building materials · 2017. 5. 31. · belarusian exports of construction materials remains highly...

April, 2014

BUILDING MATERIALS

1

The Belarusian building materials industry takes up approximately 6% of the total industrial production of the country. The main factor in the growth of this industry is the state policy aimed at stimulating investment in fixed assets and, in particular, in construction. However, in connection with the revision of public policies of construction sector support (reduced emission crediting of government programs), in 2013, there was a trend slowdown in the production of basic building materials. By the end of 2013 the industry growth rate was 3.9%. In particular, there is a decrease in production of ceramic tiles and ceramic bricks.

The industry of building material production is directed towards addressing the needs of the building complex of the Republic of Belarus. However, in conditions of internal market compression, in front of the construction industry there is a task to constantly increase exports. The reduction of the impact of the devaluation of 2011 was reflected in a decline in export growth and the rapid growth of imports of basic materials till the end of 2013. Belarusian exports of construction materials remains highly dependent on exports to Russia. In 2013, Belarus does not have a negative foreign trade balance in basic building materials , as well as in derivative building materials. Belarus takes a strong position in the regional market of building materials. The country is one of the largest suppliers of ceramic tiles and float glass to Russia (about one-third of imports) and to Ukraine.

In terms of cement production per capita, Belarus (533 kg.) is the leader not only in front of its neighbors in the CIS, Ukraine (about 230 lbs.) and Russia (393 kg.), but also some EU countries. At the same time, the market of construction materials with high added value (ceramic tiles, glass, construction mixtures, etc.) has a considerable growth potential, because the level of per capita consumption in Belarus is much lower than in developed countries.

The Belarusian branch of production of construction materials is monopolized with the overwhelming predominance of state property. And so each type of construction materials is made by 1-3 state enterprises (except concrete products where the company is distributed over all regions of the country). A small number of private companies are also dependent on the state in terms of distribution of material resources and marketing.

The construction material industry is characterized by significant depreciation of fixed assets (about 60%), as well as by a high level of material and energy consumption of production. In connection with this, in 2012-2013, large-scale investment projects for the reconstruction of 2 cement plants, the 2nd production line of the JSC "Gomelsteklo“, the 5th process line at RUE "Granite" have been implemented in Belarus. In 2013, the construction of a new cement line and the cement bonded particle board manufacturing enterprise in Krychau, as well as of the line for the production of building materials on the basis of the Gomel chemical plant wastes (phosphogypsum) were finished.

Throughout 2013 the growth rate of the industry of building

materials production was 4%

2013 indicated the formation of the trend of improvement in

foreign trade in building materials

The cement production per person in Belarus is about 530

kg.

The industry is characterized by a high degree of state

monopoly

In Belarus, a wide-scale of investment projects for the

reconstruction of the enterprises of the industry

have been implemented

CJSC "Investment Company “UNITER” ©

The industry of manufacturing of other non-metallic mineral products (PNMP) is 5.58% of the total industrial production in Belarus. In 2013, in Belarus in the PNMP industry goods worth 3.79 bln USD were produced.

One of the main drivers of growth in the industry of construction materials in Belarus is housing, which until recently has been actively stimulated by the state. However, after the crisis of 2011 interest rates on loans have risen sharply, and the volume of concessional housing crediting of the population fell sharply. In the years 2011 and 2012, the volume of housing construction in Belarus has been decreasing and only in 2013 was able to overcome this downward trend. The volume of housing increased by 17.6%. Plans for the construction of housing in 2013 amounted to 6.5 mln m2. In 2014, experts expect an increase in housing construction in Belarus as well (in particular thanks to the introduction of a large number of "long term constructions").

An additional source of growth for the industry is the export of construction materials, but due to low transport lever, export of construction materials is inherently very limited. In addition, the enterprises of the industry still use ineffective approaches for the promotion of products, which hampers exports under increasing competition in foreign markets.

By the end of 2013 the growth in the production industry of PNMN were higher than in most other enterprises of industry. Thus the total volume of industrial production in Belarus in 2013 decreased by 4.8% compared with 2012.

In 2012, the investment projects on construction of new technological lines for the production of the cement using the "dry" method with a capacity of 1.8 mln tons each in the factories of Kostyukovichi Krasnoselskaya, the construction of the 5th technological line for the production of crushed stone with a capacity of 3 mln tons at RUPE "Granite“, the modernization of the production line of float glass at "Gomelsteklo“ have been finished.

The production of construction materials can be presented in two levels: • The production of basic construction materials (cement, crushed

stone, lime, gypsum), • Production of derivatives of construction materials (brick, slate,

glass, concrete products (JBI), cellular-concrete blocks, tiles, dry mixes, and so on).

A general description of the industry*

* Cumulative data about the industry of construction materials is given under the heading "Manufacture of other non-mineral products" (PNMP).

Source: National Statistical Committee

Source: Comtrade, Uniter

Source: National Statistical Committee, Uniter

2

100.0

94.4

106.1 106.7 103.4

107.5

-5.6%

12.4% 0.6%

-3%

3.9%

-10.0%

0.0%

10.0%

20.0%

80.00

90.00

100.00

110.00

2008 2009 2010 2011 2012 2013

Production of building materials in comparable prices (2008 = 100)

PNMP production volume, (2008=100)Share in production volume of the previous year, %

5 102 5 748 6 700 5 487 4 484 5 274

12.7% 16.6%

-18.1% -18.3%

17.6%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

0

2 000

4 000

6 000

8 000

2008 2009 2010 2011 2012 2013

Housing construction in 2008-2013 in Belarus

thsd sq m Growth rate (YOY), %

93 52 50

88 123 138

135 117 159 180

214 227

0

100

200

300

2007 2008 2009 2010 2011 2012

Export/Import of basic construction materials in Belarus, 2008-2013, mln USD

Export Import

602

357 464

584 658 711

455

293 390 400

519 571

0

200

400

600

800

2008 2009 2010 2011 2012 2013

Export/import of derivative construction materials, 2008-2013, mln USD

Export Import


April, 2014

BUILDING MATERIALS

Cement Manufacture. In the structure of the construction material

manufacturing of the enterprises of the Ministry of Architecture and

Construction of the Republic of Belarus cement occupies the first place

with a share of about 30% of total production.

In Belarus, cement is produced at three plants. In 2013, cement

production amounted to 5057 thsd tons. Over the past six years, the

volume of cement production in Belarus increased on average by 3.7%

per year. The increase in production is largely due to high rates of

housing construction. Despite the introduction of new production

facilities, a significant increase in the production of cement in 2012 and

2013 was not observed. The growth of cement production in 2012 was

6.6%, and in 2013 only 3.1%. Experts expect a significant increase in

cement production to 6 mln tons in 2014. This growth is due to a

major contract for the supply of cement to Russia (2 mln tons in

2014).

In the structure of cement production 90% is accounted for by Portland

cement, about 8% by other types of cement. The share of portland

cement decreased from 14% in 2007 to 1.5% in 2011.

Foreign trade. In 2013, the share of exports in the production of cement

has reached 27% (compared to a year earlier, the figure was 20%). Thus,

last year, Belarus exported 1,368 thsd tons of cement, which is 365 thsd

tons more than a year before. The sharp rise in exports was caused by

the increase in the volume of cement production, the weak dynamics

of the internal market, as well as the state policy to increase exports of

construction materials. Almost all of the cement is being delivered to

Russia (92.5%). The second country in terms of exports of Belarusian

cement in 2013 became Lithuania (4.2%).

From 2011 to 2013, cement exports in Belarus exceeded its imports.

The growth rate of imports of cement in Belarus decreased from 54% to

22% in 2013. Nevertheless, the volume of imports in Belarus is

constantly growing, which is a result of the high demand in the domestic

market during the peak periods in the summer.

In Belarus, cement mainly comes from Russia, Lithuania, Latvia and

Ukraine. Insignificant amounts are also imported to the domestic

market of Turkey and the EU.

Source: Comtrade, SCC




3

4 219 4 350 4 531 4 604

4 906 5 057

3.11%

4.16% 1.61%

6.56%

3.07%

0.0%

5.0%

10.0%

15.0%

3 500

4 000

4 500

5 000

5 500

2008 2009 2010 2011 2012 2013

Cement production in Belarus during 2008-2013

Production, thsd tons Growth rate, %

Portland cement 90.3%

Slag cement

1.5%

Other kinds of cement

8.2%

Structure of production of cement by type

233

456 475 582

1 003

1 368

72

285 599 422

650 791

-100100300500700900

1 1001 3001 500

2008 2009 2010 2011 2012 2013

Export/import of cement in 2008-2013, thsd tons

Export Import

Russia

92.5%

Lithuania 4.2%

The rest 3.3%

The structure of exports of cement

in 2013

Россия

35% Lithiania 24%

Ukraine

13%

Latvia

5%

The rest 3%

The structure of imports of cement

in 2013


April, 2014

BUILDING MATERIALS

Consumption. The annual cement consumption per capita in Belarus is

470 kg, which is quite high compared with countries such as Russia,

Ukraine, the Baltic countries. Among the CIS countries, on this indicator

Belarus is comparable with Kazakhstan (about 470 kg). From 2008 to

2012, the domestic consumption of cement increased from 4058 to

4553 thsd tons. In 2013, the domestic consumption of cement in

Belarus decreased by 2% compared to the previous year and amounted

to 4480 thsd tons.

More than a third of cement is used for the production of reinforced

concrete, about the same amount goes to the production of ready-

mixed concrete. The world's leading cement producers generally do not

sell cement per se, but having companies that manufacture concrete

products and ready-mixed concrete and developed logistics, sell finished

products directly to customers on construction sites.

Key players. Currently, three state-owned enterprises produce cement in Belarus :

1. JSC "Krasnoselskstroymaterialy" - KSM (Volkovysk, Grodno.).

2. JSC "Belarusian Cement Plant" - BTZ (Kostyukovichi, Mogilev.).

3. JSC "Krichevcementnoshifer" - KTSSH (Krichev, Mogilev.).

Source: Uniter

Investments. In 2012, the construction of 2 production lines of dry cement of the capacity of 1.8 mln tons per year has been completed, and in June 2013, at the new line in Krychau a trial batch of cement has been obtained. The design and construction of new lines was carried out with the involvement of the Chinese company CITIC.

Basic construction materials

KTSS

BTZ KSM

Source: Uniter

5.5 %

6.2 %

6.2 %

6.6 %

8.1 %

32,7 %

37.1 %

0.0% 20.0% 40.0%

Ready-mixed concrete and cement-containing solutions

Products of cellular concrete, expanded clay and other fillers

Other products, expenses at construction sites,

technological losses

Sale to the population

Asbestos-cement products


The structure of cement consumption by the construction complex of Belarus

The capacity of the internal market of cement of Belorussia during 2008-2013, thsd tons

Concrete and concrete products, products of industrial

housing construction

Dry mixes

4

The structure of cement production in Belarus

2008 2009 2010 2011 2012 2013

Production

Export

Import

Consumption

4 219 4 350 4 531 4 604 4 906 5 057

233 456 475 582 1 003 1 368

72 285 599 422 650 791

4 058 4 179 4 360 4 445 4 553 4 480

BTZ+KTSSH, 64%

KSM, 36%


April, 2014

BUILDING MATERIALS

Source: Comtrade, National Statistical Committee



Consumption. The estimated market of the Ministry of Architecture and Construction of crushed stone in Belarus is about 140-170 mln USD. Despite the increase in production capacity, in Belarus there is a problem with the supply of crushed stone due to the assignment of quotas for crushed stone sales to individual consumers.

In 2013, the capacity of the domestic market for crushed stone Belarus increased by 6.4% and amounted to 14.7 mln tons.

More than one third of the total volume of crushed granite used in road construction, another 3/1 is used in the manufacture of products and structures made of concrete and reinforced concrete, the rest is used for the production of ready-mixed concrete. At the same time 17% of crushed stone is delivered directly in finished form to industrial sites (construction of roads). Source: Uniter

CRUSHED STONE

Production. In the structure of construction materials of the enterprises of the Ministry of Architecture and Construction in Belarus, 9% is the total production volume of a share of rubble. In 2013, the production volume of rubble and gravel in Belarus amounted to about 15.9 mln tons, which is more than in 2012 by 3.8%. In Belarus, gravel, crushed granite, crushed rubble, crushed dolomite are produced.

Foreign trade. Over the past 2 years Belarus has increased the share of exports in the production of crushed stone up to 16%. Thus, in 2013, the export of rubble slightly increased and reached 2.5 mln tons (the previous year was 2.3 mln tons), despite some deficiency of this material on the domestic market during the summer months. 87% of exports of crushed stone falls on a traditional partner of Belarus - Russia. The market for crushed stone, especially of fine fractions, is growing, so the export potential for crushed stone is pretty large.

The import of crushed stone to Belarus is provided mainly by Ukraine (about 95%) and is mainly provided by the stone crushing plant in Tomashewsky, which is located in the Rivne region, but belongs to Belarus.

5

Ukraine

95%

Russia 2%

Others 3%

The structure of crushed stone import to Belarus,

2013

Russia 87%

Lithuania

10%

Others 3%

The structure of crushed stone export from Belarus,

2013

11.2 11.7 12.4

15.8

15.3 15.9

4.5%

5.6%

27.9%

-3.2%

3.8% -0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

0

5

10

15

20

2008 2009 2010 2011 2012 2013(E)

Crushed stone production in Belarus, 2008 - 2013

mln tons Growth rate

0.8 0.5

1.0

2.2 2.3 2.5

0.6 0.8

1.5 1.3

0.8 1.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2008 2009 2010 2011 2012 2013 (E)

Export/import of crushed stone in Belarus in 2008-2013, mln tons

Export Import

11.1

12.0 12.9

15.0

13.8 14.7

19.1%

8.8% 7.2%

16.0%

-7.7%

6.4%

-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25

0

2

4

6

8

10

12

14

16

2008 2009 2010 2011 2012 2013(E)

The capacity of the internal market for crushed stone of Belarus, 2008 - 2013

mln tons Growth rate


April, 2014

BUILDING MATERIALS

Key players. In Belarus the rubble is produced by 7 companies, the largest of which are RUPP "Granit", JSC "Dolomite" CUE "Kubgranit" Glushkevichsky Shchebzavod, JSC "Nerudprom".

More than 70% of the total volume produced in the Republic of Belarus of crushed stone is accounted for by RUPP "Granite“. The JSC "Dolomite" (the issuing of crushed dolomite stone) takes up 8% of the market, imports account for about 6%.

The RUPP "Granit" is the Europe's largest enterprise in mining and processing of granite into rubble and sand for construction works. The capacity of the enterprise is 16 mln tons of gravel per year.

• RUPP "Granit" delivers its products to the domestic market as well as in Russia, Poland, Lithuania.

The JSC "Dolomite" is located in the city of Vitebsk (Ruba) and is the only one in the Republic of Belarus and Europe's largest enterprise in mining and processing of raw dolomite.

• In addition to dust production, the company produces dolomite rubble, which is used for making road coatings, for the improvement and planning of works, for the manufacture of non- critical reinforced concrete structures, as well as in the steel industry and the manufacture of glass.

• The annual production of crushed stone is approximately 1,400 tons.

Investments. In the 1st quarter of 2012 a 5th line for production of fine crushed stone fractures at RUPP "Granite" (European standard) with a capacity of 3 mln tons of gravel per year was put into operation. Thus the capacity of the company has increased to 16 mln tons of crushed stone per year. In addition, it is expected that the company will also explore the Sitnitsky deposit of construction stone with the creation of a production capacity of at least 9 mln tons of crushed stone per year. With such volumes of production, the deposit will be used for about 58 years. In the past, this deposit was offered to foreign investors. However, in view of the importance for the state, the government commissioned RUPP "Granit" to develop this deposit on its own. Of the total project cost of USD 350 mln, the company needs external financing (presumably bank loans with state support) of 50%.

Source: SCI, Ministry of Finance

Source: Uniter

Financial performance of the RUPP "Granit", mln USD

Источник: ГКИ Республики Белару сь

Financial results of JSC "Dolomite", mln USD

Source: SCI

6

Figures 2008 2009 2010 2011 2012

The net asset value

Revenues from sales

Net profit

Profitability of sold production, work and services

The share of sold exports, %

Receivables

Payables

90.9 87 93.2 105.6 n/a

101.1 1

19.5 115.5 105.6 141.5

6 17,3 3.1 11.1 9.6

18.7

-

37.7

0.7

10

5.8

29.3

10.6

18.9

n/a

5 7.5 3.7 9.6 n/a

14 11.3 16.7 24.6 n/a

Figures 2009 2010 2011 2012 3Q

The net asset value

Revenues from sales

Net profit

Profitability of sold products, work and services, %

Receivables

Payables

17.7 18.5 22.5 20.8 n/a

26.6 33.1 30.4 40.3 27,2

0.6 1,2 0 0.7 0.7

4.8 7.5 2.6 0.0 2.8

1.8 1.9 1.1 n/a n/a

3.6 4.1 4.0 n/a n/a

RUPP "Granit"

71%

JSC "Dolomit"

8%

Glushkevichsky stone

plant 4%

Other manufactur

ers 11%

Import 6%

Shares of the manufacturers in the total market of crushed stone in Belarus


April, 2014

BUILDING MATERIALS

LIME

Production. Production of lime takes 4% of the total of material production of the system of the Ministry of Architecture and Construction. In Belarus, the lime is produced from chalk deposits. In general, for the last 6 years, there was a decrease in the production of this product. So compared to 2007, where 925 thsd tons of lime was produced, in 2013 the volume production fell by almost 20% and amounted to 747.6 thsd.

Foreign trade. The share of exports in the production of lime in Belarus decreased from 15% in 2006 to 7% in 2012, however in 2013 the share of exports rose again to 10%. The trade balance for lime in 2013 improved significantly. The volume of imports decreased significantly and amounted to 22.6 thsd tons. Supplies of lime in Russia accounted for 85%, and in Lithuania for about 8%. The import of lime to Belarus was done mainly from Russia.

Consumption. Lime is used for the production of cementitious mortars, wall materials, and in the manufacture of glass. In addition to the construction industry, lime is also used in metallurgy, the production of sugar, air purification and sewage, chemical and other industries. Based on the data of production and foreign trade, the volume of the internal market of lime in Belarus in 2013 decreased in comparison to 2012 and amounted to 696 thsd tons.

Key players. Lime is made directly at cement plants that are located close to the chalk quarries. Other companies that produce products of lime (JSC "SMF", Grodno CBM) only process the lime purchased from them. The Molodechno company "SMF" buys raw materials for the production of lime and its products from the Kostyukovichi lime plant at the Belarusian Cement Plant. About half of the lime in Belarus is produced at the JSC 'Krasnoselskstroymaterialy".

Investments. In early 2012, the company Tryple, which owns the Berezovsky KSI, signed with an agreement with the Government of Belarus about the complex development and exploitation of silicate sand and chalk of the "Khotislavlskoye“ deposits. The occurring reserves of chalk in the deposit "Khotislavlskoye" in the Malorita district can be used for the production of air-calcium lime and the sand reserves can be used for the production of silicate products. All extracted resources are given to the CJSC "Quartzmelprom" for processing. By 2014, the company plans to build a plant for the production of construction lime of the capacity of 150 thsd tons and of particulate skim chalk of capacity of 50 thsd tons.

Source: Uniter



7

900 788

805 793 747 748

-12.51%

2.15%

-1.44% -5.74% 0.03%

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

0

100

200

300

400

500

600

700

800

900

1 000

2008 2009 2010 2011 2012 2013

Lime production in Belarus, 2008 - 2013

thsd tons Growth rate

88.1

67.7

49.5 40.8

49.9

74.2

16.4

10.0

41.6 45.5

52.1

22.6 0.0

20.0

40.0

60.0

80.0

100.0

2008 2009 2010 2011 2012 2013

Export / import of lime in Belarus in 2008-2013, thsd tons

Export Import

Krasnoselskstroymate

rialy 47%

Grodnensk KSM 17%

BTZ 15%

Zabudova 7%

BMZ 8%

Stat. differences

6%

Structure of lime production by producers, 2012


April, 2014

BUILDING MATERIALS

GYPSUM

Production. Despite a high demand for gypsum binders in Belarus, its production depends on imported raw materials. This is why the production of gypsum in Belarus decreased during the devaluations in 2009 and 2011. In 2012, it produced 68.7 thsd tons of gypsum (gypsum binders), which is 4.4% more than in 2011, and in 2013 it produced 70.9 thsd tons of Gypsum (3.2% growth).

Foreign trade. Due to the fact that gypsum is not extracted in Belarus, the country has to import it in large volumes. Belarus imports it as a raw material for the production of gypsum binders and the plasters themselves (plaster). Thus, given that the exports of gypsum from Belarus are negligible and can be not taken into account, the import gypsum is the size of the domestic market. In Belarus, about 300-400 thsd tons of gypsum and 30-50 thsd tons of plaster are imported. While raw gypsum material is imported to Belarus mainly from Moldova and Russia, more than 70% of gypsum plasters are supplied to the domestic market from Poland and Latvia.

Key players. In Belarus, gypsum is produced by two companies: JSC "Belgips" (97-99% of the market) and JSC "SMF" (1-3%). Thus, we can speak of a monopoly on the market for the production of gypsum. Besides the production of gypsum binders, "Belgips" is the only Belarusian manufacturer of gypsum boards and gypsum boards for interior partitions, and it also produces dry mixes.

Prospects of the industry. In February 2013, the State Property Committee announced that it is preparing the sale of "Belgips" to the Russian company "Volma". The transaction cost should be 5 mln USD and the investor is obliged to invest 40 mln EUR in the construction of a new plant near Minsk. The most urgent issues that can be solved by joint efforts are the creation of a stable source of raw materials, optimization for transporting raw materials, improving product quality (due to new equipment), as well as the expansion of the market. They are trying to solve the resource problem with gypsum in Belarus with the help of the Russian investor LLC "Gipspromresurs", which is planning to create a variety of building materials based on waste (phosphogypsum) from the Gomel Chemical Plant. The investment is estimated to be 17 mln USD. As of early 2013, the investor has already invested 1.5 mln USD in the project and has purchased the building for its implementation. At the same time the construction schedule is 2 months behind schedule.



Source: National Statistical Committee Financial performance of JSC "Belgips", mln USD

Source: Ministry of Finance

8

Figures 2009 2010 2011 2012 2013 3 кв. Revenues from sales

Profits from sales Net profit Net assets The number of employees

9.71 10.26 10.25 11.01 9.17

0.26 0.25 0.91 0.00 0.08

0.03 0.06 0.03 0.04 -0.13 3.24 4.05 2.11 2.16 n/a 275 268 273 272 270

900 788

805 793 747 748

-12.51%

2.15%

-1.44% -5.74% 0.03%

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

0

200

400

600

800

1 000

2008 2009 2010 2011 2012 2013

Gypsum production in Belarus, 2008-2013

thsd tons Growth rate

313 264 284

412 372

25 37 35 38.96 47

0.0

100.0

200.0

300.0

400.0

500.0

2009 2010 2011 2012 2013

Import of gypsum and plaster in Belarus in 2008-2013, thsd tons

Gypsum import Plaster import

Moldova 52%

Russia

21%

Ukraine

25%

Others

2%

Structure of gypsum imports in Belarus in

2013.

Poland

49%

Latvia 23%

Russia

19%

Ukraine 9%

Structure of plaster imports in Blearus in

2013


April, 2014

BUILDING MATERIALS

REINFORCED CONCRETE PRODUCTS

Production. The manufacture of concrete products in the structure of construction material production of the Ministry of Architecture and Construction in Belarus takes up about 15%, second only to cement and tiles. In the period from 2005 to 2010, the industry of production of precast concrete and structures in Belarus has developed steadily and rapidly. During these five years, the volume of the manufacture of concrete products increased almost 2-fold, reaching nearly 4 mln m3. However, due to the fact that the production of concrete products is most sensitive to the sharply declining volume of housing construction since 2011, for the last 3 years, the volume of production in the country’s JBI has fallen to the level of 2008 and is estimated by Uniter to be about 3.45 mln m3. Although the tendency for growth in 2013 should be noted.

One-third of the manufactured of reinforced concrete products in Belarus account for panels and structures for large-panel construction. A significant share (17%) in the structure of concrete products is occupied by wall panels. At the same time, 40% of manufactured concrete products account for other products and designs. Over the last year the share of power transmission line supports and sleepers grew, which is associated with the implementation of major infrastructure projects in the country.

Foreign trade. In the total structure of construction material exports of the enterprises of the Ministry of Architecture and Construction the volume of prefabricated concrete structures and products takes up about 7%. Belarus mainly exports the following types of concrete products: columns, piles, pipes, hollow decking for floors, wall panels. The volume of exports of articles of concrete products is much higher than the volume of imports and in 2013 it amounted to 800 thsd tons (over 100 mln USD). Despite the significant decline in exports in 2009, in the last 4 years, the Belarusian construction industry increased the volume of foreign supplies of concrete products almost 3 times . Almost all JBI exports go to Russia.

The volume of imports of reinforced concrete products in Belarus in 2013 amounted to 41 thsd tons (14 mln USD). Mainly substandard reinforced concrete products that are not produced by the Belarusian refineries are imported. About 90% of reinforced are concrete products imported from Lithuania.

Consumption. The main consumer of reinforced concrete products in Belarus is housing. During the period from 2005 to 2008, the average consumption of reinforced concrete wall products in Belarus has grown steadily and in 2008 reached its peak – 0.34 m3/m2. Starting from 2009, the figure began to fall, reaching 0.21 m3/m2 in 2013 (estimate).

Derivative building materials


Source: Comtrade


9

3 169 3 467 3 965 3 727

3 300 3 450

9% 14%

-6%

-11%

5%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0

1 000

2 000

3 000

4 000

5 000

2008 2009 2010 2011 2012 2013

Manufacture of reinforced concrete products in Belarus, 2008 - 2013

thsd m3 Growth rate

Other products

and structures

40% Panels and

other structures for large housing

30%

Wall panels

17%

Reinforced concrete

pylon 6%

Concrete sleepers

4%

Reinforced concrete

pipe 3%

Structure of production of reinforced concrete products by type

544 564

277 349

530

678 794

8 9 13 86

23 32

41 0

200

400

600

800

1 000

2007 2008 2009 2010 2011 2012 2013

Export / import of reinforced concrete products in Belarus in 2007-2013, thsd tons

Export Import


April, 2014

BUILDING MATERIALS

Belarus produces ceramic, silicate and other kinds of bricks. The volume of construction brick production, estimated by Uniter, has reduced in 2013 by 1% compared to 2012 and amounted to about 900 mln conditional bricks. In general, over the last 4 years there was a tendency to reduce the production of bricks. The share of ceramic bricks in the production of construction bricks amounts to 40-50%.

Despite the fall in production of construction bricks, the production of cellular concrete blocks continued to increase the pace of growth in 2013. It reached 3.325 bln according to Uniter and increased by 2% compared with 2012. This dynamic has developed thanks to the growing popularity of this material in Belarus, thanks to its technical (high strength, low density) and economic (lower cost and shorter construction time) characteristics. The maximum monthly capacity for the production of cellular concrete blocks was reached in July 2012, and amounted to 306.5 thsd m3.

Source: National Statistical Committee, NIPTIS, UNITER

Key players. Reinforced concrete products in Belarus are produced by more than 70 companies, some of which are construction trusts, producing reinforced concrete products for their own use, or companies that specialize in the production of reinforced concrete products. The market is fairly uniform: the companies ensure the construction industry in their regions with productions and have the appropriate capacities. The largest manufacturer of reinforced concrete products is the JSC "Minskzhelezobeton" with a production volume of about 220 thsd m3.

Investments. Over the past 2 years, three house-building plants and startup complexes of production modernization at five more mills have been put into operation. In general, most reinforced concrete plants require technical re-equipment for the production of non-standard reinforced concrete products for which there is a growing demand from both foreign and from domestic consumers.

WALL MATERIALS

Production. Wall materials (bricks, ceramic, silicate and cellular concrete blocks) take up about 6% of the total production of construction materials of enterprises of the system of the Ministry of Architecture and Construction.

According to the National Statistics Committee, in the production of wall

Derivative building materials

Source: Uniter

Source: National Statistical Committee, NIPTIS, UNITER

10

materials per capita, Belarus is the undisputed leader among the CIS

countries with a rate of about 440 conv. bricks. It is followed by Russia (100 conv. bricks per capita), Ukraine (55 conv. bricks).

JSC "Minskzhele

z obeton" 12%

JSC "Grodnozhil

stroy" 10%

JSC "Gomelzhelezobeton"

8% "Gomel house-

building factory"

7% "Plant of reinforced concrete

products" (Baranovich

i) 7%

JSC "Spetszhelez obeton"

5%

51%

Structure of production of reinforced concrete products by supplier

478 480 501 494 489

447

1%

4%

-1% -1%

-9% -10%

-5%

0%

5%

10%

300

400

500

600

2008 2009 2010 2011 2012 2013(E)

Production of ceramic bricks in Belarus, 2008-2013

mln bricks Growth rate

2 982 2 456 2 772 2 972 3 260 3 325

5%

-18%

13% 7%

10%

2%

-20%

-10%

0%

10%

20%

0

1 000

2 000

3 000

4 000

2008 2009 2010 2011 2012 2013 (E)

Production of cellular concrete blocks in Belarus, 2008 - 2013

mln bricks Growth rate


April, 2014

BUILDING MATERIALS

Foreign trade. The volumes of export of the Belarusian construction bricks and cellular concrete blocks in 2013 were estimated by Uniter to be 122 mln USD. If in 2012 Belarus exported about 29% of the produced ceramic bricks, then in 2013 the share of exports in production was more than 60%. Almost all export products are exported to Russia. Imports of construction bricks in Belarus during the last years was insignificant and the average does not exceed 1-2% of the total consumption. In 2012, imports of construction bricks in Belarus amounted to 3.3 mln USD. The main country-suppliers of bricks in Belarus are: Ukraine, Poland and the EU.

The growth in the use of concrete, solid facade glass and other materials in construction reduce the level of use of construction bricks. In addition, the general slowdown in construction in Belarus impacted the domestic use of walling materials by the domestic market and the export growth. According to NIPTIS, the consumption of aerated

Grodnens k KSM 21%

Gomelstr oimateria

ly

23%

concrete from Belarus decreased by 18.7% and amounted in 2012 to

about 1.7 mln m3, while the share of exports in production has reached more than 60%. The consumption of ceramic bricks in 2012 is estimated to be 270 mln units (30% decrease compared to 2011).

The most extensive consumer class of the building brick is housing (in particular individual). In construction, the domestic demand for brick supply is 30-35%. Key consumers of brick are large construction organizations and firms engaged in private and individual construction.

Key players. 7 enterprises, which account for 72% of the production, produce silicate bricks, 4 of which are subject to the MSA. The largest producers of sand-lime bricks are Gomelstroimaterialy, Grodno KSM, Mogilev KSM. 5 of 12 manufacturers of cellular concrete blocks are also included in the structure of the MSA and produce 46% of its production. Thus, the most independent and competitive segment in the production of wall materials in Belarus is the segment of the production of cellular concrete blocks.

Investments. Despite the fact that the state was trying to privatize 2 companies for the production of ceramic bricks in 2011 , buyers for these assets were not found. However, in 2012, the Minsk City Executive Committee has sold 38.6% of the stake of the Russian company Zabudova to Russ-K.



Structure of production of silica brick

by producers, 2012

Lyubansk КSM 13%

Minsk KSI 12%

Smorgons ilikatobet

on 1%

Mogilev KSM 23%

Kvarzmel prom 7%

Source: Uniter

11

Russia 97%

Ukraine 3%

Structure of building bricks export of Belarus,

2013

Ukraine

28%

Poland

32%

Belgium

11%

Russia 9%

Others

20%

Structure of imports of building bricks in

Belarus, 2013

88.9

41.2 51.1

67.8

103.5 121.9

2.1 1.4

1.9

2.2 2.9

3.3

0.020.040.060.080.0

100.0120.0140.0

2008 2009 2010 2011 2012 2013 (E)

Export / import of building bricks in Belarus in 2008-2013, mln USD

Export Import


April, 2014

BUILDING MATERIALS

CERAMIC TILE

Production. In the structure of construction material production by enterprises of the system of the Ministry of Architecture and Construction, ceramic tile takes up 15% of total production, second only to cement. For 6 years, the production of ceramic tiles in Belarus increased by 7 mln m2 (30%). Taking into account the 11% decline in the production of tiles in 2009, the average annual growth rate of production during this period was 3.3%.

Despite the strong growth in recent years there has been a tendency to reduce the rate of growth of ceramic tile production because of the saturation of the domestic market and limited export growth. In 2013, the volume of ceramic tiles has reached 27.3 mln m2, and fell by only 0.1% compared to 2012. About 60% of the total tiles produced in Belarus falls on glazed ceramic tiles for interior wall cladding.

Foreign trade. The export of ceramic tiles makes the most significant contribution to the structure of exports of building materials of the enterprises of the Ministry of Architecture and Construction. Thus, about 25% of the exports of building materials account for ceramic tiles. The volume of production of ceramic tiles is 2.5 times greater than the volume of the internal market. Thus, the Belarusian producers of ceramic tiles are export-oriented. About 70-80% all made tiles are exported annually, making Belarusian products recognizable on foreign markets.

In 2013 19.4 mln m2 of ceramic tiles (71% of total production) were exported. It was 4.4% less than in 2012. Mainly glazed ceramic tiles are exported, the share of which is about 80% in the total of exports. The structure of exports is quite stable and is characterized by the traditional dominance of Russia - more than 70% of tile exports. Large consumers of Belarusian tiles are also Moldova and Ukraine. EU countries account for about 2% of exports.

At the same time, despite the highly developed production of ceramic tiles, Belarus imports about 40% of domestic consumption. In 2013, exports of ceramic tiles increased by 27.9% and amounted to 5.5 mln m2. Tiles in Belarus come from Ukraine (32%), Russia (28%), Poland (27%) and other countries, mainly the EU.


Source: National Statistical Committee, Comtrade


12

23.15 20.53 23.86 25.60 27.29 27.27

9.67%

-11.29%

16.22%

7.26% 6.62%

-0.08%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2008 2009 2010 2011 2012 2013 (о)

Manufacture of ceramic tiles in Belarus in 2008 - 2013 years, mln m2

Ceramic tiles Growth rate

Russia 74%

Ukraine 9%

Moldova 7%

Kazakhstan

3%

Uzbekistan 1%

The rest 6%

Structure of exports of ceramic tiles from

Belarus, 2013

Украи

на 32%

Росси

я 28%

Poland

27%

Italy 7%

China 4%

Spain 5%

The rest 2%

Structure of imports of ceramic tiles from

Belarus, 2013

17.7 17.7 15.1 19.1 18.2 20.3 19.4

5.7 6.2

4.3 4.7 3.5

4.3 5.5

0.0

10.0

20.0

30.0

2007 2008 2009 2010 2011 2012 2013(E)

Export / import of ceramic tiles in Belarus in 2007-2012, mln m2

Export Import


April, 2014

BUILDING MATERIALS

Consumption. The consumption of ceramic tiles per capita is about 1.4 m2, which is lower than in Russia (1.5), Ukraine (1.6), the Baltic states (2.8) and Poland (3.1). The demand for ceramic tiles by type of customer, depending on the purpose of buildings that are under construction can be divided as follows: residential construction, as well as performing repairs in older homes and apartments. Taken together, these two groups take up over 50% of consumers.

The volume of the internal market of ceramic tiles of Belarus takes up less than half of the country's production and in 2013 amounted to 13.4 mln m2. Despite the general downward trend in the share of imports in consumption, in 2013 it increased by 3 percentage points compared with 2012.

Key players. In Belarus, 3 companies manufacture ceramic tile s:

• JSC "Keramin" (production in 2012 (estimate) = 20.2 mln m2)

• JSC "Beryozastroymaterialy" (production in 2012 (estimate) = 8,000,000 m2 and

• JSC "Brestsky KSM" (production in 2012 = 1.9 mln m2.

Investment. The state controls the two manufacturers of ceramic tiles: JSC "Keraminum" (57%) and JSC "Beryozastroymaterialy" (99.8 % stake).

At the end of 2011 at the JSC "Beryozastroymaterialy“, the investment project for the organization of the production of ceramic tiles of the size 25x35 cm for swimming pools with the Italian equipment company SACMI. 5 mln EUR got invested into it. This is an import substituting project – till this time wall tiles for swimming pools in the country were not produced. Annual demand of the domestic market is about 30-35 thsd m2 of tiles, which is significantly less than the possibilities of the new production line (up to 2.8 mln m2 per year).

In order to increase the production of ceramic tiles to 20 mln m2, "Keraminum" has developed an investment program for 2012-2015, which foresees the reconstruction and modernization of plant №3. As early as by the end of 2012 till beginning of 2013 an investment project for the construction of the third atomizer, worth 15 mln euros, is being carried out.

The Brestsk KSM also has plans to build a new line of tiles with the capacity of 2.5 mln m2 per year. The required investment is estimated at 4 mln euro.


Source: company websites, Uniter

Selected Indicators of "Keraminum" mln USD


Elected Indicators of "Beryozastroymaterialy" mln USD

Individual results of JSC "Brest KSM" mln USD

13

Figures 2011 2012 3 Q,. 2013

Revenue from sales

Profit from sales

Net profit

Net assets Number of employees

121.9 128.7 104.1

32.9 8.9 6.7

35.0 9.9 8.8

138.4 109.2

2725 2657 2630

Figures 2011 2012 3 Q, 2013

Revenue from sales

Profit from sales

Net profit

Net assets

The number of employees

36.8 47.2 41.8 6.4 5.3 5.7

8.4 1.0 0.7

34.6 31.8

1094 1141 1134

Figures 2011 2012 3 Q, 2013

Revenue from sales Profit from sales Net profit Net assets The number of employees

12.4 16.8 14.2 2.6 1.5 0.5 2.5 0.7 0 0.0 10.0

569 643 705

11.7 9.7 9.5

10.82863 11.313 13.37

53% 44% 49%

32% 38% 41%

0%

50%

100%

0

10

20

2008 2009 2010 2011 2012 2013 (о)

The capacity of the internal market of ceramic tiles in Belarus, mln m2

Consumption

Imported products share in consumption

Keramin 64%

Beryozastroymaterial

y 29%

Brest KSM 7%

Structure of ceramic tiles according to producers


April, 2014

BUILDING MATERIALS

2

Derivative Materials

FLAT GLASS Manufacturing. Dynamics of manufacturing of float glass in Belarus is characterized by a sharp (+ 49%) increase of manufacture volumes in 2013, which is due to launching after the reconstruction process of the line №2, the only domestic manufacturer of the product - "Gomelsteklo." With a new line working at full capacity in 2011, manufacturing of float glass in Belarus increased by 33% to 23 mln m2 as well as completion of the production line №1. Thus, the increase in the manufacturing of float glass was mainly due to the higher productivity of new lines. With the commissioning of the line №1 at full capacity, production capacity for glass manufacturing in Belarus increased by almost two times and reached 42.5 mln m2. At the same time, due to a compression of the internal market and restrictions on the export capacity Uniter estimates float glass manufacturing in Belarus in 2013 in 35 mln m2. Foreign trade. Belarus exports more than half of flat glass produced. After a decline in 2011 the share of exports in production in 2013 increased to 62%. Despite strong growth in exports, which in 2013 reached 22 mln m2 (+ 57% in 2012 due to increased exports to Russia), imports of glass also shows strong growth – in 2013, the imports of glass was 6,000,000 m2 (+ 50% by 2012) exports of flat glass is characterized by the dominance of Russia: in 2013, its share still fell from 68% to 54% of total exports of Belarus glass. At the same time, the supply of Belarusian glass on the Ukrainian market returned to its previous level, and the share of the country's exports increased from 26% in 2012 to 38% in 2013. Share of imports in domestic consumption of flat glass in Belarus is about 30%. Mainly the glass, which is thicker than 5 and less than 3 mm, is imported due to insufficient manufacturing of these kinds of glass in the country. The main countries of float glass suppliers on the territory of Belarus are Russia (78%), Poland (17%) and other countries.

Source: Belstat

Source: Comtrade, Belstat

Source: Belstat

18 18 17 23 24

35

-5% -2%

33%

3%

49%

-20.0%

0.0%

20.0%

40.0%

60.0%

0.0

10.0

20.0

30.0

40.0

2008 2009 2010 2011 2012 2013

Flat glass manufacturing in Belarus, 2008 - 2013

mln m2 Growth rate

10 10 11 11 14

22

5 3 5 3 4 6 0

20

40

2008 2009 2010 2011 2012 2013

Export / import of float glass in Belarus in 2008-2013, mln sq m

Export Import

Russia 54% Ukraine

38%

Turkey 4%

Lithuania 1%

The rest 3%

The structure of exports of flat glass from Belarus, 2013

Russia 78.0%

Poland 16.9%

China 1.7%

The rest 3.4%

The structure of imports of flat glass from Belarus, 2012


April, 2014

BUILDING MATERIALS

Derivative Materials

Consumption. Float glass is used in the manufacture of insulating glass units (about 50% of the market), the construction and reconstruction of buildings (about 30%), for the manufacturing of automotive glass (9%), as well as for glazing greenhouses and in the manufacture of furniture. One of the main factors increasing the consumption and demand for float glass is the rate of growth in industries that are major consumers of flat glass, namely, the construction industry, machine building and the furniture industry. So in 2013, the volume of domestic flat glass market has increased in comparison with 2012 by 30% and amounted to 19.4 mln m2, and the share of imported glass remained unchanged at 30%. 95% of demand is on the float glass 4-6 mm thick. However, 5% of the market is covered by high-quality glass (more than 5 and less than 3 mm), which is imported into the country. Key players. JSC "Gomelsteklo" is a monopoly in the manufacturing of float glass in the domestic market. JSC "Gomelsteklo" produces flat glass for the modern float technology.

Source: Belstat, Uniter

In addition to flat glass, the company manufactures foam glass (approx. 32 thsd m2), tempered glass (680 thsd m2), double glazing (approx. 74 thsd m2), shelves for refrigerators, glassware for furniture. The company is a resident of FEZ "Gomel-Raton". Investment. In April 2010, it was launched a new production line for float glass manufacturing with capacity of 780 tons of glass per day. With the commissioning of the new line in June 2010, the first production line was stopped for the reconstruction, which was commissioned in March 2013. Capacity of the new line is 800 tons of glass per day. The estimated cost of upgrading, according to the business plan of the company, - 45 mln euros.

At the same time, despite a significant amount of external borrowing, the SCC of Belarus noted shortcomings of the enterprise in terms of the delay in the return of foreign exchange earnings of about 2 mln euros. The company also has plans to implement the project in the industrial processing of flat float glass: the manufacturing of tempered, mirror, laminated, curved tempered, energy-saving glass.

The Belarusian government is also planning to organize the manufacturing of soda ash - a raw material for glass manufacturing - in partnership with a Russian investor.

Source: Uniter


15

Indicators 2011 2012

Q3 2013

Proceeds from sales

90.6 98.2 83.4

Sales income

19.4 7.2 8.9

Net profit 14.4 1.1 0.3

Net wealth 54.9 77.0

Employees number

3220 3097 2951

13.0 11.1 11.5

14.9 14.3

19.4

38% 31%

45%

17%

31% 30%

0%

10%

20%

30%

40%

50%

0

5

10

15

20

25

2008 2009 2010 2011 2012 2013

The capacity of the internal market of flat glass in Belarus mln m2

Consumption

Imported products share in consumption

Double-glazed

windows 50%

Construction and

reconstruction 30%

Auto glass 9%

Glazing greenhou

ses 5%

Furniture glass 6%

The structure of demand for flat glass

Financial results of JSC " Gomelsteklo“, mln USD


April, 2014

BUILDING MATERIALS

16

Financial Analysis

PNMP industry is represented mainly by the companies of the corporate sector - as in 3 quarter of 2013, the share of companies in the industry in revenue reached almost 70%. On the top 10 of the industry of building materials accounts for about 40% of all proceeds industry (2013).

Over three quarters of 2013 the total revenue of the corporate sector PNMP industry amounted to 1.3 bln USD (for reference, for the 3rd quarter 2012 revenues were 1.02 bln USD, while the growth is due to an increase in the number of enterprises in the corporate sector from 51 to 65).

Source: Belstat, Ministry of Finance, UNITER

Industry sector of PNMP sufficiently consolidated, so for the top 5 companies account for 52% of total revenues of the industry (corporate sector), and in the top 10 - 69% already.

The largest enterprises are: 3 cement factories with a total revenue for the 3rd quarter of 2013 around 500 mln USD. Completing the top 10 companies in the sector of "Beryozastroymaterialy", JSC "UKH Zabudova" and JSC "Minsk factory of silicate products." However, many of the leaders in terms of revenue is not included in the top 10 leaders of the net profit. Among the companies with high net profit can be distinguished - Keraminum JSC and JSC Gomelstroimaterialy Minskzhelezobeton.

Top 10 companies in terms of revenue in Q3 2013, mln USD

Revenue Structure of PNMP industry by main activity, 2013

Top 10 companies in terms of net profit for Q3 2013, mln USD

Source: UNITER, Ministry of Finance Source: UNITER, Ministry of Finance

-

2.0

4.0

6.0

8.0

10.0

Corporate sector,

69%

Unincorporated sector,

31%

The contribution of the corporate sector (JSC) in total revenue of industry

organizations PNMP, 2013

- 50 100 150 200 250

Krasnoselskstroymaterialy

Krichevcementnoshifer

BCF

Keramin

Gomelsteklo

Minskzhelezobeton

Gomelstroimaterialy

Berezastroimaterialy

UKH Zabudova

MGSP

Cement 38%

ZhBlik 18%

Building blocks and sand-lime

brick 8%

Other 36%


April, 2014

BUILDING MATERIALS

Financial analysis - cement

17

KSM is the largest enterprise of Belarus cement industry in many parameters: the volume of cement production, the value of the net assets, earnings and the breadth of assortment. The smallest of the three companies - BZP, with revenues of almost 2 times less than the KSM, was the first and only until 2012, now working on the "dry" method of cement manufacturing. According to figures for the 3rd quarter 2013 revenues of BCF and KСSH are practically at the same level.

At the same time, the analysis of financial results showed that net profit in the first BCF has a positive value and the second is much higher than on

KСSH (more than 10 times). In addition, the return on sales for BCF - the

highest among the cement industry - 6% and significantly decreased as compared with 2012, due to higher efficiency of the "dry" method of cement manufacturing in comparison with the traditional one.

Revenue for Q3 2013, mln USD


Net profit for the 3rd quarter of 2013, mln USD

If we consider the efficiency of the utilization of labor resources, in terms of revenue per employee BCF is almost on one level with KСSH and exceeds the rate of KSM.

The average revenue per employee in Q3 2013, thsd USD


ROA of sales, %



227

138 132

0

50

100

150

200

250

KSM KCSH BCF

0.5

-3.7

-7.6 -10

-8

-6

-4

-2

0

2

BCF KSM KCSH

-2

0

2

4

6

8

10

12

14

16

18

2009 2010 2011 2012 3 кв 2013

KSM KCSH BCF

63 61

53

45

50

55

60

65

KCSH BCF KSM


April, 2014

BUILDING MATERIALS

Recent changes

Against the background of the decline in industrial manufacturing in January- September 2013, by 4.6% (yoy) due to reduced supplies of Russian oil processing industry of building materials throughout the year showed different results, so the most dynamic was, the 2nd quarter, (due, primarily turn to the seasonality and specificity of manufactured,

goods), showing an impressive growth of 59%, however, by the end of year growth declined in the fourth quarter of 2013, the industry has passed the stage of decline.

First of all, growth is associated with an increase in the demand for goods manufactured by the construction companies, in connection with the implementation of several large-scale projects (modernization of track facilities, the construction of roads and infrastructure, the beginning of the project Bel NPP). Cement production in Belarus in the fourth quarter of 2013 decreased by 5.3% compared to the same period last year. Export of cement on the contrary for this period increased by almost 40% compared with the same period last year. At the same time, imports continued to increase (+ 48% the previous year).

While excess cement actively promoted in the Russian domestic consumption of cement, in Belarus in the fourth quarter of 2013 it was not significantly decreased compared with the previous year (-6.2%). The growth of the gross indicators (production, export) hides the low efficiency of the cement industry in Belarus. In order to be competitive at the Russian market as compared to local producers who receive natural gas at a much lower price, Belarusian producers are forced, to supply, cement to Russia by the price of its cost, and sometimes below. Russia remains the main consumer of the Belarusian cement occupying 90% of total exports of Belarusian cement.

Production of construction materials by quarters

12000

10000

8000 6000 4000

2000

0

5 321 6 934 7 521

7 430 5 742 59%

9 114 9 971 9 162 0.8 0.6

0.4 0.2

0 -0.2

-0.4

1 Q. 2 Q. 3 Q. 4 Q. 1 Q. 2 Q. 3 Q. 4 Q. 2012 2012 2012 2012 2013 2013 2013 2013

The volume of production PNMP, bln rubles.

in% of the volume in the previous period

Source: Belstat

30%

8%

-1%

-23% 9%

-8%

Source: Belstat

As for the lime, its manufacturing in the 4th quarter of 2013 decreased by 4.4% compared to the same period last year. Despite the small volume of foreign trade of the building materials, exports in Q4 2013 increased by 31% to a level of 17 thsd. About 80% of the exports is Russia. Import lime, on the contrary, decreased significantly from 11 thsd. tons to 2 thsd tons by 5.5 times, due to the reduction of purchases of metallurgical lime of Belarusian Metallurgical Factory, which has introduced a new system of lime kilns.

Source: Belstat

18

1 267 1 235 1 200 1 159

153 185 226 267

0.0

500.0

1 000.0

1 500.0

2 000.0

The dynamics of the cement market in September- December 2012 and 2013.

1 267 1 235 1 200 1 159

153 185 226 267

0.0

500.0

1 000.0

1 500.0

The dynamics of the cement market in September- December 2012 and 2013.


April, 2014

BUILDING MATERIALS

In the fourth quarter of 2013 the volume of manufacturing decreased by 9% compared to the same period in 2012, export was a subject to the reduction by nearly 9%, while imports contrary slightly increased by 6%. In the face of increasing imports (+ 6%) and a reduction of manufacturing (including exports) internal market fell slightly by 4%. Decline in exports touched glazed tiles, as well as almost all major consumers of Belarusian tiles, including Russia and Ukraine.

Float glass market in the fourth quarter of 2013 was characterized by a significant build-up of manufacturing and exports due to the gradual release of a new manufacturing line at full capacity. For September- December 2013 it was produced in Belarus a 44% more,

than at the same period of 2012, namely 9.1 mln m2. Exports grew at a faster pace: in the fourth quarter of 2013 the growth rate of exports was 47%. Belarus has significantly increased its deliveries of glass to Azerbaijan, Moldova, Ukraine, Russia and some EU countries. In 2013, the Gomel glaziers opened the Turkish market. With the growth of the domestic glass manufacture it does not stop the growth of imports (but at a slower rate) in the fourth quarter of 2013, imports increased by 21%, which indicates that the JSC "Gomelsteklo" failed to take all available niches with the commissioning of a new line.

Despite a 1% decrease in the manufacturing of crushed stone in Belarus, foreign trade dynamics in the 4th quarter of 2013 was positive: 2.5-fold increase in the export and only 18% increased imports. Entering a new line on the RUPP "Granit", influenced the growth of export in standard positions, however, the country has a shortage of crushed stone fines. Dynamics of manufacturing and foreign trade of precast concrete in the fourth quarter of 2013 has developed in different directions. Decreasing in production by 40%, while export growth of 40%. As for the market of silicate bricks and blocks, due to the possible use of the material in the fourth quarter was not a sharp drop in domestic consumption, reducing the production and import of building materials.

Key figures for individual building materials in Belarus in Jan-Sep 2013.

19

6 326 4 991 9 096 6 745

1 533 2 868 1 855 4 206

0.0

5 000.0

10 000.0

15 000.0

Market dynamics of polished glass in Sep-Dec 2012 and 2013.

7 232

3 526 6 556

3 387

1 254

4 960 1 329 4 498

0.02 000.04 000.06 000.08 000.0

10 000.0

Market dynamics of ceramic tiles in Sep-Dec 2012 and 2013

4 Q 2012 4 Q 2013 % Crushed stone, gravel, pebbles

Manufacture mln m3 4.2 4.2 -0.9% Export thsd t 322 832 158.4% Import thsd t 306 361 18.0%

Gypsum and gypsum plasters

Manufacture thsd t 18.2 17.0 -6.6% Export thsd t 0.122 0.129 5.7% Import thsd t 132 156 18.2% Market volume thsd t 150.08 172.87 15.2%

Prefabricated buildings of concrete Manufacture thsd m3 56.0 33.5 -40.2% Export thsd t 155.1 217.5 40.3% Import thsd t 23.5 10.3 -56.4%

Bricks and blocks of concrete Manufacture mln 594.1 611.9 3.0% Export thsd t 187.0 236.0 26.2% Import thsd t 0.21 0.25 20.3%


Recent changes

April, 2014

BUILDING MATERIALS

Recent changes INPUT OF HABITATION IN BELARUS IN 2013

5 273.8 thsd sq.m of total area of housing was completed in Belarus in 2013, which is 81.1% of the required task of the year and by 17.6% more than in 2012. It was built 63.3 thsd of new apartments (in 2012 - 57.2 thsd). For citizens who are registered and in need of better housing conditions, there was commissioned 2 825.6 thsd sq.m of total area, or 53.6% of the total volume of completed dwellings. In rural areas, there was commissioned 1 404.2 thsd sq.m of total area of housing, or 26.6% of the total input by the country (in 2012 - 21.5%). In 2013, the construction of housing used 32.9 trillion Belarusian rubles

of investment in fixed capital, which is 16.2% of total investment and 124.5% compared to 2012. The predominant sources of housing finance are own funds of the population (51.1% of the investment) and loans (loans) of banks (31.1%).

PLANS FOR CONSTRUCTION OF HOUSING IN BELARUS IN 2014

In 2014, Belarus plans to build 6.5 mln square meters of housing, including it is planned to be commissioned 2.5 mln sq.m of living area with state support. In 2014, at a fast pace there will be a construction by the mechanism of the state order. In addition, an active program will be implemented for the construction of rental housing. While the volume of it is not so great, but in subsequent years they will increase. This will reduce to some extent the cost of housing at the primary and the secondary market. Currently growth in the commissioning of housing in Minsk is marked. Thus, in January-February 2014 it was commissioned 180.9 thsd sq.m of total area of housing, which is 166.9% compared to January- February 2013. In the early 2014, the President of Belarus demanded to reduce the rate of housing construction in Minsk and set the task to create and develop satellite towns in Minsk. Minsk opportunities for the building either apartment buildings or industrial enterprises have been exhausted, so the construction in the city should be carried out only where it is really needed. It is because of the sealed city development, there has been pressure on urban infrastructure: traffic jams are formed, more problems connecting to public networks of new businesses and homes.

CERTIFICATION OF CONSTRUCTION COMPANIES

Contracting and design organizations in Belarus will undergo special certification upon admission to the services market. Cancelling of licensing weakened construction sector.

There are 5 classes of liability buildings. Each class will be held liable certification of contractors who can perform this type of work. At the same time the construction of the buildings of the lower class, such as the fifth, the organization will be allowed without this certification, thus, small firms will not be diminished.

PROBLEMS OF CEMENT INDUSTRY

Results of the modernization of the cement industry in Belarus: the excess of the cement, prices are too high, markets are narrowed and factories are in debts. 5 years ago Belarus suffered from a lack of cement. After launching the new capacity cement manufacturing increased significantly. The problem is that it is now so much cement that it is no longer necessary - the construction boom ended in Belarus and Russia. The problem is exacerbated by the fact that the domestic cement becomes quite expensive. The cost of its production is higher than the Russian, because of the difference in the price of energy. About 40% of the produced cement is produced wet - very energy-intensive and expensive, and therefore is not demanded. If the upgrade was not aimed at increasing manufacturing, but at its variation, the difficult financial situation could have been avoided. Therefore, the state has set a new challenge: to hold another upgrade until 2017 with a view to moving on to dry production.

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Recent changes

BELGIPS WAS SOLD TO RUSSIAN VOLMA

Russian Corporation "Volma" managed to get ahead of German Knauf in the struggle for the purchase of state-owned shares of "Belgips." Having a direct sale of 99.5% stake in JSC "Belgips" for 5.27 mln USD. Condition of the sale of state is to invest in Belgips until July 1, 2018 no less than 43 mln euros, of which 24.7 mln are to be made before 30 June 2016. Investments will be directed at both the modernization of existing production of “Belgips " and the construction of a new factory. In particular, within the next 2 years existing lines for the production of gypsum board have to be upgraded, increasing its capacity to 10 mln square metres per year. For this purpose, it is planned to invest at least 2.5 mln euros. In addition, until July 1, 2018 a factory for the production of building materials based on gypsum must be built and put into operation in the village. Gatovo, Minsk region. The factory will include a line for the production of gypsum partition blocks up to 500 thsd sq. m per year, CCC capacity of 100 thsd tons per year, gypsum board capacity of 30 mln square m per year. The investor is obliged to keep up to 1 July 2018 the current number of jobs in "Belgips."

INVESTMENT IN THE CONSTRUCTION INDUSTRY IN BELARUS

Shareholders of ''Technonikol'', major manufacturer of roofing materials, are going to build in Belarus another factory. Authorities of Mogilev region for this purpose have identified a Russian company a piece of land in the region. A new factory with capacity of 80 thsd tons per year will produce thermal insulation on base of stone wool. Investment in the project will amount up to 2 bln Russian rubles. Start of the manufacturing line is scheduled for 2016. Building of the enterprise will boost exports insulation on base of stone wool up to 24 thsd tons per year. Projected sales regions - Belarus, Russia, the Baltic Countries, Northern and Western Europe. The planned capacity of the new factory will significantly increase the export of basalt insulation to Western markets, which will contribute to foreign currency inflows to Belarus and will improve the balance of trade.

Construction of a manufacturing of basalt insulation that provides up to 30% additional savings of heat will be a real contribution to reducing the energy intensity of GDP in Belarus.

WORK OF FOREIGN CONSTRUCTION COMPANIES IN BELARUS ARE UNDER QUESTION

A year ago, it was said that all companies operating in Belarus in the field of construction, should have the status of a resident to pay taxes to the Belarusian budget. A year ago, the Council of Ministers began to develop appropriate decision, which was signed on 31 December 2013 and 1 January 2014, it began to operate.

The document led the opening of the new rules and activities in the country for foreign companies. The main innovation is that these missions were banned from Belarus for economic activity, and was only approved for auxiliary and preparatory activity. This affected foreign construction companies. On 31 December, they worked at their offices in Belarus, legally, and on January 1 their activities appeared to be outlawed. The only recommendation is to establish in the country company by a resident and work through it.

However, it takes time to establish such company. At the same time, foreign companies weren`t officially warned about innovation in advance.

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THE WARRANTY PERIOD FOR APPROVED CONSTRUCTION OBJECTS IN BELARUS REDUCED TO 5 YEARS

Warranty period for the accepted for operation construction objects in Belarus reduced to five years, except for technological and engineering equipment, warranty periods for which are set by the manufacturer. Previously, the warranty period for the objects accepted for operation and construction contracts has been increased from five to eight years, but now in the country, a series of other measures aimed at protecting the citizens were approved, so it was decided to return the previously established warranty. In principle, five years is enough for the warranty period for objects accepted for operation. This provision came into force on 1 January 2014.

RESERVING FUNDS TO REMEDY THE DEFECT

Resolution of the Council of Ministers on April 1, 2014 approved the Regulations on the procedure for making a reservation contractor resources to ensure elimination of the result of construction, special, installation work of poor quality, identified during the warranty period of construction, to take them into account, spending, including transfers to local budgets . In accordance with the Regulations funds are reserved for the duration of the warranty period on a special account opened by the contractor for each object in a bank or non-bank financial institution. The customer, the developer shall transfer to the special account funds for 1.5% of the value of work performed by the contractor and accepted by the customer, excluding VAT. Reserved funds are earmarked and used by the contractor to pay for the cost of work to address the result of the work of poor quality during the warranty period of operation. In the absence of construction, special, installation work of poor quality during the warranty period the contractor shall be entitled to object to use at their discretion:

•after one year of operation of the facility - 50% of the reserved funds; •after two years of operation of the facility - 30% of the reserved funds; •at the end of the warranty period of the object - the balance of earmarked funds and accrued interest.

BENEFITS FOR CONSTRUCTION NPP

The President of Belarus by the decree №156 from April 10, approved the terms of the construction of high-voltage transmission lines and substations for the power of the Belarusian NPP. According to the document, the project has received benefits under North China Electric Power Design and engineering company with a Chinese engineering and consulting corporation, which became the main contractor. Financing the construction will be funded by a soft loan the Export-Import Bank of China. Chinese general contractor is relieved of the need for compensatory plantation and compensatory payments value removed or transplanted flora objects. Seizing land under the objects of the investment will be in the manner provided for land acquisition for state needs. The project is also relieved of the requirement of completion of import operations within 60 days from the date of payment.

By the Decree imported for the project equipment, components and raw materials are exempt from duties and VAT for up to 31 December 2018. From the payment of VAT are exempt pace of implementation of the Chinese company goods and services as defined in the contract. Land for construction are exempt from land tax for a period up to 31 December of the year following the year of completion of construction.

The President also allowed a Chinese company to attract foreign labor for the project. Building the infrastructure for the issuance of the Belarusian NPP power is necessary up to January 1, 2019.

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Статистическое приложение

* - Indicators were calculated based on market exchange rates (average score of the market rate in 2011 - 5984 USD / BYR). ** - In April - October 2011, there was a multiplicity of exchange rates.

23

Statistical addendum Key Indicators

measurment

2005 2006 2007 2008 2009 2010 2011 2012

Nominal GDP BYR trln 65.07 79.27 97.17 129.79 137.44 164.48 274.28 527.39

Nominal GDP * USD bln 30.2 37.0 45.3 60.8 49.2 55.2 47.3 63.1

Real GDP growth % year/year 9.4 10.0 8.6 10.2 0.2 7.7 5.3 1.5

Industrial production % year/year 10.5 11.4 8.7 11.5 -2.0 12.0 9.1 5.7

Agricultural production % year/year 1.7 5.9 4.1 8.9 1.0 2.5 6.6 6.1

CPI % year/year p. avg. 10.4 7.0 8.4 14.8 13.0 7.7 52.3 67.5

CPI % year/year eop 8.0 6.6 12.1 13.3 10.1 9.9 108.7 21.8

ICPPP % year/year p. avg. 12.1 8.3 16.3 14.8 15.0 13.5 69.2 90.5

ICPPP % year/year eop 11.0 9.0 22.2 15.4 11.3 18.9 149.6 21.0

Exports of goods and services (USD) % year/year 15.9 22.3 24.2 34.2 -32.9 20.3 54.2 11.4

Imports of goods and services (USD) % year/year 3.8 33.2 28.0 37.0 -27.0 22.8 29.3 2.5

Current account USD mln 436 -1448 -3040 -4988 -6178 -8278 -5775 n/a

Current account * % GDP 1.4 -3.9 -6.7 -8.2 -12.6 -15.0 -12.2

FDI (net) USD mln 303.0 351.0 1790.0 2150.0 1782.0 1352.0 3928.0 n/a

International reserves USD mln eop 1297 1383 4182 3061 5653 5031 7916 8095

Fiscal balance % GDP -0.7 1.4 0.4 1.4 -0.7 -2.6 2.4 0.5

Internal public debt % GDP eop 5.8 6.5 6.3 6.6 5.7 5.6 11.8 9.3

Gross External Debt * % GDP eop 17.0 18.5 27.6 24.9 44.8 51.6 71.9 n/a

The monetary base % year/year eop 74 20 38 12 -12 50 84 62

Exchange rate (NBB, official)** BYR/USD p. avg. 2154 2145 2146 2136 2793 2978 4623 8336

Exchange rate (NBB.,official)** BYR/USD eop 2152 2140 2150 2200 2863 3000 8350 8570

Exchange rate (NBB, official)** BYR/EUR p. avg. 2681 2692 2937 3135 3885 3950 6432 10713

Exchange rate (NBB, official)** BYR/EUR eop 2546 2817 3167 3077 4106 3973 10800 11340 Source: IPM Research Center


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Statistical addendum

Production of certain other non-metallic mineral products (annual data)

Source: Belstat

* - Indicators were calculated based on market exchange rates (average assessment of the market rate in 2011 - 5984 USD / BYR). ** - In April - October 2011, there was a multiplicity of exchange rates.

24

2011 2012 2013

Manufacture of other non-metallic mineral products, bln rubles 14 699 27 205 33 989

float glass; flat glass ground or polished, thsd m2 22 969 23 679 35 337

Bottles of colorless glass, and other containers of glass, except for canning jars, mln pcs.

197 967 211 657 135.5

tableware and kitchenware of porcelain, thsd pcs. 25 393 26 162 27 593

Ceramic goods sanitary, thsd pcs. 1 238.30 1 167.00 1 019.30

ceramic tiles and slabs, thsd m2 25 606 27 292 27 254

Portland cement, aluminous cement, slag cement and similar hydraulic cements, thsd tons

4 604 4 906 5 056.80

lime, thsd tons 793.9 747.4 747.6

gypsum, thsd tons 65.8 68.7 70.9

building bricks and blocks of concrete or of artificial stone, mln cond. brick 3 709.40 3 715.80 2819

corrugated sheet (Slate) mln cond. plates. 152.5 158.2 75.1

reinforced concrete cross ties, m3 60.7 64.2 61 261

slag, silicate mineral wool and similar mineral wools, including mixtures thereof, in blocks, sheets or rolls, thsd m3

1 291 1 276 1 310.50


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External trade, 2007-2012

Source: Belstat

25

2007

2008

2009

2010

2011 2012

2013

Derivative building materials, mln USD Exports 519.1 602.0 357.3 464.1 584.2 658 711

Imports 341.1 454.5 293.4 390.3 400.4 519 571 Balance 178 148 64 74 184 139 140 Basic building materials, mln. USA

Exports 90 93 52 50 88 123 138 Imports 99 135 117 159 180 214 227 Balance -10 -42 -65 -108 -91 -92 -89 Articles of stone, plaster, cement, asbestos, mica or similar materials, mln USD. USA

Exports 156 200 95 129 187 249 280 Imports 131 173 121 161 145 195 225 Balance 25 26 -26 -32 42 54 55

Ceramic goods mln USD 80.9

Exports 145 171 108 128 140 163 174 Imports 85 120 70 90 93 106 131 Balance 61 51 37 38 47 57 43

Glass and glassware, mln USD

Exports 218 232 155 206 251 246 257 Imports 126 161 102 139 162 218 215 Balance 92 70 53 67 89 28 42

Crushed stone, mln t Exports 1.3 0.8 0.5 1.0 2.2 2.3 2.5

Imports 0.3 0.6 0.8 1.5 1.3 0.8 1.3

Market capacity. mln. tons. 11.0 12.9 13.9 14.9 15.0 15.1 14.7 Building bricks, mln USD

Exports 85.4 88.9 41.2 51.1 67.8 103.5 121.9 Imports 2.2 2.1 1.4 1.9 2.2 2.9 3.3 Ceramic tile, mln m2

Exports 17.7 17.7 15.1 19.1 18.2 20.3 19.4 Imports 5.7 6.2 4.3 4.7 3.5 4.3 5.5 JBI, thsd tons

Exports 544 564 277 349 530 677.6 794.4 Imports 8 9 13 86 23 32.3 41.2 Lime, thsd tons Exports 119.6 88.1 67.7 49.5 40.8 49.9 74.2 Imports 0.8 16.4 10.0 41.6 45.5 52.09 22.6 Cement, thsd tons

Exports 442 233 456 475 582 1 003 1 368 Imports 151 72 285 599 422 650 791


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Data on the production of basic building materials in January-September 2013

Sourse: Belstat,

26

1 Q. 2012

2 Q. 2012

3 Q. 2012

4 Q. 2012 1 Q. 2013

2 Q. 2013 3 Q. 2013 4 Q. 2013

The volume of production PNMP, bln rubles

5 320.6 6 933.7 7 520.9 7 430.0 5 742.4 9 114.0 9 970.6 9 161.7

in% of the volume in the previous period 30% 8% -1% -23% 59% 9% -8%

glass 5 364.0 5 830.0 6 143.0 6 326.0 6 502.0 8 915.0 10 824.0 9 096.0

ceramic tiles 6 723.0 6 588.0 6 749.0 7 232.0 6 692.0 6 841.0 7 165.0 6 556.0

cement 937.9 1 284.5 1 417.2 1 266.8 897.1 1 363.2 1 596.9 1 199.6

lime 160.9 211.2 194.6 180.7 165.2 197.6 212.1 172.7

gypsum 15.1 16.7 18.7 18.2 15.8 18.8 19.3 17.0

bricks 601.1 833.3 822.1 594.1 589.2 768.4 849.5 611.9

constructions 43.8 45.2 51.3 56.0 52.7 54.5 50.1 33.5

concrete 259.5 434.0 487.8 483.7 297.2 531.1 555.6 473.7

broken stone 3 268.0 3 977.0 4 172.0 4 194.0 4 067.0 4 362.0 4 695.0 4 156.0


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Data of external trade of basic building materials in January-September 2013

Source: Belstat,

27

Indicator 4 Q 2012 4 Q 2013

Cement, thsd tons

Exports thsd tons 185 267 44.3%

Imports thsd tons 153 226 47.7%

Crushed stone, gravel, crushed stone, thsd m3



Lime, thsd tons


Imports thsd tons 11 2 -83.6%

Gypsum and gypsum plasters, thsd tons

Exports thsd tons 0.122 0.129 5.7%


Prefabricated buildings of concrete


Imports thsd tons 23.5 10.3 -56.4%

Building bricks and blocks of concrete or artificial stone


Imports thsd tons 0.21 0.25 20.3%

Ceramic tile, thsd m2

Exports thsd tons 4960 4 498 -9.3%

Imports thsd tons 1254 1 329 6.0%

Float glass, thsd m2

Exports thsd tons 2 868 4 206 46.7%

Imports thsd tons 1 533 1 855 21.0%


April, 2014

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Contact information

Roman Osipov Director [email protected] +375 29 6 57 83 26

Maxim Kochov Deputy Director [email protected] +375 29 6 29 14 65

Dmitriy Kirilenko

Head of Research and Studies [email protected] +375 29 184 40 41

CJSC «Investment Company «UNITER» Belarus, Minsk, Nezavisimosti square, 117a, 12th

floor, BC «Alexandrov Passage» Tel. : (+375 17) 385 24 63 Fax : (+375 17) 385 24 64 email : [email protected]

Disclaimer: This report is prepared for informational purposes only, and is not an offer on the implementation of a strategic transaction. Opinions, projections and estimates in this report reflect our judgment on the date of publication and are subject to change without notice. Although the information in this report comes from sources which we believe to be reliable, and although we have provided their accuracy as of the date of publication, we make no warranties, expressed or implied, of usefulness of the report with respect to the prediction of future events, or assessment of the current or future value of the securities. Any investment decision based on this report should be made based solely on the discretion of the investor, and not under any circumstances UNITER or any UNITER employees or third parties shall not be liable in any way for any action of any party, made on the basis of this report. Neither UNITER nor any UNITER employees nor third parties are liable for damages that result from such action.

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