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Execution of a_cement_project_from_az[1]

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  • 1. Capital Market Day 2009 1 Execution of a cement project from A-Z Per Mejnert Kristensen VP, Head of Project Division EMEA/APAC, Cement
  • 2. Capital Market Day 2009 2 Introduction Long term trends in the global cement industry FLSmidth’s role in a cement project from A-Z Uncertainties and risks in execution of cement projects Outlook in Cement Agenda
  • 3. Capital Market Day 2009 3 Per Mejnert Kristensen • VP, Head of Project Division EMEA/APAC, Cement • Joined FLSmidth in 1992 • Positions in FLSmidth: – VP, Head of Project Division EMEA/APAC – VP, Head of Project Division 1 – General Manger, FLSmidth China – Chief Representative Thailand – Ass. Site manager, 10,000 tpd project, Thailand – Project Sales
  • 4. Capital Market Day 2009 4 FLSmidth Cement Project Divisions
  • 5. Capital Market Day 2009 5 Introduction Long term trends in the global cement industry FLSmidth’s role in a cement project from A-Z Uncertainties and risks in execution of cement projects Outlook in Cement Agenda
  • 6. Capital Market Day 2009 6 Growing need for cement remains despite current global crisis ! Long term trends
  • 7. Capital Market Day 2009 7 Expected future average: ~ 60-75 mty New global contracted cement kiln capacity (excl. of China) 0 20 40 60 80 100 120 140 160 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E mty 2009E: 25-50 mty Contracted kiln capacity is an indicator of total cement capital investments. However, the kiln system only accounts for around 25% of the value of a cement production line and additionally, the lifetime of a kiln is generally longer than the other equipment
  • 8. Capital Market Day 2009 8 Growing need for cement remains despite current global crisis ! Emerging markets will continue to be the driver - now also Africa Long term trends
  • 9. Capital Market Day 2009 9 0 20 40 60 80 100 120 140 160 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Asia (excl. China & India) India Russia Europe North America South America Middle East Africa Geographical distribution of new global contracted cement kiln capacity (excl. China) mty
  • 10. Capital Market Day 2009 10 Growing need for cement remains despite current global crisis ! Emerging markets will continue to be the driver - now also Africa Cement kiln sizes growing Long term trends
  • 11. Capital Market Day 2009 11 Wet kilns 1892: 1.8x18 m 35 tpd 1967: 7.6x232 m 3500 tpd Preheater kilns 1970: 6.0x96 m 4000 tpd Precalciner kilns 1984: 5.0x80 m 5500 tpd 1990: 6.0x96 m ≥10,000 tpd 2006 →: 6.6x93 m ≥12,000 tpd History of kiln capacity development
  • 12. Capital Market Day 2009 12 Cement kiln sizes continue to grow
  • 13. Capital Market Day 2009 13 Cement kiln sizes continue to grow 1000 2000 3000 4000 5000 6000 1970 1980 1990 2000 2010 Year Averageplantclinkercapacity(t/d)
  • 14. Capital Market Day 2009 14 Growing need for cement remains despite current global crisis ! Emerging markets will continue to be the driver - now also Africa Cement kiln sizes growing Increased environmental focus Long term trends
  • 15. Capital Market Day 2009 15 Half of the fuel used in German cement plants is alternative fuel Rapid increase in alternative fuel usage during the past 5 years - due to focus on lowering production costs in a cement market with excess production capacity0 10 20 30 40 50 60 1999 2000 2001 2002 2003 2004 2005 Alternative fuel energy coverage in %
  • 16. Capital Market Day 2009 16 The trends Going from here To there ☺ Increased focus on emissions
  • 17. Capital Market Day 2009 17 Introduction Long term trends in the global cement industry FLSmidth’s role in a cement project from A-Z Uncertainties and risks in execution of cement projects Outlook in Cement Agenda
  • 18. Capital Market Day 2009 18 A cement plant from A to Z Feasibility study Proposal stage and signing of contract Design and order handling stage Civil design and construction Erection, start-up, Commissioning, handover, guarantees Production, operation and maintenance of the plant FLSmidth strengths and capabilities FLSmidth strengths and capabilities Customer requirements Customer requirements
  • 19. Capital Market Day 2009 19 Feasibility stage Budget proposals for various sizes Budget proposals for various sizes Market size, cement prices, investment costs ? Market size, cement prices, investment costs ? ? ?
  • 20. Capital Market Day 2009 20 Proposal stage and signing of contract Leadtime as a conse- quence of requirements Leadtime as a conse- quence of requirements Tender requirements on main features or technical specialities Tender requirements on main features or technical specialities Basic plant Adapted plant Taylor made 24 mth Contract
  • 21. Capital Market Day 2009 21 Proposal stage and signing of contract FLSmidth tests the raw materials FLSmidth tests the raw materials Raw material samples to FLSmidth Raw material samples to FLSmidth R&D and test centre in Denmark and India
  • 22. Capital Market Day 2009 22 Proposal stage and signing of contract Advanced process designAdvanced process designOptimal process and low production cost Optimal process and low production cost FLSmidth has in house laboratory with all modern testing facilities. FLSmidth process designers are carrying a heritage of more than 100 years of experience and know how. FLSmidth is constantly increasing investments in research and development
  • 23. Capital Market Day 2009 23 Proposal stage and signing of contract FLSmidth has equipment for the entire proces FLSmidth has equipment for the entire proces Can we get the complete package from FLSmidth ? Can we get the complete package from FLSmidth ? Main machines & auxuilary equipment of FLSmidth design Electrical equipment Vendor equipment
  • 24. Capital Market Day 2009 24 Proposal stage and signing of contract FLSmidth offers split-supplyFLSmidth offers split-supplyLocal supply and manufacturing Local supply and manufacturing 1 2 4 6 5 18 3 12 7 40% imported 60% local manufactured
  • 25. Capital Market Day 2009 25 Proposal stage and signing of contract Typical cost compositionTypical cost compositionWhat are the total cost?What are the total cost? Machinery 40% Buildings 30% Erection 15% Supervision 5% Transport 5% Others 5%
  • 26. Capital Market Day 2009 26 Proposal stage and signing of contract Different options are possible Different options are possible Equipment, civil design or turnkey? Equipment, civil design or turnkey? Equipment Civil design Construction Erection
  • 27. Capital Market Day 2009 27 Proposal stage and signing of contract All information sources are used such as Google Earth etc. All information sources are used such as Google Earth etc. Finding the right site information? Finding the right site information?
  • 28. Capital Market Day 2009 28 Proposal stage and signing of contract 3D layouts and models3D layouts and modelsVisualisation to customer Visualisation to customer
  • 29. Capital Market Day 2009 29 Proposal stage and signing of contract 3D layouts incorporated in actual landscape 3D layouts incorporated in actual landscapeVisualisation to authoritiesVisualisation to authorities
  • 30. Capital Market Day 2009 30 Proposal stage and signing of contract Quick order startQuick order startSigning the contractSigning the contract
  • 31. Capital Market Day 2009 31 Design and order execution A strong project teamA strong project teamSafe order handlingSafe order handling Experience + skills + tools
  • 32. Capital Market Day 2009 32 Design and order execution Company size and strengths in market Company size and strengths in market Security in a changing world Security in a changing world Long track record Global presence Customer FLSmidth Supply chain Buying power Vendor relations
  • 33. Capital Market Day 2009 33 Design and order execution World wide designWorld wide designClose contact to the supplier Close contact to the supplier Global design centres design 24 hours a day
  • 34. Capital Market Day 2009 34 Design and order execution Fast civil designFast civil design Integrated technical and civil design Integrated technical and civil design
  • 35. Capital Market Day 2009 35 Manufacturing, inspection and expediting High quality equipmentHigh quality equipment Close co-operation with large workshops Close co-operation with large workshops
  • 36. Capital Market Day 2009 36 Shipping Safe transportSafe transport Odd-size equipment or in containers Odd-size equipment or in containers
  • 37. Capital Market Day 2009 37 Construction and installation Swift and trouble free con- struction and installation Swift and trouble free con- struction and installation Experienced and skilled supervisors Experienced and skilled supervisors
  • 38. Capital Market Day 2009 38 Training of client’s staff Training of staffTraining of staff FLSmidth Institute - good training programme FLSmidth Institute - good training programme
  • 39. Capital Market Day 2009 39 Commissioning, handover and guarantees Vi har en god track rekord mht at opfylde garantierne. Har vi evt nogle kurver eller lignende? A swift start of the plantA swift start of the plant FLSmidth has a good record for reaching all guarantees FLSmidth has a good record for reaching all guarantees FLSmidth
  • 40. Capital Market Day 2009 40 Operation of the plant A safe and economical operation of the plant A safe and economical operation of the plant FLSmidth offers full operation and maintenance FLSmidth offers full operation and maintenance
  • 41. Capital Market Day 2009 41 Introduction Long term trends in the global cement industry FLSmidth’s role in a cement project from A-Z Uncertainties and risks in execution of cement projects Outlook in Cement Agenda
  • 42. Capital Market Day 2009 42 Progress of ongoing projects (to be addressed in following slides) When will signed LoI’s and non-effective contracts materialise? General market outlook very uncertain these days ! Even though our customers wants to move ahead with projects, they are met by financing constraints, - i.e. not even our customers can tell when they will be able to go ahead ! Factors contributing to uncertainty about project income
  • 43. Capital Market Day 2009 43 Project Income Flow -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th (P AC ) Period of execution Contract POC Net Sales CM SG&A EBIT Typical project progress and income recognition Down payment Letter of Credit Engineering Procurement Manufacture Shipping Installation
  • 44. Capital Market Day 2009 44 Project Income Flow -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th (P AC ) Period of execution Contract POC Net Sales CM SG&A EBIT Typical project progress and income recognition Down payment Letter of Credit Engineering Procurement Manufacture Shipping Installation
  • 45. Capital Market Day 2009 45 Delayed supplies from vendors Client not ready to receive goods or formalities not in place (e.g. BTI) Client wants to postpone project Suspension of project due to ”temporary” problems with financing Termination of project due to client’s inability to continue Risks in execution of a cement project All of the above creates uncertainty about timing of income recognition… ….and just a few months delay around New Year can impact the annual result significantly !
  • 46. Capital Market Day 2009 46 Project Cash Flow -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th (P AC ) 31st Period of Execution Contract Client payments Total Project Cost Payments SG&A payments Net Cash Typical project cash flow
  • 47. Capital Market Day 2009 47 What happens when orders are cancelled or put on hold? “Cancelled” – Initiated work and issue of purchase orders stop – Legal department gets involved – We stick to our contractual rights - no matter which client – We have the right to be compensated for incurred and committed costs and as well as a pro-rata contribution margin – Cancellation fee to be claimed “Put on hold” – Initiated work and issue of purchase orders stop – Contract and time schedule is amended – We preserve the right to be compensated for any additional costs – Some clients are constrained on cash, others are adjusting priorities
  • 48. Capital Market Day 2009 48 Overall approx. 10 % of order backlog currently on hold. 3 - 4 major projects are partly suspended – no major cement projects cancelled so far (but some minor) We are in very close contact with the customers and they are all determined to carry on – but limited by financing Recent events on (partly) suspended contracts: Receipt of progress payment – strong indicator of commitment Agreement on prolonged delivery schedule Agreement on finalising engineering but procurement on hold for a specified period At this stage we thus feel relatively confident about our existing cement project portfolio – but timing still uncertain Status of our existing cement project portfolio
  • 49. Capital Market Day 2009 49 Introduction Long term trends in the global cement industry FLSmidth’s role in a cement project from A-Z Uncertainties and risks in execution of cement projects Outlook in Cement Agenda
  • 50. Capital Market Day 2009 50 We have the strongest brand in the market ! We have a global reach – present in every corner of the world ! Strong belief in future prospects, because:
  • 51. Capital Market Day 2009 51 Project centres Rep. officesProduction Global undertaking with a local presence
  • 52. Capital Market Day 2009 52 We have the strongest brand in the market ! We have a global reach – present in every corner of the world ! We have a complete product portfolio ! Strong belief in future prospects, because:
  • 53. Capital Market Day 2009 53 Cement plant flow sheet 3 Cement silo Cement silo Cement silo Cement mill Separator Roller press Gear unit Clinker Silo 2 Packers Ship loading Ship unloading Limestone Clay Sand Iron 1 2 3 4 1 2 34 Storage Crusher Analyzer Filter Filter Grate cooler Raw meal silo Raw mill Coal mill
  • 54. Capital Market Day 2009 54 Cement kiln sizes continue to grow ATOX mills OK mills MMC Cooler ILC preheater 3-support kiln DUOFLEX burner Holcim Ste. Genevieve The world’s first 12,000 tpd single kiln line
  • 55. Capital Market Day 2009 55 We have the strongest brand in the market ! We have a global reach – present in every corner of the world ! We have a complete product portfolio ! We have an unsurpassed reference list ! Strong belief in future prospects, because:
  • 56. Capital Market Day 2009 56 VKu/15.03.2007 Ozarow 2 7000 tpd Ain Soukna 5000 tpd Kursk 3500 tpd Holcim 5500 tpd Carribean Cement 3250 tpd ACC, Rabigh 7000 tpd Jovein 3900 tpd Lappeenranta 1800 tpd CIBA (Orascom) 1500 tpd Unicem, Calabar 6250 tpd Dwaalboom 3300 tpd Natal Simuma 1500 tpd EMCC (Orascom) 7500 tpd Ash Grove foreman 4200 tpd Rio Grande Pueblo 3000 tpd Ha Long 5500 tpd ABG Kutch 10000 tpd CIBA Grey 6250 tpdArabian CC, Ramliya 6000 tpdSinai, Gabal Lebni 2 4200 tpd Sinai White 2 1300 tpd Madras Cement 7600 tpdAbyek Cement 4500 tpdKhuzestan, Ramhormoz 5500 tpd Karcement 3200 tpd AUCC 2 5000 tpdTepeaca 10000 tpd Dalmia 3x4500 tpd Cimsa Eskisehir 2100 tpd Ivano-Frankivsk 2300 tpd Star Cement 6500 tpd Ash Grove, Moapa 4350 tpd Essroc, Martinsburg 5000 tpd Keystone, Bath 3000 tpdSte. Genevieve 12000 tpd Hoang Thach 3 3300 tpd Sanghi, Kutch 10000 tpdOrient, Adilabad 4000 tpd Platin 4000 tpd Kokshe Cement 5500 tpd Cem. Andorra 2350 tpd Marquesado 3300 tpd Al Takamol 4500 tpd Indocement 700 tpd Fancesa 750 tpd ACC Chanda 7000 tpd CSN 2 x OK 39 Binani 2 6500 tpd LSR Slantsy 5000 tpd Volyn 6000 tpd Golden Bay 350 tpd Lafarge Joppa 7200 tpd Gulf Cement 5000 tpd Molins 4100 tpd Argos 4500 tpd Aleppo 7500 tpd Ait Baha 5000 tpd Podgorensky 6000 tpd Akbulak 6000 tpdJP Kutch 10000 tpd Projects the last 4 - 5 years ! > 100 new production lines > 150 mtpy capacity !
  • 57. Capital Market Day 2009 57 CIS >45 Africa >96 India >141 South America >162 Central America >94 Middle East >55 Australia >25 North America >356 Rest of Asia >269 FLSmidth has built ~ 2000 cement kilns worldwide since 1898 Europe >674
  • 58. Capital Market Day 2009 58 We have the strongest brand in the market ! We have a global reach – present in every corner of the world ! We have a complete product portfolio ! We have an unsurpassed reference list ! We are investing most in R&D ! Strong belief in future prospects, because:
  • 59. Capital Market Day 2009 59 The cement industry’s largest R&D centre
  • 60. Capital Market Day 2009 60 We have the strongest brand in the market ! We have a global reach – present in every corner of the world ! We have a complete product portfolio ! We have an unsurpassed reference list ! We are investing most in R&D ! We are the strongest Group – Cement & Minerals Strong belief in future prospects, because: We are very well positioned for the future !
  • 61. Capital Market Day 2009 61 Questions

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