16/05/2013 1 Presentation of Interim Report Q1 2013 17 May 2013 Interim Report Q1 2013 1 Forward-looking statements Interim Report Q1 2013 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. 17 May 2013 Interim Report Q1 2013 2 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 costs and 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.
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FLSmidth First Quarter Interim Report 2013 Presentation
FLSmidth 1st quarter interim report for 2013 was released on 17 May 2013. Best viewed on a full screen mode, this first quarterly 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 next quarter.
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16/05/2013
1
Presentation of Interim Report Q1 2013
17 May 2013Interim Report Q1 2013 1
Forward-looking statements
Interim Report Q1 2013
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.
17 May 2013Interim Report Q1 2013 2
p y g
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.
16/05/2013
2
Th S h l 48 ld d G iti
New Group CEO since 1 May 2013
New CEO
Thomas Schulz, 48 years old and German citizen
MSc & PhD in Engineering with a dissertation in Mineral Mining and Quarrying
Former member of Sandvik’s Group Executive Management
Leadership style: Performance driven and ambitious team playerteam player
17 May 2013Interim Report Q1 2013 3
Great business model with a sustainable profitable
Reasons for joining FLSmidth
New CEO
pgrowth potential
International company with strong brand name andperformance
Exciting product offerings within both minerals and cement
Scandinavian business culture and heritage
Great match – FLSmidth is a reflection of what I have done the last 20 years
17 May 2013Interim Report Q1 2013 4
16/05/2013
3
Large pool of professional business people
First impressions of FLSmidth
New CEO
Large pool of professional business peopleValue-driven company with a strong engineering base
Customer intimacy supported by global footprint- not least in India
Strong business cultureObvious synergies between the cement and minerals businesses
A truly global company with the ambition to be the most professional and innovative service provider
Cost, profit and capital efficiency improvements are necessary
17 May 2013Interim Report Q1 2013 5
Shareholder value
Key focus areas
New CEO
Shareholder value
Internal efficiency
Customer intimacy
Safety performance and culture
Service-check of Group Strategy
M i l H dliMaterial Handling
17 May 2013Interim Report Q1 2013 6
16/05/2013
4
Current market trends
Interim Report Q1 2013
Increased market uncertainty experienced in the second half of 2012 continued into 2013of 2012 continued into 2013
Short-term outlook for mining capex has deteriorated
Most commodity prices have retreated from peak levels, including copper and gold, though still above investment thresholds
Short-term outlook for most bulk materials remains subdued,but market dynamics (import/export) create opportunities
17 May 2013Interim Report Q1 2013 7
Service activities still at healthy level
In Cement, good opportunities persist although with increasing competition
Medium to long term prospects remain encouraging
Key Highlights
Q1 is seasonally weak – 2013 is no exception
Market outlook has deteriorated in recent months- particularly for mining capital projects
Guidance for 2013 is unchanged– however skewed towards the lower end however skewed towards the lower end
Corrective actions will be developed and communicated in connection with the Q2 report
17 May 2013Interim Report Q1 2013 8
16/05/2013
5
Order intake down 22% owing to no large orders in Mineral Processing and
Financial developments in Q1 2013
Q1 Results 2013
FLSmidth & Co. A/S(DKKm) Q1 2013 Q1 2012 Change g g
Cement in Q1
Revenue up 17% attributable to all segments but Material Handling
EBITA down 38%, primarily due to execution of low margin orders in Material Handling and Cement backlog as well as one-off costs of DKK 68m in Q1’13.
Net results down 86% including discontinued activities of DKK 51m
Order backlog (quarterly)1% Q1 2012DKKm Book to bill ratio*
0
2,000
4,000
6,000
8,000
10,000
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
-22% vs. Q1 2012DKKm
0.80.911.11.21.31.41.51.6
05,000
10,00015,00020,00025,00030,00035,000
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
-1% vs. Q1 2012DKKm Book-to-bill ratio*
Announced O&M orders **Announced capital ordersUnannounced orders
Unannounced orders stable but order intake decreasing due to fewer large orders in Q1
Order intake in Customer Services remains healthy
Expected backlog conversion to revenue: 57% in 2013, 24% in 2014 and 19% in 2015 and beyond. O&M** contracts accounted for DKK 4.9bn (17%) of the order backlog at the end of Q1
17 May 2013Interim Report Q1 2013 11
*) Order backlog divided by Last-Twelve-Months Revenue
**) Operation & Maintenance
Revenue increased 17% in Q1 2013
Interim Report Q1 2013
Revenue (quarterly)+17% vs Q1 2012DKKm
Revenue growth Q1’13 vs. Q1’12
0
2,000
4,000
6,000
8,000
10,000
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
+17% vs. Q1 2012DKKm
Growth CustomerServices
MaterialHandling
Mineral Processing
Cement Group
Organic 12% 3% 14% 19% 11%
Acquisitions 23% 0% 5% 0% 8%
Currency -3% -3% -2% -1% -2%
Total 32% 0% 17% 18% 17%
Estimated organic revenue growth of 11% and acquisitive revenue growth of 8% in Q1 2013
Pattern of increasing quarterly revenue over the calendar year expected to be repeated in 2013
17 May 2013Interim Report Q1 2013 12
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7
Gross margin development in Q1 2013
Interim Report Q1 2013
Gross margin
Gross profit (quarterly)+3% Q1 2012DKKm
Gross margin Q1’13 vs. Q1’12- by segmentGross margin
24.6%24.9%
21.9%
10%
15%
20%
25%
30%
0
500
1,000
1,500
2,000
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
+3% vs. Q1 2012DKKm - by segment
28.7%
18.2% 21.8%26.8%27.0%
11.8%
21.5% 19.8%
CustomerServices
MaterialHandling
MineralProcessing
Cement
Q1’13Q1’12 Q1’13Q1’12 Q1’13Q1’12 Q1’13Q1’12
17 May 2013Interim Report Q1 2013 13
Decline in gross margin is primarily attributable to developments in Cement and Material Handling – as expected and guided – due to lower margins in the backlog for different reasons
Lower gross margin in Customer Services in Q1 is due to business mix
Services Handling Processing
EBITA decreased 38% in Q1 2013
Interim Report Q1 2013
EBITA i
EBITA (quarterly)38% Q1 2012DKKm DKKm
Change in EBITA vs. Q1’12 EBITA margin
9.1% 8.4%
4.5%
0%
3%
6%
9%
12%
15%
0
200
400
600
800
1,000
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
-38% vs. Q1 2012DKKm
408254
180 169
164
0100200300400500600700
EBITA Q1'12 Increase in revenue
Decrease in gross margin
Increase in SG&A costs
EBITA Q1'13
DKKm
EBITA margin down on Q1’12 for all segments despite revenue growth
Margin decline due to decrease in gross margin and increase in SG&A costs
17 May 2013Interim Report Q1 2013 14
16/05/2013
8
Cash flow from operating and investing activities
Interim Report Q1 2013
CFFO (quarterly)DKKm
CFFI (quarterly)+48% vs Q1 2012DKKm298% vs Q1 2012DKKm
-800-400
0400800
12001600
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
+48% vs. Q1 2012DKKm
-3,000-2,400-1,800-1,200
-6000
600
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
-298% vs. Q1 2012
Negative CFFO due to lower operational profit and increased working capital
CFFI reflects that acquisitions are temporarily on hold in 2013, and includes DKK +92m related tosale of non-core activities in Ludowici, Australia
17 May 2013Interim Report Q1 2013 15
Net Working capital developments in Q1
Interim Report Q1 2013
Average Net Working CapitalWorking capital ratio 7.7%DKKm NWC* /Revenue LTM**End Q1 2013 vs. End Q4 2012
Change in Net Working capitalDKKm
0%
2%
4%
6%
8%
10%
12%
0
500
1,000
1,500
2,000
2,500
3,000
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
1,629 2,335
158 1,672
603 1,145
583
-
1,000
2,000
3,000
4,000
5,000 Ambition to cap NWC/Revenue at 10%
2011 2011 2011 2011 2012 2012 2012 2012 2013
17 May 2013Interim Report Q1 2013 16*) NWC: Average Net Working Capital excl. Cembrit
**) LTM: Last Twelve Months
Increase in net working capital due to increase in Work In Progress (WIP) as progress billing was impacted by Easter Holidays and contract conditions
Trade Payables decreased in Q1 following very high activity level and receipt of invoices in Q4, however off-set by a decrease in Trade Receivables due to increased cash collections
16/05/2013
9
Increased capital efficiency is top priority
Interim Report Q1 2013
ROCE* (quarterly)Average capital employed ROCE17% in Q1 2013 EBITA %
Declining ROCE explained by lowerEBITA% and TOCEp p y
DKKm
0%5%10%15%20%25%30%
03,0006,0009,000
12,00015,00018,000
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
ROCE17% in Q1 2013ROCE target
0%2%4%6%8%
10%12%14%
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
2008
20102011
2012
Q1’13 LTM**
2009
EBITA %
Turnover /Capital Employed (TOCE)
EBITA% and TOCE (Turnover/Capital Employed)
Average capital employed has increased notably due to acquisitions.. (DKK +3.5bn from Q1’12 to Q1’13)
..and therefore return on capital employed has fallen (From 23% in Q1’12 to 17% in Q1’13)
ROCE expectations: ~15% in 2013, increasing in 2014 and exceeding target of >20% in 2015
17 May 2013Interim Report Q1 2013 17
*) ROCE: Return on Capital Employed calculated on a before tax basis, including goodwill and based on last 12 months’ EBITA and average Capital Employed
Gearing 1.5x EBITDA +5% vs. Q1 2012Equity ratio target (self-imposed)Gearing target (self-imposed)
Net debt and gearing increased in Q1 mainly due to weaker CFFO
The equity ratio was unchanged at 30%
Committed credit facilities amounted to DKK 8.3bn (excl. mortgage) at the end of Q1 2013
17 May 2013Interim Report Q1 2013 18
*) NIBD excluding Cembrit
**) LTM: Last-Twelve-Months
16/05/2013
10
Share buyback program to be initiated
Interim Report Q1 2013
In February, it was announced that the Board y,of Directors plan for an extraordinary cash distribution of DKK 521m in the form of a share buyback program under ‘Safe Harbour’ rules
The Board of Directors will be initiating the program within the next 7 days
17 May 2013Interim Report Q1 2013 19
Customer Services
17 May 2013Interim Report Q1 2013 20
16/05/2013
11
Stable order intake but weaker EBITA margin
Customer Services
Revenue (quarterly)DKKm EBITA margin+32% Q1 2012
Order intake (quarterly)+6% vs Q1 2012DKKm DKKm EBITA margin+32% vs. Q1 2012
0%
4%
8%
12%
16%
20%
0
500
1,000
1,500
2,000
2,500
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
0
1,000
2,000
3,000
4,000
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
+6% vs. Q1 2012DKKm
Announced O&M ordersAnnounced capital ordersUnannounced orders
Record high level of unannounced orders in Q1 reflects continued good market conditions
Revenue benefitting from good order intake in previous quarters and current quarter
Margin adversely impacted by business mix and costs of one-off nature
Number of employees Q1’13 vs. Q1’12- by segmentNumber of employees decreased slightly - by segment
4,540
3,132 2,275 2,474
5,907
3,676 2,934 2,292
Q1’13Q1’12
Number of employees decreased slightly in Q1’13 (from 14,827 to 14,811), but increased 19% vs. Q1’12 Increase vs. Q1’12 is primarily related to acquisitions and blue collar workers in connection with O&M contractsDevelopments in divisional number of employees are impacted by allocation of Q1’13Q1’12 Q1’13Q1’12 Q1’13Q1’12
17 May 2013Interim Report Q1 2013 44
CustomerServices
MaterialHandling
MineralProcessing
Cement
employees are impacted by allocation of group staff