Frank Manfredi. Orlando, FL. February 20, Manfredi & Associates, Inc.

Transcription

1 Frank Manfredi February 20, 2017 Orlando, FL

2 Presentation Outline U.S. Equipment Forecast Impact Of Emission Regulations Used Equipment Buyers Dilemma Questions and Comments

3 U.S. Equipment Market Current demand Dealers reducing inventory plentiful used equipment available Users renting machines segment up 10% to 15% Net minus 8% to 10% in 2016 minus 3% to 5% in construction employment up -- 6 to 6.1 million Other Important demand drivers Energy sector suffering Government funding at standstill Government regulations

4 Estimated U.S. Construction Machinery Market (units) % Change Estiamted % Change Forecast % Change Product vs vs vs 16 Asphalt Pavers 1,275 1,340 1, % 1, % 1, % Compactors 4,315 4,530 4, % 4, % 4, % Cranes 1,830 1,450 1, % 1, % 1, % Crawler Tractors 5,700 6,100 6, % 5, % 4, % Hydraulic Excavators 39,000 42,300 44, % 37, % 36, % Loader Backhoes 16,000 15,200 17, % 16, % 16, % Motor Graders 2,695 2,800 2, % 2, % 2, % Haulers - Rigid % % % Haulers - Articulated 1,300 1,500 1, % 1, % 1, % RT Forklifts 15,090 15,800 15, % 14, % 14, % Rubber Tracked Loaders 23,200 25,500 34, % 30, % 31, % Skid Steer Loaders 41,027 45,000 39, % 37, % 35, % Wheel Loaders 19,000 21,000 22, % 20, % 19, % Total 171, , , % 173, % 167, %

5 U.S. Construction Machinery Market (Percent Change)

6 A v e r a g e H o u r s o f M o n t h l y u s a g e p e r Komatsu North America Average Hours of Machine Usage per Machine M a c h i n e month MOV

7 U.S. Emission Regulations Have Changed The Market Tier IV interim January 2012 Tier IV Final January 2014 Availability of ultra-low Sulphur Diesel Need for a stable used equipment market Need for predictable residual values

8 How Big is the Equipment Business? How Big Is The Equipment Business? Source: Bloomberg L.P.

9 The Ti Book by Malcolm Gladwell Tipping point -> some change is irreversible Why some ideas tip, meaning they change and the change is irreversible The machinery industry is at an irreversible Tipping Point More than 50% of all equipment sold in 2014 went into rental fleets That ratio could move to 65% by 2020

10 The Black Swan A Book by Nassim Nicholas Taleb A Black Swan event comes as a complete surprise and is inappropriately rationalized after the fact with the benefit of hindsight The emergence of the equipment rental business is a Black Swan event

11 The Black Elephant A cross between a Black Swan event with the elephant in the room A problem that is visible to everyone, yet no one wants to deal with it EPA emission regulations are an example of a Black Elephant event

12 Economy Millennials do not have the desire to own things There will be an Uber or AirBNB entry to the machinery industry that will disrupt the status-quo YardClub (CE) and MachineryLink (AG) are two start ups that will be disruptive Even a small increase in utilization could shrink equipment market

13 North American Equipment Owner s Dilemma

14 ultra Low Sulphur Diesel Fuel Availability Isolating Impact of Emission Regulations Regulated versus Non-Regulated Markets

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16 Value of Used Machine Same No Matter What Tier Level % residual 24% residual Price paid by less regulated market customer New Chinese Machines Sold For Less Than Used Year 1 Year2 Year 3 Year 4 Year 5 Year 6 Year 7 Tier III Tier Ivi Tier IV final

17 The Future Operational differences between brands negligible The future belongs to those manufacturers who help the user dig a hole, lift materials to a scaffold, load a hopper

18 Future Competition Will Not Be Other Equipment Manufacturers Software Developers Contractors Mine Operators Large Fleet Owners Equipment Rental Companies

19 Too Much Information!! Users who receive telematics data generally have not altered their operational behavior Too Much Information Overwhelmed with data Dashboard must provide actionable advice not just more information Fault code algorithms needed that identify problems and provide solutions Must be Agnostic

20 Conclusions Manufacturers will have to take a more active role in the distribution of their products Distributors must expand into rentals which will require much more capital The development of the sharing economy for machinery will impact rental companies and distributors the most and long term may result in reduced demand for machines

21 Comments