RIES ENGINEERING S. Co.

BUSINESS REVIEW
OCTOBER 2012 ADDIS ABABA, ETHIOPIA
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TOPICS
1. 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
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TOPICS
2. Power systems 2.1. Sales Performance Power Systems Units 2.2. Sales Performance Power Systems Value 2.3. 2013 forecast Power systems 3. 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 4. Management of Chinese customers - Quote & Sales Process Caterpillar - Suggested improvements
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1.CAT MACHINES

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1.1 SALES PERFORMANCE-CAT MACHINES (UNITS)

PRDCT GP
TTT WL TL MG HEX WEX BHL ADT OHT TH SSL/MTL

2012
ANNUAL PLAN 87 14 2 37 56 13 8 10 21 4 2 1 2 1 13 62 34 101 2 1 YTD 3RD QR YEE 248 9 128 8

YE 2011
120 22

48 62 4 2 2 4

PAVING
TOTAL
MAKING PROGRESS POSSIBLE

25
279

5
218

8
405

17
281

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1.2. SALES PERFORMANCE-CAT MACHINES (VALUE)

PRDCT GP
TTT WL TL MG HEX WEX BHL ADT OHT TH SSL/MTL

2012 (000US$)
ANNUAL PLAN 33,477 6,256 750 8,383 15,739 3,313 738 3,880 13,320 658 64 35 70 77 3,102 16,324 8,087 23,358 395 158 YTD 3RD QR 51,932 4,949 YEE 101,148 5,375

YE 2011 (000US$)
46,347 7850

10,828 13,516 917 230 579 3,101

PAVING
TOTAL
MAKING PROGRESS POSSIBLE

3,398
89,976

518
76,937

1,016
139,607

1,753
85,122

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1.3. CAT SHIPMENT PINS MACHINES

PRDCT GROUP
BCP BL HEXMN SSL TH TT WL CORE HEXLG HEXMD HEXSM 1 161 39 28 0 87 12 18 0 54 30.8 64.3 20 523 56 92 7 5 255 15 48 5 25 48.8 26.8 52.2 71.4 4 0 0 1 0 0

2010
IND
9 4

2011
PINS
0 0

2012 YTD OCT

PINS
12 4.2 0

CAT
0 0

IND
50 24 5

CAT
6 1 0

IND
33 27 0 1 1 3 1 689 158 179 0

CAT
5 1 0 1 0 3 0 227 10 44 0

PINS
15.2 3.7 /0 100 0 100 0 32.9 6.3 24.6 /0

HEXWH
MG MWL/SEM TTMD
MAKING PROGRESS POSSIBLE

6
5 16 67

0
3 3 51

0
60 18.7 76.1

17
92 84 175

4
64 23 96

23.5
69.6 27.4 54.9

4
29 131 188

2
15 32 124

50
51.7 24.4 66

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1.3 CAT SHIPMENT PINS MACHINES (CONTD)

2010
IND 14 4 10 CAT 2 0 2 PINS 14.3 0 20 IND 41 4 5 32

PRDCT GROUP
DIVERSIFIED PRDCT ACOM PNEU SCOM

2011
CAT 22 1 0 21 PINS 53.7 25 0 65.6

2012 YTD OCT

IND 33 1 32 CAT 8 0 8 PINS 24.2 0 25

MINING
ART LWL Q & CT TTTLG OVERALL

19
2 15 2 203

19
2 15 2 108

100
100 100 100 53.2

10
2 4 4 624

10
2 4 4 293

100
100 100 100 47

5
5

5
5

100
100

760

245

32.2

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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.
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1.5. LOST SALES PURCHASE FROM CHINA (YTD OCT.12)

CUSTOMER 1. HYDRAULIC EXCAVATORS CHINA HIGHWAY HUI CHEN Subcontractor of CGGC CREC B2 CCECC SANY SANY XGMA VOLVO KOMATSU KOMATSU KOMATSU KOMATSU SY285 SY225 XG822 EC290 PC360 PC220 PC400-8 PC300-7 MFRR MODEL QTY 74 4 4 3 5 37 12 2 3

KOMATSU
CGCOC HANSON
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PC220
PC300

1
3

KOMATSU

1.5. LOST SALES PURCHASE FROM CHINA (YTD OCT.12)

CUSTOMER 2. TRACK TYPE TRACTORS MFRR MODEL QTY 26

CREC B2
CCECC CREC B2

SHANTUI
SHANTUI SHANTUI SHANTUI XGMA LIUGONG LIUGONG

SD22, SD32
SD22 SD32 SD22, SD32 N/A ZL856 +N/A ZL856

9
3 3 11

3. WHEEL LOADERS
HUI CHEN CREC B2 CCECC

36
3 21 6

CREC B3
JIANGXI W&HP CGCOC HANSON
MAKING PROGRESS POSSIBLE

XGMA
N/A KOMATSU

XG953
N/A WA380

2
2 2

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1.5. LOST SALES PURCHASE FROM CHINA (YTD OCT.12)

CUSTOMER 4. COMPACTORS MFRR MODEL QTY 33

CHINA HIGHWAY
HUI CHEN CCECC CREC B3

SANY
XGMA XCMG XCMG

SSR200
N/A 202,262 20T

4
2 8 2

CGCOC
CRECB2 5. MOTOR GRADERS CHINA HIGHWAY

XGMA
N/A SANY

P2626
N/A SHG190

4
13 17 6

CCECC
CREC B2 GRAND TOTAL M/C
MAKING PROGRESS POSSIBLE

VOLVO
N/A

930G
N/A

3
8 186

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1.6.LOST SALES LOCAL TENDERS YTD SEPT 12

CUSTOMER
1. HYDRAULIC EXCAVATORS SUR CONSTRUCTION AA CITY ROADS AUTHORITY AA CITY ADMIN R&DPO 2. WHEEL EXCAVATOR SUR CONSTRUCTION AA CITY ROADS AUTHORITY 3. TRACK- TYPE TRACTORS AA CITY ADMIN R&DPO 4. MOTOR GRADERS WONJI SHOA SUGAR FACTORY 5. WHEEL LOADERS VOLVO G940 KOMATSU DI55A-6R DOOSAN VOLVO 210WZ SWEL210 DOOSAN VOLVO VOLVO 420-LCV E380DL EC380-BLC

MFRR

MODEL

QTY
14 10 3 1 8 5 3 1 1 2 2 2

AA CITY ADMIN R&DPO

TOTAL
MAKING PROGRESS POSSIBLE

VOLVO

L110F

2
27

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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)
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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)

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1.9. 2013 FORECAST CAT MACHINES

PRDCT GP
TTT WL TL MG HEX WEX BHL ADT OHT TH SSL/MTL G PAVING FORSTRY P LANDFILL C TOTAL
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CAT
QTY VALUE (000 USD)

ESTIMATED INDUSTRY
230 200 2 103 160 12 25 14 29 4 1 150 3 3 936

CAT PINS
60.9 10 100 60.2 30 41.7 52 100 100 50 100 21.3 100 100 40.0

140 20 2 62 48 5 13 14 29 2 1 32 3 3 374

58,159 6,608 700 16,931 14,976 1,095 539 5,851 25,453 339 45 3,796 960 1,245 134,492

2. POWER SYSTEMS

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2.1. SALES PERFORMANCE-POWER SYSTEMS (UNITS)

2012

PRDCT GP
CAT OLYMPIAN TOTAL

ANNUAL PLAN 20 140 160

YTD

3RD 5

QR

YEE 14 129 143

YE 2011
10 64 74

113 118

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2.2. SALES PERFORMANCE-POWER SYSTEMS (VALUE)

2012 (000 US$)

PRDCT GP
CAT OLYMPIAN TOTAL

ANNUAL PLAN 2,314 1,760 4,074

YTD 3RD QR 1,111 1,437 2,548

YEE 1,473 1,734 3,207

YE 2011 (000 US$) 882 830 1,712

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2.3. 2013 FORECAST POWER SYSTEMS

PRDCT GP CAT OLYMPIAN TOTAL

QTY 30 185 215

VALUE (000 USD) 3,545 2,643 6,188

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3. RENTAL

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3.1. RENTAL PERFORMANCE

2012 PARTICULARS CAT M/C ANNUAL PLAN 63+7=70 4 14 90,192 2,080 9,988 81,346 900 3,359 85,605 YTD 3RD QR 52+8=60 2 9 54,703 500 0 55,972 200 0 56,172 YEE 48+8=56 2 9 84,800 900 3,744 80,882 80 1,572 82,534 YE 2011 19+8=27 0 0 31,864 0 0 22,757 0 0 22,757

NO. OF UNITS

CAT GEN ALLIED P CAT M/C

HOURS

CAT GEN ALLIED P CAT M/C

TOTAL CAT GEN REVENUE (000 Birr) ALLIED P TOTAL

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3.2. RENTAL 2013 FORECAST

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

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3.3. RENTAL FLEET BUILD UP (UNITS)

MODEL
D8R D6R

2011 PLAN
14 2

2012 PLAN
4

2013 PLAN ORIGINAL

4

ACTUAL
14 2

ACTUAL

REVISED
8

950H
140H/K/M 12K 324DL 329DL M316 CS56 CS64 GENSETS M CRANE DUMP T WATER T LOW BED CM & D TOTAL

2
7 4 2 4 1 1 7 4 2 4 1 1 1 2 1 5 2 2 4 49 35 23 2 1 3 2 1 1 4

1
4

1
8

2 1

1 2 1 3

5 2 2 1 1

13

12

25

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3.4. RENTAL FLEET INVESTMENT FOB/CFR/FCA

PRODUCT TYPE 1. TTTs 2. WLs FOB/CFR/FCA (US$) 2011 4,902,875 339,878 2012

3. MGs 4. HEX & WEX

5. PAVING 6. GENSETS 7. ALLIED PRODUCTS TOTAL TOTAL 2011 & 2012

2,145,159 1,361,093
93,475 85,010 1,131.305 8,502,602 10,058,795 1,556,193

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4. MANAGEMENT OF CHINESE CUSTOMERS

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Request for quote in Africa

African dealer to handle quote/negotiation

Africa dealers office to follow up in China Y

Delivery/invoicing in Africa ?

N Same deal being discussed in Africa ? Y N Request for quote in China To Africa dealers office?

Africa dealers office to finalize deal

Chinese dealer to alert Africa dealers office

Africa dealers office & Chinese dealer to come to a sales agreement Africa dealers office to follow up in China with Chinese dealer

Africa dealers office (AUE) to be aware & involved in all deals

Africa dealers office & Chinese dealer to come to a referral agreement

Delivery/invoicing in Africa ?

QUOTE & SALES PROCESS - CATERPILLAR

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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 Customers head offices (not through CAT dealer in China) to conclude deals started in Ethiopia.
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Request for quote in Africa

African dealer to handle quote/negotiation

AUE to follow-up in China, if requested AUE to follow-up in China Y

Delivery/invoicing in Africa ?

N Same deal being discussed in Africa ?

Africa dealer to finalize deal

Y N Request for quote in China

AUE in consultation with African dealer & Customer to come to a sales agreement

To AUE?

Chinese dealer to alert AUE

AUE in consultation with Africa dealer & Chinese dealer to come to a sales agreement AUE to follow up in China with Chinese dealer

Africa dealers office (AUE) to be aware & involved in all deals

AUE in consultation with Africa dealer & Chinese dealer to come to a referral agreement

Delivery/invoicing in Africa ?

QUOTE & SALES PROCESS SUGGESTED IMPROVEMENT

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