Speech for the FinExpertiza Network’s annual conference
1. Ad hoc Solutions & Strategic Partnerships:
The Fundamental Factors of Success for Sustainable
Global Expansion
Vladimir Gorbenko
2. ТМH
20192
Views expressed. The views expressed herein are those of the presenter; they do not necessarily reflect the views of the TMH Group.
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Disclaimer
3. ТМH
20193
0
7
14
21
28
CRRC Bombardier
Transportation
Alstom Siemens
Mobility
Hitachi Rail
Systems
TMH Stadler Rail Trinity Rail The
Greenbrier
Co.
GE
Transportation
Wabtec
Top 10 rolling stock manufactures ranked
by estimated new rolling stock revenue
[bln €]
Новый подвижной состав
Прочая выручка
TMH Ranks in Top 6 of Global Rolling Stock Manufactures
Source: Research of an independent analytical agency dated august 2018
73% Total market share of
top 10 manufactures
55
bln €
Top 6
New rolling stock
Other revenues (rail sector)
4. ТМH
20194
TMH: #1 Transport Machinery Company in Sales of Railway Freight
and Passenger Rolling Stock in CIS
Market
share
Q-ty of rivals
at domestic
market
380-90% 270-80%
1>90%
360-70%>10<5%
350-60%280-90%
Electrical multiple units Passenger coaches
Freight wagons Electrical locomotives
Shunting locomotivesDiesel locomotives
Metro cars
5. ТМH
20195
Recent Trends for Rolling Stock Manufactures: M&A and Expansion to Global Markets
87% 86%
78%
55%
9%
5% 4%0%
20%
40%
60%
80%
100%
Siemens Alstom Bombardier GE Transportation
Wabtec
CRRC ТМХ Sinara (Russia)
Share of export sales
[%]
Sources: Annual reports of the companies
Note: data for Siemens Mobility is presented as share of segment in total sales of Siemens (due to omission of published segment reporting for Siemens Mobility)
Focus on domestic marketsActive expansion on global markets
Ø = 77%
Key observations
Export sales represent >75% of global majors’ turnover
Recent sales volumes on historical / domestic markets do
not allow financing CAPEX and R&D requirements
The exception is CRRC (Chinese state-owned company) with focus
on delivery to capacious though highly regulated domestic market
6. ТМH
20196
Summation of Global Expansion of TMH
Jan 2019. New order for
delivery of 23 diesel
locomotives for Railways
of Cuba
Dec 2018. New order for
overhaul of 8 metro cars for
Sofia, Bulgaria (+option for
additional volumes of 40
metro cars)
Sep 2018. New order for delivery of 1 300
passenger coaches for Railways of Egypt.
Contract signed by Russian-Hungarian
consortium amounts to more than 1 bln EUR
Notes: information presented for last 18 month, more details are available at
http://tmholding.ru/press_office/events/
May 2018. Opening of railway depo
“Mechita” in Buenos Aires, Argentina
after an intense renovation performed by
“TMH Argentina”
Oct 2018. New production facility
acquired (“DCD Rolling Stock”, Boksburg,
South African Republic). Key functions –
assembly, maintenance and renovation
of different railway rolling stock
Oct 2019. New order for
delivery of 60 metro cars
(12 trains) for Baku, Azerbaijan
Oct 2018. New order for
delivery of 20 metro cars
(5 trains) for Tashkent,
Uzbekistan
7. ТМH
20197
What are the Market Requirements?
P a r a m e t e r ( 1 ) M a t u r e
m a r k e t s
C h i n a
E m e r g i n g
m a r k e t s
( o t h e r t h a n
C h i n a )
Regulatory barriers for new market entries High High Low
Competitiveness of local suppliers High Low(2)
Low
Stage of development of technology and innovations
in local manufacturing industries
High High Low
Availability of long-term finance for infrastructure
projects (sources, instruments etc.)
High High Low
… … … …
Target Market’s Demand
Turnkey solutions
provided by global majors
with considerable share of localization
adjusted to the projects’ specifications
secured with the instruments of long-term finance
Markets Stratification
Notes: (1) The list of parameters presented is intentionally not complete, (2) Local monopoly (CRRC) – state owned company
Priority for expansion
8. ТМH
20198
Contract facilitation and securitization
Global Expansion: Response of TMH to New Market’s Demand (1/2)
Case #1: Approach to finance projects in Egypt
Russian Export Center(1) African Export-Import Bank(2)
Product
delivery
Project
finance
New infrastructure
projects
EGYPT
Notes: (1) https://www.exportcenter.ru/en/, (2) https://www.afreximbank.com/
9. ТМH
20199
Global Expansion: Response of TMH to New Market’s Demand (2/2)
Case #2: Initiatives for local industry development in Argentina
Step 1
Renovation and re-launch of depo
Mechita in Buenos Aires, Argentina
Initial investments amount to $3 mln
Headcount at re-launch: 100 ee
Step 2
Construction of new production
facilities, renovation of industrial
equipment
Development of railway
infrastructure near Mechita
Target headcount: 1 200 ee
ARGENTINA
Result
Incorporation of industrial cluster
for localization of technologies
with capabilities to realize
potential for exporting across
Latin America
10. ТМH
201910
Global Expansion: Strategic Partnerships and Risk Allocation
F a c t o r P r e f e r r e d s o l u t i o n
At market entry stage and intense expansion
Market research and project feasibility analysis
Strategy and industrial consultants
(both global majors and locals)
M&A deals structuring and due-diligence
Local consulting firms (members of
global networks only)
Real estate valuation and picking
Real estate consultants (both global
majors and locals)
Financial services and financial recourses’ facilities Local banks and financial institutions
Regular operations
Legal and compliance support
Local consulting firms (members of
global networks only)
Accounting and tax computation
Audit and assurance
Whom do we seek in target export markets?
Main idea
Focus on core operations of the business with a proper risk
allocation is the key element of successful entry on global
market
11. ТМH
201911
Ad hoc solutions & strategic partnerships
in new target markets facilitate
sustainable global expansion