ACC — Investor Presentation 2018

Jun 4, 2018

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亞洲水泥股份有限公司 Asia Cement Corporation

Stock code: 1102 TT

IR presentation

Jun 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$ 3.3 billion (as of 31 Mar 2018)

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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 10 [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% 14,477 1997 Far EasTone Telecommunications Ltd. 4904 TT 1.0% 2,423 1992 Far Eastern International Bank 2845 TT 2.4% 736 1975 Oriental Union Chemical Corp. 1710 TT 7.2% 1,926 Value(2) quy Hold(3) porated Year Investees oc code g (1)						2016	2017	1Q18
ˇ 1968 U-Ming Marine Transport Corp. 2606 TT 39.3% 11,723						(345) 392 83
1967 Far Eastern Department Stores Ltd. 2903 TT 5.7% 1,306
ˇ 1949 Far Eastern New Century Corp. 1402 TT 23.8% 33,412						1,347 1,694 510
Others (unlisted investees)						347 435 136
Total 66,003						1,350 2,522 729

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 31 Mar 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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• Asia Cement (China) realized a R$308m Net Profit in 1Q18, greatly improved compared with the R$70 million net loss in 1Q17.

• Asia Cement recorded a NT$ 5,469 million Net Profit in 2017, representing a 39% YoY growth. Both the profitability of cement business and the profit contribution from equity investees have improved significantly thanks to the fundamental recovery.

• The BOD proposed a cash dividend of NT$1.2/sh for AGM’s resolution, representing a 4.3% dividend yield and 89% payout based on the distributable earnings.

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

Jiangsu (Nanjing)

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Inventory Market Price
500 90
450 80
400 70
350 60
300 50
250 40
200 30
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Inventory 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) : 1Q18 Operating data points

RMB / t RMC:RMB / mm[3 ] Note: VAT included

m tonnes

RMC:mm

%

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Cement Product by Region

RMB / t

m tonnes

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AC(China) : 2017 Operating data points

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RMB / t m tonnes
RMC:RMB / mm [3 ] RMC:mm [3 ] % Gross Margin
ASP Shipment
FY16 FY17
500 35 30%
FY16 FY17 FY16 FY17
400 29.2 28.2 25% 24%
400 30 25%
348
20%
25
287 20% 18%
300 257
226 20 14%
15%
200 179 15
10%
10
100 4%
5 1.3 1.8 1.4 1.0 5%
0 0 0%
Cement Clinker RMC Cement Clinker RMC Cement Clinker RMC
Note: VAT included
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Note: VAT included

Cement Product by Region

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ASP
RMB / t
FY16 FY17
350
315
306
300 279 270
236
250 229 218 215
200
150
100
50
0
Jiangxi Hubei Sichuan Jiangsu
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Shipment

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m tonnes
12.0 10.9 FY16 FY17
10.6
10.0
8.6
7.6
8.0 7.2
6.8
6.0
4.0 2.9 2.9
2.0
0.0
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:

• Infrastructure investment remains strong.

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

• Property destocking continues, leading index house new starts 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: 2017~2020

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• Control capacity expansion

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1. Stricter policy for clinker replacement 2. No more new license through waste co-processing projects.

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• 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

40 60 80 100 120 140	103 56 110 79 93 Coal consumption of clinker (kgce/t) Power consumption of clinker (kWh/t) Energy consumption of clinker (kgce/t) Power consumption of cement (kWh/t) Energy consumption of cement (kgce/t) ACC National Standard	Unit: mg/m3	SO2	NOX	Dust Particles
		ACC Jiangxi 80 309 10
		National Limit 200 400 30
		ACC Hubei 40 262 12 ACC Sichuan 13 294 14
		National Limit 100 320 20

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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
：
Capacity 14 mt / year
Chengdu - Sichuan
Jiujiang - Jiangxi
40%
45%
35% 31% 32% 31% 40% 38% 38% 39%
30% 28% 35% 35%
35%
25%
21%
30%
20%
25%
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
：
Capacity 8 mt / year
Nanchang - Jiangxi
Wuhan - Hubei 40%
40% 35%
29%
35% 30% 27%
26% 26% 26%
30% 27% 27% 27% 27% 26% 25%
25% 20%
2013 2014 2015 2016 2017
20%
2013 2014 2015 2016 2017
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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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m tonnes
Production Demand NT$/tonne
91.58% Anti-dumping tariff
20 2,600 imposed on cement products from China
2011/5/30~2022/2/19
15 2,400
12.0 12.2 12.5 2,400
11.7
10.3 10.2
2,285
10
2,200
5
2,100
0 2,000
2012 2013 2014 2015 2016 2017 2009 2010 2011 2012 2013 2014 2015 2016 2017
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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 stays healthy 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

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30%
28%
28% 27% 27% 27%
ACC: Cement & Clinker Sales Volume 26%
26%
m tonnes
() 24%
Export sales Local sales
6 24%
22%
5
1.7 1.6 20%
4
1.2 1.4 2012 2013 2014 2015 2016 2017
1.5
3 1.1
•
Export market coverage
2
3.3 3.4 3.4 3.2 America Africa Asia
2.7 2.5 100% 3%
1 14%
20%
29% 31%
80% 40%
0
2012 2013 2014 2015 2016 2017
60%
97%
Not including trading sales, about 0.2mt in 2017 86%
40% 80%
71% 69%
60%
20%
0%
2012 2013 2014 2015 2016 2017
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• ACC: Cement & Clinker Sales Volume

* Not including trading sales, about 0.2mt in 2017

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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
1Q18 1Q17	YoY	2017 2016	YoY
Operating revenue 16,574 12,513 32% 64,899 60,946 Operating cost 13,244 11,580 14% 54,728 52,359 Gross profit 3,329 933 257% 10,171 8,587 Operating expenses 656 492 33% 2,734 2,355 Operating Income 2,674 440 508% 7,437 6,233 Non-operating Income (net) 377 (319) 1,062 244 Equity Income 729 323 126% 2,522 1,350 Finance costs (408) (526) (1,772) (1,638) Dividend income 2 3 326 398 Gain (loss) on valuation of investment property 27 36 217 648 Gain (loss) on exchange (96) (368) (455) (237) Others 122 212 224 (278) Pre tax Income 3,051 121 8,499 6,477 Tax 635 (25) 1,834 1,793 Net income 2,415 146 1557% 6,666 4,683			6% 5% 18% 16% 19% 87% 42%
Profit Attributable to Owners of Parent 1,897 237 702% 5,469 3,946 Profit Attributable to Non-controllinginterests 518 (91) 1,197 738			39%
EPS (NT$/share) 0.60 0.08 696% 1.74 1.26			38%
Gross margin 20.1% 7.5% 15.7% 14.1%
Operating margin 16.1% 3.5% 11.5% 10.2%

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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

	1Q18 1Q17	YoY		2017 2016	YoY
Operating revenue	16,574 12,513 32% 12,597 9,621 31% 1,318 922 43% 1,926 1,366 41% 734 605 21% 13,244 11,580 14% 3,329 933 257% 656 492 33% 2,674 440 508% 2,202 260 746% 223 7 2928% 55 96 -42% 193 76 154%			64,899 60,946 6% 49,651 46,840 6% 6,115 6,004 2% 6,037 5,122 18% 3,097 2,980 4% 54,728 52,359 5% 10,171 8,587 18% 2,734 2,355 16% 7,437 6,233 19% 5,554 3,832 45% 1,039 1,490 -30% 165 236 -30% 679 675 1%
Cement IPP Stainless Steel Others
Operating cost Gross profit
Operating expenses Operating Income
Cement IPP Stainless Steel Others

Revenue Breakdown

Operating Income Breakdown

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Summary of Balance Sheets (IFRS-consolidated basis)

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NT$ million
	1Q18	2017
Current Assets	54,269	50,263
Cash & Cash Equivalents	10,205	7,739
Short Term Investment	11,868	12,508
Others	32,197	30,015
Non-Current Assets	195,631	196,802
Long-term Investment	83,346	84,383
Fixed Assets	89,273	89,484
Intangible Assets	4,591	4,553
Other Assets	18,421	18,382
Total Assets	249,900	247,064
Current Liabilities	50,810	53,948
Short-term Debts	40,904	43,733
Others	9,906	10,215
Non-Current Liabilities	50,456	47,320
Bonds Payable	10,000	10,000
Bank Loans	30,289	27,278
Others	10,167	10,042
Total Liabilities	101,266	101,268
Total Shareholders’ Equity	148,633	145,796
Book value/share (NT$)	38.5	37.9
ROE	5.9%	4.4%
Net Gearing Ratio	45.6%	47.7%

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

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AC(China):Summary of P&L

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RMB million
	1Q18	1Q17	YoY		2017	2016	YoY
Operating revenue	1,949	1,338	46%		7,816	6,338	23%
Operating cost	1,310	1,183	11%		5,905	5,088	16%
Gross Profit	639	156	310%		1,910	1,250	53%
Other net income/(loss)	24	26			20	(14)
Selling&marketing costs	101	86			398	431
Administative expenses	72	66			276	255
Operating income	489	30	1533%		1,257	550	128%
Finance costs	61	88			275	222
Shares of results of jointly controlled entities	1	0			3	3
Pre tax Income	429	(58)			985	331
Tax	110	12			349	179
Net Income	319	(70)	-559%		636	151	321%
Equity shareholders of the company	308	(70)	-540%		602	134	350%
Minority interests	11	0			34	17
EPS (RMB/share)	0.20	(0.04)	-540%		0.38	0.09	350%
Gross margin	32.8%	11.6%			24.4%	19.7%
Operating margin	25.1%	2.2%			16.1%	8.7%
Net margin	16.4%	-5.2%			8.1%	2.4%
EBITDA margin	36.1%	18.3%			27.5%	22.6%

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

RMB million
	1Q18	2017
Current Assets	5,541	5,259
Inventories	834	728
Trade and other receivables	2,958	2,960
Bank balances and cash	1,116	940
Others	634	632
Non-Current Assets	10,945	11,151
Property,Plant&Equipment	9,110	9,302
Long-term investments	61	60
Others	1,775	1,789
Total Assets	16,486	16,410
Current Liabilities	3,481	4,235
Borrowings- due within one year	2,365	2,991
Trade and other payables	1,011	902
Others	105	341
Non-Current Liabilities	2,476	1,964
Borrowings- due after one year	2,429	1,912
Others	47	52
Total Liabilities	5,957	6,200
Total Equity	10,529	10,210
Book Value(RMB/Share)	6.7	6.5
ROE	12.6%	5.6%
Net Gearing Ratio	36.0%	40.0%
Net Debt	3,678	3,963

heets & Cash Flow
RMB million
	1Q18	1Q17
Cash Flows from Operating activities	354	25
Cash Flows from Investing activities	(8)	(63)
Cash Flows from Financing activities	(171)	28
Net change in cash and equivalents	176	(10)
Cash and equivalents at beginning of period	940	533
Cash and equivalents at end of period	1,116	523

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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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