FLSmidth & Co.

Annual Report (ESEF) • Feb 21, 2024

Untitled Annual Report 2023 1 January – 31 December 2023 Annual Report 2023 FLSmidth & Co. A/S Vigerslev Allé 77 DK-2500 Valby CVR No. 58180912 FLSmidth ■ Annual Report 2023 2 FY23 highlights 3 Letter to our shareholders 5 Highlights Financial performance highlights 2023 8 Sustainability performance highlights 2023 9 5-year key figures 10 2024 financial guidance 11 Long-term financial targets 12 Business FLSmidth at a glance 14 FLSmidth Group in the world 15 Strategy and business model 16 Sustainability 18 EU taxonomy 20 Mining business FLSmidth Mining at a glance 22 FLSmidth Mining in the world 23 FLSmidth Mining CORE'26 strategy 24 Market outlook and trends 26 Mining financial performance 27 Cement business FLSmidth Cement at a glance 30 FLSmidth Cement in the world 31 FLSmidth Cement GREEN’26 strategy 32 Market outlook and trends 33 Cement financial performance 34 Non-Core Activities Accelerated exit of Non-Core Activities 36 Non-Core Activities financial performance 37 Financial performance Consolidated Quarterly financial performance 39 Consolidated Annual financial performance 42 Governance Risk management and risk mitigation 47 Corporate governance 51 Board of Directors 55 Board competencies 57 Group Executive Management 58 Remuneration 60 Shareholder information 61 Financial statements Consolidated financial statements 64 Key accounting estimates and judgements 69 Parent company financial statements 123 Statement by Management 131 Independent auditor's report 132 Contents Management review 2023 FLSmidth reports Annual Report 2023 In our Annual Report for the FLSmidth Group we provide financial and operational information about the Group’s performance in 2023, and we describe the Group’s strategic plans and future goals. Sustainability Report 2023 In our Sustainability Report 2023, we disclose our progress towards achieving our sustainability ambitions. Corporate Governance Statement 2023 In our Corporate Governance Statement, you can read more about how we have incorporated and follow the recommendations prepared by the Danish Committee on Corporate Governance. Remuneration Report 2023 In our Remuneration Report, you can get a comprehensive overview of the remuneration of our Executive Management and our Board of Directors. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 3 FY23 highlights Advance Filtration Technologies (AFT) business was sold in July 2023. Mining Continued improvement in underlying profitability with an adjusted EBITA margin of 10.8% Better-than-expected integration of Mining Technologies led to increased synergy take-out Pumps, Cyclones & Valves Business Line established to support our growth ambitions Cement Solid improvement in underlying profitability with an EBITA margin of 6.7% Continued product portfolio pruning including divestments of the AFT business Decision to explore divestment options for the business announced in January 2024 Non-Core Activities Accelerated exit from the Non-Core Activities segment, supported by the KOCH Solutions transaction Backlog further reduced to DKK 531m at the end of 2023 Sustainability Good progression on all of our Science Based Targets Increasing diversity in the work- place with percentage of women managers increasing to 16.3% Energy reduction initiatives, more renewable energy and improved monitoring to drive down our own CO 2 emissions Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 4 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements Execution, transformation, integration, pure play separation and improved profitability. These are all the key themes describing our 2023. We have continued to see strong strategic progression across all areas. We are truly proud of this, and we have a very exciting future ahead of us! Tom Knutzen Chair Mikko Keto CEO Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 5 2023 has been yet another dynamic year for FLSmidth where we have continued to deliver on our key transformation activities. Driven by the hard work of all our dedicated employees, we have con- tinued to improve our business performance amidst an everchanging business environment. We are a key part of the solution Increasing the supply of critical minerals mined in a sustainable manner is essential to economic devel- opment and the green transition. At the same time, the cement industry remains one of the highest emitting industries in the world. Consequently, our value proposition is more relevant than ever, espe- cially in the midst of increased macroeconomic un- certainty and geopolitical turmoil. As a market-leading supplier to the global mining and cement industries, we take great pride in and responsibility for enabling more sustainable busi- ness practices for our customers. Not just to im- prove their performance, but also to reduce the en- vironmental impact from mineral processing and cement production. Integration, synergies and transformation Since the launch of our pure play strategies for Mining and Cement in early 2023, we have main- tained a relentless focus on ensuring a strong inte- gration of Mining Technologies, simplifying our busi- ness, optimising our operations and improving our profitability. During the year, we have successfully improved our legacy Mining business, while at the same time managed to integrate Mining Technologies ahead of our initial expectations. As a result, we have raised the total annual cost synergy takeout from the acquisition to around DKK 600m against the ini- tial expectations at the time of the acquisition of around DKK 360m. We have continued to simplify, de-risk and right-size our Cement business to improve profitability and make it “fit-for-purpose” with a strategic focus on the core products and services required in the ce- ment industry. The exit from Non-Core Activities (NCA) continued to progress at an accelerated pace. Since the NCA segment was established in Q4 2022, we have re- duced the order backlog by more than 85% and we are well on track for a full exit by the end of 2024. We still expect a total loss of around DKK 1bn over the exit period. This is an important achievement, as it paves the way for a more streamlined and profita- ble FLSmidth in the future. Embracing a future as two companies As part of the pure play separation process be- tween Mining and Cement, we have assessed dif- ferent business models, investment scenarios and potential ownership structures. Based on these as- sessments, we have concluded that the Cement business in the longer-term could benefit from an alternative ownership than FLSmidth’s. By pursuing a separate ownership, our objectives are to unlock the full potential of each of the busi- nesses and thereby maximise shareholder value. The process of exploring divestment options for the Cement business has been initiated, however any transaction is of course not guaranteed. Until further notice, the Cement business will continue to exe- cute on its ‘GREEN’26’ strategy and work towards the long-term financial target that has been set for the business. Exploring divestment options for the Cement business also represents a key step in unlocking the full long- term potential for our Mining business, which already today accounts for around 80% of our total Group revenue. We continue to see tremendous long-term opportu- nities in mining backed by strong industry funda- mentals and a positive long-term market outlook, especially due to the ever-growing demand for criti- cal minerals such as copper, lithium and cobalt. However, to fully leverage these growth factors, it requires dedicated management attention and sig- nificant investments. Continued performance improvement As a result of continued progression on our key transformation efforts, including the better-than-ex- pected integration of Mining Technologies, we have continued to improve our underlying business per- formance, and consequently delivered a positive cash flow from operations in 2023. Both Mining and Cement saw improved profitability in 2023. This was driven by strong execution, a re- lentless focus on reducing and limiting the share of more complex and risky orders, continued business simplification and product portfolio pruning in the Cement business. Performance has been adversely impacted by challenging market conditions, espe- cially in the cement industry. The mining service market has remained stable, whereas the mining products market has been impacted by some cus- tomers delaying large investment decisions. Further, we have continued to make good strides on our sustainability agenda during 2023. This in- cludes a good progression on all of our Science Based Targets as well as on the alignment with the EU Taxonomy. Ensuring a strong sustainability per- formance across our organisation remains a key fo- cus area while continuously mitigating areas where we have seen an unsatisfactory development, ex- emplified by our safety agenda where our perfor- mance has deteriorated versus last year. Execution and transformation in focus Our focus in 2023 was largely aimed at ensuring a strong integration of Mining Technologies and im- plementing the pure play strategies. With the inte- gration nearing completion, the focus for 2024 will be on ensuring continued execution of our transfor- mation. We will continue to simplify our business, optimise our footprint, implement the principal company model and execute on the pure play separation. In Letter to our shareholders Pursuing separate ownership for our Mining and Cement businesses is key to unlocking their respective full potentials. We believe Cement could benefit from an alternative owner, and that FLSmidth is best served by dedicating all its focus to the Mining business. Tom Knutzen, Chair Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 6 addition, we have started to re-invest some of the synergies into key commercial areas with the aim of fuelling our long-term growth ambitions for the Mining business. These investments will in particu- lar be directed towards areas that can further boost our service business growth and profitability as well as key innovation and technologies, exemplified by the HPGR Pro in Mining. This includes investments in our consumables busi- ness and in our service centres, manufacturing setup and in our Pumps, Cyclones & Valves busi- ness. The latter in particular holds significant un- tapped potential, and in order to maximise our full long-term value creation, we have as of February 2024 appointed a new President for this Business Line and elevated this role into the Group Executive Management to ensure strongest possible manage- ment attention. An exciting future We firmly believe that both our Mining and Cement businesses hold exciting long-term potential driven by economic development and the much-needed green transition. When we announced our decision to explore an alternative ownership for the Cement business, we simultaneously re-confirmed our 2026 long-term financial targets for both the Mining and Cement business. The re-confirmation of our long-term ambitions fur- ther serves as clear testament to our continued conviction in our strategy. In addition, it serves as testament to our confidence in our ability to suc- cessfully deliver on the transformation journey that we have embarked on – to the benefit of both our employees, customers, society and shareholders. We would like to acknowledge all our employees’ hard work and unwavering dedication. At the same time, we would also like to take this opportunity to thank our customers and shareholders for their con- tinued trust and support and we look forward to continuing this journey with you in 2024. Tom Knutzen Chair Mikko Keto CEO With the launch of our new pure play strategies, we have set clear directions and ambitions for our transformation journey in- cluding the long-term financial potential for both Mining and Cement. Key focus is to walk- the-talk to ensure strong strat- egy execution to the benefit of our employees, customers, soci- ety and shareholders. Mikko Keto, CEO Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 7 Highlights Financial performance highlights 2023 8 Sustainability performance highlights 2023 9 5-year key figures 10 2024 financial guidance 11 Long-term financial targets 12 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 8 Financial performance highlights 2023 Mining Technologies is included for the last four months of 2022. Non-Core Activities was established as of Q4 2022. Mining Cement Non-Core Activities Group Order intake (DKK) ▼ 8.7% 16,280 Order intake (DKK) ▼ 26.1% 4,888 Order intake (DKK) ▼ 0.5% 208 Order intake (DKK) ▼ 13.3% 21,376 Revenue (DKKm) ▲ 13.4% 17,107 Revenue (DKKm) ▼ 3.4% 6,048 Revenue (DKKm) ▲ 89.1% 951 Revenue (DKKm) ▲ 10.3% 24,106 EBITA & EBITA margin (DKKm - %) ▲ 20.0% 1,375 8.0% (adj. 10.8%) EBITA & EBITA margin (DKKm - %) ▲ 100.0% 408 6.7% EBITA & EBITA margin (DKKm - %) ▲ 15.2% (345) -36.3% EBITA & EBITA margin (DKKm - %) ▲ 52.5% 1,438 6.0% (adj. 8.0%) Revenue split by Service & Products (%) Revenue split by Service & Products (%) Revenue split by Service & Products (%) Cash flow from operating activities DKK 623m ▼ from DKK 968m in 2022 Earnings per share DKK 8.7 ▲ from DKK 6.5 in 2022 Net working capital ratio 5.7% ▼ from 7.8% end of 2022 NIBD/EBITDA 0.4x ▼ from 0.6x end of 2022 17,822 16,280 2022 2023 6,613 4,888 2022 2023 209 208 2022 2023 24,644 21,376 2022 2023 15,082 17,107 2022 2023 6,264 6,048 2022 2023 503 951 2022 2023 21,849 24,106 2022 2023 1,146 1,375 2022 2023 204 408 2022 2023 (407) (345) 2022 2023 943 1,438 2022 2023 62% (2022: 61%) 38% (2022: 39%) Service Products 54% (2022: 56%) 46% (2022: 44%) Service Products 32% (2022: 41%) 68% (2022: 59%) Service Products Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 9 Sustainability performance highlights 2023 1. To align with upcoming CSRD reporting requirements, scope 1 and 2 emissions data in 2022 are updated to reflect our financial control of Mining Technologies. Emissions data from Mining Technologies was disclosed separately in our 2022 Sustainability Report. 2. In 2023 we updated our Scope 3 calculation methodology. The 2022 figure is updated to reflect this change as well as the inclusion of Mining Technologies. See our Sustainability Report for more details. We align our business with the core principles of environmental, social and governance responsibilities. In 2023, we progressed in all our sustainability performance indicators except safety. All performance figures include Mining Technologies as of 1 September 2022. Scope 1 and 2 greenhouse gas emissions 1 tCO 2 e (market-based) Scope 3: Economic intensity (use of sold products) 2 tCO 2 e/DKKm order intake Water m 3 38,022 2.7% improvement 5,430 0.6% improvement 167,610 5.9% improvement Scope 1 and 2 CO 2 emissions fell within our 2023 target. Despite the integration of Mining Technologies in 2023, emissions decreased due to site consolidation and on- going emissions reductions initiatives. This includes scope 2 (market-based) emissions decreasing as renew- able electricity coverage increased from 21% to 26%. Scope 3 economic intensity improved from 2022, main- taining the strong reduction shown in the previous year. This is due to the sales split between less emissions-in- tensive products in Mining versus high emissions-inten- sive products in Cement remaining stable. Economic in- tensity decreased by 41.3% from our 2019 base year, placing us significantly ahead of the trajectory to meet our 2030 goal of a 56% reduction. Water withdrawal was reduced by 5.9% from 2022. However, water withdrawal from water-stressed areas in- creased as our exposure to water stress grew with ac- quired Mining Technologies sites and as other regions experienced high water stress. Expanding on our water reduction initiatives, we will launch a water conservation plan aligned with local and regional regulations in 2024. Safety (Total recordable injury rate) Total recordable injury rate/million working hours Women managers % Spend with suppliers with science-based targets % EU taxonomy - aligned revenue % of total revenue 2.7 1.2 deterioration 16.3 2.0%-points improvement 12.6 4.9%-points improvement 6.2 4.8%-points improvement Safety performance significantly deteriorated during the year, primarily due to increased frequency of inci- dents in manufacturing sites, organisational changes resulting in loss of knowledge, and greater use of third-party contractors. We remain committed to our Zero Harm safety ambition and are implementing more knowledge-sharing activities and training. We achieved our 2023 target and are progressing well towards our 2030 target of 25%. This reflects the suc- cess of our inclusive and focused hiring practices and more women promoted into leadership. We surpassed our 2023 target for spend with suppliers with science-based targets. This was mainly due to more of our larger suppliers committing to the Science Based Targets initiative and reflects our ongoing engagement with suppliers to promote environmentally responsible practices. Our 2025 target is for 30% of our spend to be with suppliers that have set science-based targets. The increase in EU taxonomy-aligned revenue is driven by a successful technical screening in compliance with rele- vant standards, specifically the completion of a life cycle assessment of additional technologies in 2023. We expect aligned revenue to continue to grow as we complete more life cycle assessments of MissionZero products and im- prove our ESG standards across the value chain. 39,079 38,022 2022 2023 5,461 5,430 2022 2023 178,064 167,610 2022 2023 1.5 2.7 2022 2023 14.3% 16.3% 2022 2023 7.7% 12.6% 2022 2023 1.4% 6.2% 2022 2023 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 10 5-year key figures DKKm 2019 2020 2021 2022 2023 Income statement Revenue 20,646 16,441 17,581 21,849 24,106 Gross profit 4,849 3,865 4,180 5,076 6,087 EBITDA 2,008 1,134 1,401 1,300 1,761 EBITA 1,663 771 1,030 943 1,438 EBIT 1,286 428 668 619 1,200 Financial items, net (115) (47) (81) (67) (146) EBT 1,171 381 587 552 1,054 Profit for the year, continuing activities 798 226 374 351 672 Loss for the year, discontinued activities (22) (21) (17) 1 (181) Profit for the year 776 205 357 352 491 Orders Order intake, continuing activities 19,554 18,524 19,233 24,644 21,376 Order backlog, continuing activities 14,192 14,874 16,592 23,541 17,593 Earning ratios Gross margin 23.5% 23.5% 23.8% 23.2% 25.3% EBITDA margin 9.7% 6.9% 8.0% 5.9% 7.3% EBITA margin 8.1% 4.7% 5.9% 4.3% 6.0% EBIT margin 6.2% 2.6% 3.8% 2.8% 5.0% EBT margin 5.7% 2.3% 3.3% 2.5% 4.4% Cash flow Cash flow from operating activities (CFFO) 948 1,421 1,449 968 623 Acquisitions of property, plant and equipment (177) (171) (116) (88) (176) Cash flow from investing activities (CFFI) (661) (376) (273) (2,310) (257) Free cash flow 287 1,045 1,176 (1,342) 366 Free cash flow adjusted for acquisitions and disposals of enterprises and activities 574 1,082 1,185 777 201 Balance sheet Net working capital 2,739 1,752 1,058 1,893 1,382 Net interest-bearing debt (NIBD) (2,492) (1,808) 889 (726) (639) Total assets 23,532 20,456 23,053 29,845 27,011 CAPEX 523 494 397 424 604 Equity 8,793 8,130 10,368 10,787 10,828 Dividend to shareholders, proposed 0 103 173 173 231 Use of alternative performance measures Throughout the report we present financial measures which are not defined according to IFRS. We have included additional information in note 7.4 Alternative performance measures and 7.8 Definition of terms. Financial ratios 2019 2020 2021 2022 2023 Book-to-bill 94.7% 112.7% 109.4% 112.8% 88.7% Order backlog / Revenue 68.7% 90.5% 94.4% 107.7% 73.0% Return on equity 9.1% 2.4% 3.9% 3.3% 4.5% Equity ratio 37.4% 39.7% 45.0% 36.1% 40.1% ROCE 10.9% 5.1% 7.2% 5.9% 8.2% Net working capital ratio, end 13.3% 10.7% 6.0% 7.8% 5.7% NIBD/EBITDA 1.2 1.6 (0.6) 0.6 0.4 Capital employed, average 15,251 15,195 14,384 15,888 17,552 Number of employees 12,346 10,639 10,117 10,977 9,377 Share ratios Cash flow per share, diluted 18.9 28.3 27.8 17.0 10.9 Earnings per share (EPS), diluted 15.5 4.2 6.9 6.5 8.7 Dividend yield 0.0 0.9 1.2 1.2 1.4 Dividend per share, proposed 0 2 3 3 4 Share price 265.4 232.8 244.3 251.7 287.2 Number of shares (1,000), end 51,250 51,250 57,650 57,650 57,650 Market capitalisation, end 13,602 11,931 14,084 14,511 16,557 Sustainability key figures Spend with suppliers with science-based targets 4.9% 7.7% 12.6% Scope 1 and 2 greenhouse gas emissions (tCO2e) market-based 41,155 34,737 39,079* 38,022 Scope 3: Economic intensity Use of sold products (GHGs in tonnes CO2e/DKKm order intake) 9,248** 10,348 5,461 5,430 Water withdrawal (m3) 221,613 197,346 201,997 178,064 167,610 Safety, TRIR Total Recordable Injury Rate (including contractors) 1.6 1.0 1.9 1.5 2.7 Women managers 11.2% 13.1% 14.3% 14.3% 16.3% EU taxonomy - aligned revenue 1.4% 6.2% Other key figures Quality, DIFOT Delivery In Full On Time 88.0% 88.3% 85.1% 81.9% 81.9% The financial ratios have been computed in accordance with the guidelines of the Danish Finance Society. Refer to note 7.8 for definitions of terms. Mining Technologies is included for the last four months of 2022. 2022 Scope 1 and 2 (market based) was updated to reflect Mining Technologies. Sustainability key figures are from our Sustainability Report. Starting in 2018, TRIR is including contractors. Spend with suppliers with science-based targets was tracked for the first time in 2021. Scope 3 economic intensity was a new target introduced in 2021 using 2019 data as baseline. No data was tracked for economic intensity in 2020. 2019 baseline has been recalculated to include Mining Technologies which is reflected in 2022 reported number. Reported lifetime greenhouse gas emissions for 2021 have been recalculated by 631 tonnes CO₂e due to two orders moved from 2021 to 2022 to align with the effective Order Intake date Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 11 2024 financial guidance Our guidance for the full year 2024, as set out in the Company Announcement no. 2-2024 on 29 January 2024, is maintained. The guidance reflects the ongoing business simplification and transformation efforts, continued improvement in the core Mining business, realisation of the full cost synergies from the Mining Technologies acquisition, continued profitability progress in the underlying Cement business and the ongo- ing exit from the Non-Core Activities segment. Mining Cement Non-Core Activities Group Revenue (DKKbn) 16.0-17.0 (DKK 17.1bn) Revenue (DKKbn) 4.0-4.5 (DKK 6.0bn) Revenue (DKKm) 250-350 (DKK 951m) Revenue (DKKbn) 20.0-21.5 (DKK 24.1bn) Adj. EBITA margin 11.5-12.5% (10.8%) Adj. EBITA margin 5.5-6.5% (6.7%) Adj. EBITA margin 9.0-10.0% (8.0%) EBITA (DKKm) Loss of 200-300 (Loss of 345) EBITA margin 7.5-8.5% (6.0%) Compared to 2023, we expect market demand to be softer in 2024, mainly driven by the Products business due to some customers delaying larger investment decisions. However, the mining indus- try continues to benefit from a positive long-term outlook for minerals crucial to global economic development and the green transition. Guidance for adjusted EBITA margin includes ad- justment for transformation and separation costs of around DKK 200m for the full year 2024. The adjusted EBITA margin is impacted by the realisa- tion of the full cost synergies from the Mining Technologies acquisition, cost base inflation and re-investment of parts of the synergies into key commercial areas to support our CORE’26 strat- egy and to fuel our long-term growth ambitions. We expect the short-term outlook for the cement industry to remain impacted by macroeconomic uncertainty. The guidance for revenue and adjusted EBITA margin reflects the ongoing execution of the ‘GREEN’26’ strategy, continued business simplifi- cation and product portfolio pruning, including the expected closing of sale of the MAAG gears and drives business during Q1 2024. Further, the guid- ance for adjusted EBITA margin includes adjust- ment for transformation and separation costs of around DKK 100m for the full year 2024. The guidance for revenue reflects continued exe- cution of the order backlog and contract negotia- tions aimed at reducing the scope of the remain- ing Non-Core Activities order backlog. The EBITA margin guidance reflects the operational loss- making nature of the business as well as costs re- lated to finalise the exit of the business segment by end of 2024. The Consolidated Group guidance reflects the sum of the guidance for the three business seg- ments. The guidance for 2024 is subject to uncertainty due macroeconomic uncertainty and geopolitical turmoil. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 12 Long-term financial targets Our long-term financial targets, as released in connection with our Capital Markets Day on 18 January 2023, are re-confirmed. Mining Cement Capital structure targets 13-15% EBITA margin for the FY2026 ~8% EBITA margin for the FY2026 <2x Leverage (NIBD/EBITDA) 30-50% Dividend pay-out ratio Based on our FY2024 guidance, we directionally expect our organic Mining revenue growth (CAGR towards FY2026) to be above market growth. We expect this to be driven by our Products business growing in line with the market and our Service business growing above the market. We expect the mining market to grow at 3-6% (CAGR). The key drivers for achieving our Mining EBITA margin target for the FY2026 include synergy takeout and commercial integration of Mining Technologies, simplification of our operating model, de-risk- ing, Service business growth, improved Service and Products mix as well as growth from our Products business. Based on our FY2024 guidance, we directionally expect our organic Cement revenue (CAGR towards FY2026) to grow in line with GDP growth in the markets where we are present. In the short to mid-term period, we expect a negative impact from re- cession on our Products revenue, while we expect our Service reve- nue to remain largely stable. In the long-term, we expect both Prod- ucts and Service revenue to grow in line with GDP growth. The key drivers for achieving our Cement EBITA margin target for the FY2026 include simplification of our operating model, de-risking, Ser- vice business growth from increased installed base penetration as well as improved Service and Products mix. Our capital allocation is focused on having a strong balance sheet while allowing for growth investments and value-adding M&A. Excess cash may be distributed either via extraordinary dividends or share buyback programmes. In addition, directional expectations for cash flow generation include: ■ Net working capital ratio to sales is expected to increase towards 15% for the FY2026 driven by Service business growth. ■ Expected annual CAPEX ratio to sales of 2-3% with investments mainly driven by green technologies and supply chain investments. ■ Effective tax rate expected to be reduced from business simplifica- tion. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 13 Business FLSmidth at a glance 14 FLSmidth Group in the world 15 Strategy and business model 16 Sustainability 18 EU taxonomy 20 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 14 Towards zero emissions by 2030 1882 Danish company founded more than 140 years ago 9,377 employees using their unique knowledge and capabilities to meet our customers’ needs 150+ countries across the globe where we serve customers 60+ countries across the globe where we have a local presence 24.1bn in consolidated Group revenue in 2023 (DKK) FLSmidth at a glance FLSmidth ■ Annual Report 2023 14 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements We are a leading supplier of productivity and sustainability solutions to the global mining and cement industries. We enable our customers in Mining and Cement to move towards zero emissions by 2030. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 15 FLSmidth ■ Annual Report 2023 15 FLSmidth Group in the world Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements Note: Numbers in brack- ets are comparative 2022 figures. North America NAMER 23% Share of revenue (24%) 5% Reported revenue growth 19% Share of employees (17%) South America SAMER 25% Share of revenue (23%) 20% Reported revenue growth 20% Share of employees (20%) Sub-Saharan Africa, Middle East & South Asia SSAMESA 14% Share of revenue (16%) -3% Reported revenue growth 26% Share of employees (26%) Asia & Australia APAC 20% Share of revenue (18%) 20% Reported revenue growth 11% Share of employees (12%) Europe, Central Asia & North Africa ECANA 18% Share of revenue (19%) 8% Reported revenue growth 24% Share of employees (25%) Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 16 Fundamentals of our business In an increasingly resource-intensive world, our customers in the mining and cement industries face a triple challenge: producing more, more sus- tainably and under more difficult conditions. Commodity demand is fuelled by global economic growth and the green transition, particularly in- creasing the need for critical minerals like copper, nickel and lithium. Our clients are not only com- mitted to increasing sustainable production meth- ods (e.g., by reducing emissions, minimising power consumption and conserving water), they also face escalating operational challenges. These in- clude declining ore grades, exploration of more remote and intricate deposits, a landscape of in- tensifying regulations and looming geopolitical uncertainties. At FLSmidth, we position ourselves as a full flow- sheet technology and service provider for the global mining and cement industries. Our role is to assist our customers in enhancing their opera- tional performance, reducing operating costs and minimising their environmental footprint. Our value proposition is anchored in our industry expertise, a foundation built on trust and profi- ciency, a team of highly skilled professionals, a significant installed base and a commitment to sustainability and technological innovation. We leverage these strengths to meet the evolving needs of our customers, ensuring that they can navigate the complexities of their industries effec- tively and sustainably. Our customers’ investment needs are twofold: capital investments and operating expenses. Cap- ital investments include new capacity and capac- ity expansions as well as replacements and upgrades in existing facilities, allowing us to intro- duce advanced technology and innovations for new sites and modernise current operations. Capi- tal investments are inherently cyclical, lumpy and subject to general and customer-specific eco- nomic conditions. The operating expenses of our customers are linked to production levels, including the day-to- day costs of energy, maintenance, labour, water recycling and other materials. Our expertise is cru- cial in enhancing operational efficiency for our customers, we leverage our large installed base to build a stable, recurring service business. Transformation FLSmidth is on a transformation journey turning from an engineering-based business with a legacy in large capital projects towards a technology company focused on service offerings. This is ac- companied by a significant simplification and streamlining of our operations. To further improve transparency, accountability and our financial performance, we have estab- lished a Business Line structure with a global P&L management under each segment. This reflects the simplification of our operating model with our global footprint being optimised to better reflect our business environment and our long-term growth opportunities. Our strategy emphasises an asset-right model and a streamlined setup. Localising our service footprint whilst consolidating our supply chain and execution centres are key. This ensures organisa- tional efficiency and prompt delivery. Innovation and R&D are prioritised to align with our sustainability and service-focused objectives, as we exit Non-Core Activities and minimise risk exposure. The pillars of our transformation include sustainability, innovation, simplification, risk man- agement, transparency, performance, agility and adherence to our core values. Continued high focus on profitability and a de- risked approach are crucial to our transformation journey. With less greenfield mining and fewer new cement plants being built, our overall strate- gic focus in Mining and Cement is shifting towards a service-led business. We pursue fewer large, complex orders and target more high-margin ser- vice offerings. Lifecycle profit approach Our ethos of 'value over volume' guides our busi- ness management, focusing on long-term profita- bility for stakeholder value creation. The products we supply in Mining and Cement often generate business opportunities far exceeding their initial investment over their lifecycle. We are strategi- cally positioned to support our customers through- out this lifecycle, capturing a substantial share of service-related revenue. Whilst Products provide a large installed base for our Service business, we maintain a selective ap- proach to the Products orders taken to ensure alignment with our profitability goals. Lifecycle prof- itability is a key consideration in our decision-mak- ing and contract engagements, with set profitability guidelines for both our Service and Products busi- nesses and their combined lifecycle offerings. Pure play approach Starting January 2024, Mining and Cement are operating as independent 'pure play' businesses. This structure enables each to focus on unique op- portunities, maximising potential and value creation. Each business follows a tailored strat- egy: CORE’26 for Mining and GREEN’26 for Ce- ment. You can read more about these pure play strategies on page 24 and 32, respectively. This approach stems from the limited synergies, distinct customer bases, product offerings and in- dustry dynamics between the businesses. It offers enhanced operational flexibility, independent de- cision-making, accountability, cost clarity and de- fined roles and responsibilities. Further progress includes the divestiture of the Non-Core Activities (NCA) segment, initiated in Q4 2022, with a substantial portion sold to KOCH So- lutions in Q3 2023. Full exit from this segment is anticipated by the end of 2024. Strategy and business model Key milestones in 2023 ■ Increased Service share from 58.7% to 66.4% of order intake. ■ De-risking our project portfolio with the accelerated divestiture of Non-Core Activities. ■ Expansion of our service centre and supply chain capabilities to foster further growth in services. ■ Transition to operating two distinct businesses from 2024. ■ Decision to explore divestment options for the Cement business announce in January 2024. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 17 Our values Our transformation and strategy execution is truly rooted in our company values, encapsulated as 'TEACH' - trust, empowerment, accountability, collaboration, and honesty. These values foster strong internal engagement and shape our inter- actions with customers, business partners, suppli- ers, shareholders and communities. People & Engagement People are at the centre of FLSmidth. Our role in the green transition and the transformation jour- ney we have embarked on are inspirational and to deliver, we need talented colleagues who share the FLSmidth values and ambitions going forward. As we operate a global business with more than 100 nationalities, finding the right people, devel- oping them and retaining them remain key to FLSmidth’s future success. Diversity, equity, and inclusion are therefore important elements in our continuous search for innovation and operational excellence across the company. We have a strong focus on our global employer branding, in-house talent development and the well-being of our em- ployees. We continue to conduct monthly wellbe- ing and engagement surveys globally to obtain dynamic feedback. We believe that diverse teams perform better and focus on ensuring that our organisation is diverse in terms of gender, background, education, nation- alities, etc. All managers and employees have a role in creating a diverse and inclusive organisa- tion. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements Our company values Trust We are trustworthy and believe others are as well Empowerment We have the necessary autonomy to drive results Accountability We take ownership to get it done Collaboration We proactively work together to achieve success Honesty We are transparent and act with good intent We execute on what we have promised: FLSmidth is transforming into a technol- ogy company focused on service offer- ings. We run a more profitable and less risky business with incredible potential, built by an exceptional team. Mikko Keto, Group CEO Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 18 The impact of our business We are part of the mining and cement industries, both known for their substantial environmental and social impacts locally and globally. The in- dustries combined contribute approximately 10% of the world’s CO 2 emissions, and the operations of mining and cement companies are often promi- nent in their local communities, emphasising the need for sustainable practices. This is a key rea- son we take a value chain approach to evaluating the impact of our business. Our impact goes far beyond our own operations and is directly tied to the operations of our suppliers and customers. It is particularly significant that 99% of our value chain emissions are generated from customers’ use of our products over their operational life. Materiality and stakeholders Our value chain approach enables us to identify potential material issues and opportunities, which we disclose in our sustainability reporting. We welcome the greater attention on harmonisation of sustainability requirements and disclosures by customers, analysts and regulators. We are in- creasingly evaluating the impacts of our business in accordance with the latest regulations and di- rectives. To prepare for the upcoming EU Corpo- rate Sustainability Reporting Directive (CSRD) re- quirements on double materiality, we have completed an impact materiality assessment as an update to our previous materiality assessment. When updated and finalised, the results of the double materiality assessment will help us priori- tise future activities and disclosures. To ensure all potential impacts were identified, we thoroughly assessed all sector-agnostic topics within the European Sustainability Reporting Standards (ESRS) together with additional sector specific topics stemming from GRI, the Copper Mark and other relevant sources. The findings are also based on our due diligence processes, Task Force on Climate-related Financial Disclosures (TCFD) assessment, human rights salience assess- ment and employee surveys. We also consider a broad range of perspectives through continuous dialogue with various stake- holder groups, such as industry associations, peers, suppliers, customers, communities and more. This dialogue is necessary for us to achieve a supportive policy environment, active involve- ment from civil society and strong collaboration across the value chain. The impact assessment has not only reinforced our current strategic focus areas, but also allowed us to identify and prioritise additional impact ar- eas across our value chain, which we will report on from 2024. Our assessment revealed that we have impacts within topics of increasing material- ity to our business, including biodiversity and eco- systems, resource use and circular economy, and affected communities. We will further address these topics by refining appropriate actions in 2024 as part of our CSRD compliance. Our current impact areas under focus in this report are described in our Sustainability Report. Once the double materiality assessment is finalised, new identified areas will be introduced in next year’s report. Governance structure Operating model Following a thorough strategic review of our sustainability approach in 2023, we are imple- menting a new operating model to further embed sustainability in our business and our organisa- tional culture, ensuring clear accountability and coordination across the company. The model in- volves embedding ESG criteria into the capital ex- penditure approval and budgeting processes, inte- grating sustainability KPIs into business processes and incentive schemes, and establishing global sustainability standards across products, services and sites and at Group level. Accountability A strong governance structure is essential for em- bedding sustainability in our organisation. The Board of Directors addresses sustainability up- dates every quarter and conducts an annual sus- tainability review to ensure it can effectively guide ongoing developments. This includes reviewing and approving our various policies annually. Group Executive Management acts as the com- pany’s Sustainability Board and holds overall ac- countability for the direction, progress and focus of our sustainability work, while the daily imple- mentation of the strategy, underlying ambitions and policies to support sustainable development lies with relevant functions and ESG policy own- ers. Key to our governance structure are targets and corresponding KPIs that are cascaded throughout the business. Our long-term incentive plan con- nects the remuneration of FLSmidth’s senior man- agement with progress in “economic intensity”, which links our business growth with selling more energy-efficient, less CO2-intensive products. The weighting of the sustainability KPI for Group Exec- utive Management is 20%. As part of the newly introduced operating model, we are progressively introducing sustainability based performance objectives within relevant employees' annual performance and develop- ment plans. Sustainability is included in the bonus programme for employees working in selected sales functions. Sustainability What is double materiality? A double materiality assessment consists of two main elements: how our activities impact society and the world and how the world around us impacts our financial performance. To date, we have completed an update to the assessment of how our activities impact society, with the financial assessment to be updated and concluded in early 2024. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 19 How we create sustainable value Our assessment of impacts, risks and opportuni- ties to date has reinforced a significant oppor- tunity for us to address key global sustainability issues, particularly related to climate change miti- gation. We aim to achieve this by helping the min- ing and cement industries address their environ- mental impact. The insights gained from our assessments shape our ambitions as we strive to be a key sustainability partner for our stakehold- ers, driving sustainable business practices across the industry value chains. Our approach to sustainability, shown in the Sustainability Wheel, focuses on two broad areas: helping our customers reduce their environmental impact through technological solutions (Mission- Zero), and continually improving our own environ- mental, social and governance performance (ESG) across our value chain. MissionZero MissionZero is our technology-based sustainabil- ity programme in which we help customers accel- erate towards more sustainable operations, re- duce their environmental footprint and benefit from the green transition and global infrastructure development. The programme focuses on helping customers reduce emissions, energy consumption, water consumption and use, and waste. Given the significance of downstream emissions in our value chain, their reduction is crucial to our long-term business performance. Our scope 3 downstream greenhouse gas (GHG) emissions reduction target is aligned with the Science Based Targets initia- tive and is part of our commitment to working to- wards the UN Sustainable Development Goals (SDGs). Environmental, social and governance Through our ESG efforts, we address the impact of our own operations, and those of our customers and suppliers, across the entire value chain. We set measurable targets and specify corresponding actions for material issues. These include address- ing our scope 1, 2 and 3 GHG emissions in accord- ance with the Science Based Targets initiative; cultivating a safe, diverse and inclusive workplace for our people; implementing clear standards for our suppliers; and upholding rigorous compliance and human rights standards. Our ESG commit- ments and targets are closely connected to the SDGs. We manage these material issues through clearly defined responsibilities and standardised processes to drive progress and effectiveness. Our approach encompasses continuous perfor- mance monitoring to identify potential issues and determine necessary actions. Read more about our priorities and actions in our Sustainability Report. Through our technology-based sustainability programme MissionZero, we help our customers reduce the environmental impact of their operations. We take a holistic approach to ESG, integrating stringent governance and human rights standards, developing a diverse, inclusive workplace, and engaging collaboratively with cus- tomers and suppliers. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 20 Part of the European Green Deal, the EU taxonomy is a core ena- bler to deliver on the EU’s ambi- tious environmental goals for 2030. We continue to report according to the EU taxon- omy framework, which demonstrates how we sup- port customers in reducing their GHG footprints. Of the six environmental objectives defined by the EU taxonomy, only “climate change mitigation” and “climate change adaptation” are in scope for our 2023 reporting. This year we have assessed the other four environment goals and concluded that our activities are not currently in scope within these objectives. Progress in 2023 In line with expectations, alignment across reve- nue, OPEX and CAPEX increased during 2023. This was driven by more core product technolo- gies fulfilling the in-depth technical screenings re- quired to show our technologies contribute to cli- mate change mitigation. We expect continued growth in alignment numbers. Revenue Total aligned revenue in 2023 increased to 6.2% of total revenue. This was driven by more mining technologies passing the technical screenings un- der economic activity 3.6 ‘Manufacture of other low carbon technologies’. Mining and Cement ac- count for 5.4% and 0.8% of aligned revenue re- spectively. Non-Core Activities accounts for no aligned revenue. Eligible, non-aligned revenue to- talled 24.1%; including aligned revenue, total eligi- ble 1 revenue 2 was 30.3%, an increase from 2022. This was partly driven by increased sales of eligi- ble products and an increase in eligible products. New eligible products in 2023 contributed 4% of the total increase. CAPEX Aligned CAPEX reflects annual additions related to our investments in our aligned product portfolio, including R&D and production equipment, and ad- ditions to tangible assets such as land and build- ings. Aligned CAPEX in 2023 increased to 6.6%, representing DKK 42m of additions, of which DKK 36m is driven by R&D activities for developing products meeting alignment criteria. Eligible, non- aligned CAPEX decreased from 61.7% in 2022 to 46.5% in 2023. This was mostly driven by a de- cline in additions related to Land and Buildings, under economic activity 7.7 ‘Acquisition and own- ership of buildings’, which was elevated in 2022 due to the acquisition of Mining Technologies. OPEX Aligned OPEX increased to 2.3% in 2023 as more products passed screenings for alignment and more of our plant and equipment used for the manufacture of products became aligned. All aligned OPEX activities relate to economic activity 3.6 ‘Manufacture of other low carbon technolo- gies’. Eligible, non-aligned OPEX increased to 32.2% in 2023. This reflects the remaining direct costs related to the production of eligible prod- ucts, including expensed R&D activities that were not aligned. EU taxonomy 1) Total eligible revenue, OPEX and CAPEX represent both “Aligned” and “Eligible and non-aligned”. 2) We use the term “revenue” instead of “turnover” to align with the terminology in our financial reporting. 20 Measuring eligibility (in scope activities) is not a measure of sustainability performance, but the initial identification process of economic activities that could support the EU’s green transition. In 2023, we identified three eligible economic activities across revenue, CAPEX and OPEX: 3.6 ‘Manufacture of other low carbon technologies’, 8.2 ‘Data-driven solutions for GHG emissions reduc- tions’, and 7.7 ‘Acquisition and ownership of build- ings’. Measuring alignment de- fines environmentally sus- tainable activities under the EU Taxonomy framework and requires further as- sessment of the identified eligible activities. To be considered sustainable un- der the framework, the three KPIs need to pass screening criteria. The screenings for alignment in- cluded proving substantial contribution to one of the environmental objectives; doing no significant harm (DNSH) to the remaining five objectives; and meet- ing minimum safeguards. To document significant contribution, products screened for align- ment must demonstrate sub- stantial contribution through a third-party approved life cy- cle assessment. We assess relevant manufac- turing sites against the DNSH criteria, using a risk-based approach, meaning that we have focused on identifying significant risk within climate adaptation, water, circular economy, pollution preven- tion and biodiversity. Further- more, we have assessed our compliance at company level with the minimum safeguards as defined by the EU Taxon- omy Regulation. See our Sustainability Report for more information about our EU taxonomy re- porting. Eligibility and alignment 2023 Revenue OPEX CAPEX Economic activities The EU has defined a list of economic activities (pur- chase/sale of goods and/or services) as enablers for the green transition. These are economic activities that could contribute to the environmen- tal objectives. Non-eligible Eligible and non-aligned Aligned Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 21 Mining business FLSmidth Mining at a glance 22 FLSmidth Mining in the world 23 FLSmidth Mining CORE'26 strategy 24 Market outlook and trends 26 Mining financial performance 27 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 22 17.1bn 2023 revenue (DKK) 62/38% 2023 Service vs. Products revenue split ~50% exposure to minerals critical to the green transition 1 6,581 Employees (FY2023) FLSmidth Mining at a glance FLSmidth ■ Annual Report 2023 22 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements Our purpose is ”mining for a sustainable world” and our mission is ”delivering solutions for tomorrow’s mine” 1 Based on order intake FY2023 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 23 FLSmidth Mining in the world FLSmidth ■ Annual Report 2023 23 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements Note: Numbers in brack- ets are comparative 2022 figures. North America NAMER 22% Share of revenue (23%) 7% Reported revenue growth South America SAMER 31% Share of revenue (30%) 19% Reported revenue growth Sub-Saharan Africa, Middle East & South Asia SSAMESA 11% Share of revenue (12%) 1% Reported revenue growth Asia & Australia APAC 20% Share of revenue (19%) 19% Reported revenue growth Europe, Central Asia & North Africa ECANA 16% Share of revenue (16%) 15% Reported revenue growth Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 24 Executing our Strategy In 2023, we have made important strides on the execution of our CORE’26 strategy. We are trans- forming FLSmidth, and our Mining business, to be- come a technology company focused on service offerings. CORE’26 creates the basis for strong performance and consistent value creation: a more profitable, less cyclical business mix with lower risk. We have established a Business Line structure and a global P&L management. Further, we have integrated Mining Technologies which was ac- quired in Q3 2022. We have expanded the share of Services and standardised Products, and we have de-risked our project portfolio. In our service business, we have focused on im- proving the customer experience and satisfaction by simplifying and streamlining our commercial operations to reduce response times and improve the ‘ease of doing business’ with FLSmidth. We have invested in growth opportunities, ex- panding our portfolio of service centres and con- sumables offerings to support our customers in running their operations efficiently. We leverage our unique knowledge of process, equipment, application and digital to create unique value through our growing suite of digital- enabled optimisation services, which we increas- ingly offer also on a subscription-basis. Purpose Our purpose is ‘Mining for a sustainable world’. Mining is crucial to the global green transition and the future demands from the growing middle-class population worldwide. The road to net-zero emis- sions requires an extraordinary increase in the supply of minerals essential to the green transi- tion, including copper, lithium, nickel and cobalt. It is both an opportunity and a responsibility, where we at FLSmidth have a unique position to lead this journey. Mission Our mission is ‘delivering solutions for tomorrow’s mine’. We continue to leverage our ability to inno- vate, improve and produce world class offerings across the full flowsheet in line with our Mission- Zero focus. This benefits our customers and drives motivation and competencies amongst our em- ployees. Focus areas Our CORE’26 strategy has four focus areas: ■ Sustainability ■ Technology ■ Service ■ Performance These focus areas are further detailed into con- crete strategic initiatives, linked to goals and cas- caded through the organisation. This way we en- sure alignment between strategic ambitions from the top and operational execution, strengthening our ability to deliver on our targets across our business – collectively, we strive towards the same goals. Sustainability Building a better future for our employees, society and the planet. As a key sustainability partner for our customers, we can drive significant progress across the indus- try value chains. Sustainability at FLSmidth has two dimensions: ■ Firstly, through our customer-centric, technology based sustainability programme, MissionZero, we help our customers accelerate towards more sustainable operations. We enable them to ben- efit from opportunities within the green transition and global infrastructure development, while also significantly reducing their environmental footprint. ■ Secondly, we address the impact of our own op- erations, and those of our suppliers, across the value chain. We set relevant targets and corre- sponding actions related to material issues which include addressing our scope 1, 2 and 3 emissions in accordance with the Science Based Targets initiative, committing to product stew- ardship, creating a safe, diverse workplace for our people and establishing clear standards for our suppliers. Read more about Sustainability and MissionZero in our Sustainability Report 2023. FLSmidth Mining CORE’26 strategy Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 25 Technology The complete provider for process and product technology. As a technology leader, we are in a unique posi- tion to enable our customers to move towards mining for a sustainable world. We are transforming from being an engineering company to a technology leader, and we are uniquely positioned to support our customers’ productivity, sustainability, and financial ambi- tions. Our efforts in innovation and digitalisation are im- portant to remain a market leader and to deliver on our mining strategy, greater scarcity of re- sources such as energy, water and raw materials leads to more complex and costly operations that challenges the performance of our customers. This calls for advanced technical solutions, which is where FLSmidth has a leading position and a competitive edge. Our strong digital capabilities are founded on our experience in digitalising the full flowsheet. This positions us as a market leader in analysing and understanding performance data. An increasing share of our products and solutions offered to our customers are becoming intelligent and self-learn- ing. Customers are increasingly focused on im- proving productivity and profitability, while reduc- ing their environmental footprint. Digitalisation offers huge potential and has be- come a natural and integral part of our product portfolio. The benefits to our customers are clear: increased productivity through optimisation, more reliable operations, increased up-time through proactive, predictive and increasingly prescriptive maintenance. Service Global partner for life-cycle performance and sus- tainability. Service is at the heart of our business – it is the key to customer productivity and the main driver of our profitability. As a leader in the industry with a significant installed based across the world, lev- eraging this is key to our future success. A higher service share allows us to maintain a healthy, sta- ble business despite the cyclical nature of the in- dustry. This makes it possible to spend more on R&D, acquire new technologies and invest in our people. A focus on service also greatly benefits our cus- tomers. We continuously deliver quantifiable value over the lifecycle of a mine that advances customers’ sustainability agendas and improves their bottom lines. Performance Accelerating profitability through core businesses, simplification and balanced risk. Performance helps us measure financials, safe- guard our business and mitigate risks. When we are more focused on our core business, prioritising value over volume, and reducing our exposure to risk and market volatility, we are a healthier and more valuable company. The successful execution of the initiatives identi- fied within the Sustainability, Technology and Ser- vice focus areas ultimately contribute to our over- all performance and growth. By investing in our people and technologies, we will realise the full potential of FLSmidth as the mining industry’s technology leader. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 26 We continue to see a stable and active service market and a relatively softer products market. The long-term industry outlook remains positive supported by economic development and a growing demand for minerals crucial for the green transition. Throughout 2023, the global mining markets have remained active within major commodities. This especially applies to the global copper, lithium and gold markets. However, we continue to see some adverse effects from delayed large capital investment decisions, permitting issues in certain countries and prevailing macroeconomic and geo- political uncertainty. Looking into 2024, the service market is expected to remain stable and active, and we continue to see a steady inflow of customer service enquiries as miners aim to improve operating performance through continued investments in productivity and sustainability solutions. The products market is inherently more volatile and remains affected by some customers delay- ing large investment decisions, albeit with a pre- vailing demand for products offering high-effi- ciency and sustainability solutions. Order intake development in Q4 2023 Mining order intake decreased by 22% compared to Q4 2022. Excluding currency effects, the order intake decreased by 18%, driven by a decline in Products orders. Service order intake increased by 1% compared to Q4 2022 reflecting stable market conditions in- cluding a healthy demand for spare parts as well as for Upgrade & Retrofits, offset by our continued efforts to exit low-margin, basic labour services. The decline in Products mainly reflected that the comparative quarter of Q4 2022 included two large orders at a combined value of around DKK 1.2bn, whereas Q4 2023 did not include any large orders. In addition, the Products order intake also reflected our continued de-risking efforts and the current market situation. During the quarter, Service and Products orders accounted for 71% and 29% of the total, respec- tively, compared to 55% and 45% in Q4 2022, re- spectively. Order intake development in 2023 Excluding currency effects, Mining order intake decreased by 5% driven by Products. This devel- opment reflects our ongoing transformation efforts and market conditions. Currencies had a 4% nega- tive impact on order intake for the year. 2022 only included four months of Mining Tech- nologies activities and the establishment of the NCA segment as of Q4 2022, whereas 2023 re- flects the full year impact of Mining Technologies activities, the NCA segment and our exit from Rus- sia. If excluding a high-level estimate of the im- pact from those changes, the underlying order in- take decline in 2023 was approximately 6% compared to 2022. Service order intake increased by 3% in 2023 re- flecting stable market conditions with a continued healthy activity level and demand for especially spare parts and consumables. Products order intake decreased by 25% in 2023. The order intake for the year included five large, announced orders with a combined value of around DKK 1.9bn compared to seven large orders with a combined value of around DKK 2.8bn in 2022. Service orders and Products orders accounted for 67% and 33% of Mining order intake, respectively, in line with our targeted share of Service order in- take. The book-to-bill was 95%, resulting in the Mining order backlog decreasing by 14% to DKK 12,267m compared to 2022. Market outlook and trends Order intake split by Region Q4 2023 Order intake split by Products and Service Q4 2023 Order intake split by Commodity Q4 2023 12% 25% 10% 29% 24% ECANA APAC SSAMESA SAMER NAMER 71% (2022: 55%) 29% (2022: 45%) Service Products 44% 11% 7% 1% 10% 27% Copper Gold Coal Fertiliser Iron ore Other Minerals Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 27 Revenue development in Q4 2023 Q4 2023 revenue increased by 2%. Excluding cur- rency effects, revenue increased by 7%. If exclud- ing the impact from our exit from Russia in 2022, the underlying revenue growth in the quarter was approximately 4%. Mining Service revenue amounted to DKK 2,505m in Q4 2023 reflecting continued active market conditions. Service revenue decreased by 5% compared to Q4 2022, which had a higher level of spare parts and consumables as well as basic la- bour services. Products revenue increased by 14% compared to Q4 2022. The growth was driven by strong back- log execution. Service and Products revenue comprised 56% and 44% of total Mining revenue in Q4 2023, respectively, compared to 60% and 40% in Q4 2022, respectively. Gross profit development in Q4 2023 Gross profit increased by 11% to DKK 1,258m, from DKK 1,132m in Q4 2022. The corresponding gross margin increased to 28.1% as a result of good mar- gin execution and our de-risking strategy, partly offset by integration costs related to the acquisi- tion of Mining Technologies. EBITA development in Q4 2023 The Adjusted EBITA margin was 11.8% when ex- cluding integration costs related to the acquisition of Mining Technologies of DKK 138m. This was driven by continued strong execution and positive effects from our ongoing transformation efforts, in- cluding a strong integration of Mining Technolo- gies. The EBITA margin increased to 8.7% from 7.7% in Q4 2022. The number of employees in Mining has been re- duced by more than 500 since the end of Q4 2022. This reduction reflects the synergy takeout related to the integration of Mining Technologies, partly offset by new hirings in key commercial ar- eas to fuel our long-term growth ambitions to sup- port our CORE’26 strategy. Revenue development in 2023 Revenue increased by 13%. Excluding currency ef- fects, revenue increased by 18%. 2022 only included four months of Mining Tech- nologies activities and the establishment of the NCA segment as of Q4 2022, whereas 2023 re- flects the full year impact of Mining Technologies activities, NCA segment and our exit from Russia. If excluding a high-level estimate of the impact from those changes, the underlying revenue growth in 2023 was approximately 21%. The growth was mainly driven by a continued healthy demand for spare parts and consumables, partly offset by relatively lower revenue within profes- sional services due to our de-risking efforts as well as market conditions. Mining Service revenue increased by 16% com- pared to 2022 reflecting stable market conditions and supported by the acquisition of Mining Tech- nologies. Service revenue accounted for 62% of the total Mining revenue in 2023. Products revenue increased by 9% compared to 2022. The growth in Products revenue was driven by strong backlog execution. Mining financial performance Growth in order intake and revenue in Q4 2023 (vs. Q4 2022) Revenue and EBITA margin DKKm EBITA margin % Revenue split by Products and Service Q4 2023 0% 2% 4% 6% 8% 10% 12% 14% 16% 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Q4 Q1 2022 Q2 Q3 Q4 Q1 2023 Q2 Q3 Q4 Service Products EBITA % Adjusted EBITA % 56% (2022: 60%) 44% (2022: 40%) Service Products Order intake Revenue Organic -18% 7% Currency -4% -5% Total growth -22% 2% Mining (DKKm) Q4 2023 Q4 2022 Change 2023 2022 Change Order intake 3,568 4,579 -22% 16,280 17,822 -9% - Hereof service order intake 2,529 2,500 1% 10,871 10,575 3% - Hereof products order intake 1,039 2,079 -50% 5,409 7,247 -25% Order backlog 12,267 14,277 -14% 12,267 14,277 -14% Revenue 4,477 4,374 2% 17,107 15,082 13% - Hereof service revenue 2,505 2,641 -5% 10,681 9,191 16% - Hereof products revenue 1,972 1,733 14% 6,426 5,891 9% Gross profit 1,258 1,132 11% 4,672 3,794 23% Gross margin 28.1% 25.9% 27.3% 25.2% Adjusted EBITA 528 542 -3% 1,856 1,598 16% Adjusted EBITA margin 11.8% 12.4% 10.8% 10.6% EBITA 390 337 16% 1,375 1,146 20% EBITA margin 8.7% 7.7% 8.0% 7.6% Number of employees 6,581 7,126 -8% 6,581 7,126 -8% Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 28 Gross profit development in 2023 Gross profit increased by 23% to DKK 4,672m, from DKK 3,794m in 2022. The corresponding gross margin increased to 27.3% as a result of good margin execution, positive effects from our ongoing transformation and a relatively higher share of Service revenue, partly offset by integra- tion costs related to the acquisition of Mining Technologies. EBITA development in 2023 In 2023 EBITA was impacted by costs related to the integration of Mining Technologies of DKK 481m. Adjusted for these costs, the EBITA margin was 10.8%. EBITA increased by 20% to DKK 1,375m and the corresponding EBITA margin in- creased by 0.4%-points. The positive development was driven by positive effects from our ongoing transformation efforts including a better-than-ex- pected integration of Mining Technologies and ac- celerated cost synergy takeout. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 29 Cement business FLSmidth Cement at a glance 30 FLSmidth Cement in the world 31 FLSmidth Cement GREEN’26 strategy 32 Market outlook and trends 33 Cement financial performance 34 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 30 6.0bn 2023 revenue (DKK) 54/46% 2023 Service vs. Products revenue split +50% presence at all cement plants across the world 1 2,669 Employees (FY2023) FLSmidth ■ Annual Report 2023 30 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth Cement at a glance “We want to use our history, reputation, and expertise to drive the green transition in the cement industry” 1 At FY2023 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 31 FLSmidth ■ Annual Report 2023 31 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth Cement in the world Clusters: 1) Turkey, Egypt, Nigeria, Pakistan, Saudi Arabia, UAE. 2) Brazil, Colombia, Mexico, Peru, 3) US, Canada 4) Denmark, Algeria, Austria, Belgium, France, Germany, Ireland, Italy, Morocco, Netherlands, Poland, Portugal, Slovakia, Spain, Switzerland, United Kingdom 5) Indonesia, Philippines, Thailand, Vietnam US 3 24% Share of revenue (23%) 1% Reported revenue growth Brazil 2 8% Share of revenue (8%) 9% Reported revenue growth Export 20% Share of revenue (19%) -1% Reported revenue growth Indonesia 5 9% Share of revenue (6%) 50% Reported revenue growth China 7% Share of revenue (8%) -19% Reported revenue growth Denmark 4 14% Share of revenue (12%) 9% Reported revenue growth Turkey 1 7% Share of revenue (9%) -31% Reported revenue growth India 11% Share of revenue (15%) -27% Reported revenue growth Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 32 FLSmidth Cement continues to progress towards our ambition of providing world-class service and technologies to help customers increase produc- tivity and reduce emissions. Our focus has been on implementing our GREEN’26 strategy with the following three pillars. 1) Shape the green future of the cement industry via innovative services and technologies to signifi- cantly reduce the 7% of global CO 2 emissions at- tributed to the industry. 2) Transition to a service-first business model, lev- eraging our over 140-year experience and pres- ence in over 50% of global cement plants and part- nering with customers to optimise their end-to-end plant performance. 3) Implement a resilient operating model that supports FLSmidth’s transition into a green, ser- vice-centric organisation, while ensuring profitabil- ity amidst a volatile macroeconomic environment and evolving Cement industry. Green transition We believe the long term future of the Cement in- dustry is green. 2023 has marked the successful launch of proprietary green technologies that have already led to noteworthy emissions reduc- tions, including the technical launch of our FUELFLEX® Pyrolyzer technology. FUELFLEX® en- ables customers to maximise use of alternative fuels and reduce NOx emissions. A key customer stated that the pilot technology was a ”game- changer for them in their ambition to reduce car- bon emissions.” While FUELFLEX® technology en- ables the firing of 100% alternative fuels, FLSmidth Cement recognises the importance of planning for a transition period. As such, we offer upgrades and technology add-ons that enable the use of conventional fuel as a ”fallback option” in paral- lel, but at much lower minimum feed rates with in- creased precision. For example, the Pfister® FEED- flex technology applied to the DRW Rotor Weighfeeder enables precise coal dosing to avoid CO 2 spikes, a necessary improvement in the tran- sition. As the cement industry faces escalating raw mate- rial costs, FLSmidth Cement remains focused on promoting calcined clay as an effective clinker substitute. Preparations for two clay sites are pro- gressing well, and we are excited to begin full op- erations in 2024. As is our DNA in FLSmidth Ce- ment, we continue to strongly invest in research and development to pioneer further innovations in cement production to drive decarbonisation in the cement industry. Going forward, we aim to con- tinue helping customers transition to such solu- tions, leveraging our technical insights, domain ex- pertise, and analysing performance plant-by- plant. Service business model In 2023, FLSmidth Cement prioritised enhancing our service offering across spares, wears and pro- fessional services, including our digital focus via asset management. Capitalising on FLSmidth Ce- ment's expertise and experience, we offer custom- ers customised asset management support to maximise the value of their plants. Using our digi- tal tools, we can connect directly to our customer's assets to identify optimisation opportu- nities and deploy our experts to support imple- mentation of tailored solutions that enhance per- formance – across operational, environmental, safety and other customer priorities. For example, we partnered with a key customer to improve op- erating performance and helped drive significant value in their operations in the United States and Canada. Additionally, we streamlined our geographic focus into seven priority service clusters, including Bra- zil, China, Denmark, India, Indonesia, Turkey and the US, representing 36 key markets, and have seen good strategic progress within these clusters in 2023. We also strengthened our agent and re- seller ecosystem to ensure global reach and en- hanced quality service delivery – even beyond our core clusters. Moving into 2024, we will con- tinue to enhance our offering to provide the high- est quality for our customers. Operating model transformation Throughout 2023, we worked to ensure the organ- isation was fit-for-purpose. We shifted our geo- graphic focus into seven aforementioned clusters, delayered significantly, and right-sized to best re- flect our green and service ambitions. Addition- ally, we have exited non-core business areas such as Advanced Filtration Technologies to optimise our product portfolio. FLSmidth also continued its pure play journey towards a stand-alone Cement organisation, as we believe this will better position us to focus on core business opportunities, opti- mise our cost base and double down on strategic growth investments. FLSmidth Cement GREEN’26 strategy Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 33 2023 was a mixed year for the cement industry with growing macroeconomic and geopolitical uncertainty as well as an evolving regulatory landscape. These headwinds were partly offset by pockets of healthier market conditions, primarily in India and the US. The fourth quarter of 2023 remained impacted by the general slow-down in market demand, which characterised most of the year. This market envi- ronment was in large parts a result of prevailing high interest rates and global inflation levels which have adversely impacted construction activ- ity and thus the demand for cement. These dy- namics have been most profound in the products market, while the service market has been rela- tively more stable through the year. As a result, global cement producers have continued to show strict capital spending discipline throughout most of 2023 and into 2024 leading to substantial de- lays in major investment decisions, which has ad- versely impacted especially the cement products market. We continue to observe healthier market condi- tions in certain geographies. Some markets, such as India and the US, have proven to be relatively less impacted by the market slow-down and are showing positive signs, especially within the ser- vice market. On the other hand, other markets, such as China and Europe remained weaker, and we expect this trend to continue in 2024. While the short-term market outlook remains chal- lenged, the long-term trend towards more sustain- able cement production, supported by the grow- ing urgency of the green transition, remains and continues to support long-term growth opportuni- ties. Order intake development in Q4 2023 Cement order intake decreased by 15% in Q4 2023 compared to Q4 2022. Excluding currency effects, order intake decreased by 13%. Service order intake decreased by 2% compared to Q4 2022, mainly due to lower orders for Up- grades & Retrofits, partly offset by an increase in orders for spare parts and professional services within our core market clusters. Products order intake decreased by 37% com- pared to Q4 2022 driven in part by our strategy of moving away from large-scale, risky projects and in part by current market conditions, which throughout 2023 have been challenging, espe- cially in Asia. Service and Products comprised 74% and 26% of the total Cement order intake in Q4 2023, respec- tively, compared to 65% and 35% in Q4 2022, re- spectively. Order intake development in 2023 Cement order intake declined by 26% in 2023 to DKK 4,888m compared to DKK 6,613m in 2022. Organically, order intake decreased by 24%. Service order intake decreased by 16% compared to 2022, mainly due to lower orders for consuma- bles and for Upgrades & Retrofits. Product order intake decreased by 40% compared to 2022 driven in part by the implementation of our GREEN’26 Cement strategy, which includes de-risking and product portfolio pruning, as well as adverse effects from market conditions. Service and Products comprised 65% and 35% of the total Cement order intake in 2023, respec- tively, compared to 57% and 43% in 2022, respec- tively. Market outlook and trends Order intake split by cluster in Q4 2023 (vs. Q4 2022) For information on clusters refer to page 31 Order intake split by Products and Service Q4 2023 13% 9% 12% 5% 4% 23% 9% 25% India Turkey Denmark China Indonesia Export cluster Brazil US 74% (2022: 65%) 26% (2022: 35%) Service Products Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 34 Revenue development in Q4 2023 Revenue decreased by 14% compared to Q4 2022. Organically, revenue decreased by 11%. Service revenue decreased by 19% compared to Q4 2022 due to challenging market conditions as well as the divestment of the AFT business com- pleted in Q3 2023. Products revenue decreased by 5% compared to Q4 2022 as a result of our customers’ continued strict capital spending disci- pline leading to delays in larger investment deci- sions. Service and Products comprised 55% and 45% of total Cement revenue in Q4 2023, respectively, compared to 59% and 41% in Q4 2022, respec- tively. Gross profit development in Q4 2023 Gross profit decreased by 28% in Q4 2023 com- pared to Q4 2022 as a result of the lower reve- nue, relatively higher share of Products revenue versus Service revenue compared to the compara- tive quarter of Q4 2022. The corresponding gross margin decreased by 5.1%-points to 24.7% in Q4 2023. EBITA development in Q4 2023 EBITA increased by 47% in Q4 2023 to DKK 103m compared to DKK 70m in Q4 2022. The increase was primarily a result of relatively lower SG&A costs due to positive effects from our ongoing transformation efforts including non-recurring one offs related to the ongoing rightsizing. The corre- sponding EBITA margin improved by 3.1%-points to 7.4% in Q4 2023. Employees The number of employees in Cement was reduced by 601 compared to end Q4 2022. The reduction reflects continued optimisation of our global foot- print, simplification of the operating model to im- prove operations and long-term profitability as well as the divestment of the AFT business com- pleted in Q3 2023. Revenue development in 2023 Revenue decreased by 3% compared to 2022. Or- ganically, revenue decreased by 1%. Service revenue decreased by 8% due to the con- tinued challenging market conditions as well as the divestment of the AFT business. Products reve- nue increased by 3% compared to 2022 as a re- sult of good backlog execution. Service and Products comprised 54% and 46% of total Cement revenue in 2023, respectively, com- pared to 56% and 44% in 2022, respectively. Gross profit development in 2023 Gross profit decreased by 5% compared to 2022 as a result of the relatively lower share of Service revenue in the year as well as costs related to the continued business simplification but partly offset by good margin execution. The corresponding gross margin declined to 25.1% compared to 25.6% in 2022. EBITA development in 2023 EBITA increased to DKK 408m from DKK 204m in 2022, mainly as a result of the net gain from the divestment of the AFT business as well as rela- tively lower SG&A costs due to the ongoing trans- formation efforts. The corresponding EBITA margin was 6.7% compared to 3.3% in 2022. The underlying EBITA (i.e., excluding the net gain from the sale of the AFT business) amounted to DKK 306m, corresponding to an increase of 50% compared to 2022 and the underlying EBITA mar- gin improved to 5.1% reflecting the impact of the continued business simplification, product pruning and focus on higher margin orders. Cement financial performance Growth in order intake and revenue in Q4 2023 (vs. Q4 2022) Revenue and EBITA margin DKKm EBITA margin % Revenue split by Products and Service Q4 2023 0% 2% 4% 6% 8% 10% 12% 0 500 1,000 1,500 2,000 2,500 Q4 Q1 2022 Q2 Q3 Q4 Q1 2023 Q2 Q3 Q4 Products revenue Service revenue EBITA % 55% (2022: 59%) 45% (2022: 41%) Service Products Order intake Revenue Organic -13% -11% Currency -2% -3% Total growth -15% -14% (DKKm) Q4 2023 Q4 2022 Change 2023 2022 Change Order intake 1,044 1,223 -15% 4,888 6,613 -26% - Hereof service order intake 775 794 -2% 3,160 3,752 -16% - Hereof products order intake 269 429 -37% 1,728 2,861 -40% Order backlog 4,795 6,386 -25% 4,795 6,386 -25% Revenue 1,397 1,618 -14% 6,048 6,264 -3% - Hereof service revenue 769 954 -19% 3,246 3,536 -8% - Hereof products revenue 628 664 -5% 2,802 2,728 3% Gross profit 345 482 -28% 1,519 1,602 -5% Gross margin 24.7% 29.8% 25.1% 25.6% EBITA 103 70 47% 408 204 100% EBITA margin 7.4% 4.3% 6.7% 3.3% Number of employees 2,669 3,270 -18% 2,669 3,270 -18% Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 35 Non-Core Activities Accelerated exit of Non-Core Activities 36 Non-Core Activities financial performance 37 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 36 The sale of material handling assets to KOCH Solutions, continued order backlog execu- tion combined with success in re-scoping and terminating con- tracts have significantly reduced the NCA order backlog during 2023. We are consequently on track for a full exit of the NCA segment by end 2024. Rationale behind the NCA segment As part of FLSmidth’s pure play Mining strategy focusing on core technologies and services, the NCA segment was established in October 2022 with the mandate to fully exit all its activities. The NCA segment comprises specific loss-making min- ing activities and products that are no longer deemed to be of core strategic importance to FLSmidth. A designated organisational structure was estab- lished to ensure transparency and effective execu- tion of the divestment or wind-down, oversee the employees that were initially part of the segment and to limit losses from these activities. The initial NCA or- der backlog started at around DKK 3.6bn as of end Q3 2022, of which approximately 50% originated from FLSmidth and 50% from the former Mining Tech- nologies. The vast majority of the order backlog re- lated to Products orders. An accelerated exit On 14 June 2023 FLSmidth and KOCH Solutions signed an Asset Purchase & Transfer Agreement involving material handling technology that is part of the Non-Core Activities segment. The transac- tion, which completed on 1 September 2023, in- cluded intellectual property for port/terminal equipment, stockyard systems, pipe conveyors and various continuous surface mining equipment from both legacy FLSmidth and Mining Technolo- gies portfolios; an order backlog totalling around DKK 0.4bn; the inclusion of project execution ser- vice for select order backlog retained by FLS- midth; the purchase and lease of certain facilities in Germany and Australia; and transfer of over 100 employees and contract workers. As a result of the sale of assets, combined with the operational closures of businesses such as KH Mineral (France) and ATP Technologies (Canada), the re-scoping and termination of various con- tracts and successful execution of open orders, the NCA order backlog has been reduced at an accelerated pace during 2023. As a consequence, and as announced upon the closing of the transaction with KOCH Solutions, we expect the NCA segment to be fully exited around end of 2024 (previously towards end of 2025). Moreover, we expect the total loss for the Non- Core Activities segment over the exit period will be around DKK 1.0bn (previously around DKK 1.2bn). The total loss estimate is based on histori- cal performance and costs associated with the winddown or divestment decision. The remaining 127 employees at end 2023 focus on managing the close-out of retained capital pro- jects, assisting with the reduction of inventory and physical closure of facilities and addressing cus- tomer inquiries relating to either intellectual prop- erty that was not in the scope of the divestment or previously closed orders (i.e., warranty and other related topics). Accelerated exit of Non-Core Activities Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 37 Order intake development in Q4 2023 Order intake for Non-Core Activities amounted to DKK 8m, of which 38% related to Service order in- take and 62% to Products order intake. The order intake was related to contractual obligations and parts already in stock. Order backlog development in Q4 2023 Order backlog amounted to DKK 0.5bn by end of Q4 2023 representing a decrease of around DKK 0.1bn compared to Q3 2023 and a decrease of around DKK 3.1bn since the establishment of the NCA segment as of Q4 2022. The decrease re- flected the divestment to KOCH Solutions and ex- ecution of the order backlog as well as continued re-scoping and contract terminations. The majority of the remaining order backlog is to be executed in countries within APAC and ECANA regions. Revenue development in Q4 2023 Revenue for NCA in Q4 2023 amounted to DKK 94m. Service and Products accounted respec- tively for 9% and 91% of revenue. Gross profit development in Q4 2023 Gross profit was negative and amounted to DKK -47m. The corresponding gross margin amounted to -50.0% reflecting the general volatil- ity and operationally loss-making nature of the NCA segment. EBITA development in Q4 2023 EBITA for NCA amounted to DKK -83m, corre- sponding to a margin of -88.3% driven by the neg- ative gross profit and costs related to the ongoing exit of the activities in the segment. Order intake development in 2023 Order intake for NCA amounted to DKK 208m in 2023 reflecting contractual obligations. The order intake level was similar to that of 2022. Service and Products orders represented 73% and 27% in 2023, respectively. Revenue development in 2023 NCA revenue amounted to DKK 951m in 2023 compared to DKK 503m in 2022, which only con- tained 3 months of NCA revenue. Service and Products revenue represented 32% and 68%, re- spectively. Gross profit development in 2023 Gross profit amounted DKK -104m in 2023 with a corresponding gross margin of -10.9% reflecting the general volatility and operationally loss-mak- ing nature of the NCA activities. EBITA development in 2023 EBITA in 2023 amounted to DKK -345m with a cor- responding EBITA margin of -36.3% reflecting the operationally loss-making nature of the NCA busi- ness and costs related to the exit. The divestment to KOCH Solutions had no material impact on EBITA for 2023. Total number of employees of the segment amounted to 127 at end 2023, representing a de- cline of 90 employees compared to Q3 2023 driven by the divestment to KOCH Solutions, con- tinued rightsizing and natural attrition. Compared to end 2022 the number of employees in the NCA segment has been reduced by 78%. Non-Core Activities financial performance Order intake split by Region Q4 2023 % Order intake split by Commodity Q4 2023 % 18% 36% 15% 25% 6% ECANA APAC SSAMESA SAMER NAMER 1% 24% 62% 13% Copper Gold Coal Fertiliser Iron ore Other Minerals Non-Core Activities (DKKm) Q4 2023 Q4 2022 Change 2023 2022 Change Order intake 8 209 -96% 208 209 0% - Hereof service order intake 3 131 -98% 152 131 16% - Hereof products order intake 5 78 -94% 56 78 -28% Order backlog 531 2,878 -82% 531 2,878 -82% Revenue 94 503 -81% 951 503 89% - Hereof service revenue 8 206 -96% 309 206 50% - Hereof products revenue 86 297 -71% 642 297 116% Gross profit (47) (320) 85% (104) (320) 68% Gross margin -50.0% -63.6% -10.9% -63.6% EBITA (83) (407) 80% (345) (407) 15% EBITA margin -88.3% -80.9% -36.3% -80.9% Number of employees 127 581 -78% 127 581 -78% NCA was established in Q4 2022 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 38 Financial performance Consolidated Quarterly financial performance 39 Consolidated Annual financial performance 42 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 39 Order intake in Q4 2023 Order intake decreased by 23% in Q4 2023 to DKK 4,620m. Excluding currency effects order intake de- creased by 20%. Service order intake decreased by 3% compared to Q4 2022, driven by relatively lower order intake for the Cement business. Prod- ucts order intake decreased by 49% compared to Q4 2022 due to both Mining and Cement. Q4 2023 did not include any large orders, while Q4 2022 included two large Mining orders with a combined value of around DKK 1.2bn. Service and Products represented 72% and 28% of total order intake, respectively, compared to 57% and 43%, respectively, in Q4 2022. Order backlog and maturity in Q4 2023 The order backlog declined by 12% to DKK 17,593m compared to the prior quarter (Q3 2023: DKK 19,993m). The year-on-year decline was driven by our continued de-risking strategy, the di- vestments completed in the Cement and NCA businesses. Further, the order backlog was im- pacted by the exit from our activities in Russia and Belarus, continued wind-down of the NCA seg- ment, ongoing execution of the order backlog and softer market conditions, especially impacting the Products businesses in both Mining and Cement. Outstanding order backlog related to Russian and Belarusian contracts amounted to DKK 0.1bn at the end of Q4 2023 (end of Q4 2022: DKK 0.7bn). The remaining orders are suspended by FLSmidth, and potential termination options are being inves- tigated. Due to the uncertain nature of these con- tracts, they have been included in the backlog maturity for ‘Within 3 years and beyond’. Revenue in Q4 2023 Revenue decreased by 8% to DKK 5,968m in Q4 2023, compared to Q4 2022, driven by lower rev- enue in the Cement business, partly offset by higher revenue in the Mining business. Group rev- enue in Q4 2023 was adversely impacted by our exit from Russia. If excluding this effect, revenue growth would have been -6%. Organically, Group revenue decreased by 4% year-on-year. Service revenue decreased by 14% compared to Q4 2022, mainly driven by lower Service revenue in the Cement business. Products revenue was un- changed compared to Q4 2022 as lower Products revenue in the Cement business was offset by higher Products revenue in the Mining business. Service and Products revenue accounted for 55% and 45% of total revenue in Q4 2023, respec- tively, compared to 59% and 41%, respectively, in Q4 2022. Consolidated Quarterly financial performance Order intake DKKm 0 2,000 4,000 6,000 8,000 Q4 Q1 2022 Q2 Q3 Q4 Q1 2023 Q2 Q3 Q4 Mining Cement NCA Growth in order intake in Q4 2023 (vs. Q4 2022) Mining Cement Non-Core Activities FLSmidth Group Organic -18% -13% n/a -20% Currency -4% -2% n/a -3% Total growth -22% -15% n/a -23% Growth in revenue in Q4 2023 (vs. Q4 2022) Mining Cement Non-Core Activities FLSmidth Group Organic 7% -11% n/a -4% Currency -5% -3% n/a -4% Total growth 2% -14% n/a -8% Backlog maturity Mining Cement Non-Core Activities FLSmidth Group Within 1 year 70% 60% 56% 67% Within 2 years 24% 20% 0% 22% Within 3 years & beyond 6% 20% 44% 11% At the end of Q4 2023, outstanding backlog for the NCA segment amounted to DKK 531m. As a portion of the backlog is expected to be terminated, this has been included in the backlog maturity for 'Within 3 years and beyond'. It remains the expectation that the NCA segment will be fully exited by end-2024. Group – continued activities (DKKm) Q4 2023 Q4 2022 Change 2023 2022 Change Order intake 4,620 6,011 -23% 21,376 24,644 -13% - Hereof service order intake 3,307 3,425 -3% 14,183 14,458 -2% - Hereof products order intake 1,313 2,586 -49% 7,193 10,186 -29% Order backlog 17,593 23,541 -25% 17,593 23,541 -25% Revenue 5,968 6,495 -8% 24,106 21,849 10% - Hereof service revenue 3,283 3,801 -14% 14,236 12,933 10% - Hereof products revenue 2,685 2,694 0% 9,870 8,916 11% Gross profit 1,557 1,294 20% 6,087 5,076 20% Gross profit margin 26.1% 19.9% 25.3% 23.2% SG&A cost (1,071) (1,225) -13% (4,452) (3,874) 15% SG&A ratio 17.9% 18.9% 18.5% 17.7% Adjusted EBITA 549 205 168% 1,919 1,395 38% Adjusted EBITA margin 9.2% 3.2% 8.0% 6.4% EBITA 412 0 n/a 1,438 943 52% EBITA margin 6.9% 0.0% 6.0% 4.3% Number of employees 9,377 10,977 -15% 9,377 10,977 -15% Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 40 Profit in Q4 2023 Gross profit and margin Gross profit increased by 20% to DKK 1,557m in Q4 2023, compared to DKK 1,294m in Q4 2022, reflecting the positive effects from our ongoing transformation efforts, partly offset by a relatively lower share of Service revenue in the quarter as well as costs related to the integration of Mining Technologies. The corresponding gross margin in- creased to 26.1% in Q4 2023 compared to 19.9% in Q4 2022. In Q4 2023, total research and development costs (R&D) amounted to DKK 103m, representing 1.7% of revenue (Q4 2022: 1.6%). Research & development costs (DKKm) Q4 2023 Q4 2022 Production costs 32 41 Capitalised 71 60 Total R&D 103 101 SG&A costs Sales, general and administrative costs (SG&A) decreased by 13% compared to Q4 2022, reflect- ing positive effects from our ongoing transfor- mation efforts and non-recurring positive one offs in Cement, partly offset by integration costs re- lated to the acquisition of Mining Technologies in Q4 2023. Further, currencies had a favourable im- pact on SG&A of DKK 33m in the quarter. As a result of this, SG&A costs as a percentage of revenue decreased to 17.9% in Q4 2023 com- pared to 18.9% in Q4 2022. EBITA and margin Excluding integration costs of DKK 138m related to the acquisition of Mining Technologies, adjusted Group EBITA margin was 9.2% in Q4 2023 com- pared to 3.2% in Q4 2022. Including integration costs, the EBITA margin was 6.9% in Q4 2023 compared to 0% in Q4 2022 which was adversely impacted by costs related to the NCA segment, costs related to our exit from Russia and Belarus and costs related to the acquisition of Mining Technologies. Amortisation of intangible assets Amortisation of intangible assets amounted to DKK 60m (Q4 2022: DKK 94m). The effect of pur- chase price allocations amounted to DKK 11m (Q4 2022: DKK 23m) and other amortisation to DKK 49m (Q4 2022: DKK 71m). . Financial items Net financial items amounted to DKK -89m (Q4 2022: DKK -47m), of which net interest amounted to DKK -26m (Q4 2022: DKK -27m), foreign exchange and fair value adjustments amounted to DKK -3m (Q4 2022: DKK -20m) and loss from associates amounted to DKK -60m (2022: DKK -1m) due to impairments. Tax Tax in Q4 2023 totalled an expense of DKK 91m compared to an income of DKK 66m in Q4 2022. Profit for the period Profit in Q4 2023 was DKK 18m (Q4 2022: loss of DKK 67m). Discontinued activities realised a total loss of DKK 154m in Q4 2023 mainly due to a write-down of other receivables, which accounted for DKK 149m of the total loss. Return on capital employed Return on capital employed (ROCE) increased to 8.2% (Q4 2022: 5.9%) due to higher earnings and a decrease in net working capital. Employees The number of employees decreased by 297 to 9,377 at the end of Q4 2023, compared to 9,674 at the end of Q3 2023. The decrease was driven by workforce reductions across all business seg- ments relating to footprint optimisation, synergies from the acquisition of Mining Technologies, and the continued rightsizing of the Cement organisa- tion. Backlog DKKm Revenue & EBITA margin DKKm EBITA margin % EBITA DKKm 0 4,000 8,000 12,000 16,000 20,000 24,000 28,000 Q4 Q1 2022 Q2 Q3 Q4 Q1 2023 Q2 Q3 Q4 Mining Cement NCA 0% 2% 4% 6% 8% 10% 12% 0 1,500 3,000 4,500 6,000 7,500 Q4 Q1 2022 Q2 Q3 Q4 Q1 2023 Q2 Q3 Q4 Service Products EBITA % Adjusted EBITA % (500) (300) (100) 100 300 500 700 Q4 Q1 2022 Q2 Q3 Q4 Q1 2023 Q2 Q3 Q4 Mining Mining adj. Cement NCA Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 41 Capital in Q4 2023 Cash flow from operating activities Cash flow from operating activities (CFFO) amounted to DKK 931m in Q4 2023 (Q4 2022: DKK 776m) and was positively impacted by DKK 1,372m from the decline in net working capital, partly offset by a negative change in provisions. Discontinued activities had a minor impact on CFFO in both Q4 2022 and Q4 2023, as the write- down of DKK 149m on other receivables in Q4 2023 had no cash impact. Cash flow from investing activities Cash flow from investing activities amounted to DKK -204m (Q4 2022: DKK -116m). The change is primarily related to the final payment of the acqui- sition of Mining Technologies. Free cash flow Free cash flow (the sum of cash flow from operat- ing and investing activities) amounted to DKK 727m in the quarter (Q4 2022: DKK 660m). Free cash flow adjusted for business acquisitions and disposals amounted to DKK 805m in Q4 2023 (Q4 2022: DKK 660m). Net working capital Net working capital decreased by DKK 1,414m to DKK 1,382m at the end of Q4 2023 (end of Q3 2023: DKK 2,796m), primarily driven by a reduc- tion in accounts receivables from increased collection and increased bad debt provision, re- duction of inventory and work-in-progress, and a write-down of other receivables relating to discon- tinued activities. The corresponding net working capital ratio declined from 11.4% of revenue in Q3 2023 to 5.7% in Q4 2023. Utilisation of supply chain financing declined to DKK 504m in Q4 2023 (Q3 2023: 614m). Net interest-bearing debt Net interest-bearing debt (NIBD) at 31 December 2023 decreased to DKK 639m (Q3 2023: DKK 1,325m). The financial gearing end of Q4 2023 amounted to 0.4x (Q3 2023: 1.0x) and remains comfortably below our target level of less than 2.0x. Financial position By the end of 2023, FLSmidth had DKK 6.3bn of available committed credit facilities of which DKK 4.7bn remained undrawn. The committed credit fa- cilities have a weighted average time to maturity of 4.3 years. Credit facilities of DKK 5.0bn and DKK 1.1bn will mature in 2027 and 2030, respectively. The re- maining DKK 0.2bn mature in later years. Addi- tionally, FLSmidth has 0.8bn of uncommitted credit facilities available. Equity ratio Equity at the end of Q4 2023 decreased to DKK 10,828m (end of Q3 2023: DKK 11,131m), driven pri- marily by currency adjustments. The equity ratio was 40.1% at the end of Q4 2023 (end of Q3 2023: 38.1%). Cash flow DKKm Net interest-bearing debt DKKm Net working capital DKKm NWC% (500) (300) (100) 100 300 500 700 900 Q4 Q1 2022 Q2 Q3 Q4 Q1 2023 Q2 Q3 Q4 Cash flow from operating activities (1,000) (500) 0 500 1,000 1,500 Q4 Q1 2022 Q2 Q3 Q4 Q1 2023 Q2 Q3 Q4 Net interest bearing debt (NIBD) 0.0% 3.0% 6.0% 9.0% 12.0% 15.0% 18.0% 0 1,000 2,000 3,000 Q4 Q1 2022 Q2 Q3 Q4 Q1 2023 Q2 Q3 Q4 Net working capital Net working capital ratio, end Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 42 Order intake in 2023 Order intake decreased by 13% compared to 2022. Excluding currency effects order intake de- creased by 10% compared to 2022. Service order intake decreased by 2% compared to 2022 driven by lower order intake in the Ce- ment business. Products order intake decreased 29% compared to 2022 driven by both the Mining and Cement business and resulted from our continued de-risk- ing strategy as well as challenging market condi- tions, mainly for the Cement business. 2022 included four months of Mining Technolo- gies activities, while 2023 reflects our exit from Russia. If excluding a high-level estimate of the im- pact from our exit from Russia and Mining Tech- nologies activities, the underlying order intake would have decreased by approximately 14% compared to 2022. In 2023, five large orders at a combined value of around DKK 1.9bn were received compared to seven large orders with a combined value of around DKK 2.8bn in 2022. Growth in order intake in 2023 (vs. 2022) Mining Cement Non-Core Activities FLSmidth Group Organic -5% -24% n/a -10% Currency -4% -2% n/a -3% Total growth -9% -26% n/a -13% Order backlog The order backlog declined by 25% to DKK 17,593m compared to DKK 23,541m as of the end of 2022. The year-on-year decline was driven by our continued de-risking strategy, the divestments completed in the Cement and NCA businesses as well as the exit from our activities in Russia and Belarus, continued wind-down of the NCA seg- ment, ongoing execution of the order backlog and softer market conditions, especially in the Cement business. Based on the order backlog maturity profile, the majority, 67% (2022: 60%) of the order backlog is expected to be converted into revenue in 2024, while 33% (2022: 40%) is expected to be con- verted to revenue in subsequent years. Revenue in 2023 Revenue increased by 10% to DKK 24,106m com- pared to 2022. Excluding currency effects, reve- nue increased by 14% compared to 2022 driven by higher revenue in the Mining business sup- ported by the Mining Technologies acquisition, partly offset by relatively lower Cement revenue. 2022 included only four months of Mining Tech- nologies activities, and furthermore 2023 reflects our exit from Russia. If excluding a high-level esti- mate of the impact from our exit from Russia and Mining Technologies activities, the underlying rev- enue would increase by approximately 13% com- pared to 2022. Service revenue increased by 10% compared to 2022 driven by higher Service revenue in the Min- ing business. Products revenue increased by 11% compared to 2022 driven by both the Mining and the Cement businesses. Service and Products revenue comprised 59% and 41% of total Group revenue in 2023, respectively, which is unchanged from 2022. Growth in revenue in 2023 (vs. 2022) Mining Cement Non-Core Activities FLSmidth Group Organic 18% -1% n/a 14% Currency -5% -2% n/a -4% Total growth 13% -3% n/a 10% Consolidated Annual financial performance Mining, Cement & NCA revenue DKKm Order intake and book-to-bill DKKm % Order intake by commodity % Backlog maturity DKKm 0 5,000 10,000 15,000 20,000 25,000 2019 2020 2021 2022 2023 Mining Cement NCA 0% 20% 40% 60% 80% 100% 120% 0 5,000 10,000 15,000 20,000 25,000 30,000 2019 2020 2021 2022 2023 Order intake Book-to-bill 20% 34% 8% 5% 1% 8% 24% Cement Copper Gold Coal Fertiliser Iron ore Other Minerals 14,125 11,761 6,851 3,912 2,565 1,920 0 4,000 8,000 12,000 16,000 20,000 24,000 2022 2023 Within 1 year Within 2 years Within 3 years and beyond Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 43 Profit Gross profit and margin Gross profit increased by 20% to DKK 6,087m in 2023, compared to DKK 5,076m in 2022. The year-on-year increase was driven by the higher revenue as well as positive effects from our ongo- ing transformation efforts, partly offset by costs re- lated to the integration of Mining Technologies. The corresponding gross margin increased to 25.3% in 2023 compared to 23.2% in 2022. Research and development costs reported in pro- duction costs amounted to DKK 155m. The R&D costs mainly related to several innovations, in- cluding new sustainable technologies for both Mining and Cement to support the MissionZero and digital solutions across the flowsheets. Capitalisation of R&D costs for the year has in- creased compared to last year primarily due to the launch of several new larger R&D projects that support our MissionZero strategy. Research & development costs (DKKm) 2023 2022 Production costs 155 169 Capitalised 222 171 Total R&D 377 340 SG&A costs Sales, general and administrative costs (SG&A) in- creased by 15% compared to 2022. The increase was driven by the inclusion of Mining Technolo- gies as well as integration costs related to the ac- quisition and our ongoing transformation efforts. The increase was partly offset by a favourable currency effect of DKK 104m. The corresponding SG&A ratio increased by 0.8%-points to 18.5%. EBITA and margin Excluding integration costs of DKK 481m related to the acquisition of Mining Technologies, adjusted Group EBITA margin was 8.0% in 2023. Including integration costs, the EBITA margin was 6.0% in 2023 compared to 4.3% in 2022. Excluding the AFT divestment gain, the underlying Group EBITA margin was 5.5%. The NCA divestment to KOCH Solutions had no material impact on EBITA. Financial items Net financial items amounted to a cost of DKK -146m (2022: DKK -67m), of which net interest cost, including interest from leasing, amounted to DKK -92m (2022: DKK -50m). Loss from associates accounted for -62m (2022: DKK -3m) due to im- pairments and foreign exchange and fair value adjustments accounted for an income of DKK 8m (2022: cost of DKK -14m). Tax The income tax expense for the year amounted to DKK 382m (2022: DKK 201m), corresponding to an effective tax rate of 36.2% (2022: 36.4%). The ef- fective tax rate was negatively affected by withholding taxes not subject to credit relief as well as write-downs of tax losses and other tax assets in Germany. The effective tax rate was pos- itively affected by adjustments to previous years regarding tax assets. Profit for the year Profit for the year increased to DKK 491m in 2023 compared to DKK 352m in 2022. Discontinued activities reported a total loss of DKK -181m, com- pared to a total profit of DKK 1m in 2022, mainly due to a write-down of other receivables, which accounted for DKK 149m of the total loss. Earnings per share Earnings per share increased from DKK 6.5 in 2022 to DKK 8.8 per share in 2023 as a result of the higher profit for the year. Return on capital employed Return on capital employed (ROCE) increased to 8.2% (Q4 2022: 5.9%) due to a higher EBITA and due to a decrease in net working capital. Employees The number of employees decreased by 1,600 to 9,377 at the end of 2023, compared to 10,977 at the end of 2022. The decrease was driven by workforce reductions across all business seg- ments relating to footprint optimisation, synergies from the acquisition of Mining Technologies, the NCA exit, including the sale to KOCH Solutions, the sale of AFT within Cement as well as contin- ued rightsizing of the Cement organisation. Gross profit and Gross margin DKKm % SG&A cost and SG&A ratio DKKm % EBITA by Mining, Cement & NCA DKKm 20% 22% 24% 26% 28% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2019 2020 2021 2022 2023 Gross profit Gross margin 12% 14% 16% 18% 20% 1,500 2,000 2,500 3,000 3,500 4,000 2019 2020 2021 2022 2023 SG&A cost SG&A ratio (1,000) (500) 0 500 1,000 1,500 2,000 2019 2020 2021 2022 2023 Mining Cement NCA Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 44 Capital Balance sheet Total assets decreased by DKK 2.8bn to DKK 27bn on 31 December 2023, mainly due to a lower level of cash and cash equivalents, resulted from repayments of bank debt, as well as lower levels of inventory and trade receivables. Capital employed Average Capital employed increased by DKK 1,664m to DKK 17,552m (2022: DKK 15,888m) due to an increase in intangible assets. The average capital employed by the end of 2023 primarily consists of intangible assets (cost price) of DKK 13,485m, mostly goodwill, patents, rights, and cus- tomer relations. Property, plant, and equipment, including leased assets, were essentially un- changed, and net working capital decreased to DKK 1,382m by the end of 2023. Net working capital Net working capital decreased by DKK 511m com- pared to 31 December 2022, primarily driven by a reduction in accounts receivables from increased collection and increase bad debt provision, reduc- tion of inventory and working-in-progress, and a write-down of other receivables relating to discon- tinued activities. The corresponding net working capital ratio was 5.7% (2022: 7.8%) and reflects a strong cash focus. Currencies impacted net work- ing capital negatively by DKK 14m. Supply chain financing Utilisation of supply chain financing decreased during 2023 and amounted to DKK 504m at the end of 2023 (2022: DKK 590m). Net interest-bearing debt Net interest-bearing debt (NIBD) amounted to DKK 639m at the end of 2023, compared to DKK 726m at the end of 2022. Financial gearing (NIBD/EBITDA) remained low at 0.4x (2022: 0.6x), and was thus well below our capital structure target of <2.0x. Equity Equity at the end of 2023 increased to DKK 10,828m (end of 2022: DKK 10,787m) mainly re- lated to the result for the year partly offset by negative currency adjustments relating to transla- tion of foreign entities and dividend payment. The equity ratio was 40.1% at the end of 2023 (2022: 36.1%). Treasury shares At the end of 2023, FLSmidth held a total of 913,828 shares as treasury shares, corresponding to approximately 1.6% of the total share capital of the company, which is unchanged from the end of 2022. Treasury shares are used to meet obliga- tions relating to the company’s share-based in- centive programmes. Dividend The Board of Directors will propose at the Annual General Meeting that a dividend of DKK 4 per share corresponding to a dividend yield of 1.4% and a pay-out ratio of 47%, will be distributed for 2023. The total dividend proposed amounts to DKK 231m. Return on Capital employed DKKm % Net working capital DKKm % Net interest-bearing debt DKKm Equity ratio % 0% 4% 8% 12% 16% 0 5,000 10,000 15,000 20,000 2019 2020 2021 2022 2023 Capital employed, average ROCE 0% 3% 6% 9% 12% 15% 18% 0 500 1,000 1,500 2,000 2,500 3,000 2019 2020 2021 2022 2023 Net working capital NWC as % of revenue (1,000) 0 1,000 2,000 3,000 2019 2020 2021 2022 2023 Net interest-bearing debt 0% 10% 20% 30% 40% 50% 2019 2020 2021 2022 2023 Equity ratio Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 45 Cash flow from operating activities Cash flow from operating activities (CFFO) de- creased to DKK 623m in 2023 compared to DKK 968m in 2022. The year-on-year decrease was primarily driven by cash outflow related to provi- sions and taxes paid. Discontinued activities im- pacted CFFO positively by DKK 19m, as the write- down of DKK 149m on other receivables in 2023 had no cash impact. (see note 2.12 for more infor- mation). Cash flow from investing activities Cash flow from investing activities (CFFI) amounted to DKK -257m in 2023 compared to DKK -2,310m in 2022 reflecting the acquisition of Mining Technologies which resulted in a cash out- flow of DKK 2,130m. In addition, the development in CFFI was a result of CAPEX investments of DKK 499m (2022: DKK 333m), and sale of activities and fixed assets of DKK 354m (2022: DKK 160m). Free cash flow Free cash flow, adjusted for business acquisitions and disposals of enterprises and activities amounted to DKK 201m in 2023 compared to DKK 777m in 2022. The decrease is primarily driven by a lower CFFO. Cash flow from financing activities Cash flow from financing activities amounted to a cash outflow of DKK 1,066m in 2023 compared to a cash inflow of DKK 1,596m in 2022. The year- on-year decrease reflected repayment of debt in 2023 as well as additional debt raised in 2022 in connection with the acquisition of Mining Technol- ogies. Cash position Cash and cash equivalents amounted to DKK 1,352m at 31 December 2023 compared to 2,130m at 31 December 2022. Restricted cash Cash and cash equivalents included bank bal- ances in countries with currency restrictions or other restrictions preventing the funds to be read- ily available at parent company level. Focused re- patriation efforts reduced restricted cash to DKK 852m at 31 December 2023 from DKK 1,459m at 31 December 2022. Other business Annual cost synergy target raised The acquisition of Mining Technologies closed on 31 August 2022. In October 2022, FLSmidth re- vised the cost synergy potential from the com- bined organisational setup, geographical footprint and pooled innovation, procurement and admin- istration structures in relation to the Mining seg- ment from DKK 360m to DKK 560m. In January 2024, the synergy potential was raised again to DKK 600m, reflecting an additional gain from optimisation of the organisational setup and geographical footprint. The integration costs related to the realisation of the synergies totalled to DKK 733m compared to the previous expectation of DKK 800m, reflecting a better-than-expected integration of Mining Tech- nologies. Changes to Group Executive Management Throughout 2023, there have been various changes in Group Executive Management, including two members taking on additional responsibilities as well as a change of the Cement President. For more detailed information, refer to page 59. Subsequent events Divestment of the Cement business On 29 January 2024, it was announced that FLS- midth has initiated a process to explore divest- ment options for its Cement business with the ob- jective of enabling the Cement business to maximise its full potential as well as to further strengthen the Mining business’ market-leading position as a full flowsheet technology and ser- vice provider to the global mining industry. FLSmidth sells its MAAG gears and drives On 22 January 2024, FLSmidth Cement entered into an agreement to sell the MAAG gears and drives business to Solix Group AB. The transaction is expected to close during the first quarter of 2024 and includes all related assets, including in- tellectual property, technology, employees and customer contracts. By the end of 2023, total as- sets and liabilities related to the activities amounted to around DKK 500m and DKK 300m, respectively. This includes non-current assets of around DKK 200m and non-current liabilities of around DKK 60m. The transaction is expected to result in an immaterial gain that will be recognised in the first quarter of 2024. CFFO DKKm CFFI DKKm Free cash flow DKKm Net cash flow from business acquisitions and disposals DKKm 0 200 400 600 800 1,000 1,200 1,400 1,600 2019 2020 2021 2022 2023 Cash flow from operating activities -2,500 -2,000 -1,500 -1,000 -500 0 2019 2020 2021 2022 2023 Cash flow from investing activities -1,500 -1,200 -900 -600 -300 0 300 600 900 1,200 2019 2020 2021 2022 2023 Free cash flow Free cash flow adjusted for business acquisitons and… -2,300 -1,800 -1,300 -800 -300 200 2019 2020 2021 2022 2023 Net cash flow from acquisition and disposal of activities Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 46 Governance Risk management and risk mitigation 47 Corporate governance 51 Board of Directors 55 Board competencies 57 Group Executive Management 58 Remuneration 60 Shareholder information 61 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 47 As we continue our transfor- mation journey, the inherent risks and challenges we face around the world require an internal ca- pability to interpret a fast-moving world and to understand how varying threats and opportunities might impact our ability to deliver on our strategy and long-term targets. It requires commitment from the entire organisa- tion to properly evaluate and generate open and constructive discussions about risks so that we can act and be more agile in response to the over- all trends that we see. It enables us to manage or contain events that have the potential to derail our strategic ambitions. Risk management and risk mitigation Key Risks Risk Categories Strategic Risks 1. Market Trends 2. Geopolitics 3. Green Transition Operational Risks 4. Transformation 5. Attract/Retain Employees 6. Employee Health & Safety 7. Cyber security Compliance Risks 8. ESG Financial Risks No financial risks identified as a top risk Strategic Risks. Relate to the risk of the organisation’s ability to achieve its strategy or maintain current business model. These risks generally arise from adverse business decisions, failure to implement deci- sions or failure to respond to external changes. Operational Risks. Arise from inadequate or failed internal pro- cesses, people and systems. The risk affects the organisation’s ability to meet company-wide ob- jectives (e.g., recruiting, hiring, retention, infor- mation technology, readiness). Compliance Risks. Risk of not being compliant with new or existing legislation or experience reputational damages as a result of perceived or unintentional improper conduct. Financial Risks. Risk of failure of business ventures or invest- ments which will impact organisation financially. The main financial risks consist of credit risk, market risk and liquidity risk. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 48 Risk Governance The key risks are continuously discussed and as- sessed by both Group Executive Management and the Board of Directors. The Group Executive Management reviews the risk map and on the ba- sis of this review the top risks are presented and discussed with the Board of Directors. The combi- nation of ongoing review of key risks and a more formal presentation of top risks allows for a thor- ough and structured process ensuring dialogue of which risks to avoid, which to mitigate and how to ensure we have the necessary agility to address new or sudden changes to already identified risks. 2023 risk review The ambitious pace we have set for our transfor- mation with a sharp focus on progress both inter- nally and externally requires flexibility and agility – the 2023 risk picture is a mixture of strategic, operational and compliance threats and opportu- nities further defined on the following pages along with their potential impact and mitigating efforts. During 2023, we have seen the political environ- ment further exacerbate risks we were already aware of both geopolitically and locally in the re- gions. Political friction continues as does concerns about climate change, while the green transition in both industries continues at a slow pace. The transformation journey to becoming a service- centric technology company with a focus on our core business with a less complex pure play set- up involves the successful completion a several internal and complex projects and we continu- ously monitor the ability of our organisation to de- liver on these projects and transformation while ensuring focus on delivering to our customers. We continue to see our project risks successfully mitigated with our focus on “Value over Volume” – a proposition that prioritises contribution margin over total order intake and revenue volume and our efforts to de-risk our portfolio by taking out low-margin and high-risk projects has produced results that can be seen in our continued underly- ing EBITA improvement in both Mining and Ce- ment throughout 2023. 2024 will see continued focus on improving pro- ject execution with clearly defined best practices for handover throughout the entire project value chain from sales to execution to service, aligning project roles across functions with improved com- munication and accountability. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 49 Risk mitigation Risk Description Potential impact Mitigation 1 Market Trends As a result of macroeconomic uncertainty, market de- mand in the mining industry is expected to be softer in the short-term, mostly related to the Products busi- ness. Similarly, the cement industry remains impacted by challenging market conditions. Lower order intake may affect profitability and could potentially slow progress on one or more of our stra- tegic goals. ■ Service markets remains stable and will help absorb potential impact ■ Staying focused on strategic initiatives (pure play separation, principal company model implementa- tion, business simplification) ■ Exit of NCA segment continuing at an accelerated pace 2 Geopolitics (Global & Regional) Accumulating shocks from various ongoing conflicts and increasing unrest in many regions along with anti- globalisation sentiments are impacting global struc- tures and relationships. Future revenue streams could be at risk if current con- flicts start to extend beyond their borders, if new con- flicts arise or if key countries turn more inward look- ing, become more nationalistic and isolated or if local political measures reduce our customers activity lev- els or their investment appetite. ■ Continuous review of potential risk-scenarios ■ Supply chain initiatives ■ Business continuity planning 3 Green Transition Industry investments in equipment to enhance sustain- ability performance is still slow for both industries. Eventually, the demand for equipment to enhance sustainability performance needs to increase to meet society’s long-term demands. However, until custom- ers increase investments, the slow investment deci- sions could potentially lead to lower order intake and thus affect profitability of the business. ■ Continued focus on and efforts to develop various partnerships with customers, local governments and other key stakeholders to help streamline and fast- track new investments ■ Own focus on renewable energy technologies and improvements 4 Transformation Our transformation journey consists of several pro- jects running simultaneously and in parallel to each other, placing high demands and increasing work- loads across the support functions of the organisation. With a workforce that has been asked to focus on many important and complex priorities at the same time, we see potential delays in execution due to bot- tlenecks arising from limited resources or process knowledge and digital system constraints and capac- ity. In general, we see this risk continuously decreasing as the various projects are managed and imple- mented: ■ Transformation Office established with purpose of managing timing, resources and interdependencies ■ Programme Board established to support work re- lating primarily to i.e. pure play separation and prin- cipal company model implementation Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 50 Risk Description Potential impact Mitigation 5 Attract/Retain Employees In general, specialists are scarce and in high demand across the mining industry and it can be challenging to stay competitive with remuneration packages. In the Cement business it is imperative that we continue to execute with excellence despite the challenging market conditions. We need motivated employees in order to deliver on our strategies for both businesses. There must be a strong culture of leadership, accountability, empower- ment and trust to attract and retain our employees. ■ Monthly well-being and engagement surveys con- ducted globally ■ Diversity, equity and inclusion are important ele- ments ■ Focus on employer branding and in-house talent development 6 Employee Health & Safety After a period of positive developments in our safety statistics, we have in 2023 seen an increase of lost time due to injuries. Building a culture of health and safety across our own and customers’ sites is core to our Zero Harm 2030 ambition as the risk of increased lost time can result in a loss of trust from employees and customers. In addi- tion, operational disturbances potentially impacts per- sonnel and attrition and our reputation as a premium employer and supplier. ■ Cross-functional auditing procedure for ISO Certifi- cations, document control system and injury cam- paign ■ Safety audits, annual safety training, focus on safety shares and recording near misses ■ Focus on workload, employee engagement and mental health 7 Cyber security The general threat of IT security breaches continues to increase as we evolve and transition to a service- centric technology company. A sophisticated cyber-attack could potentially disrupt day-to-day operations for a period of time, resulting in delays to customers and additional costs to get the business up and running again. ■ IT Security Policy, annual training, multifactor au- thentication, audits, antivirus and patch manage- ment, behavioural analysis ■ Full cyber security certification, contingency plans, cloud-based solutions and IT Security Committee 8 ESG Increasing ESG regulation is complex and extensive requiring specialised resources to manage and main- tain. This is further complicated by political instability and unrest in many countries making it difficult to nav- igate as potential reputational risk of not being seen as doing the right thing increases. There is a potential risk of being non-compliant with current and emerging ESG regulation and with the continuously changing political environment, there is a potential risk that we may not act quickly enough to address the various changing environments. ■ Annual Sustainability Report and public policy briefs ■ Alignment with Science Based Targets, Post 2020 Biodiversity Framework, OECD, etc. ■ Creating a safe, diverse and inclusive workplace ■ Clear standards for suppliers ■ Clear standards within compliance and human rights for our own business and our suppliers Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 51 The Board of Directors continuously evaluates the work of Group Executive Management by specifying targets and assessing at what level or degree such targets have been met. Framework The Board of Directors believes that effective cor- porate governance has a positive impact for the company’s shareholders, employees, customers and other stakeholders. Thus, the Board of Direc- tors regularly reviews the company’s corporate governance framework and policies and assesses the need for any adjustments in light of the Group’s activities, the statutory requirements and the Danish Corporate Governance Recommenda- tions. The following statement constitutes the company’s statutory reporting according to Sec- tion 107b of the Danish Financial Statements Act. Governance structure The company’s shareholders exercise their rights at the general meeting. Any shareholder has the right to raise questions, and resolutions can gen- erally be passed by a simple majority of votes cast. However, the adoption of a resolution to amend the company’s articles of association or to wind up the company requires that the resolution is passed by not less than two thirds of the votes cast as well as of the share capital represented at the general meeting. FLSmidth maintains a clear division of responsibil- ity and separation between the Board of Directors and the Group Executive Management. The Group Executive Management is responsible for the day- to-day business of the company, and the Board of Directors oversees the Group Executive Manage- ment and handles overall managerial issues of a strategic nature. For additional information refer to: www.fls- midth.com/en-gb/company/investors/governance. Board of Directors The Board of Directors consists of board mem- bers elected at the Annual General Meeting and board members elected pursuant to the provi- sions in the Danish Companies Act on employee representation. The Board of Directors currently consists of nine members, six members elected at the Annual General Meeting and three members elected by and among the Group’s employees. The board members elected at the Annual Gen- eral Meeting shall be no less than five and no more than eight members in order to maintain a small, competent and quorate Board of Direc- tors. These board members serve for a one-year term and therefore stand for election every year. However, re-election may take place. The Com- pensation & Nomination Committee identifies and recommends candidates to the Board of Directors. Pursuant to the provisions of the Danish Compa- nies Act on employee representation, the three board members elected by and among the Group’s employees are elected for a term of four years. The most recent election took place in 2021, where two new employee-elected members joined the Board of Directors. Immediately after the Annual General Meeting, the Board of Directors elects, among its own mem- bers, a Chair and a Vice Chair. A job and task de- scription has been created and outlines the duties and responsibilities of the Chair and the Vice Chair. Board meetings are called and held in accord- ance with the Board of Directors’ rules of proce- dure and annual plan. In general, between six and eight ordinary board meetings are scheduled every year. However, when deemed necessary, additional meetings are held and the meeting fre- quency has been higher in recent years. To en- hance board meeting efficiency, the Chair con- ducts a planning meeting with the Group CEO prior to each board meeting. In 2023, 17 board meetings were held. Apart from contemporary business issues, the most important issues dealt with in 2023 were: pure play, deployment steps for the strategy rolled out in 2023, continued exe- cution of the wind-down of the NCA segment, Corporate governance Shareholders Board of Directors (6 AGM and 3 employee-elected members) Chairship Compliance Chair Compensation & Nomination Committee Audit, Risk & ESG Reporting Committee Technology Committee Group CEO Group Executive Management 2023 2022 Number of registered shareholders (1,000) 52 54 Treasury shares (1,000) 914 (1.6%) 914 (1.6%) Number of shares held by the Board and Group Executive Management (1,000) 73 74 Total Board of Directors remuneration (DKK) 6.8m 6.6m Total Group Executive Management remuneration (DKK) 32.0m 25.8m Number of members of the Board of Directors (elected at the AGM) 6 6 Independent members of the Board of Directors (excluding employee elected) 100% 100% Number of board committees 3/4 4 Number of board meetings held (overall meeting attendance in %) 17 (93%) 14 (100%) In August 2023, the Compensation Committee and the Nomination Committee were merged Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 52 sustainability and strategic review of the Cement business. All members of the Board of Directors partici- pated, physically or virtually, in all relevant board and committee meetings in 2023, except two members who were unable to attend one board meeting, two other members who were unable to attend two board meetings and a third member who was unable to attend four board meetings all due to conflicting appointments. To ensure that the Board of Directors can perform its duties in the best possible manner and to achieve a highly informed debate with the Group Executive Management, the company strives for board membership profiles that reflect substantial managerial experience from internationally oper- ating industrial companies and that match FLSmidth’s company values. At least one member of the Board of Directors must have CFO experience from a major listed company, and amongst the other members there should be a strong representation of experienced CEOs from major internationally operating and preferably listed companies. Further, most board members elected at the Annual General Meeting should hold competencies in general manage- ment including strategy development, financing and market dynamics, international controls and accounting as well as the acquisition and sale of companies. In addition, it is preferable that board members have a background in the capital goods sector with expertise in products and services. For a description of the competencies of the Board of Directors, refer to pages 55 - 56. All six members of the Board of Directors elected at the Annual General Meeting are independent in the opinion of the board considering the criteria specified by the Danish Committee on Corporate Governance, which is an independent body pro- moting corporate governance best practice in Danish listed companies. As part of its annual plan, the Board of Directors performs an annual self-evaluation to evaluate the contribution, engagement and competencies of its individual members. The Chair is responsible for the evaluation. The overall conclusions of the 2023 board evaluation were satisfactory. Compensation & Nomination Committee In August 2023, it was decided to merge the Com- pensation Committee and the Nomination Com- mittee to one committee, and the combined com- mittee is now referred to as the Compensation & Nomination Committee. The background for the merger was that the topics discussed are often in- terrelated and benefit from joint considerations. The Compensation & Nomination Committee con- sists of Tom Knutzen (Chair), Mads Nipper, Thrasyvoulos Moraitis and Daniel Reimann. In 2023, the Compensation Committee met once, the Nomination Committee met three times, and the combined Compensation & Nomination Com- mittee met three times. Main activities in 2023 have been related to as- sessing the composition and competencies of the Board of Directors and the succession planning as well as approval of incentive plans and overall re- muneration schemes for the Group Executive Man- agement and the management layer reporting to the Group Executive Management. Audit, Risk & ESG Reporting Committee The Audit, Risk & ESG Reporting Committee con- sists of Anne Louise Eberhard (Chair), Mads Nip- per and Gillian Dawn Winckler who are all consid- ered independent and have considerable insight and experience in financial matters, accounting and auditing in listed companies. In 2023, the committee met six times and the com- mittee’s main activities were to consider specific fi- nancial risks, including tax risks, accounting and auditing matters, as well as paying special atten- tion to financial processes, internal control envi- ronment and cyber security. Particular focus areas in 2023 have been to over- see the integration connected to the acquisition of Meeting attendance in 2023 Board of Directors Board meetings attended Audit, Risk & ESG Reporting Committee Compensation Committee Nomination Committee Compensation & Nomination Committee Technology Committee Tom Knutzen (Chair) 17/17 5/6¹ 1/1² 3/3² 3/3² 2/2 Mads Nipper (Vice Chair) 17/17 6/6 1/1 3/3 3/3 Anne Louise Eberhard 17/17 6/6² Thrasyvoulos Moraitis 16/17 1/1 3/3 3/3 3/3⁴ Gillian Dawn Winckler 13/17 6/6 Daniel Reimann, elected for the Board in 2023 10/10 1/1 3/3 2/2 Claus Østergaard (employee-elected) 16/17 1/3¹ Leif Gundtoft (employee-elected) 17/17 1/3¹ Carsten Hansen (employee-elected) 15/17 3/3 Richard Robinson Smith, left the Board in 2023 5/7 1/1³ 1) Voluntary participation (not member of the committee) 2) Chair of committee 3) Chair of committee until AGM held in March 2023 4) Chair of committee from AGM held in March 2023 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 53 the Mining Technologies business, and the pure play strategy for the operational and legal sepa- ration of the Cement business. Further, focus has also been on the new and upcoming ESG report- ing requirements (CSRD), ESG risks as well as EU Taxonomy. The Technology Committee The Technology Committee consists of four board members, Thrasyvoulos Moraitis (Chair), Tom Knutzen, Daniel Reimann and Carsten Hansen. The Technology Committee met three times in 2023. The three meetings focused on sustainabil- ity, digitalisation and core product research and development respectively. The main objectives in 2023 were to review the KPIs for R&D projects and alignment with FLSmidth’s strategic priorities, as well as the effectiveness of investment in R&D and the commercial potential of the R&D projects. Fur- thermore, an evaluation was performed of the key IP obtained as a result of the Mining Technologies acquisition. Group Executive Management The Group Executive Management of FLSmidth consists of the Group CEO and the Group CFO who forms the management registered with the Danish Business Authority. The Group has a wider Group Executive Manage- ment that holds the overall responsibility for the day-to-day operations and consists of eight Group Executive Vice Presidents, including the Group CEO and CFO. The members of the Group Execu- tive Management are all experienced business ex- ecutives having vast experience in managing global businesses and teams. Throughout 2023, there have been various changes in executive management, including role adjustments. The Chief Digital Officer (CDO), Mikko Tepponen, has taken up a dual role as CDO and Chief Oper- ations Officer (COO). This expanded role provides the right opportunity to review and design the most effective organisational set-up to drive our digital and operational business transformation, delivering maximum value to our Business Lines and support functions. Cori Petersen has taken up an expanded role, now overseeing not only People but also Sustain- ability. This expanded reporting structure aims to strengthen the integration of sustainability within our culture, provide clear visibility and engage- ment around sustainability as a key strategic fo- cus area, and drive governance and execution of our internal and external efforts for all stakehold- ers. In October 2023 we welcomed Christopher Ashworth as the new Cement President - oversee- ing the pure play strategy for the Cement busi- ness. Christopher Ashworth brings a wealth of expertise from global industrial companies, having held various senior leadership positions. As a performance-driven leader with extensive experi- ence in operational efficiency, customer satisfac- tion, and portfolio transformation, he has a proven track record of crafting and executing transforma- tive strategies for global corporations. He will continue our transformation efforts under Cement’s GREEN’26 strategy. Gender representation on the Board of Directors and at other management levels of FLSmidth & Co. A/S The Board of Directors of FLSmidth & Co. A/S con- tinually evaluates the gender representation on the Board of Directors and at the other manage- ment levels of the company in accordance with Section 139c of the Danish Companies Act. The following constitutes the company’s statutory gen- der reporting according to Section 99b of the Dan- ish Financial Statements Act. At the end of 2023, the gender representation among the six members of the Board of Directors elected by the general meeting of FLSmidth & Co. A/S was considered equal in accordance with ap- plicable Danish law 1 . Among the board members elected by the general meeting, 33.33% were women and 66.67% were men. Accordingly, no target has been set for the Board of Directors. At the end of 2023, the gender representation at the other management levels of FLSmidth & Co. A/S was also considered equal in accordance with applicable Danish law. Among this group of seven people, 28.57% were women and 71.43% were men. For this reason, and since FLSmidth & Co. A/S had less than 50 employees in the latest fi- nancial year, neither a target nor a policy has been introduced for the other management levels of the company. The company aims to maintain a gender balance that is considered equal according to applicable law. Thus, in connection with recommendations and appointments, diversity is deliberately taken into account when considering the profiles and qualifications of potential candidates. Diversity across the organisation FLSmidth is dedicated to achieving a greater gen- der balance across the entire organisation and has set a voluntary target of 25% of the entire workforce and people managers are women by 2030. At the end of 2023, women accounted for 20% (end of 2022: 19%) of the total workforce, while 16% (end of 2022: 14%) of all managers were women. FLSmidth is a learning organisation, and our peo- ple are our most valuable resource. 42% of the workforce is below the age of 40. 53% have less than 5 years seniority, which reflects the transition FLSmidth has gone through over the past several years. * According to the Danish Business Authority’s guidelines on target figures, policies and reporting on gender balance, a gender balance of 40%/60% (or the closest percentage below 40% taking into account the number of people), is considered equal. ** The other management levels of FLSmidth & Co. A/S have been identified in accordance with the definition set out in Section 139c of the Danish Companies Act and taking into consideration the applicable guidelines issued by the Danish Business Authority. Gender representation in FLSmidth & Co. A/S 2023 Board of Directors Total number of members 6 Underrepresented gender in percentage 33.33% Target figure in percentage Not required Year for achievement of target figure Not required Other management levels Total number of members 7 Underrepresented gender in percentage 28.57% Target figure in percentage Not required Year for achievement of target figure Not required Members of the Board of Directors elected by the general meeting of FLSmidth & Co. A/S. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 54 Presentation of financial statements and internal controls To ensure the high quality of the Group’s financial reporting, the Board of Directors and the Group Executive Management have adopted a number of policies, procedures and guidelines for the presentation of the financial statements and inter- nal controls which can be found at: www.flsmidth.com/en-gb/company/investors/gov- ernance Report on Data Ethics Policy In 2022, FLSmidth introduced its Data Ethics Pol- icy. The policy addresses the data ethics princi- ples applied by FLSmidth as well as the approach to data processing covering all relevant data types. When using artificial intelligence and the like, we strive to ensure that the results are not discriminatory or biased. The short- and long-term consequences of data processing activities, espe- cially when new technology is applied, are con- sidered and the impact on the data subjects are taken into account. Security of data is important to us. FLSmidth adheres to the six fundamental ethi- cal values developed by the expert group on data ethics to the Danish Data Ethics Council. For additional information in accordance with Sec- tion 99d of the Danish Financial Statements Act, refer to: www.flsmidth.com/data-ethics Sustainability Report Concurrently with the Annual Report, FLSmidth has published its annual Sustainability Report cov- ering non-financial performance related to envi- ronmental, social and governance impacts. The report has been published every year since 2010, guided by Global Reporting Initiative (GRI) stand- ards, and is prepared in compliance with sections 99a and 107d of the Danish Financial Statements Act and the EU Taxonomy Regulation disclosure requirements. The report also serves as an addi- tion to the online Communication on Progress to the United Nations Global Compact. The report has been subject to limited assurance performed by EY. The report is available at: www.flsmidth.com/SustainabilityReport2023 Report on compliance with Recommendations on Corporate Governance Pursuant to the rules set out in the Nasdaq Nordic Main Market Rulebook for Issuers of Shares, Dan- ish listed companies must provide a statement on how they address the Recommendations on Cor- porate Governance issued by the Danish Commit- tee on Corporate Governance in December 2020 based on the ‘comply or explain’ principle (https://corporategovernance.dk/english). FLSmidth’s position on each specific recommen- dation is summarised in the corporate governance statement which has been prepared pursuant to section 107b of the Danish Financial Statements Act and is available at: www.flsmidth.com/en-gb/company/investors/gov- ernance/governance-reports In the opinion of the Board of Directors, FLSmidth complies with all the Corporate Governance Rec- ommendations applicable to Danish listed compa- nies, except recommendation 3.5.1 related to ex- ternal assistance in connection with evaluation of the Board of Directors, where the company only complies partially. The Board of Directors only en- gages external assistance in the evaluation if deemed relevant. It is the general opinion of the Board of Directors that external assistance rarely yields any benefits. However, each member of the Board of Directors has the right to request exter- nal assistance in the evaluation. Employees Geographical distribution Employees Length of service Employees Age distribution 25% 11% 25% 20% 19% ECANA APAC SSAMESA SAMER NAMER 33% 20% 16% 31% <2 years 2-4 years 5-10 years >10 years 11% 31% 30% 20% 8% <30 years 30-39 years 40-49 years 50-59 years >59 years Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 55 Board of Directors FLSmidth ■ Annual Report 2023 55 Tom Knutzen Chair Mads Nipper Vice Chair Anne Louise Eberhard Thrasyvoulos Moraitis Gillian Dawn Winckler Age 61 57 60 60 61 Nationality Danish Danish Danish British/Greek British/Canadian Gender Male Male Female Male Female Member of the Board of Directors since 2012, Chair since 2022 (elected at the AGM). Chair of the Compensation & Nomination Committee and member of the Technology Committee 2022, Vice Chair since 2022 (elected at the AGM). Member of the Audit, Risk & ESG Reporting Committee and the Compensation & Nomination Committee 2017 (elected at the AGM). Chair of the Audit, Risk & ESG Reporting Committee 2019 (elected at the AGM). Chair of the Technology Committee and member of the Compensation & Nomination Committee 2019 (elected at the AGM). Member of the Audit, Risk & ESG Reporting Committee Number of shares in FLSmidth 50,000 1,220 2,000 1,000 1,000 Executive and non-executive positions in Denmark Chair of the Board of Directors of Tivoli A/S. Vice Chair of the Board of Directors of Jeudan A/S, Egmont Fonden and Egmont International Holding A/S CEO of Ørsted A/S Chair of the Boards of Directors of Finansiel Stabilitet SOV, Moneyflow Group A/S and Moneyflow 1 A/S. Member of the Board of Directors of Bavarian Nordic A/S, Simcorp A/S, Knud Højgaards Fond, VL52 ApS and Den Danske Unicef Fond. Director of EA Advice ApS, Member of the Advisory Board of DESGi, Danish ESG initiative by EY and Axcelfuture and Faculty Member at Copenhagen Business School (CBS Executive, Board Education) None None Executive and non-executive positions outside Denmark Member of the Board of Directors of Givaudan SA (CH) and Jungbunzlauer Holding AG (CH) None None CEO of Serra Verde Group (CH). Advisor and principal in Vision Blue Resources (UK). Member of the Board of Directors of Reload Greece Foundation (UK) Chair of the Board of Directors of Pan American Silver Corporation (CA). Member of the Board of Directors of West Fraser Timber Limited (CA), and BC Parks Foundation (CA), a non-profit organisation, and director with Sinova Global Inc. (CA) FLSmidth ■ Annual Report 2023 55 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 56 Board of Directors Daniel Reimann Claus Østergaard Leif Gundtoft Carsten Hansen Age 44 57 62 60 Nationality Danish Danish Danish Danish Gender Male Male Male Male Member of the Board of Directors since 2023 (elected at the AGM). Member of the Technology Committee and the Compensation & Nomination Committee 2016 (elected by the employees) 2021 (elected by the employees) 2021 (elected by the employees) Member of the Technology Committee Number of shares in FLSmidth 0 429 128 52 Executive and non-executive positions in Denmark Member of the Board of Directors of Norican Global A/S. Principal at Altor Equity Partners A/S. Director of Visser Holding ApS and Shepherd’s Tree Holding ApS None None None Executive and non-executive positions outside Denmark None None None None FLSmidth ■ Annual Report 2023 56 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 57 Board competencies FLSmidth ■ Annual Report 2023 57 Tom Knutzen (Chair) Mads Nipper (Vice Chair) Anne Louise Eberhard Thrasyvoulos Moraitis Gillian Dawn Winckler Daniel Reimann Claus Østergaard (E) Leif Gundtoft (E) Carsten Hansen (E) CEO (operational) experience Finance, Audit Committee, Accounting, Treasury Strategy Development M&As, Joint ventures, Alliances Capital markets, Listed company experience Risk Management, Legal, Compliance HR, Total Rewards & Labour Safety, Health, Environment, Sustainability Digital transformation, Technology advancement Cement and Mining Industry Knowledge/Experience Commercial and Project excellence Related Industrial experience Service, Aftermarket experience (E) = Employee-elected Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 58 Group Executive Management Mikko Keto Roland M. Andersen Mikko Tepponen Chris Reinbold Title Group Chief Executive Officer Employed by FLSmidth since 2021 Group Chief Financial Officer Employed by FLSmidth since 2020 Chief Operations Officer and Chief Digital Officer Employed by FLSmidth since 2020 Mining, Products Business Line President Employed by FLSmidth since 2020 Age 56 55 44 56 Nationality Finnish Danish Finnish American Gender Male Male Male Male Education MSc Economics from Helsinki School of Economics MSc Corporate Finance, Executive Management Programme, London Business School MSc Automation Technology MBA, Finance, Indiana University, B.S. Mechanical Engineering, University of Illinois Number of shares in FLSmidth 2,600 10,740 0 0 Past experience Numerous senior management positions with Metso (2010-2020), President for Services and Pumps business areas. Head of Sales, KONE corporation (2008-2010). Various management positions in multiple countries with Nokia Networks (1994-2008) CFO with NKT (2015-2020) and interim CEO with NKT (2018-2019). Prior to that various CFO roles in multiple countries for A.P. Moller – Maersk, Cybercity, Telenor, Torm and NKT. Vice President, Digital Product Development, Wartsila (2017-2020), Director of Digitalisation at Wartsila (2015- 2017), Senior Manager, Product Management, Digital Services at Outotec (2012-2015). COO & CTO, Sigma Solutions (2010-2012) Senior Vice President, Global Product Line Man- agement, FLSmidth. Various managerial positions at ABB (1989-2020); Group Vice President, Global Product Manager; Region Division Manager, Southeast Asia; Senio Vice President, Head of US Power Sales; Senior Vice President, HV Products North America Non-executive positions Member of the Board of Directors of Normet Group None Member of the Board of Directors of Etteplan Oui None FLSmidth ■ Annual Report 2023 58 * Registered with The Danish Business Authority. Trading in FLSmidth shares by executives and associated persons is only reported for executives registered with the Danish Business Authority. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 59 Group Executive Management FLSmidth ■ Annual Report 2023 59 Joshua Meyer Christopher Ashworth Cori Petersen Annette Terndrup Title Mining, Service Business Line President Employed by FLSmidth since 2022 Cement President Employed by FLSmidth since 2023 Chief People & Sustainability Officer Employed by FLSmidth since 2016 Group Legal Counsel Employed by FLSmidth since 2004 Age 48 59 54 54 Nationality American American American Danish Gender Male Male Female Female Education MBA, UNC Kenan-Flagler Business School BSB, University of Minnesota – Carlson School of Management MBA, Copenhagen Business School / University of Southern Carolina Darla Moore School of Business BS, Civil Engineering, Virginia Military Institute BS in Business Administration: Human Resource Management, Senior Professional in Human Resources. Certified by Human Resource Certification Institute Master of Laws (Denmark) and LLM (England) Number of shares in FLSmidth 0 0 918 2,546 Past experience Vice President Global Sales, Genie/Terex (2019-2022), Senior Vice President, Metso (2017-2019), Region Mining Manager/Commer- cial Director in Caterpillar Inc. (2012-2017). Vari- ous managerial positions in Caterpillar Inc. (1998-2012) Vice President & Managing Director – Eurotherm (2013-2022), General Manager / Director at Invensys (2009-2013), Managing Di- rector Wonderware (2008-2010) Scandinavia -All Schneider Electric companies Director Human Resources, US, FLSmidth (2016), Director, Human Resources, North America, FLSmidth (2017). Various managerial positions in Rio Tinto (2011-2016). Various managerial and specialist positions (1987-2011) Head of Group Legal (2013-2016). Various managerial positions in FLSmidth (2006-2013). Corporate counsel FLSmidth (2004-2006). Lawyer Ashurst (1998-2003). Trainee lawyer, Lett, Vilstrup & Partnere (1994-1997) Non-executive positions None Member of the Board of Directors of LAAS Copenhagen None None Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 60 Total remuneration to Board of Directors and Group Executive Management registered with Danish Business Authority increased compared to 2022. Total remuneration increased compared to 2022, primarily due to increase in the expense on share- based remuneration. This covers the grant of a new share-based long-term incentive program (Restricted Share Units) that were granted to se- lected key employees, including the Group CEO and Group CFO, and an increase in the expense on the three Long-term incentive programmes granted in 2021, 2022 and 2023. Base salary The Group CEO received a base salary increase of 4.5% in 2023. The Group CFO has not received any base salary adjustment in 2023. Short-term incentive programme The pay-out under the short-term incentive pro- gramme reflects that average performance for the financial KPIs (order intake, revenue contribution margin, EBITA margin and CFFO) were signifi- cantly above target and achievement on individ- ual goals above target. Long-term incentive programme In 2023, management received no pay-out for the long-term incentive programmes (LTIP) for the per- formance periods 2019-2022. The KPIs for the 2023 LTIP grant are: EBITA-margin, total share- holder return and a sustainability-linked KPI. Other incentives To realise the Group’s transformation journey over the next three years a new share-based long-term incentive program (Restricted Share Units) was granted to selected key employees, in- cluding the Group CEO and the Group CFO. Fur- ther, a long-term cash-based incentive bonus was granted to the Group CEO. Remuneration of Group Executive Management The Board has adopted overall guidelines for in- centive pay for the Group Executive Management establishing a framework for variable salary com- ponents in order to support FLSmidth’s short- and long-term goals. The purpose is to ensure that the remuneration structure does not lead to impru- dence, short-term behaviour or unreasonable risk acceptance on the part of the Group Executive Management. The Board’s Compensation Committee considers on a regular basis the Group Executive Manage- ment’s remuneration. The total remuneration of the Group Executive Management consists of the following compo- nents: ■ Base salary ■ Short-term incentives in the form of a cash bo- nus (up to 75% of annual base salary) ■ Long-term incentives in the form of performance shares (up to 100% of base salary) ■ Other incentives of up to 150% of the annual base salary in cash and/or in shares ■ Up to 18 months’ notice in the event of termina- tion of employment and severance payment of a maximum of 6 months’ base salary ■ Customary benefits such as company car, tele- phone, etc. Remuneration of the Board of Directors The Board of Directors’ total remuneration con- sists of an annual cash payment for the current fi- nancial year, which is submitted for approval at the Annual General Meeting. The Board of Direc- tors’ fees are normally pre-approved by the Gen- eral Meeting for the year in question and then fi- nally approved by the shareholders at the following year’s General Meeting. In approving the final fees, shareholders may take unexpected workload into consideration and increase the pre- liminarily approved fees for all or some members of the Board of Directors. The Board of Directors’ fees do not include incentive-based remuneration. Cash payment is unchanged from 2022 and con- sists of a base fee of DKK 450,000 to each Board member, graded in line with additional tasks and responsibilities as follows: ■ Ordinary Board members 100% of the base fee ■ Board Vice chair 200% of the base fee ■ Board Chair 300% of the base fee ■ Committee Chair fee DKK 225,000 ■ Committee members fee DKK 125,000 The Chair and Vice chair do not receive payment for committee work. The fee structure was last ad- justed in 2017. The remuneration report can be found here: www.flsmidth.com/RemunerationReport2023. Remuneration Remuneration facts A detailed description of the remuneration of individual members of the Board of Directors and Executive Management is disclosed in the Remuneration Report. Total remuneration of the Board of Directors, DKKm Total remuneration of Executive Management registered with the Danish Business Authority, DKKm 6.5 6.6 6.8 2021 2022 2023 39.0 25.8 32.0 2021 2022 2023 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 61 Total shareholder return was 15.3% in 2023. Dividend of DKK 4.00 per share is proposed. Capital and share structure FLSmidth & Co. A/S is listed on Nasdaq Copenha- gen. The share capital is DKK 1,153,000,000 (un- changed versus end of 2022) and the total num- ber of issued shares is 57,650,000 (unchanged versus end of 2022). At the end of 2023, FLS- midth held a total of 913,828 equal to approxi- mately 1.6% of the share capital as treasury shares. Each share entitles the holder to 20 votes. The FLSmidth shares are included in 161 Danish, Nor- dic, European and global share indices. As of 18 December 2023, the FLSmidth shares are no longer included in the Danish Copenhagen 25 in- dex. The shares are instead included in the Dan- ish Large Cap index. At the time of issuing the 2023 financial state- ments for FLSmidth & Co. A/S, the company had approximately 51,700 registered shareholders (2022: 53,500). Major shareholders owning more than 5% of the share capital and of the votes were Altor Invest 7 AS, Tjuvholmen Allé 19, 0252 Oslo and Lundbeckfonden, Scherfigsvej 7, 2100 Copenhagen Ø. When excluding major sharehold- ers and certain other related shareholding, the free float of FLSmidth’s outstanding shares is esti- mated to be approximately 72%. Approximately 19% of the share capital is held by private investors, with the vast majority being held by Danish private investors, and 68% was held by institutional investors. Of the institutional owner- ship, approximately 23% was held by Danish in- vestors (including Lundbeckfonden). Return on the FLSmidth share in 2023 The total return on the FLSmidth share in 2023 was 15.3% (2022: 4.3%), calculated as share price appreciation and dividends paid. By comparison, the Danish Copenhagen 25 index increased by approximately 5% in 2023. The share price ended 2023 at DKK 287.20 com- pared to DKK 251.70 at the end of 2022, having traded between DKK 244.00 and DKK 345.60 dur- ing the year. Total shareholder return was in- cluded as a KPI in the long-term incentive pro- gram during 2023. The average daily traded volume was 200,432 shares, representing a decrease of approximately 25% compared to 2022. Development in shareholder structure % Share price development in 2023 Volume, 1,000 Share price, DKK Change in methodology for differentiating between Danish retail and institutional investors Shareholder information 0 10 20 30 40 50 60 70 80 90 100 2019 2020 2021 2022 2023 Danish (private) Danish (institutional) Non-registered FLSmidth & Co. A/S Foreign Lundbeckfond Invest A/S Novo A/S Altor Invest 7 AS Bestinver Gestión S.A SGIIC 220 260 300 340 0 1,000 2,000 3,000 4,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Daily volume Share price Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 62 Capital structure and allocation FLSmidth takes a conservative approach to capi- tal structure with an emphasis on relatively low debt, gearing and financial risk. The Board of Di- rectors’ priority for capital structure is as follows: ■ Leverage (NIBD/EBITDA < 2) ■ Dividend pay-out ratio (30-50% of net profit) In addition, the Board of Directors’ priority for cap- ital allocation is to ensure a strong balance sheet while allowing for growth investments and value- adding M&A. Excess cash can be distributed ei- ther via extraordinary dividends or share buy- back programmes. The Board of Directors will propose at the Annual General Meeting that a dividend of DKK 4 per share (2022: DKK 3 per share), corresponding to a dividend yield of 1.4% and a pay-out ratio of 47% to be distributed in 2023, which is in line with our targeted pay-out ratio. FLSmidth Investor Relations FLSmidth engages in an open and active dia- logue with the capital markets. It is FLSmidth’s ob- jective to have an appropriately diversified share- holder base in terms of geography, investment style and investment horizon. Accordingly, the purpose of Investor Relations is to: ■ Ensure compliance with relevant rules and reg- ulation for companies listed on Nasdaq Copen- hagen. ■ Ensure that FLSmidth is perceived as a visible, accessible, reliable and professional company by the capital markets. ■ Ensure that relevant, accurate, balanced and timely information is made available to the cap- ital markets as basis for regular trading and fair pricing of the shares. ■ Ensure that the Board of Directors and Group Executive Management are briefed on relevant information received based on dialogue with in- vestors, analysts and other financial market stakeholders. To achieve these goals, an open and active dia- logue with the capital markets takes place through stock exchange announcements and fi- nancial reporting, investor presentations, webcasts, conference calls and other forms of electronic communication investor meetings, roadshows, AGMs and capital market days. FLSmidth & Co. A/S is generally categorised as a capital goods or industrials company and is cur- rently being covered by 14 equity analysts, seven of which are based outside Denmark. For further details regarding analyst coverage, see the company website: www.FLS- midth.com/analysts. All investor relations materials and investor rela- tions contact information are available to inves- tors at the company website: www.FLSmidth.com/investors Financial calendar 2024 10 Apr 2024 Annual General Meeting 15 May 2024 Q1 2024 Interim Financial Report 15 Aug 2024 H1 2024 Interim Financial Report 12 Nov 2024 9M 2024 Interim Financial Report Share and dividend key figures 2019 2020 2021 2022 2023 CFPS (cash flow per share), DKK (diluted) 18.9 28.3 27.8 17.0 10.9 EPS (earnings per share), DKK (diluted) 15.5 4.2 6.9 6.5 8.7 BVPS (book value per share), DKK 171 159 180 188 188 DPS (dividend per share), DKK, proposed 0 2 3 3 4 Pay-out ratio (%) - 50 48 49 47 Dividend yield (dividend as percent of share price end of year) 0.0 0.9 1.2 1.2 1.4 FLSmidth & Co. A/S share price, end of year, DKK 265.4 232.8 244.3 251.7 287.2 Listed number of shares (1,000), end of year 51,250 51,250 57,650 57,650 57,650 Number of shares excl. own shares (1,000), end of year 50,056 50,152 56,725 56,736 56,736 Average number of shares (1,000), (diluted) 50,092 50,153 52,080 56,879 57,137 Market capitalisation, DKKm 13,602 11,931 14,084 14,511 16,557 Share and dividend key figures Share information Market Nasdaq Copenhagen Symbol FLS ISIN DK0010234467 Number of shares 57,650,000 Sector Construction and Materials ICB Code 5010 Segment Large Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 63 Consolidated Financial statements Consolidated financial statements 64 Key accounting estimates and judgements 69 Parent company financial statements 123 Statement by Management 131 Independent auditor's report 132 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 64 Primary statements Income statement 65 Statement of comprehensive income 65 Cash flow statement 66 Balance sheet 67 Equity statement 68 Notes Key accounting estimates and judgements 69 1. Operating profit and segments 70 1.1 Income statement by function 71 1.2 Segment information 71 1.3 Geographical information 73 1.4 Revenue 74 1.5 Staff costs 77 2. Capital employed and other Balance sheet items 78 2.1 Return on capital employed 79 2.2 Intangible assets 79 2.3 Impairment of assets 81 2.4 Property, plant and equipment 83 2.5 Leases 84 2.6 Investments in associates 85 2.7 Provisions 85 2.8 Pension obligations 87 2.9 Contractual commitments and contingent liabilities 88 2.10 Business acquisitions 89 2.11 Disposal of activities 91 2.12 Discontinued activities 91 3. Working capital 92 3.1 Net working capital 93 3.2 Inventories 93 3.3 Trade receivables 94 3.4 Work in progress 95 3.5 Other receivables 96 3.6 Trade payables 96 3.7 Other liabilities 96 4. Tax 97 4.1 Income tax 98 4.2 Paid income tax 99 4.3 Deferred tax 99 4.4 Tax on other comprehensive income 101 4.5 Our approach to tax and tax risk 101 5. Financial risks and capital structure 102 5.1 Shares and capital structure 103 5.2 Earnings per share 104 5.3 Financial risks 104 5.4 Financial income and costs 108 5.5 Derivatives 108 5.6 Fair value measurement 109 5.7 Net interest bearing debt 110 5.8 Financial assets and liabilities 110 6. Other notes 112 6.1 Share-based payment 113 6.2 Related party transactions 114 6.3 Audit fee 114 6.4 Events after the balance sheet date 114 6.5 List of Group companies 115 7. Basis of reporting 117 7.1 Introduction 118 7.2 Basis of preparation 118 7.3 Defining materiality 118 7.4 Alternative Performance Measures 118 7.5 Material Accounting policies 119 7.6 Impact from new IFRS 119 7.7 New IFRS not yet adopted 119 7.8 Definition of terms 120 Consolidated financial statements Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 65 Mining Technologies is included with twelve months in 2023 and four months in 2022. Income statement Statement of comprehensive income Notes DKKm 2023 2022 1.4 Revenue 24,106 21,849 Production costs (18,019) (16,773) Gross profit 6,087 5,076 Sales costs (1,679) (1,704) Administrative costs (2,773) (2,170) Other operating net income 126 98 EBITDA 1,761 1,300 2.4, 2.5 Depreciation and impairment of property, plant and equipment and lease assets (323) (357) EBITA 1,438 943 2.2 Amortisation and impairment of intangible assets (238) (324) EBIT 1,200 619 5.4 Financial income 1,371 1,588 5.4 Financial costs (1,517) (1,655) EBT 1,054 552 4.1 Tax for the year (382) (201) Profit for the year, continuing activities 672 351 1.2, 2.12 Profit/(loss) for the year, discontinued activities (181) 1 Profit for the year 491 352 Attributable to: Shareholders in FLSmidth & Co. A/S 497 370 Minority interests (6) (18) 491 352 5.2 Earnings per share (EPS): Continuing and discontinued activities per share (DKK) 8.8 6.5 Continuing and discontinued activities per share, diluted (DKK) 8.7 6.5 Continuing activities per share (DKK) 12.0 6.5 Continuing activities per share, diluted (DKK) 11.9 6.5 5.1 Proposed dividends per share (DKK) 4.0 3.0 Notes DKKm 2023 2022 Profit for the year 491 352 Items that will not be reclassified to profit or loss: Actuarial gains and losses on defined benefit plans 17 101 4.3, 4.4 Tax of actuarial gains and losses on defined benefit plans (5) (24) Items that are or may be reclassified subsequently to profit or loss: 5.3 Currency adjustments regarding translation of entities (359) 149 5.5 Cash flow hedging: - Value adjustments for the year 34 (28) - Value adjustments transferred to work in progress 4 12 4.3, 4.4 Tax hereof (10) 8 Other comprehensive income for the year after tax (319) 218 Comprehensive income for the year 172 570 Attributable to: Shareholders in FLSmidth & Co. A/S 175 587 Minority interests (3) (17) 172 570 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 66 Accounting policy The cash flow statement is presented using the in- direct method and shows the composition of cash flow divided into operating, investing and financ- ing activities for both continued and discontinued activity and the changes in cash and cash equiva- lents during the year. Cash flow from operating activities consists of earnings before depreciation, amortisation and im- pairment (EBITDA) adjusted for changes in provi- sions and net working capital, other non-cash op- erating items, financial items received and paid and taxes paid. Cash flow from investing activities comprises pay- ments made and cash received in connection with the acquisition and disposal of businesses and non-current assets including dividend from associ- ates. Cash flow from financing activities comprises changes in the size or composition of equity and loans, repayment of interest-bearing debt includ- ing lease liabilities, acquisitions and disposal of non-controlling interests, movements in treasury shares and payment of dividend to shareholders. Cash and cash equivalents mainly consist of bank deposits. Cash flow statement Notes DKKm 2023 2022 1.2 EBITDA 1,761 1,300 1.2 EBITDA, discontinued activities (171) (10) Adjustment for gain on sale of activities and property, plant and equipment and other non-cash items (85) 4 2.7 Change in provisions, pension and employee benefits (236) 640 3.1 Change in net working capital 298 (446) Cash flow from operating activities before financial items and tax 1,567 1,488 5.4 Financial items received and paid (94) (49) 4.2 Taxes paid (850) (471) Cash flow from operating activities 623 968 2.10 Acquisition of enterprises and activities (118) (2,120) 2.2 Acquisition of intangible assets (323) (245) 2.4 Acquisition of property, plant and equipment (176) (88) Acquisition of financial assets (3) (23) 2.11 Disposal of enterprises and activities 283 1 Disposal of property, plant and equipment 71 159 Disposal of financial assets 0 6 2.6 Dividend from associates 9 0 Cash flow from investing activities (257) (2,310) Dividend paid (170) (176) Buyout of minority interests (13) 0 Acquisition of treasury shares (1) 0 5.7 Repayment of lease liabilities (133) (134) 5.7 Change in interest-bearing debt (749) 1,906 Cash flow from financing activities (1,066) 1,596 Change in cash and cash equivalents (700) 254 Cash and cash equivalents at beginning of period 2,130 1,935 Foreign exchange adjustment, cash and cash equivalents (78) (59) Cash and cash equivalents at 31 December 1,352 2,130 The cash flow statement cannot be inferred from the published financial information only Free cash flow DKKm 2023 2022 Free cash flow 366 (1,342) Free cash flow, adjusted for acquisitions and disposals of enterprises and activities 201 777 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 67 Balance sheet Notes DKKm 31/12 2023 31/12 2022 Assets Goodwill 6,448 6,433 Patents and rights 688 766 Customer relations 331 392 Other intangible assets 143 148 Completed development projects 174 204 Intangible assets under development 653 422 2.2 Intangible assets 8,437 8,365 Land and buildings 1,777 1,983 Plant and machinery 391 493 Operating equipment, fixtures and fittings 117 131 Tangible assets in course of construction 104 40 2.4, 2.5 Property, plant and equipment 2,389 2,647 4.3 Deferred tax assets 2,314 1,921 2.6 Investments in associates 81 157 Other securities and investments 56 59 Other non-current assets 2,451 2,137 Non-current assets 13,277 13,149 3.2 Inventories 3,450 3,971 3.3 Trade receivables 4,516 5,108 3.4 Work in progress 2,769 3,147 Prepayments 423 874 Income tax receivables 229 321 3.5 Other receivables 995 1,145 Cash and cash equivalents 1,352 2,130 Current assets 13,734 16,696 Total assets 27,011 29,845 Notes DKKm 31/12 2023 31/12 2022 Equity and liabilities 5.1 Share capital 1,153 1,153 Foreign exchange adjustments (879) (517) Cash flow hedging (32) (70) 5.1 Retained earnings 10,615 10,247 Shareholders in FLSmidth & Co. A/S 10,857 10,813 Minority interests (29) (26) Equity 10,828 10,787 4.3 Deferred tax liabilities 207 294 2.8 Pension obligations 363 414 2.7 Provisions 660 896 5.7 Lease liabilities 132 206 5.7 Bank loans and mortgage debt 1,633 1,929 3.4 Prepayments from customers 338 578 Income tax liabilities 110 103 3.7 Other liabilities 53 85 Non-current liabilities 3,496 4,505 2.8 Pension obligations 2 2 2.7 Provisions 1,635 1,611 5.7 Lease liabilities 101 117 5.7 Bank loans and mortgage debt 54 615 3.4 Prepayments from customers 1,595 2,193 3.4 Work in progress 3,025 3,592 3.6 Trade payables 4,024 4,339 Income tax liabilities 277 346 3.7 Other liabilities 1,974 1,738 Current liabilities 12,687 14,553 Total liabilities 16,183 19,058 Total equity and liabilities 27,011 29,845 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 68 Equity statement 2023 2022 DKKm Share capital Foreign exchange adjustments Cash flow hedging Retained earnings Shareholders in FLSmidth & Co A/S Minority interests Total Share capital Foreign exchange adjustments Cash flow hedging Retained earnings Shareholders in FLSmidth & Co A/S Minority interests Total Equity at 1 January 1,153 (517) (70) 10,247 10,813 (26) 10,787 1,153 (665) (54) 9,937 10,371 (3) 10,368 Comprehensive income for the year Profit/loss for the year 497 497 (6) 491 370 370 (18) 352 Other comprehensive income Actuarial gain/loss on defined benefit plans 17 17 17 101 101 101 Currency adjustments regarding translation of entities (362) (362) 3 (359) 148 148 1 149 Cash flow hedging: - Value adjustments for the year 34 34 34 (28) (28) (28) - Value adjustments transferred to work in progress 4 4 4 12 12 12 Tax on other comprehensive income (15) (15) (15) (16) (16) (16) Other comprehensive income for the year 0 (362) 38 2 (322) 3 (319) 0 148 (16) 85 217 1 218 Comprehensive income for the year 0 (362) 38 499 175 (3) 172 0 148 (16) 455 587 (17) 570 Transactions with owners: Dividend paid (170) (170) (170) (170) (170) (6) (176) Share-based payment 53 53 53 25 25 25 Buyout of minority interests (13) (13) (13) 0 0 0 Acquisition of treasury shares (1) (1) (1) 0 0 0 Equity at 31 December 1,153 (879) (32) 10,615 10,857 (29) 10,828 1,153 (517) (70) 10,247 10,813 (26) 10,787 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 69 When preparing the consolidated financial state- ments, we are required to make several estimates and judgements. These affect the carrying amounts of balance sheet items and income and expenses for the financial year. This note includes the areas that involve a higher degree of judge- ment or complexity and where changes in as- sumptions and estimates will likely have a signifi- cant impact on the consolidated financial statements. These areas are categorised as key accounting estimates and judgements. The signifi- cance of the impact on the consolidated financial statements of those estimates and judgements is categorised into three levels: low, medium and high, where only the two last levels result in clas- sification as key accounting estimates/judge- ments. Impact significance Key accounting estimate The determination of the carrying amount of some assets and liabilities requires the estimation of the effect of uncertain future events on those assets and liabilities and actual results may differ from the estimates made. Making the estimates involve developing expectations of the future based on assumptions, that we to the extent possible sup- port by historical trends or reasonable expecta- tions. We believe that our estimates are the most likely outcome of future events. Key accounting judgements Key accounting judgements are made when ap- plying accounting policies. Key accounting judge- ments are the judgements made, that can have a significant impact on the amounts recognised in the consolidated financial statements. The areas that are categorised as key accounting estimates and judgements are unchanged com- pared to last year. The description of the key accounting estimates and judgements are included in the individual notes as shown below. As a global business, FLSmidth is exposed to risks associated with climate change comprising both transitional and physical risks. In general, climate-related changes have not im- posed significant uncertainty on the financial statement but poses opportunities to FLSmidth for delivering solutions to our current and future cus- tomers to succeed on the green transition. Invest- ment in developing such solutions has been fac- tored into the future expected cash flows in e.g. the impairment test of intangible assets. Further, in preparing the consolidated financial statements 2023, management has considered the impact of climate change, particularly in the context of our sustainability performance, to the extent possible. This includes that our 2030 SBTi targets to reduce emissions across the value chain are considered in our financial forecasts. The potential consequences on the value and useful life of property, plant and equipment were assessed as having no material financial impact. The geopolitical situation from various ongoing conflicts and increasing unrest in many regions along with anti-globalisation sentiments are im- pacting global structures and relationships. Poten- tial risk-scenarios are continuously reviewed and supply chain initiatives are ongoing. Key accounting estimates and judgements Key accounting estimates and judgements Low Medium High Key accounting estimates and judgements Note Key accounting estimates and judgements Nature of accounting impact Impact of estimates and judgements 1.4 Revenue Determine recognition method Judgement 2.7 Provisions Estimate warranty provision Estimate 2.10 Business acquisitions Purchase price allocation Estimate and adjustment 3.2 Inventories Estimate valuation of inventories Estimate 3.3 Trade receivables Estimate level of expected losses Estimate 3.4 Work in progress Estimate total cost to complete Estimate 4.3 Deferred tax Estimate the value of deferred tax assets Estimate Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 70 Section 1 Operating Profit and Segments 1.1 Income statement by function 71 1.2 Segment information 71 1.3 Geographical information 73 1.4 Revenue 74 1.5 Staff costs 77 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 71 1.1 Income statement by function It is our policy to prepare the income statement based on an adjusted classification of the cost by function in order to show the earnings before de- preciation, amortisation and impairment. Depreci- ation, amortisation, and impairment are therefore separated from the individual functions and pre- sented in separate lines. The income statement prepared on the basis of cost by function is shown below: 1.2 Segment information FLSmidth has three operating and reporting seg- ments – Mining, Cement and Non-Core Activities. The Mining and Cement segments are dedicated to provide customers full flowsheet technologies and service solutions to enhance their productivity and support the sustainability agenda. This in- cludes offering single services or products as well as product bundles with related performance guarantees in accordance with the Group Risk Management approach. The Non-Core Activities, were separated effective from 1 October 2022 and include Mining activities and product types that either offer limited or no aftermarket potential, are characterised by high execution risks, are highly engineered and/or lack standardisation, and we see no viable commercial model for FLSmidth to turn these around. Further- more, these products are not aligned with or im- portant to FLSmidth’s sustainability agenda. A designated organisational structure oversees the segment. The order backlog is expected to be di- vested or wound down by the end of 2024. The segments have technology ownership and develop and drive the life cycle offering and prod- uct portfolio. Five regions support sales and ser- vice within Mining and Non-Core Activities while activities in Cement are supported by seven core clusters. The structure helps create a productivity-driven organisation with a strong, unified digital ap- proach and fewer touchpoints strengthening our local presence, customer focus, and life cycle of- fering in order to capture growth. The segmentation reflects the internal reporting and management structure. Accounting policy Segment income and costs include transactions between the three segments, if any. Such transac- tions are carried out on market terms. Some administrative functions such as finance, HR, IT and legal are shared by the segments. Such shared costs are paid by the business seg- ments based on assessment of consumption. Discontinued activities are not a separate reporta- ble segment but presented as discontinued opera- tions under IFRS 5. Geographical information in note 1.3 is based on five regions. Revenue is presented in the region in which delivery takes place. Non-current assets and employees are presented in the region in which they belong. Income Statement by function DKKm 2023 2022 Revenue 24,106 21,849 Production costs, including depreciation and amortisation (18,348) (17,123) Gross profit 5,758 4,726 Sales costs, including depreciation and amortisation (1,703) (1,738) Administrative costs, depreciation and amortisation (2,981) (2,467) Other operating net income 126 98 EBIT 1,200 619 Depreciation, amortisation and impairment consist of: Depreciation and impairment of property, plant and equipment and lease assets (323) (357) Amortisation and impairment of intangible assets (238) (324) (561) (681) Depreciation, amortisation and impairment are divided into: Production costs (329) (350) Sales costs (24) (34) Administrative costs (208) (297) (561) (681) Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 72 1.2 Segment information – continued 2023 FLSmidth Group Mining Cement Non-Core Continuing Discontinued DKKm Activities ¹⁾ activities activities ²⁾ Income statement Revenue 17,107 6,048 951 24,106 0 Production costs (12,435) (4,529) (1,055) (18,019) (14) Gross profit 4,672 1,519 (104) 6,087 (14) SG&A costs (3,087) (1,140) (225) (4,452) (157) Other operating net income³ 13 113 0 126 EBITDA 1,598 492 (329) 1,761 (171) Depreciation and impairment of property, plant (223) (84) (16) (323) 0 and equipment EBITA 1,375 408 (345) 1,438 (171) Amortisation of intangible assets (204) (34) 0 (238) 0 EBIT 1,171 374 (345) 1,200 (171) Order intake 16,280 4,888 208 21,376 0 Order backlog 12,267 4,795 531 17,593 0 Gross margin 27.3% 25.1% -10.9% 25.3% EBITDA margin 9.3% 8.1% -34.6% 7.3% EBITA margin 8.0% 6.7% -36.3% 6.0% EBIT margin 6.8% 6.2% -36.3% 5.0% Number of employees at 31 December 6,581 2,669 127 9,377 0 Reconciliation of profit/(loss) for the year EBIT 1,200 (171) Financial income 1,371 4 Financial costs (1,517) (17) EBT 1,054 (184) Tax for the year (382) 3 Profit/(loss) for the year 672 (181) 2022 FLSmidth Group Mining Cement Non-Core Continuing Discontinued Activities ¹⁾ activities activities ²⁾ 15,082 6,264 503 21,849 0 (11,288) (4,662) (823) (16,773) (7) 3,794 1,602 (320) 5,076 (7) (2,444) (1,346) (84) (3,874) (3) 39 59 0 98 0 1,389 315 (404) 1,300 (10) (243) (111) (3) (357) 0 1,146 204 (407) 943 (10) (223) (101) 0 (324) 0 923 103 (407) 619 (10) 17,822 6,613 209 24,644 0 14,277 6,386 2,878 23,541 0 25.2% 25.6% -63.6% 23.2% 9.2% 5.0% -80.3% 5.9% 7.6% 3.3% -80.9% 4.3% 6.1% 1.6% -80.9% 2.8% 7,126 3,270 581 10,977 0 619 (10) 1,588 7 (1,655) (12) 552 (15) (201) 16 351 1 1) Non-Core Activities constitutes a separate reportable segment prospectively from 1 October 2022. Comparative information has not been restated. Further information can be found in the 2022 Annual Report note 1.2. Under the previous segmentation Mining and Non-Core Activities was presented as one segment. 2) Discontinued activities mainly consist of non-mining bulk material handling. 3) Other operating net income is presented as a separate line item instead of presented together with SG&A cost. Comparative information has been restated. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 73 1.3 GEOGRAPHICAL INFORMATION Revenue, non-current assets (intangible assets and Prop- erty, plant and equipment) and number of employees are disclosed for all Regions. Revenue, non-current assets (intangible assets and Prop- erty, plant and equipment) are disclosed for home coun- try of our Headquarter and countries that account for more than 5% of Group reve- nue. FLSmidth ■ Annual Report 2023 73 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements North America NAMER Revenue: DKK 5,536m (2022: DKK 5,270m) Non-current assets: DKK 3,816m (2022: DKK 3,650m) Employees: 1,759 (2022: 1,807) USA Revenue: DKK 3,300m (2022: DKK 2,909m) Non-current assets: DKK 2,889m (2022: DKK 2,986m) Canada Revenue: DKK 1,295m (2022: DKK 1,457m) Non-current assets: DKK 908m (2022: DKK 648m) South America SAMER Revenue: DKK 6,094m (2022: DKK 5,081m) Non-current assets: DKK 813m (2022: DKK 467m) Employees: 1,852 (2022: 2,240) Chile Revenue: DKK 2,347m (2022: DKK 2,136m) Non-current assets: DKK 516m (2022: DKK 169m) Peru Revenue: DKK 1,502m (2022: DKK 1,266m) Non-current assets: DKK 210m (2022: DKK 151m) Brazil Revenue: DKK 1,670m (2022: DKK 1,199m) Non-current assets: DKK 87m (2022: DKK 147m) Europe, Central Asia & North Africa ECANA Revenue: DKK 4,381m (2022: DKK 4,064m) Non-current assets: DKK 4,424m (2022: DKK 4,819m) Employees: 2,311 (2022: 2,775) Denmark Revenue: DKK 59m (2022: DKK 54m) Non-current assets: DKK 744m (2022: DKK 1,264m) Kazakhstan Revenue: DKK 1,269m (2022: DKK 625m) Non-current assets: DKK 124m (2022: DKK 36m) Asia & Australia, APAC Revenue: DKK 4,711m (2022: DKK 3,928m) Non-current assets: DKK 1,442m (2022: DKK 1,643m) Employees: 1,054 (2022: 1,326) Australia Revenue: DKK 2,156m (2022: DKK 2,007m) Non-current assets: DKK 1,434m (2022: DKK 1,624m) Sub-Saharan Africa, Middle East & South Asia, SSAMESA Revenue: DKK 3,384m (2022: DKK 3,506m) Non-current assets: DKK 331m (2022: DKK 433m) Employees: 2,401 (2022: 2,829) India Revenue: DKK 1,197m (2022: DKK 1,600m) Non-current assets: DKK 139m (2022: DKK 222m) Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 74 1.4 Revenue Revenue arises from sale of life cycle offerings to our customers. We sell a broad range of goods and services within the Mining and Cement seg- ments split into the main business Products and Services. Revenue within the Non-Core Activities segment reflects the performance of the backlog and sale of parts already in stock. Products Products range from standardised and customised equipment to plants, plant extensions, process systems and process system extensions. The lat- ter has usually significant contract price, a long lead time affecting the consolidated financial statements in more than one financial year, a high degree of project management and involve more than one FLSmidth entity in the delivery to the customer. Revenue from products that are standardised or customised to a low degree are recognised at the point in time when control of the products transfers to the customers, usually upon delivery. Revenue from the sale of products that are cus- tomised to a larger extend is usually recognised over time, applying the percentage of completion cost-to-cost method. Highly customised product sales will often entitle us to receive a down payment from the customer, followed by several progress payments linked to our performance progress. Upon completion or delivery, we will usually be entitled to the final payment. To the extent possible we obtain pay- ment guarantees to minimise the credit risk during execution. Most of the products are sold as fixed price contracts. Services Services comprise various service elements to support the life cycle offerings portfolio. The sale can consist of spare parts, wear parts, service hours, long-term maintenance contracts and sale of upgrades and rebuilds. The sale of service hours includes amongst others sale of supervision, electronic or mechanical service of equipment or plants. The performance obligation for service sales and maintenance contracts is either each service hour or the full contract, depending on the contract wording. Most service contracts are fixed price contracts, if not for the full service, then for the hourly rate. Service sales are recognised over time as the services are provided to the customer based on the cost-to-cost method. We are nor- mally entitled to payment once the service has been provided or on a monthly basis. Revenue split by Regions Revenue by Revenue stream Revenue by Mining, Cement and Non-Core Activities 24% 23% 23% 25% 16% 14% 18% 20% 19% 18% 0% 20% 40% 60% 80% 100% 2022 2023 ECANA APAC SSAMESA SAMER NAMER 41% 41% 59% 59% 0% 20% 40% 60% 80% 100% 2022 2023 Service Products 69% 71% 29% 25% 2% 4% 0% 20% 40% 60% 80% 100% 2022 2023 NCA Cement Mining Revenue split on industry and category 2023 2022 Mining Cement Non-Core Group Mining Cement Non-Core Group DKKm Activities Activities Products business 6,426 2,802 642 9,870 5,891 2,728 297 8,916 Service business 10,681 3,246 309 14,236 9,191 3,536 206 12,933 Total revenue 17,107 6,048 951 24,106 15,082 6,264 503 21,849 Non-Core Activities constitutes a separate reportable segment prospectively from 1 October 2022. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 75 1.4 Revenue – continued Upgrades and rebuilds are defined as one perfor- mance obligation. Revenue is typically recognised over time using the cost-to-cost method. The pay- ment pattern for upgrades and rebuilds are very similar to the pattern for products. Revenue recognition principles The table below decomposes revenue by seg- ments into revenue recognition principles, i.e. ei- ther at the point in time or over time to reflect the percentage of completion of the performance obli- gations in the contracts. Percentage of completion covers a wide range of different types of contracts, from contracts where the customer consumes the services over time, such as fixed price service contracts, to more com- plex product bundles with engineering subject to the enhanced risk governance structure under the Risk Management Board and to risk quotas. To re- flect the wide range of contracts that are ac- counted for using percentage of completion, the category has been decomposed into two subcate- gories from 1 January 2023 with comparative in- formation restated. The nominal increase in percentage of completion is due to the acquisition of Mining Technologies being included with twelve months in 2023 and four months in 2022. Backlog The order backlog on 31 December 2023 amounted to DKK 17,593m (2022: DKK 23,541m) and represents the value of outstanding perfor- mance obligations on effective contracts, where we will transfer control at a future point in time and the remaining performance obligations on contracts where we transfer control over time. A contract is effective when it becomes binding for both parties depending on the specific conditions of the contract. This usually means that the con- tract has been signed and the prepayment (if any) has been received. Information on the split of the order backlog between the three segments can be found in note 1.2. Based on the order backlog maturity profile, the majority, 67% (2022: 60%) of the order backlog is expected to be converted into revenue in 2024, while 33% (2022: 40%) is expected to be con- verted to revenue in subsequent years. Besides the key accounting judgments described in the box, revenue is impacted by key accounting estimate related to the estimate of the percentage of completion (estimate of total cost to complete). The key accounting estimates are further ex- plained in note 3.4. Backlog maturity DKKm Accounting policy Revenue from contracts with customers is rec- ognised when control of the goods or services are transferred to our customers at an amount that reflects the transaction price to which we expect to be entitled in exchange for these goods or services. Judgement is made to de- termine if a contract for sale of products or ser- vices, or a combination hereof, involves one or more performance obligations. If a contract contains more than one performance obliga- tion, the contract price is allocated to each performance obligation based on the relative stand-alone selling price for each performance obligation. Revenue from products and services is recog- nised over time, using the cost-to-cost method, when 1) we have no alternative use for the goods or services to be delivered and 2) we have an enforceable right to payment for work completed. If we do have an alternative use for the goods or services to be delivered, e.g. products with a low degree of customisation, revenue is recognised at the point in time when control transfers to the customer, usually upon delivery. 14,125 11,761 6,851 3,912 2,565 1,920 0 4,000 8,000 12,000 16,000 20,000 24,000 2022 2023 Within 1 year Within 2 years Within 3 years and beyond Revenue split on timing of revenue recognition principle 2023 2022 Mining Cement Non-Core Group Mining Cement Non-Core Group DKKm Activities Activities Point in time 9,442 2,610 55 12,107 8,034 2,689 239 10,962 Percentage of completion - Service, single machines and product bundles 6,050 3,102 0 9,152 4,975 3,017 0 7,992 - Product bundles with engineering under enhanced risk governance 1,615 336 896 2,847 2,073 558 264 2,895 Total revenue 17,107 6,048 951 24,106 15,082 6,264 503 21,849 Non-Core Activities constitutes a separate reportable segment prospectively from 1 October 2022. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 76 1.4 Revenue – continued If we do not have an enforceable right to payment for work completed throughout the contract term, revenue is recognised at the point in time when the control transfers to the customer, usually upon cus- tomer acceptance. In the case of significant uncer- tainties with the collectability of contract considera- tion, revenue is recognised upon cash receipt. In determining the transaction price revenue is re- duced by probable penalties, payment of liqui- dated damages and any other claims that are pay- ments to our customers. The transaction price is also adjusted for any variable elements, where we estimate the amount of the variable transaction price. The variable amount is estimated at contract incep- tion and re-estimated periodically throughout the contract term. The variable amount is recognised as revenue when it is highly probable that reversal will not occur. Warranties are granted in connection with the sale of equipment and systems and are classified as as- surance-type warranties that are not accounted for as separate performance obligations. Refer to note 2.7, Provisions, for accounting policy on warranties provisions. Revenue is recognised less rebates, cash discounts and value added tax and duties. Key accounting judgements Judgement regarding recognition method Judgements are made when determining if revenue on product or service is recognised over time or at a point in time. The judgements relate to if we have an alternative use of the assets being produced and if we have an en- forceable right to payment throughout the contractual term. When assessing if an asset being produced has no alternative use to FLSmidth, we esti- mate the alternative use cost amount. We have limited historical data as we rarely redi- rect our assets. The estimate is based on the specifics of each contract. When assessing if we are entitled to payment throughout the contract term, a judgement is made based on the contract wording, legal en- titlement and profit estimates. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 77 1.5 Staff costs Staff costs consist of direct wages and salaries, re- muneration, pension costs, share-based pay- ments, training etc. related to the continuing activi- ties. The increase in staff costs relates primarily to in- flation and restructuring following the implementa- tion of our transformation strategy and the inte- gration of Mining Technologies. There is a positive effect from foreign currency rates of DKK 145m (2022: negative impact of DKK 215m). Composition of staff costs During 2023 the remuneration of the Board of Directors and Group Executive Management was as follows: Remuneration Board of Directors Remuneration Group Executive Man- agement Two members of the Group Executive Manage- ment are registered with The Danish Business Au- thority. During 2023, the registered members of the Group Executive Management earned remu- neration as follows: Remuneration registered executives Each member of the Group Executive Manage- ment is, other than the base salary, entitled to customary benefits. Additionally, the members of Group Executive Management participate in short- term- and long-term incentive programmes. The short- and the long-term incentive programmes are capped at 75% and 100%, respectively, of the annual base salary. In addition to this each execu- tive may, at the Board of Directors’ discretion, receive an additional incentive of up to 150% of the annual base salary, which can be cash and/or share based. The individual maximum and target levels are fixed as part of the ongoing remunera- tion adjustment cycle. To realise FLSmidth’s transformation journey over the next three years, selected key employees in- cluding the registered executives were granted a long-term share-based programme ('restricted share units’). Further information can be found in note 6.1. The CEO was granted a cash-based long-term bonus vesting over three years based on different key milestones related to the transfor- mation of the Group. The members of the Group Executive Manage- ment have up to 18 months’ notice in the event of termination of employment and severance payment may correspond to a maximum of 6 months’ base salary. For details related to the remuneration of the Board of Directors and Group Executive Manage- ment, refer to the Remuneration Report 2023: www.flsmidth.com/RemunerationReport2023. Accounting policy Staff costs include wages and salaries, cash bo- nuses, share-based payments, pension costs, ben- efits and social security costs. In general, staff costs are expensed when the services are ren- dered by the employees. When long-term incen- tive programmes are provided, the costs are ac- crued over the period that makes the employees entitled to the payment. Termination benefits are expensed when an agreement has been reached between the Group and the employee and no fu- ture service is rendered by the employee in ex- change for the termination payment. The Group’s pension plans consist of both defined contribution plans and defined benefit plans (pen- sion plans). The accounting policy for pension plans can be found in note 2.8. The accounting policy for share-based payments can be found in note 6.1. DKKm 2023 2022 Wages, salaries and other remuneration 4,469 4,326 Contribution plans and other social security costs, etc. 631 599 Defined benefit plans 30 25 Share-based payment 54 25 Other staff costs 546 338 5,730 5,313 The amounts are included in the items: Production costs 3,437 3,195 Sales costs 1,120 1,217 Administrative costs 1,173 901 5,730 5,313 Average number of employees in continuing activities 10,197 10,621 Year-end number of employees 9,377 10,977 DKKm 2023 2022 Board of Directors fees 6.8 6.6 Total 6.8 6.6 DKKm 2023 2022 Wages and salaries 32 32 Bonus 18 20 Benefits 2 3 Severance package 6 14 Share-based payment 15 7 Other incentives 4 3 Total 77 79 DKKm 2023 2022 Wages and salaries 14 13 Bonus 8 8 Benefits 1 1 Severance package 0 0 Share-based payment 8 4 Other incentives 1 0 Total 32 26 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 78 Section 2 Capital employed and other Balance sheet items 2.1 Return on capital employed 79 2.2 Intangible assets 79 2.3 Impairment of assets 81 2.4 Property, plant and equipment 83 2.5 Leases 84 2.6 Investments in associates 85 2.7 Provisions 85 2.8 Pension obligations 87 2.9 Contractual commitments and contingent liabilities 88 2.10 Business acquisitions 89 2.11 Disposal of activities 91 2.12 Discontinued activities 91 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 79 2.1 Return on capital employed Capital employed is determined as the sum of fixed assets and net working capital. capital employed is used for determining the key performance indicator Return on capital employed (ROCE). The table be- low shows the decomposition of capital employed. Capital employed ROCE ROCE is calculated based on average capital em- ployed to reflect the annual development. In 2022, the average capital employed is adjusted by in- cluding the increase in capital employed coming from Mining Technologies prorated to the period af- ter acquisition. ROCE increased during the year, driven by an increased EBITA that was partly offset by an increase in average capital employed. 2.2 Intangible assets Goodwill arising from business acquisitions is rec- ognised in the consolidated financial statements. The carrying amount of goodwill per segment is shown in note 2.3. The finalisation of the initial ac- counting in 2023 for the acquisition of Mining Technologies in 2022 led to an increase in good- will in 2023 of DKK 108m, see note 2.10 for more information. Patents and rights acquired are recognised in the consolidated financial statements. The patents and rights include patents, trademarks, technol- ogy, and other rights. Our intangible assets under development consist of research and development (R&D) projects and software. Much of the knowhow/R&D we generate, originate from work for customers, of which some is expensed and some is capitalised depending on the nature of the cost. In 2023, R&D costs ex- pensed totalled DKK 155m (2022: DKK 169m). The expense is included in production costs. The addi- tion of intangible assets under development amounts to DKK 322m (2022: DKK 242m) where capitalised R&D cost amounts to DKK 193m (2022: DKK 146m) and the remaining capitalised relates to IT related projects. Of those capitalised costs, DKK 138m (2022: DKK 94m) are internally gener- ated. In 2022, impairment of DKK 75m was recog- nised on R&D projects. In 2023, there was no im- pairment. In the table on the next page, intangible assets are shown by type. Other intangible assets consist of software and completed software implementa- tion projects, whereas completed development projects primarily consist of R&D costs (develop- ments in relation to production techniques, pro- cesses, and similar). Until completed, internally developed assets are presented in a separate col- umn. Accounting policy Goodwill Goodwill arises from business combinations and is determined as the excess of the purchase price over the fair value of the net assets acquired, in- cluding contingent liabilities. Goodwill is ex- pressed in the functional currency of the entity ac- quired. Internally generated goodwill is not capitalised. Goodwill is allocated to the cash gen- erating units as defined by Management and be- ing the segments Mining and Cement as no good- will is related to the Non-Core Activities. Subsequently, goodwill is not amortised but is tested for impairment at least once a year or sooner if impairment indication arises. Further in- formation on the impairment test and the recogni- tion of a potential impairment loss on goodwill can be found in note 2.3. Intangible assets other than goodwill Patents and rights, including trademarks, cus- tomer relations, software applications and other intangible assets are measured at cost less accu- mulated amortisation and impairment losses. Cus- tomer relations are acquired in business combina- tions, only, while patents and rights, including trademarks, software applications and other intan- gible assets can be acquired as part of business combinations, in separate acquisitions or be inter- nally developed. The Group uses significant resources on innova- tion in relation to production techniques/pro- cesses, software solutions and the like. For accounting purposes, the innovation activities are classified into a research phase and a development phase. Projects within the develop- ment phase are capitalised if it can be demon- strated that FLSmidth has the technical feasibility, intention, and sufficient resources to complete the development and provided that the cost to de- velop can be determined reliably and it is proba- ble that the future earnings or the net selling price will cover production, sales, and administrative costs plus development costs. Other development costs and costs in the research phase are recog- nised in the income statement when incurred. De- velopment costs consist of salaries and other costs that are directly attributable to development activities. Development projects in progress are not amor- tised but are tested for impairment at least once a year. Once a development project has been completed it is amortised on a straight-line basis over the es- timated useful life. Similarly, other intangible as- sets are amortised on a straight-line basis over the estimated useful life of the assets which is as fol- lows: ■ Patents and rights, including trademarks, up to 30 years ■ Customer relations up to 30 years ■ Other intangible assets up to 20 years; primarily consist of software applications with useful life up to 5 years ■ Completed development projects (R&D projects) up to 8 years Intangible assets are written down to recoverable amount if lower. Further information can be found in note 2.3. DKKm 2023 2022 Intangible assets at cost value, 13,485 13,308 note 2.2 Property, plant and equipment at 2,389 2,647 carrying amount, note 2.4 Net working capital, note 3.1 1,382 1,893 Capital employed, total 17,256 17,848 DKKm 2023 2022 EBITA 1,438 943 Capital employed, average 17,552 15,888 ROCE, average 8.2% 5.9% * For 2022, the average capital employed is adjusted to reflect the acquisition of Mining Technologies Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 80 2.2 Intangible assets – continued 2023 Goodwill Patents and Customer Other Completed Intangible Total rights relations intangible development assets under DKKm assets projects development Cost at 1 January 6,434 2,204 2,015 929 1,304 422 13,308 Foreign exchange adjustments (84) (7) (64) (5) 0 0 (160) Acquisition of group enterprises 108 0 0 0 0 0 108 Disposals of enterprises (9) (15) 0 (1) 0 0 (25) Additions 0 0 0 1 0 322 323 Disposals 0 0 (19) (46) 0 (4) (69) Transferred between categories 0 0 0 56 31 (87) 0 Cost at 31 December 6,449 2,182 1,932 934 1,335 653 13,485 Amortisation and impairment at 1 January (1) (1,438) (1,623) (781) (1,100) 0 (4,943) Foreign exchange adjustment 0 6 54 5 1 0 66 Disposals of enterprises 0 1 0 1 0 0 2 Disposals 0 0 19 46 0 0 65 Amortisation and impairment 0 (63) (51) (62) (62) 0 (238) Amortisation and impairment at 31 December (1) (1,494) (1,601) (791) (1,161) 0 (5,048) Carrying amount at 31 December 6,448 688 331 143 174 653 8,437 2022 Goodwill Patents and Customer Other Completed Intangible Total rights relations intangible development assets under DKKm assets projects development Cost at 1 January 4,364 2,127 1,925 884 1,272 310 10,882 Foreign exchange adjustments 111 12 58 10 0 0 191 Acquisition of group enterprises 1,959 65 32 0 0 0 2,056 Additions 0 0 0 3 0 242 245 Disposals 0 0 0 (5) (61) 0 (66) Transferred between categories 0 0 0 37 93 (130) 0 Cost at 31 December 6,434 2,204 2,015 929 1,304 422 13,308 Amortisation and impairment at 1 January 0 (1,343) (1,524) (719) (1,039) 0 (4,625) Foreign exchange adjustment (1) (7) (43) (11) (1) 0 (63) Disposals 0 0 0 5 61 0 66 Amortisation and impairment 0 (88) (56) (56) (121) 0 (321) Amortisation and impairment at 31 December (1) (1,438) (1,623) (781) (1,100) 0 (4,943) Carrying amount at 31 December 6,433 766 392 148 204 422 8,365 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 81 2.3 Impairment of assets Result of annual impairment test We perform an annual impairment test of goodwill and intangible assets under development. Neither in 2023 nor in 2022 did the test reveal an impair- ment need. Intangible assets relate primarily to business combinations, software and develop- ment projects. The annual impairment test is an assessment of whether the cash generating units will be able to generate sufficient positive net cash flow in the future to support the carrying amount of the assets related to the units. Management believes that no reasonable changes in the key assumptions are likely to re- duce the excess value in any of the cash generat- ing units to zero or less. Carrying amounts of intangible assets included in the impairment test are specified in the table be- low. Following the pure play there has been iden- tified adjustments to the split of intangible assets between Mining and Cement. Cash generating units The cash generating units equal our operating and reportable segments, Mining, Cement and Non-Core Activities, these being the smallest group of assets which together generate incoming cash flow from continued use of the assets and which are independent of cash flow from other as- sets or groups of assets. The cash generating units are unchanged compared to last year. As no non-current assets (including goodwill and other intangible assets) relate to Non-Core Activi- ties, the impairment test only covers Mining and Cement. Key assumptions The recoverable amount determined in the impair- ment test is based on a value-in-use calculation. To determine the value-in-use, management is re- quired to estimate the present value of the future free net cash flow based on budgets and strategy for the coming five years as well as projections for the terminal period. Significant parameters in the estimate of the present value are discount rate, revenue growth, EBITA margin, expected investments and growth expectations for the termi- nal period. The discount rate is determined separately for Mining and Cement to reflect the risks specific to each CGU. The discount rate applied is the weighted average cost of capital (WACC) and re- flects the latest market assumptions for the cost of equity and the cost of debt. The cost of equity is determined assuming that in- vestors are holding a global equity exposure, with the risk-free rate determined as a 10-year US treasury rate and the equity premium determined on the US market. The weighting of the cost of debt and cost of equity is based on the capital structure for relevant peer groups for the two in- dustries. The expected annual growth rate and the ex- pected margins in the budget period are based on historical experience and the assumptions about expected market developments. The long-term growth rate for the terminal period is based on the expected growth in the world economy, specifically for the industries. In 2023, the long- term growth rate in the terminal period was set to 3.0% for Mining and 2.0% for Cement. In 2022, the growth rate was 3.0% for both segments. Investments reflect both maintenance and expecta- tions of organic growth. Mining Throughout 2023, the global mining markets have been active within major commodities. However, we continue to see some adverse effects from de- layed large capital investment decisions, permit- ting issues in certain countries and prevailing mac- roeconomic and geopolitical uncertainty. Looking into 2024, the service market is expected to remain stable and active, and we continue to see a steady inflow of customer service enquiries as miners aim to improve operating performance through continued investments in productivity and sustainability solutions. Longer term, the industry outlook remains positive and is supported by a growing demand for miner- als crucial to a successful green transition. On the shorter term, we expect our Mining reve- nue growth to be driven primarily by our Service business growing above the market. On the mid- term, we expect growth to be driven by both the Products and the Service business. The key driv- ers for achieving the EBITA margin target include synergy takeout and commercial integration of Mining Technologies, simplification of our operat- ing model, de-risking, Service business growth, im- proved Service and Products mix as well as growth from our Product business. Carrying amounts of intangible assets 2023 2022 Mining Cement Non-Core Group Mining Cement Non-Core Group DKKm Activities Activities Goodwill 6,323 125 0 6,448 6,219 214 0 6,433 Patents and rights 672 16 0 688 480 286 0 766 Customer relations 331 0 0 331 391 1 0 392 Other intangible assets 133 10 0 143 99 49 0 148 Completed development projects 115 59 0 174 136 68 0 204 Intangible assets under development 475 178 0 653 281 141 0 422 Total 8,049 388 0 8,437 7,606 759 0 8,365 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 82 2.3 Impairment of assets – continued Cement 2023 was impacted by the general slow-down in market demand. This market environment was in large parts a result of prevailing high interest rates and global inflation levels which have adversely impacted construction activity and thus the de- mand for cement. These dynamics have been most profound in the products market, while the service market has been relatively more stable through the year. As a result, global cement pro- ducers have continued to show strict capital spending discipline throughout most of 2023 and into 2024 leading to substantial delays in major investment decisions, which has adversely im- pacted especially the cement products market. While the short-term market outlook remains chal- lenged, the long-term trend towards more sustain- able cement production, supported by the grow- ing urgency of the green transition, remains and continues to support long-term growth opportuni- ties. We expect our Cement revenue to grow with the GDP growth in the markets where we are present. In the short to mid-term we expect a negative im- pact from changed strategy on becoming Product and Service centric leading to lower projects revenue, while our Service revenue and core Product revenue will remain largely stable and grow with inflation. To reflect the uncertainty around the long-term development and growth, the growth in the terminal period has been low- ered from 3% to 2% in the impairment test. The key drivers for achieving the EBITA margin target include simplification of our operating model, ex- tensive cost focus to align to new business vol- ume, de-risking and higher share of Service busi- ness. Sensitivity analysis Based on current assumptions we see no impair- ment indications, and our key assumptions are not sensitive to reasonable changes to an extent that will result in an impairment loss neither individu- ally or in combination. For example, a lowering of perpetual growth to zero and increasing the dis- count rate by two percentages points will not lead to impairment. Similarly, a decrease in EBITA by 30% or an increase in investments as a percent- age of revenue by 2 percentage points will not lead to impairment. Key assumptions 2023 2022 Mining Cement Mining Cement Investments % of revenue 2.5% 1.0% 2.5% 2.0% Growth rate in the terminal period 3.0% 2.0% 3.0% 3.0% Discount rate after tax 10.0% 10.5% 9.5% 10.0% Discount rate before tax 13.5% 14.2% 13.3% 14.0% EBITA margin 11-14% 3-8% 7-14% 3-8% Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 83 2.4 Property, plant and equipment Land and buildings with a cost price net of depre- ciation of DKK 48m (2022: DKK 48m) are pledged against mortgage debt of DKK 215m (2022: DKK 226m). The fair value of land and buildings pledged exceeds the value of the mortgage debt. Accounting policy The Group measures property, plant and equip- ment at cost less accumulated depreciation and impairment losses. The cost of self-constructed as- sets includes the cost of materials and direct la- bour. Property, plant and equipment include lease assets, see further in note 2.5. Depreciation is charged on a straight-line basis over the estimated useful life of the assets until they reach the estimated residual value. Estimated useful life is as follows: ■ Buildings, 20-40 years ■ Plant and machinery, 3-15 years ■ Operating equipment and fixtures and fittings, 3- 15 years ■ Leasehold improvements, mainly related to land and buildings, up to 5 years or following the cor- responding lease agreement ■ Land is not depreciated. Carrying amount of property, plant and equipment 2023 2022 Land and Plant and Operating Property, Total Land and Plant and Operating Property, Total buildings machinery equipment, plant and buildings machinery equipment, plant and fixtures and equipment fixtures and equipment fittings under fittings under DKKm construction construction Cost at 1 January 2,595 1,787 786 40 5,208 2,529 1,661 886 21 5,097 Foreign exchange adjustments (73) (48) (9) (5) (135) 66 43 13 1 123 Acquisitions of enterprises 31 (40) 0 0 (9) 327 167 47 11 552 Disposals of enterprises (31) (38) (18) 0 (87) 0 0 0 0 0 Additions 5 26 24 121 176 4 20 19 45 88 Disposals (77) (91) (72) 0 (240) (344) (118) (190) 0 (652) Transferred between categories 19 27 6 (52) 0 13 14 11 (38) 0 Cost at 31 December 2,469 1,623 717 104 4,913 2,595 1,787 786 40 5,208 Depreciation and impairment at 1 January (872) (1,305) (681) 0 (2,858) (989) (1,286) (811) 0 (3,086) Foreign exchange adjustment 22 35 8 0 65 (24) (34) (15) 0 (73) Disposals of enterprises 1 23 14 0 38 0 1 (1) 0 0 Disposals 51 86 70 0 207 214 111 188 0 513 Depreciation (74) (87) (39) 0 (200) (72) (99) (41) 0 (212) Transferred between categories 0 (1) 1 0 0 (1) 2 (1) 0 0 Depreciation and impairment at 31 December (872) (1,249) (627) 0 (2,748) (872) (1,305) (681) 0 (2,858) Carrying amount at 31 December, owned assets 1,597 374 90 104 2,165 1,723 482 105 40 2,350 Carrying amount at 31 December, leased assets, note 2.5 180 17 27 0 224 260 11 26 0 297 Carrying amount at 31 December, property, plant and equipment 1,777 391 117 104 2,389 1,983 493 131 40 2,647 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 84 2.5 Leases We are party to several lease contracts as lessee, by which we lease offices, warehouses, manufacturing facilities and vehicles. We enter into lease contracts due to the flexibility it pro- vides as it may ease the scalability to always adapt the asset base to the operational activity. The majority of the lease assets relate to land and buildings and the lease contracts are typically made for fixed periods of 1 to 10 years, with a weighted average lease term of 2 years. The av- erage discount rate applied for land and buildings is 3.59% at the end of 2023 (2022: 3.71%). The amounts included in the income statement re- lated to expensed leases are presented in the ta- ble. During 2023 cash outflows for capitalised leases were DKK 145m (2022: DKK 146m). Interest related to leases was DKK 12m (2022: DKK 12m) and im- pacted CFFO negatively, and the remaining DKK 133m (2022: DKK 134m) was repayment of lease debt included in CFFF. Refer to note 5.8 Financial assets and liabilities for maturity analysis of lease liabilities Further to the above cash outflow, DKK 13m (2022: DKK 16m) was included in CFFO for costs relating to short term, low-value and variable lease payments not recorded on the balance sheet. In September 2022, FLSmidth signed a lease of a new headquarter at Havneholmen in Copenha- gen. The new headquarter is currently in the con- struction phase. It is expected that the lease will be effective in 2026. The minimum lease pay- ments over the term of the lease amount to a total of DKK 0.2bn We are not party to any significant lease contracts as lessor. Accounting policy Assets and liabilities arising from a lease are ini- tially measured on a present value basis. Lease li- abilities include the net present value of the pay- ments, which are fixed or variable dependent on an index or a rate. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the lease asset. Service components are excluded from the lease liability. The lease payments are discounted using an in- cremental country specific borrowing rate, based on a government bond plus the Group’s credit margin. The lease payments are split into an interest cost and a repayment of the lease liability. Lease assets are measured at cost comprising the following: ■ The amount of the initial measurement of lease liability ■ Any lease payments made at or before the com- mencement date less any lease incentives re- ceived ■ Any initial direct costs, and ■ Restoration costs The lease assets are depreciated over the term of the lease contract on a straight-line basis. Extension options (or periods after termination op- tions) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Carrying amount of leases 2023 Land and Plant and Operating Total DKKm buildings machinery equipment Carrying amount at 1 January 260 11 26 297 Foreign exchange adjustments (2) 0 (1) (3) Acquisitions of enterprises 0 0 0 0 Disposals of enterprises (44) 0 0 (44) Remeasurement 9 0 (1) 8 Additions 71 13 21 105 Disposals (14) 0 (2) (16) Depreciation (100) (7) (16) (123) Carrying amount at 31 December 180 17 27 224 2022 Land and Plant and Operating Total DKKm buildings machinery equipment Carrying amount at 1 January 252 8 37 297 Foreign exchange adjustments (1) (1) (1) (3) Acquisitions of enterprises 50 1 2 53 Remeasurement 11 1 0 12 Additions 68 8 15 91 Disposals (7) (1) 0 (8) Depreciation (113) (5) (27) (145) Carrying amount at 31 December 260 11 26 297 Expensed leases DKKm 2023 2022 Cost relating to short-term leases 7 11 Cost relating to leases of low-value assets that are not shown above 4 4 as short-term leases Cost relating to variable lease payments not included in lease liabilities 2 1 Expensed lease costs in the income statement 13 16 The lease costs are included in the following lines: Production cost 6 9 Sales cost 1 2 Administrative cost 6 5 Expensed lease costs in the income statement 13 16 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 85 2.5 Leases – continued The following factors are normally the most rele- vant: ■ How the asset supports the direction of the Group, from a strategic standpoint, location of the asset, timing of the option being exercisable ■ If there are significant penalties to terminate (or not extend), the Group is typically reasonably certain to extend (or not terminate) ■ If any leasehold improvements are expected to have a significant remaining value, the Group is typically reasonably certain to extend (or not terminate) Payments associated with short-term and low value leases are recognised on a straight-line ba- sis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture at a low value. 2.6 Investments in associates Investments in associates includes an investment in Intertek Robotic Laboratories Pty Ltd, Australia, with a 50% share. Although we hold 50% of the shares and voting rights, we do not share the control, hence the in- vestment is not a joint venture. As we do have sig- nificant influence the investment is treated as an investment in associates and accounted for using the equity method. The primary activity of the company is to provide automated and robotic sample preparation, fusion and analytical testing services, including the pro- curement, construction and commissioning of la- boratories. In Q4 2023, an impairment loss of DKK 61m on the investment was recognised leading to a net loss from associates of DKK 62m in the income state- ment for 2023. The impairment loss reflects a downward revision of expected future perfor- mance. Carrying value of investments in associates, FLSmidth share Financial information of 100% of Intertek Robotic Laboratories Pty Ltd, prepared in accordance with FLSmidth accounting policies, is as follows (not only FLSmidth’s share): Intertek Robotic Laboratories Pty Ltd Investments in associates, FLSmidth share 2.7 Provisions Provisions are liabilities of uncertain timing or amount. Our provisions consist of: ■ Provision for warranty claims in respect of goods or services already delivered ■ Provisions for cost related to restructuring ■ Provisions for loss-making contracts (included in other provisions) ■ Provisions for losses resulting from disputes and lawsuits (included in other provisions) ■ Provisions for indirect tax risks (included in other provisions) Total provisions have decreased by DKK 212m compared to last year. All categories contributed to the decrease. The finalisation of the purchase price allocation for Mining Technologies in 2023 increased provi- sions by DKK 14m, composed by a decrease in warranty provisions of DKK 91m more than offset by an increase in other project related provisions of DKK 105m (included in other provisions). Warranty provisions cover expected costs to rem- edy warranty claims during the warranty period. The warranty provision is recognised during the production phase. The warranty period starts once the performance obligation in the contract has been finalised and runs seldomly for more than two years and often only up to one year. The overall decrease in warranty provision compared to 2022 is due to finalisation of the purchase price allocation for Mining Technologies, see above. Restructuring provisions relate to costs expected to be incurred when executing restructurings de- cided and communicated by management. In most cases, the restructuring will occur in the near future. The provision is impacted by execution of the restructurings from 2022 related to the Date of Owner-Name of acquisiship Voting associate Country tion interest share Intertek Robotic Australia 31-May 50% 50% Laboratories Pty 2019 Ltd DKKm 2023 2022 Beginning value 1 January 157 162 Foreign exchange adjustments (5) (1) Impairment loss (61) 0 Loss from associates (1) (4) Dividend paid (9) 0 Carrying value at 31 December 81 157 DKKm 2023 2022 Revenue 131 138 Loss for the period (2) (8) Total comprehensive income 0 0 Dividend paid (18) 0 Current assets 60 66 Customer relations 77 97 Non-current assets 11 33 Current liabilities (16) (28) Equity 132 168 The financial information reflects the adjustments made in relation to the acquisition. DKKm 2023 2022 FLSmidth's share of equity, 50% 66 84 Goodwill 15 73 Carrying value at 31 December 81 157 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 86 2.7 Provisions – continued Non-Core Activities as well as integration of Min- ing Technologies that were impacted by a natural reduction in workforce. The transformation strat- egy decided in 2023 led to additions to the re- structuring provisions. The decrease in other provisions is a combination of a decline related to ongoing legal disputes partly offset by the increase due to the finalisation of the purchase price allocation for Mining Tech- nologies, see above. Continued activities’ share of Group provisions is shown below. The provisions from continued and discontinued activities add up to our total provi- sions. In our cash flow statement, the changes in provi- sions are combined with the changes in pensions and employee benefits. The impact on cash flows from changes in provisions, pensions and em- ployee benefits (adjustment to the amounts recog- nised in the income statement) is shown in the ta- ble below. Cash flow effect from change in provisions, pension and employee benefits Accounting policy Provisions are recognised when we, due to an event occurring before or at the balance sheet date, have a legal or constructive obligation and outflow of resources is expected to settle the obli- gation. Provisions for warranty claims are estimated on a order-by-order basis based on historical realised costs to handle warranty claims. The provision co- vers also unsettled claims from customers or sub- contractors. Provisions for restructuring costs are made only if the restructuring has been decided at the balance sheet date in accordance with a specific plan, and only provided that the parties involved have been informed about the overall plan. Provisions for loss-making contracts (included in other provisions in the table) cover customer con- tracts expected to result in a loss as the expected cost to complete exceeds revenue. The expected cost overrun that is not covered by revenue is rec- ognised as a provision. The key accounting esti- mate is explained in note 3.4. Provisions regarding disputes and lawsuits (in- cluded in other provisions in the table) are based on Management’s assessment of the likely out- come settling the cases based on the information at hand at the balance sheet date. DKKm 2023 2022 Pensions and employee benefits (35) (50) Provisions (226) 680 Of which relate to foreign 25 10 exchange adjustments Cash flow effect (236) 640 Provisions 2023 2022 DKKm Warranties Restructuring Other Total Warranties Restructuring Other Total Provisions at 1 January 980 404 1,123 2,507 543 47 557 1,147 Foreign exchange adjustments (17) (1) (1) (19) 2 0 (19) (17) Acquisition of Group enterprises (91) 0 105 14 295 6 381 682 Additions 346 312 940 1,598 325 411 652 1,388 Used (128) (288) (983) (1,399) (98) (56) (307) (461) Reversals (207) (67) (132) (406) (87) (4) (141) (232) Provisions at 31 December 883 360 1,052 2,295 980 404 1,123 2,507 Provisions related to continued activities DKKm 2023 2022 Provisions at 1 January 2,390 999 Foreign exchange adjustments (19) (17) Acquisition of Group enterprises 14 682 Additions 1,592 1,385 Used (1,388) (428) Reversals (359) (231) Continued activities share of Group provisions 2,230 2,390 Key accounting judgements Estimated warranty provision When estimating the warranty provision we take into consideration several years of war- ranty cost information, any specific risk related to customer contracts, knowledge about de- fects and functional errors in the product port- folio, risks associated with newly launched products as well as customer losses in con- nection with suspension of operation. We in- clude all of these factors as relevant, to esti- mate a warranty provision that to the best of our knowledge reflects our responsibility to- wards our customers in the future. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 87 2.8 Pension Obligations Defined contribution plans The majority of our pension plans are defined con- tribution plans and we have no further payment obligations once the contributions are paid. Under these pension plans, we recognise regular pay- ments, e.g. a fixed amount or a fixed percentage of the salary. Pension costs related to defined contribution plans are recognised in staff costs (note 1.5) and amounted to DKK 625m (2022: DKK 599m). Defined benefit plans We also have defined benefit plans where the re- sponsibility for the pension obligation towards the employees rests with us. Under a defined benefit plan, we have an obligation to pay a specific ben- efit, e.g. retirement pension in the form of a fixed proportion of the salary at the time of retirement. Under these plans, we carry the risk in relation to future developments in interest rates, inflation, mortality, etc. A change in the assumptions upon which the calculation is based results in a change in the present value of the pension obligation. Such actuarial gains and losses are recognised in other comprehensive income and amounted to net gains of DKK 17m in 2023 (2022: net gain of DKK 101m). The majority of the total pension obligations are partially funded with assets placed in pension funds and through insurance. In 2024 we expect to make a contribution to the defined benefit plans of DKK 14m (2023: DKK 18m). The weighted aver- age duration of the obligations is 14 years (2022: 15 years). Pension contributions by plan types % Pension obligations by country % Fair value of plan assets by Instruments 0% 20% 40% 60% 80% 100% 2022 2023 Defined contribution plans Defined benefit plans 0% 20% 40% 60% 80% 100% 2022 2023 USA Switzerland Germany India Other 0% 20% 40% 60% 80% 100% 2022 2023 Equity instruments Debt instruments Other assets Pension obligations 2023 2022 Present value Fair Net Present value Fair Net of pension value of plan obligations of pension value of plan obligations DKKm obligations assets obligations assets Value at 1 January (1,081) 665 (416) (1,116) 794 (322) Interest on obligation/asset (36) 22 (14) (26) 21 (5) Service costs (30) 0 (30) (25) 0 (25) Recognised in the income statement (66) 22 (44) (51) 21 (30) Actuarial gains and losses (7) 24 17 217 (116) 101 from financial assumptions Recognised in other comprehensive income (7) 24 17 217 (116) 101 Acquisition of enterprises 0 0 0 (180) 0 (180) Disposal of activities 8 0 8 0 0 0 Foreign exchange adjustments 4 (2) 2 (51) 46 (5) Settlements 5 0 5 26 (26) 0 Employer contributions 0 33 33 0 2 2 Participant contributions 0 0 0 0 1 1 Benefits paid to employees 207 (177) 30 74 (57) 17 Other changes 224 (146) 78 (131) (34) (165) Value at 31 December (930) 565 (365) (1,081) 665 (416) Actuarial gains and losses relate primarily to changes in financial assumptions Actuarial assumptions 2023 2022 Average discounting rate applied 3.3% 3.3% Expected future pay 2.9% 3.3% increase rate Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 88 2.8 Pension obligations – continued Sensitivity analysis Below shows a sensitivity analysis based on changes in the discount rate, all other things being equal. A change in the discount rate will result in the fol- lowing changes in the net pension obligation: Sensitivity Accounting policy Contributions to defined contribution plans are recognised in staff costs when the related service is provided. Any contributions outstanding are rec- ognised in the balance sheet as other liabilities. For defined benefit plans, annual actuarial calcu- lations are made of the present value of future benefits payable under the pension plan using the projected unit credit method. The Group uses ex- ternal actuarial experts. The present value is calculated based on assump- tions about future developments in variables such as salary levels, interest, inflation and mortality rates. The present value is only calculated for benefits earned by the employees through their employment with the Group to date. The actuarial calculation of present value less the fair value of any plan assets is recognised in the balance sheet as pension obligations. The pension costs (service costs) for the year, based on actuarial estimates and financial fore- casts at the beginning of the year, are recognised in the income statement within staff costs. The in- terest on the net pension obligation is recognised in the income statement within financial costs. The difference between the forecast development in pension assets and liabilities and the realised val- ues is called actuarial gains or losses and is rec- ognised in other comprehensive income. If a pension plan constitutes a net asset, the asset is recognised only to the extent that it equals the value of future repayments under the plan or it leads to a reduction of future contributions to the plan. 2.9 Contractual Commitments and contingent liabilities Contractual commitments As part of our digital strategy, FLSmidth has made a fund investment in Chrysalix, a venture capital firm that specialises in transformational industrial innovation. We have made a capital commitment of USD 10m. The capital commitment can be called up until 2029, with the investment period being the first 5 years. The timing and amounts of each capital call are uncertain. The undrawn part of the capital commitment at 31 December 2023 amounted to DKK 30m (2022: DKK: 36m). Contingent liabilities Contingent liabilities cover guarantees and other contingent liabilities related to legal disputes etc. At the end of 2023, contingent liabilities amounted to DKK 2,638m (2022: DKK 3,762m) ex- cluding the Mining Technologies issued corporate guarantees mentioned below. Guarantees Guarantees consist of customary performance and payment guarantees. The volume of the guar- antees amounted to DKK 2,272m (2022: DKK 3,259m). The decrease relates primarily to expiry of guarantees from the acquisition of Mining Tech- nologies and to our continued de-risking efforts. At the end of 2022, Mining Technologies had issued additional corporate contract support guarantees to customers of DKK 784m. By the end of 2023 al- most all such guarantees have expired. It is customary market practice to issue guaran- tees to customers, which serve as a security that we will deliver as promised in terms of perfor- mance, quality, and timing. The volume of the guarantees varies with the activity level and re- flects the outstanding order backlog, finalised pro- jects and deliveries that are covered by warran- ties etc. Only a minor share of such guarantees is expected to materialise into losses. In the event a guarantee is expected to materialise, a provision is recognised to cover the risk. Such provisions are covered by note 2.7, and included either within warranty provisions or other provisions. Other contingent liabilities We are involved in legal disputes, certain of which are already pending with courts or other authori- ties and other disputes which may or may not lead to formal legal proceedings being instigated against us. Other contingent liabilities amount to DKK 366m (2022: DKK 503m). The outcome of such proceedings and disputes is by nature un- known, but is not expected to have significant im- pact on our financial position. The decrease dur- ing 2023 is related to the receivable written down in discontinued activities. A customer has initiated arbitration against FLSmidth and certain partners for an amount of DKK 208m, for alleged contractual breaches. FLSmidth is rejecting the claim in arbitration. DKKm 2023 2022 Discount rate - 1%, increase 128 110 Discount rate + 1%, decrease (83) (103) Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 89 2.10 Business Acquisitions Acquisition of Mining Technologies in 2022 On 31 August 2022, FLSmidth acquired Mining Technologies. Mining Technologies is a leading full-line supplier of solutions for mining systems, material handling, mineral processing and ser- vices. The combination of FLSmidth and Mining Technologies creates a leading global mining technology and service provider with operations from pit-to-plant with a strong focus on productiv- ity and sustainability. Furthermore, FLSmidth’s strong existing service setup will provide addi- tional aftermarket opportunities, while the joint R&D capabilities and combined portfolio will ena- ble accelerated innovation in digitalisation and MissionZero solutions. The mining industry is characterised by sound fun- damentals and a positive outlook, based on un- derinvestment over the past decade and increas- ing demand due to the clean energy transition. The timing of this acquisition positions FLSmidth to capture enhanced value from the mining growth cycle underway. In addition to the competitive ad- vantages of scale, FLSmidth will be able to offer a stronger value proposition to customers through combined competencies and a wider offering. Such synergies as well as the value of the assem- bled workforce constitute the major parts of the goodwill recognised on the acquisition. The acquisition was incorporated into the cash generating unit Mining. Prospectively from 1 Octo- ber 2022, the non-core activities in the acquired business were transferred to Non-Core Activities as part of the strategic review in 2022. The provisional purchase price allocation pre- sented in Annual report 2022 has been updated and finalised in August 2023 to reflect new infor- mation obtained about facts and circumstances that existed on 31 August 2022. This includes the finalisation of the project reviews and the agreement with the Seller on the final ad- justments to the purchase price, the latter being mainly the net of adjustments related to net work- ing capital at closing and the resolution of a dis- pute on adjustments related to the project busi- ness. In total, the final adjustments amounted to DKK 72m that has been paid in 2023. The table shows the provisional purchase price al- location included in Annual report 2022 and the fi- nal purchase price allocation leading to an in- crease in goodwill in 2023 of DKK 108m. The changes include the impact from the final purchase price adjustment of DKK 72m and a de- crease in net assets of DKK 36m. The decrease in net assets reflects changes in the estimated fair value of property, plant and equipment of DKK - 45m, increase in project related provisions of DKK 12m and impact on net assets of DKK 21m from changes in tax assets and tax liabilities. The changes have been implemented without re- stating the purchase price allocation in the Annual report 2022 as the impact is not material. Provisions include the estimated fair value of con- tingent liabilities of DKK 0.1bn to cover the risk on performance and payment guarantees and to cover for pending and potential legal disputes. The contractual amount of trade receivables ex- ceeds the fair value by DKK 0.1bn. Acquisition related costs amounted to DKK 33m in 2022 and were included in the income statement as administrative costs. The consolidation of Mining Technology increased Revenue and reduced Net profit in 2022 by DKK 1,227m and DKK 112m, respectively. Assuming FLSmidth had taken over Mining Technologies with effect from 1 January 2022, the estimated im- pact would be a further increase in Revenue of DKK 2.7bn and decrease in Net profit of DKK 0.1bn in 2022. Acquisitions in 2023 Effective from 1 June 2023, FLSmidth has acquired the American company Morse Rubber. The acqui- sition supports FLSmidth Mining’s CORE’26 strat- egy and will be adding advanced moulding capa- bilities for rubber and composite mill liners, as well as screen media and various rubber and Business Acquisitions 2022 (Mining Technologies) Allocation of purchase price on assets acquired and liabilities assumed (DKKm) Provisional Final (AR 2022) (AR 2023) Patents and IP rights 65 65 Customer relations 32 32 Land and buildings 377 379 Other tangible assets 230 183 Deferred tax assets 67 60 Inventories 820 820 Trade and other receivables 1,107 1,113 Work in progress 187 181 Other current assets 368 368 Cash 1,019 1,019 Total assets 4,272 4,220 Pension liabilities 180 180 Other non-current liabilities 149 121 Provisions 682 694 Prepayments from customers 119 119 Work in progress 783 783 Trade payables 564 564 Other current liabilities 632 632 Total liabilities 3,109 3,093 Total identifiable net assets 1,163 1,127 Goodwill 1,959 2,067 Purchase price 3,122 3,194 Cash 1,019 1,019 Net cash transferred to the seller 2,103 2,175 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 90 2.10 Business acquisitions – continued rubber ceramic wear components to our existing offerings. The purchase price of DKK 42m equals net assets acquired. The acquisition increased property, plant and equipment by DKK 36m, work- ing capital assets and liabilities by DKK 12m and DKK 6m, respectively. The impact on net profit was insignificant. Accounting policy Acquired businesses are included in the consoli- dated financial statements from the date when control (the acquisition date) of the business is transferred to FLSmidth. The purchase price includes consideration al- ready paid/received, deferred consideration and expected contingent consideration. The purchase price is allocated to the identified assets, liabilities and contingent liabilities (net assets) based on their fair values at acquisition date and any ex- cess of the purchase price over the net assets is recognised in the balance sheet as goodwill within intangible assets. In the event the purchase price is lower than the net assets, the difference is recognised in the income statement (a gain from a bargain purchase). If, on the acquisition date, there are any uncertain- ties with respect to identifying or measuring the acquired net assets, the initial recognition will be made on the basis of estimated fair values. The estimated fair values may be adjusted or addi- tional assets or liabilities may be recognised dur- ing the measurement period of up to 12 months to reflect new information that becomes available about conditions prevailing on the acquisition date. Such adjustments are made to the initial pur- chase price allocation as a restatement of prior in- formation, including to the amount of goodwill. Any subsequent adjustment of contingent consid- eration is recognised directly in the income state- ment, unless it relates to new information on con- ditions prevailing at acquisition date obtained during the measurement period and therefore im- pacting the purchase price allocation. Key accounting estimates and judgements Purchase price allocation The allocation of the purchase price to as- sets acquired and liabilities assumed in- volves judgement related to identifying as- sets and liabilities, especially for intangible assets. For the acquisition of Mining Technol- ogies, we identified customer relations and IP rights as separate intangible assets with a positive fair value. Estimates are required when determining the fair value of the identified assets and liabili- ties at acquisition date. The estimate of the fair value of customer relations is based on expected revenue, saved selling costs and a survival period of 15 years. The estimate of fair value of liabilities related to the project business, such as warranties, the order back- log (loss-making projects) and lawsuits is based on expected future cash outflow re- quired to settle liabilities. For the order back- log, the estimated fair value includes an ad- justment for low margin projects. In 2022, the purchase price allocation for Mining Technologies was provisional await- ing especially the final purchase price and fi- nalisation of project reviews. The purchase price allocation was finalised 31 August 2023 when the measurement period of 12 months ended. This involved judgement on whether new information obtained reflected facts and circumstances that existed at 31 August 2022. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 91 2.11 Disposal of activities On 14 June 2023, FLSmidth and KOCH Solutions signed an asset purchase & transfer agreement in- volving material handling technology that is part of the Non-Core Activities segment. The transac- tion was completed on 1 September 2023 and led to the derecognition of assets and liabilities of DKK 100m and DKK 33m, respectively, and a re- duction in the backlog in Non-Core Activities of around DKK 400m. The transaction had no mate- rial impact on EBITA for 2023, subject to final price adjustments. On 14 July 2023, FLSmidth sold its Advance Filtra- tion Technologies (AFT) business to Micronics, a leading global provider of industrial filtration solu- tions. The sale included all related assets, includ- ing intellectual property, technology, employees and customer contracts. The divestment of the AFT business is part of FLS- midth Cement’s pure play strategy, which includes focusing the cement Products portfolio on the core technologies required for the green transition in the cement industry. The completion of the trans- action led to the derecognition of assets and lia- bilities of DKK 207m and DKK 73m, respectively, and a reduction in the order backlog in Cement of DKK 101m. The transaction led to a gain of DKK 102m. Total assets and liabilities in activities sold are shown in the table below. Gains and losses from disposal of activities are included in the line item ‘Other operating net income’. There was no dis- posal of activities in 2022. 2.12 Discontinued activities Discontinued activities include the remaining re- sponsibilities to finalise legacy projects, handling of claims, etc. retained on the sale of the non-min- ing bulk material handling business in 2019. In 2021, a customer made an unsubstantiated cash withdrawal of DKK 130m on a performance guarantee. We now foresee a high risk of not be- ing able to collect the amount and the receivable including other net working capital amounts due from the customer has been written down to zero in 2023. This has led to a net loss of DKK 149m. The table below shows the share of Group provi- sions disclosed in note 2.7 that are included within discontinued activities. The activities account for DKK 132m (2022: DKK 362m) of FLSmidth’s net working capital shown in note 3.1. In total, remaining discontinued activities represent a net asset of DKK 67m (2022: DKK 245m). The segment note 1.2 shows the full disclosure of the income statement for discontinued activities. Tax income of DKK 3m in 2023 relates to joint tax- ation contribution and reassessment of tax risks. Accounting policy Discontinued activities comprise disposal groups, which have been disposed of, ceased or are clas- sified as held for sale and represents a separate major line of business or geographical area. Discontinued activities are presented in the income statement as profit/loss for the year, dis- continued activities and consists of operating in- come after tax. Gains or losses from disposal of the assets related to the discontinued activities and adjustments hereto are likewise presented as discontinued activities in the income statement. In the consolidated cash flow statement, cash flow from discontinued activities is included in cash flow from operating, investing and financing activi- ties together with cash flow from continuing activi- ties. DKKm 2023 Intangible assets 25 Tangible assets, including lease assets 93 Current assets 189 Total assets 307 Pension 8 Lease liabilities 49 Current liabilities 49 Total liabilities 106 DKKm 2023 2022 Provisions at 1 January 117 148 Additions 6 3 Used (11) (33) Reversals (47) (1) Provisions 65 117 Discontinued activities share of CFFO DKKm 2023 2022 EBITDA, see segment note 1.2 (171) (10) Change in provisions (53) (31) Change in net working capital 250 (6) Cash flow from operating activities before financial items and tax 26 (47) Financial items received and paid (7) (3) Cash flow from operating activities 19 (50) Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 92 Section 3 Working capital 3.1 Net working capital 93 3.2 Inventories 93 3.3 Trade receivables 94 3.4 Work in progress 95 3.5 Other receivables 96 3.6 Trade payables 96 3.7 Other liabilities 96 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 93 3.1 Net working capital Net working capital represents the assets and lia- bilities necessary to support FLSmidth’s daily operations. The impact on FLSmidth’s cash flows from net working capital is also showed in table below. Net working capital decreased by DKK 511m com- pared to 31 December 2022, driven primarily by a strong cash collection from trade receivables and lower inventories partly offset by a decrease in prepayments from customers due to the de-risking strategy mainly impacting product orders. Currency impacts decreased net working capital at 31 December 2023 by DKK 14m (2022: an in- crease of DKK 112m). Utilisation of supply chain financing decreased during 2023 by DKK 86m (2022: an increase of DKK 100m). 3.2 Inventories Inventories net of impairment Inventory level has decreased by 13% in 2023. The lower inventory level is mainly driven by an increase in impairments for slow moving stock and obsolete items. The write-down in 2023 includes a write-down on strategic inventories. Accounting policy Inventories are measured at cost based on weighted average cost prices. In the event that cost of inventories exceeds the expected selling price less cost of completion and selling costs, the inventories are impaired to the lower net realisable value. The net realisable value of inventories is measured as the expected sales price less costs of completion and costs to finalise the sale. Impairment assessment of the inventory is per- formed item by item including: ■ Test for slow moving stock ■ Test for aging of inventory ■ Assessment of expected market (pricing and market potential) ■ Assessment of strategic inventory items DKKm 2023 2022 Raw materials and consumables 454 461 Goods in progress 831 1,117 Finished goods and 2,165 2,393 goods for resale Inventories 3,450 3,971 Impairment of inventories DKKm 2023 2022 Impairment at 1 January 379 353 Foreign exchange adjustments (32) 8 Additions 709 159 Realised (260) (89) Reversals (52) (52) Impairment at 31 December 744 379 Net working capital DKKm 2023 2022 Inventories 3,450 3,971 Trade receivables 4,516 5,108 Work in progress, asset 2,769 3,147 Prepayments 423 874 Other receivables 855 1,030 Derivative financial instruments 37 54 Prepayments from customers (1,933) (2,771) Trade payables (4,024) (4,339) Work in progress, liability (3,025) (3,592) Other liabilities (1,637) (1,509) Derivative financial instruments (49) (80) Net working capital of the Group 1,382 1,893 Cash flow effect from change in NWC DKKm 2023 2022 Inventories 310 (680) Trade receivables 431 92 Trade payables (208) 379 Work in progress (230) (118) Prepayments from customers (810) 183 Prepayments 439 187 Other receivables and other liabilities 479 (291) - of which relate to foreign exchange gain/(loss) (113) (198) 298 (446) Key accounting estimates Estimated valuation of inventories When assessing the net realisable value of in- ventories we take marketability, obsolescence and development in expected selling prices into account. Also inventory turnover, quantities and the nature and condition of the inventory items including the classification as strategic in- ventory are considered in the assessment. We in- clude all of these factors as relevant, to ensure that our inventory is reflected at the expected selling price, if lower than cost. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 94 3.2 Inventories – continued Obsolete items are impaired to the value of zero. Management considers part of the inventories as strategic. Strategic items are held in inventory, even if slow moving, because they are considered key equipment to the customers, that we need to be able to deliver with very short notice. Raw materials and consumables include purchase costs of materials and consumables, duties and freight. Work in progress, finished goods and goods for resale include cost of manufacturing in- cluding materials consumed and labour costs plus an allowance for production overheads. Produc- tion overheads include operating costs, mainte- nance of production facilities as well as admin- istration and factory management directly related to manufacturing. 3.3 Trade receivables Trade receivables relate to both our Service and Products businesses. Trade receivables de- creased in 2023 due our cash collection efforts and increases in impairments on specific trade re- ceivables primarily from customer contracts in Mining Technologies past due by more than three months. Trade receivables net of impairment specified according to aging Impairment of trade receivables specified accord- ing to aging is shown on the right. The increase in impairments in 2023 is based on historical observed default rate adjusted for up to date estimates of uncertainties in specific project related activities and current market conditions. Impairment of trade receivables Accounting policy Trade receivables are initially measured at fair value and subsequently measured at amortised cost. A credit loss allowance is made upon initial recog- nition based on historical observed default rates adjusted for forward looking esti- mates. The cost of the credit loss allowances is in- cluded in administration costs. A loss is consid- ered realised when it is certain that we will not recover the receivable, e.g. in case of bankruptcy or similar. DKKm 2023 2022 Not due for payment 3,245 3,597 Overdue < one month 680 590 Overdue one - two months 216 183 Overdue two - three months 62 95 Overdue > three months 313 643 Trade receivables 4,516 5,108 Trade receivables not due for 420 562 payment with retentions on contractual terms DKKm 2023 2022 Impairment at 1 January 415 333 Foreign exchange adjustments (8) (10) Additions 471 293 Reversals (96) (80) Realised (91) (121) Impairment at 31 December 691 415 Impairment of trade receivables specified according to aging 2023 2022 Expected Gross Impairment Expected Gross Impairment loss rate carrying loss rate carrying DKKm amount amount Not due for payment 1.1% 3,281 36 1.3% 3,626 47 Overdue < one month 5.4% 719 39 6.2% 631 39 Overdue one - two months 12.6% 247 31 14.4% 215 31 Overdue two - three months 21.5% 79 17 24.8% 129 32 Overdue > three months 64.5% 881 568 28.9% 922 266 Total 5,207 691 5,523 415 Key accounting estimates Estimated level of expected losses When estimating the level of receivables that in the future is expected not to be collected we take the following information into account; historical losses on receivables, ageing of the receivables, access to payment securities and possibilities to off-set assets against claims. When making the assessment we also evalu- ate the expected development in macro-eco- nomic and political environments that could impact the recoverability. We have made estimates of our expectation to the future losses on receivables by applying a consistent methodology. The calculation of ex- pected credit losses (ECL) incorporate forward- looking estimates. These estimates are mainly based on historical experience on losses and adjusted to reflect the current situation. The impact from the adjustments to reflect the current situation has decreased compared to at the end of 2022. This reflects a slight de- crease in uncertainty in the macroeconomic outlook compared to last year and can be seen from the decline in expected loss rate by ageing. This is however offset by the increase on specific impairment of receivables overdue by more than three months. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 95 3.4 Work in progress Work in progress relates to contracts with custom- ers where revenue is recognised over time. As the costs to produce the output under a contract are incurred, revenue is calculated reflecting the share of costs incurred compared to total ex- pected costs to fulfil the contract (percentage of completion). The revenue is recognised as work in progress (gross work in progress) and consists of cost incurred including margin. Balances on a spe- cific contract is removed from work in progress once the work is completed and accepted by the customer. Especially for more complex product bundles with engineering, the work typically ex- tends over several financial years. The total amount of work in progress therefore includes ac- cumulated revenue for several years for contracts where the work has not been finalised and/or ac- cepted by the customer. During the execution, invoices are issued accord- ing to the invoice structure for each transaction. The invoiced amounts reduce the balance on work in progress (Net work in progress in the ta- ble). Depending on the invoice structure, the work in progress balance on a specific contract can change from being presented as an asset (a con- tract asset) in one period to being presented as a liability (a contract liability) in the next period. In the balance sheet and as shown in the table, net work in progress on contracts where work per- formed exceeds the invoiced amount are pre- sented as assets while contracts where the in- voiced amount exceeds the work performed are presented as liabilities. In general, the invoicing structure reflects the pro- gress on the work to be performed and work in progress liabilities are, therefore, usually con- verted into revenue in the next year. The decrease in gross work in progress reflects our de-risking strategy. Composition of work in progress Note 1.4 include information on the order backlog reflecting effective contracts with customers where we will transfer control at future point in time and the remaining performance obligations on contracts where we transfer control over time. In addition to net work in progress, contract liabili- ties include prepayments received from customers of DKK 1,933m (2022: DKK 2,771m). The prepay- ments are recognised separately in the balance sheet as current and non-current liabilities. Pre- payments presented as current reflect amounts that are expected to be recognised as revenue during the following year. When assessing impairment on the work in pro- gress net balances we evaluate on a contract by contract basis. If an impairment on a contract is probable we recognise the expected loss and a related provision. Accounting policy Work in progress consists of contract assets and contract liabilities for contracts with customers where revenue is recognised over time. For contracts included as work in progress revenue reflecting the percentage of completion is recog- nised when the outcome of the contracts can be es- timated reliably. The percentage of completion is calculated based on a cost-to-cost basis (input method) and is the ratio between the cost incurred and the total estimated cost. The contracts are measured at an amount equal to the selling price of the work performed (per- centage of completion) less progress billings and expected losses. The selling price is the total expected income from the individual contracts. If variability is included in the selling price, we use the most likely amount method. An expected loss is recognised when it is deemed probable that the total contract costs will exceed the total revenue from individual contracts. The expected loss is recognised immediately as a cost and as a provision for a loss-making contract. Fur- ther information can be found in note 2.7. When the selling price of the work performed ex- ceeds progress billings, work in progress is pre- sented as an asset and relate to unbilled work in progress. Work in progress assets have substan- tially the same risk characteristics as the trade re- ceivables for the same types of contracts. Ex- pected credit loss on work in progress assets is included within the loss allowance for trade re- ceivables as managed together. When progress billings exceed the selling price of the work performed, work in progress is presented as a liability. Prepayments from customers are recognised as a liability. DKKm 2023 2022 Gross work in progress 40,853 46,107 Invoicing on account (41,109) (46,552) to customers Net work in progress (256) (445) Of which is recognised as work in progress: Under assets 2,769 3,147 Under liabilities (3,025) (3,592) Net work in progress (256) (445) Key accounting estimates Estimated costs to complete We estimate the total expected costs for our con- tracts. The estimates primarily relate to the level of contingencies to cover unforeseen costs, such as cost changes due to changes in future supplies of raw materials, subcontractor products and services as well as unforeseen costs related to execution and hand-over. The estimates are based on the specifics for each contract while taking historical data into account. For contracts sold to customers in politically and economically unsta- ble countries, the estimates include additional risk coverage due to a higher level of uncer- tainty. We reassess our project financials, including up- date of expected project costs on an ongoing ba- sis, to ensure that expected cost increases are appropriately reflected in the estimated cost to complete. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 96 3.5 Other receivables Specification of other receivables Other receivables of DKK 891m, including the de- rivatives, are included within net working capital. The remaining DKK 104m is included in net inter- est bearing debt. 3.6 Trade payables To improve the relationship with our suppliers and minimise the finance cost in the value chain, FLS- midth facilitates a supply chain financing pro- gramme funded by a credit institute. When partici- pating in this program, the supplier has the option to receive early payment from the credit institution based on the invoices approved by FLSmidth through a factoring arrangement between the sup- plier and the credit institution, where the invoices are transferred to the credit institution without re- course. The amounts payable to suppliers included in the supply chain financing programme are classified as trade payables in the balance sheet as well as in the cash flow statement (working capital within cash flow from operations). The trade payables covered by the supply chain financing programme arises in the ordinary course of business from sup- ply of goods and services and the payment terms are not significantly extended compared to trade payables not part of the supply chain financing programme. At the end of 2023 trade payables covered by the programme amounted to DKK 504m (2022: 590m). 3.7 Other liabilities Specification of other liabilities Other liabilities of DKK 1,686m, including the deriv- atives, are included within net working capital and DKK 175m is included in net interest bearing debt. Employee benefits are not included in neither net working capital nor net interest bearing debt. DKK 53m (2022: DKK 85m) is included in non-current liabilities and DKK 1,974m (2022: DKK 1,738m) in current liabilities. DKKm 2023 2022 Indirect taxes receivables 522 522 Deposits 56 107 Derivatives 37 54 Other 380 462 Total 995 1,145 DKKm 2023 2022 Indirect taxes payables 213 210 Accrued employee items 751 779 Employee benefits 164 181 Derivatives 49 80 Other accruals and payables 850 573 Total 2,027 1,823 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 97 Section 4 Tax 4.1 Income tax 98 4.2 Paid income tax 99 4.3 Deferred tax 99 4.4 Tax on other comprehensive income 101 4.5 Our approach to tax and tax risk 101 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 98 4.1 Income Tax The income tax expense for the year amounted to DKK 382m (2022: DKK 201m), corresponding to an effective tax rate of 36.2% (2022: 36.4%). The ef- fective tax rate was negatively affected by with- holding taxes not subject to credit relief as well as write-downs of tax losses and other tax assets in Germany. The effective tax rate was positively af- fected by adjustments to previous years regarding tax assets previously value at nil, mainly in USA, and non-taxable income. Uncertain tax positions reflect management’s as- sessment of the risk of a position taken by the Group being disputed by a tax authority. The as- sessment considers the inherent risk and uncer- tainty of undertaking complex projects and oper- ating in a variety of developed and developing countries. The assessment includes the most likely outcome of both ongoing and potential fu- ture tax audits but also an assessment of whether the most likely outcome differs significantly for other possible outcomes. The provision for uncer- tain tax position is slightly increased in 2023. Accounting policy Income tax for the year comprises current tax and changes in deferred tax including valuation of de- ferred tax assets, adjustments to previous years, foreign paid withholding taxes including available credit relief and changes in provisions for uncer- tain tax positions. Income tax for the year is recognised in the In- come Statement, unless it is attributable to items recognised in other comprehensive income. Exchange rate adjustments of deferred tax are in- cluded as part of the year’s adjustments to deferred tax. Current tax is calculated using the applicable tax rates for the financial year on the expected taxa- ble income for the year. The resulting tax is re- duced by tax paid on account in the year. Current tax is recognised in the balance sheet as either a receivable or a liability for each tax jurisdiction and includes also previous years taxes. Deferred tax is calculated using the balance sheet liability method on all temporary differences be- tween the carrying amounts for financial reporting purposes and the amounts used for taxation pur- poses, except differences relating to initial recog- nition of goodwill. Tax losses that are likely used against future taxa- ble income in the same legal tax unit and jurisdic- tion in the next five years are included in the measurement of deferred tax. Deferred tax liabili- ties regarding investments in subsidiaries are rec- ognised if the shares are expected to be sold in the short-term. Deferred tax assets/liabilities and tax receiva- bles/payables are offset if the Group has a legal right to offset these and intends to settle these on a net basis or to realise the assets and settle the liabilities simultaneously. Uncertain tax positions are measured at the amount estimated to be required to settle such po- tential future obligations. We measure these un- certain tax positions on a yearly basis through in- terviews with key stakeholders in the main Group entities. We determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The ap- proach that better predicts the resolution of the uncertainty will be followed. Management has as- sessed that for uncertain tax positions the most likely outcome method will in most circumstances best predict the resolution of uncertainty. Composition of tax for the year and effective tax rates 2023 2022 Tax Effective Tax Effective DKKm tax rate tax rate Tax according to Danish tax rate (232) 22.0% (122) 22.0% Differences in the tax rates in foreign subsidiaries relative to 22% (24) 2.2% 2 -0.3% Non-taxable income and non-deductible costs 50 -4.8% (4) 0.7% Net change in valuation of tax assets (140) 13.3% (3) 0.5% Change in deferred tax due to adjustment of tax rates 0 0.0% (8) 1.5% Adjustments regarding previous years, deferred tax (27) 2.6% (22) 4.0% Adjustments regarding previous years, current tax 140 -13.3% (1) 0.2% Withholding tax (141) 13.4% (66) 12.0% Uncertain tax positions (8) 0.8% 23 -4.2% Total tax for the year and effective tax rate (382) 36.2% (201) 36.4% Composition of tax for the year DKKm 2023 2022 Current tax on net profit for the year (844) (514) Withholding tax (141) (66) Change in deferred tax 498 387 Change in tax rate on deferred tax 0 (8) Adjustments regarding previous years, deferred tax (27) (22) Adjustments regarding previous years, current tax 140 (1) Uncertain tax positions (8) 23 Tax on profit for the year, continuing activities (382) (201) Earnings before tax on continuing activities 1,054 552 Earnings before tax on discontinued activities (184) (15) Total earnings before tax 870 537 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 99 4.2 Paid income tax Income tax paid in 2023 amounted to DKK 850m (2022: DKK 471m). The increase in tax paid is mainly caused by increased profit, payment regarding prior years and an increase in withhold- ing taxes. Besides income tax, Group activities generate sales taxes, customs duties, personal income taxes paid by the employees, etc. which are ex- cluded from income tax. The Group has prepared a preliminary assess- ment of the Group’s exposure to Pillar II income taxes. It is not expected that the Group will be ma- terially impacted by the Pillar II international tax reform. 4.3 Deferred Tax Deferred tax assets at the end of 2023 amount to DKK 2.314m (2022: DKK 1,921m) and deferred tax liabilities amount to DKK 207m (2022: DKK 294m). The net deferred tax assets amount to DKK 2.107m (2022: DKK 1,627m). Income tax paid DKKm Significant deferred tax assets, net DKKm 0 30 60 90 120 150 180 210 Denmark Chile Brazil Australia Mexico Peru South Africa Kazakhstan Ghana China Other 2022 2023 - 200 400 600 800 1,000 Share of assets and tax losses valued at nil Deferred tax assets 2022 2023 USA 2022 2023 Chile 2022 2023 Germany 2022 2023 Denmark 2022 2023 India 2022 2023 Australia Composition of deferred tax 2023 Included in Income Statement Balance Acquisition of Currency Adjustment to Changed tax Change in Included in Balance sheet 1 enterprises adjustment previous rate deferred tax Other sheet 31 January years compre-December hensive DKKm income Intangible assets 86 0 2 (14) (1) 160 0 233 Property, plant and equipment 244 0 (2) (18) 0 39 0 263 Current assets 128 0 (13) (4) 1 222 (18) 316 Liabilities 662 27 (15) 3 0 38 (5) 710 Tax loss carry-forwards, etc. 643 16 (7) 34 0 184 0 870 Share of tax assets valued at nil (136) 0 10 (19) 0 (140) 0 (285) Net deferred tax assets/(liabilities) 1,627 43 (25) (18) 0 503 (23) 2,107 of which related to discontinued activities 9 5 14 2022 Included in Income Statement Balance Acquisition of Currency Adjustment to Changed tax Change in Included in Balance sheet 1 enterprises adjustment previous rate deferred tax Other sheet 31 January years compre-December hensive DKKm income Intangible assets 115 1 (9) (12) (2) (7) 0 86 Property, plant and equipment 256 (24) (2) 14 0 0 0 244 Current assets (2) (32) 0 92 0 69 1 128 Liabilities 606 22 2 (170) (3) 229 (24) 662 Tax loss carry-forwards, etc. 497 10 5 22 (3) 112 0 643 Share of tax assets valued at nil (151) 0 (1) 32 0 (16) 0 (136) Net deferred tax assets/(liabilities) 1,321 (23) (5) (22) (8) 387 (23) 1,627 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 100 4.3 Deferred Tax – continued Recognition of net deferred tax assets is based on forecasted taxable income considering the appli- cation of a changed business model, including our pure play Mining and Cement strategies, and fore- casted growth and margins for the coming years. Deferred tax assets valued at nil amounting to DKK 285m (2022: DKK 136m) relate to tax losses and tax assets mainly in discontinued entities, and the increase relates primarily to Germany, where the tax assets are not likely to be fully utilised within a foreseeable future. As of 31 December 2023, the non-recognised part of the tax assets in Germany amounts to DKK 199m (2022: DKK 66m). Recognising tax assets is a key accounting estimate and is based on man- agement’s forecast of earnings incorporated cost savings and the recovery of the market. Temporary differences regarding future repatria- tion of profit from entities in foreign countries are estimated at DKK 375m-425m in 2023 (2022: DKK 325m-375m). These liabilities are not recognised because the Group is able to control when the lia- bility is released, and it is considered probable that the liability will not be triggered in the fore- seeable future. All foreign paid withholding taxes in the Group has been recognised. In 2022, DKK 108m of foreign paid withholding taxes in the USA were not recognised. Net deferred tax Maturity profile of tax assets valued at nil DKKm 2023 2022 Deferred tax assets 2,314 1,921 Deferred tax liabilities (207) (294) 2,107 1,627 DKKm 2023 2022 Within one year 4 12 Between one and five 111 0 years After five years 864 489 Base value of tax assets 979 501 valued at nil Tax value 285 136 Deferred tax assets valued at nil consist of: Temporary differences 51 51 Tax losses 928 450 979 501 Key accounting estimates Estimated value of deferred tax assets The value of deferred tax assets is recognised to the extent that it is deemed likely that taxable in- come in the future can utilise the tax losses. For this purpose the income from the coming five years is estimated, based on forecasts. In assessing the probability of the future realisa- tion of deferred tax assets, we have considered the economic outlook in our forecasts of taxable income and reversals of taxable temporary differ- ences. The uncertainty of forecasts is related to macroeconomic developments, including the de- mand for environmental investments by our cus- tomers, not least within the Cement industry. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 101 4.4 Tax on other comprehensive income Tax recognised in other comprehensive income by the components of other comprehensive income to which it relates is shown in the table below. 4.5 Our approach to tax and tax risk Being a responsible taxpayer is important to us, and this means that we will pay the correct amount of taxes at the right time in all countries where we do business. We strive to accomplish this through a strong governance framework fo- cused on compliance with applicable laws as well as generally agreed principles of international taxation and standards for responsible business conduct. We are a global company undertaking complex projects and operating in a variety of de- veloped and developing economies. Inherent risk and uncertainty regarding compliance require- ments and double taxation are common issues faced by our business. We actively mitigate tax risk and uncertainties from business operations. Our objective is to be transparent regarding our tax affairs by communicating openly and in a clear, timely and transparent manner. Tax on other comprehensive income 2023 2022 Deferred Current Tax Deferred Current Tax tax tax income/ tax tax income/ DKKm cost cost Value adjustments of hedging instruments (18) 8 (10) 1 7 8 Actuarial gains/losses on defined benefit plans (5) 0 (5) (24) 0 (24) Tax on other comprehensive income (23) 8 (15) (23) 7 (16) Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 102 Section 5 Financial risks and Products structure 5.1 Shares and capital structure 103 5.2 Earnings per share 104 5.3 Financial risks 104 5.4 Financial income and costs 108 5.5 Derivatives 108 5.6 Fair value measurement 109 5.7 Net interest bearing debt 110 5.8 Financial assets and liabilities 110 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 103 5.1 Shares and capital structure Shares Share capital is DKK 1,153m and the total number of authorised and issued shares is 57,650,000. Each share entitles the holder to 20 votes and no shares have special rights attached to it. Shareholders At 21 February 2024, FLSmidth had two major shareholders. Altor Invest 7 AS and Lundbeck- fonden have both disclosed holdings of voting rights exceeding 10% of total outstanding voting rights. No other shareholders have reported a par- ticipating interest above 5%. Capital structure FLSmidth takes a conservative approach to capi- tal structure with an emphasis on relatively low debt, gearing and financial risk. The Board of Di- rectors’ priority for capital structure is as follows: ■ Leverage (NIBD/EBITDA < 2) ■ Dividend pay-out ratio (30-50% of net profit) The priority for capital allocation is to ensure a strong balance sheet while allowing for growth in- vestments and value-adding M&A. Excess cash can be distributed either via extraordinary divi- dends or share buy-back programmes. Shareholders’ equity includes the following reserves: ■ Share capital (nominal value of shares issued) ■ Foreign exchange adjustments (accumulated currency adjustments regarding translation of foreign entities) ■ Cash flow hedging (fair value of derivatives that hedge the currency risks on expected future cash flows and meet the criteria for cash flow hedging) ■ Retained earnings (all other components of shareholders’ equity including share premium) Treasury shares Our holding of treasury shares at the end of 2023 accounted for 1.6% of the share capital (2022: 1.6%). The Board of Directors is authorised until the next Annual General Meeting to let the Company ac- quire treasury shares up to a total nominal value of 10% of the Company’s share Products in ac- cordance with Section 12 of the Danish Compa- nies Act. The treasury shares are used to hedge share- based incentive programmes, and are recognised directly in equity in retained earnings (zero value in the balance sheet). Refer to note 6.1 for further information. Dividend per share The Board of Directors will propose at the Annual General Meeting that a dividend of DKK 4 per share corresponding to a dividend yield of 1.4% and a pay-out ratio of 47%, will be distributed for 2023. The total dividend proposed amounts to DKK 231m. Outstanding shares net of Treasury shares (1,000) 2023 2022 Treasury shares at 1 January 914 925 Used for share based payments 0 (11) Treasury shares at 31 December 914 914 Outstanding shares net of Treasury shares: Outstanding shares net of Treasury shares 1 January 56,736 56,725 Movement, treasury shares 0 11 Outstanding shares net of Treasury shares at 31 December 56,736 56,736 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 104 5.2 Earnings per share Earnings per share from continuing activities in- creased to DKK 12.0 in 2023 (2022: DKK 6.5). Earnings per share from discontinued activities equalled DKK -3.2 in 2023 (2022: DKK 0.0). The number of dilutive shares from share-based payment (see note 6.1) is determined as the num- ber of shares that are expected to vest under share-based payments to employees, reduced by the numbers of shares that represents the fair value of service during the remaining vesting pe- riod. 5.3 Financial risks Due to the international activities and the industry characteristics, risks are an embedded part of do- ing business. We are exposed to financial risks, that can have a material impact to the consoli- dated financial statements of the Group. The financial risks are to the extent possible man- aged centrally for the Group and are governed by the Treasury Policy, which is approved by the Board of Directors. The Treasury Policy is updated on an annual basis to address any changes in the risk picture. The main financial risks that we are exposed to are interests, currency, credit and liquidity risks. Interest rate risk Interest rate risks arise from interest-bearing as- sets and liabilities. Interest-bearing items consist primarily of cash and cash equivalents, bank loans and mortgage debt. According to the Treasury Policy, hedging of inter- est rates is governed by a duration range and is managed by using derivatives such as interest rate swaps. No interest derivatives have been used during 2023 or 2022. As of 31 December 2023, the majority of our inter- est-bearing debt is carrying a floating rate. All other things being equal, a 1%-point increase in the interest rate will increase our interest cost by DKK 6m (2022: DKK 7m), calculated as 1% of the net interest bearing debt as of 31 December 2023. The sensitivity to changes in the interest rate has decreased in 2023 due to the decrease in debt. Currency risk The Treasury Policy aims to reduce the most sig- nificant currency risks to better predict the impact on the income statement as well as the cash flows to be paid or received and to protect the EBITDA of the individual entities from changes in ex- change rates. The risks are managed through hedging activities by entering commonly used de- rivatives such as forward contracts. The currency risks, which is transaction risk, arise primarily from purchase and sale in foreign currencies compared to the functional currency of each of the Group entities. The Treasury Policy sets forth thresholds and re- quirements for the hedging strategy to be applied. Hedge accounting is applied for the largest pro- ject transactions. For other project transactions, the currency risk is either not hedged or economi- cally hedged, dependent on the significance of the risk. We are, to a large extent, carrying out transac- tions in EUR and USD as these currencies are pre- ferred in the Mining and Cement industries. EUR against DKK is currently not considered an expo- sure due to the Danish Kroner being pegged to the Euro. . Earnings per share from continuing and discontinuing activities DKKm 2023 2022 Profit for the year, continuing activities 672 351 Minority interests 6 18 FLSmidth's share of profit, continuing activities 678 369 Loss for the year, discontinued activities (181) 1 FLSmidth's share of loss, discontinuing activities (181) 1 FLSmidth's share of profit 497 370 Number of shares (1,000) 2023 2022 Issued shares 1 January 57,650 57,650 Issue of new shares, weighted 0 0 Treasury shares, weighted 914 920 Average number of outstanding shares 56,736 56,730 Dilutive effect of share based payment 401 149 Average diluted number of outstanding shares 57,137 56,879 DKK per share 2023 2022 Earnings per share from continuing activities 12.0 6.5 Earnings per share from discontinued activities (3.2) 0.0 Earnings per share from continuing and discontinued activities 8.8 6.5 DKK per share 2023 2022 Diluted earnings per share from continuing activities 11.9 6.5 Diluted earnings per share from discontinued activities (3.2) 0.0 Diluted earnings per share from continuing and discontinued activities 8.7 6.5 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 105 5.3 Financial risks – continued The project nature of the business changes the foreign currency risk picture towards and against specific currencies from one year to another, de- pending on the area in which we have activities. The table ‘Transaction impact’ is a sensitivity anal- ysis showing the gain/loss on net profit and other comprehensive income of a 5% percent apprecia- tion of the largest currency exposure towards DKK (a 5% decrease will have similar opposite effect). The analysis assumes that all other variables, ex- posures and interest rates in particular, remain constant. The analysis includes the offsetting im- pact from monetary items and derivatives used to hedge the currency risk. The impact on net profit for the year includes monetary items in foreign currencies that are cur- rency adjusted through the income statement as well as any derivatives used for economic hedg- ing. The impact on other comprehensive income in- cludes the value adjustment on derivatives desig- nated as hedge accounting in effective cash flow hedges. The value adjustments are transferred to the income statement as the hedged cash flows through the work in progress are recognised in the income statement. In addition to the transactional effects, in the event of currency developments, we will also be im- pacted by translation effects from the Group enti- ties with net assets in functional currencies other than Danish Kroner and Euro. In 2023 translation effects of DKK -359m (2022: DKK 149m) have been recognised in Other Comprehensive income. A 5 % appreciation on the currencies with largest exposure towards Danish Kroner will have the fol- lowing effect on other comprehensive income (a 5% depreciation will have a similar negative ef- fect). The project nature of the business changes the foreign currency risk picture towards and against specific currencies from one year to another, de- pending on the area in which we have activities. The table ‘Transaction impact’ is a sensitivity anal- ysis showing the gain/loss on net profit and other comprehensive income of a 5% percent apprecia- tion of the largest currency exposure towards DKK (a 5% decrease will have similar opposite effect). The analysis assumes that all other variables, ex- posures and interest rates in particular, remain constant. The analysis includes the offsetting im- pact from monetary items and derivatives used to hedge the currency risk. The impact on net profit for the year includes monetary items in foreign currencies that are cur- rency adjusted through the income statement as well as any derivatives used for economic hedg- ing. The impact on other comprehensive income in- cludes the value adjustment on derivatives desig- nated as hedge accounting in effective cash flow hedges. The value adjustments are transferred to the income statement as the hedged cash flows through the work in progress are recognised in the income statement. In addition to the transactional effects, in the event of currency developments, we will also be im- pacted by translation effects from the Group enti- ties with net assets in functional currencies other than Danish Kroner and Euro. In 2023 translation effects of DKK -359m (2022: DKK 149m) have been recognised in Other Comprehensive income. A 5 % appreciation on the currencies with largest exposure towards Danish Kroner will have the fol- lowing effect on other comprehensive income (a 5% depreciation will have a similar negative ef- fect). Translation impact Credit risk We are exposed to credit risks arising from cash and cash equivalents, derivatives and receivables including work in progress. At 31 December 2023, total credit risk was DKK 9,664m (2022: DKK 11,547m) as shown in the table below. The credit risk is governed by the Group’s Credit Risk Policy. For receivables the credit risk is managed by con- tinuous risk assessments and credit evaluations of customers and trading partners; having country specific risk factors in mind. To the extent possi- ble, the credit risks are mitigated through use of payment securities, such as letters of credit and guarantees issued by first class rated banks, or by securing positive cash flow throughout the execu- tion under customer contract. At the end of 2023, 10% (2022: 7%) of our work in progress asset and 6% (2022: 9%) of our trade receivables balance were covered by payment securities. Our customers and trading partners mainly con- sist of companies within the Cement and Mining industry. Credit risk is among other things depend- ent on the development in these industries. DKKm Change 2023 2022 USD 5,0% 106 84 CLP 5,0% 52 34 CAD 5,0% 47 34 INR 5,0% 27 39 AUD 5,0% 20 2 MXN 5,0% 18 15 Transaction impact DKKm 2023 2022 Currency Change Net Other Net Other profit for compre-profit for compre-the year hensive the year hensive income income USD 5,0% 4 (12) 8 (30) GBP 5,0% (1) 0 0 0 AUD 5,0% (1) 0 1 0 CAD 5,0% 1 (1) 1 (1) MXN 5,0% 1 0 1 0 CNY 5,0% 1 0 4 0 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 106 5.3 Financial risks – continued The Treasury Policy sets forth authority limits for the credit risk exposure related to cash and cash equivalents as well as derivatives. The limits are based on the counterparty credit rating. We have entered into netting agreements with the counterparties used for trading of derivatives, which means that the credit risk for derivatives is limited to the net assets per counterparty. We aim at using banks of high quality in the coun- tries we operate in. However, due to the nature of our business and operations in emerging markets, we are sometimes exposed to banks where the credit rating and quality can be lower than what we typically see in developed countries. We consider the maximum credit risk to financial counterparties to be DKK 1,365m (2022: DKK 2,142m). All financial assets, excluding other secu- rities and investments, are expected to be settled during 2023. Total exposure to credit risk DKKm 2023 2022 Non-financial counterparties: Trade receivables, note 3.3 4,516 5,108 Work in progress, assets, note 3.4 2,769 3,147 Other receivables, note 3.5 995 1,145 of which derivatives (37) (54) Other securities and investments 56 59 Total non-financial counterparties 8,299 9,405 Financial counterparties: Derivatives, netted amount 13 12 Cash and cash equivalent 1,352 2,130 Total financial counterparties 1,365 2,142 Total exposure to credit risk 9,664 11,547 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 107 5.3 Financial risks – continued Liquidity risk The objective of the Treasury Policy is to ensure that the Group always has sufficient and flexible financial resources at our disposal to ensure con- tinuous operations and to honour liabilities when they become due. The financial resources consist of non-restricted cash and cash equivalents together with undrawn committed facilities. Financial resources are moni- tored daily to ensure that the available amount exceeds the Treasury Policy threshold of DKK 3,000m. Committed facilities includes a Revolving Credit Facility with a group of international banks, a green term loan with Nordic Investment Bank and a Danish mortgage loan. The weighted average maturity of these loans is 4.3 years at the end of 2023, and no facilities matures before 2027. The committed facilities contain standard clauses such as pari passu, negative pledge, change of control and a leverage financial covenant. The Group did not default or fail to fulfil any of its financial cove- nants, in neither 2022 nor 2023. By the end of 2023, total committed credit facili- ties were DKK 6,322m (2022: DKK 6,326m) of which DKK 4,689m (2022: DKK 4,397m) was unu- tilised. The financial resources, undrawn commit- ted facilities together with non-restricted cash of DKK 500m, amounted to DKK 5,189m and shows comfortable headroom to the DKK 3,000m thresh- old. Short-term liquidity is managed through interna- tional cash-pools and by having overdraft facilities in place with various financial institutions. Restricted cash Restricted cash is bank balances in countries with currency restrictions or other restrictions prevent- ing the funds to be readily available at parent company level. The definition of restricted cash is unchanged from last year. Restricted cash amounted to DKK 852m (2022: DKK 1,459m). Focused repatriation efforts during 2023 has reduced the restricted cash significantly. Cash in Indonesia and Mongolia is no longer clas- sified as restricted cash. Credit risk ratings per financial institution % Maturity profile of Group funding facilities DKKm Group restricted cash DKKm 0% 20% 40% 60% 80% 100% 2022 2023 AA A BBB BB B Not rated 0 1,000 2,000 3,000 4,000 5,000 6,000 < 1 year 1-5 years > 5 year 2022 2023 0 100 200 300 400 500 China India Brazil Morocco South Africa Russia Ghana Angola Indonesia Other 2022 2023 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 108 5.4 Financial income and costs Net financial costs Cash flow effect from financial income and costs As shown in the table the large movement in for- eign exchange rates during 2022 and 2023 led to significant gross foreign exchange gains and losses. On a net basis, foreign exchange adjust- ments, including the impact from economic hedges, amounted to DKK 11m (2022: DKK -6m) primarily related to the cost of hedging the loan portfolio to the functional currency of the borrow- ing entity (forward points) and exposures in the non-hedgeable emerging market currencies, as well as timing differences between cash flows and hedges. The net interest cost totalled DKK 80m (2022: DKK 38m) related to loans and deposits. Fair value adjustment of shares of net DKK -3m (2022: DKK -8m) relates to shareholdings in ce- ment companies. Further information on [income/loss] from associ- ates can be found in note 2.6 Accounting policy Financial income and costs comprise interest in- come and costs, realised and unrealised foreign exchange gains and losses arising from monetary items, income/loss from associates accounted for at equity method and fair value adjustments of shares and derivatives where hedge accounting is not applied. 5.5 Derivatives The Group’s derivatives are entered into to hedge the currency risk and accounted for as hedge ac- counting or economic hedges. We use derivatives to hedge currency risks arising from monetary items recognised in the balance sheet. Fair value adjustments recognised in finan- cial items in the income statement amounted to DKK 58m (2022: DKK 26m). Economic hedge At 31 December 2023 the fair value of our hedge agreements that are not recognised as hedge ac- counting amounted to DKK -9m (2022: DKK -14m). The breakdown of the economic hedges by most important currencies for each of the years 2023 and 2022 is shown in the table below. DKKm 2023 2022 Interest income 69 36 Fair value adjustment 582 728 of derivatives Foreign exchange gains 717 822 Fair value adjustment of shares 3 2 Total financial income 1,371 1,588 Interest cost (149) (74) Loss from associates (62) (3) Lease interest cost (12) (12) Fair value adjustment (524) (702) of derivatives Foreign exchange losses (764) (854) Fair value adjustment of shares (6) (10) Total financial costs (1,517) (1,655) Net financial costs (146) (67) DKKm 2023 2022 Interest received 70 37 Interest paid (164) (86) Cash flow effect (94) (49) Carrying amount, net fair value DKKm 2023 2022 Econo-Cash Total Econo-Cash Total mic flow hedge mic flow hedge hedge hedge hedge hedge Financial instruments asset 26 11 37 17 37 54 Financial instruments liability (35) (14) (49) (31) (49) (80) Total (9) (3) (12) (14) (12) (26) Economic Hedge DKKm 2023 2022 Currency Notional Net fair Notional Net fair amount value amount value AUD (1,075) (2) AUD (974) (15) USD 751 (26) USD (512) 3 CAD 509 11 EUR 358 (1) GBP 374 1 CNY 43 (1) MXN 276 3 Other 4 Other 0 Total (9) (14) A negative notional amount represents a sale of the currency Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 109 Cash flow hedge We use forward exchange contracts to hedge cur- rency risks regarding expected future cash flows that meet the criteria for cash flow hedging. The fair value reserve of the derivatives is recog- nised in other comprehensive income until the hedged items affect the income statement through work in progress. The fair value of derivatives is rec- ognised in other receivables and other liabilities. The majority of the cash flow hedge instruments are expected to settle and affect the income statement within one year. Ineffectiveness is recognised in the income state- ment within financial items. Ineffectiveness was im- material in 2023 and 2022. At 31 December 2023, the fair value of our cash flow hedge instruments amounted to DKK -3m (2022: DKK -12m). The breakdown of the cashflow hedges by most important currencies for each of the years 2023 and 2022 is shown in the table below. Changes in the cash flow hedging reserve Accounting policy Derivatives are initially recognised in the balance sheet at fair value and subsequently remeasured at fair value. Fair value of derivatives is included in other receivables or other liabilities respec- tively. Fair value changes of derivatives that are accounted for as cash flow hedging instruments are recognised in other comprehensive income. Any ineffective portions of the cash flow hedges are recognised in the income statement within fi- nancial item. When the hedged cash flows materi- alises, the fair value of the hedging instrument is transferred from other comprehensive income into the line item of the hedged item. Any changes in the fair value of derivatives not used for hedge accounting are recognised in the income statement within financial items. Certain contracts contain conditions that corre- spond to derivatives. In case the embedded deriv- atives deviate significantly from the overall con- tract, they are recognised and measured as separate instruments at fair value. That is unless the contract concerned as a whole is recognised and measured at fair value. 5.6 Fair value measurement Financial instruments are remeasured at fair value on a recurring basis and are categorised into the following levels of the fair value hierarchy: Level 1: Observable market prices for identical in- struments (quoted prices) Level 2: Valuation techniques primarily based on observable prices or traded prices for comparable instruments Level 3: Valuation techniques primarily based on non-observable input Securities and investments consist primarily of in- vestments in shares. The fair value is either deter- mined as the quoted price in an active market for the same type of instrument (level 1) or at fair value based on available data which include valu- ation based on multiple of earnings or equity from the latest available financial statements (level 3). The derivatives are forward exchange contracts not traded on an active market. The fair value is therefore estimated using a valuation technique, where all significant inputs are based on observa- ble market data; such as exchange rates, interest rates, credit risk and volatilities (level 2). There have been no transfers between the levels in 2023 or 2022. DKKm 2023 2022 Change in cash flow hedge 34 (28) reserve Reclassified from other 4 12 comprehensive income to work in progress Financial instruments measured at fair value 2023 DKKm Level 1 Level 2 Level 3 Total Securities and investments 17 0 39 56 Derivatives, asset 0 37 0 37 Derivatives, liability 0 (49) 0 (49) 17 (12) 39 44 2022 DKKm Level 1 Level 2 Level 3 Total Securities and investments 17 0 42 59 Derivatives, asset 0 54 0 54 Derivatives, liability 0 (80) 0 (80) 17 (26) 42 33 Cash flow hedge DKKm 2023 2022 Currency Notional Net fair Notional Net fair amount value amount value USD (296) 5 USD (643) (8) EUR 241 (7) EUR 374 (5) CAD (13) (1) Other 0 Other 1 Total (3) (12) A negative notional amount represents a sale of the currency Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 110 5.7 Net interest bearing debt 5.8 Financial assets and liabilities Accounting policy The financial assets are classified based on the contractual cash flow characteristics of the finan- cial asset as well as our intention with the finan- cial asset according to our business model. If cash flows from a financial asset are solely pay- ments of principal and interests the classification is either: ■ Amortised cost, for financial assets, where the objective is to hold the financial asset to collect the contractual cash flows. ■ Fair value through profit/loss, for other financial assets Hedging instruments designated as hedge ac- counting are classified separately and are meas- ured at fair value. Based on this, all financial assets and liabilities, except for hedging instruments, securities and in- vestments, are measured at amortised cost. The table on the next page shows the fair value of all financial instruments and compares it to the carrying amount. For the mortgage debt, the fair value is determined as the quoted price of the un- derlying mortgage bonds funding the debt. The carrying amount for the other items is a reasona- ble approximation of fair value. 2023 Carrying Cash flows Acquisition of Additional Foreign Carrying amount 1 enterprises lease liability exchange amount 31 January 2023 during the effect December DKKm year 2023 Lease liabilities 323 (133) (49) 96 (4) 233 Bank loans and mortgage debt, committed 1,929 (296) 0 0 0 1,633 Bank loans and mortgage debt, uncommitted 615 (561) 0 0 0 54 Other liability 0 168 0 0 7 175 Interest bearing debt 2,867 (822) (49) 96 3 2,095 Cash and cash equivalents 2,130 (700) 0 0 (78) 1,352 Other receivables 11 60 0 0 33 104 Interest bearing assets 2,141 (640) 0 0 (45) 1,456 Net interest bearing debt / (assets) 726 (182) (49) 96 48 639 2022 Carrying Cash flows Acquisition of Additional Foreign Carrying amount 1 enterprises lease liability exchange amount 31 January during the effect December DKKm 2022 year 2022 Lease liabilities 304 (134) 51 98 4 323 Bank loans and mortgage debt, committed 726 1,308 0 0 (105) 1,929 Bank loans and mortgage debt, uncommitted 17 598 0 0 0 615 Other liability 0 0 0 0 0 0 Interest bearing debt 1,047 1,772 51 98 (101) 2,867 Cash and cash equivalents 1,935 254 0 0 (59) 2,130 Other receivables 1 11 0 0 (1) 11 Interest bearing assets 1,936 265 0 0 (60) 2,141 Net interest bearing debt (889) 1,507 51 98 (41) 726 In 2022, cash flows from cash and cash equivalents are net of cash taken over from Mining Technologies of DKK 1,019m. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 111 5.8 Financial assets and liabilities – continued 2023 2022 Assets Maturity of cash flows Total cash Fair value Carrying Maturity of cash flows Total cash Fair value Carrying DKKm flows amount flows amount < 1 year 1-5 years > 5 year < 1 year 1-5 years > 5 year Hedging instruments (hedge accounting) 8 0 0 8 11 11 37 0 0 37 37 37 Hedging instruments (economic hedging) 26 0 0 26 26 26 17 0 0 17 17 17 Securities and investments 0 0 56 56 56 56 0 0 59 59 59 59 Fair value through profit and loss 26 0 56 82 82 82 17 0 59 76 76 76 Trade receivables 4,516 0 0 4,516 4,516 4,516 5,108 0 0 5,108 5,108 5,108 Work in progress 2,769 0 0 2,769 2,769 2,769 3,147 0 0 3,147 3,147 3,147 Other receivables 958 0 0 958 958 958 1,090 0 0 1,090 1,090 1,090 Cash and cash equivalents 1,352 0 0 1,352 1,352 1,352 2,130 0 0 2,130 2,130 2,130 Amortised cost 9,595 0 0 9,595 9,595 9,595 11,475 0 0 11,475 11,475 11,475 Total financial assets 9,629 0 56 9,685 9,688 9,688 11,529 0 59 11,588 11,588 11,588 2023 2022 Liabilities Maturity of cash flows Total cash Fair value Carrying Maturity of cash flows Total cash Fair value Carrying DKKm flows amount flows amount < 1 year 1-5 years > 5 year < 1 year 1-5 years > 5 year Hedging instruments (hedge accounting) (12) (1) 0 (13) (14) (14) (49) 0 0 (49) (49) (49) Hedging instruments (economic hedging) (35) 0 0 (35) (35) (35) (31) 0 0 (31) (31) (31) Fair value through profit and loss (35) 0 0 (35) (35) (35) (31) 0 0 (31) (31) (31) Lease liabilities (109) (188) (1) (298) (233) (233) (128) (200) (22) (350) (323) (323) Mortgage debt (21) (84) (185) (290) (215) (215) (16) (63) (154) (233) (227) (226) Bank debt (97) (1,178) (431) (1,706) (1,472) (1,472) (542) (1,833) 0 (2,375) (2,318) (2,318) Trade payables (4,024) 0 0 (4,024) (4,024) (4,024) (4,339) 0 0 (4,339) (4,339) (4,339) Other liabilities (1,927) (51) 0 (1,978) (1,978) (1,978) (1,737) (85) 0 (1,822) (1,822) (1,822) Amortised cost (6,178) (1,501) (617) (8,296) (7,922) (7,922) (6,762) (2,181) (176) (9,119) (9,029) (9,028) Total financial liabilities (6,225) (1,502) (617) (8,344) (7,971) (7,971) (6,842) (2,181) (176) (9,199) (9,109) (9,108) Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 112 Section 6 Other notes 6.1 Share-based payment 113 6.2 Related party transactions 114 6.3 Audit fee 114 6.4 Events after the balance sheet date 114 6.5 List of Group companies 115 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 113 6.1 Share-based payment Share-based payment programmes outstanding by the end of 2023 consist of the performance share programme (the recurring long-term incen- tive programme) and a restricted share pro- gramme that was granted in 2023. Performance shares The performance shares units (PSU) are based on a three year performance period and the perfor- mance measurement is based on key financial performance indicators as well as contin- ued employment. For the outstanding pro- grammes the key performance indicators are EBITA margin, total shareholder return (TSR) and a sustainability indicator (MZ). The programme granted in March 2020 expired during 2023 with- out any payout. Under the programmes, the number of PSUs (shares) that will eventually vest depends on the level of achievement of the key performance indi- cators. The purpose of the performance share pro- gramme is to ensure common goals for Group Executive Management, key employees and shareholders. The value of the PSUs at grant date is measured at fair value (market price) of the shares adjusted for the expected performance under the TSR KPI. For the 2023 plan, a maximum of 74,216 shares (2022: 75,703 shares on the 2022 plan and a grant of 10,240 shares under the 2020 plan) were granted to Executive Management at the grant date. The total number of outstanding performance shares at the end of 2023 was 655,083 (2022: 597,682) of which 563,957 are expected to vest (2022: 306,555). This includes the expected vesting of 143,754 performance shares in 2024 under the programme granted in March 2021. Conditional grant March-23 March-22 March-21 Performance period Jan 2023 - Dec 2025 Jan 2022 - Dec 2024 Jan 2021 - Dec 2023 Vesting period Mar 2023 - Feb 2026 Mar 2022 - Feb 2025 Mar 2021 - Feb 2024 Vesting conditions, other than service conditions EBITA, TSR, MZ EBITA, TSR, MZ EBITA, TSR, MZ DKK/DKKm 2023 2022 Market price per share, end of year 287.20 251.70 Total fair value of performance shares expected to vest at the end of the vesting period, end of year 162 77 2023 2022 Outstanding performance shares Group Key Total number Group Key Total number Executive employees Executive employees Management Management Outstanding performance shares 1 January 132,625 465,057 597,682 132,735 416,437 549,172 Awards 74,216 249,041 323,257 86,443 198,213 284,656 Vested 0 0 0 0 0 0 Lapsed (31,454) (162,843) (194,297) (32,733) (115,115) (147,848)Forfeited (5,967) (65,592) (71,559) (8,539) (79,758) (88,298)Change in positions (7,984) 7,984 0 (45,281) 45,281 0 Outstanding performance shares 31 December 161,436 493,647 655,083 132,625 465,057 597,682 Expected to vest 138,032 425,925 563,957 75,367 231,288 306,655 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 114 6.1 Share-based payment - Continued Restricted shares To realise the Group’s transformation journey over the next three years, selected key employees were granted a three-year share programme in 2023, see table below. The programme will vest in two tranches, being 1/3 after two years and the remaining share after three year and subject to the participant being actively employed. Other In 2022, 10,740 of shares were allotted as other incentives. The shares are accounted for as equity settled share-based payment under IFRS 2. Accounting policy The performance share programme and the re- stricted share programmes are classified as equity based, as the schemes settle in shares. The value of the services received in exchange for the granting of performance share units (PSUs) and restricted share units (RSUs), is measured as the fair value of the share units at grant date. The fair value of the PSUs and RSUs is determined based on the quoted share price and for the PSUs adjusted for the expected performance under the TSR KPI, both determined at grant date. The fair value is not adjusted for dividend as participants of the programme are compensated for dividend pay-outs during the performance period. The fair value is recognised in staff cost in the in- come statement and in equity over the vesting pe- riod which is three years. On initial recognition of the PSUs, the number of PSUs expected to vest are estimated. Subse- quently, the estimate is revised so that the total cost recognised is based on the actual number of PSUs expected to vest, however, keeping the ex- pectations related to the TSR KPI unchanged com- pared to grant date. 6.2 Related party transactions Related parties to FLSmidth are determined as members of the Board of Directors and Group Ex- ecutive Management, their close family members, or companies in which these persons have signifi- cant influence and the associated entities over which FLSmidth has significant influence. During 2023, FLSmidth has had ordinary sales transactions of DKK 10m (2022: DKK 15m) with its associate Intertek Robotic Laboratories Pty Ltd. Other than that, there were no significant transac- tions between FLSmidth and any of its related par- ties, other than ordinary remuneration of the Board of Directors and Group Executive Manage- ment in 2022 and 2023. Refer to note 1.5 Staff cost and the Remuneration report 2023. 6.3 Audit fee Fees to independent auditor In addition to statutory audit, EY Godkendt Revisionspartnerselskab, the Group auditors ap- pointed at the Annual General Meeting, provided other assurance engagements, primarily consisting of limited assurance report on the Sus- tainability Report and reasonable assurance re- port on the Remuneration Report for FLSmidth & Co. A/S. Other services provided in 2023 and 2022 included certain advisory services in respect of the integration of Mining Technologies. All non- audit services have been approved by the Audit Committee. 6.4 Events after the balance sheet date On 22 January 2024, FLSmidth Cement entered into an agreement to sell the MAAG gears and drives business to Solix Group AB. The transaction is expected to close during the first quarter of 2024 and includes all related assets, including in- tellectual property, technology, employees and customer contracts. By the end of 2023, total as- sets and liabilities related to the activities amounted to around DKK 500m and DKK 300m, respectively. This includes non-current assets of around DKK 200m and non-current liabilities of around DKK 60m. The transaction is expected to result in an immaterial gain that will be recognised in the first quarter of 2024. On 29 January 2024, FLSmidth announced that we will explore the available divestment options for our Cement business. The announcement does not impact FLSmidth financial statements of 2023. We are not aware of any other subsequent mat- ters, that could be of material importance to FLSmidth’s financial position. DKKm 2023 2022 Statutory audit 22 21 Other assurance engagement 1 1 Total audit related services 23 22 Tax and indirect taxes 0 0 consultancy Other services 2 2 Total non-audit services 2 2 Total fees to 25 24 independent auditor Restricted shares Conditional grant March-23 Performance and vesting period Mar 2023 - Mar 2026 Vesting conditions, other than service conditions None Fair value, end of year (DKKm) 30 2023 Outstanding restricted shares Group Key Total number Executive employees Management Awards 2023 49,468 58,671 108,139 Forfeited (2,716) (2,053) (4,769) Change in positions (840) 840 0 Outstanding restricted shares 31 December 2023 45,912 57,458 103,370 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 115 6.5 List of Group Companies Company name Country Direct Group holding (pct.) FLSmidth & Co. A/S Denmark ○ FLSmidth Real Estate A/S Denmark 100 ○ FLSmidth S.A.C. Peru 100 ○ FLSmidth (Beijing) Ltd. China 100 ○ FLSmidth Finans A/S Denmark 100 ○ Matr. nr. 2055 A/S Denmark 100 ○ SLF Romer XV ApS Denmark 100 ⌂ Gemena Sp. Z.o.o. Poland 100 FLSmidth Cement A/S (Formerly FLSmidth Global Services A/S) Denmark 100 ○ FLSmidth Denmark Cement Holding ApS Denmark 100 ⌂ FLSmidth Cement India LLP India 100 ○ NLSupervision Company Angola, LDA. Angola 100 ○ NL Supervision Company Tunisia Tunisia 100 ○ ISIRNEL S.A. Uruguay 100 ○ FLSmidth Cement Brasil Ltda. Brazil 100 ○ FLSmidth Cement Mexico S.A. de C.V. Mexico 100 ○ FLSmidth Mekanik Sistemler Satis Bakim Ltd. Sti Turkey 100 FLSmidth A/S Denmark 100 ○ FLSmidth MAAG Gear AG Switzerland 100 ⌂ FLSmidth MAAG Gear Sp. z o.o. Poland 100 ○ FLS Maroc Morocco 100 ○ FLSmidth Kenya Limited Kenya 100 ○ FLSmidth (Thailand) Co. Ltd. Thailand 100 ○ FLSmidth Panama Inc. Panama 100 ○ FLSmidth S.A. Ecuador 100 ○ FLSmidth Paraguay S.A. Paraguay 100 ○ Cement Knowledge Center Kingdom of 51 Saudi Arabia ○ The Pennies and Pounds Holding, Inc. Philippines 33 ○ FLSmidth S.A. Spain 100 ⌂ FLSmidth S.A.S. Colombia 100 ○ FLSmidth Mongolia Mongolia 100 ○ FLSmidth (UK) Limited United 100 Kingdom ○ FLSmidth Caucasus Limited Liability Company (LLC) Armenia 100 ○ NHI-Fuller (Shenyang) Mining Co. Ltd. China 50 Company name Country Direct Group holding (pct.) ○ FLSmidth Limited Ghana 100 ○ FLSmidth (Private) Ltd. Pakistan 100 ○ FLSmidth Argentina S.A. Argentina 100 ○ FLSmidth Zambia Ltd. Zambia 100 ○ FLSmidth Iranian (PJSCo) Iran 100 ○ FLSmidth Ventomatic S.p.A. Italy 100 ⌂ FLSmidth MAAG Gear S.p.A. Italy 100 ○ PT FLSmidth Indonesia Indonesia 100 ○ FLSmidth Spol. s.r.o. Czech 100 Republic ○ FLSmidth GmbH Austria 100 ○ FLSmidth Co. Ltd. Vietnam 100 ○ FLSmidth Philippines, Inc. Philippines 100 ○ FLSmidth LLP Kazakhstan 100 ⌂ TOO FLSmidth Plant Construction Kazakhstan Kazakhstan 100 ⌂ TOO FLSmidth Plant Engineering Kazakhstan Kazakhstan 100 ○ FLSmidth Shanghai Ltd. China 100 ○ FLSmidth Qingdao Ltd. China 100 ○ Saudi FLSmidth Co. Kingdom of 100 Saudi Arabia ○ FLSmidth Nepal Private Limited Nepal 100 ○ FLSmidth SAS France 100 ○ FLSmidth Rusland Holding A/S Denmark 100 ⌂ FLSmidth Rus OOO Russia 100 ○ FLSmidth Industrial Solutions Ltda. Brazil 100 ○ FLSmidth Industrial Solutions Makine Sanayi Ve Ticaret A.Ş. Turkey 100 ○ FLSmidth Services Foreign Enterprise LLC Uzbekistan 100 FLS US Holdings, Inc. USA 100 ○ FLSmidth Inc. USA 100 ⌂ Phillips Kiln Services (India) Pvt. Ltd.* India 50 ⌂ Fuller Company USA 100 ⌂ FLSmidth Cement USA Inc. USA 100 ⌂ FLSmidth Dorr-Oliver Eimco SLC Inc. USA 100 ⌂ Ludowici Mineral Processing Equipment Inc. USA 100 ⌂ FLSmidth Dorr-Oliver Inc. USA 100 › FLSmidth Dorr-Oliver International Inc. USA 100 ○ Morse Rubber LLC USA 100 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 116 6.5 List of Group Companies – continued Company name Country Direct Group holding (pct.) FLS Germany Holding GmbH Germany 100 ○ FLSmidth Wadgassen GmbH Germany 100 ⌂ FLSmidth Wadgassen Ltd. Russia 100 ○ FLSmidth Pfister GmbH Germany 100 ○ FLSmidth Real Estate GmbH Germany 100 ○ FLSmidth Wiesbaden GmbH Germany 100 ○ FLSmidth Mining Technologies GmbH Germany 100 ⌂ thyssenkrupp Industrial Solutions Maroc SARL (in Members voluntary Morocco 100 liquidation) ⌂ FLSmidth Cement (Beijing) Ltd. China 100 ⌂ PT. FLSmidth Industries Southeast Asia Indonesia 100 ⌂ Mining Plants & Systems Bulgaria EOOD Bulgaria 100 ⌂ KH Mineral S.A.S. France 100 ⌂ OOO FLSmidth Mining Technologies (RUS) Russia 100 ⌂ FLSmidth Mining Technologies (Thailand) Ltd. Thailand 100 Company name Country Direct Group holding (pct.) FLSmidth Minerals Holding ApS Denmark 100 ○ FLSmidth Private Limited India 100 ○ FLSmidth S.A. Chile 100 ○ FLSmidth Ltd. Canada 100 ○ FLSmidth S.A. de C.V. Mexico 100 ○ FLSmidth (Pty.) Ltd. South Africa 100 ⌂ FLSMIDTH-SOCIEDADE UNIPESSOAL, LDA Angola 100 ⌂ FLSmidth Mozambique Limitada Mozambique 100 ⌂ FLSmidth (Pty) Ltd. Botswana 85 ⌂ FLSmidth South Africa (Pty.) Ltd. South Africa 75 ⌂ FLSmidth Industrial Solutions Africa (Pty) Ltd. South Africa 100 › FLSmidth Industrial Solutions South Africa (Pty) Ltd. South Africa 100 › FLSmidth Industrial Solutions (Botswana) (Proprietary) Limited Botswana 100 › FLSmidth Industrial Solutions Mozambique Limitada Mozambique 100 ○ FLSmidth Pty. Ltd. Australia 100 ⌂ FLSmidth ABON Pty. Ltd. Australia 100 ⌂ IMP Group Pty Ltd (in Members voluntary liquidation) Australia 100 ⌂ Intertek Robotic Laboratories Pty Ltd. Australia 50 ⌂ FLSmidth Industrial Solutions (Australia) Pty. Ltd Australia 100 ⌂ Ludowici Pty. Limited (in Members voluntary liquidation) Australia 100 › Ludowici Packaging Australia Pty. Ltd. (in Members voluntary liquidation) Australia 100 › Ludowici Australia Pty. Ltd. (in Members voluntary liquidation) Australia 100 » Rojan Advanced Ceramics Pty. Ltd. (in Members voluntary liquidation) Australia 100 » Ludowici China Pty Limited (in Members voluntary liquidation) Australia 100 ⌂ FLSmidth Krebs Australia Pty. Ltd. (in Members voluntary liquidation) Australia 100 ⌂ ESSA Australia Limited (in Members voluntary liquidation) Australia 100 ⌂ DMI Holdings Pty. Ltd. (in Members voluntary liquidation) Australia 100 ⌂ DMI (Australia) Pty. Ltd. (in Members voluntary liquidation) Australia 100 ⌂ Fleet Rebuild Pty. Ltd. (in Members voluntary liquidation) Australia 100 › Mayer Bulk Group Pty. Ltd. (in Members voluntary liquidation) Australia 100 » FLSmidth Mayer Pty. Ltd. (in Members voluntary liquidation) Australia 100 ⌂ FLSmidth M.I.E. Enterprises Pty. Ltd. (in Members voluntary liquidation) Australia 100 Associate There are no activities in the Russian companies Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 117 Section 7 Basis of reporting 7.1 Introduction 118 7.2 Basis of preparation 118 7.3 Defining materiality 118 7.4 Alternative Performance Measures 118 7.5 Material Accounting policies 119 7.6 Impact from new IFRS 119 7.7 New IFRS not yet adopted 119 7.8 Definition of terms 120 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 118 7.1 Introduction This section provides an overview of our principal accounting policies and judgements as well as new and amended IFRS standards and interpreta- tions. The following sections provide an overall descrip- tion of the accounting policies applied to the con- solidated financial statements. We provide a more detailed description of the accounting policies and key estimates and judgements in the notes. An overview of key accounting estimates and judge- ments are provided in a separate section after the primary financial statements. The descriptions of accounting policies in the statements and notes form part of the overall de- scription of accounting policies. The annual report has been approved by the Board of Directors at its meeting 21 February 2024. The annual report will be presented to the shareholders of FLSmidth & Co. A/S for approval at the Annual General Meeting on 10 April 2024. 7.2 Basis of preparation The consolidated financial statements of FLSmidth Group have been prepared in accord- ance with IFRS Accounting Standards ® as adopted by the EU and further requirements in the Danish Financial Statements Act for listed companies in class D. We have prepared the consolidated fi- nancial statements in accordance with all the IFRS accounting standards effective at 31 December 2023. The financial year for the Group is January 1 – December 31. The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, except for derivatives and securities, which are measured at fair value. The accounting policies are unchanged from last year except from changes included in note 7.6. As required under the Commission’s Delegated Regulation (EU) 2019/815 (ESEF Regulation), FLS- midth & Co. A/S’ annual report is filed in the Euro- pean Single Electronic Format (ESEF). The consoli- dated financial statements and notes are tagged using inline eXtensible Business Reporting Lan- guage (iXBRL). FLSmidth Group’s iXBRL tagging complies with the ESEF taxonomy included in the ESEF Regulation and developed based on the IFRS taxonomy published by the IFRS Foundation. Where a financial statement line item is not de- fined in the ESEF taxonomy, an extension to the taxonomy has been created, except for elements corresponding to subtotals. The annual report submitted to the Danish Financial Supervisory Au- thority consists of a zip-file (213800G7EG4156NNPG91-2023-12-31-en.zip) that includes an XHTML file, that can be opened in standard web browsers and a number of technical XBRL files that make automated extracts of the in- corporated XBRL data possible. 7.3 Defining materiality The annual report is based on the concept of ma- teriality, to ensure that the content is material and relevant to the readers. The consolidated financial statements consist of many transactions. These transactions are aggregated into classes accord- ing to their nature or function, and presented in classes of similar items in the consolidated finan- cial statements and in the notes as required by IFRS. If items are individually immaterial, they are aggregated with other items of a similar nature in the consolidated financial statements or in the notes. The disclosure requirements throughout IFRS are substantial, and we provide the specific disclo- sures required by IFRS unless the information is considered immaterial to the economic decision- making of the readers of these consolidated finan- cial statements. 7.4 Alternative Performance measures We present financial measures which are not de- fined according to IFRS. We use these alternative performance measures (APM) as we believe that these financial measures provide valuable infor- mation to our stakeholders and management. The financial measures should not be considered as a replacement for performance measures as de- fined under IFRS, but rather as supplementary in- formation. The alternative performance measures may not be comparable to similarly titled measures pre- sented by other companies, as the definitions and calculations may be different. Our definitions of the financial measures are included in note 7.8 Definition of terms. We use several alternative performance measures throughout the report. The most commonly used are: Growth We use different alternative performance measures related to growth, such as order intake, order backlog and growth. We use these measures in the daily management of our busi- ness, as order intake and order backlog are part of the main indicators of our future activity level. Profit We use different alternative performance measures related to profit, such as EBIT, EBITA and EBITDA. EBITA is a measure which is com- monly used within the industry and included in our calculation of return of capital employed. To re- flect the underlying performance, we have in 2022 and 2023 supplementary included adjusted EBITA and adjusted EBITA margin in the manage- ment report. The adjustments cover the integra- tion costs of DKK 481m (2022: DKK 252m) related to the integration of Mining Technologies. In 2022, EBITA was also adjusted for costs of DKK 200m related to the exit of Russian activities. Cash flow We use different alternative performance measures related to cash flow, such as free cash flow. We use free cash flow to measure how much cash we generate from our operations after main- taining our capital employed. Therefore, free cash flow is determined as cash flow from operating and investing activities. Financial position We use different alternative performance measures related to the financial position, such as capital employed, net working capital and net in- terest-bearing debt. Capital employed and net working capital are included in our calculation of return of capital employed. Net working capital is also a measure we use in the daily management of our business, as it is closely related to the activ- ity. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 119 7.5 Material Accounting policies The descriptions of material accounting policies in the notes form part of the overall description of accounting policies. Consolidation The consolidated financial statements comprise the financial statements of FLSmidth & Co. A/S (the parent company) and subsidiaries controlled by FLSmidth & Co. A/S, prepared in accordance with Group accounting policies. The consolidated financial statements are prepared by combining items of a uniform nature and subsequently elimi- nating intercompany transactions, internal share- holdings and balances and unrealised intercom- pany profits and losses. Foreign currencies The consolidated financial statements are pre- sented in Danish Kroner (DKK) that is the func- tional currency of the parent company. Foreign currency transactions are translated into the functional currency defined for each company using the prevailing exchange rates at the trans- action date. Monetary items denominated in for- eign currencies are translated into the functional currency at the prevailing exchange rates at the reporting date. Financial statements of foreign subsidiaries are translated into Danish Kroner at the prevailing ex- change rates at the reporting date for assets and liabilities, and at average exchange rates for in- come statement items. All exchange rate differences are recognised as fi- nancial income or financial costs, except for the following, that are recognised in other comprehensive income, translated at the prevail- ing exchange rates at the reporting date: ■ Translation of foreign subsidiaries’ net assets at the beginning of the year ■ Translation of foreign subsidiaries’ income state- ments from average exchange rates to the ex- change rates prevailing at the reporting date ■ Translation of long-term intercompany bal- ances, which are considered to form part of the net investment in subsidiaries Goodwill arising from the acquisition of new com- panies is treated as an asset belonging to the new foreign subsidiaries and translated into Danish Kroner at prevailing exchange rates at the report- ing date. Unrealised gain/loss relating to hedging of future cash flow is recognised in other comprehensive in- come. 7.6 Impact from new IFRS We have implemented all changes to IFRS stand- ards as adopted by the EU and applicable for the 2023 financial year, including: Amendments to IAS1, Disclosure of Accounting Policies (issued February 2021). Disclosure of ma- terial accounting policies rather than significant accounting policies. Amendments to IAS 8, Definition of Accounting Es- timates (issued February 2021). The amendment introduces a definition of accounting estimates to distinguish changes in accounting estimates from changes in accounting policies. Amendments to IAS 12, Deferred taxes (issued May 2021). The amendments clarify the account- ing for deferred tax on leases and decommission- ing obligations. Amendments to IAS 12, International Tax Reform Pillar Two Model Rules (issued May 2023). Re- quires the disclosure of information on the expo- sure to Pillar Two taxes and provides a mandatory exception from recognising deferred tax related to Pillar II taxes. The implementation of the above amendments has not had and is not expected to have a signifi- cant impact on the consolidated financial state- ments. 7.7 New IFRS not yet adopted Generally, we expect to implement all new or amended accounting standards and interpreta- tions when they become mandatory and have been endorsed by the EU. IASB has issued new or amended accounting standards, which become ef- fective after 31 December 2023. The following amendments are relevant for FLSmidth & Co. A/S, but none of these are ex- pected to have a significant impact on the consoli- dated financial statements: New IFRS not yet updated IFRS Description Effective date Amendments to IAS 1, Amendment related to promoting consistency when classifying a 01-Jan-24 Presentation of Financial liability with an uncertain settlement date as a current or non-current Statements liability. The amendment also requires disclosure of information on the risk that a non-current liability becomes payable within twelve months (issued January 2020 and October 2022) Amendments to IFRS 16, Introduces measurement requirements for sale and leaseback 01-Jan-24 Leases transactions that satisfy the requirements in IFRS 15 for being accounted for as a sale (issued September 2022) Amendments to IAS 7 and IFRS The amendment adds disclosure requirements on supplier finance 01-Jan-24 7, Supplier Finance arrangements (issued May 2023) Arrangements Amendments to IAS 21: Lack of The amendment adds provisions on how to assess whether a currency 01-Jan-25 Exchangeability is exchangeable into another currency and, when it is not, how to estimate the exchange rate and disclosures to be provided (issued August 2023) Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 120 7.8 Definition of terms Acquisition development Development as a consequence of business ac- quisition, disregarding development from cur- rency. In general, business acquisitions are in- cluded in the development from organic growth after 12 months, unless it earlier is impracticable to distinguish acquisition development from organic growth, e.g. due to integration into existing busi- ness. Alternative performance measure A financial measure of historical or future financial performance, financial position or cash flows, other than a financial measure defined or speci- fied according to IFRS. Book-to-bill Order intake as a percentage of revenue. BVPS (Book value per share) FLSmidth & Co. A/S´ share of equity excluding mi- norities divided by year-end number of shares. Capital employed, average In 2023, the average capital employed was ad- justed due to the acquisition of Mining Technolo- gies by including the increase in capital employed coming from Mining Technologies prorated to the period when FLSmidth was the owner. Capital employed, end of period Intangible assets (cost) + property, plant and equipment (carrying amount) + lease assets + net working capital. Capital expenditure (CAPEX) Investment in intangible assets as well as prop- erty, plant and equipment and leased assets. Ex- cluding impact from acquisitions. CFFF Cash flow from financing activities. CFFI Cash flow from investing activities. CFFO Cash flow from operating activities. CFFO / Revenue CFFO as a percentage of last 12 months’ revenue. CFPS (cash flow per share), (diluted) CFFO as a percentage of average number of shares (diluted). Currency development The difference between the current figure re- ported and the same figure had the exchange rates towards DKK been the same as in the com- parison period. DIFOT Delivery in full on time. Dividend yield Dividend as percent of share price end of year. EBIT Earnings before interest and tax and impairments of investments in associated companies. EBIT margin EBIT as a percentage of revenue. EBITA and adj. EBITA Earnings before, interest, tax, amortisation and im- pairments of investments in associated compa- nies. Adjusted EBITA equals EBITA plus integration costs of DKK 481m (2022: DKK 252m) and in 2022 also costs to exit Russia of DKK 200m. EBITA margin and adj. EBITA margin EBITA as a percentage of revenue. Adjusted EBITA margin calculated as Adjusted EBITA as a percentage of revenue. EBT Earnings before tax. EBT margin EBT as a percentage of revenue. Effective tax rate Income tax expenses as a percentage of EBT. EPC projects Engineering, procurement and construction. EPS projects Engineering, procurement and supervision. EPS (earning per share) Net profit/(loss) divided by the average number of shares outstanding (adjusted for treasury shares). EPS (earnings per share), (diluted) Net profit/(loss) divided by the average number of shares outstanding (adjusted for treasury shares) less share options in-the-money. Equity ratio Equity as a percentage of total assets. Financial gearing (NIBD/EBITDA) Net interest-bearing debt (NIBD) divided by EBITDA. Free cash flow CFFO + CFFI. Free cash flow adjusted for acquisitions and disposals of enterprises and activities CFFO + CFFI + acquisitions of enterprises and ac- tivities - disposals of enterprises and activities. Gross margin Gross profit as a percentage of revenue. Growth decomposition Increase/decrease in percentage compared to last year. Currency effect is current year amount com- pared to current year amount at last year’s foreign exchange rate. Organic effect is growth +/- cur- rency effect and acquisition effect. Acquired growth from Mining Technologies, which was in- cluded from 1 September 2022 (i.e. 4 months in 2022), is included in organic growth in 2023 as it is not possible to fully separate this from the leg- acy FLSmidth Mining business. In 2022 Mining Technologies was included in acquired growth. Market capitalisation The share price multiplied by the number of shares issued end of year. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 121 7.8 Definition of terms – continued Net interest-bearing debt (NIBD) Interest-bearing debt less interest-bearing assets and bank balances. Net working capital, average (Net working capital, end of year + net working capital, end of last year)/2. Net working capital, end Inventories + trade receivables + work in progress for third parties, net + prepayments, net + financial instruments, net + other receivables – other liabilities – trade payables. Net working capital ratio, average Net working capital, average as a percentage of last 12 months revenue. Net working capital ratio, end Net working capital as a percentage of last 12 months´ revenue. Number of shares outstanding The total number of shares, excluding FLSmidth’s holding of treasury shares. NIBD/EBITDA Net interest-bearing debt (NIBD) divided by last 12 months’ EBITDA. Operational expenditure (OPEX) External costs, personal cost and other income and costs. Order backlog The value of outstanding performance obligations on current contracts at end of year. Order backlog / Revenue Order backlog as a percentage of last 12 months´ revenue. Order intake Orders are included as order intake when an or- der becomes effective, meaning when the contract becomes binding for both parties dependent on the specific conditions of the contract. Organic development Development as a consequence of growth in al- ready existing business, disregarding develop- ment from currency. Other comprehensive income All items recognised in equity other than those re- lated to transactions with owners of the company. Pay-out ratio The total dividends for the year as a percentage of profit/(loss) for the year. Return on equity Profit/(loss) for the last 12 months´ as a percentage of equity ((Equity, end of year + equity, end of last year)/2). ROCE (return on capital employed) EBITA as a percentage of capital employed, aver- age. Sales, General & Administrative costs (SG&A costs) Sales cost + Administrative cost ± other operating items. Total shareholder return Share price increase and paid dividend. Sustainability related definition of terms EU Taxonomy – eligible CAPEX FLSmidth CAPEX linked to economic activities cur- rently defined in the EU Taxonomy as a percent- age of total additions to tangibles and intangibles, before depreciation, amortisations or any remeas- urements. Includes additions through acquisitions. EU Taxonomy – eligible OPEX FLSmidth OPEX linked to economic activities cur- rently defined in the EU Taxonomy as a percent- age of direct OPEX costs. These relate to day-to- day servicing, maintenance and repair of assets used for production, as well as non-capitalised R&D costs. EU Taxonomy – eligible revenue FLSmidth revenue linked to economic activities currently defined in the EU Taxonomy as a per- centage of total revenue. FLSmidth defines reve- nue-generating eligible equipment and technolo- gies as those aimed at substantial GHG emission reductions in the value proposition of the product offerings. EU Taxonomy – aligned CAPEX The portion of FLSmidth ‘EU Taxonomy - Eligible CAPEX’ that is aligned to technical screenings for environmentally sustainable economic activities defined in the EU Taxonomy. Measured as a per- centage of total additions to tangibles and intangi- bles, before depreciation, amortisations or any re- measurements. Includes additions through acquisitions. EU Taxonomy – aligned OPEX The portion of FLSmidth ‘EU Taxonomy - Eligible OPEX’ that is aligned to technical screenings for environmentally sustainable economic activities defined in the EU Taxonomy. Measured as a per- centage of direct OPEX costs. EU Taxonomy – aligned revenue The portion of FLSmidth ‘EU Taxonomy - Eligible Revenue’ that is aligned to technical screenings for environmentally sustainable economic activi- ties defined in the EU Taxonomy. Measured as a percentage of total revenue. Number of suppliers screened for sustainability Count of suppliers screened. Both active and po- tential new suppliers. A screening includes review of the suppliers Health and Safety, Environmental and Social performance. Scope 1 greenhouse gas emissions (in tonnes CO₂-equivalents) Scope 1 emissions are direct emissions of green- house gases and are measured as CO₂-equiva- lents. Scope 1 emissions for FLSmidth comprise fuel and gas use for various operational activities. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 122 7.8 Definition of terms – continued Scope 2 greenhouse gas emissions (GHG) (in tonnes CO₂-equivalents) Scope 2 emissions include indirect emissions from electricity, heat, steam and cooling purchased and consumed by FLSmidth. Scope 3: Economic intensity, use of sold prod- ucts (tCO₂e/DKKm order intake) Downstream scope 3 greenhouse gas emissions from lifetime use of sold products sold in the re- porting year, divided by order intake for the same period. Spend with suppliers with science-based targets FLSmidth external spend with companies as hav- ing set SBT targets on (website) versus total FLS- midth external spend. Total Recorded Incident Rate (including contrac- tors) TRIR TRIR accidents include fatalities, Lost time incident (LTI), medically treated injuries (MTI) and Re- stricted Work cases (RWC). The total recordable incident frequency rate (TRIR) is calculated as the number of TRI accidents per one million hours worked. Water withdrawal (m3) Water withdrawal includes all resources FLSmidth withdraws from groundwater or consumed from waterworks. Women managers, % Women employees with one or more direct re- ports. Share of Women managers by year-end di- vided by all managers at year-end. (Year-end or respective quarter end). Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 123 Primary statements Income statement 124 Balance sheet 125 Equity 126 Notes 1. Staff costs 127 2. Financial income and costs 127 3. Tax for the year 127 4. Distribution of profit for the year 127 5. Property, plant and equipment 127 6. Financial non-current assets 128 7. Deferred tax assets and liabilities 128 8. Other receivables 128 9. Derivatives 129 10. Provisions 129 11. Maturity profile of current and non- current liabilities 129 12. Other liabilities 129 13. Audit Fee 129 14. Contractual and contingent liabilities 129 15. Related party transactions 129 16. Shareholders 130 17. Events after the balance sheet date 130 18. Accounting policies (parent company) 130 Parent company financial statements Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 124 Management’s review Parent company FLSmidth & Co. A/S’ activities include holding of shares in Group enterprises and the Group’s Treasury activities. Regarding the holding of treasury shares reference is made to section 5.1 in the consolidated financial state- ments. Dividend from Group enterprises to the parent company, FLSmidth & Co. A/S, amounted to DKK 17m in 2023 (2022: DKK 41m) and the profit for the year amounted to DKK 116m (2022: DKK -41m). Other operating costs amounted to DKK 44m pri- marily consisting of administrative costs and Management costs. A decrease compared to 2022 where the cost was affected by extraordi- nary costs related to the integration of Mining Technologies into FLSmidth Group. No impairment of investments in Group enter- prises occurred in the year. The increase in net financials is caused by an in- crease in interest income from Group enter- prises. Net financial income is DKK 170m (2022: DKK 81m). Total assets at year-end amounted to DKK 11,712m (2022: 11,849m) and the equity amounted to DKK 3,688m (2022: 3,740m). The result for the Parent exceeds the Manage- ment’s expectations primarily caused by the in- crease of the interest income. The financial guidance for 2024 for the Parent is that we expect to realise a profit for the year be- tween DKK 0m and DKK 50m. The guidance for the year does not include any potential impair- ments of investments in Group enterprises. Income statement Notes DKKm 2023 2022 Dividend from Group enterprises 17 41 Other operating income and cost 1 1 1 Staff costs (7) (6) Other operating costs (44) (107) 6 Impairment of investments in Group enterprises 0 (52) 5 Depreciation, amortisation and impairment (1) (1) EBIT (34) (124) 2 Financial income 1,572 1,693 2 Financial costs (1,402) (1,612) EBT 136 (43) 3 Tax for the year (20) 2 Profit for the year 116 (41) 4 Distribution of profit for the year: Retained earnings (115) (214) Proposed dividend 231 173 116 (41) Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 125 Balance sheet Notes DKKm 2023 2022 Assets 5 Land and buildings 6 7 5 Property, plant and equipment 6 7 6 Investments in Group enterprises 3,629 2,566 6 Other securities and investments 12 16 Financial non-current assets 3,641 2,582 Total non-current assets 3,647 2,589 Receivables from Group enterprises 7,665 8,594 7 Deferred tax assets 45 35 8 Other receivables 92 118 Receivables 7,802 8,747 Cash and cash equivalents 263 513 Total current assets 8,065 9,260 Total assets 11,712 11,849 Notes DKKm 2023 2022 Equity and liabilities Share capital 1,153 1,153 Retained earnings 2,304 2,414 Proposed dividend 231 173 Equity 3,688 3,740 10 Provisions 9 9 Provisions 9 9 11 Bank loans 1,429 1,716 11 Other liabilities 2 0 Total non-current liabilities 1,431 1,716 11 Bank loans 20 583 11 Debt to Group enterprises 6,364 5,614 11 Income tax liabilities 78 38 11+12 Other liabilities 122 149 Total current liabilities 6,584 6,384 Total liabilities 8,024 8,109 Total equity and liabilities 11,712 11,849 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 126 Share capital is divided into 57,650,000 share of DKK 20 each. Each share entitles its holder to 20 votes, and there are no special rights attached to the shares. Profit for the year DKK 116m (2022: DKK -41m) is transferred to retained earnings, of which DKK 231m (2022: DKK 173m) is proposed as dividend. Equity DKKm Share capital Retained earnings Proposed dividend Total Equity at 1 January 2022 1,153 2,626 173 3,952 Profit for the year 0 (41) 0 (41) Dividend paid 0 3 (173) (170) Proposed dividend 0 (173) 173 0 Share-based payment 0 (1) 0 (1) Equity at 31 December 2022 1,153 2,414 173 3,740 Profit for the year 0 116 0 116 Dividend paid 0 3 (173) (170) Proposed dividend 0 (231) 231 0 Share-based payment 0 2 0 2 Equity at 31 December 2023 1,153 2,304 231 3,688 Number of shares (1,000): 2023 2022 2021 2020 2019 Share capital at 1 January 57,650 57,650 51,250 51,250 51,250 Issue of shares 0 0 6,400 0 0 Share capital at 31 December 57,650 57,650 57,650 51,250 51,250 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 127 1. Staff costs The company pays remuneration to the Group’s Board of Directors and the Group’s Executive Management employed in Denmark, with the lat- ter being an average of 8 employees (2022: 8). Most of the compensation is allocated to other Group entities. Remuneration of the company’s Board of Directors for 2023 amounts to DKK 7m (2022: DKK 7m), including DKK 0m (2022: DKK 0m) which was incurred by the parent company. The total remuneration of the Group’s Executive Management amounted to DKK 77m (2022: DKK 79m), of which DKK 7m (2022: DKK 6m) was in- curred by the parent company. In respect to Group's Executive Management in- centive program (bonus and share-based pay- ment) reference is made to sections 1.5 Staff costs and 6.1 Share-based payment in the consolidated financial statements. 2. Financial income and costs Foreign exchange gains and losses relate primar- ily to derivatives used to hedge the currency ex- posure for the Group. 3. Tax for the year 4. Distribution of profit for the year Proposed distribution of profit: 5. Property, plant and equipment DKKm 2023 2022 Salaries and other remuneration 3 3 Bonus 2 2 Share-based payment 2 1 7 6 Average number of employees 8 8 DKKm 2023 2022 Interest income 5 8 Interest income from Group enterprises 443 144 Foreign exchange gains 1,124 1,541 Total financial income 1,572 1,693 Write-down of loans to Group enterprises 0 (38) Interest cost (99) (41) Interest cost to Group enterprises (237) (66) Foreign exchange losses (1,066) (1,467) Total financial costs (1,402) (1,612) DKKm 2023 2022 Current tax on profit/loss for the year (30) (3) Withholding tax (1) (2) Adjustments of deferred tax 13 4 Adjustments regarding previous years, deferred taxes (3) 4 Adjustments regarding previous years, current taxes 1 (1) Tax for the year (20) 2 DKKm 2023 2022 Proposed dividend 231 173 Retained earnings (115) (214) Profit for the year 116 (41) 2023 DKKm Land and buildings Operating equipment, fixtures and fittings Total Cost at 1 January 23 2 25 Cost at 31 December 23 2 25 Depreciation and impairment at 1 January (16) (2) (18) Depreciation (1) 0 (1) Depreciation and impairment at 31 December (17) (2) (19) Carrying amount at 31 December 6 0 6 2022 DKKm Land and buildings Operating equipment, fixtures and fittings Total Cost at 1 January 23 2 25 Cost at 31 December 23 2 25 Depreciation and impairment at 1 January (15) (2) (17) Depreciation (1) 0 (1) Depreciation and impairment at 31 December (16) (2) (18) Carrying amount at 31 December 7 0 7 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 128 6. Financial non-current assets Financial non-current assets include investments in Group enterprises measured at cost less impair- ment and other securities and investments meas- ured at fair value. The additions and disposals for the year are re- lated to our pure play strategy which has resolved in regrouping of the ownership of specific entities within the group structure. For specification of investments in Group enter- prises see note 6.5 in the consolidated financial statements. Result of annual impairment test At the end of 2023, the cost price of the invest- ments in subsidiaries was tested for impairment. The impairment test was based on value in use. The impairment test did not reveal an impairment loss or reversal of impairments recognised in prior years. In the annual impairment test 2022, an impair- ment loss amounting to DKK 52m in the subsidiary FLSmidth Cement A/S was identified. Key assumptions The impairment test has been based on a five year forecast for FLSmidth Cement A/S. The ap- plied discount rate after tax is 10.5% (2022: 10.0%) and reflects the latest market assumptions for the risk free rate based on a 10-year US government bond, the equity risk premium and the cost of debt. The long-term growth rate for the terminal period in the impairment test 2022 was based on the expected growth in the world economy as well as input from current long-term swaps. Based on these factors, a long-term annual growth rate for the terminal period of 3.0% was applied in 2022. In 2023, the long-term growth has been de- creased to 2.0%. 7. Deferred tax assets and liabilities For impact from deferred taxes on the income statement, see note 3. 8. Other receivables Other receivables mainly include foreign ex- change rate derivatives with positive fair value of DKK 54m (2022: DKK 82m). The derivatives relate to Group Treasury’s hedge of the currency expo- sure in the Group. DKKm 2023 2022 Tangible assets 17 17 Liabilities 28 18 Net value of deferred tax assets 45 35 2023 DKKm Investments in Group enterprises Other securities and investments Total Cost at 1 January 3,245 37 3,282 Additions 2,026 0 2,026 Disposals (963) 0 (963) Cost at 31 December 4,308 37 4,345 Impairment/fair value adjustments at 1 January (679) (21) (700) Fair value adjustments 0 (4) (4) Impairment/fair value adjustments at 31 December (679) (25) (704) Carrying amount at 31 December 3,629 12 3,641 2022 DKKm Investments in Group enterprises Other securities and investments Total Cost at 1 January 3,245 37 3,282 Cost at 31 December 3,245 37 3,282 Impairment/fair value adjustments at 1 January (627) (16) (643) Impairment (52) 0 (52) Fair value adjustments 0 (5) (5) Impairment/fair value adjustments at 31 December (679) (21) (700) Carrying amount at 31 December 2,566 16 2,582 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 129 9. Derivatives The currency exposure for the Group is hedged according to the Financial Policy, however at Par- ent company level, the hedges are treated as eco- nomic hedges, as no hedge accounting is applied. At 31 December 2023, the fair value of hedge agreements amounted to DKK -11m (2022: DKK -3m). More information on the background etc. for hedging of the currency exposure in FLSmidth Group can be found in note 5.5 Derivatives in the consolidated financial statements. 10. Provisions 11. Maturity profile of current and non-current liabilities Maturity profile of liabilities: 12. Other liabilities Other liabilities include foreign exchange rate de- rivatives with negative fair value of DKK 63m (2022: DKK 84m). The derivatives relate to Group Treasury’s hedge of the currency exposure in the Group. 13. Audit Fee In addition to statutory audit, EY Godkendt Revisionspartnerselskab, the Parent company au- ditors provided other assurance engagements to the Parent company. 14. Contractual and contingent liabilities The parent company has provided guarantees pri- marily to financial institutions at a total amount of DKK 11,941m (2022: DKK 13,521m) of which DKK 4,107m have been utilised in 2023 (2022: DKK 6,794m). Out of the total amount, DKK 10,931m are related to parent corporate guarantees issued for guarantee facilities with banks (2022: DKK 11,315m), out of which DKK 3,482m is utilised (2022: DKK 5,157m). In connection with disposal of enterprises, normal guarantees, etc. are issued to the acquiring enter- prise. Provisions are made for estimated losses on such items. The parent company is the administration com- pany of the Danish joint taxation. According to the Danish corporate tax rules, as of 1 July 2012, the Company is obliged to withhold taxes on interest, royalty and dividend for all companies subjected to the Danish joint taxation scheme. The parent company has issued letter of support for a limited number of Group companies. There are no significant contingent assets or liabil- ities apart from the above. 15. Related party transactions Related parties include the parent company’s Board of Directors and Group Executive Manage- ment and the Group companies and associates that are part of the Group. There have been no transactions with related par- ties in 2023 and 2022, apart from Group Execu- tive Management´s remuneration stated in note 1, dividend and Treasury activities as mentioned be- low. Capital transactions with subsidiaries are in- cluded in note 6 and balances are disclosed sep- arately in the balance sheet. Dividends received are disclosed in the income statement. Parent company’s sales of services consist of managerial services and insurance services. The parent company´s purchase of services mainly consists of legal and tax assistance provided by the subsidiary FLSmidth A/S. Financial income and costs are attributable to the FLSmidth Group’s in-house Treasury func- tion, which is performed by the parent company, FLSmidth & Co. A/S. Other receivables and other liabilities are mainly attributable to this activity. Economic hedge, DKKm 2023 Currency Notional amount Net fair value AUD 127 (2) CAD 509 11 CLP (186) 1 GBP 412 1 MXN 276 3 PLN 129 1 USD 1,882 (26) Other 0 0 Total (11) A negative notional amount represents a sale of the currency Economic hedge, DKKm 2022 Currency Notional amount Net fair value AUD 86 9 CAD 422 2 CLP 4 (1) GBP 581 (10) MXN 255 4 PLN 77 1 USD 1,821 (9) Other 0 1 Total (3) A negative notional amount represents a sale of the currency DKKm 2023 2022 Provisions at 1 January 9 9 Addition 0 0 Reversals 0 0 Provisions at 31 December 9 9 DKKm 2023 2022 Bank loans 20 583 Debt to Group enterprises 6,364 5,614 Income tax liabilities 78 38 Other liabilities 122 149 Within one year 6,584 6,384 Bank loans 1,429 1,716 Other liabilities 2 0 Within one to five years 1,431 1,716 After five years 0 0 Total 8,015 8,100 DKKm 2023 2022 Statutory audit 5 4 Other assurance engagement 1 1 Total audit related services 6 5 Total fees to independent auditor 6 5 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 130 For guarantees provided by the parent company for related parties, see note 14. 16. Shareholders At 21 February 2024: Two shareholders have reported a participating interest above 10%: ■ Altor Invest 7 AS ■ Lundbeckfond Invest A/S, Denmark. No other shareholders have reported a participat- ing interest above 5%. 17. Events after the balance sheet date For more information refer to note 6.4 Events after the balance sheet date in the consolidated finan- cial statements. We are not aware of any other subsequent mat- ters, that could be of material importance to FLSmidth’s financial position. 18. Accounting policies – parent company The financial statements of the Parent company (FLSmidth & Co. A/S) are prepared in conformity with the provisions of the Danish Financial State- ments Act for reporting class D enterprises. To ensure uniform presentation, the terminology used in the consolidated financial statements has as far as possible been applied in the Parent com- pany’s financial statements. The accounting policies for the Parent company are unchanged from 2022. Income statement The company’s main activity, dividend income from Group enterprises, is presented first in the in- come statement. Dividend from Group enterprises Dividend from investments in Group enterprises is recognised as income in the parent company’s in- come statement in the financial year in which the dividend is declared. This will typically be at the time of the approval by the Annual General Meet- ing of distribution from the company concerned. When the dividend distributed exceeds the accu- mulated earnings after the date of acquisition, the dividend is recognised in the income statement, however, this will trigger an impairment test of the investment. Property, plant and equipment Depreciation is charged on a straight line basis over the estimated useful life of the assets until they reach the estimated residual value. In the parent company’s financial statements, the depre- ciation period and the residual value are deter- mined at the time of acquisition and are reas- sessed every year. Estimated useful life is as follows: ■ Buildings, 20-40 years ■ Operating equipment and fixtures and fittings, 3- 15 years ■ Land is not depreciated. Leases The company has chosen IAS 17 as an interpreta- tion for the accounting for leases. Operating leases are recognised in the income statement on a straight line basis. Investments in group enterprises Investments in Group enterprises are measured at cost less impairment. Where the cost exceeds the recoverable amount, an impairment loss is recog- nised to this lower value. To the extent the distrib- uted dividend exceeds the accumulated earnings after the date of acquisition, an impairment test of the investment is triggered. Other securities and investments Other securities and investments consist of shares in cement plants that are acquired in connection with the signing of contracts and are measured at fair value. Value adjustments are recognised in the income statement as financial items. Receivables and financial liabilities Receivables from Group enterprises are measured at amortised cost. The company has chosen IAS 39 as interpretation for impairment of financial as- sets. Therefore, an impairment loss on a receiva- ble is recognised if it is expected that the receiva- ble will not be collected in full. Financial liabilities other than derivatives, are measured at amortised cost. Derivatives are measured at fair value on a recur- ring basis with value adjustments recognised in the income statement as financial items. Deriva- tives with a positive fair value are presented in the line item Other receivables and derivatives with a negative fair value are presented in the line item Other liabilities. Cash flow statement As the consolidated financial statements include a cash flow statement for the whole Group, no indi- vidual statement for the parent company has been included, see the exemption provision, sec- tion 86(4) of the Danish Financial Statements Act. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 131 The Board of Directors and the Executive Board have today considered and approved the Annual Report for the financial year 1 January – 31 De- cember 2023. The consolidated financial statements are prepared in accordance with IFRS Accounting Standards as adopted by the EU. The Parent com- pany financial statements are prepared in accord- ance with the Danish Financial Statements Act. Further, the Annual Report is prepared in accord- ance with additional requirements of the Danish Financial Statements Act. In our opinion, the consolidated financial state- ments and the Parent company financial state- ments give a true and fair view of the Group’s and the Parent company’s financial position at 31 De- cember 2023 as well as of the results of their op- erations and the consolidated cash flows for the fi- nancial year 1 January – 31 December 2023. In our opinion, the management’s review gives a fair review of the development in the Group’s and the Parent company’s activities and financial mat- ters, results of operations, consolidated cash flows and financial position as well as a description of material risks and uncertainties that the Group and the Parent company face. In our opinion, the annual report for the financial year 1 January – 31 December 2023 with the file name 213800G7EG4156NNPG91-2023-12-31- en.zip is prepared, in all material respects, in com- pliance with the ESEF Regulation. We recommend the Annual report for adoption at the Annual General Meeting. Valby, 21 February 2024 Executive management Mikko Juhani Keto Group CEO Roland M. Andersen Group CFO Board of directors Tom Knutzen Chair Mads Nipper Vice chair Anne Louise Eberhard Thrasyvoulos Moraitis Gillian Dawn Winckler Daniel Reimann Claus Østergaard Leif Gundtoft Carsten Hansen Statement by Management Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 132 To the shareholders of FLSmidth & Co. A/S Report on the audit of the consolidated financial statements and parent com- pany financial statements Opinion We have audited the consolidated financial state- ments and the parent company financial state- ments of FLSmidth & Co. A/S for the financial year 1 January – 31 December 2023, which comprise income statement, balance sheet, statement of changes in equity and notes, including material accounting policy information, for the Group and the parent company, and a consolidated state- ment of comprehensive income and a consoli- dated cash flow statement. The consolidated fi- nancial statements are prepared in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act, and the parent com- pany financial statements are prepared in accord- ance with the Danish Financial Statements Act. In our opinion, the consolidated financial state- ments give a true and fair view of the financial po- sition of the Group at 31 December 2023 and of the results of the Group's operations and cash flows for the financial year 1 January – 31 Decem- ber 2023 in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. Further, in our opinion the parent company finan- cial statements give a true and fair view of the fi- nancial position of the parent company at 31 December 2023 and of the results of the parent company's operations for the financial year 1 Jan- uary – 31 December 2023 in accordance with the Danish Financial Statements Act. Our opinion is consistent with our long-form audit report to the Audit Committee and the Board of Di- rectors. Basis for opinion We conducted our audit in accordance with Inter- national Standards on Auditing (ISAs) and addi- tional requirements applicable in Denmark. Our responsibilities under those standards and re- quirements are further described in the "Auditor's responsibilities for the audit of the consolidated fi- nancial statements and the parent company finan- cial statements" (hereinafter collectively referred to as "the financial statements") section of our re- port. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' International Code of Ethics for Pro- fessional Accountants (IESBA Code) and the addi- tional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibil- ities in accordance with these requirements and the IESBA Code. To the best of our knowledge, we have not pro- vided any prohibited non-audit services as de- scribed in article 5(1) of Regulation (EU) no. 537/2014. Appointment of auditor We were initially appointed as auditor of FLSmidth & Co. A/S on 30 March 2017 for the financial year 2017. We have been reappointed annually by res- olution of the general meeting for a total consecu- tive period of 7 years including the financial year 2023. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the fi- nancial year 2023. These matters were addressed during our audit of the financial statements as a whole and in forming our opinion thereon. We do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that con- text. We have fulfilled our responsibilities described in the "Auditor's responsibilities for the audit of the fi- nancial statements" section, including in relation to the key audit matters below. Our audit included the design and performance of procedures to re- spond to our assessment of the risks of material misstatement of the financial statements. The re- sults of our audit procedures, including the proce- dures performed to address the matters below, provide the basis for our audit opinion on the fi- nancial statements. Accounting for projects The material accounting policy information and disclosures about revenue recognition related to projects are included in notes 1.4, 2.7 and 3.4 to the consolidated financial statements. FLSmidth’s Mining and Cement segments deliver customised equipment (projects in the form of more complex product bundles with engineering), which usually have a significant contract price and typically extends over more than one financial year. Due to the nature of these projects and in accordance with the accounting policy, FLSmidth recognises and measures revenue from such long term projects over time based on the cost-to-cost method. Accounting for projects involve significant man- agement judgments in respect of estimating the cost to complete the projects, including risk con- tingencies, warranties, liquidated damages, claims and the expected time to completion as well as the risk of credit losses. Together with the impact from executing projects in parts of the world where macro-economic and geopolitical factors as well as various on-going conflicts may have an adverse effect, changes in these estimates during the execution of projects can significantly impact the revenue, cost and contribution recognised. Ac- cordingly, we considered the accounting for pro- jects to be a key audit matter for the consolidated financial statements. How our audit addressed the key audit matter As part of our procedures, we assessed the judg- ments made by management regarding the esti- mated costs to complete the projects and the as- sumptions made in assessment of warranty Independent auditor's report Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 133 provisions by comparing these on a sample basis to underlying accounting records and supporting documentation. We assessed the changes in esti- mated project cost and risk contingencies by com- paring these to budgets, latest estimates and un- derlying documentation on a sample basis, and discussed these with project accounting, project management and group management. We further assessed management’s judgements regarding exposures related to claims and liquidated dam- ages for projects and provisions to mitigate con- tract-specific financial risks as well as the risk of credit losses. For those balances subject to claims, we made inquiries of external and internal legal counsel. Valuation of inventory The material accounting policy information and disclosures about inventories are included in note 3.2 to the consolidated financial statements. FLSmidth carries inventories in the balance sheet at the lower of cost and net realisable value. The inventories include strategic items, which are held in inventory, even if slow moving, because they are considered key equipment for the customers that FLSmidth needs to be able to deliver with short notice. The valuation of inventories involves significant management judgements to determine whether inventories are still technically relevant when demand for the inventory items is expected. The current market conditions are also consid- ered. Accordingly, we considered this to be a key audit matter for the consolidated financial state- ments. How our audit addressed the key audit matter As part of our procedures, we analysed the age- ing of inventories recorded and obtained on a sample basis supporting documentation regarding valuation of slow moving items. Further, we as- sessed management’s judgements in respect of the expected market demand and expected sales price for significant aged items by comparing these on a sample basis to available supporting documentation. Valuation of trade receivables The material accounting policy information and disclosures about trade receivables are included in note 3.3 to the consolidated financial state- ments. FLSmidth carries trade receivables in the balance sheet at the amortised costs net of impairment losses, which is the original invoice amount less an estimated loss allowance for lifetime expected credit losses. FLSmidth has significant trade re- ceivables from a wide range of customers across the world. Trade receivables include inherent risk of credit losses influenced by specific characteris- tics and circumstances of the customer, e.g. the customer’s ability to pay, access to securities and payment guarantees, as well as the ageing of the receivable. The current market conditions and any country specific matters are also considered. Ac- cordingly, we considered this to be a key audit matter for the consolidated financial statements. How our audit addressed the key audit matter As part of our procedures, we analysed the age- ing of trade receivables and obtained on a sample basis supporting documentation regarding man- agement’s expected credit losses from items with particular risk characteristics. We evaluated man- agement’s assessment of recoverability particu- larly for significant aged items by corroborating them on a sample basis against internal and ex- ternal evidence regarding the likelihood of pay- ment. Statement on the Management's review Management is responsible for the Management's review. Our opinion on the financial statements does not cover the Management's review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial state- ments, our responsibility is to read the Manage- ment's review and, in doing so, consider whether the Management's review is materially incon- sistent with the financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the Management's review provides the in- formation required by relevant law and regula- tions. Based on the work we have performed, we con- clude that the Management's review is in accord- ance with the financial statements and has been prepared in accordance with the requirements of relevant law and regulations. We did not identify any material misstatement of the Management's review. Management's responsibilities for the financial statements Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act and for the preparation of parent company fi- nancial statements that give a true and fair view in accordance with the Danish Financial Statements Act. Moreover, Management is responsible for such in- ternal control as Management determines is nec- essary to enable the preparation of financial statements that are free from material misstate- ment, whether due to fraud or error. In preparing the financial statements, Manage- ment is responsible for assessing the Group's and the parent company's ability to continue as a go- ing concern, disclosing, as applicable, matters re- lated to going concern and using the going con- cern basis of accounting in preparing the financial statements unless Management either intends to liquidate the Group or the parent company or to cease operations, or has no realistic alternative but to do so. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 134 Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assur- ance as to whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an au- ditor's report that includes our opinion. Reasona- ble assurance is a high level of assurance, but is not a guarantee that an audit conducted in ac- cordance with ISAs and additional requirements applicable in Denmark will always detect a mate- rial misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit conducted in accordance with ISAs and additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: ■ Identify and assess the risks of material mis- statement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, inten- tional omissions, misrepresentations or the over- ride of internal control. ■ Obtain an understanding of internal control rele- vant to the audit in order to design audit proce- dures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's and the par- ent company's internal control. ■ Evaluate the appropriateness of accounting pol- icies used and the reasonableness of account- ing estimates and related disclosures made by Management. ■ Conclude on the appropriateness of Manage- ment's use of the going concern basis of ac- counting in preparing the financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's and the parent company's ability to continue as a going concern. If we con- clude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial state- ments or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group and the parent company to cease to continue as a going con- cern. ■ Evaluate the overall presentation, structure and contents of the financial statements, including the note disclosures, and whether the financial statements represent the underlying transac- tions and events in a manner that gives a true and fair view. ■ Obtain sufficient appropriate audit evidence re- garding the financial information of the entities or business activities within the Group to ex- press an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opin- ion. We communicate with those charged with govern- ance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with rele- vant ethical requirements regarding independ- ence, and to communicate with them all relation- ships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements and the parent company financial statements of the cur- rent period and are therefore the key audit mat- ters. We describe these matters in our auditor's re- port unless law or regulation precludes public disclosure about the matter. Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 135 Report on compliance with the ESEF Regulation As part of our audit of the consolidated financial statements and parent company Financial State- ments of FLSmidth & Co. A/S, we performed proce- dures to express an opinion on whether the an- nual report of FLSmidth & Co. A/S for the financial year 1 January – 31 December 2023 with the file name 213800G7EG4156NNPG91-2023-12-31- en.zip is prepared, in all material respects, in com- pliance with the Commission Delegated Regula- tion (EU) 2019/815 on the European Single Elec- tronic Format (ESEF Regulation) which includes requirements related to the preparation of the an- nual report in XHTML format and iXBRL tagging of the consolidated financial statements including notes. Management is responsible for preparing an an- nual report that complies with the ESEF Regula- tion. This responsibility includes: ■ The preparing of the annual report in XHTML format; ■ The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to ele- ments in the taxonomy, for all financial infor- mation required to be tagged using judgement where necessary; ■ Ensuring consistency between iXBRL tagged data and the consolidated financial statements presented in human readable format; and ■ For such internal control as Management deter- mines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assur- ance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have ob- tained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: ■ Testing whether the annual report is prepared in XHTML format; ■ Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; ■ Evaluating the completeness of the iXBRL tag- ging of the consolidated financial statements in- cluding notes; ■ Evaluating the appropriateness of the com- pany’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; ■ Evaluating the use of anchoring of extension el- ements to elements in the ESEF taxonomy; and ■ Reconciling the iXBRL tagged data with the au- dited consolidated financial statements. In our opinion, the annual report of FLSmidth & Co. A/S for the financial year 1 January – 31 December 2023 with the file name 213800G7EG4156NNPG91-2023-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Copenhagen, 21 February 2024 EY Godkendt Revisionspartnerselskab CVR no. 30 70 02 28 Henrik Kronborg Iversen State Authorised Public Accountant mne24687 Jens Thordahl Nøhr State Authorised Public Accountant mne32212 Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 136 FLSmidth & Co. A/S’ financial reports, whether in the form of annual reports or interim reports, filed with the Danish Business Authority and/or an- nounced via the company’s website and/or NASDAQ Copenhagen, as well as any presenta- tions based on such financial reports, and any other written information released, or oral state- ments made, to the public based on this report or in the future on behalf of FLSmidth & Co. A/S, may contain forward looking statements. Words such as ‘believe’, ‘expect’, ‘may’, ‘will’, ‘plan’, ‘strategy’, ‘prospect’, ‘foresee’, ‘estimate’, ‘project’, ‘anticipate’, ‘can’, ‘intend’, ‘target’ and other words and terms of similar meaning in con- nection with any discussion of future operating or financial performance identify forward-looking statements. Examples of such forward-looking statements include, but are not limited to: ■ Statements of plans, objectives or goals for fu- ture operations, including those related to FLSmidth & Co. A/S’ markets, products, product research and product development. ■ Statements containing projections of or targets for revenues, profit (or loss), CAPEX, dividends, Products structure or other net financial items. ■ Statements regarding future economic perfor- mance, future actions and outcome of contin- gencies such as legal proceedings and state- ments regarding the underlying assumptions or relating to such statements. ■ Statements regarding potential merger & acquisition activities. These forward-looking statements are based on current plans, estimates and projections. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which may be outside FLSmidth & Co. A/S’ influence, and which could materially affect such forward-looking statements. FLSmidth & Co. A/S cautions that a number of im- portant factors, including those described in this report, could cause actual results to differ materi- ally from those contemplated in any forward-look- ing statements. Factors that may affect future results include, but are not limited to, global as well as local political and economic conditions, including interest rate and exchange rate fluctuations, delays or faults in project execution, fluctuations in raw material prices, delays in research and/or development of new products or service concepts, interruptions of supplies and production, unexpected breach or termination of contracts, market-driven price re- ductions for FLSmidth & Co. A/S’ products and/or services, introduction of competing products, reli- ance on information technology, FLSmidth & Co. A/S’ ability to successfully market current and new products, exposure to product liability and le- gal proceedings and investigations, changes in legislation or regulation and interpretation thereof, intellectual property protection, perceived or ac- tual failure to adhere to ethical marketing prac- tices, investments in and divestitures of domestic and foreign enterprises, unexpected growth in costs and expenses, failure to recruit and retain the right employees and failure to maintain a cul- ture of compliance. Unless required by law FLSmidth & Co. A/S is under no duty and undertakes no obligation to update or revise any forward-looking statement after the distribution of this report. Forward looking statements Introduction Highlights Business Mining business Cement business Non-Core Activities Financial performance Governance Financial statements FLSmidth ■ Annual Report 2023 137 Annual report 2023 1 January – 31 December 2023 FLSmidth & Co. A/S Vigerslev Allé 77 2500 Valby Denmark Tel.: +45 36 18 18 00 Fax: +45 36 44 11 46 corppr@flsmidth.com www.flsmidth.com CVR No. 58180912 Annual reportAuditor's report on audited financial statementsParsePort XBRL Converter2023-01-012023-12-312022-01-012022-12-31213800G7EG4156NNPG91Reporting class D58180912OpinionBasis for Opinion213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember213800G7EG4156NNPG912023-01-012023-12-31213800G7EG4156NNPG912022-01-012022-12-31213800G7EG4156NNPG912022-12-31213800G7EG4156NNPG912023-12-31213800G7EG4156NNPG912021-12-31213800G7EG4156NNPG912022-12-31ifrs-full:IssuedCapitalMember213800G7EG4156NNPG912023-01-012023-12-31ifrs-full:IssuedCapitalMember213800G7EG4156NNPG912023-12-31ifrs-full:IssuedCapitalMember213800G7EG4156NNPG912022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800G7EG4156NNPG912023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800G7EG4156NNPG912023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800G7EG4156NNPG912022-12-31ifrs-full:ReserveOfCashFlowHedgesMember213800G7EG4156NNPG912023-01-012023-12-31ifrs-full:ReserveOfCashFlowHedgesMember213800G7EG4156NNPG912023-12-31ifrs-full:ReserveOfCashFlowHedgesMember213800G7EG4156NNPG912022-12-31ifrs-full:RetainedEarningsMember213800G7EG4156NNPG912023-01-012023-12-31ifrs-full:RetainedEarningsMember213800G7EG4156NNPG912023-12-31ifrs-full:RetainedEarningsMember213800G7EG4156NNPG912022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800G7EG4156NNPG912023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800G7EG4156NNPG912023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800G7EG4156NNPG912022-12-31ifrs-full:NoncontrollingInterestsMember213800G7EG4156NNPG912023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember213800G7EG4156NNPG912023-12-31ifrs-full:NoncontrollingInterestsMember213800G7EG4156NNPG912021-12-31ifrs-full:IssuedCapitalMember213800G7EG4156NNPG912022-01-012022-12-31ifrs-full:IssuedCapitalMember213800G7EG4156NNPG912021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800G7EG4156NNPG912022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800G7EG4156NNPG912021-12-31ifrs-full:ReserveOfCashFlowHedgesMember213800G7EG4156NNPG912022-01-012022-12-31ifrs-full:ReserveOfCashFlowHedgesMember213800G7EG4156NNPG912021-12-31ifrs-full:RetainedEarningsMember213800G7EG4156NNPG912022-01-012022-12-31ifrs-full:RetainedEarningsMember213800G7EG4156NNPG912021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800G7EG4156NNPG912022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800G7EG4156NNPG912021-12-31ifrs-full:NoncontrollingInterestsMember213800G7EG4156NNPG912022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember213800G7EG4156NNPG912023-12-31cmn:ConsolidatedMember213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember1213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember2213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember1213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember2213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember3213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember4213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember5213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember6213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember7213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember8213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember9213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember1213800G7EG4156NNPG912023-01-012023-12-31cmn:ConsolidatedMember2213800G7EG4156NNPG912022-01-012022-12-31cmn:ConsolidatedMemberiso4217:DKKiso4217:DKKxbrli:sharesxbrli:pure