Annual General Meeting - KHD Events / Important Topics 2015 Annual General Meeting – May 2016 Idle Capacity – Low order backlog at the beginning of FY 2015 and unsatisfactory order

Annual General Meeting KHD Humboldt Wedag International AG

Jürgen Luckas, CFO

Yizhen Zhu, EVP

Daniel Uttelbach, EVP Sales & Technology

Tao Xing, EVP

May 18, 2016

Annual General Meeting – May 2016

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» 160 years of experience in the cement industry.

» We offer a full line of equipment and engineered solutions for

cement plants, including individual machines, spare parts, and

associated plant services.

» Process engineering and project execution.

» Leader in energy-efficient and environmentally friendly

products for the grinding and pyroprocessing sections of

cement plants.


3

culture of caring

Not allowing unsafe practices, behaviors, or

conditions to exist.

deliver what we promise

Delivering to exceed our customer’s

expectations.

meaningful

Bringing value to everything we do – our

work, employees, customer relationships.

transparent & honest

Creating lasting partnerships by

encouraging open dialogue.

KHD Values


4

Executive Management Team

Daniel Uttelbach, EVP

Sales & Technology

With KHD since 2004.

Tao Xing, EVP


Yizhen “Mario” Zhu, EVP


Jürgen Luckas, CFO



5

Agenda

Business Performance 2015

2015 in Brief

Financial Performance 2015

Questions


Outlook 2016

First Quarter 2016

6

2015 in Brief

Business

Changes in the

Management Board

Improved way of working in

project execution

Segment classification

changed: Supervision

Services as part of Capex

segment

Sales and tendering

strengthened – including

expansion of Branch in

Teheran

KHD wins milestone project

in India

Financials

Error correction for FY 2014

(measurement of projects at

US subsidiary)

Adverse market conditions

and challenges in the

execution of certain projects

lead to EBIT of € -17.7

million

Revenue at € 172.1 million

considerably lower than

previous year

2015 Order Intake does not

assure full capacity

utilization for 2016

Industry

Global cement demand

decreased

Slowdown in China and

continued consolidation

among global cement

operators lead to very few

investments in new capacity

Fierce competition: Margin

pressure for all projects

available on market

Cement and clinker exports

on the rise

External market study

declares KHD as market

leader for energy-efficient

roller press technology

(excl. China)


7

Events / Important Topics 2015


Error Correction in KHD Group Financial Statements for 2014 - After concluding internal and

external investigations, the revenue reported for the 2014 financial year was overstated by € 5.9

million. Due to the effects of currency exchange difference the retroactive reduction of Group equity

amounts to € 6.4 million.

Segment Classification - The supervision of the erection and commissioning of cement plants that

is directly connected with the project business has been re-aligned under the Capex segment.

Bank Loan - On September 30, 2015, KHD signed a contract for a low-interest bank loan for a fixed

term of three years. Bank loan amounts to € 25 million and is due for repayment in October 2018.

Increased flexibility with regard to available liquidity.

Cost Overruns – Difficulties in the execution of some large projects had an adverse impact on the

gross profit in FY 2015.

Arbitration Court Proceedings with a Customer in South America - In the 2013 financial year, a

customer in South America submitted an arbitration claim with the International Chamber of

Commerce (ICC). Arbitration award in January 2016 resulted in additional expenses of € 14.6

million. Full impact has been recorded in the 2015 consolidated financial statements.

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Events / Important Topics 2015


Idle Capacity – Low order backlog at the beginning of FY 2015 and unsatisfactory order intake

resulted in underload of engineering and other project execution departments (idle capacity costs of

€ 3.3 million).

Cooperation Agreement between Humboldt Wedag GmbH and AVIC International Beijing Co.

Limited – As AVIC Beijing benefits in its own business from the extensive technological expertise

and the positive influence of KHD’s subsidiary Humboldt Wedag GmbH on customers during

marketing, tendering for joint projects, contract negotiations as well as during project execution. In

consideration of this context, AVIC Beijing agreed to compensate Humboldt Wedag GmbH in a one-

time payment of € 18 million. No sale of intellectual property or granting use of KHD brand or

intellectual property free of cost!

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Agenda


2015 in Brief


Questions


Outlook 2016

First Quarter 2016

10

Global Cement Consumption (billion tons)


• 2015 first year where

global cement demand

dropped

• Market will bottom out in

2018 for new kiln lines

• Need for stand-alone

grinding units will

increase especially in the

US and SSA

• Positive messages: Volume will come back in

mid-term

Chances for modernization

and upgrade projects

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Order Intake

Overall order intake of € 154.1 million

was significantly lower than expected,

due to further delays in project awards

and customer’s challenges to secure

financing.

Project order intake (Capex segment)

€ 113.2 million includes milestone

order in India for slag grinding.

Significant growth in Plant Services

with € 40.9 million (previous year:

€ 34.5 million – taking segment

classification changes into account).

Order backlog as of December 31,

2015 of € 183.8 million (previous year:

€ 201.8 million) does not provide a

sufficient basis for the full utilization of

existing capacities in 2016.


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Shree Cement Ltd

Line X, Ras Rajasthan &

Line I, Raipur

India

» 4,750 tpd clinker, each

» Plant operation and training

KHD-supplied equipment included:

» 2-string, 6-stage Preheater, PH 8864

» PYROCLON®; R LowNox Calciner

» PYROTOP® compact mixing chamber

» 3-Pier Rotary Kiln Ø 4.6m x 68.0m

» PYROJET® Burner

» PSC Cooler, Hammer Crusher


13

Star Cement Meghalaya

Lumshnong, Meghalaya

India

» 5,300 tpd clinker







» PYROJET® Burner

» PSC Cooler, Hammer Crusher


14

KCS Kahramanmaras

Cement, Turkey

• 4,500 tpd capacity

• Combustion chamber for coarse secondary fuels


» Roller Press RPS 16-170/180 with ROLCOX®

system for control and monitoring.

» Cascade separator, type VS 524 as static classifier.

» High efficiency separator SEPMASTER®, type

SKS-VC 3250 as dynamic classifier.

» System fan HKF 200/265.


Agenda


2015 in Brief


Questions


Outlook 2016

First Quarter 2016

16

Revenue

Low order backlog at beginning of

FY 2015 lead to revenue of € 172.1

million - a 26.5% decrease in

comparison with the previous year

(€ 234.3 million).

Capex segment revenue of € 136.7

million fell short of previous year

figure of € 199.7 million.

Plant Services segment revenue saw

slight growth at € 35.3 million

(previous year: € 34.6 million) .


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Group earnings

Adjusted gross profit* decreased from € 26.4

million in 2014 to € 16.2 million in 2015, due to

lower revenue and difficulties in the execution of

several major projects.

Other operating income increased considerably

to € 23.6 million (€ 5.6 million in 2014), thanks to

Cooperation Agreement with AVIC (€ 18 million).

Unsatisfactory EBIT of € -17.7 million (€ -4.8

million in FY 2014) / -10.3% EBIT margin (-2.0%

in FY 2014).

EBT amounted to € -9.2 million (€ -1.9 million in

FY 2014).


* Cost of sales comprise € 14.6 million related to an arbitration award as well as € 3.3 million idle capacity costs. As these costs are not directly linked to

2015 revenue, they are excluded while calculating adjusted gross profit and adjusted gross profit margin. 18

Segment earnings

€ 136.7 million revenues were

significantly lower than in previous

year (€ 199.7 million).

Adjusted gross profit* of just € 6.7

million (€ 15.9 million in FY 2014);

adjusted gross profit margin of 4.9%

lower than 7.9% in FY 2014.

EBIT amounted to € -21.9 million

(previous year: € -10.3 million).


Capex Segment

* Cost of sales comprise € 14.6 million related to an

arbitration award as well as € 3.3 million idle capacity

costs. As these costs are not directly linked to 2015

revenue, they are excluded while calculating adjusted

gross profit and adjusted gross profit margin.

€ 35.3 million revenue shows slight

increase over € 34.6 million in the

previous year.

Satisfactory gross profit of € 9.5

million (€ 10.3 million in 2014).

Gross profit margin of 26.9% lower

than 30.4% in FY 2014.

Significantly positive EBIT of € 4.2

million (previous year: € 5.5 million).

Plant Services Segment

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Financial Position and Employees

Total assets € 392.3 million (€ 387.9 in FY 2014)

include € 112.7 million in cash and cash equivalents

(previous year: € 123.6 million) and € 100 million

loan granted to AVIC (previous year: € 100 million).

KHD Group’s finance strategy continues to be

characterized by robust liquidity with equity of

€ 203.4 million and a 51.8% equity ratio.

Nevertheless, € 16.1 million decrease in equity

chiefly due to net loss for the year.

Net working capital increased to € 25.1 million from

€ 11.8 million at the end of 2014, primarily due the

increase in receivables.

735 employees at the end of 2015 (777 at the end of

2014).


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Agenda


2015 in Brief


Questions


Outlook 2016

First Quarter 2016

21

Key figures Q1 2016

First Quarter 2015

in € million Jan. 1 -

Mar. 31,

2016

Jan. 1 -

Mar. 31,

2015

Order Intake -1.1 58.3

Revenue 34.8 50.7

Adjusted Gross Profit 2.6 4.8

Adjusted Gross Profit margin (in %) 7.5 9.5

EBIT -8.0 -5.5

EBIT margin (in %) -23.0 -10.8

EBT -6.2 -3.0

Group net loss for the period -6.5 -4.2

EPS in € -0.13 -0.08


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Cash flow

in € million

Jan. 1 -

Mar. 31, 2016

Jan. 1 -

Mar. 31, 2015

Cash flow from operating activities -14.7 -12.3

Cash flow from investing activities 1.2 1,3

Cash flow from financing activities 0.0 0.0

Continued high level of cash

in € million

Mar. 31, 2016 Dec. 31, 2015

Equity 195.6 203.4

Equity ratio (in %) 51.5 51.8

Cash and cash equivalents 97.6 112.7

Intercompany loans 100.0 100.0

Net Working Capital 32.1 25.1

Order Backlog 148.0 183.8

Employees 744 735


Key figures Q1 2016

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OOO „Sengilejewskij

Zementnyj Sawod Uljanowsk,

Russia

• Doubled output of previous wet process system

• KHD managed the project from quarry to packing


» Four-stage HUMBOLDT PR 7950/4 preheater

» PYROCLON®-R Calciner

» PYROTOP compact ® mixing chamber

» PYRORAPID® 2-pier Kiln - Ø 4,4m x 52 m

» PYRO-JET® Burner HPJ/230GO

» PYROFLOOR® Clinker Cooler

» SEPMASTER® SKS-Z 2500

» PRODUX-R®Automation systems

» ROMIX® Raw meal quality control

» PROFLOOR®-CONTROL

» SCANEX®

» RELATYREX®


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JSW Cement Ltd

Nandyal, Kurnool, A.P.

India




» Raw material grinding system, designed for 510 tph

having 2 x Roller Press RP 16 – 170/180





» PYROJET® Burner

» PYROFLOOR® Clinker Cooler with Roll Crusher

» Cement Grinding system, designed for 350 tph OPC

Having 2 x Roller Press RP 16 – 170/180

» Slag Grinding system, designed for 2 x 170 tph @ 4500 blaine

with Roller Press (2 x RP 16 – 170/180)





» Raw material grinding system, designed for 3 x 225 tph

having 3 x Roller Press RP 16 – 170/180

» 2 x 2-string, 6-stage Preheater, PRZ 7952




» PYROJET® Burner

» Grate Cooler

UltraTech Ltd

Rawan, Chattisgarh

India


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OAO Novoroscement

Perwomaiskij” cement plant

Noworossijsk, Russia

• 6,000 tpd clinker

• Plant operation and training


» 2-string, 4-stage preheater

» PYROCLON®; R calciner


» PYRORAPID® 2-pier rotary kiln Ø 5.2m x 65.0m

» PYROJET® Burner

» PYROFLOOR® clinker cooler - PFC with hammer-type clinker

crusher

» 2 Roller Presses RP 20 – 170/180;

» Static V-separator, type VS

» Ball mill Ø 3.8m x 12.75m

» SKS –Z dynamic separator

» Quality control and automation with KHD expert systems


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Agenda


2015 in Brief


Questions


Outlook 2016

First Quarter 2016

28

Outlook – Markets 2016


Political uncertainties, low commodity prices, the slowdown in China as well as consolidation in the

cement industry will continue to have a significant impact on business throughout 2016 and most

likely 2017.

Chinese cement consumption is expected to contract by 5% per year before growth returns in 2019.

For Sub-Saharan Africa as well as in the USA, cement imports will play a major role, so that despite

growing cement demand, only limited investment in new cement capacity is expected.

Due to the difficult investment environment in Russia, decisions for new cement plants or for

modernizations and expansions will continue to be postponed.

There will be growth in some markets, like India, where 6.8% p.a. is expected through 2020.

Pricing for the projects that will be awarded in the near future will remain under pressure due to an

extremely high level of competition in all markets.

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Adjusted Outlook 2016

KHD continues to expect a considerably higher volume of new orders in the 2016 financial year than

in the previous year. Thus, the reported outlook for order intake remains unchanged.

With the expectation that the planned order intake for the remaining three quarters of the financial

year will be achieved, KHD confirms that the forecasted significant increase in order backlog

and a balanced operating cash flow can still be achieved.

However, KHD will not reach the revenue and EBIT targets for the current financial year.

This is mainly due to the lack of order intake in the first quarter in the Capex segment.

According to the current forecast, KHD is expecting revenues for the 2016 financial year

that will be approximately 10% lower than in the previous year

EBIT is expected to be significantly lower than in the 2015 financial year.

KHD has a solid equity and liquidity position, which can also help it master especially difficult

market conditions in the cyclical business of cement plant engineering. The Group continues to

anticipate a stable financial position and net assets situation for the financial year 2016.


30

Leverage large installed base for Plant Services

Clean Technology: Continue to strengthen KHD’s

environmental focus, e.g. low NOx pyro-processing

Complete plant solutions rather than KHD products

only

Re-Enter and expand presence in the Middle East

Globalize Tendering team

Expand Sales teams and work on client

relationship

Project Execution: Policies/Governance

Strengthen execution teams in Germany and USA

Global engineering to optimize utilization

Enhance (EPC) capabilities

Re-organization

& Governance

Client focus

Full Service

Provider

1

2

3

Aug. – Oct. 2015 Nov. 2015 - June 2016 July 2016 - onwards

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Three Steps related to our Strategy

R & D at KHD - based on Energy, Environment and Efficiency

Fully functional COMFLEX®

production unit with 2 KHD Roller

Presses

Simulation of material behavior to

design new grinding plants

Follow-up and confirm existing

plant data

Test improvement plans and

processes before investing

Technology Center in Germany


32


KHD will host four Technology Summits in 2016 in

various KHD regions.

The first Technology Summit 2016 was held in

India in April.

• 88 participants from 33 cement companies

across India, Nepal, Bhutan and SriLanka

joined.

• Excellent feedback from customers and

sense of partnership.

Next summits planned in Iran, Turkey and South

America

Getting closer to Customers in 2016

33

CSR at KHD in 2015

KHD has been supporting an Organization called SWECHHA in India since 2010. SWECHHA is

focused on empowering people by creating awareness and educating underprivileged youths to make

a change in their own environment both physical and social

KHD support and volunteers made the following possible in 2015:


Various literacy programs, with over 580 kids and 55 volunteers.

Approximately 700 books distributed in the community.

40 out-of-school children were engaged in back-to-school sessions

Informed 25 families on the Section 12 of the Indian Right to Education Act,

which led to school admissions for 17 kids.

Workshop on gender and employability for 20 children aged 12-18 years was

conducted in March 2015.

Environmental workshop and film screening for 20 kids aged 13-15.

Learning session on sexual abuse for children aged 7-18.

3 exposure trips for over 85 kids (20 volunteers from KHD) – museums, nature

exposure and also fun activities.

110 young children and youth volunteers created, butterfly patch, a mini food

forest and a native herb garden and planted over 700 trees at four different

locations in Delhi.

2 workshops on environment and leadership conducted with 40 KHD

employees in July 2015.

34

http://intranet.khd.com/tl_files/bilder/news/marketing/Swechha/Sweccha ON.jpg

Agenda


2015 in Brief


Questions


Outlook 2016

First Quarter 2016

35

Questions


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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" 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 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 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 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 and uncertainties are set out in our

financial statements for the year ended December 31, 2015.


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Documents

Annual General Meeting - KHD Events / Important Topics 2015 Annual General Meeting – May 2016 Idle Capacity – Low order backlog at the beginning of FY 2015 and unsatisfactory order