ANDRITZ Group Capital Market Day 2013, Germany · Major developments since last Capital Market Day...

Capital Market Day 2013, GermanyANDRITZ GROUP

Contents

Major developments since last Capital Market Day

Update on market and outlook for the business areas

Capital Market Days: goals and summary

Capital Market Day 2013, Germany – ANDRITZ GROUP – Wolfgang Leitner2

3 Capital Market Day 2013, Germany – ANDRITZ GROUP – Wolfgang Leitner

Acquisition of ANDRITZ Gouda (1) Complementing drying business of SEPARATION

Products and services:Drying equipment, mainly drum dryers and paddle dryers, for food industry (e.g. baby food), chemical industry, and municipalities

Strategic fit:Complementation and extension of ANDRITZ SEPARATIONʼs drying portfolio

Locations:Netherlands (headquarters), Germany, France, China, Singapore, Indonesia, and USA

Number of employees:~140

Annual sales:~40 MEUR

◄ Drum dryer of ANDRITZ Gouda


ANDRITZ Gouda (2)Sales by region and important customers

Important customers: Danone Heinz Petrobras PWT/Ambarli Emsland Nestlé National Starch

Tate & Lyle Unilever BASF Cargill Veolia Roquette Frères

▲ Paddle dryer of ANDRITZ Gouda

54

13

4

12

9

8

Europe

North America

South America

Asia (without China)

China

Others

Sales byregion 2012

in %


Acquisition of majority stake in Shende MachineryStrengthening of pelleting business, especially in Asia

Products and services:Systems for mid-size animal/aquatic feed and biomass pelleting

Strategic fit:Strengthening of ANDRITZ SEPARATIONʼs portfolio and enhancement of position in China and other Asian countries

Locations:Netherlands (headquarters), Germany, France, China, Singapore, Indonesia, and USA

Number of employees:~120

Annual sales:~20 MEUR

▲ Pellet mill of Shende Machinery

▲ Dies and rolls for pellet mill

Capital Market Day 2013, Germany – ANDRITZ GROUP – Wolfgang Leitner

Organic and external growth ANDRITZ GROUP since 2005

6

2005

ANDRITZGROUP

Sales(MEUR)

2012

ANDRITZ GROUP sales 2005:1,744 MEUR

Organic growth ofGroup companies

2005: 1,149

ANDRITZ GROUP sales 2012: 5,177 MEUR

Acquisitions:1,525

Organic growth of acquisitions: 759


Where has the growth come from?Growth trends by business area

7

HYDRO:

Organic growth plus market share gains in selective markets (Europe, North America)

PULP & PAPER:

Growth in line with market; 25% weight of large-scale contracts in 2011, now <10%

METALS:

Since 2009, the “old” ANDRITZ METALS segment has stayed at low post-crisis level (except furnaces),

strong organic growth of Schuler with slight market share gains

SEPARATION:

Most of growth organically driven; both segments (solid/liquid separation, feed and biofuel) contributed to that

growth

Contents





MARKETLarge-scale projects: Solid demand for rehabilitation and modernization to continue due to age of installed base Some greenfield hydropower projects in emerging markets (Africa, South America)

Small-scale projects:Good activity to continue, especially in emerging markets (high energy demand, low capex needs)

Pumps:Demand for special pumps to remain high (irrigation, water transport, etc.)

COMPETITION Stable at challenging level Asian competitors?


Submersible motor pump for drainage purposes iniron ore mines. The pumps are 13.4 meters long

and have an outer diameter of just 80 centimeters.A complete pump unit weighs 9.5 tons. ►

HYDROGlobal market volume substantially below peak levels

9


HYDROCumulative installed hydropower capacity (GW)

10

1,0581,017

880850827804785

1,3621,3201,2801,2371,2001,1671,1281,093

913984947

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

CAGR 2003-2005: 2.6% CAGR 2006-2012: 3.7% CAGR 2003-2012: 3.4% CAGR 2013E-2020E: 3.2% CAGR 2003-2020E: 3.3%

Strong growth from 2006 onwards

2013-2020: expected average annual growth of 3.2%

Source: GlobalData

Units older than 30 years (in % of installed capacity in operation)


HYDROFavorable long-term potential for rehabilitation/modernization

11

Source: ANDRITZ; Platts – UDI

55% of installed capacity older than 30 years!

%

Installed hydropower capacity 2012 (1,058 GW) by region in %


HYDRO: based on 55% share of capacity being olderthan 30 years, it would take 58 years to modernize this fleet

12

Source: GlobalData, Hydropower&Dams World Atlas

Todayʼs annual 10 GW rehab rate is not sufficient to stop aging of existing fleet!

MARKETPulp: Investments in greenfield pulp mills to continue, mid-term some order awards in South America

and Asia Modernization projects to increase efficiency and profitability of existing mills Green energy investments Regionally different development for biomass pelleting projects

Paper and packaging:Solid demand for tissue and container board machines

Nonwoven and plastic film:Reasonable project activity

Service:Good potential to grow organically and by acquisitions

COMPETITION Stiff price competition for greenfield projects to continue Challenging environment for brownfield projects Consequences of Metso split-up?


PULP & PAPERReasonable project activity, but fierce competition

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▲ ANDRITZ will deliver a biomass boiler plant to the new Värtaverket combined heat and power plant in Stockholm, Sweden. The plant will largely replace fossil-based fuels like coal and oil with eco-friendly biomass.


World consumption of papermaking fiber raw materials has grown from 289 million t in 1995 to 406 million t in 2011 ( annual average growth rate: 2.1%)

The consumption is forecast to grow by an annual average of 1.6% in the long term, reaching 510 million t by 2025:

World consumption of papermaking fiber through 2025Expected growth of 1.6% per year

Consumption of .. 2011 (million t)

2025E(million t) CAGR

Recoveredpaper 223 305 +2.3%

Chemical wood pulp 129 154 +1.3%

Mechanical and semi-chemical wood pulps 37 36 -0.3%

Non-wood pulps 17 15 -0.8%

Source: Pöyry


-270 1,282 914 2,532 978 1,368 3,445 236 67 1,559 1,750 2,270 4,295

132,452 133,734 134,648 137,180 138,158 139,526 143,207 143,207 143,274 144,833 146,583 148,853 153,148

+/- ktons

Despite new capacities built, net capacity worldwide has only marginally increased

Total ktons

ktons/aDevelopment of net global chemical pulp production capacity (market pulp + integrated pulp)

Chemical pulp production capacity:


PULP & PAPERPlanned major projects > 1 million tons

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▲ In addition to the existing mill in Três Lagoas (photo), Brazil, Fibria plans to erect a second market pulp line. Eldorado Brasil announced two additional pulp lines in Três Lagoas

* In million t; source: Pöyry

Country Owner ProjectCapacity/

year*Planned start-up

Brazil Klabin Ortigueira 1.1 2015

Brazil Eldorado Três Lagoas 4.0 2017 et seq

Brazil Fibria Três Lagoas 1.5 2017 et seq

Brazil Fibria Aracruz 1.5 2017 et seq

Brazil Veracel Eunápolis 1.5 2017 et seq

Brazil Brasileira de Celulose Peixes 1.5 2017 et seq

Brazil Suzano Imperatriz 1.3 2017 et seq

Brazil Portucel Brazil - 1.3 2017 et seq

Chile Arauco Bio-Bio 1.6 2017 et seq

China Guangxi Jingui Qinzhou City 1.2 2017 et seq

Indonesia Oki Pulp & Paper Mills Palembang 2.0 2017 et seq

Mozambique Portucel Mozambique - 1.3 2017 et seq

Fibria, Brazil

1,250,000 t/a; start-up 2009

Botnia, Uruguay

1,000,000 t/a; start-up 2007

Veracel Celulose, Brazil

900,000 t/a; start-up 2005

Aracruz fiberline C, Brazil

700,000 t/a; start-up 2002


Each project enhances our reputation (1)

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Wood-yard Cooking Washers Bleach

plantPulp dryer

ANDRITZ scopeof supply

Balingline Evaps Recov.

boilerWL

plant


plantPulp dryer


boilerWL

plant

Hunan Tiger Forest & Paper Group, China

400,000 t/a; start-up 2008Wood-yard Cooking Washers Bleach

plantPulp dryer


boilerWL

plant


plantPulp dryer


boilerWL

plant

CMPC Santa Fe, Chile


plantPulp dryer


boilerWL

plant


plantPulp dryer


boilerWL

plant

Eldorado Celulose e Papel, Brazil

1,600,000 t/a; start-up 2012


Each project enhances our reputation (2)

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ANDRITZ scopeof supply

Zhanjiang Chenming Paper Group, China


plantPulp dryer


boilerWL

plant

Wood-yard Cooking Washers Oxygen

delignifac. ScreeningBleachplant

Pulpdryer


boilerWL

plant

Montes del Plata, Uruguay

1,600,000 t/a; start-up delayed beyond Q3 2013Wood-yard Cooking Washers Oxygen

delignifac. ScreeningBleachplant

Pulpdryer


boilerWL

plant

… and now we are working on …


Update on pulp mill project in Uruguay

~ 95% of project finished

Customer published in September that start-up of the mill is further delayed beyond Q3 2013

Additional provisions likely if difficult labor situation on site continues

When this contract was signed two years ago, it had all the ingredients for success: ANDRITZ successfully executed a similar project in good cooperation with owner (Fray Bentos pulp mill:

successful start-up in 2007): Same country Same sub-suppliers Same capacity

Difference is only related to labor-related strikes on site, which are impacting all suppliers and owners


ANDRITZ and EPC/large-scale contracts

EPC contracts come inherently with generally manageable, but ultimately not fully avoidable risks

ANDRITZ will limit EPC contracts to divisions where EPC scope offers superior value to customers customers that are willing to pay fair price for such superior value countries with good prospects for repeat orders

In addition, ANDRITZ will continue to offer alternative supply structures such as open book, third-party general contractor etc. in circumstances, where the above mentioned criteria do not apply

In the aggregate, EPC sales are not expected to exceed 15-20 % of total sales

MARKETMetalforming: Automotive demand to slow down from record levels of past years; regionally different

development: Europe ex Germany weak, Asia and South America good Stable demand from other industries

Stainless steel:Investment activity to remain at very low level, no big capex plans by customers

Carbon steel:Unchanged slow market; some early signs of recovery?

Furnaces: Good demand to continue

COMPETITION Stable at challenging level Depreciation of Yen to benefit Japanese

competitors?


METALSGood activity in furnaces, low in carbon and stainless

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▲ Schuler successfully started up a 1,600 ton servo press for Miele, Germany. Miele increased the output by up to 50% with the new press.

Core competence Schuler:press shop equipment

Core competence ANDRITZ METALS:processing lines for the production of

steel and aluminum strips

METALSEntire process chain from hot rolled strip to finished parts


part handlingformingblankingcoatingheat treatmentpicklingrolling

Total flat strip mill products in million metric tons

Share of consumption of flat strip mill products by industry in Europe 2008-2012 (in %)

Consumption of flat strip mill products Car industry with the largest share

Source: Eurofer


2010 2011 2012

8490

82

MARKETMunicipalities:Investment activity at reasonable levels

Industries: Reasonable demand in food processing Low project activity in mining, minerals, and chemical industries

Animal feed:Continuing at solid level

Biomass pelleting:Good demand to continue

ANDRITZ’s product issues expected to be resolved in Q1 2014 at the latest

COMPETITIONChallenging with many local competitors


SEPARATIONSlow market to continue

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▲ Biomass torrefaction pilot plant in Frohnleiten, Austria. The energy content of torrefied biomass is 20% higher than that of white wood pellets.

Contents

Foto

: BM

W A

G/M

artin

Klin

dtw

orth






Sales: 3.0 bn. EUR

Share ofrenewable

energy sales> 50%

4.0/4.5 bn. EUR 5.0 bn. EUR

EBITAmargin:

7.0%(factual6.5%)

7.0%(factual5.1%*)

7.0% over the cycle: Goal achieved in 2010 + 2011 (each 7.2%) Goal almost achieved in 2012 (6.9%) Average 2010-2012: 7.1%

Dividend:~40%payoutratio

~50%payoutratio

~50% payoutratio

~50% payoutratio

2007 2008 2009 2010 2011 2012

Goal achieved Goal not achieved Goal pending

Review of Capital Market Daysʼ goals: sales and dividend goals achieved, pending margin goal reached in 2010-2012

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* Including restructuring expenses; excluding: 6.0%


Expected market and order intake development: Stable market development to continue in all four business areas, however no sign of major recovery for

2014

Excluding Schuler, ANDRITZ’s order intake 2013 will be slightly lower than 2012 expected to remain stable in 2014

Chances for some larger orders in HYDRO and PULP & PAPER

Operational measures and IFRS related issues: Given the expected developments as described above, certain, although limited capacity adjustments will

be targeted in some areas

Schuler: First round of simplifications of complex corporate structure and shift of value added to major markets

expected by end of Q4 2013 Purchase price allocation of intangibles (backlog, patents, customer relations) based on IFRS regulations

lead to amortization of approx. 50 MEUR p.a. in 2013 and 2014, declining to below 30 MEUR p.a. from 2015 to 2020

Earnings influencing factors 2013 and 2014and margin improvement potential (1)


Margin developmentShort-term Long-term

ANDRITZ GROUP - +HYDRO o +PULP & PAPER - +METALS + oSEPARATION - ++

o stable + positive - negative

Margin development: Short-term: Group margin impacted by one-off cost

overruns in PULP & PAPER and SEPARATION; HYDRO stable at solid level; METALS supported by Schuler

Ongoing review of opportunities for structural improvements: Schuler/Müller Weingarten, PULP & PAPER, METALS, SEPARATION

Long-term: Upside due to targeted earnings

improvement in PULP & PAPER as well as in SEPARATION; HYDRO to remain at good level

Earnings influencing factors 2013 and 2014and margin improvement potential (2)

Goal: 7%, improve to 8% with top line sales growth

*

* Including restructuring expenses

2005-2009: avg. 6.0% 2000-2004: avg. 5.3%


Target to continue long-term profitable growth Goal: maintain 7% and improve to 8% with top line sales growth

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** Including Schuler as of March 1, 2013; for the reference periods of last years, no pro-forma figures available

% MEUR

Payout ratio (%)

Dividend per share (EUR)


Dividend goals: Keep payout ratio at least at ~50% Mid-term increase to ~60%

Confirmation of dividend payout ratio goalConsistent dividend policy

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Long-term structural trends within all four business areas should

support long-term organic growth of ANDRITZ; however, currently

subdued project activity in all business areas due to general

economic environment being without clear direction

ANDRITZ to adjust organization to market environment

Acquisitions will remain strategic focus to complement product

range and support long-term growth

Capital Market Day goals 2013:

EBITA margin: regain 7% and improve to 8% with top line sales

growth

Dividend: payout ratio at least at ~50% and mid-term increase to

~60%


Summary

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Capital Market Day 2013, GermanyANDRITZ GROUP

Certain statements contained in this presentation constitute “forward-looking statements.” These statements, which contain the words “believe”, “intend”, “expect” and words of similar meaning, reflect management’s beliefs and expectations and are subject to risks and uncertainties that may cause actual results to differ materially.

As a result, readers are cautioned not to place undue reliance on such forward-looking statements. The company disclaims any obligation to publicly announce the result of any revisions to the forward-looking statements made herein, except where it wouldbe required to do so under applicable law.

All figures according to IFRS.

Due to the utilization of automatic calculation programs, differences can arise in the addition of rounded totals and percentages.

MEUR = million euros.

Disclaimer


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