1. GENERAL INFORMATION 2. BASIS FOR INTERIM FINANCIAL ... · PATO CHEMICAL INDUSTRY PUBLIC COMPANY...

PATO CHEMICAL INDUSTRY PUBLIC COMPANY LIMITED AND ITS SUBSIDIARY

NOTES TO THE INTERIM FINANCIAL STATEMENTS

FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER 2019 (UNAUDITED)

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1. GENERAL INFORMATION

Pato Chemical Industry Public Company Limited was a public company limited and was listed on

the Stock Exchange of Thailand in 1993. The Company is engaged in the business of formulating

and distributing of pesticide. The major shareholders is Trillit family.

The address of its registered office is at 3388 New Petchburi Road, Bangkapi, Huai Khwang,

Bangkok.

2. BASIS FOR INTERIM FINANCIAL STATEMENTS PREPARATION

The interim financial statements are prepared on a condensed basis in accordance with Thai

Accounting Standard (TAS) No. 34 Interim Financial Reporting; guidelines promulgated by the

Federation of Accounting Professions (“TFAC”); and applicable rules and regulations of the Thai

Securities and Exchange Commission.

The interim financial statements are prepared to provide an update on the financial statements for

the year ended 31 December 2018. They do not include all of the financial information required for

full annual financial statements but focus on new activities, events and circumstances to avoid

repetition of information previously reported. Accordingly, these interim financial statements

should be read in conjunction with the financial statements of the Company and its subsidiary for

the year ended 31 December 2018.

The preparation of interim financial statements in conformity with Thai Financial Report Standards

requires management to make judgments, estimates and assumptions that affect the application of

accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual

results may differ from these estimates.

“The Company” represents “Pato Chemical Industry Public Company Limited,” while “The Group”

represents “Pato Chemical Industry Public Company Limited” and its subsidiary which is “Pato Crop

Care Company Limited”.

The significant transactions between the Company and the Subsidiary have been eliminated in the

consolidated interim financial statements.

3. NEW FINANCIAL REPORTING STANDARDS

3.1 Financial reporting standards that became effective in the current period

During the period, the Group has adopted the revised (revised 2018) and new financial

reporting standards and interpretations which are effective for fiscal periods beginning on or

after 1 January 2019. These financial reporting standards were aimed at alignment with the

corresponding International Financial Reporting Standards with most of the changes directed

towards clarifying accounting treatment and providing accounting guidance for users of the

standards. The adoption of these financial reporting standards does not have any significant

impact on the Group’s financial statements. However, the new standard involves changes to

key principles, which are summarised below:


NOTES TO THE INTERIM FINANCIAL STATEMENTS (CON’T)


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TFRS 15 Revenue from Contracts with Customers

TFRS 15 supersedes the following accounting standards together with related interpretations.

TAS 11 (revised 2017) Construction Contracts

TAS 18 (revised 2017) Revenue

TSIC 31 (revised 2017) Revenue-Barter Transactions Involving Advertising Services

TFRIC 13 (revised 2017) Customer Loyalty Programmes

TFRIC 15 (revised 2017) Agreements for the Construction of Real Estate

TFRIC 18 (revised 2017) Transfers of Assets from Customers

Entities are to apply this standard to all contracts with customers unless those contracts fall

within the scope of other standards. The standard establishes a five-step model to account for

revenue arising from contracts with customers, with revenue being recognised at an amount

that reflects the consideration to which an entity expects to be entitled in exchange for

transferring goods or services to a customer. The standard requires entities to exercise

judgement, taking into consideration all of the relevant facts and circumstances when applying

each step of the model.

This standard does not have any significant impact on the Group’s financial statements.

3.2 Financial reporting standards that became effective for fiscal years beginning on or after

1 January 2020

The Federation of Accounting Professions issued a number of new financial reporting

standards and interpretations, which are effective for fiscal years beginning on or after

1 January 2020. These new standards involve changes to key principles, which are

summarised below.

Financial reporting standards related to financial instruments

A set of TFRSs related to financial instruments consists of five accounting standards and

interpretations, as follows:

Financial reporting standards:

TFRS 7 Financial Instruments: Disclosures

TFRS 9 Financial Instruments

Accounting standard:

TAS 32 Financial Instruments: Presentation

Financial Reporting Standard Interpretations:

TFRIC 16 Hedges of a Net Investment in a Foreign Operation

TFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

These TFRSs related to financial instruments make stipulations relating to the classification of

financial instruments and their measurement at fair value or amortised cost (taking into

account the type of instrument, the characteristics of the contractual cash flows and the

Company’s business model), calculation of impairment using the expected credit loss method,

and hedge accounting. These include stipulations regarding the presentation and disclosure of

financial instruments. When the TFRSs related to financial instruments are effective, some

accounting standards, interpretations and guidance which are currently effective will be cancelled.




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The management of the Group is currently evaluating the impact of these standards to the

financial statements in the year when they are adopted.

TFRS 16 Leases

TFRS 16 supersedes TAS 17 Leases together with related Interpretations. The standard sets

out the principles for the recognition, measurement, presentation and disclosure of leases, and

requires a lessee to recognise assets and liabilities for all leases with a term of more than 12

months, unless the underlying asset is low value.

Accounting by lessors under TFRS 16 is substantially unchanged from TAS 17. Lessors will

continue to classify leases as either operating or finance leases using similar principles to

those used under TAS 17.

The management of the Group is currently evaluating the impact of this standard on the

financial statements in the year when it is adopted.

4. SIGNIFICANT ACCOUNTING POLICIES

The interim financial statements are prepared using the same accounting policies and methods of

computation as were used for the financial statements for the year ended 31 December 2018, except

for the change in the accounting policies due to the adoption of TFRS 15, Revenue from Contracts

with Customers, as follow:

Revenue recognition

Sale of goods

Revenue from sale of goods is recognised at the point in time when control of the asset is

transferred to the customer, generally on delivery of the goods. Revenue is measured at the amount

of the consideration received or receivable, excluding value added tax, of goods supplied after

deducting discounts and consideration payable to customers.

5. TRANSACTIONS WITH RELATED PARTIES

5.1 Relationships and pricing policies

Relationships

Subsidiary :

Pato crop care Co., Ltd. Shareholding by the Company and Directorship

Related companies :

Kentex Properties Co., Ltd. Common Shareholders and Directors

Pricing policy

Sales Compared to market price

Purchase Cost plus margin

Management fee At Contract price which had been agreed upon

Rantal income/Rental expenses At Contract price which had been agreed upon




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5.2 Balance of transaction with related parties

Balances of transactions with related parties as at 30 September 2019 and 31 December 2018 are as

follows:

In Baht

Consolidated

financial statements

Separate


30 September

2019

31 December

2018

30 September

2019

31 December

2018

Trade accounts receivable

Subsidiary - - 12,208,878 21,566,796

Other accounts receivable

Subsidiary - - 1,576,521 905,605

Accrued dividend income

Subsidiary - - - 8,150,000

5.3 Revenue and expenses transactions between related parties

Transaction with related parties for the three-month periods ended 30 September 2019 and 2018

are as follows:

In Baht

Consolidated


Separate


2019 2018 2019 2018

Revenue from sales

Subsidiary - - 4,780,684 18,453,988

Rental income

Subsidiary - - 150,000 150,000

Management income

Subsidiary - - 395,353 789,206

Purchase

Subsidiary - - - 996,000

Rental expenses

Related company 240,000 240,000 240,000 240,000

Directors and

management’s benefits

Short-term employee benefits 2,010,616 2,028,512 2,010,616 2,028,512

Post-employment benefits 66,636 98,177 66,636 98,177

Total 2,077,252 2,126,689 2,077,252 2,126,689




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Transaction with related parties for the nine-month periods ended 30 September 2019 and 2018 are

as follows:

In Baht Consolidated


Separate


2019 2018 2019 2018

Revenue from sales

Subsidiary - - 26,812,621 52,150,415

Rental income

Subsidiary - - 450,000 450,000

Management income

Subsidiary - - 1,126,521 2,240,267

Purchase

Subsidiary - - - 1,944,800

Rental expenses

Related company 720,000 690,000 720,000 690,000 Directors and management’s

benefits

Short-term employee benefits 5,836,384 5,949,250 5,836,384 5,949,250

Post-employment benefits 1,675,947 294,532 1,675,947 294,532

Total 7,512,331 6,243,782 7,512,331 6,243,782

6. SHORT-TERM INVESTMENTS

The movement in short-term investments held for trade investments for the nine-month period ended 30 September 2019 can be analysed as follows:

In Baht

Consolidated

financial

statements

Separate

financial

statements

Opening balance 185,339,394 177,325,063

Additions 10,000,000 10,000,000

Disposal during period (141,373,972) (133,373,972)

Gain on sales of Short-term investment 475,912 456,352

Change in fair value 901,080 915,168

Ending balance 55,342,414 55,322,611




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7. TRADE AND OTHER ACCOUNTS RECEIVABLE


Financial Statements

Separate

Financial Statements

30 September

2019

31 December

2018

30 September

2019

31 December

2018

Trade accounts receivable-

Related company (Note 5.2) - - 12,208,878 21,566,796


Other companies 98,616,187 147,363,562 85,897,945 124,919,189

Total trade accounts receivable 98,616,187 147,363,562 98,106,823 146,485,985

Other accounts receivable-

Related companies (Note 5.2) - - 1,576,521 905,605

Accrued dividend-Related

companies (Note 5.2) - - - 8,150,000

Advances payment 1,781,964 2,249,955 1,781,964 2,249,955

Prepaid expenses 780,774 1,717,174 770,774 1,697,174

Total 101,178,925 151,330,691 102,236,082 159,488,719

Trade accounts receivable as at 30 September 2019 and 31 December 2018 are as follows:

In Baht

Consolidated


Separated


30 September

2019

31 December

2018

30 September

2019

31 December

2018


Related company

Within credit terms - - 10,258,892 21,566,796

Overdue : Less than 3 months - - 1,949,986 -

Total trade accounts receivable-

Other companies-net - - 12,208,878 21,566,796


Other companies

Within credit terms 98,165,177 147,363,562 85,446,935 124,919,189

Overdue : Less than 3 months 403,172 - 403,172 -

7 -12 months 829,587 - 829,587 -

Total trade accounts receivable-

Other companies-net 99,397,936 147,363,562 86,679,694 124,919,189

Doubtful debt (781,749) - (781,749) -

Total trade accounts receivable 98,616,187 147,363,562 85,897,945 124,919,189




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8. INVENTORIES

In Baht

Consolidated


Separated


30 September

2019

31 December

2018

30 September

2019

31 December

2018

Finished Goods 20,701,049 13,533,552 18,145,878 12,958,157

Work In Process 2,100,557 1,254,568 2,100,557 1,254,568

Raw Material and

Packaging Supplies 237,092,792 275,991,686 231,505,075 267,559,808

Total 259,894,398 290,779,806 251,751,510 281,772,533

9. AVAILABLE-FOR-SALE INVESTMENTS

The movement in available-for-sale investments for the nine-month period ended 30 September 2019

can be analyzed as follows:

In Baht

Opening balance 57,110,258

Additions 2,208,156

Disposal during the year (2,213,895)

Gain on disposal of available-for-sale investments 213,392

Capital decrease (159,085)

Gain on change in fair value 1,642,202

Ending balance 58,801,028

10. INVESTMENTS IN SUBSIDIARY

Separate financial statements as at 30 September 2019 and 31 December 2018

Activities

Paid up Capital

(In Baht)

%

Holdings

At Cost

(In Baht)

Pato Crop care Co., Ltd.

formulating and

distributing of pesticide 5,000,000 100 5,000,000

11. PROPERTY, PLANT AND EQUIPMENT

Consolidated and Separate financial statements

In Baht

For the nine-month period ended 30 September 2019

Net book value, Beginning of period 56,461,078

Add Acquisition 7,489,689

Less Disposals (700,002)

Depreciation (5,745,474)

Net book value, End of period 57,505,291




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12. INTANGIBLE ASSETS

In Baht

Consolidated

financial

statements

Separate

financial

statements

For the nine-month period ended 30 September 2019

Opening net book value 24,001,786 21,425,881

Add Acquisition between period 2,991,456 2,138,086

Less Amortization (3,625,964) (3,554,563)

Closing net book value 23,367,278 20,009,404

13. SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONS

As at 30 September 2019, the Group and the Company has trust receipts amount of Baht 32.22

million (31 December 2018: the balance of the Group of Baht 87.38 million and the balance of the

Company in the amount of Baht 84.16 million) and as at 30 September 2019 the Group has the

facilities available with bank overdrafts and loans from banks in the amount of Baht 1,208.32

million (31 December 2018 : amount of Baht 1,220.70 million), which bear interest at the rate of

2.00%-2.80% per annum (31 December 2018 : 1.60%-2.54% per annum).

14. TRADE AND OTHER ACCOUNTS PAYABLE

In Baht

Consolidated


Separated


30 September

2019

31 December

2018

30 September

2019

31 December

2018

Trade accounts payable-

other companies 19,507,336 48,295,606 19,423,193 47,743,289

Advances for inventories 22,663 6,782 22,064 6,782

Accrued expenses 20,213,892 31,288,408 16,578,059 27,650,060

Total 39,743,891 79,590,796 36,023,316 75,400,131




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15. EMPLOYEE BENEFIT OBLIGATIONS

The Company operate post employment benefit and pension based on the requirement of Thai

Labour Protection Act B.E. 2541 to provide retirement benefits and other long term benefit to

employees based on pensionable remuneration and length of service.

Movement in the present value of the defined benefit obligations:

In Baht

For nine-month period ended 30 September 2019

Defined benefit obligations at 1 January 2019 16,537,590

Included in profit or loss :

Current service cost 614,534

Past service cost 3,955,994

Interest cost 295,905

Actuarial losses 1,051,526

Defined benefit obligations at 30 September 2019 22,455,549

Amendments to the law relating to the legal severance pay rates

On 5 April 2019, The Labor Protection Act (No. 7) B.E. 2562 was announced in the Royal

Gazette. This stipulates additional legal severance pay rates for employees who have worked for

an uninterrupted period of twenty years or more, with such employees entitled to receive not less

than 400 days’ compensation at the latest wage rate. The law is effective from 5 May 2019. This

change is considered a post-employment benefits plan amendment and the Company and its

subsidiaries have additional long-term employee benefit liabilities of Baht 4 million as a result.

The Company and its subsidiaries reflected the effect of the change by recognising past service

costs as expenses in the statement of comprehensive income the second quarter of the current year.

16. DIVIDENDS PAID

At the ordinary shareholders’ meeting dated on 23 April 2019, the shareholders approved the

payment of dividends at Baht 1.00 per share for 142.4 million shares totaling Baht 142.4 million out

of operating of the year 2018. The Company has already paid for such dividends on 8 May 2019.

At the ordinary shareholders’ meeting dated on 24 April 2018, the shareholders approved the

payment of dividends at Baht 1.2 per share for 142.4 million shares totaling Baht 175.1 million out

of operating of the year 2017. The Company has already paid for such dividends on 8 May 2018.




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17. INVESTMENT INCOME

Investment income for the three-month and nine-month periods ended 30 September 2019 and 2018.

Consolidated financial statements In Baht For the three-month

periods ended

For the nine-month

periods ended

2019 2018 2019 2018

Gain(loss) on disposal of short-term

investments 3,949 (199,900) 475,912 (715,493)

Gain on disposal of available-for-sale

investments 213,392 668,594 213,392 1,811,167

Unrealized gain(loss) from changes

in value of investments (943,253) 2,133,374 901,080 (337,322)

Dividends income 1,832,281 1,080,130 4,426,430 5,381,394

Interest income 5,582 5,306 20,371 21,856

Total 1,111,951 3,687,504 6,037,185 6,161,602

Separate financial statements In Baht For the three-month

periods ended

For the nine-month

periods ended

2019 2018 2019 2018

Gain(loss) on disposal of short-term

investments 3,949 (199,900) 456,352 (715,493)

Gain on disposal of available-for-sale

investments 213,392 668,594 213,392 1,811,167

Unrealized gain(loss) from changes

in value of investments (943,332) 2,133,374 915,168 (337,322)

Dividends income 1,832,281 1,080,130 4,426,430 5,381,394

Interest income 5,582 5,306 19,609 21,752

Total 1,111,872 3,687,504 6,030,951 6,161,498

18. BUSINESS SEGMENT INFORMATION

Operating segment information is reported in a manner consistent with the internal reports that

are regularly reviewed by the chief operating decision maker in order to make decisions about the

allocation of resources to the segment and assess its performance.

The Group engaged in a business of formulating and distributing of pesticide. The Company

operates in one geographical area in Thailand. Therefore, these financial statements present the

financial information by segment.




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19. INCOME TAX

Income tax expenses for the three-month periods ended 30 September 2019 and 2018 are made up as

follows:

Income tax expenses for the nine-month periods ended 30 September 2019 and 2018 are made up as

follows:

In Baht

Consolidated


Separated


2019 2018 2019 2018

Current income tax:

Interim corporate income tax charge 6,297,823 9,315,132 6,057,223 8,665,052

Deferred tax:

Relating to origination and reversal

of temporary differences (217,046) (47,526) (217,046) (47,526)

Total 6,080,777 9,267,606 5,840,177 8,617,526

Income tax recognised in other

comprehensive income

Gain(loss) on change in value of

available-for-sale investments (570,011) 245,744 (570,011) 245,744



Separated


2019 2018 2019 2018

Current income tax:

Interim corporate income tax charge 18,758,732 28,209,114 18,030,353 26,487,689

Deferred tax:

Relating to origination and reversal

of temporary differences (1,129,636) (142,578) (1,129,636) (142,578)

Total 17,629,096 28,066,536 16,900,717 26,345,111

Income tax recognised in other

comprehensive income

Gain(loss) on change in value of

available-for-sale investments 328,440 (762,290) 328,440 (762,290)

Actuarial loss (210,305) - (210,305) -

Total 118,135 (762,290) 118,135 (762,290)




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Deferred tax assets in the statements of financial position as at 30 September 2019 and 31 December

2018 are summarized below.

Consolidated and Separate financial statements

20. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company and its subsidiaries use the market approach to measure their assets and liabilities

that are required to be measured at fair value by relevant financial reporting standards, except that

the cost approach or income approach is used when there is no active market or when a quoted

market price is not available.

Fair value hierarchy

In applying the above-mentioned valuation techniques, the Company and its subsidiaries endeavor

to use relevant observable inputs as much as possible. TFRS 13 Fair Value Measurement

establishes a fair value hierarchy categorising such inputs into three levels as follows:

Level 1-Use of quoted market prices in an observable active market for such assets or liabilities

Level 2-Use of other observable inputs for such assets or liabilities, whether directly or indirectly

Level 3-Use of unobservable inputs such as estimates of future cash flows

As at 30 September 2019 and 31 December 2018 the Group had the assets that were measured at

fair value using different levels of inputs as follows:

(Unit:Baht)

Consolidated Financial Statements

30 September 2019

Level 1 Level 2 Level 3 Total

Assets measured at fair value

Held for trade investments

Unit Trust - 55,342,414 - 55,342,414

Available-for-sale investments

Equity instruments 58,801,028 - - 58,801,028

In Baht

30 September

2019

31 December

2018

Statements of financial position

Increase in deferred tax assets

Doubtful debt 156,350 -

Provisions for employee benefit obligations 4,491,109 3,307,518

Surplus from changes in value of available-for-sale

securities 689,232 1,017,672

Deferred tax assets-Net 5,336,691 4,325,190




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(Unit:Baht)

Separated Financial Statements

30 September 2019




Unit Trust - 55,322,611 - 55,322,611



(Unit:Baht)

Consolidated Financial Statements

31 December 2018




Unit Trust - 185,339,394 - 185,339,394



(Unit:Baht)

Separated Financial Statements

31 December 2018




Unit Trust - 177,325,063 - 177,325,063






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21. FOREIGN CURRENCY RISK

The Company exposures to foreign currency risk relates primarily to their business transactions

which are denominated in foreign currencies, no financial derivative was adopted to manage such

risks.

As at 30 September 2019, the Company has asset and liabilities which are not hedged as follows:

Exchange rate

Currency Amount (In Baht)

Trust receipts U.S. Dollars 1,047,135

30.7661

Trade Account payable U.S. Dollars 180,432

30.7661

YEN 28,819,200

0.287284

22. PROCEEDING IN THE EVENT THAT THE DEPARTMENT OF AGRICULTURE CONDUCTS

A DRAFT OF THE MINISTRY NOTIFICATION OF HAZARDOUS SUBSTANCE TYPE 4

On 22 October 2019, the meeting of the Hazardous Substance Committee considered canceling

the use of Paraquat, Chlorpyrifos, and Glyphosates. The meeting approved a resolution of the

adjustment of all 3 pesticides from Type 3 Hazardous Substances into Type 4 Hazardous

Substances (Hazardous substances that are prohibited to be manufactured, imported, exported or

possessed) proposed by the Ministry of Agriculture and Cooperatives with immediate

enforcement from 1 December 2019. The meeting assigned the Department of Agriculture to

carry out a draft Ministry Notification of the Hazardous Substance List and provide a public

hearing for further consideration of the committee. The manufacturers, importers, exporters, or

the possessors of the Type 4 Hazardous Substances prior to the effective date of the Ministry

Notification, must comply within thirty days from the effective date of the Announcement of the

Ministry. The stakeholders are in the process of preparing a consultation with the relevant

government agencies to consider the common practice of resolving the said impact on all relevant

parties.

As at 30 September 2019, the Company has inventories of the said chemicals in the amount of

Baht 55.8 million. However, the Company’s management has not been able to evaluate the

impact on the value of such inventories because there is uncertainty about the timing of the

consideration of issuing the law in addition to the fact that the Company is able to sell such

products after the meeting had the resolution to cancel the use of such 3 chemicals. Therefore, the

Company has not considered to record an allowance for devaluation of inventories as at

30 September 2019.

23. COMMITMENTS AND CONTINGENT LIABILITIES

As at 30 September 2019, the Company:-

a) Has long-term lease agreement covering office space ending 31 May 2021. The rental charges

amounted to Baht 80,000 per month.

b) Has contingent liabilities from letters of guarantee issued by banks for the payment of

electricity amounting to Baht 294,500.

24. APPROVAL OF INTERIM FINANCIAL STATEMENTS

These interim financial statements were authorized for issue by the Board of Directors on

14 November 2019.

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