12. Financial Statements and Operating Results

12. Financial Statements

  (A) Report of Independent Auditor and Opinions

  Report of independent auditor certified by Ernst & Young Office
  Limited of the Company and its subsidiaries for the years ended
  December 31, 2008, 2007 and 2006 to the consolidated financial
  statement and the separate financial statements was expressed an
  unqualified opinion on the financial position and the results of
  operations and cash flow for the year then ended in accordance with
  generally accepted accounting principles.

  (B) Financial Statements

-   Consolidated Balance Sheet

-   Consolidated Income Statements

-   Consolidated Statements of Cash Flows

-   Consolidated Financial Ratios

  On 1 January 2007, the Company changed its accounting policy for
  recording investment in subsidiary and associated companies in the
  separate financial statements from the equity method to the cost
  method, in compliance with Accounting Standard No. 44 (revised 2007)
  regarding “Consolidated Financial Statements and Separate Financial
  Statements”, under which investments in subsidiaries, jointly
  controlled entities and associates are to be presented in the separate
  financial statements under the cost method.

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* 2006 figures have been reported as previous template presented as
below.

- Cost of sale 16,270 Million Baht

- Selling and administrative expenses 2,056 Million Baht

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* Certain amounts in the statement of Cash Flows for the year ended 31
December 2006 have been reclassified to conform to the current year’s
classification.

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* Certain amounts in the statement of Cash Flows for the year ended 31
December 2006 have been reclassified to conform to the current year’s
classification.

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  12.2 Management Discussion and Analysis (MD&A)

Analysis of Financial Performance

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  Net sales

  Group:

  For financial year 2008, consolidated net sales declined by THB 1,495
  million or 7 percent to THB 21,305 million. The cement business marked
  lower net sales of THB 1,751 million, or 9 percent to THB 18,226
  million. The ready-mix concrete and aggregates business showed a
  positive net sales development of THB 291 million, or plus 9 percent
  to THB 3,598 million. Net sales generated from other business amounted
  to THB 743 million, a decrease of THB 21 million from 2007, or 3
  percent.

  Cement business:

  Thailand was not spared the impact of the widespread crisis as, from
  the middle of the year onward; the construction industry began its
  perceptible downward slide along with most industries. Thus the cement
  industry was also affected to a considerable extent.

  To further complicate the business landscape, the country’s lengthy
  political uncertainties eroded the confidence in all sectors –
  manufacturers, service providers and consumers. Along with the loss of
  confidence, the unfavorable political situation adversely affected the
  implementation of major infrastructure projects. The real estate
  sector also slowed down considerably as consumers decided to delay big
  expenditures during the time of uncertainties. Thus Thailand’s cement
  market in year 2008 declined by around 10 percent to 24.8 million tons
  from 27.7 million tons in year 2007.

  As the Company foresaw the severity of this crisis and its impact on
  the construction industry very early, the Company took drastic
  measures to proactively take control of our long-term profitability
  and eventually mothballed two clinker production lines (kilns)
  effective January 1, 2008. This measure reduced the Company’s clinker
  production capacity by 2.5 million tons.

  On the export side, the total volume fell by 14 percent to 15.6
  million tons from 18.2 in year 2007. And as a result of the mothballed
  2 kiln lines, the Company’s export volume dropped by 36 percent to 3.9
  million tons from 6.2 million tons in year 2007. Vietnam remained the
  Company’s biggest export market for clinker, followed by the Middle
  East. Singapore is the largest destination for export cement. Export
  prices for cement and clinker were significantly higher in USD terms
  as a result of surging commodity prices and thus production costs.

  As a result, net sales of the cement segment dropped by 9 percent to
  THB 18,226 million from 19,977 in year 2007.

  Concrete and aggregates business:

  In year 2008, the Company sold 2.2 million cubic meters of ready-mix
  concrete. This was an increase over the 2.1 million cubic meters sold
  in 2007. Overall, selling prices were not much different from the
  previous year and still on a low level mainly due to a highly
  competitive market situation.

  The aggregates business commenced its limestone and sand operations in
  year 2007 and was able to significantly raise total volume sold of
  rock and sand.

  Other business:

  In 2008, net sales generated from other business slightly decreased by
  3 percent from previous year due to the drop in demand and consumers’
  confidence.

  Net Profit

  SCCC effectively run a lean but efficient operation in year 2008. In
  order to maintain its performance and profitability, the Company
  raised selling prices along with the surging commodity and energy
  cost, further improved internal efficiency in raw material and energy
  consumption and tightly controlled fixed costs. As a result, costs and
  expenses for year 2008 amounted to THB 17,129 million, a decline of
  THB 1,259 million, or 7 percent from THB 18,388 million in 2007. Net
  profit of the Company and its subsidiaries declined by THB 57 million,
  or 2 percent, to THB 3,173 million in year 2008.

  Total production cost of goods sold of THB 11,603 million for year
  2008 were THB 817 million lower than the THB 12,420 million recorded
  in year 2007 mainly due to less demand for our products and services.
  The Company was able to compensate surging commodity and energy prices
  with higher efficiency and cost reductions.

  Selling and distribution expenses were reported at THB 4,343 million,
  an improvement of THB 521 million, or 11 percent, from THB 4,864
  million in the previous year, and was mainly a matter of less
  delivered cement and clinker volumes and through effective cost
  controls and lower energy and transportation costs.

  Administrative expenses were reported at THB 1,183 million, THB 79
  million or 7 percent higher from THB 1,104 million in year 2007. The
  ratio of administrative expenses to net sales for year 2008 was 5.5
  percent, slightly higher than the 4.8 percent in year 2007 due to
  lower total net revenues.

  Financial expenses for year 2008 amounted to THB 167 million, an
  increase of THB 50 million from THB 117 million in 2007 and a result
  of higher interests paid for the Company’s drawdown of additional
  short-term loans.

  Other income of total THB 135 million resulted mainly from foreign
  exchange gains as a result of the Baht versus USD depreciation.

  For year 2008, operating EBITDA amounted to THB 5,054 million, a
  decline of THB 157 million or 3 percent from THB 5,211 million in year
  2007.

Analysis of Cash Flows

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Cash flow from operating activities

  Consolidated cash flow from operating activities for year 2008 was THB
  3,099 million, a decline of THB 901 million from THB 4,000 million in
  2007. Lower revenues and higher year-end inventory of clinker, solid
  fuel and kraft paper negatively impacted the cash flow generation.
  However, there was no stock loss or write down on all inventories held
  at year-end and all these materials on stock will be used in first
  quarter 2009 and thus its related cash flow will be realized at the
  same time.

Cash flow used for investing activities

  Consolidated cash flow used for investing activities in year 2008 was
  net THB 1,611 million, an additional THB 163 million from THB 1,448
  million in the previous year. Capital expenditures were made for the
  Company’s ongoing construction of a new preparation platform for
  alternative fuels and raw materials, a new mortar production plant,
  new investments for two new waste heat recovery plants and expansions
  in ready-mix concrete and aggregates.

Cash flow from financing activities

  The Annual General Meeting of Shareholders approved to pay a final
  dividend of THB 7.50 for year 2007 and the Board of Directors approved
  an interim dividend of THB 6.50 for first half year 2008. Therefore,
  the Company used THB 3,220 million for dividend payments and, as a
  balance, eventually drawdown additional financing liabilities of THB
  2,337 million.

Analysis of Financial Position

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Total Assets

  Consolidated total assets as of December 31, 2008, were THB 23,503
  million, additional THB 2,000 million assets from THB 21,503 million
  in 2007. Current assets were THB 5,984 million compared to THB 4,976
  million in 2007 as a result of higher cash and cash equivalents, trade
  accounts receivables and inventories. Trade accounts receivables
  accounted for 44 percent and 55 percent of current assets, or equal to
  an average collection periods of 45 days and 42 days at year-end in
  2008 and 2007, respectively. Total inventory represented 32 percent of
  current assets in both financial years.

  Total property, plant and equipment – net stood at THB 13,424 million
  – THB 905 million higher than in the previous year, mainly due to
  aforementioned ongoing investments in the construction of a new
  preparation platform for alternative fuels and raw materials, a new
  mortar production plant, two new waste heat recovery plants and
  expansions in ready-mix concrete and aggregates.

  During the course of the year, the Company sold several assets not
  used in operations and thus reduced its book value to THB 329 million.

  Consolidated other non-current assets as of December 31, 2008 rose by
  THB 429 million to THB 2,684 million from THB 2,255 million in 2007
  mainly due to additional intangible assets from acquired aggregates
  mining rights and concessions.

Total Liabilities

  As at December 31, 2008, the Company and its subsidiaries reported
  total liabilities of THB 7,658 million, a growth of THB 2,045 million
  from THB 5,613 million in 2007. This is mainly due to the additional
  drawdown of short-term loans from financial institutions in the amount
  of THB 2,425 million.

  At year-end 2008 and 2007, consolidated trade accounts payable
  amounted to THB 1,257 million and THB 1,516 million, respectively,
  representing 19 percent and 34 percent of current liabilities.

Shareholders’ Equity

  As at December 31, 2008, and December 31, 2007, total shareholders’
  equity was THB 15,845 million and THB 15,890 million, respectively
  (based on 237.5 million paid-up shares).

12.3 Auditor’s Fee

  In 2008 Ernst & Young Office Limited received from the Company and its
  subsidiaries audit fees of 4.036 million baht and 1.065 million baht
  for non-audit services.