USI — Management Reports 2022

Mar 23, 2022

USI CORPORATION

(Stock Code ： 1304)

Investor Conference

2022.03.23

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Disclaimer

This presentation includes the Company’s current information. Any development or adjustments thereof will be published according to laws, regulations or rulings. The Company is not obligated to update or revise this presentation.

The information in this presentation is not for investment advices.

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Presentation Outline

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General Information of USI Business Review and Outlook Finance Information Q&A

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General Information of USI

Reported By: Mark Wu (Vice President of Sales & Marketing Dept.)

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Established Date

Ma 26 1965 y ,

Ca ital p

NT$11,888M (up to Dec. 31, 2021)

No. of Employees

462 (up to Feb. 28, 2022)

Individual ： NT$16,030M Revenue (2021) Consolidated ： NT$71,760M

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High Pressure LDPE/EVA Plant

• Main Products

• Facility Capacity •

• • • Low Density Polyethylene 4 sets of High-Pressure LDPE/EVA Total at Resins

• Autoclave Production 150KMT (Injection/Film Grades)

• Lines • Ethylene Vinyl Acetate Copolymer Resins (Foaming/HMA/PV Grades)

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Low Pressure HDPE/LLDPE Plant

Production Annual Main Facility Capacity Products 1 set of Gas Phase • HDPE/LLDPE Total at • High Density Polyethylene Resins Production Line 130KMT (Injection/Yarn/ Rotation Grades)

1 set of Gas Phase • HDPE/LLDPE Total at Production Line 130KMT

• 1 set of Gas Phase

• Linear Low Density Polyethylene Resins (Blown Film/Casting Grades)

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Business Review and Outlook

Reported By: Mark Wu (Vice President of Sales & Marketing Dept.)

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Crude/Ethylene Prices Review
•
In H1 of 2021, ethylene price fluctuated due to annual maintenance of
naphtha cracking plants. In H2 of 2021, the upward price trend of ethylene
was supported by crude oil price.
（ $/b ） （ $/MT ）
Brent C2 NEA
120 1400
2021
1200
100
1000
80
800
60
600
40
400
20
200
0 0
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Source from: Platts

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EVA Prices Review

EVA Price Trend

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EVA 14%~20% CFR CMP
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EVA 22%~30% CFR NEA

Ethylene CFR NEA

4100 2021 3900 3700 3500 3300 3100 2900 2700 2500 2300 2100 1900 1700 1500 1300 1100 900 700 500 300

Source from: ICIS

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PE Prices Review

PE Price Trend

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1400
1300
1200
1100
1000
900
800
700
600
500
400
300
USD/MT
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HD YARN CFR FEA

HD INJ CFR FEA

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2021
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Ethylene NEA

Source from: Platts

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Business Review of 2019 to 2021

Comparison of Sales Volume

275 271 269 270 265 260 256 255 250 245 2019 2020 2021

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Unit: KMT
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2020 & 2021

Sales Volume Comparison

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2020 2021 Variance
Total 270,919 269,093 -1,826
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Unit: MT

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• The supply and demand of EVA changed greatly in year 2021. In Q1, a server cold hit petrochemical plants in the Gulf Coast of the US which resulted in a global supply and demand imbalance and thus prices soared sky high. In Q2, the demand of PV turned weak. Coupled with the supply increased by the release of several new EVA plants in China, the market prices were adjusted lower. In H2 of 2021, PV demand revived and the price rose sharply again from Aug. till the end of Oct. due to extremely tight supply of EVA which led the prices hit a record high.

• In H2 of year 2021, not only the PV demand improved but the deepsea cargos for shoe sole foaming grades were in limited availability so the OEM plants for branded shoes turned to local procurement which caused EVA sales further increased compared with 2020. The sales for HMA kept stable.

• EVA total sales in 2021 increased by 9 % compared with 2020.

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• Due to the slowdown of the COVID-19 epidemic, the supply of masks returned to normal so its demand was reduced and the same for greatly HDPE supply. Since August, the crude oil and ethylene prices had reversed from its bottom lows but PE were hard to prices relatively pass on forward thus profits shrunk. Throughout the whole year in 2021, HD/LLD total sales were lower than year 2020.

• HDPE: Affected by the slowdown of the epidemic, hygienic prevention market demand for both domestic and foreign sales decreased. In 2021, its sales dropped by 13% against 2020.

• LLDPE: Strengthening the sales to downstream customers led the sales volume increased. In 2021, its sales increased by 30% compared with 2020.

• LDPE: Kept sales to existing regular customers through APC’s OEM. The sales volume in 2021 decreased by 9% to that of year 2020.

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Global PV Demand

2010~2022 Global PV Installations

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(Est.)
240
240
220
200
180 195
180
160 170
140
139
120
100 115
98 97
80
60 75
40 56
45
41
20 28 30
18
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
(GW)
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Source from:

IHS 、北極星、 Trend Force 、 SPE 、 CPIA 、 BNEF 、 Wood Mackenzie

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China EVA Demand

Year	Production	Import	Export	Demand	Self-sufficiency rate (%)
2017	555	1,035	64	1,526	36%
2018	631	976	49	1,558	40%
2019	736	1096	60	1,771	42%
2020	741	1177	54	1,864	40%
2021	1007	1117	71	2,053	49%

Unit: KMT

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2500
2000
1500
1000
500
0
2017 2018 2019 2020 2021
Reference: Chem99,
Production Import Export Demand China Customs Data
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CHINA EVA CAPACITY

Company Annual Capacity Start Date Product Application BEIJING DONGFANG PC 40 1995 film/packaging BEIJING HUA MEI POLYMER COMPANY LIMITED 60 2010 HMA SINOPEC YANSHAN COMPANY 200 2011 film/foam/lamination BASF-YPC COMPANY LIMITED 200 2005 film/foam(contain high VA)/W&C LEVIMA ADVANCED MATERIALS TECHNOLOGY 100 2015 foam(contain high VA)/W&C/PV FORMOSA PLASTICS CORP.NINGBO 72 2016 foam(contain high VA)/W&C/PV JIANGSU SAILBOAT PETROCHEMICAL 300 2017 foam(contain high VA)/W&C/PV/HMA SHAANXI YANCHANG COAL YULIN EN. AND CH. 300 2021 film/foam/W&C/PV SINOPEC YANGZI PC 100 2021 foam(contain high VA)/PV/HMA SINOCHEMQUANZHOU PETROCHEMICAL 100 2021 foam/W&C ZHEJIANG PETROLEUM & CHEMICAL CO.,LTD. 300 2021 PV SINOPEC ZHONGKE(GUANGDONG)REF.& CH. 100 2022 Total 1872 (already start-up) FUJIAN GULEI PETROCHEMICAL 300 2022 XINJIANG DUSHANZI TIANLI HIGH&NEW TECH 200 2022 SHENHUA NINGXIA COAL INDUSTRY - SABIC BASICINDUSTRY 100 2022 LEVIMA ADVANCED MATERIALS TECHNOLOGY (DEBOTTLENECK) 50 2022 FORMOSA PLASTICS CORP.NINGBO (DEBOTTLENECK) 28 2022 NINGXIA BAOFENG ENERGY 250 2023 ABUNDANT DRAGON GROUP 300 2024 JIANGSU SAILBOAT PETROCHEMICAL(二期) 200 2025 Total(New Capacity) 1428 UNIT：KMT 18/31

2021 ESG Performance

Environment Aspect

• Recovery of 12.87MT of plastics through promotion of the plastic resin pellet leakage prevention and management program.

• Implementation of the ISO 46001:2019 Water Efficiency Management System and completion of external certification in February 2022.

• Implementation of ISO 14067:2018 Carbon Footprint of Products and completion of external certification in January 2022.

• Constant implementation of ISO 14064 Greenhouse Gases Inventory and scope 3 inventory.

• Regulator electricity saved 1%, corporate energy saved 1.2%, carbon saved 1.5%, water saved 1%

• 2021 performance: Electricity saved 0.75% (average 1.38% between 2015 and 2021), Energy saved 5.1%, Carbon saved 2.39%, Water saved 4.26%

• 2022 targets: Electricity saved 1.71%, Energy saved 7.36%, Carbon saved 4.07%, Water saved 3.63%

• No non-compliance with environmental protection regulations (5 cases in 2020)

• 2021 environmental expenditure was about NT$135.3 million, increased by 16.5% from 2020.

• Completion of investments in 3 rooftop solar sites in central Taiwan with capacity of about 5MW.

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2021 ESG Performance

Social Aspect

• Implemented training on process safety management ( PSM ) 329 persons, totaling 1,902 hours.

• Epidemic control with local communities, donation for building epidemic quick test station, employee blood donation, adoption of air purification zones, and sponsoring USI Education Foundation.

• Zero job-related injuries

• Promotion of AI safety protection and recognition

• Organizing the 2nd (2021) USI Cup Charity Softball Competition to integrate sports with charity.

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2021 ESG Performance

Governance Aspect

• Development of high-liquidity injection HDPE products

• EVA sales increased by 12,107MT from 2020 to 147,000MT, a new high in history.

• Promotion by Taiwan Ratings to twA/twA-1 with a “steady” outlook.

• Commercial operations of the Fujian Gulei Petrochemical Project in December 2021.

• Awards

• Top 5% in the 7[th] (2020) Corporate Governance Evaluation.

• TCIA Industrial Contribution Award 2021

• Bronze Award, TSAA Taiwan Sustainable Action Award

• “Top 50 Corporate Sustainability Awards”and “Platinum Corporate Sustainability Report Award”at the Taiwan Corporate Sustainability Awards (TCSA).

• GCSA Sustainability Reporting – Bronze Class

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Operation Outlook In 2022

OIL ：

During the global economy and worldwide demand recovery, it is now affected by the short term of Ukraine-Russia war with economic sanctions against Russia conducted by multiple countries. The oil price is forecasted to be fluctuating at its high end.

ETHYLENE ：

In H1 2022, due to annual maintenance of crackers in various places and the reduced production under economic considerations global ethylene supply is lower than expected. However, in H2, after the release of new production capacity in China and the . lifting of geopolitical war crisis, its supply is expected to increase

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Operation Outlook In 2022

PE and EVA ：

 Affected by the war between Ukraine and Russia, crude oil prices fluctuated heavily which caused raw materials like ethylene rose. Market is still full of variables such as persisting containers shortage and ports congestion while COVID-19 virus continued mutations resulting in slow demand as well as economy uncertainties such as global carbon reduction and carbon border taxes charge.

 Carbon reduction and green energy issues are catching global concerns and will be gradually implemented surely. For longterm demand, the PV market still looks optimistic. It is estimated in 2022, the installation capacity will be around 195-240 GW. Although there will be estimated 700-1000 thousand tons of new EVA capacity released in 2022, the market is still very optimistic for long-term PV encapsulant film demand.

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Operation Outlook In 2022

PE and EVA ：

 In year 2022, the global new production capacity of PE will be about 9 million tons of which China will account for about 4.5-4.9 million tons while North America will account for about 2.2-3 million tons.

 This new global PE capacity increased in 2022 may be a new high in recent years. China’s demand accounts for more than one-third of the world’s total but its demand growth rate reached a new low in recent years. It is difficult for Asian PE to sell to EU and US markets due to expensive freight costs. The operating rate of PE in Asia is likely to hit a record low.  Continuously promoting high-performance EVA products and improving the quality of HD/LLD products in order to develop niche market customers.

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Gulei Petrochemical Project

• Taiwan and China each holds 50%

• Total investment (Taiwan & China)：30.39 Billion RMB

.

Sales and production of Ethylene, Propylene, Butadiene, Ethylene Vinyl Acetate copolymers (EVA), Ethylene Oxide (EO), Ethylene Glycol (EG), etc.

• 2016/11 Fujian Gulei Petrochemical Co. Ltd. was established.

• 2017/12 Opening ceremony of Fujian Gulei Petrochemical Co. Ltd. was launched.

• 2018/08 Overall design of Gulei Petrochemical Project was approval.

• 2019/05 The Land Usage Proposal and Infrastructure Plan were reviewed.

• 2019/06 Project construction was started

• 2021/03 Test-run of PP item was successfully performed

• 、 、

• 2021/08 Test-run of Steam cracker SM EO/EG item was successfully performed

• 2021/10 Test-run of SBS item was successfully performed

• 2021/12 Fujian Gulei Petrochemical Co. Ltd. started commercial operations

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USI Corporation and Subsidiaries

Consolidated Financial Information

Reporter :Amy Kuo, Manager of Accounting Dept. Date : 2022, Mar. 23

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USI Corporation Consolidated Statements of Income

(In millions of NTD, except per share data)

	2021 FY	2020 FY	YoY%	2019 FY	2018 FY
Sales	71,756	50,201	42.9%	55,657	60,893
Cost ofgoods sold	54,002	39,721	36.0%	48,924	55,098
Gross profit	17,754	10,480	69.4%	6,732	5,795
grossprofit ratio	25%	21%		12%	10%
R&D expenses Selling and administrative expenses	4,441 430	3,230 363	37.5% 18.4%	3,385 416	3,440 422
Operating income	12,883	6,887	87.1%	2,932	1,933
operating income ratio	18%	14%		5%	3%
Non-operating income(loss)	(130)	236	-155.2%	434	597
Income before income taxes	12,752	7,123	79.0%	3,366	2,530
Income taxes	2,673	1,440	85.6%	820	654
Net income	10,079	5,683	77.4%	2,545	1,876
net income ratio	14%	11%		5%	3%
Net income attributable to
- USI Corporation	5,191	2,410	115.4%	1,281	540
- non-controlling interests	4,888	3,273	49.4%	1,264	1,336
Basic Earnings Per Share	4.84	2.25		1.19	0.50

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USI Corporation Financial ratio analysis-Consolidated

	2021 FY	2020 FY	2019 FY	2018 FY
Operating income margin(%)	18	14	5	3
Net income margin(%)	14	11	5	3
Debt ratio(%)	34	37	45	47
Current ratio(%)	227	225	222	205
Quick ratio(%)	172	185	177	155
Accounts receivable turnover days	43	54	52	50
Inventory turnover days	40	42	43	45

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Thanks for attending the conference and your kind support.

Company Website：http://www.usife.com.tw

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