TSRC Corporation (2103) Earnings Call Transcript & Summary

[Foreign Language] Ladies and gentlemen, welcome to TSRC 2025 Virtual Investor Conference. I'm Thomas Lin from TSRC Corporate Development Department. Let me first remind you of the safe harbor clause for the relevant information in today's presentation that is predictive in nature. The presentation content shown today is in Chinese and will be conducted in both Chinese and English. Please refer to TSRC company website for the English version of the presentation. [Foreign Language] In the 1-hour conference today, our CFO will cover TSRC financial performance for the period of 2024 through Q1 2025. Then our CEO will cover TSRC 2025 full-year market outlook and updates on TSRC key projects. In the last 15 minutes, we will have a Q&A session. And please refer to the Zoom to type in your questions at any time during the conference. [Foreign Language] Let's welcome TSRC Chief Financial Officer, Mr. Edward Wang, to start the presentation, please.

[Foreign Language] 2024 was a very challenging year for most of Taiwan-based petrochemical companies. In such a difficult environment, TSRC's financial performance in 2024 was in line with our expectation. Revenue hit a 10-year high of TWD 37.2 billion, up 18% from previous year. EPS was TWD 1.04, up 27% from previous year. [Foreign Language] So with the support of strong volume, first quarter revenue hit a 10-year high at TWD 10.4 billion, and EPS came in at TWD 0.40. The strong results are mainly driven by strong SRD performance, especially benefited by higher ESBR volume. So you probably are aware, almost we started our Shenhua relocation 2 years ago. So after 2 years' construction, Shenhua's new ESBR plant successfully commenced commercial production in the first quarter this year. So meanwhile, the original old plant will be still operated in parallel for a period of time of this year, which led to the higher ESBR volume. In addition, the healthy natural rubber and butadiene price gap in the first quarter also bolstered synthetic rubber price. The other highlights for first quarter is SSBR. So far, we only have 1 SSBR production site, which is in Kaohsiung. And its output was totally sold out. So as the EV sales is growing very fast, especially in China, so most of our brand customers are pushing us to expand our SSBR capacity as soon as possible. Actually, we are planning to expand our SSBR capacity in the existing Shenhua site very soon. For AMD, I would say, generally speaking, the business overall remains challenged, especially our U.S. entity, TSM. Overall speaking, the contribution from SBS, SEBS and prime material declined on a year-on-year basis, except SEBS saw some Q-on-Q improvement in terms of gross profit. The main reason for the decline were mainly due to the market competition, unfavorable product mix, delayed introduction of new products and the SEBS customer delay in its pre-buy orders. But in contrast, SIS performance was slightly better than same period last year or previous quarter. That's due to the widening product spread. And also the Q1 gross profit was benefited from lower raw material costs. [Foreign Language] So as you can see, among the 3 major regions, Asia ranked top in terms of revenue and revenue share. This is mainly due to our strong synthetic rubber business. But meanwhile, we also see AMD's Asia business grew slightly compared to the other 2 regions. For Europe, both revenue and share saw slight decline, which suggests, first, the EU -- the Europe automotive industry is facing challenge from Asia's peer. And second, overall European region's economy was not recovered soon as the other 2 regions. And for America, in recent years, SIS is facing strong competition from low-cost Asian products. So our American business functioned with TSM's SIS revenue. In addition, this first quarter was also affected by the delayed pickup from our SBS pre-buy customers. [Foreign Language] So continuing its strong momentum in 2024, ISRPL's Q1 performance is still very strong. It's mainly due to its operation benefit from the strong demand of the Indian domestic automotive market and favorable BD pricing formula. In the first quarter of this year, PSIC recognized TWD 177 million investment income. So it's an increase either compared to same period last year or previous quarter. Our ARL-TSRC operation was still challenged. That's mainly affected by the competition and the sluggish Chinese real estate market. But in response to the challenges, ARLANXEO-TSRC is planning to introduce some new high-priced or high value-added product to expand its product portfolio. So we will see those new products will be introduced very soon in second half of this year. [Foreign Language] So I'll quickly comment on the price trend. So from this pretty trend chart, you can see the BD price actually climbing up from roughly USD 1,250 per metric ton in the beginning of this year to roughly USD 1,500 in the end of this first quarter. But the natural rubber price just lingering around USD 1,900 per metric ton. So we see the very healthy price gap between the natural rubber and butadiene, so which in a way boost the synthetic rubber price. That's -- so this chart given what I said in the beginning, that's part of why our Q1's performance was relatively strong. So I end my conclusion.

[Foreign Language] Let's welcome TSRC Chief Executive Officer, Mr. Joseph Chai, to continue the presentation for the next 20 minutes. Thank you.

[Foreign Language] A very good afternoon to all our shareholders, investors as well as friends from the media. Thank you for making time to attend our first investor conference, which is conducted online for this year. And here, I will report out and explain our 2025 market outlook as well as some of the operating key items. [Foreign Language] TSRC delivered solid business performance in the first quarter. And we did this because we were successful in responding to the market changes with agility, which enabled us to drive both the growth in volume and profit. Our CFO earlier in his financial report and review had provided the details by different product lines of the key reasons for the financial performance in the first quarter. So I'm not going to repeat those, but I'll just kind of quickly summarize some of the key factors. So one of the key -- first key factors is the smooth ramp-up of our Shenhua plant after our relocation. And this ramp-up, the smooth, successful ramp-up and commercialization enable us to have the volume to meet the demand opportunities that we found. And overall, the tire market, the auto market has been fairly stable in -- over in Asia, especially in China. So this enabled us to be able to capture the opportunities in the areas that we are strong in. And early -- just before passing on to my presentation, the CFO also pointed out the price spread between natural rubber and BD, which is very healthy during the first quarter, and this is a definitive factor for our growth in terms of profitability. Last but not least, the India market continues to be stable and strong. And if you notice all these factors, key factors are related to the SRD business or synthetic rubber business rather than the AMD business, which requires more work and is in a challenging market situation. [Foreign Language] We expect the next quarter and the third quarter to have fairly tough headwinds. We expect the U.S. reciprocal tariff policy to disrupt the chemical supply chain by increasing the fragmentation of the global trade flow. And this tariff impact will increase the volatility in product demands and key monomer sourcing and pricing. Under this kind of major uncertainties, purchase sentiment is dampened. And we are already seeing that impact currently. But what I want to say is that among all these, it really is a factor of uncertainties and volatility changes. We do not expect to have quick solutions to this oversupply and pricing competition across all the product lines. And we continue to manage and expect the operating costs to remain elevated through the next couple of quarters. [Foreign Language] Against the uncertainties -- the market uncertainties, there are actions that we are taking and continue to take to navigate through these uncertainties. First, we need to optimize our product portfolio and adjust or reposition our supply chain in order to enhance our business resilience amid the whole changing trade flow. We will increase our SPP, meaning sales, production, procurement, or we sometimes call S&OP engagement frequency, in order to respond to the market volatilities. TSRC has and will continue to maintain a very prudent expenditure discipline. This is an area that I think we have done very well, and we continue to do that, especially in the times of difficulties and uncertainties. But more positively, we will accelerate -- we will continue to accelerate the development of our specialty applications, especially in medical and green tire solutions. This will enable TSRC to pursue opportunities of higher value in the coming quarters. [Foreign Language] Please allow me now to provide some updates on some of the key projects that we are undertaking or we have undertaken. First and foremost, last couple of years, we talked about one of the key projects is the relocation of our Shenhua and ARLANXEO-TSRC joint venture's new plant. And I'm happy to report that we have commercialized the new plant despite the increased market competitiveness. And right now we continue our effort to proceed with our SSBR new line investment, which is very important in our initiative to upgrade our value proposition and our offering. And we will work with our global tire customer to accelerate our new grades commercialization as well as development. [Foreign Language] Last but not least, very important, let me provide an update on our ESG initiatives. We have demonstrated over the years since 2021 that we are able to achieve a 2.5% carbon reduction annually. And moving forward, the challenge to meet both the business growth and carbon emission reduction is going to get more challenging, but we are -- we endeavor to overcome these challenges and committed to our carbon reduction targets. And in '19 -- sorry, in 2024, we received some several ESG accolades, which includes the EcoVadis Platinum for our TSM, which is our U.S. plant; Silver award for our TSRC-UBE joint venture in Nantong. And in early part of this year, in January, we -- our TSM, which is our U.S. plant, has obtained ISCC+ certification. And for the Taiwan Stock Exchange Corporate Governance Rating, we continued to maintain at least 6% to 20% our achievements. And with CDP, we also have achieved a very good rating and certification. [Foreign Language] Last, let me summarize a few key points here. In 2024, we demonstrated that we are able to deliver year-on-year business improvement despite a very challenging industry market situation. And looking at the market, the market remains -- outlook remains subdued and with uncertainties and disruptions and volatility. I have highlighted the actions we are taking and will continue to take to ensure TSRC delivers the business resilience that we have committed to our shareholders. Last but not least, we will expedite our key projects, as I mentioned, a couple of them, both in terms of development as well as in our investment in key projects and green innovation in order to support the growth momentum moving forward. With that, I thank you for your attention, and I'll hand over to our spokesperson for question and answer.

[Foreign Language] Now let's start the Q&A session. And we will reach out using your contact information for the questions that we did not have enough time to cover today. [Foreign Language] Joe, please.

[Foreign Language]

[Foreign Language]

[Foreign Language] Joe, SSBR?

[Foreign Language]

[Foreign Language] Joe?

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] We will end the virtual investor conference today, and thank you for your participation. Please also be invited to provide your feedback on the conference via the web page after the Zoom meeting ends. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]