CFA Research Challenge '16 - Helwan University In Cairo - Initiated Coverage Over Arabian Cement Company.

1. Helwan University In Cairo
CFA Research Challenge
2016

2. Helwan University In Cairo – HUC
This is Student Research supervisor by Faculty Advisor Professor of Economics & Finance
Dr. Ahmed Abd El- Halim Ewis.
Prepared by Five Students from one of Egyptian Public University – Helwan University
Hosted by CFA Research Challenge by Egypt Charted Financial Analyst - CFA Institute.
The duration of preparation of this report start from the kick off meeting at Pricewaterhouse&Coopers
from October 2015 till Jan 2016.
The Students College: Faculty of Commerce & Business Administration – English Section – Senior Year (4th Year).
Mohsen Mahmoud Accounting Department
Manar Eisaa Business Information System
Amr Nabil El-Siefy Accounting Department
Noha Ashraf Business Information System
Nourhan Boshra Economics Department

3. CFA Institute Research Challenge
Hosted by
Local Challenge CFA Society of Egypt
Helwan University

4. Helwan University – Student Research
This report is published for educational purposes only by students Cement Industry
Competing in the CFA Research Challenge Egyptian Exchange(EGX)
Date: 19/1/2016 Current Price: EGP 8.26 (19/1/2016) Recommendation: BUY
Ticker : ARCC.CA USD1.00 = EGP 7.83 Target Price: 14.65EGP (Upside79%)
Highlights
Arabian cement is an Egyptian company and one of the leading producers of cement in Egypt
(appendix M) , the company has a market share of 8%, we issued buy recommendation as
our estimation for fair value per share is EGP 14.65 with an 79% upside potential. We used
both DCF method and relative valuation method to reach the estimated fair value, adding
that our analysis on the company, the cement industry in Egypt and the Neighboring region.
The Fair value we reached after all is supported by many factors.
Company Specific Factors
 the company’s stable energy supply as the company completed shifting to coal
phase
 coal cost is around 31% less than the natural gas on which the company used to
depend as the man energy source
 The high margins enjoyed by the company that enable it to absorb any cost
increases.
Industrial and economic Factors
The expected increase in the construction activities as a result to the increase in the
population, the new Mega projects in the country, and also the expected increase in the
market capacity.
The main risks facing the company and the industry as well:
prices cut down as the company will reach the full capacity in 2018 and the growth in the
company’s revenues beyond that will depend mainly on the price.
Saudi Arabia cement: there is a surplus of 20 million ton and Egypt is one of the main
markets the country considers exporting to them. This will affect the price and increase the
competition
Business Description
Arabian Cement Company was founded 18 years ago by a group of Egyptian shareholders,
however. Due to market conditions the project was halted for a while until September 2004,
when the Spanish cement group” Cementos La Union” (CLU) decided to invest in ACC, resuming
ACC’s activities. The company operations started in 2008 and it’s currently a leading cement
producer. Majority owned by Cementos La Union, which is a cement player with operations in
several countries such as Chile and Congo. ACC operated as a private company until its IPO in
2014. Appendix (A)
Production
The company established with the aim of building a cement plant with a capacity of producing
2.5 MTA. Now, ACC has a production capacity of 5 MTA with a market share of 8% as of 1H15,
after the second line started production in 2012. The Company sells four types of cement, which
are either bagged and branded or sold in bulk. Appendix (B)
Properties
ACC has two production lines and each one includes:
 One raw materials vertical grinding mill
Arabian Cement Company
Cost of Debt 6.11%
Cost of Equity 17.8%
Growth Rate (g) 3.5%
ERP 9.0%
Beta 0.90
Terminal value 7,135,363,727
PV of Terminal CF 3,148,812,960
Rf rate 9.7%
Enterprise Value 6,331,461,089
No. of Outstanding Shares 378,739,700
Equity Value 5,549,122,815
Fair Value (FV) 14.65
Recommendation - ( BUY )
Figure 1: Market profile
Figure 2: Valuation summary

5.  One clinker silo.
 Five stage pre-heater, kiln and cooler system
 Two horizontal cement mills
 Two cement silos
 Packing unit and four bulk loading outlets, two for each silo.
 Transportation services split between own fleet and third party.
 One palletizer
Strategy
The Company’s vision is to be one of the top two premium cement brands in Egypt by price and
to become the second largest cement plant in Egypt by production capacity with one of the
highest profitability per ton of production. The Company aims to achieve this vision by
implementing the following strategies:
1. Secure Energy Supply: ACC invested in an energy program to shift its dependence on natural
gas to other fuels (namely solid and refuse derived fuel (“RDF”)). The company now has the
technical capability to substitute 70% of energy needs through coal and 10% through RDF, the
decision had been largely a financial one, with coal prices around 30 percent cheaper than gas
prices. Coal is imported from Dekhiela port in Alexandria, Sokhna port which is only 30 km away
from the plant, and Imports are coming through Adabeya port which is 65 km away. The
proximity to these ports provides the company with operational efficiencies and helps to reduce
transportation cost. The desired Fuel mix is 70% coal and 30% RDF which may be done by the
second half of next year.
2. Optimize existing relationships in order to maximize sales: The Company also plans to
concentrate on developing its commercial activities. On a blended basis the Company currently
commands the second highest price of cement across all governorates and Management
strongly believe that by (I) utilizing its experienced commercial team on the ground; (ii) growing
and maintaining good relations with customers; and (iii) continuing to grow the Company’s
Express Wassal service, the Company can maintain this price positioning and maintain the right
mix of customer sizes and control supplied amounts for each governorate.
3. Vertical Expansion:
• Andalus Ready Mix concrete: it became part of Arabian Cement Company, using its brand Al
Mosalah as its main component.
• RDF Plants: During 1H15, the company used RDF to generate between 7-10% of its energy
requirements. Starting June 2015 the company started commissioning the hot disc operations to
enable using alternative fuels of up to 30% of the total energy needs. Appendix (I)
4. Expanding production in Egypt:
The Company is in a position to use its unutilized land to build up to two additional production
lines as per the facility design. Alternatively, if there is a strategic opportunity to acquire an
existing player and the valuation is justifiable, the Company could pursue that opportunity as a
further means of expanding production in Egypt.
Management and governance
Management has successfully positioned the Company as one of the leading players in the
Egyptian cement market since the start of commercial production of cement in 2010. The entire
executive Management team. Has an average of 16 years of experience, the management has
effectively overcome many obstacles Mainly the Energy issues, lack of natural gas, and shifting
to coal. The Company maintains international best practices in management through its adoption
of the quality management system developed by TUV-SUD Management Service GmbH, which
is an internationally accredited¨
certification body that has the know-how to audit and certify a
wide range of internationally recognized management systems in various sectors and industries.
Appendix(C)
Audit Committee: In accordance with the EGX Listing Rules, the Board has formed an audit
committee, comprised of three members. The audit committee is chaired by Mr. Salvador Veguer
Roger and also comprises Mr. Maged Hosny Mohamed Al-Sayed and Mrs. Elena Bertolin.
Shareholder structure: 60% Aridos Jativa, 17.5% El Bourini Family 22.5% Free Float.
Corporate structure
The Company currently has two consolidated Subsidiaries, and has a 50% joint venture interest
in a third company (ARM). Appendix(D)
Regulation
The Egyptian cement industry is subject to Egyptian laws, regulations and rules applicable to
industrial establishments and their environmental compliance. These include regulations that
apply Egyptian standards for the specifications of various types of cement, such as the Egyptian
Standard number 1/4756 of 2009 for Portland cement. In addition, the Environmental Law and
its Executive Regulations require cement producers to follow the permitted limits of emissions
relating to cement production.
Corporate Social Responsibility
Khaleeha Suessi: A Competition Supporting Startups in Suez. Hope Village Society: ACC has been
supporting Hope Village Society to develop its “Dream Building” project since 2010. Among
Figure 3:ownership Structure
Figure 4: Cement Utilization Source Company & Team
Projection
Market Share

6. others, Hope Village Society initiatives include securing shelter to more than 300 orphans
through its properties across Cairo. Appendix(E)
Industry Overview &Competitive positioning
The cement industry has some distinctive characteristics. It is a capital intensive industry, and
energy intensive. The world map of cement has changed dramatically over the past 60 years,
where the center of gravity has been moving steadily away from the west toward the East or
developing economies. Appendix(F)
Demand Drivers:
The cement consumption is closely related to the construction industry business cycle. It’s also
related to the population; this relationship is intuitive because the ultimate purpose of any
building and construction development activity is to serve people, whether in the
form of housing, commercial, industrial, service or infrastructure developments. Appendix(G)
Cement demand is primarily derived from the following segments—
Housing at 60%–65%: Housing accounts for a major portion of total domestic cement demand.
Infrastructure at 20%–25%: This demand comes from infrastructure projects. The projects are
funded by the government. Infrastructure development can be tracked through the government
funds that are allocated for the projects.
Commercial construction at 10%–15%: The commercial construction sector can be divided into
retail, office space, hotels, and other civil structures—hospitals, multiplexes, and schools.
Industrial at 5%–10%
For ACC the main demand segment is Housing.
Cost Drivers:
The major cost drivers for cement production are as follows -
1.Power and fuel costs: The cement industry relies on power. Power and fuel costs account for
30-40% of production cost. Coal remains the largest single component in the overall fuel mix
used by the cement industry. Cement Plants in Egypt have started shifting to coal science 2013
due to gas limitation. And it’s imported mainly from South Africa ACC was one of the first
companies to use coal. ACC currently uses a fuel mix of 70-80%coal, 10-15%Alternative fuel, 5-
10%Diesl. Appendix(H)
2.Limestone and other Raw material costs: The primary raw material that’s used is limestone.
Raw materials account for 30%–40% of the cost of sales, they are sourced from quarries near the
plant
3.Transportation expenses: Cement plants are located near limestone reserves. As a result,
cement has to travel a considerable distance to reach the end-users. It constitutes from 10% to
20% of the cost of sales.
4.Selling and Other expenses: These account for 15%–20% of the cost of sales.
Competitive Positioning
Egyptian Cement Industry
Egypt is the 14th largest cement producer in the world, contributing approximately 1.4% of
global cement production. The Egyptian cement market is primarily driven by local consumption,
particularly residential real estate construction, which has been relatively stable over the past
few years. Egypt’s cement sector consists of approximately 24 cement companies some of which
operate more than one plant in Egypt, with a combined annual capacity of approximately 70
Mmtpa.
“Porter’s Five Forces”
Rivalry (High) The Company operates in a highly competitive sector with 25 cement companies
some of which operate more than one plant in Egypt, eight of which benefit from the support of
a significant international cement company shareholder. The Company must compete with these
companies in a variety of ways including by offering the right product mix, quality and price.
Threat of substitutes (Low) the industry does not face a credible threat of competition. This
represents the reality of the cement industry. No product exists to date that can substitute
effectively for cement.
Buyer bargaining power (low) the power of consumers is limited due to the lack of substitutes.
Supplier bargaining power (High) Suppliers of cement industry are divided into three
categories: suppliers of transportation, Suppliers of coal and suppliers of raw materials. Cement
manufacturers have argued that price hikes in the cement industry are due to increases in the
price of both transportation and raw materials. The raw materials the company needs for the
production of cement (limestone, clay, gypsum and water) are granted by the Egyptian
government. As for transportation, the company full transportation service for bulk and/or
bagged products provided by the company’s fleet of 25 trucks as well as by 3rd party business
partners, it helps Reducing ACC’s dependency on external transport providers which is
fragmented and can be unreliable. The stronger Bargaining power is
Barriers to entry and exit: the cement industry has high barriers to entry and high barriers to
exit. First, government creates barriers by limiting the number of licenses it sells for
Figure 5: Global Cement Production

7. production. Second, assets needed to produce cement cannot be easily utilized for another
industry (i.e. the cement industry is highly asset specific). Finally, economies of scale can
prevent entry. For cement firms, neutralizing the high fixed costs requires a minimum efficient
scale of production that creates a strong barrier to entry
Competitive Strategy:
Cost leadership: this is the followed strategy by the company. ACC’s continues efforts to
reduce the cost enable it to have one of the highest margin per ton comparing to its peers,
which make the company able to absorb any cost increase. At the same time the company
maintained its cement premium quality.
INVESTMENT SUMMARY
The analysis on the company, industry, and the Sector by which the industry is affected along
with the estimated valuation based on our calculation using both DCF model and multiple
valuation, confirm our recommendation to Buy as our estimation for fair value per share is
EGP 14.65 with an 77% upside potential.
This valuation is supported by and derived from numerous factors:
Company specific Factors
Reliable Secured energy supply
Energy accounts for more than 30% of the company’s cost of goods sold. The Company has
stopped its dependency on Egypt’s unreliable natural gas supply, in addition to preventing its
exposure to the expected increase in natural gas prices. ACC was one of the leading companies
to shift to Coal.the decision had been largely a financial one as natural gas costed the company
USD 8 per MMBTU, comparing to USD 5.5 per MMBTUfor coal which is 31% cheaper, plus it’s
more reliable, as shortage of natural gas has cost the company significant losses and led to the
stoppage of clinker production and importing clinker at higher prices. ACC substituted more
than 70% of its energy needs with coal.The proximity to the main ports (Dekhiela, Sokhna, and
Adabeya) from which the coal is imported helps the company to reduce transportation cost.
the company used RDF to generate between 7-10% of its energy requirements. Since June 2015
the company started commissioning the hot disc operations to enable using alternative fuels
of up to 30% of the total energy needs which gives the company with Better Position for
Diversifying Energy Sources.
High Profitability
The higher margins enjoyed by the Company provide it with a buffer to be able to absorb any
cost increases. They also mean that the Company is more likely to achieve greater
profitability in the future if costs generally in Egypt increase and peers with a higher cost base
are forced to pass on these cost increases to consumers, thereby increasing the market price
for cement. Growth profit margin will get be stronger starting from 2016 mainly because the
final fuel mix would be implied which costs the company less as the cost will go to USD
5.2/MMBTU from the natural gas cost which is USD 8/MMBTU, there would be no more
imported clinker.
Stable Market share
Andalus for Concrete offers the Company vertical integration and allows the Company to
secure market share through the use of its products in large scale construction projects. The
Company specializes in all aspects of concrete products; it uses the Company’s brand Al
Mosalah as the main component for its production of concrete.
Industry Specific Factors
Country wide mega projects
From the new administrative capital to the 1mn housing units and road network projects.
This will have a significant impact on cement demand and increase the utilization Capacity.
This also will offset the decrease in informal individual construction activities which has
witnessed remarkable increase due to illegal building activities on agricultural lands following
the January 2011 revolution. ACC is Located in the northern area of the country where most
mega projects take place and away from the potential threat of cheap Saudi imports.
Housing Supply Shortage
We are living on only 6% of our land, it’s expected that the population to be more than 180
million by 2050. Egypt’s demographic profile has witnessed slight improvements in
urbanization levels. Increasing marriage rates coupled with the low urbanization rates,
compared to regional peers, is likely to put further pressure on the already undersupplied
housing market.
Figure 6: EBITDA
Figure 7: gross Profit
Figure 8: EBIT
Figure 9: Company Net Profit

8. Two construction projects are currently taking place. The first is the Social Housing Program
which the
Increase in residential units the annual demand of Egyptians for residential property has
reached 600,000 units, according to Minister of Housing Mostafa Madbouly. The total
investments in the real estate sector registered EGP 250bn, 45% of which was for the
governmental sector.
Two projects are currently taking place. The first is the Social Housing Program, a project
through which the government is aiming to provide one million units, around 200,000
residential units per year, for low-income Egyptian citizens.
The second one took a place in March 2014 when a major UAE construction firm Arabtec
agreed to build the one million affordable homes project on 160m square meters of land with
investment from the private sector of $40bn (EGP 280bn) backed by Egypt, Abu Dhabi and
possibly Saudi Arabia.
Strong Growing sector
The industry is highly affected to the construction sector which grows annually by around the
double rate by which the GPD grows. The construction sector grew from 2005/2006 to
2012/2013 by a CAGR of 20%, the real estate sector in the same period grew by a CAGR of 14%
both at constant prices and both grew by a CAGR of 18%, 16 respectively at current prices. This
will be reflected by an increase in the cement sector as well
Announced agreements
Minister of Tourism HishamZaazou stated that bilateral discussions are being held between
Egypt and Saudi Arabia on plans to build the largest tourist resort in Sharm El-Sheikh. He said
the investment required for the project is approximately $4bn.
The Emirati Majid Al Futtaim Group (MAF) announced on Thursday the beginning of
construction of City Centre Almaza, with EGP 4bn in investments.MAF has invested EGP 800m
of their equity in City Centre Almaza so far, rather than from banking loans.
Increase in market Capacity
minister of Industry and Foreign Trade Tarek Qabil announced that the ministry issued
conditions for tender documents and requirement specifications of cement production to
meet the future needs of the local market, which is expected to reach 90.4 million tonnes by
2022.
Valuation
In order to reach fair value for ARCC, we have used Discounted Cash Flow (DFC) method, using
Free Cash Flow to Firm (FCFF) approach, which is suitable for ARCC because the Company
intends to change its capital structure to be free from debt during the forecasted period.
According to our detailed DCF analysis we estimated the target price to be EGP 14.65.
 Discounted Cash Flow (DCF) method (Figure 12)
The Discounted Cash Flow (DCF) method used in the valuation of ARCC was the Free Cash Flow
to Firm (FCFF) approach, which is defined as after tax operating cash flow after covering all the
company’s capital expenditures and working capital needs. Our forecast horizon extends for 5
years, from 2016 to 2020, which represent the terminal year. The terminal value is estimated
using constant growth Gordon Growth Model.
 WACC – Weighted Average Cost of Capital (Figure13 &14)
The rate that a company is expected to pay on average to all of its security holders to finance
its assets we compute it use a moving weighted average cost of capital (WACC) to discount
FCFF. WACC has been change with values according to each year specifically start from 2016
till 2020 as the capital structure of the firm changes through our forecast horizon. For more
details about components of WACC and its assumptions please refer to Figure (xx)
Weight of debt from our forecast Balance Sheet is (0%). Loans will finish their interest at
2019. The beginning of the year 2020 we assume that will not be debt obligation due to the
company. There is no any plans for taking another additional loans as the target of the
company for their capital structure for no debts. Weight of equity we compute it from our
forecast Balance Sheet (100%) as a company will be with 0% debt.
 In our DCF valuation, we have used the following assumptions:
6,331,461,089
(1,073,814,463)
291,476,189
5,549,122,815
-
5,549,122,815
Shares Outstanding 378,739,700
14.65
Enterprise Value - EV
Consolidated Equity Value
Less: Debt
Add: Cash
Attribuitbal Equity Value
FV/Share, EGP
Less: Minority Interest
DCF COMPONENTS (EGP)
2016 2017
9.7% 9.7%
0.9 0.9
9.0% 9.0%
17.8% 17.8%
Cost of Debt before Tax 7.9% 7.9%
Corporate Income Tax 22.5% 22.5%
6.11% 6.11%
70% 81%
30% 19%
14% 16%
WACC COMPONENTS
Risk Free Rate - RF
B e t a
Equity Risk Premium - ERP
Cost of Equity
Weight of Equity
Weight of Debt
WACC
Cost of Debt
Figure 10: Source Central Bank & IMF projection
Figure 11: Source Central bank
Figure 12: DCF Team Estimate
Figure 13: WACC analysis Team Estimate

9. 1. After tax Risk Free Rate of 9.7%, representing government 2015 treasury bills.
2. The sum of market and country risk premium is equal to 9 % (Based on A. Damodaran’s
Model)
3. Beta of 0.9 (source: Bloomberg), although our calculations have a beta lower than 0.9
(0.5), we preferred to use a beta of 0.9 to reflect the current political and economic risks.
4. The cost of equity was derived using the Capital Asset Pricing Model (CAPM) having a
value 17.8%
5. Perpetual growth of 3.5%. From IMF forecasted world inflation in 2020. Effective tax rate
Appendix(P) is (22.5%) that refer to the last amend in the Egyptian tax law (91) on 21 August
2015
6. The After-tax cost of debt was calculated using value of 6.11% for ARCC and marginal tax
rate
7. In calculating ERP of 9% we used Damodaran Equity risk premium model, it states that, to
estimate the equity risk premium for a country, we start with a mature market premium and
add an additional country risk premium. We used the Implied US market risk premium for S&P
500 which is 6% as a mature market premium and add to that risk premium of 3% which is
Egypt’s 5 years’ credit default swap (CDS)
 Relative Valuation Method (Figure15&16)
While the DCF method was the main valuation approach, we also compared ARCC to other
comparable companies in the region. We identified its most appropriate local peers then we
calculated the fair value of the company using the multiples valuation technique, by
multiplying the average of the P/E ratios of the comparable companies excluding ARCC
and the EPS 2015 of ARCC to reach a fair value of 7.87. This FV is totally not reflecting
the market due to insufficient data and difficulty in finding comparable and timely
comparisons, we depend only on DCF valuation model and assigned 100% weight to it. In
addition to some draw backs in using P/E and EV/EBITDA ratios including that a multiple
represents a snapshot of where a firm is at a specific time, but fails to capture the dynamic
nature of business and competition.
 Risks to valuation
- Lower than forecasted local cement demand, would adversely affect the projected
sales volumes.
- Lower than forecasted sales volumes and/or selling price, would negatively affect
the projected sales values, which in turn will lead to lower valuation.
- Higher than projected cost of production would affect valuation adversely.
- Higher than projected capital expenditure would negatively affect valuation.
2018 2019 2020
9.7% 9.7% 9.7%
0.9 0.9 0.9
9.0% 9.0% 9.0%
17.8% 17.8% 17.8%
7.9% 7.9% 7.9%
Corporate Income Tax 22.5% 22.5% 22.5%
6.11% 6.11% 6.11%
17% 100% 100%
7% 0% 0%
17% 18% 18%
WACC COMPONENTS
Risk Free Rate - RF
B e t a
Equity Risk Premium - ERP
Cost of Equity
Cost of Debt before Tax
Cost of Debt
Weight of Equity
Weight of Debt
WACC
Potential Scenarios Fair Value Estimated Fair value Change
Risk free rate of 12.5% 12.08 14.65 -18%
Utilization at 2015 level 12.73 14.65 -13%
Increase in Expected prices by 10% 27.9 14.65 90%
Decrease expected prices by 10% 5.31 14.65 -64%
Terminal growth rate of 5.033% 15.79 14.65 8%
Taxes on coal by 10% 14.02 14.65 -4%
Taxes on coal by 30% 12.76 14.65 -13%
Beta of 0.5 19.93 14.65 36%
Increase in Electricity Prices by 20% 13.43 14.65 -8%
Scenario Analysis
Figure 14: WACC analysis Cont.
9.06
10.26
7.41
9.00
Median 8.93
Forecasted EPS 2015 0.88
FV 7.87
Weight 0%
P/E Multiple
P/E of Industry
4.70
4.43
Median 4.57
EBITDA 3,240,230,755
EV / Share 8.56
Weight 0%
EV/EBITDA
EV/EBITDA of Industry
Figure 15: PE
Figure 16: EV/EBITDA

10. Financial Analysis:
Financial Ratios
2013
A
2014
A
2015
P
2016
P
2017
P
2018
P
2019
P
2020
P
Liquidity Ratio
a) Current Ratio 0.41 0.49 0.58 0.76 0.97 1.49 2.46 3.07
b) Quick Ratio 0.28 0.25 0.29 0.56 0.76 1.23 2.10 2.71
Activity Ratio
1)Average Inventory Turnover 14.77 10.69 7.72 9.65 13.13 13.19 12.94 12.90
2) Average age of Inventory 24.72 34.15 47.28 37.81 27.80 27.68 28.21 28.29
3)Debtor’s Turnover 10.99 52.18 42.46 47.71 50.87 50.92 49.85 49.61
4) Average Collection Period 33.22 6.99 8.60 7.65 7.17 7.17 7.32 7.36
5) Average Payment Payable 84.16 74.74 78.87 77.34 73.64 73.33 74.74 74.94
6) Total assets turnover 0.61 0.76 0.71 0.79 0.91 1.00 1.05 1.06
Debt Ratio
1) Debt Ratio 66.54% 61.08% 54.75% 45.41% 36.93% 28.32% 23.20% 21.69%
2) Debt/Equity ratio 199% 157% 121% 83% 59% 40% 30% 28%
Profitability Ratio
1) Gross profit margin 41.65% 36.76% 33.88% 38.52% 40.33% 41.67% 42.70% 43.46%
2) Operating profit margin 29.85% 25.59% 22.13% 27.12% 29.75% 31.83% 33.23% 34.28%
3) Net Profit Margin 20% 15% 14% 19% 22% 24% 26% 27%
4) Return on total Assets
(ROA) 13% 11% 11% 15% 20% 24% 26% 27%
5) Average return on total
Assets (ROA) 12.29% 11.37% 10.28% 15.17% 19.89% 24.29% 26.93% 28.16%
6) Return on total Equity
(ROE) 38.46% 28.88% 23.36% 28.26% 31.36% 33.38% 34.36% 34.53%
7)Average return on total
Equity (ROE) 36.71% 31.38% 24.48% 30.43% 33.80% 36.02% 36.25% 36.29%
8) EPS 55.36 0.99 0.88 1.24 1.61 2.01 2.31 2.57
Revenues: Appendix(W)
Total revenue will continue to grow driven by
Increase in capacity: it’ expected reach to increase by the company average
market share of 8.17% and reach full utilization in 2018 as the total cement
market capacity will increase by the same average from 2010 t0 2014,
excluding 2013 considering it an outlier as the market was facing gas shortage
and stoppage of clinker production
Prices Recovery: the prices will recover after the 2015 drop that was mainly a
result of the softer increase in demand and the prices cut by one of the market
players forcing other companies to lower the price. We used the last updated
cement price of 2016 as it’s more accurate as a base to expect future prices
taking into consideration the effect of the inflation.
EPS: Appendix(O) There was a stock split in 2014 of 50 times, by which the par
value of the share was set to EGP 2 instead of EGP 100 that justifies the
significant change of EPS from 2013 to 2014
COGS (Figure19) (Appendix L&W): cost per ton is expected to drop to EGP 341 in 2016 from
EGP 355 in 2015, the decrease is driven by:
 Stoppage of using imported clinker Shifting to coal will be completed by the end of
the first half of 2016
 Diesel will be only used till the first half of 2016 in which (2016) it would represent
5% of the fuel mix instead of 13% that was used in 2015.
Starting from 2016 the cost per ton will increase to reach EGP 438 mainly based on these
assumptions:
Raw material: which is mainly used for making clinker, will increase by a steady percentage
of sales based on the historical data and we excluded both 2013 and 2014 because there was
a big amount of imported clinker in both years
Figure 17:Source Company & team calculations
Figure 18: Sales Volume Team Estimate

11. Coal: imported mainly from South Africa, will represent 70% of the fuel mix with a cost of
USD 5.5/MMBTU, we used IMF forecast for the coal prices of south Africa, and we expect
that the price will remain at the same average as the main coal consumers like USA and China
are shifting to other energy resources like natural gas due to environmental concerns.
RDF: It costs the company USD 4.5/MMBTU. We expected the prices of waste and other
types of RDF to increase by the inflation rate as more companies are starting to use RDF
Electricity: The government has issued the new tariff per kw with an annual increase, we
expect the cost per KW to increase by 5% annually beyond 2018, The electricity is mainly
used in the cements mills, every ton of cement requires 65 kw and much less for the ton of
clinker which is around 17 kw.
O&M: We expected it to stay in its average percent of sales in both 2012 and 9M 2015, as in
both periods there was either no or little imported clinker, that’s because more imported
clinker means less clinker production process so less O&M cost.
Other costs: Represent around 20% of sales are forecasted as a percentage of sales as they
have maintained a stable percentage of sales over the past years.
Debt: according to the last declaration of the company in May 2015 about the restructure of
the due installment to be over sixteen equal installments started from july2015 to july2019
Depreciation, Amortization and CAPEX. Appendix W &V)
ARCC CAPEX has been changing from 2010 to 2015. There was a dramatic increase in 2014
as a result of constructing a new production line. We estimated that the CAPEX will
gradually increase based on the inflation rate, as there are no major Fixed Assets
investments.
The terminal year’s CAPEX was equated with the value of the year’s depreciation, to avoid
the Gross Fixed Assets diminishing by the depreciation value.
Depreciation is calculated on the straight-line method to write off the cost of each asset to
its residual value over the estimated useful lives of assets. The depreciation expenditure is
obtained by multiplying the depreciation-to-sales ratio by the sales in this period.
Intangible assets have a finite useful life and are carried at cost less accumulated
amortization. Amortization is calculated using the straight-line method to allocate these
costs over 10 years.
INVESTMENT RISK
Risks Related to the Company
The energy supply risk (operational) (OR1)
Energy represents around 35% of the Company’s production costs. ACC suffered from
shortage in both natural gas. Appendix(K) and electricity which led to significant losses, now
as the company has shifted to coal and no longer depends on gas, the risk of gas disruption is
no longer exist. The current risk is the coalitions that object to coal being used for industrial
use due to its environmental threats. An Egyptian environmental coalition named “Egyptians
Against Coal” (EAC) released a statement calling for the end of coal usage in Egypt by 2017. If
the government took any procedures to ban coal usage the Company may be unable to
increase or maintain its current levels of production.
The Company relies extensively on third parties to operate its production facilities and
quarries (operational) (OR2)
The Company outsources the operation of the limestone quarry and the production of
cement to RHI and outsources the production of clinker to NLS.There are a number of risks
associated with the Company’s dependence on third-party, including: quality assurance,
potential lack of adequate capacity during periods of excess demand, and the risk that a sub-
contractor goes out of business. Changes in the Company’s relationship with RHI or NLS or
termination of the relevant agreements may disrupt its operations
The exploitation rights (Legal) (LR1)
The main raw materials for the cement production require a valid exploitation rights given by
the Egyptian government in order to extract them. If those rights are restricted or cancelled
by the government authorities, RHI may not be able to mine the quarry and deliver
limestone. This would impair the Company’s ability to operate the Plant, so if the company
was forced to source limestone from different quarry, its supply of limestone could be
disrupted or it may no longer gain the benefit of its close proximity to its current source
The Company relies heavily on the position of its brand in the market (operational) (OR3)
Figure 19: Cogs breakdown 2016 Team Estimate
Figure 20: source Company & Team Estimate
Figure 21: Source South Valley Company

12. Al Mosalah, the company’s main brand which is positioned in the premium segment of the
cement market in Egypt, represented 89% of the company’s sales in 2014 and about 86% in
9M 2015. the Company relies heavily on that positioning in order to maintain its target
market share and margins. if the Company is unable to maintain its brand positioning, it will
be more difficult to maintain existing margins.
The Company is controlled by a single Shareholder (market) (MR1)
60% of the Company’s Shares are owned by Aridos which in turn is owned by CLU. This gives
Andrios significant control over the company’s business. The interest of other shareholders
may sometimes not match his interests. The ability of Aridos to delay or prevent certain
actions could cause the price of the Shares to decline.
Risks Related to the Egyptian Cement Industry
Cement Prices cut down (market risk) (MR2)
The company’s revenues are really sensitive to the cement price, as the company is close to
full utilization and the only growth beyond that depends on the price per ton, recently the
market has witnessed a decrease in prices and it’s the first time since way many years, and
that was due to the softer increase in demand plus unnamed big market player started to cut
the price down to increase sales forcing other companies to lower the price. We believe the
prices will recover and continue to increase as a result to the expected increase in demand.
Thereat of Saudi Arabia Cement. (Economic) (ER1)
Saudi Arabia is considering lifting the 3 year exports bans on cement and steel to relieve over
supply in the local market as construction sector had witnessed a reduction as a slump in oil
prices has pushed the government to cut spending on non-essential projects so cement firms
are trying to reduce surplus of 20million tone. According to the chairman of the Gulf
Kingdom’s cement makers, they aim to supply Egypt with six million tons of cement. The ton
of cement is sold for an average of EGP 500 which is close the cement price in Egypt, adding
the freight cost the price will go even higher around EGP 600-625. If cement producer in
Saudi decided to sell the ton at lower prices that would affect the market and may force the
cement producer in Egypt to cut the prices down.
Demand for cement depends on the level of construction activity in Egypt (economic) (ER2)
Cement consumption in Egypt has a high correlation with construction levels particularly in
the residential real estate sector, as well as the spending by the Egyptian government on
infrastructure and public sector projects and other investments, which lead to high
consumption of cement
Risks Relating to Egypt
The Company is exposed to political, economic and legal risks in Egypt.
the Egyptian Government is heavily reliant on foreign aid to address chronic budget deficits.
There can also be no assurance that aid will continue, this might lead to more taxes
imposed by the government to cover the deficit. Since the 2011 revolution, Egypt has also
experienced a material decline in foreign investment and tourism. The EGP has also
experienced significant devaluation. Economic and political conditions may from time to
time affect the share price.
securities markets in Egypt
Risks Relating to an Investment in the Shares
The Company may not pay dividends to holders of Shares in the future. (market) (MR3)
The Company’s ability to pay dividends will depend on the Company’s existing and
future financial condition. Even if the Company generates significant profits, it may not pay
dividends if the Board believes that shareholder value may be increased more effectively by
using the profit for other purposes.
Limited free float of shares (market) (MR4)
The limited free float (22.5%) may have a negative impact on the liquidity of the Shares and
result in a low trading volume of the Shares, which could adversely affect the then prevailing
market price for the Shares.
Market risk
Foreign exchange risk (FXR)
The group is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the US Dollar and Euro. Foreign exchange risk arises from future
commercial transactions and assets and liabilities in foreign currencies at the date of the
financial statements.
Interest rate risk (IRR)
Figure 22: Source Company & Team estimate
Figure 23:Risk Matrix

13. the Company is exposed to interest rate risk arising from its loans. The Company borrows
funds at variable interest rates. Loans issued at variable rates expose the Company to cash
flow interest rate risk.
Liquidity risk (LR)
The Company’s liquidity risk arises from timing differences between cash inflows and
outflows. As all sales are on credit.
SWOT Analysis:
Strengths
1) One of the leading producers of cement in Egypt
2) Diversity (differentiation)
3) Outsourcing strategy
4) Low transportation costs
5) Strong and dynamic management team
Weaknesses
1) Most of the sales are generated from only one type of cement
2) High energy costs
3) competitive market
Opportunities
1) Broad distribution network
2) Strategic location
3) Efficient technology and production techniques
Threats
1) Depending on a third party contractor
2) Aridos Owning most of the company’s share
3) Disruptions or delays in the supply of raw materials
4) Laws and regulations
5) Limitation of insurance policies
6) Economic instability
7) Increasing costs
Figure 24: SWOT Analysis

14. Appendix (A)
HISTORY
The initial business plan for the company, following CLU’s indirect acquisition, was for the Company to seek to produce
2 Mmtpa of clinker for export to the European market due to economies expected to be achieved through favorable
rates on energy, tax concessions, proximity to raw materials and proximity to sea ports. Opportunities in the Egyptian
market were subsequently identified by Management and as cost competition in Europe was not as favorable as initially
anticipated at the date of inception of the business plan, the focus of the business shifted to the domestic Egyptian
market
Appendix(B)
PRODUCTION
Utilizing its skills and expertise, Management has successfully managed to position its premium brand cement which
represent around 85% of sales, Al Mosalah, as a leading premium brand in the Egyptian market. The Company’s other
brands including, in particular, its lower-priced brand cement, Al Tahrir, are integral tools for the Company’s marketing
and pricing strategy and enable the Company to provide cement products for the various segments of the Egyptian
cement industry. Also in 2011, the Company launched its Express Wassal service, a cement delivery service for bulk and
bagged products provided by the Company’s fleet of 25 trucks (which can be adapted for both bulk and bag
transportation) as well as by third party business partners. As of 1H15, ACC distributed 59% of its production through
its own distribution network: Direct delivery (28%), distribution center in Banha (19%) and the newly opened in
warehouse at Damanhur (12%).ACC is the only cement producer in Egypt with its owns warehouse facilities that act
both distribution hub and sales points.
INTEGRATED PRODUCTION PROCESS
Overview
Cement is typically made by heating limestone (calcium carbonate) and smaller quantities of clay and sand in a kiln to
1450 C. This process is known as calcination. A molecule of carbon dioxide is liberated from the calcium carbonate to
form calcium oxide, or quicklime, which is then blended with the other materials that have been included in the mix.
The resulting hard substance, called clinker, is then ground with a small amount of gypsum (which prevents cement
from flash setting and slows down the curing process) into a powder to make cement.
Manufacturing Process
The Company’s cement manufacturing process can be divided into three stages: limestone mining, clinker production
and cement production.
 Limestone Mining
The Company’s limestone mining operations are carried out in a limestone quarry area approximately 2.8 km from the
Company’s Plant. The Company has a utilization contract with the Suez Quarry Department of the Suez Governorate
which is renewable on a yearly basis.
A crusher with a capacity of 1,200 tph is also located in the quarry area.

15. Under an operational management agreement, RHI is responsible for the operation of the quarry and the geological
mapping and analysis. RHI also carries out planning for future works including all drilling and transporting limestone to
the crusher hopper.
 Clinker Production
The limestone, after being mixed with the clay (received by trucks from different quarries including the quarry operated
by ARM) and crushed in the crusher, is transported via conveyor belt to the Plant.
The other raw materials (other than well water) are delivered by truck to the Company’s production facilities.
The limestone and other raw materials are then distributed into special dispensers equipped with scales in order to
control mixing percentages. The mixture is then transported via conveyor belts to the raw materials vertical grinding
mills for each production line, each of which has a grinding capacity of 500 tph. The raw materials vertical grinding mill
is part of the production line and its main function is to grind raw materials to the required fineness for pyro-process.
After grinding the materials are ready for clinkerization.
Clinker is formed by passing the ground raw materials through a five stage pre-heater, kiln and cooling system (currently
producing between 6,600-7,000 tpd for each of the two lines). The raw materials mixture is burned, melted and forms
pebbles in a rotating kiln. This involves heating the raw materials in a pre-heater from ambient temperature to between
860c-880c for approximately 30 seconds. The material then remains in the calciner for around five seconds for de-
carbonation and then another 10 seconds in a lower cyclone before being fed to the kiln where it is retained for around
25 minutes at normal capacity.
The material is then cooled in a special cooler at the end of the kiln by using air (the retention time is another 25-30
minutes depending on the cooler speed).
Under another operational management agreement, NLS is responsible for the technical management, operation and
maintenance of the machinery involved in the clinker production at the Plant, including receiving raw materials from
the Company, transportation of limestone from the quarry on the conveyor belt, mix storage, raw grinding, burning and
cooling to produce and store clinker. NLS also manages the fire suppression system in the Plant, including the
management of the Plants’ firefighting network and trucks. Under the operational management agreement, NLS
guarantees that the Plant will produce at least 4.2 million tons of clinker per year.
 Cement Production
Clinker is transported to clinker silos (one per line) by conveyor belts and is then extracted from the silo and fed into
horizontal cement mills (two mills per line) with a capacity of 190 tph each. The cement mills contain iron balls of various
sizes that grind clinker and other components when the mills rotate. The resultant ground cement is then fed to the
cement silos (two per line) by a belt bucket elevator.
Cement bags of 50 kilograms each are packed at the packing station by three packing machines per line, each with a
capacity of 120 tph. The full cement bags are then loaded on the trucks at a rate of more than 2,400 bags per hour. Bulk
cement is pumped into cement trucks via feeding tubes located directly under each cement silo at a rate of 250 tph. In
2013 the Company produced approximately 3,875,000 tons of bagged cement and 148,000 tons of bulk cement.
Under its operational management agreement with the Company, RHI is responsible for the operation (including
technical management) and maintenance of the machinery and equipment of the cement production at the Plant
including clinker extraction machinery, grinding, cement storing, packaging and dispatch of cement in addition to the
required maintenance, including the supply of all necessary spare parts. Under the operational management agreement,
RHI guarantees that, subject to certain conditions (e.g. a sufficient supply of clinker), the Plant will produce at least 4.6
million tons of cement per year.

16. Appendix(C)
MANAGEMENT
Executive Officers
Executive Position Career History Description
Mr. Jose Mar´ıa Magrina Chief Executive
Officer
Mr. Magrina worked in the field of
management consultancy with
Deloitte˜ Consulting, PwC and
Accenture, covering the gas, oil and
construction industries where he
advised for nine years on strategy and
operations in various developed and
developing countries.
He graduated from the Universidad Politecnica de Catalu´ na
(Spain) and received his MBA at the Instituto de Empresa˜
and Hong Kong Science and Technology University in 2004.
Mr. He has been involved since the beginning of
construction of the Plant affording him valuable experience
of the Company. Mr. Magrina currently oversees the sales
and marketing teams in the Company’s offices and the
production teams in the Plant.
Mr. Tarek Talaat Chief Commercial
Officer
In 1996 he joined Black and Decker, as
Kuwait and Qatar Area Sales Manager.
In 2001 he joined Lafarge as
Commercial Director for Alexandria
Portland co. In 2004 he joined
Cementia Trading AG, Zurich,
Switzerland, the international trading
arm of Lafarge, as Regional Manager.
Mr. Talaat graduated with a Bsc. in Civil Engineering from
Cairo University and received his MBA from the Swiss
Business School. Since July 2009 he has been the Chief
Commercial Officer of the Company, leading and developing
the sales, marketing, distribution, transportation and trading
functions and setting the division’s strategy.
Mr. Sherif Salib Chief Financial
Officer
he ran his own company for eight years
providing consultancy services in the
field of information technology. He also
worked for USAID in water and
wastewater infrastructure projects for
four years
He graduated from the American University in Cairo with
Bsc. of Computer Science and later received his MBA at the
American University in Cairo. Since joining the Company Mr.
Salib has been able to increase the efficiency of the entire
reporting system, leveraging on his information technology
background that played a key role in the development and
implementation of the reporting program SAP.
Mr. Sergio Alcantarilla Chief Operations
Officer
In 2002, he started his career in the
cement industry and, since then, has
participated practically in all fields of
the business’ technical side. After more
than five years as Plant Manager in
Spain.
He graduated from the Superior Industrial Engineering
School in the University of Seville (Spain). Currently he
oversees the entire production process (both the Company’s
shadow production team and RHI and NLS’ respective
teams).
Mr. Hussein El Ashmawi Chief Human
Resources Officer
Mr. El Ashmawi has been the Chief
Human Resources Officer since joining
the Company in April 2012. Prior to
joining the Company, Mr. El Ashmawi
was with ABB working as HR Manager
for Egypt and sub regional central
Africa.
acquired his Bsc. from the faculty of Medicine & Surgery,
Cairo University in 1994. He complimented this with a
Master Degree in Pediatrics in 2001 from the same
university. he obtained an MBA from Beaumont Institute of
Management, Washington State University, he enjoys 16
years of experience in the human resources management
field.
Mr. Nael El Koshairy Chief Legal
Officer & Head of
Aggregates
started his career as an auditor with
top financial advisory firms, he took
managerial financial positions in oil and
gas, pharmaceutical and cement
companies. He was budgeting manager
for Cemex (Egypt) and British Gas
graduated from Richmond, the American International
University in London, in 1990. He is a Certified Public
Accountant from California State Board of Accountants, Los
Angeles, USA. he succeeded in directing financial operations
of companies of EGP2 billion in revenues. He joined the
Company in 2008 as the Chief Financial Officer, and assumed
this position till 2012. Currently, he holds the position of
Chief Legal Officer & Head of Aggregates of the Company
Mr. Fernas El Hakim Governmental
Affairs Director
30 years of experience in the cement
industry in Egypt during his tenure at
ASEC Engineering
Mr. El Hakim previously served the Company’s Chief
Operations Officer.
Source: Preliminary offering circular Highlight

17. Board of Directors
Member Age Position Description
Mr. Generoso Bertolin Agustin 45 Chairman 15 years of experience gained during his work at CLU as a
Chairman
Mr. Wahid Abou Bakr Ahmed Al-Ebiary 68 Vice Chairman over 40 years of experience in the cement sector having
worked at various firms in Spain and Egypt in the sales and
marketing of cement.
Mr. Ricardo Vela Ibanez 52 Managing
Director
20 years of experience gained during his work at CLU as a
General Manager.
Mr. Jose Mar´ıa Magrina Vadillo˜ 45 Executive Director an executive Board member and Chief Executive Officer of
the Company. 19 years of professional experience stretches
across several industries.
Mr. Ahmed Mohamed Ahmed Ali 66 Director lawyer in Egypt. Mr. Ali also sits on a number of other
boards including Degla Company and Triple A for Trading
and Development
Mr. Maged Hosny Mohamed Al-Sayed 62 Director a prominent Egyptian architect and shareholder of Degla
Company that has developed several landmark projects in
Egypt.
Mr. Salvador Viguer 60 Director over 30 years of management experience and is currently
the Chief Financial Officer of CLU.
Source: Preliminary offering circular Highlight
Appendix(D)
CORPORATE STRUCTURE
 ACC for Management
ACC for Management is a service company responsible for providing labor and human resources to the Company under the terms of a
service agreement entered into between them dated 4 July 2011. Under the terms of this agreement ACC for Management is required to
provide the Company with services including administrative, accounting, feasibility and restructuring services. These services are provided
by ACC for Management through the secondment to the Company of employees with experience in sales, transport, accounting and
cement production in return for a monthly fee paid by the Company to ACC for Management. ACC for Management is an Egyptian limited
liability company that was registered on the commercial register on 16 May 2011 for a 25year period which is due to expire on 15 May
2036. 99% of the issued share capital is held by the Company with the remaining 1% held by Mrs.’s Elena Bertolin who is a project manager
for CLU.
 Andalus for Concrete
Andalus for Concrete offers the Company vertical integration and allows the Company to secure market share through the use of its
products in large scale construction projects. The Company specializes in all aspects of concrete products, including standard mixes, high
strength mixes and special concrete specifications. Andalus for Concrete uses the Company’s brand Al Mosalah as the main component for
its production of concrete.
The Company currently operates two ready mix plants in new urban developments around Cairo (New Giza in West Cairo and 5th
Settlement in East Cairo) and has plans to expand its operations to 10 plants.
At the end of April 2010, Andalus for Concrete started to produce and supply concrete for the New Giza project in accordance with the
terms of an agreement entered into on 31 August 2009 between Andalus for Concrete and New Giza Co for Real Estate Development, (an
affiliate of Degla Company) (the New Giza Supply Agreement). During 2012, Andalus for Concrete established its sales department to
increase its production volume in the 6th of October market in addition to the New Giza Project. Andalus for Concrete produced over
30,000 m3 of concrete for more than 40 customers outside the New Giza project during 2012 compared to 4,000 m3 in 2011.
Andalus for Concrete is an Egyptian joint stock company which was registered on the commercial register on 24 October 2009 for a 25year
period, which is due to expire on 25 October 2034. 99.96% of the issued share capital is held by the Company with the remaining shares
being held equally by Aridos and Wahid Abu Bakr El-Ebiary.
 ARM
ARM is an Egyptian joint stock company that registered in the commercial register on 14 November 2013 for a 25-year period, which is
due to expire on 13 November 2038. ARM’s total issued share capital is EGP 250,000 divided into 2,500 shares of EGP 100.00 each. 50% of
the issued share capital of ARM is held by the Company, 49% of the issued share capital is held by RHI, and 1% of the issued share capital
is held by Mr. Mohamed Ashraf Sami Abdel Salam Kassab.
ARM’s board of directors consists of eight board members. The Chairman of ARM’s board is Mr. Jose Mar´ıa Magrina Vadillo and Mr.
Mohamed Ashraf Mohamed Sami Abdel Salam Kassab is the Managing Director.

18. It is planned that ARM will supply the Company with clay for its cement production with further plans to supply other manufacturers once
exploitation increases.
Management expects that ARM will become a subsidiary of the Company from the commencement of its operations.
Appendix(E)
Corporate Social Responsibility
A) Khaleeha Suessi”
Competition Supporting Startups in Suez
Arabian Cement Company has teamed up with Nahdet El Mahrousa to launch “Khaleeha Suessi”, a social start-up competition focused on
supporting social entrepreneurs tackling local economic challenges and opportunities in Suez.
The main goal of the program is to create employment opportunities through providing entrepreneurs with the tools needed to successfully
establish a business with strong social impact.
The program is divided into two phases: a 2.5 months Validation phase and a 1-year Incubation Journey.
B) Hope Village Society
ACC has been supporting Hope Village Society to develop its “Dream Building” project since 2010. Among others, Hope Village Society
initiatives include securing shelter to more than 300 orphans through its properties across Cairo, 10th of Ramadan and Alexandria. The
Dream Building project aims at serving as an integrated shelter for all the Hope Village orphans. As such, ACC is collaborating with Hope
Village by providing it with the cement needed to complete its project.
To date, over 40% of the project has been completed, and ACC will continue its support until the entire development is complete. ACC will
also continue its support to Hope Village Society initiatives, aiming to deliver a better future for Egyptian children.
Appendix(F)
INDUSTRY OVERVIEW
Emerging markets such as India and China now represent approximately 60% of the world-wide cement market. Chinese growth, which
has recently been typified over-construction, is by far the largest single factor behind rising global cement consumption over this period.
However, slowing Chinese economic growth and the fact that China is now actively removing older and less efficient cement plants mean
that Chinese production is unlikely to increase at the same rate as has been observed in the recent past. It may even fall in the next few
years if the central government pulls the appropriate levers. Economically-advanced nations such as Europe and the Americas account for
most of the remainder.
Moving to the Middle East region Particularly Saudi Arabia there is a domestic cement surplus of around 22 million tons, Cement producers
demanding government to lift a long-standing export ban, Saudi Arabia partially lifted the cement export ban in 2009 before enforcing it
again in 2012 to ensure enough supplies for domestic projects. Egypt would be a target market if the ban were lifted. According to Jihad
Al-Rasheed, chairman of the national cement committee in the council of Saudi chambers of commerce and industry, they are ready to
export 6Mt of their cement surplus to Egypt. Despite the satisfaction in the Egyptian market, the price of cement in Saudi Arabia adding
the shipment cost is slightly lower than the Egyptian cement, which is considered a risk on the Egyptian Cement producers as the prices in
Saudi Arabia are going down.
Appendix(G)
DEMAND DRIVERS
The cement consumption is related to the construction industry, which in turn is largely determined by the overall macro-economic
growth. However, cement is to some extent protected from extreme cycles in the construction industry, because it is almost used in
every type of construction. That is why the cement demand as a building material is the last to be influenced during economic
recessions and the first to benefit from an economic recovery. The demand on cement is inelastic in nature, as a decrease in cement
prices will not significantly boost consumption during down cycle in the construction sector, as well as an increase in cement prices will
not materially reduce demand throughout a high construction activity period. Cement demand will only increase for an individual
country up to a certain level of urbanization. Most countries enter a “repair and maintain” stage. In developed countries this trend is
reinforced by low population growth rates. To see this effect, we need look no further than the EU28, the U.S., and Japan. The cement
industry of each of these developed regions produced 12–34% less cement in 2012 than it did in 2000.As each economy achieves the
“repair and maintain” level of development, demand for cement will be reduced in an increasing number of countries, causing growth
in global cement demand to fall. After this point, it is conceivable that global cement demand, and by extension the amount of coal it
requires, will peak. However, whether or not this could occur by 2050 remains to be seen.
Egypt Demand Fundamentals
Cement Consumption Growth driven by growing GDP
The demand fundamentals in the Egyptian cement industry remain strong, with strong growth potential on the back of healthy
demographics.

19. Egypt’s GDP per capita is low when compared to other emerging and regional markets. GDP per capita is widely believed to carry a strong
correlation with cement consumption as it is an indicator for a country’s level of development. Management believes that the current low
base GDP per capita, coupled with Egypt’s expected average annual GDP growth rate of 5% over the next five years, should act as a strong
driver for cement demand in the future (Source: IMF).
Need Based Infrastructure Spending
Egypt’s demand fundamentals are also based on need driven investments. Egypt has historically suffered from low levels of investment in
infrastructure. The general state of Egypt’s infrastructure is poor, due to historically low levels of investment in infrastructure, in
comparison to emerging markets
Housing Supply Shortage
Egypt’s demographic profile has witnessed slight improvements in urbanization levels; however, the country still lags behind its peers
indicating room for growth. Increasing marriage rates coupled with the low urbanization rates, compared to regional peers, is likely to put
further pressure on the already undersupplied housing market.
Growth in Real Estate Development
Demand for cement in Egypt is also driven by increasing real estate development activity, which is partially driven by a housing supply
shortage. The real estate sector is expected to continue to drive cement sales due to a major structural shortage in the market, particularly
in middle and low cost housing, despite the launch of several large projects by Egyptian real estate developers. This shortage was evident
in the increase in real estate developers’ net sales in addition to the increase in house prices across various regions, despite political and
economic turmoil. The country still lags behind its peers indicating room for growth. Increasing marriage rates coupled with the low
urbanization rates, compared to regional peers, is likely to put further pressure on the already undersupplied housing market
Growth in the under penetrated mortgage loans market is also expected to become a driver for growth in housing demand, further
supporting the urbanization movement. Several large commercial banks have recently announced increasing allocations on their balance
sheets to mortgage loans focused on middle and low income housing.
The company Sales is driven by levels of individuals’ construction activity, particularly in the Delta region, which is the company’s main
Market, has generally continued following the January 2011 revolution as builders seek to take advantage of the vacuum created in
terms of government regulation and oversight of construction activity and, to an extent, this has helped to sustain the Company’s
results throughout the period. However, sustained growth in the construction sector and therefore demand for cement, is expected to
result only from a general improvement in economic conditions that the Company expects will follow from the emergence of a more
stable political situation in Egypt. Fiscal stimulus packages aimed at improving Egypt’s infrastructure and measures designed to address
the housing shortage in Egypt are the type of initiatives which would be likely to have a significant effect on the demand for cement
and therefore the Company’s results.
The Company’s primary customers are made up of distributors, wholesalers and retailers. The Company does not sell its product to the
end user; except in the ready-mix concrete market through its subsidiary Andalus for Concrete. The Company currently targets a
balance of customers that allows it to maintain a large customer base, while limiting transactions with customers to cash transactions,
ensuring that the Company’s balance sheet remains strong with no exposure to credit risks.
The Company’s customer base typically consists of between 120 - 150 customers with no single customer providing a material
proportion of the Company’s revenue. The chart below shows the customer concentration in relation to tons of cement sold per
month:
Appendix(H)
POWER AND FUEL COST
The cement industry uses around 5% of the coal produced globally every year, using on the order of 330–350 Mt of coal per year. Oil and
gas have also been used but have traditionally been limited to countries with large natural reserves. The fact that thermal energy represents
30–40% of overall costs for the cement industry has increasingly led to a search for lower-cost fuels. In the past 25–30 years this has led to
the rise of the use of alternative fuels, a term used to describe any non-fossil fuel that has sufficient calorific value for cement production.
The drivers for the use of any alternative fuel will often include legislation that demands reduced CO2 emissions, the impact of landfill taxes
and bans, and the price of alternative fuels relative to conventional fuels.
In Egypt Cement companies also assume responsibility for:
 Coal transport from ports to the plant
 Unloading, handling, grinding, combustion and storage at plant according to EU best practice
 Emission monitoring and control, and waste management
The coal price has headed steadily downwards over the past four years. It’s all down to chronic oversupply and low demand. Mines in
Australia, South Africa, Colombia and other big coal mining countries have had strong production. But demand from the countries that
import coal isn’t growing as strongly as it was. China, Japan and India are still importing coal, but demand isn’t going up the way it was
seven or eight years ago.
ACC currently uses a fuel mix of 70-80%coal, 10-15%Alternative fuel, 5-10%Diesl.
Appendix(I)

20. RDF: means refuse derived fuel
Types of Alternative Fuel materials include:
• Municipal solid wastes: The Egyptian government owns the landfills and tenders the collection and treatment together or
separately among waste management companies. All geographic locations for waste management have been contracted to
collection or treatment companies;
• Dried sewage sludge: The main supplier for dried sewage sludge is Orasqualia Company. Orasqualia is a 50% joint-venture
between Aqualia and Egypt’s Orascom Construction Industries. Its plant is located at Quatameya and is designed to treat waste
water coming from New Cairo; and
• Agriculture waste: This includes rice straw and cotton stalks
Egypt annually produces around 34.6 million tons of municipal solid wastes, as well as 12.3 million tons of biomass or animal waste and
plant substances which are used as a source of fuel.
There is little operational experience of using alternative fuels in Egypt. However, the majority of Egyptian cement companies are part
of international cement companies which have experience elsewhere. Hence, knowledge transfer should not be a major obstacle.
There are two different approaches for the alternative fuels procurement; the first procurement approach involves the purchase of
alternative fuels that are readily collected and prepared by others, such that cement company does not get involved in the processing of
the fuels themselves, while the second procurement approach involves the collection and the preparation of the alternative fuels by the
cement company itself, to control its own supply chain.
The following cement companies have indicated their enthusiasm to proceed with alternative fuel projects.
Arabian Cement Company
Arabian cement plant operates 2 identical production lines with a total production capacity of 4.2 Million ton of clinker per year. They
are proposing to partially substitute Natural Gas used in the clinker production process in the production lines with 40,000 tons of
agricultural wastes / year (rice straw and cotton stalk), 20,000 tons of sludge / year, and 82,000 tons of Refuse Derived Fuel (RDF) / year.
Like Suez Cement Company & Ameriya Cement Company, they will purchase fuels from dedicated fuel collectors or suppliers using long
term contracts
Lafarge Cement Company
Lafarge Cement Company is currently using 23,000 ton/ year of hazardous waste on Kiln 4. The hazardous waste is mainly composed of
the waste generated from the local petroleum industry and the pharmaceutical industry. This application of beneficial utilization of waste
has been welcomed by the regulators (EEAA) and they would be pleased to see the quantity of hazardous waste disposed of by this route
increasing.
Lafarge Cement has also invested in a solid shredded waste (RDF) fuel plant to utilize 72,000 tons/year of RDF for Kiln 2. The RDF will be
mainly composed of rejects from a waste sorting and baling plant.
Lafarge has also indicated that it is planning a further phase of the alternative fuel project which will utilize a 120,000 t/year of rice straw
fuel for Kiln 1.
CEMEX Assiut
CEMEX Assiut has a registered CDM project which utilizes two sources of Biomass residues:
56,400 tons / year of trimmings from a dedicated Casurina trees plantation developed solely for biomass production
333,000 tons of agricultural residues/year (rice straw, rice husk, cotton stalks, sugar cane, and maize residues).
CEMEX Assiut has also proposed the utilization of 60,000 tons / year of other alternative fuels such as tires, liquid residues (used oils,
lubricants, etc.), industrial sludge and RDF.
CEMEX has indicated some early difficulties with the operation during the pilot phase. This appears to be largely caused by blockages in
the pneumatic conveyor taking the shredded waste from the dosing systems to the calciner and these blockages cause irregular flow of
fuel and fuel on/off situations which in turn cause process disturbances and, in this case, increased CO trips on the electrostatic
precipitators. CEMEX are foreseeing the fitting of a mechanical feeding system rather than pneumatic feeding system for the alternative
fuels for their next installation.
Suez Cement Company
Suez Cement’s strategy aims to merge and promote the use of alternative fuels. There are two plants of Suez Cement Company (SCC)
that have plans for alternative fuels utilization. They have submitted Environmental Impact Assessments (EIAs) to the EEAA for such
projects and are also applying for CDM registration.
Kattameya Cement Plant is proposing to utilize 30,000 tons of agricultural residues /year and 25,000 tons of RDF /year, whereas Helwan
Cement Plant is proposing to utilize 40,000 tons, agricultural residues/year, 10,000 tons of sludge / year and 20,000 tons of RDF /year.
Suez Cement Company will not get involved in the procurement of the fuels themselves. They will purchase fuels from dedicated fuel
collectors or suppliers using long term contracts.

21. Appendix (J)
EGYPTIAN CEMENT INDUSTRY
In 2006, industry produced 30 million ton of cement. In 2010 that number jumped to 50 MT, due to a 200% increase in the producers.
Total cement production capacity stands at 70 million tone. While this figure is much higher than current market consumption, it is
anticipated that demand will grow in the near future as Egypt's economy and construction sector recovers.
Egypt’s cement sector consists of approximately 24 cement companies some of which operate more than one plant in Egypt, with a
combined annual capacity of approximately 70 Mmtpa
Appendix (k)
ENERGY CRISIS IN THE EGYPTIAN CEMENT SECTOR
The Egyptian cement sector has suffered from a severe energy crisis over the last few years, where the supply of natural gas and/or
fuel oil was not enough to sustain full production rates. In many cases, the plant operators were forced to reduce the kiln feed, and on
several occasions they had to stop the kiln completely. This resulted in loss of production, as well as several other problems related to
unsteady operational conditions, Gas shortages in April, May and June 2014 had cut Arabian Cement's first-half clinker production, by
almost 20 percent compared with the previous year. Cement plants that were producing their own electric power using diesel
generators were the most affected by the energy crisis. Furthermore, as grinding imported clinker was not an easy task due to the
limitations of the electric power grid, plants were forced to suspend their grinding mills
Currently, the installed capacity of Egypt’s cement industry is approximately 62 million tpy. The industry consumes more than 9% of
total primary energy in the country, making it the most energy-consuming sector. At near past, most of the consumed energy in the
cement sector is supplied in the form of natural gas or fuel oil, which is provided by the state at subsidized prices. Over the last few
years, it became obvious that Egypt has a very low level of self-sufficiency in terms of both natural gas and fuel oil, with a clear trend of
increasing the import of most energy types year after year. With a badly suffering budget and limited resources in terms of hard
currency, the burden of subsidizing energy to the cement sector was considered beyond the limits, especially if one considers the
rapidly increasing global energy prices. Power plants currently get 72% of the natural gas produced in Egyptian fields, which has led to
the stoppage of gas supplies to a number of factories and a reduction in gas supply to a number of others, according to the EGAS
official.
In exclusive statements to Al-Borsa, the official said that EGAS has halted gas supplies to cement factories. The company is now sending
fuel oil instead due to Egypt’s decreased gas production and power plants receiving most of the country’s gas supplies.
He explained that the Helwan, Al-Qatameya, and Al-Qawmeya cement factories have been exempt from the gas cuts as they are
connected directly to the Abu Gharadiq gas field. The three factories have a total consumption of 61m cubic feet of gas per day.
The EGAS official said that Egyptian cement factories’ total needs are 430m cubic feet of gas per day. If the price of Brent continues to
decline in the coming years, gas supplies will remain out of reach for the cement sector, he said.
At first the Ministry of Petroleum intended to reduce supplies to cement plants by 35% in January and February 2014. Reportedly the
price of cement then shot up by 30% in March 2014 to offset the rise in energy prices. Then the gas was cut completely, leading to the
shutdowns. So companies started to shift to coal.

22. Appendix (L)
COGS Projection
Main Items Assumption
Imported Clinker In 2013 the company started to import clinker due to the gas disturbance which led to a temporarily stoppage
in the clinker production, this increased the cost significantly, specially in 2014 as the imported clinker cost
represented 34% of total COGS. As importing clinker costs more than making clinker. This has stopped
completely in 2015 with the stable energy supply and shifting to coal. This helped to reduce cost.
Raw Material We projected the row material cost as a percentage of sales based on both 2012 & 9M 2015 data, since they
indicate the more accurate percentage of sales, because in both 2013 and 2014 there was a big amount of
imported clinker, so less amount of raw materials which are mainly used to make clinker and there will be no
more imported clinker in the future.
Energy
Coal The final fuel mix that will be implied in the first half of 2016 is 70% coal and 30% RDF. The ton per clinker
requires 3.5MMBTU, 2.45 MMBTU comes from coal which is around 0.103 ton (each ton of Coal contain 23.8
MMBTU). Coal is imported mainly from South Africa and Ukraine which it stopped exporting due to political
issues. We used the IMF forecast for South Africa’s coal price per ton, it’s expected that the price will remain
around the same average based on the following reasons:
 The main coal consumers like USA and china are shifting to other energy resources like natural gas
due to environmental concerns.
 South Africa which is the main supplier for the company discovered two new mines that are
expected to decrease the price of coal as it will increase coal surplus.
 There is no clear trend now of prices for the further future as the global economy is not in its best
status.
The coal currently costs the company EGP 900 per ton which is around USD 115.38 this means that there is
around USD 54 extra freight cost per ton, we assumed this cost will increase by the world inflation rate (IMF
Forecast).
RDF It costs the company USD 4.5/MMBTU. We expected the prices of waste and other types of RDF to increase
by the inflation rate as more companies are starting to use RDF to generate energy in the kilns.
Diesel Currently represent less than 13% of the energy mix, we expected that it will be used till the first half of 2016,
in which it will only represent 5% of energy mix.
Electricity The government has issued the new tariff per kw with an annual increase, we expect the cost per KW to
increase by 5% annually beyond 2018.
The electricity is mainly used in the cements mills, every ton of cement requires 65 kw and much less for the
ton of clinker which is around 17 kw.
O&M We expected it to stay in its average percent of sales in both 2012 and 9M 2015, as in both periods there was
either no or little imported clinker, as imported clicker what brought down the percentage in 2013 and even
more in FY14 when much more imported clinker was used, that’s because more imported clinker means less
clinker production process so less O&M cost
Other costs Represent around 20% of sales are forecasted as a percentage of sales as they have maintained a stable
percentage of sales over the past years.

23. Appendix (M)
OVER VIEW ABOUT ARABIC REPUBLIC OF EGYPT
Arabian country which located in the northeast corner of Africa and southwest of Asia, part of the country located in Asia which Sinai
and the rest in Africa. It extents along almost 1million KM(390,000square) and the Nile river which is the longest river in the world
cross through it.
Egypt is the most populous country in north Africa and in the Arabian world, it is the fifteenth most populous in the world with 90
million citizens, most of the population lives next to the Nile river
The economy of Egypt was centralized planned economy which focus mainly on import substitution, in the past century many
international monetary fund arrangements helped Egypt to improve the macro economic performance in addition to participation in
gulf war which helped Egypt to decrease the massive debts.
In the past fifteen years many fiscal, taxation and structural reforms helped Egypt to move toward a more market oriented economy,
the annual growth was also affected by these reforms which result for average 0.08 annually between 2004&2009.
As the country government failed to diversify the wealth equally so the conditions went bad and the 2011 Jan revolution took place to
force president Hosni Mubarak to stop down.
In these events the Egyptian foreign exchange reserves fall from 36 billion$ in Dec2010 to only 16.3 billion$ in Jan 2012, also the
Egyptian credit risk was lowered from(B+) to(B) in 2013, the credit risk was lowered again to reach CCC for long term credit risk and
from B to C for the short term credit.
In Dec 2015 Fitch institution had proved that credit rating classification to Egypt in B with stable outlook as a result of the progress in
the implementation of the financial and economic reforms, in the last December the rating of Egypt raised from (-B) to B) and this after
the repeated cutting down after the Egyptian revolution.)
Under the supervision of president Abdel-Fattah El-Size the Egypt Economic Development conference in March 2015, The conference is
a key milestone of the government’s medium term economic development plan, which is designed to bring prosperity and improved
social services to the people of Egypt, The EEDC will reposition Egypt on the global investment map and affirm its potential as a source
of political and economic stability in the region and a trusted partner on the international stage.
Macro-economic analysis
Significant imbalances in the Egyptian economy have emerged in recent months, which combined with a deteriorating security
situation, threaten to disrupt growth going forward. Latest data show falling industrial production, declines in the non-oil sector and
weak revenues at the expanded Suez Canal. Moreover, the important tourism sector is at risk of collapse following a series of terrorist
incidents attributed to the Islamic State (ISIL) in the Sinai Peninsula. A decline in tourism and further weakening of confidence among
foreign investors will not only drag on economic activity and the government’s ability to push ahead with spending projects, but this
will also exacerbate problems associated with a severe shortage of foreign exchange reserves all these made budget deficits.
Macroeconomic analysis broadly focuses on three things: national output measured by gross domestic product (GDP)), unemployment
and inflation.
GDP growth
-Egypt is the second largest economy in the Arab world. Services are the most important sector of the economy and account for around
47.5 percent of total GDP. The most important segments within Services Are Wholesale and Retail Trade (10 percent of the output),
Government (9 percent), Transportation and Communication (8 percent), Finance, Insurance and Real Estate (8 percent) and Tourism
(4 percent). Industry constitutes 30 percent of the output and the largest segments within this sector are: Manufacturing (15.5 percent)
and Extraction (13.5 percent). Agriculture accounts for 14.5 percent of output and Electricity, Water, Sanitation and Construction for
around 7 percent.
- Egypt has one of the most developed and diversified economies in the Middle East. Until 2010, Egyptian economy was growing an
average 5 percent a quarter as a result of several economic reforms attracting
foreign investments. During that time, the economy and the living standards
for majority of population improved. Yet, living conditions for the average
Egyptian still remained poor and large income disparities continued to grow,
leading to the public discontent. The 2011 revolution, which brought down
President Hosni Mubarak regime, have caused economic slowdown as
political and institutional uncertainty and rising insecurity continue to hurt
tourism, manufacturing, and construction.
- the last GDP growth rate is 4.5 in the second quarter of 2015

24. Unemployment rate
Unemployment Rate in Egypt increased to 12.80 percent in the third quarter of 2015 from 12.70 percent in the second quarter of 2015.
the government developed a national training plan to encourage employment as part of its efforts to reduce unemployment.
The plan aims to provide two million with jobs. 170,000 jobs were provided throughout 2014, of which 70% were filled, Prime Minister
Ibrahim Mehleb said, noting that the goal is to increase the number of these opportunities by 25% during each stage.
According to Mehleb, the government seeks to annually train and prepare, through the plan, approximately 750,000 Egyptians to work
in Egypt. A further 850,000 others will be trained to work abroad in a number of both traditional and new markets in Africa, Eastern
Europe, and Asia.
Inflation rate
The annual inflation rate in Egypt was recorded at 11.1 percent in November of 2015
Appendix (N)
LOANS AND DEBT
First Loan
On September 2006, the Group has obtained a loan facility from the National Bank of Egypt of US $103.9 million.
In 31 January 2008, the Bank approved to increase the loan to be US $149 million to cover the increase in the investment cost, in addition
to financing 15% of the industrial license fee.
Second Loan
In 31 January 2008, the bank also approved a new facility of US $142 million to finance the second production line as well as 25% of the
second line’s industrial license fee; an equivalent amount of US $57 million will be utilized in Egyptian Pounds
Third Loan
On 22 February 2011, the Group obtained a new loan facility from the National Bank of Egypt amount to 265 million Egyptian pound to
finance the construction of a clinker mill
On Feb 2015 the full loan balance was paid.
Fourth loan
On 20 June, 2013, the company obtained a loan facility from the National bank of Egypt which is amounted to 70 million Egyptian pounds
in order to contribute in the financing of 70% of the gross investment cost which is amounted to 100 million Egyptian pounds, which is
needed for new project held by the company for the purpose of using the solid and agricultural wastes as an alternative fuel beside the
natural gas in the process of manufacturing.
APPENDIX (O)
SHARE SPLIT
On 23 January 2014, the company's management held an extra-ordinary general assembly meeting in which a decision was
approved for the stock split through modifying the par value of the company's share as a prelude for the listing of the company in
the Egyptian stock exchange market. The extraordinary general assembly approved on modifying the par value of the share to be 2
EGP instead of EGP 100.
In addition to the mentioned above, the extra-ordinary general approved updating article number (6) from the article of association
which states that the capital of the company amounted to EGP 757,479,400 distributed among 7,574,794 shares the par value for
each share is EGP 100 to be distributed among 378,739,700 shares the par value for each share is EGP 2.

25. Appendix (P)
TAX POSITIONING
Arabian Cement Company was passed with a Tax Exception from the start day of its activity & operations here in Egypt from
2008 until 2014 this decree is belong to the Egyptian Tax &Investment Law No (8), So it’s start to pay and surrender Tax return
to ETA – Egyptian tax authorities from 2014 to pay Corporate Income Tax liability with a tax rate 25% with an additional 5% to
the revenues over 1 M, But now there is amend in the law On August 2015, Law No.(96) was issued to amend the general
corporate income tax rate to be 22.5% from the tax base.
Not means that if the company will passing with Tax exemption that it will not compute Deferred Tax. From 2010 until 2014
there is deferred taxes the company had as a liability and obligations accrued in P&L statements but this value tend to decrease
from the first year until it comes with positive value in 2015 that’s mean there is no liabilities toward the company at this item,
So we assume the item Deferred tax will be Zero to 2020 as ACC considered now one of the Tax payers in Egypt, there is a
corporate income tax liability the company will paid after negotiation with the ETA and the Tax inspector that represent it.
Egyptian Taxation & Accounting Standards Amendments
Summary of the principal tax consequences for holders of ordinary shares who are not resident in Egypt (Non-Residents). only
the tax consequences for Non-Resident Investors who hold the ordinary shares as capital assets and does not address the tax
consequences. The ministry of Investment’s Decree No. (110) of 2015 was issued on July 9, 2015. It has been decided to replace
and supersede the former Egyptian Accounting standards for the preparation and presentation. The application of the former
Egyptian Accounting standards issued by Ministerial Decree No. 243 of 2006 was cancelled, effective as a date of applying this
decree was published in the official Gazette, an shall be effective as of January 1, 2016 and will be applied on the entities whose
fiscal year starts on or after this date.
(1) Corporate tax  The Company enjoys a tax exemption for a period of 5 years starting from
the fiscal year following the startup of the production of the Company’s
operation. This period was determined by the General Authority for Free
Zones and Investments to start from 22 April 2008. Consequently, the
Company is exempted from corporate tax for the period from 1 January
2009 till 31 December 2013.
 For the years from 2006 till 2008 the company has been hypothetically
accounted due to statute of limitation.
 The Company prepares tax return according to income tax laws and
regulations and submits them on a timely basis as stated by the law, from
2009 till 2015.
(2) Sales tax  The sales tax was inspected till December 2015 and the Company paid the
final settlement.
 The Company submits tax return on a timely basis and the Company’s
books have not yet inspected for 2012 and 2013.
(3) Stamp tax  The stamp tax was inspected till the year 2011 and the Company paid the
final settlement.
 The Company’s books have not yet been inspected for the year 2012 and
2013.
 Under Egyptian Law No. 9 of 2013 amending Egyptian Law No. 111 of
1980, stamp duty of 0.1% shall be imposed on the buyer and a similar
stamp duty shall be imposed on the seller regarding all transactions on
EGX.
(4) Payroll tax  Payroll tax was inspected till 2007 by the Tax Authority and final
settlement was reached
(5) Dividend W.H Tax  Dividends are not taxed under Egyptian tax law. Taxes are levied only on
the corporation’s net profit.
(6) Tax of Capital Gains  Under Tax Law No. 91 of 2005, there is no capital gains tax levied in Egypt
on the sale or exchange of listed shares.
 EFSA and EGX are responsible for the collection of the stamp duties and
transfer them to the (ETA).
(7) Inheritance Tax  Under Law No. 227 of 1996, Egypt has abolished all inheritance taxes.
Accordingly, no inheritance taxes in Egypt will be chargeable on the death
of an owner of shares.

26. Income statement – (P&L) (Appendix Q)
P/L 2013A 2014A 2015P 2016P 2017P 2018P 2019P 2020P
EGP EGP EGP EGP EGP EGP EGP EGP
SalesRevenues 2,075,452,431 2,520,586,769 2,302,538,041 2,458,367,520 2,779,667,902 3,148,484,091 3,410,201,831 3,656,946,984
Costofgoodssales(COGS) (1,211,052,518) (1,593,960,480) (1,522,537,438) (1,511,517,458) (1,658,515,044) (1,836,383,695) (1,954,039,037) (2,067,564,411)
GrossProfit 864,399,913 926,626,289 780,000,603 946,850,063 1,121,152,858 1,312,100,396 1,456,162,794 1,589,382,574
GPM 42% 37% 34% 39% 40% 42% 43% 43%
Selling,Generalandadministrativeexpenses (57,082,529) (91,030,115) (70,714,328) (75,500,080) (85,367,687) (96,694,574) (104,732,311) (112,310,217)
EBITDA 807,317,384 835,596,174 709,286,275 871,349,983 1,035,785,171 1,215,405,821 1,351,430,483 1,477,072,356
Depreciation (165,239,602) (168,130,074) (177,326,631) (182,123,153) (186,216,363) (190,700,352) (195,621,059) (200,950,799)
Amortization (22,519,999) (22,519,999) (22,519,999) (22,519,999) (22,519,999) (22,519,999) (22,519,999) (22,519,999)
EBIT 619,557,783 644,946,101 509,439,645 666,706,831 827,048,809 1,002,185,471 1,133,289,425 1,253,601,558
Foreignexchangeloss (68,702,795) (25,856,362)
loaninterestexpense (62,390,449) (36,113,430) (29,090,463) (23,530,767) (15,687,178) (7,843,589) (1,960,897) -
operationlicenceexpense (45,024,000) (45,024,000) (38,228,283) (28,838,071) (19,530,463) (10,222,856) (2,784,526) -
electricityagreementinterestexpense (12,282,000) (12,282,000) (10,290,324) (8,298,649) (6,306,973) (4,315,297) (2,323,622) -
bankoverdraftinterestexp
longtermnotespaybleinterestexpense (1,141,179) (3,128,382) (585,799) - - - -
InterestIncome 1,468,411 826,015 754,559 805,625 910,918 1,031,782 1,117,548 1,198,409
TotalFinancecost-net (186,930,833) (119,590,956) (79,982,894) (60,447,659) (40,613,696) (21,349,960) (5,951,496) 1,198,409
OtherOperatingIncome 13,516,433 1,223,200 1,117,384 1,193,006 1,348,928 1,527,908 1,654,916 1,774,657
Others (6,338,531) (2,263,854)
EBT 439,804,852 524,314,491 430,574,136 607,452,178 787,784,041 982,363,419 1,128,992,844 1,256,574,624
DeferredIncomeTax (20,486,537) (14,000,000) - - - - - -
IncomeTax - (135,591,732) (96,879,181) (136,676,740) (177,251,409) (221,031,769) (254,023,390) (282,729,290)
NetProfit 419,318,315 374,722,759 333,694,955 470,775,438 610,532,632 761,331,650 874,969,454 973,845,333
NPM 20% 15% 14% 19% 22% 24% 26% 27%
MinorityInterest 1,316 4,823
NetProfitoShareholders 419,316,999 374,717,936 333,694,955 470,775,438 610,532,632 761,331,650 874,969,454 973,845,333
ArabianCementCompariy(S.A.E)
ConsolidatedStatementofIncome-P/L

27. BALANCE SHEET – FINANCIAL POSITION (APPENDIX R)
2013 A 2014 A 2015 P 2016 P 2017 P 2018 P 2019 P 2020 P
EGP EGP EGP EGP EGP EGP EGP EGP
Non current Assets
Fixed Assets (net) 2,653,318,452 2,676,733,351 2,593,152,631 2,491,029,479 2,392,450,716 2,297,923,428 2,206,469,820 2,206,469,820
Projects under construction 143,613,902 99,410,072 58,564,316 - - - - -
Intangible assets (net) 162,456,478 139,936,479 117,416,480 94,896,481 72,376,482 49,856,483 27,336,484 4,816,485
Investments in Joint ventures 31,250 - - - - - - -
Total non-current Assets 2,959,420,082 2,916,079,902 2,769,133,427 2,585,925,960 2,464,827,198 2,347,779,911 2,233,806,304 2,211,286,305
Current Assets
Inventory 96,510,807 201,761,865 192,721,210 120,455,362 132,169,846 146,344,498 155,720,649 164,767,677
Debtors and other debit balances (Net) 39,925,935 56,679,974 51,776,752 51,286,508.97 57,989,483.51 65,683,733.71 71,143,694.07 76,291,296.06
Due from related parties 1,758,966 827,715 756,112 807,283 912,793 1,033,905 1,119,848 1,200,875
Operating Cash 159,750,204 137,567,241 125,666,694 134,171,472 151,707,233 171,836,286 186,120,178 199,586,903
Excess cash 1,402,489 21,799,505 16,866,067 158,406,416 279,013,991 449,058,865 667,760,786 948,298,532
Total Current Assets 299,348,401 418,636,300 387,786,835 465,127,042 621,793,346 833,957,288 1,081,865,156 1,390,145,283
Total Assets 3,258,768,483 3,334,716,202 3,156,920,262 3,051,053,002 3,086,620,544 3,181,737,199 3,315,671,459 3,601,431,588
Current Liabilities
Provisions 7,110,829 8,770,069 11,580,532 11,580,532 11,580,532 11,580,532 11,580,532 11,580,532
Current Income Tax liabilities 518,278 135,158,769 58,096,302
Creditors and Other credit balances 316,233,689 336,514,326 321,435,610 319,109,090 350,142,980 387,694,318 412,533,521 436,500,812
Dividend Payble
Current portion of long - term loans 337,970,515 294,065,338 162,292,850 162,292,850 162,292,850 81,146,425
Current portion of long term other liabilities 69,438,000 77,934,000 114,462,000 114,462,000 114,462,000 75,902,000 12,308,000 -
Due to related parties 1,921,649 3,905,131 3,073,024 3,050,782 3,347,476 3,706,478 3,943,949 4,173,083
Overdrafts - - - - - -
Total Current Liabilities 733,192,960 856,347,633 670,940,319 610,495,254 641,825,837 560,029,753 440,366,002 452,254,427
Net (deficit) in Working capital (187,588,737) (225,078,741) (148,931,394) (161,191,250) (173,998,865) (189,919,192) (200,073,810) (209,994,580)
Change in WC (350,242,521) (37,490,004) 76,147,347 (12,259,855) (12,807,615) (15,920,327) (10,154,618) (9,920,770)
Non current liabilities
Borrowings 520,680,947 341,739,770 405,732,125 243,439,275 81,146,425 - - -
other liabilities 576,555,416 486,502,712 322,991,988 202,672,000 88,210,000 12,308,000 - -
Deferred income tax liability 337,985,370 352,418,333 328,794,174 328,794,174 328,794,174 328,794,174 328,794,174 328,794,174
Total non-current Liabilities 1,435,221,733 1,180,660,815 1,057,518,287 774,905,449 498,150,599 341,102,174 328,794,174 328,794,174
Total Liabilities 2,168,414,693 2,037,008,448 1,728,458,606 1,385,400,703 1,139,976,436 901,131,927 769,160,176 781,048,601
Equity
Issued and paid up capital 757,479,400 757,479,400 757,479,400 757,479,400 757,479,400 757,479,400 757,479,400 757,479,400
Legal Reserve 118,792,048 129,463,619 156,122,086 189,491,582 236,569,125 297,622,388 373,755,553 373,755,553
Retained Earning 214,078,006 410,755,576 514,850,088 718,669,562 952,581,843 1,225,487,388 1,415,258,357 1,689,128,127
Total Shareholder's Equity 1,090,349,454 1,297,698,595 1,428,451,574 1,665,640,543 1,946,630,369 2,280,589,176 2,546,493,311 2,820,363,081
Non controling Interest 4,336 9,159 10,082 11,756 13,739 16,096 17,973 19,906
Total Shareholder's Equity & Non controling Interest 1,090,353,790 1,297,707,754 1,428,461,656 1,665,652,299 1,946,644,108 2,280,605,272 2,546,511,284 2,820,382,986
Total Liabilities and Equity 3,258,768,483 3,334,716,202 3,156,920,262 3,051,053,002 3,086,620,544 3,181,737,199 3,315,671,459 3,601,431,588
Consolidated Balance Sheet
Arabian Cement Company

28. BALANCE SHEET - COMMON SIZE ANALYSIS (APPENDIX S)
2013 A 2014 A 2015 P 2016 P 2017 P 2018 P 2019 P 2020 P
EGP EGP EGP EGP EGP EGP EGP EGP
Non current Assets
Fixed Assets (net) 81% 80% 82% 82% 78% 72% 67% 61%
Projects under construction 4% 3% 2% 0% 0% 0% 0% 0%
Intangible assets (net) 5% 4% 4% 3% 2% 2% 1% 0%
Investments in Joint ventures 0% 0% 0% 0% 0% 0% 0% 0%
Total non-current Assets 91% 87% 88% 85% 80% 74% 67% 61%
Current Assets 0% 0% 0% 0% 0% 0% 0% 0%
Inventory 3% 6% 6% 4% 4% 5% 5% 5%
Debtors and other debit balances 1% 2% 2% 2% 2% 2% 2% 2%
Due from related parties 0% 0% 0% 0% 0% 0% 0% 0%
Operating Cash 5% 4% 4% 4% 5% 5% 6% 6%
Excess cash 0% 1% 1% 5% 9% 14% 20% 26%
Total Current Assets 9% 13% 12% 15% 20% 26% 33% 39%
Total Assets 100% 100% 100% 100% 100% 100% 100% 100%
Current Liabilities
Provisions 0.22% 0.26% 0.37% 0.38% 0.38% 0.36% 0.35% 0.32%
Current Income Tax liabilities 0% 4% 2% 0% 0% 0% 0% 0%
Creditors and Other credit balances 10% 10% 10% 10% 11% 12% 12% 12%
Dividend Payble 0% 0% 0% 0% 0% 0% 0% 0%
Current portion of long - term loans 10% 9% 5% 5% 5% 3% 0% 0%
Current portion of long term other
liabilities
2% 2%
4% 4% 4% 2% 0% 0%
Due to related parties 0% 0% 0% 0% 0% 0% 0% 0%
Overdrafts 0% 0% 0% 0% 0% 0% 0% 0%
Total Current Liabilities 22% 26% 21% 20% 21% 18% 13% 13%
Net (deficit) in Working capital -6% -7% -5% -5% -6% -6% -6% -6%
Change in WC -11% -1% 2% 0% 0% -1% 0% 0%
Non current liabilities
Borrowings 16% 10% 13% 8% 3% 0% 0% 0%
other liabilities 18% 15% 10% 7% 3% 0% 0% 0%
Deferred income tax liability 10% 11% 10% 11% 11% 10% 10% 9%
Total non-current Liabilities 44% 35% 33% 25% 16% 11% 10% 9%
Total Liabilities 67% 61% 55% 45% 37% 28% 23% 22%
Equity
Issued and paid up capital 23% 23% 24% 25% 25% 24% 23% 21%
Legal Reserve 4% 4% 5% 6% 8% 9% 11% 10%
Retained Earning 7% 12% 16% 24% 31% 39% 43% 47%
Total Shareholder's Equity 33% 39% 45% 55% 63% 72% 77% 78%
Non controling Interest 0% 0% 0% 0% 0% 0% 0% 0%
Total Shareholder's Equity & Non
controling Interest
33% 39% 45% 55% 63% 72% 77% 78%
Total Liabilities and Equity 100% 100% 100% 100% 100% 100% 100% 100%
Balance Sheet-Common Size

29. INCOME STATEMENT ANALYSIS (Appendix T)
P/L 2013A 2014A 2015P 2016P 2017P 2018P 2019P 2020P
EGP EGP EGP EGP EGP EGP EGP EGP
NetSales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Less
Costofsales(COGS) 58.35% 63.24% 61.48% 59.67% 58.33% 57.30% 56.54% 56.54%
GrossProfit 41.65% 36.76% 33.88% 38.52% 40.33% 41.67% 42.70% 43.46%
S&GAExpense -2.75% -3.61% -3.07% -3.07% -3.07% -3.07% -3.07% -3.07%
EBITDA 38.90% 33.15% 30.80% 35.44% 37.26% 38.60% 39.63% 40.39%
Depreciation&Amortization -7.96% -6.67% -7.70% -7.41% -6.70% -6.06% -5.74% -5.50%
EBIT 29.85% 25.59% 22.13% 27.12% 29.75% 31.83% 33.23% 34.28%
Financecost-net -5.76% -3.17% -3.47% -2.46% -1.46% -0.68% -0.17% 0.03%
Others -0.31% -0.09% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
EBT 21.19% 20.80% 18.70% 24.71% 28.34% 31.20% 33.11% 34.36%
DeferredIncomeTax -0.99% -0.56% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
IncomeTax 0.00% -5.38% -4.21% -5.56% -6.38% -7.02% -7.45% -7.73%
NetProfit 20.20% 14.87% 14.49% 19.15% 21.96% 24.18% 25.66% 26.63%
I/SCommonSizeAnalysis