gstel 06
Post on 12-Mar-2016
215 Views
Preview:
DESCRIPTION
TRANSCRIPT
CONTENTS
Financial Highlights
Message from Chairman of the Board of Directors
Message from Chief Executive Officer
Message from Chairman of the Audit Committee
Steel Industry and Overview
Report on Operating Results and Key Events in 2006
Safety and Environmental Concern
Social Activities
Organization Chart
Board of Directors
Information on the Board of Directors and Management Team
Information of IOD ’s Accreditation and Certification Program
Structure of Management
Changes in Shareholding by the Board of Directors and
Management Team
General Information
Nature of Business
Risk Factors
Corporate Governance
Structure of Shareholding
Related Transactions
Notes and Analysis on Financial Status and Performance Results
Board of Directors’ Responsibilities with Regards to Financial
Reports
Report of Independent Auditor and Financial Statements
SET Information reference guide under Form 56-2
The Principles of Corporate Governance
001
010
012
013
014
018
023
024
026
028
030
038
039
050
051
052
055
062
072
073
078
081
082
1 1 9
120
Data from Financial Statement 2006 2005 2004
Total Assets
Total Liabilities
Total Shareholders’ Equity
Sales
Total Revenues
Gross Profit (Loss)
Operating Profit (Loss)
Net Profit (Loss)
Retained Earnings(Loss)
(Baht Million)
(Baht Million)
(Baht Million)
(Baht Million)
(Baht Million)
(Baht Million)
(Baht Million)
(Baht Million)
(Baht Million)
41,617
15,037
26,580
18,003
19,119
2,019
1,655
1,678
12,030
28,264
6,716
21,548
22,202
22,297
3,257
2,531
2,741
11,422
21,718
2,911
18,807
21,270
21,979
3,059
2,599
8,902
12,712
Financial Ratios 2006 2005 2004
Liquidity Ratio
Debt to Equity Ratio
Gross Profit (Loss) Ratio
Operating Profit (Loss) Ratio
Net Profit (Loss) Ratio
Average Return on Equity
Average Return on Assets
Net Earnings (Loss) per Share
Book Value per Share
(Times)
(Times)
(%)
(%)
(%)
(%)
(%)
(Baht)
(Baht)
1.52
0.57
11.21
9.14
8.77
6.97
4.80
0.17
2.64
3.91
0.31
14.67
11.40
12.29
13.58
10.95
0.33
2.63
2.65
0.15
14.38
12.22
40.50
72.94
48.54
1.36
2.86
FINANCIAL HIGHLIGHTS
010 In year 2006, Thailand’s economy grew at a slightly increasing rate over
the previous year due to the fact that private investment and expenditures
were affected from numerous factors, namely political instability, civil
unrest, turbulence in the deep South, oil price fl uctuations as well as
continuing Baht appreciation. Though this affected such downstream
industries using hot rolled coils as their base materials as construction
and automobile parts industries, expanded at a slow rate, but it did not
have much impact on hot rolled coil industry since the domestic demand
increased. Overall, though prices of hot rolled coils in late 2006 rose from
the lowest point of late 2005, they had continually fl uctuated due to anxiety
over China’s production capacity increment and the world’s high stock
quantities. The Company has been prepared to cope with these challenges
all along with confi dence in its current potentiality, vision in the world’s
developments and changes, long – standing experience in forecast and
operation as well as preparation in line with current and future
situations.
As for the 2006 performance, due to the management policy with vision
and caution in operations, dedication and cooperation between the
management and all staff, the Company maintained its performance results
at high levels. Its sales volumes registered as high as Baht 19,119 million
with an operating profi t of Baht 1,678 million or 6.97% return on equities
per annum which was at a satisfactory level. It is one of a few factories in
the Southeast Asia Region maintaining their performance results at almost
the same level as those of the previous year.
MESSAGE FROM CHAIRMAN OF THE BOARD OF DIRECTORS
Mr. Vijit Supinit
Chairman of the Board of Directors
In addition, with its long experience in this industry, determination to
develop its potentiality at the utmost, management knowledge and capabilities
to cope with challenges in the dynamic industrial world, the Company
enjoyed a success and was well received by investors in public listing in
the Stock Exchange of Thailand (SET). Its securities were traded on the
SET for the fi rst time on 25 January 2006 under the security name of
“GSTEEL” to gather resort funds from the public for its working capital
and business expansion in the future. The Board of Directors determines
to supervise the business management to be transparent with good
governance and adhere to principles of good business supervision to create
confi dence and fairness to shareholders, investors, business partners and
all parties concerned equally. The board will dedicate itself to perform its
duties effectively for the Company’s sustaining success and worthy return
for shareholders.
For year 2007, the Company has become an alliance with a major hot rolled
coil producer and an acceleration in mega projects by the ruling government
are likely to enable the hot rolled coil business trend in 2007 more
satisfactory.
On behalf of the Board of Directors, I would like to express my gratitude
to shareholders for their trust, confi dence and support to the Company all
along. All shareholders can share very well its pride as an upstream
industry partly being the country’s economic driving force since it has
supplied hot rolled coils as raw materials for the country’s mid and
downstream industries. As a result, raw material import from overseas
has signifi cantly decreased, this was signifi cant in terms of both quantity
and quality, also, a substantial amount of foreign exchange has been saved.
In addition, the Company’s products are competitive and well accepted by
domestic and international markets. Meanwhile, export of its quality
products are competitive in the world market and bring in more foreign
exchange, thus partly strengthening the country’s overall fi scal position.
012
During year 2006, G Steel Public Company Limited successfully became
the leader of Thailand’s hot rolled coil producers who, among a few
producers, registered profits from the hot rolled coil production and sales
in spite of worldwide steel price fluctuations since mid 2006. With the
management’s vision in planning and inventory control as well as strict
production cost controlling measures, the Company marked a net
operating profit of approximately Baht 1,678 million in 2006.
In regard to management and financial policy, the Company resorted to
funding sources at reasonable costs for its production expansion project
investment through an initial public offering of 1,500 million shares at the
value of Baht 2,400 million in January 2006. In the same month, it was
listed in the Stock Exchange of Thailand, and its securities were traded on
the SET to mobilize funds from the public for its working capital and
business expansion in the future.
In year 2007, G Steel speeded up its production expansion projects,
including the addition of Skinpass Mill and the Pickling and Oiling Line,
to respond to customers’ rapidly growing needs for all types of hot rolled
products to cope with the country’s sustaining economic growth.
With the experience and expertise in hot rolled coil production, the
Company has continually researched and developed steel quality and
production. Lately, the Company formed a strategic alliance with Nakorn
thai Strip Mill Public Company Limited (NSM) to jointly develop diversified
products to thoroughly cover customers’ demands.
On behalf of the Company’s management and employees, I would like to
thank all shareholders, business partners and customers, raw material
suppliers as well as service providers for their supports over the year.
G Steel will maintain our performance standard with all our knowledge and
expertise to enable the Company to produce and distribute high quality hot
rolled coils to meet consumers’ demand and create value added to our
shareholders.
Dr. Somsak Leeswadtrakul
Chief Executive Officer
013MESSAGE FROM CHIEF EXECUTIVE OFFICER
According to the resolution of the Company’s annual ordinary
shareholders’ meeting on the nomination of the Audit Committee with
a 3 – year service term starting from 9 June 2004 to 8 June 2007, the
Audit Committee, consisting of 3 independent members with the Internal
Audit Manager as a secretary, is as follows:
1. Prof. Paichitr Roajanavanich Chairman of the Audit Committee
2. Assoc. Prof. Prapanpong Vejjajiva Member of the Audit Committee
3. Mr. Preecha Prakobkit Member of the Audit Committee
4. Ms. Sophit Changaroon Internal Audit Manager /
Secretary to the Audit
Committee
The Audit Committee is responsible for examining the accuracy of the
internal audit and sufficient disclosure of financial statements prior to
submission for perusal and approval by the Board of Directors. The
committee also coordinates with the internal auditor and authorized
external auditors to assure appropriate internal controlling systems,
compliance with laws and relevant legal requirements as well as to
scrutinize selection and nomination of the Company’s external auditors
and propose their remuneration.
For the accounting period ending 31 December 2006, the Audit Committee
examined the accuracy, completeness and sufficiency of significant
contents in accordance with generally accepted accounting practice and
examined the internal audit systems, risk prioritization and operations in
various aspects in accordance with legal requirements. The examinations
were not conducted on every item but on those considered significant as
per the Internal Audit Department’s plan.
The Audit Committee found no significant deficiencies in the internal audit
systems that would significantly effect the Company’s financial
statements and reported the audit results to the Board of Directors’
meeting.
On behalf of the Audit Committee
(Professor Paichitr Roajanavanich)
Chairman of the Audit Committee
MESSAGE FROM CHAIRMAN OF THE AUDIT COMMITTEE
014 HOT ROLLED COIL INDUSTRY SITUATION IN 2006
In 2006, the hot rolled coil price situaton in the world market slightly fluctuated, when
compared to that in 2005. The first quarter of 2006 marked the lowest price of the cycle,
thereafter prices rose substantially worldwide. The prices in many regions gradually dropped
during midyear, while European prices remained high until the middle of the last quarter of
2006. Nevertheless, hot rolled coil prices (commercial grade) in the world market at the
2006 year–end ranged between USD 460 – 520 (FOB export prices) varying in different
regions. Despite the decreases from those in the third and fourth quarters of 2005, the prices
were at moderately higher levels than those in the first quarter. The situation in the United
States was an exception as steel prices were tuning to respective normal levels as a result of
demand and supply adjustment, thus, they were slightly lower than those in the first quarter.
A major reason was that the economy slowed down, particularly in the construction and real
estate sectors.
China still had an impact on the world’s steel market in terms of both demand and supply.
According to statistics of the International Iron and Steel Institute (IISI) in 2006, the country
produced the highest quantity of crude steel in the world, amounting to 418.8 million tons
or one – third of the world’s overall crude steel outputs. Its total output grew by 18.5% over
the previous year, whereas the global gross outputs increased by 8.8% from 1,139.6 million
tons in 2005 to 1,239.5 million tons in 2006. Therefore, changes in demand and supply in China
significantly effected the market and steel prices worldwide.
Thanks to the Chinese government’s policy not to support steel export since 2005 onwards,
in 2006 they reduced / abolished tax redemption for many steel export items in addition to
015
STEEL INDUSTRY AND OVERIVEW
016
other measures of the previous year. Thus, price competitiveness of Chinese producers
decreased, when compared to competitors overseas, as the former were forced to sell at higher
prices. China’s steel export volumes subsequently dropped.
In 2006, regional and international mergers in the steel industry occurred in many countries.
Analysts had opinions that such mergers were stemmed from the fact that steel producers
were quite scattered. According to IISI data in 2005, it was estimated that in 2006 combined
outputs of the world’s top 5 largest steel producers were less than 20% of the world’s total
outputs. This could not be comparable with other industries, like automobile, ship building,
such metal mining as nickle, tin, copper, zinc, aluminium, iron, coal and so on, the leading
producers’ combined outputs made up a much higher proportion. An explicit example was
China’s steel industry which was of a very scattering nature, its top 3 largest producers had
a combined outputs of less than 18% of the country’s total outputs. The proportion was
relatively low, if compared with those of such major steel – making countries as South Korea
(over 80%) and Japan (over 60%). Consequently, a merger trend was high in the future
in order to control supply in the market, reduce production costs and support steel price more
effectively.
As for Thailand’s hot rolled coil industry, the situation was a similar phenomenon worldwide:
there were recovery, expansion and sluggishness periods in 2006 in accordance with domestic
and international market mechanism as well as local economic situation. According to the
latest reports of the Iron and Steel Institute of Thailand, during January – November 2006,
the country’s demand for hot rolled coils totalled 5.25 million tons, or 14.4% drop from that of
the same period of the previous year, whereas local producers had a combined outputs of
approx. 4.13 million tons, and net steel import volume was 1.12 million tons. The decrease was
due to economic slowdown as a result of political instability, construction and real estate sector
stagnation for a long period of time and somewhat low government expenditures for country
development and relatively low domestic consumption, in spite of higher export volumes.
017
HOT ROLLED COIL INDUSTRY TREND IN 2007
On the supply side worldwide, a MEPS report anticipated that overall raw steel outputs
will further expand by 5.4% to 1,300 million tons with China taking the lead. Cooperation
among producers to control supply and business mergers tends to continue and become
more significant than earlier since it has been proven worldwide to definitely enable the steel
industry as a whole to be stable and profitable.
On the demand side worldwide, it is estimated to expand in many country groups/ regions ;
China, India, Middle East and Africa, etc. Besides, the world economy is expected to expand at
a satisfactory rate despite of a slight decrease from the previous year. It is believed that
relaxing oil prices will clearly contribute to a greater economic expansion in many developing
countries.
Although steel prices in the world market trend become more stable with average prices
higher than those of the previous year, they will vary slightly between regions. This is because
China has reduced its steel export, and the prices are obviously higher. In addition, major raw
material costs keep on rising. Nevertheless, buyers will be willing to pay at higher prices
due to the balance between demand and supply in the world market from 2007 onwards.
As for Thailand’s hot rolled coil industry trend in 2007, it is anticipated that demand for both
hot rolled coils for the construction sector and for high quality grade, will substantially
increase. This is in line with recovery in residential and commercial building construction
sector, production sector, automobile parts, electronics and electrical appliance industries
in particular, which are expected to grow continually from the increased export volumes.
Additionally, if the situation turns out as per the interim government’s plan and current
implementations, Thailand will have a growing demand for steel from last year for
infrastructure development projects. These are parts of mega projects the budget
reimbursements of which are accelerated to start the construction in 2007.
019
018
REPORT ON OPERATING RESULTS AND KEY EVENTS IN 2006
OPERATING RESULTS AMIDST FLUCTUATIONS IN STEEL INDUSTRY SITUATION
Year 2006 saw signifi cant changes and fl uctuations in the steel industry situation. Despite
Thailand’s continuing consumption growth for hot rolled coils, a cycle of price upwards for almost
3 years came to an end in late 2005, during which prices rapidly adjusted downwards until the
end of last year, the prices decreased by over 30%. Bargaining power in the market switched to
buyers, lower quality steel products were imported from China. The business management during
the second half of last year was very diffi cult.
Nevertheless, with production cost controlling and continuing effi ciency improvement as well as
proper inventory control at appropriate levels, the Company managed to brave through the crisis
of steel falling prices. Eventhough the second half of 2006 performance results were unavoidably
effected by the low steel prices, the Company’s overall annual performance results were highly
satisfactory. It was one of a few steel producers in Southeast Asian region that managed to
maintain performance results at the levels close to those of the previous year. Its total annual
sales volumes registered at approximately 1 million tons due to a reduction in its production plan
in accordance with market situation. Meanwhile, the total sales value amounted to Baht 19,119
million with average selling prices in 2006 slightly lower than those in the preceding year. The
majority of incomes were from domestic sales since export prices were lower than the domestic
ones. The gross profi t rate for the entire year was at 11.21%, close to that of the previous year,
and the operating profit amounted to Baht 1,678 million, or Baht 0.17 per share.
ISSUANCE OF STOCK OPTIONS FOR DIRECTORS AND EMPLOYEES
On 12 January 2006, the Company issued warrant for an amount of 100 million units of its
common shares to directors and employees. The warrant with no regulated offering prices
would be due in 5 years from the issuance date. One unit of warrant could be exercised to buy
1 common share at the price of Baht 1 per 1 common share. The members of the Board of Directors
and employees could exercise one third of their allocated rights 1 year, 2 years and 3 years
respectively after the company’s common shares were traded on the SET with the fi rst stipulated
exercise date on 30 March 2007 and the last date on 11 January 2011.
LISTING IN THE STOCK EXCHANGE OF THAILAND
The Company was listed in the Stock Exchange of Thailand and its shares were traded on the
SET for the fi rst time on 25 January 2006 under the security name of “GSTEEL” to raise funds
from general public for its working capital and business expansion in the future. With its
potentiality in many aspects, i.e., the management’s vision and competence, capabilities to continually
lower production costs when compared to the market as a whole, further development of high quality
products to meet customers’ demands as well as continuing public relations to make its presence
felt and accepted by the public, the Company was rated as a strong listed fi rm in 2006 and was among
leaders in Thailand’s hot rolled coil business.
ISSUANCE AND OFFERING OF ADDITIONAL USD 70 MILLION BOND TO OVERSEAS INVESTORS
In February 2006, the Company issued and offered additional 70,000 units of bond with a faced value
of USD 1,000 per unit, totalling USD 70 million, to overseas investors. The debentures were offered
at USD 1,019.78 per unit with the same terms and conditions as the ones previously issued in October
2005.
ENTERING INTO A STRATEGIC ALLIANCE WITH NAKORNTHAI STRIP MILL PUBLIC COMPANY
LIMITED (NSM)
On 26 June 2006, the Board of Directors’ meeting resolved the making of an agreement with Oriental
Investment Company Limited (which became its subsidiary later on) to buy rights over secured
convertible debts as per its business rehabilitation plan for Nakornthai Strip Mill Public Company
Limited. from On City Holding Limited and NSM’s creditors for not more than USD 130.12 million with the
total amount not more than USD 180 million. Its subsidiaries would invest approximately USD 120
million, whereas the Company would invest about USD 60 million. The management considered that
entering into a strategic alliance with NSM would enhance both companies’ potentiality in many
areas such as production, competition, cost controlling, market accessibility, business risk reduction
as well as turning a competitor into an alliance. Additionally, the board meeting resolved cancellation
of proportions to allot 1,750 million common shares to be offered to the public and cancellation of
greenshoe option or over allotment of 450 million shares. The meeting also resolved an allotment
of remaining additonal shares of not over 2,200 million units to On City Holding Limited and NSM
creditors as parts of settled prices.
On 2 August 2006, the Company’s Extraordinary Shareholders’ Meeting approved the cancellation of
1,750 million common share allotment proportions to be offered to the public and the cancellation of
greenshoe option allotment of 450 million shares and also approved limited allotment of remaining
additional shares of not over 2,200 million units to NSM creditors at not less than Baht 1.40 per 1 common
share. NSM creditors would settle for shares with their convertible rights for NSM common shares as
per NSM’s business rehabilitation plan (including additions) for not over USD 60 million or NSM’s 2,511,266,071
common shares. In this regard, the meeting assigned the board and/or a taskforce delegated by the
board to map out details on increased common share allotment in terms of both price and quantity.
020
On 12 September 2006, the Company issued 1,400 million additional common shares which were
not yet alloted at Baht 1.51 per share, to NSM creditors in exchange with NSM’s 2,511,266,071 common
shares resulting from an exercise of the rights over secured convertible debts as per the debt
restructuring agreement. The transfer of this lot of shares to the Company had already been
completed.
On 28 June 2006, Oriental Investment Company Limited (which later on became its subsidiary
and had the name changed into Oriental Access Company Limited) entered into a Memorandum
of Understanding with On City Holding Limited on behalf of NSM creditors to buy rights over
secured convertible debts of Nakornthai Strip Mill Public Company Limited for approximate USD
104.3 million with the regulated FOREX rate at Baht 43.5065 per USD 1 for the common share
conversion as per the business rehabilitation plan at the price of Baht 0.42 per NSM’s new common
share.
Currently, the Company and Oriental Investment Company Limited had 5,803,673,289 common
shares in NSM or 23.51% of NSM paid – up registered capital.
ADVANTANGES OF THE ALLIANCE BETWEEN G STEEL AND NSM
1. Reducing raw material costs. Both fi rms can pooled their purchases for higher quantities,
therefore, they could buy raw materials at the lower prices.
2. Sharing production know - how and best practice. Becoming an alliance enables G Steel
and NSM to share production technology, they could cooperate for optimum of production,
thus achieve the maximum benefi ts of their respective organization.
ISO 14001 AND TIS/OSHAS 18001 CERTIFICATION
The Company had determined and persevered all along to become a fi rm with standards in all
aspects of management systems namely, quality, environment, hygiene and safety. In 2006, it
was highly successful to have been certifi ed by TUV NORD for compliance with international
standards and requirements. It was of the Company’s great pride as it received certifi cations of
ISO 14001 for environment , TIS 18001 and OSHAS 18001 for occupation health and safety
management system.
021
022
023
The Company has committed to have hot rolled coil produced without any environmental impacts
on communities and the society, also taking into consideration safety and occupation health of its
employees and contractors.
Having complied with requirements of ISO 14001, TIS 18001 and OSHAS 18001 throughout 2006,
G Steel aimed at assuring that all operation units administrated, environment, safety and hygiene
matters are as per international standards which focused on effective and efficient administration.
The aim of environmental administration is to worthily utilize resources, whereas the aim of safety
administration is to reduce accidents and minimize wastage rate in year 2007 and succeeding years.
The Company regularly held meetings with contractors for better understanding and joint
improvements in safety, hygiene and environment implementation. Moreover, it assigned a
taskforce to handle emergency in the factory and to coordinate with relevant agencies outside to
organize joint emergency exercises.
Giving an importance of human resources, G Steel organized compulsory training courses on
environment, safety and hygiene to assure that its staff and contractors received adequate and
appropriate trainings. Training topics for respective employees varied in accordance with their
job positions and responsibilities.
Owing to perseverance and determination to abide by international standards and requirements
in environment, hygiene and safety, the Company achieved its goal, receiving ISO 14001
certification in environmental administration standard, TIS 18001 certification in hygiene and
safety administration together with OSHAS 18001 certification by TUV NORD. The accrediting
body for ISO 14001 was TUV Cert and NAC.
Also, the Company participated in the Greenhouse Gas Emission Reduction from Industry in Asia
and the Pacific (GERIAP) as per United Nations Environment Programme (UNEP). It turned out
successfully as the Company substantially decreased fuel energy consumption, thus reducing
greenhouse gas emission. In this regard, the Company was presented with a plaque and a
certificate by UNEP for its remarkable success as a hot rolled coil plant to control and reduce
greenhouse gas emission to atmosphere.
SAFETY AND ENVIRONMENTAL CONCERN
024
025
In 2006, G Steel took part in various social activities such as educational, environmental, religious and other
activities as follows.
EDUCATION
Realizing the importance of education, the Company intended to take part in educational development which
would enable the country to be a learning society leading to sustaining developments. The Company rendered
supports to several projects, namely :
• Participation in “The Global University Network for Innovation – Asia and the Pacifi c (GUNI-AP) 2006” in
cooperation with Mahidol University during 9 – 11 November 2006
• Supporting the organization of “Thailand Future” on 7 December 2006, in cooperation with Thammasat
University Foundation under the Royal Patronage of H. M. the King
• Providing learning opportunities for students from various educational institutions to visit its factory premise
and production process all year round
• Donating educational apparatus to schools in its vicinities in Ban Khai District, Rayong Province
• Donating scholarships to Thai Buddhist, Christian, and Muslim youths
RELIGION
Realizing an importance of religion as a spiritual refuge and guidance for people to live in harmony, the Company has
taken part in fostering religions in the society by donating for the maintenance of many religious buildings such as building
of restrooms and other infrastructures of temples in the remote areas of the country and donating for the purchase of
necessary equipment to various religious establishments.
SOCIAL ACTIVITIES
G Steel has regularly provided supports to foundations and charity organizations to extend aid to the people with less
opportunity for better living conditions, apart from assistance to natural disaster - affl icted people. Year 2006 was an
auspicious occasion celebrating the 60th Anniversary of H.M. the King’s Accession to the Throne; the Company participated
in numerous activities as follow:
• Co-sponsorship of the Fireworks Project for the Celebration of the 60th Anniversary of H.M. the King’s Accession
to the Throne at Queen Sirikit National Convention Center
SOCIAL ACTIVITIES
• Co-sponsorship of the charity concert, “A Choral Celebration to Celebrate the 60th Anniversary of H.M. the King’s
Accession to the Throne” which all proceeds went to the Chaipattana Foundation
• Making donation to the Chaipattana Foundation via the Board of Investment (BOI) for H. M. the King’s 80th Birthday
Celebration in 2007
• Making donation to Vibhavadi Rangsit Foundation to publish a book entitled “His Royal Visit to the United States
in B.E. 2503, Pakistan in B.E. 2505 , and the Malaya Federation in B.E. 2505” written by HRH Princess Vibhavadi
Rangsit in honor of H.M. the King. Proceeds from the book will be presented to H.M. the King for charities at his
royal disposition
• Co-sponsorship of the “Royal Diamond Jubilee Musical Celebration Project” to celebrate the 60th Anniversary of
H.M. the King’s Accession to the Throne and to publicize H.M. the King’s musical brilliance to the world and to raise
fund to support the development of various musical programs in Thailand
• Making donation to the Police General Hospital Foundation under the Royal Patronage of H.M. the Queen
• Making donation to fl ood – affl icted people via His Excellency Prime Minister General Surayudh Julanonda at the
Government House
• Making donation to fl ood – affl icted people via the Television Channel 5
• Making donation to Thai Red Cross Society in Rayong Province and participating the annual Thai Red Cross Society
Fair at the Amphorn Garden in Bangkok in cooperation with the National Council of Women of Thailand Under the
Royal Patronage of H.M. the Queen
• Support and sponsorship to the Factory’s surrounding community in a variety of activities such as the National
Children’s Day festival, community sports events, and other donation to the Nonglalog Sub-district Administration
OTHER ACTIVITIES
In 2006, the Company had continually participated in many events to publicize its business to the public and those
interested in the steel industry. It cooperated with the public sector in organizing numerous events, namely,
• Sponsorship and participation in the “Bangkok Steel Exhibition & Conference 2006” in cooperation with the Iron
and Steel Institute of Thailand (ISIT) during 13 –15 July 2006 at Siam Paragon
• Sponsorship and participation in the 3rd “SBB Steel Markets Asia 2006”, the largest steel industry seminar in Southest
Asian region during 6 – 7 November 2006 at Grand Hyatt Erawan Hotel Bangkok
026
Remuneration Committee
Executive Committee
Nomination Committee
Audit Committee
ORGANIZATION CHART
Board of
Directors
President Mr. Ryuzo Ogino
Internal Audit Department
Office of the President
President Ms. Patama Leeswadtrakul
Assistant Chief Executive Officer Ms. Patama Leeswadtrakul
Chief Executive Officer Dr. Somsak Leeswadtrakul
Vice President - Finance Mr. Chaimongkol Boonchanaphan
Vice President - Commercial Ms. Methikarn Chutipongsiri
Vice President - Corporate Finance Mr. Nakun Sakunchotikarote
Senior Vice President - Operation
Mr. Nopakao Srisuvanon
Vice President - Operation Mr. David James Scott
Executive Vice President - Expansion & Engineering
Mr. Joachim Burgers
Vice President - HR & Administration Mr. Nakun Sakunchotikarote (Acting)
Vice President - Accounting Ms. Kannikar Soykeeree (Acting)
Senior Vice President Ms. Kannikar Soykeeree
028
BOARD OF DIRECTORS
01 Mr. Vijit Supinit Chairman of the
Board of Directors
02 General Singha Saovapap Director
03 Ms. Patama Leeswadtrakul Director
04 Dr. Somsak Leeswadtrakul Director
05 Professor Paichitr Roajanavanich Director
06 Assoc. Prof. Prapanpong Vejjajiva Director
07 Mr. Yanyong Kurovat Director
08 Pol. Lt. General Prakard Sataman Director
09 Mr. Ryuzo Ogino Director
10 General Choochat Kambhu Na Ayudhya Director
11 Mr. Chainarong Monthienvichienchai Director
12 Mr. Preecha Prakobkit Director
13 Mr. Chaipatr Srivisarvacha Director
14 ML. Sasiwimol Kasemsri Director
15 Mr. Stephane Benayon Director
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
030
031
INFORMATION ON THE BOARD OF DIRECTORS
1. Mr. Vijit Supinit
- Chairman of the Board of
Directors
65
-none- • Class 3 Leadership Program,
Capital Market Academy
• Class 31 National Defense
Course at the National Defense
Academy
• M. Econ., Yale University, USA
• B. Econ. (Honors),
Manchester University,
England
-none- G Steel Public Company Limited
2006-Present Chairman of the Board of Directors
Others
2003-Present Chairman of the Board of Directors
The Stock Exchange of Thailand
2003-Present Chairman of the Board of Directors
Asset Management Corporation
1993-1996 Chairman of the Board of Directors
The Export and Import Bank of
Thailand
1992-1996 Commissioner Securities and
Exchange Commission, Thailand (SEC)
1990-1996 Governor and Chairman
The Bank of Thailand
1990-1996 Executive Director
The Offi ce of the National Economic and
Social Development Board
1990-1991 Director
The Offi ce of the Board of Investment
1987- 1990 Executive Director
Siam City Bank Public Co., Ltd.
2. General Singha
Saovapap
- Vice Chairman of the
Board of Directors
- Chairman of the
Nomination Committee
76 -none- • Honorary Doctorate in
Sociology and Anthropology,
Ramkhamhaeng University
• A Principle of Hospital
Administration Program
• M.D., Chulalongkorn University
0.01% G Steel Public Company Limited
2006-Present Chairman of the Nomination Committee
2003-Present Vice Chairman of the Board of Directors
Others
2003-Present Chairman of the Board of Directors
Chaopraya Hospital Public Co., Ltd.
1994-Present Chairman of the Board of Directors
Kanchanaburi Health Center Co., Ltd.
1993-Present Chairman of the Board of Directors
Phattanakarn Vechakit Co., Ltd.
1986-Present Chairman of the Board of Directors
Vibhavadi Hospital Public Co., Ltd.
1986-Present Chairman of the Board of Directors
Jittiporn Co., Ltd.
1986-Present Chairman of the Board of Directors
River Kwai Evergreen Hills Resort Co.,
Ltd.
Name/Position Age
(Years)
Rela-
tion-
ship
Education % of
Shares
Experience
7. Mr. Yanyong Kurovat
- Director
- Executive Director
- Nomination Committee
Member
68 -none- • Class 5 National Defense
Course for Joint Private and
Public Sectors at the National
Defense Academy
• Graduate Diploma in
Government, Chulalongkorn
University
• B.A. (Pol.Sci.), Chulalongkorn
University
-none- G Steel Public Company Limited
2006-Present Nomination Committee Member
2004-Present Director and Executive Director
Others
2003-Present Director
G.O. International (Thai) Co,. Ltd
2003-Present Advisor
MAN Trucks & Bus Concessionaires
(Thailand) Co., Ltd.
2000-Present Managing Director
Technology Operation Group Co,. Ltd.
2000-Present Managing Director
Academic Network Co,. Ltd.
8. Pol. Lt. General Prakard
Sataman
- Director
- Executive Director
- Remuneration Committee
Member
64 -none- • Class 1 Advanced Management
Program at the National
Defense Academy
• Class 37 National Defense
Course at the National Defense
Academy
• International Police Program,
USA
• LL.B., Thammasat University
-none- G Steel Public Company Limited
2006-Present Remuneration Committee Member
2004-Present Director and Executive Director
Others
2006-Present Advisor to Interior Deputy Minister
2006-Present Advisor to the Board of Directors
State Railway of Thailand
2005-Present Advisor to the Board of Directors
Sirikit National Convention Center
2004-Present Advisor
Thai Pure Drinks Co., Ltd.
2000-2006 Member of Disciplinary Committee
Office of the Auditor - General
2000-2003 Commander of the Police Forensic
Science, Royal Thai Police
3. Ms. Patama
Leeswadtrakul
- Vice Chairman of the
Board of Directors
- Executive Director
- Assistant Chief Executive
Offi cer
- President
42
Wife of
Dr.
Somsak
Lee-
swad-
trakul
• Honorary Doctorate in
General Administration,
Ramkhamhaeng University
• MBA.,
Ramkhamhaeng University
• B. Econ.,
Ramkhamhaeng University
9.70% G Steel Public Company Limited
2003-Present Vice Chairman of the Board of
Directors, Executive Director,
Assistant Chief Executive Offi cer
and President
Others
2003-Present Chairman of the Board of Directors
G.E.I. Holding Co., Ltd.
1997-Present Chairman of the Executive Committee
Paitoon Hotel and Resort Co., Ltd.
1990-2006 Chairman of the Board of Directors
Siam Jetty and Container Co., Ltd.
4. Dr. Somsak
Leeswadtrakul
- Director
- Chairman of the
Executive Committee
- Chief Executive Offi cer
54 Husband
of Ms.
Patama
Leeswad
trakul
• The Program for senior
executives in criminal justice
administration class 10.
• Honorary Doctorate in
Industrial Management,
University of the Americas,
Louisiana, USA
• Honorary Doctorate in General
Administration,
Ramkhamhaeng University
• Honorary Doctorate in
Administration,
Kasetsart University
• MBA., Ramkhamhaeng
University
• B. Econ.,
Ramkhamhaeng University
0.06% G Steel Public Company Limited
1995- Present Director, Chairman of the Executive
Committee and Chief Executive
Offi cer
Others
1995-Present Director
Thai Special Steel Industry Public
Co., Ltd.
1995-Present Director
Siam Integrated Cold Rolled Steel
Public Co., Ltd.
1994-Present Director
Felix River Kwai Resort
Kanchanaburi Co., Ltd.
1990-Present Director
Nas Toa (Thailand) Co,. Ltd.
1989-Present Director
Thai Steel Pipe Industry Co., Ltd.
1988-Present Director
Thailand Iron Works Public Co., Ltd
Name/Position Age
(Years)
Rela-
tion-
ship
Education % of
Shares
Experience
Name/Position Age
(Years)
Rela-
tion-
ship
Education % of
Shares
Experience
032
5. Professor Paichitr
Roajanavanich
- Director
- Chairman of the Audit
Committee
78 -none- • MGA. (Fiscal Policy),
Pennsylvania University, USA
• Graduate Diploma in
Accountancy (Equivalent to
Master’s Degree), Thammasat
University
• LL.B., Thammasat University
• CPA-Thailand
-none- G Steel Public Company Limited
2004-Present Director and Chairman of the
Audit Committee
Others
2002-Present Chairman of the Audit Committee
Sicco Securities Public Co., Ltd.
1999-Present Chairman of the Audit Committee
MBK Development Public Co., Ltd.
1999-Present Chairman of the Audit Committee
Pathum Rice Mill and Granary
Public Co., Ltd.
1999-Present Chairman of the Audit Committee
Muramoto Electron (Thailand)
Public Co., Ltd.
6. Associate Professor
Prapanpong Vejjajiva
- Director
- Audit Committee Member
- Chairman of the
Remuneration Committee
71 -none- • Class 28 National Defense
Course at the National Defense
Academy
• Certifi cate in Business
Administration, Stanford
University
• Graduate Diploma in Welfare
Administration, Stockholm
University, Sweden
• M.A. in Social Science,
Stockholm University, Sweden
• B.A. (Pol.Sci.)(2nd Class
Honors) in Government,
Chulalongkorn University
-none- G Steel Public Company Limited
2006-Present Chairman of the Remuneration
Committee
2005-Present Audit Committee Member
2004-Present Director
Others
2005-Present Chairman of the Board of Directors
C&C International Venture Co., Ltd.
2005-Present Chairman of the Board of Directors
The Master Asset Management Co., Ltd.
2001-Present Chairman of the Board of Directors
Primavest Asset Management Co., Ltd.
1995-Present Director
Dhammaniti Public Co., Ltd.
1994-Present Chairman of the Board of Directors
Home Place Group Public Co., Ltd.
1990-2006 Vice President
(Development and Planning)
Sasin Graduate Institute of Business
Administration,
Chulalongkorn University
033
Name/Position Age
(Years)
Rela-
tion-
ship
Education % of
Shares
Experience
7. Mr. Yanyong Kurovat
- Director
- Executive Director
- Nomination Committee
Member
68 -none- • Class 5 National Defense
Course for Joint Private and
Public Sectors at the National
Defense Academy
• Graduate Diploma in
Government, Chulalongkorn
University
• B.A. (Pol.Sci.), Chulalongkorn
University
-none- G Steel Public Company Limited
2006-Present Nomination Committee Member
2004-Present Director and Executive Director
Others
2003-Present Director
G.O. International (Thai) Co,. Ltd
2003-Present Advisor
MAN Trucks & Bus Concessionaires
(Thailand) Co., Ltd.
2000-Present Managing Director
Technology Operation Group Co,. Ltd.
2000-Present Managing Director
Academic Network Co,. Ltd.
8. Pol. Lt. General Prakard
Sataman
- Director
- Executive Director
- Remuneration Committee
Member
64 -none- • Class 1 Advanced Management
Program at the National
Defense Academy
• Class 37 National Defense
Course at the National Defense
Academy
• International Police Program,
USA
• LL.B., Thammasat University
-none- G Steel Public Company Limited
2006-Present Remuneration Committee Member
2004-Present Director and Executive Director
Others
2006-Present Advisor to Interior Deputy Minister
2006-Present Advisor to the Board of Directors
State Railway of Thailand
2005-Present Advisor to the Board of Directors
Sirikit National Convention Center
2004-Present Advisor
Thai Pure Drinks Co., Ltd.
2000-2006 Member of Disciplinary Committee
Office of the Auditor - General
2000-2003 Commander of the Police Forensic
Science, Royal Thai Police
9. Mr. Ryuzo Ogino
- Director
- Executive Director
- President
63 -none- • B.Econ., Keio University, Japan -none- G Steel Public Company Limited
2005-Present Director and Executive Director
2004-Present President
Others
2000-2004 Director
Suncall Corporation
1965-2000 Director
Itochu Corporation
Name/Position Age
(Years)
Rela-
tion-
ship
Education % of
Shares
Experience
10. General Choochat
Kambhu Na Ayudhya
- Director
- Remuneration
Committee Member
62 -none- • Class 7 National Defense
Course for Joint Private and
Public Sectors at
the National Defense Academy
• Certifi cate of the
Royal Thai Army War College
• Diploma of General Surgery,
Council of Doctors of Medicine
• Doctor of Medicine,
University of Gottingen,
Germany
• M.D.,
University of Munster,
Germany
-none- G Steel Public Company Limited
2006-Present Remuneration Committee Member
2003-Present Director
Others
2006-Present Chairman of the Board of Directors
Singha Paratech Public Co., Ltd.
2005-Present Physician Leader
Medical Bureau to His Majesty
the King
2004-Present Chairman of the Board of Directors
Lucky Music Co., Ltd.
2003-Present Army Special Expert
Royal Thai Army
2003-Present Chairman of the Board of Directors
Unity Percussion Co., Ltd.
2003-2004 Advisor
National Defense Studies
Institute, Military Supreme Command
2001-2003 Director General
Royal Thai Army Medical Department
2000-2001 Director
King Mongkut Medical Administration
Center
1998-2000 Deputy Director General
Royal Thai Army Medical Department
11. Mr.Chainarong
Monthienvichienchai
- Director
- Nomination Committee
Member
61 -none- • M.A. (Management),
Asian Institute of Management
• B.A. (Business Administration),
Chulalongkorn University
0.01% G Steel Public Company Limited
2006-Present Nomination Committee Member
2000-Present Director
Others
2002-Present Director
Paitoon Hotel and Resort Co., Ltd.
1994-Present Director
Saint John for Education Co., Ltd.
1991-Present Vice Chairman of the Board of
Trustees Saint John’s University
1977-Present Director General
Saint John’s College
035
034
Name/Position Age
(Years)
Rela-
tion-
ship
Education % of
Shares
Experience
12. Mr.Preecha Prakobkit
- Director
- Audit Committee Member
58
-none-
• Executive Leadership
Thunderbird,
The American Graduate
School of International
• Senior Executive Program
Sasin Graduate Institute of
Business Administration,
Chulalongkorn University
• Mini MBA, Thammasat
University
• Business Administration,
Roosevelt University, USA
-none-
G Steel Public Company Limited
2003-Present Director and Audit Committee
Member
Others
1988-Present Managing Director
Amway (Thailand) Co., Ltd.
13. Mr. Chaipatr
Srivisarvacha
- Director
48 -none- • MBA (Finance), IIIinois
Benedictine College
• Bachelor of Science
(Metallurgy) Lehigh University
-none- G Steel Public Company Limited
2004-Present Director
2004-2005 Audit Committee Member
Others
2006-Present Director
MRM Mobile Co., Ltd.
2003-Present Chairman of the Board of Directors
Ecco Communications Co., Ltd.
2002-Present Independent Director
Brooker Group Public Co., Ltd.
2001-Present Independent Director
Thanachart Bank Public Co., Ltd.
1999-Present Chief Executive Officer
Cap Maxx Co., Ltd.
1993-Present Executive Director
Salon La Prairie (Far East) Co., Ltd.
1992-Present Executive Director
Faces Co., Ltd.
1992-Present Executive Director
SVAC Co., Ltd.
Name/Position Age
(Years)
Rela-
tion-
ship
Education % of
Shares
Experience
14. ML. Sasiwimol
Kasemsri
- Director
- Executive Director
42
-none-
• Master of Intellectual Property
(MIP),
Franklin Pierre Law, USA
• LL.M. (International Laws),
Chulalongkorn University
• LL.B.,
Chulalongkorn University
-none-
G Steel Public Company Limited
2004-Present Director and Executive Director
Others
2003-Present Director
The Unified Council Co., Ltd
2000-2003 Attorney
LS Horizon Ltd.
1993-2000 Attorney
Baker and Mckenzie Co., Ltd.
15. Mr. Stephane Benayon
- Director
- Executive Director
39
-none-
• B.Econ., York University
-none-
G Steel Public Company Limited
2003-Present Director and Executive Director
Others
2002-Present Director
Superior Overseas (Thailand)
Co., Ltd.
2001-Present Managing Director
Distresses Assets Investment
1998-2001 Director
Prebon Yamane (Hong Kong) Ltd.
037
036
INFORMATION OF MANAGEMENT TEAM
Name/Position Age
(Years)
Rela-
tion-
ship
Education % of
Shares
Experience
1. Mr. Joachim Burgers
- Executive Vice President
Expansion & Engineering
56 -none- • Electrical Engineering and
Industrial Engineering as Dipl.
Eng., Mercator Technical
University, Germany
-none- G Steel Public Company Limited
Present Executive Vice President
Expansion & Engineering
1995-2000 Vice President
Expansion Project & Engineering
2. Ms. Kannikar Soykeeree
- Senior Vice President
- Vice President
Accounting (Acting)
33 -none- • MBA., University of the Thai,
Chamber of Commerce
• Bachelor of Atrs, Chandrakasem
Rajabhat University
-none- G Steel Public Company Limited
Present Senior Vice President
1999-2006 Vice President - Commercial
3. Mr. Nopakao Srisuvanon
- Senior Vice President
Operation
47 -none- • Bachelor of Engineering,
Chulalongkorn University
-none- G Steel Public Company Limited
Present Executive Vice President
Expansion Project & Engineering
1995-2000 Vice President
Expansion Project & Engineering
4. Mr. David James Scott
- Vice President
Operation
43 -none- • Bachelor of Engineering,
Electrical and Electrical
Engineering,
Southbank University,
London, England
-none- G Steel Public Company Limited
Present Vice President - Operation
2004-2006 Assistant Vice President
Expansion Project
2003-2004 Senior Department Manager
Support Service
038
039
Name
Thailand Institute of Directors : IOD
Director
Accreditation
Program (DAP)
Class/year
Director
Certification
Program (DCP)
Class/year
The Role of
Chairman
Program (RCP)
Class/year
Audit Committee
Program
(ACP)
Class/year
Finance for
Non-Finance
Director (FND)
Class/year
1. Mr. Vijit Supinit 54/2006 _ 13/2006 _ _
2. General Singha Saovapap _ _ 10/2004 _ _
3. Ms. Patama Leeswadtrakul 49/2005 _ 8/2003 _ _
4. Dr. Somsak Leeswadtrakul 49/2005 _ 8/2003 _ _
5. Prof. Paichitr Roajanavanich _ _ _ 15/2006 _
6. Assoc. Prof. Prapanpong
Vejjajiva
49/2005 _ 4/2001 11/2006 _
7. Mr. Yanyong Kurovat 22/2004 _ _ _ _
8. Pol. Lt. General Prakard
Sataman
45/2005 _ _ _ _
9. Mr. Ryuzo Ogino _ _ _ _ _
10. General Choochat Kambhu
Na Ayudhya
22/2004 _ _ _ _
11. Mr. Chainarong
Monthienvichienchai
22/2004 _ _ _ _
12. Mr. Preecha Prakobkit 23/2004 _ _ 11/2006 19/2005
13. Mr. Chaipatr Srivisarvacha _ 34/2003 11/2005 _ _
14. ML. Sasiwimol Kasemsri 23/2004 _ _ _ _
15. Mr. Stephane Benayon _ _ _ _ _
INFORMATION OF IOD’ S ACCREDITATION AND CERTIFICATION PROGRAM
STRUCTURE OF MANAGEMENT
MANAGEMENT STRUCTURE
The Company’s management structure comprises 5 committees: Board of Directors, Executive Committee, Audit
Committee, Nomination Committee and Remuneration Committee.
The respective roles and responsibilities are summed up as follows.
(1) BOARD OF DIRECTORS
As at 31 December 2006, the Company had 15 members in the Board of Directors and during 2006, there was a
change in one director and his position.
• New Director 1 person:- Mr. Vijit Supinit, Chairman of the Board of Directors
on 8 February 2006 (to replace Mr. Vira Susangkarakan who died in 2005)
The Board of Directors as at 31 December 2006 hence consisted of 15 members as listed below.
1. Mr. Vijit Supinit Chairman of the Board of Directors
2. General Singha Saovapap Director
3. Ms. Patama Leeswadtrakul Director
4. Dr. Somsak Leeswadtrakul Director
5. Professor Paichitr Roajanavanich Director
6. Assoc. Professor Prapanpong Vejjajiva Director
7. Mr. Yanyong Kurovat Director
8. Pol. Lt. General Prakard Sataman Director
9. Mr. Ryuzo Ogino Director
10. General Choochat Kambhu Na Ayudhya Director
11. Mr. Chainarong Monthienvichienchai Director
12. Mr. Preecha Prakobkit Director
13. Mr. Chaipatr Srivisarvacha Director
14. ML. Sasiwimol Kasemsri Director
15. Mr. Stephane Benayon Director
040
041
AUTHORIZED SIGNATORY DIRECTORS ON THE COMPANY’S BEHALF are Dr. Somsak Leeswadtrakul or
Ms. Patama Leeswadtrakul or Pol.Lt. General Prakard Sataman or Mr. Stephane Benayon co-signs with Mr. Vijit
Supinit or Mr. Ryuzo Ogino or Mr. Yanyong Kurovat or ML. Sasiwimol Kasemsri together with company’s seal.
THE BOARD’S ROLES AND RESPONSIBILITIES
1. To manage the Company’s business according to legal frameworks, its objectives, rules and regulations as
well as shareholders’ meeting resolutions with honesty and discretion on the Company’s benefi ts.
2. To stipulate the Company’s policies and business direction and to oversee and supervise an execution of the
Management to meet the set policies effi ciently and effectively.
3. To be accountable to shareholders at all times and to manage for the maximum benefi ts of the shareholders as well
as to disclose to investors with acceptable standards, the relevant accurate, complete and transparent information.
4. To appoint and revise the Company’s list of authorized signatory directors.
5. To appoint subcommittees to supervise, monitor and control essential management issues, namely,
Executive Committee and Audit Committee and so forth.
6. To delegate any person or persons to duly act on behalf of the Board within a duly time frame. The Board
may have such a delegation repealed, changed or modifi ed.
7. To stipulate recruiting, selecting, hiring and appointing any person as deemed appropriate as Chief Executive Offi cer
and stipulate appropriate remuneration and to empower the CEO to transfer, suspend and terminate employment.
8. To prepare annual Board of Directors’ report and be responsible for the preparation and disclosure of
fi nancial statements revealing the Company’s fi nancial status and operating results of the preceding year
to present to shareholders’ meeting.
9. To convene at least once every 3 months. Rulings of the Board meeting will be based on a majority vote.
Directors with confl icts of interest in any matters shall have no voting rights on the specifi c issue.
10. To hold the Annual Shareholders’ Meeting within 4 months after the Company’s accounting year-end date.
In any case where any director or parties with possible confl icts of interest (as per announcements of SEC
offi ce and/or the Stock Exchange of Thailand) may have any confl icts of interest, the director(s) shall have
no authority to approve the matter.
BOARD OF DIRECTORS CONSISTS OF 5 INDEPENDENT DIRECTORS AS FOLLOWS:
1. Professor Paichitr Roajanavanich
2. Assoc. Professor Prapanpong Vejjajiva
3. Mr. Preecha Prakobkit
4. General Choochat Kambhu Na Ayudhya
5. Mr. Chaipatr Srivisarvacha
STRUCTURE OF CRITERIA FOR THE SELECTION OF INDEPENDENT DIRECTORS
The Company’ s Board of Directors selectively extends an invitation to persons of recognized capability,
experience, vision and with a good understanding of the nature of the Company’s business. The Board deems
such appointments as a favorable contribution to the Company’s progress and development. Such persons must
also be willing to devote their time adequately to the business of the Company, and they must ensure they meet
all regulations and requirements of the goverment agencies concerning the appointment of an independent
director of a business entity.
(2) EXECUTIVE COMMITTEE
As at 31 December 2006, the Company had a 7 - member Executive Committee consisting of:
1. Dr. Somsak Leeswadtrakul Chief Executive Offi cer
2. Ms. Patama Leeswadtrakul Executive Director
3. Pol. Lt. General Prakard Sataman Executive Director
4. Mr. Yanyong Kurovat Executive Director
5. ML. Sasiwimol Kasemsri Executive Director
6. Mr. Ryuzo Ogino Executive Director
7. Mr. Stephane Benayon Executive Director
EXECUTIVE COMMITTEE’S ROLES AND RESPONSIBILITIES
1. To scrutinize the Company’s policies, business plan, investment plan and annual budgeting to the Board of
Directors for approval.
2. To monitor, supervise and control operations to achieve the set objectives of the plans approved by the
Board of Directors or as per its assignment. To report results of the execution to the Board of Directors for
its information.
3. To approve an execution or payment for any execution which exceed an authority or an authorization amount
of the management in accordance with the Company’s authorization regulations or as per an annual budget
approved by the Board of Directors.
4. To review the organization chart, authorization structure, remuneration policy as well as the Company’s
salary structure.
042
5. To scrutinize authorizations for managerial and operational
levels covering areas of fi nance, accounting, procurements,
investment, borrowings, collateral, sales or disposal or transfer
of any assets, entering into any agreement or contract and
any other execution as deemed fi t.
6. To delegate any person or persons to execute on behalf of the
Executive Committee as deemed appropriate. They may cancel
or repeal, change or revise the authorization conferred.
7. To contemplate and approve openings of varied bank
accounts with any commercial banks as deemed appropriate
and assign persons to authorize withdrawals or payments
from those bank accounts.
8. To execute any other tasks assigned by the Board of Directors.
The authorization to the Executive Committee described above
shall not cover any authorization enabling it to approve any
transactional items that any Executive Director or parties with
possible confl icts of interest as per announcements of SEC offi ce
may have conflicts of interest with the Company or any
subsidiaries (if any). The Executive Committee shall submit the
matter to the Board of Directors and the Shareholders’ Meeting
for perusal and approval of the tranasctions as per regulations
or announcements or pertinent laws.
(3) AUDIT COMMITTEE
As at 31 December 2006, the Audit Committee consists of 3
Independent Directors with 3 year service term. They are:
1. Professor Paichitr Roajanavanich
Chairman of the Audit Committee
2. Associate Professor Prapanpong Vejjajiva
Audit Committee Member
3. Mr. Preecha Prakobkit
Audit Committee Member
ROLES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE
1. To examine the Company to have accurate fi nancial reports
with sufficient disclosure, coordinating with the external
auditors and the executive in charge to have quarterly and
annual financial reports prepared. The Committee may
recommend the external auditors to examine or check any
items as deemed necessary or essential during the audit.
2. To examine the Company to have appropriate and effective
internal control and audit systems in cooperation with the
external auditors and Internal Audit Department.
3. To examine the Company’s operations in compliance with laws
on securities and stock exchange, SEC and SET regulations or
any other laws related to the company’s business.
4. To select and propose a nomination of the Company’s
external auditors and their remuneration, by taking into
account their reliability, resource adequacy, existing workload
of particular auditor offi ce and work experience of respective
team members assigned to audit the Company.
5. To deliberate complete and accurate disclosure of the
Company’s information in case of inter-related transactions or
transactions with possible confl icts of interest.
6. To carry out any other tasks assigned by the Board of Directors
with consent of the Audit Committee, i.e. to review fi nancial
and risk management policies, management conduct as per
business codes and in cooperation with the Company’s
management to review the key reports as Executive Notes and
Analysis to the public as per legal requirements.
7. To prepare the Audit Committee’s report to be included in the
annual report and have it signed by the committee’s Chairman.
The report shall comprise the following information:
• Notes on the preparation procedure and disclosure of
information in the Company’s fi nancial reports in relations
with their completeness and reliability.
• Notes on adequacy of the internal audit systems .
• Justifi cations for nomination of the Company’s external
auditors for another term.
• Notes on compliance with laws on Securities and Exchange,
SEC and SET regulations and any other laws relating to the
Company’s business.
• Any other reports considered suitable for information of
shareholders and general investors under scopes of roles
and responsibilities assigned by the Board of Directors.
8. The Audit Committee is accountable to the Board of Directors as
per roles and responsibilities entrusted by the Board of Directors
and shall report to it the performance, recommendations and
fi ndings at least twice a year.
In any cases where any Audit Committee member or parties with
possible confl icts of interest (as per announcements of SEC Offi ce
and/or the Stock Exchange of Thailand) may have any confl icts of
interest with the Company or any subsidiaries (if any), the Audit
Committee shall submit the matter to the Board of Directors and/or
the shareholders’ meeting for perusal and approval of the transactions
as per regulations or announcements or pertinent laws.
(4) NOMINATION COMMITTEE
As at 31 December 2006, the Nominaton Committee consists of 3
Directors with 3 year service term. They are:
1. General Singha Saovapap
Chairman of the Nomination Committee
2. Mr. Yanyong Kurovat
Member of the Nomination Committee
3. Mr. Chainarong Monthienvichienchai
Member of the Nomination Committee
044
045
ROLES AND RESPONSIBILITIES OF THE NOMINATION COMMITTEE
1. To set all rules and policies for persons to be nominated as directors of the Board of Directors, members
of other committees and Chief Executive Offi cer.
2. To consider and nominate appropriate persons to be appointed as directors of the Board of Directors,
members of other committees and Chief Executive Offi cer for the Board of Directors’ and/or the Meeting
of the Shareholders’ approval.
3. To inform and report the Board of Directors as to results of the meeting of the Nomination Committee
and other matters that should be informed.
4. To perform any other things as may be assigned by the Board of Directors.
(5) REMUNERATION COMMITTEE
As at 31 December 2006, the Remuneration Committee consists of 3 Directors with 3 year service term.
They are :
1. Associate Professor Prapanpong Vejjajiva Chairman of the Remuneration Committee
2. Pol. Lt. General Prakard Sataman Member of the Remuneration Committee
3. General Choochat Kambhu Na Ayudhya Member of the Remuneration Committee
ROLES AND RESPONSIBILITIES OF THE REMUNERATION COMMITTEE
1. To set all rules and policies relating to remuneration payable to the Board of Directors, other committees
and Chief Executive Offi cer to be proposed to the Board of Directors and/or the Meeting of the
Shareholders, as the case may be, for their approval.
2. To fi x the necessary and appropriate amount of remuneration for the Board of Directors, other committees
and Chief Executive Offi cer in each year.
3. To inform and report the Board of Directors as to results of the meeting of the Remuneration Committee
and other matters that should be informed.
4. To perform any other thing as may be assigned by the Board of Directors.
MANAGEMENT TEAM
As at present the Company’s Management Team comprises:
1. Dr. Somsak Leeswadtrakul Chief Executive Offi cer
2. Ms. Patama Leeswadtrakul Assistant Chief Executive Offi cer
and President
3. Mr. Ryuzo Ogino President
4. Mr. Joachim Burgers Executive Vice President - Expansion & Engineering
5. Ms. Kannikar Soykeeree Senior Vice President
6. Mr. Nopakao Srisuvanon Senior Vice President - Operation
7. Mr. David James Scott Vice President - Operation
ROLES AND RESPONSIBILITIES OF THE CHIEF EXECUTIVE OFFICER
1. To stipulate business plan, investment plan and annual budgeting to submit to the Executive Committee
and/or the Board of Directors for approval.
2. To take responsibility of the overall management and to deliberate the Company’s management policies
enabling operations to achieve the set objectives under the framework of the policies, business plans
and budgets approved by the Board of Directors.
3. To approve an execution or payment for any execution according to the Company’s authorization
regulations or annual budgets approved by the Board of Directors.
4. To recruit, hire, reshuffl e, suspend or terminate an employment of any executives or employees in all
positions and to stipulate scopes of roles and responsibilities as well as appropriate remuneration. An
execution of positions equivalent to a Senior Executive Vice President or higher shall be reported to the
Executive Committee for their information, while an execution of positions equivalent to the Internal
Audit Department management shall be made with the Audit Committee’s considerations.
5. To appoint respective authorized persons to sign the Company’s documents in the areas of accounting,
fi nance, procurement, production, sales, general administration and any other important documents.
6. To set, change, revise, and cancel any rules, statements, announcements, regulations, punishment
measures and internal controlling systems to serve as operational guidelines for all employees and to
enable an internal organizational management executed as per the Company’s stipulated policies.
7. To appoint advisors in any fi elds as necessary to the operation for the Company’s benefi ts. The CEO is
empowered to appoint attorney(s) to fi le a lawsuit or defend any case relating to the Company.
8. To delegate any person to execute any tasks on his behalf as deemed appropriate. He may cancel, repeal,
change or revise the authorization conferred.
9. To report the operating results and development or progress of projects as well as fi nancial status to the
Executive Committee and the Board of Directors.
10. To execute any other tasks assigned by the Executive Committee or the Board of Directors.
In any cases where the Chief Executive Offi cer or persons with possible confl icts of interest may have any
confl icts of interest, the CEO shall have no right to approve the execution.
THE SELECTION OF DIRECTORS AND THE CHIEF EXECUTIVE OFFICER
Candidates for the Company’s Directors and Chief Executive Offi cer are selected by the Nomination Committee. The
Company assigns the duty to the Board of Directors to recruit knowledgeable and competent candidates with relevant
experiences and qualifi cations as per Clause 68 in the Public Limited Company Act B.E. 2535, pertinent announcements
by the Securities and Exchange Commission and the Company’s rules and regulations for the benefi ts of the Company’s
effi cient operations.
046
047
REMUNERATIONS FOR THE DIRECTORS AND MANAGEMENT TEAM
The Annual General Shareholders Meeting of Year 2006 on 24 April 2006 approved a total remunerations for the
Directors for 2006 at the amount of not exceeding Baht 8 million, and the Board of Directors Meeting No. 5/2006 on
10 May 2006 worked out a remuneration structure for the Company’s Directors as follows.
Position Position
Remuneration
(Baht/Month)
Monthly
Remuneration
(Baht/Month)
Meeting Allowance
(Baht/Time)
- Chairman of the Board of Directors
- Directors/Executive Directors
- Chairman of the Audit Committee
- Audit Committee Members
- Nomination Committee Members
- Remuneration Committee Members
100,000
-
20,000
-
-
-
-
30,000
40,000
40,000
-
-
10,000
5,000
5,000
5,000
5,000
5,000
Any director who concurrently holds the Company’s managerial positions will receive remuneration in the forms of
monthly salary thus will not be entitled to the remuneration listed above. In cases where any director takes up more
than 1 position, he/she will be entitled only to the remuneration of the position offering the highest return.
TOTAL REMUNERATION FOR THE BOARD OF DIRECTORS AND THE MANAGEMENT IN 2006
Items Year 2006
Persons Amount (Baht Million)
Remuneration Details
Board of Directors
Management*
15
6
6.28
33.32
remuneration and meeting
allowance
salary, bonus and other
compensations
* Including expatriate executives
REMUNERATION FOR INDIVIDUAL BOARD MEMBERS IN 2006
Items Names and Positions Remuneration
(Baht)
Meeting Allowance
(Baht)
Total Monetary
Remuneration
(Baht)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Mr. Vijit Supinit
Chairman of the Board of Directors
General Singha Saovapap
Vice Chairman of the Board of Directors
and Chairman of the Nomination
Committee
Ms. Patama Leeswadtrakul *
Vice Chairman of the Board of Directors,
Executive Director, Assistant Chief
Executive Officer and President
Dr. Somsak Leeswadtrakul *
Director, Chairman of the Executive
Committee and Chief Executive Officer
Professor Paichitr Roajanavanich
Director and Chairman of the Audit
Committee
Assoc. Prof. Prapanpong Vejjajiva
Director, Audit Committee Member and
Chairman of the Remuneration Committee
Mr. Yanyong Kurovat
Director, Executive Director and
Nomination Committee Member
Pol. Lt. General Prakard Sataman
Director, Executive Director and
Remuneration Committee Member
Mr. Ryuzo Ogino *
Director, Executive Director and
President
General Choochat Kambhu Na Ayudhya
Director and Remuneration Committee
Member
Mr. Chainarong Monthienvichienchai
Director and Nomination Committee
Member
Mr. Preecha Prakobkit
Director and Audit Committee Member
Mr. Chaipatr Srivisarvacha
Director
ML. Sasiwimol Kasemsri
Director and Executive Director
Mr. Stephane Benayon
Director and Executive Director
1,100,000
360,000
_
_
720,000
480,000
360,000
360,000
_
360,000
360,000
480,000
360,000
360,000
360,000
80,000
45,000
_
_
75,000
80,000
50,000
55,000
_
50,000
20,000
70,000
35,000
25,000
40,000
1,180,000
405,000
_
_
795,000
560,000
410,000
415,000
_
410,000
380,000
550,000
395,000
385,000
400,000
* Directors who concurrently held managerial positions in the Company and received remuneration in the form of
monthly salary were not entitled to any other monthly remuneration nor meeting allowance.
048
049
OTHER REMUNERATIONS
The Shareholders’ Extraordinary Meeting No. 2/2004 on 5 October 2004 resolved an issuance and allocation of
warrants for 100,000,000 units to the Company’s directors and employees (prior to the Company’s initial public
offering) as a recognition to their contribution and a motivation for them to continue intentionally their
performance with the Company in the long run. The details on the matters are as below:
Type of Instrument Named and Non-Negotiable Certificate of Warrants
It will be transferable solely in case of an inheritance or beneficiary heir
Offering Size 100,000,000 units
Offering Price Baht 0 per unit (Zero Baht)
Issuing and Offering Date 12 January 2006
Expiry Date 11 January 2011
Exercise Ratio 1 unit of warrant per 1 ordinary share
Exercise Price Baht 1 per share
Exercise Period One year after the date when the Company’s shares are traded on the SET until the
expiry date of the warrants (24 January 2007- 11 January 2011). Holders are entitled to
exercise at the one-third of total allocated warrants and shall exercise their right for
the full portion at one time.
Two years after the date when the Company’s shares are traded on the SET until the
expiry date of the warrants (24 January 2008-11 January 2011). Holders are entitled to
exercise at another one-third of total allocated warrants and shall exercise their right
for the full portion at one time.
Three years after the date when the Company’s shares are traded on the SET until
the expiry date of the warrants (24 January 2009-11 January 2011). Holders are entitled
to exercise at another one-third of total allocated warrants and shall exercise their
right for the full portion at one time.
Exercise Dates The last working day of March, June, September and December until the expiry date
of the warrants. The first date to exercise the right is 30 March 2007 and the last date
is 11 January 2011
The directors will be allocated not over 2,000,000 units each, whereas the directors concurrently serving as
the Company’s employees will be entitled to an allocation to employees as well. The Company carried out the
allocation on 12 January 2006 as per guidelines approved by the Board of Directors as follows:
Names
Positions Quantity
(units)
Board of Directors
1. Mr. Vijit Supinit
2. General Singha Saovapap
3. Ms. Patama Leeswadtrakul
4. Dr. Somsak Leeswadtrakul
5. Professor Paichitr Roajanavanich
6. Assoc. Prof. Prapanpong Vejjajiva
7. Mr. Yanyong Kurovat
8. Pol. Lt. General Prakard Sataman
9. Mr. Ryuzo Ogino
10. General Choochat Kambhu Na Ayudhya
11. Mr. Chainarong Monthienvichienchai
12. Mr. Preecha Prakobkit
13. Mr. Chaipatr Srivisarvacha
14. ML. Sasiwimol Kasemsri
15. Mr. Stephane Benayon
Chairman of the Board of Directors
Vice Chairman of the Board of
Directors
Vice Chairman of the Board of
Directors
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
_
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
Management
1. Dr. Somsak Leeswadtrakul
2. Ms. Patama Leeswadtrakul
3. Mr. Ryuzo Ogino
4. Mr. Joachim Burgers
5. Ms. Kannikar Soykeeree
6. Mr. Nopakao Srisuvanon
7. Mr. David James Scott
Chief Executive Officer
Assistant Chief Executive Officer
and President
President
Executive Vice President
Expansion & Engineering
Senior Vice President
Senior Vice President – Operation
Vice President - Operation
5,000,000
2,750,000
2,750,000
2,000,000
2,000,000
2,000,000
784,000
Employees
704 employees
Total
54,688,200
99,972,200
050
051
C H A N G E S I N SHAREHOLDING BY THE BOARD OF DIRECTORS
Shareholding (Shares) : Par 1 Baht
Names Position As of 31 Dec. 2005
As of 31 Dec. 2006
Changes
1. Mr. Vijit Supinit Chairman of the Board of
Directors
_ _ _
2. General Singha Saovapap Vice Chairman of the
Board of Directors
1,500,000 1,500,000 _
3. Ms. Patama Leeswadtrakul Vice Chairman of the
Board of Directors
1,061,060,793 1,077,802,793 16,742,000
4. Dr. Somsak Leeswadtrakul Director 7,154,071 7,154,071 _
5. Professor Paichitr
Roajanavanich
Director _ _ _
6. Assoc. Prof. Prapanpong
Vejjajiva
Director _ _ _
7. Mr. Yanyong Kurovat Director _ _ _
8. Pol. Lt. General Prakard
Sataman
Director _ _ _
9. Mr. Ryuzo Ogino Director _ _ _
10. General Choochat Kambhu
Na Ayudhya
Director _ _ _
11. Mr.Chainarong
Monthienvichienchai
Director 1,500,000 1,500,000 _
12. Mr. Preecha Prakobkit Director _ _ _
13. Mr. Chaipatr Srivisarvacha Director _ _ _
14. ML. Sasiwimol Kasemsri Director _ _ _
15. Mr. Stephane Benayon Director _ _ _
CHANGES IN SHAREHOLDING BY MANAGEMENT TEAM
1. Mr. Joachim Burgers Executive Vice President Expansion & Engineering
_ _ _
2. Ms. Kannikar Soykeeree Senior Vice President _ _ _
3. Mr. Nopakao Srisuvanon Senior Vice President Operation
_ _ _
4. Mr. David James Scott Vice President - Operation _ _ _
MANAGEMENT TEAMCHANGES IN SHAREHOLDING BY M
General Information
G STEEL PUBLIC COMPANY LIMITED
G STEEL PUBLIC COMPANY LIMITEDGSTEEL0107538000746
18th Fl. SSP Tower 3, 88 Silom Road, Suriyawong, Bangrak, Bangkok 10500, ThailandTel. 0-2634-2222, Fax. 0-2634-4114
55 Moo 5, SSP Industrial Park, Nonglalog, Bankhai, Rayong 21120, ThailandTel. 0-3886-9323, Fax. 0-3886-9333
www.gsteel.com30 October 1995
1 November 1999
Production and Distribution of Hot Rolled Coils900 - 1,550 mm.1.0- 13.0 mm.Melting - Electric Arc Furnace from GermanyCasting - Medium Slab Casting Machine from JapanRolling - Hot Strip Mill from Japan1,800,000 tons per annum734 persons
12,000,000,000 Baht 12,000,000,000 Baht 1 Baht per Share 11,100,000,000 Baht 11,100,000,000 Baht
Thailand Securities Depository Co., Ltd.4th, 7th Fl., Stock Exchange of Thailand Building62 Rajadapisek Road, Khlong Toey, Bangkok 10110
Tel. 0-2229-2800 Fax. 0-2359-1259
The Hong Kong and Shanghai Banking Corporation LimitedLevel 30, HSBC Main Building, 1 Queen’s Road Central, Hong Kong
Ms. Rungnapa Lertsuwankul Certifi ed Public Accountant Registration No. 3516
Ms. Vissuta Jariyathanakorn Certifi ed Public Accountant Registration No. 3853
Ms. Sumalee Reewarabandith Certifi ed Public Accountant Registration No. 3970
Ernst & Young Offi ce Ltd.193/136-137 33rd Fl., Lake Rajada Building, Rajadapisek Road, Khlong Toey, Bangkok 10110
Tel. 0-2264-0777 Fax. 0-2264-0789-90
Company
Company’ s Name SymbolRegistration No.Head Offi ce
Plant Offi ce
WebsiteEstablishment DateProduction Commencement DateBusiness TypeWidthGaugeProduction Technology
Production CapacityNo. of Employees
Registered Capital and Paid-up Capital
Registered CapitalOrdinary SharesPar ValuePaid-up CapitalPaid-up Ordinary Shares
Referrals and Their Locations
Common Stock Registrar
Bond Trustee
Auditor
052
053
NATURE OF BUSINESS
G Steel Public Company Limited is a hot rolled coil producer and distributor with objectives to substitute import
and to serve domestic demand. Its products are used as raw materials for such downstream industries as cold
rolled coils, galvanized steel, steel pipes and structural steel products for construction, petroleum containers or
LPG cylinders, automobile and parts, electrical appliance, furniture, and so on.
The Company’s hot rolled coil mill is equipped with the world’s latest state of the art technology and completed
infrastructure. With the total investment of over Baht 40,000 million, melting, casting, and rolling processes are
integrated into one mill: the Compact Mini Mill, which comprises melting technology in the electric arc furnace,
casting technology in the medium slab casting machine, and rolling technology in the hot strip mill.
The production process starts from having steel scrap and pig iron melted in an electric arc furnace at about 1,600° C
into liquid steel, which is then improved quality with additives to meet customers’ respective requirements. The
refined liquid steel is cast into medium sized slab of 80 - 100 mm. and subsequently hot - rolled into a specific
required gauge. Being the fi rst in Thailand and among very few of its kind in the world, the mill can make hot rolled
coil at the minimum thickness of just 1.0 mm. The entire process is continuous and merely takes 3.5 hours.
The Company’s hot rolled coil mill was designed with the maximum production capacity of 3.4 million tons.
Presently, it runs at 1.8 million ton capacity per annum, and a designated production efficiency for product mixed
ratio as per market requirements is 1.5 million tons per annum. The Company’s hot rolled coil meets international
standards, i.e. ASTM, JIS, DIN, BS and Thailand Industrial Standards (TIS).
In the year 2006 the Company achieved its goal, receiving ISO 14001 certification in environmental administration
standard, TIS 18001 certification in hygiene and safety administration together with OSHAS/TIS 18001 and CE
Marking certification by TUV NORD.
INCOME STRUCTURE
The Company’s income structure during the past 3 years can be divided as per the nature of business as follows.
(Unit : ‘000 Baht)
Incomes Distribution
Channels
2004 2005 2006
Amount % Amount % Amount %
Sales from Hot
Rolled Coils
Domestic
Overseas
16,435,025
4,835,227
76.7
22.6
19,654,894
2,546,951
88.2
11.4
16,809,293
1,193,753
88.0
6.2
Total Sales 21,270,252 99.3 22,201,845 99.6 18,003,046 94.2
Other Incomes 140,018 0.7 95,234 0.4 1,115,763 5.8
Total Incomes 21,410,270 100 22,297,079 100 19,118,809 100
Notes: The Company’s other incomes included sales of various scrap from production process, interest income and
foreign exchange gain.
The Company’s main income was from domestic sales due to the high demand from both construction and
industrial sectors. While the local production could not meet the local consumption, over 2 million tons had to be
imported. Nevertheless, the Company has also continued exporting to establish overseas market bases for its
business expansion in the future. The fact reflected that quality of the Company’s products was well accepted in
overseas market as America, Europe, Middle East, and Asia.
FUTURE PLAN
The Company has long – term plans to expand production capacity from 1.8 million tons per annum to 3.4 million
tons per annum to meet domestic demand surplus.
Besides, becoming an alliance with Nakornthai Strip Mill Public Company Limited (NSM) – also in the hot rolled coil
production business – had continually positive effects on the Company in terms of purchasing, marketing,
production and so on. In addition, both companies’ know - how had been exchanged and adapted to develop new
products. As a result, the Company will have more diversified products in the future to respond and cover
customers’ needs, especially automobile parts, electronics and electrical appliance, furniture and other industries
in the future.
054
Business risk factors that may significantly affected return on investment and guidelines to prevent such risks can
be summed up as follows:
1. PRODUCTION RISKS
1.1 RISKS FROM RAW MATERIAL PRICE FLUCTUATIONS
Prices of such major raw materials as scrap and pig iron are of cyclic nature, hence there are price
fl uctuations: upward and downward trends. The Company has no protection tools for the raw material
procurement risks that may expose it to diffi culties during the downward cycle. As the Company may
have high – priced raw material inventory, its production costs will be high accordingly. This may have
impacts on its performance results.
Nevertheless, prices of scrap and pig iron follow the world market mechanism, in which the prices vary
with demands for hot rolled coils. i.e. the former to follow the latter’s upward and downward trends.
Besides, the fact that the Company has raw material purchasing agreements on consignment basis that
is the payment for major raw materials will be made upon an actual usage at the price of the purchasing
date enabled it to manage major raw material prices. However, it has to be responsible for interest
expenses for the overdue balance from B/L date to the date of payment for scrap and pig iron. As such,
it can manage to settle selling prices of hot rolled coils to customers, taking into account costs of major
raw materials purchased as major costs to stipulate selling prices of its products. Consequently, it is less
exposed to fl uctuations of major raw material prices.
1.2 RISKS FROM DEPENDENCY ON MAJOR RAW MATERIALS FROM OLIGOPOLY SOURCES
To produce hot rolled coils, main raw materials required include scrap and smelt iron. The Company has
imported a higher quantity of scrap than locally purchased with the proportion of 80:20. As for crude
iron, it has to fully import. Generally, producers worldwide will have transactions with only a few vendors
in order to continually control quality, terms and conditions. The Company has purchased main raw
materials from major distributors overseas such as Stena Metal Inc., Steel Base Trade AG and Cargill
International Trading Pte. Ltd., and so forth who have been its trade partners for a long time.
However, its major trade partners are long – standing multinational fi rms with strong fi nancial status.
It has also built up relationship with many other raw material distributors, both local and international,
who are prepared to support and to have business transactions with the Company. In this regard, it has
a policy to split a small quantity of raw material purchases to other distributors in order to maintain
business relationship with them. Currently, a number of new local and international distributors have
regular transactions with the Company given thus a high bargaining power in prices, payment terms and
so on.
2. MARKETING AND DISTRIBUTION RISKS
They are risks from fl uctuations of products’ market prices owing to the business downtrend because some
downstream industries using its products as their base materials such as construction industry is also of cyclic
nature. As a result, demand and prices of the Company’s products have fl uctuated in accordance with the
RISK FACTORS
056
business cycle. This may affect its performance results in the
future during business downtrend. The fl uctuations of products’
market prices may have impacts on the Company’s incomes during
particular period of time as well as on its business, fi nancial status,
performance results and its future.
Moreover, as its products have been in demand for many
downstream industries, i.e., hot rolled coil industry for automobile
industry, galvanized sheets for many industries. The business
downtrend fluctuations of the aforementioned industries will
naturally affect its performance. However, recessions in some other
downstream industries like construction ones (which mainly use
long - sized products) will have less effects on demand and prices
of the Company’s products.
Nevertheless, it expects that with its production effi ciency and
competitiveness at the current level, the Company will be able to
gear its production for export should the market demand during
the downtrend heavily fall. Presently, it has developed overseas
market bases. The fl uctuations of products’ prices, however, do not
have much impact on its performance results as raw material prices
and product prices normally vary with each other. Hence, its profi t
slightly fl uctuated.
3. FINANCIAL RISKS
The Company is exposed to risks on foreign exchange
fluctuations as a majority of the income are in Baht
denomination whereas such raw material as scrap and crude
iron are purchased from overseas. Additionally, it issued and
offered USD 170 million worth debentures to overseas investors
during 2005 – 2006 which will be due in 2010 with a 10.5 interest
rate. Its subsidiary has borrowed USD 120 million short-term
loans from financial institutions in 2006. Thus, the Company
bears a great deal of expenses in USD denomination. It does not
have any FOREX risk prevention contracts with commercial
banks. Therefore, FOREX fluctuations may jack up its costs,
subsequently its profitability, and may have effects on its
liquidity, financial status, performance results and its future.
However, the Company anticipated that the impacts on its
business are limited because the stipulation of its selling prices
has been referred to selling prices in the world market which
directly involved USD denomination. Such matunal hedge makes
FOREX fluctuation directly vary with the stipulation of its selling
prices.
4. ENVIRONMENTAL AND PERSONNEL RISKS
4.1 RISKS FROM POSSIBLE POLLUTION - CAUSING PRODUCTION
The Company’s business is to produce hot rolled coils involving
melting, casting and rolling. The process may cause such
pollution as airborne particles, heavy metal contaminating
water and temperature of water in the process as well as
over – limit noise pollution. The Company has installed pollution
controlling systems in line with current laws and regulations
on environment. However, it is still exposed to risks as it may
not detect some certain environment – affecting pollution. In such
cases, it will have to absorb a higher cost to improve the affected
environment. It may also have to install more pollution
monitoring and controlling systems in accordance with more
stringent laws or regulations. This will increase its expenses,
including those incurred by legal disputes should the Company
fail to reduce such pollution. The situation has impacts on its
business, fi nancial status, performance results and future.
In 2006, the Company had complied with environmental standards
and regulations and was certifi ed ISO 14001 by TUV NORD.
Besides, it commissioned an environment expert fi rm to carry out
regular audits in its factory for every 6 months and regularly present
the fi ndings to the Ministry of Industry. The Company is, therefore,
confi dent not to face the aforementioned situation.
4.2 RISKS FROM OPERATIONS WITH POSSIBLE HAZARD TO
EMPLOYEES
The Company’s business is a heavy industrial one; its employees
may be affected by hazard from melting, rolling and handling
of very heavy materials. Such cases will incur the Company
increased expenses from compensation for infl icted persons as
well as expenses from penalty. This will naturally affect its
business, fi nancial status, performance results and future.
Nevertheless, the Company has an emergency plan and safety
measures which meet standards and accepted by government
agencies and relevant private parties. It received OSHAS / TIS
18001 certifi cations for accident prevention or risk rate reduction
during work. According to past records, it was found out that
since its establishment, its accident rate was very low, and there
was no claims from employees for any damages.
058
5. RISKS RELATED TO GOVERNMENT POLICIES AND RELEVANT RULES AND REGULATIONS
5.1 RISKS FROM FREE TRADE AGREEMENTS (FTA) WHICH COVER HOT ROLLED COIL PRODUCTS
At present, Thailand is under the Free Trade Agreement negotiation process. The FTA forum relating to
the steel industry is Thai – Japanese free trade negotiation. During the latest round, Japan would like
Thailand to reduce its import duty for hot rolled coils to 0% with immediate effect, while Thailand preferred
to maintain the import duty at 5% for the next 10 years and gradually reduce it from year 11 to year 15 to 0%.
If the talk results turned out in favor of Japanese side, some Thai producers will be affected. There will
also be quota limit. In this regard, the Company will be affected by competition from Japanese hot rolled
coil makers. This, in turn, will affect its performance results in the future. In addition, should the
government carry on its FTA negotiation with other countries, having hot rolled coil products included
in negotiation topics, the Company will have impacts from higher competition.
However, the Company anticipated that if conclusion of Thai – Japanese FTA negotiation turned out as
per Japanese proposals, it may not receive much effect because most producers in Japan are currently
levied for anti – dumping taxes. If such tax is no more levied or lenient, the Company will remain competitive
since it has continually improved its product quality, pricing and production effi ciency to be competitive
in the world arena.
5.2 RISKS FROM PRICE CONTROLLING MEASURES BY GOVERNMENT AGENCIES
According to an announcement of the Commerce Ministry, steel sheets are controlled goods with regulated
maximum selling price ceiling for each producer. To increase prices above the regulated ceiling, each
producer is required to submit to the government agency for price increment approval, and within 7 days,
if the agency does not turn down the request for the rise, the producer may increase its product prices.
However, it may face risks from not having granted permission from the government agency for the increment,
or it may not be able to increase their prices in line with growing costs. The government price control may
produce negative effects on business, fi nancial status, performance results and business future.
In the past, the Company managed to adjust its selling prices to cope with higher costs; it absorbed merely
a small portion of increase. Moreover, it successfully exported at the world market prices. Such prices
refl ected real costs, and there is no need to solely depend on domestic sales if prices for the latter market
are not in line with real cost burdens.
059
5.3 RISKS FROM GOVERNMENT POLICIES AFFECTING ITS OPERATIONS AND PERFORMANCE RESULTS
The Company’s business is in heavy industry the performance results of which may be affected by
government policies. Currently, the Company received promotional privileges from the Board of
Investment (BOI) and received protection under the Anti – Dumping Act. Hence, its business is exposed
to risks from changes in such policies.
Nevertheless, it anticipated that BOI – relevant policy changes will not affect the Company as it has
already been granted promotional privileges for the ongoing business and its production expansion.
Changes in government policies will have no retroactive effects on already – approved projects. Meanwhile,
cancellation of anti – dumping measures by the government in the future may have some impacts on it
in terms of competition from overseas. However, it expected that with its advanced production technology
and capabilities to make products on par with competitors in the world market, the cancellation of such
measures was likely to slightly affect its performance results.
6. RISKS FROM A LEGAL DISPUTE
In the past, it was sued by minority shareholders, two of which jointly fi led a complaint against the Company.
The complaint claimed that an agreement between the Company and its affi liated creditor (Siam Power Generation
Co., Ltd.) made on 24 November 2001 was a legal accord made with dishonest exercise of rights. This caused
damages to creditors as well as plaintiffs who were the Company’s shareholders. They asked the court to void
the agreement and claimed for Baht 54,450,000 from the Company for the damages.
On 25 July 2005, the court dismissed the case after which the plaintiff shareholders appealed to the appeal
court. The court had an order not to accept the appeal. The plaintiff shareholders later on submitted their
appeal against the court order; the appeal court again dismissed the complaint.
Presently, the plaintiff shareholders appealed the verdict of the appeal court, and the Company submitted its
justifi cations. The case is under the perusal of the Supreme Court. Should the Supreme Court uphold the appeal
court verdict; the case shall be considered completely ceased. Should the verdict turn out against the previous
one; the case will proceed to trial procedures again. This exposes the Company to risks from the legal
dispute.
060
7. INVESTMENT RISKS FOR INVESTORS
It is a risk from stock options offered to members of the Board of Directors, management and employees at a
special price. The 2/2004 Shareholders’ Ordinary Meeting on 5 October 2004 had a resolution to allot 100 million
units of the Company’s stock options to its directors, management and employees at a right – exercising price
of Baht 1 per share. The right was regulated to be exercised 1 year, 2 years and 3 years after the stock was
traded on SET respectively at the quantity of one – thirds of the stock options allocated. Each year, the right
shall be exercised on the last working day of March, June, September and December. Investors hence had risks
for having comparatively higher costs than the holders of the stock options. Additionally, they were exposed
to a risk of declining stock prices if this group of stock option holders sold out their shares upon an exercise of
their rights. The investors would face dilution effect as well.
However, there were merely 100 million units of the stock options offered to directors, management and
employees. Should they all exercise their right, the stock options would be converted into 100 million common
shares or 0.90% of total shares (11,100 million shares), a very small proportion. The situation shall not affect
share prices and ownership.
8. GENERAL RISKS
RISKS FROM NOT BEING ABLE TO OPERATE BUSINESS DUE TO FACTORS BEYOND CONTROL
The Company has risks from many factors beyond control, namely, natural disasters, industrial accidents,
arson, terrorism, technical mistakes and problems as well as labor protest. As its entire production
processes are located in the same area, it is exposed to a high risk to business stoppage should any
serious situation or disasters occur. The fact that the Company bought machines and equipment from
a few vendors and its production process is highly complicated and endanger from very high temperature,
it faced production risks caused by machinery defects or numerous industrial accidents. The aforementioned
factors may produce negative effects on the Company’s business, fi nancial status, performance results
and its future.
However, its machinery and equipment were made by leading producers with technology accepted
worldwide. The quality of the machines and production process made it unlikely to face serious production
disruptions leading to signifi cant loss of incomes. Besides, the Company hired responsible employees
from overseas who had expertise in steel production. Continuous production trainings for staff were
organized. This reduced chances for losses from extended production stoppage as employee errors were
minimal.
As for a situation where production could not be implemented due to other factors such as sabotage,
natural disasters and strikes, the Company has security systems. It hires outside security fi rm as well as
in – house security department staff to strictly monitor entries and exits around the clock. Moreover,
the factory is adequately equipped with standard fi re extinguishing tools and systems to cope with all
possible fi re accidents. Fire extinguishing exercises and evacuation were drilled in accordance with
standards of relevant government agencies. The Company also holds insurance policy to protect its
assets for possible damages.
061
062
063
CORPORATE GOVERNANCE
Understanding its roles and responsibilities to the Company and the shareholders, the Board of Directors has studied
the 15 - item good governance principles and recommendations for directors of listed companies as per guidelines of
the Stock Exchange of Thailand. This is to further enhance the Company’s transparent operations, business ethics,
and internal control systems as well as to emphasize an equal importance of shareholders and their benefi t protection.
The Board formulated a corporate governance policy with the following detailed guidelines and implementation results
for the preceding year.
(1) CORPORATE GOVERNANCE POLICY
Realizing benefi ts and importance of the good corporate governance for the enhancement of transparent
and effi cient management and administration which will create confi dence among shareholders, investors
and all parties concerned, the Board of Directors set a corporate governance policy as the Company’s
operations standard and procedures. It covers following principles:
• To treat shareholders and stakeholders equally and fairly.
• To carry out its roles and responsibilities in supervision and management honestly, ethically, prudently
and discreetly to achieve the set goals for the maximum benefi ts of the Company and shareholders as well
as to prevent possible confl icts of interest.
• To manage the Company with transparency under the effi cient internal control and audit systems and to
disclose adequate information to shareholders and all parties concerned to ensure equal information.
• To control and manage risks to be at levels appropriate to the Company’s business.
• To run the business with honesty under pertinent legal framework and business ethics.
(2) RIGHTS AND EQUALITY OF SHAREHOLDERS
The Board of Directors shall equally treat and project rights and benefi ts of all shareholders, no matter they
are majority or minority ones, institute or foreign investors, particularly the rights to access the Company’s
data and information which are published on the Company’s website, www.gsteel.com to attend shareholders’
meetings, to express their opinions and enquiries in the meetings and to jointly deliberate and vote during
the sessions. The Board shall facilitate the shareholders’ meetings in positive manners to encourage equal
and transparent treatment for all shareholders.
(3) RIGHTS OF VARIOUS GROUPS OF STAKEHOLDERS
All groups of stakeholders shall be treated equally by the Board of Directors, no matter they are shareholders,
employees, business partners, customers, competitors, communities in the factory’s vicinity or other
stakeholders to ensure that their basic rights and benefi ts shall be protected and taken care of in accordance
with relevant laws and legal requirements with no discrimination towards any particular person or groups
just because of personal relationship or benefi ts.
(4) SHAREHOLDERS’ MEETINGS
The Board of Directors gives an importance to shareholders’ meetings as they are basic rights of the
shareholders. The meetings shall be organized and run according to the Company’s regulations, Public Limited
Company Act B.E. 2535 and SET rules and regulations. The Board shall encourage an equal treatment for all
shareholders with transparency and simplifi ed handing procedures and facilitate shareholders to exercise
their rights to attend meetings and to obtain the Company’s data and information prior to the sessions. Equal
opportunities and time allocation shall be provided for all shareholders to express their opinions and raise
any questions during the meeting as per the proposed agenda and issues. The minutes shall be recorded
accurately for shareholders’ follow - up and examination. The Board shall also require the Company’s
management team members relating to the agenda and its legal advisors to attend the shareholders’ meetings
every time to provide information and address shareholders’ questions and enquiries.
In 2006, the Company held the Annual General Meeting of Shareholders once and the Extraordinary General
Meeting of the Shareholders once. The Company has developed the arrangement formality of each Annual
General Shareholders’ Meeting (AGM) in order to set standard for an AGM and to comply with the AGM
Checklist which is evaluated by the SEC and an independent appraiser. The checklist has the follow details:
• Disclosing adequate information for shareholders’ decision making, disseminating to them in advance
information and an invitation letter to the meeting as legally required giving them time. Also, the meeting
information is published in advance on www.gsteel.com for the shareholders to study before the
meeting.
• Facilitating shareholders and their proxy who attend the meeting by using barcode system in the registration
and voting counting processes and notifi cation of voting method and vote counting as well as other relevant
meeting regulations they should be aware of. The voting forms are distributed to the shareholders before
the meeting.
• Strictly conducting the meeting as per the set agenda and providing a question-answer session for clarifi cation
and fairness to shareholders and all parties concerned. Explicitly disclosing voting results of each agenda
with details on number of persons and number of voting shares exercised for approval, disapproval or
abstention.
• Having shareholders meeting session tape-recorded, taking main contents of enquiries in the minutes for
future references and also to enable absentee shareholders to catch up with the relevant details.
• Overseeing and conducting the shareholders meeting in accordance with the Company’s regulations, the
Public Limited Company Act B.E. 2535, SEC and SET announcements or regulations.
064
065
(5) VISION AND LEADERSHIP
With an aim to establish the Company’s business stability and sustaining success in the long run, the Board
of Directors together with the management team reviewed and adapted the vision and mission to suit changing
environments. They stipulated goals, business plans and budgeting, taking into account the highest economic
value added and long term stability for the Company and shareholders. They supervised and monitored
managerial execution to carry out effectively and effi ciently as per the set business plan.
Besides, to enhance good governance in the organizational management, the Board of Directors served as
a leader to set guidelines on good corporate governance, code of conduct, standards and procedures to
approve inter-related transactions with companies or parties with possible confl icts of interest, a clear division
of authority between shareholders and the Board, as well as between the Board and the management and
committees for balance of power and independent cross-checks.
(6) CONFLICTS OF INTEREST
The Board of Directors shall contemplate inter-related transactions with possible confl icts of interest among
shareholders, directors, and the management team with discretion, honesty, justifi cations and independence
within an ethical framework. This includes complete disclosure of information for the Company’s benefi ts
as a whole in strict conformity with guidelines and methods in SET announcements and regulations.
Observations by the Audit Committee on necessity and appropriateness of the transactions shall be
included.
The Board of Directors regulated measures and procedures to approve inter-related transaction with related
companies or parties with possible confl icts of interest, not allowing parties with direct or indirect confl icts
of interest to take part in deliberating the transactional item. The Audit Committee was required to jointly
contemplate and make observations on necessity and justifi cations of the items for the Company’s maximum
benefi ts. It was also regulated that the disclosure of the transactional items be included in the Notes to the
Financial Statements in the annual report as per the generally accepted accounting practice as per the
information disclosure form (Form 56-1) and Annual Report (Form 56-2).
(7) BUSINESS ETHICS
The Board of Directors shall monitor and supervise the Company’s business operations, and execution of
duties by the directors, management team and employees to conform with business ethics, apart from the
Company’s rules and regulations and pertinent legal framework.
The Board of Directors had the Company’s code of conduct for the management and employees to refer to
as guidelines in an execution of its duties with consistent and stringent compliance. The code covers business
execution with honesty, equal and fair treatment to stakeholders, confl icts of interest, confi dentiality, and
an abuse of information as well as receipt of gifts and rewards. The Internal Audit Department was assigned
to monitor and examine compliance with the stipulated codes.
The Board of the Directors has a policy for the executive directors and employees to avoid or abstain from
trading the Company’s shares for one month prior to a revelation of the Company’s information, i.e. fi nancial
data and so on, to the public that may have effects on share prices.
(8) BALANCE OF POWER FOR DIRECTORS WITHOUT MANAGEMENT AUTHORITIES
The structure of the Board of Directors should comprise directors without management authorities and independent
directors of not less than 60% of the total members. Of this, at least 3 directors shall be independent directors
and Audit Committee members. As at 31 December 2006, the Board consisted of 15 members as follows:
• Directors with management authorities 3 members (or 20%)
• Directors without management authorities 7 members (or 47%)
• Independent Directors 5 members (or 33%)
The directors without management authorities and independent directors totaled 12 or 80%, more than a half which
was enough to balance with directors with management authorities, thus enabling the Board to deliberate
independently.
(9) INTEGRATION OR SEGREGATION OF POSITIONS FOR MANAGERIAL BALANCE OF POWER
The Board of Directors clearly divided scopes of roles and responsibilities among the Board of Directors, Executive
Committee, Audit Committee and the Chief Executive Offi cer (CEO) with a clear stipulation that the Chairman
of the Board shall not be the same person as the Chairman of the Executive Committee or the CEO and shall
not have any relationships with any executive or management team. This is to prevent any executive to have
unlimited power and to enable managerial balance of power and cross-checking.
(10) REMUNERATIONS FOR DIRECTORS AND THE MANAGEMENT
The Board of Directors shall be responsible for regulating criteria on remunerations for directors in accordance
with a resolution of the shareholders’ meeting and have the Executive Committee regulate fair, appropriate
and motivating remunerations for the Chief Executive Offi cer based on his/her performance appraisal and
the Company’s operating results. The Executive Committee shall also stipulate policies on the Company’s
salary structure and compensations as well as reveal information on remunerations for the directors and
management team in the Annual Report.
In 2006, the Annual General Meeting of Shareholders of the year 2006 on 24 April 2006 regulated the maximum
amount of not over Baht 8 million annual remunerations to the Board of Directors and assigned the Board
to scrutinize a detailed allocation as deemed appropriate. In this regard, the 3/2005 Board Meeting on 20
May 2005 resolved that any director with a managerial position who received a monthly remuneration in the
form of salary shall not be entitled to any remunerations for directors.
(11) BOARD OF DIRECTORS’ MEETING
The Board of Directors is required to convene at least 4 times a year, and each meeting shall be conducted as
per the Company’s regulations, The Public Limited Company Act B.E. 2535 as well as SEC and SET regulations.
The Chairman of the Board as the chairman of the meeting shall promote prudent discretion and allocate
appropriate time for the management to present any matter and adequate time for directors to comprehensively
discuss on key issues thoroughly and carefully. Minutes of each meeting shall be taken to enable directors and
parties concerned to check. All directors are required to attend every meeting except there are sound reasons
for their absence.
In 2006, the Board of Directors convened 10 times, the meetings were strictly organized and conducted as
per the Company’s regulations, as well as the Public Limited Company Act B.E. 2535. Agenda and relevant
information were disseminated to the directors for their study and contemplation approximately 7 days prior
066
067
to the meetings. During each session, the Board members were given opportunities to comprehensively
discuss key issues thoroughly. The secretary to the Board and legal advisors attended the session and took
minutes which also included enquires and the Board’s suggestions for future references of the Board and
parties concerned. Details on attendances of the Board at the meetings in 2006 are listed below.
Item Names and Positions Numbers of
Attendance/
Total Numbers of
Meeting
Remarks
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Mr. Vijit Supinit
General Singha Saovapap
Ms. Patama Leeswadtrakul
Dr. Somsak Leeswadtrakul
Prof. Paichitr Roajanavanich
Assoc. Prof. Prapanpong Vejjajiva
Mr. Yanyong Kurovat
Pol. Lt. General Prakard Sataman
Mr. Ryuzo Ogino
General Choochat Kambhu Na Ayudhya
Mr. Chainarong Monthienvichienchai
Mr. Preecha Prakobkit
Mr. Chaipatr Srivisarvacha
ML.Sasiwimol Kasemsri
Mr. Stephane Benayon
8/8
9/10
10/10
10/10
9/10
9/10
10/10
10/10
9/10
9/10
4/10
10/10
7/10
5/10
8/10
First meeting: Meeting 3/2006
(12) COMMITTEE
The Board of Directors appointed committee(s) to assist it in studying, monitoring and controlling the
operations and screening its respective assignments with distinct scopes of roles and responsibilities. Currently,
4 committees have been appointed.
1) The Executive Committee comprising 7 directors.
2) The Audit Committee with 3 year service term, comprising 3 members, each of them is an independent
director. Criteria on the committee selections is as follows:
• Holding not over 5% of overall voting shares in the Company, subsidiaries, affi liations or any parties
with possible confl icts of interest (including related persons as per Clause 258 of the Securities and
Exchange Act B.E. 2535).
• Having no participation in management nor employment, advisors receiving regular monthly salary nor
having controlling authorization in the Company, subsidiaries, affi liations or any parties with possible
confl icts of interest at least for one year.
• Having no business relationship, direct or indirect stakes in fi nancial and managerial areas in the Company,
subsidiaries, affi liations or any parties with possible confl icts of interest in manners to lose their
independence.
• Having no close kinship with the management, the major shareholders of the Company, subsidiaries,
affi liations or any parties with possible confl icts of interest nor being appointed a representative to
protect benefi ts of the major shareholders or directors.
• Being competent to perform its duties, to voice out
comments or to report results of any tasks assigned by
the Board of Directors with independence and not being
under control of the management nor the Company’s
major shareholders or related parties or close relatives
of the aforementioned persons.
3) The Nomination Committee with 3 year service term,
comprising 3 members
4) The Remuneration Committee with 3 year service term,
comprising 3 members
(13) INTERNAL CONTROL AND AUDIT SYSTEMS
With an emphasis on effi cient internal control and audit systems
both in management and operational levels, the Board of
Directors and the Executive Committee are directly responsible
for organizing and maintaining the internal control system and
assessing an adequacy of the system in 5 areas, namely,
organizational control and environment protection measure; risk
management measure; management control activities;
information and communication measure; and monitoring. Of
this it is included a stipulation of business direction and follow -
up, development of information and communication system to
support decision making, regulation of scopes of roles and
authorization amount for each managerial level, provision of
distinct standard and procedure for inter-related transactions
between the Company and parties with possible confl icts of
interest, and adoption of generally accepted accounting practice
policy in which external auditors have independence to make
observations and access to signifi cant data.
Apart from having set up an Internal Audit Department to audit
in the areas of fi nance and operation, the Company commissioned
external legal advisors with expertise in particular areas to
supervise compliance with rules, regulations and pertinent legal
requirements to ensure that the Company’s operations and key
activities were effi ciently executed in the stipulated direction.
To enable the internal auditors to independently perform for an
organizational balance, the Board of Directors has the Internal
Audit Department to directly report to the Audit Committee and
the Board of Directors. In 2006, the Audit Committee convened
6 times to review justifi cations of inter-related transactions,
adequacy of internal control systems. They also met with the
external auditors to examine fi nancial statements and deliberate
reports on disclosure of fi nancial data in the fi nancial statements
and to scrutinize an annual auditing plan as well as to monitor
results of the internal audits.
068
069
(14) REPORT OF THE BOARD OF DIRECTORS
The Board of Directors shall prepare the Board’s annual report to present to the shareholders’ meeting. It
shall cover signifi cant issues as per the Annual Report Form (Form 56-2) and shall be as per good governance
guidelines for directors of listed companies recommended by the Stock Exchange of Thailand. The report
shall include its responsibilities in preparing fi nancial statements under the examination of the Audit Committee
to ensure accurate and complete accounting data with adequate disclosure of signifi cant data in notes to the
statements as per generally accepted accounting practice.
(15) RELATIONSHIP WITH INVESTORS
The Board of Directors shall supervise to ensure the Company’s accurate, complete, adequate, timely and
transparent disclosure of signifi cant information. In this regard, an investor relations unit was set up to
communicate with institute investors, shareholders, investment analysts and government authorities. The
Company also publishes all the information on the website www.gsteel.com as a channel to disseminate data
and information such as those on the Company, its business and fi nance and any coverage affecting investment
decision and so forth such as announcement to SET, the Company’s activity news, and AGM information. This
will enable investors to monitor information on the Company more conveniently. In addition, it organized
numerous activities, i.e. meeting with the press, analysts’ meeting, domestic and overseas road shows, participation
in exhibitions of the Stock Exchange of Thailand, the Association of Securities Analysts and other organizations
to disseminate information and address to interested investors’ enquiries on the Company’s performance.
INTERNAL INFORMATION CONTROL
It is a policy of the Company that all of its directors and/or executive members are prohibited from using any
material internal information, which has not yet been disclosed to the public, for their own or any other person’s
interest including for their or any other person’s trading of the Company’s securities. Procedures for controlling
the Company’s management people in respect of their use of the Company’s internal information are as follows:
1. To inform executive members of the Company’s departments or sections as to their duties to give report in
respect of the Company’s securities held by them and their spouses and non-sui juris children, including the
report of any changes thereof pursuant to Section 59 and penalty provisions specifi ed in Section 275 of the
Securities and Exchange Act B.E.2535 (A.D. 1992).
2. To circulate letters to executive members of the Company informing them that any executive members,
who receive or are aware of any of the Company’s material internal information and fi nancial statements
where such information may affect the price of the properties, should avoid or cease trading the Company’s
securities for a period of 1 month and that they are prohibited from disclosing such material information
to other persons prior to the disclosure of such material internal information and fi nancial statements
to the public. In this connection, the Company has imposed penalties in the Company’s regulations for
the persons who use such internal information in breach of the regulations for their own interests starting
from orally warning up to dismissal.
LABOR DISPUTES
At present, there is no any labor dispute.
EMPLOYEE IMPROVEMENT POLICY
It is a Company’s policy that the Company’s employees must be regularly trained in order to improve their skill and
knowledge. Such training is rendered on learning by doing basis and advice and recommendation from the experts
in each particular area of works are also given to the employees. Furthermore, the Company provides support to its
employees by way of having them constantly attend training and seminar courses conducted by other organizations.
Payment of appropriate remuneration as an incentive to the Company’s employees is another policy of the Company
such that the Company may maintain its employees for a long period of time.
DIVIDEND POLICY
In normal situations where the Company does not require any additional investment or business expansion plan
and has enough liquidity, it has a policy to pay dividend at approximately 50% of its net earning after tax and
legally required reserve. Nevertheless, the Board of Directors may resolve the Company to pay dividend
differently from the set policy as deemed necessary and appropriate, for instance, in case of economic or market
condition changes or any other situations affecting its liquidity.
070
INTERNAL CONTROL
According to the Company’s Board of Directors
Meeting No. 7/2004 held on 7 October 2004
in which the Company’s Audit Committee
participated, an evaluation in respect of the
Company’s internal control was made by the Board
of Directors by way of inquiring for information
from and distributing questionnaires to the
Company’s management members regarding the
adequacy of the Company’s internal control system
in 5 areas, i.e. organization and environment, risk
management, control over management’s practice,
information technology and communication systems
and following-up system. The Board of Directors
was of the view that the Company’s internal control
was at a certain satisfactory level and the internal
control in respect of the Company’s transaction
made or engaged in with the Company’s major
shareholders, directors, management members or
related persons was sufficient. Moreover, the Board
of Directors encouraged the Company’s
management members to develop and improve
internal control system of the Company on a
continuing basis in order to strengthen the
Company’s Good Corporate Governance.
The Company’s Board of Directors have evaluated
the sufficiency of the Company’s internal control for
2006 as follows:
1. Organization and Environment
The Company’s production target is, in its business
operation, always set by high level of management.
Checking or following - up on operational results is
rendered via meeting among executives or
management members of each of the Company’s
departments at least once a month. Such production
target and operational results will then be informally
reported and presented to the Company’s Board of
Directors meeting. Appropriate remuneration to
employees in the relevant departments is also
arranged for the appropriate consideration.
Moreover, the Company’s management has set up a
code of conduct in which the prohibition of the
Company’s executives or management members and employees from doing anything that may create a conflict of
interest in respect of the Company and the Company’s customers and the penalty for violation of such code of
conduct are included. The Company also has manuals for its procurement practices in line with those of ISO standard
in relation to financial matters. With respect to general management of the Company, operational plan is prepared in a
form of flow chart.
2. Risk Management
The Company has always been attentive to the internal and external risks which may have significant effects to the
Company’s business. The Company always analyzes various risk related incidents such as the world’s steel market
situation, the trend in domestic demand for steel, the economy and social issues. The Company also has
procedures for implementation by setting up the Audit Committee to make policy and monitor all risks
management of the Company.
3. Control over Management’s Practice
An internal control system is established to ensure that such stipulated internal control procedures has been followed.
In regard of connected transactions, each of the Company’s directors and executive members should be required to
give report or to disclose to the Company’s Board of Directors as to the conflict of interest that such person has or
may have and there should also be mechanisms or procedures to follow up and monitor such persons in order for such
persons to comply with those stipulated procedures and approval required. Such tasks could be rendered by the
Company’s internal control department. In the event of a transaction involving or may involve a connected person
where a long term commitment is to be engaged by the Company, procedures to follow up or monitor the Company’s
obligations agreed hereunder through out such period should be set up.
4. Information Technology and Communication Systems
The Company has been giving full attention to the information technology and communication systems.
The Board of Directors has been provided with sufficient and accurate information to be considered in each
meeting. The Board of Directors would receive the meeting agenda and details at least 7 days in advance. The
minutes of the meeting included details of the directors’ questions, opinions and comments and any differ in
opinion from any member of the Board of Directors should be recorded such that the shareholders or any related
persons will be able to review the directors’ performances. With respect to accounting policy, the Audit Committee
has been providing opinion regarding the accounting policy to the Company’s Board of Directors for consideration
and approval.
5. Following - up System
Operational results have been reported to the Company’s Board of Directors by management on a quarterly year
basis. In this connection, comparisons between the current and the previous period of operational results and
informal production target and operational result were also given to the Board of Directors. Furthermore, weekly
executives’ meetings in order to analyze the problems and solutions thereof have been made. Finally, the Company
has just recruited a manager of internal control department including certain officers to work therein for the
Company’s internal control works while these people are to give reports in respect of results of internal control to
the Audit Committee directly Recommendations: Reports in respect of comparisons between the Company’s actual
operational results and the targets and the following-up results should, in case of difference, be given to the
Company’s Board of Directors formally and regularly. In addition, there should be systemized mechanisms for
preparing and giving reports to the Audit Committee and the Board of Directors in respect of audited results,
audited result following-up, any material errors, fraudulences and doubtful fraudulences.
072
073
STRUCTURE OF SHAREHOLDING
Names and proportions of the first 10 major sharehodlers as at
31 December 2006 are as follows:
Item Names of Shareholders Number of Shares %
1 Superior Overseas (Thailand) Co., Ltd. 1 2,522,588,903 22.73
2 Ample Vision Group Ltd. 2 1,622,083,795 14.61
3 Dr. Somsak and Ms. Patama Leeswadtrakul Group 3 1,134,956,864 10.22
4 Rochelle Finance Limited 505,582,531 4.55
5 Morgan Stanley & Co International Limited 410,726,800 3.70
6 Mr. Nirum Ngamchumnanrit 295,200,000 2.66
7 Great Western Limited 271,241,066 2.44
8 Bethleham International Limited 223,733,651 2.02
9 Eastgate Limited 179,910,635 1.62
10 Newhaven Limited 177,733,373 1.60
11 Others 3,756,242,382 33.85
Total 11,100,000,000 100.00
1 The shareholding structure of Superior Overseas (Thailand) Co., Ltd.
(1) Ms. Patama Leeswadtrakul 29.42%
(2) Mr. Eakphet Chansue 19.80%
(3) Ms. Chunpit Phattana 15.38%
(4) Marcow Wealth Investment Co., Ltd. 10.00%
(5) Others 25.40%
2 The shareholding structure of Ample Vision Group Ltd.
(1) Mr. Hamish Gordon Cruden 100.00%
3 Dr. Somsak and Ms. Patama Leeswadtrakul Group consisting of:
(1) Ms. Patama Leeswadtrakul 9.70% ( 1,077,802,793 shares )
(2) Dr. Somsak Leeswadtrakul 0.06% ( 7,154,071 shares )
(3) Ms. Suthidarat Leeswadtrakul 0.22% ( 25,000,000 shares )
(4) Ms. Suratiporn Leeswadtrakul 0.22% ( 25,000,000 shares )
INTER-RELATED TRANSACTIONS WITH PARTIES WITH CONFLICT OF INTEREST
In 2006, the Company had inter – related transactions with parties with conflict of interest as follows:
Parties with Conflict
Of Interest
Relationships Types of
Transactions
Transactions
Value in 2006
Balance
at 2006
Year-end
Details / Terms &
Conditions
Sukhumvit Inter
Development Co.,Ltd.
(“SID”)
Nature of Business
- Real Estate Development
(Office building,
industrial estate and
others)
- 1.26% of shares held
directly and indirectly
by the Company’s
director and
shareholder, G Steel’s
ex – director serving as
a member of SID’s
Board of Directors
• Raw water
expense
14,709,884 1,286,340 • As per a contract to
buy and sell raw water via
SID, an industrial estate
park management, at a
more competitive price
than direct purchase
from the producer.
Paitoon Hotel and
Resort Co., Ltd. (“PHR”)
Nature of Business
- Hotel
- 69.4% of shares held
directly and indirectly
by the Company’s
directors and
shareholders, and have
common members of
Board of Directors
• service fees
1,920,155 272,973 • For service fees for
usages of Arnoma
Hotel’s facilities for the
Company’s meetings
and receptions of
foreign guests. The
hotel is situated in a
convenient location
and charges standard
service fees.
Oriental Access Co., Ltd.
(“OA”)
Nature of Business
- Business Consulting
- 99.92% of shares held
indirectly via Siam
Professional Holding
Co., Ltd.
• service fees
105,978,836 105,978,836 Service fees for
consultation rendered
to OA on business and
production process
management.
074
075
INTER – RELATED TRANSACTIONS WITH MAJOR BUSINESS ALLIANCES
Business Alliances Relationships Types of Transactions
Transactions Value in
2006
Balance at 2006 Year-end
Details / Terms & Conditions
Nara International Co., Ltd.
(“Nara”)
Nature of Business
- Steel Wholesaler and
Retailer
- Producer of other industrial
products
- The Company’s
directors and
shareholders formerly
served as directors in
Nara and held Nara’s
shares directly and
indirectly. However,
they quitted from both
capacities since
September 2004
• Expenses
for other
raw materials
and
consumable
supplies
• Expense for
the selling of
goods
• Expense for
the selling of
scrap
662,716,008
3,038,635,348
3,601,670
98,150,628
403,028,358
_
• Expenses for other raw material and
consumable supplies for the
production, a proportion of not
more than 3% of production costs.
Prices are based on costs plus
standard margin under normal
business terms and conditions.
• Expenses for the selling of hot rolled
coils at market prices under normal
business terms and conditions like
other customers with good financial
status and punctual payment
records as per the Company’s
terms and conditions.
• Expenses for the selling of scrap
from production process, Selling
prices are based on costs plus
standard margin under normal
business terms and conditions like
other customers .
Advance Metal Fabrication
Co., Ltd. (“Advance”)
Nature of Business
- Wholesaler and retailer of
steel and scrap
- The Company’s
directors and
shareholders formerly
served as directors in
Advance and held the
latter’s shares directly
and indirectly, however,
they relinguished since
September 2004
• Sales of
scrap
• Expense for
the selling of
goods
• Expense for
the selling of
scrap and
raw steel
2,989,004,338
1,304,805,704
11,959,482
200,235,008
341,816,850
_
• Expenses for scraps for production
process. Prices are based on costs
plus standard margin under normal
business terms and conditions and
not higher than those purchased
from other suppliers.
• Expenses for the selling of hot
rolled coils at market prices under
normal business terms and
conditions like other customers
with good financial status and
punctual payment records as per
the Company’s terms and
conditions.
• Expenses for the selling of scrap
the selling prices are based on
costs plus standard margin under
normal business terms and
conditions like other customers.
Business Alliances Relationships Types of Transactions
Transactions Value in
2006
Balance at 2006 Year-end
Details / Terms & Conditions
Federal Steel Industry Co.,
Ltd. (“Federal”)
Nature of Business
- Steel wholesaler and
retailer
- Its directors were
formerly the
Company’s directors
and shareholders, they
quitted since October
2004
• Expense for
the selling
of goods
2,028,079,940 361,276,533 • Expenses for the selling of hot
rolled coils at market prices under
normal business terms and
conditions like other customers
with good financial status and
punctual payment records as per
the Company’s terms and
conditions.
Trinity Freight and
Shipping Co., Ltd.
(“Trinity Freight”)
Nature of Business
- Freight forwarding
service provider
- Steel wholesaler and
retailer
- The Company’s
business alliance
• Freight
forwarding
service fees
• Expense for
the selling
of goods
758,737,692
41,419,538
54,941,569
24,044,869
• Expenses for transporting scrap
from ports to the factory,
transporting hot rolled coils from
the factory to customers’ premises
and ports for overseas markets.
Service charges were based on
weight and approximately the
same rate as other service
providers.
• Expenses for the selling of hot
rolled coils at market prices under
normal business terms and
conditions like other customers
with good financial status and
punctual payment records as per
the Company’s terms and
conditions.
Trinity International Co., Ltd.
(“Trinity Inter”)
Nature of Business
- Wholesaler
- Customs clearance service
provider
- Steel wholesaler and
retailer
- The Company’s
directors, shareholders
and executives were
formerly Trinity Inter’s
directors and
shareholders, but they
relinguished since early
2002 and 2003
respectively
• Service fees
21,614,185
2,550,247
• Service fees for customs clearance
for hot rolled coil import and
export. The fees were at market
prices in general.
076
077
Business Alliances Relationships Types of Transactions
Transactions Value in
2006
Balance at 2006 Year-end
Details / Terms & Conditions
Millennium Metal Work Co., Ltd.
(“Millenium”)
Nature of Business
- Steel wholesaler and
retailer
- An ex – major share
holder of Superior
Overseas (Thailand)
formerly served as
Millennium’s directors,
but quitted from the
position since 2003.
Expense for
the selling
of goods
500,034,738 137,056,621 Expenses for the selling of hot
rolled coils at market prices under
normal business terms and
conditions like other customers
with good financial status and
punctual payment records as per
the Company’s terms and
conditions.
STANDARD AND PROCEDURES TO APPROVE INTER – RELATED TRANSACTIONS WITH RELATED
FIRMS OR PARTIES WITH CONFLICT OF INTEREST
The Company has a policy to protect benefits of all shareholders with strict standards and procedures
to control inter – related transactions with related firms or parties with conflict of interest as follows:
- In approving any transactions with related firms or parties with conflict of interest and business
alliances (to be referred altogether as “parties with conflict of interest”), the Board of Directors and
the Audit Committee shall contemplate and stipulate a clear cut policy as follows:
• The Board of Directors shall execute according to the Securities and Stock Exchange laws,
rules, regulations, announcement by SEC and SET. It shall also disclose information on inter-
related transactions, acquisition or disposal of principal assets of the Company or its
subsidiaries as per SET regulations and generally accepted accounting practice stipulated by
the Accounting Association.
• Clear-cut guidelines on and scopes of management roles and authorization of each managerial
level have been set.
- In case where the Chief Executive Officer (CEO) or parties with possible conflict of interest
may have conflicts of interest with the Company, affiliated companies or parties with
conflicts of interest, the CEO cannot approve the transaction.
- In case where any Executive Directors or parties with possible conflict of interest may have
conflicts of interest with the Company, affiliated companies or parties with conflicts of
interest, the Executive Committee has to submit the matter to the Board of Directors for
its perusal and approval of the transaction.
- In case where any Director or parties with possible conflict of interest may have conflicts of
interest with the Company, affiliated companies or parties with conflicts of interest, the
Director cannot approve the transaction.
- Any shareholder with possible conflict of interest on specific matter, he/she cannot approve
the transaction.
- For normal business transactions with related companies or parties with possible conflict of interest
and with business alliances, i.e., purchase of raw materials or services and selling of goods.
• The Internal Audit Department shall monthly audit itemized transactions to examine prices in
reference to prevailing market prices and normal business terms and conditions, comparable to
those applied with non-related business parties for the Company’ s maximum benefits. The
transactions are to quarterly report to the Audit Committee for its further perusals.
• The Audit Committee shall contemplate and opine on necessity and justification of the reported
transactions for the Company’ s maximum benefits, taking into account prices and business
terms and conditions, compared to transactions with non-related business parties for the same
or similar products. Should the Audit Committee find out that any execution is not carried out
as per the stipulated policies, the Audit Committee shall report the matter to the Board of
Directors or the Chief Executive Officer for their information and remedies.
- For other transactions such as borrowings, acquisitions or disposals of principal assets or entering
into any agreement or contracts, the Company requires comments from the Audit Committee for
necessity and justification of the transaction. In case where the Audit Committee has no expertise to
contemplate the inter-related transactions, the Company shall nominate an independent expert or the
external auditors to provide notes on the transactions for decisions to be made by the Board of
Directors or shareholders, whichever cases.
POLICY FOR INTER-RELATED TRANSACTIONS IN THE FUTURE
Having a policy on inter-related transactions in the future, the Company shall stipulate terms and
conditions as per standard practices at the market price, comparable to prices and conditions applied
to other business partners or vendors for the Company’s maximum benefits. It has no policy to extend
financial assistance to or guarantee any related firms or parties with conflict of interest in the future.
In making such inter-related transactions in the future with the parties with conflict of interest, it shall
assign the Audit Committee or the internal auditors or independent experts as deemed fit to
contemplate and make observation on appropriateness of prices and transaction justification. Such
transactions shall be executed according to the standard or procedures on inter – related transactions
as per an announcement of the SET and regulations of the Office of SEC.
078
079
NOTES AND ANALYSIS ON FINANCIAL STATUS AND PERFORMANCE RESULTS IN 2006
OVERALL PERFORMANCE RESULTS
Thailand’s steel industry situation in 2006 had fl uctuated all year – long due to unusual political situation and economic
slow down, however, fl uctuations were less than the situation in 2005. Average steel prices in year 2006 decreased
from the previous year since demand in the world market, China in particular, declined, and demand in Thailand dropped
by 14% from the previous year. Consequently, relevant entrepreneurs were forced to adapt to the situation, reducing
their production outputs in line with the market situation to support prices and to prevent supply and inventory
surpluses. In 2006, average steel prices continually reduced. Nevertheless, speculations and hoardings alleviated,
prices hence became more stable.
In 2006, G Steel’s total hot rolled coil outputs amounted to 0.97 million tons, a 13% decrease from that of the preceding
year with the production effi ciency of 65%. Its total sales volumes recorded at Baht 18,003 million, because of its prime
objective to maintain its domestic market shares. Focusing on domestic sales at a proportion of 93% of its overall
outputs, versus 7% for export sales, the Company aimed at maintaining balance between its production and selling
prices as well as maintaining relationship with overseas customers.
The Company’s profi tability in 2006 declined, compared to that of 2005 primarily due to a decrease in sales volumes
and increase in costs of goods sold, selling and administrative and interest expenses. However, the performance results
were at satisfactory level as the Company’s fi nancial ratios were higher than an overall average fi gure of the industry.
The selling gross margin marked at Baht 2,019 million or 11.2%, though it was lower than the previous year but much
higher than the industry’s overall average. This was due to effective management of sales and production costs. The
Company enjoyed a net profi t of Baht 1,678 million, including the profi t from the business rehabilitation,
or 8.8% net margin and 7.0% return on equities.
SELLING AND OTHER INCOMES
In 2006, G Steel and its subsidiaries marked a total income of Baht 19,119 million, its main income was
from the selling of goods of Baht 18,003 million or 94.2% of the total income, an 18.9% reduction from
the previous year due to market stagnation during the fi rst and third quarters as well as reducing steel
prices in line with an overall market demand decline throughout the year. Additionally, other incomes
of 5.8% were from services provided at Baht 115 million, an interest income of Baht 176 million, a profi t
of Baht 761 million from foreign exchange and other incomes of Baht 63 million.
SELLING, ADMINISTRATIVE AND INTEREST EXPENSES
In 2006, the Company and its subsidiaries had selling and administrative expenses of Baht 831 million.
Of this, Baht 558 million, or 3.1% of selling incomes, was for the Company’s expenses including
transportation, wages and salary, professional fees for legal and fi nancial advisors, expenses for
an issuance of additional debentures and other expenses invariable to production activities.
The Company and its subsidiaries bore interest expenses of Baht 606 million, mainly incurred from
an issuance of USD 170 million Bond, purchases and maintenance of raw materials, iron scrap and smelt
iron and other interest expenses.
080
081
OPERATING PROFIT AND NET PROFIT
The Company and its subsidiaries registered an operating profi t of Baht 1,655 million, or 9.1% operating profi t rate.
When combined with business rehabilitation profi t, the net profi t accounted for Baht 1,678 million or 8.8% rate, compared
to 38.8% of the previous year. The net earning per share was Baht 0.17, a 50% reduction from the previous year, while
the return on equities ratio was 7.0%, a 48.7% reduction from the previous year. Nevertheless, in 2006, the Company
had an accumulated profi t of Baht 12,712 million, an 11.3% rise from the previous year.
ASSETS AND LIQUIDITY
The Company and its subsidiaries had total assets of Baht 41,617 million, Baht 12,562 million of which were current,
whereas Baht 29,055 million were non – current. The liquidity ratio was 1.5 times, and the current liquidity ratio was
0.7 times, which was on average of the industry. In 2006, the Company invested in shares of Oriental Access Company
Limited and Nakonthai Strip Mill Public Company Limited at the book value of equity method of Baht 2,103 million,
or the stock values of Baht 2,145 million. At 2006 year-end, an investment in rights over secured convertible debts
amounted to Baht 3,989 million.
The fi xed assets including land, property and equipment at 2006 year-end had Baht 19,899 million of book value, an
increase of Baht 2,575 million or 14.9% over the previous year.
LIABILITIES
At 2006 year-end, the Company and its subsidiaries had a total liabilities of Baht 15,037 million, an increase of
Baht 8,321 million or 1.2 times increase over the preceding year. Of this, Baht 8,272 million were current liabilities, while
Baht 6,765 million were non-current ones.
In August 2006, the subsidiary companies borrowed from foreign fi nancial institutions USD 115.3 million, equivalent to
Baht 4,348 million, with one year repayment period.
The Company issued and offered bond with the faced value of USD 70 million to overseas investors in February
2006 and received a debenture value surplus of USD 1.4 million, adding up to USD 71.4 million. Taking into account,
conversion into Baht, foreign exchange conversion and deduction of expenses for the issuance of debentures, the net
book value was Baht 2,541 million. When combined with the net book value of the other debenture faced values of USD
100 million issued and offered to investors in October 2005, the total bond value at 2006 year – end amounted to
Baht 6,024 million. Of this, USD 170 million will be due in October 2010.
FINANCIAL STATUS
The Company has a firm financial structure since its risks are relatively low, compared to the industry average.
At 2006 year – end, its liabilities to capital was merely 0.57 times, its interest and debt coverage are satisfactory.
Its non-current liabilities to earnings before interest, tax and depreciation were 2.3 times, which was considered low,
while its interest coverage rate was 3.7 times, a low risk on interest delinquency.
INCURRING OF DEBT
Any new incurred debt will happen when the Leverage Ratio is lower than 4.50 to 1.00 if the debt incurring date is
before 1 January 2008, or the leverage ratio is lower than 4.00 to 1.00 if the debt incurring date is before 1 January
2008, or 4.00 to 1.00 if the debt incurring date is before or after 1 January 2008.
BOARD OF DIRECTORS’ RESPONSIBILITIES WITH REGARDS TO FINANCIAL REPORTS
G Steel’s Board of Directors is directly responsible for the Company’s
financial reports as appeared in the annual report. The reports comprise
the balance sheet, profit and loss statement, statement of changes in
shareholders’ equity, statements of cash flow and notes on financial
statements, prepared by the Company’s management according to the
generally accepted accounting practices with the selection of and
consistent compliance with appropriate accounting policies. Discretion and
estimation had been exercised at their best in the preparation of the report
with sufficient disclosure of significant information in the notes on the
financial statement for the benefits of shareholders and general investors.
The Board of Directors established and maintained the appropriate and
efficient internal control and audit systems to ensure that the accounting
data were complete, accurate and adequate to uphold the Company’s assets
and not to allow any corruption or significant unusual practices to occur.
Moreover, the Board of Directors appointed the Audit Committee to
examine the accounting policies and quality of the financial reports, to
examine the internal control systems as risk management system.
The Audit Committee’s remarks on the matters appeared in their report,
already included in the annual report. The Company’s certified auditors,
nominated by the Board of Directors, had sufficient independence to audit
the financial reports and also to attach their notes on the financial status,
performance results and the Company’s cash flow in the financial report.
Dr. Somsak Leeswadtrakul Mr. Ryuzo Ogino
Chief Executive Officer President
082
To the Board of Directors and Shareholders of
G Steel Public Company Limited
I have audited the accompanying consolidated balance sheet of G Steel
Public Company Limited and its subsidiaries as at 31 December 2006,
the related consolidated statements of income, changes in shareholders’
equity and cash flows for the year then ended and the separate financial
statements of G Steel Public Company Limited for the same year. These
financial statements are the responsibility of the Company’s management
as to their correctness and the completeness of the presentation. My
responsibility is to express an opinion on these financial statements based
on my audit. The separate financial statements of G Steel Public Company
Limited for the year ended 31 December 2005, as presented herein for
comparative purposes, were audited by another auditor of our firm under
his report dated 24 February 2006 expressed an unqualified audit opinion
on those statements.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statements presentation. I believe that
my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial positions of G Steel Public Company
Limited and its subsidiaries, the separate financial statements of G Steel
Public Company Limited as at 31 December 2006, and the results of their
operations and cash flows for the year then ended in accordance with
generally accepted accounting principles.
Without qualifying my opinion on the above financial statements, I draw
attention to Note 6 to the financial statements regarding the investments
of the Company and its subsidiary company in ordinary shares and rights
of secured convertible debts.
Rungnapa Lertsuwankul
Ernst & Young Offi ce Limited Certifi ed Public Accountant
Bangkok: 26 February 2007 (Thailand) No. 3516
REPORT OF INDEPENDENT
AUDITOR
CONSOLIDATED THE COMPANY ONLY
Note 2006 2006 2005
(Unit: Baht)
The accompanying notes are an integral part of the financial statements.
ASSETS
Current assets
Cash and cash equivalents 1,616,101,861 1,598,585,692 1,621,834,060
Trade accounts receivable 7, 17 2,122,768,748 2,122,768,748 2,225,655,011
Trade accounts receivable - related party 18 20,114,078 _ _
Amount due from related parties 18 479,862,051 514,749,613 _
Current portion of loans to and 18 _ 12,748,056 _
interest receivable from related parties
Inventories - net 8 7,118,502,998 7,118,502,998 3,602,905,841
Other current assets 9, 17 1,204,523,593 1,201,669,257 414,014,471
Total current assets 12,561,873,329 12,569,024,364 7,864,409,383
Non-current assets
Restricted deposits at fi nancial institutions 10 757,755,673 757,755,673 433,772,798
Investments 11 2,102,918,156 1,428,999,300 _
Investment in rights over secured 12 3,989,311,444 _ _
convertible debts
Loans to related parties 18 _ 10,786,650 _
Property, plant and equipment - net 13 19,898,769,070 19,898,769,070 17,323,570,435
Intangible assets - computer software 14 45,788,483 45,788,483 46,888,924
Other non-current assets 15 2,260,481,655 2,260,481,655 2,594,951,851
Total non-current assets 29,055,024,481 24,402,580,831 20,399,184,008
TOTAL ASSETS 41,616,897,810 36,971,605,195 28,263,593,391
BALANCE SHEETS
G STEEL PUBLIC COMPANY LIMITED
AND ITS SUBSIDIARIES
AS AT 31 DECEMBER 2006 AND 2005
CONSOLIDATED THE COMPANY ONLY
Note 2006 2006 2005
(Unit: Baht)
084
The accompanying notes are an integral part of the financial statements.
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term loan from fi nancial institution 16 4,347,696,000 _ _
Trade accounts payable 17 2,277,484,657 2,277,484,657 1,111,668,960
Trade accounts payable - related party 18 205,133,059 205,133,059 _
Others payable 17 527,490,215 527,489,715 273,292,560
Payable on purchase of investment 326,077,200 _ _
Advance received from customers 267,818,967 267,818,967 241,775,836
Current portion of liabilities which were 19 11,826,077 11,826,077 76,191,866
included under the former
rehabilitation plan
Other short-term loan 20 3,000,000 _ _
Accrued expenses 17, 18 111,284,155 99,874,358 151,270,169
Accrued interest 21 194,269,225 176,793,869 157,398,562
Total current liabilities 8,272,079,555 3,566,420,702 2,011,597,953
Non-current liabilities
Liabilities which were included under the
former rehabilitation plan 19 740,358,732 740,358,732 752,225,756
Bonds 22 6,024,315,243 6,024,315,243 3,952,104,687
Total non-current liabilities 6,764,673,975 6,764,673,975 4,704,330,443
Total liabilities 15,036,753,530 10,331,094,677 6,715,928,396
BALANCE SHEETS (Continued)
G STEEL PUBLIC COMPANY LIMITED
AND ITS SUBSIDIARIES
AS AT 31 DECEMBER 2006 AND 2005
085
CONSOLIDATED THE COMPANY ONLY
Note 2006 2006 2005
(Unit: Baht)
The accompanying notes are an integral part of the financial statements.
Shareholders’ equity
Share capital
Registered share capital 23
12,000,000,000 ordinary shares of
Baht 1 each 12,000,000,000 12,000,000,000 12,000,000,000
Issued and paid up share capital
11,100,000,000 ordinary shares of Baht 1 each
(2005: 8,200,000,000 ordinary 11,100,000,000 11,100,000,000 8,200,000,000
shares of Baht 1 each)
Other surplus
Share premium 2,561,677,530 2,561,677,530 1,719,140,000
Premium on capital reduction 24 206,307,094 206,307,094 206,307,094
Retained earnings
Appropriated - statutory reserve 25 681,974,286 681,974,286 595,058,886
Unappropriated 12,030,307,683 12,090,551,608 10,827,159,015
Equity attributable to Company’s shareholders 26,580,266,593 26,640,510,518 21,547,664,995
Minority interest - equity attributable to minority
shareholders of subsidiary (122,313) _ _
Total shareholders’ equity 26,580,144,280 26,640,510,518 21,547,664,995
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 41,616,897,810 36,971,605,195 28,263,593,391
BALANCE SHEETS (Continued)
G STEEL PUBLIC COMPANY LIMITED
AND ITS SUBSIDIARIES
AS AT 31 DECEMBER 2006 AND 2005
CONSOLIDATED THE COMPANY ONLY
Note 2006 2006 2005
(Unit: Baht)
086
The accompanying notes are an integral part of the financial statements.
Revenues
Sales 17 18,003,046,540 18,003,046,540 22,201,844,756
Service income 18 115,059,265 106,789,579 _
Gain on exchange rate 761,237,010 464,528,960 31,083,813
Interest income 18 176,224,827 102,350,184 21,377,732
Other income 63,241,458 63,241,458 42,772,256
Total revenues 19,118,809,100 18,739,956,721 22,297,078,557
Expenses
Cost of sales 17, 18 15,984,535,025 15,984,535,025 18,945,164,232
Selling and administrative expenses 17 831,374,477 557,679,934 466,940,749
Share of loss from investment in 42,010,000 _ _
associated company
Total expenses 16,857,919,502 16,542,214,959 19,412,104,981
Income before interest expense 2,260,889,598 2,197,741,762 2,884,973,576
Interest expense (605,794,633) (482,220,559) (353,736,948)
Income before minority interest 1,655,094,965 1,715,521,203 2,531,236,628
Loss of minority interest 182,313 _ _
Income from ordinary activity 1,655,277,278 1,715,521,203 2,531,236,628
Extraordinary items
Gain from rehabilitation 27 22,786,790 22,786,790 209,396,414
Net income for the year 31 1,678,064,068 1,738,307,993 2,740,633,042
G STEEL PUBLIC COMPANY LIMITED
AND ITS SUBSIDIARIES
FOR THE YEARS ENDED
31 DECEMBER 2006 AND 2005
INCOME STATEMENTS
087
CONSOLIDATED THE COMPANY ONLY
Note 2006 2006 2005
(Unit: Baht)
The accompanying notes are an integral part of the financial statements.
G STEEL PUBLIC COMPANY LIMITED
AND ITS SUBSIDIARIES
FOR THE YEARS ENDED
31 DECEMBER 2006 AND 2005
INCOME STATEMENTS
Earnings per share 28
Basic earnings per share
Income from ordinary activity 0.17 0.17 0.31
Extraordinary item _ _ 0.02
Net income 0.17 0.17 0.33
Weighted average number of ordinary shares 10,047,671 10,047,671 8,200,000
(thousand shares)
Diluted earnings per share
Income from ordinary activity 0.17 0.17 _
Extraordinary item _ _ _
Net income 0.17 0.17 _
Weighted average number of ordinary
shares (thousand shares) 10,066,365 10,066,365 _
CONSOLIDATED THE COMPANY ONLY
2006 2006 2005
(Unit: Baht)
088
The accompanying notes are an integral part of the financial statements.
Cash fl ows from operating activities
Net income for the year 1,678,064,068 1,738,307,993 2,740,633,042
Adjustments to reconcile net income to net cash provided
(paid) from operating activities: -
Depreciation and amortisation 596,221,251 596,221,251 572,976,550
Amortisation of deferred bond arrangement fees 29,029,867 29,029,867 4,846,764
Amortisation expenses 95,055,641 95,055,641 70,143,363
Amortisation of premiums (discounts) of bonds 3,166,800 3,166,800 (3,856,147)
Allowance for diminution in value of inventories 128,168 128,168 4,303,481
Unrealised gain on exchange (671,971,569) (517,091,246) (16,905,376)
Share of loss from investment in associated company 42,010,000 _ _
Minority interest in subsidiaries (122,313) _ _
Income from operating before changes in operating assets 1,771,581,913 1,944,818,474 3,372,141,677
and operating liabilities
Decrease (increase) in operating assets
Trade accounts receivable 63,239,913 63,239,913 (983,766,400)
Amount due from related parties (499,976,129) (514,749,613) _
Inventories (3,515,725,325) (3,515,725,325) (1,441,208,010)
Other current assets (820,048,315) (817,193,979) 209,185,751
Intangible assets (890,361) (890,361) (86,402,203)
Other non-current assets (74,164,760) (74,164,760) (91,589,945)
Increase (decrease) in operating liabilities
Trade accounts payable 1,201,850,934 1,201,850,934 (85,950,786)
Amounts due to related companies 205,133,059 205,133,059 _
Other payable 601,096,355 254,197,155 (56,867,663)
Advance received from customers (1,264,318) (1,264,318) 207,852,814
Accrued interest payable 41,082,718 22,195,689 157,300,636
Accrued expenses (38,257,192) (49,666,989) 57,494,191
Net cash fl ows from (provided in) operating activities
before extraordinary items (1,066,341,508) (1,282,220,121) 1,258,190,062
Extraordinary items (22,786,790) (22,786,790) (209,396,414)
Net cash fl ows from (provided in) operating activities (1,089,128,298) (1,305,006,911) 1,048,793,648
G STEEL PUBLIC COMPANY LIMITED
AND ITS SUBSIDIARIES
FOR THE YEARS ENDED
31 DECEMBER 2006 AND 2005
CASH FLOWS STATEMENTS
089
CONSOLIDATED THE COMPANY ONLY
2006 2006 2005
(Unit: Baht)
The accompanying notes are an integral part of the financial statements.
Cash fl ows from investing activities
Increase in restricted deposits at fi nancial institutions (323,982,875) (323,982,875) (432,772,798)
Cash paid for acquisition of subsidiary _ (999,300) _
Decrease (increase) in deposits for purchases of assets 182,844,262 182,844,262 (1,288,835,502)
Loan to related parties _ (24,565,856) _
Net increase in property, plant and equipment (3,169,429,084) (3,169,429,084) (1,767,440,860)
Acquisition of rights over secured convertible debts (4,706,239,600) _ _
Net cash fl ows used in investing activities (8,016,807,297) (3,336,132,853) (3,489,049,160)
Cash fl ows from fi nancing activities
Cash received from short-term loan from fi nancial institution 4,479,312,000 _ _
Cash received from increase in share capital 2,400,000,000 2,400,000,000 _
Other short-term loan 3,000,000 _ _
Payment of expenses related to increase in share capital (85,462,470) (85,462,470) _
Cash received from the subscription of bonds 2,800,888,996 2,800,888,996 4,024,163,722
Payment of bonds arrangement fee (56,089,107) (56,089,107) (96,935,283)
Payment of liabilities which were included under
the former rehabilitation plan (53,446,023) (53,446,023) (218,540,883)
Dividend paid (388,000,000) (388,000,000) _
Net cash fl ows from fi nancing activities 9,100,203,396 4,617,891,396 3,708,687,556
Net increase (decrease) in cash and cash equivalents (5,732,199) (23,248,368) 1,268,432,044
Cash and cash equivalents at beginning of year 1,621,834,060 1,621,834,060 353,402,016
Cash and cash equivalents at end of year 1,616,101,861 1,598,585,692 1,621,834,060
Supplemental cash fl ows information
Non-cash items
Trade accounts receivable decreased by offsetting with
trade accounts payable _ _ 1,990,058,070
Issue ordinary shares in exchange of investment
in associated company 1,428,000,000 1,428,000,000 _
Convert investment in rights over secured convertible
debts to ordinary shares of associated company 716,928,156 _ _
Cash paid during the year for: -
Interest expense 651,757,871 545,659,153 196,338,386
Interest capitalised in assets 407,906,460 407,906,460 22,965,707
G STEEL PUBLIC COMPANY LIMITED
AND ITS SUBSIDIARIES
FOR THE YEARS ENDED
31 DECEMBER 2006 AND 2005
CASH FLOWS STATEMENTS
090
CO
NS
OL
IDA
TE
D
Oth
er
Su
rplu
sIs
sue
d a
nd
Pre
miu
mp
aid
-up
Sh
are
cap
ita
lR
eta
ine
d e
arn
ing
sM
ino
rity
No
tesh
are
ca
pit
al
pre
miu
mre
du
ctio
nA
pp
rop
ria
ted
Una
ppro
pria
ted
inte
rest
To
tal
Ba
lan
ce a
s o
f 1
Ja
nu
ary
20
05
8,2
00
,00
0,0
00
1,
719
,14
0,0
00
2
06
,30
7,0
94
4
58
,02
7,2
34
8
,22
3,5
57
,62
5
_18
,80
7,0
31,
95
3
Ne
t in
com
e f
or
the
ye
ar
__
_13
7,0
31,
65
2
2,6
03
,60
1,3
90
_
2,7
40
,63
3,0
42
Ba
lan
ce a
s o
f 3
1 D
ece
mb
er
20
05
8,2
00
,00
0,0
00
1,
719
,14
0,0
00
2
06
,30
7,0
94
5
95
,05
8,8
86
10
,82
7,1
59
,015
_
21,
54
7,6
64
,99
5
Issu
e in
cre
ase
d s
ha
re c
ap
ita
l 2
3
2,9
00
,00
0,0
00
9
28
,00
0,0
00
_
__
_3
,82
8,0
00
,00
0
Exp
en
ses
con
cern
ing
th
e in
cre
ase
d
s
ha
re c
ap
ita
l2
3
_(8
5,4
62
,47
0)
__
__
(85
,46
2,4
70
)
Un
rea
lise
d t
ran
sact
ion
in in
com
e s
tate
me
nts
2,9
00
,00
0,0
00
8
42
,53
7,5
30
_
__
_3
,74
2,5
37
,53
0
Ne
t in
com
e f
or
the
ye
ar
__
__
1,6
78
,06
4,0
68
_
1,6
78
,06
4,0
68
Ap
pro
pri
ate
d s
tatu
tory
re
serv
e2
5
__
_8
6,9
15,4
00
(8
6,9
15,4
00
)_
_
Div
ide
nd
pa
id
29
_
__
_(3
88
,00
0,0
00
)_
(38
8,0
00
,00
0)
Incr
ea
se in
min
ori
ty in
tere
st_
__
__
60
,00
0
60
,00
0
Ne
t lo
ss o
f m
ino
rity
inte
rest
__
__
_(1
82
,313
)(1
82
,313
)
Ba
lan
ce -
as
of
31
De
cem
be
r 2
00
611
,10
0,0
00
,00
0
2,5
61,
67
7,5
30
2
06
,30
7,0
94
6
81,
97
4,2
86
12
,03
0,3
07
,68
3
(12
2,3
13)
26
,58
0,1
44
,28
0
G S
TE
EL
PU
BL
IC C
OM
PA
NY
LIM
ITE
D
AN
D I
TS
SU
BS
IDIA
RIE
S
FO
R T
HE
YE
AR
S E
ND
ED
31
DE
CE
MB
ER
20
06
AN
D 2
00
5
ST
AT
EM
EN
TS
O
F C
HA
NG
ES
IN
S
HA
RE
HO
LD
ER
S’
EQ
UIT
Y
(Un
it: B
aht)
Th
e a
com
pa
ny
ing
no
tes
are
an
in
teg
ral
pa
rt o
f th
e fi
na
nci
al
sta
tem
en
ts.
091
G S
TE
EL
PU
BL
IC C
OM
PA
NY
LIM
ITE
D
AN
D I
TS
SU
BS
IDIA
RIE
S
FO
R T
HE
YE
AR
S E
ND
ED
31
DE
CE
MB
ER
20
06
AN
D 2
00
5
ST
AT
EM
EN
TS
O
F C
HA
NG
ES
IN
S
HA
RE
HO
LD
ER
S’
EQ
UIT
Y
TH
E C
OM
PA
NY
ON
LY
Oth
er
surp
lus
Issu
ed
an
dP
rem
ium
pai
d-u
pca
pit
alR
etai
ne
d e
arn
ing
s
No
tesh
are
cap
ital
Sh
are
pre
miu
mre
du
ctio
nA
pp
rop
riat
ed
Una
ppro
pria
ted
Tota
l
Ba
lan
ce a
s o
f 1
Ja
nu
ary
20
05
8,2
00
,00
0,0
00
1,
719
,14
0,0
00
2
06
,30
7,0
94
4
58
,02
7,2
34
8
,22
3,5
57
,62
5
18,8
07
,03
1,9
53
Ne
t in
com
e f
or
the
ye
ar
__
_13
7,0
31,
65
2
2,6
03
,60
1,3
90
2
,74
0,6
33
,04
2
Ba
lan
ce a
s o
f 3
1 D
ece
mb
er
20
05
8,2
00
,00
0,0
00
1,
719
,14
0,0
00
2
06
,30
7,0
94
5
95
,05
8,8
86
10
,82
7,1
59
,015
2
1,5
47
,66
4,9
95
Issu
e in
cre
ase
d s
ha
re c
ap
ita
l 2
3
2,9
00
,00
0,0
00
9
28
,00
0,0
00
_
__
3,8
28
,00
0,0
00
Exp
en
ses
con
cern
ing
th
e in
cre
ase
d
s
ha
re c
ap
ita
l2
3
_(8
5,4
62
,47
0)
__
_(8
5,4
62
,47
0)
Un
rea
lise
d t
ran
sact
ion
in in
com
e s
tate
me
nts
2,9
00
,00
0,0
00
8
42
,53
7,5
30
_
__
3,7
42
,53
7,5
30
Ne
t in
com
e f
or
the
ye
ar
__
__
1,7
38
,30
7,9
93
1,
73
8,3
07
,99
3
Ap
pro
pri
ate
d s
tatu
tory
re
serv
e 2
5
__
_8
6,9
15,4
00
(8
6,9
15,4
00
)_
Div
ide
nd
pa
id2
9
__
__
(38
8,0
00
,00
0)
(38
8,0
00
,00
0)
Ba
lan
ce -
as
of
31
De
cem
be
r 2
00
611
,10
0,0
00
,00
0
2,5
61,
67
7,5
30
2
06
,30
7,0
94
6
81,
97
4,2
86
12
,09
0,5
51,
60
8
26
,64
0,5
10,5
18
Th
e a
com
pan
yin
g n
ote
s ar
e a
n in
teg
ral p
art
of
the
fi n
anci
al s
tate
me
nts
.
(Un
it: B
aht)
092
1. GENERAL INFORMATION
a) G Steel Public Company Limited is a public company incorporated and domiciled in Thailand. The Company
is principally engaged in the manufacture and distribution of hot rolled coils and its registered address is
88, SSP Tower 3, 18th Floor, Silom Road, Suriyawong, Bangrak, Bangkok.
b) On 25 January 2006, the Stock Exchange of Thailand approved the trading of the Company’s securities on
the Stock Exchange of Thailand.
2. BASIS OF PREPARATION
The fi nancial statements have been prepared in accordance with accounting standards enunciated under the
Accounting Act B.E. 2547. The presentation of the fi nancial statements has been made in compliance with the
stipulations of the Notifi cation of the Department of Business Development dated 14 September 2001, issued
under the Accounting Act B.E. 2543.
The fi nancial statements have been prepared on a historical cost basis except where otherwise disclosed in the
accounting policies.
3. BASIS OF CONSOLIDATION
3.1 The consolidated fi nancial statements were presented for the fi rst time as a result of the acquisition of
subsidiaries during the period ended 30 September 2006.
3.2 The consolidated fi nancial statements include the fi nancial statements for the year ended 31 December
2006 of G Steel Public Company Limited and the following subsidiary companies:
Assets as a percentage to the consolidated total assets
as at 31 December
Revenue as percentage
to the consolidatedtotal revenue
for theyear ended
31 DecemberCompany’s name
Nature
of business
Percentage of
shareholding
Country of
incorporation
2006 2006 2006
Percent Percent Percent
Held by the Company
Siam Professional Holding 99.93 Thailand 10.2 0.1
Holdings Co., Ltd. company
093
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G STEEL PUBLIC COMPANY LIMITED
AND ITS SUBSIDIARIES
FOR THE YEARS ENDED
31 DECEMBER 2006 AND 2005
Percentage of Country of
Company’s name Nature of business indirect shareholding incorporation
2006
Percent
Held by subsidiary company
Oriental Access Co., Ltd. Consulting service 99.92 Thailand
(100% held by Siam Professional Holdings Co., Ltd.)
3.3 Material balances and transactions between the Company and its subsidiary companies have been
eliminated from the consolidated financial statements.
4. ADOPTION OF NEW ACCOUNTING STANDARDS
In October 2006, the Federation of Accounting Professions issued Notifi cation No. 26/2006 regarding Accounting
Standard No. 44 “Consolidated Financial Statements and Accounting for Investments in Subsidiaries” (Amendment
No. 1), under which investments in subsidiaries, jointly controlled entities and associates are to be presented in
the separate fi nancial statements under the cost method rather than the equity method. Entities which are not
ready to adopt the cost method in 2006 can continue to use the equity method through the end of 2006 and
adopt the cost method as from 1 January 2007.
In addition, in November 2006, the Federation of Accounting Professions issued Notifi cation No. 32/2006 stated
that investment in associated company has to be recognised in the separate fi nancial statements under the
cost method in accordance with the Notifi cation No. 26/2006.
In this regard, the Company has elected to adopt the above accounting policy in the third quarter of 2006 as a
result of an acquisition in the subsidiaries and associate for the fi rst time in that period.
5. SIGNIFICANT ACCOUNTING POLICIES
5.1 Revenue recognition
Sales of goods
Sales of goods are recognised when the signifi cant risks and rewards of ownership of the goods have
passed to the buyer. Sales are the invoiced value, excluding value added tax, of goods supplied after
deducting discount and allowance.
Rendering of services
Service revenue is recognised when services have been rendered taking into account the stage of completion.
Interest income
Interest income is recognised as interest accrues based on the effective rate method.
5.2 Cash and cash equivalents
Cash and cash equivalents consist of cash in hand, cash at fi nancial institutions and all highly liquid
investments with an original maturity of three months or less and not subject to withdrawal restrictions.
094
5.3 Trade accounts receivable and allowance for doubtful accounts
Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is
provided for the estimated losses that may be incurred in collection of receivables. The allowance is generally
based on collection experiences and analysis of debtor aging.
5.4 Inventories
Finished goods are valued at the lower of cost (moving average method) and net realisable value.
Raw materials and other consumable are valued at the moving average cost and constitute part of production
costs whenever consumed.
Offi ce supplies, which useful life over 1 year, are recorded as other assets and amortised over the estimated
useful life over 2 years.
The associated company records fi nished goods using specifi c method, raw materials using FIFO method.
The effect of the difference in accounting policy is immaterial to the calculation of share profi t (loss) from
investment in associated company and the book value of investment in the consolidated fi nancial statements.
5.5 Investments
Investments in subsidiary and associated companies in the separate fi nancial statements are accounted
for under the cost method.
Investments in associated company in the consolidated fi nancial statements are accounted for under
the equity method. Under this method, the investment is recorded at cost and for each subsequent year
adjusted to incorporate the Company and its associated company’s proportionate share of the operating
results of the associated company.
The difference of cost of investment lower than the net book value of the investment in associated company
recognised as income on a systematic basis over the remaining weighted average useful life of the identifi able
depreciable assets.
5.6 Property, plant and equipment/Depreciation
Land is stated as cost. Building and equipment are valued at cost less accumulated depreciation and
allowance for loss on impairment of assets.
Depreciation of plant and equipment is calculated by reference to their costs on the straight-line basis
except for depreciation of machinery which calculated on productive-output method over the following
estimated useful lives:
Buildings 20 years
Machinery and plant equipment 5 and 30 years
Offi ce equipment 5 years
Furniture and fi xtures 5 years
Leasehold improvement 5 years
Motor vehicles 5 years
Depreciation is included in determining income.
No depreciation is provided for land and factory under construction.
5.7 Intangible assets
Computer software is stated at cost less accumulated amortisation. Amortisation of computer software
is calculated by reference to its cost on the straight-line basis over the expected future period, for which
the assets are expected to generate economic future, of 10 years.
The amortisation is included in determining income.
095
5.8 Deferred bond arrangement fees / Discounts or premiums on bonds
Bond arrangement fees are recorded as deferred expenses and to be amortised on an effective interest
rate method over the period of bonds.
Discounts or premiums on the issuance of bonds were amortised on an effective interest rate method
over the period of bonds.
The amortisation of deferred bond arrangement fees and discount or premiums on bonds are included in
determining income.
5.9 Related party transactions
Related parties comprise enterprises and individuals that control, or are controlled by, the Company,
whether directly or indirectly, or which are under common control with the Company.
They also include associated companies and individuals which directly or indirectly own a voting interest in
the Company that gives them signifi cant infl uence over the Company, key management personnel, directors
and offi cers with authority in the planning and direction of the Company’s operations.
5.10 Capitalisation of interest cost
Interest cost on borrowings for purchases of machinery and construction of factory are capitalised as
part of the cost of related assets and will be ceased when these assets are completed.
5.11 Foreign currencies
Foreign currency transactions are translated into Baht at the exchange rates ruling on the transaction
dates. Assets and liabilities denominated in foreign currencies outstanding at the balance sheet date are
translated into Baht at the exchange rates ruling by the Bank of Thailand at the balance sheet date. Gains
and losses on exchange are included in determining income.
5.12 Impairment of assets
The Company assesses at each reporting date whether there is an indication that an asset may be
impaired. If any such indication exists, the Company makes an estimate of the asset’s recoverable amount.
Where the carrying amount of the asset exceeds its recoverable amount, the asset is considered impaired
and is written down to its recoverable amount. Impairment losses are recognised in the income statement.
An asset’s recoverable amount is the higher of fair value less costs to sell and value in use.
5.13 Employee benefi ts
Salary, wages, bonuses and contributions to the social security fund and provident fund are recognised
as expenses when incurred.
The Company issued warrants to purchase the ordinary shares to directors and employees of the Company.
The transaction will be recorded in the fi nancial statements when the warrants are exercised.
5.14 Provisions
Provisions are recognised when the Company has a present obligation as a result of a past event, it is
probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
5.15 Income tax
Income tax is provided for in the accounts based on the taxable profi ts determined in accordance with tax
legislation.
5.16 Derivatives
Forward exchange contracts
Receivables and payables arising from forward exchange contracts are translated into Baht at the rates
096
of exchange ruling on the balance sheet. Unrealised gains and losses from the translation are included in
determining income. Premiums or discounts on forward exchange contracts are amortised on a straight-line
basis over the contract periods.
Interest rate swap contracts
The net amount of interest to be received from or paid to the counterparty under the interest rate swap
contracts is recognised as income or expenses on an accrual basis.
5.17 Use of accounting estimate
Preparation of fi nancial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions in certain circumstance, affecting the amounts reported in
the fi nancial statements and related notes. Actual results could differ from these estimates.
6. INVESTMENT OF THE COMPANY AND ITS SUBSIDIARY COMPANY
THE COMPANY
On 26 June 2006, the meeting of the Board of Directors of the Company passed a resolution to approve Oriental
Investment Co., Ltd.’s (subsequently is the Company’s subsidiary) acquisition of rights of claim over secured
convertible debt to equity in accordance with the business rehabilitation plan of Nakornthai Strip Mill Public
Company Limited (“NSM”), amounting to not more than USD 130.12 million from On City Holdings Limited and
the existing creditors of NSM at a price of not more than USD 180 million. The subsidiary was to invest USD 120
million and the Company was to invest USD 60 million. The Company’s management considered this strategic
alliance with NSM to be an enhancement in the capacity of both the Company and NSM in various aspects
such as production, competition, cost controlling, market entering, business risk reduction and changing the
competitor to the business alliance. In addition, the meeting of the Board of Directors of the Company approved
the Company’s cancellation of 1,750 million of shares allocated to the initial public offering and the 450 million
shares of the over allotment/Greenshoe option. In addition, the Board of Directors also approved the allocation
of not more than 2,200 million shares to On City Holdings Limited and the existing creditors of NSM as the part
of the consideration for the transfer of the above-mentioned rights of claims.
On 2 August 2006, an Extraordinary General Meeting of the Company approved the Company’s cancellation of
1,750 million of shares allocated to the initial public offering and the 450 million shares of the over allotment/
Greenshoe Option. In addition, the meeting approved the allocation of not more than 2,200 million shares to the
existing creditors of NSM, by way of private placement at an offering price of not less than Baht 1.40 per share.
Creditors of NSM is to make payment for the shares by transfer of the rights of claim over debts to be converted
to the ordinary shares of NSM, according to the business rehabilitation plan of NSM (including the amendment
to be made) in the amount not exceeding USD 60 million, or equivalent to 2,511,266,071 shares. In this regard,
the Board of Directors and/or any persons assigned by the Board are granted the authority to determine any
details in respect of the allocation of the additional shares and offer price.
On 12 September 2006, the Company issued the 1,400 million unallocated additional shares at an allocation price
of Baht 1.51 per share (the market price of the Company’s shares as of the date of exchange was Baht 1.02 per
share) to six creditors under the Master Restructuring Agreement of NSM in exchange of 2,511,266,071 ordinary
shares in NSM, resulting from the conversion of rights in secured convertible debt. The Company allocated the
additional shares to the group of creditors under the restructuring plan as follows: -
1. Rochelle Finance Limited 505,582,531 shares
2. Eastgate Limited 179,910,635 shares
3. Great Western Limited 271,241,066 shares
4. Newhaven Limited 177,733,373 shares
5. Bethleham International Limited 223,733,651 shares
6. On City Holdings Limited 41,798,744 shares
097
The Company received the transfer of 2,511,266,071 shares in NSM on 19 September 2006 and the Company
registered the change in paid-up shares capital with the Ministry of Commerce on 12 September 2006.
THE SUBSIDIARY COMPANY
On 28 June 2006, Oriental Investment Co., Ltd. (subsequently is the Company’s subsidiary and changed its
name to Oriental Access Co., Ltd.) entered into a Memorandum Of Understanding with On City Holdings Limited,
on behalf of the representation of NSM, as to acquire rights of claim in secured debt amounting to USD 104.3
million to be converted to equity in Nakornthai Strip Mill Plc., (“NSM”) at Baht 0.42 per share, applying the fi xed
exchange rate of Baht 43.5065 per USD 1, at a price of USD 122 million.
The subsidiary company paid USD 113 million on 13 September 2006 in order to settle such purchase and outstanding
unpaid balance as of the ending year was USD 9 million. The subsidiary received the transfer of 1,456,519,267
shares of NSM, of which converted from USD 14.1 million of principal debt, at a conversion price of Baht
0.42 per share on 22 September 2006. The remaining debt amounting to USD 90.2 million, represents rights of
claim in secured debt which is to be converted to equity within 18 months.
As of 30 September 2006, the Company and its subsidiary had received a total of 3,967,785,338 shares of NSM
with an average cost of investment to the Company at Baht 0.51 per share and the subsidiary at Baht 0.44
per share. The Company determined the consideration using Adjusted Net Book Value at Baht 0.68 per share
discounting by 25 percent due to the business characteristic of NSM which required a highly investment and
could hardly be estimated. The steel business also signifi cant fl uctuates with the change in the world market.
In addition, NSM operated its full capacity in 2005, and this was used as the base year to prepare fi nancial
forecasting. Therefore, it is possible that actual operating result in the future may signifi cant differ from
the estimation.
The market price of ordinary shares of Nakornthai Strip Mill Plc. as of the transaction date was Baht 0.38
per share.
In addition, the Company hired an independent fi nancial advisor (Sage Capital Limited) to study the reasonableness
and benefi t of this investment. That fi nancial advisor has already reported the result of the study to the Board
of Directors.
7. TRADE ACCOUNTS RECEIVABLE
The outstanding balances of trade accounts receivable as at 31 December 2006 and 2005, are aged based on
due date, is as follows:
(Unit: Baht)
CONSOLIDATED AND
THE COMPANY ONLY
2006 2005
Age of receivable
Not yet due 939,201,404 641,575,199
Past due
Less than 3 months 1,159,548,071 1,582,256,771
3 - 6 months 24,019,273 1,823,041
2,122,768,748 2,225,655,011
098
8. INVENTORIES
(Unit: Baht)
CONSOLIDATED AND
THE COMPANY ONLY
2006 2005
Raw materials 5,572,394,768 1,833,835,240
Finished goods 805,710,582 705,659,699
Spare parts 395,023,703 564,547,300
Consumable 263,775,407 291,560,650
Others 91,196,969 216,774,215
Total inventories 7,128,101,429 3,612,377,104
Less: Allowance for slow-moving inventories (9,598,431) (9,471,263)
Inventories - net 7,118,502,998 3,602,905,841
9. OTHER CURRENT ASSETS
(Unit: Baht)
CONSOLIDATED THE COMPANY ONLY
2006 2006 2005
Other receivables 219,469,298 219,469,298 49,164,440
Deposit for purchase of investment 326,077,200 326,077,200 _
Refundable value added tax 172,454,686 172,454,686 31,903,364
Suspense value added tax 53,775,222 53,775,222 118,114,176
Advance for purchases of goods and service 397,462,134 397,462,134 196,243,634
Interest receivable 20,975,056 20,975,056 _
Others 14,309,997 11,455,661 18,588,857
1,204,523,593 1,201,669,257 414,014,471
The outstanding balance of other receivables in the consolidated and the separate fi nancial statements of the
Company as of 31 December 2006 represents Baht 177 million of credit notes issued by the Company’s suppliers
in order to reduce the price after payment had been made (2005: Baht 17 million) and Baht 326 million of deposit
for investment which On City Holdings Limited will refund to the Company.
10. RESTRICTED DEPOSITS AT FINANCIAL INSTITUTIONS
The outstanding balance was deposits at fi nancial institutions which the Company pledged with a bank as
a guarantee of interest payment on bonds and bank guarantees issued by bank as described in Note 35.4.
099
11. INVESTMENTS
THE COMPANY ONLY
These represent investments in ordinary shares in the following subsidiaries and associated companies.
(Unit: Million Baht)
THE COMPANY ONLY
As at 31 December 2006
Paid-up Shareholding
Name of incorporation capital percentage Cost
Subsidiary companies %
Siam Professional Holdings Co., Ltd. 1.0 99.93 1.0
Oriental Access Co., Ltd. (Held by Siam
Professional Holdings Co., Ltd.) 6.0 99.92 _
Associated company
Nakornthai Strip Mill Plc. 23,279.5 12.08 1,428.0
Total investments 1,429.0
Siam Professional Holdings Co., Ltd. was incorporated as a company under the Civil and Commercial Code
on 22 August 2006, with a registered share capital of Baht 1 million, consisting of 10,000 ordinary shares with
a par value of Baht 100 each. The Company purchased these shares on 22 August 2006.
On 26 June 2006, a Board of Directors meeting of the Company passed a resolution approving the
Company’s acquisition of a 94 percent interest in Oriental Access Co., Ltd. (formerly known as “Oriental
Investment Co., Ltd.”), comprising 94 ordinary shares with a par value of Baht 10,000 each. The Company acquired
the shares on 30 June 2006.
On 24 June 2006, an Extraordinary General Meeting of the shareholders of Oriental Access Co., Ltd. passed
a resolution approving a Baht 5 million increase in that company’s registered share capital through the issue
of an additional 500 ordinary shares with a par value of Baht 10,000 each. The Company purchased all of
the additional shares at par value.
On 24 August 2006, the Company executed an agreement to sell 594 ordinary shares of Oriental Access
Co., Ltd., at Baht 10,000 per share, to Siam Professional Holdings Co., Ltd., the subsidiary company which
99.93 percent of interest held by the Company. The Company thus indirectly holds 99.92 percent of Oriental
Access Co., Ltd accordingly.
As described in Note 6, on 12 September 2006, the Company issued 1,400 million unallocated shares at an allocation
price of Baht 1.51 per share to six creditors under the business rehabilitation plan in exchange of 2,511,266,071
ordinary shares of Nakornthai Strip Mill Plc. (“NSM”). The market price of the Company at the date of exchange
is Baht 1.02 per share. Consequently, the Company recorded cost of investment in NSM at the fair value of
1,400 million additional issued shares of the Company.
100
CONSOLIDATED
These represent investments in ordinary shares in the following associated company.
(Unit: Million Baht)
CONSOLIDATED
As at 31 December 2006
Shareholding Carrying amounts
Name of incorporation percentage Cost based on equity
method
%
Investments in Nakornthai Strip Mill Plc. held by
G Steel Public Company Limited 12.08 1,428.0 1,402.1
Oriental Access Co., Ltd. 7.92 716.9 700.8
2,144.9 2,102.9
On 22 September 2006, Oriental Access Co., Ltd., the subsidiary company which 99.92 percent of interest
indirectly held by the Company received 1,456,519,267 shares of NSM resulting from the conversion of rights of
claim over secured convertible debt to equity of USD 14.1 million from the total rights of claim USD 104.3 million.
The valuation of investment as of the conversion date was Baht 634.3 million.
Subsequently on 12 December 2006, the subsidiary company converted the rights of claim over convertible debt
of USD 1.8 million or equivalent to Baht 82.6 million to 189,684,342 million of ordinary shares in accordance with
the condition stipulated in rehabilitation plan of NSM. As a result, investments in NSM held by the subsidiary
increased from Baht 634.3 million to Baht 716.9 million and the shareholding percentage in NSM of the Company
and its subsidiary therefore increase from 19.09% to 20.0%.
During the year, the Company and its subsidiary recognised Baht 52.7 million of share loss of NSM and Baht 10.7
million of negative goodwill as income, including as part of share loss from investment in associated company
in the income statement.
As a stipulated condition in the short-term loan agreement of the subsidiary company with the fi nancial
institutions, the subsidiary company had to pledge existing shares held in NSM and shares to be converted
in the future as the security for loan. However, the subsidiary company had not yet pledged its existing shares
in NSM since the NSM shares are subject to 6 months lock-up period after the Stock Exchange of Thailand
approves the additional ordinary shares as listed securities under the business rehabilitation plan of NSM and
therefore their trading, transfer and pledge are prohibited.
As of 31 December 2006, the market price of ordinary shares of NSM was Baht 0.34 per share or equivalent to
the valuation of investment Baht 1,413.5 million.
12. RIGHTS OF CLAIM OVER SECURED CONVERTIBLE DEBT
As described in Note 6, on 28 June 2006 Oriental Access Co., Ltd., (subsequently is a subsidiary of the Company)
executed a Memorandum Of Understanding with On City Holdings Limited; a company incorporated in the
British Virgin Islands, to purchase rights of claim over secured convertible debt amounting to USD 104.3 million
from On City Holdings Limited and existing creditors under the debt restructuring plan, at USD 122 million.
The subsidiary company paid USD 113 million on 13 September 2006 to settle such purchase and exercise rights
101
of claim in secured convertible debt amounting to USD 14.1 million to equity (as described in Note 11). The remaining
of rights of claim over secured convertible debt amounting to USD 90.2 million, as equivalent to Baht 4,071.9
million is the rights can be converted to equity within 18 months (within 6 January 2008). If the subsidiary
company exercises that conversion right of USD 90.2 million, the subsidiary company will receive 9,349,915,246
shares of Nakornthai Strip Mill Plc.
(Unit: Million)
CONSOLIDATED
USD Baht Shares
Rights over secured convertible debt -
beginning of year _ _ _
Add: Acquisition during the year 104.3 4,706.2 9,349.9
Less: Convert to ordinary shares during the year (15.9) (716.9) (1,646.2)
Rights over secured convertible debt - end of year 88.4 3,989.3 7,703.7
Under the rehabilitation plan of Nakornthai Strip Mill Plc., the subsidiary company will receive interest charged
at MLR on USD 63 million of principal until the principal is converted to equity. Interest on the above secured
convertible debt is to be received in full within the period of 10 years, commencing from the date the rehabilitation
plan is effective, and was to be received on a quarterly basis starting from October 2006. As of the balance
sheet date, the subsidiary has not received interest on this secured convertible debt.
As of 31 December 2006, the subsidiary company assigned rights and interest on rights of claim over secured
convertible debt of the subsidiary as security against short-term loan from fi nancial institution.
13. PROPERTY, PLANT AND EQUIPMENT
(Unit: Baht)
CONSOLIDATED AND THE COMPANY ONLY
Offi ce
equipment,
Building and Machinery and furniture Assets under
Land improvement equipment and fi xture Vehicle construction Total
Cost:
31 December 2005 734,848,633 2,014,700,151 17,841,991,965 134,000,772 6,315,814 1,759,686,234 22,491,543,569
Acquisition _ 9,033,976 397,922,451 4,174,503 3,540,000 2,754,758,153 3,169,429,083
31 December 2006 734,848,633 2,023,734,127 18,239,914,416 138,175,275 9,855,814 4,514,444,387 25,660,972,652
Accumulated depreciation:
31 December 2005 _ 604,150,529 2,124,142,659 76,480,886 2,015,388 _ 2,806,789,462
Depreciation for the year _ 66,823,445 509,574,839 16,492,138 1,340,026 _ 594,230,448
31 December 2006 _ 670,973,974 2,633,717,498 92,973,024 3,355,414 _ 3,401,019,910
Allowance for impairment:
31 December 2005 305,901,193 538,176,254 1,511,491,498 5,614,727 _ _ 2,361,183,672
31 December 2006 305,901,193 538,176,254 1,511,491,498 5,614,727 _ _ 2,361,183,672
Net book value:
31 December 2005 428,947,440 872,373,368 14,206,357,808 51,905,159 4,300,426 1,759,686,234 17,323,570,435
31 December 2006 428,947,440 814,583,899 14,094,705,420 39,587,524 6,500,400 4,514,444,387 19,898,769,070
Depreciation for the year:
2005 (Baht 566 million included in cost of production, the remaining included in determining income) 572,976,550
2006 (Baht 586 million included in cost of production, the remaining included in determining income) 594,230,448
102
As of 31 December 2006, certain assets of the Company have been fully depreciated but are still in use. The
original cost, before deducting accumulated depreciation, of these assets amounted to Baht 140.7 million (2005:
Baht 127.1 million).
14. INTANGIBLE ASSETS - COMPUTER SOFTWARE
(Unit: Baht)
CONSOLIDATED
AND THE COMPANY ONLY
2006 2005
Beginning balance 46,888,924 45,582,224
Acquisition/Transfer in 890,361 1,306,700
Amortisation for the year (1,990,802) _
Net 45,788,483 46,888,924
15. OTHER NON-CURRENT ASSETS
(Unit: Baht)
CONSOLIDATED
AND THE COMPANY ONLY
2006 2005
Deferred supply cost 199,052,652 82,090,184
Deposits for purchases of raw materials 923,446,553 1,048,755,030
Deposits for purchases of assets 1,105,991,240 1,288,835,502
Deposits for used of energy _ 170,429,906
Other deposits 31,991,210 4,841,229
2,260,481,655 2,594,951,851
16. SHORT-TERM LOAN FROM FINANCIAL INSTITUTIONS
On 30 August 2006, Oriental Access Co., Ltd. (“the subsidiary company”) executed a syndicated credit facility
agreement of USD 120 million with overseas fi nancial institutions and received USD 115.3 million of such amount
on 13 September 2006 for the payment of rights of claim over secured convertible debt of USD 113 million as
described in Note 12.
The loan carry interest at the percentage of SIBOR + margin per annum, with such interest is to be repaid on
every three-month, commencing from December 2006 and the principal repayment is to be made within one
year.
103
On 30 August 2006, the subsidiary company executed a number of agreements with the lenders in order to
provide collateral for the above credit facility agreement. These agreements are summarised below.
1. An agreement pledging shares of Nakornthai Strip Mill Plc. converted from existing claims, including any
additional shares received in the future resulting as a result of a share split, change in par value, transfer
of shares or if for any other reasons the number of shares increases.
2. Assignmen t of the operation services agreement made with Nakornthai Strip Mill Plc., assigning present
and future rights, and interest received from Nakornthai Strip Mill Plc. under the above agreement.
3. Assignment of rights and interest on rights of claim over secured convertible debt of the subsidiary
company. Under this assignment agreement, the subsidiary company agreed to notify the assignee and
security trustee of any changes in the rights or any conversion of convertible debts, in writing.
4. Assignment of rights in deposit accounts and interest on such deposits, including any other existing or
future rights or benefi ts generated.
In addition, on 30 August 2006 the Company executed a guaranteed agreement to guarantee an existing and
future loans of the subsidiary company.
17. TRANSACTIONS WITH BUSINESS ALLIANCES
During the years, the Company had signifi cant business transactions with its business alliances, which the
Company formerly had shareholders or directors in common or had the directors who have relationships with
the Company’s directors, The business transactions have been concluded on commercial terms and bases agreed
upon in the ordinary course of business between the Company and those companies. Below is a summary of
those transactions.
(Unit: Million Baht)
CONSOLIDATED AND
THE COMPANY ONLY
2006 2005 Pricing policy
Sales of goods 6,913 11,237 Normal selling price
Purchases of raw materials 3,652 2,832 Cost plus margin
Purchases of raw water _ 1 As stipulated in agreement
Commission paid _ 3 As stipulated in each agreement
but not exceed USD 3 per tonne
Transportation expenses
and other services 780 623 Agree-upon basis and contractual
price
Other income 16 12 Cost plus margin
Sales for 2006 amounting to Baht 214 million (2005: Baht 186 million) are “Bill and Hold Sales” transactions of
which the goods have not been delivered but the customers signed as acceptance on their invoices. The above
sales of Baht 27 million was made with a business alliance (2005: Baht 186 million was made with two business
alliances).
The outstanding balances of transactions as of 31 December 2006 and 2005 have been shown as follows:
104
(Unit: Baht)
CONSOLIDATED
AND THE COMPANY ONLY
2006 2005
Trade accounts receivable
Nara International Co., Ltd. 403,028,358 570,797,604
Advance Metal Fabrication Co., Ltd. 341,816,850 422,591,095
Federal Steel Industry Co., Ltd. 361,276,533 163,948,558
Millennium Metal Work Co., Ltd. 137,056,621 128,793,459
Trinity Freight and Shipping Co., Ltd. 24,044,869 273,367,527
1,267,223,231 1,559,498,243
Other current assets - other receivables
Trinity Freight and Shipping Co., Ltd. 1,861,333 9,225,698
Nara International Co., Ltd. _ 1,201,954
Advance Metal Fabrication Co., Ltd. _ 547,433
1,861,333 10,975,085
Trade accounts payable
Nara International Co., Ltd. 98,150,628 58,317,772
Advance Metal Fabrication Co., Ltd. 200,235,008 134,548,355
298,385,636 192,866,127
Other payables
Trinity Freight and Shipping Co., Ltd. 54,941,569 _
Trinity International Co., Ltd. 2,550,247 898,495
57,491,816 898,495
Accrued expenses
Advance Metal Fabrication Co., Ltd. _ 100,000
Trinity International Co., Ltd. 5,283,936 2,181,233
Trinity Freight and Shipping Co., Ltd. 43,783,672 104,757,153
49,067,608 107,038,386
105
18. RELATED PARTY TRANSACTIONS
During the years, the Company had signifi cant business transactions with their related parties. These transactions,
which have been concluded on the commercial terms and bases agreed upon in the ordinary course of
businesses between the Company and those companies. Below is a summary of those transactions.
(Unit: Million Baht)
CONSOLIDATED THE COMPANY ONLY
2006 2006 2005 Pricing policy
Transactions with subsidiary
companies
Operating service income _ 107 _ Fixed rate and percentage on net
sales at stipulated in agreement
Interest income _ 1 _ 7% p.a.
Transactions with associated
company
Sales of raw materials 904 904 _ Normal selling price
Operating service income 115 _ _ Fixed rate and percentage on net
sales at stipulated in agreement
Purchases of raw materials 187 187 _ Normal selling price
Interest on investments in
rights over secured
convertible debts
74 _ _ MLR p.a.
Transactions with related
companies
Purchases of raw water 15 15 13 Contractual price
Gain from rehabilitation _ _ 182 Agree-upon basis
The outstanding balances of the above transactions as at 31 December 2006 and 2005 are consist of
the following:
(Unit: Baht)
CONSOLIDATED THE COMPANY ONLY
2006 2006 2005
Trade accounts receivable - related party
Associated company
Nakornthai Strip Mill Plc. 20,114,078 _ _
Amount due from related parties
Subsidiary company
Oriental Access Co., Ltd. _ 109,311,042 _
Associated company
Nakornthai Strip Mill Plc. 479,862,051 405,438,571 _
Total amount due from related parties 479,862,051 514,749,613 _
106
The Company recorded receivable from sales of raw materials to an associated company as amount due
from related parties rather than trade accounts receivable - related party because raw materials sold to that
associated company was purchased from outside for sales.
(Unit: Baht)
CONSOLIDATED THE COMPANY ONLY
2006 2006 2005
Loans to and interest receivable from related parties
Subsidiary companies
Oriental Access Co., Ltd. _ 18,422,514 _
Siam Professional Holdings Co., Ltd. _ 5,112,192 _
Total loans to and interest receivable from
related parties _ 23,534,706 _
Less: Current portion _ (12,748,056) _
_ 10,786,650 _
Loans to 2 subsidiaries of USD 0.5 million and Baht 5 million carried interest at 7 percent p.a. and have
maturity date on annually basis, commencing from December 2006 to 2010, and on demand respectively.
(Unit: Baht)
CONSOLIDATED THE COMPANY ONLY
2006 2006 2005
Trade accounts payable - related party
Associated company
Nakornthai Strip Mill Plc. 205,133,059 205,133,059 _
Accrued expenses
Related company (Related by way of the same
group company)
Sukhumvit Inter Development Co., Ltd. 1,286,340 1,286,340 1,126,789
During 2006, movements of loans to and interest receivable from related parties were as follow:
(Unit: Baht)
Balance as at During the year Balance as at
1 January 2006 Increase Decrease 31 December 2006
Loans to and interest receivable
from related parties
Subsidiaries
Siam Professional Holdings _ 5,112,192 _ 5,112,192
Co., Ltd.
Oriental Access Co., Ltd. _ 18,422,514 _ 18,422,514
_ 23,534,706
107
Directors and management’s remuneration
In 2006 the Company and its subsidiaries paid salaries, meeting allowances and gratuities to their directors and
management totaling Baht 39.6 million.
In 2006, the Company allocated approximately 100 million warrants to purchase of the Company’s ordinary
shares to the directors and employees, without charge. The details of warrants were stated in Note 26 to
fi nancial statements.
Guarantee obligations with related parties
The Company has outstanding guarantee obligations with its related parties, as described in Note 34.4 to
the fi nancial statements.
19. LIABILITIES WHICH WERE INCLUDED UNDER THE FORMER REHABILITATION PLAN
(Unit: Baht)
CONSOLIDATED
AND THE COMPANY ONLY
2006 2005
Balance - beginning of the year 828,417,622 1,256,354,919
Repayment during the year (53,446,023) (218,540,883)
Trade and fi nancial creditors forgiven debts after the
rehabilitation plan (22,786,790) (209,396,414)
Balance - end of the year 752,184,809 828,417,622
Less: Current portion of liabilities included under the former
rehabilitation plan (11,826,077) (76,191,866)
Total liabilities which were included under the former
rehabilitation plan 740,358,732 752,225,756
20. OTHER SHORT-TERM LOAN
The outstanding represents short-term loan which the subsidiary obtained from a former shareholder of the
subsidiary. This loan has no interest charged and the repayment period is on demand.
21. ACCRUED INTEREST
(Unit: Baht)
CONSOLIDATED THE COMPANY ONLY
2006 2006 2005
Bonds 154,494,169 154,494,169 104,233,782
Consigned inventories 22,299,700 22,299,700 53,164,780
Financial institution 17,475,356 _ _
194,269,225 176,793,869 157,398,562
109
108
22. BONDS
On 2 September 2005, an extraordinary general meeting of the Company’s shareholders passed a resolution to
approve the issue of bonds in an amount not exceeding USD 250 million or the equivalent in other currency and
the offer of such bonds on the Singapore Stock of Exchange. On 4 October 2005, the Company offered its bonds
to foreign investors, with the following terms and conditions: -
- Form Unsecured bonds
- Maturity period 5 years
- Issue date 4 October 2005
- Maturity date 4 October 2010
- Offering value USD 100 million
- Offering amount 100,000 units
- Face value USD 1,000 per unit
- Offering price USD 981.16 per unit
- Interest 10.5 percent per annum, with semi-annual payment on 4 April and 4 October
of each year
- Redemption at the option
of the Company Full or partial redemption on or after 4 October 2008 at a price of 105.25
percent of principal in 2008, 102.625 percent in 2009 and 100 percent in 2010
plus accrued interest up to the period of redemption
- Redemption at the option
of the bondholders Redemption at a price of 101 percent of principal plus accrued interest at
any time until maturity if there is a signifi cant change in the Company’s
shareholding structural
- Covenants 1) A reserve is to be set aside as security for interest payment
2) If the Company creates additional long-term debt, it must maintain
certain fi nancial ratios
3) No dividend may be declared or paid if the Company is in defaulted on
interest payment
4) Fund received from bond issuance are not to be used for other than
the stipulated purposes
In addition, on 16 February 2006, the Company issued and offerred 70,000 units of bonds to the foreign inves-
tors. The bonds have face value at USD 1,000 each, or totalling USD 70 million. The offering price was USD
1,019.78 per unit and the term and conditions were the same as the above issued bonds.
(Unit: ‘000 Baht)
CONSOLIDATED AND THE COMPANY ONLY
2006 2005
USD 100 million USD 70 million USD 100 million
bonds bonds Total bonds
Fair value of bonds 4,093,574 2,746,562 6,840,136 4,093,574
Effect of exchange rate (470,494) (210,406) (680,900) 23,886
Premiums (discounts) on face value (61,623) 45,850 (15,773) (73,267)
Amortisation of deferred bonds
arrangement fees (78,394) (40,754) (119,148) (92,089)
Book value of bonds 3,483,063 2,541,252 6,024,315 3,952,104
23. SHARE CAPITAL
In January 2006, the Company issued 1,500 million new shares with a par value of Baht 1 each and sold them
through an initial public offering at a price of Baht 1.60 per share, or for a total of Baht 2,400 million. The
Company recorded the expenses of Baht 85.5 million associated with the increase in share capital as a deduction
against premium on ordinary shares. The Company registered the increases in its share capital from Baht 8,200
million to Baht 9,700 million, comprising 9,700 million of ordinary shares of Baht 1 each, with the Commerce
Ministry on 20 January 2006. The Stock Exchange of Thailand has granted a listing of the Company’s ordinary
shares and permitted trading on 25 January 2006.
As described in Note 6, the Company issued 1,400 million ordinary shares at Baht 1.51 to swap the ordinary shares
in Nakornthai Strip Mill Plc. totalling 2,511 million shares. The market price of the Company at the transaction
date was Baht 1.02 per share. The Company recorded shares issued for the exchange with the ordinary shares
of Nakornthai Strip Mill Plc. at the market price of the transaction date, the paid-up share capital of the
Company therefore increased from Baht 9,700 million to Baht 11,100 million, comprised of 11,100 million or ordinary
shares with a par value of Baht 1 each. The share premium increased by Baht 28 million. The Company registered
its issued and paid up share capital of Baht 11,100 million with the Commerce Ministry on 12 September 2006.
The Stock Exchange of Thailand approved the additional ordinary shares of the Company as listed securities on
3 October 2006.
24. PREMIUM ON CAPITAL REDUCTION
In order to comply with the capital restructuring process stipulated in the rehabilitation plan, in 2004 the Com-
pany reduced its paid-up share capital from Baht 5,000 million (500 million ordinary shares with a par value of
Baht 10) to Baht 50 million (5 million ordinary shares with a par value of Baht 10) to eliminate its defi cit. The
capital reduction of Baht 4,950 million compared to a defi cit the Baht 387.7 million as at 31 July 2003, and the
excess of the capital reduction over the defi cit was presented as “Other surplus” in the balance sheet. The
Company offset premium on capital reduction amounting to Baht 4,356 million (4,400 million of increased ordi-
nary shares with par value of Baht 1 each at Baht 0.01 each) against the share discount as a result of the capital
reduction.
111
110
25. STATUTORY RESERVE
Pursuant to Section 116 of the Public Company Limited Act B.E. 2535, the Company is required to set aside to
a statutory reserve at least 5 percent of its net income, after deducting accumulated defi cit brought forward
(if any), until the reserve reaches 10 percent of its registered share capital. The statutory reserve can not be
used for dividend payment.
26. WARRANTS
On 12 January 2006, the Company issued approximately 100 million warrants to subscribe the Company’s ordinary
shares to directors and employees of the Company (ESOP), without charge. The warrants are exercisable for a
period of 5 years from the issue date, in a ratio of 1 warrant to 1 ordinary share. The exercise price is Baht 1 per
share. The directors and employees could be able to exercise each of the one-third of all allocated warrants after
the Company’s shares have been traded on the Stock Exchange of Thailand for 1 year, 2 years and 3 years,
respectively. The fi rst date of exercise is on 30 March 2007 and the last date is on 11 January 2011.
27. GAIN FROM REHABILITATION (Unit: Baht)
CONSOLIDATED
AND THE COMPANY ONLY
2006 2005
Gain from rehabilitation forgiven by trade payable as a results of the
repayment prior to maturity 25,889,107 27,599,139
Gain from rehabilitation plan forgiven by a related company as a result
of the repayment prior to maturity _ 182,195,223
Total gain from rehabilitation 25,889,107 209,794,362
Less: Adjustment of suspense value added tax of forgiven debts (3,102,317) (397,948)
22,786,790 209,396,414
The Company negotiated with its trade accounts payable and other payable under the rehabilitation plan that
the Company will pay the debts prior to the maturity and all creditors would agree to reduce the partial of
indebtedness. Most of creditors agreed with the Company’s negotiation and therefore the Company recorded
the portions of indebtedness forgiven under gain from rehabilitation in the income statements.
In 2005, the Company entered into an agreement with a trade payable to repay liabilities under the business
rehabilitation plan as of 31 December 2004 amounting to Baht 133.3 million before maturity, in accordance with
a memorandum of understanding on debt repayment dated 6 December 2005. Under this MOU, the Company is
to pay Baht 80.0 million of debt and the trade payable agrees to cancel Baht 53.3 million of debt for the
Company. The Company agreed to repay such debt on an installment basis, within July 2006 and as of
31 December 2005, had repaid Baht 41.4 million and recorded a Baht 27.6 million gain from business rehabilitation,
in proportion to the payment made, presented as an extraordinary item in income statement. In addition, the
Company paid Baht 165.3 million of liabilities under the rehabilitation plan to a related company, and that related
company, which agreed to cancel Baht 182.2 million of debt for the Company because of repayment was made
prior to the maturity date, in accordance with the proposals to pay indebtedness prior to maturity dated
28 October 2005 and 31 October 2005. The Company recorded the indebtedness of Baht 209.8 million forgiven
by the related company, upon extraordinary item in the 2005 income statement.
28. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net income for the year by the weighted average number
of ordinary shares in issue during the year.
Diluted earnings per share is calculated by dividing the net income for the year by the weighted average number
of ordinary shares in issue during the year plus the weighted average number of ordinary shares which would
need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation assumes
that the conversion took place either at the beginning of the year or on the date the potential ordinary shares
were issued.
Reconciliation between basic earnings per share and diluted earning per share is presented below.
CONSOLIDATED
For the year ended 31 December 2006
Weighted average
number of ordinary Earnings
Net income shares per share
(Thousand Baht) (Thousand shares) (Baht)
Basic earnings per share
Net income 1,678,064 10,047,671 0.17
Effect of dilutive potential ordinary shares
ESOP _ 18,694
Diluted earnings per share
Net income of ordinary shareholders assuming the
conversion of warrants to ordinary shares 1,678,064 10,066,365 0.17
THE COMPANY ONLY
For the year ended 31 December 2006
Weighted average
number of ordinary Earnings
Net income shares per share
(Thousand Baht) (Thousand shares) (Baht)
Basic earnings per share
Net income 1,738,308 10,047,671 0.17
Effect of dilutive potential ordinary shares
ESOP _ 18,694
Diluted earnings per share
Net income of ordinary shareholders assuming the
conversion of warrants to ordinary shares 1,738,308 10,066,365 0.17
No presentation of diluted earnings per share in the 2005 fi nancial statements because the Company issued
warrants to purchase the ordinary shares to the directors and employees of the Company in 2006.
113
112
29. DIVIDEND PAID
Dividend
Approved by Total dividend per share
(Million Baht) (Baht)
Dividend from net earnings of 2005 Annual General Meeting of
shareholders on 24 April 2006 388.0 0.04
Total for 2006 388.0 0.04
30. NUMBER OF EMPLOYEES AND RELATED COSTS
CONSOLIDATED
AND THE COMPANY ONLY
2006 2005
Number of employees at end of year 729 718
Employee costs for the year (Thousand Baht) 339,465 338,685
31. PROMOTIONAL PRIVILEGES
The Company has received promotional privileges from the Board of Investment for the manufacture of hot
rolled coils, pursuant to the promotion certifi cate No. 1047/2539. Subject to certain imposed condition, the
privileges include an exemption from corporate income tax for a period of 8 years from the date the promoted
operations commenced generating revenues and a 50% reduction of corporate income tax on income derived
from the promoted operations for a period of 5 years after the tax-exemption period end.
The Company’s revenues from sales for the years are below shown divided according to promoted and non-
promoted businesses.
(Unit: Baht)
Promoted business Non-promoted business Total
2006 2005 2006 2005 2006 2005
Revenues from sales
Domestic sales 16,809,293,349 19,654,893,575 _ _ 16,809,293,349 19,654,893,575
Export sales 1,193,753,191 2,546,951,181 _ _ 1,193,753,191 2,546,951,181
Total 18,003,046,540 22,201,844,756 _ _ 18,003,046,540 22,201,844,756
The Company is not liable to corporate income tax for the years due to tax loss brought forward.
32. FINANCIAL INFORMATION BY SEGMENT
The Company and its subsidiaries’ business operations involve 3 principal segments: manufacture and sold of
Hot Rolled Coils, consulting services and holding company. These operations are mainly carried on in Thailand.
Below is the consolidated fi nancial information for the year ended 31 December 2006 of the Company and its
subsidiaries by segment.
(Unit: Million Baht)
Manufacture and
sold of Hot Consulting
Rolled Coils services Holding company Total
Revenue from external – Domestic
sales
16,809.3 115.1 _ 16,924.4
- Export sales 1,193.7 _ _ 1,193.7
18,003.0 115.1 _ 18,118.1
Segment income 1,718.4 115.1 _ 1,833.5
Unallocated income and expenses
Interest income 176.3
Other income 824.4
Administrative expenses (229.3)
Share of loss from investment in
associated company (42.0)
Interest and fi nancial expenses (907.6)
Income before extraordinary item 1,655.3
Extraordinary item - gain from
repayment in prior period
stipulated rehabilitation 22.8
Net income 1,678.1
Property, plant and equipment 19,898.8 _ _ 19,898.8
Unallocated assets 21,718.1 _ _ 21,718.1
Total assets 41,616.9
In 2005, the operations of the Company is in a single industry segment in manufacturing of hot rolled coils and
is carried on in the single geographical area in Thailand. As a result, all of revenue, operating profi ts and assets
as refl ected in these fi nancial statements pertain to the aforementioned industry segment and geographic
area. Export sales for the year 2005 was amounted to Baht 2,547 million.
33. PROVIDENT FUND
The Company and its employees have jointly established a provident fund as approved by the Ministry of Fi-
nance in accordance with the Provident Fund Act B.E. 2530. The fund is monthly contributed to by employees,
at the rate of 2 percent of their basic salaries, and by the Company at the same rate, and will be paid to em-
ployees upon termination in accordance with the rules of the fund. The fund is managed by Kasikorn Assets
Management Co., Ltd. During the year 2006, the Company contributed Baht 3 million (2005: Baht 2 million) to
the provident fund.
115
114
34. COMMITMENTS AND CONTINGENT LIABILITIES
34.1 Long-term services commitments
The Company has entered into agreements of providing raw materials, raw water, water supply management
and dock service fee. The Company is to pay service fees related to raw materials management, raw water,
water supply management and dock fees based on the quantity used.
The Company has entered into the purchase of gas with 2 companies and is to pay service fees under
this agreement at the variable rate based on the quantity of gas used and the fi xed rate as follows:-
(Unit: Million Baht)
Amount
2007 25.2
2008 - 2009 50.5
The Company had agreements to purchase raw materials with overseas suppliers for 40,169 tonne of
unreleased raw materials, which the ownership is belong to the sellers. In addition, the Company had to
pay interest at rate LIBOR + 1 to 1.75 percent on the unrealised raw materials.
34.2 Operating leases commitments
The Company has entered into several lease agreements in respect of the lease of offi ce building space.
Future minimum rentals payable under these leases as at 31 December 2006 are as follows:
(Unit: Million Baht)
Amount
2007 5.5
2008 - 2013 33.7
34.3 Other agreements commitments
The Company has commitments to pay fi nancial advisory fees, other advisory and service fees totalling
Baht 15.7 million. In addition, the Company has commitment to pay consulting fee, machine installation
based on working hours and the fi xed rate totalling USD 0.5 million, machinery and construction of
factory under the expansion project totalling USD 26.8 million and Baht 192.1 million.
34.4 Guarantees
The Company has guaranteed bank credit facilities of its subsidiary company amounting to USD 120 million.
As of 31 December 2006, the Company had Baht 441 million (2005: Baht 31 million) of letter guarantees
issued by banks on behalf of the Company in respect of certain performance bonds as required in the
normal course of business.
34.5 Litigation
The Company was sued by 2 minority shareholders with a combined shareholding of 5.5 million shares,
claiming compensation for damage amounting to Baht 54.5 million suffered as a result of the Company
entering into the business rehabilitation process and restructuring its capital. On 25 July 2006, the Court
of First Instance ordered the suit dismissed. The shareholders, as the plaintiff, subsequently requested
leave to appeal but the Court First Instance refused to hear the appeal, fi nalizing the hearing of the case
by the court. However, the shareholders appealed the order of the court refusing leave to appeal. The
Appeals Court ordered the suit dismissed.
As at the balance sheet date, the shareholders have petitioned against the order of the Appeals Court
with the Supreme Court and the Company has submitted its case against the appeal. The litigation is
therefore being heard by the Supreme Court and if the Supreme Court uphold the order of the Appeals
Court, the outcome of the case is considered fi nal. However, if the Supreme Court cancels the existing
order, the case will need to be reheard.
35. FINANCIAL INSTRUMENTS
Financial risk management policies
The Company and its subsidiaries are exposed to risks from changes in interest rates and currency
exchange rates and risks from nonperformance of contractual obligations by counterparties. The
Company and its subsidiaries uses derivatives, as and when it considers appropriate, to manage such
risks. In addition, the Company and its subsidiaries have policies to enter into contracts with creditworthy
counterparties. Therefore, the Company and its subsidiaries do not expect any material fi nancial losses
to arise as a result of counterparties failing to discharge their obligations as stipulated in the fi nancial
instruments.
The accounting policies for derivatives are disclosed in the notes to fi nancial statements regarding
signifi cant accounting policies. The Company and its subsidiaries have no policies to hold or issue
derivatives for speculative or trading purposes.
Interest rate risk
Interest rate risk is the risk that future fl uctuations in market interest rates will affect the operating
results and cash fl ows of the Company and its subsidiaries.
The Company and its subsidiaries’ exposure to interest rate risk relates primarily to its cash at banks,
loans, investments in rights of claims over convertible debts, borrowings from fi nancial institutions
debentures and liabilities under the former rehabilitation which are subject to interest. As of 31 December
2006, the Company has Interest Rate Swap Transaction Agreement with a bank for principal totaling USD
120 million. The contract is for a period of 3 years, commencing from 4 April 2006 and maturing in April
2009. The Company has to pay interest on semi-annual, at each of 4 April and 4 October, to the bank at
a fi xed rate of 8.8 percent and the bank is required to pay interest to the Company at a rate depended
upon the rate of return of the securities as stipulated in the agreement.
As at 31 December 2006, the signifi cant fi nancial assets and liabilities classifi ed by type of interest rate
and, for those fi nancial assets and liabilities carrying interest at fi xed rates, by the contractual repricing
or maturity date (whichever is earlier) are as follows:
(Unit: Million Baht)
CONSOLIDATED
Fixed interest rates Non-
Within Over Floating interest Effective
1 year 1-5 years 5 years interest rate bearing Total interest rate
(% p.a.)
Financial assets
- Cash and cash equivalents _ _ _ 1,615.7 0.4 1,616.1 0.5 - 1.0
- Trade accounts receivable _ _ _ _ 2,122.8 2,122.8 _
- Trade accounts receivable - related party _ _ _ _ 20.1 20.1 _
- Amount due from related parties _ _ _ _ 479.9 479.9 _
- Deposits at fi nancial institutions
with restriction 78.5 _ _ 679.3 _ 757.8 0.5 - 3.0
- Investments in rights of claims
over secured convertible debts _ _ _ 3,989.3 _ 3,989.3 MLR
78.5 _ _ 6,284.3 2,623.2 8,986.0
Financial liabilities
- Short-term loan from fi nancial
institution _ _ _ 4,347.7 _ 4,347.7 SIBOR
- Trade accounts payable _ _ _ _ 2,277.5 2,277.5 _
- Trade accounts payable - related party _ _ _ _ 205.1 205.1 _
- Other payables _ _ _ _ 853.6 853.6 _
- Other short-term loan _ _ _ _ 3.0 3.0 _
- Liabilities under the former
rehabilitation plan _ _ _ _ 752.1 752.1 _
- Bonds _ 6,024.3 _ _ _ 6,024.3 10.5_ 6,024.3 _ 4,347.7 4,091.3 14,463.3
117
116
(Unit: Million Baht)
THE COMPANY ONLY
Fixed interest rates Non-
Within Over Floating interest Effective
1 year 1-5 years 5 years interest rate bearing Total interest rate
(% p.a.)
Financial assets
- Cash and cash equivalents _ _ _ 1,598.2 0.4 1,598.6 0.5 - 1.0
- Trade accounts receivable _ _ _ _ _ 2,122.8 _
- Trade accounts receivable
- related parties _ _ _ _ 514.7 514.7 _
- Deposits at fi nancial institutions
with restriction 78.5 _ _ 679.3 _ 757.8 0.5 - 3.0
- Loan to related parties 12.7 10.8 _ _ _ 23.5 7.0
91.2 10.8 _ 2,277.5 2,637.9 5,017.4
Financial liabilities
- Trade accounts payable _ _ _ _ 2,277.5 2,277.5 _
- Trade accounts payable
- related party _ _ _ _ 205.1 205.1 _
- Other payables _ _ _ _ 527.5 527.5 _
- Liabilities under the former
rehabilitation plan _ _ _ _ 752.1 752.1 _
- Bonds _ 6,024.3 _ _ _ 6,024.3 10.5_ 6,024.3 _ _ 3,762.2 9,786.5
Foreign currency risk
Foreign currency risk is the risk that the value of a fi nancial instrument will fl uctuate because of changes in
foreign exchange rates.
The Company and its subsidiaries are exposed to signifi cant foreign currency risk in respect of purchase/
sales transactions and borrowing denominated in foreign currencies. However, the Company has entered into
forward contracts with maturities of less than one year to mitigate the foreign currency risk.
Foreign currency assets/ liabilities
As at 31 December 2006, the outstanding balances of the Company and its subsidiaries’ fi nancial assets and li-
abilities denominated in foreign currencies are as follow:
CONSOLIDATED
Financial Financial Average exchange rate
Foreign currency assets liabilities As at 31 December 2006
(Million) (Million) (Baht per 1 foreign currency unit)
USD 122 338 36.0932
EUR 2 _ 47.4592
JPY 25 14 0.3035
THE COMPANY ONLY
Financial Financial Average exchange rate
Foreign currency assets liabilities As at 31 December 2006
(Million) (Million) (Baht per 1 foreign currency unit)
USD 125 208 36.0932
EUR 2 _ 47.4592
JPY 25 14 0.3035
As at 31 December 2006, the Company and its subsidiaries had the following outstanding forward contracts:
CONSOLIDATED AND THE COMPANY ONLY
Contractual exchange rate
Foreign currency Bought amount Sold amount Bought Sold
(Million) (Million) (Baht per 1 foreign currency unit)
USD 12 _ 35.1950 - 38.4700 _
Credit Risk
Credit risk refers to the risk that counterparty will default on its contractual obligations, resulting in a fi nancial
loss to the Company.
The Company is exposed to credit risk primarily with respect to trade accounts receivable and other receivable.
The Company’s management manages such risk by establishing credit limits for customers and counterparties
and analysing their fi nancial position on an ongoing basis. As a result, the Company does not expect to incur
material fi nancial losses.
However, the Company is exposed to concentrations of credit risk with respect to trade receivables because it
has a few major customers who are in the same industry. The maximum exposure to credit risk is limited to the
carrying amounts of receivables as stated in the balance sheet.
118
Fair value
Fair value represents the amount for which an asset could be exchanged or a liability settled between know-
ledgeable, willing parties in an arm’s length transaction.
Since major fi nancial assets and fi nancial liabilities are short-term in nature, and loans to and loans from carry
interest at rates which approximate market rates, the fair values of fi nancial assets and fi nancial liabilities are
estimated to be close to the amounts presented in the balance sheet.
The Company estimated fair value of bonds using discounted cash fl ow based on the current interest rate. The
fair value of bonds are insignifi cantly different from the aggregate carrying value.
36. RECLASSIFICATION
Certain amounts in the fi nancial statements for the year ended 31 December 2005 have been reclassifi ed to
conform to the current year’s classifi cations, with no effect on previously reported net income or shareholders’
equity.
37. SUBSEQUENT EVENT
On 12 February 2007, Oriental Access Co., Ltd. the subsidiary of the Company received the transfer of
additional 1,646,203,609 shares converted from rights over secured convertible debt in accordance with the
business rehabilitation plan or equivalent to approximately 6.67 percent of registered and paid-up share
capital of NSM. The number of these shares and the existing shares made the Company and its subsidiary
held 5,803,673,289 shares, or approximately 23.51% of registered and paid-up shares capital of NSM.
38. APPROVAL OF FINANCIAL STATEMENTS
These fi nancial statements were authorised for issue by the Company’s Board of Directors on 26 February
2007.
119
SET INFORMATION REFERENCE GUIDE UNDER FORM 56-2
No. Topic Page
1 GENERAL INFORMATION
The Company and all details
Other reference persons
51
2 SUMMARY OF FINANCIAL INFORMATION
Financial Highlights
1
3 TYPE OF BUSINESS
Nature of Business, Income Structure and Structure of Transactions
with Business Alliances
52
4 RISK FACTORS
55
5 SHAREHOLDER’S STRUCTURE AND MANAGEMENT
• Shareholder List of 10 Major shareholders
• Management, Management’ s Structure and Nomination of Directors
and Management Team
• Remuneration for the Management, Remuneration by Cash and
remuneration by other
• Good Corporate Governance
• The Policy of Internal Information Using Protection
• Internal Control
72
39
45
62
68
69
6 COMMON INTERESTED PERSONS AND CONNECTED TRANSACTIONS
• Related transactions between the company and the parties with
conflicts of interest
• Related transactions between the company and with business alliances.
• Approval procedures for inter-related transactions
73
74
76
7 MANAGEMENT DISCUSSION AND ANALYSIS 78
8 FINANCIAL STATEMENTS 82
120
THE PRINCIPLES OF CORPORATE GOVERNANCE
No. Topic Page
1 Policy on Corporate Governance 62
2 Shareholders : Rights and Equitable Treatment 62
3 Various Group of Stakeholders 62
4 Shareholders’ Meetings 63
5 Leadership and Vision 64
6 Conflict of Interest 64
7 Business Ethics 64
8 Balance of Power for Non-Executive Directors 65
9 Aggregation or Segregation of Positions 65
10 Remuneration for Directors and the Management 65
11 Board of Directors’ Meetings 65
12 Committee 66
13 Controlling System and Internal Audit 67
14 Directors’ Reporting 68
15 Relations with Investors 68
Designed by : Pink Blue Black & Orange Co., Ltd. Tel. +66 (0) 2300 5124 www.colorparty.com
top related