Lihua International — Investor Presentation (December 2013)
30 slides from Lihua International's investor presentation, Dec 6, 2013
Slide 1: Lihua International, Inc. December 2013
Lihua International, Inc. December 2013 NASDAQ: LIWA
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. All statements, other than stat
Slide 3: Lihua International, Inc.
Lihua International, Inc. (NASDAQ: LIWA) 3 Products : Copper anode, copper rod, pure copper fine and superfine wire, copper clad aluminum ( CCA) fine and superfine wire, and CCA cable for power transmission ( launching in 6 - 12 months ) Uses: Consumer electronics, white goods, automotive, elect
Slide 4: Investment Highlights
I nvestment Highlights Market leader • Large, rapidly growing copper alternative products and wire markets Rigorous quality controls, established reputation and distribution channels • Vertically integrated, highly scalable business model • Expansion capacity and low - cost advantage Proprieta
Slide 5: Growth Strategy
Growth Strategy Increase earnings and return on invested capital Leverage strong R&D partnerships to develop new products for new markets; CCA cable and wire products for power transmission and electronics Significantly expand production capacity to meet demand ▪ Added 50,000 tons of copper anod
Slide 6: China: The World's Leading Copper Consumer
China: The World’s Leading Copper Consumer 2012 refined copper consumption totaled approximately 7.7 million tons, or nearly 40% of the worldwide total** 2013 refined copper demand is expected to increase 5.3% over 2012 to approximately 8.1 million tons, to reach 9.7 million tons in 2015** * Sou
Slide 7: China: Copper Demand and Market Drivers
China: Copper Demand and Market Drivers Driving copper demand: ▪ Infrastructure build - out ▪ Urbanization ▪ Strong demand for a variety of consumer goods and industrial applications Government imposing new industry regulations: ▪ Improve manufacturing efficiency ▪ Reduce environmental impact of
Slide 8: Limited Commodity Risk
Limited Commodity Risk Copper price fluctuations largely passed through to customers: • Refined copper and wire product prices are based on the market price for materials (set at a discount to Shanghai spot copper prices) with a fixed dollar markup Gross profitability is closely correlated to sp
Slide 9: Limited Copper Supply Creates Opportunity
Limited Copper Supply Creates Opportunity Recycling and recycling technologies fueled by: ▪ High copper prices ▪ Low mine production ▪ Low - grade domestic mine output ▪ Lack of reserves and high import costs Alternatives to pure copper such as CCA ▪ CCA bimetallic materials are ideal substitute
Slide 10: Addressing Market Demand
Addressing Market Demand Copper Anode Fundamental building block for all copper products Customer demand exceeds production capacity Gross Margin: Lower Credit Terms: 5 - 7 days ROIC: Higher Market Size: Large Commodity Risk: No Copper and CCA Wire Established sales channels; diversified customer ba
Slide 11: Manufacturing Process
Manufacturing Process 11 Copper Anode Input Recycling Wire Processing End Products Scrap Copper Cleaning / Smelting Drawing Copper Rod Coating / Plating Super Fine Wire Fine Wire Magnet Wire Tin Plated Wire CCA Raw Wire New CCA Produced Wire
Slide 12: New Manufacturing Facility
New Manufacturing Facility Constructed three new copper anode smelters with annual capacity of 75,000 – 90,000 tons Fourth smelter construction and environmental upgrades underway ; completion expected in early 2014 Refined copper capacity to reach 150,000 – 170,000 tons per year upon completi
Slide 13: State-of-the-art Refinery and Drawing Technologies
State - of - the - art Refinery and Drawing Technologies 13
Slide 14: Expanding R&D Capabilities
Expanding R&D Capabilities Established partnership with Beijing Modern Research Institute of Recycling Economy (RIORE) ▪ Establishing a joint R&D center at Danyang headquarters ▪ Focus on study of copper recycling with the goal of developing new, environmentally - friendly products Collaboration
Slide 15: Operating Results Highlights
Operating Results Highlights 15 3 Months Ended Sep 30, % Change Year Ended Dec 31, % Change ($MM, except per share) 2013 2012 2012 2011 Revenue $219.4 $238.8 (8.1)% $ 853.8 $ 637.1 34.0% Copper and CCA wire 85.6 101.2 (15.4)% 393.8 335.6 17.3% Copper anode 116.7 118.2 (1.3)% 381.1 287.3 32.6% Copper
Slide 16: Growing Revenue and Profit
0 10 20 30 40 50 60 70 80 90 100 2007 2008 2009 2010 2011 2012 YTD Gross Profit 16 0 100 200 300 400 500 600 700 800 900 2007 2008 2009 2010 2011 2012 YTD Revenue US$ in Millions Growing Revenue and Profit US$ in Millions
Slide 17: Increasing Bottom Line Results
$0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 2007 2008 2009 2010 2011 2012 YTD Non-GAAP Net Income Increasing Bottom Line Results US$ in Millions 17 US$ in Millions $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0 2007 2008 2009 2010 2011 2012 YTD Adjusted EBITDA
Slide 18: Increasing EPS and Cash per Share
Increasing EPS and Cash per Share $0.72 $1.34 $ 1.77 $1.93 $1.43 $2.25 $3.10 $3.52 $4.82 *$6.28 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 FY 2009 FY 2010 FY 2011 FY 2012 YTD EPS (diluted) Cash per Share (diluted) 18 * YTD cash per share as of 9/30/13
Slide 19: Selected Balance Sheet Data
Selected Balance Sheet Data (in thousands of $USD) Sep. 30, 2013 Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2008 Cash $188,266 $144,300 $105,638 $90,609 (1) $34,615 $26,042 Accounts Receivable 48,986 45,285 31,082 32,973 10,996 5,043 Inventories 23,651 17,844 15,502 16,156 17,5
Slide 20: Full-Year 2013 Guidance
Full - Year 2013 Guidance The Company currently expects to complete the expansion of its copper anode recycling systems and environmental infrastructure in early 2014, at which time it expects to be able to fully ramp production on its third copper anode smelter and complete the construction on it
Slide 21: Key Ratios and Valuation Metrics
Key Ratios and Valuation Metrics Market Capitalization: $167.5 million (1) Cash per Share ( 9 /30/13): $6.28 Price/Cash: 0.89x P/E (TTM*): 2.9x Price/Sales (TTM*): 0.19x Price/Book (9/30/13): 0.51x Return on Equity: 19.9% Return on Assets: 15.7% Return on Invested Capital: 19.3% 21
Slide 22: Lihua International
LiHUA INTERNATIONAL
Slide 23: Experienced Management with Industry Expertise
Experienced Management with Industry Expertise 23 Name Title Experience Zhu Jian Hua Founder, Chairman & CEO Founded Lihua and built the Company to its current level Over 25 years experience in China ’ s copper industry Vast relationships within the copper industry Wang Ya Ying Founder & COO
Slide 24: Valuable Board of Directors with Public Company Expertise
Valuable Board of Directors with Public Company Expertise 24 Name Title Experience Robert C. Bruce Independent Director Founder, President and CEO of Zylo Media, LLC President & founder of Oakmont Advisory Group, a financial management consulting firm COO, Treasurer and Director for Enterix In
Slide 25: Income Statement
Income Statement 25 Selected Income Statement Items $mm, FYE 12/31 2012 2011 2010 2009 2008 2007 2006 CAGR '06 - 12 Revenues $853.8 $637.1 $370.5 $161.5 $50.0 $32.7 $15.7 77.0% y - o - y growth 34.0% 71.9% 129.4% 223.1% 52.9% 108.3% - EBITDA 82.2 69.7 56.7 33.0 15.1 9.4 4.9 49.6% y - o - y growth 17
Slide 26: World Copper Consumption by Ton
World Copper Consumption by Ton Source: http://www.investorsguru.com/ViewNewsletter.html?id=13 26
Slide 27: China: A Decade of Copper Demand
China: A Decade of Copper Demand Source: http://sufiy.blogspot.com/2010/10/cibc - los - azules - minera - andes - and - tnr.html 27
Slide 28: End Market Uses
End Market Uses White Goods Electronics Infrastructure Power 28
Slide 29: Product Mix by Sales
Copper Anode 45% CCA and Copper Wire 46% Copper Rod 9% Product Mix 2011 Product Mix by Sales 2012 Product Mix by Sales Lihua continues to shift its product mix to refined copper products, which carry lower gross margins than wire products, but have a much higher return on invested capital due to a s
Slide 30: Committed to Environmental and Industry Leading Standards
Committed to Environmental and Industry Leading Standards 30 • 2011 Advanced Science and Technology Innovation Enterprises • 2011 Best Internal Audit Practice Award • 2011 Top Ten Outstanding Leading Industrial Enterprises in Danyang’s Ideological Development
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