FLSmidth-With Focus on Brazil 2012
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Transcript of FLSmidth-With Focus on Brazil 2012
FLSmidth in Latin America - with Focus on Brazil
ACl 29.feb.12:
Insert frontpage picture
William O’Shea, Senior Vice President & COO FLSmidth Inc., Brazil, 29 March 2012
FLSmidth is Focused and Differentiated
We will focus on 6 key industries Coal Iron ore Fertilizer Copper Gold Cement
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.
2
Japan
Italy
Israel Iran
India
Hungary Hong Kong
Greece
Germany
Georgia
Gabon
France Estonia
Czech Republic
Croatia
China
Brazil
Belgium Australia
Argentina
Canada
Singapore
Saudi Arabia
Russia
Romania
Poland
Thailand
Tanzania
Taiwan Switzerland
Sweden
Spain South Korea
Slovakia
Philippines Nigeria
Netherlands Morocco
Mexico
Malaysia
Lithuania
Kenya
1,500
1,000
500
0
60 50 40 30 20 10 0
Vietnam
United States
United Kingdom
Turkey
Tunisia
Cement plants are needed where GDP grows...
Emerging
markets
Mature
markets
Maturing
markets
Cement consumption per capita (2006-9 avg., in kg)
Real GDP per capita (2006-9 avg., in 2005 kUS $) Note: United Arab Emirates and Norway excluded as outliers
1
3
…whereas mining is focused in specific regions High-level illustration of commodity reserves
Central & South America
APAC
EME
Africa
China
18
2
22
1
60
Gold
16
44
Iron Ore
3 1
Coal
43
40
Copper
20 13
% of total
0
Fertilizers
North America
% of total
20
0
Fertilizers
25 24
Gold
8 13
Iron Ore
5 3
Coal
28
15
Copper
7 10
40
60
% of total
40
20
0
Fertilizers
25 33
Gold
13 11
Coal Copper
10 12 16
36
Iron Ore
10
34
60
20
0
Fertilizers
4
23
Gold
4
14
Iron Ore
8
37
Coal
13
44
Copper
5 7
60
% of total
40
% of total
60
40
20
0
Fertilizers
43
13
Gold
15 12
Iron Ore
2 3
Coal
4 4
Copper
3 5
20
0
Fertilizers
0 1
Gold
23 17
Iron Ore
22 28
Coal
18 20
Copper
17 11
% of total
60
40
Production (2009/2010) Reserves 1. Production values: 2010 estimates; coal 2009 Note: Fertilizers = Potash and Phosphate Rock; North America excluding Mexico; APAC excluding China Source: USGS; EIA
1
4 4
Focus on our customers, is paramount.
We must become Closer to our customers
so we can understand and fulfill their needs
and create a relationship, where the focus is not
entirely on price…
Customer Intimacy
Product Leadership
Operational
Excellence
but customer intimacy cannot succeed without a strong foundation of product leadership and operational excellence
FLSmidth Customer Commitment
Lowest Life Cycle CAPEX Costs
Lowest Total Cost of Ownership
Reduce Engineering Costs
Shorten Project Lead Times
Meet Promised On-Time Deliveries
Communicate Schedule Delays
Safety and Corporate Responsibility
7
WORKING DRAFT
Last Modified 1/21/2010 12:58:28 PM Eastern Standard Time
Printed
GETTING CLOSER TO THE CUSTOMER
Transform Sales Force Structure from Product Focus to Customer Solutions Focus
Customer Driven Enterprise
What do we look like to our customers?
Product Driven Enterprise We need to be here
Cement Products and Sales Strategies Different Than Minerals
Raw Materials & Raw Coal Handling
Raw Meal Production
Clinker Production Grinding Storage, Packing &
Dispatch Automation
Exploration Development Extracting Material handling
Comminution Separation Refining
Cement has all pieces of Cement Plant and sells direct to Customers
Minerals sells individual products, often through EPCM’s and is moving toward broader solutions like Bundles, Islands, and Systems
10
Typical physical mining site
Minerals: Long history of strategic acquisitions
FLSmidth (Denmark) starts to supply equipment and services to the minerals industry
….supplemented by multiple acquisitions Key historical milestones….
1992
1993
1995
1996
1997
1998
1999
2001
2006
2007
2008
2009
2010
2011
1990
1926
1959
1990
1997
2007
1914
Fuller Company is established in Catasauqua, PA, USA
Traylor Engineering & Manufacturing Company is acquired by Fuller Company (Established 1902)
FLSmidth acquires Fuller Company
FLSmidth forms a separate minerals company, FFE Minerals
FFE Minerals changes name to FLSmidth Minerals
Acquisition of GL&V transformed minerals to a single source solution supplier
Acquisitions in the mineral industry
11
McKinsey & Company | 13 13
Product
Mineral Processing
Materials Handling Conveyors – Feeders – Stackers/Reclaimers – Loading/Unloading
Pyro
Kilns–Dryers–Fluid Beds–Suspension
Separation
Flotation–Classifiers Screens–Cyclones
Comminution
Crushers – Mills Sizers
Extraction In-Pit Crushing
Mine Hoists
Parts & Services
ONE SOURCE FROM EXTRACTION TO FINAL PRODUCT
Process Support, Startup, Commissioning
Training, Spare Parts & O&M Services
Customer Services – Cradle to Grave
Metallurgical Test and Studies
Conceptual Studies
Basic Engineering
Detailed Engineering
Mechanical Erection
Operation Plant
Global Super Centers for Spares, Rebuilds, and Repairs
3/29/2012 Title 16
Spokane
Boise
Richmond
Orillia
Bethlehem
Pekin
Monterrey
Lima
Antofagasta
Santiago
Sao Paulo
UK
Paris
Madrid
Vienna
Milan
Johannesburg
Singapore
Jakarta
Perth
Melbourne Gosford
Manila
Beijing
Shanghai
Moscow
Brisbane
Salt Lake City
Perth
Arequipa
Santiago
Belo Horizonte
Customer Intimacy
Best Total Solution
Votorantim
Mongolia
South Africa
Tucson
16
Brisbane
Antofagasta
O&M Contracts Around the World
Mexico Chile Tunisia Libya Egypt Angola Zambia M. East India
28-11-2011
Agenda
Brazilian Economy – Highlights and Impact on local Minerals and Cement industry
Cement Industry – Brazil highlights
Minerals Industry – Brazil highlights
Doing business in Brazil
Brazil: The Last 10 Years
Macroeconomic stability initiated under the Real Plan of 1995.
Inflation, the main impediment to long-term financing in Brazil, was brought under control, in spite of an increase on recent months;
Fiscal and monetary policies were strengthened: Introduction of the Fiscal Responsibility Law in 2000; Implementation of the inflation targeting regime in 1999; Move to a floating exchange rate in 1999;
The country is progressively better equipped to face external and
domestic shocks to the economy.
Brazilian economy behaved quite well in the recent financial crisis.
FONTE: GALANTO
Major Triggers and Projects
Deep water Oil & Gas exploration in the Pre-Salt area: Oil & Gas industry Capex to US$200bn over the next few years, 4
major new Refineries ( Premiun I and II ) , and FPSO’s ( 24 ships) Exports should climb to approximately 15% of GDP.
Hosting two major sports events. Soccer World Cup of 2014: investments in the order of US$14bn
(as in Brazil’s Bid submitted to FIFA). Olympic games of 2016: investments on the order of US$40bn
(Beijing, 2008).
Some major projects underway: Major hydro electricity plants in the Brazilian North basin ( Santo
Antonio, Jirau and Belo Monte). House and Infrastructure ( Bolsa Familia , Minha Casa Minha Vida)
Fonte: Raymenod James
Implications for the Construction Industry
Macroeconomic stability led to the recent rebirth of long-term financing in Brazil As a result, credit to the housing sector has grown extraordinarily in recent times, fueling the construction boom The construction boom was also boosted by infrastructure bottlenecks (which still persist), an important housing deficit in Brazil, and government measures aimed at addressing these problems
Fonte: Raymenod James
Comments:
Over the longer term, the effects of the World Cup and the Olympic Games are important but shouldn't be exaggerated:
They are one-off effects, and may just end up anticipating some construction expenditures that would have taken place anyway;
The outlook for the industry is dependent on continued economic growth, Cement is Driven by Domestic GDP Growth Minerals is driven by global commodities demand
The possibility that suppressed inflationary forces could take hold
once the world starts recovering at a faster pace implies that interest rates will go up. The increase in borrowing costs will have implications for the growth of housing credit, thereby also affecting developments in the construction industry.
Brazil Cement Market Outlook 2012-2014
The Brazil cement market is showing a lot of strength
As the Brazilian GDP is projected to be growing at 3-5% per annum
for next several years, commensurately the cement market will also
grow approximately 6-9 % per annum
Based on 2011 cement production and population the Brazilian
specific consumption is approx. 310 Kg/inhabitant year, with big room
for growing on next several years
During 2011 the cement consumption growth in Brazil was very
impressive reaching 7.9% during the year, on top of a growth
2009/2010 of 14.3% .
Cement Business:
Sales on Internal market
40
.2
39
.7
38
.9
38
.9
34
.9
35
.7
37
.7
41
.0
45
.1
51
.6
51
.7
59
.1
63
,8
66
.9
72
.2
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
CEM
EN
T
SA
LE
S
MT
PA
Cement Sales - Internal Market
Origin
Dec (1,000 ton.) Dec. 11 Jan.- Dec. (1,000 ton.) Jan-Dec 2011
2010 2011 Dec. 10 2010 2011 Jan-Dec 2010
North 316 312 -1,2% 3.288 3.615 9.9%
Northeast 994 1.068 7.3% 11.280 11.985 6.3%
Midwest 488 521 6,8% 6.242 6.839 9,6%
Southeast 2,320 2,313 -0,3% 29.558 31.626 7.0%
South 732 807 10,2% 8.787 9.436 7,4%
Total internal market 4,850 5,021 3,5% 59.155
63,501 7.3%
Fonte: SNIC
Brazil - Cement Sales – December 2011
29/03/20
12 37
Selling in Brazil
Brazilian customers are often reluctant to buy from foreign suppliers, who are not present in Brazil
This is due to the bureaucracy and slowness of the Brazilian customs
Having a set-up with spare parts and Brazilian service/sales engineers are important to Brazilian customers
FLSmidth in Brazil
FLSmidth in Brazil: 1924 First equipment sold in
Brazil to Brazil West company
1955 Started local office
activities
Headquarters Brazil: Votorantim - SP with a branch in Belo Horizonte
FLSMIDTH-BR team: 180
29/03/20
12 39
Noisy contraints
• Tax charge and complexity
• Infrastructure
• Lack of qualified workforce
• Cost of capital still high
t
The list of noisy constraints is long, but Brazil has shown that it is capable of promoting important reforms
29/03/20
12 40
Taxation
Company Tax: Progressive starting at 24% up to 34% Most common taxes are sales taxes The government collects average 38% of GDP in taxes per year High administration costs due complex and bureaucratic taxation system
29/03/20
12 41
Infrastructure
Several botlenecks on Brazilian infrastructure: Ports Airports Roads and railways Public transportation Energy Cost.
29/03/20
12 42
Lack of qualified workforce.
Poor basic eduction system => Quantity x Quality Few technical schools Hot market facing lack of skilled workers Need of companies invest on education Very poor education on foreign languages
29/03/20
12 43
Cost of capital still high
The basic interest rate is very high: Two years ago: 12.25% year Present status : 9.75% year
29/03/20
12 44
Silent Changes in Brazil 1/2
Heightened social mobility Accelerated growth in formal employment Significant demographic bonus More focused social policies Well regulated banking system Healthy expansion in banking credit
29/03/20
12 45
Silent Changes in Brazil 2/2
High degree of simultaneous investments
Strong foreign appetite and country’s recognition as regional leader
Consolidation of inflation target system.
Implementation of few but good microeconomic reforms
International insertion strengthened by robust commodity demand
External liabilities concentrated in investments, instead of external debt
29/03/20
12 46
Recent major orders in Brazil
5 Jan 2011 Votorantim Five Pyro Lines Six Finish Mills
29 Dec 2011 Cimpor Cimentos do Brasil Ltda Greenfield Plant Plant Expansion
22 March 2012 Margem Companhia de Mineração Greenfield Plant