1. The Changing Structure of The Global Construction Equipment Industry March 2016, Dusseldorf

2. A Management Consultancy that specialises in the research and analysis of international construction equipment markets. The largest of its kind in the world. Formed in 1981 as part of the Economist Intelligence Unit. Management Buy-Out in 1995. Now owned by KHL Offices in: - London, England- New York, USA- Tokyo, Japan - Beijing, China - New Delhi, India www.offhighway.co.uk WHO WE ARE

3. Products Included in This Presentation Articulated Dump Trucks Asphalt Finishers Backhoe Loaders Crawler Dozers Crawler Excavators Crawler Loaders Mini Excavators Motor Graders Motor Scrapers Rigid Dump Trucks RTLTs – Masted RTLTs – Telescopic Skid-Steer Loaders Wheeled Excavators Wheeled Loaders

4. WE ARE FACING A MOST UNCERTAIN FUTURE

5. Some Positives … But Many Negatives

6. The Road Ahead is Far From Straight and Clear

7. Global Overview Global Equipment Sales * Forecast 2012: $99 billion 2013: $93 billion 2014: $93 billion 2007: $98 billion 2009: $55 billion 2010: $77 billion 2011: $102 billion Sales ($ Billion) 2015*: $84 billion 2019*: $92 billion 2007 2011 2012 2013 2014 2015*2019* ­ China $11$35 $24$21 $19$12$16 ­ North America $28$20 $25$26 $29$30$29 ­ Europe $20$12 $13$12$13 ­ India $2$3 $2 $3 ­ Japan $5$3 $4$6 $5 ­ Rest of World $32$29 $32$25 $24$23$27 ­ TOTAL WORLD $98$102 $99 $93 $84 $92

8. Global Value of Construction Equipment, by Type 2014 ($ Billion) Total: $93.3 billion

9. Key Sales Trends, by Region, 2006-2019* (Units) * Forecast

10. Key Production Trends, by Region, 2006-2014 (Units)

11. Global Recovery: Governments’ Investment is Essential They Influence 80% of Machinery Demand

12. Global Sales of Construction Equipment 2000 – 2019* (Units) * Forecast Average 2010-2014: 880,762 Average 2015-2019*: 768,435

13. Changing Structure of Global Demand, 2007-2019* (% of Total) 2007 *Forecast 2014 2019* 2011

14. A Long and Winding Road To Recovery Europe

15. Europe: Development of Sales, 2000-2019* (Units) * Forecast Average 2010-2014: 116,407 Average 2015-2019*: 130,695

16. Europe: Structure of Sales, by Product, 2007-2019* (% of Total) 2007 2019* 2014 *Forecast

17. Europe: Structure of Sales, by Country, 2007-2019* (% of Total) 2007 2014 *Forecast 2019*

18. Europe: Development of Production, 2000-2014 (Units) Average 2005-2009: 180,805 Average 2010-2014: 141,015

19. North America Still Fragile, But Positive Signs of Recovery

20. North America: Development of Sales, 2000-2019* (Units) * Forecast Average 2010-2014: 138,061 Average 2015-2019*: 173,632

21. North America: Structure of Sales, by Product, 2007-2019* (% of Total) 2007 2014 *Forecast 2019*

22. North America: Development of Production, 2000-2014 (Units) Average 2005-2009: 166,262 Average 2010-2014: 113,179

23. India Growth Will Be Stronger and More Dependable Than in The Past

24. India: Development of Sales, 2000-2019* (Units) * Forecast Average 2010-2014: 45,212 Average 2015-2019*: 52,296

25. India: Structure of Sales, by Product, 2007-2019* (% of Total) 2007 2014 2019* * Forecast

26. India: Development of Production, 2000-2014 (Units) Average 2005-2009: 25,543 Average 2010-2014: 44,398

27. China Rapid Increase, Rapid Decline – Stable Future?

28. China: Development of Sales, 2001-2019* (Units) * Forecast Average 2010-2014: 321,888 Average 2015-2019*: 148,591

29. China: Focus on The Crisis Sales, Wheeled Loaders 2004-2019* (Units) * Forecast Average 2010-2014: 163,022 Average 2015-2019*: 58,800 29

30. China: Focus on The Crisis Sales, Crawler Excavators 2004-2019* (Units) * Forecast Average 2010-2014: 113,244 Average 2015-2019*: 53,200 30

31. China: Development of Production, 2000-2014 (Units) Average 2005-2009: 225,062 Average 2010-2014: 358,552

32. China: Structure of Sales, by Product, 2007-2019* (% of Total) 2007 2014 2019* *Forecast

33. China: Excess Capacity By Product Type, 2015 (Units) Wheeled Loaders Chinese Theoretical Capacity: 420,000 Global Sales: 125,500** Excess Capacity: 274,500** * Crawler, Wheeled, Mini ** Forecast 2015 Excess Capacity: 274,500 Excess Capacity: 175,000 China Sales: 60,000 China Sales: 63,500 Excavators* Chinese Theoretical Capacity: 548,000 Global Sales: 373,000 ** Excess Capacity: 175,000**

34. Crucial Role of Exports China: Exports of Construction Equipment, 2006-2014 Units

35. Excess capacity – probably 75% too much Large machine population and stock of used machines blocking new equipment sales Easy financing – very dangerous indeed -Must do better credit checks -Very high % of repossessions Too many suppliers offering similar ‘solutions’ -Products, financing, distribution -But little cash for R&D, or future expansion Top 10 manufacturers gaining greater market share – but not rapidly recently -2002: 49% -2009: 64% -2014: 63% Smaller manufacturers diluting the market -Consolidation? -Mergers and Acquisitions? -Exit from the industry altogether China: Current Challenges Facing The Industry Domestic

36. China: Current Challenges Facing The Industry International ‘Brand China’ seen to be a problem - Poor machine quality - Poor customer support - More of a perception than reality – many machines now very good indeed. Problem of brand differentiation in ‘Gong’ approach. Standards and emissions in developed countries. Focus on developing countries - Customer expectations are lower - Less brand loyalty - Lower margins Crucial problems of creating distribution network Urgent need for: - Global brand recognition - International management - First world distribution customer support Probably only achievable short term through acquisition - But do they now have the cash?

37. Global Summary Still A Most Uncertain Future

38. mail@offhighway.co.uk Telephone: +44 (0)1892 786270 DAVID C A PHILLIPS Managing Director Please do not hesitate to contact the team for help at: THANK YOU!