· 2017. 3. 2. · 2 annual report 2003 financial highlights (in million thb) 2001 2002 2003 sales...

2 ANNUAL REPORT 2003

FINANCIAL HIGHLIGHTS

(in Million THB) 20012001200120012001 20022002200220022002 2003 2003 2003 2003 2003

Sales Revenues 5,546 5,845 6,1306,1306,1306,1306,130Total Revenues 5,606 5,874 6,1676,1676,1676,1676,167Gross Margin 1,399 1,861 1,7401,7401,7401,7401,740Earnings before Interest and Taxes 686 1,253 1,1721,1721,1721,1721,172Net Profit (Loss) 88 802 871871871871871Depreciation 378 390 394394394394394Cash Flow from Operating Activities 529 1,379 1,4331,4331,4331,4331,433Capital Expenditures 70 58 8686868686Total Assets 12,153 11,574 12,35412,35412,35412,35412,354Total Liabilities 7,550 6,169 4,9004,9004,9004,9004,900Total Loan/Debentures 6,808 5,446 4,0854,0854,0854,0854,085Shareholdersû Equity 4,603 5,405 7,4547,4547,4547,4547,454Persons Employed as of Year End 415 402 385385385385385Production in Thousands of Tons

PVC 184 184 188188188188188VCM 186 186 184184184184184NaOH 112 121 125125125125125

Information per Share & Financial Ratio

(in THB) 20012001200120012001 20022002200220022002 20032003200320032003

Profit (loss) per Share 0.10 0.89 0.960.960.960.960.96Book Value per Share 5.10 5.99 8.258.258.258.258.25Dividend per Share - - -----Weighted Average Number of Shares 903,010,187 903,010,187 903,010,187903,010,187903,010,187903,010,187903,010,187Net Profit Margin 1.6% 13.7% 14.1%14.1%14.1%14.1%14.1%Return on average equity (ROE) 1.9% 16.0% 13.6%13.6%13.6%13.6%13.6%Return on average assets (ROA) 0.7% 6.8% 7.3%7.3%7.3%7.3%7.3%

3VINYTHAI PUBLIC COMPANY LIMITED

2,0001,8001,6001,4001,2001,000800600400200

-

1,399

1,8611,740

871802

88

2544 2545 2546

5,5005,0004,5004,0003,5003,0002,5002,0001,5001,000500

-

4,540

940

2544 2545 2546

66

4,886

857

102

5,143

880

107

12,600

12,400

12,200

12,000

11,800

11,600

11,400

11,200

11,000

12,153

2544 2545 2546

11,574

12,354

Gross Margin and Net Profit

Gross Margin Net Profit

25%of

Sales

32%of

Sales

28%of

Sales

MTH

B

PVC Caustic Soda Others

Sales by Products

MTH

B

Total Assets

MTH

B


COMPANY PROFILE

Vision, Mission and ValuesOur VisionVinythai is an ethical entity with sustainable profitabilityand growing businesses :

Vinythai is a customersû partner in supplyinghigh quality products at competitive price andsupports the customersû growth.Vinythai provides employees with the opportunityto develop their potential.Vinythai gives due consideration to health,safety and the environment.

Our MissionTo provide customers in Thailand and Asiawith high-quality Polyvinyl Chloride resinsand Caustic Soda, backed by world-classtechnology, and to ensure satisfactory returnsfor the shareholders.

Our ValuesWe firmly believe in :

ExcellenceExcellenceExcellenceExcellenceExcellenceëMaximizing the value of all company activities,while respecting ethical practices, based onfairness and integrity.

CreativityCreativityCreativityCreativityCreativityë Providing an environment that enables theemergence of virtually any idea, to bringadded value to core competencies and togive the Company a competitive edge.

EmpowermentEmpowermentEmpowermentEmpowermentEmpowermentë Fostering a culture that encourages delegation,taking responsibility, speed of response,accountability and flexibility in order toanswer effectively and efficiently to achallenging and competitive environment.

TeamworkTeamworkTeamworkTeamworkTeamworkë Developing an efficient organization bybuilding teamwork with open communicationthroughout the Company, sharing knowledge,technologies, and best practices.


Sales Revenues 2001 2002 2003 MTHB % MTHB % MTHB %

Sales in Thailand

1. PVC Resins 2,850 51.4 3,114 53.3 3,003 49.0

2. Caustic Soda 897 16.2 839 14.4 875 14.3

3. Others 66 1.2 102 1.7 107 1.8

Total Sales in Thailand 3,813 68.8 4,055 69.4 3,985 65.1Sales Abroad

1. PVC Resins 1,690 30.5 1,772 30.3 2,140 34.9

2. Caustic Soda 43 0.7 18 0.3 5 0.0

Total Sales Abroad 1,733 31.2 1,790 30.6 2,145 34.9Sales in Thailand and Abroad

1. PVC Resins 4,540 81.9 4,886 83.6 5,143 83.9

2. Caustic Soda 940 16.9 857 14.7 880 14.3

3. Others 66 1.2 102 1.7 107 1.8

Total Sales in Thailand and Abroad 5,546 100.0 5,845 100.0 6,130 100.0

2001 2002 2003

% Shareholding (Unaudited)

Product / Service Company by Vinythai Income Income Income

(MTHB) % (MTHB) % (MTHB) %

Produce & Supply Pimai Salt 20.44% 986 100 985 100 1,004 100 Pure Refined Salt Co., Ltd.

Nature of Business Operation

Income StructureVinythai obtains the major part of its income from

the manufacture and distribution of PVC resins, underthe çSIAMVICé trademark, and from Caustic Soda. The

Remark :Remark :Remark :Remark :Remark : No clarif ication of the shareholding structure of group of companies since the company does not have a parent or subsidiary company. Pimai Salt Co., Ltd. is the only one associated company of Vinythai.

The production facilities, which are located in MapTa Phut, include, two PVC plants (emulsion andsuspension resins), one VInyl Chloride Monomer (VCM)plant, one Ethylene Dichloride (EDC) plant and oneChlor-Alkali (MCA) plant. The purpose of those last threeunits is to integrate upstream the production of PVC, inorder to rely as much as possible on locally purchasedraw materials and utilities, such as ethylene from ThaiOlefins Public Company Limited (TOC), salt from PimaiSalt Company Limited (PSC), and electricity from

Associated Companyûs Income Structure

income structures of Vinythai and its associatedcompany are as follows:

Glow SPP Public Company Limited (Glow Group). Inorder to further secure the availability of raw materials,Vinythai is a minority shareholder of both TOC and PSC.

Apart from the Chlorine which is consumeddownstream in the production processes, the Chlor-Alkaliplant also produces significant quantities of Caustic Soda(0.67 t / t PVC) as well as Hydrogen and SodiumHypochlorite. These products are also sold on thedomestic market.

In addition, the site has the capability of importingeither EDC or VCM as well as exporting NaOH if needed.

High-tech PVC Plays Leading Role in Small Aircraft ConstructionAircraft construction at Wiener Neustadt uses the so-called çsandwiché method of construction,

in which airplane parts such as fuselage, wings, control surfaces, and high deformation resistanceinterior components are fitted together, layer by layer, in a lamination process. The top layer ofthe çsandwiché consists of carbon or glass fibre-reinforced synthetic material wrapped arounda core of meshed PVC resin foam. This resin form insert - although extremely light-weight -possesses great shear resistance, distributing the stress over a greater surface area. The resinfoam gives the components added stability, at the cost of only negligible added weight. So, PVCresin foam is used because it is durable, easily workable, and has good mechanical properties.

More information visit at www.solvinpvc.com

New life for PVC : silenceA new innovative application, essentially made of recycled post consumer PVC, in the

form of a sound barrier along highways was set up industrially by the company Deceuninck.Itûs a rigid PVC foam product filled in itûs core with stone wool.

One element of this barrier can be up to 4 meters of length with the height of 50centimeters.

The first realization is to be visited on the crossings of highway E40-E17 at Zwitjnaarde inBelgium. Other realizations are under considerations in the Netherlands.


PVC saves coral reefs in ThailandAs PVC has been proved to be a material friendly to the environment, the stable material

without releasing any chemicals to the environment, and co-living with the marine creaturesplus its advantages of low cost, easy built-up, long lasting and reusable for several times, PVCpipe is used for cultivating the coral reefs at Samaesarn area, Amphur Sattahip, Chonburiprovince, under the supervision of the Foundation of Marine Science Activities andConservation supported by Vinythai Public Company Limited.

More information visit at www.vinythai.co.th and www.vinythaicoral.org

SolVin BretzelA fourth generation Canopy Raft, the SolVin Bretzel takes its name from the famous Bretzel

salted bread snack from the German-speaking world, universally known as pretzel in English.Its structure is based on inflatable hoops made of anti-UV PVC between which a net is drawn.Its 400 m2 surface enables it to be placed for several days right on the canopy in order toprovide easy, safe and prolonged access to it, to the scientists of different disciplines.

The scientists use the raft for exploring the wealth of plant and animal life perched in thetreetops, where the biodiversity is greatest.


Plasticised PVC cashes in on FraudA massive new market for specially produced plasticized PVC film has opened up in India

as the country begins to move to plastic money from 2003. The use of plasticized PVC film hasallowed several innovative security features to be incorporated, which it is believed will bevirtually impossible for someone to fake.


PVC flooringPVC flooring is becoming increasingly popular due to its versatility, performance, wide

range of colour options and designs available. Among its many advantages are that it isrelatively easy to maintain, it is cost effective and architects, designers and homeowners canall achieve exactly the appearance they are looking for. Today, vinyl flooring is widely usedin schools, hospitals, retail and leisure sectors as well as domestic applications, and can bemade to look just like wood, ceramics or even slate.


Products

ANNUAL REPORT 20038

VINYTHAI PUBLIC COMPANY LIMITED 9

Kitten Heel Flip FlopPVC shoe with Kitten Heel Flip Flop for spring fashion footwear in the west. Those flip flop

hits the streets in high stepping style as another style representing the çadd a heelé craze.Cleverly combining a basic summer flip flop with a Hollywood kitten heel, the pressurized moldon the sole of the shoe acts as a ùspineû that stabilizes without taking away from its rubberizedappeal.


Visa Mini - A Breakthrough in Card DesignAt only 40 millimeters by 66 millimeters, Visa Mini, made from PVC, is nearly half the size

of a regular-sized Visa card, and is the answer to your expectations and demand forincreased convenience and mobility in your everyday life. With a perforated hole in thebottom left corner, you can attach the Visa Mini to your key chain, mobile phone or othercarry-along device!


CD-Roms and Baby bottlesCaust ic soda i s used in the

production of a kind of plastic calledPolycarbonates. Polycarbonates aretransparent thermoplastic polymerswhich are mainly used as mouldingcompounds. CD-Roms and baby bottlesare well known examples of this use.

DiapersSuper absorbent polymer is

used for diapers. This kind ofabsorbent is a cross linked formof the Sodium salt of PolyacrylicAcid which is manufactured byAcrylic Acid and Caustic Soda.

Soaps and DetergentsCaustic soda plays a

significant role in the manu-facture of powder soaps,bar soaps and detergents,with a considerable amountbeing used in the productionof industrial and speciallysoaps.

Food IndustryCaustic soda has a variety of uses

in the Food Industry ; refining of animaland vegetable oils to remove fatty acidsprior to use in foodstuff production,general cleaning operations and lyepeeling of potatoes, fruit and vegetables.

Water Treatment IndustrySignificant amounts of caustic soda

are also used for industrial and municipalwater treatment.

Pulp and PaperCaustic soda is used in the

production of pulp and paperand aluminium.

Cotton fabricsCaustic soda is used in the

production of cotton fabrics tohelp improve fibre strength andabsorption of dyes.

More information visit at www.vinythai.co.th and www.solvay.com


1. Policy on Corporate GovernanceThe Board of Directors carried out its duties with

maximum transparency and in full conformity with theCode of Best Practices, which was defined for directorsof listed companies, as prescribed by the StockExchange of Thailand. In recognition of the importanceof corporate governance, the Board of Directors alsoformulated a written corporate governance policy, withthe aim to increase the Companyûs competitiveness,leading to the sustainable business growth for theCompany as well as to enhance confidence to share-holders, investors, and all stakeholders. Reflecting theBoard of Directorsû commitment to fully abide by theprinciples of good corporate governance were the Boardof Directorsû policy and good corporate governancestrategies, which had a strong emphasis on internalcontrol and internal auditing. Such an emphasisenabled the management to more effectively performin compliance with the regulated policy, the legalframework and business ethics - for the long-termbenefit of the shareholders.

2. Shareholders: Rights and EquitableTreatmentDuring the year 2003, the Company held twice

Shareholdersû Meetings : Annual Ordinary General Meetingof Shareholders was held on April 25, 2003 andExtraordinary General Meeting of Shareholders washeld on September 4, 2003. Both shareholdersû meetingswere held at the conference room on the 11th floor ofC.P. Tower, at 313 Silom Road, in Kwaeng Silom, KhetBangrak, Bangkok. The Company sent out a notice tocall shareholdersû meeting, complete with details of theagenda, 14 days in advance. Each item on the agendaincluded comments from the Board of Directors. Theminutes of the meeting were recorded in their entirety,with their accuracy, could be verified by the shareholders.In addition, proxy form was attached together with thenotice to call shareholderûs meeting. The Company alsoplaced the notice to call shareholdersû meeting in Thaidaily newspaper for three consecutive days prior to themeeting.

In 2003, the Company provided an additionaloption for the shareholders. In case any shareholderis unable to attend the shareholdersû meeting, theindependent directors could be appointed as proxy. Inaddition, the Company improved in providing more detailinformation on the matters for consideration.

3. Various Groups of StakeholdersGreat emphasis is placed on every group of stake-

holders, both internal, such as staff members and themanagement, and external, such as competitors,suppliers, creditors, customers, members of thepublic, the various communities and other sectors. TheCompany is well aware of the value of the supportgiven by each of these groups, all of which contributetowards the Companyûs competitiveness and enhancedcorporate profits. As their participation is understood tohave a positive effect on the Company in the long run,great effort is made to ensure that they are well takencare of.

Shareholders : The Company aims to represent thebest interests of shareholders inoperating the business by concen-trating on long-term growth andvalue. The Company will providecontinuous and good returns to share-holders, including transparent andaccurate information disclosure.

Corporate Governance and Management Structure


Employees : The Company develops within theorganization by building teamworkand continuously enhancing thecompetency of its employees for thegreat benefit towards the Company.

Social and Environment :The Company has stressed on theenvironmental and social responsi-bilities in the local communities byproviding the most effective safetyand environmental protection system.The Company supports the publicbenefit activities of the surroundingareas as well as public events oflocal communities. In addition, theCompany places emphasis on thefull conformity with the laws andregulations.

Customers : The Company aims at creating thecustomersû confidence and satisfactionof i t s qual i ty of products andservices at reasonable prices. TheCompany also provides comprehen-sive and accurate information relatingto the products and services.

Suppliers : The Company places great importanceon the common interest shared withsuppliers with regards to the conductof equitable business operationsand according to the trading termsand agreements, without being inconflict with any laws and regulations.The selection of suppliers is conductedwith great care and fairness.

Competitors : The Company supports and encouragesa free trade policy and conducts itsbusiness under the rules of competi-tion on the basis of fairness, ethics,and the adherence to the legalframework.

4. Shareholdersû MeetingsThe Company has organized shareholdersû meetings

with equitable treatment for all participants and in strictaccordance with legal procedures, from meetinginvitation, distributing meeting documents to informingall concerned of the meeting agendas. Meetingprocedures as well as the submission of meeting reportshave been in line with SETûs regulations. The Companyhas provided names and necessary personal records ofdirectors who retired by rotation and were proposed tobe re-appointed for another term in the annual reportwhich was submitted to the shareholders prior to themeeting.

In 2003, the Annual Ordinary General Meeting ofShareholders was held on April 25, 2003, and agendaconsidered were the Companyûs annual operatingresults and dividend payment, the appointment of theauditor and consideration of the auditing fee, theappointment of new directors in place of those to beretired by rotation and the remuneration of the Boardof Directors. The Company also held the ExtraordinaryGeneral Meeting of Shareholders on September 4, 2003and agenda considered was the reduction of theCompanyûs registered capital and paid-up capital. Thechairman of the Board of Directors attended both ofthe shareholdersû meetings and acted as chairman.Among other directors participating in the meeting werethe chairman of the Audit Committee, the AuditCommittee members, and the managing director. Theexternal auditor also attended both of the shareholdersûmeetings.

The chairman of the meeting provided equalopportunities for shareholders to examine the corporateoperation and encouraged them to raise questions,express their opinions and recommendations. Anysignificant inquiries and responses made by themanagement were recorded in the minutes of themeeting.


5. Leadership and VisionThe Board of Directors holds its responsibility to

shareholders in relation to the Companyûs business

operations, including directing the Companyûs targets

for optimum benefits of shareholders and all stakeholders.

The Board of Directors is in charge of :

1. Managing and carrying on the business of

the Company in accordance with the law,

objectives, Articles of Association and any

resolutions that are made at the shareholdersû

meeting with honesty and with a view to

preserving the interests of the Company.

2. Endorsing the Companyûs vision, mission and

strategy including setting of targets, business plans

and the corporate budget.

3. Directing the Company to implement the

internal control and internal audit systems, along

with effective risk management measures.

4. Assigning the Executive Committee and Audit

Committee to monitor constantly the Companyûs

performance and internal audit operation.

5. Clearly defining and separating the roles and

responsibilities of the Board of Directors, the

Audit Committee, the Executive Committee, the

Remuneration Committee and the management,

as per the description given under Item 12.

6. Supervising and monitoring the activities of

the Executive Committee to ensure that its

performance is in line with the established policy.

The Executive Committee is accountable for the

review and approval of the Companyûs capital

expenditure. However, such expenditure cannot

be approved without the consent of the share-

holders if a conflict of interest is involved.

Similarly, the shareholdersû consent is required

for the specific situation, as listed under the

regulations of the Securities and Exchange

Commission and the Stock Exchange of Thailand.

7. Arranging the Annual Ordinary General Meetingof Shareholders to be held once a year within4 months from the end of fiscal year. TheExtraordinary General Meeting of Shareholderscan be held on a case by case basis if thereare special agendas that must be discussedurgently and need approval from the shareholders.

8. Arranging to propose the Balance Sheet andthe Profit & Loss Statements as at the end offiscal year to the shareholdersû meeting forapproval. The Balance Sheet and the Profit &Loss Statements were reviewed by the externalauditor prior to proposing to the shareholdersûmeeting.

9. Providing the financial reporting and significantinformation with accuracy, appropriateness andcompleteness to the shareholders, in addition tothe assertion of the reporting.

6. Conflict of InterestsIn order to avoid any unnecessary problems, the

Board of Directors carefully scrutinises any issues thatmight possibly result in a conflict of interest. Such issuesare acknowledged by the Board of Directors, in linewith the Stock Exchange of Thailandûs regulations basedon Armûs Length Basis. Details, counter parties, value,reasons and the necessity of each transaction have allbeen disclosed in the Annual Report, and in Form 56-1.


Considering the supervision of the usage of insideinformation, the Companyûs Code of Ethics designatedthat executives or concerned departments receivinginside information are restrained from disclosingcorporate data to the public or unconcerned partiesand misusing their roles and confidential information fortheir own advantages. The Board of Directors specifiedthat the Board members and the management have todisclose reports on each personûs change in securitiesholdings to the Office of the Securities and ExchangeCommission in accordance with Section 59 of theSecurities and Exchange Act B.E. 2535. In case of thepurchase, sale, or transfer of securities, the Boardmembers and the management shall report their changein such securities holdings to the Office and the StockExchange of Thailand within 3 official days after thedate of executing the purchase, sale, or transfer ofsecurities. In case of the contravention with the Section59, they shall be liable to a fine not exceeding 500,000baht and a further fine not exceeding 10,000 baht forevery day during which the contravention continues inaccordance with the Section 275 of the Securities andExchange Act, B.E. 2535. In addition, the Board ofDirectors and the management shall submit one copyof the disclosure report of securities holdings to theCompany for record.

7. Business EthicsThe Company introduced a Code of Ethics for the

management and employees, giving them guidance asto how to perform their duties in line with the corporatemission, and with honesty and fairness to the Company,every group of stakeholders, the public and the localcommunities. The management and staff membersagreed via written consent to adhere to the code. TheCompany has assured that compliance with theseethics will be continuously maintained, while penaltieshave been imposed for any violations.

8. Balance of Power for Non-executiveDirectorsThe Board of Directors consists of 16 directors.ë Number of directors nominated 11

by two major shareholders(Among them, four directorsconstitute the Executive Committee)

ë Number of independent directors 5(Among them, three are appointedas the Audit Committee members)

9. Aggregation or Segregation of PositionsThe chairman of the Board of Directors is in office

for a term of three years, and is nominated alternatelyby one of the Companyûs two major shareholders: SolvayS.A. and Charoen Pokphand Group Co., Ltd. Currently,the chairman of the Board of Directors is nominatedby Solvay S.A., which holds 46% of the total shares.The chairman of the Board and the managing directorare not the same person, but they represent majorshareholder, Solvay S.A. However, the Companyûs Boardstructure comprises the other major shareholder,Charoen Pokphand Group Co., Ltd, and another fiveindependent directors of which create the balance ofpower and oversee the administration of theCompany.

The Company has clearly defined in writing themanagementûs roles and responsibilities at each level.For the sake of control, the Company separates thefunction of authorization of the transactions from thatof book recording and safeguarding of assets.


10. Remuneration for Directors and theManagementRemuneration for directors : the Company fixed

the remuneration policy for the directors with maximumtransparency. The remuneration for directors is at theappropriate level for the industry. Directors who serve asAudit Committee members or Executive Committeemembers are given additional remuneration due to theextra assignments.

The remunerations of Directors, Audit Committeemembers and Executive Committee members areregularly put in the agenda for approval in the share-holdersû meeting every year.

Remuneration for the management : the remu-neration for the management is in conformity with theprinciples and policy set by the Board of Directors,which corresponds to the performance of theCompany.

Remuneration paid in 2003 : the remuneration fordirectors and the management was as follows:

Directors

Year 2002 Year 2003Number of Number ofPersons Total (THB) Persons Total (THB)

Monthly Remuneration 16 4,800,000 16 4,630,000

Management

The remuneration for the four executive directors,

as an additional monthly remuneration for the year 2003

was 960,000 baht, with no increase from 2002. The 2003

remuneration for eight executives (including resigned

executive) was 35,808,335 baht. The remuneration

consisted of salary, bonus and provident funds.

11. Board of Directorsû MeetingsThe Board of Directorsû meeting is scheduled in

advance. In addition, the Board shall hold extraordinary

meetings whenever they are deemed appropriate.

The meeting agenda is clearly defined and prepared in

advance. The Company submits notice of the Board of

Directorsû meeting, together with the meetingûs agenda,

to the directors at least 15 days before the event. The

meetingûs materials are also submitted to the directors

in advance, to ensure that the directors are given

adequate time to study the issues prior to the meeting.

Each meeting usually lasts approximately three hours.

During the year 2003, six meetings were held. The record

of directorsû attendance is as follows :


Name 1st Year of Appointment / No. of Attendance /Latest Year of Appointment Total No. of Meeting

1. Dr. Christian De Sloover 1999 / 2002 6/62. Dr. Phisit Pakkasem 1999 / 2002 6/63. Mr. Prasert Poongkuman 1996 / 2003 6/64. Mr. Aloysius Michielsen * 1995 / 2003 1/65. Mr. Henri Lefebvre * 1996 / 2001 2/66. Dr. Chokchai Aksaranan 1993 / 2001 6/67. Mr. Arsa Sarasin 1993 / 2001 3/68. Mr. Marss Wan-Cheng Kuo 1997 / 2003 6/69. Ms. Rapeepan Luangaramrut 1993 / 2003 5/6

10. Mr. Dominique Dussard * 2000 / 2002 3/611. Mr. Umroong Sanphasitvong 1999 / 2001 5/612. Mr. Pala Sookawesh 1994 / 2002 4/613. Mr. Chavarat Charnvirakul 1997 / 2002 6/614. Mr. Pote Videtyontrakich 1999 / 2002 6/615. Mr. Jean-Pierre Pleska * 2000 / 2001 3/616. Mr. Vincent De Cuyper 2002 / 2003 6/6

*Director whose residence is outside the Kingdom.

Directors who are representatives of the foreignshareholder and do not stay in the Kingdom aresometimes inconvenient to attend the Board meeting.However, they provide their opinions and proposedsuggestions related to the agenda and meetingmaterials which were submitted to them in advance.

12. CommitteesThe Board of Directors set up three committees, to

support the administration and strengthen the goodcorporate governance practices, as described below:

The Executive Committee : The Company hasappointed the current Executive Committee effectiveon August 1, 2002. The chairman of the ExecutiveCommittee holds a three-year term. The chairmanshipof the Executive Committee alternates with thechairmanship of the Board of Directors, that is, if thechairman of the Board of Directors is nominated bySolvay S.A., the chairmanship of the Executive Committeeis nominated by Charoen Pokphand Group Co., Ltd. orvice versa.

The Executive Committee comprises four boardmembers, of which two members are respectivelynominated by Solvay S.A. and Charoen PokphandCo., Ltd. Currently, the Executive Committee membersare as follows:

1. Dr. Chokchai Aksaranan Chairman2. Dr. Christian De Sloover Member3. Mr. Marss Wan-Cheng Kuo Member4. Mr. Vincent De Cuyper MemberThe Executive Committee has the following authority

and duties:1. To work with the managing director on behalf

of the Board of Directors2. To support the Companyûs operations and make

recommendations to the Board of Directors3. To review and approve all capital expenditure

of the Company4. To appoint, promote and replace the Companyûs

key personnel5. To consider the adjustment of the managementûs

remuneration


The Audit Committee :The Audit Committee :The Audit Committee :The Audit Committee :The Audit Committee : the current Audit Committee

members have been re-appointed since 12 November2002 for another three-year term. All of them areindependent directors. The Audit Committee comprisesthe following members:

1. Mr. Pala Sookawesh Chairman2. Mr. Chavarat Charnveerakul Member3. Mr. Pote Videtyontrakich Memberwith Mr. Sethapong Chandhanayingyong, Assistant

Vice President Finance as the secretary of the AuditCommittee.

The Audit Committee is authorised to fulfill thefollowing duties:

1. To review the Companyûs financial reportingprocess, to ensure accuracy and adequacy.

2. To ensure that the Company has an appropriateand effective internal control system in place.

3. To review the performance of the Company, toensure compliance with the securities andexchange law, regulations of the Stock Exchangeof Thailand, and laws relating to the business ofthe Company.

4. To consider, select and nominate the Companyûsexternal auditors, and propose the annual audit fee.

5. To review the disclosed information of theCompany, to ensure that any transaction doesnot lead to any conflict of interest.

6. To prepare an Audit Committee Report, to bedisclosed in the Companyûs Annual Report.

7. To perform any other activities as assigned bythe Board of Directors.

The Audit Committee holds regular meetings; inthe year 2003, there were a total of four. The AuditCommitteeûs activities were reported to the Board ofDirectors on July 16, 2003 as mid-year report and onFebruary 26, 2004 as year-end report.

The Remuneration CommitteeThe Remuneration CommitteeThe Remuneration CommitteeThe Remuneration CommitteeThe Remuneration Committee : : : : : the RemunerationCommittee has been in existence since 12 November2002, and comprises three directors, as follows:

1. Mr. Pala SookaweshChairman of the Audit Committee Member

2. Dr. Christian De SlooverChairman of the Board of Directors Member

3. Dr. Chokchai AksarananChairman of the Executive Committee Member

The Remuneration Committee is authorised toconsider the remuneration of the directors and othercommittee members appointed by the Board ofDirectors and submit a proposal to the annualshareholdersû meeting for approval.

The company has not yet established the NominationCommittee to carry out the screening process.

13. Control System and Internal AuditControl and Internal Audit

Extending from the management down to theoperational level, the Companyûs control system explicitlydefines, in writing, the authority and duties of allemployees. All are given a framework, within whichthey can control the utilisation of the Companyûs assets,while the duties of operational staff and inspectors arekept separate. Additionally, a financial control systemwas introduced, via the implementation of a financialreporting process for the various levels of managers.

Established since 2001, the Companyûs Internal AuditDepartment is responsible for performing any audit-related duties, with the aim to ensure that the Companyûsmain operation and significant financial activities areoperated efficiently and in accordance with establishedguidelines. The department must also ensure thatactivities are conducted in full conformity with the lawand compliance control.

Being one of its affiliate, Solvay also sends itsinternal audit team to Vinythai regularly, at least once ayear. This is to ensure that Vinythaiûs operation is in linewith Solvayûs policy and standard. For the past years,Solvayûs auditors viewed that the Company hasadequate effectiveness of internal control system andno significant issues were found.


To help develop in-house internal audit skills and tolay down the guidelines for the Internal Audit Department,the Company selected and hired an externalconsultant, namely Deloitte Touche Tohmatsu JaiyosCo., Ltd. and PricewaterhouseCoopers in 2000 and 2002,respectively, to perform the business risk assessment andinternal audit. The consultants highlighted any weakpoints in the Companyûs internal control system, to enablecorrection and improvement. The two consultantswere not the Companyûs auditors and they were ableto report their findings with complete objectivity. TheCompanyûs internal auditors have continuously performedthe follow-up of the corrective actions according tothose recommendations.

The Internal Audit/TQM Department overseesconstant internal control to ensure improved controlmeasurements related to all events, environment andvariable risks. The internal audit report stated that nosignificant issues were found and that all the Companyûsoperations were being performed legitimately. Theinternal control systems were proper and efficient, whilethe supervision for the safeguarding of assets was alsocarried out well, to prevent the management andemployees from exploiting the assets for their ownbenefit.Risk Management

The Board of Directors strongly emphasises riskmanagement. Any corporate risks that affect, bothinternally and externally, the Companyûs businessoperation were identified, while protection and riskmanagement measures were put in place. Any riskfactors related to the Companyûs business operationshave been stated in a separate topic of the AnnualReport, and in Form 56-1.

For any risk that confronts the Companyûs business,the Company has prepared standard practices torespond in an appropriate, systematic and efficientmanner by focusing on risk awareness, improving workprocedures and the most suitable employment ofresources.

14. Directorsû ReportingThe Board of Directors is well aware of its

responsibilities to the integrity of financial information. Inaddition, the Board of Directors effectively maintains theinternal control systems, ensuring the accuracy andcompleteness of the Companyûs bookkeeping and theadequate safeguarding of its properties for the benefitof shareholders and investors to acknowledge theCompanyûs financial status, business performance inaccuracy and rationality.

çResponsibility Statement from the Board ofDirectors on the Disclosure of the Financial Reporté wasprepared and presented in a separated item as shownin the Annual Report.

15. Relations with InvestorsIn its realisation that any financial information and

non-financial information may have an impact on thedecisions made by both investors and stakeholders,the Board of Directors directed the management todisclose all information completely, accurately and timely,with reliability and consistency. The management complied.

The Vice President Finance and Administration is incharge of Investor Relations activities. He has beenassigned to communicate directly with institutional andindividual investors, analysts and concerned governmentagencies. In year 2003, the activities related to theinvestor relations were as follows:

ë 63 Company Visits by investors and analystsë 2 Corporate Road Show abroadë Presentation at the çListed Companies Meet

Investorsé event arranged by the Stock Exchangeof Thailand

Investors may inquire for any information fromthe Company at: Tel. 0-2240-2425 ext.3106 or Fax.0-2240-1375. Alternatively, they may contact theCompany through its website: www.vinythai.co.th or e-mailat [email protected]


The Directors on the Board recognise their duty

and responsibility as directors of a listed company under

the Public Limited Companies Act BE 2535 (1992) and

the importance of their conformity to all applicable

rules and regulations. The financial statements and

information set out in Vinythai Public Company Limitedûs

Annual Report this year have been prepared in

compliance with the generally accepted accounting

principles in Thailand and other appropriate and

consistent accounting policies with careful consideration.

The company, therefore, has properly disclosed all

important information in the Notes under the Financial

Statements in a highly transparent manner.

The Board of Directors has provided and

maintained an appropriate and efficient internal control

system, ensuring that all accounting records are

accurate, complete and sufficient to protect the companyûs

assets and prevent fraud and mismanagement.

In this regard, the Board of Directors has appointed

the Audit Committee, comprising both non-executive

and independent directors, to review the financial

reporting and internal audit procedures. The Audit

Committee has monitored, evaluated, commented on,

and reported to the Board of Directors the results from

the external auditors and the Internal Audit Department

to ensure the development of a thorough risk

management programme. The Committee also ensures

that the internal control system is adequate and

sufficient for the company to comply with all relevant

laws and regulations. The Audit Committeeûs Report is

presented in this Annual Report accordingly.

The Board of Directors agrees that the overall

internal control system of the company is satisfactory,

and that the financial statement of Vinythai Public

Company Limited for the year ending 31 December

2003 has been prepared in accordance with the

generally accepted accounting principles in Thailand

and that it complies with all relevant rules and

regulations.

Responsibility Statement from the Board of Directors on theDisclosure of the Financial Report


Audit Committeeûs Report

The Board of Directors

in the Meeting No. 5/2002,

held on November 12, 2002,

reso lved to re-appoint

Mr . Pa la Sookawesh,

Mr. Chavarat Charnvirakul,

and Mr. Pote Videtyontrakich

to be the members of the

Audit Committee for another 3-years term, having

Mr. Pala Sookawesh as the Chairman.

The Audit Committee has performed its duties in

conformity with the mission entrusted by the Board of

Directors as prescribed in the Audit Committee Charter

under the guidance announced by the Stock Exchange

of Thailand. In 2003, the Audit Committee held four

ordinary meetings in which the management was

invited to attend and discussed on issues of concern.

The major activities held during the year 2003 are

summarized as follows:

1. Reviewed the financial statements and auditor

report both the 2002 year end reports and the 2003

quarterly report with the external auditor and the

management before submission to the Stock Exchange

of Thailand and the public. This review process ensured

that the financial information was complete, correct

and reliable, with adequate disclosure to meet the

accounting standards and requirements of relevant laws

and regulations.

2. Reviewed the disclosure of connected transactions

and potential conflicts of interest to ensure that the

Company has operated strictly by rules and regulations

that are concerned.

3. Reviewed the internal audit reports on the

Companyûs operations. Internal auditing processes

included planning, reporting, and following up the

implementation of the internal and external auditorsû

recommendations for improving effectiveness and

efficiency of the operations.

4. Evaluated the performance of Vinythaiûs auditor,

Ernst & Young Office Limited (E&Y), during the past

year whereby E&Y has performed their work with

knowledge and expertise. The Audit Committee,

therefore, recommended to the Board of Directors to

have E&Y be re-appointed by the shareholders as

Vinythaiûs auditor for 2003.

5. Followed up the implementation of recommendations

under Business Risk Assessment (BRA) conducted by the

PricewaterhouseCoopers Risk Management Service

Limited in 2002. Most of the recommendations have

been successfully implemented by the Management,

while a few others are in the process of implementation.

6. Followed up the implementation of recommendations

from Solvay Internal Audit conducted in October 2002.

Almost all of the recommendations have been

successfully implemented by the Management, while a

few others are in the process of implementation.

Upon consideration of the above issues, the

Committee is of the opinion that the Companyûs

financial statements were prepared in accordance with

generally accepted accounting principles and that the

Company conducted the business in compliance with

the regulations of the Security and Exchange Commission

and the Stock Exchange of Thailand and also related

laws. The existing internal control system and internal

audit function can ensure that the financial information

is complete, correct and reliable with sufficient disclo-

sure.

Mr. Pala Sookawesh

Chairman of the Audit Committee


InternalAudit Department

Vice PresidentFinance & Administration

Personnel andAdministrationDepartment

FinanceDepartment

AccountingDepartment

Business IntelligenceDepartment

Plant Manager

Management - QualityRepresentative - Environmental

- Occupational Health and Safety

Corporate Affairsand Communications

Department

TQM Department

Audit Committee Executive CommitteeRemunerationCommittee

Marketing andSales Department

Customer CareService Department

Quality Controland Customer

Development Department

Safety & EnvironmentDepartment

EDP Department

ProcurementDepartment

MCA Department

VCM Department

PVC Department

MaintenanceDepartment

Board of Directors

Managing Director

Vice PresidentMarketing & Sales

Organization Chart of Vinythai Public Company Limited


1 2 3 4 5

Board of Directors of Vinythai

1. DR. CHRISTIAN DE SLOOVER Chairman of the Board of DirectorsEducation M.B. Brussels Free University, Belgium ë ISMB, Harvard Business School, U.S.A.Experience President, Solvay Asia Pacific Pte. ë CEO, Animal Health and Bioproducts Division, Solvay S.A. Belgium

2. DR. PHISIT PAKKASEM Vice ChairmanEducation Ph.D. (Dev. Economics) University of Pittsburgh, U.S.A. ë MPA. (Dev. Economics) Harvard University,

U.S.A. ë B.A. (Economics) Claremont Menûs College, U.S.A.Experience Executive Advisor to Charoen Pokphand Group ë Chairman, TISCO Finance Public Company

Limited ë Chairman, Thai Sugar Millers Corporation Limited ë Chairman, Thai Smart Card CompanyLimited

3. MR. HENRI LEFEBVRE DirectorEducation Chemical Engineering, Liege University, BelgiumExperience Executive Committee, Solvay S.A. Belgium ë General Manager Plastics, Solvay S.A. Belgium

4. MR. PRASERT POONGKUMAN DirectorEducation Honorary Doctoral Degree in Social Development, Prince of Songkhla University ë Honorary Doctoral

Degree in Agriculture, Jearjeang University, ChinaExperience Vice Chairman, Charoen Pokphand Group ë Chairman, Agro Industry and Food Business

Group, Charoen Pokphand Group Company Limited ë Chairman of Executive Committee,Petrochemical Business Group, Charoen Pokphand Group Company Limited ë Director, CharoenPokphand Foods Public Company Limited

5. MR. ALOYSIUS MICHIELSEN DirectorEducation Ph.D. (Business Administration), University of Chicago, U.S.A.Experience Director and Chairman of Executive Committee, Solvay S.A. Belgium


6 7 8 9 10 11

6. MR. MARSS WAN-CHENG KUO Director and Executive CommitteeEducation Bachelor (Chemical Engineering), Min-Chi Institute of TechnologyExperience President, Petrochemical Business Group (C.P. Group) ë Vice President and General Manager,

Inteplast Corporation

7. MR. DOMINIQUE DUSSARD DirectorEducation Master in Laws of University Catholic of Louvain, BelgiumExperience General Counsel for Europe and Asia Pacific, Solvay S.A. Belgium

8. MISS RAPEEPAN LUANGARAMRUT DirectorEducation Diploma in Vocational Education, Stamford College, Singapore ë International Business English, U.C.

Berkeley California, U.S.A. ë Advance Management Program, Harvard Business School ë TrainingçDirector Certification Program 37/2003é, Thai Institute of Directors Association (IOD)

Experience President, 110 Vipa Company Limited ë Director, Samart Corporation Public Company Limitedë Director, Samart Infonet Company Limited ë Director, Peroxythai Company Limited

9. MR. ARSA SARASIN DirectorEducation Bachelor of Business Administration, Boston University, U.S.A. ë Training çDirector Accreditation

Program 5/2003é, Thai Institute of Directors Association (IOD)Experience Chairman, Padaeng Industry Public Company Limited

10.MR. UMROONG SANPHASITVONG DirectorEducation B.A. and M.S. Accounting, Thammasat University ë Training çDirector Certification Program 5/2001é,

Thai Institute of Directors Association (IOD)Experience Deputy Group CFO, Charoen Pokphand Group Company Limited ë Director, C.P. Seven Eleven

Public Company Limited ë Director, Telecom Asia Public Company Limited

11.DR. CHOKCHAI AKSARANAN Director and Chairman of Executive CommitteeEducation Ph.D. (Chemical Engineering), University of New Brunswick, CanadaExperience Senior Vice President, Charoen Pokphand Group Company Limited ë Chairman, Bangkok Commercial

Asset Management Company Limited ë Director and Chairman of Audit Committee, Aromatic(Thailand) Public Company Limited ë Director and Audit Committee, Saha Patana InterholdingPublic Company Limited ë Director and Audit Committee, Asset Management Corporation


12 13 14 15 16

12.MR. VINCENT DE CUYPER Managing Director and Executive CommitteeEducation Master of Industrial Management, University of Leuven, Belgium ë Chemical Engineering, University

of Louvain, BelgiumExperience Plant Manager, Vinythai Public Company Limited. ë PVC Project Manager, Solvay Indupa S.A.I.C.,

Argentina

13.MR. POTE VIDETYONTRAKICH Independent Director and Audit CommitteeEducation B.A. (Economics) Yale University, U.S.A. ë M.B.A. Harvard Graduate School of Business Administration, U.S.A.

ë Training çChairman 2000 No.2/2001é, Thai Institute of Directors Association (IOD)Experience Managing Director, Private Equity (Thailand) Company Limited ë Managing Director, Credit Suisse

First Boston (Singapore and Bangkok) ë Deputy Minister, The Ministry of Commerce

14.MR. CHAVARAT CHARNVIRAKUL Independent Director and Audit CommitteeEducation Bachelor of Science in Economics, Thammasat University ë Fellowship, the Joint State Private Sector

Course, The National Defense College of Thailand ë Training çChairman 2000 No.3/2001é, ThaiInstitute of Directors Association (IOD)

Experience Director and Chairman of the Advisory Board, Sino-Thai Engineering & Construction Public CompanyLimited ë Chairman of Thailand Iron and Steel Institute ë Deputy Minister of Finance ë HonorableSenior Advisor, The Federation of Thai Industries

15.MR. JEAN-PIERRE PLESKA DirectorEducation Chemical Engineering, Mons Polytechnic School, BelgiumExperience Managing Director, Strategic Business Unit Vinyls, Solvay S.A. Belgium ë Managing Director and

Executive Committee, Vinythai Public Company Limited

16.MR. PALA SOOKAWESH Director and Chairman of Audit CommitteeEducation Honorary Doctorate Degree in Engineering From Chulalongkorn University ë Certificate in Advance

Management Program, Harvard Business School, U.S.A. ë The Joint State Private Sector Course Class 3ë Master of Industrial Engineering, Oregon State University, U.S.A. ë Bachelor of Engineering (2nd

Class Honors) in Electrical Engineering (Power), Chulalongkorn University ë Training çChairman 2000No.2/2001é, Thai Institute of Directors Association (IOD)

Experience Director, PTT Public Company Limited ë Director, PTT Exploration and Production Public CompanyLimited (PTTEP) ë Chairman, The Aromatics (Thailand) Public Company Limited ë Director, ThaiOlefins Public Company Limited ë Director, Electricity Generating Authority of Thailand ë Director,Thai Oil Co., Ltd. ë Audit Committee Ministry of Agriculture & Co-Operatives


1 2 3 4

Steering Committee

1. MR. VINCENT DE CUYPER Managing Director and Executive CommitteeEducation Master of Industrial Management, University of Leuven, Belgium ë Chemical Engineering, University of

Louvain, BelgiumExperience Plant Manager, Vinythai Public Company Limited ë PVC Project Manager, Solvay Indupa S.A.I.C,

Argentina

2. DR. SANTISUK SANGUANRUANG Vice President Finance & AdministrationEducation Ph.D. and M.S. (Ag. Econ.), Oregon State University, U.S.A. ë M.B.A. Louisiana State University, U.S.A.

ë B.A. (Accounting), Chulalongkorn UniversityExperience Vice President, Finance & Accounting Department, Thai Olefins Company Limited ë Assistant

Professor, School of Business Administration, National Institute of Development Administration (NIDA)

3. MR. SOMSAK LEAUPATHANASUK Vice President Marketing & SalesEducation M.B.A. Chulalongkorn University ë B.Sc. (Chem.) Mahidol University ë Dip. Anal. Chem. Chulalongkorn

UniversityExperience Assistant Vice President Marketing & Sales, Vinythai Public Company Limited ë PVC Sales Department

Manager, Vinythai Public Company Limited ë Marketing Director, Siam Occidental ElectrochemicalCo., Ltd.

4. MR. MARC LAHALLE Plant ManagerEducation Bachelor of Chemical and Mechanical Engineering, University of Grenoble (INPG), FranceExperience VCM Department Manager, Solvic S.A., Jemeppe, Belgium. ë VCM Production Department Manager,

Vinythai Public Company Limited ë VCM Project Manager, Solvay S.A., Brussels, Belgium


1 2 3 4 5 6 7

8 9 10 11 12 13 14 15

Management Team

1. Mr. Sompot Cheeranorawanich Assistant Vice President Corporate Affairs and Communications,

Safety & Environment Department Manager

2. Mr. Sethapong Chandhanayingyong Assistant Vice President Finance

3. Mrs. Siriporn Wuthilaohaphan Quality Control and Customer Development Department Manager

4. Mrs. Ratana Punyashthiti Assistant Vice President Personnel & Administration

5. Ms. Premruthai Chaiyakul Business Intelligence Department Manager

6. Mr. Surachet Nainapalert Customer Care Service Department Manager

7. Mr. Sanjay Pandey Finance Department Manager

8. Mr. Gilles Schmit PVC Department Manager

9. Mr. Patrick Lefevre Maintenance Department Manager

10. Mr. Thananchai Luksamanapha VCM Department Manager

11. Mrs. Varaiporn Piphipattanaprapt Accounting Department Manager

12. Mr. Suchat Penglee Procurement Department Manager

13. Mr. Kitti Chaloembanphachon EDP Department Manager

14. Dr. Supachat Chairatanathavorn TQM Department Manager, Internal Audit Department Manager

15. Mr. Boonchana Mongkonkarn MCA Department Manager


MANAGEMENT REPORT

General Economic OutlookThe world is fast becoming a single integrated

market, especially for commodity chemicals like PVCand Caustic Soda, which demand and growth arereflected in world GDP figures.

In 2003, world GDP grew by 2.6 per cent. With fastgrowth in the second half, the overall yearûs performancewas moderated somewhat by the first six months, whenthe war in Iraq and outbreak of SARS broughtacross-the-board uncertainties to the economic scene.

The North American region accounts for one-thirdof world GDP, and the sharp economic upsurge takingplace in the United States, with 3 per cent GDP growth,saw the economy improving markedly. Such recoverywas underpinned by robust consumption growth, which,in turn, was supported by tax cuts and record levels ofmortgage refinancing as well as a rebound inemployment. The same trend was seen in Canada andMexico.

For Western Europe, the GDP growth stoodstubbornly at only 0.7 per cent, on the back ofpoor growth prospects in Europe. Domestic demandremained subdued, with high unemployment anduncertainty over the economic and geopolitical outlookrestraining consumption. Signs were visible; however, thatindustrial production was starting an upswing, with theannouncement of tax cuts in Germany and Francesupporting this view.

In Asia, except for Japan, GDP growth took astrong hold at 5.6 per cent, despite a host of reasons to

keep it down. While the first quarter was disappointing,the second quarter was heavily affected by the SARSepidemic and uncertainties related to the war in Iraq.However, a noticeable change of direction was seen inmid-2003, when consumer confidence rose throughoutAsia. China was still growing stronger and stronger, andSouth Korea was beginning to experience positiveeconomic results after a long period of negativity. Indiaûsprospects were notable, while Japan was enjoyingupward, if still slight, growth. Strength in the U.S. andglobal economy spurred continued export growththroughout the Asian region.

Thailandûs GDP growth in 2003 also showed a strongimprovement over initial forecasts at 6.5 per cent, boostedby improved consumer confidence, low interest rates, abuoyed SET and rising private investment. The recoverywas significant from mid-year, especially in the last quarter.

The pace of Thailandûs economy exceeded allexpectations and current forecasts predict 2004 growthat about 7-8 per cent. However, the results of suchunexpected events as the recent outbreak of bird flu,should be watched with caution.

In general, continued growth is expected for 2004.Supporting the forecasts for a positive economicoutlook was the outstanding growth in the U.S.A. duringthe last quarter of 2003, coupled with a rebound inbusiness investment and solid consumption and exportgrowth in Japan.


18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0 2545 2546 2547 2548 2549

403

800700600500400300200100

0

185215

315

395415370 345 340 318

250310

270

370 380 375

280 263 275 278 285 292 283

153145

301

435

515

605

705

605

520570 580

545495 520

565

670700

660

505545

590565

610640 658

710

310359

413

524562

489443 483 462

430 436 463498

564 575

493463

515488 495 536

556 586

EDC-VCM-PVCFar East Prices Evolution 2002-2003

Source : Harriman monthly Report as published for month arrival (i.e.About one month after publication)

Jan'02

Jan'03

US$/ton

EDC VCM PVC

Asia Pacific : PVC Demand vs Capacity 2002-2006

CapacitySource : Vinythai

kton / year

Demand

Year

General PVC Industry Outlook

Following the strong revival of the global economythroughout the entire Asia Pacific region, driven by aGDP growth in China of 9% in 2003, total PVCconsumption further increased in 2003 and is expectedto climb still higher to 11.7 Mtons in 2004. Particularlystrong growth was observed in China, India andSoutheast Asia.

Significant increases in PVC production capacityare expected to come on stream, especially from 2005on, but lack of VCM and EDC will remain a key issue inthe years to come for non-integrated PVC producers.Considerable investments are in progress in VCMproduction by acetylene in China. However, thedeciding factor is likely to be the operating rate andcompetitiveness of these production facilities, taking

into account the huge electricity consumption requiredby the process and the significant electricity shortagesbeing faced in China.

In line with the global economic recovery, FarEastern PVC prices further improved early in 2003 toreach US$ 700 per ton in March. Unfortunately, theoutbreak of SARS strongly affected the Asian economies

as well as the movement of goods across Asia. Conse-quently, PVC prices dropped sharply to US$ 500 per tonby May 2003. Luckily, global economic growth quicklygot back on track and continued to strengthen through-out the last quarter of 2003. Consequently, Far EasternPVC prices progressively and continuously strengthened,and were back up to the US$ 700 per ton level by theend of the year.


500

450

400

350

300

250

200

150

100

50

0

01/4

2

04/4

2

07/4

2

10/4

2

01/4

3

04/4

3

07/4

3

10/4

3

01/4

4

04/0

1

07/4

4

10/4

4

01/4

5

04/4

5

07/4

5

10/4

5

01/4

6

04/4

6

07/4

6

10/4

6

300

250

200

150

100

50

0

01/4

2

04/4

2

07/4

2

10/4

2

01/4

3

04/4

3

07/4

3

10/4

3

01/4

4

04/4

4

07/4

4

10/4

4

01/4

5

04/4

5

07/4

5

10/4

5

01/4

6

04/4

6

07/4

6

10/4

6

1999-2003 Far East PVC-EDC Spread History(PVC price-EDC price*0.82-C2H4 price*0.23)

Source : Harriman monthy Report as published for month arrival (i.e. About one month after publication)

US$/

TON

1999-2003 Far East PVC-VCM Spread History

Source : Harriman monthy Report as published for month arrival (i.e. About one month after publication)

US$/

TON

In addition to strengthening PVC prices, the year2003 was marked by the temporary shut-down of animportant VCM facility in Southeast Asia, leading to asevere shortage situation for PVC producers relying onVCM purchases as raw materials. On the other hand,this shut-down released some EDC availability on thespot Southeast Asian market, explaining the stagnantprice of EDC in the second half of 2003. Suchuncontrollable factors effecting the rise and fall of rawmaterials prices and their availability reinforce thegeneral opinion that being fully integrated to EDC andVCM production is a key strength for PVC producers likeVinythai.

Outlook for 2004The year 2003 confirmed that the Asian petrochemical

industry, and in particular the PVC industry, was in anupward cycle, based on the following:

- China remains the main engine of growth for PVCdemand in Asia.

- Domestic demand in Thailand has significantlyimproved, especially in the construction sector,thanks to renewed infrastructure investment as wellas the expansion of the private property business.

- The global demand for PVC is growing faster thanthe installed capacity to produce it.

- EDC and VCM supplies are expected to remaintight.

Vinythai expects that such factors will help raise FarEastern PVC prices further, from an average of US$ 600per ton in 2003 to an average of US$ 650 per ton in2004 - a trend expected to extend into 2005, where anaverage PVC price of US$ 680 per ton could be seen.Nevertheless, external factors, over and above the strongfundamentals of the PVC industry, could still have atemporarily negative impact on this globally positivetrend.

Following the strong competition in the domesticPVC market, pricing policies in Thailand, which are basedon import parity prices, have already taken intoaccount the reduced AFTA import duty tariff of 5per cent which should remain at that level in 2004 .

In line with its vision to support customer growth,while strengthening the companyûs profitability, Vinythaidecided at the end of 2003 to further debottleneck itsEDC-VCM chain, through an investment which willenable Vinythai to provide customers with an additional8,000 tons of PVC and 10,000 tons of caustic soda ayear by early 2005.


Risk Issues and Mitigation1. Risk from the Fluctuation of Product and

Raw Material Prices in InternationalMarkets

Over a period of time, the price of PVC resin ininternational market can fluctuates considerably by itsvery nature. As such, Vinythaiûs revenue from bothexport and domestic sales may rise and fall sharply,often because of circumstances beyond the Companyûscontrol. Vinythai is also vulnerable to international pricefluctuations for ethylene, which is one of the Companyûskey raw materials, besides salt and electricity. Ethyleneaccounts for around 40% of the total production cost,while salt and electricity comprise approximately 20%.The prices of the latter two, however, are lessfluctuated.

MitigationMitigationMitigationMitigationMitigation ::::: Vinythaiûs fully-integrated productionprocess helps, to some extent, shieldthe Company from such volatility.To improve the ethylene cost,the Company, together with otherofftakers, aims to negotiate with thesupplier for a pricing formula thatreflects more on the Asian marketsituation.

2. Risk from Government Tariff PolicyThe import tariff for PVC resin has been gradually

reduced from 40% in 1993 to 5% in 2003 under the AFTA(ASEAN FREE TRADE AREA) Scheme, and to the current20% for imports from countries outside AFTA. The tariffrates, however, may drop further in the future. Such areduction in import tariff would have a negative effecton Vinythaiûs domestic sales revenue.

MitigationMitigationMitigationMitigationMitigation ::::: In response to this situation, theCompany has continuously adoptedcost reduction schemes at all levelswhich, in particular, enhance plantûsproductivity. In addition, Vinythai andother petrochemical producers havejointly requested the authorities forthe rescheduling in the tariff reduction.Some further protection is neededfor a capital intensive industry, likePetrochemical.

3. Risk from Reliance on Limited Numbersof Suppliers

Vinythaiûs PVC integrated production processrequires 3 important raw materials i.e. ethylene, electricity,and salt whereby the company has entered intoagreements with individual suppliers accordingly. In caseof ethylene and salt, it is considered that the numbersof suppliers are limited. Vinythai is facing a risk of rawmaterial shortage in case of crisis that causes any ofthese suppliers being unable to fulfill their commitment.

MitigationMitigationMitigationMitigationMitigation ::::: The Company has entered into along term contract with each supplierto ensure that the Company will beable to operate continuously and,additionally, shall be able to negotiatefor extending the agreement whenit is expired. For short term problem,if any, the Company may be ableto source ethylene from other localor from oversea suppliers. In case ofsalt, the Company could import EDCas raw material for VCM production.


4. Risk from Reliance on a Single BusinessSector

In Thailand, as much as approximately 40% ofall PVC resin is used by the pipe and fittings sector,with demand being closely linked to the constructionindustry. This, in turn, is directly influenced by theeconomic climate of the country.

MitigationMitigationMitigationMitigationMitigation ::::: The Company has adopted adiversification policy that focuses onthe expansion of and penetrationinto other applications, such asr igid profiles, film and sheet, wire andcables and artificial leather. Vinythaiis also penetrating into new andmore diversified export markets.

5. Risk from Foreign Exchange RateFluctuations

Although Vinythai is no longer burdened with aforeign currency loan, the Company is still exposed tofluctuating exchange rates, which affect it in twodifferent ways. While Vinythaiûs sales prices in bothexport and local markets are closely linked to the USdollar, so too is the cost of ethylene, accounting foralmost half of the cost of production. Thus, half of theCompanyûs revenue remains unhedged.

MitigationMitigationMitigationMitigationMitigation ::::: The Company monitors closely theforeign exchange market and wouldenter into forward contracts wheneverappropriate.

6. Repayment RiskUnder its debenture covenants, the Company is

obliged to repay the principal and interest todebentureholders every six months. Each installment (ofthe principal) amounts to 681 MTHB, with payments tocontinue until August 2006.

MitigationMitigationMitigationMitigationMitigation ::::: The Companyûs operat ion hascontinuously improved. EBITDA andcash flow from operation are gettingbetter overtime. Meanwhile, theinterest expenses are declining,thanks to Vinythaiûs cons is tentdebt repayments. This helps lightenthe overall debt servicing load.Should Vinythai be subjected to ashortage of cash to service the debt,however, Vinythai has 800 MTHBSponsorsû support as back up fromthe two major shareholders.

7. Risk from Floating Interest RateThe debentures issued by the Company are

subjected to the floating Minimum Lending Rate quotedby Bangkok Bank Public Company Limited.

MitigationMitigationMitigationMitigationMitigation ::::: At present, interest rates are inclinedto remain stable or may increase alittle bit during the second half of2004. However, the Company willmonitor the money market closelyand may use the interest rate swapmechanism whenever appropriate.


140

120

100

80

60

40

20

02539(#) 2540 2541 2542 2543 2544 2545 2546

Production Performance (Base 100=1996)

% (Bas

e 10

0=19

96)

Year

NaOH VCM PVC-E PVC-S

The plant maintained high operating rates

throughout 2003, enabling Vinythai to set new annual

production records in both the Chlor-Alkali and PVC

plants, even though production was slightly effected by

the SARS outbreak.

Production and Process Development

The total production of NaOH, VCM and PVC

increased by 1.5 per cent compared to figures from the

previous year.

In order to sustain its customer growth and maximise

PVC production, Vinythai has decided to increase its

VCM and NaOH capacities respectively by 7 per cent

and 11 per cent in the first quarter of 2005.

The plant continued to control both production fixed

and variable costs, with the streamlining of the

organisation enabling a new all-time high productivity

performance, which was up 7 per cent over the

previous year. Nevertheless, production variable costs

soared, in line with the sharp hike in gas and ethylene

prices.

COMPANY PERFORMANCE


2538(*) 2539(#) 2540 2541 2542 2543 2544 2545 2546

214

683

895 932 979

1,1001,160

1,2211,291

Vinythai Productivity Evolution 1995-2003

*Stand alone PVC production#Start-up VCM-Electrolysis plants

Year

Prod

uced

Mix

Tons

per E

mploy

ee

Produced NaOH+VCM+PVC Tons per Employee and Year

In addition to the two new paste resin grades, Vinythai

also continued to improve on the quality of existing

grades, in a bid to take a greater market share in the

high-priced application market. Focusing on the

development of a more streamlined organisation, Vinythai

has also managed to strengthen its quality management,

all the way from production to customers, and to sustain

In accordance with its commitment to the

Responsible Care˙ initiative, Vinythai strengthened its

occupational health and safety management system,

enabling a full year without any single working day lost

as a result of accidents.

In collaboration with customer technical services and

marketing & sales, two new paste resin grades were

developed and successfully launched in 2003, for a

wider market appeal.

innovative solutions and partnerships with both its PVC

and Chlor-Alkali customers. These were all achieved in

the year 2003, via an upgrade to the ISO 9001:2000 quality

management system and ISO/IEC 17025 accreditation

for the companyûs PVC laboratory, in the scope of

determining the Viscosity Index (K-Value) of PVC resin

and the Residual Vinyl Chloride Monomer in PVC resin.


900

800

700

600

500

400

300

200

100

0 2541 2542 2543 2544 2545 2546 2547

360 350410 438 466

820820800770730

667600

270340

Thailand : 1998-2004 Total PVC Capacity/Demand Projection

Capacity

Year

in Ktons

DemandSource : Vinythai

Marketing and Sales

PVC ResinsIn 2003, Thailandûs GDP growth increased at the

rate of 6.5 per cent. The domestic PVC consumption,which is directly linked to the GDP growth, rose byabout 6.8 per cent from 410 to 438 KMT through theyear.

On the regional market, despite the war in Iraq

and SARS outbreak in the second quarter of the year, a

quick recovery was seen in the latter half of 2003. In

addition, the antidumping policy, announced by the

Chinese government to certain manufacturers from the

U.S.A., Japan, Korea, Taiwan and Russia, came out in

favour of Vinythai, being a non-listed manufacturer.

Hence, the company achieved a total sales

volume of 191 KMT, a 3.2 per cent rise from the previous

year, when sales of 185 KMT were achieved. The

increase was the result of higher export sales, which

increased by 17 per cent, from 69 KMT to 81 KMT.

Meanwhile, domestic sales slumped by 4.3 per cent,

down from 116 KMT to 110 KMT.

Vinythai faced a difficult year with price deteriora-

tion of the domestic market. Strong competition among

local converters in pipes/fittings as well as more heated

competition in the calendering sector, fuelled by ASEAN

and Chinese producers, was so significant that tariffs

on local resin prices were brought down to just 5 per

cent (equivalent to ASEAN tariff rates), in a bid to

enhance the competitiveness of domestic converters.

Despite the lower tariffs in the domestic market,

however, the higher sales volume and higher interna-

tional average price (US$ 600/MT in 2003 compared to

US$ 550/MT for suspension grade) still managed to boost

Vinythaiûs turnover and profits to higher levels than

those of 2002.


300

250

200

150

100

50

0

Caustic Soda Far East vs Chlorine Spot US Prices 2002-2003

Jan'02

Jan'03

Caustic Soda Prices

Source : Harriman Monthly Report as published for month arrival (i.e. About one month after publication)

US$/MT

Chlorine Spot Prices

Meanwhile, demand for suspension PVC, profile

and calendering products saw an upswing, on the back

of a then bustling construction sector.

Total PVC imports for both suspension and

emulsion grades were estimated at 44 KMT, a slight

increase from 2002, with about half of the imports

coming from Japan, followed by Korea and U.S.A. Such

a trend was recognized as their efforts to diversify

business away from China, on the back of the recent

antidumping duties imposed on producers from these

countries.

Caustic SodaThe domestic market for caustic soda increased

by 11 per cent in 2003, with the polycarbonate sector

at 18 per cent, and chemicals and textiles both up by

4 per cent.

Although Vinythai is not supplying caustic soda to

polycarbonate producers and despite its increased

imports, Vinythai was able to achieve an increase in

sales of 5 per cent in 2003. Only a single parcel of a

minimum quantity of goods was exported in January

2003. As far as prices were concerned, caustic soda

international prices continuously decreased through 2003

in the Far East, from US$ 180/DMT in the beginning of

the year to US$ 140/DMT CFR at the end.


An Analysis of PerformanceIn 2003, the Companyûs overall performance was

considered to be good. The production and sales couldreach the targets for the year, despite some negativeconsequence from the Iraq war and the outbreak ofthe Severe Acute Respiratory Syndrome (SARS) whichhad an impact on the demand for PVC during the firsthalf of 2003. The Company reacted well by adjustingthe business and sales plans and could achieve asatisfactory result for the year.

Analysis of Income

In 2003, the Company realized a total revenue of6,167 MTHB, of which 6,130 was earned from salesrevenue, an increase of 285 MTHB or 4.9% higher thanthe previous year. Main factors driving the rise in Vinythaiûsturnover were the 3.1% increase in PVC quantities sold,and the increases by 2.2% and 2% in the price of PVCand the Caustic Soda respectively. The domestic PVCand Caustic Soda selling prices, as usual, followed thetrends of the international markets. With its plant beingrun at full capacity, Vinythai increased its production ofCaustic Soda by 4% while the PVC production increasedby 2% from the previous year.

PVC sales in 2003 represented 84% of the totalsales, while the Caustic Soda contribution was 14%.Fifty-eight per cent of the total PVC revenue was fromdomestic sales, while almost 100% of the Caustic Sodaproduced by Vinythai was sold locally.

Analysis of Cost and Expenses

(1) In 2003, the cost of sales amounted to 4,390MTHB, an increase by 406 MTHB or 10.2%, fromthe previous year. The increase in the unit costof Ethylene by 16.4% was a major contributingfactor. Both the cost per unit of salt andelectricity dropped slightly comparing to theprevious year. In addition, Vinythai was still ableto control the production fixed costs, exceptfor the sharp increase in plant and equipmentinsurance premiums.

(2) Selling and administrative expenses in 2003amounted to 599 MTHB, a decrease of 10 MTHB,or 1.7%, from the previous year. The majorchanges from the previous year are as follows:ë Transportation cost increased +27 MTHB

due to higher quantity soldand more export proportion inthe sales

ë Accrued Royalty expenses - 17 MTHBdecreased by

ë Insurance premium increased by + 7 MTHBë Value of obsolete assets being - 36 MTHB

written down decreased byë Expenses on Capital Structure + 6 MTHB

restructuring(3) Interest expenses in 2003 amounted to 301 MTHB,

a significant decrease of 150 MTHB, or 33%,from 2002. The lower indebtedness arising fromthe Companyûs consistent debenture repaymentsand the lower interest rates contributed to thelower interest expenses.

Explanation & Analysis of Financial Status and Performance


Summary of Performance

Vinythai concluded the year 2003 with a net profitof 871.3 MTHB, an increase of approximately 8.7% fromthe year before that posted a net profit of 801.7 MTHB.This achievement was the result of the increase in salevolume combining with the higher average prices ofboth PVC and Caustic Soda. In addition, the decreasein interest expenses also contributed to a betterperformance as well. Full capacity utilization helpedretaining a satisfactory gross margin rate of 28% thisyear comparing to a gross margin rate of 32% in 2002even though the major raw material average pricesharply increased by the yearend. In addition, the netprofit margin for 2003 also increased from 13.7% in 2002to 14.2%. Vinythai records show that an 871.3 MTHBprofit in 2003 could be regarded as the highest in theCompanyûs history in term of operating result excludingany unrealized foreign exchange gain or loss. In thisrespect we could conclude that, 2003 was an excellentyear for Vinythai following a good year in 2002.

An Analysis of Financial Status

Analysis of Assets

As of 31 December 2003, Vinythai had total assetsof 12,354 MTHB, an increase of 780 MTHB, or 6.7%, from2002. Descriptions of the Companyûs significant assetsand explanations for any important changes areprovided below:

(1) As of 31 December 2003, the Company hadcash and cash equivalents worth 69 MTHB,compared to 80 MTHB in 2002. The balance inthe Companyûs deposit account, reserved forservicing debentures, was 560 MTHB at end of2003. This amount was allotted to service thenext installments of debentures as required bythe debenture covenants.

(2) Account receivables were at 1,067 MTHB in2003, a slightly increase, comparing to 1,055MTHB in 2002 which was mainly due to theincrease in PVC sales volume and averagePVC sales prices. The continuously streamlined

credit control system helped control theoutstanding of account receivables. Noadditional allowance for doubtful accounts wasmade in 2003.

(3) Vinythaiûs net inventory at the end of 2003 was525 MTHB, a decrease from 652 MTHB of 2002.Major parts of the inventory comprised finishedgoods, spare parts and raw materials.

(4) By the end of 2003, Vinythaiûs investments inequity shareholdings of the two main rawmaterial suppliers were valued at 1,804 MTHB,an increase of 1,182 from the previous year.This significant increase was due to the changein investment evaluation from equity methodto mark to market in the share of one company,as it became listed in the Stock Exchange ofThailand during the year.

(5) Net property, plant and equipment at the endof 2003 were worth 8,193 MTHB, a decrease of300 MTHB, or 3.5%, from 2002. The decreasewas due mostly to the yearly depreciation ofthe machinery and equipment. New purchasesof fixed assets for the year 2003 were about 86MTHB.


Analysis of Liabilities

Vinythaiûs total liabilities at the end of 2003 amountedto 4,900 MTHB, a decrease of 1,269 MTHB, or 20.6%, from2002. Major part of the liabilities was the outstanding ofThai Baht debentures of 4,085 MTHB, inclusive of thecurrent portion to be due within one year. Theoutstanding debentures have decreased progressively,as the Company has paid regularly 1,362 MTHB peryear.

Analysis of Shareholdersû Equity

As of 31 December 2003, the shareholdersû equitywas 7,454 MTHB, an increase of 2,049 MTHB, or 37.9%,from the previous year. The increase in shareholdersûequity were from the following items:

ë Net profit for the year 2003 was at 871 MTHB.ë There was an unrealized gain in the value of

investment available for sale of 1,178 MTHB.

An Analysis of Cash FlowAs of 31 December 2003, the Companyûs Cash

Flow Statement showed 69 MTHB of cash and cashequivalents compared to the 80 MTHB of the previousyear. The sources and uses of funds were as follows:

(1) The net cash flow from operating activitiesincreased by 54 MTHB from 1,379 MTHB in 2002to 1,433 MTHB in 2003, equivalent to anincrease of 3.9%. This was due to the tighteningin the working capital management.

(2) The net cash payment for investing activities in2003 stood at 83 MTHB, compared to 50 MTHBin 2002. The purchase of new fixed assets in2003 amounted to 86 MTHB.

(3) The net cash payment for financing activitieswas 1,362 MTHB in 2003, compared to 1,375MTHB in 2002. The net payments made werefor the Companyûs biannual debenture install-ments.

ConclusionThe year 2003 should be regarded as another

excellent year for Vinythai as the Company was selfsufficient in generating cash from its operations to fulfillits debt repayment obligation without resorting toshort-term debt financing or to the Sponsorsû support.Even though there was a negative impact from the Iraqwar and the outbreak of SARS, the Company was ableto adjust its operating plans and could achieve anoutstanding outcome.

The excellent performance in 2003 led to a returnon equity of 13.6% comparing to 16.0% in 2002. Thereturn on equity rate was lower due to the booking ofan unrealized gain in the value of investment availablefor sale for the first time. The return on assets improvedto 7.3% from 6.8% of the previous year. The debt-to-equity ratio improved progressively from 1.14 in 2002 to0.66 at end of 2003, on the back of an improvingperformance, consistent debenture repayments and alsofrom the booking of an unrealized gain.

From the clear sign of recovery in the domesticeconomy together with the current up trend of theglobal PVC industry, the year 2004 looks promising foran opportunity for the Company to perform well again,despite an increasing trend of a main raw materialprice.


Total Quality Management (TQM)In the year 2003, Vinythai strengthened its Total

Quality Management Policy, drawn up in line with the

companyûs objectives and business targets, as follows:

ë To upgrade the quality management system to

ISO 9001:2000 by BVQI (Bureau Veritas Quality

International). Such an upgrade has also meant

that Vinythaiûs scope has been considerably

expanded, from the manufacture of not just

Chlor-Alkali, PVC, and Vinyl Chloride and Ethylene

Dichloride, but also of hydrogen, and PVC

research and development. As well as providing

greater customer assurance, the certification also

enables to upgrade existing quality and service

standards.

ë To achieve ISO/IEC 17025 laboratory management

accreditation for two PVC resin tests -

(1) determination of the viscosity index and

(2) determination of the residual VCM content

in PVC. Such accreditation marks another quality

milestone for Vinythai and yet further assurance

for customers of the companyûs quality standards.

Furthermore, the ability to determine the residual

VCM content in PVC is an important requirement

for customersû medical applications.

ë To achieve Halal status for the companyûs caustic

soda products by the Islamic Central Committee

of Thailand, to assure Muslims of the productsû

adherence to their religious requirements and

standards.

ë To conduct customer satisfaction surveys, both

in the domestic and export market, for effective

customer feedback. The results are used as

a basis for further improvement.

ë To review the companyûs 2003-2004 plan to enable

greater competitiveness in the current business

environment and to assure the achievement

of all planned business targets. This last item

involved all personnel from senior management

up, under the guidance of the Managing Director.

Innovation and SuggestionIn line with the Company policy and values, the

Innovation and Suggestion Committee 2003 actively

promoted further innovation. Highly successful, the new

initiative saw the ratio of innovation proposed per

person reach the all-time high of 2.6 in 2003. Underlining

the companyûs success in this field was the submission

of two Vinythai innovation projects for the Solvay Vinyls

Strategic Business Unit Innovation Award. Both of them

were winners, one of them a first prize winner and the

other a third prize one. The first prize award was also

selected as being one of the Best Innovations among

the whole Solvay Groupûs 133 innovations that year.

Total Quality Management and Innovation


Human Resource Management

In 2003, the Vinythai human resource managementpolicy reinforced the overall effectiveness of both theorganisation and employees. Strongly emphasised wasthe development of a flexible and dynamic organisationone that was highly responsive to the changingenvironment. Meanwhile, to enhance competitiveness,the skills and potential of employees were furtherdeveloped to increase the value of their contributions -for greater productivity and higher quality products.

Four important support projects were alsocompleted, these being:

Performance Management SystemCompetency was integrated into the companyûs

Performance Management programme, in order toimprove the organisationûs overall performance throughthe employees themselves.

All employees were given individual performancetargets, aligned with and in support of the companyûsvision, mission and strategy. These were followed upsystematically via performance evaluation practices, withtraining programmes put in place to improve anyweaknesses. The plan was to provide employees withskills and knowledge in various areas to prepare themfor greater responsibility. Finally, the performance resultswere linked with the companyûs Variable BonusCompensation System, to provide motivation and rewardsto high-performing employees.

Career Development PlanningVinythaiûs Career Development Planning Programme

was also introduced to develop the potential of employees,while preparing those showing promise for roles thatwould serve the future needs of the company. Such aprogramme is in line with the companyûs policy ofsupporting internal promotion.

When the programme was started in 2003,management positions were the first to be highlighted,with the potential of management personnel being

assessed against required competency. From there, atentative career development plan was drawn up,complete with the recommended areas of training anddevelopment for each individual.

Training and DevelopmentThe company conducted continuous annual

training and development activities to suit both thespecific potential of each individual and the organisationûsneeds for future growth.

The training and development activities consisted of :ë In-house training for all employees to strengthen

their core competencies.ë Specific public and overseas training to gain

technical knowledge and skills.ë Training by internal instructors to develop knowledge

sharing among the employees.

Employee Satisfaction SurveyAn Employee Satisfaction Survey was conducted

to measure the employeesû satisfaction with their workplace. It confirmed that the employees were satisfiedoverall with their working conditions and environment.

The results of the survey were used as a basis forthe companyûs human resource management andaction plan, to enhance employee motivation stillfurther.


12

9

6

3

0

10.6

3.6

1.50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1.2

253510.5894

25363.5624

25371.5352

25380

25390

25400

25410

25420

25430

25440

25451.2195

25460VNT

IFR1

(Cas

e/1,00

0,00

0 man

hours)

1992-2003 Accident Statistic of Vinythai

IFR1 (Injury Frequency Rate of Lost Worked Day Case in 1992-2003)

The Continuous Development for SustainableThe Continuous Development for SustainableThe Continuous Development for SustainableThe Continuous Development for SustainableThe Continuous Development for SustainableOccupational Health, Safety and Environment & SocietyOccupational Health, Safety and Environment & SocietyOccupational Health, Safety and Environment & SocietyOccupational Health, Safety and Environment & SocietyOccupational Health, Safety and Environment & SocietyContributions and Community RelationsContributions and Community RelationsContributions and Community RelationsContributions and Community RelationsContributions and Community Relations

In 2003, Vinythai was able to maintain a high safetyperformance without losing a single working daybecause of an accident.

Continuously maintaining and strengthening itsOccupational Health and Safety Management system,according to the world-acclaimed OHSAS 18001standard, Vinythai also ensured that ISO 14001environmental management standards were maintainedthroughout the company. Both systems are continuouslybeing implemented in a way that is in harmony with thecompanyûs staff, contractors and the surroundingcommunity. To verify Vinythaiûs performance in theareas of health, safety and the environment, thecompany underwent extensive surveillance audits everysix months, which were conducted by a certified body.In addition to this, the company also organised thefollowing activities to enhance its performance in 2003.

ë Organised Occupational Health and SafetyAwareness Refreshment training for all staff.

ë Promoted and encouraged the application ofthe Fault Tree Analysis Technique to find the rootcause of any significant accidents or incidents.

ë Launched the safety behaviour campaign viatwo different programmes: Task Observation and

in the Rayong Provincial and Chlor-Alkali Emer-gency Mutual Aid Group (CATEMAG) emergencydrills.

ë In line with the companyûs commitment toResponsible Care˙, and with the collaboration ofthe transporters, the company officially adoptedthe recently established Code of ManagementPractice on çDistributioné and çSafety and QualityAssessment System (SQAS)é. This was to improvesafety and environmental performance for goodstransportation.

ë Implemented the European Pollutant EmissionRegister (EPER) in order to evaluate with greateraccuracy the companyûs environmental perfor-mance. This was also in line with the companyûscommitment to continuous improvement.

ë Followed the requirements of the European Councilof Vinyl Manufacturers (ECVM) and the Euro Chlorin order to enhance the companyûs environmentalperformance still further.

Vinythaiûs Sustainable Development

Safety Volunteer. Aimed at continuously reducingthe risk of accidents, these also improved thesafety behaviour of both company staff andcontractors.

ë Regularly performed emergency and crisis commu-nication drills at different levels, sometimes withexternal support. The company also participated


Product Stewardship : Responsibilitythroughout the product lifecycle

As one of the key component in Responsible Care˙

initiative, Product Stewardship is one of our program toshow the concept of producers taking responsibility forthe environmental impacts of their products, health andsafety throughout their lifecycle not only manufacturingstage, but also when its products are transported, stored,used, recycled or disposed of whether by distributors,processors or customers.

In 2003, Vinythai had played a key role to theCATEMAG - Chlor Alkali Products Transportation Emer-gency Mutual Aid Group activities including being anactive member, promoting the activity for HazardoursTransportation Response Plan Practice at the provinciallevel in alliance with the Chlor-Alkali manufacturers,transporters and authorities in November. Togetherwith other PVC producers in the Asia Pacific Region,Vinythai hosted the Environment meeting in Bangkokfor Asia Pacific Vinyl Network (APVN) to exchangethe environment information and program for PVCsustainable development in August. We were alsocontributing to the 2003 activities and performance ofFederation of Thai Industry (FTI) for Petrochemical club,Chemical club and Plastic club, Petroleum Institute ofThailand (PTIT), Map Ta Phut Public Relations Club (MPR),Rayong Environmental and Safety ManagementAssociation (RESA), I-3A Group, and EmergencyResponse Mutual Aid Group (EMAG).

Social ContributionsVinythai is wholly committed to conducting its

business hand in hand with the sustainable developmentof the environment, society and its neighbouringcommunities. As an extension of this commitment, it alsostrives to keep people living in the immediate vicinityinformed about any PVC and Caustic Soda issues. Thecompany is happy, as a responsible corporate citizen,to promote and support activities for the mutual benefitof others in society and in the surrounding communities.Vinythaiûs list of social contributions include:Educational Activities

ë A knowledge centre, open for students fromvarious educational institutions and for officialsfrom government offices and private agencies

throughout the country. Visitors to this facility canlearn about the PVC and Caustic Soda productionprocesses and the company environmentalmanagement programme. Vinythai also servesas a training site for students seeking moreexperience in the petrochemical field.

ë Educational support, by providing scholarships forneedy students and donating school materials.

Children and Youth Activitiesë The company is a sponsor of National ChildrenûsDay, supporting a total of 18 schools and thelocal government offices in the province ofRayong. Vinythai also shows its care for childrenûshealth in the community and helps promoteexercise-related activities for youth during theirfree time via the donation of sports equipmentfor communities and schools.

ë In cooperation with the Map Ta Phut PublicRelations Club (MPR), Vinythai organised thethird annual youth camp for çdeveloping leadershipamong childrené, to promote good leadershipskills amongst young volunteers and greaterenvironmental awareness for the good of theircommunities.

Religious Activitiesë The company sponsors various religious activities,and jointly organised, with Rayong Province andMap Ta Phut Industrial Estate Office (MTP-IEAT),the Annual Robes-Presentation 2003 at Sophon-Wanaram Temple, Tambol Map Ta Phut, in Rayong.

ë Also as a part of its religious activity programme,the company donated garbage bins for wasteselection and segregation to many temples inthe Map Ta Phut municipality area, with the aimto promote recycling and minimise waste.


Environmental Activitiesë Vinythai is a founder of the Marine ScienceActivity and Conservation Foundation and thesole supporter of the çStaghorn Coral Cultivation,using PVC Pipes to Rehabilitate the Thai Seaéproject, which focuses on the conservation ofthe coral reef in Tambol Samaesarn, AmphurSattahip, in Chonburi. The company and founda-tion organised a press conference to mark thekick-off ceremony on 13 November 2003, at PlazaAthenee Hotel, Bangkok.

ë Also for the environment, Vinythai organised forthe second consecutive year, with the Map TaPhut Municipality and local communities, its beachcleaning and tree planting campaign to markHis Majesty the Kingûs Birthday on 5 December.The project was named çBeautiful Beach...Vinythaicares for the Environmenté and was held atSuchada Beach, Tambol Map Ta Phut, in Rayong.

Other Activitiesë Vinythai launched three projects with the aim toopen up dialogue with neighbouring communitiesand the local media by giving them the opportunityto meet with the companyûs management, tolearn about and better understand the company,for improved cooperation in the future.These projects were:

Mini Open House for CommunitiesManagement meets Local MediaTeaching Action to Communities (housewives)in the Map Ta Phut area

ë Other activities sponsored by the companyfor various government agencies and neighbouringcommunities, included:

A Football Competition as part of theAnti-Drug Campaign in the Muslim Mapyacommunity,The Lionsû Bowling Event in Rayong, MapTa Phut Muang Mai,A Seminar on çTerrorist prevention andinstability in the industrial areaé, co-organisedwith Rayong Province, Rayong Environmentaland Safety Management Association (RESA),and the Map Ta Phut Industrial Estate Office.

The Eastern Expo 2003 at Star Plaza Hotel,Rayong.

ë In line with its commitment to help improvethe quality of life of the people of Rayong,the company provided support , on thecompanyûs Safety, Occupational Health andEnvironment Day in October 2003, to the MapTa Phut & Amphur Muang Rayong womenûsvocational groups, especially for the OneTambol One Product (OTOP) project - agovernment initiative to help develop distinctivelocal products.

ë In cooperation with the Map Ta Phut PublicRelations Club (MPR), Vinythai also organisedthe MPR Crisis Management Mutual Aid GroupMemorandum of Understanding.

ë Vinythai sponsored 18 signs of indicating theresponsible areas and the directions for Huay-Pong Police Station, Rayong.

Moreover, Vinythai, in cooperation with the RayongEnvironmental and Safety Management Association(RESA), Emergency Mutual Aid Group (EMAG),Chlor-Alkai Transportation Emergency Mutual Aid Group(CATEMAG), I-3A Road Group, and Map Ta Phut PublicRelations Club (MPR), participated in emergencyresponse drills at both the provincial and local industrialestate level as part of the Crisis Management MutualAid for Public Relations plan. Vinythai is fully dedicatedto taking all necessary action to protect its surroundingcommunities and share experience among members toensure maximum benefits for both the society andcommunity.

ANNUAL REPORT 200344

Auditor Report andFinancial Statements31 December 2003 and 2002


I have audited the balance sheets of Vinythai

Public Company Limited as at 31 December 2003 and

2002, and the related statements of earnings, changes

in shareholdersû equity and cash flows for the years then

ended. These financial statements are the responsibility

of the Companyûs management as to their correctness

and completeness of the presentation. My responsibility

is to express an opinion on these financial statements

based on my audits.

I conducted my audits in accordance with

generally accepted auditing standards. Those standards

require that I plan and perform the audits to obtain

reasonable assurance about whether the financial

statements are free of material misstatement. An audit

Report of Independent Auditor

includes examining, on a test basis, evidence supporting

the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting

principles used and significant estimates made by

management, as well as evaluating the overall financial

statement presentation. I believe that my audits provide

a reasonable basis for my opinion.

In my opinion, the financial statements referred

to above present fairly, in all material respects, the

financial position of Vinythai Public Company Limited as

at 31 December 2003 and 2002, and the results of its

operations and cash flows for the years then ended in

accordance with generally accepted accounting

principles.

Narong Puntawong

Certified Public Accountant (Thailand) No.3315

Ernst & Young Office Limited

Bangkok: 23 January 2004

To The Board of Directors and Shareholders ofVinythai Public Company Limited


FINANCIAL STATEMENTS

The accompanying notes are an integral part of the financial statements.

BALANCE SHEETSVINYTHAI PUBLIC COMPANY LIMITED

AS AT 31 DECEMBER 2003 AND 2002

(Unit : Baht)

Note 20032003200320032003 2002

ASSETS

CURRENT ASSETS

Cash and cash equivalents 68,534,665 80,376,513

Deposit reserved for servicing bonds 3 559,823,469 558,975,355

Accounts receivable - trade

Unrelated parties 964,363,939 911,112,765

Related parties 5 163,987,716 204,952,220

Less : Allowance for doubtful accounts (61,500,000) (61,500,000)

Accounts receivable - trade, net 4 1,066,851,655 1,054,564,985

Amounts due from related parties 5 2,201,064 3,741,413

Inventories - net 6 525,291,766 651,803,970

Other current assets

Prepayments 47,721,330 8,817,567

Value added tax refundable 20,491,635 13,369,186

Others 4,605,800 7,168,956

Total other current assets 72,818,765 29,355,709

TOTAL CURRENT ASSETS 2,295,521,384 2,378,817,945

NON - CURRENT ASSETS

Investment accounted for under equity method 7 176,868,041 173,242,981

Investment in available-for-sale securities 8 1,626,721,288 448,750,700

Property, plant and equipment - net 9 8,192,586,734 8,492,401,712

Deferred underwriting and arrangement

fee for bonds 51,851,154 71,381,535

Other non-current assets 10,008,375 8,906,834

TOTAL NON - CURRENT ASSETS 10,058,035,592 9,194,683,762

TOTAL ASSETS 12,353,556,976 11,573,501,707



BALANCE SHEETS (Continued)VINYTHAI PUBLIC COMPANY LIMITED

AS AT 31 DECEMBER 2003 AND 2002

(Unit : Baht)

Note 2003 2002

LIABILITIES AND SHAREHOLDERSû EQUITYCURRENT LIABILITIESAccounts payable - trade

Unrelated parties 197,664,317 175,953,292 Related parties 5 218,856,258 145,375,888

Total accounts payable - trade 416,520,575 321,329,180 Current portion of bonds 10 1,361,600,000 1,361,600,000 Amounts due to related parties 5 82,123,979 24,175,496

Other current liabilitiesAccrued interest expenses 82,367,474 133,697,929Accrued expenses 68,501,267 80,866,107Others 111,756,360 105,354,397

Total other current liabilities 262,625,101 319,918,433TOTAL CURRENT LIABILITIES 2,122,869,655 2,027,023,109NON - CURRENT LIABILITIESBonds - net of current portion 10 2,723,200,000 4,084,800,000Other liabilities 11 53,458,994 56,884,722

TOTAL NON - CURRENT LIABILITIES 2,776,658,994 4,141,684,722TOTAL LIABILITIES 4,899,528,649 6,168,707,831SHAREHOLDERSû EQUITYShare capital 12

Registered 932,297,199 ordinary shares of Baht 6 each (2002 : 932,297,199 ordinary shares of Baht 10 each) 5,593,783,194 9,322,971,990Issued and fully paid 903,010,187 ordinary shares of Baht 6 each (2002 : 903,010,187 ordinary shares of Baht 10 each) 5,418,061,122 9,030,101,870

Share premium 12 - 1,125,000,000Unrealised gain on changes in the value of investment in available-for-sale securities 8 1,177,970,588 -

Retained earnings (deficit)Appropriated - statutory reserve 13 42,899,831 -Unappropriated 815,096,786 (4,750,307,994)

TOTAL SHAREHOLDERSû EQUITY 7,454,028,327 5,404,793,876TOTAL LIABILITIES AND SHAREHOLDERSû EQUITY 12,353,556,976 11,573,501,707



STATEMENTS OF EARNINGSVINYTHAI PUBLIC COMPANY LIMITED

FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002

(Unit : Baht)

Note 2003 2002

REVENUES

Sales 6,129,673,306 5,844,842,114

Exchange gain 9,811,892 6,882,644

Interest income 1,812,095 3,324,006

Other income 22,527,691 15,694,240

Share of profit from investment accounted

for under equity method 3,625,060 3,528,758

TOTAL REVENUES 6,167,450,044 5,874,271,762

EXPENSES

Cost of sales 4,389,792,617 3,983,948,288

Selling and administrative expenses 599,304,120 609,726,782

Loss on disposal of fixed assets 534,432 22,146,010

Directorsû remuneration 14 5,590,000 5,760,000

TOTAL EXPENSES 4,995,221,169 4,621,581,080

EARNINGS BEFORE INTEREST 1,172,228,875 1,252,690,682

INTEREST EXPENSES (300,965,012) (450,951,028)

NET EARNINGS FOR THE YEAR 871,263,863 801,739,654

BASIC EARNINGS PER SHARE

Net earnings 0.96 0.89



STATEMENTS OF CHANGES IN SHAREHOLDERSû EQUITYVINYTHAI PUBLIC COMPANY LIMITED


(Unit : Baht)

Unrealised gain

on changes in

Issued and Premium the value of Retained earnings (deficit) Total

paid - up on investment Statutory Unappropriated

Note share share capital in available- reserve

capital for-sale

securities

Balance-beginning of 2002 9,030,101,870 1,125,000,000 - - (5,552,047,648) 4,603,054,222

Net earnings for the year - - - - 801,739,654 801,739,654

Balance-end of 2002 9,030,101,870 1,125,000,000 - - (4,750,307,994) 5,404,793,876

Reduction of share capital

to offset accumulated

deficit 12 (3,612,040,748) - - - 3,612,040,748 -

Transfer of share premium

to offset accumulated

deficit 12 - (1,125,000,000) - - 1,125,000,000 -

Increase in fair value

of investment 8 - - 1,177,970,588 - - 1,177,970,588

Statutory reserve 13 - - - 42,899,831 (42,899,831) -

Net earning for the year - - - - 871,263,863 871,263,863

Balance-end of 2003 5,418,061,122 - 1,177,970,588 42,899,831 815,096,786 7,454,028,327


STATEMENTS OF CASH FLOWSVINYTHAI PUBLIC COMPANY LIMITED


(Unit : Baht)

20032003200320032003 2002

Cash flows from (used in) operating activities

Net earnings 871,263,863 801,739,654

Adjustments to reconcile net earnings to

net cash provided by (paid from) operating activities :-

Depreciation 394,063,271 389,981,429

Amortisation of prepaid royalty - 50,806,451

Provision for obsolete inventories (597,191) 11,714,415

Allowance for unused fixed assets - 25,051,273

Amortisation of underwriting and

arrangement fee for bonds 19,530,381 19,530,381

Share of profit from investment accounted for

under equity method (3,625,060) (3,528,758)

Loss on disposal of fixed assets 534,432 22,146,010

1,281,169,696 1,317,440,855

Decrease (increase) in operating assets :-

Accounts receivable - Unrelated parties (53,251,174)(53,251,174)(53,251,174)(53,251,174)(53,251,174) 86,842,494

Accounts receivable - Related parties 40,964,50440,964,50440,964,50440,964,50440,964,504 (36,669,123)

Amounts due from related parties 1,540,349 (2,989,752)

Inventories 113,802,848 (4,866,094)

Other current assets (43,463,056) 38,675,019

Increase (decrease) in operating liabilities :-

Accounts payable - Unrelated parties 21,711,025 (22,047,373)

Accounts payable - Related parties 73,480,370 (11,887,072)

Amounts due to related parties 57,948,483 7,618,693

Other current liabilities (57,293,332) (306,942)

Other liabilities (3,425,728) 6,996,624

Net cash flows from operating activities 1,433,183,985 1,378,807,329




STATEMENTS OF CASH FLOWS (Continued)VINYTHAI PUBLIC COMPANY LIMITED

FOR THE YEARS ENDED 31 ECEMBER 2003 AND 2002

(Unit : Baht)

Note 20032003200320032003 2002

Cash flow from (used in) investing activitiesCash flow from (used in) investing activitiesCash flow from (used in) investing activitiesCash flow from (used in) investing activitiesCash flow from (used in) investing activities

Acquisition of fixed asset (86,105,208) (57,828,061)

Proceeds from sales of fixed assets 4,629,030 5,647,777

Decrease (increase) in other non-current assets (1,101,541) 1,849,773

Net cash flows used in investing activities (82,577,719) (50,330,511)

Cash flows from (used in) financing activitiesCash flows from (used in) financing activitiesCash flows from (used in) financing activitiesCash flows from (used in) financing activitiesCash flows from (used in) financing activities

Net incease in deposit reserved for servicing bonds (848,114) (13,828,924)

Repayment of bonds (1,361,600,000) (1,361,600,000)

Net cash flows used in financing activities (1,362,448,114) (1,375,428,924)

Net decrease in cash and cash equivalents (11,841,848) (46,952,106)

Cash and cash equivalents at beginning of year 80,376,513 127,328,619

Cash and cash equivalents at end of year 15 68,534,665 80,376,513

Supplemental cash flow information :-

Cash paid during the year for

Interest expenses 352,295,467 502,281,482


NOTE TO FINANCIAL STATEMENTS

VINYTHAI PUBLIC COMPANY LIMITED1. GENERAL INFORMATION

Vinythai Public Company Limited was incorporated as a public limited company under Thai laws. The Company

operates its business in Thailand and its principal activity is the manufacture and trading of Polyvinyl Chloride

and Sodium Hydroxide (caustic soda). Its registered address is No. 2, I-3 Road, Tambol Map Ta Phut, Amphur

Muang, Rayong.

2. SIGNIFICANT ACCOUNTING POLICIESThe financial statements have been prepared in accordance with accounting standards pronounced by the

Institute of Certified Accountants and Auditors of Thailand which are effective under the Accounting Act B.E.

2543.

Significant accounting policies adopted by the Company are summarised below.

2.1 Sales

Sales are the invoiced value, excluding value added tax, of goods supplied and delivered, after deducting

discounts and allowances.

2.2 Allowance for doubtful accounts

Allowance for doubtful accounts is provided for the estimated collection losses that may be incurred in

collection of receivables. The allowance is based on collection experience and a review of the status of

receivables outstanding at the balance sheet date.

2.3 Inventories

Inventories are valued at the lower of cost (weighted average method) or net realisable value.

2.4 Investment

Investment in associated company is stated under equity method.

Investment in available-for-sale securities is stated at fair value, which is based on the latest bid price of the

last working day quoted by the Stock Exchange of Thailand. Any gains or losses from the changes in the

fair value of the investment are shown as a separate item under the shareholdersû equity in the balance

sheet and will be credited or charged to earnings when the investments have been disposed of.

2.5 Depreciation

Depreciation of fixed assets is calculated by reference to their costs on the straight-line method over the

following estimated useful lives :-

Building and improvement - 5, 10, 30, 50 years

Leasehold improvement - 50 years

Machinery and equipment - 5, 10, 15, 30 years

Furniture, fixtures and equipment - 5, 10, 30 years

Vehicles - 5, 10 years

No depreciation is provided for land and machinery under installation.


2.6 Foreign currencies

Exchange rates adopted for foreign currency transactions during the year are the rates ruling on the

transaction date. For assets and liabilities in foreign currency outstanding on the balance sheet date are

translated at the rates ruling on the balance sheet date.

Exchange gains and losses are included in determining earnings.

2.7 Basic earnings per share

Earnings per share as presented in the earnings statements is the basic earnings per share which is

determined by dividing net earnings for the year by the number of ordinary shares in issue during the year.

2.8 Use of accounting estimates

Preparation of financial statements in conformity with generally accepted accounting principles requires

management to make estimates for certain accounting transactions, affecting amounts reported in the

financial statements and notes related thereto. Subsequent actual results may differ from these estimates.

3. DEPOSIT RESERVED FOR SERVICING BONDSAs of 31 December 2003, the balance of cash at bank of Baht 560 million (2002 : Baht 559 million) was reserved

for servicing bonds.

In connection with the issuance of the bonds as referred to in Note 10, the Company is required to maintain

a debt service reserve account with the bondholdersû representative. On a monthly basis (except in the month

in which the bonds are to be redeemed), the Company is to deposit an amount at least one fifth of the bond

principal due for redemption under the next installment. This is to ensure that on the last day of the month prior

to the month in which the bonds are to be redeemed, the Company will have sufficient cash for the

repayment of the principal amount due and payable to the bondholders.

4. ACCOUNTS RECEIVABLE - TRADEAs at 31 December 2003 and 2002, aging of the outstanding balance of accounts receivable was as follows :-

(Unit : Baht)

Accounts Receivable

Unrelated Parties Related Parties Total

2003 2002 2003 2002 2003 2002

Current receivables 810,452,894 753,443,027 163,987,716 184,224,726 974,440,610 937,667,753

Past due receivables

Less than 3 months 81,725,643 82,661,371 - 20,727,494 81,725,643 103,388,865

3 - 6 months 3,228,442 - - - 3,228,442 -

6 - 12 months - - - - - -

More than 12 months 68,956,960 75,008,367 - - 68,956,960 75,008,367

Total 964,363,939 911,112,765 163,987,716 204,952,220 1,128,351,655 1,116,064,985

Less : Allowance for doubtful accounts (61,500,000) (61,500,000)

Accounts receivable - trade, net 1,066,851,655 1,054,564,985


The balance of accounts receivable-unrelated parties included the debt due from one local company whichhas applied to the Central Bankruptcy Court for business rehabilitation. As at 31 December 2003, the balanceof such debt is approximately Baht 57 million. Based on the information contained in the Rehabilitation Plan,which has already been approved by the majority of the creditors on 19 March 2002 and approved by theCentral Bankruptcy Court on 25 April 2002, the Companyûs management has set aside a provision ofapproximately Baht 48 million against this debt.

5. RELATED PARTY TRANSACTIONSDuring the year, the Company had significant business transactions with its associated and related companies(related by way of holding interest, common shareholders and/or common directors). These transactions werein the ordinary course of business of the Company and in accordance with prices and rates stipulated in therelevant agreements with those companies. Significant transactions with those related companies are summarisedbelow.

(Unit : Million Baht)For the years ended 31 December Pricing policy

2003 20021. Sales of finished productsRelated companies :Charoen Pokphand Petrochemical Co., Ltd. and Charoen Pokphand Group companies 756 769 Market pricesSolvay S.A. and Solvay Group companies 73 94 Market pricesPeroxythai Co., Ltd. 37 29 Market pricesThai Olefins Public Company Limited 9 8 Market prices2. Others incomeRelated companies :Peroxythai Co., Ltd. 3 2 Market pricesSolvay S.A. and Solvay Group companies 7 1 Market prices3. Purchase of raw materialsAssociated company :Pimai Salt Co., Ltd. 181 187 Contract prices of salt which

approximate production costs.Related company :Thai Olefins Public Company Limited 1,991 1,705 Average of Ethylene market

prices in major regions worldwide.4. Purchase of spare parts, services expenses and othersRelated companies :Solvay S.A. and Solvay Group companies 12 22 Market pricesPeroxythai Co., Ltd. 1 1 Market prices5. Royalty expensesRelated company :Solvay S.A. 57 74 Accrued at the rate applicable

in the former agreement.6. Commission expensesRelated companies :Solvay S.A. and Solvay Group companies 4 5 Normal market rates


The outstanding balances of the transactions are shown separately as related parties items in the balance

sheets.

Under the former license and on-going know-how agreements with Solvay S.A., the Company had to pay

royalties on a basis and at a rate stipulated therein. During the year 2000, the Company made advance

payment of such royalties covering the period as from January 2000 up to July 2002, totaling Baht 225 million

to the related company. Such on-going know-how agreement expired in July 2002. However, for accounting

purposes, the royalty for the on-going know-how has been accrued in the accounts in subsequent months using

the rate applicable in the former agreement. The Company and the related company are currently in the

process of negotiating a new agreement under fair and reasonable terms. Since entry into a new agreement

needs to comply with the rules regarding connected transactions issued by the Stock Exchange of Thailand and

needs the approval of the Companyûs Board of Directors, the actual amount of the royalty payable in future

may differ from that accrued in the accounts.

6. INVENTORIES (Unit : Baht)

2003 2002

Finished goods 155,286,913 212,208,977

Spare parts 214,369,629 245,865,082

Raw materials 158,835,314 196,198,675

Work in process 9,504,613 10,561,704

Packing materials 8,295,297 8,969,532

Total 546,291,766 673,803,970

Less : Provision for obsolete inventories (21,000,000) (22,000,000)

Inventories - net 525,291,766 651,803,970

7. INVESTMENT ACCOUNTED FOR UNDER EQUITY METHODThis represents an investment in Pimai Salt Company Limited, a 20.44% owned associated company.

As at 31 December

2003 2002Baht Baht

Investment - at cost 203,221,440 203,221,440

Accumulated share of loss in

associated company (26,353,399) (29,978,459)

Investment in associated

company - equity method 176,868,041 173,242,981

The Company recognised its share of profit and loss from investment in the associated company based on the

financial statements as of 31 December 2003, as received from that associate. Those financial statements were

prepared by the management of that associate and are currently in the process of being audited by another

auditor. The Companyûs management believes that the audited financial statements will not materially differ

from the aforesaid financial statements.


8. INVESTMENT IN AVAILABLE-FOR-SALE SECURITIESThis represents an investment in 22,437,535 ordinary shares in Thai Olefins Public Company Limited. Since the

shares were listed on the Stock Exchange of Thailand in November 2003, the investment has now been classified

as an investment in available-for-sale securities carried at fair value, which is based on the latest bid price of

the last working day quoted by the Stock Exchange of Thailand (Baht 72.5 per share) (2002 : the investment was

classified as other long-term investment).

Baht

Investment - at cost 448,750,700

Add : Unrealised gain from changes in the fair value of investment 1,177,970,588

Investment - at fair value 1,626,721,288

9. PROPERTY, PLANT AND EQUIPMENT(Unit : Baht)

Building and Machinery Furniture, Machinery

leasehold and fixtures and under

Land improvement equipment equipment Vehicles installation Total

CostCostCostCostCost : : : : :

31 December 2002 2,909,414 1,738,216,330 9,290,201,866 382,550,287 7,124,581 22,004,815 11,443,007,293

Purchases - - - - - 86,105,208 86,105,208

Transferred from spare parts - - 13,306,547 - - - 13,306,547

Transferred in (out) - 9,213,373 15,423,666 3,031,503 - (27,668,542) -

Disposal / write-off - (13,417,717) (7,389,072) (23,568,458) (419,866) - (44,795,113)

31 December 2003 2,909,414 1,734,011,986 9,311,543,007 362,013,332 6,704,715 80,441,481 11,497,623,935

AccumulatedAccumulatedAccumulatedAccumulatedAccumulated

depreciationdepreciationdepreciationdepreciationdepreciation : : : : :

31 December 2002 - 309,736,598 2,436,134,500 197,730,223 7,004,260 - 2,950,605,581

Depreciation for the year - 34,782,311 326,044,702 33,193,373 42,885 - 394,063,271

Depreciation for disposal/ -

write-off items - (13,417,709) (2,346,821) (23,449,533) (417,588) - (39,631,651)

31 December 2003 - 331,101,200 2,759,832,381 207,474,063 6,629,557 - 3,305,037,201

Net book valueNet book valueNet book valueNet book valueNet book value : : : : :

31 December 2002 2,909,414 1,428,479,732 6,854,067,366 184,820,064 120,321 22,004,815 8,492,401,712

31 December 2003 2,909,414 1,402,910,786 6,551,710,626 154,539,269 75,158 80,441,481 8,192,586,734

Depreciation charge

(included in earnings

statement) for the year :

2002 389,981,429

2003 394,063,271

The Company has mortgaged its land, office building, factory buildings, machinery and equipment as security

with the bondholdersû representative.


10. BONDSOn 26 February 2001, the Company issued Baht 7,400 million of five-and-a-half-year bonds (7,400,000 units with

a par value of Baht 1,000 each) maturing on 26 August 2006 to institutional investors or investors meeting

specific criteria. Principal and interest are repayable twice a year, on 26 February and 26 August, with the

interest rates as follows :-

Period Interest Rate (% per annum)

1st - 6th months from date of bond issuance 8.5

7th - 18th months from date of bond issuance 7.75

19th month until maturity date MLR of Bangkok Bank Public Company Limited

Under the conditions of the bond issuance, the Company has to comply with certain obligations stipulated in

the rights and obligations of the Company and the bondholders. Among others, these include the maintenance

of a debt to equity ratio of not more than 2 : 1 and that the Company will not implement any reduction in

its paid-up capital unless such reduction is authorized by a resolution of a meeting of the bondholders. In

addition, any dividend payment is not to exceed 40 percent of the net profit of the Company unless approval

has been granted by a meeting of the bondholders. As at 31 December 2003, the Company had a debt to

equity ratio of 0.66 : 1 (31 December 2002 : 1.14 : 1), which did not exceed the required ratio.

In addition, the two major shareholders have entered into a Shareholdersû Support Agreement to provide cash

deficiency support in servicing debt in the amount not exceeding Baht 800 million as security for the bondholders.

The Company has mortgaged its fixed assets and pledged its debt service reserve account with the bondholdersû

representative.

By a resolution of the bondholdersû meeting passed on 9 July 2003, the Company was given consent to reduce

its paid-up capital in order to offset its deficit, so that it would be in a position to legally pay dividends to its

shareholders. However, such consent is granted on the condition that the Company not pay a cash dividend

until redemption of the bonds is complete.

11. PROVISION FOR LONG-TERM EMPLOYMENT BENEFITS AND PROVIDENT FUNDFrom 1 January 1994, the Company provided a long-term employment fund scheme for its employees with five

years or more of continuous service. Under the scheme, an employee was entitled to receive upon retirement

or resignation, a sum computed in accordance with the rules of the scheme. Effective 31 January 2003, the

Company canceled this scheme. However, the Company will maintain any accumulated benefits and

employees will still be entitled to receive these upon retirement or resignation. The outstanding balance of the

provision made by the Company for these long-term employment benefits as at 31 December 2003 was

approximately Baht 53.5 million (2002 : Baht 56.9 million), and this is included in çOther liabilitiesé in the balance

sheets.


On 1 February 2003, the Company and its employees jointly established a provident fund scheme under the

Provident Fund Act B.E. 2530, to replace the long-term employment fund scheme and provide benefits to

employees upon retirement or resignation. The fund comprises monthly contributions from both the employees

and the Company. The contributions made by the Company this year and recorded as expenses amounted

to Baht 9 million.

12. SHARE CAPITALResolutions of the Extraordinary General Meeting of Shareholders passed on 4 September 2003 authorised the

Company to utilize the share premium, amounting to Baht 1,125,000,000, to reduce the deficit, which as at 31

December 2002 amounted to Baht 4,750,307,994, and approved the reduction of the Companyûs registered

capital from Baht 9,322,971,990 to Baht 5,593,783,194 and the reduction of the paid-up capital from Baht

9,030,101,870 to Baht 5,418,061,122, by reducing the par value of the shares from Baht 10 each to Baht 6 each.

In addition, the Extraordinary General Meeting authorized the transfer of the Baht 3,612,040,748 reduction in

paid-up capital to reduce the deficit remaining after deduction of share premium. The number of the

Companyûs shares comprising registered capital and paid-up capital remained at 932,297,199 shares and

903,010,187 shares, respectively.

The Company has effected the above-mentioned resolutions in the current year.

13. STATUTORY RESERVEUnder the Public Limited Companies Act B.E. 2535, the Company is required to set aside as a statutory reserve

at least 5 percent of its net profit, after deducting accumulated deficit brought forward (if any), until the

reserve reaches 10 percent of its registered share capital. The statutory reserve could not use for dividend

payment.

14. DIRECTORSû REMUNERATIONDirectorsû remuneration represents the benefits paid to the Company directors in accordance with Section 90

of the Public Limited Companies Act, exclusive of salaries and related benefits payable to the managing

director who is one of the executive directors.

15. STATEMENTS OF CASH FLOWSFor the purposes of the statements of cash flows, cash and cash equivalents include cash in hand and at banks

and deposit with financial institution with an original maturity of 3 months or less and without restrictions.

16. FINANCIAL INFORMATION BY SEGMENTThe Companyûs operations comprise the manufacturing and distribution of PVC and related by-products for

both domestic and export markets. In 2003, the export sales represented approximately 35.0 percent (2002 :

30.6 percent) of total sales. The Companyûs operations involve a single industry segment and are carried out

from a single geographic area in Thailand.


17. PROMOTIONAL PRIVILEGESThe Company was granted the tax privileges under the Investment Promotion Act B.E. 2520, approved by the

Board of Investment in accordance with the following two investment promotion certificates :-

Investment promotion certificate No. 1051/2532, dated 28 March 1989, for the manufacture of PVC and VCM.

Subject to certain imposed conditions, the privileges include exemption of corporate income tax on net profit

for a period of seven years commencing as from 1 August 1992 (the first date of earning operating income)

and ending on 31 July 1999. Profits derived thereafter from the promoted activity shall be subject to income tax

at a reduced rate of fifty percent of the normal tax rate for another five years after expiration of corporate

income tax exemption period.

Investment promotion certificate No. 1579/2541, dated 21 December 1998, for the manufacture of certain

additional volumes of PVC and VCM, and caustic soda. Subject to certain imposed conditions, the privileges

include exemption of corporate income tax on net profit for a period of eight years commencing as from 1

June 2002 (the first date of earning operating income under this investment promotion certificate) and ending

on 31 May 2010. Profits derived thereafter from the promoted activity shall be subject to income tax at a

reduced rate of fifty percent of the normal tax rate for another five years after expiration of corporate income

tax exemption period.

Total revenues for the year 2003 and 2002 is divided into promoted and non-promoted revenue as follows :-

(Unit : Baht)

Promoted Non-promoted Total

2003 2002 2003 2002 2003 2002

REVENUESREVENUESREVENUESREVENUESREVENUES

Sales 5,373,988,453 4,884,118,828 755,684,853 960,723,286 6,129,673,306 5,844,842,114

Exchange gain 8,602,252 5,751,336 1,209,640 1,131,308 9,811,892 6,882,644

Interest income 1,555,455 838,228 256,640 2,485,778 1,812,095 3,324,006

Other income 21,789,319 14,378,843 738,372 1,315,397 22,527,691 15,694,240

Share of profit

from investment

accounted for

under equity

method 3,178,152 2,948,732 446,908 580,026 3,625,060 3,528,758

TOTAL REVENUESTOTAL REVENUESTOTAL REVENUESTOTAL REVENUESTOTAL REVENUES 5,409,113,631 4,908,035,967 758,336,413 966,235,795 6,167,450,044 5,874,271,762

18. EMPLOYEES AND RELATED COSTS

2003 2002

Number of employees at end of year (Persons) 385 402

Employee costs (Thousand Baht) 266,563 269,595


19. LEASE AND RENTAL COMMITMENTSAs at 31 December 2003, the Company had the following outstanding lease and rental commitments:-

a) Lease commitments in respect of land for its plant for a period of 30 years as from 15 June 1989 to 14 June

2019. The outstanding balances of rental commitments are approximately Baht 124.9 million.

b) Commitments in respect of motor vehicle operating leases amounted to approximately Baht 15.8 million

which are repayable within the year 2007.

c) Other lease and rental commitments payable in the future are as follows :-

(Unit : Million Baht)

2003 2002

Payable within 1 year 38.5 34.1

Payable between 2 - 4 years 34.8 62.0

73.3 96.1

20. OTHER COMMITMENTSThe Company had the following other outstanding commitments:-

a) The Company has entered into an agreement to purchase raw materials from a related local company.

The Company agrees to purchase raw materials at the quantity and price stipulated in the agreement.

b) The Company has entered into an agreement with an associated company to purchase raw materials

produced by this associated company at the quantity and at the price stipulated in the relevant joint

venture agreement.

21. BANK GUARANTEESAs at 31 December 2003, there were outstanding bank guarantees and standby letters of credit totaling Baht

188 million (2002 : Baht 248 million) issued by banks on behalf of the Company, mostly to secure the

commitments arising from the purchase of raw materials from a related company.

22. FINANCIAL INSTRUMENTSFinancial risk management and policies

The Company is exposed to risks from changes in market interest rates and in currency exchange rate and from

nonperformance of contractual obligations by counterparties. The Company uses derivative instruments, as and

when it considers appropriate, to manage such risks. It does not hold or issue derivative instruments for

speculative or trading purposes.

Interest rate risk

The interest rate risk is the risk that future movements in market interest rates will affect the results of the

Companyûs operations and its cash flows. The Companyûs exposure to interest rate risk relates primarily to its

deposits with financial institutions and bonds. The details of bonds were described in Note 10 to financial

statements.

Foreign currency risk

The Companyûs exposure to foreign currency risk relates primarily to its receivables and payables that are

denominated in foreign currencies. The Company primarily utilizes forward exchange contracts to hedge such

financial assets, when they consider it appropriate.


Forward exchange contracts outstanding on 31 December 2003 are summarized below.

Forward exchange

Foreign currency Contract Forward rate

(Million) (Baht per unit of foreign currency)

USD 7.5 40.005

As at 31 December 2003, the Company had the following foreign currency assets and liabilities which were

unhedged.

Currency Amount Exchange rate as at the balance sheet date

(Baht per unit of foreign currency)

Assets

EUR 68,503 49.5517

Liabilities

USD 477,265 39.7378

EUR 158,335 50.1000

YEN 45,000 0.3731

Credit risk

The Company is exposed to credit risk primarily with respect to trade receivable. However, due to the

Companyûs prudent credit policy and its diversified customer base, the Company does not anticipate material

losses from its debt collection.

Fair value

The majority of financial assets and liabilities carry interest rates close to current market rates. Given this, the

management believes that the fair value of the Companyûs financial assets and liabilities does not materially

differ from their carrying value.

23. PRESENTATIONThe presentation of the financial statements has been made in compliance with the stipulations of the

Notification of the Department of Business Development dated 14 September 2001, issued under the Accounting

Act B.E. 2543.

Certain amounts in the prior yearûs financial statements, as presented herein for comparative purposes, were

reclassified to conform to the current year classifications, with no effect on previously reported net profit or

shareholdersû equity.

24. APPROVAL OF FINANCIAL STATEMENTSThese financial statements have been approved by the Companyûs directors.


GENERAL INFORMATION

Company InformationVinythai Public Company Limited is a joint venture

between Solvay S.A., Belgium and Charoen PokphandGroup and has as its objectives the production andsupply of petrochemical products, especially PVC resinsand by-products of PVC production. Vinythai wasregistered as a juristic person of a limited company typeunder the Civil and Commercial Code on 27 December1988 and registered its conversion to a public limitedcompany, registration no. BorMorJor. 158, on 16 August1993.

Vinythaiûs plant and Head office is located at No.2, I-3 Road, Map Ta Phut Industrial Estate, Tambol MapTa Phut, Amphoe Muang, Rayong Province, TelephoneNo. (038) 683-112, Fax No. (038) 683-048. Business Officeis located at 14th Floor, Green Tower 3656/41 Rama IVRoad, Khet Klongtoey, Bangkok 10110, Telephone No.0-2240-2425, Fax No. 0-2240-1383. Vinythaiûs website iswww.vinythai.co.th.

After the reduction of the registered capital andpaid-up capital by reducing par value from Baht 10each to Baht 6 each in November 2003, Vinythaiûsregistered capital as of 31 December 2003 was Baht5,593,783,194 consisted of 932,297,199 ordinary shareswith a par value of Baht 6 per share and paid-upcapital of Baht 5,418,061,122 consisted of 903,010,187ordinary shares with a par value of Baht 6 per share.

Information concerning Juristic Personwhich Vinythai holds at least 10% of itsissued sharesPimai Salt Co., Ltd.

Pimai Salt, as Vinythaiûs associated company, is apure refined salt producer. It was established under theJoint Venture Agreement among Thasco ChemicalCo., Ltd., Thai Refined Salt Co., Ltd. and Vinythai toproduce and supply pure refined salt. Vinythai holds282,252 ordinary shares of Pimai Salt, equivalent to 20.44%of its total issued shares which is 1,380,582 ordinary sharesat a par value of Baht 100 per share.

Pimai Saltûs plant is in Amphoe Pimai, NakornRatchasima Province, Thailand. Pimai Saltûs Head Officeis located at 2nd Floor, Srifuengfung Building, 1016 RamaIV Road, Silom, Khet Bangrak, Bangkok 10500, TelephoneNo. 0-2633-9380-6, Fax No. 0-2633-9390.

Other ReferencesOrdinary Share Registrar : Thailand Securities Depository

Company Limited4, 6-7th Floor, Stock Exchangeof Thailand Building62 Rajadapisek RoadKlongtoey Bangkok 10110Tel. 0-2229-2800 and 0-2654-5599Fax. 0-2359-1262-3

Debenture Registrar : Bangkok Bank PublicCompany LimitedSecurities Service Department,G Floor, Trinity Building333 Silom RoadBangrak, Bangkok 10500Tel. 0-2230-1136 and 0-2230-1784Fax. 0-2231-5507-8

Auditor : Mr. Narong Puntawongse and/or Mr. Ruthr Chaowanagawiand/or Mr. Sophon PermsiriwallopErnst & Young Office Limited33rd Floor, Lake Rajada Building193/136-137 New Rajadapisek RoadBangkok 10110Tel. 0-2264-0777Fax. 0-2264-0790

Legal Counsel : Chandler & Thong-Ek7th Floor, Bubhajit Building20 North Sathorn RoadBangkok 10500Tel. 0-2266-6485Fax. 0-2266-6483-4


Top Ten Major Shareholders

No. Names of Shareholders 18 August 2003 (Latest closing date of Vinythaiûs share register in 2003)

Number of shares %(Shares)

1 Solvay S.A. 418,964,991 46.40 2* Charoen Pokphand Group Co., Ltd. 192,357,780 21.30 3* Charoen Pokphand Holding Co., Ltd. 60,109,699 6.66 4* C.T. Petrochemical Co., Ltd. 13,077,510 1.45

5 American International Assurance Co., Ltd. 10,374,400 1.156 Thai NVDR Co., Ltd. 8,149,315 0.907 HSBC (Singapore) Nominees Pte. Ltd. 7,609,300 0.848 Thana Holding Co., Ltd. 6,400,000 0.719 Governmental Pension Fund 5,325,400 0.59

10 Citibank International (Luxembourg Branch) 5,214,400 0.58

* Companies in Charoen Pokphand Group

The holding of the Companyûs shares and debentures by the Management as of 31 December 2003 and changesThe holding of the Companyûs shares and debentures by the Management as of 31 December 2003 and changesThe holding of the Companyûs shares and debentures by the Management as of 31 December 2003 and changesThe holding of the Companyûs shares and debentures by the Management as of 31 December 2003 and changesThe holding of the Companyûs shares and debentures by the Management as of 31 December 2003 and changes

from the past year.from the past year.from the past year.from the past year.from the past year.

Common SharesCommon SharesCommon SharesCommon SharesCommon Shares

Name Title No. of Shares No. of Shares Change31 December 2002 31 December 2003

1. Mr. Arsa Sarasin Director 201,418 101,418 Decreased by100,000 shares

2. Miss Rapeepan Luangaramrut Director 1,288,826 1,258,826 Decreased by30,000 shares

3. Mr. Sompot Cheeranorawanich AVP Corporate 3,800 3,800 NoneAffairs and

Communications

Investor Relation :Investor Relation :Investor Relation :Investor Relation :Investor Relation : Please visit Vinythaiûs website : www.vinythai.co.th or contact Dr. Santisuk Sanguanruang, VicePresident Finance & Administration Tel. 0-2240-2425 Fax. 0-2240-1375, E-mail address : [email protected]

DebenturesDebenturesDebenturesDebenturesDebentures

Name Title No. of Debeutures No. of Debeutures Change

31 December 2002 31 December 2003

1. Mr. Prasert Pungkuman Director 28,000 28,000 None


2003 - Significant Related TransactionsProduct or natureProduct or natureProduct or natureProduct or natureProduct or nature Nature of relationship andNature of relationship andNature of relationship andNature of relationship andNature of relationship and Transaction betweenTransaction betweenTransaction betweenTransaction betweenTransaction between ThousandThousandThousandThousandThousand

of businessof businessof businessof businessof business connected transactionsconnected transactionsconnected transactionsconnected transactionsconnected transactions companiescompaniescompaniescompaniescompanies BahtBahtBahtBahtBaht

Associated CompanyAssociated CompanyAssociated CompanyAssociated CompanyAssociated Company1. Pimai Salt Co., Ltd. Production of salt Vinythai holds 20.44 - sells salt to Vinythai 181,108

per cent of its shares andpurchases salt for use inchlorine production andhas common directors.

Related Company Related Company Related Company Related Company Related Company1. Solvay S.A. Production and Holds 46.40 per cent - sells spare part, 11,634

Belgium and distribution of products of Vinythaiûs shares and equipment and serviceSolvayûs Subsidiaries in 4 core businesses : has common directors. to Vinythai

Chemical, Plastic, - reserve for royalty fees 57,043Human Health and - commission fees for 3,583Plastic Processing exporting products

- purchases PVC 73,446from Vinythai

- purchases equipment 3,690and chemical fromVinythai

- purchases chemical 1,831container from Vinythai

- commission fees 1,644received

2. CPPC-Decorative Production and Company owned by - purchases PVC from 141,146Products Co., Ltd. distribution of soft PVC, Charoen Pokphand Group Vinythai

sponge PVC and floor Co., Ltd.covering PVC

3. C.A. Petrochemical Production and Company owned by - purchases PVC 209,878Co., Ltd. distribution of PVC Charoen Pokphand Group from Vinythai

pipes and fittings Co., Ltd.

4. Charoen Pokphand Production and Company owned by - purchases PVC 404,559Petrochemical distribution of rigid PVC Charoen Pokphand Group from VinythaiCo., Ltd. Co., Ltd.

5. Thai Olefins Public Production and Vinythai holds 2.73 per cent - sells ethylene and 1,991,030Co.,Ltd. distribution of ethylene, of shares and has tail gas to Vinythai

propylene and common directors. - purchases NaOH 7,195other by-products from Vinythai

- purchases Sodium 1,340hypochlorite fromVinythai

6. Peroxythai Co.,Ltd Production and Sodufa B.V. (a company - sells Hydrogen peroxide 768distribution of owned by Solvay S.A.) 50% to VinythaiHydrogen peroxide holds 83.92% of its shares. - purchases Hydrogen 37,034

from Vinythai- Vinythai provides a 2,940part of BangkokOfficeûs space for rent

Remark : Remark : Remark : Remark : Remark : The above related party transactions are in the ordinary course of business. The amount shown above were alreadyincluded in the Statements of Earning. There are additional explanations in Notes no. 5, 7, 8, 20 and 21 to the 2003 financialstatements as examined and reported by the auditor under his audit report dated 23 January 2004.

· 2017. 3. 2. · 2 annual report 2003 financial highlights (in million thb) 2001 2002 2003 sales...

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