11. Financial Statements and Operating Results

1.  Financial Statements

  (A) Report of Independent Auditor and Opinions

  Report of independent auditor certified by Ernst & Young Office
  Limited of the Company and its subsidiaries for the years ended
  December 31, 2012, 2011 and 2010 was expressed an unqualified opinion
  with an emphasis of matters on the financial position of Siam City
  Cement Public Company Limited and its subsidiaries and of Siam City
  Cement Public Company Limited and the results of operations and cash
  flows for the years then ended in accordance with generally accepted
  accounting principles.

  (B) Financial Statements

-   Consolidated Statements of Financial Position

-   Consolidated Statements of Income and Consolidated Statements of
    Comprehensive Income

-   Consolidated Statements of Cash Flows

-   Consolidated Financial Ratios

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  11.2 Management Discussion and Analysis (MD&A)

  Analysis of Financial Performance

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  Revenues

  Total net sales for 2012 posted a 14% growth compared to 2011 as all
  key business segments performed well after recovering from the flood
  crisis last year. In particular, it is achieved through volume
  expansion and improved price realization except cement pricing which
  declined due to intense competition. The net sales from core cement
  business increased by 10 percent compared to 2011, due to on-going
  infrastructure, commercial projects and real estate sector expansion
  including cement demand growth in neighboring countries.

  Our net sales performance in Ready-mixed concrete, Mortar, and Conwood
  products has significantly increased due to demand growth in the
  domestic market, our own capacity addition and improved pricing in the
  industry. Customers greatly responded to our innovative INSEE Mortar
  by shifting their behavior from mixing concrete themselves to mortar
  as ready to use products. Moreover, we expanded our production
  capacity of Ready-mixed concrete plants, second production line of
  Mortar and third production line of Conwood products to serve high
  demand in the market.

  Expenses

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  Production of cost of goods sold totaled Baht 15,273 million,
  recording an increase of Baht 2,409 million or 19% from the previous
  year. The specific production cost was increased by 8% resulting from
  increasing fuel cost in the world market and electricity unit rates.
  Thanks to key energy saving initiatives, such as waste heat recovery
  and alternative fuels the cost escalation was somewhat mitigated. The
  Company focused on process efficiency and cost competitiveness. The
  four kilns operation achieved 88% production rate at contained fixed
  production cost.

  Selling, distribution and administrative expenses increased as higher
  volume dispatched in multiple businesses while diesel prices and
  minimum wage increases too impacted the overall cost. However,
  administrative expenses were controlled at appropriate levels due to
  improving productivity and process efficiency.

  The Company’s net profit after non-controlling interests of the
  subsidiaries reached Baht 3,636 million in 2012, compared to Baht
  3,293 million in 2011, which was 10.4% better than in 2011. Apart from
  sustained operating EBITDA, net profit further benefited from lower
  applicable tax rates of 23% in 2012 compared to 30% in 2011.
  Furthermore, BOI privilege from our green power generation plants
  created tax benefit to the Company and addition to other tax
  optimization initiatives.

Analysis of Financial Position

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  Net Working Capital

  As a result of strong net sales improvement for all segments, trade
  and other receivables were increased while inventories were decreased
  with higher dispatches. In term of payable, main increase stem from
  normal operation such as accounts payable, accrued bonus, accrued
  electricity and accrued transportation which were in line with the
  higher cost curve in 2012. Moreover, we enhanced cash management
  effectiveness to maximize benefit of supplier’s credit terms. The
  Company has also managed cash cycle with our business alliances which
  resulted in shorten days receivable outstanding.

  Investments

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  Property, plant and equipment net value was Baht 15,234 million or 54%
  of the total assets, registered an increase of Baht 471 million or 3%
  which was due to the acquisition of property, plant and equipment
  totaling Baht 1,900 million offset by Baht 1,429 million of
  depreciation, transferred out, and disposal of assets during the
  financial year 2012. Key investments in 2012 are in respect of the
  followings:

  - 3rd line of fiber cement business in Thailand and a new plant in
  Indonesia – Baht 96 and 344 million respectively

  - Refurbishment of a mothballed kiln – Baht 179 million

  - Upgrade waste heat recovery plants – Baht 121 million

  We also invested in other projects for community, and improving our
  green technology such as INSEE Green Park “His Majesty’s 84^(th)
  Birthday Ming Mongkol Park”. Further investment noted in alternative
  fuel feeder system, aggregates quarries and plant expansion, new
  Ready-mixed concrete plants, and INSEE Mortar second production line.

  Intangible assets were increased from acquisition of aggregates
  concession in Suphanburi to secure resources for Company’s
  competitiveness.

  Other non-current assets was Baht 450 million which increased by Baht
  272 million or 152% mainly due to advance payments to suppliers

  Funding

  Outstanding debenture is falling due in June 2013 (due within 12
  months) was presented as current liabilities. The company issued
  4,000,000 units of unsubordinated, unsecured non discounted debentures
  with name-registered debenture certificates at the price of Baht 1,000
  per unit totaling Baht 4.0 billion on 16 June 2009. The debenture
  carries a 4-year tenor at a coupon rate of 4.50% per annum with
  interest payable semiannually.

  Loans from financial institution, amounted to Baht 1,037 million of
  which financing for investment in fiber cement business expansion in
  Indonesia Baht 467 million and 3^(rd) production line in Saraburi,
  Thailand Baht 300 million. The remaining amount relates to financing
  for normal operation.

  Dividend

  Dividend, the Company paid Baht 13 per share dividend to shareholders
  during the year 2012 which was the same amount as in 2011. Dividend
  payout ratio of 2012 is 82% of consolidated financial statements which
  is much higher than the Company’s dividend policy of 60%. The dividend
  amount of Baht 13 per share represents Baht 7 per share of interim and
  Baht 6 per share as final dividend.