16

MDU RESOURCES G ROUP, INC.

Knife River Corporation is the eighth-largest aggregate producer in the

United States. Target market focus and cost-management strategies helped

maintain strong earnings in 2007, despite a downturn in housing markets across

the country that decreased sales volumes in its core product lines.

construction materials

construction materials

construction materials

and contracting

In it for the long haul

Knife River is refining its business focus to

concrete capabilities in Harrisburg,

offset the effects of the slowing housing

Oregon. In 2008, Knife River will continue

Industry experts project that demand for

market by emphasizing its capabilities to

to concentrate its aggressive acquisition

infrastructure and public works projects

serve the booming energy industry. It is

efforts on adding aggregate reserves

will continue to be strong. This represents a

becoming a significant supplier of

and further strengthening its position in

sizeable share of Knife River's business --

construction materials on projects such

existing markets.

publicly funded work accounts for about

as wind farms, refinery expansions and

60 percent of revenue -- and will provide

Another significant effort begun in 2007

electric generating facility upgrades.

good opportunities to offset some of the

was branding of the construction materials

effects of the weak housing market. In

Focus on expansion

operations under the name and logo of

addition, Knife River will work with industry

Knife River expanded its liquid asphalt

Knife River. Previously, Knife River

associations to ensure adequate funding

facilities in 2007, adding storage tanks in

companies operated under more than 40

of the Federal Highway Trust Fund, which

Texas and California. With its storage

different names. The branding campaign

supplies about 45 percent of all highway

terminals, Knife River is able to buy asphalt

unifies Knife River's operations while

spending in the United States.

oil -- a key component of asphalt -- from

building broader customer and industry

refineries in the winter, when supply is higher

recognition of the company's capabilities.

major customers

and prices are lower. This strategy has

Knife River completed a six-year project

Federal, state and local governments

■

helped Knife River manage price volatility

General and commercial contractors

■

to install a resource planning system

during the construction season and earn

Residential and commercial developers

■

at all of its operating locations. The effort

Homebuilders

■

strong margins on oil sold to third parties.

consolidates the company's data and

General public

■

Knife River also expanded its operations in

processes on a unified computer system.

peers

Granite Construction Inc., Martin Marietta Materials

2007 by acquiring five more companies.

Inc., U.S. Concrete Inc., Vulcan Materials Co.

2007 was the ninth consecutive year of

Four of these additions focus principally on

safety improvements at Knife River, with a

competitors

supplying construction materials. Knife

Other construction materials companies such

10 percent reduction in the lost-time accident

as Cemex, CRH (Oldcastle), Eagle Materials Inc.,

River grew organically by adding a ready-

rate. The company's employees continue to

Granite Construction Inc., Holcim Ltd., LaFarge

mix plant to existing operations in Boise,

North America Inc., Martin Marietta Materials Inc.,

put safety at the forefront of operations.

Idaho, and expanding on its prestress

Rinker Group Ltd., TXI LLC, Trinity Industries Inc.