Interim report Q1 2018

Transcription

1 Interim report

2 Key highlights Interim Report ORGANISING FOR GROWTH New operating model effective 1 July Strong organic growth in service orders Strong free cash flow First large mining order in three years Significant currency headwind MARKET OUTLOOK Good aftermarket momentum Mining capex continuing positive trend Stable outlook for cement GUIDANCE MAINTAINED Revenue 18-2bn EBITA margin 8-1% 2

3 Safety performance Total Recordable Injury Frequency Rate (TRIFR) 3.3 TRIFR Number of recordable injuries per million working hours Safety ambition: No injuries New safety KPI: TRIFR Total Recordable Injury Frequency Rate includes medical treated injuries in addition to lost time injuries, including contractors from TRIFR target : As of, TRIFR is including contractors, while comparison numbers are excluding contractors. TRIFR would have been 3.1 in if contractors were excluded. 3

4 Organising for growth a new way of working and reporting from 1 July 1 Why 2 What 3 How To accelerate growth through enhanced digitalization and productivity offerings To enforce a productivity-driven organisation with a strong, unified digital approach To simplify our way of working through fewer interfaces and a united frontline towards customers Two Industries will drive and develop the life-cycle offering and product portfolio Seven Regions will drive customer relations, sales and service of the full life-cycle offering One central digital organisation will drive a unified approach to digitalization to enhance productivity A natural next step in our organisational evolution 4

5 Countries Two industries, seven regions, one digital approach BEFORE Cement Customer Services Minerals Product Companies AFTER Cement Mining Projects & Engineered Products Service Projects & Engineered Products Products Life-cycle ownership Life-cycle ownership Sales & O&M regions Sales & service regions Sales regions Sales & service regions Regions Sales & service ownership Group Functions Digital Group Functions Customers Customers Customers Customers Customers 5

6 Group Executive Management from 1 July Annette Terndrup Legal & Strategy CEO *) Thomas Schulz Cori Petersen HR Sofie K. Lindberg Communications & Marketing Brian Day Head of Regions CFO *) Lars Vestergaard CPO Asger Lauritsen Scott Baker North America CDO Mikael Lindholm Andres Costa South America Cement Industry Jan Kjaersgaard Carsten R. Lund Europe, Russia & North Africa Mining Industry Manfred Schaffer Per M. Kristensen Asia Anders Bech Subcontinental India GEM Extended GEM Mark Clifford Deon De Kock Australia Sub-Saharan Africa & Middle East *) Registered with the Danish Business Authority Note: GEM = Group Executive Management; CPO = Chief Procurement Officer; CDO = Chief Digital Officer 6

7 Sustainable technology highlight SAGwise TM total mill process control in mining New generation process control for SAG mills Total process control: controls feed, speed and slurry density Based on acoustic sensing and operational parameters Customer benefits Up to 6% increased production 3-6% lower power consumption Reduces maintenance cost by decreasing liner damage up to 45% Reduces environmental impact The SAG mill 7

8 Revenue split in MINING vs. CEMENT BUSINESS REVENUE CAPITAL vs. SERVICE BUSINESS REVENUE EBITA margin 9.5% EBITA margin 6.5% ROCE <2% 53% 47% ROCE >2% 41% 59% Cement business Mining business Service business Capital business 8

9 Organic growth in total service order intake but significant currency headwind ORDER INTAKE (TOTAL SERVICE) +7% vs Unchanged vs. *) REVENUE (TOTAL SERVICE) -3% vs. -6% vs. 3,5 3,5 3, 2,5 2,341 2,868 2,885 3, 2,5 2,328 2,675 2,57 2, 2, 1,5 1,5 1, 1, 5 5 *) Not currency adjusted. Currency effect in around -9% 9

10 Order intake impacted by currency headwind Large order in Minerals but none in Cement in 6, ORDER INTAKE -1% vs. (-3% organic) ORDER INTAKE VS. - by division Actual order intake, +1% -3% +66% -54% Organic growth 5, 2, +2% -9% +5% -57% Growth 4, 3, 2, 1, 1,5 1, 5 1,861 1,9 1,597 1, ,117 1, Orders <DKK 2m Orders >DKK 2m '17 '18 '17 '18 '17 '18 '17 '18 Customer Service Product Companies Minerals Cement One large minerals order from Kazakhstan of more than USD 1m Stable level of base orders 1

11 Market outlook Mining Continuing optimism in the mining industry Slowly starting to translate into increasing CAPEX Positive outlook for Activity in most commodities but largest interest in copper and gold Cement Select opportunities but significant regional differences Few tenders for large orders and continued intense competition keeps margins under pressure Increasing OPEX-related spend and optimisation of existing assets Customers primary focus is on productivity 11

12 Financial performance in () Change Order intake 5,18 5,561-1% Revenue 4,235 4,371-3% Currency headwind -8% on both order intake and revenue Organic developments in revenue and order intake Order intake -3% (tough comparison quarter for Cement division) Revenue +3% Gross margin 25.4% 25.9% EBITA % EBITA margin 8.1% 8.5% Financial costs net (35) (34) Tax (66) (6) Profit, discontinued activities (11) (17) Profit for the Group ROCE 1.4% 9.4% Employees (Group) 11,79 11,869 12

13 Cash flow statement in Group () EBITDA continuing adjusted EBITDA discontinued (11) (24) Change in provisions (85) 19 Change in NWC *) 142 (16) Financial payments (4) (5) Positive contribution from change in net working capital in CFFO in 18 will include a cash outflow of DKK.2bn related to settlement of dispute on a legacy project in discontinued activities Taxes paid (11) (128) CFFO (Group) CFFO (continuing activities) CFFI excl. acquisitions & disposals (52) (35) Acquisitions & disposals 1 CFFI (42) (35) Free cash flow *) Cash flow effect from NWC includes discontinued activities and is adjusted for currency effects 13

14 Organic revenue growth +3% REVENUE -3% vs. REVENUE VS. - by division 6, 5, 4, 3,758 4,371 4,235 2, 1,5 2% 1% % 2% Organic growth -6% 3% 1% -3% Growth 3, 2, 1, 1, 5 1,724 1,612 1,275 1, Revenue Order intake '17 '18 '17 '18 '17 '18 '17 '18 Customer Service Product Companies Minerals Cement Revenue increased 3% organically, primarily attributable the Product Companies division 14

15 Higher gross margin in the two capital divisions 1,5 27.6% GROSS PROFIT -5% vs. 25.9% 25.4% Gross margin 3% 4% GROSS MARGIN '18 VS. '17 - by division 1,2 24% 3% % 12% 6% 2% 1% 32.1% 31.8% 31.8% 3.3% 17.3% 19.1% 1.7% 12.5% Gross Profit Gross Margin % % '17 '18 '17 '18 '17 '18 '17 '18 Customer Service Product Companies Minerals Cement Decrease in Product Companies gross margin due to business mix with relatively more cement related revenue in the quarter 15

16 Administrative costs still trending down 19.3% SG&A COSTS -3% vs. SG&A ratio* SG&A decreased 2m or 3% vs. '17 primarily due to FX developments 1, 8 16.% 16.% 2% 16% 6 12% 4 8% 2 4% % SG&A SG&A ratio *) SG&A ratio: SG&A costs (Sales, General and Administration) as percentage of revenue 16

17 EBITA decreased due to lower revenue EBITA -8% vs. EBITA margin EBITA BRIDGE '17 vs. ' % % 8.5% 8.1% 1% 8% % 4% % 1 % EBITA '17 Decrease in revenue Decrease in gross margin Decrease in SG&A and depreciations EBITA '18 EBITA EBITA-ratio 17

18 Net working capital lowest level since 213 3, NET WORKING CAPITAL continuing activities 18% Net working capital developments continuing activities End End Change 2,5 15% Inventories 2,375 2, , 12% Trade Receivables 3,843 4,324 (481) 1,5 9% Trade Payables (2,845) (2,916) (71) 1, 6% WIP Assets net (333) 5 3% Prepayments net (1,334) (1,59) 256 % Other liabilities net (683) (884) 21 NWC total 1,59 1,833 (243) NWC at the end of was 8.9% of the last 12 months revenue (target over the cycle: <1%) Significant decline in long overdue receivables 18

19 Capital structure in line with long-term targets 1, EQUITY Equity ratio 38% Minimum equity ratio target Equity ratio 4% 5, NIBD NIBD/EBITDA.7 Maximum NIBD/EBITDA target NIBD / EBITDA Continuing activities 5. 8, 3% 4, 4. 6, 2% 3, 2, , 1% 1, 1. 2, Equity Equity ratio % NIBD NIBD/EBITDA. Net debt decreased to DKK 1,167m (end of : DKK 1,545m) 19

20 Return on Capital Employed (ROCE) EBITA LTM DKK 1,486m ( : 1,415m) ROCE *) 1.4% ( : 9.4%) Capital employed DKK 14,326m ( : 14,993m) Cement ROCE > 2% Mining ROCE < 2% Growth (ORDER INTAKE & REVENUE) Cement EBITA 6.5% Mining EBITA 9.5% Growth and operating leverage to drive increase in ROCE Profit (EBITA%) Capital (NWC%) *) ROCE: Return on capital employed calculated on a before tax basis, including goodwill and based on last 12 months EBITA and average capital employed Ensure strong operating leverage as growth returns Run business to optimise free cash flow generation 2

21 Cement & Mining will be our new reporting segments First time in Interim Report CEMENT GROUP MINING Restated historical data for new reporting segments will be provided in due time before the release of the 18 Interim Report. Cement costs Regional sales and costs Mining costs Revenue and gross profit will be reported by Mining or Cement industry Cement P&L Group costs Group P&L Mining P&L Clear ownership for all costs on three levels: Industry Region Group 21

22 Management agenda Managing the cycle (customers, costs & cash) Strategic focus areas KPIs: ROCE Order intake EBITA% NWC% TRIFR (Total Recordable Injury Frequency Rate) DIFOT (Delivery In Full On Time) Trend YoY Long term: Productivity Provider #1 Customers People Innovation Sustainability Digitalization Short term: Expand in wear parts Grow products Standardise 22

23 Group guidance for Group Realised Guidance Revenue (DKK bn) EBITA margin 8.1% 8-1% ROCE 1.4% 1-12% Assumptions: Based on foreign exchange rates at the beginning of the year Market conditions will improve moderately in mining and be stable in cement No one-off costs planned for 23

24 Key highlights Interim Report Strong service order intake New operating model from 1 July Significant currency headwind IMPACTING ORDER INTAKE, REVENUE AND EBITA Solid free cash flow STRONG CAPITAL STRUCTURE Guidance for REVENUE DKK 18-2BN EBITA MARGIN 8-1% 24

25 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 forward-looking statement after the distribution of this presentation. 25

26 Backup slides flsmidth.com/linkedin flsmidth.com/twitter flsmidth.com/facebook flsmidth.com/instagram flsmidth.com/youtube 26

27 Our organisation has evolved over time Adjusting to changing market conditions Cement Minerals Consisting of >4 business units Cement Minerals Processing Material Handling Customer Services Cement Minerals Product Companies Customer Services Cement Mining Working through seven regions Capacity cycle Recession Productivity cycle Digitalization 27

28 Roadmap to long term targets Revenue, EBITA% and ROCE 3, 25, 2, 15, 1, 5, 3.% 25.% 2.% 15.% 1.% 5.% ROCE TARGET >2% EBITA% TARGET 1-13%.% Revenue LTM EBITA margin LTM ROCE LTM 28

29 Long-term financial targets reflect growth ambitions Group long-term financial targets Annual revenue growth Above market average on track to deliver EBITA margin 1-13% on track to deliver ROCE >2% dependent on growth Equity ratio >3% already there Financial gearing (NIBD/EBITDA) <2 already there Pay-out ratio 3-5% already there 29

30 Customer Services () Change Order intake 1,9 1,861 2% 6,967 Order backlog 2,465 2,56-2% 2,26 Revenue 1,612 1,724-6% 6,832 Gross margin before shared costs 31.8% 32.1% 32.1% EBITA margin before shared costs 22.9% 22.7% 22.9% EBITA ,3 EBITA margin 13.3% 14.6% 14.7% EBIT EBIT margin 1.7% 12.1% 12.1% 3

31 Customer Services ORDER INTAKE +2% vs. REVENUE -6% vs. EBITA margin 2, 1,8 1,6 1,4 1,2 1, ,5 2, 1,5 1, 5 2% 16% 12% 8% 4% % Order intake Revenue Revenue EBITA margin 31

32 Product Companies () Change Order intake 1,461 1,597-9% 5,623 Order backlog 2,776 3,124-11% 2,687 Revenue 1,315 1,275-2% 5,564 Gross margin before shared costs 3.3% 31.8% 3.% EBITA margin before shared costs 2.5% 21.3% 2.4% EBITA EBITA margin 1.6% 12.3% 11.6% EBIT EBIT margin 8.7% 1.4% 9.7% 32

33 Product Companies ORDER INTAKE -9% vs. REVENUE +3% vs. 2, 2, EBITA margin 16% 1,5 1,5 12% 1, 1, 8% 5 5 4% - % Order intake Revenue Revenue EBITA margin Business mix had an adverse impact on the EBITA-margin in 33

34 Minerals () Change Order intake 1, % 3,134 Order backlog 4,447 4,18 8% 4,16 Revenue % 2,586 Gross margin before shared costs 19.1% 17.3% 18.% EBITA margin before shared costs 9.% 4.7% 7.5% EBITA (16) (37) N/A (76) EBITA margin -2.7% -6.3% -3.% EBIT (37) (62) (163) EBIT margin -6.2% -1.5% -6.3% 34

35 Minerals ORDER INTAKE +5% vs. REVENUE +1% vs. 2, 1,2 2, EBITA margin 2% 1,5 1, 8 1,5 1% 1, 6 1, % % -2% Orders < DKK 2m Orders > DKK 2m Revenue Revenue EBITA margin 35

36 Cement () Change Order intake 737 1,719-57% 4,546 Order backlog 4,796 6,85-21% 5,193 Revenue % 4,77 Gross margin before shared costs 12.5% 1.7% 11.3% EBITA margin before shared costs 7.4% 5.2% 4.8% EBITA 5 (18) -128% (81) EBITA margin.6% -1.9% -2.% EBIT (2) (26) (111) EBIT margin -.2% -2.7% -2.7% 36

37 Cement ORDER INTAKE -57% vs. REVENUE -3% vs. EBITA margin 2,5 2,5 15% 2, 2, 1% 1,5 1,5 5% 1, 1, % 5 5-5% -1% Orders < DKK 2m Orders > DKK 2m Revenue Revenue EBITA margin 37

38 Order intake and revenue growth by division Order intake growth '18 vs. '17 Growth Growth (currency adj.) Customer Services Product Companies Minerals Cement Group 1% -3% 66% -54% -3% ORDER INTAKE '18 classified by division Customer Service 21% 14% 37% Acquisition 2% % 3% % 1% Product Companies Currency effect -1% -6% -19% -3% -8% Total 2% -9% 5% -57% -1% Minerals Cement 28% Revenue growth '18 vs. '17 Growth Growth (currency adj.) Customer Services Product Companies Minerals Cement Group 2% 1% % 2% 3% Acquisition 1% % 1% % 2% REVENUE '18 classified by division Customer Service Product Companies 13% 21% 36% Currency effect -9% -7% -9% -5% -8% Total -6% 3% 1% -3% -3% Minerals Cement 3% 38

39 Order intake by industry ORDER INTAKE '18 classified by industry 22% 32% 2% 1% 6% 6% 31% Cement Copper Gold Coal Iron ore Fertilisers Other 39

40 Order backlog and conversion to revenue 2, ORDER BACKLOG -2% vs. Order backlog/revenue 1% Expected backlog conversion to revenue: 66% in 22% in , 8% 12% in 22 and beyond 12, 6% 8, 4% 4, 2% % Order backlog Order backlog/revenue *Order backlog divided by last 12 months revenue 4

41 Net working capital components Decline in receivables and net work-in-progress led to reduction in net working capital 5, 4, 3, 2, TRADE RECEIVABLES 5, 4, 3, 2, TRADE PAYABLES 1, 1, NET WORK-IN-PROGRESS (ASSET) INVENTORIES NET PREPAYMENTS (LIABILITY) 5, 5, 5, 4, 4, 4, 3, 3, 3, 2, 2, 2, 1, 1, 1, 41

42 Increasing number of employees in Minerals NUMBER OF EMPLOYEES '18 VS. '17 - by division excl. shared employees Total number of employees End (continuing activities): 11,656 5, Change vs , 3, 2, 1, 3,9 3,879 Customer Service 2,744 2,734 Product Companies 1,27 1,228 Minerals 2,662 2,37 '17 '18 '17 '18 '17 '18 '17 '18 Cement 42

43 Growth and EBITA margin levers Structural growth in our industries Self-initiated growth opportunities through key levers presented today Cement 3-4% Mining 4-5% Growth rates per annum over the cycle Cement +2-3% Mining +3-4% Digitalisation as the foundation for productivity Innovation to address complexity of operations Increased coverage of the product life cycle Globalising market-leading products EBITA margin improvement through operating leverage and procurement savings ROCE >2% requires 1 EBITA > DKK 3bn If EBITA margin = 1% revenue should be > DKK 3bn If EBITA margin = 13% revenue should be > DKK 23bn 1) Based on Capital Employed of DKK 15bn 43

44 Thank you flsmidth.com/linkedin flsmidth.com/twitter flsmidth.com/facebook flsmidth.com/instagram flsmidth.com/youtube 44