2012 Internal Business Review

MAKING PROGRESS POSSIBLE

Caterpillar Confidential Yellow

RIES ENGINEERING S. Co.

Page 1

BUSINESS REVIEW

OCTOBER 2012ADDIS ABABA, ETHIOPIA



TOPICS

1. CAT Machines1.1. 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



TOPICS

2. Power systems2.1. Sales Performance Power Systems – Units

2.2. Sales Performance Power Systems – Value

2.3. 2013 forecast – Power systems

3. Rental3.1. 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

Page 3



1.CAT MACHINES

Page 4



1.1 SALES PERFORMANCE-CAT MACHINES (UNITS)

Page 5

PRDCT GP2012

YE 2011ANNUAL PLAN YTD 3RD 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



1.2. SALES PERFORMANCE-CAT MACHINES (VALUE)

Page 6

PRDCT GP2012 (‘000US$)

YE 2011 (‘000US$)ANNUAL PLAN YTD 3RD 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



1.3. CAT SHIPMENT PINS – MACHINES

PRDCT GROUP2010 2011 2012 YTD OCT

IND CAT PINS IND CAT PINS IND CAT PINS

BCP 9 0 0 50 6 12 33 5 15.2

BL 4 0 0 24 1 4.2 27 1 3.7

HEXMN 5 0 0 0 0 /0

SSL 1 1 100

TH 4 0 0 1 0 0 1 0 0

TT 3 3 100

WL 1 0 0 20 5 25 1 0 0

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 0 /0

HEXWH 6 0 0 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

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1.3 CAT SHIPMENT PINS – MACHINES (CONT’D)

PRDCT GROUP2010 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 0 0

PNEU 4 0 0 5 0 0

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

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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 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

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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

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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

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1.6.LOST SALES – LOCAL TENDERS YTD SEPT ‘12CUSTOMER 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

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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 GPCAT

ESTIMATED INDUSTRY

CAT PINSQTY 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

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2. POWER SYSTEMS

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2.1. SALES PERFORMANCE-POWER SYSTEMS (UNITS)

PRDCT GP2012

YE 2011 ANNUAL PLAN

YTD 3RD QR YEE

CAT 20 5 14 10

OLYMPIAN 140 113 129 64

TOTAL 160 118 143 74

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2.2. SALES PERFORMANCE-POWER SYSTEMS (VALUE)

PRDCT GP2012 (‘000 US$)

YE 2011 (‘000 US$) ANNUAL

PLANYTD 3RD 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



2.3. 2013 FORECAST – POWER SYSTEMS

PRDCT GP QTY VALUE (‘000 USD)

CAT 30 3,545

OLYMPIAN 185 2,643

TOTAL 215 6,188

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3. RENTAL

Page 21



3.1. RENTAL PERFORMANCE

PARTICULARS2012

YE 2011ANNUAL PLAN

YTD 3RD 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 0

ALLIED P 14 9 9 0

HOURS

CAT M/C 90,192 54,703 84,800 31,864

CAT GEN 2,080 500 900 0

ALLIED P 9,988 0 3,744 0

TOTAL REVENUE (‘000 Birr)

CAT M/C 81,346 55,972 80,882 22,757

CAT GEN 900 200 80 0

ALLIED P 3,359 0 1,572 0

TOTAL 85,605 56,172 82,534 22,757

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3.2. RENTAL 2013 FORECAST

PARTICULARSCAT

MACHINESCAT

GENSETSALLIED

PRODUCTSTOTAL

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

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3.3. RENTAL FLEET BUILD UP (UNITS)

MODEL2011 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

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3.4. RENTAL FLEET INVESTMENT – FOB/CFR/FCA

PRODUCT TYPEFOB/CFR/FCA (US$)

2011 2012

1. TTTs 4,902,875

2. 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

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4. MANAGEMENT OF CHINESE CUSTOMERS

Page 26

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 ?NY

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

QUOTE & SALES PROCESS - CATERPILLARPage 27



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

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-upin China, if requested

To AUE?

Chinese dealer to alert AUE

Y

N

Y

AUE in consultation withAfrica dealer & Chinese dealer to


Y

N

AUE to follow up in China with Chinese dealer

N

Delivery/invoicing

in Africa ?NY

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

QUOTE & SALES PROCESS – SUGGESTED IMPROVEMENT

AUE in consultation with African dealer & Customer to


AUE to follow-upin China

Page 29

Documents

2012 Internal Business Review