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FLSmidth annual report for 2011 was released on 21 February 2012. Best viewed on a full screen mode, this annual report informs the reader about how well FLSmidth's business is doing financially, as well as FLSmidth's growth strategies and new financial targets projected for the next year.
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Presentation of Annual Report 2011
21/02/2012Annual Report 2011 1
Forward-looking statements
Annual Report 2011
21/02/2012Annual Report 2011 2
FLSmidth & Co. A/S’ financial reports, whether in the form of annual reports or interim reports, filed with the Danish Business Authority and/or announced via the company’s website and/or NASDAQ OMX Copenhagen, as well as any presentations based on such financial reports, and any other written information released, or oral statements made, to the public based on this interim report or in the future on behalf of FLSmidth & Co. A/S, may contain forward-looking statements.
Words such as ‘believe’, ‘expect’, ‘may’, ‘will’, ‘plan’, ‘strategy’, ‘prospect’, ‘foresee’, ‘estimate’, ‘project’, ‘anticipate’, ‘can’, ‘intend’, ‘target’ and other words and terms of similar meaning in connection with any discussion of future operating or financial performance identify forward-looking statements.Examples of such forward-looking statements include, but are not limited to:• statements of plans, objectives or goals for future operations, including those related to FLSmidth & Co. A/S markets, products, product research and product
development• statements containing projections of or targets for revenues, profit (or loss), capital expenditures, dividends, capital structure or other net financial items• statements regarding future economic performance, future actions and outcome of contingencies such as legal proceedings and statements regarding the underlying
assumptions or relating to such statements• statements regarding potential merger & acquisition activities. These forward-looking statements are based on current plans, estimates and projections. By their very
nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which may be outside FLSmidth & Co. A/S’s influence, and which could materially affect such forward-looking statements.
FLSmidth & Co. A/S cautions that a number of important factors, including those described in this presentation, could cause actual results to differ materially from those contemplated in any forward-looking statements.
Factors that may affect future results include, but are not limited to, global as well as local political and economic conditions, including interest rate and exchange rate fluctuations, delays or faults in project execution, fluctuations in raw material prices, delays in research and/or development of new products or service concepts,interruptions of supplies and production, unexpected breach or termination of contracts, market-driven price reductions for FLSmidth & Co. A/S’ products and/or services, introduction of competing products, reliance on information technology, FLSmidth & Co. A/S’ ability to successfully market current and new products, exposure to product liability and legal proceedings and investigations, changes in legislation or regulation and interpretation thereof, intellectual property protection, perceived or actual failure to adhere to ethical marketing practices, investments in and divestitures of domestic and foreign enterprises, unexpected growth in costsand expenses, failure to recruit and retain the right employees and failure to maintain a culture of compliance.Unless required by law FLSmidth & Co. A/S is under no duty and undertakes no obligation to update or revise any forward-looking statement after the distribution of this presentation.
Q4’11 BEST quarterly operating result EVER9% growth & 9.9% EBIT ratio in 2011
New STRATEGY to unfold growth potentialProposed dividend DKK 9 per share
21/02/2012Annual Report 2011 3
Q4 results 2011
Annual results 2011
Minerals
Cement
Cembrit
New Group strategy
New Group structure
Future outlook
Capital Market Day: 17 April 2012
Agenda
Annual Report 2011
21/02/2012Annual Report 2011 4
Order intake up 32% on Q4’10, however sequentially down 18% due to very strong Q3’11
Strong revenue growth due to increasing order backlog in previous quarters as well as continued strong demand for Customer Services
Margin improvements as a consequence of strong top-line growth and operational leverage, as well as favourable product mix and solid order execution
Financial developments in Q4 2011
Q4 Results 2011
21/02/2012 5
FLSmidth & Co. A/S(DKK m) Q4 2011 Q4 2010 Change
Order intake 5,856 4,428 +32%Revenue 7,286 5,520 +32%Gross margin 26.3% 25.5%EBITDA 995 633 +57%EBITA* 938 579 +62%EBITA-ratio 12.9% 10.5%EBIT 870 536 +62%EBIT-ratio 11.9% 9.7%Results 567 329 +72%CFFO 260 232 +12%
Annual Report 2011
*) Definition of EBITA: Earnings before amortisation and write-down of intangible assets
Order intake up 16% on last year due to strong developments in MineralsRevenue growth due to increase in order backlog over the last two years and continued strong demand for Customer ServicesSteady margins overall -however with different segment developmentsThe effect of Purchase Price Allocations amounted to DKK 178m in 2011 and is expected to be around DKK 220m in 2012Cash flow from operating activities down due to temporary spike in working capital in Q4’11
Financial developments in 2011
Annual Report 2011
21/02/2012 6
FLSmidth & Co. A/S(DKK m) 2011 2010 Change
Order intake 24,044 20,780 +16%Order backlog 27,136 23,708 +14%Revenue 21,998 20,186 +9%Gross margin 26.1% 25.8%EBITDA 2,647 2,387 +11%EBITA* 2,405 2,177 +10%EBITA-ratio 10.9% 10.8%EBIT 2,171 1,990 +9%EBIT-ratio 9.9% 9.9%Results 1,437 1,278 +12%CFFO 1,148 1,335 -14%
Annual Report 2011*) Definition of EBITA: Earnings before amortisation and write-down of intangible assets
Emerging markets 69% of revenue in 2011
31%
21%
48%
Annual Report 2011
21/02/2012Annual Report 2011 7
Revenue 2011 – classified by country category
High-income countries(Cf. World Bank’s definition)
BRIC countries(Brazil, Russia, India, China)
Developing countries (Exclusive of BRIC)
7%
37%56%
Cement
Revenue 2011 – classified by segment
Cembrit
Minerals
Pattern of increasing quarterly revenue over the year repeated in 2011, however slightly more skewed towards year end than usual
EBIT-margin increasing over the course of 2011 due to top-line growth, a favourable product mix and project completions with a better-than-expected financial result
Revenue increased 32% in Q4 2011
Annual Report 2011
21/02/2012Annual Report 2011 8
0
2.000
4.000
6.000
8.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Revenue (quarterly)+32% vs. Q4 2010DKKm EBIT ratio
0,0%2,0%4,0%6,0%8,0%10,0%12,0%14,0%
0
200
400
600
800
1.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
EBIT (quarterly)+62% vs. Q4 2010DKKm
EBIT ratio between 9-10% throughout the cycle
Annual Report 2011
21/02/2012Annual Report 2011 9
RevenueDKKm
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
-
500
1.000
1.500
2.000
2.500
3.000
2007 2008 2009 2010 2011
EBITDKKm EBIT ratio
-20%
0%
20%
40%
60%
80%
-5.000
-
5.000
10.000
15.000
20.000
25.000
30.000
2007 2008 2009 2010 2011
Growth
EBIT ratio between 9-10% through the cycle - unusual for a company in a cyclical industry
Stable margin development is a reflection of FLSmidth’s asset light business model leading to aflexible cost structure
Purchase price allocations PPA DKK 178m in 2011, expected to be DKK ~220m in 2012
Step-change in level of unannounced orders to DKK ~4bn per quarter sustained in Q4
Order backlog declined in Q4 due to high revenue recognition
Expected conversion of order backlog end of 2011 to revenue: 62% in 2012 and 23% in 2013
Order intake increased 32% in Q4 2011
Annual Report 2011
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-
2.000
4.000
6.000
8.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Order intake (quarterly)+32% vs. Q4 2010DKKm
0,800,901,001,101,201,301,401,501,60
05.000
10.00015.00020.00025.00030.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Order backlog (quarterly)+14% vs. Q4 2010DKKm Book-to-bill ratio
Announced O&M ordersAnnounced Capital ordersUn-announced orders
CFFO adversely affected by increase in paid taxes (due to intra group transfer of IPR) and temporary increase in working capital in Q4 2011
Increase in working capital in Q4 related to high level of execution and revenue recognition in December resulting in large amount of invoices that are not yet due for payment
Cash flow and working capital
Annual Report 2011
21/02/2012Annual Report 2011 11
CFFO (quarterly)+12% vs. Q4 2010DKKm
Working capital (quarterly)+85% vs. Q4 2010DKKmFree cash flow
-
500
1.000
1.500
2.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011-400
-200
0
200
400
600
800
1.000
-400
-200
0
200
400
600
800
1.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Net debt position following five acquisitions and high level of organic investments in 2011
Equity ratio of 35% comfortably above minimum targeted level of 30%
Dividend of DKK 9 per share proposed, equivalent to 33% pay-out ratio and 3% dividend yield
Continued strong financial platform
Annual Report 2011
21/02/2012Annual Report 2011 12
NIBD (quarterly)DKKm
0%5%10%15%20%25%30%35%40%
0
2.000
4.000
6.000
8.000
10.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Equity (quarterly)DKKm Equity ratio
(0,8)(0,6)(0,4)(0,2)-0,2 0,4 0,6 0,8
(2.000)(1.500)(1.000)
(500)-
500 1.000 1.500 2.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Gearing (NIBD/EBITDA)
Gearing 0.04x EBITDA +9% vs. Q4 2011
Minerals
21/02/2012Annual Report 2011 13
2011 - RECORD YEAR for Minerals
BEST EBIT resultHIGHEST revenue
LARGEST order intake…EVER!
21/02/2012Annual Report 2011 14
Level of unannounced orders consistently higher in 2011 than in 2010 - run rate DKK ~2.6bn
Drop in EBIT ratio in first half due to one-off losses on two contracts
High level of execution and revenue in Q4’11
Strong revenue growth & margin improvement in Q4
Minerals
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Revenue (quarterly)DKKm EBIT ratio+49% vs. Q4 2011
0,0%2,0%4,0%6,0%8,0%10,0%12,0%14,0%
0
1.000
2.000
3.000
4.000
5.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
-
1.000
2.000
3.000
4.000
5.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Order intake (quarterly)+65% vs. Q4 2010DKKm
Announced Capital orders
Unannounced orders
Distribution of order intake in 2011
42%
28%
21%
9%Comminution
Separation
Material Handling
Other
Minerals
21/02/2012Annual Report 2011 16
Order intake 2011 – classified by technology
34%
14%10%
6%7%
29%
Copper
Gold
Coal
Iron ore
Fertilizers
Other
Order intake 2011 – classified by industry
The industry is generally buoyant with unchanged growth drivers (industrialisation & urbanisation in emerging markets) sparking global demand for particularly coal, iron ore, fertilizers and copper
No significant changes to competitivelandscape
The trend is for global mining companies to engage with global suppliers that can muster a broad range of products and services
Expected conversion of order backlogto revenue: 73% in 2012 and 20% in 2013
Continued strong demand for mining equipment
MINERALS DKKm 2011 2010 Change
Order backlog 13,408 9,752 +37%
Order intake 15,900 10,982 +45%
Revenue 12,374 9,587 +29%
EBITA 1,479 1,124 +32%
EBITA ratio 12.0% 11.7%
EBIT 1,306 987 +32%
EBIT ratio 10.6% 10.3%
Minerals
21/02/2012Annual Report 2011 17
Cement
21/02/2012Annual Report 2011 18
2011 – mixed picture in Cement
Strong executionScattered markets
Orders up 17% (excl. Customer Services)
21/02/2012Annual Report 2011 19
Overall order intake in Cement hit by slowdown in traditionally large cement markets.
In India, high growth has led to high inflation, which is being countered by high interest rates and a consequent slowdown in investments.
In North Africa, the Arab Spring created uncertainty and unpredictability, which has temporarily curbed investment activity and consumption of cement.
Expected conversion of order backlog to revenue: 52% in 2012 and 26% in 2013
Traditionally strong markets subdued in 2011
CEMENT DKKm 2011 2010 Change
Order backlog 13,838 14,146 -2%
Order intake 8,248 10,036 -18%
Revenue 8,367 9,372 -11%
EBITA 894 1,064 -16%
EBITA ratio 10.7% 11.4%
EBIT 837 1.017 -18%
EBIT ratio 10.0% 10.9%
Cement
21/02/2012Annual Report 2011 20
-
1.000
2.000
3.000
4.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Level of unannounced orders stable throughout 2011 – run rate around DKK 1.4bn
EBIT-margin increasing in Q4 due to top-line growth, a favourable product mix and project completions with a better-than-expected financial result
Strong revenue growth & margin improvement in Q4
Cement
21/02/2012Annual Report 2011 21
Revenue (quarterly)DKKm EBIT ratio+13% vs. Q4 2010
0,0%2,0%4,0%6,0%8,0%10,0%12,0%14,0%16,0%
0
1.000
2.000
3.000
4.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Order intake (quarterly)-10% vs. Q4 2010DKKm
Announced O&M ordersAnnounced capital ordersUnannounced orders
020406080
100120140160
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Asia (excl. China & India)IndiaRussiaEuropeNorth AmericaLatin AmericaMiddleEastAfrica
mty
Global contracted new kiln capacity (excl. China)
Cement
21/02/2012Annual Report 2011 22
Global contracted new kiln capacity in 2011 46 mty(2010: 65 mty)
FLSmidth31%
Sinoma28%
Polysius19%
KHD6%
Others16%
Market shares
Customer Services
21/02/2012Annual Report 2011 23
0
500
1.000
1.500
2.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Strong service revenue growth in 2011
Customer Services
21/02/2012Annual Report 2011 24
Minerals Customer ServicesOrder intake and revenue (quarterly)
DKKm
0
500
1.000
1.500
2.000
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Cement Customer ServicesOrder intake and revenue (quarterly)
DKKm
Order intake
Revenue
Order intake
Revenue
Minerals Customer services order intake increased 33% in 2011 and accounted for 27% of total Minerals order intake
Minerals Customer services revenue increased 22% in 2011 and accounted for 32% of total Minerals revenue
Cement Customer services order intake decreased 44% in 2011 (due to no O&M contracts received in 2011) and accounted for 38% of total Cement order intake
Cement Customer services revenue increased 9% in 2011 and accounted for 40% of total Cement revenue
Cembrit - Europe’s largest dedicated provider of fibre-cement products
21/02/2012Annual Report 2011 25
The European markets are still expected to offer considerable opportunities for long-term expansion of the fibre-cement segment in terms of higher market share for Cembrit roofing materials
Prospects for 2012 reflect macro economic uncertainty suggesting a lengthy period of low growth in Europe
Positive results in Q4’11 due to mild weather
Cembrit
21/02/2012Annual Report 2011 26
Revenue (quarterly)DKKm EBIT ratio+7% vs. Q4 2010
-10,0%
-5,0%
0,0%
5,0%
10,0%
-600-400-200
0200400600
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
CEMBRITDKKm 2011 2012 change
Revenue 1,460 1,383 6%
EBITA 58 30 +93%
EBITA ratio 4.0% 2.2%
EBIT 54 27 +100%
EBIT ratio 3.7% 2.0%
“We will be our customers’ preferred full-service provider of sustainable minerals and cement technologies”
New Vision and New Group Strategy
21/02/2012Annual Report 2011 27
”Focused full-service provider”
New Group Strategy
21/02/2012Annual Report 2011 28
We will focus on 6 key industries:CoalIron oreFertilizerCopperGoldCement
We will not diversify into unrelated industries
We will differentiate from competitors by offering full service within our key industries and core technologies; minerals processing and material handling
Full-service provider
We will build state-of-the-art machinery and then bundle this with services to supply the solutions our customers need the most
We do no longer regard products and machinery as "the end", but rather as "the means" by which we supply services to our customers
Providing full service solutions will enable us to cover more of the customers' life cycle
”Focused full-service provider”
New Group Strategy
21/02/2012Annual Report 2011 29
Life cycle approach
We will focus on a product portfolio that reflects our customers' life cycle
Maximize sales to each customer
Our primary value-proposition will be based on a holistic life-cycleapproach where total cost of ownership (TCO) is lower than our competitors and based on more sustainable and eco-efficient technologies
Full flow-sheet
We will offer customers in our six key industries full flow sheet solutions that reflect our core competences
The objective is to complete the flow sheet in each of our six key industries - though with varying scope
We will pursue business activities within our core activities that will result in market leadership
We build our strategy around three themes:
Customer intimacyProduct leadershipOperational excellence
Our approach will be balanced and interlinked
We will align our solutions with our customers’ needs
Three key strategic themes
New Group Strategy
21/02/2012Annual Report 2011 30
Customer intimacy
Product leadershipOperational excellence
New Group Structure
New Group Structure
21/02/2012Annual Report 2011 31
MineralsCement*
FLSmidth
Old structure
Customer Services
Bulk Materials* Non-Ferrous Cement
FLSmidth
Projects and Products
Projects and Products
New structure
*) Some product companies previously belonging to Cement are moved to Bulk Materials since a considerable part of their future activities is related to minerals
Market potential p.a. (estimated)
DKK~70bn DKK~90bn DKK~50bn DKK~60bn
Industries served All focus industries Coal, iron, fertilizers and other bulk minerals
Copper, gold and other minerals
Cement
Main competitors All OEM suppliers,specialised services and parts suppliers
ThyssenKrupp, Sandvik, Takraf, FAM, Metso, etc.
Metso, Outotec,ThyssenKrupp, Sandvik, Weir, etc.
Sinoma, ThyssenKruppPolysius, KHD, etc.
Revenue 2011*) (proforma)
DKK 5.3bn DKK 5.0bn DKK 6.8bn DKK 4.4bn
EBITA-% 2011(proforma)
~16% ~5% ~12% ~11%
New Group Structure
New Group Structure
21/02/2012Annual Report 2011 32
Customer Services Bulk Materials Non-Ferrous Cement
FLSmidthBulk Materials, Non-Ferrous and Cement still include a total of DKK 1.9bn service revenue in product companies. Total service revenue amounted to DKK 7.2bn in 2011 representing 33% of Group revenue
*) Elimination in the form of inter-company trade amounted to approx. DKK 1bn in 2011
New Group Structure
Group Executive Management to be enlarged
21/02/2012Annual Report 2011 33
Bulk Materials
Christian Jepsen*Executive Vice President
Non-Ferrous
Peter FlanaganExecutive Vice President
Cement
Per Mejnert KristensenExecutive Vice President
Jørgen Huno Rasmussen*
CEO
Poul Erik Tofte*(until 30 March 2012)
Ben Guren*(from 10 April 2012)
CFO
Customer Services
Bjarne Moltke Hansen*1
Executive Vice President
*) Executive officer registred with the Danish Business Agency1) Responsible for Cembrit
Future Outlook
21/02/2012Annual Report 2011 34
New financial targets
Future Outlook
21/02/2012Annual Report 2011 35
Financial targets
Annual revenue growth Above market averageEBITA ratio 10-13%Equity ratio >30%Financial gearing (NIBD/EBITDA) <2Pay-out ratio 30-50%CFFI (excl. acquisitions) DKK -700m to -900m
Group Guidance 2012 Actual 2011
Revenue DKK 24-26bn DKK 22bn
EBITA ratio >10% 10.9%
EBIT ratio 9-10% 9.9%
Tax rate 30-32% 31%
CFFI (excl. acquisitions) DKK -900m DKK -733m
Guidance 2012
Future Outlook
21/02/2012Annual Report 2011 36
Segments Guidance 2012
Revenue trend vs. 2011 EBITA ratio trend vs. 2011 Order intake trend vs. 2011
Customer Services Increasing (DKK 5.3bn) Stable (~16%) Increasing (DKK 5.3bn)
Bulk Materials Increasing (DKK 5.0bn) Strongly increasing (~5%) Increasing (DKK 5.5bn)
Non-Ferrous Increasing (DKK 6.8bn) Slightly decreasing (~12%) Stable (DKK 9.7bn)
Cement Slightly increasing (DKK 4.4bn) Decreasing (~11%) Slightly increasing (DKK 4.4bn)
Cembrit Slightly increasing (DKK 1.5bn) Increasing (~4%) n/a n/a
Record year for Minerals
Cement hit by Arab spring and growth pause in India
Launch of new group strategy: “Focused full-service provider”
New group structure: Four divisions instead of two
Group Executive Management enlarged to six members
New financial targets
Key take-aways
Key take-aways
21/02/2012Annual Report 2011 37
Capital Market Day17 April 2012 at 15:00FLSmidth, Copenhagen
For more information: www.flsmidth.com/cmd2012
Visit FLSmidth at MineExpo in Las Vegas and at our offices in Salt Lake City, USA on 26-27 September 2012
21/02/2012Annual Report 2011 38
