LUDOWICI LIMITED 
By 24 February 2012
CHAIRMAN'S REVIEW
2011 saw Ludowici build upon its strong position in the
global minerals processing business, and demonstrated
the Company's commitment to expanding its business through
both organic and acquisitive growth initiatives.
Ludowici generated revenues of $219.7 million in 2011 - in
line with the 2010 full year result. Given the termination of
an exclusive Chinese distribution agreement in late 2010 that
accounted for circa $22 million revenue that financial year,
this result was an excellent outcome. Following termination
of this agreement, Ludowici has a substantial opportunity to
build a stronger and more sustainable business in China - a
key growth area for the business.
Post the termination of the above mentioned Chinese
distribution agreement; on a stable revenue base the
Company generated a record 2011 EBITDA of $26.4 million
compared to $25.6 million in 2010.
Over the past four years Ludowici has embarked on a
company-wide improvement program. It gives me great pleasure
to update you on the extensive progress that has been
made.
A main area of focus over the past few years has been growing
revenues from the sale of consumables and spares. In 2011 the
Company generated circa 65% of its revenue from the sale of
consumable and aftermarket products - providing a stable
revenue stream. The significant growth in this business was
enhanced by the acquisition of several value adding
businesses.
As part of the improvement program Ludowici has actively
pursued value creating acquisitions, particularly in the
mineral processing consumables area. In August 2011 Ludowici
announced the acquisition of Meshcape Industries - a South
African based supplier to the mining sector. The integration
of the acquisition into Ludowici's consumables business is
well underway, and has made a substantial contribution to the
business over the past three months.
The acquisition of Meshcape provides us with an opportunity
to build our presence in the African region - one of the
world's fastest growing resource regions with several new
resource projects being established. This acquisition
reflects the Company's strategy to develop a geographically
balanced portfolio of capital and consumables businesses.
Another initiative undertaken during the year as part of the
company-wide improvement program was an investment in the
Company's manufacturing facilities, with the commissioning of
a new production facility in Chennai, India, and commitment
to a production facility in Qingdao, China. As well as
lowering our global unit cost base, these investments
establish a presence in key Asian hubs reflecting Ludowici's
strategic focus in expanding its global footprint in high
growth markets.
Expanding Ludowici's global footprint has diversified the
Company's revenue base and customer base. Ludowici
is now a truly global supplier to the domestic and global
mineral processing industries.
Ludowici's revolutionary patented Reflux Classifier separation technology is establishing a strong market position as the preferred technology globally for coal and mineral processing. The technology continues to receive strong industry endorsement demonstrated by the two significant sales orders announced in December 2011. The product is also making significant in-roads into 'non-coal' markets, helping to build a sustainable and diverse customer base for the technology. The Reflux Classifier is an example of Ludowici's collaborative approach to research and development. On this occasion our partner is the University of Newcastle.
Well-funded, with a strong balance sheetIn July 2011 Ludowici successfully raised approximately net $10.1 million via a rights issue to institutional and retail shareholders. The raising was used to facilitate the Company's global expansion aspirations with funds contributing towards the capital expenditure on the Chennai and Qingdao facilities, as well as the acquisition of Meshcape Industries. Ludowici continues to maintain a strong balance sheet, with net gearing stable at 33.9%.
Increased dividend
Your Directors have declared a fully franked final dividend
for 2011 of 11 cents per share. This dividend will be paid on
9 May 2012, and brings the total dividend for 2011 to 21
cents per share, which represents an increase of
5% on the previous year. The dividend reinvestment plan for
the 2011 final dividend has been suspended.
As you will be aware, on 23 January 2012, global engineering
company FLSmidth made an offer to acquire all of the issued
capital in Ludowici for $7.20 per share and on 10 February
2012 the Board advised that a counter offer had been made by
the Weir Group PLC for $7.92 per share. On 13 February 2012,
The Weir Group PLC lodged an application with the Takeovers
Panel in relation to statements made by FLS in relation to
its proposal. On
16 February 2012, Ludowici Limited announced that it had
received an amended offer from FLS for $10.00 per share and
that it had entered into a Scheme Implementation Agreement
with FLS which is subject to and will not become binding
until the proceedings in the Takeovers Panel are determined
(the "Transaction"). Accordingly the proposed increase in
price above FLSmidth's initial proposal will not proceed
if the Takeovers Panel makes
orders which have the effect that such proposal cannot
proceed.
The Board unanimously resolved that subject to the Scheme
Implementation Agreement becoming binding, the proposed
Transaction was in the best interests of shareholders and to
recommend that shareholders approve the proposed Transaction,
subject to there being no superior offer and an independent
expert concluding that the Transaction is in the best
interest of shareholders. Refer to the ASX or Ludowici
websites for full announcement details and terms &
conditions. If the transaction proceeds, the Board expects
completion to occur in June 2012.
On 23 February 2012, Ludowici Limited announced that it had
received a revised Competing Proposal from Weir at a price of
$10.00 cash per Ludowici share, the same price as the
FLSmidth proposal announced on
16 February 2012.
Under the proposal, Weir (or a nominee) will acquire all of
Ludowici's shares for $10.00 cash per share (less any
dividends declared or paid by Ludowici before the transaction
is completed) by way of Scheme of Arrangement ("Weir
Proposal"). The Weir Proposal is conditional on the Takeovers
Panel making a decision to the effect that FLSmidth cannot
offer, or propose to pay, Ludowici shareholders more than
$7.20 per share whether for a specified period or
otherwise.
The Board of Ludowici acknowledged receipt of the Weir
Proposal and noted that it was on similar terms and
conditions and at the same price as the recommended offer by
FLSmidth but expires at 5.00pm Friday
24 February 2012.
The Board will keep you informed of developments as they
unfold.
Ludowici's pleasing results and continued successful strategy
execution reflects the hard work of all of the Company's
people. On behalf of the board I would like to thank Patrick
Largier, the senior executive team, and all of the staff for
their continued dedication and hard work.
Yours sincerely,
Chairman
