2016 ANNUAL RESULTS ANNOUNCEMENT. March, 2017

Transcription

1 2016 ANNUAL RESULTS ANNOUNCEMENT March, 2017

2 Disclaimer This document has been prepared for general information purposes only and is not, and should be not construed as, an offer for sell or a solicitation of an offer to buy any securities Information and opinions contained herein have been compiled in good faith by China Hengshi Foundation Company Limited from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness or correctness All opinions and estimates contained in this document are provided in good faith but without legal responsibility and are subject to change without notice Neither China Hengshi Company Limited and/or any of its subsidiaries or affiliates, nor any of its or their officers, employees or representatives, accepts any responsibility or liability whatsoever from any actions or claims arising from any use or interpretation of the information contained herein 2

3 Table of Content Section Annual Results Review 2 Financial Analysis 3 Development Strategies 4 Question and Answer 3

4 4 Section I 2016 Annual Results Review

5 2016 Market Review In 2016, the global accumulative installed wind power capacity reached 486.7GW (2015: 432.7GW), representing a year on year increase of 12.4%, but the global newly-installed wind power capacity exceeded54.6gw, down 14.2% from 2015 (2015: 63.6GW). Among them, due to the correction after the Rush to Install Wave of wind power capacity in 2015 in the PRC and the shortage of power grid in consumptions of wind power, the PRC s wind power capacity decreased significantly. In 2016, the PRC s newly-installed wind power capacity reached 23,3GW (2015: 30.5GW), representing a year on year decrease of 23.6%. The performance of wind power market in emerging countries and major developed countries was divergent: India s newly-installed wind power capacity reached3.6gw in 2016, setting a new record of the local country and ranking fourth globally. in newly installed wind power capacity; The European market maintained its strong growth with 13.9GW of newly-installed wind power capacity; The newly-installed wind power capacity in North America was basically flat as compared to its strong growth in The PRC s Government have rolled out various policies to promote, regulate and guide the development of the entire industry: In March 2016, National Development and Reform Commission and National Energy Administration have published the Measures for the Administration of the Guaranteed Buyout of Electricity Generated by Renewable Energy Resources, which stated the set up of renewable energy green certification trading system; In December 2016, National Energy Administration issued the Renewable Energy Development under the 13th Five- Year Plan, which requested a full coordination and implementation of the development of wind power, and making a detailed layout on the development of wind power in key areas, in order to achieve the proportion of non-fossil-fuels energy to primary energy consumption of over 15% and over 20% by 2020 and The domestic wind power market has returned to rational growth from overheating and over-rapid growth. Although there are short-term fluctuations, the overall upward trend has not changed in nature 5

6 2016 Annual Results Summary In 2016, facing the challenges that domestic economic growth continuously slow and sharp drop in domestic wind power market, the company, under the leadership of the board of directors, has done a series effective work in market development, structural adjustment of authors, promoting efficiency and quality, increasing the merit, constructing factories overseas and so on, achieving good results. The sales volume, sales revenue and profit grew significantly and reached a record high. Specific reports as follows: Throughout the year, the sales volume increased by 16.55% as compared with that of last year; sales revenue amounted to approximately RMB1,236 million, representing an increase of 23.29% as compared with that of last year; gross profit amounted to approximately RMB421 million, representing an increase of 40.94% as compared with that of last year; net profit amounted to approximately RMB252 million, representing an increase of 39.31% as compared with that of last year. from last year. The net profit increased by % year on year, if excluding financial guarantee factors in 2015, RMB Million FY2016 FY2015 Compared to 2015 Revenue 1, , % Gross Profit % Net Profit % Adjusted Net Profit (1) % 6 Notes 1. Net profit adjusted for non recurring gain on disposal of financial guarantee

7 Products and Application (1) E/PP Compofil Fabrics E/PP compofil fabrics is principally used in transportation, construction and sporting goods industries Multi-axial Fabrics* Principally used in wind turbine blades, ship manufacturing, transportation, pipelines, pressure vessels, sporting goods pipelines and chemical containers Bi-axial fabrics Tri-axial fabrics Quad-axial fabrics Stitched Mats Principally used in ship manufacturing and pipelines Uni-directional Fabrics* Principally used in wind turbine blades, pressure vessels and pipeline manufacturing materials 7 Notes 1. Based on 2016 Revenue Woven Roving Combo Mats Principally used in ship manufacturing, pipelines and sporting goods * Mainly used in wind industry

8 Adjust Product Structure 1. Strengthened promotion on high modulus productions such as E7, and actively participated in the development of new high performance fiberglass fabrics E8 in wind power. - The annual high modulus sales revenue amounted to approximately RMB205.3 million, representing 16.60% of the total sales revenue, and an increase of % as compared to the same period of last year. 2. Expanded the market for non-wind new applications - Compofil composite cloth is a kind of product used in transportation, which can be used to make truck parts and car lightweight components. - In 2016, the sales revenue of the company was RMB46.7 million, representing a year on year increase of 51.83%. 8

9 Wide Coverage for Major Global Wind Markets(1) Europe North America China ) Rest of World 9 Note 1. The wind datat of the world based on Global Wind Stastics 2016 from Global Wind Energy Council and the ratio of Hengshi is basedon 2016 Annual Report.

10 Global Business Analysis RMB Million FY2016 FY2015 Change Europe % North America % Asia (1) % Latin America % Australia % Africa % Overseas market % PRC market (2) % Total 1, , % 10 Note 1. Asia includes Hong Kong, Macau and Taiwan, but excludes the PRC; 2. PRC market excludes Hong Kong, Macau and Taiwan;

11 Continuous Growth of Business 1 Consolidating existing customers - The Company has covered all well-known manufacturers of wind turbines and blades worldwide and domestic. It is very important to solidify the corporation with the existing customers to continually increase their confidence in products and satisfaction on service; - The Company has achieved the incremental sales revenue from existing customers of 240 million; - With the deepening trust of customers, the company has realized bulk supply of products to 5 seminew customers (the customers developed in the recent two years), which included LM, an international renowned wind turbine blades manufacturer. 2 Exploring new clients - We built relationships with famous wind turbine manufactures domestic and abroad and further expanded the primarily wind market such as Germany and India; - 11 new customers were developed, and 6 of them are high modulus product customers; - we continued to strengthen the testing verification of the products. The annual total number of samples sent to our customers for testing was 461, representing a year on year increase of 58.97%, and we have 9 customers undergoing testing verification. 11

12 Promotion of Production management and Technology 1. Promotion of production management We encouraged all employees to participate in innovation to accelerate the upgrade of production manufacturing equipment and auxiliary equipment, optimization and adjustment of production layout and operational process. We comprehensively promote the development and commissioning of the Manufacturing Execution System( MES System ), which effectively promoted the production management efficiency, reduced unit production cost. We are to build a new production plant of "automation, intellectualization, informationization and refinement. 2. Technological upgrading We provided solution on lightweight manufacturing of large blades for customers by optimizing the structure design of fiberglass fabrics; We continuously improved the process compatibility for customers in the later stages of production through constant upgrades of our process technologies and equipment; We extended the processing of our products, which helps our customers shorten production cycle, elevated the production efficiency and created larger. 12

13 检测 & 研发 Hengshi Testing Center has obtained Laboratory accreditation from CNAS and authorized accredited laboratory from DNV-GL - CNAS laboratory is the highest permit for the capability of the laboratories in the PRC, it also has the strictest condition demands for applicants and it takes longest time to award recognition; - DNV-GL is a universally recognized institution of testing and certification in the wind power industry, with half of the large scale wind power certification around the world done by DNV-GL. - China Hengshi is the only Chinese company holding the two certifications in the fiberglass fabrics used in wind power industry 13

14 Production Quality Zhejiang Hengshi obtained 2016 Mayor Quality Award in Jiaxing City and ZHEJIANGMADE 14 Mayor Quality Award in Jiaxing City ZHEJIANGMADE

15 Overseas Construction & Layout Hengshi Egypt - Has passed the Vestas certification and successfully entered the stage of bulk production, and is orderly expanding testing certifications for certification for certain major wind power customers. The major testing certification is expected to finish in the first half of 2017; - Has passed the 3 system certificates (namely ISO9000, ISO14000, and OHSAS18000 certificate) successfully - The Egypt Phase II Expansion Plan is proceeding as planned, which is expected to launch in April Hengshi USA - Has concluded an investment agreement with the south Carolina government successfully ; - Hengshi USA Wind Power Material Corporation has already been incorporated, work such as plant site selection, plant layout and the purchase, installation and testing of equipment in later stage have been implement in an orderly manner. Formal commissioning is expected to launch at end of American project signing ceremony American factory

16 16 Section II Financial Analysis

17 Financial Highlights RMB million FY2016 FY2015 Change Sales Revenue % Gross Profit % Net Profit % Adjusted Net Profit (1) % Gross Profit Margin 34.03% 29.76% 4.27% Adjusted Net Profit Margin (1) 20.45% 11.59% 8.86% Earning per Share- Basic (RMB yuan) % 17 Notes 1. Net profit adjusted for non recurring gain on disposal of financial guarantee

18 Profitability Grows Rapidly with the Promising Wind Power Market Gross Profit and Margin Analysis 18 RMB Million Gross Margin(%) The gross profit of the company increased by RMB122.2 million, while gross profit margin increased 4.2% year on year, it mainly because Unit manufacturing costs have declined In 2016, since the company adopted a series of effective cost control measures, the unit production cost decreased. In addition, in 2016, the year-on-year growth in sales volume resulted in further amortization of fixed costs, resulting in lower unit costs. Proportion of high gross margin products has increased In 2016, the company actively adjusted the product structure, and increased the proportion of products with high added value of E7 high modulus fabrics, clipping fabrics and composite fabrics

19 Profitability Grows Rapidly with the Promising Wind Power Market (continued) Adjusted Net Profit and Margin (1) Analysis RMB million Adjusted Net Profit Margin (%) The net profit margin of the company increased by 8.9% year on year, it mainly because: Gross margin increase - In 2016, the gross profit margin of the company increased 4.2% year on year Cost reduction - In 2016,the amount of the financing of the company decreased by RMB350.0 million, the financial cost decreased by RMB17.0 million - In 2016, there was no listing fee, which decreased by RMB27.9 million compared to Notes 1. Net profit adjusted for non recurring gain on disposal of financial guarantee

20 Balance Sheet Summary RMB Million FY2016 FY2015 Non-current Assets Current Assets ,100.8 Inventories Account receivables Bills receivables Bank balances and cash Others Total Assets 1, ,689.8 Non-Current liabilities Current Liabilities Account payables Bills payables Bank borrowings Others Total Liabilities Total Equity 1, ,051.7 Healthy financial position Gearing ratio (1) is approx24.4%,13% lower than 2015; Average turnover day of inventory is 49 days, Average turnover day of receivables is 116 days, basically the same as in 2015 Bank Borrowings have fallen sharply, but the company is flush with cash 20 Note 1. Gearing Ratio : Total Liabilities / Total Assets

21 21 Section Ⅲ Development Strategies

22 Development Strategies Further consolidate and enhance our market leadership globally and become the global leader for the R&D and manufacture of fiberglass fabrics used in the wind turbine blade sector Expand Market Share Continue to consolidate the leading position globally and focus on the fiberglass fabrics used in wind turbines with a unit capacity of 5.0 MW+ Target to become the largest global manufacturer and supplier of fiberglass fabrics used in the wind turbine blade sector in the next 2 to 3 years Expand Product Portfolio Strengthen the development of products and markets in the field of non-wind applications and actively foster new growth points Develop new products or new applications of fiberglass fabrics so as to broaden our revenue sources Optimize Supply Chain Through overseas layout, we put further into customers, improve customer satisfaction and expand market share Strategically select locations in order to capture cost synergy arising from fiberglass procurement from China Jushi Capabilities & Efficiencies Optimization Enhance R&D Capabilities Optimize the production process and upgrade equipment continuously, and improve the applicability of the product process Continue to maintain and enhance the strong R&D capabilities Adopt a customer-oriented R&D strategy to identify market opportunities 22

23 Investor relations The company is convinced that effective communication with shareholders is very important for strengthening investor relations and making informed decisions for investors. In order to promote effective communication with investors, the company set up complete methods of shareholders communication and contact, and established Hong Kong Office in March 2016, shareholders and investors can learn about the business, performances, strategies, etc. of the company through the following ways. Hong Kong Office of China Hengshi Contact Us Kevin. Tang Add.: Tsimshatsui Centre, East Wing 66 Mody Road, Kowloon, Hong Kong Chief Securities Representative Tel: (852) Fax: (852) Web:

24 24 Questions and Answers

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