Chair's Address and CEO Presentation to 2024 Annual Meeting

PO Box 6159
Wellington 6141
New Zealand
DX SP21009
Level 6
57 Courtenay Place
Te Aro
Wellington
Telephone: 04 384-9734
Email: cmc@colmotor.co.nz
Website: www.colmotor.co.nz




CHAIR’S ADDRESS TO THE 106
th
ANNUAL MEETING


Ladies and Gentlemen,

In this address I want to discuss our results for the 30 June 2024 financial year, take a
high-level look at the current state of the New Zealand automotive market and then
where we see our prospects in a market environment that has significantly changed.


Financial results
CMC Shareholders have enjoyed an extended period of exceptional returns over the
last decade or even longer. This coincided with the new vehicle market posting year-
over-year growth as the favourable trading environment continued. At times this was
boosted by artificial intervention and stimulus as a result of Government policy, but it
mainly arose from the Company having leading market brands and a continuing
pipeline of new models coming to market at the right times.

Our dealerships continued to grow as they focussed on increasing customer
satisfaction across all our product ranges and in our parts and service support
business. We certainly made the most of this positive trading environment and as you
well know, it culminated in a record profit in the 2022 financial year when light
vehicles, trucks and tractors all fired at once. That $33.3m Trading Profit and record
dividend payout was the reward Shareholders were delivered for their support and
loyalty.

That trading environment has changed significantly since then and we are being
challenged, especially in the tractor business where an economic downturn always
results in farmers misplacing their wallets. The pullback was also seen in the light
vehicle dealerships and we have recently seen some softening in our truck
operations, although they have continued to process good volume on a monthly basis.

The 2024 light vehicle market year-to-date is down 16.7% on the prior year. This at a
time when new vehicle product availability has freed up considerably and many
importers have seen record inventory coming to market. There is certainly stressed
selling activity happening in the industry and this behaviour has a cascading impact
on the market, particularly the new vehicle industry.

By the way, that near 17% decline I mentioned in the current calendar year follows the
2023 year being down 9.5%. These are not only seismic declines in volume but also
a complete reversal of conditions experienced over the prior decade.

As an interesting aside, within this general market decline the Ford Ranger, Everest
and Transit were some of the very few vehicles to post stronger sales than the prior
year. While driven to a degree by rental vehicle sales, it has also been driven by our
committed dealer group.

This stressed vehicle environment makes it tough for our dealers to navigate their way
through increased inventory levels, the market share expectations of our franchise
partners and having to reduce their cost bases to a new ’normal’ in terms of market
volume.

In the tractor business it is manifestly apparent that high interest rates have smashed
demand for new tractors and equipment to a level not seen for many years. The
market essentially halved overnight for us in the deep south. Even though the dairy
payout forecast is favourable, the negative state of the red meat sector, massive
increases in on-farm costs and the spectre of continuing interest rate burdens has
seen the lights turned out by many of Agricentre’s traditional customers.

Agricentre is continuing to secure its share and more of the limited action that is out
there and I thank Grant Price and his Team for this effort. Unfortunately for them the
reality is they have been swimming against a significant tide but it is a tide that will
eventually turn.

So, within this rather bleak portrayal of the market environment the financial result for
2024, at a Trading Profit of $17.9m and the resultant total dividend of 35cps, is
possibly better than expected. My description of the market is very much focused on
the back end of the financial year, as we traded reasonably strongly in the first six
months to 31 December 2023. As of now we are challenged by the environment I
have outlined to you.

Our safest course of action, which we have been following for some time, is to re-build
our profitability based on the market we see in front of us; not wait until the market
comes right or returns to normal. This is our new normal and we must deliver
satisfactory shareholder returns based on what is in front of us.

Our dealerships reacted quickly and are well on the new journey but not all are not
there yet.

Our thanks and appreciation for all that has been achieved is directed to Alex and his
Team, especially our Dealer Principals and their management teams for again
delivering in an increasingly challenging environment.


Property
As the economy tightened, we made the prudent decision to slow and defer some of
our property developments. We have maintained progress on the very important
initiatives around Southpac Trucks in the lower north Island and the facility re-build in
Masterton, which is essentially an all new look for that dealership.

We are diligently progressing our enhanced representation options for Ford in
Rangiora, a significant growth corridor north-west of Christchurch.

Governance
Last year the Shareholders’ Association gave us a ‘fail’ rating in some areas of our
governance disclosures.

First and foremost, I want to re-iterate that we know our Shareholders expect the
Board and Management to remain clearly focused on the financial strength and
performance of the Company. This is to ensure it continues to provide the solid
returns that underpin the dividend stream you expect from your investment.

I made a commitment at our last Annual Meeting that the Board would review our
disclosures and public facing material and this has been done. We have broadened
the website disclosures in a number of areas and of course this year is our first year
reporting on Climate Related Disclosures. I want to acknowledge the extensive work
done in the CRD area over the past two years that has been led by June Gibbons.
This has enabled the Company to be fully compliant in terms of its reporting
obligations under the CRD regime. It has been a huge journey, so thank you June
and the Group Office team.

We have no doubt that climate change is a real issue. Equally, I am confident the
work we carry out in our annual risk reviews was meeting the need to identify the risks
to our business, be they short, medium or long term, as this is not new to us. The
team’s work has been thorough and I have to say that there are elements of the
process and their detailed requirements that were onerous and bordered on being of
no real benefit to anyone – company, shareholders or stakeholders in general. We
can only hope that common sense prevails and the reporting requirements are
thoroughly reviewed and re-focused on only ‘stuff’ that actually matters. There is no
benefit to CMC Shareholders to add cost for no material benefit.


Near Term Outlook
I’ve given you a graphic and purposely negative picture of the trading environment our
businesses have experienced and continue to face. The six months we are currently
in remains ‘tough’ as we sort our way through cost reduction requirements across the
Group. This is an over-supplied so over-competitive market, where some of our
competition are ‘moving the metal’ just to keep cash flowing. The market and the
economy remain flat at best. At our core, CMC is a ‘new vehicle’ retail and service
business that rides the wave of consumer confidence and discretionary income.

Our view of the forward market is dominated by the immediate economic issues we
can all see. New Zealand should not underestimate the potential disruptive influences
that lurk off-shore and the potential for further supply chain disruption from global
conflicts. These could impact exchange rates and oil prices at any time – one gets
the feeling we are inches from that in the Middle East.

So here are some comments you won’t hear from me today:
- green shoots
- I think the worst is over
- lower interest rates will solve all our challenges

We could catastrophise on many fronts but I prefer to go back to what I said earlier.
We must continue to be the architects of our forward performance and it is up to us to
make the changes necessary to create the success needed to reward our
Shareholders. We have a strong product and brand portfolio and we have new
product to bring to market. These basics have held us in good stead over the years
and I know this is what Alex and the Team focus on.

Let me finish by passing on my personal thanks to our Board and to Alex and his
Management Team across the Group. Most importantly, thank you also to our
Shareholders and commercial partners for your support and continuing loyalty to the
Company at all levels.


A J Waugh
Chair
The Colonial Motor Company Limited

8 November 2024

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106
th
Annual General
Meeting 2024

Agenda
1.Welcome and Introduction
2.Address from the Chair
3.Resolutions
4.Presentation from the CEO/GM:PPT
5.General Business
6.Light lunch and refreshments

Report from the Group
Chief Executive
Alex Gibbons
106
th
Annual Meeting
8 November 2024

Thank you
Despite the trading profit being down this year, in what can only be
described as a tough trading market, our people have rolled up their
sleeves. This has resulted in dealerships maintaining, or in many
instances growing, their relative market share.
Our people are committed, loyal and highly capable and we thank
them all for their contributions as we forge ahead this year.
We couldn’t achieve what we do without our brand partners. CMC
continues to stand side-by-side with you.

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5,000
10,000
15,000
20,000
25,000
198419841985198619871988198919901991199219931994199519951996199719981999200020012002200320042005200620062007200820092010201120122013201420152016201720172018201920202021202220232024
Monthly New Vehicle Registrations since 1984
Deregulation
(Assembly & Used
Imports)
GFC
Pandemic, lockdowns
& government
regulation
Source: MIA Total Industry Registrations

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
01/2003/2005/2007/2009/2011/2001/2103/2105/2107/2109/2111/2101/2203/2205/2207/2209/2211/2201/2303/2305/2307/2309/2311/2301/2403/2405/2407/2409/24
Monthly New Vehicle Registrations Mix: Passenger and SUV
Passenger/SUV: Battery ElectricPassenger/SUV: Hybrid, PHEVPassenger/SUV: ICE
Source: MIA Total Industry Registrations

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
01/2003/2005/2007/2009/2011/2001/2103/2105/2107/2109/2111/2101/2203/2205/2207/2209/2211/2201/2303/2305/2307/2309/2311/2301/2403/2405/2407/2409/24
Monthly New Vehicle Registrations Mix: Light Commercial
Light Commercial: Hybrid, PHEV, Battery ElectricLightCommercial: ICE
Source: MIA Total Industry Registrations

Ford backing
electric

As the light vehicle market
pivots towards electric, Ford
New Zealand is right on time
with their new models.
CMC has invested
significantly in Ford facilities
and our people across New
Zealand. It’s great to see
popular models arriving in
their various next-generation
electrified forms.

Mazda
Mazda continues to focus
on refreshing their SUV
lineup.
The CX80 is the latest addition,
available with both Hybrid and
PHEV powertrains.

Heavy Duty
Trucks
It is an important time for Southpac
as the team prepares for the arrival of
Next Generation DAF.
We can’t say much about the new
model, other than it’s an ‘all-new’
state-of-the-art truck in every respect.
Southpac will be unveiling further
details as 2025 unfolds.
Model changes on this scale are
exciting but also disruptive. In the
short-term, Southpac will maintain
elevated inventory to support
customers while the factory is re-
tooled ahead of the new model’s
launch.

Light Duty Trucks
Our JAC journey continues to build
momentum, albeit with a long
road ahead.
The work of our distribution company,
NZ Automotive Limited (NZAL), over
the last year was focused on
implementing the critical building
blocks; vehicle specifications,
compliance, testing and establishing a
sales and service network.
2025 will mark an important milestone
as the Diesel Automatic range arrives
to support the existing EVs.
We know it will take NZAL and dealers
several years to establish a foothold in
the light-duty truck market. However,
we continue to see this market as an
important strategic investment
for CMC.

Major Capital Projects
CMC continues to
support and invest in
long-standing,
strategic partnerships,
customers and people
across the Group.
However, trading
conditions are tough
and a prudent
approach is required to
navigate today's
market.
Palmerston North
Greenfields property development and the
heavy truck facility are progressing.
South Auckland
Review underway to determine the future
long-term facility requirements to support
franchise partners in the region.
Avon City Motors
The dealership requires a larger premises in
Rangiora to support growing Ford sales, used
vehicles and commercial servicing.
Fagan Motors
The dealership showroom rebuild is
on track for completion in early 2025.
Ruahine Motors
Dealership rebuild is on hold
as we navigate current market
conditions.
Dunedin City Motors
A building extension has been added to support Ford
parts in the region, in addition to upgrading the Mazda
showroom’s exterior.
Nelson
CMC acquired a dealership facility in
a strategically important location.
The property is currently leased.

Industry
•Registrations in decline
•Oversupply
•New entrants
•Competition driving down margins
•Clean Car Standard
•Hybrid/PHEV favoured over BEV
CMC Dealers today
•Sales volumes stable, ahead of the market
•Robust processes, training and management
•Invested in first-class dealership facilities
•Brand partners launching new models
•Competition driving downmargins
•Returned to higher inventory costs
CMC Dealer outlook
•Perform well relative to the market
•Margins will remain under pressure
•Lower interest rateswill lessen inventory
costs, but the cost of doing business remains
high
•Well positioned tocapitalise’when’ the
market recovers
•Too early to determine where the market is
heading
New Vehicles

Industry
•Market volumes stable
•Market disruptions shift vehicle values rapidly
•Vehicle margins returned to normal levels
•Lower value used vehicles in higher demand
•Influx of 'near new' used vehicles
•Clean Car Standard
CMC Dealers today
•Sales volumes increased, ahead of the market
•Internal focus on systems and processes
•Used operationssupport the new vehicle
franchise/s
•Limited exposure to lower value used vehicles
•Higher exposure to mid/high value used
vehicles
CMC Dealer outlook
•Perform well relative to the market
•Continue supporting existing franchise car
dealers, rather than looking to establish a
standalone used vehicle brand
•Increased investment available to dealers to
grow their capability and operations
Used Vehicles

Industry
•Industry and market challenged
•Market volume decline
•Oversupply
•New entrants
•Shift away from high HP tractors
•Poor used tractor disciplines
CMC Dealers today
•Labour of love at present
•Maintaining market share
•Competition driving down margins
•Realigning inventory to meet changing
demand
•High inventory costs
CMC Dealer outlook
•Awaiting a rebound in the market
•Focus on supporting customers, who are also
doing it tough
•Realigning cost structures and inventory mix
to meet the market
Tractors

Industry
•Market volumes stable but forward outlook
cooling
•Lingering backlog of trucks awaiting
bodybuilding
CMC Dealers today
•Sales volumes stable, strong market share
•Operating sub-optimally to clear the backlog
•Starting to feel the impact of the slower
economy
•High inventory costs
CMC Dealer outlook
•Perform well relative to the market, with
potential disruption around the DAF model
transition
•Short-term inventory requirements remain
elevated
•Cooling market over the course of this year
Heavy Trucks

Data Analytics & Reporting
Over the last 18 months CMC has been quietly enhancing our in-
house analytical tools, digital reporting and knowledge sharing.
This has resulted in our management teams having faster
access to in-depth department analysis, improving their ability
to identify opportunities and share them with frontline teams.
This, coupled with our use of external industry experts, is
working to ensure our dealers stay ahead.

Internal Focus
Continue aligning dealership cost structures to the market
Grow digital capabilities & data analytics to give our dealers the edge
Build on our used vehicle momentum
Brand Focus
Get behind next generation vehicles and back our long-term partners
to succeed
Build a strong foundation for future success with Light-Duty-Trucks
Prepare for the launch of the next generation DAF
External Focus
Continue delivering a first-class ‘local’ customer experience
Drive efficiency and productivity to deliver long-term returns for
shareholders

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200
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800
1,000
1,200
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1,800
2,000
DieselPetrolLPGElectricity Used
CMC Group Emissions FY24 TCO2e
Climate Related
Disclosures
CMC's first climate statement was
published in the 2024 Annual Report.
Climate risks are integrated into our
existing strategic risk framework.
Our decentralised business model
supports adaptation to potential
physical impacts. However the core
industries we operate in are exposed
to regulatory and social impacts.
We continue to work with our
franchise partners, suppliers and the
industry to find opportunities to
reduce our impacts.

Thank you
On behalf of the Management Team, we would like to thank
our Shareholders for their continued support and long-term
focus.
It’s a tough market out there, particularly for new vehicle
dealers, but CMC is open for business and we are ready to
tackle the challenges this year will bring.