THE WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY 2010

MARIA LEENEN, HAMBURG, SEPTEMBER 2010

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010
 OUTLINE

OUTLINE

I: METHODOLOGY OF SCI VERKEHR 3

II: WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY –

RESULTS OF THE STUDY 10

III: STRATEGIC CHALLENGES 19

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 2
 STRATEGIC EXPERTISE

OUR SCOPE: STRATEGIC ADVICE FOR INTERNATIONAL CLIENTS

• SCI is an independent consultancy company for the transportation sector with activities and
projects around the world
• SCI is specialised in strategic advice to the railway and logistics industry

STRATEGY CONSULTING MARKET-, ENTERPRISE- AND

PORTFOLIO-ANALYSIS

• Strategy development • Competition analyses

• Portfolio assessments • Market analyses
• Mergers & acquisitions • Product analyses
• Due diligences • Market entry strategies
• Asset value assessments • Transport and sector analyses
• Sector-related economic consulting

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 3
 CUSTOMERS

WORLDWIDE CUSTOMERS ASK FOR SCI’S EXPERTISE

• AAE Ahaus Alstätter Eisenbahn AG • ABB Schweiz Ltd. • AEG SVS Power Sypply Systems • Alcan Composite Structures • Allco Leasing GmbH •
Alstom Transportation • Amtrak Office of Inspector General• Angel Trains Cargo • Ansaldo Signal N.V. • AnsaldoBreda spa • Arriva International UK
• Auctus Management GmbH & Co. KG • Axtone GmbH • Babcock Brown London • BAE Systems Ltd. • Balfour Beatty Rail GmbH • Bank of
America • Bayer Material Science AG • Bayerische Landesbank • Bearing Point SAS • Behr Industry GmbH & Co. KG • Bochumer Verein
Verkehrstechnik GmbH • Bombardier Transportation • Bonatrans a.s. • Calyon • Cargocare AG • China South Locomotives & Rolling Stock
Corp. Ltd. • CKD Vagonka a.s. • Connex • Cummins • Dellner Kupplungen GmbH • Deuta-Werke GmbH • Deutsche Bahn AG • Deutsche
Beteiligungs AG • Deutsche Binnenschiffreederei • Deutsche Messe AG • Deutscher Gewerkschaftsbund • Dimetronic S.A. • DuPont Performance
Coatings GmbH & Co. KG • Durtrack AG • ELIN EBG traction GmbH • ESW GmbH • EWS Railway LTD • Extel Systems Wedel • Fahrleitungsbau
GmbH • Faiveley Transport • Ferrostaal AG • Fooke GmbH • Furrer+Frey AG • GE Transportation Systems • Greenbrier Equity Group LLC •
Group Ermewa SA • Gutehoffnungshütte Radsatz GmbH • Hanning & Kahl GmbH • Hans Böckler Stiftung • Heitkamp Rail GmbH • Hitachi Europe
Ltd. • HSH Nordbank AG • Hübner GmbH • I.T.I. Finanziaria S.P.A. • ING Bank N.V. • Interpipe • INVEST Financial Corporation • KfW IPEX-Bank
GmbH • Knorr-Bremse • Korea Railroad Research Institut • Lavoisier SAS • Lease Valuation International Inc. • Leonhard Moll Betonwerke •
Liebherr Transportation Systems GmbH • LLOYDS TSB Bank PLC • MAN • Marubeni Corporation • Microelectrica Scientifica Spa • Mitron OY •
Mitsui & Co. • Molinari Consulting AG • MTU Friedrichshafen • Nahverkehr Rheinland GmbH • National Australia Bank • NedTrain Consulting •
Nexans • Odenwald & Compagnie • ÖBB • One Equity Partners Europe GmbH • Ox-traction N.V. • Oxford Analytica Ltd. • Paribus-SK-Rail
Management • Parsons Brinkerhoff Pte Ltd • Patentes Talgo S.A. • Pfleiderer Infrastrukturtechnik GmbH & Co. KG • Phoenix Dichtungstechnik GmbH
• Pintsch Bamag GmbH • Plasser & Theurer Export von Bahnbaumaschinen GmbH • Prover Technology AB • Prysmian Spa • Rail Cargo Austria •
Rail Interiors S.p.A. • Rail One GmbH • Rexwal Services SA • Rexxon Services SA • Rotem Company • Royal Bank of Scotland • Sabler Consult
GmbH Wien • SAFOP SAP • Saft‘s Industrial Battery Group • SBB Cargo AG • Schalker Eisenhütte GmbH • Schaltbau AG • Scheidt & Bachmann
GmbH • Schreck-Mieves GmbH • Schweizer Elektronic AG • Secheron SA • Serco-NedRailways • SGL Carbon SE • Siemens AG • Sika Schweiz
AG • SIRTI S.p.A. • SKF Group • Skoda Transportation s.r.o. • Société Générale Group • Solaris Bus & Coach S.A. • Stadler Rail AG • Steer Davies
Gleave • Stemmann-Technik GmbH • Stinnes AG • Stratorg S.A. • Strukton Systems • SüdLeasing GmbH • Sumitomo Mitsui Banking Corp.
Europe Ltd. • Syndex • Synosys Inc. • Tatravagonka a.s. • Terra Firma Investments 2 Ltd. • Telenor Sverige AB • TFK Transportforschung GmbH •
Thermo King Deutschland • Thyssen Krupp GfT Gleistechnik GmbH • Tiefenbach GmbH • Toyo Engineering Corporation • Traktionssysteme Austria
GmBH • Tram S.A. • Transpetro GmbH • Transtechnik GmbH & Co. KG • Transwerk South Africa • Trinity Rail GmbH • TÜV Rheinland • U.S.
Government • Universal de Productos Electricos S.A. • VAE GmbH • Valspar Industries GmbH • Veolia Transport • Verband der Bahnindustrie
Germany • Verkehrs Industrie Systeme GmbH • Verkehrsbetriebe Zürich • Voestalpine Bahnsysteme GmbH • Voith Turbo • VolkerRail • Vossloh
AG • Vossloh Kiepe GmbH • VR Leasing AG • VTG AG • Wagony Swidnica S.A. • Walter Bau AG • Wacosa AG • Weilburg Coatings GmbH •
Westfracht • WestLB AG • Wincanton GmbH • Wirtschaftsministerium Baden-Württemberg • ZAO Transmashholding • ZF Sachs AG • Zuken GmbH

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 4
 SKILLS

STRATEGIC ADVICE NEEDS SOUND FACTS AND FIGURES

TOOLS AND PRODUCTS

STRATEGIC CONSULTING

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 5
 STUDY
“WORLDWIDE MARKET”

GENERATED FROM DETAILED STUDIES WE PROVIDE THE

AGGREGATE STUDY “THE WORLDWIDE MARKET FOR RAILWAY
TECHNOLOGY”

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 6
 FORECAST
METHODOLOGY

4 STEPS OF THE SCI MARKET FORECAST

• Awarded and documented projects

Contracted
• Periods (delivery known)

• Established and announced projects

Announced
• Options

• Expected projects
Virtual
• General announcements
Project-based
• Replacement purchase and maintenance
Long-term drivers demand (based on installed base)
• Development of railways and transport
• Megatrends
• Macroeconomic development
• Railway affinity

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 7
 FORECAST
METHODOLOGY

SCI MARKET FORECAST TOOL CALCULATES MARKET VOLUME OF

THE WORLD MARKET FOR RAILWAY TECHNOLOGY

Schematic Illustration of SCI Market Forecast Tool

Market volume [EUR billion]

Long-term drivers

Virtual
Announced
Contracted

© SCI Verkehr GmbH

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 8
 OUTLINE

OUTLINE

I: METHODOLOGY OF SCI VERKEHR 3

II: WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY –

RESULTS OF THE STUDY 10

III: STRATEGIC CHALLENGES 19

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 9
 TOTAL MARKET VOLUME

THE MARKET FOR RAILWAY TECHNOLOGY CONTINUOUS TO GROW

Total market volume [EUR billion] Trends

• 4.1% annual growth in the world market by 2015

(including increase in prices)
160

131
• General drivers
102 – Globalization
– Urbanization
– Environmental protection
– Safeness
• Current drivers
– Stimulus packages
– Recovery of freight transport market
2006* 2010 2015

© SCI Verkehr GmbH

Legend: * Methodology change in 2008

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 10
 TRANSPORT MARKETS

RAIL TRANSPORT MARKETS RECOVERING FASTER THAN EXPECTED

Freight: global rail transport development [Index 2000 = 100]

Trends
200
Market performance
[Index 2000= 100]

100 = 6 930 billion tkm • Railway market recovered

150
quicker than expected from
world economic crisis: 4.5%
growth in 2010
100
2000 2003 2006 2009 2012 2015 • 2008 freight level is going to be
reached again in 2011

Passenger: global rail transport development [Index 2000 = 100]

• Rail passenger transport more
200 sustainable: 1.0% growth in
Market performance
[Index 2000= 100]

100 = 2 380 billion Pkm

2009
150

100
2000 2003 2006 2009 2012 2015

© SCI Verkehr GmbH

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 11
 MARKET VOLUMES AND
MARKET GROWTHS

REGIONAL MARKETS GROWING DIFFERENTLY

Market volumes 2010 and market growth in the period up to 2015 by regions

Western Europe: Eastern Europe: CIS:

- MV: EUR 39.8 bn - MV: EUR 9.6 bn - MV: EUR 13.7 bn
- CAGR: 3.3% - CAGR: 2.9% - CAGR: 4.9%

North America:
Asia:
- MV: EUR 19.5 bn
- MV: EUR 36.5 bn
- CAGR: 5.0%
- CAGR: 4.3%

South/Central America: Africa/Middle East: Australia/Pacific:

- MV: EUR 3.3 bn - MV: EUR 5.7 bn - MV: EUR 2.9 bn
- CAGR: 6.8% - CAGR: 4.0% - CAGR: 2.3%
© SCI Verkehr GmbH
Legend: CAGR = compound annual growth rate

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 12
 TOP TEN COUNTRIES

COUNTRIES’ RANKING CHANGE: CHINA NO. 1

Top ten countries by market volume [EUR billion]

Trends
(average 2009–2011 p.a.)
(2009 ranking) • China ranks top in the world
(2) for the first time, replacing the
US market
(1)
• Currently, all global players
(3) benefit from Chinese market
(4) • The Russian market is the
(7) third-largest in the world and
has to invest heavily to replace
(6)
its vehicle fleet
(5)
• Germany asserts its rank and
(8) remains the only European
(10) country within top five
(9)

© SCI Verkehr GmbH

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 13
 PRODUCT SEGMENTS

THE ROLLING STOCK SEGMENT REMAINS INVESTMENT AREA NO. 1

Market volume and market growth by product segment

Trends
[EUR billion/%]
• Rolling stock segment with highest
market volume
– 2010: EUR 74.3 billion
Market volume [EUR billion]

– 2008: EUR 73.8 billion

• Increasing share of passenger

Growth rate [%]

Market volume [EUR billion]
vehicles
– 2010: 67%
– 2008: 50%
• Infrastructure has grown due to the
economic stimulus programmes
• 2010: EUR 42 billion
– 2008: EUR 39.5 billion
• Trends will continue around 2013
and apply to systems technology as
well
Market growth [%]

© SCI Verkehr GmbH

Legend: Growth rate corresponds to the compound annual growth rate CAGR

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 14
 SHARE OF OEM AND
AFTER SALES

AFTER-SALES MARKET WITH SLOWER GROWTH RATE THAN OEM -

BUT LESS VOLATILE

Share of OEM and after-sales-service in product segments 2010 Trends

• After-Sales market grows more

slowly than OEM market
Rolling Stock Infrastructure Systems Technology – OEM: 4.6%
– After-Sales: 3.6%
49% 42% 53% • After-Sales markets volatility is
much lower
– OEM: 4.9%
– Total After-Sales: 0.1%
• Step by step the After-Sales
markets are becoming more
51% 58% 47% accessible

OEM After-Sales-Service

© SCI Verkehr GmbH

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 15
 MARKET DETAIL

MARKET ASSESSMENT NEEDS A VIEW IN DETAIL

Market volume and market growth by rolling stock segment and region [EUR billion/%]
Market growth 2010–2015 [%]

© SCI Verkehr GmbH Market volume [EUR billion]

Legend: Growth rate corresponds to the compound annual growth rate CAGR

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 16
 MARKET DETAIL

.... SOME EXAMPLES OF “STARS, CASH COWS AND LOSERS”

WITHIN THE MARKETS AND SEGMENTS

Market volume and market growth by rolling stock segment and region [EUR billion/%]

LRV Australia HST Asia

FW North America
Market growth 2010–2015 [%]

D-Loco Asia

LRV CIS EMU Western Europe

PC Eastern Europe

© SCI Verkehr GmbH Market volume [EUR billion]

Legend: Growth rate correspond to the compound annual growth rate CAGR

SCI Verkehr GmbH / Büro Hamburg / +49 (40) 50 71 97-0 / September 2010 17
 OUTLINE

OUTLINE

I: METHODOLOGY OF SCI VERKEHR 3

II: WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY –

RESULTS OF THE STUDY 10

III: STRATEGIC CHALLENGES 19

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 18
 TOP TEN MANUFACTURERS

CHINESE MANUFACTURERS ARE ON THE FAST TRACK

New rolling stock: top ten rolling stock

Trends
manufacturers by turnover 2009 (estimation)
(2008 ranking) • Bombardier extended market
(1) lead in 2009
(2) • Alstom still is in the second
(4)
place

(3) • Both, CNR and CSR out-

compete Siemens regarding
(5) market volumes
(7) • CAF entered the top ten for the
(10) first time
(*) • Freight wagon manufacturer
Trinity left the top ten after the
(8)
sharp fall of sales in 2009
(6)

Turnover 2009 [EUR billion]

Legend: * not in the ranking 2008

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 19
 ESTABLISHED VS. CHINESE
MANUFACTURERS

GROWTH RATES OF ESTABLISHED AND CHINESE MANUFACTURERS

DRIFT APART

New rolling stock: turnover development by

manufacturer [EUR billion] Trends

• Between 2005 and 2009 turnover of both Chinese

Turnover new rolling stock [ EUR billion]

manufacturers more than doubled

– Yearly growth rate: 20%

+108% • In the same period, turnover of the “The Big

Three” had a 17% growth
– Yearly growth rate: 4%

+17%
• The Chinese manufacturers’ share in the
worldwide market grows very dynamically

Alstom/Bombardier/Siemens CNR/CSR

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 20
 PROFITABILITY OF RAILWAY
MANUFACTURERS

PROFITABILITY MAKES ALL THE DIFFERENCE

Total: revenue and EBIT comparison top railway manufacturer 2009

[EUR billion/%] Trends

• The Big Three gained a higher

Turnover [EUR billion]

profitability than Chinese

EBIT Margin [%]

companies
• Up to now state owned
Chinese manufacturers are
more focused on increasing
volumes – but they are
catching up
• Highest profitability is found in
specialised and/or medium
Transporation1

Alstom Trasnport³
Siemens Mobility²
Bombardier

sized companies with two digit

EBIT Margins

© SCI Verkehr GmbH

1 Financial year ending 31 Jan, ² Financial year ending 30 Sept, ³ Financial year ending 31 Mar,* Gross profit

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 21
 CHINESE MANUFACTURERS’
WORLDWIDE PRESENCE

CHINESE MANUFACTURERS ARE “AT THE GATES”

PKP Cargo and CNR to create CNR exports

joint venture, CNR’s first plant locomotives to Belarus
outside China

Delivery of CSR multiple

units for Georgia

CNR exports freight

wagons to Vietnam and
Mongolia

CNR exports trams to

Malaysia / CSR receives
CNR builds for the Rio major order from Malaysia
de Janeiro metro
CNR exports metro coaches
to Saudi Arabia / CSR signs
Saudi locomotive contract CSR supply metro
Major contract for CNR coaches for Rapid Metro
from Argentina Rail Gurgaon in India /
CSR will exports
CSR Zhuzhou delivers Mumbai Metro to receive
DMUs to Tunisia
first 14 locos to Iran CSR trains

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 22
 CONSEQUENCES

WHAT ARE THE CONSEQUENCES FOR THE ESTABLISHED

MANUFACTURERS?

NEW DEVELOPMENTS ESTABLISHED ADVANTAGES

• More and more, Chinese market is

served by strong Chinese domestic
• Established players still have
industry
– Advantage in technology
• Therefore, global players will lose – Advantage in profitability
relevant market shares in China
– Efficiency of production
and elsewhere
• Specialists can deal more flexibly
• New markets in USA, South
with the highly fragmented markets
America and India may not be able
in Europe
to compensate those losses

23
 CHALLENGES

OUR CLIENTS ADAPTATION TO CHALLENGES – SOME EXAMPLES OF

OUR PROJECT WORK

• A component manufacturer wants to consolidate the international bogie market and intended to
Positioning acquire an European bogie manufacturer. SCI has to cross-check the market situation

Costs / • A supplier wants to adjust their product prices and production costs regarding the target costs in
efficiency the different regional markets

Suitable new • Asian technology group seeks possibilities for a market entry in Russia (including a roadmap for
markets suitable products as well as entry strategies and cooperation partners)

• An international Investor wants to acquire a rolling stock leasing company. SCI has to evaluate the
Financing business plan and the expected market position of the target. We estimated the fair market value
of the assets and the target.

• A vehicle manufacturer is looking for market opportunities, partnerships and targets to increase
Maintenance
their maintenance business

24
 SUMMARY

UNDERSTANDING OF THE SPECIFIC MARKET REQUIREMENTS

MAKES THE DIFFERENCE

Stable market with long-term growth opportunities - but...

.... changing market environment...

• European home markets come under fire
• Asian companies try to take advantage from home market experience
• Expected next waves of M&A and consolidation processes

....requires different market intelligence

• Continuous observation and understanding of the markets
• Monitoring of projects and positioning of competitors

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 25
 CONTACT

CONTAKT

Maria Leenen Andreas Wolf Christian Bessler

CEO Project Manager Marketing & Sales
SCI Verkehr GmbH SCI Verkehr GmbH SCI Verkehr GmbH

Schanzenstraße 117 Vor den Siebenburgen 2 Vor den Siebenburgen 2

20357 Hamburg 50676 Cologne 50676 Cologne

Tel.: +49 (40) 50 71 97-0 / Tel.: +49 (221) 931 78-16 Tel.: +49 (221) 931 78-20
September 2010 Fax: +49 (221) 931 78-78 Fax: +49 (221) 931 78-78
Fax: +49 (40) 50 71 97-20 E-Mail: a.wolf@sci.de E-Mail: c.bessler@sci.de
E-Mail: m.leenen@sci.de

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 26