T.S.M.C. — Investor Presentation 2019

Sep 19, 2019

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台灣苯乙烯工業股份有限公司
Taiwan Styrene Monomer Co.
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Taiwan Styrene Monomer Co. Investor Conference

2019.09.1919

1

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Disclaimer

This report discloses forecast on operation and revenue. The actual result might be different from today’s forecast as the company could not control the uncontrollable factors the forecast was based on.

These uncontrollable factors could come from all directions including the change of supply and demand, price adjustment, competition, global economy, supply chains and exchange rates and many other unpredictable factors.

TSMC is not responsible for updating the contents in this report shall any changes occur or would TSMC send out notifications or reminders for the same. This report does not solicit investments and should not be used as investment guide; TSMC is not responsible for any loss or damage incurred due to this report.

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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Agenda

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Corporate Profile
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Market Review & Outlook
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Financial Review
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Q & A
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Company Highlight

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Listed on Consolidated Founded Paid In Capital TWSE Revenue (2018) 5,278.7 M 15,382.7 M Nov. 16, 1979 Aug., 1987 NTD NTD Managing Group Employee Taipei HQ Office 8F.-1, No.6, Sec. 1, Roosevelt Rd., Taipei +886-2-2396-6007 Chairman : Wen-Yuan Lin 195 GM : Pao Chen (by Jun. 30, 2019)

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TSMC Group
Petrochemical Materials Environmental Investment Hospitality
& Construction Development
Engineering
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Kaohsiung Plant Linyuan Industrial Park No.7, Gongye 1st Rd., Kaohsiung +886-7-641-4511

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Quality Policy

Taiwan Styrene Monomer Corporation

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Technology
Enhance professional technologies
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S

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Services
Provide comprehensive services
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M

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Management
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C

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Consistency
Ensure quality consistency
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Major Products

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|||||
|---|---|---|---|
|Capacities|2018 Sales by|
|Products|Applications|(tons/year)|Products|
|The major source material for polystyrene (PS),|
|acrylonitrile butadiene styrene (ABS), styrene-|340,000|
|butadiene rubber (SBR) and other polymers.|
|94.49%|
|The specialty chemical mainly used as a desorbent|
|for producing Para-xylene in Parex process and Fluxy|7,000|
|2.46%|
|process.|
|The by-product of the styrene production process,|
|Toluene|
|8,700|
|mainly used as an organic solvent.|
|1.20%|
|Ethyl-|The intermediate product of the styrene production|
|380,000|
|benzene|process, used as the solvent of polystyrene.|
|0.12%|

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

SM Production Materials and Products

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ABS
Acrylonitrile Butadiene Styrene
EPS
Expanded Polystyrene
HIPS
Benzene High Impact Polystyrene
Ethyl- PS
乙苯
benzene Polystyrene
Ethylene SBR
Styrene-Butadiene Rubber
TPE
Thermoplastics Elastomer
Others
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

SM Downstream Products and Applications

Name	Acronym	Products and Applications	Products and Applications
Acrylonitrile Butadiene Styrene	ABS	auto parts, household appliances, computer case, acrylic board, toys, motorcycle case, luggage case
Expanded Polystyrene	EPS	packaging, insulation, construction, artwork and floating materials, partition board, ice box, cake box
High Impact Polystyrene	HIPS	keyboard, mouse, computer case, disposable tableware
Polystyrene	PS	CD/DVD box, ballpoint pen, X'mas light
Styrene-Butadiene Rubber	SBR (SSBR)	rubber/color soles, tire
Thermoplastics Elastomer	TPE	auto, electronic & household appliances
Unsaturated Polyester Resins	UPR	thermoset composite applications, button
Emulsion Styrene- Butadiene Rubber	E-SBR	mats, rubber goods and others

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

TSMC Clients

The major SM clients are domestic PS, ABS and SBR manufacturers which includes home appliance, mechanical, automobile, electronic and packaging industries. As for PDEB, the clients are chemical plants across the world.

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Exxon Mobil Ruhr Oel GmbH Indian Oil Corporation TonenGeneral
USA Germany India Japan
Exxon Mobil OJSC NAFTAN ANPZ S-Oil
Nederland Belarus Kazakhstan S. Korea
FuHaichuang Petrochemical Co
China
Formosa Chemicals & Fiber
Chinese Petroleum Co.
Turkey
Taiwan Chi Mei
Petkim Petrokimya
Taita Chemical
Iran Taiwan Synthetic Rubber Corp.
Bandar Imam Petrochemical Co.
LCY Chemical Industry
Esfahan Petrochemical Co.
Eternal Materials
Kuwait
Kuwait Paraxylene Malaysia
Sultanate of Oman Indonesia Petroliam Nasional Berhad
Aromatics Oman Pertamina
United Arab Emirates Saudi Arabia Thailand Singapore
AquaChem SABIC Esso Jurong Aromatics Co.
SATORP Thai Paraxylene Exxon Mobil
PTT Global Chemical
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Company and Production History

M1 plant debottleneck accomplished, SM capacity raised to 140 K tons.

SM Production

SM1 & SM2 plants debottleneck accomplished. SM total capacity reached 340 K tons.

SM1 plant established, SM production capacity reached 100 K tons.

SM2 plant established, SM total production capacity reached 240 K tons

K tons/yr. 300 200 100 0

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PDEB2 line established. 3.5 K tons capacity built total capacity of 7.0 K tons achieved

PDEB3 feasibility study

PDEB Production

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K tons/yr. 8 PDEB1 line established. PDEB plant debottleneck accomplished 1.5 K tons capacity built PDEB capacity raised to 3.5 K tons. 6 4 2 0

Basic design for SM1 process improvement accomplished

Cogeneration plant in operation SM1 debottleneck project

Overall production cost reduction reengineering project accomplished Multi-function distillation energy-saving projects accomplished

Energy Saving

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Plant set up Company founded Paid-in capital 75M NTD

Capital

Paid-in capital increased to ~ 4.6 Bn NTD Paid-in capital increased to ~ 4.8 Bn NTD Paid-in capital increased to ~ 5.3 Bn M NTD Paid-in capital increased to ~ 5.6 Bn NTD

Capital increased to ~5.2 Bn NTD Capital relief to ~5.0 Bn NTD Board of Directors resolved to buy back common stocks for the cancellation of shares

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Quality, Safety and Environment Systems

Since 1995

ISO-9000 quality management system implemented in 1995 and certified in Nov. of the same year.

Since 1997

Since 1998

ISO-14001 Joined Taiwan Responsibility Environmental Care Association (TRCA) since Management System 1998 and pledge the health implemented and & safety for employees, certified in Dec. 1997. clients, public and environment.

Since 2009

OHSAS-18001 Occupational Health &Safety Management Systems implemented and certified in Dec. 2009.

Since 2009 Since 2014 Since 2016 ISO-14064-1 (CNS Implementation of TOSHMS 14064-1) Organization (Taiwan Occupational Safety Quantification & & Health Management) Reporting of Green according to Ministry of Labor House Gases System and certified for implemented and Performance Recognition of certified in Jan. 2014. the Occupational Safety and Health Management Systems.

CNS-15506 Occupational Health & Safety management systems implemented and certified in Dec. 2009.

Since 2018

ISO-9001 (2015) Quality System version change, verification and certified in Sep. 2018.

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Operational Strategy and Strategy Development

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Strengthen the core business (SM) and expand the production
and sales of specialty chemical (PDEB)
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Establishment of a catalyst laboratory to improve catalyst
performance
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 Improvement of raw material and energy utilization efficiency.
Cost Reduction  Continuous process improvement
 Renovation of Industrial Safety and Environmental Protection
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 Amalgamation
Subsidiary and Investment Management  Business optimization
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Retrospect and Prospect of SM Market

1. 2018 World Styrene Demand and Supply

2. Outlook of World Styrene Demand Growth for 2019~2021

3. Styrene Demand and Supply for Taiwan

4. 2019 First Half Retrospect

5. 2019 Second Half Outlook

6. Overview of Production and Sales for TSMC

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2018 Global SM Supply & Demand

2018 SM Demand by its downstream products

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Others
TPE 8%
2%
SBL
6%
SBR
PS
3%
34%
UPR
5%
SAN
2%
ABS
18%
EPS
22%
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2018 Global SM Supply & Demand

2018 Worldwide SM Demand by Region

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Middle East India Africa
Russia
4% 2% 0.2% Others
2%
Central Euro.
0.2%
2%
W. Europe
14% China
35%
S. America
3%
N. America
13%
Japan
5%
SE. Asia
S. Korea
Taiwan
5%
9%
6%
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Global SM Supply & Demand

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Kilo Metric tons	79.0% 80.0% 81.0% 82.0% 83.0% 84.0% 85.0% 86.0% 87.0% 88.0% 89.0% 90.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 產量 需求 總產能 開工率 Production Total Capacity Operating rate Demand

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

World SM Demand Year-On-Year Growth

2,300

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1,800 1,300 800 300 (200) (700) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 其他 Others SE. Asia 東南亞 NE. Asia 東北亞 Middle East 中東 西歐 W. Europe 北美 N. America 全球 Global Demand

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Regional SM Net Trade

5,000

4,000

3,000 2,000

1,000

• (1,000) (2,000) (3,000)

(4,000)

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(5,000)

2009

2010 2011 2012

2011 2012 2013 2014 2015 2016 2017 2018 N. America 北美 西歐 W. Europe Middle East 中東 NE. Asia 東北亞 東南亞 SE. Asia 其他 Others

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2018 Global SM Supply & Demand

Unit : K Metric Tons

Region/Company	Demand	Production	Net Trade
NE Asia	16,628	14,733	1,895
China	10,502	7,505	2,997
Japan	1,478	1,968	-490
S. Korea	2,681	3,201	-520
Taiwan	1,967	2,059	-92
SE Asia	1,405	1,915	-510
N. America	3,984	4,947	-963
S. America	868	573	295
W. Europe	4,327	4,399	-72
Central Europe	503	237	266
Russia	521	629	-108
Middle East	1,118	2,808	-1,690
India	734	0	734
Africa	62	0	62
Others	68	0	68
Total	30,218	30,241

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

China SM Supply & Demand

12,000

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85.0%
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0 2,000 4,000 6,000 8,000 10,000 Kilo metric tons	60.0% 65.0% 70.0% 75.0% 80.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 總產能 產量 需求 開工率 Domestic Demand Total Capacity Production Operating rate Operating rate

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Outlook of World SM Demand Growth for 2019~2021

• According to IHS, the global GDP growth rate is forecasted 2.6~2.7% for 2019~2021.

 Under the condition described above, the annual growth rate of world SM demand would be around 2.5%.

 The major growth of SM demand is in Mainland China. Its annual growth rate would be 3.9~4.8%. (The growth rate is 5.2% in 2018)

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Taiwan SM Supply & Demand

Unit : K Metric Ton

Year	Demand	Production	Net Trade
2009	1,777	1,906	129
2010	1,995	1,922	-73
2011	1,792	1,693	-99
2012	1,822	1,790	-32
2013	1,924	2,044	120
2014	1,795	1,974	179
2015	1,864	2,020	156
2016	1,886	2,118	232
2017	1,913	1,823	-90
2018	1,880	2,110	230
**Average **	1,865	1,940	75

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Styrene Demand and Supply for Taiwan Market

 Taiwan’s SM market is basically net export.

• In 2018, Taiwan’s SM production was 2,110,537 tons, demand was 1,879,850 tons and the net export was 230,687 tons.

• Since last June, China has started imposing ADD tax on US, South Korea and Taiwan’s SM import. In addition, the US-China trade war started last July has led to a slowdown in global economic growth, a sharp recession in China’s export to US, and a change in global SM trade flow. This has resulted in the shrinking and fallen of SM demand and price, thus the company profit is not ideal in last 4Q.

• After the G20 summit last December, US and China reached a consensus and both agreed to wait 90 days before imposing tariffs to allow negotiations. It resulted in a gradual improvement in market confidence and recovery of SM downstream markets in the first half of the year.

• However, on August 1st, as Trump administration was not satisfied with China’s progress in purchasing American agricultural products, Trump announced on Twitter that a additional 10% tariff will be levied on US$300 billion worth of Chinese imports from September 1. As a result, SM prices began to drop again and it is expected that SM manufacturers will not be profitable in the second half of the year.

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Styrene Demand and Supply for Taiwan Market (cont.)

 On Aug. 23, China announced the additional tariffs of 5%~10% will be levied on 5,078 products that is about $75 billion worth of US goods, effective in two stages on Sep. 1 and Dec. 15. In addition, 25% and 5% duties on US cars and auto parts respectively will be resumed on Dec. 15.

• In response to China, Trump ordered US business out of China and announced that the existing 25% tariff on $250 billion worth of goods will be hiked to 30% as of Oct. 15. And the planned 10% tariff on the remaining $300 billion in goods will instead be 15% starting on Sep. 1. Even though it is said that two sides will get back to the negotiating table, it remains to be seen.

• As escalating trade tensions between the US and China, it drives a surge in global risk aversion. The China's yuan slumped below the 7.1 mark against the US dollar and it is expected that RMB exchange rate will possibly keep declining.

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2019 First Half Retrospect

• The annual maintenance of Asia SM plants was scheduled mainly from March to May for this first half and the production lost is about 640 kilotons in this period.

• Due to the floods, dense fog and storage tank fire in US, the US SM export was seriously delayed. As the result, the deliveries to Europe and Northeast Asia customers, such as South Korea and Taiwan, were affected. Thus the SM price remained supported .

 While SM annual maintenance was about to end around this May and June, the Korea SM supply became tight. It is because that South Korea’s Hanwha Total (annual capacity 1,050 kilotons) was unable to restart due to labor strikes and factory fires. Beside, the production of LG’ SM plant located at Daesan (annual capacity 170 kilotons) was suspended due to its upstream cracker shutdown and raw material supply interruption. These continuously supported the SM market price.

 As for the cost side, benzene market prices were weak due to the new production capacity (FuHaiChung 480 kilotons; Hengli 900 kilotons) and oversupply. In addition, ethylene demand depression led to the price decline. These factors made the company profit remaining good for the first half of the year.

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2019 Second Half Outlook

 The global SM demand is about 30,000 kilotons and the demand growth rate is estimated around 1.5~1.8% this year, that is about 500 kilotons. The SM capacity addition is less this year. Brazil‘s Videolar Innova and South Korea’s YNCC have produced extra 160 kiloton and 80 kilotons from debottleneck since this April and July respectively. Most of other new capacity addition is mainly in China but the production will be postponed to next year. Therefore, the overall SM supply this year should be tight.

• There is anxiety about global economic growth as uncertainties around US-China trade war and others. The economic growth of China and other emerging markets are slowing down. Thus the demand for end products is declining, so as the SM downstream industries.

• As there is less SM maintenance for this second half, the Korea’s SM plant shut down described above will be restored, and SM export from Europe and US to NE Asia will be resumed, it is expected that the NE Asia’s SM price will fall as the supply is sufficient and demand is slowing down. While the benzene price goes strong in 3Q, SM margin is compressed and the profit will not be as good as first half of the year.

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Overview of Production and Sales for TSMC

2014~2018 SM Production vs Sales Volume

2018 Sales by Products

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Ton
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2014 2015 2016 2017 2018
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Ethyl
benzene Hydrogen
Toluene
0.12% 0.69%
1.20%
Steam
1.03%
PDEB
2.46%
Styrene
Monomer
94.49%
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Production Sales

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Taiwan Styrene Monomer Co.
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3 Financial Review

TSMC Consolidated Income Statement

TSMC Consolidated Income Statement	TSMC Consolidated Income Statement	TSMC Consolidated Income Statement	TSMC Consolidated Income Statement	TSMC Consolidated Income Statement
Unit：M NTD
	2017	2018	2018 1H	2019 1H
Revenue	14,751	15,383	8,076	6,256
Cost	13,062	13,406	6,908	5,330
Grossprofit	1,689	1,977	1,168	926
Grossprofit rate	12%	13%	14%	15%
Operating expenses	406	442	249	203
Netprofit	1,283	1,535	920	723
Netprofit rate	9%	10%	11%	11%
Non-operating income	-37	13	20	-4
Profit before tax	1,246	1,548	940	719
Tax	-262	-361	-226	-84
Netprofit of the term	985	1,187	714	635
Profit rate	7%	8%	9%	10%
Net Income Attributed to
- Stockholders of the company	1,056	1,216	738	642
- Non-controlling Interest	-71	-30	-23	-7
EPS(NTD)	2.00	2.30	1.40	1.22

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Taiwan Styrene Monomer Co.
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3 Financial Review

TSMC Consolidated Financial Analysis

	2016	2017	2018	2019 1H
Debts ratio(%)	35.95	30.69	26.57	31.00
Current ratio(%)	158.92	176.39	172.55	139.45
Quick ratio(%)	112.51	112.99	135.71	118.27
Average collection turnover(times)	16.01	12.45	13.48	11.78
Average collection days	22.79	29.31	27.08	30.98
Average inventory turnover(times)	17.62	21.18	19.35	18.92
Average inventory turnover days	20.71	17.23	18.86	19.29
Return on total equity(%)	18.80	13.02	15.52	17.03
10 15 20 25
	18.8
		13.02	15.52	17.03
	ROE(%)

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4 Q & A

TSMC EPS & Dividend

		2014	2015	2016	2017	2018
EPS(NTD)		-0.07	1.31	2.67	2.00	2.30
Cash dividend (NTD)		-	1.00	2.20	1.60	2.00
Stock Dividend from Retained Earnings (NTD)		-	-	-	-	-
1 0 1 2 3				267		2.3
				.	2
			1.31
		~~-0.07~~
-

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EPS
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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4

Q & A

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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台灣苯乙烯工業股份有限公司 Taiwan Styrene Monomer Co.