FLSmidth 2nd Quarter Report 2012

Interim Report Q2 2012

15 August 2012 Interim Report Q2 2012 1

Forward-looking statements



FLSmidth & Co. A/S’ financial reports, whether in the form of annual reports or interim reports, filed with the Danish Business Authority and/or announced via the company’s website and/or NASDAQ OMX Copenhagen, as well as any presentations based on such financial reports, and any other written information released, or oral statements made, to the public based on this interim report or in the future on behalf of FLSmidth & Co. A/S, may contain forward-looking statements. Words such as ‘believe’, ‘expect’, ‘may’, ‘will’, ‘plan’, ‘strategy’, ‘prospect’, ‘foresee’, ‘estimate’, ‘project’, ‘anticipate’, ‘can’, ‘intend’, ‘target’ and other words and terms of similar meaning in connection with any discussion of future operating or financial performance identify forward-looking statements. Examples of such forward-looking statements include, but are not limited to: • statements of plans, objectives or goals for future operations, including those related to FLSmidth & Co. A/S markets, products, product research and product

development • statements containing projections of or targets for revenues, profit (or loss), capital expenditures, dividends, capital structure or other net financial items • statements regarding future economic performance, future actions and outcome of contingencies such as legal proceedings and statements regarding the underlying

assumptions or relating to such statements • statements regarding potential merger & acquisition activities. These forward-looking statements are based on current plans, estimates and projections. By their very

nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which may be outside FLSmidth & Co. A/S’s influence, and which could materially affect such forward-looking statements.

FLSmidth & Co. A/S cautions that a number of important factors, including those described in this presentation, could cause actual results to differ materially from those contemplated in any forward-looking statements. Factors that may affect future results include, but are not limited to, global as well as local political and economic conditions, including interest rate and exchange rate fluctuations, delays or faults in project execution, fluctuations in raw material prices, delays in research and/or development of new products or service concepts, interruptions of supplies and production, unexpected breach or termination of contracts, market-driven price reductions for FLSmidth & Co. A/S’ products and/or services, introduction of competing products, reliance on information technology, FLSmidth & Co. A/S’ ability to successfully market current and new products, exposure to product liability and legal proceedings and investigations, changes in legislation or regulation and interpretation thereof, intellectual property protection, perceived or actual failure to adhere to ethical marketing practices, investments in and divestitures of domestic and foreign enterprises, unexpected growth in costs and expenses, failure to recruit and retain the right employees and failure to maintain a culture of compliance. Unless required by law FLSmidth & Co. A/S is under no duty and undertakes no obligation to update or revise any forward-looking statement after the distribution of this presentation.

Very strong order intake in Q2 All segments except Bulk Materials delivered solid EBITA results in Q2 EBIT results and guidance impacted by DKK 188m one-off write-down of capitalised R&D costs Cembrit sales process initiated Revenue guidance narrowed to DKK 25-26bn (excl. Cembrit) EBITA margin guidance of minimum 10% maintained


Order intake up 20% on Q2’11, and also up 13% sequentially

Revenue up 26% due to increasing order intake last year, particularly in Non-Ferrous and Customer Services

EBITA up 36% and EBITA margin of 10.0% delivered in Q2

EBIT negatively impacted by DKK 188m one-off write down of capitalized R&D costs

Financial developments in Q2 2012

Q2 Results 2012

15 August 2012 4

FLSmidth & Co. A/S (DKKm)

Q2 2012 Q2 2011 Change

Order intake 7,246 6,048 +20%

Order backlog 30,803 25,011 +23%

Revenue 6,036 4,795 +26%

Gross margin 24.9% 25.6%

EBITA 605 445 +36%

EBITA margin 10.0% 9.3%

EBIT 349 404 -14%

EBIT margin 5.8% 8.4%

Net results 223 294 -24%

CFFO 333 426 -22%

Employees 13,818 12,144 +14%


Segment developments

21%

17%

37%

25%



Order intake Q2 2012 – classified by segment

Customer Services

Bulk Materials

Cement

26%

20% 33%

15%

6%

Bulk Materials Non-Ferrous

Revenue Q2 2012 – classified by segment

Customer Services

Cement

Cembrit

Non-Ferrous

37%

21%

14%

5%

2%

5%

16%


Announced orders in Q2 2012 Cement Middle East DKK 630m Coal Mozambique DKK 370m (BM) Cement USA DKK 780m Phosphate Morocco DKK 460m (NF) Total DKK 2,240m

Distribution of order intake by industry


Order intake Q1-Q2 2012 – classified by industry

Cement

Copper

Gold

Coal

Iron ore

Fertilizers

Other

Unannounced orders record high DKK 5bn in Q2 (particularly related to Non-Ferrous)

Level of announced orders stable at DKK 2.4bn in Q2

Order backlog increased 7% in Q2 and is 23% higher than one year ago

Order intake increased 20% in Q2 2012



0

2,000

4,000

6,000

8,000

Q2

2010

Q3

2010

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2010

Q1

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Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Order intake (quarterly)

+20% vs. Q2 2011 DKKm

0.8 0.9 1 1.1 1.2 1.3 1.4 1.5 1.6

0

5,000

10,000

15,000

20,000

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Q2

2010

Q3

2010

Q4

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2011

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2011

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2011

Q1

2012

Q2

2012

Order backlog (quarterly)

+23% vs. Q2 2011 DKKm Book-to-bill ratio*

Announced O&M orders Announced Capital orders Unannounced orders

*) Order backlog divided by Trailing-Twelve-Months Revenue

Organic growth +20% (excl. currency impact and acquisitions)

Pattern of increasing quarterly revenue over the calendar year likely to be repeated in 2012

Solid EBITA results in all segments except Bulk Materials

Revenue increased 26% in Q2 2012



0

2,000

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8,000

Q2

2010

Q3

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Q4

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Q2

2011

Q3

2011

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2011

Q1

2012

Q2

2012

Revenue (quarterly)

+26% vs. Q2 2011 DKKm EBITA margin

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0

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Q2

2012

EBITA (quarterly)

+36% vs. Q2 2011 DKKm

Tight focus on SG&A developments



SG&A ratio down from unacceptable high level in Q1’12

Increase in SG&A vs. last year partly due to:

Acquisitions (DKK ~60m in H1’12)

High tender activity leading to increasing proposal costs - adding to costs now, but revenue later

Additionally, SG&A included costs of non-recurring nature amounting to DKK ~100m in H1’12:

Implementation of new strategy and organization

Business alignment related to roll out of global ERP business system

Transaction and integration costs in connection with acquisitions

Initiatives put in place to manage SG&A more closely:

Cost awareness program

Systematic cost level targets and closer monitoring of non-recurrent costs

SG&A ratio

0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

18.0%

0

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400

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Q2

2010

Q3

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2011

Q1

2012

Q2

2012

SG&A (quarterly)

+14% vs. Q2 2011 DKKm

One-off write-down of capitalised R&D costs in Q2



Q2 results include a one-off write-down of capitalized R&D costs and decommissioning costs amounting to DKK 188m

Related to R&D project in ground-breaking new technology

Important milestones have been met and patents have been taken out..

..but commercial tests have not been able to demonstrate acceptable results

R&D project related to Cement, Non-Ferrous and Customer Services and the write-down will negatively impact EBIT in each of the three divisions by approximately DKK 60m

CFFO adversely impacted by increase in working capital of DKK 191m in Q2

CFFI amounted to DKK -386m in Q2 related to acquisition of Process Engineering Resources Inc. and Knelson Russia as well as tangible assets in connection with ongoing strategic activities

Temporary slow down in acquisitions except for smaller bolt-on in coming quarters

Cash flow from operating and investing activities



CFFO (quarterly)

-22% vs. Q2 2011 DKKm

-1,000 -800 -600 -400 -200

0 200 400 600

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

CFFI (quarterly)

-161% vs. Q2 2011 DKKm

-1,000 -800 -600 -400 -200

0 200 400 600

Q2

2010

Q3

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Q4

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Q1

2011

Q2

2011

Q3

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Q4

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Q1

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Q2

2012

Tight focus on working capital developments



Working capital (quarterly)

+154% vs. Q2 2011 DKKm

Working capital increased 10% in Q2 to DKK 2,117m

Structural reasons for increase in working capital:

Strategic initiatives in Customer Services

Change in business mix towards more mining and less cement

Specific reasons for increase in inventory in Q2 2012

Increasing inventories to reduce delivery lead times in product companies

Reduction in Work-in-progress net (liability) caused by high level of execution and increase in prepayments to subcontractors

Initiatives put in place in Q2 to manage working capital more closely:

Monthly reporting, monitoring and follow-up on KPIs

Systematic NWC responsibility in the global organisation

Specific initiatives launched in relation to accounts receivables, account payables, inventories, etc.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

-

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Q1

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Q2

2012

WC /TTM* Sales

*) TTM : Trailing-Twelve-Months

Net debt increasing in Q2 due to distribution of dividend of DKK 471m and negative cash-flow

Equity ratio reduced to 32% due to distribution of dividend and increased balance sheet total

Dividend of DKK 9 per share paid on 10 April 2012 (equivalent to DKK 471m)

Capital structure



NIBD (quarterly) DKKm

0% 5% 10% 15% 20% 25% 30% 35% 40%

0

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Q2

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Equity (quarterly)

DKKm Equity ratio

(0.8) (0.6) (0.4) (0.2) - 0.2 0.4 0.6 0.8

(2,000) (1,500) (1,000)

(500) -

500 1,000 1,500 2,000

Q2

2010

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Q2

2012

Gearing (NIBD/ TTM* EBITDA)

Gearing 0.3x EBITDA +15% vs. Q2 2011

TTM: Trailing-Twelve-Months

Acquisition of Ludowici



Acquistion of Ludowici finalised on 3 July 2012

Completes FLSmidth’s concentrator flowsheet used in copper, gold and other base metals. Enhances coal preparation and iron ore proprietary technology packages which now cover most key production steps

Enterprise value AUD 388m (DKK 2.3bn) equivalent to implicit EV/EBITDA multiple of 13.4x based on 2011 proforma result of AUD 29m (including full year effect of the acquisitions Meshcape and Amseal)

Estimated effect of Ludowici in H2 2012:

Revenue DKK 0.8bn EBITA margin 9.2% Group one-off transaction costs DKK 35m Effect of purchase price allocations DKK -40m NIBD DKK 2.3bn

Ludowici will be included evenly in Non-Ferrous and Customer

Services

Substantial sales synergies expected to be achieved over the next couple of years

Market trends



Continued strong underlying demand and order intake - particularly in Non-Ferrous

No significant changes in project pipeline or ongoing dialogue with customers

However, mining capex outlook appears to have deteriorated in the short term due to increased macroeconomic uncertainty

Installation of new mining capacity is currently challenged by lengthy permitting processes, budget overruns and slightly tighter financing

Long term prospects remain encouraging

In Cement, proposal activity is high in many parts of the World. Inquiry levels and tender activity have even started to pick up in India

Customer Services


Customer Services

Customer Services


(DKKm) Q2

2012 Q2

2011 Change

Q1-Q2 2012

Q1-Q2 2011

Change Full-year

2011 Expected trend

in 2012

Order intake 1,569 1,358 +16% 3,415 2,713 +26% 5,271 Strongly increasing1)

Oder backlog 6,708 6,202 +8% 6,708 6,202 +8% 6,082

Revenue 1,608 1,253 +28% 2,976 2,304 +29% 5,259 Strongly increasing1)

EBITDA 244 227 +7% 437 369 +18% 882

EBITA 231 214 +8% 411 342 +20% 838

EBITA margin 14.4% 17.1% 13.8% 14.8% 15.9% Stable

EBIT 1552) 213 -27% 3292) 340 -3% 832

EBIT margin 9.6%2) 17.0% 11.1%2) 14.8% 15.8%

1) Previous expectation: Increasing 2) Including one-off write-down of capitalized R&D costs of approximately DKK 60m

Strong order intake reflects good market conditions and high capacity utilisation throughout the non-ferrous industries and in certain regions of the cement business

Clear pattern of increasing quarterly revenue over the calendar year

O&M contracts progressing well and Supercenter build-out in line with plans

Strong growth in order intake and revenue

Customer Services


Revenue (quarterly)

DKKm EBITA margin +28% vs. Q2 2011

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

0

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+16% vs. Q2 2011 DKKm

Bulk Materials


Bulk Materials Division

Bulk Materials


*) Previous expectation: Stable

(DKKm) Q2

2012 Q2

2011 Change

Q1-Q2 2012

Q1-Q2 2011

Change Full-year

2011 Expected trend

in 2012

Order intake 1,272 1,261 +1% 2,215 2,902 -24% 5,482 Increasing

Oder backlog 5,230 5,340 -2% 5,230 5,340 -2% 5,136

Revenue 1,271 1,068 +19% 2,331 1,985 +17% 5,005 Increasing

EBITDA 28 -5 n/a 56 7 +700% 276

EBITA 17 -11 n/a 33 -5 n/a 225

EBITA margin 1.3% -1.3% 1.4% -0.3% 4.5% Decreasing1)

EBIT 12 -24 n/a 16 -36 n/a 146

EBIT margin 0.9% -2.2% 0.7% -1.8% 2.9%

Slightly weakening outlook for Bulk Materials in the short term, but hotlist still encouraging

Prudent tender approach

Primary focus on improved operational excellence

Modest order intake and execution challenges

Bulk Materials


Revenue (quarterly)


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+1% vs. Q2 2011 DKKm

-4.0%

0.0%

4.0%

8.0%

12.0%

16.0%

-500

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Q2

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Tight focus on execution challenges in Bulk Materials

Bulk Materials


Bulk Materials Handling business facing challenges related to difficulties in project execution...

..stemming from underestimated risks in connection with orders received in previous years...

..combined with lack of timely handling and mitigation hereof

A number of initiatives have been put in place, including:

Transfer of project management know-how and best practices from other divisions

New division head and member of Group Executive Management, Carsten Lund took office on 1 July 2012 and has relocated to Wadgassen in Germany, where the Material Handling Technology Centre is based

Strengthened divisional Management Group

Based on the new management’s assessments, expectations to profitability in 2012 have been changed from “Stable” to “Decreasing” relative to last year’s EBITA margin of 4.5%

Non-Ferrous


Non-Ferrous

Non-Ferrous


(DKKm) Q2

2012 Q2

2011 Change

Q1-Q2 2012

Q1-Q2 2011

Change Full-year

2011 Expected trend

in 2012

Order intake 2,808 2,322 21% 5,253 4,002 31% 9,731 Strongly increasing1)

Oder backlog 10,362 6,975 49% 10,362 6,975 49% 8,779

Revenue 2,057 1,262 63% 3,779 2,425 56% 6,766 Strongly increasing2)

EBITDA 209 119 74% 356 251 42% 859

EBITA 193 108 77% 328 228 44% 815

EBITA margin 9.4% 8.6% 8.7% 9.4% 12.0% Slightly decreasing

EBIT 893) 82 8% 1833) 169 8% 689

EBIT margin 4.3%3) 6.6% 4.8%3) 7.0% 10.2%

1) Previous expectation: Stable 2) Previous expectation: Increasing 3) Including one-off write-down of capitalized R&D costs of approximately DKK 60m

Level of unannounced orders particularly high in Q2

Margin slightly under pressure since order backlog is emptied for orders taken in 2007 and 2008 at more favourable terms and conditions than today

Continued strong order intake and revenue growth

Non-Ferrous


Revenue (quarterly)


0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

18.0%

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Q2

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+21% vs. Q2 2011 DKKm

Cement


Cement

Cement


(DKKm) Q2

2012 Q2

2011 Change

Q1-Q2 2012

Q1-Q2 2011

Change Full-year

2011 Expected trend

in 2012

Order intake 1,902 1,291 47% 3,317 1,818 +82% 4,439 Slightly increasing

Oder backlog 9,240 7,151 29% 9,240 7,151 +29%

Revenue 952 1,028 -7% 1,811 2,177 -17% 4,354 Slightly increasing

EBITDA 155 121 28% 257 257 0% 541

EBITA 144 106 36% 237 227 +4% 494

EBITA margin 15.1% 10.3 13.1% 10.4% 11.3% Slightly increasing1)

EBIT 742) 104 -29% 1592) 221 -28% 475

EBIT margin 7.8%2) 10.1% 8.8%2) 10.2% 10.9%

1) Previous expectation: Decreasing 2) Including one-off write-down of capitalized R&D costs of approximately DKK 60m

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Q2

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Proposal activity remains high in many parts of the world

The Indian market still subdued, but inquiry levels and tender activity picking up

Strong order execution leading to increase in margins

High order intake and solid order execution

Cement


Revenue (quarterly)

DKKm EBITA margin -7% vs. Q2 2011

0.0%

5.0%

10.0%

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+47% vs. Q2 2011 DKKm

Cembrit - Europe’s largest dedicated provider of fibre-cement products


Cembrit sales process initiated

Cembrit


Revenue (quarterly) DKKm EBITA margin -3% vs. Q2 2011

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

-200

-100

0

100

200

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400

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Q2

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03

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Q3

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Q4

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Q1

2012

Q2

2012

DKKm Q2

2012 Q2

2011 change

Q1-Q2 2012

Q1-Q2 2011

change

Revenue 383 394 -3% 699 684 +2%

EBITA 33 25 +32% 27 17 +59%

EBITA margin

8.6% 6.3% 3.9% 2.5%

Part of FLSmidth since 1927 and the only

remaining Building Materials Company in the

Group

Not part of FLSmidth’s long term strategy,

and a sales process is initiated

As a consequence, Cembrit will be reported as

discontinued activities from Q3

FLSmidth cautions that there is no assurance

that the process will in fact lead to a sale and

that no firm timeline has been set for the

completion of the process

Future Outlook


Financial targets (unchanged)

Future Outlook


Financial targets

Annual revenue growth Above market average

EBITA margin 10-13%

Equity ratio >30%

Financial gearing (NIBD/EBITDA) <2

Pay-out ratio 30-50%

CFFI (excl. acquisitions) DKK -700m to -900m

The Board will be considering and adopting new financial targets for Return on Capital Employed – no later than in connection with the Annual Report for 2012

Group Guidance 2012 Previous guidance Actual 2011

Revenue DKK 25-26bn1) DKK 24-26bn DKK 22bn

EBITA ratio ≥10% 10.9%

EBIT ratio 8-9%2) 9-10% 9.9%

Tax rate 30-32% 31%

CFFI (excl. acquisitions

and their subsequent Capex needs)

DKK -900m DKK -733m

Group guidance 2012 updated

Future Outlook


1) Continuing activities - excluding Cembrit, and including Ludowici as of 3 July 2012 2) EBIT-margin expectation reduced due to write-down of capitalized R&D costs of DKK 188m

Key take-aways Strong order intake and solid EBITA results in all segments except Bulk Materials, where challenges persist EBIT impacted by DKK 188m one-off write-down of capitalised R&D costs Cembrit sales process initiated Full-year guidance updated


Questions & Answers Visit FLSmidth at MINExpo in Las Vegas and at our offices in Salt Lake City, USA on 26-27 September 2012 Follow us on Twitter: @flsmidth


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