CATERPILLAR IN EMERGING MARKETS Rich Lavin, Group President
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 "will," believes, expects, estimates, anticipates, will be, should and similar words or expressions identify forwardlooking 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 forwardlooking statements.
What I ll Cover Today Overview of Caterpillar and recent history Brief review of the 2009 outlook & beyond Our Emerging Markets Strategy
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
End Markets Machines Residential Nonresidential Industrial Infrastructure Mining & Quarrying Energy Waste Forestry
Engines Broadest Range of Engines in Our Industry From 100 KW to 22,000 KW
End Markets Engines Electric Power Cat Machines Petroleum Exit On-Highway Marine Industrial
Geographic Diversity The Global Leader Caterpillar Broadest footprint in the industry In about 50 countries Well more than 50% of employees outside the U.S. Geographic Mix - Sales and Revenues Outside North America 43% North America 57% Outside North America 61% North America 39% 1997 2008 Caterpillar Dealers 181 Cat dealers 3,000+ branches & rental stores Over 120,000 employees
Sales and Revenues 2008 Sales and Revenues $51.3 Billion Synergistic growth & improved earnings stability Genuine Cat Replacement Parts Products 66% Integrated Services 34% Solar Customer Services
6 Years of Growth 24% EPS CAGR 2003 to 2008 Sales and Revenues Earnings Per Share $5.17 $5.37 $5.66 $51.3 $41.5 $45.0 $4.04 $30.3 $36.3 $2.88 $22.8 $1.56 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008
What I ll Cover Today Overview of Caterpillar and recent history Brief review of the 2009 outlook & beyond Our Emerging Markets Strategy
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 1 st time and let dealers cancel orders Declines in every region Wide range +/- for 2009
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
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
Emerging Markets CSF Caterpillar will establish a profitable leadership position in each of the emerging markets by leveraging the holistic Caterpillar business model.
Aggressive Implementation Cat Differentiation Financial services Supply base Product design Product support Caterpillar s Global Business Model Components Distribution Logistics Manufacture Reman
CIS Footprint Future Operation Current Operation Cat Footprint 4 offices 1 logistics/parts center 1 manufacturing facility - HEX, OHT 900 Employees Cat Tosno LLC: OHT Cat Tosno LLC: HEX Tosno Moscow Moscow Office Moscow Distribution Center Novosibirsk Office Novosibirsk Khabarovsk Office Cat Dealers Footprint Dealership: 16 Branches: 110 Dealer employees: 3,000 Almaty Almaty Office Khabarovsk
India/ASEAN Non-Manufacturing Footprint Cat Footprint 8 offices 3 logistics/parts centers 1 R&D center 1 Training center Cat Employees: 4,800 Turbomach India Pvt Ltd. Mumbai Solar Turbines Delhi Government Affairs Delhi Machine Parts Distribution Center Tiruvallur Cat India Private Ltd Tiruvallur Cat Dealers Footprint Dealership: 14 Total CRS in India: 20 Cat Dealer Employees: 1,700+ Delhi Singapore Office: Marketing, Cat Finance, Logistics, Marine, Services Cat Power India Pvt Ltd. Hosur Engine Parts Distribution Center Hosur Bangalore Office: India Power system Mktg AP Logistics AP Shared Service Mumbai Hosur Tiruvallur Chennai Bangalore Engine R&D Center Chennai Singapore Balikpapan Asia Distribution Center Singapore PT Solar Services Indonesia Jakarta Office: PT Cat Finance Indo. PT Solar Services Indo. Jakarta Trakindo Training Center l
India/ASEAN Manufacturing Footprint Cat Footprint Today: 4 manufacturing facilities Future: 8 manufacturing facilities Cat Employees: From 4,800 to 6,500 Future Operation Current Operation Delhi CPIPL Bangalore: LPSD; EPD F G Wilson Pondicherry: EPD CIPL Chennai: QCTC, SWL- 2021, BHL-SS MHEX Facility Chennai: MHEX SPBU Chennai: Hose & coupling Mumbai Bangalore Chennai Cat Indonesia Batam: Truck bodies and chassis for QCT, Large Mining Trucks Remanufactured components Singapore Singapore Batam Balikpapan Jakarta PTNR Natra Raya : MHEX, TTT,Worktools l
China Growth $5 Sales & Revenues Billions of US Dollars $4 $3 $2 $1 Sales & Revenue targets have been met or exceeded over past 3 years in China In 2008, achieved 70% revenue growth over 2007, compared to 14% growth globally
The Challenge of China: Product Strategy Market Share 0 World-class Mid-tier Low-end Years World-class segment varies by product Significant segment for machine markets developed by MNCs Requires aggressive marketing Re-educate customers Mid-tier segment is tough battleground Rapidly growing, at expense of low-end Quality wins battle Low-end Local competitors dominate here Consolidation will occur over time
Current China Manufacturing Footprint Cat Footprint Today: 6 manufacturing facilities Cat Employees: 5,100 CPPX Xuzhou:MG, ACOM, CPLN, SCOM CXL Xuzhou: CHEX, MHEX, TTT Beijing Tianjin i Jinan Qingdao Qingzhou CCMC Wuxi-I:Hydraulics, Xuzhou Hose, Valves, Cabs Wuxi Nanjing Suzhou Shanghai APS Tianjin: EPD ATL Tianjin:Undercarriage SEM Qingzhou: CWL, SWL, MWL, LPT, TX, Cabs, SEM Kunming Guangzhou Hong Kong Taiwan
Future China Manufacturing Footprint Cat Footprint Today: 6 manufacturing facilities Future: 16 manufacturing facilities Cat Employees: From 5,100 to 12,000 Future Operation Current Operation Worktools Xuzhou Shaanxi TTT Xuzhou New Chengdu paving Xuzhou CPPX Xuzhou:MG, ACOM, CPLN, SCOM CXL Xuzhou: CHEX, MHEX, TTT Wuhan Beijing Tianjin i Jinan Qingdao Qingzhou CCMC Wuxi-I:Hydraulics, Xuzhou Hose, Valves, Cabs Wuxi Nanjing Suzhou CNCL Nanjing: BCP Shanghai APS II Tianjin: EPD APS Tianjin: EPD ATL Tianjin:Undercarriage SEM Qingzhou: CWL, SWL, MWL, LPT, TX, Cabs, SEM CCMC Wuxi-II: Cylinders, Gear pumps 400,1000 Engines Wuxi: IPSD Kunming Guangzhou Taiwan CSCL Suzhou: MG, MWL Reman move from CDC Hong Kong Note: * CRS Included Sanya
Local Production Growth in AP No. of Models 90 80 70 60 50 40 30 20 10 0 Product Portfolio (Locally built machines, engines & Gen sets) Today 2010
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
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 Capital Machinery 6 150 1 F.G. Wilson Dealer in China, 7 in AP region 100 SEM Dealers covering China
Cat Dealer Expansion - 2010 ECI-Metro Group 7 Cat Dealerships Sichuan,Tibet Yunnan Guizhou, Chongqing Qinghai Shaanxi Ningxia Gansu China Engineers Group 8 Cat Dealerships Jiangxi Fujian Guangdong Hunan Guangxi Hainan Xingjiang Hong Kong, Macau Total Provincial Dealerships: 29 Total Branches and CRS: 220+ WesTrac China Group 6 Cat Dealerships Beijing,Tianjin, Hebei Jilin Shanxi Liaoning Helongjiang Inner Mongolia Lei Shing Hong Group 7 Cat Dealerships Shanghai, Zhejiang Anhui Shandong Jiangsu Henan Hubei Taiwan Capital Machinery 1 Dealership
Future sites: China Non-Manufacturing Footprint 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 Cat Employees: From 5,100 to 12,000 (manufacturing included) CCI Kunming: Caterpillar China Investment Co. Ltd. Kunming Branch AP China Proving Ground Demo & Learning Center Kunming GMD Guangzhou: Mak Diesel Engine Motoren Foshan: Kiel engine and spare parts Guangzhou Hong Kong Future Operation Current Operation Beijing Office: CCI Beijing:Caterpillar China Harbin Investment Co. Ltd. CCFL Beijing: Caterpillar (China) Financial Leasing Solar Turbine Beijing CLSTL Tianjin: Beijing Caterpillar Logistics Service Tianjin Tianjin CRDC Qingdao: Qingdao Caterpillar Jinan R&D Center, China, Qingdao Qingzhou CXDC Xuzhou: Caterpillar Xuzhou Design Center Xuzhou Suzhou CRDC Wuxi: Caterpillar Nanjing Wuxi R&D Center, China, Wuxi ILC-SIP Suzhou: China Wuhan i Shanghai Inbound Logistics Center China Distribution Center Hangzhou Shanghai CLSC SH: Caterpillar Logistics Service SH CMTS: Caterpillar Marine Trading (SH) Co, Ltd TaiwanCCL Shanghai: Caterpillar CCL China HK:Caterpillar Ltd. Shanghai China Rep CLSC HK: Caterpillar Logistics Service
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
China Stimulus Package China Stimulus Package Scope Includes $4Trillion RMB ($586B) that is incremental to original 2009 and 2010 planned spending in the China 11 th 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
Growing Dealer Network Financial services Supply base Developing Strong Local Supply Chain Product design Developing products for local market needs Product support Caterpillar s Global Business Model Components Distribution Logistics Producing for Domestic & for Export Manufacture Reman Caterpillar Components Produced in Country