Flsmidth & Co. A/s · OMXCOP:FLS
Flsmidth & Co. A/s — Q2 2023 Earnings Presentation
48 slides from Flsmidth & Co. A/s's earnings presentation, Aug 15, 2023
Slide 1: Investor presentation Interim report Q2 2023
15 August 2023 Investor presentation Interim report Q2 2023
Slide 2: Forward-looking statements
Forward-looking statements FLSmidth & Co. A/S’ financial reports, whether in the form ▪ Statements regarding future economic performance, unexpected breach or termination of contracts, market- of annual reports or interim reports, filed with the Danish future actions and outcome of contingencies suc
Slide 3: Key highlights for Q2 2023
Key highlights for Q2 2023 Mining Cement • 6% growth in order intake supported by Mining Technologies • 33% decline in order intake due to slow-down in market demand • Revenue growth of 23% mainly driven by Service • Revenue growth of 11% driven by order backlog execution • Adj. EBITA margin improve
Slide 4: Key sustainability highlights for Q2 2023
Key sustainability highlights for Q2 2023 ↑2.8%p improvement in spend from suppliers ↑19% improvement in tCO2e vs. Q1’23 with SBT targets vs. 2022 due to more renewable energy usage Scope 3 Scope 1 & 2 upstream our operations ↑ 5.1% ↑1.8%p ↓1.5 ESG improvement vs. H1’22 due to less water usage Water
Slide 5: Mining order intake growth mainly driven by Products and reflecting a stable Service market
Mining order intake growth mainly driven by Products and reflecting a stable Service market Q2’23 HIGHLIGHTS +12% Organic order intake growth* DKKm 5,000 MINING ORDER INTAKE DKKm 6,000 MINING ORDER INTAKE 4,215 +6% 3,989 5,000 +6% 4,000 1,600 4,000 Reported order intake growth 1,447 +11% 3,000 1,275
Slide 6: Mining revenue growth mainly driven by strong execution in the Service business
Mining revenue growth mainly driven by strong execution in the Service business Q2’23 HIGHLIGHTS +29% Organic revenue growth* DKKm 5,000 MINING REVENUE DKKm 5,000 MINING REVENUE +23% 4,351 +23% Reported revenue growth 4,000 3,529 1,518 4,000 1,485 1,518 3,000 +8% 3,000 1,406 1,406 65% Service share
Slide 7: Continued good improvement in Mining profitability
Continued good improvement in Mining profitability MINING EBITA ADJ. EBITA MARGIN Q2 2023 DKKm Margin 10.8% 400 14% 12% 10.5% 10.8% 9.6% 300 Excluding DKK 97m in costs related to the 10% 8.6% integration of Mining Technologies 7.8% 6.5% 8% 200 372 6% 276 274 REPORTED EBITA MARGIN 4% 100 2% 7.8% 8.6%
Slide 8: Cement order intake declined by 33% in Q2'23 driven by a slow-down in market demand
Cement order intake declined by 33% in Q2’23 driven by a slow-down in market demand Q2’23 HIGHLIGHTS -31% Organic order intake growth DKKm 2,000 CEMENT ORDER INTAKE 1,912 DKKm 2,000 CEMENT ORDER INTAKE -33% -33% Reported order intake growth 1,500 925 -43% 1,276 1,500 925 531 524 524 59% 1,000 1,000
Slide 9: Stable Cement profitability driven by operating model simplification and de-risking
Stable Cement profitability driven by operating model simplification and de-risking Q2’23 HIGHLIGHTS 14% Organic revenue growth* DKKm 2,000 CEMENT REVENUE DKKm CEMENT EBITA Margin +11% 100 6% 1,670 4.3% 11% 4.3% 1,498 75 1,500 4% Reported revenue growth 800 692 800 +23% 50 2.1% 649 649 73 2% 68 52%
Slide 10: NCA exit progressing well. Accelerated exit, pending transaction with KOCH Solutions
NCA exit progressing well. Accelerated exit, pending transaction with KOCH Solutions Q2’23 HIGHLIGHTS (DKK) 32 Order intake m Non-Core Activities (NCA) order backlog (DKKbn) Key comments • Starting order backlog of ~DKK 3.6bn when NCA was -61% established at end Q3 2022 378 Revenue m • • • 439 emplo
Slide 11: Consolidated financial performance in Q2 2023
Consolidated financial performance in Q2 2023 (DKKm) Q2 2023 Q2 2022 Change COMMENTS Order intake 5,523 5,901 -6% Revenue 6,399 5,027 27% ▪ Q2 2023 reflects our exit of Russia, the Mining Technologies acquisition and ongoing exit of Non-Core Activities Gross margin 23.4% 24.7% SG&A -1,082 -856 26% ▪
Slide 12: Gross margin in Q2'23 reflecting good improvement in Mining offset by ongoing exit of Non-Core Activities
Gross margin in Q2’23 reflecting good improvement in Mining offset by ongoing exit of Non-Core Activities GROSS PROFIT GROSS MARGIN BY SEGMENT DKKm +20% growth vs. Q2 2022 Gross margin Q2 2023 vs. Q2 2022 2,000 30% 23.4% 1,500 24.7% Mining Cement Non-Core Activities 23.2% 20% 1,000 10% 500 24.8% 25.
Slide 13: SG&A costs in Q2'23 reflecting inclusion of Mining Technologies cost base and integration costs
SG&A costs in Q2’23 reflecting inclusion of Mining Technologies cost base and integration costs SG&A COSTS COMMENTS DKKm Stable SG&A ratio vs. Q2 2022 SG&A ratio ▪ SG&A costs increased 26% to DKK 1,082m from DKK 856m in 1,200 20% 17.9% Q2 2022 driven by: 17.0% 1,000 16.9% 15% ▪ Inclusion of Mining T
Slide 14: Q2'23 adjusted Group EBITA margin reflecting ongoing transformation activities
Q2’23 adjusted Group EBITA margin reflecting ongoing transformation activities GROUP EBITA GROUP EBITA MARGIN BRIDGE DKKm 8% increase vs. Q2 2022 EBITA margin Q2 2023 vs. Q2 2022 Approx. %p development 600 10% 8.0% -2.5% 8% 6.7% 4% 400 6.1% 6.0% -1.5% 5.2% 6% 8.0% 3.9% -1% 6.7% 2% 6.1% 4% -1.5% 5.2%
Slide 15: Decrease in net working capital driven by good cash collection
Decrease in net working capital driven by good cash collection partly offset by lower prepayments from customers NET WORKING CAPITAL NET WORKING CAPITAL DEVELOPMENT IN Q2 2023 DKKm NWC ratio (DKKm) Q2 2023 Q1 2023 Change 3,000 12% 10.6% Inventories 3,978 4,059 -81 10.1% 2,500 9.2% Trade receivables
Slide 16: Good cash flow generation in Q2'23
Good cash flow generation in Q2’23 GROUP CASH FLOW CONTINUING ACTIVITIES (DKKm) Q2 2023 Q2 2022 DKKm EBITDA adjusted 434 395 1,000 Change in provisions 178 61 800 Change in NWC 27 -555 600 Financial payments -18 -11 400 Taxes paid -274 -85 200 CFFO (continuing activities) 347 -195 0 GROUP (DKKm) Q2
Slide 17: Financial gearing remains well-below our capital structure target
Financial gearing remains well-below our capital structure target LEVERAGE AS OF END NIBD Q2 2023 DKKm NIBD/EBITDA STABLE AT 1.0x NIBD/EBITDA 1.0x Net interest-bearing debt / EBITDA ratio 2,000 1,000 1.0x 2.5 2.0 1.5 1.0 0.5 0 0.0 CAPITAL STRUCTURE TARGET -0.5 2x -1,000 -1.0 Q2 2021 Q3 2021 Q4 2021
Slide 18: Financial guidance for 2023 is maintained
Financial guidance for 2023, as set out on 8 August 2023, is maintained Mining Cement Non-Core Activities Group Realised August 2023 Realised August 2023 Realised August 2023 Realised August 2023 H1’23 Guidance H1’23 Guidance H1’23 Guidance H1’23 Guidance Revenue DKK 8.5bn Around 17.0 DKK 3.3bn Arou
Slide 19: Continued good transformation progress
Continued good transformation progress Ambition/target Progress Key comments and developments ~DKK 560m annual run-rate • Number of employees reduced by +800 since Mining Technologies acquisition cost synergies by end 2023 • On track for second wave of employee reductions during H2 2023 Mining • 87%
Slide 20: Investor information
Investor information FINANCIAL CALENDAR INVESTOR RELATIONS CONTACTS 9 November 2023 9M 2023 Interim Report Jannick Lindegaard Denholt VP, Head of Investor Relations +45 2169 6657 [email protected] Andreas Escherich Holkjær SHARE INFORMATION Senior Investor Relations Officer Market Nasdaq Copenhagen +
Slide 21: Appendix
Appendix 1. Our equity story in a nutshell 2. Q2’23 financial appendix 21 15 August 2023
Slide 22: Our value proposition
Our value proposition Our pure play Key market Our value Our long-term targets strategies drivers creation drivers for the FY2026 • Full flowsheet coverage • Green transition • Large installed base Mining • Middle class • Service centricity 13-15% CORE´26 • growth Industry challenges • • Sustainabil
Slide 23: FLSmidth at a glance
FLSmidth at a glance We are a leading supplier of productivity and sustainability solutions to the global mining and cement industries We enable our customers in mining and cement to move towards zero emissions by 2030 1882 Danish company 10,234 employees using their unique 150+ countries across the
Slide 24: FLSmidth in the world
FLSmidth in the world North America Europe, North Africa & Russia1 24% 37% 17% Share of revenue ▲ Reported Share of employees 19% ▲ 30% 25% 2021: 22% revenue growth 2021: 17% Share of revenue Reported Share of employees 2021: 18% revenue growth 2021: 22% Asia& Australia 2 18% Share of revenue ▲ 5% R
Slide 25: Our organisation and culture is evolving with our ongoing business transformation
Our organisation and culture is evolving with our ongoing business transformation Core transformation Core strategic focus Core P&L model Core values drivers Transition to pure play We have changed Sustainability T Trust (from Q4 2022) from regional P&L Region Region Region Region Region De-risking
Slide 26: Simplifying our operating model to realise efficiencies
Simplifying our operating model to realise efficiencies, ensure stronger execution and improve profitability Transition to pure play Simplification De-risking Impact Footprint optimisation - Reduce risk exposure Reduced complexity Mining less countries, offices → risk quotas introduced and legal ent
Slide 27: Our pure play mining strategy: CORE'26
Our pure play mining strategy: CORE’26 Mining for a sustainable world Sustainability Service Building a better future for our Delivering Global partner for life-cycle employees, society and the planet performance and sustainability solutions for tomorrow's mine Technology Performance The complete pr
Slide 28: Our pure play Cement strategy - GREEN'26
Our pure play Cement strategy - GREEN’26 - has three focus areas driving Cement’s transformation Operating model Service business Green transition model transition transition 28 15 August 2023
Slide 29: We are digitalising the entire flowsheet
We are digitalising the entire flowsheet Pumps, Product Cyclones & Beneficiation Tailings digitalisation level Extraction Conveying Comminution Valves and Recovery Thickening Filtration Management Sensors Product Control Insights Health Optimisation 29 15 August 2023
Slide 30: Our agile global Operations setup serves as a unique competitive advantage
Our agile global Operations setup serves as a unique competitive advantage Operations in numbers ~4% of revenue spend on logistics & distribution +125,000 10 factory sites annual customers deliveries +15 service centres globally ~35% of all purchase orders are automated ~90% delivery in full on time
Slide 31: Our sustainability framework: MissionZero and ESG
Our sustainability framework is integrated with our business model and centred around two areas: MissionZero and ESG 31 15 August 2023
Slide 32: Key benefits delivered by a MissionZero Mine
Key benefits delivered by a MissionZero Mine 45% reduction in flotation energy per kWh/t 30% overall energy 30% increase consumption in plant reduction throughput 35% reduction in grinding energy per 35% increase kWh/t in revenue from metals recovered Zero steel grinding balls 80% reduction used in
Slide 33: Many moving parts in the short-term, paving the way towards long-term financial targets
Many moving parts in the short-term, paving the way for an accelerated journey towards our long-term financial targets FY’2021 FY’2022 FY’2023 FY’2024 FY’2025 FY’2026 TK Mining integration ~DKK 800m Integration costs to take out synergies ~DKK 560m Annual synergies (100% run-rate expected by end 202
Slide 34: Initiatives to achieve long-term Mining EBITA margin target of 13-15%
We have well-defined initiatives in place to achieve our new long-term Mining EBITA margin target of 13-15% for the FY2026 Mining EBITA margin bridge Illustrative %p development 13-15% Adjusted 10-11% FLSmidth Mining FY2023 adj. Synergies & Mining post Simplification De-risking Service growth Servic
Slide 35: Our long-term Cement EBITA margin target is ~8% for FY2026
Our long-term Cement EBITA margin target is ~8% for the FY2026 Cement EBITA margin bridge Illustrative % development ~8% 4-5% Underlying Operating model De-risking Service mix Service growth from Products mix FY2026 target FY2023 guidance* simplification increased installed improvement and rightsizi
Slide 36: Directional expectations for cash flow generation
Directional expectations for cash flow generation Net working capital (NWC) CAPEX Effective tax rate ratio to sales for the FY2026 annual ratio to sales ≤15% FY 2022: 7.8% 2-3% FY 2022: 1.9% FY 2022: 36.4% NWC expected to increase in line with Investments mainly driven by green Effective tax rate ex
Slide 37: Capital allocation is focused on a strong balance sheet
Capital allocation is focused on a strong balance sheet while allowing for growth investments and value-adding M&A 1. 2. 3. 4. Leverage Dividend pay-out Investments incl. Excess cash bolt-on M&A distribution <2x 30-50% Key focus on service, target of target ratio digital & complementary (NIBD/EBITDA
Slide 38: Financial appendix Q2 2023
Financial appendix Q2 2023 38 15 August 2023
Slide 39: Mining
Mining (DKKm) Q2 2023 Q2 2022 Change Organic H1 2023 H1 2022 Change Organic Order intake 4,215 3,989 6% 12% 8,392 9,146 -8% -6% - Service order intake 2,615 2,542 3% 5,517 5,072 9% - Products order intake 1,600 1,447 11% 2,875 4,074 -29% Order backlog 13,472 12,544 7% 13,472 12,544 7% Revenue 4,351
Slide 40: Mining order intake by commodity
Mining order intake by commodity MINING ORDER INTAKE Q2 2023 Other 20% Copper 41% Iron ore 7% Fertilizer 1% 6% Coal 25% Gold 40 15 August 2023
Slide 41: Cement
Cement (DKKm) Q2 2023 Q2 2022 Change Organic H1 2023 H1 2022 Change Organic Order intake 1,276 1,912 -33% -31% 2,620 3,773 -31% -30% - Service order intake 752 987 -24% 1,565 1,931 -19% - Products order intake 524 925 -43% 1,055 1,842 -43% Order backlog 5,658 6,917 -18% 5,658 6,917 -18% Revenue 1,67
Slide 42: Revenue and EBITA margin for Mining and Cement
Revenue and EBITA margin for Mining and Cement MINING CEMENT DKKm Margin DKKm Margin 5,000 14% 2,500 6% 4.3% 4.3% 10.8% 12% 4,000 10.5% 2,000 4% 9.6% 1,485 1,518 10% 2.1% 3,000 8% 1,500 2% 1,406 8.6% 7.8% 692 800 649 2,000 6.5% 6% 1,000 0% 2,700 2,833 4% 1,000 2,123 500 -2% 849 890 870 2% 0 0% 0 -4%
Slide 43: Order intake and revenue growth
Order intake and revenue growth Order intake growth Mining Cement NCA Group Revenue growth Mining Cement NCA Group Q2 2023 vs Q2 2022 Q2 2023 vs Q2 2022 Organic 12% -31% n/a -1% Organic 29% 14% n/a 32% Currency -6% -2% n/a -5% Currency -6% -3% n/a -5% Total growth 6% -33% n/a -6% Total growth 23% 11
Slide 44: Order backlog and conversion to revenue
Order backlog and conversion to revenue Order backlog / last 12 months revenue at 83.7% in Q2 2023 ORDER BACKLOG EXPECTED BACKLOG CONVERSION TO REVENUE +5.6% vs. Q2 2022 ▪ 31% in ‘2023’ DKKm Order backlog/Revenue ▪ 58% in ‘2024’ 30.000 140% ▪ 11% in ‘2025 and beyond’ 25.000 120% Outstanding order ba
Slide 45: Regional revenue split
Regional revenue split REVENUE REVENUE H1 2023 H1 2022 18% 17% 24% 26% 13% 16% 26% 21% 19% 20% North America North America South America South America Europe, Central Asia & North Africa Europe, Central Asia & North Africa Sub-Saharan Africa, Middle East & South Asia Sub-Saharan Africa, Middle East
Slide 46: Group
Group (DKKm) Q2 2023 Q2 2022 Change Organic H1 2023 H1 2022 Change Organic Order intake 5,523 5,901 -6% -1% 11,155 12,919 -14% -12% - Service order intake 3,388 3,529 -4% 7,183 7,003 3% - Products order intake 2,135 2,372 -10% 3,972 5,916 -33% Order backlog 20,544 19,461 6% 20,544 19,461 6% Revenue
Slide 47: Cash flow statement
Cash flow statement GROUP (DKKm) Q2 2023 Q2 2022 Change FY 2022 EBITDA, continuing adjusted 434 395 39 1,304 EBITDA, discontinued -4 -3 -1 -10 Change in provisions 174 57 117 640 Change in NWC 62 -566 628 -446 Financial payments -20 -11 -9 -49 Taxes paid -274 -86 -188 -471 CFFO (Group) 372 -214 586
Slide 48: Net working capital components
Net working capital components Net working capital increased to DKK 2,542m at the end of Q2 2023 DKKm DKKm TRADE RECEIVABLES TRADE PAYABLES 6,000 4,000 3,449 4,821 5,000 3,000 4,000 3,000 2,000 2,000 1,000 1,000 0 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2021 2021 2021 2022 2022 2022