FUCC — Investor Presentation 2018

Dec 22, 2018

FUCC

Formosan Union Chemical Corp.

2018 Investor Conference
12.22.2018
(Stock Symbol: 1709)

Disclaimer

Information from this presentation may include forward-looking statements, however it is not limited to statements on all of our possible business activities, events or developments. Such statements are based on our assumptions on future operation and political, economic and market factors not in our control. Actual operational outcomes may be significantly different from such statements.

Company Historical Highlights

June 1973 Established in Taipei City on June 21, 1973. The registered capital is NT$50,000,000.
April 1977 Completed Linyuan Factory in Kaohsiung. Started producing detergent-use alkyl benzenes.
July 1986 Company stock officially offered to the market for trading.
Oct. 2004 Nonylphenol plant expansion, annual production capacity is 25KT.
Dec. 2010 Replaced old alkylation equipment with new ones. Increased the total capacity of alkyl benzenes to 125KT.
Jan. 2014 Received the permission to release the first domestic unsecured convertible debenture. The total amount is NT$ 0.7 billion. The debenture has been listed since February 20th in the year.
May 2016 Completed plant debottleneck, annual production capacity increased to 24KT.
April 2018 Started-up 40KTA Nonylphenol Plant in Jiangsu, China. The plant is 50-50 JV with
Chang Chun Group.

Business Scope

Main business:
We're committed to the manufacturing, processing and sale of alkyl benzene, normal olefin and hydrogenated hydrocarbon resin and its derivatives and the operation and investment of other related businesses.

Business Proportion for Main Products (Departments)?Our main business focuses on the manufacturing and sale of the products and derivatives below: Alkyl benzene, alkyl phenol, alkyl benzene sulfonic acid and hydrocarbon resin.

Year	2017		2016
Item	Amount	Ratio (%)	Amount	Ratio (%)
Alkylation Department	5,753,804	65.48	5,623,045	65.58
Resin Department	2,693,769	30.65	2,625,007	30.61
Agriculture & Others	340,207	3.87	326,368	3.81
Total	8,787,780	100.00	8,574,420	100.00
Unit: NT$ thousand

Our Products

Alkyl benzene: An upstream material required for washing powder and detergent in daily and chemical products.

Alkyl benzene sulfonic acid: Alkyl benzene becomes the main component of the decontaminant after processing. It is extensively used in the home cleaning and care field, including washing powder, detergent and home cleaner.

Alkyl phenol: It's the upstream material for surfactant and raw material for lubricant additive. It's mainly used in the industrial detergent, antioxidant, high-class printing ink resin, hardener and lubricant.

C9 hydrocarbon resin/hydrogenated hydrocarbon resin: It's the upstream material for adhesive and hot melt adhesive. It increases viscosity and moisturization.

Other: We focus on the sale of agricultural product and sugar trade.

Market Analysis

Primary sales region of product
Unit: NT$ thousand
| Year | | 2017 | | 2016 | |
| --- | --- | --- | --- | --- | --- |
| Sales Region | | Amount | Ratio (%) | Amount | Ratio (%) |
| Domestic sales | | 2,215,774 | 25.21 | 2,560,990 | 29.87 |
| Export sales | China | 1,737,024 | 19.77 | 1,720,012 | 20.06 |
| | Vietnam | 638,220 | 7.26 | 599,023 | 6.99 |
| | Philippines | 428,419 | 4.88 | 495,334 | 5.78 |
| | Guatemala | 636,205 | 7.24 | 363,483 | 4.24 |
| | United States | 507,100 | 5.77 | 462,566 | 5.39 |
| | Japan | 420,514 | 4.79 | 410,021 | 4.78 |
| | Subtotal for others | 2,204,524 | 25.09 | 1,962,991 | 22.89 |
| Net sales | | 8,787,780 | 100 | 8,574,420 | 100 |

Short and Long Term Business Development Plans

Alkyl benzene
Short term: We aim to strengthen customer service and consolidate our market.
Long term: We offer customers with sophisticated services and develop new usage of products via flexible backup operation.
Alkylphenol
Short term: We continue to develop the European and U.S. markets to increase the market share.
Long term: To maintain the operating rate, we develop other alkylphenol products such as the lubricant additive to enhance the operating income.
Hydrogenated hydrocarbon resin
Short term: We provide a complete production line for hydrogenated and non-hydrogenated C9 hydrocarbon resin. We develop a highly hydrogenated hydrocarbon resin with high softening point to meet customization needs.
Long term: We expand the productivity and increase the production efficiency.

Financial Overview
Financial information for the last 5 years

SIMPLIFIED CONSOLIDATED STATEMENTS OF INCOME IN THE LAST 5 YEARS

Unit: NT$ million	2014	%	2015	%	2016	%	2017	%	2018Q3	%
Operating revenue	11,075	100	9,462	100	8,574	100	8,787	100	7,670	100
Operating costs	10,146	92	7,939	84	6,747	79	7,137	81	6,539	85
Gross profit	929	8	1,523	16	1,827	21	1,650	19	1,131	15
Operating expenses	719	6	735	8	783	9	796	9	585	8
Profit from operations	210	2	788	8	1,044	12	854	10	546	7
Non-operating income and expenses	44	0	58	1	66	1	(34)	0	38	1
Profit before income tax	254	2	846	9	1,110	13	820	10	584	8
Income tax expense	52	0	144	2	209	2	158	2	135	2
Net profit	202	2	702	7	901	11	662	8	449	6
Earnings per share (NT$)	0.43		1.48		1.96		1.32		0.88
Cash dividends (NT$)	0.60		1.18		1.51		1.50

CONSOLIDATED REVENUE IN THE LAST 5 YEARS

Chart: Unit: NT$ million

Category
2014	11075.0
2015	9461.0
2016	8574.0
2017	8787.0
2018Q3	7670.0

NET PROFIT IN THE LAST 5 YEARS

Chart: Unit: NT$ million

Category
2014	202.0
2015	702.0
2016	901.0
2017	662.0
2018Q3	449.0

SIMPLIFIED CONSOLIDATED STATEMENTS OF INCOME

Unit: NT$ million	2018Q3	%	2017Q3	%	Amount of increase (or decrease)	Rate of increase (or decrease) (%
Operating revenue	7,670	100	6,555	100	1,115	17
Operating costs	6,539	85	5,260	80	1,279	24
Gross profit	1,131	15	1,295	20	(164)	(13)
Operating expenses	584	8	582	9	2	0
Profit from operations	546	7	713	11	(167)	(23)
Non-operating income and expenses	38	1	(8)	0	46	575
Profit before income tax	584	8	705	11	(121)	(17)
Income tax expense	136	2	138	2	(2)	(1)
Net profit for the period	449	6	567	9	(118)	(21)

Financial ratio analysis in the last 5 years

Chart

Category
2014	2.3199999999999883	3.11
2015	7.09	10.43
2016	8.93	12.49
2017	6.42	8.66
2018Q3	4.14	5.87

Q&A