TSRC Corporation ($2103)

[Foreign Language] Ladies and gentlemen, welcome to TSRC 2026 Virtual Investor Conference. I'm the Deputy Spokesperson of TSRC. As usual, I would like to remind everyone of the safe harbor notice for the contents presented today, they are predictive in nature. [Foreign Language] In today's 1-hour conference, our CFO will cover TSRC 2025 and 2026 Q1 financial performance. Then our CEO will cover TSRC 2026 business highlights and market outlook. In the last 15 minutes, we will have a Q&A session, and please refer to the zoom function to type in your questions at any time during the conference. [Foreign Language] Let's welcome our CFO, Edward Wang, to start today's presentation.

[Foreign Language] 2025 was a challenging year for TSRC and then many other petrochemical companies in Taiwan. TSRC delivered a result in line with our expectation. Net profit was TWD 448 million with EPS of TWD 0.54 excluding the impact of the TWD 387 million impairment loss recognized in the third quarter. EPS was TWD 0.96. [Foreign Language] So first quarter financial performance was largely impacted by the outbreak of the Middle East conflict at the end of February. The global petrochemical supply chain was also disrupted by the conflict leading to a rapid increase in raw material, energy and transportation costs. So many companies, including TSRC, will concern about supply stability, especially some raw material supplier we even declared force majeure to reduce supply. So fortunately, TSRC team reacted quickly, keeping abreast of the market dynamics ensuring the supply of raw materials and delivering goods on time to meet the customers' needs. So all these factors contributed to a significant increase in TSRC's first quarter's sales volume for both SRD and PPE. So let me comment quickly on product line. So among the product mix ESBR benefited from a significant increase in both production and sales volume and successfully passed on some of the increased raw material cost to making a significant contribution to the first quarter's profit. For BR, volume increased compared to last year, while selling price was limited by market competition. And for SSBR, overall, I would say, it remains stable. So move to TPE. SEBS contributed the most among the 3 product line, mainly due to the growing orders from downstream customers, which drove sales growth rising raw material costs led to pricing increases, while increased the production volume resulting in lower unit fixed costs. So these 2 factors combined to significantly improve our profitability compared to the previous quarter and same period last year. So for the other product of TPE, SIS. Volume increase on sequential or year-on-year basis, but the price remained competitive. So resulting in overall profit declines. And for SBS volume benefit from order delayed from first quarter last year, coupled with a favorable pricing formula to result in overall gross profit growth. [Foreign Language] Among these 3 major sales regions, Europe saw relatively high year-on-year revenue growth, reflecting the cautious attitude of European customers due to supply chain uncertainty caused by the war. This was evident by both -- in both SEBS and SIS products with customers showing greater acceptance of price increase. The American region saw sequential growth, primarily reflecting seasonal factors for SEBS product, while the SIS market remained highly competitive. Asia saw a significant growth compared to the previous quarter due to higher proportion of [indiscernible] SRD product but remained flat compared to same period last year. [Foreign Language] So for the 2 equity investment, as you can see, the 2 investments continue to perform well in the first quarter. ISRPL remain the main source of profit among the 2 investees, mainly benefited from strong domestic demand in India and a favorable butadiene pricing formula. So TSRC recognized TWD 190 million investment income in the first quarter. So a significant increase of TWD 45 million from previous quarter and compared to the same period last year, slightly increased by TWD 30 million. And for ARLANXEO-TSRC, operating performance in the first quarter, as you can see, was very outstanding. So TSRC recognized investment income of TWD 51 million, roughly 90% increase from first quarter last year and compared to same period last year is a [ 2- fold ] increase. So this was mainly due to ARLANXEO-TSRC's success, increase in sales in the industrial and machinery sector, offsetting the decrease in sales caused by sluggish real estate market in China. In addition, the benefit of economic scale brought by the higher capacity of the new plant and the introduction of high value-added product from ARLANXEO France in recent year have also effectively continued to -- contribute to the profit. [Foreign Language] So as you can see, [ the BD charge ] for the butadiene price gradually rose from roughly $900 per metric ton at the end of last year to $1,300 per metric ton before the war. So after the outbreak of the war, crude oil price rose rapidly. Butadiene price also surged as high as to $2,130 per metric ton in March. And in April, we even touched $2,680 per metric ton. So as mentioned earlier, due to the raw material shortage, some [ countries ] even reduced contract supply by announcing force majeure. So this means even you have money, supply could not be guaranteed. But as the war situation easy and crude oil price, I would say, fluctuates. So we expect the butadiene price is expected to gradually decline in the coming months. But I think overall, it's still subject to the -- how the war with Iran will unfold. The other point I need to mention is, as you can see in the gray bar chart, which is the price gap between natural rubber and butadiene. So synthetic rubber price rose due to the increased raw material, but natural rubber price actually was not significantly affected and remain among 2,000 per metric ton. In March, there was even a short period where butadiene prices were higher than natural rubber price due to a sharp rise in butadiene price. So we initially expect synthetic rubber price will be affected. But in the short term, customers seems more concerned about stable supply and synthetic rubber price have not been impacted. I would say the long-term effect remains to be seen. So this is the end of my presentation. I hand over to our CEO, Joe.

[Foreign Language] A very good afternoon, dear shareholders and investors. Thank you very much for attending TSRC first investor conference for the year 2026. The purpose of today's presentation is to help you better understand TSRC's management's mindset and concrete actions in 2026. As all of you know, over the past year, the external environment has changed dramatically, including geopolitical conflicts, volatility in energy and raw material prices and global macroeconomic uncertainty. Against this backdrop, the management has placed stronger emphasis on maintaining stable operations, disciplined resource allocation and clear strategic direction under different scenarios. So I will begin with an overview of the overall market environment, then explain our specific actions on the supply chain management, our pricing, our procurement and product portfolio. Finally, returning to how we execute on mid- and long-term competitiveness and value creation as a foundation of further discussion. [Foreign Language] Let me first begin with discussing our first quarter performance. As our CFO explained earlier, TSRC delivered solid financial performance in the first quarter of 2026. And some of the key drivers include effective increase in our capacity utilization and sales volume growth. But more importantly, it's the quality of that growth. In the face of raw material supply disruptions and rapid sales fluctuation. We maintain stability in order to structure and margin through -- sorry, in the face of raw material supply disruption and rapid price fluctuation, we maintain stability in order to structure margins through effective supply-demand management, timely pricing communication with our customers and cross-regional supply chain deployment. We also captured additional opportunities due to the tight raw material supply conditions. In these situations, where raw material availability was constrained, the value of our long-established supplier relationships and procurement strategy becomes very evident, enabling us to seize opportunities while others can and continue to provide stable supply to customers and increase our market -- in an increasing market volatility. [Foreign Language] When we look at the external environment, we all will gravitate towards what's happening in the Middle East. So the recent Middle East conflict is a critical variable that cannot be ignored. This is not merely a regional event. It has triggered change reactions across the entire petrochemical and rubber industry value chain from the upstream crude oil to the midstream feedstock and the downstream synthetic rubber products. Nearly every stage has been affected to various degree. The rapid increase in raw materials and energy costs have driven up overall manufacturing costs, while instability in logistics and lead time has forced various companies to reevaluate inventory and capacity planning. In the initial few weeks following the conflict, panic buying was observed. However, as higher costs were passed through to the customers, demand began to soften and stabilize. Nevertheless, it significantly increased the volatility and operation planning challenges. [Foreign Language] As we look ahead to the remainder of 2026, I must candidly acknowledge that the market remains highly uncertain with no single development path. Tariff policy uncertainty, geopolitics, energy prices and inflationary pressure are deeply intertwined rendering traditional economic cycle assessment less reliable. The Middle East conflict is expected to have a long-term impact. On supply stability and cost volatility across the entire petrochemical value chain. At the same time, elevated energy prices and inflationary pressure are likely to keep manufacturing and operating costs elevated. In response, TSRC management is not focused on predicting a single most likely scenario. Instead, we prepared for multiple possibilities through prudent assumptions, flexible capacity inventory and careful capital allocation and real-time monitoring mechanism to ensure stable operational and control risks even under adverse conditions. [Foreign Language] In an uncertain external environment, the key issue is how we translate strategy into concrete actions. TSRC have experienced multiple industry cycles and unexpected events, which includes the COVID-19 pandemic and the impact of recent years of industry overcapacity. And we have developed a relatively effective response framework. This includes diversified sourcing of raw materials, strategic supply chain deployment and aligned cross-functional operating processes. These systems enable us to maintain product quality and delivery reliability during periods of supply tightness without compromising long-term strategy. At the same time, we continue to invest in mid- and long-term growth initiatives such as SSBR and medical materials, ensuring that when the market stabilizes, we will have a more robust product portfolio and technological innovation. [Foreign Language] For 2026, TSRC management's core commitment is that even in the face of market headwinds, we will not sacrifice our long-term strategic growth potential in exchange for short-term results. We continue to emphasize disciplined cost management and supply-demand balance rather than passively reacting to cost volatility. At the same time, we maintain a high level of discipline and timely execution in raw materials procurement, pricing and supply chain optimization. Externally, remain committed to supporting our customer success and deepening our technical collaboration with our customers. Internally, we ensure that resources are focused on areas that truly create value. This approach allows us to deliver resilient financial performance across different market scenarios. [Foreign Language] In conclusion, we'd like to take the opportunity, and we hope that shareholders and investors understand that TSRC competitive advantage is not based on solely on precise forecasting of market trends, but rather on organizational resilience, institutionalized management and a consistent execution of long-term strategy. Whether the market environment is favorable or challenging, these foundational capabilities enable the company to make calm, rational decisions and avoid structural mistakes in a highly volatile condition. Management's responsibility is to ensure that the company maintains sustainability and growth options across all cycles while continuing to create middle- to long-term value for our shareholders. [Foreign Language] To conclude and before we move into the Q&A session, the first quarter results confirm our existing strategies are effective, but we should not become overly optimistic as a result. The market environment in 2026 remain highly challenging and uncertain despite the near-term headwinds. Nevertheless, supported by proven resilience, disciplined execution and fast cross-organization response capability, we believe TSRC remains well positioned to capture upside opportunities with well-managed risk and continue to strengthen investor confidence. Thank you for your attention. With that, I will hand over to [ Mingyi ] for our Q&A session.

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

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[Foreign Language] We will end the conference today, and thank you for your participation. To help us improve future event, please provide your feedback in our satisfaction survey. The survey page will automatically redirect in your browser after the meeting concludes. Thank you.