December 12, 2017
OPPORTUNITY DAY Q3/2017
(THAILAND) PUBLIC COMPANY LIMITED OPPORTUNITY DAY Q3/2017 December - - PowerPoint PPT Presentation
TOA PAINT (THAILAND) PUBLIC COMPANY LIMITED OPPORTUNITY DAY Q3/2017 December 12, 2017 DISCLAIMER IMPORTANT: You must read the following before continuing. The following applies to this document, the oral presentation of the information in this
December 12, 2017
OPPORTUNITY DAY Q3/2017
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IMPORTANT: You must read the following before continuing. The following applies to this document, the oral presentation of the information in this document by TOA Paint (Thailand) Public Company Limited (the “Company”) or any person on behalf of the Company, and any question-and-answer session that follows the oral presentation (collectively, the “Information”). In accessing the Information, you agree to be bound by the following terms and conditions, you represent that you are outside the United States, and if applicable, you consent to delivery of the attached document by electronic transmission. The information contained in this presentation is intended solely for your reference. This presentation contains “forward-looking statements”, which are based on current expectations and projections about future events, and include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “plans”, “could”, “should”, “predicts”, “projects”, “estimates”, “foresees”, “seek” or similar expressions or the negative thereof, as well as predictions, projections and forecasts of the economy or economic trends of the markets and the Company’s industry, which are not necessarily indicative of the future or likely performance of the Company or its industry, and projections and forecasts of their performance, which are not
known and unknown risks, uncertainties and other important factors beyond the Company’s control that could cause its actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions and estimates regarding the Company’s present and future business strategies and the environment in which it will operate in the future. Forward-looking statements are not guarantees of future performance. These forward-looking statements speak only as at the date of this document, and the Company does not undertakes any obligation or undertakes to supplement, amend, update or revise any forward-looking statements as a result
The Company makes no representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case,
materially differ from those provided in the forward-looking statements and indications of past performance are not indications of future performance. In no event shall the Company be responsible or liable for the correctness of any such material or for any damage or lost opportunities resulting from use of this material. The Company makes no representation whatsoever about the opinion or statements of any analyst or other third party. The Company does not monitor or control the content of third party opinions or statements and does not endorse or accept any responsibility for the content or use of any such
The Information contains certain non-GAAP measures, including EBITDA, that are not audited, not included in the Company’s audited financial statements and not presented in accordance with Thai Financial Reporting Standards. The measures have been used by management as a supplemental measure of the Company’s performance. Although these measures are either contained in or fully reconcilable to line items on the Company’s audited financial statements and/or based on management accounts, they may not be equivalent to similarly named measures used by other companies, and should not be considered as a measure comparable to income statement items for the relevant period in the financial statements. The information set out herein is subject to change without notice, its accuracy is not guaranteed, has not been independently verified and it may not contain all material information concerning the Company. The Information also contains certain statistical data and analyses (the “Statistical Information”) which have been prepared in reliance upon information furnished by the Company and/or third party sources for which the Company has either obtained or is in the process of obtaining the necessary consents for use. Numerous assumptions were used in preparing the Statistical Information, which assumptions may
Information and/or the assumptions upon which they are based reflect present market conditions or future market performance. Moreover, any information from third party sources contained in the Information may not be used or relied upon by any other party, or for any other purpose, and may not, directly or indirectly, be reproduced, disseminated or quoted without the prior written consent of such third party. The Information does not purport to be a complete description of the terms of or the risks inherent in any actual or proposed transaction described herein. The Company’s securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or the securities laws of any state of the United States, and may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of such act or such laws. This presentation does not constitute an offer to sell or a solicitation of an offer to buy or sell the Company’s securities in any jurisdiction.
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INDUSTRY OUTLOOK 3 FINANCIAL SUMMARY 1 MARKET OVERVIEW 1
Geographical reach in AEC Product segments Distribution channels
Source: Company information 4
Breakdown of revenue by product segments, 9M2017 Breakdown of revenue by geography, 9M2017 Breakdown of revenue by distribution channel, 9M2017
9M2017 revenue: THB11.5bn
Thailand THB10.1bn 87.7% Vietnam THB0.8bn 7.0% Others THB0.6bn 5.3% Retail dealers THB8.4bn 73.3% Modern trade THB1.7bn 15.1% Others THB1.4bn 11.6% Decorative THB7.8bn 68.3% Non-decorative THB3.2bn 28.1% Others THB0.5bn 3.6%
Retail dealer sales is the dominant distribution channel, derived mainly from Bangkok and nearby vicinity Low population density Supply chain and logistic challenges Retail dealer preference for established brands Rise of modern trade distribution
Key industry trends and challenges
Sources: Frost & Sullivan, Company information, Department of Provincial Administration, The Ministry of Interior (March 31, 2017) Notes: 1 As at September 30, 2017 in Thailand 2 Out of 77 provinces and 790 districts in Thailand
Comparative Advantage Maximum product reach to end users Strong retail-dealer resistance to non- TOA brands Strong brand awareness and fierce customer loyalty Ability to respond to consumer trends
TOA has a comparative advantage with its extensive distribution coverage coupled with unique Auto Tinting Machines
1 3 4 5
Extensive coverage
6,367
retail dealers1
77 provinces1,2 790 districts1,2
Technology
SAP
ERP and Business Intelligence systems
Unique TOA Auto Tinting Machines
4,1911
2
5
TOA's response Product consultants
In-store and modern trade
3,505 4,006 4,191
1,442 1,687 1,775 2014 2016 9M17 Thailand Other AEC markets 5,693 5,966
6 Source: Company information
>10,000 different shade variations Premiumisation Enhanced customisation Reduced inventory carrying costs
Increasing usage of our Auto Tinting Machines by retail dealers and modern trade distributors…
4,947
Thailand 87.7% Vietnam 7.0% Others3 5.3%
16,449 16,753 16,297 3,848 3,740 12,189 11,458 2014 2015 2016 9M2016 9M2017
Year 3Q 9M
Sales (THBm)
8 Source: Company information Notes: 1 Carve-out Financial Statements 2 Statutory Financial Statements 3 Other countries mainly comprise sales revenue from customers in Laos, Malaysia, Indonesia, Myanmar and Cambodia 4 Other products sold to the Divested companies and related companies e.g. raw materials
Increasing diversification in all aspects of geography and products
Geography Product 2014 9M17 2014-2016 CAGR
(1.7%) Vietnam 10.8% Others 7.5% Decorative 0.1% Non- decorative 1.6% Other business products (21.3%)
2016
Thailand 89.3% Vietnam 6.6% Others3 4.1% Thailand 87.0% Vietnam 8.2% Others3 4.8% Decorative 68.8% Non- decorative 26.2% Other business products4 5.0% Decorative 69.5% Non- decorative 27.4% Other business products4 3.1% Decorative 68.3% Non- decorative 28.1% Other business products4 3.6% 1.8% (2.7%) (2.8%) (6.0%)
YoY growth (%)
1 1 1 2 2
4,976 5,979 6,203 4,696 3,922 1,448 1,225
30.3% 35.7% 38.1% 38.5% 34.2% 37.6% 32.7%
20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 110.0% 1,000 2,000 3,000 4,000 5,000 6,000 7,000
2014 2015 2016 9M2016 9M2017 3Q2016 3Q2017 Gross profit Margin
9
Gross profit (THBm) and margin (%)
Source: Company information Notes: 1 Carve-out Financial Statements 2 Statutory Financial Statements
We have shown strong profitable growth over the past few years driven by our strong brand and products. In 9M2017, margins decreased as a result of higher average raw materials prices
(15.4 %) 20.2% 3.7% (16.5%) YoY growth (%)
1 2 2 2 2 1 1
10
EBITDA (THBm) and margin (%)
Source: Company information Notes: 1 Carve-out Financial Statements 2 Statutory Financial Statements
2,216 3,190 3,559 2,795 1,852 827 531
13.2% 18.7% 21.5% 22.6% 16.1% 21.1% 14.1%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 110.0% 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
2014 2015 2016 9M2016 9M2017 3Q2016 3Q2017 EBITDA Margin
(33.7%) (35.8%) 44.0% 11.6% YoY growth (%)
We have shown strong profitable growth over the past few years driven by our strong brand and products. In 9M2017, margins decreased as a result of higher average raw materials prices
2 1 1 1 2 2 2
11 Source: Company information Notes: 1 Carve-out Financial Statements 2 Statutory Financial Statements
Net profit (THBm) and margin (%)
1,321 2,117 2,507 1,993 1,237 585 343
7.9% 12.4% 15.2% 16.1% 10.7% 14.9% 9.1%
0.0% 20.0% 40.0% 60.0% 80.0%
500 1,000 1,500 2,000 2,500 3,0002014 2015 2016 9M2016 9M2017 3Q2016 3Q2017 Net profit Margin
2 2 2 2 1 1 1
YoY growth (%) (37.9%) (41.4%) 60.3% 18.4%
We have shown strong profitable growth over the past few years driven by our strong brand and products. In 9M2017, margins decreased as a result of higher average raw materials prices
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We have demonstrated exceptional return on asset and equity given our strong business fundamentals
Return on equity3 (%)
Source: Company information Notes: 1 Carve-out Financial Statements 2 Statutory Financial Statements 3 Return on equity is calculated as net profit divided by average shareholders’ equity. Average shareholders’ equity is calculated by averaging the
4 Return on total assets is calculated as net profit divided by average total assets. Average total assets is calculated by averaging the opening and closing balance sheet figures. 5 Ratios are calculated using annualized net profit
10.5% 16.5% 22.2% 17.1%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
2014 2015 2016 9M2017 35.4% 50.9% 93.4% 118.7%
0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0%
2014 2015 2016 9M2017
Return on total assets4 (%)
1 1 1 2,5 2,5 1 1 1
13 Source: Company information
(THBm) 459 245 435 214 241
50 100 150 200 250 300 350 400 450 500
2014 2015 2016 9M2016 9M2017
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reduced volumes of medium to economy grade products and non-decorative paint and coating products as a result of the economic slowdown continuing from 2016 and one-off Vietnam VAT registration requirements during the first quarter of 2017
revenue, as well as the increase in raw material costs. We continue to monitor the situation and are considering passing increased raw materials cost to customers
sheet position
the decrease in dividend payables, long-term loans from financial institutions, and income tax payables 1 2 3 4 5
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11,300 12,349 12,901 13,132 13,537 14,106 14,861 15,597 16,408 17,295 18,265 4.6% 9.3% 4.5% 1.8% 3.1% 4.2% 5.4% 5.0% 5.2% 5.4% 5.6% 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F Nominal GDP (THBbn) YoY growth
Source: Frost & Sullivan
Economy impacted by two natural disasters – strong Tohoku earthquake disrupted the supply chains of Thai-based Japanese manufacturers in March and severe flooding in second half of the year resulted in over THB400bn losses Increase in public spending, household consumption and investments drove the rise in GDP Political and social unrest dampened public spending and household consumption growth rates Social unrest followed by military intervention adversely impacted the inflow of investments, state spending and tourism Public spending and tax cuts stimulated growth albeit the droughts caused by El-Nino Brexit, US withdrawal from Trans- Pacific Partnership and the passing
to volatility, but was alleviated by improved economic performance
Reduced
income taxes
Higher
tourist arrivals
Greater
private consumption
Increased
public investments
While recent GDP growth has been impacted by domestic and international political uncertainty, a recovery in the economy and construction market is expected from a number of positives
Shrinking household sizes
Thailand’s economy and construction market is underpinned by strong fundamentals with socio-economic factors providing tremendous opportunity for growth in the paints and coatings industry
34.4% 37.9% 39.4% 66.5% 42.5% 41.9% 41.7% 26.5% 21.2% 19.1% 17.8% 6.6% 1.9% 1.1% 1.1% 0.4% 2009 2011 2013 2015 1–2 persons 3–4 persons 5–7 persons 8 persons or more Distribution of households by size
Increasing urbanisation
167 182 189 191 197 204 215 225 237 250 263 3.8% 3.0% 2.2% 1.9% (0.9%) 0.3% 1.6% 1.9% 2.1% 2.2% 2.5% 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F GDP per capita (THB '000) Inflation
Rising GDP per capita and stable inflation
Source: Frost & Sullivan
22.3 (20.6%) 25.2 (21.0%) 28.6 (21.7%)
15 17 19 21 23 25 27 29
2011 2016 2021F Number of households (m) / % urban households
17
Relative to more developed markets, Thailand and other AEC countries have significantly lower per capita consumption of paints and coatings, demonstrating substantial upside potential
Source: Frost & Sullivan
20.0 15.0 10.5 10.0 9.0 8.0 6.0 3.0 1.5 1.5 1.0 Norway Singapore Japan USA Malaysia Thailand Indonesia Vietnam Cambodia Laos Myanmar
APAC developed country average: 9.7 APAC overall average: 4.7
AEC
Per capita paints and coatings consumption, litres, 2016
18
Retail decorative paints and coatings market size and forecast
19
Retail TOA's predominant channel in Thailand Sale of products through retail dealers nationwide Modern trade Main distribution channel of foreign manufacturers Occurs through large chain stores such as Homeworks, HomePro and Thai Watsadu Catalyzes retail consumers' awareness and participation in the painting process Projects & exports Large-scale projects for the government, property developers, and real estate companies Wholesale export globally
Dominated by TOA1
Most other players inclined towards industrial paints and coatings manufacturing
13.7 19.2 24.6 2011 2016 2021F (THBbn) 48.7% Akzo Nobel 13.8% Beger 13.3% Jotun 8.1% Nippon 5.2% Others 10.9%
Source: Frost & Sullivan Note: 1 According to Frost & Sullivan by market share for year 2016
Market's promising growth underpinned by favourable socio-economic factors. Competitive landscape dominated by top player TOA
Competitive landscape Channels
Shift
towards premium decorative paints and coatings
Shorter
repainting cycles
Increased
housing stock
Retail non-decorative paints and coatings market size and forecast
20
has a sizeable presence and is trailing the market leaders marginally across all non-decorative paints and coatings segments Wood
3.0 3.9 5.2 0.8 1.0 1.4 1.0 1.5 2.2 2011 2016 2021F Wood Coatings Waterproofing Protective Coating (THBbn)
Direct sales to Original Equipment Manufacturers ("OEM"), such as furniture and construction material manufacturers, is the most prevalent distribution method2 TOA does not distribute its products through this channel Procured directly from manufacturers by contractors and developers OEM Projects Retail and modern trade Main distribution channel for TOA's non-decorative products Less prevalent compared to other distribution channels
Beger 32.8% 28.2% Others 39.0% Sika 28.0% 20.0% Parex Group 10.0% Others 42.0% Jotun 30.0% 28.0% Others 42.0%
Waterproofing Protective coating
Source: Company information, Frost & Sullivan Note: 1 According to Frost & Sullivan for year 2016 2 TOA does not distribute its products through this channel
Channels
Growth in the non-decorative paints and coatings market is expected to accelerate from increased consumption, industrialisation and tourism
Competitive landscape1
Increased
consumer awareness about housing structure protection
Increased
Renovation and repainting activities
Increased
FDI inflows from industralisation
Oseven 45.0% 8.0% Akzo Nobel 10.0% Others 22.0% Adora 15.0% 0.8 1.2 1.7 2011 2016 2021F 0.2 0.2 0.3 2011 2016 2021F 1.0 1.3 1.9 2011 2016 2021F
Retail market size and forecast1 Competitive landscape2 Channels
Retail sales are approximately 50.0%-60.0%
Highest sales of 15.0%-20.0% through the retail channel Retail channel accounts for 10.0%- 20.0% of total waterproofing sales Limited presence of retail dealers 95.0% of sales are project sales through channel partners
Sources: Frost & Sullivan, Bloomberg as at June 26, 2017 Notes:
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6.3 9.7 15.6 2011 2016 2021F (THBbn) Wood Waterproofing Protective coating 4 Oranges 23.0% Akzo Nobel 18.0% 9.8% Nippon 9.0% Jotun 8.0% Others 32.2% Kova 49.0% Akzo Nobel 10.0% Jotun 10.0% 6.0% Others 25.0% Jotun 50.0% Akzo Nobel 40.0% Hai Phong 5.0% Others 5.0%
Vietnam's fast developing economy is expected to drive its paints and coatings industry, underpinned by increasing consumer spending, a growing construction sector, furniture export and public spending
Non-decorative
Increased
construction activity
Increased
wood furniture manufacturing activity
Increased
housing constructions and development (THBbn)
0.8 1.2 1.6 2011 2016 2021F 0.8 1.0 1.3 2011 2016 2021F 0.5 0.6 0.7 2011 2016 2021F 9.5 12.1 15.6 2011 2016 2021F 18.8 26.7 41.0 2011 2016 2021F
Retail market size and forecast2 Competitive landscape
Sources: Frost & Sullivan, Bloomberg as at June 26, 2017 Notes: 1 Comprising Indonesia, Malaysia, Myanmar, Cambodia and Laos 2 Illustrative figures based on USDTHB exchange rate of 1:33.980 as at June 26, 2017 22
(THBbn)
The combined retail decorative paint and coating market of TOA's other AEC markets1 is expected to grow by a 5-year CAGR of 7.7%, driven by increasing urbanisation, economic reforms, infrastructure spending and rising disposable income
Indonesia Malaysia Myanmar Cambodia Laos
(THBbn) (THBbn) (THBbn) (THBbn)
Increased
urbanisation
Increased
disposable income
Growing
construction sector
Increased
political instability
Reduced
speed in developing commercial property
Increased
rural household income
Increased
import taxation
Increased
construction activity Production plants
under construction
under construction
COD in Q3 2017
under construction
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Country Location Ownership Estimated CAPEX (THBm) Objectives Expected start construction Estimated completion Indonesia Kawasan Industri Millenium, Kabupaten Tangerang, Propinsi Banten Freehold 670.0 Production plant Q2 2017 Q2 2018 Myanmar Thilawa Special Economic Zone Leasehold right (until Jun 4, 2064 with option to extend another 25 years) 312.0 Production plant (Relocate from existing Yangon Plant) Q3 2017 Q3 2018 Cambodia Phnom Penh Special Economic Zone Leasehold right (until December 8, 2067 with option to extend another 50 years) 254.1 Production plant Q1 2018 Q4 2018 Total 1,236.1
Myanmar
To be operated by TOA Coating (Myanmar) Co., Ltd.
Cambodia Indonesia
To be operated by PT TOA Coating Indonesia
1
Source: Company information Note: 1 According to the resolution of the Board of Directors’ meeting No.9/2017 held on December 4, 2017
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Indonesia
To be operated by PT TOA Coating Indonesia
Distance
Travel time around 75 min.
Travel time around 45 min.
Source: Company information
Capacity 7.7 m Gallons Estimated Capex 670.0 THBm Estimated Completion Q2 2018
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Source: Company information
Capacity 4.0 m Gallons Estimated Capex 312.0 THBm Estimated Completion Q3 2018 Myanmar
To be operated by TOA Coating (Myanmar) Co., Ltd.
Distance
Travel time around 1 hour
Travel time around 1.30 hours
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Capacity 3.4 m Gallons Estimated Capex 254.1 THBm1 Estimated Completion Q4 2018 Cambodia
Distance
Travel time around 1 hour
Travel time around 30 min.
Travel time around 15 min.
Source: Company information Note: 1 According to the resolution of the Board of Directors’ meeting No.9/2017 held on December 4, 2017
27 Source: Company information Note: 1 Excludes production capacity of TOA Skim Coat (Cambodia) Co., Ltd. 2 Relocate from Yangon to Thilawa Special Economic Zone 3 Total production capacity post taking into account the planned shutdown of existing Yangon Plant
3
Total production capacity1
Million Gallons per year Million Gallons per year
New production plant in Indonesia New production plant in Myanmar2 New production plant in Cambodia