FLSmidth Minerals
Transcript of FLSmidth Minerals
Handelsbanken Mining Seminar, 18 November 2009 1
FLSmidth Minerals Christian Jepsen, President & CEO
Handelsbanken Mining Seminar, Stockholm, 18 November 2009
Handelsbanken Mining Seminar, 18 November 2009 2
FLSmidth & Co. in brief
Vision
It is FLSmidth’s vision to continuously strengthen its position as the preferred partner and leading supplier of equipment and services to the global cement and minerals industries
Listed on NasdaqOMXMarket Cap EUR ~2bn5-10 most traded share in Copenhagen~ 1/3 foreign investors ~ 1/3 private Danish investors~ 1/3 institutional Danish investors
Approx. 10,900 employees, of which~ 1,700 in Denmark~ 3,000 in India
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Key messages in Q3 2009
Satisfactory developments in revenue, earnings and cash-flow
Markets are still relatively weak, although Q3 saw some signs of improvement– Cement is a local business, capitalizing on
local opportunities even in the current environment
– Minerals is a late-cyclical global business with a huge potential, servicing many industries, however many of which suffering from subdued demand in the short term
Upward revision of expected revenue in 2009
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Asset light business model
Engineering house / technology provider
Flexible cost structure
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)
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Minerals is becoming increasingly important - Accounts for 38% of FLSmidth Group revenue today
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2.000
4.000
6.000
8.000
10.000
12.000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q1-Q32009
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Minerals Revenue (DKKm)
Share of Total Revenue (continuing business)
FLSmidth Minerals is among the leading suppliers of equipment and services to the global minerals industry
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FLSmidth Minerals has successfully carried out a number of acquisitions over the past 16 years
1993 Technequip, Canada1997 Vecor, South Africa1998 ABON, Australia1999 Buffalo, South Africa2003 ConveyorKit, South Africa2005 MVT & Möller Materials Handling
transferred from FLSmidth Cement2005 Excel Crusher Technology, USA2006 Excel Foundry and Machine, USA2006 KOCH Transporttechnik, Germany2007 RAHCO, USA2007 GL&V Process, Canada2008 Pneumapress, USA2008 Dawson Metallurgical Laboratories, USA2008 CEntry Engineers, USA2009 Conveyor Engineering, USA
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SupplierSupplier
ofof
solutionssolutionsSupplierSupplier
ofof
equipmentequipment
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Material Handling
Crushing, Grinding & Sizing
Separation
FLSmidth Minerals product portfolio
CrushingGyratory CrushersCone CrushersLow Speed SizersRoll CrushersJaw CrushersFeeder-BreakersHammer millsVertical Shaft ImpactorsPlants & SystemsCrusher Gears
GrindingBall MillsSAG/ AG MillsRod MillsMill GearsLimestone Preperation Systems- FT Series Ball MillsMill Performance Enhancements
ClassificationHydrocyclonesWet ClassificationHeavy Media SeparationDry Classification
FlotationWEMCO SmartCellDorr-Oliver CellsXcell Flotation CellsWEMCO 1 plus 1OxallizerAttrition CellsFlash Flotation CellsAgitair Flotation CellsProFlote
SedimentationClarifiers and ThickenersHi-Rate ThickenersDeep Cone Paste ThickenersPaste Production Storage MechanismsE-CAT Clarifier-ThickenerSuperthickeners - Caisson ThickenersCableTorq-SwingLift Thickeners and ClarifiersTraction ThickenersReactor-Clarifier Solids - Contact UnitsDelta-Stak ClarifiersFeed Dilution SystemsSedimentation DrivesSlurry Mixers and AgitatorsGranular Media Filtration SystemsCausticizersLime Slakers
FiltrationPressure FiltrationAFP Filter PressShriver Filter PressVertical Pressure FiltersBeltpress FiltersGravity Belt ThickenersDregs ClariPress FiltersWhite Liquor ClariDisc FiltersPressure Tube FiltersVacuum FiltrationHorizontal Belt FiltersVacuum Drum FiltersConventional Drum FiltersSpecial Drum FiltersVacuum Disc FiltersAgidisc Vacuum FiltersAmerican Disc FiltersHigh Capacity Disc FilterLime Mud ClariDisc FiltersHorizontal Pan FiltersIndexing Belt Filters
Material HandlingPipe ConveyorsFixed ConveyorsFeedersStackers-ReclaimersBucket Chain ExcavatorCircular Bridge ScraperLongitudinal Bridge ScraperMobile Stacking ConveyorPortable ConveyorsPortal ScraperRadial StackersSide ScraperEquipment ApplicationsLeach PadsAt-the-Face Mining ConveyorsMobile Stacking ConveyorsPneumatic Conveying- Pressure Vessels- TurbuflowPortable ConveyorsUnderground Mining- Mine Hoists- Cages- Guide Rollers- Load Stations- Mine Haulage Cars- Ross Chain Feeders- Sheaves- Skips
PyroprocessingRotary Kilns & DryersPreheatersCoolersFluid Bed SystemsGas Suspension SystemsSmeltingCombustion SystemsPilot Processing PlantsPyro Gears
Pumps and ValvesPumpsmillMAX PumpsMetal Slurry PumpsCentrifugal PumpsDorrco Positive Displacement PumpsGorator PumpsODS Air-Operated Diaphragm PumpsValvesKnife Gate ValvesTech-Taylor ValvesVacuum Breaker Valves
Speciality ProductsCanal DiggersExcavatorsCoking PlantsRolling Mill TechnologiesRotary Agglomerators
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Mining equipment suppliers
Exploration Development Extraction Material Handling
Crushing, Grinding & Sizing
Separation Refining
Exploration for mineral resources
•Remote sensing
•Geophysical / geochemical tests
•Samples
Feasibility studies
Drilling and modeling of the ore body
Selection of appropriate mining technique
Capital investment in mine infrastructure
Mining of the ore body
Rock breaking
Surface mining
Underground mining
Mined minerals transported to processing site
Use of loaders, trucks, trains, at the face mining systems and conveyors
Materials are crushed and ground to achieve finer particles
Particles sized for optimum recovery of minerals specie
Flotation, leaching, sedimentation and filtration are used to increase the mineral content to an economic level
Refining to increase concentration of minerals further
Key techniques:
•Pyro-metallurgy
•Electro-winning
Source: Morgan Stanley, FLSmidth
FLSmidth MineralsMetso Minerals
Outotec
SandvikAtlas Copco
Boart Longyear
TerexAstec
Komatsu
Joy GlobalCAT
Chinese (var.)
Bucyrus
Furukawa
Typical mining site plant
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FLSmidth DawsonMetallurgical services
FLSmidth MineralsDesign/supply of
Process plant
FLSmidth DesignCivil works,
Construction management
FLSmidth CEntryFeasibility, basic/detailed
engineering
Value Chain Engineering
Activities
FLSmidth Minerals - more than just an equipment supplier!
Acquired on 4 August 2008
Acquired on 1 October 2008
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“Traditional” industries “Unnoticed” industries
Base Metals CopperMolyLeadZincNickelIron Ore
Industrial Minerals
AggregateLime/LimestoneSoda Ash/ Brine/ PhosphateFertilizer (Potash/Phos Acid)
Pigments (Kaolin/TiO2 /PCC)
Precious Metals
GoldSilverPlatinumDiamonds
Energy CoalPetcokeUraniumFGDOil SandsBio-Ethanol / Geo ThermalOil & GasDewaxing (SOD)
Light Metals AluminumAlumina & BauxiteMagnesium
CSPP(Chemical, Steel, Pulp & Paper)
Pulp & PaperSteel/Iron OreBase & Fine ChemicalsFood & Pharma
Industries served
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Alumin
a Refin
ing Alumina SmelterFGD Scrubber Blowdown Tre
atment
Iron Ore Beneficiation
KCl Potash
Nickel Laterite P
ressure Acid Le
ach
Oil Sand ExtractionRecaust
icizing System
ClariConcept® Terminal Treatment SystemsSteel Mill
TiO2 Sulfate Process
Uranium Processing
Base Metal Concentration
Coal Preparation
Phosphate Washing &
Phos Acid Production
Flow sheet capabilities
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PRESSURE / VACUUMFILTRATION
PNEUMAPRESS
CONCENTRATOR PLANTWASTE MATERIALS
DRY AREA CONCENTRATOR PLANT
PRIMARY CRUSHERS
MATERIAL HANDLING ‐OVERLAND CONVEYOR
DISPOSAL SYSTEM
DUST COLLECTION
GRINDING FLOTATION
AUTOMATION AND CONTROL
PRIMARY CRUSHING
SECONDARY AND TERTIARY CRUSHING
SEDIMENTATION
SAG / AG MILL ROUGHER
SCAVENGER
CLEANER
REGRIND
CONCENTRATOR THICKENING
TAILINGBALL/ ROD MILL
MATERIAL HANDLING
IN PLANT CONVEYORS
CLASSIFICATION
VACUUM FILTRATION
IN PLANTCONVEYORS
STACKER RECLAIMER
LOADING SYSTEMS
FILTRATION, STORAGE & LOADING
DUST COLLECTION
MATERIAL HANDLING
FILTRATION
HANDLING
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Why is Material Handling our growth story?
Ore content of most mined materials is typically down to 1-2%
In an open-pit mine, a lot of overburden material has to be removed to get down to the ore. As the mines have become bigger,the competitive position of FLSmidth has become better
The mined material needs to be transported from the mine (at-the-face-mining) to the processing plant (overland and stockpiling) and around the plant (in-plant). After processing, the waste material is transported and deposited in designated areas (dry stocking)
FLSmidth Minerals offers large scale, customised, integrated and energy-efficient material handling solutions which is a technological, economic and environmental alternative to traditional conveying methods (such as trucks) requiring less man-power and fuel
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Animation
3-Minute Minerals
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Minerals
Q1-Q3 20096,379
545618
8.5%9.7%
Q1-Q3 20087,056
543797
7.7%11.3%
DKKm YTDRevenueEBITEBIT adj.EBIT ratioEBIT ratio adj.
Highlights Q1-Q3 2009
Improved EBIT-ratio vs. last year- less impacted by purchase price allocations re. GL&V Process
Sharp decline in order intake in Q1-Q3
Strict focus on cost control and working capital, while preserving vital competencies and know-how
Current business environment
Market outlook remains weak in the short term
Mining companies are currently revisiting their 2010 CAPEX budgets, and many are announcing increased budgets
Project pipeline very large, particularly in coal, iron ore, gold, phosphate and copper and material handling
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Order intake (gross)
-65% vs. Q3 2008
Order backlog-30% vs. Q3 2008
Revenue-24% vs. Q3 2008
EBIT adj. -32% vs. Q3 2008
Quarterly developments – Minerals (DKKm)
DKKm
1370
3960
2426
0
1000
2000
3000
4000
5000
Q3 2007
Q4 2007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
DKKm
8.744
13.588
9.615
02000400060008000
100001200014000
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
DKKm
1.875
2.754
2.081
0
1000
2000
3000
4000
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
DKKm
213
312
211
0
100
200
300
400
500
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
*) Adjusted for effect of purchase price allocations related to GL&V Process; DKK -56m in Q3 2008 and DKK -24m in Q3 2009
*)
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Other19%
Material Handling
24%
Pyro technology
7%
Separation35%
Comminution15%
Industrial metals
6%
Light metals23%
Precious metals
9%
Other base metals
3%
Copper10%
Other 12%
Energy9%
Coal13%
Steel15%
Order intake (by product) Order intake (by industry)
Capital order intake Q1-Q3 2009
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Customer Services (included in Cement & Minerals)
~40% of order intake and ~30% of revenue in Minerals is within Customer Services
Customer Services includes: spare parts, wear parts, service before, under and after the delivery of new equipment, maintenance contracts, upgrades, modernisation projects, etc.
FLSmidth Minerals runs three long-term maintenance contracts in South America:
–Los Pelambres, Chile (prolonged in 2008)–Collahuasi, Chile (prolonged in 2008)–Peñasquito, Mexico (contracted in 2008)
- more resilient than capital orders in the current down-turn..
1.309
2.331 2.397
0
500
1.000
1.500
2.000
2.500
3.000
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
DKKm
Minerals Customer Services revenue (12M trailing)
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The mining world today
Metal prices appear to be stabilizing above threshold levels
The credit situation remains tight and the banking sector is still reluctant to fund new projects
Most large viable projects belong to the major mining houses or are being financed by Chinese investors. Junior companies, and their projects, are the most effected by the crisis
However, some people continue to realize that the China and India growth stories are still intact giving us some optimism for 2010
Many mining companies are currently revisiting, and consequently increasing their 2010 CAPEX budgets
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Industry Dynamics
Industry themes
Near term– Slow economic growth– Capital scarcity– Low /stabilizing
commodity prices
Long term– Structural demand from
BRIC to drive metal consumption growth
– Lowest cost per produced ton key
– Environmental issues
Producer response
Near term–Operational closures–Driving down costs–Capex deferral–Consolidation (cheaper than greenfield)
Long term–Supply shifts to different geographies
–Supply shortage–Focus on specific segments–Supply chain management
FLSmidth Minerals
Near term–Continue integration –Flawless execution to maintain margins
– Weather the storm
Long term–One Source - One Partner –Low cost/high quality supplier
–Focused Industry Leader and Innovator
FLSmidth Minerals must be positioned for both near-term and long-term
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Current industry trends and opportunities
Industry needs:
Shorter project lead times
Water
Reduced environmental impact
Super-sized production lines
Lower CAPEX
Deeper long term support
FLSmidth Minerals Response:
Complete flowsheet capability
Technology leader in water recoveryPaste thickener technologyHorizontal belt filtersPneumapress
Exploring new designs for crushing and grindingHydrometallurgical processing
The world’s largest process equipment
Outsourcing to low cost countries
Full service maintenance contracts
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FLSmidth Minerals’ competitive advantage
Strong position in all relevant product segments
Strong local presence in all geographical markets
Total flow sheet coverage with Heritage Brand Names
Technological edge for large-scale equipment/systems
Strong Value Proposition
Strong balance sheet
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Market reality in 2008
The sky is the limit and opportunities are ample..The sky is the limit and opportunities are ample..
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Market reality in 2009
Global economy in shock, demand disappears..Global economy in shock, demand disappears..
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Market expectation 2010
Dawning optimism, demand to return..Dawning optimism, demand to return..
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Market outlook in Minerals
Under-investments in the mining industry for many yearsHigh capacity utilizationDepleting ore qualitiesRebounding economic growth and underlying demandIncreasing population, industrialisation and urbanisation in emerging markets
Commodity supply shortage is looming
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Source: BHP Billiton
Developed countries stable to declining consumption of copper per capita as economy matures
Emerging markets Steep increase in copper consumption per capita as level of urbanisation and industrialisation increases
China and India are coming from very low levels
Relationship between copper consumption and GDP per capital over time
An ever increasing population as well as rising urbanisation and industrialisation in emerging markets will - sooner or later – lead to increased demand for a number of metals and minerals
Minerals
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Market opportunities in Minerals
EuropeOpportunities in coal and
industrial minerals
South America Strong market led by investments in copper in Chile and Peru as well
as iron ore in Brazil
North AmericaOpportunities in copper and gold
AfricaStrong market with considerable political risk. Especially gold and
uranium is expanding
Middle EastLarge potential for phosphate and
potash
AustralasiaStrong market led by investments in iron ore, coal and base metals
Russia / CISStrong but volatile market.
Opportunities in copper and gold
IndiaOpportunities in alumina, iron ore
and coal
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Source: McKinsey
The mining industry is still generating cash…
EBITDA Margins
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..but when will they invest..?
Source: McKinsey
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In the meantime, certain industries are more active than others..
Source: McKinsey
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Group Long term growth and earnings prospects
In periods of high activity: Expected EBIT ratio: 10-12%
In periods of low activity: Expected EBIT ratio: 8-9%
Urbanisation and industrialisation in developing countries are expected to generate increasing demand for cement and minerals in future.
Top priority
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2009 2008■
New cement kiln capacity 40-50mty (previously 25-50mty) 123mty■
Revenue DKK 22-23bn (previously 20-23bn) DKK 25,285m■
EBIT-ratio 8.5-9% 9.5%■
Tax rate 20% 31%■
CFFI (excl. acquisitions) DKK -300m DKK -663m
■
Significant slowdown in Cement and Mining capex is expected in 2009
Guidance 2009
■
Cement Revenue slightly down compared to 2008 Satisfactory earnings■
Minerals Revenue slightly down compared to 2008 Satisfactory earnings■
Cembrit Revenue down compared to 2008 Modest negative earnings
Segments
Group
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Concluding remarks
FLSmidth has positioned itself as one of the leading suppliers of equipment and services to the global minerals industry with a unique ‘One Source’ business model
FLSmidth has a flexible cost structure and will adjust to ever changing market conditions whilst preserving vital know-how and competencies
FLSmidth has proven the ability to acquireand innovate in a recessionary environment
We believe that Minerals is a long termgrowth story. It is not a matter of if – but when!
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Questions