SE CEMENT — Investor Presentation 2022

Nov 28, 2022

 Investor Seminar? ? Stock ID ：1110 Report time ：2022/11/30

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DISCLAIMER

The contents discussed in this briefing and in the conferences are prepared based on existing information. Some of the financial or business-related information may contain descriptions about the Company’s future prospects. These descriptions are prone to risks and uncertainties, and may lead to outcomes that are different from those described in this briefing.
The Company is not responsible for future updates or amendments to this briefing. Contents of this report have been published solely for the purpose of information exchange and should not be construed as investment recommendations.

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HELLO!
Content

Company Highlights
Industry
Highlights
Operating Highlights
Financial
Highlights
Future
Prospects
Q＆Ａ

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Company Highlights

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December 28,1956
Founder Mr. Chiang-Chang Chen
founded Southeast Cement
COMPANY HISTORY

October 1994
Shares listed on TWSE for trading

January 1999
Min-Hsien Chen succeeded in the role of Chairman
October 2009 - Present
Mr. Min-Tuan Chen succeeded in the role of Chairman

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Company Profile

Company profile
 Company name: Southeast Cement Corporation
Date of establishment: December 28, 1956
Date of listing: October 22, 1994
Paid-up capital: NT$5,720,007,970
Employee count: 104
Chairman: Min-Tuan Chen
President: Kuan-Hua Chen
Main products: Portland cement, Portland slag cement and water-quenched blast furnace slag
Business coverage: cement production and trade, house and land leasing, land development, cable TV and recycling business.

Investments and affiliated enterprises

 Southeast Investment Co., Ltd.
Southeast Paper Manufacturing Co.,
Ltd.
 Dong Nai Construction Co., Ltd.
Southeast Gao Liang Recycling Co.,
Ltd.
 Southeast Milo International Co., Ltd.
 Southeast Construction Co., Ltd.
CHC Resources Corporation
 Nan Hsia Timber Co., Ltd.

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MAIN PRODUCTS AND APPLICATION

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Type 1 Portland cement
Referred to as general cement, it is the most common type supplied in the market. It is suitable for any structural and concrete work that is not exposed to sulfate soil or groundwater.
Southeast Cement Corporation has been dedicated to the local market since it was founded in 1956. It manufactures Portland cement of excellent stability and quality under the Southeast brand, for which it has earned the trust of its customers.

MAIN PRODUCTS AND APPLICATION
Type 2 Portland cement

Applicable for ? (1) Construction works with prolonged exposure to sea breeze or corrosion by seawater, such as breakwater, tetra pod, port, caisson and coastal constructions.? (2) Mass concrete constructions, such as a dam, bridge, reservoir, etc.
(3) Underground foundations, such as a building basement, underpass, tunnel and the underground mass railway transit system.

Portland slag cement
A mixture of Portland cement and blast furnace slag that meets CNS15286 standard.
Properties: lower hydration heat, high compressive strength in the later period, durability and low cost.
Bulk slag cement : soil improvement, dam engineering, maritime engineering, tunnel engineering, and sewer, bridge and river bank engineering.
Bagged slag cement: suitable for tile work. Easy to work with due to the longer final setting time, and able to prevent efflorescence and molds.

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Blast furnace slag

Steel factories produce molten residues in the form of silicate and aluminate when smelting iron. These residues are quenched into granular form, which are known as blast furnace slag. These blast furnace slag granules are first dried then ground into powder form of appropriate fineness. It is used mainly as a concrete additive or as a cementitious material to replace part of the cement content, or mixed with cement to create Portland slag cement. The raw materials of Southeast slag are water-quenched slag granules sourced from China Steel Corporation. The slag contains no other additive or waste whatsoever, and has been well-known for its consistent and reliable quality.
MAIN PRODUCTS AND APPLICATION

Southeast Waterproof Cement

To accommodate Taiwan’s humid and rainy climate, Southeast Cement has invested significantly in the development of waterproof products for many years. One of the successes the Company has achieved in this respect was the “Southeast Waterproof Cement” which, despite being water-impermeable, is air-permeable. These characteristics can effectively protect buildings from corrosion due to acid rain or moisture, which may cause problems such as water leakage, weathering, cracking or erosion of the steel structure. The product is free from toxic elements or hazards. It improves the endurance of buildings, hence assuring residents by providing better safety and a lifestyle of higher quality.
CNS Mark

The CNS Mark is MOEA. product quality certification system.Southeast cement has been certified with the CNS Mark for more than 50 years. Our persistence in terms of quality is the strongest commitment and promise that we can offer consumers.

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OVERVIEW OF THE LAND?DEVELOPMENT ?BUSINESS

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In April 2022, we established a subsidiary"Southeast Milo International Co. Ltd.".The Group holds 51% of the shares as a professional team for the future development of revitalized assets.

OVERVIEW OF THE LAND?DEVELOPMENT ?BUSINESS
Asset activation section
The land in Kaohsiung Asia New Bay Area has been rezoned to 16,129.6 pings and was originally used as a parking lot, and a land lease has been signed with our subsidiary, Southeast Milo International Co., Ltd., In order to establish a market segmentation, the overall planning will be carried out in the form of a park, which is expected to be developed in two areas, A and B. A large manufacturer will be stationed in area A (on the side of Fuxing Road), while 8 to 12 roadside stores and a three-dimensional parking lot are planned in area B (on the side of Chenggong Road), which is expected to attract first-tier chain brands from home and abroad to station there.

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Circular Economy Business Overview
Southeast Gao Liang Recycling Co., Ltd. was established in 2019, and its Renwu plant has been completed to produce Controlled Low Strength Backfill Material (CLSM for short), which is mainly used as CLSM pellets after processing by recycling harmless business waste.
The Renwu plant will sell 54,758 cubic meters of ready-mixed concrete in the third quarter of 2022. Due to the increasing demand of construction projects in Kaohsiung area, the sales volume will increase year by year in the future, and the environmental protection has become the key point of domestic economic development in recent years, we expect to spend more than 800 million yuan to build a new Dafa plant in Kaohsiung Dafa Industrial Zone, and expand the existing Kaohsiung plant in Renwu area and add a new intelligent production line. In the future, the Dafabet plant will receive waste from the general business and produce recycled concrete granules, which will be handed over to the Kaohsiung plant for making CLSM and other cement products to achieve effective reuse of resources.
The EIA of the Dafabet plant has been approved, and is currently in the process of applying for the establishment permit, plant and equipment construction, trial operation, and operation permit. It is expected that the plant construction and equipment importation will be completed in the fourth quarter of 2023 and the application for commissioning will be made in the first quarter of 2024 after the application for operation permit is obtained.

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Industry Highlights

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Ready mixed concrete market

Industry Overview ：

Kaohsiung City's social housing project
public works contracting in the Qiaotou Science Park
TSMC's factory construction
Renwu Industrial Park development
MRT Red Line extension project
MRT Yellow Line project contracting
Zuoying Military Port tunnel and dock project
and civil construction projects are still active and the area of construction is growing
which helps cement shipments grow steadily

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Shipment amount of concrete in Taiwan ：
Comparison between 2022/1-2022/8 and 2021/1-2021/8
READY MIXED CONCRETE MARKET

Chart

Category	2022/1-2022/8	2021/1-2021/8
Annual
(thousand/m3)
29077.0	28228.0
Unit price
(NTD/ m3)
2463.0	2316.0
Sales volume
(Million/NTD)
71615.0	65374.0	Department of Statistics, MOEA
Annual growth in amount(%) +849 thousand/m3 +3.01%

Annual rrowth in sales volume(%) +147 thousand/m3 +6.35%

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HOUSING?MARKET
Area of construction initiated in the Taiwan Region: Comparison between 2022/01-2022/08 and 2021/01-2021/08

Unit: square meters
| | 2022/1-2022/8 | 2021/1-2022/8 | Percentage diffeence(%) |
| --- | --- | --- | --- |
| Northern region | 10,429,359 | 7,528,632 | +38.53% |
| Central region | 6,042,983 | 5,887,098 | +2.65% |
| Southern region | 6,367,178 | 4,897,336 | +30.01% |
| Eastern region and others | 735,798 | 1,083,430 | -32.09% |
| Total | 23,575,318 | 19,396,496 | +21.54% |
Construction and Planning Agency, Ministry of the Interio

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CEMENT?INDUSTRY
Unit: ton

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 2022 Importers take advantage of low cost to increase imports have seriously eroded the domestic cement market.

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our
office
OPERATING HIGHLIGHTS

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Q3 PRODUCTION AND SALES ANALYSIS

單位：公噸
| | Production | | Sales | |
| --- | --- | --- | --- | --- |
| Type | Cement | Slag | Cement | Slag |
| 2022/1-2022/9 | 310,843 | 88,876 | 345,089 | 101,342 |
| 2021/1-2022/9 | 386,364 | 113,695 | 405,893 | 110,433 |
| Differential discrepancy | -19.55% | -21.83% | -14.98% | -8.23% |
 Sales regions: Southern region, with Kaohsiung, Pingtung and Tainan as the main sales targets, off-shore islands and the Central region

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SOUTHERN REGION MARKET ANALYSIS
Currently, the TSMC plant construction project in Nanzhi,
the development of the Renwu Industrial Park,
the MRT Red Line extension project,
the MRT Yellow Line project contracting project,
the Zuoying Military Port tunnel and dock project,
the construction of the Yida Hospital in Pingtung,
and the Tainan North Outer Ring Road project...etc. continue to be in progress,
contributing to the steady growth of cement and Slag powder shipments.

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FINANCIAL HIGHLIGHTS

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Operation results
Consolidated income statement
Unit: thousand dollars
| | 2022/1-2022/9 | 2021 | 2020 | 2019 |
| --- | --- | --- | --- | --- |
| Operating revenues | 1,231,013 | 1,846,785 | 1,590,986 | 1,584,940 |
| Gross profit | 98,688 | 134,568 | 67,372 | 82,289 |
| Operating profit | (8,900) | 12,054 | (30,573) | (8,509) |
| Current net income | 15,893 | 133,811 | 16,949 | 33,243 |

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Operation results
Consolidated balance sheet
Unit: thousand dollars
| | 2022/9/30 | % | 2021 | % | 2020 | % | 2019 | % |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Cash and cash equivalents | 190,975 | 1.7% | 419,504 | 3.8% | 176,743 | 1.8% | 207,931 | 2.1% |
| Notes and accounts receivable | 350,485 | 3.1% | 341,504 | 3.1% | 415,858 | 4.2% | 397,060 | 4.1% |
| Inventory | 974,321 | 8.6% | 841,074 | 7.7% | 884,310 | 9.0% | 650,957 | 6.7% |
| Current assets | 1,986,120 | 17.6% | 2,053,373 | 18.7% | 1,963,779 | 19.9% | 2,026,192 | 20.8% |
| Total assets | 11,279,466 | 100.0% | 10,958,500 | 100.0% | 9,865,320 | 100.0% | 9,740,348 | 100.0% |
| Short-term borrowing | 1,180,000 | 10.5% | 1,240,000 | 11.3% | 235,000 | 2.4% | 200,000 | 2.1% |
| Accounts payable | 197,578 | 1.8% | 194,523 | 1.8% | 223,854 | 2.3% | 199,813 | 2.1% |
| Current liabilities | 1,783,137 | 15.8% | 1,683,431 | 15.4% | 723,920 | 7.3% | 661,655 | 6.8% |
| Non-current liabilities | 911,508 | 8.1% | 564,360 | 5.1% | 592,681 | 6.0% | 507,709 | 5.2% |
| Total shareholders’equity | 8,584,821 | 76.1% | 8,710,709 | 79.5% | 8,548,719 | 86.7% | 8,570,984 | 88.0% |

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Operation results
Consolidated revenue performance
Unit: thousand NTD
| | 2022/1- 2022/9 | 2021/1- 2021/9 | Annual growth (decline) |
| --- | --- | --- | --- |
| Operating revenues | 1,231,013 | 1,343,659 | (8.38%) |
| Operating costs | 1,132,325 | 1,260,713 | (10.18%) |
| Gross profit | 98,688 | 83,486 | 18.21% |
| Operating expenses | 107,588 | 84,278 | 27.66% |
| Operating profit | (8,900) | (792) | (1,023.74%) |
| Other income/expenses | 28,382 | 129,316 | (78.05%) |
| Pre-tax profit | 19,482 | 128,524 | (84.84%) |
| Income tax expense | (3,589) | (12,875) | 72.12% |
| Current net income | 15,893 | 115,649 | (86.26%) |
| Other comprehensive income - current | (76,532) | (14,100) | (442.78%) |
| Total comprehensive income - current | (60,639) | 101,549 | (159.71%) |
| Earnings per share | 0.07 | 0.21 | (66.67%) |
| Closing outstanding shares(thousand shares) | 572,000 | 572,000 | - |

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Operation results
Consolidated Gross Profitability
by the Department in Q3
Unit: thousand NTD
| Department | 2022/1-2022/9 | Percentage | 2021/1-2021/9 | Percentage | Growth rate |
| --- | --- | --- | --- | --- | --- |
| Cement | 944,709 | 76.74% | 944,138 | 70.27% | 0.06% |
| Slag powder | 121,239 | 9.85% | 136,887 | 10.19% | (11.43%) |
| Leasehold | 46,097 | 3.75% | 44,429 | 3.30% | 3.75% |
| Construction | - | - | 196,920 | 14.66% | (100.00%) |
| Ready mixed concrete | 118,968 | 9.66% | 11,885 | 0.88% | 900.99% |
| Others | - | - | 9,400 | 0.70% | (100.00%) |
| Total | 1,231,013 | 100.0% | 1,343,659 | 100.0% | (8.38%) |

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Operation results
Consolidated Operating Revenues by the Department in Q3
Unit: thousand NTD
| Department | 2022/1-2022/9 | 2021/1-2021/9 | Differential discrepancy |
| --- | --- | --- | --- |
| Cement | 66,300 | 33,684 | 32,616 |
| Slag powder | 2,033 | 11,662 | (9,629) |
| Leasehold | 16,030 | 16,081 | (51) |
| Construction | - | 20,240 | (20,240) |
| Ready mixed concrete | 14,325 | (196) | 14,521 |
| Others | - | 2,015 | (2,015) |
| Total | 98,688 | 83,486 | 15,202 |

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Operation results
Consolidated financial analysis for the most recent year
| | 2021 | 2020 | 2019 |
| --- | --- | --- | --- |
| Debt Asset ratio (%) | 20.51 | 13.35 | 12.01 |
| Current Ratio (%) | 121.98 | 271.27 | 306.23 |
| Return on Assets (%) | 1.37 | 0.22 | 0.39 |
| Return On Equity (%) | 1.55 | 0.20 | 0.39 |
| Profit margin (%) | 7.25 | 1.07 | 2.10 |
| Earnings per share (NTD) | 0.25 | 0.04 | 0.06 |
| Cash dividends per share (NTD) | 0.2 | 0.1 | 0.1 |

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FUTURE ?PROSPECTS

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OPERATING STRATEGY

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Resources are reused in a circular economy
Slag cement and controlled low strength materials (CLSM)
CIRCULAR ECONOMY

Customer Oriented Quality Improvement
Ready-mixed concrete and reinforcing steel are indispensable materials for construction. The application and evaluation of material source control, proportioning design, production control, end-of-pipe verification and quality control techniques are used to meet construction standards and design requirements.
Build and pass the ISO 9001 quality management system to achieve the goal of quality policy.
Circular Economy Sustainable Environment
We are committed to promoting ESG, establishing and passing the ISO 14001 environmental management system, and planning We have set up and passed the ISO 14001 environmental management system, planned short-, medium- and long-term goals, and implemented a vision of sustainable development. To transform the concrete industry into a recycling, carbon-reducing, waste-reducing, energy-saving We will develop a green and sustainable industry.
Compliance with laws and regulations Safe production
We have established and passed ISO 45001 occupational safety and health management system to protect our employees from To protect employees from injuries and illnesses at work and to enjoy a safe and happy life, in order to enhance the overall competitiveness of the company.

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OPPORTUNITIES AND THREATS
Opportunities
The government is promoting circular economy, so that waste resources can be fully recycled and reused, minimizing waste and maximizing resources, and bringing investment opportunities.
The problem of labor shortage in the aging population is inevitable, and there are business opportunities for pre-casting and modular construction.
Asia's new bay area has convenient transportation, good living opportunities, and the advantage of harbor view, and major public construction is being completed one after another, leading to industrial transformation.
The government is planning to build a 5G AIoT new innovation base, and the development of the "Special Trade Zone 3" and the 205th Military Factory will be favorable, driving manufacturers to move in and creating job opportunities.
Threats
The future carbon levy will increase operating costs.
The rising cost of coal will increase the cost of cement production.
In the future, the proportion of green power and natural gas generation will increase, and the cost of electricity is bound to rise.
Online shopping and e-commerce have been eroding the traditional retail restaurant market since their launch, and consumer habits and preferences continue to change.
In the post-epidemic era, the consumer market has been affected by the impact of the food and beverage retail business, and the willingness to expand is becoming more conservative.

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STRENGTHS AND WEAKNESSES
Strengths
We will deepen our customer service to ensure the quality of our products and develop new products to capitalize on our existing market advantages and increase our operating profit base.
Strengthen the maintenance of equipment to improve production efficiency and increase competitiveness.
The location of Asia District is good, surrounded by many scenic spots in Kaohsiung City, with convenient transportation and crowd gathering power.
The recruitment team has a good grasp of the needs of international famous brands and chain stores to expand their locations, which helps to bring in the representative manufacturers to create stable development benefits.

Weaknesses
The international trend of carbon reduction will make government environmental policies more stringent and operations more challenging.
The lower fertility rate has led to a shortage of workers in the industry and a potential problem with human resources.
The retail and catering market in the vicinity of the Bay Area is relatively mature, and there is competition from shopping malls such as Taiyuanbai, Taifeng Mall and Unity Dream Mall.
The land around the existing investment targets has not yet been developed, and the planning of traffic routes is limited.

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Q&A

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Thanks for Listening

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