Construction and Mining Technique Atlas Copco Capital Markets Day, December 2, 2008 Björn Rosengren, Business Area President Atlas Copco Capital Markets Day, December 2, 2008
Construction and Mining Technique 2 Atlas Copco Capital Markets Day, December 2, 2008 Construction and Mining Technique Asia/ Australia 21% Africa/ Middle 15% East North 22% America 10% South America 30 000 25 000 20 000 15 000 10 000 18,0% 17,4% 15,9% 13,7% 10,7% 10,1% 8,9% 8,6% 20% 18% 16% 14% 12% 10% 8% 6% 32% Europe 5 000 0 4% 2% 0% -01-02 -03-04 -05-06 -07-08 Sept Revenues, MSEK Operating margin, % 12 month figures. Restated for IFRS from 2004. 3 Atlas Copco Capital Markets Day, December 2, 2008 Construction and Mining Technique 50% 40% Change in revenue volume and price, % Structural changes, % CAGR, 1998-2007 CAGR, 2003-2007 30% 20% 10% 29% 15% 0% -10% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Q1 Q3 2008 4 Atlas Copco Capital Markets Day, December 2, 2008 1
Construction and Mining Technique Q3 2008 MSEK July Sept 2008 July Sept 2007 Change % Orders received 7 884 6 814 + 16% Revenues 7 742 6 634 + 17% Operating profit as a percentage of revenues 1 455 18.8 1 119 16.9 + 30% Return on capital employed, % 31 33 5 Atlas Copco Capital Markets Day, December 2, 2008 Orders per Customer Segment Construction and Mining Technique ~40% Building and Construction ~60% Mining Figures are estimated 2008 6 Atlas Copco Capital Markets Day, December 2, 2008 Global Mining 2006 Open pit Underground 19 % 11 % 20 % 30 % 8 % 12 % Total 5 900 Mt Source: Raw Materials Group, 2008 7 Atlas Copco Capital Markets Day, December 2, 2008 2
Ore Production and Overburden 2007 Open pit Underground Crude Ore 5 337 31% Overburden 70 9% 69% Overburden 11 741 91% Crude Ore 698 Strip ratio 2.2 Strip ratio 0.1 Strip ratio = waste rock Source: Raw Materials Group, 2008 8 Atlas Copco Capital Markets Day, December 2, 2008 Open Pit / Underground Ore Production 2007 Open pit Underground Crude ore Iron ore Ni PGM Pb/Zn Au Cu 0 1 000 2 000 3 000 Million ton Crude ore Iron ore Ni PGM Pb/Zn Au Cu 0 100 200 300 Million ton Source: Raw Materials Group, 2008 9 Atlas Copco Capital Markets Day, December 2, 2008 CMT Mining Exposure to Different Minerals and Metals Other Coal 10% 5-10% 35-40% Base metal Precious metals 35% 10-15% Iron 10 Atlas Copco Capital Markets Day, December 2, 2008 3
Copper an Example Copper production vs ore grade Copper/Ore Metal Production (mt) 2500 2000 1500 1000 500 Increased demand for copper Lower grade More excavated copper ore per ton crude copper 0 1930-45 -60-75 -88-91 -94-00 Ore Grade (%) 2,0 Copper Ore Grade (%) Ore Production (mt) Copper production 1,8 1,6 1,4 1,2 1,0 0,8 0,6 0,4 0,2 0,0 Source: Raw Materials Group, Stockholm 11 Atlas Copco Capital Markets Day, December 2, 2008 Copper Use vs GDP kg per capita 12 Japan 10 Growth demand W Europe Canada Potential 8 Saudi Australia USA Malaysia 6 Russia Kazakhstan 4 Thailand China South Africa Latin America 2 Brazil Indonesia Africa India 0 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 USD per capita PPP adjusted 2005 Source: Häggström, Handelsbanken, 2006 12 Atlas Copco Capital Markets Day, December 2, 2008 Corporate Concentration % of total value of non-fuel mineral production at the mine stage 35 30 25 20 15 10 5 0 1990 1995 2000 2003 2004 2005 2006 Largest 4 largest 11 largest Source: Raw Materials Group, 2008 13 Atlas Copco Capital Markets Day, December 2, 2008 4
Mining Companies and Control of Mining 4 100 companies 332 billion USD Major companies 149 Medium and small companies 957 83% Junior companies (mainly exploration) 3 067 17% Number of companies Metal production Source: Raw Materials Group, 2007 14 Atlas Copco Capital Markets Day, December 2, 2008 Top Ranked Mining Companies Metals 1 2 3 4 5 6 7 8 9 10 11 BHP Vale Rio Tinto Anglo American Freeport Codelco Xstrata Norilsk Nickel Barrick Grupo Mexico Newmont Australia Brazil Australia UK USA Chile Switzerland Russia Canada Mexico USA Source: Raw Materials Group, 2007 15 Atlas Copco Capital Markets Day, December 2, 2008 CMT Mining Orders Split by Customer Size 35% The 11 biggest mining companies Others 65% 16 Atlas Copco Capital Markets Day, December 2, 2008 5
Mining CAPEX Opportunities BRIC countries will continue to grow volume Some major open pit mines are going underground Remote located ore-bodies Declining ore-grades Efficiency improvements in operations Safety and environmental requirements 17 Atlas Copco Capital Markets Day, December 2, 2008 Economic downturn is normally mitigated by investments in infrastructure 18 Atlas Copco Capital Markets Day, December 2, 2008 Infrastructure Projects Roads and railways The total network of roads/railways and metros in the world will 2050 will be tripled of today Estimation until 2012 New roads: +30% whereof 50% in Asia and 25% in EU Maintenance: EU and North America 65% Maintenance after 2012 (est.) New EU countries and Asia due to quality will be next issue for maintenance and extension Atlas Copco s equipment represents 10% in the projects 19 Atlas Copco Capital Markets Day, December 2, 2008 6
Infrastructure Projects Hydro power plants and dams We count on 5-10% annual growth dominated by Asia followed by Latin America while Africa has the need and potential Atlas Copco s equipment represents 10% in the projects 20 Atlas Copco Capital Markets Day, December 2, 2008 Strategy Organic Growth and Acquisitions 22 Atlas Copco Capital Markets Day, December 2, 2008 Strategic Areas for Growth Strong presence in both mining and construction New product development Aftermarket Key customer management Focused growth markets Acquisitions 23 Atlas Copco Capital Markets Day, December 2, 2008 7
Strong Presence in both Mining and Construction Mining Construction Underground mining Surface mining Quarries Geotechnical work Tunneling Water well Road development Shallow oil and gas Hydropower plants 24 Atlas Copco Capital Markets Day, December 2, 2008 CMT in Mining Underground mining Surface mining 25 Atlas Copco Capital Markets Day, December 2, 2008 CMT in Construction Demolition Quarrying Surface civil engineering Underground civil engineering Global leadership in defined niches Road construction and maintenance 26 Atlas Copco Capital Markets Day, December 2, 2008 8
Product Development New products and solutions, a driving force in the organic growth Trends Safety Enhanced productivity Design and ergonomics Intelligent product concept 27 Atlas Copco Capital Markets Day, December 2, 2008 T15 28 Atlas Copco Capital Markets Day, December 2, 2008 XLP for Low Seam Mining 29 Atlas Copco Capital Markets Day, December 2, 2008 9
DH 5 30 Atlas Copco Capital Markets Day, December 2, 2008 Pit Viper 235 31 Atlas Copco Capital Markets Day, December 2, 2008 RCS Total Solutions 32 Atlas Copco Capital Markets Day, December 2, 2008 10
Aftermarket 70% 18 000 Global service competence Fleet management system Extend product offer on aftermarket products Separate organization 65% 60% 55% 50% 15 000 12 000 9 000 6 000 45% 3 000 40% 0-98 -99-00 -01-02 -03-04 -05-06 -07-08 Q3 (12M) Aftermarket, share of revenues, % Aftermarket & consumables, MSEK Equipment, MSEK 34 Atlas Copco Capital Markets Day, December 2, 2008 Growing the Aftermarket Business Growth in Aftermarket comes from: Increased fleet of equipment Growing our Customer Share Offer new products 35 Atlas Copco Capital Markets Day, December 2, 2008 Key Customer Strategy Organization to support key customers Take more responsibility through aftermarket contracts Offer global contracts and support Build partnership relations 36 Atlas Copco Capital Markets Day, December 2, 2008 11
Atlas Works Closely with Leading Mining Co s Let s have a look at Rio Tinto Diamonds Zinc, silver Talc Coal and gold Gold Coal Borates Gold Aluminium TiO 2 / Iron Iron Ore Talc Talc Copper / Tin Zinc Copper / Gold / Silver / Molybdenum Copper / Gold Iron ore Copper Gold Uranium TiO 2 Gold Copper Gold Uranium Diamonds Salt Iron ore Talc Aluminium Coal Gold Bauxite Coal Alumina Aluminium Coal Copper/ gold Aluminium Borates Source: Rio Tinto 37 Atlas Copco Capital Markets Day, December 2, 2008 Strategic Growth Markets Russia/ East Europe USA China India Brazil 39 Atlas Copco Capital Markets Day, December 2, 2008 India Strong market growth Market leading position Growth areas: Hydro power, Infrastructure and Coal mining New factory for Dynapac 40 Atlas Copco Capital Markets Day, December 2, 2008 12
China Strong market growth Market leading position Expected increase in infrastructure investments New factory in Nanjing for ADS products 41 Atlas Copco Capital Markets Day, December 2, 2008 Brazil Strong market growth Market leading position Large mining and construction market Large international contractors 42 Atlas Copco Capital Markets Day, December 2, 2008 Russia >40% average annual growth since the millennium Market leading position Very dependent on oil and minerals 43 Atlas Copco Capital Markets Day, December 2, 2008 13
USA World s largest construction market Market leading position Strong distribution network Present in several customer segments 44 Atlas Copco Capital Markets Day, December 2, 2008 Acquisitions / Divestments Construction and Mining Technique 2008 2007 Focus, Prisma Fluidcon 2004 2005 2006 CRM Thiessen Lifton Contex Rotex Oy 2003 Ingersoll-Rand Drilling Solutions Baker Hughes Mining Tools 2002 Professional Diamond Drilling Equipment and Mining Drilling Services 2001 Shenyang Rock Drilling Machinery 2000 Ankertechnik (MAI) Krupp Berco Bautechnik 1998 Christensen Hobic Products JKS Boyles (Div: JKS Lamage) (Div. Robbins TBM) 45 Atlas Copco Capital Markets Day, December 2, 2008 Conclusion and Outlook The global financial crisis has clearly affected the market demand and we see a clear slowdown in mining investments The slow construction market is expected to start growing, driven by infrastructure investments, especially in emerging markets and by projects initiated to stimulate the economy Atlas Copco CMT is well prepared to adapt to the changes in demand 46 Atlas Copco Capital Markets Day, December 2, 2008 14
We are committed to your superior productivity through interaction and innovation. 47 Atlas Copco Capital Markets Day, December 2, 2008 15