TECO — Investor Presentation 2020

Dec 18, 2020

TECO Electric & Machinery Co., Ltd.

==> picture [435 x 68] intentionally omitted <==

==> picture [435 x 67] intentionally omitted <==

==> picture [435 x 68] intentionally omitted <==

==> picture [435 x 68] intentionally omitted <==

==> picture [435 x 68] intentionally omitted <==

2020 3rd Quarter Earnings Conference

November 17, 2020

==> picture [721 x 65] intentionally omitted <==

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. 3Q20 Financial Results II. Recap of Recent Major Events

3

Statements of Comprehensive Income – 9M 20

(In NT Millions) 9M 2020		9M 2019	YoY
Operating Revenue 33,349 - Recurring Operating Revenue 32,878 - Gain(Loss) on financial assets at fair value through profit or Loss 471 Net Gross Profit 8,192 Operating Profit 2,674 Non-operating Income 722 Income Before Tax 3,396 Income Tax (484) Net Income ** 2,728		35,850 35,754 96 8,996 2,876 739 3,614 (752) 2,587	-7.0% -8.0% 390.6% -8.9% -7.0% -2.3% -6.0% -35.6% 5.5%
EPS(NT$) 1.41		1.33	6.0%

• Excluding non-controlling interest

4

Financial Highlights – 9M 20

(In NT Millions)	9M 2020 9M 2019 YoY	9M 2020 9M 2019 YoY
Net sales -Recurring *	32,878	35,754 -8.0%
Gross Margin - Recurring * Operating Margin - Recurring *	23.5% 24.9% -140bps 6.7% 7.8% -110bps
EPS (NT$)	1.41	1.33 6.0%
ROE (%) **	6.1%	6.3% -20bps
ROA (%) **	3.5%	3.6% -10bps

• 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 – 3Q20

(In NT Millions)	3Q 2020		2Q 2020	QoQ 3Q 2019		YoY
Operating Revenue	11,448		11,236	1.9% 11,601		-1.3%
- Recurring Operating Revenue	11,437		10,857	5.3% 11,606		-1.5%
- 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 **	11 2,543 712 254 966 (185) 802		379 3,002 1,153 638 1,792 (200) 1,479	-97.1% (5) -15.3% 2,990 -38.2% 937 -60.2% 168 -46.1% 1,105 -7.5% (233) -45.8% 785		-320.0% -14.9% -24.0% 51.2% -12.6% -20.6% 2.2%
EPS(NT$)	0.41		0.76	-46.1% 0.40		2.5%

• Excluding non-controlling interest

6

Financial Highlights – 3Q20

(In NT Millions)	3Q 2020 2Q 2020 QoQ 3Q 2019	3Q 2020 2Q 2020 QoQ 3Q 2019	3Q 2020 2Q 2020 QoQ 3Q 2019	YoY
Net sales -Recurring *	11,437	10,857 5.3% 11,606		-1.5%
Gross Margin - Recurring *	22.1% 24.2% -210bps 25.8% -370bps
Operating Margin - Recurring *	6.1% 7.1% -100bps 8.1%			-200bps
EPS (NT$)	0.41	0.76 -46.1% 0.40 2.5%
ROE (%) **	5.2%	10.2% -500bps	5.5% -30bps
ROA (%) **	3.0%	5.6% -260bps	3.1% -10bps

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

• ** Annualized number and excluding non-controlling interests

7

Recurring Operating Revenue vs. Gross Margin

NT$ Billion

==> picture [583 x 289] intentionally omitted <==

----- Start of picture text -----

14 30%
25.8% 24.2% 24.2% 24.2%
12
25%
20.4%
22.1%
10
20%
8
15%
6 12.0
11.6 11.4
10.6 10.9
10%
4
5%
2
0 0%
3Q19 4Q19 1Q20 2Q20 3Q20
Recurring Operating Revenue Gross Margin
----- End of picture text -----

• 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

8

Recurring Operating Profit vs. Operating Margin

NT$ Million

==> picture [604 x 225] intentionally omitted <==

----- Start of picture text -----

1,200 8.1% 8.2% 9.0%
6.9% 7.1% 8.0%
1,000
7.0%
6.1%
800 5.3% 6.0%
5.0%
600
4.0%
942
400 774 3.0%
728 701
633
2.0%
200
1.0%
0 0.0%
3Q19 4Q19 1Q20 2Q20 3Q20
----- End of picture text -----

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

9

Revenue Breakdown 1/2

==> picture [654 x 338] intentionally omitted <==

----- Start of picture text -----

In 9M 2020, total
consolidated topline
down 7.0% YoY
Others Others
20.2% 18.7%
Electrification
Products
Electrification
44.6%
TECOM Products
TECOM
3.2% 50.0%
2.4%
9M20 Energy & 9M19
Engineering
Energy &
9.2%
Engineering
11.9%
Home
Home Appliance
Automation
Appliance 11.7% Automation
& Intelligent
13.4% & Intelligent
7.5%
7.2%
----- End of picture text -----

10

Revenue Breakdown 2/2

==> picture [721 x 446] intentionally omitted <==

----- Start of picture text -----

In 3Q 2020, total
consolidated topline
Others
down 1.3 YoY, up
17.9% 1.9% QoQ Others
17.5%
Electrification
Products
TECOM 43.8% Electrification
2.4% TECOM Products
2.4% 50.3%
Energy & 3Q20
Energy & 3Q19
Engineering
Engineering
14.3%
11.3%
Others
21.8% Electrification
Home Automation Products Home
Appliance & Intelligent 43.2% Appliance Automation
14.8% 11.6%
6.8% & Intelligent
TECOM
6.9%
2.6%
2Q20
Energy &
Engineering
10.9%
Home Automation
Appliance
& Intelligent
13.2%
8.2%
11
----- End of picture text -----

1/2 Sales on Major Business Lines

==> picture [652 x 278] intentionally omitted <==

----- Start of picture text -----

NT$ Billion
20 17.9
14.9
15
10
4.2 4.5 4.0
3.3
5 2.6 2.5
0
Electrification Automation & Home Appliance Energy &
Products Intelligent Engineering
9M2019 9M2020
----- End of picture text -----

12

2/2 Sales on Major Business Lines

==> picture [611 x 323] intentionally omitted <==

----- Start of picture text -----

NT$ BIllion
8
5.9 5.9
6
5.0 4.9 5.0
4
2 1.5 1.7 1.6 1.6
1.3 1.2 1.3 1.3 1.1 1.2
0.8 0.9 0.8 0.9 0.8
0
Electrification Automation & Home Appliance Energy &
Products Intelligent Engineering
3Q19 4Q19 1Q20 2Q20 3Q20
----- End of picture text -----

13

Balance Sheets – Sep. 2020

( In NT$ 1,000)	Amount % Sep. 2020	Amount % Sep. 2020	Amount % Dec. 2019	Amount % Dec. 2019	Sep. 2019	Sep. 2019
					Amount %
Cash & Cash Equivalent	20,308,158	19%	19,111,371	19%	18,616,097	19%
Receivable	10,086,451 10%		10,711,774 11% 9,853,585 10%		11,095,563 11%
Inventories	10,008,929	10%	9,853,585		10,307,603 11%
- Financial assets at fair value through profit or Loss	3,614,643 3%		2,418,162 2%		2,392,642 2%
- Financial assets at fair value through other comprehesive income	20,654,294 19% 106,068,500 100%		15,538,746 16% 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%		14,472,980 15%
Total Assets					98,036,047 100%
Payable	11,497,747	11%	11,954,866		11,664,105 12%
Short-term Borrowings(inclu. Long - term liabilitis, current portion)	2,938,004 3%				2,026,526 2%
Long-term Borrowings	4,671,586	4%	6,673,954		7,290,720 7%
Corporate Bond Payable	6,000,000 6%				4,000,000 4%
Total Liabilities	38,673,838	36%	37,389,614		37,512,387 38%
Equities	67,394,662 64% 4.41 3.15 2.36 1.75 -9.9%				60,523,660 62%
Key Indices AR Turnover (times) Inventory Turnover (times) Current Ratio Quick Ratio Net Debt to Equity					4.49
					3.07
					2.14
					1.55
					-8.8%

14

Agenda

I. 3Q20 Financial Results II. Recap of Recent Major Events

15

Breakthrough under the Epidemic

• China market：Grasp the economic rebound trend to increase sales to minimize the impact of other markets. Sales in China revenue in Q3 grows ~20% YOY, the Q4 is even stronger. It is expected to grow in 2020 vs. 2019.

• There is a positive growth on large size motor business, as well as its order intake.

• Through the explosion proof motor and IE3 efficient motor, it is estimated that small size motor business could grow versus 2019.

16

Breakthrough under the Epidemic

• Commercial Air Conditioners: By the end of September, the sales grows up approximately 10% and will keep expanding direct sale (Government projects) and light commercial air condition DC conversion to take advantage of the subsidy of the government for energy saving. It is expected to grow for the whole year’s sales.

• Household air conditioners: By the end of September, sales grows more than 10%. It will keep the growth momentum through the full year.

17

TECO selected as a member of DJSI Emerging Markets

• TECO has been incorporated, as the only one new Taiwanese firm in the category of ELQ Electrical Components & Equipment, into 2020 Dow Jones Sustainability Index (DJSI), with its extraordinary performance in the two items of "innovation management" and "environmental policy and management system," for both of which it was granted full marks.

• � In addition to its outstanding performance in environmental policy, TECO has received various kinds of acknowledgement for its extraordinary performance in corporate governance, including platinum award of top 50 CSR report of TCSA for six years in a row, top 5% in corporate governance evaluation by the TWSE, and inclusion as a constituent stock of "FTSE4Good TIP Taiwan ESG Index."

18

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

==> picture [721 x 65] intentionally omitted <==