competitive strength enhanced Fiscal Year 2011 Results of KHD Humboldt Wedag International AG Investors and Analysts webcast presentation Jouni Salo, CEO Yizhen Zhu, COO March 30, 2012
At a glance 2011 in a nutshell: Difficult conditions strengthened position Business Performance Order Intake Revenue EBIT and EPS Financials Cash Position Equity Bonding Line Competitive Strength Global Footprint Value Chain Cost Effectiveness Full Year Results 2011 Page 1 / 24
Agenda Business Performance Financial Performance Strategic Achievements in 2011 Outlook Full Year Results 2011 Page 2 / 24
Business Performance Global cement market growth weakened in 2011 China Slack in real estate and construction sector due to stricter regulations By far the largest single market Overall Customers more pessimistic Insufficient capacity utilization Challenging financing conditions India Slowing growth and rising energy costs delay projects capacity utilization fell from 60 to 70% Russia Investment below expectations due to significant growth risks 32.0 RoW 1.5 Russia 3.9 Brazil, US 6.4 India Source: Global Cement Report, 9. Edition (2011) China 56.2 Full Year Results 2011 Page 3 / 24
Business Performance Order intake down, order backlog stable Economic slow down is felt: Lower order intake in our two biggest markets India and Russia Order backlog and order intake (2009 2010 Pro-forma) in million Stable development in Turkey: 3 new orders Additional order of 80 million in Q3 (details not disclosed) Working closely with AVIC on several tenders - no order intake impact in 2011 Partnership with Weir Minerals has generated additional sales Full Year Results 2011 Page 4 / 24
Agenda Business Performance Financial Performance Strategic Achievements in 2011 Outlook Full Year Results 2011 Page 5 / 24
Financial Performance Revenue declines due to tough market conditions Customers delay completion of orders and postpone projects Main reasons: pessimistic outlook, difficult financing conditions Revenue contribution from new orders below expectations Order intake and revenue in million 450 393,7 400 350 307,9 307,9 300 250 200 224,7 234,6 150 123,6 100 50 0 2009 2010 2011 Pro-forma order intake Pro-forma revenue Full Year Results 2011 Page 6 / 24
Financial Performance Operating profit reflects completion of high-margin projects Operating profit more stable (- 8.6%) than revenue Operating margin at satisfactory level thanks to completion of high-margin projects and flexible cost structures EBIT and EBIT margin in million and % 60 50 13.8% Other operating profit rose to 4.3 million mainly due to consolidation of 50% stake in KHD OOO Increase of sales expenses due to intensified key account management Administrative and other expenses reduced by 1.2 million 40 30 20 10 0 8.7% 7.5% 49.7 25.0 17.6 2009 2010 2011 Full Year Results 2011 Page 7 / 24
Financial Performance Cash Flow: unrestricted cash position almost unchanged CF from operating activities: lower order intake, postponed projects, tax payments CF from investing activities: SAP project and acquisition of remaining stake KHD OOO CF from financing activities reflects capital increase and interest received Cash Flow in million 300 250 200 150 279.3-65.8-4.3 81.4-2.9 287.7 100 50 0 cash op. inv. fin. exch. cash end of CF CF CF rate end of 2010 2011 Full Year Results 2011 Page 8 / 24
Financial Performance Balance Sheet: Asset-light business model, strong capital base Low level of non-current assets additional goodwill due to acquisition of remaining stake of KHD OOO Decrease in business volume results in decline of current assets and liabilities Equity ratio up to 54.1% thanks to successful capital increase in Q1 (20% shareholding by AVIC) New bonding line in Q1 12 with 130 million volume Assets in million Liabilities in million 214 216 Full Year Results 2011 Page 9 / 24 450 400 350 300 250 200 150 100 50 0 56 9 226 293 148 15 300 111 117 2009 2010 2011 Other current assets Cash and cash equivalents Non current assets 450 400 350 300 250 200 150 100 50 0 170 148 46 49 234 53 145 2009 2010 2011 Current liabilities Non current liabilities Equity
Financial Performance Earnings per share and profit appropriation Group net profit at 13.5 million, down from 15.8 million Earnings per share in Due to higher number of issued shares, decrease of EPS Proposal to carry forward the net retained profits of KHD AG ( 6.4 million) Rational: Strong capital base needed for internal and external growth 1,2 1 0,8 0,6 0,4 0,2 1.13 0.47 0.28 0 2009 2010 2011 Full Year Results 2011 Page 10 / 24
Agenda Business Performance Financial Performance Strategic Achievements in 2011 Outlook Full Year Results 2011 Page 11 / 24
Strategic Achievements Key Pieces of our Group Strategy Operational excellence and commitment Customer-focused growth Technical leadership Strategic partnerships Full Year Results 2011 Page 12 / 24
Strategic Achievements Customer-focused growth (I): Taking the global view Expansion and empowerment of Customer Service Centers New CSC Asia-Pacific strengthens market position in China and other Asian growth markets Strengthened customer services and sales New sales offices in key regions Turkey, Saudi Arabia and Brazil Stronger position in Russia after buyout of KHD OOO Intensified service activities Active marketing Increased tendering activities Full Year Results 2011 Page 13 / 24
Strategic Achievements Customer-focused growth (II): Advanced technology-based services Focused services in line with technological core competence add to our asset-light business model New roller-press refurbishment line near New Delhi strengthens customer relationships Technical plant audits implemented in Russia and other regions CRM management system established, group-wide roll-out in 2012 Full Year Results 2011 Page 14 / 24
Strategic Achievements Strategic partnerships: AVIC Unique market position: premium technology + efficient and costeffective construction expertise Together we almost cover 80% of the value creation of a cement plant Chinese market access in attractive niches Procurement center, established in 2011, helps to exploit cost advantages of Chinese supply market Full Year Results 2011 Page 15 / 24
Strategic Achievements Strategic partnerships: Weir Minerals Already 14% of total KHD order intake in the mineral-processing sector in 2011 More volume and better economies of scale Our highly energy-efficient roller presses supplement our cooperation partner s product portfolio. Full Year Results 2011 Page 16 / 24
Strategic Achievements Technical Leadership 1.6% of revenue for research and development and 40 patents in 2011 Our COMFLEX system is one of the most energy-efficient grinding processes KHD s Combustion Chamber wins award for Most innovative technology for alternative fuels use at the 6th Global CemFuels Conference (Feb. 12) Industry leader in calcining technology with low NO X Highly-efficient equipment helps reduce CO 2 Full Year Results 2011 Page 17 / 24
Strategic Achievements Operational Excellence and Commitment True international team Group-wide emphasis on customer and service orientation, underlined by new management structure Intense management training and regular exchange of information and ideas Standardizing processes using SAP and CRM system Performance-based remuneration takes into account customer and service-related KPIs Full Year Results 2011 Page 18 / 24
Agenda Business Performance Financial Performance Strategic Achievements in 2011 Outlook Full Year Results 2011 Page 19 / 24
Outlook Outlook for 2012 Worldwide economic and cement industry conditions remain difficult Plan to increase order intake, also through projects with AVIC Continued expansion of parts and service business Delayed execution in some projects will challenge planned revenue growth EBIT margin for 2012 is forecast to fall short of the 7.5% achieved in 2011 Full Year Results 2011 Page 20 / 24
Outlook Major Achievements in Q1 2012 First joint project for KHD and AVIC in Venezuela (January) EPC project for new 2,400 tpd line KHD supplier of core equipment, engineering and services KHD awarded 100 million project in Malaysia (March) Environmentally-friendly, cost-efficient solution KHD-AVIC partnership continues to gain momentum Full Year Results 2011 Page 21 / 24.
Outlook Promising long-term perspectives Growth will be driven by the emerging markets The BRIC countries will account for 80% of future growth Service business will become increasingly important Decision making will continue to be driven by environmental requirements and cost cutting Full Year Results 2011 Page 22 / 24
Disclaimer for Forward-Looking Information This document contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forwardlooking words such as "plans", "expects" or "does not expect", "is expected", "scheduled", "estimates", "forecasts", "intends ", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of the Company to differ materially from the expectations of the Company include, among other things, general business and economic conditions globally, commodity price volatility, industry trends, competition, changes in government and other regulation, including in relation to the environment, health and safety and taxation, labor relations and work stoppages, changes in political and economic stability, the failure to meet certain conditions of the offer and/or the failure to obtain the required approvals or clearances from regulatory and other agencies and bodies on a timely basis or at all, the inability to successfully integrate the operations and programs of businesses and/or companies acquired with those of the Company, incurring and/or experiencing unanticipated costs and/or delays or difficulties relating to integration of acquired businesses, disruptions in business operations due to reorganization activities and interest rate and currency fluctuations. Such forward-looking statements should therefore be construed in light of such factors. Other than in accordance with its legal or regulatory obligations, the Company is not under any obligation and the Company expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additional information about these and other assumptions, risks and uncertainties are set out in our financial statements for the year ended December 31, 2011. Full Year Results 2011 Page 23 / 24
competitive strength enhanced Fiscal Year 2011 Results of KHD Humboldt Wedag International AG Investors and Analysts webcast presentation Jouni Salo, CEO Yizhen Zhu, COO March 30, 2012