TongHwa — Interim / Quarterly Report 2021

Dec 27, 2021

TONG-HWA SYNTHETIC FIBER CO.,LTD.

Third Quarterly Financial Results Investor Conference

Stock code 1418 December 2021

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Agenda

• Company Profile

 On April 1st, 2021, the board of directors approved to stop production of acrylic cotton production line

• 3[rd] Quarterly Financial Results

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Founded
March 2, 1970
Number of Date of listing
employee
February 14,
46 people 1977
Capital
568 millions
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1. Background

2. Human resource arrangement

3. Inventory and machinery equipment disposal 4. Transformation plan for asset revitalization

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 Due to the global pandemic of COVID-19 in early 2020, the global freight circulation and business transaction were completely disrupted, which caused customers to reduce the operating rate, and resulted in the stagnation of the acrylic fiber market demand.  The epidemic has made work-from-home and homeschooling a common phenomenon. The demand for ABS resin, which is widely used in home appliances and electronic products, has surged. The demand for ABS has driven the price of the main raw material of acrylic cotton, AN, to rise sharply. However, the selling price of acrylic cotton was not able to rise accordingly.

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 In order to survive the epidemic situation and reduce operating losses, the company decided to adjust its business strategy, stopping the production of acrylic cotton production line, to reduce staff and cut various expenses. Only partial processed sliver (TOP) production is maintained.

• The board of directors passed resolution on April 1st, 2021 to stop the production of acrylic cotton production line, and only to maintain partial processed slivers (TOP) production.

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 On April 1st, 2021, the massive dismissal plan was submitted to the administrative authority in accordance with the law and were processed in accordance with labor-related laws, regulations and procedures. Autonomous consultations were conducted on April 8th, 16th, 26th, 2021 and reached agreement on April 26th, 2021. The severance payment of NTD 22,943,000 was recognized on June 1st, 2021, the day of dismissal.

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• The board of directors passed resolution to stop the production of acrylic cotton production line, and only to maintain partial processed slivers (TOP) production. Therefore, the WIP and partial raw materials, belonging to the suspended acrylic cotton production line, were recognized as the inventory depreciation loss of NTD 45,525,000.

• Considering future operation plans and existing capacity planning, it is expected there will be no future cash inflows for some machinery and transportation equipment. As a result, the recoverable amount of the asset is lower than the book value. Impairment loss of NTD 39,060,000 is recognized.

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• After stopping acrylic cotton production line, for the sustainable operation, the company will execute transformation plan for asset revitalization in phases.

• The board of directors approved the re-planning of the polymerization unit that has stop operation and no longer in use, including 8 pieces of land in the Tonghwa Section , to be leased to gain rental income or future capital appreciation.

 Since the fourth quarter of 2021, the property has been transferred into the account item of "Investment Property“. And in accordance with the requirements of the securities issuer's financial report preparation standards, the subsequent measurement of investment property will adopt the fair value model.

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 For the re-classifying company’s owner-occupied property as investment property, the financial statements for the fourth quarter, 2021 is expected to have a net increase of assets of NTD1,066,076,000, a net increase of liabilities of NTD100,742,000, and other comprehensive income – revaluation profit net increase of NTD965,334,000 transferred into other equity. (The actual amount is subject to the accountant’s review.)

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CONSOLIDATED BALANCE SHEETS

Reviewed

September 30,2021

Amount: NT$ thousand	Amount: NT$ thousand	Amount: NT$ thousand
	Amount	%
Current assets	415,300	17%
Noncurrent assets	2,014,055	83%
Total assets	2,429,355	100%
Current liabilities	17,788	1%
Noncurrent liabilities	2,230,171	92%
Total liabilities	2,247,959	93%
Capital	568,343	23%
Capital reserve	8,006	0%
Retained earnings	(903,081)	-36%
Others	588,774	24%
Treasury stocks	(80,651)	-3%
Total equity attributable to owners of parent company	181,391	7%
Non-controlling interests	5	0%
Total equity	181,396	7%
Net per share (NT$)	3.34

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Reviewed

~~For the Nine Months Ended Septem~~	~~ber 30, 2021~~ Amount: NT$ thousand	~~ber 30, 2021~~ Amount: NT$ thousand
	Amount	%
NET REVENUE	35,462	100%
COST OF REVENUE	(139,362)	-393%
GROSS PROFIT	(103,900)	-293%
OPERATING EXPENSES	(49,346)	-139%
OTHER OPERATING INCOME AND EXPENSES,	(25,702)
INCOME FROM OPERATIONS	(178,948)	-505%
NON-OPERATING INCOME AND EXPENSES	(42,645)	-120%
INCOME BEFORE INCOME TAX	(221,593)	-625%
INCOME TAX EXPENSE	5,622	16%
NET INCOME	(227,215)	-641%
OTHER COMPREHENSIVE INCOME (LOSS)	1,100	3%
TOTAL COMPREHENSIVE INCOME FOR THE	(226,115)	-638%
NET INCOME(LOSS)ATTRIBUTABLE TO:
Shareholders of the parent	(227,210)	-641%
Noncontrolling interests	(5)	0%
TOTAL COMPREHENSIVE INCOME
Shareholders of the parent	(226,110)	-638%
Noncontrolling interests	(5)	0%
EARNINGS PER SHARE (NT$)	(4.18)

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Thank You !!

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