Becoming more focused and agile João Ney Colagrossi President, Minerals business area © Metso Content 1. 2. 3. 4. 2 © Metso This is Minerals Market outlook and drivers Transforming Minerals Conclusions Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi This is Minerals A leading, full-scope supplier of sustainable technologies Metso Minerals business area today A leading, full-scope supplier of sustainable technologies for the mining, aggregates and metal recycling industries Net sales 2013: EUR 1,563 million Personnel ~4,000 Minerals Processing Solutions Crushing and Screening Equipment Metal Recycling • Product offering and systems deliveries for efficient minerals processing • Products and systems that cover the entire aggregates production process • Integrated products and services for metal recycling • #1 in grinding mills and mining crushers • #1 in aggregates crushing and screening • #1 in metal recycling equipment • 60% of Minerals business area’s net sales • 32% of Minerals business area’s net sales • 8% of Minerals business area’s net sales 4 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Metso Minerals serves globally mining, aggregates and recycling customers Minerals business area net sales rolling 10/2013-9/2014 Net sales by customer segment Net sales by business type Net sales by geographic area Employees by geographic area 0% 8% 11% 33% 26% 6% 23% 36% 25% 20% 80% 22 % 13% 17% 26% 22% Aggregates Equipment Europe Europe Mining / Copper Systems North America North America Mining / Iron Aggregates South America South America Mining / Gold Other Asia-Pacific Asia-Pacific Africa and Middle East Africa and Middle East Mining / Other Recycling 5 2% 10% 20% © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Mining, aggregates and recycling segments are somewhat different but synergistic Mining Aggregates Metal Recycling Customers • 100’s with top 10 majors • Make dust from big rocks and extract minerals • 1000’s, only a few global ones • Produce aggregates (shape and size) • 1000’s, only a few global ones • Recover metals Technology trends • Energy and water efficiency • In-the-pit processing / ore sorting • Automation / simulation / optimization • Continuous development to stay ahead ”pirates” • Products for mid-market segment • Smart equipment • Sorting and recovery of many metals • Smaller sized machines • Emission controls Operating model • Direct sales, key accounts, engineering companies • Engineering • Sourcing and Project mgmt • Direct sales, distribution • Engineering • Assembly • Direct sales, distribution • Engineering • Assembly Synergies between the segments • Common assets-light supply chain for crushers, screens, shredders • Common crushing and screening knowledge base • Global footprint and global capabilities (incl. Distributors) 6 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Our product and systems offering for Mining customers 7 Grinding mills Mining crushers Process equipment Bulk material handling Pyro processing Mining systems © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Our product and systems offering for Aggregates customers 8 Crushers Screens and feeders Lokotracks Portable plants Mid-market products Aggregates systems © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Our product, systems and services offering for Recycling customers Metal shredders Metal shears Metal balers Texas Shredder shredder Lindemann shear Lindemann baler Waste recycling Recycling services Recycling systems M&J waste pic 9 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Decline in major mining project orders, aggregates flat Mining and Aggregates capital orders received EUR million 2 000 1 500 1 000 500 0 Q4 Q1 Q2 Q3 Q4 Q1 2012 Capital orders received, aggregates, rolling 12 months 10 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 Capital orders received, mining, rolling 12 months Retaining GP-%* despite lower volumes Mining and Aggregates capital net sales and GP-% % EUR million 2 000 120 1 800 100 1 600 1 400 80 1 200 1 000 60 800 40 600 400 20 200 0 Q4 Q1 Q2 Q3 Q4 2012 Capital net sales, aggregates, rolling 12 months Q1 Q2 Q3 Q4 Q1 2013 Capital net sales, mining, rolling 12 months Q2 Q3 2014 GP -%, Indexed • Improved sales mix: less systems, stable development in aggregates • Results through global procurement initiatives • Successful monitoring and management of global pricing 11 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi * Before non recurring items 0 Market outlook and drivers Long-term outlook solid for all customer industries Short-term mining outlook somewhat challenging, long-term outlook solid for all segments Production growth 2007-14 Aggregates 4% 2014-17 Equipment outlook 2014-15 2016-17 Comments • • • • 4-6 % Growth driven by infrastructure spending China and other emerging markets as drivers USA also picking up Unused capacity limiting short-term growth Metal recycling 3% 3% • Global steel production still growing • China and other emerging markets as drivers • Regulations key in Europe and N. America Iron ore mining 7% 2% • Small uncompetitive miners exiting • Domestic Chinese production reducing • Large seaborne suppliers still growing 2% • Demand growth expected to continue • Copper mine utilization at a high level • Copper deficit expected by 2017 -1 % • Small gold miners have been hit hard • Supply driven mainly by fast grade erosion • Demand driven partly by speculative needs Copper mining Gold mining 13 © Metso 3% 5% Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi ? Global aggregates production expected to grow ~5 % p.a. driven by emerging markets Crushed stone production output value (USD bn) 4-6% 63 63 58 54 4% 37 42 39 36 44 47 Rest of APAC 5% 7% China 25% 11% Africa and Middle East 1% 6% Europe -4% 4% Latin America 18% 10% North America -3% 7% 2007-12 CAGR 2012-17 CAGR 50 38 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 14 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Source: Construction Intelligence Center, Sep 2014 Global metal scrap production expected to grow ~3 % p.a. driven by emerging markets Metal scrap recovery by region (Mt) 3% 3% 598 712 636 731 752 776 800 660 15 2008 © Metso 4% 3% China 6% 4% Africa and Middle East 2% 7% Europe 1% 2% Latin America 1% 4% North America 1% 2% 2007-12 CAGR 2012-17 CAGR 584 566 461 2007 Rest of APAC 2009 2010 2011 2012 Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi 2013 2014 2015 2016 2017 Metal Bulletin Research, October 2013 Global mining production expected to grow ~2 % p.a. but dynamics is different by commodity Global ore production by commodity (000 Mt) 2% 5% 6,6 6,0 1,2 7,0 1,3 7,5 1,4 1,2 2,4 2,5 2,7 8,4 8,5 8,6 8,7 8,8 1,7 1,6 1,6 1,6 Gold 5% -1% 3-4% 1,7 1,7 2,9 3,0 Copper 3% 2% 2% 2,8 2,9 3,0 2,8 2,9 3,6 3,7 3,8 3,9 4,0 4,1 4,2 Iron 7% 2% 1% 2007-14 CAGR 2014-17 CAGR Grade erosion 8,0 1,6 8,2 2,4 2,4 2,9 3,2 3,4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 16 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Source: Raw Materials Group, March 2014 Iron ore: Chinese steel production is still growing, China replacing domestic iron ore with imports Chinese production of steel (Mmt) 1,000 900 800 700 600 500 400 300 200 100 0 +9% 626 2010 +5% 683 2011 +5% +8% 717 2012 815 775 2013 2014e Chinese steel production still expected to grow 5 % in 2014 17 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Chinese imports of iron ore (Mmt) 1,000 900 800 700 600 500 400 300 200 100 0 +10% +11% 619 2010 +9% 687 2011 746 2012 860-970 820 2013 2014e How much domestic iron ore supply imports will replace still uncertain Iron ore: 30% of iron ore production unprofitable at USD 100/ton price level Iron Ore Production Cost ~30% above USD 100/T ~46% above USD 80/T Mmt ( Accumulated) 18 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Iron ore: seaborne market will balance in 2016, if Chinese demand will increase at least 5% p.a. Seaborne market for iron ore (Mmt) 1,750 Iron Ore Seaborne Demand Iron Ore Seaborne Supply 1,700 1,650 1,600 1,550 1,500 1,450 1,400 1,350 2014 19 © Metso 2015 Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi 2016 Source: Management estimates 2017 2018 Copper: stable demand growth expected, mine utilization already high, deficit expected by 2017 Copper demand: stable 4% growth expected in the coming years Mt 4% 30 25 18.0 18.1 19.3 19.8 20.4 21.2 21.9 23.1 24.2 25.2 25.2 26.1 11.7 12.0 12.4 China copper usage Rest of the world copper usage 20 17.0 18.2 15 3.6 5.0 5.2 7.1 7.4 7.9 8.8 9.5 10.0 10.6 11.1 13.4 13.2 12.8 11.0 11.9 11.9 11.6 11.7 11.9 12.5 13.1 13.5 13.5 13.7 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10 5 0 Copper supply: Capacity utilization already high, deficit expected by 2017 World mine production 1,621 1,841 12 2013 20 © Metso World mine capacity 1,841 1,500 01 2014 1,421 1,664 02 2014 Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi 1,543 1,851 03 2014 1,506 1,798 4 2014 1,550 1,865 1,547 05 2014 Source: ICSG, Wood McKenzie, Morgan Stanley Research ,Oct 2014 1,811 06 2014 1,882 1,507 07 2014 Gold: demand is partly hard to predict, future supply outlook flat but grade erosion high Gold demand: Investment demand has been and will be hard to predict Mt 5,000 4,000 0% 3% 3,429 3,404 3,305 3,864 4,129 3,919 4,139 3,988 4,307 4,250 4,276 4,260 4,294 4,304 Investment demand 3,000 2,000 Fabrication demand 1,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Gold supply: Future supply outlook flat, but grade erosion requiring capex Mt 3,500 3,000 2,500 2,000 0% 3% 2,441 2,437 2,377 2,521 2,581 2,648 2,738 2,829 3,017 3,035 3,051 3,040 3,009 3,090 Gold mine production 1,500 1,000 500 0 2006 21 © Metso 2007 2008 2009 2010 Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi 2011 2012 2013 2014 2015 Source: Morgan Stanley 2016 2017 2018 2019 Efficiency is the biggest challenge for miners Metso is transforming itself to be better able to help the miners in this challenge 22 Past: 2009-2012 Present: 2013-2015 Future: 2016-2020 Boom Downturn Recovery Surge in projects Projects put on hold Even larger role of service capabilities Race for growth Cost, cash, dividends Focus on process efficiency, energy & water High cost inflation Rising cost pressure Continued cost pressure on equipment and parts War for talent New CEOs and more active shareholders Further consolidation and centralization © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Transforming Minerals For being better able to help our customers with the efficiency challenge New operating model Less cyclical and more robust to market volatility Right-sized to market activity Agile and simpler organization Less cyclical and more robust operating model ∫ Asset-light operating model Re-focused systems business Renewal of key product offering 24 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Minerals strategic priorities Transforming us to provide even better solutions to our customers 2013 – 2014 New operating model Customer focus Future solutions 25 © Metso 2014 – 2017 • Global procurement • Right-sized to market activity • Factory footprint simplification • Agile and simpler organization • From 3 to 12 market areas • Asset-light operating model • Performance culture • Re-focused systems business • Job rotation • Renewal of key product offering • Mid-market segment • Africa and Oceania coverage • Key account management • Global distribution management • Pricing excellence • CRM and analytics • Hydraulic rolls crusher range • Next generation concentrator • Vertical grinding mill range • Embedded intelligence • Next generation Lokotracks • Next generation unit crushers • In-pit crushing plants • Complete in-the-pit solutions Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Right-sized, agile and simple Several initiatives already completed and on-going Right-sized to market activity 26 Agile and simpler structures Completed • Headcount reduced by 940 • Factory closure in New Zealand • Factory closure in Germany • Factory closure in India • Engineering resources • Purchased services Completed • Recycling business re-structuring • From 3 to 12 market areas • Major organization de-layering • 65% of senior management rotated • Project excellence program On-going • Factory closure in Canada • Further evaluation of factories • Sales force and sales support • Project delivery organization On-going • Recycling business turnaround • Technical center consolidation • Sales office consolidation • Systems business re-structuring • Support function simplication © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Assessing asset-light model in Aggregates Preparing to cope with the changes in the market activity Current model in Aggregates Component fabrication In-house Example of asset-light model Component fabrication Outsourced Component Current manufacturing model In-house machining Component Asset-light manufacturing model Outsourced machining Assembly, testing and painting Assembly, testing and painting In-house In-house Improved asset-efficiency, flexibility and cost competitiveness 27 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Asset-light model in Mining and Recycling Preparing to cope with the changes in the market activity Current model in Mining Component fabrication Outsourced Future asset-light model Component fabrication Outsourced Component In-house Current manufacturing model/ outsourced machining Component Asset-light manufacturing model Outsourced machining Assembly and commissioning Assembly and commissioning In-house In-house Improved asset-efficiency, flexibility and cost competitiveness 28 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Re-focused systems business Equipment, process circuits and process islands in scope Go-to-Market Model Equipment delivered Process circuit Process island Complete plant 0-40 EUR Million Very high 20-50 EUR Million High 40-100 EUR Million Medium 100-200+ EUR Million Low Low Medium Medium/High Very high Medium Medium/High High High Typical scope • Metso equipment • Process engineering • Other equipment • Detailed engineering • Structures and piping • Installation • Civils and mine infra Typical order • Net sales • Share of Metso technology • Risk exposure • Add on service potential Business role 29 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Strategic focus Very limited use only Global procurement We are raising the annual procurement savings target further Savings target for 2014 1.7% of total spend Achieved so far: 1.9% of total spend Savings target for 2015: 3.2% of total spend • Savings achieved through: - 30 © Metso Continued category sourcing projects Product renewals and design-to-cost activities Focus towards internal / external supply chain options Increased use of best-cost country suppliers Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Customer focus: Mid-market Two acquisitions made to enable us to serve mid-market customers Shaorui acquisition • • • • 31 Completed in September 2013 A leading local market position and a well-known brand in South China Ongoing actions to improve Sharoui’s product offering and manufacturing Good level of new orders in 2014 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Joint venture with LiuGong • • • • 50 / 50 joint venture in late 2013 Metso: technological know-how LiuGong: extensive distribution and manufacturing capabilities First Chinese-made tracked jaw plant is ready for delivery in Q1/2015 Future solutions: 2012-2014 highlights Sustainable profit improvements for our customers every day In-pit crushing plants Vertical grinding mills Hydraulic roll crushers Next generation Lokotracks reducing the need for trucks improving energy efficiency significantly 32 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi limiting the need for water integrating crushers and screens Future solutions: Next generation concentrator Research program to make step-change in minerals processing • Metso and JKTech to work with leading Chilean mining companies at their existing mines • Target to develop the next generation minerals concentrator - Research themes: primary grinding, ball mill - grinding, classification and coarse particle flotation Objectives: Developing knowledge, operational methods, new equipment and novel circuit designs in mineral processing • Targeting a step change in performance by reducing: - Capital cost - Operating cost - Embedded energy - Flotation plant footprint and operating costs - Net water usage 33 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Future solutions: Embedded intelligence Enabling remote control and optimization of process equipment Fleet or Installed base level Intelligence Plant level Intelligence Machines level Intelligence 34 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi Conclusions Capital Markets Day 2014 Market outlook and drivers Short-term mining outlook somewhat challenging, long-term outlook solid for all customer industries Emerging markets growth driving aggregates demand Metal recycling offers great potential for product and services businesess •Efficiency is the biggest challenge for our customers. 35 © Metso Metso Capital Markets Day 2014: Minerals by João Ney Colagrossi This is Minerals • • • • A leading, full-scope supplier of sustainable technologies Customer industries: Mining, Aggregates, Metal recycling Strong product offering Able to retain GP-% despite lower volumes Minerals Transformation: • Becoming more focused, asset-light and agile to cope with changes in the market activity. • Product focused and more selective with systems • Metso is transforming itself to be better able to help the miners with the efficiency challenge
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