GBM — Investor Presentation 2021

Sep 14, 2021

Goldsun Building Materials Co., Ltd.

I. Company Profile
II. Operating Performance in the 1st Half of 2021
III. Outlook for the 2nd Half of 2021 and Future Operations
IV. Company's Potential Advantages (Highlights)
V. Important Appendix

September 14, 2021

Scan to check the building safety
Scan the QR code with your smartphone to see the traceability records from Goldsun. They immediately show the source of sand and gravel, the strength of concrete, date of pouring, chloride ions inspection, and other information, giving you access to information on building quality.

Notes:

I. Company Profile
Company information
Invested in Wellpool (stock code 8424), with 51% in shareholding in 1984.
Established Taipei Port Terminal Company in 2009, and officially started operations in 2016.

Established a ready-mix concrete plant in Suzhou from 2003-2005
Established Jin Shun Maritime Limited in 2012
Established Yuan Shun Maritime in 2013
Established Gimpo Marine Co., Ltd. in 2018
At present, we have 6 dredging ships, and import 6-10 million tons of sand and gravel a year
Established in 1954. Listed in the Taiwan Stock Exchange since 1978. Current capital at NT$11.8 billion.

A leader in Taiwan's ready-mix concrete market.
28 ready-mix plants in Taiwan, accounting for 15% of market share.
Revitalization of the corporate group's land assets and innovation of construction business.

P.1

Notes:

II. Operating Performance in the 1st Half of 2021
Operating Performance in the 1st Half of 2021

(I)

Consolidated revenue was NT$10.578 billion, an increase of NT$2.082 billion (↑24.5%) from NT$8.496 billion in 2020.
(Domestic concrete ↑NT$910 million + Suzhou concrete ↑NT$965 million + Other consolidated entities NT$207 million)

Domestic concrete sales volume was 3.168 million m3, with an ASP of NT$2,412, compared with 3.1 million m3, with an ASP of NT$2,173 in 2020, an increase of 68,000 m3 (↑2.2%) in volume and NT$239 (↑11%) in ASP.

(II)

Suzhou concrete sales volume was 943,000 m3, with an ASP of CNY502, compared with 528,000 m3, with an ASP of CNY486 in 2020, an increase of 415,000 m3 (↑78.6%) in volume and CNY16 (↑3.3%) in ASP.

(III)

Goldsun's standalone gross margin was 20.79%, which was a significant increase of 5.79% from 15% in the same period last year. However, because Suzhou Concrete's gross margin was only 4% (its revenue accounted for 19.5% of the consolidated revenue), the consolidated gross margin was reduced to 17.85%.

(IV)
P.2

Operating Performance in the 1st Half of 2021

(V)

Although Suzhou Concrete had risen both in price and volume in the first half of the year, the raw materials of sand and gravel had soared (hoarding supplies) and the concrete market could not have the price hike transferred simultaneously due to the contracts and market practice (about 3 months of difference), the gross margin dropped from 8.6% in 2020 to the bottom of 4% in Q2 2021. Fortunately, due to the catch-up ASP and the correction in the prices of raw materials of sand and gravel, the gross margin has gradually recovered starting July. It is estimated that it will reach the normal level of last year's starting September.

The "consolidated net profit before tax" is NT$1.683 billion, an increase of NT$576 million from the NT$1.107 billion in the same period last year, a substantial increase of 52%. However, the "actual income tax" of about 18% was required for this year, so the "consolidated net income" is NT$1.345 billion, an increase of NT$276 million from NT$1.069 billion in the same period last year.

(VI)
P.3

III. Outlook for 2nd Half of 2021 ad Future Operations
Outlook for 2nd Half of 2021 ad Future Operations

(I)

With the following six trends in development, the orders on hand have reached a new high of more than 8 million M3 (1.23 times the annual sales volume of 6.5 million M3). Under the strategy of "Selecting the best for shipment," not only gross profit and profitability have increased significantly, but payment terms have become better and the A/R days have decreased slightly (125 days↓120 days).
The construction and expansion of semiconductor industry clustering, further driving the development of real estate around those companies.
The emerging industrial parks will drive the demand and prosperity of the surrounding construction and real estate properties.
(Industry migration + Construction in place + Population migration = New town)
The Ministry of the Interior has actively amended laws to establish floor area ratio incentives for urban revitalization. The revitalization of old buildings, offices and factories has experienced significant growth. This is just the beginning, and the business opportunities should continue for at least five years.
In order to resolve the problems of demand for industrial land, the program of the “renewal of factories and offices” will accelerate to create (energy-saving, smart, energy storage)-enabled and functional factories and offices.
The pandemic has eased and the situation of lack of labor has improved, and the real estate boom has shown signs of recovery.
The “Great South, Great Development” policy will be invested with NT$ 900 billions of funds within the next 4 years, for measures of public infrastructure, tax preference and start-up assistance in southern cities and counties to balance the regional development. Also, there will be two science industrial parks established in Pingtung and Chiayi, respectively, which aim to form a science corridor in the great south with Tainan Science Park, Chiaotou Science Park and Shalun Smart Green Energy Science Park.
P.4

Outlook for 2nd Half of 2021 ad Future Operations

In the first half of the year, the sales volume of domestic concrete was only 3.168 million M3 (an average of 528,000 M3 per month), as it was affected by the Spring Festival (February) and the rainy season (June). The monthly sales volume for the second half of the year is expected to return to normal at 550,000 to 580,000 M3 (22,000 M3 x 26 days). Based on the scheduling of orders, the ASP is also higher than that of the first half of the year. Overall, the operations are optimistic.

(II)

The performance of Suzhou Concrete in the first half of the year was not as good as expected. However, the ASP starting July has price catch-up to make up for the drop, raw materials prices have fallen and gross margins have risen significantly. It is expected that the performance will return to a normal level just like the domestic concrete market and we will stay optimistic.

(III)

(IV)

TSMC's 2 nm process plant (with an area of 89.8 hectares) at Baoshan phase 2 site in Hsinchu Science Park has passed the environmental assessment and begun the land acquisition. The construction will start in the first half of 2022 and it is to go into mass production in 2024. Based on the expansion scale of a 3 nm process plant, the volume of concrete required should be more than 500,000 M3.

(V)

The newly purchased Rende Flagship Plant in Tainan, expected to enter mass production in Q4 2022, has an area of 2,900 square meters, and it is estimated to have a production volume of 600,000 M3, which is in line with the governmental policy of the “Great South, Great Development,” and will show its effect in a timely manner.

Implementation of the "Energy-saving and carbon-reduction policy (Carbon Neutrality)" and the research and development of "Backfill materials for wafer inorganic slurry" and other projects.

(VI)
P.5

IV. Company's Potential Advantages (Highlights)
Company's Potential Advantages (Highlights)

(I)

In response to the government's "Eastern District Gateway Program," the development of the Nangang Depot will create substantial asset appreciation and realize future benefits.

We have sufficient assets. They were acquired back in the day, so the cost is low. They have room for growth in capital gains, which will bring stable cash flow and non-operating income. The benefits can be even more apparent when the NT$ appreciates.
The construction land plot (across the street from the Pingshi Camp Rezoning Area) on Zhonghua East Road in Tainan City was acquired in 1988, and covers an area of 1,655 ping.
The construction land plot (adjacent to Kaohsiung Marriott Hotel and E Sky Mall) on Minzu Road in Kaohsiung City was acquired in 1991, and covers an area of 2,028 ping.

(II)

The synergy of the one-stop-shop approach for importing sand and gravel by the Taipei Port Terminal Company Limited is expected in the short term.

(III)

(IV)

The company's profits have increased significantly. In 2020, the "Net cash inflow from operating activities" reached NT$2.84 billion. Sufficient funds can be used for effective capital expenditure, and the company has the ability to keep up with "High dividend yield and high yield."

(V)

Our exclusive R & D technology has won us the “Taiwan Concrete Institute Award of Engineering Excellence” for three continuous years, which made us the designated supplier of high-end concrete for electronics factory, as well as that of the proton and heavy ion therapy center of major medical institutions.
P.6

五、 Appendix

Appendix
A.Consolidated income statement summary for the last three years:

1

Unit of amount: NT$100 million
| Item/Year | 2018 | 2019 | 2020 | 2021 H1 |
| --- | --- | --- | --- | --- |
| Operating revenue (Note 1) | 186.45 | 190.05 | 188.78 | 105.78 |
| Operating gross profit | 14.08 | 12.90 | 31.33 | 18.88 |
| Gross profit margin (%) | 7.55% | 6.79% | 16.60% | 17.85% |
| Operating expenses | 9.58 | 9.26 | 8.09 | 4.17 |
| Operating Expense Ratio (%) | 5.14% | 4.87% | 4.29% | 3.94% |
| Non-operating income and expenses (Note 2) | 0.90 | 9.07 | 3.82 | 2.12 |
| Pre-tax net profit | 5.40 | 12.71 | 27.06 | 16.83 |
| Net profit after tax | 5.91 | 11.86 | 25.51 | 13.45 |
| Earnings per share (NT$) | 0.37 | 0.80 | 1.90 | 1.1 |

Note 1: 2018 and 2019 include NT$2.798 billion and NT$1.546 billion in revenue, respectively, from the plant in Fujian, while there is no such revenue in 2020.
Note 2: Non-operating income and expenditure: About NT80 million in cash dividends are recorded every year. In 2019, there is income from the disposal of cement plants in Fujian and the building in Zhongli. In 2020, there is a refund of overpaid royalties from Taipei Port Terminal. In 2021, an income of NT$160 million from the disposal of plant in Kushan is put to the account entry.
P.7

Appendix
B.Income statement summary for the last three years:

1

Unit of amount: NT$100 million
| Item/Year | 2018 | 2019 | 2020 | 2021 H1 |
| --- | --- | --- | --- | --- |
| Operating revenue | 114.02 | 127.28 | 144.95 | 77.83 |
| Operating gross profit | 4.37 | 10.21 | 25.16 | 16.18 |
| Gross profit margin (%) | 3.83% | 8.02% | 17.36% | 20.79% |
| Operating expenses | 5.51 | 5.71 | 5.13 | 2.76 |
| Operating Expense Ratio (%) | 4.84% | 4.49% | 3.54% | 3.55% |
| Non-operating income and expenses (Note ) | 6.19 | 6.73 | 5.03 | 2.51 |
| Pre-tax net profit | 5.05 | 11.22 | 25.06 | 15.93 |
| Net profit after tax | 5.15 | 11.02 | 24.73 | 13.00 |
| Earnings per share (NT$) | 0.37 | 0.80 | 1.90 | 1.10 |

P.8

C.Product cost structure of the concrete
industry
Appendix
Raw material costs can account for more than 83% of production costs so that the control of sources of materials is the key.

[unsupported chart]

[unsupported chart]

P.9

D.Structure of consolidated revenue of
Goldsun Building Materials in the past
three years
(after internal revenue write-off)
Appendix

[unsupported chart]

[unsupported chart]

[unsupported chart]

Unit: NT$ 100 million

2019
2020
2021H1

Business unit
/
Year

125.2
65.9%
142.8
75.6%
76.4
72.2%
-
　　Taiwan Business Unit
Concrete

16.6
8.7%
14.3
7.6%
8.8
8.3%
-
　　Taiwan Business Unit
Other

32.8
17.3%
31.7
16.8%
20.6
19.5%
　　China ready-mix business

15.5
8.2%

China cement business

190.1
188.8
105.8
Total

P.10

Notes:

Appendix
F.Main sources of sand and gravel for the
domestic concrete industry
(I)
Taipei area: Imported sand and gravel (mostly from China), domestic sand and gravel (Hualien and Taitung [Hualien River system and Liwu River system]) (Yilan [Lanyang River system]), Sanxia and Taoyuan underground, and some from Da-an River (transported by trucks on their returning trips) and others.

(II)
Taoyuan, Hsinchu, and Miaoli area: Local rivers (Dahan River system, Houlong River system, and Zhonggang River system), underground and a small amount from Da-an and Dajia (transported by trucks on their returning trips).
(III)
Taichung, Yunlin and Chiayi area: Local rivers (Da-an River system , Dajia River system, Zhuoshui River system, and Dadu River system), imported sand, underground and mountain streams. Note 1
(IV)
Tainan and Kaohsiung area: Local rivers (Gaoping River system)
Due to the cost (transportation) factor, the use of gravel aggregates shows differences in regions.
P.11
Note 1: The quality of materials from dredging works in mountain streams is relatively low, and the materials are used to supply other industry peers for the construction projects in mountain areas.

Notes:

Touqian River
Houlong River
Dan-an River
Dajia River
Dadu River
Zhuoshui River
Bazhang River
Gaoping River
Xiuguluan River
Hualien River
Guan-Yang River

G.Distribution table of materials
sources from China
Appendix

Luoyuan County
Minhou County (Songmen, Qingzhou)
Shihu
Shijing
P.12

Notes:

Nanping City
Sanming City
Longyan City
Zhangzhou City
Xiamen City
Quanzhou City
Putian City
Fuzhou City
Ningde City
Lianjiang County
Matsu Islands

Taipei City
Taoyuan City
Hsinchu City
Miaoli County
Taichung City
Taroko National Park
Yilan County

H. Construction project price index in the past two years
- Ready-mix concrete
Appendix

Chart:

Category	Prince Index
Aug	117.5
Sep	118.0
Oct	118.5
Nov	119.2
Dec	120.7
Jan,2020	122.4
Feb	125.0
Mar	127.5
Apr	128.3
May	128.8
Jun	128.9
Jul	129.0
Aug	129.3
Sep	129.3
Oct	129.3
Nov	129.2
Dec	130.0
Jan,2021	130.4
Feb	130.6
Mar	130.9
Apr	131.1
May	131.3
Jun	131.8
Jul	132.7
---	---
Price Index	117.5
Source: National Statistics of the ROC
P.13

Appendix

"Xinyi District of Tainan" Pingshi Camp Rezoning Area Seeking Investment

Pingshi Camp Rezoning Area is known as the Xinyi District of Tainan. The City Government is actively engaged in seeking investment for urban renewal. Through collaboration, it is expected to allocate 120 units of social housing, further promoting the land use.
Pingshi Camp Re-zoning Area in East District is considered a prime area. The City Government once tendered a plot of cost equivalent land as a commercial district in 2019. The area was about 3,657 ping, with a starting bid price of NT$856,000 per ping. A construction company from Taichung won the bid with NT$988,000 per ping, totaling more than NT$3.6 billion for the whole plot of land. It was the crown jewel of that public tender project and the development prospects of the area are promising.
Urban Development Bureau of Tainan City Government stated that for land plot #8, 9, 15, 16, and 18 of Pingshi Section in East District, the urban renewal project adopted a "transfer of rights" approach. With a building bulk ratio bonus, the City Government will obtain at least 120 units of social housing to meet the target housing policy.
The Urban Development Bureau said that owners of land plots under planning will receive their royalties after the renewal and the winning bidder can fully grasp the sales and planning of their products. It is hoped that the investment strategy will create regional development and a win-win situation for the public sector and investors.
The Urban Development Bureau pointed out that the total land area of the investment base is about 2.4 hectares and it is adjacent to the T. S. Mall and Tainan Ambassador Commercial District, and close to the Dawan Interchange that has been opened and public transportation facilities in the area, as well as the 100-meter landscape park (Pingshi Park) in the center. It has the potential to become the other city center of Eastern Tainan. Public-private collaboration creates new opportunities for urban development.
P.14

Appendix

P.15

I.Reconstruction opportunities worth 13 trillion for 4.36
million houses nationwide that are more than 30 years old
Appendix
Number of tax-registered residences more than 30 years old nationwide and in six special municipalities
| Item Region | Total number of properties (residences) | House average age (years) | Number of houses more than 30 years old (residences) | % of all houses more than 30 years old |
| --- | --- | --- | --- | --- |
| Nationwide | 8,810,119 | 31 | 4,365,243 | 49.55% |
| Taipei City | 899,693 | 35.49 | 634,959 | 70.58% |
| Tainan City | 701,063 | 32.95 | 349,020 | 49.78% |
| Kaohsiung City | 1,072,440 | 31.57 | 546,968 | 51.00% |
| New Taipei City | 1,636,188 | 29.43 | 756,385 | 46.23% |
| Taichung City | 1,045,910 | 28.51 | 407,704 | 38.98% |
| Taoyuan City | 854,508 | 26.3 | 291,956 | 34.17% |
| Source: Real estate information platform of the Ministry of the Interior. Table by reporter Yi-Ping Hsu | | | | |
According to the real estate information platform of the Ministry of the Interior, of the 8.81 million houses nationwide with household registration in 2020 Q2, 4.36 million of them are more than 30 years old, which meet the criteria for urban renewal and old buildings renovation. Assuming that each rebuilt property averages about 30 pings at NT$100,000 per ping, the opportunity for construction would value as much as 13 trillion, nearly 70% of last year's GDP.
P.16