Page 25 - 2022 Sustainability Report

COMPANY OVERVIEW

financial condition and product demand. The Company anticipates that any increased operating costs or taxes relating to
GHG emission limitations at the Woodville or cement facilities would be passed on to customers. The magnesium oxide
products produced at the Manistee operation, however, compete against other products that, due to the form and/or
structure of the source material, require less energy in the calcination process, resulting in the generation of fewer GHG
emissions per ton of production. Due to GHG emissions requirements, the Manistee facility may be required to absorb
additional costs, including for taxes or capital investments, in order to maintain competitive pricing in that market.
Future technologies or practices to address climate change also may present regulatory and policy challenges. For example,
although several large-scale projects for carbon capture are in the development phase, no technologies or methods of operation
for reducing or capturing GHGs from cement manufacture have yet been proven successful in a full production environment,
other than improvements in fuel efficiency. Future modifications to implement such technologies at the Company’s facilities
could require regulatory review of existing air permits and emissions limitations, which could trigger significant additional costs
or operational changes. In addition, various industry associations are engaged in an effort requesting the U.S. Department of
Transportation (USDOT) and other agencies to further revise relevant standards to allow for greater rates of clinker substitution
(e.g., the replacement of clinker with alternative materials, such as pozzolan, slag and fly ash), similar to the rates currently
permitted for European cement producers. If higher rates of substitution and blending are, in fact, permitted in the future, the
result is likely to be both reduced clinker and power consumption in cement production, which would, in turn, reduce GHGs
emitted in connection with each ton of cement produced in the United States.

Physical Risks and Impacts

In addition to impacts from increased regulation, climate change may result in physical impacts that could have adverse
effects on the Company’s operations or financial condition. Physical impacts may include disruptions in production and/or
regional supply or product distribution networks due to major storm events, shifts in regional rainfall and temperature
patterns and intensities, as well as flooding from sea level changes. In addition, production and shipment levels for our
building materials business correlate with general construction activity, which occurs outdoors and, as a result, is affected
by erratic weather patterns, seasonal changes and other unusual or unexpected weather-related conditions, which can
significantly affect that business. In the Company’s cement and downstream operations businesses, the physical impacts
of climate change may result in disruptions to its operations or its customers’ transportation activities, including impacts
on production capabilities and capacities, supply chain interruptions and project delays that can impact the Company’s
reputation and result in additional costs to the Company. Excessive rainfall and other severe weather jeopardize
production, shipments and profitability in all markets served by the Company in its building materials business. In addition,
climate and inclement weather can reduce the useful life of an asset.
In particular, the Company’s operations in the southeastern and Gulf Coast regions of the United States and The Bahamas
are at risk for hurricane activity, most notably in August, September and October. The Company is also at risk for Pacific
Ocean storm activity. The last few years brought an unprecedented amount of precipitation to the United States and
particularly to Texas and the southeastern United States, notably the Carolinas, Florida and Georgia, where it impacted
the Company’s facilities. In California and Arizona, continuing drought has led to water use restrictions in numerous
water districts, and insufficient supply of water for the Company’s operations in those areas could impact production. In
California, recent storms and flooding have caused operational delays and challenges. While reconstruction actives may
offset some or most of the financial impacts on sales and demand, any of these events could have a material adverse
effect on the Company’s business and operations.

As the Company’s footprint of quarries and aggregates facilities has grown nationwide, management believes it has
bolstered resilience in its operations by maintaining a geographically diverse business and distribution network that is
increasingly able to adjust to local disruptions and source materials from different facilities. In addition, because the
Company transports aggregates products by various methods, including rail and water, it may be able to mitigate supply
or transportation issues in any location caused by severe weather or disruptions in any transport modality.

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