CSC — Interim / Quarterly Report 2014

Nov 11, 2014

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China Steel Corporation

November 13 & 14, 2014

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Table of Contents
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•Company Overview	2
•Performance	6
•Financial Review	10
•EPS & Dividends (common stock)	11
•Sales	12
•Strategy	14

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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, 2013

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Steel Sales revenue
breakdown by products Domestic/Export by revenue
 Leading manufacturer of flat steel products (2014.1~3Q) (2014.1~3Q)
 Continuously upgrading towards higher
value-added products Bar, 8% [Billet/Slab, 1% ] Hot Rolled,
Major 25% Export 35%
Plate, 10%
business  Dominant position in the domestic market
 Continue to capture rapid growth
Wire Rod,
in South East Asia and China markets
15%
Domestic 65%
Cold Rolled,
41%
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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 Corporation India Pvt. Ltd (CSCI)

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.

• Qingdao China Steel Precision Metals Co.

• China Ecotek Corporation

• Info-Champ Systems Corporation

Industrial Materials Businesses Service and Investments Businesses

• Gains Investment Corporation

• C. S. Aluminum Corporation

• China Steel Security Corporation

• China Steel Chemical Corporation

• China Prosperity Development Corporation

• CHC Resources Corporation

• Himag Magnetic Corporation

• China Steel Precision Materials

CSC Group domestic market share (2014.1~3Q)

Capacity & market share

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84%
72%
 Our group crude steel 10% 20%
capacity reached 16.1
38% 84%
mmt in 2014(combining 57% 60% 57% 62%
China Steel Corporation
25% 26%
and Dragon Steel’s EAF
and No.1&2 blast furnace). Hot- Bar/Rod Electro- Plate Cold-rolled Hot-rolled Electrical
Galvanized Galvanized Steel
Steel
CSC Dragon Steel Chung Hung
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Company Overview: Awards and Honours
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• 2014.01 CSC was awarded RobecoSAM Steel Industry Leader and ranked as Gold Class

• 1 Sustainability leaders.

• 2013.11 CSC was included in CDP ‘s (Carbon Disclosure Project) 2013 Climate Disclosure

• 2 Leadership Index for Asia ex-Japan, and ranked 5th in Materials Sector.

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• 2013.11 The ROC Enterprise Environmental Protection Award, EPA, Executive Yuan. Only 19 enterprises received the Award.

4

• 2013.11 CSC’s 2012 CSR report received the “Best Report Award of the Manufacturing Industry” by TAISE. Also CSC’s sustainable development performance is recognized in fields including “Climate Leadership”, “Sustainable Innovation” ,“Transparency and Integrity”, and “Creativity in Communication”.

• 2013.09 CSC was elected for inclusion in the DJSI-World and DJSI-Emerging Markets. In 2013, with only three steel making corporations being included in the Dow Jones Sustainability Indexes,

• 5 CSC was selected as the Industry Leader in sustainable development.

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• 2013.08 CSR Green Growth Award, British Standards Institution.

• 2013.04 CSC is an accredited member of the 2012-2013 Climate Action Program by worldsteel. CSC’s efforts for fulfilling its commitment to take part in the worldsteel CO2 data collection program

• 7 are highly recognized.

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• 2013.03 China Steel Building is the winner of Architizer A+ Award, U.S.A.

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Company overview: Group capacity & Production lines
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Group capacity

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Crude steel capacity (mmt)
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Commencement of new capacity/production lines: CSC group

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(0.2 mmt)
Q1 2015
CSCI
Project
(0.15 mmt)
APR 2014
NGO Line
(1.2 mmt)
OCT 2013
MAR 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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Amount: NT$ million

Item	*2014.9	*2014.3Q	*2014.1~3Q
Consolidated Operating Revenue	30,857	92,268	276,846
Consolidated Operating Income	2,687	8,580	20,260
Consolidated Income Before Income Tax	2,966	8,572	20,265

*preliminary result

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Performance-Sales Revenue Breakdown
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Item 2014.3Q 2014.1~3Q 1 Steel products 76,109,033 228,001,869 2 Non-steel industry materials 9,445,845 27,134,849 3 Construction 4,267,873 13,828,158 4 Transportation and service 1,641,962 5,054,544 5 Others 803,685 2,826,154 LessSales returns and allowances 0 0 Total 92,268,398 276,845,574 Unit：NTD Thousands	Item 2014.3Q 2014.1~3Q 1 Steel products 76,109,033 228,001,869 2 Non-steel industry materials 9,445,845 27,134,849 3 Construction 4,267,873 13,828,158 4 Transportation and service 1,641,962 5,054,544 5 Others 803,685 2,826,154 LessSales returns and allowances 0 0 Total 92,268,398 276,845,574 Unit：NTD Thousands	Item 2014.3Q 2014.1~3Q 1 Steel products 76,109,033 228,001,869 2 Non-steel industry materials 9,445,845 27,134,849 3 Construction 4,267,873 13,828,158 4 Transportation and service 1,641,962 5,054,544 5 Others 803,685 2,826,154 LessSales returns and allowances 0 0 Total 92,268,398 276,845,574 Unit：NTD Thousands	Item 2014.3Q 2014.1~3Q 1 Steel products 76,109,033 228,001,869 2 Non-steel industry materials 9,445,845 27,134,849 3 Construction 4,267,873 13,828,158 4 Transportation and service 1,641,962 5,054,544 5 Others 803,685 2,826,154 LessSales returns and allowances 0 0 Total 92,268,398 276,845,574 Unit：NTD Thousands
	Item	2014.3Q	2014.1~3Q
1	Steel products	76,109,033	228,001,869
2	Non-steel industry materials	9,445,845	27,134,849
3	Construction	4,267,873	13,828,158
4	Transportation and service	1,641,962	5,054,544
5	Others	803,685	2,826,154
Less	Sales returns and allowances	0	0
	Total	92,268,398	276,845,574

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

2014.1H	Steel	Others	Adjustment and Elimination	Total
Revenues from external customers	$ 149,502,605	$ 35,074,572	$ -	$ 184,577,177
Inter-segment revenues	32,328,753	22,104,885	( 54,433,638)	-
Segment revenues	$ 181,831,358	$ 57,179,457	($ 54,433,638)	$ 184,577,177
Segment profit	$ 6,285,081	$ 4,914,341	$ 480,307	$ 11,679,729
Interest income	175,692	121,221	( 28,812)	268,101
Interest expense	( 1,770,692)	( 156,277)	18,468	( 1,908,501)
Share of the profit (loss) of associates and joint ventures	5,943,611	1,821,679	( 7,443,332)	321,958
Other non-operating income and expenses	871,255	757,910	( 296,638)	1,332,527
Profit before income tax	11,504,947	7,458,874	( 7,270,007)	11,693,814
Income tax expense	798,985	860,626	61,468	1,721,079
Net profit for the period	$ 10,705,962	$ 6,598,248	($ 7,331,475)	$ 9,972,735

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Performance- consolidated basis
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Consolidated Income Statement

IFRSs	Units: NT$ millions	Units: NT$ millions	Units: NT$ millions	Units: NT$ millions
	2013.1H		2014.1H
Revenues	173,156		184,577
Gross profit	19,017		18,532
Gross margins	10.98%		10.04%
Profit before tax		12,210	11,694
Net profit		10,235		9,973
Attributable to
Owners of the corporation		8,678		8,782
Non-controlling interests		1,557		1,191

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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 12/31/2013※06/30/2014※ Debt 206,337 255,206 299,578 312,393 362,630 376,939 Debt/Equity 78.22% 88.43% 95.99% 102.26% 113.55% 118.87% Asset 470,126 543,808 611,686 617,892 681,999 694,046 Debt / Asset 43.89% 46.93% 48.98% 50.56% 53.17% 54.31% Net Debt＊ 167,867 227,035 273,421 283,402 338,593 337,667 Net Debt /Asset 35.71% 41.75% 44.70% 45.87% 49.65% 48.65%	Units: NT$ millions 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013※06/30/2014※ Debt 206,337 255,206 299,578 312,393 362,630 376,939 Debt/Equity 78.22% 88.43% 95.99% 102.26% 113.55% 118.87% Asset 470,126 543,808 611,686 617,892 681,999 694,046 Debt / Asset 43.89% 46.93% 48.98% 50.56% 53.17% 54.31% Net Debt＊ 167,867 227,035 273,421 283,402 338,593 337,667 Net Debt /Asset 35.71% 41.75% 44.70% 45.87% 49.65% 48.65%	Units: NT$ millions 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013※06/30/2014※ Debt 206,337 255,206 299,578 312,393 362,630 376,939 Debt/Equity 78.22% 88.43% 95.99% 102.26% 113.55% 118.87% Asset 470,126 543,808 611,686 617,892 681,999 694,046 Debt / Asset 43.89% 46.93% 48.98% 50.56% 53.17% 54.31% Net Debt＊ 167,867 227,035 273,421 283,402 338,593 337,667 Net Debt /Asset 35.71% 41.75% 44.70% 45.87% 49.65% 48.65%	Units: NT$ millions 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013※06/30/2014※ Debt 206,337 255,206 299,578 312,393 362,630 376,939 Debt/Equity 78.22% 88.43% 95.99% 102.26% 113.55% 118.87% Asset 470,126 543,808 611,686 617,892 681,999 694,046 Debt / Asset 43.89% 46.93% 48.98% 50.56% 53.17% 54.31% Net Debt＊ 167,867 227,035 273,421 283,402 338,593 337,667 Net Debt /Asset 35.71% 41.75% 44.70% 45.87% 49.65% 48.65%	Units: NT$ millions 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013※06/30/2014※ Debt 206,337 255,206 299,578 312,393 362,630 376,939 Debt/Equity 78.22% 88.43% 95.99% 102.26% 113.55% 118.87% Asset 470,126 543,808 611,686 617,892 681,999 694,046 Debt / Asset 43.89% 46.93% 48.98% 50.56% 53.17% 54.31% Net Debt＊ 167,867 227,035 273,421 283,402 338,593 337,667 Net Debt /Asset 35.71% 41.75% 44.70% 45.87% 49.65% 48.65%	Units: NT$ millions 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013※06/30/2014※ Debt 206,337 255,206 299,578 312,393 362,630 376,939 Debt/Equity 78.22% 88.43% 95.99% 102.26% 113.55% 118.87% Asset 470,126 543,808 611,686 617,892 681,999 694,046 Debt / Asset 43.89% 46.93% 48.98% 50.56% 53.17% 54.31% Net Debt＊ 167,867 227,035 273,421 283,402 338,593 337,667 Net Debt /Asset 35.71% 41.75% 44.70% 45.87% 49.65% 48.65%	Units: NT$ millions 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013※06/30/2014※ Debt 206,337 255,206 299,578 312,393 362,630 376,939 Debt/Equity 78.22% 88.43% 95.99% 102.26% 113.55% 118.87% Asset 470,126 543,808 611,686 617,892 681,999 694,046 Debt / Asset 43.89% 46.93% 48.98% 50.56% 53.17% 54.31% Net Debt＊ 167,867 227,035 273,421 283,402 338,593 337,667 Net Debt /Asset 35.71% 41.75% 44.70% 45.87% 49.65% 48.65%
	12/31/2009	12/31/2010	12/31/2011	12/31/2012	12/31/2013※	06/30/2014※
Debt	206,337	255,206	299,578	312,393	362,630	376,939
Debt/Equity	78.22%	88.43%	95.99%	102.26%	113.55%	118.87%
Asset	470,126	543,808	611,686	617,892	681,999	694,046
Debt / Asset	43.89%	46.93%	48.98%	50.56%	53.17%	54.31%
Net Debt＊	167,867	227,035	273,421	283,402	338,593	337,667
Net Debt /Asset	35.71%	41.75%	44.70%	45.87%	49.65%	48.65%

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 +held-to-maturity financial assets-current+ derivative financial assets for hedging-current)

※ IFRSs basis

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Performance- Historical EPS and dividends paid
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(in NTD per share) Dividend 122 83 85 84 85 87 85 85 87 88 85 132 86 payout(%)

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6.00
5.00
4.00
3.00
2.00
1.00
-
cash dividend stock dividend EPS
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0.30
2.78
0.10
3.56 4.49 0.38 1.05
0.40
0.50
0.35
0.30
0.35
0.50
3.90 3.75
3.50
0.15 3.00 0.43
0.33 0.15
0.20 1.99 0.20
1.40 1.30
0.82 0.80 1.86 3.94 5.26 4.83 2.03 1.54 1.01 2.83 1.36 1.01 0.70
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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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2014.1~3Q CSC sales volume totaled 7.27 million metric tons

Domestic/Export sales volume breakdown of 2014.1~3Q

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Hot-Rolled,
27.4%
Cold-Rolled,
Billet/Slab ,
19.7%
1.3%
Vehicles Export 35.48%
(2.58 million
China Japan 19.5%
metric tons)
Bar/Rod, 25.6%
22.0% Coated
Products,
Plate,
18.7%
11.3% Coil center Others 22.8%
Piping
Wire-rope 1.0%
Re-rolling
Hand tools 1.4%
S.E. Asia 32.1%
Bolts-nuts
Others 1.4%
Domestic 64.52%
Ship-building 2.7%
(4.69 million metric tons)
Ship-building
Trader 3.7%
Vehicles 4.7%
Piping 6.4%
Steel structure 7.1%
Re-rolling 11.2%
Bolts-nuts 16.6%
Coil center 20.7%
Direct users 23.1%
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0% 5% 10% 15% 20% 25%
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Sales (CSC +DSC:HRC)
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2014.1~3Q sales volume (CSC & HRC of DSC) totaled 9.85 million metric tons

Domestic/Export sales volume breakdown of 2014.1~3Q

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Hot-Rolled,
Billet/Slab,
46.5%
0.7%
Vehicles
Bar/Rod, Cold- China
16.2% Rolled, Export 38.43% Japan 18.6%
14.5% 19.6%
Plate, 8.3% (3.79million
Coated
metric tons)
Products,
13.8% Others 21.8%
Coil center
Wire-rod 0.8% Piping
Hand tools 1.2%
Ship-building 2.1% Re-rolling Domestic 61.57% S.E. Asia 40.0%
Others 2.8% Bolts-nuts (6.06 million
Trader 3.2% metric tons)
Ship-building
Vehicles 3.6%
Steel structure 5.8%
Piping 9.5%
Bolts-nuts 12.8%
Coil center 17.2%
Direct users 18.1%
Re-rolling 22.9%
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0% 5% 10% 15% 20% 25%
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1

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

2 Strengthen sales channels through overseas investment

• 3 Increase the supply chain value of steel-related industries by developing advanced products & technology and green manufacturing process

4 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

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6
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Implement cost reduction measures, enhance energy-saving & environmental protection, and strengthen workplace safety

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$76.33mm) 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 NSSMC’s Wakayama plant to produce slab

• 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
New Asia Project
China
China
On March 21 [st] 2014, the Board of
China Directors passed the resolution of Invest US$30.5mm in China Steel Precision
PCMI Metal Products (Chongqing) Co., Ltd investing the coil center in Kunshan,. Materials to acquire 70% of the equity.
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
Thailand Xiamen Chunyuan Precision
Mechatronic Co., Ltd
Thai Sumilox
India Company Limited
China Steel Corporation China
India Pvt. Ltd. (CSCI) Thailand Guangzhou Mayer Corp., Ltd
Capacity: ES 0.2 mmt TSK Steel Co. Ltd.
Vietnam
Thailand CSC holds 51% of CSVC
SB Coil Center Capacity: 1.2 mmt (CR 0.5 mmt, GA/GI
0.3 mmt, ES 0.2 mmt, PO 0.2 mmt)
(Thailand) Ltd.
Malaysia
Tatt Giap Steel Centre Vietnam
Sdn. Bhd.
CSGT Metals Vietnam Joint Stock
Malaysia
Company
CSC Steel Holdings Berhad
Capacity: CR 0.60 mmt (CRC 0.36 mmt
Vietnam
including PO, GI 0.12 mmt, PPGI 0.12 mmt)
Hanoi Steel Center Co., Ltd.
Indonesia
PT MICS Steel Indonesia
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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
advanced products and technology and green manufacturing process
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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 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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Implement cost reduction measures, enhance energy-saving &
environmental protection, and strengthen workplace safety
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Cost Reduction Performance

• 2.07 billion: Use of low cost raw material and reduction of procurement cost

2012

• 1.47 billion: Cogeneration/ Provide saturated steam and industrial gas to nearby plants with 6.03 billion heat demands NTD • 0.9 billion : Nationalization of manufacturing system, equipment, replacement parts and spare parts

• 1.45 billion: Provide saturated steam and industrial gas to nearby plants with heat demands

• 2013

• 1.03 billion: Expense saving from nationalization of 5.52 billion equipment and replacement parts • NTD 0.71 billion: Improvement of manufacturing process, use of low price raw material, and reduction of alloy cost

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