Segment-based approach to Russian 3PL market

Kirill VlasovStrategy Development Director

STS/RLS Logistics

7th European 3PL Summit24 November 2009

Company profile

STS/RLS – a leading Russian 3PL industry player

Key company facts and figures

� Established in 1990s

� Focused on Russia and CIS

� Combined 2008 revenues: ca. USD 350 million

� Over 1000 clients, among them many Russian and international blue chips

STS/RLS Logistics

Created by 2009 merger of STS Logistics and RLS

� International and domestic freight operations (air, sea, road, rail)

� Complex project solutions for oil/gas and power generation industries

� Integrated LP services (transport, warehousing, services) for FMCG, retail, automotive and chemicals industries

� Related services

> Customs clearance

> Insurance

> Logistics consulting

� Over 1000 clients, among them many Russian and international blue chips

� Combined staff: 1200 employees in HQ, 25 regional offices in Russia, 4 CIS and 3 overseas offices

� Warehouse space: 150 000 sq. m. A and B-class in 8 cities of Russia

� International partner network (China, Germany, Japan, Turkey)

Freight forwarding Project logistics Contract logistics Services

Business focus areas

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Russian logistics market – international comparisons

Russia: second largest logistics market in Europe

Size of logistics markets in USD bn (2008) Logistics costs compared to GDP (2008)

China2 20,0%

Russia 13,4%

1 300US

1 230Europe1

2

Logistics costs in Russia are relatively high compared to GDP, under the likely influence vast geography and poor infrastructure

1 EU27+Switzerland and Norway, 2007; 2 2006, estimate; 3 2007Source: Langley/Capgemini; Fraunhofer Institut

13,0%India2

US 9,7%

Germany3 8,4%

540China2

280Germany3

225Russia

150France3

Europe

Global avg. = 11,7%

2

Size and dynamics of STS/RLS market vs. German market and vs. GDP

Russian logistics market has been growing at >20%, but is hit hard by crisis

Russian STS/RLS target market vs. GDP German logistics market vs. GDP

RUR bn USD bn EUR bn

Drop 08-09FCRUR = -8%

Drop 08-09FCRUR = -12%

21 63023 290

25 180 26 59024 590

CAGR 05-08 RUR = 7%

2 1202 190

2 250 2 270

2 150

Drop 08-09FCEUR = -8%

USD bnDrop 08-09FC

EUR = -5%CAGR 05-08EUR = >2%

3

Russian logistics market has suffered strongly from crisis and rouble devaluation

Note: conversions at appropriate annual avg. rates for historical points; forecast using USD/RUR = 32,2 (average 2009 to date)Source: Rosstat; IMF; RBC; Fraunhofer Institut

CAGR 05-08 = EUR = 8%

USD = 14%

2005 2006 2007 2008 2009E

Market in USD bn Market in RUR bn GDP in RUR bn

USD = -32%CAGR 05-08 RUR = 17%USD = 22%

2 210

2 560

3 2003 520

80

90

125 142

2005 2006 2007 2008 2009E

3 100

98

EUR = -8%USD = -14%

276175

189205

218

218237

281

321

200

Market in USD bn Market in EUR bn GDP in EUR bn

3

Future growth scenarios

Russian logistics market most likely to return to growth in sync with GDP

Optimistic case(Council of National Strategy)

Pessimistic case(MERT)

Base case (IMF)

RUR bn USD bn

3 52093 94 96 99

Market, USD bn Market, RUR bn GDP, RUR bn

RUR bn USD bn

3 840142

101 106113 119

3 520

142

96 97 100104

RUR bn USD bn

CAGR 08-12 USD = - 8%

CAGR 08-12 USD = - 4%

CAGR 08-12 USD = - 9%

4

If RUR shows weakness, the market may not reach 2008 levels in USD terms in the next 3 years

Note: conversions at appropriate annual avg. rates for hist. points. FC with USD/RUR = 32,20112 (YTD 08/11/2009)Source: As indicated, STS/RLS estimates

� Commodity prices stabilize and continue growing

� Government stimulus packages help the economy return to stable growth

� Banks making credit available, favorable fiscal and monetary policy make investments affordable

� Commodity prices remain volatile but at acceptable current levels

� Economy loses only little momentum after expiry of governmental stimuli

� Lacking efficiency of Russian manufacturers makes them slow to benefit from recovery of world economy

� Slow recovery of world economy due to unemployment, diminished consumer spend, continuously limited credit availability, protectionism

� Stagnating commodity prices� Lacking efficiency/competitiveness

of Russian manufacturers

2008 2009FC 2010FC 2011FC 2012FC

2 990 3 0203 080

3 180

2008 2009FC 2010FC 2011FC 2012FC

3 520

3 2603 420

3 620

101 106 3 520

2008 2009FC 2010FC 2011FC 2012FC

3 100 3 130

3 220 3 340

96 97

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Addressable market potential estimates

Continued outsourcing of logistics may soon offset the effects of crisis

Share of outsourced logistics(current vs. forecast)

Europe 66%

Asia Pacific

62%

2009 E (Russia) 2014 E

74%

70%

Addressable market estimates (bn USD)

2008

Optimistic

In-house logisticsOutsourced logistics(addressable market)

92 50

65 54

5

Depending on market scenario, outsourced logistics market may fully recover the pre-crisis level by 2012

Latin America

51%

Germany 49%

North America

47%

Russia 30-40% 50-55%

60%

57%

54%

Base

Pessimistic

2012E

Assumptions: by 2012 market gains 60% of projected increase from 30-40% to 50-55%; all calculation based on constant USD

1 Data used for calculation: 35% outsourced in 2008; 52,5% outsourcing level to be reached by 2014Source: Langley/Capgemini; Fraunhofer Institut; STS/RLS estimates

57 47

55 46

2014Forecast

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Selected Russian domestic logistics market segments (USD bn, 2008)

STS/RLS serve some of the largest Russian logistics market segments

Estimates

FMCG 17,7 20 1,8

Alcoholic beverages 3,7 19 1,8

Fashion/Footwear 3,4 18 2,1

Furniture/DIY 2,2 17 5,3

Consumer/Commercial vehicles 1,7 16 7,4

Pharma/Biotech 1,7 15 7,5

Fresh 1,3 14 9,2

Consumer electronics 0,8 13 10,8

Machinery, equipment, vehicles 7,0 12 0,7

Finished consumer

goods

7,0

0,8

1,3

1,7

1,7

2,2

3,4

3,7

17,7

Source: GKS; RZD; Industry research$ STS/RLS analysis

Machinery, equipment, vehicles 7,0 12 0,7

Construction components/materials 8,3 11 3,5

Intermediate goods 3,5 10 8,3

Parts/Components 0,7 9 7,0

Coal 10,8 8 0,8

Oil, LNG, chemicals (except pipelines) 9,2 7 1,3

Ferrous metallurgy products 7,5 6 1,7

Agriculture products 7,4 5 1,7

Bulk construction materials 5,3 4 2,2

Ore 2,1 3 3,4

Forestry products 1,8 2 3,7

Fertilizers 1,8 1 17,7

Industrial products

Commodities

and bulk products

1,8

1,8

2,1

5,3

7,4

7,5

9,2

10,8

0,7

3,5

8,3

7,0

6

Segment profile

Vast experience in industrial and complex project logistics

� Complex project logistics� Transportation of oversized and overweight

equipment� Provision of all types of transport (air, road, rail,

sea)� Provision of tailored infrastructure solutions

> Land transportation in severe conditions (e.g., Arctic)

Service portfolio

Oil/Gas

� Baker Hughes� Caspian Pipeline

Consortium� CentrCaspneftegaz� Neftegazengineering� Rosneft

Key clients

Power generation

• Boguchanskaya Hydroelectric Plant Bureyskaya Hydroelectric Plant

• Kambaratynskaya Hydroelectric Plant

Industrial and project logistics

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STS/RLS is able to deliver any equipment to any destination

(e.g., Arctic)> Temporary installations (jetties, roads, bridges)> Lifting of power lines

� Intermediate storage � Project customs clearance, including in all major

seaports of Russia

� Rosneft� Tenaris� TNK-BP

Hydroelectric Plant

7

Ability to provide complex, tailored solutions inside Russia and CIS

Transportation of generator wheel for

Kambaratynskaya HEP (Kyrgyzstan)

Airlifting of generator wheel for Bureyskaya HEP (Russia)

Industrial and project logistics

Delivery of railway engine from manufacturingplant in Russia to Iraq

Transportation of sodium powder Using sealed containers

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Segment profile

Wide range of services in parts’ logistics

� Cargo pick-up at consignee warehouse� Transportation between distribution centers� Break-bulk cross-docking � Delivery to final destination� Handling of large SKU assortment (> 30k SKUs)� Transportation and storage of special goods

> Oversize (above standard pallet size)> Fragile (glass)

Service portfolio

Consumer/Commercial

� Ford� Mazda� Pirelli

Key clients

Industrial

� Komatsu� OTIS

Automotive and parts logistics

> Fragile (glass)> High value (delivery in cages)

� Customs clearance� Value-added services

> Insurance (freight, liability)> Shipment tracking> Return of proof-of-delivery documentation

� Storage and delivery of rubber tires

Our flexibility allows us to provide tailored solutions to most of our clients

9

Ability to cover door-to-door supply chain of our clients in Russia & CIS

Automotive and parts logistics

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Segment profile

A leading LSP for Russian FMCG and retail industry

Service portfolio

FMCG

� Baltika � Beiersdorf � Efes � Kraft � L’Oreal � Mars

Key clients

Retail

� Auchan� Metro� X5 Retail Group

FMCG and Retail logistics

� Transportation using all modes of transport� FTL, FCL, LTL solutions� Warehousing

> Network of A-/B-class warehouses in all cities with population over 1 million

> Storage and cross-docking� Handling of large SKU assortment (> 30k SKUs)� Transportation and storage of special goods

STS/RLS is serving (or have served in the past) a large part of Russia’s FMCG leaders

� Mars � Nestle � PepsiCo � Procter & Gamble� SCA Hygiene

…and 500 morecompanies

� Transportation and storage of special goods> Temperature control> Humidity control

� Customs clearance� Value-added services

> Insurance (freight, liability)> Shipment tracking> Return of proof-of-delivery documentation

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Tailored solution for transportation and warehousing

FMCG and Retail logistics

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Summary

Our drive for quality and high service level never stops

� CRM/ERP (IWIS, developed locally)

� WMS (Logistic Vision)

� E-services (tracing of shipments and client notification)

� Commercial department includes a team of Key Account Managers (KAMs)

� KAM fulfill the roles of “one-point-of-contact problem solvers” for clients

� KAM role split based on industry specialization

IT systems development

Key accountmanagement

� Certified by Bureau Veritas

� Maintained since 2004

� Fast receipt of proof-of-delivery documentation

� Availability of document scans for accelerated client notification

� One bill of lading for complex transit shipments

� Quarterly client surveys conducted to measure service quality

� Surveys linked with quality KPIs, which form an integral part of STS/RLSperformance management and quality assurance systems

ISO 9000:2001

Customized solutions

Client satisfactionmeasurement

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Contact information

We are open for international cooperation

Our clients focus on their businessWe take care of logistics

Kirill VlasovKirill Vlasov

STS/RLS Logistics

Strategy Development Director

+7 (495) 775 02 02

+7 (495) 933 00 33

+7 (985) 760 2209 (mob.)

stsmow@stslogistics.net

moscow@rls.ru

kvlasov@rls.ru

www.stslogistics.net

www.rls.ru

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