战略性重组课件

RolandBerger&Partners–InternationalManagementConsultantsBarcelona–Beijing–Berlin–Brussels–Bucharest–Budapest–BuenosAires–Detroit–Düsseldorf–Frankfurt–Hamburg–Kiev–LisbonLondon–Madrid–Milan–Moscow–Munich–NewYork–Paris–Prague–Riga–Rome–SãoPaulo–Shanghai–Stuttgart–Tokyo–Vienna–ZurichStrategicre-engineeringofGeberitChina

–Interimreport–

GeberitInternationalAG

RolandBerger&Partners–IntContent(1) PageManagementSummary 5A. Marketenvironment 12A1. MacrobusinessenvironmentinChina 13A2. Marketanalysisofsanitarysystem 36A3. Marketanalysisofpipingsystem 67B. StrategyevaluationandSales&Marketing 80B1. Strategyevaluation 81B1.1 Corporatestrategyanalysis 82B1.2 Productstrategyevaluation 89B2. Sales&Marketing 91B2.1 RetailchannelGSHA 95B2.2 ProjectchannelGSHA 103B2.3 OEMchannelGDAI 107B2.4 Marketing 110B2.5 Benchmarking:Kohler(China) 112Content(1) PageManagementSumContent(2) PageC. Financial,organizationandprocessesanalysis 122C1. Financialsituationanalysis 123C1.1 GeberitShanghai 124C1.2 GeberitDaishan 138C2. Organizationandprocesses 145C2.1 Organizationstructure 146C2.2 Managementstructure 151C2.3 Keyprocessanalysis 157D. Restructuringoptions 164D1. Generaloptionsandpre-selection 165D2. In-depthevaluation 176D2.1 Equitybuyout 178D2.2 Termination 183D2.3 Bankruptcy 186D2.4 Comparisonofthealternatives 190D3. Feasiblescenarios 193Content(2) PageC. Financial,Back-upAcronymlistBoDCCSCJVEJVFDIFICGDAIGSHAJVKTSVGMWFOEBoardofDirectorsCompetenceCenterShanghaiCo-operativeJointVentureEquityJointventureForeignDirectInvestmentForeignInvestmentCommissionGeberitFlushingTechnology(Daishan)Co.Ltd.GeberitPlumbingTechnology(Shanghai)Co.Ltd.JointVentureKohlerTechnicalSpecialistViceGeneralManagerWhollyForeignOwnedEnterprisesBack-upAcronymlistBoDBoardofManagementsummarySHA-4309-03690-08-15a.PPT-xManagementsummarySHA-4309-036ChinacouldbeamarketofstrategicimportanceforGeberit’sinternationalbusiness(1)ChinaisapromisingmarketforGeberit.WehaveanachievablebusinesstargetofRMB200millionrevenuebyyear2005,fromwhich,130millioncomesfromsanitaryproductsand70millionisgeneratedbypipingbusiness.Amongalltheproductlines,tankfittings,Pluviaandconcealedcisternarethetop3productlineswiththepotentialofRMB140millionor70%ofthetotalOverallChinesemacroeconomicdevelopmentisundergoingastrongmomentum.Inthenext5years,itisestimatedthatGDPwillgrowat7%annually,thegrowthoffixedassetinvestmentwillincreaseby8%,andhousingconstructionwillalsogrowby8%p.a.Chinesesanitarymarketismostlyaceramicmarket,withanannualdemandof43millionunitsofsanitaryceramicproductsinChinain1999whichmeansthepotentialmarketofnearly2millionsetsfortankfittingsaswellas2millionunitsofmediumtohighendcisternssoldinthemarket.Withthegrowthinthehousingmarket,Chinesesanitarymarketwillcontinueanannualgrowthof6~8%.Furthermore,duetotherapidincreaseofbathroomdecoration,themediumtohighendsegmentofsanitaryproductswilldefinitelyleadtheindustrygrowth.By2005,theshareofmediumtohighendsegmentwillrisefromcurrent20%to35%MarketenvironmentChinacouldbeamarketofstrChinacouldbeamarketofstrategicimportanceforGeberit’sinternationalbusiness(2)Asthelargestconstructionindustryintheworld,ChinapresentsanimmensepotentialforGeberit’spipingproducts.BothHDPEandMeplapossesssignificantproductadvantagesoverthecurrentlyusedChineseproducts.However,thesignificantpricegapcouldbeaseriousbarrierforadeepmarketpenetration.ForPluvia,theopportunitiesareveryattractive.Presentlymorethan15roofprojects,altogether700,000sqmareindifferentphasesoftheprocessofbiddingBothGeberit’sconcealedcisternandPluviaroofdrainagesystemaremismatchedwithChinesetraditionalindustryhabits,thiscanonlybesolvedbyalong-termcommitmentintheChinamarketandeffectivemarketing.DuetotheChineseconsumerstraditionalmindsetthatplasticproductarelowerpriced,Chantierdoesn’thaveanoptimisticmarketperspectiveRightnow,formostofGeberit’sproducts,thecompetitionisnotsotough,whichmeansagoldenopportunityforGeberittobecomeamarketleaderinChina.ItalsomeanstimepressureforGeberit.Currentlycompetitors(e.g.GroheDAL,Caroma)aregearingupandwillbecomeaggressiveverysoonMarketenvironmentChinacouldbeamarketofstrOverall,thestrategyofGeberitinChinahasnotbeenfullyachievedandsalesandmarketingareparticularlyweak(1)Strategyandsales&marketingAlthoughGSHAdevelopedastrategywhenfounded,thestrategicobjectivestopenetrateintotheChinesemarkethaven’tbeenachieved--currentstrategyisunfocusedThevisionofGSHAisnotcommunicatedwithintheorganization,norisitimplementedIncomparison,GDAI’sstrategyisgoingintherightdirectionandisintheprocessofbeingimplemented,Theystillhaveproblemstosolve,suchasslowmarketresponsiveness,poorcustomerunderstandingetc.ThecorecompetenceofGeberitEuropestandsforadvancedtechnology,premiumqualityandbrand,excellentpre-and-aftersalesservices.ThishasnotallbeentransferredtoGeberitChinaCurrentproductportfolioofsellingChantier,Duofixandpublicproductsisunbalanced.Strategicfocusshouldbeonconcealedcistern,tankfittingsandPluviaandHDPEAstosalesandmarketingoperations,GSHAhasnoclearstrategyindevelopingdistributionnetworkOverall,thestrategyofGeberOverall,thestrategyofGeberitinChinahasnotbeenfullyachievedandsalesandmarketingareparticularlyweak(2)Strategyandsales&marketingGeberit’sproductsaresoldthrough3channels:retailsalesandprojectsalesthroughdistributors,andOEMGeberitlacksclearplanningofretailnetworkdevelopmentandhasneitherintentionnorleveragetomonitordistributor'snetworkoperationsProjectsalesperformancehasbeenaffectedmainlybybothpoorcustomerservicesandincompatibilitywithcurrentChineseinstallationandapplicationhabitsThereareanumberofsetbacksthatneedtobeovercometoimproveOEMsales:unsatisfactoryproductdevelopmentandcustomization,slowmarketresponsivenessandhighpricingExceptforaveryfewmarketingrelatedactivitiessuchasseminarsandattendingexhibitions,essentiallymarketingdepartmentdoesn’tperformmarketingfunctionssuchasbuildingupbrandetc.KohlerhasdonefarbettercomparedtoGeberitintheareaofsalesandmarketing,suchasraisebrandawareness,influencecustomersanddesigninstituteOverall,thestrategyofGeberFinancials,organizationandprocessesTheGMofGSHAlacksleadership.Hismanagementstyleisself-centered.Itiswidelyperceivedthathedoesnottrustthelocalstaff.Hispersonalityisnotacceptedbyemployees.Asaresult,thereisnomotivatingcorporateculture,notrustbetweenmanagementteamandstaff,nomotivationandcommitmentamongthestaffandhighstaffturnover.(e.g.CCS)Theofficialorganizationalstructure,whichischangedfrequently,isnotimplemented.Department’sfunctionisnotclearlydefined.Somefunctions(e.g.HR)areoverlappingandsomearenotimplemented.(e.g.Marketing)Thecurrentoperationprocessisproduction-orientedinsteadofmarket-oriented,leadingtoignoranceofmarketdemands.Thecontrolofthewholeprocessisonlyonpaperandisnotfollowedinreality.Althoughthereisnoopenconflictsbetweenthem,theJVpartnerspursuetheirown(personal)interests.Itisparticularlyobviouswhenrecruitment,promotionandlay-offareconcerned.GSHAisonthebrimofbankruptcy.Morethan70%ofproductssoldhavenegativegrossprofitmargin,resultinginanincreaseofoperatinglossesinlinewithincreaseofsales.Thecompanycannotsurvivewithoutacontinuouscashinjectionfromtheparentcompany.AlthoughtheoperatinglossesofGDAIhavebeenreducedasaresultofimprovedgrossprofitmarginsandincreasedsales,thefinancialsituationisstillcriticalThereisnoleadershipatGSHA.GSHAisclosetobankruptcy.GDAIshowspositivedevelopmenttrendFinancials,organizationandpGeberitshouldaimforequitybuyoutandconsiderterminationorbankruptcyasfall-backpositionRestructuringoptionsToseparatefromtheChinesepartnerisapremisetosecuresuccessofrestructuringSomekeyproblemsparticularlyaffectingtoHRMarerelatedtotheChinesepartnerInaddition,Lida’sproductsarecontributingtothehugelossduetotheir-7%grossprofitmarginandthesharpdeclineinsalesvolumeduetoshrinkageoflowendmarketTherefore,onlyequitybuyout,terminationandbankruptcyarefeasibleConsideringcost,time,riskandthepotentialimpactonfutureintegrationandconsolidation,equitybuyoutshouldbedeemedasthefirstchoice,andterminationorbankruptcyasfall-backpositionThebuyoutandterminationoptionsdependtoalargeextendonthewillingnessoftheChinesepartnerandcantakealongtime.Therefore,GeberitshouldstartpreparationsandnegotiationsquicklyGeberitshouldaimforequityA.MarketenvironmentSHA-4309-03690-08-15a.PPT-xA.MarketenvironmentSHA-430A1.MacrobusinessenvironmentinChinaSHA-4309-03690-08-15a.PPT-xA1.MacrobusinessenvironmeOverallthebusinessenvironmentispositiveforGeberit’sinvestmentinChinaMacrobusinessenvironmentinChina8%annualgrowthforecastedforconstructionindustryStrongmomentumforrealestatemarketgrowthSteadygrowthforhighendrealestatemarket7%annualGDPgrowthestimatedinthenextfiveyearsAnotherboomforFDI1)expectedAnestimated8%annualgrowthforfixedassetinvestmentby2005ConsistenteconomicpoliciestowardsreformandopeningupDramaticChinesehouseholdincomegrowthduringthepast15yearsMacroeconomictrendHousingsupplymarketGovernmentpoliciesSocialfactorsGovernment’spreparationforWTO

entryCentralgovernment’sefforttodevelopwesternregionTheemergenceoftopconsumersgroupwithstrongpurchasingpowerSignificantlyincreasedbathroomdecorationstandardandspending1):ForeigndirectinvestmentOverallthebusinessenvironmeChinaisoneofthefastestdevelopingcountriesinAsiaandtheglobeAnnualGDPgrowthinChina[%]GDPgrowthinAsia,1998/1999China1)EstimateJapanMalaysiaIndonesiaIndiaPhilippinesTaiwanSingaporeHongKongThailandGermany1.4%USA4.1%Source:OECD,RolandBerger&Partnersanalysis1)ChinaisoneofthefastestdeThekeyindicatorsofthefirsthalfof2000showastrongconfidenceintheChinesemacroeconomictrendFixedassetinvestmenthitRMB754billioninthefirsthalfof2000,up12.1%comparedwiththeperiodoflastyear,amongthese,theinvestmentofrealestatewasRMB201billion,up24.1%SalesvolumeoftheretailmarketreachedRMB1625billion,up10.1%,andthedisposableincomeperurbanresidentincreasedby7.7%Foreigntradevolumeachievedasignificantgrowthof37%,amountedatUSD217billion,amongthese,exportwasUSD115billion,up38%,importwasUSD102billion,up36%Keyindicatorsinthefirsthalfof20008.2%GDPgrowthachievedinthefirsthalfof2000Source:CountyInformationCenter36503950+8.2%[BillionRMB]ThekeyindicatorsofthefirsInthenext5years,macroeconomicdevelopmentwillbeoptimisticinChinaWTOaccessionwillbring1.75%moreforeigninvestment,USD100billionincrementalFDIperyear,willboosteconomygrowthby1%annuallyThefixedassetinvestmentisestimatedtogrowat8%peryearChinaplanstoacceleratetheurbanizationprocessby2%peryearRealestatemarketwillgrowat7-8%henextfiveyearsThetrendofChina’smacro-economy7%annualGDPgrowth1)inthenextfiveyears[1978=100]1):excludingtheinflationfactor 2):EstimationSource:ChinaInfobank,Asianmonitor,RB&Panalysis2)+10.8%p.a.+7.8%p.a.+11.6%p.a.+8.1%p.a.+7%p.a.Inthenext5years,macroecoAboomforforeigninvestmentcanbeexpectedinChinainthenext5~10yearsFDIgrowthGrowthofEuropeanUnioninvestment[BillionUSD][BillionUSD]60.9%p.a.4.2%5.7%6.6%9.2%8.8%11.1%TheweightedshareofEuropeancompanies’investmentintotalFDIisincreasing70.11.5%p.a.12%p.a.1)1)EstimationbasedontheassumptionofWTOentrySource:SateStatisticsBureau,RB&Panalysis70%p.a.15.8%p.a.AboomforforeigninvestmentWFOE(whollyforeignownedenterprise)isbecomingamoreandmorewidely-acceptedapproachforforeigninvestmentCompositionofFDIinChinaLegalformationofforeigninvestmentSource:StateStatisticsBureauBack-up154.856.9EuropeanUnionJapanUSATaiwanHongkongOthers23.925.624.921.5[BillionUSD][BillionUSD]Theaccumulationofactualforeigninvestmenttotheendof1999ActualforeigninvestmentofJan.~July20009.93.0EJVWFOECJV6.8EJV:EquityJointVentureCJV:CooperativeJoint

VentureOthersTotal:307.6Total:19.9WFOE(whollyforeignownedentThefixedassetinvestmentisestimatedtogrowat8%annuallyinthenext5years,andmorethan60%willbeinvestedinconstructionprojectThegrowthoffixedassetinvestmentCompositionofthefixedassetinvestmentin1999Source:ChinaStatisticYearbook2000,RB&Panalysis[BillionRMB]14.8%8.8%13.9%5.1%8%p.a.[BillionRMB]1879.3400.6PurchaseofmachineryequipmentConstructionandinstallationOthers705.3Total:2985.3ThefixedassetinvestmentisConstructionindustrywillgrowsteadilyatanestimated8%annualrateGrossoutputvalueofconstructionindustry[BillionRMB]GrowthofgovernmentinfrastructureinvestmentGrowthofresidentialhousingsupplyGrowthofrealestatemarketGrowthofrenovationmarket21.8%7.6%10.3%10.3%8%Source:ChinaStatisticYearbook2000,NationalPlanningCommission,RB&PanalysisConstructionindustrywillgroThetotalfloorspaceofhousingsupplyhasexperiencedanaverageannualgrowthof6.5%inthepast5years,morethan8%growthcanbeexpectedthisyearGrowthoftotalhousingsupplyAverageannualgrowthofurbanresidentialsupplyis12.7%,whichisleadingthetotalgrowthrateof6.5%,andwillcontinuetobethegrowthengineRuralresidentialsupplygrowthislimitedduetoslowfarmers’incomegrowthWTOentryisexpectedtostimulateanotherhigh-growthperiodofofficebuildingsupplyTrendofhousingsupply[Billionsqm]+6.5%p.a.UrbanresidentialRuralresidentialNon-residential1.461.621.661.711.872.031)1):Projectionbasedontheprogressofthefirsthalfyearof2000Source:ChinaStatisticYearbook2000,ChinaConstructionIndustryYearbook1999,RB&Panalysis+8.5%ThetotalfloorspaceofhousiBuildingconstructioncanbedividedintoresidentialbuildingsandnon-residentialbuildingsBack-upBuildingsclassificationTotalconstructionResidentialbuildingsNon-residentialbuildingsUrbanresidentialRuralresidentialIndustrialbuildingsCommercialbuildingsOthersManufacturingplantHotelRetailstoreRestaurantEntertainmentOthersPublicbuildings

e.g.:airport,exhibitioncenter,stadiumInstitutionalbuildingsHospitalsSchoolsOthersOthersOfficebuildingsBuildingconstructioncanbedTotalhousingsupplyin1999reached1.87billionsqminChinaThefloorspacecompletedNationalBeijingShanghaiJiangsuZhejiangGuang

dongResidentialUrbanVillasandgoodapartments(sold)RuralIndustrialCommercialOfficeOthers(retailing,entertainment,catering…)Others(public,institutional,hospitals,schools…)Total13935594.36834111223119104147187419.6015.200.554.4017.274.116.811.914.9036.8717.3213.360.393.9615.263.955.022.152.8732.58101.0428.490.3172.5639.697.7016.347.229.12138.0164.8120.810.3044.0024.257.0810.885.585.3089.6086.0442.380.8943.6639.1113.1115.528.606.92125.14Back-upHousingsupplyofnationwideandkeyareas1999[Millionsqm]Source:ChinaStatisticsYearbook2000,ProvincialStatisticsYearbook2000Totalhousingsupplyin1999rTheresidentialfloorspacesupplyaccountsfor74.3%ofthetotalhousingsupplyin1999Compositionofhousingsupply(1999)Compositionsofnon-residentialbuildings(1999)Back-up481559RuralresidentialbuildingsNon-residentialbuildingsUrbanresidentialbuildings834[Millionsqm]119147IndustrialbuildingsOfficebuildingsOthers111[Millionsqm]Total:1874Total:481104OthercommercialbuildingsThegroupofcommercialbuildingsTheresidentialfloorspacesuRealestatemarketisshowingastrongmomentumin2000,salesofsquaremetersup38%fromJan.toJulyvs.thesameperiodin1999Source:StateStatisticBureau,ChinaInfobankFloorspacecompleted[Millionsqm]+19.1%HousingsalesMarketindicationof2000.1~71999(1-7)2000(1-7)+38%1999(1-7)2000(1-7)72%84%28%16%TheactualinvestmentinrealestatereachedRMB250.4billion,up28.6%32millionsquaremetersoflandwasusedforrealestatedevelopment,up23.1%Marketpriceslightlyincreasedby1.9%TopcitiessuchasShanghai,Beijing,Guangzhou,Shenzhenareleadingthegrowth,e.g.theprivateconsumptioninBeijingwasalmosttripledto2.3millionsquaremeterscomparedwiththeperiodofthelastyearPrivatebuyerInstitutionalbuyer[Millionsqm]36.350.1RealestatemarketisshowingHighendrealestateisontrackofsteadygrowthduringthepast5yearsGrowthofsalesofvillas

andhighendapartments*Compositionof

highendrealestatemarket(1999)*:Thehighendrealestatemarketisdefinedbythesellingpricepersqm,in1999,thecriteriaisabove4500RMBpersqmGuangdongOthersShanghaiBeijing[Millionsqm]+15%p.a.[Millionsqm]2.520.890.550.3942%Total:4.36HighendrealestateisontraChinesegovernmentisendeavoringtodrivesustainableeconomicgrowthOpen-upContinuouslyadoptthedirectionmarketorientedeconomydevelopment,themarketwillopenfurtherPrepareforWTOentrytogainmoreforeigninvestmentandsellmoreabroadWesternregiondevelopmentTonarrowthegapofeconomicdevelopmentbetweencoastalareaandwesternregionTocreateextradomesticmarketdemandbygovernmentdirectionsettingSustainable

economicgrowthMarketreformDomesticmarketdemanddrivenKeepthegrowthofgovernment’sinvestmentininfrastructurePrioritizethemarketdevelopmentofrealestatebyissuingoutstimulatingpolicies,suchashousingprivatizationpolicy,taxcutofhousingconsumptionCreateconsumptionmarketdemandbyincreasingthepayofgovernmentstaff50%,loweringdowndepositinterestetc.KeepSOEreformatthetopagendaofeconomicdevelopment,toachievealong-termsolutionforaviableSOEbusiness,someshort-termpainsmaybecausedsuchasalargeamountofworkerslaid-offChinesegovernmentisendeavorProbablyChinawilljoinWTOearlyin2001,whichwillmakeatremendousimpactintheChinesemacroeconomicenvironmentBoosteconomicdevelopmentImpacttoGeberit’sbusinessinChinaIntensifymarketcompetitionMorefavorableinvestmentenvironmentEasiertoimportGeberitEuropeanproducedproductstoChinesemarketImpacttomacroeconomicenvironmentOverall,WTOwillmakeadramaticimpactonChina’seconomicdevelopmentbyopeningthedoortoforeignbusinessandmakingChineseproductsmoreaccessibletotheglobalmarketWTOentrywillboostonenewtideofforeigninvestmentinChinesemarketWTOentrywillalsobringconsumerspendinggrowthWTOentrymeansmoreinternationalplayerswillcometoChinesemarketbyexportingtheirproductswiththelowertarifforbydirectinvestmentinthemarketThetariffforsanitaryproduct,nowaround40%willbereducedto10%inthecoming5years,agreatfavorforAmericanorEuropeansanitaryproductsimportedtoChinaWTOentrywillstrengthenkeycompetitors’determinationforChinesemarketlikeCaroma,GroheDal.TheywillmoveintothemarketquicklyWTOentryimplicationProbablyChinawilljoinWTOeWesternregiondevelopmentwillcreateaconsiderablemarketdemand,however,Geberitshouldnotbeoverly-optimisticImplicationtoGeberitGovernment’sdirectionChinesegovernmentwillinvest100billionUSDininfrastructureconstructionacrossthewesternregioninthecoming10years,invest24billionUSDinecologicalenvironmentprotectionandenhancement70%oftheloansfrominternationalfinancialorganizationandpreferentialloanstoChinesegovernmentwillbepouredintowesternregionGovernmentissuedextraincentivesandpreferentialtreatmenttoattractmoreforeigninvestmentinthewesternregionThewesternindustrystructurewillbeoptimizedtobemoreefficientandenvironmentalfriendlyToimprovefarmer’sincomeThemassiveinfrastructureupgradeandconstructionwillcreatecertainmarketdemandforGeberit’sproducts.E.g.around20airportsinwesternregionwillbebuiltorupgradedinthenext5years,apotentialmarketforPluviaandpublicproductsThehouseholdincomeandthegeneraleconomicdevelopmentinwesternregionwillstilllagfarbehindtheeasterncoastalareainChina,Itwilltakequitealongtimeforthewesttocatchup,Geberitshouldnotbeoverly-optimistictotargetatthevastbutpoorwesternmarketSource:ChinaInfobank,RB&PanalysisWesternregiondevelopmentwilChina’swesternregion,avastlandwithrichnaturalresources,lagsfarbehindnationaleconomicdevelopmentOverview(1999)GeographyIndicatorIncomepercapitaLandareaPopulationGDPGDPpercapitaWesternregion406USDSKM5.4mn285mnUSD133.2bn467.4USDAs%ofnational60%57%24%15%62%Accountfornomorethan4%oftotalcontractedandutilizedforeigninvestmentRichnaturalresourcessuchaswater,gas,coal,andoreThewesternregionconsistsof10provinces:Shichuang,Chongqing,Guizhou,Tibet,YunnanShangxi,Gangshu,Qinghai,Ningxia,XingjiangBack-upSource:ChinaStatisticsYearbook2000,RB&PanalysisChina’swesternregion,avastChineseurbanresidentsincomeandconsumptionpercapitahasdramaticallyincreasedinthepast15yearsAnnualpercapitadisposableincomeofurbanresidents(1999)Annualpercapitaconsumptionofurbanresidents(1999)+16%p.a.+22%p.a.+6%p.a.+16%p.a.+22%p.a.+6%p.a.[RMB][RMB]Source:ChinaStatisticsYearbook2000,RB&PanalysisChineseurbanresidentsincomeAconsumergroupwithstrongpurchasingpowerhasemergedintheChineseconsumermarket,theyaredemandingandbrandconsciousAnnualpercapitadisposableincomeofurbanresidentsNotpricesensitive,butsmartonconsumervalueStrongbrandconsciousness,brandasakeyinfluencertothepurchasingdecisionDemandingonproductquality,targettohighendmarketWillingtotrynewconceptsPoorbrandloyaltyFeaturesofthetopconsumergroup[RMB]Aconsumergroupwithstrongp11.5%ofhouseholdshavereachedmonthlyincomesofmorethan8000RMBinShanghai,BeijingandGuangzhouSegmentationbymonthlyhouseholddisposableincome3000-5000<3000TargethouseholdunitsInthetop3Chinesecities,thereexistmorethan1.3millionhouseholdunits,eachofwhichearnsmorethan8000RMBpermonth[Million]5000-80008000-10000>10000Top3citiesNumberofHouseholdunitsShanghai11.39TotalBeijingGuangzhou4.914.192.29Back-up[RMB]Target1.31Source:ChinaInfobank,RB&Panalysis11.5%ofhouseholdshavereachBathroomdecorationstandardhasincreasedsignificantlyTodecoratethebathroomtobeacozyprivatespacebyspendinggenerouslyUsebranded,highqualitysanitaryproductsCostaround20~30%ofthetotalhousedecorationbudget,e.g.inShanghai,it’scommonforonehouseholdtospendfromRBM4000to10,000inbathroomdecorationBathroomrevolutioninChinaSource:Chinainfobank,Asianmonitor,RB&PanalysisHousingprivatizationleadstomoreprivatehousingownershipSocialconceptinfluencedbywesterncountriesAgrowinghouseholdincomeandconsumptionpowerMarketingoutputoftheleadinginternationalsanitarymanufacturerssuchasAmericanStandard,Toto,KohlerBathroomdecorationstandardhA2.MarketanalysisofsanitarysystemSHA-4309-03690-08-15a.PPT-xA2.MarketanalysisofsanitChinesesanitarymarketismostlyaceramicmarket,theannualmarketdemandofsanitaryceramicreached43millionunitsin1999Compositionofsanitarymarketdemand(1999)Compositionofflushingtankconsumption(1999)Washbasin[Millionunit]Non-residentialbuildings[Millionunit]Total:43Total:12.3UrbanresidentialbuildingsToiletbowlFlushingtankOthers**:UrinalceramicandsquattingtoiletRuralresidentialbuildingsSource:NationalBuildingMaterialsBureau,RB&PanalysisChinesesanitarymarketismosItwillcontinuallygrowat6-8%peryearinthenext5yearsRealestatemarketwillbedevelopedatanannualgrowthof7~8%inthenext5yearsTheannualurbanresidentialhousewillincreasefrom450millionsqmin1998to550from2000-2005Theurbanizationprocesswillspeedupinthenext15years,andthenumberofcitieswillincrease2.6%peryearResidentialhousinggrowthBathroomdecorationmarketwillsteadilygrowat5%annuallyinthenext5yearsThereexistaround60-70milliontoiletsetsinChina,alargeamountofwhicharetoooldtobefunctioningwell,ornotefficientforwaterconsumption.ThiswillleadtomarketgrowthinbathroomrenovationRenovationmarketgrowthAnannualgrowthof6-8%ofsanitarymarketItwillcontinuallygrowat6-Thedataoftotalsanitaryceramicsalesin1999isbasedonthestatisticsofbothhousingsupplymarketandsanitaryindustryTotalsanitaryceramicsalesin1999[Millionunit]WashbasinFlushtankToiletbowlUrinalSquattingtoiletTotalNationalNewRenovationBeijingNewRenovationShanghaiNewRenovationJiangsuNewRenovationZhejiangNewRenovationYangtzeRiverDelta*NewRenovationGuangdongNewRenovation16.1712.993.200.530.330.200.580.360.270.730.570.162.441.770.681.290.870.4212.289.233.050.380.590.180.490.400.091.641.200.440.740.510.2412.289.233.050.380.590.180.490.400.091.641.200.440.740.510.240.8860.8160.0700.0410.0340.0070.0370.03