AIDC — Interim / Quarterly Report 2016

Aug 26, 2016

AIDC Business Status

‧ ‧ ‧ Accountability Innovation Dedication Customer Orientation Aerospace Industrial Development Corporation August 29, 2016

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Contents

I. Market Status II. Financial Review III. Achievements & Prospects

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I. Market Status - Defense

1. Defense Market

1. According to a new report released by the Stockholm International Peace Research Institute (SIPRI), global military expenditures topped US$1.68 trillion in 2015, an increase of about 1% from the previous year. That represents the first increase in global military spending since 2011. (Source: SIPRI report, April 4, 2016)

2. Due to tensions in the regions of South China Sea, Eastern Europe and the Middle East coupled with terrorist attacks, Taiwan increased its military budget by 0.7% in 2015, so did the neighboring countries.

3. Taiwan Government has chosen five innovative industries to drive the growth of Taiwan’s next-generation industries. Defense industry, being one of the five, is expected to lead the investment momentum of the industries and upgrade the development of Taiwan’s defense industry.

Military spending increase rate of Taiwan and neighboring countries in 2015

Taiwan Japan S. Korea China India Singapore Malaysia + 0.7% + 1.0% + 3.6% + 7.4% + 0.4% + 5.6% + 7.7%

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I. Market Status – Defense (cont’d)

2. Defense Business Updates (on major projects)

、 � IDF F-16A/B Upgrade

IDF Upgrade F-16A/B Upgrade

� Military Aircraft MRO

UH-1H Helicopter 2nd AFLC GOCO

Air Force Academy A/C Maintenance GOCO

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I. Market Status – Defense (cont’d)

2. Defense Business Updates (on major projects)

• －

• � Advanced Jet Trainer In Pursuit

In accordance with National Defense Act Article 22, to establish an autonomous national defense infrastructure, AIDC committed to giving full support to ROCAF’s acquisition of indigenously-built trainers, which is expected to greatly favor Taiwan in terms of enhancing overall industrial capabilities, sustaining pool of human resources and boosting production values.

• Military Engines

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TFE-1042
Applied on the IDF
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F124
Applied on M346 Advanced Trainer
by Leonardo-Finmeccanica (Italy)
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I. Market Status – Commercial

1. Commercial aviation market updates 1. Market outlook ： Global market forecast of commercial airplane demand for the next 20 years: � Annual growth rate of RPK: 4.5%~4.8% � New airplane demand: 33,000~39,000 � Market value: US$5.2~5.9 trillion

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Annual growth rate of RPK (Revenue Passenger Kilometer) Sources: Airbus GMF (2016-2035); Boeing CMO (2016-2035)

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I. Market Status – Commercial (cont’d)

1. Commercial aviation market updates 2. Major demand: strong demands from the emerging markets and low cost carriers have made singleaisle airplane the most popular model.

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I. Market Status – Commercial (cont’d)

1. Commercial aviation industry Updates 3. Engine demand: Per Forecast International 2016 Q2 report, global engine requirement for the next ten years (2016-2025) will reach 12,000 units, a total value of US$720 billion.

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Units 12,621
11614 12,129 12,242 Value 11,783 12,317
12,000
11,268
10,924 10,975 80000
10,226
10,000
60000
8,000
6,000 40000
4,000
20000
2,000
0 0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: Forecast International_2016 Q2 7
Unit Production (Units)
Value Statistics ($US M)
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I. Market Status – Commercial (cont’d)

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2. Commercial Aviation Programs (on major projects)
� Popular A/C & Engines GE Aviation
Top 2 Supplier in Asia
Sikorsky S-92 Cockpit
Airbus Single-Aisle A320
CFM56 GE90
Aft Belly Fairing Composite Panels
Rolls-Royce
Boeing Single-Aisle B737
MLG Door/Pressurized Door Long-Term Supply
Chain Partner
Airbus Giant A380
HTP Tip Boeing Dreamliner B787
HT Leading Edge TRENT 800 V2500
� NextGen A/C & Engines
CFM LEAP-X
C-Series
A320neo B737MAX
MRJ Trent XWB GEnx
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II. Financial Review

1. Income Statement

Unit: NT$ in Millions

	ITEM	Q2	Q2	Q2	Q2	Q1~Q2	Q1~Q2	Q1~Q2	Q1~Q2
		Y2016		Y2015		Y2016		Y2015
	Revenue	7,480	100%	6,921	**100% **	13,809	**100% **	12,761	100%
	Cost of Goods Sold	6,333	85%	6,016	87%	11,685	85%	11,089	87%
	Gross Profit	1,147	15%	905	13%	2,123	15%	1,672	13%
	Operating Expenses	321	4%	259	4%	572	4%	450	4%
	Operating Income	826	11%	645	9%	1,551	11%	1,222	9%
	Non-operating Income	(51)	-1%	(115)	-2%	(203)	-1%	(181)	-1%
	Pre-tax Income	775	10%	530	7%	1,348	10%	1,041	8%
	Income Tax Expenses	194	2%	86	1%	283	2%	173	1%
	Net Income	581	8%	445	6%	1,065	8%	868	7%
	EPS(NT$）	0.64		0.49		1.17		0.96

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II. Financial Review (cont’d)

2. Revenues

With military and commercial businesses developing in tandem, it may compensate possible risks in either sector and help to secure steady growth.

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Unit: NT$ 100 million
Year 2011 2012 2013 2014 2015 2016/1~7
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II. Financial Review (cont’d)

3. Net Income and EPS for the last 5 years

Net Income in NT$ 100M Dollars

EPS in NT$/share

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30 3.0
Net Income EPS
25 2.23 2.5
2.06
20 2.0
1.37 1.42
15 1.24 1.5
1.17
10 20.29 1.0
18.72
12.48 12.89
11.26 10.65
5 0.5
0 0.0
2011 2012 2013 2014 2015 2016Q2
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Note ： 2011-2012 ROC GAAP were observed; the IFRS was adopted since 2013.

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III. Achievements & Prospects

1. Recent Achievements (I)

� Three Major Facility Investment:

1. Engine Case Manufacturing Center (ECMC) ： Inaugurated on April 14, 2016

2. TACC-19 Composite Plant ： Inaugurated on July 1, 2016

3. F-16A/B Upgrade & Maintenance Building: to be completed in Q1 of 2017

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23 Hangar (under construction)
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#15A Spraying Plant (under construction)

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III. Achievements & Prospects (cont’d)

2. Recent Achievements (II)

• AIDC ranks 120th in “2015 Top 2000 Survey: Manufacturing” conducted by the Commonwealth Magazine.

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Source: Commonwealth Magazine, No. 597, May 11, 2016

• Won Global Views Magazine CSR Award in the “Traditional Manufacturers” category

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• Established Taiwan � Grand opening of US Aerospace A-Team 4.0, subsidiary, AIDC USA LLC integrating 220 companies.

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III. Achievements & Prospects (cont’d)

1. Recent Achievements (III)

� Corporate Social Responsibility

Planting trees for Education and Care for Fulfilling teenagers’ dream of Environment Protection disadvantaged children round-the-island ride

－ � Invest Industry 4.0 Intelligent Machine Monitoring System

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III. Achievements & Prospects (cont’d)

2. Prospects

As of July 31, 2016 AIDC revenue reached NT$16 billion, which meets our expectation. AIDC shall continue its efforts from the perspectives of business, Industry and talent cultivation, and shall use the edge of Taiwan A-Team to Taiwan’s aerospace expand aerospace production values while working persistently for the national security and industry development.

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Business
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Talents
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• With three objectives of TAIA, i.e. information sharing, industry involvement and international exchange to lead industry upgrade. Industry

• Defense: Fully support indigenously-built aircraft policy

� Industry-university cooperation to cultivate talents

• Commercial: Pursue high value-added a/c segment and engine components business

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－ －
Thank you for your attention
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