CSC — Investor Presentation 2017

Oct 25, 2017

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China Steel Corporation

October 27, 2017

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Sustainability, our STEEL commitment. http://www.csc.com.tw/csc/hr/csr/index.htm

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•
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• CSC Group Overview

• Operation and Development Strategies

• Sales Analysis

• Dividend Policy

• Appendixes: Financial Status & Performance

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CSC Overview

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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, 2016
Steel Sales revenue
 Leading manufacturer of flat steel products breakdown by products Domestic/Export by revenue
(2017.1~3Q) (2017.1~3Q)
in Taiwan
 Continuously upgrading towards higher Billet/Slab, 8% Hot Rolled,
Export 31%
Major value-added products Bar, 8% 24%
business
 Dominant position in the domestic market Plate, 9%
 Continue to capture rapid growth
in South East Asia and China markets
Wire Rod,
15%
Cold Rolled,
Domestic 69%
36%
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CSC Group Overview

Steel Core Businesses

• China Steel Corporation

• Chung Hung Steel Corporation

• Dragon Steel Corporation

• CSC Steel Sdn. Bhd.

• Major business  China Steel Sumikin Vietnam (CSVC )

• China Steel Corporation India Pvt. Ltd (CSCI)

Other Group Businesses

• Engineering Businesses Logistic Businesses  China Steel Machinery Corporation  China Steel Express Corporation  China Steel Structure Co., Ltd.  China Steel Global Trading Corporation  China Ecotek Corporation  China Steel Precision Metals Qingdao Co., Ltd.  Info-Champ Systems Corporation  China Steel Precision Metals Kunshan Co., Ltd.  CSC Solar Corporation Industrial Materials Businesses Service and Investments Businesses  C. S. Aluminum Corporation  Gains Investment Corporation  China Steel Chemical Corporation  China Steel Security Corporation  CHC Resources Corporation  China Prosperity Development Corporation  Himag Magnetic Corporation  China Steel Management Consulting Corporation  China Steel Precision Materials

• China Steel Resources Corporation

• CSC Precision Metal Industrial Corporation

Capacity & market share

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CSC Group domestic market share (2017.1~3Q)
89%
76% 16%
13%
 Our group crude steel 34%
87%
capacity reached 16 mmt 77% 71%
56% 63%
in 2017(combining China 39%
26%
Steel Corporation and
Dragon Steel’s EAF and Hot- Bar/Rod Electro- Plate Cold-rolled Hot-rolled Electrical
No.1&2 blast furnace). Galvanized Galvanized Steel
Steel
CSC Dragon Steel Chung Hung
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Operation and Development Strategies

To pass down corporate culture, implement career planning, create LOHAS environment and promote image of CSC Group;

To improve customer lean service, strengthen strategic partnerships, solidify domestic market and expand sales channels of export;

To integrate resources of CSC Group, map out green industries, investigate in deep-processing fields and increase self-sufficiency ratio of raw materials;

To research and develop advanced products, materials for defensive, applied technology and green processes for increasing chain value of steel industry;

To enhance engineering capabilities of CSC Group, develop green and rail businesses carefully, and expand engineering business proactively;

To expand supply of CSC Group’s products, reduce cost continuously, elaborate on energy saving and environmental protection, strengthen occupational safety and health, and increase industry chain value with intelligent manufacturing and improving services of industry 4.0.

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Overseas Production Sites and Sales Channels

China

China

China China Steel Precision Materials Corporation China Steel Precision Metals Kunshan Co., PCMI Metal Products (Chongqing) Co., Ltd Ltd. CSC holds 70% of the equity interest CSC holds 80% stake Capacity: 8,000 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 Thailand Mechatronic Co., Ltd India Thai Sumilox China Steel Corporation Company Limited Vietnam India Pvt. Ltd. (CSCI) China Steel Sumikin Vietnam Joint CSC holds 100% of CSCI Thailand Stock Co. (CSVC) Capacity: ES 0.2 mmt TSK Steel Co. Ltd. CSC holds 56% of CSVC Capacity: 1.2 mmt (CR 0.5 mmt, GA/GI India Thailand 0.3 mmt, ES 0.2 mmt, PO 0.2 mmt) Mahindra Auto Steel SB Coil Center Private Limited Co., Ltd (Thailand) Ltd. Vietnam CSGT Metals Vietnam Joint Stock Malaysia Company Tatt Giap Steel Centre Sdn. Bhd. Malaysia CSC Steel Sdn. Bhd. CSC holds 46% of CSHB Vietnam Capacity: CR 0.48 mmt (CRC 0.24 mmt Hanoi Steel Center Co., Ltd. including PO, GI 0.17 mmt, PPGI 0.07 mmt)

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Overseas Investments of CSC group

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

- Sales Channels CSGT

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Shanghai, China
CSGT(Shanghai) Co., Ltd
Osaka, Japan
CSGT Japan Co., Ltd
Kaohsiung. Taiwan
CSGT HQ. Hong Kong
CSGT Hong Kong Ltd
Mexico
Ho Chi Minh City,
Vietnam CSGT Mexico Rep. Office
CSGT HCMC Rep.
Office
Singapore
Mumbai, India CSGT Singapore Pte. Ltd.
CSGT Trading India Pvt. Ltd.
Jakarta, Indonesia
CSGT Singapore Pte. Ltd. Jakarta Rep. Office
Bangkok, Thailand
CSGT Singapore Pte. Ltd. Bangkok Rep. Office
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Subsidiary:5 ； Representative office:4

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－ Production Site CSVC

• Capture potential growth in Vietnam market and expand the sales channel of HR products.

• Build the production site in AFTA, get closer to customers in ASEAN countries, and break through the tariff barriers .

CSVC

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－ Production Site CSCI

• Export to Middle Eastern and European countries.

• Use the resources of CSC Group to . expand Indian domestic market

CSCI

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－ Overseas Investment FHS

• Establish strategic alliances.

• Capture the growth opportunities in ASEAN steel market.

• Breakthrough the tariff barriers of AFTA.

• Secure long-term supply of semi-products.

FHS

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Raw Materials Investment

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Major raw materials Semi-products Ferroalloy
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East Asia United Corp.
Acquired 22.5%
(USD$1.11 bn) of Formosa
Ha Tinh Steel Corporation
Acquired 39.04% of
Acquired 19% of Sakura Hsin Hsin Cement
Ferroalloys Sdn. Bhd. for lime stone
(USD$76.19mm)
Acquired 3.68% of 2 subsidiaries
of ArcelorMittal Mines Canada
(investment amount USD$270mm)
Iron
Coal &
Iron ore
Iron Acquired 5% of Sonoma coal
project (investment amount
AUD$16.44mm)
Acquired 0.41% of CSN
Acquired 2.5% of Roy Hill iron ore
Mineracao S.A. (investment
amount NTD$2.74bn) project (investment amount
AUD$315mm)
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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, Canada, 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.

• NSSMC’s Wakayama plant as a reliable supply source for slab

• Formosa Ha-Tinh Steel Corporation

• As a mutual supply of hot-rolled and slab products.

Ferro-alloy

• Long-term contract to reduce market risks

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

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

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- R&D on High End Products : EV Application

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MODEL-X
MODEL-3
Roadster MODEL-S
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
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500 5k 23k 40k 70k 130k 250k 500k 1,000k

To meet TESLA’s demand of new MODEL-3 launched in 2017, CSC successfully designed a customized thin-gauged electrical steel sheet, 25CS1250HF, with high quality and excellent performance. CSC also try to align with several key players (e.g. Fukuta, TECO, Hota and etc.) in Taiwan to setup a EV industrial settlement for consolidating business opportunities of the growing EV global market.

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- R&D on High End Products : Hot Stamping

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Coil with AO Coating
for Hot Stamping
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*AO: Anti-oxidation

• Hot stamping technology and coils with AO-coating for hot stamping had been developed.

• Constructions in Honley and Changchun CECK Auto. Parts Co. have already completed. Both two companies have received orders from OEMs now and will begin to deliver hot stamping parts to the OEMs in 2018.

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- - R&D on High End Products : Development of Ni Base Superalloys

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Corrosion-Resistant Valves *SOFC Components

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Heat-Resistant Parts

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Furnace Bells

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Welding Wires

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High-Temperature Fasteners

*SOFC: Solid Oxide Fuel Cell

• More than 10 products developed for furnaces, fasteners and welding applications.

• Dedicated to developing cost-saving process and high-end energy/aerospace products.

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- Increasing High End Product Ratio

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High-End Product Ratio
CATEGORY
50
47.42
48 45.72
46
43.01
44 45.40
HIGH 42
PERFORMANCE
38.63
% 40
37.09
38
38.36
36
34
HIGH
TECHNICAL
32
CONTENT
30
HIGH
VALUE-ADDED
＊ In early 2017, CSC reviewed and revised the definition of high-end product. The high-
(
)
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＊ In early 2017, CSC reviewed and revised the definition of high-end product. The highend product ratio for the past few years is adjusted accordingly.

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- Upgrading Steel using Industries

Increasing value of industrial chain

Broadening differentiation of products Developing collaboratively customized products

Strengthening partnerships

Promoting Joint Research Laboratories

Enhancing added value of products

Strengthening Early Vendor Involvement and technical marketing

Expanding Cultivating demand of high Alliance for grade steel at Steel Industries terminal market

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In order
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Green Energy Business : Solar Power

In order to put Corporate Social Responsibility into practice and respond to government’s green energy policy, China Steel, together with its’ subsidiaries, including CEC, CSCC, and DSC, has established CSC Solar, a solar energy company. CSC Solar plans to invest TWD 4.36 billion in order to create 80MW electricity capacity .

Planning PV System in CSC Group (80MWp 2017-2019)	Planning PV System in CSC Group (80MWp 2017-2019)
Capacity(kWp)	81,017.45
Annual Energy Output(kWh)	103,500,000
Require Area(m2)	810,174.50

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100 million kwh electricity output and NTD 400 million revenue p.a.

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Reduce CO2 emission by 43,504 tons p.a.

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Electricity output is equivalent to the power demand of 1,430 households.

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The effect of CO2 emission reduction equals to the effect of planting 3,973,328 trees.

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Sales Analysis (CSC Standalone)

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2017.1~3Q CSC sales volume totaled 8.23 Domestic/Export sales volume breakdown of 2017.1~3Q
million metric tons
Hot-Rolled,
27.2%
Cold-Rolled,
Export 31.60%
16.3% Vehicles
(2.60 million
China Japan 17.1%
Billet/Slab, metric tons)
12.0% Coated 21.8%
Products,
15.5%
Coil center
Bar/Rod, 20.2% Others 26.8%
Plate, 8.8% Piping
Wire-rope 0.6%
Hand tools 1.0% Re-rolling
S.E. Asia 34.3%
Ship-building 1.0% Bolts-nuts Domestic 68.40%
Vehicles 4.0% (5.63 million metric tons)
Trader 4.0%
Ship-building
Steel structure 4.8%
Piping 5.6%
Re-rolling 11.9%
Bolts-nuts 14.4%
Coil center 14.8%
Others 17.5%
Direct users 20.4%
0% 5% 10% 15% 20% 25% 30%
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Sales Analysis (CSC & BF Products of DSC)

2017.1~3Q sales volume (CSC & BF Domestic/Export sales volume breakdown of 2017.1~3Q products of DSC) totaled 11.12 million metric tons

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Hot-Rolled,
Billet/Slab, 41.5%
13.5% Cold- Vehicles
Rolled,
12.0%
China Japan 18.2%
Export 34.14%
Bar/Rod, 16.9%
14.9% Coated Coil center (3.80million
Products, Piping metric tons)
Plate, 6.6%
11.5%
Others 21.8%
Wire-rope 0.5%
Ship-building 0.8%
Hand tools 0.8% Re-rolling
Vehicles 3.1% Bolts-nuts Domestic 65.86%
S.E. Asia 43.1%
Trader 3.1% (7.32million
Steel structure 4.0% metric tons)
Ship-building
Piping 7.1%
Bolts-nuts 11.1%
Coil center 12.4%
Direct users 15.8%
Others 19.9%
Re-rolling 21.4%
0% 5% 10% 15% 20% 25% 30%
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Dividend Policy

(in NTD per share)

Dividend payout(%)

Cash Dividend payout(%)

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84 85 87 85 85 87 88 85 132 86 70 102 82
74 78 78 78 64 66 70 74 105 67 70 102 82
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6.00
5.00
4.00
3.00
2.00
1.00
-
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
0.50
0.35
0.30
0.30
0.50
3.90 3.75
3.50
0.43
2.78 -
0.33 1.99 0.15 0.20 -
1.30 -
5.26 4.83 3.56 4.49 2.03 1.54 1.01 2.83 1.36 1.01 0.38 0.10 1.05 0.70 1.43 1.00 0.49 0.5 1.04 0.85
0.40
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Cash Dividend Stock Dividend EPS

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Closing Remarks

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Thank you!

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	Appendix1: Consolidated Operating Results Item 2017.1H 2017.1~8* Consolidated Operating Revenue 167,849 226,959 Consolidated Operating Income 11,638 14,472 Consolidated Income Before Income Tax 9,814 12,565** Unit: NTD millions	Appendix1: Consolidated Operating Results Item 2017.1H 2017.1~8* Consolidated Operating Revenue 167,849 226,959 Consolidated Operating Income 11,638 14,472 Consolidated Income Before Income Tax 9,814 12,565** Unit: NTD millions	Appendix1: Consolidated Operating Results Item 2017.1H 2017.1~8* Consolidated Operating Revenue 167,849 226,959 Consolidated Operating Income 11,638 14,472 Consolidated Income Before Income Tax 9,814 12,565** Unit: NTD millions
	Item	2017.1H	*2017.1~8
	Consolidated Operating Revenue	167,849	226,959
	Consolidated Operating Income	11,638	14,472
	Consolidated Income Before Income Tax	9,814	12,565

*preliminary result

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Appendix2: Consolidated Income Statement

IFRSs	Unit: NTD millions	Unit: NTD millions	Unit: NTD millions	Unit: NTD millions
	2016.1H		2017.1H
Revenues	137,291		167,849
Gross profit	15,885		18,732
Gross margins	11.57%		11.16%
Profit before tax		7,849		9,814
Net profit		7,081		8,686
Attributable to
Owners of the corporation		5,762		7,087
Non-controlling interests		1,319		1,599
Earnings Per Share(NTD)		$0.37		$0.46

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Appendix3:

Consolidated Financial Status 12/31/2012 12/31/2013※12/31/2014※12/31/2015※12/31/2016※6/30/2017※ Debt 312,393 362,630 348,049 357,414 346,542 363,420 Debt/Equity 102.26% 113.55% 103.99% 111.44% 105.15% 112.68% Asset 617,892 681,999 682,737 678,139 676,122 685,954 Debt/Asset 50.56% 53.17% 50.98% 52.71% 51.25% 52.98% Net Debt＊ 283,402 338,593 322,284 329,674 324,942 342,697 Net Debt/Asset 45.87% 49.65% 47.20% 48.61% 48.06% 49.96% Unit: NTD millions	Consolidated Financial Status 12/31/2012 12/31/2013※12/31/2014※12/31/2015※12/31/2016※6/30/2017※ Debt 312,393 362,630 348,049 357,414 346,542 363,420 Debt/Equity 102.26% 113.55% 103.99% 111.44% 105.15% 112.68% Asset 617,892 681,999 682,737 678,139 676,122 685,954 Debt/Asset 50.56% 53.17% 50.98% 52.71% 51.25% 52.98% Net Debt＊ 283,402 338,593 322,284 329,674 324,942 342,697 Net Debt/Asset 45.87% 49.65% 47.20% 48.61% 48.06% 49.96% Unit: NTD millions	Consolidated Financial Status 12/31/2012 12/31/2013※12/31/2014※12/31/2015※12/31/2016※6/30/2017※ Debt 312,393 362,630 348,049 357,414 346,542 363,420 Debt/Equity 102.26% 113.55% 103.99% 111.44% 105.15% 112.68% Asset 617,892 681,999 682,737 678,139 676,122 685,954 Debt/Asset 50.56% 53.17% 50.98% 52.71% 51.25% 52.98% Net Debt＊ 283,402 338,593 322,284 329,674 324,942 342,697 Net Debt/Asset 45.87% 49.65% 47.20% 48.61% 48.06% 49.96% Unit: NTD millions	Consolidated Financial Status 12/31/2012 12/31/2013※12/31/2014※12/31/2015※12/31/2016※6/30/2017※ Debt 312,393 362,630 348,049 357,414 346,542 363,420 Debt/Equity 102.26% 113.55% 103.99% 111.44% 105.15% 112.68% Asset 617,892 681,999 682,737 678,139 676,122 685,954 Debt/Asset 50.56% 53.17% 50.98% 52.71% 51.25% 52.98% Net Debt＊ 283,402 338,593 322,284 329,674 324,942 342,697 Net Debt/Asset 45.87% 49.65% 47.20% 48.61% 48.06% 49.96% Unit: NTD millions	Consolidated Financial Status 12/31/2012 12/31/2013※12/31/2014※12/31/2015※12/31/2016※6/30/2017※ Debt 312,393 362,630 348,049 357,414 346,542 363,420 Debt/Equity 102.26% 113.55% 103.99% 111.44% 105.15% 112.68% Asset 617,892 681,999 682,737 678,139 676,122 685,954 Debt/Asset 50.56% 53.17% 50.98% 52.71% 51.25% 52.98% Net Debt＊ 283,402 338,593 322,284 329,674 324,942 342,697 Net Debt/Asset 45.87% 49.65% 47.20% 48.61% 48.06% 49.96% Unit: NTD millions	Consolidated Financial Status 12/31/2012 12/31/2013※12/31/2014※12/31/2015※12/31/2016※6/30/2017※ Debt 312,393 362,630 348,049 357,414 346,542 363,420 Debt/Equity 102.26% 113.55% 103.99% 111.44% 105.15% 112.68% Asset 617,892 681,999 682,737 678,139 676,122 685,954 Debt/Asset 50.56% 53.17% 50.98% 52.71% 51.25% 52.98% Net Debt＊ 283,402 338,593 322,284 329,674 324,942 342,697 Net Debt/Asset 45.87% 49.65% 47.20% 48.61% 48.06% 49.96% Unit: NTD millions	Consolidated Financial Status 12/31/2012 12/31/2013※12/31/2014※12/31/2015※12/31/2016※6/30/2017※ Debt 312,393 362,630 348,049 357,414 346,542 363,420 Debt/Equity 102.26% 113.55% 103.99% 111.44% 105.15% 112.68% Asset 617,892 681,999 682,737 678,139 676,122 685,954 Debt/Asset 50.56% 53.17% 50.98% 52.71% 51.25% 52.98% Net Debt＊ 283,402 338,593 322,284 329,674 324,942 342,697 Net Debt/Asset 45.87% 49.65% 47.20% 48.61% 48.06% 49.96% Unit: NTD millions
	12/31/2012	12/31/2013※	12/31/2014※	12/31/2015※	12/31/2016※	6/30/2017※
Debt	312,393	362,630	348,049	357,414	346,542	363,420
Debt/Equity	102.26%	113.55%	103.99%	111.44%	105.15%	112.68%
Asset	617,892	681,999	682,737	678,139	676,122	685,954
Debt/Asset	50.56%	53.17%	50.98%	52.71%	51.25%	52.98%
Net Debt＊	283,402	338,593	322,284	329,674	324,942	342,697
Net Debt/Asset	45.87%	49.65%	47.20%	48.61%	48.06%	49.96%

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

• ＊ Net debt = debt – cash & cash equivalents – ( financial assets at fair value through profit or loss-current + available-for-sale -

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

※ IFRSs basis

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