Progress Report on the implementation of the planned business development. To : The President of the Stock Exchange of Thailand

Transcription

1 Ref: Inv-Out 005/2559 February 29, 2016 Subject : Progress Report on the implementation of the planned business development. To : The President of the Stock Exchange of Thailand Refer : Shun Thai Rubber Gloves Industry (Public) Co., Ltd. Letter no. Inv-Out 003/2558 dated January 30, 2015 business development plan. Letter no. Inv-Out 026/2558 dated September 4, 2015 Report on the progress in business development plan. Letter no. Inv-Out 001/2559 dated January 8, 2016 Report on the progress in business development plan. (adjunct) Reference is made to your request to Shun Thai Rubber Gloves Industry Public Co.,Ltd. (the Company) to report our progress on delisting rehabilitation and to deliver our financial statements to the Stock Exchange of Thailand quarterly. The Company has prepared the business development plan and have informed the implementation of such plan to the Stock Exchange of Thailand as per the above-mentioned letters. We would like to advise the progress of delisting rehabilitation plan as follows: 1. Short term business development plan (within one year). 1.1 Recapitalization Unit : Million Baht Year Old capital Add New Capital (Million Baht) (Million Baht) (Million Baht) Allocated , , Existing shareholders Therefore, proportion of shareholders as at December 31, 2015 is 1, million Baht. 1 / 7

2 1.2 Debt Restructuring Debt Restructuring with Financial Institutions The Company did not restructure debt with any financial institution. Our debt status is normal Debt Restructuring with Thai Hua Rubber Public Co., Ltd. The Company s debt repayment is ongoing, according to the restructuring agreement dated May 14, Debt status is normal. 1.3 Improving the company performance The Board of Directors together with management have set guidelines on how to fix the problem by intensive marketing to increase distribution channel. Moreover, we improved the efficiency of production, developed process to reduce redundant work, reduce production costs as well as operating costs and financial costs. Details of the improvement plan are as follows: Marketing Development Plan o The Company focused on expanding the market of high margin products e.g. surgical gloves, clean room gloves, household gloves and latex examination gloves. o The Company has successfully expanded its market to new customer groups. We targeted to increase market share on latex examination gloves - lightly powdered in South America, Middle East countries as well as Vietnam and Laos. o The Company had good response from targeted domestic customers, focusing market expansion to various groups such as: Household gloves our high profitable goods that meet standard quality requirement. Moreover, they suit our production lines which are capable in manufacturing thick gloves. We also planned to expand to Flock Line gloves and Double Dipped gloves market. 2 / 7

3 Nitrile powder free latex examination gloves and natural rubber gloves for general industry the Company has policy to expand market base to food industry and electronics industry. Surgical gloves, sterilized medical gloves - our relatively high growth rate products. o The Company has negotiated with old customers, we lost due to our cost miscalculation, resulting in uncompetitive and out of market price. Eventually, these customers had good response and returned to purchase our products Additional investment in new machinery purchase and machinery reparation to reduce costs and increase productivity. The Company planned to improve productivity by improving the efficiency of existing machinery and invest in the purchase of additional equipment in order to support marketing expansion, improve product quality, minimize loss of production as well as supporting the production of new goods. In response to market demand and to reduce the cost of production, the Company invested in plants renovation, machinery and equipment enhancement. Total cost of these investments is approximately 230 million Baht. Details are as follows: Improvement of the Chlorine wash and the purchase of the new machine used in the wash dry and production. Machines installation and test run process were done in November The purchase of gloves walleting and automatic packaging machines Gloves walleting and automatic packaging machines were installed and test run was done in November / 7

4 The automatic packaging machine is being modified by supplier to suit our utilization The purchase of new molds The Company has purchased additional molds as planned which were delivered and installed for utilization completely in December The purchase of steam boiler using firewood fuel The 2 sets of steam boilers using firewood fuel with capacity of 7.5 tons / hour were completely installed and test run was done in January This investment is expected to minimize fuel costs, create production backup system, reduce productivity loss, reduce shutdown in production as well as serving production expansion plan in future The investment of effluent water treatment process The Company has invested in the development of water supply system from effluents in order to bring effluents reused. Being the solution to water scarcity and meet the growing demand in the future, it also contributes to environmental protection to the public by reducing the waste water released into the community. This process was completed with test run done in January The investment of factory buildings renovation As factory buildings were very old, the Company has invested to renovate them to be in proper working condition The procurement of concentrated latex The Company has undergone a reorganization and improved the procurement regulations to increase efficiency in the procurement of raw latex. In coordination with the production department to reduce the burden of latex storage, the company currently employs a Just in Time (JIT) to reduce this burden and cost of latex storage, so that we can 4 / 7

5 add liquidity to the company. Afterwards, the Company held a tender to buy latex and other chemicals to obtain quality and the most reasonable price The management of fuel In the past, the Company used palm kernels as boilers fuel but as the price tends to raise and in order to minimize fuel costs, the Company did feasibility study of using other fuel such as Refuse Derived Fuel (RDF), which has a heating value similar to palm kernels but at a much cheaper cost or even the use of natural gas or other fuel such as firewood. Finally, the Company has reached an agreement on hiring a company that specializes in energy management, to operate the fuel supply. Thus, fuel cost was reduced by more than 30 percent. All of the above plans reflected to company s operational net profit of each quarter as follows; Unit : Million Baht Item Q1/58 Q2/58 Q3/58 Q4/58 Revenues from operating activities Costs of sales Gross profit Selling and Administrative expenses Net Profit from operating activities To improve the liquidity and reduce the financial cost After the capital increase, the Company has negotiated with creditors and commercial creditors to repay debts and requested for better trade discounts. The Company has repaid in total about 310 million Baht to reduce financial costs. As a result, debt-to-equity ratio of the Company has decreased to suit operating conditions and the Company's industry type. 5 / 7

6 2. To develop potential long term business 2.1 Replacing production lines and expanding customer base If short-term plans of the Company's results are positive, the company will consider replacing the production lines to accommodate increased demand and to modify the production line to produce products desired by the market. In addition, the company will use the opportunity of the AEC in finding new customers although not specifically just AEC. We shall also incorporate with companies whose markets are in the targeted countries. 2.2 Investment and study of other business to maximize returns for investors To increase the maximum return to the shareholders which is the most important goal of the Company. We foresee that the Company should not rely solely on the glove business. However, there is a necessity to find new business initiatives and it can be supplementary of the original business or businesses in other industries such as real estate, renewable energy, medical technology and other related businesses. The Company will do the feasibility study of doing other businesses with good returns hereafter. In the past, the Company studied biomass business, such as power plants, biomass related business. Since it is a low-risk business and we can sell electricity to the state government. The state has long-term purchasing power while this type of investment is not high comparing with large businesses such as power plants or other industrial facilities. Moreover, the returns are also attractive to investors. Later, our Board of Directors decided to invest in purchasing ordinary shares of Northern Renewable Energy Co., Ltd. ("NRE") from NRE shareholders, on August 18, 2015 comprising of 3,136,000 ordinary shares, at Baht per share, equivalent to 48.25% of total ordinary shares of NRE, at Baht per share. Total value of investment is million Baht. This is in accordance with the business development plan. The Company considers that it can increase the range of worthy investment with good returns. The Company can gain Know-How from NRE business, who specializes in biomass. Furthermore, this can also reduce the risk of investment as we shall have Portfolio investment increasing from the rubber business i.e. biomass energy business. 6 / 7

7 The Company anticipates that our implementation to improve the capital structure, operational structure, production and financial cost reduction as well as investment in new projects as carried out by short-term plans and developing long-term business, shall have good impact to the business and performance of the Company. However, the Company will report progress of the delisting rehabilitation to the Stock Exchange of Thailand according to the SET regulations until delisting is over. Please be informed accordingly. Yours sincerely, (Mr.Supachai Sukanjanaporn) Deputy Chairman 7 / 7