LUZHOU BIO-CHEM TECHNOLOGY LIMITED A Mouth-Watering China - - PowerPoint PPT Presentation

LUZHOU BIO-CHEM TECHNOLOGY LIMITED Corporate Presentation and 3QFY17 Results

November 14, 2017

A Mouth-Watering China Consumption Story

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Business Overview Financial Highlights Growth Strategies

Contents

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Business Overview

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Operating Climate

The Group is facing with higher electricity cost due to constant upgrading of power generation plants to meet the environmental air pollution control introduced by the central government. The Group expects the market conditions in the coming months to be challenging due to stiff competition among the corn sweetener players in the industry caused by over capacity of the corn sweetener and hence downward pressure on all its corn refining products. Higher staff cost and the average raw corn material prices are expected to affect the profit margins of the Group The changes in the government policies and hence the uncertainty for the industry will also be challenging to the Group

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Operating Climate

The USDA estimates that corn stockpiles in China are projected to reach 90.6 million metric tons this year

Source: Bloomberg, http://www.bloomberg.com/news/articles/2015-11-03/drought-turning-china- hope-for-record-crop-into-shrunken-harvest

High price of cane sugar has resulted in food & beverage manufacturers turning to alternative sweeteners For comparison, the prices of sweetener products supplied by Luzhou (as at September 2017) are as follows: Fructose: RMB 2,455/tonne Dextrose: RMB 2,207/tonne High Maltose Syrup: RMB 2,117/tonne

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Price Comparisons to Cane Sugar

Source: Company, 中国昆商糖网 RMB/tonnes

2,000 3,500 5,000 6,500 8,000 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17

Cane sugar pricing in Nanning City, China

2,257 1,296 1,566

1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800 3,000 3,200 Jul- 15 Aug- 15 Sep- 15 Oct- 15 Nov- 15 Dec- 15 Jan- 16 Feb- 16 Mar- 16 Apr- 16 May- 16 Jun- 16 Jul- 16 Aug- 16 Sep- 16 Oct- 16 Nov- 16 Dec- 16 Jan- 17 Feb- 17 Mar- 17 Apr- 17 May- 17 Jun- 17 Jul- 17 Aug- 17 Sep- 17

Corn Sweetener Corn Starch By-Products Corn

7 RMB/tonnes (excluding taxes)

Price Trends

Source: Company

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Financial Highlights

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9MFY17 Financial Highlights

Group revenue increased by 9.0% y-o-y Gross profit margin of 9.6%, 8.6% lower y-o-y; Net profit of RMB 0.8 million, increased by 102.6% compared with net loss of RMB 30.9 million in 9MFY16 Net profit margin of 0.1%, increased significantly compared with net loss margin of 2.2% in 9MFY16 Cash and cash equivalents of RMB 265.5 million as at 30 September, 2017 (RMB 301.2 million as at 31 December, 2016)

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RMB’mil 3QFY17 y-o-y Chg (%) q-o-q Chg (%) 9MFY17 y-o-y Chg (%) Revenue

513.3

0.7

0.9 1,509.4

9.0 Gross Profit

36.5

(25.9)

(17.3) 144.4

(1.0) (Loss)/Profit Before Tax

(34.5)

(1,231.0)

(186.2) 1.4

105.1 Net (Loss) /Profit

(34.5)

(839.0)

(186.9) 0.8

102.6 Gross Profit Margin

7.1%

(26.8)

(18.4) 9.6%

(8.6) Net (Loss)/Profit Margin

(6.7%)

(857.1)

(185.9) 0.1%

104.5

Income Statement Highlights

3Q: Three months ended September 30 9M: Nine months ended September 30

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RMB’mil

Revenue

500 1000 1500 2000 2500 3000 3500 4000 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 647 873 809 798 605 571 445 488 695 1034 901 842 565 684 430 508 767 935 880 751 442 656 509 513 940 1063 810 618 463 520 538

1Q Revenue 2Q Revenue 3Q Revenue 4Q Revenue

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Revenue by Product Categories

Total Revenue: RMB 1,509.4 mil

Corn refining, 99.9% Animal feeds, 0.0% Others, 0.1%

9MFY17

Y-o-y change in revenue Y-o-y change in sales volume Y-o-y change in weighted average selling price Gross profit margin Y-o-y change in gross profit margin Corn refining 10.0% 15.1% (2.1%) 9.5% (11.2%) Animal feed (100.0%) (100.0%) NA

• NA

Corn refining, 99.0% Animal feeds, 0.7% Others, 0.3%

9MFY16

Total Revenue: RMB 1,384.3 mil

Food, 32.9% Beverage, 19.3% Fermentation , 17.7% Others, 30.1%

9MFY17

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Revenue by Industry

Food, 31.9% Beverage, 24.0% Fermentation, 14.3% Others, 29.8%

9MFY16

Total Revenue: RMB 1,509.4 mil Total Revenue: RMB 1,384.3mil

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RMB’mil

Net Profit/EBITDA

• 400.0
• 300.0
• 200.0
• 100.0

0.0 100.0 200.0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 9MFY17 54.5 1.3

• 14.3

6.0 50.5 14.6

• 113.8
• 339.8

28.4 13.9 0.8 162.5 104.8 92.7 125.6 195.7 146.0 40.1

• 80.9

172.6 144.0 34.5

Net Profit EBITDA

FY13

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RMB’mil As at end 9MFY17 As at end FY16 Chg (%) Current Assets 652.1 779.5 (16.3)

• Cash & Cash Equivalents

265.5 301.2 (11.9)

• Inventories

146.2 175.6 (16.7)

• Trade and Other Receivables

239.5 301.9 (20.6) Total Assets 1,387.4 1,483.2 (6.5) Current Liabilities 638.5 670.7 (4.8)

• Trade and Other Payables

332.7 332.7

• Short Term Borrowings

298.5 330.0 (9.5) Long Term Borrowings 579.9 640.0 (9.4) Total Liabilities 1,257.7 1,348.5 (6.7)

Balance Sheet Highlights

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RMB’mil As at end 9MFY17 As at end FY16 Chg (%) Inventory Turnover Days 32 40 (20.0) Receivables Turnover Days 33 35 (5.7) Payables Turnover Days 47 47

• Debt to Equity Ratio#

6.77 7.20 (6.0)

Balance Sheet Highlights

Price to Book Value* 0.64 0.66 (3.0)

# Total interest bearing loans / Total equity

* Based on share price of RMB 0.14 as at October 17, 2017

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RMB’mil 9MFY17 9MFY16 Chg (%) Net Cash Generated from Operating Activities 120.7 114.9 5.0 Net Cash (Used in) Investing Activities (18.9) (106.8) (82.3) Net Cash (Used in)/Generated from Financing Activities (118.8) 78.5 (251.3) Net (Decrease)/Increase in Cash & Bank Balances (17.0) 86.6 (119.6) Cash & Bank Balances at Beginning of Period 155.2 81.9 89.5 Cash & Bank Balances at End of Period 138.2 168.5 (18.0)

Cash Flow Statement Highlights

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Growth Strategies

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Focusing on products where the Group has pricing advantages as a high volume producer (e.g. Sorbitol), and high margin products such as fructose, high maltose syrup, maltitol, etc. Cost savings from suspension of unprofitable products Conserving cash for the uncertainties due to over capacity of corn sweetener products Consolidation of production facilities and upgrading to flexible production lines, to achieve higher production efficiency, capacity, and economies of scale Planned expansion into Xinjiang in 2018 (may be further delayed due to unfavourable economic climate) to take advantage of untapped demand for fructose supply in that region, from major customers such as Coca-Cola and Pesi Cola

Growth Strategies

Safe Harbour Statement

This presentation may contain forward looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward looking statements as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from other companies, shifts in customer demands, customers and partners, changes in operating expenses, including employee wages, benefits and training, governmental and public policy changes and the continued availability

• f financing in the amounts and the terms necessary to support future business. You are cautioned not

to place undue reliance on this presentation and the information contain therein, which are based on current view of management on future events. Without prejudice to or derogating from the generality of the foregoing, no representation or assurance is given by Luzhou Bio-chem Technology Limited that this presentation contains all information that an investor may require. To the extent permitted by applicable law, by Luzhou Bio- chem Technology Limited or its related persons (and their respective directors, associates, connected persons and/or employees) shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) arising from the reliance or use of the information contain in this presentation. Investors are advised to make their own independent evaluation from this presentation, consider their

• wn individual investment objectives, financial situation and particular needs and consult their own

professional and financial advisers as the legal, business, financial, tax and other aspects as investors may regard as relevant.

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