The Board of Directors of Buzzi Unicem met on November 13, 2008 to examine the interim management report as of September 30, 2008.


The negative trend of financial markets and the lack of liquidity recorded in the last months have made the world macroeconomic scenario vulnerable and sharply shrunk growth prospects. The moves governments have taken to rescue primary financial institutions, besides weighing down on national budgets, seem far from rebuilding consumer and industry confidence and fear is for a protracted recession scenario.

In the third quarter of 2008  the construction sector confirmed the first-half trend with good levels in Central Europe markets and sale volumes still growing in Eastern Europe countries, driven by favorable trading conditions. The economic cycle slowdown consolidated in some mature markets, such as Italy whose trend is more penalizing than what expected at the beginning of the year. In the United States, housing demand is still stagnant and the award of new contracts in the non-residential sector has sharply dropped; moreover adverse weather has negatively impacted sales volumes. The Mexican market records a slowdown in residential building, partly influenced by the US crisis while the country’s infrastructure development plans continue.

In the first nine months of 2008, group’s cement and clinker volumes at 24.9 million tons are down 4.0% over 2007. Volumes contrasting scenario shows a quite negative trend in mature markets (Italy, the United States) partly offset by Central and Eastern Europe countries; slightly downward is the Mexican market.
Ready-mix concrete volumes reach 12.9 million cubic meters, up 1.6%  over 9M-07, thanks to the production restructuring and rationalization plans carried out in Germany and the higher production capacity in the United States following some recent acquisitions.
Compared with 9M-07 cement selling prices in local currency show a favorable dynamics almost everywhere, with outstanding changes in Russia and Ukraine. Conversely in the United States unit average revenues are slightly lower than in the previous year. Ready-mix concrete average unit prices have generally improved. Production costs continue to be under strong pressure, driven by fuel hikes.

Consolidated net sales increase by 4.1% from €2,618.4 million to €2,724.7 million and Ebitda at €738.7 million improves by €19.7 million (+2,7%). Net of non-recurring items, Ebitda would have improved by €6.6 million (+0.9%). Recurring Ebitda to sales margin decreases from 27.4% to 26.6%. Changes in the scope of consolidation account for an increase of €32.1 million in net sales and €1.9 million in Ebitda. Foreign exchange fluctuations negatively impact the two figures by €76.5 million and €24.5 million respectively. Like-for-like net sales and Ebitda would have increased by 5.7% and 5.9% respectively. After amortization and impairment charges for €160.7 million (€144.8 million in 9M-07) Ebit increases to €578.0 million (€574.3 million at September 2007). Finance costs increase from €28.2 million to €52.6 million, mainly due to foreign exchange differences, while the contribution of the associates accounted for under the equity method has halved (from €11.0 million to €5.5 million).
As a result, profit before tax is down 4.7% (from €557.1 million to €530.9 million) while net profit benefits from a more favorable average tax rate and increases from €355.1 million to €362.9 million (+2.2%). After allotment of minorities, consolidated net profit comes in at €295.1 million (-1.5% versus €299.5 million in 2007).

Cash flow is equal to €523.6 million versus €499.9 million at September 2007. Net debt as of 30 September 2008 amounts to €794.7 million, up €173.5 million over year-end 2007. In the first nine months, the group invested  €358.5 million in property, plant and equipment, €185.2 million thereof for capacity expansion projects. Equity investments, equal to €232.1 million mainly relate to the acquisition of a 35% stake in two Algerian cement plants (€110.0 million), of the grinding terminal “Cementi Cairo Srl” based near Savona (€41.0 million) and of 100% of Dorsett Bros. Concrete Supply, Inc. in Houston (€50.5 million) as well as to the purchase of Dyckerhoff AG shares (€17.3 million). As of September 30, 2008, total equity, inclusive of minority interest, stands at €2,807.8 million versus €2,513.4 million as of December 31, 2007. Consequently debt/equity ratio is equal to 0.28 (0.25 at 2007 year-end).

Italy
In the first nine months cement and clinker volumes sold, exports included, are down 13.2%. The construction market continues to show a downward trend, caused by the decline of new house starts and the slowdown of the public sector following investments cuts. The rigorous price policy implemented in the first months of the year has lately given way to a recovery of the market share, with consequent price erosion compared with the good levels of the beginning of 2008. The third quarter was marked by an enduring energy costs inflation which further squeezed income margins. The present weakness of crude oil prices hints however at a turnabout in the forthcoming months.
Also ready-mix concrete sales suffer from the market slowdown, posting a 16.2% decrease with prices in line with inflation.
Overall, net sales in Italy come in at €658.6 million, down 9.8% versus €730.4. million in 9M-07. Ebitda stands at €121.4 million (€153.4 million in 2007, -20.9%), with a decline of Ebitda to sales margin from 21.0% to 17.4%, net of non recurring items.

At the beginning of November the company announced the plan to stop production at the Santarcangelo di Romagna (RN) plant, with the final shut down of the unit on 31 December 2008. Buzzi Unicem reached this decision because the plant, which dates back to 1920, gradually ceased to be competitive during the last few years due to the rising cost of electricity, fuel, transport, spare parts and services. Closing the plant will allow the company to maximize the production capacity in the other Italian plants and cut costs and capital expenditures by approximately €5 million per year on a permanent basis.

Central Europe
In Germany, cement volumes sold are up 4.1%, thanks to a moderate growth of the market, sustained by non residential building, infrastructure works and exports to the Netherlands. Ready-mix concrete sector records a sizeable production growth of 12.8%, including the widening in the scope of consolidation. Cement and ready-mix concrete average unit revenues have improved by 7% and 10% respectively. Net sales in Germany stand at €459.5 million versus €383.5 million in 9M-07. Ebitda is up 24.4%, from €61.5 million in 2007 to €76.5 million.

In Luxembourg cement volumes sold are stable (+0.6%), with slightly higher prices. Overall net sales decrease 2.9%, from €71.5 million to €69.4 million, only due to the change in the scope of consolidation, net of which they would have increased by 6.9%. Ebitda improves from €14.2 million to €20.0 million (+40.8%) but, excluding non-recurring items in both years (gain on  disposal of Eurobeton remaining stake in 2008 and provision for losses on disposal of Marbrerie Jaquemart in 2007), Ebitda variance would have been negative for €4.3 million.

In the Netherlands, in the first nine months, volumes sold exceed 0.85 million cubic meters of ready-mix concrete (+18.1% over 2007), with net sales at €103.4 million (+2.4% over 2007) and Ebitda slightly lower than in the previous year (from €4.9 million to €4.7 million).

Eastern Europe
In Poland and the Czech Republic, where our subsidiaries closely cooperate with intercompany sales, volumes sold increase by 9.3% and 1.2% respectively; volumes are sustained also in Ukraine, confirming the first-half growth rate, with an improvement of 7.1%.  In Russia and especially in the Urals region, the construction sector continues to boost thanks to commercial investments and infrastructure works, while some possible perceived slowdowns seem to be more attributable to the lack of qualified manpower than to the financial crisis. In such a context, Suchoi Log plant capacity continues to be fully utilized: in the first nine months tons sold have slightly decreased (-1.7%) but the gap recorded at the beginning of the year has been almost recovered.
Average selling prices in local currency improve in all countries and specifically: they show a moderate recovery in the Czech Republic (+5.1%), a significant progress in Poland (+14.4%) and a strong rise in Ukraine (+39.8%) and especially in Russia (+71.4%). Such a rise in prices, besides being due to a carried over effect of the increases occurred during 2007, reflects a favorable variance occurred in the second and third quarter in Poland and Ukraine, and a slight erosion in Russia.
Ready-mix concrete volumes are up 8.5%, driven by all our countries of operations, with selling prices generally improving, especially in Ukraine and Poland.

The progress in volumes and prices has led to a net sales overall increase of 38.2% from €532.6 million to €736.2 million; foreign exchange effect is favorable in Poland and the Czech Republic, unfavorable in Russia and Ukraine, with an overall positive balance of €10.1 million. Ebitda is up 65.4%, from €188.4 million to €311.5 million; the improvement is attributable mainly to Russia, however also Ukraine and Poland show a strong growth. At September year-to-date the expense booked for the assembly of used machinery for the capacity expansion project in Russia amounts to €7.8 million.

United States of America
In the first nine months, cement volumes sold are down 8.2%. The decline is less marked than in the overall market thanks to the positive performance of Texas operations. The strong slowdown in residential construction continues without adequate counteracting from commercial and public building by now also influenced by the deteriorating economic scenario. Some extreme adverse weather conditions (hurricanes) amplified the negative scenario of the period. Despite a growing competition in some areas, the decline in average unit prices is moderate (-2.6%) and in the third quarter they are only slightly lower than in the second one. Ready-mix concrete volumes increase by 24.8% thanks to a wider scope of consolidation which includes the batching plants acquired at the end of 2007 and during 2008 in Texas, Missouri and Tennessee. Overall net sales come in at €554.5 million versus €646.3 million (-14.2%) and Ebitda is down 37.2% from €224.7 million to €141.2 million. Excluding the effect linked to dollar weakness, the two figures would have decreased by 2.9% and 28.9% respectively.
Ongoing is a restructuring of operations, which has brought to discontinue cement and clinker production at Independence, KS plant and slag grinding at New Orleans, LA with consequent cost reduction expected in 2009. Also the Oglesby, IL cement plant will temporarily cease production, starting from  December 1, 2008.

Mexico (50% consolidation)
Moctezuma’s cement volumes sold decrease by 2.0%, mainly as a consequence of the slowdown recorded in the third quarter, with average selling prices in local currency improving by about 4%. Ready-mix concrete sales are up 9.3%, with prices in line with the previous year’s ones. Net sales and Ebitda translated into euro show a negative trend: net sales decrease by 3.7% (from €160.6 million to €154.7 million) and Ebitda is down 11.9% (from €71.8 million to €63.3 million), with Ebitda to sales margin at 40.9% versus 44.7% in 2007. The result is negatively affected mainly by the cost inflation recorded during the year and by a penalizing translation effect. At constant rate the two figures would have come in at +4.7% and -4.2% respectively.

Outlook
In Italy, volumes are expected to go down by around 10%, with profitability in decline. Compared with the first nine-month average, prices are deteriorating which makes future prospects more uncertain.
In Germany, in a context of slightly positive volumes and average prices in improvement, operating results are very likely to be confirmed on the rise.
In Eastern Europe markets, we expect a good increase of the overall profitability although in the last quarter the trend of growth rates will be less brilliant than in the first nine months.
In the United States of America demand will remain weak, with operating results trend and Ebitda margin coming out similar to those reported at end-September.
In Mexico the outlook is for stable or slightly declining volumes, in a better pricing environment. Profitability is expected to stand at a lower level than the 2007’s one. Consequently, at group’s level, for the full year 2008 we confirm the expectations set forth in the first half interim report, i.e. the attainment of recurring operating results slightly lower than the ones posted in 2007. Consolidated net profit will likely decrease, due to more penalizing finance costs and to a higher portion attributable to minority interest.

The manager responsible for preparing the company’s financial reports, Silvio Picca, declares, pursuant to paragraph 2 of 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 records.

Company contacts:
Investor Relations Assistant
Mariangiola Fiore
Phone. +39 0142 416 404
Email  mfiore@buzziunicem.it