thyssenkrupp Dashboard LAtm 3 0

thyssenkrupp
West Coast South America

Overview of a growing market

1st of July 2016
Presented by Michael Höllermann
CEO RHQ SA

EXECUTIVE SUMMARY

Governments across Latin America are struggling to address
macroeconomic imbalances while maintaining growth

Latin America
June 2016

EXECUTIVE SUMMARY FSG VIEW

Latin America

Governments across Latin America are struggling to address macroeconomic imbalances while maintaining growth

Low Growth Forecasted 2016 GDP growth High Growth • Latin America’s economy will contract by 0.7% in 2016,
dragged by Brazil’s deep recession.

• Timid growth in other major markets such as Mexico and
Colombia.

• Brazil, interim president Temer is facing considerable obstacles to
implementing his proposed reform agenda

• Argentina is grappling with stubbornly high inflation despite the
application of orthodox macroeconomic measures

• Risk of major social unrest is rising in Venezuela.

• Peru continues it ongoing growth rate of 3-5% per annum

FSG View
Improving economic environment
No major changes
Deteriorating economic environment

| Latin America Market Monitor | June 2016

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CHILE

Analysis and Stats

Latin America
June 2016

National Data – Chile

Political Situation | BBC: “South America´s most stable and prosperous nation”

• General Facts: Salvador Allende Augusto Pinochet

• Official: República de Chile 7 hours time difference to Germany, 15 hour flight (FRA-Santiago)
• Capital: Santiago de Chile Corruption index: 23/168 - 70/100
• President: Michelle Bachelet
• 1878 – 1883: War of the Pacific
• Winning northern territories from Bolivia and Perú

− Bad Relationship between these countries to this
day

− Bolivia claims a corridor to the Pacific Ocean
• 1971 – 1988 d'état blow

− Against Salvador Allende and following Pinochet
dictatorship

• Violation of Human Rights
− But also reason for the present economic
success.
− Chicago Boys

Chile is currently a stable market

Country analysis about Chile
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National Data - Chile Human Development
Index (HDI)
Development Indicators 0.832Poverty headcount ratio at national poverty lines (% of

Gross enrollment ratio, primary, both sexes (%) population)
100% 2013
14.4% 2013 Income level
CO2 emissions (metric tons per capita) 22.2% 2011 High income: OECD
4.6 - 2011 25.3% 2009
29.1% 2006 GDP at market prices
18.7% 2003 (current US$)
$258.1 billion 2014
Life expectancy at birth, total (years)
81 - 2014 Population, total
17.76 million 2014

Chile is a nation comparable with the stronger European countries

Source: http://data.worldbank.org/country/chile |
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National Data - Chile

Development Indicators – Ex/ Import balance

Chilean Top Imports - Exports Overall Exports and Imports for Chile 2015
2014
•The total value of exports (FoB) was US$63.4 billion.
•The total value of imports (CIF) was US$63.6 billion.

•At the HS6 digit level, 3,160 products were exported to 176
countries and 4,303 products were imported from 177 countries. 1

Copper is a dominant source of income - Almost all consumables are imported

Source: http://data.worldbank.org/country/chile |
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Economic Development - Chile

Historical and current economic figures of Chile.

Economic Situation GDP Stats

• Economic Facts: • GDP: 2015: 240 Mrd. USD (2014: 225 Mrd.
USD) {#43 in the world}
− Strongest sovereign bond rating in South
America. − Services: 40,9%

− Market – oriented economy − Mining 9% (2014: 11%)

− Chile has the strongest private property − Processing industry 10,9%
rights in Latin America, scoring 90 on a
scale 90 of 100 − Commerce 8,6%

− Trade Agreements with European Union • GPD per capita: $18,400 – richest country in
Latin America.
Annual GDP Growth (%)
• Revenues, all together 20.2% of GDP in
2013, were the second lowest among the 34
OECD countries

Nations that have an FTA with Chile appear in dark blue, those that have not ratified a negotiated FTA in light blue, and those in FTA
negotiations in purple. Chile is in red.

Chile is a strong member of the international trading community

Source: http://data.worldbank.org/country/chile |
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Economic Development - Chile Human Development

Economic figures of Chile.

Socio Economic Situation Obstacles:

− Economic Growth: % / Inflation Rate: 2,8% low productivity in mining and industrial sector & decreasing
− inequality-adjusted human development index of 0.661,
− In 2013, 2.1% of the population lived on less than US $3.10/day Cu price at high production costs.
− Gini Index 2014: 50.5 Dependance of Energy imports & high local Energy prices.
− Unemployment Rate: 6,4% Dependance of international Raw material prices.
Enviroment: Water shortage, Mining spillage and more
Growth drivers:
restricive laws for minning
 political will to expand & diversify the economy

 produces 40% of global Cu

Chile is a good place to make business although social problems will rise

Source: http://data.worldbank.org/country/chile |
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Business Environment - Chile

Business drivers and limitations

Demography  Income inequality among the highest in Latin Renewable  Renewable Energy Center to identify developments
America energies and best practices in renewable energy technologies
from around the world, disseminating its findings
 Moderately low labor costs within Chile and throughout the region.
 Low productivity; high work discipline
 Strikes and public protest significant risk to  Two Wind parks in the planning stage

business operations  One solar project in the approval stage

Urbanization  Developed and efficient infrastructure network Finite  Extensive raw material resources
 Extension and modernization of infrastructure: resources  Energy supply Chile’s Achilles’s heel due to limited
 - Extension Metro Santiago (USD 2.8bn)
 - Urban expressway Costanera Central (USD domestic energy resources
 High reliance on copper exports and energy imports
2bn)
 - Airport Santiago (USD 0.7bn) (natural gas, oil)
 Water scarcity (cyclical droughts, projects in areas of

deserts)

Globalization  Peripheral geographical location Political  Stable democratic political system; trans-parent legal
 Economic growth based on raw material export; framework framework particularly relating to foreign investment
and independent judiciary
small domestic market
 Sound financial sector and high foreign reserves  Corruption is a diminishing problem
 Integration with the global economy  Labor legislation highly restrictive and rigid
 Moderately low corporate taxes

Chile must diversify its GDP income sources

Source: doingbusiness.org
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Business Environment - Chile Opportunities

Chile as business location for thyssenkrupp Renewable energy: wind, water, sun
Ports in each region
STRENGTHS Mining
Good Telecommunication
Many Resources Requirement to renew the navy
Trade agreements
Free Market Economy Threat
Good local presence
Ongoing business in various areas Natural Hazards: volcanos, earthquakes, tsunamis
Dependence of resources
WEAKNESSES Terrible reputation of thyssenkrupp Elevators
Border Conflicts with Peru and Bolivia – risk of embargo
Public Education – privatized and expensive
Not enough local knowledge of thyssenkrupp technologies

Situation Chances
Renewable Energy from dry Bio Mass
Importing Energy 38 bio USD (8 Projects)
46% of investment in mining 10th largest Li reserves
54% of GDP based on Cu Service projects
80% of mining projects not before 2020 Navy will purchase new Submarines and Frigattes 6 bio USD
Navy needs modernization

Risk finite Cu resources
low Cu prices
tk Elevators - terrible reputation

Chile is a good place to make business for thyssenkrupp

Source: doingbusiness.org
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thyssenkrupp presence - Chile

History and Current Business Activities.

History

August Thyssen

1853 1906 1954 1960
Henschel & Sohn Visit of the Minister Blohm + Voss
Krupp supplies minting rods deliver the first of for Economic delivers two bulk
to the Mint of Chile 140 locomotives to Affairs, Jorge carriers
Chile Silva, to August
1854 Thyssen-Hütte 1965
Before 1914 Henschel supplies
Krupp delivers first coin Thyssen has a 1955 diesel engines for
press commercial agency Dr. C. Otto & busses
in Valparaiso Comp. (later
1881 Thyssen) erects a 1966
1935 semi coke plant for Chiles Ambassador
1872 Krupp supplies Delivery of five Corporaión de visits Krupp in
railroad locomotives to the Fomento de la Essen
state railway of Producción de
Krupp delivers field equipment for Chile Pupunahue 1968
August Thyssen-
and mountain guns the track Hütte supplies
Compania de Acero
Santiago - del Pacifico with
know-how for the
Valparaiso operation of the
blast furnace
Alfred Krupp 1889
1960
Krupp opens a
representative
office in Chile

1850 1880 1900 1950

thyssenkrupp has been in business with Chile since 1853

Source:
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thyssenkrupp presence - Chile

History and Current Business Activities.

History

1970 1990 2000 2007 2010 2015

Turnover of Rheinstahl Thyssen Edelstahlwerke Uhde delivers a The BHG Group TK companies in ThyssenKrupp
AG (later Thyssen takes over Pittsburgh plant for the orders the Chile are TK Industrial
Industrie) reaches DM 2 Commercial – as Thyssen production of 925 worldwide largest Aceros y Solutions opens
mn, mainly through Aceros Especiales the t/day of salpetre gravel crusher for Servicios (MX), new service
supplies of motors company represents and 1,060 t/day of the Collahuasi TK Elevadores center in Chile
Thyssen‘s commercial ammonium nitrate copper mine from and TK Ingenieria
1970 interests to ENANEX, TK Fördertechnik Chile
Mejillones 2(F0ö1r2dertechnik)
Delivery of a spinning 1991 2008-2013
plant for worsted yarn to Krupp Uhde TK Aceros y
Santiago by Spinnbau, Krupp Corpoplast and Krupp finalizes a fertilizer TK VDM and Rothe Servicios supply
Bremen Formoplast deliver a p20la0n4t Erde participate in wear-resistant
complete plant for the ThyssenKrupp the construction of heavy plates for
1973 production of 1.5-litre-PET delivers XAR- the worlds largest copper mining
bottles to a beverage bottler heavy plates for the radio-telescope in
Thyssen Niederrhein in Santiago de Chile troughs of dumper the Atacama desert Escondida, the
employs an engineer trucks for the (delivery of „Pernifer“ world's largest
from Chile, who had left 1996 transport copper material and large- copper mine in
the country following the diameter bearings) the Atacama
military coup Delivery of two semi-mobile desert, orders the
crushers to Compania Minera construction of
two conveyor
1989 Dona Ines de Collahuasi by ore in the Atacama systems from TK
Fördertechnik
Krupp Industrietechnik Krupp desert

builds a mobile 1999 2005
crusher for the copper

ore mine Polysius builds a cement plant Opening of a TK
Chuquicamata in the for Cementos Melon Steel Service
North of Chile Centre

1970 1990 2000 2010

Thyssenkrupp has a good footprint in Chile

Source:
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thyssenkrupp presence - Chile Santiago de Chile

thyssenkrupp locations  tk Aceros y Servicios S.A. (SE)
 tk Elevadores S.A. (ET)
Antofagasta  thyssenkrupp Industrial Solutions

 tk Aceros y Servicios S.A. (SE) (Chile) Limitada (IS)
 tk Elevadores S.A. (ET)
Temuco
Conception
 tk Elevadores S.A. (ET)
 tk Aceros y Servicios S.A. (SE)
 tk Elevadores S.A. (ET)

thyssenkrupp is present in the mayor urban aglomerations

Source: http://www.kpmg.com/
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Industry analysis - Chile

Automotive

Market Leaders

•Sales: Chile´s small population makes a relatively small vehicle market and during 2013 Hyundai
remained the market leader with 18 percent share of total vehicles sales, followed by Gm and Renault-
Nissan with 15 and 11 percent shares respectively
•Production: Chile´s domestic car production was ceased in mid-2008 and its automotive industry is now
limited top car parts. The domestic market which is entirely dependent on imports – benefited from its
extensive network of free-trade agreements (FTAs) with the EU, US, South Korea, China and Japan.
Also, tariff-free access to motor vehicles from Argentina and Brazil will have a positive impact.
•Segmentation
• On a regional basis, vehicle sales remain concentrated in the centre of the country, particularly in the
Metropolitan Region (including Santiago). A deeper penetration within rural areas is forecasted.
• In Chile, passenger cars (saloon is the preferred choice) represents 58 percent of the total market for
light vehicles, followed by SUVs at 18 percent and vans at 14 percent.

•Pricing
•Within Chile´s automotive market is an extensive competition between car brands, which keeps the car
prices low by international standards.
Majority of the cars purchased are payed with a mix of cash down-payments and financing due to low and
declining interest rates.

It is not planned to build an automotive plant in Chile in the near future

Source: http://www.kpmg.com/
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Industry analysis - Chile

Defense

The Chilean Law N° 13.196 known as Ley Reservada del issued on 29 October 1958
(allocate revenues from the copper mining corporations for the purchase and maintenance of
Materiel of the Chilean armed forces) will issue the Chilean Navy with 1.3 bio. USD by 2017
for the purchase of new surface or subsurface Vessels. There is a current requirement to
construct 2 new diesel submarines (type 214) and 4 +2500t Vessels (type MEKO A200)

1) Extension of Sub-Surface Vessels thyssenkrupp HDW 209 class

The Navy has decided to extend the service time of both 209 (built 1980) submarines. A US$
90 mio. refit (per boat) is planned to start 2018.

The project is planned for 30 months with a US$ 40 mio. participation (per boat) for tkMS

2) Construction of 2 Corvette type vessels – 2300t displacement

The Navy is planning to start building two seagoing, airdefence vessels beginning
construction in 2018.

tkMS is planning to participate in this tender (expected Q3 2017) by offering the thyssenkrupp
Blohm & Voss K-130 Corvette class as built for the German and Israeli Navies. The budget
per vessel is US$ 250 mio. tkMS would provide design, material packages and support in the
construction of the vessels at ASMAR in Chile.

tkMS is currently represented
by Ferrostaal - Chile

thyssenkrupp Marine Systems is present in Chile – there are US$ 300 million
opportunities

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Industry analysis - Chile # Customer/Keyword Contra OI GO (%) GET (%) CV
ct (MUSD
Industrial Solutions )
5
Market Trends – April 12, 2016: 10
40
23,000 jobs lost last year in Chile in the mining sector
30
Copper price lowest in the last 7 years – Price of Copper – 1 Collahuasi Puerto EPC Q3 2016 50 50
$2.0935/lb Patache 50 30
80
Gold Price not stable – Price of Gold - $1258.14/ounce 2 Collahuasi EP+S Q4 2016/ 50 30 12
3 Shiploader/Port 2017
Challenges 4 Reclaimer 25 30
30
• 25 projects – delayed 2 years, 21 projects delayed 2-4 5 KHMG / Sierra Gorda II EP Q4-2017 / 90 30 150
years, 9 projects 4-6 years 6 4 HPGRs + 3 Ball Mills 2018 30
7
• Governance 8 Codelco / El Teniente + EP+S 2017 / 35
Nuevo Nivel Mina 2018
• Communication Crushing Plant
Conveyors
• Data base – support for proposals
Codelco / El Teniente + EP+S 2017 / 35
• Mark ups, P&L - competition Recursos Norte 2018
Crushing Plant
• Transparencies between BU’s Conveyors

• Continued viewed – Europe/NA are the only places to Lundin Mining (AMEC) EP 2017 / 35
manufacture Fruta del Norte Project 2018

• Price Competitiveness

Opportunities Pucobre / El Espino
Crushing
• Revamp model before upturn Plant+Conveyors+Mills+ 2017 / 30
HPGRs 2018
• Technology and Innovation • GSM – LCC, Engineering EP
• Overhaul of Proposals Center
• Change in Culture Teck + Goldcorp EP 2017 / 10
• Must win structural projects • Services Business – Growth Proyecto Corredor 2019

• Exceed Projects/Services -
Business Targets

thyssenkrupp IS is strong in Chile – there are US$ 307 million in opportunities

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Industry analysis - Chile CHILE
4.282 Units
Elevators 340 Employees

Chile: Economy, is not growing as fast as

expected FC16 is 1,5% & BDGT17 2%, tke has
a solid NI Backlog

Challenges LATAM MFG BR LATAM FIELD BR
MFG BR
NI Operations to perform • Argentina, Colombia,
Metro Chile Paraguay, Uruguay and • Product certification:
Bad reputation due to almost fatal accident with Chile should buy only Increase presence in ISO
client ending paralysed Brazil elevators
Several issues with delays in delivering NI jobs • Intensifying an area of
Some fines charged from customers • Tax benefits (APEC) testing and qualification
ensuring the product
Opportunities • Peru, Panama, Central certifications (tech PUB)
America and distributors
New Service manager, many service preferably buy from Brazil • Review of guarantees
iniciatives. LATAM FIELD BR processes and critical
Shared Service Center items aimed at the solving
Brazil as main material supplyer • Consolidation of speed
administrative functions -
CSC – started in January • Factory must ensure
quality and quantity of
• Brazil corporate areas 100% of shipped volumes
supporting LATAM
• Have competitive prices on
• Service pilot project with the market (-15% FY16)
Brazil
• Accessibility production
• Optimize logistics between inside (produce instead of
Brazil and LATAM buying)

• Review the ordering and • Create a quality
supply process of parts, management that runs
preferably buy standard horizontally
parts from Brazil

thyssenkrupp Elevators Chile is currently giving the brand a bad name

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PERU

Analysis and Stats

Latin America
June 2016

Photography: The president of the Peruvian Institute of Nuclear Energy, Susana Petrick, poses at Peru's Oscar Miro Quesada
(Racso) Nuclear Centre, named after prominent Peruvian scientific journalist Oscar Miro Quesada (18841981), a.k.a. Racso.

National Data – Peru President:
Pedro Pablo Kuczynski
Political Situation

• General Facts:

• Peru is a Presidential representative democratic republic with
a multi-party system. Under the current constitution, the
President is the head of state and government; he or she is
elected for five years and cannot serve consecutive terms.

• Overview

• It is rich in copper, silver, lead, zinc, oil and gold.

• The country experienced an economic boom in the 2000s, and
in 2011 Peru was said to have one of the world's fastest-
growing economies.

• Foreign investors, attracted by the government and
encouraged by favorable conditions, have been keen to get
involved in exploiting the country's mineral wealth, but the
authorities have faced opposition in rural areas to the
extractive projects that local residents say will cause pollution,
use up scarce water supplies and fail to lift them from poverty.

Peru is an emerging market that faces 5 further years of growth

Country analysis about Perú
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National Data - Peru Human Development
Index (HDI)
Development Indicators 0.734Poverty headcount ratio at national poverty lines (% of

Gross enrollment ratio, primary, both sexes (%) population)
101% 2014
22,7% 2014 Income level
CO2 emissions (metric tons per capita) 23,9% 2013 Upper middle income
1.8 - 2011 25,8% 2012
27,8% 2011 GDP at market prices
30,8% 2010 (current US$)
$202.6 billion 2014

Life expectancy at birth, total (years)
75 - 2014

Population, total
30.97 million 2014

Peru is an emergin country – it is far from being called a 3rd world country

Source: http://data.worldbank.org/country/chile |
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National Data – Peru

Import - Exports

Peruvian Top Imports -Exports 2014 Overall Exports and Imports for Peru 2014

Exports and imports of Peru in 2014 are below, along with number of
countries and products

•The total value of exports (FoB) was 38,459 million.
•The total value of imports (CIF) was 42,194 million.
•At the HS6 digit level, 3,320 products were exported to 174 countries
and 4,156 products were imported from 194 countries. 1

Commodities are the dominant source of income – Fertilizers need to be imported

Source: http://data.worldbank.org/country/chile |
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Economic Development - Peru

Economic figures of Peru

Economic Situation GDP Stats Annual GDP Growth (%)

− Very strong agriculture and mining. − GPD: $371.3 billion {#49 in the world}

− Strong tourism. − GDP per head 2015: about 8,8 Mio. CLP (~14.000
USD)
− Economic Freedom Status:
Moderately Free − GDP in Peru averaged 45.30 USD Billion from
1960 until 2014, reaching an all time high of 202.60
− 2016 Economic Freedom Score: 67.4 USD Billion in
(down 0.3 point)
− Gross Fixed Capital Formation in Peru decreased
− Economic policy: Politics are all to 26667.48 PEN Million in the first quarter of 2016
focused on economic growth from 35292.59 PEN Million in the fourth quarter of
2015.
− National Corruption is still an issue
(corruption index: Rank: 88 /168 Pedro Pablo Kuczynski served as a Cabinet chief, finance
Score: 36 /100 ) minister and mining and energy minister in the
governments of Fernando Belaunde and Alejandro
− International integration (Mercosur Toledo. He has also worked for the World Bank and in the
and other international agreements, private sector. Independently wealthy from an investment
exports, finance markets, a.o.): Peru portfolio, “PPK” is the candidate for orthodox
is planning full integration into the economics.
Andean Free Trade Area.

− Outlook: Continued sustainable
economic development

Peru is doing well – In 5 – 10 years it could be considered a develpend nation

Source: http://data.worldbank.org/country/chile |
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Business environment - Peru

Historical and current economic figures of Peru.

− Peru is a type 3 (Länderklasse) development country that has identified four
strategic areas to be improved by the Peruvian state:

a) Human security, contributing to secure universal access to drinking water and
sanitation, as well as eliminating all forms of exclusion and discrimination;

b) governance, contributing to a democratic, transparent and efficient state,
guaranteeing universal access to justice and assisting the decentralization
process.;
c) human development, through universal access to quality education and
improved health and nutrition;
d) sustainable competitively, through the promotion of national competitiveness,
appropriate work conditions and abundant work opportunities, sustainable use of
natural resources and the protection of the environment, scientific and
technological development and the integration of Peru in the world economy

Peru is a developing country that needs to solve basic problems

Source: http://data.worldbank.org/country/peru
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Business environment - Peru Human Development

Historical and current economic figures of Peru.

Socio Economic Situation

− Economic Growth: 3.3% / Inflation Rate: 3,54%
− inequality-adjusted human development index of 0.563
− In 2013, 9.7% of the population lived on less than US $3.10 a day
− Gini Index 2014: 50.5
− Unemployment Rate: 6,45%

Average to Minimum Wages

750 PEN = 226 USD
hours/ week 48 – 60
= 1.20 – 0.95 USD/hour

A growing middle class is indicative of an increase of education & demand for
consumables

Source: http://data.worldbank.org/country/peru

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Business Environment - Chile Renewable  Hydropower only renewable resource exploited
energies energy demand covered 60% of by hydro power
Business drivers and limitations with increasing tendency

Demography  Limited skilled labor pool  Wind power negligible due to absence of regulatory
framework and reliable record of wind potential;
 Wages for trained staff comparable with US wages lack of human, financial, and technical resources
 Increasing purchasing power of lower income

groups
 Unequal income distribution; entrenching

problem of underemployment and
unemployment

Urbanization  Poor-quality transport network Finite  Rich in natural resources - one of world largest
resources producer of gold, silver, copper, zinc and lead
 Insufficient power supply – 89% (95% LAC1
Region) access to electricity, but only 30% of rural  Peru’s proved oil reserves are located onshore in
population (lowest in Latin America) the Amazon region; natural gas exporter

 Government announced a series of transport-  Government approved beginning of oil and gas
related infrastructure through public-private exploration in the Amazon rainforest
partnerships
 Shale gas found; Maple Energy is seeking
investment partners

Globalization  Open economy with low tariffs Political  Progress in improving efficiency and enforcement
framework of legal system
 Relatively risky country by both regional and global
standards but does present an attractive  New statutory minimum monthly wage (USD 195
environment for investors since 2009)

 Free Trade agreements with USA, EU and China  Remaining prevalent corruption in government
 Sound financial sector procurement and judicial system
 Strong foreign reserves
 Political and social tension over major mining and
hydrocarbons exploration in the Amazon region

The lack of electricity is a mayor problem – If solved the national economy wil grow
faster

Source: doingbusiness.org

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Business environment - Peru

Peru as business location for thyssenkrupp

STRENGTHS Threat

Natural resources: Oil, natural gas, minerals, protein rich ocean, New Government very weak: No changes in policy or law in the next 5
Fertile with sufficient water
Major industries: mining, agriculture and fishing, years
cultural heritage/tourism Increase in narcotics production – security issues
La Niña expected December 2016 (no rain nation wide)
WEAKNESSES
Compliance
Economy is dependent on volatile international commodity prices.
Situation Chance
Agriculture challenged by low productivity and highly fragmented land
ownership. growing agrar production high demand for fertilizers

Fishing strongly influenced by climate phenomenon (el Niño) huge natural gas potential offer down stream tech

Insufficient infrastructure: inadequate transportation (lack of roads, Consolidated cement market Improve services
rails, bridges and pipelines), hesitation to invest in high capital
intensive infrastructure projects. outdated surface fleet a 6 Frigate programe (6 bio USD)

Opportunities insufficient energy distribution renewable energy for local sourcing

Tourism growth. very large mining deposits advising needed
New Free trade agreements.
Growth Economy: very strong stock market (access to private insufficient infrastructure infrastructure buildup
capital), Political support,
growing GDP with low inflation. Risk
Very low wages with 48-60 work hours/week.
extreem weather

weak government

compliance

budget to low for all possible chances

thyssenkrupp has major opportunities in Peru – a strategy needs to be developed

Source: http://data.worldbank.org
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thyssenkrupp presence - Chile

History and Current Business Activities.

History

Alfred Krupp August Thyssen 1961
Peruvian trainees
1901-06 1953 work at the Thyssen-
The Peruvian Hütte, Duisburg
Krupp delivers ambassador visits
material for light the steel works in 1964
railways Oberhausen Handelsunion buys a
subsidiary in Lima:
1850 1880 1923 1955 Ferrunion S.A.
Thyssens’s steel
Krupp delivers minting Krupp supplies Henschel & Sohn works import iron 1964-66
rods to the State Mint field and delivers the first of ore from Marcona Erection of a cement
of Peru mountain 17 locomotives Mining Company plant in Yura by
cannons to Peru on a regular basis Krupp
1969
1850 1880 1900 1957 Krupp delivers the
The Thyssen largest girth gear and
Group assists in tubular mill to Peru
the expansion of
the Chimbote steel 1969
works Rheinstahl Hüttenwerke
supplies 107 armored
1950 personnel carriers based
on a Mercedes Benz
chassis

1960

thyssenkrupp goes back 166 years in Peru

Source:
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thyssenkrupp presence - Chile

History and Current Business Activities.

History

1973 1980 1998/99 2003 2010 2012
TK Robins, Colorado,
Hoesch Handel and Krupp supplies two Thyssen Aufzüge has Thyssen Eletec has Polysius operates a USA, supplies a belt
Industria Peruana de pilot plants for the a participation in 83 employees service center in conveyor system to the
Alambre sign a examination and Peru: Thyssen Peru in which milling Antapaccay copper
contract for the supply processing of oxidic Eletec, Lima cylinders are mine and receives an
of a tube plant copper ore reconditioned award for innovative
products
1975 1984 1999 2007 2011/12
Exhibition on Villa Krupp Canada puts 2013
Krupp Maschinenbau Hügel: „Peru through into operation a belt ThyssenKrupp TK Plant TK Robins, Colorado,
supplies worsted yarn the millenia: Art and conveyor system for Elevadores and Technology receives USA, receives the order
spinning works to culture in the land of Perinha Polysius have 90 orders from to supply a belt
Hilados Garcia, Lima the Inka“ employees customers from the conveyor system for the
1990 areas cement, Las Bambas copper
1977 1985 minerals and mine
HDW delivers 4 mining, amounting
HDW delivers 2 submarines HDW to 2015
submarines HDW Class 209/1200 for the 4 bn EUR ThyssenKrupp provides
Class 209/1200 for the Peruvian Navy new crushing and
Peruvian Navy overland conveying
1980 system for Cuajone
1978 copper mine

Augusst Thyssen- 2000 2010
Hütte gives technical
assistance to
Empresa Siderurgica
del Peru for their
coking plant at
Chimbote steel works

1970

thyssenkrupp is a brand in Peru – the Navies pride are thyssenkrupp submarines

Source:
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thyssenkrupp presence - Chile

History and Current Business Activities thyssenkrupp locations

Lima

 tk Elevadores S.A.C. (ET)

Arequipa

 tk Industrial Solution (Peru)
S.A. (IS)

Although most of Peru´s business is done in Lima, there are possibilities for expansion

Source: http://www.kpmg.com/
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Industry analysis – Peru

Automotive

Market Leaders

Sales: As there are no vehicle production plants in Peru, all vehicles are imported. During 2013,
Hyundai accounted for the largest share, 26 percent of total vehicle sales, followed by Toyota and
GM with 22 and 11 percent respectively.
Segmentation
Within Peru’s automotive market compact and fuel-efficient cars have become more attractive
owing to high average oil prices. The market for high-end brands and sports utility vehicles (SUVs)
remains small.
Pricing
Within Peru’s automotive industry, around one-half of all vehicle are purchased with cash. Only 20
percent of vehicle purchases are made using credit and the remaining 30 percent are paid through
other means such as collective funds.

It is not planned to build an automotive plant in Peru in the near future

Source: http://www.kpmg.com/
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Industry analysis – Peru

Defense

Peru drives 6 Sub-Surface Vessels of the thyssenkrupp HDW 209 class
In Mai 2016 a 7 year technical assistance project contract was signed for 4 of
these vessels.
- tkMS foremost goal is a smooth execution of the signed contract in order to
insure full order intake and minimize risks and losses to maintain or increase
the planned future order intake.
- Beside the main contract this also includes that the Offset obligations need
to be executed in an efficient manner with close contact to ministry of defense.
The Peruvian Navy must standarizue
the Peruvian Navy has initiated a program for Multipurpose Frigates.
- The program, that has passed initial stages within the Navy and will be
presented to the new government shortly
- purchase of 6 frigates. tkMS has proposed a MEKO A200 Frigate variant
- Delivery of first of it batch is scheduled for 2021
tkMS is currently only represented by a Sales Rep from Ferrostaal
There have been cooperation talks between tkMS and tkIS Peru for the
ongoing and future projekts

tk Marine Systems is weak in Peru – there are US$ +2 bio in low Pget/Pgo opportunities

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Industry analysis – Peru # Customer/Keyword Contract OI GO (%) GET (%) CV
(MUSD
Industrial Solutions 1 )
2
Market Trends – April 12, 2016: 3
Add info 4
5
Challenges 6
7
• Please add info here 8

Opportunities

• please add info here

thyssenkrupp IS is present in Peru – there are US$ x million in opportunities

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Industry analysis – Peru

Elevators

Peru: Please Add info • PERU LATAM FIELD BR
Challenges 4.282 Units MFG BR
• 340 Employees
Please add info here • • Product certification:
LATAM MFG BR Increase presence in ISO
Opportunities
Argentina, Colombia, • Intensifying an area of
Add info here Paraguay, Uruguay and testing and qualification
Chile should buy only ensuring the product
• Brazil elevators certifications (tech PUB)

• Tax benefits (APEC) • Review of guarantees
• processes and critical
• Peru, Panama, Central items aimed at the solving
• America and distributors speed
preferably buy from Brazil
• Factory must ensure
LATAM FIELD BR quality and quantity of
100% of shipped volumes
Consolidation of
administrative functions - • Have competitive prices on
CSC – started in January the market (-15% FY16)

Brazil corporate areas • Accessibility production
supporting LATAM inside (produce instead of
buying)
Service pilot project with
Brazil • Create a quality
management that runs
Optimize logistics between horizontally
Brazil and LATAM

Review the ordering and
supply process of parts,
preferably buy standard
parts from Brazil

thyssenkrupp IS is strong in Chile – there are US$ 307 million in opportunities

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COLOMBIA

Analysis and Stats

Latin America
June 2016

Photography:

National Data – Colombia

Political Situation

• General Facts:

• Colombia has significant natural resources and its diverse
culture reflects the indigenous Indian, Spanish and African
origins of its people.

• Decades-long violent conflict involving outlawed armed
groups, drug cartels and gross violations of human rights,
although since 2002 drastic improvements have been
achieved

• It also has a highly stratified society where the traditionally
rich families of Spanish descent have benefited from this
wealth to a far greater degree than the majority, mixed-
race population. With few avenues for social mobility, this
provided a natural constituency for left-wing insurgents.

President:
Juan Manuel Santos

Population: 46.9 million (UN, 2011)
Capital: Bogotá
Area: 1.14 million sq. km (440,831 sq. miles)
Life expectancy: 70 years (men), 78 years (women) (UN)
GNI per capita: US $5,510 (World Bank, 2010)

thyssenkrupp has an important presence in Bogota that is not felt due to its dispersion

Country analysis about Colombia
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National Data – Colombia

Development Indicators

Gross enrollment ratio, primary, both sexes (%) 130% Poverty headcount ratio at national poverty lines (% of

2009 population)

27.8% 2015 Income level
28,5% 2014 Upper middle income
30,6% 2013
32,7% 2012 GDP at market prices
34,1% 2011 (current US$)
$377.7 billion 2014

CO2 emissions (metric tons per capita) Life expectancy at birth, total (years)
1.6 - 2011 74 - 2014

Population, total
47.79 million 2014

National Data - Colombia

Source: http://data.worldbank.org/country/chile |
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National Data – Colombia

Development Indicators

Overall Exports and Imports for Peru 2014

Colombian Top Imports -Exports 2014 Exports and imports of Colombia in 2014 are below, along with
number of countries and products

• The total value of exports (FoB) was 54,795 million.
• The total value of imports (CIF) was 64,028 million.
• At the HS6 digit level, 3,425 products were exported to 183

countries and 4,274 products were imported from 199 countries. 1

Human Development

Chile copper is a dominant source of income

Source: http://data.worldbank.org/country/chile |
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Economic Development - Peru

Historical and current economic figures of Peru.

(GDP, inflation, interests, investment, etc.) – incl. comparison with selected other countries (e.g. Brazil, Chile, Peru, Colombia)

Economic Situation GDP development in Colombia: Annual GDP Growth (%)

• Growth drivers: Latin America & Caribbean (developing
only):
− Very strong agriculture and mining. Strong
tourism. − income level: upper middle income

− Obstacles (incl. industrial, political, and socio- − GDP at market prices (current US$):
demographic trends) : $377.7 billion 2014

− Economic Freedom Status: Moderately Free − Population, total: 47.79 million 2014

− 2016 Economic Freedom Score: 67.4 (down 0.3 − GPD: $371.3 billion {#49 in the world}
point)
− GPD per capita: $11,817
− Economic policy (historical trends, current
situation, and outlook):. Historical and current economic figures of
Argentina (GDP, inflation, interests,
− International integration (Mercosur and other investment, etc.) – incl. comparison with
international agreements, exports, finance selected other countries (e.g. Brazil, Chile,
markets, a.o.): Peru is planning full integration China, Germany)
into the Andean Free Trade Area. In addition,
Peru is a standing member of APEC and the GDP origin and industry/trade structure in
World Trade Organization, and is an active Argentina
participant in negotiations toward a Free Trade
Area of the Americas (FTAA). Additionally there
is a standing free trade agreement between the
EU and Peru. T: Social tension: strong classism
(social classes are closed)

Na−tiOountlaoolk:DFuatutare e-coEnocmoicndoevmeloicpmSenittuation - Peru

Source: http://data.worldbank.org/country/chile |

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Business environment - Colombia

Historical and current economic figures of Colombia.

(GDP, inflation, interests, investment, etc.) – incl. comparison with selected other countries (e.g. Brazil, Chile, Peru, Colombia)

Business Indicator

thyssenkrupp has an important presence in Bogota that is not felt due to its dispersion

Source: http://www.doingbusiness.org/
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Business Environment – Colombia

Business drivers and limitations

Demography  Third most populous country in Latin America Renewable  Significant wind and solar resources that remain
 Poverty affects nearly 46% of the population energies largely unexploited
 High unemployment level
 With 70% of the country’s power generation,
hydropower is a very important national energy
source

 Due to increasing gas-powered electricity, the
heavy reliance on hydropower will be reduced

Urbanization  One of the most urbanized countries in Latin Finite  Strong increase in oil, natural gas, and coal
America resources production after the implementation of a series of
regulatory reforms and increasing investment
 Infrastructure, telecommunications and power
sectors are particularly well positioned for growth  World's fourth largest thermal coal exporter
 Self-sufficient in natural gas supply; recently began
 Government’s plans to designate 1.5% of GDP to
infrastructure projects over the next two years exporting to neighboring Venezuela
while increasing this to 3% by 2014  Production from shale or coalbed methane gas

Globalization  Fourth largest economy in Latin America Political fields planned
 A weak external environment is exposing framework
 While security has undoubtedly improved, state
Colombia’s overdependence on US trade and high presence remains weak in many areas and crime
oil prices levels in the cities remain high
 Lack of export diversification
 Further possible attacks on oil infrastructure by
insurgent groups such as Fuerzas Armadas
Revolucionarias de Colombia (FARC) and Ejercito de
Liberacion Nacional (ELN)

thyssenkrupp has an important presence in Bogota that is not felt due to its dispersion

Source: doingbusiness.org
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Business environment – Colombia

SWOT Analysis Colombia. Opportunities

Colombia as business location Peace deal with the FARC guerrillas: land reform (1mio hectare new farm
land), Frozen accounts cleared and re-injected into money flow (20-40 bio
STRENGTHS USD),

Access to two oceans Threat
Large population (nearly 50 million)
Abundant natural resources (agricultural and Slowdown in growth associated with falling commodity prices
mineral)
Considerable tourism potential Devaluation of the Colombian Peso
Prudent economic policy Insufficient infrastructure (wide areas of the country are almost inaccessable –
Institutional stability (oldest ongoing democracy in
LatAm) the capital is 12 truckhours from the closest port)
Sound banking system Post Conflict – social unrest

WEAKNESSES Low Oil price

Sensitive to raw materials prices and the American Situation Chance
economic cycle Please Insert text here Please insert text here

(hydrocarbons representing almost 50% of the Risk
country's exports) Please Insert text here

Road and port infrastructure deficiencies
Problematic security situation linked to drug
trafficking
Educational and healthcare shortcomings
Large informal sector (60% of jobs)
Lack of skilled labor and low productivity
Legislative, judicial and administrative delays,
corruption
Structural unemployment, poverty and inequality

thyssenkrupp has an important presence in Bogota that is not felt due to its dispersion

Source: http://data.worldbank.org
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thyssenkrupp presence – Peru

History and Current Business Activities.

History

1970 2001 2011
Blohm + Voss 2 submarines ThyssenKrupp Uhde finishes plant
HDW Class 209/1200 for the for Polipropileno del Caribe ThyssenKrupp Elevator is
Colombian Navy (Propilco S.A.) in Cartagena supplying 39 elevators, 20
escalators, 16 moving
1983 2005 walks and 33 passenger
Blohm + Voss supplies The Heavy Plate Profit Center of TK boarding bridges for a new
Colombia with four corvettes Stahl AG opens its own steel service terminal at Bogota
class FS1500 center in Santiago de Chile (TK Aceros Eldorado International
y Servicios) for special structural steel Airport
plates and processed blanks for
customers in Chile, Colombia, Peru, 2015
Argentina and Uruguay
ThyssenKrupp Marine
Systems attends fair in
Cartagena/CO

2008 2015

Blohm + Voss delivers 2 material ThyssenKrupp IS receives order to build
packages for the overhaul and cement plant in Colombia (contract value
modernisation of submarines HDW around €100 million - Planned startup end
Class 209/1200 for 2017) from Cementos Argos, the biggest
the Colombian cement producer in Colombia and one of
Navy the biggest in the Caribbean

1970 2000 2010

thyssenkrupp has an important presence in Bogota that is not felt due to its dispersion

Source:
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thyssenkrupp presence - Colombia

History and Current Business Activities

thyssenkrupp locations

Bogota

 tk Comercial Colombia S.A.S.
(SE)

 tk Elevadores S.A. (ET)

It is not planned to build an automotive plant in Chile in the near future

Source: http://www.kpmg.com/
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Industry analysis – Colombia

Automotive.

Overview: Situation, drivers and obstacles of industry segments with relevance for tk
AUTOMOTIVE

Population (million, 2012) 46.6;
GDP per capita (current dollars, 2012) 7,842;
Extension of the territory (thousands of km2) 1141.7;
Red Road (thousands of km, 2011) 214.4;
Automotive Park per 1000 inhabitants (2011) 80.2;
New car sales (thousands of units, 2012) 316.0;
Average price of cars (COP Millions, 2012) 34.5;
new vehicles financed (% New Car Sales) 58.0;
Vehicle imports come mainly from Mexico and Korea;
Colombia ranks second in the production of motorcycles in the region, after Brazil, with an annual production of 515,000 motorcycles.

There is no large automotive plant planned for Colombia in the next 5 years

Source: http://data.worldbank.org
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Industry Analysis – Colombia

Economic stats of Colombia.

Overview: Situation, drivers and obstacles of industry segments with relevance for tk

DEFENSE

The Colombian Armed Forces are Currently Involved in international peacekeeping missions. The Most
Important one being a 50 Zear ongoing posing of a battalion of infantry in the Sinai peninsula. Currently
there are 300,000 armed personnel (200000 Police Force) at a cost of 10 bio USD / year (only armed
forces). These numbers will fall as soon as the peace talks are successful With FARC. The annual
investment budget for new equipment is 400 mio USD. It is customary to request larger sums Directly
from parliament for larger investments.

Cement
Mining
Construction
Energy

Derivation of hypotheses attractive market segments for tk

Company MES, standing in the business environment (major player or just a small company in
engineering), fields of activities, employees, financials if possible, of Having Their potential contacts to the
"big ones" in Colombia (like EcoPetrol) etc.
Promigas gas companies, Pacific, Canacol Energy - standing in comparison to other Local gas / oil
exploration companies, business relationships to off-takers (F. E. EcoPetrol is an off-taker), assets,
reserves etc.
EcoPetrol - current activities, future needs or plans to expand, financial standing etc.
Bechtel - Their activities in Colombia if Known
Gas supplier's interest in long term gas supply (in general)

There are interesting opportunities for thyssenkrupp Industrial Solutions in Colombia

Source: http://data.worldbank.org

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Industry Analysis – Colombia

Economic stats of Colombia.

Overview: Situation, drivers and obstacles of industry segments with relevance for tk

Colombian market and potential off-takers:

Methanol demand
Potential of Super light crude oil (SLCO)* as diluent or solvent to be used to lower viscosity of heavy crude oils to facilitate exploration and
transport
Potential for gasoline*
Potential for fertilizers
Potential off-takers of the products mentioned
tk E bad reputation for post sales services
huge increase in agrarian production
Sugar/ Palm oil/ renewable energy production
Oil refining capacity insufficient
requirement to increase 40k BPD
Plastic production insufficient
National plastic production sold for the next 4 years
higher demand for fertilizers
requirement to build fertilizer plant
outdated surface fleet
requirement to build 4 +2500t frigates (2 bio USD)
Insufficient Energy Nationwide
requirement to build small local energy plants
Construction boom
increased market share for tk E / need for Cement

thyssenkrupp has an important presence in Bogota that is not felt due to its dispersion

Source: http://data.worldbank.org

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Doing business in LatAm

Cultural understanding – Importance of RHQ.

Latin America
June 2016

Photography: http://storylawfirm.com/

Doing business in LatAm

Cultural understanding – Importance of RHQ.

Sale

Object Person
Facts and Figures Private Contact
Quality
Experteese

Object oriented culture Trust Relationship
(e.g. Germany) oriented culture

(e.g. LatAm)

The “German way” of doing business does not work in LatAm unless there is no
competition

Source:

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Doing business in LatAm Patronato thinking:e.g. LatAm client

Cultural Strategy due to "Patronato" Decision Father figure
maker
Team thinking e.g: German client Clear Orders

Decision VS
maker .
Hierarchy
All are important Serve
„Children“

The complexity of purchasing the thyssenkrupp products overwhelm the decisionmaker:
- Sales process must be far more coopreative with client
- tk must „do the clients work“
- To save „face“ all work must seem to come from the decisionmaker
- High risk of „Patronising“

The “German way” of doing business does not work in LatAm unless there is no
competition

Source:
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