1 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 Investors Meeting (September 16, 2014)
1
Construction and Mining Equipment Business in Latin America
September 16, 2014Hishashi Shinozuka
Director and Senior Executive OfficerPresident of the Construction and Mining
Equipment Marketing Division
Investors Meeting (September 16, 2014)
2
1. Outline of Komatsu’s Latin American Business1) Positioning2) Footprints3) Operations4) Operation by country
2. Other operations in Latin America1) Panama Stock Operation (PSO)2) Next-generation mining equipment: Autonomous Haulage System (AHS)3) CSR activities
Contents【Pages】
3-8
9-11
3
0FY11 FY12 FY13
554.0
・ 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)
1-1) Positioning
Sales of mining equipment by region: Latin America(to outside customers)
614.5
506.3
34%
Demand for major 7 products
‐60.00%
‐40.00%
‐20.00%
0.00%
20.00%
40.00%
60.00%
0
100000
200000
300000
400000Units
8%
Breakdown of sales by product for FY2013
Estimated by Komatsu
0
25,000
FY10 FY11 FY12 FY13
15%
1,677.01,739.3 1,749.7
1,615.6
EuropeLatin America Japan
YoY change: global
North AmericaOthers
YoY change: Latin AmericaChina
JPY82.5/USD JPY79.0/USD JPY82.5/USD JPY99.6/USD JPY82.5/USDJPY79.0/USD JPY99.6/USD
JPY in bn
2,000
1,500
1,000
500
600
400
200
JPY in bnAfrica
Middle East
Oceania
Asia
China
CIS
Europe
North America
Japan
Latin America
Global
Latin America
Construction equipment Mining eqpt Parts
Service
Others
OthersServicePartsMining eqptConstruction eqpt
Sales of construction & mining equipment by region (to outside customers)
41-2) Footprints
0
2000
4000
6000
8000
10000
0
5000
10000
15000
20000
USD/Ton*Estimated by Komatsu
Units Brazilian
crisis
Brazilian currency
crisis
Production
Sales
Local production Reinforcement of distributors Expansion of mining equipment business
Expansion of aftermarket business
Distribution
Mercosurfounded
“Lehman Shock”
1980s1970s
NAFTAin effect
Argentinean currency crisis
1990s 2000s 2010 and forward2010 and forward
Latin American demand for 7 major products*
73 Brazil: Began production ofconstruction equipment(together with sales function)
74 Mexico: Began production of construction equipment(together with sales function)
55 Exported graders to Argentina
(09 Discontinued)
99: Established distributor through equity participation.
05 Chile: EstablishedReman plant for parts
09: Made equity participation in distributor in Peru.
10 Miami: Closed down and transferred southern Latin America marketingfunction to Chile.
11 Chile: Acquired truck vessel maker
12: Made equity participation in distributor of mining equipment in Colombia.
12: Established service subsidiary in Panama.
Mexican debt crisis
85 Miami: Transferred sales base.
72 Panama:Established sales subsidiary (Coordinating Latin American sales
except for Mexico & Brazil)
80s: Built distribution network to cover entire Latin America.
13 Brazil: Established Reman plant for parts
98 Established sales subsidiary in Brazil
10 Miami: Closed down and transferred northern Latin America marketingfunction to Komatsu America Corp.
13 Mining equipmentAcquired distributor.
95 Miami: EstablishedLatin America regional HQ company.
(Coordinating Latin American sales except for Brazil)
71 Opened Panama office (-- 72)73 Opened Mexico office (-- 74) 78 Opened Bogota office (-- 84)
75 Opened Lima office (-- 83)
76 Opened Caracas office (-- 83)
10 Opened Mexican office. ( -- 13)
90s: Established the current distribution network. 13: Made distributor of mining
equipment a subsidiary in Brazil.
Establishment of distributors
Demand Copper price
5
Komatsu Brasil International Ltda.Brazilian marketing HQ for construction equipment
Komatsu CumminsChile Ltda.(KCC)
Komatsu Chile S.A.(KCH)Distributor of construction & mining equipment
1-3) OperationsOperating 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.
No. of distributors: 26 companiesIncl. 3 companies (Komatsu equity)
(Chile, Brazil and Colombia)
Komatsu do Brasil Ltda.Plant to produce construction equipmentPlant to remanufactureparts
Komatsu Holding S.A. (KHSA)Latin American HQ for mining equipmentSouthern Latin American HQ for construction equipmentTecpalsa in ColombiaDistributor of construction & mining equipment
Tecmap in PanamaMining equipment service
Komatsu Mitsui Maquinarias Peru S.A. (KMMP) in PeruDistributor of construction & mining equipment
Road Machinery in MexicoDistributor of mining equipment
Igaretta in ArgentinaDistributor of construction & mining equipmentTiesa in PanamaDistributor of construction & mining equipment
Distributor: MB Comércio de Peças e Serviços Ltda. (MB)
10 dealers of construction equipment
Komatsu Reman Center Chile (KRCC)Plant to remanufacture parts
Majority equity held bythe Komatsu Group
Major market of mining equipment
IndependentDistributor
Komatsu America Corp. NLAD
Northern Latin America marketing HQ
Makomex in MexicoDistributor of construction equipment
Equinova in MexicoDistributor of construction equipment
Diteca in Ecuador Distributor of construction & mining equipment
Mega/Makint in VenezuelaDistributor of construction & mining equipment
Others
(As of August 2014)
Panama:Logistic base for construction & mining equipment
6
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.
1-4) Operation by Country: Chile
Sales by industrial sector (USD)
Population of mining equipment and maintenance service contracts
【Merits for customers】 Stable machine operation and improved
productivity Fixed running costs and easy budgeting Streamlined operation
【Merits for distributors】 Stable earnings Increased sales of genuine parts
No. employees of employees by country (consolidated) (excl. Japan)
Provision of sophisticated service(incl. service contracts)
Remanufacturing of parts
Sales and rental of construction equipmentSales of used equipment
Retail finance
Functions in Chile
Conceptual
Construction equipmentOther equipmentServiceService contracts
Mining equipmentOthersParts
Index: FY04=100
Komatsu
Customers
Periodic inspection, maintenance and repairs Planned overhaul of keycomponents
(Service differs depending on the contract.)
Payment of fixed fees
No maintenance contract(Repair and overhaul fees, when provided)
Cumulative repair expenses
Maintenance contract(fixed amount)
Operating hours
1st overhaul 2nd overhaul
Start
Population of mining equipment% of service contracts
Population index: FY04=1
No. of employees (consolidated) as of March 31, 201435 countries: 51,279 (incl. 22,117 in Japan)
Chile China USA Indonesia Australia Brazil Germany Thailand S. Africa Others
71-4) Operation by Country: BrazilThe 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* Organization
WarehouseSales/service baseMajor mining region
Southern branch of KBI(incl. parts warehouse) in 2013
KBI head office
Parts warehouse of KDB in Sao Paulo in 2013
Northern branch of KBI(incl. parts warehouse) in 2013
KDB’s Reman plant for parts in Sao Paulo in 2013
Market conditions of mining equipment
Demand for mining equipment*
• World’s second largest production of iron ore
Characteristics of production: KDB
2013:Established sales and service company of mining equipment (100% equity of the Komatsu Group): MB Comércio de Peças e Serviços Ltda. (MB)
2013:Established sales and service company of mining equipment (100% equity of the Komatsu Group): MB Comércio de Peças e Serviços Ltda. (MB)
High growth potentials
*Estimated by Komatsu
*Estimated by Komatsu
% of Brazil
Latin America Brazil Sales function
Construction eqptwholesale
Mfg function Construction eqptfor domestic and export sales
MB: sales/service distributor of mining equipment
Construction equipment:10 sales/service distributors
Reman & salesof parts
No. of models made by KDB 12 models
Domestic salesDomestic sales% of KDB-made productsNo. of KDB-made models
Establishment of mining equipment business organization
Units
Units
8
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.
1-4) Operation by Country: Peru
Demand for mining equipment*
Sales recorded by KMMP (USD)
2009: Our equity participation
Major mining customers & new mines
1,235.3 1,298.6 3 3
1,256.4 1,281.0 3 3
230.2 248.7 4 4
166.2 161.3 6 6
3,418.5 3,478.7 3 3
28.9 26.1 3 3
=
Source: JOGMEC Mineral Resource Report (2014/3)
Provision of sophisticated service (incl. service contracts)
Reman of parts
Sales and rental of construction equipment and sales of used equipment
Retail finance
KMMP’s basesTransfer and use of know-how accumulated in Chile
Minerals2011Production
2011WorldRank2012
Production
2012WorldRank
Copper (K tons)
Zinc (K tons)
Tin (tons)
Lead (K tons)
Gold( tons)
Silver (tons)
World’s top 3 minerals
CopperZincGoldMining (exploration/development projects)Smelter
Production of copper expanded 150% in Perufrom 2003 to 2012.
Units
Drove expansion of the mining equipment market.
Equipment
Aftermarket
Index: 2005 = 1
Head officeBranch
Callao Workshop/Parts depot
Lima head office
92-1) 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
Advantages of PSO
1) Short-term deliveryTime needed from distributors’ placement of orders to arrivals at the port of destinationIn case of Chile: 120 10 days
・Dynamic changes in demand resulting from large-scale projects and economic changes. ・Chronic, high interest rates
2) Distributors’ inventoryDistributors’ inventories have dropped by about 60% since the start of PSO operation.
Marine transport (Panama Chile): 10 days
Distributor in Chile
Marine transport (Japan Chile): 30 days
Stock and re-export
Marine transport (Japan Panama): 20 days
Production & shipment: 90 days
Plants in Japan PSO
Production & shipment: 90 days Orders
from distribut
or
Before
PSO
<PSO operation: conceptual>
(PSO stockyard)
Komatsu (Made in Japan) Panama
Exporting from the hub port of Panama to other countries of Latin America
Subsidiary distributor
Distributor under NLAD
Distributor under KHSA
Japan
102-2) Next-generation Mining EquipmentKomatsu 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.
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-large930E 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.
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-large930E 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
Development and deployment of AHS: HistoryLevel of AHS technology
Began R&DIn 1990
GPS became available to the private sector in 1996
Applied to 290-ton dump truck (930E) in 2002
Tested in CODELCO’s RadmiroTomic mine in 2006
AHS market: expandingAHS technology: advancing
Commercial operation at CODELCO’s Gabymine in 2008
Trial operation begun in Rio Tinto’s West Angelas mine in 2009
112-3) CSR Activities (in case of Chile)
Use technological and human resources and other assets of the company to contribute to the growth of society.
Promote healthy lifestyle of employees and their families.
Be responsible for business impact on the natural environment.
Offer opportunities for education and support the development of skills.
Environment
Social contribution
Education
Health
Rehabilitation support program for young peopleKCC assists young people, who have committed crime, to learn KCC-related technical skills and acquire a high school diploma.
Support of rebuilding schools in Haiti which suffered a massive earthquakeSupport 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.
Under the following four principles, Komatsu Cummins Chile Ltda. (KCC) makes social contribution efforts in a 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.
Thorough recyclingIn FY 2013 KCC recycled waste equivalent of 5,100 kilograms, which was generated in house. It is continuing its recycling efforts.
Komatsu Chile sponsors the Family RunVolunteer employees of the head office in Santiago and their families hold a running event.