ACC — Investor Presentation 2018

Nov 15, 2018

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亞洲水泥股份有限公司 Asia Cement Corporation

Stock code: 1102 TT

IR presentation

Nov 2018

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

• Dividend Policy

• Financials

• CSR achievement

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Company Snapshot

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Company Snapshot

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Market Cap: US$ 3.6 bn / NT$112.4 bn (as of 14 Nov 2018)

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• Establish in March 1957
ACC •
The second-largest cement player
Taiwan •
Cement capacity: 5.0 million tonnes annually
•
Top 10 [th] clinker producer
ACC • Strategic location in Central and Western China
Asia Cement
China •
Cement capacity: 33.0 million tonnes annually
(1102 TT)
(743 HK) •
Listing in HKEx since May 2008
•
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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Investment Portfolio 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	Equity Income
quy Hold(3)	porated Year	Investees	oc code	g (1)	Value(2)	2016	2017	3Q18	1-3Q18
2004 Asia Cement (China) Holdings Corp. 743 HK 67.7% 28,927 1997 Far EasTone Telecommunications Ltd. 4904 TT 1.0% 2,266 1992 Far Eastern International Bank 2845 TT 2.4% 774 1975 Oriental Union Chemical Corp. 1710 TT 7.2% 1,597
ˇ 1968 U-Ming Marine Transport Corp. 2606 TT 39.3% 9,893						(345) 392 294 576
1967 Far Eastern Department Stores Ltd. 2903 TT 5.7% 1,238
ˇ 1949 Far Eastern New Century Corp. 1402 TT 23.8% 39,980						1,347 1,694 686 2,196
Others (unlisted investees)						347 435 162 662
Total 84,674						1,350 2,522 1,142 3,434

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 2018. 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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Summary of 9M18 results (743 HK)

• The Net Profit attributable to owners of parent was RMB$ 1,598 in 9M18 . EPS was RMB$ 1.02/sh , representing a 762% yoy growth.

• ASP of cement products increased 47% yoy to RMB$ 339/t in 3Q18 and 42% yoy to RMB$ 325/t in 9M18 due to the disciplined supply and stable demand.

• Shipment of cement products increased 9% yoy to 7.7mt in 3Q18 and 8% yoy to 21.4mt in 9M18 .

• GP/t of cement products increased to a record high RMB$ 133/t in 3Q18 from RMB$ 48/t in 3Q17, and RMB$ 123/t in 9M18 from RMB$ 44/t in 9M17 attributable to the increase in ASP.

Summary of 9M18 results (1102 TT)

• The Net Profit attributable to owners of parent was NT$ 3,072(+60% yoy) in 3Q18 and NT$ 9,298(+146% yoy) in 9M18. EPS was NT$ 0.98/sh in 3Q18 and NT$ 2.96/sh in 9M18.

• The Net Gearing ratio decreased to 41.0% in 9M18 from 47.7% in 2017.

• .

• The Cash flow from operation increased to NT$ 3,962mn

• The Book Value per share increased to NT$ 41.1/sh .

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

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Unit: RMB / t ; %

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Hubei (Wuhan)
Inventory Level Market Price
600 90
550
80
500
70
450
400 60
350
50
300
40
250
200 30
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Sichuan (Chengdu)
Inventory Level Market Price
600 90
550
80
500
70
450
400 60
350
50
300
40
250
200 30
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Jiangxi (Nanchang)

Jiangsu (Nanjing)

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Inventory Level Market Price
600 90
550
80
500
70
450
400 60
350
50
300
40
250
200 30
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Inventory Level Market Price
600 90
550
80
500
70
450
400 60
350
50
300
40
250
200 30
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Source: Digit Cement

AC(China) : 3Q18 Operating data points

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RMB / t m tonnes
RMC:RMB / mm [3 ] ASP RMC:mm [3 ] Shipment Gross Margin
435 3Q17 3Q18
3Q17 3Q18 3Q17 3Q18
50%
339 342 337
7.7 39%
7.0
230 228 30%
21%
13%
0.5 0.3 0.2 0.4
Cement Clinker RMC Cement Clinker RMC -4%
Cement Clinker RMC
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Note: Net of VAT (16% since May 2018)

Cement Product by Region

RMB / t

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ASP
3Q17 3Q18
360
328 348 340
243 236 250
213
Jiangxi Hubei Sichuan Jiangsu
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Shipment

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m tonnes
3Q17 3Q18
2.9 3.0
2.2
1.7 1.8 1.7
0.7 0.7
Jiangxi Hubei Sichuan Jiangsu
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AC(China) : 9M18 Operating data points

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RMB / t RMC:RMB / mm [3 ] ASP m tonnes RMC:mm [3 ] Shipment Gross Margin
9M17 9M18
9M17 9M18 419 9M17 9M18
21.4
325 324 19.8 42%
303 38%
228
214
22%
19%
13%
1.5 1.2 0.7 0.9 1%
Cement Clinker RMC Cement Clinker RMC Cement Clinker RMC
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Note: Net of VAT (16% since May 2018)

Cement Product by Region

RMB / t

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ASP
9M17 9M18
335 328 341
312
246 244
215 225
Jiangxi Hubei Sichuan Jiangsu
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m tonnes Shipment
9M17 9M18
8.0
7.6
6.5
4.9 4.9 5.1
2.1 1.9
Jiangxi Hubei Sichuan Jiangsu
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PRC Market Overview

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China Cement Demand: The New Normal

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2016-2020:

2009-2011: Demand boosted by R$4 trillion stimulus

2012-2015:

Demand increase slowed down and oversupply weakened ASP

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

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m tonnes
3,000 Cement Production
2,432 [2,476 ]
2,500 2,348 2,403 2,316
2,063 [2,184 ]
2,000 1,868
1,629
1,500
1,000
500
0
2009 2010 2011 2012 2013 2014 2015 2016 2017
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2018 cement demand catalysts:

• Government plans to boost Infrastructure investment since 2H18.

• Property leading index house new starts growth remains strong and developer’s land acquiring sustain.

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:

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1. Stricter policy for clinker replacement

Control capacity 2. No more new license through waste

expansion co-processing projects.

Phrase out capacities by 1. Retire 393 mt clinker capacity by 2020 lifting industry standards 2. Raise UT rate from 70% to 80%

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• Schedule production halt to restrain output

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1. Applied nationwide since 2017 2. Temporary suspension as emergency measures for air pollution control

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1. M&A, cross holding, JVs

Encourage consolidation 2. Carry out pilot program to subsidize capacity out

Source: China Cement Association “De-capacity action plan”, ”Cement industry 13[th] five 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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Strength of AC(China)

• Superior to regulatory requirements in energy efficiency and GHG emission

• 85% sales are high-grade cement

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

• Sufficient limestone resources and reserves

2017 Energy Consumption and Emission

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ACC National Standard
130
120
110
109.7
100
102.8
90
93.1
80
70 79.1
60
50 56.4
40
Coal Power Energy Power Energy
consumption consumption consumption consumption consumption
of clinker of clinker of clinker of cement of cement
(kgce/t) (kWh/t) (kgce/t) (kWh/t) (kgce/t)
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Unit: mg/m3	SO2	NOX	Dust Particles
ACC Jiangxi 80 309 10
ACC Hubei 40 262 12
ACC Sichuan 13 294 14
National Standard 200 400 30
Special Limit 100 320 20
Ultra-low Standard 35 100 10

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AC(China): Foreseeable Solid Regional Demand

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Yangtze River Economic Belt

Rise of Metropolitan Regions

Gan Jiang New District

Hubei & Sichuan: International integrated transportation hub

Source: National & Provincial Development and Reform Commission

AC(China) Strategy: to Dominate Locally

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2017: Capacity Rank top 10 nationwide

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：
Capacity 11 mt / year
Chengdu - Sichuan
45% 40%
40%
35%
28% [31% 32% 31% ]
30%
25% 21%
20%
2013 2014 2015 2016 2017 1H18
：
Capacity 8 mt / year
Wuhan - Hubei
40%
35%
30% 27% 27% 27% 27%
26%
25%
25%
20%
2013 2014 2015 2016 2017 1H18
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：
Capacity 14 mt / year
Jiujiang - Jiangxi
45%
38% 38% [39% ]
40%
35% 35% 36%
35%
30%
25%
2013 2014 2015 2016 2017 1H18
Nanchang - Jiangxi
40%
35%
30% 27% 26% 26% 26% 29% 28%
25%
20%
2013 2014 2015 2016 2017 1H18
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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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NT$/tonne 91.58% Anti-dumping tariff
2,600 imposed on cement products from China
2011/5/30~2022/2/19
2,400
2,400
2,275
2,200
2,100
2,000
2009 2010 2011 2012 2013 2014 2015 2016 20171-3Q18
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• Demand bottomed in 2017 due to private sector weakness.

• Catalyst: NT$420 billion infrastructure budget from 2018~2021

• ACC & TCC dominate 75% of production

• ASP remains steady since anti-dumping tariff blocked import from China

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Source: Taiwan Cement Manufacturers’ Association, TCMA

ACC: 2[nd] Largest Cement Player in Taiwan

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• Domestic market shares

• ACC: Cement & Clinker Sales Volume

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• Export market coverage

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Dividend & Financials

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Steady Payout with Enjoyable Yields

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• Payout guide: >= 80%

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

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Operating Performance (IFRS-consolidated basis)

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NT$ million
3Q18 3Q17	YoY	1-3Q18 1-3Q17	YoY
Operating revenue 21,899 16,538 32% 60,908 45,349 34% Operating cost 16,301 14,055 16% 45,981 39,387 17% Gross profit 5,598 2,484 125% 14,927 5,962 150% Operating expenses 963 659 46% 2,568 1,763 46% Operating Income 4,635 1,825 154% 12,360 4,197 194% Non-operating Income (net) 778 815 2,892 1,032 Equity Income 1,142 1,085 5% 3,434 1,887 82% Finance costs (389) (405) (1,188) (1,356) Dividend income 5 15 431 321 Gain (loss) on valuation of investment property 24 81 76 183 Gain (loss) on exchange (84) (15) (12) (356) Others 81 54 151 353 Pre tax Income 5,413 2,639 15,252 5,229 Tax 1,292 405 3,350 900 Net income 4,121 2,235 84% 11,902 4,329 175%
Profit Attributable to Shareholders of Parent 3,072 1,925 60% 9,298 3,778 146% Profit Attributable to Non-controllinginterests 1,049 309 2,604 552
EPS (NT$/share) 0.98 0.61 60% 2.96 1.20 146%
Gross margin 25.6% 15.0% 24.5% 13.1%
Operating margin 21.2% 11.0% 20.3% 9.3%
EBITDA margin 27.2% 18.2% 26.3% 17.5%

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Performance by Segments (IFRS-consolidated basis)

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

NT$ million
	3Q18 3Q17	YoY		1-3Q18 1-3Q17	YoY
Operating revenue	21,899 16,538 32% 17,140 11,907 44% 2,134 2,096 2% 1,804 1,643 10% 821 892 -8% 16,301 14,055 16% 5,598 2,484 125% 963 659 46% 4,635 1,825 154% 3,833 1,063 261% 474 490 -3% 47 20 139% 281 252 12%			60,908 45,349 34% 47,514 34,011 40% 5,168 4,604 12% 5,734 4,459 29% 2,491 2,275 10% 45,981 39,387 17% 14,927 5,962 150% 2,568 1,763 46% 12,360 4,197 194% 10,309 2,639 291% 1,056 851 24% 180 137 32% 814 571 43%
Cement IPP Stainless Steel Others
Operating cost Gross profit
Operating expenses Operating Income
Cement IPP Stainless Steel Others

Revenue (1-3Q18)

Operating Income (1-3Q18)

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Summary of Balance Sheets and Cash Flow Statement (IFRS-consolidated basis)

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NT$ million

	3Q18	2017
Current Assets	77,814	50,263
Cash & Cash Equivalents	16,171	7,739
Short Term Investment	24,837	12,508
Others	36,806	30,015
Non-Current Assets	199,296	196,802
Long-term Investment	90,651	84,383
Fixed Assets	85,662	89,484
Intangible Assets	4,359	4,553
Other Assets Total Assets	18,624 277,110	18,382 247,064
Current Liabilities	67,123	53,948
Short-term Debts	56,306	43,733
Others	10,817	10,215
Non-Current Liabilities	51,921	47,320
Bonds Payable	12,171	10,000
Bank Loans	29,189	27,278
Others	10,562	10,042
Total Liabilities	119,044	101,268
Total Shareholders’ Equity	158,065	145,796
Book value/share (NT$)	41.1	37.9
ROE	9.1%	4.4%
Net Debt	56,657	60,763
Net Gearing Ratio	41.0%	47.7%

	NT$ million
		1-3Q18	1-3Q17
	CF from Operating activities	3,962	3,854
	CF from Investing activities	(8,531)	(5,419)
	CF from Financing activities	12,971	1,993
	Net change in cash	8,431	170
	Cash at beginning of period	7,739	7,450
	Cash at end of period	16,171	7,620

Note: Under the IFRS 9 applied since 2018, mutual fund investment has been classified as operating activities.

Note: Net gearing = Nebt debt / (total equity - minority interest)

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AC(China):Summary of P&L

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RMB million
	3Q18	3Q17	YoY		9M18	9M17	YoY
Operating revenue	2,943	1,830	61%		7,889	5,189	52%
Operating cost	1,808	1,435	26%		4,938	4,176	18%
Gross Profit	1,135	395	187%		2,951	1,014	191%
Other net income/(loss)	(26)	4			(8)	53
Selling&marketing costs	109	103			328	293
Administative expenses	72	67			217	195
Operating income	928	228	306%		2,398	578	315%
Finance costs	55	59			173	214
Shares of results of jointly controlled entities	2	1			6	2
Pre tax Income	875	170			2,230	365
Tax	213	61			578	165
Net Income	662	109	505%		1,652	200	725%
Profit Attributable to Owners of Parent	640	104	518%		1,598	185	762%
Minority interests	22	6			54	15
EPS (RMB/share)	0.41	0.07	518%		1.02	0.12	762%
Gross margin	38.6%	21.6%			37.4%	19.5%
Operating margin	31.5%	12.5%			30.4%	11.1%
Net margin	22.5%	6.0%			20.9%	3.9%
EBITDA margin	39.0%	24.6%			38.7%	23.7%

AC(China):Summary of Balance Sheets & Cash Flow

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RMB million	RMB million
9M18 1H18 2017	9M18 9M17
Current Assets 8,591 5,711 5,259 Inventories 814 716 728 Trade and other receivables 3,875 3,395 2,960 Bank balances and cash 3,289 974 940 Non-Current Assets 10,540 10,762 11,151 Property,Plant&Equipment 8,736 8,926 9,302 Total Assets 19,131 16,474 16,410 Current Liabilities 4,333 3,601 4,235 Borrowings- due within one year 3,028 2,476 2,991 Trade and other payables 1,085 937 902 Non-Current Liabilities 3,204 1,941 1,964 Borrowings- due after one year 3,142 1,886 1,912 Total Liabilities 7,537 5,542 6,200 Total Equity 11,594 10,932 10,210 Equity Attributable to Parent 11,266 10,626 9,910 Book Value(RMB/Share) 7.2 6.8 6.4	CF from Operating activities 1,533 511 CF from Investing activities (9) (70) CF from Financing activities 825 (301) Net change in cash 2,349 139 Cash at beginning of period 940 533 Cash at end of period 3,289 673
ROE 20.5% 19.2% 5.6% Net Gearing Ratio 25.5% 31.9% 40.0%
Debt 6,170 4,362 4,903 Net Debt 2,878 3,388 3,963

Note: Net gearing = Net debt / (total shareholders’ equity – minority interests)

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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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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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