2013 Annual Results March 2014
2013 Results Highlights Operational � Ø Period-end installed capacity of 23.7mt (2012: 23.7mt) Ø Cement sales volume of 17.6mt (2012: 14.3mt). Additionally, 0.6mt of clinker sales (2012: 0.7mt). Ø Cement ASP’s of RMB228/t (2012: RMB238/t) Financial � Ø Gross Profit increase to RMB729.3m (2012: RMB675.2m) Ø EBITDA increase to RMB1188.7m (2012: RMB1056.4m) Ø Net Gearing 67.0% (2012: 69.1%) Ø Cash & cash equivalents of RMB623.1m (2012: RMB518.8m) Capacity 31 Dec 2013: Shaanxi – 21.1mt Ø Completed issuance of RMB800m MTN in March 2013. 3-year term at 6.1%. Proceeds used to refinance short-term onshore bank loans and for general Xinjiang – 2.6mt working capital. Further Developments � Ø Xinjiang Yili Plant, 1.5mt, and Guiyang Huaxi Plant, 1.8mt, to be completed in 2H2014, taking the Group’s capacity to 27mt. Ø New revenue stream: The Lantian Cement Kiln Waste Sludge Treatment Facility. 2
Financial Analysis and KPIs RMB Million (unless otherwise Ended Ended % Ended Ended specified) 31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012 Cement Sales Volume 17.6 14.3 23.1% ASP/t (RMB) 228 238 Revenue 4,167.8 3,524.1 18.3% GP/t (RMB) 41 47 Gross Profit 729.3 675.2 8.0% NP/t (RMB) 22 26 EBITDA 1,188.7 1,056.4 12.5% Profit Attributable to Trade receivable 378.3 364.9 3.7% 14 14 Shareholders Turnover Days (5) Basic EPS (cents) (1) 8.3 8.3 - Inventory 53 54 Turnover Days (6) Interim Dividend (cents) Nil Nil - Trade payable Proposed Final Dividend (cents) 2.0 2.0 - 73 63 Turnover Days (7) Gross Profit Margin 17.5% 19.2% (1.7 p.pt) EBITDA Margin 28.5% 30.0% (1.5 p.pt) Notes ： (1) There is no change in the basic EPS despite the increase in profit Net Profit Margin 9.2% 10.6% (1.4 p.pt) attributable to shareholders due to the increase in the weighted average number of shares as compared with the corresponding period in 2012 following the issuance of new shares to the Italcementi Group as part of As at As at the purchase consideration for the Fuping Cement Plant in June 2012 31 Dec 2013 3 Jun 2013 (2) Net debt equal to total borrowings, medium-term notes and senior Total Assets 10,664.7 10,298.9 3.6% notes, less bank balances and cash and restricted bank deposits (3) Net Gearing is measured as net debt to equity Net Debt (2) 3,406.8 3,350.4 1.7% (4) Fixed charge means interest expenses Net Gearing (3) 67.0% 69.1% (2.1 p.pt) (5) 365 day / (Turnover / Average trade receivable) Net Debt / EBITDA 2.9 3.2 (9.4%) (6) 365 day / (Production cost / Average inventory) EBITDA / Fixed Charge (4) 4.1 3.7 10.8% (7) 365 day / (Production cost / Average trade payable) Net Assets Per Share(cents) 112 107 4.7% 3
Growth and Profitability Revenue Sales Volume for Cement Tonnage (Millions) RMB Million % YoY Growth = 23.1% % % 5 7 . 6 . 8 2 YoY Change = 18.3% 3 = = = R R G G A C A 3 C 1 3 - - 9 1 0 – 9 0 Gross Profit Profit Attributable to Shareholders RMB Million RMB Million % 4 09 - 13 CAGR = 3.4% 3 . = R G A C 3 1 9 - - 0 YoY Change = 8.0% YoY Change= 3.7% 4
Production Cost Analysis Average Coal Cost Production Cost RMB Million RMB per ton +6.0% - 1 0 +33.6% . 4 % - 1 6 . 7 % 3.1% 3.9% 3.1% Average Electricity Cost 3.6% RMB per kwh -4.3% 2.2% -11.1% 3.5% Average Limestone Cost RMB per ton -18.45 % +8.0% 5
2013 Market Review Shaanxi Demand � Ø 2013 demand reasonable. Approx 10% yoy demand growth. Ø Infrastructure demand pick up led by railway. South Shaanxi strong due to Xi’an to Chengdu High speed Railway. Urban & Rural demand steady. Shaanxi Supply � Ø 2mt of new supply in Xianyang in 2013. Less than 5mt of new supply in 2014 & no more beyond that. The tail end of a 30mt build out of new supply between 2010-2014. Ø Continued closure of inefficient capacity. Emission controls and planned abolishment of PC32.5 to further constrict supply. Xinjiang � Ø Volumes low due to lack of infrastructure demand. ASPs reasonable and profitability maintained. WCC Volumes, ASPs & COS � Ø 18.2m tons cement & clinker sales. Approx 74% capacity utilisation. Ø ASP’s especially weak in 3Q13 due to capacity additions during the slow season. Improvement into 4Q and year end as demand picked up. Ø COS stable. Coal price remains favourable, partially offsetting impact of lower ASP’s. 6
Shaanxi – Infrastructure Project Demand Xi’an to Chengdu High Speed Railway Passenger Line � • Total distance of 343KM within Shaanxi Province, passing through Xi’an and Hanzhong Regions; over 85% of total distance accounted for by bridges and tunnels. Shaanxi total consumption approx. 4.0 - 4.5 million tons. • WCC supplying over 70% of the tender sections - approx. 3 million tons over 5 years. Construction commenced 2013. Xi’an to Hefei Double Track Railway � • Key national coal transportation route linking NW China to Anhui Province. Total distance of 957KM of which 250KM is in Shaanxi Province passing through Weinan and Shangluo Regions. • WCC supplying 6 out of 8 Shaanxi Province sections, approx 300,000 to 400,000 tons of cement per year. Project one third completed with another 3 years of construction. Southern Shaanxi Resettlement Project ( 陝南移民搬遷工程 ) . � • Resettling approx. 2.4 million people in Southern Shaanxi between 2011& 2020. Expected cement consumption of 12-14mt. • WCC supplied approx. 750,000 tons of cement to this project in 2013. Relocation target for 2014 is 228,000 people. Baoji to Hanzhong Highway � • Distance of over 150KM within WCC area, passing through Hanzhong Region to Sichuan border. Total consumption from WCC expected up to 1mt. • WCC has won 100% of tender sections of the Hanzhong to Sichuan Border Segment in 4Q13, with 2 more sections still to be tendered. In addition to the above, WCC is currently supplying cement to the following projects: � • Huang-Han-Hou Railway; Lanzhou-Chongqing Railway; Ankang – Pingli Highway. • Tendering to commence for the Ankang - Yangpingyuan Double Track Railway in 1H2014. 7
Environmental Protection Solutions New Revenue Stream – Waste Treatment � Ø Lantian Plant Cement Kiln Waste Sludge Treatment Faciltiy Phase I completed in January 2014. Ø Heat from cement kiln used to burn waste sludge with minimal incremental cost, no additional energy or secondary pollution. Ø Established under auspices of Shaanxi Provincial & Municipal Environmental Protection Administration Department to treat industrial waste from the new Samsung Semiconductor Plant in Xi’an. Ø Phase II to be completed in 2014 leading to total capacity to treat 210,000 tons of waste per year. Ø Estimated profitability of Rmb100m per year at full capacity. Ø Further plans to roll out similar facilities at WCC’s other lines within the next 2-3 years. New Emission Standards – Nitrous Oxide (NOx) and Particulate Matter (PM) � Ø NOx: Most Group plants have had De-Nox equipment installed in 2012 and 2013, with Shangluo Zhenan to be completed in 2014. The equipment reduces Nox emissions by 60% to within expected new emission standards. Ø PM: 3 production lines (Lantian I & II, Shifeng) modified to meet new PM standards in 2013; 2 more (Pucheng I and Zhen’an) to be completed in 1H2014. The rest already meet standards and do not need modification. Ø Most Group plants already meet the new emission standards that are to be implemented in 2015. Remainder to be completed in 2014 ahead of full implementation of new standards on a national level. 8
2014 Prospects Shaanxi � Ø Demand: Southern Shaanxi demand strong & getting stronger with infrastructure demand pick up. Xi-Cheng High Speed & Bao- Han Highway major demand drivers. Xi-Xian New Area development and Xi’an Metro important sources of demand in Central Shaanxi . Demand growth is estimated at approx 10% pa in 2014/15. Ø Supply: One last batch of capacity additions expected in Central Shaanxi in 1H2014. No further additions planned in the province beyond that. Ø New capacity continues to be gradually absorbed by the market and producers expect increased price stability in 2014. Looking for an eventual reversal of oversupply in 2014 and 2015 as demand catches up with capacity. Xinjiang � Ø Significant infrastructure growth yet to commence in Hotan District but capacity growth has been curtailed in 2013. Anticipating further development plans that will lead to demand growth. Hotan District plants remain profitable but at the expense of volumes. Expansion � Ø Xinjiang Yili Plant , 1.5mt & Guiyang Huaxi Plant , 1.8mt to be completed in 2H2014, taking WCC to 27m tons capacity. No further capacity addition plans beyond this. Group Focus for 2014 � Ø Railway and road construction to drive demand in Southern Shaanxi core markets with stronger pricing. Increased price stability in central Shaanxi and the Xi’an metropolitan market, where the Group looks to consolidate its increased market share. Ø Environmental Protection Solutions. Reducing emissions and Waste Sludge Treatment Facilities as a new revenue stream. Ø Focus on conserving cash, reducing gearing and repayment of USD Senior notes in January 2016. 9
West China Cement Limited Shaanxi Province 10
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