Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Message from the Chairman The world is never short of surprises and 2007 turned out to be another colorful and volatile one. The major events of interest were the continuing strength of the commodity markets, predominately in soft commodities, precious metals and crude oil. We witnessed many commodities registering record high prices during the year despite the emergence of the subprime problems in the United States. Many global banks have suffered significant damage to their balance sheets, and many have asked for new capital injections from sovereign funds like those of Singapore, China and the Middle Eastern countries. The rubber market, having recovered from the disastrous collapse during the second half of 2006, had a much more stable outcome with RSS3 trading in the range of a low of US Dollar 2.00 to a high of US Dollar 2.65 per kilogram during 2007. The more stable outlook of rubber amidst the extremely volatile external environment saw many tire makers record healthy profit margins. The strong economic performance of China, India and the rest of Asia has in some way provided a cushion for the deceleration of the U.S. economy. From the perspective of rubber demand in 2007, Sri Trang Group did not see any weakening of the global economies, and indeed it continued to see healthy demand for its products. In 2007 Sri Trang Group achieved the total tonnage rubber sales of some 722,000 metric tons, or 7.5% of the global rubber production. This was a record for the group. We processed and exported rubber from Thailand and Indonesia and dealt with various other suppliers of rubber like Vietnam and Malaysia, where we currently have no presence. Apart from selling more rubber to our wide spectrum of customers, China continued to out-perform in terms of rubber consumption. China has now become the biggest consumer of natural rubber globally, consuming in excess of two million metric tons of rubber per annum. The rubber import to China accounts for 75% of the total consumption where China’s own domestic production is being constrained by its lack of infrastructures and cultivatable land. Sri Trang is pleased to say it has taken advantage of the enormous growth in the Chinese economies by more than doubling its sales into China. Our marketing efforts into the Indian rubber market also produced satisfactory results during 2007. Overall 2007 has been an excellent year for the group in terms of production and sales. It will continue to fine-tune its operations in order to achieve a return on investments commensurate with its wide spectrum of activities. The management would like to thank all stakeholders for their understanding and support once more during 2007. The group looks forward to delivering an improved performance in 2008.
( Mr.Somwang Sincharoenkul ) Chairman Sri Trang Agro-Industry Public Company Limited March 3, 2008
1
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Board of Directors
* ** ***
Mr. Somwang Mr. Prasit Mr. Viyavood Mr. Chaiyos Mr. Puang Mrs. Promsuk Mr. Anan Mr. Kitichai Mr. Sukit*
Sincharoenkul Panidkul Sincharoenkul Sincharoenkul Cherdkiatgumchai Sinchareonkul Pruksanusak Sincharoenkul Attopakorn
Mr. Kriang
Yanyongdilok
Mr. Prakob**
Visitkitjakarn
Mr. Samacha***
Potavorn
Chairman Vice Chairman Managing Director Director Director Director Director Director Independent Director / Chairman of Audit Committee Independent Director / Audit Committee Independent Director / Audit Committee Independent Director / Audit Committee
Mr. Sukit Attopakorn resigned on November 8, 2007 Mr. Prakob Visitkitjakarn, independent director, was appointed Chairman of Audit Committee since February 1, 2008 Mr. Samacha Potavorn was appointed to the Audit Committee / Independent Director since February 1, 2008
2
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
General Information Company Name (Thai) Company Name (English) Stock abbreviation Business registration No. Authorize capital Paid-up capital Main Business
:
บริษทั ศรีตรังแอโกรอินดัสทรี จํากัด (มหาชน)
: : : : : :
Head Office Address
:
Website Branch Address
: :
Sri Trang Agro-Industry Public Company Limited STA 0107536001656 1,000 Million Baht 1,000 Million Baht Producer and Exporter Rubber Smoked Sheets, Block Rubber and Concentrated Latex 10 Soi 10 Phetkasem Road, Hatyai, Songkhla 90110 Tel 0-7434-4663 (Automatic 14 Lines) Fax 0-7434-4677, 0-7423-7423, 0-7423-7832 http://www.sritranggroup.com 36/82 23rd Floor, P.S.Tower, Sukhumvit 21 Road (Asoke) Klongtoey Nua, Wattana, Bangkok 10110 Tel 0-2259-2964-71 Fax 0-2259-2958
Factory Address No.
:
1.
2.
3.
4.
5.
6.
Address
13/1 Jinggit Road, Thupthiang, Muang, Trang 92000 Tel
0-7521-0500-2
Fax
0-7521-0503
99/3 Moo 7 Phangla, Sadao, Songkhla 90170 Tel
0-7445-2623-6
Fax
0-7445-2622
1 Moo 2 Thumyai, Thungsong, Nakhonsithammarat 80110 Tel
0-7532-9830-3
Fax
0-7542-3118
399 Moo 7 Tambol HuayNang, HuayYod, Trang 92130 Tel
0-7529-4316-7
Fax
0-7529-4317
101/1-4 Moo 7 Praiwas, Kajanadis, Surat Thani 84160 Tel
089-873-1486
Fax
081-956-0559
68/2 Moo 4 Suradthanee-Punpin Rd, Watpradoo, Muang, Surut Thani 84000 Tel
0-7720-0521-3
Fax
0-7720-0524
3
Sri Trang Agro-Industry Public Company Limited
No. 7.
8.
9.
10.
Annual Report 2007
Address 41/1 Moo 13 Donyang, Pratuo, Chumphon 86210 Tel
0-7757-8410-2
Fax
0-7757-8414
139 Moo 2 Trang-Sikao Road, Na Muangpet, Sikao, Muang, Trang 92000 Tel
0-7557-0042-3
Fax
0-7557-0041
24 Moo 1 Prayatrang Road, Tambol Tachang, Muang, Chantaburi 22000 Tel
0-3932-3089
Fax
0-3932-3089
136/1 Moo 1 Sirorod Road, Tambol Kaotum, Yarang, Pattani 94160 Tel
0-7326-2784
Fax
0-7326-2785
Names of subsidiaries in which the Company holds more than 10% of the shares No. 1.
Address Semperflex Asia Corporation Limited 110/1 Kanjanavanit Road, Pahtong, Hatyai, Songkhla 90230
2.
Tel
0-7447-1231-5
Fax
0-7447-1230
Semperform Pacific Corporation Limited 110/2 Kanjanavanit Road, Pahtong, Hatyai, Songkhla 90230
3.
Tel
0-7447-1231-5,
Fax
0-7447-1230
Num Hua Rubber Company Limited 99 Moo 3 Samnakkham, Sadao, Songkhla 90120
4.
Tel
0-7441-2268, 0-7441-1982-3
Fax
0-7441-2255
Anvar Parawood Company Limited 101 Moo 3 Samnakkham, Sadao, Songkhla 90120 Tel
0-7441-2756-7
Fax
0-7441-2853
4
Sri Trang Agro-Industry Public Company Limited
No. 5.
Annual Report 2007
Address Premier System Engineering Company Limited 123 Moo 8 Kanjanavanit Road, Banpru, Hatyai, Songkhla 90250
6.
Tel
0-7447-1480-3, 0-7447-1368
Fax
0-7447-1290, 0-7447-1430
Rubberland Products Company Limited 109 Kanjanavanit Road, Pahtong, Hatyai, Songkhla 90230
7.
Tel
0-7429-1223-4, 0-7429-1755, 0-7429-1476
Fax
0-7429-1477
Siam Sempermed Corporation Limited 110 Kanjanavanit Road, Pahtong, Hatyai, Songkhla 90230
8.
Tel
0-7447-1471, 0-7429-1648-9, 0-7429-1471-5
Fax
0-7429-1650
Sadao P.S. Rubber Company Limited 207/1 Padang Besar Road, Sadao, Songkhla 90120
9.
Tel
0-7446-0483-5, 0-7441-1838
Fax
0-7441-1837
Starlight Express Transport Company Limited 13/1 Jingjit Road, Thupthiang, Muang, Trang 92000
10.
Tel
0-7521-0500-2
Fax
0-7521-0503
Startex Rubber Corporation Limited 10 Soi 10 Phetkasem Road, Hatyai, Songkhla 90110
11.
Tel
0-7521-0500-2
Fax
0-7521-0503
Thai Tech Rubber Corporation Limited 2 Chuti Uthit 3 Road, Hatyai, Songkhla 90110
12.
Tel
0-7423-0768, 0-7423-0406-7, 0-7423-9063-4
Fax
0-7423-8650
Pattana Agro futures Company Limited 33/84 Wallstreet Tower 17th floor, Surawong Rd., Bangrak Bangkok 10500 Tel
0-2632-8826
Fax
0-2632-8825
5
Sri Trang Agro-Industry Public Company Limited
No. 13.
Annual Report 2007
Address Thai Tank Installation Company Limited* Head Office : 99/1-3 Moo 13 Krissadanakorn 21, Bangna-Trad Rd., Km 7, Bangkaew, Bangplee, Samutprakarn 10540 Tel
0-2316-4167-8
Fax
0-2751-7022
Phuket Branch : 9 Moo 7 Phuket Port Baan Aowmakham Sakdidah Road Tambol Vichai, Muang, Phuket 83000
14.
Tel
0-7639-1021-2
Fax
0-7639-1022
Sri Trang Rubber and Plantation Company Limited ** 13/1 Jinggit Road, Thupthiang, Muang, Trang 92000
15.
Tel
0-7521-0500-2
Fax
0-7521-0503
Sri Trang International Pte. Ltd. 1 Raffles Place No.28-03, OUB Centre, Singapore 048616
16.
Tel
001-65-6532-5210 , 001-65-6532-5321
Fax
001-65-6532-7501
Sri Trang USA Inc. 401 East Market Street, Suite 210, Charlottesville, Virginia 22902 USA.
17.
Tel
001-1-434-296-0080 , 001-1-434-244-0089
Fax
001-1-434-296-0098
Sempermed USA Inc. 13900 49th Street North, Clearwater, FL 33762, U.S.A.
18.
Tel
001-1-800-366-9545
Fax
001-1-800-763-5491
Shanghai Foremost Plastic Industrial Co., Ltd. *** 159, Lane 356, Chexin Highway, Chedun Town, Songjiang District, Shanghai 201611 P.R.C.
19.
Tel
001-86-21-5760-9389
Fax
001-86-21-5760-9296
Shanghai Semperit Rubber & Plastic Products Co., Ltd. 2, Bridge, Beisong Road, Minhang, Shanghai 20111 P.R.C. Tel
001-86-21-6409 0850 , 001-86-21-6409 0300
Fax
001-86-21-6409 0850
6
Sri Trang Agro-Industry Public Company Limited
No. 20.
Annual Report 2007
Address PT Sri Trang Lingga Indonesia TPA.2 RT.26 & 29 Keramasan, Palembang, Indonesia
21.
Tel
001-62-711-445 666
Fax
001-62-711-445 222
Semperflex Shanghai Co., Ltd. Shanghai Chemical Industry Park, Fengxian Subzone, Canggong Road 1255, 201424 Tel
001-86-21-5744-8386
Fax
001-86-21-5744-8385
* Went out of business since November 22, 2007 ** Established since December 14, 2007 *** Hold Shares by subsidiary company, Siam Sempermed Corp., Ltd. 100 % Securities Registrar Thailand Securities Depository Co., Ltd. 62 Thailand Securities Exchange Building, 4th, 7th Floors, Ratchadaphisek Road, Khlong Toey, Bangkok 10110 Tel (02) 3591200-1 Fax (02) 3591259 Auditor Miss. Nongram Laohaareedilok, Certified Public Auditor Registration No.4334 AST Master Co., Ltd. No. 790/12 Thonglor Tower, Soi Thonglor 18, Sukhumvit 55 Road, Khlong Ton, Khlong Toey, Bangkok 10110 Tel (02) 3815716, 7148842-3, 3818016-7 Fax (02) 1850225 And/or Mrs. Suvimol Krittayakiern, Certified Public Auditor Registration No.2982 DIA International Auditing Co., Ltd No. 316/32 Sukhumvit 22 Road (Soi Sainamthip), Klong Toey, Bangkok 10110 Tel (02) 2595300-2 Fax (02)2601553, 2598956, 2598959 Legal Advisor Mr. Wasin Uchuwasin, Wasin Law Office No. 234 Niphat Uthit 1 Road, Hatyai, Songkhla 90110 Tel (074) 245789, 246081 Fax (074) 246081 Kamthorn, Suchart & Somsak Suite 31A, Sin Sathorn Tower 77/132 Khrungthonburi Road, Klongsarn, Bangkok 10600 Tel (02) 4400288-97 Fax (02) 4400298-99
7
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Summary of Financial Results Operations Performance of Company and Subsidiaries in 2005-2007 Unit : Thousand Baht 2005
2006
2007
Sales income
28,846,514
39,033,979
50,017,125
Total revenue
29,157,580
39,236,709
50,313,353
Gross profit
1,206,343
2,484,127
2,154,129
Net profit (loss)
(173,050)
582,302
108,375
5.00
5.00
5.00
162,570
200,000
200,000
(1.06)
2.91
0.54
0.25
1.50
1.00
12,545,515
14,755,656
18,015,473
Total liabilities
8,260,273
10,594,206
14,010,106
Paid – up capital
1,000,000
1,000,000
1,000,000
Shareholders' Equity
4,285,242
4,161,450
4,005,367
429,982
11,216
12,487
21.43
20.81
20.03
Book value
(0.59%)
1.48%
0.22%
Return on equity
(4.16%)
13.79%
2.65%
Return on asset
(1.46%)
4.27%
0.66%
Book value per share – Baht The weighted average number Of common shares – Thousand Share Net profit (loss) per share - Baht Dividend per share – Baht Total assets
Minority interest Book value - Baht
8
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Characteristics of Business Undertakings Sri Trang Agro-Industry Public Company Limited was established in 1987 with a registered capital of 31 Million Baht. The company is a producer and exporter of natural rubber, which is one of the most important agricultural products in the southern part of Thailand. Directed by Mr. Somwang Sincharoenkul, the management has continuously expanded its operations to support the growth of the domestic and international rubber industry. The company went public in 1993. The company started with rubber smoked sheets which is the main raw material for the automobile tire industry. Founded in 1988, Rubber Land Production began to produce concentrated latex to support the demand of the medical latex glove industry and elastic thread industry. In 1989, the company created a partnership with an Austrian company to found Siam Sempermed Corporation Limited and produce the medical latex gloves. In 1993 the company invested in a joint venture with Thai Tec Rubber Corporation Limited to start the STR block rubber project in response to the increasing demand for STR block rubber as raw material in the automobile tire industry. To become a leader in the natural rubber industry, the management realized the company needed to develop its business to become a universal producer in order to add value to its products. In addition the company has continuously expanded into finished products by creating partnerships with both domestic and international investors. It has founded new companies to support the production in the area that each company can supplement one another in terms of raw materials, transfer of technical know-how and services. Moreover the company’s policy, in line with that of the government and BOI, to focus on export-driven production which has assisted the company to attain much higher purchasing power than that of domestic market alone. This policy has benefited the country by bringing enormous amounts of foreign currency into the Kingdom each year. Besides that, the use of domestic products as raw materials has a significant and positive affect on the employment rate and local economy. Being one of the large producers and exporters, the company focuses strategically on improving the efficiency and competitiveness in the international market. The company established a Trading and Distribution Unit in important regions to support marketing activities and to expand distribution channels to penetrate new markets. This strategy has strengthened the image of Thai companies in the global market as well. Currently the Sri Trang Group has 21 companies and 18,000 Million Baht in assets. It is well known as one of the biggest groups in the rubber industry, the leading exporter and the biggest distributor of rubber and rubber products.
9
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
The description of the Sri Trang Group Primary Rubber Product Company Sri Trang Agro-Industry PLC.
Business rubber smoked sheets
(Trang Branch)
Quality System - ISO 9001:2000 by TUV Rheinland in 2003
concentrated latex
- ISO 9001:2000 by TUV Rheinland in 2003 - ISO 14001:2004 by TUV Rheinland in 2006
Sri Trang Agro-Industry PLC.
rubber smoked sheets
(Hat Yai Branch)
- ISO 9001:2000 by TUV Rheinland in 2003 - ISO 14001:1996 by TUV Rheinland in 2003 - OHSAS 18001:1999 by TUV Rheinland in 2003
Sri Trang Agro-Industry PLC.
STR block rubber
(Thung Song Branch)
- ISO 9001:2000 by TUV Rheinland in 2003 - ISO 14001:2004 by TUV Rheinland in 2007
Sri Trang Agro-Industry PLC.
STR block rubber
(Sikao Branch)
- ISO 9001:2000 by TUV Rheinland in 2005 - ISO 14001:2004 by TUV Rheinland in 2007
Sri Trang Agro-Industry PLC.
concentrated latex
(Chumporn Branch) Sri Trang Agro-Industry PLC.
in 2005 concentrated latex
(Surat thani Branch) Sri Trang Agro-Industry PLC.
- ISO 9001: 2000 by TUV Rheinland in 2005
concentrated latex
(Kanjanadit Branch) Rubberland Product Company Limited
- ISO 9001:2000 by TUV Rheinland
- ISO 9001:2000 by TUV Rheinland in 2005
concentrated latex
- ISO 9001:2000 by TUV Rheinland in 2003
Thai Tech Rubber Corporation Limited
STR block rubber
- ISO 9000:2000 by TUV Rheinland Industry Service in 1999 - ISO 14000:2004 by TUV Rheinland Industry Service in 2005
10
Sri Trang Agro-Industry Public Company Limited
Company
Annual Report 2007
Quality System
Business
Num Hua Rubber Company Limited
concentrated latex rubber smoked sheets
- ISO 9001:2000 by TUV Rheinland in 2003
air-dried sheet rubber Sadao P.S. Rubber Company Limited
rubber smoked sheets
- ISO 9001:2000 by TUV Rheinland in 2003
PT Sri Trang Lingga Indonesia
STR block rubber
- ISO 9001:2000 by TUV Rheinland in 2007
Finished/Value Added Product Company Siam Sempermed Corporation Limited
Business
Quality System
powdered and
- ISO 9001:2000 by TUV Management
powder-free latex examination gloves
Service in 2005 - ISO 13485:2003 by TUV Product Service in 2005 - ISO/IEC 17025:2005 by Department Of Medical Sciences, Ministry of Public Health in 2006.
Shanghai Semperit Rubber & Plastic
handrails escalator
Products Co., Ltd. Semperform Pacific Corporation Limited
injection-moulded
- ISO 9001:2000 by TUV Management
rubber and plastic
Service in 2005
parts Semperflex Asia Corporation Limited
Semperflex Shanghai Company Limited
High-pressure
- ISO 9001:2000 by TUV Management
hydraulic hose
Service in 2005
High-pressure hydraulic hose
Shanghai Foremost Plastic Industrial
Plastic Grove
Co., Ltd.
Trading / Distributor Company
Business
Sempermed USA Inc.
Trading / distributing natural rubber in U.S. market
Sri Trang International Pte. Ltd.
Trading / distributing natural rubber in Singapore market
Sri Trang USA Inc.
Distributes latex examination gloves in USA.
11
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Other businesses Company Thai Tank Installation Company Limited Anvar Parawood Company Limited
Business
Rent out concentrated latex storage facilities to exporters produces parawood for the furniture/pallets
Startex Rubber Company Limited
Quality System
- ISO 9001:2000 by TUV Rheinland in 2007
rubber and oil Palm plantation
Premier System Engineering Company Limited
research/development in machinery/ production process and IT services
- ISO 9001:2000 by Thailand Institute Of Scientific and Technological Research (TISTR) - OHSAS 18001:1999 by TUV Rheinland in 2006 ISO/IEC 17025:2005 by Thai Industrial Standard Institute (TISI) in 2006
Starlight Express Transport Company Limited
logistic services for Sri Trang Group
ISO 9001:2000 by Thailand Institute of Scientific and Technological Research (TISTR) in 2004
Pattana Agro futures Company Limited
brokerage activities in Agro future market of Thailand
Sri Trang Rubber and Plantation
Rubber plantation
Company Limited
12
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Shareholding Structure in the Group Sri Trang Agro-Industry Public Company Limited
Primary Rubber Product 99.9%
99.9%
99.9%
90%
Rubberland Products
Finished / Value added product 50%
Semperflex Shanghai
40% Num Hua Rubber
Semperform Pacific Corp.
Trading / Distribution 100%
Services / Other Business
Sri Trang International Pte
100%
99.9%
Anvar Parawood
99.9% *
Premier System Engineering
Sri Trang USA Inc. 99.9% *
Sadoa P.S. Rubber
40%
50%
Semperflex Asia Corp.
Sempermed USA Inc. 99.9% *
Sri Trang Lingga Indonesia
36% *
Siam Sempermed Corp. 40%
33.5% Thai Tech Rubber Corp.
10%
Shanghai Semperit Rubber & Plastic Product
10%
99.9%
* Direct and indirect holding share proportions
13
Startex Rubber Corp.
Starlight Express Transport
Pattana Agro Future
Thai Tank Installation Sri Trang Rubber and Plantation
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Operation results in the Year 2007
Name
Unit
Thousand Baht
Total
Profit
Total
Total
Shareholder’s
Revenue
(Loss)
Assets
Liabilities
Equity
1. Nam Hua Rubber Company Limited
3,902,954
96,084 1,295,804
983,189
312,616
2. Rubberland Products Company Limited
1,034,630
28,971
467,243
137,834
329,409
3. Sadao P.S. Rubber Company Limited
856,461 (11,163)
183,761
200,408
(16,646)
4. Premier System Engineering Company Limited
343,416
13,461
180,822
28,780
152,042
5. Anvar Parawood Company Limited
510,768
644
57,916
21,939
35,977
6. Starlight Express Transport Company Limited
307,046
15,984
94,097
27,223
66,874
3,071
325
51,580
147
51,433
548,791
4,886
120,314
101,895
18,419
75,004
(231)
32,302
29,743
2,559
698,042 (19,286)
243,204
236,965
6,239
11. Siam Sempermed Corporation Limited
6,667,763 333,720 4,061,843
510,324
3,551,519
12. Semperflex Asia Corporation Limited
1,166,132
251,227
763,593
7,831
80,344
96,655 678 32,548 27,220 11,253,65 4 160,848 3,234,498 2,632,449
5,328
7. Startex Rubber Company Limited 8. Sri Trang International Pte Ltd. 9. Sempermed USA Inc. 10. PT Sri Trang Lingga Indonesia
13. Semperform Pacific Corporation Limited 14. Sempermed USA, Inc. 15. Thai Tech Rubber Corporation Limited
68,466
73,824 1,014,820 (1,208)
88,175
602,049
16. Pattana Agro futures Company Limited
11,682
1,920
135,215
48,417
86,798
17. Shanghai Semperit Rubber & Plastic Products
74,715
18,185
97,499
20,773
76,726
18. Thai Tank Installation Company Limited
522
(352)
17,898
2,432
15,466
19. Semperflex Shanghai Company Limited
33,852
(7,754)
137,896
29,822
108,074
2
(310)
49,714
24
49,690
Company Limited
19. Sri Trang Rubber and Plantation Company Limited* * Registered on Dec, 14th 2007 Note Company 8,9,14
Unit : Thousand US Dollar
Company 10
Unit : Million Rupiah
Company 17, 19
Unit : Thousand Yuan
Number 18 Thai Tank Installation Company Limited is a supplier of rubber tank and is a 10% shareholder th since Nov, 7 2007 at the shareholder meeting of Thai Tank Installation Company Limited and has special approval to close the company and unregistered the company with the Ministry of Commerce Thailand
14
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Financial information by business segment Revenue income structure Unit : Thousand Baht
2005
2006 %
15,501,999
54%
22,130,192
57%
29,428,997
59%
Ribbed smoked sheet
7,498,400
26%
8,927,186
23%
12,274,813
25%
Concentrated Latex
4,715,710
16%
6,789,368
17%
7,203,835
14%
Other Products
1,130,405
4%
1,187,233
3%
1,109,480
2%
28,846,514
100%
39,033,979
100%
Block rubber
Total
Income
2007
Income
%
Income
50,017,125
Product Characteristics Major Product Types
Applications
Ribbed Smoked
• Raw material in the automobile
• 5 Grades of Ribbed Smoked Sheets (RSS) 1, 2, 3, 4 and 5
tire industry, parts of automobile, belt, pipe, and shoes etc.
• ADS (Air Dried Sheet) Block Rubber
• 4 Types of products; STR 10, STR 20, STR5L and STR CV • SIR (Production in Indonesia)
• Raw material in the automobile tire industry, and used as substitute to rubber smoked sheet grade 3
Concentrated Latex
• Raw material in the productions of
• Latex with 60%
latex examination gloves, condoms and elastic rubber
15
%
100%
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Finished products
Service & other business
Medical Examination Glove
Rubber and palm oil Plantation
Rubber and Plastic Parts
Transportation Services
High-Pressure Hydraulic Hoses
Engineering Services
Escalator Handrails
Rubber Wood Production
The company’s products consist of:
Rubber Smoked Sheet (RSS), which can be classified into five categories; Rubber smoked sheets grade 2, 3, 4, and 5. Rubber Smoked Sheets are classified by the quality of each sheet. Rubber Smoked Sheets are used as a raw material in the production of other products including automobile tires, pipes, shoes and parts of automobiles, ect.
Block Rubber is classified into four main categories; STR 20, STR 10, and SIR 20. Like Rubber Smoked Sheets, Block Rubber is used as raw material in the production of other products, and the biggest consumption of the product comes from the automobile tire industry. In general, the qualification of STR 20 can be used to substitute RSS grade 3.
Concentrated Latex with 60% concentration can be used as raw material in the production of other products such as latex examination gloves, condoms and elastic rubber thread.
Primary products of the company are intermediate materials used as inputs in the production of finished products. Most of the demand for the company’s primary products comes from the automobile tire industry, depending on the global economic conditions. Good economic conditions will increase the purchasing power, especially on the motor vehicle products and commercial vehicles. For Concentrated Latex the mainly consumption of concentrated latex are latex examination gloves, condoms and elastic threads. Since the consumption of those products tends to increase, the demand for concentrated latex has a positive growth rate as well. However, the production of natural rubber depends on the seasonal climate. Rubber out put normally decreases between March to May and increases between December to February each year. To cope with such seasonal supply constraint, the marketing department has managed to acquire orders to match the company’s capacity, while the company can still gain margins from appropriate pricing.
16
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Structure of Customer Base Unit: Tons 2007 Tire Producer Trading and Importing Domestic User
Sales Volume Tons 579,161 136,190 6,132
% 80 19 1
Customer Characteristics Customer of the company can be categorized into three main groups: 1) Automobile tire manufacturers consisting of leading global tire manufacturers such as Bridgestone, Michelin, Yokohama, Hankook, Continental, Goodyear, Pirelli, and tire manufacturers in China. Using large amount of natural rubber as raw material in their production, these customer groups have stable and high purchasing power, 2) Trading companies in Japan and other importers in Asia, China, Taiwan, Korea, America and Europe. These importers have customer bases with long established relationships and prefer purchasing from agents since they offer various exclusive deals, such as long-term contracts which help reduce delivery and price risk. 3) Domestic customers, including automobile tire, motorcycle tire, rubber parts, latex examination glove and elastic rubber thread manufacturers. These manufacturers are also export oriented, of which their demands are growing at a satisfactory rate.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Management plan over the past year The overall outlook in the natural rubber industry remained positive for manufacturers as demand for natural rubber products remained strong while supplies remained consistent with normal seasonal patterns without any natural or climate irregularities. Owing to prices fluctuation, the management focused the company’s production on blocked rubber production of which its demand remained strong. As one of a regional player in rubber industry, the company offered various products to satisfy and meet customers’ demands. The management also placed special emphasis on marketing and sales management, raw material sourcing, planning and purchase and inventory management for the whole organization in order to cope with the trends of industry. The company continuously expanded the business to achieve its goal of being a leading regional player in the rubber industry, with integrated product lines of both natural rubber and finished products. 1. Marketing Management. The management successfully penetrated markets in China and India, which have high potential for economic growth and increased demand for natural rubber products. The company increased its market share by encouraging users to enter long term contracts in block rubber which was produced from her factories in Thailand and Indonesia.
The
management placed emphasis on loyalty to customers as well as expanding market channels. 2. Production Expansion. In 2007, Indonesia had achieved a satisfactory growth, especially in its basic economics. Having vast suitable areas for rubber and palm oil plantations, Indonesia is forecasted to become the world’s largest producer of natural rubber and palm oil, while Thailand and Malaysia will be the world’s second largest producer. This will greatly affect price as well as supply in the world market. The establishment of the subsidiary PT Sri Trang Lingga Indonesia at Palembang, South Sumatra Island, is a major milestone for the company to increase its block rubber production capacity situated in the world’s second largest rubber producing nation to feed the international tire industry.
This is to ensure sustainable growth
of the company’s marketing plan in addition to its SIR out sourcing from other Indonesian producers.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
The subsidiary was officially opened in 2006 and is considered to be the first Thai company in the rubber industry to establish a block rubber factory in Indonesia. Supported by many financial institutes in Thailand, Singapore, and Indonesia, the company has ensured credit facilities to finance its production expansion in phase 2, which will increase its production capacity to 4,000 tones per year and will subsequently reach 6,000 tones in the near future. STR and SIR products have steadily rising demand in the global market due to continued expansion of in the tire industry remains. Although the price of raw materials saw constant increases, this did not affect tire producers’ profitability as they could pass on such costs to their ultimate buyers. The company currently, therefore, has received orders greater than its production capacity. For the Block Rubber group, the management has improved the production facilities her own factories in Amphur Thungsong and Amphur Sikao, and subsidiaries at Num Hua Rubber Company Limited. The improvements include the production lines, the elimination any handicap in work flow process and the improvement of machineries/ equipments to increase efficiency in production. The As a result the monthly capacity increased from 13,700 metric ton/month to 16,500 metric ton/month. The company also plans to establish two additional block rubber plants one in the North East which will become the second most important rubber plantation area in Thailand and second one in down south area . The production capacity of both plants is expected to reach 8,000 tones per month, and both plants will be ready for test running their production lines in the first and the fourth quarter of 2008. 3. Expansion of the raw material sources. Given current capacities quality raw materials is a key factor for the success. The raw materials sourcing unit has cover most of the area in the Southern area to ensure the sufficient raw materials supplies for her need. The company has also conducted feasibility study of raw materials sourcing in three further down South provinces of which had abundant rubber supplies. This will also help beneficial to the pubic as it will create source of income for farmers. 4. Establishment of Sri Trang Rubber and Plantation Company Limited. In the view of prevailing cycle of the natural rubber industry, rubber plantations gain most benefit from high prices while producers and exporters still need to manage risk from price fluctuations. The company has long term plans to invest in rubber plantations in the North Eastern and Northern areas which are promoted by the government as new rubber
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
plantation area. The company established Sri Trang Rubber Plantation Company Limited to operate rubber plantations and rubber related products. The company holds 99.99% of registered capital of 100 million baht. The subsidiary is expected to be responsible for the raw material handling to ensure the continued supply for the group. 5. Siam Sempermed Co., Ltd and Semperflex Asia Co., Ltd. Those affiliated companies have been successful in solving the difficulties experienced during the year 2006 as a result of rising material prices, labor shortages and appreciation of Thai baht that outpaced an ability to increase selling prices. Siam Sempermed Corp, one of the largest producers of latex examination gloves in Thailand, achievable expanded its production capacity of the examination glove to 9,000 million pieces annually, while Semperflex Asia Corp has reached full production capacity of Braided Hoses and Spiral Hoses of 23.5 million meters annually. A high pressure hydraulic plant in China was completed according to the plan and was ready for operation in the first quarter of 2007. It was officially opened in March 2007 by the Minister of Industry of Austria. The annual capacity of Braided hose will 3 million meter and 5 million meters in year 2007 and 2008 respectively.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Market and Competition Environment Overall Competition. 
Domestic competition. Competition in this industry is mainly focused on product quality and punctual delivery,
while price is determined by the global market. As profit margins are relatively low compared to other industries and a large cash flow is required for operations, competition in this industry is limited to those companies which have been operating for long time. The main consumers include global leading automobile tire producers, medium tire producers, tire producers in China, the examination latex glove industry and the elastic rubber thread industry. The tire manufacturing industry has high bargaining powers due to its consistent large consumption and purchasing volume. The natural rubber industries, especially exporters, are focused on the manufacturing process to maintain the quality of products. Production capacity is another factor that customers look for, to ensure the manufacturer will deliver products on time. Thus, a good reputation is a major factor that leads manufacturers to maintain long term business relationship with their customers. The company expects to be one of the top five producers in the country, providing the three main lines including Rubber Smoked Sheets, STR block rubber and Concentrated Latex. The company is also the only company in Thailand to establish a plant in Indonesia and offers more variable products to customers than domestic competitors. The company’s policy emphasizes emerging markets, especially producers in China and India, as well as the tire producers mentioned above. The market for natural rubber still sees continual growth, which forces manufacturers and exporters to increasingly emphasize the sourcing of materials. Local market prices are the main factor here, followed by extensive sourcing networks that ensure a consistent supply for production lines. 
International competition. Manufacturers in Thailand and Indonesia are considered most influential in the rubber
industry controlling more than 50% of total global production. The STR block rubber and Smoked Sheet Rubber price in Thailand will be always influenced by Indonesia due to more than 2.5 million tons per year capacity. While out of 3 million tons products were spreading into STR block rubber, ribbed smoked sheets, and concentrated latex. The consuming countries tend to purchase more STR block rubber due to its specific quality, compact packaging, convenience for transportation and competitive price. The global market price of natural rubber is therefore influenced by producers with the lowest production cost, Indonesia. Being the biggest producers in the world, Thai companies have to expand STR block rubber production in substituting ribbed smoked sheet production. Concentrated latex, of which its
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
demand relying on the growth of the latex medical examination glove and elastic rubber thread industry, face interrupted pricing problems from time to time. Industry Overview. The industries showed a satisfactory outlook during 2007, where sales of rubber with high prices were seen. Even though there were two periods of price fluctuations in the global market as a result of sub prime crisis in the United States of America during the second and third quarter and between mid-November to mid-December, the average price of rubber increased 8 percent in both the domestic and global market with a steadily rising trend. The price of Ribbed Smoked Rubber Sheet decreased to the lowest average price of 70.31 baht per kilogram (US Dollar 2,030) in July and continued to increase to a peak in November with the average of 84.84 baht per kilogram (US Dollar 2,595). Obviously, It is note worthy that weakening world price did not result in a comparable decrease in local price due to farmer speculation that such a fall would be only short-lived therefore withholding their inventory putting into the market.
The longer period of raining season in Thailand was also the
influenced factor of tightening supply situation. The factors affecting of price fluctuations. The lowest level price in July was the result of the sub prime crisis in America that might affected the world demand for natural rubber. China, the big consuming countries, also tried to slow the economic growth which expanded more than 11.1% during the first quarter of the year. Chinese government employed both fiscal and monetary policy, i.e. the reduction of export tax subsidy and interest rates hike in order to curb speculative activities in the stock market. As such the effects started prevail during middle of the year. Added to this year longer than expected rainy season which also postponing their harvesting season a few months, the price of rubber after July rose again due to tight supply situation. This occurred not only in Thailand, but also in Indonesia, especially during November and December 2007. The prices of other commodities, especially crude oil and gold, that went in opposite direction to the US dollar also benefited the price of rubber. Consumption. The consumption demand was seen as satisfactory in view of ever increasing usage of natural rubber in automobile tire industry which resulted in positive sales and profitability in 2007. Demand in the Chinese market remained strong, especially in the automobile industry which expanded 160% between year 2002 to 2007, and is expected to produce 10 million automobiles in 2010. This has supported rapid expansion of the automobile parts industry, including the automobile tire industry. The rapid growth of the tire industry has created high
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Annual Report 2007
competition in the Chinese market, and Chinese tire manufacturers turned to the export markets in order to reduce internal market risk. As a result China has become one of the biggest tire exporters in the world during the last 5 years. Table Showing Movement in the Exported Rubber Prices, FOB Bangkok Unit: Baht
Month January February March April May June July August September October November December Average Price
RSS3 2006 74.09 82.00 81.24 82.25 92.36 104.30 95.98 83.48 68.77 69.61 60.62 62.80 79.79
STR20 2007 74.83 82.26 78.72 81.42 81.71 78.26 70.31 72.76 74.10 78.91 84.84 84.00 78.51
2006 70.05 77.83 76.53 76.15 82.54 93.66 90.75 82.24 68.53 69.09 60.08 60.09 75.63
Source: Rubber Research Institute Department of Agriculture
23
2007 70.29 76.34 73.85 75.13 76.85 75.20 68.80 71.50 72.90 77.13 81.25 82.18 75.12
Latex 2006 53.72 61.72 63.49 60.82 65.38 72.64 67.35 57.09 46.56 50.40 43.90 42.31 57.12
2007 50.80 59.58 59.52 58.44 55.83 51.16 44.90 47.01 48.88 51.68 55.72 54.76 53.19
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Graph showing the price of RSS 3 and TSR 20 at Singapore Rubber Exchange.
Sicom 2006-2007
US Cent
300 280 260 240 220 200 180 160 140 120 100 1/06 03/0
Date
3/06 03/0
5/06 03/0
7/06 03/0
9/06 03/0
1/06 03/1
1/07 03/0
RSS 3
3/07 03/0
5/07 03/0
7/07 03/0
9/07 03/0
1/07 03/1
STR 20
The chart indicated the movement of FOB Bangkok rubber prices and shows prices of Rubber Smoked Sheet Grade 3 and TSR Block Rubber in the Singapore Commodity Exchange, which increased in the early part of 2007 and decreased in July. The average price of Rubber Smoked Sheet is US Dollar 2,030 per ton, and the average price of TSR Block Rubber is US Dollar 1,970 per ton, the lowest level in the year due to the effect from sub prime crisis. The price level has continuously adjusted since August to its highest level in November with the average price of US Dollar 2,595 per ton for Rubber Smoked Sheet and US Dollar 2,477.5 per ton for TSR Block Rubber.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Risk Factors Business and Industry Risks. Risk factors remain the same as indicated in the previous years, but some factors have a greater potential to affect world rubber prices than others. The Sub-Prime crisis was one of the most important factors that greatly affected various commodity prices in 2007. 1. Price Volatility. The price level tends to move drastically in a short time span period and this strongly affects management operation plans. As there was a phenomenon of speculation took place in almost every stage of the supply chain, the rubber price has been rising since the end of 2006 from 60 Baht per kilogram to a peak of 80 Baht per kilogram at the end of second quarter. Pullbacks occurred after the outburst of the sub prime crisis which negatively affected stock markets around the world, especially in the United States. In addition, concerns over global recession might also affected consumption of commodity products, especially oil. Besides the fundamental factor of demand and supply, oil and gold are additional factors affecting the price of natural rubber as the market price correlation of oil, gold and natural rubber are running in the same direction. In the past few years, oil prices have been continuously increasing which allowed commodity hedge funds to heavily participate and push the market prices. As a result, direction forecasting became more difficult and this has affected the company’s long term production and distribution plans. 2. Economic Outlook and Global Demand for Natural Rubber. More than 70 percent of the demand for natural rubber comes from tire industry, which essentially depends on the global economy. The Asia economy, especially China, India, and Japan, has enjoyed a constantly high growth rate while the EU countries and Eastern Europe are growing at a very satisfactory rate. The demand for natural rubber is therefore still thigh and remains in balance to the supply of natural rubber. 3. Competition among Major Exporting Countries. The competition has seen little change. Thai producers have been in a better situation as Indonesia has faced limited raw material supplies and the local producers cannot produce SIR block rubber at their full capacities.
As a result, occasionally there was no price
difference between block rubber produced from Thailand or Indonesia. Presently Thailand is still the world’s biggest rubber producer followed by Indonesia and Malaysia. Thailand’s production in 2007 was approximately 3 million tons, which was marginally less than the production output of year 2006. Indonesia in the meantime could produce 2.765 million tons
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Annual Report 2007
represented an increase of 4-5 percent over the previous year’s figure and is forecasted to increase to 3.072 million tons in 2010. There was the conclusion that Indonesia would become the world’s biggest natural rubber producer within the next 5-7 years as there were still vast areas suitable for natural rubber plantations, especially in Sumatra and Kalimantan islands. Indonesian government has been supporting rubber industry in the form of granting loans to farmers in order to develop/replanting the rubber plantations. 4. Domestic Competition. See competition overview on page 21 5. Climates and Raw material supply. As natural rubber is an agricultural product and its supply varies according to the seasons, any years with unusual climate conditions will see production volume inevitably affected and, in turn, price fluctuations. With a limited supply of natural rubber each year, the purchasing price of raw materials will be reflected from the local market price or is equal to other competitors. Therefore, the managing of raw material procuring without having influenced from price fluctuation is difficult to achieve. The company cannot directly engage in any future contracts with local farmers or vendors due to counter party risks. The enforcement of future contract with the local and/or small vendors could not materialize. The company therefore manages the risk of material sourcing by aligning purchase planning with marketing plans, as well as taking into account other considerations including supply in the market, market price level and expected future price which require hands-on experience, sourcing networks suitable for each area and climate conditions which are uncontrollable factors. Besides the real consumers and suppliers who are actual operators, the increasing players in the rubber business are commodity hedge funds as well as a number of speculators who went into the future market. Those are having somewhat influence factor in addition to the actual production/consuming demand as fundamental factor for price determination. Financial Risk and Administrative Risk. 1. Financial Liquidity, Interest Rate and Currency Exchange Rates. In 2007 the high level of rubber price impacted the company’s working capital requirements for materials sourcing and sales activities. The company inevitably needed more loans from financial institutions. However interest rate levels dropped in 2007 compared to past years.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
For currency exchange rates, the company had large denomination values of export in US dollars as well as a certain level of foreign investments. The movement of currency exchange rates of the Thai Baht and other competing countries’ currencies is a major factor in the company’s performance. The Thai Baht has continually appreciated against the US dollar since 2006. The currency exchange stood around 36 Baht per US dollar at the beginning of the year and gradually strengthens to 33.5 Baht per US dollar in December 2007. The impact forced Thai exporters to increase their prices in US dollar term. The company has entered into currency forward contracts with many banks as the measure to prevent/hedge the fluctuation of the exchange rate. The volume engaged was also to cover the future sales volume. However generally the exchange rates among Asian countries, except Indonesia, have all appreciated at comparative level and therefore have not decreased any competitive advantage among Thai producers. Currently the company has ensured sufficient credit facilities from several domestic and international financial institutions. However the company could face higher pressure from rising natural rubber prices and continual expansion of the rubber industry that drives production and sales volumes upwards. The company, as a major producer and exporter of natural rubber with a very high volume, in turn requires high levels of working capital as payments for purchases from local farmers are made in cash term. Thus an appropriate level of liquidity is an important factor for running the business efficiency. Currently, apart from the company’s capital, loans from financial institutions are the only major source of working capital required for operations as other types of debt instruments are negatively affected by the sub prime crisis. 2. Management and Administrative Risk. The company’s main business operations are in the natural rubber industry which is considered as a commodity product. In the past few years many commodity hedge funds became a big player in the market. They have a role of big investment in speculating in the future market and thus resulted in unprecedented impacts on natural rubber price. The company, which has manufacturing based in the Southern and the Eastern regions of Thailand, had to manage the increasing risks arising from price fluctuations more acutely, in addition to managing materials sourcing. Business operations related to agricultural products need good and highly effective administration, otherwise quality of raw material damage is highly probable. However as the price forecast becomes more complex because of the numerous factors contributing to price movement, it is agreed that the natural rubber business is becoming much more complicated than previously.
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Annual Report 2007
Long-established relationships between business partners are an important factor that supports the expansion of business. It has been proven record for the major company with long track records of successes in the natural rubber industry of not doing any diversification out of rubber industry. It is challenging for a newly established company without any established experience to enter the rubber industry, because customers emphasize experience, track records, reliability of the products and reputation of the management team. This is especially important during periods of extreme price fluctuations where the risk of nondelivery of the contracts is usually high. Marketing direction and pricing policy are main strategies that impact on other units of the organization. Capable human resources equipped with experience and expertise to cope with the rapidly changing environment is a key factor since the preciseness of forecasts is difficult to attain. It is a factor that can contribute greatly to the success of business operations that needs agility to deal with constant change. The management of Sri Trang Agro-Industry Plc. has a long track record and vast experience in the natural rubber industry. The management is well respected by the business community, both domestically and internationally. However this has made the company at risk from any changes in the management team, who also happen to be major shareholders. On the other hand this will prevent other major shareholders from making any changes to the business operations of the company, where the current management team is unable to mange the business operation effectively and in turn causes an adverse impact on shareholders.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Shareholding Structure and Management List of 10 major shareholders as at 28th December 2007 No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Shareholders’ name Sri Trang Holding Co.,Ltd Mr. Viyavood Sincharoenkul Mr. Aram Sirisuwat Mr. Somwang Sincharoenkul Mr. Veerasit Sincharoenkul Mr. Kitichai Sincharoenkul Mr. Prasit Panidkul Mr. Sumade Sincharoenkul Mr. Puang Cherdkiatgumchai Southland Rubber Co.,Ltd
Shares 44,028,412 *31,393,855 6,846,872 *3,841,485 3,200,000 *3,499,300 *2,408,395 1,781,391 *1,611,806 1,180,200
Percentage 22.01 % 15.70 % 3.42 % 1.92 % 1.60 % 1.75 % 0.92 % 0.89 % 0.81 % 0.59 %
* The number of shares according to the Report of securities holding in Company as at 28th December 2007 The groups holding more than 10% of the shares as of 28th December 2007 - Sri Trang Holding Co.,Ltd - Sincharoenkul family
44,028,412 45,956,154
Shares22.01 % Shares22.98%
Note: Sri Trang Holdings Co.,Ltd has a registered capital of 88 million Baht and five directors, namely Mr. Somwang Sincharoenkul, Mr. Viyavood Sincharoenkul, Mr. Chaiyos Sincharoenkul, Mr. Kitichai Sincharoenkul, Mr. Puang Cherdkiatgumchai. The largest group of shareholder is the Sincharoenkul family who hold 3,781,280 shares, representing 42.97% of the total share holding. Changes in the number of Shares and the Shareholder’s Equity over the past five years. There have been no significantly changes in the shareholder structure over the past five years.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Management Structure Board of Directors Audit Committees Executive Board
Managing Directors
Executive Director Production 1
Executive Director Production 2
Executive Director Production 3
Primary Rubber Product Group
Block Rubber Product Group
Executive Director Financial and Accounting
Concentrated Latex Product Group
Executive Director Bangkok Branch
Other Businesses
Board of Directors Company’s directors consist of board of administrators, Independent Director and Audit Committee as follows; No.
Name
Last name
Position
1.
Mr. Somwang
Sincharoenkul
Chairman
2.
Mr. Prasit
Panidkul
Vice Chairman
3.
Mr. Viyavood
Sincharoenkul
Managing Director
4.
Mr. Anan
Pruksanusak
Director
5.
Mrs. Promsuk
Sincharoenkul
Director
6.
Mr. Puang
Cherdkiatgumchai Director
7.
Mr. Chaiyos
Sincharoenkul
Director
8.
Mr. Kitichai
Sincharoenkul
Director
9.
Mr. Sukit *
Attoprakorn
Independent Director / Chairman of Audit committee
10.
Mr. Prakob **
Visitkitjakan
Independent Director / Audit committee
11.
Mr. Kriang
Yanyongdilok
Independent Director / Audit committee
12.
Mr. Samacha ***
Potavorn
Independent Director / Audit committee
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Sri Trang Agro-Industry Public Company Limited
* ** ***
Annual Report 2007
Mr. Sukit Attopakorn resigned on November 8, 2007 Mr. Prakob Visitkitjakarn, independent director, was appointed Chairman of Audit Committee since February 1, 2007 Mr. Samacha Potavorn was appointed to the Audit Committee / Independent Director since February 1, 2007
Directors empowered to sign on behalf of the company Directors who are empowered to sign on behalf of the company are any two directors from eight directors, excludes independent directors and audit committees, given a joint signatures with the company seal. The areas of responsibility and duties of the Board of Directors According to the company policy, the areas of responsibility and duties of the Board of Directors as follows: 1. Duties of the Board of Directors The Board of Directors must manage the company by using knowledge, abilities and experiences to generate highest benefits to the company. Also, the Board of Directors must perform duties according to objectives and regulations of the company and shareholder’s resolutions with high carefulness to protect company’s interests and accountability to shareholders as stated in company’s regulations and must set up a meeting once every three months. 2. Revision and agreement of suitable policy The Board of Directors have to responsible for revision and make an agreement related to the policies and operating directions of the company proposed by directors. 3. Oversee and manage the Board of Administrators The Board of Directors must manage and oversee the Board of Administrators to perform the task according to the policy efficiently and inform the Board of Administrators to present contents that are substantial to the operation of the company. Other related personal disclosure should be considered according to the regulations of SEC and the Stock Exchange of Thailand. If necessary, the Board of Directors will determine to contract outside consultant to give advice or professional opinion to support the decision making in substantial contents of the company. 4. Organize Internal Controlling and Inspection System Directors of the company regulate the company to organize effective internal controlling and internal inspection system. Particularly, the transactions that directors will be gained or loss or relate to the regulation of law or SET will have to be approved from shareholders meetings.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Executive Board No.
Name
Last name
Position
1.
Mr. Viyavood
Sincharoenkul
Chairman of Executive Board
2.
Mr. Prasit
Panidkul
Executive Board
3.
Mr. Chaiyos
Sincharoenkul
Executive Board
4.
Mrs. Promsuk
Sinchareonkul
Executive Board
5.
Mr. Anan
Pruksanusak
Executive Board
6.
Mr. Kitichai
Sincharoenkul
Executive Board
The areas of responsibility and duties of the Executive Board The Executive Board has the powers and duties as follows: 1) To authorize, planning and company’s operation according to the policy set out by Board of Directors. 2) To appoint the executives to oversee company’s benefit and efficiency of good governance. 3) To appoint 2 of the administrators to sign and stamp company seal and appoint in Letter of Power to any employee who can act as a representative of the company and ensure to oversee the company’s benefit 4) The Executive Board must manage the employees’ perks by following the circumstances, customs and relevant to the active regulations. 5) To obtain the approval right for trade transaction or any transaction concerning the company.
Audit Committee. The Audit Committee was established in 1999 in accordance to the definitions established by the Stock Exchange of Thailand. The following persons comprised the Audit Committee: No.
Name
Last Name
Position
1.
Mr. Prakob *
Visitkitjakarn
Independent Director / Chairman of audit committee
2.
Mr. Kriang
Yanyongdilok
IndependentDirector Director/ Audit committee Independent
3.
Mr. Samacha **
Potavorn
Independent Director / Audit committee
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Annual Report 2007
Note: *Mr. Sukit Attopakorn resigned from Director Position on 8th November, 2007 and has appointed Mr. Prakob Visitkitjakan as the Chairman of the Audit Committee as well as appointed Mr. Samacha Potavorn to be the Audit Committee The Areas of Authority and Responsibility of the Audit Committee The Audit Committee has areas of authority and responsibility to report to the Board of Director as follows: 1. To ensure that the financial statement of the company reflects true, complete and sufficient information, and is reliable by coordinating with outside auditor and executive who in charge of quarterly and yearly financial reports. 2. To ensure that the company has an appropriate and efficient internal control system. 3. To select and propose the appointment of the auditor including appropriate wage for the auditor. 4. To ensure that the company follows all relevant regulations and laws of Stock Exchange of Thailand or other laws involved company’s business. 5. To consider the company’s information disclosure with corrective and complete and also ensure that there will not be any conflicts of interest. 6. To organize a corporate governance report of the audit committee by clarifying within company annual report
7.
To act in any manner as delegated by the Board of Directors.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
In 2007 the Board of Directors arranged 10 meetings. There were 13 Executive Board meetings and 4 Audit Committee meetings. Meeting attendances in 2007 were as follows: No.
Name
Last Name
Meeting Attend
Meeting Attend
Meeting Attend
Board of Directors
Executive Board
Audit Committee
Meeting
Meeting
Meeting
1.
Mr. Somwang
Sincharoenkul
10 / 10
-
-
2.
Mr. Prasit
Panidkul
10 / 10
12 / 13
-
3.
Mr. Viyavood
Sincharoenkul
10 / 10
13 / 13
-
4.
Mr. Puang
Cherdkiatgumchai
10 / 10
-
-
5.
Mrs. Promsuk
Sinchareonkul
10 / 10
12 / 13
-
6.
Mr. Chaiyos
Sincharoenkul
10 / 10
12 / 13
-
7.
Mr. Anan
Pruksanusak
10 / 10
13 / 13
-
8.
Mr. Kitichai
Sincharoenkul
10 / 10
13 / 13
4/4
9.
Mr. Sukit*
Attoprakorn
8 / 10
-
3/4
10.
Mr. Prakob
Visitkitjakarn
10 / 10
-
4/4
11.
Mr. Kriang
Yanyongdilok
10 / 10
-
4/4
* Mr. Sukit Attopakorn resigned from Director Position on 8th November, 2007 Selection of Board Members and the Management The selection of directors must be approved by the shareholders’ meeting. Candidates must have the qualifications under the Public Company Act B.E. 2535. The Board of Directors shall consider the persons who are suitable, qualified and able to make a significant contribution to the company. The Board of Directors can delegate a person to recommend such persons for nomination to the shareholders’ meeting for approval. Selection Process through the Shareholders’ Meeting 1. The shareholders meeting shall indicate the number of Board Members. The number of Board Members must be more than five members and one quarter of the members must live in Thailand. The Board of Directors can delegate persons to perform any acts of its behalf, but they can not assign the Board of Directors or others to perform on their behalf as directors. The Board of Directors has the right to receive remuneration including salary, meeting fees and bonuses. 2. The shareholders meeting shall elect board members in accordance with the following procedures.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
(1) A shareholder shall have one vote for each share held. (2) Each shareholder shall be entitled to cast their vote as prescribed under (1). Each shareholder can vote for more than one person, but each shareholder can not divide their vote into several fractions in the selection on the nominated names. (3) Candidates shall be decided on the basis of the highest number of the votes cast. In case of tied votes, the chairman presiding over the meeting shall have the casting vote. 3. One third of the total number of the Board Members shall leave from their positions in each Annual General Meeting. If the number of Board Members can not be divided into three portions, Board Member shall leave in the number closest to one third of the total number. 4. Besides leaving at the end of term, Board Members shall leave from their position for any of the following reasons: (1) Pass away. (2) Resign. (3) Being under qualified, or having prohibited characteristics according to the Public Company Act B.E. 2535. (4) The shareholders meeting has the resolution to leave as described in (7). (5) Court orders to leave. 5. Any Board Member can resign from the position by submitting a resignation letter to the company. The resignation shall take effect on the day the letter arrives at the company. 6. If there is vacant position as a result of other reasons besides leaving at the end of term, the Board of Directors shall elect the person meeting qualifications and having the qualifications under the Public Company Act B.E. 2535. Except when the term of a Board Member is less than two months, the person appointed to be Board Member shall be in the position until the end of term. The resolution of Board Director in accordance with paragraph 1 must number not less than three quarters of the number of remaining Board Members. 7. The shareholders meeting can vote to expel any Board Member before the end of their term by voting in numbers not less than three quarters of the number of shareholders who come to the meeting, have the right to vote and have total stock not less than one quarter of the total stock.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
8. Board Members can hold the company stock. 9. The Board of Directors shall elect any Board Member to be the chairman and vice chairman. The Board of Directors can elect more than one person to be vice chairman. The vice chairman’s responsibility is to perform tasks as assigned by the chairman. 10. The Board of Directors meeting shall have an attendance of not less than one quarter of the total number of Board Members. In case the chairman of the Board of Directors cannot attend the meeting, the vice chairman shall preside over the meeting. If the vice chairman cannot perform this task, the Board Members attending the meeting shall elect any board member to be the chairman of the meeting. The resolution of the meeting shall follow the higher vote. A Board Member shall have one vote, except the member who receives benefit from this vote who shall not have the right to vote. In the case of a tied vote, the chairman presiding over the meeting shall have the casting vote. 11. The chairman or the assigned person shall send the meeting appointment letter to the Board of Directors not less than seven days prior to the meeting. Under urgent circumstance and to preserve the company’s rights and benefits, the meeting notice can be varied and the meeting can be scheduled in accordance with any situation deemed as appropriate.
Selection of Independent Directors An Independent Director is a qualified and independent person according to the definition established by the Stock Exchange of Thailand. The company established rules for selecting Independent Directors as follows: (1) Holding not more than 5% of paid-up capital of the company, affiliated company or any related company. (2) Does not take part in the company’s management, is not an employee or a consultant who receives salary from the company, affiliated company or any related company, or any majority shareholder of the company. (3) Has no direct or indirect benefit or interest in the finance and management of the company, affiliated company or any related company. (4) Not a relative or close relative of any member of management or majority shareholder of the company.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
(5) Not appointed as a representative to safeguard interests of the company’s directors, majority shareholders or shareholders who are related to the company’s majority shareholders. In addition, an Independent Director must feel free to give opinions or report work performance as required without any personal interest, benefit or position, and free from the control of any party including any circumstances by which pressure may be exerted which makes an independent opinion impossible. Executives As of 31st December 2007, the following 11 persons were Directors of the company. Relationship Mr. Somwang
Sincharoenkul
Chairman
Yes
Mr. Prasit
Panidkul
Vice Chairman
No
Mr. Viyavood
Sincharoenkul
Managing Director
Yes
Mr. Chaiyos
Sincharoenkul
Director
No
Mr. Puang
Cherdkiatgumchai
Director
Yes
Mrs. Promsuk
Sinchareonkul
Director
Yes
Mr. Anan
Pruksanusak
Director
No
Mr. Kitichai
Sincharoenkul
Director
Yes
Mr. Sukit*
Attopakorn
Independence Director / Chairman of Audit Committee
Mr. Prakob
Visitkitjakan
Independence Director Audit Committee/
Mr. Kriang
Yanyongdilok Potavorn
No
Independence Director Audit Committee/
Mr. Samacha
No
No
Independence Director Audit Committee/
No
Note: * Mr. Sukit Attopakorn resigned from Director position since 8th November 2007
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Executive Profiles. 1. Mr. Somwang Sincharoenkul
81-years-old
Relationship
Father of Mr. Viyavood Sincharoenkul and Mr. Kitichai Sincharoenkul
Education
Chung Ling High School, Panang, Malaysia
Current Position 1993 – Present
Chairman, Sri Trang Agro-Industry PLC.
1987 – 1993
Chairman, Sri Trang Agro-Industry Co., Ltd.
Experience 1946 – 1986
Director, Yang Thai Pak Tai Co.,Ltd.
No. of Shares held
3,841,485 Shares
2. Mr. Prasit Panidkul
61-years-old
Relationship
No
Education
Executive Micro MBA, Thammasart University
Current Position 1993 – Present
Vice Chairman, Sri Trang Agro-Industry PLC.
1987 – 1993
Vice Chairman, Sri Trang Agro-Industry Co., Ltd.
Experience 1986 – 1991
Member of Trang Provinvial Council
1975 – 1997
Managing Partner, Trang Sahakarn Khonsong Ltd.
No. of Shares Held
2,408,395 Shares
3. Mr. Viyavood Sincharoenkul
53-years-old
Relationship
Mr. Somwang Sincharoenkul’s son
Education
PhD. In Chemistry Queen Elizabeth’s College, University of London
Current Position 1993 – Present
Managing Director, Sri Trang Agro-Industry PLC.
1987 – 1993
Managing Director, Sri Trang Agro-Industry Co., Ltd.
Experience 1985 – 1987
General Manager, Yang Thai Pak Tai Co.,Ltd.
No. of Shares Held
31,393,855 Shares
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
4. Mr. Chaiyos Sincharoenkul
57-years-old
Relationship
No
Education
Executive Micro MBA, Thammasart University
Current Position 1993 – Present
Director, Sri Trang Agro-Industry PLC.
1987 – 1993
Director, Sri Trang Agro-Industry Co.,Ltd.
Experience 1990 – 1992
Member of Chamber of Commerce, Trang Province
1970 – 1986
Assistant Manager, TTR Production Dividion, Yang Thai Pak Tai Co.,Ltd.
No. of Shares Held
1,482,165 Shares
5. Mr. Puang Cherdkiatgumchai
80-years-old
Relationship
Mrs. Promsuk Sincharoenkul’s father
Education
Assumption (ACC)
Current Position 1993 – Present
Director, Sri Trang Agro-Industry PLC.
1987 – 1993
Director, Sri Trang Agro-Industry Co.,Ltd.
No. of Shares Held
1,611,806 Shares
6. Mrs. Promsuk Sincharoenkul
54-years-old
Relationship
Mr. Somwang Sincharoenkul’s daughter in law
Education
Business Administration, The Institute of Chartered Secretary and Administrator, U.K.
Current Position 1995 – Present
Director, Sri Trang Agro-Industry PLC.
Experience 1982 – 1985
Export Management, Yang Thai Pak Tai Co.,Ltd.
No. of Shares Held
31,393,855 Shares
7. Mr. Anan Pruksanusak
54-years-old
Relationship
No
Education
Executive Micro MBA, Thammasart University
Current Position 1995 – Present
Director, Sri Trang Agro-Industry PLC.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Experience 1990
Founder of Sadao P.S. Rubber Co.,Ltd.
1984
Founder of Nam Hua Rubber Co.,Ltd.
No. of Shares Held
349,437 Shares
8. Mr. Kitichai Sincharoenkul
49-years-old
Relationship
Mr. Somwang Sincharoenkul’s son
Education
Master of Business Administration Indiana State University, USA.
Current Position 1988 – Present
Manager, Sri Trang Agro-Industry PLC., Bangkok Branch
1985 – Present
Director, Sri Trang Agro-Industry PLC.
Experience 1984 – 1987
Credit Department, Citibank
No. of Shares Held
3,499,300 Shares
9. Mr. Prakob Visitkitjakarn
68-years-old
Relationship
No
Education
B.A.(Hon.) in Finance, Indiana University, USA Master’s Degree in Finance, Indiana University, USA
Current Position 2008 – Present
Chairman of Audit Committee, Sri Trang Agro-Industry PLC.
2004 – Present
Director, Lease It Co.,Ltd.
1993 – Present
Independent Director, Sri Trang Agro-Industry PLC.
1999 – Present
Chairman of the Audit Committee, Siam City Cement PLC.
Experience 1999 – 2008
Audit Committee, Sri Trang Agro-Industry PLC.
1997 – 2002
Executive Vice President, Bank of Ayudhaya PLC.
1995 – 1997
President, Sahathanakit Thai Finance Company
1975 – 1995
Executive Vice President, Bank of Ayudhaya
No. of Shares Held
88,600 Shares
10. Mr. Kriang Yanyoungdilok
70-years-old
Relationship
No
Education
B.A. Accounting, Thammasart University
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Current Position 1999 – Present
Independent Director and Audit Committee, Sri Trang Agro-Industry PLC.
Present
Certified Public Accountant
Experience 2004 – Present
Audit Committee, Oishi Group PLC.
1985 – 1998
Revenue Officer, Revenue Department
1968
No. of Shares Held
Transferred to Revenue Office, Phuket Province, as Class three Inspector Class three government official, Office of the AuditorGeneral of Thailand - Shares
11. Mr. Samacha Potavorn
65-years-old
Relationship
No
Education
Thai barrister – at – law Master of Political Science
1965
Current Position February 2008 – Present Experience 2006 – February 2008 2003– 2004 2002 - 2003 2000 - 2002 1997 - 2000 1996 - 1997 1984 - 1996 1969 - 1983 No. of Shares Held
Audit Committee and Independent Director Sri Trang Agro-industry PLC. Assistant Secretary of Ministry of Interior Governor, Phang-nga province Law advisor, Ministry of Interior Assistant Permanent Secretary of Ministry of Interior /Vice-Director of southern boarder province control center Vice-Governor, Pattalung Province, Trang Province Assistant Province Officer District Chief-officer Assistant District Officer - Shares
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Management Team As of 31st December 2007, the following persons comprised the Management team. 1. Mr. Viyavood
Sincharoenkul
Managing Director
2. Mr. Prasit
Panidkul
Executive Director – Production
3. Mr. Chaiyos
Sincharoenkul
Executive Director – Production
4. Mr. Anan
Pruksanusak
Executive Director – Production
5. Mrs. Promsuk
Sincharoenkul
Executive Director - Finance and Administration
6. Mr. Kitichai
Sincharoenkul
Executive Director – Bangkok Branch
7. Mr. Choosit
Sae – Lee
Marketing Manager
8. Mr. Piti
Chenvanij
Marketing Manager
9. Mr. Somboon
Pruksanusak
Manager of Quality Control
10. Mr. Chaidej
Pruksanusak
Block Rubber Product Manager
11. Mr. Chalermchai Norsakul
Block Rubber Factory Manager – Thung Song Branch
12. Mr. Chalermpop Khanjan
Concentrated Latex Product Manager
13. Ms. Khanittha
Seesuk
Block Rubber Factory Manager – Si Kao Branch
14. Mr. Veerachai
Sriruangrat
Concentrated Latex Factory Manager –Trang Branch
15. Mr. Bucha
Pipitapan
Rubber Smoked Sheet Factory Manager – Hatyai Branch
16. Mr. Atipat
Malisuwan
Rubber Smoked Sheet Factory Manager –Trang Branch
17. Mr. Ekkachai
Chalothornsudithi
General and Administrative Manager
18. Mrs. Areerat
Soyphuraya
Accountant Manager
19. Ms. Narisara
Sincharoenkul
Financial Manager
Total staff of 669 persons and 2,830 daily workers.
Management’s Remuneration. 1. Monetary remuneration. The financial compensation for eight directors: Director Honorariums totaling
1,728,000 Baht
The financial compensation for three audit committee members: Audit Committee Honorariums totaling
1,200,000 Baht
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Name
Position
1. Mr. Somwang Sincharoenkul 2. Mr. Prasit Panidkul 3. Mr. Viyavood Sincharoenkul 4. Mr. Chaiyos Sincharoenkul 5. Mr. Puang Cherdkiatgumchai 6. Mrs. Promsuk Sincharoenkul
Chairman Vice Chairman Managing Director Director Director
Compensation 2007 216,000 216,000 216,000 216,000 216,000
Director
216,000
Director
216,000
Director
216,000
7. Mr. Anan Pruksanusak 8. Mr. Kitichai Sincharoenkul 9. Mr. Sukit Attopakorn* 10. Mr. Prakob Visitkitjakan 11. Mr. Kriang Yanyongdilok
Independence Director / Chairman of Audit Committee Independence Director / Audit Committee Independence Director / Audit Committee
* Mr. Sukit Attopakorn resigned on November 8, 2007 Executive directors – salary and bonus (6 persons) 29,331,680 Baht 2. Other remunerations -NoneAuditors’ remuneration 1. Audit fee Audit fee in fiscal year 2007
1,780,000 Baht
2. Non audit fee -None-
43
480,000 360,000 360,000
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
The Use of Inside Information and Principles of Internal Control Inside Information As a public company listed on Stock Exchange of Thailand, the company is conducted in the correct manner with equitable treatments of all participants according to the Inside Information Control policy applied on 28th September 2007 as follows: 1. The use of inside information for purchasing and selling securities. The Board of Directors, Management team, their spouses and their child without legal age must report the number of stocks held accordance with the regulations of the Stock Exchange of Thailand and the Office of the Securities and Exchange Commission (SEC). The Board of Directors, Management team, employees and staff of the company who receive inside information are prohibited from direct or indirect use of this inside information that might affect the price of company’s securities. They are also prohibited from revealing such inside information to allow others to take advantage from this information. The Board of Directors and Management team must report their share holdings in accordance with the regulation of the Office of the Securities and Exchange Commission (SEC). 2. The revealing of information. The company has policies to reveal important information to the public as follows: a. The Board of Directors and all employees have a responsibility to ensure all documents and inside news are handled in an honest manner and shall not be revealed to outsiders, except when the company allows. The information concerning related transactions between partners is operated under normal business circumstances. Where the nature of the information is doubtful, consultation with management should be carried out. b. The company shall disclose information to the public in a clear, timely and equal manner. c. The disclosure of any information/inside news to the public shall be approved by the Managing Director or other assigned persons. Former executives or staff are not excluded from their responsibilities and will not disclose inside information to outsiders nor take advantage from inside information.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
The Principles of Good Corporate Governance The company sets guidelines on corporate supervision following five principles of good corporate governance as follows: 1. Shareholders Rights. The company acknowledges the reasons that shareholders will trust and confide in the investment of the company. The company has emphasized policies or operations to ensure that shareholders rights are treated fairly and the company will render equitable treatment to all parties in accordance with the law. The company also encourages shareholders to use their right such as: (1) Rights to Receive Dividend Payments. The company, affiliated companies and related companies operate a conservative dividend payment policy by considering the financial status, cash flow, tendency of dividend payments from affiliated and related companies, the expectations of necessary capital investments, external factors and the economic environment affecting company operations. The dividend payment policy is 30% of total net profit. For instance, the dividend payment in 2007 is 1 baht per share, which is 185% of total net profit. (2) Shareholders Meetings. The company recognizes the importance of the disclosure of information to shareholders. The information is truly, clearly and completely explained and allowed all attending shareholders to make decisions, to vote and to make recommendation in shareholders meetings. (3) Rights to Vote at the Shareholders Meeting. The company will distribute the agenda and all related documents to shareholders in advance. The meeting invitation letter includes the details of the agenda, related documents, the comments of the Board of Directors, the power of attorney letter in accordance with the regulations of the Ministry of Commerce and the list of Independence Directors to allow shareholders to assign persons to attend the meeting, a map of the meeting location, the documents shareholders must present on the meeting and the rules of the company. To communicate with shareholders as well as the investors, the company offers the information relating to the meeting through www.sritranggroup.com. (4) Shareholders rights to make recommendations and ask any questions. The chairman of the meeting shall allow sufficient time and encourage shareholders to express
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
their opinions and ask any questions concerning the agenda, and other issues presented during the meeting.
2. Equitable treatment for shareholders. (1) The shareholders meeting will operate according to the agenda in the meeting invitation letter. The agenda will not be added to without notice to shareholders. All related documents for the meeting will be submitted to all shareholders in advance and via the company’s website. In addition the company will also make an announcement about the shareholders meeting at least three days consecutively in public newspapers and not less than three days prior to the meeting date. This is to ensure sufficient time to study the agenda before the meeting. The chairman of the meeting will indicated the voting and the vote counting process during the meeting. In the shareholders meeting, the chairman of the meeting will allow sufficient time for shareholders to express their views and ask questions concerning the agenda and other company activities. The chairman of the meeting will aim to answer and provide all information to satisfy the shareholders. Queries and comments by participants of the meeting will also be recorded in the minutes of the meeting. The company will submit the minutes to the Stock Exchange of Thailand within the required time frame. (2) Encourage shareholders to vote on each item on the agenda. The vote counting will be held and the resolutions notified in the conference room. (3) The true and complete minutes of the meeting will be submitted to the Stock Exchange of Thailand and to the Office of the Securities and the Exchange Commission (SEC) within 14 days of the meeting. The minutes of the meeting will also be distributed on the company’s website. (4) The policy regarding the use of inside information is described on page 32 (5) Disclosure of the shareholding structure in affiliated companies and related companies, to ensure shareholders about the transparency and auditable operating structure. This is described in the shareholding structure of the group on page 15 (6) The company places emphasis on information disclosure to be sufficient, accurate and in time for shareholders. (7) Shareholders can get more information regarding company activities, corporate supervision and control by email from an Independent Director, the company secretary or the investor relationship center.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
3. Stakeholders’ Rights. The company’s growth to date can be attributed to good cooperation and support from all parties involved; staff, raw material vendors, clients and consumers, financial institutions, government agencies and shareholders. The company acknowledges its responsibilities towards these stakeholders and ensures that their rights are treated fairly. The company will render equitable treatment to all parties concerned as follows: - Shareholders. The company operates its business with reliable financial and accounting systems to provide the highest satisfaction for shareholders and with concern for the long term growth of the company with appropriate levels of remuneration. - Employees. The company treats all its employees equally, creates a good environment and atmosphere inside the organization, and provides reasonable and appropriate levels of remuneration. The company also supports employees to develop their knowledge, skills and experiences for their chosen career paths. - Customer.
The company is dedicated to providing customers with satisfaction and
performance in terms of quality products and services, including on-time delivery. - Vendor/Supplier. The company operates within a competitive context by strictly honoring promises and commitments it has entered into. - Government agencies. The company operates under laws relating to the environment, labor safety, taxes, etc. as well as governmental notices relating to business operations. - Environment and Social responsibility. The company generally provides support to the surrounding community and sets efficient safety standards to the surrounding environment. In addition, the Board of Directors has established the management system to ensure the company complies with government rules and regulations, and all stakeholders get fair treatment. This is also distributed through the company’s ethics manual and website.
4. Information Disclosure and Transparency. a. The Board of Directors is responsible for the company’s information disclosure, including financial and non-financial information, in an accurate, complete and timely manner through accessible channels that stakeholders can equally receive information accordance with the regulations of authority departments.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
b. The Board of Directors established a Public Relations department to communicate with investors, outsiders and related persons, and an Investors Relations department to communicate with shareholders, stakeholders, investors and analysts. c. The Board of Directors will ensure that all published information is complete, accurate and accountable in both Thai and English languages. Information is released through the channel provided by the Stock Exchange of Thailand and the company’s website. d. The Board of Directors has a responsibility to report the corporate supervision policy through the annual report and website. e. The Board of Directors has a responsibility to reveal information about meeting attendance of directors and the audit committee. f.
The Board of Directors has responsibility to prepare balance sheets, income statements, audit reports, annual reports and other related reports, and present these reports to the shareholders meeting.
g. The Board of Directors has a responsibility to report risk factors, characteristic of risks, causes and effects to company’s operations through the annual report. The Board of Directors will ensure the company discloses accurate, clear, reliable, and on-time information in accordance with the regulations of the Office of the Securities and Exchange Commission and the Stock Exchange of Thailand. The published information is prepared in the form of the annual report (56-1) and annual report (56-2). In addition, the Investors Relations department is delegated to communicate with investors, shareholders, security analysts and related government agencies. The company always updates the company website in order to offer the published information. Contact the Investor Relations Department, (02) 259-2964-71 ext. 25 – 27 or Fax (02)259-2958, or via or www.sritranggroup.com
5. The Responsibility of the Board of Directors. Roles and Responsibility of the Board of Directors.
The Board of Directors is responsible for considering and making decisions in important issues relating to company operations, and the formulation of financial policies, strategies, and goals.
The Board of Directors has responsibilities to ensure that the company has reliable records of accounting reports, financial reports and accounting audits.
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Annual Report 2007
The Board of Directors has responsibilities to ensure there is evaluation of internal control procedures and internal audits.
The Board of Directors has responsibilities to consider the risk factors that might occur and to establish a risk management policy.
The Board of Directors has the responsibilities to consider and solve conflicts of interest, including related transactions, in order to benefit the company and its stakeholders.
The setting of Committees The Board of Directors has responsibilities to carefully consider and to make decisions in important issues relating to company operations. The Board of Directors therefore appointed specific committees to consider any specific issue. The Audit Committee has been appointed with at least three Independent Directors, with at least one person who has accounting knowledge and is qualified as an Independent Director in accordance with the requirements of the Stock Exchange of Thailand and the definition of Independent Directors, setting specifics for the company in order to oversee the internal controls, financial reports, corporate supervision, risk management and the selection of external auditing firm. The Independence of the Board of Directors The Board of Directors established the independence qualification in accordance with the notice of the office of the Securities and Exchange Commission and the Stock Exchange of Thailand. Remuneration for Directors The remuneration of Directors has been established in accordance with the industry standard, experiences, responsibilities and authorities which are comparable to others in the same industry. The position of Directors The Board of Directors has established the position number of Directors policy which can accept director’s position of no more than five public companies. The skill development of Directors and Management The Board of Directors will encourage and support about good governance practice policy, by keeping close communication with the agency which oversees on this aspect.
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Sri Trang Agro-Industry Public Company Limited
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Internal Control The company recognizes the importance of having an adequate and effective system of internal controls for the company and its subsidiaries through the Internal Audit department. Internal control systems were established to monitor and ensure the work efficiency of every unit in the organization, and in accordance to company business objectives. The Internal Audit department, an independent unit, directly reports to the company’s Board of Directors and the Audit Committee. Moreover, the unit has responsibility to submit the internal audit reports of the audit work each quarter to the Audit Committee. The external auditor who certified the 2007 financial statement suggested there was no material deficiency in the internal control systems of the company in the financial and accounting areas. The internal control system and function can be summarized as follows:
The Audit Committee – The Audit Committee is responsible for assessing the adequacy and effectiveness of internal controls in the company by reviewing the duty of the company’s Internal Audit department and company’s external auditor. In addition, the Audit Committee is also able to give any recommendations on how to improve the quality of internal audit systems and internal control systems directly to the Board of Directors for the improvement of internal audit practices in the future.
The Internal Audit Department – The duty of the department is related to auditing operations, monitoring and controlling tasks of all business units in the company and its subsidiaries. By assessing the likelihood and impact of each risk, the team is able to prioritize the risk importance and classify into high, medium and low risk in order to improve efficiency and effectiveness of the company and its subsidiaries. The unit worked closely with the Board of Directors to make any recommendations for further improvements in the organization.
Management Control Activity – The Board of Directors sets the budget and business objectives on an annual basis by determining the key performance index on margin, operations and measurement of customer satisfaction by survey. The company’s goal and business plan will be notified to all employees for action in order to help the company achieve its specified business targets.
Risk Assessment – The Company takes into account all risk factors, both internal and external, that might affect the company’s performance. There will be continuous assessment of potential risks in every unit in the organization. Any deficiency will be raised in the monthly meeting and corrective action will be implemented to solve the issue in order to meet the company’s budget.
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Annual Report 2007
Control System – The Company clearly defines its written working objectives, workflow, the limit of authorization, rule, regulations and guidelines at every level within the organization. This is to ensure codes of conducts are well observed and adhered to by every individual in the group.
Information and Communication – The Company has various communication networks, mainly divided into Internet website and Intranet website. The Internet website is a communications channel between the company and stakeholders, such as shareholders, investors and other external parties. For internal communication among the group, the Intranet website is the key instrument for correspondence. This is to ensure the efficiency and accurate of information, and delivered in time to all related parties.
Monitoring System – To monitor performance of all business units within the company, the management has scheduled, on a monthly basis, each business unit to report its performance. The Internal audit team is also involved in the meeting to report the adequacy of control systems and audit assessments within each particular unit.
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Annual Report 2007
Related Transactions The company has related transactions with subsidiaries and related companies as disclosed in section 4 of the notes to the financial statement. Subsidiaries and joint ventures are related through common shareholding and/or directorships as indicated in the Character of Business Undertaking and Group Shareholding structure on page 12. Shareholding structure of those subsidiaries has been amended in year 2006 by 100 percent acquisition by the company. This is to simplify company’s structure, eliminate connected transactions’ concern among subsidiaries, and enhance the management transparency in accordance with good corporate governance principle. Reason and Necessity of Related Transactions The transactions are conducted under normal business practice with the benefit if the organization as first priority. Prices under these transactions are set at market rates. The company ensures quality control of raw materials and /or the most efficient selling strategy. In addition, geographical locations influence the efficiency of the raw material sourcing process or production plans at certain differing time frames. The marketing and production departments of each organization plan a flexible distribution and delivery scheme that meets customer requirements. When the production line cannot meet customer requirements, the marketing department can enter into related transactions to achieve the highest customer satisfaction and enhance future business relationships.
Approval Process for Related Transactions The approval of related transactions is conducted under the same practice as other outside transactions that are based on normal business conditions and market prices. Responsible people, namely purchasing staff or marketing officers, will follow rules and procedures as defined by company policy. The company will report these transactions to the Audit Committee in the approval of year-end financial statements.
Policy or the Potential of Future Related Transaction. It is expected that the company will engage in related transactions under normal business operations in the future, and in a similar manner to transactions in preceding years. As a result of shareholder restructuring, the company can reduce the complication of shareholders structure to prevent problems of related transactions concerning price setting.
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Annual Report 2007
Explanation, Financial Analysis and Performance The following explanation and analysis should be considered with the financial statement and financial notes of the company, as well as the operational information that appears in this document. The company has prepared and presented this financial statement in accordance with the generally accepted accounting standards of the Institute of Certified Accountants and Auditors of Thailand B.E. 2547, and the requirement of the Securities and Exchange Commission and the Stock Exchange of Thailand.
The company’s performance Overall Performance The company’s main business is as a producer and distributor for ribbed smoked sheets, block rubber and concentrated latex while subsidiaries are producers for ribbed smoked sheets, block rubber, concentrated latex, engineering services providers, and shipping services providers, and rubber plantation and Para wood processors. The affiliates are producers and distributors for medical examination gloves, high pressure hydraulic hoses, rubber and plastic parts, STR block rubber and brokers in the Agricultural Future Exchange of Thailand. The company has strategies to be a fully integrated rubber firm, ranging from raw materials to finished products, in order to accommodate the strong demand for natural rubber in both domestic and international markets. The company’s total revenue from sales and services was 50,017 Million Baht. It represented an increase of 28 percent or 10,983 Million Baht compared to the previous year. The sales volume was 721,483 tons, an increase of 187,622 tons or 35 percent compared to the sales volumes in 2006. The marketing department has succeeded in covering more target markets, especially customers in China and India. For the block rubber products and ribbed smoked sheets, demand is still constantly high because of automobile tire manufacturers. The subsidiary in Singapore, Sri Trang International Pte Ltd, could increase sales volume by 50 percent compared with 2007 while the subsidiary PT SriTrang Lingga Indonesia could run the production lines per targeted and had sales volume of 36,456 tons this year. The average selling price in 2007 was 2,100 – 2,300 US dollar per metric ton – an increase of 4-6 percent, The export portion increased from 76 percent to 79 percent. The sub prime crisis in the United States affected the depreciation of US dollar compared with other currency including the Thai Baht. The Thai Baht has continuously appreciated from 35.78 Baht per US dollar at the end of 2006 to 34.54 Baht per US dollar by June 2007, and has reached 33.66 Baht per US dollar at the end of December 2007. As a result, the selling price in Thai Baht term decreased by 5 – 6
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
percent while the cost of raw material lowered by only 3 – 4 percent due to unusual climate conditions in Southern region since October affected rubber production in the local market. The rubber price in the world market had increased to its peak in the last quarter of the year as a result of strong interested in the futures markets, the increasing crude oil prices and the constant demand for natural rubber, especially in the tire industry which has seen rapid growth. At the end of 2007 on the Singapore Commodity Exchange (SICOM), the selling price of ribbed smoked sheets was US dollar 2,587 per ton, and US dollar 2,502 per ton for TSR block rubber. Compared with 2006, the closing price of ribbed smoked sheet and TSR block rubber was US dollar 1,952 per ton and US dollar 1,842 per ton respectively. Because of the factors stated above, especially the rubber price situation in the fourth quarter, the company’s profits dropped from 6.4 percent to 4.3 percent in 2007. After deducting sales and administration expenses and interest paid, the company has recorded a loss before other income of 129 Million Baht. After deductions for losses in foreign exchange of 6 Million Baht, added to other income of 86 Million Baht and income tax deductions of 42 Million Baht, the company generated operating losses of 91 Million Baht. Adding the share of profit from affiliates of 193 Million Baht and losses from subsidiaries of 6 Million Baht, the company had the net profit of 108 Million Baht during 2007 compared to net profit of 582 Million Baht in 2006.
Other factors affecting the company’s operation. Foreign exchange. Baht/US dollar
FOREX ( Baht per US Dollar)
43 42 2006
41
@ 2006 37.88
40 39
2007
38 37 36
35.78
@ 2007 34.52
35 34 33
33.66
32 31 30 JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Due to sub prime crisis in the United States, the US dollar has been weakening against other currency including the Thai Baht. The Thai Baht currency has continuously appreciated from 35.78 Baht per US dollar at the end of 2006 to 34.54 Baht per US dollar at
54
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
the end of June 2007, and reached the strongest of 33.66 Baht per US dollar at the end of December 2007. The average exchange rate appreciated 9 percent. As such the average exchange rate of 37.88 Baht per US dollar in 2006 was adjusted to 34.52 Baht per US dollar in 2007. As a major proportion of the company’s sales (80 percent) come from the export market, the result was a decrease in the selling price per unit and the sales value when converted into Thai Baht term. Unit: million Baht Consolidate Financial Statement
Loss from foreign exchange
2006
(95)
2007
(5)
Increase (decrease)
%
(90)
(94%)
However, the company has policy to hedge currency exchange risks by using financial derivatives as the instrument tools to prevent items in foreign currency. As a result the company can reduce the effect from currency exchange losses to a certain level. The company generated loss of 5 Million Baht from the currency exchanges compared to the loss of 95 Million Baht in the previously year. On 31st December 2007, the company has forward contracts of foreign currency and option with nine commercial banks, which accounted for 166.2 million US dollar or 5,592.3 Million Baht.
Financing Expenses. Unit: million Baht Consolidate Financial Statement
2006
2007
Increase (decrease)
Sales revenue
39,034
50,017
10,983
Interest paid
542
561
18
Percent per sale (%)
1.39
1.12
3
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Interest Rate % 9.0%
8.0%
MLR 2006
7.0% MLR 2007
2006 5.70% 6.0%
5.0%
2007 4.77%
4.0% 2006 MLR 2007
2007 MLR 2006
3.0% JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
The company’s interest paid expenses increased 18 Million Baht from the previous year which represented an increase of 3 percent. However the ratio of interest paid to sales revenue dropped from 1.39 percent to 1.12 percent as a result of efficient loan sourcing management to control financing expenses at a satisfactory level. From the chart comparing the company’s interest rates in 2006 -07 and MLR interest rate, the company in year 2007 was able to control interest rates at the lower rate than those of 2006.
Shares of profit from investment in affiliates. Unit: Million Baht 2006
2007
Increase (decrease)
Siam Sempermed Co., Ltd.
33
134
101
Semperflex Asia Co., Ltd.
0
31
31
Thaitech Rubber Corporation Ltd.
87
54
(33)
Sempermed USA. Inc.
5
12
7
(0)
1
1
1
(1)
(2)
Semperflex Shanghai Co., Ltd. Shanghai Foremost Plastic Industrial (indirect)
(8)
(17)
(9)
(3)
(21)
(18)
Total
115
193
79
Consolidate Financial Statement
Pattana Agro Futures Co., Ltd. Semperform Pacific Co., Ltd.
56
%
69%
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Shares of profits from investment in affiliates amounted to 193 Million Baht, which was an increase of 79 Million Baht or 69 percent from the previous year. The company got contribution in term of sharing profit and loss from various investments in the affiliated companies. The major activities were profits of 134 Million Baht from Siam Sempermed Corporation Limited, 31 Million Baht from Semperflex Asia Corporation Limited.
The two
companies had been successfully in improving efficiency by cost reduction programs, expanding diversity of products of which had higher margin, adjusting selling price thus resulted in higher sales value and volume. The others were 54 Million Baht from Thai Tech Rubber Corporation Inc., 12 Million Baht from Sempermed USA Inc. and 1 Million Baht from Pattana Agro Futures Co.,Ltd. On the negative side, there was loss contribution of 1 Million baht from Semperform Pacific Corporation while there was room for further improvement from affiliates in China. Semperflex Shanghai Co.,Ltd., which was officially opened in March 2007 and ran accordingly to the plan of targeted output 5 Million meters braid hoses in year 2008. Shanghai Foremost Plastic Industrial, subsidiary of Siam Sempermed Corp continued to face the difficulty of higher raw material cost, energy cost and production process . In this year, the company recognized sharing of loss from the mentioned two companies of 17 Million Baht and 21 Million Baht respectively.
Operating Results of Each Product Line. Structure of sales and services income in 2007.
Structure of Sales and service income 2006 ( million baht) Others, 1,109 , 2%
RSS, 12,275 , 25%
LATEX, 7,204 , 14%
STR, 29,429 , 59% RSS
LATEX
57
STR
Others
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Total sales and services income was 50,017 Million Baht, natural rubber products accounted for 98 percent or 48,908 Million Baht. Of total sales, block rubber was worth 29,429 Million Baht or 59 percent, ribbed smoked sheets was worth 12,275 Million Baht or 25 percent, and concentrated latex was worth 7,204 Million Baht or 14 percent. Other sales, including Para wood, latex examination gloves and transportation and engineering service were worth 1,109 Million Baht representing 2 percent of group total sales. Block Rubber. The company generated revenue of 29,429 Million Baht from block rubber, an increase of 33 percent or 7,299 Million Baht over the previous year. Total sales volumes were 403,928 tons, increasing from the last year by 38 percent or 111,985 tons. Due to the consistently increasing demand from tire manufacturers, the selling price increased 6.6 percent from an average price of US dollar 2,000 to 2,132 per ton, but the exchange rate appreciated by 9 percent or 3.36 Baht per US dollar. As a result the selling price in terms of Thai Baht decreased 4 percent while selling costs lowered by 3 percent. Thus, the company’s gross margin decreased from 5.5 percent to 4.7 percent with the gross profit of 1,382 Million Baht. Ribbed Smoked Sheet. The company generated revenue of 12,275 Million Baht from Ribbed Smoked Sheets which was an increase of 3,348 Million Baht or 37 percent over the preceding year. The sales volume increased by 50 percent from 112,497 tons to 168,219 tons. The selling price increase 2 percent from an average export price of US dollar 2,087 to 2,133 per ton. The exchange rate appreciated by 9 percent which decreased the average selling price in Thai baht terms by 8 percent, while costs reduced only 4 percent. Thus, the company’s gross margin decreased from 6 percent to 2 percent with the operating profit of 255 Million Baht. Concentrated Latex and By-products. The company generated revenue of 7,204 Million Baht from concentrated latex, an increase of 415 Million Baht or 6 percent over the previous year. Sales volumes were 146,435 tons, increasing 16 percent or 19,884 tons. The selling price decreased by 8 percent while selling costs dropped 5 percent. As a result, the company’s profit margin decreased from 8.6 percent to 5.8 percent.
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Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Financial Status. Assets. As of December 31, 2007, the group had total assets of 18,015 Million Baht, an increase of 22 percent or 3,260 Million Baht compared to the figure at the end of 2006. Current assets were 13,014 Million Baht representing 72 percent of total assets, an increase of 27 percent or 2,732 Million Baht. Most of current assets are accounts receivable and inventory as shown in the table. Unit: Million Baht Consolidate Financial Statement
31/12/2006
%
31/12/2007
%
Increase (decrease)
%
Cash and saving
737
5%
926
5%
190
26%
Market securities investment
21
0%
26
0%
5
26%
Traded Receivables
3,040
21%
4,417
25%
1,377
45%
Inventory
6,189
42%
7,361
41%
1,172
19%
295
2%
284
2%
(12)
(4%)
10,282
70%
13,014
72%
2,732
27%
1,960
13%
2,186
12%
226
12%
2,383
16%
2,591
14%
208
9%
131
1%
224
1%
94
72%
14,756
100%
18,015
100%
3,260
22%
Other Current assets Current assets Investment in subsidiaries Land, building, equipment – net Non-current assets Total assets
Traded Receivables. Traded Receivables had a value of 4,417 Million Baht, representing 25 percent of total assets. Accounts receivables increase by 1,377 Million Baht or 45 percent as a result of the increased sales volume of 26 percent from 45,000 tons to 57,000 tons per month. The selling price increased by 30 percent compared to the selling price at the end of 2006 while the exchange rate appreciated by 6 percent and the accounts receivable collecting period was between 25 and 30 days. Inventory. The value of the inventory was 7,361 Million Baht, representing 41 percent of total assets with the quantities of 104,597 tons. The inventory values increased by 1,172 Million Baht while the quantity of inventory dropped by 2,624 tons compared to the end of 2006. As a result of the unusual heavily rain climate in the South since October, the production of rubber entered into
59
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
the market decreasingly and caused raw material prices to increase by between 33-40 percent. The inventory holding period was around 40 – 47 days.
Investments in subsidiaries, affiliates and others. The company had investments in subsidiaries, affiliates and others totaling 2,186 Million Baht. The investments increased by 226 Million Baht or 12 percent from last year. The company made the last installment of capital investments of 35 Million Baht in Shanghai Semperflex Company Limitted, while receiving 193 Million Baht from the share of profits from affiliates including 113 Million Baht from Siam Sempermed Company Limited, 12 Million Baht from Semperned US Inc., 54 Million Baht from Thai Tech Rubber Corporation, 31 Million Baht from Semperflex Asia Company Limited and 1 Million Baht from Patana Agro Future Co.,Ltd. In addition, the company received the share of losses which included 17 Million Baht from Shanghai Semperflex Co.,Ltd, and 1 million Baht from Semperform Pacific Co.,Ltd, plus a loss of 1.9 Million Baht from Thai Tank Installation Co.,Ltd which operated a tank renting business that went out of business. Assets Quality Assets The company had investments in marketable securities which were available for sale as at 31st December 2007 as follows: Unit: Million Baht Consolidate Financial Statement
31/12/2006
31/12/2007
Increase (decrease)
%
Market securities - cost
31
32
1
3%
Deduct – the book value adjustments
(10)
(6)
4
(44%)
21
26
5
26%
Fair price
The value of investment in marketable securities as shown in the fair price, with demand in the market increased by 5 Million Baht from the increasing fair price of banking shares and preferred stock (SCB-P). Account Receivable. The company has trade receivables of 4,417 Million Baht at the end of 2007. As 80 percent of sales were export and most customers are big tire manufacturers with good financial status,
60
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
there is no problem in payments of account receivables and the average aging account receivable details as following. Unit: Million Baht Consolidate Financial Statement
31/12/2006
%
31/12/2007
%
2,415
79%
3,674
83%
Overdue 1 – 30 days
488
16%
666
15%
Overdue 31 – 60 days
75
2%
51
1%
Overdue 61 – 90 days
52
2%
25
1%
Overdue 91 – 120 days
8
0%
2
0%
Overdue 121 – 365 days
2
0%
12
0%
Overdue 365 days
6
0%
4
0%
3,046
100%
4,435
100%
With in credit terms
Total net account receivable Provision for doubtful debts Net
(6)
(17)
3,040
4,417
The company has set up a provision for doubtful accounts for both domestic and overseas customers totaling 17 Million Baht. This represents 0.38 percent of total trade receivables. Efficiency Ratio. Turnover on total assets Unit: Million Baht Consolidate Financial Statement
2005
2006
2007
Increase (Decrease)
2.46
2.87
3.07
0.20
Total revenues
29,158
39,237
50,313
11,077
28%
Total assets
12,546
14,756
18,015
3,260
22%
Turnover on total assets
%
The efficiency of using total assets to generate income is 3.07 times, increasing from 2006 which was 2.87 times. The company’s total revenue increased by 28 percent from the previous year while the total assets increased by 22 percent. This is because the marketing department could successfully in covering more target markets, especially customers in China, and India. Subsidiaries Sri Trang International Pte Ltd, can increase sales volumes by
61
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
50 percent and PT Sri Trang Lingga Indonesia could start its production line on target. Moreover, the company received higher shares of profits from affiliates.
Turnover on total fixed assets. Unit: Million Baht Consolidate Financial Statement
2005
2006
2007
Increase (decrease)
7.80
9.29
10.62
1.33
Total revenues
29,158
39,237
50,313
11,077
28%
Total fixed assets
3,975
4,473
5,001
528
12%
Turnover on total fixed assets
%
Turnover on total fixed assets was 10.62 times, increasing from 2006 which was 9.29 times. The company’s total revenue increased by 28 percent as stated above while the total fixed assets increased by 12 percent. During the year the company reclassified land from nonoperational use to the land being used for operation by using assessment information from an independent assessor. Moreover, the company invested 485 Million Baht in land, buildings and equipment for production efficiency improvement, invested 43 percent in block rubber production, 32 percent in concentrated latex, 15 percent in plantations and 10 percent in information technology and other areas. Those additional assets will be beneficial to the company in the near future.
Financial Liquidity and Investment Expenses. Cash Flow. The company had increment of cash and cash equivalents of 190 Million Baht with the following details: The company had cash of 2,366 Million Baht from financing activities supported by domestic and overseas financial institutes, who supported both long and short term loans with the value of 2,666 Million Baht. This amount of money was used to pay dividends of 300 Million Baht. Due to domestic factor, the unusual climate of heavily rain in the South since October negatively affected rubber production in the local market. For overseas factors, the strong interest by commodity hedges funds in the futures market and the constant demand for natural rubber, especially from the tire industry, affected the price of raw materials and rubber prices in the world market to increase in the last quarter of the year. The company had net cash used in operating activities of 1,320 Million Baht, which was in trade receivable for 1,385
62
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Million Baht, in inventory for 1,128 Million Baht, in trade payable for 999 Million Baht, and in investing activities for 856 Million Baht. The usage of this amount of cash included 462 Million Baht in land, buildings and equipment for production efficiency improvement, 35 Million Baht for the last installment investment in Shanghai Semperflex Company Limited, 346 Million Baht for purchasing additional shares in subsidiaries from previous shareholders, 39 Million Baht in deposits of which belonged to the Singapore subsidiary – Sri Trang International Pte Ltd. which had been used as collateral. The company also received the dividend from Shanghai Semperit Rubber and Plastic of 19 Million Baht and received cash from selling assets of 8 Million Baht. Important key liquidity ratio. Keys Liquidity Ratio. Unit: Million Baht Consolidate Financial Statement
2005
2006
2007
Increase (decrease)
liquidity ratio
1.17
1.04
0.95
( 0.09 )
Total current assets
8,570
10,282
13,014
2,732
27%
Total current liabilities
7,320
9,862
13,707
3,845
39%
%
The liquidity ratio was 0.95 times, decreasing from the previous year which was 1.04 times as current liabilities increased more than current assets. The current assets increase by 27 percent while current liabilities increase by 39 percent as unusual climate conditions affected production of rubber supply to the market and caused the price of rubber to increase. As such the company needed to use more short term loans from financial institutes to support the business activities. The inventories were 57 percent and trade receivable were 34 percent of current assets. However, the inventory was considered as high liquidity asset in converting into sales generation and there was no problem in trade receivables as most trade receivables are the big tire manufacturers who have good financial status. In addition, the company spent 346 Million Baht to purchase additional shares in the subsidiaries from previous shareholders in order to reduce the complex nature of the subsidiaries structure. As a result, the company’s liquidity has decreased compared to last year.
63
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Quick Ratio. Unit: Million Baht 2005 Quick Ration (times)
2006
%
2007
Increase (decrease)
%
0.41
%
0.47
0.42
(0.01)
Trade receivables
2,102
3,040
30%
4,417
34%
1,377
45%
Inventory – Net
5,096
6,189
60%
7,361
57%
1,172
19%
Current Assets (not include inventory)
3,474
4,093
40%
5,654
43%
1,560
38%
Total current assets
8,570
10,282
100%
13,014
100%
2,732
27%
Total current liabilities
7,320
9,862
3,845
39%
13,707
The quick ratio was 0.41 times, which has not changed much compared with previous year. As the current liabilities increased in terms of inventory and 57 percent of current assets was also the inventory, the quick ratio dropped marginally compared to last year.
Liabilities Unit: Million Baht 31/12/2006
%
31/12/2007
%
Increase (decrease)
%
8,719
82%
11,904
85%
3,185
37%
953
9%
1,606
11%
653
69%
Other current liabilities
190
2%
196
1%
6
3%
Total current liabilities
9,862
93%
13,707
98%
3,845
39%
732
7%
303
2%
(429)
(59%)
Total liabilities
10,594
100%
14,010
100%
3,416
32%
Shareholders equity
4,161
4,005
(156)
(4%)
Net liabilities(deduct cash and saving)
9,858
13,084
3,226
33%
Short term loans from financial institutes Trade payable and liability from purchasing the subsidiaries
Total non-current liabilities
The total liabilities were 14,010 Million Baht. Deducting cash and bank deposits of 926 Million Baht, the company had net liabilities of 13,084 Million Baht, an increase of 3,226 Million Baht, 33 percent over the preceding year. Net current liabilities were 3,845 Million Baht, increasing 39 percent. The short term loan from financial institutes has increased to 3,185 Million Baht.
64
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
This was used to purchase raw materials and finished products in daily business activity of which required high operating cash. The trade accounts payable of rubber purchasing increased by 999 Million Baht from the purchasing of rubber to stock up inventory. The rubber price had also increased by 30–40 percent compared to same period of last year while the accounts payable from purchasing shares of the subsidiaries decreased 346 Million Baht from the final payment. The portion of current assets was 98 percent of total liabilities. The noncurrent liabilities were 303 Million Baht, decreasing 429 Million Baht or 59 percent from last year. The D/E Ratio, after deducting cash and savings cash, was 3.27 - increasing from last year which was 2.37. Unit: Million Baht Consolidate Financial Statement Debt to Equity Ratio
2005 1.69
2006 2.37
2007 3.27
Debt to Equity Ratio was 3.27 times, which was higher than the preceding year. As current liabilities increased, the company needed to use working capital to purchase raw materials in order to respond to the increase of sales volumes and increasing production activities. As stated above, the use of working capital was inevitably increased. Nevertheless with the good inventory turnover, the quality of trade receivables and a good prospect of income from investments should positively affect the company’s liquidity and payment ability for both short and long term loans. The company has confident in her liquidity status committed to repay off the loans owing to the financial institutions. Even though the company has been strongly supported from various financial institutions in term of working capital, she continued to explore/studied the possibility of new financial products with the cooperation from financial institutes. The Sub Prime issue however has negatively affected the debt market. At presently the company relies mainly credit facility from financial institution as the source of fund to support her business operation.
The
management has been well aware of some concerning about weakening financial ratio caused by higher business activities both volume and price level. The correction measurement to improve the ratio has been under studied which requires certain period of time to implement. Nevertheless assessing the company’s past record and performance, the company has never faced problems of debt servicing to financial institutions. As the industry environment still remains positive, the company believes that financial institutions will continue to support the company. With long term established business relationship, the company is able to continue maintaining credit lines and there is no sign of a tendency towards negative business relationships in the foreseeable future. For overseas loans the company entered into
65
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
forward foreign exchange contracts to hedge against any exchange rate risks. Currently there is 3 million US dollar loan outstanding of which has been hedged with the forward exchange rate of 33.055 Baht per US dollar. The contract will end on May 28, 2008. The group has no other significant assets or liabilities in foreign currencies which were affected from the exchange rate risks.
Shareholder’s Equity. As of December 31, 2007 the company’s equity was lowered by 156 Million Baht to 4,005 Million Baht, a reduction of 4 percent compared to the previous year. The major shareholders equity portion lowered by 157 Million Baht as a result of net profit of 108 Million Baht this year. The dividend payment was 300 Million Baht plus 5 Million Baht from the loss provision from sellable securities account, and the loss from translation currency adjustment in subsidiaries in foreign countries which decreased by 30 Million Baht. The minor shareholders equity increased 1 Million Baht as a result of cumulative translation adjustments in the minor shareholders equity at PT Sri Trang Lingga Indonesia worth 7 Million Baht, and deductions of 6 Million Baht from the losses of operation which attributed to the minor shareholder.
66
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
Audit Committee Report To the shareholders of Sri Trang Agro-Industry Public Company Limited. The Audit Committee of Sri Trang Agro-Industry Public Company Limited consists of 3 independent directors who are not the management director of the Company as follows; Mr. Prakob
Visitkitjakarn
Chairman of Audit Committee
Mr. Kriang
Yanyongdilok
Audit Committee
Mr. Samacha Potavorn
Audit Committee
The Audit Committee was assigned by the company’s Board of Directors to perform its duty and responsibilities in compliance with the Audit Committee Charter and in accordance with the requirements of the Stock Exchange of Thailand. During fiscal year 2007, the Audit Committee conducted a total of four meetings with full collaboration from senior management, external auditors and internal audit team fulfilling the scope of responsibility assigned. This can be summarized as follows:
The Audit Committee reviewed quarterly financial statements and financial statements for the year 2007 together with the external auditor and the management to ensure that the information and contents were accurate and in accordance with generally accepted accounting principles. Through the meeting, there were discussion, exchange of opinions and assessment on the reporting before granting the approval.
Attended the meeting for review and acknowledge the report presented by internal audit department. The committee has made the assessment for the internal audit plan/schedules to ensure that there were sufficient. Various recommendations had been guided to the audit team to improve better efficiency.
Review and ensure the company be complied with government rules and regulations under the good governance concept. By having the company adhered, operated according to the regulations regarding to the Securities and Exchanges Commission Act, the Stock Exchange of Thailand Rules, and any other applicable laws. The audit committee has encouraged transparency policy by having sufficient disclosure information to the public.
Consider the nomination and appointment of the external auditors including remuneration. The audit committee would recommend the external auditors to the shareholders’ meeting for approval as the auditor of the company.
67
Sri Trang Agro-Industry Public Company Limited
Annual Report 2007
In conclusion, the Audit Committee has been able to carry out all assignments independently without any restrictions from the Management and has received a strong collaboration from every party involved in presenting the information consideration.
Yours sincerely,
(Mr. Prakob Visitkitjakan) Chairman of Audit Committee 6 March 2008
68