CONTENTS
80 DIAMOND ROOFING TILES PCL.
EXPANDED AREA OF EXPORT Distributors in neighboring countries Expansion plan for Middle East countries In 2007, DRT derived export revenue of about 9% and this has increased to 13% in 2008 mainly from neighboring countries such as Laos, Cambodia, Burma and also China, Taiwan and India. DRT has plans to increase export revenue to between 13-15% of total revenue.
VISION, MISSION AND VALUES Vision “A Better Alternative for the Customers” Mission “We are in the business of production and distribution as well as services relating to roofing tiles, boards and accessories. We believe that our ability to serve the needs and expectations of our customers, employees, society and shareholders, is the foundation of success in our mission.” • For our customers, we will deliver quality products with designs that are different and worth the value at competitive pricing by utilizing modern technology and offering excellent service to the customers with our strong distribution channels and effective management. • For our employees, we will build and promote an environment of learning, advancement and well-being of employees in order to allow the employees to achieve their fullest potential. • For our society, we will support the society that we live in and be a company that is friendly to the environment. • For our shareholders, we will create financial return with continuous growth and stability. Values “We will continue to be diligent, devoted, teamwork-oriented, honest, fair and transparent; learning, sharing and improving; focus on the Company’s objectives and success and on achieving excellence; and have service-mind both inside and outside of the Company” The company’s core values can be represented by the acronym “D TILES” which stands for D – Diligence T - Team Work I – Integrity L - Learning E – Excellence S - Service
: : : : : :
Diligent and hard-working Work as a team Work with integrity, honesty and transparency Learning, share knowledge, and continuous improvement Determined to achieve corporate objectives and have drive for excellence Service mind both towards internal and external clients
81 ANNUAL REPORT 2008
COMPANY PROFILE Company’s Name: Abbreviation: Registration Number: Type of Business: Registered Capital:
Diamond Roofing Tiles Public Company Limited DRT 0107547001041 Production and distribution of roofing tiles, siding boards, boards and other roofing accessories as well as roof installation service under the trademark names of Diamond, Roof, Adamas and Jearanai. 1,049,650,000 ordinary shares at a par value of Baht 1 per share totaling Baht 1,049,650,000 1,000,000,000 issued and paid-up ordinary shares totaling Baht 1,000,000,000
BACKGROUND: 1985 On August 28, 1985 2001 On April 3, 2001 2002 On December 26, 2002 2004 On December 2, 2004 2005 On November 9, 2005
The Company was established under the name of Siam City Tiles and Pipes Company Limited with Siam City Cement Public Company Limited as a major shareholder. The Company formally changed its name to Diamond Roofing Tiles Company Limited (DRT). There was a change in the shareholder structure with Myriad Materials Company Limited becoming a major shareholder. The Company was incorporated as a public company and became Diamond Roofing Tiles Public Company Limited. The Company was given permission by the Securities and Exchange Commission (SEC) to register its ordinary shares for trading on the Stock Exchange of Thailand (SET) and its shares were first traded on November 29, 2005 under the stock trading acronym of “DRT”.
LOCATIONS: Head Office:
Branch Office 1: Branch Office 2:
69-70 Moo 1, Mitraphap Road, Km. 115, Tambol Talingchan, Amphur Muang, Saraburi 18000 Tel: 036-224001-8, Fax: 036-224015-7 408/163-165, Paholyothin Place Bldg., 40th Floor, Paholyothin Road, Samsennai, Phayathai, Bangkok 10400 Tel: 02-619-0742, Fax: 02-619-0488 490 Khon Kaen Distribution Center, Tambol Banped, Amphur Muang, Khon Kaen 40000 Tel: 0-4323-4643-4 Call Center: 0-2619-2333 Website: www.diamondtile.com E-mail Address: Corpcenter@diamondtile.com
REFERENCES: Registrar:
Auditor:
Thailand Securities Depository Co., Ltd. 62 Stock Exchange of Thailand Building Rajadapisek Road, Klongtoey, Bangkok 10110 Tel: 02-229-2000, Fax: 02-654-5649 KPMG Phoomchai Audit Ltd., 195, 22nd Floor, Empire Tower, South Sathorn Road, Bangkok 10120 Tel: 02-677-2000, Fax: 02-677-2222
82 DIAMOND ROOFING TILES PCL.
STATEMENT FROM THE CHAIRMAN During 2008, Thailand was affected by the economic and financial crisis that emerged and spread throughout the world as well as the domestic political crisis that severely slowdown investment projects from both private and public sectors. Demand for construction works declined sharply, amidst a lost in confidence by consumers. There was an excess supply situation in the construction material markets, such as roof tile, siding board, etc., which intensified price competition in the industry.
Financial Status and Opearational Result During 2008 Diamond Roofing Tiles Public Company was affected by the aforementioned crisis, which resulted in 2008 performance below expectation. The Company reported 2008 revenue of Baht 2,542 million, and net profits of Baht 284.82 million. However, the Company still had a strong financial status and good cashflow level, which enabled the Company to repay debt and pay dividend to shareholders. The Company has current ratio of 1.58 times and net debt to equity ratio of 0.35 : 1, which is considerably low and should provide some room to make more loans should the Company would embark on future investment. Although the domestic economic condition adversely affected the Company’s operation over the last year, the Company’s management employed various strategies to mitigate the impact, which included exporting more products overseas. As a result the Company’s 2008 export revenue rose 29.61% from the previous year.
Human Resource is the Vital Factor for the Company’s Success The Company realizes the importance of human resources. The Company established the Employee Share Ownership Program (ESOP) to issue 49,650,000 warrants to Directors and employees of the Company to motivate them to work better and encourage the knowledgeable, capable and efficient employees to stay with the Company on the long-term as co-owners of the Company. The ESOP program was approved by the Extraoridary Shareholders’ Meeting No. 1/2008, dated June 17, 2008. On October 10, 2008, the Office of the Securities Exchange Commission approved the plan to sell such securities within one year. However, as the financial crisis pushed the Company’s stock price lower than fair value, the Company did not offer those securitities yet.
Research and Development and Continued Investment The Company has continued to develop and introduce new products to the markets. The Company plan to launch Jearanai Tile, Simply Cut collection, which is a new product to the market, in early 2009. The Company signed a contract to purchase NT9 production line with MFL Faserzementanlagen Ges.m.b.H from Austria in early 2008. The NT9 production line will produce siding board, wall board, floor tiles and
83 ANNUAL REPORT 2008
other synthetic wood products to increase product varieties and enhance the Company’s competitiveness. The Company should be able to start production in early 2010.
Treasury Share Buyback to Manage Capital During the Board Meeting No. 198, dated October 20, 2008, the Board of Directors resolved to make share buyback to manage the Company’s capital as the Company had excess cash and the Company’s share price is lower than its fair value. As at the end of 2008, the Company already bought 19.41 million shares. As a result of the buyback, the Company’s earning per shares as at the end of 2008 increased by 1.98%.
Occupational Health and Safety The Company realizes the importance of safety in the workplace. During 2008, the Company was awarded two awards, which were Certificate in Environmental and Occupational Safety (OHSAS 18000 : 2007) from SGS (Thailand) Company Limited and Safety Award from the Department of Labor Protection and Welfare, The Ministry of Labor for being a company that has had an excellent rate of reduction of labor accidents.
Environmental Practices and Activities within the Community Environmental protection is a crucial issue in the Company’s operation. The company maintains its commitment to care for the environment and continues to strive for environmental certification standards or the ISO 14001 by the year 2009. For the community activities, the Company joined with community leaders and villagers to arrange many community events in Saraburi, such as Children Day, Buddhist Lend Day Celebration, donated tiles to renovate temple, and contructed house for the storm victim, etc.
Summary The Board of Directors wishes to inform the shareholders that from the operating results of 2008, the Company’s net profit was Baht 284.82 million or a net profit of Baht 0.29 per share with the par value of Baht 1.00 per share. Accordingly, the appropriation of earnings for Baht 0.25 per share dividend payment to the shareholders has been proposed. The Company has already paid the interim dividend of Baht 0.15 per share to shareholders on September 19, 2008 and will pay final dividend at Baht 0.10 per share which is expected to be paid on April 29, 2009. Total dividend payment constitutes for 86% of 2008 net profits. The Board expects that the 2008 economic and financial crisis will continue create impact into 2009 and may inevitably affect the Company. The Board of Directors will manage the Company prudently by using good corporate governance practice and management working capital efficiently to maintain good cashflow and liquidity, so the company could prevail and operate for further growth in the future. Lastly, the Board of Directors wishes to express its thanks to all shareholders, trading partners and stakeholders for their continuing support of the Company and their contributions to the Company’s development and success.
(Mr. Prakit Pradipasen) Chairman of the Board
84 DIAMOND ROOFING TILES PCL.
REPORT OF THE AUDIT COMMITTEE The Audit Committee was assigned with the roles and responsibilities assigned by the Company’s Board of Directors, including to review the financial statements to ensure accuracy and reliability, to review internal controls and internal audit systems for appropriateness and efficiency; to ensure compliance with the relevant law; to appoint the external auditor of the Company and to consider connected transaction or transaction that may cause conflict of interest to ensure full compliance with the relevant laws. The Audit Committee would like to report operation results on the assigned matters which can be summarized as follows: (1) Reviewed the Company’s’ audited quarterly and annual financial statements of year 2007 and discuss with external accounting auditor and management to ensure that they were prepared in compliance with generally accepted accounting standards with adequate disclosure of the financial information and in accordance with the facts and changes that have occurred. (2) Conduct 2008 review to determine audit scope to cover significant risks and sufficiency of the Company’s internal controls system and found that there was no significant deficiency. The Management was recommended to improve and adjust some systems for further caution. (3) Ensured that the Company complied with the laws and regulations of the Securities and Securities Exchange, regulations of the Stock Exchange of Thailand and laws related to the business operation of the Company. The Audit Committee did not find significant violation during 2008. (4) Reviewed the related transactions or transactions that might have conflict of interest during 2008 and found that all were carried out according to the normal business practice and were fully disclosed in accordance to the regulations put forth by the Office of Securities Exchange Commission and the Stock Exchange of Thailand.. (5) Made suggestions to the Management to give priority to operate the Company within the principles of good corporate governance as established by the Stock Exchange of Thailand with regular review to build confidence among the shareholders and all relevant stakeholders. (6) Considered the proposals from a total of 5 external auditors and recommended to the Board of Directors in order to propose to the Shareholders’ Meeting for appointment of Mr. Montri Panichkul, certified public accountant license no. 3461; or Mrs. Nachalee Boonyakarnkul, certified public accountant license no. 3126; or Mrs. Viphawee Boonyaprasith, certified public accountant license no. 3096 of Deloitte Touche Tohmatsu Jaiyos Audit Company Limited, who are qualified accounting auditor according to the requirement of the Office of the Securities Exchange Commission and the Stock Excahange of Thailand to be the Company’s external auditor for financial year 2009 and determined the annual audit fee of 850,000.00 Baht. (7) During 2008, the Audit Committee held a total of 9 meetings. All Audit Committee members were present in every meeting. The Audit Committee reported summarized operational result to the Board of Directors for acknowledgement and consideration every quarter. The Audit Committee is fully independent and has functioned in accordance to the assigned roles and responsibilities. The Audit Committee has received full cooperation from the Management and has met with the external auditor to discuss every quarter to take comments on the financial statements and accounting and internal controls and found no significant irregularities or errors. 13 February 2009 On behalf of the Audit Committee
(Mr. Somboon Phuvoravan) Audit Committee Chairman
85 ANNUAL REPORT 2008
REPORT OF THE NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee has performed its duties as assigned by the Board of Directors. During 2008, the committee held 6 meetings to consider the following matters. (A) Nomination of the Company’s Audit Committee to replace the Committee members who were retired by rotation According to the existing charter, the Company’s Audit Committee determined that the Audit Committee shall have 2-year term, in which the entire Audit Committee would be retired by rotation on 21 January 2009, namely Mr. Somboon Phuvoravan Audit Committee Chairman Mr. Suvit Nardwangmuang Audit Committee Member Mr. Anun Louharanoo Audit Committee Member The Nomination and Remuneration Committee’s Meeting No. 5/2551 dated November 13, 2008 has resolved to select all of the above 3 Audit Committee Members for the re-appointment as the Audit Committees of the Company for another 3 years from January 22, 2009 to January 21, 2012 (according to the new rule that allows the Audit Committee to remain in the position on 3-year term) due to following reasons (1) All three Audit Committee Members are qualified independent directors according to the requirements of the Office of Securities Exchange Commission (SEC) and the Stock Exchange of Thailand (SET). (2) The Audit Committee has audited the Company’s operation and provided beneficial suggestion for the Company. The committee also ensured that the Company’s operation is consistent with the relevant laws and regulations of the SET and Office of the SEC. (3) The Audit Committee has diligently performed its duties. It held 9 meetings in 2008 and every Member of the Audit Committee were present in every meeting. (B) Nomination of the Company’s Directors to replace the Directors who were retired by rotation One-third of the Directors must be retired by rotation at the Annual General Meeting of Shareholders, thus, the Nomination and Remuneration Committee must consider and nominate suitable candidates that are suitable for the Company’s director positions that are vacant by rotation. Accordingly, the Nomination and Remuneration Committee has established methods and procedure for the nomination as follows. (1) The Nomination and Remuneration Committee acknowledges the names of Directors who would be retired by rotation and names of outside persons whom have been proposed for the selection process for the director positions from both the Company’s Directors and minority shareholders. (2) The Nomination and Remuneration Committee considers suitable candidates for the director positions of the Company from the lists of proposed candidates, of which the candidates who are appointed to become the directors of the Company must not have characteristics prohibited by the relevant laws. (3) The Nomination and Remuneration Committee selects and proposes the name list of candidates whom are considered suitable candidates for the Company’s directorship positions to replace those Directors whom are retired by rotation, to the Board of Directors for consideration before proposing to the Annual General Meeting of Shareholders, accordingly. In 2009 Annual General Meeting of Shareholders, there will be 3 Directors retired by rotation, namely: Mr. Chaiyut Srivikorn Director Mr. Asanee Chantong Director Mr. Suvit Nardwangmuang Mr. Suvit Nardwangmuang, who has informed that he would not take up every position after the end of his office term (Director, Independent Director, Audit Committee Member and Nomination and Remuneration Committee Member).
86 DIAMOND ROOFING TILES PCL.
The Nomination and Remuneration Committee’s Meeting No. 1/2552 dated January 15, 2009 and No. 2/2552 dated February 25, 2009 have considered for the nomination of suitable candidates for the Company’s directorship positions replacing the above Directors who retired by rotation. The Committee has considered various qualifications and resolved to proposed following 3 candidates to replace directors who will retire by rotation, namely Mr. Chaiyut Srivikorn, Mr. Asanee Chantong and Mr. Sakda Maneerattanachai due to the following reasons: (1) They all possess the knowledge, capabilities and experience which are deemed beneficial and also essential in the management of the Company for future growth and development. (2) They have qualifications suitable to assume director positions in the publicly listed company according to the Company’s regulations and requirements of the Office of the SEC and the SET. (3) Mr. Chaiyut Srivikorn and Mr. Asanee Chantong, who are proposed to be re-appointed back for another term, have diligently performed their duties. They actively participated in all 13 Board meeting, except Mr. Chaiyut Srivikorn who missed one meeting due to personal engagement overseas. (4) As for Mr. Sakda Maneeratchatchai, who has been proposed to return for the Director, Independent Director and Audit Committee Member positions in replacement of Mr. Suvit Nardwangmuang, was the former Director and Managing Director of the Company until December 31, 2006 and was previously the advisor to the Management Committee and Managing Director from January 1, 2007 to December 31, 2008. During his management tenure, he lead the Company well, ensured profit and continued stability for the Company. He possesses qualifications and working experiences which are beneficial to the Company’s business operation and has passed the qualifications and criteria according to the regulations established by the Securities and Exchange Commission (SEC) according to the Letter
No. Jor.77/2552 dated March 3, 2009. (C) Consideration of the Remuneration for the Company’s Directors The Nomination and Remuneration Committee uses the following criteria for considering the remuneration for the Directors. (1) The remuneration must be appropriate for scope of duties and responsibilities of the Directors. (2) The remuneration should be at the level similar to other companies in the Stock Exchange of Thailand that have similar operating results and at the level with sufficient incentive to keep good Directors with the Company. (3) The remuneration must be related to the overall performance of the Company. The Nomination and Remuneration Committee’s Meeting No.1/2552 dated January 15, 2009 has considered monthly remuneration of the Directors, Audit Committee, Nomination and Remuneration Committee, and chairman of other committees to be appropriate for the duties and in line with the industry. The Nomination and Remuneration Committee also considered proposing for the annual remuneration for Directors based on the overall performance and operating results of the Company in 2008. The Committee proposed to pay 2008 monthly remuneration and annual bonus in the amount equal to those paid in 2007. (D) Criteria to evaluate performance of the Company The Nomination and Remuneration Committee determined the criteria to evaluate performance of the Company or Key Performance Indicators (KPI) to consider salary adjustment and bonus payment to the Company’s employees. The Nomination and Remuneration Committee evaluated performance of the Company by considering annual budget, the Company’s operational target and the market and economic condition.
87 ANNUAL REPORT 2008
(E) Consideration of the Annual Salary Adjustments and Bonuses for the Management and Employees (1) The Nomination and Remuneration Committee has considered adjusting the annual salary adjustments for the top executives of the Company based on the operating results of the Company and individual work performance. As for the bonus for the top executives, the criteria are the same with other employees in general. (2) The Nomination and Remuneration Committee has considered the bonuses and annual salary adjustments for the employees based on the overall operating results of the Company, market and economic situation, employment condition, as well as benchmarking with salary adjustment rates of other companies within similar industrial sectors. (F) Consideration of Welfare Adjustment for the Employees The Nomination and Remuneration Committee has considered improving the general welfares for the employees of the Company in order to be suitable with the rise in cost of living and be comparable with other companies within similar industrial sectors. (G) Consideration of issuing warrants to subscribe for the Company’s common shares to Directors and employees under Employee Stock Ownership Program (ESOP) The Nomination and Remuneration Committee and the Company’s financial advisors proposed issuing warrants to subscribe for the Company’s common shares to Directors and employees under Employee Stock Ownership Program (ESOP). The ESOP warrants is issued to motivate employees to work diligently which would eventually result in rising share price. The plan also motivates the capable and competent employees to enhance the Company’s competitiveness. The ESOP program has been approved by the Extraordinary Shareholders’ Meeting No.1/2008, dated June 17, 2009.
25 February 2009 On behalf of the Nomination and Remuneration Committee
(Mr. Chaiyut Srivikorn) Nomination and Remuneration Committee Chairman
88 DIAMOND ROOFING TILES PCL.
REPORT OF THE RISK MANAGEMENT COMMITTEE The Management Committee resolved to appoint Risk Management Committee according to order No. 020/2008, dated February 19, 2008, which comprised of 12 management representatives from all business units of the Company. Mr. Satid Sudbuntad, Deputy Managing Director, Sales and Marketing, is the Risk Management Committee Chairman. The Risk Management Committee will determine risk management policy to control risk at the acceptable level and to conform to the good corporate governance principles. During 2008, the Risk Management Committee held 6 meetings to determine risk management policy, operational plan and follow up plan to ensure adequate and appropriate risk management system, which can be concluded as follow. (1) Determine adequate and appropriate risk management plans and procedures to cover all the risks that may potentially occur with the Company. (2) Evaluate and analyze various risk factors and prioritize those risks into urgent risk (red risk) or potential future risk (yellow risk) and correct or prevent them from happening. (3) Follow-up risk management result on the urgent risk as well as preventive measure for the potential risk by prepare quarterly risk management report and propose it to the Management Committee and Board of Directors after being reviewed by the Audit Committee. (4) Review risk management policy and system as well as the investigation and reporting system to ensure that the Company has adequate, appropriate and effective risk management system. (5) Supervise and ensure that the Company’s operation is within the scope of risk management and disclose risk information to the regulators and public accurately and regularly. During 2008, the Risk Management Committee could control various risks to the level that they will not significantly affect the Company’s operation. The committee will perform responsibilities with responsibility and prudence for the best interest of the Company, shareholders and all stakeholders. 13 February 2009 On behalf of the Risk Management Committee
(Mr. Satid Sudbuntad) Risk Management Committee Chairman
89 ANNUAL REPORT 2008
90 DIAMOND ROOFING TILES PCL.
BOARD OF DIRECTORS
As at December 31, 2008, the Company’s Board of Directors comprises of a Directors.
Name 01 Mr. Prakit Pradipasen
Age Shareholding: 66 1.90%
Position Chairman
Education and Training
• Bachelor of Science in Business Administration Silliman University, Philippines • Master of Business Administration Wayne State University, USA • Citibank Credit Training Center, Philippines • Senior Executive Program, Stanford National of Singapore, Singapore • Special Program of National Defence College, Joint Public & Private Sector Class 3 • Program for Senior Executive The Sloan School of Management Massachusetts Institute of Technology, USA • Director Accreditation Program Class 1/2004 (DAP 1/2004)
Current Working Experience
Chairman Director / Audit Committee Chairman Director / Audit Committee Chairman Chairman of Audit Committee Director
02 Mr.Chaiyut Srivikorn
42 0.08%
Asian Marine Service PCL The Erawan Group PCL Supalai PCL Thai Chamber of Commerce Myriad Materials Co.,Ltd. , Etc.
Director / Nomination and Remuneration Committee Chairman
Education and Training
• Bachelor of Economics, New York University, USA • Master of Public Administration, NIDA • Director Accreditation Program Class 33/2005 (DAP 33/2005)
Current Working Experience
Chairman Director Executive Director Chairman President
03 Mr. James Patrick Rooney
70
Education and Training
• The American Graduate School of International Management, MBA • Yale University Department of Far Eastern Studies • Pomona College, BA • Director Certification Program Class 47/2004 (DCP 47/2004) • Charter Director Class (Class 4/2008)
0.20%
K M C Apparel Company Limited Myriad Materials Co.,Ltd. TCH Suminoe Co.,Ltd. Thai Outdoor Sport Co.,Ltd. Srivikorn Group Holdings Co.,Ltd. Etc.
Director
91 ANNUAL REPORT 2008
Name
Age Shareholding: Position Current Working Experience Chairman Director Director Director Director
04 Mr. Phaithoon Kijsamrej
65 0.13%
J.P. Rooney & Associates Ltd. , Bangkok, Thailand Myriad Materials Co.,Ltd. , Bangkok, Thailand Samitivej PCL Bangkok Airways Ltd. , Bangkok, Thailand Taxplan Ltd. , Bangkok, Thailand ,Etc.
Director / Nomination and Remuneration Committee Member
Education and Training • Bachelor of Commerce, Chulalongkorn University • Asian Institute of Management, Manila, Philippines • Pacific Rim Bankers Program, University of Washington, USA • Director Accreditation Program Class 32/2005 (DAP 32/2005) • Director Certification Program Class 55/2005 (DCP 55/2005)
Current Working Experience Director / Audit committee Chairman Audit Committee Member Director Director Chairman
05 Mr. Somboon Phuvoravan
62 0.55%
Finansa Life Assurance Co.,Ltd. The Thai Chamber of Commerce Myriad Materials Co.,Ltd. Siam Administrative Management Co.,Ltd. SCMB Co.,Ltd. ,Etc.
Independent Director / Audit Committee Chairman
Education and Training • Bachelor of Mechanical Engineering , Chulalongkorn University • Master of Business Administration, Thammasat University • Director Accreditation Program Class 32/2005 (DAP 32/2005) • Audit Committee Program Class 4/2005 (ACP 4/2005) • Director Certification Program Class 55/2005 (DCP 55/2005) • Monitoring the System of Internal Control and Risk Management Class 1/2007 (MIR 1/2007) • Monitoring the Internal Audit Function Class 1/2007 (MIA 1/2007) • DCP Refresher Course (RE DCP 1/2008) • Monitoring the Quality of Financial Reporting (MFR) 6/2008
Current Working Experience President
Cemtech international Co..Ltd.
Past Working Experience Executive Director / Senior Vice President Siam City Cement PCL Executive Director Eagle Cement Co., Ltd. Executive Director Holcim (Bangladesh) Co., Ltd., Etc.
92 DIAMOND ROOFING TILES PCL.
Name 06 Mr. Suvit Nardwangmuang
Age Shareholding: 64 0.10%
Position Independent Director / Audit Committee Member / Nomination and Remuneration Committee Member
Education and Training
• Bachelor of Engineering.(Civil) , Chulalongkorn University • (M.I.M. (Master in Marketing, Thammasart University • Director Accreditation Program Class 24/2004 (DAP 24/2004) • Audit Committee Program Class 4/2005 (ACP 4/2005) • Finance for Non-Finance Director (FN) 2004 • Monitoring the System of Internal Control and Risk Management Class 1/2007 (MIR 1/2007) • Monitoring the Internal Audit Function Class 1/2007 (MIA 1/2007) • Understanding the Fundamental of Financial Statement Class12/2007 (UFS 12/2007)
Current Working Experience
Director Director
Past Working Experience
Managing Director / Chief Executive Officer Royal Porcelain PCL Managing Director Ceratech Co.,Ltd. Managing Director Kohler (Thailand) PCL. Etc.
07 Mr. Anun Louharanoo
55 None
Royal Porcelain PCL SV&A Holding Co.,Ltd.
Independent Director / Audit Committee Member / Nomination and Remuneration Committee Member
Education and Training
• Bachelor of Accounting, Thammasat University • Bachelor of Laws, Thammasat University • Director Accreditation Program Class 1/2003 (DAP 1/2003) • Director Certification Program Class 29/2003 (DCP 29/2003) • Audit Committee Program Class 2/2004 (ACP 2/2004) • DCP Refresher Course Class 2/2006 (DCP 2/2006) • Improving the Quality of Financial Reporting Class 2/2006 (QFR 2/2006) • Monitoring the System of Internal Control and Risk Management Class 1/2007 (MIR 1/2007) • Monitoring the Internal Audit Function Class 1/2007 (MIA 1/2007) • Corporate Governance Workshop Board Performance Evaluation 2007 • Role of the Compensation Committee Class 7/2008 (RCC7/2008)
Current Working Experience
Director / Executive Director / Chief Financial Officer Executive Director Independent Director / Audit Committee Member Director
Lanna Resources PCL PT. Lanna Harita Indonesia Royal Porcelain PCL Thai Agro Energy PCL Etc.
93 ANNUAL REPORT 2008
Name 08 Mr. Asanee Chantong
Age Shareholding: 56 None
Position Director / Management Committee Chairman / Managing Director
Education and Training • Bachelor of Science (Chemistry), Chiengmai University • Master of Management, Sasin Graduate Institute of Business Administration, Chulalongkorn University • Director Accreditation Program Class 63/2007 (DAP 63/2007)
Past Working Experience Managing Director Joint Managing Director Assistant Managing Director
09 Mr. Satid Sudbuntad
48 0.30%
S.K.I. Ceramics Co.,Ltd. Kohler (Thailand) PLC. Royal Porcelain PLC., Etc.
Director / Management Committee Member / Deputy Managing Director Sales and Marketing
Education and Training • Bachelor of Engineering, King Mongkut’s Institute of technology North Bangkok • Master of Engineering Administration (Major in Marketing Technology) The George Washington University, Washington D.C., U.S.A. • Managing Change and Change of Management in Asia Insead Euro-Asia Center, Hong Kong (2/2000) • Orchestrating Winning Performance International Institute for Management Development, Lausanne, Switzerland (6/2000) • Director Certification Program Class 2001 (DCP 12/2001) • Finance for Non-Finance Director (FN) 2003 • Audit Committee Program Class 8/2005 (ACP 8/2005)
Past Working Experience Director Executive Manager
Karat faucet Co.,Ltd.) Siam City Cement PCL, Etc.
94 DIAMOND ROOFING TILES PCL.
Board of Directors and Management Structure >> From left to right below:
>> From right to left above:
1. 2. 3.
1. 2. 3. 4. 5. 6. 7. 8. 9.
Mr. Phaithoon Kijsamrej Mr. Prakit Pradipasen Mr. Chaiyut Srivikorn
Mr. James Mr. Anun Mr. Somboon Mr. Suvit Mr. Satid Mr. Asanee Mr. Maitree Ms. Thanakarn Mr. Suwit
Patrick Rooney Louharanoo Phuvoravan Nardwangmuang Sudbuntad Chantong Tawonatiwasna Phanthapirat Kaewamphunsawat
95 ANNUAL REPORT 2008
96 DIAMOND ROOFING TILES PCL.
OCCUPATIONAL HEALTH, SAFETY, ENVIRONMENT AND SOCIETY Occupational Health and Safety The Company realizes the importance of safety in the workplace
and believes that accidents, injuries and illness as a result of work
related problems can be prevented if all employees and management
work together to prevent them. During the last year the Company has implemented
various projects to ensure our employees, contractors and visitors’ safety. Some of these projects included: • The 5 S Activity (Japanese Concept of Improvement in the Workplace) • “Safe Songkran Festival” campaign • The “Safety Walk Rally” campaign • The “Stop Smoking for the King” campaign • 3rd Safety Week of 2008 Due to strong determination to reduce work-related accidents, the accident statistics have gradually reduced over the past year. Awards and Merits the Company has achieved During 2008: Certificate in Environmental and Occupational Safety (OHSAS 18001:2007) from SGS During 2007: Safety Award from the Department of Labor Protection and Welfare, The Ministry of Labor for being a company that has had an excellent rate of reduction of labor accidents. The company has implemented the 5 S activity since 2007 and planed to apply 5 S concept to be part of every operation. Every employee took part in creating safe and better environment and enhancing operation efficiency. The Company sees the benefits of 5S in term of clean work place, well-arranged inventory that is easy to find, reduced defects and reduced stock space. So the Company applies 5 S in the clients’ premises, in which the Company applied 5S concept in a client sites and expect to apply in 2 more sites in 2009.
Environmental Practices The company considers responsibilities toward environment and society important roles and part of doing business. Therefore, the Company places great emphasis and importance on controlling production process. During the past year the following activities have taken place: 1. The measurement of air quality in the workplace such as the steam funnel, color spraying and glazing funnels and xylene to check that the emissions must not affect environment. 2. Measurement of noise, dust and chemical qualities, of which results passed safety standards.
97 ANNUAL REPORT 2008
3. Measurement of water quality in and around the plant, of which results are normal levels. 4. Installed water treatment system to treat and reuse water, which reduce water consumption. 5. Construct dangerous waste storage facility to separate waste, reduce environmental impact and wait to be disposed according to the regulations. 6. Discard of refuse, broken tile pieces, sealer remains and spilled oil outside of the plant according to the regulations set forth for industrial companies and reports are sent to www.diw.go.th which is the primary website for Department of Industrial Works. 7. Hire an advisor to prepare ISO 14001 by preparing document system and create environment-conscious value. The company maintains its commitment to care for the environment and continues to strive for environmental certification standards or the ISO 14001 by the year 2009.
Activities within the Community
The company has taken part and aided several community projects such as: The Company joined with community leaders, villagers and school kids’ parents to arrange Children’s Day event by arranging activities, games, rewards, school equipment and lunch for students and children on 11 January 2008 at Huay Li Temple School, Talingchan SubDistrict, Muang District, Saraburi.
The Company gave “Diamond” roof tiles and siding board to Captain Somjit Jongjorhor to give out for public benefits
The Company donated Pansa candle and tiles to Baan Kluay Temple, Takud Sub-District, Muang District, Saraburi Province to renovate monk’s chambers and temple restrooms. The Company arranged “Karaoke” fund raising activity to donate to Phrabath Numphu Temple, Lopburi Province.
The Company and Taling Chan District Administration, Saraburi Province initiated “House for the poor, in the honor of the King.” The Company donated tiles, siding board and some cash to construct a new house for Mrs. Tem Buaporn as her house was completely destroyed by the storm. The Company also provided aids for other less unfortunate people.
The Company donated roof tile and siding board to Kao Jampa Temple School , Muang District, Saraburi Province on June 18, 2008.
The Company, Mrs.Vimol Palawat, Saraburi deputy governor, and Office of Labor Welfare, Saraburi Province donated roof tiles to Charoenrat Bumrong (Nonklo) on December 4, 2008.
98 DIAMOND ROOFING TILES PCL.
BUSINESS ACTIVITIES The Company’s core business is the production and distribution of roofing tiles, siding boards, boards and other roofing accessories as well as roof installation service under the trademark names of Diamond, Roof, Adamas and Jearanai. The Company’s sole production facility is located in Saraburi province. The facility covers an area of over 147 rai of land. The Company currently employs 701 employees and its main products may be categorized as follows:
Fiber Cement Tile such as Roman Tile, Small Corrugated Tile, Flat Sheet and Fiber Cement Ridge, having ratio of revenue to total sales
Concrete Tile such as Gran Onda and Adamas and Concrete Ridge, having ratio of revenue to total sales
Jearanai Tile such as Jearanai Shingle Roof, Jearanai Board, Jearanai Mold, Jearanai Lath and Jearanai Eaves, having ratio of revenue to total sales
In 2007 and 2008 of 71%
and 67%, respectively.
In 2007 and 2008 of 12% and 14%, respectively.
In 2007 and 2008 of 1% and 5%, respectively.
Siding such as Siding Board, Lath and Eaves, having ratio of revenue to total sales
In 2007 and 2008 of 14% and 11%, respectively.
Accessories such as Paint, Bird Guard and Foil, etc., having ratio of revenue to total sales
In 2007 and 2008 of 2% and 3%, respectively. The Company has earned the following accreditations • • • • •
ISO 9001:2000 certification for both its production facility and offices from SGS (Thailand) Co.,Ltd. TIS Standards from the Thai Industrial Standards Institute, Ministry of Industry OHSAS 18000:2007 for Occupational Health and Safety from SGS (Thailand) Co.,Ltd. ISO 14000 for Environment Management System standards, expected to receive accreditation in 2009. Thailand’s Brand from Department of Export Promotion, Ministry of Commerce
99 ANNUAL REPORT 2008
SIGNIFICANT CHANGES IN THE PAST YEAR April
• Signed contract to buy NT-9 production line from the Austrian company MFL Faserzementanlagen Ges.m.b.H.
June
• The Extraordinary Shareholders’ Meeting no.1/2008, dated June 17, 2008 approved the issuance of 49,650,000 units of warrants to Directors and/or employees of the Company under the Employee Share Ownership Program and approve capital increase of Baht 49,650,000 Baht from a previous registered capital of Baht 1,000,000,000 Baht (One-billion Baht) to new registered capital of 1,049,650,000 Baht (One-billion, forty-nine million, six-hundred fifty thousand Baht), all of which are 1,049,650,000 common shares (One-billion, forty-nine million, six-hundred fifty thousand shares) with par value of Baht 1.00 per share and amend Memorandum of Association Item 4. to be consistent with the capital increase.
July
• Completed capital raising process and amended Memorandum of Association Item 4 on 1 July 2008.
October
• The Board of Directors’ Meeting no. 198, dated October, 20, 2008 approved treasury stock buyback plan to manage capital with the total fund of no more than 75,000,000 Baht and shares not exceeding 5.00% of total paid-up shares, which are 50,000,000 shares. As at the end of 2008, the Company bought 19,409,100 treasury shares worth 27,938,661.56 Baht with average share price of Baht 1.44 per share. 2008 year-end earnings per share increased by 1.98%. • The Board of Director’s Meeting no. 197, dated October 6, 2008 approved to establish regional distribution center at Khon Khaen province (HUB), to service customers in the upcountry who do not have a direct access to Saraburi plant. The Company has established its first hub, which would start operation in 2009.
FUTURE PROJECTS Project NT-9: Autoclave Cured, Non-Asbestos Board Production Line The Company has plans to carry out the installation of machinery for the production of non-asbestos board, Autoclave Cured, within the Company’s plant site, in order to achieve continuous growth and be prepared for possible control of asbestos use in the future. This additional production line will be used for production of nonasbestos flat board which has seen significant market growth. The production capacity is approximately 50,000 tons per year with an estimated investment budget of Baht 465 million and estimated installation period of 22 months. The Company expects to complete equipment installation and launch product by early 2010.
100 DIAMOND ROOFING TILES PCL.
INDUSTRY TRENDS AND COMPETITION 1. Product Characteristics
The Company manufactures and distributes roofing, siding boards, boards and other such as Fiber Cement Tiles, Concrete Tiles, Synthetic Siding Board and accessory products used in the roofing process including providing services related to roofing tiles installation.
1.1 Fiber Cement Tile Product Group Fiber Cement Tile is produced by using Portland cement and mixing it with asbestos fiber and water. This type of tile is high heat resistant, thin and light weight, but strong. Fiber Cement Tiles are relatively inexpensive and have a lifespan of over 10 years. Since the majority of Thai homes are made out of wood, the light weight of the fiber cement tiles makes them appropriate for the structure of the homes. The roofing process using fiber cement tiles is also relatively easy and the tile is easy to find, making this type of tile a popular choice for home construction for the past 40 years. Products from this group include Roman Tile, Small Corrugated Tile and Flat Sheet, etc.
1.2 Concrete Tile Product Group Concrete Tiles is produced from Portland cement, rough sand, dust colorant and water. In general, Concretes Tiles are thicker and heavier than the fiber cement tiles. Therefore, the housing structure needs to be stronger and roofing process requires more expertise. However, with added beauty, the concrete tiles have become increasingly popular, especially among the housing projects. Products from this group include Gran Onda and Adamas.
1.3 Jearanai Tile Product Group Jearanai tile is another type of smooth roofing tile produced from Portland cement, paper pulp and a blend of natural fiber. This product was developed as a new kind of roofing to serve modern consumers who like smooth roofing tiles but still reflect the traditional Thai housing style featuring shingle roofing tiles. The new Simply Cut design would be launched in early 2009.
1.4 Siding Product Group Siding or synthetic board is produced from Portland cement, paper pulp and a blend of natural fiber, thus making its useful life very long without having problems with rotting and termites as the real wood but its styling and elasticity are still similar to real wood. Siding board has been increasing in popularity in Thailand for only a few years. Currently, the products have been developed to serve several requirements and uses such as wood replacement, siding boards, ceilings, eaves, laths, etc.
1.5 Board Product Group The Board products are produced from Portland cement, cellulose and blend of natural fiber, making them elastic, durable and easily installed, which can be used both indoor and outdoor. The products therefore can serve the consumers’ requirement. The Board products received increasing popularity and are substitute products for the smooth board made from asbestos fiber. Moreover, the Company has developed siding Board installation system to install siding board in the construction projects or tall buildings, which enhance value for the Company’s Board product group. Other Products: In addition to the above products, the Company is also a leading distributor of various roofing accessories including paint, bird guard and foil, etc. Moreover, the Company provide service regarding roof tile installation service by well-trained team.
101 ANNUAL REPORT 2008
2. Marketing and Competitive Strategy 2.1 Current Industry Situation and Competition During 2008, Thailand has been affected by financial crisis that spread around the world and the domestic political crisis. As a result, many investment projects, both government and private, slowdowned significantly and demand from construction sector greatly decline. Consumer lacked confidence in spending. However, construction material supply, such as roof tile, siding board, etc. were facing excess supply situation, which intensified price competition in the industry.
(A) Current Industry Competition Competition in the roofing tile and siding board industry is concentrated among the group of large operators including Siam Cement Group, Mahaphant Group, Olanvanich Group and Diamond Roofing Tiles. Each operator competes by developing new products to meet various demands of consumers.
(B) Competitive Conditions in Thailand Demand for cement roofing tile products declined due to economic slowdown. However, the market for these products is relative large and growing, particularly in rural market. The price competition remains intense in this product group. Sales of concrete tile and Jearanai shingle roof products rely heavily on the demand from housing projects. Due to the continued slowdown in the real estate and housing project sector, competition has increased among the competitors. Currently, production capacities are not being fully utilized, thereby increasing price competition. For synthetic siding board products, as production capacity increased during economic slowdown, the price competition become intense as most large producers are trying to introduce their new products into the market. The board products are new products that are substitute products for the traditional smooth board. The good points are their versatile usage and environmental friendly as they do not contain asbestos fiber Market Share by Company for 2007 Producer (Unit : Million Baht)
Total Sales Revenue 2007
Market Share
1. The Siam Cement Group
8,692.40
45.74%
2. The Mahaphant Group
4,901.48
25.79%
3. Diamond Roofing Tiles PCL
2,591.25
13.64%
4. The Kiternit Group
2,046.70
10.77%
5. Thai Ceramic Roofing Tiles Co., Ltd.
556.87
2.93%
6. Srikungdhonburi Co., Ltd.
213.60
1.13%
19,002.30
100.00%
Total
Reference: Department of Business Development, Ministry of Commerce
The value of imported roofing tiles from overseas in 2008 was Baht 375.94 million which decreased by 1.41 percent from 2007.
(C) Competition in Foreign Markets The export of Thai roofing tiles to the overseas markets was valued at Baht 789.66 million in 2008. This was an increase of 38.12 percent from 2007.
102 DIAMOND ROOFING TILES PCL.
Value of Exports of Roofing Tiles Type (Unit : Million Baht) Fiber Cement Tiles Concrete Tiles Total Export Value Growth Rate (%)
Year 2008
Year 2007
Year 2006
552.70 236.96 789.66 38.12%
407.58 164.16 571.74 (0.49%)
452.04 122.53 574.57 32.95%
Source: Customs Department
The majority of exports of roofing tiles and roofing materials have been to neighboring countries such as Laos, Cambodia, Malaysia and Myanmar. Since the products are relatively heavy and fragile and have relatively high transportation cost in comparison with the product value, there are limitations to long distance transport.
Trading Countries Trading Countries (Unit : Million Baht)
Fiber Cement Tiles Proportion Concrete Tiles Proportion
Laos Cambodia Myanmar Others Total
327.87 220.50 3.40 0.93 552.70
59.32% 39.89% 0.62% 0.17% 100.00%
29.68 158.04 26.49 22.75 236.96
12.53% 66.69% 11.18% 9.60% 100.00%
Source: Customs Department
(D) Future Trends in Competition As for the future trends in competition for the roofing tiles, synthetic wood and board market, the majority of sales are in the domestic market. Therefore, as the product demand still affected by the economic slowdown, the competition remain intense. The fiber cement tiles products have high market value and are well accepted in upcountry market. The competition is mainly on price, although the market trend remains stable from the previous year. As for the Concrete Tiles product, it has seen excess production capacity in the market when compared to the product demand. Even though there has been increasing popularity, the slowdown in real estate market still drives fierce price competition. As for synthetic siding board product, the market is relatively stable. However, as some producers expand production capacity and there are many sellers in the market, competition is expected to intensify. The producers focus on expanding product line to respond to clients’ requirements. The Board products receive increasing popularity in the market as they are flexible, durable, easy to install and can be used both indoor and outdoor.
2.2 Characteristics of the Customers, Target Market and Distribution Channels The Company has both domestic and overseas sales having the proportion of sales as follows: Sales Revenue (Unit : Million Baht) Domestic Market Overseas Market Total
2008
Proportion
2007
Proportion
2006
Proportion
2,097 309 2,406
87.16% 12.84% 100.00%
2,282 238 2,520
90.54% 9.46% 100.00%
2,155 173 2,328
92.56% 7.44% 100.00%
103 ANNUAL REPORT 2008
The Company mainly distributes its products through 3 distribution channels, mainly agents, housing developers and exports. The three distribution channels account for 83%, 4% and 13%, respectively. • As for the agents, the Company current has over 600 distributors located throughout the country. Among them there are 50 large buyers. • As for housing developers, the Company sold products directly to housing projects in Bangkok Metropolitan and upcountry. During 2008, the Company focused on expanding board products for the high rise projects. • As for overseas market, the Company has distributed its products to the neighboring countries including Laos, Cambodia, Myanmar and Taiwan. The trend for exports to these countries is increasing with the Company having increased its export sales revenue proportion from 9.46 percent in 2007 to 12.85 percent in 2008. In 2009, the Company is still focused on export market expansion to Australia, India and the Middle East countries.
2.3 Competitive Strategy The Company has established key competitive strategies to be in line with the Company’s vision, mission and values (A) To Offer the Most Satisfactory Service to all our Customers The Company has established the sales and marketing team for continuing the development and training of customers’ employees including training for the shop staff, developing shop sales staff as well as representative retail shops’ managers. The Company also conducts a survey on customer satisfaction once or twice a year to improve the service. The Company also established a Call Center system in order to provide timely service and information. The 2008 customer satisfaction survey indicated that 95% of customers are highly satisfied with the Company’s products and services, based on 250 customers who respond to the survey. (B) To Provide Effective and Timely Product Delivery Service A reliable, timely and correct delivery of products is one of the essential factors of good service that a customer desires according to the Company’s policy of making delivery of products within 24 hours of receiving the purchase order. To ensure that this policy is met, the Company has improved and upgraded the delivery process to increase coordination in all related areas such as production, warehousing and customer service. This also includes order processing, transport of products onto delivery trucks, proper planning of delivery routes and after-sales service. Furthermore, there are projects to visit to the customer’s site for logistic aspect to introduce effective ways to store and manage the products. (C) To Continuously Develop and Introduce New Products to the Market The Company has a policy of continuously developing new variety of products for the market to meet the needs of its customers, including roofing tiles, siding boards, wall panels and installation equipment, including subcontracting service by experienced staff and development in production technology for future competition. (D) To Maintain Current Pricing Levels to Remain Competitive in the Industry The Company has a policy of maintaining competitive prices in line with current competitors in the market by focusing in the quality upon variety of the products and providing services to add value or distinguish the Company’s products. The Company sets fair prices for the consumers and offers discount to trading partners for competitive target and lastly, to maintain acceptable profit margin.
104 DIAMOND ROOFING TILES PCL.
(E) To Develop Further Product Distribution Channels Currently, the Company has over 600 wholesale distributors around the country which are important in pushing the products of the Company. Therefore, the development of the sales representatives to have appropriate knowledge in several aspects and in line with trading model for each group of shops, is an important policy that the Company has implemented by focusing on training seminars to provide knowledge in various aspects to increase its competitive capability level. (F) To Establish Regional Distribution Center (HUB) The Company has a policy to respond to needs of every customer groups. So the Company has established regional hub to service customers in the upcountry who do not have a direct access to Saraburi plant. The Company has established its first hub at Khon Kean Province, which would start operation in early 2009.
3. Product Sourcing Service 3.1 Production The Company has a policy of utilizing full production capacity to ensure maximum production for the whole year and to realize the cost benefits of the Economy of Scale theory. It also reserves product stock in order to meet periods of high demand. In 2008, the Company utilized overall production capacity of 81 percent (as the Company improve lead time in the production process), down from 90 percent in 2007, as economy slowdown.
3.2 Sourcing of Raw Materials
The main raw material components used in making roofing tiles are sourced both domestically and from overseas sources: (A) Domestic Raw materials that are sourced domestically are: Portland cement, sand, colorant, paper fiber and other raw materials. The utilization proportion of domestic raw materials has decreased from 60.68 percent in 2007 to 57.05 percent in 2008 as economic slowdown reduced overall production. (B) Overseas Raw materials that are sourced from abroad are: asbestos fiber, synthetic fiber, paper pulp and other raw materials. The utilization proportion of overseas raw materials has increased from 39.32 percent in 2007 to 42.95 percent of all the raw materials used in 2008. This was due to the Company making purchase orders according to the planned production in 2008, which result in rising overseas raw materials contributions.
3.3 Problems with Sourcing Raw Materials In the past, the Company had never experienced any problem with shortage of raw materials supply used for the production. This is due to the Company’s efficient planning and purchasing schedules for raw materials. The Company also purchases raw materials from several trading partners for each type of product. Accordingly, the Company has sufficient credit facility for working capital and has good relations with the customers for a long time making the Company being well trusted by the trading partners.
105 ANNUAL REPORT 2008
3.4 Environmental Impact Over the past three years, the Company abides strictly by the rules and regulations set out by governmental regulatory agencies concerning the environment, including the Ministry of Industry and Ministry of Natural Resources and Environment, Ministry of Public Health and Ministry of Interior. The Company has been able to comply with all regulations without fail. Concerning the use of asbestos fibers in production, the Company abides by the regulations set forth by the Ministry of Interior concerning health and safety in the workplace which regulates the amount of asbestos fiber in the air to not more than 5 fibers per cubic centimeter of air. The appendix to this regulation also states that regulation for factories is not more than 2 fibers per cubic centimeter of air (Ror.Ngor.4) Results of asbestos testing for factory at 11 areas as of September 30, 2008 Asbestos Content in Air Fiber/cubic centimeter atmosphere
Work / Area Preparation of Raw Materials FC1
Less than 0.001
Preparation of Raw Materials FC2
0.001
Preparation of Raw Materials FC3
Less than 0.001
Cover Pacing FC
Less than 0.001
Preparation of Raw Materials FC5
Less than 0.001
Tile Corner Cutter
Less than 0.001
Tile Polish WIP FC
0.001
Tile Cutter
0.003
Cover Spinning FC3-4
Less than 0.001
Cover Spinning FC5-6
Less than 0.001
Asbestos Warehouse
0.009
Source: Environmental Assessment Report by Health and Envitech Company Limited.
The results for the asbestos testing on September 30, 2008 confirmed that the Company was within and had complied with safety regulations in all 11 areas tested. The Company has also installed additional water treatment systems in 2008 to ensure that water from the factory is properly treated. After the treatment, the treated water is re-used in the production process. As for air pollution, which may occur from dust and particles being released in the tile cutting and polishing process, the Company has installed dry air treatment systems and an air treatment room to control the emissions from production. The Company also constructs buildings to store hazardous waste. Investments in equipment to lower environmental pollution over the past 3 years: Year
Description
Amount (million Baht)
2006
Air and water treatment systems
2.05
2007
Air and water treatment systems
2.12
2008
Air, water, and hazardous waste treatment systems
15.28
106 DIAMOND ROOFING TILES PCL.
107 ANNUAL REPORT 2008
SHAREHOLDING STRUCTURE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
10 Largest Shareholders
No. of Shares
Proportion
Myriad Materials Co., Ltd. Diamond Roofing Tiles PCL. Mr. Prakit Pradipasen Mr. Anun Loupanich Thai NDVR Co., Ltd. Mr. Burana Chavalittamrong Bangkok Insurance PCL Mrs. Siriwan Jungthirapanich Mr. Sakda Maneeratchatchai Cyber Venture Co., Ltd. Others Total
733,250,000 25,534,700 18,969,500* 14,280,000 8,677,600 8,500,000 7,981,500 7,200,000 5,600,000 5,536,500 164,470,200 1,000,000,000
73.33% 2.55% 1.90% 1.43% 0.87% 0.85% 0.80% 0.72% 0.56% 0.55% 16.44% 100.00%
* Number of shareholding including spouse and minor child
The Company has determined the name list of shareholders with rights to attend the 24th Annual General Meeting of Shareholders (Year 2009) and rights to receive dividends on the Record Date of Monday, March 9, 2009, and compiled the name list of shareholders according to Clause 225 of the Securities and Exchange Act by closing the share registry book, suspending transfer of shares on Tuesday, March 10, 2009. Currently, Myriad Material Co., Ltd. is the major shareholder of the Company, having the group of Mr. Chaiyut Srivikorn, group of Mr. Prakit Pradipasen and group of Khunying Sasima Srivikorn as the major shareholders both directly and indirectly with shareholding of 40.00 percent, 25.11 percent and 25.00 percent, respectively. Accordingly, the representatives of Myriad Materials Co., Ltd. group who have positions of directorship in the Company are Mr. Prakit Pradipasen, Mr. Chaiyut Srivikorn, Mr. James Patrick Rooney and Mr. Phaithoon Kijsamrej. Nevertheless, the approval of related transactions of the Company has been done according to the announcement of the Stock Exchange of Thailand and the Securities and Exchange Commission (SEC) and the person who may have conflict of interest cannot approve the transaction that is related to such person. The transaction must be considered by the Audit Committee who will provide opinions before the above transaction is carried out, in order to be used as information for consideration before proposing to the Board of Directors and/or Shareholders’ Meeting for approval. The Company will disclose the related transaction in the footnotes to the financial statements of the Company.
REMUNERATION FOR THE DIRECTORS AND MANAGEMENT For Directors and managements’ remuneration, the Board of Directors appoints the Nomination and Remuneration Committee to consider remuneration for the Company’s Directors and management. The Committee determined the criteria to remunerate Directors and Management by benchmarking with other companies in the same industry and other listed companies in the Stock Exchange of Thailand. The Committee has carefully considered appropriate remuneration as well as business expansion and the Company’s profit growth. Then the committee would propose the management’s remuneration plan to the Company’s Board of Directors for approval. For the Directors’ remuneration plan, the Committee would propose to the Board to further propose to the shareholders’ meeting for shareholders’ approval.
108 DIAMOND ROOFING TILES PCL.
1. Explicit Remuneration Remuneration for the Board of Directors (Unit : Million Baht) Name of Director
2008
2007
2006
1. Mr. Prakit Pradipasen 2. Mr. Chaiyut Srivikorn 3. Mr. James P. Rooney 4. Mr. Phaithoon Kijsamrej 5. Mr. Suvit Nardwangmuang 6. Mr. Sakda Maneeratchatchai (retired 31/12/2006) 7. Mr. Satid Sudbuntad 8. Mr. Somboon Phuvoravan
0.99 0.75 0.53 0.65 0.82 0.53 0.89
0.82 0.50 0.39 0.48 0.60 0.39 0.75
0.80 0.34 0.34 0.70 0.44 0.34 0.34 0.70
9. Mr. Anun Louharanoo 10. Mr. Asanee Chantong (started 1/1/2007) Total
0.82 0.53 6.51
0.60 0.39 4.92
0.44 4.44
In 2006, according to the 21st Shareholders’ Meeting (Year 2006), the Company adjusted its remuneration for two audit committee members. In 2007, according to the 22nd Shareholders’ Meeting (Year 2007), the Company has paid remuneration for the Nomination and Remuneration Committee for the 4 members since April 2007.
Remuneration for the Management Description Total Number of the Executives (person) Salary, bonus and other compensations (million baht)
2008
2007
2006
6 21.80
6 21.72
6 18.91
2. Other Remunerations 2.1 The Company has set up a provident fund for its employees; whereas in 2007 and 2008, the Company contributed to the provident fund for the executives in the amount of Baht 0.63 million and Baht 0.70 million, respectively. 2.2 The company has initiated an Employee Shares Ownership Program (ESOP), which has been approved by the Extraordinary Shareholders’ Meeting No.1/2008, dated June 17, 2008 by issuing 49,650,000 warrants for the Company’s Directors and employees. The Office of Securities Exchange Commission (SEC) resolved to allow the securities issuance on October 10, 2008. To date, none of those warrant has been exercised. Details of the ESOP plan are disclosed on the Company’s website.
109 ANNUAL REPORT 2008
BOARD OF DIRECTORS AND MANAGEMENT STRUCTURE The Management structure of the Company consists of the Board of Directors and 3 committees including the Audit Committee, the Nomination and Remuneration Committee, and the Management Committee, and the Executives of the Company. The scopes of authorities and duties of the Board of Directors and the Executives in the management of the Company are conducted in accordance with the law, objectives, articles of association of the Company, Board’s resolutions, as well as the shareholders’ meeting resolutions including compliance with the laws concerning Securities and Securities Exchange, regulations and good practices of the Office of the Securities Exchange Commission (SEC), the Stock Exchange of Thailand (SET) and relevant laws to the Company’s operation. The Company must also report of the stakeholders and related persons and disclosure of information to the shareholders and public which have established that the Directors and Executives must manage the Company with accountability, prudence and honesty for the utmost benefit of the Company. Details as followed.
1. The Board of Directors As of December 31, 2008, the Board of Directors of the Company comprised of 9 Directors which are: • 2 directors who are executives. • 4 non-executive directors • 3 independent directors Name 1. Mr. Prakit Pradipasen 2. Mr. Chaiyut Srivikorn 3. Mr. James P. Rooney 4. Mr. Phaithoon Kijsamrej 5. Mr. Somboon Phuvoravan 6. Mr. Suvit Nardwangmuang 7. Mr. Anun Louharanoo 8. Mr. Asanee Chantong 9. Mr. Satid Sudbuntad 10. Ms. Thanakarn Phanthapirat
Title Chairman Director Director Director Independent Director Independent Director Independent Director Director / Management Committee Chairman Director / Management Committee Member Company Secretary (started 1/8/08)
Board of Directors’ Meeting (Times) 2007 2008 12/12 10/12 10/12 11/12 11/12 11/12 10/12 12/12 12/12 12/12
13/13 12/13 11/13 10/13 13/13 13/13 13/13 13/13 13/13 13/13
Authorized Directors of the Company: The names of the directors authorized to sign for the Company are: Mr. Prakit Pradipasen, Mr. Chaiyut Srivikorn, Mr. James P. Rooney, Mr. Phaithoon Kijsamrej, Mr. Asanee Chantong and Mr. Satid Sudbuntad. Two out of six must sign together and affix seal of the Company. Authorities and Duties of the Board of Directors: 1. Establish Company’s policy, objectives, business plan and budget as well as oversee the management of the Management Committee and the Management to be in accordance with the assigned policy for effectiveness and utmost benefit to the Company and the shareholders by monitoring and assessing the performance regularly. 2. Establish scope of duties and responsibilities of the Committees and Management and convey the information to the related parties regularly, as well as assign the duties and responsibilities to the Committees, individual or several Directors or other persons to perform certain matter on behalf of the Board of Directors under supervision of the Board of Directors within the time period that is deemed appropriate, of which the Board of Directors may cancel, revoke or change the authorized person or such authority when deemed appropriate.
110 DIAMOND ROOFING TILES PCL.
3. Establish good corporate governance according to the laws of the Securities and Securities Exchange, regulations of the Office of SEC, the SET or laws which are related to the Company’s business. 4. Establish appropriate and sufficient internal control system, internal audit and risk management system, as well as regular monitoring of these matters by having the Committees reporting their operating results every quarter to the Audit Committee and Board of Directors. 5. Establish and arrange for the Board of Directors’ Meeting and Shareholders’ Meeting, including regular preparation of the financial statements showing financial status, communication and disclosure of Company’s information to the related parties as follows: 5.1 Arrange the Board of Directors’ Meeting for at least once every 3 months and convene the extraordinary meetings as necessary. The Company held 13 Board of Directors’ Meetings in 2008. 5.2 Arrange to prepare the Company’s balance sheets and statements of income at end of financial period of the Company that have been reviewed by the Audit Committee and external auditor and propose to the Board or Directors and Shareholders’ Meeting for consideration. 5.3 Arrange for the Annual General Meeting of Shareholders within 4 months from the end of the financial period of the Company. 5.4 Arrange for the Extraordinary Meeting of Shareholders in order to consider urgent matters including matters that are required by law to have approval from the shareholders’ meeting before proceeding with the matter such as capital increase, capital reduction, issuance of debentures, disposition or transfer of Company’s important part of business partially or entirely to other persons or acquisition or taking transfer of other company’s business to the Company and amendment of the Memorandum or Articles of Association, etc. 6. Promote that the employees at all levels to be aware of the code of conduct and ethics by realizing the importance of the internal control and internal audit system in order to reduce risk from fraudulent and improper use of authority, as well as preventing illegal activities relating to the business of the Company.
Company Secretary The Board of Directors resolved to appoint Ms. Thanakarn Phanthapirat to be the Company’s secretary from August 1, 2008 and determine following scopes of responsibilities that the secretary must perform responsibly, prudently and honestly: 1. Arrange shareholders and Board of Directors’ meetings to be in compliance with the Company’s rules and regulations and regulations of relevant regulatory agencies. 2. Make meeting minutes of the shareholders and Board of Directors’ meetings and follow up the operation result according to the shareholders and Board of Directors’ resolutions. 3. Ensure that the information disclosures are in compliance with rules and regulation of the SET and the Office of the SEC. 4. Prepare and keep following documents (A) Director’s registration (B) Board’s meeting invitation and meeting minutes (C) Shareholders’ meeting invitation and meeting minutes (D) The Company’s Annual Report. 5. Store connected transaction reports that Directors and managements report to the Company. 6. Give preliminary advice to the Board concerning rules and regulations of the Company and ensure that the practices are in compliance with those regulations. The secretary must report any significant changes to the Directors. 7. Oversee Board of Directors’ activities and other issues according to the laws or as assigned by the Board of Directors or by the securities exchange regulators. The secretary has prepared initial report concerning the Company’s secretary / document storage (Form 89/15-1)
to the SET and the Office of SEC and post information on the Company’s website.
111 ANNUAL REPORT 2008
In all, the Company is under the process of determining the procedures to report connected transaction of Directors, management and connected person according to the announcement of the Securities Exchange Committee No. Thor.Jor.2/2009 to be in effect by 2009.
2. The Committees The Board of Directors has established the following 3 Committees.
2.1 The Audit Committee The Board of Directors’ meeting no. 199, dated November 24, 2008, resolved to re-appoint the Audit Committee Members who would be retired by rotation on January 22, 2009 to resume existing position for another 3 years from January 22, 2009 to January 21, 2012. The Board also resolved to use new rules issued by the Audit Committee to ensure strict and transparent operation. Qualifications of the Audit Committee According to the Audit Committee’s regulation, the Audit Committee Members must be truly independent. Therefore, the Company places a high priority for this issue and strictly abides by the Security and Exchange Act and regulations and good corporate governance guideline set forth by the Office of SEC and the SET. The Audit Committee Member must have the following qualifications: 1. The Audit Committee Member must be the Company’s Independent Directors who have following qualifications: (A) Not holding more than 1 (one) percent of the paid-up capital of the Company, subsidiaries, affiliates, or any related juristic persons, also including the shareholding by related persons. (B) Is not or was not Executive Directors, workers, employees or consultant with regular fee paid from the Company, subsidiaries, affiliates, associated companies or juristic persons that may have conflict of interest, unless such tenure was over at least 2 years prior to the appointment. (C) Is not related or a relative, either via family tie or legally related, such as in form of parents, spouse, siblings, children, as well as spouses of children, executives, major shareholders, authorized directors or the person who will be proposed to become executive or authorized director of the Company or subsidiaries. (D) Never have business relationship with the Company, subsidiaries, affiliates or juristic persons that may have conflict of interest in the manner that could interfere independent judgment. The Audit Committee Member must not or never be major shareholders, Director other than Independent Director, or managements, or related persons with the Company, subsidiaries, affiliates or juristic persons that may have conflict of interest, unless such tenure was over at least 2 years prior to the appointment. The business relationship according to paragraph 1 include the normal trade transaction concerning property or real estate leasing, service, financial service including lending, guarantee, collateralize, or other similar practice which could result in the Company or contract party having obligation to another party with value exceeding 3% of total net tangible assets or more than Baht 20 million, which ever amount is lower. The liability calculation can be calculated according to the connect transaction value according to the announcement from the Board of the SET concerning information disclosure of the listed company. The obligation shall include debts that occur within one year prior to the date that has business relationship with the same person. (E) Is not or was not the external auditor of the Company, subsidiaries, affiliates or juristic persons that may have conflict of interest. The Audit Committee Member must not be major shareholders, Director other than Independent Director, or managements of the audit company that work for the Company, subsidiaries, affiliates or juristic persons that may have conflict of interest, unless such tenure was over at least 2 years prior to the appointment. (F) Is not or was not specialist service provider, including legal or financial consultant that receive fees more than Baht 2 million per year from the Company, subsidiaries, affiliates or juristic persons that may have conflict of interest. In case the specialist service provider is juristic person, then the Audit Committee Member must not be major shareholders, Director other than Independent Director, or
112 DIAMOND ROOFING TILES PCL.
managements of the service provider, unless such tenure was over at least 2 years prior to the appointment. (E) Is not the Director that has not been appointed as representative protecting interest of the Company’s Director, major shareholder or shareholder who is related to the major shareholder of the Company. (F) Does not have any other characteristic that may prevent exercise of independent judgment regarding the Company’s operation. 2. Must not be directors who have been assigned by the Board to decide on the operation affairs of the Company, subsidiaries, affiliates, associate companies or juristic person that may have conflict of interest, unless the decision is made on collective basis. 3. Must not be Directors of the Company, subsidiaries, affiliates, associate companies of the listed companies. 4. Have adequate knowledge and experience to operate as audit committee. There must be at least one Audit Committee who are knowledgeable and experienced enough to audit the reliability of the financial statements. The Company has a strict policy to search for Audit Committee Member that possesses knowledge, capability and qualifications as announced by the SEC and the Stock Exchange of Thailand. The Company must have the Audit Committee Members of not less than one-third of the total number of Directors of the Company and comprise of at least 3 Audit Committee Members of which one of them must possess the knowledge in accounting and finance and must be appointed by the Board of Directors or the Shareholders. During 2008, the Audit Committee held 9 meetings. As of December 31, 2008, the Audit Committee comprised of the following 3 members: Name 1. Mr. Somboon Phuvoravan 2. Mr. Suvit Nardwangmuang 3. Mr. Anun Louharanoo *
Title Audit Committee Chairman Audit Committee Member Audit Committee Member
Audit Committee Meeting (Times) 2007 2008 9/9 9/9 9/9
9/9 9/9 9/9
*Mr. Anun Louharanoo is the Audit Committee Member who possess adequate knowledge and experience to verify the validity of the Company’s financial statements, Mr. Samart Viriyakattiyaporn is the secretary of the Audit Committee
Authorities and Duties of the Audit Committee: 1. To review the preparation process and disclosure of the Company’s financial reports for their correctness, completeness and reliability. 2. To review and ensure that the Company’s internal controls and internal audit systems are appropriate and effective, and to review independence of the internal audit. The Audit Committee shall approve appointment, relocation, termination the chief of internal audit or other unit that responsible for internal audit process. 3. To ensure that the Company abides by the laws and regulations concerning Securities and Securities Exchange, regulations set forth by the SET, and other relevant laws concerning business operations of the Company. 4. To consider and recommend for appointment the Company’s external auditor and determine the audit fee by considering the reliability and sufficiency of resources and amount of work of the particular audit office, as well as the experience of the assigned person to perform the audit of the Company and meet with the external auditor without participation of the management at least once a year. 5. To consider connected transaction or transaction that may cause conflict of interest and ensure they are in compliance with the relevant laws and regulations of the SET. This is to ensure that those transactions are carried out are reasonable and to the best interest of the Company.
113 ANNUAL REPORT 2008
6. Prepare Report of the Audit Committee by disclosing in the Company’s annual disclosure form (Form 56-1) and Annual Report (Form 56-2), whereas the report must be signed by the Chairman of the Audit Committee and include the following information: (A) The opinion of the Committee on the financial reports of the Company for their correctness, completeness and reliability. (B) The opinion of the Committee on the sufficiency of internal controls of the Company. (C) The opinion of the Committee as to the Company’s abiding by the laws and regulations of the Securities, the Office of the SEC and the SET, and other relevant laws concerning business operations of the Company. (D) The opinion of the Committee concerning suitability of the external auditor. (E) The opinion of the Committee concerning connected transaction. (F) Amount of the Audit Committee meeting and the attendance record of each Audit Committee Member. (G) The opinion or comment that the Committee receives from complying with the Charter. (H) The presentation of any other reports or pertinent information that is deemed appropriate for shareholders to know within the scope of duties and responsibilities as assigned to the Committee by the Board of Directors. 7. Any other responsibilities assigned by the Board of Directors with the consent from the Audit Committee. 8. Report the result of the Audit Committee to the Board of Directors regularly or at least once every quarter. During operation, the Audit Committee has duty to report directly to the Board of Director. The Board of Directors is still responsible for the Company’s operations to the outsiders. In case the responsibilities of the Audit Committee have been changed, the Company must notify the resolution for such changed responsibilities and roles as well as the new scope of responsibilities of the Audit Committee that has been changed according to the form required by the SET within 3 (three) days after the change took place. The practice is in accordance with the regulations of the SET concerning information disclosure through digital media. Accordingly, the Company has established the Internal Audit and Compliance Control with duties to supervise and perform the audit tasks so that the operations are in compliance with the work system or standards of established internal audit and to coordinate and support the work of Audit Committee in corporate governance matter.
2.2 The Nomination and Remuneration Committee According to the Board of Directors’ Meeting No. 177 dated February 26, 2007 which resolved to establish Nomination and Remuneration Committee to determine nomination and remuneration policies for the Directors and Executives according to the good corporate governance principles. The Board of Directors resolved to approve the Nomination and Remuneration Committee Charter to indicate clear and transparent operational guideline. During 2008, the Nomination and Remuneration Committee held 6 meetings altogether. As of December 31, 2008, the Nomination and Remuneration Committee of the Company comprised of 4 members as follows: Name
1. Mr. Chaiyut Srivikorn 2. Mr. Phaithoon Kijsamrej 3. Mr. Suvit Nardwangmuang 4. Mr. Anun Louharanoo
Title
Nomination & Remuneration Meeting (Times) 2007 2008
Nomination and Remuneration Committee Chairman Nomination and Remuneration Committee Member Nomination and Remuneration Committee Member Nomination and Remuneration Committee Member
Mr. Asanee Chantong, Managing Director, was the Secretary to the Nomination and Remuneration Committee.
4/4 4/4 4/4 4/4
6/6 6/6 6/6 6/6
114 DIAMOND ROOFING TILES PCL.
Authorities and Duties of the Nomination and Remuneration Committee: The Nomination and Remuneration Committee is responsible for the duties assigned by the Board of Directors. The Committee must perform following responsibilities and duties responsibly, prudently and honestly: 1. Authorities and Duties on Nominating Directors or Executives shall be as followed (1.1) Consider and review the structure and qualifications of the Board of Directors, the Committees and Executives of the Company appropriately and propose to the Board of Directors for further consideration of approval. (1.2) Consider nomination criteria and procedures in selecting suitable candidate to take Directorship position as well as to nominate and propose the list of suitable candidates according to the nomination process to the Board of Directors to further propose to the shareholders’ meeting for shareholders’ approval. The Nomination and Remuneration Committee shall proceed the following: (A) To acknowledge the names of Directors whom are retired by rotation and names of outside persons whom have been proposed for the selection process for the director positions from both the Company’s Directors and minority shareholders (if any). (ฺB) To evaluate the proposed candidates that they must not have characteristics prohibited by the Public Company Limited Act, laws concerning Securities and Securities Exchange, good corporate governance principle of the Office of the SEC and the SET, and relevant laws to the business operation. (C) The proposed candidates must possess knowledge, skills, and specialization that could benefit the Company. They must be honest and straightforward, courageous in making opinion, have reputable working experience and ethical. (D) The proposed candidates must not operate the business that is of the same nature and in competition with the business of the Company, regardless of doing it for the benefit of oneself or for the others. (1.3) To select and propose the suitable candidate for the Company’s secretary to the Board of Directors in the event that the position has become vacant for further approval. (1.4) To select and propose the suitable candidates for the management positions from the level of assistant managing director to the Managing Director to the Board of Directors in the event that the position has become vacant for further approval. (1.5) Determine the succession plan for the Board of Directors, Committees and Executives and determine the succession criteria and propose to the Board of Directors for further approval. (1.6) To carry out other matters as assigned by the Board of Directors concerning with the nomination of directors and executives. 2. Authorities and Duties on Remunerating Directors and Executives shall be as followed (2.1) Consider types and criteria to remunerate Directors. The Nomination and Remuneration Committee has obligation to consider types and criteria for remunerating the Board of Directors and Committees fairly and appropriately according to the following criteria. (A) Consider Directors’ remuneration by benchmarking with the companies in the same industry and the listed companies in the SET. (B) Consider Directors’ remuneration according to their accountability and responsibilities as well as potential benefits each Director expected to contribute. The Directors who is assigned with more responsibilities should be remunerated accordingly, such as for the Directors in the Committees. (C) Consider Directors’ remuneration according to the Company’s annual operational performance. (D) Consider Directors’ remuneration according to the Annual Self-Assessment of the Board of Directors’ Performance, review and make suggestion on the evaluation procedures and report the evaluation result to the Board of Directors to use the information to improve the Board of Directors’ operational efficiency.
115 ANNUAL REPORT 2008
3.
4. 5.
6.
(E) To review remuneration types and criteria every year, both in term of monetary remuneration and remuneration types, such as monthly remuneration in form of meeting fees and annual remuneration in form of bonus, to be paid to the Board of Directors and Committee, and proposed the suggestion to the Board of Directors and Shareholders’ Meeting for further approval. (2.2) Consider types and criteria to remunerate employees and management of the Company. (A) Determine the Key Performance Indicator (KPI) of the Company to determine the annual salary increase and bonus for the Company’s employees. The Committee will consider annual budget, the Company’s objective as well as the economic condition and present its comment to the Board of Directors for approval. (B) To consider and endorse the work performance assessment, annual salary increase and remuneration structure of the Company’s executives up from the assistant managing director to Managing Director, which will be proposed for consideration and approval by the Board of Directors. (C) To consider and propose salary structure, benefits and other fringe benefits of the Company’s employees both in terms of cash and non-cash. Consider selling new securities (or warrants) for the Directors and employees. The Nomination and Remuneration Committee shall consider various conditions to motivate Directors and employees to create value for shareholders in the long run and retain quality employees with the Company, but the remuneration should not be too high and must be fair to the shareholders as well. Moreover, if there is any Directors or employees who will be allocated more than 5% of the total allotment. According to the laws concerning SEC, the Office of the SEC must give consent for such allotment. However, the Nomination and Remuneration Committee Member who are allocated more than 5% of total allotment cannot give consent on the issue. The Nomination and Remuneration Committee has the authority to invite the Management or relevant persons to attend the meeting or to make clarifications on any relevant matters. Prepare the Report of the Nomination and Remuneration Committee at least once a year to the Board of Directors and disclose it in the information disclosure form (Form 56-1) and Annual Report (Form 56-2) of the Company, whereas the report must be signed by the Chairman of the Nomination and Remuneration Committee. The report must indicate an amount of the Nomination and Remuneration Committee meetings and the attendance record of each member To carry out other duties as assigned by the Board of Directors concerning with the consideration of the remuneration.
2.3 The Management Committee According to the Board of Directors’ Meeting No. 175 dated November 27, 2006 which resolved to terminate the Board of Executive Directors from December 31, 2006 and established the Management Committee on January 1, 2007 to determine corporate policies, business plan, operational plan, and annual budget and approve the Management Committee Charter to have clear and transparent operating guidelines. During 2008, the Management Committee held 36 meetings altogether. As of December 31, 2008, the Management Committee comprised of 5 members as follows: Name 1. Mr. Asanee Chantong 2. Mr. Satid Sudbuntad 3. Mr. Maitree Tawonatiwasna 4. Mr. Suwit Kaewamphunsawat 5. Ms. Thanakarn Phanthapirat
Title Management Committee Chairman Management Committee Member Management Committee Member Management Committee Member Management Committee Member and Secretary
116 DIAMOND ROOFING TILES PCL.
Authorities and Duties of the Management Committee: The Management Committee has the authority, duty and responsibility to manage the day-to-day operation of the Company, having a weekly meeting for briefing of the operating results in order to assess the work performance in accordance with the objectives, policies, business plan and budget which have been approved from the Board of Directors of the Company. The scope of duties and responsibilities are as follows: 1. To oversee and monitor the management of the Company according to the objectives, policies, business plan and budget which have been approved from the Board of Directors’ Meetings. 2. To consider the proposals from the management concerning with the establishment of the vision, mission, core value, policy, direction and strategy for the operation of the business including financial plan, human resources management, investment, annual budget and key performance indicator (KPI) and to propose these matters to the Board of Directors for approval. 3. To monitor the operations of the Company to be conformed to the established policies and objectives. 4. To set corporate structure and authority, including the appointment, hiring, transferring, establishment of salary and wages, bonuses from employee level to the executive level which is not on the directorship position, as well as termination of employment. 5. To consider setting the target for profit and loss and the proposal of interim dividend or yearly dividend payment before proposing the matter to the Board of Directors for consideration. 6. To have the authority to appoint working committees for operating or managing the business of the Company and establish authorities, duties and responsibilities of the working committees including overseeing the operation of the appointed working committees in order to meet the policies and objectives such as the Risk Management Committee. Including the authority to grant the authority to one or several executives or other person to conduct certain matters within the set period, under the control of the Management Committee, of which the Management Committee may terminate, revoke, change or revise the authorized person or the granting of such authorization as deemed appropriate. 7. To have the authority to work and give authorization according to the regulations that have been set forth and authorized by the Board of Directors of the Company. 8. The Management Committee reports directly to the Board of Directors and reports operation results during every Board of Directors’ Meeting. 9. The Management Committee can request for advice from independent expert as appropriate if they are not particularly knowledgeable in the area upon the approval of the Board of Directors. 10. To carry out other matters as occasionally assigned by that the Board of Directors of the
Risk Management Committee The Management Committee resolved to appoint Risk Management Committee according to order No. 020/ 2008, dated February 19, 2008 to determine risk management policy, review operational plan, review and control unacceptable risk, report risk management result to the Management Committee and the Audit Committee, follow up to ensure there is adequate and appropriate risk management system, and approve Risk Management Charter to provide clear and transparent operating guidelines. During 2008, the Risk Management Committee held 6 meetings altogether. As of December 31, 2008, the Risk Management Committee comprised of 12 members as follows: Name 1. Mr. Satid Sudbuntad 2. Mr. Suwit Kaewamphunsawat 3. Mr. Songkran Suwanmak 4. Mr. Somkuan Sittichoketum 5. Mr. Sunthorn Suwannajade 6. Mrs. Jongkolnee Narksen
Title Chairman Member Member Member Member Member
Name 7. Mr. Supoj Suwanmunee 8. Mr. Adul Suden 9. Mr. Chalermkeat Asavatavegul 10. Mr. Phongsak Chamnanchang 11. Miss Saowapa Pamanee 12. Mr. Songsak Watawattana
Title Member Member Member Member Member Member and secretary
117 ANNUAL REPORT 2008
Authorities and Duties of the Risk Management Committee: The Risk Management Committee is responsible for the duties assigned by the Board of Directors. The Committee must perform following responsibilities and duties responsibly, prudently and honestly:1 To determine risk management policy and plan to cover all the risks that may occur on the Company’s business and propose to the Board of Directors for approval. 2 To apply risk management policies and plans to the actual operation, analyze various factors that may lead to risks, and determine the way to make adjustment according to those risks. (A) Red risk is the risk that must be addressed immediately, which must have corrective measures to reduce risk. (B) Yellow risk is the risk that must be monitored and could turn out to be new risk, which must have preventive measures to prevent this risk from happening. (C) Green risk is the factor that is not considered risk. 3 Follow up on the management of the unacceptable risk whether if there is any corrective and preventive measures to prevent it from happening in the future by preparing risk management report to the Management Committee and the Audit Committee. 4 Review policy and control system to evaluate, manage and control risk, including inspecting and reporting system to ensure that the Company has adequate and efficient risk management measures. 5 Supervise and ensure that the risk management guideline are carried out and review that the risk information are adequately and regularly disclosed to the regulators and public. 6 Prepare reports concerning adequacy of the risk management system and propose them to the Management Committee and the Board of Directors for further consideration. 7 Prepare the Report of the Risk Management Committee and disclose it in the information disclosure form (Form 56-1) and Annual Report (Form 56-2) of the Company, whereas the report must be signed by the Chairman of the Risk Management Committee. The report must indicate an amount of the Risk Management Committee meetings and the attendance record of each member 8 To carry out other duties as assigned by the Board of Directors concerning with the Company’s Risk Management.
3. The Executives The Company has a policy to search out management who have the knowledge, capability and experience that could benefit the Company, have reputable working experience and ethical, and received consent from the Nomination and Remuneration Committee and the Board of Directors. As of December 31, 2008, the Company had a total of 5 executives as follows: Name 1. Mr. Asanee Chantong 2. Mr. Satid Sudbuntad 3. Mr. Maitree Tawonatiwasna 4. Mr. Suwit Kaewamphunsawat 5. Ms. Thanakarn Phanthapirat
Title Managing Director Deputy Managing Director, Sales and Marketing Deputy Managing Director, Production and Engineering Assistant Managing Director, Sales and Marketing Assistant Managing Director, Finance and Accounting Manager
Authorities and Duties of the Managing Director: 1. To determine vision, mission, core value, objectives, policy, business plan strategy for the operation of the business including financial plan, investment plan, human resources management, annual budget and Key Performance Indicator (KPI) and criteria to evaluate the Company’s achievement to propose these matters to the Board of Directors for approval. 2. To manage the Company’s operation according to the objectives, policies, business plan and budget which have been approved from the Board of Directors and/or Management Committee.
118 DIAMOND ROOFING TILES PCL.
3. To follow and assess the results of the operations of the Company regularly to prevent risk from various factors, including internal and external risk that could cause any potential shortfall to the set target; and to report operating results to the Management Committee and the Board of Directors for acknowledgment and further consideration. . 4. Supervise the Company’s operation to be in compliance with the Company’s rules and regulations, laws concerning Securities and Securities Exchange, regulations and good corporate governance guideline of the Office of the SEC and the SET, and other laws that relevant to the Company’s business. 5. To have the authority to appoint and manage various working groups to carry out certain duties with efficiency for the benefit of the Company with transparency and/or to assign certain individuals to have particular authority to act as proxy within the scopes as stipulated and/or to carry out duty within the regulations or directives stipulated by the Board of Directors of the Company and/or the Company’s stipulations. 6. To have the authority to appoint or hire, transfer, move or terminate employees of the Company and to set the salary and wages, remuneration, bonuses and benefits of the employees of the Company from the level of departmental manager downwards. 7. To have the authority to issue orders, regulations, announcements or records to ensure that the operations of the Company conform with the policies and for the benefit of the Company and to ensure that rules and regulations are observed in the organization. 8. To have the authority to work and give authorization according to the regulations that have been set forth and authorized from the meetings of the Board of Directors of the Company 9. To carry out other matters as occasionally assigned from the Board of Directors or the Management Committee. Notwithstanding, the granting of authorities, duties and responsibilities of the Board of Directors, Committee, Directors or one or many Executives shall not be in the way of granting or further granting of authorization that will enable the authorized person to approve transactions that may have conflict, stake or any other conflicts of interest (according to the stipulations set forth by the Office of the SEC, the SET and relevant law to the Company’s operation) with the Company, subsidiaries or affiliates. This excludes any decisions or authorizations made in the course of the normal operations of the Company and within the clearly set limits of authority.
119 ANNUAL REPORT 2008
CORPORATE GOVERNANCE The Company realizes the importance of the good corporate governance and therefore has established the Principles of Good Corporate Governance according to the direction established by the Stock Exchange of Thailand, in order for the Company to have the management that is efficient, transparent, can be audited and trusted by the shareholders, investors, stakeholders and all relevant parties, which is the means to add value and promote sustainable growth for the Company. Therefore, the Company has established the following important corporate governance policy.
Category No. 1: Rights of Shareholders • The Company has established the protection for the rights of shareholders and encourage the shareholders to exercise their basic rights as stipulated by the laws such as the rights to share the profit of the Company; to buy, sell, or transfer shares; to obtain relevant and adequate information of the Company; to participate and vote in the shareholders’ meetings to elect or remove members of the board, to determine directors’ remuneration, to appoint the external auditor and determine the audit fee and make decision on any transactions that affect the Company, etc. • The Company has set up its website in order to provide important information and news such as financial reports, annual and quarterly operating results, annual report. As for the invitation to the shareholders’ meeting, the same information as the documents that must be forwarded to the shareholders are disseminated on the Company’s website at least 30 days before the date of the meeting. In addition, the shareholders are provided with the opportunity to visit the operation of the Company, of which the Company arranged for the shareholders to visit its operation at least once in 2008. • The Company arranges for the shareholders’ meeting, facilitates the meeting venue which is located in the middle of the city, easily accessible and provide sufficient period of time for the meeting. The Company also recognizes the importance of the shareholders’ meeting and therefore has required that the whole board of directors attend every meeting. In 2008, there was a Director who has personal business and could not attend the meeting. During the meeting, the chairman provides equal opportunity for the shareholders to offer suggestions and make inquiries and the chairman or directors would clarify every inquiry. Accordingly, the Company would accurately and completely record the issues of inquiries and opinions or recommendations from the shareholders within the meeting minutes and publish it on the Company’s website in both Thai and English versions. • The Company has operated according to the Annual General Shareholders’ Meeting (AGM Checklist), which established by the Office of the Securities Exchange Commission and the Stock Exchange of Thailand together with Thai Investor Promotion Association and Listed Company Association. The Company’s 2008 AGM scored equal or more than 90 (excellent). • Since 2007, the Company provided the shareholders the right to propose for the meeting agenda items and director candidates in advance prior to the meeting, as well as providing opportunity for the shareholders to send inquiries in advance concerning with the meeting agenda via the Company’s website. However, in 2008, there was no shareholder proposing any meeting agenda item in advance or proposing any candidate for the new director.
Category No. 2: Equitable Treatment of Shareholders • The Company has the policy to treat and facilitate the shareholders in an equal way including meeting participation, obtaining information and voting in the shareholders’ meeting. In each calling a shareholders’ meeting, the Company shall arrange to forward the meeting invitation including directors’ opinions as well as supporting information for each meeting agenda to the shareholders in advance at least 7 days prior to the meeting (or as required by the Office of the SEC and the SET). The meeting invitation is also advertised in the newspaper at least 3 days before the meeting without adding meeting agenda that the shareholders did not get informed in advance, in order to provide the shareholders sufficient time to consider and study relevant information for participation and voting in the meeting. • In the event that the shareholder cannot attend the meeting, the shareholder may grant proxy to another person as proxy to attend the meeting, of which the Company has provided alternative for the shareholder by
120 DIAMOND ROOFING TILES PCL.
proposing the independent director as proxy for the shareholder to participate and vote in the meeting according to the wishes of the shareholder by specifying the name of the director acting as proxy in the proxy form enclosed with the meeting invitation. • The Company has established supervision guidelines on the use of inside information; that is, the Company prohibits the director, executives, manager and employees of the Company from the use of Company’s inside information that have not been disclosed to the public or have an effect on the Company’s share price, for personal benefit, including trading of shares. If the Company found that a shareholder, director, executive, manager and employee of the Company violate the prohibition stated in this announcement, the Company would take legal action and punish the wrongdoer.
Category No. 3: Roles of Stakeholders • The Company has established framework for business ethics which is published in the Company’s website as guidelines for practices toward the rights of the every group of stakeholders regardless of being internal stakeholders such as employees and executives of the Company or external stakeholders such as creditors, competitors, communities and societies, which can be summarized as follows. Ethics in Conflict of Interest Matter The Company has established the following policies which prohibit the directors, executives and employees of the Company for seeking personal gain from the Company. • The directors, executives and employees of the Company are prohibited from operating in similar type of business or business that is in competition with Company. • The directors, executives and employees of the Company are to avoid making transactions that are connected and may have conflict of interest with the Company. • If it is necessary to carry out such transaction for the Company’s benefit or the connected transaction cannot be avoided, the directors, executives and employees of the Company, the person with interest in the transaction must prepare memorandum for acknowledgement by the board of directors according to the chain of command. Furthermore, directors, executives or employees having an interest in a transaction must not be involved in its approval process and must conduct it as if it is a transaction done with a third party. • Must not use inside information for personal benefit in dealing in the shares of the Company or give inside information to the third party for benefit in dealing in the shares of the Company, including not taking opportunity or using inside information of the Company to seek personal benefit or for conducting business or other activities in competition with the Company or related business. Ethics toward Shareholders The Company has policy to conduct its business with integrity, honesty, and ethics and intends to do its best to develop its business while creating valuable investment returns for the shareholders in a continuing and sustainable manner in which all shareholders are treated equitably. Ethics toward Customers The Company realizes the importance of customer satisfaction to the Company’s success; therefore, it intends to continue conducting its business with higher efficiency and effectiveness for the utmost benefit of the customer of the Company. Ethics toward Trading Partners The Company has policy to treat its trading partners equitably and fairly, taking into consideration the Company’s interest and on the basis of mutual benefit, avoiding circumstances that may lead to a conflict of interest, as well as making efforts to comply with all contractual obligations, providing reliable information and accurate report, conferring or negotiating for solutions to problem on the basis of business relationship. Ethics toward Business Competitors The Company has policy to behave toward its business competitors in a way consistent with international practice and the legal framework for business competition, not spying on or fraudulently seeking knowledge of its competitors’ trade secrets.
121 ANNUAL REPORT 2008
Ethics toward Creditors The Company has policy to comply with the all the terms and conditions agreed upon in every loan transaction. Ethics toward Employees The Company realizes that the employees are extremely valuable asset and the success factor, making essential contribution to the Company’s achievement of its goals. Therefore, it is the Company policy to treat the employees fairly in all respect including opportunity, remuneration, promotion, as well as professional development. Ethics toward Community and Society The Company has policy to conduct business that will benefit the community and society while safeguarding the environment as well as customs and traditions of communities in countries where the Company operates in and it is the Company policy to become a responsible corporate citizen in both safeguarding the environment and safety of the Company’s activities, to comply with all relevant laws, rules and regulations, to continuously contribute to uplifting the quality of life either by itself or through close collaboration with relevant authorities and communities. • The Company has provide measures or channels for the stakeholders to participate in the Company’s activities by disclosing relevant information to the stakeholders, and provide opportunity for the stakeholders to make suggestion or complaint directly to the Audit Committee without going through the Company’s management, which can be sent via E-mail without disclosing the name of the person who file the suggestion or complaint. The Audit Committee would propose to the Board of Directors to find preventive measure and consider compensate for the damaged party accordingly and reasonably on case by case basis.
Category No. 4: Disclosure and Transparency • The Company has a policy regarding disclosure of important information of the Company to be accurate, complete and timely according to the regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand through various channels and the Company’s website in both Thai and English, so that the persons using the information can have access to the information in the same way. • The Company has a policy for disclosing the information in the information disclosure form (Form 56-1) and Annual Report (Form 56-2) in accordance with the regulations of the Office of the SEC and the SET. • As for matters concerning with Investor Relations, the Company has assigned Mr. Satid Sudbuntad, Deputy Managing Director Sales and Marketing, to be responsible for communicating and providing to investors, analysts, shareholders and other interested persons. He can be reached at the following contact number (036) 224-001 to 8 or his E-mail: Corpcenter@diamondtile.com. During 2008, the Company met investors and interested person by arranging a site visit. The Company met analysts in various opportunities to present annual and quarterly operational result. The Company also met various media to communicate the Company’s operating result, new product launches and marketing communication, etc.
Category No. 5: Responsibilities of the Board • The Company’s Board of Directors comprises of 9 directors, 2 being the executive directors, 4 non-executive directors and 3 independent directors. These directors possess the knowledge, capabilities and various expertises which are beneficial to the Company’s business operation and are qualified to assume the directorship positions as specified in the Company’s regulation and by relevant laws. • Nonetheless, the Company’s Chairman is currently in the directorship position at more than 5 listed companies of which detailed information of directorship position for each of the Directors can be found in the Attachment 1 of the information disclosure form (Form 56-1) and the Annual Report (Form 56-2). However, the above directorship positions have not affected the duties of the Director since the Director has been devoting his time to conduct the duties for the Company by consistently attending the meetings and attended every Board of Directors’ meeting last year. He also continued to provide opinions and recommendations which are beneficial to the Company.
122 DIAMOND ROOFING TILES PCL.
• The Board of Directors is the leader in establishing the policies and involved in the consideration and approval for the establishment of Company’s vision, mission, strategies, business plan and budget, as well as supervising the Management to efficiently and effectively operate in compliance with the established policies. • The Board of Directors is responsible for important business operation and corporate governance, financial statements of the Company and financial reports that are shown to the public within the information disclosure form (Form 56-1) and the Annual Report (Form 56-2). The financial statements have been prepared in accordance with the generally accepted accounting standards by using the appropriate accounting policy and audited on a regular basis by a certified external auditor that has been approved by the Office of the SEC. The preparation of said financial documents was undertaken with appropriate accounting standard and regularly practiced, with prudence and careful estimation and sufficiently disclosed in the notes to the financial statements. • The Company has established and maintained an effective internal control system in order to reasonably ensure that the accounting records are correct, completed and protected from significant fraudulent or irregular activities by having the Audit Committee, comprising directors that non-executive and adequately independence, to supervise and be responsible for the quality of financial reports and internal control system and having the unit for the internal control and audit with duties to supervise and audit various business activities of the Company to ensure that the Company has conducted its business in accordance with the rules and regulations established by the authorities and the Company. Furthermore, in order for the said unit to have its independence, able to fully perform its audit duties and balance, the said unit is under and directly reports the control and audit findings to the Audit Committee, as well as having efficient risk management measures and regular monitoring of the activities of the said matters. • The Board of Directors has appointed various committees to carry out various matters as assigned and separated the roles, duties and responsibilities among the Board of Directors, Committees and the Management by setting clear levels of authorities for financial activities of which details can be found under the topic of Board of Directors and Management Structure on Page 109 of the Annual Report. The Company has established the following 3 committees. 1. The Audit Committee comprises of 3 members whom were appointed on January 22, 2007. In 2008, the Committee held 9 meetings altogether. The Board of Directors resolved to re-appoint the entire Audit Committee to resume existing positions for another 3 year from January 22, 2009 to January 21, 2012. 2. The Nomination and Remuneration Committee comprises of 4 members whom were appointed on February 26, 2007 with an office term period of 3 years and in 2008, the Nomination and Remuneration Committee held 6 meetings altogether. 3. The Management Committee comprises of 5 members whom were appointed on January 1, 2007. In 2008 the Management Committee held meeting every week for a total of 36 meetings. • The Board of Directors’ Meeting is held at least once every 3 months and additional special meetings are convened as necessary. The meeting invitation including supporting information for the meeting agenda are forwarded to the Board of Directors at not less than 7 days prior to the meeting date according to the regulations of the Company. In 2008, the Board of Directors held 13 meetings altogether having meeting attendance summarized within the topic of Board of Directors and Management Structure on page 109 of the Annual Report. • The Company has separated the positions of Chairman of the Board and Managing Director into 2 positions which are not held by the same person, to ensure the balance of power between them. The Company has clearly established the roles, authorities and responsibilities for and between the Chairman of the Board and Managing Director so that none of them possesses unlimited authority and overlapping. The Chairman of the Board is the leader on policies and the Managing Director is the leader on management. • The Company has issued the Code of Conduct concerning with ethical conduct of the Board of Directors, the Management and employees as guidelines for all relevant parties to follow in their operation practices and duties of the Company with integrity, honesty and fairness, including practices toward the Company and all the stakeholders, public and society. The Code of Conduct has been announced to all relevant parties in the Company’s website and the monitoring of its practice are performed and if it is found that any relevant
123 ANNUAL REPORT 2008
person does not conform to the said Code of Conduct, the person shall be considered for punishment accordingly. • The Company has established measures to prevent the conflict of interest by strictly abiding by the laws of the Securities and Exchange and articles of association, announcements, directives or regulations of the Office of the SEC and the SET. The transaction that a director, executive, shareholder or person that may have conflict of interest, such person shall not have the right to vote for such transaction. Accordingly, such transaction must be in accordance with the main business operation of the Company with pricing policy and other terms and conditions according to the market and comparable with pricing of other external parties in general. The directors and executives are required to report the changes of Company’s shareholding to the Board of Directors and the Office of the SEC according to Section 59 of the Securities and Exchange Act B.E. 2535. • The Company has established measures to protect the investors which can be audited afterward; that is, the Company shall disclose the related transactions within the notes to the financial statements of the Company which have been audited by the auditor and the Company arranges for its verification by having the Audit Committee offering the opinions concerning with necessity and rationale of the related transactions stated in the audited financial statements. • The Board of Directors has determined policies and procedures for the managements to immediately report to the Board of Directors or the Audit Committee in case of any fraud, suspicion of fraud, any act that violate the law or other actions that may significantly affect the Company’s reputation and financial status, such as the transaction that may cause conflict of interest, significant fraud or abnormality in the internal audit system, violation of the law concerning Securities and Securities Exchange, regulations of the SET or other laws that are relevant to the Company’s business. The Company is issuing the policy to take effective in 2009. • The Nomination and Remuneration Committee has clearly and transparently established the criteria for the remuneration of the directors at the level deemed appropriate for the duties and responsibilities of each of the directors without making excessive remuneration when compared with other companies within the similar industrial sector. Accordingly, the Director who is also an executive shall receive additional remuneration for being the executive by relating to the Company’s operating results and performance of the individual director. The Company has also disclosed information on the remunerations for the directors and executives as required by the Office of the SEC, of which details can be found on the topic of Remuneration for Directors and Management page 107 of the Annual Report. • The Company has determined the assessment criteria and arrange the assessment on the performance of the Board of Directors as a whole once every year by using the guidelines as established by the Thai Institute of Directors and the SET and adjusting them to be in line and appropriate to the Company’s business. The said assessment form consists of 4 topics including board composition, strategic guidance, monitoring and evaluation and accountability, of which the assessment results on the Board of Directors’ performance has concluded that it is “Agreed” with the overall performance on all 4 topics. • In accordance with the management of the Board of Directors, Committees and Executives of which roles and authorities must be conducted in compliance with the Company’s regulations and also according the rules and regulations of the Office of the SEC and the SET and relevant laws applicable to the Company’s business operation and practices toward the shareholders, stakeholders and all relevant parties of which various rules and regulations have constantly changing. Therefore, in order to reduce the risk from actions that arise from misunderstanding or misinterpretation of various rules and regulations by the Board of Directors and Executives of the Company who operate the business with prudence, believing in honesty and rational for the utmost benefit to the Company, the Company therefore has established liability insurance on the accountability of Directors and Executives of the Company and to make compensation to the Company in order to protect form liabilities that may occur to the Company, Board of Directors and Executives of the Company.
Corporate Governance Evaluation
Thai Institute of Directors has issued 2008 Corporate Governance Evaluation Report for the listed Companies in Thailand. Diamond Roof Tile Public Company Limited was among the companies who receive “Very Good” Corporate Governance rating ( ) with average score of 85%.
124 DIAMOND ROOFING TILES PCL.
SUPERVISION ON THE USE OF INSIDE INFORMATION According to the Board of Directors’ Meeting No. 156 dated March 18, 2005, the Company has established the Code of Conduct for the business operation of the Company in order to comply with the good corporate governance policy. In addition, the Company has established the policy and supervision guidelines for directors and executives on the use of inside information of the Company for their personal benefit. The following guidelines have been approved by the Board of Directors’ Meeting dated March 18, 2005. 1. The Company has informed the directors and executives of the responsibility for reporting the shareholding in the Company of themselves, spouse and children of under legal age, as well as reporting any changes of their Company’s shareholding to the Securities and Exchange Commission according to the Section 59 and the Penal Code according to Section 275 of the Securities and Exchange Act B.E. 2535. 2. The Company prohibits the directors, executives, managers and employees of the Company to use inside information of the Company that have not been disclosed to the public and have significant influence on the share price of the Company, for their personal benefit. Accordingly, the person who is in possession of the inside information which have not been disclosed to the public is prohibited from trading the Company’s shares during the 1-month period before such information are disclosed to the public. If it is found that the shareholder, director, executive, manager and employee of the Company violate the prohibition according to this announcement, the Company shall proceed with legal action and severely punish the wrongdoer. 3. In case of a director, executive, manager or an employee being convicted of a criminal case according to the Securities and Exchange Law, the Company will severely punish such person according to one or several of the followings. • Reduction of salary or compensation. • Termination, firing or removal from the position of a director, executive, manager or an employee, alleging that such person has intentionally caused damage to the Company. If such person holds the directorship position in the Company, the matter will be proposed to the shareholders’ meeting for its consideration. • Report the wrongful activity to the Stock Exchange of Thailand and/or the Securities and Exchange Commission. • Report the case for legal prosecution to the police or the inquiry official. • Carry out any matters in accordance with the resolutions of the Board of Directors or the shareholder’s meeting of the Company.
125 ANNUAL REPORT 2008
RISK MANAGEMENT The Company’s Risk Management Committee, Management Committee and Board of Directors evaluate business risks and determine measures to prevent or reduce potential risks as follows:
1. Risks from external factors 1.1 Risks from asbestos usage control regulations from the government The Company may face regulatory risks as the Ministry of Public Health has issue policy and regulations to reduce and gradually eliminate asbestos usage. The label committee issued a draft law to make any products with asbestos content be labeled, such as brake, clutch, etc. in automotive industry or roof tiles, rubber tile, pipeline, etc. in construction industry. The Company has followed up closely on this issue to study and evaluate the impacts together with other roof tile producers. The Company also took part in sourcing international specialist to educate the regulators and producers how to use asbestos safely and presented findings from various international institutes that asbestos is not critically hazardous substance. Moreover, the Company has gradually launched products with no asbestos content such as Jearanai tile, siding board, etc. However, the Rotterdam Convention, COP IV meetings at Rome, Italy, dated October 27, 2008, was considering to announce Chrysotile Asbestos a hazardous substance, which will be added in appendix 3 of sub-contract Rotterdam, which are the substances that must be reduced and eliminated. For Thailand, a representative from Thai Environment Institute participated in the meeting. The meeting resolved not to include Chrysotile Asbestos in the PIC List in Appendix 3 of Rotterdam Sub-Contract. 1.2 Risks from pricing and raw material scarcity • Cement is the Company’s key raw material. The Company does not have any raw material supplier problem as there are many producers. There is also no pricing problem as the Company buys cement from many producers, which gives the Company good bargaining power. • Asbestos is currently one of the key raw materials that face both scarcity and pricing risk due to an increasing demand from China and India, while the producers gradually exit the industry, resulting in the remaining producers raising prices. Moreover, many ship vessels around the world prohibit the transportation of asbestos. The Company manages this risk by increasing inventory, make annual ordering plan from 5 major producers in an adequate and appropriate amount, and cooperates with suppliers to come up with procurement and logistic plan to reduce transportation problems. 1.3 Risk from rising transportation costs The Company’s products are heavy and fragile. Therefore, the transportation cost to clients’ premises is one of the major production cost. The energy crises in mid-2007 caused continued impact to mid-2008, which directly increased transportation cost. However, toward the end of 2008, the oil price fell sharply from the global financial crisis. The Company monitors the situation carefully and continues to prepare itself if the oil price would rise again. The Company determined the following measures: • Plans truck route appropriately and carry full loading on every truck • Increase round-trip trucks, which carry goods in both trips, as they cost less than single-trip trucks. • Use multimodal transportation between truck and boat in southern Thailand. • Encourage clients to pick products up by themselves, where the Company will subsidize part of the transportation costs for the clients, which is cheaper than the Company doing all delivery. • Encourage transportation sub-contractor to improve trucks to use other alternative energies, such as NGV. These trucks constitute about 24% of total fleets, and expect to rise in 2009.
126 DIAMOND ROOFING TILES PCL.
1.4 Risk from machine disruption As there are increasing demand for wider product varieties and quick delivery, the Company must plan continued running of the machines. Any disruption, including annual maintenance or machine break down, may affect delivery plan. The engineering division determines annual maintenance plan to ensure that the Company can continuously produce products, such as. • Using preventive maintenance measures, collect maintenance record, determine maintenance plan, make follow-up and prepare spare parts to support according to plans. • Preparation of annual maintenance plan by using computers. Prepare and test spare parts to reduce machine down time by 7-15 days. 1.5 Risk from pricing competition During 2008, the Company faced the risk from pricing competition as the economy slowdown and many producers still have excess capacity. Therefore, the Company focused on before and after-sales service, installation service and timely delivery to create differentiation. The Company has also continued to launch new products to the market. 1.6 Risk from financial management and foreign exchange The company does not have policy to make loan in foreign currencies. However, the normal trade creditors from importing raw material, machine and equipment may put the company at risk of foreign exchange. The Company enters into currency forward contract and opens foreign currency deposit (FCD) by deposit US dollar receipt to deposit in the FCD account to pay for raw materials without having to make foreign exchange again, thus reduce foreign currency volatility risk.
2. Management risks Management risks of major shareholder The Company is a subsidiary of Myriad Materials Co., Ltd. As of December 31, 2008, Myriad Materials Co., Ltd. has 73.33% holding in the company. Including the shareholding of the directors that represent Myriad Materials Co., Ltd., it will have more than 75% holding in the Company, which enables Myriad Materials Co., Ltd. to have complete control of shareholders’ meeting resolution. However, the Company has practiced public company’s Code of Best Practices and is determined to operate business according to the Good Corporate Governance guideline to ensure operation ethics and fair information disclosure. For the connected transaction, the persons who have potential conflict of interest cannot vote on the relevant issue. The Audit Committee will provide comments for those transactions and proposes to the Board of Directors and/or shareholders’ meeting for further approval. The Company will disclose any connected transaction in the notes attached to financial statements.
127 ANNUAL REPORT 2008
INTERNAL CONTROLS OF THE COMPANY The Audit Committee is responsible for auditing the Company’s operation according to the policies and regulations set forth by the Company, the laws and regulations of the relevant regulators and promote the Company to have accounting consistent with generally accepted accounting standard. This includes auditing the Company for proper internal controls, internal auditing and management practices that minimize risk and are properly controlled, proper, up to date and effective. The Audit Committee is non-biased and free to conduct such audits as deemed necessary and may make use of the Office of Internal Audit and Compliance Control which directly reports to the Audit Committee. The Office of Internal Audit and Compliance Control are responsible to control and assess the proper controls according to the Audit Committee’s directions. Whereas, their main job is to assess if there are proper controls to prevent problems from occurring, assess the integrity of the information and financial reports and present the information in a timely and transparent method to assure that the policies of Good Corporate Governance are abided by effectively according to the international standard. From the assessment of the Company’s internal control in 5 main areas, which are organization and environment, risk management, management control, information system, and follow-up and assessment methods, the Audit Committee concluded that the Company has adequate internal control systems for transactions related to the major shareholders, directors, management, or other related person. The Committee also agreed that there are sufficient internal control systems on other areas as well. The Company’s internal control system can be concluded as follow:
1. Organization and Environment The Company has set up and provided for the establishment of this Organization and has delegated responsibility accordingly for management flexibility. The Company realizes the importance of developing and enhancing information systems for effectiveness of the Company as a whole. Therefore, in order to develop this effectiveness, it has implemented the computer system ERP and the program SAP version ECC6 to improve its information systems since January 2008. In 2008, the Company stressed the importance on environment conservation. Moreover, the Company was certified Industrial Standard for Service Excellence ISO 9001:2000 and Environmental and Occupational Safety (OHSAS 18000:2007) from SGS. The Company expects to receive certification ISO 14001 in 2009. The Company also encourages employees to enhance the company’s effectiveness by initiating 5S committee to supervise, promote, advice and coordinate the operation effectively and to continue to improve workplace to a better and safe environment
2. Risk Management The Company has conducted a proper analysis of the risks that may occur both inside and outside that may have an effect on the organization. These include; use of asbestos risk; price and availability of raw materials risk; rising delivery costs risks; equipment breakdown risk; competitive pricing risk; and management risk due to major shareholder and management of finances and foreign currency. As information technology has become widely used, the Company appointed the IT department to oversee the Company’s IT system and comply with the Computer-Violation Act BC2550. The Company has managed the use of the Company’s IT system properly and effectively to prevent problem that may risk violating this Act and other relevant laws. The Company issues regulations concerning computer usage and indicate measures against those who fail to comply with the regulations. To determine measures and methods to prevent, fix and follow-up on any situation that would cause the risk factor and to review the current controls in place and the need to increase or change these controls to prevent further problems. Thus, the Company assigned the Risk Management Committee to be responsible for this problem. The Committee comprises of 1 supervisor and 10 management members as the committee and appoints Deputy Managing Director, Sales and Marketing to be the chairman of the committee, which comprises
128 DIAMOND ROOFING TILES PCL.
a total of 12 members. This Committee has the following responsibilities: 1. Propose risk management policy to the Management Committee for approval prior to the operation. 2. Implement Risk Management policies by closely cooperating with the department responsible for risk management and introduce appropriate measures and investment to prevent risk. 3. Review risk management report, oversee risk management effectiveness to correct unacceptable risks. 4. Propose report concerning adequacy of risk management system to the Management Committee and Audit Committee to further propose to the Board of Directors.
3. Control of Work Effectiveness of Administrative Department The Company has laid down the parameters and responsibilities of its officers and the amount of petty cash or cash that each level of management is allowed to authorize. It has also divided the responsibility among them. Thus, the steps for reimbursement or procurement of money; hiring employees; and other activities are clearly stated in the regulations of the Company and have been disbursed to the employees involved. In addition, any activities involving legal matters carried out by the major shareholder, Directors, Management or others involving the Company shall be carried out according to the by-laws of the Securities and Exchange Commission of Thailand and the related laws. This includes any preventative measures to enforce that these activities are authorized accordingly as such that may be carried out with an outsider in order to ensure that these activities are done for the good of the Company as a whole.
4. Management Information Systems and Communications The Company realizes the importance of continuing development of its Management Information Systems for the effectiveness and linking of information of the organization. From January 2, 2008, the Company has implemented Enterprise Resources Planning (ERP) of SAP version ECC6 to replace the old system. The Company has continuously developed database to enhance management decision, so that the management and shareholders can be confident in the Company’s information management system.
5. Follow-up and Assessment Methods The Company has continuously followed up on its performance in comparison to its planned goals and budgets. Reports were sent to the Company’s Director’s at least every 3 months. In 2008, there were 13 planning and budgeting meetings. Furthermore, if there was found to be an issue impacting the Company, additional meetings could be called to change or add to the goals and plans to accommodate with changing situation. Additionally, the Company also has the Office of Internal Audit and Compliance Control that has the responsibility to audit the various departments and units to see if they are working according the goals and budgetary guidelines. If it is found to have a discrepancy, the Office of Internal Audit and Compliance Control would report to the Audit Committee within a specified time. In turn, the Audit Committee would then report to the Company’s Board of Directors every quarter, whereas the Audit Committee would also have to offer its recommendations for a solution to the problem in order to promote effective internal control system of the Company.
129 ANNUAL REPORT 2008
DIVIDEND PAYMENT POLICY Dividend payment policy to shareholders: the Company’s policy is to pay a dividend each year of not less than 50 percent of its net profit after deductions or legal provisions set forth in the Company’s regulations or by law and in the instance that a dividend payment would not have significant impact to the normal operations of the company. The Company has started paying dividend to its shareholders since 2003 when the Company started to generate profits and have deducted all the loss carry forward. A summary of dividends paid in 2008 are as follows: Dividend Net profit per share (Baht per share) Dividend per share (Baht per share) Dividend % as of earning per share Total dividend paid (Baht million) Total paid up shares (million shares) Treasury shares as of 2008 end (million shares) Par value (Baht per share)
2008
2007
2006
0.29 0.25 86% 248** 1,000 19.41** 1.00
0.39 0.30 76% 300 1,000* 1.00
1.57 1.10 70% 220 200 5.00
* For 2007, the Extraordinary Shareholders’ meeting no. 1/2007, dated August 21, 2007 resolved to change the Company’s share par value from the previous par value of Baht 5.00 (Five Baht) per share to a par value of Baht 1.00 (One Baht) per share making the registered share capital of Baht 1,000 million divided into 200 million common shares at a par value of Baht 5.00 (Five Baht) per share to become a registered share capital of Baht 1,000 million divided into 1,000 million common shares at a par value of Baht 1.00 (One Baht). ** There was change in the Company’s registered capital, please see “Significant changes in the past year” page 99 From the able above, 2008 total dividend paid is calculated base on paid-up shares as at the end of 2008. However, the number of shares that will be entitled to dividend must be calculated base on the paid-up and outstanding shares as of March 9, 2009 (record date).
130 DIAMOND ROOFING TILES PCL.
RELATED TRANSACTIONS The Company’s Board of Directors has established approval process for related transactions or transaction that may cause potential conflict of interest by strictly adhering to the Securities and Exchange laws, regulations, announcements, orders or stipulations established by the Stock Exchange of Thailand, with the following measures. 1. The Audit Committee must consider and give their comments before transaction occurs. 2. In case the Audit Committee is not able to give any comment on any transaction, the Company must provide independent specialist to provide comments for the Audit Committee to form their comments before proposing to the Board of Directors and/or Shareholders’ Meeting for further consideration. 3. The persons who have potential conflict of interest cannot vote on the transaction that is related to them. 4. The Company will disclose the related transaction in the notes attached to financial statements. The Audit Committee will give comments concerning the necessity and rationale of the related transaction that has been reviewed by external accounting auditor. The Company had the following related transactions: Company Supalai Pcl.
Type of relationship Supalai PCL has a mutual Director, Mr. Prakit Pradipasen, but no mutual shareholding. • Mr. Prakit Pradipasen is the Chairman of the Board of Diamond Roofing Tiles Pcl. (Seller) • Mr. Prakit Pradipasen is the Chairman of the Audit Committee and Chairman of Nomination and Remuneration Committee and independent director of Supalai Pcl. (buyer)
Type of transaction Sales to large customer with normal trading conditions applied.
Amount (Million Baht) 2008 2007 2.80
1.82
Pricing Policy Normal sales price of the product must be in line with those offered to large customers with normal trading conditions
The Board of Directors’ meeting no. 196, dated August 25, 2008 has approved the principle related to transactions that are part of normal business practices between the Company and the Company’s Directors, management or related persons. The management can approve transactions of such nature if the transaction is carried out according to the normal business practices in similar situations. The transaction must be free of influence from Directors, management or related person. The Board of Directors assigned Management Committee to prepare report of the related transaction and report to the Board of Directors every quarter.
131 ANNUAL REPORT 2008
STATEMENT OF THE BOARD OF DIRECTORS’ RESPONSIBILITIES TO THE FINANCIAL REPORT The Board of Directors gives importance to and takes responsibility for the financial statements for 2008 of the Diamond Roofing Tiles Public Company Limited, as well as all the financial information appeared in the annual report. Such financial statement have been prepared in accordance with the regulations in the notification of the Department of Business Development, dated September 14, 2001, effective under the Accounting Act B.E. 2543 and in compliance with the Thai Accounting Standards (“TAS”) including related interpretations and guidelines promulgated by the Federation of Accounting Profession (“FAP”) and with generally accepted accounting principles in Thailand, established in the Accounting Profession Act B.E. 2547. The Board of Directors is responsible for the preparation of the financial reports of Diamond Roofing Tile Public Company Limited, assuring that the report of the financial status, operating results and cash flows are true and accurate and represent a fair accounting of the Company’s financial records. These financial statements have been prepared in accordance with the generally accepted accounting standards and principles by using accounting policies that are appropriate and in line with the corresponding business operations. The Company has also considered and maintains adequate provision for future uncertainties or items that may have a significant effect on future operations by disclosure of important information in the Notes to the Financial Statements and the Certified Public Accountant’s opinion in the Report of the Independent Auditor. For this purpose, the Board of Directors has appointed the Audit Committee, comprised of independent and nonexecutive directors with necessary qualifications as the Securities and Exchange Act B.E. 2551 and Notification of the Capital Market Supervisory Board , to review the financial statements for compliance with the accounting standards; to review internal controls and internal audit systems for appropriateness and efficiency; to review that business operations have been conducted in accordance with the Company’s regulations and relevant laws without conflict of interest; as well as to consider and propose the appointment of the Company’s auditors. The Audit Committee has also submitted the Report of the Audit Committee, included within the Annual Report Year 2008. 25 February 2009 On behalf of the Board of Directors of Diamond Roofing Tiles Public Company Limited
(Mr. Prakit Pradipasen) Chairman of the Board
(Mr. Asanee Chantong) Managing Director
132 DIAMOND ROOFING TILES PCL.
SUMMARY OF OPERATING RESULTS AND FINANCIAL ANALYSIS (Based on the Financial Statements Year 2008) 1. Revenue Revenue (Unit : Bath Million) Revenue from product sales and service Other incomes Total revenue
2008
%
2007
%
Increase (Decrease)
% Variance
2,510.02 32.71 2,542.73
98.71 1.29 100.00
2,599.58 22.49 2,622.07
99.14 0.86 100.00
(89.56) 10.22 (79.34)
(3.45) 45.44 (3.03)
The Company’s total revenue for 2008 decreased from 2007 by 3.03 percent, comprising of the following: • The Company had revenue from sales of products for a total of Baht 2,510.02 million in 2008. This was a decrease of Baht 89.56 million or 3.45 percent from 2007 because the global financial crisis and domestic political crisis, causing the real estate market to decrease sharply, resulting in lower demand for roofing tiles and construction materials. • The Company had other revenues for a total of Baht 32.71 million in 2008. This was an increase of Baht 10.22 million or 45.44 percent from 2007 because during 2008, the Company wrote back reserve of asset impairment for obsolete inventory and goods amounting Baht 20.92 million, revenue from sales of scrap of Baht 10.52 million, and interest income of Baht 1.27 million.
2. Expenses Expenses (Unit : Bath Million) Cost of sales and service Sales and administration expenses Total expenses
2008
%
1,735.82 79.93 435.89 20.07 2,171.71 100.00
2007
%
1,660.22 79.64 424.54 20.36 2,084.76 100.00
Increase (Decrease)
75.60 11.35 86.95
% Variance
4.55 2.67 4.17
The Company’s total expenses for 2008 increased from 2007 by 4.17 percent, comprising of the following: • The Company had costs of sales and service for a total of Baht 1,735.82 million in 2008. This was an increase of Baht 75.60 million or 4.55 percent from 2007 because the energy crises in the first half of the year drove up raw material, energy and transportation costs higher. For the latter half of the year, the rising costs was due to fixed cost items, such as depreciation or overhead, did not reduce in line with lower utilization. Moreover, weaken Baht drove up the raw material costs, which eventually drove production cost up. • The Company had sales and administration expenses for a total of Baht 435.89 million in 2008. This was an increase of Baht 11.35 million or 2.67 percent from 2007 because during 2008, the Company set provision for foreign losses of Baht 15.37 million, while the actual sales and administration fell Baht 4.02 million.
133 ANNUAL REPORT 2008
3. Profits Profits (Unit: Baht million)
2008
Revenue from product sales and service Gross profit EBITDA EBIT Net profits after tax Earning per share (Baht/share) Return on Equity
2,510.02 774.20 505.01 371.02 284.82 0.28* 18.75%
% of sales 100.00 30.84 20.12 14.78 11.35
2007 2,599.58 939.36 676.24 537.31 393.38 0.39* 26.60%
% of sales 100.00 36.14 26.01 20.67 15.13
Increase (Decrease)
% Variance
(89.56) (165.16) (171.23) (166.29) (108.56) (0.11) (7.85%)
(3.45) (17.58) (25.32) (30.95) (27.60) (27.60)
* based on 1 billion common shares
• The Company had gross profits for a total Baht 774.20 million in 2008. This was a decrease of Baht 165.16 million or 17.58 percent from 2007 because the sales of lower margin Jaeranai and concrete products increased sales contribution. Moreover, the cost of production and service increase due to economic cycle as mentioned above. • The Company had net profits for a total of Baht 284.82 million in 2008. This was a decrease of Baht 108.56 million or 27.60 percent from 2007 because the total revenue declined and the cost of production and service increase due to economic cycle as mentioned above. • The Company had earning per shares of Baht 0.28 per share in 2008. This was a decrease of Baht 0.11 per share or 27.60 percent from Baht 0.39 per share in 2007. The return on equity (ROE) fell from 26.60 percent in 2007 to 18.75 percent in 2008.
4. Financial Status Items (Unit: Baht million) Total assets Total liabilities Total shareholders’ equity Book value – Baht per share
As of December 31, As of December 31, 2008 2007 1,995.38 513.04 1,482.34 1.48*
1,941.72 386.26 1,555.46 1.56*
Increase (Decrease)
% Variance
53.66 126.78 (73.12) (0.07)
2.76 32.82 (4.70) (4.70)
* based on 1 billion common shares
• The Company’s total assets at end of 2008 increased from the end of 2007 by Baht 53.66 million or an increase of 2.76 percent, due to an increase in account receivable of Baht 15.58 million, inventory of Baht 23.20 and increase in fixed asset and other non-current assets of Baht 79.32 million. On the other hand, cash on hand and deposit decreased by Baht 56.49 million and other current assets declined by Baht 7.95 million. • The Company’s total liabilities at end of 2008 decreased from end of 2007 by Baht 126.78 million or an increase of 32.82 percent, short term loan increase by 185.74 million while other current assets fell by Baht 12.32 million and non-current liabilities decreased by Baht 46.64 million. • The Company’s shareholders’ equity at end of 2008 increased from end of 2007 by Baht 73.12 million or a decrease of 4.7 percent, as net profits increased by Baht 284.82 million, but the Company paid dividend of Baht 330 million and buy back treasury shares worth Baht 27.94 million. So the book value decreased from Baht 1.56 per share at the end of 2007 to Baht 1.48 per share at end of 2008
134 DIAMOND ROOFING TILES PCL.
5. Cash Flows Items (Unit: Baht million) Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net increae (decrease) in cash Cash at beginning of the period Cash at end of period CFROE = Cash Flow Return on Equity
2008
2007
364.91 (206.98) (214.43) (56.49) 99.98 43.49 24.02
400.06 (122.32) (313.37) (35.63) 135.61 99.98 27.05
• The Company had the net cash inflow from operating activities in 2008 of Baht 364.91 million, which was higher than the net profit by Baht 80.09 million, due to transactions that did not affect the cash such as depreciation of assets and disposition of legal rights of Baht 133.98 million and provision for losses of foreign exchange hedging of Baht 15.37 million. The account receivable increased by Baht 15.44 million and the inventory increased by Baht 23.20 million and tax payable decreased by Baht 35.93 million. However, account payable increased by Baht 4.67 million and other assets decreased by Baht 0.64 million. • The Company had the cash outflow flows from investment activities of Baht 206.98 million in 2008 because the Company invested in fixed and intangible assets worth total of Baht 208.95 million, but the Company received interest income and proceeds from asset disposition of Baht 1.97 million. • The Company had the cash outflows from financing activities of Baht 214.43 million in 2008, due to longterm debt and financial lease repayment of Baht 102.98 million, interest payment of Baht 8 million, and dividend payment to the shareholders of Baht 330 million, and treasury share buy back of Baht 27.94 million. The Company increased short-term debt and long-term debt by Baht 185.74 million and Baht 68.75 million, respectively.
6. Liquidity Items
2008
2007
Current Ratio (times) Quick Ratio (times) Cash flow Liquidity Ratio (times) Account Receivable Turnover Ratio (times) Average Collection Period (days) Inventory Turnover Period (days) Average Payable Period (days) Cash Cycle (days)
1.58 0.75 0.87 8.13 44 24 21 47
2.47 1.29 1.28 9.09 40 26 23 43
• The Company’s overall liquidity was considered good. As of year ended 2008, the Company had an overall current ratio of 1.58 times, as current assets fell 3.11 percent from 2007 and current liabilities increased by 52.02%. The quick ratio was at 0.75 times as inventory increased by 5.85 percent from 2007 year end. The Company’s Cash flow liquidity ratio was at 0.87 times as cash flow from operation fell by Baht 35.15 million from the end of 2007.
135 ANNUAL REPORT 2008
• The Company had a Cash Cycle in 2008 of 47 days, up 4 days from 2007 year end, due to a increase in the average collection period by 4 days, a decrease in average payable period by 2 days and a decrease in inventory turnover period by 2 days.
7. Debt service ability Items Total Debt to Equity (times) Interest Coverage Ratio (times) Debt Services Coverage Ratio (times)
2008
2007
0.35 55.66 4.59
0.25 46.71 9.58
• The Company had a total debt to equity ratio at end of 2008 of 0.35 times, which is considered. Although the Company has a investment project in the future, the Company can increase debt. It also had an interest coverage ratio of 55.66 times, which is considered no problem for meeting interest obligations. • The Company decreased its debt services coverage ratio from 9.58 times at end of 2007 to 4.59 times at end of 2008, due to EBITDA was at Baht 505.01 million, has long-term loan and financial lease that will be repaid within one year of Baht 102.99 million as at the end of 2007, and repaid loan interest of Baht 8.11 million. Audit Fees of The Company for year ended December 31, 2008 The appointed certified public accountant for the Company was Ms. Bongkot Amsageam, certified public accountant no. 3684 of KPMG Phoomchai Audit Co., Ltd. The followings are the details of the audit fees for 2007-2008: Items (Unit: Baht) Annual audit fee Interim financial statements audit fee Other expenses Total
2008
2007
630,000 390,000 80,000 1,100,000
630,000 360,000 58,000 1,048,000
136 DIAMOND ROOFING TILES PCL.
AUDIT REPORT OF CERTIFIED PUBLIC ACCOUNTANT To the shareholders of Diamond Roofing Tiles Public Company Limited
I have audited the accompanying balance sheets of Diamond Roofing Tiles Public Company Limited as at 31 December 2008 and 2007, and the related statements of income, changes in equity and cash flows for the years then ended. The Company’s management is responsible for the correctness and completeness of information presented in these financial statements. 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 statement 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 Diamond Roofing Tiles Public Company Limited as at 31 December 2008 and 2007, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
(Bongkot Amsageam) Certified Public Accountant Registration No. 3684 KPMG Phoomchai Audit Ltd. Bangkok 13 February 2009
137 ANNUAL REPORT 2008
Balance sheets
Diamond Roofing Tiles Public Company Limited As at 31 December 2008 and 2007 Assets Current assets Cash and cash equivalents Trade accounts receivable Inventories Other current assets Total current assets Non-current assets Property, plant and equipment Land not used in operations Computer software under installation Intangible assets Other non-current assets Total non-current assets Total assets Liabilities and equity Current liabilities Short-term loans from financial institutions Trade accounts payable Current portion of long-term loans Current portion of finance lease liabilities Income tax payable Other current liabilities Total current liabilities Non-current liabilities Long-term loans from financial institutions Finance lease liabilities Total non-current liabilities Total liabilities Equity Share capital Authorised share capital Issued and paid-up share capital Share premium Retained earnings Appropriated Legal reserve Reserve for treasury shares Unappropriated Treasury shares Total equity Total liabilities and equity
Note
2008
(in Baht)
2007
5 6 7 8
43,487,665 302,110,728 419,677,754 34,002,869 799,279,016
99,982,114 286,531,570 396,479,183 41,942,887 824,935,754
9, 12 10, 12
1,067,679,346 86,529,488 39,544,741 2,343,660 1,196,097,235 1,995,376,251
987,445,850 86,529,488 21,132,333 20,763,958 909,108 1,116,780,737 1,941,716,491
185,743,217 102,629,722 112,500,000 2,899,501 18,317,517 84,694,558 506,784,515
97,058,492 100,000,000 2,987,616 54,246,099 79,064,848 333,357,055
12 12
6,255,000 6,255,000 513,039,515
50,000,000 2,899,501 52,899,501 386,256,556
15 15 17
1,049,650,000 1,000,000,000 102,247,800
1,000,000,000 1,000,000,000 102,247,800
17 17
105,000,000 27,938,661 275,088,936 (27,938,661) 1,482,336,736 1,995,376,251
88,000,000 365,212,135 1,555,459,935 1,941,716,491
11
12 13 12 12 4, 14
16
138 DIAMOND ROOFING TILES PCL.
Statements of income
For the years ended 31 December 2008 and 2007 2008
Note
Revenues Revenue from sale of goods and rendering of services Other income Total revenues Expenses Cost of sale of goods and rendering of services Selling and administrative expenses Total expenses Profit before interest and income tax expenses Interest expense Income tax expense Profit for the year Basic earnings per share
(in Baht)
2007
4
2,510,021,325 32,706,414 2,542,727,739
2,599,578,327 22,487,670 2,622,065,997
20 4, 19, 20
1,735,820,736 435,884,632 2,171,705,368 371,022,371 (8,105,281) (78,101,628) 284,815,462 0.29
1,660,216,918 424,537,734 2,084,754,652 537,311,345 (11,643,904) (132,287,737) 393,379,704 0.39
21 22
Statements of changes in equity
For the years ended 31 December 2008 and 2007 Retained earnings
Note
Balance at 1 January 2007 Profit for the year Dividends Legal reserve Balance at 31 December 2007 Profit for the year Treasury shares acquired
23 17
16 Dividends 23 Legal reserve 17 Reserve for treasury shares 17 Balance at 31 December 2008
Appropriated to Issued and Appropriated reserve for paid-up to Share treasury Treasury share capital premium legal reserve shares Unappropriated shares (in Baht) 1,000,000,000 102,247,800 68,000,000 231,832,431 - - - - 20,000,000 1,000,000,000 102,247,800 88,000,000 - -
- -
- -
393,379,704 (240,000,000) (20,000,000) 365,212,135
Total equity 1,402,080,231
- 393,379,704 - (240,000,000) - 1,555,459,935
- 17,000,000 -
- 27,938,661
284,815,462 - - (27,938,661) (330,000,000) (17,000,000) (27,938,661) -
284,815,462 (27,938,661) (330,000,000) -
1,000,000,000 102,247,800 105,000,000
27,938,661
275,088,936 (27,938,661) 1,482,336,736
139 ANNUAL REPORT 2008
Statements of cash flows
For the years ended 31 December 2008 and 2007 Note
Cash flows from operating activities Profit for the year Adjustments for Depreciation and amortisation Interest income Interest expense Unrealised loss (gain) on exchange Bad and doubtful debts expense (reversal) Allowance for obsolete and decline in value of inventories (reversal) Reversal of allowance for impairment of assets Loss from disposal of plant and equipment Provision for loss on forward exchange contracts Income tax expense Changes in operating assets and liabilities Trade accounts receivable Inventories Other current assets Other non-current assets Trade accounts payable Other current liabilities Income taxes paid Net cash provided by operating activities Cash flows from investing activities Interest received Purchases of plant and equipment Increase in computer software under installation Increase in intangible assets Sale of equipment Net cash used in investing activities Cash flows from financing activities Interest paid Dividends paid Increase (decrease) in bank overdrafts and short-term loans from financial institutions Proceeds from long-term loan from financial institution Repayment of long-term loan from financial institution Finance lease payments Purchases of treasury shares Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
5
2008
(in Baht)
2007
284,815,462
393,379,704
133,984,782 (1,268,962) 8,105,281 846,061 4,709,498 (29,847,387) (3,860,000) 921,323 15,370,000 78,101,628 491,877,686
138,915,215 (4,479,114) 11,643,904 (126,701) (560,000) 19,841,783 935,948 132,287,737 691,838,476
(20,148,983) 6,648,816 7,256,729 (1,434,552) 4,664,820 (9,924,884) (114,030,210) 364,909,422
(42,525,176) (100,437,396) (21,248,035) 2,276,250 (19,697,836) 13,762,324 (123,909,101) 400,059,506
1,952,250 (206,222,060) (2,725,490) 19,500 (206,975,800)
3,795,826 (106,135,850) (21,132,333) (158,714) 1,311,364 (122,319,707)
(8,001,661) (329,998,350)
(11,639,794) (240,000,000)
185,743,217 68,755,000 (100,000,000) (2,987,616) (27,938,661) (214,428,071)
(5,060,213) (50,000,000) (6,670,948) (313,370,955)
(56,494,449) 99,982,114 43,487,665
(35,631,156) 135,613,270 99,982,114
140 DIAMOND ROOFING TILES PCL.
Note
Contents
1
General information
2
Basis of preparation of the financial statements
3
Significant accounting policies
4
Related party transactions and balances
5
Cash and cash equivalents
6
Trade accounts receivable
7
Inventories
8
Other current assets
9
Property, plant and equipment
10
Land not used in operations
11
Intangible assets
12
Interest-bearing liabilities
13
Trade accounts payable
14
Other current liabilities
15
Share capital
16
Treasury shares
17
Share premium and reserves
18
Segment information
19
Selling and administrative expenses
20
Personnel expenses
21
Income tax expense
22
Basic earnings per share
23
Dividends
24
Financial instruments
25
Commitments with non-related parties and others
26
Thai Accounting Standards (TAS) not yet adopted
27
Reclassification of accounts
141 ANNUAL REPORT 2008
These notes form an integral part of the financial statements. The financial statements were authorised for issue by the directors on 13 February 2009.
1
General information Diamond Roofing Tiles Public Company Limited, the “Company”, is incorporated in Thailand and has its registered office and factory addresses at 69-70 Moo 1, Mitraphab Road (Km.115), Tambol Talingchan, Amphur Muang, Saraburi Province, Thailand. The Company was listed on the Stock Exchange of Thailand in November 2005. The major shareholder during the financial year was Myriad Materials Co., Ltd. (73.3% shareholding), incorporated in Thailand. The principal businesses of the Company are manufacturing of roof tiles and side board.
2
Basis of preparation of the financial statements The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the Thai language. The financial statements are prepared in accordance with Thai Accounting Standards (“TAS”) including related interpretations and guidelines promulgated by the Federation of Accounting Professions (“FAP”) and with generally accepted accounting principles in Thailand. The Company has adopted the following new and revised Thai Accounting Standards (TAS) which were issued by the FAP during 2007 and effective for accounting periods beginning on or after 1 January 2008. TAS 25 (revised 2007) Cash Flows Statements TAS 29 (revised 2007) Leases TAS 31 (revised 2007) Inventories TAS 35 (revised 2007) Presentation of Financial Statements TAS 39 (revised 2007) Accounting Policies, Changes in Accounting Estimates and Errors TAS 41 (revised 2007) Interim Financial Reporting TAS 51 Intangible Assets The adoption of these new and revised TAS does not have any material impact on the Company’s financial statements. The FAP has issued during 2008 a number of revised TAS which are only effective for financial statements beginning on or after 1 January 2009 and have not been adopted in the preparation of these financial statements. These revised TAS are disclosed in note 26. The financial statements are presented in Thai Baht, rounded in the notes to financial statements to the nearest thousand unless otherwise stated. They are prepared on the historical cost basis except as stated in the accounting policies. The preparation of financial statements in conformity with TAS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. These judgements, estimates and assumptions are based on historical experience and various other factors, including management’s assessment of the potential impact on the Company’s operations and financial position of the global economic crisis. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.
142 DIAMOND ROOFING TILES PCL.
3 Significant accounting policies (a) Foreign currencies Foreign currency transactions Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Thai Baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of income. Non-monetary assets and liabilities measured at cost in foreign currencies are translated to Thai Baht using the foreign exchange rates ruling at the dates of the transactions.
(b) Cash and cash equivalents Cash and cash equivalents in the statements of cash flows comprise cash balances, call deposits and highly liquid short-term investments. Bank overdrafts that are repayable on demand are a component of financing activities for the purpose of the statement of cash flows.
(c) Trade and other accounts receivable Trade and other accounts receivable are stated at their invoice value less allowance for doubtful accounts. The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer payments. Bad debts are written off when incurred.
(d) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the moving average principle, and comprises all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured finished goods and work in progress, cost includes an appropriate share of overheads based on normal operating capacity and is calculated using standard cost adjusted to approximate average cost. On 29 May 2008, the Revenue Department approved the Company’s change in accounting policy for the valuation of inventories (supplies) from the first-in, first-out method to the moving average cost method which was effective on 1 January 2008. The change in accounting policy has no material effect on the financial statements for the years ended 31 December 2008 and 2007. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete and to make the sale. An allowance is made for all deteriorated, damaged, obsolete and slow-moving inventories.
(e) Property, plant and equipment Owned assets Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Leased assets Leases in terms of which the Company substantially assumes all the risk and rewards of ownership are classified as finance leases. Property, plant and equipment acquired by way of finance leases is capitalised at the lower of its fair value or the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of income.
143 ANNUAL REPORT 2008
Depreciation Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows: Buildings and structures Machinery and equipment Furniture, fixtures and office equipment Vehicles
5-20 5-20 5 5
Years Years Years Years
No depreciation is provided on freehold land or assets under construction and installation.
(f) Intangible assets Intangible assets that are acquired by the Company, which have finite useful lives, are stated at cost less accumulated amortisation. Amortisation Amortisation is recognised in the statement of income on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives are as follows: Deferred know-how and technical assistance fees Software licenses
10 10
Years Years
(g) Impairment The carrying amounts of the Company’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amounts are estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in the statement of income. Calculation of recoverable amount The recoverable amount of assets is the greater of the asset’s net selling price or value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversals of impairment Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(h) Interest-bearing liabilities Interest-bearing liabilities are recognised at cost.
144 DIAMOND ROOFING TILES PCL.
(i) Trade and other accounts payable Trade and other accounts payable are stated at cost.
(j) Provisions A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
(k) Repurchase of share capital (treasury shares) When share capital recognised as equity is repurchased, the amount of consideration paid, including directly attributable costs, is classified as treasury shares and recognised as a deduction from equity. An equal amount is appropriated from retained earnings and taken to a reserve for treasury shares within equity. When treasury shares are sold, the amount received is recognised as an increase in equity by crediting the cost of the treasury shares sold, calculated using the weighted average method, to the treasury shares account and transferring the equivalent amount back from reserve for treasury shares to retained earnings. Surpluses on the sale of treasury shares are taken directly to a separate category within equity, ‘Surplus on treasury shares’. Net deficits on sale or cancellation of treasury shares are debited to retained earnings after setting off against any remaining balance of surplus on treasury shares.
(l) Revenue Revenue excludes value added taxes and is arrived at after deduction of trade discounts. Sale of goods and rendering of services Revenue is recognised in the statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there is continuing management involvement with the goods or there are significant uncertainties regarding recovery of the consideration due, associated costs or the probable return of goods. Rendering of services income is recognised as services are provided. Rental income Rental income is recognised in the statement of income on a straight-line basis over the term of the lease. Interest income Interest income is recognised in the statement of income as it accrues.
(m) Expense Operating leases Payments made under operating leases are recognised in the statement of income on a straight line basis over the term of the lease. Contingent rentals are charged to the statement of income for the accounting period in which they are incurred. Finance costs Interest expense and similar costs are charged to the statement of income for the period in which they are incurred. The interest component of finance lease payments is recognised in the statement of income using the effective interest rate method.
145 ANNUAL REPORT 2008
(n) Income tax Income tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date and applicable to the reporting period, and any adjustment to tax payable in respect of previous years.
4
Related party transactions and balances Related parties are those parties linked to the Company as shareholders or by common shareholders or directors. Transactions with related parties are conducted at prices based on market prices or, where no market price exists, at contractually agreed prices. Relationships with related parties that control or jointly control the Company or are being controlled or jointly controlled by the Company or have transactions with the Company were as follows: Name of entity Supalai Public Company Limited
Country of incorporation/ nationality Thailand
Nature of relationships Some common directors
The pricing policies for particular types of transactions are explained further below: Transactions Sale of goods and rendering of services
Pricing policy At market price
Significant transactions for the years ended 31 December 2008 and 2007 with related parties were as follows: Other related parties Sale of goods and rendering of services Directors’ remuneration
2008 2007 (in thousand Baht) 2,796 6,496
1,818 5,348
Trade account receivable Other related party Supalai Public Company Limited
1,051
157
Accrued directors’ remuneration expense
1,900
1,425
Balances as at 31 December 2008 and 2007 with related parties were as follows:
5
Cash and cash equivalents Cash on hand Cash at banks - current accounts Cash at banks - savings accounts Highly liquid short-term investments Total
2008 2007 (in thousand Baht) 130 80 13,124 13,240 30,082 36,513 152 50,149 43,488 99,982
The currency denomination of cash and cash equivalents as at 31 December was as follows: Thai Baht (THB) United States Dollars (USD) Total
2008 2007 (in thousand Baht) 37,130 99,982 6,358 43,488 99,982
146 DIAMOND ROOFING TILES PCL.
6 Trade accounts receivable Related party Other parties
Note 4
Less allowance for doubtful accounts Net Bad and doubtful debts expenses (reversal) for the year
2008 2007 (in thousand Baht) 1,051 157 309,390 307,145 310,441 307,302 (8,330) (20,770) 302,111 286,532 4,709 (560)
Aging analyses for trade accounts receivable were as follows: Related party Within credit terms Overdue: Less than 60 days Other parties Within credit terms Overdue: Less than 60 days 60 - 120 days 120 - 360 days Over 360 days Less allowance for doubtful accounts Net Total The normal credit term granted by the Company ranges from 30 days to 120 days. The currency denomination of trade accounts receivable as at 31 December were as follows: Thai Baht (THB) United States Dollars (USD) Total
806
157
245 1,051
157
255,327
248,573
37,498 2,407 8,669 5,489 309,390 (8,330) 301,060 302,111
39,494 398 194 18,486 307,145 (20,770) 286,375 286,532
306,982 3,459 310,441
294,814 12,488 307,302
7 Inventories Finished goods Work in progress Raw materials Supplies Goods in transit Less allowance for obsolete and decline in value of inventories Net
2008 2007 (in thousand Baht) 98,864 137,038 87,793 147,773 215,644 94,505 23,385 26,026 10,476 37,469 436,162 442,811 (16,484) (46,332) 419,678 396,479
8 Other current assets Prepayment for purchase of goods Prepaid expenses Others Total
2008 2007 (in thousand Baht) 28,229 28,934 950 2,296 4,824 10,713 34,003 41,943
147 ANNUAL REPORT 2008
9
Property, plant and equipment Building and structures
Land Cost At 1 January 2007 Additions Transfers Disposals At 31 December 2007 and 1 January 2008 Additions Transfers Disposals At 31 December 2008 Accumulated depreciation At 1 January 2007 Depreciation charge for the year Disposals At 31 December 2007 And 1 January 2008 Depreciation charge for the year Disposals At 31 December 2008 Allowance for impairment loss At 1 January 2007 At 31 December 2007 and 1 January 2008 Reversal of impairment losses At 31 December 2008 Net book value Owned assets Assets under finance leases Total at 31 December 2007 Owned assets Assets under finance leases Total at 31 December 2008
Machinery and equipment
Furniture, Fixtures and office Equipment Vehicles (in thousand Baht)
Assets under construction and installation
Total
18,118 (471) -
361,444 20,882 23,021 (1)
1,674,107 33,925 234,215 (21,674)
28,896 11,442 (5,035)
53,998 5,724 2,036 (4,189)
278,507 34,163 (259,272) -
2,415,070 106,136 (471) (30,899)
17,647 17,647
405,346 12,387 7,441 (23,580) 401,594
1,920,573 63,268 33,305 (19,701) 1,997,445
35,303 5,229 4,843 (1,816) 43,559
57,569 207 (30) 57,746
53,398 125,131 (45,589) 132,940
2,489,836 206,222 (45,127) 2,650,931
-
235,767 17,094 (1)
1,095,032 104,632 (21,434)
21,383 4,069 (4,476)
30,773 10,423 (2,741)
-
1,382,955 136,218 (28,652)
-
252,860 15,020 (22,710) 245,170
1,178,230 98,902 (19,638) 1,257,494
20,976 6,096 (1,808) 25,264
38,455 8,890 (30) 47,315
-
1,490,521 128,908 (44,186) 1,575,243
-
1,400 1,400
2,280 2,280
300 300
20 20
7,869 7,869
11,869 11,869
-
(1,281) 119
(2,280) -
(280) 20
(19) 1
7,869
(3,860) 8,009
17,647 17,647 17,647 17,647
151,086 151,086 156,305 156,305
740,063 740,063 739,951 739,951
14,027 14,027 18,275 18,275
10,975 8,119 19,094 7,721 2,709 10,430
45,529 45,529 125,071 125,071
979,327 8,119 987,446 1,064,970 2,709 1,067,679
The gross amount of the Company’s fully depreciated plant and equipment that was still in use as at 31 December 2008 amounted to Baht 1,131.1 million (2007: Baht 1,126.2 million). The Company’s land, a portion of buildings and structures and machinery and equipment were used as collaterals for long-term loan and other credit facility lines obtained from certain local financial institutions as discussed in Note 12.
148 DIAMOND ROOFING TILES PCL.
10 Land not used in operations (in thousand Baht)
Cost At 1 January 2007 Transfer At 31 December 2007 and 1 January 2008 At 31 December 2008
109,058 471 109,529 109,529
Allowance for loss on impairment At 1 January 2007 At 31 December 2007 and 1 January 2008 At 31 December 2008
23,000 23,000 23,000
Net book value At 31 December 2007 At 31 December 2008
86,529 86,529
The Company is in the process of considering how best to generate future economic benefits from such land. A portion of land title deed of land not used in operations, which had net book value as at 31 December 2008 and 2007 totalling Baht 16.4 million, was jointly owned with two other companies. A portion of the Company’s land not used in operations was used as collateral for long-term loan and other credit facility lines obtained from a local financial institution as discussed in Note 12.
11 Intangible assets Deferred know-how and technical assistance fees Cost At 1 January 2007 Additions At 31 December 2007 and 1 January 2008 Additions At 31 December 2008
Total
26,883 26,883 26,883
159 159 23,858 24,017
26,883 159 27,042 23,858 50,900
Accumulated amortisation At 1 January 2007 Amortisation charge for the year
3,580 2,690
8
3,580 2,698
At 31 December 2007 and 1 January 2008 Amortisation charge for the year At 31 December 2008
6,270 2,688 8,958
8 2,389 2,397
6,278 5,077 11,355
20,613 17,925
151 21,620
20,764 39,545
Net book value At 31 December 2007 At 31 December 2008
Software Licenses (in thousand Baht)
149 ANNUAL REPORT 2008
12 Interest-bearing liabilities Current Short-term loans from financial institutions Secured unsecured Current portion of long-term loans from financial institutions Secured Current portion of finance lease liabilities Non-current Long-term loans from financial institutions - secured Finance lease liabilities Total
2008 2007 (in thousand Baht) 90,000 95,743 185,743
-
112,500 2,899 301,142
100,000 2,988 102,988
6,255 6,255 307,397
50,000 2,899 52,899 155,887
298,243 6,255 304,498
100,000 50,000 150,000
The periods to maturity of interest-bearing liabilities, excluding finance lease liabilities, as at 31 December were as follows: Within one year After one year but within five years Total
As at 31 December 2008, the Company had bank overdraft and other credit facility lines from various financial institutions which bear interest at rates ranging from 4.5% to 6.5% per annum. (2007: interest rates ranging from 7.1% to 8.0% per annum) In April 2006, the Company entered into a long-term loan agreement with a local financial institution for Baht 200 million with interest at fixed rate of 5.75% per annum for the first year, 6% per annum for the second year and MLR minus 0.5% per annum, thereafter. This loan is repayable in 8 quarterly installments of Baht 25 million each commencing from August 2007. As at 31 December 2008, the outstanding balance of loan amounted to totalling Baht 50 million. (2007: Baht 150 million) In April 2008, the Company entered into a long-term loan agreement with a local financial institution of Baht 250 million for purchase of machinery, which has to be completely withdrawn within 365 days from the loan agreement date. This loan has interest at fixed rate of 4.5% per annum and is repayable in 8 quarterly installments of Baht 31.25 million each commencing from July 2009 with negative pledge of such machinery. As at 31 December 2008, the outstanding balance of loan amounted to totalling Baht 68.8 million. In June 2008, the Company entered into a long-term loan agreement with a local financial institution of Baht 150 million for purchase of machinery. This loan has interest at fixed rate of 4.3% per annum and is repayable in 24 monthly installments commencing from the first withdrawal date. Thereafter, the principal is repayable in 8 quarterly installments of Baht 18.75 million each with negative pledge of such machinery. As at 31 December 2008, the Company had not made a withdrawal of such loan from the financial institution.
150 DIAMOND ROOFING TILES PCL.
Loans, overdraft and other credit facility lines from financial institutions as at 31 December were secured on the following assets: Note Land Building and structures Machinery and equipment Land not used in operations Total
9 9 9 10
2008 2007 (in thousand Baht) 17,647 17,647 44,104 51,676 33 36 40,735 40,735 102,519 110,094
As at 31 December 2008, the Company had unutilised credit facilities totalling Baht 732.0 million (2007: Baht 666.1 million).
Finance lease liabilities Finance lease liabilities as at 31 December were payable as follows:
Within one year After one year but within five years Total
Principal
2008 Interest
2,899 2,899
106 106
Payments Principal (in thousand Baht) 3,005 2,988 2,899 3,005 5,887
2007 Interest
Payments
278 106 384
3,266 3,005 6,271
The Company entered into finance lease agreements for vehicles with various local leasing companies with fair value amounting to approximately Baht 8.4 million (2007: Baht 26.8 million) as at the initial date of the lease agreements. The agreements are for the period of 4 years. As at 31 December 2008, the net book value of leased assets amounted to approximately Baht 2.7 million (2007: Baht 8.1 million). Interest-bearing liabilities of the Company as at 31 December 2008 and 2007 were denominated entirely in Thai Baht.
13 Trade accounts payable Other parties
2008 2007 (in thousand Baht) 102,630 97,058
The currency denomination of trade accounts payable as at 31 December was as follows: Thai Baht (THB) United States Dollars (USD) Canadian Dollars (CAD) Euro (EUR) Total
51,958 36,997 13,675 102,630
55,638 41,218 202 97,058
14 Other current liabilities Accrued operating expenses Payables for purchase of fixed assets and others Provision for loss on foreign exchange of forward contracts Withholding tax payable Deposits and advances received Others Total
2008 2007 (in thousand Baht) 20,566 24,187 37,211 37,028 15,370 2,282 4,371 6,618 9,102 2,648 4,377 84,695 79,065
151 ANNUAL REPORT 2008
The currency denomination of other current liabilities as at 31 December was as follows: 2008 2007 (in thousand Baht) 83,774 79,065 921 84,695 79,065
Thai Baht (THB) Euro (EUR) Total
15 Share capital
Authorised At 1 January - ordinary shares - ordinary shares Reduction in par value from Baht 5 to Baht 1 Increase of new shares At 31 December - ordinary shares Issued and paid At 1 January - ordinary shares - ordinary shares Reduction in par value from Baht 5 to Baht 1 At 31 December - ordinary shares
Par value Per share (in Baht)
Number
2008
2007 Amount Number Amount (thousand shares/thousand Baht)
5 1
1,000,000
1,000,000
200,000 -
1,000,000 -
1
49,650
49,650
800,000 -
-
1
1,049,650
1,049,650
1,000,000
1,000,000
5 1
1,000,000
1,000,000
200,000 -
1,000,000 -
1
-
-
800,000
-
1
1,000,000
1,000,000
1,000,000
1,000,000
At the extraordinary shareholders’ meeting held on 21 August 2007, the shareholders passed a resolution to change the par value of the Company’s shares from Baht 5 par share, totalling 200,000,000 shares, to Baht 1 per share, totalling 1,000,000,000 shares. The Company registered the change in share capital with the Ministry of Commerce on 4 September 2007. At the extraordinary shareholders’ meeting held on 17 June 2008, the shareholders passed a resolution to approve the Employee Stock Option Program. Accordingly, the extraordinary shareholders’ meeting also passed a resolution to increase the authorised share capital by Baht 49,650,000 from Baht 1,000,000,000 (1,000,000,000 shares at Baht 1 par value) to Baht 1,049,650,000 (1,049,650,000 shares at Baht 1 par value). The new ordinary shares of Baht 49,650,000 (49,650,000 shares at Baht 1 par value) are to be reserved for the exercise of warrants, which are planned to be issued to directors and employees of the Company. The Company registered the increase in share capital with the Ministry of Commerce on 1 July 2008 and the Company’s Employee Stock Option Program was approved by the Securities and Exchange Commission on 10 October 2008.
16 Treasury shares The treasury shares account within equity comprises the cost of the Company’s own shares held by the Company. As at 31 December 2008, the Company held 19,409,100 of the Company’s shares, comprising 1.9% of the Company’s issued share capital, at a total cost of Baht 27,938,661 as investments available-for-sale. In October 2008, the Board of Directors of the Company approved a treasury share plan (‘Plan’) to re-purchase not more than 5 per cent, or 50 million shares, of the Company’s shares then in issue. The purpose of the Plan is to
152 DIAMOND ROOFING TILES PCL.
manage the Company’s excess liquidity. The maximum amount approved for share purchase under the Plan is Baht 75 million and the price to be paid for the shares is not to exceed 115 percent of the average closing price on the Stock Exchange of Thailand (SET) over the 5 trading days before each share purchase is made. The Company may purchase the shares through the SET during the period from 4 November 2008 to 3 May 2009. The shares purchased may be resold after 6 months but within 3 years from the date of purchase.
17 Reserves Share premium Section 51 of the Public Companies Act B.E. 2535 requires companies to set aside share subscription monies received in excess of the par value of the shares issued to a reserve account (“share premium”). Share premium is not available for dividend distribution. Legal reserve Section 116 of the Public Companies Act B.E. 2535 requires that a company shall allocate not less than 5% of its annual net profit, less any accumulated losses brought forward, to a reserve account (“legal reserve”), until this account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution. Reserve for treasury shares The reserve for treasury shares represents the amount appropriated from retained earnings equal to the cost of the Company’s own shares held by the Company.
18 Segment information The Company operates in a single line of business, namely the manufacturing of roof tiles and side boards, which is an integrated line of product. The Company’s operations are carried on entirely in Thailand. Revenue and gross profit for the years ended 31 December were derived from the following markets: Revenue Domestic Export Total Gross profit Domestic Export Total
2008 2007 (in thousand Baht) 2,191,767 2,361,050 318,254 238,528 2,510,021 2,599,578 691,282 887,154 82,919 52,207 774,201 939,361
19 Selling and administrative expenses Distribution Marketing Personnel Provision for loss on forward exchange contracts Net foreign exchange loss Administrative Total
2008 2007 (in thousand Baht) 81,775 72,999 135,918 147,646 119,512 117,469 15,370 1,735 81,575 86,424 435,885 424,538
153 ANNUAL REPORT 2008
20 Personnel expenses 2008 2007 (in thousand Baht) 163,431 152,510 5,619 5,045 56,030 66,899 225,080 224,454
Wages and salaries Contribution to defined contribution plans Others Total
The defined contribution plan comprises a provident fund established by the Company for its employees. Membership to the fund is on a voluntary basis. Contributions are made monthly by the employees at rates ranging from 3% to 5% of their basic salaries and by the Company at rates from 3% to 5% of the employees’ basic salaries. The provident fund is registered with the Ministry of Finance as a juristic entity and is managed by a licensed Fund Manager.
21 Income tax expense 2008 2007 (in thousand Baht) 78,102 132,288
Current tax expense Current year Reconciliation of effective tax rate Profit before tax Income tax using the Thai corporation tax rate Income not subject to tax Expenses not deductible for tax purposes Revenue granted income tax exemption or expenses that are deductable in a greater amount Total
Rate (%)
2008
25
22
(in thousand Baht) 362,917 90,729 (8,426) 6,643 (10,844) 78,102
Rate (%) 25
25
2007
(in thousand Baht) 525,667 131,417 (2,288) 7,658 (4,499) 132,288
Income tax reduction Royal Decree No. 387 B.E. 2544 dated 5 September 2001 grants a company listed on the Stock Exchange of Thailand on or before 31 December 2005 a reduction in the corporate income tax rate from 30% to 25% for the five consecutive accounting periods beginning on or after the date that the company had its securities listed on the Stock Exchange of Thailand. The Company was listed in November 2005 and the period for the tax reduction will expire on 31 December 2010.
22 Basic earnings per share The calculations of basic earnings per share for the years ended 31 December 2008 and 2007 were based on the profit for the years attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding during the years as follows: Profit attributable to equity holders of the Company (basic) Number of ordinary shares outstanding at 1 January Effect of own shares held (treasury shares) Weighted average number of ordinary shares outstanding (basic) Earnings per share (basic) (in Baht)
2008 2007 (in thousand Baht) 284,815 393,380 1,000,000 1,000,000 (1,617) 998,383 1,000,000 0.29 0.39
154 DIAMOND ROOFING TILES PCL.
23 Dividends
At the annual general meeting of the shareholders of the Company held on 26 March 2007, the shareholders approved the appropriation of dividends of Baht 0.60 per share on 200 million ordinary shares with the par value of Baht 5 per share, amounting to Baht 120 million. The dividend was paid to shareholders during 2007. At the meeting of Board of Directors of the Company held on 20 August 2007, the Board of Directors approved the appropriation of interim dividends of Baht 0.6 per share on 200 million ordinary shares with the par value of Baht 5 per share, amounting to Baht 120 million. The interim dividend was paid to shareholders during 2007. At the annual general meeting of the shareholders of the Company held on 4 April 2008, the shareholders approved the appropriation of dividends of Baht 0.18 per share on 1,000 million ordinary shares with par value Baht 1 per share, amounting to Baht 180 million. The dividend was paid to shareholders during 2008. At the meeting of Board of Directors of the Company held on 25 August 2008, the Board of Directors approved the appropriation of interim dividends of Baht 0.15 per share on 1,000 million ordinary shares with par value Baht 1 per share, amounting to Baht 150 million. The interim dividend was paid to shareholders during 2008.
2007 Amount (thousand Baht) 120,000
120,000 240,000 180,000
150,000 330,000
24 Financial instruments Financial risk management policies The Company is exposed to normal business risks from changes in market interest rates and currency exchange rates and from non-performance of contractual obligations by counterparties. The Company does not hold or issue derivative financial instruments for speculative or trading purposes. Risk management is integral to the whole business of the Company. The Company has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Company’s risk management process to ensure that an appropriate balance between risk and control is achieved. Interest rate risk Interest rate risk is the risk that future movements in market interest rates will affect the results of the Company’s operations and its cash flows because certain loan interest rates are floating. However, the management believes that the Company has no material interest rate risk because such financial costs have no material effect on the Company’s financial statements. Foreign currency risk The Company is exposed to foreign currency risk relating to purchases and sales of goods and fixed assets which are denominated in foreign currencies. The Company primarily utilises forward exchange contracts with maturities of less than one year to hedge such financial liabilities denominated in foreign currencies. The forward exchange contracts entered into at the balance sheet date also relate to anticipated purchases of goods denominated in foreign currencies, for the subsequent period.
155 ANNUAL REPORT 2008
At 31 December, the Company was exposed to foreign currency risk in respect of financial assets and liabilities denominated in the following currencies: Note
2008 2007 (in thousand Baht)
United States Dollars Cash and cash equivalents Trade accounts receivable Trade accounts payable
5 6 13
6,358 3,459 (36,997)
12,488 (41,218)
Canadian Dollars (CAD) Trade accounts payable
13
(13,675)
-
13 14
(921) (41,776)
(202) (28,932)
15,179 (26,597)
(28,932)
Euro (EUR) Trade accounts payable Other current liabilities Gross balance sheet exposure Currency forwards Net exposure
At 31 December 2008, the Company entered into forward exchange contracts with a local financial institution to purchase the following foreign currencies: United States Dollars (USD) Canadian Dollars (CAD) Total
Currency (in thousand)
43 539
Equivalent amount (in thousand Baht) 1,500 15,266 16,766
The terms of the agreements are for no more than 3 months and the contracts will terminate within March 2009. As at 31 December 2008, if the Company terminated the forward exchange contracts it would have a gain of approximately Baht 0.2 million. Credit risk Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle its financial and contractual obligations to the Company as and when they fall due. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on customers requiring credit over a certain amount. At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. However, due to the large number of parties comprising the Company’s customer base, Management does not anticipate material losses from its debt collection. Liquidity risk The Company monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Company’s operations and to mitigate the effects of fluctuations in cash flows. Fair values The fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The following methods and assumptions are used to estimate the fair value of financial instruments. The fair value of cash and cash equivalents, current investments in fixed deposits and trade and other short-term receivables is taken to approximate the carrying value due to the relatively short-term maturity of these financial instruments.
156 DIAMOND ROOFING TILES PCL.
The fair value of bank overdrafts, trade and other short-term payables is taken to approximate the carrying value due to the relatively short-term maturity of these financial instruments. The fair value of the long-term loans is taken to approximate the carrying value because the interest rate is close to current market interest rate.
25 Commitments with non-related parties and others (a) (b)
Capital commitments Contracted but not provided for Buildings and other structures Machinery and equipment Computer software Total Other commitments Unused letter of credit for goods and supplies Bank guarantees Total
2008 2007 (in thousand Baht) - 7,313 362,010 14,785 - 2,516 362,010 24,614 - 37,469 10,407 10,178 10,407 47,647
(c) The Company entered into the Service Agreement relating to a centre for an online database with a company, whereby the latter will provide online database and other facilities as prescribed in the agreement. In consideration thereof, the Company is committed to pay fee as indicated in the agreement. This agreement was in effect for a period of three years commencing from 1 December 2005, and could be automatically renewed for a successive period of one year each unless written notice of termination was given by either party ninety days before the expiry date. The Company agreed to terminate the service agreement in December 2008. (d) The Company entered into a Know-How and Technical Assistance Agreement with a foreign company, whereby the latter will provide technical assistance for manufacturing of certain products. This agreement has been in effect for a period of five years commencing from February 2004 and can be terminated under the conditions indicated in the agreement. The Company is committed to pay fee as prescribed in the agreement.
26 Thai Accounting Standards (TAS) not yet adopted The Company has not adopted the following revised TAS that have been issued as of the balance sheet date but are not yet effective. These revised TAS will become effective for financial periods beginning on or after 1 January 2009. TAS 36 (revised 2007) Impairment of Assets TAS 54 (revised 2007) Non-current Assets Held for Sale and Discontinued Operations The adoption and initial application of these revised TAS is not expected to have any material impact on the Company’s financial statements.
27 Reclassification of accounts Certain accounts in the 2007 financial statements have been reclassified to conform to the presentation in the 2008 financial statements as follows: Before reclass. Statement of income Revenue from sale of goods and rendering of services Net foreign exchange gain Other income Cost of sale of goods and rendering of services
2,591,253 5,162 18,277 (1,652,843)
Reclass. (in thousand Baht) 8,325 (5,162) 4,211 (7,374) -
In the opinion of management, the new classification is more appropriate to the Company’s business.
After reclass. 2,599,578 22,488 (1,660,217)