Here We Go Again, Or Do We? A BCO Perspective on Carrier Shipper Relationships

Alan Mctaggart, Group Logistics Director

Today’s Presentation

Outline of Techtronic Industries Business (TTI)

Techtronic Ocean Freight Programme

Conclusions on the “Shared Experience”

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Techtronic Industries Co. Ltd.

A world-class leader in design, manufacturing and marketing of Power Tools, Outdoor Power

Equipment, and Floor Care and Appliances for consumers, professional and industrial users.

POWER EQUIPMENT FLOOR CARE & APPLIANCES

3

1999

Acquisition

2000-2004

Acquisition

2005

Acquisition

2003

Acquisition

2002

Acquisition

2007

Acquisition

1985 2012

Founded

TTI

1,000

2,000

3,000

SALES

(US$m)

Expansion

1986 Revenue

US$3M 2011 Revenue

US$3.7B

1990

Listed on

HKSE

4

Diverse Global Customer Base

Mass Merchants / Home Centers Industrial Distributors / Independent Hardware Stores

5

Global Presence

Power Equipment,

Floor Care and

Appliances

Milwaukee Professional

Tools

• Sales & Marketing

• Research &

Development

• Manufacturing

Consumer and Trade

Tools

• Sales & Marketing

• Research &

Development

Outdoor Products

• Sales & Marketing

• Research &

Development

• Manufacturing

Floor Care and

Appliances

• Sales & Marketing

• Research &

Development

• Manufacturing

UNITED STATES

Power Equipment,

Floor Care and

Appliances

CANADA

Power Equipment ,

Floor Care and

Appliances

EUROPE

Floor Care and

Appliances

• Manufacturing

MEXICO

Power Equipment,

Floor Care and

Appliances

LATIN AMERICA

Power Equipment,

Floor Care and

Appliances

ASIA

TTI WORLD WIDE

HEADQUARTERS

AUSTRALASIA

Power Equipment,

Floor Care and

Appliances

MIDDLE EAST, AFRICA,

INDIAN SUBCONTINENT

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Global Sales and Ocean Freight Volume

Sales by Segment Sales by Region

Ocean Freight Volume 25,000 FEUS Per Year

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North America 72% By Value

15,000 FEUS 60% By Volume

Rest of the World 7% By Value

4,000 FEUS 16% By Volume

Europe 21% By Value

6,000 FEUS 24% By Volume

Power Equipment 73% By Value

13,000 FEUS 52% By Volume

Floor Care & Appliances

27% By Value

12,000 FEUS 48% By Volume

Innovated Faster than our Competitors

Cut costs Faster than our Competitors

Improved Quality Faster than our Competitors

Partnered with the MOST Demanding and Fastest

Growing Customers

Critical Success Factors

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TTI Ocean Logistics Rationalization & Outcome/Experience

Consignees Forwarders Origin Booking Parties

Shipping Lines

USA T.P. Ocean Freight Summary Situation OLD - As Was (Late 2006)

Power Tool &

Outdoor

Equipment

Floor Care

& Appliances

F

G

H

I

A

G

H

I

J

K

D

E

A

B A

A

B

I

J

K

L

M

N

C

D

E

B

C

D

E

F

C

E

E

F

G

H

9 11 14

Supplier (PRC)

Outside Suppliers

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Consignees Origin Booking Parties

USA T.P. Ocean Freight Summary Situation NEW - As Is (Mid 2007)

Power Tool &

Outdoor

Equipment

Floor Care

& Appliances

Supplier (PRC)

C

U

S

T

O

M

S

B

R

O

K

E

R

S

C

D

A

B

A

Outside Suppliers

Customs Broker Shipping Lines

4 1 1

11

Cost reduction

Access to Economies of Scale

Process Improvements

Service Level Improvements

Consolidate Information System

Supplier Management

TTI Group Ocean Freight Project Vital Few Objectives

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TTI OFFERS TTI EXPECTATIONS

Regular, Year Long, High

Volume Support and Contract

Lower Stable Rates – No

PSS/GRI

Yearly Rates

Fulfilled MQC Commitment Stable Space Provision

Reasonable Volume Forecast

+/-10% (Port Pairs)

Reliable and Predictable

Schedules

Immediate Uncomplicated

Centralized Decision Making and

Communication

Transparency

No Low Season Shopping Measurable Performance (KPIs)

Opportunity for Long Term

Relationship

Worthwhile High Level

Relationship

Stable Supply Chain

TTI Ocean Freight Offer and Expectations

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The 6 Year Experience

+19% Before Currency

2007 - 2013

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Logistics Confessions

2007 No Fuel Concession

2009 & 2011 Renegotiated Europe Contract

2008/2009 Christmas and Spring Shopping USA

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TTI Summary of Contracted Carriers 2007 - 2013

2007 - 2008 2008 - 2009 2009 - 2010 2010 - 2011 2011 - 2012 2012 - 2013

Rank Carrier Rank Carrier Rank Carrier Rank Carrier Rank Carrier Rank Carrier

1 A 1 G 1 A 1 J 1 A 1 G

2 B 2 E 2 H 2 D 2 G 2 A

3 C 3 F 3 B 3 A 3 F 3 B

4 D 4 C 4 E 4 B 4 J 4 I

5 D 5 G 5 C 5 B 5 J

6 B 6 D 6 H 6 H

7 A 7 I 7 K 7 M

8 L

GREED

FEAR

COURAGE / STABILITY / STRATEGY

Ranking trend & Behavior:

OPPORTUNITY

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Prevalent Patterns of Erratic Carrier Behaviour

Lack of Self Confidence • Have you heard?

• Follow my leader?

Lack of Reality

• 5 or 6 GRIs to Europe

• USD2500 B/E to West Coast!!

• Not a large impact on the sales price!!

Understated Value of

Customers & Relationships

• BAF destroyed goodwill (TTI Experience)

• FOB, CIF, NVOs, BCO’s; Small, Medium,

Large

Confused Strategy/If At All

• Long Term/Short Term

• Q3/4 2011 Bad NVOs

• Q3/4 2012 Bad BCO’s

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Reality and Changes – Now and Future

Dropping Global Demand

Less Peaks and Troughs (Surges)

Over Supply of Capacity – 13500T./Vessels

Ecommerce

Capital Supply Squeeze

Increasing Industry Price Volatility

Complete Transparency

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Visible Improvements

Pricing Discipline and Stability

Strength of USA Market

Clever Disposition of Vessels

Recognition of Long Term Relationships

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Suggestions for Moving Forward

Index Linked Contracts with BCO’s

Be Realistic; Resist Science Fiction

Have a Strategy and Recognize It

Value Long Term Customer Relationship

Be Courageous

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The Last Word

“People of the same trade seldom meet together, even

for merriment and diversion, but the conversation ends

in a conspiracy against the public, or in some

contrivance to raise prices.”

- Adam Smith, The Wealth of Nations

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THANK YOU