11. Financial Highlight

(1) Financial statements

  The company paid 430,000 Baht to the auditor for audit fee. There was
  no non-audit fee.

  Auditor report

The auditor has reported the financial statements of Pato Chemical
Industry Public Co., Ltd. as of 31 December of 2008-2011 without any
conditions.

(2) Balance Sheet, Statement of Income, Statement of cash flows

  Pato Chemical Industry Public Co., Ltd.

  Statements of Financial Position for the year ended December 31 (Unit
  :Thousand Baht)

  Separated Financial Statements Consilidated

  ----------------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- --- -------------- --------
                    2008                  2009                   2010                   2011                       2011           

                    Amount       %        Amount        %        Amount        %        Amount        %            Amount         %

  ASSETS                                                                                                                           

  CURRENT ASSETS                                                                                                                   

  Cash and cash     8,710        1.84     37,187        5.95     33,388        4.50     181,028       31.09        185,992        31.95
  equivalents                                                                                                                     

  Short - term      126,865      26.77    253,486       40.59    295,198       39.78    178,930       30.73        178,930        30.73
  investments                                                                                                                     

  Trade accounts    92,870       19.60    161,177       25.81    163,006       21.97    52,173        8.96         52,173         8.96
  receivable                                                                                                                      

  Inventories       176,529      37.25    102,674       16.44    175,274       23.62    84,941        14.59        84,941         14.59

  Assets held for   -            -        -             -        -             -        500           0.09         500            0.09
  sale                                                                                                                            

  Advances for      -            -        -             -        2,577         0.35     -             -            -              -
  inventories                                                                                                                     

  Other current     1,869        0.39     2,495         0.40     1,937         0.26     2,240         0.38         2,240          0.38
  assets                                                                                                                          

  Total current     406,843      85.84    557,019       89.19    671,380       90.47    499,812       85.84        504,776        86.70
  assets                                                                                                                          

  NON - CURRENT                                                                                                                    
  ASSETS                                                                                                                          

  Investment in     -            -        -             -        -             -        5,000         0.86         -              -
  subsidiary                                                                                                                      

  Property, plant   66,704       14.07    67,380        10.79    64,012        8.63     60,421        10.38        60,421         10.38
  and equipment -                                                                                                                 
  net                                                                                                                             

  Intangible assets -            -        -             -        6,155         0.83     15,101        2.59         15,101         2.59

  Other non -       395          0.08     120           0.02     567           0.08     1,903         0.33         1,903          0.33
  current assets                                                                                                                  

  Total other       67,099       14.16    67,500        10.81    70,734        9.53     82,425        14.16        77,425         13..30
  assets                                                                                                                          

  Total Assets      473,942      100.00   624,519       100.00   742,114       100.00   582,237       100.00       582,201        100.00

  LIABILITIES AND                                                                                                                  
  SHAREHOLDERS'                                                                                                                   
  EQUITY                                                                                                                          

  CURRENT                                                                                                                          
  LIABILITIES                                                                                                                     

  Short - term      22,838       4.82     80,440        12.88    127,698       17.21    -             -            -              -
  loans from                                                                                                                      
  financial                                                                                                                       
  institutions                                                                                                                    

  Trade accounts    10,444       2.20     -             -        -             -        -             -            -              -
  payable - related                                                                                                               
  companies                                                                                                                       

  - other companies 5,647        1.19     33,684        5.39     35,820        4.83     81            0.01         81             0.01

  Statements of                                                                                                    Consolidated   
  Financial                                                                                                                       
  Position (Con)                                                                                                                  
  Separate                                                                                                                        
  Financial                                                                                                                       
  Statements                                                                                                                      

  Current portion   126          0.03     87            0.01     -             -        -             -            -              -
  of hire-purchase                                                                                                                
  contracts payable                                                                                                               

  Accrued income    7,702        1.63     27,287        4.37     33,099        4.46     22,132        3.80         22,132         3.80
  tax                                                                                                                             

  Accrued expenses  11,039       2.33     14,644        2.34     26,181        3.53     21,138        3.63         21,138         3.63

  Advanced receive  -            -        -             -        -             -        5,000         0.86         5,000          0.86
  from assets held                                                                                                                
  for sale                                                                                                                        

  Others current    23           0.00     202           0.03     398           0.05     281           0.05         301            0.05
  liabilities                                                                                                                     

  Total Current     57,819       12.20    156,344       25.03    223,196       30.08    48,632        8.35         48,652         8.36
  Liabilities                                                                                                                     

  NON - CURRENT                                                                                                                    
  LIABILITIES                                                                                                                     

  Hire-purchase     87           0.02     -             -        -             -        -             -            -              -
  contracts                                                                                                                       
  payable-net                                                                                                                     

  Employee benefit  -            -        -             -        -             -        8,109         1.39         8,109          1.39
  obligations                                                                                                                     

  Total Liabilities 57,906       12.22    156,344       25.03    223,196       30.08    56,741        9.75         56,761         9.75

  SHAREHOLDERS'                                                                                                                    
  EQUITY                                                                                                                          

  Share                                                                                                                            
  capital-common                                                                                                                  
  share Bht. 10 par                                                                                                               
  value                                                                                                                           

  (2009 : Share                                                                                                                    
  capital-common                                                                                                                  
  share Bht. 1.00                                                                                                                 
  par value)                                                                                                                      

  Authorized share  140,000      -        140,000       -        140,000       -        140,000       -            140,000        -
  capital                                                                                                                         
  14,000,000 shares                                                                                                               

  (2009 :                                                                                                                          
  Authorized share                                                                                                                
  capital                                                                                                                         
  140,000,000                                                                                                                     
  shares)                                                                                                                         

  Issued and fully  140,000      29.54    140,000       22.42    140,000       18.87    140,000       24.05        140,000        24.05
  paid-up share                                                                                                                   
  capital                                                                                                                         
  14,000,000 shares                                                                                                               

  (2009 : Issued                                                                                                                   
  and fully paid-up                                                                                                               
  share capital                                                                                                                   
  140,000,000                                                                                                                     
  shares)                                                                                                                         

  Premium on share  135,000      28.48    135,000       21.62    135,000       18.19    135,000       23.19        135,000        23.19
  capital                                                                                                                         

  Retained earning                                                                                                                 

  Appropriated for  14,000       2.95     14,000        2.24     14,000        1.89     14,000        2.40         14,000         2.40
  legal reserve                                                                                                                   

  Un-appropriated   127,036      26.80    179,175       28.69    229,918       30.98    236,496       40.62        236,440        40.61

  Total             416,036      87.78    468,175       74.97    518,918       69.92    525,496       90.25        525,440        90.25
  Shareholders'                                                                                                                   
  Equity                                                                                                                          

  Total Liabilities 473,942      100.00   624,519       100.00   742,114       100.00   582,237       100.00       582,201        100.00
  and Shareholders'                                                                                                               
  Equity                                                                                                                          

  Book value per    29.72                 3.34                   3.71                   3.75                       3.75            
  share ( baht )                                                                                                                  

  Par Value         10                    1                      1                      1                          1               

  Common Share      14,000,000            140,000,000            140,000,000            140,000,000                140,000,000     
  ----------------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- --- -------------- --------

  Income Statements for the year ended December 31 Unit : Thousand

  Separate Financial Statements Consolidated

  ------------------------------------ ------------ --------- ------------- --------- ------------- ------------- ------------- --------- -- ------------- ---------
                                       2008                   2009                    2010                        2011                       2011          

                                       Amount       %         Amount        %         Amount        %             Amount        %            Amount        %

  Revenues                                                                                                                                                 

  Sales                                758,032      100.00    851,616       100.00    896,356       100.00        954,921       100.00       954,921       100.00

  Cost of sales                        (537,411)    (70.90)   (591,997)     (69.51)   (569,653)     (63.55)       (630,306)     (63.55)      (630,306)     (66.01)

  Gross profit                         220,621      29.10     259,619       30.49     326,703       36.45         324,615       36.45        324,615       33.99

  Reversal of provision for doubtful   -            -         -             -         -             -             -             -            -             -
  account from loan                                                                                                                                        

  Gain on exchange rate                -            -         4,113         0.48      6,376         0.70          (2,213)       0.70         (2,213)       (0.23)

  Other income                         3,414        0.45      5,821         0.68      7,751         0.85          8,933         0.85         8,935         0.93

  Profit before expenses               224,035      29.42     269,553       31.29     340,830       37.43         331,335       37.43        331,337       34.46

  Selling expenses                     (26,363)     (3.46)    (38,680)      (4.49)    (58,762)      (6.45)        (45,135)      (6.45)       (45,135)      (4.69)
  expenses??????????????????????????                                                                                                                       

  Administrative Expenses              (24,630)     (3.23)    (26,145)      (3.03)    (29,826)      (3.28)        (31,335)      (3.28)       (31,335)      (3.26)

  Management Remuneration Others       (15,197)     (2.00)    (5,236)       (0.61)    (5,515)       (0.61)        (5,636)       (0.61)       (5,636)       (0.59)

  Total Expenses                       (66,190)     (8.69)    (70,061)      (8.13)    (94,103)      (10.34)       (82,106)      (10.34)      (82,165)      (8.54)

  Profit before finance costs and Tax  157,845      20.73     199,492       23.16     246,727       27.10         249,229       27.10        249,172       25.91
  income tax                                                                                                                                               

  Finance cost                         (6,218)      (0.82)    (932)         (0.11)    (1,521)       (0.17)        (1,799)       (0.17)       (1,799)       (0.19)

  Profit before Income Tax             151,627      19.91     198,560       23.05     245,206       26.93         247,430       26.93        247,373       25.72

  Income Tax                           (38,851)     (5.10)    (41,421)      (4.81)    (61,463)      (6.75)        (75,015)      (6.75)       (75,015)      (7.80)

  Net Profit (Loss)                    112,776      14.81     157,139       18.24     183,743       20.18         172,415       20.18        172,358       17.92

  Earnings per share (bath)            8.06                   1.12                    1.31                        1.23                       1.23           

  Par value (bath)                     10.00                  1.00                    1.00                        1.00                       1.00           

  Weight average (Share)               14,000,000             140,000,000             140,000,000   140,000,000   140,000,000                140,000,000    
  ------------------------------------ ------------ --------- ------------- --------- ------------- ------------- ------------- --------- -- ------------- ---------

[TABLE]

(c) Financial Ratio

Pato Chemical Industry Public Co.,Ltd. Financial Ratio 2008-2011

  Separate Financial statements Consolidated

  ----------------------------- --------- -------- -------- --------- -- ---------
                                2008      2009     2010     2011         2011

  Liquidity Ratio                                                        

  Current Ratio (Time)          7.04      3.56     3.01     10.28        10.38

  Quick Ratio (Time)            3.95      2.89     2.20     8.47         8.57

  Cash Flow Ratio (Time)        1.02      1.97     0.69     2.41         2.41

  Receivable Turnover (Time)    6.65      6.70     5.53     8.88         8.88

  Collection Period (Day)       54        54       65       41           41

  Inventory Turnover (Time)     3.24      4.24     4.10     4.84         4.84

  Inventory T/Period (Day)      111       85       88       74           74

  Account Payable Turnover      6.90      7.74     4.10     7.71         7.71
  (Time)                                                                 

  Payment Period (Day)          52        47       88       47           47

  Cash Cycle (Day)              113       92       65       68           68

  Profitability Ratio                                                    

  Gross Profit Margin (%)       29.10     30.49    36.45    33.99        33.99

  Profit from operation (%)     20.37     22.26    25.95    25.40        25.39

  Other profit (%)              (0.37)    1.04     1.55     0.70         0.70

  Cash (%)                      72.98     111.19   56.54    137.87       134.89

  Net Profit Margin (%)         14.81     18.24    20.18    17.93        17.92

  Return on Equity (%)          28.70     35.54    37.23    33.02        33.01

  Efficiency Ratio                                                       

  Return on Total Assets (%)    22.41     28.61    26.89    26.04        26.03

  Return on Fixed Assets (%)    177.51    252.29   298.67   295.16       295.07

  Assets Turnover (Time)        151.31    156.86   133.24   145.22       145.23

  Financial Ratio                                                        

  Debt to Equity (Time)         0.14      0.33     0.43     0.11         0.11

  Interest Coverage (Time)      25.37     271.59   127.87   224.51       224.49

  Cash Basis (Time)             1.58      1.79     0.92     1.98         1.98

  Payout Ratio (%)              93.10     84.64    85.34    87.70        87.72

  Per Share (Baht)                                                       

  Book Value (Baht)             29.72     3.34     3.71     3.75         3.75

  Earnings per Share (Baht)     8.06      1.12     1.31     1.23         1.23

  Dividend per Share (Baht)     7.50      9.50     1.12     1.08         1.08

  Growth Rate                                                            

  Total Sale (%)                (11.00)   31.77    18.83    (21.54)      (21.55)

  Cost of Goods Sold (%)        (64.42)   170.00   42.76    74.58        74.57

  Sales Revenue (%)             22.16     12.35    5.25     6.53         6.53

  Selling & Admin Expense (%)   17.33     9.68     0.26     7.33         7.34

  Net Profit (%)                40.60     39.34    16.93    6.17         6.20
  ----------------------------- --------- -------- -------- --------- -- ---------

2) Management Discussion and Analysis (Unit : 1,000 Baht)

The financial statement of Pato Chemical Industry Plc. only is used for
the comparison of figures during fiscal year 2009-2010 while the
financial statement of Pato Chemical industry Plc. and subsidiary is
used for the comparison in the fiscal year 2011.

The performance of Pato Chemical Industry Plc and subsidiary indicated
net profit (loss) totaled 157.14, 183.74 and 172.35 million baht in 2009
– 2011 respectively. These figures represent an increase or a reduction
percentage of 39.34, 16.93 and (6.19) respectively.

In 2009, the world economic recession which began in 2008 continued to
have a severe effect on Thailand's economy, resulting in lower growth
rate in 2009 and weaker purchase power of overseas consumers. This
affected the structure of the Thai agricultural production which heavily
relies on exports. In addition, the Baht continued to appreciate, from
an average of 35 Baht per dollar at the beginning of 2009 to an average
of 33 Baht per dollar at the end of the year. As a result, Thailand's
competitive advantage decreased in the global market, leading to a
reduction in the manufacturing sector.

While the global crude oil prices were fluctuating, causing production
costs to rise, the inflation rate in 2009 was on the downward trend,
which is a mere reflection of the population's decreased consumption and
spending, and in no way stimulated the production the sector. On the
upside, the 2009 weather conditions were kind to farming. Although short
flooding occurred in some areas, its impact on production was not
severe.

Meanwhile, the government launched several measures and policies such as
provision of water sources, the price guarantee scheme, and the income
guarantee scheme, which supported production as well as the selling
prices in the agricultural sector. As a result, the prices of several
agricultural products in 2009 were satisfactory despite being lower than
in 2008 during which the prices were extremely high. This led to a
year-on-year decrease of 0.23% in agricultural gross domestic product
(GDP).

In 2010, overall economic situation had recovered from pending economic
depression since the end of the year 2009. Upon monetary and financial
policy and measures of the countries all over the world helped boost the
world economy in the first half of the year 2009, and continuously
influenced to the second half of the year which made overall economic
situation were in the state of further expansion.

The economic situation of Thailand had still expanded corresponding with
global economic situation resulting from domestic consumption growth
rate and export of private sector as well as the higher growth of
tourism. The economic growth rate was at 7.8 % despite of the draught
crisis where water levels of many major dams were at their minimum
levels at the beginning of the year, the pest outbreak causing damage to
agricultural product, and the heavy flood at the end of the year in the
provinces all over the country. Concert effort of both public and
private sector were made for emergency aid and assistance. The public
sector implemented various kinds of policies and measures, the
relaxation for debts burden, compensation, low interest rate loan, price
guarantee for agricultural product and farmers, for instance. Overall
affected agricultural product had caused lower production rate. However,
higher demand for agricultural products locally and worldwide help push
up its prices. (Office of Agricultural Economics reported a reduction of
agricultural production index by 2.1% in 2009 to 109.9 in 2010, and an
increase of agricultural product price index by 22.8% in 2009 to 155.4
in 2011)

In 2011, global economic growth continued to increase slightly from
various factors both inside and outside the country which affected the
global economy eg., in the United states and in European countries.
Political issues, financial crisis, inflation, public debts crisis
coupled with great earthquake and Tsunami in March caused the world fell
into a recession.

Thailand saw an economic improvement in accordance with the world
economy with a development in local consumption, export, and tourism
industry during the first 3 quarters. The last quarter was affected by
flooding led to a halt in Thai economic process such as manufacturing
process, agriculture, traveling, household spending, and investment. The
economic growth rate increased only by 0.1% in 2011. All relevant
sectors, both public and private implemented urgent assistance. The
government launched policies and measures to ease the debt burden;
compensation for damages, low-interest loans, and the pledge of
agricultural produce were for instances. Though the flood damaged
agricultural land and various agricultural produce which led to lower
yield, the domestic and world demand increased. As a result,
agricultural economy expanded by 2.2% in 2011.

Consequently, performance of the company during the past 3 years were as
follows :

Sales revenue during 2009 – 2011 was 851.62, 896.36, an 954.92 million
Baht respectively, representing increases of 12.35%, 5.25%, and 6.53%
respectively.

Total revenue during 2009 – 2011 was 861.55, 910.48, and 961.64 million
Baht, representing increases of 13.15%, 5.68%, and 5.62% respectively.

Cost of Sales in 2009– 2011 was 592.00, 569.65, and 630.31 million Baht,
representing increases (decrease) of 10.16%, (3.77%), and 10.65%
respectively.

 

In 2009, as the world economy continued to go into recession, the growth
rate of Thailand’s economy went down. Both domestic and overseas factors
affected the agricultural production structure immensely. Exports
decreased inline with product prices which created no incentive for
expansion of production. As a result, total sales in the first half of
the year amounted to 446.15 million Baht, a drop of 72.87 million or
14.04% when compared with the previous year.

In the second half of year, despite the impact from the financial
crisis, the weather conditions were very beneficial to farming. Together
with the ongoing outbreaks of Brown Plant Hoppers and Blast Diseases in
rice fields, these factors led to a rise in the demands for the
company’s products. Consequently, total sales in the second half of the
year amounted to 405.47 million Baht, a decrease of 166.45 million Baht
or 69.64%, resulting in the sales for the entire year of 815.62 million
Baht, a rise of 93.58 million Baht or 12.35%.

Sales costs of 2009 amounted to 592 million Baht, an increase of 53.39
million Baht or 9.91%. It is noted that the risen sales costs were lower
than the increased sales, showing effectiveness in cost management.
During the first half of the year, the company slowed down its raw
material purchases due to remaining inventory and for the purpose of
maintaining a balance between the amount of raw materials and market
demands. This caused the amount of raw material purchases to fall down
by 39.65% year-on-year. However, market demands for the company’s
products increased drastically in the second half of the year, causing
the raw material purchases to go up by 67.11% in order to sufficiently
support the market demands. However, the total purchases for the entire
year still dropped by 9.64% compared with the previous year. The prices
of raw materials tended to fall between downward and stable, and last
year’s raw material costs were higher than those as of now. As for labor
cost management and other production expenses, the company set a policy
that emphasized the most economic, cost-effective and efficient
management under the current economic conditions at the time. As a
result, in 2009 there was only a slight increase in the number of
workers to meet production needs. Thus, labor costs for production rose
only by 5.73% and other production expenses rose by 6.23% compared with
the previous year. The increase in labor costs for production is due to
labor costs, overtime costs and worker rewards as well as employee
benefits. Meanwhile, the increase in other production costs is due to
transport expenses, electricity and water fees and material waste
expenses. Such increases are a result of higher total sales, amid high
market competition coupled with increased market demands, making it
necessary to maintain market share. Thus, production and sales costs
rose by 4.43% and 9.91%, respectively. Such increases in costs, however,
are still lower than the rise in total sales with gorss profits
increasing by18.32%, compared with the previous year.

Other income in 2009 totaled 5.82 million Baht, a decrease of 2.41
million Baht or 70.49% due to increased investments in debt instruments
and income from sales of old vehicles.

In 2010, the world economy was still growing from the end of 2009 and
the growth rate of Thai economy was higher resulting from both external
and internal factors which affected the structure of Thai agricultural
products immensely. The demand of consumption of the international and
local market increased while production of agricultural product such as
rice, palm oil and cassava were affected by the drought, the outbreak of
pest, and disease during the first half of 2010. Besides severe floods
during the second half of the year resulted in the decrease of
agricultural production especially yearly paddy and off-season paddy.

From the abovementioned factors which led to the decrease of
agricultural products, but since the consumption demand was increasing
helping to maintain the good price especially for rubber, factory cane
and palm oil. On the contrary, the rice prices reduced as a result of
the lower prices abroad. The sales volume in 2009 thus totaled 896.36
million Baht, an increase of 44.74 million Baht or 5.25 % year-on year.

The cost of sales in 2010 amounted to 569.65 million Baht, a decrease of
22.32 Baht or 3.77 %. It was found that the cost of sales were lower
when compared with the increase of sales volume showing the efficiency
of the policy and cost management undertaken including other factors
causing lower cost of sales. The purchase of raw materials led to the
sufficient inventory to meet the market demands.

The fluctuation of the prices of raw materials variable by the oil
prices in the world market which tended to increase, made the average
prices of raw materials excluding the purchase order cost higher by
10-15 % year-on year. Accordingly, the economic problems in US economy
led to Baht strong against the dollar. Since the beginning of the year,
the average exchange rate was at 33.52 Baht to a dollar. It was until
the end of the year, the average exchange rate was at 30.29 Baht to a
dollar causing the prices of raw materials from overseas were between
slightly increase and downward trend. The prices of some raw materials
were not changed but the influence of the strong Baht causing the cost
of raw materials used for production lower by 11.14 % when comparing
with last year. As for labor cost and production costs, the Company set
the most economical, effective and efficient policy and management for
current economic situation. In 2010, the number of employees increased
to meet production process needs. Thus labor cost for production
increased by 8.93 % and the production cost increased by 9.82 % year-on
year. This increase came from labor cost, overtime cost and diligent
allowances as well as employee benefit. Meanwhile, the increase in other
production costs incurred from electricity and water fees, material
waste expenses and machine repairing expenses. Such increases are from
the reason of higher total sales volume under market circumstances of
high competition coupled with increase in market demands after the
draught and flood. It is necessary for the Company to maintain the
market share. Furthermore, the currency exchange rate which affected the
average cost of raw materials was reduced resulting production and sales
costs to be reduced by 0.29 and 3.77 % respectively. The gross profit
for 2010 amounted to 36.45 %, an increase of 25.84 % from 2009.

As for other incomes for 2010 amounted to 7.75 million Baht, an increase
of 1.93 million Baht or 33.16 % which originated from an increase of
investment in bonds and income from the sale of used vehicles.

In 2011, the world economy during the first half of 2011 continued to
expand and resulted in the growth rate of Thai economy. Both internal
and external factors which were the increase of domestic and world
demand led to the significant structure expansion of agricultural
production. There was a high growth in agricultural sector accordingly.
The weather were favorable with sufficient rain for cultivation during
the first half of the year and it was until the third quarter that the
floods largely expanded in the northern, the north-eastern, and the
central part of the country and damaged agricultural sector and
agricultural products. The agricultural sector continually shrank from
the third to the forth quarter in a higher degree. While Thai economy
continued to grow during the second quarter from higher volume and value
of exports, domestic demand and private consumption slowed down from the
effect of flooding. The demand for the products of the company
consequently decreased from August onwards.

The effect from the enforcement of the Hazardous Substance Act (No.3)
B.E. 2551, a revision of the previous Hazardous Substance Act B.E. 2535
on August 23, 2008 resulted in the expiration of import, formulation,
and export permit on August 22, 2011. (Three years from the enforcement
date) The company is not able to import or formulate any products but is
able to sell remaining finished products for another 2 more years and
thus demand increased significantly before August 22, 2011.

The above factors led to sales revenue for the first 3 quarters to be
882.71 million baht, an increase of 191.23 million baht year-on-year, or
a difference of 27.66 %. The sales declined in the forth quarter due to
the floods. Total sales revenue for 2011 was 954.92 million baht. An
increase of 58.56 million baht represented a difference of 6.53%.

Cost of sales in 2011was 630.11 million baht, an increase of 60.66
million baht or 10.65% different. Cost of sales increased at the higher
rate than the sales revenue. Cost of raw materials increased by the
volatility of world oil price affected from the political unrest in the
Middle East. Prices of raw materials increased by about 5-20% compared
to 2010.

The fluctuation of the exchange rate of the baht weakened against the
U.S. dollar was another factor. The averaged exchange rate was 30.16
baht to the dollar by the beginning of the year and it was averaged at
31.86 baht to the dollar by the end of the year resulting in price of
imported raw materials to increase. The total value of raw materials
purchase orders rose by 20.02% compared to the previous year. As for
labor and overhead cost, the company set a policy that emphasized the
most economic, cost-effective and efficient management under the current
economic conditions at the time. As a result, in 2011 there was only a
slight increase in the number of workers to meet production process
needs and the enforcement of the Hazardous Substance Act. (No.3) B.E.
2551 which resulted in the end of production on August 22, 2011. Thus,
labor costs rose by 16.96% and overhead cost rose by 5.76% compared to
the previous year. This increase came from wages, overtime costs and
employee benefits. As for the increase in overhead costs, this came from
the increasing in sales and the speeding up of production to keep up on
the enforcement of the mentioned Act. Moreover, the company wanted to
keep stocks to meet market demand and to maintain market share. Thus,
production and sales costs rose by 19.43% and 9.80% respectively. Gross
profit margin in 2011 was 33.99% or a decrease of (0.64)% year-on-year.

Other income in 2011 was 8.93 million baht. An increase of 1.18 million
baht represented a difference of 15.23%. This income was from investment
in debt securities, interest receivable, and the selling of old cars.

Table showing rate of increases (reduction) during 2009 – 2011

+-----------+-------------------+------------------+------------------+
|           |  PATO             |                  |                  |
+-----------+-------------------+------------------+------------------+
| Year      | Sales Revenue     | Total revenue    | Cost of Sale     |
+-----------+-------------------+------------------+------------------+
| 2009      | 12.35             | 13.15            | 10.15            |
+-----------+-------------------+------------------+------------------+
| 2010      | 5.25              | 5.68             | (3.77)           |
+-----------+-------------------+------------------+------------------+
| 2011      | 6.53              | 5.62             | 10.65            |
+-----------+-------------------+------------------+------------------+

Sales and General Administrative expenses during 2009-2011 totaled
70.06, 94.10, and 82.17 million Baht, representing increases (decreases)
of 5.84%, 34.31%, and (12.68%) respectively, not including financial
cost.

Financial cost in 2009 – 2011 totaled 0.93, 1.52, and 1.80 million Baht,
representing increases (decreases) of (85.05%), 63.44%, and 18.42%
respectively.

In 2009, selling and administrative expenses have been reclassified in
the 2008 financial statements to conform to those of 2009 by separating
selling expenses from administrative expenses as follows :

  -------------------------- -------------------- ------------------------
                             2008                 2007

  Sales expenses             38,680,290           32,283,362

  Management expenses        26,145,121           27,535,102

  Management remuneration    5,236,000            5,172,829

  Total expenses             70,061,411           64,991,293
  -------------------------- -------------------- ------------------------

Selling expenses amounted to 38.68 million Baht, a rise of 6.40 million
Baht or 19.81% compared to the previous year. This is due to increased
sales as a result of increased marketing expenses such as commission
fees, freight expenses and promotional expenses. Administrative expenses
totaled 26.14 million Baht, a year-on-year drop of 1.39 million Baht or
(5.05)%. This is a result of an offset between some increased expenses
such as employee benefits, and some decreased expenses such as doubtful
accounts which decreased by 2.12 million Baht or (98.70)% and a
recoverable amount from doubtful accounts of 1.02 million Baht. The
company has a policy to be cautious in giving loans to customers and in
considering the suitability of each customer under the current economic
circumstance. This results in a very small portion of doubtful accounts
in each year, which shows the company’s effective management of accounts
receivable.

Gain (loss) on foreign exchange of 2009 amounted to 4.11 million Baht, a
hike of 4.84 million Baht or 661.19% compared with the previous year,
shown under the caption of Revenues. The ongoing economic recession is
responsible for the volatility of foreign exchange rates. The Baht
continued to appreciate, from an average of 35 Baht per dollar at the
beginning of 2009 to an average of 33 Baht per dollar at the end of the
year. This led to realized gain on exchange of 3.33 million Baht and
unrealized gain on exchange of 0.78 million Baht based on adjustment of
exchange rates as at year end on T/R and outstanding overseas accounts
payable.

Remuneration to senior executives has been reclassified in 2009 and
2008. The remuneration went up by 0.06 million Baht or 1.22% due to an
appointment of one additional independent committee member.

Financial expenses or interest in 2009 amounted to 0.93 million Baht, a
year-on-year drop of 5.29 million Baht or (85.05)% due to the
appreciation of the Baht. The company managed its payment to T/R and
overseas accounts payable to suit the financial situation and the
appreciation of the Baht in order to maximize the company’s interest at
the moment by complying with the payment terms. This results in low
interest.

In 2010, cost of sales totaled 58.76 million Baht, representing an
increase of 20.08 million Baht or an increase of 51.91 % compared with
the previous year. As a result of the increase in total sales volume,
there was a rise in various costs particularly those involving
commission, transportations, vehicle, and sales promotion and marketing
totaled 29.83 million Baht or an increase of 3.68 million Baht
representing an increase of 14.07 compared to the previous year. The
increases in administrative expenses were from employee benefits,
miscellaneous expenses, donation for education, and a recoverable amount
from bad debts of 1.18 million Baht.

Management remunerations in 2010 totaled 5.52 million Baht or an
increase of 0.28 million Baht representing an increase of 5.34 % in line
with company’s policy to adjust the management salary by 5 %.

As for profit (loss) from exchange rates in 2010 totaling 6.37 million
Baht booked in a part of revenue, this showed an increase of 2.26
million Baht or 54.99 % compared to the previous year. This resulted
from the US economy which led to a fluctuating exchange rate throughout
the year. The Baht strengthened at 30.29 Baht to the dollar by the end
of 2010. The company booked a realized forex gain of 3.48 million Baht
and (1.22) million Baht unrealized loss resulting from exchange rate
adjustment by T/R payables left at year end.

Financial cost in 2010 totaled 1.52 million Baht, reflecting an increase
of 10.59 million Baht or 63.20 % compared to the previous year. The
consequence of the strengthening of the Baht against dollar made a
prudent and appropriate management of T/R payables in light of the
financial situation and fluctuating Baht value at the time was
implemented to economize and to maximize the company’s interest. This
was arranged by making performance in accordance with the terms of
payment or otherwise extension of terms of payment which may lead to a
slightly increase of interest payable burden. However, this was more
beneficial to the company as it was able to pay the interest at a lower
rate of exchange.

In 2011, based on the types of transactions, cost of sales totaled 45.13
million baht, a decrease of (13.63) million baht represented a 23.20%
decrease compared to the previous year. This was because during the
second half of 2011 total sales decreased from the effect of the
Hazardous Substance Act.(No. 3) B.E. 2008. Sales mainly rose in the
second quarter and dropped in the third and forth quarters. It was found
that cost of sales and marketing decreased on sales promotion,
commission, transportation, and vehicles expenses. Administrative
expenses totaled 31.33 million baht, an increase of 1.56 million baht
represented an increase of 5.23% year-on-year. The increase were from
increase in charity donation, miscellaneous expenses and employee’s
salaries

The remuneration for management in 2011 was 5.64 million baht. The 0.12
million baht difference marked an increase of 2.17% and it was due to
the policy to adjust salary of management by about 5% on average.

Profit (loss) from exchange rate in 2011 totaled (2.21) million baht. A
decrease of (8.59) million baht marked a decrease of 134.71% compared to
the previous year. This came from the fluctuations in the exchange rate
throughout the year due to the uncertainty in the global economic
problems in many countries and caused the baht to weaken. At the end of
the year, the exchange rate was 31.86 baht to the dollar.

Financial costs in 2011 totaled 1.80 million baht. The 0.28 million baht
difference marked an increase of 18.42% compared to the previous year.
This was due to the depreciation of the baht. The management made a
prudent and appropriate management of T/R payables in light of the
financial situation and fluctuating baht value at the time to economize
and maximize the company’s interest on financial costs. This was done by
arranging terms of payment considering to pay on due date or to extend
the term of which may lead to a slightly increase of interest payable
burden. However, this was more beneficial to the company as it was paid
at a lower rate of exchange.

The above operational results led to gross profit during 2009-2011 to
total 259.62, 326.70, and 324.62 million Baht respectively, representing
a percentage of 30.49, 36.45, and 33.99 respectively.

Operational profits in 2009–2011 came to 189.56, 232.60, and 242.45
million Baht respectively, representing a percentage of 22.26, 25.95,
and 25.39 respectively.

Net profits in 2009 – 2011 came to 157.14, 183.74, and 172.36 million
Baht, or a percentage of 18.24, 20.18, and 17.92 respectively.

Return on equity during 2009 – 2011 were 35.34%, 37.23, and 33.01%
respectively.

In 2009, The ongoing economic recession led to lower growth rate of GDP
despite a rise in exports during the fourth quarter. Many factors
mentioned above are also attributable to such decrease. During the first
half of the year, the global financial crisis had an ongoing severe
effect on both Thailand and overseas, causing the world market demands
for agricultural products to lower, which led to lower domestic
agricultural production. The selling prices of agricultural products
slightly decreased yet are still satisfactory. However, due to the
decrease in demand, sales in the first half of the year dropped. As the
financial crisis continued, the outbreak of Brown Plant Hoppers and
Blast Diseases intensified. This results in an increase in demands for
the company’s products, which consequently led to a drastic hike in
sales during the second half of the year, leading to satisfactory
operating results for the entire year of 2009, with a 12.35% rise in
sales. Due to the factors mentioned above, management policies in terms
of production and the high market competition, especially in terms of
pricing, it is necessary for the company to maintain its market share.
Effective cost management is the solution that would enable the company
to compete in the market. As a result, the company set a policy that
emphasized the most economic, cost-effective and efficient management
under the current economic conditions at the time. This led to increases
of 4.32%, 5.73% and 6.23% in material costs, labor costs and overhead
costs, respectively. Increases of 4.43% and 9.1% in cost of production
and cost of sales, respectively, are due to the rise in sales. The
increase of costs is still lower than the increase in sales, resulting
in gross profits of 30.49% of the total net profits, a 18.32% rise
compared with the previous year.

Selling and administrative expenses increased by 5.07 million Baht or
7.8% in 2009 due to a rise in sales. Consequently, the company
maintained its economic and cost-effective policy in investments and
selling expenses to maximize income by emphasizing promotional
activities to stimulate demands, especially during the third and fourth
quarter. The increase in selling and administrative expenses along with
remuneration to senior executives is lower than the rise in sales,
leading to an increase of 22.75% in operating profits of 2009, compared
with the previous year.

Profit (loss) on exchange increased due to the appreciation of the Baht,
resulting in a positive effect on gain on exchange and lower material
costs. It also had a positive impact on payment to overseas and T/R
accounts payable under the financial condition and the value of the Baht
at the time. As a result, the company was able to comply the terms of
payment, saving the burden of interest payment which decreased financial
expenses substantially.

Corporate income tax payable increased slightly by 2.57 million Baht or
6.61%, compared with the previous year. In 2009, there was a tax credit
as a result of a lawsuit amounting to 34.22 million Baht, and payment of
debts for which the company made a full allowance totaling 10.05 million
Baht. Such transactions slightly increased corporate income tax payable.

Due to the factors mentioned above, the company had satisfactory
operating results, leading to increases of 18.24% and 35.54% in net
profits and return on shareholders’ equity, respectively, compared with
the previous year.

In 2010, the overall economic situation expanded by 7.8 % as a result of
the increase of domestic consumption, export of private sector and
tourism. There were internal and external factors affecting the
structure of Thai agricultural production, however, the consumption
demand of the international and local market increased. Production
sector confronted with the drought, the outbreak of pest and diseases,
and severe floods in many areas resulting in lower production especially
yearly paddy and off-season paddy.

Consumption demand was still high leading to high agricultural product
prices particularly for sugarcane and palm oil. On the contrary, prices
of paddy were reduced due to the decline of the prices in the world
market. Floods during the end of Q4 resulting the delay in cultivation
season and thus affected Q4 sales of the company. However, total sales
still increased by 5.25 %. Meanwhile, aforementioned production factors
coupled with policies set on management, production and marketing
situation which was at high competition on prices, it was inevitable for
the company to use marketing strategy in sales promotion and others to
maintain the market share as much as possible. The company also focused
on efficient and cost-effective management along with current situation,
in order to be competitive cost-wise and to effectively maintain market
share. This led to a rise (fall) of raw material cost, labor cost and
overhead cost by (11.4), 8.93, and 9.82 % respectively. Production cost
and selling cost decreased by 0.29 and 3.77 % respectively. The changing
rate of selling cost was at the lower rate more than the increase of
total sales volume. This made gross profit rate in 2010 was equal to
326.70 million Baht or 36.45 % of net sales volume. The increase amount
of 67.8 million Baht reflected an increase of 25.84 % from the previous
year.

Selling and administration expenses in 2010 showed an increase of 20.08
million Baht and 3.68 million Baht or 51.91 and 14.07 % respectively
from the previous year. The result of the increase of total sales volume
and the marketing policy able to compete with competitor helped the
company to maintain market share. The company policy on efficient and
cost-effective management to maximize revenue and sales promotion to
stimulate product demand in every quarter led to an operational profit
of 232.60 million Baht in 2010. The 43.04 million Baht represented a
22.71 % increase over last year.

Profit from exchange rates increased from the continuing appreciation of
the Baht value. Performance management on T/R payables in light of the
financial situation and the Baht value at the time was implemented for
forex gain. Therefore, the management of the terms of payment may lead
to some increase of interest payable burden, on the other hand, it was
found worth doing so when compared to forex gain.

Corporate income tax increased by 20.04 million Baht or an increase of
48.39 million Baht over last year. There was a tax credit of 34.22
million Baht in 2009 from an execution of the legal case. In 2010, there
was repayment of bad debt totaled 1.18 million Baht. In addition, the
good operational result made an increase of higher profit before
taxation and thus led to a higher corporate income tax in 2010.

As a result of these main factors, the company had good operational
results leading to a net profit of 183.74 million Baht, representing a
percentage of 20.18 of total revenue. The increase of 26.60 million Baht
over 2009 operation results represented a percentage of 16.93%. Return
on shareholder’s equity was 37.23 %, an increase from the previous year.

In 2011, Thailand economic growth rate increased only by 0.01% from
domestic consumption, export of private sector, and tourism rose during
the first 3 quarters. The forth quarter was affected by the floods in
wide range of agricultural area in the northern, the north-eastern and
the central regions and caused significant damages to agricultural
productions. In consequence, manufacturing, tourism, household spending,
and investment sector were slowed down.

The significant effect was from the enforcement of the Hazardous
Substance Act (No.3) B.E. 2551, a revision of the previous Hazardous
Substance Act B.E. 2535 on August 23, 2008 resulted in the expiration of
import, formulation, and export permit on August 22, 2011. (Three years
from the enforcement date) The company is not able to import or
formulate any products but is able to sell remaining finished products
for another 2 more years.

The 2 major factors, economic and natural disaster factor and the
enforcement of the mentioned Act. caused structural changes in demand of
company’s products. Before the enforcement date, August 22, 2011 the
demand of the products increased dramatically during the second quarter
causing total sales to rise by 54.92% compared to the previous year. The
sales started to slow down in the third quarter and declined further to
the lowest position in the forth quarter.

Total sales of 2011 increased by only 6.53% compared to the previous
year. Production was affected by the volatility of the world oil price
causing the prices of raw materials to rise. The enforcement of the Act.
caused the company to accelerate the timely production. The company had
to bear burden of fixed costs incurred after the date stopping of
production and import causing the increasing rate in cost of sales
higher than the increasing rate in sales. However, the company
efficiently manage production costs with save and most cost-effective in
line with the current economic situation in order to maintain market
share as possible. Because of the sales and cost of sales discussed
above, the gross profit was 324.62 million baht, representing 33.99% of
net sales. The (2.08) million baht represent a slightly decrease of
(0.64)% compared to the previous year.

Selling and administrative expenses in 2011 dropped by (11.94) million
baht or a decrease of (12.68) % compared to last year resulted from the
decrease in sales. The company devised the policy to maintain market
share and administrative policy to generate worthwhile and efficiency
income from investment. The profit from operations in 2011 was 242.45
million baht or 25.39%. The difference of 9.85 million baht marked an
increase of 4.23% compared to the previous year.

Profit (loss) from the exchange rate, incurred due to the
all-year-fluctuation, was the influence of the world economy. Such
phenomenon had affected several regions of the world and led to the
constant weakness of the Baht value. Hence, the management of debt
payment to creditors T/R as well as to foreign creditors must rely on
with financial market and the Baht value situations at that time and
that led to the loss from the exchange rate.

The corporate income tax in 2011 was 75.01 million baht. An increase of
13.55 million baht marked an increase of 22.05 % compared to last year.
The corporate income tax rate in 2011was 30 % of the net profit while
that in 2010 was only 25 % of the net profit. When considering the net
profit prior to the income tax in 2011, it increased by 2.16 million
baht marked or 0.88 %. Due to the aforementioned factors, the corporate
income tax in 2011 increased.

According to the main aforementioned factors, the company then has a
satisfied performance and this led to 172.36 million baht for the net
profit in 2011which was 17.92 % of the total revenue- a decrease of
11.38 million baht or 6.17% when compared with that in 2010. As a
result, the return on equity decreased slightly to 33.01%.

Total assets in 2009-2011 amounting to 624.52, 742.11, and 582.20
million Baht respectively, marked an increase (decrease) at a percentage
of 31.77, 18.23, and (21.55) respectively.

Total liabilities in 2009-2011 amounting to 156.34, 223.20, and 56.76
million Baht, marked an increase (decrease) of 170.09%, 42.76%, and
(74.57) respectively.

Shareholder equity in 2009-2011 amounting to 468.17, 518.92, and 525.44
million Baht, marked an increase of 12.52%, 12.53%, 10.84% respectively.

In 2009, revenues from sales increased by 12.35% in line with cash flows
which went up by 87.01%. The current ratio decreased from 7.04 times in
2008 to 3.56 times in 2009. The quick ratio also decreased from 3.95
times in 2008 to 2.89 times in 2009. The liquidity of cash flow
increased from 1.02 times in 2008 to 1.97 times in 2009. The collection
period remained at 54 days in 2008 and 2009. The average sales time went
down from 111 days in 2008 to 85 days in 2009. The payment period went
down from 52 days in 2008 to 47 days in 2009, resulting in the cash
cycle of 92 days.

In analysis, the current ratio is on downward trend as a result of an
increase in sales, which caused the majority of raw material purchases
to be made during the third and fourth quarters. This increased T/R and
other accounts payable, resulting in an increase in liabilities during
such periods. As a result, the current ratio is on downward trend.
However, other ratios are on upward trend. The liquidity of cash flow
increased as evidenced by the fact that the collection period remained
the same while sales increased. The company was able to collect more
debts, resulting in reasonably high liquidity in cash. Inventory
turnover accelerated as a result of good management that balanced the
raw material purchases and market demands. This led to a 41.84% drop
from last year. The payment period also accelerated since the company’s
liquidity is satisfactory. In addition, partially due to the
appreciation of the Baht, the company was able to comply with terms of
payment of T/R and other accounts payable. The abovementioned factors
increased current assets. Meanwhile, current liabilities also increased
because of the rise in raw material purchases during the third and
fourth quarters, which led to decreases in current and quick ratios, yet
remained satisfactory. Other ratios adjusted in a positive way,
resulting in higher cash flows from operating activities.

Cash flows from financing activities decreased by 65.89% because of
increases in T/R and overseas accounts payable during the third and
fourth quarters, as a result of high domestic and overseas purchases of
raw materials. In addition, the company paid a dividend of 105 million
Baht, an increase from last year, coupled with a rise in cash flows from
operating activities. This led to a decrease in financing activities.

Regarding the funding structure, the debt/equity ratio increased from
0.14 times in 2008 to 0.33 times in 2009. This is due to increases in
T/R and other accounts payable as a result of raw material purchases
during the second half of the year, and higher corporate income tax
payable and accrued expenses. Although the debt/equity ratio increased
compared with last year, it is considered very low and remained
satisfactory.

Interest payment coverage surged from 25.37 times in 2008 to 271.59
times in 2009. This is due to the company’s high liquidity in cash which
resulted in lower interest. Return on total assets and return on fixed
assets increased from 22.41% and 117.51% in 2008 to 28.61% and 252.29%
in 2009, respectively. Total assets turnover went up from 151.31 times
in 2008 to 156.86 times in 2009. Return on asset management generated
revenue and net profits effectively.

Based on the current funding structure, the company set a financial
management policy with utmost caution and effectiveness, focusing on low
risk, high return. This principle of low risk, high return is applied to
even temporary investments. The company also considered risks from
foreign exchange during the recession and potential interest arising
from debt payment extension in the future. As a result, it entered into
a forward contract to prevent potential risk at a suitable period to
maximize its benefits. The company continued to invest current
liabilities in current assets to maximize return and incur the least
financial costs while still able to optimize return on net worth. The
company followed its policy to maintain the best ratios for key
financial ratios and to achieve highest stability. Consequently, it led
to the operating results of the year 2009 as described above.

In 2010, as sales revenue rose only by 5.25%, operational cash flow thus
decreased by 37.61%, with current ratio decreased from 3.56 times in
2009 to 3.01 times in 2010. Quick ratio decreased from 2.89 times in
2009 to 2.20 times in 2010. Cash flow ratio decreased from 1.97 times in
2009 to 0.69 in 2010. Average debt collection period rose from 54 days
in 2009 to 65 days in 2010. Average inventory turnover period rose from
85 days in 2009 to 88 days in 2010. Average payment period rose from 47
days in 2009 to 88 days in 2010, thus making cash cycle equal to 65
days.

Analysis of the current ratio showed a downward trend as inventories in
2010 totaled 175.27 million baht, or an increase of 70.71% compared to
the previous year. The procurement of raw material in 2010 amounting to
596.5 million baht showed an increase of 25.26% compared to 2009. Most
of them were made in Q4 totaling 195.52 million baht which represented
32.80 of the whole year purchase. They still remained under T/R and
outstanding overseas accounts payable which resulted in an increase in
current liabilities in 2010. Liquidity ratio and cash flows from
operating activities tended to decrease consequently. Debt collection
period and inventories turnover were slow down and resulting in lower
cash cycle. The main reasons were for the stocking up of raw materials
to meet production demand under new Hazardous Substance Act (No.3) B.E.
2551, the revision of Hazardous Substance Act B.E. 2535, enforced on
August 23, 2008 provided that manufacturing permit, import permit,
export permit and having in possession permit will be valid through the
expiration date of such permits. Certificate of hazardous substance
registration, certificate of notification for production, import, export
or having in possession will be valid for another 3 years from the date
of effectiveness. In 2011, all certificates and permits will be expired,
the company has to purchase raw materials to fulfill production and
marketing demand before the expiration date of permits and certificates.
However, most liquidity ratio tended to drop only slightly.

Cash flow from investing activities decreased by 63.24% compared to the
previous year. The company increased a temporary financial investment in
2010 by 37 million Baht, a purchase of additional equipment machinery
and vehicles by 6.23 million baht, and expenses for the new registration
according to new above mentioned act by 6.16 million Baht.

Cash flow from financing activities rose by 80.16% compared to the
previous year due to raw material procurement orders from abroad rose in
Q4. In addition, there was a 133 million Baht dividend payout, a higher
amount than the previous year.

The investment structure consisted a debt to equity ratio rose from 0.33
times in 2009 to 0.43 times in 2010. This came from T/R payables and
other account payables for the procurement of raw materials during
second half of the year, coupled with the increase in accrued corporate
income tax and outstanding expenses from the increase in total revenue.
The company saw an increase in shareholders’ compared to the previous
year. The said ratio is considered to be very low and is in good
position.

The interest coverage ratio dropped from 271.59 times in 2009 to 127.87
times in 2010. cash flows form operating activities decreased immensely
from the policy to purchase raw materials and thus led to an increase in
financial cost and a decrease in interest coverage. The return on assets
decreased from 28.61% in 2009 to 26.89 in 2010. The returned on fixed
assets increased from 252.29 % in 2009 to 298.67 % in 2010 due to a
slightly increase in machinery, equipments, and vehicles. The return on
assets ratio decreased from 156.86 times in 2009 to 133.24 times in
2010. Although there was a slight decrease in efficiency ratio, the
company is still able to generate income resulting in efficiency
operating result.

From above mentioned investment structure, the company manages to lay
down a policy for the most cautious and efficient financial management,
bearing in mind low risk and the most worthwhile returns in current
situation for temporary investments and plan set for the purchasing of
raw materials of low price but at good quality. The company also bear in
mind internal and external factors such as exchange rates, payment term
management, T/R payables and outstanding overseas accounts which will
lead to financial cost in the future. Forward Contracts are applied to
avoid risks at appropriate period for the most benefit.

The company still has the policy of bringing current liabilities for
investment in current assets in order to achieve the highest return and
reduce financial costs, while shareholders are still given the highest
return. Key financial ratios are also maintained to their best. Thus
operational results in 2010 were achieved as mentioned above.

In 2011, from the increase of the sale figure at 6.53 %, the company’s
net profit in 2011 was 172.36 million baht. This led to the significant
change in the balance sheet from that of 2010 because of the
aforementioned natural disaster as well as the new Hazardous Substance
Act. So, the total asset and total debt decreased to 159.91 million baht
and 166.44 million baht or 21.55 % and 74.57 % respectively. When
compared with that of last year, it decreases in the sections account
receivables, inventory, short-term loan from the financial institutions,
and account payables, etc.

Hence, from the performance in 2010, the cash flow from operations
increased by148.70 % with an increase in the current ratio from 3.01
times from that in 2010 and to 10.38 times in 2011. Quick ratio
increased from 2.20 times in 2010 to 8.57 times in 2011. The liquidity
of cash flow increased from 0.69 % in 2010 to 2.4 % in 2011. The average
collection period decreased from 65 days in 2010 to 41 days in 2011. The
average inventory turnover period decreased from 88 days in 2010 to 74
days in 2011. The average payment period decreased from 88 days in 2010
to 47 days in 2011 and this made the cash cycle equaled 68 days. From
the operations, it was clearly shown that the liquidity ratios were
better than those of the former years. The effect of the new Hazardous
substance Act was that the production had to be temporarily paused
during the new license registration process. The company then had no
purchasing order for raw material as well as the materials used in
production. Moreover, the sale figure before August 22, 2011 and the
demand for goods in the market abnormally increased and this changed the
goods from being bought on credit term to be bought in cash in order to
have goods sold to the agriculturists. Due to all factors, trade account
receivable, inventory, account payables, T/R creditors decreased while,
the cash and the cash equivalents including short-term investment
increased and finally led the increase of the cash flow from operating
activities.

The cash flow from the investment activities increased by 322.34 % when
compared with that of last year. The company had sold the short-term
investment to promote the liquidity for 120 million baht in 2011, had
purchased the machines, the equipments as well as the vehicles for 6
million baht. Moreover, the company had paid for the on-process
registration fee due to the Hazardous Substance Act mentioned above for
9 million baht.

The cash flow from the financing activities increased by 231.59 % when
compared with that of last year since the payment for T/R creditors
which ended in the fourth quarter and the dividend payment of 156.80
million baht which was an increase from last year.

When considering the capital structure, it was found that the debt to
equity ratio decreased from 0.43 time in 2010 to 0.11 time in 2011. The
decrease of current liabilities from the trade account payables and the
T/R creditors led to a decrease in such ratio and it was considered
very-good level.

The interest coverage ratio increased from 127.87 times in 2010 to
224.51times in 2011. The cash flow from operations increased rather a
lot. From the changing policy in selling goods based on the market
demand, the sale figure increased and the company’s liquidity also
increased a lot and this led to the increase of the ability to pay off
interest.

At the same time, the company’s performance was at a very-good level and
thus minimizing the decrease in profit. With the current economy
situation affected by the flood as well as the effective of the
Hazardous Substance Act, the return on assets decreased from 26.89 % in
2010 to 26.03 % in 2011 and the return on fixed assets decreased from
298.67 % in 2010 to 295.07 % in 2011.

Assets turnover increased from 133.24 times in 2010 to 145.23 times in
2011due to the investment in fixed assets. The efficiency ratio
decreased a bit but it was able to generate profit and led to a
satisfied operating result.

From the investment structure shown, the company also set a prudent and
efficient financial management policy with consideration on all risks
and expenses that may occur to minimize the effect to the company
performance, for example, expenses incurred from the investment in
product re-registration as a result of the new Hazardous Substance Act.
The company also carries out the production plans including setting the
policy in purchasing appropriate raw materials in quantity, price, and
quality to comply with the on-process of the license registration.
Moreover, the company still conducts the marketing plans as well as
marketing strategies to stay competitive in the highly competitive
market. Various internal and external factors are also considered either
the fluctuation of the exchange rate and term of payment for T/R which
will cause the financial cost burden in the future. These must be
planned in order to avoid risks that may occur as well as to be able to
comply with the financial situation at that time for the ultimate
economy and benefit.

The company also puts the strong emphasis on financial stability by
paying off current liabilities and investing in current assets for
liquidity and the ultimate benefit. This will cause the most economical
financial costs in order to achieve highest return on shareholders’
equity and this will sustain the significant financial ratios as shown
in the aforementioned performance of 2011.

One significant factor affecting the performance in 2012 is that the
economy growth rate still continually expands in the range of 3.5-5.5 %
but there is also the problem in the Baht value resulted from
no-confidence in the politics of the Middle East especially the high oil
price in the world market due to the turmoil in the Middle East
especially that in Iran. Another crucial factor that will affect the
company performance is the natural disasters that will occur in the
future.

However, it is expected that the economy in the agricultural sector will
expand in the range of 4.5-5.5 % based on the normal weather state. Most
agricultural outputs increase due to the increasing demands both in the
country and abroad. The agricultural production still face risk factors
that may occur like drought, floods, the pest outbreak, and the effect
of the Hazardous Substance Act (No.3) which was effective in 2011. 2012
is the time of the on-process of the registration for the new license
for each product of the company. This will affect both the changing
demand and supply of the country. Nevertheless, there are still positive
factors that will yield positive effect to the agricultural section both
in the production and the price dimensions. This is in the form of the
government’s policies and regulations like the pledge of paddy rice,
development of basic factors on irrigation, provision of land for
agriculturists, provision of assistance for those affected from the
natural disaster in all provinces, etc. to help elevate the levels of
the production and the price in order to support and encourage farmers.

In agricultural sector production, the Government will continue to
provide its full support in all areas such as:

  1.   Technology development - Developing production technology by
educating farmers and providing good plant breeds in order to further
develop quality of output and create competitive capability.

2.   Marketing - Helping to sustain agricultural prices by providing
farmers with loans using their agricultural goods as collateral. This
will keep agricultural prices from falling too low and let market forces
operate on their own.

3.   Finances – Providing loan support which might be in the form of a
village fund, low-interest loans so as to create opportunity for
farmers.

4.  Promote agricultural processing – This is done by creating added
value to products which would develop product quality and enable to
export.

Government support on production and its strategy to restructure
agricultural products to make it in line with market needs and create
competitiveness for the country, will improve farmers’ situation and
living standards.

Raw material prices rising higher with world market conditions are a
risk factor, making the cost price of products higher. Higher oil
prices, Baht fluctuation and weakening, drought and flooding, and the
new regulation from the government enforced recently are also external
factors which are beyond control. However, the company has devised a
policy to ease the effects from these risk factors.

1. Company policy to manage forex on raw material imports, for example,
with an extension of account payable to reduce risks and the
consideration of favorable exchange rate.

2.  Practicing more caution when ordering raw materials, seeing that it
    concords with needs. This will reduce damage from excessive
    inventory. However, lead Time is considered to avoid short of
    inventory.

3.  Making careful consideration before opening new trade accounts and
    expanding credit lines to prevent damage from bad debts and strictly
    performing in accordance with collection policy.

4.  Disseminate knowledge on technology and correct usage of product to
    increase yields, promote safety, with no environmental effects.

5.  Arrange enough budget to handle with the Hazardous substance Act
    (No.3) B.E. 2551 enforced.

These above factors affect the company’s operations and financial
position. Therefore, it is the policy of the company to try and reduce
the adverse effects from these various factors through the above
mentioned measures. Although, these are outside factors that cannot be
controlled, it is expected that this policy will reflect in better
operations for the company.