CENTURY SYNTHETIC FIBER CORPORATION MANAGEMENT PRESENTATION 2017 - - PowerPoint PPT Presentation

CENTURY SYNTHETIC FIBER CORPORATION

MANAGEMENT PRESENTATION 2017 BUSINESS PERFORMANCE & 2018 PLAN

April 17th 2018

GROWTH PROSPECTS OF TEXTILE AND APPAREL INDUSTRY

Vietnam is transforming into a new hub for textile and garment production

 Global textile industry is recovering, in which Vietnam has the fastest growth rate.  VN is gradually taking market shares in major textile import markets.  Many global brands have been relocating garment orders from China to VN  Vietnam has advantage over its peers thank to favourable tariff treatment under various trade treaties (VJFTA, VKFTA, EVFTA, CPTPP).  There is a growing flow of investments into local textile and dying subsector, transforming Vietnam into a major supplier of fabric and accessories in South East Asia.  Polyester filament excels natural fibers in both growth rate and share in total consumption.  However, the trend of price competition has been a challenge for most enterprises in the industry. However, the level of price competition in the high end market segment is always lower and likely to be profitable.

GROWTH PROSPECTS OF TEXTILE AND APPAREL INDUSTRY

Global textile industry is recovering, in which Vietnam has the fastest growth rate.

• 0.8%

6.5% 2.6% 3.2% 2.4% 2.5% US EU*** Japan

Global textile import volume growth rate in 2017 of 3-major markets

2016 vs 2015 2017 vs 2016 2.5% 8.3% 9.4% 7.2% 9.2% 6.1% US EU*** Japan

VN‘s textile export volume growth rate in 2017 in 3-major markets

2016 vs 2015 2017 vs 2016

Source: Customs Departments of 3 countries. EU***: EU data is only updated to Nov. 2017

GROWTH PROSPECTS OF TEXTILE AND APPAREL INDUSTRY

VN is gradually taking market shares in major textile import markets.

Source: Customs Departments of 3 countries. EU***: EU data is only updated to Nov. 2017

6.9% 2.0% 8.0% 7.1% 2.1% 8.6% 7.0% 2.0% 9.2% US EU*** Japan

Shares of VN textile export volume 2015-2017 in US, EU, JPN

2015 2016 2017 10.1% 2.9% 9.6% 10.8% 3.0% 10.6% 11.5% 3.2% 11.2% US EU*** Japan

Shares of VN textile export value 2015-2017 in US, EU, JPN

2015 2016 2017

THE POTENTIAL GROWTH OF POLYESTER FILAMENT IS HUGE

5

 During the period 2008 – 2016, the world consumption of polyester filament has experienced a CAGR of 7.3%, vis-à-vis cotton at a slow CAGR of 0.2% and polyester staple at 2.4%.  Share of polyester filament in total consumption rose from 33% (2008) to 45% (2016).  Popularity of polyester yarns is driven by its diversified application for textile (e.g. footwear and apparel, home furnishing, etc.) and industrial purposes (e.g. tire reinforcement, safety belts, etc.).

46% 46% 44% 45% 43% 41% 41% 38% 36% 44% 44% 45% 54% 54% 56% 55% 57% 59% 59% 62% 64% 56% 56% 55%

Polyester filament excels natural fibers in both growth rate and share in total consumption

72 81 86 90 93 100 101 23 24 23 23 24 24 24 23 29 33 36 39 42 46 15 16 17 18 17 18 19

20 40 60 80 100 120

2008 2010 2012 2013 2014 2015 2016 Million tons Global Fiber Consumption Total Cotton PES FY PES SF

Source: The Fiber Year Consulting 2016 Note: PES FY is polyester filament. PES SF is polyester staple

YARN PRICE WAS IMPROVED SIGNIFICANTLY

Following uptrend in oil price, yarn price is gradually recovering and becoming stable

Source: ccf.com.cn

Raw material price from 2016 to 03/2018

33.62 38.34 45.92 48.33 41.6 48.24 49.44 52.81 50.6 48.32 50.17 51.67 57.4 64.73 64.94

10 20 30 40 50 60 70 80

Oil price from 2016 to 03/2018

• 300

600 900 1,200 1,500 1,800 PTA MEG PET Chip DTY FDY

USD/tấn

Vietnam’s Polyester filament sector increased by about 13% gaining high growth rate in major markets.

• 1.7%

11.2% 41.9% 12.9% 50.1% 206.7% Thailand Japan Korea VN’s fiber export value growth rate in Thailand, Korea, Japan Whole market VN exports 28.5% 32.7% 9.0% 16.5% 3.2% 4.4% 2016 2017 VN’s fiber export value share in Thailand, Korea, Japan Thailand Korea Japan

YARN PRICE WAS IMPROVED SIGNIFICANTLY

53% 79% 33% 22% 74% 201% 14% 203% 850% 31% 95% STK Đ.T.Hưng Hualon Formosa

Yarn export value’s growth rate among companies in Thai, Korea, Japan

Thailand Korea Japan 43% 63% 27% 13% 64% 172% 191% 737% 24% 53% STK Đ.T.Hưng Hualon Formosa

Yarn export volume’s growth rate among companies in Thai, Korea, Japan

Thailand Korea Japan

Vietnam’s Polyester filament sector increased by about 13% gaining high growth rate in major markets.

YARN PRICE WAS IMPROVED SIGNIFICANTLY

TEXTILE COMPANIES ARE SHIFTING PRODUCTION FROM CHINA TO VIETNAM

9 Many global brands have been relocating garment orders from China to VN

China is losing its competitive advantage

• f

production costs (labor, environment). Major brandnames want to take advantage of preferential tariffs from FTAs. VN is receiving the preferential tariffs treatment under several FTAs (EVFTA, VKFTA, VJEPA). VN textile-dyeing sector’s capacity has been expanding significantly due to those projects which aim to catch TPP’s opportunities early. Cambodia garment export is growing strongly due to the preferential tariff treatments from US, EU  the demand on fabrics imported from VN is rising strongly. Trend of relocating garment

• rders from China to VN

Countries signed/will sign FTAs with Vietnam Signing status VIETNAM CHINA Japan (ROO*: Fabric forward) Yarn Effective from 12/2008 0% 5% Clothing 0% 8.4%-10.9% Korea (ROO: Cut & Sew) Yarn Effective from 20/12/2015 0% 8% Clothing 0% 13% EU (ROO: Fabric forward) Yarn Signed on 2/12/2015, waiting for ratification. 0% 4% Clothing EIF, B3, B5, B7 6.3%-12% AANZFTA (ROO: Cut & Knit) Yarn Effective from 01/01/2010 0% from 2018 ChAFTA 0% from 2015 Clothing NZ-China FTA: 0% CPTPP (ROO: Yarn forward) Yarn Signed on 08/03/2018, waiting for ratification. MX (B5) MX(5%) Clothing AUS(EIF, AU4-A, AU3-B), CAN (EIF,B4), MX (B10,B16), NZ(EIF,B7) AUS(10%), CAN (18%), MX(30%), NZ (10%) 10

TAKING ADVANTAGE OF FTAs

Garment orders tend to be relocated to VN to take advantage of FTAs

• ROO: Rule of Origin
• EIF: entry into force
• B4: eliminate in 4 stages
• B5: eliminate in 5 stages
• B10: eliminate in 10 stages
• B16: eliminate in 16 stages
• B7: eliminate in 7 stages
• AU4-A: remove in 4 stages, 0% in the 4th stage,
• AU3-B: remove in 3 stages, 0% in the 3rd stage

169.4 171.1 109 110 20 40 60 80 100 120 140 160 180 2015 2016

Textile and apparel’s revenue and import value into EU

Textile and apparel's revenue Import value

EVFTA

Vietnam's growth opportunities in EU are huge

Banglades h, 13% Cambodia , 3% Vietnam, 3%

Shares in import value from EU

China Bangladesh Turkey India Cambodia Vietnam Other

Source: Euratex, Statista

About garments: Vietnam’s market share may be increased several times by receiving the preferential tariffs treatment since EVFTA takes effect.

CPTPP

Vietnam could double its market share to CPTPP countries by by receiving the preferential tariffs treatment since this agreement is ratified.

13.26 10.21 8.66 3.70 1.68 1.78 Canada Mexico Australia Chile Peru New Zealand

• 5.00

10.00 15.00

Import value share of TPP members in 2016

Source: WITS

2.70% 2% 5% 2% 1% 1% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% Australia NZ Canada Mexico Peru Chile

Vietnam’s market share in local garment import 2016

FDI PROJECTS IN TEXTILE AND APPAREL INDUSTRY

Garment orders tends to be relocated to VN to take advantages of FTAs

Firms/Projects Business Sectors Investment value (USD mil.) Worldon Premium Apparel products 2015: 140; 2017: +310 Gain Lucky Knitting 2015: 140; 2017: +87 ECLAT Knitting, Polo T-shirts 2015: +50.5 HAPUTEX (Nam Phuong) Fabric 120 PACIFIC CRYSTAL Fabric 180 FAR EASTERN NEW CENTURY Fiber-Fabric-Garments 760 SHEICO Sportswear 50 PANCO (Korea) Textile -Garment 30 DE LICACY Fiber, Knitting fabric, Finished Products 100 Luthai Textile Fiber, Colored Fabric 170 Huntsman Textile Effects Dyes, chemicals Avery Dennison RBIS Clothing tags for Uniqlo, the North Face 30

Capacity expansion of STK’s major customers (tons/month)

190 Size of capacity expansion Current production capacity (million metres /year)

DALUEN 20 Bamboo 45

57 SAMIL

(tons/month)

DE LICACY

Gain Lucky 56 +1,700 +1,200 +600 +350 +370

VIETNAM IS BECOMING A MAJOR SUPPLIER OF FABRIC AND ACCESSORIES IN SOUTH EAST ASIA

906 1,000 1,354

2015 2016 2017

VN’s total fabric export value (USD mil.)

12.1% 18.7% 27.5% 34.0% 34.0%

Growth rate of VN’s fabric export value in ASEAN 2015-2016

Source: VN Textile and Apparel Association Source: https://data.aseanstats.org +25.6% , y-o-y

“Century” brand is highly appreciated by customers thank to high product quality, excellent customer service & competitive prices

Year Number of new customers %/sales revenue

2015 56 7% 2016 87 15% 2017 85 7.7%

0% 2% 26% 33% 32% 7% 0% 12% 12% 16% 43% 17%

11% 12% 12% 0% 62% 3%

Japan Korea Thailand Turkey Vietnam Others

Revenue by markets 2015-2017

2015 2016 2017

EXPANDING CUSTOMER’S NETWORK & CONQUERING THE NEW MARKET

ACHIEVEMENTS IN 2017

Building platform to catch market opportunities

• TB4 was put into operation in 2017, raising

the Company‘s total capacity to 60.000 tons p.a

• Achieved quality certifications
• Developed customer’s network and new

markets successfully.

• Signed a contract with Unifi to produce

recycled yarn in Jan 2017.

• Signed the contract with E.DYE LTD. To

produce color yarn in Feb 2017. This project will be put into operation in Q3-Q4- 2018

• Speeded up the implementation of air-

covering project.

• Speeded up the cooperation to establish

supply chain from yarn > fabric >garment

Ratios are improved

2017 BUSINESS PERFORMANCE

41,217

53,939

• 10,000

20,000 30,000 40,000 50,000 60,000 0% 20% 40% 60% 80% 100%

2011 2012 2013 2014 2015 2016 2017

Volume (tons)

Budget Actual %Actual/Budget

+31%, Y-O-Y

87.1

99.6

97% 82% 77% 114% 61% 23%

114%

20 40 60 80 100 120 140 0% 20% 40% 60% 80% 100% 120%

2011 2012 2013 2014 2015 2016 2017

NPAT (VNDmn.))

Budget Actual %Actual/Budget

+46%, Y-O-Y +248%, Y-O-Y

2,710 1,917 2,458 1,336 534

1,662

2012 2013 2014 2015 2016 2017

EPS (VND)

+211%, Y-O-Y

935 1,099 1,543 1,458 1,184 1,358

1,989

91% 86% 97% 92% 70% 83%

• 200

400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2011 2012 2013 2014 2015 2016 2017

Revenue (VND mn.)

Budget Actual %Actual/Budget

FINANCIAL PERFORMANCE WAS IMPROVED SIGNIFICANTLY

KPIs Unit As at 31/12/2017 As at 31/12/2016 Debt/Equity Times 1.04 1.50 Net debt/Equity Times 0.89 1.37 Current payment ratio Times 0.84 0.88 Quick payment ratio Times 0.29 0.28 Return on Sales (ROS) % 5.01% 2.10% Return on Assets (ROA) % 5.03% 1.40% Return on Equity (ROE) % 12.79% 4.10%

SPORTSWEAR FASHION EXCELS

Global Sportswear Revenue (USD billion)

132 135 141 146 152 158 165 175

2011 2012 2013 2014 2015 2016 2017F 2018F Source: infogram.com

Average growth rate during 2015-2024 reaches 7% annually.

Source: Global Industry Analysts’ Report

KEY DRIVERS

Rising health consciousness and wish to enhance quality of lives. Trends of dynamic fashion. Technology development - innovative products. Rising disposable income in emerging markets.

Virgin Polyester 93% Recycled Polyester 7%

Total production of Polyester Fiber reached 52 mil. tons in 2016

The proportion of Recycled Polyester production

Source: Textile Exchange, https://textileexchange.org/downloads/2017-preferred-fiber-materials-market-report/

RECYCLED MATERIAL IS EXPECTED TO GROW DRAMATICALLY

According to 2017 Textile Exchange report, up to 2020 more than 45 worldwide textile companies will commit to use Recycled Polyester no less than 25%.

To cooperate with the strategic partner in order to produce recycled yarn.

CENTURY ALWAYS QUICKLY RESPONSIVE TO THE MARKET TRENDS

4% 10% 20% 25%

2017 2018F 2019F 2020F

The contribution of recycled yarn in total revenue

Thêm hình thùng

“ZERO DISCHARGE OF HAZARDOUS CHEMICALS” program

THE COMMITMENTS FOR PROTECTION OF ENVIRONMENT AND WATER RESOURCES

OBJECTIVES

Number of attendees: 23

Source: roadtozero.com

To minimize clean water usage; To minimize waste water containing hazardous chemicals; To eliminating hazardous chemicals in textile and shoes production chain up to 2020.

STK cooperated with E.DYE LTD. to set up E.DYE Vietnam JSC. This project aims to catch the market trends from 2019 to 2020.

Cooperate with the strategic partner to make color yarn in accordance with ZDHC program. This project is built

• n

the Company’s existing advantage

• f

technology and technical management. The project’s objectives are:  To create added-value for the Company  To satisfy the demand for color yarn of large branded customers in international markets  To reduce environmental pollution  To reduce water usage

CENTURY ALWAYS QUICKLY RESPONSIVE TO THE MARKET TRENDS

2018 BUDGET PLAN

DTY, 75% FDY, 11% RE, 14%

Sales mix

The Company’s budget in 2018 is based on the following assumptions:

• Average selling price: +7%
• Average chip price: +5%
• Price gap: +9%
• Gross profit margin: 11.6%

VN 63% Korea 11% Thailan d 12% Japan 12% Others 2%

Sales revenue by markets 2017E 2018 +/- Sales volume (tons) 53,938 59,620 +10.5% Sales revenue (VND bil.) 1,989 2,354 +18.4% NPAT (VND bil.) 99.6 125.8 +26.3%

Capacity (tons)

2017 2018 2019 2020

TB5

Recycle chip +1,500 DTY +3,300

Colour yarn

6,120

Project Total investment capital (VND bil.)

2017 2018

TB5

12.5 116.77

Colour yarn

27.05 + partly contribute existing plants, machineries in Trang Bang, Cu Chi

INVESTMENT PROJECTS

Continue to focus on textile industry and related fields that can utilize the core business' advantages