4Q2018 & FY2018 RESULTS PRESENTATION · 220.2 195.2 221.7 341.3 641.3 0 100 200 300 400 500 600 700...

中国尚舜化工控股有限公司

CHINA SUNSINE CHEMICAL HOLDINGS LTD.

1

4Q2018 & FY2018RESULTS PRESENTATION

1 March 2018

PRESENTATION OUTLINE

Our Company

Financial Overview

Key Developments

Industry Info and Outlook

2

Our Company

3

About China Sunsine Chemical

✓ Specialty rubber chemicals producer

✓ World’s largest producer of Rubber Accelerators

✓ PRC’s biggest producer of Insoluble Sulphur

✓ Superior product-quality and economies of scale

✓ Accredited by a strong customer base of top tire makers

✓ Beneficiary of stringent environmental protection standards

4

Our Products - Rubber Chemicals5

Rubber AcceleratorsMBT MBTS CBS TBBS TMTD

DPG DCBS ….

Insoluble

Sulphur

Anti-OxidantsTMQ

6PPD

4010NA

Our Products: Rubber Chemicals

Rubber Chemicals are

Essential Additivesin the production of rubber products

6

Global Consumption of Rubber

Car Tyres61%

Tube/ Tape6%

Boots10%

Other Tire9%

Latex4%

Other Products10%

7

http://www.chemn.com

Accelerators1.7%

Vulcanizing agents 2%

Anti-oxidants2.2%

Rubber

Global rubber consumption in 2017:

28.27 million tons - By IRSG

• By weight, every 100 tons of rubber consumes

about 6 tons of rubber chemicals (100:6)

• By value, rubber chemical’s cost accounts for

about 3% of total tire cost (100:3)

8

Our Strong Customer Base

(2006)

(2006)

(2003)

(1997)

• Over 1,000

customers globally

• Serves more than

2/3 of the global

top 75 tire makers

• 1/3 output exported

Market Share: Rubber Accelerators9

PRC Market Share

Global Market Share19%

24% 24% 25%

28%29% 30% 30%

31%33%

7%

11% 12% 12%14% 16% 17% 17%

18%20%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

MARKET SHARE

Our Market Leadership Position10

CompanyAnnual

Capacity 2018

China Sunsine中国尚舜

Tianjin Kemai

天津科迈

Yanggu Huatai

阳谷华泰

87,000 tons

51,000 tons

45,000 tons

GLOBAL TOP 3 ACCELERATOR PRODUCERS

Company Annual Capacity 2018

China Sunsine中国尚舜

Yanggu Huatai

阳谷华泰

30,000 tons

20,000 tons

15,000 tons

PRC TOP 3 INSOLUBLE SULPHUR PRODUCERS

Sennics

圣奥化学

Our Production Bases11

Five production bases in

three locations

Financial Overview

12

P&L Highlights13

* SGD to RMB exchange rate @5.0062

RMB ’mln 4th Quarter Ended Year Ended

31 Dec18 31 Dec17 Change 31 Dec 18 31 Dec 17 Change

Group Revenue 770.1 873.3 (12%) 3,283.3 2,738.4 20%

Gross Profit 249.4 291.2 (14%) 1,125.9 788.1 43%

Gross Profit Margin 32.4% 33.3% (0.9 pts) 34.3% 28.8% 5.5 pts

Profit Before Tax 142.3 195.6 (27%) 711.6 476.8 49%

Profit After Tax 108.6 132.0 (18%) 641.3 341.3 88%

EPS

(RMB cents/SGD Cents*)

22.11/4.42

26.85/

5.36

(18%) 130.45/26.06

70.83/

14.15

84%

Revenue Growth14

RMB ’mln

619.5797.9

718.4

991.41,175.1

1,417.3

1,695.9

2,077.3

1,859.1

2,036.9

2,738.4

3,283.30

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

FY18 Revenue up 20% y-o-y boosted by higher average selling price (ASP) and sales volume

Revenue By Quarter15

RMB ’mln

4Q18 vs 4Q17 : -12%

4Q18 vs 3Q18 : - 1%432.1

497.3475.9

453.8445.1

491.1547.3 553.4

575656.2

634.4

873.3856.9 880.6

775.6770.1

0

100

200

300

400

500

600

700

800

900

1000

1Q 2Q 3Q 4Q

2015 2016 2017 2018

1Q20182Q2018

3Q20184Q2018

Sales Contribution (By Region)16

Rest of Asia

US

Europe

Others

PRC

62%

FY18 Sales Contribution (y-o-y)

27%

2%

8%

Region 4Q2018 FY2018 FY2017

China 64% 62% 64%

Rest of Asia 23% 25% 24%

US 2% 2% 5%

Europe 8% 9% 5%

Others 3% 2% 2%

Total 100% 100% 100%

Sales Volume17

Tons

31,036 30,787

45,42054,275

60,907

81,371

98,345

108,973114,572

135,791140,476

151,486

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000


FY18 Sales volume up 8% y-o-y due mainly to higher sales volume of Insoluble

Sulphur (IS) and Anti-oxidant products

Sales Volume by Products18

Tons

31,036 29,805

40,196

46,34350,148

64,252

72,71076,089 76,090

82,767 83,335 83,255

0464

3,468 4,413 7,873

10,724 11,94812,102

15,41720,031 22,283

25,759

0 185 1,361 2,971 2,0615,183

12,281

19,903 21,640

31,21434,858

42,472

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000


Accelerator Insoluble Sulphure Anti-oxidant and others

Sales Volume FY18 vs FY17 Utilization Rate

Accelerators + 0% Almost fully utilized

Insoluble Sulphur + 16% Fully utilized

Anti-oxidants & Others + 24% About 90%

Sales Volume By Quarter19

25,377

30,948

29,203 29,04530,051

34,483

36,797

34,46033,046

34,55834,098

38,77436,797 37,567 37,166

39,957

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1Q 2Q 3Q 4Q

2015 2016 2017 2018

Tons1Q2018 2Q2018

4Q18 vs 4Q17 : +3%

4Q18 vs 3Q18: +8%

3Q2018

4Q2018

New record

Overall Average Selling Price (ASP)20

RMB/Ton

19.8K

25.9K

15.8K

18.3K19.3K

17.4K

17.2K

19.1K

16.2K

15.0K

19.4K21.5K

0

5,000

10,000

15,000

20,000

25,000

30,000


ASP by Quarter21

RMB/Ton

17.0K16.0K 16.3K

15.6K14.8K 14.2K

14.8K16.0K

17.3K

18.9K 18.5K

22.4K23.2K 23.3K

20.7K19.1K

0

5,000

10,000

15,000

20,000

25,000

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

• 4Q18 ASP dropped 15% y-o-y mainly due to the eased short supply situation and the decrease

in raw material prices

22

RMB/ Ton

Main Raw Materials Cost

2,000

6,000

10,000

14,000

18,000

22,000

Key Raw Materials Price Trend

Aniline

Tert-butylamine

Cyclohexylamine

Ketone

Dicyclohexylamine

Carbon Disulfide

Aniline

Gross Profit

FY18 Gross profit grew 43% y-o-y due to higher ASP and sales volume

23

125.2

226.8160.2

224.1293.4

243.9308.0

567.4492.0

547.1

788.1

1125.9

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

1000.0

1100.0

1200.0


RMB ’mln

Net Profit24

RMB ’mln

76.1106.7

88.3115.3 99.4

3276.7

220.2195.2

221.7

341.3

641.3

0

100

200

300

400

500

600

700


Net Profit

• Net Profit surge due to higher ASP and higher sales volume.

• Group’s main subsidiary-Shangdong Sunsine enjoys a concessionary tax rate of

15% throughout FY17, FY18 and FY19 due to its “High-tech Enterprise” status

Net Profit By Quarter25

47.4 47.155.3

45.533.6

49.0

72.866.3

57.2

74.5 77.6

132.0

149.5 191.7 143.4

108.6

0.0

50.0

100.0

150.0

200.0

250.0

1Q 2Q 3Q 4Q

2015 2016 2017 2018

4Q18 vs 4Q17: - 18%

4Q18 vs 3Q18: - 24%

1Q2018

RMB ’mln2Q2018

3Q2018

239.7

484Q2018

• A RMB48 million tax refund was credited in 2Q18

Margins Analysis26

20.2%

28.4%

22.3% 22.6%

25.0%

17.2%18.2%

27.3% 26.5% 26.9%28.8%

34.3%

12.3%13.3%

12.3% 11.6%

8.5%

2.3%4.5%

10.6% 10.5% 10.9%12.5%

19.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Gross ProfitMargin (GPM)

Net Profit Margin(NPM)18.1%

--- Adjusted by taking out the one-time credit of tax expense of RMB 48 mln in FY17

Margins Analysis By Quarter27

31.7%

24.3%

26.8%

23.5%24.2%

27.3%28.2%27.2%

24.4%

28.5%26.8%

33.3%34.9%

36.7%

32.7% 32.4%

11.0%9.5%

11.6%10.0%

7.5%

10.0%

13.3%11.0%

10.0%11.4%12.2%

15.1%

17.4%

27.2%

18.5%

14.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Gross ProfitMargin (GPM)

Net ProfitMargin (NPM)

21.8%

--- Adjusted by taking out the one-time credit of tax expense of RMB 48 mln in FY17

Balance Sheet Highlight

31/12/2018 31/12/2017 31/12/2016

Current Assets (RMB’mln) * 2,016.4 1,424.6 1,050.5

Current Liabilities (RMB’mln) 421.8 385.3 280.8

Current Ratio 4.78 3.70 3.74

Shareholders’ Equity (RMB’mln) 2,325.5 1,742.4 1,361.6

D/E ratio ** 0 0 0

NAV per share (RMB cents) (equivalent to SGD cents)

473.32/

94.6

354.37/

70.8

293.42/

58.6

Net Cash per share (RMB cents)（equivalent to SGD cents)

211.4

42.2

101.6/

20.3

56.1/

11.2

28

* Including Cash RMB 1,038.6 mln

** No bank borrowing

Key Developments

29

Ongoing Projects

Project Status CapEx

30,000-ton fully-automated, high-end

Accelerator TBBS at Shanxian:Whole project was approved in

Jan 2019

1. Phase I of 10,000-ton capacity Commercial production commenced RMB 100 mln

2. Phase II of 20,000-ton capacityProduction line to be installed in

2019RMB 60 mln

Insoluble Sulphur at Dingtao:10,000-ton production line

Obtained approval in Nov 2018

Commercial production commencedRMB 50 mln

Heating Plant:Add one boiler and one electric generator

Completed RMB 100 mln

30

The Group is currently negotiating with local government to acquire more land for further expansion

Annual Capacity

2007

(before IPO)FY17 FY18 FY9e

Rubber

Accelerators 32,000 87,000 87,000 117,000

Insoluble

Sulphur nil 20,000 30,000 30,000

Anti-oxidant

(TMQ & 6PPD) nil 45,000 45,000 45,000

Total 32,000 152,000 162,000 192,000

31

Industry Info and Outlook

32

China’s New Car Sales33

8.8 9.4

13.6

18.1 18.5 19.322

23.5 24.6

28 28.9 28.1

-10

0

10

20

30

40

50

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

sales

growth yoy

• 28.1 mln cars sold in China in 2018, down 2.8% y-o-y

• New car sales volume have seen the first time drop after 28 years of consecutive growth

in million units %

Global Vehicle Population34

240 250 260279

295310

327

0

50

100

150

200

250

300

350

400

2012 2013 2014 2015 2016 2017 2018

http://subscribers.wardsintelligence.com/analysis/world-vehicle-

population-rose-46-2016

PRC Motor Vehicle Population

Mln units

• Global vehicle population is growing, mainly driven by rising car ownership in developing countries

http://www.sohu.com/a/289093749_390500

Riding on Rising Tire Consumption35

• Replacement tire and new car tire sales account for 70% and 30% respectively

• As overseas factories of Chinese tyre makers produce for export to the US and the EU, tire

production in China expected to grow moderately

443 456 470529

562 565610

653

0

100

200

300

400

500

600

700

2010 2011 2012 2013 2014 2015 2016 2017

Source: http://www.tyrefh.org/

PRC Tire Production Volume

2840 2990 31403400

3660

0

1000

2000

3000

4000

5000

2014 2015 2016 2017 2018e

Projected worldwide tire market volumefrom 2014 to 2018

in million unitsin million units

www.statista.com

•

Competitive Strengths36

Market Leadership

Products & Economy of Scale

Strong Customer Base

Environmental Protection advantage

R&D Capability

Ready Resources for Future Expansion

- World largest accelerators and China’s biggest IS producer

- Capturing 20% of global and 33% of China’s accelerators markets

- Listed in the first batch of “National Champion Manufacturing Enterprise”

- “High-tech Enterprise” Status

- Academician R&D workstation in collaboration with Tsinghua and CAS

- R&D Centre partnered with Qingdao University of Science and Technology

- Early adopter of Environmental protection initiative

- 1/3 of capex invested in environmental protection and safety

- Transformation and upgrading towards “Green, Intelligent & Miniaturized”

- Strong cash position

- Built-up infrastructures

- Over 1,000 customers worldwide spanning over 40 countries

- Serving 2/3 of global top 75 tire manufacturers

- 1/3 output exported

- Superior quality and Full range of varieties

- Stable supply

- Largest capacity with economy of scale

Some Investors’ Concerns -1

Q : Are rubber chemical products commodities?

A : NO – They are products in the niche market.

Reasons:1. Rubber chemicals are not produced in a large scale

2. Renowned tire makers, which account for the bulk of the global tire production, require rubber chemicals to satisfy their special, onerous specifications. High technology and talents are required to make such rubber chemicals

3. China Sunsine has been profitable since 1998

37


Q : Are entry barriers high for the rubber chemical industry?

A : Yes.

Reasons:

1. Capital intensive -- land, environmental protection and safety infrastructure.

2. Know-how -- technology, talents and management skills also required to produce specialty chemicals.

3. Stringent supplier selection process by renowned tire makers, taking into account of production capabilities, capacity, quality of products & services and compliance with government’s regulations etc.

4. Rubber chemical industry currently undergoing consolidation.

5. Difficult to get approval for new capacities

38


Q : Will weakening car sales affect the rubber chemical industry?

A : There will be material impact only if the new car sales experience significant negative growth

Reasons:

1. New cars accounts for only 30% of tire consumption. Existing cars consume the remaining 70% as replacement for old tires. For passenger cars, every car needs to replace 1.5 piece of tires every year.

2. New car sales in developing countries expected to stay robust owing to low car ownership

39

Country US Australia Italy Japan Germany S. Korea China

Motor vehicles per

1,000 people

910 740 625 591 555 459 231

https://en.wikipedia.org/wiki/List_of_countries_by_vehicles_per_capita


Q : Will weakening ASP affect the Group’s performance?

A : The Group expects a downward pressure on ASP moving forward. For a long run, growing sales volume is what we are pursuiting for sustainable growth

Reasons:

1. ASP depends on the demand & supply situation and raw material prices. The Group is able to gain a reasonable margin due to its comprehensive competitive advantage.

2. Growing sales volume to further strengthen our market leadership position.

3. Robust financial position to support future capacity expansion

40

Trade war tension between US and China makes

the world economy uncertain and weakens

China’s tire export to US

Turning Challenges into Opportunities41

Challenges Opportunities

Short supply situation may ease as some

affected productions resuming gradually which

could lead to the decline of ASP

The policy affects smaller producers more

and will lead to industry consolidation,

benefiting bigger players

Sunsine's capacity growth will result in sales

volume growth and lower unit cost. Profit will

grow in long term even if ASP normalises

Group’s sales to US are small, about 2%.

Wherever they are located, tire factories all

over the world need rubber chemicals

Stringent environmental and safety enforcement

may affects all chemical companies in China

Listed On SGX Mainboard42

SHARE PERFORMANCE

• P/E 5 times & P/B 1.4 times

• Dividend yield 4.2%

Dividend Payment History43

Net Profit

(in RMB ’mln)Dividend

(in SGD cents)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6

0

100

200

300

400

500

600

700


Net Profit

Dividend

Chairman’s Message44

Mr. Xu Chengqiu

Executive Chairman

“I am pleased that the Group has achieved this phenomenal performance in

2018. The global economic and geopolitical conditions remain uncertain.

China’s economy is continuing to slow down. Auto sales have seen its first

decline in 2018 after 28 years of consecutive growth. On top of that, some

players which have placed more emphasis on their environmental protection

and safety measures had resumed their operations. The Group expects

downward pressure on prices moving forward.”

“In spite of many challenges ahead, as a leading rubber chemicals producer,

the Group continues to focus on production technology and innovation through

investment in R&D, to gain a competitive edge over other players We remain

cautious about the outlook of the Group and are confident of our profitability

in the next 12 months.”

45

Q & A

MEDIA/INVESTOR CONTACT

Tong Yiping, CFO, [email protected]

Jennie Liu, IR Manager, [email protected]

112 Robinson Road #11-01

Singapore 068902

(+65) 6220-9070

www.ChinaSunsine.com

4Q2018 & FY2018 RESULTS PRESENTATION · 220.2 195.2 221.7 341.3 641.3 0 100 200 300 400 500 600 700...

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