169393322-2012-Internal-Business-Review.pptx

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1. RIES ENGINEERING S. Co. Page 1 BUSINESS REVIEW OCTOBER 2012 ADDIS ABABA, ETHIOPIA

2. TOPICS CAT Machines 1.1. Sales Performance CAT machines – Units 1.2. Sales Performance CAT machines – value 1.3. CAT shipment PINS 1.4. Major Factors that affected HEX PINS 1.5. Lost sales – Purchase from China 1.6. Lost sales – Local tenders 1.7. HEX competition price example 1.8. WL & Compactors competition price examples 1.9. 2013 forecast CAT machines Page 2

3. TOPICS Power systems 2.1. Sales Performance Power Systems – Units 2.2. Sales Performance Power Systems – Value 2.3. 2013 forecast – Power systems Rental 3.1. Rental performance 3.2. Rental 2013 Forecast 3.3. Rental fleet build-up –Units 3.4. Rental investment FOB/CFR/FCA price Management of Chinese customers Quote & Sales Process – Caterpillar Suggested improvements Page 3

4. 1.CAT MACHINES Page 4

5. 1.1 SALES PERFORMANCE-CAT MACHINES (UNITS) Page 5 PRDCT GP 2012 YE 2011 ANNUAL PLAN YTD 3 RD QR YEE TTT 87 128 248 120 WL 14 8 9 22 TL 2 MG 37 13 34 48 HEX 56 62 101 62 WEX 13 2 4 BHL 8 1 1 2 ADT 10 2 OHT 21 4 TH 4 SSL/MTL 2 1 2 PAVING 25 5 8 17 TOTAL 279 218 405 281

6. 1.2. SALES PERFORMANCE-CAT MACHINES (VALUE) Page 6 PRDCT GP 2012 (‘000US$) YE 2011 (‘000US$) ANNUAL PLAN YTD 3 RD QR YEE TTT 33,477 51,932 101,148 46,347 WL 6,256 4,949 5,375 7850 TL 750 MG 8,383 3,102 8,087 10,828 HEX 15,739 16,324 23,358 13,516 WEX 3,313 395 917 BHL 738 77 158 230 ADT 3,880 579 OHT 13,320 3,101 TH 658 SSL/MTL 64 35 70 PAVING 3,398 518 1,016 1,753 TOTAL 89,976 76,937 139,607 85,122

7. 1.3. CAT SHIPMENT PINS – MACHINES PRDCT GROUP 2010 2011 2012 YTD OCT IND CAT PINS IND CAT PINS IND CAT PINS BCP 9 50 6 12 33 5 15.2 BL 4 24 1 4.2 27 1 3.7 HEXMN 5 /0 SSL 1 1 100 TH 4 1 1 TT 3 3 100 WL 1 20 5 25 1 CORE 161 87 54 523 255 48.8 689 227 32.9 HEXLG 39 12 30.8 56 15 26.8 158 10 6.3 HEXMD 28 18 64.3 92 48 52.2 179 44 24.6 HEXSM 7 5 71.4 /0 HEXWH 6 17 4 23.5 4 2 50 MG 5 3 60 92 64 69.6 29 15 51.7 MWL/SEM 16 3 18.7 84 23 27.4 131 32 24.4 TTMD 67 51 76.1 175 96 54.9 188 124 66 Page 7

8. 1.3 CAT SHIPMENT PINS – MACHINES (CONT’D) PRDCT GROUP 2010 2011 2012 YTD OCT IND CAT PINS IND CAT PINS IND CAT PINS DIVERSIFIED PRDCT 14 2 14.3 41 22 53.7 33 8 24.2 ACOM 4 1 25 1 PNEU 4 5 SCOM 10 2 20 32 21 65.6 32 8 25 MINING 19 19 100 10 10 100 5 5 100 ART 2 2 100 LWL 2 2 100 4 4 100 5 5 100 Q & CT 15 15 100 4 4 100 TTTLG 2 2 100 OVERALL 203 108 53.2 624 293 47 760 245 32.2 Page 8

9. 1.4. MAJOR FACTORS THAT AFFECTED HEX PINS Exclusive deals concluded by METEC with selected manufacturers Over 60 units of Liebherr R944B HEX imported 100 units of Hyundai R320LC-7 HEX + HL760-7A WL imported in August 2012 62 units of Chinese (XCMG?) HEX+MG+Drilling rig imported in August 2012 Doosan & Hyundai were able to capture large HEX sales with various customers because of their low price Over 74 HEXs imported from China by Chinese contractors operating in Ethiopia. VOLVO was able to capture HEX tenders because of lower price as compared with CAT. Page 9

10. 1.5. LOST SALES – PURCHASE FROM CHINA (YTD OCT.12) CUSTOMER MFRR MODEL QTY 1. HYDRAULIC EXCAVATORS 74 CHINA HIGHWAY SANY SY285 4 SANY SY225 4 HUI CHEN XGMA XG822 3 Subcontractor of CGGC VOLVO EC290 5 CREC B2 KOMATSU PC360 37 KOMATSU PC220 12 CCECC KOMATSU PC400-8 2 KOMATSU PC300-7 3 KOMATSU PC220 1 CGCOC HANSON KOMATSU PC300 3 Page 10

11. 1.5. LOST SALES – PURCHASE FROM CHINA (YTD OCT.12) CUSTOMER MFRR MODEL QTY 2. TRACK TYPE TRACTORS 26 CREC B2 SHANTUI SD22, SD32 9 CCECC SHANTUI SD22 3 SHANTUI SD32 3 CREC B2 SHANTUI SD22, SD32 11 3. WHEEL LOADERS 36 HUI CHEN XGMA N/A 3 CREC B2 LIUGONG ZL856 +N/A 21 CCECC LIUGONG ZL856 6 CREC B3 XGMA XG953 2 JIANGXI W&HP N/A N/A 2 CGCOC HANSON KOMATSU WA380 2 Page 11

12. 1.5. LOST SALES – PURCHASE FROM CHINA (YTD OCT.12) CUSTOMER MFRR MODEL QTY 4. COMPACTORS 33 CHINA HIGHWAY SANY SSR200 4 HUI CHEN XGMA N/A 2 CCECC XCMG 202,262 8 CREC B3 XCMG 20T 2 CGCOC XGMA P2626 4 CRECB2 N/A N/A 13 5. MOTOR GRADERS 17 CHINA HIGHWAY SANY SHG190 6 CCECC VOLVO 930G 3 CREC B2 N/A N/A 8 GRAND TOTAL M/C 186 Page 12

13. 1.6.LOST SALES – LOCAL TENDERS YTD SEPT ‘12 CUSTOMER MFRR MODEL QTY 1. HYDRAULIC EXCAVATORS 14 SUR CONSTRUCTION DOOSAN 420-LCV 10 AA CITY ROADS AUTHORITY VOLVO E380DL 3 AA CITY ADMIN R&DPO VOLVO EC380-BLC 1 2. WHEEL EXCAVATOR 8 SUR CONSTRUCTION DOOSAN 210WZ 5 AA CITY ROADS AUTHORITY VOLVO SWEL210 3 3. TRACK- TYPE TRACTORS 1 AA CITY ADMIN R&DPO KOMATSU DI55A-6R 1 4. MOTOR GRADERS 2 WONJI SHOA SUGAR FACTORY VOLVO G940 2 5. WHEEL LOADERS 2 AA CITY ADMIN R&DPO VOLVO L110F 2 TOTAL 27 Page 13

14. 1.7. HEX COMPETITION PRICE EXAMPLES FOB Prices in China Komatsu PC 360 = US$ 222,493 (-17% of CAT 336DL) Komatsu PC 220 = US$ 153,303 FOB prices in Ethiopia Hyundai R380LC-98H = US$ 138,430 (-40% of CAT 329DL) Hyundai R330LC-9S= US$ 127,662 (-46% of CAT 329DL) DOOSAN 340LC-A= US$ 165,000 (-38% of CAT329DL & - 31% of CAT 336D ) DOOSAN DX300LC-A= US$ 145,000 (-39% of CAT 329DL) VOLVO E380DL = -12% of CAT 336DL VOLVO E380BLC= US$ 169,440 (-12% of CAT 336DL) Page 14

15. 1.8.WL & COMP. COMPETITION PRICE EXAMPLES FOB prices in Ethiopia Liugong CLG616 (16t)= US$ 49,000 (-51% of CAT CS76) Doosan SD300 WL= US$ 58,000 (-68% of CAT 950H) Page 15

16. 1.9. 2013 FORECAST – CAT MACHINES PRDCT GP CAT ESTIMATED INDUSTRY CAT PINS QTY VALUE (‘000 USD) TTT 140 58,159 230 60.9 WL 20 6,608 200 10 TL 2 700 2 100 MG 62 16,931 103 60.2 HEX 48 14,976 160 30 WEX 5 1,095 12 41.7 BHL 13 539 25 52 ADT 14 5,851 14 100 OHT 29 25,453 29 100 TH 2 339 4 50 SSL/MTL 1 45 1 100 G PAVING 32 3,796 150 21.3 FORSTRY P 3 960 3 100 LANDFILL C 3 1,245 3 100 TOTAL 374 134,492 936 40.0 Page 16

17. 2. POWER SYSTEMS Page 17

18. 2.1. SALES PERFORMANCE- POWER SYSTEMS (UNITS) PRDCT GP 2012 YE 2011 ANNUAL PLAN YTD 3 RD QR YEE CAT 20 5 14 10 OLYMPIAN 140 113 129 64 TOTAL 160 118 143 74 Page 18

19. 2.2. SALES PERFORMANCE- POWER SYSTEMS (VALUE) PRDCT GP 2012 (‘000 US$) YE 2011 (‘000 US$) ANNUAL PLAN YTD 3 RD QR YEE CAT 2,314 1,111 1,473 882 OLYMPIAN 1,760 1,437 1,734 830 TOTAL 4,074 2,548 3,207 1,712 Page 19

20. 2.3. 2013 FORECAST – POWER SYSTEMS PRDCT GP QTY VALUE (‘000 USD) CAT 30 3,545 OLYMPIAN 185 2,643 TOTAL 215 6,188 Page 20

21. 3. RENTAL Page 21

22. 3.1. RENTAL PERFORMANCE PARTICULARS 2012 YE 2011 ANNUAL PLAN YTD 3 RD QR YEE NO. OF UNITS CAT M/C 63+7=70 52+8=60 48+8=56 19+8=27 CAT GEN 4 2 2 ALLIED P 14 9 9 HOURS CAT M/C 90,192 54,703 84,800 31,864 CAT GEN 2,080 500 900 ALLIED P 9,988 3,744 TOTAL REVENUE (‘000 Birr) CAT M/C 81,346 55,972 80,882 22,757 CAT GEN 900 200 80 ALLIED P 3,359 1,572 TOTAL 85,605 56,172 82,534 22,757 Page 22

23. 3.2. RENTAL 2013 FORECAST PARTICULARS CAT MACHINES CAT GENSETS ALLIED PRODUCTS TOTAL NO. OF UNITS 69+7=76 5 10 91 TOTAL HRS 106,124 2,460 9,990 145,154 TOTAL REVENUE (‘000 BIRR) 157,931 1,216 22,141 181,288 Page 23

24. 3.3. RENTAL FLEET BUILD UP (UNITS) MODEL 2011 2012 2013 PLAN PLAN ACTUAL PLAN ACTUAL ORIGINAL REVISED D8R 14 14 4 4 8 D6R 2 2 950H 2 2 1 1 140H/K/M 7 7 4 4 8 12K 4 4 324DL 2 2 1 1 2 329DL 4 4 1 1 M316 1 1 CS56 1 1 CS64 1 1 GENSETS 2 2 2 1 3 M CRANE 1 1 DUMP T 5 3 5 WATER T 2 2 2 LOW BED 2 2 1 1 CM & D 4 TOTAL 49 35 23 13 12 25 Page 24

25. 3.4. RENTAL FLEET INVESTMENT – FOB/CFR/FCA PRODUCT TYPE FOB/CFR/FCA (US$) 2011 2012 1. TTTs 4,902,875 WLs 339,878 3. MGs 2,145,159 4. HEX & WEX 1,361,093 5. PAVING 93,475 6. GENSETS 85,010 7. ALLIED PRODUCTS 1,131.305 TOTAL 8,502,602 1,556,193 TOTAL 2011 & 2012 10,058,795 Page 25

26. 4. MANAGEMENT OF CHINESE CUSTOMERS Page 26

27. Request for quote in Africa Delivery/invoicing in Africa ? Africa dealers office & Chinese dealer to come to a referral agreement Africa dealers office to finalize deal African dealer to handle quote/negotiation Request for quote in China Same deal being discussed in Africa ? Africa dealers office to follow up in China To Africa dealers office? Chinese dealer to alert Africa dealers office Y N Y Africa dealers office & Chinese dealer to come to a sales agreement Y N Africa dealers office to follow up in China with Chinese dealer N Delivery/invoicing in Africa ? N Y Africa dealers office (AUE) to be aware & involved in all deals QUOTE & SALES PROCESS - CATERPILLAR Page 27

28. SUGGESTED IMPROVEMENTS NEFC SHOULD ACTIVELY WORK WITH AUE Negotiations with Chinese dealers about GP for deals concluded through them should be handled by NEFC NEFC should actively participate in all meetings to be held in China No need to go to AUE for deals concluded with Chinese customers in Ethiopia. Not correct also to pay commission to AUE for such deals. AUE should communicate directly with Chinese Customer’s head offices (not through CAT dealer in China) to conclude deals started in Ethiopia . Page 28

29. Request for quote in Africa Delivery/invoicing in Africa ? AUE in consultation with Africa dealer & Chinese dealer to come to a referral agreement Africa dealer to finalize deal African dealer to handle quote/negotiation Request for quote in China Same deal being discussed in Africa ? AUE to follow-up in China, if requested To AUE? Chinese dealer to alert AUE Y N Y AUE in consultation with Africa dealer & Chinese dealer to come to a sales agreement Y N AUE to follow up in China with Chinese dealer N Delivery/invoicing in Africa ? N Y Africa dealers office (AUE) to be aware & involved in all deals QUOTE & SALES PROCESS – SUGGESTED IMPROVEMENT AUE in consultation with African dealer & Customer to come to a sales agreement AUE to follow-up in China Page 29