CEMENTING A STRONGER FUTURE - KHD CEMENTING A STRONGER FUTURE . Agenda Business Performance 2013...

Annual General Meeting

Jouni Salo, CEO, Ralph Quellmalz, CFO, Yizhen Zhu, COO Asia Pacific

Annual General Meeting - KHD Humboldt Wedag International AG May 27, 2014

CEMENTING A STRONGER FUTURE

Agenda

Business Performance 2013

Financial Performance 2013

Outlook 2014

Annual General Meeting – May 2014 2

Highlights 2013

First Quarter 2014

AVIC Takeover

Review 2013

Highlights 2013

Annual General Meeting – May 2014

Grew backlog for modernization and

environmental projects by over 12%, with

new orders in Turkey, Russia and the USA

Implemented HPGR license agreement

Ralph Quellmalz appointed CFO

Hubert Keusch elected Chairman of

Supervisory Board

Created two new business units; CAPEX

and Parts & Services

AVIC and group of bidders announce

takeover offer on October 11, 2014

3

https://intranet.khd.com/tl_files/bilder/news/Sales/VDZ 2013/Jouni Image1.jpg

2013 in brief


Highlights 2013

Business

KHD advanced

technology helps to win

projects in difficult market

Won strategic

environmental project in

the USA - in addition to

previously won Lafarge

environmental projects in

North America

New modernization

project in Russia

KHD maintains leading

position in Turkey

Parts & Services

business unit established

Financials

Increase in revenue

Execution of low-margin

projects and difficulties in

project execution led to

lower EBIT margin

Continued solid liquidity

Stable equity

Decrease in order

backlog, but still at

reasonable level

Industry

Overall low level of new

projects awarded in the

industry

Continued delays for

additional cement

capacity projects

Amount of environmental

and modernization

projects grew as

expected

Strong competition and

margin pressure

4

Business Snapshot 2013


Highlights 2013

5

in € mio.

Agenda



Outlook 2014


Highlights 2013

First Quarter 2014

AVIC Takeover

CN +7%

2013 market growth below expectations



IN +4%

LA +2%

FSU +4%

NA +4%

SSA +7%

World (excl. China) +2%

WE -7%

Share of Consumption in %

Source: ICR Research/ Morgan Stanley 2014, CW Group Report 2012

China (59%) India (6%)

USA (2%) Brazil (2%)

Russia (2%) Rest of the World (29%)

EE +3%

MENA +1%

Global Cement Consumption Growth 2013

7

Key markets



India

Disappointing economic growth

Low capacity utilization and rising costs

delayed investments

Increased fear of inflation as currency

came under pressure

Turkey

Economy and cement market recovery

along with strong construction activity

Political landscape led to increased

insecurity towards year-end

Russia

Sluggish growth, but strong construction

activity

Primarily modernization investments

Americas

Strong recovery in North America

Growth driven by environmental

regulations and increased cement

demand

Latin America consumption growth below

expectations

8

410.9

491.0

172.4

413.8

0

100

200

300

400

500

600

Order Intake Order Backlog

2012 2013

Winning projects despite very difficult market

Order intake decrease in the first three quarters

followed by strong order intake of € 89.6 million

in Q4

KHD advanced technology secures order with

Volsk Cement for modernization project € 77

million – total project value

Additional orders for Clean Technology in the

US (Holcim) and new cement capacity in

Turkey (Bati Anadolu, Limak Bati) and in Sub-

Saharan Africa (Cimentfort-Angola)

Parts & Services order intake equaled 23% of

total full year order intake

Decrease in order backlog, but remains at

reasonable level


Order intake and order backlog

in € million

- 58.0 % -15.7%

9


R&D: Securing Technological Leadership

KHD continued strong focus on R&D

with € 3.2 million investment in 2013

focusing on

• Standardization to increase

competitiveness in the market

• Environmental solutions for a cleaner

future

• Service products to support customers

in reducing their total cost of

ownership

24 patents in 2013



Parts & Services: Added Value for Customers – Lower cost of Ownership

New business unit with clear

global roles and responsibilities

Investments in R&D to develop

new service products

Building service team for more

frequent plant visits and stronger

customer support

Business unit set up in order to

achieve Group target of making

Parts & Services 30% of total

revenues



Agenda



Outlook 2014


Highlights 2013

First Quarter 2014

AVIC Takeover

Significant revenue increase

Major revenue contributions from projects in

Malaysia, Venezuela and Italy

Project execution for projects Malaysia,

Venezuela and Turkey with our strategic partner

AVIC contributed 30% to total revenues

Parts & Services revenue equaled 15% of total

revenues



Revenue

in € million

213.5

249.6

0

50

100

150

200

250

300

2012 2013

+16,9%

13

Lower EBIT - Difficulties in project execution and low-margin projects

Gross profit declined from € 43.8 million to

€ 29.4 million; gross profit margin down from

20.5% to 11.8%

Counter measures taken:

More focused tendering towards our

strategic customer segment and projects

led to reduction sales expenses of

€ 4 million

Reduction of administrative expenses

from € 18.5 to € 16.0

Continued strong focus on R&D with

€ 3.2 million investment



EBIT and EBIT margin

in € million and %

6.4

1.2

3.0%

0.5%

-4%

-3%

-2%

-1%

1%

2%

3%

4%

0

1

2

3

4

5

6

7

8

9

10

2012 2013

14

Balance Sheet: Continued high levels of equity and liquidity

Increase in other current assets

stemming from increase in

receivables and amounts due

from customers

Reduced cash due to negative

operating cash flow of € -47.1

million

Equity ratio remains high at

53.2%



17 15

283 228

136

175

00

50

100

150

200

250

300

350

400

450

500

2012 2013

Other current assets

Cash and cash equivalents

Non-current assets

230 223

44 35

162 160

0

50

100

150

200

250

300

350

400

450

500

2012 2013

Current liabilities

Non-current liabilities

Equity

15

High level of cash despite outflows from operating activities



283

-47 -1 -2 -3

228

180

200

220

240

260

280

Cash endof 2012

op. CF inv. CF fin. CF* exch. rate Cash endof 2013

* excluding restricted cash

Negative cash flow from operations

resulting mainly from low order

intake and a high number of projects

close to completion

Due to current market conditions,

payment terms are less favorable

than in the past

Total restricted cash at € 28.1 million

Cash and cash equivalents incl.

restricted cash amount to € 228.2

million

16

Agenda



Outlook 2014


Highlights 2013

First Quarter 2014

AVIC Takeover

Takeover offer well-received

Takeover offer accepted for 44,244,113 KHD shares by

the end of the additional acceptance period (January 13,

2014) corresponding to approximately 89.016% of KHD’s

share capital and voting rights.

(including the KHD shares held by Max Glory and the KHD shares, which the bidder AVIC

International Engineering Holdings Pte. Ltd. acquired upon completion of share purchase

and transfer agreement listed under 5.4 of the offer documents)

Takeover


Benefits for KHD

Improved competitiveness in a

difficult market environment

Unique position for EPC

projects

Better access to African, Asian

(including China) and Latin

American markets

Upward margin potential –

German technology with

Chinese speed and cost

18

Agenda



Outlook 2014


Highlights 2013

First Quarter 2014

AVIC Takeover

Key figures

First Quarter 2014


in € million Jan. 1 -

Mar. 31,

2014

Jan. 1 -

Mar. 31,

2013

Variance

in %

Order Intake 25.3 21.6 15.7%

Revenue 59.9 45.5 31.6%

Gross Profit 7.0 6.3 11.1%

Gross Profit margin (in %) 11.6 14.0

EBIT -1.7 -1.5 -13.3%

EBIT margin (in %) -2.8 -3.3

EBT -1.3 -1.0 -30.0%

Group net profit for the period -1.2 -0.7 -71.4%

EPS in € -0.02 -0.01

First Quarter 2014


Cash flow

in € million

Jan. 1 -

Mar. 31, 2014

Jan. 1 -

Mar. 31, 2013

Cash flow from operating activities 21.4 -14.1

Cash flow from investing activities -0.3 -0.3

Cash flow from financing activities -1.1 0.7

Continued high level of cash

in € million

Mar. 31,

2014

Dec. 31,

2013

Variance

in %

Equity 223.0 222.5 0.2%

Equity ratio (in %) 53.5 53.2

Cash and cash equivalents 251.9 228.2 10.4%

Order Backlog* 304.8 339.3 -10.3%

Employees 771 757 1.8%

Agenda



Outlook 2014


Highlights 2013

First Quarter 2014

AVIC Takeover

Outlook – Markets 2014

Outlook 2014

Capacity expansion

Demand for new capacity expected to

remain subdued

Share of environmental and

modernization projects expected to

increase

Fierce competition continues to put

pressure on margins

Holcim-Lafarge merger may impact

decisions for investing in new capacity

Economic Growth

Progressive recovery expected to

continue in North America

India is expected to recover after

general elections in May 2014

Russian situation recently turned

unstable and is difficult to predict

Strong economic growth expected to

continue in Sub-Saharan Africa

Sources: Morgan Stanley Global Cement 2014 Outlook, IMF World Economic Outlook


Outlook


Source: ICR Research/ Morgan Stanley 2014

CN +4%

IN +5%

LA +4%

FSU +4%

NA +6%

SSA +7%

World (excl. China) +4%

WE -1%

EE +2%

MENA +4%

Outlook – Markets 2014

24

Group financial outlook 2014

Outlook 2014


Significant increase in order intake expected due to projected market improvement

Revenue expected on the same level as in 2013

Positive cash flow from operations mainly due to higher order intake

We foresee unsatisfactory gross profit margin in 2014 due to projects won under fierce

competition

Recently won environmental and modernization projects are forecasted to increase

gross profit margin in the future

Slightly negative EBIT and EBIT margin

Financial position expected to remain stable

25

Group strategic initiatives 2014 and onwards

After successful takeover intensified cooperation

with our major shareholder AVIC, especially in the

areas of competitiveness and marketing

Open new markets with AVIC for EPC projects, like

Sub-Saharan Africa and Latin America

Focus on environmental and modernization projects

in North America

Improve project execution and profitability

Develop new products

Expand service business with new business unit

“Parts & Services”

Outlook 2014



Outlook 2014

AVIC and KHD working as one team

discussing environmental solutions with

Chinese customers and international media

at recent event in Beijing – April 2014

CEMENTING A STRONGER FUTURE

THANK YOU

28

Disclaimer for Forward-Looking Information

This document contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature. Forward-looking

statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and

uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often,

but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects" or "does not expect", "is

expected", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or

statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are

qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Such forward-looking statements involve known and

unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially

different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could

cause actual results, performance or achievements of the Company to differ materially from the expectations of the Company include, among other

things, general business and economic conditions globally, commodity price volatility, industry trends, competition, changes in government and other

regulation, including in relation to the environment, health and safety and taxation, labor relations and work stoppages, changes in political and economic

stability, the failure to meet certain conditions of the offer and/or the failure to obtain the required approvals or clearances from regulatory and other

agencies and bodies on a timely basis or at all, the inability to successfully integrate the operations and programs of businesses and/or companies

acquired with those of the Company, incurring and/or experiencing unanticipated costs and/or delays or difficulties relating to integration of acquired

businesses, disruptions in business operations due to reorganization activities and interest rate and currency fluctuations. Such forward-looking

statements should therefore be construed in light of such factors. Other than in accordance with its legal or regulatory obligations, the Company is not

under any obligation and the Company expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a

result of new information, future events or otherwise. Additional information about these and other assumptions, risks and uncertainties are set out in our

financial statements for the year ended December 31, 2013.

29 Annual General Meeting – May 2014

CEMENTING A STRONGER FUTURE - KHD CEMENTING A STRONGER FUTURE . Agenda Business Performance 2013...

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