1 You've been in the industry for a few years now. How did you first get involved in cement?

Early in my career, I was an engineer designing and supervising a number of major construction projects in the Middle East and the United Kingdom. As a result, I obtained practical, hands-on use of concrete in roads, bridges, ports, and buildings. I joined Essroc in 1988 as chief financial officer after spending several years at PepsiCo in both division and corporate positions.

In 1991, I became head of the Construction Materials business in addition to my chief financial officer responsibilities. At all times, I have been involved with all management aspects of the business. I was named president and chief operating officer in September 1994.

2 What are the biggest changes you have seen in your tenure in the industry?

There have been a few dramatic changes that are inescapable. The first important trend is consolidation, both in cement and in concrete. In cement today, single-plant operations find it continually more difficult to survive in competition against the large multi-national organizations that have emerged. It's like the mom-and-pop office supply store trying to compete against Staples. There are always economies of scale to consider.

Our company is just one example of the consolidation trend. Our direct parent company is Ciments Francais, which in turn has as its majority shareholder Italcementi. We recently adopted the Italcementi group identity.

This type of consolidation offers financial strengths that lead to investment in product production, as well as in research and development that smaller organizations could not consider. It manifests itself in the distribution network as well.

Consolidation also is occurring among our customers with the formation of larger, stronger, and more sophisticated ready mix and concrete products' organizations.

The second change is globalization. It's a logical extension of consolidation and plays a role in U.S. production and importation. About 75% of the total volume of cement used in the United States is produced here. The other 25% is imported by ship, a cost-effective mode of transport once the product is on the ship.

Larger global companies can balance the supply and demand swings that may occur in their market areas by importing additional product when demand is high and relying on their own local manufacturing capacity when the market cools off, as it inevitably does.

This balancing act would be much more difficult without international strengths, and it's certainly more cost-efficient than expanding capacity to meet demand that may not be there once you have your new equipment on-line. However, this will lead to the construction of large plants on the water in countries where costs are low and less-restrictive environmental regulations exist.

A third change is the trend toward viewing the customer in a different light. At Essroc, we emphasize a value-added approach to the business. We concentrate on customer needs and want the customer to gain something from a "partnership" with our company. We have trained our people to be as knowledgeable as our customers in the concrete business and in concrete technology. This moves the industry away from one that sells a commodity to one that solves problems. We're working with our customers on a daily basis to solve problems, to be proactive in their businesses, and to provide service second to none.

In addition to top-notch service, we are exploring new product technologies based on research and development advances both here and abroad. Concrete technology is quickly evolving and we'll be seeing exciting new products and applications emerging as we move into the 21st century. That will include more admixtures and a trend toward other cementitious materials.

This "value" trend has been aided by the professionalism of industry management. The cement industry in the United States began in the middle of the 19th century at a time when jobs were scarce and workers lived within the shadow of the plant. The companies were small, independent, often family-run operations. By contrast, today's cement companies are professionally managed by individuals with both the educational and practical experience to run a large multi-national enterprise. This is a major change that has accelerated dramatically over the past 20 years.

Another important trend is the imposition of even stricter environmental regulations and the emergence of the need to address local community concerns. This trend has gained momentum first with the Clean Air Act and subsequently with the latest EPA proposals on particulates, ozone, and global warm ing. It also is clear that the cement industry is investing even greater proportions of its cash flow in environmental projects.

While we support protection of the environment, regulations must be based on sound science and take into account cost considerations for the regulated industries. The consumer, for example a homebuyer, probably does not understand that they are the ones who will ultimately bear these costs. Are they willing to pay 20% more for a house? In any event, this trend will continue.

Recognition of environmental concerns isn't new, but in the United States and Canada it has been accelerating quickly and the more serious the issue, the more the regulators want the community participating in decision-making.

Naturally, this shift in attitude about how plants fit into the community influences corporate decision-making in many ways. This includes whether it's worth making the capital investments that are needed to update facilities. If global warming proposals are adopted, many small inefficient plants may well be shut down. Since these plants are typically in small communities, the local impact and loss of jobs could be severe.

Last but not least, is the role of technology in making the cement industry more competitive. Technological advances are critical for the industry's future. These include low-cost solutions to productivity improvements developed by our equipment suppliers, which will be a major component in our success as we move forward. Effective solutions also must address environmental issues, so we can achieve high productivity and minimal environmental impact at the same time.

Technology in operations where the use of the computer has increased dramatically also is crucial. Control rooms today are light years ahead of where they were even 15 years ago. Technology also impacts the way we communicate with our customers, employees, and parent company. We rely on e-mail, the Internet, and voice mail to speed the exchange of vital information between offices, plants, and continents.

3 There has been a great deal of talk recently about the globalization of the industry-the reduction in the number of players who control cement production worldwide. How does your organization view this trend?

We're very much a part of it and endorse this approach for a variety of reasons. Productivity is greatly enhanced by the exchange of ideas and by the economies of scale that can be achieved. In addition, larger players also can bring leading-edge technologies and better value to their customers worldwide.

Additionally, distribution systems become much more efficient. Companies can shift supplies to those market areas where they are needed, without the time lag and enormous expense of expanding capacity.

Global strengths help us operate more effectively on a local level, too. We have the expertise to forecast effectively, evaluate our facilities, and assess ways to meet our local market challenges in the coming decades. As an example, at present we are evaluating expansion at two different plants. We will probably select just one for this investment, but we have the resources and technical expertise to complete these assessments and the expansion itself.

4 Some people are saying that the "Asian tigers" are losing their roar. If so, where do you see the next up-and-coming markets?

I'm not sure I agree that long-term growth in the Asian market is cooling off. These markets are slowing from their very high growth rates, but the long-term outlook remains positive and should continue to be unless the recent instabilities in their currencies continue.

Indonesia is still growing. China is clearly a huge market that is growing rapidly. We cannot forget India, either. It is one of the most populous nations on the planet. India is an interesting paradox. The potential is there. After all, one can't ignore 800 million people. But India's demand for cement hinges on its economy. If the Indian government can move forward with needed reforms that benefit business, there will be a huge market. The people need homes, roads, commercial structures, and the many other construction projects that use large quantities of cement.

5 How interested are you in the emerging South American markets, the so-called "Puma" economies?

The Italcementi Group sees the Latin and South American economies strengthening. Brazil, Mexico, Argentina, Chile-all are growth engines. As their respective governments get their financial houses in order and restructure their debt and economies, there will be interesting possibilities for the cement industry in these locales. For example, the Brazilian industry is going through a major restructuring. As indicated by Mr. Yves Rene Nanot in a recent speech, South America is one of the areas we may evaluate as appropriate.

6 What are your long-term predictions for the worldwide cement market?

We're generally positive. Infrastructure needs in developing countries, as well as the United States, will create huge demand for cement. Transportation, housing, and growth will accelerate that demand.

Using cement in those economies makes a tremendous amount of sense because it's a versatile product. It can be used in all sorts of construction applications.

We've seen projections for 2% growth worldwide and 1% for the United States. In fact, we see positive global growth trends in most countries.

In the states, cement is vying with other types of construction materials. The industry is battling back to regain lost market share in highway construction and in concrete homes. New cement and concrete products and technologies should make a difference in the coming decade.

There's a huge market potential in our market areas, too, with revitalization of the infrastructure. A recent AASHTO study indicated that, with a $40 billion federal and state highway program, the United States is only addressing 50% of the nation's needs over the next 20 years. We have to make up this gap for the U.S. economy to remain efficient and competitive worldwide. Without this investment, we will quickly lose our edge.

The cloud on this otherwise rosy horizon is global warming and how it will be handled as an international goal. If industrialized nations have restrictions and developing nations do not, you could see about 25% of U.S. production move off-shore because of higher costs. The only way to level the regulatory and competitive playing field would be to impose import duties on those countries that do not participate, which we encourage. Either way, price increases are probably inevitable.

7 What was the thinking behind Italcementi's new branding and the "nail-shell" logo?

We view the logo as a spiral. That symbolizes the dynamic nature of our business as it evolves. It also reflects the constant rotation associated with our process-kilns, roller mills, grinding mills, and the concrete mixer. Additionally, it captures the shape of the fossils found abundantly in limestone, our primary raw material.

The new corporate identity program unites our worldwide organization with a common vision-"A World Class Local Business"-and a common corporate logo. It reflects the alliance of Italcementi and Ciments Francais, with their combined resources, including 15,000 employees in 10 countries. Sales were $3.2 billion in 1996. In the organization, there are 51 cement plants plus ready mix and aggregate facilities.

This new group identity is a crucial step in the integration of both companies and their respective subsidiaries. Over the past four years, the group has put into place unified management for operations, technical, R&D, human resources, and finance. The identity program completes this unification by giving it visual representation.

8 What have been the major changes since the acquisition of Ciments Francais in 1992?

In 1992, Italcementi acquired a majority position in Ciments Francais, not the entire company. The integration of the two organizations' operations created economies of scale that were not possible for us as a group of smaller companies.

This is truly a synergistic approach in which the total is greater than the sum of the individual parts. For example, we have combined our two research and development organizations. Moreover, many corporate functions, such as human resources, purchasing, and technology, are managed globally. This is efficient and helps us tap into a wide range of skills and talents across the globe.

With the integration of the two companies, Italcementi Group management first refocused attention on our core business-cement. In addition, as articulated by Messrs. Giampiero Pesenti and Yves Rene Nanot, we have evaluated geographic positioning strategies, withdrawing in Europe from Portugal, Germany, and the Czech Republic, while concentrating in other markets where Italcementi Group has a strong, stable presence, such as France, Belgium, and North America. Similarly, the Group sees development potential in Morocco and Turkey, where it has facilities. There is also interest in emerging markets where there is high growth potential, such as China, Southeast Asia, and, to a lesser extent, Latin America.

In addition, the Italcementi Group companies concentrated on cost reductions and improvements in profitability. We incorporated enhanced technologies into our daily activities and achieved appropriate efficiencies through operating and maintenance cost-reduction programs. Finally, we emphasized debt reduction. These approaches produced significantly improved profitability.

In addition to corporate restructuring and repositioning, with the change in management control, there's been a change in corporate philosophy, in part because Italcementi is a family-owned business. Italcementi has a long-term perspective on ensuring business success because management thinks in terms of generations, not operating quarters. This approach to the business takes on long-range perspectives that are refreshing. It is good for a company in a business like ours to be oriented toward the long term, since we need lots of capital investment to continuously improve facilities, develop innovative new approaches and products, and invest in good people to run the company worldwide now and 20 years from now.

The conclusion of this interview will be published in the July 1998 issue of Rock Products Cement Edition.