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Investor Relations 2011
2
Contents
Company overview
Product portfolio
Sales breakdown
Long term contracts
Capacity expansion plan
• DNT
• Ammonium nitrate
• MNB
• Nitric acid
Capex plan
Green growth business
Huchems in 2015
Future growth strategies
Outlook of polyurethane
2011 earnings review
Summary of historical P&L
Appendix
3
Company overview
Key takeaways Locations
Company Huchems Fine Chemical Corp.
EstablishedSep. 15, 2002
Spun off from Namhae Chemical Corp.
Listed Oct. 7, 2002
CEO Mr. Jung, Kyong Duck
Paid-in capital W40.9bn
Number of
employees216
Key products
Own products 86%
Trade 13%
CDM 1%
<Plant site 1> <Plant site 2>
• Area: 340,000m2
• Capacity: 1.1mMT/yr
• Area: 115,000m2
• Plant 2 starting from 2012
4
own products
DNT
MNB
+Toluene
+Benzene
+Ammonia
TDI
MDI
Adipic acid
Ammonium nitrate
Product portfolio
Largest nitric acid producer in Asia
Specializes in precursors of polyurethane
Vertically integrated from nitric acid to intermediates to isocyanates
Nitric acid
Ammonia
5
Product
2010 1H 2011
Total sales(Wbn) Total (%) Utilization rate(%) Total sales(Wbn) Total (%) Utilization rate(%)
Own product
Nitric acid 92 17% 101% 47 16% 99%
DNT 183 34% 100% 109 35% 78%
MNB 151 28% 99% 86 28% 98%
Ammonium
nitrate34 6% 102% 17 6% 97%
Trade 74 14% - 41 13%
CDM 5 1% - 7 1% -
Total 539 100% - 307 100% 93%
Sales breakdown
※The newly built DNT plant (60,000 tons pa) started operations in 2Q
6
Long term contracts
Partnership with strategic key customers
Long term contracts are made for stable sales with key customers
Pricing formula : All factors for risk exposure are considered
Product Customer Contract year Contract period
Nitric acidBASF Korea 15-year 2003~2018
Rhodia Polyamide 8-year 2008~2016
MNB Kumho Mitsui Chemical 15-year 2009~2024
DNT
KPX Fine Chemical6-year 2008~2013
10-year 2011~2021
OCI 2-year2008~
(automatically extended bi-yearly)
Ammonium
nitrateKoryo Nobel Explosives 5-year 2011~2015
CDM RWE Power AG 6-year 2007~2012
Sales volume is defined together with minimum off-take quantity
- Raw materials price, Exchange rate, Inflation
7
#4 DNT plant construction
Expectation
Total US$800m of additional turnover for 10 years
Current level of profitability to be maintained
2010 2Q 2011
180,000
240,000
33%
Capacity expansion plan
(Unit: MT)
DNT (Di Nitro Toluene)
Capacity increased by 60ktons to 240ktons
Total US$100m invested
Construction and test-run are successfully completed
Agreed with customer for 10 year contract
8
Expansion through debottlenecking
Capacity to be increased to 80ktons
Total US$10m to be invested
Increase of market share in Japan and SE Asia
Export target
0.6
45
9
18
78%
CAGR 134%
Capacity expansion plan
(Unit: MT)
(Unit: US$m)
2007 2008 2009 2010 2011(E)
2009 2010 2011(E)
45,00053,000
80,000
Ammonium nitrate
9
Capacity expansion plan
2009 2010 2012(E)
150,000170,000
320,0002nd expansion
88%
1st expansion
12%
MNB (Mono Nitro Benzene)
(Unit: MT)#2 MNB plant construction
Capacity to be increased by 150ktons
Total US$30m to be invested
Commercial production to be commenced in 3Q12
Minimum investment cost for maximum turnover & profitability
Expectation
Opportunity for more number of customers in local and overseas to minimize risks
10
Capacity expansion plan
#5 Nitric acid plant construction
Nitric acid
Capacity to be increased by 400ktons
Total US$150m to be invested
Commercial production to be commenced in 3Q12
Shortage to be released by new line
Expectation
Preparation for quick growth of captive use for downstream expansion
Aggressive sales expansion to China & Japan
(Unit: MT)
11
Product
Capacity(MT)
Capex(US$m) Completion
Existing Additional Total
DNT 180,000 60,000 240,000 100 2Q 2011
Ammonium nitrate 53,000 27,000 80,000 10 4Q 2011
Nitric acid 640,000 400,000 1,040,000 150 3Q 2012
MNB 170,000 150,000 320,000 30 3Q 2012
Total 1,043,000 637,000 1,680,000 290
CAPEX plan
12
Green growth business
Carbon76%
UN2%
Huchems
22%
(2007~2012) (post 2012)
CDM earning sharing
CDM business review
- Launched CDM business alliance with Carbon GmbH(Austria) in 2007
- Install facilities to reduce N2O gas in nitric acid plants CO2-equiv CER (certified emission reduction): 1.5mn tons
- Expect annual sales and operating profit of US$6m with 22% share until 2012
- To inherit facilities from Carbon for free
- Total income will belong to Huchems after expiry of current contract with Carbon GmbH
UN2%
Huchems
98%
Post 2012
2007 2008 2009 2010
US$1.8m US$6m US$4.5m US$4.9m
Expected revenue
1H 2011 2012(E) 2013(E)~
US$6.6m US$6m US$20m
13
Huchems in 2015
(bnW)
1.2tnW sales in 2015
300
600
900
1,200
2009 2010 2011(E) 2012(E) 2013(E) 2014(E) 2015(E)
A project
#1 MNB
#4 DNT &Ammonium
nitrate
#5 Nitric acid & #2 MNB
100% CDM
B project
14
Future growth strategies
Continuous growth
Globalization
Nitric acid
DNT
MNB
Ammonia
Benzene
Toluene
TDI
MDI
AA
Upstream Downstream
Increase market share in Japan, China and SE Asia
Overseas production base
Integration to upstream & downstream
Secure original technologies to increase competitiveness
Searching new business opportunities for long-term growth
15
4,8136,527
7,703 8,60210,151
3,712
4,458
4,9105,236
5,767
3,850
3,184
2,9512,805
2,600
1,375
1,751
1,9292,057
2,266
'05 '07 '10 '12(E) '15(E)
13,750
Other
(Unit : kt)
15,920
17,53918,700
20,596
North
America
EU
Asia
11.0%
12.6%
28.0%
49.3%
Outlook of polyurethane
Polyurethane market analysis Polyurethane consumption structure
[Source: Fuji Research , ADL Analysis] [Source: Data Monitor, ADL Analysis ] [As of 2009]
23%
14%
11%
22%
30%
18.0% 20.0%33.0%
US Asia EU
27.0% 25.0%
43.0%
US Asia EU
25.0% 30.0%35.0%
US Asia EU
25.3% 28.2%37.0%
US Asia EU
Other
Clothing
Automobiles
Architectural
Home
appliance
Consumption by region
16
2011 earnings review
(Wbn)2011 2010
1H 2011 1H 2010 YoY2Q 1Q QoQ 2Q YoY
Sales 156.6 150.3 4.2% 125.3 25.0% 306.9 265.1 15.8%
Operating profit 22.6 18.0 25.1% 18.0 25.5% 40.6 42.7 -4.9%
Pre-tax profit 23.2 19.6 18.6% 18.5 25.9% 42.8 47.7 -10.2%
Net profit 18.4 15.7 17.1% 14.6 26.1% 34.1 36.8 -7.2%
※ 2Q10, 1Q11, 2Q11 financial information are K-IFRS non- consolidated basis
Sales recorded 157bnW, improved by 25% YoY and 4% QoQ, driven by increases of product prices
Operating profit was 23bnW, increased by 26% YoY and 25% QoQ due to growing CDM sales.
Net profit totalled 18bnW improved 26% YoY and 17% QoQ.
2Q FY11 Performance
17
Summary of historical P&L
(US$m) 2006 2007 2008 2009 2010 1H 2011
Sales 301 302 416 452 539 307
Operating profit 22 38 46 83 76 41
Pre-tax profit 21 40 59 87 87 43
Net profit 15 28 40 67 67 34
Sales Operating profit
2006 2007 2008 2009 20102006 2007 2008 2009 2010
CAGR 15.7% CAGR 37.4%
Appendix
19
Shareholding structure
Stock Information
Outstanding shares : 40,878,588 shares
Rights issue : 4,258,186 shares in May 2010
Bonus issue : 15,329,470 shares in September 2010
Major
shareholder
36.8%
Foreigninvestor11.1%
Stock overview
Largest Shareholder Stake
Taekwang Industrial 11.1%
Mr. Yeon-Cha Park 10.9%
Jeongsan 6.2%
Taekwang MTC 4.0%
Other related parties 4.8%
Total 37.0%
Code : 069260 KS
Face value : 1,000W
Market cap : W1,051bn
Avg Trading Value (60D): W7.0bn
Largest shareholder,
37.0%
NACF, 8.3%
National pension,
7.5%
Foreign ownership,
13.0%
Domestic investor &
minority shareholders
34.2%
20
Dividends
2005 2006 2007 2008 2009 2010
EPS(W) 389 711 1,328 1,953 1,936 1,738
DPS(W) 180 260 490 1,000 1,500 800
Dividends(Wbn) 3.8 5.5 10.4 20.4 31.9 32.7
Payout ratio 46.3% 36.6% 36.9% 50.7% 48.0% 48.5%
Dividend yield 2.4% 3.0% 2.6% 4.7% 4.8% 3.9%
Dividends Trend Payout Trend
Dividends
2005 2006 2007 2008 2009 2010
3.85.5
10.4
20.4
31.9 32.7
2005 2006 2007 2008 2009 2010
46.3%
36.6% 36.9%
50.7%48.0% 48.5%
(unit:Wbn)
2.4%3.0%
2.6%
4.7% 4.8%
3.9%
Dividend
yield
21
Financial Statements
Balance sheet Income statement
<Wmn> 2Q 2011 1Q 2011 2010
Total assets 664,201 675,476 576,755
Fixed assets 258,269 243,735 223,944
Current assets 405,932 431,741 352,811
Shareholders’ equity 429,090 408,510 423,706
Paid-in capital 40,879 40,879 40,879
Capital surplus 181,842 181,841 181,842
Accumulated other comprehensive
income3,947 1,808 0
Retained earnings 202,422 183,982 200,985
Total liabilities 235,111 266,966 153,049
Long-term debt 59,482 43,847 3,501
Current liabilities 175,629 223,119 149,548
Total liab, SE 664,201 675,476 576,755
<Wmn> 1H 2011 1H 2010 2010
Sales 306,920 265,071 539,342
Cost of sales 251,262 206,230 427,282
Gross profit 55,658 58,842 112,059
Other profit 2,834 605 4,487
SG&A 15,694 16,216 35,356
Other expense 2,181 522 1,542
Operating profit 40,617 42,709 79,648
Net finance income 2,209 4,956 10,188
Pretax profit 42,826 47,665 89,836
Tax 8,686 10,876 19,316
Net profit 34,140 36,789 70,520
Forward-looking statements in this presentation material reflect the current views of Huchems with respect to future events and financial performance, and are subject to certain risks and uncertainties,
which could cause actual results to differ materially from those anticipated.
Huchems believes the expectations reflected in this material are based on reasonable assumptions, but gives no assurance that the expectations will be realized.
19F, Kukdong Bldg. 60-1 Chungmuro 3ga, Junggu, Seoul, Korea
Investor Relations : T. 822-2262-0664, email : [email protected]
www.huchems.com