RUSSIAN PRINTING INDUSTRY REVIEW

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RUSSIAN PRINTING INDUSTRY REVIEW

• July, 21
• 2006 NPES International seminar
• Evgueny Boutman
• President of ECS Group

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Market review of Russian printing
enterprises

• Over 6500 print enterprises are currently work in
  Russia
• By the end of 2005 the division is as follows
  600 nationally state owned, 1000 locally state
  owned and 5000 private

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• Out of 6500 printing enterprises
• 53 (3450) small (less than 20 employees),
• 38 (2450) mid-size ( 30 - 100 employees)
• 9 (600) large (100 employees).

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• According to financial data (annual turnover) the
  division is as follows
• Small (up to 0.25M) 50 (3250 companies)
• Mid-size (0.25M-1.0M) - 38 (2450 companies)
• Large (over 1.0M) 9 (450 companies)

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• Additional information
• The printing market is adjusting to packaging
  market. Over 1000 specialized packaging companies
  and many of the above mentioned companies are
  involved in this segment

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Printing market structure by products types

• Key types of products
• Periodicals newspapers, magazines, etc.
• Books schoolbooks, soft and hard cover books,
  guides, etc.
• Commercials and advertising leaflets, booklets,
  posters, labels, postcards, tickets, calendars,
  business cards, envelopes, folders, etc.
• Labeling self-adhesive and dry labels
• Cardboard packaging.

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Total Russian printing market in 2005 estimated
worth 2 000 M (consumables and equipment
1100 M)

• The turnover breakdown is as follows
• Periodicals printing (34) 680 million
• Book printing (19) 380 million
• Commercial printing (19) 380 million
• Label production (12) 240 million
• Cardboard packaging (16) 320 million

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Types of printing in Russian market

• Market split by types of printing is as follows
  
• Offset printing - 60.
• Flexo printing - 25.
• Digital printing - 7.
• Letterpress printing - 5.
• Screen printing, rotogravure and other special
  types of printing - 3.

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• Comments
• Offset printing - growing.
• Flexo printing - rapidly growing.
• Letterpress printing is coming down.
• Digital printing is slowly developing.
• Screen printing, rotogravure and other special
  types of printing are stable

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The general situation in the industry

• The manufacturing and consumption paper volume in
  Russia is 40 kg per capita (2005).
• Russia consumes 12 - 14 times less paper per
  capita comparing to USA, Japan or Germany.

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History and trends

• The rapid development of the printing market of
  Russia was in 1999 -2003.
• One of the reasons was financial default in 1998.
  And a consequently many orders were returned from
  abroad that caused growth of the Russian printing
  industry.
• Another reason was the necessity to upgrade the
  equipment installed during Soviet Era. Both
  production volume and investment activity were
  increasing.
• Nowadays the development is coming down. The
  general growth rate of printing industry is now
  reduced to the average growth rate of the Russian
  economy to 4-5 annually.
• The Quality of printing companies is getting
  better at the moment. Today managers are working
  under production process, cost reduction and
  personnel qualification. We are facing
  differentiation of printing companies by types of
  services.

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Suppliers in the Russian printing market

• All suppliers can be split by two kinds
• direct channel- from manufacturers,
• indirect channel - through distributors and
  dealers.

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Key factors of success for suppliers in Russian
market

• Volume of installed base.
• Brand reputation.
• Regional sales network.
• Financial conditions (pricing, payment terms,
  project financing etc.).
• Quality of technical service
• Delivery terms.

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ECS Holding Group

• ECS business is distribution
• Revenue in CY06 should be about 180-200M
• 500 people
• 70 vendors
• 5 regional offices in Russia and 4 in former
  Soviet republics
• GAAP accounting, ERP system, strong financial
  management
• Total credit line from vendors - 19M

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ECS structure

• IT industry
• Apple PRO
• Apple EDU
• Apple RETAIL

• Printing Packaging industry
• Printhouse
• Apostrof
• HGS
• Oriental Print
• Variant

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ECS regional offices
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ECS business structure

• Apostrof Ryobi, Dainippon Screen, Horizon,
  Schneider Senator, etc.
• Revenue forecast in 0621 M
• 45 employees
• 15 salesman in Moscow and 4 regional offices
• 17 service engineers including 4 regional offices
• 230 deals per year
• HGS MAN Roland, Dainippon Screen, Wohlenberg,
  Steinemann, etc.
• Revenue forecast in 06 28M
• 108 employees
• 9 salesman in Moscow and 2 regional offices
• 34 service engineers including 2 regional offices
• 50 deals a year
• Printhouse Flint Group, Lastra, Konica, etc.
• Revenue forecast in 06 18M
• 124 employees
• 23 salesman in Moscow and 7 regional offices
• 14500 deals per year

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ECS business structure

• Oriental Print Indian and Chinese print
  machinery
• Revenue forecast in 06 10M
• 35 employees
• 7 salesman including 2 regional offices
• 340 deals a year
• Variant Mark Andy, Fisher Cracker, LabelMan
  etc.
• Revenue forecast in 06 8M
• 44 employees
• 13 salesmen
• 14 service engineers
• 70 deals per year

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Q A