Improve the World with Technology. Investor Presentation September 2009

Transcription

1 Improve the World with Technology Investor Presentation September 2009

2 Safe Harbor Statement This presentation may contain forward-looking statements and management may make additional forward-looking statements in response to your questions. Such written and oral disclosures are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of All statements other than statements of historical fact in this presentation are forward-looking statements, including but not limited to, the Company s ability to raise additional capital to finance the Company s activities; the effectiveness, profitability, and the marketability of its products; the period of time for which its current liquidity will enable the Company to fund its operations; the Company s ability to protect its proprietary information; the Company s ability to secure raw material supplies to support its production plans; the Company s ability to operate its plants efficiently; general economic and business conditions; the volatility of the Company s operating results and financial condition; the Company s ability to execute is expansion plans; the Company s ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the Company s filings with the Securities and Exchange Commission. Although we believe our expectations expressed in such forward looking statements are reasonable, we cannot assure you that they will be realized. Investors are cautioned that such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the anticipated results, and therefore we refer you to a more detailed discussion of the risks and uncertainties in the Company s filings with the Securities & Exchange Commission. The forward-looking statements contained in this presentation are made only of this date, and China XD Plastics is under no obligation to revise or update these forward-looking statements. 2

3 Who We Are China XD China XD Value Value Creator Creator of of the the Supply Supply Chain Chain Oil Refineries Develops, manufactures, and distributes modified plastics, primarily for the use in the exterior and interior trim and in the functional components of more than 30 automobile models. Plastic Resin Suppliers Modified Plastics Manufacturers Auto Makers Plastic Auto Parts Manufacturers 3

4 Corporate Overview Largest Chinese Manufacturer of Modified Plastics for automobile applications in China Key Facts Headquartered in Harbin, China Total usable area of 336,400 square feet Annual production capacity of 70,000 tons with 19 operating production lines 396 full time employees Products Modified Polypropylene, modified ABS, modified Nylon, alloy plastic, engineering plastics and environment friendly plastics, 129* of which are certified by auto makers Applications and Customers Mainly used in automotive ti exterior and interior i trim and functional components, as well as industrial plastic parts and components used in large-scale oil fields, mining machinery, vessel propulsion system, high-speed trains, aerospace etc. End users include China FAW, the largest auto maker in China, Brilliance Auto, Hafei Auto, and among other car manufacturers in China. * as of June

5 Products and Applications Over 90% of Products are Modified Plastics for Automobiles End Applications Interior parts and components (Such as Instrument board, glove box, etc.) Product Portfolio Divided id d into 6 Categories Modified Polypropylene Modified ABS Modified Nylon Alloy Plastics Environment-friendly plastics Engineering Plastics Special engineering plastics (under development) Exterior parts and components (Such as door mirror, front and rear bumpers, etc.) Function components (Such as air conditioner s shell, engine cover, etc.) 5

6 Sample of End-Users 6

7 Capital Market Summary OTCBBSymbol CXDC Share Price (previously closed on 09/01/09) $5.85 Market Capitalization $231.4 MM Shares Outstanding (fully diluted)* 39.6 MM Net Revenues (TTM) $100.6 MM Gross Profit (TTM) $21.6MM Net Income (TTM) $15.5 MM Earnings per Common Share (fully diluted) $0.39 P/E (TTM) 14.9X Fiscal Year End December 31 * Revenue, Gross Profit, Net income and P/E(TTM) / Shares Outstanding and EPS (As of June 30, 2009) 7

8 Key Milestones 19 production lines in use, annual capacity reached 70,000 tons 7 Jan 2009 Listed in the US Capital Market 6 Dec 2008 Xinda Macromolecule Material Research Institute was established 5 Nov 2007 Capacity more than tripled and reached 25,000 tons 4 Jan 2006 First 2 production lines were launched with annual capacity of 7,000 tons 3 Jan 2005 Harbin Xinda Macromolecule Material Inc. was founded 2 Sep 2004 Harbin Xinda Nylon factory, the predecessor of the Company was founded 1 Jul

9 Market Opportunity Automobiles China Automobile Production ( in million) China Automobile Sold (in million) Production Sold % 23.3% 16.4% 10.6% E 35% 30% 25% 20% 15% 10% 5% 0% % 23.3% 21.9% 7.9% E 40% 35% 30% 25% 20% 15% 10% 5% 0% Key Drivers: Rising income and growing affluence of middle class in China Growing Consumption of automobiles in China Economic Policy stimulating the consumption of automobiles in China Source: National Bureau of Statistics of China 9

10 Market Opportunity Modified Plastics for Automobiles China Automotive Plastics Demand Domestic vs. Imports Volumes ("000 metric tons) 1,600 1,414 40% 1,400 31% 33% 1,200 1,060 30% 23% 955 1,000 25% % % % 10% 200 5% - 0% E 35% 2004 (0.7mm tons) 31% 2009 E (1.4mm tons) 35% $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $- Sales ($ billion) 46% 44% $ % 35% $1.96 $1.01 $ E 50% 40% 30% 20% 10% 0% 69% 65% Domestic Imported Source: National Bureau of Statistics of China, Chinese markets for Automotive Plastics from Research and Markets, and China XD s estimate 10

11 Cash For Clunkers vs. Cars Go Villages Cash For Clunkers Cars Go Villages Borrowing from future sales? Has ended on Aug. 24, 2009 Enough for 650,000 to 850,000 cars* *: Based on $3,500 or $4,500 rebate per car **: Based on RMB 3,000 or 5,000 rebate per car Creating a new market for automobiles, most buyers are first time and potentially repeating buyers Will last until the end of this year Enough for 1-1.7MM cars** 11

12 Competitive Advantages Strong Competitive Position Customized products Geographic Advantage Adjacent to China s largest automobile center The northern region of the PRC is a relatively low cost resource center High barrier of entry Attractiv e ROI Large customer base University-educated local workforce available Strong Government Support Extended tax benefits: 15% tax rate through 2011 Superior credit profile at local banks over years Leading National R&D Center Lower cost production Proprietary formulas developed by our own research institute Excellent Customized Service Long history of excellent customized service to auto OEMs in China 12

13 Manufacturing Process Measuring Plasticizing and Cooling and Homogenizin and Blending Extrusion Cutting g and Packing State-of-the-Art Manufacturing Facilities 13

14 Technology Innovation Panel of Consultants: Top Scientists and Experts in Modified Plastics Wu, Zhongwen: Chief Scientist, Jilin University Zheng, Kai: Secretary General, China's Plastics Engineering Industry Association Huang, Yudong: Harbin Industrial University Li, Bin: Eastern Forest Industry University Xing, Yuqing: Harbin Industrial University Jiang, Zhenhua: Jilin University Talents at The Research Institution 66 researchers with average working experiences over ten years in modified plastics research and development 90% with PhD. Master or bachelor degrees Industry Leading Modified Plastic Research Institute Industry Leading Modified Plastic Research Institute The most advanced auto-specific polymer research institution in China Has 102 sets of state of the art equipments in macromolecule industry 14

15 Strategic Location Currently, the company is focusing mainly on coverage of the Northeast t China Shenyang Daqing Harbin Changchun By 2013, the company plans to cover North China markets and becomes one of the major suppliers in this region Beijing Tianjing Qingdao Nanjing By 2015, the company plans to cover East China markets and becomes one of the major suppliers in this region Chongqing Chengdu Wuhan Guangzhou Shanghai Zhejiang Fuzhou Shenzhen Represents the main targeted market in Northeast China Represents the main targeted market in North China Represents the main targeted market in East China 15

16 Focused Growth Strategy Geographic Expansion Targeting Major Automotive Manufacturing Regions Strategic Rationale 100,000 tons 200,000 tons 300,000 tons The Northeast base to achieve sales output of 100,000 tones by The North China base to achieve sales output of 100,000 tons by 2011, together adding the total production up to 200,000 tons. The East China base to achieve sales output of 100,000 tons by 2013, with the total production up to 300,000 tons. Chongqing Chengdu Daqing Harbin Changchun Shenyang Beijing Tianjing Qingdao Nanjing Shanghai Wuhan Zhejiang Fuzhou Guangzhou Achieve economy of scale Sustain investment in research and development to ensure the leading edge technology and develop more number of high value-added products Increase market share through geographic expansion of sales network and selected acquisition Shenzhen 16

17 Financial Highlights Revenues ($ Millions) Gross Profit ($ Millions) Net Income ($ Millions) $75.8 $58.3 $17.3 $12.4 $13.7 $9.0 $34.2 $33.5 $6.3 $8.2 $5.3 $7.2 $13.4 $2.8 $ H2008 1H H2008 1H H2008 1H

18 Financial Highlights Revenue and Margin Performance $ % 0% $30.0 $ % 25.1% 25.8% 22.9% 21.0% 17.1% 21.8% 20.9% 25.0% 20.0% $ % $ % 16.6% 6% 16.6% 6% 15.0% $ % $5.0 $10.4 $23.1 $22.3 $20.0 $26.4 $ % $0.0 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 0.0% Revenue Gross Margin Operating Margin 18

19 Financial Highlights Second Quarter 2009 Revenue was $31.9 million, 38.2% increase from the Q Gross profit was $6.7 million, 15.1% increase from the Q Gross profit margin was 20.9%, compared to 25.1% in the Q EBITDA was $6.2 million, 12.5% increase from the Q Net income was $5.0 million, while non-gaap net income excluding the non-cash charge was $5.4 million, 6.5% increase from the Q Diluted earnings per share was $0.13 and non-gaap diluted earnings per share was $0.14, up 22.7% and 35.9%, respectively, from the Q Three Months Ended Six Months Ended $ in millions Change Change Q2 Q2 vs.q2 H1 H1 vs.h Revenue $31.9 $ % $58.3 $ % Gross Margin 20.9 % 25.1 % -4.2 % 21.3 % 24.3 % -3.0 % Op Income (Loss) $5.3 $5.3 -$0.2 % $9.7 $ % Depreciation & Amortization $0.5 $ % $0.9 $ % Net Income $5.0 $ % $9.0 $ % 19

20 Financial Highlights Financial Ratios Significant Ratios 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 Selling Expenses 02% 0.2% 01% 0.1% 09% 0.9% 04% 0.4% 02% 0.2% 02% 0.2% G&A Expenses 2.2% 0.9% 2.9% 3.2% 4.0% 3.5% R&D Expenses 0.7% 1.09% 1.1% 1.1% 1.1% 0.7% Current Ratio Inventory Turnover Days Sales Outstanding Return on Assets 6.6% 9.9% 7.1% 3.5% 6.9% 7.7% Return on Equity 17.4% 29.2% 19.4% 9.3% 14.3% 14.9% 20

21 Financial Highlights Balance Sheet ($ '000 ) June. 30, 2009 Dec. 31, 2008 Cash and cash equivalents 1,467 3,869 Accounts receivable 9,732 11,235 Inventory 14,874 12,439 Total Current Assets 44,883 44,755 Property, plant and equipment, net 19,124 19,333 Total Assets 64,677 64,714 Accounts payable Short Term Debt 20,203 20,520 Total Liabilities 31,196 40,653 Total Shareholders' Equity 33,481 24,061 Total Liabilities and Shareholders Equity 64,677 64,714 21

22 Management Jie Han, Chairman and Chief Executive Officer Mr. Han founded d Harbin Xinda Nylon Factory in 1985 and cofounded Xinda in With 25 years of industry experience, Mr. Han is an expert in the modified plastic industry. He currently serves as executive director of China Plastic Processing Industry Association, as an outstanding entrepreneur at the industry of modified plastics, and as director of the Heilongjiang Industry Commerce Association. In addition, Mr. Han serves as a deputy to the Harbin Municipal People s Congress. Taylor Zhang - Chief Financial Officer Mr. Zhang is a native of Harbin and has over seven years of experience in finance and operation in a broad range of industries. PriorjoiningChinaXD,Mr.ZhangservedasCFOof Advanced Battery Technologies, Inc (Nasdaq: ABAT). From 2007 to 2008, he served as Executive Vice President of Finance in China Natural Gas (Nasdaq: CHNG). From 2005 to 2007, Mr. Zhang worked as a research analyst in New York Private Equity. He holds a MBA from University of Florida. Qingwei Ma, Chief Operating Officer Appointed as Chief Operating Officer in 2008, Mr. Ma had been serving the company and was General Manager of Xinda Macromolecule from 2004 to 2008, during which Mr. Ma led the successful establishment of sales network, building a comprehensive system ensuring effective and efficient purchase, production, marketing and other functions. Prior to joining Xinda, Mr. Ma worked for Harbin Xinda Nylon Factory, the Company s predecessor, for 6 years. Mr. Ma has 12 years of experience in the modified plastics industry. Junjie Ma, Chief Technology Officer Mr. Ma has over 12 years of experience in the modified d plastic industry. He successfully established the research institute and helped the Company to gain 122 certifications from Chinese auto makers, the largest number of certifications among Chinese companies. He has organized and formed a top class science advisory team and maintains close collaboration relationship with Chinese macromolecule well-known science R&D institutes and universities. As a result, Mr. Ma is effectively taking full advantage of state-of-the-art R&D devices and top technique talents to keep the institute s leading position in China. 22

23 Independent Directors Lawrence W. Leighton Chairman of Audit Committee Mr. Leighton has had an extensive 40 year international investment banking career. Mr. Leighton received his BSE degree in engineering from Princeton University and an MBA degree from Harvard Business School. His previous positions includes Co-Head of the Corporate Finance Department at Clark, Dodge & Co., Limited Partner of Bear Stern, Managing Director of JPMorgan Chase Bank and CEO of the U.S. investment bank of Credit Agricole, the major French Bank. Cosimo J. Patti Chairman of Compensation Committee Mr. Patti s previous positions include roles as Senior Director of Strategy Management, Director of Business Strategy, and Senior Vice President of Lehman Brothers. He is an Arbitrator of SEC and National Association of Securities. Mr. Patti has been an Independent Director of American Oriental Bioengineering Inc. (NYSE: AOB) since Linyuan Zhai Chairman of Nomination Committee Mr. Zhai worked for China FAW Group Corporation for 37 years with abundant experience in terms of technology, production, and business management. He is a Senior Expert in the auto industry. Mr. Zhai served as general manager of automobile manufacturing, successfully led Four Ring Company, a subsidiary of FAW group, to go public in China. He is one of the pioneers and outstanding contributors of FAW group s success. Yong Jin - Independent Director Jin, a professor at Tsinghua University and academician of the Chinese Academy of Engineering, is an executive member of Chemical Industry and Engineering Society of China and Chinese society of particuology, vice chairman of China Institute of Ecological Economy, director of Industrial Ecology Economy and Technology Committee, Council Convenor of the Chemical discipline in the State Council Academic Degrees Committee, professional advisers for Beijing Municipal Government, Lectureship Award recipient in fluidization by American Institute of Chemical Engineers (AIChE), the world's leading organization for chemical engineering professionals, with more than 40,000 members from 93 countries, consultant for the Germany magazine " Chemical engineering & technology ". Jin has published and presented more than 350 papers in important journals and conferences domestically and internationally, 138 of which were included in Science. Jin also has more than 30 patent applications. 23

24 Investment Highlights g 1 Tremendous Market Demand Driven by Large and High Growth Addressable Automobile Market in China 2 High Barriers to Entry Due to Strict Certification Requirements by Automotive Manufacturers 3 4 Industry Leading R&D Center State of the Art Equipment and Experienced Research Team Largest Number of Certification Largest Product Portfolio Certified by Leading Auto Makers in China 5 Proven Operating Model Rapidly Growing, Sustainable and Profitable Business 6 Seasoned Management Team With Extensive Professional Knowledge and Years of Experience of Serving Auto OEMs 7 Well Defined Growth Strategy Balanced Organic Growth and Expansion through Acquisition 24

25 Contact Information China XD Plastics Company Ltd. Mr. Taylor Zhang, CFO Phone: (New York) Mr. Allan Lao, IR Director Phone: (China) Website: Investor Relations Firm: CCG Investor Relations Inc. Mr. Crocker Coulson, President Mr. Ed Job, CFA Phone: (New York) SEC Attorney Crone Rozynko LLP 101 Montgomery Street, Suite 1950 San Francisco, CA94104 Phone: (415) Fax: (415) Auditors Bagell, Josephs, Levine & Company, LLC 406 Lippincott Drive Suite J Marlton, NJ Phone: (856) Fax: (856) info@bjlcpas.com 25