INTEGRATIO

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ANNUAL REPORT 2016

VALUEONE

COMPANY PROFILE

Elementia is a leading building materials company that offers a broad portfolio of products and solutions for the construction industry and industrial market.

Elementia has three divisions: Cement, Metal Products and BuildingSystems. Our 29 facilities are located in 9 countries of the Americas, from which we meet clients’ needs by covering markets of interest through more than 5,000 distributors, supported by the prestige of our brands and the reliability of our products.

Among others, Elementia produces the following products: cement, light building systems (including fibercement and plastic products), copper and copper-alloy products.

Elementia is a unique building materials platform with a comprehensive product portfolio, leading brands, commercialization capabilities and an extensive distribution network through which we have successfully integrated our three divisions: Cement, Metal Products and BuildingSystems aiming to be the preferred supplier for the construction industry.

The Power of Oneness strategy has defined Elementia’s goals to help it reach the objectives it set upon its creation. Oneness encompasses three main pillars:

ONE GROWTHONE INTEGRATIONONE VALUE

Elementia is strategically positioned in attractive markets to help transform and reinvent the traditional construction industry towards a new lightweight construction trend. Its innovative products and services – resulting from generated new technologies, solutions and alternatives for its markets – allow it to have a favorable impact on the communities it serves by improving life’s quality.

Elementia plays a key role in changing times, by not only rapidly adapting in a fast-evolving environment, but by being a leader that embraces change by improving a quality of life.

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Elementia S.A.B. de C.V., Ps. million as of December 31, 2016 and 2015. 2016 2015 Change

Net sales 19,090 16,974 12%

Gross profit 5,624 4,457 26%

Consolidated net income 687 12 5,625%

Operating income 2,349 1,849 27%

EBITDA 3,595 3,002 20%

Total assets 53,760 31,506 71%

Cash and cash equivalents 3,912 3,103 26%

Receivables 3,481 2,336 49%

Inventories 4,601 2,881 60%

Others current assets 2,158 1,388 55%

Long-term assets 39,607 21,798 82%

Total liabilities 29,552 15,640 89%

Current liabilities 10,825 3,965 173%

Long-term liabilities 18,727 11,675 60%

Consolidated shareholders’ equity 21,628 15,803 37%

Total minority interest 2,580 64 3,948%

Total majority interest 24,208 15,866 53%

FINANCIAL HIGHLIGHTS

BuildingSystems

Metal Products

3,800 20%

1,481 41%

7,709 41%

946 26%

7,249 39%

1,166 32%

Cement (Cement Mx, Cement U.S.)

SALES% by division

EBITDA% by division

HEDGING STRATEGY

• Elementia hedged 20% of its international bond in two tranches, 85% of the debt contracted with the ECA, and hedged its peso-denominated syndicated credit facilities to U.S. dollars.

• January 2016: Copper hedging was increased to 2,000 tons from 1,000 tons.

NEW CREDIT LINE

June 2016: Elementia signed an ECA (Export Credit Agency) facility agreement with Santander, guaranteed by COFACE, for up to U.S.$ 128 million, which bears interest rate at Libor 6 months + 80 bps and matures in 2027.

Ps. million

Ps. million

11 1412 1513 16

19,0

90

16,9

74

15,3

31

12,9

29

13,5

06

14,5

05

11 1412 1513 16

3,59

5

3,00

2

2,67

5

1,91

3

1,87

7

1,74

8

11 1412 1513 16

2,34

9

1,84

9

1,60

4

1,19

7

1,36

6

1,27

1

3

SUCCESSFUL CAPITAL

INCREASENovember 2016: Successfully completed a capital increase for close to Ps. 4.4 billion through a Rights Offering by the subscription of 218,435,955 shares, at a price of Ps. 20.00 /share utilized to complete the acquisition of 55% of Giant Cement Holding, Inc.

5.6%CAGR 2011-16

Cement U.S.Ps. 717 million

15.5%CAGR 2011-16

Cement U.S.Ps. 169 million

Ps. 4.4billion

capital increase

13.1%CAGR 2011-16

Cement U.S.Ps. 57 million

CEMENT

EXPANSIONWe continued with the Tula facility expansion plan by adding 1.5 million tons to reach 3.5 million tons of installed capacity. The expansion remains on track in terms of budget and schedule.

MANAGEMENT CHANGES

• November 2016: Mr. Juan Francisco Sánchez Kramer was ratified as Chief Financial Officer, and served as interim CFO since March 2016.

• January 2016: Ms. Laura Cañez Olvera was appointed Head of Strategic Planning.

• November 2016: Ms. Laura Puig Grajales was appointed Head of Innovation; a new strategic department aimed at expanding Elementia’s product portfolio.

GIANT ACQUISITION

November 2016: Elementia completed the acquisition of a controlling 55% stake of Giant Cement Holding, Inc. from Cementos Portland Valderrivas, S.A. for U.S.$ 220 million.

NET SALESPs. million

EBITDAPs. million

OPERATING INCOME

Ps. million

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TO MY FELLOW SHAREHOLDERS:

The success achieved in 2016 was based on the implementation of our business strategy. Without question, the global changes that took shape over the course of the year certainly brought external challenges, but many of the actions we had taken since inception, such as prod-uct and geographic diversification, were key to extracting positive results.

Among some major obstacles were the decline of com-modity prices, government budget cuts in Latin America and the significant exchange rate volatility in the region, that, added to flat interest rates in the U.S. versus interest rate increases in Mexico, a strong global market volatility resulting from Brexit and the slowdown of China’s econ-omy, which complicated our business climate. In such a turbulent landscape, we had to more than ever, have our three divisions – Cement, Metal Products and BuildingSys-tems – work together in order to generate competitive ad-vantages through our strategy “The Power of Oneness" in order to overcome a period of continued global volatility.

To that end, we held a remarkable event that helped us solidify our customer base. For the first time in our his-tory, Elementia held a global convention that brought together customers and employees from all nine coun-tries in which we operate and other countries in which we are present.

billion in net sales and Ps. 3.6 billion in EBITDA

Ps.19.1

The convention focused on strengthening cross-selling op-erations between the three divisions. Its success was over-whelming. We received tremendous feedback and recom-mendations on areas to develop which highly contributed to the positive effects we had at year-end.

It pleases me to say that in 2016, Elementia maintained its growth trends posting double-digit growth through-out its divisions; all while strengthening our balance sheet and maintaining a sound financial discipline. Ad-ditionally, we generated over Ps. 19.1 billion in net sales and Ps. 3.6 billion in EBITDA, up by 12% and 20%, re-spectively, as compared to 2015. Our results during the year demonstrate that The Power of Oneness strategy is taking root and is enabling us to achieve our expected and desired performance.

With regards to our strategic framework, we set both or-ganic and inorganic growth goals for the year 2016.

MESSAGE TOOUR SHAREHOLDERS

5

FRANCISCO JAVIER DEL VALLE PEROCHENA CHAIRMAN OF THE BOARD OF DIRECTORS

cement production capacity per year; and so, we conclud-ed that Giant was the ideal opportunity to enter the U.S. market at a reasonable price and a very attractive upside in terms of value generation.

Generating value to our shareholders as well as for our customers remained the main focus for Elementia during the year. In 2016, we delivered by strengthening our lead-ership in the building materials industry. First, we further diversified the company’s geographic presence across large, growing markets and favorable trends.

Second, we took significant steps in redefining and rein-venting the elements of light construction through prod-uct innovation.

Third, we had great progress into creating communication bridges with our customers in order to properly under-stand and meet their needs.

Finally, we continuously strived to improve our active per-formance by investing in our team and capabilities to build the industry’s most forward-thinking products and services, all supported by The Power of Oneness strat-egy, which in terms of human resources takes on a spe-cial meaning, strengthening us as one cohesive team that seeks common objectives.

I cannot express enough how valuable we consider our man-agement team as well as the rest of the staff in Elementia. They are the engine that makes our corporate strategy run in a continuous and successful way every day. For that reason, this year, we took our support towards them to the next lev-el. We successfully launched the Instituto Elementia. This ini-tiative consists of online courses coaching key topics essen-tial for Elementia’s development and corporate identity, such as: accountability, Elementia at the Mexican Stock Exchange, ethics, security and training courses.

The popularity of these courses within the team has been impressive and I cannot thank them enough for their ef-forts put in completing them. Their high level of commit-ment to the Instituto Elementia and the company added to their high level of expertise in the industry reassures me that we will continue to make the difference in the con-struction world today and in the years to come.

I see a great future for Elementia; and I can assure you that our Board will continue to play an active role in over-seeing our strategies to deliver on the value-creation framework and in measuring our progress against it.

First, the triumph in organic growth was the result of our ability to earn our customers and distributors´ trust each day by remaining committed to constant service improve-ment and reinvention.

Being able to meet our customers’ needs in a timely man-ner is key for long-term company value creation; and therefore, Elementia has always worked to anticipate and embrace the changes in the construction environment af-fecting our customers. From our earliest efforts to provide a product portfolio that could supply all materials needed to build a typical house, to our most recent efforts of de-veloping state-of-the-art products through a greater fo-cus on R&D efforts enabled us to offer more value-added products. Elementia has never stopped innovating and is a catalyst for the long-term success of our businesses.

However, what satisfies me the most is that in 2016, not only did we expand through one of the pillars in our strate-gic framework, but we accomplished both. Last November, we proudly announced that Elementia successfully com-pleted the acquisition of a 55% stake and full control of Giant Cement Holding, Inc. This transaction was the result of a highly-detailed analysis and the “full potential” review performed with the help of Bain & Company. We are ruled by the principles of corporate governance which guide the way we behave toward our various stakeholders. Therefore, all decisions taken by our Board of Directors seek value cre-ation for shareholders and to keep their best interest. The acquisition of Giant was no exception.

Giant’s acquisition granted Elementia access to the third-largest cement market in the world. The cement market in the U.S. presents attractive growth opportuni-ties with the rebound in public and private construction activity and demand for cement returning to pre-crisis lev-els, which has driven as well, price recovery. Added to that, the acquisition enabled us to add 2.8 million tons of

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DEAR SHAREHOLDERS,

2016 was an extraordinary year for Elementia as we achieved several milestones to solidify our Power of Oneness strategy aimed at revolutionizing the construction industry with integrated building material solutions.

We not only raised close to an additional Ps. 4.4 billion in capital backed by the confidence of our investors, but we also successfully entered the U.S. cement market with the acquisition of Giant Cement Holding. At the same time, we reported a record Ps. 19.1 billion on revenue and Ps. 686 million in net income for the year.

The external challenges that began to take force in 2016 and continue today have been daunting for every Mexican company. However, Elementia’s geographic diversification has been critical to overcome the significant exchange rate volatility. Our results continued to reflect the effectiveness of our building materials platform operating in nine coun-tries. We delivered EBITDA of Ps. 3.6 billion, up 20% com-

pared to 2015, and free cash flow before CAPEX of Ps. 3.42 billion equivalent to 95% of generated EBITDA in 2016.

Our three divisions, working together – Cement, Metal Prod-ucts and BuildingSystems – are what make Elementia so unique; no other company has the brand and product portfolio we offer and the construction world is taking notice. Over the course of the year, each division continued to strengthen our leadership position in the markets where we operate.

First, the Cement Division in Mexico posted an unprece-dented 39% EBITDA growth to Ps. 1.31 billion compared to 2015 driven by our high-quality products and Fortaleza’s strong brand positioning which kept our prices in the top quartile in all our markets.

Our successful acquisition of Giant Cement Holding and our penetration into the U.S. cement market was, as we have stated since our IPO, the next planned phase of growth for Elementia: to add assets in countries where we have oth-er operations and that have a high opportunity for value creation. After a thorough due-diligence process, we saw that Giant presented a unique opportunity to enter the U.S. market at a reasonable price and a very attractive upside in terms of value generation. For instance:

REPORT FROM OUR CHIEF EXECUTIVE OFFICER

Our three divisions, WORKING TOGETHER – Cement, Metal Products and BuildingSystems – are what make Elementia so unique; no other company has the brand and

construction world is taking notice.

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I. it further helps us balance our currency profile shifting it into a more dollar-denominated one;

II. it presents important opportunities to recover value in terms of capacity utilization and pricing, both of which are below the industry average in the regions where we participate. We have outlined the necessary plan and CAPEX to achieve this, a plan which had not been feasible due to Giant’s heavy financial burden; it can now be achieved through Elementia’s strong bal-ance sheet;

III. it enables us to have vertical integration with our Build-ingSystems Division in the U.S. between our soon to be open facility in Indiana and our plant in North Carolina; and

IV. finally, it presents a valuable opportunity to further our cost-cutting initiatives in Mexico by implementing Gi-ant’s vast know-how in the use of alternative fuels and technology.

As a firm, we have a history of showing leadership and ex-perience in turning around companies troubled by financial constraints and transforming them into value-generating in-stitutions. This time was no exception. The Giant acquisition was feasible thanks to our strict financial discipline, our solid balance sheet, and our strong corporate governance practic-es that have always distinguished Elementia.

Furthermore, and regarding corporate governance, I’m proud to let you know that given the potential conflict of interest in this transaction due to the fact that one of our major shareholders also has (indirect) participation in the ownership of Giant, the directors appointed by Carso ab-stained from voting. The corporate practices and audit committee recommendation to conduct ourselves in this way, and which was based on a Fairness Opinion, was car-ried out in full.

In the Metal Products Division, we took significant steps in leveraging our Nacobre brand, and as a result, it reported an EBITDA of Ps. 1.16 billion, 20% higher as compared to the previous year. Once again, our proven strategy for this division is: focused on selling higher value added prod-ucts, cost cutting initiatives and copper hedging and con-tinue to improve metal yields.

Finally, let me touch upon the business segment that – as I have expressed before – I truly believe has the biggest po-tential to help innovate the elements of lightweight con-struction and therefore have the strongest performance turnaround in the long-term: the BuildingSystems Division. Although we faced some headwinds in this division during the year (such as lack of government projects in Mexico,

LEVERAGING OUR NACOBRE BRAND, and as a result, it reported an EBITDA of Ps. 1.16 million, 20% higher when compared to the previous year.

FERNANDO RUIZ JACQUESCHIEF EXECUTIVE OFFICER

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natural disasters impacting demand in Ecuador, the lon-ger than expected learning curve for the automatization of the Central American operations, and the challenging economic conditions in Central and South America), we reported a promising double-digit growth of 12% in rev-enue at year-end. However, I would most like to highlight that 4Q16 was the beginning of the recovery in terms of EBITDA generation, due to the diversification of the divi-sion’s product portfolio.

During 2016, BuildingSystems developed the highest num-ber of new products within the group, led by our expand-ed Innovation department. Our innovative product-line now offers building materials which are more flexible and show less breakage. We are confident that these value-added products will give us the competitive advantage the division and the company need to take the lead in the geographies we have presence; but even more important, it allows us to transition from a traditional-oriented construction industry into a new lightweight construction trend.

I am very pleased by the progress we have made in trans-forming our organization into the Elementia that we en-visioned since its creation: a fully-integrated building ma-terials entity, where “the whole” is greater than the sum

of its parts. The Power of Oneness strategy has enabled us to become that: a growing and profitable building ma-terials platform with a comprehensive product portfo-lio, leading brands, an extensive distribution network and commercialization capabilities that supplies all the main construction stages. We are confident that the concept of Oneness is what sets us apart from any other company out there in the construction industry.

We have devoted significant attention to study our current business mix to create synergies and cross-selling opportu-nities that would not only maximize our shareholders’ val-ue, but that will redefine today’s construction industry. That is why during 2016, the efforts of the entire organization were focused on achieving ONE INTEGRATION within our three divisions, ONE GROWTH catalyzed by organic and inorganic development, and ONE VALUE created by our commitment to our customers, shareholders and communi-ties we have presence in.

Although Elementia has amassed its portfolio of business over time, we are now equipped to be, as ONE, the mar-ket’s supplier of choice in all stages of the building mate-rials industry. After a year-long project in which we met face-to-face with our customers to learn what they need

During 2016, BuildingSystems developed the highest number of new products with STATE-OF-THE-ART TECHNOLOGY within the group.

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from us in order to be successful, we obtained a clear roadmap for what we needed to do to succeed. We are now a truly customer-oriented company with the knowl-edge and ability to supply innovative products, offer bet-ter service and improved commercialization strategies. It gives me great satisfaction that in 2016, we established these communication bridges that have allowed us to be closer than ever to all of our clients.

Looking into 2017, we continue to see exciting opportu-nities to invest for the future and to do even more for our customers and shareholders – as well as continue to sup-port the essential components of the construction val-ue chain. We cannot deny that 2017 is off to a challeng-ing start. However, I am confident that Elementia has the right team, technologies and competitive advantages to, once again, excel in the construction business.

In the face of growing uncertainty, we will work to improve operating efficiencies through the reduction of costs, by rightsizing, optimizing processes and logistics, and inno-vating by implementing the use of alternative raw materi-als. We will continue to increase our cross-selling initiatives in order to complement our product portfolio and deliver a comprehensive solution to our distributors and customers.

And finally, we plan to capitalize from our leveraged brands and markets in which we see potential.

Aiming to take the company to the next level, we consoli-dated our management team by adding Mr. Juan Luis Alfie-ro Caballero as new Head of BuildingSystems and Mr. Lau-ra Cañez Olvera as Head of Strategic Planning to our team. Moreover, we ratified Mr. Juan Francisco Sánchez Kramer as Chief Financial Officer and we hired heads for Marketing and Innovation at Elementia level.

We recognize that none of this would be possible without the devoted support from our team here at Elementia. I am proud to say, that our team is comprised with people that have the capabilities and motivation required to successfully execute our corporate strategy. They are the basis of our corporate identity, and for that reason, I would like to thank each and every one of them for their effort and loyalty.

I would also like to thank our clients, suppliers and our share-holders for the trust you have in us. We believe that together, we can make a difference in the construction industry in Latin America and the U.S. by offering innovative products, services and building alternatives that will boost economic productivity.

We will give it our best!

FERNANDO RUIZ JACQUESCHIEF EXECUTIVE OFFICER

to studying our current business mix to CREATE SYNERGIES and cross-selling

construction industry.

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CEMENT DIVISIONThe Division’s latest acquisition – Giant – represents important opportunities on its own, but also brings opportunities from business convergence.

• Improve Elementia’s positioning in the U.S. by offering complementary products.

• Selective targeting of specific customers – like big builders – taking advantage of the distribution network of Giant and Allura.

BUILDINGSYSTEMS DIVISIONThroughout the Americas, we have taken advantage of our strong distribution network to allocate new complementary products like rotating-molding and products from other Divisions; the U.S. operations – which has steadily grown faster than the market since its acquisition in early 2014 – will also share opportunities with the latest addition to our product portfolio: Giant.

METAL PRODUCTS DIVISIONIts complete product spectrum developed over the past 60 years, has significantly contributed to the development of Nacobre’s unmatched distribution network – a network now also being used by the other two Divisions, thereby, transforming small retail stores into “multi-product buyers” from “single-product buyers”.

+4,300independent distributors and customers

12distribution centers

12warehouses

29production plants

ALIGNING COMMERCIAL ACTIVITY INTO ONE PLATFORM

TOGETHER IS

BETTER Our 3 Divisions working together as ONE allow us to provide a comprehensive product portfolio and aim to deliver integral solutions to our customers and clients across all stages of the construction process; from the foundations phase, all the way to finishing and facades.

Extensive distribution network throughout 9 COUNTRIES in the Americas is hard to replicate.

11 1412 1513 16

6,86

4

4,36

1

3,21

9

3,07

5

2,76

4

2,76

4

11

HOW DO WE DO IT?

Although Elementia has assembled its portfolio of businesses over time, our main goal is to be a one-stop vendor that satisfies the needs of the construc-tion stages, and thereby be a single solu-tion and the market’s supplier of choice within the construction industry.

Cementos Fortaleza, Nacobre and Mexalit (Mexico)

Giant Cement and Allura (U.S.)

Plycem (C.A.) and Nacobre (Mexico)

Plycem (C.A.) and Allura (U.S.)

Our distribution network allows us to cost effectively EXPAND our offering and enter new markets.

We strengthen our position as ONE COMPANY by bringing together all the acquisitions, all geographies, and all three Divisions into one culture and one common goal supported by cen-tralized back office services and our overall strategy, which we call The Power of Oneness.

SUBSTANTIAL CROSS-SELLING OPPORTUNITIES ACROSS DIVISIONS AND REGIONS

DIVERSIFIED SALES

No single customer represents over 4% of consolidated net sales

WIDE PRODUCT

DIVERSIFICATION

Rotating molding installed capacity

Tons

20%CARG 2011-16

57% increase in Colombia´s production capacity in 2016, and start-up of operations in

Central America.

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15

15

15

16

16

16

14

14

14

15

15

15

16

16

16

14

14

14

1,48

11,

166

946

942

975

1,06

9

572

856

1,11

932

.711

.918

.4

39.7

13.0

15.6

39.0

16.1

12.3

3,80

07,

249

7,70

9

2,37

17,

485

6,87

2

1,74

77,

218

6,07

3

14 15 1614 1515 1614 115 16

14 15 16

4 614 15 16

12

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ELEMENTIA AT A GLANCEA UNIQUE, growing and profitable building materials platform with a comprehensive product portfolio, leading brands, an extensive distribution network and commercialization capabilities that can supply up to 75% of the materials used to build a typical house.

Products and solutions to meet the needs of the various construction methods, becoming a KEY PLAYER in all of the construction stages.

Its LEADERSHIP as a building materials company can be found throughout the western hemisphere across large, growing markets with favorable industry trends.

Over 6,600 COMMITTED employees and a VALUE-FOCUSED management team with the character, culture, intellect, experience and wisdom necessary to rightfully execute The Power of Oneness corporate strategy.

ONE INTEGRATION

9 countries

29 plants

13 top brands

#1 in Mexico as the largest

copper alloys manufacturer and one of the Top 5 worldwide

#1 in Latin America and # 2 in the

Top 5 cement companies in Mexico and the East Coast of the U.S.

Strong presence along all of the construction stages allow us to build value-generating opportunities for our shareholders, employees and communities.

EBITDAPs. million

EBITDAPs. million

EBITDAPs. million

NET SALESPs. million

NET SALESPs. million

NET SALESPs. million

EBITDA MARGIN (%)

EBITDA MARGIN (%)

EBITDA MARGIN (%)

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CEMENT DIVISIONPRODUCTS Grey and white cement, mortar and ready mix.

MARKETS Focuses on the self-construction segment within the central region of Mexico and the East Coast of the U.S., representing around 20% of Elementia’s sales.

PRODUCTION FACILITIES Mexico: 3 vertically integrated facilities – Tula, Vito and Palmar – with a cement production capacity of 2.0 million tons. A 1.5 million tons capacity expansion is being carried-out to be completed by mid-2017, reaching 3.5 million tons.

U.S.: 3 vertically integrated cement plants, 2 aggregate quarries and 6 cement terminals, adding over 2.8 million tons of cement production capacity per year.

BUILDINGSYSTEMS DIVISIONPRODUCTS Fibercement and plastic panels, sidings, trims, roofing and floors; in addition to paints, water storage, pipes and self-construction kits.

MARKETS Focuses on the light building systems, facades and self-construction segment across North and South America.

PRODUCTION FACILITIES 21 facilities across the U.S., Mexico, Honduras, El Salvador, Costa Rica, Colombia, Ecuador, Bolivia and Peru, totaling a 1.8 million tons production capacity.

CHALLENGES Accelerate the transition from a traditional-oriented construction industry into a new lightweight construction trend.

METAL PRODUCTS DIVISIONPRODUCTS Copper and Copper-alloy rigid and flexible pipes, fittings, faucets, valves, brass and condenser, moldeable copper connections, among others.

MARKETS Focuses on the self-construction and industrial application segments, while also serving others sectors such as electronics and coinage in Mexico and other 30 countries.

PRODUCTION FACILITIES Three facilities located in Mexico City, San Luis Potosí and Celaya with a total production capacity of 60 thousand tons.

Expanding its footprint

In line with its growing strategy, the Division has further expanded into the third-largest market in the world, the U.S., where it satisfies the East Cost through its Keystone, Dragon and Giant Cement brands.

A leader in the Americas

Its strong geographic presence throughout the Americas and highly-recognized brands and innovative products rank this Division as one of the main players supplying the finishing and facades construction stage.

Devoted to creating value-added products

With over 65 years of serving the Mexican market, the Nacobre brand has positioned itself as the number one brand of choice when it comes to choosing copper and copper-alloy products for the construction sector. The Division is devoted to creating higher value products – such as pipes, fittings, faucets, valves, among others – by transforming copper into innovative products.

CHALLENGES The integration and implementation of the highly detailed value-generating roadmap obtained from the “full potential” Giant analysis developed along with Bain & Company.

OPPORTUNITIES Implementation and ramp-up of the cement capacity expansion planned to start commercial operations by mid-2017 supported by its brand positioning, the gradual recovery of Mexican homebuilders, construction of shopping malls and office buildings, and the resilience of the self-construction sector.

BRANDS Fortaleza, Keystone, Dragon and Giant Cement.

OPPORTUNITIES Solidify the BuildingSystems leadership by reopening the currently idled TerreHaute plant in Indiana and launching operations at the new plastic roofing and rotating-molding in Peru, Central America and Colombia.

A potential vertical integration between the BuildingSystems and Cement operations in the U.S.

Further expand the Division’s innovative product line with more flexible and breakage tolerant products developed through in-house developed technologies including the use of alternative raw materials.

BRANDS Mexalit, Eureka, Allura, Plycem, Eternit, Duralit, Fibraforte and Frigocel.

CHALLENGES Continue to reach strong growth in a market amidst copper cycles.

OPPORTUNITIES Continue to offer higher value-added products via innovation and improved metal yields, while fully capitalizing from the Nacobre brand by marketing new products under its name.

BRANDS Nacobre and Cobrecel.

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We generate value by having a positive impact in the construction industry, generating new technologies, innovation, new and alternative solutions for our markets, as well as jobs and wealth.

EMPLOYEE

VALUE Our employees’ effectiveness, career development, and ability to adapt to a changing landscape are critical for us to continue to deliver sustained shareholder value. Like-wise, maintaining our corporate standards and strong fi-nancial performance for the long term requires a pipe-line of high-caliber talent. We believe the most effective workforce is a motivated workforce, and as such, from the moment employees join Elementia and through-out their careers, we provide them opportunities to help them build their knowledge, skills and experience.

GENERATING SHAREHOLDER VALUE At Elementia we are constantly working to generate and maintain shareholder value. Overall, throughout our entire operation, we work to improve operating ef-ficiencies through the reduction of costs, by rightsizing, optimizing of processes and logistics, and implementing the use of alternative raw materials. Moreover, we con-tinue to increase our cross-selling initiatives in order to complement the product portfolio and deliver compre-hensive solutions to our distributors and customers.

At the same time, we pay close attention to capital al-location based on strong ROIC metrics, and building a solid balance sheet supported by financial discipline.

CULTURE

DRIVE RESULTS

We are working on developing a corporate culture that focuses on making things happen.

BUILDING

THE BASIS OF OUR CORPORATE CULTURE

The main drivers of this culture of change are accountability for performance, col-laboration, growth mindset, high sense of purpose and employee engagement.

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GIVING BACK &

COMMUNITY VALUE It’s embedded in our core values and Elementia’s principles of success to “Give Back.” We challenge ourselves to be a trusted and steady partner for our clients and our communities, while ensuring that we always have the courage to do the right thing.

We are always looking for a responsible way to positively affect the communities in which we have presence, with the intent to return part of what they´ve given us. We plan to make another dream come true: by 2017 we plan to start-up Elementia’s foundation focusing on promoting better living opportunities in the countries and communities where we have operations.

ENHANCING OUR

LEADERSHIP

IN ALL THE GEOGRAPHIES AND MARKETS THAT WE OPERATE IN

Our sound financial position gives us the capabili-ty to continue seeking regional expansion opportu-nities and product diversification to deliver profitable growth to all of our shareholders.

OUR EFFORTS REMAIN FOCUSED ON GENERATING FUTURE

VALUE

• Committed to our vision, our markets, and our clients by fulfilling our promises in a systematic way.

• Remain innovative and one step ahead in terms of of-fering unique products, improved services, and better commercialization strategies.

IMPROVING

THE LIFE OF USERS IS ESSENTIAL TO US

Our purpose as a company is to transform our final users´ lives - make it better. We have devoted much attention and effort in creating communication channels that al-low us to better understand and support them.

“Experto Plycem” Project The “Kardias” Project The “Con Tokyo 2020” Project

A customer-oriented company that can EFFICIENTLY & PROACTIVELY meet customer needs.

Lost Time Injury Severity Rate

Days x 200,000 / working hours

16

and by focusing on high-quality standards for our products and services.

REACHING NEW HEIGHTS VIA

GO-TO-MARKET STRATEGIES In the BuildingSystems Division we entered new segments, such as repair and remodeling and modular building in the U.S. gaining market share from existing and adjacent mar-kets. Likewise, we have been very successful in the imple-mentation of the go-to-market strategy developed along with BCG (the Boston Consulting Group) in 2016, and re-cently, in capturing Big Builders as new customers and hav-ing capacity utilization rate at levels that allow us to outline the plan to reopen the TerreHaute facility in Indiana.

In Mexico, we implemented the go-to-market strategy also developed along with BCG, focused on strategic distribu-tors that allow us to have a wider geographic coverage in both the roofing and water-solutions segments and dimin-ish the specific weight of governmental projects.

ADDING A GIANT INTO THE FAMILY

• Vertically integrate Giant Cement & Allura in those locations that make sense.

• Take advantage of Giant Cement & Allura’s already installed distribution networks and customer base to consolidate both businesses.

CAPITALIZING ON

NACOBRE’S MOMENTUM We took advantage of Nacobre’s leading positioning and extensive distribution channels to market a wider and more complete product portfolio with lower investments. In summary, the strategy is to develop higher value added products through innovation while at the same time im-proving productivity.

INCREASING

PRODUCTION CAPACITY TO CONSTANTLY SUPPLY THE MEXICAN MARKET

By mid-2017 we will complete the 1.5 million tons ca-pacity expansion in the Cement Division in Mexico to reach 3.5 million tons, which we plan to ramp-up in about 2 years following the same strategy we have fol-lowed since 2013: top quality, premium brand, and high-er pricing quartile for the self-construction segment.

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CAPITAL ALLOCATION CRITERIA

• Strategic fit • Financial fit: + NPV,

reasonable IRR, & ROIC > company’s WACC

FEASIBLE ACQUISITIONS MADE POSSIBLE DUE TO:

• Strict financial discipline

• Solid Balance Sheet

GROWTH VIA INNOVATION

We opened an Innovation Department aiming to transform the construction industry from a technology averse one to one that is adaptable and changing. Without a doubt, this department is key for Elementia’s understanding of customers’ needs and to be-come a leader in bringing complete solutions in the construction business.

Since its launch, we have taken all of our expertise developed throughout our different divisions and geographies and created new value-added products that promote efficien-cies along the main construction stages.

EXPANDING OUR PRODUCT PORTFOLIO WITH STATE-OF-THE-ART TECHNOLOGY

We launched a variety of new fibercement products with new technologies in Mexico, Colombia, Bolivia and Ecua-dor, which have already shown good acceptance from our customers given the several advantages they offer. These new products are easy to handle, and are more tolerant to breakage, therefore offering advantages to both, final con-sumers and distributors.

EXPANDING OUR FOOTPRINT IN COUNTRIES IN WHICH WE ARE ALREADY PRESENT

Last November, we took a major step in Elementia´s next growth phase by entering the U.S. cement market through the acquisition of 55% of outstanding shares of Giant Cement Holding Inc. This positioned Elementia as the fourth-largest cement player in the East Coast in terms of installed capacity. Currently, Giant is operating with the support of Ele-mentia in some key areas where it needs it. At the same time, we are developing synergy opportunities with Allura, in terms of commercialization and logistics. Nevertheless, the highest additional value will come from bringing the assets back to par, and by doing so, regaining quality, capacity utilization rate, and pricing all based on demand and pricing expectations in the regions of influence before beginning to gain market share.

ADDITIONAL CAPEX INITIATIVESGEOGRAPHY GROWTH CAPEX

Colombia Doubled rotational molding operations U.S.$2.4 million

Colombia New plastic roofing line U.S.$4 million

Peru Relocation and capacity expansion of the plastic roofing plant U.S.$19 million

Central America Started rotational molding operations U.S.$1.5 million

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ACQUISITION OF GIANT CEMENT, INC.

In November 2016, Elementia completed its acquisition of a controlling 55% stake of Giant Cement Holding, Inc. (“Giant”), an American cement company headquartered in Alexandria, Virginia from Cementos Portland Valderrivas, S.A. Consistent with the objectives laid out during its IPO, Elementia found in Giant a value-driven opportunity to grow its core cement business in a country where it already had existing operations.

GIANT ACQUISITION:

TRANSACTION SUMMARY

GIANT’S BACKGROUND

With a history dating back as one of the first cement producers in the U.S., Giant was ranked 4th in terms of cement production in the East Coast at the time of the acquisition, covering the territory that extends from Maine to Georgia.

In recent years, Giant had faced cash flow challenges due to its financial burden, and due to the market downturn from the 2008 economic crisis. Resulting cash flow restrictions caused a downwards spiral that made it difficult for Giant to maintain optimum production levels and standards in its facilities. This has resulted in quality, maintenance, and reliability issues that further challenged the company from taking advantage of growth opportunities.

• Successful Rights Offering raised close to Ps. 4.4 billion for Elementia.

• U.S.$ 220 million paid by Elementia for a controlling 55% stake of Gi-ant using the proceeds obtained from the capital increase resulting in an implied equity value of U.S.$ 400 million.

• Elementia granted an intercompany loan to Giant for U.S.$ 305 mil-lion through its committed credit lines.

• Giant utilized both resources (totaling U.S.$ 525 million) to pre-pay 100% of its current debt, as previously agreed between the parties.

ONE GROWTH

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GIANT ACQUISITION RATIONALE • Entry into U.S.: the third-largest cement market

in the world. • Significant opportunity for EBITDA expansion.• The right timing for U.S. market expansion.• Accretive; valued at U.S.$ 250 per ton vs

greenfield U.S.$ 400 per ton.• Complementary products and geographies to

improve U.S. positioning.

OBTAINED

ASSETS • Three cement plants• Two aggregate quarries• Six cement terminals• Solid customer base• Reputable brands such as

Keystone, Dragon, Giant, and Grr!

GIANT’SCOMPANIES

Giant CementKeystone Cement CompanyDragon ProductsGRR! (Giant Resourse Recovery)

GIANT’S PRODUCTS AND SERVICESCEMENTGiant produces the widest range of cement, including grey cement, special cement and innovative, fast-setting, high-performance cement.

Cement is the essence of the history that the Group has forged for itself as it has adapted successfully to changing times and fur-nished its customers with the solutions needed to adapt to each situation.

RECYCLINGRecycling is the safest solution for reusing waste that needs to be de-stroyed responsibly. We convert this waste into fuel and use it to make our products.

AGGREGATESGiant’s aggregates are a re-flection of our commitment to quality and the environ-ment. Careful planning and excellent restoration are an integral part of the way we quarry for aggregates.

Elementia added over 2.8 MILLION TONS of cement production capacity per year.

Giant’s financial cost decreased by

>75%

BENEFITS FROM GIANT’S TURNAROUND:

Expected to be seen within 3 – 4 years.

INSTALLED CAPACITY:

2.8 million Tons

CEMENT / Terminal

HEAD OFFICE

RECYCLING / Plant

CEMENT / Plant

AGGREGATES / Plant

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MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS

CONSOLIDATED RESULTSIn line with expectations and despite macroeconomic vol-atility, Elementia reported double-digit growth in consoli-dated figures:• Consolidated net sales increased 12% in 2016 to

Ps. 19.1 billion.• Consolidated EBITDA rose 20% to Ps. 3.6 billion

in 2016.• Elementia reported net income of Ps. 687 million in

2016 compared to Ps. 12 million in 2015.

On October 28, 2016, Elementia successfully completed a capital increase for Ps. 4.4 billion. The subscription period for 218,435,955 shares, at a price of Ps. 20.00 per share, con-cluded with approximately 95% subscription. The proceeds were used to acquire 55% and the control of Giant Cement Holding, Inc (Giant). The transaction was conducted in two parts: i) Elementia acquired 55% of Giant for a total of U.S.$ 220 million and granted a loan to Giant for U.S.$ 305 million through its committed credit lines; ii) Giant utilized both resources (U.S.$ 220 million + U.S.$ 305 million) to prepay its current debt, thereby re-ducing its financial cost by approximately 75%.

Elementia strengthened its balance sheet by optimizing its debt profile by:• Obtaining an ECA (Economic Credit Agency) facility

agreement with Santander; this credit line is guaran-teed by COFACE for up to U.S.$ 128 million, with an interest rate of Libor 6 months + 80 basis points and with a maturity at 2027.

• Hedging 20% of its U.S. dollar-denominated senior unsecured notes in two tranches at Ps. 18.25 and Ps. 18.30 per U.S.$.

Elementia generated solid cash flow before CAPEX of Ps. 3.4 billion in 2016, up 33% from 2015, representing 95% of EBITDA, mainly due to EBITDA growth and work-ing capital cash flow generation. In accordance with the company’s expansion strategy, during 2016, Elementia invested over Ps. 8.1 billion, out of which Ps. 2.6 billion were for the capacity expansion in Mexico, 4.2 for Giant’s 55% outstanding shares acquisition and the rest for main-tenance and bolt-on expansions.

Despite an environment of high volatility and uncertain-ty mainly caused by political issues in the U.S., Elemen-tia continued its growth trends in both sales and EBITDA in 4Q16 as a result of brand positioning, cross-selling ef-forts, product innovation, management’s ability to prop-erly execute the company’s corporate strategy, and busi-ness acquisitions.

LEVERAGEGross debt as of December 31, 2016 reached Ps. 17.01 billion, an increase of Ps. 8.61 billion, compared to Ps. 8.39 billion registered as of December 31, 2015. This result was due to:• The usage of Elementia's committed credit lines in or-

der to grant Giant a loan so it could complete prepay-ing its previous debt.

• The usage of ECA’s (Economic Credit Agency) credit line for U.S.$ 72.7 million dollars to fund the cement capac-ity expansion in Mexico.

• The impact of the Mexican peso vs. U.S. dollar ex-change rate on the dollar-denominated debt (senior unsecured notes totaling U.S.$ 425 million dollars and ECA’s credit line).

The Cement Division in Mexico posted a net sales INCREASE OF Ps. 712 MILLION in 2016, and EBITDA reached Ps. 1.3 BILLION in 2016, up 39% when compared to 2015.

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In accordance with the company’s financial strategy of maintaining a solid and flexible Balance Sheet, net debt to EBITDA (including Giant proforma) ratio was 3.17x times and interest coverage was 4.37x times as of December 31, 2016, both within the covenants set by the financial insti-tutions (3.30x net debt/EBITDA). Furthermore, 82% of Ele-mentia’s total financial debt is long term.

Resulting from the acquisition of 55% of Giant and the expectation and time that credit ratings agencies consid-ered reasonable for Giant’s integration, they decided to change Elementia's ratings as follows:• S&P: BB rating with Stable outlook• Fitch: BB+ rating with Stable outlook

The Cement Division in Mexico posted a net sales in-crease of Ps. 712 million in 2016, and EBITDA reached Ps. 1.3 billion in 2016, up 39% when compared to 2015. This positive performance was mainly attributable to an increase in the average sales price, a greater utilization of installed capacity and operating efficiencies, which offset the increase in energy costs. Also, these results include ready-mixed operations.

Regarding the expansion of cement capacity at the Tula plant by 1.5 million tons in order to reach a total of 3.5 million tons of installed capacity, the project remains on track in terms of budget and schedule and commercial operations are expected to begin by early 3Q17.

Revenues for the BuildingSystems Division reached Ps. 7.7 billion in 2016, A 12% INCREASE, while EBITDA reached Ps. 946 million in 2016.

In the Metal Products Division, revenues reached Ps. 7.3 BILLION in 2016, while EBITDA reached Ps. 1.2 billion, a 20% increase.

In the Metal Products Division, revenues reached Ps. 7.3 bil-lion in 2016, down 3% year-over-year due to a lower ref-erence price (US$ 2.20/pound in 2016 vs U.S.$ 2.51/pound in 2015) and a decrease in export sales volume and gener-ic products. It is important to highlight that this Division reported galvanized sheet sales during 2015; however, in 2016 these sales were reported under the Building Systems Division, excluding this effect, volume decreased 6% in 2016 vs 2015.

This Division remains focused on operating efficiency which leads to an improvement in production costs that supports EBITDA growth. EBITDA for 2016 was Ps. 1.2 billion, up by 20% as compared to 2015.

Revenues for the BuildingSystems Division reached Ps. 7.7 billion in 2016, a 12% increase, while EBITDA reached Ps. 946 million in 2016 or 12% lower than 2015. This result was due to an extraordinary performance in the U.S., and Cen-tral America, which combined with the strong performance of the Andean region, helped to partially offset the perfor-mance in Mexico. It is important to highlight that the fourth quarter of 2016 represented the beginning of the recovery for the division due to the implementation of the “full po-tential” project in the U.S. and Mexico, where it includes "right sizing" efforts and strategic refocus, as well as bene-fits from the automatization project in Central America.

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Elementia is committed to good corporate governance, which promotes the long-term interests of shareholders, strengthens Board and management accountability and helps build public trust in the company.

At Elementia we have always had a strong commitment on complying with all of the laws and regulations set on every country in which we operate, as the company’s three main values are: Integrity, Responsibility and Com-mitment; and our philosophy focuses on: Innovation, Safety, Teamwork and being Result-Oriented.

Elementia strives to maintain the highest standards of in-tegrity and ethical conduct in our relationships with share-holders, employees, representatives, suppliers, competi-tors, government and general public. Every one of us at Elementia is responsible for continuing to uphold these high standards on all our daily activities. Our Board of Di-rectors is appointed at the General Ordinary Shareholders’ Meeting; and since 2014, four out of eleven members are independent in adherence to the principles of the Code of Best Corporate Practices of the Mexican Business Coordi-nating Council.

The Board is responsible for determining Elementia’s cor-porate strategy (which is currently The Power of One-ness) and for defining and supervising the implementation of the values and vision that has always characterized us. Most importantly, our Board is also in charge of approving all transactions – including M&A’s – and those carried out in the ordinary course of the business based on our corpo-rate bylaws. The Board of Directors relies on the Audit and Corporate Practices Committees, whose members, includ-ing the Chairman, are all independent directors.

WE COMPLY WITH MEXICAN LAWS AND ADHERE TO BEST CORPORATE PRACTICES

CORPORATE GOVERNANCE

Moreover, Elementia’s Board of Directors establishes corpo-rate governance guidelines which provide a framework for the effective governance of the company. The guidelines address matters such as the Board’s mission, director´s re-sponsibilities, director´s qualifications, determination of di-rector´s independence, board committee structure, chief ex-ecutive officer´s performance evaluation and management succession. Moreover, the Board regularly reviews develop-ments in corporate governance and updates the corporate governance guidelines and other governance materials as it deems necessary and appropriate.

During the fourth quarter of 2016, we began to develop a project – which we call Elementia 2.0 – with the purpose of becoming a more agile company in terms of decision making including a new outline for corporate structure that will help us become the company we envision in terms of geographical footprint, market diversification, in-stalled capacity and portfolio of solutions.

Furthermore, we consolidated the management team by including Juan Luis Alfiero Caballero as Head of Build-ingSystems, Claudio Paramo Chavez as Head of Market-ing and ratified Juan Francisco Sánchez Kramer as Chief Financial Officer, we also included Laura Cañez Olvera as Head of Strategic Planning and Laura Puig Grajales as Head of Innovation – two key areas for Elementia’s proper execution of its Power of Oneness strategy.

We are also working on developing the corporate cul-ture which summarizes in MAKING THINGS HAPPEN. The main drivers of this culture of change are: performance accountability, collaboration, growth mindset, high sense of purpose, and employee engagement. At Elementia, we are convinced that culture drives results.

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BOARD OF DIRECTORS

CHAIRMAN OF THE BOARD

FRANCISCO JAVIER DEL VALLE PEROCHENA

Mr. Del Valle Perochena is the Chairman of the Board of Directors. He has been a member of the Board since the year 2000 and has over 25 years of experience in the construction industry. Additionally, he holds a Bach-elor's Degree in Business Administration and a Mas-ter’s Degree in Economics from the Anahuac University, and a Senior Management Program (AD-2) from IPADE Business School. He currently serves as Managing Di-rector of Controladora GEK, S.A.P.I. de C.V. and is also a Board member at Grupo Kaluz, Banco Ve por Más, S.A., Institución de Banca Múltiple, Grupo Financiero Ve por Más among others.

SECRETARY (non-member)

JUAN PABLO DEL RÍO BENÍTEZDEPUTY SECRETARY (non-member)

SANTIAGO BERNARD COVELO

COMMISSIONER (non-member)

WALTER FRASCHETTO VALDÉS

DIRECTORS

ANTONIO DEL VALLE PEROCHENAEDUARDO DOMIT BARDAWILJAIME RUIZ SACRISTÁNGERARDO KURI KAUFMANNALFONSO SALEM SLIMANTONIO GÓMEZ GARCÍA

INDEPENDENT DIRECTORS

EUGENIO CLARIOND RANGELDIVO MILÁN HADDADJOSÉ KURI HARFUSHJUAN RODRÍGUEZ TORRES

AUDIT COMMITTEE

JUAN RODRÍGUEZ TORRES (CHAIRMAN)EUGENIO CLARIOND RANGELDIVO MILÁN HADDAD

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MANAGEMENT TEAM

FERNANDO RUIZ JACQUESCHIEF EXECUTIVE OFFICER

Mr. Ruiz Jacques is Elementia’s Chief Executive Officer. He holds a Degree in Civil Engineering from the Universidad Iberoamericana and holds a Master's Degree in Business Administration from the University of California at Berke-ley, as well as a Master's Degree in Finance from Universi-dad Anáhuac. Mr. Ruiz Jacques has 9 years of experience in our company. Prior to being Elementia’s Chief Executive Officer, he served as Director of the BuildingSystems Divi-sion. Moreover, he brings over 19 years of experience in the construction and distribution industry.

JUAN FRANCISCO SÁNCHEZ KRAMERCHIEF FINANCIAL OFFICER & INTERIM INVESTOR RELATIONS OFFICER

Mr. Sánchez Kramer was ratified as Elementia’s Chief Fi-nancial Officer in late 2016. Previously he served as Inves-tor Relations Officer. He has over 21 years of experience in the construction industry, including eight years at Gru-po Kaluz. His experience also includes management posi-tions in sales, strategic planning, financial planning, busi-ness development, supply chain and investor relations. Mr. Sánchez Kramer holds a degree in Engineering from the Universidad del Valle de México and a Post Graduate Degree in Business Administration from the Universidad Iberoamericana and Business Development from Instituto Tecnológico y de Estudios Superiores de Monterrey.

JAIME ROCHA FONTDIRECTOR, CEMENT DIVISION

Mr. Rocha Font is our Director of the Cement Division as of March 1, 2015. He holds a Degree in Civil Engineering from the Universidad Católica de Chile and a Master’s De-gree in Business Administration from IMD, IPADE and ULB. Mr. Rocha Font has over 23 years of experience in the ce-ment industry and he previously held various senior man-agement positions at Holcim. Moreover, he is also a mem-ber of several associations such as Canacem and ANTP.

GUSTAVO ARCE DEL POZODIRECTOR, METAL PRODUCTS DIVISION

Mr. Arce del Pozo is our Director of the Metal Products Di-vision. He holds a Degree in Business Administration and over 27 years of experience at Elementia. Mr. Arce del Pozo has worked in various positions in the commercial area serving the aluminum, copper and copper alloys mar-kets locally and internationally.

JUAN LUIS ALFIERO CABALLERODIRECTOR, BUILDINGSYSTEMS DIVISION

Mr. Alfiero has more than 24 years of experience in glob-al and family companies including building materials, en-ergy, mining, and automotive, where he held positions as managing director, division director, sales, among others. Mr. Alfiero holds an Engineer’s Degree and an MBA from the Instituto Tecnológico y de Estudios Superiores de Mon-terrey (ITESM).

JOSE LLONTOPDIRECTOR, CEMENT DIVISION U.S.

Mr. Jose Llontop has been the CEO and President of Giant Cement Holding, Inc. since August 2012. He has over 28 years of experience, his past leadership duties involved ce-ment operations in Europe and Egypt. Mr. Llontop holds an Engineering Degree from the University of Virginia, and an MBA from Rice University, he also attended the Har-vard Business School's General Manager Program in Cam-bridge, MA.

25

As Chairman of the Audit and Corporate Practices Com-mittee of Elementia, S.A.B de C.V. (“the Committee”), I hereby report the following:

The Committee held meetings during the following months: April 2016, July 2016, October 2016, February 2017 and April 2017 in which discussions included mat-ters pertaining to fiscal year 2016, among other import-ant Company issues. The meetings were attended by the members of the Committee, the external and internal au-ditors and Elementia’s executive officers that were asked to attend. The activities and resolutions were recorded in the corresponding minutes.

I would like to take this opportunity to submit the Com-mittee’s activities report corresponding to the fiscal year as follows:I. Transactions with Related Parties

Transactions conducted between related parties were reviewed validating that they were conducted in ac-cordance with the policies previously approved by the Committee, and no irregularities were found.

II. Evaluation of the Internal Control System According to the evaluation of the internal auditor, the external auditor, the CEO and the CFO, a plan to improve the Internal Control System in order to com-ply with the objectives established by management and to improve safety to prevent or detect errors and material irregularities in the normal course of busi-ness was implemented in March 2017. Through Gov-ernance, Risk and Compliance Solutions (GRC) with-in our SAP ERP System, we will constantly oversee 8 macro-processes and 208 controls. The system will continue to evolve and gradually include all business-es within the Company so that by year-end 2018 it encompasses all areas of Elementia.

III. Evaluation of the Internal Audit Functions The Audit Committee has been monitoring the needs of the Internal Audit Division to ensure that the nec-essary human and material resources are available to adequately perform its functions. In this respect, we followed the working programs and activities estab-lished during fiscal year 2016. Likewise, the members of the Committee met with the Internal Audit Direc-tor, with no other Executive Officers present, to re-ceive and discuss information deemed pertinent.

IV. Evaluation of the External Auditor’s Performance We continued to employ the services of Galaz, Yama-saki, Ruiz Urquiza, S.C. (Deloitte) as the Company’s external auditors. Their fees for fiscal year 2016 were duly reviewed and approved. We received the audited financial statements as of December 31, 2016 from the external auditor. Similarly, the work of the external auditors Galaz, Ya-masaki, Ruiz Urquiza, S.C. (Deloitte), as well as that of the partner in charge, was found to be satisfactory. The external auditors confirmed their independence. The members of the Committee have met with the external auditors, with no other executive officers present, to receive additional information about mat-ters covered in the cases in which it was requested.

V. Financial Information The Company’s financial statements were discussed during the Committee’s meetings with the Executives responsible for drafting and reviewing them, with no relevant comments made to the information presented. Similarly, the audited financial statements correspond-ing to the fiscal year ended December 31, 2016 were approved by the Committee.

Mexico City, April 24, 2017To the Board of Directors of Elementia, S.A.B de C.V.

REPORT OF THE AUDIT AND CORPORATE PRACTICES COMMITTEE

26

VI. Relevant Events We reported that 2016 has been, once again, a re-markable year for Elementia. We completed a new ECA facility to fund the Cement capacity expan-sion in Mexico. We also increased capital through a Rights-Offering for close to Ps. 4.4 billion, which was used for the acquisition of a controlling stake of 55% outstanding shares of Giant Holding Inc. In order to complete the transaction, Elementia used commit-ted credit lines to grant Giant a loan to complete the pre-payment of its convertible bond. This loan be-came an intercompany loan once the transaction was completed. The Company continued with the imple-mentation of its strategic plan known as “The Pow-er of Oneness”, which focused on ensuring that the “whole” is greater than the sum of its parts. The Company also evolved executing hedging strategies for its debt position which mitigated currency ex-change exposure. During 2016, the Management Team was also changed and strengthened: the Head of the Build-ingSystems Division joined the company, the CFO was ratified, the Heads of Marketing, Strategic Planning, and Innovation also joined the Company.

VII. Accounting Policies The accounting policies followed by Elementia were reviewed and approved in terms of the information received as a result of new regulations. The accounting and information policies and criteria followed by Elementia are considered adequate and sufficient.

VIII. Report from the Chief Executive Officer The report from the Chief Executive Officer on the ac-tivities for the 2016 fiscal year was received and ap-proved.

IX. Legal Report The report made by the General Counsel on the status of legal matters and litigations was received periodically.

X. Proposal Pursuant to the work done, it is recommended that the Board of Directors submit the Elementia audited finan-cial statements for the year ended December 31, 2016 for approval at the Annual Shareholders’ Meeting.

Sincerely,

JUAN RODRIGUEZ TORRESChairman of the Audit CommitteeJUANANAN RRRRRRRRRRODO RIGUEZ TORRESChairman of the Audit Committee

CONTACT INFORMATION

This document contains certain statements related to the general information about Elementia, S.A.B. de C.V., (Elementia) regarding its activities to date. This document includes a summary of the information regarding Elementia and is not intended to convey all the information related to the company. Such information has not been included for the purpose of giving specific advice to investors. The statements contained herein reflect the current picture of Elementia with respect to future events and are subject to certain risks, uncertainties, and assumptions. Various factors could cause Elementia’s future results, performance, or achievements to differ from those expressed or implied in these statements. If one or more of these risks or uncertainties occur, or should the underlying assumptions prove to be incorrect, actual future results may vary materially from those described herein as anticipated, assumed, estimated, or expected. Elementia does not intend to update the statements presented herein, nor does it assume any obligation to do so.

CORPORATE OFFICESPoniente 134 # 719Colonia Industrial Vallejo02300, Azcapotzalco, Ciudad de México

INDEPENDENT AUDITORGalaz, Yamazaki, Ruiz Urquiza, S.C.member of Deloitte Touche Tohmatzu Limited

INVESTOR RELATIONSJuan Francisco Sánchez KramerInvestor Relations OfficerPhone: 52 (55) 5728 5300jsanchezk@elementia.com

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www.elementia .com