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8-K - CHINA RUITAI INTERNATIONAL HOLDINGS CO., LTD. | v213791_8k.htm |
Investor Presentation
March 2011
We make consumer products better, stronger, safer
and longer lasting.
1
Safe Harbor Statement
Under the Private Securities Litigation Reform Act of 1995: Any statements set forth
herein that are not historical facts are forward-looking statements that involve risks
and uncertainties
that could cause actual results to differ materially from those in the
forward-looking statements.
Potential risks and uncertainties include, but are not limited to, such factors as
unanticipated changes in product demand, interruptions in the supply, downturns in the
Chinese economy, changes in
applicable regulations, and other information detailed
from time to time in the Company's filings and future filings with the United States
Securities and Exchange Commission. Accordingly, although the Company believes
that the expectations reflected
in such forward-looking statements are reasonable,
there can be no assurance that such expectations will prove to be correct.
2
Company Vision
We are the leading cellulose ether
manufacturer in China
We maintain a diversified
product portfolio
We have a global sales network
Our management team is experienced
in our industry
We make consumer products better,
stronger, safer and longer lasting
We constantly develop
new products to address current and
prospective customer needs
As consumer products mature in China, we intend to be the leading supplier of cellulose
ether in the Chinese market and a recognized exporter of cellulose ether worldwide.
President Xing Fu Lu
3
China Ruitais Product
As an adhesive, Hydroxypropyl Methyl Cellulose
(HPMC) is used as a binding agents in
adhesives such as glues or other construction materials.
As a food stabilizer or filler, Microcrystalline Cellulose (MC)
is a stabilizer in foods or
inactive filler in tablets and pharmaceuticals.
As a thickening and bonding agent, Hydroxyethyl Cellulose (HC) and Ethyl Cellulose
(EC) are used in cosmetics, shampoos, gels and pharmaceuticals.
Ginned cotton and wood pulp are the key raw materials for producing cellulose ether.
Cotton
Cellulose Ether
Cotton Crops
Cellulose ether is an organic, cotton-based chemical that dissolves in water and solvents for
use as a thickening and bonding agent in liquids and solids and a stabilizer in foods.
What is Cellulose Ether ?
Ginned Cotton
4
Select Financials
China Ruitai International Holdings Co, Ltd
OTCBB: CRUI
Sector
Industrial / Processed Chemicals
Fiscal Year
December 31st
Last-Traded Price (3/4/11)
$0.61
52-Week Range
$0.30 - $1.50
Average Volume (3 months)
2,560
Common Shares Outstanding (3/4/11)
26.0 M
Market Capitalization
$15.9 M
Management Ownership
86.5%
2009 Revenue
$35.7 M 13.1%
2009 Net Income
$5.6 M 8.4%
2009 Diluted EPS
$0.21 8.5%
2010 Guidance
REVENUES
NET INCOME
EPS
$ 43.0 M
20.4 %
$7.0 M
25.0 %
$0.27 23.8%
5
Corporate Overview
Original manufacturer of cellulose ether in China
The largest domestic manufacturer of non-ionic cellulose ether
Located in Wenyang town, Shandong province
12 major product categories marketed under the trademarked brand names
RuiTai and Rutocel
10 production lines with annual production capacity of 8,500 tons
555 full-time employees
Shandong
Ruitai
6
Milestones
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
In Oct, Tai An Ruitai Cellulose Co, Ltd.
was established
1st and 2
nd production lines with
Annual designed production capacity
was 500 tons (HPMC, MC)
In May, EC was successfully
developed
3rd HEC production line was
launched (annual production
capacity 500 tons)
In July, H-HPC was developed
4th HPC production line was launched
(annual production capacity 170 tons)
5th production line with annual
capacity of 750 tons was launched
HEMC was developed
6th production line with
annual capacity of 3,000
tons was launched
MCC was developed
7th production line with
annual capacity of 450
tons was launched
8th production line with
annual capacity of 1,300
tons was launched
9th production line with annual
capacity of 1,500 tons was
launched
In November, Shandong Ruitai Co,
Ltd. conducted RTO on OTCBB\
10th production line with
annual capacity of 500
tons of EC was launched
7
Product Categories
MC / HPMC / HEC / EC
12 major product categories with 260 industry-specific products
HEC and EC (Hydroxyethyl Cellulose
and Ethyl Cellulose)
Normal grade for shampoo, paint and
glossy gels and pharmaceutical
Gross Profit Margin: 46.46%-51.64%
HPMC (Hydroxypropyl Methyl
Cellulose)
Epoxy component for
cement and adhesive applications
and also pharmaceutical, food and
cosmetics.
Gross Profit Margin: 30%-31.14%
Revenue Contribution (%)
FY2010
MC (Microcrystalline Cellulose)
Adhesive and stabilizer in construction
materials, ceramics, disperser for
pesticide etc
Gross Profit Margin: 17.91 24.23%
8
Product Uses
Pharmaceutical
Membrane reagent, stabilizer,
thickener
Construction
Latex paint, cement applications as
thickener and adhesive
Food and Personal Care
Thickening agent in jam, ice cream,
and toothpaste
Cosmetics
Thickener for shampoo and lipstick
Petro-chemical
Basic component in PVC
Wide Applications for Non-Ionic Cellulose Ether
9
Global Demand
Source: * Cellulose Industry Association
Global demand for nonionic cellulose ether in 2009
was 650K tons and expected to reach 750K tons in 2010* with a
Long term CAGR of 9.1%
Nonionic cellulose ether global
demand by industry
PVC
Pharmaceutical
Construction
Other
10
Domestic Demand
Domestic Market
Total: 66,
500
tons/yr
Construction
Latex paint, mortar dry
mix, paint filler
2 5,000 tons/yr
PVC
HPMC improves quality
and performance
15,000 tons/yr
Pharmaceutical
Membrane re-agent,
disperser, stabilizer,
thickener
10,000 tons/yr
Food & Cosmetic
Toothpaste, ice cream,
eye-drops, thickener and
stabilizer
3,500 tons/yr
Others
e.g. Military
5,000 tons/yr or above
Petroleum
HPMC being used in
petroleum drilling
8,000 tons/yr
Non-ionic cellulose ether consumption by industry
Domestic output of non-ionic cellulose ether in 2009 was approximately 45,000
tons. The gap between output and demand was fulfilled by import
Source: Cellulose Industry Association
HPMC
EC
MC. HEC & EC
HPMC
HPMC
HPMC
11
Attractive Industry Outlook
International markets
provide opportunities
Attractive international marketplace
looking for lower cost cellulose products.
Industry consolidation
opportunities
Fragmented market offers capacity and
customer growth through acquisitions
China maintains labor and
raw material cost advantage
China Ruitais products are less
expensive than imports and competitive in
export markets
Domestic demand driven by key
consumer and infrastructure verticals
Policy stimulus in 2010:
Construction materials go to village*
Product properties difficult to substitute
Source: * No. 1 documents from Central Government in 2010 issued at Jan 31st 2010
12
Facilities and Production Lines
Staff of 555 including manufacturing on 10 production
lines, sales, marketing, administration and research and
development.
Since 2000, China Ruitai has built a succession of
production lines each year.
Current capacity of 10 production lines total approximately
8,500 tons per year.
Production lines are able to manufacture 260 different
types of cellulose ether tailored to specific product
manufacturing needs.
Lines are able to adapt to new product requirements and
differing blends of cellulose ethers specific to customers
product requirements.
13
Research and Development
Research team of 36 and actively recruiting
from top chemical engineering programs in the
Shandong Provinces.
Long-term relationship with prestigious
academic institutes:
Beijing Institute of Technology
Guangzhou Chemical Research Institute
Jinxi Chemical Research Institute
Shenyang Medical College
China Pharmaceutical University
Wuxi Chemical Research Institute
Research teams coordinate with sales teams to
meet strict customer requirements
14
Sales and Customer Base
Stable sales network
Factory-direct sales force with significant
industry experience
Additional sales offices in JiangSu, Shanxi,
Guangxi, Guangdong, Xinjiang, Sichuang,
Yunnan, Heilongjiang and Hunan province
Broad customer base
Exports to US, Europe, Japan, India and South
Korea
Centralized sales for pharmaceutical, cosmetic
and food industry in the Shan Dong headquarter
95% direct sales to the customer
Domestic distribution into over 30 provinces
managed by 9 major sales offices
Source: * 12 months ended December 31, 2010
15
INTERNATIONAL
DOMESTIC
Established Competitors include Dow
Chemical
(US), Shin-Etsu (Japan),
Hercules (US), and Clariant Co
(Germany), Samsung Fine (South
Korea)
Higher price due to high production
and labor costs associated with cotton
cultivation and procurement
International companies have difficulty
competing with Chinese producers
competitive prices
Fragmented market with majority focused
on the construction industry
Relatively concentrated market in
pharmaceutical, food and petro-chemical
industries
Main Established competitors are:
ShanDong Heda - 5,000 tons/yr
Hercules China - 3,000 tons/yr
Huzhou Zhanwang 3,000 tons/yr
Competition
With 8,500 tons of annual production,
China Ruitai is the Leading Manufacturer in China
16
Management Team
Xing Fu Lu
President
Gang Ma
CFO
Dianmin Ma
Chairman &
CEO
Chairman Ma started the company in 2000 which was the original manufacturer of cellulose
ether in China.
Mr. Ma is a Professional Accountant with approximately 20 years of experience in the
chemical industries in China.
He has formerly served as Finance Manager for FeiCheng JinTai Company, FeiCheng Oil
Chemical Plant, and FeiCheng RuiTai Fine Chemical Company, Ltd.
Gang Ma was appointed Chief Financial Officer on November 8, 2007.
Mr. Ma worked for Shangdong GMB Company from August 1995 to July 1999 in the
companys financial and accounting department.
Crystal
Tang, VP
of Finance
Worked as associate in PricewaterCoopers investment management group.
Graduated from University of Illinois with a Masters in Accounting.
Xing Fu Lu is a professional engineer with over 25 years of experience.
Previously the General Manager in FeiCheng Oil Chemical Plant, and FeiCheng RuiTai
Fine Chemical Company, Ltd.
17
Revenue Growth
Total revenue for the first nine months of fiscal 2010 was $32.6 M, up 21.3% from
$26.9 M in the prior years period.
Adding to the revenues for the first nine months of 2010 were more sales to new
customers from the pharmaceutical, cosmetics and food industries.
18
Gross Profits and Margins
The gross profit margin decreased by 5.2% for the nine months ended Sept 30, 2010, from
35.5% to 30.2%, compared to the same period of fiscal 2009 as a result of the increase in
price for ginned cotton,
the Companys main raw material.
Ruitai is passing through price increases start from Q3 and resulted to increased the margin
for 570 basis points to 32% in the third quarter of 2010.
19
Net Income Growth
Net income for the first nine months of fiscal year 2010 was $5.3 M, compared to $4.4 M
in the prior years corresponding period, a 19.2% increase year over year.
Ruitai strictly controls costs to maximize earnings
20
Summary Statements
FY ended Dec 31
2008
2009
9 month 2010
Mgmt.
($'s in millions)
(Audited)
(Audited)
(Unaudited)
Guidance*
Revenues
41.1
35.7
32.6
43.0
Y/Y Growth
7.0%
-13.1%
Gross Profit
13.0
23.9
9.8
Gross Profit Margin
31.6%
66.8%
30.2%
Operating Income
8.3
7.7
7.6
Operating Margin
20.1%
21.6%
23.2%
Net Income
5.2
5.6
5.3
7.0
Net Margin
12.6%
15.7%
16.2%
16.3%
Dec 31, 2008
Dec 31, 2009
Sept 30, 2010
($'s in millions)
(Audited)
(Audited)
(Unaudited)
Cash and Equivalents
5.3
10.2
22.0
Current Assets
57.3
64.4
58.5
Total Assets
82.1
120.2
114.4
Current Liabilities
66.0
96.2
86.5
Total Liabilities
66.0
98.1
86.5
Total Stockholders' Equity
16.2
22.0
27.9
INCOME
BALANCE SHEET
21
Summary Cash Flow
($'s in thousands)
nine months ended Sept 30,
2010
2009
Cash Flow from Operating Activities
Net Income
5,290
4,439
Depreciation
1,778
968
Amortization of land use rights
84
80
Stock based compensation
0
166
Change in Operating Assets and Liabilities:
Restricted cash
16,769
(1,057)
Accounts receivable
(3,824)
(1,916)
Notes receivable
5,696
0
Advance to suppliers
(361)
0
Inventories
758
1,497
Other receivable
(1,207)
(886)
Accounts payable
1,081
343
Notes payable
(25,007)
11,691
Advance from customers
1,198
(237)
Income Tax Payable
953
970
Other payables
1,212
(2)
Net Cash Provided by Operating Activities
5,247
16,056
Cash Flows from Investing Activities
Purchase of property and equipment
(1,593)
(1,282)
Net Cash Provided by (Used In) Investing Activities
(1,593)
(1,282)
Net Cash Provided by (Used In) Financing Activities
7,750
(9,793)
Effect of exchange rate changes on cash
439
16
Net Change in Cash and Cash and Equivalents
(11,404)
-4,980
Cash and Cash Equivalents at Beginning of Period
10,175
5,319
Cash and Cash Equivalents at End of Period
22,019
10,315
22
Growth Strategies
Capture greater domestic share through aggressive sales
and marketing programs
Focus sales and production on high margin products
Grow international markets through distributors
Develop new products for specific industries
Increase Ruitai brand equity and recognition
23
Contact Us
Auditor: Bernstein & Pinchuck LLP
Drew Bernstein
Seven Penn Plaza,New York, NY 10001
(212) 279-7900
Internal Control advisor: UHY Advisors
Melanie Chen
19 west 44th street,New York, NY 10036
(212) 381-4700
Attorney: Loeb & Loeb, LLP
Mitchell S. Nussbaum
345 Park Avenue, New York, NY10154
212.407.4159/212.504.3013
PRC Attorney: B & D Law Firm
Andy Gu
86 10 6478 9105
www.bdlawyer.com.cn
Company:
Crystal Tang VP - US Office
(212)-899-5131 Fax:(212) 899-3189
1221 Avenue of Americas Suite 4200
New York, NY 10020
crystal@rutocel.com
Mr. Dianmin Ma, CEO
Wenyang Town, Feicheng City ShanDong,
China 271603
Telephone: 86 538 38 50 703
http://www.ruitai.com
http://www.rutocel.com
Investor Relations:
John T. Mattio, SVP
HC International, CT and NY
(203) 616 5144
John.mattio@hcinternational.net