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Cement Manufacturing Performance Report 2010 Methodology

Based on 15A, GMR, ATR and PEP 2010

Cement Manufacturing Excellence

Building Cost effective Plants Operating Plants efficiently Leading Technological Development

Prepared by:

Date:

Holcim Group Support Ltd Cement Manufacturing Services with support of Corporate Sustainable Development 08.03.2011

The copyright for this document and all appendices are reserved by Holcim Group Support Ltd

Cement Manufacturing Performance Report 2010 - Methodology

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Table of Contents 1. 2. 3. INTRODUCTION METHODOLOGY CEMENT MANUFACTURING PERFORMANCE - RESULTS 2010 3 3 6

Annex:

Cement Manufacturing Performance Indices - Definitions and Rating Criteria

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1.

INTRODUCTION Since 2007, a yearly assessment of cement manufacturing performance is performed by HGRS/CMS with the objective to identify, in a systematic way, plants with significant potential for improvements. To get a comprehensive overview of the plant performance, eight performance indices have been defined in the following manufacturing areas: Production cost Production capacity Maintenance Product quality Thermal energy Electrical energy Environmental performance OH&S. In addition, an overall performance index is calculated as average of the eight performance indices.

2.

METHODOLOGY The study has been made for the 97 integrated cement plants of the consolidated group companies. White cement plants and grinding stations are not considered. The overall performance of a cement plant is summarized by the radar screen as shown in the graph (see page 4). The methodology has been updated in 2010 with two minor adjustment: the Production Cost Index yields a score of 100 points when the ratio of Actual / Budget for Specific Cost Cement is 0.9 or lower; a score of 90 points when the ratio is 1.0; a score of 0.5 when the ratio is 1.1; a score of 0 when the ratio is 1.5 or greater. the Enviro Index includes a new indicator PCB elimination reflecting the always increasing environmental targets in the Holcim group. Accordingly, we recalculated the Production Cost Index for the 2009 in order to have fully comparable figures. Insofar, the red and blue diagrams reflect the actual performance profile of a plant (resp. in 2010 and 2009) while the green diagram indicates the highest achieved value for each index in the Group (Benchmark). The performance of each plant may be evaluated according to the gap it has with respect to the best in class for each index.

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Radar Screen

Production Capacity

100%
OH&S

80% 60% 40% 20%

Product Quality

Enviro

0%

Production Cost

Electrical Energy

Maintenance

Thermal Energy

Benchmark 2010 Plant X 2010 Plant X 2009

Each performance index integrates one or several relevant indicators depending on the considered manufacturing index, most of these individual indicators are reported in 15A (Production Cost Report), ATR (Annual Technical Report), GMR (General Management Report) or PEP (Plant Environmental Profile). Details about the definition and the calculation of performance indices as well as on the rating criteria are presented in the Annex. A ranking has been made for each plant and for each of the performance indices (see page 5), this refers to the 97 plants considered in the analysis. For the Product Quality Index, the ranking was made for 94 plants as quality data were not available for the 3 plants in Australia. A ranking of the plants according to the overall performance index has also been made; the results will be released in May 2011.

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Performance Profile and Ranking 2010 (out of 97 cement plants) Plant X Index Ranking
75

black 82

Production Capacity Index Product Quality Index Production Cost Index Maintenance Index Thermal Energy Index Electrical Energy Index Enviro Index OH&S Index

57%
53

85%
71

53 71
85

75% 30%
36

85 36
26

57% 82%
22

26 22
47

87% 95%

47 black

Overall Performance Index

71%

70

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3.

CEMENT MANUFACTURING PERFORMANCE - RESULTS 2010

See attachments in e-mail.

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Annex: Cement Manufacturing Performance Indices (2010) Definitions and Rating Criteria

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Definition of the performance indices

Principles adopted When an Operational Road Map target is achieved, then the corresponding rating is 100% (e.g. Net Availability Index= 90% => Production Capacity Index = 100%). Excellence is achieved for a given performance index if its rating is > 90% (green color), with exception of the overall performance index for which the threshold is 75%. Performance is considered as low for a given performance index if its rating is < 50% (red color), with exception of the overall performance for which the threshold is 60%.

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Production Capacity Index

Set of indicators used for index calculation Kiln net availability index [%] Rating Criteria 90% 89% 80% 50% Index Calculation 100* 90 50 0

*different proportional scaling of Index between 100 and 50 %, 50 and 0 % Low potential > 90 %

Production Capacity Index [%]

50% < Moderate potential < 90 % High potential < 50 %

Quality Index
Set of indicators used for index calculation
Customer complaints [ratio actual vs. target] Product performance benchmarking against competitors [%] Compliance to internal product specification [%] Product uniformity (Coefficient of variation early strength*) [%] OR 2-day <1 1-2 >2
*linear scaling

Compliance to clinker specification [%]

Scores per indicator [%]

3-day <5 5-8 >8 > 90 90-70 < 70 20 20-0 0

95 95-85 < 85

95 95-75 < 75

<7 7-10 > 10

Low potential > 90 %

Product Quality Index [%]

[ scores per indicator]
*Main products, cement production volume weighted average

50% < Moderate potential < 90 % High potential < 50 %

Reporting period spans from December previous year to November current year

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Production Cost Index

Set of indicators used for index calculation Specific actual cost of cement (SACC) [RC/t cem] Rating Criteria Specific cost of cement: Actual / Budget < 0.9 Actual / Budget < 1 Actual / Budget < 1.1 Actual / Budget < 1.5 Index Calculation 100* 90 50 0

*different linear scaling of Index between 100 and 90 %, 90 and 50 %, 50 and 0 % Low potential > 90 %

Production Cost Index [%]

50% < Moderate potential < 90 % High potential < 50 %

Maintenance Index
Set of indicators used for index calculation
Kiln MTBF1 per plant [hours]
400* 300** 250 < 400* 125 < 300** < 250* < 125**

Scores per indicator [%]

Mill MTBF2 per plant [hours]

125*** 50**** 25 < 125*** 25 < 50**** < 25*** <25****
# with

Scores per indicator [%]

Actual specific maintenance cost vs. guide value [%]

0% > 0% 20% > 20%

Scores per indicator [%]

50 25 < 50***** < 25*****

35 17.5 < 35 # < 17.5 #

15 5 < 15 # <5#

*Wet Kiln, **Other Kilns, ***Ball Mill incl. Roller Press as pre-grinder, ****Other Mills incl. Roller Press as finish grinder and
Horizontal Roller Mills, *****with linear scaling, quadratic scaling

Low potential > 90 %

Maintenance Index [%]

[ scores per indicator]
1The Kiln MTBF indicator (with a weight of 35%) is calculated based on the following: Only kilns with more than 2,000 actual operating hours are considered The Kiln MTBF indicator is the sum of the scores (%) for each kiln of the plant The maximum score (%) for each kiln of a plant is equally divided by the total number of kiln/s of a plant 2The

50% < Moderate potential < 90 % High potential < 50 %

Mill MTBF indicators (with a weight of 15%) is calculated based on the following: Only raw mills and cement mills are considered. Only mills with more than 2,000 actual operating hours are considered If a mill is operated more than 2,000 hours but no value is reported in the ATR, value to be used is zero The Mill MTBF indicator is the sum of the scores (%) for each mill of the plant The maximum score (%) for each mill of a plant is equally divided by the total number of mills/s of a plant

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Thermal Energy Index

Set of indicators used for index calculation Specific thermal energy consumption kiln [MJ/t clin] (weight: 30%) Specific actual unit cost of thermal energy [USD/GJ] (weight: 70%) Rating Criteria Scores per indicator [%]

Kiln system specific guide values***: range minimum range maximum AVG range minimum** AVG range maximum**

100* 0 100* 0

*proportional scaling per kiln, in case of more than one kiln clinker production volume weighted average value to be calculated, ** average of the three plants with the highest and lowest specific cost of thermal energy
***guide values [MJ/t clin]: Short Dry Kiln with Grate Preheater (Lepol): Short Dry Kiln with 2 Stage Suspension Preheater: Short Dry Kiln with 3 Stage Suspension Preheater with Precalciner: Short Dry Kiln with 4 Stage Suspension Preheater / with Precalciner: Short Dry Kiln with 5 Stage Suspension Preheater / with Precalciner: Short Dry Kiln with 6/7 Stage Suspension Preheater / with Precalciner: Shaft Preheater with 1/2 Cyclone Stages: Long Dry Kiln: Long Wet Kiln: Shaft Kiln: Consideration of impact of bypass rate on kiln heat consumption: -10 MJ/t clin/%bypass for precalciner kilns -20 MJ/t clin/%bypass for preheater kilns without calciner 3300-4500 3700-5200 3350-4700 3200-4400 3100-4000 3050-3800 3500-5000 4000-5800 5200-7600 3300-4200

Low potential > 90 %

Thermal Energy Index [%]

[ scores per indicator]

50% < Moderate potential < 90 % High potential < 50 %

Electrical Energy Index

Set of indicators used for index calculation Specific electrical energy consumption cement [kWh/t cem] (weight: 50%) Specific unit cost of electrical energy [USD/kWh] (weight: 50%) Rating Criteria Scores per indicator [%] 100** 0

Ratio actual consumption / plant specific reference value* Comparison between actual cost and reference range: AVG Minimum**** AVG Maximum****

100*** 0

*Plant specific target value = 90% Plant specific reference value

**Score = 100% if actual consumption / plant specific reference value < 0.9 **Score = 0% if actual consumption / plant specific reference value > 1.3
***Score = 100% if actual cost < AVG Minimum ***Score = 0% if actual cost > AVG Maximum ****Average of the three plants with the highest and lowest specific cost of electrical energy

Low potential > 90 %

Electrical Energy Index [%]

[ scores per indicator]

50% < Moderate potential < 90 % High potential < 50 %

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Enviro Index
Set of indicators used for index calculation Rating Criteria Scores per indicator [%] 100* 0 -20 -20

Environmental performance indicator

Legal compliance

100% 0%
Non-compliance

ORM compliance
*proportional scaling

Non-compliance

Low potential > 90 %

Enviro Index [%]

[ scores per indicator]

50% < Moderate potential < 90 % High potential < 50 %

OH&S Index
Set of indicators used for index calculation
Lost time injury frequency rate (LTIFR) [#/h] Injuries** causing death or permanent disability [#] *different proportional scaling

Rating Criteria
Group standard, <2

Index Calculation
# Injuries** causing death or permanent disability>0 : OH&S Index=0% # Injuries** causing death or permanent disability=0: OH&S Index=100-5*LTIFR %*

Group standard, 0

**own, subcontracted and third party personnel

Low potential > 90 %

OH&S Index [%]

50% < Moderate potential < 90 % High potential < 50 %