FLSmidth in Latin America - with Focus on Brazil

ACl 29.feb.12:

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William O’Shea, Senior Vice President & COO FLSmidth Inc., Brazil, 29 March 2012

FLSmidth is Focused and Differentiated

We will focus on 6 key industries Coal Iron ore Fertilizer Copper Gold Cement

We will not diversify into unrelated industries

We will differentiate from competitors by offering full service within our key industries and core technologies; minerals processing and material handling.

2

Japan

Italy

Israel Iran

India

Hungary Hong Kong

Greece

Germany

Georgia

Gabon

France Estonia

Czech Republic

Croatia

China

Brazil

Belgium Australia

Argentina

Canada

Singapore

Saudi Arabia

Russia

Romania

Poland

Thailand

Tanzania

Taiwan Switzerland

Sweden

Spain South Korea

Slovakia

Philippines Nigeria

Netherlands Morocco

Mexico

Malaysia

Lithuania

Kenya

1,500

1,000

500

0

60 50 40 30 20 10 0

Vietnam

United States

United Kingdom

Turkey

Tunisia

Cement plants are needed where GDP grows...

Emerging

markets

Mature

markets

Maturing

markets

Cement consumption per capita (2006-9 avg., in kg)

Real GDP per capita (2006-9 avg., in 2005 kUS $) Note: United Arab Emirates and Norway excluded as outliers

1

3

…whereas mining is focused in specific regions High-level illustration of commodity reserves

Central & South America

APAC

EME

Africa

China

18

2

22

1

60

Gold

16

44

Iron Ore

3 1

Coal

43

40

Copper

20 13

% of total

0

Fertilizers

North America

% of total

20

0

Fertilizers

25 24

Gold

8 13

Iron Ore

5 3

Coal

28

15

Copper

7 10

40

60

% of total

40

20

0

Fertilizers

25 33

Gold

13 11

Coal Copper

10 12 16

36

Iron Ore

10

34

60

20

0

Fertilizers

4

23

Gold

4

14

Iron Ore

8

37

Coal

13

44

Copper

5 7

60

% of total

40

% of total

60

40

20

0

Fertilizers

43

13

Gold

15 12

Iron Ore

2 3

Coal

4 4

Copper

3 5

20

0

Fertilizers

0 1

Gold

23 17

Iron Ore

22 28

Coal

18 20

Copper

17 11

% of total

60

40

Production (2009/2010) Reserves 1. Production values: 2010 estimates; coal 2009 Note: Fertilizers = Potash and Phosphate Rock; North America excluding Mexico; APAC excluding China Source: USGS; EIA

1

4 4

Area’s of Mining and Cement Growth

5

Focus on our customers, is paramount.

We must become Closer to our customers

so we can understand and fulfill their needs

and create a relationship, where the focus is not

entirely on price…

Customer Intimacy

Product Leadership

Operational

Excellence

but customer intimacy cannot succeed without a strong foundation of product leadership and operational excellence

FLSmidth Customer Commitment

Lowest Life Cycle CAPEX Costs

Lowest Total Cost of Ownership

Reduce Engineering Costs

Shorten Project Lead Times

Meet Promised On-Time Deliveries

Communicate Schedule Delays

Safety and Corporate Responsibility

7

WORKING DRAFT

Last Modified 1/21/2010 12:58:28 PM Eastern Standard Time

Printed

GETTING CLOSER TO THE CUSTOMER

Transform Sales Force Structure from Product Focus to Customer Solutions Focus

Customer Driven Enterprise

What do we look like to our customers?

Product Driven Enterprise We need to be here

Cement Products and Sales Strategies Different Than Minerals

Raw Materials & Raw Coal Handling

Raw Meal Production

Clinker Production Grinding Storage, Packing &

Dispatch Automation

Exploration Development Extracting Material handling

Comminution Separation Refining

Cement has all pieces of Cement Plant and sells direct to Customers

Minerals sells individual products, often through EPCM’s and is moving toward broader solutions like Bundles, Islands, and Systems

10

Typical physical mining site

Minerals: Long history of strategic acquisitions

FLSmidth (Denmark) starts to supply equipment and services to the minerals industry

….supplemented by multiple acquisitions Key historical milestones….

1992

1993

1995

1996

1997

1998

1999

2001

2006

2007

2008

2009

2010

2011

1990

1926

1959

1990

1997

2007

1914

Fuller Company is established in Catasauqua, PA, USA

Traylor Engineering & Manufacturing Company is acquired by Fuller Company (Established 1902)

FLSmidth acquires Fuller Company

FLSmidth forms a separate minerals company, FFE Minerals

FFE Minerals changes name to FLSmidth Minerals

Acquisition of GL&V transformed minerals to a single source solution supplier

Acquisitions in the mineral industry

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WORLD LEADING TECHNOLOGIES IN

ALL PROCESS CATEGORIES

McKinsey & Company | 13 13

Product

Mineral Processing

Materials Handling Conveyors – Feeders – Stackers/Reclaimers – Loading/Unloading

Pyro

Kilns–Dryers–Fluid Beds–Suspension

Separation

Flotation–Classifiers Screens–Cyclones

Comminution

Crushers – Mills Sizers

Extraction In-Pit Crushing

Mine Hoists

Parts & Services

ONE SOURCE FROM EXTRACTION TO FINAL PRODUCT

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FULL FLOWSEET CAPABILITIES

Add Material Handling Islands upstream and downstream

Process Support, Startup, Commissioning

Training, Spare Parts & O&M Services

Customer Services – Cradle to Grave

Metallurgical Test and Studies

Conceptual Studies

Basic Engineering

Detailed Engineering

Mechanical Erection

Operation Plant

Global Super Centers for Spares, Rebuilds, and Repairs

3/29/2012 Title 16

Spokane

Boise

Richmond

Orillia

Bethlehem

Pekin

Monterrey

Lima

Antofagasta

Santiago

Sao Paulo

UK

Paris

Madrid

Vienna

Milan

Johannesburg

Singapore

Jakarta

Perth

Melbourne Gosford

Manila

Beijing

Shanghai

Moscow

Brisbane

Salt Lake City

Perth

Arequipa

Santiago

Belo Horizonte

Customer Intimacy

Best Total Solution

Votorantim

Mongolia

South Africa

Tucson

16

Brisbane

Antofagasta

Typical Warehouse and Rebuild Facility in Country

O&M Contracts Around the World

Mexico Chile Tunisia Libya Egypt Angola Zambia M. East India

28-11-2011

Doing Business in Brazil

Agenda

Brazilian Economy – Highlights and Impact on local Minerals and Cement industry

Cement Industry – Brazil highlights

Minerals Industry – Brazil highlights

Doing business in Brazil

Brazil: The Last 10 Years

Macroeconomic stability initiated under the Real Plan of 1995.

Inflation, the main impediment to long-term financing in Brazil, was brought under control, in spite of an increase on recent months;

Fiscal and monetary policies were strengthened: Introduction of the Fiscal Responsibility Law in 2000; Implementation of the inflation targeting regime in 1999; Move to a floating exchange rate in 1999;

The country is progressively better equipped to face external and

domestic shocks to the economy.

Brazilian economy behaved quite well in the recent financial crisis.

FONTE: GALANTO

Major Triggers and Projects

Deep water Oil & Gas exploration in the Pre-Salt area: Oil & Gas industry Capex to US$200bn over the next few years, 4

major new Refineries ( Premiun I and II ) , and FPSO’s ( 24 ships) Exports should climb to approximately 15% of GDP.

Hosting two major sports events. Soccer World Cup of 2014: investments in the order of US$14bn

(as in Brazil’s Bid submitted to FIFA). Olympic games of 2016: investments on the order of US$40bn

(Beijing, 2008).

Some major projects underway: Major hydro electricity plants in the Brazilian North basin ( Santo

Antonio, Jirau and Belo Monte). House and Infrastructure ( Bolsa Familia , Minha Casa Minha Vida)

Fonte: Raymenod James

Implications for the Construction Industry

Macroeconomic stability led to the recent rebirth of long-term financing in Brazil As a result, credit to the housing sector has grown extraordinarily in recent times, fueling the construction boom The construction boom was also boosted by infrastructure bottlenecks (which still persist), an important housing deficit in Brazil, and government measures aimed at addressing these problems

Fonte: Raymenod James

29/03/20

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Social class breakdown in Brazil 2005 to 2010

Source IBGE

Comments:

Over the longer term, the effects of the World Cup and the Olympic Games are important but shouldn't be exaggerated:

They are one-off effects, and may just end up anticipating some construction expenditures that would have taken place anyway;

The outlook for the industry is dependent on continued economic growth, Cement is Driven by Domestic GDP Growth Minerals is driven by global commodities demand

The possibility that suppressed inflationary forces could take hold

once the world starts recovering at a faster pace implies that interest rates will go up. The increase in borrowing costs will have implications for the growth of housing credit, thereby also affecting developments in the construction industry.

BRAZILIAN CEMENT

INDUSTRY

Brazil Cement Market Outlook 2012-2014

The Brazil cement market is showing a lot of strength

As the Brazilian GDP is projected to be growing at 3-5% per annum

for next several years, commensurately the cement market will also

grow approximately 6-9 % per annum

Based on 2011 cement production and population the Brazilian

specific consumption is approx. 310 Kg/inhabitant year, with big room

for growing on next several years

During 2011 the cement consumption growth in Brazil was very

impressive reaching 7.9% during the year, on top of a growth

2009/2010 of 14.3% .

Cement Business:

Sales on Internal market

40

.2

39

.7

38

.9

38

.9

34

.9

35

.7

37

.7

41

.0

45

.1

51

.6

51

.7

59

.1

63

,8

66

.9

72

.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

CEM

EN

T

SA

LE

S

MT

PA

Cement Sales - Internal Market

Origin

Dec (1,000 ton.) Dec. 11 Jan.- Dec. (1,000 ton.) Jan-Dec 2011

2010 2011 Dec. 10 2010 2011 Jan-Dec 2010

North 316 312 -1,2% 3.288 3.615 9.9%

Northeast 994 1.068 7.3% 11.280 11.985 6.3%

Midwest 488 521 6,8% 6.242 6.839 9,6%

Southeast 2,320 2,313 -0,3% 29.558 31.626 7.0%

South 732 807 10,2% 8.787 9.436 7,4%

Total internal market 4,850 5,021 3,5% 59.155

63,501 7.3%

Fonte: SNIC

Brazil - Cement Sales – December 2011

BRAZILIAN MINERAL

INDUSTRY

Global metal mining

Fonte: Raw Materials Group,

FONTE: IBRAM

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DOING BUSINESS IN

BRAZIL

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Selling in Brazil

Brazilian customers are often reluctant to buy from foreign suppliers, who are not present in Brazil

This is due to the bureaucracy and slowness of the Brazilian customs

Having a set-up with spare parts and Brazilian service/sales engineers are important to Brazilian customers

FLSmidth in Brazil

FLSmidth in Brazil: 1924 First equipment sold in

Brazil to Brazil West company

1955 Started local office

activities

Headquarters Brazil: Votorantim - SP with a branch in Belo Horizonte

FLSMIDTH-BR team: 180

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Noisy contraints

• Tax charge and complexity

• Infrastructure

• Lack of qualified workforce

• Cost of capital still high

t

The list of noisy constraints is long, but Brazil has shown that it is capable of promoting important reforms

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Taxation

Company Tax: Progressive starting at 24% up to 34% Most common taxes are sales taxes The government collects average 38% of GDP in taxes per year High administration costs due complex and bureaucratic taxation system

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Infrastructure

Several botlenecks on Brazilian infrastructure: Ports Airports Roads and railways Public transportation Energy Cost.

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Lack of qualified workforce.

Poor basic eduction system => Quantity x Quality Few technical schools Hot market facing lack of skilled workers Need of companies invest on education Very poor education on foreign languages

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Cost of capital still high

The basic interest rate is very high: Two years ago: 12.25% year Present status : 9.75% year

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Silent Changes in Brazil 1/2

Heightened social mobility Accelerated growth in formal employment Significant demographic bonus More focused social policies Well regulated banking system Healthy expansion in banking credit

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Silent Changes in Brazil 2/2

High degree of simultaneous investments

Strong foreign appetite and country’s recognition as regional leader

Consolidation of inflation target system.

Implementation of few but good microeconomic reforms

International insertion strengthened by robust commodity demand

External liabilities concentrated in investments, instead of external debt

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Recent major orders in Brazil

5 Jan 2011 Votorantim Five Pyro Lines Six Finish Mills

29 Dec 2011 Cimpor Cimentos do Brasil Ltda Greenfield Plant Plant Expansion

22 March 2012 Margem Companhia de Mineração Greenfield Plant

Thank you