1 Investors Meeting (September 16, 2014)
Construction and Mining Equipment Business in Latin America
September 16, 2014 Hishashi Shinozuka Director and Senior Executive Officer President of the Construction and Mining Equipment Marketing Division
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Contents 【Pages】 1. Outline of Komatsu’s Latin American Business 1) Positioning 2) Footprints 3) Operations 4) Operation by country
3-8
2. Other operations in Latin America 9-11 1) Panama Stock Operation (PSO) 2) Next-generation mining equipment: Autonomous Haulage System (AHS) 3) CSR activities
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1-1) Positioning ・ While Latin American demand accounted for only about 8% of global demand in 2013, our sales in Latin America represented about 15% of total sales, translating into the third important market after Japan and North America. ・In terms of breakdown of sales of mining equipment by region, Latin America represented the largest share of all regions. (About 34% for FY2013) Sales of mining equipment Sales of construction & mining Demand for major 7 products 25,000 equipment by region by region: Latin America 400000 Units
Estimated by Komatsu
Latin America
Japan
Europe YoY change: global
YoY change: Latin America
China
North America Others
60.00%
JPY in bn
(to outside customers)
40.00%
1,739.3
1,677.0
1,749.7
Middle East
554.0
600
506.3
Oceania
1,500
Asia China
20.00%
614.5
JPY in bn
Africa
2,000
1,615.6 300000
(to outside customers)
400
CIS
1,000
Europe North America 200
200000 0.00%
500
Japan
15%
0
0 ‐20.00% 100000
34%
Latin America
FY10
FY11
FY12
JPY82.5/USD
JPY79.0/USD
JPY82.5/USD
FY13 JPY99.6/USD
FY11
FY12
FY13
JPY79.0/USD
JPY82.5/USD
JPY99.6/USD
Breakdown of sales by product for FY2013 Service ‐40.00%
8% 0
Global
Latin America ‐60.00%
Construction equipment
Construction eqpt
Mining eqpt
Mining eqpt
Parts
Parts
Others
Service
Others
1-2) Footprints Latin American demand for 7 major products* Demand
Units
Copper price
Mexican debt crisis
20000
NAFTA in effect
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*Estimated by Komatsu Mercosur founded
Brazilian currency crisis
Argentinean currency crisis
“Lehman Shock”
USD/Ton
10000 8000 6000
15000 4000
10000
2000
5000 0
1970s Establishment of distributors
1990s
1980s Local production
Reinforcement of distributors
74 Mexico: Began production of construction equipment (together with sales function) 73 Brazil: Began production ofconstruction equipment Production (together with sales function)
Sales
85 Miami: Transferred 72 Panama: sales base. Established sales subsidiary (Coordinating Latin American sales except for Mexico & Brazil)
71 Opened Panama office (-- 72) 76 Opened Caracas office (-- 83) 73 Opened Mexico office (-- 74) 78 Opened Bogota office (-- 84) 75 Opened Lima office (-- 83) 55 Exported graders to Argentina
Distribution
0
2010 and forward
2000s Expansion of mining equipment business
Expansion of aftermarket business
（09 Discontinued）
13 Brazil: Established Reman plant for parts
05 Chile: Established Reman plant for parts 11 Chile: Acquired truck vessel maker
95 Miami: Established Latin America regional HQ company. (Coordinating Latin American sales except for Brazil) 98 Established sales subsidiary in Brazil
10 Miami: Closed down and transferred southern Latin America marketing function to Chile. 10 Miami: Closed down and transferred northern Latin America marketing function to Komatsu America Corp. 13 Mining equipment Acquired distributor. 10 Opened Mexican office. ( -- 13)
09: Made equity participation in distributor in 80s: Built distribution network to 99: Established distributor Peru. 12: Made equity participation in cover entire Latin America. through equity participation. distributor of mining equipment in Colombia. 12: Established service subsidiary in Panama. 90s: Established the current distribution network. 13: Made distributor of mining equipment a subsidiary in Brazil.
1-3) Operations
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Operating production bases in Brazil, logistic base in Panama and powerful distribution network, especially in Chile.
Only Komatsu and CAT maintain powerful distribution networks, covering entire Latin America. (As of August 2014) Major market of mining equipment
Komatsu Holding S.A. (KHSA) Latin American HQ for mining equipment Southern Latin American HQ for construction equipment
Majority equity held by the Komatsu Group Independent Distributor
Tecpalsa in Colombia Distributor of construction & mining equipment
Panama: Logistic base for construction & mining equipment
Tecmap in Panama Mining equipment service
No. of distributors: 26 companies Incl. 3 companies (Komatsu equity) (Chile, Brazil and Colombia)
Diteca in Ecuador
Distributor of construction & mining equipment
Distributor of construction & mining equipment
Distributor of mining equipment
Distributor of construction & mining equipment
Distributor of construction equipment
Mega/Makint in Venezuela
Road Machinery in Mexico
Tiesa in Panama
Makomex in Mexico
Distributor of construction equipment
Distributor of construction & mining equipment
Distributor of construction & mining equipment
Northern Latin America marketing HQ
Equinova in Mexico
Komatsu Mitsui Maquinarias Peru S.A. (KMMP) in Peru
Igaretta in Argentina
Komatsu America Corp. NLAD
Others
Komatsu Cummins Chile Ltda. (KCC)
Komatsu Brasil International Ltda.
Komatsu Chile S.A. (KCH)
Distributor of construction & mining equipment
Komatsu Reman Center Chile (KRCC) Plant to remanufacture parts
Komatsu do Brasil Ltda.
Plant to produce construction equipment Plant to remanufacture parts
Brazilian marketing HQ for construction equipment Distributor: MB Comércio de Peças e Serviços Ltda. (MB) 10 dealers of construction equipment
1-4) Operation by Country: Chile
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Komatsu’s stronghold base in Latin America. Sales of mining equipment drive sales, accounting for about 60% of total sales in the region for FY2013. Expanding business based on aftermarket revenues against the backdrop of stable growth of Komatsu machine population. Conceptual
Sales by industrial sector (USD)
Other equipment
Others
Service
Parts
Service contracts
(Service differs depending on the contract.)
Index: FY04=100
Customers
Mining equipment
Komatsu
Construction equipment
Periodic inspection, maintenance and repairs Planned overhaul of key components
No maintenance contract (Repair and overhaul fees, when provided)
Payment of fixed fees
Cumulative repair expenses Maintenance contract (fixed amount)
Start
Operating hours 1st overhaul
【Merits for customers】 Stable machine operation and improved productivity Fixed running costs and easy budgeting Streamlined operation
Population of mining equipment and maintenance service contracts
【Merits for distributors】 Stable earnings Increased sales of genuine parts
No. employees of employees by country (consolidated) (excl. Japan)
Population of mining equipment
No. of employees (consolidated) as of March 31, 2014 35 countries: 51,279 (incl. 22,117 in Japan)
% of service contracts
2nd overhaul
Functions in Chile Provision of sophisticated service(incl. service contracts) Remanufacturing of parts
Population index: FY04=1
Sales and rental of construction equipment Sales of used equipment Retail finance Chile
China
USA Indonesia Australia Brazil Germany Thailand S. Africa Others
1-4) Operation by Country: Brazil
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The largest market for construction equipment in Latin America (about 50% of the total) In response to the government’s preferential policy for products made in Brazil, Komatsu has production plants and engages in integrated operation of production and sales. Demand for construction equipment* Units
Latin America
*Estimated by Komatsu Brazil
Characteristics of production: KDB
Organization Sales function
MB: sales/service distributor of mining equipment
% of Brazil Construction eqpt wholesale
Construction equipment: 10 sales/service distributors
No. of models made by KDB
12 models
Domestic sales Mfg function
Construction eqpt for domestic and export sales
Domestic sales % of KDB-made products No. of KDB-made models
Reman & sales of parts
Market conditions of mining equipment • World’s second largest production of iron ore High growth potentials Units
Demand for mining equipment* *Estimated by Komatsu
Establishment of mining equipment business organization 2013: Established sales and service company of mining equipment (100% equity of the Komatsu Group): MB Comércio de Peças e Serviços Ltda. (MB) Warehouse Sales/service base Major mining region KBI head office
Northern branch of KBI (incl. parts warehouse) in 2013
Southern branch of KBI (incl. parts warehouse) in 2013 Parts warehouse of KDB in Sao Paulo in 2013 KDB’s Reman plant for parts in Sao Paulo in 2013
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1-4) Operation by Country: Peru In 2009, Komatsu made equity participation in Komatsu Mitsui Maquinarias Peru S.A. (KMMP), a distributor in Peru. By capitalizing on its know-how of the mining equipment business accumulated in Chile, Komatsu is responding to an expanding market for mining equipment in Peru. Demand for mining equipment*
Major mining customers & new mines
Minerals
2011 World 2011 2012 Production Production Rank
Copper (K tons)
1,235.3 1,298.6
3
3
Zinc (K tons)
1,256.4 1,281.0
3
3
Lead (K tons)
230.2
248.7
4
4
Gold( tons)
166.2
161.3
6
6
3,418.5 3,478.7
3
3
3
3
Silver (tons) Copper Zinc Gold Mining (exploration/development projects) Smelter
Tin (tons)
=
28.9
26.1
Sales recorded by KMMP (USD)
Aftermarket
Index: 2005 = 1
Units
Production of copper expanded 150% in Peru from 2003 to 2012.
Drove expansion of the mining equipment market.
World’s top 3 minerals
Source: JOGMEC Mineral Resource Report (2014/3)
Equipment
2012 World Rank
2009: Our equity participation
Transfer and use of knowhow accumulated in Chile
KMMP’s bases
Provision of sophisticated service (incl. service contracts) Reman of parts Sales and rental of construction equipment and sales of used equipment Retail finance
Head office Branch
Callao Workshop/ Parts depot
Lima head office
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2-1) Use of Panama Stock Operation (PSO) By having stock at Panama, the hub port of Latin America, Komatsu is achieving short-term delivery and reducing inventory burden of distributors.
Characteristics of Latin American market
Panama
Komatsu (Made in Japan)
・Dynamic changes in demand resulting from large-scale projects and economic changes. (PSO stockyard) ・Chronic, high interest rates
Japan
Advantages of PSO Exporting from the hub port of Panama to other countries of Latin America
1) Short-term delivery Time needed from distributors’ placement of orders to arrivals at the port of destination In case of Chile: 120 10 days Before
Production & shipment: 90 days
PSO
Production & shipment: 90 days
Plants in Japan
Subsidiary distributor Distributor under NLAD Distributor under KHSA
Marine transport (Japan Chile): 30 days Marine transport (Japan Panama): 20 days
Stock and reexport
Marine transport (Panama Chile): 10 days
PSO
2) Distributors’ inventory Distributors’ inventories have dropped by about 60% since the start of PSO operation.
Orders from distribut or
Distributor in Chile
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2-2) Next-generation Mining Equipment Komatsu introduced Autonomous Haulage System for the first time in the world to Chile, where the Komatsu Group has a wealth of product support experience of mining equipment. Komatsu is promoting AHS introduction in other regions based on experiences gained in Chile.
Development and deployment of AHS: History Level of AHS technology Began R&D In 1990
GPS became available to the private sector in 1996
Applied to 290ton dump truck (930E) in 2002
Tested in CODELCO’s Radmiro Tomic mine in 2006
AHS market: expanding AHS technology: advancing
Commercial operation at CODELCO’s Gaby mine in 2008
Trial operation begun in Rio Tinto’s West Angelas mine in 2009
e of deployment] ving high ance and reliability of matsu have begun ng it to other major ompanies. , he 150-unit project truck with Rio Tinto alia.) in 2011.
World’s first commercial introduction of AHS dump trucks: Gaby mine fleet ・In 2008, Komatsu led the world by making commercial introduction of 11 super-large 930E dump trucks to Gaby mine of CODELCO, the world’s largest producer of copper. ・Since then Komatsu has increased the fleet, and 18 units were in operation as of March 2014. ・ Under the lump-sum subcontract agreement, Komatsu maintains all these dump trucks, which are in operation round the clock.
PC8000 excavator loading 930E dump truck
2-3) CSR Activities (in case of Chile)
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Under the following four principles, Komatsu Cummins Chile Ltda. (KCC) makes social contribution efforts in a variety of areas and encourages its employees to participate in social contribution activities voluntarily and proactively. Be responsible for business impact on the natural environment. Environment
Thorough recycling In FY 2013 KCC recycled waste equivalent of 5,100 kilograms, which was generated in house. It is continuing its recycling efforts.
Use technological and human resources and other assets of the company to contribute to the growth of society. Social contribution
Rehabilitation support program for young people KCC assists young people, who have committed crime, to learn KCCrelated technical skills and acquire a high school diploma.
Offer opportunities for education and support the development of skills. Education
Support of rebuilding schools in Haiti which suffered a massive earthquake
Support to Haiti which suffered a massive earthquake in 2010. In collaboration with the Chilean government and NPO, Komatsu Chile has worked on the project to rebuild school buildings which had been destroyed by the earthquake.
Promote healthy lifestyle of employees and their families. Health
Komatsu Chile sponsors the Family Run Volunteer employees of the head office in Santiago and their families hold a running event.
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Thank you for your interest in Komatsu.
