responsibility We add value to our costomers projects. ANNUAL REPORT 2007

Transcription

1 responsibility We add value to our costomers projects. ANNUAL REPORT 2007

2 Contents 01 Agenda 02 Çimsa in Brief 03 Financial Highlights 04 Milestones 06 Message from the Chairman 08 Board of Directors and Audit Committee 09 Senior Management 11 Worldwide Developments in the Cement Industry in Developments in the Turkish Cement Industry in From an Investors Perspective 14 Activities in Our Production Plants 14 Çimsa Mersin Plant 16 Çimsa Kayseri Plant 17 Çimsa Eskiflehir Plant 18 Çimsa Ni de Plant 20 Ankara Cement Grinding and Packaging Facility 20 Çimsa Plant Information 21 Sales Production Figures 21 Capacity Utilization Rates of Rotating Kilns in Malatya Cement Packaging Plant 23 Products 26 Ready-Mixed Concrete 29 Cement and Ready-Mixed Concrete Plants 31 Investments in Organizational Studies and Training 32 Çimsa Development Programs 32 Senior Management Development Programs 32 Learning Organization Training 32 Behavioral and Vocational Training 34 Learning Organization Project 37 A New Performance Criterion: Measurement of the Organizational Climate 39 Çimsa s Strategy Map 41 Links and Terminals Abroad 41 Çimsa Cementos Espãna S.A.U. - Spain 41 CSN Cement Sales North GmbH - Germany 41 Çimsa Cement Free Zone Ltd - Cyprus 41 C MSAROM Marketing Distributie S.R.L. - Romania Marketing Activities 47 Report on Compliance with Corporate Governance Principles 54 Annual Report Consolidated Financial Statements Together with Peport of Independent Auditors 103 Domestic Selling Points and Suppliers 128 Abroad Supply Points and Telephone Numbers

3 AGENDA Ç MSA Ç MENTO SANAY VE T CARET A.fi. The agenda was reviewed at the Board of Directors Meeting number 1128 on March 18, 2008 and submitted to the General Assembly for endorsement. The Agenda of the Regular General Assembly to be held at hours on Tuesday, April 8, AGENDA: 1- Call to order and composition of the Administrative Board, 2- Authorization of the Administrative Board to approve the meeting minutes 3- Reading and discussion of the Board of Directors' Annual Report and the Auditors' Reports, 4- Reading, discussion and approval of the balance sheet and income statement; consideration of and decision on the dividend distribution proposal, 5- Release of Board of Directors and Auditor Committee from their liabilities 6- General Assembly ratification of the board members elected by the board of Directors to replace the outgoing members, 7- Re-election of board members whose terms have expired and specification of their new terms, 8- Re-election of members of the Audit Committee whose terms have expired and specification of their new terms and compensation, 9- Informing shareholders of donations made during the year, 10- Ratification of the independent auditing company selected by the Board of Directors, 11- Authorization of the Chairman and Members of the Board of Directors to conduct procedures set out in articles 334 and 335 of the Turkish Commercial Code. Authorized Capital Ceiling : TRY 200,000,000 Issued Capital : TRY 135,084,442 Date of Incorporation : December 21, 1972 Plant Location : Yenitaflkent Beldesi, Mersin / TURKEY Tel: +90 (324) (pbx) Fax: +90 (324) Website: Address: Toroslar Mah., Tekke Cad., Yenitaflkent 33013, Mersin, Turkey Annual Report 01

4 Ç MSA IN BRIEF Çimsa aspires to achieve business excellence at an international standard in terms of its Quality Management, Environmental Management, and Occupational Health and Safety Systems. A leading Turkish manufacturer of cement and ready-mixed concrete products, Çimsa produces special products such as white cement and calcium aluminate cement, as well as gray cement. Founded in 1972, the company began operations in In the space of three decades the company has managed to triple its production. Çimsa is the market leader in the production of special-type cement, and it currently operates cement and ready-mixed concrete plants in Adana, Mersin, Kayseri, Eskiflehir, Ni de, Ankara, Antalya, Nevflehir, Osmaniye, Kahramanmarafl, Aksaray, Karaman, Konya, Bilecik, and Kütahya. it is an international company creating employment for the national economy of Turkey. Çimsa aspires to achieve business excellence at an international standard in terms of its Quality Management, Environmental Management, and Occupational Health and Safety Systems. The introduction of the waste-burning unit in 2006 has brought significant benefits towards protecting the environment while cutting fuel costs. The company also organizes scores of activities that contribute to the social and cultural development of Turkey. Çimsa exports cement to thirty-five countries. As illustrated by its most recent investment of US$ 80.2 million, Çimsa Cement Net Sales and EBITDA (US$ Million) 450 Net Sales - US$ Million EBITDA - US$ Million Cumulative Average Growth Rate Net Sales : %15 EBITDA : % Annual Report Note: the figures are stand-alone values between 1997 and 2002, and consolidated figures for 2003 and after.

5 FINANCIAL HIGHLIGHTS (Currency- New Turkish Lira (TRY)) Key Balance Sheet Indicators Cash and Cash Equivalents 56,106,226 53,748,963 Marketable Securities (net) - - Trade Receivables (net) 84,778,910 64,351,750 Inventory (net) 89,401,544 59,283,064 Current Assets Total 268,317, ,731,229 Financial Assets (net) 289,655, ,250,857 Property, Plant and Equipment (net) 420,086, ,312,729 Intangible Assets (net) 20,396,240 21,602,208 Fixed Assets Total 863,357, ,661,786 Total Assets 1,131,674, ,393,015 Shareholders' Equity 926,572, ,697,758 Key Income Statement Indicators Sales (net) 574,985, ,447,540 Income and Profit from Other Operations 167,391,122 21,868,675 Operating Profit before Tax 331,569, ,936,552 Net Profit for the Year 290,274, ,096,434 Total Assets Shareholders' Equity Sales (Net) Net Profit for the Year 1,200,000,000 (TRY) (TRY) (TRY) (TRY) 1,000,000, ,000, ,000, ,000, ,000, Annual Report 03

6 MILESTONES 1972 The company is established in Mersin Production commences with an annual production capacity of 1,000,000 tons Coal mill enters operation at the plant to bring down costs. Kiln units are installed Construction work starts on ready-mixed concrete plants Grey/white cement clinker production plant entered operation, producing world-class white cement, and gray cement as required Quality assurance system is established; the company gains the TS-EN-ISO 9002 Quality Assurance System Certificate Grinding/packing plant acquired in Kayseri A 500,000 tons capacity storage/packing plant in Antalya is acquired, in addition to another packing plant in Malatya Çimsa becomes the world's largest white cement producer under one roof with the establishment of the Hac Sabanc Production Plant, Çimsa's second white cement production line The quality assurance system is revised in accordance with the new ISO 9000 standard in order to convert to a quality management system. The Company is also awarded the TS-EN-ISO 9001:2000 Quality System Certificate. Production commences at a new plant, manufacturing calcium aluminate cement, a special type of hydraulic binder resistant to high temperatures, chemical corrosion and water, and that can rapidly reach high compressive strength Closure of storage and packaging facility in Antalya. Initiation of the Work Excellence Project which accelerates and enhances performance as well as ensuring greater job security Çimsa submits the highest bid in a Turkish Saving Deposits Insurance Fund auction of Standart Cement (the Eskiflehir Cement Plant and the Ankara Cement Grinding Facility), resulting in Çimsa's acquisition of Standart Cement, which now supplies its products to the market under the Çimsa brand. A completely new gray clinker production plant with a daily capacity of 1,800 tons is established in Kayseri. Hence, the existing cement grinding and packing plant becomes an integrated plant by the end of the year, reaching an annual capacity of 600,000 tons of clinker production. To increase ready-mixed concrete production and capacity, ready-mixed concrete plants enter service in Osmaniye and Kahramanmarafl. In addition, one mobile concrete terminal, two concrete pumps and 10 mixers are added to the production and services fleet. Dust and gas emissions released during operations are brought under control thanks to electro-filters and bag filters. As part of a systematic approach to protect and preserve the environment and individual health and to raise awareness among employees, the company established the TS-EN-ISO Environment Management System and attained certification. 04 Annual Report

7 To ensure the safety of employees, contracted employees and visitors, the company implemented the TSE Occupational Health and Safety Management System and attained certification. Çimsa obtained an Alternative Fuel Usage Certificate from the Ministry of Environment and Forestry enabling the incineration of category I and II waste oil. Erçim Çimento Sanayi Ltd. fiti., based in the Turkish Republic of Northern Cyprus, was acquired becoming the first international Çimsa subsidiary A new cement mill with a capacity of 100 tons per hour and a clinker silo with a capacity of 70,000 tons were built in Kayseri. A new cement mill with an 85 ton per hour capacity, a new cement storage plant with a capacity of 5,000 tons, and a closed trass (natural puzzolanic) silo were added to the Ankara Facility. Our second international subsidiary, Cimsarom Marketing Distributie S.R.L. was established in Romania. A 50% stake in the Germany-based Cement Sales North GmbH was acquired in June 2006, making it the third international subsidiary. Exportaciones Sabanc S.A., located in Spain, was acquired to become Çimsa's fourth international subsidiary. License to Use Alternative Fuels as Supplementary Fuels was obtained for Plant I in Mersin. The ncirlik Ready-Mixed Concrete Plant entered operation. In addition, the Tarsus Ready-Mixed Concrete Plant was purchased and the Bat kent Ready-Mixed Concrete Plant was leased. Twenty-five mixers and two pumps were bought for readymixed concrete operations An agreement was signed with Loesche in April for the modernization of the Mersin Cement Mill III. The project is set for completion in mid Investment for modernizing Production Line I in Eskiflehir Plant was completed in May; the plant went back into operation. The new 85 tons per hour capacity cement mill in Eskiflehir was operating by the end of May. The new Production Line II went into operation in Mersin to produce calcium aluminate cement, a special type of hydraulic binder resistant to high temperatures, chemical corrosion and water, and that can rapidly reach high compressive strength. An agreement was signed with FLS at the end of July to renovate the clinker cooling and kiln units of the Mersin Production Facility I. The project is set to be completed in early In Eskiflehir, the new coal mill, with a grinding capacity of 40 tons of petroleum coke per hour to serve both production lines, went into service at the end of October. Oysa Ni de Cement Factory was taken over at the beginning of November under the name of Çimsa Çimento San ve Tic. A.fi. Ni de Cement Factory. The investment in Production Line II, with a production capacity of 2,300 tons of clinker per day, was completed in Eskiflehir, and the facility was operating by the end of the year. Construction began on a 600 tons cement silo at the Malatya Terminal, to be finished in February Operations were underway to establish new cement terminals in Spain (Alicante), Romania (Constanta) and Russia (Novorossiysk). License to Use Alternative Fuels as Supplementary Fuels obtained for Plant I in Mersin in 2006 was revised to extend its scope. New ready-mixed concrete plants were opened in Bilecik, Silifke, Karahan, and Kütahya plants. Twenty new trans-mixers and two concrete pumps were added to the fleet of vehicles. Twenty mixers and two pumps were bought for readymixed concrete operations. Twenty-seven mixers and five pumps were taken over from Oysa. Silifke and Ambarl Plants went into operation. Plants were taken over from Oysa in Aksaray, Karaman, and Ere li on November 1, P nar Ready-Mixed Concrete in Bilecik was taken over on May 17, The lease of a plant in Kütahya on November 1, 2007 concluded the plant purchases and leases for Annual Report 05

8 MESSAGE FROM THE CHAIRMAN To efficiently manage the synergy and coordinate our increasing number of plants in Turkey, our headquarters was moved to Istanbul and work to create the infrastructure for growth abroad is underway. Dear Shareholders, Cement consumption is rising around the world. In Turkey, too, the cement sector has been among the most vibrant in the past few years. Cement consumption in Turkey demonstrated consistent double-digit growth from 2004 to 2006 and, despite the economic difficulties, it grew by 2% in 2007, surpassing 42 million tons. We believe that in the forthcoming years, provided macroeconomic policies continue with structural reforms that strengthen competition, reliability, and investment in business, cement consumption per capita in Turkey will rise from the current level of 650 kg to kg, as seen in the EU. Although this bright picture of rising demand is overshadowed in part by the new production capacity of 8-10 million tons that will come on line in the short-term, we still view the future positively. By the end of 2005, we invested approximately US$ 100 million in our Eskiflehir and Ankara plants, purchased from the Saving Deposits Insurance Fund. As a result of these investments in clinker lines and mills, our clinker and cement grinding capacity has tripled. These investments and the improved capacity utilization lowered fuel and coal consumption. After the Saving Deposits Insurance Fund handed over these two plants, their high dust emissions were reduced to levels compliant with environmental standards. In all markets where we operate we continued to expand our ready-mixed concrete business, led by Eskiflehir, Bilecik, and Kütahya, through takeovers and building plants. In 2007, the merger with Oysa was completed and the Ni de plant was incorporated into Çimsa. To efficiently manage the synergy and coordinate our increasing number of plants in Turkey, our headquarters was moved to Istanbul and work to create the infrastructure for growth abroad is underway. In 2008, we will grow via new investments in the Mediterranean and Black Sea basins, and enlargement of our terminal network in Germany, Spain, Romania, and TRNC. 06 Annual Report

9 As one of the three key players in the global white cement sector, Çimsa's sales exceeded one million tons in Similarly we have become the biggest supplier in the calcium aluminate cement sector, which we entered relatively recently. In order to meet increasing export demand, a second kiln came on stream doubling our capacity. Following Ekobeyaz, we marketed Ekoharç maintaining our efforts to offer our customers economic and ecological products. Our turnover reached US$ 440 million and our operational profit (EBITDA) attained the US$ 163 million mark. While growing, we aim to make contributions that create benefits for the future. To this end we support formal and vocational education activities and environmental projects, especially in the regions where we operate. In recognition of social responsibilities, we have contributed to the preservation of the natural habitat in those of our plants which were awarded the License to Use Wastes as Supplementary Fuels. In Mersin, 50,000 saplings are being planted for the rehabilitation of quarries. An artificial lake is being made out of the old clay furnace in the Eskiflehir plant to create a new habitat for diverse animal and plant species compatible with the geography, on 50,000 m 2 of land. For many years, we have organized panels, contests, and sponsorship activities to help preserve our artistic and cultural heritage and to support new talent. The most recent link in this chain of events was the sponsorship of a book entitled, A Historic Tour of the Asian Side of Istanbul by Gönül Hal c. Within this framework, we continued our sponsorship for the 2007 Archiprix-Turkey Architecture Students Graduation Projects Contest. We are delighted with the achievement of rem Yak c, whom we have supported since She was 73rd in the category for 10-year-olds at the 2007 World Chess Championships, in which 105 contestants from 52 countries participated. In the Turkish Championship she took second place, earning a place on the Turkish National Chess Team. I thank everyone who contributed to and supported Çimsa's growth objectives. Best regards, Erhan Kam fll Chairman of the Board Annual Report 07

10 BOARD OF DIRECTORS AND AUDIT COMMITTEE Board of Directors 1 Erhan Kam fll Chairman 2 Mehmet Göçmen Vice Chairman 3 M. Nedim Bozfak o lu Member 4 Tamer Güven Member 5 Y lmaz Külcü Member 6 Mehmet Hac kamilo lu General Manager Audit Committee Mehmet Sert Auditor Bahad r Boran Auditor 08 Annual Report

11 SENIOR MANAGEMENT Mehmet Hac kamilo lu General Manager 2 Hüseyin Özkan Assistant General Manager (Marketing and Sales) 3 Basri Dinçer Assistant General Manager (Cement Production) 4 Tamer Denizci Assistant General Manager (Financial and Administrative Departments) 5 fiahap Sar er Assistant General Manager (Ready-Mixed Concrete) 6 Mutlu Do ruöz Assistant General Manager (Investment and Automation) 7 Mehmet fiahin Plant Manager (Kayseri) 8 Fikret Uluakay Plant Manager (Eskiflehir) 9 Do an Özkul Plant Manager (Ni de) 10 Naci Rüzgar Plant Manager (Ankara) Annual Report 09

12 MERS N 1,543 1,589 1,640 1,680 1,832 2,012 2,110 2,278 2,557 performance In each and every task, our aim is high performance. 2,755 2,934 Global Cement Consumption (in millions of tons) T 07T 08T Source: The Global Cement Report, 7th Edition, 2007

13 WORLDWIDE DEVELOPMENTS IN THE CEMENT INDUSTRY IN 2007 Another good year... What about 2008? A shining star in the business firmament over the last few years, the global cement sector continued to bustle in Regardless of world economic growth of 5.1%, the global construction sector is still making baby steps for the most part, particularly in emerging economies and Asian countries. Urbanization, the massive shortage of housing stock, and expanding infrastructural investments keep the demand for construction materials alive. One view of the cement sector reveals that global consumption in 2007 decelerated slightly due to economic developments, with growth falling back to 7.7% to total 2.76 billion tons. Although demand for cement has been strong in many developed or developing countries, it has slid in the USA - traditionally one of the biggest markets for cement - under the impact of the housing market turmoil. The dynamism of Asian economies, a driving force in the growth of the global economy, broke the shipping costs records set in Since the cost of transporting raw materials spiked, especially between Latin America (e.g. Brazil) and Asia, transportation costs in the cement sector (for raw materials, fuel, and also for export) were exorbitant and it also became difficult to find ships to fix cargoes. On top of this, soaring oil and coal prices drove cement production costs up still further up. However, increased oil revenue caused construction work in oil producing Middle Eastern countries and Russia to boom, heightening the demand for cement. the big cement producers more obvious. To reinforce their market position in developed countries, they have vertically integrated in ready-mixed concrete and aggregates, while shifting cement production to developing markets. The takeovers of Orascom (active in developing markets) and Hanson PLC (producer of construction materials) by Lafarge and HeidelbergCement, respectively, are the best examples of this strategy. Influenced by debates around shrinking fossil-fuel levels, the Kyoto Protocol, and the restrictions on CO 2 emissions, the issues of using alternative raw materials and fuels, and the production of cement with higher quantities of admixtures have stayed at the top of the agenda for the cement sector. The global economic unrest surfacing towards the end of 2007, the mortgage crises, and the slowing world economy hint that 2008 will be tough in general, and the abundance of liquidity will dwindle. For the cement sector specifically, the leaps in prices of oil, fuels, raw materials and freight, and the fact that capacity investments made recently will come on line, cast a question mark over Global economic developments and their effect on the construction sector in recent years have made the general strategies of Annual Report 11

14 DEVELOPMENTS IN THE TURKISH CEMENT INDUSTRY IN 2007 Housing construction fueled cement consumption Running parallel to GNP and the construction sector, cement consumption in Turkey recorded the highest level in its history in 2006 with growth of 19%. As GNP rose 4% by the third quarter of 2007, the construction sector grew by 11.5% acting as an important factor in the increase in domestic cement consumption. In 2007, cement consumption in Turkey stood at about 42 million tons, according to the Turkish Cement Manufacturers Association. The relatively warm winter allowed the construction sector to keep busy, but there was a hiatus when early elections were announced in the second quarter. In previous years, the third quarter was always a time of high demand in the construction and cement sectors. However, the third quarter of 2007 was dampened by the elections and the anticipated demand didn't materialize. Hence, the growth for the first three quarters stayed at 3.6%. Lower than expected consumption in the final quarter brought the annual figure to 42 million tons, only 2% up on Although no cement was imported in 2007, 909,000 tons of clinker was imported to meet demand in the high season. Cement exports were up by 17% to reach 6.6 million tons while clinker exports were up by 1% to total 1.6 million tons. In exports, the Iraqi market remained crucial, while Russia and Syria became more attractive. From the second half of the year, dramatic increases in shipping freight costs, fuel prices (coal, petroleum coke) and, as a result, raw material prices, pushed cement production costs up. Rising fuel and raw material prices will speed up cement producers move to alternative fuels (waste tires, waste oils, industrial waste, etc) and alternative raw materials (slag, fly ash, etc.) Other factors, such as rising electricity prices, will adversely influence cement production costs. The significant development of the Turkish construction and cement sectors in the last four years has proved attractive to new investors. Investment in around 18 million tons of a new clinker capacity is planned for the upcoming years and it is projected that almost half of these investments will come on line in Such a buoyant market has drawn in foreign investors. In 2007, two new international cement producers came to Turkey through partnerships. For 2008, negative developments in the construction and more especially the housing sectors will feed through to the cement sector in parallel with economic trends. This together with the new capacities coming on line in 2008 will induce the sector to turn to exports as an alternative to domestic sales. Domestic Cement Sales and Consumption per Capita Turkey's Cement Exports (million tons) Domestic Cement Sales (thousand tons) Consumption per Capita (kg per capita) Cement Export Clinker Export ,127 31,530 30,999 25,082 26,811 28,106 30,670 35,083 41,610 42,456 45, T Source: Turkish Cement Manufacturers Association, Group Estimate Source: Turkish Cement Manufacturers Association 12 Annual Report

15 FROM INVESTORS PERSPECTIVE JPMorgan We think that the diversity of its product portfolio will partly insulate Çimsa from the uncongenial market conditions that may occur in the domestic market in 2008 and Concurrently, we estimate that Çimsa will expand its main market share. We predict that Çimsa will meet 9% of domestic demand in 2009, as opposed to 5.6% in In 2008, Çimsa will raise its grey clinker capacity to 4.2 million tons in addition to the current capacity of 1.1 million tons. This will place Çimsa in third in the national market in terms of capacity. Deutche Bank The 2007 Third Quarter Financial Results were parallel to our estimates. By the end of the third quarter, Çimsa announcement of TRY 142 million in earnings, TRY 59 million in EBITDA, and TRY 44 million in net profit verified our forecast of TRY 140 million, TRY 60 million, and TRY 42 million, respectively. Finans Investment The Best Cement Company on the Istanbul Stock Exchange Thanks to the diversity of its product portfolio and the balanced distribution of its export and domestic sales, Çimsa was less affected than its competitors by the drop in grey cement prices. We think Çimsa is the best cement company in the sector. Balanced Distribution of Exports and Domestic Sales Due to its flexible production structure, Çimsa has become the third biggest white cement producer in the world. We think that in the period between 2007 and 2009, the company will prevail in the Syrian market, compensating for the fragility of the national market where competition is intense. fl Investment Çimsa is Well-Positioned in Turkey Çimsa has a 20% market share in Anatolia and a 19% share in the Mediterranean region of Turkey, both rapidly growing Turkish regions. The company benefits from the demand for cement, which expands in conjunction with industrialization in those regions. The World's Third Biggest Cement Company With an annual production capacity of 1.1 million tons, Çimsa is the third largest white cement company in the world following Cemex and Aalborg. This commanding competitive advantage has differentiated Çimsa from its rivals and given it a distinct position in the national market. Annual Report 13

16 ACTIVITIES IN 2007 Our Production Plants Çimsa Mersin Plant First Production Line The rotating kiln, which entered production in 1975, has a diameter of 5.25 meters with two cyclone lines, each equipped with four-stage preheating. It has a production capacity of 3,350 tons per day with 10 plant type-unax coolers. In 1983, cool grinding and burning systems were added to the plant to improve fuel efficiency. This kiln burns 100% petrocoke (with 4.5% sulfur content), enabling significant cuts in fuel costs. In 2006 a waste incineration unit was brought into operation, also providing additional income for the plant. In this unit, wastes such as residual petroleum tank sludge, used air bag filters, used shop rags and petroleum spilled soil are burned. Work to increase the capacity of the unit is continuing. The waste menu was expanded in 2007 and work continues on enhancing the capacity of the wasteburning unit. The plant has two crushers, one prehomogenization plant, two ball mills for raw materials, two raw meal silos, and two enclosed stockholes for clinker reserves. The cement grinding process takes place in two ball mills and one vertical mill. The cement conveyance system, which had been pneumatic, was adapted into a system with air slide and elevator delivery in 2004, obtaining savings in electricity. Again in 2004, the number two cement mill was converted into a one-cabin mill and by installing a roller-press system with VSK separator, grinding capacity was improved and energy consumption of the mill was reduced. Produced cement is stored in four 10,000 tons, one 3,000 tons and three 2,000 tons silos. Packing is carried out by five packing machines, each with a capacity of 100 tons per hour and two 1.5 tons big-bag filling machines. Bulk cement is loaded through the filling points below the silo. Limestone and clay are the two main raw materials used during production. Second Production Line The production line consists of crushers, a raw material mill with prehomogenization systems, two raw meal silos, a rotating kiln and a clinker stockhole. It is possible to produce gray or white clinker in the kiln, which entered service in December As a result of improvements to the raw meal conveyance systems in 2003 and 2004, the company was able to cut its electricity consumption. In 2004, a new installation allowed hot waste gas from the clinker cooler to be used in the raw meal mill, which brought significant fuel savings through deactivation of the drying kiln. With the completion of its precalcination modification in 2005, the usage of 4.5% sulphurized petrocoke was improved from 85% to 100%, allowing for considerable fuel savings. 14 Annual Report

17 KAYSER The 'SA' in our name means reliability. reliable One of Mimar Sinan s works

18 OUR PRODUCTION PLANTS (CONTINUED) Third Production Line This line, which entered operation in December 1999, produces white cement. The plant comprises of a crusher, a raw material mill with a pre-homogenization plant, a raw meal silo, a rotating kiln and a stockhole for clinker. A white cement grinding mill with a capacity of 100 tons per hour is also available at the plant. The kiln burns 100% (4.5% sulphur) petroleum coke. Produced white cement is stored in two 5,000 tons silos and one 2,000 tons silo. The packaging unit consists of three packing machines, each with a capacity of 100 tons per hour, and two big-bag filling machines. Bulk cement is loaded through the filling points below the silo. The plant also includes one palletizing machine and one plastic wrapping unit without pallet. Calcium Aluminate Cement Production Plant The plant, which became operational in 2002, comprises of a kiln with a clinker production capacity of 2 tons per hour, a cement mill with a grinding capacity of 5 tons per hour and a packaging unit. In 2007, the second kiln with a clinker production capacity of two tons an hour became operational. Çimsa Kayseri Plant The plant was established by Akçimento, a Sabanc Group company, in It was acquired by Çimsa in It original annual grinding and packaging capacity of 820,000 tons of cement was supplemented in 2005 by a rollerpress to increase the grinding capacity and to reduce energy consumption. Work begun on a clinker production line on October 9, 2004 to transform the plant into an integrated cement plant. After the plant's construction and assembly process was completed, it entered operation, producing its first clinker on December 26, The plant boasts state-of-the-art technology comprising an ILCtype base unit, a low nitrous oxide emission precalcination system, a pre-heater with a fivestage cyclone, and a 55 meters long, 3.6 meters diameter rotating kiln. The plant's initial daily production capacity of 1,800 tons of clinker was increased to 2,000 tons after improvements. In addition, the plant has a raw material crusher with an annual capacity of 300 tons, clay and limestone pre-homogenization facilities, a raw meal mill and a 5,000 tons capacity raw meal silo. The trass mill was modified into a coal mill with a capacity of 20 tons per hour. The clinker cooler is a SF-type grate cooler. A second 110 tons per hour cement mill entered operation in August 2006, in addition to the existing 100 tons per hour ball mill. Again in 2006, a second clinker storage plant with 70,000 tons capacity was added to the existing 65,000 tons capacity unit in order to prevent pollution and maintain the clinker quality. The trass (puzzolanic) silo was converted into a 1,500 tons cement silo in The plant's packaging unit has two automatic rotary packers with a capacity of 100 tons per hour, and three bulk cement loading stations are available. The plant produces CEM I 42.5N Portland, CEM II/B-M (P-L) 32.5R and CEM II/A-M (P-L) 42.5R composite Portland cement. Production of masonry cement (Ekomasonry) TS EN MC 12.5X has also begun. 16 Annual Report

19 In 2007, the Kayseri plant broke a record by producing 766,000 tons of clinker, 27% above its capacity at founding. Moreover, waste burning operations were carried out in The Alternative Fuel Burning Operation License was obtained. Initially limited to waste oils and contaminated waste, successful trial burns allowed the license's scope to be extended to burn waste oils, contaminated waste, dye stuff, sludge, refinery waste, and scrap tires as secondary fuels. Çimsa Eskiflehir Plant The Eskiflehir Plant is located 22 kilometers along the Eskiflehir-Istanbul highway on a site of about 1,800 m 2. Having entered operation in 1957, the plant utilized a 3.6 meters diameter, 125 meters long (German MIAG technology) wet kiln with an annual capacity of 150,000 tons until The total annual production capacity of the line was raised to 425,000 tons in 1976 with the addition of a 3.6 meters diameter, 52 meters long MIAG technology three-graded pre-heater dry kiln with an annual production capacity of 275,000 tons. A surge in energy prices in the 1980s and technical developments in the sector encouraged the replacement of the dry system production line's preheater with the Polysius four-graded pre-calcination pre-heater in Following this and other modifications, the line's annual production capacity was expanded to 440,000 tons. The wet kiln unit, by then economically and functionally obsolete, was halted and uninstalled in Subsequently: In 1990, the laboratory building was refurbished. Automation by FLS technology was put in use for laboratory and process management. In 1994, the Polycom roller pres clinker precrusher became operational, raising the first cement mill's capacity from 27 to 40 tons per hour and the second cement mill's capacity to 95 tons per hour. In 1997 preparations and plans to raise the clinker capacity of the production line from 1,400 tons per day to 1,950 tons per day were completed. However, these plans were only partially realized due to financial constraints. Currently, the kiln has a daily production capacity of approximately 1,500 tons per day. In 1998, the capacity of the second cement mill was raised from 60 to 75 tons per hour after transforming it into a closed circuit system with the addition of a Polysius Sepol dynamic separator. On December 22, 1999, Esbank was transferred to the Banking Regulation and Supervision Board (BDDK). Esbank was the majority shareholder in Eskiflehir Cement. This company eventually transferred from the BDDK to the Rumeli Corporation, and then to the Saving Deposits Insurance Fund. Finally, on December 27, 2005, Çimsa acquired the plant. The plant was able to produce a record 486,000 tons of clinker in the first year following its acquisition by Çimsa. In order to meet regional demand and be prepared for upcoming years, the following steps were taken to grow capacity by 30% and they were completed in May 2007: Installation of a new dynamic separator in place of the old static separator located in the raw material mill Annual Report 17

20 OUR PRODUCTION PLANTS (CONTINUED) Renewal of the pre-heating units and expansion and renovation in the first stage cyclones Replacement of the existing clinker cooler with a new high efficiency clinker cooler unit Installation of a new electro filter in the kiln unit Replacement of burning dosage system and kiln burner Setting up a new closed-circuit cement mill with a capacity of 85 tons per hour in addition to the present two cement mills On November 6, 2006, similar to the investment made in the Kayseri production line, the following were completed for usage at the end of the year: The establishment of a new coal mill with a capacity of 40 tons per hour that can feed production lines I and II Raw meal crusher and conveyance systems with a capacity of 750 tons per hour (which will support both production lines) and 2 x 20,000 tons of mix materials, 2 x 4,000 tons of calcareous homogenization plants and raw meal conveyance systems A new clinker production line with an output capacity of 2,300 tons of per day. The Eskiflehir Plant's production capacity was raised from an initial 480,000 tons of clinker, to 700,000 tons of clinker in 2006, to 1.4 million tons of clinker in the last two years. The plant produces three types of cement, CEM I 42.5R Portland cement, CEM II/B-M (PL) 32.5R composite Portland cement and MC 12.5X Masonry cement. The products are mainly marketed in Eskiflehir, Kütahya, Bilecik, Sakarya, and Ankara. Çimsa Ni de Plant Turkish Cement Industry Inc. established the Ni de Cement Plant in 1957 under the name Ni de Cement Industry Inc. with the participation of 758 founding partners for the development of Ni de and neighboring cities. The wet system cement plant was built by F. Krupp on a 523 km 2 area, three kilometers from the city center with a capacity of 85,000 tons/year. It went into production in After a capital increase on November 16, 1965, it was made a public organization under Çitosan. In 1972, when the wet system could no longer satisfy demand, the construction of production Line II by K.H.D. Humboldt with an annual capacity of 265,000 tons, and using pre-heated dry system technology, was started. The line was in operation on September 2, 1976 and raised the plant's total annual production capacity to 350,000 tons. Over time, 824 km 2 of land was bought to fulfill the extra need for raw materials arising from the operation of Production Line II, after which the total size of the plant increased to 1,348 km 2. Under resolution 89/4 of the High Board of Planning on March 30, 1989, % of the shares of Çitosan in the Ni de Cement Plant were handed over for privatization. On March 23, 1992, it was sold to Hac Ömer Sabanc Holding and the Armed Forces Pension Fund (Oyak). The plant changed its name to Oysa-Ni de Cement Industry Inc. The plant's wet system production line, an outdated and costly system, idle since 1989, was sold as scrap in The silos of this system are now being used by the new system. 18 Annual Report