FLSmidth & Co. A/S · OMXCOP:FLS
FLSmidth & Co. A/S — Investor Day (2009)
26 slides from FLSmidth & Co. A/S's investor day presentation, 2009
Slide 1: FLSmidth – current status and strategy
FLSmidth – current status and strategy Poul Erik Tofte Group Executive Vice President and CFO Capital Market Day 2009 1
Slide 2: Poul Erik Tofte
Poul Erik Tofte Group Executive Vice President and CFO Joined FLSmidth in 2003 Previous positions: - CFO and EVP, Nettest - CFO GN Great Nordic - CFO Monberg & Thorsen - CFO Carnegie Denmark Capital Market Day 2009 2
Slide 3: Current status and strategy
Current status and strategy Agenda Transformation over the past 7 years Follow-up on the Annual Report for 2008 Capital Market Day 2009 3
Slide 4: Transformation over the past 7 years
Transformation over the past 7 years A family-controlled, A focused, well-shaped endebted conglomerate engineering company with four different and independant business The leading supplier of areas equipment and services to the global cement and minerals industries 2002 2009 Capital Market Day 2009
Slide 5: What has changed since 2002? Group Structure
What has changed since 2002? Group Structure Non-core activities have been divested Cement and Minerals are more balanced in size Much stronger focus on Customer Services The Indian office has become a corner-stone in the corporate strategy 2002 2009 Capital Market Day 2009 5
Slide 6: More engineering in India
More engineering in India - less in Denmark and USA From 5% in 2003 to 23% of the global staff in 2008 Systematic transfer of standard engineering work to India from Denmark and USA Denmark Denmark 16% 27% Other 42% USA Other 2003 2008 19% 59% USA 9% India 5% India 23% Capital Market Day 2009 6
Slide 7: What has changed since 2002? Ownership structure
What has changed since 2002 ? Ownership structure Market Cap DKK 2,926m Market Cap DKK 9,629m Number of shareholders ~16,000 Number of shareholders ~42,000 A and B shares Only one share class Danish Danish Own shares (non-registrered) (non-registrered) 2% Danish 14% Own shares ATP 3% 8% institutiona
Slide 8: What has changed since 2002? Operations
What has changed since 2002 ? Operations Changed sales policies and stringent contract conditions Focus on profitability rather than market share Organisation changed to project-oriented from technology-oriented Accountability established in the organisation Increased off-shoring of engine
Slide 9: More Minerals and Customer Services
More Minerals and Customer Services – less dependent on large cement projects Order intake 2003 2008 Cement DKK 6,328m DKK 15,721m Minerals DKK 2,424m DKK 14,730m - of which is DKK 1,825m DKK 6,073m Customer Services Minerals’ share of order intake up from 28% to 48% Customer Services’ revenue u
Slide 10: Current business mix
Current business mix Revenue 2008 Revenue 2008 - by type of product - by country category Customer Projects Services 65% High-income Developing 22% countries countries 33% 67% Products 13% Revenue 2008 - by segment Cembrit 5% Minerals Cement 41% 54% Capital Market Day 2009 10
Slide 11: Asset light business model
Asset light business model Flexible cost structure Engineering house / technology provider Most manufacturing is out-sourced (~80-90%) Low working capital due to prepayments from customers of 10-25% Low maintenance CAPEX (estimated ~1-2% of revenue) Capital Market Day 2009 11
Slide 12: Flexible cost structure
Flexible cost structure Production costs DKK 15,685m in 2008, of which Sales price ~80% relates to out-sourced manufacturing, equivalent to ~65% of revenue EBIT margin ~10% SG&A Depreciations Capacity costs ~11% Administrative costs DKK 1,579m in 2008 Amortisations equivalent to ~6% of revenue,
Slide 13: Cement – transformation over the past 7 years
Cement – transformation over the past 7 years Revenue DKKm EBIT-ratio 16,000 12.0% EBIT-ratio has been constantly improving since 2003, primarily 14,000 10.0% due to improved order execution 12,000 and higher quality of order 8.0% backlog 10,000 6.0% 8,000 Guidance 2009: 4.0% Revenue slightly lo
Slide 14: Minerals – transformation over the past 7 years
Minerals – transformation over the past 7 years Revenue DKKm EBIT-ratio Revenue has been constantly increasing since 2002 due to 12,000 12.0% both organic and acquisitive growth 10,000 10.0% EBIT-ratio has improved since 8,000 8.0% 2004, where profit was hit by process challenges in connection 6
Slide 15: Cembrit – transformation over the past 7 years
Cembrit – transformation over the past 7 years Cembrit has grown to become Revenue DKKm EBIT-ratio the largest dedicated distributor and the second- 1,600 20.0% largest producer of fibre- 1,400 10.0% cement products in Europe 1,200 0.0% 1,000 Cembrit has a strong -10.0% 800 production platform i
Slide 16: Working capital trends 2009
Working capital trends 2009 4500 Prepayments 2000 Inventories 4000 1800 3500 1600 3000 1400 1200 2500 1000 2000 800 1500 600 1000 400 500 200 0 0 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008 Trade receivables Trade payables 6000 3000 5000 2500 4000 2000 3000 1500 2000 1000 1
Slide 17: Follow-up on the Annual Report for 2008: Guidance 2009
Follow-up on the Annual Report for 2008 Guidance 2009 - Group 2009 2008 ■ New cement kiln capacity 25-50mty 123mty ■ Revenue 20-25bn 25,285m ■ Earnings “Satisfactory” ■ Significant slowdown in Cement and Mining Capex is expected in 2009 Guidance 2009 - Segments ■ Cement Revenue slightly down compare
Slide 18: Order backlog
Order backlog Orders cancelled and ‘put on hold’ – we hope to have seen the peak in Q4 2008 Why? Orders cancelled – End 2008 DKK ~0.9bn (~3% of order backlog) – Typically contracted within the previous three-six months =>purchase orders not issued and letters of credits not opened yet Orders on
Slide 19: Margin drivers in 2009
Margin drivers in 2009 Positive Negative Healthy backlog Declining operational leverage Relative increase in revenue Inefficient use of internal from product companies resources related to order postponements Relative increase in revenue from Customer Services Declining pricing power vis
Slide 20: Guidance 2009
Guidance 2009 Factors affecting revenue in 2009: Timing of order execution and deferral of deliveries Timing and level of new orders Revenue Guidance Long term margin targets: 25 20 Low activity: 8-9% High activity: 10-12% ’satisfactory earnings’ Capital Market Day 2009 20
Slide 21: Base scenario
Base scenario We are at the trough right now – the question is how deep and how wide will it be? Ecstasy Bull scenario Stabilisation Base scenario Bear scenario State of shock / misery 2009 is expected to be a year of transition with low visibility. We expect to have better visibility in 2010. Capit
Slide 22: Decision to pay dividend for 2008 postponed
Decision to pay dividend for 2008 postponed Equity ratio target: 30% Lower order intake in 2009 lower prepayments & financial flexibility Maintain ability to pursue strategic acquisitions: - Acquisition of Conveyor Engineering announced on 27 Feb. 2009 NIBD & gearing Equity & Equity ratio Net
Slide 23: Analyst consensus estimates after Q4 2008
Analyst consensus estimates after Q4 2008 Group (DKKm) 2009 2010 2011 Revenue 22,881 19,945 18,571 Reported EBIT 1,985 1,602 1,494 EBIT-ratio 8.7% 8.0% 8.0% Cement (DKKm) 2009 2010 2011 Revenue 11,907 8,826 7,458 Reported EBIT 1,088 754 582 EBIT-ratio 9.1% 8.5% 7.8% Minerals (DKKm) 2009 2010 2011 Re
Slide 24: Management priorities in 2009
Management priorities in 2009 Cash Costs Customers We do not control the markets, but… …we are agile …we will cut costs when needed Capital Market Day 2009 24
Slide 25: The FLSmidth equity story
The FLSmidth equity story The leading supplier of equipment and services to the global cement and minerals industries Leading technology and best flowsheet coverage Asset light business model Flexible cost structure - we can and will adjust our cost base, when needed Customer Services is a
Slide 26: Questions
Questions Capital Market Day 2009 26