Presented toThe Economic Summit LuncheonWorld of Concrete

ByPierre G. VillereAllen-Villere Partners

January 22, 2008

Our Overview: A Population Bomb That Drives Everything

Despite the current slowdown, AVP remains extremely bullish on the outlook for the construction industry and the concrete business as a subset

We believe the next recovery cycle will be as strong or stronger than any in the past

WHY?

Our Overview: A Population Bomb That Drives Everything

A report prepared by The Brookings Institute in early 2005 titled “Toward a New Metropolis: The Opportunity to Rebuild America” is striking in its conclusions, which are driven by population growth as projected by the US Census Bureau

Just think:The first 100 million in population – the Pilgrim’s

landing to 1915 (300 years!)The next 100 million – 1967 (52 years)

Our Overview: A Population Bomb That Drives Everything

Just think:The third 100 million – 2006 (39 years)Estimates for the fourth 100 million – 2043 (37

years)

Brookings extensively reports on the corresponding demand for new building space of all types, i.e. commercial, residential, industrial, and public, to accommodate our population growth:

Our Overview: A Population Bomb That Drives Everything

By 2030, which is well beyond the relevant projection we are presenting here, but indicative of the velocity in growth, they believe:about half of the buildings in which Americans

live, work, and shop will have been built after 2000

most of the space built between 2000 and 2030 will be residential space

Our Overview: A Population Bomb That Drives EverythingOverall, most new growth will occur in the

South and the WestHere are some specifics:

Space Demand: The Greatest in History300 billion square feet of built space

existed in 2000427billion square feet will be required by

203082 billion square feet of that demand will

be from replacement of existing space131 billion square feet will be new space

Space Demand: The Greatest in HistoryMost of the space built between 2000 and

2030 will be residential spaceThe largest component will be homes, at over

100 billion square feet by 2030, with a value of roughly $10 trillion in today’s dollars

However, percentage-wise, the commercial/industrial sectors will have the most new space, with over 60% of the space in 2030 less than 30 years old

Space Demand: The Greatest in HistoryOverall, most new growth will occur in the South

and West, with a tremendous variation in the total amount of buildings to be built between regions:In the Northeast, less than 50% of the space built in

2030 will have been built since 2000In the West, that figure is about 87%, a near

doubling of built space in that regionFast-growing southern and western locales, like

Nevada and Florida, and cities like Austin and Raleigh, will see the most dramatic growth

Space Demand: The Greatest in HistoryProjected demand for industrial space in the

Midwest outpaces that of other regions, unlike other major land uses

Though a small component of overall growth, states with a strong industrial presence will see the largest amount of growth

California far outpaces the rest of the nation in absolute square feet in new industrial construction, but the next four largest are:

Space Demand: The Greatest in HistoryOhioMichiganIllinoisIndianaALL are Rust Belt statesBy 2030, 70% of the Midwest’s industrial

space will be less than 30 years old

Space Demand: The Greatest in HistoryWhile these projections may seem

overwhelming, they also demonstrate that nearly half of what will be the built environment in 2030 doesn’t even exist yet, giving the current generation a vital opportunity to reshape future development

Recent trends indicate that demand is increasing for more compact, walkable , and high-quality living, entertainment, and work environments

Space Demand: The Greatest in HistoryThe challenge for leaders is to create the

right market, land use, and other regulatory climates to accommodate new growth in more sustainable ways

So What Does That Mean For Our Industry????

A Coming Boom…

Total Concrete Volume Could Range Between 600-700M600-700M Yards by 2015

• We have studied projections from several industry sources and examined historical rates of consumption growth to project ready-mixed concrete production in 2015

Total Concrete Volume Could Range Between 600-700M600-700M Yards by 2015

• Our internal estimates indicate total US concrete production could be as low of 500 million cubic yards (in the case of a near-term, mild recession and prolonged housing slump)

• 18 months ago, we projected a high 800 million cubic yards if economic expansion resumes, but we no longer believe that number in achievable

Total Concrete Volume Could Range Between 600-700M600-700M Yards by 2015

RMC Production Estimates for 2015

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

900,000,000

F.W. Dodge

Projection

(1.8%)

PCA

Projection

(2.2%)

NRMCA

Projection

(2.1%)

Historical

Per Capita

(1.54)

Estimated

Inflationary

Growth

(2.5%)

28 year

Average

Historical

Growth

(4.7%)

10 year

Average

Historical

Growth

(6.0%)

Projection Source

Yar

ds P

rodu

ced

2015 Total Concrete Volume Projections

I know you are saying to yourself, “That is some crystal ball!”

Based on this data, it is reasonable to assume that production by the end of 2015 could range between 600-700M cubic yard mark for the US

Obviously, the higher the production potential, the greater impact on the future growth of the ready mixed concrete industry

…And Other Areas We See In Our Crystal Ball

Consolidation Will ContinueFleet Efficiency Will Continue To GrowHR Will Continue to Be A ChallengeMore Sophisticated Marketing Will Play A

Key Role In Growth

Overview: The Areas We See In Our Crystal Ball

Mixers Will Continue to Become More Sophisticated

Permitting And Compliance Will Become More Daunting Than Ever

Technology Will Continue To Be The Key Driver in Efficiency Improvements

Consolidation Will ContinueWe estimate that more than 500 companies

have been consolidated since the late 90’sSuccession, estate planning, and a

concentration of net worth in the family business will continue to motivate the sale of smaller producers to the larger ones

The Top 25 producers in the US represent 50-55% of total production in 2006

Consolidation Will ContinueWe think the Top 25 producers in the US will

represent 80% of total production in 2015Of those, the Top 10 could command more

than 50% of the marketThe smaller independents in local markets

will find it more difficult to compete with larger, more sophisticated operations

Consolidation Will ContinueThe exception will be the smallest producers

in the smallest markets, who will be with us forever

Fleet Efficiency Will Continue To Grow

In 1995, the average yards

delivered/year/truck was 4398, against a US market totaling 261.5 million cubic yards

In 2005, the average yards delivered/year/truck was 5846, against a US market totaling 458.3 million cubic yards

This represents a per-truck delivery efficiency improvement of 33% over the ten-year period.

Fleet Efficiency Will Continue To Grow

During this same period, total production yardage grew by 75% (261.5M vs. 458.3M)

Finally, the US mixer fleet grew from 59,454 units in 1995 to 78,393 in 2005, for an increase of 31%

Anecdotally, with believe the total fleet may be 5-10% larger, because smaller producers are difficult to measure

HR Will Continue to Be A ChallengeThere has been so much written on the

challenges of hiring truck drivers, and there is really no relief in sight.

In markets with large pools of new immigrants, or with an ingrained blue collar culture, the problem will not be so acute

HR Will Continue to Be A ChallengeIn markets where such pools don’t exist, the

available labor pools will become even more challenging

New initiatives, such as captive Driver Training Schools, outreach programs to local high schools, etc. will become a must for producers in the tougher labor pool markets

More Sophisticated Marketing Will Play A Key Role In Growth

The role of our state and national associations will continue to grow in educating the specifying community and consumers at large

A continued effort to educate the industry to sell concrete, rather than price concrete, will be adopted and/or grown by the leaders in individual markets

More Sophisticated Marketing Will Play A Key Role In Growth

Continuing to educate the customer base at large of the benefits of concrete over asphalt will be critical in continuing to grow volumes at the national level

Mixers Will Continue to Become More Sophisticated

By 2015, new mixers being delivered without GPS/camera/tracking systems will be the exception, not the rule

Truck tracking will be more accurate, with intelligent, real-time routing to compensate for traffic patterns, weight restrictions, etc., translating into more efficient fleet utilization

Mixers Will Continue to Become More SophisticatedElectronic detection devices that already

measure slumps and quantities of water added at the job site will be supplemented by sensors that report mileage, fuel usage, hydraulic temperature and pressure, water temperature, and the top speed a driver reached

In-cab cameras will make use of video, increasing safety awareness and efficiency

Multiple cameras at various angles around the truck will also monitor job site activity

Permitting And Compliance Will Become More Daunting Than EverFederal EPA and state environmental

compliance will continue to become more stringent in most states, and compliance costs will continue to escalate

Environmental compliance costs may accelerate at the same percentage rates as recent increases in insurance, fuel, and cement

Permitting And Compliance Will Become More Daunting Than EverWith new plants as unpopular as prisons and

landfills, permitting for “greenfield” locations will become harder, and will probably be eliminated altogether in many large, urban markets

In the face of permitting challenges, sited and permitted plants will continue to rise in value

Permitting And Compliance Will Become More Daunting Than Ever

The trend towards siting plants in aggregates suppliers’ yards will be one way around this issue

Technology Will Continue To Be The Key Driver in Efficiency ImprovementsTechnology will continue to drive

improvements in productivity, profitability, and the ability to “work smarter”

Things that now “take a while” will be instantaneous, will all real-time metrics loaded onto your screen

You will know the profitability of each load the moment the truck is batched, and the erosion of that profit based on waiting time/return

Technology InnovationsImprovements in GPS

Next generation will take into account traffic patterns, weight restrictions, etc.

Complete integration with back office, truck maintenance, etc.

Voice & Status (like Never Lost or OnStar)

Technology InnovationsComplete, seamless, integration of all systems

DispatchPayrollA/PQCTruck Maintenance

Real Time Productivity and ProfitabilityBy Load, as the truck is rolling out of the plantBy Customer, in real timeBy Plant, in real time

Plant InnovationsThe advent of truly “smart”

plantsBatching performance will be

measured in real timeTemperature and humidity levels

will be measured in real time, and adjustments made to the mix designs

Wireless Technology will be prevalent in all aspects of operations, from dispatch to batching to trucks and delivery

These systems will move and monitor gates, valves, conveyors, and other mechanical parts

Plant InnovationsIP Addressable ValvesAutomatic Maintenance

Signals or e-mail identifying failing or failed components

Automatic QC InformationImmediate e-mail notification of

mix issues

InventoryAutomatic e-mail or integration of

materials based on inventory, outstanding orders, and production models

Communication InnovationsCameras in PlantsCentralized

BatchingCameras on Trucks

Job Site ConditionsSafety Issues

Voice Over IPConnectivity at Low

Costs

Communication Innovations Electronic or Web Business

OrdersTicketsInvoicesPaymentDelivery SchedulesPDAs

Summary – Our OpinionReady mixed concrete production will grow to

between 600-700 million cubic yards by 2015, driven by the underlying assumptions in the Brookings Report

An average yard of concrete will sell in a range of $105 - $115, with certain markets well over $120 - $125, without value-added products

Fleet utilization will continue to climb due to technology

Driver recruiting and training will grow to being the biggest challenge for many producers

Summary – Our OpinionEnvironmental compliance costs will continue to

climb, becoming one of the fastest growing costs by percentage

Many of you will be far more computer-literate than you are today

Many of you will become better marketersAll of you will have had to adapt to are larger,

consolidated industry ever striving for greater efficiency

And finally…

Thank You!