2014-1-2 recovery and breakthrough review of 2010 and prospects for 2011 jan 10, 2011

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Recovery and Breakthrough

Review of 2010 and Prospects for 2011

Jan 10, 2011

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The largest container supplier in the world, as well as the largest manufacturer of road transportation vehicles in China

A manufacturer of and service provider for tank equipment for the energy (natural gas), chemicals and liquid food industries

A major offshore engineering equipment manufacturer in China A leading supplier of airport ground equipment in China

1.1 Business Overview

Focus on developed and emerging markets, enhance the capability of equipment production, expand into the service segment, and consolidate resources

Implement a 3-year strategic upgrading program to establish a platform for the Company’s robust long-term development

Capitalize on the recovery in the container industry, improve efficiency and maintain our leadership, and improve the profitability of our vehicle business

Consolidate tank equipment assets for the energy, chemicals and liquid food industries, and capture consumption upgrading opportunities in China;

Strengthen our R&D capabilities in the offshore engineering segment and achieve strong financial performance, capture potential opportunities and explore new markets

Market Position

Development Strategies

Demand for containers is expected to rebound amidst global economic recovery following the global financial crisis

Logistics, infrastructure construction and investment in connection with urbanization will resume their rapid growth

Demand from the energy, chemicals, food production, processing, storage and transportation sectors is growing and expanding

Demand for offshore oil equipment has continued its growth momentum and shifted to deepwater equipment; the global offshore engineering sector has seen slight recovery

Business Opportunities

Strategic Objectives

To become a major player in the global market; to achieve revenues of RMB80-100bn by 2012 – 2013

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Four Major Businesses

ContainersSpecial-purpose

vehicles, heavy trucks

equipment for the energy,

chemicals and liquid food industriesOffshore engineering

Other Businesses

Airport equipment

and related services Logistic equipment and related services

(manufacturing and solution provider )Railway trucks

Real Estate

Development

Finance leasing (Finance and Finance Leasing companies)

Business Structure

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Locations of Our Major Businesses and Products

throughout the World

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Jan- Sept 10 Jan-Sept 09 YOY change (%)

Gross revenue (100mn) 381.77 138.86 174.94% Net profit (100mn) 23.25 7.76 199.70%

1.2 Operating Results for the First Three Quarters of 2009

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Dry cargo container business has recovered from a trough and seen rising prices and volumesAlongside recovery of the global economy and shipping sector, demand for dry cargo containers has seen significant growth in 2010. Industry-wide demand for dry cargo containers is expected to exceed 2.5mn TEU, higher than estimates earlier in the year (1.3mn TEU), representing 60% of the demand during 2007-2008

2H10 has seen a full order book for dry cargo containers. During January-September 2010, cumulative sales volumes for dry cargo containers reached 916,300 TEUs vs 15,200 TEUs the year before; cumulative sales volumes for refrigerated containers reached 58,300 TEUs, up 99.50% over the same period in 2009; cumulative sales volume of special containers has reached 41,100s, up 11.45% over the same period in 2009

Dry cargo container prices have seen a significant increase from USD1,800 in early 2010 to USD2,700 in the 3rd quarter, and have remained at USD2,550-2,600 during the 4 th quarter

Profitability in the dry cargo container segment has improved significantly during the first three quarters and reached the highest level in recent years

1.3 Business Development Overview – the Container Business

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1.3 Business Development Overview – Road Transportation VehiclesSignificantly increased revenue and improved annual profitability The road transportation vehicle business of the group achieved significant growth above expectations, driven by the continued recovery of domestic economy and infrastructure investment in 1H. While production and sales decreased to some extent in Q3, the business maintained strong momentum in Q4

Achieved cumulative sales volume of 114,500 vehicles from Jan to Sep 2010, up 64.29% over the same period of last year

Recovery in the shipping market and a rise in throughput of port containers in 2010: orders for semi-trailers for logistics also began recovering

With strong market demand, increased production and sales, improved product structure, enhanced cost control and effective implementation of marketing strategies, it is expected that the overall profitability of the road vehicle business will increase significantly in 2010 to its highest ever level

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Entry into heavy truck business in 2009Investment background and objectives: The investment decision was made based on forecast demand for heavy trucks, driven by domestic economic development and the Group’s assessment of internal demand. In January 2009, the Group announced its investment plan in the heavy truck industry, marking its entry into the sector

Business and organizational structure: comprising CIMC Chery Joint Truck Co. and Yuchai Joint Power Co., Ltd. , The C & C Truck Co., Ltd. (hereinafter referred to as “C&C Truck”) is a joint venture of between CIMC Vehicle and Chery which hold 45% stake each

Development target: to become one of the leading truck suppliers in China with the ability to manufacture world-class heavy trucks independently

1.3 Business Development Overview – Road Transportation Vehicles

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Entry into heavy truck business in 2009Key competitive strengths:

By leveraging the respective advantages of Chery (R&D of passenger cars), CIMC (manufacturing of logistics equipment and special vehicles) and Yuchai (manufacturing of diesel engines), and through a strategic relationship with Fast Group (leading gear box producer) and Fuhua Heavy Industry (the largest axle supplier in China), C&C Truck Co., Ltd has created a comprehensive heavy truck industry chain

Products positioned at mid-to-high end heavy trucks: European quality and Chinese cost s

Integrated design concept initiated by C & C Truck Co., Ltd in design, development of truck chassis and assembly to achieve seamless connection and optimal performance of the vehicle, avoidance of change and damage to chassis during the course of vehicle modification, which improves the reliability of products, optimizes the overall performance , and reduces the modification cost and time cycle. In terms of service offering, C & C Truck Co., Ltd rejects traditional marketing models and puts service before marketing, boosting marketing with service and production with marketing


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Progress of heavy truck business: bulk production by the end of 2010May 2009: C & C Truck Co., Ltd started the phase I construction of its project in Wuhu, Anhui . The total investment amounts to RMB3.2bn (including stamping, welding, coating, car body, and assembly), with a production capacity of 30,000 heavy trucks per year. On Oct 25, 2010, the first U340 truck was produced at C & C Truck Co., Ltd.On 25 November, the Yuchai Joint Power Project was launched in Wuhu City, Anhui Province. Yuchai Joint Power Limited was set up by Guangxi Yuchai Machinery Co., Ltd. and Jirui Joint Heavy Industry Limited, and is principally engaged in production and sale of engines and spare parts used by heavy vehicles. Total investment amounts to RMB2.5 billion and construction was split into three phases. Ultimate productivity will reach 200,000 engines for heavy vehicles Dec 18, 2010: C & C Truck Co., Ltd publicly released its marketing strategy and product price. By leveraging the respective advantages of Chery (R&D of passenger cars), CIMC (manufacturing of logistic equipment and special vehicles) and Yuchai (manufacturing of diesel engines), C & C Truck Co., Ltd has successfully created a complete heavy truck industry chain, giving a competitive advantage to its product priceThe serial products of C & C Truck Co., Ltd mainly include: tractor, trucks, mixers and special purpose vehicles, which started to accept orders from the market on Nov 15. It is expected that about 21 types (more than 600 models) of products will be launched to the market by 2011 at the price range of RMB180,000 to 800,000


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On 3 August 2007, CIMC acquired Enric Energy Equipment Holdings Limited (3899.HK). In August 2009, the Group completed the consolidation and optimization of its related assets in energy, chemicals and liquid food. As assets have been injected into Enric, the plan of forging a global operating platform of equipment manufacturing and services for energy, chemicals and liquid food has now been successfully completed

Energy equipment—— Applications in downstream natural gas sector: CNG compressor, pressure container, gas station and

transportation vehicles

—— Equipment for midstream LNG storage and transportation, treatment and other low temperature equipment (industrial gas container, LNG station, peak shaving station and project contracting)

—— Turnkey contract for storage tank project for large upstream LNG receiving station (in 2009, our group’s subsidiary TGE GAS won the bid for Portugal LNG receiving station phase II project worth Euro1bn; domestically won the bid for LNG tank EPC contract in Zhejiang, with a contractual construction period of 3 years at ca. RMB1.2-1.4bn)

Chemical equipment—— Intermodal tank containers, Dalian Heavy Equipment Base (product scope mainly include Coal gasification,

ethylene cracking furnace, a large ammonia, fertilizer high pressure equipment, oil refining hydrotreating, hydrocracking, methanol, key equipment, desalination of sea water evaporator)

LF equipment and solutions for storage and transportation —— Juice (orange) tanks, tank terminals, tanks for vessels; beer production equipment ; and relevant

transportation vehicles;

—— Main production bases located in Europe and Nantong, Jiangsu

1.3 Business Development Overview – Equipment for Energy, Chemicals and Liquid Food Industries

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CIMC Enric 1H2010 revenue and business structure

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Areas CIMC has been involved in

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In order to meet its customers needs, an integrated technology for City and Town LNG and CNG projects was successfully developed by Enric to suit investment conditions featuring different size, district, environmental and resources patterns. It can supply natural gas in a highly efficient manner to urban residents, industrial users and vehicular users within a radius of 1,000 km from the gas source using an economic operating mode based on large-scale point-to-point energy logistics.

Enric’s LNG-CNG Integrated Business Solutions for City and Town Gas Projects

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Liquid food equipment ——stationary storage tank

Stainless steel food, chemical storage tanks, tank terminals and marine tanks (for orange juice)

Beer tanks, fermentation tanks and sake tank facilities;

Holvrieka under CIMC Enric is a market leader in the stainless steel storage tank manufacturing with presences in the Netherlands, Belgium and Denmark, covering the chemicals, food and shipping sectors

As the designer and developer of marine tanks (for orange juice) and related logistics concepts, Holvrieka is the sole manufacturer of such products in the market. Its annual turnover for beer tanks is approximately US$48 million, accounting for 30% of the global beer tank market

Liquid food equipment ——Tank trucks

Aluminum powder tanks, liquid tanks, powder tank containers

Stainless steel liquid chemical tanks, liquid food tanks, powder tanks

Tank trucks, van semi-trailer; oil tanks, freezer storage semi-trailers, generator for semi-trailers

As impacted by recession in Europe, both revenue and profit expect to drop in 2010


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TGE provides the following services:• Pre-construction process FEED and

engineering services• EPC turn-key contracts• EPCS engineering procurement and

construction supervision• PMC owners project management / investment

advisory services

EPC general contracting:• Project management• Basic design• Detailed design• Engineering supervision• Procurement

• Construction• Commissioning and start-up services • Training of operators • Commercial operations assistance

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In November 2008, CIMC acquired 10% of the issued share capital of Yantai Raffles Shipyard Ltd. and entered the offshore engineering market

Key strengths:

Yantai CIMC Raffles Shipyard Ltd. is a leading offshore and marine fabrication specialist and is the biggest manufacturer with the largest orders in China in terms of the semi-submersible oceanographic engineering equipment construction business. In 1996, the original Yantai Shipyard and Singapore established Yantai Raffles Ocean Engineering Co., Ltd. Founder Mr. Zhang Liren has over 30 years ocean engineering experience

Raffles is mainly engaged in the construction of mobile drilling rigs and associated supporting vessels that include semi-submersible drilling rigs, jack-up drilling rigs, FPSO, FSO, platform supply vessels, pipe laying vessels, luxury yachts and other prototype vessels, with facilities located in Yantai, Haiyang and Longkou

World class shipbuilding facilities: including the second largest 18-meter dry docks in Asia, closed dry dock, semi-submersible launching barges of 15,000 tons and the biggest 20,000-ton gantry cranes in the world

Modular manufacturing: realize separate on-land construction of upper & lower hulls and dock assembly, which can in theory save 2MM working hours

Design experience: rich experience accumulated in the detailed design and engineering of self-elevating platform, semi-submersible platform and multi-functional supply vessels

1.3 Overview of Business Development - Offshore Engineering

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Semi-submersible offshore drilling platforms that are hoisted by 20,000-ton gantry cranes were successfully assembled in November 2008. On 25 Sep 2009, we successfully assembled the fourth-generation semi-submersible offshore drilling rig for Brazilian Schahin Oil & Gas Company with 20,000-ton gantry cranes, which is a breakthrough in installation and assembly of large-scale offshore engineering modules and reaching a world-class level

CIMC Offshore Engineering R&D Center Company Limited (the “Research Center”) was wholly invested in and established by the Company in Yantai city in October 2009

The Company made an unconditional voluntary cash offer to all shareholders (excluding the offeror and its associates) of Yantai Raffles through its wholly-owned subsidiary on 16 November 2009. The offer price was fixed at US$1.41 per share. As of 18 Jan 2010, The Company holds 50.01% of shareholding of Yantai Raffles, becoming the controlling shareholder


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2009 business revenue mix and gross marginIn 2009, Yantai Raffles posted operating revenues of US$632mn (SGD$918.6mn), net profit of SGD$27.30mn with gross margin of 11.88%

Of which：—— Semi-Submersible’s revenue is US$ 420mn, accounting for 66.71% of total operating revenue with gross margin of over 17%—— Jack-up’s revenue is US$ 25.49mn, accounting for 4.03% of total operating revenue with gross margin of 16%—— Special-purpose vehicles and others generated revenue of US$185mn, accounting for 29.25 % of total operating revenue

2010 Business Situation2010 full-year revenue is expected to be lower than estimates


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Project progress and order situationThe offshore engineering projects under construction are well on track. Currently, Yantai Raffles has completed 5 convergence projects of semi-submersible offshore drilling rig. In Sep-Oct 2010, the Company successfully completed the testing of 2 deepwater semi-submersible offshore drilling rigs(COSL PIONEER and Schahin H200), and delivered them to COSL and Petrobras separately in October and November successfully

Currently, Yantai Raffles has under construction order volumes of US$600m, including 8 drilling rigs, of which 4 are deepwater semi-submersible offshore drilling rig ； additionally one Van Oord and one pipe laying vessel are under construction ； 2010 new orders are about US$1,000mn, largely jack-ups and special-purpose vessels


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Background of offshore oil industry

Exploring and develop in oil & gas resources offshore broadly has 3 processes: (1) geophysical prospecting——adopt seismic exploration method to explore the geological structure of seafloor and find out oil bearing structure with geophysical survey ship, providing foundation for drilling ； (2) drilling—— usually use jack-up or semi-submersible drilling rig, to drill and take core samples in prospective oil & gas geological areas to decide whether to drill evaluation wells, and the number and location ； (3) development—— calculate oil reserve and make development plan, including resources, engineering and economic evaluation, then determine fixed platform or floating rig for production, storage and transportation. All processes above are based on offshore engineering equipment

The percentage of oil & gas production offshore production takes has reached to 45% in 2000 from 10% in 1970. In recent years, over two thirds of new-developed oil & gas fields around the world are located offshore. As onshore oil & gas resource is exhausted and the development of deepwater technology and energy demand grows, exploring deepwater will be the trend

Leading international offshore oil & gas project equipment market advisory and research institution——IMA launched its market research report, claiming that global large oil & gas companies have targeted deepwater and the north pole as their oil field objectives. Large companies such as Royal Dutch Shell, BP, ExxonMobil and large companies in Russia, China and Japan are expanding to deepwater, which generates huge demand for offshore oil & gas developing equipment


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Mn bbl/day

World oil production growth started to slow down after 1980

Source ： DnB 、 BP 、 CERA 、 IEA

Offshore oil production is needed to meet the deficit

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Offshore engineering equipment

Offshore engineering equipment refers to large-size equipment and ancillary equipment used for exploration (mainly oil and gas resources), production, processing, storage and transportation, management and logistics services, including floating drilling platform, floating production facilities and offshore engineering auxiliary vessels, such as drilling equipment and floating production storage and offloadings (FPSO) such as deep-water semi-submersible drilling platform and deep-water floating barge, and semi-submersible platform production systems (including tension-leg platform production platforms), self-elevating platform production system, barge production system and other mobile offshore oil production facilities, floating cranes and pipe-laying barge

Investment direction of and future demand for offshore oil and gas development equipment is trending towards deeper water operation, bigger loading capacity, more advanced facilities, higher level of automation and better security

1.4 Business Development Overview - Offshore Engineering

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Size of Overall Market Demand Offshore engineering equipment refers to large-sized equipment and ancillary equipment

used for exploration (mainly oil and gas resources), production, processing, storage and transportation, management and logistics services, including floating drilling platform, floating production facilities and offshore engineering auxiliary vessels

Statistics show that average total annual investment in global offshore oil and gas development from 2002 to 2007 stands at +US$100 billion and the highest level being US$125 billion

In general, in regard to global offshore oil and gas resources development, investment in equipment stands at 20%-25%. Based on forecast average annual investment of US$350 billion on global offshore oil and gas resources development from 2011-2015, corresponding average annual volumes in the period in connection to global offshore engineering equipment market would be around US$80 billion

1.4 Business Development Overview - Offshore Engineering

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Drillship Semi-submersible Drilling Platform

Self-elevating Drilling Platform

Submersible Drilling Platform

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2.1 Prospects

ContainersIncreased demand for containers is expected to be maintained in 2011 whilst demand for dry cargo containers may reach 3.5-4 million TEU

Major factors: 1. Investment for new capacity is still required by shipping sector; 2. Demand for replacement fro old containers; 3. Reduced container turnover after 20-30% cut in shipping speed

Increased demand for reefer containers and special-purpose containers is expected to be maintained

Road transportation vehiclesIt is forecast that the road transportation vehicle business (excluding heavy trucks) will maintain a growth rate of around 20% in next two to three years whilst income from 2012 to 2013 is expected to reach Rmb20 billion

It is expected that income from business of heavy trucks to reach Rmb15 to 20 billion from 2012 to 2013

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3.1 Prospects

Energy, chemicals, liquid food equipment business The size of this business is expected to reach RMB10 billion around 2012

Liquid natural gas (the “LNG”) still accounts for a very low proportion of China's overall energy consumption. The global LNG market has maintained a growth rate of approximately 7.5% per annum since 1995. Therefore, demand for LNG receiving stations, gasification stations, offshore and land storage and transportation equipment in the midstream of the industrial chain as well as filling stations in the downstream will keep expanding

With China's rapid economic growth, demand for storage and transportation of chemicals and hazardous products is also expanding

With the increasing income levels and rising consumption amongst Chinese people, the industry for liquid foods including beer and fruit juice also sustains rapid growth. Meanwhile, as government requirements demand ever higher transport safety and food safety assurances and monitor, the standards and quality requirements for operation services are getting more stringent

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Offshore Engineering Business The Group will capitalise on Yantai Raffles’ business platform to improve management and

strive to become one of the leaders in global offshore engineering industry

—— To accelerate development of a professional offshore engineering R&D centre, so as to enhance its independent innovation capability and develop offshore engineering products with self-owned intellectual property rights as soon as possible

—— To seek domestic equipment to complement the supply chain of offshore engineering equipment, and to continuously improve the localization rate of key equipment based on the established capability of contracting with its offshore platforms

After 2012, it is expected that the business revenue will reach RMB15 billion

3.1 Prospects

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Offshore Engineering Business The state strongly supports the development of offshore engineering equipment, which is listed as part of its “Twelfth Five-

year Plan” In October 2010, the State Council promulgated the “Decision on the Acceleration of the Nurture and Development

of Strategic Emerging Industries” ( 《关于加快培育和发展战略性新兴产业的决定》 ), which clearly states that the intention “to focus on the development of oceanic resources and to put great efforts in developing offshore engineering equipment”

The drafting of the “Development Plan for Offshore Engineering Equipment During the Twelfth Five-year Plan Period” ( “《十二五”期间海洋工程装备发展规划》 ), which is formulated by the Ministry of Industry and Information Technology is basically complete, and is expected to be announced in the first quarter of 2011. In order to achieve the goal for output volume for the Twelfth Five-year Plan Period, there will be the construction of an additional 50 million tons of production capacity in the offshore continental shelf and continental slope of the PRC. Also, there will be 2-3 deep-water oil-gas fields that will have construction finished and be put into production, with the total investment expected to exceed RMB250 – 300 billion

The Medium and Long Term Development Plan for China’s Shipbuilding Industry (2006 to 2015) proposes: to employ different methods (such as independent research and development, Sino-foreign joint design and technology introduction) to acquire the optimization techniques and design techniques of key equipment for ship building and offshore engineering; to set up one to two offshore engineering equipment research and development centers; and to grant more loans to domestic shipbuilding enterprises that need liquidity for the construction of offshore engineering equipment.

The Shipping Industry Realignment and Stimulation Plan (2009 to 2011) proposes: in 2011, the market share for offshore engineering equipment will increase to 10%; a number of specialized offshore engineering and equipment manufacturing bases will begin to take shape; and development breakthroughs of offshore engineering equipment will be realised. More resources will be put into scientific research and development and technological reform, so as to support the R&D of offshore engineering equipment and also the technological reform in offshore engineering of specialized facilities and equipment

3.1 Prospects

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Driving new value, Moving the world

创 · 造 · 新价值

2014-1-2 recovery and breakthrough review of 2010 and prospects for 2011 jan 10, 2011

Documents

container business slide

dry cargo container

dry cargo containers

road vehicle business

dry cargo container

deepwater equipment

year recovery

dry cargo container