Kenda Rubber Industrial LTD
Investment Forum
Proxy Spokesman Wei-ShuChen
The information in this document was
acquired from sources available to the
company and is subject to change. The
information from TSE MOPS shall take
precedence in case of discrepancies.
Disclaimer
Outline
• Business Strategies
(Production, R&D and Marketing)
• Operating Results
• Q & A
Production
Strategy
Plant PCR MC BC TUBE TBR
Yuanlin plant ˇ ˇ ˇ
Yunlin plant ˇ ˇ
Kenda Tire
(Shenzhen) ˇ ˇ ˇ
Kenda Rubber
(China) ˇ ˇ ˇ ˇ ˇ
Kenda Rubber
(Vietnam) ˇ ˇ ˇ
Kenda Tire
(Tianjin) ˇ ˇ ˇ
Kenda Rubber
(Tianjin) ˇ
Kenda Rubber
(Huizhou) ˇ ˇ ˇ ˇ
Kenda Rubber
(Indonesia) ˇ ˇ ˇ ˇ
In planning
Factory Production
In planning
Factory Production
On August 12, 2014, the Board of Directors passed the
proposal of opening an Indonesia factory. The Company
will accelerate the set up of the factory to full-fill the
Indonesia market and react to the US Anti-
dumping/Anti-subsidy.
The construction of the second plant of Kenda Rubber
(China) and the plant of Kenda Rubber (Huizhou) is on
schedule .
From December 1, 2014, China cancelled the sales tax
on tires of light motorcycle and auto under 250cc.
。
Factory Production
To integrate sources effectively, to simplify the
management procedures and to reduce the operating
cost, Kenda passed the proposal to merge the two
factories in Tianjin (KT&KJ).
To simplify business structure and coordinate group
strategy, Kenda Tire (ShenZhen) will be dissolved in
2015.
Kenda signed the agreement with Kaisa Group (Shen-
Zhen) for developing the land Kenda Shen-Zhen located.
Background
United Steelworkers (USW) filed anti-dumping and anti-subsidy
lawsuits against China’s sedan and light-truck tire imports with the
US Department of Commerce (DOC) and International Trade
Commission (ITC) on June 3, 2014.
On July 22, the ITC voted 6-0 that Chinese manufacturers were
causing material injury to US tire manufacturers, prompting the
toDOC launch anti-dumping and anti-subsidy investigations. The
result of Anti-subsidy investigation has been released on Nov 24,
2014. The result of Anti-dumping investigation is expected to be
announced on Jan 21, 2015.
Anti-dumping/Anti-subsidy
The result of Anti-subsidy investigation
(released on Nov 24, 2014)
Corporate Name Tax rate
GITI Tire 17.69%
Cooper Tire & Rubber 12.50%
Shandong Yongsheng Rubber 81.29%
Other Companies 15.69%
Impact on Chinese tire manufacturers
The released tax rate of anti-subsidy is higher than market expectation,
which indicates the tax rate of anti-dumping will also higher than
estimation. The result could damage the US import market of tire from
China even worse than predicted. Given the fact that the supply from
China maybe drop 2/3, the price of US-produced tires will rise, which
hurts US consumers.
The measures will be imposed for five years and could be extended for
another five years after the sunset review. The review could be repeated
an unlimited times and indefinitely periods. This will pose a huge obstacle
to Chinese tire manufacturers.
Surplus capacity in China could be relocated to regions
other than the US, intensifying competition.
Smaller Chinese tire manufacturers could exit the
market, while stronger manufacturers will aggressively
seek out opportunities to build plants in the US or other
countries.
This could trigger a global domino effect, prompting
other countries to launch anti-dumping investigations
against China’s products involved in the US case.
Kenda’s future plan
Adding equipment in Taiwan plants; boosting capacity to take
orders from subsidiaries in China.
Tapping into emerging markets; increasing exposure of OEM
business; increasing exposure in non-PCR tires such as bicycle
and motorcycle tires.
No expansion plans in China in the near term except for the
scheduled construction of the second plant of Kenda Rubber
(China) and the plant of Kenda Rubber (Huizhou) ; establishing a
new plant in Indonesia.
Continuing to relocate investment to Taiwan.
The investigations will bring more pros than cons to Kenda.
Outlook is positive.
R&D Strategy
Improving R&D capability & product quality
Expanding the Taiwan R&D center, which is
responsible for new product development, testing,
and technology upgrades.
Establishing the US R&D center by hiring many
technology experts to develop products that cater to
North American consumers and accelerate new
product development.
Expanding the Kunshan R&D center and seeking
out more opportunities to team up with Chinese car
companies.
Marketing
Strategy
Promoting Kenda’s own brand
Promoting sub-brands
Sports Marketing
Sponsoring Cannondale professional bike team Sponsoring the Uni-President 7-Eleven Lions
Sponsoring the NBA team Cleveland Cavaliers
Operational
Results
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014年
1-11月
11,567
14,564
18,675
21,281 19,899
24,245
28,203 29,821
32,451 30,601
Revenue
Note:Consolidated sales grew NT$31.9mn after ADI acquisition in 2013.
Unit: NTD mn
0%
10%
20%
30%
40%
Bicycle Motocycle PCR Others
27.63% 27.61%
9.69%
35.07% Spare tires accounted
for 13% of PCR
Sales breakdown by tire types Jan.-Nov. 2014
NT元/KG
Tire raw material price trend
86.85
56.49
100.64
139.75
100.85
76.03
47.50 73.23
45.07
70.20
109.00
83.21
58.09
50.60
-
30
60
90
120
150
2008 2009 2010 2011 2012 2013 2014年12月
Natural
Rubber
(SIR20)
Syntheic
Rubber
(SBR1500)
Consolidated gross margin
0%
5%
10%
15%
20%
25%
30%
2007 2008 2009 2010 2011 2012 2013 2014Q3
15.44%
13.53%
28.04%
19.03%
15.92%
21.95%
24.92% 26.24%
Consolidated gross margin(Quarter)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Q3
2,468
2,702
53
414 490 432
2,492
1,544
1,529
2,644 769
1,490
NT$mn
3,019 3,367
Net profit/loss
Note: The 2013 data already eliminated the prior equity under common control when acquiring ADI.
NT$元
4.38 4.24
Earnings Per Share
Note: The 2013 data already eliminated the prior equity under common control when acquiring ADI.
NT$元
1.01 1.16 1.06 1.01 1.05 1.12 1.15
13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3
Note: The 2013 data already eliminated the prior equity under common control when acquiring ADI.
Earnings Per Share(Quarter)
Thank you for supporting Kenda.
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