Management Direction of Doosan September 2008 0 Disclaimer The information herein is provided for your convenience only. This document includes forward-looking statements including profit and loss estimates for 2008 and beyond. Such forward-looking statements involve both known and unknown risks, uncertainties and changes in market or other projected circumstances, which may cause actual results or performance to differ materially from stated or implied results or performance. Exchange rates and raw material prices could cause actual profits and revenue to differ materially from those stated and implied by such forward-looking statements. Please note that projections contained in this document reflect current market situations and management direction of Doosan and its affiliates, and may change or be modified in accordance with changes in market conditions and group strategy. The information is for information purposes only. We make no guarantees and assume no responsibility for the use of the information provided. Please do not base your investment decision on the information contained in this document. 1 Doosan is the 6th largest conglomerate in Korea (T KRW) Conglomerate ranking in Korea Key facts of Doosan (based on market capitalization) Ranking Market Cap Items Facts(’08 E) 1. Samsung 151.5 Revenue 23 2. LG 54.5 3. SK 39.5 EBITDA 2.4 4. Hyundai Motor Company 38.1 5. Hyundai Heavy Industries 27.5 Asset 26 6. Doosan 18.4 Total # of employees 35,300 7. Lotte 15.9 (August, ’08) 8. Kumho Asiana 11.0 9. GS 8.3 10. Hanjin 6.8 Source : `08. 7.17. Disclosure by Korea Exchange 2 Doosan is the oldest conglomerate in Korea with 112 years of history Early Market Restruct- Transition Growth Diversification Dominance uring to new biz. ~1900 `50 `60 `70 `80 `90 2000 `08~ Founded in 1896 Trading OB Beer Whisky Soju CocaCola Consumer Corn Product Goods Kimchi / Service Advertisement-Oricom Publication Fashion Capital 3M Nestle Kodak Construction Chemical Process Equipment Industrial Bottle/Can Packing Goods Electro-materials Power / Water / Casting & Forging Construction Equipment / Machine Tools / Industrial Vehicle 3 Doosan’s major affiliates Doosan Corp. • Electro-Materials • Liquor 41.2% (50.1%) Doosan Heavy • Power plant: nuclear/thermal Industry • Desalination plant • Casting/forging 38.9% 39.8% 20.0% 100% 51% (41.8%) (45.2%) (25.0%) Doosan Doosan Doosan Doosan Doosan Infracore* Mecatec Engine* Construction Capital** • Construction • CPE*** • Marine Diesel • Housing/civil/ • Installment/ equipment • Plant system Engine plant Lease finance • Industrial • Steel bridge • Corporate finance vehicles • Venture finance • Machine tool * Doosan Infracore owns 51.8% of DII shares and Doosan Engine owns 48.2% Listed ** Doosan Infracore holds another 20.0% share of Doosan Capital Private ***CPE: Chemical Process Equipment ( ) : % of share based on voting right 4 Table of contents • Change of Doosan • Doosan's Management Direction • Growth Strategy of Core Affiliates • Key Financials 5 Crisis in 1995 (B KRW) Cashflow from Operation 300 200 Debt (T KRW) 3.6 100 2.7 0 2.2 '90 '91 '92 '93 '94 '95 1.9 -100 1.4 Interest Expense 400 300 0 200 -0.4 100 -0.5 Significant negative 0 '90 '91 '92 '93 '94 '95 Cashflow cashflow CAPEX for Maintenance 160 120 -0.9 80 ‘91 ‘92 ‘93 ‘94 ‘95 40 0 L/E* 292% 376% 436% 544% 688% '90 '91 '92 '93 '94 '95 * Liability to Equity 6 Strategic changes for the last 10 years Take-off for global leadership Acquisition of new growth engine & portfolio transformation Successful restructuring 1996 2000 2006 •Restructuring •New start (2G Strategy) •Global M&As –3M, Nestle, Kodak –Growth of business –AES (US, ‘05) –OB, CocaCola, Seagram –Growth of people –Mitsui Babcock (UK, ’06) –Divestiture/ liquidation –IMGB (Romania, ’06) •Growth by M&A –Yonhap Capital (Finance, ’06) –Yantai Yuhua (China, ’07) •Improved financial structure −Doosan Heavy (former KHI) –CTI Engine (US, ’07) –D/E: 688% Æ 150% −Koryo Industrial Dev. (merged –Bobcat (US, ’07) into Doosan Construction) –Moxy (Norway, ’08) •Operation Improvement −Doosan Infracore (former −Introduction of performance Daewoo HI&M) •Continued restructuring enhancement programs –Kimch, etc •Management system upgrade 7 Doosan's change • Consumer Goods Æ ISB* • Domestic Æ Global Company • Local Leader Æ Global Leader * Infrastructure Support Business 8 Change from consumer goods to ISB* (T KRW) Business mix ISB affiliates : 20 (Revenue) 3.4 23 • Doosan Heavy 6.0 • Doosan Infracore 5.3 Industrial Goods • D I I 2.9 (33%) • Doosan Const. 2.0 • Doosan Engine 1.9 ISB • Doosan Mecatec 0.8 (87%) • IMGB / Babcock 1.2 Consumer Goods Non-ISB affiliates : 3 (67%) • Doosan Corp • Oricom Non-ISB -EM** BG • Samhwa C&C (13%) -Liquor BG • Doosan Capital ‘98 ’08(E) - Fashion BG • Neoplux - Publishing BG • Doosan Bears * Infrastructure Support Business ** Electro-Materials - Techpack BG 9 Change from domestic to Global company (T KRW, # of people) Revenue mix People mix 3.4 23 8,275 35,300 20 0.4 (0.2%) Overseas (12%) Overseas 15,100 (42.8%) 13 (57%) 3.0 8,255 Korea Korea (88%) (99.8%) 20,200 (57.2%) 10 (43%) ’98 ’08 ’98 ’08 10 Doosan's global network 91 subsidiaries, 45 branches, 29 plants, 3,800 dealers North Dacota, USA United Kingdom Beijing, China • MX, SSL, CTL production • Doosan Babcock Energy • China Holding Co. of plant of DII of Doosan Heavy Dubai, UAE • R&D Center of Doosan Infracore Doosan Heavy Belgium • Excavator/forklift production plant of Doosan Infracore Domestic plants • Doosan Infracore • Incheon ● ●●▲ • Changwon #1, #2 ● ● ● • Doosan Heavy ● ● Florida, USA ● Industries and ● ● • DHT, a desalination ● Construction company of Doosan • Changwon Heavy Yantai, China • Construction equipment Texas, USA Dobris, Czecho. India plant, Doosan Infracore • HF Controls, an • MX, SSL production • Doosan E&S instrument & control plant of DII • R&D Center of Doosan Sri Lanka system comp any Heavy • Doosan Heavy • Steel plant of Doosan ● Heavy ● Vietnam Doosan Group Romania • Casting & forging plant of • Steel structure production ● Subsidiaries 91 Papua New Guinea Doosan Heavy plant of Doosan Heavy Branches 45 • Power plant of Doosan • Boiler, HRSG production Dealers 3,800 plant of Doosan Heavy Heavy Infracore/Doosan Heavy Mfg. plant 29 Major plant projects 11 Change from local leader to global leader Local Market Position Global Market Position • Beer : #1 in Korea Doosan • Desalination MSF: #1 in Global (M/S 40%) • HRSG1) : #1 in Global (M/S 32%) Heavy • Soju : #2 in Korea • Crankshaft : #3 in Global (M/S 23%) • Casting/Forging : #1 in Global • Beverage* : #1 in Korea • Nuclear : #1 in Global : #1 in Korea • SSL/CTL2) : #1 in Global (M/S 39%) • Whisky Doosan • Attachment : #1 in Global (M/S 8%) Infracore • Portable Air : #1 in Global (M/S 28%) • Publishing : #1 in Korea Compressor • Fast Food : #1 in Korea • Excavator : #1 in China (M/S 20%) • Machine Tools : #4 in US (M/S 9%) • Kimchi : #1 in Korea Engine/ • Ship Engine : #2 in Global (M/S 25%) • CPE : #1 in Global • CCL** : #1 in Korea Mecatec * In carbonated soft drink 1) HRSG: Heat Recovery Steam Generator ** Copper Clad Laminate 2) SSL : Skid Steer Loader, CTL : Compact Track Loader 12 Growth of Doosan Revenue EBITDA (T KRW) (B KRW) 23.0 2,400 CAGR 18.6 2,103 21% CAGR 26% 11.8 1,013 6.9 670 3.4 247 '98 '02 '05 '07 '08(E) '98 '02 '05 '07 '08(E) 13 How did we make it happen? • "Cash is king!" • Bold restructuring • Transformation through Proactive M&A • Expertise in Operation • People Core Skills of management in Doosan 14 Cash is king! • Cashflow as top business priority – Cashflow based management system unique to Doosan – Most important factor for MBO (30%~40%) • Restructuring driven by cashflow, not by profit – Asset sales below the book value – Exit decision: Endure one-off big loss • Working Capital Management – DSO reduction: 154 days (`96) → 80 days (`01) • Management of adequate Capex and improvement of asset efficiency – Asset turnover: 0.63 (`96) → 0.73 (`01) 15 Bold restructuring Cash flow (B KRW) 923 • Portfolio restructuring 562 – Sale of key businesses : 13 biz 350 ㆍCoca Cola (’97), OB (’98), 13 182 Whisky (’98), etc ’95 ’96 ’97 ’98 ’99 ’00 ’01 – Divestiture of 12 businesses Financial ㆍVending machine, Pizza, Milk, etc -590 crisis -908 • Balance sheet restructuring Debt-to-equity* ratio (%) – ROIC < WACC as decision criteria 692 – Sale of real estate and idle assets 688 (e.g. Group HQ building) 333 – Sale of investment equity 191 (3M, Nestle, Kodak(’96)) 149 * Total liability '95 ‘96 ‘98 ‘00 ‘01 16 Proactive M&A and successful PMI •Stepping stone for transformation from consumer DHI acquisition goods company to heavy industry company •Acquisition based on fair value: 2.1x the market price – EBITDA Multiple: 7.5x in ’01 → 4.7x in ’04 •Successful turnaround: Market cap increase by 25~40x – Global leadership in power generation and desalination •Entry in construction equipment business DI acquisition •Acquisition based on fair value: 2.4x the market price – EBITDA Multiple: 14.5x in ’05 → 6.8x in ’08 •Successful turnaround: Market cap increase by 2.2~5x •M&A for global competitiveness: 9 companies Global M&A •Became Global Top 7 in construction equipment – Product/regional portfolio synergy – Basis for Global Top 3 in 2012 17 Doosan's principle of M&A: Strategic approach Pay Fair Value and focus on synergy : Double corp. value within 3~4yrs. Strategic objective M&A targets • AES (desalination) • Mitsui Babcock (generation) Technology / Skill • Yonhap Capital (financing) • CTI (engine) • Bobcat (construction equipment) • IMGB (casting & forging) • Yantai Yuhua (wheel loader) Product / Capacity • Bobcat(compact equipment) • Tong Myung Motrol (CE core parts) • Moxy (ADT, RDT*) Market / Network • Daewoo HI&M • Bobcat(network in US and Europe) * ADT: Articulated Dump Truck RDT: Rigid Dump Truck 18 Doosan's principle of M&A: Stick to financial guideline Revenue (T KRW) 30 M&A Bobcat growth 23 M&A DI 20 18.6 M&A DHI 15.9 11.8 10 6.2 6.1 8.7 3.4 3.1 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 Debt to Affordable 7 EBITDA* 6.5 5.8 Good 5 4.0 3.9 3.9 3.6 2.5 3.0 2.9 Excellent 3 * Based on Net Debt ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 19 Value creation after M&A – DHI(incl.
Details
-
File Typepdf
-
Upload Time-
-
Content LanguagesEnglish
-
Upload UserAnonymous/Not logged-in
-
File Pages46 Page
-
File Size-