company presentation...automotive business ojsc gaz −ceo, chairman volvo construction equipment...

OFFICIAL DEALER OF VOLVO CONSTRUCTION EQUIPMENT

Ferronordic Machines

Company Presentation May 2012


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Exclusive dealer of Volvo Construction Equipment in Russia for two years

Core focus on the Volvo brand

Strong and growing construction equipment market

Rapidly increasing presence all over Russia

Experienced management and board of directors and supporting shareholders

€80M of capital raised

STRICTLY PRIVATE AND CONFIDENTIAL

COMPANY OVERVIEW

Outlets: 6 → 12 → 53

Employees: 160 → 326 → 540

Revenue: VCE → €74M → €268 M

Complimentary brands added: TRUCKS

Market: ~8,000 → 10,167 → 25,635 (takeover, end 2010, end 2011)

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MARKET OVERVIEW

COMPANY OVERVIEW

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

GD

P g

row

th

Russian GDP growth EU GDP growth Adv. economies GDP growth

◊ Russian GDP has grown faster than Western economies historically, and is expected to continue to show higher growth

◊ Inadequate road network and low infrastructure rankings highlight the investment need going forward

◊ Infrastructure investments are expected to almost double in 2013e compared to 2008

◊ Major planned construction projects include the South Stream pipeline, the Marine Façade district in St. Petersburg, Kaliningrad Nuclear Power Plant, and numerous projects related to the 2014 Winter Olympics, the 2016 Ice Hockey World Championship, and the 2018 FIFA World Cup

Russian economy

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Currently inferior infrastructure Significant infrastructure investments going forward

Russian GDP expected to outgrow Western economies

Note: “Advanced economies” include 34 of the world’s most advanced countries Source: IMF World Economic Outlook

CAGR 2011e–16e Russia 4.0% EU 1.9% Adv. economies 2.5%

Source: World Economic Forum – GETR 2010

Ranking among 125 countriesRoads 111Airports 87Ports 82Railroads 33

Availability and quality of transport infrastructure

Note: “Capex of monopolies includes Russian Railways, Electricity Utilities, Gazprom and Transneft Source: Rostat

23,1 17,8 20,1 25,7 29,3 32,0 13,8 9,3

29,1 37,3 44,6 49,1 50,5 58,2 66,3

80,8 81,6 82,9 87,4 85,3

115,5 143,8

155,4 164,0

2,2% 2,2%

3,4% 3,6% 3,7% 3,6%

0,0%0,5%1,0%1,5%2,0%2,5%3,0%3,5%4,0%

0255075

100125150175200

2008 2009 2010 2011 2012e 2013e

Infrastructure spending as % av G

DP

US

D b

illio

n

Total

Capex of monopolies

Non-budget

Infrastructure spending as % av GDP

MARKET OVERVIEW


1 84

8

1 73

7

1 73

6

1 66

4

1 39

4

910

714

384

259

155

57

0200400600800

1 0001 2001 4001 6001 8002 000

Roa

d de

nsity

(km

per

'000

sq.

km

of l

and

area

)

Construction equipment market in Russia ◊ Construction output in Russia expected to grow close to 10

per cent annually over the next few years

◊ The Russian CE market was over 25,000 units in 2011, up from approximately 10,000 in 2010 (import numbers)

◊ The market for construction equipment consists of five different segments:

– Oil and gas industry

– Mining industry

– Forestry industry

– Road construction industry

– General construction industry

◊ The Russian market is fairly scattered with many participants, but five leading players have approximately 10 per cent market share each1)

– Hitachi, Volvo CE, Caterpillar, Komatsu and JCB

◊ Strong efficiency and outsourcing trend – Increased demand for efficiency of construction projects drives

demand on high-quality equipment and well developed service network

– Large conglomerates are outsourcing service of equipment

– Large geographical distances between customers drive need for scale and utilization of synergies

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Construction output in Russia

f = forecast o = outlook Note: Construction output is defined as the total value of construction work carried out by construction companies based on contracts and/or agreements signed with clients (excl. VAT) Source: Transport Infrastructure construction Market in Russia 2011, February 2011, PMR Publications

1) Excluding Chinese and CIS brands

1 549 1 754 2 351

3 293

4 528 3 998 4 206

4 761 5 433

6 253 7 278

8 458 13%

18% 18%

13%

-13%

-1%

7% 8% 9% 9% 9%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

Real Y/Y change

RU

B b

illio

n

Value Real Y/Y change

MARKET OVERVIEW


$110bn

$20bn

$50bn

We expect USD330b of infrastructure related spending in 2011E-2015E

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MARKET OVERVIEW

Infrastruction

($330b in 2011E-2015E)

$190bn

$90bn

$35bn

$30bn

$25bn

$60bn Transport

Power utilities

Public utilites

Highways

Railways

Pipelines

Generation

Transmission

Distribution

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COMPANY OVERVIEW

COMPANY OVERVIEW

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COMPANY OVERVIEW


Vision To be regarded as the leading

service and sales company within our business areas

in the CIS markets

Strategic and financial objectives

◊ “Best in class” growth and margin

◊ Absorption rate of 1.0x by 2015

◊ IPO within the next few years

◊ Leadership within the market for construction equipment

◊ Geographical expansion of current product portfolio

◊ Expansion into related business areas such as other machinery and commercial vehicles

◊ Extract synergies in dealer network infrastructure development and support functions

COMPANY OVERVIEW


Financial objectives Strategic objectives

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Ferronordic Machines – Strategic cornerstones

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COMPANY OVERVIEW


◊ Leading service and product availability

◊ Tailored service and repair programs

◊ Financial services offerings

◊ Developed trade-in system

◊ Fleet & Residual value management

◊ Rental fleets

CUSTOMER ORIENTATION

◊ World’s 3rd largest manufacturer of construction equipment

◊ Building on No.1 brand position in Russia

◊ Broad range of equipment for road-, general construction, oil- and gas, mining and civil engineering companies

◊ Development through additional strong brands

BUILD ON STRONG BRAND RECOGNITION – VOLVO CE

◊ High density network – many points of presence, less “show-off buildings”

◊ Mobile workshops and service vans/trucks

◊ Well equipped, purpose-built facilities in select locations

◊ Expand in the rest of the CIS region

◊ Infrastructure to be used for other brands

SUPERIOR INFRASTRUCTURE

◊ Implementation of best practices and processes

◊ Leading IS/IT systems

◊ Close cooperation with manufacturers

◊ Get the right people to do the right job right

◊ Continuous improvement of processes

OPERATIONAL EXCELLENCE

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Product offerings

11

Sales breakdown Jan-Dec 2011 Sales breakdown by product type Jan-Dec 2011

Source: Ferronordic Machines Source: Ferronordic Machines

COMPANY OVERVIEW


New machines 78%

Parts 17%

Service 2%

Rental 1%

Attachments 1% Used machines

2%

EXC 35%

BHL 12%

AH 30%

WL 9%

PAV 6%

GRA 4%

COMP 1%

LOGSET 3%

OTHER 0%

Hard products

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COMPANY OVERVIEW

◊Planned maintenance service

◊Diagnostic of machines

◊Planned and unplanned repair

◊Overhaul – providing new life to older machines

◊Sales of used machines

◊Spare part sales and delivery

◊Remanufacturing of vital parts (engines, gearboxes etc)

◊Service contracts

◊Fleet management services (Caretrack)

◊Financial solutions

Focus on soft products

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◊ Insurance

◊Logistics

◊Trade in of used machines and residual value management for customers

◊Rental of machines

◊Provision of financed full service and repair fleet management contracts – customer pays fixed price for used machine hours on a monthly basis

◊Consultancy

◊Application engineering


COMPANY OVERVIEW

Customer segment and regional business area approach

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Customer Segments

Central N-W South Volga Urals Siberia Far East

Road construction

Oil- and gas

Metals and mining

Quarries and aggregates

Building

Infrastructure and utilities

Forestry


COMPANY OVERVIEW

Volvo CE on the Russian market for construction equipment

◊ The two largest districts in terms of sales, Central and Northwestern, constitute approximately 41% of the construction output in Russia

◊ In 2010, 82% of units sold came from NW and CTR. This was 65% in 2011

◊ Urals, Volga and South have generated strong revenue, currently accounting for approx. 27% of units sold

◊ All in line with FNM’s strategy 15

Volvo CE units sold per region 2011

Source: Ferronordic Machines

Russia – Construction output per region 1H 2011

Comments Map of Russia

Southern

Volga

Far Eastern Central

Northwestern

Urals Siberia

Central 27%

Volga 16%

Northwest 14%

Urals 13%

South 13%

Siberia 10%

Far East 7%

Northwest 35%

Central 30%

Urals 14%

South 7%

Volga 6%

Siberia 6%

Far East 2%


COMPANY OVERVIEW

http://upload.wikimedia.org/wikipedia/commons/7/77/Map_of_Russian_districts,_2010-01-19.svg

Network development map – May 2012

Khabarovsk Krasnoyarsk

Ekaterinburg

St .Petersburg

Moscow

Krasnodar

Murmansk

Petrozavodsk

Arkhangelsk

N.Novgorod

Vladivostok

Kazan’

Vologda

Voronezh

Chelyabinsk

Tver’

Perm’

Norilsk

Novosibirsk Stavropol

Surgut

Rostov na Donu

Sovetski

Velsk

(56) FNM year to date 2012 (10) SSK locations

V.Novgorod

Tyumen

Sochi

Tula

Yaroslavl

Volsk

Saratov

Saransk

Kaliningrad

Pitkyaranta

Lipetsk

Ryazan

Belgorod

Smolensk Sikhtifkar

Koriazhma

Buinaksk

Pskov

Armavir

Number of FNM outlets is planned to grow substantially

Currently: 56

2015: ~100

Ufa

Novokuznetsk

Bratsk

Irkutsk Chita Abakan

Kemerovo

Neryungri

Novy Urengoy

Uhta

Samara

Kaluga

Volgograd

Magadan

Yakutsk

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Blagoveshensk

COMPANY OVERVIEW


2–4 YEARS, EUR 3–10 MILLION

Road-map for establishment of a large new dealership

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Rented location Container set-up Purpose built facility

Rent location for sales and service

personnel Land acquired Building work starts

Container set-up Purpose built facility

finalised

COMPANY OVERVIEW


No.1 Brand Image

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COMPANY OVERVIEW

Additional brands

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Ferronordic Machines customer

◊ Importer and dealer in Russia

◊ Distribution and service

◊ Ferronordic Machines seeks to leverage its distribution network further by selling adjacent product categories from additional brands

Selection of additional brands added to Ferronordic Machines’ portfolio:

COMPANY OVERVIEW


TRUCKS

Board of Directors

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COMPANY OVERVIEW


Name Position Selected current assignment(s) Selected previous assignments

Per-Olof Eriksson

Chairman Board member of Investment AB Öresund and Biotage

CEO of Sandvik and Seco Tools

Marika Fredriksson

Director Consultant SVP and CFO, Gambro SVP/CFO, Autoliv SVP/CFO Volvo CE

Martin Leach

Vice Chairman Chairman, Magna Group Chairman and CEO at GAZ International, CEO of Maserati Spa and President Ford of Europe at Ford Motor Company

Erik Eberhardson

Executive Vice Chairman

Head of Business Development, Ferronordic Machines Group

Board member in Magna International; Chairman and CEO, OJSC GAZ; GM Volvo Trucks (Ukraine); CEO, Volvo (Ukraine) and President (CIS), Volvo CE

Lars Corneliusson

Director CEO, Ferronordic Machines Group MD Volvo Vostok (Russia); President, Volvo Trucks (Russia) and advisor to Russian Ministry of Economy/Transport (World Bank)

Tom Jörning

Director MD, Volvo Truck (CEE) Several senior positions within Volvo Truck including VP (East Europe), Volvo Truck (Europe)

Magnus Brännström

Director CEO, Oriflame RD (CIS and Asia) and MD (Russia), Oriflame

Erik Danemar

Director Mining and resources, Company Equity Analyst, Deutsche Bank

Various positions within Deutsche Bank and United Financial Group

Board of Directors

Senior Management Team

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PREVIOUS APPOINTMENTS

CURRENT APPOINTMENTS

◊ Magna International Inc

− Board member ◊ OJSC Russian Machines

− Managing Director for Automotive Business

◊ OJSC GAZ − CEO, Chairman

◊ Volvo Construction Equipment

− President, CIS ◊ Volvo Truck Corporation

− Managing Director, Volvo Ukraine

◊ Co-owner and Executive Vice Chairman and Head of Business Development Ferronordic Machines Group

◊ Board member of Lindab AB

◊ Volvo Group

− Managing Director, Volvo Vostok, Russia,

− President, Volvo Trucks Russia

◊ Member of the Executive Board of AEB

◊ Hifab International AB ◊ Russian Ministry of Transport,

Moscow ◊ ICS Interconsult Sweden AB

◊ Co-owner and CEO of Ferronordic Machines Group

◊ Emeyu LLP

− CFO & COO ◊ HSBC Bank

− Director, Investment Banking

◊ Credit Suisse First Boston (London, New York, Chicago) − Investment Banking

◊ Co-owner and CFO of Ferronordic Machines Group

Erik Eberhardson Lars Corneliusson Anders Blomqvist


COMPANY OVERVIEW

42,9%

12,2%

11,0%

7,2%

5,0%

4,9%

3,6%

3,6%

3,6% 6,1%

Noonday

Mellby Gård

Ferronordic Machines Holdings

Creades

Investment AB Öresund

Fastighetsaktiebolaget Granen

AltoCumulus

Anista Sárl

Ferronordic Group

Other

Shareholders

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COMPANY OVERVIEW


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FINANCIAL OVERVIEW

COMPANY OVERVIEW


EUR MM 2011 2010** % change

Revenue 268,0 126,8 111%

Gross Profit 38,7 14,8 162%

% Margin 14,4% 11,6%

OPEX 26,3 17,1 54%

EBITDA 12,3 (2,3) NM

% Margin 4,6% NM

Net Income* 2,7 (5,4) NM

Analysis of 2011 results

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* Excludes amortisation of transaction related intangibles. ** 2010 numbers annualised – only seven months of operations.


FINANCIAL OVERVIEW

EUR MM

Q1 2012

Q1 2011 % change

Revenue 57,6 42,1 37%

Gross Profit 9,0 6,2 44%

% Margin 15,6% 14,8% -

OPEX 7,5 5,1 46%

EBITDA 1,5 1,1 34%

% Margin 2,6% 2,6% -

Net Income* 0,7 0,4 83%

Q1 Profit & Loss

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STRICTLY PRIVATE & CONFIDENTIAL

* Excludes amortisation of transaction related intangibles.

EUR MM

Q1 2012 2011

Cash & Cash Equivalent 14,4 12,4

Short term debt 17,9 24,0

Long term debt 44,1 43,5

Financial leases 8,5 7,9

Net debt 56,1 63,0

Bond Convenant 3,0x 3,2x

Working capital 39,5 48,0

Shareholders Equity 21,2 20,0

Total Assets 136,2 137,2

Balance sheet analysis

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STRICTLY PRIVATE & CONFIDENTIAL

company presentation...automotive business ojsc gaz −ceo, chairman volvo construction equipment...

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