Kasen International Holdings Limited. (Stock Code: 496)

Transcription

1 Kasen International Holdings Limited (Stock Code: 496) Corporate Presentation April 2006

2 Disclaimer This information provided to you in this presentation does not constitute, or form part of any offer for subscription of, or solicitation of any offer to subscribe for or to sale any securities of Kasen International Holdings Limited ( Kasen or the Group ) nor shall it form the basis of, nor can it be relied on, in connection with any contract or commitment whatsoever. Accordingly, any decisions in connection with the subscription or purchase of securities of the Group pursuant to or in connection with any offering must be made solely on the basis of the information contained in the Group s publicly available financial statements. Confidentiality This information provided to you in this presentation is given on a confidential basis and must not be passed to, or their contents disclosed to, any person (s) and no copy shall be taken thereof. 2

3 Kasen A leading upholstered furniture and leather products manufacturer in China Purchases and processes raw cowhides and wet blues into finished leather and fully assembled upholstered furniture With vertical integration, successfully sustains its customers through low costs, high quality and fast delivery schedule Largest upholstered furniture manufacturer in China (China National Furniture Association) Largest leather products manufacturer in China (China State Statistical Bureau) 3

4 Contents I. Industry Overview 5 II. Corporate Profile. 10 III. Business Review. 21 IV. Financial Highlights. 28 V. Outlook and Prospect. 34 VI. Investment Highlights

5 Industry Overview 5

6 Solid Industry Fundamentals Global upholstered furniture consumption (US$m) Leather upholstered furniture consumption (US$m) 29, CAGR: 7.7% 32,015 34,751 37, E CAGR: 3.4% 39,001 40,000 6, CAGR: 8.4% 7,472 8,176 8, E CAGR: 6.6% 9,059 9, E 2006E Fabric (including micro-fibers) Leather Source: CSIL Milano - Furniture Industry Research Institute ( CSIL ) E 2006E US Europe Others Source: CSIL Milano - Furniture Industry Research Institute ( CSIL ) Note: Upholstered furniture market has grown steadily over the past few years. Leather upholstered furniture has also grown steadily, with the US and Western Europe being the largest markets 6

7 The Rising Tide of Imports Total US Furniture Imports from China Total EU Furniture Imports from China US$bn bn Source: International trade Administration Source: Eurostats 7

8 Upholstered Furniture Imports Composition F Market Size (US$bn) 3-yr growth rate (%) % of sales % of imports Market Size (US$bn) 3-yr growth rate (%) % of sales % of imports US Imports N/A N/A From China From Others EU imports* N/A N/A From China From Others Source: CSIL Note: * Includes intra-eu trade CSIL forecasts a 20% CAGR for Chinese upholstered furniture exports between 2005 and This implies a 55% and 19% share of US and European imports, respectively in

9 Steep Rise in Outsourcing China emerging as the leading upholstered furniture exporter into the US Rebased to E 2006E US consumption Total imports into the US Imports from China into the US Source: CSIL Milano - Furniture Industry Research Institute ( CSIL ) Note : The key trend in the global upholstered furniture industry has been the steep rise in outsourcing, principally by international brand name furniture companies to Chinese manufacturers. 9

10 Company Profile 10

11 Key Milestones 2000: Commenced full-scale production of leather furniture covers 2003: Commenced full-scale production of automotive leather Largest leather producer and upholstered furniture manufacturer in China : First leather manufacturer in China to move from using hog skins to cowhides 2001: Commenced full-scale production of leather upholstered furniture 2004: Commenced full-scale production of fabric upholstered furniture and furniture covers Higher Point Sofa Industrial Park commenced commercial operations 11

12 Shareholder Structuring Mr. Mr. Zhu Zhu Zhangjin Warburg Pincus PincusFunds ( WP ) ( WP ) Individuals Shareholders¹ Others² Public Public Float Float 32.43% 18.44% 19.11% 0.02% 30.00% Note: 1. Including Cao Haoqiang (1.10%), who is one of the Selling Shareholders 2. Others represent Runyi Wang and Yiu Hoi Yan 12

13 Management Team Mr. Zhu Zhangjin Chairman and Chief Executive Officer Involved in serveral business ventures in the areas of textile, leather processing, garment, trading, etc. Over 18 years of experience in the leather manufacturing industry Vice Chairman of the China Leather Association and the deputy director of the Science and Technology Commission Awarded the Top Ten Outstanding Youths in Zhengjiang Province in 2003 and the Top Ten Businessmen in Zhejing in 2004 Mr. Zhou Xiaosong Executive Director Vice president and General Manager of Leather Manufacturing Division, and the Director of research and development center Work in leather manufacturing industry for over 16 years Mr. Zhu Jianqi Executive Director Vice president and General Manager of Treasury Has about 20 years of experience in the accounting and financial fields Mr. Sun Qiang Chang Non-Executive Director Currently the managing director of Warburg Pincus Asia LLC Has spent about 20 years in the investment banking industry and private equity markets 13

14 Vertically Integrated Platform Completes the full manufacturing process of products from the purchase of raw cowhides and wet blues to the assembly and delivery of final products to customers Leather manufacturing Purchase raw materials Tanning Splitting and coloring Finished leather Flexibility to produce a wide range of products Upholstered furniture Automotive leather Furniture leather Footwear leather Setting and finishing 14

15 Value Chain Provides vertically integrated manufacturing services to end-market retailer customers whom the Group does not compete with Raw materials suppliers Leather tanneries Furniture manufacturers Retailers Vertically integrated platform 15

16 Large Scale Manufacturing Capabilities Production facilities amounted to approximately 1,300,000 s.q.m. Approximate annual capacity Upholstered furniture Furniture leather Automotive leather 9.5 million seats million square feet 30 million square feet GFA of production facilities 957,615 square meter 258,483 square meter 22,507 square meter Note: 1. GFA of production facilities excludes Haining Hengsen with 40,909 square meter gross floor area, that produces wooden parts used for upholstered furniture 2. For illustrative purposes, we have treated every three dinner chairs produced as equivalent to the production of one furniture seat 16

17 Shorter Delivery Cycles The vertically integrated operations enable the Group to complete customer orders for upholstered furniture products faster than others Customer places orders Delivery 1-3 weeks 1-2 weeks 1-2 weeks 3-4 weeks Raw materials procurement Wet blue production Leather setting and finishing Production of - furniture leather; - furniture cover; or - automotive leather Upholstered furniture production Transportation and shipping Based on rolling forecast from customers Upon actual customer orders 17

18 Meeting Customer Needs Speed Stable supply and timely delivery of products Cost Competitive pricing Vertically integrated and large-scale operations Quality Consistent high quality products Flexibility Ability to meet customers changing product and volume demands 18

19 Strong Customer Connections Customers 19

20 Outsourcing Offers Compelling Benefits Higher quality products at lower costs Focus on core competencies Increase importance of time-to-market, time-to-volume and time-to-money Reduce capital investment and overhead costs Increase flexibility 20

21 Business Review 21

22 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Revenue Breakdown by Products Product mix adjustments are continuously made to maintain revenue growth and gross margin and enhance long-term competitiveness For 12 months ended 31 December 0% Upholstered Furniture Furniture Leather Automotive Leather Leather Garments Others 22

23 Growth in Upholstered Furniture 3,000,000 2,500,000 For 12 months ended 31 December 35.5% 2,755,003 (RMB'000) 2,000,000 1,500,000 1,000,000 1,128, % 80.2% 2,033, , ,

24 Growth in Leather Products For 12 months ended 31 December 650, , % 593, , , % 491,839 (RMB'000) 450, , , , % 427, , , ,

25 Market Expansion & Diversification For 12 months ended 31 December (RMB 000) Change(%) United States 2,383,797 1,915, % PRC, Hong Kong 727, , % Russia , % Europe 119,709 89, % Australia 187,543 70, % Others 56,844 7, % Total 3,475,457 2,852, % 25

26 Higher Point Project Name Type Products Status Hainix Sofa 50.5% owned JV Upholstered furniture Operating Wansheng 50.5% owned JV Upholstered furniture (specializing in fabric) Operating Hidea 50.5% owned JV Upholstered furniture (likely to add wooden accessories in the future) Operating Liema 50.5% owned JV Upholstered furniture (specializing in dining chairs) Operating Ou Yi May 50.5% owned JV Upholstered furniture Operating Home Point Wholly owned Upholstered furniture (specializing in sofa cover) Trail run since May 2005 Libero Wholly owned Upholstered furniture Not yet operating Home Craft Wholly owned Upholstered furniture Facilities not built Note: As at 31 December, 2005, six out of eight factories formally commenced operation. The total sales amounted to RMB [925,916,000] in 2005 (2004: RMB [265,722,000]), representing an increase of [248.5]%. 26

27 Higher Point Project (Cont.) Great achievement in developing customers, and became an important part of Group s operation Higher Point Turnover Growth (RMB'000) 950, , ,916 Has aroused enormous interest of major overseas furniture manufacturers and will become the driving force for the Group s future expansion 750, , , , % 350, , , ,000 50, For 12 months ended 31 December 27

28 Financial Highlights 28

29 Financial Highlights 2005 For 12 months ended 31 December (RMB 000) 2004 Change (%) Turnover 3,475,457 2,852, % Gross Profit 548, , % Gross Margin (%) 15.78% 15.55% % Net Profit 265, , % Net Margin (%) 7.65% 7.91% -0.26% Basic Earnings per Share RMB 41cents RMB 47 cents % 29

30 Strong Revenue Growth Momentum For 12 months ended 31 December 4,000,000 3,500, % 3,475,457 (RMB'000) 3,000,000 2,500,000 2,000,000 1,500,000 1,386, % 2,135, % 2,852,391 1,000, ,

31 Strong Net Income Growth For 12 months ended 31 December 300,000 (RMB'000) 250, , , , % 13.23% 225, % 265, , ,706 50,

32 Financial Ratio For 12 months ended 31 December ROE 11.56% 18.81% Current Ratio 1.38x 0.94x Total Debt/ Equity 56.2% 131.1% Days of Receivable Days of Inventory

33 Share Data Based on the closing price as of 19 April 2006 Share Price 52-week high/low Final Dividend (for 12 months ended 31 December 2005) Total Issued Shares Basic Earnings per Share (for 12 months ended 31 December 2005) P/E Ratio Market Capitalization HK$ HK$ 2.900/1.900 HK$ 7.58 Cents 1,014,045,369 shares RMB 41 cents 6.77 X HK$ 2,712,571,362 33

34 Outlook & Prospect 34

35 Dynamic and Growth-Oriented Strategy Goals: Solidify leading position as the largest leather products manufacturer in China Become the world s largest producer to upholstered furniture products and automotive leather Products expansion Fabric furniture and covers Automotive leather Footwear leather Outdoor leisure products Upholstered furniture UK Markets expansion Australia Automotive leather Japan China Production facilities expansion 35

36 Strong Capacities Expansion with a Low Cost Higher Point is the investment for future growth - to create an upholstered furniture manufacturing park in China to attract leading furniture companies globally Acquired the land for the Higher Point Project on favorable terms and price and most of the investments to increase production capacity completed in previous years up to Different manufacturing plants, different customers and products Confidentiality of customers protected Higher Point - World s premier upholstered furniture manufacturing park Production space: 741,760 s.q.m Annual capacity: 4.2m seats The production facilities are designed for multiple purposes and can easily be transform to other products. Ability to provide customers with a guaranteed and stable supply of quality products Domestic partnerships with local entrepreneurs Reduces competition 36

37 Investment Highlights 37

38 Investment Highlights Solid industry fundamentals coupled with steady outsourcing growth Vertically integrated and large-scale manufacturing platform Strong customer relationships Dynamic and growth-oriented strategy Experienced management and sophisticated financial sponsor Solid financial track record with stable dividend payout in the future 38

39 Thank you! 39