FLS in China

PSt – March 2006

 Presentation
in Shanghai
on April 6, 2006
by

Palle Steenbøl
Chief Representative

PSt – March 2006

 Agenda

• The Chinese cement industry

• FLS in China
– Historical high lights
– Workshop in Qingdao
– Beijing office
– Future prospects

PSt – March 2006

Cement consumption per capita

PSt – March 2006

 Cement capacity in China
Historical output, 1960 - 2005

1200 30
1000 25

% annual growth
Mio. tpy output

800 20
600 15
400 10
200 5
0 0
1960 1970 19801990 2000 2001 20022003 2004 2005
Output
Year
Growth

PSt – March 2006

 Where is the cement consumed?

Rest of the China

world 44%
44%

USA India
6% 6%

Total global consumption: ~ 2.1 bio. tpy

PSt – March 2006
 Chinese cement industry

Cement consumption in China

2002 2003 2004 2005

Total cement consumption mio. tpy 725 863 970 1060
- annual increase % 9,7 19,0 12,4 9,3
New and upgraded lines in operation No. 77 122 143 90

PSt – March 2006

 Chinese cement industry

Output and no. of new lines, 2003 - 2004

Type of kiln Production (mio. tpy) No. of lines

2003 2004 increase 2003 2004 increase

Modern PC kilns 199 317 118 350 493 143
Wet kilns 40 40 0 250 250 0
Shaft kilns 581 569 -12 11,500 11,100 -400
Other types of kilns 43 44 1 0
Total 863 970 107 12,100 11,843 -257

PSt – March 2006

 Chinese cement industry

Output and no. of new lines, 2004 - 2005

Type of kiln Production (mio. tpy) No. of lines

2004 2005 increase 2004 2005 increase

Modern PC kilns 317 420 103 493 583 90
Wet kilns 40 40 0 250 250 0
Shaft kilns 569 558 -11 11.100 10.850 -250
Other types of kilns 44 42 -2 150 145 -5
Total 970 1.060 90 11.993 11.828 -165

PSt – March 2006

 FLS in China
Historical highlights
• 1906First contract for two rotary kilns in Tangshan
• 1912Office established in Beijing
• 1928The office was moved to Shanghai
• 1948The office in Shanghai was closed
• 1978“Open door” policy re-established
and so was the activities of FLS
• 1984 New Representative Office established in Beijing
• 2000 Establishment of company (WFOE) in China
with own workshop in Qingdao, Shandong.
• 00-05 FLS supplies: ~ 78 raw mills
~ 52 Duoflex burers
and the first two 10,000 lines
to the Chinese cement industry
PSt – March 2006
 FLS Qingdao
• In 2001 a workshop was leased in a 900 m² building owned
by Maersk Container Industry in Qingdao.
• In 2002 the workshop was moved to the present location, and
with a building area of 1.500 m².
• In 2004 the workshop area under roof was expanded with an
additional 1.800 m², giving a total of 3.200 m².
• In 2006 a complete new workshop will be constructed with a
total workshop area of 10.800 m².

PSt – March 2006

PSt – March 2006
First Duoflex ready for shipment

PSt – March 2006

Duoflex Burner

PSt – March 2006

 Duoflex Burners
numbers sold via FLS-QD
35

30

25
Numbers Sold

20
Export
China
15

10

0
2001 2002 2003 2004 2005

Year PSt – March 2006

SF Cross Bar Cooler

PSt – March 2006

PSt – March 2006
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PSt – March 2006
 FLS Qingdao
Employees end of 2005
1 General Manager
2 Assistant/Secretary
3 Managers (New workshop, Production and Finance)
1 Technical Service/QA Supervisor
15 Staff
TOTAL: 22 Employees (White collar)

Production:
4 Foremen
9 Team leaders
79 Workers
6 Contract workers
TOTAL: 98 Employees (Blue collar)

ALL: 120 Employees. PSt – March 2006

 FLS Qingdao
Number of Employees

160

140

120

100

80

60

40

20

0
2001 2002 2003 2004 2005 2006 est.

Year
PSt – March 2006
 FLS Qingdao
Manufacturing turn-over in Mio. RMB

60

50

40

30

20

10

0
2001 2002 2003 2004 2005 2006 est.

PSt – March 2006

FLS Qingdao (Q4 – 2006)

PSt – March 2006

FLSmidth – Beijing Office

PSt – March 2006

 FLSmidth A/S – Beijing Office
Total number of employees with base in Beijing is 25, consisting of:

1 General Manager – Chief Representative

1 Secretary
3 Sales Engineers
2 Project Management (Manager + Assistant)
6 Sourcing (Manager (DN) + 5 Assistants)
1 Finance Manager
2 Spare Parts Sales
5 Site Supervisors
3 Office workers

PSt – March 2006

 FLSmidth A/S – Beijing Office

Main activities

• Sales to the local market

- Equipment and Spare Parts

• Project management

• Supervision & Trouble Shooting

• Sourcing
PSt – March 2006
PSt – March 2006
PSt – March 2006
Atox grinding table ordered at CITIC

PSt – March 2006

 Vertical raw mills sold in China
2000 – 2005
number of mills
35

30
No. of mills sold

25 FLS
20 Loesche
Pfeiffer
15 UBE
10 Polysius

0
2000 2001 2002 2003 2004 2005
Year

Total no. of Atox mills 2000 - 2005: 78 (+ 8 in 2006) PSt – March 2006
 Vertical raw mills sold in China
2000 – 2005
market shares
100

80
Market share, %

FLS
60 Loesche
Pfeiffer
40 UBE
20 Polysius

0
2000 2001 2002 2003 2004 2005
Year

PSt – March 2006

 FLS sales in China
1999 – 2005
(number sold)

40
35
30 Vertical mills
N o . s o ld

25 Kilns
20
15 SF coolers
10 Duoflex
5
0
2000 2001 2002 2003 2004 2005
Year

PSt – March 2006

 FLSmidth A/S
Sales turn over in China

• FLS sales in China hit the bottom in the years

just after the Asian economical crises.
• The Sales started to pick up again in year 2000
• Both in 2003 and 2004 the total sales exceeded
DKK 700 million.
• The authorities decision – in 2004 - to cool
down investments in the cement industry
affected the sales in 2005.
PSt – March 2006
FLSmidth A/S Sales to China
900

800

700

600

500
mDKK

400

300

200

100

0
2000 2001 2002 2003 2004 2005
Year

PSt – March 2006

 Sales in China
for separate group companies
900

800

700

600

Pfister
mDKK

500
MAAG
Ventomatic
400 FFEM
FLSmidth

300

200

100

0 PSt – March 2006

2004 2005
 Sourcing in China

• Sourcing from Low Cost Countries (LCC) is a

must in order to stay competitive.
• However – it is essential for FLS to ensure
high quality products as well as trustworthy
delivery times.
• Many potential suppliers in China - but
thorough checking is needed before they
become “Approved sub-supplier”.

PSt – March 2006

 FLS in China
Future Prospects

• The expansion and renewal of the Chinese

cement plants will continue at relatively high
rate
• FLS aim is to maintain our position as
preferred foreign supplier of various
specialized equipment
• Continued increased sourcing for our global
projects
• Increased focus on After Sales Services
PSt – March 2006
Yingde Conch 4 x 5.000 tpd
Production lines

PSt – March 2006