31
0 0 2010 Annual Results Announcement Corporate Presentation March 2011
0 0
2010 Annual Results Announcement
Corporate Presentation
March 2011
1
This document does not constitute, or form part of any offer for subscription or sale of, or solicitation of any offer to
subscribe for or buy of any securities of COSTIN New Materials Group Limited (the “COSTIN” or the “Group”), nor shall
it be construed as calculated to invite any such offer, nor shall this document or any part of it form the basis of, nor can
it be relied upon in connection with, or act as an inducement to enter into any contract or commitment whatsoever.
FORWARD-LOOKING STATEMENTS
This presentation contains certain forward-looking statements with respect to the financial condition, results of
operations and business of the Group and certain of the plans and objectives of the management of the Group. Such
forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the
actual results or performance of the Group to be materially different from any future results or performance expressed
or implied by such forward-looking statements. Such forward-looking statements were based on assumptions regarding
the Group's present and future business strategies and the political and economic environment in which the Group will
operate in the future. Reliance should not be placed on these forward-looking statements, which reflect the view of the
Group 's management as of the date of this presentation only. There can be no assurance that future results or events
will be consistent with any such forward-looking statements.
CONFIDENTIALITY
This document is given to you on a confidential basis and must not be passed to or transmitted to, or their contents be
disclosed to, any other person and no copy shall be taken hereof.
Disclaimer
2
Agenda
I. Company Overview
II. Financial Highlights
III. Market Review
IV. Business Review
V. Future Plans and Strategies
VI. Open Forum
3
I. Company Overview
4
Production based in Jinjiang, Fujian Province, the PRC
Engaging in the research and development, production and sale of recycled chemical fibres and non-woven materials which are targeted for industrial applications
Main products: Recycled chemical fibres and non-woven materials which are targeted for industrial applications
Current annual production capacity:
Recycled chemical fibres: 2 production lines with annual production
capacity of 30,000 tonnes
Non-woven materials: 17 production lines with annual production
capacity of 122,300,000 yards
2009: RMB 747 million
2010: RMB 984 million
2009: 543 (At production line – 319)
2010: 647 (At production line – 441)
Company Overview
Main Business
Products and
Production Capacity
Revenue
Number of Employees
5
Products and Applications
Curtain
Mattress
Front/rear part of shoes
Innersole
Wall decoration
Coverage materials
Filtration materials Household materials Shoe materials Decoration materials
Fume and smoke filtration
Polyester staple fibres and other functional fibres
Non-woven Materials
Civil engineering materials
Water-proof materials in respect of infrastructure
Suitcases
Environmentally friendly shopping
bag
Suitcase and packaging materials
Anti-bacteria
Aroma absorption
Oil-resistance
Thermal-resistance
Water-repellency
Functional non-woven fabrics
Interior decoration materials for automobile
Seat cover
Recycled Polyester Staple Fibre
Recycled PET chips
6
II. Financial Highlights
7
2010 Results Highlights
2010 2009 Change
(RMB Mn) For the year ended 31 December
Turnover 983.7 746.6 +31.8%
Gross profit 335.7 220.7 +52.1%
Profit from operations 281.5 192.8 +46.0%
Profit before tax 274.3 180.6 +51.9%
Taxation 52.5 32.0 +64.1%
Profit for the year attributable to owners of the Company
221.8 148.6 +49.3%
Basic earnings per share
(RMB) 0.31 0.25 +24.0%
Strong Turnover and Profit Growth Enhanced Product Mix Contributed to Rising Margins
8
Strong Financial Performance and Robust Growth
(RMB Mn)
746.6
983.7
0
200
400
600
800
1,000
2009 2010
(RMB Mn)
148.6
221.8
0
50
100
150
200
250
2009 2010
(RMB Mn)
220.7
335.7
0
100
200
300
400
2009 2010
(RMB Mn)
192.8
281.5
0
50
100
150
200
250
300
350
2009 2010
Turnover Profit for the year attributable to owners of the Company
Profit from operations Gross Profit
9
565.9
759.6
224.1
983.7
180.7
746.6
0
300
600
900
1,200
2009 2010
178.1
271.9
63.8
335.7
42.6
220.7
0
100
200
300
400
2009 2010
Turnover & Gross Profit by Business Segments
Recycled chemical fibres Non-woven materials
(RMB Mn) (RMB Mn)
Turnover Gross Profit
24.2%
22.8%
19.3%
19.0%
75.8%
77.2%
80.7%
81.0%
10
Gross Profit Margin at a Glance
2010 2009 Change
For the year ended 31 December
Non-woven materials 35.8% 31.5% +4.3%pt
Recycled chemical fibres 28.5% 23.6% +4.9%pt
Total 34.1% 29.6% +4.5%pt
Increased sales of high end non-woven materials resulted in margin
expansion of non-woven materials and thus enhanced the Group’s profitability
11
Diversified Revenue Streams
Dubai Hong Kong PRC except Hong Kong Indonesia India
13.6%
1.0%
0.5%
0.2%
57.1%
27.6%
55.8%
25.9%
18.3%
For the year ended 31 December
Others
2009 2010
12
Operating Expenses Analysis
2010 2009
For the year ended 31 December
(RMB Mn) (As % of turnover) (RMB Mn) (As % of turnover)
Turnover 983.7 100 746.6 100
Distribution
expenses (17.2) 1.7 (11.6) 1.6
Administrative
expenses (47.3) 4.8 (27.1) 3.6
Total operating
expenses 64.5 6.5 38.7 5.2
13
Effective Working Capital Management
74
66
0
10
20
30
40
50
60
70
80
90
2009 2010
Days
For the year ended 31 December
8480
0
10
20
30
40
50
60
70
80
90
2009 2010
Days
For the year ended 31 December
15
25
0
10
20
30
40
50
60
70
80
90
2009 2010
Days
For the year ended 31 December
A/R Turnover A/P Turnover Inventory Turnover
14
Solid Financial Position
2010 2009
As at 31 December
Current ratio (times) 2.94 1.24
Interest coverage (times) 38.9 15.8
Operating cashflow (RMB Mn) 181.6 69.1
Bank balances and cash (RMB Mn) 627.8 124.4
Gearing ratio (%) 14.3 % 30.4%
ROE (%) 23.6% 48.4%
Capital expenditure (RMB Mn) 72.6 98.7
15
III. Market Review
16
The Twelfth Five-Year Plan as a driving force for new material industry development
The seven strategic emerging industries
include:
Energy saving & environmental protection
New information technologies
Biotechnology
Manufacturing of sophisticated equipment
New energy
New materials
New energy automobiles
The Twelfth Five-Year Plan suggest to expand the domestic demand, accelerate the building of a green society and enhance the scene of environmental protection of the citizens.
The Twelfth Five-Year Plan drives the development of new material and environmental friendly industries,
and brings growth potential to the Group’s recycled materials and high-end filtration products
New material industry is one of the seven strategic emerging industries
stated in the Twelfth Five-Year Plan
17 Source: China Textile Industry Development Reports 2002-2010, edited by China Textile and Apparel Press
Thousand Kt
Filtration Material Market
As standard for filtration
materials become higher,
woven fabrics can no longer
satisfy such standard. Non-
w o v e n f a b r i c s h a v e
gradually replaced woven
fabrics and widely been
applied in various industries
O u t p u t o f f i l t r a t i o n
materials have increased
more than double to approx.
559,000 tons in 2010
200 200 240 267 301 301 410 483 559220 230 305 317 330 428 488 529 611350
685 8521,083
1,2151,397
1,523
218315
362 382421
519568
638711
265
312
356
316
502
566
602
636
667
230280
280320
380
426
495
595
703
758
977
1,043
1,223
1,570
1,996
2,022
2,642
3,087
2,618
3,185
3,654
4,537
5,543
6,065
7,232
8,217
270610
224
181144
46
105
35
220
240
150
2,081
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2002 2003 2004 2005 2006 2007 2008 2009 2010
Filtration materials
Framework materials
Tarpaulin materials
Leather fabric
Textile for building use
Textile for packaging
Textile for medical and hygienic use
Others
Output of textiles categorized for industrial consumption in the PRC
18
IV. Business Review
19
Diversified Product Mix and Extensive Application
The Group’s non-woven materials can be customized to a variety of special functions to
meet the needs of customers from various industries
The Group’s recycled chemical fibres can be used as raw materials for the production of
environmentally friendly filtration materials, dust filtration materials for industrial and
thermal and erosion resistant materials and non-woven fabrics.
As the ownership of automobiles increased significantly throughout the PRC, the excess demand of textiles for automobiles in the market has to be satisfied by
imports. This motivates the growth in the Group’s non-woven materials and recycled chemical fibre.
Product Functions Applied as Industries /materials
Non-
woven
materials
Absorbency
Liquid repellency
Resilience
Flame resistance
Shock absorption
Filtering
Bacterial resistance
As consumables
for
heavy industrial
enterprises
Steel
Cement
Coal-fired
power station
Chemical
Coal
Ferrous
metal
industries
As raw material
for
the manufacture
of
consumer
products
Textile
Footwear
Luggage &
leather-ware
Automobile
Suitcase
Household
decoration
20
As of 31 December 2010
17 production lines for non-woven materials, 11 of which are stitch-bonded and 6 of which are needle-punching. Total capacity amounted to approximately 120 million yards
2 production lines of recycled chemical fibres for the production of polyester staple fibres with a capacity of 30,000 tonnes.
12,000 tons/annum polyester staple fibres and 23,000 tons/annum PET chips capacity expansion and technology upgrade project have been approved by the Environmental Protection Bureau of Jinjiang, Fujian, the PRC. It is expected that the projects will complete by the second quarter of 2011.
In June 2010, the Group entered into a purchase agreement with Dilo Systems GmbH in Germany regarding the equipment for filtration materials production lines
Compound materials and automobile interior decoration production lines have gradually commenced production in the second half of 2010
Expand Production Capacity to Satisfy Market Demand
Annual Production Capacity Utilization Rate
For the year ended 31 December
2010 2009 2010 2009
Non-woven materials
(Existing) 81.5m yards 81.5m yards 85.8% 81.0%
Non-woven materials
(Expanded) 40.0m yards N/A 10.3% N/A
Recycled chemical
fibres 30,000 tons 30,000 tons 95.5% 99.6%
Expand Production Capacity
21
Strong R&D Capabilities and Advanced Technology Know-how
In late 2009, Xinhua Company, a subsidiary of the Group, was recognized as a high and new technology enterprise by Fujian Provincial Department of Science and Technology, Fujian Provincial Department of Finance, Fujian Provincial office of State Administration of Taxation and Fujian Local Taxation Bureau.
In late 2010, the Group has successfully passed the onsite reevaluation of the China Textiles Development Center and retained its qualification of “Fabrics China Pioneer Plant - Environmentally-friendly Filtering Materials”
The strong research team comprised well-experienced technical personnels and university scholars, and is led by former professors in textile engineering of the Tianjin Polytechnic University.
Apart from establishing the Research and Development Centre of Non-woven Technologies jointly with Tianjin Polytechnic University, the Group has also established the Research and Development Centre for New Materials in Textile Industry jointly with Wuhan University of Science and Engineering, in order to promote the Group’s autonomy in R&D and technology.
New Developments through
Environmental Approaches
.
Better life with Technology
As at 31 December 2010, the Group successfully registered 2 patents on its own and 2 patents jointly with Tianjin Polytechnic University. The Group is also applying for
registration of 23 patents which consist of 4 patents being jointly applied for registration by the Group and Tianjin Polytechnic University, and 19 patents being applied for registration
by the Group on its own.
屢獲殊榮的研發中心 R&D Centre with High Recognitions
屢獲殊榮的研發中心 Experienced R&D Team
22
Recognitions for High Quality and Standard of Products
Year of grant Awards / accreditations Awards organization
January 2010 Provincial Famous Products 2009 People’s Government of Fujian
Province
January 2010 ISO9001 : 2008 SGS United Kingdom Ltd.
September 2010
SCS Recycled environmental
protection certificate of the
United States
Scientific Certification System of
the United States
Leveraging its solid experience and expertise in research and development, the Group is able to develop and produce high quality products
23
V. Future Plans and Strategies
24
Market Outlook
The State Council strives to increase the proportion of seven strategic emerging
industries to 8% of GDP by 2015, and increase the proportion to 15% by 2020.
The government policies supported the use of non-woven materials, including
filtration materials, automobile interior decoration and synthetic leather.
The PRC government plans to reduce the intensity of carbon dioxide emissions
per unit in 2020 by 40-45% compared with the level of 2005. Therefore, the PRC
government is expected to highly regulate industries that traditionally release
dust pollutants, such as steel, cement, coal fired power station, etc.
It is expected that the Chinese government will continue to impose stricter
restrictions over traditional industries emitting pollutants. This will further drive
the growth of demand for filtration materials with special environment protection
functions from these industries.
As COSTIN emphasizes the use of recycled raw materials, we believed that the
supportive government policies towards recycled raw materials will bring
enormous business opportunities to us.
Strong government support to drive the demand for
quality high-end non-woven materials
25
To become one of the market leaders in the non-woven materials and recycled chemical fibre
industries in the PRC which use recycled raw materials
Our Business Strategies
25
Bolster R&D and
enhance product quality
Capacity expansion and
production ramp up
Formulate the
“Third Five-Year Plan”
for COSTIN
New products development
and sales network expansion
26
Capacity Expansion and Production Ramp Up
Technology upgrade and expansion of recycled polyester staples production lines
Upon the completion of technology upgrade and expansion of the 2 recycled polyester staples production lines, the capacity will increase to 42,000 tonnes per annum.
To maintain the market position and competitive advantage in the production of non-woven materials and recycled chemical fibres by recycled
raw materials, through capacity expansion and production ramp up.
Production Facilities under Expansion
Technology upgrade and expansion of recycled polyester staples and PET chips production lines
12,000 tons/annum recycled polyester staple fibres and 23,000 tons/annum PET chips capacity expansion and technology upgrade project has will be completed by the second quarter of 2011. Upon the completion, the Group will increase the volume of import for chips from 30,000 tonnes to 53,000 tonnes per annum, for which the scale of production in recycled polyester staples will increase from 30,000 tonnes to 42,000 tonnes per annum.
Purchase agreement for filtration materials production lines
The Group had already entered into a purchase agreement with Dilo Systems GmbH in Germany regarding the equipment for filtration materials production lines, which is expected to commence operation by June 2011.
The Group planned to commence production of high end filtration materials by the second quarter of 2011.The Group will commence production of compound synthetic leathers and automobile interior decoration by the second quarter of 2012.
Overall development in 2011
Looking ahead in 2011, the Group will expand its production lines to 28, such additional capacities include 2 production lines for filters, 3 production lines of needle-punching and 6 production lines of stitch-bonded. The total capacity will increase to approximately 150 million yards.
27
Bolster R&D and Enhance Product Quality
Successfully obtained the American SCS Recycled Content Certificate by capitalizing on advanced inspection and testing equipment. The certificate denoted zero emission in exhaust gas and sewage.
Strictly comply with the environment protection certificate and strive to become a leading green enterprise in China
Improve and optimize the functions and production technologies for non-woven materials and recycled chemical fibres, which will continue to improve product quality, and reduce production costs from reinforcing recycling and reducing emission of pollutants to achieve
sustainable development.
According to the China Textile Industry Development Report 2008, in 2008, the PRC cement and steel output accounted for 40% and 25% of the total annual output of the world respectively.
These industries create huge amount of dust pollutants and it is expected that the demand for dust filtration material will continuously increase.
With the trend of promoting more stringent environment protection policy in the PRC, demand for non-woven filtration materials will increase.
The Group will place resources in developing and upgrading non-woven filter materials.
R&D Advantages
Market Opportunities
28
New Products Development and Sales Network Expansion
Gradually shift market position from household consumer goods at present to industrial consumer goods, and actively develop the filtration materials and automobile interior decoration markets
Disposable income in China increase upon the further increase in the GDP of China. Sales of automobiles in China increase significantly, which will be the force gearing the growth of automobile interior decoration market.
Increase the proportion of domestic demand from approximately 56% at present to 70% within the coming three years, so as to align with the opportunities arising from domestic demand ahead.
Marketing team attends large-scale conference and sales fair to explore potential overseas market.
Continue to recruit experienced sales and marketing staff, provide regular training to them to strengthen their ability.
Depending on the Group’s future plan and development, the Group may consider establishing other sales network, i.e. distribution agents.
New products development
Sales network expansion
29 29
Formulate the “Third Five-Year Plan” for COSTIN
Ultimate target: To build a high technology corporation
Formulate the
“Third Five-Year Plan”
to expand domestic market
1
Additional investment in high-end environment protection products for which the Group’s dust
removing filtration materials for industrial purposes will occupy a share in the high-end
market of China
2 4 Additional investment
in advanced
environment
protection dust
removal equipment to
develop unique high-
end products
Introduce the automobile interior
decoration and needle-punched
synthetic products to satisfy the
demand in domestic market
3
30
VI. Open Forum
