Mining Equipment and Aggregate & Cement Sector Businesses · Mining Equipment and Aggregate &...

15
Mining Equipment and Aggregate & Cement Sector Businesses September 16, 2016 Hisashi Shinozuka Director and Senior Executive Officer President of Construction and Mining Equipment Marketing Division Komatsu Ltd. <Komatsu IR Day 2016 Meeting>

Transcript of Mining Equipment and Aggregate & Cement Sector Businesses · Mining Equipment and Aggregate &...

Mining Equipment and Aggregate & Cement Sector Businesses

September 16, 2016

Hisashi ShinozukaDirector and Senior Executive Officer

President of Construction and Mining Equipment Marketing DivisionKomatsu Ltd.

<Komatsu IR Day 2016 Meeting>

Mining Equipment Business

1

Mining equipment Construction equipment Utility equipmentCustomers’ businesses

Limited to regions with resourcesGlobal operation

Global operation is rare. Country or region specific.

Mainly in smaller areas

Hours of machine operation

24/7Over 5,000 hrs/year

8-16 hrs/day and 5-6 days/week1,000--3,000 hrs/year

8 hrs/day (max) and 5 days/weekUp to 1,500 hrs/year

Locations of machine use

Remote areas (in main)Almost no relocation of machines

Urban, suburbia and remote areasRelocation of machines for each project

Urban and suburbiaFrequent relocation of machines

Customers’ expectations

SafetyProductivity/machine utilization,$/ton, and lifecycle costs

Machine performance/reliability,Model range and ample attachments Initial costs

Versatility,Ample attachmentsInitial costs

Customer service Maker/distributor Distributor/maker Distributors

Machine ownership Customers (relatively high %) Customers and rental companies ←

Competitors A few Many Extensively many(esp. mini excavators)

Market Characteristics (1/2) 2

Estimated by Komatsu350

300

250

200

150

100

50

0Annu

al pr

oduc

tion v

olum

e (in

dex)

The ratio of underground mining equipment to increase

Underground

Breakers

Crushing & conveyingequipment

Underground truck

Surface

Komatsu’s offering

Fleet control system

Roof support

Bulldozer

Motor graderDump truck

Wheel loader

Hydraulic excavator

Market size in FY2014 Source:Estimated by Komatsu from materials published by relevant companiesMining machines and our product offering

Komatsu

Joy GlobalSurface

Joy GlobalUnderground

Market size: JPY3 tnSurface: JPY1.9 tn (64%)

Underground: JPY1.1 tn (36%)

About JPY1.4 tnapplicable to Komatsu’s offering

Production volume of minerals: surface and underground mining

Shearer

LHD

Continuous miner

Hydraulic jumbo drill

Drag line

Drill

Rope shovel

Market Characteristics (2/2)

Underground: small and medium-sized mines

Underground: major mines (supercaves)

Underground: major mines (excl. supercaves)

Surface mines

Year

3

0

500

1,000

1,500

2,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Market Trends (1/2)• All commodity prices peaked out in 2011. They appear to have bottomed out in 1Q, FY2016.• We anticipate that commodity prices will head for slow recovery, although they won’t recover to the peak level.

2011/Feb.$187.18

$57.50

0

50

100

150

200

250Ja

nAp

rJu

lO

ctJa

nAp

rJu

lO

ctJa

nAp

rJu

lO

ctJa

nAp

rJu

lO

ctJa

nAp

rJu

lO

ctJa

nAp

rJu

lO

ctJa

nAp

rJu

lO

ctJa

nAp

rJu

l

2009 2010 2011 2012 2013 2014 2015 2016

US$/MT Iron ore

2011/Sep$1,771.88 $1,327.80

0

500

1,000

1,500

2,000

Jan

Apr

Jul

Oct

Jan

Apr

Jul

Oct

Jan

Apr

Jul

Oct

Jan

Apr

Jul

Oct

Jan

Apr

Jul

Oct

Jan

Apr

Jul

Oct

Jan

Apr

Jul

Oct

Jan

Apr

Jul

2009 2010 2011 2012 2013 2014 2015 2016

GoldUS$/Ounce

As of Sep. 9

Source: Kitco

Source: International Monetary Fund

$69.60

0

50

100

150

Jan

Apr Ju

lO

ctJa

nA

pr Jul

Oct

Jan

Apr Ju

lO

ctJa

nA

pr Jul

Oct

Jan

Apr Ju

lO

ctJa

nA

pr Jul

Oct

Jan

Apr Ju

lO

ctJa

nA

pr Jul

2009 2010 2011 2012 2013 2014 2015 2016

Thermal coalUS$/MT

Source: World Bank (Monthly ave.)Description: Australian Thermal Coal FOB New Castle., 12000 btu/pound

As of Sep. 9

2011Feb$137.53c

0.000.501.001.502.002.503.003.504.004.505.005.50

0

2,000

4,000

6,000

8,000

10,000

12,000

Jan

May Sep

Jan

May Sep

Jan

May Sep

Jan

May Sep

Jan

May Sep

Jan

May Sep

Jan

May Sep

Jan

May Sep

2009 2010 2011 2012 2013 2014 2015 2016

CopperUS$/MT 2011/Feb$9,880.94

Source: World Bank (Monthly ave.)Description: grade A LME spot price CIF European

US$/lb

$4,615.00 US$/ton$2.09 US$/lbAs of Sep. 9

As of Sep. 9

x: 2000 = 100

Thermal coalIron oreCopper

Gold

*data after 2016 is estimated by Komatsu

Long-range price trend of main commodities

4

0

50

100

150

200

250

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020

2.2%

6.1%

6.9%0.0%

3.0%

Market Trends (2/2)• While the business environment of the mining equipment industry remains challenging in the short range, we project that

demand for mining equipment will gradually recover to a 4,000-unit level in the mid to long term, supported by an increase of consumption of major minerals and corresponding increase in their production volume.

Mining Equipment Demand and Index of Major Commodity Consumption

(Units)Consumption

(Indexed)

Mining Equipment Demand *1

Indexed Major Commodity Consumption (Production in 2000 indexed to 100) *2

Annual Growth Rate of Indexed Major Commodity Consumption *3

*1: For Komatsu’s mining product lines only *2: Major Commodity=Thermal coal, met coal, iron ore, copper *3: Average of annual growth rate over the period

Source: Komatsu Estimate

5

196.1 214.9

194.3

96.3 91.7 84.2

206.8 140.6

115.6

+22%+18%

-14%

+15%+33%

+11%

-18%-1% -10% -12%

-50%

0%

50%

0

200

400

600

800

FY07FY08FY09FY10FY11FY12FY13FY14FY15FY16 FY14FY15FY16

356.5

422.0

361.5

554.0

614.5

417.0

506.3499.3

447.3

54.9 52.7

56.9

50.4 45.7

23.5 22.9 23.2

22.1 19.4

37.5 34.4

33.6

35.0 33.2

+24%+20%

+4%-1%

-17%-27% -23%

-4% -7%-3%

+20%

-19%

-4%

-4%-12%

-12%

-15%

-50%

0%

50%

0

50

100

150

200

250

FY12/1Q2Q 3Q 4Q FY13/1Q2Q 3Q 4Q FY14/1Q2Q 3Q 4Q FY15/1Q2Q 3Q 4Q FY16/1Q

FY15/1Q2Q 3Q 4Q FY16/1Q

Middle East & Africa OceaniaAsia ChinaEurope & CIS Latin AmericaN. America Y-o-Y change

139.1157.0163.4

129.6119.2

155.2

107.2115.9

150.5120.9

118.7128.8

130.8

110.1113.7

394.1

107.598.3

Sales of Mining Equipment and Outlook

Annual sales of mining equipment (incl. parts and service) Quarterly sales of mining equipment (incl. parts and service)

Y-o-Y change

Billions of yenBillions of yen

Y-o-Y change

PartsEquipm

entService, etc

Equipment

PartsService, etc.

Initial projection Initial projection

• For the first 3-Month period of FY2016, sales declined by 15% from the corresponding period a year ago, to JPY98.3 billion, as affected by the Japanese yen’s appreciation and reduced sales of parts.

• We project that full-year sales for FY2016 will decrease from FY2015, as affected by a decline in demand for new equipment and the Japanese yen’s appreciation.

6

1. Growth Strategies Based on Innovation

In response to our surrounding environment and tasks, we will work to achieve sustainable growth by focusing efforts and through open innovation, when applicable, in 1) Growth strategies based on innovation, 2) Growth strategies of existing businesses, and 3) Structural reforms designed to reinforce the business foundation, centering on DANTOTSU products, service and solutions.

. Growth Strategies of Existing Businesses

3. Structural Reforms Designed to Reinforce the Business Foundation

• Development of next-generation construction and mining equipment as well as next-generation components

• Deployment of AHS*1 and reinforcement of platform for mining solutions

• Contributions to expanding sales by developing new products, incl. DANTOTSU products• Expansion of earnings in the value chain• Expansion of the mining equipment business• M&A

• Continuous reduction of costs (production and fixed costs)• Reforms of spare parts operation• Lean and powerful development• Development of human resources with global perspective and framework to promote diversity for

sustainable growth

Basic Strategies of Mid-range Management Plan(part for mining)

*1: AHS stands for Autonomous Haulage System and means a system to operate unmanned dump trucks.

IoT at Komatsu IoT enables connection and sharing of real-time information concerning all processes from production to sales.

IoT enables connection and sharing of real-time information concerning all processes from production to sales.

Production being connected Plants being connected to market information

DANTOTSUProducts

7

Western Australia: Riot Tinto s iron ore mines• Began operation in 2008.• Total of over 70 units in operation at Nummuldi,

Yandicoogina and HopeDown4.

Growth Strategies Based on Innovation: AHS• We have delivered 100 AHS autonomous dump trucks (cumulative) to mines in Australia and Chile. • We have been controlling an AHS autonomous dump truck fleet from urban area located over 1,500km away from the mine

in Australia. • AHS has proven a high degree of flexibility capable of operating 24/7 in different work conditions, such as iron, coal and

other mines. • We hauled 1,000,000,000 tons (cumulative) of earth as of September 2016.

Chile: Codelco’s copper mine• Began operation in 2008.• 18 units in operation at Gaby mine.

Conceptual diagram of AHSCentral control room GPS satellite

Fleet control

Dumping siteLoading site

8

Growth Toward Our 100th Anniversary and BeyondAlthough we assume that demand will remain sluggish for the time being, we will achieve our growth above the industry’s average by promoting growth based on innovation and of existing businesses.

9

Growth acceleration with the acquisition of Joy GlobalSales: U$ 3.0〜3.5 BnOp. margin: 10〜15%

Aggregate and Cement Sector

10

Characteristics of Aggregate and Cement Sector1. Market characteristics[Customers: distributed worldwide] [Main machines: mostly made in Japan]

2. Machines for use and production process

Mining

Aggregate/cement

Loading and hauling of ore Transportation End productsSmall no. of machines

Large no. of machines

Buildings, automobiles,smart phones, etc.

Super-large machines

Large & medium-sized machines

Foreign demand: exports

Domestic demand: Transport within 50-70km

Refining

Products

BlastingProcessing

Crushed stone, gravel, sand

Cement

Iron, copper, gold, coal, etc.

BlastingCementplants Concrete

plants

LimestoneBuildings, homes, etc.

Roadbed material, etc.

Positioned in the middle of mining and construction sectors.

Site operation resembles mining. Compared to mining, more sites, smaller

scale and relatively smaller machines. Locally produced and consumed due to

low unit price, and limited distance of transportation.

, /

Mining customers Aggregate/cement customers Construction customersNo. of customers

Hours of machine use

Site locationProduct destination

Customer needs

Few (global players) Many

10-16hrs/day, 6days/week

Cities & suburbsFew (locally produced & consumed)Safety, environment, $/ton

Extensively many

24/7Over 5,000hrs/yr

8-16hrs/day, 5-6days/week

Mainly remote areas Cities & suburbsMany N/A

Safety, $/ton Initial cost, trade-in value, fuel cost

11

4.5

5.8 10

.4 18.0 23

.5

9.8

10.2

12.7

15.0

17.5

31.436.4

45.0 54.557.3

01020304050607080

05

1015202530

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Cement production in China and other countries100Mn. tons %

Soaring in ChinaGradually increasing in other countries

Reference: World Bank

Market Environment

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Cement production by region (excl. China)AsiaCISEuropeLatin AmericaMiddle East etc.North AmericaJapan

100Mn. tons

Middle East

Asia

EuropeL. AmericaN. America

CIS Japan

Soaring in emerging countriesStable in advanced countries

1. Expanding cement productionStable expansion supported by economic growth centering on emerging countries

2. Structural change of the industry (M&A and emerging global majors)

14.2 16.023.1

33.0

41.0

0

2000

4000

6000

8000

10000

0

10

20

30

40

50

1995 2000 2005 2010 2015

Global production, GDP, Urbanization rate

産量

均)

100Mn. tons USD

Urbanization rate: 53.8%

Urbanization rate: 44.6%

Large companies becoming larger and global, mainly reflecting low interest rates.

● Lafarge Holcim established (2015)● Heidelberg Cement acquires Italcement (2016)

Per capita GDP (world average)

Cement production volume

China (%)OthersChina

12

We position the aggregate & cement sector as the third important market segment, following mining and construction.

Basic policy

3) We will take full advantage of our global network of distributors.

2) To expand business, we will capitalize on our know-how in building customer relationships and global operations, accumulated in the mining equipment business.

1) By creating an exclusive unit in the head office in Tokyo we will make efforts as a company-wide project

Reinforcing Global Presence in the Aggregate & Cement Sector13

Thank you for your interest in Komatsu.

14