Fushi Copperweld, Inc. <br />ROTH Fall Conference<br />September 2010<br />
Forward Looking Statements<br />SAFE HARBOR LANGUAGE<br />This presentation may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, which can be identified by the use of words such as “believes,” “expects,” “may,” “will,” “intends,” “plans,” “estimates” or “anticipates,” or other comparable terminology as well as future or conditional verbs such as “will,” “should,” “would,” or “could” or by discussions of strategy, plans or intentions. These statements are based on management’s current expectations and assumptions about the industries in which the Company operates. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, those risks and uncertainties described in the Company’s most recent Annual Report on Form 10-K, including under “Forward Looking Statements and Associated Risk” and “Risk Factors”, and Fushi Copperweld’s quarterly reports on Form 10-Q. These reports can be accessed through the “Investor Relations” section of Fushi Copperweld’s website at www.fushicopperweld.com. Fushi Copperweld disclaims any intent or obligation to update or revise any forward-looking statements in response to new information, unforeseen events, changed circumstances or any other occurrence. All forward-looking statements are qualified in their entirety by this cautionary statement.<br />USE OF NON-U.S. GAAP FINANCIAL INFORMATION AND RECONCILIATION TO COMPARABLE GAAP NUMBER<br />For the purpose of this presentation, the company has used certain other financial measures such as EBITDA (defined as net income before interest expense, interest income, income taxes, depreciation and amortization), Adjusted EBITDA (net income before interest expense, interest income, income taxes, depreciation and amortization as adjusted to remove charges related to changes in the fair value of derivative liabilities), and Adjusted EPS (defined as earnings per share as adjusted to exclude unusual gains and charges) that are not determined in accordance with generally accepted accounting principles in the United States (GAAP). The company believes that these non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission are useful to investors because they facilitate period-to-period comparisons of Fushi’s Copperweld performance and enable investors to assess the company’s performance in the way that management does. EBITDA, Adjusted EBITDA and Adjusted EPS may not be comparable to similarly title measures reported by other companies, and should be considered in addition to, and not as substitutes for, or superior to operating income, cash flows, revenues or other measures of financial performance prepared in accordance with U.S. GAAP. Such measures are not a completely representative measure of either the historical performance or the future potential of Fushi. Reconciliations of these measures to GAAP measures are included in the appendix.<br />2<br />
Who We Are<br />A leading global manufacturer of bimetallic wire – fast growing substitute for solid copper wire <br />Infrastructure applications: utility, telecom and transportation<br />Customized, engineered conductors – not commodity products<br />Proprietary technology and high-quality products<br />Multinational company with facilities in China, U.S. and UK<br />3<br />
Investment Highlights<br />Global leadership: products, technology, scale, brand<br />Rapidly growing Chinese and global infrastructure markets<br />Proprietary technology – high barriers to entry<br />Strong growth profile with minimal capex requirements thanks to lean manufacturing techniques<br />Financial strength and flexibility<br />Experienced management team with significant insider ownership<br />4<br />
Creating the Global Bimetallics Leader<br />5<br />Fushi International begins operations in response to huge need for wire in China<br />Fushi International lists on Nasdaq<br />Well-positioned for strong growth globally<br />Fushi acquires Copperweld, forming the world's largest bimetallic wire producer<br />Fushi International goes public<br />~<br />2001<br />2005<br />2007<br />2010<br />~<br />~<br />~<br />~<br />1915<br />1999<br />2000<br />2001<br />1975<br />2005<br />2006<br />CopperweldBimetallics engineers create a metallurgical bond between copper and steel<br />CopperweldBimetallics spun off<br />Copperweld Inc. acquired by LTV, a large steel producer<br />LTV files for Chapter 11 protection as a result of the steel cycle<br />Copperweld Inc. sold to Atlas Tube (Dofasco)<br />Established copper cladding capacity at greenfieldfacility in Tennessee<br />Combined the market access of Fushi with the brand and technology of Copperweld into a global leader<br />
6<br />Our products are engineered conductors, NOT commodity products<br />Superior Product Offering<br />
Proprietary Technology<br /><ul><li>Process has direct impact on product quality
Cladding (vs. plating) technology is significant barrier to entry
Appointed to Chinese National Standards Committee</li></ul>Bimetallic Capacity (MT)<br />77,000<br />15,000<br />4,800<br />Market Share<br />Brand Recognition<br />Breadth of Product Offering<br />Cost-Efficiency<br />Product Quality<br />Global MarketKnowledge<br />Customer Base<br />R&D / Technology<br />We are the only company with scale, global footprint, superior technology, and low-cost manufacturing in the bimetallic industry — the true worldwide leader.<br />Note: Based on management’s estimates.<br />Advantages over Western Competitors<br />Advantages over Chinese Competitors<br /><ul><li>Breadth and quality of products
Access to global growth markets</li></li></ul><li>Well-Diversified Business Mix<br />Product Mix<br />End Markets<br />Transportation1%<br />Geography<br />Customer Concentration<br />10<br />Note: All data refers to six month period ended June 30, 2010.<br />
Large, Addressable Wire / Cable Market <br />11<br />Broad End-Markets and Applications for Copper Wire & Cable<br />Global Wire & Cable Market <br />by Region<br />China<br />U.S.<br />$46 billion (1)<br />$21 billion (2)<br />$140 billion (1)<br />Electronic Equipment<br />(36%)<br />Electronic Equipment(32%)<br />Electric Utilities(22%)<br />Building Construction<br />(29%)<br />Electrical Equipment(13%)<br />Electrical Equipment(23%)<br />Industrial Machinery & Equipment<br />(13%)<br />Industrial Machinery & Equipment (6%)<br />Motor Vehicles(7%)<br />Building Construction<br />(12%)<br />Transportation(3%)<br />Other (3%)<br />Other(1%)<br />Source: “Insulated Wire & Cable in China to 2011”, The Fredonia Group, May 2008.<br />Source: “Insulated Wire & Cable: US Industry Study with Forecasts to 2015”, The Freedonia Group, Spetember 2006.<br />
China isa Rapidly Growing Market<br />12<br />Telecommunications<br />Electric Utility<br />Transportation<br /><ul><li>Mobile and broadband penetration in Asia are at 51% and 11% and growing
Planned capex of $33 billion by largest power grid operator in 2010
Response to widespread power outages in mid-2000’s and increased energy demands
Over $100 billion planned investment in railway infrastructure in 2010
Planned capex spending railway infrastructure of over $700 billion over next decade
China railway network expected to be over 120,000 KM by 2020</li></ul>Sources: “Forecast Mobile Services, Worldwide, 2004-2013”, Gartner Dataquest Market Statistics. “Forecast Mobile Services, Asia/Pacific 2004-2013”, Gartner Dataquest Market Statistics, and Wall Street Research, Electrics Components Industry Association Branch of Optical Cable of China, Ministry of Industry and Information Technology, Ministry of Railways, <br />
Making Inroads into New Geographical Markets Poised for Growth in the Long-Term<br />13<br />India<br />Brazil<br />Middle East<br /><ul><li>Ambitious 20-year plan to raise country’s standard of living has created opportunities in utility, CATV and public transportation.
The world’s second-largest population with a booming service sector economy means enormous opportunity in telecom.
As host country for 2014 FIFA World Cup and 2016 Olympics, Brazil is making massive infrastructure investments in utility, telecom and railway.
Copperweld® CCS brand is already very well-known and the product has been widely used in much of the country.
Transition to post-petroleum economy has begun with many opportunities in solar, wind and other renewable energy projects.
Railway projects, particularly in the UAE and Saudi Arabia, have been announced. Modern cities such as Dubai, Abu Dhabi and Riyadh are requiring more build-out in infrastructure.</li></ul>Sources: Brazilian Ministry of Finance — Your Industry News — The Cable Directory — CRU<br />
14<br />Growing Global End Markets<br />We have access to all of the fastest-growing end-markets globally<br />Note: All figures represent Compounded Annual Growth Rates (“CAGRs”). <br />Sources: Energy Information Administration “International Energy Outlook”, 2006 , Gartner Dataquest Market Statistics, Jefferies Equity Research estimates, Wall Street Research estimates, World Bank data and Global Wind Energy Council data, and the Association of the European Rail Industry “Worldwide Market for Railway Infrastructure”. <br />
Penetrating & Expanding Markets<br />Organic Growth Opportunities<br />Acquisition Strategy<br /><ul><li>Expansion of existing applications into new, high-growth emerging markets
Increase market share within geographical areas currently served
Continue developing new products, applications and markets to diversify and enhance profitability
Relocate assets to new facility Yangtze River Triangle; provides direct access to over 100 telecom and power cable and wire manufacturers</li></ul>16<br />Reported 2009 revenues as audited under Chinese GAAP of approximately $24 million.<br />
First Half Year 2010<br />18<br />In million $, except per share amount<br />(1) Adjusted for non-recurring items. See appendix for reconciliation between reported and adjusted result.<br />
Source: Copper and aluminum prices sourced from Platts Metal. Steel prices are listed in American Metal Market and represent an average of the specific types of steel Fushi purchases, including processing costs. <br />Substantial Leverage to Copper Prices<br />19<br /><ul><li>Price products on a “metals plus” cost basis; contracts with customers work-in metal price adjustments
Copper costs directly impact selling prices but $ margin per lb remains stable through the cycle
High copper prices favor lower-cost bimetallic products</li></ul>Historical Pricing and Margins ($ / lb)<br />Constant $ margin per lb despite volatility in raw material prices<br />
Liquidity remains strong while at the same time executing internal growth and acquisition strategies</li></li></ul><li>Experienced Management Team<br />22<br />
Investment Highlights<br />Global leadership: products, technology, scale, brand<br />Rapidly growing Chinese and global infrastructure markets<br />Proprietary technology – high barriers to entry<br />Strong growth profile with minimal capex requirements thanks to lean manufacturing techniques<br />Low-cost producer; substantial leverage to price<br />Experienced management team with significant insider ownership<br />23<br />