Chairman's Statement

Board of Directors

Report For the Fiscal Year Ended

on 31st December 2017

Honorable Shareholders,

Peace and God’s mercy and blessing be upon you,,,

The Board members and myself are pleased to welcome you, and submit to your General Assembly the 47th Annual Report, which provides explanations on the main activities and achievements of the Company and its subsidiaries during the fiscal year ended on 31st December 2017, together with the report of the Independent Auditors, as well as the Statements of the Financial Position, Income, Comprehensive Income, Changes in Ownership Equity and Consolidated Cash Flows.

Dear Shareholders,

It gives me great pleasure to inform you that it has been more than 45 years since the production in your Company from its Shuaiba plant to the local market which began its operations in year 1972, taking part in development of the construction and industrial sectors in the country to support the national economy. And certainly with the high quality standards of its production, without exposure to longtime storage, and meeting the requirements of real estate for citizens as well as industrial housing projects and the projects related to cement at all times. In addition to our professional and service oriented marketing and sales efforts to ensure special relationship with all its consumers meeting their requirement and satisfaction, thereby increasing its strength and stability in the market despite of the challenges that are faced, it can keep its main role in the industrial development process in the country, and it can deal with this challenge from the confidence of capability to get through it, and its insistence on continuing on development and advancement, and with high level of techniques to producing cement throughout the years. With the grace of God and great trust, we all are aiming to serve the national economy to improve, and achieve the best result for shareholders. Following is the explanation for the company’s achievements and activities for the year 2017:

Sales and Marketing:

Your company continued its advancement by hard work to meet the local market needs for Ordinary Portland Cement, Sulphate Resistant Cement Type-V and GGBS material, which have high special characteristics substantially required in many developing projects. With all capabilities and facilities the Company can produce 16 thousand Tons of Cement per day (5 Million Tons per year) despite the intense competition it faces in the Kuwaiti market from the Iranian Cement and others that import to Kuwait market. As a national local industry, and also the recession in the construction sector as a result of delaying the commencement of some major governmental developing projects, or contractors starting implementation, and the delay in accomplishing some of the infrastructure projects for several new residential cities, and others projects. Moreover, the company was unable to obtain the necessary licenses from the Ministry of Commerce & Industry to export the Kuwaiti Cement to Iraq market, besides the increase in the economic recession as a result of the political events, which is not allowing to operate Kiln and Raw Mill at full capacity although we will continue to do our best to maintain the production with a high degree of quality that can earn the trust of various projects in the Country. In this year, the Company recorded a good result in the volume and quantity of sales. Bulk cement storage and sales terminal at west Shuaiba area - Mina Abduallah, and the subsidiary Kuwait Cement Ready–mix Company also took part in making a good effort to market the Cement (Ordinary, Resistant Type-V and White) that are produced in our plant. We hope that the circumstances will change and the reason for recession will be gone so that we could resume the revival of the economic cycle and the major residential projects and any other development for the country in general and the market in particular. Thus the company could increase its sales quantity and value during 2018 and the subsequent years, for the interest of the Company and its shareholders, God Willing. We hope more support from the personnel who are in charge for the industrial affairs by providing the needed protection.

The project of exploiting used tires as a source of traditional fuel in the kilns for clinker production:

The company has taken care of its hard and continuing pursuit to benefit from exploiting the used tires as source of fuel in the kilns for clinker production at Shuaiba plant, and after the successful trial of exploiting the used tires in the first Kiln Line-I has been completed without any negative impact on the environment or operational issues of the type of produced clinker from kiln. The Environment Public Authority agreed on studying the environmental impact presented from one of the qualified environmental consultancy offices for exploiting shredded tires as a raw material in clinker production Kiln on a continuous basis, and now it is in an advanced stage of following-up with the Public Authority for Industry to have their final consent for burning shredded tires in Company plant, as well as starting to discuss importing and fixing alternative handling equipments with many of specialized European companies for using shredded tires in the second Kiln Line-II on the other hand. We have great confidence and optimism that we will be able to achieve this goal by the third quarter of year 2018 God Willing.

Bulk cement storage and sales terminal at west Shuaiba area / Abdullah port.

The storage & sales terminal of bulk cement (ordinary and sulphate resistant type-V), which is owned by Kuwait Cement Company and located in Abdullah port area, with operational capacity of 6000 tons per day during this year has achieved the maximum sales since commercial production started in March 2013. The terminal total sales reached throughout the year of quantity (1.460) million with an increase of 2% as compared to the year 2016, and this is due to the increase in capacity of the trucks fleet to transport bulk cement from Shuaiba plant to the storage terminal, and to add trucks with cement silos with a transport capacity reaching 60 ton per each silo. Also, increased the storage area with efficient scheduling of work constantly day and night including Fridays, vacations and holidays in order to enable those with urgent orders to receive their needs of Cement easily and smoothly as the terminal is located outside the main gate of Shuaiba area, which grants us hope to realize more growth and good results during the year 2018, with God Willing.

Subsidiary Companies: Kuwait Cement Ready-mix Company (K.S.C) (closed)

Kuwait Cement Ready-mix Company has realized further achievements in year 2017 by producing the ready mix through presenting technical services, in addition to the geographical expansion including all areas of Kuwait, that has reflected on the increased sales of the ready- mix concrete by 20% as compared to the year 2016. To ensure further success, the Company continues to use the latest technology for designed mixes according to the international specifications. The Company can characterize by producing the designed mixes with high strength and hardness, and that giving from God and the efficiency of its mankind and technology elements, in addition to continue hard working for more achievements through the year 2017 which the most prominent of it a plant construction in Al-Zour area to serve Al-Zour refinery related to Kuwait Integrated Petroleum Industries (Kuwait National Petroleum previously) as the Company seeking in the next step to Plant construction in Al-Mitlae area to serve Al-Mitlae residential city project related to Public Authority for Housing Welfare, and in accordance with this major expansions the Company increased its fleet for year 2017 from trucks and cars (mixer trucks, pumper trucks, silos and any other different trucks), to meet and implement all the contractual obligations that expanded all over the country and all sectors (oil, government, private and civil).

Shuwaikh Cement Company (K.S.C) (closed).

Shuwaikh Crusher situated at Fujairah Emirates, continued its activities and business development for the year 2017, and purchased a big new Crusher from Messrs. SBM an Austrian company with a production capacity between (16) thousand tons to (20) thousand tons daily, will be fixed in quarries zone. Also, the production will commence by the end of February 2018 as expected, and the total production capacity for both the crushers will be more than (40) thousand tons daily with high quality and grade, that will reflect on crusher sales. It is worth mentioning that the crusher Production for year 2017 amounted to (5.7) million tons and Sales (5.2) million ton from the limestone material of all sizes, gravel, washed sand of all types, road paving material (road-base), and certainly for Shuwaikh Crusher obtaining a new land which contained a solid mountain chain which will be exploded, and that will provide a material stock enough to produce for the next (15) years. The company has ambitious plans and projects for increasing sales and production throughout the year 2018 God Willing especially with the starting of the commercial production for the new crusher and the availability to export it to external markets and that can add to the Company’s interests and accomplish the Company’s goals.

Amwaj international Real Estate Company (K.S.C) Closed:

Amwaj International Real Estate Company (K.S.C) Closed, has accomplished a good profit the year 2017 from its activity of managing the Cement House properties and marketing the leasing units using the best marketing methods, as well as its investment activities in local Companies listed on the Kuwait Stock Exchange and other international Companies having high reputation and strong performance, in addition to investing in several portfolios and funds managed by professional Companies and bodies in various geographical sectors (Kuwait, Gulf Cooperation Council countries, United States), which reflects the Company’s intent of diversifying its investment portfolio to reduce risks also guarantee to have good returns and fixed cash flows in the next years God Willing.

Governance report

Kuwait Cement Company to keep full commitment to implementing all governance applications and the relevant policies and regulations containing all details related to the roles and responsibilities of the Board of Directors and its meetings, as well as the three committees emerging the Audit committee, Risk management committee and Nomination & remuneration committee, and in the scope of leading company’s business and high level of control, foster performance, improving and supporting responsibility and transparency, reduce risks and regulation level progression and the managerial work and integrity, which ensures interest of the company keeping and protecting shareholders rights, and that will be mentioned in more details later in the company governance report pages for year 2017.

Financial report

The net profit amounted to KD 17,195,498 and earnings per share 24.11 Fils for the year ended on 31st December 2017, as compared with net profit of KD 19,496,545 and earnings per share 27.06 Fils for the fiscal year ended on 31st December 2017. Total value of assets amounted to KD 305,743,642 as of 31st December 2017 as compared with KD 300,388,578 as of 31st December 2016 i.e. an increase of 2% as of 31st December 2017, the total reserves amounted to KD 107,989,309 as compared with KD 104,354,913 as of 31st December 2016.

Profit Distribution

Total ownership equity amounted to KD 197,420,061, and the profits carried forward amounted KD 28,437,008 as of 31st December 2017. The Board of Directors suggests distributing the profits as follows: Description K.D. Cash to Shareholders 20% (20 Fils per share) 14,262,063 Profits carried forward for next year 14,174,945 Total 28,437,008 Before the end of our report, it strikes us in the hearts and affects our hearts to leave a dear brother For All of us our late colleague, Suleiman Khaled Al-Ghunaim, who moved to God’s mercy last September. On this painful occasion, we recall his efforts and dedication to the company through his position as Vice Chairman since its establishment in 1968 until it became a prominent center among the public shareholding companies in the State of Kuwait, but this is the will of God, we ask God to have mercy on him, and to dwell in the spaciousness paradise.

Honorable shareholders:

Finally, the Board of Director has the honor to explore with you the Company’s main achievements in year 2017. The Board of Directors are honored to raise highest thanks and admiration to His Highness the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah – leader of humanitarian deeds, may God protect him, for all his gracious support and patronage to the industrial development as well as his dignified directives to expedite the execution of the country’s strategic development projects, which with God’s Willing shall fulfill the desire of His Highness to transform Kuwait into a financial and business center. The Board of Directors plead to God almighty to grant His Highness health and wellness, to preserve Kuwait during his auspicious reign, and to keep it safe, secured, stable and prosperous. The Board of Directors also extends its highest thanks and admiration to His Highness the Crown Prince Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah for his immense and assiduous efforts for the good and benefit of our beloved Kuwait. Moreover, the Board of Directors extends its highest thanks and admiration to His Highness the Prime Minister Sheikh Jaber Mubarak Al-Hamad Al-Sabah for his gracious patronage and continued encouragement for the industrial sector. The Board of Directors extends utmost thanks to their Excellences the Ministers and all other government institutions, affiliate companies, local banks and the Industrial Bank of Kuwait for their support and collaboration. The Board also expresses its thanks to all technical and administrative staff for their sincere dedication and commitment towards preserving the Company’s progress and prosperity. The Board also expresses its thanks to the honorable shareholders and appreciate their valued trust and support to us. Pleading to God Almighty to grant us further luck and success, Peace and God’s mercy and blessing be upon you,,,

Rashed Abdulaziz Al-Rashed

Chairman