Part 3

13. Financial Position and Operational performance

Financial statements

Auditor

  --------------------------- -------------------- ------- --------------
  Year                        Name of auditor      CPA no. Auditing firm

  2017/18 ( April 1, 2017-Mar Mr. Chayapon         3972    EY Office
  31,2018)                    Supasethnon                  Limited

  2016/17 ( April 1, 2016-Mar Mr. Chayapon         3972    EY Office
  31,2017)                    Supasethnon                  Limited

  2015/16 ( April 1, 2015-Mar Mr. Chayapon         3972    EY Office
  31,2016)                    Supasethnon                  Limited

  2014/15 ( April 1, 2014-Mar Mr. Termphong        4501    EY Office
  31,2015)                    Opanaphan                    Limited

  2013/14 ( April 1, 2013-Mar Mr. Termphong        4501    EY Office
  31,2014)                    Opanaphan                    Limited
  --------------------------- -------------------- ------- --------------

Auditor’s report

For all the past years, including the year ended on March 31^(st) 2018,
the Auditors have given an unqualified opinion that the financial
statements were fairly presented and prepared in accordance with
generally accepted accounting principles.

The financial statements of last 3 years, for both Consolidated and
Standalone, latest being the year ended on 31^(st) March 2018, have been
given for the purpose of comparison and for the appreciation of the
change in revenues and profitability over the years.

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14. Management Discussion and Analysis of operational performance and
    financial status

    1.  Operational performance

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PTL, a subsidiary of PCL, was incorporated on March 26, 2002 to engage
in the production and distribution of PET film (Polyethylene
Terephthalate Film or Polyester Film) mainly for export markets focusing
on packaging, industrial and electrical segments. The Company commenced
operations from its first production line in April, 2003. Since then,
the Company has expanded its operations significantly, both within and
outside Thailand. In Thailand, the Company has invested in Extrusion
Coating lines, Cast Polyproplene line, Silicone Coating line, Thick PET
film line, Blown film line and a few Metallizers. Apart from this the
Company has also set up manufacturing subsidiaries in Turkey (2005) USA
(2012) and in Indonesia (Greenfield project under implementation),
trading companies in Europe, Turkey and China, Liaison offices in
Malaysia and Korea.

All our operational product lines in Thailand have the following
certifications:

-   ISO 14001:2004 certification on Environment Management system

-   ISO 9001:2008 certification on Quality Management system

-   OHSAS 18001:2007 certification on Occupational Health and Safety
    Management system

-   ISO 22000:2005 certification on Food Safety standards

-   TPM Excellence Award (Category A)

-   Kosher Certificate

All our product lines in Turkey have the following certifications:

-   ISO 14001:2004 certification on Environment Management system

-   ISO 9001:2008 certification on Quality Management system

-   OHSAS 18001:2007 certification on Occupational Health and Safety
    Management system

-   BRC/IoP – certification on Global Standard For Packaging and
    Packaging Materials (For Plain and Metallized Film lines)

-   ISO 50001:2011 certification on Energy Management system

Polyplex group aims to become one of the world market leaders in plastic
film industry by continuously expanding its market share through regular
expansions in capacity and diversification in its product portfolio. The
Thin PET film line in US and the Thick PET Film line in Thailand, which
started in 2013 have added 31,000 MT and 28,800 MT per annum in the
Company’s combined PET film capacity. The Greenfield Thin PET Film line
in Indonesia which is under implementation and expected to start
operations in Q3 of 2019 will add another 44,000 MT p.a to the Group’s
PET film capacity. By venturing into the manufacture of related products
such as BOPP film (In India), and CPP films & Blown Films (In Thailand),
which are other Packaging substrates, used by Converters, in addition to
PET film, Polyplex aims to become a preferred packaging substrate
provider as against just a PET thin film supplier. Apart from this, in
order to further diversify its product range, the group has regularly
been expanding into other products such as Silicone coated film
Extrusion coated films, Blown film and Metallized films. The recycling
project in Thailand has been set up to find sustainable solution for
film based process waste.

Polyplex group has set out clear business strategies:

1) Focus on product development and technical services to penetrate high
growth and high margin markets,

2) Continued focus on cost efficiency through Kaizens including
debottlenecking and energy saving/ efficient investments

3) Boosting delivery efficiency through focus on distributed
manufacturing and logistics

4) Diversifying the product portfolio to minimize the risk of cyclical
impact of the PET film industry, to increase stability of Earnings

5) Continuous effort to improve the share of value added and specialty
products in the product portfolio.

6) Endeavor to attain Customer satisfaction through supply of consistent
quality products

7) Judicious mix of On-shore, Off-shore and Near-shore strategy.

8) Systems are created and strengthened to enhance cross-learning and
sharing best practices/benchmarking across various units and businesses
of the Group to enhance efficiency and synergy.

9) Focus on innovation and collaborative application development has
helped the Company become a preferred supplier/ partner with several
large multinational customers.

In the current year, due to growth in demand and slowdown in capacity
additions, there has been an improvement in market sentiment and hence,
an improvement in the overall operational performance at Thailand,
Turkey and in USA.

For the year ended 31 March 2018, the company has reported a net profit
(after minority interest) of Bt 1,169.99 million on consolidated basis,
as compared to a net profit of Bt 1,366.36 million in the corresponding
year. The corresponding year included forex gains of Bt 326.01 million
as against which there is a forex loss of Bt 263.96 million in the
current year. Keeping aside the forex fluctuations, the normalized net
profit for the corresponding year was Bt 1,044.35 million, which has
increased by 37.28% to Bt 1,433.94 million in current year.

For the year ended 31 March 2018, the company has reported a net profit
of Bt 212.32 million on Standalone basis, as compared to a net profit of
Bt 498.97 million in the corresponding year. The corresponding year
included forex gains of Bt 233.16 million as against which there is a
forex loss of Bt 57.54 million in the current year. Keeping aside the
forex fluctuations, the normalized net profit for the corresponding year
was Bt 265.82 million, which has increased by 1.52% to Bt 269.86 million
in current year.

One of the keys reason for the higher profitability at Thailand as well
as subsidiaries is the higher volumes in current year as compared to
corresponding year, as well as better value addition in some of the
product lines as compared to corresponding year partially offset by
appreciation in THB. The performance was impacted at Thailand due to
start-up losses at the time of implementation of the Direct Melt Cast
line at Thailand. There was also a shutdown of 7 days in the Turkey film
plant to implement an energy saving project which impacted production
and profitability. The corresponding year had been impacted by breakdown
of the Thick PET film line in Thailand, which resulted in loss of
volumes and also another breakdown in the Chips line in Turkey which
resulted in higher costs due to purchase of PET chips at a premium.

The key highlights of the year’s performance are as follows:

TOTAL REVENUES

Consolidated:

Sales Revenue:

Consolidated Sales revenue of the company has increased from Baht
11,538.84 million to Baht 12,672.95 million, an increase of Baht
1,134.11 million or 9.83% mainly due to overall higher volumes at
Thailand and the subsidiaries and also due to better average sales
realization driven by higher raw material prices as well as improved
market conditions compared to the corresponding year

Table illustrating consolidated sales revenue from Exports and Domestic
sales is as below:

  -------------- ----------- -------- ----------- -------- ----------- --------
                 2015-16              2016-17              2017-18     

  Market         Bt. Million %        Bt. Million %        Bt. Million %

  Exports        7,996.33    65.13    7,728.24    66.98    8,048.19    63.51

  Domestic sales 4,281.99    34.87    3,810.57    33.02    4,624.76    36.49

  Total          12,278.32   100.00   11,538.81   100.00   12,672.95   100.00
  -------------- ----------- -------- ----------- -------- ----------- --------

Note: Sales made by the distribution company in the Netherlands/ Turkey/
China has been considered as Exports.

Other Income:

The other income has decreased from Baht 64.24 million in the
corresponding year to Baht 54.50 million due to lower other income at
subsidiaries (decrease in interest income at Turkey partly offset by
interest income at the new subsidiary in Indonesia). The lower other
income at subsidiaries is partly offset by higher other income at
Thailand.

There was an exchange gain of Baht 326.01 million in corresponding year
as against which there is an exchange loss of Baht 263.96 million in
current year. The forex losses are primarily on account of losses on the
restatement of Euro loans at Thailand and USA due to strengthening of
Euro against USD and Baht. This is partly offset by the gains on USD
loan restatement at Thailand due to Baht strengthening against USD.

The combined net impact of the above factors has contributed to an
overall increase in the total consolidated revenue by Baht 798.36
million or 6.69% to Baht 12,727.45 million.

Standalone:

Sales Revenue:

The Company’s total sales revenue is mainly driven by Exports, with
80-85% of its total sales revenue coming from exports.

Table illustrating the Company’s sales revenue from export and domestic
sales is below:

  -------------- ----------- -------- ---------- -------- ---------- --------
                 2015-16              2016-17             2017-18    

  Market         Bt. million %        Bt.        %        Bt.        %
                                      Million             Million    

  Exports        4,498.67    82.55    4,410.71   83.69    4,494.01   82.05

  Domestic sales 951.27      17.45    859.68     16.31    983.26     17.95

  Total          5,449.94    100.00   5,270.38   100.00   5,477.27   100.00
  -------------- ----------- -------- ---------- -------- ---------- --------

On a standalone basis, the Company recorded sales of Baht 5,477.27
million, an increase of Baht 206.89 million or 3.93%, due to overall
higher volumes as well as better sales realization in some of the
businesses.

Other Income:

The other income has increased from Baht 32.44 million to Baht 39.18
million due to dividend from subsidiary in Thailand and higher income
from insurance claims. This is partly offset by lower Export incentive
income due to reduction in the incentive rates applicable for the
Company’s products.

There was an exchange gain of Baht 233.16 million in corresponding year
as against which there is an exchange loss in current year of Baht 57.54
million. The exchange loss is due to unrealized losses on the Euro Loan
restatement, partly offset by gains on the USD loan restatement.

The net impact of the above factors has contributed to decrease in total
revenues by Baht 19.54 million or 0.35%.

TOTAL EXPENSES

Consolidated

The key elements of the Company’s cost structure are raw materials,
packing, electricity & fuel, depreciation, staff cost, selling &
administrative expenses and finance costs.

The company recorded total consolidated expenses of Baht 11,396.94
million being an increase over corresponding year by Baht 1,012.84
million or 9.75%.

The cost of sales has increased by Baht 688.41 million or 7.38% mainly
due to higher volumes at Thailand as well as subsidiaries. The per unit
raw material cost has also increased as compared to the corresponding
year of last year due to increase in key raw material prices.

A broad break up of COS is given below:

  ---------------------------------------------- --------- --------- ---------
  Description                                    2015-16   2016-17   2017-18

  Raw materials and consumables used             74.4%     73.7%     75.2%
  (incl.change in inventory)                                         

  Depreciation ( in COS)                         7.6%      7.9%      7.3%

  Salaries, wages and other employee benefits    8.4%      9.3%      8.7%
  (in COS)                                                           

  Utilities (Power/Natural Gas/ Chilled water    7.8%      7.6%      7.3%
  etc)                                                               

  Others                                         1.7%      1.4%      1.5%

                                                 100.00%   100.00%   100.00%
  ---------------------------------------------- --------- --------- ---------

The selling expenses have increased by Baht 69.91 million or 10.21% due
to increase in overall sales volumes at Thailand as well as
subsidiaries, resulting in increase in outbound freight, sales
commission, warehousing expenses etc.

The administrative expenses have decreased by Baht 9.44 million or 2.57%
due to lower expenses at the Turkey subsidiary which are partly offset
by higher expenses at Thailand, Indonesia and USA. The increase at
Thailand is due to higher professional and legal consultation charges,
expenses relating to the Indonesia investment, Interim dividend related
expenses, etc, which is partly offset by savings in certain other
administrative expenses. The increase at USA is due to higher bad debt
provision and employee related admin expenses, partly offset by savings
in certain other expenses.

As a % to total revenue, total expenses have increased from 87.05% to
89.55% mainly due to higher cost of sales and selling expenses partly
offset by lower administrative expenses and also higher sales and other
income, partly offset by The forex losses in current year as compared to
the forex gains in the corresponding year has also contributed to the
increase in total expenses as a % to total revenues.

The consolidated finance costs during the year were Baht 122.42 million,
a decrease of Baht 25.05 million or -16.99% over corresponding year.

The key reason for decrease is mainly lower interest on working capital
debt at Thailand and USA and lower term debt interest due to repayment
of loans made over the past year. The impact of lower debt is partly
offset by higher LIBOR rates.

The Consolidated Corporate Income tax expense in this year is Baht 30.44
million as compared to the expense of Baht 23.56 million in the
corresponding year mainly due to increase in tax expenses at the
subsidiaries.

The combined net result of all the above factors has resulted in a net
profit on consolidated basis of THB 1,169.99 million, as against a net
profit of Baht 1,366.36 million in the corresponding year.

Standalone

The total expenses for the company standalone are Baht 5,215.30 million
being an increase over corresponding year by Baht 274.90 million or
5.56%.

The Cost of sales is Baht 4,788.65 million, which is an increase over
corresponding year by Baht 182.99 million or 3.97%. This is mainly due
to overall higher sales volumes and also higher raw material prices as
compared to corresponding year led by sharp increase in MEG.

A broad breakup of the COS is given below:

  ---------------------------------------------- --------- --------- ---------
  Description                                    2015-16   2016-17   2017-18

  Raw materials and consumables (incl.change in  72.0%     71.8%     71.9%
  all inventory)                                                     

  Depreciation ( in COS)                         7.9%      8.2%      8.1%

  Salaries, wages and other employee benefits    8.3%      8.7%      8.4%
  (in COS)                                                           

  Utilities (Power/Natural Gas/ Chilled water    9.6%      9.0%      9.3%
  etc)                                                               

  Others                                         2.3%      2.3%      2.3%

                                                 100.0%    100.0%    100.0%
  ---------------------------------------------- --------- --------- ---------

The selling expenses have been higher by Baht 25.08 million or 9.39%
mainly due to higher sales volumes and increase in sea freight,
brokerage & commission, foreign travel expenses etc.

Administrative expenses have been higher than corresponding year by Baht
9.29 million or 13.75% due to higher professional and legal consultation
charges, expenses relating to the Indonesia investment, Interim dividend
related expenses, etc, which is partly offset by savings in certain
other administrative expenses.

As a % to total revenue, total expenses have increased from 89.24% to
94.54% mainly due to higher cost of sales, selling and administrative
expenses and forex losses, partly offset by higher sales and other
income.

The finance costs on a standalone basis during the year were Baht 88.56
million, a decrease of Baht 8.05 million or 8.33% over corresponding
year.

The key reason for decrease in finance costs is the lower interest on
working capital borrowings and lower interest on term debt due
repayments made over the past year. The savings in working capital and
term debt interest is partly offset by higher interest on intercompany
loans due to higher average borrowings. The impact of lower term debt is
partly offset by higher LIBOR rate.

The combined net result of all the above factors has resulted in a net
profit on Standalone basis of THB 212.32 million, as against a net
profit of Baht 498.97 million in the corresponding year.

Profit margins – Gross Profit, Operating Profit and Net profit ratios

On Consolidated basis, the gross margin and operating margin have
improved compared to previous year due to the improvement in overall
market sentiments and better operational performance, including the
operations of the newer projects in Thailand and USA due to further ramp
up of capacity utilization. The net margins (on reported basis) have
dropped due to the forex losses this year as compared to forex gains
last year. The forex losses are mainly unrealized and relates to the
restatement of Forex loans.

1.  Financial status

As at 31st March, 2018, there has been a sharp depreciation of THB
against the Euro (approx. THB 1.59/Euro) as compared to the exchange
rate on 31st, March 2017, so the translation of the Company’s
subsidiaries whose reporting currency is Euro, has been at a higher
exchange rate, thereby resulting in translation gains. This is partly
offset by translation losses on subsidiaries with reporting currency in
USD, due to THB appreciation against the USD (approx. THB 3.26/USD) at
period closing. On an overall basis, there is a Net translation gain of
Baht 183.75 million.

TOTAL ASSETS

As on 31^(st) March 2018, The Company’s consolidated total assets were
Baht 15,136 million, higher by 5.12% as compared to Baht 14,399 million
in the previous year.

On a Standalone basis, the total assets as on 31^(st) March 2018 were
Baht 8,632 million, higher by about 4.52% as compared to Baht 8,259
million of previous year.

The main components of Total Assets are Current assets, Fixed assets,
Investments and other non-current assets. A brief summary of the
movement in the various components of total assets is given below:

Current assets

-   The increase in consolidated cash and cash equivalents is mainly due
    to cash generated from operations, partly offset by term loan
    repayments at Thailand and USA and other cash outflows for
    operational purposes, dividend payment and the Investment in
    Indonesia.

-   Decrease in current investments is due to redemption of investments
    by Ecoblue Limited to support its dividend payout.

-   Trade and other receivables on a consolidated basis have increased,
    due to higher trade receivables at the subsidiaries, on account of
    higher volumes and prices. This is partly offset by lower trade
    receivables on Standalone basis, due to change in sales/customer mix
    and lower reported sales volume.

-   Inventories on a consolidated basis have increased mainly due to
    higher raw material inventory (price and volume increase, higher
    process inventory and finished goods inventory at Thailand and
    subsidiaries).

-   There is a decrease in advance payment for purchase of goods, mainly
    at Thailand and Turkey, due to delivery of material against advances
    paid.

-   There is an increase in Input tax refundable mainly due to higher
    VAT refundable at Thailand and at subsidiaries.

-   Other current assets – There is a decrease in other current assets
    mainly at Thailand due to lower MTM gain at Thailand on outstanding
    forward contracts at March 2018 end, as against MTM gain on
    outstanding forwards as at the end of March’ 2017 and also a
    reduction in discount receivable at year end, on the key raw
    material supplies. There is no significant variation in the other
    current assets at the subsidiaries.

Non-current assets:

-   The restricted bank deposit represents bank deposits pledged with
    the bank, as per terms of the term loan facility of the US
    subsidiary.

-   Decrease in Property Plant & Equipment (net block) is mainly due to
    depreciation charged during the YTD period, partly offset by normal
    capex additions at Thailand and the subsidiaries.

-   There is an increase in Advances for purchase of fixed assets due to
    advances against the Blown Film line project, Metallizer project,
    Indonesia project and also against normal CAPEX.

-   There is no significant variation in the other non-current assets.

Return on assets

On a consolidated basis, the return on assets is 7.92% as compared to
9.10%% during previous year. On a standalone basis, it is 2.51% as
compared to 6.12% during previous year. The drop is mainly on account of
the significant forex losses on the forex loan restatement as compared
to the forex gains last year. If we normalize the impact of Forex
fluctuations in both years, there is an improvement in Return on Assets
from 6.93% to 9.71% on consolidated basis, whereas on Standalone basis,
it is about the same (3.20% in 2017-18 as against 3.26% in 2016-17).

1.  Liquidity

Cash flow

Consolidated

-   For the year 2017-18, the Company and its subsidiaries generated
    cash of Baht 1,696 million in operating activities as per details
    below:

    -   Cash generated from operating activities (before changes in
        operating assets and liabilities) was Baht 2,307 million.

    -   The impact of changes in working capital ( Outflow of Baht 610.5
        million) is as under:

        -   Increase in Accounts Receivable by Baht 201.5 million due to
            higher sales revenues resulting from improved average
            selling prices and also higher volumes in some businesses.

        -   Increase in inventories by Baht 383 million due to higher
            raw material inventory (price and volume increase, higher
            process inventory and finished goods inventory.

        -   Decrease in Accounts Payable by Baht 29.3 million due to
            lower related party payables (lower volumes) partly offset
            by higher unrelated trade payables due to higher prices of
            raw material.

        -   Payment of long term employee benefits – Baht 5.2 million

        -   Cash paid for income tax – Baht 29.7 million

        -   Decrease in other current/ non-current assets by Baht 15.8
            million ( Mainly at Thailand due to lower MTM gain on
            forward contracts and lower discount receivable on raw
            materials)

        -   Increase in other current liabilities by Baht 22.4 million
            due to increase in expenses payable and accrued expenses at
            Thailand and the subsidiaries

-   Net cash used in investing activities is Baht 519.2 million as per
    details below:

    -   Net additions to fixed assets – Baht 334.1 million.

    -   Baht 4.3 million decrease in the restricted bank deposit.(Amount
        set aside for servicing the loan repayment and interest payment,
        as part of the Loan covenants of the US subsidiary’s term loan
        for the PET film line project)

    -   Increase in Intangible assets – Bt 1.3 million

    -   Net increase in Advance and Accounts payable for fixed assets by
        Baht 204.9 million

    -   Decrease in current investments –Bt 2.3 million

    -   Cash received from Interest – Bt 14.5 million

-   The net cash outflow from financing activities of Baht 605.2
    million:

    -   Increase in Short term loan for WC financing and other funding
        requirement – Baht 961.8 million

    -   Repayment of Long term loans from banks - Baht 960 million

    -   Dividend paid during the year – Baht 492.7 million

    -   Cash paid for interest on term loans and short term loans – Baht
        114.3 million

The surplus thereof, offset with translation adjustment gain of Baht
27.3 million, and opening balance of Baht 730.7 million has resulted in
a net closing balance of Baht 1,330.1 million.

Standalone

-   During the year 2017-18, the Company, on a standalone basis,
    generated net cash from operating activities of Baht 630.9 million
    as per details below:

    -   Cash generated from operating activities (before changes in
        operating assets and liabilities) was Baht 763.2 million.

    -   The impact of changes in working capital (Outflow of Baht 132.3
        million) is as under:

        -   Decrease in Accounts Receivable by Baht 95.8 million due to
            change in sales mix and lower reported sales volume.

        -   Increase in Inventories by Baht 254.2 million

        -   Decrease in other current/ non-current assets by Baht 9.6
            million (Mainly due to lower MTM gain on forward contracts
            and lower discount receivable on raw materials).

        -   Payment of long term employee benefits – Baht 0.7 million

        -   Increase in Accounts Payable by Baht 10.9 million due to
            higher raw material prices.

        -   Increase in other current liabilities by Baht 6.3 million

-   Net cash used in investing activities is Baht 594.7 million as per
    details below:

    -   Equity Investment of Baht 492.4 million into PT Polyplex Films
        Indonesia, the new subsidiary under which the Greenfield PET
        Thin film line project is being implemented.

    -   Net additions to fixed assets– Baht 105.4 million (Includes the
        investment in new Blown Film line and Normal maintenance CAPEX).

    -   Net increase in Advance and Accounts payable for fixed assets by
        Baht 10.4 million

    -   Dividend from subsidiary – Ecoblue Limited – Bt 13.3 million

-   The net cash outflow from financing activities of Baht 30.2 million
    is on account of below activities:

    -   Increase in Short term loan for WC financing and other funding
        requirements – Baht 1,055 million

    -   Repayment of Long term loans to banks – Baht 495.9 million

    -   Cash paid for interest on term loans and short term loans – Baht
        88.3 million

    -   Repayment of loan to subsidiary – Ecoblue Limited - Baht 15
        million

    -   Dividend payout – Baht 486 million (Final dividend of Baht 324
        million for FY 2016-17 and Interim dividend of Baht 162 million
        for FY 2017-18)

The surplus thereof, together with the opening balance of Baht 38.6
million resulted in a net closing balance of Baht 44.4 million.

Liquidity ratio

In 2017-18, consolidated current ratio was 1.59 and quick ratio was
0.94. The Company’s (standalone) current ratio was 0.44 and quick ratio
was 0.22. Consolidated average debt collection period during 2017-18 was
54 days along with Account payables period of 41 days and average
selling period of 24 days, resulting in a cash cycle of 36 days as
against a cash cycle of 35 days of previous year. The average debt
collection period of the Company (standalone) during 2017-18 was 69 days
along with Accounts payable period of 48 days and average selling period
of 9 days resulting in cash cycle of 30 days as against 32 days in
previous year.

1.  Sources of funds

Sources of funds consist of long term and short term loans from
financial institutions and shareholders’ equity.

TOTAL LIABILITIES

As on 31^(st) March, 2018, consolidated Total liabilities stood at Baht
4,597 million, a decrease of Baht 135 million as compared to previous
year. The major movements in Liabilities are as under:

Current Liabilities:

-   Increase in short term borrowings is due to additional borrowings at
    Thailand for the Dividend payment and for the Equity Investment in
    the Indonesia subsidiary. This is partially offset by lower level of
    borrowings at the US subsidiary.

-   Decrease in trade and other payables is due to lower related trade
    payables at Thailand and US subsidiary due to lower volumes
    purchased from parent company. This is partly offset by increase in
    unrelated trade payable at Thailand and subsidiaries (due to higher
    volumes and price of key raw material) and higher payables for fixed
    assets.

-   The decrease in Long term loans (including current portion) is due
    to prepayment by the US subsidiary of term loan amounting to USD 14
    million falling due for repayment in FY 2018-19, by borrowing
    inter-company loan from the subsidiary in Turkey. Apart from this,
    the term loan reduction is also on account of repayment of loans at
    Thailand and due to the unrealized gains on the USD loan
    restatement, which is offset by unrealized losses on the Euro loan
    restatement.

-   The increase in related party loan in standalone financials is from
    the unrealized losses due to the sharp depreciation of THB against
    the Euro. There is no change in the Forex Loan balance as compared
    to March’17.

-   Increase in other current liabilities is mainly due to increase in
    expenses payable and other accrued expenses at Thailand and the
    subsidiaries.

Major changes in Shareholder Equity:

-   The retained earnings on standalone basis have decreased due to the
    dividend appropriation of Baht 486 million (including the Interim
    dividend), partly offset by the net profits generated during the
    year. On a consolidated basis, retained earnings have increased due
    to the net profits generated during the year, partly offset by the
    dividend appropriation.

-   The increase in other components of equity is mainly due to exchange
    translation net gains arising on account of translation of the Euro
    denominated balance sheet of the subsidiaries due to the
    depreciation of Baht against Euro, partly offset by losses on USD
    denominated balance sheet of subsidiaries due to appreciation of THB
    against USD, as explained above.

-   The increase in Non-controlling interests of subsidiaries is due to
    minority share of profits generated during the current year partly
    offset by minority’s share of dividend appropriation.

Return on equity

The Return on Equity on Consolidated basis is 11.61% and 5.64% on
Standalone basis as compared to 15.32% on consolidated basis and 14.98%
on Standalone basis, lower this year due to the lower profitability
owing to the forex losses from loan restatement.

The Company has a policy to pay dividend at 40% of consolidated net
profits, taking into account economic conditions, growth plans, future
deployment opportunities, the Company’s financial position and liquidity
and subject to the approval by the shareholders.

For the year 2017-18, the Board has recommended a payout of THB
0.55/share or total payout of THB 495 million, out of which THB
0.18/share of THB 162 million was paid out as Interim dividend in
December 2017 and balance of THB 0.37/share or THB 333 million is being
proposed as Final dividend, for approval of shareholders in the Annual
General meeting in July 2018.

Leveraging & interest coverage ratio

The net debt equity ratio (debt only - short term and long term,
including current portion, after netting off cash & cash equivalents and
current investments) is 0.17 on a consolidated basis (as compared to
0.26 in previous year end) and 1.12 (as compared to 0.92 in previous
year end) on a standalone basis. The improvement in consolidated net D/E
is due improved cash reserves at the Turkey subsidiary (on account of
cash generated from operations). On the standalone basis, there is an
increase in D/E ratio due to higher level of working capital debt to
support the operations, as well as dividend payments and investment in
Indonesia.

Debt equity ratio (for total debt, including current + non-current
liabilities), is 0.44 on a consolidated basis and 1.38 on a standalone
basis.

There is no major change in the interest coverage ratio despite the
higher interest expenses, mainly due to improvement in cash generated
from operations.

Commitments

As at 31 March 2018 and 2017, the Company’s foreign exchange contracts
outstanding are summarised below.

+------------+----------+----------+-----------------+-----------------+
| 2018       |          |          |                 |                 |
+------------+----------+----------+-----------------+-----------------+
|            | Bought   | Sold     | Contractual     |                 |
|            |          |          | exchange rate   |                 |
+------------+----------+----------+-----------------+-----------------+
| Foreig     | amount   | amount   | Bought          | Sold            |
| n currency |          |          |                 |                 |
+------------+----------+----------+-----------------+-----------------+
|            | (        | (        | (Baht per 1     |                 |
|            | Million) | Million) | foreign         |                 |
|            |          |          | currency unit)  |                 |
+------------+----------+----------+-----------------+-----------------+
| US dollar  | 4.36     | 32.46    | 30.9715 -       | 30.9300 -       |
|            |          |          | 32.5261         | 32.4550         |
+------------+----------+----------+-----------------+-----------------+
|   Euro     | 0.99     | 1.92     | 38.7400         | 38.5600 -       |
|            |          |          |                 | 39.1400         |
+------------+----------+----------+-----------------+-----------------+
|   Japanese | -        | 77.31    | -               | 0.2940 - 0.2945 |
|   yen      |          |          |                 |                 |
+------------+----------+----------+-----------------+-----------------+

+------------+----------+----------+-----------------+-----------------+
| 2017       |          |          |                 |                 |
+------------+----------+----------+-----------------+-----------------+
|            | Bought   | Sold     | Contractual     |                 |
|            |          |          | exchange rate   |                 |
+------------+----------+----------+-----------------+-----------------+
| Foreig     | amount   | amount   | Bought          | Sold            |
| n currency |          |          |                 |                 |
+------------+----------+----------+-----------------+-----------------+
|            | (        | (        | (Baht per 1     |                 |
|            | Million) | Million) | foreign         |                 |
|            |          |          | currency unit)  |                 |
+------------+----------+----------+-----------------+-----------------+
| US dollar  | 3.18     | 31.30    | 34.4552 -       | 34.4400 -       |
|            |          |          | 35.4615         | 35.7600         |
+------------+----------+----------+-----------------+-----------------+
|   Euro     | 1.02     | 1.25     | 37.6760         | 36.9500 -       |
|            |          |          |                 | 37.9000         |
+------------+----------+----------+-----------------+-----------------+
|   Japanese | -        | 51.35    | -               | 0.3082 - 0.3114 |
|   yen      |          |          |                 |                 |
+------------+----------+----------+-----------------+-----------------+

  As at 31 March 2018 and 2017, subsidiaries had forward foreign
  exchange contracts as follows:

+-------+---------+-----------+-----------------------+---------------+
| 2018  |         |           |                       |               |
+-------+---------+-----------+-----------------------+---------------+
| Fo    | Bought  |           | Contractual exchange  |               |
| reign |         |           | rate                  |               |
+-------+---------+-----------+-----------------------+---------------+
| cur   | amount  | Sold      | Bought                | Sold          |
| rency |         | amount    |                       |               |
+-------+---------+-----------+-----------------------+---------------+
| YTL   |   6.8   | -         | YTL 4.6281 - 4.9837   | -             |
|       |         |           | per EUR 1             |               |
|       | million |           |                       |               |
+-------+---------+-----------+-----------------------+---------------+
| USD   |   8.3   |   0.2     | USD 1.2287 - 1.2453   | Baht 31.12    |
|       |         |   million | per EUR 1             | per USD 1     |
|       | million |           |                       |               |
+-------+---------+-----------+-----------------------+---------------+
|       |         |           |                       |               |
+-------+---------+-----------+-----------------------+---------------+
| 2017  |         |           |                       |               |
+-------+---------+-----------+-----------------------+---------------+
| Fo    | Bought  |           | Contractual exchange  |               |
| reign |         |           | rate                  |               |
+-------+---------+-----------+-----------------------+---------------+
| cur   | amount  | Sold      | Bought                | Sold          |
| rency |         | amount    |                       |               |
+-------+---------+-----------+-----------------------+---------------+
| YTL   |   3.8   | -         | YTL 3.9360 - 4.2196   | -             |
|       |         |           | per EUR 1             |               |
|       | million |           |                       |               |
+-------+---------+-----------+-----------------------+---------------+
| USD   |   6.6   | -         | USD 1.0570 - 1.0912   | -             |
|       |         |           | per EUR 1             |               |
|       | million |           |                       |               |
+-------+---------+-----------+-----------------------+---------------+
| EUR   |   0.4   | -         | EUR 1.0796 per USD 1  | -             |
|       |         |           |                       |               |
|       | million |           |                       |               |
+-------+---------+-----------+-----------------------+---------------+

(a) As at 31 March 2018, the Company and its subsidiaries had capital
    commitments of approximately Baht 1,074 million (2017: Baht 79.5
    million) (The Company only: Baht 46.5 million (2017: Baht 16.3
    million)), relating to the acquisitions of machinery and equipment.

(b) As at 31 March 2018, the Company and its subsidiaries had
    commitments totaling Baht 9.5 million (2017: Baht 8.5 million) under
    various service agreements (The Company only: Baht 8.9 million
    (2017: Baht 8.8 million)). These agreements expire between April
    2018 to September 2019.

(c) The Company and its subsidiaries had entered into several lease
    agreements in respect of office building space and equipment. The
    term of the agreements are generally between 1 and 4 years.

(d) Future minimum rentals payable under these leases are as follows:

+------------------------------------+----------------+----------------+
|                                    | (Unit: Million |                |
|                                    | Baht)          |                |
+------------------------------------+----------------+----------------+
|                                    | As at 31 March |                |
+------------------------------------+----------------+----------------+
|                                    | 2018           | 2017           |
+------------------------------------+----------------+----------------+
| Payable:                           |                |                |
+------------------------------------+----------------+----------------+
|   In up to 1 year                  | 4.0            | 0.3            |
+------------------------------------+----------------+----------------+
|   In over 1 and up to 5 years      | 2.2            | -              |
+------------------------------------+----------------+----------------+

(e) As at 31 March 2018, the Company has provided guarantee worth USD
    30.0 million (2017: USD 30.0 million) for working capital facilities
    obtained by a subsidiary, Polyplex USA LLC.

(f) As at 31 March 2018, the Company has provided guarantee of USD 84.0
    million (2017: USD 84.0 million) for the long-term loans obtained by
    its subsidiary (Polyplex USA LLC). As at 31 March 2018, the
    outstanding balance of this subsidiary’s loan was USD 24.4 million
    (2017: USD 38.3 million).

(g) As at 31 March 2018, Polyplex Europa Polyester Film Sanayi Ve
    Ticaret Anonim Sirketi has provided guarantee for credit facilities
    obtained by Polyplex Paketleme Cozumleri Sanayi Ve Tickaret Anonim
    Sirketi to the extent of EUR 5.7 million (2017: EUR 5.7 million).

(h) The Company has provided corporate guarantee for securing the
    payables towards the raw material suppliers of Polyplex USA LLC. The
    outstanding amount of payables in respect of such guarantees is USD
    3 million as at 31 March 2018 (2017: USD 2 million).

(i) As at 31 March 2018 and 2017, there were outstanding bank guarantees
    as follows:­

  -------------------- ---------- -------------- --------- ------------ ----------
  (Unit: Million)                                                       

                                  Consolidated             Separate     
                                  financial                financial    
                                  statements               statements   

  Letters of guarantee Currency   2018           2017      2018         2017
  for                                                                   

  Electricity usage    Baht       -              0.6       -            0.6

  Bill of lading       Baht       7.7            3.8       7.7          3.8
  reissuance                                                            

  Others               Baht       -              0.3       -            0.3

  Total                Baht       7.7            4.7       7.7          4.7

  Customs duty         Euro       0.7            2.8                    

  Purchase payment     USD        -              1.2                    
  -------------------- ---------- -------------- --------- ------------ ----------

1.  Main factors which may affect the future operational performance and
    financial position

  The last few years have been very challenging year for the Polyester
  Film industry due to the excessive oversupply caused by the
  significant supply additions that happened, following the up cycle in
  2010/ 2011. For Polyplex, the additional challenge has been the ramp
  up and stabilization of the new projects which started in 2013 in
  Thailand and USA. Both these projects have seen better utilization
  rates and profitability in the last year due to improved market
  conditions and internal production efficiencies, as well as
  improvement in product mix.

  The key challenges for the company in the coming year would be the
  following:

-   Raw material price volatility and any significant upward movement in
    prices, which although largely get passed on to the end customers,
    it usually happens only with some time lag and may impact the
    margins in the interim. In any case, volatility in raw material
    prices is not good, as it dampens the overall business sentiment.

-   Although the utilization rates of the Thin PET film line in USA and
    Thick PET Film line in Thailand have shown a significant improvement
    over previous year, near to optimum levels, the challenge remains to
    maintain stability and consistency in the performance.

-   Volatility of THB against USD and Euro as well as the movement of
    Euro against the USD impacts the profits of the company. The company
    is exposed to 2 types of exchange fluctuation risks, one on the
    operational profits, including the restatement of the foreign
    currency denominated assets/ liabilities of the company on a
    standalone basis and secondly, on the conversion of the
    subsidiaries’ financial statements, which are denominated in USD,
    Euro and RMB, into THB currency for the purpose of consolidation.
    While the Company hedges most of its operational foreign currency
    exposures, the fluctuations on account of restatement of long term
    loans cannot be completely hedged. As on 31^(st) March, 2018, the
    total foreign currency denominated loans at Thailand are Euro 69
    million (including related party loans) and USD 13 million and at
    USA is USD 24 million and Euro 42 million (related party loan).

-   Smooth and timely implementation of the Greenfield PET Thin Film
    line project in Indonesia, within budgeted cost. The Company has
    already deployed key members of the Projects team at Indonesia, to
    oversee the implementation of the project.

  In the long run, the Company still remains confident of retaining its
  competitive edge due to various reasons as mentioned below:

1.  Benefit from its various projects and expansions in the recent past:

a.  PTL and its manufacturing subsidiaries have derived significant
    benefits from the captive PET resin production to serve its raw
    material demand on costs, quality and security of availability. The
    main advantages of a captive resin plant are lower cost of
    production because of efficiencies in raw material sourcing as also
    a lower conversion cost besides ensuring timely availability of raw
    material for the film plants. Easy availability of PTA and MEG would
    reduce the supply risk although cost of the same still

  remains a matter of concern for any PET film manufacturer as it has a
  direct impact on the margins of every manufacturer. Captive production
  of resin also allows the company to develop new specialty film
  products.

  b. Metallizer plants in Thailand, Turkey and USA have helped improve
  the product mix by increasing the share of specialty film in the
  overall sales portfolio. In Thailand PET as well CPP and Blown PP
  films are being Metallized whereas in Turkey and in US, the
  Metallizers are used to metalize PET films. A new replacement
  metallizer is being added in USA to enhance their capacity and share
  of value added films.

  c. The 2 Extrusion coating lines in Thailand have further helped the
  company to reduce their exposure to commodity grades of film and
  increase the proportion of value added films and other specialty
  grades of film.

  d. The CPP line which started in Thailand in 2010 has helped the
  company broad base its product offerings to the converters and move
  towards becoming a complete packaging solution provider for its
  customers, rather than just a PET film supplier.

  e. The Silicone Coating project which started in 2012 and the Blown PP
  line which started in 2013 in Thailand, has further diversified the
  product portfolio of the company and add a highly value added product
  in its portfolio. A project is underway for a second Blown PP film
  line in Thailand.

  f. The Thick PET film line, implemented in Thailand in 2013 has also
  helped further diversify the product portfolio and mitigate the risk
  associated with the cyclical nature of the Thin PET film industry, as
  Thick PET film is a relatively more stable industry.

2.  Polyplex has been deriving benefits from the larger size and
    distributed manufacturing operations across 4 geographies and a
    Greenfield project in a new location (5^(th) location) underway,
    whereby it has qualified as a preferred global supplier with many
    multinational and large customers with global operations.

3.  Polyplex has been able to establish itself as a reliable supplier of
    consistent quality products

4.  Polyplex had also invested significantly in distribution, through
    the acquisition of a company in USA (Polyplex (Americas) Inc. (PA),
    [which has now been merged with Polyplex USA LLC (PUL), the
    manufacturing entity in USA], the investment in Polyplex (Trading)
    Shenzhen Co Ltd, China, setting up of the trading company in
    Netherlands and Turkey and by establishing warehouses across Europe
    for better distribution. It has also set up Liaison offices in
    Malaysia and in Korea and is in the process of setting up a Sales
    Rep. office in Japan.

    1.  Remuneration for auditor/s

1.  Audit fee

  The Company paid audit fee as below:

  - A total of Baht - paid to the auditor/s for the past fiscal year;
  and

-   A total of Baht 2,490,000.00 paid to the accounting firm the
    auditor/s work for, or the person or business related to the
    auditor/s and the accounting firm for the past fiscal year.

2.  Non-audit fee

  The Company made payment for other services, i.e. examination of
  compliance with conditions of promotion certificates, and legal and
  tax advisory services, including BOI and tax audit services, as
  follows:

-   A total of Baht - paid to the auditor/s for the past fiscal year and
    Baht - payable in the future for the service not yet fully done for
    the past fiscal year; and

-   A total of Baht 82,500 paid to the accounting firm the auditor/s
    work for, or the person or business related to the auditor/s and the
    accounting firm for the past fiscal year, and Baht 727,500 payable
    in the future for the service not yet fully done for the past fiscal
    year.