ACC — Investor Presentation 2017

Dec 1, 2017

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亞洲水泥股份有限公司 Asia Cement Corporation Stock code: 1102 TT

IR presentation

Nov 2017

Disclaimer

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This presentation contains forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. Actual results may differ materially from those expressed or implied by these forward-looking statements. Because of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation might not occur in the way we expect, or at all. You should not place undue reliance on any forward-looking information.

In preparing the information herein, ACC have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to ACC or which was otherwise reviewed by ACC. Neither ACC nor its advisors have made any representation or warranty as to the accuracy or completeness of such information and nor do they assume any undertaking to supplement such information as further information becomes available or in light of changing circumstances. None of ACC, nor any of their respective affiliates, advisers or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. Neither this presentation nor any of its contents may be reproduced to a third party without the prior written consent of ACC.

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Table of Contents

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 Company snapshot

• What’s New

• PRC market overview

• Taiwan market overview

• CSR achievement

• Dividend Policy

• Financials

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Company Snapshot

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Company Snapshot

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Market Cap: US$ 3.0 billion (as of 14[th] Nov 2017)

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• Establish in March 1957
Taiwan •
The second-largest cement player
(1102 TT) • Cement capacity: 5.0 million tonnes annually
• Listing in HKEx since May 2008
•
Top 12 [th] clinker producer
China
Asia Cement •
Strategic location in Central and Western China
(743 HK)
•
Cement capacity: 33.0 million tonnes annually
•
Consolidated entities: cement value-chain
business, IPP, stainless steel, transportation.
Investment
•
Equity investees: mainly FENC (1402 TT) and
U-Ming Marine (2606 TT)
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Cross-holding in Far Eastern Group

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• Profit contribution from equity-held investees have bottomed out as fundamentals recovered.

NT$ million

Eit	Incor-		Stk	Holdins	Market	Equity Income	Equity Income	Equity Income
2004 Asia Cement (China) Holdings Corp. 743 HK 67.7% 11,650 1997 Far EasTone Telecommunications Ltd. 4904 TT 1.0% 2,204 1992 Far Eastern International Bank 2845 TT 2.4% 700 1975 Oriental Union Chemical Corp. 1710 TT 7.2% 1,901 quy Hold(3) porated Year Investees oc code g (1) Value(2)						2015	2016	1~3Q17
ˇ 1968 U-Ming Marine Transport Corp. 2606 TT 39.3% 11,610						298 (345) 236
1967 Far Eastern Department Stores Ltd. 2903 TT 5.7% 1,189
ˇ 1949 Far Eastern New Century Corp. 1402 TT 23.8% 32,577						1,733 1,347 1,392
Others (unlisted investees)						955 347 259
Total 61,832						2,986 1,350 1,887

Note1: Asia Cement comprehensively holds 72.0% of Asia Cement(China) Holdings. (100%-owned AC(Singapore) holds a 4.1% stake and Asia Engineering Pte. holds a 0.2% stake of Asia Cement(China)) Note2: The market value is calculated on the basis of ACC's holding shares and the equity's closing price at 14 Nov 2017.

Note3: Since 1 January 2013, Asia Cement (China) Holdings Corp. and most unlisted investees are classified as the consolidated entities.

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What’s New

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What’s New?

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• Asia Cement recorded a NT$ 3,778 million Net Profit in 9M17, while NT$1,925m (NT$0.61/sh) was recorded in 3Q17, representing a 106% YoY growth. Both the operating profits and equity income improved significantly thanks to the fundamental recovery.

• For Asia Cement China, the 26% yoy growth in cement ASP covered the coal cost hike and lifted the gross margin to 20%. Upward momentum in both ASP and sales volume continues.

• In 2017, scheduled production halts effectively restrains the cement output in the weak season, relieves the inventory pressure and elevates the ASPs.

AC(China): Cement GP/t

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AC(China): Regional P.O42.5 Price & Inventory Levels

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Unit: RMB / t ; %

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Hubei (Wuhan) Sichuan (Chengdu)
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Jiangxi (Nanchang)

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Jiangsu (Nanjing)
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Source: Digit Cement

AC(China) : 3Q17 Operating data points

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RMB / t
m tonnes %
RMC:RMB / mm [3]
ASP RMC:mm [3] Shipment Gross Margin
500 10 40%
3Q16 3Q17 3Q16
395 3Q16 30%
400 8 7.3 30%
341 7.0 3Q17
3Q17 20% 21%
300 269 266 6 20%
14%
217 12%
200 163 4 10%
100 2 0%
0.4 0.5 0.3 0.2
-4%
0 0 -10%
Cement Clinker RMC Cement Clinker RMC Cement Clinker RMC
Note: VAT included
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Cement Product by Region

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ASP
RMB / t
3Q16 3Q17
350
292
284
300 276
249
250 222 228
203 210
200
150
100
50
0
Jiangxi Hubei Sichuan Jiangsu
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Shipment

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m tonnes
3.5 3Q16 3Q17
2.9
3.0 2.7
2.5
2.1
2.0 1.8 1.7 1.7
1.5
1.0 0.7 0.7
0.5
0.0
Jiangxi Hubei Sichuan Jiangsu
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AC(China) : 9M17 Operating data points

RMB / t m tonnes RMC:RMB / mm[3] RMC:mm[3]

%

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Note: VAT included

Cement Product by Region

RMB / t

m tonnes

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PRC Market Overview

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China Cement Market: From Stimulus to Reform

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2016-2018:

2009-2011:

2012-2015:

Demand increase slowed down and oversupply weakened ASP

“New Normal Economy” urges Supply-Side Reform and industry evolution.

Demand boosted by R$4 trillion stimulus

13-5 period demand catalysts:

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• Infrastructure investment remains strong

• PPP(Public-Private-Partnership) projects continued to increase in size and accelerate the execution

• Property destocking may lead a new cycle of construction new starts

Supply control in both top-down & bottom-up ways

• Policy-driven tightening: higher requirements on eco-friendly, energy efficiency and quality control.

• Industry consolidation & scheduled production halt

Source: Ministry of Industry and Information Technology(MIIT), National Development and Reform Commission(NDRC), China Cement Association(CCA)

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China Cement Supply-side Reform: 2017~2020

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No more new capacity through: Close the loophole of 1. Replacement among different parties new capacity addition

1. Garbage co-processing projects

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Phrase out capacities by comprehensive standards

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1. Retire 393 mt clinker capacity by 2020 2. Carry out pilot program to subsidize capacity out, target 80% UT rate

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Schedule production halt to restrain output

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1. Applied nationwide since 2017

2. Effectiveness hangs on peers consensus and local government supervision

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Encourage consolidation: M&A, capacity swap, cross holding, etc

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Consolidation target:

1. Reduce 25% of cement companies 2. Top 2 dominate 80% of regional market

Source: China Cement Association “De-capacity action plan”, ”Cement industry 13[th] 5 year plan”, PRC State Council “Guiding policies to facilitate structural upgrade of building materials industry”

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AC(China): Survival of the Fittest

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Stricter regulations on air-pollutant emission

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PC32.5(R) cement cancellation, nationwide safety inspection

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Tiered electricity pricing; extra cost for the inefficient

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Retire inefficient & ≦ 2500 t/d clinker production lines

Strength of AC(China)

• De-NOx equipment fully installed

• 80% sales are high-grade cement

• Superior to regulatory requirements in energy efficiency and GHS emission

• 90% UT rate and no clinker line ≦ 2500 t/d

Threaten to Others

• Unlimited fines & compulsory suspension for violation of environmental law

• Higher reliance on low-grade products and less self-sufficient clinker supply

• Up to RMB 0.4/kw extra electricity cost

• Rectification cost too high to stay

Source: National Development and Reform Commission(NDRC),

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AC(China): Foreseeable Solid Regional Demand

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Yangtze River Economic Belt

Rise of Metropolitan Regions

Jiangxi ： Gan-Jiang New District

Hubei & Sichuan: “National Central Cities” and international transportation hub

Source: National & Provincial Development and Reform Commission

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AC(China) Strategy: to Dominate Locally

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2017: Capacity Rank top 10 nationwide

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Capacity ： 11 mt / year
Capacity ： 14 mt / year
Chengdu - Sichuan
Jiujiang - Jiangxi
40%
45%
35% 31% 32% 40% 38% 38%
28% 35% 35%
30%
35%
25% 21% 30%
20%
25%
2013 2014 2015 2016
2013 2014 2015 2016
Capacity ： 8 mt / year
Nanchang - Jiangxi
Wuhan - Hubei
40%
40% 35%
35% 30% 27% 26% 26% 26%
30% 27% 27% 27% 27% 25%
25% 20%
2013 2014 2015 2016
20%
2013 2014 2015 2016
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Source: ACC(C) annual report

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Taiwan Market Overview

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TW Cement Market: Sophisticated and Highly Concentrated

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Mature and net export cement market

Oligopoly keep ASP steady

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91.58% Anti-dumping tariff imposed on cement products from China 2011/5/30~2022/2/19

• Demand bottomed in 2016 due to private sector

  • ACC & TCC dominate 75% of production

• weakness.

• Catalyst: NT$420 billion infrastructure projects from

• ASP stays healthy since anti-dumping tariff blocked import from China

• 2018~2021

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Source: Taiwan Cement Manufacturers’ Association, TCMA

ACC: 2[nd] Largest Cement Player in Taiwan

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• ACC: Cement & Clinker Sales Volume

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()
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• Not including trading sales, which amounts to 0.1mt in 1~3Q17

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•
Domestic market shares
30%
28%
28% 27% 27% 27%
26%
26%
24%
24%
22%
20%
2012 2013 2014 2015 2016 1-3Q17
•
Export market coverage
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CSR Achievement

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ACC: 1[st] -tier Partner in Building a Sustainable Home

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Awards/ Recognition

• Taiwan Corporate Sustainability Awards : Top 50, Golden Medal of non-tech industrials

• Scored B in Carbon Disclosure Project (CDP), top of peers in Greater China region

• 6 times award winner of Excellent Company in GHG Reduction

• Listed in “Taiwan Corporate Governance 100 Index ” and “Taiwan High Salary 100 Index”

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Commitment

• Go green : take part in Circular Economy to process and utilize urban & industrial waste

• Go digital and Go smart : develop Cement 4.0 project to improve the efficiency in mining, manufacturing, maintenance, and warehouse management.

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ACC: Pioneer in Safe and Clean Mining

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Dust Control
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Ensure air quality by enclosed belt conveyor and water sprinkling in the quarry site

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Noise Reduction Upgrade conveyor, 24x7 monitoring to ensure low noise exposure

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Blast Vibration Management Superior to global regulatory requirements (≦0.15cm/sec)

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Slope Stability Enhancement Install rockfall barrier, conduct geological assessment prior to the law

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Soil and Water Conservation Integrate concave mining, drainage system, detention pond to prevent landslide

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Replantation

“Sustainable Mining Paragon” recognized by APEC; cultivate indigenous plants and restore the eco-system

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Dividend & Financials

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Steady Payout with Enjoyable Yields

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Payout ratio(%)
120%
100%
98% 100% 100% 99%
90%
80%
81% 83% 80% 84% 81%
60%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
4.0
NT$/share
Total dividend
Cash dividend
3.0
Stock dividend
3.0
2.6
2.2
2.1 2.1 2.1
2.0
1.9
2.0
1.1
2.2 0.9
1.0 2.4 2.3
1.8 1.8 1.9 1.7 1.8
1.1
0.9
0.0
8%
Dividend yield(%)
6%
6.4%
6.2%
5.9%
5.6%
5.4%
4% 4.7% 4.8%
4.3%
3.1% 3.3%
2%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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• Payout guide: >= 80%

*Dividend yield= Cash dividend / Last 12-month average share price

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Operating Performance of 3Q17 (IFRS-consolidated basis)

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NT$ million
	3Q17 3Q16	YoY	1-3Q17 1-3Q16	YoY
Operating revenue Operating cost Gross profit	16,538 15,037 10% 45,349 44,104 14,055 12,966 8% 39,387 38,443 2,484 2,071 20% 5,962 5,662 659 591 11% 1,763 1,624 1,825 1,480 23% 4,197 4,039 815 (101) 1,032 (714) 1,085 375 190% 1,887 652 (405) (384) (1,356) (1,199) 15 4 321 393 81 49 183 203 (15) (142) (356) (437) 54 (3) 353 (326) 2,639 1,379 5,229 3,325 405 208 900 623 2,235 1,170 91% 4,329 2,702			3% 2% 5% 9% 4% 60%
Operating expenses Operating Income
Non-operating Income (net) Equity Income Finance costs Dividend income Gain (loss) on valuation of investment property Gain (loss) on exchange Others Pre tax Income Tax Net income
Profit Attributable to Owners of Parent Profit Attributable to Non-controlling interests	1,925 937 106% 3,778 2,342 309 234 552 360			61%
EPS (NT$/share)	0.61 0.30 106% 1.20 0.75			61%
Gross margin	15.0% 13.8% 13.1% 12.8%
Operating margin	11.0% 9.8% 9.3% 9.2%

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Performance by Segments of 2Q17 (IFRS-consolidated basis)

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Note: Cement revenue= Taiwan cement operation(cement, RMC and other downstream value chain) + China cement operation

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NT$ million
3Q17 3Q16 YoY 1-3Q17 1-3Q16 YoY
Operating revenue 16,538 15,037 10% 45,349 44,104 3%
Cement 11,907 11,196 6% 34,011 33,469 2%
IPP 2,096 1,818 15% 4,604 4,598 0%
Stainless Steel 1,643 1,236 33% 4,459 3,664 22%
Others 892 787 13% 2,275 2,373 -4%
Operating cost 14,055 12,966 8% 39,387 38,443 2%
Gross profit 2,484 2,071 20% 5,962 5,662 5%
Operating expenses 659 591 11% 1,763 1,624 9%
Operating Income 1,825 1,480 23% 4,197 4,039 4%
Cement 1,063 682 56% 2,639 2,103 26%
IPP 490 534 -8% 851 1,158 -27%
Stainless Steel 20 62 -68% 137 177 -23%
Others 252 203 25% 571 601 -5%
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1~3Q17 Revenue 1~3Q17 Operating Income
Power
10%
Stainless
Cement
Steel
75%
10%
Others
5%
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Power
20%
Stainless
Steel
Cement
3%
63% Others
14%
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Summary of Balance Sheets (IFRS-consolidated basis)

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NT$ million
	3Q17	2016
Current Assets	47,912	42,149
Cash & Cash Equivalents	7,620	7,450
Short Term Investment	11,367	9,182
Others	28,925	25,517
Non-Current Assets	198,340	196,322
Long-term Investment	84,799	80,698
Fixed Assets	90,457	94,114
Intangible Assets	4,731	4,867
Other Assets	18,353	16,643
Total Assets	246,252	238,471
Current Liabilities	53,007	40,858
Short-term Debts	44,357	31,758
Others	8,650	9,099
Non-Current Liabilities	49,217	56,950
Bonds Payable	10,000	14,095
Bank Loans	29,370	32,843
Others	9,847	10,013
Total Liabilities	102,224	97,808
Total Shareholders’ Equity	144,028	140,663
Book value/share (NT$)	37.6	36.5
ROE	4.0%	3.1%
Net Gearing Ratio	51.3%	50.6%

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72% owned subsidiary AC(China): P&L

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RMB million
	3Q17	3Q16	YoY		1~3Q17	1~3Q16	YoY
Operating revenue	1,830	1,530	20%		5,189	4,339	20%
Operating cost	1,435	1,249	15%		4,176	3,604	16%
Gross Profit	395	281	41%		1,014	735	38%
Other net income/(loss)	4	11	-65%		53	(9)	-702%
Selling&marketing costs	103	112	-7%		293	320	-8%
Administative expenses	67	66	2%		195	204	-4%
Operating income	228	115	99%		578	202	186%
Finance costs	59	56			214	154
Shares of results of jointly controlled entities	1	(0)			2	2
Pre tax Income	170	58			365	50
Tax	61	30			165	82
Net Income	109	28			200	(33)
Equity shareholders of the company	104	24			185	(41)
Minority interests	6	4			15	8
EPS (RMB/share)	0.07	0.02			0.12	(0.03)
Gross margin	21.6%	18.3%			19.5%	16.9%
Operating margin	12.5%	7.5%			11.1%	4.7%
Net margin	6.0%	1.8%			3.9%	-0.8%
EBITDA margin	24.6%	21.7%			23.7%	19.8%

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Capacity in Jiangxi, China

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Capacity in Hualien, Taiwan Capacity in Jiangxi, China

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Thank you

ir@acc.com.tw http:// www.acc.com.tw

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Q&A: Mining Concerns

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Videos: ACC Eco-friendly Achievements

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Download: ACC Financials

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