Mining Equipment and Aggregate & Cement Sector Businesses
September 16, 2016 Hisashi Shinozuka Director and Senior Executive Officer President of Construction and Mining Equipment Marketing Division Komatsu Ltd.
1
Mining Equipment Business
2
Market Characteristics (1/2) Mining equipment
Construction equipment
Utility equipment
Customers’ businesses
Limited to regions with resources Global operation
Global operation is rare. Country or region specific.
Mainly in smaller areas
Hours of machine operation
24/7 Over 5,000 hrs/year
8-16 hrs/day and 5-6 days/week 1,000--3,000 hrs/year
8 hrs/day (max) and 5 days/week Up to 1,500 hrs/year
Locations of machine use
Remote areas (in main) Almost no relocation of machines
Urban, suburbia and remote areas Relocation of machines for each project
Urban and suburbia Frequent relocation of machines
Customers’ expectations
Safety Productivity/machine utilization, $/ton, and lifecycle costs
Machine performance/reliability, Model range and ample attachments Initial costs
Versatility, Ample attachments Initial costs
Customer service
Maker/distributor
Distributor/maker
Distributors
Machine ownership
Customers (relatively high %)
Customers and rental companies
←
Competitors
A few
Many
Extensively many (esp. mini excavators)
3
Market Characteristics (2/2) Surface
Underground
Source: Estimated by Komatsu from materials published by relevant companies
Market size in FY2014
Mining machines and our product offering
About JPY1.4 tn applicable to Komatsu’s offering
Joy Global Underground
Drill Underground truck
Drag line
Market size: JPY3 tn Surface: JPY1.9 tn (64%) Underground: JPY1.1 tn (36%)
Hydraulic jumbo drill Hydraulic excavator
Komatsu
Rope shovel Breakers Shearer
Joy Global Surface
Production volume of minerals: surface and underground mining
Wheel loader Crushing & conveying equipment
Roof support
350
Motor grader Continuous miner
Fleet control system
Dump truck
Bulldozer
Komatsu’s offering
Annual production volume (index)
LHD
300
Underground: small and medium-sized mines
Estimated by Komatsu
Underground: major mines (supercaves) Underground: major mines (excl. supercaves)
250
Surface mines
200 150 100 50
The ratio of underground mining equipment to increase
0 Year
4
Market Trends (1/2) All commodity prices peaked out in 2011. They appear to have bottomed out in 1Q, FY2016. We anticipate that commodity prices will head for slow recovery, although they won’t recover to the peak level. 250
Iron ore
US$/MT
12,000
2011/Feb. $187.18
200
US$/MT
Copper
2011/Feb $9,880.94
10,000
US$/lb 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00
8,000
150
$57.50
100
4,000 2,000
Source: International Monetary Fund
0
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep
0
2011
2012
2011Feb $137.53c
2013
2014
2015
Thermal coal
2,000
$69.60 50
As of Sep. 9
2011
2012
2013
2014
2015
2012
2013
2014
2015
2016
Gold
$1,327.80
1,000
As of Sep. 9
0
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
Source: Kitco
2016
2009
2010
2011
2012
2013
2014
2015
2016
2,000
Long-range price trend of main commodities 1,500
x: 2000 = 100
Thermal coal
*data after 2016 is estimated by Komatsu
Iron ore Copper
1,000
Gold
500
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2009
2008
2006
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1993 1994
1992
0 1991
2010
2011
500
Source: World Bank (Monthly ave.) Description: Australian Thermal Coal FOB New Castle., 12000 btu/pound
2009
2010
2011/Sep $1,771.88
1,500
100
0
2009 US$/Ounce
2016
2005
150
2010
2010
2009
US$/MT
$4,615.00 US$/ton $2.09 US$/lb Source: World Bank (Monthly ave.) Description: grade A LME spot price CIF European As of Sep. 9
2007
50
As of Sep. 9
6,000
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul
• •
5
Market Trends (2/2) •
While the business environment of the mining equipment industry remains challenging in the short range, we project that demand for mining equipment will gradually recover to a 4,000-unit level in the mid to long term, supported by an increase of consumption of major minerals and corresponding increase in their production volume. Mining Equipment Demand and Index of Major Commodity Consumption Consumption (Indexed) 250
(Units) 10,000 Mining Equipment Demand
*1
9,000 Indexed Major Commodity Consumption (Production in 2000 indexed to 100) 8,000
Annual Growth Rate of Indexed Major Commodity Consumption
*2
６.１%
*3
7,000
6.9%
200
0.0%
6,000
3.0%
150
2.2%
5,000
100
4,000 3,000
50
2,000 1,000 0
0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
*1: For Komatsu’s mining product lines only
*2: Major Commodity＝Thermal coal, met coal, iron ore, copper
*3: Average of annual growth rate over the period
Source: Komatsu Estimate
6
Sales of Mining Equipment and Outlook For the first 3-Month period of FY2016, sales declined by 15% from the corresponding period a year ago, to JPY98.3 billion, as affected by the Japanese yen’s appreciation and reduced sales of parts. We project that full-year sales for FY2016 will decrease from FY2015, as affected by a decline in demand for new equipment and the Japanese yen’s appreciation.
• •
Annual sales of mining equipment (incl. parts and service) Billions of yen 800
Quarterly sales of mining equipment (incl. parts and service)
Y-o-Y change
+22% +18%
-18%
554.0
400
0%
417.0
506.3 499.3
163.4
447.3
155.2
394.1 206.8
361.5
140.6
96.3 200
91.7 84.2
-3% -4% -7%
157.0 139.1
-27%
-19%
-23%
-4%
0%
-12% -15% -12%
-50% 150.5
129.6 119.2 107.2 100
-4%
120.9 130.8 128.8 115.9 113.7 118.7 110.1 107.5 98.3
50
37.5 33.6 34.4 33.2 35.0 23.5 23.2 22.9 22.1 19.4 54.9 56.9 52.7 45.7 50.4
Parts
214.9 194.3 196.1
Service, etc
115.6
150
+20%
-17%
-50%
Y-o-Y change
50%
+24% +20% +4% -1%
200
Oceania China Latin America Y-o-Y change
0
FY14FY15FY16
Initial projection
Initial projection
FY16/1Q 4Q 3Q 2Q FY15/1Q
FY07FY08FY09FY10FY11FY12FY13FY14FY15FY16
FY16/1Q 4Q 3Q 2Q FY15/1Q 4Q 3Q 2Q FY14/1Q 4Q 3Q 2Q FY13/1Q 4Q 3Q 2Q FY12/1Q
0
Equipment Service, etc. Parts
356.5
-10% -12%
Equipment
422.0
-1%
250
614.5
-14%
600
Billions of yen
50%
+33% +15% +11%
Middle East & Africa Asia Europe & CIS N. America
7
Basic Strategies of Mid-range Management Plan（part for mining） In response to our surrounding environment and tasks, we will work to achieve sustainable growth by focusing efforts and through open innovation, when applicable, in 1) Growth strategies based on innovation, 2) Growth strategies of existing businesses, and 3) Structural reforms designed to reinforce the business foundation, centering on DANTOTSU products, service and solutions.
1. Growth Strategies Based on Innovation • Development of next-generation construction and mining equipment as well as next-generation components • Deployment of AHS*1 and reinforcement of platform for mining solutions *1: AHS stands for Autonomous Haulage System and means a system to operate unmanned dump trucks.
. Growth Strategies of Existing Businesses • • • •
Contributions to expanding sales by developing new products, incl. DANTOTSU products Expansion of earnings in the value chain Expansion of the mining equipment business M&A
DANTOTSU Products
IoT at Komatsu IoT enables connection and sharing of real-time information concerning all processes from production to sales.
being connected to Production being connected Plants market information
3. Structural Reforms Designed to Reinforce the Business Foundation • • • •
Continuous reduction of costs (production and fixed costs) Reforms of spare parts operation Lean and powerful development Development of human resources with global perspective and framework to promote diversity for sustainable growth
8
Growth Strategies Based on Innovation: AHS • • • •
We have delivered 100 AHS autonomous dump trucks (cumulative) to mines in Australia and Chile. We have been controlling an AHS autonomous dump truck fleet from urban area located over 1,500km away from the mine in Australia. AHS has proven a high degree of flexibility capable of operating 24/7 in different work conditions, such as iron, coal and other mines. We hauled 1,000,000,000 tons (cumulative) of earth as of September 2016. Conceptual diagram of AHS GPS satellite
Central control room Fleet control
Loading site Dumping site
Western Australia: Riot Tinto s iron ore mines • Began operation in 2008. • Total of over 70 units in operation at Nummuldi, Yandicoogina and HopeDown4.
Chile: Codelco’s copper mine • Began operation in 2008. • 18 units in operation at Gaby mine.
Growth Toward Our
100th
Anniversary and Beyond
9
Although we assume that demand will remain sluggish for the time being, we will achieve our growth above the industry’s average by promoting growth based on innovation and of existing businesses.
Growth acceleration with the acquisition of Joy Global Sales: U$ 3.0〜3.5 Bn Op. margin: 10〜15％
10
Aggregate and Cement Sector
11
Characteristics of Aggregate and Cement Sector 1. Market characteristics Positioned in the middle of mining and construction sectors.
[Customers: distributed worldwide] [Main machines: mostly made in Japan] Mining customers No. of customers
Few (global players)
24/7 Over 5,000hrs/yr ,
Hours of machine use Site location
Mainly remote areas
Product destination Customer needs
Many Safety, $/ton
Aggregate/cement customers Construction customers Many
Site operation resembles mining.
Extensively many
8-16hrs/day, 5-6days/week 10-16hrs/day, 6days/week / Cities & suburbs Few (locally produced & consumed) Safety, environment, $/ton
Compared to mining, more sites, smaller scale and relatively smaller machines.
Cities & suburbs
Locally produced and consumed due to low unit price, and limited distance of transportation.
N/A Initial cost, trade-in value, fuel cost
2. Machines for use and production process Loading and hauling of ore Small no. of machines
Mining
Transportation
End products
Products
Super-large machines Blasting Processing
Refining
Foreign demand: exports
Iron, copper, gold, coal, etc.
Buildings, automobiles, smart phones, etc.
Large no. of machines Large & medium-sized machines
Aggregate/ cement
Crushed stone, gravel, sand
Blasting
Cement plants
Limestone
Roadbed material, etc.
Concrete plants Cement
Domestic demand: Transport within 50-70km
Buildings, homes, etc.
Market Environment Cement production in China and other countries
25
Others
20
China (%)
40
8000
30
20
6000 41.0
Urbanization rate: 44.6％
4000
33.0 10
2000
23.1 14.2
2005
6.0 5.0
2010
Cement production by region (excl. China) Asia CIS Europe
Soaring in emerging countries Stable in advanced countries
4.0
Latin America
3.0
North America
2015
Middle East etc.
Middle East
Japan
0.0
Reference： World Bank
Europe
N. America
CIS
2. Structural change of the industry (M&A and emerging global majors) Large companies becoming larger and global, mainly reflecting low interest rates.
Asia
L. America
1.0
0 2000
100Mn. tons
2.0
16.0
0 1995
0
5.8 10.2
Per capita GDP (world average)均）
10 5
Urbanization rate: 53.8％
36.4
31.4
4.59.8
10000
産量 volume Cement production
54.5
45.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
50
15
Soaring in China Gradually increasing in other countries
Japan
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
100Mn. tons
USD
China
23.5 17.5
Stable expansion supported by economic growth centering on emerging countries
%
80 70 57.3 60 50 40 30 20 10 0
18.0 15.0
1. Expanding cement production
10.4 12.7
100Mn. tons
30
Global production, GDP, Urbanization rate
12
● Lafarge Holcim established (2015) ● Heidelberg Cement acquires Italcement (2016)
Reinforcing Global Presence in the Aggregate & Cement Sector Basic policy
13
We position the aggregate & cement sector as the third important market segment, following mining and construction.
1)
By creating an exclusive unit in the head office in Tokyo we will make efforts as a company-wide project
2)
To expand business, we will capitalize on our know-how in building customer relationships and global operations, accumulated in the mining equipment business.
3)
We will take full advantage of our global network of distributors.
14
Thank you for your interest in Komatsu.
