2010 GLOBAL FORECASTING & MARKETING CONFERENCE – Miami, October 21 st , 2010

2010 GLOBAL FORECASTING & MARKETING CONFERENCE – Miami, October 21 st, 2010

Market Composition & Capital Spending Survey

The Latin American Metalworking Industry

Focus on Mexico & Brazil

Strategic Media Partners:

Presented by

2

Contents

Methodology and reach Equipment Scope for this Report Latin American Market Overview

Market Trend Evolution Metalworking Equipment Imports 2011 Market Forecast by Category

Mexico Demographic Data Imports by Country of Origin Survey findings & Market Forecast

Brazil Demographic Data Imports by Country of Origin Survey findings & Market Forecast

Summary Appendix

Detailed Purchase Intention Results

3

Methodology & Reach

Email survey invited 9,221 Latin American subscribers of Metalmecánica magazine; 9,082 metalworking industry subscribers of NEI magazine (Brazil); and 5,146 metalworking industry subscribers of Reportero Industrial magazine (Latin America).

Limited to one answer by company. In-depth questionnaire.

All participants were validated as qualified readers.

The survey obtained 1,106 valid responses from 17 Latin American countries, representing a 4,7% response rate.

4

Equipment Scope for this Report

Metal Cutting Equipment

8456 - Laser, Ultra-sonic, EDM, Ionic, Plasma arc8457 - Machining Centers8458 - Lathes (Incl. Turning Centers)8459 - Drilling, Boring, Milling Mach.8460 - Deburring, Sharpening, Grinding Mach.8461 - Planing, Shaping, Slotting, Broaching Mach.

Metal Forming & Fabricating Equipment

8462 - Presses, Bending, Folding, Punching, Shearing Mach.8463 - Draw-benches, Thread Rolling, Wire Working Mach.8515 - Welding Equipment

Parts and Accessories

8466 - Parts and Accessories for Machine Tools

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

2002 2003 2004 2005 2006 2007 2008 2009 2010e

MEXICO BRASIL Arg + Chi + Col + Ecu + Per + Ven

5

Latin American Metalworking Equipment ImportsMexico, Brazil + Top “ROLA” Countries (Rest Of Latin America)

Source: ALADI: Latin American Trade Integration Association.Trend calculation: B2Bportales

Total Import Market:Real ‘09: US$3,07 Billion-33.9% compared to ’08

‘10 Estimated: US$3,5 Billion+13.4% compared to ‘09

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

2002 2003 2004 2005 2006 2007 2008 2009 2010e

ARGENTINA VENEZUELA CHILE COLOMBIA PERU ECUADOR

6

Market Trend Evolution: Metalworking Equipment ImportsTOP 6 “ROLA” Countries (Mexico and Brazil excluded)

Source: ALADI: Latin American Trade Integration Association.Colombia 2009: Estimated on projection of 5 months reported to Aladi

US$

000

FOB

ROLA countriesEstimated‘10 Imports:US$636 million+8% compared to ‘09

BRAZIL

MEXICO

ARGENTINA

CHILE

COLOMBIA

ECUADOR

PERU

VENEZUELA

-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

12,0

2008

2009

2010E

2011P

7

Source: ECLAC, Economic Commission for Latin America and the Caribbean.

2008 2009 2010E 2011PBRAZIL 5,1 -0,2 7,6 4,5MEXICO 1,5 -6,5 4,1 3,0ARGENTINA 6,8 0,9 6,8 4,5CHILE 3,7 -1,5 4,3 6,0COLOMBIA 2,7 0,8 3,7 3,0ECUADOR 7,2 0,4 2,5 2,0PERU 9,8 0,9 6,7 4,5VENEZUELA 4,8 -3,3 -3,0 2,5

Average 5,2 -1,1 4,1 3,8

Latin American Market OverviewGDP - Mexico, Brazil + Top Rest Of Latin America

“Although recovery has been relatively quick, lingering questions and doubts regarding the evolution of the global economy may dampen the regional

outlook in the medium-term.” (ECLAC)

Growth is expected to slow down around the second half of 2010. Although the region will continue to expand in 2011, it will do so at only 3.8% approximately

- 100.000 200.000 300.000 400.000 500.000 600.000

8461 - Planing, shaping, slotting, broaching Mach.

8459 - Drilling, Boring, Milling Mach.

8456 - Laser, Ultra-sonic, EDM, Ionic, Plasma arc

8460 - Deburring, Shaping, Grinding Mach.

8458 - Lathes (Incl. Turning Centers)

8457 - Machining Centers

US$ 000

126,965

211,846

216,402

240,355

393,429

495,807

8

2011 Imports Forecast - Metal Cutting $1.68 Billion

MEX39%

BR45%

ROLA16%

9

Metal Cutting Equipment Imports – 2008-2011 Comparison

- 100.000 200.000 300.000 400.000 500.000 600.000

8461

8459

8456

8460

8458

8457

2011 (e) 2010 (p) 2009 2008

1.899.347

1.173.791

1.454.140

1.684.804

2008 2009 2010 (P) 2011 (e)

TOTALS

- 100.000 200.000 300.000 400.000 500.000 600.000 700.000 800.000 900.000 1.000.000

8463 - Draw-benches, thread rolling, w ire worling Mach.

8515 - Welding equipment

8462 - Presses, bending, folding, punching, shearing Mach.

US$ 000

933,917

536,249

146,454

10

2011 Imports Forecast - Forming & Fabricating: $1.61 Billion

MEX43%

BR36%

ROLA21%

Significant participation of ROLA countries, compared with 16% in cutting machines

11

Forming & Fabricating Eq. Imports – 2008-2011 Comparison

- 200.000 400.000 600.000 800.000 1.000.000 1.200.000

8463

8515

8462

2011 (e) 2010 (p) 2009 2008

1.911.150

1.402.065

1.401.250

1.616.620

2008 2009 2010 (P) 2011 (e)

TOTALS

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

MEX BR ROLA

372.

876

237.

798

111.

925

US$ 000

12

2011 Imports Forecast: Parts & Accessories: US$723 Million

8466- Parts & Accessories

MEX52%

BR33%

ROLA15%

37% of the total investment is dedicated to Parts and Accesories

13

Parts & Accessories Imports – 2008-2011 Comparison

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

450.000

500.000

MEXICO BRAZIL ROLA

2008 2009 2010 (p) 2011 (e)

833.372

495.657

627.345

722.600

2008 2009 2010 (P) 2011 (e)

TOTALS

14

MEXICO Factories’ Capacity Utilization Average age of machines in Plant Size of Companies by Number of Employees Main Markets/Sectors Served by Metalworking Plants Mexican Imports by Country of Origin Investment trends in 2011 Equipment imports forecast 2010 Projected Investment Distribution

15

Base: 287

26% report capacity usage of +80%

Down -16% from last year

16% report capacity usage of less than 50%

Same percentage as last year

Mexican Metalworking Plants2009 Capacity utilization

90% or more10%

Between 80% and 89%

16%

Between 66% and 79%

34%

Between 50% and 65%

24%

Less than 50%16%

Less than3 years old

15.6%3-10 years old42.6%

More than 10 years old

41.8%

16

Base: 287

Total reported number of machines : 7,230Average per plant: 25

Average Age of Machines in Plant

Tremendous opportunity for new Machinery Suppliers

17Base: 287

Size of Mexican Plants Included in the SurveyBy Number of Employees (2010)

1 to 1033%

11 to 2015%21 to 50

15%

51 to 10014%

101 to 2007%

201 to 5006%

501 or more10%

Number of companies with 1 to 10 employees answering the survey is 12% higher than the reported in 2009.36% of the sample represents companies of 50 or more employees.

18

Base: 287

Markets/Sectors Served by Mexican Plants (2010)

18%

5%

6%

7%

8%

11%

16%

26%

29%

31%

33%

0% 5% 10% 15% 20% 25% 30% 35%

Other

Medical equipment (optical, surgical and dental)

Instruments/devices: electric, photographic, laboratory, measurement (excl. Medical)

Aerospace

Other transport equipment and components

Machinery, agricultural and construction equipment

Electrical and electronic equipment

Machinery and components (excluding agricultural or construction)

Automobiles and parts

Metal products: structures, valves, pipes, tools, etc.

Molds, dies and tooling

19

Metalworking Equipment – By Country of OriginMexican Imports 2008 - 2009

Source: ALADI: Latin American Trade Integration Association.

Italy, Taiwan & USA was affected the most with imports decrease in 2009. China is still small in this market, but registered the lesser reduction in US dollars percentage.Last year, Japan was the second exporter to Mexico. This year Germany reached that position.

2008 2009 09/08USA 808.934 38,9% 483.676 35,8% -40,2%Germany 346.481 16,7% 251.832 18,6% -27,3%Japan 283.781 13,6% 177.843 13,1% -37,3%Italy 151.484 7,3% 73.072 5,4% -51,8%China 65.433 3,1% 57.396 4,2% -12,3%Taiwan 57.362 2,8% 33.218 2,5% -42,1%Other 366.851 17,6% 275.889 20,4% -24,8%TOTAL 2.080.326 100% 1.352.926 100% -35,0%

-

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

900.000

2008 2009

20

Base: 287

2011 Expected Investment Trends

No change 47%

Increase48%

5%Decrease

Increase average: 32,6%

Decrease average: 44,3%

This expected trend represents

a potential increase of

13,4%in total

investments

DIRECTION PERCENTAGE

What direction and by what percentage will your investments in machines change in 2011?

21


"Production of vehicles in the period January-July 2010 grew 78.8% over the same period in 2009". "Compared with the same period in 2008, it still represents a fall of 27.8%"

(Eduardo Solís, President, AMIA, Mexican Association of Automotive Industry).

"The metalworking industry reported a decline and stood at -14.3% in 2009, but a growth of 12.3% is expected by the end of 2010".

(Marco Herrera, Chairman of the Metalworking Sector, CANACINTRA, Mexican Chamber of Transformation

Industries).

22


"This year, companies in the aerospace parts sector have planned investments of approximately US$1.2 billion to modernize its technology and production processes". “The size of the sector is expected to double in the next five years. The component design industry area will have over 400 specialized companies".

(Mario Martínez, Technology Director, ITESM, Institute for Technology Studies in Monterrey).

"We depend on the recovery of the U.S. market: we hope to reach production levels of 2008 in 2012 or 2013".

(Agustín Ríos, president, INA, National Autoparts Industry)

23

Base: 236

Mexico - Metal CuttingInstalled Equipment 2010 vs. Buying Intention 2011

79%

74%

51%47%

39%

31%

24%

14%

7%

28%

17%

9% 8%

4%

25%

13%

1%

8%

2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Lathes Milling Machines

Grinding Machines

Sawing and Cut-off

Machines

Machining Centers

Turning Centers

Boring Machines

Electrical Discharge Machines

(EDM)

Transfer Machines

Other

Installed Intention

24

2011 Metal Cutting Equipment Imports Forecast: $658 Million(2008-2011 Comparison)

- 50.000 100.000 150.000 200.000 250.000 300.000







41.309

59.820

63.951

98.629

125.796

268.613

US$ 000

781.261

515.566

580.351

658.118

2008 2009 2010 (P) 2011 (e)

TOTALS

59%

50%

38%

34% 33%

15%14%

11%

4%

35%

24%

10% 9% 8%

0%

8%6% 7%

5%

0%0%

10%

20%

30%

40%

50%

60%

70%

Welding Machinery & Equipment

Presses Turret Punches &

Shears

Plasma-Arc/Plasma

Cutting

Roll Forming Machines

Press Brakes Wire forming Laser Cutting Systems

Water Jet Cutting

Machines

Other

Installed Intention

25

Base: 110

Mexico - Metal Forming and FabricatingInstalled Equipment 2010 vs. Buying Intention 2011

26

2011 Forming & Fabricating Equipment Imports Forecast: $685 Million(2008 – 2011 Comparison)

- 50.000 100.000 150.000 200.000 250.000 300.000 350.000 400.000 450.000

8463 - Draw-benches, thread rolling,wire worling Mach.


8462 - Presses, bending, folding,punching, shearing Mach.

69.058

232.869

383.685

US$ 000

835.814

545.975

604.596

685.611

2008 2009 2010 (P) 2011 (e)

TOTALS

0%

10%

20%

30%

40%

50%

60%

70%

New Equipment Used Equipment Refurbished Equipment

61%

16%23%

27

Mexico – 2011 Projected Investment Distribution

Base: 245

New Equipment participation is similar to last year

Refurbished UP from 14% last year

Used DOWN from 24% last year

28

BRAZIL Factories’ Capacity Utilization Average age of machines in Plant Size of Companies by Number of Employees Main Markets/Sectors Served by Metalworking Plants Mexican Imports by Country of Origin Investment trends in 2011 Equipment imports forecast 2010 Projected Investment Distribution

90% or more13%

Between 80% and 89%

21%

Between 66% and 79%

30%

Between 50% and 65%

23%

Less than 50%13%

29Base: 278

Brazilian Metalworking Plants2009 Capacity Utilization

Capacity utilization is lowerthan that reported for 2008.

34% report over 80% of installed capacity;13% reports less than 50%

Less than 3 years old

24.6%

3 to 10 years old44.8%

More than 10 years old

30.6%

30

Base: 278

Total reported number of machines : 5,676Average per plant: 20.4

Average Age of Machines in Plant

Significant opportunity for new Machinery Suppliers

31Base: 278

Size of Brazilian Plants in the Survey By number of employees (2010)

1 to 1029%

11 to 2021%

21 to 5021%

51 to 10012%

101 to 2009%

201 to 5004%

501 or more4%

Number of companies with 1 to 10 employees answering the survey is 8% higher than the reported in 2009.29% of the sample represent companies with 50 or more employees.

32

Markets/Sectors Served by Brazilian Plants (2010)

Base: 278

33%

3%

7%

8%

13%

14%

15%

16%

17%

29%

29%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Other

Aerospace

Medical equipment (optical, surgical and dental)

Instruments/devices: electric, photographic, laboratory, measurement (excl. Medical)

Molds, dies and tooling

Machinery, agricultural and construction equipment

Other transport equipment and components

Automobiles and parts

Electrical and electronic equipment

Metal products: structures, valves, pipes, tools, etc.

Machinery and components (excluding agricultural or construction)

33

Metalworking Equipment – By Country of OriginBrazilian Imports 2008 - 2009

Source: ALADI: Latin American Trade Integration Association.

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

2008 2009

2008 2009 09/08Japan 278.966 18,3% 240.716 21,3% -13,7%Germany 275.107 18,1% 200.135 17,7% -27,3%Italy 192.912 12,7% 148.081 13,1% -23,2%USA 139.200 9,2% 130.564 11,6% -6,2%Taiwan 143.685 9,4% 88.479 7,8% -38,4%China 138.984 9,1% 82.866 7,3% -40,4%Other 352.310 23,2% 238.145 21,1% -32,4%TOTAL 1.521.164 100% 1.128.986 100% -25,8%

Despite a decrease in total imports in 2009, USA grew its market share in 2.4%. Contrary to the situation observed in Mexico, China was affected the most during the crisis, with 40% reduction in total exports to Brazil, and 2% reduction in market share.

No change 42%

Increase57%

1%Decrease

Increase average: 34,9%

Decrease average: 33,3%

DIRECTION PERCENTAGE

This expected trend represents

a potential increase of

19,4%in total

investments

34

Base: 278

What direction and by what percentage will your investments in machines change in 2011?


35

"I have a hunch that the turnover of 2011 will be 20% higher than it has been in 2010. Therefore, it will virtually reach the same exceptional level as it did in 2008.""The metalworking sector was negatively affected during the last quarter of 2008 and the first half of 2009. Starting in July, companies gradually returned to buy”.

(Thomas Lee, director, Grupo Megga, Sao Paulo)

“Hiring in the machine building sector increased in May 2010. It went up 4.4% compared to May 2009, from 232,200 to 242,331 employees. By October 2008, the month prior to the crisis it had felt down to 3.15%”.

(Abimaq, July 2010 Report)


36

“We believe that the outsourcing manufacturing market was one of the sectors that was hurt the most during the 2009 crisis. Some of our customers said that their own clients stopped outsourcing their projects and went back to manufacturing them on their own.In my opinion, manufacturers of elevators, steel furniture, electrical cabinets, air conditioners, refrigeration, power generation, industrial ovens, among others, are the most active thanks to the increasing expansion of the construction sector".

(Ferri Amilson, Director General - Salvagnini do Brasil)


80%

71% 71%

42%

34%

26% 25%

10%5%

56%

17%

7% 6% 5%

21%

9%5%

3%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Lathes Milling Machines

Saw ing and Cut-off

Machines

Grinding Machines

Machining Centers

Turning Centers

Boring Machines

Electrical Discharge Machines

(EDM)

Transfer Machines

Other

Installed Intention

37

Brazil - Metal CuttingInstalled Equipment 2010 vs. Buying Intention 2011

Base: 156

• As in Mexico, high interest in Machining Centers.

For this year significantly increased buying intention for transfer machines.

38

2011 Total Metal Cutting Equipment Imports Forecast: $761 Million(2008-2011 Comparison)

- 20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000 180.000 200.000







60.483

112.330

113.959

108.205

179.634

186.344

US$ 000

783.243

470.440

639.458

760.955

2008 2009 2010 (P) 2011 (e)

TOTALS

68%

49%

31%27%

24% 23%

8%6%

1%

55%

18%

12%9%

7% 7% 7%

2%5%

2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Welding Machinery & Equipment

Presses Roll Forming Machines

Plasma-Arc/Plasma

Cutting

Turret Punches &

Shears

Press Brakes Wire forming Laser Cutting Systems

Water Jet Cutting

Machines

Other

Installed Intention

39

Base: 241

Brazil - Metal Forming and FabricatingInstalled Equipment 2010 vs. Buying Intention 2011

As in Mexico, Laser Cutting has a high installed/intention ratio

40

2011 Metal Forming & Fabricating Eq. Imports Forecast: $586.5 Million(2008 – 2011 Comparison)

- 50.000 100.000 150.000 200.000 250.000 300.000 350.000 400.000 450.000

8463 - Draw-benches, thread rolling,

wire working Mach.


8462 - Presses, bending, folding,

punching, shearing Mach.

45.701

133.524

407.344

US$ 000

529.950 532.090

492.915

586.569

2008 2009 2010 (P) 2011 (e)

TOTALS

0%

10%

20%

30%

40%

50%

60%

70%

80%

New Equipment Used Equipment Refurbished Equipment

76%

10%14%

41

Brazil - 2011 Projected Investment Distribution

Base: 193

New Equipment DOWN from 79% last year

Refurbished UP from 8% last year

Used UP from 12% last year

SummaryAfter consulting several sources, including the results of the Capital Investment Survey and industry experts opinion across the region, the Metalmecanica’s 2011 forecast for capital investment in imported equipment is summarized as follows (US$ Millions):

42

Total Latin America $ 4.024 100%

By Country

Mexico $ 1.716 43%

Brazil $ 1.585 39%

Top 5 Rest of Latin America $ 722 18%

By Group of Products

Cutting Machinery $ 1.685 42%

Forming & Fabricating Equipment $ 1.615 40%

Parts & Accesories $ 723 18%

www.metalmecanica.comwww.reporteroindustrial.comwww.nei.com.br

Miguel Garzón, Editorial [email protected]

Thank you!Teri Rivas, Associated [email protected]

Eduardo Tovar, [email protected]

44

Base: 154

Mexican Buying Intentions by Investment Amount, 2010

1. Machining Centers

See Appendix for detailed report by country by segment

Less than $30,00030%

From $30,000 to $60,000

13%From $60,001 to $120,000

22%

From $120,001 to $250,000

12%

More than $250,000

23%

YES25%

NO75%

Documents

2010 GLOBAL FORECASTING & MARKETING CONFERENCE – Miami, October 21 st , 2010