caterpillar CLSA Asia Investors' Forum

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caterpillar CLSA Asia Investors' Forum

  1. 1. CATERPILLAR IN EMERGING MARKETS Rich Lavin, Group President
  2. 2. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements contained in this presentation are forward-looking and involve risks, assumptions and uncertainties that cause actual results of Caterpillar to be materially different from those projected or implied in the forward looking statements. In this context, words such as quot;will,quot; “believes,” “expects,” “estimates,” “anticipates,” “will be,” “should” and similar words or expressions identify forward- looking statements made on behalf of Caterpillar. It is important to note that actual results of Caterpillar may differ materially from those described or implied in such forward-looking statements based on a number of factors and uncertainties, including, but not limited to, changes in economic conditions; currency exchange or interest rates; political stability; market acceptance of Caterpillar's products and services; significant changes in the competitive environment; changes in law, regulations and tax rates; and other general economic, business and financing conditions and factors. A more complete summary of risks and uncertainties is described in more detail in Caterpillar's Form 10Q filed with the Securities and Exchange Commission on October 31, 2008. Caterpillar undertakes no obligation to update these forward- looking statements.
  3. 3. What I’ll Cover Today Overview of Caterpillar and recent history Brief review of the 2009 outlook & beyond Our Emerging Markets Strategy
  4. 4. Product Range Machines About 300 Models in a broad range of product categories … Backhoe Loaders Skid Steer Loaders Multi Terrain Loaders Integrated Tool Carriers Wheel Loaders Excavators Wheel Excavators Track-Type Tractors Track Loaders Pipelayers Landfill Compactors Soil Compactors Wheel Dozers Motor Graders Wheel Tractor Scrapers Articulated Trucks Off Highway Trucks Underground Trucks Underground Loaders Track Skidders Wheel Skidders Feller Bunchers Vibratory Compactors Asphalt Compactors Asphalt Pavers Pneumatic Compactors Cold Planers Rotary Mixers
  5. 5. End Markets Machines Residential Nonresidential Industrial Infrastructure Energy Waste Forestry Mining & Quarrying
  6. 6. Engines Broadest Range of Engines in Our Industry From 100 KW to 22,000 KW
  7. 7. End Markets Engines Petroleum Cat Machines Electric Power Exit Industrial On-Highway Marine
  8. 8. Geographic Diversity The Global Leader Geographic Mix - Sales and Revenues Caterpillar • Broadest footprint in the industry Outside North Outside America • In about 50 countries North North North 39% America America • Well more than 50% of America 43% 57% employees outside the U.S. 61% 1997 2008 Caterpillar Dealers • 181 Cat dealers • 3,000+ branches & rental stores • Over 120,000 employees
  9. 9. Sales and Revenues Synergistic growth & improved earnings stability Genuine Cat 2008 Sales and Revenues Replacement Parts $51.3 Billion Products 66% Integrated Services Solar Customer Services 34%
  10. 10. 6 Years of Growth 24% EPS CAGR 2003 to 2008 Earnings Per Share Sales and Revenues $5.66 $5.37 $5.17 $51.3 $45.0 $4.04 $41.5 $36.3 $2.88 $30.3 $22.8 $1.56 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008
  11. 11. What I’ll Cover Today Overview of Caterpillar and recent history Brief review of the 2009 outlook & beyond Our Emerging Markets Strategy
  12. 12. 2009 Outlook - Sales and Revenues A Very Difficult Year $40B +/- 10% • Outlook changed significantly during Q4 • Credit markets tightened • Commodity prices tumbled • We opened the order board for the 1st time and let dealers cancel orders • Declines in every region • Wide range +/- for 2009
  13. 13. 2009 Outlook Worldwide Recession 2008 2009 Actual Outlook Sales and Revenues $51.3 B $40B +/- 10% Earnings Per Share $5.66 $2.50 Excluding $500M for redundancy costs
  14. 14. Key Longer-term Trends Long-term Positive for Caterpillar We expect strong growth in worldwide infrastructure spending over the next decade Significant need to improve and rebuild infrastructure in the developed world … after years of under investment … Stimulus will help Significant growth in the developing world … and that leads to a discussion of our strategy for emerging markets
  15. 15. Emerging Markets CSF Caterpillar will establish a profitable leadership position in each of the emerging markets by leveraging the holistic Caterpillar business model.
  16. 16. Aggressive Implementation – Cat Differentiation Supply Financial base Product services design Product Components support Caterpillar’s Global Business Model Logistics Distribution Manufacture Reman
  17. 17. CIS Footprint Future Operation Current Operation Cat Footprint 4 offices • Cat Tosno LLC: OHT 1 logistics/parts center • Cat Tosno LLC: HEX 1 manufacturing facility • - HEX, OHT Tosno 900 Employees • Moscow Moscow Office Moscow Distribution Center Novosibirsk Office Khabarovsk Office Novosibirsk Khabarovsk Almaty Cat Dealers Footprint • Dealership: 16 • Branches: 110 Almaty Office • Dealer employees: 3,000
  18. 18. India/ASEAN Non-Manufacturing Footprint Cat Dealers Footprint Cat Footprint • Dealership: 14 • 8 offices • Total CRS in India: 20 • 3 logistics/parts centers • Cat Dealer Employees: 1,700+ • 1 R&D center Solar Turbines Delhi • 1 Training center Government Affairs Delhi • Cat Employees: 4,800 Machine Parts Distribution Turbomach India Pvt Ltd. Mumbai Center Tiruvallur Cat India Private Ltd Tiruvallur Delhi Singapore Office: Marketing, Cat Finance, Logistics, Marine, Services Mumbai Cat Power India Pvt Ltd. Hosur Asia Distribution Center Singapore Hosur Tiruvallur Chennai Engine Parts Distribution Bangalore Center Hosur Engine R&D Center Bangalore Office: Chennai – India Power system Mktg Singapore PT Solar Services Indonesia – AP Logistics Balikpapan – AP Shared Service Jakarta Office: PT Cat Finance Indo. – Jakarta PT Solar Services Indo. – Trakindo Training Center l
  19. 19. India/ASEAN Manufacturing Footprint Future Operation Cat Footprint Current Operation • Today: 4 manufacturing facilities • Future: 8 manufacturing facilities Cat Employees: From 4,800 to 6,500 Delhi Mumbai Bangalore CPIPL Bangalore: LPSD; EPD Chennai Remanufactured components Singapore F G Wilson Pondicherry: EPD CIPL Chennai: QCTC, SWL- Singapore 2021, BHL-SS Batam Balikpapan MHEX Facility Chennai: MHEX SPBU Chennai: Hose & Cat Indonesia Batam: Truck coupling bodies and chassis for QCT, Large Mining Trucks Jakarta PTNR Natra Raya : MHEX, TTT,Worktools l
  20. 20. China Growth Sales & Revenues Billions of US Dollars $5 • Sales & Revenue $4 targets have been met or exceeded over past 3 $3 years in China • In 2008, achieved 70% $2 revenue growth over 2007, compared to 14% $1 growth globally
  21. 21. The Challenge of China: Product Strategy • World-class segment varies World-class by product – Significant segment for machine markets developed by MNCs – Requires aggressive marketing Market Share – Re-educate customers • Mid-tier segment is tough Mid-tier battleground – Rapidly growing, at expense of low-end – Quality wins battle • Low-end Low-end – Local competitors dominate here 0 – Consolidation will occur over time Years
  22. 22. Current China Manufacturing Footprint Cat Footprint • Today: 6 manufacturing facilities • Cat Employees: 5,100 APS Tianjin: EPD Beijing ATL Tianjin:Undercarriage Tianjin SEM Qingzhou: CWL, Jinan SWL, MWL, LPT, TX, Qingdao Cabs, SEM Qingzhou CCMC Wuxi-I:Hydraulics, Xuzhou Hose, Valves, Cabs Wuxi Nanjing Suzhou i Shanghai CPPX Xuzhou:MG, ACOM, CPLN, SCOM CXL Xuzhou: CHEX, MHEX, TTT Kunming Taiwan Guangzhou Hong Kong
  23. 23. Future China Manufacturing Footprint Future Operation Cat Footprint Current Operation • Today: 6 manufacturing facilities • Future: 16 manufacturing facilities Cat Employees: From 5,100 to 12,000 APS II Tianjin: EPD APS Tianjin: EPD Beijing ATL Tianjin:Undercarriage Tianjin SEM Qingzhou: CWL, Jinan SWL, MWL, LPT, TX, Qingdao Cabs, SEM Qingzhou CCMC Wuxi-I:Hydraulics, Xuzhou Hose, Valves, Cabs Shaanxi Worktools Xuzhou Wuxi TTT Xuzhou Nanjing Suzhou Chengdu New paving Xuzhou Wuhan i Shanghai CPPX Xuzhou:MG, CCMC Wuxi-II: Cylinders, ACOM, CPLN, SCOM Gear pumps 400,1000 Engines Wuxi: CXL Xuzhou: CHEX, CNCL Nanjing: BCP IPSD MHEX, TTT CSCL Suzhou: MG, MWL Kunming Taiwan Reman move from CDC Guangzhou Hong Kong Note: * CRS Included Sanya
  24. 24. Local Production Growth in AP Product Portfolio No. of (Locally built machines, engines & Gen sets) Models 90 80 70 60 50 40 30 20 10 0 Today 2010
  25. 25. Supply Chain • Over 300 suppliers provide parts for domestic operations and export • Over 1000 international suppliers to support local growth • Dedicated supplier development resources • China Distribution Center established in 2006 outside of Shanghai • Prime product local source suppliers support service parts business
  26. 26. Cat China Distribution Network • CAT Dealers – 5 dealers in Greater China region Dealers Branches Employees WesTrac 13 1258 Lei Shing Hong 19 1482 China Engineering 9 1100 ECI-Metro 11 1100 6 150 Capital Machinery • 1 F.G. Wilson Dealer in China, 7 in AP region • 100 SEM Dealers covering China
  27. 27. Cat Dealer Expansion - 2010 WesTrac China Group Total Provincial Dealerships: 29 6 Cat Dealerships ECI-Metro Group 7 Cat Dealerships Total Branches and CRS: 220+ • Beijing,Tianjin, Hebei • Sichuan,Tibet Jilin Shanxi • • Yunnan Liaoning • Guizhou, Chongqing Helongjiang • • • • • Qinghai Inner Mongolia • • • • • • Shaanxi • • • • Lei Shing Hong Group Ningxia • • • • • • • 7 Cat Dealerships • • Gansu • • • • • • • • • •• • Shanghai, Zhejiang •• • • •• • • Anhui Shandong • • • • • • Jiangsu Henan • • • • • China Engineers Group • • • • • •• • • • Hubei Taiwan 8 Cat Dealerships • • • • • • • • Jiangxi Fujian • • • • • • Capital Machinery – 1 Dealership Guangdong Guangxi • • • • • • •• • • • Hunan Hainan • Xingjiang Hong Kong, Macau • •
  28. 28. China Non-Manufacturing Footprint Future Operation Current Operation Cat Footprint • Today: 9 offices, 2 logistics/parts centers, 3 R&D centers; • Future: 9 offices, 3 logistics/parts centers, 3 R&D centers and 2 Demonstration/Proving grounds Beijing Office: • Cat Employees: From 5,100 to 12,000 (manufacturing included) Beijing:Caterpillar –CCI Harbin China Investment Co. Ltd. –CCFL Beijing: Caterpillar (China) Financial Leasing –Solar Turbine Beijing CLSTL Tianjin: Beijing Caterpillar Logistics Service Tianjin CRDC Qingdao: Tianjin Qingdao Caterpillar Jinan R&D Center, China, Qingdao Qingzhou CXDC Xuzhou: Caterpillar Xuzhou Design Center Xuzhou Suzhou CRDC Wuxi: Caterpillar R&D Center, China, Wuxi Nanjing Wuxi ILC-SIP Suzhou: China Wuhan i Inbound Logistics Center Shanghai China Distribution Center Hangzhou Shanghai CLSC SH: Caterpillar Logistics Service SH CCI Kunming: Caterpillar China Investment Co. Ltd. Kunming Branch CMTS: Caterpillar Marine Trading (SH) Co, Ltd Taiwan CCL Shanghai: Kunming Guangzhou Caterpillar Future sites: Hong Kong GMD Guangzhou: Mak China Ltd. Shanghai Rep CCL HK:Caterpillar China Diesel Engine AP China Proving Ground Motoren Foshan: Kiel Demo & Learning Center CLSC HK: Caterpillar engine and spare Logistics Service parts
  29. 29. Cat Reman • New Industry Standards • Lowering Customer Cost • Same As New Quality • Benefits the Environment In China • NDRC Agreement Signed • Started operation in Nov. 2007 • About 60 employees • Leading the industry in China • High-tech Solutions • 2008 workshop with Chinese government on policy making
  30. 30. China Stimulus Package • China Stimulus Package Scope • Includes $4Trillion RMB ($586B) that is incremental to original 2009 and 2010 planned spending in the China 11th Five-Year Plan • Includes new & previously rejected projects and projects moved forward to ’09 –’10 • Significant allocation to projects in Cat industries (transportation, earthquake rebuilding, energy) • Funding • Central government will fund $170B of $586B • Balance will come from local government and others (primarily state owned banks) • State owned banks well positioned to fund Stimulus projects • $37B of funding from central and local government – already released and allocated • Cat China Division and Team China Actions • Team to coordinate action plans to take full advantage of stimulus package • Project opportunities being identified and action plans being developed and implemented
  31. 31. Developing Strong Local Supply Chain Growing Developing Dealer products for Supply Network Financial Product base local market services design needs Product Components support Caterpillar’s Global Business Model Logistics Distribution Manufacture Reman Caterpillar Components Producing for Produced in Domestic & Country for Export

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