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16OCPAnnual report 2010GLOBAL STRATEGYMarket leadershipand world food securityOCP’s industrial development program,put on track throughout 2010(1), servesthe dual goal of consolidating the Group’sleadership on the global phosphatemarket and reinforcing its commitmentto food security for humanity.OCP’s massive industrial developmentprogram is on track. A program with aninvestment of MAD 115 billion over the2010-2020 ten-year period, of which 75 billionover the next four years. This large-scale undertaking is part of the Group’s strategy to achieveindustrial excellence in three areas: product leadership, cost leadership and industrial flexibility,as major levers to enhance competitiveness.1. Product leadershipOCP is sitting on large phosphate reserves.With a market share of approximately 30% forrock phosphate and 40% for phosphoric acid,the Group is one of the main players in the global phosphates market.( 1 ) Disclaimer: The present document reportsevents occurring, projected or forecast in 2010. Alldates mentioned with no year indication are to beunderstood as referring to 2010.The Group hastargeted a 30%-40%reduction of its costs.However, to fully benefit from the competitive advantage due to volume, OCP is determinedto increase its production of fertilizers, whichamounts to an average 15% of world marketshare. The Group aims at a 40% market share,while sustaining its take of the other productsin the phosphate value chain. This is one ofthe goals of OCP’s industrial capacity development program. At the same time, the Group iscarrying out an intense R&D activity aimed atdeveloping its already extensive range of phosphate derivatives in order to offer products inline with the needs of global agriculture. HenceOCP’s massive investment program aimed at anear doubling of its mining capacity, from 30 to55 million tonnes/pa, and a threefold increaseof its fertilizer production, expected to reach 10Mt/pa of DAP from the current 3.6 Mt/pa.

GLOBAL STRATEGYMarket leadership and world food security17OCP keeps a close watch on thedownstream of the phosphateindustry, particularly on the pricesof agricultural commodities.2. Cost leadershipOCP is geologically privileged with rich oredeposits, and equally privileged geographically,as its mine basins are close to ports with goodinfrastructure. By improving its productivityand industrial processes, the Group is targetinga 30%-40% cost reduction. A major contributionwill come from the two giant pipeline projects(Khouribga-Jorf Lasfar and Gantour-Safi) thatwill transport raw phosphate currently carriedby train. This will drastically reduce transportcosts, as washed phosphate (in the form of pulp)will no longer need drying at the mine as in thecase of railway transportation, neither will ithave to be re-moisturized when reaching thechemical plants for processing. Hence the important energy and water savings.Cost reduction will also come from watermanagement. The Group is investing in usedwater recycling to further develop raw phosphate processing and enrichment, with the aimof reaching a positive water balance by 2015. Onthe chemical plants side, OCP plans to build newseawater desalination units to produce the freshwater needed in the industrial processes.Also contributing to cost leadership is thebusiness transformation program called “Iqlaa”.Launched in April 2009, its ongoing goal is tobe systematically on the lookout for cost reduction opportunities, while building a performance-based culture at all Company levels. Initialresults emerge more than convincing (see boxpage 42).3. Industrial flexibilityA key element in competitiveness improvement in 2010 is the creation of a Business Steeringcommittee, a value-based production management tool. The goal henceforth is not only to satisfy demand but also to sell where the market ismost profitable. The Business Steering committee is the linchpin between the Sales, Marketingand Raw Material Procurement Department, andthe Operations Department, in permanent interaction. This enables a maximization of marginsby optimizing production through choices andtradeoffs of the various products (rock, acid orfertilizer) and qualities.Customer information is crucial to offeringthe right product and successfully managingclient relationship from an operational point ofview. This is the role of Customer RelationshipManagement (CRM). « It is a tool that enablescustomer identification and support, as well as

18OCPAnnual report 2010knowledge of the customer environment; it is avaluable help to proactive decision making, » explains Karim Laghmich, Chief Operations Officerat the Sales, Marketing and Raw Material Procurement Department. To successfully meet marketrequirements, OCP has also created its Marketing Division. « Marketing is a strategic functionthat supports the sales function, » explains Mohamed Belhoussain, head of the Division. « TheMarketing Division will have a thorough, moreglobal view of a situation, while a salespersonwill often have a regional, more limited grasp. »Thanks to itsindustrial flexibility,OCP is in a position toadjust its supply fora better response tomarket requirements.Two events have further contributed to enhancethe Group’s industrial flexibility: the merger in2009 of the Mines and Chemicals Departmentsinto one Operations Department, and the adoption of an integrated and dynamic operating procedure with its counterpart the Sales, Marketingand Raw Material Procurement Department.OCP is thus in a better position to meet thegrowing global demand and to increase its market share. Analyzing various parameters suchas global population growth, changing food requirements, prices of energy and commodities,experts in the main international specializedorganizations – FAO (Food and Agriculture Organization), IFA (International Fertilizer Associ-

GLOBAL STRATEGY19Market leadership and world food securityOCP’s ambitious industrialdevelopment program aims atdoubling its mining capacity andincreasing threefold its chemicalcapacity by 2020. Total capitalinvestment: 115 billion MAD.ation), IFPRI (International Food Policy ResearchInstitute) and others – forecast a 3-3.5% per annum progression in global demand for phosphate fertilizers over the medium to long term.Thanks to its industrial development program,the Group aims to capture at least half the expected increase in global demand for phosphatefertilizers. An increase resulting in additionalproduction capacities of 2-3 million tonnes/pa ofDAP being implemented or planned worldwide.Price volatility makes monitoringa strategic necessityIn recent years, the price volatility that traditionally affects raw materials markets hasreached agricultural products as well. It hasbecome such an international concern that itwas added to the G20 agenda at the Pittsburgh(United States) Summit in 2009. Heads of Statediscussed the impact of this volatility on globalfood security, and decided the issue would beaddressed as a priority at the June 2011 meetingof the G20 agriculture ministers in Paris.OCP is concerned by this volatility as it isliable to affect the price of phosphates. To beprepared to adapt its product supply to marketfluctuations, it is of strategic importance for theGroup to monitor the downstream of its activities. This entails keeping a tight watch on theprices of agricultural commodities (called softcommodities). Actually, it is vital to monitor avariety of aspects liable to impact these prices,such as changes in dietary habits, the state ofagriculture, energy prices, as well as the broader economic environment. And the monitoringshould take place at a global level as well as regional or country level, especially where OCP hasits major customers.With the extent and quality of its reserves,the size and flexibility of its production facilities, and its human capital nurtured on a performance and cost reduction culture throughthe Iqlaa program, the Group is well aware thatit possesses the key means to gain additionalmarket share. However, the Company has implemented two additional equally importantessentials, namely, monitoring beyond its corebusiness and internalising expertise in key related areas.Partnership with leadersto internalize expertiseMining is an industry with highly intensiveneeds in energy, water, infrastructures, logistics

20and engineering. With a development programof the magnitude of OCP’s, projects to be implemented in these areas are of extraordinarydimensions. Controlling costs entails masteringall these different fields outside of the Group’score business. Hence the importance to drawfrom global best practices and internalize theexpertise. OCP is doing just that through partnerships with international leaders in each field.The joint venture with Jacobs is a first and greatillustration.OCP created JESA, a 50/50 joint venture withJacobs Engineering Inc., to learn and benefitfrom a transfer of skills. JESA, a Moroccan company, can then develop and implement its ownprojects in Morocco, in Africa or elsewhere. OCPwill have thereby internalized engineering skills.At the same time, it will have created a businessplatform with its own ambitions.The same is happening in the field of sustainable development, through the Group’s cooperation with Ecology & Environment. E&E is anAmerican leading company in consulting andknow-how transfer in the fields of renewableenergies, eco-building and waste management.2011 should see the reinforcement of this cooperation in various OCP projects.Innovation, key toindustrial excellenceOCP is convinced of the importance of innovation to achieve and consolidate industrialexcellence, which is crucial to the consolidationof its leadership. For this reason, the Goup conducts an intense R&D activity at its various sites(see box page 40). Constantly on the lookout forOCPAnnual report 2010cutting-edge solutions, the Group has initiatedthe 1st International Symposium on Innovationand Technologies in the Phosphate Industry. Theconference, known as Symphos, will take placeearly May 2011 in Marrakech. It is meant as aplatform dedicated to deal with topics related toinnovation in this key sector. It will, in particular, address aspects of economic, environmentaland human development, by comparing experiences and best practices.Several hundred participants are expected toattend the Symphos. And several dozen speakersfrom leading companies in the industry will address topics such as “new products”, “agricultureand fertilization”, “environment and sustainabledevelopment”, among others. « The top playersof the phosphate industry are expected at thisconference, which will also address the industry’s need to migrate from eco-efficiency to ecodesign, in order to fully integrate sustainabledevelopment in its strategies, » said MohamedAmalhay, coordinator of the conference.Beyond the exchange of ideas and experiences, Symphos will be of interest to OCP forother reasons. Given the number and variety ofcompanies taking part, the conference is likelyto turn out to be a haven of partnership opportunities for the Group in many areas related tothe core of its business. Again, OCP addressesthe principle of partnership with a great openness and always the same goals: to implement its projects in these areas;to internalize relevant expertise;to open to these partnerships the scope ofopportunities outside of the Group, by offering

GLOBAL STRATEGYMarket leadership and world food securityA strong illustration of OCP’s attention to matters of globalinterest: in 2010, the Group sponsored for the second yearin a row the World Policy Conference, a forum dedicatedto issues of world governance. CEO Terrab is seen hereon the sidelines of the conference, in a discussion withBan Ki-moon, Secretary General of the UN, and Thierryde Montbrial, General Director of the Institut françaisdes relations internationales and founder of the WPC.services nationally or internationally in their areas of expertise.Global influence beyond phosphatesOwing to the very nature of its business, OCPcannot ignore the issues of agriculture. Becauseit is a direct outlet for its products, but also because, as a supplier of phosphate in all forms,the Group is aware of being a major player in theplanet’s food security. An even greater responsibility considering the large planned increase inits fertilizer production.Among others, OCP is following the progression of what is known as “offshore farms”, apartnership system whereby land is bought orrented in Africa and Asia by foreign States lacking sufficient arable land at home to ensurecurrent or future domestic food needs for theirpopulations. These are contracts involving millions of hectares of farmland traditionally benefiting from little if any fertilization, of which theinvesting States – as well as large agribusinesscorporations – expect consistent yields.Faced with international aid that is strugglingto lift Africa out of food shortages(1), this provision of capital and expertise could be at leastpart of the solution to low crop yields on thiscontinent. In fact, Africa does have a huge agricultural potential, but so far it has not beendeveloped due to lack of infrastructure, marketsand human skills, among others. If certain conditions are met, particularly in some countriesin Africa, this offshore farming could greatly( 1 ) The World Food Program (WFP) estimates at 239 million thenumber of people suffering from malnutrition in Sub-Saharan Africa, that is 30% of the region’s population.The aim is notonly to meetdemand, but alsoto sell on highermargin markets.21

22OCPAnnual report 2010Karim Laghmich, Chief Operations Officer at theSales, Marketing and Raw Material ProcurementDepartment: « The Customer Relationship Management(CRM) is a tool that enables customer identificationand support, as well as knowledge of customerenvironment, to help proactive decision making. »accelerate the growth of the continent’s agricultural production. However, there is a risk thatthe phenomenon turns into a “brown gold rush”attracting major hedge funds totally alien toagriculture.OCP is also keeping an eye on another major problem plaguing agriculture in developingcountries, especially in Africa, namely agricultural subsidies in rich countries. Due to thesesubsidies, food products from rich countriesare imported into the African market at priceswell below local production costs. Thus unableto make a living, African farmers abandon theirland and move to ever growing cities’ slums. Itis clear that the challenge for the continent is tobe competitive and find market opportunities.But it is also clear that if local producers are notsubsidized or protected, African agriculture willbe unable to survive in this unfair competition.The Group intends tocapture at least halfthe forecast increasein global demand forphosphate fertilizers,while preservingits presence onthe other links ofthe value chain.As a global supplier of fertilizers well awareof its responsibilities towards world food security, OCP takes part in many international forumsand conferences on various topics of global concern, particularly those relating to agriculturaldevelopment, an inevitable condition of foodsafety for humanity. Some examples: In April, in Marrakech, the Group organizedthe 1st FMB Africa, bringing together professionals, members of the scientific community and development agencies with an interest in Africa. In September, in Accra (Ghana), it participated as an industrial partner in the 2010 edition of the Africa Green Revolution Forum. In October, in Marrakech, CEO Mostafa Terrab represented OCP at the 3rd edition of theWorld Policy Conference. The WPC was attendedby dozens of statesmen and top internationalofficials around a debate on global governance.Progression ofexport volumesAn increasingshare for valueadded products(in million tonnes)

GLOBAL STRATEGY23Market leadership and world food securitySamia Charadi, OCP’s Strategy and Partnerships Director:« OCP is determined to be involved in the exchangeof ideas, in reflection and in organizing debates inall areas that have an impact on agriculture. » In January 2011, in Mumbai (India), OCPwill attend the 17th Partnership Summit. Amongthe topics to be discussed: “the challenges ofpoverty”, “the necessity for sustainable development”, “the risks threatening global economicgrowth”, “the global financial context”, “the convention on international trade” and “economicdevelopment: necessity and challenges of urbanplanning”.All evidence that the Group’s culture, basedin-house on a philosophy of exchange and onthe dynamics of collective reflection, is also expressed beyond both the borders of the Kingdom and the core of the Group’s business. « OCPis determined to be involved in the exchange ofideas, in reflection and in organizing debates inall areas with an impact on agriculture, » statesSamia Charadi, OCP’s Strategy and 10819905.9495.5531.72419950.8141.5481.0452000Raw PhosphatePhosphoric acid (P2O5)Phosphates in all forms (P2O5)Fertilizers (P2O5)2.16420057.1742.3440.9321.6892010

24OCPAnnual report 2010MARKETSOCP consolidatesits international positionsThe Group’s export sales reboundedsharply after the 2009 market’s steepdecline. A strong recovery reflecting,among other things, OCP’s policy ofmigration towards a product portfolio withgreater emphasis on fertilizers and otherhigher value-added finished products.Demand: Indiaand Brazil, amongthe main driversof its increase.Supply: newproductioncapacities onthe market.Following a significant contraction in 2009due to the credit crunch, demand for fertilizers strongly resumed in 2010. Thisrecovery is part of a broader movement whereagricultural raw materials (soft commodities)registered near price hikes during the secondhalf of the year in reaction to various naturaldisasters (floods in China, droughts and fires inRussia and Ukraine.). High oil prices bear theirshare of responsibility in this rise, as they led tohigher demand for biofuels. This, in turn, contributed to the rise in the prices of soft commodities and thus stimulated the demand forfertilizers, including phosphates.At the same time, the psychological effectsof the 2008 crisis have somewhat tamed speculation in the fertilizer market. And that helpedbring prices back to levels more in line withfarmers’ economic si

CP is celebrating its 90th anniversary this year. 90 years of a history rich with accomplishments of which we are all proud at OCP. 2010 was a particular success from this point of view. Success at home. We are proud to have contributed to the wealth and well-being of our country. Through our exports, which scored a strong upsurge this year.