Capital Equipment News April 2019

reclaimed a market leading position in rammers, pedestrian and ride-on rollers. However, this is our core and the focus now turns on getting the product mix right across all six of our SBUs – alongside the soil and asphalt compaction (SBU 2) we have SBU 1 - concrete technology, SBU 3 - utility, SBU 4 - excavation, SBU 5 – materials handling with aftersales making up the sixth SBU. Of note is that last year we recorded overall growth of about 10% compared with 2017 and doubled our sales in soil and asphalt compaction (SBU 2) and this in a time when the market has not seen huge growth. But we just realigned ourselves, found new channels, new partners and segments and stepped right in. I also revisited our dealership structure. To have the highest dealer density where we also had the highest density of direct sales was a conflict of interest. The original 18 or so dealers who had been randomly chosen over the years have been significantly reduced to 10 in South Africa and 4 in our neighbouring countries – Namibia, Botswana, Zimbabwe and Mozambique. MS: You have had a very big focus on the dealership structure. What has been your approach in that regard? DV: For me, a dealer is not someone who gives you a certain turnover – as a principal we have an expectation of business development and it is also about commitment from our dealers. Commitment means signing a target achievement letter, working out a collaboration with us, providing a business plan and showing us the willingness to grow the business together with us in the long-term. Using this approach and taking into consideration the size of the different markets and territories, we reduced our dealer numbers in South Africa and Sub-Saharan Africa. I am very excited to announce that we have just appointed a new dealer in Mozambique, Pinto and Cruz, originally from Portugal, with whom I had dealt in my previous role in Europe. They are finding their feet in Mozambique with a team of Mozambicans who are well-versed in the local construction industry and we are expecting good market penetration here. Our plans for 2019 include entering the Seychelles at the beginning of Quarter 2 (Q2). This will be followed by Ethiopia and Mauritius, also in Q2. We have already identified the dealers in these regions so it’s just a matter of signing dealer agreements. We have also recently opened discussions for a new agent in Zambia with the intention of seeking representation in the Copperbelt. In Zimbabwe, we have

Pelgin Consultancy Services, a long-term partner of ours and we are just waiting for the economy to bounce back. We have a strong belief in and have given a strong commitment to Pelgin Consultancy Services to be there for them. Business is happening and there are lots of leads in Zimbabwe but the problem is Forex payments across the border. We are trying to work with financial institutions to support our partner in that regard. MS: You mentioned that you have regained market share in SBU 2. What is the state of other business units? DV: We hosted a dealer summit this year at the end of January and one of the key resolutions was that in 2019 we have to focus on the complete product mix. We must stop cherry-picking. It’s easy to sell a rammer because we are the market leader already. Speaking about other business units, SBU 3 (Utility) is all about pumps, light towers and breakers. Contractors are often forced to work after dark to avoid penalties and good lighting is essential as it is also a safety issue for workmen. We offer a range of light towers that provide excellent and efficient lighting for a variety of applications from roadworks and building sites to the mining industry, so there is plenty of opportunity to grow this market segment. When it comes to SBU 4 (excavation), the market where we play is unfortunately relatively small. Wacker Neuson’s largest offering in this range is about 15 t. The core market in South Africa when it comes to compact excavators is the 1,5 to 5 t range, with about 100 unit sales per annum. However, the biggest volumes are in the 5 t class. We are targeting to grow our current market share of about 20% to 30% this year, which is about a third of the market. The most important growth market is SBU 5 – materials handling – where we offer wheel loaders, telehandlers and skid steer loaders. We have already reached a third of the market in terms of market share within the class of telehandlers and are proud to keep about 40% of the market share within the wheel loader segment. Further from a market development point of view, we recently launched a new range of TLBs. Why TLB? It is a trusted tool in the South African market and our customers have been asking for it. As a customer- centric company, we give our customers what they want. Two field test units we brought in to see how the market reacts were sold to Swaziland well before the tests even started! This gives us great confidence going forward with this product. We

then had to wait for new test units which arrived in January and each of our branches – Johannesburg, Cape Town and Durban – have a unit to conduct demos in their respective markets. I am also extremely excited about our new range of skid steer loaders. The new units which have just arrived include both canopy and cabin versions. Our target is to be amongst the top three suppliers of skid steer loaders in 2019. The product comes with a ground breaking, one-year, bumper- to-bumper and four years/4 000 hours (which-ever comes first) engine warranty, which is unique in South Africa. When it comes to SBU 6 (aftersales), we have made good progress in professionalising our warehouse. We are currently implementing a new warehouse management system to speed up all processes. The second big project for SBU 6 is to ensure that everyone, especially the dealerships, lives up to the Wacker Neuson service standards. We want to hand over the service responsibility to the dealers because they are customer-facing. That’s why we have kept the dealer appointment strategy at a 300 km radius, so that each and every customer can find a Wacker Neuson representative, whether a branch, a dealer or service agent, within this radius. MS: Technology is changing the face of service. What are you doing in terms of adoption of service- enhancing technologies? DV: The introduction of Vuzix lenses in June 2019 to enhance our aftersales capabilities is going to be a game changer for Wacker Neuson, dealers and customers. Vuzix lenses are just like sunglasses which allow you to see a projection of information on the screen inside, enabling technicians to see the interior of machines that are operating hundreds of kilometres away. This will significantly increase uptime and eliminate the need for technicians to travel long distances to solve issues they can take care of remotely. Last but certainly not least, we will also introduce our own Wacker Neuson telematics platform, EquipCare, in September this year. I know telematics is quite sophisticated, but for me it’s about proactivity when it comes to maintenance. We want to professionalise our back office and give the customer the assurance that we are proactive when it comes to the health of their machines, and also assure them that we want to maintain their machine throughout its product lifecycle until such a point when they are ready to invest in a new unit. b

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