Ticker:

Recommendation:BUY Price Target: 4.30

CFA Institute Research Challenge

Price: 3.35

CIMPOR
CIMENTOS DE PORTUGAL SGPS SA Business Summary
CIMPOR - Cimentos de Portugal SGPS SA is a Portugal-based holding company primarily engaged in the production and sale of construction materials, such as cement, concrete, mortar and aggregates. The Company is active in Portugal, Spain, Morocco, Tunisia, Egypt, Turkey, Brazil, Peru, Mozambique, South Africa, China, India and Cape Verde. The Companys investments are held essentially through two subsidiaries: Cimpor Portugal SGPS SA, which holds the investments in companies dedicated to the production of cement, concrete, aggregates and mortar in Portugal, and Cimpor Inversiones SA, which holds the investments in companies operating abroad.

Cimpor Cimentos de Portugal SGPS SA

Rua Alexandre Herculano, 35, Sao LISBOA 1250-009 Portugal

P/E DividendYield Beta: Shares Outstanding(Mil.) Market Cap(Mil.) Institutional Holdings Price to Book Debt to Equity Return on Equity

16.91 5.08% 0.91 672.00 2,197.44 1.06%

Performance
Price(): 3.35 Volume(millions): 0.1 52 Week High: 5.70 52 Week Low: 2.93 Currency: EUR

1.33 119.72% 7.27 *Source: Reuters

Stock performance vs. the Market (Jan 04=100%)

Sales

Source (Reuters)

Net Profit

Financial Summary

Source (Reuters)

BRIEF: For the six months ended 30 June 2012, CIMPOR - Cimentos de Portugal SGPS SA revenues decreased 7% to EUR1.11B. Net loss totaled EUR204.8M vs. income of EUR132.2M. Revenues reflect Portugal segment decrease of 22% to EUR134.4M, Spain segment decrease of 26% to EUR93.1M, China segment decrease of 38% increase from EUR2.5M to EUR298.6M. It is the component of PSI INDUSTRIALS Index (weighting 44.27%), and it was once the component of PSI-20 Index. It is now weighting 4.49% of PSI ALL-SHARE Index.

Source (Reuters)

CIMENTOS DE PORTUGAL SGPS SA

CFA Institute Research Challenge

Business Description
A worldwide leader of cement manufacturing
Cimpor, which has its headquarters in Portugal, is one of the worlds top ten cement groups. Portugal, Spain, Cape Verde, Brazil, Morocco, Tunisia, Egypt, Turkey, Mozambique, South Africa, China and India are the 12 countries where Cimpor operates and where it employs almost 8,250 people of 33 different nationalities. Cimpors main business is the manufacture and sale of cement. Its 26 plants and 16 grinding mills currently have an installed production capacity of 36.5 million tons of cement per year using its own clinker. Cimpor group also produces and sells ready-mix concrete, aggregates and dry mortars with the aim of ensuring the vertical integration of its businesses The company reported sales of 2.28 billion Euro (US$3.00 billion) for the year ending December of 2011. This represents a very small increase of 1.6% versus 2010, when the company's sales were 2.24 billion Euro. Sales of Others saw an increase that was more than double the company's growth rate: sales were up 16.2% in 2011, from 113.49 million Euro to 131.86 million Euro. CIMPOR - Cimentos de Portugal SGPS SA also saw significant increases in sales in Concrete and Aggregates (up 14.6% to 492.39 million Euro) . Cement Production Capacity:36.5Mton/year Protugal
Installed capacity Cement Plants Emploees

Key Milestones:
1976:CIMPOR created. 1983:Replacing fuel oil with coal in all plants. 1985:Last wet production line transformed to dry process 1991:Company goes public. 1994:Jump Project sets up 1998:In Portugal, the production exceeds 100 millions tones. 2001:Best Performing Companies Over 1 Year Award. 2002:International acquisition begins. 2012: Camargo Corra group became Cimpors majority shareholder with 72.9% of the share capital.

Egypt 7.0 3 1210 3.2 4 967 N/A 1 118 6.6 6 1511

Installed capacity Cement Plants Emploees

Mozambique 4.0 1 503 1.3 1 206 1.8 1 222 3.0 4 817

Installed capacity Cement Plants Emploees

0.9 1 584 1.6 1 483 1.2 1 481 6.0 2 971

Spain
Installed capacity Cement Plants Emploees

Morocco
Installed capacity Cement Plants Emploees

South Afica
Installed capacity Cement Plants Emploees

Cape Verde
Installed capacity Cement Plants Emploees

Tunisia
Installed capacity Cement Plants Emploees

Protugal
Installed capacity Cement Plants Emploees

Brazil
Installed capacity Cement Plants Emploees

Turkey
Installed capacity Cement Plants Emploees

China
Installed capacity Cement Plants Emploees

Source (Company document)

CIMENTOS DE PORTUGAL SGPS SA

CFA Institute Research Challenge

A successful external growth strategy

Cimpor has over 10 years of experience in growing through acquisitions, Beginning in 1992 by acquiring the Spanish holding company CORPORACIN NOROESTE S.A, then, in 1994 the company Moambique S.A. 2 years latter in 1994,the company acquired 55% of the Moroccan company ASMENT DE TMARA. In 1997, Cisafra and the cement business of Serrana's Group were acquired, leading to the creation of SOCIEDADE DE CIMENTOS DO BRASIL, S.A. To get its business in Tunisia, the company acquired Societ des Ciments de Jbel Oust. Two year latter, which is 1998, the company has
strengthened its position in Brazil through the acquisition of the Brennand Group, including the following companies: Companhia de Cimentos Gois, Companhia de Cimento Atol and Companhia de Cimento Portland.

At the beginning of 2000, Amreyah Cement Company joins the companys portfolio and at this year alos,the Portuguese government sells the remaining 10% it still holds in the company. With the purchase of Natal Portland CementCompany (NPC) in 2002, the company expands his international presence. 2003, the purchase of two factories in Cordoba and Biebla allows the company continue to strengthen his absolute position in Spain. 2005, by purchasing Cimentos de Cabo Verde,the company gets enter the 8th foreign county . Finally in 2007,by purchasing Shandong Liuyuan New Type Cement Development, the cmpany gets its business in the worlds fastest growing county-China, which is also the biggest consumer of cement and aggregate products because of its massive demand for infrastructure. By this acquisition, Cimpor gets the contract to be the only foreign supplier for parts of Chinese high-speed railway project. At the same year, Cimpor also gets into the market of Peru and Turkey. In 2008, the acquisitions continue in China and Spain, and the also, the company gets into its 12th foreign market-India by acquiring Shree Digvijay. In 2012, Public Tender for purchasing Cimpor shares through which InterCement begins to hold 94.11% of its capital stock. InterCement is a holding that gathers cement sector assets for the Camargo Corra Group, one of the biggest private business groups in Brazil, present in 17 countries and with nearly 60 thousand employees.

Research & Development

This area is led by Cimpor Tec, which is responsible for technical development and innovation worldwide and supporting the business units. The R&D projects underway, on which Cimpor has invested more than EUR 7 million in the last five years, include the reduction of CO2 emissions associated with the cement manufacturing process, the development of new hydraulic binders, the use of alternative fuels and raw materials and the design of new equipment for the cement industry. The R&D initiatives in partnership with universities and university institutes are directly steered by CIMPOR. In the specific case of one of these projects, the nano-engineering of CSH through a contract with the Massachusetts Institute of Technology (MIT), a provisional patent was registered in 2011, which could become definitive if the development of research over the year gives it support.

CIMENTOS DE PORTUGAL SGPS SA

CFA Institute Research Challenge

Investment Summary
Target Price of 4.3 twelve months from now: BUY recommendation. We initiate coverage on Cimpor with a BUY rating and a 12-month price target of 4.3 Advantages: Correlation with General economie: Cimpor is a leading company in the Cement & Aggregate sector, which is highly depended on the general economie. Not only for Cimpor but also his major competitors, the stock price is always highly correlated with the major index. Which gives as a good reason to establish our provision based on the GDP. Presence in emerging market: Its presence in 3 BRIC (Brazil, Russia, India, China) counties gives a opportunity to get a high profit from these countries growth, however, those are the market with much more competitor from all over the world, which makes it difficult to get a high profit, and whats more, is that, to manage the company in those emerging countries is far more different then in Europe, such as how to get his relationship with the local government and how to communicate with the local employee. Disadvantages: European debt crisis continues to influence companys performance, as a company which has a D/E ratio more than 1 for the past 5 years (competitors gets this ratio around 60%). The situation becomes rather difficult for Cimpor to finance his operations and investments at a low cost. How ever, the takeover in june 2012 will get the company on some level the ability to go against the bad general economize of Europe .

Cimpor Stock Price and Major Events

Source (Reuters)

2-May 1 2009
09 1st quarter result announced

4-Fer 11 2010
Camargo Corra, S.A. acquires a 6.5% qualyfying participation in CIMPOR.

5-June 5 2011 1-Apr 24 2008

08 1st quarter result announced

3-Dec 18 2009
Announcement on 18 December of the launch of the takeover bid at the price of 5.75 euros, by the Brazil registered company Companhia Siderrgica Nacional (CSN)

Protugeuse Election

6-May 29 2012
Intercement Austria Holding GmbH Updates on Obligatory Public Offering for Acquisition of Total of CIMPOR Cimentos de Portugal SGPS SA's Ordinary Shares

CIMENTOS DE PORTUGAL SGPS SA

CFA Institute Research Challenge

Industry Overview and Competitive Positioning

Currently, the cement industry has many features of globalization. The global cement industry is expected to grow at an annual rate of 3%, which is close to the speed of the development of the world economy, supposing the cement consumption has a steady growth, then the global cement production is estimated at about 22 million tons a year. As the cement consumption, Emerging Market is leading the row where China ranked first, followed by India. Some cement companies keen to build new plants and expand existing production capacity, which will allow the capacity to grow to more than 14 million tons a year. It can be said that the cement in developing countries is still a sunrise industry, while with a periodicity in the developed countries. The focus of the cement industry is of course the environment and sustainable development issues, at the same time, the emerging market gets the intention of those big groups all around the world. People usually think that emerging markets are the Middle East / North Africa, Asia, Latin America and Eastern Europe, as well as parts of Africa. Middle East / North Africa:Attracted by the considerable profits from the Middle East, the some of the world's cement giant, is expected to soon be stationed in the this market as more and more multinational companies stationed in Lebanon, as well as North Africa, Egypt, Morocco and Tunisia and other countries. The Middle East accounted for 6% of the world's cement industry with an annual production of over 115 million tons, 77% of the production comes fore Egypt, Iran and Saudi Arabia. It is worth mentioning that the Gulf region's cement consumption has a more than 13% growth rate from 2000. Many people think that the annual per capita consumption of cement is the herald of prosperity and development. The Gulf region is one of the regions of the world where cement annual consumption per capita stays more than 1000kg. Most of the enterprises in the Gulf region is building new plants or upgrading their existing facilities. Asia:Economics experts predict that China and India will soon become the leader of the world economy. It is also said that, after the United States, China, the third largest economy in the Asia-Pacific regionIndia is going to replace Japan to become the world's third-largest economy in the next ten years. Economic development and demand for cement is highly correlated as we can see the relation between the cement consumption and a countrys GDP. India's annual cement production in the past two years has increased from 64 million tons to 126 million tons, more than doubled than 10 years ago. Assuming that the growth rate of the cement consumption and the rate of economic growth are parallel, the Indian cement industry will need to increase its production capacity of ten million tons a year to twelve million tons a year. Those Cement projects currently under construction, will only increase the production capacity of 6 million tons in two years.

GDP forecasting
Source:IMF

CIMENTOS DE PORTUGAL SGPS SA

CFA Institute Research Challenge

Economic Environment
The international economic environment was marked by overall slower growth, with the emerging and developing countries increasingly becoming the motors of world economic development. The increasing tension in financial markets during 2011 and 2012, which has increased the intensity of deleveraging in some economies, with main focus on the euro area and the peripheral countries, in particular.Emerging countries have grown even more in importance in terms of cement demand, and they currently account for more than 90% of worldwide consumption, especially in Asian countries, which account for more than 70% of the total. In terms of industry trends, there is a strengthening of cost cutting programmes as a way of tackling the consecutive price increases of various inputs, especially energy. The gradual increase in co-processing has assumed particular importance in these programmes, taking into account the environmental and economic advantages it provides. The rise in the world cement market of various groups from emerging countries, such as Russia, China and India, is also to be noted.

PESTEL Analysis:
new laws regarding sustainable development
new public construction projects
evolution of energy costs
evolution of the crisis in mature markets
economic growth in emerging countries
needs of human beings: habitation, trasportation and protection etc.
polulation growth and accelerated urbanization
reduction CO2 emissions
optimization of energy efciency
green house gases and raw material use
water pollution and solid waste health and safety law employment law antitrust law

As we can see from the analysis. Cimpors biggest advantage is the presence in the emerging markets, for a long point of view, we can see the value of Cimpors big investment in these countries. Considering the slow down of economy and debt crisis in Europe, investing more in Asia and other emerging markets becomes the main strategy of the group. The takeover of the group also gives a great opportunity to get a higher growth in the future, for all of this and based on our evaluation, we believe the Cimpor is company worth investing.

CIMENTOS DE PORTUGAL SGPS SA

CFA Institute Research Challenge

Valuation
Our 12-month price target of 4.3 is a weighted average of our target prices under DCF and multiplesbased valuation. We assigned a higher weight to multiples-based valuation than DCF valuation because of the similarity of those companies for all of them are ranked in 10 biggest companies in the industry, another reason is that, as a industry with a high periodicity like the economy, the assumption of DCF with steady growth in the future will give the valuation a big deviation. Weights Price DCF 70% 3.82 Multiples 30% 5.01 Target Price 4.30 Our Target price is 28% above the companys current price.

DCF Valuation
Growth, profitability and risk expectations are reflected in a discounted cash flows model (DCF). The key to this valuation is a reasonable forecast for the future performance of the company. As we said, the company is highly correlated with the general economy, we will estimate our forecast base on the GDP growth forecast form 2012 to 2017 by the IMF (International Monetary Fund). As different countries will drive the companys growth, for each country will have a GDP growth very different from the other, we will do the forecast for each country then sum together. Then, we also need some other key features like: The EBITDA margin is very different for each market, in countries with big initiative investments like China and India, the EBITDA margin is around 7% and 12%, compare to 31.85% in Portugal. So we get the average information of EBITDA margin for each country in the past 5 years, then as 2012 is a year with negative net Income, we assume that for the mature market like Portugal, the EBITDA will recover in few years and stay steady for the future. For the emerging market like China, EBITDA will gets to the average level in 5 years. Weighted Average Cost of Capital(WACC) is computed by considering both the cost of equity and the cost of Debt. As Cimpor is a highly leveraged company (Debt/Equity more than 1), getting the WACC is very important for our valuation. Operating Free Cash Flows are computed on the basis of forecasts and are discounted with the WACC Our DCF valuation employs a 5.92% WACC, calculated via an iterative process (between WACC, Enterprise Value, Equity Value) with the following key assumptions: Risk-free rate: 1.43% (10 year German bund) Equity market risk premium: 14.67%( Considering Ba3 credit spread of the country) Beta : 0.95 (un-leveraged: 0.53) Pre-tax cost of debt: 4% (as at dec 2012) Effective tax-rate: 29.38% Terminal growth rate: 3% Target price in 12-mounth under DCF

5.01

CIMENTOS DE PORTUGAL SGPS SA

CFA Institute Research Challenge

Relative valuation models

Peer group comparison valuation This valuation model results a target price of 3.82. We elected five companies as a peer group and four ratios to assess the share price. The target price is the average of the four median price. Forward P/E: current price / estimated EPS in one year MBR: market value/book value EV/Sales: enterprise value/estimated sales in one year EV/EBITDA: enterprise value/estimated EBITDA in one year Company Forward P/E MBR EV/Sales1 Holcim 12.81 1.09 2.16 Heidelberg 12.73 0.63 1.05 Buzzi Unicem 23.78 0.75 0.58 Italcementi 90.20 0.27 1.63 Lafarge 13.51 0.77 2.05 Mean Price 11.32 1.82 2.49 Median Price 5.00 1.94 3.00

EV/EBITDA 6.09 5.84 3.32 10.87 9.07 4.44 4.08 (source:Reuters)

Finacial Analysis
Turnover and EBITDA Cimpors revenue has grown 15.7% over the past five years, from 1.96bn in 2008 to 2.28bn in 2010, at a compounded annual growth rate of 2.96%. Cimpors revenue declined in 2009 is as a result of a global slowdown after the sub-prime mortgage crisis and the Europe debt crisis. but quickly rebounded 7.3% in 2010. During the period of 2007-2011, Cimpors EBITDA has lightly decreased from 30.9% in 2007 to 27.1% in 2011. Net income In 2007 which is the year before the global financial crisis, Cimpor gets a Net income of 304M, then in 2008, the year of the crisis , Net income, without doubt gets down to 219 , even four years after, in 2011 this number doesnt recover to the level of 2007. In 2012, which we have get the annual report, but we can already predict a negative Net income from the companys poor quarter.

CIMENTOS DE PORTUGAL SGPS SA

CFA Institute Research Challenge

Financial Strength
Quick Ratio Current Ratio LT Debt/Equity Total Debt/Equity 2007 0.92 1.15 0.80 1.13 2008 0.98 1.54 1.27 1.39 2009 1.01 1.45 0.93 1.16 2010 0.79 1.09 0.61 1.03 2011 1.04 1.44 0.82 1.09

Financial Strength looks at business risk. The stronger a company is from a financial standpoint, the less risky it is. The Quick Ratio compares cash and short-term investments (investments that could be converted to cash very quickly) . As we can see, for Cimpor, the total Debt/Equity ratio is bigger then 1 in the last five years, as his competitors has this ratio at around 0.6.which means Cimpor gets a much high leverage then his competitors. Having a high leverage might be very risky, especially when the company has some problem to finance his day to day operation. While after the take over in 2012, the companys leverage might be lower in the next 5 years.

Profitability
Profitability Gross Margin Operating Margin Net Profit Margin Interest Coverage 2007 0.73 0.22 0.16 7.51 2008 0.70 0.19 0.11 7.98 2009 0.72 0.18 0.11 7.23 2010 0.71 0.18 0.11 8.69 2011 0.71 0.16 0.09 4.63

Again, we can see in 2008 the Company suffers the Global financial crisis with a decline in Gross Margin, then comparing the Gross Margin and Operating Margin from 20107 to 2011, As the Gross Margin remains the same, Operating Margin gets down to 0.16.

EPS
EPS 2007 0.45 2008 0.33 2009 0.36 2010 0.36 2011 0.30

Cimpors EPS gets down after 2007 ,during 2009 and 2010, the EPS gets a little recovery and in 2011 gets down again.

Management Effectiveness
ROE 2007 19.2% 2008 12.2% 2009 15.7% 2010 13.2% 2011 9.3%

The ROE gets more than 50% decline in five years, which meanly because of the bad economic environment all over the world during this time.

CIMENTOS DE PORTUGAL SGPS SA

10 CFA Institute Research Challenge

Investment Risks
Default risk According to S&P, Cimpor gets a BB rating for long term and B rating for short term which is relatively a low rating comparing to his competitors. Management risk Cimpor has some management problem in emerging markets like China, as top executive is not a local people, there are lots of problem of communication and adaptation, resulting a low efficiency. Economic risk As we said already, the economic growth is the key to the companys development. But a recession will lead to a downside of the industry, just like 2008. Currency risk A multinational company must always take the exchange rate into account which may bring positive or negative impact to companies. To avoid this kind of risk, the company may get long term contract in the financial market to hedge. Increasing energy cost The production of cement requires a lot of energy, whereas the energy cost continues to rise in the recent years. The group participates in some R&D projects which may decrease the consumption of energy and optimize the energy efficiency. Waste management cost The protection of natural environment enforce a strict treatment of waste, which implies that a cost needs to be settled. Political risk Investing in some countries could be controlled by the local government. Successful localization requires not only cultural coherence, but also political harmony.

Disclosures:
Ownership and material conflicts of interest: The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company. The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the content or publication of this report. Receipt of compensation: Compensation of the author(s) of this report is not based on investment banking revenue. Position as an officer or director: The author(s), or a member of their household, does not serves as an officer, director or advisory board member of the subject company. Market making: The author(s) does not act as a market maker in the subject companys securities. Ratings guide: Banks rate companies as either a BUY, HOLD or SELL. A BUY rating is given when the security is expected to deliver absolute returns of 15% or greater over the next twelve month period, and recommends that investors take a position above the securitys weight in the S&P 500, or any other relevant index. A SELL rating is given when the security is expected to deliver negative returns over the next twelve months, while a HOLD rating implies flat returns over the next twelve months. Disclaimer: The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with [Society Name], CFA Institute or the CFA Institute Research Challenge with regard to this companys stock.

CIMENTOS DE PORTUGAL SGPS SA

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Table of Exhibits
Basic information
Sales and services rendered..p12 EBITDAp12

DCF Valuation
WACC Calculation..p13 GDP forecast.p13 Sale growth forecast..p14 EBITDA margin forecast.p14 Turnover forcastp15

Financial Data
Balance Sheet.p16 Income Statementsp18 Cash flows...p19

CIMENTOS DE PORTUGAL SGPS SA

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Sales and services rendered ( million) Portugal Spain Morocco Tunisia Egypt Turkey Brazil Mozambique South Africa China India Others Unallocated Eliminations Consolidated 0 1,416 74 -124 1,366 199 47 88 13 1,574 128 -167 1,535 2004 560 347 55 54 67 227 51 116 18 1,684 130 -175 1,639 31 2,024 134 -191 1,966 2005 577 373 61 53 104 270 55 120 2006 532 431 72 60 128 2007 563 471 80 60 121 163 322 60 130 24 2008 547 359 89 64 161 156 401 77 138 66 32 43 2,133 142 -186 2,089 2009 449 329 94 70 241 108 427 81 153 81 53 32 2,116 101 -132 2,085 2010 2011

438 272 94 78 227 155 609 88 145 106 48 31 2,292 195 -247 2,239 378 250 100 84 166 166 689 115 149 128 51 32 2,305 261 -291 2,275

EBITDA ( million) Portugal Spain Morocco Tunisia Egypt Turkey Brazil Mozambique South Africa China India Others Unallocated Consolidated

2004 176 87 26 16 30 78 6 40 0 459 -7 452

2005 183 103 26 15 48 63 7 42 1 488 8 496

2006 174 144 34 18 63 61 8 48 3 551 12 563

2007 173 138 35 19 59 39 74 12 43 2 3 596 11 607

2008 172 83 41 17 73 16 102 14 46 6 3 3 577 10 586

2009 150 47 42 20 105 11 123 12 70 5 10 3 596 10 606

2010 138 33 42 23 87 22 191 11 59 9 4 3 622 8 630

2011 99 35 41 24 50 31 210 24 60 18 3 3 598 18

616

CIMENTOS DE PORTUGAL SGPS SA

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Calculation of WACC
Cost of Debt Beta Beta unleverage Equity Risk premium Taxe Risk free rate Ke D/E E Wacc 4% 0.95 0.54 14.67% 29.38% 1.43% 9.30% 1.09 1 5.93% (As at dec 12,2012) (Wiping off big event) (Considering Ba3 credit spread of the Portugal) (Effectif) (Ten year german Bund) (Using CAPM) (5 years average)

GDP forecast-Source(IMF)

GDP forecast

Brazil China Egypt India Morocco Mozambique Portugal South Africa Spain Tunisia Turkey

2010 7.53% 10.45% 5.15% 10.09% 3.70% 7.09% 1.40% 2.89% -0.32% 3.12% 9.16%

2011 2.73% 9.24% 1.78% 6.84% 4.85% 7.32% -1.67% 3.12% 0.42% -1.80% 8.50%

2012 1.47% 7.83% 1.96% 4.86% 2.87% 7.50% -3.01% 2.59% -1.54% 2.70% 2.97%

2013 3.95% 8.23% 3.03% 5.97% 5.54% 8.40% -1.02% 3.03% -1.32% 3.31% 3.53%

2014 4.20% 8.51% 4.51% 6.39% 5.12% 7.79% 1.20% 3.86% 1.00% 4.06% 4.00%

2015 2016 4.20% 4.11% 8.54% 8.54% 6.00% 6.49% 6.74% 6.89% 5.27% 5.62% 7.85% 7.82% 1.85% 1.89% 4.15% 4.15% 1.55% 1.70% 5.31% 5.50% 4.26% 4.41%

2017 4.14% 8.50% 6.51% 6.95% 5.95% 7.78% 1.78% 4.15% 1.73% 6.01% 4.40%

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Sales growth forecast

Sales growth Portugal Spain Morocco Tunisia Egypt Turkey Brazil Mozambique South Africa China India Others 2013 -1.02% -1.32% 5.54% 3.31% 3.03% 5.29% 7.90% 12.60% 6.05% 24.69% 11.94% 7.09% 2014 1.20% 1.00% 5.12% 4.06% 4.51% 6.00% 8.39% 11.69% 7.72% 25.54% 12.78% 8.00% 2015 1.85% 1.55% 5.27% 5.31% 6.00% 6.39% 8.41% 11.77% 8.30% 25.63% 13.49% 8.54% 2016 1.89% 1.70% 5.62% 5.50% 6.49% 6.62% 8.22% 11.74% 8.29% 25.61% 13.77% 8.68% 2017 1.78% 1.73% 5.95% 6.01% 6.51% 6.60% 8.28% 11.67% 8.29% 25.50% 13.89% 8.75%

Sales growth Total

2018 5.50%

2019 5.00%

2020 3.80%

2021 3.00%

2022 2.70%

EBITDA margin forecast

EBITDA/Sales Portugal Spain Morocco Tunisia Egypt Turkey Brazil Mozambique South Africa China India Others Historical average 2012 31.85% 20.69% 23.49% 4.08% 45.01% 34.62% 28.99% 25.00% 45.26% 31.11% 14.54% 5.00% 28.29% 31.64% 15.34% 16.00% 39.31% 38.89% 7.87% -22.22% 12.50% 12.50% 23.56% 14.29% 2013 20.69% 8.00% 34.62% 25.00% 33.00% 16.00% 31.64% 15.34% 38.89% -18.50% 12.50% 15.00% 2014 23.00% 15.00% 38.00% 26.00% 37.00% 17.00% 32.00% 15.34% 38.00% -5.50% 13.50% 16.00% 2015 27.00% 23.00% 40.00% 27.00% 40.00% 14.54% 33.00% 15.34% 39.00% 4.50% 17.50% 18.00% 2016 31.00% 22.00% 42.00% 28.00% 42.00% 14.54% 35.00% 15.34% 39.31% 8.50% 19.50% 19.00% 2017 31.85% 23.49% 45.01% 28.99% 45.26% 14.54% 35.00% 15.34% 40.00% 15.00% 22.50% 23.56%

EBITDA forecast Total

2018 29%

2019 28%

2020 27%

2021 26%

2022 25%
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CIMENTOS DE PORTUGAL SGPS SA

15 CFA Institute Research Challenge

Turnover forecast
Turnover (net of eliminations) Portugal Spain Morocco Tunisia Egypt Turkey Brazil Mozambique South Africa China India Others Total Sales Sales (net of eliminations) Total Sales 2011 378.20 249.77 99.65 83.59 165.65 165.65 688.90 114.65 148.73 127.61 50.80 32.12 2305.30 2018 2640.07 2019 334.48 188.38 99.96 76.89 173.01 76.89 680.49 96.11 138.41 69.20 61.51 26.91 2022.25 2020 2012 331.08 185.91 105.50 79.44 178.25 80.96 734.28 108.23 146.78 86.29 68.86 28.82 1950.42 2021 3035.67 2013 335.05 187.77 110.90 82.67 186.29 85.82 795.91 120.87 158.12 108.33 77.66 31.13 2063.39 2022 3126.74 2014 341.25 190.69 116.75 87.05 197.46 91.30 862.82 135.10 171.24 136.10 88.13 33.79 2193.65 2015 347.70 193.92 123.31 91.84 210.28 97.35 933.72 150.95 185.43 170.95 100.27 36.72 2334.51 2016 353.89 197.28 130.65 97.36 223.96 103.77 1011.00 168.58 200.80 214.54 114.20 39.93 2487.29 2017

2785.28 2924.54

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Balance Sheet-(Source: Company documents)

Balance Sheet ( million) Non-current assets: Goodwill Intangible assets Tangible assets Investments in associates Other investments Accounts receivable-other Taxes recoverable Other non-current assets Deferred tax assets Total non-current assets Current assets: Inventories Accounts receivable-trade Accounts receivable-other Taxes recoverable Cash and cash equivalents Other current assets Non-current assets held for sale Total current assets Total assets Shareholders' equity: Share capital Treasury shares Currency translation adjustments Reserves Retained earnings Net profit for the year Equity before non-controlling interests Non-controlling interests Total shareholders' equity Non-current liabilities: CIMENTOS DE PORTUGAL SGPS SA 16 672 -20 184 272 384 304 1,796 103 1,899 672 -42 -150 283 522 219 1,505 111 1,616 672 -40 59 287 615 237 1,831 92 1,923 672 -33 256 281 715 242 2,133 97 2,230 672 -29 46 274 822 198 1,983 101 2,084 231 324 23 30 540 6 0 1,154 4,834 328 313 30 43 170 11 0 895 4,615 294 264 29 53 439 26 58 1,163 4,927 362 284 25 60 660 22 34 1,447 5,385 337 282 27 62 610 10 41 1,370 5,237 1,284 13 1,895 164 164 12 20 5 123 3,680 1,277 43 2,008 98 131 11 16 34 103 3,721 1,352 70 2,128 25 10 12 28 32 107 3,764 1,445 70 2,188 23 13 12 34 22 129 3,938 1,359 55 2,214 18 28 12 36 4 140 3,867 2007 2008 2009 2010 2011

17 CFA Institute Research Challenge

Deferred tax liabilities Employee benefits Provisions Loans Obligations under finance leases Accounts payable-other Taxes payable Other non-current liabilities Total non-current liabilities Current liabilities: Employee benefits Provisions Loans Obligations under finance leases Accounts payable-trade Accounts payable-other Taxes payable Other current liabilities Total current liabilities Total liabilities liabilities and shareholders' equity

198 17 191 1,324 6 21 2 169 1,929

197 17 152 1,911 5 20 1 115 2,418

234 20 154 1,637 5 28 1 122 2,201

273 19 171 1,253 3 26 1 80 1,826

265 19 198 1,635 17 20 0 45 2,198

2 3 623 2 196 73 45 61 1,006 2,935 4,834

5 2 202 2 207 59 41 63 581 2,999 4,615

5 1 454 3 183 61 37 61 803 3,004 4,927

4 1 935 3 199 74 44 68 1,329 3,155 5,385

5 1 554 3 192 73 68 59 955 3,153 5,237

CIMENTOS DE PORTUGAL SGPS SA

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18 CFA Institute Research Challenge

Income Statements-(Source: Company documents)

Income Statements ( million) Operating income: Sales and services rendered Other operating income Total operating income Operating expenses: Cost of goods sold and material used in production Changes in inventories of finished goods and work in progress Supplies and services Payroll costs Depreciation, amortisation and impairment losses on goodwill, tangible and intangible assets Provisions Other operating expenses Total operating expenses Net operating income Net financial expenses Share of profits of associates Other investment income Profit before income tax Income tax Net profit for the year -165 -4 -25 -1,575 438 -58 8 2 390 -69 321 -185 -9 -31 -1,762 393 -49 -87 2 258 -25 233 -226 -3 -35 -1,772 377 -52 0 -11 314 -68 246 -216 -4 -40 -1,907 409 -47 -1 -13 348 -97 252 -539 7 -642 -207 -631 27 -709 -225 -579 -2 -677 -250 -643 15 -758 -260 1,966 48 2,014 2,089 66 2,154 2,085 63 2,148 2,239 76 2,316 2007 2008 2009 2010

CIMENTOS DE PORTUGAL SGPS SA

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19 CFA Institute Research Challenge

Cash folws-(Source: Company documents)

Consolidated Cash Flow ( Million) Cash flows from operating activities Investing activities: Receipts relating to: Changes in consolidation perimeter Investments Tangible assets Investment subsidies Interest and similar income Dividends Others Payments relating to: Changes in consolidation perimeter Investments Tangible assets Intangible assets Others Cash flows from investing activities Financing activities: Receipts relating to: Loans obtained Sale of treasury shares Others Payments relating to: Loans obtained Interest and similar costs Dividends Others Cash flows from financing activities (3) -362 -91 -123 -14 -590 -266 249 6 126 381 Variation in cash and cash equivalents (4) = (1) + (2) + (3) Effect of currency translation and other non monetary transactions Cash and cash equivalents at the beginning of the period* Cash and cash equivalents at the end of the period* -510 -87 -133 -17 -746 -183 179 19 381 579 -943 -148 -136 -12 -1,240 -305 -27 4 579 556 320 2 3 324 558 4 1 564 930 2 3 935 (2) -4 -11 -237 -8 0 -259 -101 -7 -20 -170 -6 0 -204 -149 -28 -17 -243 -7 0 -295 -243 5 129 6 3 14 0 1 158 0 0 17 1 36 1 0 55 0 1 11 0 39 1 0 52 (1) 2009 615 2010 511 2011 520

CIMENTOS DE PORTUGAL SGPS SA

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