How do we get there?

Our core operating principles

HOW DO WE GET THERE?

Core operating principles

CORE PRINCIPLES

RATIONALE

BUSINESS MODEL

1.

We own quarries and lime, as their fixed costs are manageable and barriers to entry are high

THIS GIVES US PRICING POWER

-> WE CALL THIS 'INVEST'

2.

We help and empower local managers to become best in class operators

THIS GIVES US COST CONTROL

WE CALL THIS 'IMPROVE'

3.

We seek to sell everything we quarry and add downstream activities only locally

THIS GIVES US MARGIN EXPANSION

WE CALL THIS 'INTEGRATE'

4.

We confront industrial challenges be it footprint or product related

THIS GIVES US A COMPETITIVE EDGE

WE CALL THIS 'INNOVATE'

Business Model

Core operating principles

CORE PRINCIPLES

CONVENTIONAL ANSWERS

CONVENTIONAL STRATEGY

1st

Construction materials, and industrial minerals evolve with GDP

MAXIMISE VALUE CHAIN EXPOSURE

VERTICAL INTEGRATION

2nd

Always aim to have revenue growth ahead of GDP growth

WE NEED PRICING POWER

WE FIGHT FOR MARKET SHARE

3rd

Always aim to have cost growth lag GDP growth

WE FIND COST SYNERGIES

CENTRALISE TO CUT HEADCOUNT

Business Model

Key Deductions

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CASE FOR INTEGRATED BUSINESS ACROSS ECONOMIC CYCLE

1st

Fighting for market share naturally implies a Volume driven strategy

PRIORITISE VOLUMES OVER PRICE AND OVER COST

2nd

If you have a Volume driven strategy you cannot have real sustained Pricing Power

WHICH WILL LIMIT ITS PRICE RISES TO GDP GROWTH AT BEST

3rd

In a trade-off between Cost and Volume, Volume wins to protect Market Share

WHILE ITS COST BASE RISES FASTER, TO PROTECT VOLUMES

→ MARGIN EROSION AND SHAREHOLDER VALUE DESTRUCTION

Business Model

Conclusions

KEY DEDUCTIONS

1.

Quarries are the asset that drive the strategy, not RMX, not cement…

Therefore, you work using platforms of locally compatible assets/businesses

2.

Therefore, you integrate horizontally across the spectrum of products

You integrate along the value chain only when it generates the right returns

3.

You compete locally where proximity and service matter

You have pricing power and cost synergies that are not secondary to volumes

Next

How we measure our success