China Sunsine Chemical Holdings Ltd. · SGX:QES
China Sunsine Chemical — H1 2019 Earnings Presentation
48 slides from China Sunsine Chemical's earnings presentation, Aug 7, 2019
Slide 1: 2Q & 1H 2019 Results Briefing
2Q & 1H 2019 RESULTS BRIEFING 7 August 2019 CHINA SUNSINE CHEMICAL HOLDINGS LTD. 中国尚舜化工控股有限公司 1
Slide 2: Presentation Outline
2 PRESENTATION OUTLINE Our Company Financial Overview Key Developments Industry Info and Outlook
Slide 3: Our Company
3 Our Company
Slide 4: About China Sunsine Chemical
About China Sunsine Chemical 4 ✓ 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
Slide 5: Our Products - Rubber Chemicals
Our Products - Rubber Chemicals 5 Rubber Accelerators Insoluble Anti-Oxidants MBT MBTS CBS TBBS TMTD Sulphur TMQ DPG DCBS …. 6PPD 4010NA
Slide 6: Our Products: Rubber Chemicals
Our Products: Rubber Chemicals 6 Rubber Chemicals are Essential Additives in the production of rubber products
Slide 7: Global Consumption of Rubber
Global Consumption of Rubber 7 Anti-oxidants Other Products 2.2% Latex 10% Vulcanizing 4% agents 2% Other Tire Accelerators 9% 1.7% Boots 10% Car Tyres Rubber 61% Tube/ Tape 6% http://www.chemn.com • By weight, every 100 tons of rubber consumes Global rubber consumption in 2017: about 6 tons of rubb
Slide 8: Our Strong Customer Base
Our Strong Customer Base 8 (2006) (1997) (2003) (2006) • Over 1,000 customers globally • Serves more than 2/3 of the global top 75 tire makers • 1/3 output exported
Slide 9: Market Share: Rubber Accelerators
Market Share: Rubber Accelerators 9 MARKET SHARE 40% 35% 33% 33% 29% 30% 30% 31% PRC Market Share 30% 28% 24% 24% 25% 25% 19% 20% 20% 20% 17% 17% 18% Global Market Share 14% 16% 15% 11% 12% 12% 10% 7% 5% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 10: Our Market Leadership Position
Our Market Leadership Position 10 GLOBAL TOP 3 PRC TOP 3 ACCELERATOR PRODUCERS INSOLUBLE SULPHUR PRODUCERS Annual Company Annual Company Capacity 2019 Capacity 2019 China Sunsine 97,000 tons China Sunsine 30,000 tons 中国尚舜 中国尚舜 Tianjin Kemai 51,000 tons Yanggu Huatai 20,000 tons 天津科迈 阳谷华泰 Sennics Yan
Slide 11: Our Production Bases
Our Production Bases 11 Five production bases in three locations
Slide 12: Financial Overview
12 Financial Overview
Slide 13: Financial Highlights
Financial Highlights 13 RMB ’mln 2nd Quarter Ended 6 Months Ended 30 Jun 19 30 Jun 18 Change 30 Jun 19 30 Jun 18 Change Group Revenue 727.0 880.6 (17%) 1,413.6 1,737.5 (19%) Gross Profit 252.3 323.6 (22%) 488.0 622.4 (22%) Gross Profit Margin 34.7% 36.7% (2 pts) 34.5% 35.8% (1.3 pts) Profit Before T
Slide 14: Revenue Growth
Revenue Growth 14 RMB ’mln 3,500.0 3,283.30 3,000.0 2,738.4 2,500.0 2,077.3 2,036.9 2,000.0 1,859.1 1,695.9 1,737.50 1,500.0 1,417.3 1,413.60 1,175.1 991.4 1,000.0 797.9 718.4 619.5 500.0 0.0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 1H18 1H19 1H19 Revenue down 19% y-o-y mainly due
Slide 15: Revenue By Quarter
Revenue By Quarter 15 RMB ’mln 1000 2Q2019 856.9 880.6 873.3 900 800 775.6 770.1 686.9 727 656.2 700 634.4 575 600 547.3 553.4 491.1 500 445.1 2Q19 vs 2Q18 : - 17% 400 2Q19 vs 1Q19 : + 6% 300 200 100 0 1Q 2Q 3Q 4Q 2016 2017 2018 2019 • 2Q19 Revenue down 17% y-o-y due to lower average selling price (
Slide 16: Sales Contribution (By Region)
Sales Contribution (By Region) 16 1H2019 Sales Contribution (y-o-y) Region 1H2019 FY2018 FY2017 Rest of Asia China 60% 62% 64% 27% Rest of Asia 21% 25% 24% PRC US US 4% 2% 5% 2% 60% Europe 8% 14% 9% 5% Europe Others 2% 2% 2% Others Total 100% 100% 100%
Slide 17: Sales Volume
Sales Volume 17 Tons 160,000 151,486 140,476 140,000 135,791 120,000 114,572 108,973 98,345 100,000 81,371 82,078 80,000 74,364 60,907 60,000 54,275 45,420 40,000 31,036 30,787 20,000 0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 1H18 1H19 1H19 sales volume up 10% y-o-y mainly due to
Slide 18: Sales Volume by Products
Sales Volume by Products 18 Tons 90,000 82,767 83,335 83,255 80,000 76,089 76,090 72,710 70,000 64,252 60,000 50,148 50,000 46,343 43,790 40,196 42,472 40,000 34,858 31,036 29,805 31,214 30,000 25,759 23,358 19,903 21,640 20,031 22,283 20,000 10,724 11,948 12,102 15,417 14,930 3,468 4,413 7,873 12,2
Slide 19: Sales Volume By Quarter
Sales Volume By Quarter 19 2Q2019 Vol Tons New High 45,000 43,363 39,957 38,715 40,000 37,567 37,166 38,774 36,797 34,483 36,797 34,558 34,098 34,460 35,000 33,046 2Q19 vs 2Q18 : +15% 30,051 2Q19 vs 1Q19: +12% 30,000 25,000 20,000 15,000 10,000 1Q 2Q 3Q 4Q 2016 2017 2018 2019
Slide 20: Overall Average Selling Price (ASP)
Overall Average Selling Price (ASP) 20 RMB/Ton 30,000 25.9K 25,000 21.5K 19.4K 20,000 19.3K 19.1K 18.3K 17.4K 19.8K 16.2K 17.2K 17.1K 15,000 15.8K 15.0K 10,000 5,000 0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 1H19
Slide 21: ASP vs Aniline Price
ASP vs Aniline Price 21 RMB/Ton 25,000 23.2K23.3K 22.4K 20.7K 20,000 18.9K18.5K 19.1K 17K 17.3K 17.6K 16K 16.3K15.6K 16K 14.8K14.2K14.8K 15,000 16.6K ASP 10.2K 9.6K 10,000 9.2K Aniline 7.8K 6.1K 7.5K 5.7K 5.4K 4.9K 6.4K 7.2K 4.7K 6.4K 6.1K 5.2K 4.8K 4.6K 5,000 4.9K 0 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q
Slide 22: Main Raw Materials Price Trend
Main Raw Materials Price Trend 22 RMB/ Ton 22,000 Aniline 18,000 Tert-butylamine 14,000 Cyclohexylamine 10,000 Ketone 6,000 Dicyclohexylamine Aniline Carbon Disulfide 2,000
Slide 23: Gross Profit
Gross Profit 23 RMB ’mln 1200.0 1125.9 1100.0 1000.0 900.0 788.1 800.0 700.0 622.4 600.0 567.4 547.1 492.0 488.0 500.0 400.0 293.4 308.0 300.0 226.8 224.1 243.9 200.0 160.2 125.2 100.0 0.0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 1H18 1H19
Slide 24: Net Profit
Net Profit 24 RMB ’mln Net Profit 700 641.3 600 500 400 341.3 341.2 300 265.9 220.2 221.7 195.2 200 106.7 88.3 115.3 99.4 100 76.1 76.7 32 0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 1H18 1H19 • 1H18 Net profit RMB341.2 excluding the tax credit of RMB48 mln recorded in 2Q18
Slide 25: Net Profit By Quarter
Net Profit By Quarter 25 RMB ’mln 250.0 2Q19 Net Profit 200.0 48 2nd Highest 2Q19 vs 2Q18: - 19% 191.7 155.8 149.5 2Q19 vs 1Q19: +41% 150.0 143.4 132.0 110.2 108.6 100.0 74.5 72.8 77.6 66.3 57.2 49.0 50.0 33.6 0.0 1Q 2Q 3Q 4Q 2016 2017 2018 2019 • 2Q19 Net profit dropped 19% compared with 2Q18 net p
Slide 26: Margins Analysis
Margins Analysis 26 40.0% 34.3% 34.5% 35.0% 30.0% 28.4% 28.8% 27.3% 26.5% 26.9% 25.0% 25.0% 22.3% 22.6% Gross Profit 20.2% 19.5% 18.8% Margin (GPM) 20.0% 17.2% 18.2% Net Profit Margin 15.0% 12.3% 13.3% 12.3% 11.6% 12.5% 18.1% (NPM) 10.6% 10.5% 10.9% 10.0% 8.5% 4.5% 5.0% 2.3% 0.0% --- Adjusted by tak
Slide 27: Margins Analysis By Quarter
Margins Analysis By Quarter 27 40.0% 36.7% 34.9% 34.7% 33.3% 34.3% 35.0% 32.7% 31.7% 28.5% 32.4% 30.0% 26.8% 27.3%28.2%27.2% 26.8% 27.2% 24.3% 23.5%24.2% 24.4% Gross Profit 25.0% 21.4% Margin (GPM) 21.8% 20.0% 17.4% 18.5% Net Profit 15.1% 16.0% 14.1% Margin (NPM) 15.0% 13.3% 11.6% 12.2% 11.0% 10.0%
Slide 28: Balance Sheet Highlight
Balance Sheet Highlight 28 30/06/2019 31/12/2018 31/12/2017 Current Assets (RMB’mln) 2,093.6 2,016.4 1,424.6 Current Liabilities (RMB’mln) 366.4 421.8 385.3 Current Ratio 5.71 4.78 3.70 Shareholders’ Equity (RMB’mln) 2,441.7 2,325.5 1,742.4 D/E ratio * 0 0 0 22% ROE** 27% 20% (annualised) NAV per sh
Slide 29: Key Developments
29 Key Developments
Slide 30: Expansion Projects
Expansion Projects 30 Project Status CapEx 30,000-ton fully-automated, high-end Whole project was approved in Accelerator TBBS at Shanxian: Jan 2019 Commercial production started in 1. Phase I of 10,000-ton capacity RMB 100 mln Jan 2019 New line to be installed in 2. Phase II of 20,000-ton capacity
Slide 31: Annual Capacity
Annual Capacity 31 2007 FY17 FY18 FY19e (before IPO) Rubber Accelerators 32,000 87,000 87,000 97,000 Insoluble Sulphur nil 20,000 30,000 30,000 Anti-oxidant (TMQ & 6PPD) nil 45,000 45,000 45,000 Total 32,000 152,000 162,000 172,000
Slide 32: Industry Info and Outlook
32 Industry Info and Outlook
Slide 33: China's New Car Sales
China’s New Car Sales 33 in million units % 35 50 30 28 28.9 28.1 40 23.5 24.6 25 22 30 18.5 19.3 20 18.1 20 sales 15 13.6 10 growth yoy 12.3 8.8 9.4 10 0 5 -10 0 -20 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H • 12.3 mln cars sold in China in 1H2019, down 12.4% y-o-y • China’s ne
Slide 34: Global Vehicle Population
Global Vehicle Population 34 PRC Motor Vehicle Population Mln units 400 350 310 327 295 300 260 279 240 250 250 200 150 100 50 0 2012 2013 2014 2015 2016 2017 2018 http://subscribers.wardsintelligence.com/analysis/world-vehicle- http://www.sohu.com/a/289093749_390500 population-rose-46-2016 • Global
Slide 35: Riding on Rising Tire Consumption
Riding on Rising Tire Consumption 35 PRC Tire Production Volume Projected worldwide tire market volume from 2014 to 2018 in million units in million units 5000 700 653 648 610 600 562 565 4000 3660 529• 3400 470 3140 500 443 456 2840 2990 3000 400 300 2000 200 1000 100 0 0 2010 2011 2012 2013 2014 2
Slide 36: Rising Consumption of Large Tires
Rising Consumption of Large Tires 36 Tyres (million 2020 2010 2015 pieces) (projected) Large tyres 98 (6.8%) 222 (12.6%) 444 (19.5%) (≥ 17 inches) Small tyres 1,352 (93.2%) 1,544 (87.4%) 1,838 (80.5%) (< 17 inches) Total 1,450 (100%) 1,766 (100%) 2,282 (100%) Source: (Goodyear 2016 annual report, pa
Slide 37: Competitive Strengths
Competitive Strengths 37 - World largest accelerators and China’s biggest IS producer Market Leadership - Capturing 20% of global and 33% of China’s accelerators markets - Listed in the first batch of “National Champion Manufacturing Enterprise” - Superior quality and Full range of varieties Product
Slide 38: Some Investors' Concerns -1
Some Investors’ Concerns -1 38 Q : Are rubber chemicals commodities? A : No. They are products in the niche market. Reasons: 1. Commodity companies cannot have sustained high profits and good returns on capitals. China Sunsine has been profitable since 1998. It ROE has been between 15-25% since 2014
Slide 39: Some Investors' Concerns -2
Some Investors’ Concerns -2 39 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. S
Slide 40: Some Investors' Concerns -3
Some Investors’ Concerns -3 40 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 around 30% of tire consumption. Cars in-use consume the remaining 70%
Slide 41: Some Investors' Concerns -4
Some Investors’ Concerns -4 41 Q : Will weakening ASP affect the Group’s performance? A : Our ASP moves in tandem with the price movements of raw materials. In the long run, growing sales volume is what we are pursuing for sustainable growth Reasons: 1. ASP depends on the demand & supply situation a
Slide 42: Some Investors' Concerns -5
Some Investors’ Concerns -5 42 Q : Will the US Tariffs against Chinese good affect the Group’s performance? A : The Group expects the impact to be minimal and manageable. Reasons: 1. Our sales to US accounts for about 2-4% of our total revenue. 2. The Group is the world largest accelerators producer
Slide 43: Turning Challenges into Opportunities
Turning Challenges into Opportunities 43 Challenges Opportunities The policy affects smaller producers more Stringent environmental and safety enforcement and will lead to industry consolidation, may affect all chemical companies in China benefiting bigger players Short supply situation may ease as
Slide 44: Listed On SGX Mainboard
Listed On SGX Mainboard 44 SHARE PERFORMANCE • P/E 5 times & P/B 1.1 times • Dividend yield 5.1%
Slide 45: Dividend Payment History
Dividend Payment History 45 Net Profit Dividend (in RMB ’mln) (in SGD cents) 700 6 5.5 600 5 500 4.5 4 400 3.5 3 Net Profit 300 2.5 Dividend 2 200 1.5 100 1 0.5 0 0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY8 FY2018 Dividend SGD 5.5 cents • Ex-dividend date: 8 May 2019 • Payment date:
Slide 46: Investment Merits
Investment Merits 46 ✓ Market leadership position and largest market share in rubber accelerators ✓ Strong customer base ✓ Further capacity expansion with acquired a pcs of land, strong cash position and the build-up of infrastructures, etc. ✓ Strong operating cashflows, RMB1.17 billion cash on hand
Slide 47: Chairman's Message
Chairman’s Message 47 “I am gratified that the Group has been able to achieve a satisfactory set of results amid the slowing down of China’s economy and the decreasing ASP. Raw material prices are still hovering at low levels. In addition, the utilisation rate for the Chinese tire makers is not high
Slide 48: Q&A Media/Investor Contact
48 Q&A MEDIA/INVESTOR CONTACT Tong Yiping, CFO, tongyiping@ChinaSunsine.com Jennie Liu, IR Manager, jennie@ChinaSunsine.com 112 Robinson Road #11-01 Singapore 068902 (+65) 6220-9070 www.ChinaSunsine.com
China Sunsine Chemical Holdings — H1 2019 Earnings Presentation on 6ix