kenda rubber industrial ltd - twse.com.tw

Kenda Rubber Industrial LTD

Investment Forum

Proxy Spokesman Wei-ShuChen

The information in this document was

acquired from sources available to the

company and is subject to change. The

information from TSE MOPS shall take

precedence in case of discrepancies.

Disclaimer

Outline

• Business Strategies

(Production, R&D and Marketing)

• Operating Results

• Q & A

Production

Strategy

Plant PCR MC BC TUBE TBR

Yuanlin plant ˇ ˇ ˇ

Yunlin plant ˇ ˇ

Kenda Tire

(Shenzhen) ˇ ˇ ˇ

Kenda Rubber

(China) ˇ ˇ ˇ ˇ ˇ

Kenda Rubber

(Vietnam) ˇ ˇ ˇ

Kenda Tire

(Tianjin) ˇ ˇ ˇ

Kenda Rubber

(Tianjin) ˇ

Kenda Rubber

(Huizhou) ˇ ˇ ˇ ˇ

Kenda Rubber

(Indonesia) ˇ ˇ ˇ ˇ

In planning

Factory Production

In planning

Factory Production

On August 12, 2014, the Board of Directors passed the

proposal of opening an Indonesia factory. The Company

will accelerate the set up of the factory to full-fill the

Indonesia market and react to the US Anti-

dumping/Anti-subsidy.

The construction of the second plant of Kenda Rubber

(China) and the plant of Kenda Rubber (Huizhou) is on

schedule .

From December 1, 2014, China cancelled the sales tax

on tires of light motorcycle and auto under 250cc.

。

Factory Production

To integrate sources effectively, to simplify the

management procedures and to reduce the operating

cost, Kenda passed the proposal to merge the two

factories in Tianjin (KT&KJ).

To simplify business structure and coordinate group

strategy, Kenda Tire (ShenZhen) will be dissolved in

2015.

Kenda signed the agreement with Kaisa Group (Shen-

Zhen) for developing the land Kenda Shen-Zhen located.

Background

United Steelworkers (USW) filed anti-dumping and anti-subsidy

lawsuits against China’s sedan and light-truck tire imports with the

US Department of Commerce (DOC) and International Trade

Commission (ITC) on June 3, 2014.

On July 22, the ITC voted 6-0 that Chinese manufacturers were

causing material injury to US tire manufacturers, prompting the

toDOC launch anti-dumping and anti-subsidy investigations. The

result of Anti-subsidy investigation has been released on Nov 24,

2014. The result of Anti-dumping investigation is expected to be

announced on Jan 21, 2015.

Anti-dumping/Anti-subsidy

The result of Anti-subsidy investigation

(released on Nov 24, 2014)

Corporate Name Tax rate

GITI Tire 17.69%

Cooper Tire & Rubber 12.50%

Shandong Yongsheng Rubber 81.29%

Other Companies 15.69%

Impact on Chinese tire manufacturers

The released tax rate of anti-subsidy is higher than market expectation,

which indicates the tax rate of anti-dumping will also higher than

estimation. The result could damage the US import market of tire from

China even worse than predicted. Given the fact that the supply from

China maybe drop 2/3, the price of US-produced tires will rise, which

hurts US consumers.

The measures will be imposed for five years and could be extended for

another five years after the sunset review. The review could be repeated

an unlimited times and indefinitely periods. This will pose a huge obstacle

to Chinese tire manufacturers.

Surplus capacity in China could be relocated to regions

other than the US, intensifying competition.

Smaller Chinese tire manufacturers could exit the

market, while stronger manufacturers will aggressively

seek out opportunities to build plants in the US or other

countries.

This could trigger a global domino effect, prompting

other countries to launch anti-dumping investigations

against China’s products involved in the US case.

Kenda’s future plan

Adding equipment in Taiwan plants; boosting capacity to take

orders from subsidiaries in China.

Tapping into emerging markets; increasing exposure of OEM

business; increasing exposure in non-PCR tires such as bicycle

and motorcycle tires.

No expansion plans in China in the near term except for the

scheduled construction of the second plant of Kenda Rubber

(China) and the plant of Kenda Rubber (Huizhou) ; establishing a

new plant in Indonesia.

Continuing to relocate investment to Taiwan.

The investigations will bring more pros than cons to Kenda.

Outlook is positive.

R&D Strategy

Improving R&D capability & product quality

Expanding the Taiwan R&D center, which is

responsible for new product development, testing,

and technology upgrades.

Establishing the US R&D center by hiring many

technology experts to develop products that cater to

North American consumers and accelerate new

product development.

Expanding the Kunshan R&D center and seeking

out more opportunities to team up with Chinese car

companies.

Marketing

Strategy

Promoting Kenda’s own brand

Promoting sub-brands

Sports Marketing

Sponsoring Cannondale professional bike team Sponsoring the Uni-President 7-Eleven Lions

Sponsoring the NBA team Cleveland Cavaliers

Operational

Results

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014年

1-11月

11,567

14,564

18,675

21,281 19,899

24,245

28,203 29,821

32,451 30,601

Revenue

Note：Consolidated sales grew NT$31.9mn after ADI acquisition in 2013.

Unit: NTD mn

0%

10%

20%

30%

40%

Bicycle Motocycle PCR Others

27.63% 27.61%

9.69%

35.07% Spare tires accounted

for 13% of PCR

Sales breakdown by tire types Jan.-Nov. 2014

NT元/KG

Tire raw material price trend

86.85

56.49

100.64

139.75

100.85

76.03

47.50 73.23

45.07

70.20

109.00

83.21

58.09

50.60

-

30

60

90

120

150

2008 2009 2010 2011 2012 2013 2014年12月

Natural

Rubber

(SIR20)

Syntheic

Rubber

(SBR1500)

Consolidated gross margin

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011 2012 2013 2014Q3

15.44%

13.53%

28.04%

19.03%

15.92%

21.95%

24.92% 26.24%

Consolidated gross margin(Quarter)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Q3

2,468

2,702

53

414 490 432

2,492

1,544

1,529

2,644 769

1,490

NT$mn

3,019 3,367

Net profit/loss

Note: The 2013 data already eliminated the prior equity under common control when acquiring ADI.

NT$元

4.38 4.24

Earnings Per Share

Note: The 2013 data already eliminated the prior equity under common control when acquiring ADI.

NT$元

1.01 1.16 1.06 1.01 1.05 1.12 1.15

13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3

Note: The 2013 data already eliminated the prior equity under common control when acquiring ADI.

Earnings Per Share(Quarter)

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