FLSmidth has succeeded over the decades due to many factors. Some cite our market focus, others our product expertise and some say it’s our process excellence. Yes, we have good times and bad times. Economies fluctuate, and the marketplace hands us one challenge after another. But this challenging climate also serves to make us stronger.
The market for new cement kiln capacity has been on the bottom of the cycle since 2009. A similar or slightly higher level of activity is expected for 2014, whereas any real recovery is not expected until 2015, depending on overall global economic growth and business sentiment. This means the market for cement capacity remains very competitive and price sensitive with every project having multiple bidders. However, it varies from project to project whether price is the most important factor. Especially for projects offered on an EP – Engineering and Procurement – basis, FLSmidth has in recent years managed to significantly reduce the price gap to emerging market competitors.
In many cases, customers value FLSmidth technology and expertise higher than initial cost. FLSmidth sees products as “the means” to service customers rather than “the end”. Typically the initial in-vestment is only around 20% of the life-cycle costs, whereas the aftermarket makes up around 80% of the costs, which also is the reason why FLSmidth engages with its customers from a total cost of ownership perspective.
Full service provider
Over the past few years, we have added another dimension to our full service provider portfolio, O&M. An Operation and Maintenance contract means we are committed to a production guarantee and assure a minimum output over a longer period. In short, FLSmidth can offer the owner of a cement plant to run the plant with FLSmidth staff and to guarantee output levels for an agreed price per tonne. To date, FLSmidth has been awarded contracts to operate and maintain 15 cement production lines – delivered by FLSmidth as well as by peers - our most recent contract being with Dangote, which you can read more about on page 4.
Our markets continue to evolve, and we will change our approach to make sure that we can create value for our customers as we always have.