Worksite Applications_2_Machine Performance 271114

COMPANY PRESENTATIONMarch 2019

INTRODUCTION TO FERRONORDIC

Official dealer of Volvo Construction Equipment in all of Russia. Core focus on Volvo CE brand, a high-quality construction equipment manufacturer and No. 1 brand in Russia

Authorized dealer of Terex Trucks (2014), Dressta (2016), Rottne (2016) and Mecalac (2017) in all of Russia

Official dealer of Volvo Construction Equipment and Mecalac in Kazakhstan since 2019

Aftermarket dealer for Volvo Trucks and Renault Trucks, and dealer for Volvo Penta in selected regions

Distribution and sales of new and used construction equipment, sales of parts, as well as providing services and technical support Growing contracting services business

Ordinary shares listed on Nasdaq Stockholm

2

Employees

Revenue (SEKm)

Outlets

Start

~160

1,1841)

6

2018

1,032

3,241

79

DevelopmentOverview

New machine revenue per customer type (2018)

Mining20%

General Construction and

Other27%Road construction

18%

Forestry18%

Quarries & Aggregates

9%

Oil & Gas7%

1) Annualized.

A HUGE MARKET AT THE EDGE OF RECOVERY

Population: ~144 million1)

Area: 16.4 million sq. km1)

Rich on forest, oil and minerals World’s largest forest land A significant portion of the Federal Government

income relates to oil and gas Strong balance sheet and approx. USD 476 billion2) in

international currency reserves plus USD 89 billion in gold2)

3

Russia at a glance GDP growth in Russia5)

Gold reserves (% of total)4)Coal reserves (% of total)3)Natural gas production (% of total)3)Oil production (% of total)3)

Sources: 1) World Bank 2) The Central Bank of the Russian Federation 3) BP Statistical Review of World Energy, June 2018 4) U.S. Geological Survey, Mineral Commodity Summaries, January 2018 5) Including the World Bank, IMF, OECD and CEEMEA Business Group.

14,1%12,9% 12,2%

5,4% 5,2% 4,9% 4,2% 4,2%

2,0%

USA

Saud

i Ara

bia

Russ

ia

Iran

Cana

da Iraq

UAE

Chin

a

Kaza

khst

an

20,0%17,3%

6,1%4,8% 4,8% 4,1% 3,3% 3,0%

0,7%

USA

Russ

ia

Iran

Cana

da

Qat

ar

Chin

a

Nor

way

Saud

iAr

abia

Kaza

khst

an

24,2%

15,5%14,0% 13,4%

9,4%

3,5% 3,3% 2,5%

USA

Russ

ia

Aust

ralia

Chin

a

Indi

a

Ger

man

y

Ukr

aine

Kaza

khst

an

18,1%

11,1% 10,2%

5,6% 4,6% 4,4% 4,3% 4,1%1,9%

Aust

ralia

Sout

hAf

rica

Russ

ia

USA

Indo

nesia

Braz

il

Peru

Cana

da

Kaza

khst

an

3,4% 1,3%0,6%

-3,8%

-0,7%

1,5%2,3%

1,5% 1,8%

2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

SIGNIFICANT NEED TO IMPROVE INFRASTRUCTURE

5

Road density in Russia and Kazakhstan is low Rail density is also lowRoad density (km road per 100 sq. km land area)1)

14 4

6

23 23

36

Far East Siberia Urals North-West Volga South Central

Rail density (km railway per 1,000 sq. km of land area)2)

The market for construction equipment is expected to capitalize on the long-term growth in Russia and Kazakhstan

An important driver will be the need to improve its aging infrastructure,the bulk of which was built in the Soviet era and needs to be upgraded

• Russia is ranked 104 out of 140 countries in terms of road quality3)

• Kazakhstan is ranked 106 out of 140 in terms of road quality3)

Clear signs that the government intends to create economic growth by increasing infrastructure spending

The Ministry of Economic Development has finalized a list of 200 infrastructure projects with an aggregate cost of approx. USD 100 billion

Sources: 1) World Bank 2) UN Economic Commission for Europe, UN Economic and Social Commission for Asia and the Pacific 3) Global Competitiveness Report 2018.

4 6 14 2343

67

129 132

172 180192

Kaza

khst

an

Russ

ia

Cana

da

Finl

and

Chin

a

USA

Swed

en

Pola

nd UK

Ger

man

y

Fran

ce

5 6 6 716 18 24

5161

74

108121

Russ

ia

Kaza

khst

an

Cana

da

Chin

a

USA

Finl

and

Swed

en

Fran

ce

Pola

nd

Slov

akia

Ger

man

y

Czec

h Re

p.

PENT-UP DEMAND

6

Imports of construction equipment to Russia (units)

Imports (excluding Russian and Chinese manufacturers)

Source: Russian import statistics (until December 2018) provided by Volvo CE.Note: Excludes Russian and Chinese manufacturers, bulldozers, rigid dump trucks and forestry machines.

THE MARKET FOR IMPORTED CONSTRUCTION EQUIPMENT IS STILL YOUNG – SALES OF PREMIUM BRANDS IN RUSSIA ONLY TOOK OFF IN 2006/2007

1 131 1 6852 655

4 436

13 525

17 489

1 649

8 004

18 627

21 009 20 573

13 568

3 5734 354

8 426

10 310

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Imported high-quality brands of construction equipment gains

momentum in Russia

Large amount of Russian, low-quality machines

The market started to recover during the

second half of 2016, after the downturn in 2014, 2015 and 1H 2016 caused by the

negative development of the Russian

economy

PRODUCT OFFERING

7

Bran

dEx

ampl

e pr

oduc

tPr

oduc

tYe

arAr

ea

Wide range of construction equipment, leveraging Ferronordic’s countrywide network

Volvo CE

Full VCE range

2010 (Russia)2019 (Kazakhstan)

All of Russia &Kazakhstan

Terex Trucks

Dump trucks and rigid haulers

2014

All of Russia

Dressta

Bulldozers and pipe layers

2016

All Russia

Rottne

Forwarders and harvesters

2016

All of Russia

Volvo Trucks &Renault Trucks

Aftermarket

2012

10 locations

Gensets

Own labelled diesel generators

(gensets)

2014

All of Russia

Mecalac

Backhoe loaders

2017 (Russia)2019 (Kazakhstan)

All of Russia &Kazakhstan

FOCUS ON AFTERMARKET

8

Proactive and competitive offering of customer service and spare parts supply, based on real-time data from the existing machine population and long experience in the industry

Proprietary system in place where signals from Volvo CE’s telematics system, CareTrack are transformed into proposed sales actions (for both machine and aftermarket sales) that are automatically uploaded to the mobile phones of the sales staff

Ferronordic’s presence in all Russian regions allows for fast delivery of parts and excellent customer support

Aftermarket sales Offering

Spare parts delivery Telematics - through Care-

Track; fuel efficiency control, operator efficiency, fleet management

Operator training Preventive maintenance service Planned and unplanned repair Overhaul Providing new life to older

machines Diagnostics of machines Remanufacturing of vital parts

Share of sales 2018

Machine sales71%

Aftermarket 24%

Other 5%

Aftermarket sales (SEKm)

0

100

200

300

400

500

600

700

800

2015 2016 2017 2018

NATIONWIDE COVERAGE

9

Khabarovsk

Krasnoyarsk

Ekaterinburg

St .Petersburg

Moscow

Krasnodar

Murmansk

PetrozavodskArkhangelsk

N.Novgorod

Artyom

Kazan

Vologda

Voronezh

Chelyabinsk

Tver

Perm

Norilsk

Novosibirsk

SurgutRostov-on-DonSovetskiy

Velsk

Tyumen

Tula

Yaroslavl

RyazanBelgorod

Smolensk

SyktyvkarKoryazhma

ArmavirUfa

Bratsk

Neryungri

Noviy Urengoy

Kaluga

Yakutsk

Blagoveshchensk

Varna

Cherepovets

Penza

Belovo

VorkutaMagadan

Chita

Elga

Mar-Kuel

Labytnangi

MakhachkalaOrenburg

Kyumba

Karpogory

Ust-OmchugYagodnoe

Velikiy Novgorod

Vysochaishy

Kemerovo

Irkutsk

Saransk

Kirov

Naberezhnye Chelny

Tomsk

Cheboksary

Ust-Ilimsk

Abakan

Samara

Kirovsk

Egvekinot

Udachniy

Aldan

Almaty

Nevinnomyssk

(79) Ferronordic outlets as of December 31, 2018

Yuzhno-Sakhalinsk

STRATEGIC OBJECTIVES

10

Leadership within the market for construction

equipment

Geographic expansion

Expansion into related business

areas

Further development of contracting

services

Aftermarket absorption rate of 100%

STRATEGIC DEVELOPMENT2010-2013: Phase I – establishing

platform 2014-2016: Phase II – streamlining

to handle market decline2017 and onwards: Phase III – leveraging market recovery and company

maturity

1 1841)

2 421 2 403 2 483

3,9%2,8%

3,6%

2010 2011 2012 2013

Revenue (SEKm) Operating margin

12 outlets326 FTEs

75 outlets731 FTEs

2 335

1 4691 658

4,4%5,9%

7,9%

2014 2015 2016

Revenue (SEKm)

75 outlets767 FTEs

73 outlets 782 FTEs

1) Annualized 2) 2011-2016 refer to adjusted EBIT, i.e. operating profit excluding (i) amortization of transaction-related intangible assets and (ii) write-downs of non-current assets in Q4 2016.

Focus on digitalization

7,3%8,4%

2017 2018

Revenue (SEKm)

74 outlets847 FTEs

2 567

79 outlets1,032 FTEs

3 241

Processes and procedures put in place

Establish countrywide platform

Building market awareness and market share

Increased aftermarket focus

Reduction of unprofitable outlets

NWC efficiency focus

Adding new brands and services

Leveraging existing organization

Growing contracting services

High market potential

Continued focus on aftermarket

Successful IPO

2)

STRONG DEVELOPMENT DESPITE LOW MARKET VALUE

12

113% 110%

73%

19% 23%

45%55%

100%

71%

95%

109%92%

140%

199%

291%

99%103%

96%61%

69%

106%

134%

0%

25%

50%

75%

100%

125%

150%

175%

200%

225%

250%

275%

300%

2011 2012 2013 2014 2015 2016 2017 2018

Inde

x= 1

00 in

201

1

Market (units) Operating profit (SEK) Revenue (SEK)

1) 2011-2016 refer to adjusted EBIT, i.e. operating profit excluding (i) amortization of transaction-related intangible assets and (ii) write-downs of non-current assets in Q4 2016.

1)

MOVING TOWARDS STRONGER CUSTOMER INTEGRATION

13

Ferronordic offering

As customers mature, their demand becomes more complex – Ferronordic is well positioned to satisfy this demand and lead this development within construction equipment

Consulting, Management & Operational Services

Com

plex

ity o

f cus

tom

er d

eman

d

Open Platform

Segment expertise

Grow in new segments

Customer Centricity

Business servicesBusiness

consultancy

Total Cost of Ownership

Finance

Cold Rental

Parts Sales

Services

Machine Sales

CONTRACTING SERVICES

14

Integrating with our customers

Part of our strategy of becoming further integrated in our customers’ business

Ferronordic supplies and maintains machines as well as provides the customers with machine operators to carry out specific works

At present, the customers primarily comprise mining companies who outsource the excavation and transportation of ore and rock at their mining sites

Payment based on volume transported

Outsourcing is common in the mining industry in other parts of the world

Still relatively underdeveloped business in Russia and Kazakhstan, but expected to grow

Ferronordic may extend similar services to customers in other industries in the future

Ope

rato

rsM

achi

neSe

rvic

ePa

ymen

tsPa

rts

Traditional methodOutsourcing method:Contracting Services

The customer

Cost of machine, parts and service

Provided by:

Volume based (per tonne, cubic meter, etc.)

or the customer

or the customer

Provided by:

FOCUS ON CONNECTIVITY AND DIGITALIZATION TO CREATE ADDITIONAL SALES

15

Ferronordic is in the forefront of using a system which utilizes its suppliers’ telematics systems to maximize sales and increase customer satisfaction and fleet efficiency

REVENUE DEVELOPMENT

16

Revenue Operating profit and operating margin1)

1 4691 658

2 567

3 241

0

750

1 500

2 250

3 000

3 750

2015 2016 2017 2018

SEKm

87

132

187

274

5,9%

7,9%

7,3%

8,4%

0%

5%

10%

15%

20%

0

50

100

150

200

250

300

2015 2016 2017 2018

SEKm

1) 2015-2016 refer to adjusted EBIT, i.e. operating profit excluding (i) amortization of transaction-related intangible assets and (ii) write-downs of non-current assets in Q4 2016.

EFFICIENT CAPITAL USAGE

17

NWC Development Net debt/(cash) development

Capital expenditure development Comments During recent years, Ferronordic has maintained a high focus on

increasing its working capital efficiency, which coupled with low investment needs have resulted in a strong cash flow generation

Given the strong market recovery in 2017 as well as the company's focus on working capital management, working capital was negative part of 2017

Limited capital usage as almost all facilities are rented Capex higher in 2018 primarily due to investments in service vans

and cars Ferronordic has been able to decrease leverage during the last few

years to a net cash position

97 110 117

476,6% 6,6% 4,6%

1,5%

-5%

5%

15%

25%

35%

-100

0

100

200

300

2015 2016 2017 2018

SEKm

NWC NWC as % of revenue

109

-82

-173

-312 -303

-450

-300

-150

0

150

2014 2015 2016 2017 2018

SEKm

7

19 21

45

1,2% 0,8%1,4%

0%

3%

5%

8%

10%

0

15

30

45

60

2015 2016 2017 2018

SEKm

Total capex Total capex as % of revenue

RETURN ON INVESTED CAPITAL

18

Note: 2014-2016 exclude one-off expenses in Q4 2016 and amortization of transaction related intangibles until May 2016.

8%

13%

18%

23%

28%

33%

38%

43%

48%

Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Return on invested capital

Strong improvement in ROIC last three years and during 2018

FINANCIAL OBJECTIVES AND DIVIDEND POLICY

19

AREA TARGET 2018

Revenue Triple 2016 revenue by 2021

95% growth in two years

Operating margin 7-9% 8.4%

Net Debt / EBITDA 0-2 x Net cash position

DIVIDEND POLICY

• The ambition should be that at least 25% of the result should be distributed to the shareholders

• The Board will take several factors into consideration when proposing the level of dividend, including the Group’s expansion opportunities, financial position and investment needs

20

OUTLOOK – CEO COMMENT

“In consideration of the recent economic recovery in Russia and Kazakhstan, Ferronordic isoptimistic about the development of the construction equipment market in both Russia andKazakhstan. Although the market is still a rather low level, Ferronordic does not believe thatthe market will grow as strongly in 2019 as it did in 2017 and 2018. As regards the future ofthe business in a longer perspective, Ferronordic remains optimistic, as the long-termfundamentals in the Russian and Kazakh construction equipment markets remain strong.The optimism is supported by the signs that Russia’s government will now try to supporteconomic growth by increasing infrastructure spending, as indicated in the May Decrees”

Q4 2018: STRONGEST QUARTER EVER – AGAIN!

Highest revenue and earnings ever in a single quarter

Continuously increasing aftermarket sales

Growing contracting services business

Geographic expansion started

Extraordinary dividend proposed

21

68%REVENUE

GROWTH Y/Y

10.3%EBITDA MARGIN

8.3%OPERATING

MARGIN

127%NET INCOME

GROWTH

22

SUMMARY – POSITIVE MOMENTUM

2018 Q1 2018 Q2 2018 Q3 2018 Q4

Revenue

Operatingprofit

EPS

ROCE

614 817 791 1,019

41 68 80 84

1.93 2.71 4.17 4.40

34% 37% 40% 41%

Worksite Applications_2_Machine Performance 271114