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international strategy overview

Doha/ Qatar. international strategy overview. 2 nd Marketing, Communications & Sales Meeting BU-IS – Dec., 2 nd 2013 By Yves Schoen, International Business Development. Agenda . REGIONAL STRATEGY - FROM “BOTTOM-UP” MARKET LANDSCAPE HIGHLIGHTS OF TNG INTERNATIONAL BUSINESS

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international strategy overview

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  1. Doha/ Qatar international strategy overview 2nd Marketing, Communications & Sales Meeting BU-IS – Dec., 2nd 2013 By Yves Schoen, International Business Development

  2. Agenda • REGIONAL STRATEGY - FROM “BOTTOM-UP” • MARKET LANDSCAPE • HIGHLIGHTS OF TNG INTERNATIONAL BUSINESS • STRATEGIC PLAN 2013-2016 • CURRENT CHALLENGES • UPDATE ON “INTEREST GROUPS” • WRAP-UP - KEY “TAKE-AWAYS” MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  3. 1-regional strategy – from bottom-up (1/4)“Strategic pyramid” of tüvnord group Main buildingblocks Bottom-up MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  4. 1-regional strategy – from bottom-up (2/4) alignment between bottom-up & top- down Corporate Step 2: Top-down directions driven by BU-IS Step 1: Bottom-up input driven by RM & IBD Regional deployment Regional Strategy Mandatory Alignment Process Country Expansion Country Strategy • New clients & large international accounts • Mega-trends • New business models & innovation • Market observation • Data collection • Existing clients & prospects • Competitors’ moves • Customers’ needs MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  5. 1-regional strategy – from bottom-up (3/4) four Layers of growth Potential “go-to-market” Status of each layer Sales New opportunities identified by Countries & RM Launched of Global Product Managers by BU-IS Methodology defined & first short list of priority countries 32 Country Packages worked out by RM, assessed and processed € 1.1b TŰV NORD GROUP 2020 Today Time MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  6. 1-regional strategy – from bottom-up (4/4) From 32 country to regional strategies 5-New external ideas 3-Product Innovation Regional Strategy • Country Strategies • Market trends & competition • Country portfolio analysis • Key strategic priorities & cross-country initiatives • Main financial targets • Key Action Plans for implementation • High-level estimates of Capex • 1-Organic • Consistency • Consolidation • Analysis 4-M&A / Partnerships 2-New countries MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  7. 2-market landscape (1/4)mega-trends still favorable to Tic Drivers “More” “Better” Drivers Business Opportunities MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  8. 2-market landscape (2/4)economic growth shifting south-east Top 10 countries contributing to global growth 2012-2017: 70.5% of worldwide growth Source: FT June 4th, 2013 UK Russia 2.5% Germany Canada Turkey 1.3% Japan 1.4%% South-Korea 1.8% US 13.9% Italy China 33.6% Indonesia 2.4% Mexico 1.6% Brazil 2.6% India 9.4% Top contributing country 2012-2017 Top contributing country 1992-2012 MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  9. 2-market landscape (3/4)CIVETS WILL BECOME INCREASINGLY IMPORTANT Real GDP CAGR 2013-2017 Source: Economist Intelligence Unit, “The global economy: Healing or still hurting?”, June 2013 MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  10. 2-market landscape (4/4)consolidation continuing with growing gaps • MAIN TRENDS IN CONSOLIDATION • Global players focusing primarily on bolt-on acquisitions since 2012 (2) • Strategic merger between DNV & GL creating #3 • €2.5b sales • 17’000 employees • >100 countries • Still lots of Private Equity-driven activity Sources: (1) Group Finance Competitive Benchmarking (April 2013), Company annual reports (2) Brokers report (July 2013) (3) Average deal size exclude larger acquisitions: ITV (SGS), ECA/Amdel/Inspectorate (BV), Moody (Intertek) MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  11. 3-highlights of TNG international business (1/2)Breakdown of TNG international turnover Resilience (*) Driver (*) Global Repeat • Resilient & stable • Low “networking effect” • Mainly asset- & system-related Project Local Productcategory (*) Client types (*) Mass-market Product Frame local Asset Frame international System Arrows showing evolution 2012 vs. 2010 Source (*):Source Country Packages / Local Management estimates • Analysis based on consolidated & unconsolidated 2012 sales figures (perimeter =~81% turnover/83% countries) MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  12. 3-highlights of TNG international business (2/2)portfolio analysis Growth above average Strong Market Position Growth above average Weak Market Position • Brazil • Turkey • China • Malaysia • … • India • South-Korea • Croatia • Latvia… ? * € 58m 42% € 39m 28% X • Greece • Poland • Czech Republic • Neth…. • USA • Spain • Italy • UK • France… $ € 23m 17% € 18m 13% Growth below average Weak Market Position Growth below average Strong Market Position 41% in challenging strategic positions  should be below 10% by 2020 MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  13. 4-Strategic plan 2013-2016 (1/4)overview of international regions X = EBIT af % of Gross Profit = Turnover TÜV NORD in m € 2014 Budget figures Western Europe Mediterranean / MEA China / FEA Central Eastern Europe [Spain] India / SEA Americas = 2013-2016 CAGR (3 years) X% 7.5% -0.1% n.a. 15.1% 17.0% +11.1% +12.6% +15.2% +29.1% n.a. 10.0% 11.3% 21.5% +12.2% 7.9% 13.9% +4.4% +13.3% +6.5% +7.2% +9.4% +8.5% +8.7% 15.4% 8.3% Note (*):Excluding Spain 22.0% • Consolidated + Unconsolidated International (2013F  2016P) • Sales (1) €179.1m  €226.8m CAGR +8.2% • EBIT (2) €11.9m  €23.6m CAGR +25.5% • EBIT margin 10.6%  13.5% MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013 Notes: (1) Sales excluding Corporate “Prudence” / (2) EBIT excluding former TNI

  14. 4-strategic plan 2013-2016 (2/4)main strategic objectives by region WESTERN EUROPE • NETHERLANDS, BELGIUM, SWEDEN: Push forward growth in niche businesses whilst maintaining or even enhancing high profitability :certification and lift & crane inspections for SMEs in the Netherlands, food & feed certification in Belgium, nuclear services to large clients in Sweden • UK, FRANCE, DENMARK : Transform into highly-differentiated niche positioning whilst investigating bolt-on acquisitions • SOUTH AFRICA: Strive to win current ESKOM tender whilst building enlarged country strategy in order to reduce dependence on single client / secondment model CENTRAL & EASTERN EUROPE (CEE) • POLAND : Optimize profitability & cash as #2 player whilst defending our leader position in certification & expanding our service portfolio in inspections and targeting food/cosmetic/energy • CZECH REPUCLIC: Continue profitability improvements and consider nuclear services depending on new nuclear program (target CEZ as key customer) • OTHERS: Create synergies across smaller Eastern European markets in terms of revenues (e.g., replicable business models, key accounts) and cost/competence • NEW MARKETS: Investigate Russia, former Soviet Republics (“Xstan”) for new market entry [SPAIN] • SPAIN : Complete turnaround given touch market situation and return to profitability • Consider strategic options given less than 1% market share and lack of differentiation MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  15. 4-strategic plan 2013-2016 (3/4)main strategic objectives by region AMERICAS (*) • BRAZIL : Drive step-change in top line, mainly through M&A, by starting forming 2 growth platforms in Automotive & Food for build-up development strategy and scanning targets in Inspection & Engineering • USA: Further grow organically by better marketing existing products, strengthening support by BRTUV and launching new environment activities (e.g., Energy Star in California) • NEW MARKETS: Create legal entities in Mexico and Columbia (M&A possible) Note: (*) Americasexcluding Spain, covered in a separate section MEDITERRANEAN/MIDDLE-EAST (MEA) • REGION : Develop Food & Agriculture, Hotel Safety & Hygiene, CPR/CPD • TURKEY: Generate step-change in top line growth organically and potentially by M&A amongst several opportunities (Industrial services in Power/Renewables and O&G, rail services, car type approval & homologation, nuclear services) • MIDDLE-EAST: Organically grow by more than 10% in UAE & Saudi Arabia whilst aiming at operating on a 50/50 sharing basis for new businesses • GREECE: Optimize profit & cash in Greece whilst pushing for staffing local experts on international contracts • ITALY:Consider niche positioning or expansion through M&A • CROATIA:Further accelerate growth whilst expanding service portfolio & considering NDT MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  16. 4-strategic plan 2013-2016 (4/4)main strategic objectives by region INDIA / SOUTH EAST ASIA (SEA) • REGION : Generate double-digit organic growth with EBIT margin above 16% by being a “full service provider” & strengthening position in system certification • INDIA : Aggressively expand food testing lab (2-3 new locations, analytical scope expansion, new customers), start infrastructure/civil inspection services, monitor potential entry into Nuclear • MALAYSIA / INDONESIA : Upgrade status in both countries to enter large project business (Bumiputra in Malaysia, PJIT in Indonesia) • THAILAND : Adapt services to seize growth brought by ASEAN free trade zone, obtain local accreditations and penetrate large projects O&G market • INDONESIA : Accelerate growth in food testing CHINA / FAR EAST ASIA (FEA) • CHINA : Turnaround business to stop losses and stabilize the organization whilst designing full strategic plan (Restructuring taskforce underway) • SOUTH KOREA : Drive organic growth by more than doubling EPC/large project market, penetrating nuclear segment serving unique customer KHNP and entering new certification domains • REGION : Structure & drive key account management across region (e.g., EPCs, ZMPC for material testing & welding) and develop “smart” market approach to enter large business opportunities (e.g., partner with technical universities to penetrate railway business in China) MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  17. 5-current challenges • Move towards more aggressive & targeted selling • “Going along” with our German customers • Strengthen our M&A to reach higher “hit rate” • M&A as a priority for selected countries: Brazil, Turkey • Revisit strategic options for mature markets with sub-scale • New market entries • Find innovative market approaches • China: Partnership with leading universities • Turkey: Joint Venture with selected players • Increase our leadership talents • Experienced in business development, M&A • High-level contacts • Agile & well-connected with domestic competence centers MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  18. 6- interest groups (1/3)moving towards increased collaboration Today‘ssituation Knowledge & ideas sharing • Little sharing of expertise / business feedback across international entities • “Re-invent the wheel” • How to promote new ideas, innovation? • How to ensure replication of successful business models? “Open” communities Expert Who’s who? Case studies Client references Leadership by GPM Stay connected Joint taskforce with BU-IS Strategy, BU-IS GPM, Group Communication, IBD and Group IT MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  19. 6-interest groups (2/3)launching pilots http://ig.tuev-nord.de MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  20. 6-interest groups (3/3)example http://ig.tuev-nord.de MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  21. 7-Wrap-upKey “take-aways” • All mega-trends positive and major wealth shift towards South-East • Consolidation underway with high valuations • Matrix-based organization allowing to better seize growth opportunities & ensure fast execution and alignment • International business in 2016: • €226.8m sales (~38% of BU-IS sales) • €23.6m EBIT (~52% of BU-IS EBIT) • Clear regional strategies derived from Country Strategies with increased regional coordination • Upside achievable through focus on selected fields, innovation, M&A MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

  22. THANK YOU YOUR QUESTIONS? MCS BU-IS meeting │ International StrategyOverview │ 02.12.2013

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