INVESTOR BRIEFING

JANUARY 2016

Disclaimer
Forward-Looking Statements
This presentation contains certain forward looking statements with respect to the financial
condition, results of operations and business of Concepcion Industrial Corporation (CIC) and
plans and goals of the management of CIC. Such forward looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual results or
performance of CIC to be materially different from any future results or performance
expressed or implied by such forward looking statements. Such forward looking statements
were based on numerous assumptions regarding CICs present and future business
strategies and the political and economic environment in which CIC will operate in the
future

Unaudited Financial Information

2015 financial Information are unaudited and preliminary and may be subject to
adjustments and modifications. Adjustments and modifications to the financial statements
may be identified during the course of the audit work, which could result in significant
differences from this preliminary unaudited financial information. The audited financial
statements and related notes are to be included in our annual report on Form 17-A for the
year ending December 31, 2015.

Helping Build Better Lives and Businesses

TODAYS PRESENTERS
Raul Joseph A. Concepcion Chairman, Chief Executive
Officer and President
Over 25 years of
Concepcion Group

experience

with

the

President
of
Concepcion-Carrier
Conditioning Company (CCAC) and CIC

Air

Ma. Victoria A. Betita Chief Finance and Information Officer

Chairman Emeritus of the Philippine Appliance

Industry Association

Over 6 years of experience with the Concepcion

Group

Holds a Business Administration Degree from

Simon Fraser University

Head of Corporate and Business Services of

CCAC

Rafael C. Hechanova, Jr. Vice President, Business

Development and Marketing, CIC and CCAC

Holds a B.S. Management Engineering degree

from the Ateneo de Manila University and a
Masters in Business Management from the Asian
Institute of Management

Over 19 years of experience with the Concepcion

Group
Director of Hy-land Realty

Director of CAC
Took up Mechanical Engineering at the De La Salle
University and graduated at the British Columbia
Institute of Technology in Canada

Mary Grace Z. Velasco Vice President

Over 10 years of experience in investor
relations, corporate planning and financial
advisory.
Head of Investor Relations and Corporate
Planning of CIC
Holds a Bachelor of Science degree in
Business Administration, Major in Finance and
Economics, from Fordham University

Helping Build Better Lives and Businesses

COMPANY OVERVIEW

Helping Build Better Lives and Businesses

Proven Track Record 50+ Years

Company Overview
Ownership

Foresight

Hyland

Horizon

Raul T. Concepcion Family

Rafael Hechanova Family

Jose Concepcion Family

22.3%

22.3%

22.3%

Public
33%

Key Partners

Business Overview

Manufactures, sells, distributes, installs and provides comprehensive air

conditioning products and services

Manufactures, assembles, distributes and sells domestic refrigeration

equipments

Joint Venture with United Technologies and a trademark agreement on

Kelvinator2
Market leader and largest distribution network in the Philippines

Trademark agreement on Kelvinator for the use of certain trademarks

related to Kelvinator brand equipments
Market leader and largest distribution network in the Philippines

Operates the largest air conditioner manufacturing facility in Philippines

Offers multiple market leading product brands,

Operates the largest refrigeration manufacturing facility in Philippines

Offers multiple market leading product brands

% of FY14 Revenue 67% , PATAMI 94%

% of FY14 Revenue 29% , PATAMI 22%

Distibute, installs and service complete line of Midea Appliances

Distributes, installs and services Otis Elevators and Escalators in the Philippines

In addition to strengthening CICs air conditioning and refrigeration product

lineup, the JV with Midea will primarily allow CIC to enter a wider spectrum
of the white goods appliance market, thereby creating new revenue streams
and realizing further growth potential

Php P 6 billion New Equipment market and highly profitable after Sales business
Synergy with existing business, Create strategic growth platform

PATAMI (5%) *

* Unconsolidated, total revenue for 2014 was at P 199 million

Align with building solutions trends

% of FY14 Revenue 4%, PATAMI 4%

Core Businesses
Consumer Appliances

Building & Industrial Systems

Future
Recent

Largest Consumer Appliance Company in

the Philippines

Preferred Building & Industrial Solution

Provider

10

Core Capabilities
Consumer Appliances

End-to-End Building Solutions

Building best-in-class capabilities critical in supporting the core and being a key differentiator

11

Long Track Record of Market

Leadership & Market Leading Brands

12

Largest Manufacturing Facilities

in the Philippines

2 Manufacturing Facilities

Combined Production area:

35,000 sq. m.

In-house R&D Facilities

8 Testing Laboratories

13

Extensive Nationwide Sales and

After Sales Footprint
24/7 Customer Care

Dedicated Parts Stores

8 parts stores
strategically
located

Nationwide Logistic
Network
Nationwide Service &
Install Capability

Nationwide
distribution

Nationwide Retail
Coverage

90% retail
store coverage

Highly Trained Service

Technicians

In-store Merchandisers
Over 1000+
disers

14

Largest Range of Product

Offerings
Air-conditioning
Residential

Light
Commercial

Condura Carrier
WRAC iCool

Carrier
Optima

Carrier
Ceiling Carrier Floor Carrier
Mounted Mounted Cassettes

Carrier XPower

Toshiba
Hi-Wall Single
Inverter

Toshiba Digital
Inverter

Carrier
Multi-Splits

Midea VRF

Refrigeration

Escalator & Elevators

Toshiba
Multi-Splits

Toshiba VRF

Commercial
System
Carrier Air Cooled Screw Carrier Water Cooled ScrewCarrier Centrifugal Chillers Carrier Tri-Rotor Screw

Refrigeration
Carrier Island Freezer Carrier Open Case Carrier Compressors Carrier Condensers Carrier Cold Rooms

15

Brands, Scale and Expertise

Multi brand Offering / Solutions offerings
allows us to price above the market place

Leveraging Scale & Expertise to

Create Competitive Advantages

16

Experienced Management
With Proven Track Record
Raul Joseph Concepcion
Chairman , CEO and President of
CIC with over 25 years of
experience in the consumer
durables industry

Raul Anthony Concepcion

President of CDI with over 20 years
of experience inthe consumer
durables industry

Renna Hechanova Angeles

Treasurer and Vice Chairman of CIC
with over 30 years of experience in

the consumer durables industry

Rafael C. Hechanova, Jr.

Exec Vice President of Business
Development and Marketingwith
over 20 years of experience in the

consumer durables industry

.

Ma. Victoria A. Betita

Chief Finance and Information Officer
with over 20 years of Finance experience
in government and various private sector
industries

Joseph Angelo Briones

Exec Vice President for Human
Resources with over 16 years of
multinational experience in HR and
General Corporate Management

Rajan Komarasu
Director of the Business Solutions Group
with over 20 years of multinational
experience primarily in the HVACR
industry

Harold Thomas Pernikar, Jr.

Director of the Consumer Solutions Group
with over 15 years of multinational
experience in various industries

Phillip F. Trapaga
General Manager, ConcepcionMidea In.
(CMIP) with over 20 years of experience in
Sales and Distribution in various industries

Alexander T. Villanueva
Director of Manufacturing and Supply Chain
Management of CCAC with over15 years
of experience in Manufacturing, operations,
and supply chain management

17

Awards & Recognitions

18

Key Financial Highlights

NET SALES & GROSS MARGIN
(PHP MIL)
21%
9%

6,940
33%

2012

9,175

7,588
32.4%

33.4%

2013

2014

PROFIT BEFORE TAXES & PBT%

(PHP MIL)

25%

25%
Growth in Earnings

2012

21%
Growth in Sales

(PHP MIL)

19%
23%

9.9%

2012

841

973
14.0%

PROFIT AFTER TAX (PAT%)

684

29%

1,056

11.1%

11.5%

2013

2014

0.2 PTS
Net Margin
Improvement

1,218

1,569

16.0%

17.1%

2013

2014

PROFIT AFTER TAX AFTER

MINORITY INTEREST
(PHP MIL)
25%
20%
426
6.1%

2012

511

637

6.7%

6.9%

2013

2014
19

Balance Sheet
Dec - 13

Dec - 14

Dec - 13

Cash

1,355

1,807

Book Value*

Current Assets

4,382

5,992

Total Assets

4,813

Borrowings
Total Liabilities

Dec - 14

2,287

2,763

BV per share (Pesos)*

6.73

8.13

7,520

Earnings per share

1.50

1.88

1,079

Return on Equity

28.5%

25.2%

1,743

3,652

Return on Assets

17.0%

17.1%

* Net of minority interest

Net Cash Position

957
Cash

2010

1,195

1,387

1,355

729

Borrowing

2011

2012

2013

2014

20

Key Financial Highlights

Per Business Unit

AIRCONDITIONING

REFRIGERATION

Net Sales

Profit After Tax (%)

PATAMI (%)

Net Sales

Profit After Tax (%)

PATAMI (%)

17% Growth

20% Growth

20% Growth

14% Growth

163% Growth

163% Growth

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

P 5,300

P 6,179

P 825

P 987

P 495

P 592

P2.289

P2,615

P 52

P 138

P 52

P 138

15.6%

16.0%

9.3%

9.6%

2.3%

5.3%

2.3%

5.3%

Strong growth driven by Replacement Market, First time

buyers, strong commercial business and rising backlog

Driven by new Models and Focus on cost reduction activities

ELEVATORS & ESCALATORS

APPLIANCES

Net Sales

Profit After Tax (%)

PATAMI (%)

Net Sales

Profit After Tax (%)

PATAMI 9%)

2014

New Acquisition

New Acquisition

2014

Start Up

Start Up

P 49

P 25

P 199

2014

2014

13.0%

6.6%

- P 69

- P 28

P 381

Acquired in April 2014

Started in November 2014. Unconsolidated

21

Key Performance Indicators

22

Dividend Policy & Declarations

Dividend Policy : 30% of prior years Net Income of CIC
1. Cash Dividend declared of Php .59 / share for all shareholders on record as of April 2,
2014. Payment date on April 30, 2014 (equivalent to 30% of 2013 Net Earnings)
2. Special Stock Dividend of 30% for all shareholders on records as of AUG. 22, 2014 and
payment date of SEPT. 8, 2014
3. Cash Dividend declared of Php .59 / share for all shareholders on record as of April 22,
2015. Payment date on May 14, 2015 (equivalent to 31% of 2014 Net Earnings)

23

STRATEGY
Position to Capture Growth

Helping Build Better Lives and Businesses

Key Drivers of Growth

25

% ownership

Household Ownership Levels

Source: Family Income and Expenditure Survey 2012

26

Relationship between Income

Level and consumption levels

27

Rising Income Higher

Ownership Levels

28

Philippine Estimated Market Size

(Different Income & Ownership Levels)
AIRCONDITIONERS
(Billion Pesos)

8 to 10 X

REFRIGERATOR
(Billion Pesos)

241

4 to 6 X

7 to 8 X
130

129

5 to 6 X
87

2 to 3 X

3 to 4 X

49

44

32

18

GDP per
Capita
(2013)

Philippines
Philippine
$ 2,764

Indonesia
Indonesia
$ 3,475

Malaysia
Malaysia

Singapore
Singapore

$ 10,513

$ 55,000

Philippines
$ 2,764

Indonesia
$ 3,475

Malaysia
$ 10,513

Singapore
$ 55,000

29

Key Drivers of Growth

30

2020 Vision
P 50 Billion Revenue / P 5 billion PAT (5 times)
# 1 Consumer Lifestyle Solution Provider
# 1 Building & Industrial Solution Provider
Best After Sales Service Provider
Most Preferred Brands
Great place to work (Attract, engage and retain the best talent)
31

Strategic Direction
1. Position CIC and its companies to benefit from the Philippine
growth story Core business
2. Execute with a clear and aggressive growth strategy

3.
4.
5.
6.
7.

Reorganize businesses to execute the strategy

Build a sustainable growth business model
Deliver consistent solid operating performance
Create a winning team
Strengthen the business thru acquisitions or new business
ventures

32

Reinforce Our Core Business And

Business Model To Capture Growth
CONSUMER LIFESTYLE
SOLUTIONS

BUILDING & INDUSTRIAL

SOLUTIONS

Future
Recent

Largest Consumer Appliance Company in

the Philippines

Preferred Building & Industrial Solution

Provider
33

Execute with a clear and

aggressive growth strategy
GROW THE CORE

EXTEND THE CORE

New Products

Service

Product Gaps

Parts

Share of Markets

Other Appliances

Distribution Gaps

Installation

Solutions
Current Products and
Brand Line Ups

Product or services that are

dependent on and related to
our core business

EXPAND BEYOND THE

CORE

Fire & Security

Building Maintenance
Remote Monitoring
Generators
Performance
Contracting
Esco
Kitchen Solutions
Elevators & Escalators
Businesses that leverage our
core competencies and core
business infrastructure

34

Organize the Business To

Execute The Strategy

35

Sept YTD
Performance

Helping Build Better Lives and Businesses

Highlights

Economy and business fundamentals

remain positive

Significant adjustments in Q3 prior year

Consumer spending starting to pick up

Weaker Peso

Continued business optimism

Stronger Competitive activities

Growing order book

Competitive environment for larger

projects (lower margins)

Growing Pipeline and backlogs in BIS

business
Commodity Prices

Weak 1st half Consumer Aircon

purchases

Project Delivery Delays

37

Key Financial Highlights

Sept YTD

KEY HIGHLIGHTS

Net Sales & Gross Margin %

6,935
5,585

+12%

7,781

YTD growth at 12% on top of a 24% growth in 2014;

strong H1 2014 still shows a high base on a YTD basis

+24%

35.2%

34.2%

2013

Net Sales

2014

Market for Consumer Air-conditioning in the first half was

flat but resumed growth in Q3

32.1%

YTD Gross Margin dropped 2.1 pts.

.8pt due to significant adjustments
.5 pt due to FX
.8 pts margin pressure and business mix

2015

Gross Margin

Profit After Tax / Net Margin

+26%

824

Reported basis PAT down 2% and PATAMI down 3% on a

year todate basis

(2%)

1.5 pts drop in PAT% driven by

809

654

+21%

(3%)
495

409
11.7%

2013

11.9%

2014

PAT

10.4%

2015

482

7.3%

7.1%

6.2%

2013

2014

2015

PATAMI

1 pt. Significant adjustment on 2014

Opex increase outpacing volume growth
Margin pressure (large projects / business mix)
Foreign Exchange

Excluding significant adjustments, normative YTD results

show a 6% growth in PAT and PATAMI

38

PAT Roadmap Sept YTD

24
90
18
203

-2% Lower
Reported Growth

40
37

60

824

810

764

2014R

Significant
Adjustments

2014N

6%
Normative
Growth

Volume

Cost
Reduction

OPEX
Increase

Margin
Pressure

Business
Mix

FX

Others

2015

Significant adjustments represent significant reversals and catchups relating to the following accounts actualization of
dealer incentives and advertising, margin take-up adjustment on project costs, and one-timers.

Opex increase driven mostly by investments in organizational capability and COPI expenses representing 3 quarters in
2015 vs. 2 quarters in 2014).

Key Ratios and Cash Flow

Sep-15

Sep-14

Cash

1,838

1,665

Current Assets

6,368

5,650

Total Assets

7,888

7,164

Borrowings

673
3,534

Total Liabilities

Sep-15

Sep-14

Book Value

3,044

2,628

BVPS (in P)

8.96

7.74

Earnings per share

1.42

1.46

1,001

Return on Equity

22.7%

29.4%

3,474

Return on Assets

14.3%

19.0%

*annualized per SEC report

Net Cash Position

Cash

Q3

YTD Sep
Operating CF

Operating CF

% to PAT

% to PAT

CCAC

710

415%

336

43%

CDI

201

725%

463

454%

CIC

(21)

(90)

(92%)

COPI

(0)

(2%)

161

238%

Reported

890

470%

870

104%

Borrowing

Net Cash

728

664

1,165
1,838

1,807

1,665

1,355

1,079

1,001
673

2013

2014

Sep-14

Sep-15

40

Individual BU Performance
September YTD Performance

Helping Build Better Lives and Businesses

Sept YTD Performance

Air-conditioning Division

Net Revenue
(Php Mil)

Overall
41.9%

Consumer/ Retail

37.7%

41.1%

35.0%

5,280

4,858

39.7%

3,774

3,986

38.0%

2013

+ 14% + 9%

2014
Sales

* Normative GM :

* 44.8%
30.6%

3,889

3,108

+22%

Commercial / B2B

Project Management in 2013 was

treated as an expense. 2014 & 15 as cost of
sales

+30%
+21%

+ 3%

2014

2015

39.3%

38.2%

877

+20%
1,084

1,390

+24%

+28%

2014

2015

28.3%

27.4%

2015

2013

GM%

36.8%

35.4%

* Normative % :

26.7%

2013

Profit After Tax / Net Margin

(Php Mil)
15.4%

16.0%

Key Highlights

14.1%
9.2%

777

9% Overall Sales growth

3% growth in Consumer/Retail Sales

446

28% Growth in Commercial business and increasing

backlog

+ 27%

(4%)

4% decline in Reported Earnings

2014

2015

15% increase in Normative Earnings

9.6%

8.5%

744

612
367

+6%

2013

+27%

(4%)

2014

2015

PAT
* Normative % :

14.7%

0
2013

466

+6%

PATAMI
14.8%

8.8%

8.9%

Helping Build Better Lives and Businesses

42

Consumer / Retail Air conditioning

HIGHLIGHTS
Q3 Markets up significantly (+45%)

Favorable weather (El Nino)

Increasing Penetration Levels
Weakest qtr. for consumer sales
Trade inventory adjustments

Strong CCAC sell out - up 30%

Strong First time buyers

Mix implications due to smaller
models

Trade Inventory down almost 40%

Sell-in up 2% for Q3
Unexpected high Sell-out in Q3
brought trade inventory down

43

Orders, Pipeline & Backlogs

Billion pesos

Commercial Orders

41%
Growth

19%
Growth

0.6

Q1

2014

2015

Q2

Pipeline
6.5

Q1

42%
Growth

2015

GROWING PIPELINE

1.4

STRONG
ORDER
GROWTH

Q3

2015

2014

YTD

2015

Backlog
9.8

7.1

Q2

2014

1.9

0.6

0.4

0.4

0.3
2014

0.8

36%
Growth

1.8

1.6

1.3

Q3

Q1

Q2

Q3

STRONG BACKLOG
44

Sept YTD Performance

Refrigeration Division
Net Revenue

Key Highlights

(Php Mil)
18.5%
1,599

2013

23.7%
1,861

24.2%
2,037

12% earnings growth due to cost reductions and

new model introductions
+16%

+10%

2014

2015

Profit After Tax / Net Margin

(Php Mil)
2.6%

10% Sales growth, 14% Units growth

5.4%

[VALUE]

5.5%

[VALUE]

Market growth acceleration

High single digits / mid low teens to high
teens growth
Penetration level growth starting

42

+140%
2013

2014

+12%
2015

* 2014 Q3 includes 7M reversal of dealer incentives

2015 results exclude intercompany charges

45

+354%

Sept YTD Performance

+40%

Elevators & Escalators

*

Same period results

Net Revenue

Key Highlights

(Php Mil)
42.0%

33.2%

Improving Developer Engagement

464

Key Wins in the last 9 months

Strong new orders growth rate

+102%

Increasing Pipeline and Backlog

2015

Service & Manpower Improvement and

Reinforcement

Filling of key positions

229

2014

Profit After Tax / Net Margin

(Php Mil)

End
2014

Q1
2015

Q2
2015

Q3
2015

Pipeline

P .5 Bn

P2.8
Bn

P 3.6
Bn

P3.6
Bn

Backlog

P .1 Bn

P .2
Bn

P .5 Bn

P.5
Bn

16.4%

68
38

14.6%

+80%
2014

2015

+80%

Orders

2014

74

89

85

(million)

2015

60

257

132
46

NE Order Growth
Elevators & Escalators
(Php Millions)

Q3 YTD Orders & Margin %

7.5%

7.2%

Q3 Key Wins:
8.5%
427

1.8%

159

151

183%
VPY

2013

2014

2015

85
2012

Q3 YTD Units Booked

182

70

79

50

2012

2013

2014

130%
VPY

2015

Residential
Condo in
Shaw (P25M)

Performing
Arts Center in Taguig
(P5M)

Hotel in Tarlac
(P5M)

Condo Complex in Pasay

(P11M)

Hospital in Bataan
(P6M)

Condo Complex
in Taguig
(P4M)

Department Store in
Mindanao
(P5M)
47

Sept YTD Performance

unconsolidated

Consumer Appliances Division

Net Revenue
(Php Mil)
11.6%

Key Highlights
10.3%

120% growth YTD

4 fold increase in Non HVAC Sales

Continuous investment in building business

Expanded distribution coverage (259
stores / 131 manned)
Midea brand building
Expanding Product Line
Store Productivity

2015

Decreasing Net Loss Margin as volume and

scale increases

(69)

Transfer of HVAC business back to CMIP at end

of December (Sales reversals)

278
126

+120%
2014

2015

Profit After Tax / Net Margin

(Php Mil)
2014

+354%

+26%

(81)
-64.3% +19%

-24.7%

48

Building Capabilities
Building Capabilities
Soft Skills

YTD Training Hours (16,100)

Shared Service
Facilities &
Company

Technical

Q2

Increased Support &

Organization and
Facilities

Q3
COPI
Front line collaboration

External & Internal Hours

Internal - BIS
staffs
65%

Safety
42%
External
Custome
rs &
Contract
ors
35%

Safety

3,500

3,300

CCAC

ERP System
Implementation (SAP)
Training & Development

2,700

2,100
2,300
2,200

Product

6,200

5,400
4,500

Q1

Key Hires (HR,

Marketing, RD&E
and Change
Management)

Sales Training

Business development

Soft
Skills
13%

Technical
37%

Customer Events

Product
& Others
8%

25

Business development

Japanese Chamber of Commerce

First Oceanic Property Management

Otis Basic Safety Orientation

Company Restricted Information

19

49

Full Year 2015

Guidance

Helping Build Better Lives and Businesses

50

BOY Guidance
Q4

FY

Sales Growth

> 20% growth

~ 15 % growth

Operating Performance
Growth (Reported)
(PATAMI)

> 20 % growth

< 5% growth

Operating Performance
Growth-Net of prior year
adjustment (Normative)

> 25 % growth

~ 13 to 15 % growth

Strong Double digit Q4 Sales, Earnings and Cash Flow

Larger first time buyers and large project completions
Strong order and pipeline growth in the commercial aircon market

FY Sales Growth guiding at 15% growth

Reported earnings guiding lower at < 5 pts growth for full year 2015
Weak First Half sales growth
Margin impact due to weaker Peso outlook and lower margin on large projects
Lower margins due to Mix (larger first time buyer, new equipment buyer)
Provisioning for bad debt (~ P 28 million impact on PAT)
Write back of unused provisions in 2014 ~ P 70 million (lesser spend).

Excluding one-time adjustment ( P 70 million), Full year normative earnings growth expected to be at 13 to 15%,
51

2016 Outlook
and Guidance

Helping Build Better Lives and Businesses

52

2016 Outlook
OPPORTUNITIES

Positive Economic
Fundamentals
Overall Consumer and
Business Optimism

UNCERTAINTIES

CHALLENGES

Weather

Competition

Pricing trends

Margin Pressure
Process and System
Challenges

Strong commercial
backlog

FX

Commodities

World Economy

Finished Goods Costing

Political Uncertainty

New Products

Energy Shortage

Reinforced Management

Guidance
Q1

FY

Sales Growth

~ 15% growth

10 to 15 % growth

Operating Performance
Growth (Reported)

~ 15% growth

10 to 15 % growth

54

Thank you
Helping Build Better Lives and Businesses

55