sutor technology group investor presentation may 2010
TRANSCRIPT
Sutor Technology Group
Investor PresentationMay 2010
This presentation includes certain statements that are not descriptions of historical facts, but are forward-looking statements. Such statements include, among others, those concerning our new production lines, our expected financial performance and strategic and operational plans, our future operating results, our expectations regarding the market for our steel finishing fabrication products, our expectations regarding the continued growth of the steel market, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause our actual results to differ materially from those anticipated, expressed or implied in the forward-looking statements. These risks and uncertainties include, but not limited to, the factors mentioned in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended June 30, 2009 and other risks mentioned in our other reports filed with the Securities Exchange Commission, or SEC. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at www.sec.gov. The words “believe,” “expect,” “anticipate,” “project,” “targets,” “optimistic,” “intend,” “aim,” “will” or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.
Safe Harbor Statement
NASDAQ: SUTR FYE: June 30
Equity Snapshot
Price ( as of 3/13/10) $2.58
Basic Shares Outstanding 40.7 MM
Market Cap $105.0 MM
Enterprise Value $147.6 MM
Cash + Restricted Cash (as of 3/31/10) $65.0 MM
Net Debt (Incl. restricted cash, as of 3/31/10) $42.6 MM
Total Assets (as of 3/31/10) $318.9 MM
Net Tangible Asset per Shares (as of 3/31/10) $4.02
Street CY 2010E EPS Estimates $0.51
Diluted EPS (TTM) $0.24
Investment Highlights
Strategic partnership with supplier and customers
Large market opportunity in growing industry
Integrated service strategy – difficult to duplicate
Strategically located near strong customer base
Innovation-focused strategy to ensure future growth
Favorable economic and business environment
Company Overview Leading China-based fine finished steel manufacturer
Key products – hot-dip galvanized steel; pre-printed galvanized steel; cold rolled steel; acid pickled steel; and welded steel pipes
Founded in 2002
Capacity of 2.0 million metric tons per year; 10 major production lines
Headcount: R&D 70, Manufacturing 565, Head Office 65
Key Verticals – Green energy (solar heaters); Household appliances; Autos; Infrastructure; Casting parts.
Sutor Technology Group Limited
(SUTR)
Sutor Technology Group Limited
(SUTR)
Changshu Huaye Steel Strip
Co., Ltd. (PRC)
Changshu Huaye Steel Strip
Co., Ltd. (PRC)
Jiangsu Cold-Rolled Technology
Co., Ltd. (PRC)
Jiangsu Cold-Rolled Technology
Co., Ltd. (PRC)
Ningbo Zhehua Heavy Steel
Pipe Manufacturing Co., Ltd. (PRC)
Ningbo Zhehua Heavy Steel
Pipe Manufacturing Co., Ltd. (PRC)
Sutor’s Business
400,000 MT capacity Longitudinal double
submerged-arc welded steel pipe
Small & large diameter and spiral seamed
300,000 MT Capacity HDG (Hot-Dip Galvanized Steel Strip)
200,000 MT Capacity PPGI (Pre-Painted Galvanized Steel Strip)
500,000 MT Capacity AP Steel (Acid Pickled Steel Strip)
250,000 MT Capacity Cold-rolled Steel
400,000 MT Capacity HDG
Hot Coiled Rolls
Acid Pickling
Cold Rolling
HDG
PPGI
Pipeline
Ningbo Zhehua Steel Pipe
Key Products
Growth DriversGovernment Policies
$586 billion government stimulus package directly flows to infrastructure
Rural & trade-in policy for household appliances
13% tax rebate for exported value add steel products
Market Forces Industrial upgrading requires high-end steel products
China’s urbanization trend spurs demand of welded steel pipe in natural gas transmission, water supply and sewage, etc.
Fixed asset investment expected to grow by 25% in 2010
Selected SUTR infrastructure projects Airport construction Piling applications for bridge construction
(Hangzhou Bay Bridge) China West-East Natural Gas Transmission
Selected SUTR infrastructure projects Airport construction Piling applications for bridge construction
(Hangzhou Bay Bridge) China West-East Natural Gas Transmission
Diversified product offering reduces operational risk and enhances growth potential
Key Verticals
67 Agents
End Users
50 Sales Professionals
Harbin
Changchun
Urumqi
XiningLanzhou
ChengduChongqing
Kunming Guangzhou
FuzhouChangsha
Wuhan
Xian
Nanchang
Hangzhou
ShanghaiNanjing
Beijing
TianjinJinan
QingdaoShijiazhuang
Yinchuan
Zhengzhou
Shenyang
Nationwide Sales NetworkFocus on developed Eastern China
Direct sales force consists of approximately 50 sales & marketing professionals as of June 30, 2009
Indirect sales channel consists of about 67 agent companies covering all major cities in China as of June 30, 2009
Sales through related party Shanghai Huaye Iron & Steel Group
Focus on developed Eastern China Direct sales force consists of approximately 50 sales & marketing
professionals as of June 30, 2009 Indirect sales channel consists of about 67 agent companies
covering all major cities in China as of June 30, 2009 Sales through related party Shanghai Huaye Iron & Steel Group
Product QualityR&D efforts and equipment importation ensures high product quality
Compliance with major international standards Approved supplier for Midea, Hitachi, Sunrain, and LG API certification (American Petroleum Institute) “National & Provincial High-Tech Brand” and “Jiangsu Well-
known Brand” recognition Ningbo Zhehua is a qualified supplier for CNPC, Petro China,
and Sinopec
R&D efforts and equipment importation ensures high product quality Compliance with major international standards Approved supplier for Midea, Hitachi, Sunrain, and LG API certification (American Petroleum Institute) “National & Provincial High-Tech Brand” and “Jiangsu Well-
known Brand” recognition Ningbo Zhehua is a qualified supplier for CNPC, Petro China,
and Sinopec
Innovation-focused Strategy♦ Only R&D center that focuses on fine finished steel technology in Jiangsu Province♦ In-house intellectual property: 20 self-developed patents (10 invention, 3 Utility
model, 7 appearance-design)♦ JCOE, an advanced technology in the welded steel pipe industry, can offer high-
end welded steel pipe for gas & oil transmission projects♦ Strategic alliance with Mid-South University: China’s leading institute in steel
technology research♦ New product initiatives: anti-bacteria steel products approved by industry experts
Anti-Corrosion Wall
Anti-Corrosion Wall
Anti-Static Workstand
Anti-Static Workstand
Anti-Scrape Door
Anti-Scrape Door
•Acid Picking
•Cold Rolling
•HDG
•PPGI
•Welded Steel Pipe
•Distribution Channel
•Direct Sales
•Sutor has vertically integrated services model•One stop solutions to address clients’ specific needs •Customized processing services to address preliminary processing services •Customize our products according to the specifics provided by our customers
Processing Sales and
Distribution
Diversified Product
Offering
•Ten production
lines
•Customized
Processing
Services
Post-sales Customer
Services
•Customized logistic
solution
One Stop Solutions Value Added Services Customer Loyalty
Integrated Service Strategy
Competitive Advantages
SUTRSUTR Private-owned CompetitorsPrivate-owned Competitors
State-owned CompetitorsState-owned Competitors
Foreign invested CompetitorsForeign invested Competitors
Highly automated facilities Vertical integration model Portfolio of wide range of
products Provincial level R & D Center Customized R&D for solar water
heater manufacturers
Highly automated facilities Vertical integration model Portfolio of wide range of
products Provincial level R & D Center Customized R&D for solar water
heater manufacturers
Low-ended products
Limited product portfolio
Small size & capacity
Low-ended products
Limited product portfolio
Small size & capacity
Shorter lead time Higher flexibility Lower cost Customer-oriented
service Quick order disposal
Shorter lead time Higher flexibility Lower cost Customer-oriented
service Quick order disposal
Longer lead time Less flexibility Higher cost Non-customer
oriented
Longer lead time Less flexibility Higher cost Non-customer
oriented
Mature procurement channels Competitive price Highly integrated logistics
system Strong sales network
Mature procurement channels Competitive price Highly integrated logistics
system Strong sales network
Higher production cost Higher price Higher transportation
cost
Higher production cost Higher price Higher transportation
cost
SUTRSUTR
SUTRSUTR
Growth Strategies
Improve Capacity
Utilization of The New 400k Ton HDG Lines
Develop New Products
Increase Capacity From 2.0M Tons to Approx. 6.0M
Tons via Acquisitions
Build New High-impact Production Facilities
Expand Sales Channels into New Markets
Company Performance Revenue ($MM) and Gross
Margin Revenue ($MM) and Gross
Margin Net Income ($MM) and Net Margin Net Income ($MM) and Net Margin
496,961
660,979696,209
605,210
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2007 2008 2009 9-month 2010
Total Sales Volume (MT)
Balance Sheet
(In Millions USD) As of June 30 As of March 31
2008 2009 2010
Cash (incl. restricted cash) $71.3 $62.3 $65.1
Total Current Assets 233.6 234.2 244.7
Total Assets 296.5 314.5 318.9
Debt 137.6 107.4 107.6
Total Liabilities 163.7 156.2 152.2
Shareholders Equity 132.7 158.3 166.7
Yongfei, JiangCFO,
Treasurer & Secretary
Lifang, ChenChairperson
& CEO
Xun, ZhangCTO
Founder and Chairperson of Sutor Technology Group Director of civil administrative bureau of Xiaoshan District, Hangzhou
from 1993 to 2001 Extensive experience in enterprise management in fine finished steel
industry
CFO, Treasurer and Secretary since February of 2007 Former CFO of Changshu Huaye Finance manager of Guangzhou Huaye Trading Co., Ltd. from 2002 to 2005
CTO since June of 2007 Previously worked as Chief Project Engineer Deputy Chief Engineer at Baoshan Iron & Steel Co., Ltd. from 1995 to
2005
Eric Zhou, Ph.D., CFA
Management Team
VP Finance since February 2010 15 years of capital market and industry experiences B.Sc. In Petroleum Engineering from China Petroleum University MBA and Ph.D. from The University of Texas at Austin
Gerard PascaleAudit Committee
Chairman & Independent Director
Xinchuang Li Governance Committee
Chairman & Independent Director
Guoyou ShaoCompensation Committee
Chairman & Independent Director
Served as Chairman of Audit Committee and Director for Sutor from Jan. 2010.
President and CEO of SC Financial Group, LLC Director, Finance of Heritage Management Consultants, Inc. Senior Financial Analyst of Intel Corporation MBA from Chicago University Certified Public Accountant
Chairman of Fortis Haitong Investment Management Company since 2002
President of Haitong Fund Management since 2002 Secretary of Party Branch of Changchun Normal University from
1991 to 1994. Vice President of Economics Department Party Branch of Jilin
University from 1975 to 1991.
Executive Director of China Metallurgical Industry Planning & Research Institute since 2008
Vice Chief Engineer of China Metallurgical Industry Planning & Research Institute since 1998
Vice Director and Chief Engineer of China Metallurgical Industry Planning & Research Institute since 2002
Master’s degree in Business Administration from Fordham University and Beijing University.
Board of Directors
Contact Information
CompanySutor Technology Group Ltd
Legal CounselPillsbury Winthrop Shaw Pittman
LLP
Eric Zhou – VP Finance12F, Building B, World Trade Center45 North Haiyu Road, Changshu, China
215500(86) 137 7305 0023 [email protected]
2300 N Street, NWWashington, DC 20037(202) 663 8158
AuditorBaker Tilly International
Hansen, Barnett, & Maxwell LLC
Robert Brown5 Triad Center, Suite 75055 North 300 West Salt Lake City, UT(801) 532 [email protected]
Investor Relations ICR
Brian M. Prenoveau, CFA441 Lexington Avenue, 4th FloorNew York, NY(203) [email protected]