F I N A N C I A L H I G H L I G H T S
2004 2003 2002
Data from Financial Statements
Total Assets (Baht Million) 21,718 14,965 21,528
Total Liabilities (Baht Million) 2,911 9,364 64,979
Total Shareholders’ Equity (Baht Million) 18,807 5,601 (43,451)
Sales (Baht Million) 21,270 12,622 5,914
Total Revenues (Baht Million) 21,979 13,517 6,255
Gross Profit (Loss) (Baht Million) 3,059 833 (217)
Operating Profit (Loss) (Baht Million) 2,599 1,187 (1,080)
Net Profit (Loss) (Baht Million) 8,902 48,005 (1,080)
Financial Ratios
Gross Profit (Loss) Ratio (%) 14.38 6.60 3.67
Operating Profit (Loss) Ratio (%) 12.22 9.40 (18.26)
Net Profit (Loss) Ratio (%) 40.50 355.15 (17.27)
Average Return on Equity (%) 72.94 n/m n/m
Average Return on Assets (%) 48.54 263.10 (4.96)
Net Earnings (Loss) per Share (Baht) 1.36 15.45 (0.22)
Book Value per Share (Baht) 2.29 10.18 (8.69)
1
M E S S A G E F R O M C H A I R M A N
The year 2004 marked significant changes and was a year in
which the company recorded remarkable success, having
quickly turned over its business to a normal situation. It enjoyed
significant improvement in operating results with the total sales
volume of as high as Baht 21,270 million, an operating profit of
Baht 2,599 million, doubling the increase over the previous
year, producing net profit of Baht 8,902 million. This was a
result of the overall steel industry situation, having stable
growth in consumption and price levels in addition to dedication
and cooperation between the management team and staff
within the company to improve production efficiency and product
quality to be widely accepted by customers. Consequently,
G Steel increased its export to North America, Europe and
Middle East. Furthermore, it successfully undertook a financial
restructure and is now on a strong and stable financial position
and considered the sole steel producer in the country having no
financial liabilities and registering the lowest debt to equity ratio.
Last year, the company modified its policies and management
structure in many areas to establish good corporate governance
under efficient internal controlling and auditing systems. It was
aimed at building confidence among shareholders, investors
and all parties concerned. It also emphasized on environmental
concerns, operational safety as well as social contributions
to enable local communities and our society to grow with
quality.
Apart from the aforementioned development and changes in the
year 2004, it took an opportunity to launch a new corporate
image reflecting its vision and mission to be the leader of
Thailand’s integrated steel industry. In this regard, the
company’s name was changed to “G Steel Public Company
Limited” in early 2004 with “3 Gs” policies:
GLOBAL: World class production technological development to
make steel products with an international standard quality to
meet a variety of customers’ requirements both in domestic
and overseas markets.
GROWTH: Management with a focus on sustainable and quality
growth by administrating all resources efficiently and appropriate
investment to attain value added to the organization, consistent
with worthy return on investment to shareholders.
GREEN: The company’s steel industry development keeps
balance between environmental concerns, contribution towards
local communities and society to have a better quality of life.
I would like to express my gratitude to all shareholders for the
confidence and continuing support extended to the company.
The Board of Directors and I are wholeheartedly determined
to manage the business for steady progress and growth to
achieve the stipulated mission to provide consistent and
worthy returns to the shareholders.
Dr. Vira Susangkarakan
Chairman of the Board of Directors
14
M E S S A G E F R O M OF T H E E X E C U T I V E C O M M I T T E E CH A I R M A N
Having been through the economic crisis, G Steel Public
Company Limited not only repaid total debts to financial
creditors but also improved the efficiency of its integrated plant,
as a result of the produced 1.1 million tons of hot rolled steel
meeting customers’ quality requirements and with short delivery
times, hence satisfying both domestic and overseas customers.
According to 2004 operating results, the company saw a
continuous increase in sales volumes and substantial rise in
operating profit. Nevertheless, its export merely accounted for
approximate by 20% of the total product sales volume. It was
relatively low compared to orders from overseas customers
during the previous year. Due to a growing domestic demand as
a result of economic expansion after the country’s economic
crisis, the company worked out de-bottlenecking plan to
increase its annual production capacity from 1.8 million tons to
3.4 million tons. The plan also included the addition of pickling
and oiling line, and HRC pickling and conditioning line in response
to demands of both domestic and overseas customers those
requiring high quality hot rolled coils.
In 2005, although G Steel has been in a period of production
capacity expansion, it will definitely record higher income.
This can be achieved through the maximization of production
efficiency at 1.5 million tons and its quality management
policy of “We are determined to produce and distribute hot
rolled steel to satisfy customers’ needs and to continually
develop the quality management systems together with the use
of environmental - friendly advanced technology”. This will lead
the company to become one of the world’s largest integrated
hot rolled coil mill leaders.
In the name of the Executive Committee, I would like to express
my gratitude to all shareholders and partners including
customers, raw material suppliers and service providers over
the previous year. I will professionally maintain our operating
standards to enable the company to continually produce and
distribute high quality hot rolled coils.
Dr. Somsak Leeswadtrakul
Chairman of the Executive Committee
15
I N F O R M A T I O N O N T H E B O A R D O F D I R E C T O R S A N D M A N A G E M E N T T E A M
Name / Position
Age
(Years) Relationship Education % of Shares Experience
01. Mr. Vira Susangkarakan
• Chairman
74 - none - • A Directors Accreditation Program
(DAP) at the Thai Institute of Directors
Association
- none - G Steel Public Company Limited
1995-Present : Chairman of the Board of Directors
• Honorary doctorate in business
administration from Berks University,
United Kingdom
• Class 18 National Defense Course
Other businesses
1993-Present : Chairman of Executive Committee
T.S.B. Trading Co., Ltd.
2002-Present : Chairman of the Board of Directors
at the National Defense Academy
• M. Eng. (Civil Engineering) from
University of Illinois, USA
• B. Eng. (Civil Engineering) from
Chulalongkorn University
Thai Agro Energy Co., Ltd.
1993-Present : Chairman of the Board of Directors
Patkol Public Co., Ltd.
1998-Present : Chairman of the Audit Committee
Phoenix Pulp and Paper Public Co., Ltd.
02. General Singha Saovapap
• Vice Chairman
74 - none - • A Chairman 2000 Program at the
Thai Institute of Directors Association
0.02% G Steel Public Company Limited
2003-Present : Vice Chairman of the Board of Directors
• Honorary doctorate in Sociology and
Anthropology from Ramkhamhaeng
University
Other businesses
2003-Present : Chairman of the Board of Directors
• A Principle of Hospital Administration
Program
• M.D., Chulalongkorn University
Chaopraya Hospital Public Co., Ltd.
1994-Present : Chairman of the Board of Directors
Kanchanaburi Health Center Co., Ltd.
1993-Present : Chairman of the Board of Directors
Phattanakarn Vechakit Co., Ltd.
1986-Present : Chairman of the Board of Directors
Vibhavadi Hospital Public Co., Ltd.
1986-Present : Chairman of the Board of Directors
Jittiporn Co., Ltd.
1986-Present : Chairman of the Board of Directors
River Kwai Evergreen Hills Resort Co., Ltd.
18
Name / Position
Age
(Years) Relationship Education % of Shares Experience
03. Ms. Patama Chiachuabsilp
• Vice Chairman
40 Wife of
Mr. Somsak
• A Chairman 2000 Program at the
Thai Institute of Directors Association
12.94% G Steel Public Company Limited
2003-Present : Vice Chairman of the Board of Directors
• Executive Director
• Assistant Chief Executive Officer
Leeswadtrakul • Honorary doctorate in General
Administration from Ramkhamhaeng
University
• B. Econ., Ramkhamhaeng University
• Assumption Commercial College
: Executive Director
: Assistant Chief Executive Officer
Other businesses
1997-Present : Chairman of the Executive Committee
Paitoon Hotel and Resort Co., Ltd.
1990-Present : Chairman of the Board of Directors
Siam Jetty and Container Co., Ltd.
2003-Present : Chairman of the Board of Directors
G.E.I. Holding Co., Ltd.
04. Mr. Somsak Leeswadtrakul
• Director
52 Husband of
Ms. Patama
• A Chairman 2000 Program at the
Thai Institute of Directors Association
0.09% G Steel Public Company Limited
1995-Present : Director
• Chairman of the
Executive Committee
• Chief Executive Officer
Chiachuabsilp • Honorary doctorate in Industrial
Management from University of the
Americas, Louisiana, USA
: Chairman of the Executive Committee
: Chief Executive Officer
• Honorary doctorate in Administration,
Kasetsart University
• Honorary doctorate in General
Administration from Ramkhamhaeng
University
• B. Econ., Ramkhamhaeng University
Other businesses
1995-Present : Chairman of the Board of Directors
Siam Integrated Cold Rolled Steel Public
Co., Ltd.
1994-Present : Executive Director
Paitoon Hotel and Resort Co., Ltd.
1994-Present : Chairman of the Board of Directors
Felix River Kwai Resort (Kanchanaburi)
Co., Ltd.
1992-Present : Director
First Steel Industry Co., Ltd.
1992-Present : Director
Inter Metal Tube Alliance (Thailand) Co., Ltd.
1992-Present : Director
Siam Ferro Industry Co., Ltd.
1988-Present : Director
Thailand Iron Works Public Co., Ltd.
1995-Present : Director
Thai Special Steel Industry Public Co., Ltd.
1989-Present : Director
Thai Steel Pipe Industry Co., Ltd.
1990-Present : Director
Nas Toa (Thailand) Co., Ltd.
19
Name / Position
Age
(Years) Relationship Education % of Shares Experience
05. Mr. Chainarong
Monthienvichienchai
• Director
59 - none - • A Directors Accreditation Program
(DAP) at the Thai Institute of
Directors Association
0.02% G Steel Public Company Limited
2000-Present : Director
• M.A. (Management), Asian Institute
of Management
• B.A. (Business Administration),
Chulalongkorn University
Other businesses
2002-Present : Chairman of the Board of Directors
Paitoon Hotel and Resort Co., Ltd.
1994-Present : Director
Saint John for Education Co., Ltd.
1991-Present : Vice Chairman of the Board of Trustees
St. John’s University
1977-Present : Director General
St. John’s College
06. Mr. Yanyong Kurovat
• Director and Executive Director
66 - none - • A Directors Accreditation Program
(DAP) at the Thai Institute of
- none - G Steel Public Company Limited
2004-Present : Director and Executive Director
Directors Association
• Class 5 National Defense Course Other businesses
for Joint Private and Public Sectors
at the National Defense Academy
• Graduate Diploma in Government,
2000-Present : Managing Director
Technology Operation Group Co., Ltd.
2000-Present : Chairman of the Board of Directors
Chulalongkorn University Academic Network Co., Ltd.
• B.A. (Pol. Sci.), Chulalongkorn 2000-Present : Advisor
University Boonrawd Brewery Co., Ltd.
2000-Present : Advisor
Saha Transportation Thonburi Co., Ltd.
07. Mr. Prapanpong Vejjajiva
• Director
69 - none - • A Chairman 2000 Program at the
Thai Institute of Directors Association
- none - G Steel Public Company Limited
2004-Present : Director
• Class 28 National Defense Course
at the National Defense Academy
• Certificate in Business Administration,
Other businesses
2005-Present : Chairman of the Board of Directors
Stanford University
• Graduate Diploma in Welfare
Administration
• M.A. in Social Science, Stockholm
C & C International Venture Co., Ltd.
2001-Present : Chairman of the Board of Directors
Primavest Asset Management Co., Ltd.
1994-Present : Chairman of the Board of Directors
University
• B.A. (Pol. Sci.) (Honors) in
Government, Chulalongkorn University
Home Place Group Public Co., Ltd.
1995-Present : Director
Dhammaniti Public Co., Ltd.
1990-Present : Vice President (Development and Planning)
SASIN Graduate Institute of Business
Administration, Chulalongkorn University
20
Name / Position
Age
(Years) Relationship Education % of Shares Experience
08. ML. Sasivimol Kasemsri
• Director and Executive Director
40 - none - • A Directors Accreditation Program
(DAP) at the Thai Institute of
Directors Association
- none - G Steel Public Company Limited
2004-Present : Director and Executive Director
• Master of Intellectual Property (MIP),
Franklin Pierre Law, U.S.A.
Other businesses
2003-Present : Director
• LL.M. (International Laws),
Chulalongkorn University
• LL.B., Chulalongkorn University
The Unified Council Co., Ltd.
2000-2003 : Attorney
Law and Solicitors Co., Ltd.
1993-2000 : Attorney
Baker and Mckenzie Co., Ltd.
09. General Choochat
Kambhu Na Ayudhya
60 - none - • A Directors Accreditation Program
(DAP) at the Thai Institute of
- none - G Steel Public Company Limited
2004-Present : Director
• Director Directors Association
• Class 7 National Defense Course Other businesses
for Joint Private and Public Sectors 2003-Present : Chairman of the Board of Directors
at the National Defense Academy
• Certificate of Royal Thai Army
War College
• M.D. University of Munster, Germany
• Doctor of Medicine University of
Gottingen, Germany
• Residency Training in General
Surgery and Diploma of General
Surgery
Unity Percussion Co., Ltd.
2004-Present : Chairman of the Board of Directors
Lucky Music Co., Ltd.
2003-2004 : Advisor, National Defense Studies
Institute, Supreme Command
2001-2003 : The Surgeon General
Royal Thai Army Medical Department
2000-2001 : Chairman
Department of Anatomy
Phramongkutklao College of Medicine
1998-2000 : Deputy Surgeon General
Royal Thai Army Medical Department
10. Pol. Lt. General Prakard
Sataman
• Director and Executive Director
62 - none - • Class 1 Advanced Management
Program at the National Defense
Academy
• Class 37 National Defense Course
- none - G Steel Public Company Limited
2004-Present : Director and Executive Director
Other businesses
at the National Defense Academy
• LL.B., Thammasat University
• Interpol Training Course, U.S.A.
2000-Present : Member of Disciplinary Committee of
Office of the Auditor - General
2004-Present : Advisor
The Pure Drinks Co., Ltd.
2005-Present : Advisor of the Committee
N.E.C. Management and Development
Co., Ltd.
21
Name / Position
Age
(Years) Relationship Education % of Shares Experience
11. Mr. Stephane Benayon
• Director and Executive Director
37 - none - • B. Econ., York University - none - G Steel Public Company Limited
2003-Present : Director and Executive Director
Other businesses
2002-Present : Director
Superior Overseas (Thailand) Co., Ltd.
2003-Present : Managing Director
Distresses Assets Investment Ltd.
2003-2004 : Director
Prebon Yamane (Hong Kong) Ltd.
12. Mr. Jeong Joon Ahn 66 - none - • M. Econ, Dankuk University - none - G Steel Public Company Limited
• Director • B. Eng, Seoul National University 2004-Present : Director and Executive Director
• Executive Director : Senior Executive Vice President
• Senior Executive Vice President
Other businesses
1994-1997 : Vice President
Hanbo Steel Co., Ltd., South Korea
13. Mr. Paichitr Roajanavanich
• Director and Chairman of the
76 - none - • A Directors Accreditation Program
(DAP) at the Thai Institute of
- none - G Steel Public Company Limited
2004-Present : Chairman of the Audit Committee
Audit Committee Directors Association
• MGA Econ. (Public Finance),
Pennsylvania University, U.S.A.
Other businesses
1999-Present : Chairman of the Audit Committee
• Higher Diploma in Accountancy
(Equivalent to Master Degree)
Thammasat University
• LL.B., Thammasat University
MBK Development Public Co., Ltd.
1999-Present : Chairman of the Audit Committee
Pathum Rice Mill and Granary Co., Ltd.
1999-Present : Chairman of the Audit Committee
Muramoto Electron (Thailand) Public
Co., Ltd.
2002-Present : Chairman of the Audit Committee
Sicco Securities Public Co., Ltd.
2002-Present : Chairman of the Board of Directors
Sicco Advisory Co., Ltd.
2000-Present : Chairman of the Board of Directors
Far East Law Office (Thailand) Co., Ltd.
22
Name / Position
Age
(Years) Relationship Education % of Shares Experience
14. Mr. Chaipatr Srivisarvacha
• Director and member of the
Audit Committee
46 - none - • A Directors Accreditation Program
(DAP) at the Thai Institute of
Directors Association
- none - G Steel Public Company Limited
2004-Present : Director and Audit Committee
• MBA (Finance) Illinois Benedictine
College
• B.Sc. (Metallurgy), Lehigh University
Other businesses
2004-Present : Director
Payzy (Thailand) Co., Ltd.
2002-Present : Independent Director
Kudu Co., Ltd.
2002-Present : Independent Director
The Brooker Group Public Co., Ltd.
2001-Present : Independent Director
Thanachart Bank Public Co., Ltd.
1999-Present : Chief Executive Officer
Capmaxx Co., Ltd.
1993-Present : Director
Salon La Prairie (Far East) Co., Ltd.
1992-Present : Director
Faces Co., Ltd.
1992-Present : Director
SVAC Co., Ltd.
1999 : Director
Krung Thai Bank Public Co., Ltd.
15. Mr. Preecha Prakobkit
• Director and member of the
Audit Committee
56 - none - • A Directors Accreditation Program
(DAP) at the Thai Institute of
Directors Association
- none - G Steel Public Company Limited
2003-Present : Director and Audit Committee
• Executive Leadership Thunderbird,
The American Graduate School of
Other businesses
2002-2005 : Director
International Business Paitoon Hotel and Resort Co., Ltd.
• Senior Executive Program, SASIN
Graduate Institute of Business
Administration, Chulalongkorn
University
• Mini MBA, Thammasat University
• B.A. (Business Administration),
Roosevelt University, U.S.A.
1988-Present : Managing Director
Amway (Thailand) Co., Ltd.
16. Mr. Ryuzo Ogino
• Assistant Chief Executive Officer
61 - none - • B. Econ, Keio University, Japan - none - G Steel Public Company Limited
2004-Present : Assistant Chief Executive Officer
Other businesses
2001-2004 : Director
Suncall Co., Ltd.
1965-2001 : Managing Director
Itochu Corp.
23
Name / Position
Age
(Years) Relationship Education % of Shares Experience
17. Mr. Chalothorn Leelamali
• Executive Vice President
37 - none - • MBA., Business Administration,
NIDA
- none - G Steel Public Company Limited
2003-Present : Executive Vice President
• B. Econ., Chulalongkorn University
Other businesses
1999-2002 : Project Financial Controller
Metro Resources Public Co., Ltd.
1998-1999 : Financial Assistant Manager
Thainox Steel Co., Ltd.
1996-1998 : Financial Analyst
Shinho Paper (Thailand) Co., Ltd.
24
CHANGES IN SHAREHOLDING BY THE BOARD OF DIRECTORS AND MANAGEMENT TEAM
Shareholding (shares) : Par Baht 1
Name Position At 31 Dec. 2003 At 31 Dec. 2004 Increase/(Decrease)
1. Mr. Vira Susangkarakan Chairman - - -
2. General Singha Saovapap Vice Chairman - 1,500,000 1,500,000
3. Ms. Patama Chiachuabsilp Vice Chairman 275,800 1,061,060,793 1,060,784,993
4. Mr. Somsak Leeswadtrakul Director 1,209,100 7,154,071 5,944,971
5. Mr. Stephane Benayon Director 2,700,000 - (2,700,000)
6. Mr. Chainarong Monthienvichienchai Director - 1,500,000 1,500,000
7. Mr. Yanyong Kurovat Director - - -
8. Mr. Prapanpong Vejjajiva Director - - -
9. ML. Sasivimol Kasemsri Director - - -
10. General Choochat Kambhu Na Ayudhya Director - - -
11. Pol. Lt. General Prakard Sataman Director - - -
12. Mr. Jeong Joon Ahn Director - - -
13. Mr. Paichitr Roajanavanich Chairman of the Audit Committee - - -
14. Mr. Chaipatr Srivisarvacha Member of the Audit Committee - - -
15. Mr. Preecha Prakobkit Member of the Audit Committee - - -
16. Mr. Ryuzo Ogino Assistant CEO - - -
17. Mr. Chalothorn Leelamali Executive Vice President - - -
25
26
C h i e f E x e c u t i v e O f f i c e r
M r . S o m s a k L e e s w a d t r a k u l
T h e E x e c u t i v e C o m m i t t e e
T h e
A s s i s t a n t E x e c u t i v e O f f i c e r
M r . R y u z o i
V i c e P r e s i d e n t
M r . N o p a k a o S r i s u v a n o n
S e n i o r E x e c u t i v e V i c e P r e s i d e n t
( O p e r a t i o n s )
M r .
Vi ( i j
M r . J o a c h i m B u r g e r s
26
T H E C O M P A N Y ’ S
B o a r d o f D i r e c t o r s
C h i e f
O g n o
( O p e r a t i o n s )
J e o n g J o o n A h n
c e P r e s i d e n t E x p a n s o n P r o e c t )
S T R U C T U R E
27
A c t i n g V i c e P r e s i d e n t
( A c c o u n t i n g a n d F i n a n c e )
M r . C h a l o t h o r n L e e l a m a l i
V i c e P r e s i d e n t
( P u r c h a s i n g a n d M a r k e t i n g )
M s . K a n n i k a r S o y k e e r e e
E x e c u t i v e V i c e P r e s i d e n t
( A d m i n i s t r a t i o n )
M r . C h a l o t h o r n L e e l a m a l i
E x e c u t i v e O f f i c e r
M s . P a t a m a
I n t e r n a l A u d i t D e p a r t m e n t
T h e A u d i t C o m m i t t e e
V i c e P r e s i d e n t
( A d m i n i s t r a t i o n )
M r . N a k u n S a k u n c h o t i k a r o t e
27
A s s i s t a n t C h i e f
C h i a c h u a b s i l p
N A T U R E O F T H E B U S I N E S S
G Steel Public Company Limited is a producer and distributor of
hot rolled coil aiming at substituting imports and meeting
domestic customers’ demands. Its products serve as raw
materials for such downstream industries as cold-rolled coils,
galvanized steel, steel pipe, structural steel products for
construction, oil or LPG container, automobile parts as well as
electrical appliance industries.
Equipped with the world’s most advanced technology, its hot
rolled coil mill spent over Baht 40,000 million capital investment,
combining melting, casting and rolling processes in the
compact mini mill. It features:
• Melting technology in the Electric Arc Furnace;
• Casting technology in the Medium Slab Casting Machine and
• Rolling technology in the Hot Strip Mill
The process starts with melting steel scrap and pig iron in the
Electric Arc Furnace at 1600°C, the quality of the liquid steel
output is then improved with chemical additives to meet varied
demands of respective customers. It is cast into medium slabs
before being hot rolled into the customers’ required thickness.
It is the sole mill in Thailand and one of very few in the world
that is able to produce hot rolled coils at the lowest thickness
of 1.0 mm. The aforementioned continuous process merely
takes 3.5 hours.
The total annual production capacity was designed at 3.4 million
tons but, due to the economic crisis across the Asian region in
1997, the production line, then was not completely installed,
accomplishing the designed capacity of 1.8 million tons per year.
The production efficiency for mixed product outputs to meet
varied market requirements consequently ran at 1.5 million
tons per year. In 2004, the company’s hot rolled coil outputs
accounted for 1.1 million tons, 61% of the maximum designed
production capacity or 74% of the production efficiency.
At present, G Steel has the first phase de-bottlenecking
investment plan to increase the annual production capacity
from 1.8 million tons to 3.4 million tons. It will also introduce
production lines for high quality products, i.e., a pickling and
oiling line, picking and conditioning line to thoroughly respond
to customers’ demands. With promotional privileges from the
Board of Investment (BOI), the construction and production
line installation are scheduled to complete in 2007.
Furthermore, the firm received BOI promotional privileges for the
second phase development of an upstream smelting mini blast
furnace project to increase its potential and competitiveness
in the world market. The upstream project will feed hot metal
from a mini blast furnace to melt with scrap to improve liquid steel
quality. This will reduce the scrap consumption, bringing down
the major raw material costs and electricity cost. Meanwhile,
the higher quality output will be used to produce a range of
high quality steels. Significantly, the investment will be over 50%
lower than that of the conventional one as the mill already has
the Smelting Electric Arc Furnace and Medium Slab Casting
Machine. Although the second phase investment plan renders
huge benefits, the company will take portions of shares in order
to reduce investment burden.
30
INCOME STRUCTURE
Unit: (’000 Baht)
2002 2003 2004
Incomes Distribution Channels Sales Amount % Sales Amount % Sales Amount %
Sales Domestic 5,562,712 93.8 11,514,447 91.0 16,435,025 76.8
from Hot Overseas 351,146 5.9 1,107,716 8.8 4,835,227 22.6
Rolled Coils Total 5,913,858 99.7 12,622,163 99.7 21,270,252 99.3
Other Income 18,314 0.3 37,212 0.3 140,018 0.7
Total Income* 5,932,172 100.0 12,659,375 100.0 21,410,270 100.0
*Year 2004 excluded Reversal of Allowance for Compensation for Breach of Contract
Year 2002 – 2003 excluded gains from foreign exchange
DOMESTIC HOT ROLLED STEEL INDUSTRY SITUATION
Thailand’s domestic hot rolled steel industry in 2004 has
continually increased from the previous year with the key
factors being expansion in the automobile parts industries and
construction sector. Meanwhile, demand growth in the world
market, especially that of the People’s Republic of China,
substantially rose. This resulted in ongoing price increases
of upstream raw materials and year long increases in the
selling price of hot rolled steel in the world and domestic
markets.
According to reports by the Iron and Steel Institute of Thailand,
in the year 2004, the country’s demand for flat products
amounted to 7.3 million tons, a 7.8% rise over the previous
year. Of this, 5.6 million tons or a 5% increase in demand of
hot rolled steel from the year 2003. The total production
capacity of the country’s five hot rolled steel producers added
up to merely 3.9 million tons. The shortfall of 2.4 million tons
had to rely on import accounting for Baht 42,500 million value.
The hot rolled steel was mainly imported from Japan, it was
of high quality. The import volume tends to essentially increase
as Thailand’s steel consumption per capita is still low compared
to that of the region.
INDUSTRY TREND IN YEAR 2005
CRU Strategies forecasted that demand for flat products
worldwide in 2005 is approximately 384 million tons, a 5.2%
growth compared to 365 million tons in the preceding year.
The demand is mainly from the Asian region, especially the
People’s Republic of China where high quality steel products have
been steadily imported to cope with the country’s development
and automobile production base expansion. Meanwhile, steel
prices in the world market have some room to slightly increase.
As for Thailand’s hot rolled steel industrial trends in the year
2005, G Steel anticipated a rise in demand for hot rolled
steel products, the high quality one in particular, as results of
approximate 15-20% growths in automobile parts and
electrical appliance industries. In addition, there are demands
from the real estate industry and infrastructure development in
line with the government’s mega projects. The domestic demand
for hot rolled steel is forecasted to grow at 5-8%, approximately
the same growth rate as the previous year. Notably, pipe
makers, metal structural steel producers and metal slitting
plants - - G Steel’s alliances - - with the total production capacity
of not less than 1.5 million tons per year are ready to support
the company upon its capacity increment.
31
S A F E T Y, E N V I R O N M E N T A L C O N C E R N S A N D S O C I A L A C T I V I T I E S
Another mission of the company receiving an equal emphasis
with the business development and growth is operational safety,
occupational hygiene, environmental quality management and,
last but not least, social contributions. In the year 2004, G Steel
carried out activities in the above mentioned areas as follows:
SOCIAL CONTRIBUTIONS
Considering social contributions as important roles and
responsibilities, in the year 2004, the company constantly paid
full attention on relevant activities all year round. It carried out
activities and made donations to communities, educational
institutions and non-governmental organizations (NGOs).
Supports to various government offices include a subsidy of
personnel recruiting and hiring to assist Government Office of
Rayong Industrial Office; provisions of supplies and equipment
to local administrative offices and provisions of sports
accessories and equipment to communities. Donations for
education related activities were also provided to students in
several schools in Ban Khai district. Additionally, the company
donated Baht 3 million to the Foundation of Medical Station
Development for the construction of a medical station in
Sakon Nakhon province. Donations through various NGOs
and official offices were made to alleviate Tsunami affected
people in the six southern provinces. In addition, Baht 500,000
donation was to Handicapped Children Aid and Rehabilitation
Foundation at Pakkret Home for procurement of rehabilitation
equipment, medicines and food.
Support to the Foundation of Medical Station Development
Assistance to Tsunami affected people
Donation to the Handicapped Children Aid and Rehabilitation Foundation
32
SAFETY AND OCCUPATIONAL HYGIENE
A full range of fire protection equipment was installed in the
factory and office buildings. Coordination with governmental and
non governmental fire fighting units were made for readiness in
case of fire. Fire evacuation practice and training on uses of fire
extinguishers were included in the mill’s emergency plan.
Besides, first aid rooms and an emergency van are available
around the clock. The company provided machine controlling
employees with such safety equipment and kits as safety shoes
and helmets, heat protection uniforms, noise protection kits,
light filtering glasses, dust covers and so on. Furthermore, it
held an annual medical check-up for staff, providing them with
health and life insurance. The welfare is to cover medical
expenses in private hospitals for both work and non work
related illnesses.
ENVIRONMENTAL QUALITY MANAGEMENT
G Steel has commissioned an independent expert to monitor
and check its environmental quality; a relevant annual report is
continually prepared. According to the report for the year
2004, pollution levels of air and treated waste water drained
out meet official stipulated standards posing no environmental
effects. Moreover, it participated in the Greenhouse Gas
Emission Reduction from Industry in Asia and Pacific (GERIAP)
as per United Nations Environment Protection’s (UNEP) plan.
The project, coordinated by the Research Institute of Science
and Technology, is scheduled to complete in the year 2005.
Last year, it had a chance to receive UNEP executives and
experts from Sweden to visit the mill and received from them
academic recommendations and demonstrations on how to
improve the efficient use of energy in the production process.
Waste water treatment
33
K E Y E V E N T S I N 2 0 0 4
PROMINENT OPERATING SUCCESS
In the year 2004, the steel industry was continually growing both in terms of market demands and price levels. To keep abreast
with the rising demand for hot rolled steel together with the plan to expand its overseas market base, G Steel increased production
efficiency rate from 61% in 2003 to 74% in 2004. The total annual output amounted to 1.1 million tons, or 20% growth over the
previous year, with the additional output being mainly exported. This almost doubled export volume, accounting for 22% of the total
sales volume. The export markets expanded to countries in North America, Europe, Middle East and ASEAN. The higher export
volume proved that the company’s product quality and production standard are well accepted and competitive in the world market.
G Steel Public Co., Ltd. registered the total sales volume of Baht 21,270 million, a growth of 69% compared to that of the previous
year. This resulted from higher sales volumes and selling prices, an increase of 18% and 42% respectively. Most of the income was
from the domestic sales. Meanwhile, the company successfully managed the production cost control, contributing to an increase in
gross profit from 7% in 2003 to 14% in 2004 thus enjoyed an operating profit of as high as Baht 2,599 million, more than two times
higher than the previous year. Significantly, retained loss was cleared in as early as the first quarter. At the end of 2004, it recorded
cumulative profit of Baht 8,682 million.
BUSINESS ALLIANCES WITH OVERSEAS STEEL MANUFACTURERS
In 2004, the company and PT Krakatau Steel, an Indonesian hot rolled steel producer, signed a memorandum to cooperate in
international marketing, technology exchange and joint business development. The memorandum also covered assistance to each
other to supply products to the other party in case of shortage for the domestic markets, production related personnel exchange to
share knowledge and experience in order to improve and develop production process and to enhance production capabilities and
quality.
FINANCIAL RESTRUCTURING SUCCESS
In 2004, G Steel carried out major financial restructuring: its par value per share was changed from Baht 10 per share to Baht
1 per share, and the registered capital was increased from Baht 1,100 million to Baht 8,200 million. An additional 4,400 million
ordinary shares were issued and offered to existing shareholders at Baht 0.01 per share, while the other additional 2,700 million
shares were private offerings at Baht 1.60 per share. The paid up capital was used to early repay to four financial creditors of its
rehabilitation plan amounting to Baht 4,031 million. These creditors agreed to forgive the remaining debt of Baht 1,185 million. As
such, the company could save Baht 1,293 million of interest expenses as per the plan, discharged all collateral, i.e., lands, buildings,
machines and equipment, had no more financial burden. The company’s debt to equity ratio reduced to 0.15 times, thus significantly
strengthening financial position.
G STEEL’S PREPARATION FOR LISTING IN THE STOCK EXCHANGE OF THAILAND
On 5 October 2004, the 2/2004 extraordinary shareholders meeting approved the increase of the company’s registered capital
from Baht 8,200 million to Baht 12,000 million in preparation for an initial public offering (IPO) and processing of its listing in the
Stock Exchange of Thailand.
34
G E N E R A L I N F O R M A T I O N
Company’s Name G Steel Public Company Limited
(formerly Siam Strip Mill Public Company
Limited)
Head Office 88, 18th Fl. SSP Tower 3 Building
Silom, Suriyawong, Bangrak,
Bangkok 10500, Thailand
Tel. 0-2634-2222, Fax. 0-2634-4114
Plant Office 55 Moo 5 Tambon Nong Lalok,
Amphoe Ban Khai,
Rayong 21120, Thailand
Tel. 0-3886-9323 Fax. 0-3886-9333
Website: http://www.g-steel.com
Registered Capital 12,000,000,000 Baht
No. of Ordinary Shares 12,000,000,000 Shares
Par Value 1 Baht
Paid up Capital 8,200,000,000 Baht
No. of Paid up Ordinary Shares 8,200,000,000 Shares
Establishing Date 30 October 1995
Production Commencement Date 1 November 1999
Type of Business Production and Distribution of
Hot Rolled Coil
900 – 1,550 mm. Width
1.0 – 13.0 mm. Thickness
Production Electric Arc Furnace from Germany
Technology Medium Slab Casting Machine
from Japan
Hot Strip Mill from Japan
Designed Production Capacity 3,400,000 tons per year
Current Production Capacity 1,800,000 tons per year
REFERRALS
Securities Registrar G Steel Public Company Limited
88, 18th Fl. SSP Tower 3 Building
Silom, Suriyawong, Bangrak,
Bangkok 10500, Thailand
Tel. 0-2634-2222 Ext. 1401,
Fax. 0-2634-4114
Auditor Mr. Sophon Permsirivallop
Certified Public Accountant
Registration No. 3182
Mr. Narong Pantawong
Certified Public Accountant
Registration No. 3315
Ms. Rungnapa Lertsuwankul
Certified Public Accountant
Registration No. 3516
Ernst & Young Office Ltd.
193/136-137 33rd Fl. Lake Rajada Building
Rajadapisek Road, Khlong Toey,
Bangkok 10100
Tel. 0-2264-0777 Fax. 0-2264-0789-90
35
R I S K F A C T O R S
MARKETING AND COMPETITON RISKS
Hot Rolled Coil (HRC) is a commodity product with no differentiation
features, particularly in a modest quality market. These probably
pose high risks in price competition especially during the
market downturn. Nevertheless, there are no signs of the steel
industry slow down in the short or medium term. With the
management’s more than 30 - year experience in the industry
and its advanced production technology, the company can
promptly make products to meet international quality standards
and customers’ requirements. G Steel strongly believes that it
will be able to compete locally and internationally. During the
last two years, the company had developed its distribution
channels and firmly built up domestic market bases. In addition
to the local market, overseas markets are expanding to cope
with the future increased production outputs. To expand to a
high quality steel market segment that imports annually more
than 2 million tons of high quality hot rolled steel, the company
worked out a development plan to make the high quality product
within the next 2 years.
PRICE RISK
With a cycle of business upturns and downturns, the steel
industry inevitably faces market price fluctuation that naturally
directly affects the company’s income and profit, especially
during downturn cycles. In normal situation, the move in prices
of steel product and raw materials is in corresponding directions,
differences between those prices are not adversely affected.
In addition, G Steel has emphasized on raw material cost
management, maintaining conversion costs at appropriate
levels at all times and minimizing production wastage. At the
current production efficiency and competitiveness, it is believed
that the company will not be affected by the price fluctuations
during a downturn. Furthermore, the domestic steel industry has
been protected by an anti dumping import duty levied on hot
rolled coils from 14 exporting countries. This significantly
reduces selling price fluctuation in the country.
RAW MATERIAL SUPPLY RISK
Major raw materials of Hot Rolled Coil production are steel
scrap and pig iron in a 70 : 30 proportion. 80-90% of the scrap
is imported whereas the pig iron is wholly imported. This can
pose risks on raw material supply disruption and shortage.
However, current supplies of both raw materials are sufficient
for the company’s ongoing rising demands, additionally, the
company has established long standing and good relationship
with the suppliers who are major distributors with a worldwide
network of raw material sources. The raw material provisions
are hence of no concerns. As the company maintains 2-3 month
raw material inventory levels, it is confident it will not be
affected by any supply disruption in the market.
FOREIGN EXCHANGE RATE FLUCTUATION RISKS
While its expenses for the raw material imports are denominated
in US dollars on an unhedged basis, most of its incomes are in
Thai Baht. The company thus is exposed to foreign exchange
fluctuation risks. Despite the major incomes in Thai Baht, it
monthly sets selling prices for domestic markets in accordance
with the prevailing foreign exchange rates, and the timing
when the selling prices are set and payments for the raw
materials are remitted is not so far apart. The foreign exchange
risks for the company are therefore reduced. However, it is
contemplating appropriate tools from financial institutions to
properly cope with the risks.
36
M A N A G E M E N T A N D C O R P O R A T E G O V E R N A N C E
MANAGEMENT STRUCTURE
The company’s management structure comprises 3 committees:
the Board of Directors, Executive Committee and Audit
Committee, whose respective roles and responsibilities are
summed up as follows.
(1) THE BOARD OF DIRECTORS consisting of 15 members:
• Executive Directors 4 members
• Non - Executive Directors 5 members
• Independent Directors 6 members
As at 31 December 2004, the list of the Board of Directors is
1. Mr. Vira Susangkarakan Chairman
2. Mr. Somsak Leeswadtrakul Director
3. Ms. Patama Chiachuabsilp Director
4. Mr. Stephane Benayon Director
5. Mr. Yanyong Kurovat Director
6. ML. Sasivimol Kasemsri Director
7. Pol. Lt. General Prakard Sataman Director
8. Mr. Jeong Joon Ahn Director
9. Mr. Chainarong Monthienvichienchai Director
10. General Singha Saovapap Independent Director
11. Mr. Prapanpong Vejjajiva Independent Director
12. General Choochat
Kambhu Na Ayudhya Independent Director
13. Mr. Paichitr Roajanavanich Independent Director
14. Mr. Chaipatr Srivisarvacha Independent Director
15. Mr. Preecha Prakobkit Independent Director
AUTHORIZED SIGNATORY DIRECTORS ON G STEEL’S BEHALF
are Mr. Vira Susangkarakan, Mr. Somsak Leeswadtrakul,
Ms. Patama Chiachuabsilp, Mr. Stephane Benayon, Mr. Jeong
Joon Ahn, Mr. Yanyong Kurovat, ML. Sasivimol Kasemsri and
Pol. Lt. General Prakard Sataman. Two of the eight authorized
signatory Directors are to co sign with the company’s stamp.
THE BOARD’S ROLES AND RESPONSIBILITIES
1. To manage the business according to laws, company’s
objectives, rules and regulations as well as shareholders’
meeting resolutions with honesty and for the company’s benefits.
2. To stipulate the company’s policies and business direction
and to oversee and supervise the execution by the Management
to meet the set policies efficiently and effectively.
3. To be accountable for shareholders at all times and to
manage for the maximum benefits of the shareholders as well
as to disclose relevant accurate, complete and transparent
information to investors as per required standards.
4. To appoint and revise the company’s list of authorized
signatory directors.
5. To appoint subcommittees to supervise, follow up and
control essential management issues, for instance, the
Executive Committee and Audit Committee and so forth.
6. To delegate any person or persons to duly act on behalf of
the board, within a predetermined time frame. The Board may
have such a delegation repealed, changed or modified.
7. To stipulate the recruiting, selecting, hiring and appointing of
any person deemed appropriate as Chief Executive Officer and
stipulate appropriate remuneration. To empower the CEO to
transfer, suspend and terminate employment and have the
execution reported to the board.
8. To have the board’s annual report prepared and to be
responsible for the preparation and disclosure of financial
statements revealing the company’s financial status and
performance results of the preceding year to present to
shareholders meeting.
9. To convene at least once every 3 months. Rulings of the
board meeting will be based on a majority vote. Directors with
conflicts of interest in any matter shall waive their voting rights
on the specific issue.
10. To hold the annual ordinary shareholders meeting within
4 months after the company’s fiscal year end date.
37
(2) EXECUTIVE COMMITTEE
As at 31 December 2004, G Steel has an 8 - member executive
committee consisting of:
1. Mr. Somsak Leeswadtrakul Chairman of the
Executive Committee
2. Mr. Vira Susangkarakan Executive Director
3. Mr. Stephane Benayon Executive Director
4. Ms. Patama Chiachuabsilp Executive Director
5. Mr. Jeong Joon Ahn Executive Director
6. Mr. Yanyong Kurovat Executive Director
7. ML. Sasivimol Kasemsri Executive Director
8. Pol. Lt. General Prakard Sataman Executive Director
EXECUTIVE COMMITTEE’S ROLES AND RESPONSIBILITIES
1. To scrutinize the company’s policies, business plan,
investment plan and annual budgeting plan to submit to the
Board of Directors for approval.
2. To monitor, supervise and control operations to achieve the
set objectives in the approved plans or as per the board’s
assignment. To report results of the execution to the board’s
meeting for its information.
3. To approve any execution or reimbursements for any
execution which exceed an authority or an authorization
amount of the management in accordance with the company’s
authorization regulations or as per an approved annual budget.
4. To review the organization chart, authorization structure,
compensation policy as well as the company’s salary structure.
5. To scrutinize authorization regulations for managerial and
operational levels covering areas of finance, accounting,
procurements, investment, loans, mortgage, collateral, sales or
disposal or transfer of any assets, making of any agreement or
contract and any other execution as deemed fit.
6. To delegate any person or persons to execute on behalf of
the executive committee as deemed appropriate. They may
cancel or repeal, change or revise the authorization conferred.
7. To contemplate and approve openings of varied bank
accounts with any commercial bank as deemed appropriate
and assign persons to authorize withdrawals or payments from
those bank accounts.
8. To execute any other tasks assigned by the board.
(3) THE AUDIT COMMITTEE
As at 31 December 2004, the Audit Committee consists of
1. Mr. Paichitr Roajanavanich Chairman of the Audit Committee
2. Mr. Chaipatr Srivisarvacha Member of the Audit Committee
3. Mr. Preecha Prakobkit Member of the Audit Committee
ROLES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE
1. To examine the company to have accurate financial reports
with enough disclosure, coordinating with the auditors and
management in charge to have quarterly and annual financial
reports prepared. The committee may recommend external
auditors to examine or check any items as deemed necessary
or essential during the audit.
2. To examine the company to have appropriate and effective
internal control and audit systems, in cooperation with the
external auditors and internal auditors.
3. To examine the company’s operations in accordance with
laws on Securities and Stock Exchange, regulations of the
Stock Exchange of Thailand or any other laws related to the
company’s business.
4. To scrutinize and propose a nomination of the company’s
auditors and their service remuneration, taking into account their
reliability, resource adequacy, existing workload of the particular
auditor office as well as work experience of their team members
assigned to audit the company.
5. To deliberate an accurate and complete disclosure of
the company’s data in case of inter-related transactions or
transactions with possible conflicts of interest.
6. To carry out, in cooperation with the management team, any
task assigned by the Board of Directors with an approval from
the Audit Committee. For instance, to review financial and risk
management policies, management conduct as per business
codes and in cooperation with the company’s management
to review key reports such as Management’s Remarks and
Analysis to the public as per legal requirements.
38
7. To prepare a report on their activities to be included in the
annual report and have it signed by the committee’s Chairman.
The report shall comprise the following information:
• Notes on the preparation procedure and disclosure of
data in the company’s financial reports in relations with
their completeness and reliability.
• Notes on adequacy of internal control systems.
• Justifications for nomination of the company’s external
auditors for another term.
• Notes on compliance with laws on Securities and Exchange,
the SET regulations or any other laws relating to the
company’s business.
• Any other reports considered suitable for information of
shareholders and general investors under the scope, roles
and responsibilities assigned by the Board of Directors.
8. The Audit Committee is accountable to the Board of Directors
as per roles and responsibilities entrusted by the Board and
shall report to them the performance results, recommendations
and findings at least twice a year.
MANAGEMENT TEAM
As at 31 December 2004, the company’s Management Team
includes:
1. Mr. Somsak Leeswadtrakul Chief Executive Officer
2. Mr. Ryuzo Ogino Assistant Chief Executive Officer
3. Ms. Patama Chiachuabsilp Assistant Chief Executive Officer
4. Mr. Jeong Joon Ahn Senior Executive Vice President
(Operations)
5. Mr. Chalothorn Leelamali Executive Vice President
(Administration)
and Acting Vice President
(Accounting and Finance)
THE RECRUITING OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
Candidates of the company’s Directors and Chief Executive
Officer are not selected by the Nominating Committee.
According to the company’s regulations, the Board of Directors
has duties to recruit knowledgeable and competent candidates
with relevant experience and qualifications as per Clause
68 in the Public Company Limited Act B.E. 2535, related
announcements by the Securities and Exchange Commission
and the company’s rules and regulations. It is for the benefits of
the company’s efficient operations.
REMUNERATIONS
Year 2004
Amount
Items Persons (Baht Mil.) Details
The Board of Directors 20 3.75 compensation,
meeting allowance
Executive Directors 6 18.49 salary, bonus, other
and management* compensations
* Including expatriate executives
The current 15 - member Board of Directors was appointed
during the 2004 Annual Ordinary Shareholder Meeting on 9
June 2004, and the 5/2004 Board Meeting on 2 July 2004
approved their remuneration as listed below:
(1) A monthly compensation of Baht 30,000
(2) A meeting allowance of Baht 5,000 a time
The board members who concurrently have the company’s
managerial positions and receive monthly salary will not be
entitled to remuneration for the board members as specified in
items (1) and (2).
39
REMUNERATION FOR THE CURRENT BOARD MEMBERS from 9 June - 31 December 2004
Item Names and Positions Compensation Meeting Allowance Total Monetary
(Baht) (Baht) Remuneration (Baht)
1. Mr. Vira Susangkarakan*
Chairman and Executive Dirtector - - -
2. General Singha Saovapap
Vice Chairman and Executive Director 210,000 10,000 220,000
3. Ms. Patama Chiachuabsilp*
Vice Chairman and Executive Director - - -
4. Mr. Somsak Leeswadtrakul*
Director and Chief Executive Officer - - -
5. Mr. Stephane Benayon
Director and Executive Director 210,000 10,000 220,000
6. Mr. Chainarong Monthienvichienchai
Director 210,000 10,000 220,000
7. Mr. Yanyong Kurovat
Director and Executive Director 210,000 20,000 230,000
8. Mr. Prapanpong Vejjajiva
Director 210,000 5,000 215,000
9. ML. Sasivimol Kasemsri
Director and Executive Director 210,000 15,000 225,000
10. General Choochat Kambhu Na Ayudhya
Director 210,000 10,000 220,000
11. Pol. Lt. General Prakard Sataman
Director and Executive Director 210,000 20,000 230,000
12. Mr. Jeong Joon Ahn*
Director and Executive Director - - -
13. Mr. Paichitr Roajanavanich
Director and Chairman of the Audit Committee 210,000 25,000 235,000
14. Mr. Chaipatr Srivisarvacha
Director and Member of the Audit Committee 210,000 20,000 230,000
15. Mr. Preecha Prakobkit
Director and Member of the Audit Committee 210,000 15,000 225,000
* Directors who concurrently hold managerial positions in the company and receive compensation in the form of monthly salary are not entitled to any
other monthly compensation nor meeting allowance.
OTHER REMUNERATIONS
The 2/2004 Extraordinary Meeting of Shareholders on 5
October 2004 resolved an issuance and allocation of warrants
to the Board members and their employees for the company’s
100,000,000 - unit ordinary shares (prior to a public offering for
new ordinary shares). It is aimed at rewarding the board members
and employees for their contributions and motivating them to
execute their duties attentively and be in the service of the
company for the long run. The board members received an
allocation of not over 2,000,000 units each whereas those
concurrently serve as the company’s employees will also be
allocated warrants as per their capacity.
40
CORPORATE GOVERNANCE
Realizing benefits and importance of good corporate governance
for the enhancement of transparent and efficient management
and administration which will create confidence among
shareholders, investors and all parties concerned, the company’s
Board of Directors set a good corporate governance policy
as the company’s operation standard and procedures. It covers
following principles:
• To treat shareholders, stakeholders, and all parties equally
and fairly.
• To carry out their roles and responsibilities in supervision
and management honestly, ethically, prudently and
cautiously to achieve the set goals for the maximum
benefits of the company and shareholders as well as
to prevent conflicts of interest from arising.
• To transparently manage the company under the efficient
internal control and audit systems and to adequately
disclose information to shareholders and all parties
concerned to ensure their equal access to information.
• To control and manage risks at levels appropriate to the
company’s business.
• To run the business honestly under legal framework and
business ethics.
Execution in compliance with good corporate governance in
each area features:
(1) TREATMENT TO SHAREHOLDERS AND STAKEHOLDERS
The company gives an importance to shareholders meetings as
a fundamental right of shareholders and support equal and
transparent treatment to all shareholders with simplified
procedures. Apart from stringent conformation to legal
requirements, the Board regulated that any management
member involving with specific agenda convene and the
company’s legal advisor attend shareholders meeting every
time to jointly provide relevant information and respond to
shareholders’ enquiry. In 2004, the company held the ordinary
shareholders meeting once and extraordinary shareholders
meeting twice. It kept on improving its organizing of the
meetings and worked out guidelines for the organizing of the
shareholders meeting as follows:
• Disclosing adequate information for shareholders’ decision
making, disseminating to them in advance information with
invitation letter to the meeting as legally required. This is
to give them time to study and contemplate the matters
prior to the meeting date.
• Facilitating shareholders and their proxy to attend the
meeting and notification of voting method and vote
counting as well as other relevant meeting regulations
they should be aware of.
• Conducting the meeting strictly conforming to the
regulations and providing a question and answer session
for clarification and fairness to shareholders and all
parties concerned. Explicitly disclosing voting results of
each agenda with details on numbers of votes and shares
exercised for approval, disapproval or abstention.
• Having shareholders meeting session tape recorded,
taking main contents of enquiry in the minutes for future
references and also to enable absentee shareholders to
catch up with the relevant details.
• Overseeing and conducting the shareholders meeting in
accordance with the company’s regulations as stipulated
by Public Company Limited Act B.E. 2535, regulations of
the Securities and Exchange Commission and the Stock
Exchange of Thailand.
Apart from the shareholders, the company strictly treats other
stakeholders, namely, employees, trade partners, customers,
competitors and communities in the vicinity according to legal
requirements and other relevant regulations. It worked out
Code of Conduct for management and employees with guidelines
for their impartial conduct and relationship with stakeholders.
(2) EXECUTION OF DUTIES OF THE BOARD OF DIRECTORS
The 15-member Board of Directors consists of 11 independent
and non-executive directors, or 73% of the board. They
nominated 2 subcommittees: the Executive Committee and the
Audit Committee with clear scope of their respective roles and
responsibilities, balance and check of their power with each
other. Besides, a majority of the board members attended
training programs by the Thai Institute of Directors Association.
The 6 independent directors have following qualifications:
• Having not more than 5% of the total voting shares in the
company, affiliated and associated firms or persons with
possible conflicts of interest (including related persons as
per Clause 258 of the Securities and Stock Exchange Act).
• Having no managerial participation, not being salary -based
employees/advisors nor having authorization in the
company, affiliated and associated firms or persons with
possible conflicts of interest for not less than 1 year prior
to the position.
41
• Having no business relationship, direct or indirect stake in
financial and managerial terms in the company, affiliated
and associated companies or persons with possible
conflicts of interest in the manner to lose their independence.
• Not being closely related to the management nor major
shareholders of the company, affiliated and associated
companies or persons with possible conflicts of interest,
and not being nominated as proxy to protect benefits of
the major shareholding director.
In 2004, the Board convened 7 times, 3 of which were meetings
of the current Board who stringently conducted the sessions
as per the company’s Article of Association and the Public
Company Act. Meeting agenda and related information are
disseminated to the board members not less than 7 days in
advance for their study and perusal. Chances are open for them
to comprehensively debate on major issues, and legal advisors
attended the sessions, taking meeting minutes as well as
questions and the board members’ recommendations to enable
the Board and related parties to follow up and check.
The Board of Directors in cooperation with the management
team set shared values, missions, goals and 3 year business
expansion plan as well as the annual budget. Besides, they
oversee and follow up the management to constantly report
performance results, any arising problems and development
of projects in addition to the examination of appropriateness
of inter-related transactions, adequacy of the internal control
systems, conduct ethics of the management and employees.
They deliberate to endorse the company’s interim and annual
financial statements, with sufficient disclosure of significant
data in the notes on the financial statements with an assistance
of the Audit Committee and the Internal Audit who follow
up and examine relevant details to present to the Board
meeting.
The annual shareholders meeting on 9 June 2004 approved
year 2004 remuneration for the Board with the maximum
amount of Baht 8,000,000 per year and assigned the latter to
allocate the remuneration in accordance with the company’s
regulations as deemed appropriate. The 5/2004 Board meeting
on 2 July 2004 in turn resolved on the matter, segregating
Executive Directors who receive the salary-based compensation
not to be entitled to the remuneration.
(3) INTERNAL CONTROL AND AUDIT SYSTEMS
Having given an importance to efficient internal control and
audit systems both at managerial and operational levels, the
company commissioned Pricewaterhousecoopers FAS Ltd. to
jointly assess and provide recommendations on the internal
control systems to serve as guidelines to the management for
the company’s development and improvement.
In 2004, it established the Internal Audit Office to audit in
financial, operational areas and compliance with rules, regulations
and concerning laws. Initially, an auditing execution focused on
financial and operational areas, while the company commissioned
an external expert legal advisor to assist the management to
ensure that the company’s operations and major activities were
executed efficiently according to the set guidelines. To make the
Internal Audit independent so as to effectively carry out their
audit and balance keeping, the Board has regulated that the
Internal Audit Office directly report their results to the Audit
Committee and the Board of Directors.
The company has 3 - member Audit Committee. In 2004, they
met 3 times to examine justifications of inter related items and
adequacy of the internal control. Apart from jointly convening
with external auditors to scrutinize the accounting policies
and reporting on disclosure of financial data in the financial
statements, they took into account an annual audit plan and
followed up reports on the internal audit results in numerous areas.
To make transparent inter related transactions with possible
conflicts of interest, the Board of Directors stipulated standard
approval procedures for transactions with stakeholders or
persons with possible conflicts of interest as follows:
• In case of normal business transactions, prices, terms and
conditions of the inter related transactions are set as per
general terms and conditions at fair and reasonable
market prices, taking into considerations the company’s
best benefits and are reported to the Audit Committee
for their perusal.
• In case of other transactions rather than the aforementioned,
for instance, borrowings, acquisitions and disposal of
principal assets or making of agreement or contracts
and so forth, the company stipulated the Audit Committee
to provide their comments on necessity and justification of
the transactions. In case that the Audit Committee has no
expertise to scrutinize the inter related transactions, the
42
company will nominate an independent expert or the
external auditors to provide notes on the transactions for
decisions to be made by the company or shareholders,
whichever cases.
• The company will arrange disclosures of information on
the inter related transactions in notes on audited financial
statements by the external auditors as per the generally
accepted accounting principles, Securities and Stock
Exchange Act and regulations of the Stock Exchange of
Thailand.
(4) RISK CONTROL AND MANAGEMENT
The company commissioned Pricewaterhousecoopers FAS Ltd.
to assess and analyze risk factors to its business and execution
in all areas. It mapped out plans to follow up, control and examine
risk management to serve as implementation guidelines for the
management and the Internal Audit Office to avoid possible
loss. Relevant executives were assigned by the Executive
Committee to systematically consolidate and, as of this report,
were working out an overall risk management plan.
(5) BUSINESS ETHICS
To have a stable and sustainable business success in the long
run, the Board had the company’s code of conduct prepared
for the management and all staff to refer to as guidelines in an
execution of their duties with consistent and stringent
compliance. The ethics cover business execution with honesty
treatment to stakeholders equally and fairly, conflicts of
interest, confidentiality, and an abuse of information, graft,
receipt of gifts and rewards. The Internal Audit Office was
assigned to monitor and examine compliance with the stipulated
codes.
INTERNAL CONTROL
During the Board meeting on 7 October 2004 in which the
Audit Committee also attended, the Board assessed adequacy
of the company’s internal control systems in 5 areas: namely,
organization and environment; risk management; monitoring
of management execution; information technology and
communications and follow-up systems. They opined that the
company had adequate internal control systems at certain
levels and also had sufficient internal control systems on the
inter related transactions with majority interest, Directors,
management and any other persons related to the
aforementioned parties. The Board encouraged and supported
the management to continually improve the internal control
systems to enhance good corporate governance.
Nevertheless, in 2004, Ernst & Young Office Ltd., the company’s
external auditor, issued recommendations on internal control,
for instance, counting of assets, withholding tax on welfare for
expatriate executives, control of reimbursement supporting
documents and claims on value added tax. The company
implemented all of the recommendations to improve operations
for more efficient internal control systems.
In addition to Ernst & Young Office’s annual recommendation
documents as aforementioned, the company also hired
Pricewaterhousecoopers FAS Ltd. in November 2004 to
assess adequacy of the internal control systems and to provide
suggestions for the systems improvement and operation
efficiency to meet international standards with even better
corporate governance in the short and long terms. Presently,
the company included their recommendations in the ongoing
implementation and internal control plans.
DIVIDEND POLICY
In normal situations when the company does not require any
additional investment or business expansion plan and has
enough liquidity, it has a policy to pay dividend at 50% of its net
earnings after tax and legally required reserve. Nevertheless,
the Board may resolve the company pay dividend differently
from the set policy as deemed necessary and appropriate, for
instance, in case of economic or market condition changes or
any other situations affecting its liquidity, and so on.
43
T H E 1 0 M A J O R S H A R E H O L D E R S
Names and proportions of the first 10 major shareholders as at 31 December 2004.
No. Names of Shareholders Number of Shares %
1. Superior Overseas (Thailand) Co., Ltd.1 2,522,588,903 30.76%
2. Ample Vision Group Ltd.2 1,622,083,795 19.78%
3. Ms. Patama Chiachuabsilp Group3 1,118,214,864 13.64%
4. Ms. Ladda Jirapongtrakul 250,000,000 3.05%
5. Mrs. Boonsri Suthirachai 210,000,000 2.56%
6. Ms. Chinnicha Shinawatra 205,000,000 2.50%
7. The Thai Military Bank Public Co., Ltd. 166,570,667 2.03%
8. Asset Management Corporation 151,250,000 1.84%
9. Mr. Chanathip Trivuth 71,476,143 0.87%
10. Ms. Suvimada Leeswadtrakul 50,451,778 0.62%
11. Others 1,832,363,850 22.35%
Total 8,200,000,000 100.00%
1 The shareholding structure of Superior Overseas (Thailand) Co., Ltd.
(1) Mr. Ekpet Chansue 66.00%
(2) Mrs. Chuanpit Pattana 20.00%
(3) Ms. Tanaporn Thongjude 10.00%
(4) Marco Wealth Investments Ltd. 4.00%
2 The shareholding structure of Ample Vision Group Ltd.
(1) Mr. Hamish Gordon Cruden 100.00%
3 The shareholding structure of Ms. Patama Chiachuabsilp Group
(1) Ms. Patama Chiachuabsilp 1,061,060,793 shares
(2) Mr. Somsak Leeswadtrakul 7,154,071 shares
(3) Ms. Suthidarat Leeswadtrakul 25,000,000 shares
(4) Ms. Suratiporn Leeswadtrakul 25,000,000 shares
44
I N T E R R E L A T E D T R A N S A C T I O N S
Parties with Conflicts of Interest RelationshipTypes of Transactions
Transactions 2004
Balance at 2004 - Year end Details / Terms & Conditions
Sukhumvit Inter Development Co.,Ltd. (formerly SSP Property Co., Ltd or SID)
•
•
Holding less than 0.01% shares in the company
25.50% of its shares held
Office rental fee (1,618,960) - The rental fee for its former office on the 11th floor of SSP Tower 2 whose contract
by the company’s Director and shareholder, Mr. Somsak Leeswadtrakul
ended in June 2004. The rate was approximately the same as other tenants.
• In 2003, its Director also served as SID’s Director, Mr. Jaime Lozare
Raw water expense (18,471,963) - As per a contract to buy and sell raw water via SID, an industrial estate park developer, at a more competitive price than direct purchase from the producer.
Siam Power Generation Co., Ltd. • 3.33% of its shares held Allowance for loss 568,360,000 - SIPCO claimed for its loss (SIPCO) by the company’s
Director and shareholder, Mr. Somsak Leeswadtrakul
of BOI priviledges on machine import duty due to the company’s violation on power
• Related to the Director, Mr. Somchai Leeswadtrakul, SIPCO’s Director, is a brother of Mr. Somsak Leeswadtrakul
purchase contract, hence delaying the construction of its power plant. BOI later granted approval for SIPCO to extend import period. The allowance was cancelled and reversed as the company’s income in the 2nd
quarter of 2004.
Debts under a financial rehabilitation plan
- (347,486,901) The balance as per the plan with no interest and annual repayment of Baht 5.29 million. The rest was to repay in the last year (15th year)
Thai Sin Steel Holding Co., Ltd. • The company’s Director: Mr. Somsak Leeswadtrakul is rehabilitation plan administrator for 2 shareholders who also have shares in Thai Sin Steel
• Holding 0.09% of the company’s shares.
Service fee for debt settlement negotiations
(137,410,000) - Service fee for negotiation on premature repayment to 3 secured creditors in the financial rehabilitation. The debt was haircut by Baht 2,190 million
Nara International Co., Ltd. • Early 2004, a Director also serves as a Board member in Nara International
Raw material expense
(535,553,704) (53,387,157) Expenses for other raw material and consumable supplies for the production. Prices are based on costs plus standard margin. Only transactions requiring L/C or through agents were processed through Nara International for their credit facilities
Sales of goods 2,298,505,927 130,563,249 Sales of hot-rolled coils at prevailing market prices. Nara International is an agent with customer base and continual order quantities. It has no collection problems, thus facing less risks from collection loss.
45
JUSTIFICATIONS ON INTER RELATED TRANSACTIONS
The inter related transactions between the company and
parties with possible conflicts of interest are normal business
transactions with the company’s general terms and conditions
as necessary for the business execution, having taken into
account its maximum benefits.
APPROVAL PROCEDURES FOR INTER RELATED
TRANSACTIONS
For any inter related transactions in the future, the Board shall
execute according to the Securities and Stock Exchange Act,
rules, regulations, announcements of the Stock Exchange of
Thailand. It shall also disclose information on the inter related
transactions, acquisition or disposal of principal assets of
the company or subsidiaries as per SET regulations, SEC
announcements and accounting standards by the Accounting
Association. For the transparent inter related transactions, the
Board mapped out approval procedures as follows:
1) For normal business transactions, prices, terms and
conditions of inter related transactions are set as per general
business terms and conditions as well as prevailing market
prices, taking into considerations the company’s maximum
benefits. The transactions are to report to the Audit Committee
for examination.
2) For other transactions rather than those in item 1, such as
borrowings, acquisitions or disposals of major assets or making
of any agreement or contracts, the company requires comments
from the Audit Committee for necessity and justification of
the transaction. In case where the Audit Committee has no
expertise to contemplate the inter related transactions, the
company will nominate an independent expert or the external
auditors to provide notes on the transactions for decisions to be
made by the Board or shareholders, whichever cases.
3) The company shall arrange disclosures of information on
the inter related transactions in notes on audited financial
statements by the external auditors as per the generally
accepted accounting principles and Securities and Stock
Exchange laws. For any inter related transactions in the future,
the company worked out a policy to apply general business
practice and market prices. It shall assign the Audit Committee
or independent experts to examine and provide justifications
on the prices and transactions as well.
46
R E P O R T O F T H E A U D I T C O M M I T T E E
The annual ordinary shareholders meeting on 9 June 2004
resolved the nomination of the Audit Committee with a 3 - year
term starting from 9 June 2004 to 8 June 2007. The 3
independent members of the committee having the Internal
Audit Manager as their secretary are:
1. Prof. Paichitr Roajanavanich Chairman of the Audit Committee
2. Mr. Preecha Prakobkit Member of the Audit Committee
3. Mr. Chaipatr Srivisarvacha Member of the Audit Committee
4. Ms. Sopit Jaeng-arun Secretary to the Committee
Scope, roles and responsibilities of the Committee were
stipulated as below:
1. To examine for the company’s accurate and adequate
disclosure of financial report.
2. To examine for the company’s efficient and appropriate
internal control and audit systems.
3. To examine for the company’s compliance with legal
requirements on Securities and Stock Exchange, SET
regulations or laws relevant to the company’s business.
4. To scrutinize, select and nominate the company’s external
auditors and propose their remuneration.
5. To scrutinize the disclosure of the company’s information
in case of inter related transactions or conflicts of
interest items.
6. To prepare a report on the Audit Committee’s activities
for disclosure in the company’s annual report.
7. To execute any other assignments by the Board of Directors
with an approval from the Chairman of the Audit Committee
8. To report results of their execution, recommendations and
their findings to the Board at least twice a year.
For the accounting period ending on 31 December 2004, the
Audit Committee convened 3 times to comtemplate and
examine the company’s operations in following areas:
1. Having examined the company’s interim and 2004 annual
financial statements together with the management’s
remarks, in cooperation with the external auditors, before
having them submitted to the Office of the Securities and
Stock Exchange Commission.
2. Having acknowledged the company’s reports, remarks
and analysis on the interim and 2004 annual financial
statements prepared by the company’s management.
3. Having approved the Internal Audit Office’s audit plans
for year 2005.
4. Having assessed adequacy of the company’s internal
control systems in accordance with an assessment
form of the Office of the Securities and Stock Exchange
Commission.
5. Having acknowledged the company’s reports on their
compliance with Securities and Stock Exchange laws and
other legal requirements related to the company’s business.
6. Having selected and proposed to the Board of Directors
for their perusals and request for the shareholders
meeting’s approval to nominate Mr. Sophon Permsirivallop
and/or Mr. Narong Pantawong and/or Ms. Rungnapa
Lertsuwankul of Ernst & Young Office Ltd. as the
company’s auditors for 2005 accounting period. They
also proposed to the Board of Directors the remuneration
of Baht 1,400,000 auditing service fee.
7. Having assessed conformation to the policy on good
corporate governance, in cooperation with the company’s
management in accordance with an assessment form of
the Stock Exchange of Thailand.
(Prof. Paichitr Roajanavanich)
Chairman of the Audit Committee
47
R E P O R T O N B O A R D O F D I R E C T O R S ’ R E S P O N S I B I L I T I E S W I T H
R E G A R D S T O F I N A N C I A L R E P O R T S
G Steel’s Board of Directors is directly responsible for the company’s financial reports as appeared in its annual report. The reports
comprise the balance sheet, profit and loss statement, statement of changes in shareholders’ equity, statements of cash flow and
notes on financial statements, prepared by the company’s management according to the generally accepted accounting principles
with the selection of and consistent compliance with appropriate accounting policies. Discretion and estimation had been exercised
at their best in the preparation of the report with sufficient disclosure of significant information in the notes on the financial
statements for the benefits of shareholders and general investors.
The Board of Directors established and maintained the appropriate and efficient internal control and audit systems to ensure that
their accounting data were complete, accurate and adequate to uphold the company’s assets and not to allow any corruption or
significant unusual practices to occur.
Moreover, the Board appointed the Audit Committee to examine the accounting policies and quality of the financial reports, to examine
the internal control systems as well as risk management system. The Committee’s remarks on the matters appeared in the Audit
Committee’s report, already included in the annual report. The company’s certified auditors, nominated by the Board of Directors, had
sufficient independence to audit the financial reports and also to attach their notes on the financial status, performance results and the
company’s cash flow in the financial reports.
(Dr. Vira Susangkarakan) (Dr. Somsak Leeswadtrakul)
Chairman of the Board of Directors Chief Executive Officer
48
N O T E S A N D A N A L Y S I S O N F I N A N C I A L S T A T U S A N D
P E R F O R M A N C E R E S U L T S
ANALYSIS ON PERFORMANCE RESULTS
OVERVIEW
The performance results for 2004 grew in all areas, albeit
production and sales volumes and operating profit. The company
registered 1.1 million tons of hot-rolled coil production volume,
an increase of 20% over the preceding year, with 74% utilization
of the maximum production efficiency. The additional outputs
were mainly exported to countries in North America, Europe,
Middle East and ASEAN, enabling it to register a distinguished
178% rise in their export volume. It accounted for 22% of the
total sales volume. The sales volume during 2004 increased
both in quantities and especially selling prices that kept on
rising all year round. The average selling price in 2004 was
42% higher than that of 2003. The company hence recorded
2003
Baht 21,270 million sales value, a 69% growth over the
previous year. Most of its incomes were from domestic markets.
Concurrently, the company successfully managed their
production costs, pushing up a gross profit rate from 7% in
2003 to 14% in 2004. Operating profits (excluding allowance
for compensation for breach of contract) were as high as Baht
2,599 million, more than two times higher growth over the
previous year, while the net profit totalled Baht 8,902 million.
The company cleared all retained loss since the beginning of
the first quarter, until the 2004 year end, and registered a
cumulative profit of Baht 8,682 million.
2004
Total 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
Production Volume (Tons) 920,131 277,575 262,392 269,654 295,017 1,104,638
Sales Volume (Tons) 934,465 293,167 260,887 268,394 284,613 1,107,062
Sales Value (Baht Thousand) 12,622,163 4,759,873 5,008,988 5,269,031 6,232,360 21,270,252
During the first half of 2004, the company negotiated with its
4 financial creditors under the rehabilitation plan to prematurely
repay the total debts of Baht 4,031 million using incomes from
sales of additional shares to existing shareholders and private
offering. The creditors agreed on the haircut of Baht 1,185
million, thus the company could save interest expense of Baht
1,293 million under the rehabilitation plan. The gains of Baht
2,478 million from premature repayment was recognized
during the first half of 2004. Having all of their collateral burdens
such as property, plant and equipment discharged, the company
had no more financial debt burden, and their debt to equity
ratio reduced to 0.15 times, significantly strengthening the
financial status. It was the year of the company’s huge success
both in their business operation and financial restructure,
indeed.
SELLING AND OTHER INCOMES
In 2004, the company enjoyed the total incomes of Baht
21,979 million, a growth of Baht 8,462 million or 63% over the
preceding year. Of this, there was a domestic selling income of
Baht 16,435 million or 43% increase, an export income of Baht
4,835 million or a 336% increase, compared to the previous
year. Additionally, there was a reversal of allowance for
compensation for breach of contract of Baht 568 million (an
item not affecting its cash flow), profits from selling steel scrap
and pig iron of Baht 121 million and other incomes of Baht
18.9 million.
Regarding the reversal of allowance for compensation for breach
of contract, the company set aside the allowance of Baht 568
million in 2003 as it violated the contract to sell and buy
49
power with Siam Power Generation Co., Ltd., causing the latter
to lose their BOI privileges. The item was later reversed in
2004 after a burden of the loss ended as per conditions in the
contract.
COST OF GOODS SOLD, SELLING AND ADMINISTRATIVE EXPENSES
The cost of goods sold (COGS) consists of 70% raw material
cost, 28% conversion cost and 2% depreciation cost. In 2004,
the company had a total COGS of Baht 18,211 million, a rise of
Baht 6,722 million or 54% over the previous year. It was due to
a higher production volume and increasing raw material prices.
Nevertheless, selling prices were increased at a higher rate,
providing a higher spread between the selling prices and raw
material costs of scrap and pig iron. The ratio of COGS to sales
volume thus decreased from 93% in 2003 to 86% in 2004, the
company marked a higher gross profit of 7% in 2003 to 14%
in 2004.
The selling and administrative expenses were Baht 417 million
or 2% of the total selling income, a reduction of Baht 66 million
or 14% from the previous year. In 2003, the company amortized
loan management fees and premiums on loans as well as
expenses for the preparation and management of the business
rehabilitation plan whereas there were no such expenses in
2004. The selling and administrative expenses were mainly
transportation expenses, staff salary and other expenses.
INTEREST EXPENSE
At present, the company has no more interest expense for
financial institution creditors. Existing interest expense is
incurred from raw material inventory -steel scrap and pig iron-
under agreement conditions in material management for
production of Hot Rolled Coil. During 2004, interest expense
accounted for Baht 121 million, an increase of Baht 64 million
or 111% over 2003 due to an increase in raw material purchase
in accordance with growing production outputs plus rising
costs of raw materials.
THE REVERSAL OF ALLOWANCE FOR ASSET IMPAIRMENT
At 2004 year end, an independent asset appraiser was hired
to assess the company’s property, plant and equipment and
found out that its asset value at prevailing market prices was
Baht 3,441 million higher than the book value. The market value
of its land was Baht 395 million, an increase of Baht 175 million;
that of the plant was Baht 910 million, a decrease of Baht 538
million and that of the machine was Baht 14,430 million, an
increase of Baht 3,804 million. The reversal of Baht 3,441
million loss on asset impairment was posted after the realization
of the loss was earlier made at Baht 5,803 million.
EARNINGS FROM BUSINESS REHABILITATION
In 2004, the company registered Baht 2,294 million earnings
from the business rehabilitation resulting from a debt reduction
by financial and trade creditors as it prematurely repaid the debts.
OPERATING NET PROFITS
The company enjoyed Baht 3,167 million operating profit, a
growth of Baht 2,548 million or 412% increase due to higher
sales volume and utilization of production capacity as well as a
higher margin from 5% in 2003 to 14% in 2004. It was due to
an increase in a gap between selling prices and raw material
costs as well as lower selling and administrative expenses.
The operating profit, excluding reversals of allowances for
loss, was Baht 2,599 million or equivalent to Baht 0.32
per share. (Based on the number of shares at the year-end)
The company saw a Baht 8,902 million net profit, including
items on asset impairment, asset disposals and profits from
the rehabilitation, a sharp reduction compared to that of the
preceding year when it registered a profit as high as
Baht 54,422 million from the rehabilitation due to its debt
restructuring plan.
FINANCIAL STATUS
As at the end of 2004, the company’s total assets were Baht
21,718 million, a rise of Baht 6,753 million over the previous
year. They were current assets of Baht 4,389 million, an increase
of Baht 2,419 million; fixed assets of Baht 16,242 million,
an increase of Baht 3,443 million; other assets of Baht 1,087
million, an increase of Baht 890 million. The increased assets
were due to the re-appraisal and growth in production outputs,
sales volume and prices. This required more working capital to
purchase and maintain raw materials as well as an increase of
credit lines to customers accordingly.
As at the end of 2004, the company’s total liabilities were
Baht 2,911 million, a reduction of Baht 6,453 million over the
previous year. They were current liabilities of Baht 1,655
50
million, an increase of Baht 625 million; long term liabilities
were interest free account payables and service fees under the
business rehabilitation plan totalling Baht 1,256 million, a
reduction of Baht 7,708 million. The decrease in long-term
liabilities was mainly due to the premature debt repayment and
the haircut by the creditors in the business rehabilitation plan
and the reversal of allowance for compensation for breach of
contract. The current liabilities was in accordance with the
higher production volumes and raw material procurement.
As at the end of 2004, the shareholders’ equity of the company
amounted to Baht 18,807 million, an increase of Baht 13,206
million from the end of 2003. Issued and paid up capital was
Baht 8,200 million, premium on shares was Baht 1,925 million
and retained earnings were Baht 8,682 million. As such, its
shareholders’ equity was substantially higher than its liabilities,
with debt to equity ratio of 0.15 times and its book value of Baht
2.29 per share.
CASH FLOW
The company had an operating cash flow of Baht 473 million,
compared to the negative cash flow of as high as Baht 395
million in 2003. The turning of its cash flow from negative to
positive positions in 2004 was due to overall improved
performance results, with increased production and sales
volumes as well as the higher profit in 2004, compared to
those of 2003. The company’s liquidity was significantly
improved, notwithstanding its need for an increased working
capital to expand its production outputs and market bases. It
had higher capability to repay debt as it registered earnings
before interest, tax and depreciation as high as Baht 3,217
million whereas its debt burden reduced to merely Baht 1,256
million.
REMUNERATIONS FOR AUDITORS
The company paid the auditing fee for Ernst & Young Office Ltd.
for the 2004 accounting period at the amount of Baht 1.3
million.
51
52
F I N A N C I A L
52
S T A T E M E N T S
R E P O R T O F I N D E P E N D E N T A U D I T O R
To the Board of Directors and Shareholders of
G Steel Public Company Limited
(Formerly known as “Siam Strip Mill Public Company Limited”)
I have audited the balance sheets of G Steel Public Company Limited as at 31 December 2004 and 2003, and the related statements
of earnings, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility
of the Company’s management as to their correctness and the completeness of the presentation. My responsibility is to express an
opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statements presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial positions of G Steel Public
Company Limited as at 31 December 2004 and 2003, and the results of its operations and cash flows for the years then ended in
accordance with generally accepted accounting principles.
Sophon Permsirivallop
Certified Public Accountant (Thailand) No. 3182
Ernst & Young Office Limited
Bangkok: 4 March 2005
53
B A L A N C E S H E E T S As of 31 December 2004 and 2003
(Unit: Baht)
Note 2004 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade accounts receivable
Trade accounts receivable - related company
Inventories - net
Other current assets
Other receivable
Refundable value added tax
Value added tax suspense
Prepayment to vendors
Others
6
13
8
353,402,016
1,059,809,659
130,563,249
2,320,984,965
40,931,318
381,449,394
91,766,042
1,297,288,857
51,515,703
270,418,384
134,000,477
43,479,147
24,760,832
-
25,055,715
67,574,359
45,484,153
19,929,443
Total other current assets 524,174,543 158,043,670
TOTAL CURRENT ASSETS 4,388,934,432 1,969,479,281
NON-CURRENT ASSETS
Restricted deposit at financial institution 7 1,000,000 -
Property, plant and equipment - net 9 16,129,106,125 12,735,306,941
Intangible assets 10
Computer software installation 45,582,224 40,991,898
Deferred supply costs 67,138,043 22,428,003
Other non-current assets
Deposits for purchases of raw materials 11 973,248,674 142,931,204
Deposits for use of energy 110,429,906 53,231,681
Deposits for others 2,866,255 599,113
Total other non-current assets 1,086,544,835 196,761,998
TOTAL NON-CURRENT ASSETS 17,329,371,227 12,995,488,840
TOTAL ASSETS 21,718,305,659 14,964,968,121
The accompanying notes are an integral part of the financial statements.
54
2003
B A L A N C E S H E E T S As of 31 December 2004 and 2003
(Unit: Baht)
Note 2004
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable
Trade accounts payable - related company
Others payable
Advance received from customers
Advance from director
Current portion of liabilities which were included under
the former rehabilitation plan
Accrued expenses
TOTAL CURRENT LIABILITIES
13
13
13
12
13
1,144,744,569
53,387,157
330,122,271
32,888,812
-
-
93,775,978
1,654,918,787
376,068,986
70,861,524
389,302,514
45,000,000
170,952
53,029,333
95,595,474
1,030,028,783
NON-CURRENT LIABILITIES
Amount due to related company
Liabilities which were included under the former
rehabilitation plan - net of current portion
13
12
-
1,256,354,919
568,360,000
7,765,721,790
TOTAL NON-CURRENT LIABILITIES 1,256,354,919 8,334,081,790
TOTAL LIABILITIES 2,911,273,706 9,364,110,573
SHAREHOLDERS' EQUITY
Share capital
Registered share capital
12,000,000,000 ordinary shares of Baht 1 each
(2003: 55,000,000 ordinary shares of Baht 10 each)
14
12,000,000,000 550,000,000
Issued and paid up share capital
8,200,000,000 ordinary shares of Baht 1 each
(2003: 55,000,000 ordinary shares of Baht 10 each) 8,200,000,000 550,000,000
Share subscription received in advance 14 - 547,024,680
Other surplus
Share premium 14 1,719,140,000 162,080,000
Premium on capital reduction 15 206,307,094 4,562,307,094
Retained earnings (deficit)
Appropriated - legal reserve 16 458,027,234 12,920,280
Unappropriated 8,223,557,625 (233,474,506)
TOTAL SHAREHOLDERS' EQUITY 18,807,031,953 5,600,857,548
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 21,718,305,659 14,964,968,121
The accompanying notes are an integral part of the financial statements.
55
S T A T E M E N T S O F E A R N I N G S For the years ended 31 December 2004 and 2003
(Unit: Baht)
Note 2004 2003
REVENUES
Sales 21,270,252,071 12,622,162,692
Reversal of allowance for breach of contract 13, 18 568,360,000 -
Other income 19 140,239,928 894,663,055
TOTAL REVENUES 21,978,851,999 13,516,825,747
EXPENSES
Cost of sales 18,211,316,404 11,788,752,412
Selling and administrative expenses
Allowance for breach of contract 13, 18
417,263,909
-
483,348,916
568,360,000
Loss on exchange
Directors' remuneration 20
58,107,583
4,200,000
-
390,000
TOTAL EXPENSES 18,690,887,896 12,840,851,328
EARNINGS BEFORE INTEREST EXPENSE 3,287,964,103 675,974,419
Interest expense (120,997,469) (57,348,559)
EARNINGS FROM OPERATING ACTIVITY 3,166,966,634 618,625,860
Reversal of allowance for assets impairment
Allowance for assets impairment
Loss from assets written off
9
9
9
3,441,440,639
-
-
-
(5,802,624,311)
(1,232,495,777)
EARNINGS (LOSS) FROM ORDINARY ACTIVITY 6,608,407,273 (6,416,494,228)
EXTRAORDINARY ITEMS
Gain from rehabilitation 12, 13 2,293,731,812 54,421,762,378
NET EARNINGS FOR THE YEAR 21 8,902,139,085 48,005,268,150
BASIC EARNINGS PER SHARE 22
Earnings (loss) from ordinary activity
Extraordinary item
1.01
0.35
(2.06)
17.51
NET EARNINGS 1.36 15.45
Weighted average number of ordinary shares with a par value of
Baht 1 each (shares) 6,574,863,388 3,107,397,260
The accompanying notes are an integral part of the financial statements.
56
S T A T E M E N T S O F C A S H F L O W S For the years ended 31 December 2004 and 2003
(Unit: Baht)
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings for the year
Adjustments to reconcile net earnings to net cash provided (paid)
from operating activities: -
Depreciation
Expenses of negotiation with overseas financial institution creditors
Allowance for compensation for breach of contract (Reversal)
Amortisation
Bad debts
Allowance for slow-moving inventories
Gain from disposal of assets
Loss from assets impairment (Reversal)
Loss from assets written off
Unrealised loss on exchange
8,902,139,085
439,093,516
(196,300,000)
(568,360,000)
32,125,445
-
-
(222,069)
(3,441,440,639)
-
28,643,825
48,005,268,150
351,522,734
-
568,360,000
25,766,532
6,063,413
5,167,782
(443,654)
5,802,624,311
1,235,674,742
2,631,354
Net earnings from operating before changes in operating assets
and operating liabilities
DECREASE (INCREASE) IN OPERATING ASSETS
Trade accounts receivable
Trade accounts receivable - related companies
Inventories
Other receivable
Refundable value added tax
Prepayment to vendors
Other current assets
Intangible assets
Other non-current assets
INCREASE (DECREASE) IN OPERATING LIABILITIES
Trade accounts payable
Trade accounts payable - related companies
Other payable
Amounts due to related companies
Advance received from customers
Other current liabilities
Net cash from operating activities before extraordinary items
Extraordinary items
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
5,195,679,163
(5,172,545,968)
(38,797,204)
(1,023,696,108)
(51,515,303)
(245,362,668)
2,005,006
(71,257,508)
(81,425,811)
(869,086,347)
5,196,046,601
-
(59,180,243)
-
(12,111,188)
(1,819,896)
2,766,932,526
(2,293,731,812)
473,200,714
56,002,635,364
(2,452,121,744)
84,902,789
(339,250,509)
-
73,054,775
(22,857,134)
(12,819,191)
-
(84,807,459)
1,713,834,371
(91,251,936)
(343,019,950)
(396,859,141)
-
(104,755,085)
54,026,685,150
(54,421,762,378)
(395,077,228)
The accompanying notes are an integral part of the financial statements.
57
S T A T E M E N T S O F C A S H F L O W S For the years ended 31 December 2004 and 2003
(Unit: Baht)
2004 2003
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in restricted deposit at financial institution (1,000,000) -
Cash received from sale of equipment 270,093 543,458
Net increase in property, plant and equipment (391,500,085) (382,554,699)
NET CASH FLOWS USED IN INVESTING ACTIVITIES (392,229,992) (382,011,241)
CASH FLOWS FROM FINANCING ACTIVITIES
Shares subscription received in advance -
Cash received from increase in share capital 4,366,975,320
Payment of expenses related to increase in share capital (62,940,000)
Payment of liabilities which were included under
the former rehabilitation plan (4,072,364,392)
Increase (decrease) in advance from director (170,952)
547,024,680
500,000,000
-
(232,274,489)
158,389
NET CASH FLOWS FROM FINANCING ACTIVITIES 231,499,976 814,908,580
NET INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year
312,470,698
40,931,318
37,820,111
3,111,207
Cash and cash equivalents at end of year 353,402,016 40,931,318
SUPPLEMENTAL CASH FLOWS INFORMATION
Non-cash items
Transfer of interest payable to liabilities under rehabilitation plan
Transfer of trade accounts payable and other payable to
liabilities under rehabilitation plan
Transfer of current portion of long-term loan to
liabilities under rehabilitiation plan
Transfer of short - term loans from financial institutions to
liabilities under rehabilitation plan
Transfer of loan to directors to liabilities under rehabilitation plan
Transfer of short - term loan from related company to
liabilities under rehabilitation plan
Transfer of liability under composition to liabilities under rehabilitation plan
Transfer of other liabilities to liabilities under rehabilitation plan
Trade accounts receivable decreased by offsetting with
trade accounts payable
Cash paid during the year for:-
Interest paid
The accompanying notes are an integral part of the financial statements.
-
-
-
-
-
-
-
-
4,490,746,656
120,997,469
4,693,608,029
526,552,986
20,576,404,036
1,187,426,011
999,665
5,200,000
35,629,000,000
8,074,207,949
2,169,014,044
3,462,128
58
S T
A T
E M
E N
T S
O
F
C H
A N
G E
S
I N S
H A
R E
H O
L D
E R
S ’
E Q
U I T
Y
For
the
year
s en
ded
31 D
ecem
ber
2004
and
200
3
59
(Uni
t: B
aht)
Oth
er s
urpl
us
Issu
ed p
aid-
up
Reta
ined
ear
ning
s (d
efic
it)
Bal
ance
as
of 1
Jan
uary
20
03
5,00
0,00
0,00
0 -
162,
080,
000
-12
,920
,280
(4
9,54
2,51
0,93
7)
(44,
367,
510,
657)
Prio
r ye
ar a
djus
tmen
t (N
ote
3)
--
--
-91
6,07
5,37
5 91
6,07
5,37
5
Bal
ance
as
of 1
Jan
uary
20
03
5,
000,
000,
000
-16
2,08
0,00
0 -
(48,
626,
435,
562)
(4
3,45
1,43
5,28
2)
to c
ompe
nsat
ion
with
def
icit
(4,9
50,0
00,0
00)
--
4,56
2,30
7,09
4 -
387,
692,
906
-
500,
000,
000
547,
024,
680
--
--
1,04
7,02
4,68
0
(4,4
50,0
00,0
00)
547,
024,
680
-4,
562,
307,
094
-38
7,69
2,90
6 1,
047,
024,
680
Net
ear
ning
s fo
r th
e ye
ar
--
--
-48
,005
,268
,150
48
,005
,268
,150
Bal
ance
- a
s of
31
Dec
embe
r 2
00
3
550,
000,
000
547,
024,
680
162,
080,
000
4,56
2,30
7,09
4 12
,920
,280
(2
33,4
74,5
06)
5,60
0,85
7,54
8
14)
7,65
0,00
0,00
0 (5
47,0
24,6
80)
1,62
0,00
0,00
0 (4
,356
,000
,000
) -
-4,
366,
975,
320
(Not
e 14
) -
-(6
2,94
0,00
0)
--
-(6
2,94
0,00
0)
Net
ear
ning
s fo
r th
e ye
ar
--
--
-8,
902,
139,
085
8,90
2,13
9,08
5
--
--
445,
106,
954
(445
,106
,954
) -
Bal
ance
- a
s of
31
Dec
embe
r 2
00
4
8,20
0,00
0,00
0 -
1,71
9,14
0,00
0 20
6,30
7,09
4 45
8,02
7,23
4 8,
223,
557,
625
18,8
07,0
31,9
53
The
acco
mpa
nyin
g no
tes
are
an in
tegr
al p
art
of t
he f
inan
cial
sta
tem
ents
.
Shar
e su
bscr
iptio
n Sh
are
Prem
ium
cap
ital
shar
e ca
pita
l re
ceiv
ed in
adv
ance
pre
miu
m
redu
ctio
n Ap
prop
riate
d Un
appr
opria
ted
Tota
l
- as
pre
viou
sly
repo
rted
- re
stat
ed
12,9
20,2
80
Redu
ctio
n pa
id u
p sh
are
capi
tal
Issu
e in
crea
sed
shar
e ca
pita
l
Unr
ealis
ed t
rans
actio
ns in
ear
ning
s st
atem
ents
Issu
e in
crea
sed
shar
e ca
pita
l (N
ote
Expe
nses
con
cern
ing
the
incr
ease
d sh
are
capi
tal
Rese
rve
for
stat
utor
y re
serv
e
N O T E S T O F I N A N C I A L S T A T E M E N T S For the years ended 31 December 2004 and 2003
1. GENERAL INFORMATION
a) G Steel Public Company Limited was incorporated as a limited company under Thai laws and then was registered as a Public
Company Limited. The Company operates its business in Thailand and its principal activity is the manufacture of hot rolled coils.
The Company registered its change in the Company’s name from “Siam Strip Mill Public Company Limited” to “G Steel Public
Company Limited” with the Ministry of Commerce on 26 March 2004. Its registered address was located on 116/36-39 SSP Tower
2 Building, Soonthornkosa Road, Klongtoey, Bangkok. Subsequently, the Company registered its change in the Company’s head office
location to 88, SSP Tower 3, 18th Floor, Silom Road, Suriyawong, Bangrak, Bangkok with the Ministry of Commerce on 12 July 2004.
b) In the past, the Company sustained persistent operating losses and suffered from a lack of working capital. As a result its total
liabilities significantly exceeded its total assets (capital deficit) and it defaulted on the payment of substantial amounts of loans and
outstanding interest. Therefore, the Company, together with three major lenders (one of them a related company), filed a petition for
business rehabilitation with the Central Bankruptcy Court. On 26 March 2001, the court ordered the Company to rehabilitate its business
and ordered the petitioners to appoint a planner and a financial advisor to prepare a debt restructuring plan. However, three creditors
who filed the petition for business rehabilitation, together accounting for more than 50 percent of voting rights, later passed a
resolution rejecting the rehabilitation plan and the court ordered the rejection of the rehabilitation plan on 22 November 2001.
Subsequently, on 25 December 2001, another creditor which is a related company filed a new petition for rehabilitation with the
Central Bankruptcy Court, and on 27 June 2002 the court ordered the Company to rehabilitate its business. On 26 December 2002,
the planner submitted a rehabilitation plan to the official receiver and the court approved the rehabilitation plan on 17 June 2003.
The Company was able to successfully comply with the process stipulated in the plan and the plan administrator therefore petitioned
the court to order the termination of rehabilitation. The court ordered such termination on 26 September 2003.
2. BUSINESS REHABILITATION PLAN
On 27 February 2001, the Company and three of its overseas financial creditors jointly filed a petition for business rehabilitation
with the Central Bankruptcy Court. The court accepted the petition, and ordered the rehabilitation of the Company’s business on 26
March 2001. The petitioners subsequently appointed a financial advisor to prepare the debt restructuring plan of the Company.
On 5 November 2001 the planner submitted a rehabilitation plan to the creditors’ committee, but overseas financial creditors rejected
the plan. Subsequently on 22 November 2001 the court cancelled its order to rehabilitate the business of the Company, and the three
lenders sued the Company for bankruptcy on the same day. On 25 December 2001 the Company and a major creditor which is a
related company filed a new petition for business rehabilitation with the Central Bankruptcy Court. Such petition was opposed by
the same group of overseas lenders and the court ordered an investigation.
On 27 June 2002 the Central Bankruptcy Court ordered the Company into rehabilitation and appointed Paper Planner Co., Ltd. as
planner. The planner submitted the Company’s rehabilitation plan to the official receiver on 26 December 2002.
On 17 June 2003, the Central Bankruptcy Court issued an order approving the business rehabilitation plan, with Paper Planner Co., Ltd.
as plan administrator. Any right and authority of the planner were transferred to the plan administrator.
The Company’s business rehabilitation plan can be summarised as follows: -
1. Debt restructuring
1.1 Secured finance creditors consist of secured financial institution creditors with debts amounting to approximately Baht
26,288.14 million according to the claims for repayment lodged. Debt is to be repaid as follows:
60
a) The new principal liability under the plan amounting to Baht 2,716 million, is to be paid in proportion to the amount of secured
debt held by each creditor, in annual installments over a period of 13 years, after completion of a period of suspension of
principal repayment (24 months from the date the court approved the plan). These liabilities carry interest at a rate of 1 percent
in the first to third years, 2 percent in the forth to fifth years and 4 percent in the sixth to fifteenth years.
b) The principal in excess of the value of the security, amounting to approximately Baht 2,500 million, is to be paid in proportion
to the part of the debt final approval granted in excess of the value of the security. Payment is to be made on an installment
basis from the 8th to the 14th year after the date the court approved the plan, with the remainder to be repaid in full in the
15th year. A fixed rate of interest of 1 percent per annum applies throughout the fixed 15-year period.
c) Principal amounting to Baht 87.24 million is to be paid from part of the capitals injected by new investors, with no interest charge.
1.2 Unsecured creditors consist of the debts of directors, trade accounts payable, the Revenue Department, government and state
enterprises creditors and creditor arising as a result of composition agreement amounted to approximately Baht 37,910.32 million
according to the claims for repayment lodged. Creditors are to be repaid as follows:
a) The payment is allotted for trade accounts payable with the ration of 1 percent to 100 percent subtract 0.38 percent. The
payment is to be made in installments from operating cash flows within 15 years and from newly arranged loan facilities with
the first payment due within 12 months from the date the court approved the plan. Debt is to be repaid at a constant rate of
1.5 percent per year from the 1st to the 14th year, with the remainder to be settled in the 15th year.
b) The outstanding principal, 0.38 percent is to be paid from the capital injected by the new investor within 60 days of the date
the plan was approved by the court.
c) No interest is to be charged on these balances through the period of repayment.
d) No repayment is to be paid to debts of directors except under other conditions stipulated in the plan.
1.3 Contingent liabilities from assessment of duty and taxes by the Customs Department, and the Revenue Department amounting to
approximately Baht 2,431.49 million according to the claims for repayment lodged. Contingent liabilities as a result of guarantees
amounting to Baht 22,210.92 million. Contingent liabilities as a result of insurance contracts amounting to Baht 10,682.29 million.
No repayment is to be made to those debts unless in accordance with other conditions stipulated in the plan.
2. Capital restructuring
The process of capital restructuring is as follows: -
2.1 The reduction of the Company’s registered share capital from Baht 7,500 million to Baht 5,000 million, consisting of 500 million
shares of Baht 10 each, through the cancellation of 250 million registered shares which have not yet been allocated.
2.2 The reduction of the number of issued and paid up shares by a ratio of 100 to 1, leaving 5 million ordinary shares of Baht 10 each,
with the reduction in capital to be offset against the deficit.
2.3 Increase registered share capital from Baht 50 million to Baht 550 million through the issue of 50 million shares at Baht 10 each,
all of which are to be sold to a new investor.
The Company had repaid liabilities identified under the rehabilitation plan, reduced its registered share capital, reduced its paid-up
share capital to 5 million ordinary shares with a par value of Baht 10 each, or a total of Baht 50 million, increased its share capital to
50 million of ordinary shares with a par value of Baht 10 each, or a total of Baht 500 million. The Company registered its reduction
and increase of shares with the Ministry of Commerce. Moreover, on 2 September 2003, the Company filed a request for the Stock
Exchange of Thailand to accept its shares for listing as marketable securities on the Stock Exchange of Thailand.
The above steps had mainly been successfully implemented in compliance with the conditions stipulated in the rehabilitation plan.
The plan administrator therefore petitioned the court to terminate the Company’s rehabilitation plan and the court ordered such
termination on 26 September 2003. Consequently, the authority and responsibility for the Company was legally returned to the
management and shareholders as from the date of termination.
3. PRIOR YEAR ADJUSTMENT
During the period ended 30 June 2003, the Company adjusted interest payable on loans and other liabilities which it had recorded
until the end of 2001, while the lenders and other creditors ceased charging interest to the Company commencing from the date the
court ordered the rehabilitation of the Company’s business. The effect of interest payable of 2002, amounting to Baht 916 million, was
to cause the brought forward balance of retained earning of 2003 to be restated as if the Company had ceased accruing interest
from the date the court ordered the rehabilitation of its business to be restated.
61
4. CHANGE IN ACCOUNT ESTIMATION
Before 2003, the Company calculated depreciation of machinery using the productive units method, over the estimated useful lives
of 25 years. In 2003, the Company changed the estimated useful life of the machinery from 25 years to 30 years, based on the
estimation of an independent specialist; John Foord Valuers Co., Ltd.
5. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting standards pronounced by the Institute of Certified
Accountants and Auditors of Thailand and with the Accounting Act B.E. 2543.
Significant accounting policies adopted by the Company are summarized below.
5.1 Revenues
Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are the
invoiced value of goods supplied, excluding value added tax, after deducting discount and goods return.
5.2 Trade accounts receivable and allowance for doubtful accounts
Trade accounts receivable is carried at its net realizable value. Allowance for doubtful accounts is provided for the estimated collection
losses that may be incurred in the collection of receivables. The allowance is based on collection experience and current status of
receivables outstanding at the balance sheet date.
5.3 Inventories
Finished goods are valued at lower of cost (first in - first out method) and net realizable value.
Raw materials and others consumable are valued at cost (moving-average method) and charged to cost of production whenever issued.
5.4 Property, plant and equipment and depreciation
Land is stated at cost less allowance for impairment, plant and equipment are stated at cost less accumulated depreciation and
allowance for impairment.
Depreciation is calculated by reference to their cost on a straight-line basis except for depreciation of machinery which calculated on
productive-output method over the estimated useful lives as follows: -
Buildings - 20 years
Machinery and plant equipment - 5, 30 years
Office equipment - 5 years
Furniture and fixtures - 5 years
Leasehold improvement - 5 years
Motor vehicles - 5 years
No depreciation is provided for land and assets under construction.
5.5 Allowance for assets impairment
The Company reviews the impairment of assets whenever events indicate that the carrying value of an asset exceeds its realizable
value. Realizable value is the higher of an asset’s net selling price and its value in use. The value in use is arrived at based on the
management estimates.
The Company recognizes an impairment loss in the earnings statements whenever the carrying value of an asset exceeds its realizable
value. The Company will reverse the impairment loss when there are indications that the value of the asset is no longer impaired or the
amount of impairment has decreased.
5.6 Intangible assets and amortisation
Computer software is stated at cost less accumulated amortisation. The Company amortised computer software on a straight line
basis over the period of 5 years.
62
No amortisation on computer software installation.
Deferred supply costs are stated at cost less accumulated amortisation. The Company amortised deferred costs on a straight line
basis over the period of 2 years.
5.7 Foreign currencies
Foreign currency transactions during the year have been translated into Baht on the rates ruling at the transaction dates. Monetary
assets and liabilities denominated in foreign currency outstanding on the balance sheet date have been translated into Baht at the
rates ruling by the Bank of Thailand at the balance sheet date.
Exchange gains and losses are included in determining earnings.
5.8 Cash and cash equivalents
Cash and cash equivalents in the preparation of statements of cash flows included cash in hand, deposits at financial institutions with
an original maturity of 3 months or less and without commitments.
5.9 Financial instruments
The Company has no policy to speculate in or engage in the trading of any financial derivative instruments.
Financial instruments carried in the balance sheet include cash and cash equivalents, trade accounts receivable, trade accounts
payable and liabilities which were included under the former rehabilitation plan. The particular recognition methods adopted are
disclosed in the individual policy statements associated with each item.
5.10 Provident fund
The Company and its employees have jointly established a provident fund scheme in accordance with the Provident Fund Act B.E.
2530. Such fund is monthly contributed by the Company and its employees at the rate of 2 percent of their basic salaries. The fund
is managed by Kasikorn Assets Management Company Limited, and will be paid to the employees upon termination in accordance
with the rules of fund.
5.11 Use of accounting estimate
Preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates for certain accounting transactions, affecting reported amounts in the financial statements and notes related thereto.
Subsequent actual results may differ from these estimates.
5.12 Basic earnings per share
Basic earnings per share is determined by dividing the net earnings for the year by the weighted average number of ordinary shares
outstanding during the year held by outside shareholders with the adjustment of ordinary shares in proportion to the change of the par
value as discussed in Note 22 and adjusted earnings per share of the prior year.
6. TRADE ACCOUNTS RECEIVABLE
The balances of trade accounts receivable as at 31 December are classified by aging as follows: -
(Unit: Baht)
2004 2003
Not yet due 886,725,881 -
Overdue
Less than 3 months 170,017,299 363,299,325
3 - 6 months 2,844,622 18,117,245
Over 9 months 221,857 32,824
1,059,809,659 381,449,394
63
The Company has not provided allowance for doubtful accounts against the balance as at 31 December 2004 and 2003 since the
Company’s management believes that the collectibility can be made by offsetting transactions with the purchases of raw materials and
consumables. Nevertheless, in 2003, the Company wrote off an account receivable amounted to Baht 3.2 million since it believed that
the balance was not recoverable.
Most of the collection from accounts receivable during the years incurred from the memorandum of understanding made between the
Company’s debtors, creditors and the Company. The debtors agreed to make the payments to the creditors instead of the Company.
7. RESTRICTED DEPOSIT AT FINANCIAL INSTITUTION
As of 31 December 2004, the balance of saving deposit has been pledged with a bank to secure for a related company in respect of
purchase of goods.
8. INVENTORIES
(Unit: Baht)
2004 2003
Raw materials
Finished goods
Goods in transit
Spare parts
Supplied cost
Others
902,435,004
421,174,233
154,983,653
331,343,325
248,181,259
268,035,273
322,032,539
329,140,416
185,015,991
176,740,754
177,266,982
112,259,957
Total inventories 2,326,152,747 1,302,456,639
Less: Allowance for slow-moving inventories (5,167,782) (5,167,782)
Inventories - net 2,320,984,965 1,297,288,857
9. PROPERTY, PLANT AND EQUIPMENT
(Unit: Baht)
Building and Machinery and Office Furniture Motor Assets under
Land improvement equipment equipment and fixture vehicles construction Total
Cost:
31 December 2003 701,401,193 1,974,068,814 17,305,086,086 73,868,081 18,500,570 1,440,335 258,363,757 20,332,728,836
Acquisition - 29,032,543 271,429,724 24,318,571 1,411,673 3,888,157 62,224,779 392,305,447
Disposal - - - (31,488) - (96,660) (803,426) (931,574)
31 December 2004 701,401,193 2,003,101,357 17,576,515,810 98,155,164 19,912,243 5,231,832 319,785,110 20,724,102,709
Accumulated depreciation:
31 December 2003 - 437,125,382 1,311,030,500 31,439,027 14,849,288 353,387 - 1,794,797,584
Depreciation for the year - 100,749,527 323,793,812 12,577,326 1,449,828 523,023 - 439,093,516
Depreciation on disposal - - - (18,466) - (59,722) - (78,188)
31 December 2004 - 537,874,909 1,634,824,312 43,997,887 16,299,116 816,688 - 2,233,812,912
Allowance for impairment :
31 December 2003 481,401,193 - 5,315,608,391 4,366,325 1,248,402 - - 5,802,624,311
Allowance for impairment
for the year (Reversal) (175,500,000) 538,176,254 (3,804,116,893) - - - - (3,441,440,639)
31 December 2004 305,901,193 538,176,254 1,511,491,498 4,366,325 1,248,402 - - 2,361,183,672
Net book value:
31 December 2003 220,000,000 1,536,943,432 10,678,447,195 38,062,729 2,402,880 1,086,948 258,363,757 12,735,306,941
31 December 2004 395,500,000 927,050,194 14,430,200,000 49,790,952 2,364,725 4,415,144 319,785,110 16,129,106,125
Depreciation for the years:
2003 351,522,734
2004 439,093,516
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9.1 On 29 November 2002, the Company had its land appraised by an independent appraiser. The market value of the land per the
report of this independent appraiser was Baht 220 million while its cost was Baht 701 million. The discrepancy between cost and market
value of Baht 481 million was included as allowance for asset impairment in the earnings statement of the year 2003.
9.2 During the year 2003, the Company wrote down the brought forward balance of its spare machinery parts by its book value of Baht
1,233 million and had all of its machinery appraised by an independent appraiser, John Foord Valuers Co., Ltd. The appraisal report of
independent appraiser dated 29 November 2002 stated that the value of the machinery under the forced sale valuation method was
Baht 2,716 million (the forced sale valuation method was used for the specific purpose of preparing a business rehabilitation plan, and
does not reflect the value in use of these assets) and at market value was Baht 10,850 million, while the carrying value (after write
down of spare parts) was Baht 16,171 million. The Company recorded loss from assets impairment amounting to Baht 5,321 million
and loss from the write off of spare parts amounting to Baht 1,233 million in the statement of earnings of 2003.
9.3 On 30 December 2004, the Company had its land, plant and machinery reappraised by an independent appraiser; The Valuation
& Consultants Company Limited, using the market value approach. The appraiser reported that the market value of the land amounted
to Baht 395 million (compared to a carrying value as of 31 December 2004 of Baht 220 million), the market value of plant amounted
to Baht 910 million (compared to a carrying value of Baht 1,448 million) and the machinery had a market value of Baht 14,430 million
(compared to a carrying value of Baht 10,626 million). The Company reversed allowance for land and machinery amounting to Baht
3,979 million previously recorded and recorded additional allowance for impairment of plant amounted to Baht 538 million in the
statement of earnings, presenting net amount as “Reversal of allowance for assets impairment” in the statement of earnings for the
current year.
As of 31 December 2004, certain assets of the Company have been fully depreciated but are still in use. The original cost, before
deducting accumulated depreciation, of these assets amounted to Baht 112.4 million (2003: Baht 24.7 million).
Depreciation for 2004 amounting to Baht 436 million (2003: Baht 350 million) has been charged to cost of sales and the remaining
Baht 3 million (2003: Baht 1 million) has been charged to selling and administrative expenses.
The title deeds of land and construction thereon with a net book value as of 31 December 2004 amounting to Baht 25 million are
pledged as collateral for the electricity usage.
10. INTANGIBLE ASSETS
10.1 Computer software installation
(Unit: Baht)
2004 2003
Balance - beginning of the year 40,991,898 40,991,898
Addition 4,590,326 -
Balance - end of the year 45,582,224 40,991,898
10.2 Deferred supply costs
(Unit: Baht)
2004 2003
Balance - beginning of the year 22,428,003 920,926
Addition 76,835,485 23,084,425
Amortisation (32,125,445) (1,577,348)
Balance - end of the year 67,138,043 22,428,003
11. DEPOSITS FOR PURCHASES OF RAW MATERIALS
The outstanding balance represents advance payments to overseas suppliers to guarantee purchases of raw materials. If the Company
is unable to use raw materials in time, as stipulated in the contracts, or to utilize raw materials already delivered to the Company but
not released, the suppliers will charge interest at the rate of LIBOR plus 1 to 1.75 percent per annum.
65
12. LIABILITIES WHICH WERE INCLUDED UNDER THE FORMER REHABILITATION PLAN/GAIN FROM BUSINESS
REHABILITATION
Liabilities which were included under the former rehabilitation plan
(Unit: Baht)
2004 2003
Indebtedness included under rehabilitation plan 62,619,190,727 62,619,190,727
New balance of principal under rehabilitation plan as of 30 June 2003 8,074,207,949 8,074,207,949
Less: Repayment (4,304,638,882) (232,274,490)
Debt forgiven by financial institution creditors (2,477,869,500) -
Liabilities under rehabilitation plan forgiven by trade accounts payable
and service creditors (35,344,648) (23,182,336)
Total liabilities included under the former rehabilitation plan 1,256,354,919 7,818,751,123
Less: Current portion of liabilities included under the former rehabilitation plan - (53,029,333)
Total liabilities included under the former rehabilitation plan - net
of current portion 1,256,354,919 7,765,721,790
Gain from rehabilitation
(Unit: Baht)
2004 2003
Gain under rehabilitation plan - 54,544,982,779
Liabilities under rehabilitation plan forgiven by trade accounts payable
and service creditors after the rehabilitation process as a result
of the repayment prior to maturity 12,162,312 23,182,336
Gain from forgiveness of debt by financial institution creditors 2,477,869,500 -
Total gain from rehabilitation process 2,490,031,812 54,568,165,115
Less: Written off of deferred loan management fee - (139,999,359)
Adjustment of value added tax on waived debts - (6,403,378)
Expenses of negotiations concerning debt forgiveness with
secured overseas financial institution creditors (196,300,000) -
2,293,731,812 54,421,762,378
The Company negotiated with trade accounts payable and other payable under the rehabilitation plan that the Company would pay the
debts prior to the maturity and all creditors would agree to reduce the partial of indebtedness. Most of creditors agreed with the
Companyís negotiation and the Company paid the balance under the proposal. Therefore the Company recorded the portions of
indebtedness forgiven under gain from rehabilitation in the statements of earnings.
During the first quarter of 2004, the Company appointed a related company and another company as consultants to negotiate with
overseas financial institution creditors to execute agreement to repay indebtedness prior to maturity. On 15 March 2004, the Company
repaid indebtedness amounting to US dollars 85 million (approximately Baht 3,360 million) to overseas financial institution creditors
and the creditors released all the remaining debts of approximately Baht 2,190 million to the Company. The Company recorded the debt
forgiven by the creditors under gain from rehabilitation plan. Expenses incurred in negotiations with the overseas financial institution
creditors consist of expenses of US dollars 3.5 million, or Baht 137.41 million (exchange rate as at contract date was Baht 39.26 per
USD 1) payable to the above related company under a consultancy service contract dated 9 January 2004, and US dollars 1.5 million,
or Baht 58.89 million (exchange rate as at contract date was Baht 39.26 per USD 1) payable to the other company under a consultancy
memorandum dated 1 February 2004, which the Company has already paid these expenses. Expenses incurred in negotiations with
these consultants are presented as a deduction from the gain from rehabilitation in statement of earnings.
Subsequently on 14 June 2004, the Company executed an agreement with a domestic financial institution to pay the outstanding debts
under the rehabilitation plan prior to maturity. The outstanding balance as of the contract date was Baht 958.3 million, the Company
66
had to repay Baht 671 million of indebtedness and that financial institution released Baht 287.3 million of debts to the Company,
released all assets which pledged against the loan to the Company. The Company repaid the debts in 2004 and recorded liabilities
forgiven by the financial institution as gain from rehabilitation plan in earnings statement.
13. RELATED PARTY TRANSACTIONS
The Company had significant business transactions with its related company (related by ways of common directors and/or common
shareholders and the same group of companies). These transactions are summarized below: -
(Unit: Baht)
2004 2003 Pricing policy
Transactions with related companies:
Sales of goods 2,298,505,927 2,213,772,897 Market Price
Purchases of raw materials 535,553,703 439,123,254 Cost plus margin
Purchases of raw water 18,471,963 12,722,043 Contractual price
Commission expense 24,223,905 11,256,082 Agree-upon basis
Rental and service expenses 1,618,960 2,840,446 Contractual price
Expense of negotiation concerning debt forgiveness 137,410,000 - Contractual price
Compensation from breach of contract - 568,360,000 Contractual price
Reversal of compensation from breach of contract 568,360,000 - Contractual price
Interest expense - 3,462,128 8% and 1% per annum
The outstanding balances of transactions have been separately shown in the balance sheets as follows: -
(Unit: Baht)
Relationship 2004
Trade accounts receivable - related company
Nara International Co., Ltd. Group company 130,563,249 91,766,042
Trade accounts payable - related company
Nara International Co., Ltd. Group company 53,387,157 70,861,524
Amount due to related company
Siam Power Generation Co., Ltd. Shareholder and director - 568,360,000
Advance from director Director - 170,952
Current portion of liabilities which were included
under the former rehabilitation plan
Itochu Corporation Co., Ltd. Shareholder - 13,093,743
Industrial Finance Corporation of Thailand Shareholder - 7,770,445
- 20,864,188
Liabilities which were included under the
former rehabilitation plan - net of current portion
Itochu Corporation Co., Ltd. Shareholder - 1,604,629,895
Industrial Finance Corporation of Thailand Shareholder - 950,506,775
Siam Power Generation Co., Ltd. Shareholder and director - 347,486,901
- 2,902,623,571
Advance received from customers
Nara International Co., Ltd. Group company 20,789,060 -
Accrued expenses
Sukhumvit Inter Development Co., Ltd. Group company 1,304,250 -
Other payable
Sukhumvit Inter Development Co., Ltd. Group company - 2,544,657
67
2003
14. SHARE CAPITAL
The Company reduced its registered share capital from 750 million shares with a par value of Baht 10, or a total of Baht 7,500 million,
to 500 million shares with a par value of Baht 10, or a total of Baht 5,000 million, through the cancellation of registered shares which
had not yet been allocated. In addition, the Company reduced the number of its issued and paid up share capital by a ratio of 100 to
1, or from Baht 5,000 million to Baht 50 million, and issued 50 million new shares with a par value of Baht 10, in order to comply with
the rehabilitation plan. Share capital after the implementation of the conditions stipulated in rehabilitation plan, amounted to Baht 550
million, consisting of 55 million shares with a par value of Baht 10 each. The Company registered the capital reduction and capital
increase with the Ministry of Commerce on 31 July 2003, 1 August 2003 and 11 August 2003, respectively.
On 28 November 2003, an extraordinary general meeting of the shareholders of the Company passed a resolution to approve the
increase in the Company’s capital by Baht 550 million through the allocation of 55 million ordinary shares with par value of Baht 10 each
to the existing shareholders in a ratio of 1 existing share : 1 new share at Baht 10 each. As at 31 December 2003, most of the
shareholders have already paid for the shares and the Company recorded the Baht 547 million received as share subscription received
in advance in the balance sheet. The Company registered the increase in share capital by Baht 550 million with the Ministry of Commerce
on 19 January 2004.
Subsequently on 16 March 2004, an extraordinary general meeting of the shareholders of the Company no.1/2004 passed a resolution
approving the change in the par value of the Company’s shares from Baht 10 to Baht 1 each. The number of ordinary shares therefore
increased to 1,100 million shares with a par value of Baht 1 each. In addition, the meeting approved a resolution to increase the
Company’s share capital by Baht 7,100 million, through the issuance of 7,100 million shares at par value of Baht 1 each, with allocation
to the shareholders as follows: -
1. Allocation of 4,400 million ordinary shares to the existing shareholders in a ratio of 1 existing share : 4 new shares at a price of Baht
0.01 per share. In case of any shares remaining unsubscribed after the allocation were to be offered to interested existing shareholders,
in proportion to their shareholdings.
2. Allocation of 2,700 million new ordinary shares to 34 specific and/or institutional investors at a price of Baht 1.60 per share.
The Company has recorded the expenses concerning the increased share capital of Baht 62.94 million as deduction in “Share premium”.
The Company registered the increases in its share capital from Baht 1,100 million to Baht 5,500 million and then to Baht 8,200
million, or 8,200 million shares with a par value of Baht 1 each, with the Commerce Ministry on 23 March 2004 and 24 March 2004,
respectively.
On 5 October 2004, an extraordinary general meeting of the shareholders of the Company passed the resolution to approve of Baht
3,800 million increase in the registered share capital, from Baht 8,200 million to Baht 12,000 million, through the issue of 3,800 million
ordinary shares with a par value of Baht 1 each. Of these shares not more than 100 million are to be reserved for the exercise of the
warrants issued to the directors and employees and not more than 3,700 million are to be reserved for an Initial Public Offering (IPO).
The Company registered its increase in registered share capital with the Ministry of Commerce in October 2004.
15. PREMIUM ON CAPITAL REDUCTION
In order to comply with the capital restructuring process stipulated in the rehabilitation plan, the Company reduced its paid-up share
capital from Baht 5,000 million (500 million ordinary shares with a par value of Baht 10) to Baht 50 million (5 million ordinary shares
with a par value of Baht 10) to eliminate its deficit. The capital reduction of Baht 4,950 million compared to a deficit of Baht 387.7
million as at 31 July 2003, and the excess of the capital reduction over the deficit was presented as “Other surplus” in the balance
sheet. The Company offset premium on capital reduction amounting to Baht 4,356 million (4,400 million of increased ordinary shares
with par value of Baht 1 each at Baht 0.01 each) against the share discount as a result of the capital reduction.
68
16. LEGAL RESERVE
Under the Public Company Limited Act B.E. 2535, the Company is required to set aside to a statutory reserve at least 5 percent of its
net profit, after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of its registered share
capital. The statutory reserve cannot be used for dividend payment.
17. WARRANTS SCHEME
On 5 October 2004, an extraordinary general meeting of the shareholders of the Company passed the resolution to approve of the issue
of 100 million warrants to subscribe to the Company’s ordinary shares to the Company’s directors and employees (ESOP warrants),
without charge. The 5-year warrants to be offered within 6 months from the date the warrants are approved by the Securities Exchange
Commission (SEC). The exercise period of warrants are three years, with one-third of the allocated warrants exercisable in each year.
The directors and employees must exercise all warrants allocated to them at the same time, with the exercise dates respectively set
at 1 year, 2 years and 3 years after the date the Company’s shares begin trading on the Stock Exchange of Thailand until the expiry
date of warrants. The warrants of approximately 30 percent are allocated to directors and the remaining 70 percent to employees.
As of the balance sheet date, there was no subscription of the above warrants.
18. ALLOWANCE FOR COMPENSATION FOR BREACH OF CONTRACT (REVERSAL)
During the fourth quarter of 2003 Siam Power Generation Co., Ltd., a related company sent a letter requesting compensation of Baht
568.36 million from the Company for damage caused by its breach of a contract to purchase electricity. This had resulted in a delay
in the construction of the electricity generating plant of Siam Power Generation Co., Ltd. and meant the loss of privileges granting an
exemption from import duty on imports of related machinery and equipment. The compensation was not included in the business
rehabilitation plan since at that time the official receiver declared that the liability had not been incurred. However, the Board of
Investment later sent a letter to the Company notifying it that it would not approve the extension of the privileges of Siam Power
Generation Co., Ltd., and therefore the issue of compensation was discussed. Subsequently, the Board of Directors of the Company
passed a resolution for a director of the Company to negotiate with the associated company and approved the payment of
compensation totalling Baht 568.36 million as per the agreement to pay compensation for the damages dated 26 December 2003.
On 4 February 2004, the Company entered into an amendment to the agreement to pay compensation for the damages, whereby
compensation is to be paid in annual installments, at each year-end, at the rate of 1 percent of the whole compensation for a period
15 years. The remaining compensation is to be paid in the final period, and no later than 15 December 2019.
In 2004, Siam Power Generation Co., Ltd. informed the Company that the Board of Investment approved an extension of the
privileges granting from imports of machinery and equipment until November 2006 that caused an obligation of the Company for the
compensation for breach of contract was completed as stipulated in the agreement dated 26 December 2003. On 31 May 2004, the
Company entered into an agreement to cancel that agreement and its amendment of agreement dated 4 February 2004 and reversed
the compensation for breach of contract amounting to Baht 568.36 million included in earnings statement for the current year.
19. OTHER INCOME
(Unit: Baht)
2004 2003
Gain on exchange rate - 857,451,130
Gain from disposal of assets 222,069 443,654
Gain from sale of raw materials 121,332,822 3,875,735
Others 18,685,037 32,892,536
140,239,928 894,663,055
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20. DIRECTORS’ REMUNERATION
Directors’ remuneration represents the benefits paid to the Company’s directors in accordance with Section 90 of the Public Limited
Companies Act, exclusive of salaries and related benefits payable to executive directors.
21. PROMOTIONAL PRIVILEGES
The Company was granted privileges under the Investment Promotion Act B.E. 2520 by the Board of Investment. Subject to certain
imposed conditions, the privileges include: -
a) Exemption of 75 percent from import duty on raw material used in the manufacturing.
b) Exemption from payment of corporate income tax on profits for a total period of 8 years commencing as from the date of first
earning operating income.
c) Exemption from income tax on dividends paid from the profit of the operation within the tax exemption period.
d) An allowance of 50 percent on corporate income tax on income from investment for a period of 5 years commencing as from
the expiration date of period of exemption from corporate income tax.
e) An allowance of double the amount of actual expenditure on transportation, electricity and water, deductible from taxable income
for a period of 10 years commencing as from the date of first earning operation income.
f) An allowance of 25 percent of any investment in installation or construction of facilities, deductible from taxable income in
addition to normal depreciation.
The operating results for the year 2004 and 2003 of the Company classified under promoted and non-promoted business are as
follows: -
(Unit: Baht)
For the years ended 31 December
Promoted business Non-promoted business Total
2004 2003 2004 2003 2004 2003
Revenues
Sales 21,270,252,071 12,622,162,692 - - 21,270,252,071 12,622,162,692
Interest income - - 471,975 726,088 471,975 726,088
Reversal of allowance for
breach of contract - - 568,360,000 - 568,360,000 -
Other income 31,311,407 881,686,624 108,456,546 12,250,343 139,767,953 893,936,967
Total revenues 21,301,563,478 13,503,849,316 677,288,521 12,976,431 21,978,851,999 13,516,825,747
Expenses
Cost of sales 18,211,316,404 11,788,752,412 - - 18,211,316,404 11,788,752,412
Selling and administrative
expenses 421,463,909 483,738,916 - - 421,463,909 483,738,916
Liabilities under composition - - - 568,360,000 - 568,360,000
Loss on exchange 58,107,583 - - - 58,107,583 -
Interest expense 120,997,469 57,348,559 - - 120,997,469 57,348,559
Total expense 18,811,885,365 12,329,839,887 - 568,360,000 18,811,885,365 12,898,199,887
Reversal of allowance for
assets impairment 3,441,440,639 -
Allowance for assets impairment - (5,802,624,311)
Loss from assets written off - (1,232,495,777)
Extraordinary items
Gain from rehabilitation plan 2,293,731,812 54,421,762,378
Net earnings 8,902,139,085 48,005,268,150
70
22. BASIC EARNINGS PER SHARE
On 16 March 2004, an extraordinary general meeting of the shareholders of the Company approved a change in the par value of the
ordinary shares from Baht 10 to Baht 1 per share. The Company registered the change with the Commerce Ministry, and adjusted the
number of ordinary shares used in the calculation of basic earnings per share of 2003 to accord with generally accepted accounting
principles.
23. PROVIDENT FUND
In the current year, the Company contributed a total of Baht 2 million to the fund (2003: Baht 2 million).
24. COMMITMENTS
24.1 As at 31 December 2004, the Company had the following outstanding commitments in respect of raw material management and
service fees: -
(Unit: USD Million)
Amount
2005 5.5
2006 - 2013 43.7
24.2 As at 31 December 2004, the Company had commitments to pay financial advisory fees totalling Baht 2 million
(2003: Baht 7 million).
24.3 As at 31 December 2004, the Company had commitments to pay a total of Baht 16.2 million for water supply management
(2003: Baht 6.6 million).
24.4 As of 31 December 2004, the Company had a commitment to pay a total of Baht 1.2 million for raw water under the agreement
(2003: Baht 2.4 million).
24.5 As of 31 December 2004, the Company had a commitment to pay a total of Baht 0.5 million for a program license (2003: None).
24.6 As of 31 December 2004, the Company had commitments to pay machine installation service fees to two companies amounting
to USD 0.7 million (2003: None).
24.7 As of 31 December 2004, under building lease and service agreement the Company was committed to pay the following office
rental and service fees: -
(Unit: Baht Million)
Amount
2005 4.8
2006 - 2013 44.0
24.8 As of 31 December 2004, the Company had the following payment commitments for the use of gas under an agreement: -
(Unit: Baht Million)
Amount
2005 21.6
2006 - 2009 97.3
24.9 As of 31 December 2004, the Company had commitments to pay a consultancy fee for the preparation of a plan to increase
production capacity, based on hours worked.
24.10 As of 31 December 2004, under a long-term agreement the Company is committed to pay dock service fees based on the
quantity loaded.
25. FINANCIAL INFORMATION BY SEGMENT
The operations of the Company is in a single industry segment in manufacturing of hot rolled coils and is carried on in the single
geographical area in Thailand. As a result, all of revenue, operating profits and assets as reflected in these financial statements
pertain to the aforementioned industry segment and geographic area. Export sales for the year 2004 was amounted to Baht 4,835
million (2003: Baht 1,108 million).
71
26. FINANCIAL INSTRUMENTS
26.1 Credit risk
The Company is exposed to credit risk primarily with respect to trade accounts receivable since the majority of sales are supplied
to a limited number of customers. However, due to the collections made by offsetting transactions with accounts payable, the Company
does not anticipate material losses from its debt collection.
26.2 Interest rate risk
The interest rate risk is the risk that future movements in market interest rates will affect the Company’s operations and its cash
flows. The Company’s exposure to interest rate risk relates primarily to its cash and deposits with banks, trade accounts receivable
and trade accounts payable. The Company does not use derivative financial instruments to hedge such risk.
26.3 Foreign currency risk
The Company’s exposure to foreign currency risk relates primarily to its deposits paid to creditors, and trade creditors which are
denominated in foreign currencies. The Company does not primarily utilize forward exchange contracts.
Below is the summary of the Company’s significant foreign currency-denominated assets and liabilities as at 31 December 2004
which were unhedged by any derivative financial instruments. The majority of these liabilities are repayable within one year.
Assets Liabilities
Exchange rate Exchange rate
Currencies Amount for translation Amount for translation
US dollars 30,186,275 39.0147 22,322,146 39.2025
Euro 717,170 52.9333 267,412 53.4818
26.4 Fair value
As the majority of financial assets and liabilities are short-term, their carrying value does not materially differ from their fair value.
27. PRESENTATION
The presentation of the financial statements had been made in compliance with the Notification of the Department of Business
Development dated 14 September 2001, issued under the Accounting Act B.E. 2543.
The Company reclassified the financial statements presented herein to conform with the current year classification with no effect to
net earnings previously reported.
28. APPROVAL OF FINANCIAL STATEMENTS
These financial statements have been approved by the directors of the Company.
Designed by : pink blue black & orange co., ltd. (color party) tel. 0-2300-5124-7 fax. 0-2300-5124-7 www.colorparty.com 72
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