LUZHOU BIO-CHEM TECHNOLOGY LIMITED A Mouth-Watering China - PowerPoint PPT Presentation

LUZHOU BIO-CHEM TECHNOLOGY LIMITED A Mouth-Watering China Consumption Story Corporate Presentation and 3QFY17 Results November 14, 2017

Contents Business Overview Financial Highlights Growth Strategies 2

Business Overview 3

Operating Climate The Group is facing with higher electricity cost due to constant upgrading of power generation plants to meet the environmental air pollution control introduced by the central government. The Group expects the market conditions in the coming months to be challenging due to stiff competition among the corn sweetener players in the industry caused by over capacity of the corn sweetener and hence downward pressure on all its corn refining products. Higher staff cost and the average raw corn material prices are expected to affect the profit margins of the Group The changes in the government policies and hence the uncertainty for the industry will also be challenging to the Group 4

Operating Climate The USDA estimates that corn stockpiles in China are projected to reach 90.6 million metric tons this year Source: Bloomberg, http://www.bloomberg.com/news/articles/2015-11-03/drought-turning-china- 5 hope-for-record-crop-into-shrunken-harvest

Price Comparisons to Cane Sugar Cane sugar pricing in Nanning City, China RMB/tonnes 8,000 6,500 5,000 3,500 2,000 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Oct-07 Apr-08 Jul-08 Oct-08 Apr-09 Jul-09 Oct-09 Apr-10 Jul-10 Oct-10 Apr-11 Jul-11 Oct-11 Apr-12 Jul-12 Oct-12 Apr-13 Jul-13 Oct-13 Apr-14 Jul-14 Oct-14 Apr-15 Jul-15 Oct-15 Apr-16 Jul-16 Oct-16 Apr-17 Jul-17 High price of cane sugar has resulted in food & beverage manufacturers turning to alternative sweeteners For comparison, the prices of sweetener products supplied by Luzhou (as at September 2017) are as follows: Fructose: RMB 2,455/tonne Dextrose: RMB 2,207/tonne High Maltose Syrup: RMB 2,117/tonne 6 Source: Company, 中国昆商糖网

Price Trends RMB/tonnes (excluding taxes) Corn Sweetener Corn Starch By-Products Corn 3,200 3,000 2,800 2,600 2,400 2,257 2,200 2,000 1,800 1,566 1,600 1,400 1,200 1,296 1,000 Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- 15 15 15 15 15 15 16 16 16 16 16 16 16 16 16 16 16 16 17 17 17 17 17 17 17 17 17 Source: Company 7

Financial Highlights 8

9MFY17 Financial Highlights Group revenue increased by 9.0% y-o-y Gross profit margin of 9.6%, 8.6% lower y-o-y; Net profit of RMB 0.8 million, increased by 102.6% compared with net loss of RMB 30.9 million in 9MFY16 Net profit margin of 0.1%, increased significantly compared with net loss margin of 2.2% in 9MFY16 Cash and cash equivalents of RMB 265.5 million as at 30 September, 2017 (RMB 301.2 million as at 31 December, 2016) 9

Income Statement Highlights y-o-y q-o-q y-o-y RMB’mil 3QFY17 9MFY17 Chg (%) Chg (%) Chg (%) Revenue 513.3 0.7 1,509.4 9.0 0.9 Gross Profit 36.5 (25.9) 144.4 (1.0) (17.3) (Loss)/Profit Before Tax (34.5) (1,231.0) 1.4 105.1 (186.2) Net (Loss) /Profit (34.5) (839.0) 0.8 102.6 (186.9) Gross Profit Margin 7.1% (26.8) 9.6% (8.6) (18.4) (6.7%) 0.1% Net (Loss)/Profit Margin (857.1) 104.5 (185.9) 3Q: Three months ended September 30 9M: Nine months ended September 30 10

Revenue RMB’mil 4000 3500 1063 810 3000 618 940 2500 935 520 880 751 2000 463 767 538 656 1500 1034 442 901 513 842 509 695 1000 684 565 508 430 873 500 809 798 647 605 571 488 445 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 1Q Revenue 2Q Revenue 3Q Revenue 4Q Revenue 11

Revenue by Product Categories 9MFY16 9MFY17 Animal feeds, 0.0% Others, Animal 0.1% feeds, 0.7% Corn Others, 0.3% refining, Corn 99.9% refining, 99.0% Total Revenue: RMB 1,509.4 mil Total Revenue: RMB 1,384.3 mil Y-o-y change Y-o-y change Y-o-y change in Gross profit Y-o-y change in in revenue in sales weighted average margin gross profit margin volume selling price Corn refining 10.0% 15.1% (2.1%) 9.5% (11.2%) Animal feed (100.0%) (100.0%) NA - NA 12

Revenue by Industry 9MFY17 9MFY16 Food, 32.9% Others, 30.1% Others, 29.8% Food, 31.9% Fermentation Beverage, Beverage, , 17.7% 19.3% 24.0% Fermentation, 14.3% Total Revenue: RMB 1,509.4 mil Total Revenue: RMB 1,384.3mil 13

Net Profit/EBITDA RMB’mil 195.7 200.0 172.6 162.5 146.0 144.0 125.6 104.8 92.7 100.0 FY13 54.5 50.5 40.1 34.5 28.4 14.6 13.9 1.3 0.8 -14.3 0.0 6.0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 9MFY17 -80.9 -100.0 -113.8 -200.0 -300.0 -339.8 -400.0 Net Profit EBITDA 14

Balance Sheet Highlights As at As at RMB’mil Chg (%) end 9MFY17 end FY16 Current Assets 652.1 779.5 (16.3) - Cash & Cash Equivalents 265.5 301.2 (11.9) - Inventories 146.2 175.6 (16.7) - Trade and Other Receivables 239.5 301.9 (20.6) Total Assets 1,387.4 1,483.2 (6.5) Current Liabilities 638.5 670.7 (4.8) - Trade and Other Payables 332.7 332.7 - - Short Term Borrowings 298.5 330.0 (9.5) Long Term Borrowings 579.9 640.0 (9.4) Total Liabilities 1,257.7 1,348.5 (6.7) 15

Balance Sheet Highlights As at As at RMB’mil Chg (%) end 9MFY17 end FY16 Inventory Turnover Days 40 32 (20.0) Receivables Turnover Days 35 33 (5.7) Payables Turnover Days 47 47 - Debt to Equity Ratio # 7.20 6.77 (6.0) Price to Book Value* 0.66 (3.0) 0.64 # Total interest bearing loans / Total equity * Based on share price of RMB 0.14 as at October 17, 2017 16

Cash Flow Statement Highlights RMB’mil 9MFY17 9MFY16 Chg (%) Net Cash Generated from Operating Activities 114.9 120.7 5.0 Net Cash (Used in) Investing Activities (106.8) (18.9) (82.3) Net Cash (Used in)/Generated from Financing Activities 78.5 (118.8) (251.3) Net (Decrease)/Increase in Cash & Bank Balances 86.6 (17.0) (119.6) Cash & Bank Balances at Beginning of Period 81.9 155.2 89.5 Cash & Bank Balances at End of Period 168.5 138.2 (18.0) 17

Growth Strategies 18

Growth Strategies Focusing on products where the Group has pricing advantages as a high volume producer (e.g. Sorbitol), and high margin products such as fructose, high maltose syrup, maltitol, etc. Cost savings from suspension of unprofitable products Conserving cash for the uncertainties due to over capacity of corn sweetener products Consolidation of production facilities and upgrading to flexible production lines, to achieve higher production efficiency, capacity, and economies of scale Planned expansion into Xinjiang in 2018 (may be further delayed due to unfavourable economic climate) to take advantage of untapped demand for fructose supply in that region, from major customers such as Coca-Cola and Pesi Cola 19

Safe Harbour Statement This presentation may contain forward looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward looking statements as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from other companies, shifts in customer demands, customers and partners, changes in operating expenses, including employee wages, benefits and training, governmental and public policy changes and the continued availability of financing in the amounts and the terms necessary to support future business. You are cautioned not to place undue reliance on this presentation and the information contain therein, which are based on current view of management on future events. Without prejudice to or derogating from the generality of the foregoing, no representation or assurance is given by Luzhou Bio-chem Technology Limited that this presentation contains all information that an investor may require. To the extent permitted by applicable law, by Luzhou Bio- chem Technology Limited or its related persons (and their respective directors, associates, connected persons and/or employees) shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) arising from the reliance or use of the information contain in this presentation. Investors are advised to make their own independent evaluation from this presentation, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as the legal, business, financial, tax and other aspects as investors may regard as relevant.

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