On course… Annual General Meeting October 2012 of KHD H b ...

On course…

Annual General Meeting October 2012 of KHD H b ldt W d I t ti l AG R t fHumboldt Wedag International AG ··· Report of the Management Board ··· Jouni Salo, CEO

October 5 2012October 5, 2012

AgendaAgenda

Responding to challenges

Performance in 2011


Achievements and outlook 2012

Annual General Meeting – October 5, 2012 Page 1 / 29

Challenging market environment


Challenging market environment

G thGrowth concerns

• Recession in Europe – fear of spreading

D li i th i i

India• Declining growth rates• Rising energy costs• Declining growth, even in emerging

markets

• US not yet stabilized

Rising energy costs• Currency weakness and high inflation

Russiay

Struggling financial markets

• Revival of bank crisis in Europe

Russia• Economic growth slows, but cement

consumption continues to grow

• Fear of credit crunch

Cement market slowdown China

• Increase in infrastructure investments

• Demand grows at a slower pace, butBRIC and IST countries still key drivers

China• Declining, but healthy growth rate• Restructuring of cement industry with

f lit d ffi i• Supply side stable focus on quality and energy efficiency


Competitive environment and strategic response of engineering industry


Competitive environment and strategic response of engineering industry

Declining margins• Tough competition, in particular from

Chinese low cost suppliers

Industry consolidation• Acquisitions and partnerships• Vertical integrationpp

• Rising costs for input materialVertical integration

• New sourcing strategies

Project foc s Foc s on moderni ation and ser iceProject focus• Lower demand for new lines• Tougher environmental regulation

Focus on modernization and service• Focus on environmental projects • Intensified R&D activities

Difficult financing conditions

g grequires plant modernization • Focus on service and after sales

Cash and cost managementDifficult financing conditions• Projects postponed and delayed• Lower than expected revenue

Cash and cost management • Focus on liquidity• Strong equity based financing strategy

• Lack of planning reliability • Cost management


The KHD way: Customer driven Asset light Knowledge intense


The KHD way: Customer-driven, Asset-light, Knowledge-intense


C t i t d th (I) T ki th l b l i


Customer-oriented growth (I): Taking the global view

E di d i C t• Expanding and empowering Customer Service Centers

• New CSC Asia-Pacific strengthensStrengthened customer

services and salesNew CSC Asia Pacific strengthens market position in China and other Asian growth markets

N b h i T k l ffi• New branch in Turkey, new sales officein South Africa

• Stronger position in Russia after buyoutStronger position in Russia after buyout of KHD OOO

• Intensified service activities

• Active marketing

Increased tenderingti itiactivities


C t i t d th (II) Ad d t h l b d i


Customer-oriented growth (II): Advanced technology-based services

F d i i li ith• Focused services in line with technological core competence add to our asset-light business model

• New roller press refurbishment shop working at capacity since going online in February. y

• CRM (Customer Relationship Management) system established, group wide roll out in 2012group-wide roll-out in 2012

• In discussions with possible strategic partnersp


C t i t d th (III) B d t b


Customer-oriented growth (III): Broad customer base


St t i t hi AVIC


Strategic partnerships: AVIC

U i k t iti i• Unique market position: premium technology + efficient and cost-effective construction expertise

• Together AVIC/KHD cover 80% of the value creation of a new cement plant

A t tt ti i h j t i• Access to attractive niche projects in China

• Procurement center established in 2011Procurement center established in 2011, helps to exploit cost advantages of Chinese supply market

• Proof of concept in 2012


St t i t hi W i Mi l


Strategic partnerships: Weir Minerals

Al d 14 % f t t l KHD d i t k• Already 14 % of total KHD order intake in the mineral-processing sector in 2011

• More volume and better economies ofMore volume and better economies of scale

• Highly energy-efficient roller presses l i ‘supplement our cooperation partner‘s

product portfolio

• Weir has a very strong and serviceWeir has a very strong and service network in the major mining markets


T h i l L d hi


Technical Leadership

1 6% of revenue for research and• 1.6% of revenue for research and development and 40 patents in 2011

• Our COMFLEX® system is one of the ymost energy-efficient grinding processes

KHD’ C b ti Ch b i• KHD’s Combustion Chamber wins award for ‘Most innovative technology for alternative fuels use’ at the 6th Global CemFuels Conference (Feb 12)Global CemFuels Conference (Feb. 12)

• Industry leader in calcining technology with low NOXX

• Highly-efficient equipment helps reduce CO2


O ti l E ll d C it t


Operational Excellence and Commitment

C ti i t ith• Continuous process improvement with focus on customers

• True international team = One KHDTrue international team One KHD

• Group-wide emphasis on customer and service orientation, underlined by new

t t tmanagement structure

• Intense management training and regular exchange of information andregular exchange of information and ideas

• Standardizing processes using SAP and CCRM system


AgendaAgenda


Performance in 2011




2011 in a nutshell: Difficult conditions strengthened position

Performance in 2011

2011 in a nutshell: Difficult conditions – strengthened position

Business Performance• Order Intake• Revenue • Revenue• EBIT and EPS

Fi i l

Financials• Cash Position• Equity q y• Bonding Line

Competitive StrengthCompetitive Strength • Global Footprint• Value Chain • Cost Effectiveness


O d i t k d d b kl t bl

Performance in 2011

Order intake down, order backlog stable

Gl b l i l d L• Global economic slowdown : Lower order intake in our two biggest markets India and Russia

350

Order backlog and order intake (2009 – 2010 pro-forma)in € million * Pro-forma: Expanded group

• Stable development in Turkey: 3 new orders

Addi i l d f € 80 illi i Q3

307,9*

224 7

304,2* 303,5 293,7

250

300

• Additional order of € 80 million in Q3 (details not disclosed)

• Worked closely with AVIC on several 123 6*

224,7

150

200

Worked closely with AVIC on several tenders - no order intake impact in 2011

• Partnership with Weir Minerals

123,6

50

100

generates additional sales0

2009 2010 2011

O d I t k O d B klOrder Intake Order Backlog


R d li d t t h k t diti

Performance in 2011

Revenue declines due to tough market conditions

C t d l l ti f d• Customers delay completion of orders and postpone projects

• Main reasons: pessimistic outlook,

Revenue1

in € million

450Main reasons: pessimistic outlook, difficult financing conditions

• Revenue contribution from new orders b l i

393.7

350

400

450

below expectations 307.9

234.6250

300

150

200

0

50

100

02009 2010 2011

1 Previous years pro formaAnnual General Meeting – October 5, 2012 Page 15 / 29

O ti fit fl t l ti f hi h i j t

Performance in 2011

Operating profit reflects completion of high-margin projects

O ti fit t bl ( 8 6 %)• Operating profit more stable (- 8.6 %) than revenue

• Operating margin at satisfactory level

EBIT and EBIT marginin € million and %30,0Operating margin at satisfactory level

thanks to completion of high-margin projects and flexible cost structures

Oth ti fit t € 4 3

8.7 %

7.5 %25,0

• Other operating profit rose to € 4.3 million mainly due to consolidation of 50 % stake in KHD OOO 15,0

20,0

25.0

17.610,0

0,0

5,0

2010 2011


C h fl h iti l t h d

Performance in 2011

Cash flow: cash position almost unchanged

C h fl f ti ti iti• Cash flow from operating activities: lower order intake, postponed projects, tax payments

Cash flowin € million

81 4 287 7300• Cash flow from investing activities: SAP

project and acquisition of remaining stake KHD OOO

279.381.4

- 2.9287.7

250

300

• Cash flow from financing activities reflects capital increase and interest received

- 65.8 - 4.3

150

200

received100

0

50

Legal CF from CF from CF from Exchange Totalunrestricted operating investing financing rate unrestrictedunrestricted operating investing financing rate unrestrictedcash activities activities activities effects cashDec 2010 Dec 2011


B l Sh t A t li ht b i d l t it l b

Performance in 2011

Balance Sheet: Asset-light business model, strong capital base

L l l f t t• Low level of non-current assets –additional goodwill due to acquisition of remaining stake of KHD OOO

Assetsin € million

Liabilitiesin € million

4509

15450

• Equity ratio up to 54.1% thanks to successful capital increase in Q1 (20% shareholding by AVIC)

170 149234300

350

40056 9

300

350

400

( g y )46 49

53150

200

250226 293 300

150

200

250

214 215145

0

50

100

150148

111 117

0

50

100

02009 2010 2011

Current liabilities

Non-current liabilities

02009 2010 2011

Other current assets

Cash and cash equivalents


EquityNon-current assets

E i h d di id d

Performance in 2011

Earnings per share and dividend

G t fit t € 13 5 illi d• Group net profit at € 13.5 million, down from € 15.8 million

• More issued shares decrease EPS

Earnings per sharein €

1 131,2More issued shares decrease EPS

• Dividend proposal of € 0.12 per share on the table

1.13

1

1,2

0 470,6

0,8

0.47

0.28

0 2

0,4

0

0,2

2009 2010 2011


AgendaAgenda


Performance in 2011





Global cement markets offer opportunities despite economic slowdownGlobal cement markets offer opportunities despite economic slowdown

Russia

ChinaLower growth rate but opportunities for

RussiaIncreasing investment in infrastructure and clean energy

opportunities for environmental technology

R t f A i

Positive growth expected -Oympics - World Cup

North AmericaCautious growth in N. American cement consumption – Rest of Asia

More infrastructure projectsOpportunities in Malaysia, Indonesia

EuropeConsumption hit by austerity programsDramatic fall in new

consumption opportunities in plant modernization

India

IndonesiaEnergy efficiency increasingly important

Dramatic fall in new orders

AfricaSouth AmericaLess affected by global

Below-average capacity utilization but service business opportunities Mid term growth expected

New opportunities in SSA countriesPlant expansions to lower imports

Less affected by global economic crisisRising cement consumption

Mid-term growth expectedlower imports


M j j t i 2012


Major projects in 2012

Fi t j i t j t f KHD d AVIC iFirst joint project for KHD and AVIC in Venezuela (January)

• EPC project for new 2,400 tpd lineC p oject o e , 00 tpd e

• KHD supplier of core equipment, engineering and services

100-million-Euro project in Malaysia(March) in cooperation with AVIC

• New 5,000 tpd line according to latest environmental standards

80-million-Euro project for EUROCEMENT80-million-Euro project for EUROCEMENT in Russia (April)

• New 1.3 m tpa cement plant in Stavropol incl. equipment, erection, commissioning


Oth d i t k i 2012


Other order intake in 2012

®• 2 COMFLEX® grinding plants in Malaysia with order volume of € 14.6 million

• 2 roller presses for the mining industry in Peru and Canada (cooperation with Weir Minerals)(cooperation with Weir Minerals)

• Total volume other projects and services already above € 30 milllion


C ti d f i b i


Continued focus on service business

G i i i li ith• Growing services in line with technological core competence add to our asset-light business model

• Actively seeking win win partnerships

• Increased activities in the Customer S i C t d t dService Centers geared towards generating more spare parts business


St th i i k t d b i it


Strengthening presence in market and business community

I di id l t t i I t b l ith• Individual customer meet in Istanbul with over 165 guests in April 2012

• Communition conference in CapetownCommunition conference in Capetowntogether with Weir Minerals

• Cemtech Beijing,– Joint booth with AVIC

• AFCM Malaysia – Joint booth with AVIC

• Petrocem, Moscow

• Hosted mayoral delegation from City of Cologne in Delhi offices


M d t t ti f 2012 i i l t ti

Outlook

Modest expectations for 2012, promising long-term perspectives

W ld id i l d ith• Worldwide economic slowdown, with impact on KHD’s core markets

• Long-term outlook for cement markets is positive

• Order backlog at its highest level since 20082008

• Revenue target between € 230 and € 250 million (2011: 235 million)

• Order intake triples in comparison to HY 2011 figure, but new orders will not have a major effect on 2012 revenues

• 2012 EBIT margin forecast: 2% - 4%


Outlook

KHD India team supports a stronger future for local children

S hh i l i i

• Swechha is a movement of young people

Swechha is a non-governmental organization focused on improving life in local communities.

y g p pengaged in environmental and social development issues by:

• Providing local children guidance in life skills, g gvalues, attitudes and self esteem

• Creating awareness on environmental issues with projects such as Monsoon Wooding – An effort to plant trees across Delhi andeffort to plant trees across Delhi, and establishing partner communities to care for their growth

• Offering children a place to go after school with programs in the areas of remedial courses, sports, media, photography, dance and fun activities

• Organizing concerts and cultural events• Organizing concerts and cultural events


CEMENTING ACEMENTING A STRONGER FUTURE

Thank you!Annual General Meeting – October 5, 2012 Page 28 / 29

y

This doc ment contains statements hich are or ma be deemed to be "for ard looking statements" hich are prospecti e in nat re

Disclaimer for Forward-Looking Information

This document contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans" "expects" or "does not expect" "is expected" "scheduled" "estimates" "forecasts" "intends" "anticipates"looking words such as plans , expects or does not expect , is expected , scheduled , estimates , forecasts , intends , anticipates or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results performance or achievements of the Company to be materially different from anyand other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of the Company to differ materially from the expectations of the Company include, among other things, general business and economic conditions globally, commodity price volatility, industry trends, competition, changes in government and other regulation including in relation to the environment health and safety and taxation labor relations and workgovernment and other regulation, including in relation to the environment, health and safety and taxation, labor relations and work stoppages, changes in political and economic stability, the failure to meet certain conditions of the offer and/or the failure to obtain the required approvals or clearances from regulatory and other agencies and bodies on a timely basis or at all, the inability to successfully integrate the operations and programs of businesses and/or companies acquired with those of the Company, incurring and/or experiencing unanticipated costs and/or delays or difficulties relating to integration of acquired businesses, disruptions in businessexperiencing unanticipated costs and/or delays or difficulties relating to integration of acquired businesses, disruptions in business operations due to reorganization activities and interest rate and currency fluctuations. Such forward-looking statements should therefore be construed in light of such factors. Other than in accordance with its legal or regulatory obligations, the Company is not under any obligation and the Company expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additional information about these and other assumptions, risks andas a esu o e o a o , u u e e e s o o e se dd o a o a o abou ese a d o e assu p o s, s s a duncertainties are set out in our financial statements for the year ended December 31, 2011.


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