TCL International Holdings Limited FY2000 Review & Outlook Mr. Vincent Yan, Executive Director March 2001
Agenda Company Background FY2000 Overview PRC Economic Outlook Home Appliances IT Business Corporate Strategy
Company Background
Key Facts Company Background (1) Established in 1981 Listed on Hong Kong Stock Exchange in Nov 1999 (Stock code:1070) IPO price: HK$1.75 Shares Outstanding: 2.5 billion shares Major shareholder: TCL Industries Ltd. (54%) 4
Company Background (2) TCL International Holdings Ltd. Home Appliances IT Business Colour Television White Goods Audio-Video products Overseas Business Personal Computer Remote Education Internet VA Services Information Appliances Network Equipment India Philippines Vietnam Others 5
FY 2000 Overview
FY2000 Overview (1) Unit sales growth in PRC (units in 000) Product Type FY1999 FY2000 Growth TV 4,000 5,100 28% Refrigerator 190 240 26% Washing Machine 390 630 62% Air Conditioner N/A 170 N/A AV 540 950 76% *Figures included TM-Henan, overseas unit sales were 700K in year 2000, total unit sales in 2000 were 5,800K 7
Revenue Mix FY2000 Overview (2) 6% 3% 5% 6% 6% 2% 4% 13% FY1999 FY2000 80% 75% TV WG AV Overseas Others *FY2000 included TM-Henan. Air-con added to WG in FY2000 8
Gross Profit Mix FY2000 Overview (3) 5% 4% 3% 4% 15% 3% 88% FY1999 FY2000 78% TV WGs AV Overseas *FY2000 included TM-Henan. Air-con added to WG in FY2000. 9
FY2000 Overview (4) Gross Profit Margin Product Type FY1999 FY2000 Change TV 25% 17% -8% White Goods 23% 22% -1% AV 19% 19% 0% *Figures in 1999 are adjusted with distribution margin for comparison. 10
FY2001 Outlook Revenue Mix Gross Profit Mix 14% 1% 6% 11% 8% 2% 2% 15% 12% 63% 66% TV WGs AV Overseas PC Others *Figures included TM-Henan. Assumed PC has full year contribution 11
PRC Economic Outlook
PRC Economic Outlook Stable growth GDP expect to grow over 7% in next few years Strong domestic demand expected Improving consumer confidence Gradual reversal of the deflationary trend Government stimulus measures Pay rise Rural tax reform Consecutive interest rate cuts Imposed interest incomes taxes Expect consumers will move away from bank savings and spend more on high-end consumer products Air-conditioner Personal Computer Mobile Phone High-end TV 13
Home Appliances
Home Appliances Group Operation Structure R&D Centre Sales & Service Network AV TV WG Overseas Operations 15
TV Continued Growth 6,000 5,000 4,000 3,000 2,000 1,000 0 TCL's Unit Sales ('000) 5,100 4,000 2,497 1,355 1997 1998 1999 2000 Continued growth in sales under fierce competition in Y2K 16
Premium selling price TV Competitive Edge Average retail prices of TV in major cities 2900 2700 2500 2300 2100 1900 1700 1500 Jan Fe Ma Ap Ma Ju Jul Au Se Oc No TCL Changhong Skyworth Konka Source: China Economy Consultancy Co. Ltd. Jan 2001 Report 17
TV Competitive Edge Better product mix - illustrated by 25" TV sales in major cities 35% 30% 25% 20% 15% 10% 5% 0% TCL Changhong Konka Skyworth Source: China Economy Consultancy Co. Ltd. Jan 2001 Report low end medium end high end Solid leadership position in mid-high end TV market Recognized as the premier domestic brand 18
TV Operations Review Optimum inventory control Maintained less than 60 days of finished good inventory turnover throughout year 2000 Faster pace in new product offerings Over 50 new models offered in year 2000 Rapid growth in overseas market Unit sales grew 80% from 1999 to 2000 Gained 5% market share in India (source: The Economic Times) 19
TV Industry Outlook (1) Long term industry trend Digital Broadcasting will fundamentally change the shape of the market Digital information display devices: next generation of home appliance It plays a key role in future households, where traditional electronics and home appliances become 3C convergent Internet Access Devices Internet Access Devices have great market potential as the Internet reaches home Major IT players in China are moving into the Internet Access Devices and Digital Display business 20
TV Industry Outlook (2) Changing competition environment in 2001 Market inventory reduced According to MII, total production reduced by 5% while total sales increased by 1.2% in Jan Nov 2000 Industry in consolidation Strong players such as TCL will significantly increase market shares, and a few leading players will dominate the market Many smaller players are becoming sub-contractors of major manufacturers with strong brands such as TCL Total supply will shrink during the phrase of industry consolidation Less room for major price cut. Better profit outlook than 2000 Product differentiation and technology advance - the main themes of the competition 21
WGs Review & Outlook Better market position - Among top 10 players in 2000 Added air-conditioner into WG product lines in 2000, doubling the revenue and profit Though competition in air-con market is keen, low penetration rate (25% in urban area) and high consumers demand will drive the market growth at 30% Will increase the level of control on WG production in 2001 to facilitate the cost reduction and new product offering 22
IT Business
IT Business Internet Value-added Services www.ejiajia.com Personal Computer TCL Computer Information Appliances Remote Education Projects China Central Radio & TV University Network Equipment 24
PC - History and Milestones Feb 1998 - Established TCL Computer May 1998 - Commenced production Dec 1999 - Top 7 position in China s desktop PC market Jun 2000 - Become one of the top 4 credit line recipients from Intel in China Sep 2000 - Top 3 position in China s consumer desktop PC market in 3Q 2000 Dec 2000 - Ranked 4 th among domestic players in 2000 - Ranked 3 rd in the home PC market in 2000 Feb 2001 - TCL Computer was successfully injected into TCL International Holdings We obtained 7% market share in the home PC market (PRC) in 2000 25
PC - Industry Outlook China is forecasted to sustain growth rates averaging 25% p.a. (source: IDC) - the fastest growing country in the world PC Unit Shipment Growth Forecasts Region 5 Yr CAGR ( 1999-2004) US 8.50% Western Europe 13.70% Japan 11.70% Asia Pacific ex Japan 22.10% Rest of World 15.50% Source : IDC Penetration rate of 3.3% of urban population lags those in developed countries such as Singapore and Hong Kong Domestic players capitalising on superior distribution channel, support network and local knowledge 26
PC - Competitive Strengths Rapid product rollout Launching one series of new products in less than every 3 months Product bundling services include: Co-operation agreement with China Motion to provide ISP connection to all TCL s PC customers PCs are equipped with One-Touch-All-Function key www.ejiajia.com - for customers of TCL Group and TCL Computer Link-up with www.sina.com Capitalising on strong brand name of TCL TCL s brand name ranks the 5th most valuable brand name in the PRC Strong brand name provides a good platform for the expansion of the PC business 27
Corporate Strategy
Corporate Strategy To become a clear leader in the PRC TV market With solid and stable management team and the right 3C product mix, TCL is poised to prevail in this market Differentiate from competitors in new product offerings Consolidate R&D resources at TCL Multimedia Electronics R&D Center as new CTO in place Re-structure the management of the distribution network, & streamline its information flow with IT to cut operation costs Upgrade factories to production centers Manufacturing multiple products in each factory to reduce manufacturing cost Expand actively into overseas market through strengthening our overseas marketing team 29
Thank You!