Execution of A Cement Project From A-Z

Execution of a cement project from A-Z
Per Mejnert Kristensen

VP, Head of Project Division EMEA/APAC, Cement
Capital Market Day 2009 1

Agenda
Introduction
Long term trends in the global
cement industry
FLSmidth’s role in a cement
project from A-Z
Uncertainties and risks in
execution of cement projects
Outlook in Cement

Per Mejnert Kristensen
• VP, Head of Project Division EMEA/APAC, Cement
• Joined FLSmidth in 1992
• Positions in FLSmidth:
– VP, Head of Project Division EMEA/APAC
– VP, Head of Project Division 1
– General Manger, FLSmidth China
– Chief Representative Thailand
– Ass. Site manager, 10,000 tpd project, Thailand
– Project Sales

FLSmidth Cement Project Divisions

Agenda
Introduction
cement industry
project from A-Z
Outlook in Cement

Long term trends
Growing need for cement remains

despite current global crisis !

New global contracted cement kiln capacity
(excl. of China)
mty Contracted kiln capacity is an indicator of total cement

capital investments. However, the kiln system only
160 accounts for around 25% of the value of a cement
production line and additionally, the lifetime of a kiln is
generally longer than the other equipment
2009E:
140 25-50 mty
120
Expected
100
future
average:
80
~ 60-75 mty
60
40
20
2009E
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Long term trends

Emerging markets will continue to

be the driver - now also Africa

Geographical distribution of
new global contracted cement kiln capacity
(excl. China)
mty
160
140 Asia (excl. China & India)

India
120
Russia
100 Europe
North America
80 South America
Middle East
60
Africa
40
20
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Long term trends


Cement kiln sizes growing

History of kiln capacity development
Wet kilns Preheater kilns Precalciner kilns

1892: 1.8x18 m 1970: 6.0x96 m 1984: 5.0x80 m
35 tpd 4000 tpd 5500 tpd
1967: 7.6x232 m 1990: 6.0x96 m
3500 tpd ≥10,000 tpd
2006 →: 6.6x93 m
≥12,000 tpd
Cement kiln sizes continue to grow

Cement kiln sizes continue to grow
6000
Average plant clinker capacity (t/d)
5000
4000
3000
2000
1000
1970 1980 1990 2000 2010

Year
Long term trends


Cement kiln sizes growing
Increased environmental focus

Half of the fuel used in German
cement plants is alternative fuel
Alternative fuel energy coverage in %
60
Rapid increase in
alternative fuel
50
usage during the
40
past 5 years
- due to focus
30
on lowering
production costs in
20
a cement market
10
with excess
production
0 capacity
1999 2000 2001 2002 2003 2004 2005

Increased focus on emissions
Going from here
The trends To there ☺

Agenda
Introduction
cement industry
project from A-Z
Outlook in Cement

A cement plant from A to Z
Customer
Customer FLSmidth
FLSmidth strengths
strengths
requirements
requirements and
and capabilities
capabilities
Feasibility study
Proposal stage and signing of contract
Design and order handling stage
Civil design and construction
Erection, start-up,
Commissioning, handover, guarantees
Production, operation and maintenance of the
plant

Feasibility stage
Market
Market size,
size, cement
cement prices,
prices, Budget
Budget proposals
proposals
investment
investment costs
costs ?? for
for various
various sizes
sizes
? ?

Tender
Tender requirements
requirements Leadtime
Leadtime asas aa conse-
conse-
on
on main
main features
features quence
quence of
of requirements
requirements
or
or technical
technical specialities
specialities
Contract
24 mth
Basic
plant
Adapted
plant
Taylor
made

Raw
Raw material
material FLSmidth
FLSmidth tests
tests the
the
samples
samples to
to FLSmidth
FLSmidth raw
raw materials
materials
R&D and test centre in

Denmark and India

Optimal
Optimal process
process and
and Advanced
Advanced process
process design
design
low
low production
production cost
cost
FLSmidth has in house laboratory with all

modern testing facilities.
FLSmidth is constantly increasing

investments in research and
development
FLSmidth process designers are carrying

a heritage of more than 100 years of
experience and know how.

Can
Can we
we get
get the
the complete
complete FLSmidth
FLSmidth has has equipment
equipment
package
package from
from FLSmidth
FLSmidth ?? for
for the
the entire
entire proces
proces
Main machines & auxuilary equipment of FLSmidth design
Electrical equipment Vendor equipment

Local
Local supply
supply and
and FLSmidth
FLSmidth offers
offers split-supply
split-supply
manufacturing
manufacturing
4
18
40% imported
7
6
60% local manufactured
1
5
2
12

What
What are
are the
the total
total cost?
cost? Typical
Typical cost
cost composition
composition
Buildings
30%
Erection
15%
Transport
5%
Supervision
Machinery 5%
Others
40% 5%

Equipment,
Equipment, civil
civil design
design Different
Different options
options are
are
or
or turnkey?
turnkey? possible
possible
Equipment Construction
Civil design Erection

All
All information
information sources
sources
Finding
Finding the
the right
right are
are used
used such
such as
as
site
site information?
information? Google
Google Earth
Earth etc.
etc.

Visualisation
Visualisation to
to 3D
3D layouts
layouts and
and models
models
customer
customer

3D
3D layouts
layouts incorporated
incorporated
Visualisation
Visualisation to
to authorities
authorities in
in actual
actual landscape
landscape

Signing
Signing the
the contract
contract Quick
Quick order
order start
start

Design and order execution
Safe
Safe order
order handling
handling AA strong
strong project
project team
team
Experience + skills + tools

Security
Security in
in aa Company
Company sizesize and
and
changing
changing world
world strengths
strengths in
in market
market
Buying
power
Supply chain
Customer FLSmidth
Long track record

Global presence Vendor
relations

Close
Close contact
contact to
to the
the World
World wide
wide design
design
supplier
supplier
Global design centres

design 24 hours a day

Integrated
Integrated technical
technical
Fast
Fast civil
civil design
design and
and civil
civil design
design

Manufacturing, inspection and expediting
Close
Close co-operation
co-operation with
with
High
High quality
quality equipment
equipment large
large workshops
workshops

Shipping
Odd-size
Odd-size equipment
equipment
Safe
Safe transport
transport or
or in
in containers
containers

Construction and installation
Swift
Swift and
and trouble
trouble free
free con-
con- Experienced
Experienced and
and
struction
struction and
and installation
installation skilled
skilled supervisors
supervisors

Training of client’s staff
FLSmidth
FLSmidth Institute
Institute
Training
Training of
of staff
staff -- good
good training
training programme
programme

Commissioning, handover and guarantees
FLSmidth
FLSmidth has
has aa good
good record
record
AA swift
swift start
start of
of the
the plant
plant for
for reaching
reaching all
all guarantees
guarantees
Vi har en god track rekord mht at opfylde

garantierne. Har vi evt nogle kurver eller
lignende?
FLSmidth

Operation of the plant
AA safe
safe and
and economical
economical FLSmidth
FLSmidth offers
offers full
full
operation
operation ofof the
the plant
plant operation
operation and
and maintenance
maintenance

Agenda
Introduction
cement industry
project from A-Z
Outlook in Cement

Factors contributing to uncertainty about
project income
Progress of ongoing projects

(to be addressed in following slides)
When will signed LoI’s and non-effective contracts

materialise?
General market outlook very uncertain these days !
Even though our customers wants to move ahead with

projects, they are met by financing constraints,
- i.e. not even our customers can tell when they will
be able to go ahead !

Typical project progress
Project Incomeand
Flow income recognition
100%
Installation
90% Shipping
Manufacture
80%
70%
Procurement
60%
Engineering
Contract
50%
40%
Letter of Credit
30%
20% Down payment

10%
0%
-10%
d
rd
st
nd
h
h
t
th
th
th
th
th
th
th
th
th
th
th
d
)
th
th
th
th
th
th
1s
AC
2n
6t
4t
5t
7t
8t
9t
3r
21
12
20
23
25
28
10
11
13
14
15
16
17
18
19
24
26
27
30 29
22
(P
th
Period of execution
POC Net Sales CM SG&A EBIT

Typical project progress
Project Income and
Flow income recognition
100%
Installation
90% Shipping
Manufacture
80%
70%
Procurement
60%
Engineering
Contract
50%
40%
Letter of Credit
30%
20% Down payment

10%
0%
-10%
d
rd
st
nd
h
h
t
th
th
th
th
th
th
th
th
th
th
th
d
)
th
th
th
th
th
th
1s
AC
2n
6t
4t
5t
7t
8t
9t
3r
21
12
20
23
25
28
10
11
13
14
15
16
17
18
19
24
26
27
30 29
22
(P
th
Period of execution
POC Net Sales CM SG&A EBIT

Risks in execution of a cement project
Delayed supplies from vendors
Client not ready to receive goods or formalities not in place

(e.g. BTI)
Client wants to postpone project
Suspension of project due to ”temporary” problems with

financing
Termination of project due to client’s inability to continue
All of the above creates uncertainty about timing of income

recognition…
….and just a few months delay around New Year can
impact the annual result significantly !

TypicalProject
project
Cash Flow cash flow
100%
90%
80%
70%
60%
50%
Contract
40%
30%
20%
10%
0%
rd
nd
t
th
th
th
th
th
th
th
th
th
th
th
th
d
)
th
st
th
th
th
th
st
h
h
1s
AC
3r
2n
4t
5t
6t
7t
8t
9t
10
11
12
23
28
30 2 9
13
14
15
16
17
18
19
20
21
24
25
26
27
31
-10%
22
(P
th
-20%
Period of Execution
Client payments Total Project Cost Payments SG&A payments Net Cash
What happens when orders are cancelled or put on hold?
“Cancelled”
– Initiated work and issue of purchase orders stop
– Legal department gets involved
– We stick to our contractual rights - no matter
which client
– We have the right to be compensated for
incurred and committed costs and as well as a
pro-rata contribution margin
– Cancellation fee to be claimed
“Put on hold”
– Initiated work and issue of purchase orders stop
– Contract and time schedule is amended
– We preserve the right to be compensated for
any additional costs
– Some clients are constrained on cash, others are
adjusting priorities

Status of our existing cement project portfolio
Overall approx. 10 % of order backlog currently on hold.
3 - 4 major projects are partly suspended

– no major cement projects cancelled so far (but some minor)
We are in very close contact with the customers and they are
all determined to carry on – but limited by financing
Recent events on (partly) suspended contracts:

Receipt of progress payment – strong indicator of commitment
Agreement on prolonged delivery schedule
Agreement on finalising engineering but procurement on hold for a
specified period
At this stage we thus feel relatively confident about our

existing cement project portfolio – but timing still uncertain

Agenda
Introduction
cement industry
project from A-Z
Outlook in Cement

Strong belief in future prospects, because:
We have the strongest brand in the market !
We have a global reach – present in every corner of the world !

Global undertaking with a local presence
Project centres Production Rep. offices

We have a complete product portfolio !

Cement plant flow sheet
Filter Filter
Crusher
Analyzer
Limestone Clay Sand Iron
1 2 3 4 Raw meal
silo
Storage
Coal mill
1
2 Grate
4 3 cooler
Raw mill
Clinker
Silo
Separator
Packers
2 3
Cement Cement
silo silo
Cement
silo
Cement mill
Gear unit Ship unloading
Roller press
Ship loading

Cement Holcim Ste.continue
kiln sizes Genevieve
to grow
The world’s first 12,000 tpd single kiln line
ILC preheater
ATOX mills
DUOFLEX burner
OK mills
3-support kiln
MMC Cooler

We have an unsurpassed reference list !

Projects the last 4 - 5 years !
Platin Lappeenranta
4000 tpd 1800 tpd
Ash Grove, Moapa Cem. Andorra
4350Grove
Ash tpd Essroc,
foreman Martinsburg 2350 tpd Ozarow 2
4200 tpd 5000 tpd Keystone, Bath Marquesado 7000 tpdHolcim
Ivano-Frankivsk
Ste. Genevieve3000 tpd 3300 tpdMolins 2300
tpdtpd
LSR KarcementKursk Hoang Thach 3
Slantsy
4100 tpd Jovein
5500 Akbulak tpd 3500 tpd3300 tpd
3200 Podgorensky
12000 tpdLafarge Joppa Cimsa Eskisehir
5000tpd
3900 tpd
6000 tpd
7200 tpd CIBA (Orascom) Aleppo Madras
JP Kutch Cement
6000 tpd
Rio Grande Pueblo Ait Baha 2100 tpd
Abyek Cement 7600 tpd Kokshe Cement Ha Long
3000 tpd 1500 tpd Grey 7500Khuzestan,
CIBA tpd Gulf Cement 10000 tpd
Ramhormoz 5500 tpd
5000 tpd
Sinai White 2 24500
Arabian tpd
CC,5500
Ramliya 5500 tpd
6250AUCC
tpd tpd5000
Volyn tpd
ABG Kutch
Tepeaca 1300 tpd6000
Sinai, Gabal
5000 tpdLebni 2ACC,
tpd Star Rabigh
Cement Sanghi, Kutch
4200 tpd 6000 tpd ACC
10000 tpd Chanda
10000 tpd Adilabad
10000 tpd 7000
6500 tpd Orient,
Ain Soukna 7000 Dalmia
EMCC (Orascom) 4000 tpdtpd
Carribean Cement 3x4500 tpd
3250 tpd 50007500
tpd tpd
Binani 2
Unicem, Calabar Al Takamol 6500 tpd
Argos 6250 tpd 4500 tpd Indocement
4500 tpd 700 tpd
Fancesa
750 tpd
CSN Natal Simuma
2 x OK 39 1500 tpd
Dwaalboom
3300 tpd
Golden Bay
> 100 new production lines 350 tpd
> 150 mtpy capacity !

VKu/15.03.2007
FLSmidth has built ~ 2000 cement kilns worldwide since 1898
Europe CIS
>674 >45
North America
>356
Middle East
>55
India
Central America >141
>94 Rest of Asia
Africa >269
>96
South America
>162 Australia
>25

We are investing most in R&D !

The cement industry’s largest R&D centre

We are investing most in R&D !
We are the strongest Group – Cement & Minerals
We are very well positioned for the future !

Questions

Execution of A Cement Project From A-Z

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Execution of a cement project from A-Z

Per Mejnert Kristensen

Capital Market Day 2009 1

Capital Market Day 2009 2

• Joined FLSmidth in 1992

Capital Market Day 2009 3

Capital Market Day 2009 4

Capital Market Day 2009 5

Growing need for cement remains

Capital Market Day 2009 6

mty Contracted kiln capacity is an indicator of total cement

Growing need for cement remains

Emerging markets will continue to

Capital Market Day 2009 8

140 Asia (excl. China & India)

Growing need for cement remains

Emerging markets will continue to

Cement kiln sizes growing

Capital Market Day 2009 10

Wet kilns Preheater kilns Precalciner kilns

Capital Market Day 2009 12

1970 1980 1990 2000 2010

Growing need for cement remains

Emerging markets will continue to

Cement kiln sizes growing

Increased environmental focus

Capital Market Day 2009 14

Capital Market Day 2009 15

Going from here

The trends To there ☺

Capital Market Day 2009 16

Capital Market Day 2009 17

Capital Market Day 2009 18

Capital Market Day 2009 19

Capital Market Day 2009 20

R&D and test centre in

Capital Market Day 2009 21

FLSmidth has in house laboratory with all

FLSmidth is constantly increasing

FLSmidth process designers are carrying

Capital Market Day 2009 22

Main machines & auxuilary equipment of FLSmidth design

Electrical equipment Vendor equipment

Capital Market Day 2009 23

Capital Market Day 2009 24

Capital Market Day 2009 25

Civil design Erection

Capital Market Day 2009 26

Capital Market Day 2009 27

Capital Market Day 2009 28

Capital Market Day 2009 29

Capital Market Day 2009 30

Experience + skills + tools

Capital Market Day 2009 31

Long track record

Capital Market Day 2009 32

Global design centres

Capital Market Day 2009 33

Capital Market Day 2009 34

Capital Market Day 2009 35

Capital Market Day 2009 36

Capital Market Day 2009 37

Capital Market Day 2009 38