TECO — Interim / Quarterly Report 2020

Oct 8, 2020

TECO Electric & Machinery Co., Ltd.

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2020 2nd Quarter Earnings Conference

August 21, 2020

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Safe Harbor Statement

• This Presentation contains certain forward-looking statements that are based on current expectations and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

• Except as required by law, we undertake no obligation to update any forward – looking statements, whether as a result of new information, future events or otherwise.

2

Agenda

I. 2Q20 Financial Results II. Recap of Recent Major Events

3

Statements of Comprehensive Income – 1H20

(In NT Millions) 1H 2020		1H 2019	YoY
Operating Revenue 21,901 - Recurring Operating Revenue 21,441 - Gain(Loss) on financial assets at fair value through profit or Loss 460 Net Gross Profit 5,649 Operating Profit 1,962 Non-operating Income 468 Income Before Tax 2,430 Income Tax (299) Net Income ** 1,926		24,249 24,148 101 6,006 1,939 570 2,509 (520) 1,802	-9.7% -11.2% 355.4% -5.9% 1.2% -17.9% -3.1% -42.5% 6.9%
EPS(NT$) 0.99		0.92	7.6%

• Excluding non-controlling interest

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Financial Highlights – 1H20

(In NT Millions)	1H 2020 1H 2019 YoY	1H 2020 1H 2019 YoY
Net sales -Recurring *	21,441	24,148 -11.2%
Gross Margin - Recurring * Operating Margin - Recurring *	24.2% 24.5% -30bps 7.0% 7.6% -60bps
EPS (NT$)	0.99	0.92 7.6%
ROE (%) **	6.5%	6.5% -
ROA (%) **	3.7%	3.7% -

• Excluding gain(loss) on financial assets at fair value through profit or loss

• ** Annualized number and excluding non-controlling interests

5

Statements of Comprehensive Income – 2Q20

(In NT Millions)	2Q 2020		1Q 2020	QoQ 2Q 2019		YoY
Operating Revenue	11,236		10,665	5.4% 12,542		-10.4%
- Recurring Operating Revenue	10,857		10,584	2.6% 12,529		-13.3%
- Gain(Loss) on financial assets at fair value through profit or Loss Net Gross Profit Operating Profit Non-operating Income Income Before Tax Income Tax Net Income **	379 3,002 1,153 638 1,792 (200) 1,479		81 2,647 809 (171) 638 (99) 447	367.9% 13 13.4% 3,101 42.5% 1,013 -473.1% 527 180.9% 1,540 102.0% (257) 230.9% 1,167		2815.4% -3.2% 13.8% 21.1% 16.4% -22.2% 26.7%
EPS(NT$)	0.76		0.23	230.4% 0.60		26.7%

• Excluding non-controlling interest

6

Financial Highlights – 2Q20

(In NT Millions)	2Q 2020 1Q 2020 QoQ	2Q 2020 1Q 2020 QoQ	2Q 2019	YoY
Net sales -Recurring *	10,857	10,584 2.6%	12,529	-13.3%
Gross Margin - Recurring *	24.2% 24.2% -		24.6% -40bps
Operating Margin - Recurring *	7.1% 6.9% 20bps		8.0%	-90bps
EPS (NT$)	0.76	0.23 230.4%	0.60 26.7%
ROE (%) **	10.2%	3.2% 700bps	8.2% 200bps
ROA (%) **	5.6%	1.8% 380bps	4.6% 100bps

• Excluding gain(loss) on financial assets at fair value through profit or loss

• ** Annualized number and excluding non-controlling interests

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NT$ Billion

Recurring Operating Revenue vs. Gross Margin

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14 30%
25.8%
24.6% 24.2% 24.2%
12
25%
20.4%
10
20%
8
15%
12.5
6 12.0
11.6
10.6 10.9
10%
4
5%
2
0 0%
2Q19 3Q19 4Q19 1Q20 2Q20
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Recurring Operating Revenue Gross Margin

• Recurring Operating Revenue = Operating Revenue – financial assets at fair value through profit or loss ** Gross Margin = Recurring Gross Profit / Recurring Operating Revenue *** Recurring Gross profit excludes financial assets at fair value through profit or loss

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Recurring Operating Profit vs. Operating Margin

NT$ Million

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1,200 8.0% 9.0%
8.1%
6.9% 8.0%
7.1%
1,000
7.0%
5.3%
800 6.0%
5.0%
600
4.0%
1,000 942
400 774 3.0%
728
633
2.0%
200
1.0%
0 0.0%
2Q19 3Q19 4Q19 1Q20 2Q20
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Recurring Operting Profit Operating Margin

• Recurring Operating Profit excludes financial assets at fair value through profit or loss ** Operating Margin = Recurring Operating Profit / Recurring Operating Revenue

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Revenue Breakdown 1/2

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In 1H 2020, total
consolidated topline
down 9.7% YoY
Others
Others
19.3%
21.4%
Electrification
Products Electrification
44.9% Products
TECOM
49.9%
TECOM 3.6%
2.5%
1H20 1H19
Energy &
Engineering
Energy & 8.1%
Engineering
10.6%
Home
Home Appliance
Automation
11.7% Automation
Appliance
& Intelligent
12.7% & Intelligent
7.9%
7.3%
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Revenue Breakdown 2/2

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In 2Q 2020, total
consolidated topline
down 10.4% YoY, up
Others
5.4% QoQ Others
21.8%
Electrification 19.6%
Products
Electrification
43.2%
Products
TECOM TECOM 49.2%
2.6% 3.4%
2Q20
2Q19
Energy &
Energy &
Engineering Engineering
10.9% Others 8.6%
21.0%
Electrification
Home
Home Automation Products
Appliance & Intelligent 46.7% Appliance Automation
11.7%
13.2% 8.2% TECOM & Intelligent
7.5%
2.3%
1Q20
Energy &
Engineering
10.3%
Home
Appliance Automation
12.2% & Intelligent
7.5%
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11

1/2 Sales on Major Business Lines

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NT$ Billion
14
12.1
12
9.8
10
8
6
4 2.8 2.8 2.3
1.8 1.7 2.0
2
0
Electrification Automation & Home Appliance Energy &
Products Intelligent Engineering
1H2019 1H2020
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2/2 Sales on Major Business Lines

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NT$ BIllion
8
6.1
5.9 5.9
6
5.0 4.9
4
2 1.5 1.5 1.6
1.3 1.2 1.3 1.1 1.3 1.1 1.2
0.9 0.8 0.9 0.8 0.9
0
Electrification Automation & Home Appliance Energy & Engineering
Products Intelligent
2Q19 3Q19 4Q19 1Q20 2Q20
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Balance Sheets – June 2020

( In NT$ 1,000)	Amount % Jun. 2020	Amount % Jun. 2020	Amount % Dec. 2019	Amount % Dec. 2019	Jun. 2019	Jun. 2019
					Amount %
Cash & Cash Equivalent	20,462,298	23%	19,111,371	19%	18,350,957	18%
Receivable	11,696,687 10%		10,711,774 11% 9,853,585 10% 99,094,404 100% 11,954,866 12% 5,268,435 5% 6,673,954 7% 1,000,000 1% 37,389,614 38% 61,704,790 62% 4.59 3.21 2.17 1.57 -10.0%		12,384,500 12%
Inventories	10,331,925	10%	9,853,585		10,881,992 11%
Total Assets	107,900,650 100%				102,025,619 100%
Payable	13,597,595	12%	11,954,866		13,581,644 13%
Short-term Borrowings(inclu. Long -term liabilitis, current portion)	3,880,214 6%				5,705,162 6%
Long-term Borrowings	5,160,989	7%	6,673,954		6,623,956 6%
Corporate Bond Payable	4,000,000 1%				1,000,000 1%
Total Liabilities	40,224,913	42%	37,389,614		39,596,723 39%
Equities	67,675,737 58% 4.13 3.01 2.12 1.57 -11.0%				62,428,896 61%
Key Indices AR Turnover (times) Inventory Turnover (times) Current Ratio Quick Ratio Net Debt to Equity					4.34
					3.05
					2.01
					1.46
					-8.0%

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Agenda

I. 1Q20 Financial Results II. Recap of Recent Major Events

15

Onshore Engineering Projects for Offshore Wind Farm

• Onshore engineering project for Changfang & Xidao Offshore Wind Farms, with Teco as the general contractor, broke ground in Lugang township of Changhua County on July 23[rd] . The wind farm is expected to fulfill the power needs of 600,000 households after completion.

• TECO boasts abundant track record for power engineering works, Ludao and Ilan

• including power plant, Lanyu power plant, city substation. With backlog of totaling 900 MW, TECO will spare no effort winning general-contractor business of other offshore wind-farm projects, such as Hai LOng 3 and Formosa III, in a bid to make TECO the leading brand for renewable-energy engineering works in Taiwan.

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Progress of TECO’s EV Motor

� Taiwan

• Motor of ebike: G new was component (stator) company’s product(ebike)

• launched on July 1[st] . It is expected to ship more than 1,000 units per month.

• � In line with the localization policy of the Bureau of Industry of the Ministry of Economic Affairs, Teco started to develop power modules with large torque motors and drives, striving for business opportunities of 10,000 units of electric bus in 5 years(2021~2025).

� Asia Pacific

• Won an order of 82 units for E-Ferry in Thailand.

• Pursue 400 units of OEM orders for Danfoss motors required by AGVs in Singapore ports, and continued to develop Southeast Asian markets such as the Vietnamese car manufacturer, Vinfast.

� India

• Completed quotation and discussion of product specifications with certain Korean car maker.(35kW Powertrain)

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Http//www.teco.com.tw ir@teco.com.tw

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