CSC — Interim / Quarterly Report 2013

Nov 22, 2013

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China Steel Corporation

November 13 & 14, 2013

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Table of Contents
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•Company Overview	2
•Performance	5
•Financial Review	9
•EPS & Dividends (common stock)	10
•Sales	11
•Strategy	13

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Company overview:
Business snapshot (CSC standalone)
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 Leading Taiwanese steel manufacturer with integrated production capabilities Overview  Headquartered in Kaohsiung with major production sites located in Kaohsiung  Annual capacity of 9.9 mmt as of Dec 31, 2012

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Steel Sales revenue
breakdown by products Domestic/Export by revenue
 Leading manufacturer of flat steel products (2013 1~3Q) (2013 1~3Q)
 Billet/Slab, 3% Hot
Continuously upgrading towards higher
Bar, 8%
Major value-added products Rolled, 23% Export 34%
Plate, 10%
business  Dominant market position domestically
 Continue to capture rapid growth
in South East Asia and China markets Wire
Rod, 16%
Domestic 66%
Cold
Rolled, 40%
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Company overview:
Business snapshot (CSC Group)
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Major business

Steel Core Businesses

• China Steel Corporation

• Chung Hung Steel Corporation

• Dragon Steel Corporation

• CSC Steel Sdn. Bhd.

• China Steel Sumikin Vietnam (CSVC )

• China Steel Precision Materials

Other Group Businesses

Logistic Businesses

Engineering Businesses

• China Steel Express Corporation

• China Steel Machinery Corporation

• China Steel Global Trading Corporation

• China Steel Structure Co., Ltd.

• China Ecotek Corporation

Industrial Materials Businesses Service and Investments Businesses

• Gains Investment Corporation

• C. S. Aluminum Corporation

• China Steel Security Corporation

• China Steel Chemical Corporation

• Info-Champ Systems Corporation

• CHC Resources Corporation

  • China Prosperity Development Corporation

• Himag Magnetic Corporation

• China Steel Corporation India Pvt. Ltd (CSCI)

CSC Group domestic market share (2013.1~3Q)

Capacity & market share

 Our group crude steel capacity reached 16.1 mmt in 2013(combining China Steel Corporation and Dragon Steel’s EAF and No.1&2 blast furnace).

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84% 81%
65%
13%
23%
2%
57% 54% 63% 71% 35% 82%
23% 23%
Hot- Bar/ Electro- Plate Cold- Hot- Electrical
Galvanized Rod Galvanized rolled rolled Steel
Steel
CSC Dragon Steel Chung Hung
Plate product of DSC is Flat steel.
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Company overview: Group capacity & Production lines
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Group capacity Crude steel capacity (mmt)

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Commencement of new capacity/production lines: CSC
group
(0.2 mmt)
Q2 2014
CSCI
Project
(0.15 mmt)
MAY 2014
NGO Line
(1.2 mmt)
OCT 2013
March 2013 Q1 2013
CSVC Project HSM
#2 BF
Expansion
(1.5 mmt) (2.5 mmt) (3 mmt → 4 mmt)
MAY 2011
(3 mmt)
#3 CR Mill / #3 CGL
JUL 2010
HSM
(2.5 mmt)
FEB 2010
#1 BF
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Performance- Consolidated operating results
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Item 2013 Q3* September 2013 Accumulated of 2013 Consolidated Operating Revenue 87,260 28,709 260,416 Consolidated Operating Income 6,044 2,411 18,552 Consolidated Income Before Income Tax 5,829 2,236 18,039 Amount: NT$ million	Item 2013 Q3* September 2013 Accumulated of 2013 Consolidated Operating Revenue 87,260 28,709 260,416 Consolidated Operating Income 6,044 2,411 18,552 Consolidated Income Before Income Tax 5,829 2,236 18,039 Amount: NT$ million	Item 2013 Q3* September 2013 Accumulated of 2013 Consolidated Operating Revenue 87,260 28,709 260,416 Consolidated Operating Income 6,044 2,411 18,552 Consolidated Income Before Income Tax 5,829 2,236 18,039 Amount: NT$ million	Item 2013 Q3* September 2013 Accumulated of 2013 Consolidated Operating Revenue 87,260 28,709 260,416 Consolidated Operating Income 6,044 2,411 18,552 Consolidated Income Before Income Tax 5,829 2,236 18,039 Amount: NT$ million
Item	*2013 Q3	*September 2013	Accumulated* of 2013**
Consolidated Operating Revenue	87,260	28,709	260,416
Consolidated Operating Income	6,044	2,411	18,552
Consolidated Income Before Income Tax	5,829	2,236	18,039

*preliminary result

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Performance-Sales Revenue Breakdown
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Unit ： NTD Thousands

	Item	2013 Q3	September, 2013	Accumulated of 2013
1	Steel products	71,692,899	24,012,420	215,322,513
2	Non-steel industry materials	8,884,150	2,990,372	26,037,973
3	Construction	4,646,085	1,413,179	12,234,146
4	Transportation and service	1,047,898	146,406	3,520,193
5	Others	989,008	146,933	3,301,017
Less	Sales returns and allowances	0	0	0
	Total	87,260,040	28,709,310	260,415,842

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Performance-CSC group
Segment revenues and operating results
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Unit ： NTD Thousands

2013/1H		Steel		Ocean Freight Forwarding	Ocean Freight Forwarding	CSCC		Others	Others	Others	Adjustment and Elimination	Adjustment and Elimination	Adjustment and Elimination	Adjustment and Elimination			Total
Revenues from external customers	$	141,907,981		$ 1,018,407		$ 4,411,365		$ 25,818,049			$			-	$		173,155,802
Inter-segment revenues		24,162,251		7,296,676		46,041			16,516,639					-48,021,607	-
Segment revenues	$	166,070,232		$ 8,315,083		$ 4,457,406			$ 42,334,688			$-48,021,607			$		173,155,802
Segment profit	$	7,869,656		$ 1,547,879		$ 1,184,415			$ 2,085,630			$- 179,383			$		12,508,197
Interest income		117,177			5,664	5,934				88,400			- 14				217,161
Interest expense	-	1,215,901			- 13,421	- 1,177			-	94,486			14			-	1,324,971
Share of the profit (loss) of associates and joint ventures		4,707,190			872,352	50,297				995,889			- 6,392,296				233,432
Other non-operating income and expenses		421,320			252,332	39,296				258,415			- 394,879				576,484
Profit before income tax		11,899,442			2,664,806	1,278,765				3,333,848			- 6,966,558				12,210,303
Income tax expense (benefit)		1,243,634			194,813	182,733				416,433			- 62,507				1,975,106
Net profit for the period	$	10,655,808			$ 2,469,993	$ 1,096,032			$ 2,917,415				$-6,904,051			$ 10,235,197
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Performance- consolidated basis
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Consolidated Income Statement

Consolidated Income	Statement	Statement	Statement	Statement	Statement	Statement	Statement	Statement
IFRS	Units: NT$ millions
	2013.2Q		2012.2Q		2013.1H		2012.1H
Revenues	84,695		96,747		173,156		190,610
Gross profit	9,930		6,769		19,017		9,647
Gross margins	11.72%		6.99%		10.98%		5.06%
Profit before tax		6,532		3,632		12,210		3,267
Net profit		5,358		3,054		10,235		2,746
Attributable to
Owners of the corporation		4,886		2,662		8,678		1,960
Non-controlling interests		472		392		1,557		786

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Performance: financial review (Consolidated Basis)
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Units: NT$ millions

	12/31/2009	12/31/2010	12/31/2011	12/31/2012	06/30/2013※
Debt	206,337	255,206	299,578	312,393	354,769
Debt/Equity	78.22%	88.43%	95.99%	102.26%	115.74%
Asset	470,126	543,808	611,686	617,892	661,287
Debt / Asset	44%	47%	49%	51%	54%
Net Debt＊	167,867	227,035	273,421	283,402	332,703
Net Debt /Asset	36%	42%	45%	46%	50%※

※ Since 2009, CSC group have issued corporate bonds and signed syndicated loans for DSC’s expansion project and overseas raw material investments.

＊ Net debt = debt - cash&cash equivalents – ( financial assets at fair value through profit or losscurrent + available-for-sale financial assets - current + Derivative financial assets for hedging-current)

※ IFRS basis

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Performance- Historical EPS and dividends paid
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(in NTD per share)

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122 83 85 84 85 87 85 85 87 88 85 132
6.00
5.00
4.00
3.00
2.00
1.00
-
0.50
0.35
0.30
0.35
0.30
0.50
3.90 3.75
3.50
0.15 3.00 2.78 0.43
0.33 0.15
0.20 1.99 0.10
1.40 1.30
0.82 1.86 3.94 5.26 4.83 3.56 4.49 2.03 1.54 1.01 2.83 1.36 0.38
0.80 1.01
0.40
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Dividend payout(%)

cash dividend stock dividend EPS 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

We maintain a high cash dividend policy to our investors and have consistently paid out 80% to 90% over the last ten years

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Sales (CSC standalone)
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2013.1~3Q CSC sales volume totaled 7.15 million metric tons

Domestic/Export sales volume breakdown of 2013.1~3Q

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Hot-
Rolled,
Cold-
25.1%
Semi Rolled,
Product, 20.9% Vehicles Export 34.76%
4.2% (2.49million
China Japan19.9%
metric tons)
24.1%
Bar/Rod, Coated
21.0% Products, Others 22.1%
Plate, Coil center
17.5%
11.3%
Piping
Wire-rope 1.0%
Hand tools 1.4%
Re-rolling
Ship-building 2.6% S.E. Asia33.9%
Bolts-nuts
Trader 3.3% Domestic 65.24%
Vehicles 4.6% Ship-building (4.66 million metric tons)
Piping 5.2%
Others 6.4%
Steel structure 6.5%
Re-rolling 9.3%
Bolts-nuts 16.5%
Coil center 20.1%
Direct users 23.1%
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Sales (CSC +DSC:HRC)
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2013.1~3Q sales volume (CSC & HRC of DSC) totaled 9.19 million metric tons

Domestic/Export sales volume breakdown of 2013. 1~3Q

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Hot-
Semi Rolled,
Product, 41.7%
3.3% Vehicles
Cold- China
Export 35.57% Japan19.3%
Rolled, 21.6%
Bar/Rod, 16.3% (3.27million
16.3% Plate, Coated metric tons)
8.8% Products, Coil center Others 23.1%
13.6%
Piping
Wire-rod 0.8%
Hand tools 1.1% Re-rolling
Domestic 64.43% S.E. Asia 36.0%
Ship-building 2.0% Bolts-nuts
(5.92 million
Trader 2.6%
metric tons)
Vehicles 3.7% Ship-building
Others 5.1%
Steel structure 5.4%
Piping 8.3%
Bolts-nuts 13.0%
Coil center 17.3%
Direct users 19.6%
Re-rolling 21.1%
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0% 5%

10% 15% 20% 25%

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Key strategies to achieve the vision
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1
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Secure self-sufficiency in raw materials through strategic upstream investment

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2 Strengthen sales channels through overseas investment

3 Increase the supply chain value of steel-related industries by developing and trying out new product

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4
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Enhance corporate culture handing-down, reinforce human resources training & development, and solidify plans for management succession

5 Enhance client relationships and networks through engineering, technical, and information management services

With the key strategies implemented, China Steel Corporation aims to become a trustworthy steel partner pursuing growth, environmental protection, energy saving and value-innovation

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Secure self-sufficiency in raw materials through
strategic upstream investment
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Major raw materials Semi-products Ferroalloy

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Acquired 5% in Dongbu Metal Co
($47.8bn WON, approximately
US$43.9mm)
East Asia
United Corp.
Invested 5% (US$175 mn) in Formosa
Ha Tinh Steel Corporation
Acquired 19% in Sakura Acquired 39.04% in
Ferroalloys Sdn. Hsin Hsin Cement
Bhd.(US$62.46mm) for lime stone
Acquired 3.68% of 2 subsidiaries of
ArcelorMittal Mines Canada
(investment amount USD$270mm)
Iron
Coal &
Iron ore
Iron Acquired 5% stake in Sonoma
coal project (investment amount
AUD$16.0mm)
Holds 1% of NAMISA
Acquired 2.5% stake in Roy Hill
company (investment amount
JPY$8.5bn, approximately iron ore project (investment
amount AUD$315mm)
US$103.1mm)
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Major raw materials

• Iron ore and coking coals are secured by long-term contract (volume)

• Partner with parties in Japan, South Korea, Mainland China, Australia and Brazil

• Secure lime stone - acquired 39.04%(group shareholding) in Hsin Hsin Cement

Semi-products

• Secure supplies from strategic partnerships and JV’s

• East Asia United Steel Corp.

• Utilize Sumitomo’s Wakayama plant to produce slab steel

• A reliable supply source for slab

• Vietnam investment with Formosa Plastics Group

• Access to semi-finished steel with lower transportation costs and market risks

Ferro-alloy

• Long-term contract to reduce market risks

• Purchased 5% stake in Dongbu Metal, Korea’s largest ferroalloys producer

• Purchased 19% stake in Sakura Ferroalloys Sdn. Bhd.

• Ensures a long-term stable supply of ferro-alloy, and lowers the acquisition cost.

To secure 30% of major raw materials through investments in mines and find multiple sources of semi-products

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Strengthen sales channels through overseas investment
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New Asia Project China

China

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PCMI Metal Products (Chongqing) Co., Ltd Invest US$30.5mm in China Steel Precision Materials to acquire 70% of the Chartered Capital. Capacity: 19,000 metric tones China Changshu Baoshunchang Steel Processing Co., Ltd China Italy Qingdao China Steel Precision Metal Co., Ltd Ardemagni SpA China Maruichi Metal Product (Foshan) Co., Ltd China Xiamen Chunyuan Precision Mechatronic Co., Ltd Thailand Thai Sumilox China India Company Limited Guangzhou Mayer Corp., Ltd China Steel Corporation India Pvt. Ltd. (CSCI) Thailand Capacity: ES 0.2 mmt SB Coil Center Vietnam CSC holds 51% of CSVC (Thailand) Ltd. Capacity: 1.2 mmt (CR 0.5 mmt, GA/GI 0.3 mmt, ES 0.2 mmt, PO 0.2 mmt) Malaysia Tatt Giap Steel Centre Sdn. Vietnam Bhd. CSGT Metals Vietnam Joint Stock Malaysia Company CSC Steel Holdings Berhad Vietnam Capacity: CR 0.60 mmt (CRC 0.36 mmt Hanoi Steel Center including PO, GI 0.12 mmt, PPGI 0.12 mmt) Co., Ltd.

Overseas Investments of CSC group

Co-invest in coil centers with peers and customers through China Steel Global Trading Co.

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Increase the supply chain value of steel-related industries
by developing and trying out new product
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Co-development for value-added products
R&D alliance
Research
Downstream
Institutes &
Customers
Universities
Design-in & Spec.-in
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• Aim for further growth and success with downstream customers

• Close collaboration with our customers, research institutions, and universities for higher value-added products

• Increase end market’s demand for higher value-added products

R&D alliances

R&D alliances	R&D alliances
Industry	R & D Alliance Total est. expenditure (US$mm)
Fasteners	High value-added fasteners 2.4
Motors	Development of high value- added technologies for the motor industry 6.8
Auto structure parts	R&D alliance for AHSS and forming technology for automobile 2.2
	R&D alliance for tube hydro- forming technology for automobile 4.1
Auto panel and inner parts	R&D alliance for advanced molding technology for automobilepanels 3.2
Wire	CTRA for wafer-cutting electroplated diamond wire saws 3.1
Steel plate Total	Preliminary R&D plan for high precision stamp-formed needle roller bearings made of locally- made low-alloy steel plate 0.1
	21.9

China Steel Corporation has committed significant efforts/developments in downstream higher value-added, higher margin steel products alongside its customers

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Enhance client relationship and networks through value-
added services
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Engineering and Technical services

• Plant Construction

• Technical Consulting

• Environmental Engineering

Customer services

• Real-time information services of order status

• Applied technology services

• Early vender involvement

Others

• Domestic and oversea consulting services regarding environmental protection and energy saving

• Railway and Rapid Transit System Engineering

• Industrial Air Conditioner

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