(UPEC 1216 TT) August 2008
Company Background • Founded in 1967 • Market capitalization US$4.4bn* • Taiwan’s largest food manufacturer with the leading retail and distribution business in Taiwan. • Strong presence in the beverage and instant noodles product lines in China market. • Targeted-Asian-markets core businesses: Food, Retail, Distribution and Trading • Continue divesting the non-core businesses. * Market capitalization was based on the closing price as of August 5, 2008 :US$1=NT$30.7
Major Entities and Selected Brands Major Entities & Selected Brands • Taiwan Food Vietnam • China Uni-President Enterprises Thailand Corp. • Southeast Asia Indonesia Philippines Retail Trading Investments Financials • PCSC (45.4%) Nan Lien International PIDC(62.5%) President • Presicarre Corp.(40%) Corp.(100%) Securities(31.8%) • Investment arm of the • PCSC is the retail arm • Importer, distributor and agent of consumer Group with the with the investment in the products including investment in LTPS TFT retail chains, including Anheuser-Busch beer, LCD,shopping mall and Starbucks,Cosmed,Mister Donuts and etc. Maxwell House Coffee biotechnology. and Chupa Chups Lollipops • Presicarre Corp. is Taiwan’s largest hypermart chains. 3
Core Competencies 1.Diversification in the single industry : the Diversification in the single industry : the 1. all- -weather F&B company weather F&B company all 2.Multi- -brand strategy brand strategy 2.Multi 3.Supply chain vertical integration: from food 3.Supply chain vertical integration: from food manufacturing, distribution, to retail manufacturing, distribution, to retail businesses. businesses.
The Business Model (I) Organization Organization Capability Capability Profit Profit Maximization Maximization Brand Brand Marginal Marginal Utility Utility Added Value Added Value Constantly enhancing the organization capability, marginal Constantly enhancing the organization capability, marginal utility, and added value to maximize brand value and utility, and added value to maximize brand value and profitability. profitability.
The Business Model (II) Operational Risk Factors : Operational Risk Factors : Operational Risk Factors : 1. Price fluctuations in raw materials 1. Price fluctuations in raw materials 1. Price fluctuations in raw materials 2. The macro-economic growth cycle 2. The macro The macro- -economic growth cycle economic growth cycle 2. 3. Consumer behaviors & preference 3. Consumer behaviors & preference 3. Consumer behaviors & preference Reaction Principles : Reaction Principles : Reaction Principles : 1.Remain the pricing setter and optimize the supply chain 1.Remain the pricing setter and optimize the supply chain 1.Remain the pricing setter and optimize the supply chain efficiency to provide the value- -added products/services and added products/services and efficiency to provide the value efficiency to provide the value-added products/services and and to be against the price fluctuations in raw materials. and to be against the price fluctuations in raw materials. and to be against the price fluctuations in raw materials. 2.International presence to reduce the impact from the single market. rket. 2.International presence to reduce the impact from the single ma 2.International presence to reduce the impact from the single market. 3. Sensitivity in the changes of consumer behaviors and the 3. Sensitivity in the changes of consumer behaviors and the 3. Sensitivity in the changes of consumer behaviors and the expertise in product & brand portfolio management. expertise in product & brand portfolio management. expertise in product & brand portfolio management. 5
The Business Model (III) ： One core + four pillars One core + four pillars Strategy ： Strategy Trading & Trading & Manufacturing+ Trading & Manufacturing+ Manufacturing+ Distribution Distribution R&D Distribution R&D R&D Brand Brand Management Management Strategic Strategic Strategic Retail Retail Retail Acquisitions Acquisitions Acquisitions Operation Operation Operation & Alliances & Alliances & Alliances
Our Visions Vision: The leading Taiwan-based F&B and Retail company with the strong presence in the Asian market. Great China leader Asia leader leader Taiwan leader Great China Asia Great China leader Asia leader Taiwan leader Speed up the presence in the integrated Asian market (including South-eastern Asia, India, 10+6 ” and Middle East areas) : “ 10+6
Market Share in Taiwan 2007 Category Market Share Yogurt Drink Dairy Products: 48.0% Fresh Milk 29.8% Flavored Milk 47.5% Non-carbonated RTD Tea 46.7% Drinks: Juice 16.5% 47.4% Instant Noodles • Successfully target the diverse consumer groups through the multi-brand strategy • Competitive R&D team and marketing capability to remain the strong product positions in the market.
Taiwan Food Sales Break-down NT$millions YOY=7.4% 50,000 15,000 YOY=7.4% 46,026 YOY=15.3% 42,845 40,252 6% 12,247 7% 9% 40,000 12,000 10,615 9% 10% 10% 10% 30,000 9,000 10% 31.5% 35% 42% 20,000 6,000 37% 10,000 42.5% 40% 3,000 33% 37% - - 2005 2006 2007 2007Q1 2008Q1 Dairy and Beverage Group Provision Group Tea, dairy products, coffee, Food stuff, edible oil, flour juice, bottled water, etc and feeds Other Group Instant Foods Group Frozen foods, meat products, Instant noodles ice cream, seasonings, etc Health Foods Group Health food products and bakery
UPEC Operation Result (I) • Result has been improving through the restructuring plan led by the UPEC new management team. 23.27% 25.00% 25.00% 22.65% 22.27% 22.09% 20.55% 20.00% 20.00% 20.06% 18.22% 15.00% 15.00% 10.00% 8.00% 10.00% 6.26% 4.91% 5.56% 5.00% 4.85% 5.00% 3.71% 3.60% 3.19% 2.34% 1.86% -0.28% 0.00% 0.00% 2007Q1 2008Q1 2004 2005 2006 2007 -5.00% Gross Margin OP Margin ROE
UPEC Operation Result (II) NT$millions 2006 2007 2008 Q1 Amount % Amount % Amount % Consolidated Sales 257,667 288,592 73,360 Parent Sales 42,845 100 46,026 100 12,247 100 Gross Margin 9,971 23.3 10,165 22.1 2,517 20.6 Operating Income 1,588 3.7 1,659 3.6 594 4.8 Pre Tax Net Income 3,739 8.7 11,022 23.9 1,274 10.4 Net Income 3,607 8.4 11,017 23.9 1,178 9.6 33,541 35,554 35,554 Common Shares 1.08 3.10 0.33 EPS (after tax) 5.14% 13.03% 1.36% ROA 8.00% 20.06% 1.86% ROE
UPEC Operation Result (III) • 2007~2008 Gain on disposal of non-core investments (NT$millions) (Non-operating Income and Gains) Profit realized* Divested Accuray (code: ARAY) 2,000 2007 Q1 6mn shares through IPO in Nasdaq Divested Allianz President Life Insurance 200 2007 Q2 A JV with Allianz 2007 Divested Mospec Semiconductor 391 2008 Divested Mospec Semiconductor 208 Holding down to 5.97%** * Attributed to UPEC ** Till April 29, 2008
Key Investments in Taiwan Food Industry • Acquired 31% holdings in 2004 Kuang Chuan • Taiwan’s 3 rd largest dairy products manufacturer with around 27% market share in fresh and flavored milk. • One of Taiwan’s leading beverage manufacturers • Operates the 3 rd largest Taiwan-based convenience store chain under “Hi-Life” brand. Wei Li Food • Acquired 32% holdings in 2007 • Taiwan’s 2 nd largest instant noodles manufacturer with around 20% market share. • 38% holding TTET Union • Taiwan’s largest soybean crushing manufacturer
Leading Retail Business in Taiwan (I) President Chain Store Corp. (UPEC owned 45.4% ) President Chain Store Corp. (UPEC owned 45.4% ) • The largest Taiwan-based convenience store chains under the Taiwan area permanent licensing agreement with 7-Eleven , with various retail and distribution businesses in Asia. • Listed on Taiwan Stock Exchange with market capitalization US$2.8bn*, cash dividend yield 2~3% 7,000 Taiwan CVS Sales 6,000 5,000 US$mn 51.7% 4,000 3,000 2,000 1,000 - 2004 2005 2006 2007 Total 5,024 5,470 5,955 6,074 PCSC 2,483 2,874 3,067 3,140 Source ： Taiwan Ministry of Economic * Market capitalization based on closing price as of August 5, 2008, US$1=NT$30.7
Leading Retail Business in Taiwan (II) President Chain Store Corp. (UPEC owned 45.4% ) President Chain Store Corp. (UPEC owned 45.4% ) • Strengthened the dominant position after Niko Mart Chain exited the market in 2007 • Operated the total number of 4,770 “7-Eleven” convenience chain stores in Taiwan as of March 31th, 2008. • Signed the Shanghai area licensing agreement with “7-Eleven”to operate convenience store chains. Number of Convenience Stores in Taiwan 10,000 8,000 6,000 4,000 48.2% 50.7% 2,000 0 2005 2006 2007 Niko Mart Chain 360 300 Exited OK Chain 873 840 818 Hi-Life Chain 1,160 1,261 1,296 Family Mart Chain 1,851 2,012 2,228 7-ELEVEN Chain 4,037 4,385 4,705
Leading Retail Business in Taiwan (III) President Coffee Corp. (UP Group owned 50%) President Coffee Corp. (UP Group owned 50%) • 50% Joint Venture with the U.S based Starbucks Coffee • Licensing Agreement with Starbucks Coffee to operates in Taiwan and in Shanghai, Jiangsu, and Zhejiang areas in China. Sales Number of Stores US$mn Taiwan / China Taiwan / China 120 250 214 97 100 200 80 140 150 62 60 100 40 50 20 0 0 2004 2005 2006 2007 2004 2005 2006 2007 2008 Mar
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