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FLSmidth's third quarter report for 2012 was released on 13 November, 2012. Best viewed on a full screen mode, this quarterly report informs the reader about how well FLSmidth's business has performed in the 3rd quarter.
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Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 1
Forward-looking statements
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 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.
Continued strong growth in revenue and order intake
Ludowici acquisition completed in Q3
Continued execution challenges inBulk Materials
Revenue guidance maintained at DKK 25-26bn (excl. Cembrit)EBITA margin guidance clarified at 10%
13 November 2012Interim Report Q3 2012 3
Order intake up 11% on Q3’11, and also up 9% sequentially
Revenue up 23% due to positive developments in all segments, particularly in Non-Ferrous and Customer Services
EBITA unchanged, reflecting a decrease in the EBITA margin
EBIT down 6%, adversely impacted by effects of purchase price allocations amounting to DKK -88m in Q3 (Q3’11: DKK -45m)
Excluding acquisitions, the number of employees increased 12%, most of which is related to O&M contracts
Financial developments in Q3 2012
Q3 Results 2012
13 November 2012 4
FLSmidth & Co. A/S(DKKm) Q3 2012 Q3 2011 Change
Order intake 7,956 7,176 +11%Order backlog 31,166 27,492 +13%Revenue 6,316 5,131 +23%Gross margin 25.6% 26.3%EBITA 628 628 0%EBITA margin 9.9% 12.2%EBIT 528 562 -6%EBIT margin 8.4% 11.0%Net results1) 377 403 -6%CFFO -28 563 n/aEmployees2) 14,740 11,628 +27%
Interim Report Q3 2012
1) Including Cembrit2) Excluding Cembrit
Segment developments
41%
20%
31%
8%
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 5
Order intake Q3 2012– classified by segment
Customer Services
Bulk Materials
Cement
30%
20%
36%
14%
Bulk MaterialsNon-Ferrous
Revenue Q3 2012 – classified by segment
Customer ServicesCement
Non-Ferrous
28%
28%14%
6%
3%
7%
14%
13 November 2012Interim Report Q3 2012 6
Announced orders in Q3 2012
O&M cement Egypt DKK >1.1bn (CS)Copper South America DKK 655m (NF)Aluminium Venezuela DKK 280m (CS)
Total DKK >2,035m
Distribution of order intake by industry
Interim Report Q3 2012
Order intake Q1-Q3 2012 – classified by industry
Cement
Copper
Gold
Coal
Iron ore
Fertilizers
Other
Unannounced orders record high DKK 5.9bn in Q3
Level of announced orders stable at around DKK 2.0bn in Q3
Order backlog increased 1% in Q3 and is 13% higher than one year ago
Order intake increased 11% in Q3 2012
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 7
0
2,000
4,000
6,000
8,000
10,000
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Order intake (quarterly)+11% vs. Q3 2011DKKm
0.80.911.11.21.31.41.51.6
05,000
10,00015,00020,00025,00030,00035,000
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Order backlog (quarterly)+13% vs. Q3 2011DKKm Book-to-bill ratio*
Announced O&M ordersAnnounced Capital ordersUnannounced orders
*) Order backlog divided by Trailing-Twelve-Months Revenue
Organic growth +16% (excl. currency impact and acquisitions)
Pattern of increasing quarterly revenue over the calendar year expected to be repeated in 2012
EBITA margin challenged by execution problems in Bulk Materials and increasing SG&A ratio
Revenue increased 23% in Q3 2012
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 8
0
2,000
4,000
6,000
8,000
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Revenue (quarterly)+23% vs. Q3 2011DKKm EBITA margin
0%
3%
6%
9%
12%
15%
0
200
400
600
800
1,000
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
EBITA (quarterly)= Q3 2011DKKm
Tight focus on SG&A developments
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 9
SG&A ratio up 1.2 %-points compared to Q3’11
Increase in SG&A vs. last year partly due to: Acquisitions (DKK ~108m in Q3 2012)
Currency effects (DKK ~75m in Q1-Q3 2012)
High tender activity leading to increasing proposal costs- adding to costs now and revenue later
Additionally, SG&A included costs of non-recurringnature amounting to DKK ~100m in Q3 2012:
Implementation of new strategy and organizationBusiness alignment related to roll out of global ERP business systemTransaction and integration costs in connection with acquisitions
Cost efficiency program initiated
SG&A ratio
0%
3%
6%
9%
12%
15%
18%
0
200
400
600
800
1,000
1,200
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
SG&A (quarterly)+34% vs. Q3 2011DKKm
CFFO adversely impacted by increase in working capital of DKK 813m in Q3
CFFI amounted to DKK -2,421m in Q3 primarily related to the acquisition of Ludowici, Decanter, Inc. and Teutrine and MIE Enterprises.
Temporary slow down in acquisitions except for smaller bolt-on in coming quarters
Cash flow from operating and investing activities
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 10
CFFO (quarterly)DKKm
-600-400-200
0200400600
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
CFFI (quarterly)-186% vs. Q3 2011DKKm
-3,000-2,400-1,800-1,200
-6000
600
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Tight focus on working capital developments
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 11
Working capital* (quarterly)+447% vs. Q3 2011DKKm
Working capital increased 3.1 %-points of sales to 10.8% in Q3
Structural reasons for increase in working capital:Strategic initiatives in Customer Services
Change in business mix towards more Customer Services, more products and mining projects and less cement projects
Specific reasons for increase in working capital in Q3:
Acquired entities in Q3 2012 contributed with DKK 525m to Group working capital
Working capital program initiated, including:Monthly reporting, monitoring and follow-up on KPIs
Systematic NWC responsibility in the global organisation
Specific initiatives launched in relation to accounts receivables, account payables, inventories, etc.
0%
2%
4%
6%
8%
10%
12%
14%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
WC /TTM* Sales
*) Working capital excluding Cembrit
*) TTM : Trailing-Twelve-Months excluding Cembrit
Net debt increased in Q3 primarily due to acquisition of Ludowici
Equity ratio declined to 29% due to increased balance sheet total, primarily attributable to acquisitions and in particular Ludowici. An equity ratio below 30% is expected to be of temporary nature
Capital structure
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 12
NIBD* (quarterly)DKKm
0%
10%
20%
30%
40%
50%
0
2,000
4,000
6,000
8,000
10,000
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Equity (quarterly)DKKm Equity ratio
-0.8-0.400.40.81.21.6
-2,000-1,000
01,0002,0003,0004,000
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Gearing (NIBD/ TTM* EBITDA)
Gearing 1.4x EBITDA +14% vs. Q3 2011
*) NIBD excluding Cembrit
*) TTM: Trailing-Twelve-Months excl. Cembrit
Cembrit sales process
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 13
Not part of FLSmidth’s long term strategy, and a sales process is on-going
Cembrit is reported as discontinued activities
A number of potential acquirers have expressed a preliminary interest in Cembrit
A sales process is expected to be completed within 12 months from the announcement in August 2012, however FLSmidth cautions that there is no assurance that the process will in fact lead to a sale
Acquisition of Ludowici
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 14
Acquisition of Ludowici finalised on 3 July 2012
Integration process is ongoing and progressing well
Ludowici to be included across Non-Ferrous and Customer ServicesSubstantial sales synergies expected to be achieved over the next couple of years, including
Additional FLSmidth equipment into coal plants
FLSmidth pull through of Ludowici products
Ludowici pull through of FLSmidth products
Added sales from Customer Services
Ludowici to substitute 3rd party screens and wear parts sold by FLSmidth in systems and islands in all focus industries
Ludowici integration ahead of plan
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 15
Cross functional integration teams for each business area are established and working effectively
Employee integration in Australia, India China, South Africa, Chile, USA and Peru on schedule and expected to be substantially complete by Q1 2013
Integration of Ludowici manufacturing activities into FLSmidth Super Centers in Chile, Peru, Australia and Tucson ahead of schedule
Supply chain and procurement integration implementation underway and starting to yield results
Successful re-branding and IT migration of FLSmidth Ludowici globally
Ludowici technologies included in larger FLSmidth projects such as the recently announced copper concentrator in Kazakhstan
Divisions to be renamed
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 16
Effective 1 December 2012 the two divisions, Non-Ferrous and Bulk Materials, will be renamed to reflect the underlying technology focus in each of the two divisions
Non-Ferrous will be renamed “Mineral Processing”
Bulk Materials will be renamed “Material Handling”
Market trends
Interim Report Q3 2012
13 November 2012Interim Report Q3 2012 17
Continued good underlying demand and order intake
Only minor changes in project pipeline or ongoing dialogue with customers
In the short term, mining companies are likely to remain focused on cash flows and reducing capex programs
In the short term, coal and iron ore seem to be the weakest commodities, whereas copper and gold are expected to hold up
Long term prospects remain encouraging
In Cement, proposal activity remain high in many parts of the World. The US cement market is beginning to see a recovery
Customer Services
13 November 2012Interim Report Q3 2012 18
Customer Services
Customer Services
13 November 2012Interim Report Q3 2012 19
(DKKm) Q3 2012
Q3 2011 Change Q1-Q3
2012Q1-Q3
2011 Change Full-year2011
Expected trendin 2012
Order intake 3,345 1,270 +163% 6,760 3,983 +70% 5,271 Strongly increasingOder backlog 7,909 6,290 +26% 7,909 6,290 +26% 6,082
Revenue 1,968 1,404 +40% 4,944 3,708 +33% 5,259 Strongly increasingEBITDA 258 253 +2% 695 622 +12% 882
EBITA 226 240 -6% 637 583 +9% 838
EBITA margin 11.5% 17.1% 12.9% 15.7% 15.9% Slightly decreasing1)
EBIT 199 238 -16% 5282) 577 -9% 832
EBIT margin 10.1 17.0% 10.7%2) 15.6% 15.8%
1) Previous expectation: Stable2) Including one-off write-down of capitalized R&D costs in Q2 of approximately DKK 60m
Very strong order intake in Q3 reflects continued good market conditions and a new seven year O&M contract exceeding DKK 1.1bn
Clear pattern of increasing quarterly revenue over the calendar year
Margin adversely impacted by one-off costs related to acquisitions
Strong growth in order intake and revenue
Customer Services
13 November 2012Interim Report Q3 2012 20
Revenue (quarterly)DKKm EBITA margin+40% vs. Q3 2011
0%
4%
8%
12%
16%
20%
0
500
1,000
1,500
2,000
2,500
03 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
0
1,000
2,000
3,000
4,000
03 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Order intake (quarterly)+163% vs. Q3 2011DKKm
Bulk Materials (to be renamed Material Handling)
13 November 2012Interim Report Q3 2012 21
Bulk Materials Division
Bulk Materials
13 November 2012Interim Report Q3 2012 22
(DKKm) Q3 2012
Q3 2011 Change Q1-Q3
2012Q1-Q3
2011 Change Full-year2011
Expected trendin 2012
Order intake 1,675 1,357 +23% 3,890 4,259 -9% 5,482 IncreasingOder backlog 5,514 5,416 +2% 5,514 5,416 +2% 5,136
Revenue 1,340 1,248 +7% 3,671 3,234 +14% 5,005 IncreasingEBITDA -29 105 n/a 27 114 -76% 276
EBITA -42 91 n/a -9 88 n/a 225
EBITA margin -3.1% 7.3% -0.2% 2.7% 4.5% DecreasingEBIT -60 67 n/a -44 33 n/a 146
EBIT margin -4.5% 5.4% -1.2% 1.0% 2.9%
Weak short term outlook for Bulk Materials, but large growth potential
Prudent tender approach
Primary focus on improved operational excellence
Good order intake but execution challenges
Bulk Materials
13 November 2012Interim Report Q3 2012 23
Revenue (quarterly)DKKm EBITA margin+7% vs. Q3 2011
0
500
1,000
1,500
2,000
03 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Order intake (quarterly)+23% vs. Q3 2011DKKm
-4%
0%
4%
8%
12%
16%
-500
0
500
1,000
1,500
2,000
03 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Tight focus on execution challenges in Bulk Materials
Bulk Materials
13 November 2012Interim Report Q3 2012 24
Bulk Materials is the youngest and less mature business area, originating from a handful acquired specialised product companies. These companies work together in a global organisation to provide customers with innovative and value-adding material handling solutions.
The organisation has lagged adequate project execution skills and know-how to handle a sharply increasing business volume
As a consequence, Bulk Materials has faced challenges related to project execution...
..stemming from underestimated risks in connection with orders received in previous years...
..combined with lack of timely handling and mitigation hereof
A number of initiatives have been put in place, including:
Transfer of project management know-how and best practices from other divisions
New division head and member of Group Executive Management, Carsten Lund took office on 1 July 2012 and has relocated to Wadgassen in Germany, where the Material Handling Technology Centre is based
Strengthened divisional Management Group
Non-Ferrous (to be renamed Mineral Processing)
13 November 2012Interim Report Q3 2012 25
Non-Ferrous
Non-Ferrous
13 November 2012Interim Report Q3 2012 26
(DKKm) Q3 2012
Q3 2011 Change Q1-Q3
2012Q1-Q3
2011 Change Full-year2011
Expected trendin 2012
Order intake 2,598 3,222 -19% 7,849 7,223 9% 9,731 Strongly increasingOder backlog 9,929 8,482 17% 9,929 8,482 17% 8,779
Revenue 2,375 1,838 29% 6,154 4,264 44% 6,766 Strongly increasingEBITDA 240 246 -2% 596 501 19% 859
EBITA 215 238 10% 543 470 16% 815
EBITA margin 9.1% 13.0% 8.8% 11.0% 12.0% Slightly decreasingEBIT 164 204 -20% 3471) 377 -8% 689
EBIT margin 6.9% 11.1% 5.6%1) 8.8% 10.2%
1) Including one-off write-down of capitalized R&D costs in Q2 of approximately DKK 60m
Stable quarterly order intake
Exploration efforts are shifting to areas with more favourable investment climates such as Africa, Mexico, Canada and the CIS countries
Margin slightly under pressure due to one-off costs related to acquisitions as well as run-off of good margin orders taken in pre-crisis years
Continued strong order intake and revenue growth
Non-Ferrous
13 November 2012Interim Report Q3 2012 27
Revenue (quarterly)DKKm EBITA margin+29% vs. Q3 2011
0%3%6%9%12%15%18%
0500
1,0001,5002,0002,5003,000
03 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
0500
1,0001,5002,0002,5003,0003,500
03 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Order intake (quarterly)-19% vs. Q3 2011DKKm
Cement
13 November 2012Interim Report Q3 2012 28
Cement
Cement
13 November 2012Interim Report Q3 2012 29
(DKKm) Q3 2012
Q3 2011 Change Q1-Q3
2012Q1-Q3
2011 Change Full-year2011
Expected trendin 2012
Order intake 667 1,507 -56% 3,984 3,324 +20% 4,439 Slightly increasingOder backlog 8,579 7,858 9% 8,579 7,858 9% 7,749
Revenue 905 844 7% 2,716 3,020 -10% 4,354 Slightly increasingEBITDA 214 52 314% 471 308 53% 541
EBITA 208 38 461% 445 264 69% 494
EBITA margin 23.0% 4.5% 16.4% 8.7% 11.3% Slightly increasingEBIT 206 33 541% 3651) 253 44% 475
EBIT margin 22.8% 3.9% 13.4%1)
8.4% 10.9%
1) Including one-off write-down of capitalized R&D costs in Q2 of approximately DKK 60m
0
500
1000
1500
2000
2500
03 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Extraordinary high EBITA margin due to projects being executed better than expected and not least finalisation of projects resulting in reversal of contingencies
Proposal activity remains high in many parts of the world, but decision-making is dragging out
The US cement market is beginning to see a recovery
Weak order intake but solid order execution
Cement
13 November 2012Interim Report Q3 2012 30
Revenue (quarterly)DKKm EBITA margin+7% vs. Q3 2011
0%
5%
10%
15%
20%
25%
0
500
1000
1500
2000
2500
03 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Order intake (quarterly)-56% vs. Q3 2011DKKm
Future Outlook
13 November 2012Interim Report Q3 2012 31
Long term financial targets (unchanged)
Future Outlook
13 November 2012Interim Report Q3 2012 32
Financial targets
Annual revenue growth Above market averageEBITA margin 10-13%Equity ratio >30%Financial gearing (NIBD/EBITDA) <2Pay-out ratio 30-50%CFFI (excl. acquisitions) DKK -700m to -900m
The Board will be considering and adopting new financial targets for Return on Capital Employed in connection with the Annual Report for 2012
Group Guidance 2012 Actual2011
Revenue DKK 25-26bn1) DKK 22bn
EBITA ratio 10%2) 10.9%
EBIT ratio 8%3) 9.9%
Tax rate 30-32% 31%
CFFI (excl. acquisitions and their subsequent Capex needs) DKK -900m DKK -733m
Group guidance 2012 clarified
Future Outlook
13 November 2012Interim Report Q3 2012 33
1) Continuing activities - excluding Cembrit, and including Ludowici as of 3 July 20122) Previous EBITA-margin expectation of ≥10% clarified at 10% in Q3 3) EBIT-margin expectation reduced in Q2 due to write-down of capitalized R&D costs of DKK
188m. Previous EBIT-margin expectation of 8-9% clarified at 8% in Q3.
Key take-awaysContinued strong order intake, especially in Customer Services
Continued execution challenges in Bulk Materials
Non-Ferrous and Bulk Materials divisions to be renamed
Full-year group guidance clarified
13 November 2012Interim Report Q3 2012 34
Questions &Answers
Next update: Annual Report 2012 on 12 February 2013
Follow us on Twitter: @flsmidth
13 November 2012Interim Report Q3 2012 35
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