LUCKY CEMENT — Call Transcript 2018

Dec 11, 2018

Lucky Cement Corporation

Earnings Conference 2018/12/11

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Disclaimer

The contents of this presentation are based on the financial statements reviewed or audited by the accountants. The financial statements are prepared in accordance with IFRS. Please refer to the financial statements of Lucky Cement Co., (the Company) for the complete contents and data.

The forward-looking statements contained in this presentation are subject to risks and uncertainties and actual results may be different. This presentation is not expressly or implicitly expressed or warranted to be correct and complete, nor does it represent a complete discussion of the Company's subsequent or consequential significant developments.

The Company is not responsible for the updating and revising of any . forward-looking statements

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A nda ge Company Profile Products & Business Market Performance CSR Future Development Q&A

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Lo o Stor g y

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Mr. Chen Liang-Chuan, the founder started his business in housing construction. He hopes that every young person who wants to get married could have a house, and their life could feel warm and happy. Therefore, the life's goal of Mr. Chen LiangChuan is to produce cement with high quality and reasonable price to build a house.

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Company Profile

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Stock Code : 1108

Company Name : Lucky Cement Corporation Date of Establishment : May 7, 1974 Listed Date : June, 1990 Paid-in Capital：NT$4,047,380,490 Chairman：Mr. Chen Liang-Chuan Head Office : 15F, 237 Songjiang Rd., Taipei, Taiwan Plants：Dongao Plant , Puxin Plant, Horen Plant Employee ：411

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Com an Milestone p y

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Lucky Cement Co., established in May 7, 1974 Dongao Plant started to operate in 1981 Lucky Cement Co., listed on TWSE in 1990

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Merged Puxin Plant in 1992

Slag Powder launched on the market in 1996 Started Circular Economy business in 2000 Horen plant Completed phase 2 expansion in 2008 ISO9001:2008 Certified in 2008

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Subsidiaries

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Luckicon Ready-mixed Concrete Factory Co., Ltd

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Dasheng Enterprise Co., Ltd.

Fuyu Development Company

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Lucky Cement Corp., Japan

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Luckyship Marine Co., Ltd

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Production Base

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Dongao Plant Product: Clinker & cement

Production Capacity: Clinker 2 million tons

Puxin Plant Product: Cement & slag powder Production Capacity: 1.4 million tons

Horen Plant

Product: Limestone, aggregates and stones Production Capacity: 6.2 million tons

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Branch Office

Cement sales ratio North：66% Taoyuan Taichun ~~g~~

Taipei Yilan

Cement sales ratio Central：16.2%

Hualien

Cement sales ratio Hualien & Taitung ：16.2%

Kaohsiung Cement sales ratio South：1.6%

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Products & Business

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limestone

Stone Aggregates

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Cement: Portland I & II

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Slag Powder

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Quicklime

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Circular Economy : Replace fuel and raw materials

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Cement Industry Horen Plant Limestone Construction Industry Clay Dongao Plant Public Silica Works Sand Cement Cement Clinker Raw Meal Pyrite Cement Products Recycled Aggregate Alternative fuel & material Ready-mixed Gravel Concrete Slag Powder Luckicon Ready-mixed Concrete Puxin Plant Factory Co., Ltd

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Sales Revenue Proportion

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Circular
Economy
10%
Stone
17%
Quicklime
Cement
1%
69%
Slag
Powder
3%
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Resource: Sales Revenue for nine months ended on September 30, 2018

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Cement Supply & Demand

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Unit: Million Tons
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16.8 16.6
Production
15.8
16 Consumption
14.6
13.4
14
12.3 12.0 12.2 12.6 12.1
11.7 10.8
12
10.2 10.1
10
7.9 7.9
8
6
4
2
0
2011 2012 2013 2014 2015 2016 2017 2018 Jan-Sep
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Resource : Taiwan Cement Manufacturers’ Association

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Avera e Cement Consum tion g p

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Unit : KG
1400
1,332
 1993 highest record 1,332 KG/per person
1200
 2017 Lowest record 432 KG/per person
1000
800
536
600
516 496
523
435
531 524
400
432
200
0
1977 1993 2011 2012 2013 2014 2015 2016 2017
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The Statistics of Building License and Construction License

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45 Building License
Unit: Million M²
39.76
38.63
40 Construction License
34.15
32.60
35 32.88
31.34 29.88
28.69
30 26.89 26.24
25.29 25.35
23.22
24.16
25
20.82
19.34
20
15
10
5
0
2011 2012 2013 2014 2015 2016 2017 2018
Jan~Sep
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Resource : Construction and Planning Agency, Ministry of the Interior

Cement Market Share

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26 Lucky Cement Import Cement
% 25.24
23
21.21
〜
21.29 May 30, 2011 Feb 19, 2022
20 Taiwan imposes 91.58% anti-dumping
19.58
duties on cement from China
18.42
17
12.34
14 14.00
11.72
11.84 11.26
Cement dumped from 11.42
China to Taiwan Clinker and cement dumped
11 from Southeast Asian countries
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8.72 9.65 9.57
8.46 9.51 9.68 8.75 8.44
7.51 7.35 7.34
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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Jan-
Sep
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Sales Volume of Cement

Unit: 10,000 tons

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140
120
100
80
60
40
20
0
2013 2014 2015 2016 2017 2018 Jan-Sep
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Sales Volume of Stone

Unit: 10,000 tons

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450
400
350
300
250
200
150
100
50
0
2013 2014 2015 2016 2017 2018 Jan.- Sep.
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Sales Volume of Rec clin Business y g

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Unit:10,000 tons
12.00
10.00
8.00
6.00
4.00
2.00
0.00
2013 2014 2015 2016 2017 2018 Jan.-Sep.
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Recycling Business as a Percentage of Total Revenue

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12%
10% 10%
8%
7%
6%
3% 6%
4% 5%
2%
2%
2%
0%
2012 2013 2014 2015 2016 2017 2018 Jan.-
Sep.
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Operating performance

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income	Consolidated Statements of Comprehensive Income	Consolidated Statements of Comprehensive Income	Consolidated Statements of Comprehensive Income	Consolidated Statements of Comprehensive Income	Consolidated Statements of Comprehensive Income	Consolidated Statements of Comprehensive Income
Unit :NT$ Millions
-200 0 200 400 600 800 1,000
		2013	2014	2015	2016	2017
Revenue		4,870	5,099	5,021	4,251	3,434
Grossprofit		542	739	906	662	129
OperatingIncome		271	441	624	426	-100
Profit		163	367	463	315	-103

O eratin erformance p g p

Consolidated Balance Sheets

					Unit: NT$	Millions
	2015	%	2016	%	2017	%
Current Assets	5,213	66%	5,361	66%	5,121	71%
Property, Plant, and	2,157	27%	1,900	25%	1,649	23%
Equipment
Total Assets	7,856	100%	7,753	100%	7,237	100%
Current Liabilities	1,825	23%	2,605	34%	1,925	27%
Total Liabilities	3,010	38%	2,951	38%	2,808	39%
Total Equity	4,846	62%	4,802	62%	4,429	61%

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Operating performance

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Unit: NT$ Millions, Except earning per share

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||||||
|---|---|---|---|---|
|2018|
|For nine months ended on|
|September 30, 2018|
|Revenue|2,460|
|Operating Costs|2,391|
|Gross Profit|70|
|O|eratin|Ex|enses|160|
|p|g|p|
|Operating Income|(74)|
|Non-Operating Income and Expenses|(8)|
|Profit before Tax|(83)|
|Tax Ex|ense|33|
|p|
|Profit|(50)|
|Other Comprehensive Income|3|
|Total Comprehensive Income|(47)|
|EPS|(0.12)|

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CSR

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Environment
Employee
Protection
Value
Circular
永續
Society Chain
Economy
永續 永續
價值鏈
價值鏈 價值鏈
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Top 20 % in Corporate Governance Evaluation

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CSR

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Employee
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1. The Company has fair salary system, employee benefits policies, labor safety and health system, and implements the concept ,"respect for life and pursuit Zero disaster ", to create a harmonious labor relations. ISO-45001 is introduced to production system and will be expected to be certified in June 2019.

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1. Various staff education and training, enhance staff skills, and fulfill human resource development.

2. Diverse complaints mechanism ensure labor rights

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CSR

1. Assist local resident and native people in employment

2. Provide Lucky cement scholarship and sponsor a variety of school activities

3. Emergency assistance for villagers

Society

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1. Volunteer for community services including road maintenance and beach clean

2. Assist community building activities

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CSR

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Certificate of recognition from our sponsored groups

Society

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Environment Protection

CSR

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1. Greening in plants

2. Improve air pollution Prevention by replacing old equipment

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清水
貯水池
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1. Implement energy-saving policies by upgrading production equipment.

4 Use recycling water in production process and carwash.

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Value Chain

CSR

Suppliers： We work with suppliers to improve corporate social responsibility, promote sustainable development of the environment, improve labor rights, safety and health, to safeguard basic human rights.

Customers：

With professional services and excellent product quality, we establish customer-oriented quality system to pursue a win-win goal for customers and the Company. Customer Service Satisfaction is 93.73 % in 2017.

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CSR-Circular Economy

Cement industry is the heart of circular economy. Through 1450℃ of high temperature and other characteristics, the production process can reduce Toxic gas (such as dioxin). It will be helpful to reduced Greenhouse effect. That Waste of resources replace raw materials becomes possible through investing in R&D and managing in production process. We can not only reduce natural resource consumption but also keep product quality. This will be helpful to achieve circular economy.

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CSR-Circular Economy

Circular Economy

Results of Circular Economy for nine months ended on September 30, 2018

1. Reduce 1,010 tons of carbon dioxide emissions.

2. Using flue gas desulfurization gypsum from power plants can reduce the imported natural gypsum 18,970 tons

3. The use of waste oil and organic sludge instead of fuel use reduces coal consumption by approximately 1,113 tons.

4. Soil from construction, contaminated farmland soil, water treatment sludge, coal ash, slag powder and waste cast sand can replace part of clay. It reduces clay consumption by approximately 40,820 tons. It is helpful to ensure the recycling of material resources, restrain natural resource consumption, reduce the environmental load, and make the industrial economy sustainable.

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Future Develo ment p

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Cement industry has become an important role in circular economy. We must do our best to fulfill the responsibility of citizens of the world. Through the reuse of resources and energy, we will achieve a win-win goal for both enterprises and the environment , and contribute ourselves to protect sustainable environment.

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Future Development

The Legislative Yuan approved the Forwardlooking Infrastructure Development Program, the program will last four years and be planned to spend NT$420 billion (US$13.7 billion) in five major construction projects including light railways, water projects, green energy, digital infrastructure, and rural and urban construction. The infrastructure projects will be helpful to drive the cement demand, and the Company will seize this opportunity.

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Asset activation

Assets	Location	Area (Ping)	Zoning
Puxin Plant	Yangmei District,, Taoyuan City	8,929.25	Industrial land
Puxin Plant	Yangmei District,, Taoyuan City	4,011.19	Industrial land
Puxin Plant	Yangmei District,, Taoyuan City	64.73	Residential area
	Yangmei District,, Taoyuan City	5.14	Land used for **railways **
Total		13,010.31

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~~Land Development~~

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Lucky Cement established Dasheng Building Enterprise Co., Ltd. in 1987 and changed its name to Dasheng Enterprise Co., Ltd. in 1989.

Dasheng Enterprise mainly focuses on the land in the Da Gan Lin area of Keelung City (located in the Anle District of Keelung City) it is about 5 minutes drive from exit Zhonghe of the Formosa Freeway.

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~~Land Development~~

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Phase I - 4.04 hectares

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~~Land Development~~

Phase II – 13.47 hectares

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Phase II Upper area 6.2 ha Lower area 7.27ha

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Land Develo ment p

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The Keelung City Government held a rezoning conference in December 6, 2018. They plan to change the location of land used for school from the north area to the south area. This will lead to a reduction in the construction land of the and an Dasheng Enterprise increase in the cost of land readjustment. Due to the major project changes, which should be approved by the Ministry of the Interior, the approval process will delay the development schedule.

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