TSRC — Investor Presentation 2020

Oct 16, 2020

2020 TSRC – Global Specialty Polymers Investor Conference, 16[th] Oct 2020

Disclaimer

The information presented and referred herein are based upon the information obtained internally and externally from our company. Forward-looking operational results, financial condition and business results might be different from those information expressly or impliedly presented herein due to various factors, including but not limited to market risks, supply chains, market demand and our upcoming high-quality products.

We undertake no obligation to publicly update or revise any statements regarding those information presented and referred herein in the event of any further changes or updates to the information presented herein.

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AGENDA

1. Introduction

• Thomas Lin, Deputy Spokesperson

2. 1H2020 Financial Performance

• Edward Wang, CFO

3. TSRC’s Response to Pandemic

Challenges – Adapt and Optimize to Emerge Stronger

• Joseph Chai, CEO

4. Q&A

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Introduction Thomas Lin, Deputy Spokesperson [1]

1H 2020 Financial Performance [2] Edward Wang, CFO

COVID-19: Navigating Diverse Economic Impact

• Pandemic and related containment measures deeply affected world economy differently across regions and sectors

• Revenue and profitability faced headwinds amid declining raw material price and end-market slowdown

• Performance of investee also negatively impacted by disrupted Sales Volume (KMT)

• demand and lockdown policy

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Revenue (NT$M) Operating Profit (NT$M)
-21% -59%
15,149
12,029 734
302
YTD Jun '19 YTD Jun '20 YTD Jun '19 YTD Jun '20
Net Income (NT$M) EPS (NT$)
617
-58 0.75
-0.07
YTD Jun '19 YTD Jun '20 YTD Jun '19 YTD Jun '20
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Revenue by Geography

• Decline in revenue reflected low raw material price and a challenging market environment - automotive and consumer market slowdown, especially in developed countries

• Sales volume edged up 1% YoY with strengthened market position following China’s lead on recovery

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Americas Europe Asia
10,598 10,140
8,565
2,295
1,883 1,873 1,735
1,377 1,305
2019 1H 2019 2H 2020 1H 2019 1H 2019 2H 2020 1H 2019 1H 2019 2H 2020 1H
Other Region
521
363 287
Amount in NT$M 2019 1H 2019 2H 2020 1H
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Strengthened Position amid Improving Market Dynamic

• Despite sharp decline in BD price, business dynamic turned favorable with the support of widened NR-BD price gap, and further enhances TSRC’s market competitiveness

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Unit: US$ Unit: US$
2,000 1,000
800
1,500 600
400
1,000 200
0
500 (200)
(400)
0 (600)
NR-BD price gap (RHS) ICIS BD CFR NEA (LHS)
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
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Major Equity Investment

• ISRPL’s performance was impacted by India government’s lockdown measures

• Performance of ARL-TSRC saw gradual improvement in 1H 2020 with demand recovery in China

• APED continued to deliver stable results

ISRPL ARL-TSRC

APED

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108
40 43
33 30
7
(13)
(34)
(95)
2019 1H 2019 2H 2020 1H
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Amount in NT$M

Note1: Full name of each investee: ISRPL- Indian Synthetic Rubber Private Limited, ARL-TSRC- ARLANXEO-TSRC (Nantong) Chemical Industries Co., Ltd., APED- Asia Pacific Energy Development Co., Ltd. Note 2: Numbers shown as TSRC’s investment income from each investee

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Adapt and Optimize to Emerge Stronger from [3] COVID-19 Joseph Chai, CEO

TSRC Strategic Objectives and Actions

• Transformation: Global specialty company

Specialty business > 50%

• Growth: High value and profitable applications

Increase investment in R&D, application, and process technologies

• Long Term Sustainability: Strong business portfolio and organization capabilities

Enhance business models and strategic alliance

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COVID-19 Caused Significant Impact and Disruptions to Market Demand

Demand Impact

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Automotive

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Sport (ASM)
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Industrial

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Consumer

Medical & Hygiene

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Construction

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Effective Execution through Pandemic

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• Ensured employees safety

• Provided sufficient facemask and PPE

• Redeployed resources to avoid retrenchment or furlough

• Continued safe operation of global sites

• Ensured supply chain and business continuity to customers

• Maintained strong cash flow and financial stability & liquidity despite challenging market conditions

• Substantial reduction in operating and capital expenses

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SRD – Strong Performance Leveraging on China Recovery

• Strong sales volume in China offset severe demand destruction outside of China

• Leveraging on healthy price spread between Natural Rubber and BD

• Optimize earnings across spot, contract, and Formula-based busines segmentation

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AMD – Navigate through Massive Demand Destructions

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•
Automotive and Sport Shoe market
weakness posed tough challenges
•
Expand coverage at less impacted
applications
•
Accelerate development of new
applications and material
technologies
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Confidential and Proprietary

Long Term Investment Remains Intact

• New high-performance HSBC platform

New polymer platforms and applications development

• Next generation ASM foaming technology

• • Medical grade SEBS

• Sytrenic viscosity modifier for lubricants

• • New elastic non-woven materials

Expand global capabilities and value delivery

• New R&D and application lab closer to target market regions

• Assets to support commercialization and supply of new products and technologies

Sustainable specialty chemicals business model

• Implement enhanced business and value models

• Continue to explore strategic alliances

• Build organizational capabilities and competitive advantage

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Pandemic Outlook Points to Uneven Recovery

Global GDP Growth Projection

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6%
4%
2%
0%
'17 '18 '19 '20 '21 '22 '23 '24
-2%
-4%
-6%
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• Battled economic requires at least 2 years recovery

• Market demand recovery varies by endmarket and regions

• Growth momentum expected to continue after recovery

• Expect drastic changes in market trend postpandemic

Unit: M Global Light Vehicle Sales 120

Pre-COVID-19 Forecast

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100
Post-COVID-19
80
Forecast
2021-2025
CAGR 3.4%
60
'17 '18 '19 '20 '21 '22 '23 '24 '25
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Source: Economist Intelligence Unit Aug 2020 Forecast; LMC Automotive Sep 2020 Forecast; TSRC forecast

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Optimize to Emerge Stronger

Major thrust into medical and hygiene with total solution approach of polymers, compounds, and semi-finished products

Greater health awareness favors ASM and medical applications

Proven Synthetic Rubber business capability leverage on stable Natural Rubber price, ample BD supply, and stable ESBR supply capacity

Increase value share of materials for automotive

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Examples

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Medical devices e.g. IV bags, tubing, film

• Strong growth ~ 5% CAGR for next decade

• Move to non-PVC materials

• TPE more environmentally friendly and sustainable

Elastic non-woven e.g. diaper, facemask, hygiene products

• Strong growth ~ 7% CAGR for next 5 years

• Wide end-use applications

• TPE elastic non-woven provides new performance features and cost advantage

High value automotive e.g. lubricant VM, high performance Tires

• Higher value materials for automotive applications

• Partnership with key companies involved

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Summary

1 YTD 2020 Business Performance

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2 Adapt and 3
TSRC Vision
Optimize to
Emerge Stronger
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Business result affected by COVID-19 impact on TSRC end-markets

Respond effectively to Maintain the short term challenges. momentum toward our Committed to long term vision to become a investment in Global Specialty technology, markets and Chemical Company applications

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Q&A

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THANK YOU

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