flsmidth minerals

Handelsbanken Mining Seminar, 18 November 2009 1

FLSmidth Minerals Christian Jepsen, President & CEO

Handelsbanken Mining Seminar, Stockholm, 18 November 2009


FLSmidth & Co. in brief

Vision

It is FLSmidth’s vision to continuously strengthen its position as the preferred partner and leading supplier of equipment and services to the global cement and minerals industries

Listed on NasdaqOMXMarket Cap EUR ~2bn5-10 most traded share in Copenhagen~ 1/3 foreign investors ~ 1/3 private Danish investors~ 1/3 institutional Danish investors

Approx. 10,900 employees, of which~ 1,700 in Denmark~ 3,000 in India


Key messages in Q3 2009

Satisfactory developments in revenue, earnings and cash-flow

Markets are still relatively weak, although Q3 saw some signs of improvement– Cement is a local business, capitalizing on

local opportunities even in the current environment

– Minerals is a late-cyclical global business with a huge potential, servicing many industries, however many of which suffering from subdued demand in the short term

Upward revision of expected revenue in 2009


Asset light business model

Engineering house / technology provider

Flexible cost structure

Most manufacturing is out-sourced (~80-90%)

Low working capital due to prepayments from customers of 10-25%

Low maintenance CAPEX (estimated ~1-2% of revenue)


Minerals is becoming increasingly important - Accounts for 38% of FLSmidth Group revenue today

-

2.000

4.000

6.000

8.000

10.000

12.000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q1-Q32009

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Minerals Revenue (DKKm)

Share of Total Revenue (continuing business)

FLSmidth Minerals is among the leading suppliers of equipment and services to the global minerals industry


FLSmidth Minerals has successfully carried out a number of acquisitions over the past 16 years

1993 Technequip, Canada1997 Vecor, South Africa1998 ABON, Australia1999 Buffalo, South Africa2003 ConveyorKit, South Africa2005 MVT & Möller Materials Handling

transferred from FLSmidth Cement2005 Excel Crusher Technology, USA2006 Excel Foundry and Machine, USA2006 KOCH Transporttechnik, Germany2007 RAHCO, USA2007 GL&V Process, Canada2008 Pneumapress, USA2008 Dawson Metallurgical Laboratories, USA2008 CEntry Engineers, USA2009 Conveyor Engineering, USA


SupplierSupplier

ofof

solutionssolutionsSupplierSupplier

ofof

equipmentequipment


Material Handling

Crushing, Grinding & Sizing

Separation

FLSmidth Minerals product portfolio

CrushingGyratory CrushersCone CrushersLow Speed SizersRoll CrushersJaw CrushersFeeder-BreakersHammer millsVertical Shaft ImpactorsPlants & SystemsCrusher Gears

GrindingBall MillsSAG/ AG MillsRod MillsMill GearsLimestone Preperation Systems- FT Series Ball MillsMill Performance Enhancements

ClassificationHydrocyclonesWet ClassificationHeavy Media SeparationDry Classification

FlotationWEMCO SmartCellDorr-Oliver CellsXcell Flotation CellsWEMCO 1 plus 1OxallizerAttrition CellsFlash Flotation CellsAgitair Flotation CellsProFlote

SedimentationClarifiers and ThickenersHi-Rate ThickenersDeep Cone Paste ThickenersPaste Production Storage MechanismsE-CAT Clarifier-ThickenerSuperthickeners - Caisson ThickenersCableTorq-SwingLift Thickeners and ClarifiersTraction ThickenersReactor-Clarifier Solids - Contact UnitsDelta-Stak ClarifiersFeed Dilution SystemsSedimentation DrivesSlurry Mixers and AgitatorsGranular Media Filtration SystemsCausticizersLime Slakers

FiltrationPressure FiltrationAFP Filter PressShriver Filter PressVertical Pressure FiltersBeltpress FiltersGravity Belt ThickenersDregs ClariPress FiltersWhite Liquor ClariDisc FiltersPressure Tube FiltersVacuum FiltrationHorizontal Belt FiltersVacuum Drum FiltersConventional Drum FiltersSpecial Drum FiltersVacuum Disc FiltersAgidisc Vacuum FiltersAmerican Disc FiltersHigh Capacity Disc FilterLime Mud ClariDisc FiltersHorizontal Pan FiltersIndexing Belt Filters

Material HandlingPipe ConveyorsFixed ConveyorsFeedersStackers-ReclaimersBucket Chain ExcavatorCircular Bridge ScraperLongitudinal Bridge ScraperMobile Stacking ConveyorPortable ConveyorsPortal ScraperRadial StackersSide ScraperEquipment ApplicationsLeach PadsAt-the-Face Mining ConveyorsMobile Stacking ConveyorsPneumatic Conveying- Pressure Vessels- TurbuflowPortable ConveyorsUnderground Mining- Mine Hoists- Cages- Guide Rollers- Load Stations- Mine Haulage Cars- Ross Chain Feeders- Sheaves- Skips

PyroprocessingRotary Kilns & DryersPreheatersCoolersFluid Bed SystemsGas Suspension SystemsSmeltingCombustion SystemsPilot Processing PlantsPyro Gears

Pumps and ValvesPumpsmillMAX PumpsMetal Slurry PumpsCentrifugal PumpsDorrco Positive Displacement PumpsGorator PumpsODS Air-Operated Diaphragm PumpsValvesKnife Gate ValvesTech-Taylor ValvesVacuum Breaker Valves

Speciality ProductsCanal DiggersExcavatorsCoking PlantsRolling Mill TechnologiesRotary Agglomerators


Mining equipment suppliers

Exploration Development Extraction Material Handling

Crushing, Grinding & Sizing

Separation Refining

Exploration for mineral resources

•Remote sensing

•Geophysical / geochemical tests

•Samples

Feasibility studies

Drilling and modeling of the ore body

Selection of appropriate mining technique

Capital investment in mine infrastructure

Mining of the ore body

Rock breaking

Surface mining

Underground mining

Mined minerals transported to processing site

Use of loaders, trucks, trains, at the face mining systems and conveyors

Materials are crushed and ground to achieve finer particles

Particles sized for optimum recovery of minerals specie

Flotation, leaching, sedimentation and filtration are used to increase the mineral content to an economic level

Refining to increase concentration of minerals further

Key techniques:

•Pyro-metallurgy

•Electro-winning

Source: Morgan Stanley, FLSmidth

FLSmidth MineralsMetso Minerals

Outotec

SandvikAtlas Copco

Boart Longyear

TerexAstec

Komatsu

Joy GlobalCAT

Chinese (var.)

Bucyrus

Furukawa

Typical mining site plant


FLSmidth DawsonMetallurgical services

FLSmidth MineralsDesign/supply of

Process plant

FLSmidth DesignCivil works,

Construction management

FLSmidth CEntryFeasibility, basic/detailed

engineering

Value Chain Engineering

Activities

FLSmidth Minerals - more than just an equipment supplier!

Acquired on 4 August 2008

Acquired on 1 October 2008


“Traditional” industries “Unnoticed” industries

Base Metals CopperMolyLeadZincNickelIron Ore

Industrial Minerals

AggregateLime/LimestoneSoda Ash/ Brine/ PhosphateFertilizer (Potash/Phos Acid)

Pigments (Kaolin/TiO2 /PCC)

Precious Metals

GoldSilverPlatinumDiamonds

Energy CoalPetcokeUraniumFGDOil SandsBio-Ethanol / Geo ThermalOil & GasDewaxing (SOD)

Light Metals AluminumAlumina & BauxiteMagnesium

CSPP(Chemical, Steel, Pulp & Paper)

Pulp & PaperSteel/Iron OreBase & Fine ChemicalsFood & Pharma

Industries served


Alumin

a Refin

ing Alumina SmelterFGD Scrubber Blowdown Tre

atment

Iron Ore Beneficiation

KCl Potash

Nickel Laterite P

ressure Acid Le

ach

Oil Sand ExtractionRecaust

icizing System

ClariConcept® Terminal Treatment SystemsSteel Mill

TiO2 Sulfate Process

Uranium Processing

Base Metal Concentration

Coal Preparation

Phosphate Washing &

Phos Acid Production

Flow sheet capabilities


PRESSURE / VACUUMFILTRATION

PNEUMAPRESS

CONCENTRATOR PLANTWASTE MATERIALS

DRY AREA CONCENTRATOR PLANT

PRIMARY CRUSHERS

MATERIAL HANDLING ‐OVERLAND CONVEYOR

DISPOSAL SYSTEM

DUST COLLECTION

GRINDING FLOTATION

AUTOMATION AND CONTROL

PRIMARY CRUSHING

SECONDARY AND TERTIARY CRUSHING

SEDIMENTATION

SAG / AG MILL ROUGHER

SCAVENGER

CLEANER

REGRIND

CONCENTRATOR THICKENING

TAILINGBALL/ ROD MILL

MATERIAL HANDLING

IN PLANT CONVEYORS

CLASSIFICATION

VACUUM FILTRATION

IN PLANTCONVEYORS

STACKER RECLAIMER

LOADING SYSTEMS

FILTRATION, STORAGE & LOADING

DUST COLLECTION

MATERIAL HANDLING

FILTRATION

HANDLING


Why is Material Handling our growth story?

Ore content of most mined materials is typically down to 1-2%

In an open-pit mine, a lot of overburden material has to be removed to get down to the ore. As the mines have become bigger,the competitive position of FLSmidth has become better

The mined material needs to be transported from the mine (at-the-face-mining) to the processing plant (overland and stockpiling) and around the plant (in-plant). After processing, the waste material is transported and deposited in designated areas (dry stocking)

FLSmidth Minerals offers large scale, customised, integrated and energy-efficient material handling solutions which is a technological, economic and environmental alternative to traditional conveying methods (such as trucks) requiring less man-power and fuel


Animation

3-Minute Minerals


Minerals

Q1-Q3 20096,379

545618

8.5%9.7%

Q1-Q3 20087,056

543797

7.7%11.3%

DKKm YTDRevenueEBITEBIT adj.EBIT ratioEBIT ratio adj.

Highlights Q1-Q3 2009

Improved EBIT-ratio vs. last year- less impacted by purchase price allocations re. GL&V Process

Sharp decline in order intake in Q1-Q3

Strict focus on cost control and working capital, while preserving vital competencies and know-how

Current business environment

Market outlook remains weak in the short term

Mining companies are currently revisiting their 2010 CAPEX budgets, and many are announcing increased budgets

Project pipeline very large, particularly in coal, iron ore, gold, phosphate and copper and material handling


Order intake (gross)

-65% vs. Q3 2008

Order backlog-30% vs. Q3 2008

Revenue-24% vs. Q3 2008

EBIT adj. -32% vs. Q3 2008

Quarterly developments – Minerals (DKKm)

DKKm

1370

3960

2426

0

1000

2000

3000

4000

5000

Q3 2007

Q4 2007

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

DKKm

8.744

13.588

9.615

02000400060008000

100001200014000

Q32007

Q42007

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

DKKm

1.875

2.754

2.081

0

1000

2000

3000

4000

Q32007

Q42007

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

DKKm

213

312

211

0

100

200

300

400

500

Q32007

Q42007

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

*) Adjusted for effect of purchase price allocations related to GL&V Process; DKK -56m in Q3 2008 and DKK -24m in Q3 2009

*)


Other19%

Material Handling

24%

Pyro technology

7%

Separation35%

Comminution15%

Industrial metals

6%

Light metals23%

Precious metals

9%

Other base metals

3%

Copper10%

Other 12%

Energy9%

Coal13%

Steel15%

Order intake (by product) Order intake (by industry)

Capital order intake Q1-Q3 2009


Customer Services (included in Cement & Minerals)

~40% of order intake and ~30% of revenue in Minerals is within Customer Services

Customer Services includes: spare parts, wear parts, service before, under and after the delivery of new equipment, maintenance contracts, upgrades, modernisation projects, etc.

FLSmidth Minerals runs three long-term maintenance contracts in South America:

–Los Pelambres, Chile (prolonged in 2008)–Collahuasi, Chile (prolonged in 2008)–Peñasquito, Mexico (contracted in 2008)

- more resilient than capital orders in the current down-turn..

1.309

2.331 2.397

0

500

1.000

1.500

2.000

2.500

3.000

Q32007

Q42007

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

DKKm

Minerals Customer Services revenue (12M trailing)


The mining world today

Metal prices appear to be stabilizing above threshold levels

The credit situation remains tight and the banking sector is still reluctant to fund new projects

Most large viable projects belong to the major mining houses or are being financed by Chinese investors. Junior companies, and their projects, are the most effected by the crisis

However, some people continue to realize that the China and India growth stories are still intact giving us some optimism for 2010

Many mining companies are currently revisiting, and consequently increasing their 2010 CAPEX budgets


Industry Dynamics

Industry themes

Near term– Slow economic growth– Capital scarcity– Low /stabilizing

commodity prices

Long term– Structural demand from

BRIC to drive metal consumption growth

– Lowest cost per produced ton key

– Environmental issues

Producer response

Near term–Operational closures–Driving down costs–Capex deferral–Consolidation (cheaper than greenfield)

Long term–Supply shifts to different geographies

–Supply shortage–Focus on specific segments–Supply chain management

FLSmidth Minerals

Near term–Continue integration –Flawless execution to maintain margins

– Weather the storm

Long term–One Source - One Partner –Low cost/high quality supplier

–Focused Industry Leader and Innovator

FLSmidth Minerals must be positioned for both near-term and long-term


Current industry trends and opportunities

Industry needs:

Shorter project lead times

Water

Reduced environmental impact

Super-sized production lines

Lower CAPEX

Deeper long term support

FLSmidth Minerals Response:

Complete flowsheet capability

Technology leader in water recoveryPaste thickener technologyHorizontal belt filtersPneumapress

Exploring new designs for crushing and grindingHydrometallurgical processing

The world’s largest process equipment

Outsourcing to low cost countries

Full service maintenance contracts


FLSmidth Minerals’ competitive advantage

Strong position in all relevant product segments

Strong local presence in all geographical markets

Total flow sheet coverage with Heritage Brand Names

Technological edge for large-scale equipment/systems

Strong Value Proposition

Strong balance sheet


Market reality in 2008

The sky is the limit and opportunities are ample..The sky is the limit and opportunities are ample..


Market reality in 2009

Global economy in shock, demand disappears..Global economy in shock, demand disappears..


Market expectation 2010

Dawning optimism, demand to return..Dawning optimism, demand to return..


Market outlook in Minerals

Under-investments in the mining industry for many yearsHigh capacity utilizationDepleting ore qualitiesRebounding economic growth and underlying demandIncreasing population, industrialisation and urbanisation in emerging markets

Commodity supply shortage is looming


Source: BHP Billiton

Developed countries stable to declining consumption of copper per capita as economy matures

Emerging markets Steep increase in copper consumption per capita as level of urbanisation and industrialisation increases

China and India are coming from very low levels

Relationship between copper consumption and GDP per capital over time

An ever increasing population as well as rising urbanisation and industrialisation in emerging markets will - sooner or later – lead to increased demand for a number of metals and minerals

Minerals


Market opportunities in Minerals

EuropeOpportunities in coal and

industrial minerals

South America Strong market led by investments in copper in Chile and Peru as well

as iron ore in Brazil

North AmericaOpportunities in copper and gold

AfricaStrong market with considerable political risk. Especially gold and

uranium is expanding

Middle EastLarge potential for phosphate and

potash

AustralasiaStrong market led by investments in iron ore, coal and base metals

Russia / CISStrong but volatile market.

Opportunities in copper and gold

IndiaOpportunities in alumina, iron ore

and coal


Source: McKinsey

The mining industry is still generating cash…

EBITDA Margins


..but when will they invest..?

Source: McKinsey


In the meantime, certain industries are more active than others..

Source: McKinsey


Group Long term growth and earnings prospects

In periods of high activity: Expected EBIT ratio: 10-12%

In periods of low activity: Expected EBIT ratio: 8-9%

Urbanisation and industrialisation in developing countries are expected to generate increasing demand for cement and minerals in future.

Top priority


2009 2008■

New cement kiln capacity 40-50mty (previously 25-50mty) 123mty■

Revenue DKK 22-23bn (previously 20-23bn) DKK 25,285m■

EBIT-ratio 8.5-9% 9.5%■

Tax rate 20% 31%■

CFFI (excl. acquisitions) DKK -300m DKK -663m

■

Significant slowdown in Cement and Mining capex is expected in 2009

Guidance 2009

■

Cement Revenue slightly down compared to 2008 Satisfactory earnings■

Minerals Revenue slightly down compared to 2008 Satisfactory earnings■

Cembrit Revenue down compared to 2008 Modest negative earnings

Segments

Group


Concluding remarks

FLSmidth has positioned itself as one of the leading suppliers of equipment and services to the global minerals industry with a unique ‘One Source’ business model

FLSmidth has a flexible cost structure and will adjust to ever changing market conditions whilst preserving vital know-how and competencies

FLSmidth has proven the ability to acquireand innovate in a recessionary environment

We believe that Minerals is a long termgrowth story. It is not a matter of if – but when!


Questions

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