CSSSC — Interim / Quarterly Report 2019

Nov 28, 2019

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CHIEN SHING STAINLESS STEEL CO., LTD. 2019 Investor Conference

November 28, 2019

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STOCKCODE: 2025(TW)

Disclaimer Notice This briefing is based on information the company obtains from various sources. Some information may be affected by future uncertainties resulting in the discrepancies in the original plan and future prospects.

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The change will be released in Market Observation Post System(MOPS).

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CONTENT

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■Company Profile
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■Operating Highlights
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■ Financial Performance
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■Future Prospect
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■Q & A
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Company Profile

 Founded: MAY,1972

 Capital: NT$2,812 million

 Chairman: Mr. Ye Shou Tong

 Employee: 105 people

• Stock Listing Day: Feb.1996

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 Main business: stainless steel cold rolled products manufacturing, trading, and import & export business

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Company History Ⅰ

 1972：Founded on May 8.

 1989 ： For cash replenishment and public offering.

 1990 ： With the construction of capital increase, paidup capital of 1.1 billion yuan.

 1996 ： The company listed on the stock, paid-up capital of 2.42 billion yuan, through the ISO9002 certification, set up a subsidiary of Chien Yin investment (shares) company.

• 2000 ： The second annealing pickling line began to test,

• paid-up capital of 3.228 billion yuan.

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Company History Ⅱ  2009 ： Typhoon Morakot wind damage part of the equipment damage, has been completed within one year.

 2012 ： The company completed the development of the first electric locomotive, the Ministry of Transportation approved by the ordinary light of the machine foot pedal type safety test certification, legal listing on the road.

 2017 ： The company and three hundred percent subsidiaries on the board of directors on Nov. 27 resolution and corporate mergers and acquisitions law for easy merger, and in Jan. 4, 2018, the Ministry of Economic Affairs approved the merger and change registration, and the paid-up capital amount 6 reached NT$2.812 billion.

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Production Technology & Process

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Maximum Capacity 12,000 (MT/month)Maximum Capacity 12,000 (MT/month)

Raw Material Stainless steel 300 series hot rolled coil, Width 1300mm, Thickness 2.0~6.0mm

Cold Rolled Products Width: 1300mm Thickness:0.3~3.5mm (cold rolled 2B steel plate)

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Operating Highlights

2018 Years Consolidated Revenue decline of 22.16% Net Profit after Tax of -514 million UNIT : NT$ 1 million 8 2017 2018

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Operating HighlightsSales Profile

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Operating HighlightsSales Ratio

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★2019 Q3 Ratio of Domestic & Export Sales

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Financial Performance-
Balance Sheets
UNIT : NT$1000 Sep.30,2019 Dec.31,2018 Dec.31,2017
Amount % Amount % Amount %
Current Assets 906,558 46 988,769 46 960,340 44
Non-current
1,068,272 54 1,150,395 54 1,237,985 56
Assets
Total Assets 1,974,830 100 2,139,164 100 2,198,325 100
Current
193,656 9 1,009,124 47 808,499 37
Liabilities
Non-current
1,098,951 56 306,041 14 17,515 1
Liabilities
Total Equity 682,223 35 823,999 39 1,372,311 62
Total Liabilities
1,974,830 100 2,139,164 100 2,198,325 100
and Equity
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PS ： 2017&2018 Consolidated Balance Sheets 、 2019 Individual Balance Sheet
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Financial Performance-
Statements of Com rehensive Income
p
9 months
Year ended Year ended
UNIT： ended
Dec. 31,2018 Dec.31,2017
NT$1000 Sep.30,2019 % % %
Amount Amount
Amount
Operating Revenue 899,757 100 2,838,205 100 3,645,877 100
Operating Costs (1,015,900) (113) (2,876,674) (101) (3,448,090) (95)
Net operating
(116,143) (13) (38,469) (1) 197,787 5
margin (loss)
Operating Expenses (27,172) (3) (46,477) (2) (49,891) (1)
Non-operating -
11,877 1 (429,278) (15) 9,195
income & expenses
Profit (loss)for
(132,689) (15) (514,137) (18) 155,178 4
the period
Earnings per
(0.47) (1.83) 0.55
12
share(in dollars)
PS ： 2017&2018 Consolidated Statements of Comprehensive Income 、
2019 Individual Statements of Comprehensive Income
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Financial PerformanceStatements of cash flows

UNIT：NT$1000	For the 9 month period ended Sep.30,2019 (Amount)	For the year ended Dec.31,2018 (Amount)	For the year ended Dec.31,2017 (Amount)
Net cash flows from(used in) operating activities	(136,789)	(239,571)	649,204
Profit before Tax	(132,689)	(514,431)	155,405
Depreciation	90,021	118,530	111,946
Net cash flows from(used in)investing activities	(14,940)	(54,191)	(15,195)
Cash paid for acquisition of property, plant and equipment	(18,238)	(47,359)	(23,006)
Net cash flows from(used in)financial activities	-	589,123	(728,911)
Cash and cash equivalents at end of period	181,703	333,432	38,071

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Financial Report-Important Description Ⅰ

一、Accountants review conclusions：Modified unqualified opinion

The operation in the three quarters of 2019 was still not as expected and continued to generate losses. As of Sep. 30, 2019, the loss to be recovered was NT$2,118,263,000 . The Company intends to adopt the following causal response to improve its operational status and financial structure to maintain the company's continued operations: 1.Improve capital structure

2.Strengthen business promotion and diversified management 3.Reduce expenditures and reduce operating costs

CSSSC believes that there are still significant 14 uncertainties in the ability to continue to operate through the above-mentioned countermeasures. However, the individual financial reports of CSSSC in the three quarters of 2019 were still based on the continuing operations accounting basis, and the accountants did not correct the review conclusions.

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Financial ReportImportant Description Ⅱ

二、Waste case description

1.On April 8, 2019 CSSSC received an indictment from Tainan District Prosecutors Office for violation of the Waste Clean-up Law. The estimated cleaning cost was NT$1,224,404,000 (including tax), and the penalty section was the highest amount of NT$15,000,000. Tainan District Court is still under trial.

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Financial ReportImportant Description Ⅲ

2. Based on the results of expert appraisal and supplemented by the quotation of relevant manufacturers, CSSSC estimates the disposal cost of landfill wastes by NT$436,395,000, and the expert's opinion estimates that it may be subject to a fine of NT$15,000,000.

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Financial ReportImportant Description Ⅳ

3. The difference from the abovementioned indictment is mainly due to the difference in the weight of the waste weight conversion calculated by sampling and testing, and the difference between the expected waste and contaminated soil removal treatment methods and the quote of relevant manufacturers affected by the estimated cost of clearing processing

Financial ReportImportant Description Ⅴ

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4.On September 17, CSSSC received a letter of consent from the competent authority on the waste disposal plan. Within 36 months were completed, except that the landfill waste involved the Tainan City Government's redraw project within one month. The clearance is completed and the competent authority is notified to enter the factory for verification.

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Financial ReportImportant Description Ⅵ 三、Provision for outstanding claims derived from purchase of materials In the second quarter of 2019, due to the purchase of materials and commercial disputes with suppliers, on Oct. 21 2019, CSSSC received a agreement with the other party. The two parties did not claim each other for commercial disputes. In the third quarter of 2019, CSSSC has prepared the liabilities for the outstanding claims, and the whole number will be reversed. CSSSC fulfilled the original contract on November 5.

Future Prospect

一 . In terms of international stainless steel, the Indonesian government officially signed agreement of the nickel mine in September and banned exports on Jan. 1,2020. Therefore the nickel price stopped falling at the end of Aug., reaching a high point at the end of Oct. But it has since fallen. Overall, the nickel prices are in a downtrend in the short term and prices are weak.

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二 . The international market for stainless steel has fluctuated greatly in recent years, and the stainless steel demand of the downstream is poor, and affect CSSSC profit. Therefore, the CSSSC of operational direction will be adjusted in response to market demand, making favorable preparation plans and seeking growth in stability.

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CHIEN SHING STAINLESS
STEEL CO., LTD.
Q& A
Thank you！