AMERICAN STANDARD www.americanstandard.com/KB.asp

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AMERICAN STANDARDwww.americanstandard.com/KB.asp

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Contents

• Short description of the company
• Short overview of Bath Kitchen
• SWOT
• Key learnings and overall objectives
• Strategy
• Where is American Standard vulnerable?

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A. Overall company overview
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SHORT COMPANY PROFILE A.S. (1/2)

• Founded in 1872 as the Pierce Steam Heating
  Company
• Stock-listed company since 1929, after the merge
  with the Standard Sanitary Manufacturing Company
• Global company with 3 B.U. Air Conditioning
  Systems and Services (brand TRANE), Bath
  Kitchen, and Vehicle Control Systems (brand
  WABCO)
• Each B.U. is a market leader worldwide
• 61,000 employees in 50 countries
• 10 billion turnover in 2005 (8 vs. 2004)
• Main events in past 10 years in 1988, AS
  escaped a hostile takeover via a leveraged
  buy-out and became debt-burdened. This explains
  why AS is less inclined to acquisitions than most
  of its competitors. Therefore the focus is on
  organic growth and the sanitation of the balance
  sheet
• All company processes based on Six Sigma

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SHORT COMPANY PROFILE A.S. (2/2)
Repartition of Sales 2005 / EBIT 2005by Business
unit ()
Repartition of Sales 2005by region
Asia/Pacific/Others
Vehicle Control Systems
18 / 24
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Bath Kitchen
America's
Europe
24 / 10
59
30
Air conditioning
58 / 66
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Concentrate /focus on a few/strongest Brand(s)
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B. Business Unit Bath Kitchen
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SHORT PROFILE OF BATH KITCHEN (1/2)

• Worlds largest global manufacturer of BK
  products, incl. CSW, taps, wellness products and
  accessories (furniture incl.)
• Total 2005 sales 2.418 billion 24 of total
  sales 10 of companys income

100
100
90
90
80
80
55
70
70
69
78
80
60
60
92
50
95
50
40
40
30
30
20
45
20
31
22
20
10
10
5
0
8
0
America's
Europe
Asia
America's
Europe
Asia
Residential
Classical Distri / Wholesale
Commercial
DIY
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SHORT PROFILE OF BATH KITCHEN (2/2)
Sales by region 2005
Sales by segment 2005
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All brands of the B K Division
America
Europe
Asien
Ideal Standard Armitage Shanks Ceramice
Dolomite Sottini, Venesta Venlo Sanitair Porcher,
Jado Senesi, Piel Sangra,Vidima Senesi, BØrma
American Standard Jado
American Standard Porcher Jado
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Sales have developed well in all segments, but
the profitability especially for Bath Kitchen
is worrying
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Bath Kitchen has never been up to the level of
our two other segments, but the performance in
2003 and 2005 calls for stern measures
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Just as AS, most of our international competitors
cover almost the entire spectrum of bathroom
products
Legend X minor weight in sales of
company XX medium weight in sales of
company XXX great weight in sales of company
Source ASD research
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Global presence of the main competitors in CSW
(year 2004)
500
400
300
200
100
Europe
Asia
America
Ceramics
(incl. sinks and
DE
FR
UK/IE
IT
BNL
Sca
ES/PT
RU
Oth
JP
CN
IN
Rest
US
CA
MX
Rest
showers)
EUR
SOA
S-Am
Size (m)
278
320
378
350
102
165
253
173
372
475
702
186
gt700
1.209
100
124
gt240
Villeroy Boch
American Standard
Duravit
Eczacibasi
Grohe
Inax
Jacuzzi brands
Kludi
Kohler
Masco
Roca
Sanitec
Toto
Legend
Market share (volume) gt 15
Market share (volume) gt2 - lt5
Market share (volume) gt5 - lt15
Market share (volume) lt2
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On the world ranking list, we estimate that we
rank 1
Total value as basis 5,2 billion Euro (ASP)
World-wide shares of main suppliers of CSW -
year 2003 coverage approx. 80 of the total
world market
VB incl. Vitromex, Roca incl. acquisitions 2006
Due to lacking data inclusive ceramic shower
trays and kitchen sinks Source BSRIA - Consult
- ASD research
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In Europe, however, we are ranked 2
Total value as basis 2,2 billion Euro (ASP)
Shares of the main supliers of CSW in Europe -
year 2003 -
Inclusive acquisitions of Roca 2006
Ceramic Sanitaryware exclusive ceramic shower
trays and kitchen sinks Source Consult and ASD
research
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More details on our market shares (1/2)
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More details on our market shares (2/2)
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CURRENT STRATEGY
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Current key lernings

• BK represents 23 of the business but only 10
  from EBIT
• CSW is with 50 the biggest business field
• Fitting business represents 26 of sales
• Wellness business makes 13
• 57 factories worldwide (33 for CSW), mostly on
  low cost basis
• aggressive pricing policy
• 50 of sales in Europe, 42 in the Americas and
  8 in Asia
• High brand awareness, but unclear positioning
• Strong in commercial/professional business due to
  plumber heritage
• many personal fluctuations

• Business impact
• Product
• Production
• Pricing
• Distribution
• Image
• Orga/General

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Current key B K objectives

• Increase our value added revenues by
• optimize rebate structures
• increasing the share of value added products
  (features to benefits like water saving, easy
  installation, easy clean)
• improving product availability and time to market
• increasing investments in marketing support
• Improving productivity by
• Plant by plant assortment alignment
• Plant to plant stabilization of output
• Use plants as logistic turntables
• Enhance cost control and cost reduction
• Simplify our business by
• Reducing models and SKUs
• Standardizing and simplifying global processes
• gt We will keep improving our performance

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SWOT (only AS team)
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Strengths
Brand/Image

• Worlds largest Bathroom Kitchen manufacturer
  with international, well-known brands (high brand
  awareness, e.g. 84 in their core markets)
• Long history and american heritage, coming
  originally from the plumbing sector, enables to
  communicate tradition, experience and technical
  competence
• Good image as complete, innovative bathroom
  supplier with interior designers, decorators,
  consumers and plumbers, due to
• complete multi-category product lines
• high competence in style and technical features
  (products with real USPs)
• userfriendly marketing supports (trainings,
  website, ...)
• Wide and deep assortment in CSW and fittings,
  which make 50 / 26 of the business
• Work with internationally well-known designers
  and architects to meet the tastes and styles of
  all markets and offer a tailored portfolio (NME,
  APAC)
• strong in the segments value (e.g. Arm. Shanks,
  Cera.Dolomite) and mass (AS/IS, private
  labels), therefore particularly price-aggressive
  and strong in project business
• Strong own sales organisation in most regions
  with vertical market specialists
• Competitive cost positioning thanks to
  international production facilities and
  standardized processes (e.g. reducing number of
  factories from 66 to 58)
• High market shares in I, UK, BUL, US

Assortment
Market
a few examples Cadet 3 Toilets, Lifetime
Whirlpools, EverClean Faucets
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Weaknesses
Business

• Worst performing division within the company gtgt
  restricts investment opportunity (shareholder
  value mentality!)
• Decreasing sales in 2005 versus 2004 (-0,9), and
  significant decline in profits (-48),
  particularly in Europe due to unfavorable mix, as
  sales migrated to economy products
• Big, fluctuant organization (risk of work
  stoppage, frequent management changes,...)
• Unclear strategy for a positioning/segmentation
  try to be everybodys darling
• No clear alignment in the portfolio,
  distribution, production and pricing policies
• Multi-brand strategy and huge assortment costly
  complex gtgt lack of synergy, loss of focus
• Standard doesnt sound very exclusive and could
  be a disadvantage for a premium positioning
• Limited assortment in furniture and Wellness
• Synergy potentials due to leadership of TRANE
  (Air Cond.) in project business are not used
• Low marketing support in the past no
  inspirational brand image
• Overdistributed and dependant on big customers
  with focus on DIY or mass market, except with
  Wolseley
• Production/manufacturing problems product
  unavailability/supply difficulties, increased
  energy costs

Strategy
Market
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Opportunities

• Growth in home ownership
• Development of a strong elderly target market
  worldwide
• Higher spending on bathrooms
• Bathrooms per house increasing
• Housing stock continues to age gt growth in the
  replacement, repair and remodeling,
• particularly in the U.S.
• Growth in developing countries, particularly in
  Asia
• Positive development in worldwide logistics

Threats

• Fluctuations in currency exchange rates
• Development at the N.Y. Stock Exchange
• Development of aggressive main competitors (for
  e.g Roca)
• Aggressive competition of low-cost suppliers in
  Asia
• Kohlers relationships with Wolseley
• Distribution concentration of the wholesale and
  the DIY (e.g. The Home Depot/Hughes)
• Increasing costs for energy and raw materials
• Purchasing high numbers of various components
• Political risks related to operations in many
  foreign countries
• Labor cost inflation, especially in low cost
  countries

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FUTURE STRATEGY
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FUTURE STRATEGY to be definedStrategic
goalsBrandsCommunicationDistribution
LogisticsStrategic Alliances