TPCC

Taiwan Prosperity Chemical Corporation

2Q/2014

Investors’ Conference

August 18, 2014

TPCC

Disclaimer

The forward-looking statements contained in this presentation are

subject to risks and uncertainties and actual results may differ

materially from those expressed or implied in these forward-looking

statements.

Taiwan Prosperity Chemical Corporation makes no representation or

warranty as to the accuracy or completeness of these forward-looking

statements and nor does Taiwan Prosperity Chemical Corporation

undertake any obligation to update any forward-looking statements,

whether as a result of new information or future events.

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Agenda

• Company Snapshot

• 2Q/2014 Financial Results

• Business Overview

• Capital Expenditure

• 2H/2014 Business Outlook

3

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Taiwan Prosperity Chemical Corp.

Established: May, 1991

Headquarter: Taipei, Taiwan

IPO in TWSE: October, 2007

Paid in Capital: NT$ 2,920 million

Market Cap:

(as of Aug/5/2014 , NTD 26.85 per share) NTD 7,840 million

(USD/NTD=29.995) ( USD 261 million )

Production facility: Lin Yuan, Kaohsiung, Taiwan

Employees: 221

(as of Jun/30/2014)

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Production Facility

Kaohsiung

(TPCC)

Beijing

Shanghai

1.Cumene

(460 KTA)

2.Phenol/Acetone

(360 KTA/221 KTA)

3.Bisphenol-A

(107 KTA)

4.Anone

(150 KTA)

5.MAN

(40 KTA)

6.H2-I

(7K Nm3/hr)

H2-II

(8.1K Nm3/hr)

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Agenda

6

• Company Snapshot

• 2Q/2014 Financial Results

• Business Overview

• Capital Expenditure

• 2H/2014 Business Outlook

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2Q/2014 Statement of Comprehensive Income

(In NT millions except otherwise noted) 2Q/14 1Q/14 2Q/13 QoQ % YoY %

Net Sales 6,497 6,116 5,922 6.2 9.7

COGS (6,415) (6,044) (5,882) (6.1) (9.1)

Gross Profit 82 72 40 13.9 105.0

Gross Margin 1.3% 1.2% 0.7% 0.1 0.6

Operating Expense (127) (115) (144) (10.4) 11.8

Operating Income (45) (43) (104) (4.7) 57

Operating Margin -0.7% -0.7% -1.8% 0 1.1

Non-operating Income/(Expense) (45) (18) (13) (150.0) (246.2)

Income before Tax (90) (61) (117) (47.5) 23.1

Income Tax Benefit/(Expense) 15 10 12 50.0 25.0

Net Income (75) (51) (105) (47.1) 28.6

Net Margin -1.2% -0.8% -1.8% (0.4) 0.6

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2Q/2014 Statement of Comprehensive Income

8

(In NT millions except otherwise noted) 2Q/14 1Q/14 2Q/13 QoQ % YoY %

Net Income (75) (51) (105) (47.1) 28.6

Other Comprehensive Income(Loss) 90 (51) 38 276.5 136.8

Total Comprehensive Income(Loss) 15 (102) (67) 114.7 122.4

Basic EPS (NT$) (0.26) (0.17) (0.36) (52.9) 27.8

ROE (%) -4.0% -3.2% -4.7% (0.8) 0.7

ROA (%) -0.3% 0.0% -2.1% (0.3) 1.8

Free Cash Flow(1) 478 (315) 27 251.7 1,670.4

(1) Free Cash Flow = Operating Cash Flow - CAPEX - L/T Investment

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1H/2014 Statement of Comprehensive Income

9

(In NT millions except otherwise noted) 1H /2014 1H /2013 YoY %

Net Sales 12,613 11,232 12.3

COGS (12,459) (11,132) (11.9)

Gross Profit 154 100 54.0

Gross Margin 1.2% 0.9% 0.3

Operating Expense (242) (256) 5

Operating Income (88) (156) 43.6

Operating Margin -0.7% -1.4% 0.7

Non-operating Income/(Expense) (63) (26) (142.3)

Income before Tax (151) (182) 17.0

Income Tax Benefit/(Expense) 25 23 8.7

Net Income (126) (159) 20.8

Net Margin -1.0% -1.4% 0.4

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1H/2014 Statement of Comprehensive Income

10

(In NT millions except otherwise noted) 1H /2014 1H /2013 YoY %

Net Income (126) (159) 20.8

Other Comprehensive Income(Loss) 39 90 (56.7)

Total Comprehensive Income(Loss) (87) (69) (26.1)

Basic EPS (NT$) (0.43) (0.54) 20.4

ROE (%) -4.0% -4.7% 0.7

ROA (%) -0.3% -2.1% 1.8

Free Cash Flow(1) 163 (578) 128.2

(1) Free Cash Flow = Operating Cash Flow - CAPEX - L/T Investment

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Sales/ GM & PAT

11

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

Sales 6,238 6,464 6,489 6,235 5,310 5,922 5,588 5,759 6,116 6,498

PAT 194 -51 -124 -118 -53 -105 -233 -262 -51 -75

GM 6.0% 1.5% 0.1% 0.3% 1.1% 0.7% -2.7% -2.7% 1.2% 1.3%

-5%

0%

5%

10%

15%

20%

25%

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000 GM NT$,M

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2Q/2014 Statement of Cash Flow

12

(In NT millions except otherwise noted)2Q / 14 1Q / 14 2Q / 13

Cash Flows From Operating Activities

Net income (90) (61) (117)

Adjustments to reconcile income

to net cash provided by operating activities235 (172) (130)

Net cash generated from operating activities 145 (233) (247)

Cash Flows From Investing Activities (54) (75) (97)

Cash Flows From Financing Activities (232) 450 216

Net Increase In Cash And Cash Equivalents (141) 142 (128)

Cash And Cash Equivalents, Begining Of Period 990 848 399

Cash And Cash Equivalents, End Of Period 849 990 271

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1H/2014 Statement of Cash Flow

13

(In NT millions except otherwise noted) 1H / 14 1H / 13

Cash Flows From Operating Activities

Net income (151) (182)

Adjustments to reconcile income

to net cash provided by operating activities63 (594)

Net cash generated from operating activities (88) (776)

Cash Flows From Investing Activities (129) (149)

Cash Flows From Financing Activities 218 755

Net Increase In Cash And Cash Equivalents 1 (170)

Cash And Cash Equivalents, Begining Of Period 848 441

Cash And Cash Equivalents, End Of Period 849 271

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Solid Financial Structure

28 26 24

19 27

33

0

5

10

15

20

25

30

35

2007Y 2008Y 2009Y 2010Y 2011Y 1H/12

2.26

1.02

1.72 1.99

2.08

1.28

0.00

0.50

1.00

1.50

2.00

2.50

2007Y 2008Y 2009Y 2010Y 2011Y 1H/12

34% 43%

51% 45%

38%

52%

0%

10%

20%

30%

40%

50%

60%

2007Y 2008Y 2009Y 2010Y 2011Y 1H/12

24.8

17.1 19.5

31.1 29.8

24.1

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2007Y 2008Y 2009Y 2010Y 2011Y 1H/12

Current Ratio

Debt Ratio (L/A)

Book Value per share

1.99

2.08 1.07

1.25

1.36

0.00

0.50

1.00

1.50

2.00

2.50

2010 2011 2012 2013 1H/2014

45% 38%

45%

58%

59%

0%

20%

40%

60%

80%

2010 2011 2012 2013 1H/2014

31.1 29.8 23.5 21.6

21.3 15

20

25

30

35

2010 2011 2012 2013 1H/2014

14

58.5%

-1.2%

2.5%

30.6% 29.0%

35.2% 36.1% 29.6%

26.3% 25.5%

23.6%

25.9%

-20%

0%

20%

40%

60%

80%

2009 2010 2011 2012 2013 1H 2014

Net Debt/ Equity Debt/ Asset

Leverage Ratios

(%)

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Agenda

• Company Snapshot

• 2Q/2014 Financial Results

• Business Overview

• Capital Expenditure

• 2H/2014 Business Outlook

15

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700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6

2010 2011 2012 2013 2014

Year - Month

CPC Propylene/Benzene (USD/MT)

Propylene

Benzene

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1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200

2,300

2,400

2,5001 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6 7 8 9

10

11

12 1 2 3 4 5 6

2010 2011 2012 2013 2014

Year、Month

BPA

Phenol

Anone

Phenol/BPA/Anone monthly average Price (USD/MT)

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Globel Phenol Capacity & Demand Outlook

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Unit：KT/YR2012

(A)

2013

(A)

2014

(F)

2015

(F)

Phenol Capacity 10,828 11,496 12,101 12,914

Bisphenol A 4,142 4,076 4,269 4,471

Phenolic Resins 2,698 2,739 2,832 2,966

Anone 958 996 1,029 1,117

Others 1,154 1,088 1,122 1,140

Phenol Demand 8,952 8,899 9,252 9,694

Capacity - Demand 1,876 2,597 2,849 3,220

Utilization Rate, % 83% 77% 76% 75%

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China Phenol Capacity & Demand

Source: TPCC

Capacity Annual Growth Rate: 23.3% Demand Annual Growth Rate: 6.55%

19

(Unit : MT)

0

500

1,000

1,500

2,000

2,500

3,000

2012 2013 2014 2015

Capacity Demand

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TPCC Sales Volume in Recent 5Years

20

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2009 2010 2011 2012 2013 1H/2014

2009 2010 2011 2012 2013 1H/2014

486,148 587,477 601,101 624,090 527,039 289,791

(Unit : MT)

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Sales Destination of 1H/2014 vs 1H/2013

21

0%

10%

20%

30%

40%

50%

60%

Taiwan India NEA China SEA USA M-East others

1H/2014

1H/2013

Taiwan India NEA China SEA USA M-East others

1H/2014 51% 15% 12% 7% 6% 5% 2% 1%

1H/2013 54% 18% 8% 8% 4% 2% 4% 1%

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MAn Series Production Capacity

2014* 2012 20XX*

80 KTA 40 KTA

BDO eq. Expansion

68 KTA 34 KTA

MAn Expansion

*: TPCC estimation

22

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Agenda

• Company Snapshot

• 2Q/2014 Financial Results

• Business Overview

• Capital Expenditure

• 2H/2014 Business Outlook

23

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Capital Expenditures NT$ M

3,065

539 539

586

30 49

0

500

1,000

1,500

2,000

2,500

2009 2010 2011 2012 2013 2014E

24

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Agenda

• Company Snapshot

• 2Q/2014 Financial Results

• Business Overview

• Capital Expenditure

• 2H/2014 Business Outlook

25

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2H/2014 Business Outlook-1

• Benzene

1. Supply from Asia will be increased in 2H/2014 due to 2 million tons new capacity put in service.

2. Benzene price in 2H/2014 shall be lower gradually due to benzene surplus in Asia.

• Propylene

1. The supply will be improved since Aug,2014, due to CPC completed turn around for new Naphtha Cracker and RFCC.

2. TPCC will reduce import quantity of propylene in 2014 compared to 2013.

3. New process Propane DeHydrogen unit in China shall produce propylene from Q3/2014 to stabilize propylene price.

26

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2H/2014 Business Outlook-2

27

• Phenol Chain Market – U.S. and Europe economics recover, and China remained stable.Demand will be picked up gradually in 2014 compared to last year. There will be one new plant to be on stream in Q4 2014 in Asia, one existing plant will be permanent shutdown in Q3 2014, the impact for 2014 will not be so much, capacity utilization will maintain around the same level as 2013.

• Corporate strategy – To cope with threats in raw material and market trends, heavy attention will be paid to achievement of best possible margin rather than highest production. Reduce operation cost by flexible operation lines.

• Business strategy – Our strategy is to increase our sales to different countries/areas to reduce the dependence on China market. Utilized equipment leasing strategies to maintain revenue growth and acquired major new series of products (BDO/THF/GBL).

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Thank You

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