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Grupo upo TRAXION ON Corporate Presentation Sant ntander ander - - PowerPoint PPT Presentation

Grupo upo TRAXION ON Corporate Presentation Sant ntander ander XXII I Annual ual Latin in Amer erica ica Confer eren ence Cancun, Mexico January, 2018 Disclaimer The material that follows presents general background information about


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SLIDE 1

Grupo upo TRAXION ON

Corporate Presentation

Sant ntander ander XXII I Annual ual Latin in Amer erica ica Confer eren ence

Cancun, Mexico

January, 2018

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SLIDE 2

Disclaimer

The material that follows presents general background information about Grupo Traxion, S.A.B. de C.V. (the “Company”) as of the date of the presentation. This information consists of information concerning the Company. It is information in summary form and does not purport to be complete. It is not intended to be relied upon as advice to potential investors and does not form the basis for an informed investment decision. This presentation is strictly confidential and may not be disclosed to any other person. The information in this presentation is preliminary in nature and subject to change. No representation or warranty, express or implied, is made concerning, and no reliance should be placed on, the accuracy, fairness or completeness of the information presented herein. All information in this presentation is subject to verification, correction, completion and change without notice. In giving this presentation, none of the Company, any of its affiliates, directors, officers, agents or employees, nor any placement agents, managers or initial purchasers undertake any obligation to provide the recipient with access to any additional information or to update this presentation or any information or to correct any inaccuracies in any such information. This presentation may contain statements that are forward-looking. Such forward-looking statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environments of the Company and its subsidiaries that may cause the actual results of the Company to be materially different from any future results expressed or implied in such forward-looking statements. None of the Company, any of its affiliates, directors, officers, agents or employees, nor any placement agents, managers or initial purchasers, shall be liable to any third party (including investors) for any investment or business decision made or action taken in reliance on the information and statements contained in this presentation

  • r for any consequential, special or similar damages.

Securities may not be offered or sold in the United States unless they are registered or exempt from registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”). This presentation is being made only to investors that, by means of their attendance at this presentation, represent that they are “qualified institutional buyers” as that term is defined in Rule 144A under the Securities Act. Any offering of securities to be made outside of Mexico will be made by means of an offering memorandum that will be sent to you at the address that you provided today. Such offering memorandum will contain, or incorporate by reference, detailed information about the Company and its business and financial results, as well as its financial statements. Investment decisions should be solely made on the basis of the offering memorandum and not on the basis of this presentation. This presentation does not constitute an offer, or an invitation or solicitation for an offer, to subscribe for or purchase any securities, nor shall any part of it nor the fact of its dissemination form part of or be relied on in connection with any contract or investment decision relating thereto. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment. If the Company should at any time commence an offering of securities, any decision to invest in such offer to subscribe for or acquire securities of the Company must be based wholly on the information contained in the offering memorandum to be issued by the Company in connection with any such offer and not on the contents hereof. By reading this presentation, you agree to be bound by terms and conditions set out above. The Company’s management highly recommends the investment community to thoroughly review the information contained in the offering memorandum and consult with independent advisors deemed necessary before making any investment decisions. A stock investment is complex, is subject to a variety of risks and uncertainties and may result in significant losses, including the full amount invested.

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SLIDE 3

Who is Traxion?

TRAXIO ION: N: The large rgest st transp sporta tati tion and logist istics ics inve vestmen stment pla latfo form rm in Mexico xico

Core strate tegy gy

▪ Integrate

te a transportation and logistics platform in an accretiv tive manner and maximize its effi ficie iency

▪ Render a one

  • ne-sto

top solution for cargo and logistic tics

▪ Operate

te companies under a best-practic tices approach to optimize performanc nce

▪ Create sustainable long-term value for clie

ients ts, inves esto tors, and stakehol

  • lde

ders Service Segments Cargo & Logistic tics Passenger

3

5,319 19

Power units

5

Leading companies

Ps

  • Ps. 6.7 billion

llion

LTM revenues1

+9,500

Employees

+365 5

Million kilometers driven annually

+900

Clients

17.5x 5x

Fleet growth in 6 years

Nationwid wide Footprint

1,562 power units +307,000 sqm of logistics space (3.2 mm sqft) 3,408 dry vans ~5.2 years avg. fleet age (16.6 years avg. of sector) Student transportation & personnel commuting 3,758 power units

1 Last-twelve-months accumulated revenues Financial and operating data as of September 30, 2017

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SLIDE 4

Exceptional Growth Story

300 316 752 760 776 4,963 5,319 2011 2012 2013 2014 2015 2016 2017

IPO

17.5 .5x x

Fleet growth

2.3x

Larger than the immediate competitor

5.7x

Larger than the average company in the sector

Ps

  • Ps. 3.9

.9 bn bn

Successfully invested in M&A since 2011

Fleet

(power units)

4

Companies logos indicate the date of integration to Traxion

Fleet CAGR

61.5% 61.5%

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SLIDE 5

Undisputed Leadership

International Freight Auto toEx Expre ress Fronte tera ra Norte te Transporta rtadora ra Egoba Grupo MyM Grupo SID LIPU PU Transporte rte Seguro ro 5 Domestic freight Intermodal Student transportation Serv rvic ices International freight & border transfers Logistics services Relocation and moving Less-than-truckload (LTL) Personnel commuting Tourism Domestic freight and Moving Logistics and Domestic Freight International Freight and Intermodal Personnel Commuting and Student Transportation Leader Leader Leader Leader Leader

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SLIDE 6

Unique Investment Opportunity

Attractive valuation relative to peers Highly-fragmented sector provides accretive growth opportunities Sound balance sheet: low leverage and stable margins Proven M&A track record Attractive sector with significant organic growth potential

We believe we are the only consolidator in the sector in Mexico

Only consolidator with financial capacity to seize growth opportunities in an accretive manner 6 Best-in-class operating platform, supported by market best practices, ensures high performance

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SLIDE 7

Diversified Business Model

51% 11% 38% Cargo Logistics Passenger 36% 23% 19% 6% 3% 3% 11% Retail Auto Industrial Education Electronics Government Other sectors

Clien ient Secto tor % % of

  • f Revenue

Segment serv rved 1 Retail 5.0% Cargo 2 Food 2.8% Logistics 3 Pulp & paper 2.7% Cargo 4 Retail 2.7% Cargo 5 Government 2.4% Cargo 6 Auto 2.3% Passenger 7 Auto 2.2% Passenger 8 Retail 2.0% Cargo 9 Auto 2.0% Cargo 10 Electronics 1.7% Logistics Top-10 clien ient breakdown wn Revenue Breakdown wn by by Segment Revenue Breakdown wn by by Secto tor Top-50 50 57%

The top-50 clients represent 57% of total revenues

Top-10 clients 26% 26%

Inte tern rnatio tional allian liances with th top opera rators rs +33 alliances with the best transportation players

Diversification contributes to a resilient business model

7

Figures as of September 30, 2017

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SLIDE 8

Sole le Pla layer er Mana nage gemen ent Servi vice ce Portfolio

  • lio

Track ack Record

  • rd

…with extensive expertise in the sector through several buisness cycles TRAXION is the leading transportation company in the country…

8

▪ Only publicly-traded company

within a family-owned sector

▪ First mover advantage ▪ Only consolidator in a highly

fragmented sector

▪ Seasoned management team;

extensive expertise in the sector

▪ Sound corporate governance

bodies

▪ Industry best practices ▪ Premium, diversified service

portfolio

▪ Long-lasting relationships with

blue-chip clients

▪ Highest satisfaction levels and

retention rates

▪ Succesful growth track record ▪ Organic and inorganic growth

potential

▪ High efficiency in operations

and processes

Key Attributes

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SLIDE 9

Proven M&A Track Record

Auto toEx Expre ress Fronte tera ra Norte te

TRAXION has been able to successfully integrate several companies…

Transporta rtadora ra Egoba Grupo MyM Grupo SID LIPU PU Transporte rte Seguro ro Acquisition: Dec 2011 Fleet: 300 ▪ Commercial strategy ▪ Administrative insittutionalization ▪ Business plan and KPIs Acquisition: Jun 2013 Fleet: 428 ▪ Commercial strategy ▪ Administrative insittutionalization ▪ Business plan and KPIs 9 Acquisition: May 2016 Fleet: 580 ▪ Fleet utilization ▪ Optimize client base Acquisition: Jun 2016 Fleet: 222 ▪ Boost fleet growth ▪ Growth opportuities with additional capital Acquisition: Oct 2016 Fleet: 3,399 ▪ Client expansion ▪ Achieve economies of scale ▪ Growth opportuities with additional capital

Best practic tices convey eyance Procuremen ent efficie ienc ncie ies Commercial ial intel telli ligence …while maintaining financial discipline on each transaction Balanced exposure to to industrie tries Diversific ificatio tion of

  • f servic

ice portfolio lio EBITD TDA effi ficie iency

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SLIDE 10

Competition Landscape

Cargo & Logistics Passenger Services Truckload Intermod modal Logistics Personnel Student Tourism Company Power Units1 Domestic Freight Intnl Freight & Transfer Relocation & Moving Less than Truckload Internodal Logistics Services Personnel Commuting Student

Transportation

Tourism 4,9632 2,189 1,887 1,867 1,724 1,641 990 790 735

TRAXION provides the broadest and most complete offering of integrated transportation premium services Large-scal ale Nationwid wide footprint Competi titiv tive cost structu ture

1 Includes trucks, buses and vans; excludes trailers 2 Proforma December 2016; Includes Egoba, MyM, Grupo SID, AFN and LIPU Source: T21 Magazine, December 2016

10

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SLIDE 11

Appealing Sector

11 Overv rvie iew

Trucking ing and bus bus transportation are essenti tial components in an industrialized economy

Virtually every ery manufactured or consumer prod

  • duc

uct, t, and pers rson

  • n is directly relate

lated to tran ansport

  • rtat

ation ion

Road ad is the main in cargo method in Mexico

Few companies offer premium ium, inte tegra rate ted services

Larg rge and fragmente ted industry (+865k power units)

No player has even 1% market share Opportunities

  • Large companies outsourcing transportation services
  • E-commerce expanding
  • Fleet flexibility provides access to unattended markets

367 413 435 470 522 186 244 284 273 292 52 77 90 105 120 1995 2000 2005 2010 2015 Road Maritime Rail

605 605 734 734 809 809 848 848 934 934

(excludes air freight)

Source: SCT 1 Includes all units as presented by SCT 2 CAGR includes all the units in the cargo and logistics segment

Mill llion ion Tons ns Tran anspo porte rted

191 203 194 199 206 215 207 221 226 235 245 260 112 122 123 127 133 143 148 170 186 202 222 246

2011 2012 2013 2014 2015 2016

Owner Operators (1-5 units) Small Companies (6-30 units) Medium Companies (31-100 units) Large Companies (+100 units)

659 659 716 716 729 729 763 763 806 806 865 865

Number of units (000s)1

Carg rgo Transporta rtatio tion Industry try Larg rge companie ies have growth wth faste ter than the rest

  • f
  • f the industry

try

2011 2011-2016 CAGR 10.7% 4.9% 4.7% 2.4% 2011 2011-2016 CAGR2

39.1 .1%

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SLIDE 12

Attractive Sector Fundamentals

Transportation is a very important component in the Mexican economy Trasportation industry in Mexico

Ps

  • Ps. 1,6

,668 bn bn

Road Air Rail Maritime

  • Ps. 1,432 bn
  • Ps. 153 bn
  • Ps. 64 bn
  • Ps. 19 bn

85.9% 9.2% 3.8% 1.1%

Road Air Rail Maritime

Transportation market in Mexico …and it is an extremely fragmented sector with tremendous consolidation potential

+140,000 Companies +865,000 Power units +900 M&A targets Transportation industry in Mexico contributes

5.9%

To annual GDP 12

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SLIDE 13

Compelling Future Growth Drivers

Several variables are expected to fuel growth in the transportation industry GDP Growth th

Mexico is the 15th largest economy in the world by GDP1

It is expected that Mexico more than doubles its GDP by 20301

The transportation sector has a strong correlation to GDP growth

1 Source: https://www.pwc.com/gx/en/world-2050/assets/pwc-the-world-in-2050-full-report-feb-2017.pdf; https://data.worldbank.org/data-catalog/GDP-ranking-table

E-comme merce Infras astr tructu ture Favorab able demographics

Virtually no logistics backbone to support e-commerce operations

e-commerce is expected to consistently gain penetration

Logistics and transportation must synchronize with e-commerce trends

The best demographic bonus: increasing working-age population

Emerging middle-class with increasing disposable income

Healthy unemployment rates and underlevered population

Mexican government has committed to invest in infrastructure

Roads and highways to absorb the most infrastructure investments

Mexico is a competitive investment destination

Positiv tive macro environment nt

The largest manufacturing installed capacity in the region

Structural reforms will be a paradigm shift in the mid-term

Internal consumption is expected to continue to grow 13 Mexic ico is is expecte ted to to require ire more freigh ight, , logisti tics and passenger serv rvic ices

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SLIDE 14

Appendix ix

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SLIDE 15

Nationwide Footprint

Total nationwide coverage and access with broad operations in the most dynamic economic regions of the country

Nuevo Leon 4.0% Quintana Roo Baja California Sonora 3.9% 3.8% Jalisco San Luis Potosi 3.9% Aguascalientes 5.4% Guanajuato 5.0% 6.3% Queretaro 5.4% 3.3%

Main Operations / Economic Regions All Subsidiaries Presence No Presence

Average National GDP growth 2.8%

Source: INEGI, Company information

15

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SLIDE 16

Long-Lasting Client Relationships

Blue-Chip client base Customer Awards and Recognitions

65 25 21 21 21 20 19 18

Average 26 years

16

  • Truckload Provider of the

Year (‘05,’06, ‘07, ‘08)

  • Logistics Provider of

Excellence (2012)

  • Small International

Carrier of the Year in Mexico (2013)

  • Recognition of Effort and

Dedication for 38 years

  • f service (2013)
  • Innovative Project (2013)
  • Stellar Line (2014)
  • Recognition for Contribution

to Operations (2015)

  • Quality Week (2015)
  • Fulfillment of Performance

and Service Indicators (2012)

  • Best Supplier – Logistics and

Replenishment Category

  • Recognition for Quality

Assurance and Reliaility with Clients

  • New Carrier of the Year

2016

  • Distinguished

Provider 2003

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SLIDE 17

Strategic Pillars

Oper erat ations ions Commer ercial cial M&A Fin inance nce

…through its well established strategy designed to maintain profitability

Constant monitoring

Continuous margin improvement

National footprint with international capabilities

Integral solutions

High-quality, reliable premium services

Solid client relationships

Brand differentiation

Incremental share in customers’ budgets

Cross-selling

Efficient capital allocation

Selective adquisitions

Synergy and implementation analisys

Disciplined leverage strategy

Sound financial position

Efficiencies and cost controls

Maximize returns through capital deployment

TRAXION has proven to grow successfully both organic and inorganically…

17

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SLIDE 18

Best-In-Class Efficiency

Average Fleet t Age Average Fleet t Utiliz lizatio tion Rate Logistic tics Facilit litie ies Utiliz lizatio tion Rate 5.8 5.8 years 95% 95% 96% 96%

Stat ate-of

  • f-the

he-art art syst stem ems World ld-Cla lass ss certifica ication

  • ns

24/7 safety and monitoring Continuous driver training High-quality fleet maintenance Commercial intelligence

+

Client t Retenti tion Rate 95% 95% High efficiency in all metrics

18

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SLIDE 19

Commercial Strategy

Highly differentiated comercial strategy fuels organic growth

19 Clien ient t relat lation ionships ips

Highly-specialized client service team

Focus on maintaining client base

Capitalize our clients’ growth Cross-sell lling ing New clie ients ts

Fully-dedicated corporate team focused on identifying opportunities

Broad service offering

Complementary service offering and business segments

Highly-seasoned sales team

Effective corporate strategy

Servce offering contributes to attract potential clients

Integrated solutions for our

  • ur clients’ needs

needs Within our

  • ur existing client base

Cargo Logistics Passenger

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SLIDE 20

M&A Criteria

TRAXION has a clear and thorough M&A selection criteria…

Additional transportation-related services Increase our exposure to current service portfolio Potential for synergies and economies of scale Opportunistic transaction approach Medium and large companies Well-run, succesful and profitable companies Strong presence and footprint in their region or niche Seasoned and commited management

Focus on

  • n target

t companies with th core abilitie lities… Key target t selection tion crite teria ia… … that ensures that every transaction is accretive Clearly ly identifie tified opportuni nitie ies

Dry vans, containers and flatbeds Parcel and packaging Logistics, warehousing and storage LTL freight Petrochemical and hydrocarbon transportation Refrigerated cargo Personnel and student transportation 20 Intermodal

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SLIDE 21

Unique Platform in the Market

Best practices in shared services

21

Procurement

Finance IT Systems Human Resources Commercial Strategy Corporate support Work groups Best practices sharing Continuous improvement Business knowledge sharing Cost reduction High-quality servicing Efficient management Integration of new companies Constant growth EBITDA GROWTH

Increase synergies potential

Human Resourc rces Commerc rcia ial IT IT Procure rement

Designated IT Budget

Plan of IT corporate initiatives

Most robust IT system in the industry

Integration culture

Build management and leadership development programs

Best processes and policies

  • f the industry

Cost savings through scale: fuel, tires, lubricants, and

  • ther

Cross selling

Commercial strategy

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SLIDE 22

Key Financial & Operating Data

2,223 5,211 1,026 1,746 9M16 9M17 3Q16 3Q17 445 971 219 341 9M16 9M17 3Q16 3Q17 1,554 5,268 1,560 5,319 9M16 9M17 3Q16 3Q17 97,192 281,130 45,137 92,360 9M16 9M17 3Q16 3Q17

Revenue (Ps. million) EBITDA (Ps. million) Fleet et (units) Kilome mete ters Driven

19.5% 18.6% 21.4% 19.5%

EBITDA Margin

∆ 239%

Kilometers driven in 3Q17 recorded an exogenous growth of 70.1% due to the acquisition of LIPU, the Passenger business segment

On a proforma basis, kilometers driven increased 7% mainly due to a more efficient operation of the Passenger segment

PF

∆ 118%

22

∆ 56%

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SLIDE 23

Key Financial & Operating Data per Segment

Cargo & Logistic tics Passenger

Financial Indicators 9M17 9M16 ∆%

Cargo & logistics revenue 2,990 2,223 34.5% Total costs 2,218 1,589 39.6% Operating expense 514 381 34.9% Operating income 332 313 6.1% EBITDA 563 474 18.8% EBITDA margin 18.8% 21.3%

  • 2.5 pp

Operating Indicators 9M17 9M16 ∆% Kilometers driven (thousand) 130,378 97,192 34.1%

  • Avg. fleet size (units)

1,555 1,554 0.1%

  • Avg. fleet age (years)

5.2 5.2

  • Avg. revenues per kilometer (Ps.)1

19.37 19.32 0.3%

  • Avg. cost per kilometer (Ps.)

15.04 14.77 1.8% Storage space (sqm) 302,844 304,265

  • 0.5%
  • Avg. revenue per sqm (Ps.)

134.84 134.61 0.2% Cost per sqm 94.33 101.00

  • 6.6%

Financial Indicators 9M17 Passenger service revenue 2,221 Total costs 1,529 Operating expense 401 Operating income 314 EBITDA 424 EBITDA margin 19.1% Operating Indicators 9M17 Kilometers driven (thousand) 150,752

  • Avg. fleet size (units)

3,713

  • Avg. fleet age (years)

6

  • Avg. revenues per kilometer (Ps.)

14.68

  • Avg. cost per kilometer (Ps.)

10.14

The growth in the Cargo & Logistics segment is mainly due to Price increases, and by the integration of the acquisitions of Grupo SID and AFN

Both Grupo SID and AFN strengthened our installed capscity both in power units and warehousing space, allowing a broader

  • ffering of value added services

Since LIPU was integrated in 4Q16, there are no comparable figures in this segment 23

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SLIDE 24

Sound Balance Sheet

30-Sep-17 Current assets 6,803 Non-current assets 8,527 Total assets 15,330 Current liabilities 1,909 Long-term liabilities 3,780 Total liabilities 5,689 Shareholders' equity 9,641 Liabilities + Equity 15,330

Debt & Cash Analis isys

16% 9% 12% 63% Up to 12 months 12-24 months 24-36 months >36 months Debt Breakdown 3Q17 4Q16 ∆$ ∆% Short-term debt 514 52 462 888.5% Short-term capital leases 92 40 52 130.0% Long-term debt 2,757 2,928

  • 171
  • 5.8%

Long-term capital leases 370 221 149 67.4% Total debt 3,733 3,240 493 15.2% Cash 526 468 58 12.4% Net debt 3,207 2,772 435 15.7% Post-IPO cash1 4,591 468 4,123 881.0% Post-IPO net debt

  • 858

2,772

  • 3,630
  • 131.0%

Financial Ratios 3Q17 4Q16 Total debt / EBITDA 2.53x 3.88x Net debt / EBITDA 2.12x 3.27x Post-IPO net debt / EBITDA

  • 1.02x
  • Total liabilities / Shareholders' equity

0.59x 1.12x

Debt Profi file le

Debt Maturity

24

Summary Balanc nce Sheet

1 Does not consider (i) the exercise of the over-allotment option (greenshoe), and (ii) the expenses related to the IPO