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The Future of Vietnam Cement IndustryPresented by Mr. Nguyen Quang ThuanCEO, StoxPlus Corporation

Grand Hyatt Bangkok, Thailand, 22 June 2015

1 The Story of Supply & Demand

2 Industry Performance Highlights

3 Long-term Outlook

4 Macroeconomic Briefing

3

Currently excessive supply in the whole country basis but a review must be done with care!

Domestic Consumption2014 : 50.82mn tons ( 9.74% y-o-y)5M2015: 21.34mn tons ( 5% y-o-y)

Export2014 : Cement - 6.05mn tons ( 49% y-o-y)2014 : Clinker – 15.18mn tons ( 37% y-o-y)5M2015: Cement – 1.90mn tons5M2015: Clinker - 3.95mn tons

Source: StoxPlus from VNCA

1315 17 18 20 22 24

2734

45 5156

65 70 70

1416

2124 27 28

3236

3944

47 45 4850

57

0

10

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Mill

ion

Tons

Total Domestic Production Cement Consumption

Vietnam Cement Consumption, 2010 - 2014

4

Supply surplus – but depending on region! Why?

Percentage of construction value (2014)

Percentage of GDP (2014)

Highland Mountainous

Red River Delta

Central North and Costal

Central Highland

South East

Mekong River Delta

Construction value & GDP per region

22.09

12.41

16.69

0

5

10

15

20

25

North Central South

Mill

ion

Tons

Vietnam Domestic Cement Consumption by Region, 2014

Source: StoxPlus from VNCA

5

Source: StoxPlus from VNCA

Clinker capacity and domestic demand by location, 2013

35.2

14.2

7.0

56.4

19.7

10.815.5

46.0

15.5

3.3

-8.5

10.4

-20

-10

0

10

20

30

40

50

60

North Central South Whole country

Capacity Demand Unbalance

Supply surplus in the North and Central but shortage in the South (HCMC area)

6

Export as the way to clean up the inventory

Source: StoxPlus from VNCA

Vietnam Cement & Clinker Export, 2010-2015

0.000.50

1.70

4.04

6.05

1.90

3

5.5

7.3

11.06

15.18

3.95

0

2

4

6

8

10

12

14

16

2010 2011 2012 2013 2014 5M2015

Mill

ion

Tons

Export Cement Export Clinker

7

Infrastructure development triggers a great cement growth consumption! But financing is a big challenge

Value of major infrastructure projects, by timeframe (US$mn)

1,157

800

1,464

22,140

553

9,645

733

16,489

8,000

7,239

57,094

35,705

36,947

3,734

0 20,000 40,000 60,000

Airports

Oil & Gas Popelines

Ports

Power Plants and T&D

Railways

Roads & Bridges

Water

2015-2020 2010-2015

Source: StoxPlus

No Project Name City/Province Value (US$mn) Timeframe Status

1 Ring roads 3 and 4, connecting HCMC with the Ben Luc - Long Thanh and Bien Hoa - Vung Tau

Ho Chi Minh 8,000 2010-2015 Under construction

2 Six-lane road widening BOT project, Hanoi - Can Tho section, part of 2,300km National Highway 1

Hanoi 6,000 2015-2020 Under construction

3 Ring Road No. 5 (Son Tay-Phu Ly, Phu Ly-Bac Giang; Bac Giang-Thai Nguyen and Thai Nguyen-Son Tay), Hanoi

Hanoi 4,100 2010-2015 Planning

4 Dau Giay - Lien Khuong Expressway

Lam Dong 3,520 NA Unknown

5 Six-lane Nha Trang City (Khanh Hoa Province) -Phan Thiet City (Binh Thuan Province) PPP Expressway Project

Khanh Hoa 3,500 2015-2020 Planning

6 Ha Long City - Mong Cai City expressway project, part of Noi Bai – Ha Long -Mong Cai expressway, Quang Ninh province

Quang Ninh 2,100 2010-2015 Planning

7 Ring road No. 4, Hanoi Hanoi 1,970 2010-2015 Planning8 Ninh Binh - Thanh Hoa road

project - 2 laneThanh Hoa 1,867 2010-2015 Planning

9 Noi Bai - Ha Long Expressway

Hanoi 1,762 NA Unknown

10 Ben Luc-Long Thanh Expressway - Part of North - South Highway

Dong nai 1,600 2015-2020 Under construction

Total 34,419

8

Residential buildings is the highest growing cement usage sector

5.4 7.010.0 12.5 13.3 15.9

2.12.6

4.25.8 6.3

6.1

7.28.0

8.5

9.410.5

10.4

2.02.6

3.4

3.74.1

4.3

0

5

10

15

20

25

30

35

40

2008 2009 2010 2011 2012 2013

US$

bn

Residential buildings Non - residential building

Civil engineering works Specialized construction services

Construction Segmentation, 2008-2013

Source: StoxPlus from GSO

9

Supply side: Very fragmented market structure, consolidation is a must!

Nghi Son…

Holcim

21%Chinfon

19%

Thang Long10%

Phuc Son…

Luks Viet Nam8%

Lafange4%

He Duong2%

VICEM Ha

Tien…

Bim Son18%

Hoang

Thach

16%

But Son13%

Hoang Mai…

Hai …

Tam Diep…

Hai Van4%

Others

3%

VICEM35%

Foreign-owned Producers

28%

Ha Long5%

Cong Thanh2%

Cam Pha7%

Quang Son5%

FICO7%

Lam Thach2%

Song Gianh7% Others

65%

Other Private & Associate Producers

37%

Source: StoxPlus from VNCA

Market Share of Key Players, 2014

10

Source: StoxPlus

Low utilisation rate in overall. Do you think they can survive with this operating situation?

Forecasted Capacity Utilization Rate of Vietnam Cement Factories (7% growth rate)

81%

73%72%

81%

77%

70% 70%

68%70%

72%

75%

60%

65%

70%

75%

80%

85%

8.75

8.79

8.73

8.74

8.75

8.76

8.77

8.78

8.79

8.80

Completed in 2014 To Complete in 2015

MTP

YSource: StoxPlus

Planned Additional Capacity from New Licenses

1 The Story of Supply & Demand

2 Industry Performance Highlights

3 Long-term Outlook

4 Macroeconomic Briefing

12

31.7%33.2%

31.3%33.0%

35.0%33.1%

22.5%24.9%

22.1% 23.6%24.3%

15.1%

21.2%

24.9%22.1%

23.6% 24.3%

31.0%

15.3%

14.9%

13.3%

19.8%

16.3%

15.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2008 2009 2010 2011 2012 2013

FT Semen Indonesia Siam Cement Group (Thai Land) Anhui Conch (China) Vietnam Cement Players

Low EBITDA vs. Regional Giant Players

Vietnamese Cement EBITDA Margin Vs. Regional Players

Source: StoxPlus, ICR

13

High fuel costs but limited alternative fuel

Sample Clinker Cost Analysis, 2013

Source: StoxPlus’ survey data

2.63

15.42

3.50

2.19

1.51

0.24 0.15

25.64

0

5

10

15

20

25

30

Material Coal Electricity Maintenance Labor SG&A Other fixed Originalprice

US$

/ to

n

Coal = 60% of clinker cost

Electricity = 14%

14

Clinker

Grinding & Packaging

Warehouse

Thanh Hoa

CanTho/Vinh Long

Hiep Phuoc –HCM

Quang NinhHai Phong

Quang Binh

Source: StoxPlus

- Clinker production concentrates on the North and Central Vietnam

- Lime stone in North and Central Vietnam

- Shortage of clinker in the South

- Very weak logistic system

Why Grinding located in HCMC area?

1 The Story of Supply & Demand

2 Industry Performance Highlights

3 Long-term Outlook

4 Macroeconomic Briefing

16

Oversupplied but when is the equilibrium point?

Source: StoxPlus

13 15 17 18 20 22 24 27 34 45 51 56 65 70 70 7790 95 102 104 107 107 107 107 107 107 107 107 107 107 107

0

50

100

150

200

250

Mill

ion

Tons

Total Domestic Production Total Consumption (5%) Total Consumption (7%) Total Consumption (9%)

Under the base case, cement equilibrium achieved by 2023

41.08 (*)

Under the Master Plan, there will be 25 cement factories to be built and operated by 2020, which would increase cement supply by 41.08 MTYP. But the status of those projects is very uncertain.

We are here

Forecast Vietnam Cement Supply - Demand

17

Opportunities remain in the South (HCMC area)!

Lack of cement in HCMC area

7.0 7.0 7.0 7.0 7.0 7.0 7.0

16.8 17.7 18.6

19.5 20.5

21.5 22.6

0

5

10

15

20

25

2013 2014E 2015E 2016E 2017E 2018E 2019E

Ton

mill

ion

Total Clinker Capacity Total consumption (5%)

The south does not have natural resources necessary to produce clinker. They will always have a shortage

of clinker

Source: StoxPlus

18

Consolidation is a must!

- Fragmented market with 26 companies and 94 factories

- Low efficiency

- Necessary to consolidate

2 Acquiror

PT SEMEN GRESIK

Taget Name

THANG LONG CEMENT JSC

1 Acquiror

VIETTEL GROUP

Taget Name

HALONG CEMENT JSC

3 Acquiror

VIETTEL GROUP

Taget Name

CAM PHA CEMENT JSC

4 Acquiror

SIAM CEMENT GROUP

Taget Name

BUU LONG CEMENT JSC

1 The Story of Supply & Demand

2 Industry Performance Highlights

Long-term Outlook

4 Macroeconomic Briefing

3

20

3,771

5,341 5,689

8,722

9,919 9,288 9,600

8,052 9,286

0

2,000

4,000

6,000

8,000

10,000

12,000US$ million

GDP Growth & CPI FDI Disbursed

Public Investment

Vietnam economy recently saw some clear signs of recovery

0%

5%

10%

15%

20%

0%

2%

4%

6%

8%

GDP Growth CPI

3,300 4,100

8,034

11,500

10,000 11,000 11,000

10,460 11,500

12,500

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

US$ million

4,358 4,840

5,428 5,407 6,021

6,627 6,586 6,800 7,199

7,702

5%

6%

7%

01,0002,0003,0004,0005,0006,0007,0008,0009,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

US$ million

Construction Value % GDP

Construction Value

21

1. Supply surplus currently but our base case forecast has indicated the equilibrium will reach in 8 years from now in 2023

2. Additional supply would be from new licenses but HCMC area always in shortage. A better logistics and related infrastructure improvements will trigger the growth

3. Domestic players operating at very low EBITDA vs. regional peers and consolidation is a must. Also opportunities for any entrants who can centralize the operations and increase efficiency

4. Energy costs remain a burden given the soaring electricity price and coal. Alternative fuels and Waste Heat Recovery Power Generation are critical success factors

5. Consolidation is a must for the industry growth. VICEM IPO is being on radar now. The only 4 domestic major players also discussed to merge as matter of survival.

Concluding Remarks

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