Copenhagen, 9 May Interim report Q1 2017

Transcription

1 Copenhagen, 9 May 217 Interim report 217

2 Key highlights Interim Report Strong growth in service activities Highest quarterly order intake since 213 Strong EBITA improvement as a result of corrective actions Ongoing pricing pressure in cement and low capex spend in mining 217 Guidance Unchanged 2 9 May 217 Interim Report 217

3 Strong safety performance Lost Time Injury Frequency Rate (LTIFR) LTIFR Number of lost time injuries per million working hours Safety ambition: No injuries 217 LTIFR target : May 217 Interim Report 217

4 Sustainable technology highlight New superior dip tube material for preheater cyclone Installation in lower stages of preheater Designed to provide the market s best wear and corrosive resistance for temperatures of up to 1,1 C => ideal for growing market of cement plants burning alternative fuels and high levels of sulphur Service life >17 months (vs months for traditional solutions) Fuel savings and reduction in power consumption of 4-8%, or Increased production of 1-2% Successful industrial test completed 4 9 May 217 Interim Report 217

5 Revenue in 217 MINERALS vs. CEMENT CAPITAL vs. SERVICE EBITA margin 1.2% EBITA margin 5.7% 39% 53% 47% 61% Cement business Minerals business Service business Capital business 5 9 May 217 Interim Report 217

6 Market outlook Minerals Processing More optimism in the mining industry - but has as yet to translate into increasing CAPEX - positive outlook for 218 Increasing OPEX-related spend and focus on asset management Interest mostly in gold and copper, but also in coal, lithium and fertiliser minerals, etc. Customers primary focus is on productivity Cement Cautiously optimistic on investments in new capacity but significant regional differences Continued intense competition keeps margins under pressure Stable, good level of OPEX-related spend Customers focus is on productivity and capacity 6 9 May 217 Interim Report 217

7 Highest quarterly order intake since 213 ORDER INTAKE +5% vs. ORDER INTAKE 217 VS. - by division Actual order intake, 6, 5, 4, 2,5 2, +14% +1% +65% -16% +19% +14% +68% -17% Organic growth Growth 3, 1,5 2, 1, Orders <DKK 2m Orders >DKK 2m 217 1, 5 1,861 1,566 1,46 1,597 Customer Service Product Companies Minerals 2,82 1, Cement Large cement orders from Colombia, Pakistan and Egypt totalling more than DKK ~1.2bn Order intake increased 3% organically in 7 9 May 217 Interim Report 217

8 Strong momentum in total service activities ORDER INTAKE (TOTAL SERVICE) +23% vs.in REVENUE (TOTAL SERVICE) +15% vs. 3,5 3,5 3, 2,5 2,558 2,341 2,868 3, 2,5 2,562 2,328 2,675 2, 2, 1,5 1,5 1, 1, May 217 Interim Report 217

9 Revenue increased 16% in 17 REVENUE +16% vs. REVENUE 217 VS. - by division 6, 2, 5, 4, 3,758 4,371 1,5 3, 2, 1, 1, 5 1,568 1,724 1,275 1, Revenue Order intake Customer Service Product Companies Minerals Cement Revenue increased 14% organically, attributable to all divisions but Minerals is typically the weakest revenue quarter, depending on milestones and shipments 9 9 May 217 Interim Report 217

10 Gross margin adversely impacted by low-margin projects GROSS PROFIT +9% vs. 217 GROSS MARGIN *) 17 VS by division Gross margin 1,6 4% 4% 1,2 25.4% 27.6% 25.9% 3% 3% 8 2% 2% 32.3% 32.1% 33.% 31.8% 4 1% 1% 18.9% 17.3% 18.5% 1.7% Gross Profit Gross Margin 217 % % Customer Service Product Companies Minerals Cement Downward pressure on gross margin in Cement due to low-margin orders in the backlog *) Divisional gross margins are presented before allocation of shared indirect production costs, such as R&D, supply chain and procurement that are managed centrally and allocated to divisions based on assessed usage and benefit 1 9 May 217 Interim Report 217

11 SG&A costs another leg down 1, 15.3% 8 SG&A COSTS -4% vs. 19.3% SG&A ratio* 2% 16.% 16% SG&A decreased 8% YoY adjusted for currency Administrative costs declined DKK 47m, while sales costs increased DKK 1m adjusted for currency as planned 6 12% 4 8% 2 4% 217 % SG&A SG&A ratio *) SG&A ratio: SG&A costs (Sales, General and Administration) as percentage of revenue 11 9 May 217 Interim Report 217

12 Increase in EBITA due to higher revenue and lower SG&A EBITA 51% vs. EBITA margin EBITA BRIDGE 17 vs % % 6.5% 8.5% 1% 8% % % 2% % EBITA '16 Decrease in gross margin Decrease in SG&A Increase in revenue EBITA '17 EBITA EBITA-ratio 12 9 May 217 Interim Report 217

13 Financial performance in 17 Continuing activities () Change Order intake 5,561 5,281 5% Revenue 4,371 3,758 16% Gross margin 25.9% 27.6% EBITA % EBITA margin 8.5% 6.5% EBITA margin adjusted 8.6% 6.6% Financial costs net (34) (38) Order intake +3% currency adjusted Revenue +14% currency adjusted Gross margins under pressure in the capital divisions EBITA margin increased due to improved cost structure and higher revenue => better operating leverage Tax (6) (36) Profit, discontinued activities (17) (6) Profit for the Group % ROCE 9.4% 9.2% Employees 11,869 12,723-7% 13 9 May 217 Interim Report 217

14 Net working capital increased DKK.1bn in 17 NWC increased by DKK 83m to DKK 2,182m in 5, TRADE RECEIVABLES 5, TRADE PAYABLES Increase in NWC as trade payables fell more than trade receivables in 4, 3, 2, 1, 4, 3, 2, 1, NET WORK-IN-PROGRESS (ASSET) INVENTORIES NET PREPAYMENTS 5, 5, 5, 4, 4, 4, 3, 3, 3, 2, 2, 2, 1, 1, 1, May 217 Interim Report 217

15 Cash flow statement in 17 Group () EBITDA continuing adjusted EBITDA discontinued (24) (11) Change in provisions 19 (11) Change in NWC *) (16) (14) Financial payments (5) (1) Taxes paid (128) (147) CFFO (Group) 149 (6) CFFO increased in 17 due to a positive development in EBITDA a substantial positive contribution from discontinued activities CFFO from discontinued activities DKK 13m in 17 ( 16: DKK -155m) sales process regarding bulk material handling activities ongoing CFFO (continuing activities) CFFI excl. acquisitions & disposals (35) (12) Acquisitions & disposals CFFI (35) (12) Free cash flow 114 (72) *) Cash flow effect from NWC includes discontinued activities and is adjusted for currency effects 15 9 May 217 Interim Report 217

16 Capital structure - NIBD reduced by DKK.2bn in 17 1, EQUITY Equity ratio 36% Equity ratio target (self-imposed) Equity ratio 4% 8, NIBD NIBD/EBITDA 1.4 Gearing target (self-imposed) NIBD / EBITDA Continuing activities 4. 8, 3% 6, 3. 6, 2% 4, 2. 4, 1% 2, 1. 2, Equity Equity ratio 217 % NIBD NIBD/EBITDA 217. Net debt decreased to DKK 2,333m due to positive free cash flow (End of : DKK 2,525m) Lowest level of debt in last 5 years 16 9 May 217 Interim Report 217

17 Return on capital employed in 17 EBITA LTM DKK 1,415m Revenue LTM DKK 18,85m Gross margin LTM 24.9% SG&A & depreciations LTM DKK 3,262m ROCE *) 9.4% Capital employed DKK 14,993m NWC DKK 2,296m Tangible assets DKK 2,58m Intangible assets DKK 1,189m *) ROCE: Return on capital employed calculated on a before tax basis, including goodwill and based on last 12 months EBITA and average capital employed ROCE 9.4% in 17 ( 16: 9.2%) Capital employed DKK 15.bn in 17 ( 16: 15.6bn) EBITA LTM DKK 1.4bn in 17 ( 16: 1.4bn) Reaching ROCE-target of 2% requires increase in EBITA to DKK ~3bn through a combination of top-line growth and margin expansion Intangible assets of DKK 1.2bn (average) is mostly historical goodwill, customer relations, patents and rights 17 9 May 217 Interim Report 217

18 Management agenda Managing the cycle (customers, costs & cash) Strategic focus areas KPIs: ROCE Order intake EBITA% NWC% Trend YoY Enhancing productivity Procurement optimisation Digitalisation / Big data Investments in people and competencies LTIFR (Lost Time Injury Frequency Rate) DIFOT (Delivery In Full On Time) 18 9 May 217 Interim Report 217

19 Group guidance unchanged Group Realised 17 Guidance 217 Revenue DKK 4.4bn DKK 17-19bn EBITA margin 8.5% 7-9% ROCE 9.4% 8-1% The guidance includes the expected impact from corrective actions, including one-off costs of DKK 2m 19 9 May 217 Interim Report 217

20 Capital Market Day 217 Time 21 June CET Productivity provider #1 Place Marketenderiet, Valby, Denmark Products Theme Growth through Productivity More information/registration US/Investor+Relations Projects Services 2 9 May 217 Interim Report 217

21 Key highlights Interim Report 217 EBITA improvement AS A RESULT OF CORRECTIVE ACTIONS Highest quarterly order intake SINCE 213 Cement Pricing pressure Mining Low capex spend Strong growth IN SERVICE ACTIVITIES Unchanged guidance FOR May 217 Interim Report 217

22 Forward-looking statements 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 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 forwardlooking statement after the distribution of this presentation May 217 Interim Report 217

23 Backup slides flsmidth.com/linkedin flsmidth.com/twitter flsmidth.com/facebook flsmidth.com/instagram flsmidth.com/youtube 23 9 May 217 Interim Report 217

24 Long-term financial targets Group long-term financial targets Annual revenue growth Above market average EBITA margin 1-13% ROCE* >2% Equity ratio >3% Financial gearing (NIBD/EBITDA) <2 Pay-out ratio 3-5% *) ROCE: Return on capital employed calculated on a before tax basis as EBITA divided by average Capital Employed including goodwill 24 9 May 217 Interim Report 217

25 Divisional long-term financial targets Divisional long-term financial targets Growth (over the cycle) EBITA% (over the cycle) Net working capital (as pct. of revenue) Customer Services 5-1% >15% 15-2% Product Companies 5-1% 12-15% ~15% Minerals 5-6% 3-8% Negative Cement 3-5% 3-8% Negative 25 9 May 217 Interim Report 217

26 Corrective actions update Program Pre-announced August Planning and implementation started September Scope announced November Implementation to be completed End of 217 Expected impact Annual EBITA improvement Hereof procurement One-off costs expected ~ DKK 5m (217 full-year effect) ~ DKK 1m ~ DKK -35m ~ DKK -37m ~ DKK -11m ~ DKK -2m ~ DKK -2m Headcount reductions ~6 (were given notice in Sep-Oct ) The expected impact of corrective actions is included in the guidance for May 217 Interim Report 217

27 Customer Services () 217 Change Order intake 1,861 1,566 19% 6,599 Order backlog 2,56 2,399 4% 2,388 Revenue 1,724 1,568 1% 6,555 Gross margin before allocation of shared costs 32.1% 32.3% 31.6% EBITA margin before allocation of shared costs 22.7% 21.9% 21.% EBITA % 816 EBITA margin 14.6% 12.6% 12.5% EBIT % 647 EBIT margin 12.1% 1.3% 9.9% 27 9 May 217 Interim Report 217

28 Customer Services ORDER INTAKE 19% vs. REVENUE 1% vs. EBITA margin 2,5 2,5 2% 2, 2, 16% 1,5 1,5 12% 1, 1, 8% 5 5 4% % Order intake Revenue Revenue EBITA margin Strongest quarterly order intake in three years, driven especially by growth in minerals services EBITA margin improved due to higher revenue and slightly reduced SG&A 28 9 May 217 Interim Report 217

29 Product Companies () 217 Change Order intake 1,597 1,46 14% 5,326 Order backlog 3,124 2,823 11% 2,87 Revenue 1,275 1,78 18% 5,15 Gross margin before allocation of shared costs 31.8% 33.% 32.1% EBITA margin before allocation of shared costs 21.3% 21.2% 2.5% EBITA % 56 EBITA margin 12.3% 1.1% 11.2% EBIT % 46 EBIT margin 1.4% 7.9% 9.2% 29 9 May 217 Interim Report 217

30 Product Companies ORDER INTAKE 14% vs. REVENUE 18% vs. EBITA margin 2, 2, 16% 1,5 1,5 12% 1, 1, 8% 5 5 4% % Orders < DKK 2m Orders > DKK 2m Revenue Highest quarterly order intake in five years, driven by strong demand for minerals parts and services as well as increased demand for air pollution control systems Despite lower gross margin, EBITA margin increased due to higher revenue and stable SG&A Revenue EBITA margin 3 9 May 217 Interim Report 217

31 Minerals () 217 Change Order intake % 2,679 Order backlog 4,18 4,229-3% 3,988 Revenue % 3,185 Gross margin before allocation of shared costs 17.3% 19.% 16.6% EBITA margin before allocation of shared costs 4.7% 6.8% 6.1% EBITA (37) (35) (135) EBITA margin -6.3% -5.% -4.3% EBIT (62) (62) (243) EBIT margin -1.5% -8.8% -7.6% 31 9 May 217 Interim Report 217

32 Minerals Orders DKK 2m Orders < DKK 2m ORDER INTAKE 68% vs. REVENUE -16% vs. EBITA margin 2, 2, 2% 1,5 15% 1,5 1, 1% 5 5% 1, % -5-5% 5-1, -1% -1,5-15% 217-2, 217-2% Orders < DKK 2m Orders > DKK 2m Revenue Revenue EBITA margin Order intake in increased over last year, but market for mining CAPEX remains subdued EBITA declined due to lower revenue and operating leverage About one third of Minerals backlog remains slow moving on customers request 32 9 May 217 Interim Report 217

33 Cement () 217 Change Order intake 1,719 2,82-17% 4,576 Order backlog 6,85 7,16-13% 5,349 Revenue % 4,286 Gross margin before allocation of shared costs 1.7% 18.5% 13.8% EBITA margin before allocation of shared costs 5.2% 7.9% 6.9% EBITA (18) (21) 28 EBITA margin -1.9% -3.7%.6% EBIT (26) (28) (3) EBIT margin -2.7% -5.% -.1% 33 9 May 217 Interim Report 217

34 Cement ORDER INTAKE -17% vs. REVENUE 71% vs. EBITA margin 2,5 2, 2% 2, 1,5 15% 1,5 1, 1, 5 1% 5% % % 217-1, 217-1% Orders < DKK 2m Orders > DKK 2m Revenue Revenue EBITA margin Order intake supported by three large orders from Colombia, Pakistan and Egypt Revenue supported by order intake last year EBITA margin reflects execution of lower margin orders in the backlog 34 9 May 217 Interim Report 217

35 Order intake and revenue growth by division Order intake growth 17 vs. 16 Growth Growth (currency adj.) Currency effect Customer Services Product Companies Minerals Cement Group 14% 1% 65% -16% 3% 5% 4% 3% -1% 2% Total 19% 14% 68% -17% 5% ORDER INTAKE 17 classified by division Customer Service Product Companies Minerals Cement 29% 13% 27% 31% Revenue growth 17 vs. 16 Growth Growth (currency adj.) Currency effect Customer Services Product Companies Minerals Cement Group 6% 13% -19% 83% 14% 4% 5% 3% -12% 2% Total 1% 18% -16% 71% 16% REVENUE 17 classified by division Customer Service Product Companies Minerals Cement 13% 21% 28% 38% 35 9 May 217 Interim Report 217

36 Order intake by industry ORDER INTAKE by industry 23% 6% 45% 3% 5% 6% 12% Cement Copper Gold Coal Iron ore Fertilisers Adjacent Ball mill inspection 36 9 May 217 Interim Report 217

37 Order backlog and conversion to revenue ORDER BACKLOG +8% vs. Order backlog/revenue 2, 16, 12, 8, 4, 95% 9% 85% 8% 75% Expected backlog conversion to revenue: 53% in % in % in 219 and beyond 217 7% Order backlog Order backlog/revenue *Order backlog divided by last 12 months revenue 37 9 May 217 Interim Report 217

38 Net Working capital 3,5 3, 2,5 2, 1,5 1, 5 NET WORKING CAPITAL continuing activities NWC at the end of was 11.6% of last 12 months revenue (target over the cycle: <1%) 217 Net working capital developments YTD continuing activities End 217 End Change Change - currency adjusted Inventories 2,387 2, Trade Receivables 4,21 4, Trade Payables -2,574-3, WIP Assets net Prepayments net -1, Other -1,128-1, NWC total 2,182 2, May 217 Interim Report 217

39 Number of employees decreasing NUMBER OF EMPLOYEES 17 VS by division excl. shared employees 5, 4, Total number of employees 217 (continuing activities): 11,717 3, Decline vs. : , 1, 4,59 3,9 2,85 2,744 1,276 1,27 2,78 2, Decline vs Customer Service Product Companies Minerals Cement 39 9 May 217 Interim Report 217

40 Thank you flsmidth.com/linkedin flsmidth.com/twitter flsmidth.com/facebook flsmidth.com/instagram flsmidth.com/youtube 4 9 May 217 Interim Report 217