GMO

DI Business Conference

Grundfos Russia Presentation

30 October 2008 Copenhagen Denmark30 October 2008, Copenhagen, Denmark

GMO

Be on the market…

Russia - GRUNDFOS in Russia

GMO

1962 - The first delivery to USSR.1964 - The GRUNDFOS’ Trade Mark was established in USSR

1992 - Rep. Office of GRUNDFOS G.m.b.H in Moscow 1996 - The GRUNDFOS’ representative in St. Petersburg.1997 - in Rostov-on-Don and N. Novgorod.1998 - in Ekaterinburg, Novosibirsk & Kazan

1998 - The OOO “GRUNDFOS-Servicecenter” was established in Moscow; the stock and head office were opened1999 Th fi t GRUNDFOS ith R i t1999 - The first GRUNDFOS pumps with Russian motors were assembled in Moscow; Rep. Office in Omsk.2000 - Rep. Offices in Ufa and Saratov2001 - The new stock & service facility (Alfa-Laval); Rep. Offices in Krasnoyarsk, Irkutsk & Samara2002 - GMO Acceleration Plan 2002 – 2006; GMO/GEF integration project; Manufacturing project in Russiaproject; Manufacturing project in Russia.2003 - The Rep. Office in Volgograd; completed GMO/GEF integration project; Start up the GMRI building construction (Istra)2004 - Rep. Offices in Perm & Minsk; Belarus - completed sales transfer project GMO/GPO-export

2005 – GMRI Grand Opening; The first CR pumps were assembled;2005 GMRI Grand Opening; The first CR pumps were assembled; Rep. Offices in Tumen & Petrozavodsk; GMA Board visit to Russia in October 20052006 – SAP (SAPFIR) project was successfully completed in GMO/GMR; full GMR operations & assembly expansion; new Rep. Office in Krasnodar; Russian Satellite Academy was opened; GMO passed EUR 100 mln in sales2007 - new Rep. offices in Kursk, Chelyabinsk, Kemerovo, Khabarovsk; local stock in Kinel/Samara; BE project in GMO; U2/SAP upgrade project; GMO Acceleration Plan 2006 – 20102008 – First BE cross-company assessment (303 points); new Rep. offices in Yaroslavl, Khabarovsk, Kemerovo, Vladivostok & Archangelsk; outsourced local stock in Novosibirsk

GMO

Adjust to the local needs…

GMO

Grundfos’ product range

GMO

Accept the difference…

GMO

New products

GMO

Energy saving

n %

F low

i

o 6 21 56 100

Operating hours %

GMO

Cost of ownership

PurchaseCost

RunningCosts

GMO

Flexibility

GMO

Look for opportunities…

GMO

Original Equipment Manufacturing

Business areas

Original Equipment Manufacturing

Domestic Building Services Commercial Building Services

Wastewater Services Water Services

Industrial End-user MarketDosing

GMO – Sales Development

GMO

EUR

GMO AccelerationPlan 2006 - 2010

p(1999 - 2007)

m EUR180

110.5

140.2

GMO AccelerationPlan 2002 - 2006

It is our mission - to successfully develop sales of Grundfos pumps and pumping systems and doing

so to be a leading pump company both on the Russian and our Export markets, contributing to better quality of life and a healthy environment .

53,9

76.2

39,44 6

3.627 6

A.B.B

5.65.0

6.68.7

4.617.5

27.6Add. Sales

B.

O.B.

Full GMO/GEF integration

Import / Home

1999 2003 2004 2005 2006 20072001 20022000Re.

Est.

GMO/Alldos integration

GMR development

Full GMO/GEF integration

Set up of local production

Belarus integration2006 2007

GMO/Alldos integration

GMO

Be prepared for a strong competition…

Russia - Served Pump Market

GMO

Russian producers in year 2007:

p

1.6 mln pumps: 0.34 mln industrial pumps, 1.26 mln domestic pumps, including 0.97 mln vibration well pumps

Total Russian served market (pumps only): (sales related to Grundfos pump types only) 2007 est. – EUR 870 mln

GRUNDFOS16%

(Price index 1.0)

2007

Russian Producers44%6

(incl. 6% CIS 5)

(Price index 0.1-0.3)

OthersProducers

40%

2007

GMO

Strengthen the Brand…

GMO

Adjust organizational set up……team work…

GMO

GMO – Existing Matrix Organization

Finance, IS& Admin.

Service

HR &Academy

Secretariat& Travel

GMO

Invest into regional development…

GMO

GMO – Sales Development

Central RegBelarus3.3%

p(GMO Regional Chart) Region: Belarus

Area: 0.21 mln km2Population: 9.9 mlnCities: 44Capital: Minsk

Region: Nord-WestArea: 1.85 mln km2Population: 14.8 mlnCities: 153Capital: St. Petersburg

Region: UralArea: 3.06 mln km2Population: 14.5 mlnCities: 133Capital: Ekaterinburg

Central Reg.51.2%

Distributionby Regions

Ural Reg.6.6%

Siberia& Far-East

3.3%

Region: Far-Eastby Regions

2007GMO

Privolzhje 9.9%

& Far-East9.0%

Region: Far EastArea: 6.52 mln km2Population: 7.5 mlnCities: 68Capital: Khabarovsk

North-West Reg.8.7%

South Reg.11.3%

Region: CenterRegional Structure: RO’s in 17 cities:

Region: Privolzhje Region: Sibiria

Area: 0.65 mln km2Population: 37.5 mlnCities: 300Capital: Moscow

Region: South

Regional Structure:

GMO Head OfficeMoscow

RHO’s in 7 cities:

Moscow

RO’s in 17 cities:

Saratov Ufa Kazan N. Novgorod Omsk Krasnoyarsk

ArkhangelskKurskChelyabinskKemerovoKhabarovsk

Kinel reg stock Region: PrivolzhjeArea: 1.07 mln km2Population: 32.4 mlnCities: 192Capital: N. Novgorod

Region: SibiriaArea: 6.77 mln km2Population: 21.4 mlnCities: 133Capital: Novosibirsk

Region: SouthArea: 0.59 mln km2Population: 21.8 mlnCities: 132Capital: Rostov on Don

MoscowSt. Petersburg Rostov on Don Samara Ekaterinburg Novosibirsk Minsk

Krasnoyarsk Irkutsk Volgograd Perm PetrozavodskTumenKrasnodar

New RO’sin Year 2008:

YaroslavlVladivostok

Kinel – reg. stock

Vladivostok

GMO

GMO – Regional Offices’ Developmentg p

New rented officeSt. PetersburgOld office St. Petersburg

New officeBelarus, Minsk

Moscow

New officeRostov on Don

New rented officeMoscow

New rented officeI t

New rented officeNovosibirsk

Istra

GMO

Learn from customers,keep & strengthen partnership,

build up a trust…build up a trust…

Russia - GMO Customer Analysis

GMO

y(Outlook for the Year 2007)

Group C5%

Group B

Group K+A75%

ABCCustomer Analyses

20%

75%GMO01 – 12/2007

CSS July 2007100% (100)

GMO

Wholesaler

Others1.9%

GMO

100%

Wholesaler65%

DistributionChannels’ Split

GMO01 – 12/2007

Installer0.7%

I d OEM

75%

Contractor31%

Ind. OEM1.4% Corporate

Image Index81%

CustomerLoyalty Index

85%

CustomerSatisfact. Index

76%

GMO

…be ready to support and coach them

GMO

• Development of the dist. channels• Price management• Promotion/differentiation/branding• Market intelligence• Dedicated sales staff

Strong price competition

GMO – Sales by Distribution Channels(Outlook for the Year 2007)

Strong price competitionMarket shares – ReplacementParallel/Grey import/Copy cats

MISC2%

Trade ProfessionalIndustrial

Trade37%

Sales perDist Channels

2%

Professional12%

Dist. Channels

2007

• Development of the indust. dist. channels• Focus on pot. application areas• System designers, Key players, Ind. end-users• Promotion/KAM

M k t k l d

• Development of the prof. dist. channels• Prof. project sales set up• Strategic alliances• Branding/KAM

M k t k l d

Industrial49%

• Market knowledge• Dedicated sales/service forces

OEMStrong competitionTime/Availability/DeliveryLocal modification

• Market knowledge• Dedicated sales/service forces

Project support & cooperationFinanceStrong competition/low marginLocal need/flexibility

GMO

VAS as a competitive advantage…

Russia - GMO Service Activity

GMO

y

Main Activities:

• STS - Service training system • Information & technical support• Service network development• Spare parts availability• Pump audit promotion / local equipment for pump audit• Service website for partners• Service partner databaseBasic Facts 2007: • Quality controlBasic Facts 2007:

• Service network – 87 in 52 cities,including 23 professional service partners

Moscow – 17 service partners• More than 1 service partner – in 15 cities• Total trained service partners’ staff – 170

GMO

Staff development and motivation…

GMO

Russia – GMO HR Activities(Outlook for the Year 2007)(Outlook for the Year 2007)

HR:

• Corporate values via personal values• Intensive recruiting efforts

GMO Response rate – 91%g

• Poul Due Jensen Academy (in Denmark)• Russian Sat. Academy (TPA, GPA, Awareness courses, Service & Customer courses)• External/internal technical & skills training, professional training for staff - sales, service, Satisfaction & Motivationadministration, IT, HR, accounting• GMO potentials’ program• Employee Development Dialogue• Employee Motivation Survey• BE project• English courses - in Moscow & in the regions

C t t / T b ildi / C• Corporate events / Team building / Company day GMO & GMR• CSR – support to abandoned kids, personal contributions from staff supported by company (joint efforts with GMR) – 35% of employees participate in the program• Talent management program• Talent management program

Loyalty

GMO

Support the growth…

Russia – GMR Developmentp(GMO/GMR cooperation)

GMO

Get closer to the customers…

GMO

Russia – GMR DC & Regional Stocks’ Developmentg p(GMO/GMR cooperation)

GEF - 5%

GMR DC:

• Full DC operation

GWP - 37%

GPC - 1%DAB - 1%GBJ - 37%

GMH - 19%

DAB - 1%

• Increasing products’ availability

• Door to door service

• Regional stocks’ developmentRegional stocks development

GMO

Invest into infrastructure…

Russia - GMO / GMR Development

GMO

p(New Construction Projects - Conceptual Design)

U TILITYBU ILD ING

G OO DS IN

D ISTRIBU TION C ENTEREXTEN SIONPRO DU CTION BUILDING

I III

EXTE NSIO NA DM INISTRATIO N BU ILD ING

G OO DS O UTII III

I

II

I

SCAL E L INE GRUNDFOS MANUFACTURING RUSSIAGMR MASTERPLAN PROPOSAL 01.02.07

Russia – GMO Key Transitional Dimensions

GMO

y(Outlook: 2000 - 2008)

Flexible, adaptable,long-term, customer,

value and future oriented

Static, traditional, strongvertical structure, short-term

tasks and result oriented

Organizationalset up

External focus of control –direction & regulation must beimposed by an external force

Internal focus of control –personal freedom & autonomy,

ability, responsibility, commitment

Change management/Staff development

Closed private censured Open, honest, transparent

“Price competitive” approach,exclusivity, privileges,personal advantages

“Service competitive” approach,long-term partnership,business competence

Comm nication platform

Customers’ growth& Selection concept

Closed, private, censured,privileged communication.

p pcommunication networks,

focus on customers

Pragmatic approach,past oriented, Competence

& Market knowledge

Innovative approach,multi-perspective,

Communication platform& KAM development

product oriented& Market knowledge

market oriented

Russia – Business Excellence

GMO

GMO