Household Appliances - Pakistan Credit Rating …€¦ · Major appliances are household appliances...
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Household Appliances November 2015
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Transcript of Household Appliances - Pakistan Credit Rating …€¦ · Major appliances are household appliances...
Household Appliances
November 2015
AGENDA
Household Appliances
• Global Industry
• Domestic Industry
• Industry Structure
• Outlook
Global Industry
Core Markets:
• Mature markets
• Slow population growth
• Replacement products
dominate sales
Growth Markets:
• Rising standards of living
• Steady population growth
• Large number of new
households with ability to
buy appliances
• Growth in global demand
due to strong growth in
emerging markets
0
100
200
300
400
500
600
700
800
900
2012 2013 2014 2015 2016 2017 2018 2019 2020
US
D (
bln
)
Global Production (value)
Global Production
Global Industry
• China the global
leader in Production
and Consumption
• United States biggest
importer of home
appliances
Actual Projected
CountryProduction Value
(USD bln) in 2013Share
China 147 34%
United States 54 13%
Japan 46 11%
Germany 34 8%
South Korea 16 4%
Other 429 31%
Total 725 100%
CountryConsumption Value
(USD bln) in 2013Share
China 108 25%
United States 68 16%
Japan 51 12%
Germany 31 7%
Russia 16 4%
Other 426 36%
Total 699 100%
Global Industry
CORE MARKETS
Western Europe
- Widely varying consumer patterns
- Overcapacity due to large number of manufacturers & brands
- Slow macroeconomic recovery
- Demand growth potential in energy-efficient and compact products
North America
- Mature market with high penetration
- 4 major retailers constitute 70% of sales
- Economic recovery to generate sector growth
- Demand growth for appliances expected to continue
Oceania & Japan
- High penetration in Oceania
- Demand driven by design, water and energy efficiency
- Japan dominated by domestic manufacturers
- Demand driven by compact products
Population 418 mln
Average # of
persons per
household:
2.3
Urban Population 78%
Population 358 mln
Average # of
persons per
household:
2.6
Urban Population 83%
Population 155 mln
Average # of
persons per
household:
2.5
Urban Population 92%
The industry is divided into two groups: major appliances and small appliances. Major appliances are household appliances
that are stationary due to their size and weight. Small appliances are those that are easier to move.
Global Industry
CORE MARKETS
Western Europe North America Oceania & Japan
0
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014
Un
its
(mln
)
Market Demand for Major Appliances
0
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014
Un
its
(mln
)
Market Demand for Major Appliances
0
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014
Un
its
(mln
)
Market Demand for Major Appliances
0
10
20
30
40
50
60
70
80
90
100
Refrigerators Washing Machines
Microwave Ovens Dishwasher Air Conditioners
% o
f h
ou
seh
old
Product Penetration
0
10
20
30
40
50
60
70
80
90
100
Refrigerators Washing Machines
Microwave Ovens Dishwasher Air Conditioners
% o
f h
ou
seh
old
Product Penetration
0
10
20
30
40
50
60
70
80
90
100
Refrigerators Washing Machines
Microwave Ovens Dishwasher Air Conditioners%
of h
ou
seh
old
Product Penetration
0
10
20
30
40
50
Major Appliances Small Appliances
US
D (
bln
)
Market Value
0
10
20
30
40
Major Appliances Small Appliances
US
D (
bln
)Market Value
0
5
10
15
20
25
Major Appliances Small Appliances
US
D (
bln
)
Market Value
Global Industry
GROWTH MARKETS
Africa, Middle East & Eastern Europe
- Product penetration low in Africa & Middle East, but high growth potential
- Eastern Europe has high potential for replacement products
- Increasing purchasing power of households in Africa and Middle East
Latin America
- Growth driven by growing middle class
- Brazil accounts for half the sales
- Slowdown in economy
- Demand growth for energy & water efficient products
South & Southeast Asia
- Economic growth, rapid urbanization, small living spaces
& rapidly expanding middle class
- Demand potential for Cookers, Refrigerators & Air Conditioners
- Low product penetration
- Demand growth for energy efficient products
Population 1,393 mln
Average # of
persons per
household:
5.9
Urban Population 45%
Population 622 mln
Average # of
persons per
household:
3.7
Urban Population 79%
Population 3,800mln
Average # of
persons per
household:
3.8
Urban Population 44%
Global Industry
GROWTH MARKETS
Africa, Middle East & Eastern Europe
Latin America South & Southeast Asia
0
5
10
15
20
25
2009 2010 2011 2012 2013 2014
Un
its
(mln
)
Market Demand for Major Appliances
0
50
100
150
200
250
300
2009 2010 2011 2012 2013 2014
Un
its
(mln
)
Market Demand for Major Appliances
0
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014
Un
its
(mln
)
Market Demand for Major Appliances
0
10
20
30
40
50
60
70
80
90
100
Refrigerators Washing Machines
Microwave Ovens Dishwasher Air Conditioners
% o
f h
ou
seh
old
Product Penetration
0
10
20
30
40
50
60
70
80
90
100
Refrigerators Washing Machines
Microwave Ovens Dishwasher Air Conditioners
% o
f h
ou
seh
old
Product Penetration
0
10
20
30
40
50
60
70
80
90
100
Refrigerators Washing Machines
Microwave Ovens Dishwasher Air Conditioners
% o
f h
ou
seh
old
Product Penetration
0
5
10
15
20
Major Appliances Small Appliances
US
D (
bln
)
Market Value
0
5
10
15
20
25
Major Appliances Small Appliances
US
D (
bln
)Market Value
0
10
20
30
40
50
60
70
Major Appliances Small Appliances
US
D (
bln
)
Market Value
Global Industry
Haier Bosch-Siemens
Whirlpool LG Home Appliances
Samsung AB Electrolux
• Six companies contributed to
20% of global sales in 2014
• LG Home Appliances market
leader (6%)
• Whirlpool (4%)
• Electrolux (3%)
-
5
10
15
20
25
30
LG Home
Appliances
Whirlpool AB Electrolux Bosch &
Siemens
US
D (
bln
)
Global Market Leaders | Revenue
2013
2014
Domestic Industry
Manufacturing & Mining
Small Scale
Manufacturing
(13%)
Large Scale Manufacturing
(80%)
Slaughtering
(7%)
Textile Food, Beverage
& Tobacco
Coke &
Petroleum
Products
Iron & Steel
Products
Non-Metallic
Mineral
Products
Automobiles Fertilizers Pharmaceuticals Paper & Board Electronics
Manufacturing Sector:
• 13.3% of GDP
• 14.2% of employed labor force
Large Scale Manufacturing:
• 10.6% of GDP
• 80% of Manufacturing Sector
Sr. #
Large Scale Manufacturing - Top 10
Groups
Weight - Quantum Index of
Manufacturing
1 Textile 20.9%
2 Food, Beverages & Tobacco 12.4%
3 Coke & Petroleum Products 5.5%
4 Iron & Steel Products 5.4%
5 Non-Metallic Mineral Products 5.4%
6 Automobiles 4.6%
7 Fertilizers 4.4%
8 Pharmaceuticals 3.6%
9 Paper & Board 2.3%
10 Electronics 2.0%
Domestic Industry | Production
• Home Appliances production
growth in Pakistan
• Refrigerators production
increased 12.5% YoY
• Deep Freezers production
increased 5.5% YoY
• Air Conditioners production
decreased by 3.3% YoY
• Low product penetration for
Refrigerators and Air
Conditioners 0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Television Washing Machine Refrigerator Air Conditioner
Pakistan | Product Penetration
Urban
Rural
Total
Refrigerators Deep Freezers Air conditioners
FY11 986,941 87,125 257,042
FY12 1,058,177 53,805 252,701
FY13 1,210,377 60,773 278,480
FY14 1,300,523 83,904 309,223
FY15 1,462,874 88,522 299,100
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
# o
f u
nit
s
Home Appliances | Pakistan Production
Domestic Industry | Demand Outlook
Factor Status
GDP Growth FY15: 4.2% ; FY16E: 4.5%
Population 2014: 185 mln
GDP Per Capita 2014: USD 1,318
Urban Population 2014: 38% (70 mln)
Average Persons per
Household
6.4 (Urban: 6.2; Rural: 6.5)
Number of Households 29 mln
30%
31%
32%
33%
34%
35%
36%
37%
38%
39%
40%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Pakistan | Urban Population
• Improvement in standard of living
• Increasing disposable income
• High potential for demand growth of
home appliances
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2011 2012 2013 2014 2015
PK
R
Un
its
Pakistan | Production & Disposable Income
RefrigeratorsDeep FreezersAir conditionersGross National Income per Capita (RHS)
Domestic Industry | Competitors
• Industry dominated by domestic
players
• High concentration:
Top 3 players comprise 75%
Refrigerator market share
Top 3 players comprise 68% AC
market share
37%
23%
14% 14%
7% 4%0%
5%
10%
15%
20%
25%
30%
35%
40%
Dawlance PEL Orient Haier Waves Others
Pakistan | Refrigerator Market Share in 2014
26%23%
19%17%
10%
5%
0%
5%
10%
15%
20%
25%
30%
Orient Haier Dawlance Others Kenwood PEL
Pakistan | Air Conditioners Market Share in 2014
Industry Structure
Competitive
Supplier Bargaining
Power
HIGH
Customer Bargaining
Power
HIGH
Barriers to Entry
HIGH
Threat of Substitutes
MEDIUM
Intensity of Competitive
Rivalry
HIGH
• 4 dominant
domestic players
• Availability of
Imported
products
• No substitutes for
refrigerators
• AC / microwave /
deep freezer
substitutes available
• Project setup is
capital intensive
• Energy shortage
• High R&D costs
• Availability of
competitor
products
• Ease of brand
switching
• Manufacturers have no control
over raw material price
Time
Sa
les
in P
KR
or
Vo
lum
es
Domestic Industry | Lifecycle
Domestic Industry | Outlook
Outlook | Positive
• Growing urbanization and standard of living
• Higher disposable income
• Low product penetration – room for growth
• Depreciation of PAK Rupee – higher cost of production
• Slowdown in economy could hamper demand
Bibliography
1. Pakistan Bureau of Statistics 2015 - http://www.pbs.gov.pk/qim
2. Pakistan Economic Survey 2014-15 – Manufacturing & Mining -
http://www.finance.gov.pk/survey/chapters_15/03_Manufacturing.pdf
3. Mexico Ministry of Economy – The Household Appliance Industry 2013 -
http://mim.promexico.gob.mx/work/sites/mim/resources/LocalContent/321/3/131001_DS_Electrodomesti
cos_EN.pdf
4. Pakistan Demographic and Health Survey 2013 -
http://www.nips.org.pk/abstract_files/PDHS%20Final%20Report%20as%20of%20Jan%2022-2014.pdf
5. Electrolux Annual Report 2014 - http://www.electroluxgroup.com/en/wp-
content/uploads/sites/2/2015/02/Electrolux-Annual-Report-2014.pdf
6. Whirlpool Annual Report 2014 - http://files.shareholder.com/downloads/ABEA-
5DXEK8/812956175x0x814660/47F80CBA-C5F9-49C2-B0CD-762661949D15/Whirlpool_2014AR.pdf
DISCLAIMERPACRA has used due care in preparation of this document. Our information has been obtained from sources
we consider to be reliable but its accuracy or completeness is not guaranteed. The information in this
document may be copied or otherwise reproduced, in whole or in part, provided the source is duly
acknowledged. The presentation should not be relied upon as professional advice.
Analysts Zain TariqSenior Financial Analyst
Aisha KhalidManager Ratings
Rana M. NadeemUnit Head Ratings
Contact Number: +92 42 3586 9504
