27Issue

September 2014

ContentsChief Executive Officer AddressZamil Industrial Second Quarter 2014 Financial ResultsZamil Towers and Galvanizing Awarded New ContractsZamil Structural Steel Awarded New Contract in JubailZamil Air Conditioners India Awarded Prestigious ProjectZamil Higher Institute for Industrial Training Signs New Training AgreementZamil Air Conditioners Opens New Showroom in Al AhsaZamil Industrial Key Founder of Business Disability NetworkZamil Industrial Sponsors Graduation Ceremony of the General Directorate of Civil DefenseZamil Industrial Holds Its Annual Ramadan IftarZamil Industrial Participates in Ramadan Sports ActivitiesZamil Industrial Sponsors Sanad Children’s Cancer Support Association Campaign and Ramadan Iftar for Social Nursery Center in DammamPolish Trade Delegation Visits Zamil IndustrialZamil Industrial Organizes Field Tours for Participants in Atabara Cultural Program Zamil Steel Vietnam Participates in International ExhibitionsZamil Industrial LPD Achievements During the Second Quarter of 2014Research and Studies

For further information please contactCorporate Communications Department

Fax: (+966 13) 810 8190 | Email: impact@zamilindustrial.comwww.zamilindustrial.com

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MESSAGE

Dear Colleagues,

Greetings and welcome to the latest issue of Impact.

As we leave behind the second quarter of 2014, Zamil Industrial once again reports substantial growth and an excellent net profit generated by the strong performance of all of our businesses. Our strategic approach based on innovation and flexibility has once again proven profitable in export markets around the world as well as here at home in Saudi Arabia.

This issue focuses on exciting new business opportunities that have emerged in recent weeks as well as new ventures between Zamil Industrial businesses and long-term partners. Its contents also provide insight into the innovative ways that our executives, management and staff have found to expand our brand globally as well as locally, often overcoming less than optimal conditions.

As a company, we seek to achieve our goals and maintain the highest standards in both corporate and neighborhood relations. We humbly accept awards and recognition for the excellence of our products and services, while sponsoring and organizing activities and events that are beneficial to our communities, both at home and abroad, that serve as vital networks of support for our operations.

I sincerely hope that you enjoy reading this issue of Impact, and look forward to your comments and contributions for future editions.

Kind Regards,

Abdulla M. Al ZamilChief Executive Officer

2 FINANCIAL RESULTS

Zamil Industrial Profits Rise to SAR 139 Million in First Half of 2014

Comparison Charts of First Half 2012-2014 Financials (six months)

Zamil Industrial Investment Company (Zamil Industrial) has announced its consolidated financial results for the period ended 30 June 2014, showing a marked increase in profits over last year.

Net profits for the second quarter of 2014 were SAR 73.1 million (USD 19.5 million), compared with SAR 63.6 million (USD 16.9 million) during the same period in 2013, an increase of 14.8 percent, and compared with SAR 66.1 million (USD 17.6 million) posted in the first quarter, an increase of 10.6 percent.

Gross profits for the second quarter of 2014 were SAR 316.1 million (USD 84.3 million), compared with gross profits of SAR 314.9 million (USD 84 million) for the same period in 2013, an increase of 1 percent.Operating profits during the second quarter were SAR 101.4 million (USD 27 million), compared with SAR 97.9 million (USD 26.1 million) for the same period in 2013, an increase of 3.6 percent.

During the six months ended 30 June 2014, net profits were SAR 139.1 million (USD 37.1 million), compared with SAR 126.3 million (USD 33.7 million), an increase of 10.1 percent over the same period in 2013.

Earnings per share grew to SAR 2.32 (USD 0.62) from SAR 2.10 (USD 0.56) during the same period in 2013.

Gross profits for the first six months were SAR 621.6 million (USD 165.8 million), compared with SAR 614.7 million (USD 163.9 million) for the same period in 2013, an increase of 1.1 percent.

Operating profits for the first six months were SAR 196.3 million (USD 52.3 million), compared with SAR 195 million (USD 52 million) for the same period in 2013, an increase of 1 percent

93,276 126,293 139,022

Net profit(SAR 000’s)

524,149 614,648 621,606

Gross Profit(SAR 000’s)

167,625 195,019 196,269

Operating Profits(SAR 000’s)

1.55 2.10 2.32

Earnings Per Share(SAR)

1,388,359 1,515,348 1,686,048

Stockholders’ Equity(SAR 000’s)

201420132012 201420132012 201420132012

201420132012 201420132012

3STRATEGIC GROWTH

According to the contract, Zamil Towers & Galvanizing Company will supply over 26,000 metric tons of lattice steel towers and low level gantries for the construction of the 380kV double circuit overhead transmission line between Tabuk Bulk Supply Point (BSP) and Tabarjal BSP owned by the Saudi Electricity Company (SEC). The project will link the generating plants in Tabuk and Tabarjal and will streamline the operation of the Kingdom’s electrical power system by facilitating the exchange of electricity between regions.

“This contract award makes Zamil Towers & Galvanizing a key participant in the infrastructure development of Saudi Arabia,” said Osama Bunyan, Chief Operating Officer of Zamil Industrial. “We anticipate smooth cooperation with MEEDCO and SEC as we work to provide the finest products and services for use in this important endeavor.”

Zamil Towers & Galvanizing Company has been providing design, manufacturing and hot dip galvanizing of lattice steel structures for power transmission lines and telecom companies, gantries, and support structures

for substations since 1985. The company also provides type testing of power transmission line towers at independent test stations in compliance with international standards as well as telecom and IBS passive and active solutions.

During its 29 years of operation, Zamil Towers & Galvanizing has supplied approximately 1,000,000 MT of lattice steel structures, most of which have been exported to 35 different countries around the globe.

Zamil Towers & Galvanizing Company Ltd. was awarded a contract worth about SAR 30.5 million (USD 8.1 million) by the Al-Sharif Group for Contracting, Trading and Development Holding Co. (ASG) to supply lattice transmission line towers and gantries for various transmission lines and substations owned by the Saudi Electricity Company (SEC) in the western region of Saudi Arabia.

According to the contract, Zamil Towers & Galvanizing Company will design, fabricate, test and supply over 6,000 metric tons of lattice steel towers, gantries and equipment support structures for the 110kV overhead transmission lines that connect a number of SEC’s substations in various cities in the western part of the Kingdom. The new family of 110kV towers will be designed and tested to meet the strict requirements of safety and efficiency standards set forth by the client.

Zamil Towers and Galvanizing Awarded SAR 134.5 Million Contract to Supply Steel Lattice Towers for Power Transmission

… and Awarded SAR 30.5 Million Contract With Al-Sharif Group

Zamil Towers & Galvanizing Company Ltd., a fully owned subsidiary of Zamil Industrial Investment Co. (Zamil Industrial), has been awarded a contract worth approximately SAR 134.5 million (USD 35.88 million) by the Middle East Engineering and Development Co. Ltd. (MEEDCO) to supply lattice towers and gantries for the 380kV double circuit overhead transmission line between Tabuk Bulk Supply Point (BSP) and Tabarjal BSP in the northern region of Saudi Arabia.

4 STRATEGIC GROWTH

According to the contract, Zamil Structural Steel Company will fabricate and supply over 4,500 metric tons of pipe racks, equipment-support structures and other steel products for the polyoxymethylene plant project owned by the National Methanol Company (Ibn Sina), a manufacturing affiliate of the Saudi Basic Industries Corporation (SABIC) in Jubail Industrial City.

The project is an expansion of Ibn Sina’s existing operations and is a joint venture between SABIC and CTE Petrochemicals Company, which is owned by Duke Energy and the U.S. specialty materials company Celanese Corporation. The POM plant at Ibn Sina is expected to have an annual capacity of 50,000 metric tons. POM is primarily used in automobiles, electronics, food processing and other vital sectors that hold substantial value to Saudi Arabia’s downstream sector development.

Known worldwide as the Middle East’s leading structural steel fabricator, Zamil Structural Steel was established in 1983 to provide expertise in the fabrication and installation of structural steel and plate works for a wide range of industrial and commercial applications. The company has gained the confidence of major international engineering, procurement and construction contractors and has built a solid reputation among its customers as a preferred partner for structural steel solutions.

Zamil Structural Steel Company Ltd., a subsidiary of Zamil Industrial Investment Co. (Zamil Industrial), has been awarded a contract worth about SAR 39.5 million (USD 10.5 million) by the Dragados Gulf Construction Company Ltd. to supply pipe racks and equipment-support structures for the National Methanol Company (Ibn Sina) polyoxymethylene (POM) plant project in Jubail Industrial City in the eastern region of Saudi Arabia.

Zamil Structural Steel Awarded New Contract in Jubail

5STRATEGIC GROWTH

It is worth mentioning that Zamil Air Conditioners India has recently completed a significant project for Whirlpool of India Limited (WOIL), which called for the supply, installation, testing and commissioning of two Turbomiser chillers of 400 kW capacity, which were designed and produced by Geoclima, a strategic business unit of Zamil Air Conditioners based in Italy. This project’s

process cooling application was designed to support work processes involving C-pentane at the Faridabad plant of WOIL in northern India. The company has commissioned and installed the Turbocor chillers along with the complete process cooling setup, marking the first successful installation of Geoclima Turbocor chillers in India.

Zamil Air Conditioners India Private Ltd., a subsidiary of Zamil Industrial Investment Co. (Zamil Industrial), has been awarded a contract worth SAR 9.4 million (USD 2.5 million) by the Supreme Infrastructure India Ltd. to supply, install, test and commission HVAC and plumbing works and to perform all essential HVAC and PHE system engineering for a prestigious institute in India.

Zamil Air Conditioners India Awarded Prestigious Project for the Mahanadi Institute of Coal Management

The contract called for the supply, installation, testing and commissioning of three water cooled screw chillers of 250 TR each, air-handling units and fan coil units, as well as the installation of complete low-temperature side works — which include plumbing, pumps, a cooling tower, water treatment plant, pipes and electrical parts — for the Mahanadi Institute of Coal Management at Bhubaneswar in Orissa state in eastern India.

“We are honored to have won such an important and prestigious contract as the provider of HVAC equipment and PHE system engineering work for this major institute in India,” said Osama Bunyan, COO of Zamil Industrial. “The opportunities that it offers are considerable in terms of both strengthening our reputation as a trusted HVAC provider and demonstrating our capacity to furnish multiple industrial solutions for this vital facility,” he added.

6 STRATEGIC GROWTH

Dr. Mohamed Abdulla Sharif, the director of the Institute, stated that the Institute is fully equipped with the modern training equipment and simulators required to effectively train the recruits in the specified fields, and that the trainees will be given ample opportunities to master the skills before they start their work with the company.

He added that the training program for each discipline starts with supportive studies in subjects such as English language, engineering science, applied mathematics and information technology, so that the trainees’ common and specialized skills and

knowledge are gradually developed on a strong foundation.

Dr. Sharif indicated that the main specialized subjects in the electrical and electronics technology program include the operation and maintenance of electrical and electronic machines, such as transformers, motors and generators, in addition to residential and industrial electrical installation and occupational safety and health. For the welding and fabrication technology program, the trainees will study methods of selecting engineering materials for various applications, metal fabrication technology and welding methodologies,

including electric arc and gas welding of pipes and plates as well as occupational safety and health.

It is worth noting that El-Seif Company has signed the second training agreement with the Institute because of their confidence in the high standard of the training programs and the trainers at the Institute; and the programs are accredited by the Technical and Vocational Training Corporation. El-Seif’s objective is to recruit and train the largest possible number of young Saudis to become reliable workers for the company in various technical fields.

Zamil Higher Institute for Industrial Training recently signed a new two-year renewable training agreement with El-Seif Engineering Contracting Company. The Institute will register and train a total of 260 of their newly recruited Saudi employees in electrical and electronics technology as well as welding and fabrication technology.

Zamil Higher Institute for Industrial Training Signs New Training Agreement

7STRATEGIC GROWTH

Zamil Air Conditioners recently took a major step in its expansion strategy by opening a new consumer air conditioning showroom at the Dhahran Street in Al Ahsa, in the eastern region of Saudi Arabia.

Zamil Air Conditioners Opens New Consumer Showroom in Al Ahsa

various types (Window, Splits and Free Standing units) selected to meet the needs of all residential customers.

On this occasion, Saqar Al Zamil commented: “The success of the Zamil Air Conditioners brand in the HVAC sector over the years

has led to the expansion of the number of showrooms located in various regions of the Kingdom of Saudi Arabia. The opening of our new branch in Al Ahsa is part of the company’s ongoing customer support and service strategy, and strengthens our leadership position in this vital sector.”

The 225 square meter showroom features complete consumer air-conditioning systems and also offers a variety of spare parts.

Saqar Ahmed Al Zamil, Director of Corporate Marketing at Zamil Air Conditioners, inaugurated the new showroom, accompanied by the marketing team and a number of local distributors. The grand opening also featured special discounts for customers in celebration of the occasion. This new showroom will offer a wide variety of room air conditioners of

“The presence of Zamil Air Conditioners in local and regional markets will continue in harmony with the plans of our marketing team to introduce and promote our high quality brand, which has gained the confidence of our valued customers all over the world,” he added. The

company’s products and services are marketed under several brand names – Classic, Cooline, CoolCare, Clima Tech and Geoclima – which vary depending on the specific market.

Zamil Air Conditioners products are manufactured using highly

energy-efficient components designed to reduce electricity consumption and lower costs. All products are engineered and built in compliance with the energy efficiency labeling system of the Saudi Organization for Standardization, Metrology and Quality (SASO).

8 EXPANDING CAPABILITIES

As part of its core values and commitment to support and implement social responsibility programs toward a more effective sustainable community service initiative, Zamil Industrial Investment Co. (Zamil Industrial) has recently contributed to the establishment of the Qaderoon Business Disability Network, which was officially launched on March 9, 2014, by the Ministry of Labor in collaboration with a number of private-sector companies.

Zamil Industrial Key Founder of Business Disability Network

This contribution is in line with the Zamil Industrial’s strategy for social responsibility to train and rehabilitate disabled members of the Saudi society from all sectors in order to allow them to participate in the march of development in Saudi Arabia, as well as the economic development and future growth of the country.

The Business Disability Network aims to motivate employers to include people with disabilities as equal, effective members of the workforce and to provide guidance, advice, and best practices to employers to facilitate the recruitment and retention of employees with disabilities. This is done, in part, by advocating for favorable government policy for disabled workers and a disability-friendly work environment.

In addition, the network trains and rehabilitates people with disabilities to work in the private sector and be active members in the community by encouraging them to work and providing supportive services to them.

The network also aims to achieve the following:

●Raise employers’ awareness on inclusion of disabled workers in the workplace through the creation of a disability-friendly environment, supportive platforms and sharing best practices.

●Align with all relevant stakeholders, including government and nonprofit organizations.

●Advocate for government policy on employment and training of people with disabilities to become active members of the workforce.

●Advise on mutually beneficial outcomes for both employers and employees with disabilities through developing processes of employment for these employees.

●Align with relevant international organizations for the application of best practices, global outreach and interactive networking.

In the coming months, the network will conduct a number of seminars and workshops, publish newsletters, and provide specialized training programs for the human resources staff at all Saudi Arabian companies to attract people with disabilities to work, in addition to providing consultancy and other logistic services to assist employers in preparing their work environments for people with disabilities.

During the coming period, all the departments and divisions in Zamil Industrial will coordinate to improve the various facilities of the company, making them more compatible with the special needs of people with disabilities and guaranteeing them easy mobility and a safe and comfortable working environment.

Founding Companies

The Business Disability Network was established by a group of leading Saudi companies and business groups in the Kingdom. More local companies are scheduled to join as founders in the coming months in order to provide more support for this distinctive national initiative.

9EVENTS

HRH Prince Saud bin Naif bin Abdulaziz, Governor of the Eastern Province, honored Zamil Industrial for its sponsorship of the graduation ceremony of the General Directorate of Civil Defense.

Zamil Industrial Sponsors Graduation Ceremony of the General Directorate of Civil Defense in the Eastern Province

A total of 1,607 personnel from the 58th preparation course on civil defense work took part in the event, which was held on Wednesday, June 11, 2014, at the Civil Defense Training Center in Dammam. Musaed Al Zamil received the honorary shield on behalf of the company.

The sponsorship represents one facet of the company’s commitment to support and promote a culture of safety among all sectors of society.

The Prince had the opportunity to observe some examples of the civil defense work performed by the graduates, including exercises dealing with different types of accidents, conducted with the participation of the Saudi Search & Rescue Team. Also present were the Director General of Civil Defense, Major General Suleiman bin Abdullah Al-Amro; a number of senior officers from other security sectors; and other VIPs.

The civil defense exercises included the use of personal protective kits; first aid and rescue equipment; the use of metal stairs in rescue work and firefighting; fire accidents; motor vehicle

accidents; catastrophic collapses of buildings; water rescue work; and incidents that involve dealing with hazardous materials.

The ceremony also featured models of the civil defense mechanical devices that graduates have been trained to operate, and included teams of motorcyclists, fire and rescue trucks, rubber rescue boats, and rapid intervention vehicles designed for hazardous material incidents, building collapses and earthquakes.

All who attended the graduation ceremony were impressed with the professionalism with which the graduates showcased the major achievements of the Saudi Civil Defense, with regard to both human resources and equipment capabilities.

10 EVENTS

The employee Iftar took place at the Sheraton Dammam Hotel and Towers, allowing the company’s employees and management teams to interact amid an informal and festive setting, which further strengthened the family atmosphere that the company has long enjoyed.

Abdulla Al Zamil passed on good wishes to the staff and thanked them for accepting the invitation, wishing them many happy returns and blessings during the holy month.

The annual Iftar aims to maintain the company’s high level of employee appreciation, strengthening both social and professional ties and building

the company’s exceptional work environment, which is considered one of the main pillars of success achieved by the company.

In celebration of the holy month of Ramadan, Zamil Industrial held its annual Ramadan Iftar, which was attended by Abdulla M. Al Zamil, Chief Executive Officer, Osama F. Bunyan, Chief Operating Officer, and senior management and employees.

Zamil Industrial Holds ItsAnnual Ramadan Iftar

11EVENTS

The Zamil Industrial team was qualified to the semi-finals of the contest, and ended the tournament with honorable recognition, while the Zamil Group team won the championship with a victory

over the Abdul Kareem team in penalties (3-2) after the match ended in draw positive (1-1).

The contest lasted for 18 days and also offered various social, sports and cultural activities

for attendees. Many famous athletes in the Eastern Province and heads of the clubs were spotted at the event, as well as government officials from various departments in Khobar.

Zamil Industrial Participatesin Ramadan Sports Activities

As part of its continued dedication to participation in major community events and social activities, the Zamil Industrial football team participated in the Al-Qadisiya Ramadan Football Tournament, which was held under the patronage of HRH Prince Saud bin Naif bin Abdulaziz, Governor of the Eastern Province, at the Al-Qadisiyah Sporting Club in Khobar.

12 EVENTS

… and Sponsors Ramadan Iftar for Social Nursery Center in Dammam

The awareness campaign aims to introduce to the public the association and the services and support programs it provides for pediatric patients with cancer, while generating some of the financial support that makes these

activities possible. The campaign offers participants the opportunity to share with their fellow patients and support them as well as to enjoy several recreational and educational activities.To mark the occasion, Sanad

Association awarded a certificate of appreciation to Zamil Industrial for the company’s excellent contribution to and support of this valuable campaign.

For the fourth consecutive year, Zamil Industrial sponsored the annual Sanad Al-Khair awareness campaign, which was conducted at several commercial malls in Riyadh by Sanad Children’s Cancer Support Association during the holy month of Ramadan.

Zamil Industrial Sponsors Sanad Children’s Cancer Support Association Campaign

For the third consecutive year, Zamil Industrial organized and sponsored a Ramadan Iftar program for residents of the Social Nursery Center in Dammam on Wednesday, 2 July 2014. The initiative, which included all residents

of the nursery, was created in conjunction with the company’s community social responsibility initiatives.

The program was held at the Sheraton Dammam Hotel and Towers. To mark the occasion,

the director of the Social Nursery Center in Dammam, Nawal Abdulrahman Al Abdulhadi, sent a letter of appreciation to the management of Zamil Industrial on behalf of the center for providing its residents with this exceptional opportunity.

13EVENTS

The president of the Saudi-Polish Business Council, Marek Gawlik, accompanied by the president of PROJPRZEM S.A., Piotr Babst, paid a visit to Zamil Industrial on August 4 and 5, 2014.

Polish Trade DelegationVisits Zamil Industrial

During the visit, the delegates discussed potential areas of cooperation and ways to strengthen economic and trade cooperation between the Saudi companies and Poland. Both groups focused on the goals of improving commercial relations and promoting joint investment projects that will further enhance the business relationship between the two countries.

The visiting delegation was impressed by the advanced level of operations at the Zamil Industrial manufacturing facilities and by the wide variety of products and services provided by the company.

The delegation was received by officials from both Zamil Industrial and Zamil Group, who delivered comprehensive presentations about the company and its various sectors and operations.

Later, the visitors proceeded to the factories of the steel and air-conditioning sectors in Dammam First and Second Industrial Cities, where they toured the plants and observed the production lines and manufacturing operations.

The delegation also visited the Zamil Architectural plant and was accompanied by engineers who provided a detailed briefing on the plant’s operations and state-of-the-art production equipment.

14 EVENTS

Zamil Industrial organized field tours of company facilities in Dammam First and Second Industrial Cities for participants in the “Atabara” cultural program, a collaboration between Saudi Aramco and ten sports clubs from various regions of Saudi Arabia, held from June 15 to July 1, 2014.

Zamil Industrial Organizes Field Tours for Participants in Atabara Cultural Program

The participants were briefed on the plants’ production lines and manufacturing operations, which added to their experiences as they seek to explore private-sector companies’ contribution to economic growth and community.The Atabara program included various sports

and cultural and recreational activities that aimed to develop youth sports skills; enhance public awareness of the need to protect the environment; explore the fundamentals of safety, health care and energy preservation; and develop the competencies and personal skills of the participants.

15EVENTS

The exhibition, with the theme “Innovative Architecture, Sustainable Future,” attracted more than 4,000 architects and design professionals. The event highlighted green architecture and groundbreaking design in its lively showcase of products, materials,

Zamil Steel Vietnam’s Manila sales office participated in the 40 th United Architects of the Philippines Convention Exhibit (UAP ConEx), the Philippines’ largest construction exhibition, which was held from April 10 to 12, 2014, at the SMX Convention Center in Manila.

Zamil Steel Vietnam Participates in Manila UAP ConEx 2014

… and Takes Part inBangkok Architect Expo 2014

technologies and services for building and construction.

The event provided a good opportunity for Zamil Steel Manila to build new relationships with industry players. Unlike other construction expos in the country, the UAP ConEx is organized by

inquiries about pre-engineered buildings (PEB) and their advantages over conventional buildings, while also introducing a variety of steel building applications. Marketing materials were specifically designed for this occasion and distributed free to visitors.

The event seeks to introduce the latest technology, architectural and building products, and material, equipment and related services to Thailand and other Southeast Asian clients. The organizer of Architect Expo hopes through this event to promote Bangkok as the center of the building material industry for ASEAN.

a group of accredited architects and showcases the best of the country’s esteemed architects. Another unique offering of this expo is the face-to-face interaction with professional architects about the development and renovation of either a residence or office building.

UAP also hosted a series of seminars on “The Business of Architecture” and “Architecture for Nation-Building,” during which the public received insightful tips and information from architects themselves. The seminars discussed technological design, and UAP offered architectural tours and talks on climate change and the future of architecture.

Zamil Steel Vietnam’s Bangkok sales office participated in the Bangkok Architect Expo 2014, which was organized by the Association of Siamese Architects from April 29 to May 4, 2014 in Bangkok.

With more than 350,000 visitors in five days, Bangkok Architect Expo is considered one of the biggest events in the construction industry of Thailand. The event provided a good opportunity for designers, consultants, engineers and contractors in the building and construction industry to network with worldwide manufacturers and clients.

Zamil Steel’s booth attracted a large number of visitors, and the sales team answered visitors’

16 HEALTH & SAFETY

The Zamil Industrial Loss Prevention (ZI LPD) team depends on these key ingredients in order to achieve both short and long-term objectives: management commitment, planning, support, teamwork, implementation, review, continual improvement and strategic development. We have achieved much during the second quarter of 2014, and we will continue to strive to do our best to execute and deliver the very highest level of performance.

●As of the second quarter of 2014, we have obtained five Presidency of Meteorology and Environment (PME) certificates for Zamil Air Conditioners (ZAC) Consumer division, Zamil Central Air Conditioners factory (ZCA), Zamil Steel Pre-Engineered Buildings Co. (ZS-PEB), Armacell Zamil Middle East Co. (AZMEC) and Zamil Structural Steel Co. (ZSSC) respectively, as well as three civil defense permits for

AZMEC, ZS-PEB and the first plant of Zamil Steel Towers & Galvanizing Co.

●Loss prevention operations at AZMEC are now officially integrated with Zamil Industrial corporate LPD programs and activities. Integration began in the first quarter of 2014, and an in-house safety engineer has been designated to coordinate the process using LPD’s comprehensive safety functions.

HSE, Fire and Security Operation Developments

●Successful completion and implementation of Color Coding and Pipe and Tank Marking systems at all Zamil Industrial facilities is well under way. Pipes are color coded and marked according to fluid type, direction and flow of pressure, in order to identify their contents and to alert employees of impending workplace dangers while controlling physical hazards to operational safety.

Zamil Industrial LPD Achievements During the Second Quarter of 2014

17HEALTH & SAFETY

●LPD conducted an environmental survey of all Zamil Industrial business units during the second quarter of 2014. Areas inspected and surveyed include multi-gas monitoring, noise level monitoring and canteen food safety, as well as an environmental audit for each section of each factory. These activities yielded positive/normal results at all Zamil Industrial factories.

●Zamil Industrial factories have concluded Emergency Action Plan (EAP) programs for the first half of the year. We are grateful for the full support and commitment of the management at each facility in reaching this goal.

●AZMEC implemented a fire protection program in April. A fire inspector has been designated to handle system operation, inspection and audit as per business plans. In addition, AZMEC recently obtained civil defense certification.

●LPD has submitted recommendations for the provision of additional CCTV coverage for the former premises of Zamil Glass operations and for a new CCTV system for the Zamil Steel PEB command post.

●A case of theft was investigated at the Jubail CoolCare warehouse. After this unsuccessful burglary attempt, LPD recommended that site management adhere to strengthened security requirements.

●The team expressed concerns about security at the Al-Hasa CoolCare warehouse, along with the need to arrange an in-house security program in order to maintain an environment secured against any adversity.

Completion of Zamil Industrial Business Units and JVs EAP ProgramThe completion of the Emergency Action Plan (EAP) program implementation for all Zamil Industrial factories and establishments revealed that each factory, as well as corporate management, has begun to seriously recognize and appreciate the value of the program to the business, and more importantly to the protection of lives and property in all Zamil Industrial buildings.

The safety culture has improved, and each company fully or partially owned by Zamil Industrial has stepped up to meet its responsibilities with regard to providing a safe and healthy working environment for employees.

EAP fire drill ratings were computed based on the following categories: (Related Reference: SHEMS Element 09)

1. EAP training/orientation/meeting attendance (percentage attendance: planned vs. actual) – 20%

2. EAP drill preparedness (preparation of necessary emergency equipment, utilities, documents and personnel) – 20%

3. EAP drill execution or emergency response implementation (number of findings of EAP auditors) – 50%

4. EAP auditors’ factory management accomplishment (percentage of resolved items from past drill) – 10%

Technical Support and Development Services

●The EAP fire drills for the nine Zamil Industrial business units were conducted in the second quarter, during

which the team focused on the emergency response and preparedness plans for the respective administration offices and office buildings of each business unit. The team provided proper safety knowledge and information to office and management staff and other occupants of the buildings about their roles and responsibilities during an emergency. Implementation went according to plan, and corporate and administration management received the program enthusiastically.

●The Corporate LPD Technical Section provided guidance and support on the EAP program implementation of Zamil Industrial out-of-kingdom (ZI-OOK) factories. During the first quarter, the corporate LPD director visited Zamil Steel Vietnam factories (Hanoi and Dong Nai) to promote the continued monitoring of all HSE programs, which included performing the required fire drills in both plants. During the second quarter, Zamil Steel Egypt (6th of October factory) executed its fire drill during the night shift. Corporate LPD guided preparations to the evaluation stage.

●As part of the enhancement of the EAP program, the LPD Technical Section, along with LPD HSE operations, prepared a potential emergency assessment of each business unit or joint venture factory. The assessment will enable each business to properly establish an emergency response and preparedness plan to be used in various types of emergency situations other than fire (chemical spills, gas leaks, etc.). All assessments were reviewed and updated in the EAP General Instructions of each Zamil Industrial factory or unit. Implementation is scheduled for 2015.

18 HEALTH & SAFETY

●The Development & Technical Support team conducted several on-site HSE and fire assessments in cooperation with the management of Zamil Industrial joint venture Riyadh factories: Ranco Zamil, SRWF and SPPI in the first quarter and SRWF second plant (Al Kharj) in the second quarter. Surveys were also conducted in extended business operations of the HVAC sector, on a building modification project at the former Zamil Glass facility and at the duct shop at the former Al Sagri factory (under Zamil Air Conditioners).

●Assistance and preparation were provided for the corporate LPD director’s visit to the Zamil Steel Vietnam factories (Hanoi and Dong Nai) in the first quarter and Zamil Steel India during the second quarter. The corporate LPD Technical Section worked in collaboration with Zamil Industrial OOK factories management personnel to ensure smoothly run proceedings and to provide effective integration of corporate LPD programs into these overseas manufacturing plants.

●The final review and revisions were completed for the newly released Zamil Industrial Home Safety Handbook, which was developed for Zamil Industrial employees and various communities. Some 30,000 handbooks were published and delivered in June. The Home Safety Handbook provides general safety guidelines for use not only in the workplace, but also at home and within the community. The Home Safety Handbook was printed in both Arabic and English and is now being distributed across all Zamil Industrial companies and business sectors and in nearby communities.

●One of the strengths of the corporate LPD Technical Section is that it provides continued assistance in the form of the latest safety data, information and statistics to each Zamil Industrial business unit that submits a request. During the first half of the year, the section provided support to the business operations of ZAC, CoolCare, ZS PEB, Zamil Process Equipment Co. and ZIMIPCO in dealing with their prospective customers and pre-bid qualifications. The corporate LPD Technical Section also assisted Zamil Air Conditioners with preparations for its ISO 14001 and OHSAS 18001 certifications. Audits were scheduled in July, and preparations involve the critical support of corporate LPD.

●Another notable accomplishment was the assistance provided to the management of the AFICO plant in the First Industrial City through a very professional and critical review and evaluation of the KFUPM study report. Corporate LPD worked hand in hand with AFICO to resolve issues in the report related to AFICO’s first plant. Several meetings with concerned parties were carried out until all concerns were finally resolved.

●LPD developed key forms and checklists used to aid LPD HSE operations in carrying out machine guarding and workplace illumination inspections at all Zamil Industrial business units. The main goal is to prevent work-related accidents involving all types of machinery and equipment used at various Zamil Industrial factories, and to ensure that sufficient lighting for the protection of employees and property is provided at each plant.

Training and Support ServicesPreventing accidents and adverse health conditions caused by exposure to workplace hazards is a key priority of the corporate LPD Training & Awareness section. Effectively promoting safety education and awareness contributes to worker competency as well as safety and health. In addition, it enables the organization to avoid distress caused by the financial cost of accidents and ill health.

During the first half of 2014, a total of 473 training sessions were accomplished – 189 in English and 284 in Arabic. From January to June, 4,183 employees completed various training programs and classroom safety education and awareness courses — 2,314 and 1,869 employees, respectively, in the English and Arabic sessions.

...Zamil Industrial LPD Achievements During the Second Quarter of 2014

According to EY’s Power Transactions and Trends report, the increasing role of the private sector in utilities that generate power and supply water could boost opportunities for large-scale transactions in MENA in the future.

Private Sector Cooperation Will Boost Opportunities for Large-scale Power Transactions in MENA

With market reform gaining momentum in the region and the unbundling of utilities increasing, the renewables sector appears to be a fertile area for growth.

“At present, utilities in the Gulf are focusing chiefly on domestic investment. There is a massive need for new power and water capacity, driven by population growth and the increased industrialization of

the region’s economies. The projections for new capacity over the next few years encompass not just generation but basic infrastructure. This demand will open up substantial opportunity for private sector involvement and transactions,” says David Lloyd, MENA Power & Utilities Transactions Leader, EY. EY is a member firm of Ernst & Young Global Limited and a global leader in assurance, tax, transaction and advisory services.

Transaction activity in the GCC is largely based on the participation of the private sector in capital projects and commercial undertakings. As power generation markets and competition become more defined and established, growth rather than consolidation is expected to be a dominant driver of activity, resulting in an increase in partnerships between state-owned businesses and the private sector.

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Some appetite for outbound investment remains

Despite the focus on growth, oil and gas deals are still being completed between both companies already based in the Gulf and between international players. In January 2013, the Saudi Arabian public pension agency picked up 19.4% of ACWA Power, an independent Saudi power company with a mixture of public and private shareholders.

A number of Middle East funds are also planning to diversify their investments and acquire assets across the globe. For example, Kuwait and Qatar’s sovereign wealth funds expressed interest in the UK utility sector in 2013. Saudi Arabia’s ACWA Power recently began to internationalize and Masdar Capital (Abu Dhabi quasi-sovereign) already owns several large-scale renewable assets internationally.

Several other utilities in the Gulf, particularly in Qatar, are known to be interested in establishing independent power plant (IPP)-type companies able to compete for new projects in international markets using their substantial capital base and their deep experience with the IPP model. This development is likely to increase competition for regulated and renewable assets in Europe.

Future in renewable energy transactions

Substantial (and largely inbound) transaction activity is expected in renewables - mainly solar and wind. Several substantial renewable energy programs are currently in the pipeline, and include all of the Gulf countries. As this market accelerates, extensive use of IPPs is expected, and foreign private sector capital will be readily available to fund, build and operate renewable energy plants.

“The hydrocarbon-rich countries of the Gulf recognize that their resources and capital may not be limitless, given the massive investment required for generation

and subsidies. There’s definite interest in switching fuel sources and raising capital from the private sector around the IPP model,” says Christian von Tschirschky, MENA Power & Utilities Leader, EY.

In particular, significant transaction activity based on joint ventures between international and domestic companies is expected, with the international companies contributing their renewables expertise and local partners drawing upon their knowledge of land, regulation, and environmental issues and the power off-take permitting process.

The Middle East continues to be one of the world’s biggest markets for independent power plants, and a number of global, independent power companies are active in the region and continually looking at new projects. Institutional investors might consider ways to participate in this developing renewable energy market, which will attract companies of all sizes and offer significant funding requirements and long-term off-take profiles. However, given how Middle East markets are structured, participation should probably be considered as a long-term initiative.