PSt – March 2006

FLS in China

PSt – March 2006

Presentation

in Shanghai

on April 6, 2006

by

Palle SteenbølChief Representative

PSt – March 2006

Agenda

• The Chinese cement industry

• FLS in China – Historical high lights

– Workshop in Qingdao

– Beijing office

– Future prospects

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Cement consumption per capita

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Cement capacity in ChinaHistorical output, 1960 - 2005

0

200

400

600

800

1000

1200

1960 1970 19801990 2000 2001 20022003 2004 2005

Year

Mio

. tpy

out

put

0

5

10

15

20

25

30

% a

nnua

l gro

wth

Output

Growth

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Where is the cement consumed?

USA6%

India6%

Rest of theworld44%

China44%

Total global consumption: ~ 2.1 bio. tpy

PSt – March 2006

Chinese cement industry

Cement consumption in China

2002 2003 2004 2005Total cement consumption mio. tpy 725 863 970 1060 - annual increase % 9,7 19,0 12,4 9,3New 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

2003 2004 increase 2003 2004 increaseModern PC kilns 199 317 118 350 493 143Wet kilns 40 40 0 250 250 0Shaft kilns 581 569 -12 11,500 11,100 -400Other types of kilns 43 44 1 0Total 863 970 107 12,100 11,843 -257

Production (mio. tpy) No. of lines

PSt – March 2006

Chinese cement industry

Output and no. of new lines, 2004 - 2005

Type of kiln

2004 2005 increase 2004 2005 increaseModern PC kilns 317 420 103 493 583 90Wet kilns 40 40 0 250 250 0Shaft kilns 569 558 -11 11.100 10.850 -250Other types of kilns 44 42 -2 150 145 -5Total 970 1.060 90 11.993 11.828 -165

Production (mio. tpy) No. of lines

PSt – March 2006

FLS in China

• 1906 First contract for two rotary kilns in Tangshan• 1912 Office established in Beijing• 1928 The office was moved to Shanghai• 1948 The 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 burersand the first two 10,000 lines to the Chinese cement industry

Historical highlights

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.

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First Duoflex ready for shipment

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Duoflex Burner

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Duoflex Burnersnumbers sold via FLS-QD

0

5

10

15

20

25

30

35

2001 2002 2003 2004 2005

Year

Nu

mb

ers

So

ld

ExportChina

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SF Cross Bar Cooler

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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

0

20

40

60

80

100

120

140

160

2001 2002 2003 2004 2005 2006 est.

Year

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FLS QingdaoManufacturing turn-over in Mio. RMB

0

10

20

30

40

50

60

2001 2002 2003 2004 2005 2006 est.

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FLS Qingdao (Q4 – 2006)

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FLSmidth – Beijing Office

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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

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Atox grinding table ordered at CITIC

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0

5

10

15

20

25

30

35

2000 2001 2002 2003 2004 2005

Year

No

. of m

ills

sold FLS

Loesche

Pfeiffer

UBE

Polysius

Vertical raw mills sold in China2000 – 2005

number of mills

Total no. of Atox mills 2000 - 2005: 78 (+ 8 in 2006)

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Vertical raw mills sold in China2000 – 2005market shares

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005

Year

Mar

ket

shar

e, % FLS

Loesche

Pfeiffer

UBE

Polysius

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FLS sales in China1999 – 2005(number sold)

05

10152025303540

2000 2001 2002 2003 2004 2005Year

No

. so

ld

Vertical mills

Kilns

SF coolers

Duoflex

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FLSmidth A/SSales 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

0

100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004 2005

Year

mD

KK

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Sales in Chinafor separate group companies

0

100

200

300

400

500

600

700

800

900

2004 2005

mD

KK Pfister

MAAGVentomaticFFEMFLSmidth

PSt – March 2006

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 - butthorough checking is needed before they become “Approved sub-supplier”.

PSt – March 2006

FLS in ChinaFuture 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