Growth Opportunities for Personal Protective Equipment Industry in a Recessionary Economy

Growth Opportunities for Personal Protective Equipment Industry in a

Recessionary Economy

Sanjiv BhaskarGlobal Director, Personal Protective Equipment

Frost & SullivanNovember, 2009

2

Agenda

• A snapshot of the global economy

• Personal Protective Equipment (PPE) industry economic impact analysis

• Opportunities for growth

• Best practices for business growth in the current economy

3

How Fear Drove the Recession – Fear is Now Bottoming Out

“The only thing we have to fear is fear

itself.”

-- Franklin Roosevelt

4

Global Response:Massive Government Stimulus

China: Interest rate cuts and $710 billion stimulus (infrastructure, rural)India: Interest rate cuts $8 billion stimulus package (infrastructure, exports, textiles)

Global Response • Governments infusing capital into financial institutions• Globally coordinated interest rate cuts • IMF offers bridge loan to meet foreign exchange requirements• Discussions, coordinated efforts (G20 summit)• Boosting spending on infrastructure projects

BrazilSupport to currency, infrastructure development under PDP (more than $64billion injected to financial system)

USA: $700 Billion bailout rapid interest rate cuts; $23 billion support for top 3 auto companies; plan to create 2.5 million jobs by 2011$819 billion Economic Recovery plan focused on infrastructure, energy, education and healthcare

UK: $340 billion bailoutGermany: $700 billion relief packageBelgium & Switzerland: Capital infusionECB Interest rate cutsFrance $50 billion stimulus package

Japan: Interest rate cuts; 500 billion yen stimulus package

South Korea:Interest rate cuts and efforts to keep currency stable $11 billion stimulus package

Australia:$52 billion pledged for supporting the economy

RussiaSupport for ruble; $64 billion stimulus package

5

Recovery in 2009-2010It is not a Far-fetched Idea

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Impact of the Downturn on Specific Industries The PPE Industry relies on end-user segments for its revenues

Source: Frost & Sullivan/Google Finance

The Relative Impact of the Economic Downturn on Specific IndustriesThe Value of the Industry Today Relative to its Value One Year Ago

77.8%

69.4%

63.5% 62.1% 61.4% 59.8%

51.6%

46.8% 45.7%

94.9%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%January 2008

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61.4% 59.8%

51.6%46.8% 45.7%

112.9%

80.9% 81.0%

68.5%

80.6%85.8%

75.5% 73.4%

86.3%

62.1%63.5%

69.4%77.8%

94.9%

65.9%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

Food P

roce

ssin

g

Health

Care

Basic

Chem

icals

S&P 500

(Tot

al M

arket

)

Aerosp

ace &

Def

ense

Const

ruct

ion

Technolo

gy

Rubber

and

Pla

stics

Autom

otive

Iron

and

Steel

Value of Market in Jan 2009 Relative to its Value in Jan 2008

Value of Market Today Relative to the Value in Jan 2008

Signs of an Economic RecoveryThe PPE Industry relies on end-user segments for its revenues

Source: Frost & Sullivan/Google Finance

The Relative Impact of the Economic Downturn and Recovery on Specific IndustriesThe Value of Market in Jan 2009 Relative to its Value in Jan 2008

January 2008

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Personal Protective Equipment Industry Economic Impact Analysis

Workplace Safety Can NOT be Compromised Despite a Slowdown

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PPE Market Composition by Product TypesGlobal PPE Market Composition Estimates, 2008

2% 3% 6%4%

6%

13%

15%22%

29%Gas

Detection

Fall

HearingEye

Footwear

Respiratory

Protective Clothing

HandHead

Source: Frost & Sullivan

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Trends in PPE Industry in 2009

Adaptability of ProductsAdaptability of Products

Comfort without sacrificing safetyComfort without sacrificing safety

Stylish productsStylish products

Innovative productsInnovative products

ConsolidationConsolidation

Pricing pressuresPricing pressures

Trending towards rental of workwearTrending towards rental of workwear

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Market Market Size and Size and GrowthGrowth

Increased Awareness in the

Workplace

Niche Applications Offer Opportunities for

Higher Penetration

Geographical Expansion into Areas with Low Compliance and

Penetration Product

Innovation

High ImpactHigh Impact

Medium ImpactMedium Impact

Low ImpactLow Impact

What will Drive Growth in the PPE Industry in 2009 and Beyond

Alternative Distribution

Channels Offer Potential for

Growth into New Applications

Increase in Professional, Scientific and Technical Services in Healthcare are Driving the Need for More PPE.

12

Market Market Size and Size and GrowthGrowth

High ImpactHigh Impact

Medium ImpactMedium Impact

Low ImpactLow Impact

Price Pressure from Generic PPE

Products Restricting Growth

Insufficient Enforcement by OSHA Restrains

Growth of the PPE Industry

Cost Conservation Measures

Resulting in Lower Replacement

Rates

Increased Automation and Outsourcing in Manufacturing

Facilities Reducing Demand for PPE

What will Restrain Growth in the PPE Industry in 2009 and Beyond

Economic Downturn Reducing

Workforce and the Demand

for PPE

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What Does this Mean for Your Market? Economic Impact Analysis of the PPE Industry


-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Head, eye and face Hearing Respiratory Hand

Workw ear Fall Footw ear

14

11%

8%

9%

7%

7%10%

9%

8%

21%

10%

Where Will The Opportunities Be?Expected PPE Revenues from Different End-user Segments (2014-2015)


Automotive Metal Fabrication

Pulp & Paper

Transportation

ConstructionOil, Gas & Petrochem

Utilities

Others

Fire Services

Healthcare

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Automotive IndustryShort term production trends

55

65

75

85

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Production

Sales

Vehicle Scrappage schemes help sales

increase / stabilization

All figures are rounded; the base year is 2008. Source: JD Power Forecasting; Frost & Sullivan

Increasing demand for small cars constituting

more than 10% of global sales by 2015

Affordable Low-cost cars to drive sales growth in Emerging

markets

Automotive Outlook: Light Vehicle Sales and Production – Recession and Recovery (Europe), 2006 - 2016

Un

its (

Million

)U

nit

s (

Million

)

Prod

uction

CAGR –10%

Product

ion

CAGR +6.4

%

Q2/Q3 2008 EU Enters

Recession

Sales back to

2007 levels only by 2012

YearYear

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HealthcareIf current trends hold, by 2050 Healthcare spending will almost double claiming 20% – 30% of GDP for some economies

In almost all countries worldwide, per capita healthcare spending is rising faster than per capita income.

No country can spend an ever-rising share of its output on health care, indefinitely. Spending growth must eventually fall in line with growth in per capita income.

$2,884

$3,647

$2,493 $2,665 $2,451 $2,693$2,337 $2,527

$2,110$2,614

$1,927$2,469 $2,371

$1,938 $1,927 $1,829 $1,609

$3,517

$717

$1,684$854

$914 $680$989 $760

$1,018$494

$1,165$449

$352$593 $431 $514

$646

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$2,884

$3,647

$2,493 $2,665 $2,451 $2,693$2,337 $2,527

$2,110$2,614

$1,927$2,469 $2,371

$1,938 $1,927 $1,829 $1,609

$3,517

$717

$1,684$854

$914 $680$989 $760

$1,018$494

$1,165$449

$352$593 $431 $514

$646

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Private Per Capita Spending (2007) Public Per Capita Spending (2007)

Spending as % of GDP (2007) Estimated Spending as % of GDP in 2050

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Aviation - A Key Industry for Career-wearTrends in Passenger Numbers

• Current economic crisis will impact the travelling public, but passenger traffic will continue to grow from 2011 onwards

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Pas

sen

ger

Nu

mb

ers

(Mill

ion

)

Domestic Traffic International Traffic2008 2018

63.0%

37.0%

38.7%

61.3%

2.3 Bn.

3.5 Bn.Annual passenger numbers, by service type 2008-2018 (Global)

Recession restrains growth

Expected open-skies in ASEAN

region

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Food Industry

• Food industry includes many sub-sectors, all with different specific needs:

• primary food processing e.g. abattoirs

• processed food production

• high-volume, low-price catering (fast-food stores etc.)

• low-volume, high-price catering (restaurants)

• beverage manufacturing

• Everybody needs to eat so, even when one of these sectors of the industry declines, another benefits

Lower in price to end-user therefore more favoured during recession

Needed for direct sales to end-users and to supply all sectors below

Alcoholic beverage sector holding up better during recession

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1

3

54

2

Small (<$1,000 million)

Large(>$2.500 million)

Market Size of Market Segments (2008)

Low(0-2%)

High(>6%)

CA

GR

for

Mark

et

Seg

men

ts

Medium($1,000-$2,500 million)

Medium(2-6%)

Sectors with highest total growth potential

Head, eye and face Protection1

Hand Protection

2 Respiratory Protection

3

4

5

Hearing Protection

CAGR is calculated from 2008 - 2015

Where Will The Opportunities Be?Key Product Segments to Focus On


6

Protective Apparel

6

Foot Protection

7

7

Fall Protecion

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China: Industries that will benefit from the stimulus packages are•Heavy Construction•Manufacturing•Mining•Oil & GasIndia: Industries that will benefit from the stimulus are:•Banking•Heavy Construction•Oil and Gas

Global Opportunities in • Infrastructure construction- Heavy Construction• Clean Energy construction• Healthcare• Mining• Oil and Gas• Utilities

BrazilIndustries that will benefit from the stimulus packages are•Automotive/transportation•Construction•Oil & Gas•Water and Waste Water Treatment

USA: Industries that will benefit from the stimulus packages are

•Banking•Green Construction•Heavy Construction•Hospitality•Healthcare•Housing•Utilities

Industries that will benefit from the stimulus packages are

UK: - BankingGermany: - Automotive and BankingFrance: - Automotive, Banking,

Healthcare and HousingItaly: - Automotive and

Construction

Industries that will benefit from the stimulus packages are Japan: Automotive/Transportation, Construction, Healthcare and Others South Korea: Banking, Commercial construction, Housing and OthersAustralia: Banking, Construction and Others

RussiaIndustries that will benefit from the stimulus packages are:•Banking•Construction•Others

Where Will The Opportunities Be?Potential end-user segments by regions (2009-2012)


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Where Will The Opportunities Be?PPE Used in Different Industries

Automotive & Transportation

X X X X X

Construction X X X X X X XFire Fighters X X X X X XFood Processing X XGlass Manufacturing X X X XHealthcare X X X XMining X X X X X X XOil & Gas X X X X X X X XPulp & Paper X XUtilities X X X X X

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What Can We Do About It?Best Practices on How to Grow in a Bottoming Market

Product Differentiation

Coordinated Efforts to Increase Compliance

Strategic Mergers and Acquisitions

Expansion to other End-User Segments,

Geographies

Preferential Pricing and Product Positioning

Deploying Technology and

Automation across

the

Functions


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What Will Catalyze the Turnaround?Best Practices on How to Grow in a Bottoming Market

Turnaround Turnaround CatalystsCatalysts

Taking Advantage of Niche Opportunities

Technological Innovation to Reduce

Costs

New Materials to Improve

Technical Features of the

Products

Strategic Mergers and Acquisitions

Concentrate on Industries that are receiving help from

the Stimulus Package such as

Heavy Construction and

Mining

Increase Efforts in End-user Segments that are not impacted

by the economic downturn like

Healthcare, Food Processing and

Hospitality

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How Can We Get in Front of the Turnaround?Best Practices on How to Grow in a Bottoming Market

Short Term Mid Term Long Term


Reach

Brand ReputationReliability

QualityTechnology

Price

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Summarizing

• Global economy has slowed down considerably since August 2008

• Global response to this crisis has been overwhelming

• Personal Protective Equipment (PPE) industry is being impacted by this global event

• Despite these events Personal Protective Equipment Industry is showing resilience and is poised for a turnaround

• Increase in infrastructure spending will improve PPE outlook

• Every company has to adopt or improvise Best practices for business growth in the current economy

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For Additional Information

Beatrice ShepherdDirector CEE & CISP: +48222440865 [email protected]

Sanjiv BhaskarGlobal Director, Personal Protective Equipment(210) [email protected]

Mark HicksNorth America Sales [email protected]

Stephen TaylorEuropean Sales Manager(44) (0) 20 7343 [email protected]

Growth Opportunities for Personal Protective Equipment Industry in a Recessionary Economy

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