9 How do Essroc and Italcementi operate together? Each Italcementi Group operating company, like Essroc, retains its own identity and operates autonomously for day-to-day activities. With the integration of our parent company, Ciments Francais, and Italcementi, management formed a Group Executive Committee to set and monitor the group's overall business activities and strategy. Jean Paul Meric, Essroc's chairman, is a member of this committee. As in any large international group, overall strategies, investment, marketing strategies, and similar plans are presented to the Group Executive Committee for approval.

The Group Executive Committee is a collegial organization that provides strategic management direction and defines objectives. The group's individual operations report to the members of the Group Executive Committee. Managers of the various groups' operating departments identify the resources available within the organization as a whole, organize them, and optimize them.

Toward that end, we work very closely with the Group and report to Mr. Meric, who is based in Paris.

This system works smoothly because it gives us the autonomy we need to run the North American operations. At the same time, we have access to capital resources, technical expertise, and research and development capabilities we might not otherwise be able to afford on our own.

Our Group Technical Center facilitates transfer of technology among each of the operating units. We also rely on the resources available through the centralized corporate departments, such as human resources and purchasing, to coordinate activities among the various operating units.

10 How much autonomy do you have as Essroc Corp.? Essroc Corp. is the parent company for all North American operations. It consists of Essroc Corp.; Essroc Cement Corp.; Essroc Canada, Inc.; San Juan Cement; and AXIM Concrete Technologies. All are run as Essroc. We also have two joint ventures in Canada-Ciments Quebec and Innocon. In total, we have eight manufacturing plants and 28 bulk and package distribution facilities throughout the northeast, southeast, and midwest in the U.S., including plants in Ontario, Canada and in Puerto Rico (San Juan Cement.) All of these operations report tothe Bath, Pa., headquarters.

Our fastest-growing division is AXIM Concrete Technologies, a subsidiary in Ohio, which produces concrete additives and grinding aids. It also produces products to retard cracking and improve surface abrasion resistance.

We run the day-to-day business from Bath, Pa., where we handle our operations, sales, and distribution activities, as well as administration. Of course, our overall strategies, programs, and budgets are approved by the Italcementi Group Executive Committee, because no one in any of today's multi-national corporations can operate in a vacuum. This is not unique to the cement industry, of course.

We have open communications to facilitate the positive exchange of ideas among all of the Italcementi Group companies. This creates dialogues that are both invigorating and productive. It makes each of the companies, Essroc included, stronger, and more profitable.

11 There has been much talk of foreign dumping of cement into the U.S. How do you think the authorities should handle that threat? I believe in free trade, but there must be a level playing field with open markets and international trade. It's difficult to compete effectively and manage one's business intelligently when foreign companies are selling in the United States at prices below the local market price in their own countries.

In many cases, these companies are subject to much less stringent environmental regulations and have lower operations and employee costs than we do. It's clear that dumping damages U.S. producers who are trying to compete. We're handicapped by enormous costs associated with environmental compliance and other governmental regulations that may not exist elsewhere.

I'm a proponent of having a means of compensating for those differences, such as countervailing duties. We support their enactment. Without this protection, cement production and jobs will eventually be forced to relocate outside the U.S. and Canada to remain competitive.

12 What proportion of the company's expenditures goes toward research and development, and where does that research take place? The Centre Technique Group (CTG) operates in both France and Italy, with some 400 employees. With this size organization, you can see the annual investment in research and development is substantial. The research is directed toward improving plant technology, plant operating practices, and new products, with the help of a Scientific Committee. Each of the Italcementi companies supports the effort.

13 What attempts are being made at the plants under your control to reduce the environmental effects of the operation on its surroundings? Quality of life is increasingly important to those living in our plant communities and we acknowledge and respect these concerns. We have communications programs in place at each of our operations and we make investments in upgrades and modifications with an eye to future federal and state requirements. One specific overall goal in each of our plants is to continuously improve our dust-control capabilities.

As part of our environmental commitment, we also have adopted an environmental statement to be prominently displayed at each facility. In addition, we have initiated citizens' advisory committees in several plant communities to stimulate productive dialogue with the community about all concerns, not just environmental ones. This has proven to be a good forum for discussion about issues of mutual interest and it enables us to explain our process and our future plans.

14 Alternative fuels, especially secondary liquid fuels, are very popular at the moment; do you have a company policy to test these new technologies? We think it's good public policy to solve environmental problems whenever possible in the conduct of our business. Part of that philosophy includes the use of alternative fuels. In the case of tires, there's the very real potential for a "win-win" situation. We reduce overall emissions associated with coal while solving a solid waste disposal problem that's associated with discarded tires. We recover the energy in the tires and reduce fossil fuel usage. From a business perspective, we save money. Society wins through reduced environmental impact and cost savings associated with disposing of the tires in other ways.

We also see a role for used oil as an alternate fuel. This captures its energy and solves yet another disposal problem.

Substituting hazardous wastes for coal is another option. While this may create some community concerns, from a business and environmental perspective, energy recovery from these wastes is an intelligent and practical option. These materials can't be landfilled, and incineration wastes the energy in them.

15 Essroc has 10 plants in America and one in Canada. Are there any plans to increase these numbers, and if so, where? There are eight wholly owned manufacturing facilities in North America, and a ninth joint-venture plant. All represent the culmination of an aggressive acquisition program that Ciments Francais launched in the 1970s and mid-1980s that included Louisville Cement and Coplay Cement. We purchased a Lone Star Cement facility in the Lehigh Valley in 1994 as part of our strategic planning for future quarry reserves.

At present, we have set debt reduction and cost reduction as goals for the short term. Consequently, our emphasis on acquisitions has not been high. However, it's always prudent to explore all strategic options, and we are always open to evaluate any opportunity that's a good fit.

16 Some people in the industry, especially those who have been a part of it for some time, complain that there is no one to replace them when they retire. What training measures are being taken by both Essroc and Italcementi to provide the cement specialists of the future? I personally have not heard these comments, but we only have ourselves to blame if this is true. Succession planning isn't easy but solid, progressive business management today demands developing good people for the future. This emphasis has been a primary focus of Mr. Pesenti, who heads the Italcementi Group.

At Essroc and at the other Italcementi Group companies, there are succession plans in place; part of the human resources program includes assigning a number of both French and Italian engineers to Essroc facilities in North America and Essroc engineers to facilities in Europe. It gives them needed international experience operating in different markets and cultures that will give them the skills to become future leaders of our Group.

In addition to some obvious synergies, we all benefit from knowledge coming from other parts of the world. To maximize this exchange and to provide insights into cultural understanding, we sponsor week-long diversity programs. We all learn from these sessions. As the COO of Essroc, I wholeheartedly endorse the concept.

17 If the guys at the international headquarters suddenly said the U.S. operation had to increase profits, what would be the first area you would tackle? This is every COO's primary goal, regardless of the impetus. In our case, the Group Executive Committee set this as a goal for all operations. It has been accomplished by focusing on cement and by divesting many downstream businesses. It also has been achieved through our many programs for enhancing volume growth, improving plant productivity, recapturing market share, and expanding distribution, as well as through cost reductions and continuous improvement programs and divestiture. We also learned to work smarter and more efficiently. Safety plays a role, too. In 1996, we had four plants in North America with no lost-time injuries for the year.

Of course, there is some upside potential with price increases. But if our competitors view the business as a commodity market, they will compete on price. I believe we should compete on value to improve margins on a long-term basis. That's why we concentrate on providing value through differentiated services to our customers and through value-added concepts, such as marketing higher-margin products that offer a distinctive edge.

Of course, we emphasize customer service benefits. As a result, today we are more profitable than the industry leader and almost as profitable as the most profitable publicly traded company. We've come a long way.

18 What is the short-term future for the U.S. market as you see it? This might better be addressed by Nancy Reagan's famous astrologer. The two leading economists who forecast for the cement industry in the United States have diametrically opposed viewpoints. One sees a downturn in 1998, saying the market may decline 5%. The other forecasts growth.

About six months ago, the general consensus was that we'd experience a recession associated with increased interest rates. That hasn't yet materialized. Now the pundits are viewing a slowdown in residential construction as less of a problem, since that's offset by increases in the number of commercial and industrial starts. Who can say? My prediction, and it is only that, is that 1998 should be flat or experience a slight decline. We'll see an upturn beyond 1998. Frankly, a flat market may not be a bad prospect because cement volumes today are close to an all-time high.

19 If you were editing a magazine for the industry, what topics would you like to see covered and why? Industry news, industry trends, in-depth company articles, technological changes worldwide, and changing issues that affect us all in the industry. This includes environmental issues both in the states and other countries. For the U.S., features that highlight the primary "players" on the political front would be helpful. Additional roundup features on the impact of legislation, its likelihood of passage, and the overall implications might be productive as well.

20 Where do you see the cement industry in 25 years? What areas of technology do you think will change the most quickly? On the product side, with new technologies, we will see improvements in the quality of concrete and in its durability. There will be new cements that are produced more fuel-efficiently. There undoubtedly will be competition from new materials that may not even exist today.

As for facilities, consolidation will continue, so we'll have fewer plants. Much of this will be driven by environmental constraints, which make it impossible for inefficient facilities to continue. Continued modernization will be the key to the future.

We'll see more emphasis on admixtures and on environmental concerns, such as carbon monoxide, dust, NOx, and SOx. Inefficient wet kilns may have to be upgraded or shut down and replaced by more fuel-efficient facilities. This consolidation will be the culmination of the trend that started 20 years ago. At the turn of the century in the Lehigh Valley of Pennsylvania, there were 44 plants; today, there are a handful.

Community dialogues will be critical as well. We encourage our plant managers to initiate forums for open communications now, recognizing that this is a trend that is here to stay.

Much depends, too, on global warming and the U.S. and Canadian governments' decisions regarding endorsing the international agreements that are proposed. If these agreements are enforced without appropriate trade offsets, production will undoubtedly move from the United States and Canada to less-developed countries, and U.S. and Canadian jobs will be lost.

As for new plants, they will likely be large facilities built in developing countries on the water to accommodate exportation. This will put additional pressures on existing facilities in developed countries including the United States, Canada, and Europe.

Finally, overall industry employment will decline as consolidation continues and plant employment levels drop. We will be doing more with fewer people as plants modernize and take advantage of new technologies.

Having said all that, I remain optimistic for the future. The outlook for our industry is bright. It's up to us to manage it. Cement industry trends will accelerate, and change will become the norm. Opportunities are significant for those companies that can adapt to the changes and challenges quickly and effectively to gain a competitive edge.