Ferronordic Machines

June 2013

Company Presentation

Ferronordic Machines in a snapshot

Authorized dealer of Volvo Construction Equipment in Russia since June 2010

Core focus on the Volvo brand

Strong and growing construction equipment market

Rapidly increasing presence all over Russia

Experienced management and board of directors and supporting shareholders

Outlets: 6 → 12 → 53 → 69 → 69

Employees: 160 → 326 → 540 → 654 → 690

Revenue: VCE → €74M → €268M → €276M → €273M

Complimentary brands added: TRUCKS

Market: ~8,000 → 10,167 → 25,635 → 31,100 → ~30,000

Note: Information at takeover, end 2010, end 2011, end 2012, end Q1 2013

MARKET OVERVIEW

Russian economy

• Russian GDP has grown faster than Western economies

historically, and is expected to continue to show higher

growth

• Inadequate road network and low infrastructure rankings

highlight the investment need going forward

• Infrastructure investments are expected to almost double in

2013e compared to 2008

• Major planned construction projects include the South

Stream pipeline, the Marine Façade district in St.

Petersburg, Kaliningrad Nuclear Power Plant, and

numerous projects related to the 2014 Winter Olympics,

the 2016 Ice Hockey World Championship, and the 2018

FIFA World Cup

Currently inferior infrastructure Significant infrastructure investments going forward

Russian GDP expected to outgrow Western economies

23.1 17.8 20.1 25.7 29.3 32.0 13.8 9.3

29.1 37.3 44.6 49.1 50.5 58.2

66.3

80.8 81.6 82.9

87.4 85.3

115.5

143.8 155.4

164.0

2.2% 2.2%

3.4% 3.6% 3.7% 3.6%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

0

25

50

75

100

125

150

175

200

2008 2009 2010 2011 2012e 2013e

Infra

stru

ctu

re s

pendin

g a

s %

av G

DP

US

D b

illio

n

Total

Capex of monopolies

Non-budget

Infrastructure spending as % av GDP

1,8

48

1,7

37

1,7

36

1,6

64

1,3

94

910

714

384

259

155

57

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Road d

ensity

(km

per

'000 s

q.

km

of

land

are

a)

Note: “Advanced economies” include 34 of the world’s most advanced countries

Source: IMF World Economic Outlook

Source: World Economic Forum – GETR 2010 Note: “Capex of monopolies includes Russian Railways, Electricity Utilities, Gazprom and Transneft

Source: Rostat

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Russian GDP growth EU GDP growth

GD

P g

row

th

$70bn

$20bn

$50bn

We expect USD280b of infrastructure

related spending in 2013E-2017E

5

MARKET OVERVIEW

Infrastruction ($280b in 2013E-2017E)

$130bn

$100bn

$35bn

$30bn

$35bn

$40bn Transport

Power utilities

Public utilites

Highways

Railways

Pipelines

Generation

Transmission

Distribution

Construction equipment market in Russia

• Construction output in Russia expected to grow close to 10

per cent annually over the next few years

• The Russian CE market was over 30,000 units in the last

year, up from approximately 25,000 units in 2011 and

10,000 in 2010 (import numbers)

• The market for construction equipment consists of five

different segments:

– Oil and gas industry

– Mining industry

– Forestry industry

– Road construction industry

– General construction industry

• The Russian market is fairly scattered with many

participants, but five leading players have approximately 10

per cent market share each1)

– Hitachi, Volvo CE, Caterpillar, Komatsu and JCB

• Strong efficiency and outsourcing trend

– Increased demand for efficiency of construction projects drives

demand on high-quality equipment and well developed service

network

– Large conglomerates are outsourcing service of equipment

– Large geographical distances between customers drive need

for scale and utilization of synergies

Construction output in Russia

e = estimate

f = forecast Note: Construction output is defined as the total value of construction work carried out

by construction companies based on contracts and/or agreements signed with clients

(excl. VAT). Construction output in Russia (RUB bn) and real change (%y-o-y), 2008-

2015.

Source: PMR, 2012

4.528 3.998

4.454

5.140 5.677 5.586

7.645

8.773

-13.2%

5.1% 5.1%

3.0%

9.0% 8.5% 7.7%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

-

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

10.000

2008 2009 2010 2011 2012e 2013f 2014f 2015f

Value Real Change

Annual Import Statistics

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

New Units

Annual Import Statistics - Growth

Rolling Rolling Rolling

4-Year 5-Year 6-Year 9-Year

Year CAGR CAGR CAGR CAGR

2007 82%

2008 77% 69%

2009 (12%) 0% 6%

2010 10% 23% 30%

2011 12% 30% 39%

2012 11% 14% 29% 40%

COMPANY OVERVIEW

Vision To be regarded as the leading

service and sales company

within our business areas

in the CIS markets

Strategic and financial objectives

◊ “Best in class” growth and margin

◊ Contribution from aftermarket 40%

◊ Absorption rate of 1.0x

Financial objectives Strategic objectives

◊ Leadership within the market for

construction equipment

◊ Geographical expansion of current

product portfolio

◊ Expansion into related business areas

such as other machinery and

commercial vehicles

◊ Extract synergies in dealer network

infrastructure development and support

functions

Ferronordic Machines

– Strategic cornerstones

◊ Leading service and product availability

◊ Tailored service and repair programs

◊ Financial services offerings

◊ Developed trade-in system

◊ Fleet & Residual value management

◊ Rental fleets

CUSTOMER ORIENTATION

◊ World’s 3rd largest manufacturer of construction

equipment

◊ Building on No.1 brand position in Russia

◊ Broad range of equipment for road-, general

construction, oil- and gas, mining and civil

engineering companies

◊ Development through additional strong brands

BUILD ON STRONG BRAND RECOGNITION –

VOLVO CE

◊ High density network – many points of presence,

less “show-off buildings”

◊ Mobile workshops and service vans/trucks

◊ Well equipped, purpose-built facilities in select

locations

◊ Infrastructure to be used for other brands

SUPERIOR INFRASTRUCTURE

◊ Implementation of best practices and

processes

◊ Leading IS/IT systems

◊ Close cooperation with manufacturers

◊ Get the right people to do the right job right

◊ Continuous improvement of processes

OPERATIONAL EXCELLENCE

Product offerings

Unit breakdown by product type 2012

New machines 73%

Parts 19%

Service 2%

Rental 2%

Attachments 1% Used machines

2%

Sales breakdown 2012

Source: Ferronordic Machines Source: Ferronordic Machines

EXC 28%

BHL 42%

AH 10%

WL 8%

PAV 3%

GRA 2%

COMP 3%

LOGSET 1%

SSL 3%

OTHER 0%

Hard products

Focus on soft products

◊ Insurance

◊Logistics

◊Trade in of used machines and

residual value management for

customers

◊Rental of machines

◊Provision of financed full service and

repair fleet management contracts –

customer pays fixed price for used

machine hours on a monthly basis

◊Consultancy

◊Application engineering

◊Planned maintenance service

◊Diagnostic of machines

◊Planned and unplanned repair

◊Overhaul – providing new life to older

machines

◊Sales of used machines

◊Spare part sales and delivery

◊Remanufacturing of vital parts (engines,

gearboxes etc)

◊Service contracts

◊Fleet management services (Caretrack)

◊Financial solutions

Volvo CE on the Russian market for construction

equipment

• The two largest districts in terms of sales, Central

and Northwestern, constitute approximately 67% of

the construction output in Russia

• In 2010, 82% of units sold came from NW and CTR.

This was 60% in 2012

• Urals, Volga, South, Far East and Siberia have

generated strong revenue, currently accounting for

approx. 40% of units sold

• All in line with FNM’s strategy

Volvo CE units sold 2012 Russia – Construction output per region Jan-Sep 2012

Comments Map of Russia

Southern

Volga

Far

Eastern Central

Northwestern

Urals Siberia

Central 26%

Northwest 31%

Ural 15%

South 7%

Volga 4%

Key Accounts 8%

Siberia 3%

Far East 4%

Subdealers 1%

Other 1% Central

25%

Volga 17%

Northwest 14%

Urals 13%

South 13%

Siberia 11%

Far East 7%

Source: Federal State Statistics Service Source: Ferronordic Machines

Network development map

17

Khabarovsk

Krasnoyarsk

Ekaterinburg

St .Petersburg

Moscow

Krasnodar

Murmansk

Petrozavodsk

Arkhangelsk

N.Novgorod

Vladivostok

Kazan’

Vologda

Voronezh

Chelyabinsk

Tver’

Perm’

Norilsk

Novosibirsk Stavropol

Surgut

Rostov na Donu

Sovetski

Velsk

(69) FNM

(2) Subdealer locations

V.Novgorod

Tyumen

Sochi

Tula

Yaroslavl

Volsk

Saratov

Saransk

Kaliningrad

Pitkyaranta

Lipetsk

Ryazan

Belgorod

Smolensk

Sikhtifkar

Koriazhma

Buinaksk

Pskov

Armavir

Number of FNM outlets is

planned to grow substantially

Currently :

69

2015:

~100

Ufa

Bratsk

Irkutsk

Neryungri

Novy Urengoy

Uhta

Samara

Kaluga

Volgograd

Yakutsk

Blagoveshensk Satka

Cherepovets

Cheboksary

Vladimir

Penza

Belovo

Vorkuta

Nalchik

Magadan

Road-map for establishment

of a large new dealership

2–4 YEARS, EUR 3–10 MILLION

Rented location Container set-up Purpose built facility

Rent location for

sales and service

personnel

Land acquired Building work starts

Container set-up

Purpose built facility

finalised

No.1 Brand Image

Additional brands

Ferronordic Machines

Ferronordic Machines customer

◊ Importer and dealer in Russia

◊ Distribution and service

◊ Ferronordic Machines seeks to leverage its

distribution network further by selling

adjacent product categories from additional

brands

Selection of additional brands added to Ferronordic Machines’ portfolio:

TRUCKS

Board of Directors

Name Position Selected current assignment(s) Selected previous assignments

Per-Olof

Eriksson

Chairman Board member of Investment AB

Öresund and Biotage

CEO of Sandvik and Seco Tools

Marika

Fredriksson

Director CFO Vestas Wind Systems A/S SVP and CFO, Gambro

SVP/CFO, Autoliv SVP/CFO Volvo CE

Martin

Leach

Vice Chairman Chairman, Magna Group Chairman and CEO at GAZ International,

CEO of Maserati Spa and President Ford of

Europe at Ford Motor Company

Erik

Eberhardson

Executive Vice

Chairman

Head of Business Development of

Ferronordic Machines LLC

Board member in Magna International;

Chairman and CEO, OJSC GAZ; GM Volvo

Trucks (Ukraine); CEO, Volvo (Ukraine) and

President (CIS), Volvo CE

Lars

Corneliusson

Director President and CEO of Ferronordic

Machines LLC

MD Volvo Vostok (Russia); President, Volvo

Trucks (Russia) and advisor to Russian

Ministry of Economy/Transport (World

Bank)

Tom

Jörning

Director MD, Volvo Truck (CEE) Several senior positions within Volvo Truck

including VP (East Europe), Volvo Truck

(Europe)

Magnus

Brännström

Director CEO, Oriflame RD (CIS and Asia) and MD (Russia),

Oriflame

Kristian

Terling

Director Managing Director, Houlihan Lokey Various positions within Credit Suisse,

Handelsbanken and Merrill Lynch

Board of Directors

Senior Management Team

PREVIOUS

APPOINTMENTS

CURRENT

APPOINTMENTS

◊ Magna International Inc

Board member

◊ OJSC Russian Machines

Managing Director for

Automotive Business

◊ OJSC GAZ

CEO, Chairman

◊ Volvo Construction Equipment

President, CIS

◊ Volvo Truck Corporation

Managing Director, Volvo

Ukraine

◊ Co-owner and Executive Vice

Chairman of Ferronordic

Machines AB, Head of Business

Development of Ferronordic

Machines LLC

◊ Board member of Lindab AB

◊ Emeyu LLP

CFO & COO

◊ HSBC Bank

Director, Investment

Banking

◊ Credit Suisse First Boston

(London, New York, Chicago)

Investment Banking

◊ Co-owner and Chief Financial

Officer of Ferronordic Machines

AB

Lars Corneliusson

Erik Eberhardson

Anders Blomqvist

◊ Volvo Group

Managing Director, Volvo

Vostok, Russia,

President, Volvo Trucks

Russia

◊ Member of the Executive Board

of AEB

◊ Hifab International AB

◊ Russian Ministry of Transport,

Moscow

◊ ICS Interconsult Sweden AB

◊ Co-owner of Ferronordic

Machines AB, President and

CEO of Ferronordic Machines

LLC

Shareholders

42,9%

14,6%

12,2,%

5,0%

5,0%

4,9%

3,6%

3,6% 2,2%

6,1%

Noonday

Founders

Mellby Gård

Creades

Investment AB Öresund

Fastighetsaktiebolaget Granen

AltoCumulus

Konstruktur Development

Sedarec

Other

FINANCIAL OVERVIEW

Ferronordic Machines Profit & Loss

12 Months 2012 - Group

EUR MM

12 Mo.

2012

12 Mo.

2011 % change

New Units 1,370 1,310 5%

Revenue 275.8 268.0 3%

Gross Profit 42.0 37.4 12%

% Margin 15.2% 13.9% -

EBITDA 13.4 12.3 9%

% Margin 4.9% 4.6% -

Net Income* (1.3) 2.7 NM

Net Debt 63.9 63.0

• New units sold up 5%

• Product mix shifted towards somewhat

smaller machines

• Revenue increase of 3%

• Aftermarket revenue up 16%

• Improved gross margin by 1.3%-point

• Offset by increase in OPEX

- Growing organization throughout Russia

• EBITDA margin improving

• Higher financial costs

• Decrease in net income

* Excludes amortisation of transaction related intangibles.

Ferronordic Machines Profit & Loss

Q1 2013 - Group

EUR MM

Q1

2013

Q1

2012 % change

New Units 261 275 (5%)

Revenue 55.0 57.6 (5%)

Gross Profit 10.4 8.1 28%

% Margin 18.9% 14.1% -

EBITDA 2.6 1.5 81%

% Margin 4.8% 2.5% -

Net Income* (2.4) 0.6 NM

Net Debt 44.6 56.1

• New units sold down 5%

• Similar product mix as last year

• Revenue decrease of 5% (3% in lc)

• Aftermarket revenue increase

• Improved gross margin by 4.8%-point

• Offset by increase in OPEX

– One-off expenses of EUR 0.3m

– Growing organization throughout Russia

• EBITDA margin improving

• Significant change in unrealized FX loss

* Excludes amortisation of transaction related intangibles.

Balance sheet summary

27

EUR MM 2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Cash & Cash Eq. 12.4 14.4 9.7 10.1 19.2 18.0

Short term debt 24.0 17.9 26.6 27.5 27.3 5.0

Long term debt 43.5 44.1 44.7 46.5 45.6 47.3

Financial leases 7.9 8.5 8.6 11.8 10.1 10.2

Net debt 63.0 56.1 70.2 75.7 63.9 44.6

Net Debt/EBITDA* 3.2x 3.0x 4.5x 4.3x 2.8x 2.7x

Working capital 48.0 39.5 46,8 48,0 36,8 17.0

% of Revenue 18% 14% 17% 17% 13% 6%

Shareholders Equity 20,0 21,2 16,3 15,4 15,1 11,9

Total Assets 137,2 136,2 148,1 150,9 155,0 155,8

Equity/Assets 15% 15% 11% 10% 10% 8%

* Calculation per Bond T&C