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Asia Bio-Chem Group

Asia Bio-Chem Group. September 2009. Forward Looking Information Statement.

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Asia Bio-Chem Group

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  1. Asia Bio-Chem Group September 2009

  2. Forward Looking Information Statement The contents of this presentation contain statements that may constitute “forward-looking statements” within the meaning of applicable securities legislation. Forward-looking statements may include financial and other projections, as well as statements regarding future plans, objectives or economic performance, or the assumptions underlying any of the foregoing. Forward-looking information involves significant risks, assumptions, uncertainties and other factors that may cause actual future results or anticipated events to differ materially from those expressed or implied in any forward-looking statements and accordingly, should not be read as guarantees of future performance or results. Actual results, performance or achievement could differ materially from those expressed in, or implied by, any forward-looking statements made and, accordingly, investors should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on Asia Bio-Chem’s business. The agents and the agents’ counsel assume no responsibility or liability of any nature whatsoever for the accuracy, adequacy or completeness of the publicly available information or as to whether all information concerning the Company required to be disclosed by the Company has been generally disclosed. The agents’ counsel and the Company's counsel are acting as counsel to the agents and the Company, respectively, and not as legal counsel to the subscriber. The agents have not engaged in any independent investigation or verification with respect to any of the information concerning the Company. Prospective purchasers are responsible for their own due diligence investigation in respect of any investment in the Company.

  3. Investment Highlights • Surging demand for agriculture products • Competitive advantages • Raw material supply • Proximity to transportation and infrastructure • Labor and capital costs • Track record of growth and profitability • Well defined growth strategies • Management has successful operating experience with extensive industry and government relationships

  4. Company Overview • Manufacturer and distributor of corn starch and related products in China with first plant in Liaoning Province (4th largest producer of corn in China) • Established in 2003 • 333 employees going to 850 • First plant processing 300,000 tones/year at full capacity • Second plant under construction to process 600,000 tones/ year • Completed a $30 million private placement in June 08 • Listing on TSX Venture Exchange (Symbol: ABC)

  5. Industry Overview

  6. Industry Overview • Global corn starch industry is over 80 million tones/year representing over $50 billion in revenues

  7. Industry Overview • China is the second largest producer of corn in the world • Industrial processing in China consumes 40 million tones of corn /year • Starch production has grown by 20% per annum

  8. Chinese Market Consolidation • Chinese corn processing industry is in early stage of development: • Only 4 companies with over 1 million tones /yr of capacity • No major multinational are significant players in China Asia Bio-Chem expects to be the 5th largest producer in the PRC by the end of 2009

  9. Uses for Corn Starch in China S t a r c h 9.7 million t/yr 6 .6million t/yr 1.7 million t/yr 1.2 million t/yr Sweeteners Other Fermentation Products Modified Starch Polyols glucose, fructose, malt syrup dextrin, citric acid, MSG, lactic acid, lysine alkali starch, acified starch, sorbitol, maltitol, mannitol Food (Soft drinks, beer, dressings, confectionary goods, children’s vitamins) Pharmaceutical, industrial, feed, food (Noodles, pudding, baked goods, adhesives, detergent, MSG, animal feed, antibiotics) Food, textile, pulp and paper (Textile coatings, paper coatings) Fine chemicals, pharmaceuticals (Toothpaste, cosmetics, plastics)

  10. Company Operations

  11. Location 2 Plants • Existing plant in ChangTu, Liaoning • New Plant in Zhaoyuan, Heilongjiang Advantageous location for: • Abundant supply of corn • Transportation ZhaoyuanCounty Beijing ChangTu County

  12. Products Starch • 65% of revenue, 72% of volume • Textiles, food additives, chemicals, plastics, pharmaceuticals, biofuels Germ • 12% of revenue, 6% of volume • Cooking oil, margarine, mayonnaise, soaps, and a variety of other products • Gluten • 16% of revenue, 8% of volume • pork, poultry and cattle feed • Fiber • 7% of revenue, 14% of volume • cattle feed

  13. Changtu Facility • Constructed in 2003 • 300,000 Tones per annum processing capacity • Operating at full capacity • Includes waste water treatment facility 16,000 m2 Manufacturing Plant Corn Storage 74 m2 Laboratory Processing equipment

  14. Customers • Over 30 customers • 7 of top 10 have been customers for over 3 years • None > 10% of revenue • Customers are in high growth industries

  15. Growth Strategy Phase1: • Build Capacity in Starch • Expand Customer Base • Become a top player in market Phase2: • Diversify Product base • Add technology and/or distribution thru: Acquisitions, JV, Strategic Partnerships

  16. Daqing Facility • 600,000 Tones /y processing capacity (one of largest in PRC) • Heilongjiang Provincial Government has coordinated the local Railroad Bureau to extend the railroad into our plant at its cost. • HLJ Provincial Government has also coordinated with the local Electricity Bureau to extend the grid into our plant at its cost.

  17. Daqing Facility • 480,000 M3 parcel of land adequate to double the plant size • The Heilongjiang Provincial Government is promoting the development of a Bio Chemical Industrial Park based on our Daqing Plant in the Province.

  18. Daqing Plant Rationale Favorable location (limited local competition and low corn costs) Acceleration of our expansion of capacity All permits and licenses are in place Relationships with a supportive local government Adds key project management staff

  19. Financial Overview

  20. Financial Performance • Improved efficiencies has provided 29% average growth • Historically stable margins • Softer market conditions and government purchases of corn in North • East China in Q4 08 and Q1 09 have created margin pressure

  21. Product & Input Pricing Historically there has been a consistent relationship with our product prices and the price of our major input, corn.

  22. Product & Input Spread Seasonally higher margins were not experienced in late 08 due to PRC Government regional purchasing of corn in North East China

  23. EBITDA and Earnings • 21% average growth in EBITDA* • Post 2007 additional cost including: Public company costs, Daqing startup costs and taxation * Adjusted for $2.7mm stock-based compensation charge in 08 ($2 .2mm in 1H 09) and $2.8mm in foreign exchange gain and gain on sale of equipment in 07

  24. Balance Sheet & Capital Structure The Company has recently secured long and short term debt facilities : • RMB 35 million ($6.6 million) Working Capital line from China Construction Bank • RMB 100 million ($18.9 million) Long term loan from China Construction Bank • RMB 100 million ($18.9 million) Long term loan from Zhaoyuan Government (1% interest)

  25. Daqing Construction Summary • Completion of the Daqing plant will be financed with two term loans, cash and equipment vendor financing • 2009 obligations • 2008 2009 2010

  26. Balance Sheet & Capital Structure

  27. Comparables • Asia Bio-Chem trades at a significant discount while maintaining superior gross margins

  28. Investment Highlights • Surging demand for agriculture products • Track record of growth and profitability • 300% growth within 6 months • Management has extensive operating expertise in China with strong customer and government relationships

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