PART 3 FINANCIAL STATUS AND PERFORMANCE

13. Financial Highlight

  ------------------------------------ -- ------------ -- -- ------------ -- -- --------------
  Financial Highlights 2015-2017                                                
  Comparison                                                                    

  Financial Highlights of Thai Central                                          
  Chemical PCL and its subsidiaries                                             

                                          (Unit: 1,000                          
                                          Baht)                                 

                                          2017               2016               2015

                                                                                Reclassified

  Sales and Services                      11,539,822         12,281,560         12,601,034

  Total Revenues                          11,653,011         12,680,038         12,875,015

  Gross Profit (Loss)                     2,999,992          3,196,977          2,201,250

  Net profit (Loss)                       1,947,123          2,316,047          1,391,112

  Net Profit attributable to owners of    1,932,399          2,305,515          1,364,793
  the parent                                                                    

  Total Comprehensive Income              1,906,220          2,317,466          1,393,285

  Total Comprehensive Income              1,891,726          2,306,916          1,367,024
  attributable to owners of the parent                                          

  Profit (Loss) Per Share (Baht)          3.30               3.94               2.33

  Dividend Per Share (Baht) **            3.20               1.50               2.30

  Total Assets                            11,197,972         11,307,790         9,600,722

  Total Liabilities                       1,437,262          1,571,802          1,294,717

  Shareholders' Equity                    9,760,710          9,735,988          8,306,005

  Equity attributions to owners of the    9,672,239          9,651,598          8,221,753
  parent                                                                        

  Per Value (Baht)                        3.00               3.00               3.00

  Number of Shares (Thousand Shares)      584,714            584,714            584,714

  Book Value Per Share (Baht)             16.54              16.51              14.06

                                                                                

  Remarks: * Thai Central Chemical                                              
  PCL. disposed investment in the                                               
  ordinary shares of 3 subsidiaries,                                            
  which are MC Industrial Chemical                                              
  Co., Ltd., MC Solvents Co., Ltd. and                                          
  MC Plastics Co., Ltd. on April 1,                                             
  2015 and reclassified in the year                                             
  2015                                                                          

  ** Dividend Per Share paid on                                                 
  previous year operation.                                                      
  ------------------------------------ -- ------------ -- -- ------------ -- -- --------------

  --------------- ---------------------- ------- -- ---------- -- ---------- -- ---------- ----------
  Financial                                                                                
  Highlights                                                                               
  2015-2017                                                                                
  Comparison                                                                               

                                                                                           

  Ratios Of                                                                                
  Financial                                                                                
  Statement of                                                                             
  Thai Central                                                                             
  Chemical PCL.                                                                            
  and                                                                                      
  Subsidiaries                                                                             

  For The Year                                                                             
  Ended December                                                                           
  31, 2016                                                                                 

                                                                                           

                                                    2017          2016          2015       

                                                                                           

  Liquidity                                                                                
  Ratios                                                                                   

                  Current Ratio          Times      7.17          6.72          6.99       

                  Quick Ratio            Times      5.37          5.38          5.41       

                  Receivable Turnover    Times      15.91         17.51         10.34      

                  Collection Period      Days       23            21            35         

                  Inventory Turnover     Times      4.59          5.64          4.72       

                  Inventory Turnover     Days       78            64            76         
                  Period                                                                   

                  Account Payable        Times      23.31         26.26         12.67      
                  Turnover                                                                 

                  Payment Period         Days       15.45         13.71         28.41      

                  Cash Cycle             Days       85.59         70.71         82.73      

  Profitability                                                                            
  Ratios                                                                                   

                  Gross Profit Ratios    %          26            26.03         17.47      

                  Net Profit Ratios      %          16.58         18.18         10.6       

                  Return on Equity       %          20            25.80         16.62      

  Efficiency                                                                               
  Ratios                                                                                   

                  Return on Total Assets %          17.17         22.05         12.43      

                  Return on Fixed Assets %          121.03        157.68        104.63     

                  Total Assets Turnover  Times      1.04          1.21          1.17       

  Financial                                                                                
  Policy Ratios                                                                            

                  Debt to Equity Ratio   Times      0.15          0.16          0.16       

                  Interest Coverage      Times      1,973.73      1,839.35      1,067.03   

                  Dividend Payout Ratio  %          80.79         63.05         68.72      
  --------------- ---------------------- ------- -- ---------- -- ---------- -- ---------- ----------

Remark : * Thai Central Chemical PCL. disposed investment in the
ordinary shares of 3 subsidiaries, which are MC Industrial Chemical Co.,
Ltd., MC Solvents Co., Ltd. and MC Plastics Co., Ltd. on April 1, 2015.

14. Management Discussion and Analysis (MD&A)

Business Overview

The Company reported in the Consolidated Financial Statement of 2017
from January 1 to December 31, 2017 that the Company achieved Profit
Attributable to Owners of the parent of Baht 1,932 million, a decrease
of 16% or Baht 374 million from the previous year of Baht 2,306 million.
It was attributed to receding demand for chemical fertilizer in 2017
resulting from low purchasing power of farmers. The reduction in other
income, due to lower earnings from sales of investment properties
compared to 2016, also caused the decline in this year’s profit.

To pursue a growth strategy, the Company invested in a packing and
warehousing facility in Myanmar under its foreign subsidiary “TCCC
Myanmar Limited”. This new facility will be the Company’s main driver to
develop fertilizer business and strengthen market presence in Myanmar.
TCCC Myanmar Limited is due to start the commercial operation in early
of 2018.

As a result, Earnings per Share for the year 2017 was 3.30 Baht,
decreased from 3.94 Baht in 2016.

Business Segment Information

The Company’s main business is to import, manufacture and distribute
variety formulas of chemical fertilizer. The Company has 3
subsidiaries, 1) TCCC Myanmar Ltd., an importer and distributor of
chemical fertilizer in Myanmar, 2) MC Agro-Chemicals Co., Ltd., an
importer and distributor of herbicide, fungicide, and insecticide for
agriculture, and 3) N.I.M. Co., Ltd., an owner and operator of the tank
terminal for storage of liquid chemicals for industrial uses. The
Company performance is analyzed in segment of Core Business and
Subsidiaries Business.

-   Core Business (Chemical Fertilizers)

Lower agricultural prices and floods in some areas were the two factors
that significantly hampered farmers’ purchasing power and hindered their
willingness to start cultivation. Despite having some supporting schemes
from the government, those subsidies were primarily focused on the low
income people rather than directly on the farmers. As a result, demand
for chemical fertilizer in 2017 decreased compared to the previous year.

In order to make up the unfavorable domestic demand, the Company exports
products to neighboring countries, Cambodia, Laos, and Myanmar. The
Company also established TCCC Myanmar to accommodate the high potential
for expansion of chemical fertilizer market.

The global fertilizer raw material market saw the stronger price uptrend
in the last quarter of 2017 as a result of picking up demands from big
economies. Despite the higher raw material prices, the appreciation of
Baht values, in some extent, helped neutralizing the raw material cost.
Under this circumstance, the Company strictly adhered to the management
policy to have inventories maintained at its optimality. In line with
the reduction in Sales, the Cost of Goods Sold decreased by 6% in 2017.

-   Subsidiaries Business

Sales Revenue and Service Income of the two subsidiaries was
insignificant at 4.5% of the total (Sales Revenue of chemical fertilizer
was 95.5%) in 2017.

Sales Revenue and Service Income of MC Agro-Chemicals increased 23% in
2017 from the previous year, resulted from stronger sales of herbicide.

Service Income of N.I.M. increased by 2% from the previous year,
resulted from slightly higher volume of chemicals stored in the tanks.

The Company established the third subsidiary, TCCC Myanmar Limited in
October, 2016. TCCC Myanmar will start operation from the early of 2018,
thereafter the Company will report of its business in Core Business
segment.

Policy and Strategy

The Company adheres to the main strategies of; 1) stably supplying high
quality products for farmers to achieve high yield and good quality in
farming, 2) providing best services to the customers to meet their
requirements, and 3) controlling production and procurement to maintain
optimal inventory, so as to generate highest income from the operation.
The Company also prioritizes the importance of safety and environment
protection in manufacturing. As a part of the Company’s CSR policy, the
Company aims at being a good corporate citizen in the local communities.

In order to achieve the sustainable growth, the Company determines to
utilize its technology and manufacturing facilities to create
distinctive values on the products, and to develop fertilizer market in
the neighboring countries to further expand the export business.

Accounting Policies

The Company’s financial year is of the period from January 1 until
December 31 of every year. The financial statements have been prepared
in accordance with Thai Accounting Standard No.1 (Revised 2016) and the
Regulation of the Stock Exchange of Thailand. The financial statements
have been prepared under the measurement basis of historical cost. The
significant accounting policies is to recognize revenue from sales when
the Company has transferred to the buyer the significant risks and
rewards of ownership of the goods. For inventories, it is stated at the
lower of cost or net realizable value. Cost is determined on a weighted
average method except for a subsidiary, MC Agro-Chemicals Company
Limited, which cost is determined on a first-in, first-out method.

Results of Operations

1.  Overview of the Operation

Statement of Profit or Loss and Other Comprehensive Income as of
December 31, 2017 compares with the Statement of Profit or Loss and
Other Comprehensive Income as of December 31, 2016.

[]

2.  Revenues from Sales and Services

[]

Remark: Income from Net Sales of 2014 was adjusted by excluding the
income from MC Industrial Chemical Co., Ltd., MC Plastic Co., Ltd., and
MC Solvents Co., Ltd., which the Company sold its shares in those
companies out in 2015.

-   Core Business (Chemical Fertilizers)

In 2017, the Company generated income from sales of chemical fertilizers
in total of Baht 11,020 million, decreased by Baht 820 million or 7%
from 2016 (Baht 11,840 million). The decrease in sales was due to the
lower demand of chemical fertilizer and farmers’ switching preferences
to the lower price formulas. Under this volatile market condition in
2017, the Company strived to maintain the competitiveness in the market
in order to achieve the highest return for shareholders.

The Company’s chemical fertilizers can be categorized into 2 types:
Compound fertilizers manufactured by the Company and Imported-Pack
fertilizers. The income from selling Compound fertilizers was in the
amount of Baht 8,362 million, decreased by Baht 612 million or 7% from
2016. Meanwhile, the income from selling Imported-Pack fertilizers was
in the amount of Baht 2,658 million, decreased by Baht 208 million or 7%
from 2016.

-   Income from the Subsidiaries’ Business

In 2017, income from the Subsidiaries’ business was from selling
herbicides used in agriculture, and servicing tank rental and terminal
operation for the storage of liquid chemicals used in various
industries, which was in the amount of Baht 520 million, increased by
Baht 78 million or 18% compared to Baht 442 million in 2016.

3.  Cost of Goods Sold and Services

Cost of Goods Sold in 2017 showed at Baht 8,540 million, decreased by
Baht 545 million Baht or 6% from 2016 (Baht 9,085 million). The higher
raw material prices in the last quarter had pushed upward pressure to
the Cost of Goods Sold in 2017. Meanwhile, the Baht appreciation
compared to the US dollars during the same period held back the rising
cost of imported raw materials. As the other costs such as energy and
transportation remained relatively unchanged, the overall Cost of Goods
Sold decreased comparably with the Sales Revenue in 2017.

4.  Selling and Administration Expenses

The Company bore the Selling and Administration Expenses at Baht 679
million, decreased by Baht 20 million or 3% from 2016 (Baht 699
million). The decrease was due to better management during the low
chemical fertilizer demand affected from lower farmers’ purchasing
power. Under this adverse condition, The Company had tried best to spend
on more selective and effective advertising campaigns to expand the sale
volume.

5.  Profitability Analysis

[]

In 2017, The Company’s Gross Profit showed at Baht 3,000 million,
decreased by Baht 197 million or 6% from 2016 (Baht 3,197 million). The
decrease of Gross Profit amount was due to the lower demand for chemical
fertilizer as well as higher raw material prices. Meanwhile, the Gross
Profit Ratio in 2017 was 26.0%, remained unchanged from 2016.

[]

[]

(Remark: the financial ratio of 2013 – 2014 included MC Industrial
Chemical Co., Ltd., MC Plastic Co., Ltd. and MC Solvents Co., Ltd.,
which the Company sold its shares out in 2015)

Analysis of Liquidity and Capital Resources

1.  Overview of Financial Statement

[]

2.  Assets

As of December 31, 2017, the Company’s Total Assets showed at Baht
11,198 million decreased by Baht 110 million or 1% from the end of 2016.
Details are shown in the table below:

[]

Cash and Cash Equivalents decreased by 23% compared to the previous
year. The significant drop in cash was mainly due to the increase in
deposits with a set period of more than three months, which was
classified into Current Investment. Thus, the Current Investment in 2017
increased by 286%. Accounts Receivable – Trade slightly decreased by 3%.
Meanwhile, Inventories increased by Baht 364 million or 22% partly as a
result of the increase of raw material prices in the 4^(th) quarter. The
Company also expects for higher sales after the purchasing power
recovery in 2018 so the inventories of some formulas are prepared to
fulfill the upcoming market demand.

-   Investments Goodwill and Amortization.

The main intangible asset is Right for use of trademarks .The Company
engaged an independent appraiser to determine the fair value of the
right to use the trademarks referred to above in accordance with the
Notification of the Stock Exchange Commission dated April 30, 2004
regarding the opinion for accounting treatment for intangible assets.
According to the reports of the independent appraiser dated January 8,
2018 and January 5, 2017, the appraisal values of the fair value of such
right as at December 26, 2017 and December 30, 2016, respectively, by
using the Discounted Cash Flow Approach are higher than the carrying
values.

For the year ended December 31, 2017 and 2016, sale under these
trademarks were approximately 98% of the Company’s total revenue from
sales.

3.  Liabilities and Equity

-   On December 31, 2017, the Company had Total Liabilities at Baht
    1,437 million, decreased by Baht 135 million or 9% from the end of
    2016.

-   On December 31, 2017, the Company had Total Equity at Baht 9,761
    million, increased by Baht 25 million or 0.3% from the end of 2016.

4.  Liquidity and Cash Flows

[]The Current Ratio was slightly improved from 6.72 times at the end of
2016 to 7.17 times at the end of 2017. Meanwhile, the Quick Ratio
changed relatively little to 5.37 at the end of 2017 from 5.38 at the
end of 2016. Despite under this unusual business environment, these
ratios were not significantly changed as the Company tried to maintain
the Current Assets and liquidity to be at the optimal level.

The Net Cash Flow provided by operating activities of 2017 was Baht
1,536 million, decreased by Baht 698 million or 31.2% from 2016 (Baht
2,234 million). Meanwhile, the Net Cash Flow used in financing
activities in 2017 was Baht 1,891 million, increased by Baht 984 million
or 108.5 % from 2016 (Baht 907 million).

At the end of 2017, the Company had cash flow of bank overdrafts and
short-term borrowings from financial institutions at the amounts of Baht
1.3 million. It decreased by Baht 10.3 million or 88.8% from the end of
2016 (Baht 11.6 million).

In 2017, Net Cash Flow used in investing activities was Baht 1,038
million, while in 2016 the Company received Cash Flow provided by
investing activities for the total of Baht 102 million. The change of
Baht 1,140 million was mainly due to the reclassification of cash
equivalents regarding the current investment on fixed deposit and the
decrease in cash inflow from selling investment properties.

5. Commitment and Contingent Liabilities and Out Balance Sheet

  5.1 The Company has capital commitments for capital expenditure as at
  December 31, 2017 and 2016 of Baht 63.63 million and Baht 97.31
  million, respectively.

  A foreign subsidiary has capital commitment for capital expenditure as
  at December 31, 2017 of USD 0.31 million (or equivalent Baht 10.21
  million) (as at December 31, 2016: nil).

  5.2 As at December 31, the Company and its subsidiaries have leased
  office buildings, warehouse, vehicles and office equipment under
  operating lease agreements. The future lease payments are summarized
  as follows:

+-------------------------+---------+---+---------+---+---------+---+---------+
|                         |         |   |         | U |         |   |         |
|                         |         |   |         | n |         |   |         |
|                         |         |   |         | i |         |   |         |
|                         |         |   |         | t |         |   |         |
|                         |         |   |         | : |         |   |         |
|                         |         |   |         | B |         |   |         |
|                         |         |   |         | a |         |   |         |
|                         |         |   |         | h |         |   |         |
|                         |         |   |         | t |         |   |         |
+=========================+=========+===+=========+===+=========+===+=========+
|                         | Conso   |   |         |   | S       |   |         |
|                         | lidated |   |         |   | eparate |   |         |
|                         |         |   |         |   |         |   |         |
|                         | Fi      |   |         |   | Fi      |   |         |
|                         | nancial |   |         |   | nancial |   |         |
|                         | Sta     |   |         |   | Sta     |   |         |
|                         | tements |   |         |   | tements |   |         |
+-------------------------+---------+---+---------+---+---------+---+---------+
|                         | 2017    |   | 2016    |   | 2017    |   | 2016    |
+-------------------------+---------+---+---------+---+---------+---+---------+
|                         |         |   |         |   |         |   |         |
+-------------------------+---------+---+---------+---+---------+---+---------+
|   Within 1 year         | 39,     |   | 24,     |   | 33,     |   | 21,     |
|                         | 808,755 |   | 133,281 |   | 534,420 |   | 659,385 |
+-------------------------+---------+---+---------+---+---------+---+---------+
|   1 - 5 years           | 26,     |   | 20,     |   | 23,     |   | 15,     |
|                         | 706,206 |   | 887,945 |   | 712,458 |   | 462,149 |
+-------------------------+---------+---+---------+---+---------+---+---------+
|                         | 66,     |   | 45,     |   | 57,     |   | 37,     |
|                         | 514,961 |   | 021,226 |   | 246,878 |   | 121,534 |
+-------------------------+---------+---+---------+---+---------+---+---------+

  For the years ended December 31, 2017 and 2016, the Company and its
  subsidiaries recognized rental fees from operating lease agreements of
  Baht 46.56 million and Baht 36.23 million in the consolidated
  financial statements, respectively, and for the separate financial
  statements of Baht 42.33 million and Baht 34.88 million, respectively.

  5.3 The Company has commitments with banks for letters of guarantee of
  issued as at December 31, 2017 and 2016 of Baht 8.66 million and 8.66
  million, respectively. Certain subsidiaries has commitment with banks
  for letters of guarantee issued in the amount of Baht 0.17 million and
  Baht 0.17 million as at December 31, 2017 and 2016, respectively.

  5.4 As at December 31, 2017 and 2016, the Company has commitment with
  a bank regarding the outstanding letters of credit amounting to USD
  10.30 million and EUR 0.05 million (or equivalent to Baht 340.42
  million) and USD 7.98 million and EUR 0.06 million (or equivalent to
  Baht 289.46 million), respectively.

  5.5 Significant Agreements

5.5.1 Technical assistance agreement

  The Company has a technical assistance agreement with a company in
  Japan. The Company is obligated to pay a basic retaining fee of USD
  50,000 per annum. The agreement is in effect for a period of one year
  and shall be automatically renewed on a yearly basis unless either
  party expresses its intention not to renew the agreement by written
  notice to other party at least three months before the expiring date.

5.5.2 Energy performance agreement

  The Company entered into Energy Performance Contract (EPC) with a
  company. The Company would be advised to improve the efficiency of
  energy saving and had to pay monthly advisory fees based on percentage
  of the electricity power saving value in each month as specified in
  the agreement. The period of payment starts when the cogeneration
  project is complete and will pay some saving amount according to
  Energy Performance Contract.

Economic & Business Forecast 2018

The global economy is expected to see a synchronized upswing in 2018.
However, the geopolitical risks that can affect the economy and
international trade still remain. The tension in Korean peninsula, the
decision on Brexit bills and the tendency towards protectionism policy
of many countries could play important roles in reversing the global
economy outlook in 2018. In addition, the probable FED rate hike may
cool down the US growth and consequently affects the global trades.

Thailand economy in 2018 should continue to see a moderate growth driven
mainly by growing export and thriving tourism. The uncertainties could
arise in the latter half of the year during the expected general
election which can have significant impact to people’s confidence and
thus the overall economy.

The agricultural price recovery is expected in 2018 due to the higher
global demand. Meanwhile, the government agricultural supporting
policies are supposed to be in effect during the farming season.
Combining with the adequate water supply to farmland, these factors are
crucial positive drivers for the agricultural sector and the Company’s
operation in 2018, as they will raise the purchasing power of farmers
and encourage them to start cultivation. With these reasons, the demand
for chemical fertilizer is likely to see the uptrend in 2018.

On the other hand, the higher raw material prices and the weaker Baht
due to the US rate hike could also drive cost up and bring gross profit
margin down. The Management will deal with these factors and strive to
achieve best performance by carrying out the following measures:

-   Retain customers and farmers’ satisfaction

-   Keep high standard of products quality

-   Keep monitoring the market closely and adjust inventory level,
    production and procurement plan to quickly respond to the market
    demand

-   Manage and control all expenses effectively

-   Continuously pursue for better manufacturing process and higher
    productivity

-   Avoid any speculations on raw material prices and foreign currency