Annual Report 2002

1
2002
Annual Report 2002
2
Agenda

• Main conclusions
• Annual Accounts
• Core activities
• F.L.Smidth Group
• FLS Building Materials
• Non-strategic activities
• FLS Aerospace
• FLS miljø
• Other
• Prospects for 2003
• Conclusion
• Questions

3
Main conclusions

• FLS Group
• Turnover DKK 16,444m (DKK 18,930m in 2001).
• Earnings before interest and tax (EBIT) DKK 647m
  (DKK 195m in 2001) on a par with expectations.
• Earnings before tax (EBT) DKK 1,347m (DKK 12m
  in 2001) on a par with expectations.
• Net interest-bearing debt DKK 2,953m (DKK 4,990m
  in 2001).
• Cash flows from operating activities DKK 714m
  (DKK 345m in 2001 adjusted for NKT dividend).

4
Financial highlights for Group
Financial highlights for the activities of the
Group
5
Focusing
Disposal of non-strategic activities
6
Cash flows
Cash flows
Adjusted for NKT Holding dividend in 2001
7
Balance sheet
Balance sheet
8
Main conclusions

• Order intake higher than anticipated
• Net turnover lower than last year and lower than
  anticipated
• EBIT and EBT on a par with 3rd quarter estimate
• Highly improved cash flows from operating
  activities
• Order backlog increased DKK 1.1bn to DKK 7.6bn
• Significant orders in Algeria, South Africa,
  China, Libya, USA and UK
• Sales of services and spare parts fell in 2002
• Market for new kiln capacity still under pressure

F.L.Smidth Group
Annual Accounts 2002
9
Financial highlights
F.L.Smidth Group
F.L.Smidth Gruppen
Annual Accounts 2002
10
Global cement consumption
F.L.Smidth Group
F.L.Smidth Group
Annual Accounts 2002
11
Yearly contracted cement kiln capacity
F.L.Smidth Group
exclusive of China
F.L.Smidth Group
Annual Accounts 2002
12
Order intake 1991-2002
F.L.Smidth Group
F.L.Smidth Group
Annual Accounts 2002
13
Order backlog in sales prices
F.L.Smidth Group
F.L.Smidth Group
Annual Accounts 2002
14
Geographical distribution of orders
F.L.Smidth Group
F.L.Smidth Group
Annual accounts 2002
15
Prospects
F.L.Smidth Group

• Total order backlog DKK 7,619m
• Majority to be processed in 2003-2004
• Same level of activity in 2003 as in 2002
• Earnings before tax (EBT) expected to be slightly
  above 2002
• At the end of the year projects in progress were,
  as a whole, in accordance with the latest plans
  and budgets

F.L.Smidth Group
Annual Accounts 2002
16
Main conclusions

• EBIT DKK 318m, better than 2001 (DKK 294m) as
  expected
• EBIT from core activities DKK 334m (DKK 324m)
• Market share generally maintained
• Investments kept at a low level
• Undertakings and activities sold at DKK 1.0bn
• Net cash flow DKK 1.3bn (DKK 0.3bn)
• NIBD reduced to DKK 1.4bn (DKK 2.7bn)
• ROCE 8.0 (5.4) and ROCE in core activities 9.6
  (7.6)

FLS Building Materials
Annual Accounts 2002
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Financial highlights
FLS Building Materials core activities
FLS Building Materials
Annual Accounts 2002
18
Focusing
FLS Building Materials

• 2002 was a busy year focusing on divestments
• Aalborg Portland Ships
• Unicon Paving stone activities in Poland, DK
  and US All US activities (RMC and
  Pumping)
• DEH Højslev Teglværk and office building
• Divestment targets achieved in 2002
• In 2003 the last non-core activities will be sold

FLS Building Materials
Annual Accounts 2002
19
Market
FLS Building Materials

• Aalborg Portland
• White cement plants in Egypt and Malaysia on
  stream
• Conversion of grey kiln in Aalborg to white
  cement production
• Market share in grey cement maintained
• Unicon
• Strategy to focus on ready-mix concrete
  implemented
• Focus on ready-mix concrete in Northern Europe
• Keener competition
• Dansk Eternit Holding
• Focus on fibre cement
• Increases sales in Danmark
• Densit
• Recession in industrial flooring

FLS Building Materials
Annual Accounts 2002
20
Prospects for 2003

• FLS Building Materials
• No support from market in Scandinavia
• Improved earnings from global sales of white
  cement
• Cost reductions and higher efficiency
• EBIT in 2003 on a par with 2002

FLS Building Materials
Annual Accounts 2002
21
Main conclusions
FLS Aerospace

• Restructuring and capacity adjustments announced
  in 2001 are implemented
• From 2.3m to 1.6m man-hours
• Write-downs on stocks and buildings at about DKK
  100m
• Higher pensions commitments during 2002
• Order backlog exceeds DKK 9bn
• Long-term contracts account for 60 of capacity
  in 2003
• Positive cash flow from operating activities
• 4th quarter earnings lower than anticipated
  primarily due to sluggish order intake in
  Component Management

Non-strategic business areas
Annual Accounts 2002
22
Financial highlights
FLS Aerospace
Non-strategic business areas
Annual Accounts 2002
23
Prospects
FLS Aerospace

• Prospects for the aviation industry subject to
  great uncertainty but key customers likely to
  continue to grow
• Due to cost reductions FLS Aerospace expects to
  significantly improve earnings in 2003.
• FLS Industries is studying opportunities for
  partnership / buyers of the company
• FLS Industries expects a settlement by end of
  2003

Non-strategic business areas
Annual Accounts 2002
24
Main conclusions
FLS miljø

• Restructuring and divestment of biomass and
  boiler activities implemented
• Air Pollution Control sold to F.L.Smidth Group at
  1 July 2002
• Focus on processing orders in hand
• - primarily desulphurisation plants
• Years net result mainly reflects difficult UK
  desulphurisation contract landed in 1999
• Total additional project processing costs at DKK
  500m
• Legal action against British steel and erection
  contractor under preparation
• Caught up with large part of the delay
• Critical erection phase expected finished in 2nd
  quarter 2003

Annual Accounts 2002
Non-strategic business areas
25
Financial highlights
FLS miljø
Annual Accounts 2002
Non-strategic business areas
26
Prospects
FLS miljø

• Continued focus on order processing and handling
  of related risks
• Biomass operating and maintenance contracts to
  be sold
• FLS miljø projects negative earnings before
  interest and tax (EBIT) in 2003
• There still remain projects that entail risks
  during the completion phase

Annual Accounts 2002
Non-strategic business areas
27
Main conclusions and prospects
Other activities

• FLS Industries has adjusted its activities and
  capacity in 4th quarter
• Pedershaab faced a sluggish market in 2002
• Capacity adjustments introduced in 4th quarter
• Pedershaab to be sold in 2003
• Dansk Træemballage sold at 1 October to the
  companys management
• Sale of Secil shares expected to take place as
  expected by the end of March at the latest
• A number of properties, sites and investments are
  to be sold by the end of 2003

Annual Accounts 2002
Non-strategic business areas
28
Prospects for 2003

• 2003 expected to be a challenging year due to
  difficult market conditions
• FLS Group expects
• A turnover slightly above DKK 15bn
• Earnings before interest and tax (EBIT) between
  DKK 300m and DKK 400m
• Earnings before tax (EBT) between DKK 250m and
  DKK 350m before disposals that may have a
  significant effect, either positive or
  negative, on the financial results.

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Conclusion

• F.L.Smidth strongly placed as worlds number one
  in equipment for cement production, etc.
• Strongly placed in cement-related building
  materials in Northern Europe
• Improvement of core undertaking earnings
• Disposal of non-core undertakings
• Focus on improving cash flow from operating
  activities

30
2002
Questions