Since becoming CEO at FLSmidth, Denmark’s globally renowned supplier of systems, equipment and services to the cement and minerals industries, five months ago, Thomas Schulz has wasted no time in identifying new growth opportunities, as Guy Woodford discovered
Mining and minerals-related production and its associated services are in Thomas Schulz’s “genetic code”.
“I was born in Germany between a big coal mine and a big steel mill. When I came out the front door I saw on my left side the red sky over the steel mill, and on the right I saw the big coal deposit at the coal mine.”
In his early working days, Schulz worked in coal and other mines. “I really enjoyed it. It’s my world. It’s all the comrades you have around. You are never alone. You always have people working with you. No matter where you go in the world, miners have a common sense of how they see things. They have a big sense of supporting colleagues. It’s like a big family. It’s amazing.”
It’s this deep-rooted knowledge of, and passion for, all things mining and minerals that Schulz has channelled into creating a highly successful career, leaving his last coveted role as president of
So what attracted him to his new Copenhagen, Denmark-headquartered employers? “First of all, it’s a fantastic company. It’s a very strong business model, as it offers both cement and mineral products and systems, with fantastic future potential. I’ve only worked for Scandinavian companies, so it sits with what I would like to have from a working environment point of view.
“There are a lot of very, very good business people here. That matters quite a lot to me. At the same time, the customers are more or less the same as I had in my previous career. It’s the perfect fit.”
Keen to appraise his new firm’s offer to customers, Schulz began his new role with a business-wide ‘Health Check’. “I looked into the strategy of the company. It’s definitely a solid one, with a good long-term view to it.
“What we saw, too, is some areas that we have to focus a little bit more on. FLSmidth has, in the last few years, acquired quite a lot of companies. Now the focus is definitely on organic growth: organic growth not only from a revenue point of view, but also from product development. Another part that came out is that we see great importance in strategic HR, people development, development throughout the whole organisation. We are a truly global company, acting and working in more than 80 countries. To create a long-term view for and of a company, you have to work on people, and we have recruited a new HR Group Executive Manager.”
Schulz said that another key outcome of the FLSmidth Health Check was identifying where greater working efficiencies could be achieved.
“We launched an efficiency programme at the end of August which will bring us an EBITDA advantage of DKK750 million in 2015. This efficiency programme focuses on our cost structure, but, at the same time, important issues like sourcing, sales boost and reinvesting into leading technology – top R&D.”
Schulz believes the diversity of FLSmidth’s offer and its impressive global presence, with 15,000 employees in offices in more than 50 countries, are enabling the company to withstand the harsh economic climate in many parts of the world, including Europe. However, he is keen to stress that, in his view, the Eurozone is not developing “that bad” and “better than expected”.
“Cement and mineral industries are cyclical. The cement industry is not global. It develops locally or region-wide.
“In China newly installed kiln lines have completely collapsed in the last few months. The fact China really went down with newly installed capacity doesn’t mean that it impacts on any other area of the world. It’s a local, transport cost-sensitive product.
“We see countries and areas of the world with quite good development in cement. We call them ‘pockets of recovery’ in cement. It’s, of course, on a significantly lower side to that of a few years ago.
“If we look at minerals, it’s cyclical too, and we’re in the down part of the cycle. We expect that the mining industry will hit the bottom by the end of 2014 and then move slowly back to growth.”
Schulz believes the continued downward trend of the mineral production equipment and services sector until 2015 is being driven by the brake on capital expenditure in the mining industry. “The mines are still operating, they are still producing. The commodity prices may have dropped but are still on a reasonably good level. Out of that [2015], we do not see a very long dry period. But, typically for mining, the growth will start slowly.”
In order to capitalise on possible stronger cement and mineral production industry growth going into 2016 and beyond, Schulz believes it won’t be a specific service or equipment line that will be the greatest generator of larger FLSmidth’s revenues and profits, but the all-round diversity of the company’s customer offer.
“We offer single equipment as well as systems. We are one source, a full service provider. No matter how things go, one part of the business always has some business. If you are in a cyclical downturn as we are at the moment on the capital expenditure side, the mines are still working, and our customer service business is working quite well. From this point of view, we are well established to perform over the whole market cycle.
Schulz says that where FLSmidth is “really unique” is in its operation and maintenance service. “We have operated customer sites for several years. We have, since 2006, contracts [to run customer sites] and this side of the business has developed well for us. You can only do that if you have expertise with customer relations and all the equipment and technology onsite, including the expertise to operate sites where non-FLSmidth equipment is installed. It’s about how to operate mills, how to operate pumping stations, and so on.”
Good customer relations is, for Schulz, the key to retaining FLSmidth’s worldwide cement and minerals production market share, and to growing its customer base in key, “higher demand” emerging markets such as Africa, the Middle East, South East Asia and Latin America.
“To have good customer relations, you have to have local presence. It’s not enough for customers to only have contact with company headquarters. If customers call, we have to be there in a short time to support them. Our efficiency programme includes reinvestment in sales offices around the world where we think we have to do more to get closer to customers. It could be that we already have a good local presence in the west of a country and have to do more in the east, or vice versa. It’s not really that we have missed out [on developing good customer relations] in one part of the world. It’s about checking that we really offer all our products, all our services locally around the world.”
FLSmidth’s notable research and development programme is being geared, says Schulz, around customer requests on environmentally-friendly cement and mineral production equipment technology. He claims the firm is world leading in its air pollution control systems, selling and offering them into areas where the firm was “not that big before”.
“In China, for example, we recently received a big order for special air pollution control technology. It’s not a country, especially when it comes to cement, where we are expecting a lot of equipment sales. Dust emission is, of course, all over the world, in some countries more than others, and we have outstanding technology to offer.”
The Chinese customer order referred to by Schulz was placed by Shenzhen Energy Company (SEC) and entails delivery of 36 FLSmidth COROMAX advanced dust emission technology units for the firm’s two coal fired power plants in southern China. The units provided will contribute, Schulz says, to achieving SEC record low dust emissions.
More than half of the coal fired power plants globally are located in China, and they are a major contributor to air pollution. As part of its latest five-year plan, the Chinese Government has given top priority to environmental protection, introducing new stricter emission legislation. The FLSmidth units will be installed at SEC’s Shajiao-B and Mawan coal fired power plants in Shenzhen, China, as an upgrade of the existing electrostatic precipitators. The COROMAX technology makes it possible to catch ultra-fine dust particles while simultaneously reducing energy consumption.
Schulz, who has a PhD in Mining Engineering, emphasises that a lot of FLSmidth’s R&D work leads to single products for customers, which the firm regularly brings to the market. He sees this as an important area for maintaining the company’s premium service provider status in the cement and minerals production and services market. And he says that in-house funding for developing leading market technologies will increase. This will have a strong focus on reducing emissions, energy consumption, and, especially, on ensuring increased productivity for customers.
Having posted revenue of €3.338 billion in 2012, 99% of which from trade outside Denmark, achieving an annual EBITDA margin of 10-13%, and ROCE (Return on Capital Employed) of above 20% per annum were two financial targets set by FLSmidth last year. Schulz says they are both achievable post-2015.
With priorities of establishing excellent, localised customer service, developing leading cement and mineral production equipment technology, and achieving greater operational efficiencies now firmly set in place, how will Schulz judge his time as FLSmidth CEO to be a success?
“FLSmidth is older than 130 years. My aspiration is definitely to build the company for the next 130 years. We had the first sales office outside Europe in the US in 1895. The aim is to stay truly global and be a preferred partner to our customers. This is a truly long-term aim. Internally, I say: ‘Let us prepare for the next 130 years.”
Schulz says he will be drawing on the wealth of knowledge and industry experience he gained over more than 20 years to make success of his FLSmidth CEO role.
“I was lucky to start my business career in Scandinavia and I am even luckier to go on with it here. The constant improvement and development of a business is what I’m trying to drive. If you have a role, such as mine, it is a calling. You are 24-7 responsible and accountable.”
Something else Schulz says he will be placing strong emphasis on in his work at FLSmidth is maintaining excellent operations safety. “It is of utmost importance not only for us, but our customers and sub-suppliers too. Safety is not a one-time hit. We have a good standing on this, and we will do more,” he adds.
Schulz also has some valuable advice for anyone looking to build a long and successful career within the cement and minerals production and services industry.
“If you make a decision – go for it! If you do so, throughout your career, you will automatically get to where you want to go. It doesn’t matter whether that is as a CEO or a sales person or something else. Think about how you can improve what you are currently working on, and work on it well 24-7, and the successful career will come out of that.”
