The Worldwide Market For Railway Technology 2010

THE WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY 2010

MARIA LEENEN, HAMBURG, SEPTEMBER 2010

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

OUTLINE

OUTLINE

I:

METHODOLOGY OF SCI VERKEHR

II:

WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY – RESULTS OF THE STUDY

10

STRATEGIC CHALLENGES

19

III:

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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STRATEGIC EXPERTISE

OUR SCOPE: STRATEGIC ADVICE FOR INTERNATIONAL CLIENTS

• SCI is an independent consultancy company for the transportation sector with activities and projects around the world • SCI is specialised in strategic advice to the railway and logistics industry

STRATEGY CONSULTING

MARKET-, ENTERPRISE- AND PORTFOLIO-ANALYSIS

• Strategy development

• Competition analyses

• Portfolio assessments

• Market analyses

• Mergers & acquisitions

• Product analyses

• Due diligences

• Market entry strategies

• Asset value assessments

• Transport and sector analyses • Sector-related economic consulting

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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CUSTOMERS

WORLDWIDE CUSTOMERS ASK FOR SCI’S EXPERTISE

• AAE Ahaus Alstätter Eisenbahn AG • ABB Schweiz Ltd. • AEG SVS Power Sypply Systems • Alcan Composite Structures • Allco Leasing GmbH • Alstom Transportation • Amtrak Office of Inspector General• Angel Trains Cargo • Ansaldo Signal N.V. • AnsaldoBreda spa • Arriva International UK • Auctus Management GmbH & Co. KG • Axtone GmbH • Babcock Brown London • BAE Systems Ltd. • Balfour Beatty Rail GmbH • Bank of America • Bayer Material Science AG • Bayerische Landesbank • Bearing Point SAS • Behr Industry GmbH & Co. KG • Bochumer Verein Verkehrstechnik GmbH • Bombardier Transportation • Bonatrans a.s. • Calyon • Cargocare AG • China South Locomotives & Rolling Stock Corp. Ltd. • CKD Vagonka a.s. • Connex • Cummins • Dellner Kupplungen GmbH • Deuta-Werke GmbH • Deutsche Bahn AG • Deutsche Beteiligungs AG • Deutsche Binnenschiffreederei • Deutsche Messe AG • Deutscher Gewerkschaftsbund • Dimetronic S.A. • DuPont Performance Coatings GmbH & Co. KG • Durtrack AG • ELIN EBG traction GmbH • ESW GmbH • EWS Railway LTD • Extel Systems Wedel • Fahrleitungsbau GmbH • Faiveley Transport • Ferrostaal AG • Fooke GmbH • Furrer+Frey AG • GE Transportation Systems • Greenbrier Equity Group LLC • Group Ermewa SA • Gutehoffnungshütte Radsatz GmbH • Hanning & Kahl GmbH • Hans Böckler Stiftung • Heitkamp Rail GmbH • Hitachi Europe Ltd. • HSH Nordbank AG • Hübner GmbH • I.T.I. Finanziaria S.P.A. • ING Bank N.V. • Interpipe • INVEST Financial Corporation • KfW IPEX-Bank GmbH • Knorr-Bremse • Korea Railroad Research Institut • Lavoisier SAS • Lease Valuation International Inc. • Leonhard Moll Betonwerke • Liebherr Transportation Systems GmbH • LLOYDS TSB Bank PLC • MAN • Marubeni Corporation • Microelectrica Scientifica Spa • Mitron OY • Mitsui & Co. • Molinari Consulting AG • MTU Friedrichshafen • Nahverkehr Rheinland GmbH • National Australia Bank • NedTrain Consulting • Nexans • Odenwald & Compagnie • ÖBB • One Equity Partners Europe GmbH • Ox-traction N.V. • Oxford Analytica Ltd. • Paribus-SK-Rail Management • Parsons Brinkerhoff Pte Ltd • Patentes Talgo S.A. • Pfleiderer Infrastrukturtechnik GmbH & Co. KG • Phoenix Dichtungstechnik GmbH • Pintsch Bamag GmbH • Plasser & Theurer Export von Bahnbaumaschinen GmbH • Prover Technology AB • Prysmian Spa • Rail Cargo Austria • Rail Interiors S.p.A. • Rail One GmbH • Rexwal Services SA • Rexxon Services SA • Rotem Company • Royal Bank of Scotland • Sabler Consult GmbH Wien • SAFOP SAP • Saft‘s Industrial Battery Group • SBB Cargo AG • Schalker Eisenhütte GmbH • Schaltbau AG • Scheidt & Bachmann GmbH • Schreck-Mieves GmbH • Schweizer Elektronic AG • Secheron SA • Serco-NedRailways • SGL Carbon SE • Siemens AG • Sika Schweiz AG • SIRTI S.p.A. • SKF Group • Skoda Transportation s.r.o. • Société Générale Group • Solaris Bus & Coach S.A. • Stadler Rail AG • Steer Davies Gleave • Stemmann-Technik GmbH • Stinnes AG • Stratorg S.A. • Strukton Systems • SüdLeasing GmbH • Sumitomo Mitsui Banking Corp. Europe Ltd. • Syndex • Synosys Inc. • Tatravagonka a.s. • Terra Firma Investments 2 Ltd. • Telenor Sverige AB • TFK Transportforschung GmbH • Thermo King Deutschland • Thyssen Krupp GfT Gleistechnik GmbH • Tiefenbach GmbH • Toyo Engineering Corporation • Traktionssysteme Austria GmBH • Tram S.A. • Transpetro GmbH • Transtechnik GmbH & Co. KG • Transwerk South Africa • Trinity Rail GmbH • TÜV Rheinland • U.S. Government • Universal de Productos Electricos S.A. • VAE GmbH • Valspar Industries GmbH • Veolia Transport • Verband der Bahnindustrie Germany • Verkehrs Industrie Systeme GmbH • Verkehrsbetriebe Zürich • Voestalpine Bahnsysteme GmbH • Voith Turbo • VolkerRail • Vossloh AG • Vossloh Kiepe GmbH • VR Leasing AG • VTG AG • Wagony Swidnica S.A. • Walter Bau AG • Wacosa AG • Weilburg Coatings GmbH • Westfracht • WestLB AG • Wincanton GmbH • Wirtschaftsministerium Baden-Württemberg • ZAO Transmashholding • ZF Sachs AG • Zuken GmbH SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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SKILLS

STRATEGIC ADVICE NEEDS SOUND FACTS AND FIGURES

TOOLS AND PRODUCTS

STRATEGIC CONSULTING

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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STUDY “WORLDWIDE MARKET”

GENERATED FROM DETAILED STUDIES WE PROVIDE THE AGGREGATE STUDY “THE WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY”

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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FORECAST METHODOLOGY

4 STEPS OF THE SCI MARKET FORECAST

• Awarded and documented projects

Contracted

• Periods (delivery known)

• Established and announced projects

Announced

• Options

• Expected projects

Virtual

• General announcements

Project-based Long-term drivers

• Replacement purchase and maintenance demand (based on installed base) • Development of railways and transport • Megatrends • Macroeconomic development • Railway affinity

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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FORECAST METHODOLOGY

SCI MARKET FORECAST TOOL CALCULATES MARKET VOLUME OF THE WORLD MARKET FOR RAILWAY TECHNOLOGY

Market volume [EUR billion]

Schematic Illustration of SCI Market Forecast Tool

Long-term drivers

Contracted

Announced

Virtual

© SCI Verkehr GmbH SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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OUTLINE

OUTLINE

I:

METHODOLOGY OF SCI VERKEHR

II:

WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY – RESULTS OF THE STUDY

10

STRATEGIC CHALLENGES

19

III:

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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TOTAL MARKET VOLUME

THE MARKET FOR RAILWAY TECHNOLOGY CONTINUOUS TO GROW

Total market volume [EUR billion]

Trends

160 131

• 4.1% annual growth in the world market by 2015 (including increase in prices) • General drivers – Globalization – Urbanization – Environmental protection – Safeness

102

• Current drivers – Stimulus packages – Recovery of freight transport market 2006*

2010

2015

© SCI Verkehr GmbH Legend: * Methodology change in 2008 SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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TRANSPORT MARKETS

RAIL TRANSPORT MARKETS RECOVERING FASTER THAN EXPECTED

Market performance [Index 2000= 100]

Freight: global rail transport development [Index 2000 = 100] 200

100 = 6 930 billion tkm

• Railway market recovered quicker than expected from world economic crisis: 4.5% growth in 2010

150 100 2000

2003

2006

2009

2012

2015

Market performance [Index 2000= 100]

Passenger: global rail transport development [Index 2000 = 100] 200

Trends

100 = 2 380 billion Pkm

• 2008 freight level is going to be reached again in 2011 • Rail passenger transport more sustainable: 1.0% growth in 2009

150 100 2000

2003

2006

2009

2012

2015

© SCI Verkehr GmbH SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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MARKET VOLUMES AND MARKET GROWTHS

REGIONAL MARKETS GROWING DIFFERENTLY

Market volumes 2010 and market growth in the period up to 2015 by regions Western Europe:

Eastern Europe:

CIS:

- MV: EUR 39.8 bn

- MV: EUR 9.6 bn

- MV: EUR 13.7 bn

- CAGR: 3.3%

- CAGR: 2.9%

- CAGR: 4.9%

North America:

Asia:

- MV: EUR 19.5 bn

- MV: EUR 36.5 bn

- CAGR: 5.0%

- CAGR: 4.3%

South/Central America:

Africa/Middle East:

Australia/Pacific:

- MV: EUR 3.3 bn

- MV: EUR 5.7 bn

- MV: EUR 2.9 bn

- CAGR: 6.8%

- CAGR: 4.0%

- CAGR: 2.3%

© SCI Verkehr GmbH Legend: CAGR = compound annual growth rate SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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TOP TEN COUNTRIES

COUNTRIES’ RANKING CHANGE: CHINA NO. 1

Top ten countries by market volume [EUR billion] (average 2009–2011 p.a.)

Trends (2009 ranking) (2) (1)

(3) (4) (7) (6) (5) (8) (10)

• China ranks top in the world for the first time, replacing the US market • Currently, all global players benefit from Chinese market • The Russian market is the third-largest in the world and has to invest heavily to replace its vehicle fleet • Germany asserts its rank and remains the only European country within top five

(9)

© SCI Verkehr GmbH SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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PRODUCT SEGMENTS

THE ROLLING STOCK SEGMENT REMAINS INVESTMENT AREA NO. 1

Market volume and market growth by product segment [EUR billion/%]

Trends

Growth rate [%]

Market volume [EUR billion]

• Rolling stock segment with highest market volume – 2010: EUR 74.3 billion – 2008: EUR 73.8 billion • Increasing share of passenger vehicles – 2010: 67% – 2008: 50% • Infrastructure has grown due to the economic stimulus programmes • 2010: EUR 42 billion – 2008: EUR 39.5 billion • Trends will continue around 2013 and apply to systems technology as well Market volume [EUR billion]

Market growth [%]

© SCI Verkehr GmbH Legend: Growth rate corresponds to the compound annual growth rate CAGR SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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SHARE OF OEM AND AFTER SALES

AFTER-SALES MARKET WITH SLOWER GROWTH RATE THAN OEM BUT LESS VOLATILE Share of OEM and after-sales-service in product segments 2010

Rolling Stock

Infrastructure

49%

51%

42%

58% OEM

Systems Technology 53%

47%

Trends • After-Sales market grows more slowly than OEM market – OEM: 4.6% – After-Sales: 3.6% • After-Sales markets volatility is much lower – OEM: 4.9% – Total After-Sales: 0.1% • Step by step the After-Sales markets are becoming more accessible

After-Sales-Service

© SCI Verkehr GmbH SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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MARKET DETAIL

MARKET ASSESSMENT NEEDS A VIEW IN DETAIL

Market growth 2010–2015 [%]

Market volume and market growth by rolling stock segment and region [EUR billion/%]

Market © SCI Verkehr GmbH Legend: Growth rate corresponds to the compound annual growth rate CAGR SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

volume [EUR billion] 16

MARKET DETAIL

.... SOME EXAMPLES OF “STARS, CASH COWS AND LOSERS” WITHIN THE MARKETS AND SEGMENTS

Market growth 2010–2015 [%]

Market volume and market growth by rolling stock segment and region [EUR billion/%] LRV Australia

FW North America

HST Asia

D-Loco Asia

LRV CIS

EMU Western Europe

PC Eastern Europe

Market © SCI Verkehr GmbH Legend: Growth rate correspond to the compound annual growth rate CAGR SCI Verkehr GmbH / Büro Hamburg / +49 (40) 50 71 97-0 / September 2010

volume [EUR billion] 17

OUTLINE

OUTLINE

I:

METHODOLOGY OF SCI VERKEHR

II:

WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY – RESULTS OF THE STUDY

10

STRATEGIC CHALLENGES

19

III:

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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TOP TEN MANUFACTURERS

CHINESE MANUFACTURERS ARE ON THE FAST TRACK

New rolling stock: top ten rolling stock manufacturers by turnover 2009 (estimation)

Trends (2008 ranking) (1)

(2) (4) (3) (5) (7) (10) (*) (8) (6)

• Bombardier extended market lead in 2009 • Alstom still is in the second place • Both, CNR and CSR outcompete Siemens regarding market volumes • CAF entered the top ten for the first time • Freight wagon manufacturer Trinity left the top ten after the sharp fall of sales in 2009

Turnover 2009 [EUR billion] Legend: * not in the ranking 2008 SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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ESTABLISHED VS. CHINESE MANUFACTURERS

GROWTH RATES OF ESTABLISHED AND CHINESE MANUFACTURERS DRIFT APART New rolling stock: turnover development by manufacturer [EUR billion]

Trends

Turnover new rolling stock [ EUR billion]

• Between 2005 and 2009 turnover of both Chinese manufacturers more than doubled – Yearly growth rate: 20% +108%

• In the same period, turnover of the “The Big Three” had a 17% growth – Yearly growth rate: 4%

+17%

• The Chinese manufacturers’ share in the worldwide market grows very dynamically

Alstom/Bombardier/Siemens

CNR/CSR

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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PROFITABILITY OF RAILWAY MANUFACTURERS

PROFITABILITY MAKES ALL THE DIFFERENCE

Alstom Trasnport³

Siemens Mobility²

Bombardier Transporation1

EBIT Margin [%]

Turnover [EUR billion]

Total: revenue and EBIT comparison top railway manufacturer 2009 [EUR billion/%]

Trends • The Big Three gained a higher profitability than Chinese companies • Up to now state owned Chinese manufacturers are more focused on increasing volumes – but they are catching up • Highest profitability is found in specialised and/or medium sized companies with two digit EBIT Margins

© SCI Verkehr GmbH Financial year ending 31 Jan, ² Financial year ending 30 Sept, ³ Financial year ending 31 Mar,* Gross profit

1

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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CHINESE MANUFACTURERS’ WORLDWIDE PRESENCE

CHINESE MANUFACTURERS ARE “AT THE GATES”

PKP Cargo and CNR to create joint venture, CNR’s first plant outside China

CNR exports locomotives to Belarus

Delivery of CSR multiple units for Georgia CNR exports freight wagons to Vietnam and Mongolia CNR exports trams to Malaysia / CSR receives major order from Malaysia

CNR builds for the Rio de Janeiro metro CNR exports metro coaches to Saudi Arabia / CSR signs Saudi locomotive contract Major contract for CNR from Argentina

CSR will exports DMUs to Tunisia

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

CSR Zhuzhou delivers first 14 locos to Iran

CSR supply metro coaches for Rapid Metro Rail Gurgaon in India / Mumbai Metro to receive CSR trains 22

CONSEQUENCES

WHAT ARE THE CONSEQUENCES FOR THE ESTABLISHED MANUFACTURERS?

NEW DEVELOPMENTS

• More and more, Chinese market is served by strong Chinese domestic industry • Therefore, global players will lose relevant market shares in China and elsewhere • New markets in USA, South America and India may not be able to compensate those losses

ESTABLISHED ADVANTAGES

• Established players still have – Advantage in technology – Advantage in profitability – Efficiency of production • Specialists can deal more flexibly with the highly fragmented markets in Europe

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CHALLENGES

OUR CLIENTS ADAPTATION TO CHALLENGES – SOME EXAMPLES OF OUR PROJECT WORK

Positioning

• A component manufacturer wants to consolidate the international bogie market and intended to acquire an European bogie manufacturer. SCI has to cross-check the market situation

Costs / efficiency

• A supplier wants to adjust their product prices and production costs regarding the target costs in the different regional markets

Suitable new markets

• Asian technology group seeks possibilities for a market entry in Russia (including a roadmap for suitable products as well as entry strategies and cooperation partners)

Financing

Maintenance

• An international Investor wants to acquire a rolling stock leasing company. SCI has to evaluate the business plan and the expected market position of the target. We estimated the fair market value of the assets and the target. • A vehicle manufacturer is looking for market opportunities, partnerships and targets to increase their maintenance business

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SUMMARY

UNDERSTANDING OF THE SPECIFIC MARKET REQUIREMENTS MAKES THE DIFFERENCE Stable market with long-term growth opportunities - but... .... changing market environment... • European home markets come under fire • Asian companies try to take advantage from home market experience • Expected next waves of M&A and consolidation processes ....requires different market intelligence • Continuous observation and understanding of the markets • Monitoring of projects and positioning of competitors

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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CONTACT

CONTAKT

Maria Leenen

Andreas Wolf

Christian Bessler

CEO

Project Manager

Marketing & Sales

SCI Verkehr GmbH

SCI Verkehr GmbH

SCI Verkehr GmbH

Schanzenstraße 117

Vor den Siebenburgen 2

Vor den Siebenburgen 2

20357 Hamburg

50676 Cologne

50676 Cologne

Tel.: +49 (40) 50 71 97-0 / September 2010

Tel.: +49 (221) 931 78-16

Tel.: +49 (221) 931 78-20

Fax: +49 (221) 931 78-78

Fax: +49 (40) 50 71 97-20

Fax: +49 (221) 931 78-78

E-Mail: [email protected]

E-Mail: [email protected]

E-Mail: [email protected]

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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