ANNUAL REPORT Polyplex (Thailand) Public Company Limited

Transcription

1 ANNUAL REPORT Polyplex (Thailand) Public Company Limited

2 Content Message from Chairman 4 Board of Directors 6 The Board of Director s Report on its Responsibility to Financial Statements 7 Audit Committee Report Key Financial Indicators 10 Financial Highlights 11 General Information 12 Policy and Overview of Business Operation 16 Nature of Business 23 Risk Factors 47 Future Projects 58 Legal Dispute 61 Shareholding Structure 61 Dividend Policy 62 Management Structure 63 Corporate Governance 73 Corporate Social Responsibility 77 Internal Control 78 Connected Transactions 79 Financial Position and Operational performance 82 Management s Discussion & Analysis 89 Information of the Director and Management 105 Detail of Director and Management in Subsidiary Companies 115 Audited Financial Statements 117 Investors can study the additional information of the company from the Annual Registration Statement Form 56-1 as shown in SEC website, or the Company website

3 Our new state- of-the- art Thick polyester film manufacturing facility in Thailand 1

4 Participation in Film tech 2014, Japan Participation in Interpack Trade Fair May,2014, Germany 2

5 Computer donations to school children Istanbul international community school Visit to our Turkey Film plant 3

6 Message from CHAIRMAN Mr. Manu Leopairote Chairman - Board and Audit Committee 4

7 The last year was one of the most difficult for the Company. The oversupply situation in the Polyester Film industry got further pronounced resulting in further drop in the margins. Coupled with the slower than expected ramp up in operations of most of the new projects of the Company in Thailand and USA as well as the weakening of the Thai Baht against the US Dollar and Euro resulted in the Company reporting a net loss for the first time since its inception in Thailand. The Company has commenced commercial operations in almost all the projects that it had initiated over the last 2-3 years - a Thin PET film line in the US, a Thick PET film line along with associated Chips plant, second Extrusion Coating Line, as well as its first Blown PP line in Thailand and an Offline Coater in Turkey. Trials at the Bottle Grade PET resin plant in Turkey have beens successfully completed and commercial operations should commence soon. In order to further enhance the specialty film portfolio, the Company had announced investments in new Metallizers in Thailand and Turkey last year which would begin commercial operations later this year and would help improve margins & help differentiate the company against its competitors. With the commencement of several new production lines, while the sales turnover of the Company increased by about 16% Y-o-Y to Baht billion, worsening market conditions and slower ramp-up in operations of the new investments, have resulted in a net loss of THB 480 million. Un-realized FX losses on restatement of FX loans availed in USD & Euro have also contributed significantly to this loss. The Company remains confident that the investment in new projects would not only generate adequate returns to the Shareholders once the industry cycle improves but would also bring more stability in earnings as these projects would help diversify the product / country / customer risks. These, along with the existing assets, will enable the Company to grow profitably in the coming years and take full advantage of the revival of the industry, as and when it happens. Despite the deterioration in financial performance over the last 2 years, the Company s balance sheet still remains strong with a low Debt-Equity ratio and sufficient liquidity. As the Company expects that the current situation of oversupply in PET film industry could last for some time, it is important to conserve cash to ensure a sound financial profile. Accordingly, the Board has not proposed any dividend payout for FY This would be the first year, since listing, that the Company has not declared dividends. However, given the current market conditions and expected outlook, I am confident that the shareholders would understand and appreciate the reasons for the same. The Company understands its social responsibilities and continues to engage in various activities at all locations to help maintaining the society, in which it operates. The successful startup of its recycling plant in Thailand demonstrates its commitment to reduce the impact of plastic waste on the environment. Apart from recycling most of its own process waste, the Company would continue its efforts to find sustainable solution for all of its waste as well as post-consumer usage film waste. On behalf of the Board, I would like to thank all the shareholders, business partners and the employees of the Company for their continued support and hard work without which we would not have been able to be among the fastest growing companies in our industry. Mr. Manu Leopairote Chairman 5

8 Board of Directors Mr. Manu Leopairote Chairman - Board and Audit Committee Dr. Virabongsa Ramangkura. Ph.D. Director and Member - Audit Committee Mr. Shiraz Erach Poonevala Director and Member - Audit Committee Mr. Sanjiv Saraf Vice Chairman Mr. Rohit Kumar Managing Director Mr. Praphad Phodhivorakhun Director Mr. Pranay Kothari Director Mr. Manish Gupta Director 6

9 The Board of Directors Report on its Responsibility to Financial Statements To the Shareholders of Polyplex (Thailand) Public Company Limited In recognition of its duties and responsibilities and in compliance with good corporate governance principles, the Board of Directors has ensured that the financial statements and financial information appearing in the annual report are accurate, complete and adequate. The financial statements are in compliance with the generally accepted accounting practices in Thailand and follow accounting standards and practices that are appropriate to the nature of business. To ensure reasonable confidence in using these financial statements, the Board has instituted and maintained internal control systems, subject to periodic review by the Audit committee and reported to the Board. The company auditor has applied generally accepted auditing standards in auditing the company s financial statements for and is of the view that these financial statements present fairly, in all respects, the financial standing, results of the operations and cash flows for the company, in accordance with generally accepted accounting principles. Mr. Manu Leopairote Chairman Mr.Rohit Kumar Vashistha Managing Director 7

10 Annual Report Audit Committee Report To the Shareholders of Polyplex (Thailand) Public Co., Ltd. Following the company s transformation into a public limited company on August 11, 2004, the shareholders meeting held on September 2, 2004 decided to constitute an Audit Committee comprising of three independent directors with knowledge, expertise and experience in finance & accounting, industry and business. The appointees were Mr. Manu Leopairote (Chairman of the Audit Committee), Dr. Virabongsa Ramangkura and Mr. Shiraz Erach Poonevala. The Audit Committee performed duties under the delegation of authority set out by the Board of Directors. Among the Audit Committee s responsibilities are to review the quarterly / annual financial results of the company, supervise whether the company was in compliance with the rules and regulations of the Stock Exchange of Thailand (SET) and Securities Exchange Commission (SEC), ensure the transparency of the accounting system, review of internal control systems and promote good corporate governance practices. In the financial year ended March 31, 2014, a total of six Audit Committee meetings were held. 1. Reviewed and approved the quarterly and yearly financial statements of the company and its subsidiaries to ensure compliance with the generally accepted accounting standards and disclosure of key information before proposing them for the Board s approval as also prior to submission to SEC and SET. After due consideration and discussion, it is the opinion of the Committee that the above mentioned financial statements are presented fairly in accordance with generally accepted accounting principles and sufficiently disclosed. 2. Reviewed the disclosure of information on transactions between the company and its affiliates or any transactions, which may have been perceived as potentially causing conflicts of interest. 3. Reviewed and monitored the corporate compliance and internal control systems as also risk mitigation measures. The Committee believes that the company s internal control systems are adequate. 4. Reviewed and approved the Final Dividend payment for the financial year ended on 31st March 2013 and recommended to the Board for their consideration and approval 5. Reviewed and approved the Annual budget for financial year for the Company and its subsidiaries and recommended to the Board for their consideration and approval 6. Considered and recommended to the Board of Directors to appoint Mr. Termphong Opanaphan (CPA No. 4501) and/or Mr. Supachai Phanyawattano (CPA No. 3930) and/or Ms. Chonlaros Suntiasvaraporn (CPA No. 4523) of EY Office Limited, as the auditors of the Company for the FY Reviewed and approved the proposal to invest in a new Metalliser in Thailand and recommended to the Board for their consideration and approval 8

11 8. Reviewed and approved the proposal to invest in a new Metalliser in Turkey and recommended to the Board for their consideration and approval 9. Reviewed and approved the proposal for extending Subordinated loan from Polyplex Europa Polyester Film Sanayi Ve Ticaret A.S.(PE) to Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi (PR), for up to Euro 15 million (67% of the requirement of PR), for supporting the investment in the PET Bottle Grade Resin project and recommended to the Board for their consideration and approval 10. Reviewed and approved the proposal to issue a Corporate Guarantee from Polyplex (Thailand) Plc for the additional term loan of USD 9 million extended by Key Indication Bank, to partially fund the cost overrun of the PET Thin film line project in USA and recommended to the Board for their consideration and approval 11. Reviewed and approved the proposal to fund the cost overrun of the PET Thin film line in USA through additional term debt borrowing and by Equity infusion and/or Sub-ordinate loans from the Company and/or its subsidiaries and recommended to the Board for their consideration and approval 12. Reviewed and approve the proposal for issuance of a Corporate Guarantee to the extent of 67% of the WC line of Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi (PR) and recommended to the Board for their consideration and approval 13. Reviewed the proposal to Invest in a Trading and Distribution company in Turkey and recommended to the Board for their consideration and approval Name Position Signature Mr. Manu Leopairote Board Chairman and Audit Committee Chairman Dr. Virabongsa Ramangkura Audit Committee Member Mr. Shiraz Erach Poonevala Audit Committee Member 9

12 Annual Report Key Financial Indicators EBITDA Net Profits and EPS EBITDA in million baht 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, % 40% 35% 30% 25% 20% 15% 10% 5% 0% EBITDA margin (%) Net Profits in million baht 4,000 3,500 3,000 2,500 2,000 1,500 1, (500) (1,000) EPS -Baht/Share Financial Year EBITDA - in million Baht EBITDA margin (%) Financial Year Net Profits EPS Total Revenues in million baht 11,500 10,000 8,500 7,000 5,500 4,000 2,500 Total Revenues 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% Net Profit margin (%) Total Assets in million baht 13,000 11,500 10,000 8,500 7,000 5,500 4,000 2,500 Total Assets 40% 35% 30% 25% 20% 15% 10% 5% 0% Return on Assets (%) 1,000-10% 1,000-5% Financial Year Financial Year Total Revenues Net Profit margin (%) Total Assets Return on assets % 10

13 1. Financial Highlights * Progression (Thousand Baht) Net Sales 7,125,366 11,183,174 10,143,111 9,230,018 10,702,538 Total Revenues 7,299,520 11,320,169 10,263,808 9,495,185 10,792,537 Gross Profit 1,731,011 4,680,656 2,311,548 1,355, ,678 Net Profit (Loss) 1,039,386 3,882,885 1,357, ,494 (479,718) Total Assets 8,866,744 11,932,901 11,938,970 16,512,186 19,581,075 Total Liabilities 3,854,260 3,570,196 3,478,368 8,267,306 10,943,098 Total Shareholder's equity 5,012,484 8,362,705 8,460,602 8,244,880 8,637,976 Financial Ratios Net Profit Margin (%) 14.24% 34.30% 13.23% 4.24% -4.44% Return on Equity (%) 21.72% 58.26% 16.14% 4.81% -5.68% Return on Assets (%) 11.71% 37.34% 11.37% 2.83% -2.66% Per Share Data (Baht) No. of shares 800,000, ,000, ,000, ,000, ,000,000 Dividend per share (Baht) NIL# Earnings per share Par value Note: Above figures and ratios are on consolidated basis, including the Company s subsidiaries in USA, Turkey, Netherlands, Singapore, China and Thailand *Previous year figures have been restated. #As proposed by the Board of Directors for consideration and approval in the 2014 Annual General meeting of the Shareholders 11

14 Annual Report General information 2.1 The company Polyplex (Thailand) Public Company Limited Stock Exchange of Thailand symbol PTL Registered Head office 75/26, Ocean Tower II, 18th Floor, Sukhumvit Soi 19, Kwaeng North Klongtoey, Khet Wattana, Bangkok Telephone (662) Facsimile (662) Factory -1 Siam Eastern Industrial Park, 60/24, Moo 3, Tambol Marbyangporn, Amphur Pluak Daeng, Rayong Factory -2 Siam Eastern Industrial Park, 60/91 Moo 3, Tambol Marbyangporn, Amphur Pluakdaeng, Rayong Factory -3 Siam Eastern Industrial Park, 60/109,Moo 3, Tambol Marbyangporn, Amphur Pluakdaeng, Rayong Type of Business Manufacturer of Polyester Thin Film (Plain and Metallized), Polyester Chips, Polyester Thick Film (Plain), Extrusion Coated film, Cast Polypropylene Film (Plain and Metallized), Silicone Coated Film and Blown PP Film Company registration number Telephone (66) Facsimile (66) Website Registered Capital Baht 960,000,000 Common Shares Par Value 960,000,000 shares Baht 1.00 per share Paid-up Capital Baht 800,000,000 Number of Employees 1,163 including subsidiaries in Turkey, USA and China, and 650 in Thailand. 12

15 2.2 Subsidiaries in which the company holds more than 10% share As at 31st March, 2014 Company Name and Address Business Type Registered Capital (shares) Issued & Paid Up - No. of shares held by the Company % shareholding Type of Shares Polyplex (Singapore) Pte Ltd. 61, Club Street, Singapore Investment Holding Company 100, , ,000 39, % 100% Common Preference Polyplex Europa Polyester Film* Sanayi Ve Ticaret A.S. Avrupa Serbest Bolgesi, 132, Ada, 7 Parsel, Velimese Mevkii, Corlu, Turkey Polyplex Trading (Shenzhen) Co. Ltd* Room.1309,A block, Galaxy Century Building, Caitian South Rd., Futian District,Shenzhen People s Republic of China Polyplex (Americas) Holding Inc. Corporation Trust Center 1209 Orange Street Wilmington, New Castle County, Delaware Polyplex USA LLC*** 3001 Mallard Fox Drive NW Decatur, Alabama EcoBlue Limited 60/91, Moo 3 Siam Eastern Industrial Park, Marbyangporn Sub-district, Pluak Daeng District, Rayong, THAILAND Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi# Avrupa Serbest Bolgesi, 132, Ada, 21 Parsel, Velimese Mevkii, Corlu, Turkey Polyplex Paketleme Çözümleri Sanayi ve Ticaret A.Ş# Muhittin Mahallesi,Çetin Emeç Bulvarı,Acun Sokak,Cemil Bayram Apt.,No:7/1 Çorlu/Tekirdağ_Turkey Manufacturer of Polyester Film & Polyester chips Distribution Company Investment and Trading & Distribution Company Manufacturing Company Manufacturing Company Manufacturing Company Trading Company 1,500,000 1,500, % Common $400,000** $400,000** 100% Common 10,000 5, % Common **** $29,458, % Common 1,065, ,000 80% Common 4,049,686 2,713,290 67% Common 20,000 20, % Common Polyplex Europe B.V. Claude Debussylaan 46, 1082 MD Amsterdam, NETHERLANDS Trading Company 30,000 2, % Common 13

16 Annual Report * Indirect holding via PSPL **$ 400,000 refers to the registered & paid up Share capital of Polyplex Trading (Shenzhen) Co. Ltd. There is no concept of number of shares or par value per share in People s Republic of China. *** Indirect Holding via Polyplex Americas Holding Inc. ****There are no shares of Polyplex USA LLC. Capital contribution from PAH is termed as Members Unit and it is 100% by PAH. # Indirect holding via Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi 2.3 Other references (a) Registrar Name Thailand Securities Depository Co., Ltd. Address 62, The Stock Exchange of Thailand Building 4th, 6th-7th Floor, Rachadapisek Road, Klongtoey, Bangkok Telephone (662) , (662) Facsimile (662) (b) Trustee N/A (c) Auditing Firm 1) Name EY Office Limited Address 33rd Floor, Lake Rajada Office Complex, 193/ Rajadapisek road Near Queen Sirikit National Convention Centre Bangkok 10110, Thailand Telephone (662) Facsimile (662) Auditors* Mr. Termphong Opanaphan (CPA No. 4501) and/or Mr. Supachai Phanyawattano (CPA No. 3930) and/or Ms. Chonlaros Suntiasvaraporn (CPA No. 4523) * Auditors of the company for the FY (d) Legal Advisors Name Allen & Overy (Thailand) Co. Ltd. Address 22nd Floor, Sindhorn Tower III, Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Telephone (662) Facsimile (662) Contact person Mr. Arkrapol Pichedvanichok Ms. Somporn Manodamrongtham Name Baker & McKenzie Ltd. 14

17 Address 990 Abdulrahim Place, 5th floor and 22nd -25th Floors, Rama IV Road,Silom, Bangrak Bangkok 10500, Thailand Telephone (662) Facsimile (662) Contact person Mr. Wittaya Luengsukcharoen Name Linklaters (Thailand) Ltd Address 20th Floor, Capital Tower, All Seasons Place, 87/1 Wireless Road Bangkok 10330, Thailand Telephone (662) Facsimile (662) Contact person Mr. Pichitpon Eammongkolchai (e) Advisor or manager under management contract N/A 15

18 Annual Report Policy and Overview of Business Operation 3.1. Vision, Mission, Objective and Strategy of the Company Vision Continuously grow and create value in all businesses and establish global leadership in the plastic film business. Mission Creating Value for stakeholders (Investors, Customers, Employees, Community) through delivering profitable value to customers and maximizing their satisfaction. Values Our core values, enunciated in the acronym S.C.O.R.E., inspire our internal and external interactions. Seamlessness We leverage synergies across hierarchies, functions and locations. Care We value our people and are committed to their development. We take a longterm approach to all our relationships. Ownership and Responsibility external stake-holders. We honor our commitments towards internal and Excellence We stretch ourselves continuously to improve the way we work. We constantly pursue newer and better ideas, processes, products and practices. 16

19 3.2. Background of the Company and key developments Polyplex (Thailand) Plc. ( PTL or the Company ) was incorporated as a private company on March 26, 2002to manufacture and distribute PET film (polyethylene terephthalate film or polyester film). In August 2004, the Company was transformed into a Public Company, with a registered capital of Baht 960 million and the IPO was subsequently made in December The Company is promoted by Polyplex Corporation Limited (PCL) based in India and engaged in the same business as the Company for more than 25 years. As on date, PCL has 51% stake in the Company through both direct and indirect shareholding and the balance 49% is with the general public. Past key changes and developments in the Company are as follows: March-April 2002 PTL was incorporated by PCL, which is a listed company (on the Bombay Stock Exchange as also National Stock Exchange) in India. PTL also acquired a plot of land with an area of 20 rai 22 square wah at Siam Eastern Industrial Park in Rayong Province in order to construct a factory for manufacture of PET film. May 20, 2002 PTL was granted a promotion certificate by BOI for PET film (production line 1) with an approved production capacity of 15,000 tons per year (now increased to 24,000 MT pa). July-2002 to April-2003 June 11, 2003 September 11, 2003 The Company started construction of the factory in July-2002 and completed its plant construction and proceeded with machinery test-run in March, 2003 followed by commercial production from April, The Company was granted a BOI promotion certificate for production of PET film (production line 2) with an approved production capacity of 15,000 tons per year (now increased to 24,000 tons per year). PET film (production line 2) with an approved production capacity of 15,000 tons per year (now increased to 24,000 tons per year). PET resin with an approved production capacity of 26,250 tons per year ( now increased to 57,000 MT pa) The Board of Directors resolved for the purchase of another plot of land adjacent to the existing land covering 8 rai 28.9 square wah area to produce PET resin which is the raw material in PET film production. November 12, 2003 Commercial production and distribution began for film production line 2. July 30, 2004 August 11, 2004 The shareholders meeting resolved for transformation of the Company into a public company, write-down of par value from Bt. 10 to Bt. 5 per share and increase of registered capital by Bt. 1,068 million to make up a total of Bt. 1,728 million requiring issue of additional million ordinary shares. The allocation of the increase in capital was as under: million Shares offered to Polyplex (Asia) Pte. Ltd. (PAPL), a juristic person registered in Singapore, being a 100% subsidiary of PCL, India. Up to 80 million shares at par value of Bt. 5 per share, making a total of up to Bt. 400 million as public offering. Registration was completed to transform the Company into a public company. 17

20 Annual Report September, 2004 December 8, 2004 February 22, 2005 February 22, 2005 August, 2005 December, 2005 March, 2006 December, 2006 March,2007 October,2007 November,2007 January,2008 April,2008 May,2008 February,2009 May,2009 September, 2009 March, 2010 July,2010 February, 2011 May, 2011 July Start up on PET resin batch plant in Thailand. IPO of 240,000,000 shares at the price of Baht 6.90 per share. PTL was granted a promotion certificate by BOI for Metalliser film with an approved production capacity of 7,500 tons per year. Start up of Continuous Chips Plant in Thailand. Start up of Metallizer Line 1 in Thailand. Start up of Thin Pet film line 1 in Turkey implemented by subsidiary company with a production capacity of 24,000 MT per annum. Metallizer start up in Turkey with a production capacity of 4,800 MT pa. Start up of Pet resin plant in Turkey with a production capacity of 57,600 MT per annum PTL was granted a promotion certificate by BOI for Extrusion Coating film project with an approved production capacity of 18,000 MT per annum for two production lines. Board of Directors of PTL approved a Project for related product diversification in CPP Film manufacture in Thailand. Total Productive Maintenance (TPM) policy adopted and rolled out by PTL to enhance productivity. PTL was granted a promotion certificate by BOI for Metallised Film Expansion Project with an approved production capacity of 8,700 MT per annum. Commencement of commercial production of the Extrusion Coating line. Commencement of commercial production of the 2nd Thin PET Film line and the 2nd Metallised Film line in Turkey and also the 2nd Metallised Film line in Thailand. PTL was granted a promotion certificate by BOI for Cast Polypropylene (CPP) film project with an approved production capacity of 15,600 MT for CPP plain and CPP Metallized film. Board of Directors of PTL approved an Investment in a Silicone Coating line in Thailand. 9 The Trading company in China - Polyplex Trading (Shenzhen) Co. Ltd was set up and capital injected through Polyplex (Singapore) Pte Ltd Commencement of commercial production of the Cast Polypropylene line PTL was granted a promotion certificate by BOI for the Silicone Coating film project with an approved capacity of 725 million sqm. Board of Directors of PTL approved an Investment in a Thick PET film line in Thailand. Board of Directors of PTL approved the investment in a new Thin PET film line in USA, under its 100% subsidiary Polyplex USA LLC (PUL). Board of Directors of PTL approved an Investment in a Blown PP film line in Thailand. 18

21 November, 2011 March, 2012 August, 2012 October, 2012 October, 2012 January, 2013 February, 2013 April, 2013 June, 2013 October, 2013 October, 2013 December, 2013 February, 2014 March, 2014 Board of Directors of PTL approved an Investment in the Second Extrusion Coating line in Thailand. The Silicone Coating plant started the commercial operations. Board of Directors approved an Investment in a new subsidiary ( EcoBlue Limited) in Thailand, for implementing the project for recycling plastic waste. Board of Directors of PTL approved the proposal for 67% acquisition by Polyplex Europa Polyester Film Sanayi Ve Ticaret A.S.( PE ), Turkey, of the shares of Polyplex Resins Sanayi Ve Ticaret A.S (PR), from Polyplex (Asia) Pte Ltd (PAPL). A project for investment in a PET Bottle grade resin line is underway at PR. Board of Directors of PTL approved an Investment in an Offline Coater at PE, Turkey. Board of Directors approved the acquisition of the balance 19.76% from the minority shareholders of Polyplex (Americas) Inc.(PA), USA. Subsequently, PA has been merged with the manufacturing subsidiary PUL. Board of Directors approved an Investment in setting up a Trading and distribution company in Netherlands. Start up of commercial operation of PET Thin Film line in Decatur, USA Start up of the second Extrusion Coating line in Thailand. Start up of commercial operations of PET Thick Film line in Thailand along with the Blown PP line. Board approved investment in 2 new Metallizers, one each in Thailand and PE, Turkey Start up of commercial operations of EcoBlue Limited, the new subsidiary of the Company in Thailand for recycling Plastic waste Start up commercial operations of PET chips plant for Thick PET film line in Thailand Start up of commercial operations of Offline coater in PE, Turkey 19

22 Annual Report Shareholding structure The current shareholding structure of the Polyplex group is: POLYPLEX GROUP- STRUCTURE Polyplex Corporation Limited ( PCL / Polyplex India) INDIA 100% Polyplex (Asia) Pte.Ltd (PAPL / Polyplex Asia) SINGAPORE 100% PAR LLC (PAR) USA 100% 16.50% 34.50% Peninsula Beverages & Foods Company Private Ltd. (PBF) INDIA 33% Public/ Institutional Shareholder 49% Polyplex (Thailand) Public Co. Ltd. (PTL / Polyplex Thailand) THAILAND Polyplex Resins Ve Ticaret Anonim Sirketi (PR / Polyplex Resins) TURKEY Polyplex America Holdings Inc. (PAH) USA 100% 100% 80% EcoBlue Ltd THAILAND 20% Private Investor 100% 67% Polyplex USA LLC (PU / Polyplex USA) USA Polyplex (Singapore) Pte. Ltd. (PSPL / Polyplex Singapore) SINGAPORE Investment and Trading & Distribution Provision of shared services FMCG OUTSIDE INTEREST INVESTMENT COMPANY MANUFACTURING COMPANY TRADING & DISTRIBUTION 100% 100% Polyplex Trading (Shenzhen) Co. Ltd. (PTSL / Polyplex China) CHINA Polyplex Europe B.V. (PEBV / Polyplex Netherlands ) NETHERLANDS 100% Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi (PE / Polyplex Europa) TURKEY 100% Polyplex Paketleme Çözümleri Sanayi ve Ticaret Anonim Şirketi (PP / Polyplex Turkey) TURKEY Polyplex Corporation Ltd. (PCL) PCL, the parent company operating for over 25 years since 1988, is one of the major producers and distributor of plastic film in India selling in both the domestic and overseas markets. It has been listed for several years on Bombay Stock Exchange and other Exchanges in India. It s paid up capital is INR million (about Bt. 176 million). PCL has the following production capacities as at 31st March 2014:- Product Annual Capacity UOM Polyester Film 55,000 MT Polyester Chips 77,600 MT Metallized Film 20,400 MT BOPP Film 35,000 MT Coated Films 270 Million Sqm Its direct and indirect shareholding in the Company aggregate to 51% of the latter s paid up capital. Polyplex has also evolved an equitable policy for distribution of markets, for common businesses, between its Indian, Thailand, Turkey and US operations based on the several factors like product range, delivered cost to customer, supply lead times and preferential duty access. Based on the same, PTL would serve South East Asia, Asia Pacific, China, Australia & New Zealand. PCL would serve South Asia. Turkey will serve, Europe, Middle East, Africa and CIS/Russian markets and US would serve North America, and South America. 20

23 The Polyplex group also has a policy on future investments in polyester film / related areas between the Company and its parent company. Investments in India/SAARC region would be decided and made by PCL and its other subsidiaries (excluding the Company) while investments In Thailand / ASEAN region as well as other countries would be in all likelihood be made by PTL or the subsidiaries in which the Company has a major stake. The above is subject to availability of Investible cash / ability to borrow debt by the existing / preferred Company as per the policy. Polyplex (Asia) Pte. Ltd. (PAPL) PAPL was established as a 100% subsidiary of PCL in July, 2004 and is now a major shareholder of PTL holding 34.5% as on 31st March The issued and paid up capital of PAPL as of March 31, 2014 stands at USD 1.13 million. Polyplex (Singapore) Pte. Ltd. (PSPL) PSPL was established as a 100% subsidiary of PTL in July 2004, as a wholly owned investment company. Subsequently, PSPL invested in Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Şirketi (PE), through Share capital injection as well as by extending subordinated loans, to set up a manufacturing factory in Turkey so as to serve the demand in European and other proximate markets. In September 2009, PSPL set up a trading company in China, Polyplex Trading (Shenzhen) Co Ltd (PTSL) by investing $ 400,000 as share capital. The issued and paid up capital of PSPL (including Preference Share Capital) as of March 31, 2014 stands at Euro 9.14 million. Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Şirketi (PE) PSPL had incorporated a 100% owned subsidiary company, PE in Turkey for setting up a Greenfield polyester film plant to cater to the European and other proximate markets. The commercial operations started in December, 2005 with the start up of the first thin PET film line. The first Metallizer plant started production in March, The PET resin plant commenced commercial production from December, The second thin PET film line and Metallized Film line commenced commercial production in May The latest addition to its asset has been an Offline Coater which started commercial production in March The issued and paid up capital of PE, including Additional Contribution from PSPL, as of March 31, 2014 stands at Euro 8.83 million. Polyplex Trading (Shenzhen) Co. Ltd (PTSL) In the financial year , PTL invested in the setting up of a wholly owned Trading Company in Shenzhen, China, through its 100% held Investment Company in Singapore, PSPL. The decision to invest in the setting up of the Trading Company in China was a strategic initiative to establish the Company s presence in China, which is one of the largest and the fastest growing market in this industry. The issued and paid up capital of PTSL as at 31st March 2014 is USD 0.4 million. Polyplex Americas Holding Inc (PAH). In FY , PTL invested in setting up a 100% Investment and Trading & Distribution Company in USA. PAH has further invested in Polyplex (USA) LLC, a manufacturing facility. The issued and 21

24 Annual Report paid up capital of PAH (including the Additional Paid-In Capital) as on 31st March 2014 is USD million. Polyplex USA LLC (PUL) Polyplex USA LLC, Decatur, Alabama, was established in FY as a 100% subsidiary of PAH. This is the first manufacturing base of Polyplex in USA. The thin PET film line has started commercial production in April, 2013 and the PET Resins plant project is currently under implementation and is expected to start commercial operations in Q2 of FY The members contribution which represents the paid up capital as on 31st March 14 is USD 29.5 million. Polyplex Resins Sanayi Ve Ticaret A.S (PR) Polyplex Resins Sanayi Ve Ticaret A.S (PR) was incorporated in Turkey, in December 2011, as a 100% subsidiary of PAPL. In October 2012, PE acquired 67% stake in PR from PAPL. The PET Bottle Grade Resin line, the first line in the Polyplex group, is under implementation at PR. The Paid up Capital of PR as at 31st March, 2014 is Turkish Lira 20.2 million. Polyplex Europe B.V Polyplex Europe B.V was established in April 2013 as a 100% subsidiary of Polyplex (Thailand) Plc. The registered capital is 3 million euro, and euro 0.2 million has been called and paid up till 31st March 14. This company is mainly engaged in the warehousing and distribution of different products of the Company in the European market. Polyplex Paketleme Çözümleri Sanayi ve Ticaret A.Ş Polyplex Europa Polyester Film Sanayi ve Ticaret Anonim Şirketi (PE) established a company in Turkey, named Polyplex Paketleme Çözümleri Sanayi ve Ticaret A.Ş. holding 99,99% of its share capital. This company will be mainly be engaged in trading of PET Film, PET chips and other products of the Company. The Registered Share capital of this company is TRY 100,000 as of March 31, 2014, which has been fully called and paid up. 22

25 4. Nature of business 4.1 Revenue structure of the Company PTL s standalone and consolidated sales value classified by regions is shown below: STANDALONE Customers Bt. Million % Bt. million % Bt. Million % Exports Asia 2, , North America Europe Others Total exports 3, , Domestic Sales Sale of chips/others Total sales revenues 4, , , Other revenues Grand total 4, , , CONSOLIDATED Customers Bt. Million % Bt. million % Bt. Million % Exports Asia 2, , , North America 2, , , Europe 2, , , Others Total exports 8, , , Domestic sales - PTL (Thailand) PE (Turkey) PUL (USA) 1, Total Domestic sales 1, , , Sale of chips/others Total sales revenues 10, , , Other revenues Grand total 10, , , Note: 1) Sale of chips/others includes both domestic and export sales. 2) Includes Exchange gain, miscellaneous sales, Export Incentive, interest received, etc. 23

26 Annual Report Consolidated Regionwise Film Sales FY Others, 1% Europe, 37% Asia, 35% North America, 27% Asia North America Europe Others 4.2. Business Goals The vision of Polyplex is to continuously grow, create value and establish global leadership in the plastic film business through building trusted partnerships with Investors, Customers, Business Associates and Employees. Keeping this vision in mind, Polyplex has been moving towards establishing itself as a Preferred packaging substrate provider as against just a PET thin film supplier, by undertaking expansions for manufacturing BOPP film and CPP film, which are other Packaging substrates used by Converters, in addition to PET thin film. The Thick PET film line in Thailand which started commercial production in Oct, 2013, is Polyplex s first step into the Thick Film segment which would help in diversifying its product and customer portfolio. The second Extrusion coating line and the Blown PP line projects in Thailand and the Offline coater in Turkey would help in diversifying its product portfolio further. PR, which will be producing and distributing bottle grade PET chips would be again a new segment for the Company. The business goal is to increase market share in various regional markets - through geographically diversified manufacturing presence, increased market penetration in key markets and build a diversified portfolio of products like Metallized films, Clear films, Thermal Lamination films, Silicone Coated film, Chemically Coated films, and other grades of packaging films like CPP, BOPP etc. The new Thin PET film line in USA which started in April, 2013, will help the company to increase its market share in American continent by moving closer to the customers and becoming a preferred on-shore supplier as against an off-shore or near-shore supplier in the past. 24

27 4.3. Promotion certificates PTL has been granted ten BOI promotion certificates, details of which are as below: S.No Certificate No. Type of business Date granted (2)/2545 PET film 20-May /(2)/2546 PET film and PET Resin 11-Jun (2)/2548 Metallized Films 22-Feb (2)/2550 Thermal Lamination Films 14-Mar (2)/2551 Metallized Films 10-Jan (2)/2552 CPP film (Plain and Metallized CPP) 4-Feb (2)/2553 Silicone Coated Film / Blown PP 14-July (2)/2555 Thermal Lamination Film (Line 2) 12-May (2)/2555 PET Thick Film and PET Resin 21-May (2)/2557 Metallized Films 20-March-2014 By virtue of the provisions of the Board of Investment Promotion Act B.E. 2520, the Company has been granted certain standard promotional privileges on the manufacturing and distributing the polyester film/resin/thermal Lamination film/cpp film/ Silicone Coated/Blown PP film as per the following sections: 25, 26, 27, 28, 31, 34, 35(1), 35(2), 35(3), 36(1), 36(2) and 37 respectively. The Company must comply with certain conditions and restrictions provided for in the promotion certificate. Details of the privileges of each of the above sections are available at Business Operations by each product line Manufacture and Distribution of Polyester thin film (Polyethylene Terephthalate Film, also called PET film, sold under the Brand name Sarafil ), is the core business of the Company, including its subsidiaries. It focuses mainly on 3 key segments - Packaging, Industrial and Electrical. The customers use the company s products as raw material to produce their end-products which are then sold to their consumers. Some examples of products made from PET thin film are Coffee/Tea bag, snack bag, softener bag, detergent bag, wire/cable wrap and hot stamping foil. 25

28 Annual Report In April 2008, the company started manufacturing a downstream value added product called Thermal Lamination film. This sold under the brand name Saralam. In this product line, the PET film or BOPP film is used as the base film, and then extrusion coated with adhesive resins like LDPE or EVA, based on the requirement of the end use application to be catered to. After the start up of the second line in June 13, the Company has increased its capacity of this product with an aim to increase the value added product sales in its mix. Some of the applications of Saralam are as under: In line with its objective of becoming a complete packaging solution provider, rather than just a thin PET film supplier, the company has in March 2010 started the manufacture of Cast polypropylene film. The company manufactures and sells plain CPP film & metallised CPP film under the brand name SaraCPP. In an effort to continue its objective of diversifying the product as well as the customer base, Polyplex set up a Silicone Coating film line is Thailand which commenced commercial operations in March 12 under the brand name Saracote. Some of its applications are as under: The Blown Polypropylene film line in Thailand is another concentric diversification by the Company in the plastic film business. This film is mainly used as a base film for the Silicone Coated film, as well as sold to potential customers. The Thick PET film line in Thailand is another related diversification by the Company which will help the company to cater more to the industrial and electrical segments as compared to the packaging segment for Thin PET film. Some of the common applications of Thick PET film are as under: 26

29 As a sustainability initiative, the Company has invested in a project to recycle its process waste as well as post consumer waste. The project has started commercial operations in December, 2013 in Thailand, under the Company s subsidiary - EcoBlue Limited. In line with its strategy to expand in related areas of the plastic industry, the Company is investing in a PET Bottle Grade resin line in Turkey. The project is expected to commence commercial operations in H2 of Product Description The range of products offered by the company is as under: A.) Transparent thin PET films which can divided into 5 sub-categories Plain Corona or chemically treated High adhesion films Ultra clear films Co-extruded films B.) Metallized PET films Semi Metallized film (low Optical density) High barrier films C.) Specialty Films Twist films Anti static films 27

30 Annual Report Heat Sealable films Isotropic Films, High Friction Films, etc Matte films Thick films D.) Thermal Lamination Film Gloss PET Thermal Film MATTE PET Thermal Film BOPP Thermal Film Metallized Thermal Film E.) Cast Polypropylene film - Product range: Lamination & Conversion grade film o Transparent film for lamination & surface printing o High hot tack film for candy packing Metallizable grade film - Transparent heat sealable film for vacuum metallization Twist grade film Retort grade film F.) Siliconized Films (Under the brand name Saracote ) in PET and PP films are used in various applications such as: Shingle roofing tapes Release liner in pressure sensitive labels. Release liner in pressure sensitive adhesive tapes. Release liner in medical and hygiene products. G.) Thick PET Film main sub categories are as under: Milky White Clear/Ultra Clear Transparent Hazy Film Product Characteristics a) Characteristic of PET film PET film characteristic properties are as follows: Optically brilliant, clear appearance Excellent mechanical strength and toughness Good dielectric properties Good flatness and coefficient of friction (COF) Tear-resistant and puncture - resistant characteristics Excellent dimensional stability over a wide range of temperatures Very good resistance to most common solvents, moisture, oil, and grease Excellent barrier against a wide range of gases PET film can also be modified with varying degrees of shrinkage, opacity & colors and different surface textures for it to be used over a wide range of applications. 28

31 A wide range of chemical treatments (in addition to corona) can be applied to PET film during its manufacture to help it adhere to various coatings. b) Characteristics of CPP Film Excellent Heat sealing properties/ High heat resistance Exceptional Optics Good dimensional stability and barrier properties Excellent printability Metallized CPP - Significantly increases barrier properties c) Characteristics of Thermal Lamination Films High gloss & stiffness provide longevity to laminated media Coated adhesive forms inseparable bond with inks/papers Surface is conducive to add-on processes like Hot stamping, UV coating Improves visual appeal of product d) Characteristics of Silicone Coated Films Silicone Coated film is designed to provide excellent carrier to pressure sensitive material Single/ Double sided coated film Superior tensile strength, dimensional stability and caliper control as compared to other Liners End Use segment Thin PET film can be used in the following 3 key segments Packaging - Clear and Metallized thin PET film can be used as part of the outer layer and middle layer of the flexible packaging such as coffee bag, snack bag, softener bag, and detergent bag. Industrial - Comprising of Hot stamping foils, flexible air-conditioning ducts, labels /ID cards, lamination products and many more. Electrical - Wire and cable wrap, membrane switches, flexible printed circuits, capacitors and motor insulation. Thick PET film is mainly used in the Industrial and Electrical segments Electrical This segment accounts for almost 60% - 65% of Thick PET film market and is driving the growth in demand of Thick PET films. This segment can be further sub-classified under the following: o Display: Flat panel display, Advance display, Holographic, STN Reflectors, Anti-reflection, Touch Panels (ITO), & Optical Applications. o Electrical: Electrical Insulation, Cable Wrap, Transformers, Slot Liners, Wedges, and Phase Insulation for Motors and Generators. o Electronics: Photo tool, Photo resist, Flexible Printed Circuits (FPC), 29

32 Annual Report Membrane Touch Switch (MTS) and Medical Sensors o Solar: PV Back sheet (Protective film), Insulation film, Protective film for Top Surface. Industrial Window Film, Laminating Film, Credit & Prepaid Cards, Medical Film etc are the key applications. Thermal Lamination films mainly cater to the following applications: Thermal Lamination of documents or printed media Reflective Insulation Flexible packaging Rigid packing using printed corrugated carton board CPP films can be used in the following key segments: Packaging - CPP film is used as the inner most layer in food packaging, due to its excellent heat sealing properties. It may also be used in Textile packaging, packaging of health care products/ consumer products etc Industrial Hot fill bags & liners, Industrial adhesive tapes, Interior automotive trim panels etc Silicone Coated Films mainly cater to the following applications: PET Release liners for labels PET Shingle tapes for the roofing industry PP release liners for labels/stickers. The segmental break-up of revenue (PTL Standalone and Consolidated) from Film sales (Plain & Metallized PET films, Thermal Lamination/ Silicone Coated Films/ CPP film and Blown PP film) are as follows: STANDALONE SALES Segment Bt. Mn % Bt. Mn % Bt. Mn % Packaging Use 3, , , Industrial Use Electrical Use Total Film Sales 4, , ,

33 CONSOLIDATED SALES Segment Bt. Mn % Bt. Mn % Bt. Mn % Packaging Use 7, , , Industrial Use 2, , , Electrical Use Total Film Sales 10, , , Note: 1) Sales of Thermal lamination film and Silicone Coated Film are included in 2 segments i.e. Packaging segment and Industrial segment Consolidated Segmentwise Film Sales FY Industrial, 32% Electrical, 1% Packaging, 67% Packaging Industrial Electrical Products with similar properties In certain applications like graphics and magnetic recordings, substituting PET film would result in compromising performance characteristics of the product (e.g., strength, flatness, clarity, tear resistance, thermal stability and chemical resistance). However, in other applications, for which certain PET film performance characteristics may not be needed, PET film competes with a wide variety of substitute materials. These applications tend to fall in the low end of the product range, where other plastic films (e.g., polyvinyl chloride, polypropylene, and polyethylene films) and paper may be considered as lower-priced substitutes. Applications for which a variety of substitute products may exist are primarily packaging and general-purpose industrial applications. BOPP Films (Biaxially Oriented Polypropylene) is one such close substitute product type, which is comparable in terms of its broad physical and mechanical properties to Polyester films. However, there are pros and cons of using PET film or BOPP films and depending upon the application requirements, a choice of the 31

34 Annual Report substrate would be made. As a result of this, both PET films and BOPP films have largely demarcated pockets where one is preferred over the other. A Comparison of BOPP Films and BOPET (Polyester) Films Polyester film is considered as the premium plastic film in the flexible packaging industry. This is also reflected by the difference in the volume of the two products. Features BOPP BOPET Water vapour barrier Excellent Fair Gas barrier properties Poor Excellent Break down voltage Poor Excellent Machineability Fair Excellent Printability Fair Excellent Suitability for metallising Poor Excellent Density (gm/cc) Low (0.91) High (1.39) Strength Fair Excellent Temperature Sensitivity Poor Excellent Polyester film when stretched in both directions gives excellent dimensional stability, gas barrier properties, break-down voltage etc. BOPP, despite stretching remains a limp film. Polyester film has better handling capabilities for fluctuations in temperatures etc. and is therefore also preferred in the less sophisticated markets. In tropical countries PET is also preferred due to its moisture and oxygen barrier properties. In addition products where aroma retention is important require the use of PET; e.g. coffee, tea. On the other hand, the low density of BOPP (0.91 Vs for PET) makes it a cheaper alternative in packaging. However, the advantage of density is to some extent offset by the need to typically have a thicker film when using BOPP as compared to PET for the same application. Further, since PET is not ordinarily heat sealable, BOPP is preferred in heat sealable applications. All over the world BOPP and PET have established their respective segments in the packaging market and overlap is insignificant. Even in times of decline in BOPP selling prices few years back, there was no visible impact on the growth in PET films consumption. This establishes the limited substitutability between the two products Business Strategy Key elements of the strategy are: - Attain cost leadership by way of capacity expansion and vertical integration. 32

35 - Capture high growth markets and build good customer relationship. - To build strong global delivery capabilities with a judicious mix of on-shore, near-shore and off-shore strategy. - Further broad base the product portfolio by investing in upgrading technical and R&D capabilities. - Concentric and related diversification to bring stability in earnings. - Consolidate market position in key geographic locations. Moving in this direction, the following initiatives have been taken by the Company in the past and are planned for future: o The setting up of 2 successive Thin PET film lines in Thailand was the first step towards achieving cost leadership position along with diversification of customer base. o With the start up of the second Thin PET film line in Turkey in May 2008, the subsidiary has an even stronger cost effective production base to service its expanding customer base in Europe, Middle East, Africa & CIS/Russia. o Backward integration into the manufacturing of PET chips has strengthened the cost structure of the Company in Thailand and also of the subsidiary in Turkey. o With the Extrusion Coating plant in April 2008 and the additional Metallizers in Thailand and Turkey in May 2008, the Company has been able to significantly increase the share of value added products, in its sales portfolio thereby improving its profitability on the whole. o As a part of its strategy of concentric diversification, the Company has set up a CPP film manufacturing line in Thailand in March This has helped the Company to establish itself as a complete packaging substrate provider. o With the start up of the new Silicone Coated film in Thailand in March 2012, the Company has been able to increase its presence in new product segments and thereby reduce the impact of the cyclical nature of the Thin Polyester Film industry. o The Company s decision to invest in a new PET Thin film line in USA is another step towards geographically diversifying its manufacturing base. This would help the Company to participate in the growth in the flexible packaging segment in the American region and increase its market share substantially. o The PET Thick film line in Thailand would help the company to bring about more stability in earnings, once the line is ramped up to optimum levels, as this segment is generally more stable in comparison to the PET Thin film segment. o The second Extrusion coating line in Thailand would help the Company to increase its market share in this industry as well as further diversify its product portfolio. o The Blown PP line would help Polyplex to enter into the Silicone coated PP film market. o The setting up of a recycle plant in Thailand for recycling various types of plastic waste is the first step by the Company towards the Green Initiative. o The investment in the PET Bottle Grade Resin line in Turkey is another initiative towards diversification of risk and enhancing of the product range. o Decision to invest in 2 new state of the art Metallizers with latest technology (one each in Thailand and Turkey), will help the Company to meet the increased as well as demand for new products in the Metallised Film market. 33

36 Annual Report o o Various types of customer engagement initiatives by the Company have helped it to not only retain key customers, but also increase its customer base across the globe. The wide network of distributors and agents has helped the Company to gain access to all key markets of the world. The parent company in India has set up a dedicated Research and Development center which works closely with key customers, including end users of convertors to develop specialty and innovative products Distribution Channel The Company distributes its products to both domestic and overseas markets, with main focus put on the latter. The product distribution is being made directly to the end users using its own marketing arms in USA, Netherlands and in China as well as commission agents across the globe. The indirect channel is mainly through distributors in designated areas. The sales through distributors and commission agents help support and even boost the sale volumes as these distributors and agents are in close proximity of the target markets, hence allowing for closer service provision to the customers with rapid delivery, and also better market penetration to access small customers. Value of total film sales to end users and distributors are as follows. Sales made through commission agents are included in End Users segment. STANDALONE SALES Customers Bt. million Bt. million Bt. million % Bt. million % End Users 2, , , Distributors 2, , , Total 4, , , CONSOLIDATED SALES Customers Bt. million % Bt. million % Bt. Million % End Users 6, , , Distributors 3, , , Total 10, , ,

37 4.7. Markets and competitive environment Global Demand and supply Thin PET Film The growth in packaging has over the years shifted the production and usage patterns of PET films. The Company s relevant segments of Packaging, Industrial and Electrical constitute 98% of the total demand and the traditional high-end technology segments like magnetic media and imaging segments are reduced to only 2% of the total consumption due to technology transformation. Better packaging not only improves the shelf life of the products but is also essential for improving product appeal in a highly competitive consumer goods industry. Flexible packaging also plays a key role in source reduction on the principle of use less waste in the first place which has ensured higher-than-gdp growth in the flexible packaging industry across the globe. PET film, being a higher-end substrate within packaging, has grown more rapidly than other substrates, growing at an average of about 7%-9% per annum. Demand in packaging is quite resilient as it relates to consumption of food products and consumer staples which are to a large extent non-discretionary in nature. This characteristic of the packaging segment has resulted in steady growth in demand, despite the adverse factors of economic slowdown witnessed in the recent past. Global PET Thin film demand by End Use 8% 1% 0% ,504 KMT 20% 24% 5% 2% 1% ,680 KMT Packaging & Metallised Films Other Industrial Electrical 68% 71% Magnetic Media Imaging Source: Company/ Industry estimates 35

38 Annual Report An increase in the purchasing power, coupled with the changing life style of people in the developing countries has brought with it a substantial increase in the per capita consumption of packaging material. As a result of this, Asia (excluding Japan & Korea), is the largest market for PET films with almost one-third of the PET films produced being consumed in this region. At the same time, per capita consumption of packaging material in developing countries is still very low as compared to the mature markets. The key drivers of demand growth in these regions are the increase in the share of organized sector, increasing consumerism, changing demographics and the resulting need for better and more convenient packaging. A similar trend is also evident on the supply-side with most of the new capacities being added in low-cost developing countries. Most of the new capacity is also focused on the packaging segment, with an emphasis on high productivity and low operating costs. This has adversely impacted the traditionally large producers of PET film operating with high cost structures, who have now been forced to concentrate in the emerging niche technologies in PET films like films for LCDs, solar panels, touch screens and specific highend applications within packaging. While trade defense measures like anti-dumping and countervailing duties are on the rise in an increasingly competitive market environment, they are unable to address the inherent problems of unproductive assets operating in the developed countries producing regular films. Global Thin PET film demand by Region 3% 3% 12% 14% ,504 KMT 64% ,680 KMT 14% 17% 2% 2% Europe North America South America Asia Middle East & Africa 69% Source: Company/ Industry estimates During the year 2013, the Thin PET film industry witnessed an oversupply scenario due to excessive capacity addition following the exceptionally high margins witnessed in the PET film industry in The current situation of oversupply is expected to continue for an 36

39 extended period of another one to two years. We expect global Thin PET film growth rates to be at about 7% in the next few years, with the demand in the South East Asian region growing at a higher rate of 8-9%. The overall capacity addition in the next 12 months is expected to be higher than the growth in demand but the actual timing of the additions will determine the duration of the current oversupply situation. Companies with consistent quality products, diversified product portfolio, access to international customers and a better supply chain model stand a better chance of participating in the market growth and improving/maintaining their margins above the industry averages. Thick PET Film The demand of Thick PET film is mainly concentrated in the developed economies of the world. Electrical and Industrial are the key segments in Thick film industry. In the last few years the demand of Thick PET film has been growing at a CAGR of about 6.0%-7.0%. New innovations and usage new applications in the Electrical segments (like Flat Screen panel, PV solar cells etc) have been driving the growth in the past and would help this industry to continue to grow at a healthy CAGR of about 6.0% for the next few years. Global Thick PET film demand by End use 16% 10% 22% 6% 11% 12% 25% 8% KMT 16% 39% KMT 8% Medical / X-Ray Other Imaging 8% Packaging / Labels 12% Flat Panel Screens Photovoltaic cells 7% Other Electrical / Electronics Other Industrial Similar to Thin Film industry, the additions in the capacity of Thick PET film has been done mainly by countries within Asia like China, South Korea and Japan. However, European and US still continue to have more than 20% of world capacity. 37

40 Annual Report Global Thick PET film demand by Region 22% 17% 9% 6% 4% 5% KMT 12% 19% KMT 13% 16% Europe North America China Japan South Korea 21% 16% 22% Taiwan Other World 18% Source: Company/ Industry estimates Industry Situation Global competition The global Thin PET film manufacturers can be classified into 3 main categories by size of their production capacity: (i) World majors with production capacity of over 100,000 tons per year (e.g. Dupont- Teijin, Mitsubishi and Toray, Cifu, Polyplex, Flex, Jindal etc). (ii) Mid-size players with production capacity between 50, ,000 tons per year and (iii) Small / local producers with production capacity of less than 50,000 tons per year Demand for PET film for magnetic media application has been high in the past, prompting major producers to focus mainly on this segment. Competition in the magnetic media segment is thus confined only to these major ones based on their long and well established expertise and experience. For other PET films including thin film, competition is seen among all groups of producers thanks to the consistently rising demand, especially for thin film which is used in packaging, industrial and electrical segments where healthy growth of demand has been recorded in the past. Thus small, mid-sized and major producers (including Polyplex group) have expanded their capacity to cope with the increasing demand in these segments. This has led to the expectation of higher market share by producers in various countries which have surplus production capacity. 38

41 Domestic competition Thailand s PET film market is of small scale as compared to the global PET film market. As per our estimates, demand in Thailand is approximately 33,000 tons per year with growth rate for next few years expected to be about 8-9% p.a. In the past, domestic producers have put emphasis on producing BOPP film rather than any other types. PTL has principally focused on PET film since its inception in Thailand and started with one PET film line, within nine months set up a second line as well. Over the years, PTL has had several other expansions in film capacity i.e value added films like Metallized film, Thermal Lamination film, Silicone Coated film etc and related product diversification like manufacturing CPP film. During 2013, Company commenced commercial operation of Thick PET, Blown PP and Extrusion Coated lines. It is presently having the largest PET Thin film production capacity in the country. The film production capacities of the various plastic film producers in Thailand as at 31st March 2014 are as follows: Production line (tons per year) Thai Film Industrials Plc. A.J. Plast. Plc. SRF industries Limited PTL* BOPP film 107, ,000 - PET Thin film 3,500 62,000 30,000 48,000 CPP film 3,500 - **15,600 BOPA film - 18,000 - Metallized film 7,000 10,800 4,000 23,800# Blown PP Film 4,645 PET Thick Film 28,800 Total 124, ,800 34,000 88,800 Thermal Lamination film mn Sqm Silicone Coated Film Mn Sqm Source: Form 56-1/Industry sources * PTL capacities are as approved by BOI, including ongoing projects. For actual attainable capacities, please refer table below, under section Production Capacity # Including capacity of 7,600 TPA for the new metalliser project under implementation ** Combined capacity p.a. as approved by BOI for CPP plain and metalized film 39

42 Annual Report Conclusion on PET film industry The PET film industry has been expanding continuously in the past. The main driving factor for the past few years has been the growth of the packaging, industrial and electrical segments. Meanwhile, PET film producers have boosted their capacity utilization and/or their production capacity aggressively to respond to the increasing growth of demand. During the years 2000 to 2013, global average capacity utilization of PET film manufacturers was in the range of 80-90% of rated or nameplate capacity, except in certain years (including in year 2013) where the utilization rate declined to below 80% due to excess capacity built up in the industry. The levels of 85-90% are considered a high utilization rate being close to the full machinery capacity. In practice, some producers produce lower than the nameplate capacity due to the long use and hence the poor condition of machinery while some produce with capacity utilization even higher than 100% of the nameplate capacity using new and modern machinery and based on their long-time expertise and experience. The trend of global capacity utilization for Thin and Thick PET film since 2002 is as under: Global Thin Plain PET Film K M T 4, , , , , , , % 93% 95% 83% 81% 85% 86% 85% 88% 86% 80% 69% 100% 95% 90% 85% 80% 75% 70% 65% 60% 55% Demand Capacity Capacity Utlization 50% 40

43 Global Thick Plain PET Film K M T 1, , , % 68% 64% 65% 73% 78% 86% 85% 91% 88% 77% 67% 95% 90% 85% 80% 75% 70% 65% 60% 55% Demand Capacity Capacity Utlization 50% Note: Data from industry sources/company Estimates Despite the rising demand for PET film, it is not easy for new entrants to compete with the existing players. It is because it is an industry that needs high levels of know-how, skills and expertise to ensure the exact product size, standard and specifications required by the customers. Project management skills are also needed to enhance efficiency and cost effectiveness that will lead to competitiveness against other producers. Capacity expansion may be unavoidable to attain larger size and hence economy of scale. Polyplex group has accumulated over 25 years experience in the PET film industry. It has been strengthened with consistent expansion in production capacity. Its management is highly competent. Delivery of products is efficient by having geographically distributed production bases and a widely spread sales and distribution network that allow for easy access to the customers. The emphasis on the countries with high demand growth potential, production and cost effectiveness and concentrating on business segments such as packaging, industrial and electrical segments which have recorded healthy growth all along has contributed to the Polyplex group becoming one of the leading producers of thin PET film (excluding capacity for magnetic media). In view of tariff barriers imposed by importing countries such as anti-dumping and anti-subsidy duties, the Company s parent company based in India has experienced such threat from both the EU and the USA several times. It has thus been keen on the issue, having information on the criteria and inspection process adopted by those countries and knowing how to deal with the problem. It is an outcome of the understanding of the process, that USA has levied zero duties till date under the anti-dumping measure against the company. 41

44 Annual Report As an outcome of the Antidumping investigation by the Government of Brazil against Thailand and Turkey, an Anti Dumping duty of about 28 cents/kg on imports from Thailand to Brazil and about 6.7 cents/kg on imports from Turkey to Brazil has been levied. The impact of these duties is not very significant as the Company s sales to Brazil are minimal. The company is undertaking all the safeguards to insulate against the risk arising out of anti-dumping duties and other protective barriers imposed by the importing countries. Outlook for the PET film industry: Global demand for PET films (Thin & Thick) is expected to grow at a CAGR of about 6-7% over the next few years. Demand growth for the products in the Flexible Packaging segment in the South East Asian region is expected to be about 8-9%. Mid size and new producers would increasingly look to diversify their product range from commodity grades to specialty grade films to improve margins. Addition to global capacity during the next 12 months is expected to be higher than the growth in the demand, and hence the current situation of over supply is expected to remain for another 1-2 years. New entrants from China have been increasingly dominating the market for PET film in the last 2-3 years, but their production is expected to mainly fulfill domestic demand which is growing rapidly. The cyclical nature of the industry would continue. The transitioning of the industry to Asia would pose higher competitive pressure in the years to come. Free Trade Agreements being entered between various countries are opening up new opportunities, as well as threats. Increasingly, the larger producers are trying to tie up strategic partnerships or acquisitions in order to ensure growth, presence in diversified markets or products or even as a measure to acquire technology for newer and sophisticated product range Manufacturing of product Production PTL is having 3 plots of land at Siam Eastern Industrial Park, Rayong Province, with a total area of about 100 Rai on which all the production facilities are built up. 42

45 a) Production capacity Capacity of Polyplex group as on 31st March 2014 (including ongoing projects) is as follows: MT 225, ,000 Polyplex Group Capacity - PET-Thin PET-Thick BOPP CPP Blown PP PET Chips Bottle Grade PET Resin Metallizer Coated Films Mn Sqm 1, , , ,600 55, , Base Film PET Film MET Film Coated Resin Film 4,645-10,000-28,800-80, ,000 24, Base Film PET Film MET Film Coated Resin Film - 58, ,000-57,600 17, Base Film BG PET PET Film MET Film Resin Resin 146 Coated Film , , , Base Film PET Film MET Film Resin INDIA THAILAND TURKEY USA Product Type India Thailand* Turkey USA Total Unit PET Thin Plain Film 55,000 42,000 58,000 31, ,000 MT PET Thick Film 28,800 28,800 MT PET Resin 77,600 80,500 57,600 57, ,300 MT Metallized Film 20,400 24,700 17,700 8,700 55,900 MT Bottle Grade PET Resin 210, ,000 MT BOPP Film 35,000 35,000 MT CPP Plain Film 10,000 10,000 MT Blown PP Film 4,645 4,645 MT Coated Films ,265 Mn Sqm * Capacities for Thailand above are attainable capacities and capacities approved by BOI based on theoretical output are higher. For BOI approved capacities in Thailand, please refer table above under section Domestic competition. The above table includes the capacities for the projects under implementation at Thailand, Turkey and in USA. 43

46 Annual Report The capacity utilization rates for the Plain PET film lines PTL Standalone and Consolidated are as follows: PET Thin Film Production & Capacity Utilization - Thailand 43,000 42,000 41,000 98% 95% 94% 95% 90% 97% 101% 101% 98% 97% 120% 100% MT 40,000 39,000 38,000 37,000 36,000 35,000 38,199 36,877 36,847 39,989 37,950 40,764 42,420 42,446 41,165 40,793 80% 60% 40% 20% 34, % Production (MT) Capacity Utilization (%) MT PET Thin Film Production & Capacity Utilization - Consolidated 120,000 98% 91% 94% 95% 89% 81% 92% 94% 95% 100,000 85% 94,843 80,000 60,320 66,748 78,032 92,197 95,296 94, ,429 60,000 40,000 38,199 41,820 20, % 100% 80% 60% 40% 20% Production (MT) Capacity Utilization (%) 0% Major raw materials PET resin PET Resin (polyethylene terephthalate resin) is the major raw material in the production process for PET films. It has been the strategy of Polyplex to produce its own Resins at all the manufacturing locations. Accordingly every location has its own Resin plant with sufficient capacity to meet its requirement. Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG): The major raw materials for PET resin production are purified terephthalic acid (PTA) and mono ethylene glycol (MEG). To ensure uninterrupted procurement of raw materials the Company has currently tied up with two local suppliers for PTA and one local supplier for MEG for PTL. The subsidiary in Turkey is importing PTA from Europe and MEG from Middle East. For the subsidiary in USA, talks are on with the local suppliers and the contracts will be finalized before the start up of the PET resin line. 44

47 The company enters into Annual contracts as per which 100% of the company s requirements would be supplied as per the specified price formula throughout the contractual period(s). Major Raw materials for the Extrusion Coated Film production: Apart from PET film, which comes mostly from the company s in house production, the major raw materials for the Extrusion Coated film production are BOPP base film and Coating chemicals such as LDPE and EVA. All these are sourced from various manufacturers / traders from within Thailand as well as imports from within the region. Major Raw materials for the Cast Polypropylene Film production: The major raw materials for the Cast Polypropylene film production are Homo Polymer and Co-Polymer. Homopolymer is being procured locally while Co-Polymer is being imported. Major Raw materials for the Silicone Coated Film production: For the Silicone Coating line, the main raw material is PET film which is transferred from the Company s in house production and also imported from the Parent company in India at Arm s length pricing. Silicone and other chemicals are being imported from USA and Europe from leading suppliers. Major Raw materials for the Blown PP Film production: For Blown PP film line, the main raw material is PP resins (Homopolymer, Co-Polymer and PP Color master batches). These are sourced from local suppliers as well as imports from within this region. The value chain for the Company s PET, CPP & Blown PP film business is depicted below: NATURAL RESOURCES BASIC PETROCHEMICALS RAW MATERIALS PLASTIC AND INTERMEDIATE PRODUCTS END PRODUCTS Natural Gas Ethylene MEG Para Xylene PTA Polypropylene Bottle Grade PET Resin Film Grade PET Resin PP RESIN Coating Base Film Metalizing I N D U S T R I A L B U Y E R S & C O N V E R T E R S Oil Polyplex s area of operation 45

48 Annual Report The value chain for Thermal Lamination film is given below: RAW MATERIALS PLASTIC AND INTERMEDIATE PRODUCTS PET / BOPP FILMS EVA / LDPE E X T R U S I O N C O A T I N G P R O C E S S T H E R M A L L A M I N A T I O N F I L M P R I N T E R S / L A M I N A T O R S E N D C U S T O M E R S Polyplex s area of operation Impact on the environment There is a negligible impact on environment caused from the polyester film production process since PET in both film and resins are generally recyclable. For its Polyester resin line, it has the required EIA approval and submits regular reports required as per EIA approval to the concerned authorities. Since its commencement of production in March 2003, PTL has not faced any significant problems relating to the environment. Inspection by the Industrial Factory Department has been undertaken on a regular basis, the result of which has come out that the Company s manufacturing process poses no environmental impacts. All our product lines in Thailand have the following certifications: ISO 14001:2004 certification on Environment Management system ISO 9001:2008 certification on Quality Management system OHSAS 18001:2007 certification on Occupational Health and Safety Management system ISO 22000:2005 certification on Food Safety standards TPM Excellence Award (Category A) All our product lines in Turkey have the following certifications: ISO 14001:2004 certification on Environment Management system ISO 9001:2008 certification on Quality Management system 46

49 OHSAS 18001:2007 certification on Occupational Health and Safety Management system BRC/IoP certification on Global Standard for Packaging and Packaging Materials (For Plain and Metallized Film lines) 5. Risk Factors Before making a decision to invest in the shares of the Company, investors should prudently consider the information about risk factors described in this section and all information contained herein. Apart from the said risk factors, there are still other unpredictable risks that may adversely impact the Company s operating results. The key risk factors are: 5.1. Industry Cycle The industry cycle of PET film hinges on the spread between the PET film price and the prices of PTA and MEG which are major raw materials. Whenever the demand supply balance favors the suppliers, the PET film and raw material price spread usually widens, thereby encouraging the manufacturers to increase production by expanding their capacities. On the contrary, if PET film supply is larger than market demand, the film price will drop, hence narrowing the spread between the film and raw material prices. This cyclical nature will inevitably affect every producer s revenues and profits. The FY witnessed a situation of significant oversupply, which has continued from 2012, thereby resulting in margins to remain at historically low levels as the manufacturers were unable to increase selling prices proportionately to pass on raw material cost increase To illustrate the cyclical impact of the PET thin film industry, the movement of profit before tax/ sales of PTL (Consolidated), is shown in comparison with that of the prices of PET film and raw materials, as below: (Average for PTL- Thailand, PE - Turkey and PUL, USA) 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% 22.31% 22.10% 17.11% 7.37% 12.90% 15.46% 14.82% 35.06% 13.72% 4.06% -7.31% CONSOLIDATED PBT AS % OF NET SALES 47

50 Annual Report Bt./Kg Selling Price /kg RM/kg Source: Company information The cyclical behavior can be seen in the above historic data, which has direct impact on the operating results of PET film producers as well as Polyplex. To mitigate such risk, the Company has sought to undertake the following: With high productivity levels and cost control measures, Polyplex believes it is one of the lower cost producers of polyester film in the world which will help it deliver better financial results than the other constituents of the industry. Diversify its product portfolio by introducing new products like Extrusion Coated Film (second Extrusion Coated film line started commercial operations in Jun 13), Cast Polypropylene Film, the Silicone Coating Line, Thick PET Film (commenced commercial production in Oct 13), Blown PP Film, which started commercial operation in Oct 13 to mitigate the risk of over dependency on a single product and single industry. The offline coater which commenced commercial operations in Mar 14 at Polyplex Turkey (PE) would be adding a new range of coated film to the product portfolio of Polyplex. Polyplex is also investing a PET Bottle Grade resin project in Turkey, under a newly formed company, in which PTL indirectly holds a 67% stake, and balance 33% is held by its parent company in Singapore Polyplex (Asia) Pte Ltd (PAPL). This project is expected to start commercial operations in H2 of Investment in 2 new Metallizers (one each at Thailand and Turkey) will help Polyplex to offer new types of products to its customers and further improve the mix of specialty film in its sales. Accessing customers operating across the globe in the flexible packaging and industrial segments by presenting alternative sourcing options from its existing manufacturing locations in Thailand, Turkey and USA and its warehousing & distribution set up in Europe and China, thereby mitigating the risk of over dependency on few customers. Diversified manufacturing and distribution base helps to mitigate the risk of volatile markets. For Eg: South East Asian markets are quite volatile in nature, whereas developed markets 48

51 of US, Europe, Japan etc are less volatile. Polyplex tries to mitigate such risks by having a diversified sales portfolio. Increased focus on new product development through R&D or technology acquisitions besides having a strong technical services team is an additional differentiator between Polyplex and its competition Risks relating to uncertainty in prices of the product and raw material The basic raw material for production of PET film is PET resin, which is in turn produced from Purified Terephthalate Acid (PTA) and Mono Ethylene Glycol (MEG). Since the cost of resin is the single largest component of the total production cost of Polyester film, the fluctuation in the resin price may hurt the Company s operating margins depending upon the ability of the Company to pass the increase in costs to its customers. As selling prices are usually negotiated on a monthly / quarterly basis, in a balanced demand supply situation, PTL is usually able to adjust the selling prices following any changes in the PET resin cost and other operating costs. The above graph of historic Selling price and Raw material price movement demonstrates the correlation between the raw material cost and the selling prices. In most of the years the movement in the selling prices have been following the trend of the raw material cost except for years where other factors influenced the prices like (down cycle in PET film industry due to imbalance in supply demand situation), when the world economies went through a turmoil and in where due to shortage in supply of PET films, the selling prices increased at extraordinarily high levels. During the FY , the Polyester film industry continued to witness excessive over supply situation, brought about by all the additional supplies which came into the market, following the extraordinary high margin levels witnessed in year The pressure on the selling prices continued, due to which the margins of all PET film manufacturers continued to remain at historically low levels. In our estimate, the oversupply situation is expected to continue for some more time, and once demand growth catches up with supplies, the markets should witness a more balanced scenario and the margins should rebound to normal levels. Analysis of historical data shows high correlation between PTA/MEG polyester film prices. The spread between two intermediates would vary depending upon the demand-supply situation of the commodity. Also sudden and sharp movements in raw material prices may affect the correlation for some time. 49

52 Annual Report The chart below shows the past trend in the pricing of PET film and PTA and MEG, in Far East/ US and Europe: USD/ Kg PET Film - PTA - MEG Price Trend (Far East) PET Film (12 Mic. Corona) PTA MEG VA Over PTA & MEG PET Film (12 Mic. Corona) PTA MEG VA Over PTA & MEG PET Film - PTA - MEG Price Trend (US) USD/ Kg PET Film (12 Mic. Corona) PTA MEG VA Over PTA & MEG PET Film (12 Mic. Corona) MEG PTA VA Over PTA & MEG Euro/ Kg PET Film - PTA - MEG Price Trend (Western Europe) PET Film (12 Mic. Corona) PTA MEG VA Over PTA & MEG PET Film (12 Mic. Corona) PTA MEG VA Over PTA & MEG Source: Industry information 50

53 The above industry data demonstrates that variations in the raw material prices by and large tend to get passed on to the end-customers. The demand-supply balance of PET films which could vary across regions could impact margins. The spread between the raw material and PET films, especially over the last few years, has moved in a band. PTL s contracts with some customers provide for a quarterly/periodic review in pricing which enables it to adjust for any raw material cost movement. The Company monitors world and local input price trends carefully and determines its procurement plans accordingly Risk associated with reliance on only a few raw material suppliers The 2 major raw materials for the company, PTA and MEG are well traded commodities, and are available from a variety of manufacturers across the world. In Thailand, the company is meeting its requirement domestically, by procuring each of these raw materials 100% from local suppliers, thereby enjoying certain distinct advantages of shorter lead time/lower raw material inventory carrying levels etc. The company has entered into long term / yearly contract for the supply of the raw material to ensure its availability. These contracts also have a supply guarantee clause to ensure that the risk of buying 100% from a single source and also a single plant operation is mitigated to a large extent. In Turkey, the company procures bulk of PTA & MEG from 2-3 global suppliers through long term / yearly contract and also explores spot opportunities for some part of the business to leverage on the surplus situation on these raw materials from time to time. These contracts guarantee the supply of the material except for force majeure situations. In US, as the PET chips plant is yet to commence operations, the company was sourcing bulk of its PET resin requirement from an unrelated local manufacturer. Some of the special resins were being procured from other units of the company as well as from PCL, India at arm s length pricing. Going forward, once the PET chips plant is operational, the company will be procuring PTA and MEG from unrelated local suppliers in USA. And as far as the pricing is concerned, since it is linked to certain standard international benchmark rates there is high degree of transparency. For the Extrusion Coated film production, apart from PET film which is transferred from the Company s in house production and also imported from the Parent company in India at Arm s length pricing, the major raw materials are BOPP base film and Coating chemicals such as LDPE and EVA. All these are sourced from various manufacturers / traders from within Thailand as well as imports from within the region. The major raw materials for the Cast Polypropylene film production are Homo Polymer and Co- Polymer. Homopolymer is being procured locally while Co-Polymer is being imported. For the Silicone Coating line, the main raw material is PET film which is transferred from the Company s in house production and also imported from the Parent company in India at Arm s 51

54 Annual Report length pricing. Silicone and other chemicals are being imported from USA and Europe from leading suppliers. For Blown PP film line, the main raw material is PP resins (Homopolymer, Co-Polymer and PP Color master batches). We are sourcing our requirement from local supplies as well as imports from within this region Risk from environmental regulatory measures All the production lines of PTL, except for the Polyester resin line, do not require any environmental impact assessment (EIA). For its Polyester Resin line, the Company has the required clearance from the regulatory authorities and utmost care is taken to ensure compliance to the same Risk from competition from existing manufacturers and entry of new players With consistently rising demand and healthy growth potential, the PET film industry attracts new capacity investments from existing large manufacturers who are well-established companies with long experience in this industry, as well as medium to small producers and new entrants with strong capital to accommodate investment in PET film plants and machinery. In this industry, it is quite commonly seen that capacity additions happen in bulk, following a period of attractive margins and profits and this disrupts the demand-supply balance for a temporary period of time, until demand growth catches up with new supplies. In certain cases, as witnessed in the last year, the oversupply is so excessive that the down cycle lasts for a prolonged period of 2-3 years. Despite the cyclical nature of this industry, it continues to remain an attractive industry with strong fundamentals and a steady demand growth. Compared to other players, Polyplex s low cost of production, established quality, geographically diversified manufacturing presence, wide range of products and global market reach are some of key factors which make Polyplex one of the leading players in this industry. It remains confident of being able to compete against both world leading producers as well as newcomers. The Company has strategically embarked on various expansion projects in Turkey, USA and Thailand over the last few years, including the 3 main projects - PET Thick film line in Thailand, PET thin film line investment in USA (both of which have started commercial operations in 2013) and the Bottle Grade PET Resin plant in Turkey (expected to commence commercial operations in H2 of ). This along with the other expansion projects in the pipeline in Thailand and Turkey will further strengthen its competitiveness (Refer Section 3 Business Overview for details on Projects commenced during the year and Section 6 Future projects for new projects in the pipeline). The company has been continuously evaluating other growth options in PET film / value added products / related areas like CPP / BOPP/ Silicone Coated Films at all existing locations in Turkey/Thailand/US, while also continuously evaluating growth options in other new locations/ new product lines. The company has also been evaluating possibilities for any acquisitions to further expand its manufacturing base and also to improve its cost structure, product offering and market reach / penetration. 52

55 5.6. Risk from trade barrier measures Trade barrier measures taken by various countries are broadly of two major types: a) Anti-dumping (AD): An anti-dumping duty can be imposed on imports if the ex-factory prices of such imported products are proved to be lower than the local selling prices of the similar products in the countries of the exporters. For the past few years, the countries adopting this measure are the European Union member countries and the US against such countries as India, China, Brazil and South Korea. b) Anti-subsidy: A countervailing duty (CVD) can be imposed if the government or any government agency provides any benefits or privileges specifically to any company or exporter of such country. Such tax measures will cause import duty on the goods produced and exported from the targeted countries imposed at such a high rate that such goods will carry higher prices and hence have difficulty to compete with the products of the rivals. For manufacturers having a regional manufacturing base in such locations, such trade defense measures can be an opportunity if anti dumping duties are levied against imports from the Asian low cost producers. The company is undertaking all the safeguards to insulate against the risk arising out of anti-dumping duties and other protective barriers imposed by the importing countries. A geographically well-diversified sales portfolio like ours will help mitigate the adverse fall-out of such an action, if any. And by having a local manufacturing presence in USA and Europe, it can take advantage of such trade barriers levied by these countries against imports from Asian countries. In the year 2008, in the US Anti Dumping petition against producers of PET film from Thailand, China, Brazil and Middle East, there was a negative injury ruling by the International Trade Commission (ITC) against Thailand and consequentially, there is no duty against Thailand imports into the US market. As an outcome of the Anti-Dumping Investigation by Brazil in the year 2007, against Thailand, an Anti Dumping duty of about 28 cents/kg on imports from Thailand to Brazil had been imposed. However, the impact of this on the Company is minimal, as the sales to Brazil are almost negligible. As an outcome of the Anti-Dumping investigation initiated by the Government of Brazil in December 2010, against UAE, Mexico and Turkey, in respect of PET film imports into Brazil, the government of Brazil imposed anti-dumping duty of USD / MT on the Company s subsidiary in Turkey (Polyplex Europa), which is however the minimum rate as compared to the rates announced for other countries as well as other producers in Turkey. Polyplex Europa s exports to Brazil are not a very significant portion of their overall sales volumes and as such, the management does not expect any major impact from the anti-dumping margin imposed. 53

56 Annual Report Risks from future projects The major risks associated with any new Projects are as below: Market Risk: Since Polyplex has a global reach and an extensive marketing and distribution network, the Company does not foresee any major risk in developing the markets new products. In the case of the Bottle Grade PET Resin plant, although this is a new product, the Company has already started establishing contacts with key customers in the target markets and remains confident of ramping up sales smoothly. Competition Risk: The Company believes that its cost structure would be globally very competitive and will be one of the major advantages to gain an edge over some of the existing producers/new entrants. Project Implementation risk: Implementation of the Project within the Budgeted cost and timeline is another critical aspect for the success of any Project. Based on past experiences, it can be very well said that the experienced Projects team at Polyplex should be able to achieve successful implementation of new projects on time and within Budgeted costs except for unforeseen circumstances. Funding Risk: Long term Debt to the extent of 65-75% of the Project cost is generally borrowed by the Company and the balance is funded out of internal accruals. Based on the good relationship with existing banks, the Company is quite confident of raising the required financing for any new future Projects at competitive terms and conditions. Currency Risk: For any new project, the currency of borrowing is decided, based on the projected operational cash flows of the project. The currency which has the maximum surplus in the operational cash flows is chosen to be the currency for the loan. This creates a natural hedge for the loan repayments, as and when the repayments start. The company also has internal FX guidelines to cover net exposure of Project costs, in various currencies by booking appropriate forward contracts, so that the risk on the initially estimated overall Project cost, on account of currency fluctuations is minimized. With the new borrowings made for the recent expansions in Thailand, the Forex loan portfolio of the Company has gone up to more than 100 Million USD (including equivalent of the Euro denominated loans), thereby exposing the Company to high amounts of unrealized Fx loss/gains on account of the restatement of such loans. Apart from all the Project specific risks and their mitigation plans as discussed above, the Company would also like to mention here that the overall Project risk of any new Project is covered by taking appropriate Insurance policies to cover various risks such as Erection and Construction all risks, Marine risks, Loss of Profit coverage due to delay in Project Start-up etc Risk from dependence on the parent company Polyplex Corporation Ltd. (PCL), through direct and indirect shareholding, currently controls 51% of the paid up shares in the Company. 54

57 In the initial 2-3 years of its incorporation, PTL s core management team consisted of persons who were previously employed by PCL and they played a vital role in successfully establishing PTL s operations ahead of the schedule and at a lower-than-estimated cost, together with ensuring high productivity levels resulting in the Company s ability to produce quality products at a competitive cost. However, after about 4-5 years of running, once operations were fully stabilized, the company successfully implemented a program for reducing the dependence on expatriates by increasing the proportion of local Thai staff in operating/managerial positions and has been managing the production and operations efficiently thereafter. The Company s present management team is composed of experienced key personnel in production, marketing, distribution and accounting/finance. It has thus been able to run the business on its own without reliance on the parent company. It is only in the research and development area and the implementation of new projects, where the parent company provides know-how and technical assistance to the Company. PTL s business operation is independent from PCL in such undertaking as public offering of equity, borrowing of loans, and other investments in the future, for instance. The parent company need not request any approval from any government bodies except for reporting of significant events to two stock exchanges where it is listed, namely Mumbai Stock Exchange and National Stock Exchange. The Company is confident that there will be no conflict of business interest between PCL and PTL on account of the following: o It is Polyplex s policy in business operation that there is an equitable distribution of business between the various manufacturing units aligned to efficient servicing of customers. o The investment in PTL and its subsidiaries is higher as compared to PCL s assets, hence the success of PTL being critical for PCL Risk from sponsor group holding about 51% of total shares Currently, PTL s major shareholder is PCL (As of March 31, 2014 the promoter Mr. Sanjiv Saraf and related parties control 46.93% in PCL), holding 16.50%, and Polyplex (Asia) Pte. Ltd. ( PAPL ) which is wholly owned by PCL, holding 34.50%, thus in aggregate holding 51% of PTL paid-up common shares of Bt. 800 million. Thus, in matters that require a three-fourths majority vote of shareholders, the minority shareholders can successfully oppose corporate actions undertaken or supported by the majority shareholders. However, the parent company will continue to play a vital role in determining the Company s policy on business administration and operation. However, PTL has set up a three-member Audit Committee to provide for an audit of the operations and the management. Besides, PCL is listed on the Stock Exchanges in India and abides by the Corporate Governance regulations prevailing for listed companies in India. 55

58 Annual Report Foreign exchange risk Most of PTL s products, i.e. about 75-85%, are for exports, which are mostly denominated in US dollars and Euro. As against this, raw material (PTA & MEG) prices are also linked to the US dollar, although their payments are done in Baht and there are Long term loan related interest payments/ loan repayments in USD and Euro. On a standalone basis, the company as at March 31st 14 had Euro loans of about 21.7 million and USD loans of about 73.5 million. There are some expenses which are in Thai Baht, i.e. locally procured raw materials, packing materials, salaries, utilities and other administrative expenses which have to be settled by income from domestic sales and from the surplus income from USD/Euro exports. Thus, broadly speaking, PTL has a net surplus US dollar and Euro position on the trade front, which can be hedged somewhat against repayment of its long-term loans. To the extent possible, the company has been trying to create a natural hedge to mitigate the risk from currency fluctuations. On an ongoing basis, the company also takes forward covers, to cover the net surplus exposure in USD and Euro. Similarly, the Company s subsidiary in Turkey has a net surplus in USD and Euro currencies whereas they have certain payments in the local currency, which is hedged from time to time by taking appropriate forward covers. The subsidiary in USA has USD revenues and USD payments, so there is a natural hedge. The project financing was also made in USD currency so that there is a natural hedge for loan repayment. The funding for new Projects of the company are also planned based on the future inflows from the Project Operations so that a natural hedge can be created to the extent possible. However, as explained above, the increased Forex loan portfolio of the Company of about USD 100 Million (including equivalent of the Euro denominated loans), exposes the Company to high amounts of unrealized Fx loss/gains on account of the restatement of such loans, thereby resulting in instability in reported net profits of the Company Interest rate risk As of March 31, 2014, the Company s outstanding long term loans (consolidated basis) were Euro 55.1 million, USD million and Baht 27.4 million, whereas outstanding short term loans were USD 20.5 million and Baht 985 million. The USD loans amounting to USD 2.4 million (O/S as on March 31st Mar 14) have already been swapped to fixed interest rate and the balance loans have floating LIBOR based interest rates. All the Euro loans have floating EURIBOR based rates. The floating interest rate may put the Company at a risk of rising financial cost if the interest rates move up. The company has been constantly monitoring the interest rates and will take interest rate swaps for converting the liability into fixed rates, if considered beneficial Risk from overlap of products and markets The product portfolio of PCL, PTL, PE and PUL is quite similar. In order to mitigate the risk from overlapping of products and markets, Polyplex has also evolved an equitable policy for distribution of markets, between its Indian, Thailand, Turkey and USA operations based on the 56

59 several factors like product range, delivered cost to customer, supply lead times and preferential duty access. Based on the same, PTL would mainly serve South East Asia, Asia Pacific, China, and Australia & New Zealand. PCL would serve South Asia. Turkey will serve, Europe, Middle East, Africa and CIS/Russian markets. The US manufacturing entity would mainly serve North American and South American markets. The Polyplex group also has a policy on future investments in polyester film / related areas between the Company and its parent company. Investments in India/SAARC region would be decided and made by PCL and its other subsidiaries (excluding the Company) while investments In Thailand / ASEAN region as well as other countries would be in all likelihood be made by PTL or the subsidiaries in which the Company has a major stake. The above is subject to availability of Investible cash / ability to borrow debt by the existing / preferred Company as per the policy Credit risks Credit risk of customers is another significant risk for any business. The Company manages the risk by adopting appropriate credit control policies and procedures. Most of the sales, which are on credit are secured either through a Letter of credit issued by the customer or by taking appropriate credit insurance coverage. The Company also takes extra caution in selection of any new customers and granting of credit. 57

60 Annual Report Future Projects 6.1. Future Projects Metallized Film Line Thailand In October 2013, the Board had approved an investment in a new metalliser in Thailand. This project is being implemented in Thailand by partially using the second plot of land, on which we have the Thermal Lamination, CPP, Silicone Coating, Blown PP and Recycling projects. Project Details The total Investment in this project is about $ 6.5 million, including working capital. The capacity of the new Metallizer is 6,500 TPA. The new line will have the capability to manufacture higher optical density films (up to 4 OD) giving us an opportunity to capture the growth in the new segment of the market, as our current metallisers have capability to manufacture only up to 3 OD Metallized films. Funding of the Project is through Long Term Debt borrowing of $ 5 million and balance is funded out of internal cash flows/ WC lines of the Company. The expected commercial start up of the project is in H2 of The project is promoted by the BOI. Project Rationale Metallized films have traditionally given better returns than plain commodity films. Current metalizing assets can give us film with up 3 OD and hence the Company is missing out on the opportunities of higher OD films. The demand for higher OD films is on the rise and unless the Company invests in enhancing its capability to offer such films, the Company would stand to miss the opportunity to participate in this segment. Demand for PET Metallized films is expected to continue to grow at a healthy rate in the coming years, and if the Company does not augment its Metalizing capacity, its market share would shrink. With better assets, the Company would also be able to maintain its competitiveness in the market Metallized Film line - Turkey In October 2013, the Board had approved an investment in a new Metallizer in Turkey under Polyplex Europa Polyester Film Sanayi Ve Ticaret A.S. (PE) Project Details Total capital investment is estimated to be about Euro

61 The new metalized film line will have an annual capacity of 6,500 MT. Funding of the Project will be done through internal cash flows of PE The new line is expected to start commercial operations H2 of Project Rationale Similar to that of Thailand, the Company felt the need to augment the capacity as well as capability of Metallized film in Turkey. The existing Metallizers at PE are also fully utilized and additional volumes can easily be sold which would fetch better contribution than plain film The new asset can produce transparent barrier films and ultra high barrier films which are not possible with the existing assets. This will help the Company to cater to new and niche segments of the industry PET Resin line - USA The PET Film grade Resin project is being implemented in Decatur, Alabama State, USA, under Polyplex USA LLC (PU). PU is held by Polyplex Americas Holding Inc (PAH) which 100% is held by Polyplex (Thailand) Plc. The PET thin film line project in USA has been successfully commissioned and commercial start up was done in April 13. The PET Resin line has also been successfully commissioned and the commercial start up is expected within Q2 of FY Project Details The annual capacity of PET Thin film is 31,000 TPA and of PET Resin line is 57,600 TPA Funding of the Project was through Long Term Debt borrowing of $ 84 million and balance was funded out of Equity investment from Polyplex (Thailand) Plc and Interco sub-ordinate loan from Polyplex Europa, Turkey PET Bottle Grade Resin plant- Turkey A PET Bottle Grade Resin project is being implemented under Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi (PR), in Turkey. This new company is held 67% by Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi (PE), a 100% subsidiary of Polyplex (Thailand) Plc and the balance 33% is held by Polyplex Asia Pte Ltd (PAPL). Project Details The total Investment in this project is about $ 80 million, including working capital of $ 8 million. The company has tied up Long term Debt financing of Euro 41 million and WC Line of Euro 6 million. The balance Project cost is funded out of Equity investment / intercompany loans from PE and PAPL in their shareholding ratio. Annual capacity is 210,000 MT per annum. The project has been successfully commissioned and trial runs are underway. It is 59

62 Annual Report expected to start commercial production in H2 of FY Project Rationale: Strategic: o It provides an opportunity to create another stream of profitable growth o At the same time, it allows for portfolio risk diversification, thereby reducing the almost complete dependence on the plastic film business. However, the risk of entering a new business is mitigated significantly as it is somewhat related due to the fact that Polyplex currently manufactures film grade PET resin at all locations for its captive needs. Thus the technology and production side risk is quite low. Attractive Industry / Product: o High growth industry with regional growth rates higher than corresponding GDP growth rates mainly driven by growth in the usage of fast growing consumer products like Mineral water bottles, Carbonated Soft drinks etc. o PET bottles offer unmatched value along with low cost as compared to glass bottles and PVC polystyrene. o Given the high proportion of raw material cost in the final product price, there is a strong correlation between the two and hence this product is less prone to cyclical swings as the raw material cost is usually a pass through to the customers. o Capacities are spread regionally and regionally short markets are being catered by imports. Capacities are spread over multiple locations in Europe and a significant portion of this capacity is constituted by low capacity older plants ( TPD), thereby negating any benefits of economies of scale vis-à-vis new and larger standalone capacities like the proposed 600 TPD plant of Polyplex. Competitive Positioning of Polyplex / Project in Turkey: o Our business model is based on strategic location which provides access to large domestic (Turkey) and near shore markets (West & East Europe) o Large target deficit markets like Bulgaria, Ukraine and Romania can be most efficiently served out of Turkey. Significant Fiscal/Duty Advantages: o Exemption from Corporate Income Tax till Turkey joins the EU o Customs Union with EU gives Turkey an edge over Asian manufacturers due to nil customs duty on exports from Turkey to the EU as compared with a normal duty rate of 6.5% or preferential duty rate under GSP of 3% applicable to other Imports. o In addition, the local industry is protected by way of trade measures like AD/ CVD measures applicable on exporters from specific countries. Currently such measures are applicable against India and other Asian/Middle East producers on imports in EU. 60

63 6.2. Other Capital Expenditure As an ongoing effort to improve productivity, reduce losses, develop products and enhance quality control, PTL and its subsidiaries in Turkey/USA undertake several small/medium capital expenditures on the basis of cost benefit analysis. The total outlay over the next months for such projects is estimated at about Bt million which includes normal insurance spares and miscellaneous equipments for upkeep of the machinery. 7. Legal Dispute NONE 8. Shareholding Structure 8.1. Securities PTL s current registered capital is Bt. 960 million of which, Bt. 800 million is paid up, divided into 800 million ordinary shares each of Bt. 1 par value The shareholding structure of PTL as on 31st March 2014 is: Name Ordinary shares Polyplex Corp. Ltd. (PCL) 132,000, Polyplex (Asia) Pte. Ltd. (PAPL) 276,000, General public 392,000, Total 800,000, % PCL s shareholding structure as of March 31, 2014 is shown as below: Name % Promoter/Sponsor Group Institutional investors 9.30 Indian public (Non Institutional Investors) Other shareholders Grand Total PAPL is 100% held by PCL and together PAPL and PCL hold 51% of PTL. 61

64 Annual Report Dividend payment policy As per the dividend policy stated in the prospectus, dividend is paid out at rate of about 40% of the annual net profit, taking into account economic conditions, growth plans, future deployment opportunities, the Company s financial position and liquidity and subject to the approval by the shareholders. For the FY , since the company has reported net losses of Baht 480 million on a Consolidated basis hence no dividend is payable as per policy. Accordingly, the Company s Board has recommended no dividend payout for this FY. This recommendation will be put forth for shareholder consideration and approval in the Annual General meeting to be held on 29th, July The following graph shows the comparison of dividend payment for the last 9 years, since the company s public listing in December ,000 Historic Net profits and Dividend Payout 2.50 Milion Baht 3,500 3,000 2,500 2,000 1,500 1, Dividend - Bt per share Net profits( Consolidated) ,042 1,039 3,883 1, Total Dividend , Dividend- Bt/Share

65 10. MANAGEMENT STRUCTURE Company Secretary Board of Directors Audit Committee Managing Director Chief Financial Officer Head Operations Head Sales & Marketing Sarafil Thin Films Head Sales & Marketing Sarafil Thick Films Business Head - SARALAM Corporate Finance Head - Production & Engineering Sarafil / CPP SE Asia SE Asia Manager - SARALAM Plant Costing and Accounts Head Saracote Plant Domestic market Domestic market Information Technology TPM America America Legal & Tax HR & Industrial Relations Europe Europe Investor Relations Quality Assurance & Technical Services Others Others Purchase & Stores PTL has a board of directors and an audit committee. There is a provision to appoint other needbased committees as may be appointed by the shareholders or the board of directors from time to time. The board members and executive officers are qualified persons with complete qualifications as per Section 68 of the Public Limited Companies Act B.E and as per the Notification of the Securities and Exchange Commission (SEC) No. KorJor. 12/2543 Re: Application for Permission and Permission to Sell Newly Issued Shares dated March 22,

66 Annual Report Details of the board of directors and other committees are as follows: Board of Directors As of March 31, 2014, PTL s Board of Directors is composed of eight members as follows: 1. Mr. Manu Leopairote Board chairman and Audit Committee Chairman 2. Dr. Virabongsa Ramangkura Director (and Audit Committee member) 3. Mr. Shiraz Erach Poonevala Director (and Audit Committee member) 4. Mr. Sanjiv Saraf Vice Chairman 5. Mr. Praphad Phodhivorakhun Director 6. Mr. Pranay Kothari Director 7. Mr. Manish Gupta Director 8. Mr. Rohit Kumar Vashistha Managing Director Mrs.Supritha Pai Kasturi is the secretary to the Board of Directors Authorized signatories Any one of the four authorized signatories, namely Mr. Sanjiv Saraf, Mr. Pranay Kothari, Mr. Manish Gupta, and Mr. Rohit Kumar Vashistha are empowered to sign with the Company s seal affixed. Power and duties of the board of directors (the Board) The Board of Directors has the powers, duties and responsibilities to faithfully and prudently conduct the operations of the Company in accordance with the Company s objectives and Articles of Association, applicable laws and resolutions of the shareholders meetings, for the benefit of the Company. A summary of the substantial duties and responsibilities of members of the Board of Directors is set out below: 1. to hold the annual general meeting of shareholders within 4 months from the close of the accounting period; 2. to call the meeting of the Board of Directors at least once every calendar quarter; 3. to arrange for the preparation and submission of the audited balance sheet and profit and loss statement at the end of each accounting period to the shareholders meeting for its consideration and approval; 4. to authorize any one or several directors to perform any action on behalf of the Board of Directors under the supervision of the Board of Directors, or granting the power-of-attorney to such designated director(s) to perform any action within the specified time as the Board of Directors may think fit; provided, however, that the Board of Directors has the sole discretion to revoke or modify such designated director or power-of-attorney as the Board of Directors may think fit. For this purpose, the Board of Directors may authorize the Executive Committee, if any, to 64

67 conduct any activities within the specified scope of work, duties and responsibilities of the Executive Committee. No authorization will entitle the Executive Committee to consider and approve the transaction which may cause a conflict of interest between the Executive Committee or any related person or interested person as the one party and the Company or its subsidiary companies as the other party. However, an exception is granted where the transaction conforms to the approved policies and rules of the Board of Directors; 5. to determine the goals, prospects, policies, business plans and budgets of the Company, and to ensure that the management work performed by the Executive Committee, if any complies with the set policies. However, the Board of Directors needs to obtain the resolution of the shareholders meeting before entering into these legal transactions, for instance, increase or reduction of capital, issue of bonds, sale or transfer of all or any substantial parts of the Company s businesses to any third party, purchase or acceptance of transfer of other businesses, amendment to the Memorandum of Association, and so on. The Board of Directors is also responsible for ensuring the Company s compliance with the securities and exchange law and rules of the SET, for instance, rules concerning the entry into connected transactions and concerning purchase or sale of substantial assets, including any law governing the Company s business; 6. to review the management structure and appoint the Executive Committee, General Manager and any subcommittees, as it deems appropriate; 7. to ensure that the Company s performance follows the business plans and budgets at all times; 8. to refrain from conducting any similar or competitive business, participating as partner in an ordinary partnership or partner with unlimited liability in a limited partnership or director in a private company or in any other firm, company or corporation operating the business similar to or in competition with the Company, regardless of whether for his/her own benefit or for others benefit. However, an exception is granted where the director provides notice to the shareholders meeting in advance of his/her effective appointment as director of the Company; and 9. to notify the Company without delay of the event of likelihood that the director may have direct or indirect interests as a result of (i) the Company s entry into any agreement; and (ii) his/her increased or decreased holding of shares or bonds in the Company or its subsidiary companies Audit Committee The Company s Audit Committee comprises of: 1. Mr. Manu Leopairote Audit Committee Chairman 2. Dr. Virabongsa Ramangkura Audit Committee member 3. Mr. Shiraz Erach Poonevala Audit Committee member Mrs.Supritha Pai Kasturi is the secretary to the Audit Committee. 65

68 Annual Report Power and duties of the Audit Committee 1. to review the sufficiency, credibility and objectivity of the financial reporting of the Company by coordinating with the external auditors and management responsible for preparing the quarterly and yearly financial reports. The Audit Committee may suggest issues or matters to be included for review or audited by the external auditors during its audit of the Company; 2. to review the adequacy and effectiveness of internal control systems and internal audit functions by coordinating with the external auditors and internal auditors (if any); 3. to review compliance with the Securities and Exchange Acts, Regulations of the SET, and any other relevant laws; 4. to consider and advise on the appointment of the external auditor including the audit fee, taking into account the creditability of the external auditor, the adequacy of its resources, the firm s audit engagements, and the experience of its supervisory and professional staff; as well as to have a meeting with the external auditor, once a year without the presence of the Executive directors or any other member of the management team. 5. to review the connected transactions and ensure proper compliance with all the relevanr SEC/ SET regulations and also to ensure adequate disclosures or conflict-of-interest disclosures; 6. to take care of any other matters assigned to it by the Board of Directors, such as reviewing the Company s financial and risk management policies, reviewing compliance with the Code of Corporate Conduct of the management, and reviewing with the company s management, all important reports which must be disclosed to the public according to the law (e.g. Management Discussion and Analysis (MD&A), etc.); 7. to report the activities of the Audit Committee in the company s annual report, which must be signed by the chairman of the Audit Committee, and to express in such annual report the Audit Committee s opinion on (i) the accuracy and completeness of the procedures for the preparation of the report and information disclosure, (ii) the sufficiency of the internal control system of the Company, (iii) opinion on the suitability of the external auditor and appointment for another term, (iv) the number of Audit committee meetings held in the previous year and the attendance of each member in such meetings, (v) opinion on the connected transactions and any transactions that may lead to conflict of interest (vi) the compliance by the Company with rules and regulations of SET, SEC and other applicable laws, and report on any information that the shareholders and investors should be aware of under the scope of power of the duty that has been assigned by the Board of Director; 8. to report the performance of the Audit Committee to the Board of Directors at least once every calendar quarter; and 9. to express its opinion on the performance, appointment, removal and determination of remuneration of the internal auditor. 66

69 10.3. Management PTL s senior management during consisted of six persons as below: 1. Mr. Rohit Kumar Vashistha Managing Director 2. Mr. Vinod Sureka Chief Financial Officer 3. Mr. Ramesh Gupta Business Head SARALAM division 4. Mr. Suresh Sundaraman Head Operations 5. Mr. Ashish Ghosh Head Sales & Marketing 6. Mr. Manoj Sinha* Head Sales & Marketing Thick PET film *Part of the year only Power and duties of Managing Director 1. to monitor and supervise the day-to-day business operations and management of the Company. 2. to undertake or perform duties in line with the policy, plan and budget approved by the board of directors and/or the Executive Committee (if any) of the Company. 3. to perform as the authorized person of the Company in administering the business in line with the objective, regulations, policy, rules, stipulations, orders and resolutions of the meeting of the Board and/or resolutions of the meeting of shareholders. 4. to appoint and manage the performance of the working committees to ensure benefit and efficiency as well as transparency in management, and be authorized to appoint and/or assign any person to specifically perform on his behalf. Such delegation of power and authority shall come under the purview of such certain authorization letter and/or comply with the regulations, stipulations or orders issued by the board of directors and/or the Company. 5. to determine mission, objectives, framework and policy of the Company including orders and supervision in overall for optimum benefit in administration. 6. to follow up and assess the Company s operational results on a regular basis to cope with both internal and external risks. 7. to consider and approve expenditure spending in the normal course of business operations, such as transacting with banks regarding deposit accounts or procurement of raw materials for production. 8. to consider the recruitment and employment of personnel as well as transfer, rotation across functional lines/departments/divisions, or termination of employment of personnel, and determine rate of wages, remuneration, bonus and welfare package relating to personnel. 9. to issue orders, regulations, announcements and memorandum to ensure the operations come out in line with the policy and for the benefit of the Company as well as to maintain discipline in the organization. 10. to perform any other duties as occasionally assigned by the Board of Directors 67

70 Annual Report Power to approve any transactions (i) which may cause a conflict of interest with the Company or its subsidiary; or (ii) in which the interests of the Managing Director or other interested person may be in conflict with the Company or its subsidiary, under the applicable rules and regulations of the SET, do not fall within the scope of the powers and authorities of the Managing Director to act at his/her own discretion or to designate any person to act on his/her behalf. Typically, these transactions need the consideration and approval of the Board of Directors and/or the shareholders meeting in accordance with the Articles of Association of the Company and subject to applicable laws Role of Company Secretary The Company has appointed Mrs. Supritha Pai Kasturi as the Company Secretary. She is a qualified Chartered Accountant from the Institute of Chartered Accountants of India and has the requisite knowledge and experience to perform this function. She also performs the role of the Secretary to the Board of Directors and to the Audit Committee. Responsibilities of Company Secretary: Arrange the Board of Directors Meetings, Audit Committee Meetings and the Shareholders Meeting in accordance with the relevant laws and regulations. Prepare the Agenda/ supporting documents for the above meetings and ensure that the same is circulated to the concerned members, at least a week in advance of the meeting date, to allow sufficient time to review the documents. Prepare the Minutes of all the above Meetings and monitor subsequent compliance with the resolutions of those Meetings. Ensure that disclosures of information to regulatory agencies (SET/SEC and other relevant regulatory agencies) are made in accordance with the applicable laws and regulations. Execute any additional duties assigned by the Board of Directors from time to time Selection of members of the board of directors, independent directors and the audit committee The Company has no Nomination Committee to select and nominate any persons to be appointed as directors of the Company. In this regard, the Board will undertake the selection process, taking into account the experience, expertise and competency of the prospective persons and the qualifications required as per the criteria prescribed in the Public Limited Companies Act B.E and as announced by the SEC and relevant agencies, as also the provisions of Articles of Association of the company. Nomination will be made at the shareholders meeting and election made under the procedures prescribed in the Company s regulations as below: I) Selection of members of the Board of Directors a) The Company is required to have a board of directors consisting of at least 5 persons. The board of directors must elect one of their members to be the Chairman and may elect 68

71 another member to be a Vice-Chairman and any other positions as they see fit. At least one-half of the directors must reside in Thailand. A director need not be a shareholder of the company. b) A meeting of shareholders must elect the directors in accordance with the following procedures and rules:- a. Each shareholder has one vote for each share held; b. Each shareholder may exercise the votes in electing one or more persons to be the directors but the votes are indivisible; and c. The person who obtains the highest votes will be elected as a director in respective order according to the required number of directors, but if two or more persons obtain equal votes, the Chairman must exercise a casting vote. c) At every general meeting of shareholders, one-third (1/3) of the directors, or if it is not a multiple of three, then number nearest to one-third (1/3) must retire from office. d) There must be a drawing by lots to determine the directors retiring on the first and second years following the registration of the company. In each subsequent year, the directors who occupy the position for the longest period must retire. A retiring director is eligible for re-election. II) Selection of members of the Audit Committee/Independent Director Audit Committee is composed of at least three independent directors with an office term of 2 years. The Company has a policy to select and nominate Audit Committee / Independent director in compliance with the SEC Notification no. KorJor. 12/2543 regarding application for and approval of offering of newly issued shares, with each of whom to have the following qualifications: a) Hold shares not exceeding 5% of the total shares with voting rights of the Company, an affiliated company, a subsidiary company, an associated company or a juristic person that may have conflict of interest, b) Not be an employee or a staff member or an advisor who receives a regular salary or a person with controlling power of the Company, an affiliated company, a subsidiary company, an associated company or a juristic person that may have conflict of interest, c) Not be a person having blood relation or legal relation in the manner of being any family member or spouse thereof of the executives, the major shareholders, the persons with controlling power or any persons to be nominated to the managerial positions or the persons with controlling power of the Company or a subsidiary company. d) Have no business relation with the Company, an affiliated company, a subsidiary company, an associated company or any juristic person that may have conflict of interest in the manner that may hinder the use of individual s independent judgment, and have 69

72 Annual Report no other nature that will hinder the individual s provision of independent opinions relating to the Company s operations. In addition, at least one independent director appointed as an Audit Committee member must have sufficient knowledge and experience in finance and accounting areas so that he/she can review the reliability of the financial statements. Other qualifications must also be taken into account, comprising business experience, expertise in the field related to the business and ethical qualifications, to ensure maximum benefits to the Company. The appointment of Audit Committee members is subject to the same criteria and procedures as those in the appointment of directors of the Board. The vacating Audit Committee member upon completion of his/her office term of 2 years may be re-appointed by the Board of Directors for another term. In the event that there is a vacancy on the grounds other than the completion of office term, the Board shall select and appoint the person who possesses the required qualifications to fill the vacancy to complete the number of the Audit Committee members as prescribed by the Board. The newly appointed Committee member shall be in the office only for the remaining period of the office term of the vacating member Remuneration for management a. Monetary remuneration Directors Before the transformation into a public company, PTL had five directors. These directors did not receive any meeting allowance from the Company. Since transformation into a Public Company in 2004, the Company has 8 Directors on the board. Until FY , the Directors had renounced their right to receive any remuneration. However, from FY , the independent directors are receiving remuneration as approved by the shareholders in the Annual General Meeting of the Company. For the FY , The actual remuneration paid to the Independent Directors is Baht 4,200,000 as against the amount approved in the Shareholder meeting of Baht 4,200,0000. Details of the same are given under: S.No Name of Director Amount Approved (Baht) Actual Paid (Baht) 1. Mr. Manu Leopairote Baht 125,000 per month Baht 1,500, Dr. Virabongsa Ramangkura Baht 75,000 per month Baht 900, Mr. Praphad Phodhivorakhun Baht 75,000 per month Baht 900, Mr. Shiraz Erach Poonevala Baht 75,000 per month Baht 900,000 In addition to the above remuneration, meeting sitting fees of Baht 10,000 per meeting attended has been paid to the Audit Committee members, which is as per the amount proposed and approved in the Shareholder meeting in July

73 For the FY , it is proposed to fix a remuneration of Baht 75,000 per month, same as in the previous year, to all the independent directors as mentioned below: 1. Mr. Manu Leopairote 2. Dr. Virabongsa Ramangkura 3. Mr. Praphad Phodhivorakhun 4. Mr. Shiraz Erach Poonevala Mr.Manu Leopairote, in his capacity as the Chairman of the Board of Directors and the Chairman of the Audit Committee would be entitled to an additional remuneration of Baht 25,000 per month, for each role. For the Audit Committee, each member would be entitled to a sitting fee of Baht 10,000 per meeting attended. The above remuneration package, to the Independent directors and Audit committee members, would be proposed to the Shareholder meeting to be held in July 2014 for their consideration and approval. The remuneration details of the senior management, including 1 executive director of PTL is as below : Remuneration (In 000 Baht) 2009/10 (Apr-Mar) 2010/11 (Apr-Mar) 2011/12 (Apr-Mar) 2012/13 (Apr-Mar) (Apr-Mar) Number of executives * 6* Salaries (In '000' Baht) 9,753 7,611 10,054 11,113 13,201 Bonus and Others (In '000' Baht) 10,325 10,292 19,257 14,576 18,503 Total 20,078 17,904 29,311 25,689 31,704 * Including some persons for part of the year only b. Other remuneration Directors Executives None None Personnel As of March 31, 2013, PTL had a total workforce of 650 persons, 607 of whom are personnel at the plant in Rayong Province and 43 at the head office in Bangkok. The Company also has 55 expatriates, 11 of whom are at the head office in Bangkok and the remaining 44 in Rayong. 71

74 Annual Report Number of employees Department As of Mar 31,2010 As of Mar 31, 2011 As of Mar 31, 2012 As of Mar 31, 2013 As of Mar 31, Executives * 2 Production Commercial, IT,Personnel & Admn Sales and Marketing Chips plant Metallizer Extrusion Coating Cast Polypropylene Project Silicone Coating Project PET Thick Film Project Blown PP Film Project Total *Excluding one person who was for part of the year Employee (non-executive) remuneration (Bt. thousand) Remuneration 2009/10 (Apr-Mar) 2010/11 (Apr-Mar) 2011/12 (Apr-Mar) 2012/13 (Apr-Mar) 2013/14 (Apr-Mar) No. of employees Salaries & Wages 78, , , , ,476 Overtime pay 7,350 11,206 13,527 18,120 27,286 Bonus 15,408 27,941 26,182 30,851 33,603 Provident fund* 2,102 2,489 2,928 4,338 4,666 Others 47,183 55,705 62,883 79,809 86,208 Total 150, , , , ,239 *The Company started contributing to the provident fund since September The contribution of the employee and employer was 4% until FY Since , the company revised the PF contribution rates and depending on the length of service, company s contribution is now in the range of 4-7%. 72

75 There has been no labor dispute for the past years. HRD Policy The company realizes the importance of its staff as they are valuable assets and play a major role in the success and growth of the company. Therefore it has a policy to develop the efficiency, knowledge and skills of its staff at all levels by having well organized training programs on a periodic basis. Training programs are designed to improve various aspects of work life like technical competence, team building, and enhancement of leadership skills, time management skills etc thereby improving the quality of the working life of the employees. Feedback of employees participating in such trainings is taken in order to help improvement of quality of seminars and trainings to be conducted in future. 11. Corporate Governance Good Corporate Governance Policy on Corporate governance Polyplex realizes the significance of good corporate governance and makes every effort to implement the Corporate Governance principles laid down by the Stock Exchange of Thailand. The company has firm belief in transparency, accountability and ethical conduct in carrying out its operations. Accordingly, the Company has formulated a policy which emphasizes regular disclosures to the public and the shareholders. In addition, the Company adopts strict internal controls and audits in recognition of their importance. It also has several risk management policies, keeping in mind a good relationship and business ethic towards business partners, shareholders and all concerned parties Rights of shareholders The Company recognizes the importance of equal rights of all shareholders and considers all the shareholders as owners of the Company irrespective of the percentage of shares owned. The Company has a policy to report to shareholders regularly on progress of operations, either directly or through the Stock Exchange of Thailand or through information on its website after listing. Shareholders will be given fourteen days advance notice of all shareholder meetings, including the meeting agenda and related information. The shareholders would be encouraged to participate in the general meetings and their views and comments would be noted and followed up. The shareholders also have the following rights which are exercised in the Annual Shareholding meetings: Re-appointment of Directors retiring by rotation and approval of the Director remuneration Approval of Auditor appointment and remuneration Approval of dividend payment 73

76 Annual Report Rights of stakeholders Polyplex has always provided equal importance to the requirements of all its stakeholders as under: Personnel: Company considers all its personnel to be valuable assets, critical to the success and growth of the organization. The Company is committed to providing a quality oriented work environment, with special emphasis on safety, along with fair and equitable remuneration. Apart from basic salary, Performance linked Bonus, Provident Fund contribution and Social Security Contribution, the Company also provides certain other benefits to its employees such as Overtime pay, Housing Allowance, Transport Allowance, Telephone allowance, Medical Insurance, Life Insurance coverage etc. Business partners: It has always been the policy of Polyplex to develop long standing and growing relationships with all its business partners based on mutual benefit and guided by good business ethics. The company values the long standing relationship with its business partners, whether it is the banks that support the trade finance and project financing requirements of the Company, or the strong Distributors/Agent network across various parts of the globe, which help in market development and ensure smooth continuity of the business operations for the company. Competitors: Polyplex will always abide by the framework of fair competition and would work towards market development and growth to the mutual benefit of the industry. Creditors: To abide by the loan covenants and provide all information about the progress of the Company to its creditors as may be required for smooth business dealings. Customers: Polyplex is committed to creating customer satisfaction by ensuring consistency in the quality of its products and offering value proposition to its global customer base. Shareholders: Polyplex strives to conduct its business in a transparent and efficient manner with a view to constantly strive to enhance shareholder value. New project investments will be evaluated prudently to ensure good returns and increase value to the shareholders. Community/Society: Polyplex realizes and cares for the safety of society, environment and quality of life of people. It places priority on activities relating to the community and the society and also by compliance of applicable laws and regulations relating to the same. During FY , the company organized Blood donation camps and encouraged employees to donate blood, organized Seedling plantations and mangrove forest conservation projects to promote nature conservation and gave donations and computers to Orphanage. 74

77 Shareholders meetings The Company endeavors to organize the shareholders meeting with equitable treatment for all participants and in strict accordance with legal procedures, from meeting invitations, proxy form for those who are unable to attend the meeting, and distribution of meeting documents to inform all concerned of the meeting agendas. The meeting venue and time will be convenient while the meeting session will allow adequate time for shareholders to ask questions on business operations or voice their opinion Leadership and vision The Board of Directors is the forum for review of plans, vision, strategies and key policies. Elaborate budgets have been formulated for all functional areas in the Company and a system of Key Result Areas (KRAs) has also been implemented for each department and individual as also at the corporate level to align interests and priorities across the organization. The Board of Directors would play a leading role in regular review of the actual operations vis-à-vis budgets as well as other key performance indicators Conflict of interest The policy is based on the principle that any decision to be made by personnel at all levels in business operations must be in the best interest of the Company. It is the duty of all personnel to avoid any transactions and/or dealings which could result in financial losses to the Company and result in personal monetary benefit. The Audit Committee is entrusted to watch over and review the internal controls and audit function to ensure their efficiency and also ensure adequate disclosures to be made as per the SEC/SET guidelines Business ethics Polyplex has a code of conduct for all personnel who emphasize observance of ethical practices, honesty and accountability. Responsibility towards all stakeholders and external agencies is encouraged in order to foster a good corporate culture and social responsibility Check and balance by non-executive directors The Company has altogether eight directors as detailed below: Status Shareholders representative Directors Executive Directors Non-Executive Directors Audit Committee Independent Directors

78 Annual Report Integration or delegation of title and authority The Chairman of the Board of Directors is an independent director and is also the Chairman of the Audit Committee. Independent directors constitute 50% of the Board of Directors and thus composition of the Board would ensure fair and effective management monitoring. The Managing Director is the CEO in charge of day-to-day operations and has specified powers with certain key decisions requiring approval by the Board of Directors Remuneration for directors and executives The remuneration of the Board of Directors and the Audit Committee is proposed to the Shareholder meeting for their consideration and approval. The Managing Director s remuneration is fixed by the Board of Directors in discharge of duties as the CEO of the Company. The remuneration of the management is open for review by the shareholders who may set the appropriate policies and guidelines on this matter Board meetings The meetings of the Board of Directors are usually convened at least once every quarter to review the operations / quarterly financial results and other matters. There were six Board meetings conducted during the FY Attendance of directors is as follows: Name Position Attendance Mr. Manu Leopairote Board Chairman & Audit Committee Chairman 6/6 Dr. Virabongsa Ramangkura Director & Audit Committee member 6/6 Mr. Shiraz Erach Poonevala Director & Audit Committee member 4/6 Mr. Sanjiv Saraf Vice Chairman of the Board 1/6 Mr.Rohit Kumar Vashistha Managing Director 6/6 Mr. Praphad Phodhivorakhun Director 4/6 Mr. Pranay Kothari Director 6/6 Mr. Manish Gupta Director 6/ Supporting committees or sub-committees The Board of Directors has recommended and shareholders have approved an Audit Committee consisting of three independent directors. The Audit Committee members have the requisite qualifications under the relevant SET rules & guidelines. The powers and allocation of work have been clearly defined by the shareholders and include review of internal control systems, review of financial reports, connected transaction or transaction involving conflict of interest. The term of the Audit committee is 2 years and may be renewed by the Board of Directors every 2 years Internal control and audit system The Board of Directors exercises control through setting of annual budgets and operational objectives, periodical review of which is done from time to time. Meanwhile, the Audit Committee oversees the internal controls and audit in the Company and suggests 76

79 measures for improvement Board of Directors report The Board of Directors is responsible for the Company s financial statements. As a part of the annual report, the directors have commented on the financial results of the Company Relationship with investors The Company places significance on the timely disclosure of accurate information to its shareholders and investors. It participates in the SET Opportunity day to disseminate information about the Company and its operations to investors and analysts. The company also organizes factory visit for the shareholders, analysts and potential investors. In the FY , the factory visit was organized in Feb 14. As regards investor relations, the Company has a well-developed IR section in the company website. Investor queries can be sent to the IR website (investorrelations@polyplexthailand.com) and will be responded to by the management of PTL. The Investors/ Analysts can also register their ID s and receive an IR alert message, when any information is updated on the Company s website. Further information regarding the Company may be obtained by contacting at tel Measures to prevent use of internal information for executives personal benefit The Company has a policy on supervision of usage of internal company information by its directors and management for their own benefit. The directors and management who come to possess internal company information are not permitted to buy or sell the securities of the Company for a specified period prior to its announcement of operating results. 12. Corporate Social Responsibility Ethical Business practices Polyplex has a code of conduct for all personnel who emphasize observance of ethical practices, honesty and accountability. Responsibility towards all stakeholders and external agencies is encouraged in order to foster a good corporate culture and social responsibility Anti Corruption and Bribery Polyplex has a code of conduct for all personnel who emphasize observance of ethical practices, honesty and accountability. Responsibility towards all stakeholders and external agencies is encouraged in order to foster a good corporate culture and social responsibility. The company is in the process of formulating an Anti-corruption and Bribery Policy, to ensure that any of its personnel do not engage in unethical business practices of any kind, for deriving personal benefits Fair Labor practices Company considers all its personnel to be valuable assets, critical to the success and growth of the organization. The Company is committed to providing a quality oriented work environment, with special emphasis on safety, along with fair and equitable remuneration. Apart from basic 77

80 Annual Report salary, Performance linked Bonus, Provident Fund contribution and Social Security Contribution, the Company also provides certain other benefits to its employees such as Overtime pay, Housing Allowance, Transport Allowance, Telephone allowance, Medical Insurance, Life Insurance coverage etc Responsibility towards customers Polyplex is committed to creating customer satisfaction by ensuring consistency in the quality of its products and offering value proposition to its global customer base Caring for the Environment Polyplex realizes the importance of caring for the environment. As a sustainability initiative, has invested in a project to recycle its process waste as well as post consumer waste. The project has started commercial operations in December, 2013 in Thailand, under the Company s subsidiary - EcoBlue Limited. Even in its normal operations, wherever possible, an effort is made to switch to energy efficient alternatives Social and Community Development Polyplex realizes and cares for the safety of society, environment and quality of life of people. It places priority on activities relating to the community and the society and also by compliance of applicable laws and regulations relating to the same. During FY , the company organized Blood donation camps and encouraged employees to donate blood, organized Seedling plantations and mangrove forest conservation projects to promote nature conservation and gave donations and computers to schools/orphanage. 13. Internal Controls At the 2/2014 board of directors meeting of PTL held on May 27, 2014 with two out of the three audit committee members also attending, the board assessed PTL s internal control by means of making inquiries with its management. Based on the assessment of PTL s internal control system in five aspects, namely organization and environment, risk management, control of the executives operation, information technology system & information communication and followup system, the board viewed that PTL has adequate internal control with regard to the making of transaction with its major shareholders, directors, executives, or persons connected with the above mentioned persons. The board considered that the Company s adequate and appropriate internal control and followup of the operations would be able to safeguard its assets against any illegitimate use by the executives. 78

81 14. Connected Transactions A summary of the connected transactions between PTL and the connected parties during the past three years is as follows Party having conflict of interest Relationship Description of transaction Pricing policy Transaction Amount (Million THB) Polyplex Corporation Ltd. (PCL) PCL is the Company s major shareholder, owning directly and indirectly the 51% of the Company s share capital and the two parties have common directors. PCL made advance payments on behalf of the Company for administrative expenses, which were mainly travelling expenses of employees, accommodations for employees family, educational fees for employees children, insurance claims of employees, insurance premium payments, project related expenses etc. The Company has given the appropriate accounting treatment to these expenses and/or collected these amounts from the employees and paid them back to PCL. The price of the transaction between PCL and the Company was a normal price in general business practice and was the price as actually paid by PCL in advance for the Company without any extra charge by PCL. Polyplex Corporation Ltd. (PCL) PCL is the Company s major shareholder, owning directly and indirectly the 51% of the Company s share capital and the two parties have common directors. PTL made payments on behalf of PCL, which were mainly traveling and other expenses of PCL employees and their families. The price of the transaction between PCL and the Company, PR and PE was a normal price in general business practice and was the price as actually paid in advance without any extra charge. 79

82 Annual Report Party having conflict of interest Relationship Description of transaction Pricing policy Transaction Amount (Million THB) Polyplex Corporation Ltd. (PCL) PCL is the Company s major shareholder, owning directly and indirectly the 51% of the Company s share capital and the two parties have common directors. Purchase of Raw material Polyester Chips and Polyester Film by all the subsidiaries of PTL including PTL As per Transfer Pricing policy of PCL (Study done by Ersnt & Young and TNMM [Transactional Net Margin] Method recommended for Transfer pricing Polyplex Corporation Ltd. (PCL) PCL is the Company s major shareholder, owning directly and indirectly the 51% of the Company s share capital and the two parties have common directors. Sale of Raw material Polyester Chips to PCL from PTL For Sale of Chips to PCL, as per Transfer Pricing policy of PCL (Study done by Ersnt & Young and TNMM [Transactional Net Margin] Method recommended for Transfer pricing. Polyplex (Asia) Pte Ltd (PAPL) PAPL is the Company s major shareholder, owning directly 34.5% of the Company s share capital and the two parties have a common director. Payment of interest by Polyplex Resins Sanayi Ve Ticaret A.S, on the loans borrowed from PAPL Loans carried a fixed interest rate of 4.5% pa until September 2012, but have been made interest free w.e.f 1st October Polyplex (Asia) Pte Ltd (PAPL) PAPL is the Company s major shareholder, owning directly 34.5% of the Company s share capital and the two parties have a common director. Acquisition by Polyplex Europa Polyester At cost to PAPL Film Sanayi Ve Ticaret A.S, from PAPL, a 67% stake in Polyplex Resins Sanayi Ve Ticaret A.S 80

83 14.2. Necessity and reasonableness of the connected transaction The connected transaction involved the advance payments made by PCL on behalf of the Company and its subsidiaries for administrative expenses. The payments were made for such expenses as transportation, accommodations for employees family, educational fees for employees children, insurance claims of employees, project related expenses etc. The Company and its subsidiaries have given the appropriate accounting treatment to these expenses and/or collected these amounts from the employees and paid them back to PCL. The reimbursement of advances/ expenses was to PCL was at the actual prices incurred without any extra charge by PCL. The connected transaction also involved the advance payments made by the Company and its subsidiaries on behalf of PCL for administrative expenses, which were later re-imbursed by PCL. During the year, the connected transaction also involved some purchases of Raw materials i.e Polyester Chips and Polyester Film from PCL. All purchases were made at Arm s Length Pricing as recommended in the Transfer Pricing study carried out by external agencies at various locations Measures or procedures for approval of the connected transaction The audit committee of PTL has examined the connected transaction described in the table above and viewed that it is in accordance with the normal business practice. For all normal business transactions in the future such as purchase and sale of material, reimbursement of expenses, the Company can undertake the transactions and inform the audit committee and the Board of Directors on a quarterly basis. For any other future connected transactions, which are not normal business transactions, the Company will assign the concerned units to gather the relevant information and provide it to the audit committee to be used as a basis for its consideration on those transactions as to whether they are consistent with the normal business practice and the market price. The Company would ensure that it follows the applicable regulations of the SEC and SET in this regard. The audit committee has to consider and inform the board of directors for the approval. The directors who have a conflict of interest may not partake in the giving of comments on those connected transactions Policy for potential connected transactions For any connected transactions that may take place in the future, the Company has a policy to set appropriate conditions on the said transactions based on the reasons and necessity of the Company. The connected transactions performed over the past period were advance payments, made for such expenses as transportation, accommodations for employees family, educational fees for employees children, insurance claims of employees etc and also some raw material procurements as explained above. There were no extra charges by the parent company regarding such cost and expenses. In performing any future connected transactions, Company s board of directors will comply with the law governing securities and exchange and the regulations, notifications and orders of the Stock Exchange of Thailand, as well as the regulations regarding disclosure of information about connected transactions and acquisition or disposal of core assets of companies or subsidiary companies according to the accounting standards defined by the 81

84 Annual Report Institute of Certified Accountants and Auditors of Thailand. Where the connected transaction involves any person who may have a conflict of interest, the Company will arrange for the audit committee to give opinion on the necessity and appropriateness of that transaction. In case the audit committee has no expertise in any such transaction, the Company will have an independent expert or its external auditor provide opinion on that transaction to be used as a basis of decision-making by the board of directors or the shareholders, as the case may be. The Company will disclose such connected transactions in the notes to the financial statements duly audited by its external auditor. 15. Financial Position and Operational performance Financial statements Auditor Year Name of auditor CPA no. Auditing firm 2013/14 ( April 1, 2013-Mar 31,2014) 2012/13 ( April 1, 2012-Mar 31,2013) 2011/12 (April 1, 2011-Mar ) 2010/11 (April 1, 2010-Mar ) 2009/10 (April 1, 2009-Mar ) Auditor s report Mr. Termphong Opanaphan Mr. Termphong Opanaphan Mr.Narong Puntawong Mr.Narong Puntawong Mr.Narong Puntawong 4501 EY Office Limited 4501 Ernst & Young Office Limited 3315 Ernst & Young Office Limited 3315 Ernst & Young Office Limited 3315 Ernst & Young Office Limited For all the past years, including the year ended on March 31st 2014, the Auditors have given an unqualified opinion that the financial statements were fairly presented and prepared in accordance with generally accepted accounting principles. The financial statements of last 3 years, for both Consolidated and Standalone, latest being the year ended on 31st March 2014, have been given for the purpose of comparison and for the appreciation of the change in revenues and profitability over the years. 82

85 Polyplex (Thailand) Public Company Limited Balance Sheet Unit: Bt. 000 s Unconsolidated Consolidated 2011/ / / / / /2014 April-March April-March April-March April-March April-March April-March Amount % Amount % Amount % Amount % Amount % Amount % Assets Current Assets Cash and cash esuivalents 29, , , ,681, ,468, , Current investments , , , Accounts receivable 805, , , ,396, ,384, ,680, Amounts due from related party Inventories 564, , , ,623, ,741, ,167, Other current assets 81, , , , , , Total Current Assets 1,481, ,706, ,637, ,116, ,881, ,003, Non-Current Assets Restricted bank deposits , , Investment in subsidiary 1,313, ,355, ,368, Land, premises and esuipment-net 3,118, ,997, ,206, ,360, ,447, ,096, Intangible assets-net , , , Deferred Tax asset , , , , Advance payment for purchases of assets 344, , , , , , Other non current assets 8, , , , , , Total Non-current Assets 4,785, ,460, ,756, ,822, ,630, ,577, Total Assets 6,266, ,167, ,393, ,938, ,512, ,581,

86 Annual Report Polyplex (Thailand) Public Company Limited Balance Sheet Unconsolidated Consolidated Unit: Bt. 000 s 2011/ / / / / /2014 April-March April-March April-March April-March April-March April-March Amount % Amount % Amount % Amount % Amount % Amount % Liabilities & Shareholders' Esuity Current Liabilities Trade and other Payables 602, , , ,338, ,178, ,322, Long-term loans-due within one year 271, , , , , ,006, Current portion of Lease agreements , Short-term loans from financial institutions 80, , , , ,044, ,650, Income tax payable , Other current liabilities 79, , , , , , Total current liabilities 1,033, ,529, ,314, ,218, ,948, ,334, Non-current Liabilities Long-term loans from related party , , Long-term loans-net of amount due within one 1,156, ,562, ,791, ,250, ,871, ,339, year Liabilities under Lease agreements , Provision for long-term employee benefits - - 7, , , , Other non-current liabilities 6, , Total Liabilities 2,195, ,098, ,114, ,478, ,267, ,943, Shareholders Esuity Issued & Paid-up Share Capital Ordinary shares 800, , , , , , Premium on ordinary shares 1,370, ,370, ,370, ,370, ,370, ,370, Other components of shareholders' equity (348,087) (2.92) (816,562) (4.95) 158, Legal Reserve 96, , , , , , Retained earnings (deficits) 1,804, ,802, ,012, ,401, ,694, ,102, Total Shareholders' Esuity 4,070, ,068, ,278, ,320, ,144, ,527, Minority Interest , , , Total Liabilities and Shareholders' Esuity 6,266, ,167, ,393, ,938, ,512, ,581,

87 Polyplex (Thailand) Public Company Limited Statement of Income and Retained Earnings Unit: Bt. 000 s Unconsolidated Consolidated 2011/ / / / / /2014 April-March April-March April-March April-March April-March April-March Amount % Amount % Amount % Amount % Amount % Amount % Revenues Net sales 4,560, ,205, ,517, ,143, ,230, ,702, Other revenues 295, , , , , , Exchange gains , , Total Revenues 4,855, ,438, ,577, ,263, ,495, ,792, Costs and Expenses Cost of sales 3,831, ,941, ,543, ,831, ,874, ,773, Selling expenses 263, , , , , , Administrative expenses 70, , , , , , Exchange losses 221, , , , Total Expenses 4,386, ,313, ,255, ,815, ,033, ,384, Profit (loss) before interest expenses 469, , (678,084) (14.81) 1,448, , (592,178) (5.49) Finance costs (34,054) (0.70) (45,973) (1.04) (85,363) (1.86) (56,210) (0.55) (86,806) (0.91) (190,048) (1.76) Income Tax ,516-85,718 - (34,187) (0.33) 16, , Net profit (loss) after income tax 435, , (677,728) (16.68) 1,357, , (488,889) (4.53) Net loss of minority interest (230) (0.00) 11, , Net profit (loss) 435, , (677,728) (16.68) 1,357, , (479,718) (4.44) Earnings (losses) per share (Bt.) (0.85) (0.60) - 85

88 Annual Report Polyplex (Thailand) Public Company Limited Cash Flow Statement Unit: Bt. 000 s Unconsolidated Consolidated April-March April-March April-March April-March April-March April-March Cash flow from operating activities Profit before tax 435,142 78, ,447 1,392, , ,226 Adjustments to reconcile profit of net cash provided by operating activities Depreciation and amortization 196, , , , , ,358 Doubtful debts (doubtful debts recovery) ,720 5,250 Allowance for diminution in value of inventories (reversal) 2,720 13,192 3,428 2,720 13,192 20,790 Dividend income -217,596-9, Interest Expense 33,003 44,981 85,363 45,147 55, ,164 Unrealized losses (gains) on foreign exchange 20, , ,869 19, , ,629 Exchange loss on the redemption of investment in subsidiary 253, , Provision for long-term employee benefits 1,682 1,673 1,817 7,270 12,905 6,411 Gains on sales of current investments -3, , Loss (gain) from disposal of F/A 0 13, ,070 1,163 Profit (Loss) from operation before changes in operating assets and liabilities 721, ,834 13,471 2,086, , ,262 Decrease (Increase) in operating assets Accounts receivable 371,036 30, , , ,531 Balance due from a related company Inventories -96, ,625-1, , , ,311 Other current assets 51,514-27,331 45,070 22, ,309 27,723 Investment in Marketable securities Other non-current assets 1,222-6, ,221-5, Increase (Decrease) in operating liabilities Accounts payable -78,613 46,860 21,471-56,597 68, ,617 Other current liabilities -27,381 24,879 10,478 5, ,648 77,586 Payment of long-term employee benefits ,988-5,524-4,351 Income tax paid ,530-30,601-5,184 Cash flow provided from (used in) operating activities 942, ,788-16,434 2,614, , ,631 86

89 Polyplex (Thailand) Public Company Limited Cash Flow Statement Unit: Bt. 000 s Unconsolidated Consolidated April-March April-March April-March April-March April-March April-March Cash flow from Investing activities Decrease (Increase) in restricted bank deposits ,864-8,214 Decrease (increase) in current investments 168,485-77,461 78, ,485-93,462 88,277 Decrease (increase) in investments in subsidiaries 369,655-42,055-13, ,837 0 Dividend from subsidiary 217,596 9, Increase in advance payment for purchases of assets -93, ,981 12,141 32, ,851 17,818 Increase (decrease) in accounts payable for purchases of fixed assets -145,631 18,539-57, ,631 19,780 60,432 Purchases of property, plant and equipment -192,207-2,110, , ,563-5,898,755-2,064,861 Proceeds from sales of property, plant and equipment ,761 70,089 15, Increase in intangible assets ,433-2,111-9,456 Net cash used in investing activities 324,412-1,894, , ,497-5,881,189-1,915,105 Cash flow from financing activities Interest Paid -40,538-58, ,752-54, , ,691 Increase (Decrease) in short term loans from financial institutions 80, , , , , ,569 Increase in long-term loans from related party , ,944 Increase in long-term loans 41,049 1,938, ,350 4,365,278 1,710,444 Repayment of long-term loans -290, , , , ,395 Dividend paid to minority shareholders Cash receivable capital increase , Dividend payment -1,360, , ,000-1,360, , ,000 Dividend paid to non-controlling interests of subsidiary , Cash received from non-controlling interests of subsidiaries ,868 1,266 Cash provided from financing activities -1,279,489 1,758, ,652-1,210,213 4,869,977 1,260,250 Currency Translation changes , , ,554 Increase in cash and cash equivalents -12,401 46,282-53, , , ,932 Cash and cash equivalents at the beginning of period (April 1) 42,042 29,641 75,923 1,231,009 1,681,810 1,468,337 Cash and Cash equivalents at the end of period (March 31) 29,641 75,923 22,314 1,681,810 1,468, ,405 87

90 Annual Report Polyplex (Thailand) Public Company Limited Financial Statement Unconsolidated Consolidated April-March April-March April-March April-March April-March April-March Liquidity Ratios Current ratio (time) Quick ratio (time) Cash flow current ratio (time) Receivable current ratio (time) Avg. debt collection period (day) Inventory turnover period (time) Avg. selling period (day) Payable current ratio (time) Loan repayment period (day) Cash cycle (day) Profitability Ratios Gross profit margin (%) 15.99% 6.29% -0.57% 22.79% 14.69% 8.68% Operating profit margin (%) 8.68% -2.58% -8.88% 14.33% 2.13% -2.79% Other profit margin (%) 6.08% 1.33% 1.31% 1.18% 0.92% 0.83% Cash to profit margin (%) % % 4.82% % % 81.13% Net profit margin (%) 8.96% 2.59% % 13.23% 4.24% -4.44% Return on equity (%) 9.59% 2.82% % 16.31% 4.89% -5.75% Efficiency Ratios Return on assets (%) 6.41% 1.59% -8.18% 11.37% 2.83% -2.66% Return on fixed assets (%) 20.26% 8.61% -7.30% 27.99% 9.15% 1.07% Asset turnover (time) Financial Policy Ratios Debt to equity ratio (time) Interest coverage ratio (time) Commitment coverage ratio (cash basis) (time) Pay out ratio (%) 31% 28% 0% 31% 28% 0% 88

91 16. Management Discussion and Analysis of operational performance and financial status 16.1 Operational performance PTL, a subsidiary of PCL, was incorporated on March 26, 2002 to engage in the production and distribution of PET film (Polyethylene Terephthalate Film or Polyester Film) mainly for export markets focusing on packaging, industrial and electrical segments. The Company commenced operations from its first production line in April, 2003 and the second production line in November, Since then, the Company has expanded its operations significantly, both within and outside Thailand. In Thailand, the Company has invested in Extrusion Coating lines, Cast Polyproplene line, Silicone Coating line, Thick PET film line, Blown PP line and few Metallizers. Apart from this the Company has also set up manufacturing subsidiaries in Turkey (2005) and in USA (2012), trading companies in Europe and China, sales representative office in Malaysia and is now in the process of opening another Sales representative office in Korea. All our operational product lines in Thailand have the following certifications: ISO 14001:2004 certification on Environment Management system ISO 9001:2008 certification on Quality Management system OHSAS 18001:2007 certification on Occupational Health and Safety Management system ISO 22000:2005 certification on Food Safety standards TPM Excellence Award (Category A) All our product lines in Turkey have the following certifications: ISO 14001:2004 certification on Environment Management system ISO 9001:2008 certification on Quality Management system OHSAS 18001:2007 certification on Occupational Health and Safety Management system BRC/IoP certification on Global Standard For Packaging and Packaging Materials (For Plain and Metallized Film lines) Polyplex group aims to become one of the world market leaders in plastic film industry by continuously expanding its market share through regular expansions in capacity and diversification in its product portfolio. The new Thin PET film line in US has added another 31,000 MT per annum in the Company s combined capacity. By venturing into the manufacture of related products such as BOPP film (In India) and CPP films (In Thailand), which are other Packaging substrates, used by Converters, in addition to PET thin film, Polyplex aims to become a preferred packaging substrate provider as against just a PET thin film supplier. Apart from this, in order to further diversify its product range, the group has regularly been expanding into value added products such as Silicone coated film (In India 2007, Thailand ), Extrusion coated films (In Thailand first line in 2008 and second line in 2013) and Metallized films. A project for new metallisers, one each in Thailand and Turkey is underway and expected to start operations in H The new investments in Thick PET film line and Blown PP line which started operations in Q3 of will help the Company to diversify further and establish itself as a leading plastic film supplier. 89

92 Annual Report The recycling project in Thailand has been set up to find sustainable solution for process as well as post consumer plastic waste. The Company is also investing in a bottle grade PET resin plant in Turkey which would be Company s first project in this industry. The project is expected to commence commercial operations in H2 of Polyplex group has set out clear business strategies: 1) Focus on product development and technical services to penetrate high growth and high margin markets, 2) Optimal Cost of Production 3) Boosting delivery efficiency through focus on distributed manufacturing and logistics 4) Diversifying the product portfolio to minimize the risk of cyclical impact of the PET film industry, to increase stability of Earnings 5) Continuous effort to improve the share of value added and specialty products in the product portfolio. 6) Customer satisfaction through supply of consistent quality products 7) Judicious mix of On-shore, Off-shore and Near-shore strategy. The excessive oversupply situation in the PET thin film industry which started in 2012, continued to deteriorate in 2013 increasing the pressure on the selling prices and thus contracting value additions further. The timing of the start up of the new projects at Thailand and at USA, has coincided with the down cycle in the core business of the company, which has also contributed to the slower than expected ramp up of these new projects, thereby increasing the losses reported by the company. The weakening of the Thai Baht against the USD and Euro in the year, have further aggravated the losses, due to the restatement of the forex (USD/Euro denominated) loans in Thailand. The highlights of the year s performance are as follows: TOTAL REVENUES Consolidated: Sales Revenue: The consolidated sales revenue has increased to Baht 10,702 million, (Baht 1,472 million or 16% increase over previous year). Increase in revenues is mainly on account of increase in volumes (start up of new projects), partly offset by drop in average selling prices of Polyester films due to the excessive oversupply situation as explained above.. The average sales realization of some of the other products such as Thermal Lamination film etc have also declined compared to previous year. 90

93 Table illustrating consolidated sales revenue from Exports and Domestic sales is as below: Market Bt. million % Bt. million % Bt. Million % Exports 8, , , Domestic sales 1, , , Total 10, , , Note: Sales made by the distribution company in the Netherlands/ China has been considered as Exports. The value additions [VA = Selling price Raw Material Cost] during the year for PTL and PE are shown below. During the current year, value additions have dropped due to the market scenario of oversupply, as explained above. 91

94 Annual Report Other Income: The other income has increased from Baht million to Baht 90 million, a marginal increase of Baht 2.23 million. The net impact of all the above factors have contributed to an overall increase in total revenue by Baht 1,297 million or 13.66% to Baht 10,792 million, over the previous year. Standalone: Sales Revenue: The Company s total sales revenue is mainly driven by Exports, with 75-80% of its total sales revenue coming from exports. Table illustrating the Company s sales revenue from export and domestic sales is below: Market Bt. million % Bt. million % Bt. Million % Exports 3, , , Domestic sales , Total 4, , , In the financial year , the Company achieved total sales revenues of Baht 4, million, an increase of Baht million or 7.4%, mainly on account of higher volumes from the start up of the Thermal Lamination line 2, Thick PET Film, Blown PP Film line. This is partly offset by lower average sales realization due to the oversupply situation in the market as explained above. Other Income: The other income has marginally increased to Baht 60 million from Baht 58.9 million due to higher miscellaneous (scrap) sales income, higher export incentive (increase in export volumes). This is partly offset by no dividend from subsidiaries this year, as compared to the dividend income of Bt 9.5 million in previous year from the US subsidiary. The net impact of all the above factors have contributed to an overall increase in total revenue by Baht million or 3.14% to Baht 4, million, as compared to the previous year. TOTAL EXPENSES Consolidated The key elements of the Company s cost structure are raw materials, packing, electricity & fuel, depreciation, staff cost and selling & administrative expenses. Cost of sales (COS) amounted to Baht 9,774 million as compared to Baht 7,874 million of previous year, representing 85.85% of the total expenses lower than 87.17% of the previous year. The cost 92

95 of sales as a % of total expenses has reduced due to exchange losses this year as compared to exchange gains in the previous year. Cost of sales includes mainly the raw material costs, packing costs, utilities, depreciation on building and machinery, staff costs etc. A broad break up of COS is given below: Description Raw materials and consumables used (incl.change in inventory) 79.2% 76.0% 74.9% Depreciation ( in COS) 4.6% 5.1% 6.1% Salaries, wages and other employee benefits (in COS) 5.5% 6.9% 7.6% Utilities (Power/Natural Gas/ Chilled water etc) 6.2% 7.6% 8.0% Others 4.5% 4.4% 3.4% 100.0% 100.0% 100.0% The increase in the COS in absolute terms is Baht 1,900 million (or 24%), which is mainly on account of higher volumes due to start up of new projects in Thailand and USA. The selling and administrative expenses have been higher by about Baht 68.7 million or 5.92% due to higher sales volumes and overall increase in scale of operations in Thailand and in USA due to the commercial start up of all ongoing projects. The company has incurred an exchange loss of Baht 383 million on consolidated basis, as compared to an exchange gain of Baht million in previous year, which is mainly on account of the unrealized exchange losses arising on the restatement of the Euro and USD denominated term loans in Thailand, due to the weakening of the Baht against Euro and USD. The finance costs, on consolidated basis, during the year were Baht million, an increase of Baht million or 118.9% over the previous year. The key reason for the increase in finance charges is the higher short term borrowing at Thailand and the subsidiaries at USA and also the interest on the term loans borrowed in Thailand and USA for the various projects, which were under project implementation phase in previous year and hence being capitalized. This is partly offset by decrease in the interest cost on account of the term loan repayments made during the year. Standalone Cost of sales (COS) amounted to Baht 4,543.2 million representing 86.44% of the total expenses, higher than Baht 3,941 million, or 91.4% of the previous year. The cost of sales as a % of total expenses has reduced due to exchange losses this year as compared to exchange gains in the previous year. The higher cost of sales in absolute terms is due to additional volumes from start up of the new projects - Thick PET film, Thermal Lamination film, Blown PP film in Thailand. 93

96 Annual Report A broad breakup of the COS is given below: Description Raw materials and consumables (incl.change in all inventory) 79.4% 77.3% 75.1% Depreciation ( in COS) 4.9% 5.7% 6.4% Salaries, wages and other employee benefits (in COS) 6.4% 7.8% 8.5% Utilities (Power/Natural Gas/ Chilled water etc) 7.5% 8.2% 8.7% Others 1.8% 1.0% 1.3% 100.0% 100.0% 100.0% Despite higher volumes, the selling expenses have been lower by Baht 4.4 million due to change in sales mix post start up of the new PET film line in US, which has resulted in higher sales volumes in Asian region and hence lower freight costs. The administrative expenses have been higher by Bt 7.2 million due to overall increase in scale of operations. The finance charges have increased from Baht 46 million to Baht 85 million, due to higher working capital borrowing and also the interest on the term loans taken for the Thick PET film, Blown PP film and Thermal Lamination line 2 in Thailand, which were all under project implementation phase in previous year and hence being capitalized. This is partly offset by decrease in the interest cost on account of the term loan repayments made during the year. Profit margins Gross Profit, Operating Profit and Net profit ratios The gross margin, operating margin and net margin have all dropped significantly compared to previous year due to the losses resulting from the decline in sales realization, coupled with increase in RM costs and other operating costs, as well as the significant exchange losses in Thailand Financial status TOTAL ASSETS As on 31st March 2014, The Company s consolidated total assets were Baht 19,581 million, higher by 18.59% as compared to Baht 16,512 million in the previous year. On a Standalone basis, the total assets as on 31st March 2014 were Baht 8,394 million, higher by about 2.77% as compared to Baht 8,167 million of previous year. The main components of Total Assets are Current assets, Fixed assets, Investments and other non-current assets. A brief summary of the movement in the various components of total assets is given below: Current Assets Accounts receivable The Company s consolidated Net Accounts Receivables as on March 31, 2014 stood at Baht 1,680 million which is higher as compared to Baht 1,384 million as on March 31, 2013, by Baht 94

97 296 million, or 21.39%. The Company s Standalone Net Accounts Receivables as on 31st March, 2014 were Baht 868 million, as against Baht 761 million in the previous year, an increase of Baht 107 million or 14.1%. The increase in receivables is mainly due to the increase in sales volumes in Thailand and in US due to start up of new projects, partly offset by lower average sales realization in current year. The average debt collection period has also reduced compared to previous year for Standalone (from 67 to 65 days) as well as Consolidated (from 54 to 52 days). Inventories On a consolidated basis, the total inventories have increased to 2,167 million from Baht 1,741 million, an increase of Baht 426 million or 24.44%. The increase in inventory levels is mainly due to higher stock of finished goods and work in process inventory, higher stock of stores and spares and higher raw material inventory at the Turkey and US subsidiaries. On a standalone basis, there is a marginal decrease from Baht 672 million to Baht 670 million. At Thailand, despite the increase in scale of operations, there is no significant increase in inventory due to increased focus on inventory management, in an effort to reduce the working capital build up. Net Fixed Assets Consolidated Net Fixed Assets (including capital work in progress CWIP, Goodwill and Other Intangible Assets) have increased by Baht 2,656 million from Baht 11,458 million to Baht 14,114 million, due to the net impact of the following: Increase due to net additions to fixed assets/intangible assets Baht 2,168 million, mainly on account of the investment in the ongoing projects in Thailand, Turkey and USA, apart from other normal CAPEX. Increase on account of Translation adjustment Baht 1,093million (net of translation impact on accumulated depreciation), mainly on account of the translation of subsidiaries Net Fixed Assets, denominated in Euro, USD and RMB, into THB for the purpose of consolidation due to the weakening of the THB against these currencies. Decrease on account of depreciation charged during the year Baht 605 million The Company (standalone) Net Fixed Assets have increased by Baht 209 million, from Baht 4,998 million to Baht 5,207 million, due to the net impact of the following: o Increase due to net addition to fixed assets - Baht 507 million mainly on account of investment in the PET Thick Film project, Blown PP and Extrusion Coated Film projects and Normal CAPEX in existing plants Decrease on account of depreciation charged during the year Baht 298 million Investment in subsidiaries During the year, the Company invested Baht 5.1 million in its 80% held subsidiary EcoBlue Limited in Thailand, under which the project for recycling of film waste was implemented during the year. 95

98 Annual Report In July, 2013 the Company invested Euro 0.2 million (equivalent to Bt 8.2 million) in a 100% subsidiary Polyplex Europe B.V in Netherlands. This company is engaged in the trading and distribution of the Company s products in the European markets. Return on assets On a consolidated as well as standalone basis, there is a negative return on assets mainly due to the net losses reported during the year Liquidity Cash flow Consolidated For the year , the Company and its subsidiaries used cash of Baht 170 million in operating activities as per details below: o Cash generated from operating activities (before changes in operating assets and liabilities) was Baht 366 million. o The changes in working capital is as under: Increase in Accounts Receivable by Baht 301 million due to higher sales revenues(start up of new projects) Increase in Inventories by Baht 447 million due to start up of new projects, resulting in increase in RM inventory/process inventory/ finished goods inventory etc. Decrease in long term employee benefits Baht 4 million Cash paid for income tax Baht 5 million Increase in Accounts Payable by due to higher purchases (increase for new projects) by Baht 117 million Increase in other current liabilities by Baht 77 million Decrease in other current/ non-current assets by Baht 27 million Net cash used in investing activities is Baht 1,915 million as per details below: o Baht 8.2 million increase in the restricted bank deposit,[amount set aside for servicing the loan repayment, as part of the Loan covenants of the US subsidiary s term loan for the PET film line project]. o Net additions to fixed assets, including advances paid for project machinery & equipments Baht 2,056 million. This includes the amount expended on various projects in Thailand, USA and Turkey. o Baht 88.3 million was withdrawn from current investments o Increase in Accounts payable for fixed assets by Baht 60 million 96

99 The net cash inflow from financing activities of Baht 1,260 million, given below, has been used partly to finance the above outflow on account of operating activities and investing activities: o Drawdown of Short term loan for WC financing Baht 606 million o Drawdown of Long term loans from banks, for new projects - Baht 1,710 million o Repayment of Long term loan to related party Baht 253 million o Repayment of Long term loans to banks Baht 452 million o Cash Received from minority shareholders in subsidiaries Baht 1.3 million o Cash paid for interest on term loans and short term loans Baht 240 million o Dividend payment Baht 112 million The deficit thereof, partly offset by the translation adjustment gain of Baht 355 million, and opening balance of Baht 1,468 million has resulted in a net closing balance of Baht 979 million. Standalone During the year , the Company, on a standalone basis, used net cash from operating activities of Baht 16 million as per details below: o Cash generated from operating activities (before changes in operating assets and liabilities) was Baht 13 million. o The changes in working capital is as under: Increase in Accounts Receivable by Baht 105 million due to higher sales revenues (start up of new projects) Increase in Inventories by Baht 1.5 million Decrease in long term employee benefits Baht 0.6 million Increase in Accounts Payable by due to higher purchases (increase for new projects) by Baht 21 million Increase in other current liabilities by Baht 10 million Decrease in other current/ non-current assets by Baht 45 million Net cash used in investing activities is Baht 467 million as per details below: o Net additions to fixed assets, including advances paid for project machinery & equipments Baht 474 million. o Investment in subsidiaries Baht 13.2 million ( New investment in the Trading company in Netherlands Polyplex Europe B.V and additional equity injection in Ecoblue Limited) o Baht 78 million was withdrawn from current investments o Decrease in Accounts payable for fixed assets by Baht 57 million 97

100 Annual Report The net cash inflow from financing activities of Baht 429 million, given below, has been used partly to finance the above outflow on account of operating activities and investing activities: o Drawdown of Short term loan for WC financing Baht 600 million o Drawdown of Long term loans from banks, for new projects - Baht 410 million o Repayment of Long term loans to banks Baht 360 million o Cash paid for interest on term loans and short term loans Baht 109 million o Dividend payment Baht 112 million The deficit thereof, together with the opening balance of Baht 76 million resulted in a net closing balance of Baht 22 million. Liquidity ratio In , consolidated current ratio was 1.15 and quick ratio was The Company s (standalone) current ratio and quick ratio were 0.71 and 0.38, respectively. Consolidated average debt collection period during was 52 days along with Account payables period of 46 days and average selling period of 13 days, resulting in a cash cycle of 19 days as against a cash cycle of 15 days of previous year. The average debt collection period of the Company (standalone) during was 65 days along with Accounts payable period of 51 days and average selling period of 3 days resulting in cash cycle of 16 days as against a cash cycle of 11 days in previous year Sources of funds Sources of funds consist of long term and short term loans from financial institutions and shareholders equity. TOTAL LIABILITIES Current Liabilities As on 31st March, 2014, consolidated current liabilities stood at Baht 4,334 million, an increase of Baht 1,386 million from Baht 2,948 million in the previous year, mainly due to the following movements: Increase in short term borrowings Baht 605 million, mainly at the Company in Thailand and also some increase at its subsidiary in USA Increase in Trade and other payables by Baht 144 million due to increase in scale of operations. Increase in other liabilities by Baht 83 million Increase in current portion of long term loans by Baht 551 million due to overall increase in loans becoming due for repayment, after expiry of initial grace period. Current portion of lease agreement Bat 1.6 million Increase in Income tax payable by Baht 0.4 million, mainly due to taxes at the US subsidiaries on certain components of their income, which cannot be offset against losses made from normal operations. 98

101 As on 31st March, 2014, the Company s Standalone current liabilities stood at Baht 2,314 million, an increase of Baht 786 million from Baht 1,529 million in the previous year, mainly due to the following movements: Increase in Short term borrowings by Baht 600 million Increase in other current liabilities Baht 14 million Increase in current portion of loans Baht 207 million Decrease in Trade and other payables Baht 35 million Term Debts On a consolidated basis, the term debt (net of current portion) has increased by Baht 1,468 million on a net basis after considering repayments of term loans made during the year.. The net decrease in the related party term loan is Baht 187 million, which is on account of part repayment of the loan from Polyplex (Asia) Pte Ltd to Polyplex Resins, to bring the lending in proportion to their shareholding ratio. The overall increase in consolidated debt is mainly on account of new loans drawn by the Company and its subsidiaries in USA and Turkey (for the PET Bottle Grade resin project) for the new projects implemented during the year and also due to the significant unrealized exchange losses of about Baht 386 million on the Euro/USD denominated loans in Thailand, due to weakening of the THB against USD/Euro currencies. This increase is partially offset by repayments made during the year. The Company s term debt on a standalone basis (net of current portion) has increased by Baht 229 million due to additional borrowings for financing the new projects implemented last year. The new term loans borrowed during the year is actually Baht 410 million, which is partly offset by increase in current portion of term loan by Baht 207 million and loan repayments of Baht 360 million during the year. There is an exchange loss of Baht 386 million on the Euro/USD loan restatements, due to the weakening of the THB against these currencies. Leveraging & interest coverage ratio The net debt equity ratio (debt only - short term and long term, including current portion, after netting off cash & cash equivalents and current investments) is 0.97 on a consolidated basis and 1.32 on a standalone basis. The increase is on account of higher debt borrowings (short term as well as long term) and lower equity base (on a standalone basis), due to reduction in retained earnings on account of losses made during the year and the dividend appropriation during the year. Debt equity ratio (for total debt, including current + non-current liabilities), is 1.28 on a consolidated basis and 1.56 on a standalone basis. The consolidated and standalone Interest coverage ratio is negative due to the losses made during the year. 99

102 Annual Report Commitments As at 31 March 2014, company had the following commitments and contingent liabilities: (a) (b) As at 31 March 2014, the Company had commitments totaling Baht million under various service agreements (2012: Baht million). These agreements expire between April 2014 and September The Company s foreign exchange contracts outstanding at 31 March 2014 are summarized below. Foreign currency Bought amount As at 31 March 2014 Contractual exchange rate Sold amount Bought Sold (Million) (Million) (Baht per 1 foreign currency unit) US dollar Euro Japanese yen Baht per USD 1 Baht per EUR Baht per USD 1 Baht per EUR 1 Baht per JPY 1 A subsidiary had forward foreign exchange contracts as follows: As at 31 March 2014 Bought amount Sold amount Contractual exchange rate YTL 1.4 million - YTL per EUR 1 USD 4.1 million - USD per EUR 1 - EUR 0.1 million USD per EUR 1 (c) (d) (e) As at 31 March 2014, the Company and its subsidiaries had capital commitments of approximately Baht million (2013: Baht million), relating to the construction of building and acquisition of machinery and equipment (The Company only: Baht million, 2013: Baht million). As at 31 March 2014, the Company had commitments totaling Baht million under various service agreements (2013: Baht million). These agreements expire between April 2014 and September The Company has entered into several lease agreements in respect of the lease of office building space and equipment. 100

103 Future minimum rentals payable under these leases are as follows: (Unit: Million Baht) As at 31 March Payable: In up to 1 year In over 1 and up to 5 years e) As at 31 March 2014, the Company has provided short-term guarantee worth USD 30.0 million (2013: USD 30.0 million) for working capital facilities obtained by a subsidiary, Polyplex USA LLC. f) As at 31 March 2014, the Company has provided guarantee of USD 84.0 million (2013: USD 75.0 million) for the long-term loans obtained by its subsidiary (Polyplex USA LLC). As at 31 March 2014, the outstanding balance of this subsidiary s loan was USD 76.5 million (2013: USD 52.1 million). g) As at 31 March 2014, the Company has provided guarantee of EUR 0.1 million (2013: EUR 2.3 million) for the long-term loans obtained by its subsidiary (Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi). h) Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi has provided guarantee for the long-term loans obtained by Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi to the extent of EUR 27.5 million. As at 31 March 2014, the outstanding balance of this loan was EUR 33.3 million (2013: EUR 20.7 million), of which EUR 22.3 million (2013: EUR 13.9 million) was guaranteed by Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi. i) As at 31 March 2014, there were outstanding bank guarantees of approximately Baht million and EUR 11.3 million (2013: Baht 0.7 million and EUR 15.7 million) issued by the banks on behalf of the Company and its subsidiaries in respect of certain performance bonds as required in the normal course of businesses (The Company only: Baht million, 2013: Baht 0.7 million). Shareholders equity The Company s shareholders equity on a consolidated basis increased from Baht 8,144 million to Baht 8,527 million, which is after accounting for Translation adjustment gain of Baht 975 million, partly offset by Net losses of Baht 480 million during the year and dividend payout of Baht 112 million for FY On a standalone basis, the decrease in shareholder equity is Baht 790 mainly due to losses during the year of Baht 678 million and the dividend payout of Baht 112 million for FY

104 Annual Report Return on equity Due to the losses during the year, there is a negative Return on equity on Consolidated as well as Standalone basis. The Company has a policy to pay dividend at 40% of consolidated net profits, taking into account economic conditions, growth plans, future deployment opportunities, the Company s financial position and liquidity and subject to the approval by the shareholders. For the year , the Company s board has proposed no dividend payout, due to the losses reported by the company on a consolidated basis. This is subject to the approval of shareholders in the Annual General meeting in July Main factors which may affect the future operational performance and financial position In comparison with the previous year, the FY was a very challenging year for the Polyester Film industry with excessive oversupply resulting in a sharp decline in selling prices and thereby squeezing the margins to historically low levels. The key challenges for the company in the coming year would be the following: - Raw material price volatility and any significant upward movement in prices, which the company might not be able pass on to the end customers in the current weak market scenario. - Successful implementation and ramp up of the Thick PET film line, Blown PP and Thermal Lamination Line 2 in Thailand and the PET Bottle plant in Turkey. - Successful Ramp up of the Thin PET film line in USA. - Given the recent volatility of THB against USD and Euro, the Impact of FX fluctuations on profits of the company will be one of the major concerns. The company is exposed to 2 types of risks, one on the operational profits as well as the restatement of the assets/ liabilities of the company on a standalone basis and secondly, on the conversion of the subsidiaries P&L accounts, which are denominated in USD, Euro and RMB, into THB currency for the purpose of consolidation. With the new USD and Euro Loans drawn for the ongoing expansions, the Forex loan portfolio of the Company has increased to almost USD 100 million (including USD equivalent of Euro loans), thereby exposing the company to significant FX fluctuation risks on the Forex loan restatements. In the long run, the Company still remains confident of retaining its competitive edge due to various reasons: 1. Benefit from its various projects, the past projects and the ones under implementation as under: a. PTL and PE have both derived significant benefits from the captive PET resin production to serve its raw material demand on costs, quality and security of availability. The main advantages of a captive resin plant are lower cost of production because of efficiencies in raw material sourcing as also a lower conversion cost besides ensuring timely availability of raw material for the film plants. Easy availability of PTA and MEG would reduce the supply risk although cost of the same still remains a matter of concern for any PET film 102

105 manufacturer as it has a direct impact on the margins of every manufacturer. Captive production of resin would also allow the company to develop new specialty film products. In line with the above strategy, the manufacturing unit in USA will also have its own resin plant. b. Metallizer plants in Thailand and Turkey have helped improve the product mix by increasing the share of specialty film in the overall sales portfolio. In Thailand PET as well CPP films are being Metallized whereas in Turkey and in US, the Metallizers are used to metalize PET films. c. The Extrusion coating plant in Thailand, which commenced operations in April 08, has further helped the company to reduce their exposure to commodity grades of film and increase the proportion of value added films and other specialty grades of film. The second Extrusion Coating line under implementation in Thailand will provide an opportunity to the company to meet the growing demand in Europe and USA. d. The CPP line which started in Thailand in March 2010 has helped the company broad base its product offerings to the converters and move towards becoming a complete packaging solution provider for its customers, rather than just a PET film supplier. e. The Silicone Coating project which commenced commercial production in March 2012 and the Blown PP line under implementation in Thailand, will further diversify the product portfolio of the company and add a highly value added product in its portfolio. f. The Thick PET film line, under implementation in Thailand will also help further diversify the product portfolio and mitigate the risk associated with the cyclical nature of the Thin PET film industry, as Thick PET film is a relatively more stable industry. g. The Company has successfully implemented the project for Thin PET film line in the USA in Q With its extensive market reach in the North American region, the Company remains confident that this decision, backed by its near shoring strategy will enable it to service its customers in a more efficient manner. h. The Bottle grade plant in Turkey which is currently in the implementation phase will be the Company s first project in the PET bottle industry. 2. Polyplex has been deriving benefits from the larger size and distributed manufacturing operations across 4 existing locations whereby it has qualified as a preferred global supplier with many multinational and large customers with global operations. 3. Polyplex has been able to establish itself as a reliable supplier of consistent quality products 4. Polyplex had also invested significantly in distribution, through the acquisition of a company in USA (Polyplex (Americas) Inc. (PA), [which has now been merged with Polyplex USA LLC (PUL), the manufacturing entity in USA], the investment in Polyplex (Trading) Shenzhen Co Ltd, China, setting up of the trading company in Netherlands in April 2013 and by establishing warehouses across Europe for better distribution. 103

106 Annual Report Remuneration for auditor/s 1. Audit fee The Company paid audit fee as below: - A total of Baht - paid to the auditor/s for the past fiscal year; and - A total of Baht 2,175, paid to the accounting firm the auditor/s work for, or the person or business related to the auditor/s and the accounting firm for the past fiscal year. 2. Non-audit fee The Company made payment for other services, i.e. examination of compliance with conditions of promotion certificates, and legal and tax advisory services, including BOI and tax audit services, as follows: - A total of Baht - paid to the auditor/s for the past fiscal year and Baht - payable in the future for the service not yet fully done for the past fiscal year; and - A total of Baht 150,000 paid to the accounting firm the auditor/s work for, or the person or business related to the auditor/s and the accounting firm for the past fiscal year, and Baht 560,000 payable in the future for the service not yet fully done for the past fiscal year. 104

107 Information of Director and Management of the Company Age Education/ Name-Surname Position (Years) Training 1 Mr.Manu Board 71 Bachelor s degree Leopairote Chairman Economics (Hons.), & Audit Thammasat University Committee Master s degree Chairman M.Sc. (Econ.), University of Kentucky, USA Ph.D in Business Administration (Honorary), Thammasat University Certificate, Industrial Development, Nagoya, Japan The National Defense College, Class 34 Working Experiences in the 5 preceding years Relation among family within % of Company / Type of Company Shareholding Period Position Business Present Board Chairman Polyplex (Thailand) & Chairman Plc. of the Audit Committee 2003-Present Counselor of The Council of State State(Trade and Industry) Chairman Neighboring Countries Economic Development Agency Present Chairman ARIP Public Company Limited Present Chairman Khon Kaen Sugar Industry Public Company Limited 105

108 Annual Report Name-Surname Position 2 Mr.Sanjiv Saraf Director & Vice Chairman Age Education/ (Years) Training Certificate, Thai Institute of Directors (IOD) The Role of Chairman Program (RCM), Class 3/2001 Directors Certification Program (DCP), Class 30/ Bachelor s degree Agricultural Engineering, Indian Institute of Technology, Kharagpur Working Experiences in the 5 preceding years Relation among family within % of Company / Type of Company Shareholding Period Position Business Present Chairman of Audit Siam Steel Committee International Public Company Limited 2004-Present Independent Thai Beverage Director/Audit Public Co. Ltd Committee (Singapore Stock Member market) 2011-Present Chairman T.M.C Industrial Public Co.Ltd - - May General Manager Polyplex (Asia) Pte. Present & CEO Ltd Present Director & Polyplex Europa Chairman Polyester Film Sanayi Ve Ticaret Anonim Sirketi, Turkey Managing Polyplex (Thailand) July 2010 Director Plc. July Vice - Chairman Polyplex (Thailand) Present Plc. 106

109 Age Education/ Name-Surname Position (Years) Training 3 Mr.Pranay Director 55 Fellow Chartered Accountant- Kothari Institute of Chartered Accountants of India Qualified Company Secretary - The Institute of Company Secretaries of India Working Experiences in the 5 preceding years Relation among family within % of Company / Type of Company Shareholding Period Position Business May Chairman Polyplex Present Corporation Ltd Present Director Polyplex America Holding Inc Director Polyplex Dec 2011 (Singapore) Pte. Ltd Present Director Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi, Turkey 2002-Present Director Polyplex (Thailand) Plc Present Executive Polyplex Director Corporation Ltd Present Director Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi 107

110 Annual Report Age Education/ Name-Surname Position (Years) Training 4 Mr. Manish Director 45 Master s degree MBA, India Gupta of Institute of Management, Bangalore 5 Dr.Virabongsa Director 71 Bachelor s degree Ramangkura & Audit First Class Honors, B.A. Committee in Political Science, member Chulalongkorn University Master s Degree Economics,University of Pennsylvania,U.S.A. Ph.D.(Econonmics), University of Pennsylvania, U.S.A. Doctor of Law (Honorary), Webster University, USA Working Experiences in the 5 preceding years Relation among family within % of Company / Type of Company Shareholding Period Position Business - - March 2008 Group CFO- Polyplex Present Polyplex group Corporation Ltd. November Director Polyplex (Thailand) Present Plc Present Director & Audit Polyplex (Thailand) Committee Plc. member Nov Chairman Strategic Present Formulation Committee for Reconstruction and Future Development (SCRF) 1994-Present Chairman Bangkok Expressway Public Co., Ltd. 108

111 Name-Surname Position Age (Years) Education/ Training Decoration - Knight Grand Cordon (Special Class) of the most Exalted Order of the White Elephant - Knight Grand Cordon (Special Class) of the most Noble Order of the Crown of Thailand Relation among family within Company Working Experiences in the 5 preceding years % of Company / Type of Shareholding Period Position Business 1995-Present Chairman of the Double A (1991) Executive Board Public Co., Ltd Present Chairman Thai-Lao Association for Friendship 2005-Present Chairman Finansa Co., Ltd Present Chairman South East Asia Energy Co., Ltd Present Chairman Bang-Mod Hospital Co., Ltd Present Chairman Nam Ngum 2 Power Company Limited Present Director Thailand Development Research Institute Foundation 109

112 Annual Report Age Education/ Name-Surname Position (Years) Training 6 Mr.Praphad Director 68 Business Management Phodhivorakhun from Sheffield College of Technology, Sheffield, England. Master Degree Business Administration (MBA), Public Administration (MPA) Ramkhamhaeng University Honorary Doctorate Degree in Business Administration Rajabhat University of Lampang Working Experiences in the 5 preceding years Relation among family within % of Company / Type of Company Shareholding Period Position Business 2008-Present Chairman of the King Power Advisory Board International Co., Ltd Present Advisory Areeya Property Chairman Public Co., Ltd Present Director Polyplex (Thailand) Plc. October Chairman Kang Yong Electric 1999-Present of Board of Pcl. Directors November Chairman Mitsubishi Electric 1995-Present of Board of Kang Yong Wattana Directors Co., Ltd. May Chairman Siam City Leasing Present of Board of and Factoring Pcl. Directors July Chairman of Yokohama Rubbers Present Board of directors (Thailand) Co., Ltd. July Director Kulthorn Kirby Present Public Company Limited 110

113 Name-Surname Position 7 Mr.Shiraz Erach Director Poonevala & Audit Committee Member 8 Mr.Rohit Managing Kumar Vashistha Director Age Education/ (Years) Training 50 Bachelor of Commerce Sydenham College of Commerce, India Master of Commerce Sydenham College of Commerce, India Associate Chartered Accountant Institute of Chartered Accountants of India 43 Bachelor s degree in Metallargy, IT -BHU, India Master s degree International business, Indian Institute of Foreign Trade, India Directors Certification Program (DCP) Class 123/2009, IOD Working Experiences in the 5 preceding years Relation among family within % of Company / Type of Company Shareholding Period Position Business Present Director & Audit Polyplex (Thailand) Comittee member Pcl. March Director - G.P. Group of Present Investment Companies Limited Mega Lifesciences February 2013 Director Public Company Present Limited - - May Managing Polyplex (Thailand) Present Director Plc. May April Director & Profit Polyplex (Thailand) 2010 Center Head Plc. Mar Director Polyplex (Asia) Pte. Present Limited. May Director Polyplex Present (Singapore) Pte. Limited. 111

114 Annual Report Name-Surname Position 9 Mr.Vinod Sureka Chief Financial Officer Age Education/ (Years) Training 39 Bachelor of Commerce, Calcutta University, INDIA, Chartered Accountant, The Institute of Chartered Accountants of India (ICAI) Working Experiences in the 5 preceding years Relation among family within % of Company / Type of Company Shareholding Period Position Business June Chairman Polyplex Trading Present (Shenzhen) Company Limited October Director EcoBlue Limited Present - - August 2008 Chief Financial Polyplex (Thailand) Present Officer Plc June Director Polyplex Trading Present (Shenzhen) Co. Limited. Sept Director Polyplex (Asia) Pte. Present Limited. Dec Director Polyplex Present (Singapore) Pte. Limited. October Director Present EcoBlue Limited 112

115 Name-Surname Position 10 Mr. Ramesh Business Gupta Head SARALAM 11 Mr. Ashish Ghosh Head Sales & Marketing Age Education/ (Years) Training 47 B Tech, REC Allahabad, University of Allahabad INDIA PGDBM Marketing, Management development Institute, Gurgaon- INDIA 48 Bachelor s / Master s Degree in Science Jiwaji University, Gwalior INDIA Master s degree in Business Administration BIT Ranchi, INDIA Working Experiences in the 5 preceding years Relation among family within % of Company / Type of Company Shareholding Period Position Business January 2013 Business Head Polyplex (Thailand) Present SARALAM Plc July General Manager Bhilwara Energy 2010-December Project Limited 2012 Management January General Manager Luminous Power June 2010 Renewable Technologies Pvt Ltd Energy - - November 2009 Head Sales & Polyplex (Thailand) -Present Marketing Plc December AVP - Marketing SRF Limited November Manufacture of Polyester Film, Nylon Tyre Chord fabric, Engineering plastics 113

116 Annual Report Name-Surname Position 12 Mr. Suresh Head Sundaram -Operations 13 Mr. Manoj Sinha Head - Sales & Marketing Thick PET Films Age Education/ (Years) Training 54 Bachelor s Degree in Chemical Engineering, A.C. College of Technology, Madras University, INDIA 55 Master s degree in Business Administration Indian Institute of Foreign Trade Working Experiences in the 5 preceding years Relation among family within % of Company / Type of Company Shareholding Period Position Business - - July 2012-Present Head Polyplex (Thailand) Operations Plc December Chief Operating Tuticorin Alkali June 2012 Officer Chemicals and Fertilisers limited June Vice President Aditya Birla Grasun 2011-November Chemicals Limited, 2011 P.R. China September Deputy General Thai Acrylic Fiber May 2011 Manager Co. Ltd - - January 2013 Head - Sales & Polyplex (Thailand) March, 2014 Marketing Thick Plc PET Films September AVP Sales & Polyplex December 2012 Marketing Thick Corporation Limited PET Film May 2003-August Sr. Manager - Garware Polyester 2012 Global Marketing Ltd Operations 114

117 Attachment - II Detail of Directors and Controller in Subsidiary companies as on Company Subsidiary Related Company Related Company Related Company Subsidiary Subsidiary Related Company Subsidiary Related Company Name list Polyplex (Thailand) Public Company Limited Polyplex (Singapore) Pte. Ltd. (PSPL) Polplex Europa Polyester Film Sanayi Ve Ticaret Anoim Sirketi (PE)* Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi (PR)** Polyplex Trading Shenzhen) Co. Ltd (PTSL)* Polyplex America Holding Inc. (PAH) EcoBlue Limited Polyplex USA LLC. (PU)*** Polyplex Europe B.V (PEBV) Polyplex Paketleme Çözümleri Sanayi ve Ticaret A.Ş (PP)** 1 Mr.Sanjiv Saraf XX - X - - / - / Mr.Pranay Kothari / - / / Mr. Manish Gupta / Mr.Rohit Kumar Vashistha //, /// / - - X - / Mr.Amit Prakash - - /, /// / / 6 Mr.Amit Kalra / - /, /// Mr. Navin Jatia - / Mr. William Mok Peng Kay - / Mr. Pranay Jain // Mr.Vinod Sureka /// / - - / - / Mr. Avneet Singh - - /// / / / 12 Mr. Ashish Ghosh /// /

118 Annual Report Company Subsidiary Related Company Related Company Related Company Subsidiary Subsidiary Related Company Subsidiary Related Company Name list Polyplex (Thailand) Public Company Limited Polyplex (Singapore) Pte. Ltd. (PSPL) Polplex Europa Polyester Film Sanayi Ve Ticaret Anoim Sirketi (PE)* Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi (PR)** Polyplex Trading Shenzhen) Co. Ltd (PTSL)* Polyplex America Holding Inc. (PAH) EcoBlue Limited Polyplex USA LLC. (PU)*** Polyplex Europe B.V (PEBV) Polyplex Paketleme Çözümleri Sanayi ve Ticaret A.Ş (PP)** 13 Commenda International BV ( Corporate Director) / / Remark X = Chairman XX = Vice Chairman / = Director // = Managing Director /// = Management * Polyplex (Singapore) Pte. Ltd. is the 100% shareholder of Polyplex Europa Polyester Film Sanayi Ve Ticaret Anoim Sirketi and Polyplex Trading (Shenzhen) Co. Ltd ** Polyplex Europa Polyester Film Sanayi Ve Ticaret Anoim Sirketi holds 67% stake in Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi and 99.99% stake in Polyplex Paketleme Çözümleri Sanayi ve Ticaret A.Ş *** Polyplex America Holding Inc. is the 100% shareholder of Polyplex USA LLC, the company under which the PET Thin film project in USA has been implemented 116

119 Independent Auditor s Report To the Shareholders of Polyplex (Thailand) Public Company Limited I have audited the accompanying consolidated financial statements of Polyplex (Thailand) Public Company Limited and its subsidiaries, which comprise the consolidated statement of financial position as at 31 March 2014, and the related consolidated statements of income, comprehensive income, changes in shareholders equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, and have also audited the separate financial statements of Polyplex (Thailand) Public Company Limited for the same period. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Thai Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Thai Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Polyplex (Thailand) Public Company Limited and its subsidiaries, and of Polyplex (Thailand) Public Company Limited as at 31 March 2014, their financial performance and cash flows for the year then ended in accordance with Thai Financial Reporting Standards. Emphasis of matter I draw attention to Note 4 to the financial statements regarding the change in accounting policy due to the adoption of Thai Accounting Standard 12 Income Taxes. The Company has restated the consolidated and separate financial statements for the year ended 31 March 2013, presented herein as comparative 117

120 Annual Report information, to reflect the adjustments resulting from such change. The Company has also presented the consolidated and separate statements of financial position as at 1 April 2012 as comparative information, using the newly adopted accounting policy for income taxes. My opinion is not qualified in respect of this matter. Termphong Opanaphan Certified Public Accountant (Thailand) No EY Office Limited (Formerly known as Ernst & Young Office Limited ) Bangkok: 23 May

121 Polyplex (Thailand) Public Company Limited and its subsidiaries Statements of financial position As at 31 March 2014 (Unit: Baht) Consolidated financial statements Separate financial statements Note 31 March March 2013 (Restated) 1 April March March 2013 (Restated) 1 April 2012 Assets Current assets Cash and cash equivalents 8 979,405,128 1,468,336,634 1,681,809,653 22,313,575 75,923,455 29,641,023 Current investments 6,000,000 94,001, ,000,000 - Trade and other receivables 9 1,680,521,425 1,384,382,467 1,396,691, ,841, ,557, ,875,522 Inventories 10 2,167,111,553 1,741,438,402 1,623,791, ,102, ,036, ,604,348 Advance payment for purchases of goods 7 39,508,703 48,280, ,064,743 6,046,783 6,063,441 6,962,067 Input tax refundable 39,090,124 63,352,128 34,110,004 39,038,195 63,346,522 34,110,004 Other current assets 92,041,855 81,791,180 75,449,714 32,140,286 50,767,931 40,165,682 Total current assets 5,003,678,788 4,881,582,054 5,116,917,757 1,637,482,742 1,706,695,432 1,481,358,646 Non-current assets Restricted bank deposits 11 20,077,979 11,864, Investments in subsidiaries ,368,767,829 1,355,546,732 1,313,491,892 Property, plant and equipment 13 14,096,250,562 11,447,677,121 6,360,048,887 5,206,739,842 4,997,594,675 3,118,710,965 Deferred tax assets ,717,533 55,620,643 27,650, ,339,118 55,620,643 19,104,622 Goodwill 7,038,679 7,038,679 3,874, Other intangible assets 14 10,420,550 3,136,482 2,007, Advance payment for purchases of assets 72,801,998 90,620, ,471,579 25,363,333 37,503, ,484,861 Other non-current assets 15,088,422 14,646,635 8,650,268 14,262,028 14,646,635 8,604,003 Total non-current assets 14,577,395,723 11,630,604,086 6,849,703,156 6,756,472,150 6,460,912,599 4,804,396,343 Total assets 19,581,074,511 16,512,186,140 11,966,620,913 8,393,954,892 8,167,608,031 6,285,754,989 The accompanying notes are an integral part of the financial statements. 119

122 Annual Report Polyplex (Thailand) Public Company Limited and its subsidiaries Statements of financial position (continued) As at 31 March 2014 (Unit: Baht) Consolidated financial statements Separate financial statements Note 31 March March 2013 (Restated) 1 April March March 2013 (Restated) 1 April 2012 Liabilities and shareholders' equity Current liabilities Short-term loans from financial institutions 15 1,650,009,412 1,044,440, ,744, ,923, ,000,000 80,000,000 Trade and other payables 16 1,322,901,265 1,178,378,311 1,094,006, ,651, ,078, ,326,785 Accounts payable from subsidiary's acquisition ,060, Current portion of long-term loans from financial institutions 18 1,006,117, ,193, ,759, ,183, ,427, ,996,222 Current portion of liabilities under finance lease agreements 19 1,570, Income tax payable 485,496 70,650 20,891, Other current liabilities 353,018, ,271, ,621, ,791, ,545,810 79,215,427 Total current liabilities 4,334,101,780 2,948,354,492 2,218,083,462 2,314,551,121 1,529,051,256 1,033,538,434 Non-current liabilities Long-term loans from related party 7 243,754, ,732, Long-term loans from financial institutions, net of current portion 18 6,339,391,415 4,871,708,643 1,250,516,899 2,791,777,802 2,562,418,211 1,156,339,503 Liabilities under finance lease agreements, net of current portion 19 5,532, Provision for long-term employee benefits 17 20,317,963 16,510,578 9,767,671 8,657,175 7,441,312 6,051,667 Total non-current liabilities 6,608,996,501 5,318,951,614 1,260,284,570 2,800,434,977 2,569,859,523 1,162,391,170 Total liabilities 10,943,098,281 8,267,306,106 3,478,368,032 5,114,986,098 4,098,910,779 2,195,929,604 The accompanying notes are an integral part of the financial statements. 120

123 Polyplex (Thailand) Public Company Limited and its subsidiaries Statements of financial position (continued) As at 31 March 2014 (Unit: Baht) Consolidated financial statements Separate financial statements Note 31 March March 2013 (Restated) 1 April March March 2013 (Restated) 1 April 2012 Shareholders' equity Share capital Registered 960,000,000 ordinary shares of Baht 1 each 960,000, ,000, ,000, ,000, ,000, ,000,000 Issued and fully paid 800,000,000 ordinary shares of Baht 1 each 800,000, ,000, ,000, ,000, ,000, ,000,000 Share premium 1,370,460,000 1,370,460,000 1,370,460,000 1,370,460,000 1,370,460,000 1,370,460,000 Retained earnings Appropriated - statutory reserve 20 96,000,000 96,000,000 96,000,000 96,000,000 96,000,000 96,000,000 Unappropriated 6,102,428,031 6,694,145,724 6,427,651,814 1,012,508,794 1,802,237,252 1,823,365,385 Other components of shareholders' equity 158,537,978 (816,562,151) (348,033,532) Equity attributable to owners of the Company 8,527,426,009 8,144,043,573 8,346,078,282 3,278,968,794 4,068,697,252 4,089,825,385 Non-controlling interests of the subsidiaries 110,550, ,836, ,174, Total shareholders' equity 8,637,976,230 8,244,880,034 8,488,252,881 3,278,968,794 4,068,697,252 4,089,825,385 Total liabilities and shareholders' equity 19,581,074,511 16,512,186,140 11,966,620,913 8,393,954,892 8,167,608,031 6,285,754,989 The accompanying notes are an integral part of the financial statements. 121

124 Annual Report Polyplex (Thailand) Public Company Limited and its subsidiaries Income statements For the year ended 31 March 2014 Consolidated financial statements Note (Restated) (Unit: Baht) Separate financial statements (Restated) Revenues Sales 23 10,702,538,404 9,230,018,464 4,517,512,645 4,205,439,768 Exchange gains - 177,398, ,836,044 Dividend income ,483,705 Other income 89,998,590 87,768,151 60,015,110 49,402,782 Total revenues 10,792,536,994 9,495,185,451 4,577,527,755 4,438,162,299 Expenses Cost of sales 9,773,860,402 7,874,168,461 4,543,188,851 3,941,029,982 Selling expenses 737,452, ,475, ,454, ,878,785 Administrative expenses 490,312, ,625,632 82,177,067 74,924,889 Exchange losses 383,089, ,790,865 - Total expenses 11,384,715,404 9,033,269,797 5,255,611,275 4,313,833,656 Profit (loss) before finance cost and income tax expenses (592,178,410) 461,915,654 (678,083,520) 124,328,643 Finance cost (190,048,006) (86,806,412) (85,363,413) (45,972,797) Profit (loss) before income tax expenses (782,226,416) 375,109,242 (763,446,933) 78,355,846 Income tax benefit ,337,462 16,328,668 85,718,475 36,516,021 Profit (loss) for the year (488,888,954) 391,437,910 (677,728,458) 114,871,867 Profit (loss) attributable to: Equity holders of the Company (479,717,693) 402,493,910 (677,728,458) 114,871,867 Non-controlling interests of the subsidiaries (9,171,261) (11,056,000) (488,888,954) 391,437,910 Basic earnings per share 24 Profit (loss) attributable to equity holders of the Company (0.60) 0.50 (0.85) 0.14 The accompanying notes are an integral part of the financial statements. 122

125 Polyplex (Thailand) Public Company Limited and its subsidiaries Statements of comprehensive income For the year ended 31 March 2014 Consolidated financial statements (Restated) (Unit: Baht) Separate financial statements (Restated) Profit (loss) for the year (488,888,954) 391,437,910 (677,728,458) 114,871,867 Other comprehensive income: Exchange differences on translation of financial statements in foreign currency 992,719,150 (484,523,568) - - Other comprehensive income for the year 992,719,150 (484,523,568) - - Total comprehensive income for the year 503,830,196 (93,085,658) (677,728,458) 114,871,867 Total comprehensive income attributable to: Equity holders of the Company 495,382,436 (70,485,401) (677,728,458) 114,871,867 Non-controlling interests of the subsidiaries 8,447,760 (22,600,257) 503,830,196 (93,085,658) The accompanying notes are an integral part of the financial statements. 123

126 Annual Report Polyplex (Thailand) Public Company Limited and its subsidiaries Statements of changes in shareholders equity For the year ended 31 March 2014 Consolidated financial statements Equity attributable to the owners of the Company Other components of shareholders equity Issued and fully paid share capital Share premium Retained earnings Appropriated - statutory reserve Unappropriated Other comprehensive income Exchange differences on translation of financial statements in foreign currency Surplus on business combination under common control Excess of cost of investment in subsidiary over the carrying amount of the interest acquired Total other components of shareholders equity Total equity attributable to owners of the Company Equity attributable to noncontrolling interests of the subsidiaries Total shareholders equity Balance as at 31 March as previously reported 800,000,000 1,370,460,000 96,000,000 6,401,772,010 (316,823,061) (31,263,716) - (348,086,777) 8,320,145, ,457,020 8,460,602,253 Cumulative effect of change in accounting policy (Note 4) ,879,804 53, ,245 25,933,049 1,717,579 27,650,628 Balance as at 31 March as restated 800,000,000 1,370,460,000 96,000,000 6,427,651,814 (316,769,816) (31,263,716) - (348,033,532) 8,346,078, ,174,599 8,488,252,881 Total comprehensive income for the year - restated ,493,910 (472,979,311) - - (472,979,311) (70,485,401) (22,600,257) (93,085,658) Dividend paid (Note 25) (136,000,000) (136,000,000) - (136,000,000) Dividend paid by subsidiary (542,636) (542,636) Additional investments in subsidiaries ,032,647 9,032,647 Acquisition of investments in subsidiary from non-controlling interests (Note 2.2) ,450,692 4,450,692 4,450,692 (27,227,892) (22,777,200) Balance as at 31 March ,000,000 1,370,460,000 96,000,000 6,694,145,724 (789,749,127) (31,263,716) 4,450,692 (816,562,151) 8,144,043, ,836,461 8,244,880, Balance as at 31 March as previously reported 800,000,000 1,370,460,000 96,000,000 6,639,743,223 (789,827,978) (31,263,716) 3,311,401 (817,780,293) 8,088,422, ,836,461 8,189,259,391 Cumulative effect of change in accounting policy (Note 4) ,402,501 78,851-1,139,291 1,218,142 55,620,643-55,620,643 Balance as at 31 March as restated 800,000,000 1,370,460,000 96,000,000 6,694,145,724 (789,749,127) (31,263,716) 4,450,692 (816,562,151) 8,144,043, ,836,461 8,244,880,034 Total comprehensive income for the year (479,717,693) 975,100, ,100, ,382,436 8,447, ,830,196 Dividend paid (Note 25) (112,000,000) (112,000,000) - (112,000,000) Additional investments in subsidiary (Note 12) ,266,000 1,266,000 Balance as at 31 March ,000,000 1,370,460,000 96,000,000 6,102,428, ,351,002 (31,263,716) 4,450, ,537,978 8,527,426, ,550,221 8,637,976,230 The accompanying notes are an integral part of the financial statements. 124

127 Polyplex (Thailand) Public Company Limited and its subsidiaries Statements of changes in shareholders equity (continued) For the year ended 31 March 2014 (Unit: Baht) Separate financial statements Retained earnings Issued and fully paid share capital Share premium Appropriated - statutory reserve Unappropriated Total Balance as at 31 March as previously reported 800,000,000 1,370,460,000 96,000,000 1,804,260,763 4,070,720,763 Cumulative effect of change in accounting policy (Note 4) ,104,622 19,104,622 Balance as at 31 March as restated 800,000,000 1,370,460,000 96,000,000 1,823,365,385 4,089,825,385 Total comprehensive income for the year - restated ,871, ,871,867 Dividend paid (Note 25) (136,000,000) (136,000,000) Balance as at 31 March ,000,000 1,370,460,000 96,000,000 1,802,237,252 4,068,697, Balance as at 31 March as previously reported 800,000,000 1,370,460,000 96,000,000 1,746,616,609 4,013,076,609 Cumulative effect of change in accounting policy (Note 4) ,620,643 55,620,643 Balance as at 31 March as restated 800,000,000 1,370,460,000 96,000,000 1,802,237,252 4,068,697,252 Total comprehensive income for the year (677,728,458) (677,728,458) Dividend paid (Note 25) (112,000,000) (112,000,000) Balance as at 31 March ,000,000 1,370,460,000 96,000,000 1,012,508,794 3,278,968,794 The accompanying notes are an integral part of the financial statements. 125

128 Annual Report Polyplex (Thailand) Public Company Limited and its subsidiaries Cash flow statements For the year ended 31 March 2014 Consolidated financial statements (Unit: Baht) Separate financial statements Cash flows from operating activities Profit (loss) before tax (782,226,416) 375,109,242 (763,446,933) 78,355,846 Adjustments to reconcile profit (loss) before tax to net cash provided by (paid from) operating activities: Depreciation and amortisation 616,357, ,977, ,092, ,512,345 Doubtful debts 5,249,847 3,719, ,764 - Decrease of inventory to net realisable value 20,789,648 13,192,437 3,428,293 13,192,438 Gains on sales of current investments (276,335) (538,611) (276,335) (538,611) Losses (gains) on sales and write off of property, plant and equipment 1,163,425 26,070,300 (545,115) 13,811,241 Provision for long-term employee benefits 6,410,802 12,904,832 1,817,346 1,673,050 Unrealised losses (gains) on exchange 349,628,751 (150,338,484) 381,869,216 (142,669,550) Dividend income (9,483,705) Interest expenses 149,164,406 55,831,760 85,363,413 44,980,673 Profit from operating activities before changes in operating assets and liabilities 366,261, ,928,406 13,470, ,833,727 Operating assets (increase) decrease Trade and other receivables (300,530,697) 444,110 (105,212,006) 30,498,118 Inventories (447,310,765) (130,693,211) (1,494,672) (120,624,571) Other current assets 27,722, ,308,852 45,070,291 (27,331,465) Other non-current assets (441,787) (5,996,367) 384,607 (6,042,632) Operating liabilities increase (decrease) Trade and other payables 116,616,566 68,428,271 21,470,615 46,859,648 Other current liabilities 77,586, ,647,576 10,478,427 24,879,002 Payment of long-term employee benefits (4,350,948) (5,523,533) (601,483) (283,405) Cash from (used in) operating activities (164,447,046) 1,002,544,104 (16,433,612) 181,788,422 Cash paid for corporate income tax (5,184,006) (30,600,596) - - Net cash from (used in) operating activities (169,631,052) 971,943,508 (16,433,612) 181,788,422 The accompanying notes are an integral part of the financial statements. 126

129 Polyplex (Thailand) Public Company Limited and its subsidiaries Cash flow statements (continued) For the year ended 31 March 2014 Consolidated financial statements (Unit: Baht) Separate financial statements Cash flows from investing activities Increase in restricted bank deposits (8,213,860) (11,864,119) - - Decrease (increase) in current investments 88,277,335 (93,462,389) 78,276,335 (77,461,389) Cash paid for investments in subsidiaries - (266,837,337) (13,221,097) (42,054,840) Dividend received from subsidiaries ,483,705 Decrease in advance payment for purchases of assets 17,818, ,851,172 12,140, ,980,947 Increase (decrease) in other payables for purchases of assets 60,432,050 19,780,187 (57,501,876) 18,538,945 Proceeds from sales of property, plant and equipment 898,282 15,209,296 11,761, ,364 Purchases of property, plant and equipment (2,064,861,084) (5,898,754,709) (498,283,532) (2,110,206,906) Increase in other intangible assets (9,456,174) (2,111,021) - - Net cash used in investing activities (1,915,105,042) (5,881,188,920) (466,828,478) (1,894,096,174) Cash flows from financing activities Increase in short-term loans from financial institutions 605,569, ,695, ,923, ,000,000 Increase in long-term loans from related party - 430,732, Repayment of long-term loans from related party (252,943,625) Increase in long-term loans from financial institutions 1,710,444,439 4,365,278, ,349,592 1,938,640,180 Repayment of long-term loans from financial institutions (452,394,688) (378,138,989) (359,869,091) (290,175,220) Cash paid for interest expenses (239,691,059) (134,915,535) (108,752,103) (58,874,776) Dividend payment (112,000,000) (136,000,000) (112,000,000) (136,000,000) Dividend paid to non-controlling interests of subsidiary - (542,636) - - Cash received from non-controlling interests of subsidiaries 1,266,000 5,868, Net cash from financing activities 1,260,250,354 4,869,977, ,652,210 1,758,590,184 Increase (decrease) in translation adjustments 335,554,234 (174,204,610) - - Net increase (decrease) in cash and cash equivalents (488,931,506) (213,473,019) (53,609,880) 46,282,432 Cash and cash equivalents at beginning of year 1,468,336,634 1,681,809,653 75,923,455 29,641,023 Cash and cash equivalents at end of year 979,405,128 1,468,336,634 22,313,575 75,923,455 Supplemental cash flows information: Non-cash transactions Increase in equipment under finance lease agreements 7,102, The accompanying notes are an integral part of the financial statements. 127

130 Annual Report Polyplex (Thailand) Public Company Limited and its subsidiaries Notes to consolidated financial statements For the year ended 31 March General information Polyplex (Thailand) Public Company Limited ( The Company ) is a public company incorporated and domiciled in Thailand. Its parent company is Polyplex Corporation Limited, which was incorporated in India. The Company is principally engaged in the manufacture and distribution of polyester films, metallized films, extrusion coated films, cast polypropylene films, silicone coated films and PET resins. The registered addresses of the Company s head office and factories are as follows: Head office: Factory 1: Factory 2: Factory 3: 75/26 Ocean Tower II, 18th Floor, Soi Sukhumvit 19, Sukhumvit Road, Kwaeng North Klongtoey, Khet Wattana, Bangkok. Siam Eastern Industrial Park, 60/24 Moo 3, Tambol Mabyangporn, Amphur Pluakdaeng, Rayong. Siam Eastern Industrial Park, 60/91 Moo 3, Tambol Mabyangporn, Amphur Pluakdaeng, Rayong. Siam Eastern Industrial Park, 60/109 Moo 3, Tambol Mabyangporn, Amphur Pluakdaeng, Rayong. 2. Basis of preparation 2.1 The financial statements have been prepared in accordance with Thai Financial Reporting Standards enunciated under the Accounting Professions Act B.E and their presentation has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 28 September 2011, issued under the Accounting Act B.E The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from the Thai language financial statements. The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policies. 2.2 Basis of consolidation a) The consolidated financial statements include the financial statements of the Company ( the Company ) and the following subsidiary companies ( the subsidiaries ): 128

131 EcoBlue Ltd. Company s name Polyplex (Singapore) Pte. Ltd. Nature of business Manufacture and distribution of recycled plastic products Investment holding company Country of incorporation Percentage of shareholding 2014 Percent 2013 Percent Thailand Singapore Polyplex America Holdings Inc. Investment holding company United States of America Polyplex Europe B.V. Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi (100% owned by Polyplex (Singapore) Pte. Ltd.) Distribution of plastic film Manufacture and distribution of polyester film and chips Netherlands Turkey Polyplex Trading (Shenzhen) Co., Ltd. (100% owned by Polyplex (Singapore) Pte. Ltd.) Distribution of plastic film The People s Republic of China Polyplex USA LLC (100% owned by Polyplex America Holdings Inc.) Manufacture and distribution of polyester film United States of America Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi (67% owned by Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi) Polyplex Paketleme Cozumleri Sanayi Ve Ticaret Anonim Sirketi (99.99% owned by Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi) Manufacture and distribution of polyester resins Distribution of plastic film Turkey Turkey b) Subsidiaries are fully consolidated, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. c) The financial statements of the subsidiaries are prepared using the same significant accounting policies as the Company. d) The assets and liabilities in the financial statements of overseas subsidiary companies are translated to Baht using the exchange rate prevailing on the end of reporting period, and revenues and expenses translated using monthly average exchange rates. The resulting differences are shown under the caption of Exchange differences on translation of financial statements in foreign currency in the consolidated statements of changes in shareholders equity. e) Material balances and transactions between the Company and its subsidiary companies have been eliminated from the consolidated financial statements. 129

132 Annual Report f) Non-controlling interests represent the portion of profit or loss and net assets of the subsidiaries that are not held by the Company and are presented separately in the consolidated profit or loss and within equity in the consolidated statement of financial position. g) During the current year, the Company invested in 100% interest in Polyplex Europe B.V., as described in Note 12 to the financial statements. h) During the current year, Polyplex Paketleme Cozumleri Sanayi Ve Ticaret Anonim Sirketi was established in Turkey, with the registered share capital of TRY 100,000. The Company s subsidiary, Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi, invested in 99.99% interest in this company. i) On 5 November 2012, the Company s subsidiary, Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi ( Polyplex Europa ), acquired 67% of the ordinary shares of a subsidiary of the major shareholder, Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi ( Polyplex Resins ), which was established on 2 December This acquisition was considered to be a business combination under common control, and the difference between the cost of this business combination under common control and the net book value of the equity of Polyplex Resins, amounting to EUR 0.76 million or equivalent to Baht 31 million, was therefore recorded as Surplus on business combination under common control and separately presented in the consolidated statements of changes in shareholders equity. Because this acquisition was a business combination under common control, the Company has treated Polyplex Resins acquired in November 2012, as if it had been a subsidiary of Polyplex Europa since it was established (2 December 2011). Therefore, the consolidated statements of income and comprehensive income for the year ended 31 March 2013 included the operating results of Polyplex Resins as from 1 April 2012, ignoring the actual date of the business combination under common control (the date the shares of the subsidiary were acquired). The operating results of Polyplex Resins for the period as from 1 April 2012 to 5 November 2012, which were included in the consolidated statements of income and comprehensive income for the year ended 31 March 2013, were loss amounting to approximately Baht 27 million (loss attributable to equity holders of the Company was Baht 18 million). In addition, in February 2013 Polyplex Europa made an additional investment in Polyplex Resins amounted to EUR 0.2 million, or equivalent to Baht 10.2 million. j) In January 2013 the Company made an additional investment in Polyplex (Americas) Inc., comprising 19.76% of all ordinary shares and 32,000 preference shares (equivalent to 3.85% of all preference shares), with a total acquisition cost of USD 0.76 million, or equivalent to Baht 23 million. After the acquisition, the Company s interest in the ordinary shares and preference shares of Polyplex (Americas) Inc. increased to 100%. The difference between the cost of the additional investment and the carrying amount of the non-controlling interests acquired, amounting to Baht 4.4 million, has been presented in other components of shareholders equity in the consolidated statement of changes in 130

133 shareholders equity. After the above additional investment in Polyplex (Americas) Inc., Polyplex (Americas) Inc. was merged with Polyplex USA LLC, whereby Polyplex America Holdings Inc. issued 1,524 ordinary shares with a par value of USD 0.01 each to the Company at USD 7.6 million to replace the ordinary shares and preference shares of Polyplex (Americas) Inc., which were cancelled. 2.3 The separate financial statements, which present investments in subsidiaries under the cost method, have been prepared solely for the benefit of the public. 3. New accounting standards Below is a summary of accounting standards that became effective in the current accounting year and those that will become effective in the future. (a) Accounting standards that became effective in the current accounting year Accounting standards: TAS 12 TAS 20 (revised 2009) TAS 21 (revised 2009) Income Taxes Accounting for Government Grants and Disclosure of Government Assistance The Effects of Changes in Foreign Exchange Rates Financial Reporting Standard: Accounting Standard Interpretations: TSIC 10 TSIC 21 TSIC 25 Operating Segments Government Assistance - No Specific Relation to Operating Activities Income Taxes - Recovery of Revalued Non- Depreciable Assets Income Taxes - Changes in the Tax Status of an Entity or its Shareholders Accounting Treatment Guidance for Transfers of Financial Assets These accounting standards, financial reporting standard, accounting standard interpretations and accounting treatment guidance do not have any significant impact on the financial statements, except for the following accounting standard. 131

134 Annual Report TAS 12 Income Taxes This accounting standard requires an entity to identify temporary differences between the carrying amount of an asset or liability in the statement of financial position and its tax base and recognise the tax effects as deferred tax assets or liabilities subjecting to certain recognition criteria. The Company and its subsidiaries have changed this accounting policy in this current period and restated the prior year s financial statements, presented as comparative information, as though the Company and its subsidiaries had initially recognised the tax effects as deferred tax assets or liabilities. The cumulative effect of this change in accounting policy has been presented in Note 4 to the financial statements. (b) Accounting standards that will become effective in the future Effective date Accounting Standards: TAS 1 (revised 2012) Presentation of Financial Statements 1 January 2014 TAS 7 (revised 2012) Statement of Cash Flows 1 January 2014 TAS 12 (revised 2012) Income Taxes 1 January 2014 TAS 17 (revised 2012) Leases 1 January 2014 TAS 18 (revised 2012) Revenue 1 January 2014 TAS 19 (revised 2012) Employee Benefits 1 January 2014 TAS 21 (revised 2012) The Effects of Changes in Foreign Exchange Rates 1 January 2014 TAS 24 (revised 2012) Related Party Disclosures 1 January 2014 TAS 28 (revised 2012) Investments in Associates 1 January 2014 TAS 31 (revised 2012) Interests in Joint Ventures 1 January 2014 TAS 34 (revised 2012) Interim Financial Reporting 1 January 2014 TAS 36 (revised 2012) Impairment of Assets 1 January 2014 TAS 38 (revised 2012) Intangible Assets 1 January

135 Effective date Financial Reporting Standards: TFRS 2 (revised 2012) TFRS 3 (revised 2012) Share-based Payment 1 January 2014 Business Combinations 1 January 2014 TFRS 4 Insurance Contracts 1 January 2016 TFRS 5 (revised 2012) Non-current Assets Held for Sale and Discontinued Operations 1 January 2014 TFRS 8 (revised 2012) Operating Segments 1 January 2014 Accounting Standard Interpretations: TSIC 15 Operating Leases - Incentives 1 January 2014 TSIC 27 TSIC 29 Evaluating the Substance of Transactions Involving the Legal Form of a Lease Service Concession Arrangements: Disclosures 1 January January 2014 TSIC 32 Intangible Assets - Web Site Costs 1 January 2014 Financial Reporting Standard Interpretations: TFRIC 1 TFRIC 4 TFRIC 5 TFRIC 7 Changes in Existing Decommissioning, Restoration and Similar Liabilities Determining whether an Arrangement contains a Lease Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds Applying the Restatement Approach under TAS 29 Financial Reporting in Hyperinflationary Economies 1 January January January January 2014 TFRIC 10 Interim Financial Reporting and Impairment 1 January

136 Annual Report Effective date TFRIC 12 Service Concession Arrangements 1 January 2014 TFRIC 13 Customer Loyalty Programmes 1 January 2014 TFRIC 17 Distributions of Non-cash Assets to Owners 1 January 2014 TFRIC 18 Transfers of Assets from Customers 1 January 2014 The management of the Company has assessed the effect of the above accounting standards, financial reporting standards, accounting standard interpretations and financial reporting standard interpretations and believes that they are not relevant to the business of the Company or do not have any significant impact on the financial statements when they are initially applied. 4. Cumulative effect of changes in accounting policies due to the adoption of new accounting standard During the current year, the Company and its subsidiaries made the changes described in Note 3 to the financial statements to its significant accounting policies, as a result of the adoption of Thai Accounting Standard 12 Income Taxes. The cumulative effect of the changes in the accounting policies has been separately presented in the statements of changes in shareholders equity. The amounts of adjustments affecting the statements of financial position and the statements of income are summarised below. (Unit: Thousand Baht) Consolidated financial statements Separate financial statements As at 31 March 2014 As at 31 March 2013 As at 1 April 2012 As at 31 March 2014 As at 31 March 2013 As at 1 April 2012 Statements of financial position Increase in deferred tax assets 355,718 55,621 27, ,339 55,621 19,105 Increase in other components of shareholders equity Increase in non-controlling interests of the subsidiaries Increase in unappropriated retained earnings 7,525 1, , ,193 54,403 25, ,339 55,621 19,

137 (Unit: Thousand Baht) For the year ended 31 March 2014 For the year ended 31 March 2013 Consolidated financial statements Separate financial statements Consolidated financial statements Separate financial statements Statements of income Increase in income tax benefit 293,790 85,718 27,987 36,516 Increase in profit attributable to equity holders of the Company Increase in basic earnings per share (Baht) 293,790 85,718 27,987 36, Significant accounting policies 5.1 Revenue recognition Sales of goods Sales of goods are recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are the invoiced value, excluding value added tax, of goods supplied after deducting discounts and allowances. Interest income Interest income is recognised on an accrual basis based on the effective interest rate. Dividends Dividends are recognised when the right to receive the dividends is established. 5.2 Cash and cash equivalents Cash and cash equivalents consist of cash in hand and at banks, and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions. 5.3 Trade receivables Trade receivables are stated at the net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in collection of receivables. The allowance is generally based on collection experiences and analysis of debt aging. 5.4 Inventories Finished goods and work in process are valued at the lower of cost (average method) and net realisable value. Cost includes all production costs and attributable factory overheads. Raw materials, spare parts and factory supplies are valued at the lower of cost (average method) and net realisable value and are charged to production costs whenever consumed. 5.5 Investments 135

138 Annual Report Investments in subsidiaries are accounted for in the separate financial statements using the cost method. The weighted average method is used for computation of the cost of investments. In the event the Company reclassifies investments from one type to another, such investments will be readjusted to their fair value as at the reclassification date. The differences between the carrying amount of the investments and their fair value on the date of reclassification are recorded in profit or loss or recorded as other components of shareholders equity, depending on the type of investment that is reclassified. 5.6 Property, plant and equipment/depreciation Land is stated at cost. Buildings and equipment are stated at cost less accumulated depreciation and allowance for loss on impairment of assets (if any). Depreciation of buildings and building improvements, machinery and equipment is calculated by reference to their costs on the straight-line basis. Depreciation of other equipment is calculated on the sum of the year digits basis. The estimated useful lives of plant and equipment are as follows: Buildings and building improvements - 20 and 50 years Machinery and equipment years Furniture, fixtures and office equipment years Motor vehicles - 5 years Depreciation is included in determining income. No depreciation is provided on land, machinery in transit, and assets under installation and construction. 5.7 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. 5.8 Intangible assets Intangible assets acquired through business combination are initially recognised at their fair value on the date of business acquisition while intangible assets acquired in other cases are recognised at cost. Following the initial recognition, the intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets with finite lives are amortised on a systematic basis over the economic useful life and tested for impairment whenever there is an indication that the intangible asset may be 136

139 impaired. The amortisation period and the amortisation method of such intangible assets are reviewed at least at each financial year end. The amortisation expense is charged to profit or loss. A summary of the intangible assets with finite useful lives is as follows: Useful lives Computer software 3-5 years 5.9 Goodwill Goodwill is initially recorded at cost, which equals to the excess of cost of business combination over the fair value of the net assets acquired. If the fair value of the net assets acquired exceeds the cost of business combination, the excess is immediately recognised as gain in profit or loss. Goodwill is carried at cost less any accumulated impairment losses. Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired Related party transactions Related parties comprise enterprises and individuals that control, or are controlled by, the Company and its subsidiaries, whether directly or indirectly, or which are under common control with the Company and its subsidiaries. They also include associated companies and individuals which directly or indirectly own a voting interest in the Company and its subsidiaries that gives them significant influence over the Company and its subsidiaries, key management personnel, directors and officers with authority in the planning and direction of the operations of the Company and its subsidiaries Long-term leases Leases of property, plant or equipment which transfer substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included in long-term payables, while the interest element is charged to profit or loss over the lease period. The assets acquired under finance leases are depreciated over the useful life of the assets. Leases of property, plant or equipment which do not transfer substantially all the risks and rewards of ownership are classified as operating leases. Operating lease payments are recognised as an expense in profit or loss on a straight line basis over the lease term Foreign currencies The consolidated and separate financial statements are presented in Baht, which is also the Company s functional currency. Items of each entity included in the consolidated financial statements are measured using the functional currency of that entity. Transactions in foreign currencies are translated into Baht at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are 137

140 Annual Report translated into Baht at the exchange rate ruling at the end of reporting period. Gains and losses on exchange are included in determining income Impairment of assets At the end of each reporting period, the Company and its subsidiaries perform impairment reviews in respect of the property, plant and equipment and other intangible assets whenever events or changes in circumstances indicate that an asset may be impaired. The Company and its subsidiaries also carry out annual impairment reviews in respect of goodwill. An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the asset s fair value less costs to sell and its value in use, is less than the carrying amount. An impairment loss is recognised in profit or loss Employee benefits Short-term employee benefits Salaries, wages, bonuses and contributions to the social security fund are recognised as expenses when incurred. Post-employment benefits and other long-term employee benefits Defined contribution plans The Company and its employees have jointly established a provident fund. The fund is monthly contributed by employees and by the Company. The fund s assets are held in a separate trust fund and the Company s contributions are recognised as expenses when incurred. Defined benefit plans and other long-term employee benefits The Company has obligations in respect of the severance payments it must make to employees upon retirement under labor law and other employee benefit plans. The Company treats these severance payment obligations as a defined benefit plan. In addition, the Company provides other long-term employee benefit plan, namely long service awards. The obligation under the defined benefit plan and other long-term employee benefit plans is determined by a professionally qualified independent actuary based on actuarial techniques, using the projected unit credit method. Actuarial gains and losses arising from post-employment benefits and other long-term benefits are recognised immediately in profit or loss Provisions Provisions are recognised when the Company and its subsidiaries have a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 138

141 5.16 Income tax Income tax expense represents the sum of corporate income tax currently payable and deferred tax. Current tax Current income tax is provided in the accounts at the amount expected to be paid to the taxation authorities, based on taxable profits determined in accordance with tax legislation. Deferred tax Deferred income tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts at the end of each reporting period, using the tax rates enacted at the end of the reporting period. The Company and its subsidiaries recognise deferred tax liabilities for all taxable temporary differences while they recognise deferred tax assets for all deductible temporary differences and tax losses carried forward to the extent that it is probable that future taxable profit will be available against which such deductible temporary differences and tax losses carried forward can be utilised. At each reporting date, the Company and its subsidiaries review and reduce the carrying amount of deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. The Company and its subsidiaries record deferred tax directly to shareholders equity if the tax relates to items that are recorded directly to shareholders equity. 6. Significant accounting judgements and estimates The preparation of financial statements in conformity with financial reporting standards at times requires management to make subjective judgements and estimates regarding matters that are inherently uncertain. These judgements and estimates affect reported amounts and disclosures; and actual results could differ from these estimates. Significant judgements and estimates are as follows: Allowance for doubtful accounts In determining an allowance for doubtful accounts, the management needs to make judgement and estimates based upon, among other things, past collection history, aging profile of outstanding debts and the prevailing economic condition. Property plant and equipment/depreciation In determining depreciation of plant and equipment, the management is required to make estimates of the useful lives and residual values of the plant and equipment and to review estimate useful lives and residual values when there are any changes. In addition, the management is required to review property, plant and equipment for impairment on a periodical basis and record impairment losses when it is determined that their recoverable amount 139

142 Annual Report is lower than the carrying amount. This requires judgements regarding forecast of future revenues and expenses relating to the assets subject to the review. Deferred tax assets Deferred tax assets are recognised for deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the temporary differences and losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of estimate future taxable profits. Post-employment benefits under defined benefit plans and other long-term employee benefits The obligation under the defined benefit plan and other long-term employee benefit plans is determined based on actuarial techniques. Such determination is made based on various assumptions, including discount rate, future salary increase rate, mortality rate and staff turnover rate. 7. Related party transactions During the years, the Company and its subsidiaries had significant business transactions with related parties. Such transactions, which are summarised below, arose in the ordinary course of business and were concluded on commercial terms and bases agreed upon between the Company and those related parties. (Unit: Million Baht) Consolidated financial statements Separate financial statements Pricing policy Transactions with subsidiaries (eliminated from the consolidated financial statements) Sales of goods With reference to market prices Dividend income As declared Sales of fixed assets Cost plus margin Purchases of raw materials With reference to market prices Rental and service income As stipulated in agreements Transactions with related companies Sales of goods With reference to market prices Purchases of raw materials With reference to market prices Other expenses With reference to market prices Interest expenses Euribor % per annum and 4.5% per annum 140

143 Purchases of investments in subsidiaries from related parties During 2013, Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi, a subsidiary, acquired investments in Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi from Polyplex (Asia) Pte. Ltd., the Company s major shareholder. In addition, the Company acquired additional ordinary shares and preference shares of Polyplex (Americas) Inc. amounting to Baht 23 million, of which Baht 9 million was acquired from Polyplex Corporation Limited. As at 31 March 2014 and 2013, the balances of the accounts between the Company and those related parties are as follows: (Unit: Thousand Baht) Consolidated financial statements Separate financial statements Trade and other receivables - related parties (Note 9) Subsidiaries , ,470 Parent company Total trade and other receivables - related parties , ,470 Advance payment for purchases of goods - related party Parent company - 31, Trade payables - related parties (Note 16) Parent company 80,921 5,645-5,645 Subsidiaries - - 1,469 - Total trade payables - related parties 80,921 5,645 1,469 5,645 Long-term loans from related party As at 31 March 2014 and 2013, the balance of loans between a subsidiary and a related company, and the movement of these loans are as follows: (Unit: Thousand Baht) Consolidated financial statements Long-term loans from related party Related by Balance as at 31 March 2013 Increase during the year Decrease during the year Translation adjustment Balance as at 31 March 2014 Polyplex (Asia) Pte. Ltd. Major shareholder 430,732 - (252,944) 65, ,754 As at 31 March 2014, long-term loans from related party carried interest at Euribor %, with that rate having been effective from 1 October The loans are repayable within 1 year and 3 months and if, on the maturity date, the subsidiary is unable to repay the loans in full, their terms will be extended for an additional period of 1 year and 3 months. 141

144 Annual Report Directors and management s remuneration During the years ended 31 March 2014 and 2013, the Company and its subsidiaries had employee benefit expenses payable to their directors and management as below. (Unit: Million Baht) Short-term employee benefits Consolidated financial statements Separate financial statements Guarantee obligations with related parties The Company has outstanding guarantee obligations with its related parties, as described in Note 28.4 to the financial statements. 8. Cash and cash equivalents Consolidated financial statements (Unit: Thousand Baht) Separate financial statements Cash 2,133 2, Bank deposits 977,272 1,465,950 21,655 75,183 Total cash and cash equivalents 979,405 1,468,337 22,314 75,923 As at 31 March 2014, bank deposits in saving accounts and fixed deposits carried interests between 0.10 and 2.83 percent per annum (2013: between 0.05 and 7.15 percent per annum). 142

145 9. Trade and other receivables The balances of trade and other receivables as at 31 March 2014 and 2013, aged on the basis of due dates, are summarised below. Trade receivables - unrelated parties Consolidated financial statements (Unit: Thousand Baht) Separate financial statements Not yet due 1,470,737 1,223, , ,042 Past due Up to 3 months 195, ,132 90,869 47, months 6,020 21, Over 6 months 20,949 11,482 1,839 1,234 Total 1,693,241 1,391, , ,250 Less: Allowance for doubtful debts (13,211) (6,914) (1,329) (1,162) Net 1,680,030 1,384, , ,088 Trade receivables - related parties Not yet due , ,661 Past due Up to 3 months - - 2, months ,809 Over 6 months - - 4,218 - Total , ,470 Other receivables Other receivables - related party Total trade and other receivables - net 1,680,521 1,384, , ,

146 Annual Report Inventories Cost Consolidated financial statements Reduce cost to net realisable value (Unit: Thousand Baht) Inventories - net Finished goods 749, ,403 (24,245) (7,578) 725, ,825 Work in process 388, ,504 (15,974) (11,720) 372, ,784 Raw materials 566, ,170 (718) - 565, ,170 Spare parts and factory supplies 288, , , ,748 Goods in transit 216, , , ,911 Total 2,208,049 1,760,736 (40,937) (19,298) 2,167,112 1,741,438 Cost Separate financial statements Reduce cost to net realisable value (Unit: Thousand Baht) Inventories - net Finished goods 72,112 71,489 (3,251) (4,794) 68,861 66,695 Work in process 204, ,162 (15,974) (11,721) 188, ,441 Raw materials 251, ,075 (718) - 250, ,075 Spare parts and factory supplies 151, , , ,160 Goods in transit 10,910 4, ,910 4,665 Total 690, ,551 (19,943) (16,515) 670, , Restricted bank deposits As at 31 March 2014, restricted bank deposits represent fixed deposits amounting to USD 0.6 million (2013: USD 0.4 million), pledged with the bank as per terms and conditions of the long-term loan facility of Polyplex USA LLC. 12. Investments in subsidiaries These represent investments in ordinary shares and preference shares in the following subsidiary companies: 144

147 (Unit: Thousand Baht) Separate financial statements Company s name Paid-up capital Shareholding percentage Cost Dividend received for the years ended 31 March Percent 2013 Percent Ordinary shares Polyplex (Singapore) Pte. Ltd. EUR 0.8 million EUR 0.8 million ,440 41, Polyplex Europe B.V. EUR 0.2 million , ,920 Polyplex America Holdings Inc. USD 29.6 million USD 29.6 million , , EcoBlue Limited Baht 26.5 million Baht 20.1 million ,341 19, Preference shares 954, ,966-1,920 Polyplex (Singapore) Pte. Ltd. EUR 8.4 million EUR 8.4 million , , Polyplex (Americas) Inc , , ,581-7,564 Total investments in subsidiaries 1,368,768 1,355,547-9,484 In accordance with a resolution of a meeting of the Board of Directors of the Company held on 12 February 2013, in April 2013 Polyplex Europe B.V. was established in Netherlands, with the registered share capital of EUR 3.0 million. The Company invested in a 100% interest in this company. In July 2013, the Company invested EUR 0.2 million, or equivalent to Baht 8.2 million, in this company. During the current year, EcoBlue Limited called up share capital of Baht 6.4 million from its shareholders, of which the Company s share was Baht 5.1 million. The Company made the share payment in August 2013 As at 31 March 2014 and 2013, the Company had investments in 39,100 preference shares of Polyplex (Singapore) Pte. Ltd. These preference shares are non-cumulative and non-participative preference shares. The Company is entitled to receive dividend at a rate not to exceed 7% per annum, in the year in which dividend is declared. 145

148 Annual Report Property, plant and equipment (Unit: Thousand Baht) Consolidated financial statements Land Buildings and building improvements Machinery and equipment Furniture, fixtures and office equipment Motor vehicles Assets under installation and construction Machinery in transit Total Cost 1 April ,508 1,207,907 6,176,924 94,448 41, ,633-8,453,159 Purchases ,647 14,473 16,359 5,805,149 2,236 5,898,754 Disposals - - (17,491) (521) (12,826) (22,550) - (53,388) Transfer in/(transfer out) - 1,059 27,156 2,258 10,663 (41,136) - - Capitalised interest ,175-84,175 Translation adjustment (48,527) (244,272) (4,808) (2,052) (213,436) - (526,394) 31 March ,209 1,161,329 6,001, ,850 53,883 6,172,835 2,236 13,856,306 Purchases 39,807 9,455 90,359 24,687 10,270 1,894,650 2,736 2,071,964 Disposals - - (3,618) - (7,115) - - (10,733) Transfer in/(transfer out) - 1,399,812 3,899,187 15,745 9,908 (5,322,416) (2,236) - Capitalised interest ,819-97,819 Translation adjustment 27, , ,647 10,362 4, ,317-1,283, March ,494 2,693,859 10,582, ,644 71,650 3,366,205 2,736 17,299,

149 (Unit: Thousand Baht) Consolidated financial statements Land Buildings and building improvements Machinery and equipment Furniture, fixtures and office equipment Motor vehicles Assets under installation and construction Machinery in transit Total Accumulated depreciation 1 April ,900 1,837,786 58,428 28, ,093,110 Depreciation for the year - 43, ,559 13,843 9, ,243 Disposals - - (1,725) (459) (9,926) - - (12,110) Translation adjustment - (5,662) (74,429) (2,628) (895) - - (83,614) 31 March ,668 2,106,191 69,184 27, ,408,629 Depreciation for the year - 80, ,915 19,084 13, ,348 Disposals - - (1,564) - (7,108) - - (8,672) Translation adjustment - 13, ,796 5,924 1, , March ,979 2,774,338 94,192 35, ,202,876 Net book value 31 March , ,661 3,895,773 36,666 26,297 6,172,835 2,236 11,447, March ,494 2,394,880 7,808,201 62,452 36,283 3,366,205 2,736 14,096,251 Depreciation for the year 2013 (Baht million included in manufacturing cost, and the balance in selling and administrative expenses) 411, (Baht million included in manufacturing cost, and the balance in selling and administrative expenses) 613,

150 Annual Report (Unit: Thousand Baht) Separate financial statements Land Buildings and building improvements Machinery and equipment Furniture, fixtures and office equipment Motor vehicles Assets under installation and construction Machinery in transit Total Cost 1 April , ,561 3,424,987 46,776 22,819 9,796-4,354,566 Purchases ,441 2,992 9,896 2,080,753 2,235 2,110,207 Disposals - - (14,347) (108) (1,624) (880) - (16,959) Transfer in/(transfer out) - 1, (1,626) - - Capitalised interest ,624-17, March , ,501 3,424,381 49,936 31,091 2,105,667 2,235 6,465,438 Purchases - 9,455 16,762 15,574 9, ,197 2, ,283 Disposals (7,115) (11,209) - (18,324) Transfer in/(transfer out) - 589,679 1,948,491 6,814 - (2,542,749) (2,235) - Capitalised interest ,171-27, March ,627 1,254,635 5,389,634 72,324 33,535 23,077 2,736 6,972,

151 (Unit: Thousand Baht) Separate financial statements Land Buildings and building improvements Machinery and equipment Furniture, fixtures and office equipment Motor vehicles Assets under installation and construction Machinery in transit Total Accumulated depreciation 1 April ,568 1,078,672 32,056 15, ,235,855 Depreciation for the year - 32, ,438 6,354 4, ,512 Disposals - - (1,235) (45) (1,244) - - (2,524) 31 March ,320 1,267,875 38,365 19, ,467,843 Depreciation for the year - 46, ,761 8,785 6, ,093 Disposals (7,108) - - (7,108) 31 March ,096 1,510,636 47,150 18, ,765,828 Net book value 31 March , ,181 2,156,506 11,571 11,808 2,105,667 2,235 4,997, March ,627 1,065,539 3,878,998 25,174 14,589 23,077 2,736 5,206,740 Depreciation for the year 2013 (Baht million included in manufacturing cost, and the balance in selling and administrative expenses) 234, (Baht million included in manufacturing cost, and the balance in selling and administrative expenses) 305,

152 Annual Report As at 31 March 2014, certain equipment items of the Company and its subsidiaries have been fully depreciated but are still in use. The gross carrying amount (before deducting accumulated depreciation) of those assets amounted to approximately Baht 46.1 million (2013: Baht 38.9 million) (The Company only: Baht 30.1 million, 2013: Baht 25.4 million). The Company and its subsidiaries have pledged their assets amounting to approximately Baht 6,007.3 million (2013: Baht 2,465.8 million) as collateral against credit facilities received from financial institutions (The Company only: Baht 2,188.7 million, 2013: Baht 2,379.9 million). In July 2012, Polyplex USA LLC acquired a group of assets used in its metallized film business from a company, with the acquisition cost of approximately USD 6.3 million. The acquired group of assets are summarised below. Million USD Trade receivables 2.8 Inventories 1.7 Machinery and equipment 1.8 The acquired machinery and equipment of USD 1.8 million, or equivalent to Baht 54.8 million, was already included in the movements of the property, plant and equipment account during

153 14. Intangible assets Details of intangible assets (computer software) are as follows: (Unit: Thousand Baht) Consolidated financial statements Cost 1 April ,285 Purchases 2,111 Disposals (276) Translation adjustment (646) 31 March ,474 Purchases 9,456 Translation adjustment 1, March ,704 Accumulated amortisation 1 April ,278 Amortisation for the year 734 Disposals (276) Translation adjustment (398) 31 March ,338 Amortisation for the year 3,010 Translation adjustment March ,283 Net book value 31 March , March ,421 Amortisation for the year ,

154 Annual Report Short-term loans from financial institutions Interest rate Consolidated financial statements (Unit: Thousand Baht) Separate financial statements 2014 (% per annum) 2013 (% per annum) Short-term loans from banks LIBOR + 2.0% LIBOR + 1.5% and LIBOR + 2.0% 665, , Trust receipt 3.20% % - 152, ,924 - Promissory notes 2.65% % 3.45% % 832, , , ,000 Total short-term loans from financial institutions 1,650,009 1,044, , ,000 Short-term loans from banks as at 31 March 2014 represent the US dollar loans of USD 20.5 million (2013: USD 22.5 million) obtained by its subsidiaries. These loans were guaranteed by the Company. 16. Trade and other payables Consolidated financial statements (Unit: Thousand Baht) Separate financial statements Trade payables - related parties 80,921 5,645 1,469 5,645 Trade payables - unrelated parties 1,073,251 1,035, , ,480 Other payables 31,057 59,920 30,987 41,438 Other payables for purchases of assets 137,672 77,515 19,768 77,515 Total trade and other payables 1,322,901 1,178, , ,

155 17. Provision for long-term employee benefits Provision for long-term employee benefits, which is compensations on employees retirement, was as follows: Defined benefit obligation at beginning of year Consolidated financial statements (Unit: Thousand Baht) Separate financial statements ,511 9,768 7,441 6,052 Current service cost 7,210 12,393 1,522 1,429 Interest cost Benefits paid during the year (4,351) (5,524) (601) (284) Actuarial gain (1,454) Translation adjustment 1,748 (638) - - Provisions for long-term employee benefits at end of year 20,318 16,511 8,657 7,441 Long-term employee benefit expenses included in the profit or loss was as follows: Consolidated financial statements (Unit: Thousand Baht) Separate financial statements Current service cost 7,210 12,393 1,522 1,429 Interest cost Actuarial gain recognised during the year Total expenses recognised in profit or loss (1,454) ,410 12,905 1,817 1,673 Principal actuarial assumptions at the valuation date were as follows: Consolidated financial statements Separate financial statements 2014 (% per annum) 2013 (% per annum) 2014 (% per annum) 2013 (% per annum) Discount rate 4.2 and and Future salary increase rate (depending on age of employee)

156 Annual Report Long-term loans from financial institutions (Unit: Thousand Baht) Loans Repayment schedule Consolidated financial statements Separate financial statements Floating rate loans Euribor + 0.6% to 3.8% (2013: Euribor + 0.6% to 3.8%) Floating rate loans Libor % to 3.38% (2013: Libor % to 2.95%) Fixed rate loans 4.61% to 5.54% (2013: 4.61% to 5.54%) Repayable as from April 2006 to August 2019 Repayable as from October 2009 to September 2020 Repayable as from April 2006 to July ,491,436 1,738, , ,905 4,775,747 3,481,310 2,315,745 1,954,340 78, ,600 78, ,600 Total 7,345,508 5,326,903 3,369,962 2,933,845 Less: Current portion (1,006,117) (455,194) (578,184) (371,427) Long-term loans - net of current portion 6,339,391 4,871,709 2,791,778 2,562,418 The Company s loan facilities are secured by the mortgage of land, premises and machinery of the Company. The subsidiary s loan facilities are secured by the mortgage of its land and premises and the pledge of its machinery and bank deposits, and are guaranteed by the Company as described in Note 28.4 to the financial statements. The loan agreements contain covenants that, among other things, require the Company and its subsidiaries to maintain a certain debt to equity ratio and debt service coverage ratio, and require a subsidiary to maintain a particular debt to EBITDA ratio. As at 31 March 2014, the Company had two interest rate swap agreements with a bank, under which the Company agreed to swap a floating interest rate of LIBOR for a fixed interest rate of 2.61 percent per annum on outstanding principal of USD 1.4 million and to swap a floating interest rate of LIBOR for a fixed interest rate of 3.54 percent per annum on outstanding principal of USD 1.0 million. The swap agreements will mature on 31 July

157 19. Liabilities under finance lease agreements (Unit: Thousand Baht) Consolidated financial statements Liabilities under finance lease agreements 7,840 - Less: Deferred interest expenses (737) - Total 7,103 - Less: Portion due within one year (1,570) - Liabilities under finance lease agreements - net of current portion 5,533 - A subsidiary has entered into finance lease agreements to lease equipment for use in its operations. The average term of the agreements is 5 years. 20. Statutory reserve Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside to a statutory reserve at least 5 percent of its net profit after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for dividend distribution. At present, the statutory reserve has fully been set aside. 21. Expenses by nature Significant expenses by nature are as follows: Consolidated financial statements (Unit: Thousand Baht) Separate financial statements Salaries, wages and other employee benefits 1,051, , , ,463 Depreciation and amortisation 616, , , ,512 Loss on diminutions in value of inventories 20,790 13,192 3,428 13,192 Raw materials and consumables used 8,145,993 5,704,793 3,347,143 3,070,983 Changes in inventories of finished goods and work in process (339,511) (71,258) (48,161) (85,364) 155

158 Annual Report Income tax Income tax expenses for the years ended 31 March 2014 and 2013 are made up as follows: Current income tax: Consolidated financial statements (Restated) (Unit: Thousand Baht) Separate financial statements (Restated) Current income tax charge 1,571 11, Adjustment in respect of current income tax of previous year (1,123) Write off of withholding income tax Deferred tax: Relating to origination and reversal of temporary differences (293,790) (27,987) (85,718) (36,516) Income tax expenses (benefit) reported in the statements of income (293,337) (16,329) (85,718) (36,516) No corporate income tax was payable for the years since the Company has been granted promotional privileges under the Investment Promotion Act B.E by the Board of Investment and has tax loss brought forward in excess of profit from non-promoted operations for the years. Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi and Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi, subsidiary and being manufacturing companies which operate in a Free Trade Zone, are eligible to benefit from corporate tax exemptions, until the end of the financial year of full membership of Turkey to the European Union. However, this exemption is limited to the earnings related to the sale of manufactured goods. Reconciliation between income tax expenses (benefit) and the product of accounting profit (loss) multiplied by the applicable tax rates for the years ended 31 March 2014 and 2013 are as follows: 156

159 (Unit: Thousand Baht) Consolidated financial statements (Restated) Separate financial statements (Restated) Accounting profit (loss) before tax (782,226) 375,109 (763,447) 78,356 Applicable tax rate 17% to 38% 17% to 38% 20% 23% Accounting profit (loss) before tax multiplied by applicable tax rate (228,467) 82,541 (152,689) 18,022 Tax effects of income under promotional privileges which is not taxable (74,438) (88,328) - (6,078) Tax effects of income which is not taxable (6,975) - - (2,181) Tax effects of non-deductible expenses 8,120 20,135 5,913 2,555 Tax effects of additional expense deductions allowed (368,800) (56,642) (40,492) (56,642) Tax effects of tax losses 672,131 53, ,268 44,324 Adjustment in respect of current income tax of previous year (1,123) Write off of withholding income tax Movement in deferred tax related to origination and reversal of temporary differences 8,145,993 5,704,793 3,347,143 3,070,983 Income tax expenses (benefit) reported in the statements of income (339,511) (71,258) (48,161) (85,364) 157

160 Annual Report The components of deferred tax assets are as follows: Statements of financial position (Unit: Thousand Baht) Consolidated financial statements Separate financial statements As at 31 March 2014 As at 31 March 2013 (Restated) As at 1 April 2012 As at 31 March 2014 As at 31 March 2013 (Restated) As at 1 April 2012 Deferred tax assets Allowance for doubtful debts 2, Allowance for diminution in value of inventories 19,457 1,116 4,991 1,836 1, Reserve for other expenses 26,805 3,017 7,531 3,739 3,017 3,258 Accumulated depreciation - Plant and equipment (339,073) - (386) Provision for long-term employee benefits 1,731 1,488 1,210 1,731 1,488 1,210 Export incentive receivables (479) (171) (166) (479) (171) (166) Unused tax loss 644,733 50,171 14, ,512 50,171 14,471 Total 355,718 55,621 27, ,339 55,621 19,105 In October 2011, the cabinet passed a resolution to reduce the corporate income tax rate from 30 percent to 23 percent in 2012 (The Company s fiscal year ), and then to 20 percent from 2013 (The Company s fiscal year ). In addition, in order to comply with the resolution of the cabinet, in December 2011, the decreases in tax rates for were enacted through a royal decree. The Company has reflected the changes in the income tax rates in its deferred tax calculation, as presented above. As at 31 March 2014 the Company and subsidiaries have deductible temporary differences and unused tax losses totaling Baht 181 million (2013: Baht 127 million) (The Company only: Baht 145 million, 2013: Baht 25 million), on which deferred tax assets have not been recognised as the Company s management believes that they might not be used to offset taxable income in the future. 23. Promotional privileges The Company has received promotional privileges from the Board of Investment for the manufacture of polyester films, metallized films, extrusion coated films, cast polypropylene films, silicone coated films and PET resins. As a promoted company, the Company must comply with certain conditions and restrictions provided for in the promotional certificates. The Company s sales for the years ended 31 March 2014 and 2013 divided according to promoted and non-promoted operations are set out below. 158

161 (Unit: Thousand Baht) Sales Promoted operations Separate financial statements Non-promoted operations Total Domestic sales 986, ,396 9,943 39, ,326 1,027,372 Export sales 3,516,087 3,177,578 5, ,521,187 3,178,068 Total sales 4,502,470 4,164,974 15,043 40,466 4,517,513 4,205, Basic earnings per share Basic earnings per share is calculated by dividing profit (loss) for the year attributable to equity holders of the Company (excluding other comprehensive income) by the weighted average number of ordinary shares in issue during the year. The computation of basic earnings per share has details below. Consolidated financial statements (Restated) Separate financial statements (Restated) Profit (loss) for the year (Thousand Baht) (479,718) 402,494 (677,728) 114,872 Weighted average number of ordinary shares (Thousand shares) 800, , , ,000 Earnings (loss) per share (Baht per share) (0.60) 0.50 (0.85)

162 Annual Report Dividends (Unit: Baht) Dividends Approved by Total dividends Dividend per share Final dividends for 2012 Annual General Meeting of the shareholders on 27 July ,000, Total dividends for fiscal year ,000, Final dividends for 2013 Annual General Meeting of the shareholders on 26 July ,000, Total dividends for fiscal year ,000, Segment information Operating segment information is reported in a manner consistent with the internal reports that are regularly reviewed by the chief operating decision maker. The chief operating decision maker has been identified as managing director. The basis that used to measure operating profit or loss of segment is same as the basis that used to measure operating profit or loss in the financial statements. For management purposes, the Company and its subsidiaries have a single industry segment, the manufacture and distribution of polyester films, metallized films, extrusion coated films, cast polypropylene films, silicone coated films and PET resins, and are carried on in two geographic areas in Thailand and overseas countries, as operated by subsidiaries. The revenue and profit information by geographical segment in the consolidated financial statements the years ended 31 March 2014 and 2013 are as follows: 160

163 (Unit: Million Baht) Thailand Overseas countries Elimination of inter-segment revenues Consolidation (Restated) Sales to external customers 3, , , , , ,230.0 Inter-segment sales (901.2) (1,786.1) - - Total sales 4, , , ,810.7 (901.2) (1,786.1) 10, ,230.0 Segment operating profit (loss) (677.1) (8.3) (27.8) (592.2) Unallocated income and expenses: Finance cost (190.0) (86.8) Income tax benefit Non-controlling interests of the subsidiaries Profit (loss) for the year attributable to equity holders of the Company (479.7) As at 31 March 2014 and 2013 Property, plant and equipment 5, , , ,461.4 (21.0) (11.3) 14, ,447.7 Intangible assets Unallocated assets 5, ,061.4 Total assets 19, ,512.2 Transfer prices between segments are as set out in Note 7 to the financial statements. 27. Provident fund The Company and its employees have jointly established a provident fund in accordance with the Provident Fund Act B.E Both employees and the Company contributed to the fund monthly at the rates of 4-7 percent (2013: 4-7 percent) of basic salary. The fund, which is managed by a licensed fund manager, will be paid to employees in accordance with the fund rules. During the year ended 31 March 2014, the Company contributed Baht 5,809,494 (2013: Baht 4,706,804) to the fund. 28. Commitments and contingent liabilities 28.1 Capital commitments As at 31 March 2014, the Company and its subsidiaries had capital commitments of approximately Baht million (2013: Baht million), relating to the construction of building and acquisition of machinery and equipment (The Company only: Baht million, 161

164 Annual Report : Baht million) Operating lease commitments The Company has entered into several lease agreements in respect of the lease of office building space and equipment. Future minimum rentals payable under these leases are as follows: (Unit: Million Baht) As at 31 March Payable: In up to 1 year In over 1 and up to 5 years Service agreements As at 31 March 2014, the Company had commitments totaling Baht million under various service agreements (2013: Baht million). These agreements expire between April 2014 and September Guarantees a) As at 31 March 2014, the Company has provided short-term guarantee worth USD 30.0 million (2013: USD 30.0 million) for working capital facilities obtained by a subsidiary, Polyplex USA LLC. b) As at 31 March 2014, the Company has provided guarantee of USD 84.0 million (2013: USD 75.0 million) for the long-term loans obtained by its subsidiary (Polyplex USA LLC). As at 31 March 2014, the outstanding balance of this subsidiary s loan was USD 76.5 million (2013: USD 52.1 million). c) As at 31 March 2014, the Company has provided guarantee of EUR 0.1 million (2013: EUR 2.3 million) for the long-term loans obtained by its subsidiary (Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi). d) Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi has provided guarantee for the long-term loans obtained by Polyplex Resins Sanayi Ve Ticaret Anonim Sirketi to the extent of EUR 27.5 million. As at 31 March 2014, the outstanding balance of this loan was EUR 33.3 million (2013: EUR 20.7 million), of which EUR 22.3 million (2013: EUR 13.9 million) was guaranteed by Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi. e) As at 31 March 2014, there were outstanding bank guarantees of approximately Baht million and EUR 11.3 million (2013: Baht 0.7 million and EUR 15.7 million) issued by the banks on behalf of the Company and its subsidiaries in respect of certain performance bonds as required in the normal course of businesses (The Company only: Baht

165 million, 2013: Baht 0.7 million). 29. Financial instruments 29.1 Financial risk management The Company and its subsidiaries financial instruments, as defined under Thai Accounting Standard No. 107 Financial Instruments: Disclosure and Presentations, principally comprise cash and cash equivalents, trade and other receivables, investments, trade and other payables, and short-term and long-term loans. The financial risks associated with these financial instruments and how they are managed is described below. Credit risk The Company and its subsidiaries are exposed to credit risk primarily with respect to trade receivables and other receivables. The Company and its subsidiaries manage the risk by adopting appropriate credit control policies and procedures and considering credit insurance contracts from time to time, and therefore do not expect to incur material financial losses. In addition, the Company and its subsidiaries do not have high concentration of credit risk since they have a large customer base. The maximum exposure to credit risk is limited to the carrying amounts of receivables and other receivables as stated in the statements of financial position. Interest rate risk The Company and its subsidiaries exposure to interest rate risk relates primarily to its cash at banks, bank overdrafts, and short-term and long-term borrowings. Most of the Company and its subsidiaries financial assets and liabilities bear floating interest rates or fixed interest rates which are close to the market rate. In addition, the Company considers interest rate swap agreements from time to time so as to reduce exposure to the interest rate risk. Significant financial assets and liabilities classified by type of interest rates are summarised in the table below, with those financial assets and liabilities that carry fixed interest rates further classified based on the maturity date, or the repricing date if this occurs before the maturity date. 163

166 Annual Report Consolidated financial statements As at 31 March 2014 As at 31 March 2013 Fixed interest rates Fixed interest rates Within 1 year 1-5 years Over 5 years Floating interest rate Noninterest bearing Total Interest rate Within 1 year 1-5 years Over 5 years Floating interest rate Noninterest bearing Total Interest rate (Million Baht) (% p.a.) (Million Baht) (% p.a.) Financial Assets Cash and cash equivalents See Note , ,468.3 See Note 8 Current investments Trade and other receivables , , , , , , , ,946.7 Financial liabilities Short-term loans from financial institutions 1, ,650.0 See Note ,044.4 See Note 15 Trade and other payables , , , , Long-term loans from related party See Note See Note 7 Long-term loans from financial institutions , ,345.5 See Note , ,326.9 See Note 18 Liabilities under finance lease agreements , , , , , , ,

167 Separate financial statements As at 31 March 2014 As at 31 March 2013 Fixed interest rates Fixed interest rates Within 1 year 1-5 years Over 5 years Floating interest rate Noninterest bearing Total Interest rate Within 1 year 1-5 years Over 5 years Floating interest rate Noninterest bearing Total Interest rate (Million Baht) (% p.a.) (Million Baht) (% p.a.) Financial Assets Cash and cash equivalents See Note See Note 8 Current investments Trade and other receivables Financial liabilities Short-term loans from financial institutions See Note See Note 15 Trade and other payables Long-term loans from financial institutions , ,370.0 See Note , ,933.8 See Note 18 1, , , , ,

168 Annual Report As at 31 March 2014, the Company had interest rate swap agreements with a bank to swap floating interest rate to fixed interest rate, as described in Note 18 to the financial statements. Foreign currency risk The Company and its subsidiaries exposure to foreign currency risk arise mainly from trading transactions and borrowings that are denominated in foreign currencies. The Company and its subsidiaries seek to reduce this risk by entering into forward exchange contracts when it considers appropriate. Generally, the forward contracts mature within one year. The Company s balances of financial assets and liabilities denominated in foreign currencies are summarised below. Foreign currency Financial assets as at 31 March Financial liabilities as at 31 March Average exchange rate as at 31 March (Million) (Million) (Million) (Million) (Baht per 1 foreign currency unit) US dollar Euro Japanese yen Pound Sterling The Company s foreign exchange contracts outstanding are summarised below. As at 31 March 2014 Contractual exchange rate Foreign currency Bought amount Sold amount Bought Sold (Million) (Million) (Baht per 1 foreign currency unit) US dollar Euro Japanese yen Baht per USD 1 Baht per EUR Baht per USD 1 Baht per EUR 1 Baht per JPY 1 166

169 Foreign currency Bought amount As at 31 March 2013 Contractual exchange rate Sold amount Bought Sold US dollar (Million) (Million) (Baht per 1 foreign currency unit) Baht per USD 1 Baht per USD 1 Swiss franc Baht per CHF 1 - Euro Japanese yen Baht per EUR 1 - Baht per EUR 1 Baht per JPY 1 A subsidiary had forward foreign exchange contracts as follows: As at 31 March 2014 Bought amount Sold amount Contractual exchange rate YTL 1.4 million - YTL per EUR 1 USD 4.1 million - USD per EUR 1 - EUR 0.1 million USD per EUR 1 As at 31 March 2013 Bought amount Sold amount Contractual exchange rate YTL 3.5 million - YTL per USD 1 YTL 0.5 million - YTL per EUR Fair values of financial instruments Since the majority of the Company and its subsidiaries financial instruments are short-term in nature or bear floating interest rates, their fair value is not expected to be materially different from the amounts presented in the statements of financial position. A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an arm s length transaction. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument. 167

170 Annual Report Capital management The primary objective of the Company s capital management is to ensure that it has appropriate capital structure in order to support its business and maximise shareholder value. As at 31 March 2014, the Group s debt-to-equity ratio was 1.27:1 (2013: 1.00:1) and the Company s debt-to-equity ratio was 1.56:1 (2013: 1.01:1). 31. Approval of financial statements These financial statements were authorised for issue by the Company s authorised directors on 23 May

171

172 Polyplex (Thailand) Public Company Limited 75/26 Ocean Tower-II, 18 th Floor, Soi Sukhumvit 19, Sukhumvit Road, Kwaeng North Klongtoey, Khet Wattana, Bangkok Thailand Tel: / Fax: