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Annual Report for FLSmidth & Co. A/S 1 January - 31 December 2013

13.02.2014

Company Announcement to the Danish Financial Supervisory Authority No. 03-2014, 13 February 2014.

The Board of Directors and the Executive Management have today considered and approved the Annual Report of FLSmidth & Co. A/S for the financial year 1 January - 31 December 2013.

The consolidated financial statements are presented in accordance with International Financial Reporting Standards as adopted by the EU. The parent financial statements are presented in accordance with the Danish Financial Statements Act. Further, the annual report is prepared in accordance with Danish disclosure requirements for listed companies.

The Annual Report is accessible at FLSmidth's website:

http://www.flsmidth.com/reports


The main conclusions of the Annual Report are:

2013 was a year marked by pre-emptive management decisions to prepare FLSmidth for the future and to manage the business cycle. Revenue was historically high despite currency headwind, while order intake declined due to the cyclical downturn of mining investments. Profitability and returns were significantly impacted by one-off costs related to management decisions and other issues. Group revenue and EBITA margin delivered as most recently guided.

Financial results in Q4 2013
Both revenue and order intake increased sequentially, but declined compared to Q4 last year. Planned costs related to the Efficiency Programme and the surprising Buxton arbitration award had an adverse impact on profitability in the quarter. The underlying EBITA margin was 8.7%.

The order intake decreased 8% to DKK 5,616m (Q4 2012: DKK 6,104m)

Revenue decreased 12% to DKK 7,420m (Q4 2012: DKK 8,395m)

Earnings before amortisation and impairment of intangible assets (EBITA) decreased
75% to DKK 222m (Q4 2012: DKK 893m), corresponding to an EBITA margin of 3.0% (Q4 2012: 10.6%)

Earnings before amortisation and impairment of intangible assets (EBITA) adjusted for special items amounted to DKK 643m, corresponding to an EBITA margin of 8.7%

Earnings before interest and tax (EBIT) decreased 92% to DKK 60m (Q4 2012: DKK 797m) corresponding to an EBIT margin of 0.8% (Q4 2012: 9.5%)

The profit amounted to DKK -179m (Q4 2012: DKK 462m)

Cash flow from operating activities amounted to DKK 77m (Q4 2012: DKK 1,532m)

Financial results for 2013
The order intake decreased 25% to DKK 20,911m (2012: DKK 27,727m)

The order backlog decreased 24% to DKK 22,312m (end of 2012: DKK 29,451m)
Revenue increased 2% to DKK 26,923m (2012: DKK 26,284m)

Earnings before amortisation and impairment of intangible assets (EBITA) decreased
62% to DKK 977m (2012: DKK 2,559m), corresponding to an EBITA margin of 3.6% (2012: 9.7%)

Earnings before amortisation and impairment of intangible assets (EBITA) adjusted for special items amounted to DKK 2,217m corresponding to an EBITA margin
of 8.2%

Earnings before interest and tax (EBIT) amounted to DKK -339m (2012: DKK 2,041m) corresponding to an EBIT margin of -1.3% (2012: 7.8%)

The profit amounted to DKK -784m (2012: DKK 1,303m)

Cash flow from operating activities amounted to DKK -157m (2012: DKK 1,720m)

Net interest-bearing debt amounted to DKK -4,718m (end of 2012: DKK -3,084m)

Working capital amounted to DKK 2,382m (end of 2012: DKK 1,950m)

Return on Capital Employed (ROCE) declined to 6% (2012: 18%)

Dividend
The Board of Directors will propose at the Annual General Meeting that a dividend of DKK 2 per share (2012: DKK 9) and a dividend yield of 0.7% (2012: 3%) be distributed for 2013.

The Board of Directors will propose to the Annual General Meeting that 1,950,000 shares acquired in connection with the share buy-back programme of DKK 521m in 2013 be cancelled, which will reduce the share capital to DKK 1,025,000,000 and the total number of issued shares to 51,250,000 after the Annual General Meeting.

Group guidance for 2014
In 2014, FLSmidth & Co. A/S expects consolidated revenue of DKK 21-24bn (2013: DKK 26.9bn) and an EBITA margin of 7-9% (2013: 3.6%).

Cost associated with the Efficiency Programme is expected to amount to approximately DKK -70m in 2014, which is included in the guidance.

The return on capital employed (ROCE) is expected to be 11-13% in 2014 (2013: 6%).

The effective tax rate is expected to be 33-35% in 2014. (2013: 35% estimated underlying).

Cash flow from investments is expected to be around DKK -0.4bn (2013: DKK -0.6bn).

The four divisions are expected to see the following developments in 2014:
Expected revenue
Customer Services DKK 7.5-8.5bn (2013: 7.6bn)
Material Handling DKK 3.5-4.5bn (2013: 4.6bn)
Mineral Processing DKK 5.5-6.5bn (2013: 9.3bn)
Cement DKK 3.5-4.5bn (2013: 5.2bn)

Expected EBITA margin
Customer Services 13-15% (2013: 9.1%)
Material Handling 0-2% (2013: -11.2%)
Mineral Processing 6-8% (2013: 8.2%)
Cement 5-7% (2013: 2.4%)

Long-term financial targets
Long-term financial goals for FLSmidth subject to normalised market conditions:

Annual growth in revenue above the market average
EBITA margin 10-13%
ROCE *) >20%
Tax rate 32-34%
Equity ratio >30%
Financial gearing (NIBD/EBITDA) <2
Pay-out ratio 30-50% of the profit for the year

*) ROCE: Return on Capital Employed calculated on a before tax basis as EBITA divided by average Capital Employed including goodwill.
  
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Please address any questions to this announcement to Mr Thomas Schulz, Group CEO, telephone +45 36 18 18 00.

An investor & press meeting and telephone conference regarding the Annual Report will be held today at 11:00 hours CET at the company's headquarters.
For further details please visit
http://www.flsmidth.com/en-US/News+and+Press/News/2014/Invitation+to+investor+meeting

FLSmidth & Co. A/S
Corporate Communications & Investor Relations