FLS Industries A/S Annual Accounts 2002 2002 Annual Report 2002

FLS Industries A/SAnnual Accounts 2002

2002

Annual Report 2002


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


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).


Financial highlights for Group

DKKm Turn. EBIT EBT

F.L.Smidth Group 7,217 105 103

FLS Building Materials 4,899 318 368

FLS miljø 1,392 (659) (779)

FLS Aerospace 2,730 (202) (289)

Other 206 (209) (750)

Total 16,444 (647) (1,347)

Financial highlights for the activities of the Group


Focusing

DKKbn 2001 2002

Unicon activities 0.6

NKT shares 0.6

Other 0.2

RMIG and Unicon paving stone products 0.5

Total 0.5 1.4

Disposal of non-strategic activities


Cash flows

DKKm 2001 2002

Operating activities 345* 714

Operating investments (1,016) (701)

Net from operations (671) 13

Cash flows

*Adjusted for NKT Holding dividend in 2001


Balance sheet

DKKm 2001 2002

Total assets 18,828 15,636

Shareholders’ equity 6,869 5,729

Net interest-bearing debt 4,990 2,953

Solvency ratio 36% 37%

Balance sheet


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 GroupAnnual Accounts 2002


Financial highlights

F.L.Smidth GruppenAnnual Accounts 2002

F.L.Smidth Group

DKKm 2001 2002

Net turnover 7,982 7,217

EBITDA 352 250

Earnings before interest and tax (EBIT) 194 105

Earnings before tax (EBT) 219 103

Cash flows from operating activities (384) 234

Cash flows from operating and investing activ. (541) 165

Net interest-bearing debt (balances) (66) (534)


Global cement consumption


F.L.Smidth Group


Yearly contracted cement kiln capacity


F.L.Smidth Group

*exclusive of China


Order intake 1991-2002


F.L.Smidth Group


Order backlog in sales prices


F.L.Smidth Group


Geographical distribution of orders

F.L.Smidth GroupAnnual accounts 2002

F.L.Smidth Group


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


Main conclusions

FLS Building MaterialsAnnual Accounts 2002

• 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 – core activities

DKKm 2001 2002


EBITDA 680 726

Earnings before interest and tax (EBIT) 324 334

Earnings before tax (EBT) 355 422

Cash flows from operating activities 512 539

Cash flows from operating and investing activ. 81 500

Return on capital employed (ROCE) 7.6% 9.6%


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


Market


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



Prospects for 2003



• 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


Main conclusions

Non-strategic business areasAnnual Accounts 2002

• 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

FLS Aerospace




DKKm 2001 2002


EBITDA 115 54

Earnings before interest and tax (EBIT) (116) (202)

Earnings before tax (EBT) (270) (289)

Cash flows from operating activities (43) 23

Cash flows from operating and investing activ. (245) (149)

Net interest-bearing debt (NIBD) 1,341 1,426

FLS Aerospace


Prospects


• 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

FLS Aerospace


Main conclusions

Annual Accounts 2002 Non-strategic business areas

• 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

• Year’s 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

FLS miljø




DKKm 2001 2002


EBITDA (150) (641)

Earnings before interest and tax(EBIT) (183) (659)

Earnings before tax(EBT) (195) (779)

Cash flows from operating activities 164 (345)

Cash flows from operating and investing activ. 139 (435)

Net interest-bearing debt (balances) (131) (402)

FLS miljø


Prospects


• 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

FLS miljø


Main conclusions and prospects


• 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 company’s 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

Other activities


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.


Conclusion

• F.L.Smidth strongly placed as world’s 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


2002

Questions

Documents

FLS Industries A/S Annual Accounts 2002 2002 Annual Report 2002