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Important Understanding

Economic Outlook Construction Update Georgia Forecast Georgia Construction Aggregates Association February 17, 2009 Thomas I. Nelson Manager, Economic Analysis Vulcan Materials Company. Important Understanding.

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Important Understanding

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  1. Economic OutlookConstruction UpdateGeorgia ForecastGeorgia Construction Aggregates Association February 17, 2009Thomas I. NelsonManager, Economic AnalysisVulcan Materials Company

  2. Important Understanding • The views, analysis and forecasts in this presentation are those of this industry economist and not those of Vulcan Materials Company or its management. • Vulcan Materials Company has not verified any of such information or undertaken an independent evaluation or assessment of the information contained herein.  This presentation should not be used, considered or relied upon in connection with an investment decision in the securities of Vulcan, and in no way, shall this presentation constitute an offer to sell or the solicitation of an offer to buy securities of Vulcan.  Furthermore, Vulcan is subject to the information and reporting requirements of the Securities Exchange Act of 1934.  Vulcan periodically files annual, quarterly, current reports, proxy statements and other information with the Securities and Exchange Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 and any prospective investor should review such filings when considering an investment decision in Vulcan.  Nothing contained in this presentation shall in any way supplement, amend or revise in any manner the information contained in such filings.

  3. Business Cycle • Recession • Employment • “Stimulus” Plan • Stock Market • Interest Rates

  4. Is the Recession Ending? • (Baa–Aaa) bond spread improving • Industrial production falling—bottom in Q2? • Employment bottom by month 17? (lag indicator) • Stock market—bottom fishing? • Trade deficit down • Energy prices much lower • Housing starts--can’t fall much further • Dollar stronger as rest of world weakens • Is the “stimulus” good news?

  5. Leading Indicator (2 months)

  6. Industrial Production has fallen

  7. Payroll Employment in Recessions

  8. Construction jobs are shrinking fast

  9. Will the “Stimulus” Work? • Much less and slower than hoped for • Economy will heal itself faster • Highways and infrastructure help • Becomes new baseline for gov’t spending • Gov’t can’t force spending or lending • Financial institutions will change • Lower payroll tax would create jobs

  10. Georgia total employment down

  11. Georgia construction jobs huge loss

  12. All metros losing jobs in 2009

  13. Construction: best year ago—now worst

  14. Stock Market falling faster--bargains?

  15. Interest Rates now stable at ZERO

  16. Blame weather rather than economy?

  17. INFLATION • Energy • Building Materials • Overall Indexes

  18. Oil Price – the giant collapse

  19. Natural Gas Price – collapse too

  20. Diesel Fuel Price – huge cost savings

  21. Gasoline Price – return to SUVs?

  22. Iron & Steel Price – more bridges?

  23. Copper Price

  24. Cement Price – stable in recessions

  25. Readymix Concrete – small gains

  26. Readymix Prices vs Cement Prices

  27. PPI Asphalt: Liquid and Concrete

  28. CONSTRUCTION • Housing • Non-Residential Buildings • Highways • Infrastructure • Total Aggregates

  29. Housing Starts can’t go much lower

  30. Georgia Housing Permits tiny

  31. Variables affecting Housing 2008-09 Factors • Excess inventory • Very tight lending standards • Mortgage Rates down to 5% • Foreclosures coming back onto market at low prices • Buyers waiting for prices to fall further

  32. GA Housing Construction PIP

  33. 2008 Awards: NonRes mixed; Res down

  34. Variables Affecting GA Buildings • Kia automobile plant with new suppliers • U.S. auto makers very weak • Delta – Northwest Airlines merger • Struggling financial services • Carpet sales hurt by weak construction • Stores constr. follows housing down • Low cost of living; low cost of business

  35. GA Non-Residential Bldgs. Constr.

  36. Highway Funding • Six year SAFETEA-LU authorization expires 9/30/2009 • $1,331,000,000 authorized for GA Hwys in FY2009 • Appropriations under Continuing Resolution to 3/6/2009 • Stimulus for Georgia: • Highways $ 931,000,000 • Transit $ 136,000,000 • Rail $ 7,000,000 • Clean Water $ 66,000,000 • TOTAL $ 1,141,000,000 • GA Fast Forward $15.8B (2005-10) – Construction funds diverted to pay debt service on GARVEE bonds?

  37. Georgia Highway Dollars

  38. GA Highways Constr. Put-in-Place

  39. GA Infrastructure Construction PIP

  40. GA Total Construction Put-in-Place

  41. Georgia Aggregates Demand Forecast

  42. The Tons Forecast for 2009

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