decrease in sales volumes and the changes in the exchange rates and scope of consolidation.

At March 31, 2008, Group revenues were 1,306.6 million euro, a decrease of 4.5% (+3.3% at constant size and exchange rates). The unfavorable exchange-rate effect and consolidation effect contributed to the reduction in recurring EBITDA to 260.9 million euro and EBIT to 157.5 million euro (down by 5.3% and 8.8% respectively). Operating results were also affected by non-recurring costs of 4.3 million euro for the production and logistics re-organization and efficiency plan in Italy. Specifically, the acquisition of the new grinding center in Ravenna, together with the facilities in Montalto di Castro (which began operations in 2005) and Novi Ligure (2006), will enable the Group to continue its production restructuring plan in Italy, replacing 2 grinding centers and 5 distribution centers to achieve a substantial improvement in local logistics and production.

After an increase of 11.9% in net finance costs and a 29.5% decrease in income tax expense, net profit from continuing operations (before the results of Turkish operations intended for sale) was 86.2 million euro (-4.1%). Net profit for the period (including results in Turkey) was 81.3 million euro (-12.4% YoY) with net profit attributable to the Group of 37.9 million euro (-31.4%).
Group investments in industrial and financial fixed assets in the first quarter rose by 20.9% to 257.6 million euro, of which approximately 148 million euro of capital expenditure to improve the production network: Investments in financial fixed assets (approximately 109 million euro) included the purchases of the Ravenna grinding center, the ready mixed concrete operations in North America and the purchase of 139,310 Ciments Français shares, to raise the equity investment to 78.97% (89.05% of voting rights).
Net debt at the end of March stood at 2,306.5 million euro, while shareholders' equity was 4,556 million euro. The gearing ratio (net debt/equity) was 50.6% (from 50.8% at December 31, 2007).
Looking at prospects for the current year, the market trends that emerged at the end of 2007 were confirmed in the first quarter of 2008, indicating a slowdown in demand in the industrialized countries in which the Group operates (with the exception of France) set against strong growth in the emerging countries (with the sole exceptions of Thailand and Kazakhstan), which account for approximately 40% of consolidated EBITDA. The most significant risk in the remaining months of 2008 is the possibility of further increases in energy costs.

Given the programs already underway to improve production efficiency and contain fixed costs and in view of the balanced price/cost dynamic emerging as a feature of 2008, the Group confirms its target of 2008 full-year operating results in line with 2007.

SALES PERFORMANCE IN THE FIRST QUARTER

In cement and clinker, the fall in sales volumes arose mainly in the mature countries, especially Italy, Spain, Greece and North America. Performance in the emerging countries reflected overall growth in sales on domestic markets (notably Egypt, Morocco and India), reducing product availability for exports and trading. Performance in emerging countries was also affected by the situation in Kazakhstan, where the temporary suspension of quarrying licenses caused production and sales operations to stop for the entire first quarter of 2008. In Thailand, continuing political instability, despite the appointment of the new government after last December’s elections, meant that the expected resumption of infrastructure works was not possible.
In aggregates, performance at constant size was generally positive, with the sole significant exception of Spain, where the significant downturn was not fully countered by the growth of the other countries, mainly France, Belgium and Morocco.

In ready mixed concrete, again at constant size, the downturn in Central Western Europe (slight growth in France and Belgium, sharp fall in Spain and Greece) produced a reduction in overall sales volumes. Performance was positive in Egypt and in North America, but sales volumes slowed in Thailand.

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

In Italy cement consumption was significantly lower than in the first quarter of 2007, and Group sales volumes decreased. The increase in sales prices countered the change in operating expenses, but the sales volume and consolidation effects, together with non-recurring costs for the re-organization of the production network, produced a downturn in EBIT. In January 2008, the Group completed the acquisition of the Ravenna grinding center, which, together with the Montalto di Castro and Novi Ligure centers, will permit competitive integration of production capacity, with efficiency measures including the closure of two smaller grinding centers and five distribution centers.

In France, where cement consumption is still rising, Group domestic sales volumes decreased, as a result of strikes in February. Revenues improved thanks to the increases in sales prices which offset the fall in sales volumes. The sharp rise in variable costs, especially for energy and raw materials, produced a downturn in recurring EBITDA.
Sales volumes of ready mixed concrete and aggregates increased; together with higher sales prices, this produced strong growth in operating results.

In Belgium, cement and clinker sales volumes at CCB (including volumes for the French market) were slightly lower.
Conversely, ready mixed concrete and aggregates sales volumes increased.
Thanks to higher sales prices in the three core businesses, revenues improved,  although the increase was not sufficient to offset in full the rise in some operating expenses, notably fuel and raw materials.

In Spain, where demand has been declining since the second quarter of 2007, Group cement sales volumes declined.
Sales of ready mixed concrete and aggregates were significantly lower, primarily as a result of the weakness of the residential building market, especially in southern Spain.
Overall revenues were down, but the positive sales price trend and containment of costs (thanks in particular to the new Malaga plant) generated operating results in line with the first quarter of 2007.

In Greece, in an unfavorable market climate generated in particular by the downturn in residential building, the strong increase in cement exports enabled the Group to counter the fall in domestic sales volumes.
Aggregates sales volumes showed a slight improvement, while ready mixed concrete slowed significantly.
Operating results decreased overall: the positive trend in sales prices was not sufficient to offset in full the impact of the sales mix and higher fuel costs.

NORTH AMERICA (USA, Canada, Puerto Rico)

In an economic situation characterized by a severe slowdown, where demand in the public works sector was unable to offset the crisis in private residential and non-residential building, Group cement sales volumes decreased, with substantially stable sales prices.
The improvement in ready mixed concrete was largely due to the enlargement of the scope of consolidation as a result of the acquisitions at the end of the first quarter of 2007 (Cambridge and Arrow) and in March 2008 (Crider & Shockey).
Given the difficult conditions in the region, operating results showed significant YoY decreases.

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

In Egypt, Group domestic cement sales volumes increased, supported by fast growing demand. Consequently, cement and clinker exports were significantly lower.
The ready mixed concrete sector benefited from the growth reported by the RMB group and the inclusion of Decom in the scope of consolidation as from the second half of 2007. Despite higher energy costs and the negative exchange-rate effect, the rise in sales prices generated significant growth in operating results.

In Morocco, where the building sector continued to expand, Group cement and aggregates sales volumes on the domestic market increased; ready mixed concrete sales volumes were stable.
Overall, despite the satisfactory performance in sales volumes and prices, operating results were slightly down owing to the increase in operating expenses, especially for clinker and fuel purchases.

In Bulgaria, cement demand continued to grow as a result of the lively residential building sector and the growth of infrastructure projects since the country joined the European Union.
Despite this favorable climate, as a result of adverse weather conditions in January Group domestic cement sales volumes were comparable with those of the year-earlier period. Overall, the rise in prices assisted by the growing demand for cement more than offset the increase in operating expenses (fuel and electricity).

ASIA (Thailand, India, China, Kazakhstan)

In Thailand, continuing political uncertainty led to delays in infrastructure works and a slowdown in private investments, with repercussions for cement demand.
In this context, the fall in Group domestic cement sales volumes was compensated by an increase in exports, where margins however are tighter. Overall, the rise in sales prices was not sufficient to offset the increase in production costs (especially fuel) and the negative exchange-rate effect.

In India, where the economy and the building sector are expanding, Group cement sales volumes increased. The strength of demand supported significant price increases, permitting absorption of the sharp increase in operating expenses and the negative exchange-rate effect.

In China, where the Group began operations in 2007, first-quarter cement and clinker sales volumes were penalized by poor weather conditions in January, while sales prices increased, with the Group reporting EBITDA breakeven.

In Kazakhstan, the temporary stoppage caused by the suspension of quarrying licenses by the local authorities in December 2007 blocked operations in the first quarter. An agreement with the authorities enabled operations to resume in April 2008.

CEMENT/CLINKER TRADING

While sales volumes dropped mainly due to the smaller contribution from Egypt as a result of high local demand, operating results made a strong improvement thanks to the growth in margins and the enlargement of the scope of consolidation (line-by-line consolidation of Hilal Cement Company as from September 30, 2007).

BUSINESS PERFORMANCE IN THE FIRST QUARTER

For the first quarter, Group revenues were 1,306.6 million euro, down by 4.5% from the year-earlier period as a result of the net change in the scope of consolidation (-5.4%) and the negative exchange-rate effect (-2.4%); improved business performance made a positive contribution of 3.3%, thanks to sales price trends.
Revenues increased in the emerging countries thanks to the contribution of Eastern Europe and Southern Med Rim (especially Egypt), with the sole exceptions of Thailand (revenues substantially unchanged) and Kazakhstan, due to the operations stoppage in the first quarter. At constant size and exchange rates, the growth in the emerging countries more than offset the decline in North America and Central Western Europe, adversely affected by poor performance in Italy and Spain.
The exchange-rate effect (-33 million euro) was negative due to the general depreciation of the other currencies against the euro (especially the Egyptian lira and the US dollar).

Operating results were penalized by the downturn in sales volumes in the mature countries, although this was countered by a positive sales price-operating expenses trend. The unfavorable exchange-rate effect was largely responsible for the slight downturn in operating results. Recurring EBITDA (260.9 million euro) and EBITDA (261.6 million euro) decreased by 5.3% and 5.6% respectively, while EBIT (157.5 million euro) showed an 8.8% decrease on the year-earlier period.

Operating results reflected the negative impact of performance in Central Western Europe, principally due to the significant decline in Italy, and, to a smaller extent, the downturn in North America. A positive contribution came from the emerging countries, notably Egypt, which reported significant progress despite translation losses on results expressed in euro. Trading also made a positive contribution, thanks to the sales price factor.
At constant size and exchange rates, the decrease in recurring EBITDA was significantly smaller, at -1.2% (-3.3 million euro).
Profit from continuing operations, before the results of the Turkish operations intended for sale, was 86.2 million euro (-4.1% YoY), reflecting the decline in operating results and the increase in net finance costs (higher interest expense on net debt and net exchange-rate losses), but benefiting from a significantly lower estimated tax charge for the first quarter compared with the year-earlier period, as a result of the greater weight of the results of countries with lower taxation and a reduction in tax rates in some countries (Spain and Morocco in particular). Net profit for the period was 81.3 million euro (-12.4%), reflecting the negative results of the Turkish operations intended for sale compared with the positive results in the year-earlier period.

The decrease in the results of companies with smaller or no minority interests (Italcementi S.p.A. in particular) and the strong improvement in the results reported by companies with significant minority interests (the Egyptian companies in particular) produced a reduction of 31.4% in Group net profit (from 55.3 million euro to 37.9 million euro) and an increase of 15.5% in net profit attributable to minorities (from 37.6 million euro to 43.4 million euro).

Net debt at March 31, 2008, was 2,306.5 million euro (including net debt of 2.3 million euro at the companies in Turkey intended for sale), compared with 2,418.2 million euro at December 31, 2007. Excluding for comparative purposes 157.9 million euro for the Calcestruzzi subgroup, which left the scope of consolidation in 2008, net debt at December 31, 2007, would have been 2,260.3 million euro. In respect of this figure, net debt at March 31, 2008, would have reflected an increase of 46.2 million euro. This result was largely due to significant investments in fixed assets in the first quarter (257.6 million euro, of which 148.3 million euro for capital expenditure and 109.3 million euro for financial fixed assets) and a net cash outflow of 18.2 million euro on operations in Turkey intended for sale, not fully offset by cash flows on operating activities (200.7 million euro) and the advance payment received (50.0 million euro) under the agreement for the sale of the Turkish companies.

Shareholders' equity was 4,556.0 million euro from 4,760.5 million euro at December 31, 2007, largely due to the significant decrease in translation reserves (220.1 million euro) caused by the depreciation of the main currencies against the euro.
The gearing ratio (net debt / shareholders' equity) was 50.6% (50.8% at December 31, 2007).

OUTLOOK

The market trends that emerged at the end of 2007 were confirmed in the first quarter of 2008, indicating a slowdown in demand in North America and Central Western Europe, with the exception of France. The current market situation could stabilize as the year progresses. In Italy, where demand is expected to fall, Group sales should make a satisfactory recovery on the downturn reported in the first quarter.
In the emerging countries, which make a significant contribution to consolidated EBITDA (approximately 40%), strong growth is expected, with the sole exceptions of Thailand and Kazakhstan.
The most significant risk in the remaining months of 2008 is the possibility of further increases in energy costs, with repercussions for operating expenses.
Given the programs already underway to improve production efficiency and contain fixed costs and in view of the balanced price/cost dynamic emerging as a feature of 2008, the Group confirms its target of 2008 full-year operating results in line with 2007.

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 to his knowledge the accounting information contained in this press release corresponds to the document results, books and accounting entries.