Lihua International — Investor Presentation (September 2010)
26 slides from Lihua International's investor presentation, Sep 16, 2010
Slide 1: September 2010
September 2010 INTERNATIONAL
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Alll statements, other than state
Slide 3: Company Profile: Lihua International, Inc.
Company Profile: Lihua International, Inc. (NASDAQ: LIWA) « Lihua is a leading vertically integrated Net Income manufacturer of copper alternative products Sam « Products: Pure copper rod, copper anode, le so56 ® pure copper fine and superfine wire, copper $25 clad aluminum (CCA) and superfine wire
Slide 4: Investment Highlights
ER ee Investment Highlights Large and rapidly growing copper alternative products and wire market Viable, vertically integrated and highly scalable business model Leading market position with low-cost advantage a0 = Proprietary recycling, drawing and enameling technologies provide sustainable materi
Slide 5: Recent Accomplishments
5 Recent Accomplishments © Launched copper anode product and signed material customer contract with leading copper conglomerate * Record 2Q10 financial results + Revenue of $75.5M (55% y-o-y growth) + Gross profit of $14.5M (49% y-o-y growth) + Net income of $9.9M or $0.34 per diluted share (48% y-o
Slide 6: Market Opportunity: Huge Demand in China
Market Opportunity: Huge Demand in China China is the largest copper consuming country in the world, accounting for approximately 35% of worldwide consumption China is highly under-resourced in domestic copper In 2009, copper consumption in the Chinese market was approximately 8.8 iillion metric ton
Slide 7: Limited Copper Supply Creates Opportunity
Limited Copper Supply Creates Opportunity China is deficient in copper reserves and is a net importer, driving growth in: « Recycling and recycling technologies « High copper prices, low mine production, lack of reserves and high import costs have fueled an increase in recycling copper « Alternative
Slide 8: Strategic Locations Throughout China
Strategic Locations Throughout China More than 98% of products sold in China huwwévonc Ke Headquarters in Danyang, Jiangsu province © Satellite offices ae LinUA N AA : f INTERNATIONAL
Slide 9: Copper Recycling to Capture Surging Demand
9 Copper Recycling to Capture Surging Demand « Launched first copper recycling facility in 1Q09 « Production now 50,000 tons per annum. Ai « Accounted for ~80% of 2010 revenue I pan al « Proprietary cleaning process leads to a large addressable market estimated at 8.8 million metric tons in 2009, or
Slide 10: Copper Anode Product Line
10 Copper Anode Product Line « Launched copper anode production in 2Q10 = Copper anode is the fundamental building block for almost all pure copper products @ Strong customer demand exceeds production capacity = Initial revenue expected in 3Q10; substantial top- and bottom-line contribution expected
Slide 11: What is Copper Clad Aluminum (CCA)?
au What is Copper Clad Aluminum (CCA)? Lihua purchases CCA from suppliers and draws it into superfine wire, which accounted for approximately 20% of Second Quarter 2010 sales e CCA, a bimetallic wire, is a conductor comprising an inner aluminum core and outer copper cladding Low-cost alternative to
Slide 12: Magnet and Fine Wire Production
oo eee 412 Magnet and Fine Wire Production Leading Chinese producer of CCA fine & magnet wire Established sales channels = Diversified customer base with over 330 customers = Large Chinese and multi-national companies One patent granted and three patents pending ISO 9001 and 14001 certified UL certi
Slide 13: Manufacturing Process
13 Manufacturing Process Input Recycling CCA Raw Wire Cleaning / Smelting Scrap Copper. —> (Proprietary Cleaning Technology) Copper Anode Copper Rod LiHUA INTERNATIONAL
Slide 14: Shifting Product Mix to Address Increasing Growth in Demand for Refined Copper
14 Shifting Product Mix to Address Increasing Growth in Demand for Refined Copper Volume (% of total) by Product 2Q 2009 2Q 2010 CCA Wire mCCA Wire lH Copper @ Copper Wire Wire | Copper ™ Copper Rod Rod LiIHUA INTERNATIONAL
Slide 15: Key Product Characteristics
15 Key Product Characteristics Fine / Superfine Refined Copper Wire (CCA / (Copper rod / Pure copper wire) copper anode) Gross Margins Higher Lower Max. Credit Terms 20-30 days 5-7 days ROIC Lower Higher Market Size topper Sie) larger Very large Commodity Risk Minimal Minimal ny LiHUA \ id INTERNATI
Slide 16: Growth Strategy
16 Growth Strategy Increase earnings and return on invested capital * Significantly expand production capacity to meet demand = Increasing vertical integration drives cost efficiencies Capitalize on expanded market opportunity through addition of copper anode ¢ Strengthen relationships with key cust
Slide 17: Production Capacity Expansion
17 Production Capacity Expansion Annual Production Capcity Tn tons, FYE 12/31 2009 2010 2011E Wire Drawing 25,500 27,500 27,500 Smelting 25,000 50,000 100,000 \\ y i/ LiIHUA Wr INTERNATIONAL
Slide 18: Experienced Management with Industry Expertise
18 Experienced Management with Industry Expertise Name Title Experience Zhujian Founder, + Founded Lihua and built the Company to its current level Hua Chairman + Over 25 years experience in China’s copper industry & CEO _ . Vast relationships within the copper industry Wang Ya Founder» Strong techn
Slide 19: Valuable Board of Directors with Public Company Expertise
Valuable Board of Directors with Public a Company Expertise Name Title Experience Robert C. Independent + President & founder of Oakmont Advisory Group, a financial management consulting firm + COO, Treasurer and Director for Enterix Inc (1999-2004) + MBA - Yale School of Management; BA - Princeton
Slide 20: Income Statement
20 Income Statement Selected Income Statement Items ‘$mm, FYE 12/31 CAGR 2009 2008 2007 2006 ‘06-09 Revenues sisl5 $50.0 $327 S157 117.5% ypo-y growth 223.1% 52.9% 108.3% - EBITDA Le 33.0 15.1 94 49 88.8% yoy growth 183% 60.9% 91.8% - EBITDA Margin 204% 30.2% «28.7% «= 31.2% EBIT 305 142 89 45 89.3%
Slide 21: Income Statement
21 Income Statement Sel ¢ Statement Items Share Data) Three Months Ended June 30, 2010 2010 2009 % Growth Revenues $75.5 $48.8 55% EBITDA $13.0 $7.1 45% EBITDA Margin 17% 26% Net Income $9.9 $6.7 48% EPS (Diluted) $0.34 $0.31 9.7% Weighted Average Shares 29.3 218 Outstanding (Diluted) Y ~\ LiHUA INT
Slide 22: Robust Top-line Growth
22 Robust Top-line Growth Revenue (in millions of USS) Gross Profit (in millions of USS) © eo 0 ¥ 0 + 92.2% CAGR 117.3% CAGR - = 20 wo 2 © 7 10 ° o al a: anal ame Labial 2008 2007, 2008 ‘2009 2O10H1 ©2010 Target Note: 2010 Grose Profit Target inthe range of 52.9 million to $55.7 milion LiIHUA sey IN
Slide 23: Robust Bottom-line Growth
Robust Bottom-line Growth EBITDA (in millions of US$) 45 Net Income (in millions of US$) 5 40 35 30 88.8% CAGR 30 178.5% CAGR 35 2B 20 20 15 15 10 10 5 - 0 o+ 2006, (2007 2008 2009 «2010H1 = 2010 2006 2007 2008, 2008 2010H1 Tage ‘Note: 2009 Adjusted Net Income Excludes $11.9MM non-cash charge Incurt
Slide 24: Strong Balance Sheet
24 Strong Balance Sheet June 30, Dec. 31, Dec. 31, Dec. 31, 2010 2009 2008 2007 Cash $87,600 $34,615 $26,042 $3,214 Accounts Receivable 17,200 10,996 5,043, 5,385 Inventory 15,386 17,534 587 2,598 Total Assets 147,616 91,166 56,813 30,075 Total Liabilities 21,121° 23,661 ° 9,021 10,992 Total Debt 2,
Slide 25: Near Term Growth Targets
Near Term Growth Targets ¢ 2010 Financial Guidance Full year 2010 gross profit to increase by 46-53% over 2009, to $52.9 to $55.7 million Full year 2010 non-GAAP net income to grow by 48-57% to $38.1 million to $40.3 million (or $1.3 to $1.4 EPS based on 29.3 million fully diluted shares a/o 6/30/10
Slide 26: Lihua: Well Positioned for Growth
26 Lihua: Well Positioned for Growth Growth Opportunity Strong Financial Performance Large and growing market * Strong top and bottom line growth Positive economic trends F * Cash Flow generation Leading industry producer * Strong Balance Sheet LiHUA Attractive Industry INTERNATIONAL | Solid Managem
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