MD & A

Explanation and Analysis of the Financial Position and Performance

Overall performance

The Company and its subsidiaries have operated the business of Automotive manufacturing parts. The main income of the company group is from selling automotive parts such as Axle shaft, leaf spring, disc brake, drum brake, stabilizer bar, coil spring etc. The sale is for car maker manufacturer (Original - Equipment Manufacturer) in the country mostly.

Profit and loss analysis

Profit Analysis

In the year 2017 and 2016, the Company has total income of 8,802 million baht and 8,397 million baht (accordingly) which has increased by 405 million baht or 5%. The net income from sale of goods and rendering of services for the year 2017 is 8,593 million baht, increased by 294 million baht or 4%. The overall automotive industry and agricultural machineries sector have been increased mainly from positive factors in exporting and domestic economic.

Cost and expense Analysis

Selling and Service Cost

In the year 2017 and 2016, the company has the total selling and service cost of 7,262 million baht and 7,062 million baht (accordingly), increased by 200 million baht or 3%; this can be explained by higher sale volume. Production efficiency improvement also contributed to higher profitability margin.

The expense from selling and service

In the year 2017, the company has the expense in the selling and service of management for the amount of 680 million baht, increased by 10 million baht or 1% due to the related expenses on the subsidiary’s business disposal. The cost control measures in administration expense including expense relating to employee and man-power was closely monitored to align with the current situation of automotive industry.

Corporate Income Tax

In the year 2017, the company has corporate income tax for the amount of 83 million baht, increased 35 million baht or 74% mainly from gain on sales of subsidiary’s business, subjected to corporate income tax at 20%, the higher sale volume and profit management in line with granted privilege from the Board of Investment.

Profit from the work operation

The company’s operating profit, excluding share of profit from investment in associates, financial cost, and corporate income tax in 2017 in the amount of 860 million baht, increased by 195 million baht from last year or 29% due to higher sale volume and gain on disposal of subsidiary’s business.

Net profit

The company’s net profit is the amount of 811 million baht, increased by 204 million baht or 34% from the previous year, mainly from the higher of sales volume and gain on disposal of subsidiary’s business.

Financial position analysis

Asset

According to the consolidated financial statement the total asset as at 31 December 2017 and 31 December 2016, are the amount of 9,572 million baht and 9,421 million baht (accordingly), increased by 151 million baht or 2% mainly from increasing of cash and cash equivalents and investments in joint venture while paid from the promoted business (BOI) for the whole amount. The interim dividends were paid on 2 Septem ber 2016 at the rate of 0.19 baht per share, totaling of 81 million baht. Thus, the remaining is at the rate of 0.41 baht per share, totaling 174 million baht, were paid to shareholders in May 2017.

As at 31 December 2017, the company’s capital structure consists of total liability for the amount of 3,152 million baht and the shareholders’ equity for the amount of 6,420 million baht; the debt-to-equity ratio is approximately 0.49 times.

Analysis of Cash Flow Statement

According to the consolidated financial statements as at 31 December 2017 and 31 December 2016, the company’s net cash inflow from operating activities is 1,532 million baht and 1,442 million baht (respectively). The company’s net cash inflow from investing activities is 174 million baht and the company’s net cash outflow from investing activities is 554 million baht (respectively).This is the result of cash received from transferred subsidiary’s business and the investment in production line, to enhance production capacity for the future customer demand. Net cash outflow from financing activities is 893 million baht and 817 million baht (respectively), which is the result of the repaid long-term loan for investment project for the amount of 754 million baht and the total cash dividend paid for the amount of 281 million baht.

Main factors and influence that might affect the work operation or the financial position in the future

The overall automobile industry in 2017 rise up mainly from domestic economic growth. The domestic sale volume is 0.86 million cars while the export sale volume is 1.12 million cars. In 2017, Thailand has remained as the base for pick-up car manufacture for worldwide export; as a result, the automotive manufacturing and parts continues to grow. In addition, the government‘s policy to promote domestic economic growth will be another reinforcement for raising automotive manufacturing and parts industry. Due to such factors, in 2018 the Company will be ready for outside and inside factors to invest in new technology and machines, invest in Research and Development to increase product value, and enhance production quality and engineering design to be cost competitive. Concurrently, the Company has managed its human resources based on “Somboon Triple Bottom Line” for the sustainability.