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Asia Outlook

Asia
Wagner

WAGNER ASIA

Servicing the best



Wagner Asia are a leading Caterpillar Dealer in Sales and Service Capability Performance in the CIS and Mongolia region

Writers Matt Bone & Steve Potter
Project Manager Eddie Clinton

Wagner Asia Equipment LLC are the official dealer for Caterpillar Inc in Mongolia. Since its establishment in 1996, with 100% Wagner investment, Wagner Asia Equipment LLC sells and rents quality Caterpillar machines (CAT) used in mining, construction, road and railroad construction, infrastructure, agricultural, energy and other industrial applications of Mongolia.

For the last eight years in row, Wagner Asia has been the leading Caterpillar Dealer in terms of sales and service capability in the CIS and Mongolia region. Wagner Asia is currently sitting at number 16 in the top 20 companies of Mongolia, by the metrics published by the of Government of Mongolia and Mongolian Chamber of Commerce and Industry, which recognise the company's contribution to the national economy, business development as well as its activities in the area of social responsibility. Wagner Asia is the undisputable market leader in its sector, and its performance is characterised by best business practice, the introduction of new technologies and products and services in Mongolia.

Steve Potter, Executive Director of Wagner Asia, acknowledges that the last 2 years have been very challenging ones for the company given that the markets for their products and services are very much linked to the health of the Mongolian economy. He expects that this situation will continue through 2014 but that the underlying fundamentals for the country, and therefore for Wagner Asia, remain positive.

A Product for All Seasons
With Wagner Asia Group being made up of 5 separate companies, the business can offer a wide range of products and solutions for the potentially large resources market in Mongolia. Wagner Asia Group consists of five companies: Wagner Asia Equipment LLC, Wagner Asia Industrial LLC, Wagner Asia Technology LLC, Wagner Asia Leasing LLC and Wagner Asia Automotive LLC. Each one of them offers the market something different including: Land Rover and Ford Motor company products, equipment leasing, sales, parts and repair services for MANITOWOC , JAC, Navistar SEM, AGCO and Terex, construction equipment as well the world famous Caterpillar brand. "We are proud to offer such a wide and diverse range of mining and infrastructure machinery that can really add value and efficiency to any project," remarks Potter. As well as offering some of the biggest names in the equipment business, Wagner Asia backs this up with the most highly developed network of support facilities in the country.

Logistical Challenges
Mongolia is sandwiched between two of the world's powerhouses. Although Russia takes some Mongolian exports, it is the import of fuel (gasoline and diesel) that makes Mongolia so dependent on its northern neighbour. China on the other hand takes almost 90% of Mongolian exports, especially key commodities such as coal, copper and iron ore. Infrastructure is currently the biggest obstacle to Mongolia being able to fully exploit its vast mineral resources. The road network is in its infancy and the country is only serviced by one railroad, which given its history, was built to the wider gauge Russian standard and not the more normal narrow gauge used by China.

Economics dictate that a Chinese gauge rail line to China is critical to the success of Mongolian commodity exports but geo-political considerations have delayed this decision and in the current commodity price downturn, this has had a materially negative impact on Mongolian exports, especially its coal exports, which are a vital source of foreign currency. The time for talking through this issue and building a narrow gauge railway is long overdue. In the short term the coal mining sector is operating well below target and this has hurt business for Wagner Asia.

Global Brand, Global Service
Wagner Asia operates a truly global supply chain as the equipment they buy comes in from all over the world including the USA, Japan, Russia, China and India. The product support division (servicing and repair) of the group draws its main support for Caterpillar parts from their Asian distribution center located in Singapore, with stock orders shipped to Tianjin, China and then by railroad to Ulaanbaatar. Despite the fact that both Caterpillar and Wagner Asia operate some of the most sophisticated logistics systems in the industry, lead times can be as long as 90 days given long distances, border crossings and weather issues that must be faced. This requires both robust long term planning and the need to hold very large inventories in Mongolia. This is essential to support the mining fleets now operating in the country that require 24/7 coverage if they are to meet the necessary operating hours that mining companies demand. To further improve support to the large export mines that are located in the Gobi desert region of southern Mongolia, Wagner Asia has recently commissioned a 5,000m2 parts distribution center. The southern distribution centre is phase 1 of larger service complex that the company intends to build to support the growing mining fleets operating in the Gobi.

Investment Potential
Following the signing of the Oyu Tolgoi - a very large integrated copper and gold mine located in the Gobi Desert - Investment Agreement between the Government of Mongolia and the global mining giant Rio Tinto in late 2009, Mongolia witnessed a surge in Foreign Direct Investment (FDI) especially in mining, which resulted in it becoming the fastest growing economy in the world in 2011 when GDP reached 17.3% growth. However a series of ill-conceived legislation introduced by the government in 2012 saw FDI plummet by over 65% and GDP growth fall to a little over 7% by mid-2014. These figures need to be put in context because for any country in the west, growth of 7.5% would be considered excellent, but one must recall that the total Mongolian economy is only around $11 billion which is tiny, to put it in context about the same size as the US city of Fargo, North Dakota so percentages can be misleading. While the government has taken steps to try and address the problems created by earlier legislation, most Mongolia experts believe that key to a return to improved FDI flows will be the signing of the phase 2 investment plan for Oyu Tolgoi. So although Mongolia remains a country of significant potential, luring back much needed foreign investors, it is proving illusive for the cash-strapped country.

Wagner Asia is a family-run business headquartered in Denver, Colorado and Potter works hard to operate the Mongolian part of the business using the same strong family values that have been instilled over the last 60 plus years by the founder Joe Wagner and his son, Bruce, the current President. The family has always taken a long term view with regard to Mongolia, but the recent rollercoaster ride has been extremely challenging and has resulted in the company shedding assets, holding back on planned capital expenditures and sadly having to downsize on people, mostly Mongolians, in whom it has invested in terms of training and development.

Despite the recent tribulations, Potter remains cautiously optimistic that Mongolia can recover from its current situation but time is running out, as witnessed by the exodus of investors and the downsizing by many companies from across the business spectrum. "As I said earlier, the owners didn't come to Mongolia to make a quick buck; they came here with a long term view and a goal of helping Mongolia develop as a robust modern economy. But that said, the business is here to make money, and we are determined to do that and to do it in the right way, the pragmatic way, the Wagner Asia way."