Ptl 12

ANNUAL REPORT 2011-2012

Con ten t04 Message from the Chairman

06 Board of Directors

07 The Board of Directorsû Report on its Responsibility to Financial Statements

08 Audit Committee Report 2011 - 12

10 Key Financial Indicators

11 Financial Highlights

12 General Information

15 Business Overview

43 Risk Factors

53 Future Projects

57 Legal Dispute

57 Shareholding Structure & Management

69 Good Corporate Governance & Internal Control

77 Financial Position and Operational Performance

98 Audited Financial Statements

134 Information of Director and Management of the Company

Polyplex receiving 2011 TPM Award

Polyester Film Plant in Thailand

Shareholdersû Company Visit - Febû 2012

POLYPLEX (THAILAND) PUBLIC COMPANY LIMITEDAnnual Report 2011-2012

PTL - SAVE THE EARTH INITIATIVES

Polyplex Participated in Japan - Pack2011 - Japan

Polyplex receiving award for çBest Under ABillion from Forbes Asiaé

POLYPLEX (THAILAND) PUBLIC COMPANY LIMITED

As anticipated, the polyester film industry retraced from historical highs of the previous year with margins

recalibrated to normalized levels. The inevitable rush of new capacity additions, concentrated mostly in

Asia, has created surplus capacity which would last for a while. Notwithstanding the comparison with

previous year profitability, the numbers for the year 2011-12 are quite respectable.

Sales at Baht 10.14 billion were lower by 9.30% as compared to the previous year reflecting the

compression in selling prices despite higher volumes. Profit after tax of Baht 1.36 billion was lower by

almost 65% over last year, but still a reasonable net margin on sales of 13.27%.

The Company remains upbeat about the plastic film industry and believes that the steps taken

to diversify risks associated with cyclical nature of polyester industry would contribute to maintaining

the growth tempo as well as a reasonable bottom line. Backed by a strong and liquid balance sheet, the

Company intends to continuously grow the business by judicious selection of opportunities.

The recent investments in CPP Film line and Silicone Coating Line and the development of other value

added Polyester film products are helping the Company diversify its product portfolio which would help

to bring in more stability in earnings. The investment in Thick PET line in Thailand, the Blown PP line

and expansion in capacity of the extrusion coating business are further steps to diversify its product and

market mix. The new thin polyester film line in USA is the continuation of the Companyûs policy to have

a geographically diversified manufacturing base which would help it to offer more value to its customers

and continue being a Global Leader in the Polyester Film business.

Mr.Manu LeopairoteChairman

MESSAGE FROM THE CHAIRMAN

Annual Report 2011-2012

Despite the sharp downturn in margins and a challenging outlook for the current year, the Company is

fully committed to the expansion projects announced in last 18 months. All the projects are progressing

satisfactorily and are expected to commence commercial operations on time. The total capital commitment

of the company on account of these projects exceeds USD 200 million which will double the companyûs

asset base in next 12 months. The start-up of these expansion projects in USA and Thailand is likely to

coincide with the reversal of current cycle and thereby benefit from improved market conditions.

Recognizing the need for significant equity contribution from the company towards the new projects, while

maintaining a healthy payout to its shareholders, the Directors have proposed total dividend of THB 0.52

per share for the FY 2011-12.

The Company also realizes its responsibility towards the society and the environment it operates in.

Adherence to all the environmental norms and striving to improve upon them is a key focus area of the

company. Also the Company undertakes various CSR activities throughout the year in a bid to do its part

in helping the society and preserving the environment.

I, on behalf of the entire Board of Directors, would like to thank all the Stakeholders and the valued

business partners for their continued support and belief in us, without which the transformation of the

Company from a local producer to a Global leader would not have been possible.

MESSAGE FROM THE CHAIRMAN

Dr. Virabongsa Ramangkura, Ph.D.Director and Member - Audit Committee

Mr. Shiraz Erach PoonevalaDirector and Member - Audit Committee

Mr. Pranay KothariDirector

Mr. Ranjit SinghDirector

Mr. Praphad PhodhivorakhunDirector

BOARD OF DIRECTORS

Mr. Manu LeopairoteChairman - Board and Audit Committee

Mr. Sanjiv SarafVice Chairman

Mr. Rohit Kumar VashisthaManaging Director

7

The Board of Directors' Report on its Responsibility to

Financial Statements

To the Shareholders of Polyplex (Thailand) Public Co., Ltd.

In recognition of its duties and responsibilities and in compliance with good corporate governanceprinciples, the Board of Directors has ensured that the financial statements and financialinformation appearing in the annual report are accurate, complete and adequate. The financialstatements are in compliance with the generally accepted accounting practices in Thailand andfollow accounting standards and practices that are appropriate to the nature of business. Toensure reasonable confidence in using these financial statements, the Board has instituted andmaintained internal control systems, subject to periodic review by the Audit committee and reportedto the Board.

The company auditor has applied generally accepted auditing standards in auditing the companyûsfinancial statements for 2011-12 and is of the view that these financial statements present fairly,in all respects, the financial standing, results of the operations and cash flows for the company,in accordance with generally accepted accounting principles.

Mr. Manu Leopairote Mr.Rohit Kumar VashisthaChairman Managing Director

8Annual Report 2011-2012Polyplex (Thailand) Public Company Limited

Audit Committee Report 2011-12

To the Shareholders of Polyplex (Thailand) Public Co., Ltd.

Following the companyûs transformation into a public limited company on August 11, 2004,the shareholdersû meeting held on September 2, 2004 decided to constitute an Audit Committeecomprising of three independent directors with knowledge, expertise and experience in finance &accounting, industry and business. The appointees were Mr. Manu Leopairote (Chairman of theAudit Committee), Dr. Virabongsa Ramangkura and Mr. Shiraz Erach Poonevala.

The Audit Committee performed duties under the delegation of authority set out by the Board ofDirectors. Among the Audit Committeeûs responsibilities are to review the quarterly/annualfinancial results of the company, review and recommend expansion project proposals, supervisewhether the company was in compliance with the rules and regulations of the Stock Exchange ofThailand (SET) and Securities Exchange Commission (SEC), ensure the transparency of the account-ing system, review of internal control systems and promote good corporate governance practices.

In the financial year ended March 31, 2012, a total of four Audit Committee meetings were held.

The Committeeûs work can be summarized as below:1. Reviewed and approved the quarterly and yearly financial statements of the company and its

subsidiaries to ensure compliance with the generally accepted accounting standards anddisclosure of key information before proposing them for the Boardûs approval as also prior tosubmission to SEC and SET. After due consideration and discussion, it is the opinion of theCommittee that the above mentioned financial statements are presented fairly in accordancewith generally accepted accounting principles and sufficiently disclosed.

2. Reviewed and monitored the corporate compliance and internal control systems as also riskmitigation measures. The Committee believes that the companyûs internal control systemsare adequate.

3. Reviewed the disclosure of information on transactions between the company and its affiliatesor any transactions, which may have been perceived as potentially causing conflicts ofinterest.

4. Reviewed and approved Interim Dividend payment based on profitability for three monthsperiod ended on 30th June 2011

5. Reviewed and approved the Final Dividend payment for the financial year ended on 31st

March 20116. Reviewed and approved the Annual budget for financial year 2011-12 for the Company and

its subsidiaries.

9

7. Reviewed the new investment proposal i.e relocation of the PET Thin film line investmentfrom Turkey to USA and proposed it to the Board of Directors for their consideration andapproval.

8. Reviewed the new investment proposal i.e to invest in a PET Resin project in USA, alongwith the implementation of the PET Thin film line project and proposed it to the Board ofDirectors for their consideration and approval.

9. Reviewed the new investment proposal for a Peel & Stick (Blown PP) Project in Thailand andproposed it to the Board of Directors for their consideration and approval.

10. Reviewed the new investment proposal, to invest in second Thermal Lamination Film Projectin Thailand and proposed it to the Board of Directors for their consideration and approval.

11. Considered and recommended to the Board of Directors to re-nominate Mr. NarongPuntawong (CPA No. 3315) and/or Mr. Supachai Phanyawattano (CPA No. 3930) and/orMs. Siraporn Ouaanunkun (CPA No. 3844) of Ernst & Young to be re-appointed by theshareholders as the auditors of the Company for the FY 2011-12.

Name Position Signature

Mr. Manu Leopairote Board Chairman and Audit

Committee Chairman

Dr. Virabongsa Ramangkura Audit Committee Member

Mr. Shiraz Erach Poonevala Audit Committee Member


Key Financial Indicators

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

11

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2011-12 2010-11 2009-10 2008-09 2007-08

Progression (Thousand Baht)

Net Sales 10,143,111 11,183,174 7,125,366 6,859,738 6,398,679

Total Revenues 10,263,808 11,320,169 7,299,520 7,062,825 6,512,014

Gross Profit 2,311,548 4,680,656 1,731,011 1,800,785 1,422,910

Net Profit (Loss) 1,361,678 3,882,885 1,039,386 1,041,966 813,551

Total Assets 11,592,820 11,932,901 8,866,744 8,880,550 8,299,334

Total Liabilities 3,233,230 3,570,196 3,854,260 4,284,324 3,970,453

Total Shareholderûs equity 8,359,590 8,362,705 5,012,484 4,596,226 4,328,881

Financial Ratios*

Net Profit Margin (%) 13.27% 34.30% 14.24% 14.75% 12.50%

Return on Equity (%) 16.29% 58.26% 21.72% 23.44% 20.80%

Return on Assets (%) 11.58% 37.34% 11.71% 12.13% 11.51%

Per Share Data (Baht)

No. of shares 800,000,000 800,000,000 800,000,000 800,000,000 800,000,000

Dividend per share (Baht) 0.52* 1.94 0.52 0.52 0.40

Earnings per share 1.70 4.85 1.30 1.30 1.02

Par value 1.00 1.00 1.00 1.00 1.00

Note: Above figures and ratios are on consolidated basis (includes figures for the Companyûs subsidiary

in Turkey which had commenced operations in 2005/06 as also for subsidiaries in Singapore & USA

which are investment holding companies and subsidiaries in USA & China which are Distribution

companies)

* Interim Dividend of Bt 0.35 per share paid in August 2011 and Final dividend of Bt 0.17 per share

as proposed to the Annual General Meeting of Shareholders 2012 for their approval.

1. Financial Highlights


2.1 The company Polyplex (Thailand) Public Company Limited

Stock Exchange of Thailand symbol PTL

Registered Head office 75/26, Ocean Tower II, 18th Floor, Sukhumvit Soi 19,

Kwaeng North Klongtoey, Khet Wattana, Bangkok - 10110

Telephone (662) 665-2706-8

Facsimile (662) 665-2705

Factory -1 Siam Eastern Industrial Park, 60/24, Moo 3, Tambol

Marbyangporn, Amphur Pluak Daeng, Rayong - 21140

Factory -2 Siam Eastern Industrial Park, 60/91 Moo 3, Tambol

Marbyangporn, Amphur Pluakdaeng , Rayong 21140

Type of Business Manufacturer of Polyester Film (Plain and Metallized),

Polyester Chips, Extrusion Coated film and Cast

Polypropylene Film (Plain and Metallized), Silicone Coated

Film

Company registration number 0107547000729

Telephone (66) 38 891 352-4

Facsimile (66) 38 891 358

Website http://www.polyplexthailand.com

Registered Capital Baht 960,000,000

Common Shares 960,000,000 shares

Par Value Baht 1.00 per share

Paid-up Capital Baht 800,000,000

Number of Employees 749 including subsidiaries in Turkey, USA and China,

and 467 in Thailand.

2. General Information

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2.2 Subsidiaries in which the company holds more than 10% share

Company Name and Business Registered No. of shares % Type of

Address Type Capital held by the shareholding Shares

(shares) Company

Polyplex (Americas) Inc. Distribution 10,000,000 203,000 80.24% Common

12200 Ford Suite A-210 Company 5,000,000 800,000 96.15% Preference

Farmers Branch, Dallas,

Texas-75234

Polyplex (Singapore) Pte Ltd. Investment 100,000 100,000 100% Common

61, Club Street, Holding 300,000 206,150 100% Preference

Singapore-069436 Company

Polyplex Europa Polyester Film* Manufacturer 1,500,000 1,500,000 100% Common

Sanayi Ve Ticaret A.S. Avrupa of Polyester

Serbest Bolgesi, 132, Ada, Film &

7 Parsel, Velimese Mevkii, Polyester

Corlu, Turkey chips

Polyplex Trading (Shenzhen) Distribution $400,000** $400,000** 100% Common

Co. Ltd* Room.1309,A block, Company

Galaxy Century Building,

Caitian South Rd., Futian

District ,Shenzhen Peopleûs

Republic of China

Polyplex (Americas) Holding Inc. Investment 10,000 4,400 100% Common

Corporation Trust Center Holding

1209 Orange Street Wilmington, Company

New Castle County,

Delaware - 19801

Polyplex USA LLC*** Manufacturing **** $21,927,000 100% Common

3001 Mallard Fox Drive NW Company

Decatur, Alabama - 35601

* Indirect holding via PSPL

** $ 400,000 refers to the registered & paid up Share capital of Polyplex Trading (Shenzhen) Co. Ltd. There

is no concept of number of shares or par value per share in Peopleûs Republic of China.

*** Indirect Holding via Polyplex Americas Holding Inc.

**** There is no shares of Polyplex USA LLC. Capital contribution from PAH is termed as Members Unit and

it is 100% by PAH.

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2.3 Other references

(a) RegistrarName Thailand Securities Depository Co., Ltd.Address 62, The Stock Exchange of Thailand Building

4th, 6th-7th Floor, Rachadapisek Road, Klongtoey, Bangkok 10110Telephone (662) 229-2800, (662) 654-5599Facsimile (662) 359-1259

(b) TrusteeN/A

(c) Auditing FirmName Ernst & YoungAddress 33rd Floor, Lake Rajada Office Complex, 193/136-137 Rajadapisek road

Near Queen Sirikit National Convention Centre Bangkok 10110, ThailandTelephone (662) 264-0777Facsimile (662) 661-9190Auditors* Mr. Narong Puntawong (CPA No. 3315) and/or

Mr. Supachai Phanyawattano (CPA No. 3930) and/orMs. Siraporn Ouaanunkun (CPA No. 3844)

* Auditors of the company for the FY 2011-12

(d) Legal AdvisorsName Allen & Overy (Thailand) Co. Ltd.Address 22nd Floor, Sindhorn Tower III, 130-132 Wireless Road, Lumpini,

Pathumwan, Bangkok 10330, ThailandTelephone (662) 263-7600Facsimile (662) 263-7699Contact person Mr. Arkrapol Pichedvanichok

Ms. Somporn ManodamrongthamName Baker & McKenzie Ltd.Address 990 Abdulrahim Place, 5th floor and 22nd -25th Floors, Rama IV Road,

Silom, Bangrak Bangkok 10500, ThailandTelephone (662) 636-2000Facsimile (662) 636-2110Contact person Mr. Wittaya Luengsukcharoen

(e) Advisor or manager under management contractN/A

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3.1 Company profile and key changes and developmentsPolyplex (Thailand) Plc. (çPTLé or çthe Companyé) was incorporated as a private company onMarch 26, 2002 with an initial registered capital of Bt. 400,000 to manufacture and distributePET film (polyethylene terephthalate film or polyester film). The registered capital of theCompany was subsequently increased to Bt. 400 million in April/May, 2002. In August 2004,the Company was transformed into a Public Company and the IPO was subsequently made inDecember 2004. The Company is promoted by Polyplex Corporation Limited (PCL) based inIndia and engaged in the same business as the Company for more than 20 years. As on date,PCL has 51% stake in the Company through both direct and indirect shareholding and thebalance 49% is with the general public.

Past key changes and developments in the Company are as follows:March-April 2002 PTL was promoted by PCL, which is a listed company (on the

Bombay Stock Exchange as also National Stock Exchange) in India. PCLtook up 100% of the Companyûs registered capital of Bt. 400,000,000divided into 8,000,000 ordinary shares at a par value of Bt. 10 pershare and 32,000,000 preference shares at a par value of Bt. 10 pershare. PTL also acquired a plot of land with an area of 20 rai 22square wah at Siam Eastern Industrial Park in Rayong Province inorder to construct a factory for manufacture of PET film.

May 20, 2002 PTL was granted a promotion certificate by BOI for PET film (productionline 1) with an approved production capacity of 15,000 tons per year.

July-2002 to April-2003 The Company started construction of the factory in July-2002 andcompleted its plant construction and proceeded with machinery test-run in March, 2003 followed by commercial production from April 2,2003 when its first sale invoice was recorded.

March/April-2003 The shareholdersû meeting resolved for increase of registered capitalby another Bt. 260 million through issuance of 20,800,000 preferenceshares at a par value of Bt. 10 per share and 5,200,000 ordinaryshares at a par value of Bt. 10 per share to the existing shareholders

June 11, 2003 The Company was granted a BOI promotion certificate for production of● PET film (production line 2) with an approved production capacity

of 15,000 tons per year (now expanded to 19,500 tons per year).● PET resin with an approved production capacity of 26,250 tons

per year

3. Business Overview


September 11, 2003 The Board of Directors resolved for the purchase of another plot ofland adjacent to the existing land covering 8 rai 28.9 square wah areato produce PET resin which is the raw material in PET film production.

November 12, 2003 Commercial production and distribution began for film productionline 2.

December 13, 2003 The Company attained ISO 9001:2000 certification on qualitymanagement system.

May 31, 2004 The Company attained ISO 14001:1996 certification on environmentalmanagement system.

May to July-2004 The company received approval from the BOI for a restatement of theinstalled capacity of both its film production lines from 15,000 tons to19,500 tons each per year. The company also applied to the BOI forfurther increase in the production capacity of both the film lines to24,000 tons per year each given the significant productivity improve-ments and additional equipment commissioned by the company.

July 30, 2004 The shareholdersû meeting resolved for transformation of the Com-pany into a public company, write-down of par value from Bt. 10 to Bt.5 per share and increase of registered capital by Bt. 1,068 million tomake up a total of Bt. 1,728 million requiring issue of additional 213.6million ordinary shares. The allocation of the increase in capital wasas under:● 133.6 million Shares offered to Polyplex (Asia) Pte. Ltd. (PAPL),

a juristic person registered in Singapore, being a 100% subsidiaryof PCL, India.

● Up to 80 million shares at part value of Bt. 5 per share, makinga total of up to Bt. 400 million as public offering.

The meeting also resolved for establishment of a holding companynamed Polyplex (Singapore) Pte. Ltd.(PSPL), registered in Singaporeas a holding company to facilitate investment and business expansionin Turkey.

August 11, 2004 Registration was completed to transform the Company into a publiccompany.

September, 2004 Start up on PET resin batch plant in Thailand with an annualproduction capacity of 7,000 MT per annum.

September 2, 2004 The shareholdersû meeting resolved for decrease of registered capitalas under:

17

● Redemption of the entire 105.6 million preference shares worthBt. 528 million, currently held by PCL, by a capital reductionprocess.

● Cancellation of the unissued ordinary shares of Bt. 240 million,comprising of 48 million shares, which were to be subscribed byPAPL.

The combined reduction as above would make the total registeredcapital Bt. 960 million of which Bt. 560 million is paid-up.The shareholdersû meeting also resolved to reduce the par value ofthe shares from Bt. 5 per share to Bt. 1 per share to be registeredalong with the capital reduction.

November 15-16, 2004 ● Reduced the 105.6 million preference shares worth Bt. 528million, currently held by PCL, by a capital reduction process.The reduction make the registered capital Bt. 960 of whichBt. 560 is paid-up capital.

● Changed the par value to Bt. 1 per share

December 8, 2004 IPO of 240,000,000 shares at the price of Baht 6.90 per share.

February 22, 2005 PTL was granted a promotion certificate by BOI for Metalliser filmwith an approved production capacity of 7,500 tons per year.

February 22, 2005 Startup of Continuous Chips Plant with a production capacity of45,500 MT per annum.

April 19, 2005 & The company received approval from the BOI for a restatement of theApril 22, 2005 installed capacity of both its film production lines from 19,500 tons to

24,000 tons each per year as also for its Chips plant from 26,250tons to 52,500 tons per year

August, 2005 Start up of Metallizer Line 1 in Thailand with an attainable annualcapacity of 4,800 MT per annum.

December, 2005 Start up of Thin Pet film line 1 in Turkey implemented by subsidiarycompany with a production capacity of 24,000 MT per annum.

March, 2006 Metallizer start up in Turkey with a production capacity of 4,800 MT pa.

December, 2006 Start up of Pet resin plant in Turkey with a production capacity of45,500 MT per annum

March, 2007 PTL was granted a promotion certificate by BOI for Extrusion Coatingfilm project with an approved production capacity of 18,000 MT perannum for two production lines.


October, 2007 Board of Directors of PTL approved a Project for related productdiversification in CPP Film manufacture in Thailand.

November, 2007 Start up of Trial run of Extrusion Coating Plant

November, 2007 Total Productive Maintenance (TPM) policy adopted and rolled out byPTL to enhance productivity.

January, 2008 PTL was granted a promotion certificate by BOI for Metallised FilmExpansion Project with an approved production capacity of 8,700 MTper annum.

April, 2008 Commencement of commercial production of the Extrusion Coating line.

May, 2008 Commencement of commercial production of the Thin PET Film lineand the Metallised Film line in Turkey and also the Metallised Filmline in Thailand.

July, 2008 The OHSAS (Occupational Health and Safety Management Systems)18001:2007 certification was received for all the product lines

February, 2009 PTL was granted a promotion certificate by BOI for Cast Polypropylene(CPP) film project with an approved production capacity of 15,600 MTfor CPP plain and CPP Metallized film.

February, 2009 Board of Directors of PTL approved an Investment for setting up aTrading company in China.

May, 2009 Board of Directors of PTL approved an Investment in a SiliconeCoating line. The location was decided as Thailand in the Boardmeeting held in October 2009

September, 2009 The Trading company in China - Polyplex Trading (Shenzhen) Co. Ltdwas set up and capital injected through Polyplex (Singapore) Pte Ltd

March, 2010 Commencement of commercial production of the Cast Polypropylene line

May, 2010 Board of Directors of PTL approved the revival of the new thin PETfilm line investment, which was earlier approved by the Board in May,2008, but kept on hold due to the global economic crisis.

July, 2010 PTL was granted a promotion certificate by BOI for the SiliconeCoating film project with an approved capacity of 725 million sqm.

February, 2011 Board of Directors of PTL approved an Investment in a Thick PET filmline in Thailand.

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May, 2011 Board of Directors of PTL approved relocation of the Thin PET filmline investment from Turkey to USA.

July, 2011 Board of Directors of PTL approved an Investment in a Blown PP filmline in Thailand.

November, 2011 Board of Directors of PTL approved an Investment in the SecondExtrusion Coating line in Thailand.

March, 2012 The Silicone Coating plant started the commercial operations.

3.2 Shareholding structureThe current shareholding structure of the Polyplex group is:

Polyplex Corporation Ltd. (PCL)PCL, the parent company operating for over 20 years since 1988, is one of the majorproducers and distributor of plastic film in India selling in both the domestic and overseasmarkets. It has been listed for several years on Bombay Stock Exchange and other Exchangesin India. Itûs paid up capital is INR 319.8 million (about Bt. 184 million).

PCL has the following production capacities as at 31st March 2012:-

Product MT p.a

Polyester Film 55,000Polyester Chips 77,600Metallized Film 20,400BOPP Film 35,000

Polyplex Corporation LimitedINDIA

Polyplex Resins, Turkey

PAR LLC. USA

Polyplex Trading(Shenzhen) Co., Ltd.

CHINA

Polyplex (Singapore)Pte. Ltd. SINGAPORE

Polyplex AmericasHolding, Delaware. USA

Public/InstitutionalShareholders

Polyplex (America)Inc. USAPrivate Investor

Polyplex (Thailand) PublicCompany Ltd. THAILAND

Polyplex (Asia) Pte, Ltd.SINGAPORE

Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi TURKEYPolyplex USA LLC.Decatur, Alabama, USA

Outside Interest

Investment Company

Manufacturing Company

Distribution Company

100%100%

100%34.5%

49%80.24%

100%

100%

100%

100%

16.5%9.88%

9.88%

100%


Its direct and indirect shareholding in the Company aggregate to 51% of the latterûs paid upcapital.

Polyplex has also evolved an equitable policy for distribution of markets, for PET film business,between its Indian, Thailand and Turkey operations based on the several factors like productrange, delivered cost to customer, supply lead times and preferential duty access. Based onthe same, PTL would serve North America, South East Asia, Asia Pacific, China, Australia &New Zealand. PCL would serve South Asia, and South America. Turkey will serve, Europe,America, Middle East, Africa and CIS/Russian markets.

The Polyplex group also has a policy on future investments in polyester film / related areasbetween the Company and its parent company. Investments in India/SAARC region wouldbe decided and made by PCL and its other subsidiaries (excluding the Company) whileinvestments In Thailand / ASEAN region as well as other countries would be in all likelihoodbe made by PTL or the subsidiaries in which the Company has a major stake. The above issubject to availability of Investible cash / ability to borrow debt by the existing / preferredCompany as per the policy.

Polyplex (Asia) Pte. Ltd. (PAPL)PAPL was established as a 100% subsidiary of PCL in July, 2004 and is now a majorshareholder of PTL holding 34.5% as on 31st March 2012. PAPL was incorporated as aninvestment vehicle of PCL for its overseas investments (including PTL). The issued and paidup capital of PAPL as of March 31, 2012 stands at USD 1.13 million.

Polyplex (Singapore) Pte. Ltd. (PSPL)PSPL was established as a 100% subsidiary of PTL in July 2004, as a wholly ownedinvestment company. Subsequently, PSPL invested in Polyplex Europa Polyester Film SanayiVe Ticaret Anonim Sirketi (PE), through Share capital injection as well as by extendingsubordinated loans, to set up a manufacturing factory in Turkey so as to serve the demandin European and other proximate markets.

In September 2009, PSPL also set up a trading company in China, Polyplex Trading (Shenzhen)Co Ltd (PTSL) by investing $ 400,000 as share capital.

During the financial year 2011-12, PTL has redeemed USD 34.3 million of its PreferenceShares in PSPL, out of the funds received from PE, by way of loan repayment and dividend.The issued and paid up capital of PSPL (including Preference Share Capital) as of March 31,2012 stands at Euro 9.14 million.

Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi (PE)PSPL had incorporated a 100% owned subsidiary company, PE in Turkey for setting up aGreenfield polyester film plant to cater to the European and other proximate markets. Thecommercial operations started in December, 2005 with the start up of the first thin PET film

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line. The first Metallizer plant started production in March, 2006. The PET resin plantcommenced commercial production from December, 2006. The second thin PET film lineand Metallized Film line commenced commercial production in May 2008.The issued and paidup capital of PE, including Additional Contribution from PSPL, as of March 31, 2012 standsat Euro 8.84 million.

Polyplex (Americas) Inc.PTL acquired 80.24% equity stake in Spectrum Marketing Inc. (renamed as Polyplex(Americas) Inc) with effect from January 1, 2006 to enhance its distribution network in theNorth American market. PCL, PTLûs parent company also has a 9.88% stake while thebalance 9.88% is held by a foreign US-based shareholder. The issued and paid up equitycapital of PA as of March 31, 2012 stands at USD 1.265 million. Apart from this the PreferenceShare capital, which is owned by PTL (96.15%) and a foreign US-based shareholder (3.85%)stands at USD 4.16 million as on March 31, 2012.

Polyplex Trading (Shenzhen) Co. Ltd (PTSL)In the financial year 2009-10, PTL invested in the setting up of a wholly owned TradingCompany in Shenzhen, China, through its 100% held Investment Company in Singapore,PSPL. The decision to invest in the setting up of the Trading Company in China was astrategic initiative to establish the Companyûs presence in China, which is one of the largestand the fastest growing market in this industry. The issued and paid up capital of PTSL as at31st March 2012 is USD 0.4 million.

Polyplex Americas Holding Inc (PAH).During FY 2011-12, PTL invested in setting up a 100% investment holding company in USA.This company would be used to invest further in the manufacturing facilities within USA. PAHhas further invested in Polyplex (USA) LLC, a manufacturing facility which is currently underproject implementation phase. The issued and paid up capital of PAH (including the AdditionalPaid-In Capital) as on 31st Marchû2012 is USD 22 million.

Polyplex USA LLCPolyplex USA LLC was established in FY 2011-12 as a 100% subsidiary of PAH. The thinPET film line along with the PET Resins plant project is being set up under this companyin Decatur, Alabama. This project is the first manufacturing base of Polyplex in USA. Themembersû contribution which represents the paid up capital as on 31st Marchû12 is USD21.9 million.


Others,3%

Turkey,7%

Europe, 27%

Asia, 26%

North America, 27%

Thailand, 9%

Others,3%

Turkey,7%

Europe, 27%

Asia, 26%

North America, 27%

Thailand, 9%

Consolidated Regionwise Film Sales FY 2011-12

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3.3 Revenue structure of the CompanyPTLûs standalone and consolidated sales value classified by regions is shown below:

STANDALONE 2009-10 2010-11 2011-12Customers Bt. million % Bt. million % Bt. Million %

ExportsAsia 1,354.06 40.15 2,288.39 44.74 2,220.06 45.72North America 443.51 13.15 955.65 18.68 809.00 16.66Europe 290.81 8.62 434.98 8.50 418.71 8.62Others 192.12 5.70 249.91 4.89 141.47 2.91Total exports 2,280.50 67.63 3,928.94 76.81 3,589.24 73.91Domestic Sales 584.03 17.51 1,013.33 19.81 915.31 18.85Sale of chips/others 1 310.12 9.30 38.46 0.75 56.09 1.16Total sales revenues 3,174.66 95.18 4,980.73 97.38 4,560.65 93.92Other revenues 2 160.69 4.82 134.26 2.62 295.32 6.08Grand total 3,335.35 100.00 5,114.99 100.00 4,855.96 100.00

CONSOLIDATED 2009-10 2010-11 2011-12Customers Bt. million % Bt. million % Bt. Million %

ExportsAsia 1,811.37 24.81 3,032.33 26.79 2,620.25 25.53North America 1,565.58 21.45 2,802.47 24.76 2,683.84 26.15Europe 2,169.96 29.73 3,464.45 30.60 2,745.07 26.75Others 357.92 4.90 289.04 2.55 396.93 3.87Total exports 5,904.84 80.89 9,588.29 84.70 8,446.09 82.29Domestic sales- PTL (Thailand) 584.03 8.00 1,013.33 8.95 915.31 8.92- PE (Turkey) 479.45 6.57 517.84 4.57 698.93 6.81Total Domestic sales 1,063.48 14.57 1,531.17 13.53 1,614.24 15.73Sale of chips/others 1 157.04 2.15 63.71 0.56 82.78 0.81Total sales revenues 7,125.36 97.61 11,183.16 98.79 10,143.11 98.82Other revenues 2 174.15 2.39 137.00 1.21 120.70 1.18Grand total 7,299.52 100.00 11,320.16 100.00 10,263.81 100.00

Note: 1) Sale of chips includes both domestic and export sales.2) Includes Exchange gain, miscellaneous sales, Export Incentive, interest received, etc.

23

3.4 Business GoalThe vision of Polyplex is to continuously grow, create value and establish global leadership inthe plastic film business through building trusted partnerships with Investors, Customers andEmployees. Keeping this vision in mind, Polyplex has been moving towards establishingitself as a Preferred packaging substrate provider as against just a PET thin film supplier, byundertaking expansions for manufacturing BOPP film and CPP film, which are other Packagingsubstrates used by Converters, in addition to PET thin film. The Thick PET film line announcedlast year by the Company was its first step into the Thick Film segment which would help indiversifying its product and customer portfolio. The second Extrusion coating line and a BlownPP line projects in Thailand would help in diversifying its product portfolio further.

The business goal is to increase market share in various regional markets - throughgeographically diversified manufacturing presence, increased market penetration in keymarkets and build a diversified portfolio of products like Metallized films, Clear films, ThermalLamination films, Silicone Coated film, Chemically Coated films, and other grades of packagingfilms like CPP, BOPP etc. During FY 2011-12, Polyplex announced to set up its firstmanufacturing base in USA, in the form of a Thin PET film line along with PET resin plant.This would help the company to increase its market share in American continent by movingcloser to the customers and becoming a preferred on-shore supplier as against an off-shoreor near-shore supplier in the past.

3.5 Promotion certificatePTL has been granted seven BOI promotion certificates, details of which are as below: -

S.No Certificate No. Type of business Date granted

1 1321(2)/2545 PET film 20-May-022 1287/(2)/2546 PET film and PET Resin 11-Jun-033 1159(2)/2548 Metallized Films 22-Feb-054 1261(2)/2550 Thermal Lamination Films 14-Mar-075 1044(2)/2551 Metallized Films 10-Jan-086 1110(2)/2552 CPP film (Plain and Metallized CPP) 4-Feb-097 1719(2)/2553 Silicone Coated Film 14-July-10

By virtue of the provisions of the Board of Investment Promotion Act B.E. 2520, the Companyhas been granted certain standard promotional privileges on the manufacturing and distributingthe polyester film/resin/Thermal Lamination film/CPP film/ Silicone Coated film as per thefollowing sections: 25, 26, 27, 28, 31, 34, 35(1), 35(2), 35(3), 36(1), 36(2) and 37 respectively.The Company must comply with certain conditions and restrictions provided for in thepromotion certificate. Details of the privileges of each of the above sections are available atwww.boi.go.th


3.6 Business Operations by each product linePTL is Thailandûs leading producer and distributor of Polyester thin film (Polyethylene TerephthalateFilm, also called PET film, sold under the Brand name ùSarafilû), with most of the companyûsproduction being exported to the foreign countries. PTL focuses mainly on 3 key segments -Packaging, Industrial and Electrical. PTLûs customers use the companyûs products as rawmaterial to produce their end-products which are then sold to their consumers. Some examplesof products made from PET thin film are Coffee/Tea bag, snack bag, softener bag, detergentbag, wire/cable wrap and hot stamping foil.

In April 2008, the company started manufacturing a downstream value added product calledùThermal Lamination filmû. This sold under the brand name ùSaralamû. In this product line, thePET film or BOPP film is used as the base film, and then extrusion coated with adhesive resinslike LDPE or EVA, based on the requirement of the end use application to be catered to.

In line with its objective of becoming a complete packaging solution provider, rather than justa thin PET film supplier, the company has in March 2010 started the manufacture of Castpolypropylene film. The company manufactures and sells plain CPP film & metallised CPP filmunder the brand name ùSaraCPPû.

In an effort to continue its objective of diversifying the product as well as the customerbase, Polyplex set up a Silicone Coating film line is Thailand which commenced commercialoperations in Marchû12 under the brand name ùSaracoteû.

A project for manufacture of Thick PET film is under implementation in Thailand and isexpected to start commercial production in Q1 of FY 2013-14. Some of the commonapplications of Thick PET film are as under:

25

3.6.1 Product DescriptionThe range of products offered by the company is as under:A.) Transparent thin PET films which can divided into 5 sub-categories

● Plain● Corona or chemically treated● High adhesion films● Ultra clear films● Co-extruded films

B.) Metallized PET films● Semi Metallized film (low Optical density)● High barrier films

C.) Specialty Films● Twist films● Anti static films● Heat Sealable films● Isotropic Films, High Friction Films, etc● Matte films● Thick films

D.) Thermal Lamination Film● Gloss PET Thermal Film● MATTE PET Thermal Film● BOPP Thermal Film● Metallized Thermal Film

E.) Cast Polypropylene film - Product range:● Lamination & Conversion grade film

- Transparent film for lamination & surface printing- High hot tack film for candy packing

● Metallizable grade film - Transparent heat sealable film for vacuummetallization

● Twist grade film● Retort grade film

F.) Siliconized PET Films (Under the brand name ùSaracoteû) in Plain, Matte, andMetallized are used in various applications such as:● Shingle roofing tapes● Release liner in pressure sensitive labels.● Release liner in pressure sensitive adhesive tapes.● Release liner in medical and hygiene products.


3.6.1.1Characteristic Producta) Characteristic of PET film

PET film characteristic properties are as follows:● Optically brilliant, clear appearance● Excellent mechanical strength and toughness● Good dielectric properties● Good flatness and coefficient of friction (COF)● Tear-resistant and puncture - resistant characteristics● Excellent dimensional stability over a wide range of temperatures● Very good resistance to most common solvents, moisture, oil, and

grease● Excellent barrier against a wide range of gases

PET film can also be modified with varying degrees of shrinkage, opacity &colors and different surface textures for it to be used over a wide range ofapplications.

A wide range of chemical treatments (in addition to corona) can be appliedto PET film during its manufacture to help it adhere to various coatings.

b) Characteristics of CPP Film● Excellent Heat sealing properties/ High heat resistance● Exceptional Optics● Good dimensional stability and barrier properties● Excellent printability● Metallized CPP - Significantly increases barrier properties

c) Characteristics of Thermal Lamination Films● High gloss & stiffness provide longevity to laminated media● Coated adhesive forms inseparable bond with inks/papers● Surface is conducive to add-on processes like Hot stamping, UV

coating● Improves visual appeal of product

3.6.1.2 End Use segmentThin PET film can be used in the following 3 key segments● Packaging - Clear and Metallized thin PET film can be used as part of

the outer layer and middle layer of the flexible packaging such as coffeebag, snack bag, softener bag, and detergent bag.

● Industrial -Comprising of Hot stamping foils, flexible air-conditioning ducts,labels /ID cards, lamination products and many more.

● Electrical - Wire and cable wrap, membrane switches, flexible printedcircuits, capacitors and motor insulation.

27

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

Thermal Lamination films mainly cater to the following applications:● Thermal Lamination of documents or printed media● Reflective Insulation● Flexible packaging● Rigid packing using printed corrugated carton board

CPP films can be used in the following key segments:● Packaging - CPP film is used as the inner most layer in food packaging,

due to its excellent heat sealing properties. It may also be used in Textilepackaging, packaging of health care products/ consumer products etc

● Industrial - Hot fill bags & liners, Industrial adhesive tapes, Interiorautomotive trim panels etc

The segmental break-up of revenue (PTL Standalone and Consolidated) fromFilm sales (Plain & Metallized PET films, Thermal Lamination/ Silicone CoatedFilms and CPP film) are as follows:

STANDALONE SALES 2009-10 2010-11 2011-12

Segment Bt. Mn % Bt. Mn % Bt. Mn %

Packaging Use 2,407.62 84.05 3986.67 80.66 3,529.79 78.36

Industrial Use 456.92 15.95 955.61 19.34 974.77 21.64

Electrical Use 0.00 0.00 0.00 0.00 0.00 0.00

Total Film Sales 2,864.54 100.00 4,942.28 100.00 4,504.55 100.00

CONSOLIDATED SALES 2009-10 2010-11 2011-12

Segment Bt. Mn % Bt. Mn % Bt. Mn %

Packaging Use 5,465.07 78.43 8,298.90 74.63 7,651.23 76.05

Industrial Use 1,369.20 19.65 2,666.52 23.98 2,319.52 23.06

Electrical Use 134.05 1.92 154.04 1.39 89.57 0.89

Total Film Sales 6,968.32 100.00 11,119.47 100.00 10,060.33 100.00

Note: 1) Sales of Thermal lamination film by Thailand are included in 2 segments i.e. Packaging

segment and Industrial segment, depending on the end use application of each type of

product sold.

2) Sales of CPP film by Thailand are included in the packaging segment, as the company

is currently catering only to this segment.

3) Sales of Silicone Coated film are included in the Industrial application.


3.6.1.3Products with similar propertiesIn certain applications like graphics and magnetic recordings, substituting PET filmwould result in compromising performance characteristics of the product (e.g.,strength, flatness, clarity, tear resistance, thermal stability and chemical resist-ance). However, in other applications, for which certain PET film performancecharacteristics may not be needed, PET film competes with a wide variety ofsubstitute materials. These applications tend to fall in the low end of the productrange, where other plastic films (e.g., polyvinyl chloride, polypropylene, andpolyethylene films) and paper may be considered as lower-priced substitutes.Applications for which a variety of substitute products may exist are primarilypackaging and general-purpose industrial applications.

BOPP Films (Biaxially Oriented Polypropylene) is one such close substituteproduct type, which is comparable in terms of its broad physical and mechanicalproperties to Polyester films. However, there are pros and cons of using PET filmor BOPP films and depending upon the application requirements, a choice of thesubstrate would be made. As a result of this, both PET films and BOPP filmshave largely demarcated pockets where one is preferred over the other.

A Comparison of BOPP Films and BOPET (Polyester) FilmsPolyester film is considered as the premium plastic film in the flexible packagingindustry. This is also reflected by the difference in the volume of the two products.

Features BOPP BOPET

Water vapour barrier Excellent FairGas barrier properties Poor ExcellentBreak down voltage Poor ExcellentMachineability Fair ExcellentPrintability Fair ExcellentSuitability for metallising Poor ExcellentDensity (gm/cc) Low (0.91) High (1.39)Strength Fair ExcellentTemperature Sensitivity Poor Excellent

Consolidated Segmentwise Film Sales FY 2011-12ElectricalUse, 1%

Packaging Use, 76%Industrial Use, 23%

ElectricalUse, 1%

Packaging Use, 76%Industrial Use, 23%

29

Polyester film when stretched in both directions gives excellent dimensionalstability, gas barrier properties, break-down voltage etc. BOPP, despite stretchingremains a ùlimp filmû. Polyester film has better handling capabilities for fluctuationsin temperatures etc. and is therefore also preferred in the less sophisticatedmarkets. In tropical countries PET is also preferred due to its moisture andoxygen barrier properties. In addition products where aroma retention is importantrequire the use of PET; e.g. coffee, tea.

On the other hand, the low density of BOPP (0.91 Vs. 1.39 for PET) makes it aùcheaperû alternative in packaging. However, the advantage of density is to someextent offset by the need to typically have a thicker film when using BOPP ascompared to PET for the same application. Further, since PET is not ordinarilyheat sealable, BOPP is preferred in heat sealable applications.

All over the world BOPP and PET have established their respective segments inthe packaging market and overlap is insignificant. Even in times of decline inBOPP selling prices few years back, there was no visible impact on the growth inPET films consumption. This establishes the limited substitutability between thetwo products.

3.6.2 Business StrategyKey elements of the strategy are:● Attain cost leadership by way of capacity expansion and vertical integration.● Capture high growth markets and build good customer relationship.● To build strong global delivery capabilities with a judicious mix of on-shore, near-

shore and off-shore strategy.● Further broad base the product portfolio by investing in upgrading technical and

R&D capabilities.● Concentric and related diversification to bring stability in earnings.● Consolidate market position in key geographic locations.Moving in this direction, the following initiatives have been taken by the Company in thepast and are planned for future:● The setting up of 2 successive Thin PET film lines in Thailand was the first step

towards achieving cost leadership position along with diversification of customerbase.

● With the start up of the second Thin PET film line in Turkey in May 2008, thesubsidiary has an even stronger cost effective production base to service itsexpanding customer base in Europe, Middle East, Africa & CIS/Russia.

● Backward integration into the manufacturing of PET chips has strengthened thecost structure of the Company in Thailand and also of the subsidiary in Turkey.


● With the Extrusion Coating plant in April 2008 and the additional Metallizers inThailand and Turkey in May 2008, the Company has been able to significantlyincrease the share of value added products, in its sales portfolio thereby improv-ing its profitability on the whole.

● As a part of its strategy of concentric diversification, the Company has set up aCPP film manufacturing line in Thailand in March 2010. This has helped theCompany to establish itself as a complete packaging substrate provider.

● The new project to manufacture Silicone Coated film in Thailand will help theCompany to increase its presence in new product segments and thereby reducethe impact of the cyclical nature of the Thin Polyester Film industry.

● Various types of customer engagement initiatives by the Company have helped itto not only retain key customers, but also increase its customer base across theglobe. The wide network of distributors and agents has helped the Company togain access to all key markets of the world.

● The parent company in India has set up a dedicated Research and Developmentcenter which works closely with key customers, including end users of convertorsto develop specialty and innovative products.

● The Companyûs decision to invest in a new PET Thin film line in USA is anotherstep towards geographically diversifying its manufacturing base. This would helpthe Company to participate in the growth in the flexible packaging segment in theAmerican region and increase its market share substantially.

● The second Extrusion coating line in Thailand would help the Company toincrease its market share in this industry as well as further diversify its productportfolio.

● The Blown PP line would help Polyplex to enter into the Silicone coated PP filmmarket.

3.6.3 Distribution ChannelThe Company distributes its products to both domestic and overseas markets, with mainfocus put on the latter.

The product distribution is being made directly to the end users using its own marketingarms in USA and in China as well as commission agents across the globe. The indirectchannel is mainly through distributors in designated areas. The sales through distributorsand commission agents help support and even boost the sale volumes as these distribu-tors and agents are in close proximity of the target markets, hence allowing for closerservice provision to the customers with rapid delivery, and also better market penetrationto access small customers.

Value of total film sales to end users and distributors are as follows. Sales made throughcommission agents are included in ùEnd Usersû segment.

31

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○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

STANDALONE SALES 2009-10 2010-11 2011-12

Customers Bt. Mn % Bt. Mn % Bt. Mn %

End Users 1,773.03 62% 2,986.43 60% 2,480.96 55.08%

Distributors 1,091.50 38% 1,955.84 40% 2,023.59 44.92%

Total 2,864.54 100% 4,942.28 100% 4,504.55 100%

CONSOLIDATED SALES 2009-10 2010-11 2011-12

Customers Bt. Mn % Bt. Mn % Bt. Mn %

End Users 4,391.10 63.02 7,375.54 66.33 6,792.27 67.52

Distributors 2,577.23 36.98 3,743.93 33.67 3,268.05 32.48

Total 6,968.32 100.00 11,119.47 100.00 10,060.33 100.00

3.6.4 Markets and competitive environment3.6.4.1Global Demand and supply

The growth in packaging has over the years shifted the production and usagepatterns of PET films. The Companyûs relevant segments of Packaging, Industrialand Electrical constitute 98% of the total demand and the traditional high-endtechnology segments like magnetic media and imaging segments are reduced toonly 2% of the total consumption due to technology transformation. Polyplexcurrently produces only thin PET films, which represents three-fourth of the overallglobal PET film demand. The Company has also decided to foray into the ThickPET film segment by putting up a manufacturing line in Thailand, which is underimplementation.

Better packaging not only improves the shelf life of the products but is alsoessential for improving product appeal in a highly competitive consumer goodsindustry. Flexible packaging also plays a key role in source reduction on theprinciple of ùuse less waste in the first placeû which has ensured higher-than-GDPgrowth in the flexible packaging industry across the globe. PET film, being ahigher-end substrate within packaging, has grown more rapidly than other substrates,growing at an average of about 8-10% per annum. Demand in packaging is quiteresilient as it relates to consumption of food products and consumer staples whichare to a large extent non-discretionary in nature. This moderated the impact of theglobal economic recessionary environment on the industry in 2008, as comparedwith some of the other segments like industrial and electrical which had beenimpacted more and had witnessed a contraction in demand in 2008. The revivalof demand growth in 2009 and 2010 has also been faster in the packagingapplication as compared to other applications of Thin PET films. 2011 witnessedsteady growth in demand in line with the expectation in the Thin PET films atabout 8%-9%.


An increase in the purchasing power in the developing countries has brought withit a large rise in the per capita consumption of packaging material. As a result ofthis, Asia (excluding Japan & Korea), is the largest market for PET films withalmost one-third of the PET films produced being consumed in this region. At thesame time, per capita consumption of packaging material in developing countriesis still very low as compared to the mature markets. The key drivers of demandgrowth in these regions are the increase in the share of organized sector, increas-ing consumerism, changing demographics and the resulting need for better andmore convenient packaging.

71%71%

2011-209810%10%

23%23%

Source: Company/ Industry estimates

A similar trend is also evident on the supply-side with most of the new capacitiesbeing added in low-cost developing countries. Most of the new capacity is alsofocused on the packaging segment, with an emphasis on high productivity andlow operating costs. This has adversely impacted the traditionally large producersof PET film operating with high cost structures, who have now been forced toconcentrate in the emerging niche technologies in PET films like films for LCDs,solar panels, touch screens and specific high-end applications within packaging.While trade defense measures like anti-dumping and countervailing duties are onthe rise in an increasingly competitive market environment, they are unable toaddress the inherent problems of unproductive assets operating in the developedcountries producing regular films.

During the year 2010, the Thin PET industry witnessed a Demand supplyimbalance scenario in favor of suppliers due to inadequate matching capacityadditions, new applications in Optical / Photovoltaic industry, demand growth ofabout 9% and closure of some old lines.

33

Due to the imbalance in demand-supply scenario, the selling prices of PET filmsmoved to historic highs. This in turn significantly improved the operating marginsof most of the manufacturers in this industry. These exceptionally high marginsattracted a lot of new investments in the Thin PET film industry. Most of thesecapacity additions started commercial operations towards the second half of 2011and first half of 2012. There are some more new projects, under implementation,which would commence production in the next 12 months.

As the capacity addition during FY 2011-12 has been much more than theincrease in demand, the current supply - demand situation is in favor of thebuyers with oversupply of PET films in the market. The current situation ofoversupply is expected to continue for another 12-18 months.

We expect global PET film growth rates to be at about 8-10% in the year 2012,with the demand in the South East Asian region growing at a higher rate of 10-12%. The overall capacity addition in FY 2012-13 is expected to be higher thanthe growth in demand but the actual timing of the additions will determine theduration of the current oversupply situation. Companies with consistent qualityproducts, diversified product portfolio, access to international customers and abetter supply chain model stand a better chance of participating in the marketgrowth and improving/maintaining their margins above the industry averages.

3.6.4.2Industry SituationGlobal competitionThe global Thin PET film manufacturers can be classified into 3 main categoriesby size of their production capacity:(i) World majors with production capacity of over 100,000 tons per year (e.g.

Dupont-Teijin, Mitsubishi and Toray, Cifu, Polyplex, Flex, Jindal etc).(ii) Mid-size players with production capacity between 50,000 - 100,000 tons

per year (e.g. Kolon, SKC, etc.) and(iii) Small / local producers with production capacity of less than 50,000 tons

per year

Demand for PET film for magnetic media application has been high in the past,prompting major producers to focus mainly on this segment. Competition in themagnetic media segment is thus confined only to these major ones based on theirlong and well established expertise and experience.

For other PET films including thin film, competition is seen among all groups ofproducers thanks to the consistently rising demand, especially for thin filmwhich is used in packaging, industrial and electrical segments where healthygrowth of demand has been recorded in the past. Thus small, mid-sized and


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○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

major producers (including Polyplex group) have expanded their capacity to copewith the increasing demand in these segments. This has led to the expectationof higher market share by producers in various countries which have surplusproduction capacity.

Domestic competitionThailandûs PET film market is of small scale as compared to the global PET filmmarket. As per our estimates, demand in Thailand is approximately 27,000 tonsper year with growth rate for 2012 expected to be about 8-10%.In the past,domestic producers have put emphasis on producing BOPP film rather thanany other types. PTL has principally focused on PET film since its inception inThailand and started with one PET film line, within nine months set up a secondline as well. Over the years, PTL has had several other expansions in filmcapacity i.e value added films like Metallized film, Thermal Lamination film,Silicone Coated film etc and related product diversification like manufacturingCPP film. The Company is in the process of setting up a Thick PET film line,Blown PP line and second Extrusion Coating line in Thailand. It is presentlyhaving the largest PET Thin film production capacity in the country.

The production capacities of the various plastic film producers in Thailand are asfollows:

Production line Thai Film A.J. Plast.PTL*

(tons per year) Industrials Plc. Plc.

BOPP film 107,000 66,000 -

PET film 3,500 31,000 48,000

CPP film 3,500 - **15,600

BOPA film - 18,000 -

Metallized film 7,000 10,800 16,200

Thermal Lamination film - - 9,000

Other coated films 3,000 - -

Total 124,000 125,800 88,800

Silicone Coated Film 725 Mn Sqm

Source: Form 56-1 of A.J.Plast Plc and T.F.I Plc

* PTL capacities are as approved by BOI. For actual attainable capacities, please refer

table below, under section ùProduction Capacityû

** Combined capacity p.a. as approved by BOI for CPP plain and metalized film

35

Most of PTLûs production is intended for exports while the other PET filmproducers have been more focused on the domestic markets. Despite thedisparity between domestic supply and demand, PTL does not foresee anyspecific threat due to its diversified sales portfolio.

Conclusion on PET film industryThe PET film industry has been expanding continuously in the past. The maindriving factor for the past five years has been the growth of the packaging,industrial and electrical segments. Meanwhile, PET film producers have boostedtheir capacity utilization and/or their production capacity aggressively to respondto the increasing growth of demand. During 2000-2011, global average capacityutilization of PET film manufacturers was in the range of 80-90% of rated ornameplate capacity, except in certain years where the utilization rate declined tobelow 80% due to excess capacity built up in the industry. The levels of 80-90%are considered a high utilization rate being close to the full machinery capacity. Inpractice, some producers can produce lower than the nameplate capacity due tothe long use and hence the poor condition of machinery while some can producewith capacity utilization even higher than 100% of the nameplate capacity usingnew and modern machinery and based on their long-time expertise andexperience.

3,000

2,500

2,000

1,500

1,000

500

-2000

86% 89% 91% 91% 89%

76%81% 81% 83% 86% 83%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

78%

Note: Data from industry sources/Estimates

Despite the rising demand for PET film, it is not easy for new entrants to competewith the existing players. It is because it is an industry that needs high levels ofknow-how, skills and expertise to ensure the exact product size, standard andspecifications required by the customers. Project management skills are alsoneeded to enhance efficiency and cost effectiveness that will lead to competitive-ness against other producers. Capacity expansion may be unavoidable to attainlarger size and hence economy of scale.


Polyplex group has accumulated over 23 years experience in the PET filmindustry. It has been strengthened with consistent expansion in productioncapacity. Its management is highly competent. Delivery of products is efficient byhaving geographically distributed production bases and a widely spread sales anddistribution network that allow for easy access to the customers.

The emphasis on the countries with high demand growth potential, production andcost effectiveness and concentrating on business segments such as packaging,industrial and electrical segments which have recorded healthy growth all alonghas contributed to the Polyplex group becoming one of the Top 5 producers ofthin PET film (excluding capacity for magnetic media).

In view of tariff barriers imposed by importing countries such as anti-dumpingand anti-subsidy duties, the Companyûs parent company based in India hasexperienced such threat from both the EU and the USA several times. It has thusbeen keen on the issue, having information on the criteria and inspection processadopted by those countries and knowing how to deal with the problem. It is anoutcome of the understanding of the process, that USA has levied zero duties tilldate under the anti-dumping measure against the parent company.

As regards Thailand, an Anti Dumping petition was launched by the USAmanufacturers of PET film against PET imports from 4 countries i.e. China, Brazil,Thailand and UAE in September 2007. In the final determination by theInternational Trade Commission (ITC) in October 2008, a negative injury rulingwas given in favor of Thailand, whereas the anti-dumping duty rates were notifiedagainst the other countriesû imports.

In March-2007, the Government of Brazil had initiated an anti dumpinginvestigation against Thailand besides India, against imports of PET films intoBrazil. The company as also its parent company in India had fully cooperatedwith the same and submitted their detailed questionnaire responses. As a finaloutcome of this investigation, an Anti Dumping duty of about 28 cents/Kg onimports from Thailand to Brazil and about 9 cents/Kg of Anti Dumping andCountervailing Duty on imports from India to Brazil has been levied. The Companyûsexport sale to Brazil is insignificant as compared to the total sales volumes. Assuch, the adverse fall out of the investigation by the Government of Brazil hashad a minimal impact on its sales.

In December 2010, the Government of Brazil initiated an anti dumpinginvestigation against UAE, Mexico and Turkey, in respect of PET film importsinto Brazil. The companyûs subsidiary in Turkey (Polyplex Europa) co-operatedfully during the investigation and submitted all the required information with

37

the authorities. In the final determination, the government of Brazil imposedanti-dumping duty of USD 67.44 / MT on Polyplex Europa, which is the minimumrate as compared to the rates announced for other countries as well as otherproducers in Turkey. Polyplex Europaûs exports to Brazil are not a very significantportion of their overall sales volumes and as such, the management does notexpect any major impact from the anti-dumping margin imposed.

The company is undertaking all the safeguards to insulate against the risk arisingout of anti-dumping duties and other protective barriers imposed by the importingcountries.

Outlook for the PET film industry:● Global demand for Thin PET films is expected to grow at a CAGR of 8-10%

over the next 4-5 years.● Demand growth for the products in the Flexible Packaging segment in the

South East Asian region is expected to be about 10-12% in 2012.● Mid size and new producers would increasingly look to diversify their

product range from commodity grades to specialty grade films to improvemargins.

● Addition to global capacity during the next 1 year is expected to be higherthan the growth in the demand, and hence the current situation of oversupply is expected to remain for another 12-18 months

● New entrants from China have been increasingly dominating the market forPET film in the last 2-3 years, but their production is expected to mainlyfulfill domestic demand which is growing rapidly.

● The cyclical nature of the industry would continue.● Dominance of the existing 3-4 large producers with market share of about

25-35% is likely to continue though with a reducing share. However,decline in their traditional market segments and slower growth in theirhome markets has constrained their ability to improve their PET filmoperations. Lowering production cost through acquisitions and jointventures with low-cost Asian countries, rationalization of capacity andcontinued emphasis on technology intensive niche products could be animportant strategic response.

● The transitioning of the industry to Asia would pose higher competitivepressure in the years to come.

● Increasingly, the larger producers are trying to tie up strategic partnershipsor acquisitions in order to ensure growth, presence in diversified markets orproducts or even as a measure to acquire technology for newer andsophisticated product range.


3.6.5 Manufacturing of product3.6.5.1Production

PTL is having 3 plots of land, one at No. 60/24 Moo 3, Siam Eastern IndustrialPark, Rayong Province, with an area of 28 rai 50.9 square wah, the second oneis located opposite to this plot, at 60/91 Moo 3, Siam Eastern Industrial Park,having an area of 35 rai, 2 nang, 54.80 square wah and the third plot is adjacentto the first plot in the same industrial park and having an area of 35 rai, 2 Nangand 66.5 square wah. The Companyûs PET thin film lines, Metallized film linesand the Polyester Chips plant are located on the first plot of land. The ExtrusionCoating line, the Cast Polypropylene (CPP) line and the Silicone Coating line areon the second plot of land. The second Extrusion coating line and the Blown PPline would also be set-up on plot number 2. The Thick PET film line with the Resinplant would be constructed on plot number 3.

3.6.5.2Production capacityPTL currently has two PET film production lines, two Metallized film lines, oneContinuous Processing PET resin manufacturing plant, one Batch processing PETresin plant, one Extrusion Coating line, one CPP plain, one CPP metalized filmline and a Silicone Coating line. Capacity of Polyplex group as on 31st March2012 (including ongoing projects) is as follows:

Note : BF = Base FilmMF= Metallized FilmCF= Coated Film

PET - Thin PET - Thick BOPP CPP Blown PP Metallizer Coated Film

Polyplex Group Capacity

BaseFilm

RawMaterial

35,00

055

,000

77,60

0

20,40

0

42,00

028

,800

10,00

04,6

45

80,50

0

15,20

0

58,00

0

57,60

0 11,00

0

31,00

0

57,60

0

8,600

160

CoatedFilm

Min Sqm

865

Min Sqm

MF

India

Base

Film

, Raw

Mat

eria

l and

Met

alliz

er (i

n to

ns)

Thailand Turkey USA

BaseFilm

RawMaterial

CoatedFilm

MF BaseFilm

RawMaterial

MF BaseFilm

RawMaterial

MF

39

Product Type India Thailand* Turkey USA Total Unit

PET Thin Plain Film 55,000 42,000 58,000 31,000 186,000 MT

PET Thick Film - 28,800 - - 28,800 MT

PET resin 77,600 80,500 57,600 57,600 273,300 MT

Metallized Film 20,400 11,000 11,000 8,600 51,000 MT

BOPP Film 35,000 - - - 35,000 MT

CPP Plain Film - 10,000 - - 10,000 MT

CPP Metallized Film - 4,200 - - 4,200 MT

Blown PP Film - 4,645 - - 4,645 MT

Thermal Lamination Film - 265 - - 265 Mn Sqm

Silicone Coated Film 160 500 - - 660 Mn Sqm

* Capacities for Thailand above are attainable capacities and capacities approved by

BOI based on theoretical output are higher. For BOI approved capacities in Thailand,

please refer table above under section ùDomestic competitionû.

The above table includes the capacities for the projects under implementation atThailand and in USA.

The capacity utilization rates for the Plain PET film lines PTL Standalone andConsolidated are as follows:

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

43,00042,00041,00040,00039,00038,00037,00036,00035,00034,000

120%

100%

80%

60%

40%

20%

0%2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Production (MT) Capacity Utilization (%)

38,199

101% 101%

36,877 36,847

39,989

PET Film Production & Capacity Utilization - Standalone

37,950

40,764

98% 95% 94% 95%90%

97%

42,420 42,446

100,00090,00080,00070,00060,00050,00040,00030,00020,00010,000

-

120%

100%

80%

60%

40%

20%

0%2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Production (MT) Capacity Utilization (%)

38,199

95% 94%

41,820

60,32066,748

PET Film Production & Capacity Utilization - Consolidated

78,032

92,197

98%91% 89%

94% 81%

92%

95,296 94,457


3.6.5.3Major raw materialsPET resinPET Resin (polyethylene terephthalate resin) is the major raw material in theproduction process for PET films. It has been the strategy of Polyplex to produceits own Resins at all the manufacturing locations. Accordingly every location hasits own Resin plant with sufficient capacity to meet its requirement.

Purified Terephthalic acid (PTA) and mono ethylene glycol (MEG):The major raw materials for PET resin production are purified terephthalic acid(PTA) and mono ethylene glycol (MEG). To ensure uninterrupted procurement ofraw materials the Company has currently tied up with one local supplier each forPTA and MEG for PTL. The subsidiary in Turkey is importing PTA from Europeand MEG from Middle East.

The company enters into Annual contracts as per which 100% of the companyûsrequirements would be supplied as per the specified price formula throughout thecontractual period(s).

Major Raw materials for the Extrusion Coated Film production:Apart from PET film, which comes mostly from the companyûs in houseproduction, the major raw materials for the Extrusion Coated film production areBOPP base film and Coating chemicals such as LDPE and EVA. The companyhas been meeting its BOPP film requirement by procuring the same from a localmanufacturer as well as importing it from Korea / other ASEAN countries. Thecoating chemicals i.e LDPE and EVA are being imported from purchased locallyas well as imported from Malaysia and Korea respectively.

Major Raw materials for the Cast Polypropylene Film production:The major raw materials for the Cast Polypropylene film production areHomo Polymer and Co-Polymer. Homopolymer is being procured locally whileCo-Polymer is being imported from Singapore. The company continues to lookout for alternative sourcing options and would decide on an appropriate rawmaterial procurement strategy for this product line, based on relevant factorssuch as pricing, quality, delivery lead time etc.

41

The value chain for the Companyûs PET & CPP film business is depicted below:

The value chain for Thermal Lamination film is given below:

NATURALRESOURCES

Natural Gas

OilPolyplexûs area of operation

RAW MATERIALS PLASTIC AND INTERMEDIATEPRODUCTS

ENDPRODUCTS

BASICPETROCHEMICALS

Ethylene MEG

PereXylene

PTA

Polypropylene

PETResin

PPResin

COATI

NG

METALLIZI

NG

BASE

FILMS

INDUSTRIAL

BUYERS

&

CONVERTERS

RAWMATERIALS

PLASTIC AND INTERMEDIATEPRODUCTS

Polyplexûs area of operation

PET/BOPPFILMS

EVA/LDPE

EXTRUSI

ON

END

CUSTOMERS

PRI

NTERS

/

LAMI

NATORS

COATI

NG

PROCESS

FILM

THERMAL

LAMI

NATI

ON


3.6.5.4Impact on the environmentThere is a negligible impact on environment caused from the polyester filmproduction process since PET in both film and resins are generally recyclable.For its Polyester resin line, it has the required EIA approval and submits regularreports required as per EIA approval to the concerned authorities.

Since its commencement of production in March 2003, PTL has not faced anysignificant problems relating to the environment. Inspection by the IndustrialFactory Department has been undertaken on a regular basis, the result ofwhich has come out that the Companyûs manufacturing process poses noenvironmental impacts.

All our product lines in Thailand have the following certifications:● ISO 14001:2004 certification on Environment Management system● ISO 9001:2008 certification on Quality Management system● OHSAS 18001:2007 certification on Occupational Health and Safety

Management system● ISO 22000:2005 certification on Food Safety standards● TPM Excellence Award (Category A)

All our product lines in Turkey have the following certifications:● ISO 14001:2004 certification on Environment Management system● ISO 9001:2009 certification on Quality Management system● OHSAS 18001:2007 certification on Occupational Health and Safety

Management system● BRC/IoP - certification on Global Standard For Packaging and Packaging

Materials (For Plain and Metallized Film lines)

43

Before making a decision to invest in the shares of the Company, investors should prudently considerthe information about risk factors described in this section and all information contained herein. Apartfrom the said risk factors, there are still other unpredictable risks that may adversely impact theCompanyûs operating results.

The key risk factors are:4.1 Industry Cycle

The industry cycle of PET film hinges on the spread between the PET film price and the pricesof PTA and MEG which are major raw materials. Whenever the demand supply balance favorsthe suppliers, the PET film and raw material price spread usually widens, thereby encouragingthe manufacturers to increase production by expanding their capacities. On the contrary, if PETfilm supply is larger than market demand, the film price will drop, hence narrowing the spreadbetween the film and raw material prices. This cyclical nature will inevitably affect everyproducerûs revenues and profits. To illustrate such cyclical impact, the movement of profitbefore tax/sales of PTL (Consolidated), is shown in comparison with that of the prices of PETfilm and raw materials, as below:

Comparison of profit before tax as a % to sales, of PTL on a consolidated basis, withprices of PET film and raw materials (Consolidated - Average for PTL-Thailand andPE-Turkey)

4. Risk Factors

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

13.78%

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

37.07

73.68

46.98

84.67

39.07

74.48

43.75

68.62

39.44

70.52

37.91

73.48

35.17

60.41

37.83

97.21

47.88

75.18

Source: Company information


The cyclical behavior can be seen in the above data of the last 9 years, which has directimpact on the operating results of PET film producers as well as Polyplex.

To mitigate such risk, the Company has sought to undertake the following:● With high productivity levels and cost control measures, Polyplex believes it is one of the

lowest cost producers of polyester film in the world which will help it deliver betterfinancial results than the other constituents of the industry.

● Diversify its product portfolio by introducing new products like Extrusion Coated Film(project implementation underway for a second Extrusion Coated film line and expectedto start in Q1 of FY 2013-14), Cast Polypropylene Film), the Silicone Coating Line(which has commended commercial production in March 2012), Thick PET Film(project implementation underway and expected to start in Q1 of FY 2013-14) to mitigatethe risk of over dependency on a single product and single industry.

● Accessing customers operating across the globe in the flexible packaging and industrialsegments by presenting alternative sourcing options from its existing manufacturinglocations in India, Turkey and Thailand and going forward, from the new manufacturinglocation in USA where a PET thin film line project is being implemented and itswarehousing & distribution set up in US and China, thereby mitigating the risk of overdependency on few customers.

● Diversified manufacturing and distribution base helps to mitigate the risk of volatilemarkets. For Eg: South East Asian markets are quite volatile in nature, whereasdeveloped markets of US, Europe, Japan etc are less volatile. Polyplex tries to mitigatesuch risks by having a diversified sales portfolio.

● Increased focus on new product development through R&D or technology acquisitionsbesides creating a strong technical services team are likely to be additional differentiatorsbetween Polyplex and its competition

4.2 Risks relating to uncertainty in prices of the product and raw materialThe basic raw material for production of PET film is PET resin, which is in turn produced fromPurified Terephthalate Acid (PTA) and Mono Ethylene Glycol (MEG).

Since the cost of resin is the single largest component of the total production cost ofPolyester film, the fluctuation in the resin price may hurt the Companyûs operating marginsdepending upon the ability of the Company to pass the increase in costs to its customers.As selling prices are usually negotiated on a monthly / quarterly basis, in a balanced demandsupply situation, PTL is usually able to adjust the selling prices following any changes inthe PET resin cost and other operating costs.

45

The above graph of historic Selling price and Raw material price movement demonstratesthe correlation between the raw material cost and the selling prices. In most of the yearsthe movement in the selling prices have been following the trend of the raw material costexcept for years where other factors influenced the prices like 2006-07 (down cycle in PETfilm industry due to imbalance in supply demand situation), 2008-09 when the world economieswent through a turmoil and in 2010-11 where due to shortage in supply of PET films, theselling prices increased at extraordinarily high levels.

During the FY 2011-12, the Polyester film industry witnessed a rebound in its value additionlevels to historical normal levels, from the extraordinary high levels witnessed in year 2010-11.This reduction was brought about by the additional supplies which came into the market in2011 and corrected the demand supply imbalance in the PET film industry seen in year 2010

Analysis of historical data shows high correlation between PTA/MEG - polyester film prices.The spread between two intermediates would vary depending upon the demand-supplysituation of the commodity. Also sudden and sharp movements in raw material prices mayaffect the correlation for some time.

The chart below shows the past trend in the pricing of PET film and PTA and MEG:

Source: Industry information

The above industry data of the Far East demonstrates that variations in the raw material pricesby and large tend to get passed on to the end-customers. The demand-supply balance of PETfilms which could vary across regions could impact margins. The spread between the rawmaterial and PET films, especially over the last few years, has moved in a band. PTLûscontracts with some customers provide for a quarterly/periodic review in pricing which enablesit to adjust for any raw material cost movement.

The Company monitors world and local input price trends carefully and determines itsprocurement plans accordingly.

19954.481.090.703.44

VA OVER PTA & MEG

19963.510.880.652.50

19972.220.630.651.43

19981.570.440.491.01

19991.480.440.440.93

20001.760.570.581.05

20011.830.490.501.22

20021.940.530.461.31

20032.150.590.671.39

20042.070.750.931.07

20051.980.810.920.94

20061.880.900.910.75

20072.060.881.080.89

20082.540.911.151.33

20092.130.840.691.14

20103.080.970.971.87

20112.611.271.301.02

20122.131.181.230.64VA OVER PTA & MEG


4.3 Risk associated with reliance on only a few raw material suppliersThe 2 major raw materials for the company, PTA and MEG are well traded commodities,available from a variety of sources in this region. However, the company is meeting itsrequirement domestically, by procuring each of these raw materials 100% from a single localsupplier, thereby enjoying certain distinct advantages of shorter lead time/lower raw materialinventory carrying levels etc. The company has entered into long term / yearly contract forthe supply of the raw material to ensure its availability. These contracts also have a supplyguarantee clause to ensure that the risk of buying 100% from a single source and also asingle plant operation is mitigated. And as far as the pricing is concerned, since it is linkedto certain standard international benchmark rates there is high degree of transparency.

For the Extrusion Coated film production, apart from PET film which is transferred fromthe Companyûs in house production and also imported from the Parent company in India atArmûs length pricing, the major raw materials are BOPP base film and Coating chemicalssuch as LDPE and EVA. The company has been meeting its BOPP film requirement byprocuring it both locally as well as importing from manufacturers within the ASEAN region.The coating chemicals i.e LDPE and EVA are also both being locally as well as importedfrom the ASEAN region.

The major raw materials for the Cast Polypropylene film production are Homo Polymer andCo-Polymer. Homopolymer is being procured locally while Co-Polymer is being imported fromSingapore. Since the production from this new line has recently started in March 2010, thecompany would continue to look out for alternative sourcing options and would decide on anappropriate raw material procurement strategy for this product line, based on relevant factorssuch as pricing, quality, delivery lead time etc.

For the Silicone Coating line, the main raw material is PET film which is transferred fromthe Companyûs in house production and also imported from the Parent company in India atArmûs length pricing. Silicone and other chemicals are being imported from USA and Europefrom leading suppliers.

4.4 Risk from environmental regulatory measuresAll the production lines of PTL, except for the Polyester resin line, do not require anyenvironmental impact assessment (EIA). For its Polyester Resin line, the Company has therequired clearance from the regulatory authorities and utmost care is taken to ensurecompliance to the same.

For the Silicone Coating line or the Thick Film line under implementation, PTL would notbe required to get any EIA approval.

47

4.5 Risk from competition from existing manufacturers and entry of new playersWith consistently rising demand and healthy growth potential, the PET film industry attractsnew capacity investments from existing large manufacturers (such as Polyplex) who are well-established companies with long experience in this industry, as well as medium to smallproducers and new entrants with strong capital to accommodate investment in PET film plantsand machinery.

Compared to these players, PTL has a lower cost of production, established quality, widerange of products and reach to all major customers across the globe. For those who are newentrants, they need to improve and develop their production competence to compete withthe existing players, the process of which will certainly take some time. Besides, they needto build up their customer base which can happen gradually through supply of consistentlygood quality products. Thus, PTL is confident that it will readily be able to compete againstboth world leading producers as well as newcomers. While the financials of the company andgroup would broadly reflect the cyclical trend of the industry, it would be able to demonstratesuperior profitability in any market situation due to its competitive edge as reflected in lowercosts, good quality, higher productivity, diversified product portfolio, value added product mixand global sales reach.

The Company has strategically embarked on various expansion projects in Turkey andThailand over the last few years and also has three other expansion projects in the pipelinein Thailand and a new PET thin film line investment under implementation in USA, whichwill further strengthen its competitiveness (Refer Section 3 -Business Overview for details onProjects commenced during the year and Section 5 -Future projects for new projects in thepipeline) The company has been continuously evaluating other growth options in PET film /value added products / related areas like CPP / BOPP/ Silicone Coated Films at all existinglocations in Turkey/Thailand/US, while also continuously evaluating growth options in othernew locations/new product lines. With the start up of the Extrusion Coated Film line, CastPolypropylene Film line, Silicone Coating Film and the projects under implementation inThailand i.e Blown PP Film, 2nd Extrusion Coated Film line and Thick PET film line, thecompany aims to further broad base its product offering to its customers, and also diversifythe risks associated with the cyclical nature of the PET film industry. The company has alsobeen evaluating possibilities for any acquisitions to further expand its manufacturing base andalso to improve its cost structure, product offering and market reach / penetration.

4.6 Risk from trade barrier measuresTrade barrier measures taken by various countries are broadly of two major types:a) Anti-dumping (AD): An anti-dumping duty can be imposed on imports if the ex-factory

prices of such imported products are proved to be lower than the local selling pricesof the similar products in the countries of the exporters. For the past few years, thecountries adopting this measure are the European Union member countries and the USagainst such countries as India, China, Brazil and South Korea.


b) Anti-subsidy: A countervailing duty (CVD) can be imposed if the government or anygovernment agency provides any benefits or privileges specifically to any company orexporter of such country.

Such tax measures will cause import duty on the goods produced and exported from thetargeted countries imposed at such a high rate that such goods will carry higher prices andhence have difficulty to compete with the products of the rivals. For manufacturers having aregional manufacturing base in such locations, such trade defense measures can be anopportunity if anti dumping duties are levied against imports from the Asian low cost producers.

The company is undertaking all the safeguards to insulate against the risk arising out ofanti-dumping duties and other protective barriers imposed by the importing countries. Ageographically well-diversified sales portfolio like ours will help mitigate the adverse fall-out ofsuch an action, if any.

In the year 2008, in the US Anti Dumping petition against producers of PET film from Thailand,China, Brazil and Middle East, there was a negative injury ruling by the International TradeCommission (ITC) against Thailand and consequentially, there is no duty against Thailandimports into the US market. This has definitely given an opportunity for the company toincrease its share on the US market through its distribution company Polyplex Americas Inc.

As an outcome of the Anti-Dumping Investigation by Brazil in the year 2007, against Thailand,an Anti Dumping duty of about 28 cents/Kg on imports from Thailand to Brazil had beenimposed. However, the impact of this on the Company is minimal, as the sales to Brazil arealmost negligible.

In December 2010, the Government of Brazil initiated an anti dumping investigation againstUAE, Mexico and Turkey, in respect of PET film imports into Brazil. The Companyûs subsidiaryin Turkey (Polyplex Europa) co-operated fully during the investigation and submitted all therequired information with the authorities. In the final determination, the government of Brazilimposed anti-dumping duty of USD 67.44 / MT on Polyplex Europa, which is the minimumrate as compared to the rates announced for other countries as well as other producers inTurkey. Polyplex Europaûs exports to Brazil are not a very significant portion of their overallsales volumes and as such, the management does not expect any major impact from theanti-dumping margin imposed.

4.7 Risks from future projectsThe major risks associated with any new Projects are as below:● Market Risk: Since Polyplex has a global reach and an extensive marketing and

distribution network, the Company does not foresee any major risk in developing themarkets new products. In the case of the Silicone Coating project, the market researchdata and the market experience already available with the parent company can also be

49

leveraged upon to ramp up the sales. For the PET Thick film also, the Company hasalready started evaluating key target markets and remains confident of ramping upsales smoothly.

● Competition Risk: The Company believes that its cost structure would be globallyvery competitive and will be one of the major advantages to gain an edge over some ofthe existing producers/new entrants.

● Project Implementation risk: Implementation of the Project within the Budgetedcost and timeline is another critical aspect for the success of any Project. Based onpast experiences, it can be very well said that the experienced Projects team atPolyplex should be able to achieve successful implementation of new projects on timeand within Budgeted costs except for un-foreseen circumstances.

● Funding Risk: Long term Debt to the extent of 65-75% of the Project cost is generallyborrowed by the Company and the balance is funded out of internal accruals. For allongoing expansions in Thailand and in the USA, financing has already been tied up atcompetitive pricing and favorable terms and conditions. Based on the good relationshipwith existing banks, the Company is quite confident of raising the required financing forany new future Projects at competitive terms and conditions.

● Currency Risk: For any new project, the currency of borrowing is decided, based onthe projected operational cash flows of the project. The currency which has themaximum surplus in the operational cash flows is chosen to be the currency for the loan.This creates a natural hedge for the loan repayments, as and when the repaymentsstart. The company also has internal FX guidelines to cover net exposure of Projectcosts, in various currencies by booking appropriate forward contracts, so that the riskon the initially estimated overall Project cost, on account of currency fluctuations isminimized. Going forward, with borrowings for the ongoing expansions in Thailand, theForex loan portfolio of the Company is expected to go up to more than 100 Million USD(including equivalent of the Euro denominated loans) over the next 1 year, therebyexposing the Company to high amounts of unrealized Fx loss/gains on account of therestatement of such loans.

Apart from all the Project specific risks and their mitigation plans as discussed above, theCompany would also like to mention here that the overall Project risk of any new Project iscovered by taking appropriate Insurance policies to cover various risks such as Erection andConstruction all risks, Marine risks, Loss of Profit coverage due to delay in Project Start-up etc.

4.8 Risk from dependence on the parent companyPolyplex Corporation Ltd. (PCL), through direct and indirect shareholding, currently controls51% of the paid up shares in the Company.


In the initial 2-3 years of its incorporation, PTLûs core management team consisted of personswho were previously employed by PCL and they played a vital role in successfully establishingPTLûs operations ahead of the schedule and at a lower-than-estimated cost, together withensuring high productivity levels resulting in the Companyûs ability to produce quality productsat a competitive cost. However, after about 4-5 years of running, once operations were fullystabilized, the company successfully implemented a program for reducing the dependence onexpatriates by increasing the proportion of local Thai staff in operating/managerial positionsand has been managing the production and operations efficiently thereafter.

The Companyûs present management team is composed of experienced key personnel inproduction, marketing, distribution and accounting/finance. It has thus been able to run thebusiness on its own without reliance on the parent company. It is only in the research anddevelopment area and the implementation of new projects, where the parent companyprovides know-how and technical assistance to the Company.

PTLûs business operation is independent from PCL in such undertaking as public offering ofequity, borrowing of loans, and other investments in the future, for instance. The parentcompany need not request any approval from any government bodies except for reporting ofsignificant events to two stock exchanges where it is listed, namely Mumbai Stock Exchangeand National Stock Exchange.

The Company is confident that there will be no conflict of business interest between PCL andPTL on account of the following:❍ It is Polyplexûs policy in business operation that there is an equitable distribution of

business between the various manufacturing units aligned to efficient servicing ofcustomers.

❍ The investment in PTL and its subsidiaries is higher as compared to PCLûs assets,hence the success of PTL being critical for PCL.

4.9 Risk from sponsor group holding about 51% of total sharesCurrently, PTLûs major shareholder is PCL (As of March 31, 2012 the promoter Mr. SanjivSaraf and related parties control 46.93% in PCL), holding 16.50%, and Polyplex (Asia) Pte. Ltd.(çPAPLé) which is wholly owned by PCL, holding 34.50%, thus in aggregate holding 51% ofPTL paid-up common shares of Bt. 800 million. Thus, in matters that require a three-fourthsmajority vote of shareholders, the minority shareholders can successfully oppose corporateactions undertaken or supported by the majority shareholders. However, the parentcompany will continue to play a vital role in determining the Companyûs policy on businessadministration and operation. However, PTL has set up a three-member Audit Committee toprovide for an audit of the operations and the management.

51

Besides, PCL is listed on the Stock Exchanges in India and abides by the CorporateGovernance regulations prevailing for listed companies in India.

4.10 Foreign exchange riskMost of PTLûs products, i.e. about 75-85%, are for exports, which are mostly denominated inUS dollars and Euro. As against this, raw material (PTA & MEG) prices are also linked tothe US dollar, although their payments are done in Baht and there are Long term loanrelated interest payments/loan repayments in USD and Euro. The company as at Mar 31st û12had Euro loans of about 3.9 million and USD loans of about 40.8 million. There are someexpenses which are in Thai Baht, i.e. locally procured raw materials, packing materials,salaries, utilities and other administrative expenses which have to be settled by income fromdomestic sales and from the surplus income from USD/Euro exports. Thus, broadly speaking,PTL has a net surplus US dollar and Euro position on the trade front, which can be hedgedsomewhat against repayment of its long-term loans. To the extent possible, the company hasbeen trying to create a natural hedge to mitigate the risk from currency fluctuations. On anongoing basis, the company also takes forward covers, to cover the net surplus exposurein USD and Euro.

Similarly, the Companyûs subsidiary in Turkey has a net surplus in USD and Euro currencieswhereas they have certain payments in the local currency, which is hedged from time to timeby taking appropriate forward covers.

The funding for new Projects of the company are also planned based on the future inflowsfrom the Project Operations so that a natural hedge can be created to the extent possible.However, as explained above, going forward, together with borrowings for the ongoingexpansions in Thailand, the Forex loan portfolio of the Company is expected to go up to morethan USD 100 Million (including equivalent of the Euro denominated loans) over the next 1year, thereby exposing the Company to high amounts of unrealized Fx loss/gains on accountof the restatement of such loans.

4.11 Interest rate riskAs of March 31, 2012, the Companyûs outstanding long term loans (consolidated basis) wereEuro 8.4 million and USD 40.8 million, whereas outstanding short term loans were USD 8million and Baht 80 million. The USD loans amounting to USD 4.8 million (O/S as on March31st û12) have already been swapped to fixed interest rate and the balance loans havefloating LIBOR based interest rates. All the Euro loans have floating EURIBOR based rates.The floating interest rate may put the Company at a risk of rising financial cost if the interestrates move up. The company has been constantly monitoring the interest rates and will takeinterest rate swaps for converting the liability into fixed rates, if considered beneficial.


4.12 Risk from overlap of products and marketsThe product portfolio of PCL, PTL and PE is quite similar. In order to mitigate the risk fromoverlapping of products and markets, Polyplex has also evolved an equitable policy fordistribution of markets, between its Indian, Thailand and Turkey operations based on theseveral factors like product range, delivered cost to customer, supply lead times andpreferential duty access. Based on the same, PTL would serve North America, South EastAsia, Asia Pacific, China, and Australia & New Zealand. PCL would serve South Asia, andSouth America. Turkey will serve, Europe, America, Middle East, Africa and CIS/Russianmarkets.

The Polyplex group also has a policy on future investments in polyester film / related areasbetween the Company and its parent company. Investments in India/SAARC region wouldbe decided and made by PCL and its other subsidiaries (excluding the Company) whileinvestments In Thailand / ASEAN region as well as other countries would be in all likelihoodbe made by PTL or the subsidiaries in which the Company has a major stake. The above issubject to availability of Investible cash / ability to borrow debt by the existing / preferredCompany as per the policy.

4.13 Credit risksCredit risk of customers is another significant risk for any business. The Company managesthe risk by adopting appropriate credit control policies and procedures. All the sales, whichare on credit are secured either through a Letter of credit issued by the customer or by takingappropriate credit insurance coverage for both domestic and export sales. The Company alsotakes extra caution in selection of any new customers and granting of credit.

4.14 Risk from European economic crisisSince the companyûs subsidiary in Turkey is mainly dependant on the European market, therecession in Europe has raised concerns regarding the potential impact of this recession onour Turkey operations for this financial year. As of now, the subsidiary has not felt any directimpact in terms of contraction in demand/ orders from its customers, which would impact itsoperations or the profitability for the current year. Since most of our products are being usedin the packaging of consumer staples (food items, soaps, detergents etc), it may be said thatsuch products are recession resistant and as such, the impact of the recession is notexpected to be very significant. However, any weakening of the Euro currency, would impactthe consolidated revenues/ profits of PTL, since the reporting currency of the Turkeysubsidiary is in Euro and most of its revenues are also Euro denominated, along withsome sales in USD currency as well.

53

5.1 Future Projects5.1.1. PET Thick Film Line - Thailand

In February 2011, the Board had approved an investment in a Thick Polyester FilmLine along with Batch Resin Plant. This project is being implemented in Thailand bypartially using the new plot of land purchased in 2010, located close to the existingfactory in Siam Eastern Industrial Park.

Project Details● The total Investment in this project is about $ 90 million, including working capital.● The PET Thick Film Line is of 5.9 meters width, with a capacity of about 28,800

TPA.● Polyester Batch Process Chips manufacturing facility is with a capacity of about

28,000 TPA● The product range from this new film line would be PET thick film in the range of

23-350 micron thickness.● Funding of the Project will be through Long Term Debt borrowing of $ 60 million

and balance will be funded out of internal cash flows of the Company and/or itssubsidiaries

● The expected commercial start up of the project is in Q1 of FY 2013-14.

Project RationalePolyplex has become a preferred supplier of PET thin film to almost all the largeconvertors in major markets in the world. In the recent past, there have been severalstructural changes in the PET film industry. Some of the large PET film producers areaccelerating exit from the competitive commodity segments in packaging (Thin films) &industrial (traditional Thick and Thin films) to electrical/electronic segments (new Thickfilm applications) - as a long term competitive repositioning strategy. By implementingthe project for PET Thick film, the company would have certain benefits as given below:● Diversification of risk from packaging dominated to industrial segments● Thick film offers a relatively higher margin and more stable business, thereby

mitigating the risk of volatility in earnings.● Would also give an opportunity to the company to meet the in house requirement

of Thick PET film for Extrusion Coated film line and Silicone Coating film line(existing in Thailand)

● Enhancement of presence in North East Asia (Japan, Korea and Taiwan) whichare large markets for traditional thick films

● Leveraging existing sales and distribution network● Extension of inherent cost competitiveness - being a part of large manufacturing

facility leading to reduction in

5. Future Projects


o Capital costo Operating overheads - manpower, shared services, SG&A etc

Status of the project

● The company has tied up Long term Debt financing of $ 60 million for partfinancing the project, but no amount has been drawn until 31st May 2012.

● Contracts of all main machineries have been entered into and delivery ofmachinery is expected to start in second half of FY 2012-13.

● The civil construction work has started and electrical/mechanical works areexpected to start within Q2 of FY 2012-13.

● The company has received the in-principle approval from BOI for the proposedinvestment. The promotion certificate would be obtained in due course of time.

5.1.2. PET Thin Film line - USAIn May 2011, the relocationto USA of the PET Thinfilm line expansion earlierplanned for implementationin Turkey was approved bythe Board. In July 2011,the Board further approvedinvestment in a PET Resinline, along with the alreadyapproved PET thin filmline. This project is beingimplemented in Decatur, Alabama State, USA.

Project Details● Total investment is estimated to be about $ 125 million including working capital.● This would include a PET Thin Film Line of 8.7 meters width with a capacity of

about 31,000 TPA, PET Resin line of 57,600 TPA and a High speed MetallizedFilm line of 2.85 meters width with a capacity of about 8,600 TPA

55

● Investment is being made under a new company incorporated in the USA -Polyplex USA LLC., 100% held by another new company - Polyplex AmericasHolding Inc, which is 100% held by Polyplex (Thailand) Plc.

● Funding of the Project is through Long Term Debt borrowing of $ 75 million andbalance will be funded out of internal cash flows of Polyplex (Thailand) Plc and/or its subsidiaries


Project RationalePolyplexûs market share in the American continent has increased significantly postacquisition of the Trading Company in the US, in January 2006. With existing US PETthin film manufacturers shifting their focus from packaging applications to high endindustrial and electrical applications and no new capacities coming in the US, there isa scope for Polyplex to further increase its market share in the US. The Companyevaluated the option of either servicing the US market from its existing manufacturinglocation(s) vis a vis setting up of a manufacturing base in the US. The Company felt thatan on shore location would be more competitive from a long term point of view ascompared to an off-shore supplier due to the following reasons:● Proximity to key markets leads to reduced cycle time, faster deliveries and is

clearly a source of differentiation in the eyes of the customer. Also this willhelp the company to reduce its logistics, delivery costs including lower workingcapital.

● Both the key raw materials i.e. PTA and MEG are surplus in North America andpossibilities of co-location also exist to further improve the economics.

● Risk of Trade remedial measures like AD/CVD duties can also be significantlyreduced / eliminated.

● An additional location will also significantly diversify the overall business risk.

5.1.3. Blown PP Film line - ThailandIn July 2011, the Blown PP film line project was approved by the Board. This project isbeing implemented in Thailand, in the same plot of land in Siam Eastern Industrial Parkwhere Silicone Coating film line was implemented.

Project Details● The total Investment in this project is about $ 10 million, including working capital.● The company has tied up Long term Debt financing of $ 7 million for financing the

project, but no amount has been drawn until 31st May 2012.● Annual capacity of the Blown PP line will be 4,645 TPA● Film to be captive input for the silicone coating line, with a view to enable better

utilization levels and expand the product mix of the Silicone Coating line.


● BOI approval for the Project has been received, by amending the Silicone CoatedFilm line approval, to include manufacture of Blown PP Film as base film.


5.1.4. Extrusion Coated Film Line II - ThailandIn November 2011, the Extrusion Coated Film line II project was approved by the Board.This project is being implemented in Thailand, in the same plot of land in Siam EasternIndustrial Park where Extrusion Coated Film Line I was implemented.

Project Details● The total Investment in this project is about $ 13 million, including working capital.● The company is planning to borrow Long term Debt financing of $ 8 million for

financing the project and balance Project cost will be funded out of internalaccruals of the Company.

● Annual capacity will be 215 million Sqm, higher than the capacity of the first linewhich is 150 million Sqm pa.

● The expected commercial start up of the project is in Q1 of FY 2013-14.● Main market for this product would be USA and Europe● The BOI promotion certificate has been received

Project Rationale● Existing Line is almost fully utilized and additional capacity is required to tap the

growth potential in this line of business● Enhance product range and capitalize on the experience and knowledge gained

from the first line.● Investing in value added products helps grow product portfolio and improve

margins and also helps in diversifying from commodity PET film business.● Reinforces Polyplexûs underlying strategy of Integrated Manufacturing, strengthens

Polyplexûs position in the Polyester Thermal Lamination market - we are the onlyintegrated supplier in the world

● Tapping growth opportunities in US/Europe where on-shore suppliers are movingtowards niche, value added products

5.2 Other Capital ExpenditureAs an ongoing effort to improve productivity, reduce losses, develop products and enhancequality control, PTL and its subsidiaries in Turkey/USA undertake several small/mediumcapital expenditures on the basis of cost benefit analysis. The total outlay over the next 12-15months for such projects is estimated at about Bt. 300-350 million which includes someenergy conservation schemes, apart from normal insurance spares and miscellaneousequipments for upkeep of the machinery.

57

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

7. Shareholding Structure7.1 Shareholding Structure

7.1.1 SecuritiesPTLûs current registered capital is Bt. 960 million of which, Bt. 800 million is paid up,divided into 800 million ordinary shares each of Bt. 1 par value.

7.1.2 The shareholding structure of PTL as on 31st March 2012 is as follows:

Name Ordinary shares %

Polyplex Corp. Ltd. (PCL) 131,999,940 16.50Polyplex (Asia) Pte. Ltd. (PAPL) 275,999,915 34.50General public 392,000,000 49.00Existing small shareholders* 145 0.00

Total 800,000,000 100.00

* Beneficial interest held by PCL and PAPL

PCLûs shareholding structure as of 31st March 2012 is shown as below:

Name %

Promoter/Sponsor Group 46.93Institutional investors 13.12Indian public (Non Institutional Investors) 29.12Other shareholders 10.83

Grand total 100.00

PAPL is 100% held by PCL and together PAPL and PCL hold 51% of PTL.

7.1.3 Dividend payment policyAs per the dividend policy stated in the prospectus, dividend is required to be paid outat rate of about 40% of the annual net profit, taking into account economic conditions,growth plans, future deployment opportunities, the Companyûs financial position andliquidity and subject to the approval by the shareholders.

The Board of PTL has recommended a dividend of Baht 0.52 per share for FY 2011-12,out of which Baht 0.35 per share was paid as Interim dividend in August 2011 and thebalance of Bt 0.17 per share will be paid out in August 2012, post approval by theShareholders in the Annual General meeting to be held in July 2012.

6. Legal Dispute-None-


2004-05

721

280

0.35

2005-06

561

224

0.28

2006-07

342

136

0.17

2007-08

814

320

0.40

2008-09

1,042

416

0.52

2009-10

1,039

416

0.52

2010-11

3,883

1,552

1.94

2011-12

1,362

416

0.52

2.502.001.501.000.500.00

Company Secretary Board of Directors Audit Committee

Managing Director

Chief Head - Head Sales & Business Head -Financial Officer Operations Marketing SARALAM

Corporate FinanceHead-Production &

SE Asia Manager-SARALAM PlantEngineering - Sarafil/ CPP

Costing andHead - Saracote Plant Domestic market

Accounts

InformationTPM America

Technology

Legal & Tax HR & Industrial Relations Europe

Investor RelationsQuality Assurance &

OthersTechnical Services

Purchase & Stores

7.2 MANAGEMENT STRUCTURE

The following graph shows the comparison of dividend payment for the last 8 years,since the companyûs public listing in December 2004.

59

PTL has a board of directors and an audit committee. There is a provision to appoint otherneed-based committees as may be appointed by the shareholders or the board of directors fromtime to time. The board members and executive officers are qualified persons with completequalifications as per Section 68 of the Public Limited Companies Act B.E. 2535 and as per theNotification of the Securities and Exchange Commission (SEC) No. KorJor. 12/2543 Re:Application for Permission and Permission to Sell Newly Issued Shares dated March 22, 2000.

Details of the board of directors and other committees are as follows:

7.2.1 Board of DirectorsAs of March 31, 2012, PTLûs Board of Directors is composed of eight members as follows:1. Mr. Manu Leopairote Board chairman and Audit Committee Chairman2. Dr. Virabongsa Ramangkura Director (and Audit Committee member)3. Mr. Shiraz Erach Poonevala Director (and Audit Committee member)4. Mr. Sanjiv Saraf Vice Chairman5. Mr. Praphad Phodhivorakhun Director6. Mr. Pranay Kothari Director7. Mr. Ranjit Singh Director8. Mr. Rohit Kumar Vashistha Managing DirectorMrs.Supritha Pai Kasturi is the secretary to the Board of Directors

Authorized signatoriesAny one of the four authorized signatories, namely Mr. Sanjiv Saraf, Mr. Pranay Kothari,Mr. Ranjit Singh, and Mr. Rohit Kumar Vashistha are empowered to sign with the Companyûsseal affixed.

Power and duties of the board of directors (the Board)The Board of Directors has the powers, duties and responsibilities to faithfully and prudentlyconduct the operations of the Company in accordance with the Companyûs objectives andArticles of Association, applicable laws and resolutions of the shareholdersû meetings, for thebenefit of the Company. A summary of the substantial duties and responsibilities of membersof the Board of Directors is set out below:1. to hold the annual general meeting of shareholders within 4 months from the close of the

accounting period;

2. to call the meeting of the Board of Directors at least once every calendar quarter;

3. to arrange for the preparation and submission of the audited balance sheet and profitand loss statement at the end of each accounting period to the shareholdersû meetingfor its consideration and approval;

4. to authorize any one or several directors to perform any action on behalf of the Boardof Directors under the supervision of the Board of Directors, or granting the power-of-attorney to such designated director(s) to perform any action within the specified timeas the Board of Directors may think fit; provided, however, that the Board of Directors


has the sole discretion to revoke or modify such designated director or power-of-attorneyas the Board of Directors may think fit.

For this purpose, the Board of Directors may authorize the Executive Committee, if any,to conduct any activities within the specified scope of work, duties and responsibilitiesof the Executive Committee. No authorization will entitle the Executive Committee toconsider and approve the transaction which may cause a conflict of interest betweenthe Executive Committee or any related person or interested person as the one partyand the Company or its subsidiary companies as the other party. However, an exceptionis granted where the transaction conforms to the approved policies and rules of theBoard of Directors;

5. to determine the goals, prospects, policies, business plans and budgets of the Company,and to ensure that the management work performed by the Executive Committee, if anycomplies with the set policies. However, the Board of Directors needs to obtain theresolution of the shareholdersû meeting before entering into these legal transactions, forinstance, increase or reduction of capital, issue of bonds, sale or transfer of all or anysubstantial parts of the Companyûs businesses to any third party, purchase or accept-ance of transfer of other businesses, amendment to the Memorandum of Association,and so on.

The Board of Directors is also responsible for ensuring the Companyûs compliance withthe securities and exchange law and rules of the SET, for instance, rules concerning theentry into connected transactions and concerning purchase or sale of substantial assets,including any law governing the Companyûs business;

6. to review the management structure and appoint the Executive Committee, GeneralManager and any subcommittees, as it deems appropriate;

7. to ensure that the Companyûs performance follows the business plans and budgets at alltimes;

8. to refrain from conducting any similar or competitive business, participating as partner inan ordinary partnership or partner with unlimited liability in a limited partnership ordirector in a private company or in any other firm, company or corporation operating thebusiness similar to or in competition with the Company, regardless of whether for his/herown benefit or for othersû benefit. However, an exception is granted where the directorprovides notice to the shareholdersû meeting in advance of his/her effective appointmentas director of the Company; and

9. to notify the Company without delay of the event of likelihood that the director may havedirect or indirect interests as a result of (i) the Companyûs entry into any agreement; and(ii) his/her increased or decreased holding of shares or bonds in the Company or itssubsidiary companies.

61

7.2.2 Audit CommitteeThe Companyûs Audit Committee comprises of:1. Mr. Manu Leopairote Audit Committee Chairman2. Dr. Virabongsa Ramangkura Audit Committee member3. Mr. Shiraz Erach Poonevala Audit Committee memberMrs.Supritha Pai Kasturi is the secretary to the Audit Committee.

Power and duties of the Audit Committee1. to review the sufficiency, credibility and objectivity of the financial reporting of the

Company by coordinating with the external auditors and management responsiblefor preparing the quarterly and yearly financial reports. The Audit Committee maysuggest issues or matters to be included for review or audited by the externalauditors during its audit of the Company;

2. to review the adequacy and effectiveness of internal control systems and internalaudit functions by coordinating with the external auditors and internal auditors (ifany);

3. to review compliance with the Securities and Exchange Acts, Regulations of theSET, and any other relevant laws;

4. to consider and advise on the appointment of the external auditor including theaudit fee, taking into account the creditability of the external auditor, the adequacyof its resources, the firmûs audit engagements, and the experience of itssupervisory and professional staff; as well as to have a meeting with the externalauditor, once a year without the presence of the Executive directors or any othermember of the management team;

5. to review the connected transactions and ensure proper compliance with all theSET regulations and also to ensure adequate disclosures or conflict-of-interestdisclosures;

6. to take care of any other matters assigned to it by the Board of Directors, suchas reviewing the Companyûs financial and risk management policies, reviewingcompliance with the Code of Corporate Conduct of the management, andreviewing with the companyûs management, all important reports which must bedisclosed to the public according to the law (e.g. Management Discussion andAnalysis (MD&A), etc.);

7. to report the activities of the Audit Committee in the companyûs annual report,which must be signed by the chairman of the Audit Committee, and to expressin such annual report the Audit Committeeûs opinion on (i) the accuracy andcompleteness of the procedures for the preparation of the report and informationdisclosure, (ii) the sufficiency of the internal control system of the Company, (iii)


opinion on the suitability of the external auditor and appointment for another term,(iv) the number of Audit committee meetings held in the previous year and theattendance of each member in such meetings, (v) opinion on the connectedtransactions and any transactions that may lead to conflict of interest (vi) thecompliance by the Company with rules and regulations of SET, SEC and otherapplicable laws, and report on any information that the shareholders and investorsshould be aware of under the scope of power of the duty that has been assignedby the Board of Director;

8. to report the performance of the Audit Committee to the Board of Directors atleast once every calendar quarter; and

9. to express its opinion on the performance, appointment, removal and determina-tion of remuneration of the internal auditor.

7.2.3 ManagementPTLûs senior management during 2011-12 consisted of five persons as below:1. Mr. Rohit Kumar Vashistha Managing Director2. Mr. Vinod Sureka Chief Financial Officer3. Mr. Manav Singh Business Head - SARALAM division4. Mr. Chandrashekhar Kalvit Head - Operations5. Mr. Ashish Ghosh Head - Sales & Marketing

Power and duties of Managing Director1. to monitor and supervise the day-to-day business operations and management of

the Company.

2. to undertake or perform duties in line with the policy, plan and budget approvedby the board of directors and/or the Executive Committee (if any) of the Company.

3. to perform as the authorized person of the Company in administering thebusiness in line with the objective, regulations, policy, rules, stipulations, ordersand resolutions of the meeting of the Board and/or resolutions of the meeting ofshareholders.

4. to appoint and manage the performance of the working committees to ensurebenefit and efficiency as well as transparency in management, and be authorizedto appoint and/or assign any person to specifically perform on his behalf. Suchdelegation of power and authority shall come under the purview of suchcertain authorization letter and/or comply with the regulations, stipulations ororders issued by the board of directors and/or the Company.

5. to determine mission, objectives, framework and policy of the Company includingorders and supervision in overall for optimum benefit in administration.

63

6. to follow up and assess the Companyûs operational results on a regular basis tocope with both internal and external risks.

7. to consider and approve expenditure spending in the normal course of businessoperations, such as transacting with banks regarding deposit accounts orprocurement of raw materials for production.

8. to consider the recruitment and employment of personnel as well astransfer, rotation across functional lines/departments/divisions, or termination ofemployment of personnel, and determine rate of wages, remuneration, bonusand welfare package relating to personnel.

9. to issue orders, regulations, announcements and memorandum to ensure theoperations come out in line with the policy and for the benefit of the Companyas well as to maintain discipline in the organization.

10. to perform any other duties as occasionally assigned by the Board of Directors

Power to approve any transactions (i) which may cause a conflict of interest withthe Company or its subsidiary; or (ii) in which the interests of the ManagingDirector or other interested person may be in conflict with the Company or itssubsidiary, under the applicable rules and regulations of the SET, do not fallwithin the scope of the powers and authorities of the Managing Director to act athis/her own discretion or to designate any person to act on his/her behalf.Typically, these transactions need the consideration and approval of the Boardof Directors and/or the shareholdersû meeting in accordance with the Articles ofAssociation of the Company and subject to applicable laws.

7.2.4 Role of Company SecretaryThe Company has appointed Mrs. Supritha Pai Kasturi as the Company Secretary. Sheis a qualified Chartered Accountant from the Institute of Chartered Accountants of Indiaand has the requisite knowledge and experience to perform this function. She alsoperforms the role of the Secretary to the Board of Directors and to the Audit Committee.

Responsibilities of Company Secretary:● Arrange the Board of Directorsû Meetings, Audit Committee Meetings and the

Shareholdersû Meeting in accordance with the relevant laws and regulations.● Prepare the Agenda/ supporting documents for the above meetings and ensure

that the same is circulated to the concerned members, at least a week in advanceof the meeting date, to allow sufficient time to review the documents.

● Prepare the Minutes of all the above Meetings and monitor subsequentcompliance with the resolutions of those Meetings.

● Ensure that disclosures of information to regulatory agencies (SET/SEC and otherrelevant regulatory agencies) are made in accordance with the applicable lawsand regulations.


● Execute any additional duties assigned by the Board of Directors from time totime

7.2.5 Selection of members of the board of directors, independent directors and theaudit committeeThe Company has no Nomination Committee to select and nominate any persons to beappointed as directors of the Company. In this regard, the Board will undertake theselection process, taking into account the experience, expertise and competency of theprospective persons and the qualifications required as per the criteria prescribed in thePublic Limited Companies Act B.E. 2535 and as announced by the SEC and relevantagencies, as also the provisions of Articles of Association of the company. Nominationwill be made at the shareholdersû meeting and election made under the proceduresprescribed in the Companyûs regulations as below:

I) Selection of members of the Board of Directorsa) The Company is required to have a board of directors consisting of at

least 5 persons. The board of directors must elect one of their members tobe the Chairman and may elect another member to be a Vice-Chairmanand any other positions as they see fit. At least one-half of the directorsmust reside in Thailand.

A director need not be a shareholder of the company.

b) A meeting of shareholders must elect the directors in accordance with thefollowing procedures and rules:-a. Each shareholder has one vote for each share held;b. Each shareholder may exercise the votes in electing one or more

persons to be the directors but the votes are indivisible; andc. The person who obtains the highest votes will be elected as a

director in respective order according to the required number ofdirectors, but if two or more persons obtain equal votes, theChairman must exercise a casting vote.

c) At every general meeting of shareholders, one-third (1/3) of the directors,or if it is not a multiple of three, then number nearest to one-third (1/3)must retire from office.

d) There must be a drawing by lots to determine the directors retiring onthe first and second years following the registration of the company.In each subsequent year, the directors who occupy the position for thelongest period must retire.

A retiring director is eligible for re-election.

65

II) Selection of members of the Audit Committee/Independent DirectorAudit Committee is composed of at least three independent directors with anoffice term of 2 years. The Company has a policy to select and nominateAudit Committee / Independent director in compliance with the SEC Notificationno. KorJor. 12/2543 regarding application for and approval of offering of newlyissued shares, with each of whom to have the following qualifications:a) Hold shares not exceeding 5% of the total shares with voting rights of

the Company, an affiliated company, a subsidiary company, an associatedcompany or a juristic person that may have conflict of interest,

b) Not be an employee or a staff member or an advisor who receives aregular salary or a person with controlling power of the Company, anaffiliated company, a subsidiary company, an associated company or ajuristic person that may have conflict of interest,

c) Not be a person having blood relation or legal relation in the manner ofbeing any family member or spouse thereof of the executives, the majorshareholders, the persons with controlling power or any persons to benominated to the managerial positions or the persons with controllingpower of the Company or a subsidiary company.

d) Have no business relation with the Company, an affiliated company, asubsidiary company, an associated company or any juristic person thatmay have conflict of interest in the manner that may hinder the use ofindividualûs independent judgment, and have no other nature that willhinder the individualûs provision of independent opinions relating to theCompanyûs operations.

In addition, at least one independent director appointed as an Audit Committeemember must have sufficient knowledge and experience in finance andaccounting areas so that he/she can review the reliability of the financialstatements. Other qualifications must also be taken into account, comprisingbusiness experience, expertise in the field related to the business and ethicalqualifications, to ensure maximum benefits to the Company.

The appointment of Audit Committee members is subject to the same criteriaand procedures as those in the appointment of directors of the Board. Thevacating Audit Committee member upon completion of his/her office term of 2years may be re-appointed by the Board of Directors for another term. In theevent that there is a vacancy on the grounds other than the completion of officeterm, the Board shall select and appoint the person who possesses the requiredqualifications to fill the vacancy to complete the number of the Audit Committee


members as prescribed by the Board. The newly appointed Committee membershall be in the office only for the remaining period of the office term of thevacating member.

7.2.6 Remuneration for managementa. Monetary remunerationDirectorsBefore the transformation into a public company, PTL had five directors. These directorsdid not receive any meeting allowance from the Company. Since transformation into aPublic Company in 2004, the Company has 8 Directors on the board. Until FY 2007-08,the Directors had renounced their right to receive any remuneration. However, fromFY 2008-09, the independent directors are receiving remuneration as approved by theshareholders in the Annual General Meeting of the Company.

For the FY 2011-12, The actual remuneration paid to the Independent Directors isBaht 4,200,000 as against the amount approved of Baht 4,200,0000. Details of thesame are as under:

S.No Name of Director Amount Approved (Baht) Actual Paid (Baht)

1. Mr. Manu Leopairote Baht 125,000 per month Baht 1,500,000

2. Dr. Virabongsa Ramangkura Baht 75,000 per month Baht 900,000

3. Mr. Praphad Phodhivorakhun Baht 75,000 per month Baht 900,000

4. Mr. Shiraz Erach Poonevala Baht 75,000 per month Baht 900,000

Note: The remuneration for Janû 12 - Marû 12 amouting to THB 1,050,000 period has been

paid to the directors in the month of Mayû 12

In addition to the above remuneration, meeting sitting fees of Baht 10,000 per meetingattended has been paid to the Audit Committee members, which is as per the amountproposed and approved in the Shareholder meeting in July 2011.

For the FY 2012-13, it is proposed to fix a remuneration of Baht 75,000 per month,same as in the previous year, to all the independent directors as mentioned below:1. Mr. Manu Leopairote2. Dr. Virabongsa Ramangkura3. Mr. Praphad Phodhivorakhun4. Mr. Shiraz Erach Poonevala

Mr.Manu Leopairote, in his capacity as the Chairman of the Board of Directors and theChairman of the Audit Committee would be entitled to an additional remuneration ofBaht 25,000 per month, for each role.

For the Audit Committee, each member would be entitled to a sitting fee of Baht 10,000per meeting attended.

67

The above remuneration package, to the Independent directors and Audit committeemembers, would be proposed to the Shareholder meeting to be held in July 2012 fortheir consideration and approval.

The remuneration details of the senior management, including 1 executive directorof PTL is as below :

Remuneration (In ù000 Baht)2007/08 2008/09 2009-10 2010-11 2011-12

(Apr-Mar) (Apr-Mar) (Apr-Mar) (Apr-Mar) (Apr-Mar)

Number of executives 5 6 6 4 5

Salaries (In ù000û Baht) 9,085 9,389 9,753 7,611 10,054

Bonus and Others (In ù000û Baht) 9,245 8,199 10,325 10,292 19,257

Total 18,330 17,588 20,078 17,904 29,311

b. Other remunerationDirectors-None-

Executives-None-

7.2.7 PersonnelAs of March 31, 2012, PTL had a total workforce of 467 persons, 430 of whom arepersonnel at the plant in Rayong Province and 37 at the head office in Bangkok. TheCompany also has 42 expatriates, 12 of whom are at the head office in Bangkok and theremaining 30 in Rayong.

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Number of employees

DepartmentAs of As of As of As of As of

March March March March March

31,2008 31,2009 31,2010 31, 2011 31, 2012

1. Executives 5 6 7 4 52. Production 140 137 162 161 1713. Commercial, IT, Personnel & Adm. 50 47 35 37 424. Sales and Marketing 16 18 21 25 245. Chips plant 25 23 21 22 216. Metallizer 33 37 37 37 357. Extrusion Coating 19 38 53 46 558. Cast Polypropylene Project - 2 51 56 529. Silicone Coating Project - - - 23 5510.PET Thick Film Project - - - - 611.Blown PP Film Project - - - - 1

Total 288 308 387 411 467

Employee (non-executive) remuneration(Bt. thousand)

Remuneration 2007/08 2008/09 2009/10 2010/11 2011/12

(Apr-Mar) (Apr-Mar) (Apr-Mar) (Apr-Mar) (Apr-Mar)

No. of employees 283 302 380 407 462Salaries & Wages 61,180 71,072 78,272 101,857 111,450Overtime pay 6,985 6,655 7,350 11,206 13,527Bonus 18,473 16,233 15,408 27,941 26,182Provident fund* 595 1,841 2,102 2,489 2,928Others 35,925 42,303 47,183 55,705 62,883

Total 123,158 138,104 150,316 199,198 216,770

* The Company started contributing to the provident fund since September 2004. The contributionof the employee and employer was 4% until FY 2010-11. During the year, the company revisedthe PF contribution rates and depending on the length of service, companyûs contribution is nowin the range of 4-7%.

There has been no labor dispute for the past years.

HRD PolicyThe company realizes the importance of its staff as they are valuable assets and play amajor role in the success and growth of the company. Therefore it has a policy to developthe efficiency, knowledge and skills of its staff at all levels by having well organized trainingprograms on a periodic basis. Training programs are designed to improve various aspectsof work life like technical competence, team building, and enhancement of leadershipskills, time management skills etc thereby improving the quality of the working life ofthe employees. Feedback of employees participating in such trainings is taken in orderto help improvement of quality of seminars and trainings to be conducted in future.

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8.1 Corporate Governance8.1.1 Policy on Corporate governance

Polyplex realizes the significance of good corporate governance and makes every effortto implement the Corporate Governance principles laid down by the Stock Exchange ofThailand. The company has firm belief in transparency, accountability and ethicalconduct in carrying out its operations. Accordingly, the Company has formulated apolicy which emphasizes regular disclosures to the public and the shareholders. Inaddition, the Company adopts strict internal controls and audits in recognition of theirimportance. It also has several risk management policies, keeping in mind a goodrelationship and business ethic towards business partners, shareholders and allconcerned parties.

8.1.2 Rights of shareholdersThe Company recognizes the importance of equal rights of all shareholders andconsiders all the shareholders as owners of the Company irrespective of the percentageof shares owned.

The Company has a policy to report to shareholders regularly on progress of operations,either directly or through the Stock Exchange of Thailand or through information onits website after listing. Shareholders will be given fourteen days advance notice of allshareholder meetings, including the meeting agenda and related information. Theshareholders would be encouraged to participate in the general meetings and theirviews and comments would be noted and followed up. In accordance with the goodgovernance practice relating to equitable treatment of shareholders, the company alsoinvites the shareholders to propose additional agenda for the Annual general meetingof the shareholders and gives sufficient time (about 30 days) to propose the Agenda.

The shareholders also have the following rights which are exercised in the AnnualShareholding meetings:● Re-appointment of Directors retiring by rotation and approval of the Director

remuneration● Approval of Auditor appointment and remuneration● Approval of dividend payment

8.1.3 Rights of stakeholdersPTL has always provided equal importance to the requirements of all its stakeholdersas under:● Personnel : PTL considers all its personnel to be valuable assets, critical to

the success and growth of the organization. The Company is

8. Good Corporate Governance & Internal Control


committed to providing a quality oriented work environment, withspecial emphasis on safety, along with fair and equitableremuneration. Apart from basic salary, Performance linkedBonus, Provident Fund contribution and Social SecurityContribution, the Company also provides certain other benefitsto its employees such as Overtime pay, Housing Allowance,Transport Allowance, Telephone allowance, Medical Insurance,Life Insurance coverage etc.

● Business : It has always been the policy of PTL to develop long standingpartners and growing relationships with all its business partners based on

mutual benefit and guided by good business ethics. The companyvalues the long standing relationship with its business partners,whether it is the banks that support the trade finance and projectfinancing requirements of the Company, or the strongDistributors/Agent network across various parts of the globe, whichhelp in market development and ensure smooth continuity of thebusiness operations for the company.

● Competitors : PTL will always abide by the framework of fair competition andwould work towards market development and growth to themutual benefit of the industry.

● Creditors : To abide by the loan covenants and provide all information aboutthe progress of the Company to its creditors as may be requiredfor smooth business dealings.

● Customers : PTL is committed to creating customer satisfaction by ensuringconsistency in the quality of its products and offering valueproposition to its global customer base.

● Shareholders : PTL strives to conduct its business in a transparent and efficientmanner with a view to constantly strive to enhance shareholdervalue. New project investments will be evaluated prudently toensure good returns and increase value to the shareholders.

● Community/ : PTL realizes and cares for the safety of society, environment andSociety quality of life of people. It places priority on activities relating

to the community and the society and also by compliance ofapplicable laws and regulations relating to the same. During FY2011-12, the company organized Blood donation camps andencouraged employees to donate blood, organized Seedlingplantations to promote nature conservation, extended supportfor Mangrove forest conservation and also gave donations toOrphanage.

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8.1.4 Shareholdersû meetingsThe Company has a policy to enable shareholders to attend meetings without undueeffort. It endeavors to organize the shareholdersû meeting with equitable treatment for allparticipants and in strict accordance with legal procedures, from meeting invitations,proxy form for those who are unable to attend the meeting, and distribution of meetingdocuments to inform all concerned of the meeting agendas. The meeting venue and timewill be convenient while the meeting session will allow adequate time for shareholders toask questions on business operations or voice their opinion.

8.1.5 Leadership and visionThe Board of Directors is the forum for review of plans, vision, strategies andkey policies. Elaborate budgets have been formulated for all functional areas in theCompany and a system of Key Result Areas (KRAs) has also been implemented foreach department and individual as also at the corporate level to align interests andpriorities across the organization. The Board of Directors would play a leading rolein regular review of the actual operations vis-à-vis budgets as well as other keyperformance indicators.

8.1.6 Conflict of interestThe policy is based on the principle that any decision to be made by personnel at alllevels in business operations must be in the best interest of the Company. It is the dutyof all personnel to avoid any transactions and/or dealings which could result in financiallosses to the Company and result in personal monetary benefit. The Audit Committee isentrusted to watch over and review the internal controls and audit function to ensuretheir efficiency and also ensure adequate disclosures to be made as per the SEC/SETguidelines.

8.1.7 Business ethicsPTL has a code of conduct for all personnel who emphasize observance of ethicalpractices, honesty and accountability. Responsibility towards all stakeholders andexternal agencies is encouraged in order to foster a good corporate culture and socialresponsibility.

8.1.8 Check and balance by non-executive directorsThe Company has altogether eight directors as detailed below:

Status Executive Directors Non-Executive Directors Audit Committee

Shareholdersû

representative Directors 1 3 -

Independent Directors - 1 3


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8.1.9 Integration or delegation of title and authorityThe Chairman of the Board of Directors is an independent director and is also theChairman of the Audit Committee. Independent directors constitute 50% of the Boardof Directors and thus composition of the Board would ensure fair and effectivemanagement monitoring. The Managing Director is the CEO in charge of day-to-dayoperations and has specified powers with certain key decisions requiring approval bythe Board of Directors.

8.1.10 Remuneration for directors and executivesThe remuneration of the Board of Directors and the Audit Committee is proposed tothe Shareholder meeting for their consideration and approval. The Managing Directorûsremuneration is fixed by the Board of Directors in discharge of duties as the CEO ofthe Company. The remuneration of the management is open for review by theshareholders who may set the appropriate policies and guidelines on this matter.

8.1.11 Board meetingsThe meetings of the Board of Directors are usually convened at least once every quarterto review the operations / quarterly financial results and other matters. There were fourBoard meetings conducted during the FY 2011-2012.Attendance of directors is as follows:

Name Position Attendance

Mr. Manu Leopairote Board Chairman & Audit Committee Chairman 4/4

Dr. Virabongsa Ramangkura Director & Audit Committee member 4/4

Mr. Shiraz Erach Poonevala Director & Audit Committee member 3/4

Mr. Sanjiv Saraf Vice Chairman of the Board 3/4

Mr.Rohit Kumar Vashistha Managing Director 4/4

Mr. Praphad Phodhivorakhun Director 3/4

Mr. Pranay Kothari Director 3/4

Mr. Ranjit Singh Director 2/4

8.1.12 Supporting committees or sub-committeesThe Board of Directors has recommended and shareholders have approved an AuditCommittee consisting of three independent directors. The Audit Committee membershave the requisite qualifications under the relevant SET rules & guidelines. The powersand allocation of work have been clearly defined by the shareholders and includereview of internal control systems, review of financial reports, connected transaction ortransaction involving conflict of interest. The term of the Audit committee is 2 years andmay be renewed by the Board of Directors every 2 years.

8.1.13 Internal control and audit systemThe Board of Directors exercises control through setting of annual budgets andoperational objectives, periodical review of which is done from time to time. Meanwhile,

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the Audit Committee oversees the internal controls and audit in the Company andsuggests measures for improvement.

8.1.14 Board of Directorsû reportThe Board of Directors is responsible for the Companyûs financial statements. As a partof the annual report, the directors have commented on the financial results of theCompany.

8.1.15 Relationship with investorsThe Company places significance on the timely disclosure of accurate information to itsshareholders and investors. It has been participating in the SET Opportunity day everyyear to disseminate information about the Company and its operations to investorsand analysts. The company also organized a factory visit for the shareholders, analystsand potential investors in February 2012, through the SET. As regards investorrelations, the Company has a well-developed IR section in the company website.Investor queries can be sent to the IR website ([email protected])and will be responded to by the management of PTL. The Investors/ Analysts can alsoregister their e-mail IDûs and receive an IR alert message, when any information isupdated on the Companyûs website. Further information regarding the Company maybe obtained by contacting at tel. +66 26652706 - 8.

Measures to prevent use of internal information for executivesû personal benefitThe Company has a policy on supervision of usage of internal company informationby its directors and management for their own benefit. The directors and managementwho come to possess internal company information are not permitted to buy or sellthe securities of the Company for a specified period prior to its announcement ofoperating results.

8.2 Internal ControlsAt the 2/2012 board of directorsû meeting of PTL held on May 24, 2012 with all three auditcommittee members also attending, the board assessed PTLûs internal control by means ofmaking inquiries with its management. Based on the assessment of PTLûs internal controlsystem in five aspects, namely organization and environment, risk management, control ofthe executivesû operation, information technology system & information communication andfollow-up system, the board viewed that PTL has adequate internal control with regard tothe making of transaction with its major shareholders, directors, executives, or personsconnected with the above mentioned persons.

The board considered that the Companyûs adequate and appropriate internal control andfollow-up of the operations would be able to safeguard its assets against any illegitimate useby the executives.


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8.3 Connected Transactions8.3.1 A summary of the connected transactions between PTL and the connected parties

during the past three years is as follows -

Party havingNet Amount Paid to

conflict ofRelationship Description of Pricing policy PCL by PTL

interesttransaction (Bt. 000ûs)

2009-10 2010-11 2011-12

Polyplex PCL is the PCL made advance The price of the 3,467 1,221 4,009Corporation Companyûs major payments on behalf of the transactionLtd. (PCL) shareholder, Company for administrative between PCL and

owning directly expenses, which were the Company wasand indirectly the mainly traveling expenses a normal price in51% of the of employees, general businessCompanyûs share accommodations for practice and wascapital and the employeesû family, the price astwo parties have educational fees for actually paid bycommon directors. employeesû children, PCL in advance

insurance claims of for the Companyemployees, insurance without any extrapremium payments, project charge by PCL.related expenses etc. TheCompany has given theappropriate accountingtreatment to theseexpenses and/or collectedthese amounts from theemployees and paid themback to PCL.

Polyplex PCL is the PTL made payments on The price of the 185 131 102Corporation Companyûs major behalf of PCL, which were transactionLtd. (PCL) shareholder, mainly traveling and other between PCL and

owning directly and expenses of PCL the Company wasindirectly the 51% employees and their a normal price inof the Companyûs families. general businessshare capital and practice and wasthe two parties the price ashave common actually paid bydirectors. company in

advance for PCLwithout any extracharge.

Polyplex PCL is the Purchase of Raw material As per Transfer - - 58,521Corporation Companyûs major - Polyester Chips and Pricing policy ofLtd. (PCL) shareholder, Polyester Film PCL (Study done

owning directly and by Ersnt & Youngindirectly the 51% and TNMMof the Companyûs [Transactional Netshare capital and Margin] Methodthe two parties recommended forhave common Transfer pricingdirectors.

* The outstanding amount payable by PTL to PCL as on 31st March 2012 was Bt 13.5 Mn (within due date),in respect of raw material purchases (material in transit as at March 31st). The amount due from PTL to PCLin respect of the Debit note for expense reimbursement has been remitted before the year end.

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8.3.2 Necessity and reasonableness of the connected transactionThe connected transaction involved the advance payments made by PCL on behalfof the Company for administrative expenses. The payments were made for suchexpenses as transportation, accommodations for employeesû family, educational feesfor employeesû children, insurance claims of employees, project related expenses etc.The Company has given the appropriate accounting treatment to these expenses and/or collected these amounts from the employees and paid them back to PCL. Thereimbursement of advances/expenses was to PCL was at the actual prices incurredwithout any extra charge by PCL.

The connected transaction also involved the advance payments made by the Companyon behalf of PCL for administrative expenses, which were later re-imbursed by PCL tothe Company.

During the year, the connected transaction also involved some purchases of Rawmaterials i.e Polyester Chips and Polyester Film from PCL. All purchases were madeat Armûs Length Pricing at the Transactional Net Margin Method (TNMM) asrecommended by Ernst & Young, India in the Transfer Pricing study done by them.The amount of Baht 13.5 million O/S to be paid to PCL as at the year end is inrespect of some material which was in transit.

8.3.3 Measures or procedures for approval of the connected transactionThe audit committee of PTL has examined the connected transaction described in thetable above and viewed that it is in accordance with the normal business practice. Forsuch transactions in the future, the Company can undertake the transactions and informthe audit committee on a quarterly basis.

For any other future connected transactions, the Company will assign the concernedunits to gather the relevant information and provide it to the audit committee to beused as a basis for its consideration on those transactions as to whether they areconsistent with the normal business practice and the market price. The Companywould follow the regulations of the SEC and SET in this regard. The audit committeehas to consider and inform the board of directors for the approval. The directors whohave a conflict of interest may not partake in the giving of comments on thoseconnected transactions.

8.3.4 Policy for potential connected transactionsFor any connected transactions that may take place in the future, the Company has apolicy to set appropriate conditions on the said transactions based on the reasons andnecessity of the Company. The connected transactions performed over the past periodwere advance payments, made for such expenses as transportation, accommodationsfor employeesû family, educational fees for employeesû children, insurance claims of


employees etc and also some raw material procurements as explained above. Therewere no extra charges by the parent company regarding such cost and expenses asbrand name and R & D, and so on. In performing any future connected transactions,PTL board of directors will comply with the law governing securities and exchange andthe regulations, notifications and orders of the Stock Exchange of Thailand, as well asthe regulations regarding disclosure of information about connected transactions andacquisition or disposal of core assets of companies or subsidiary companies accordingto the accounting standards defined by the Institute of Certified Accountants andAuditors of Thailand.

Where the connected transaction involves any person who may have a conflict ofinterest, the Company will arrange for the audit committee to give opinion on thenecessity and appropriateness of that transaction. In case the audit committee hasno expertise in any such transaction, the Company will have an independent expertor its external auditor provide opinion on that transaction to be used as a basis ofdecision-making by the board of directors or the shareholders, as the case may be.The Company will disclose such connected transactions in the notes to the financialstatements duly audited by its external auditor.

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9. Financial Position and Operational performance

9.1 Financial statementsAuditor

Year Name of auditor CPA no. Auditing firm

2011/12 Mr.Narong Puntawong 3315 Ernst & Young Office Limited

(April 1, 2011-Mar 31, 2012)


(April 1, 2010-Mar 31, 2011)


(April 1, 2009-Mar 31, 2010)


(Apr 1, 2008-Mar 31, 2009)


(Apr 1, 2007- Mar 31, 2008)

2006/2007 Mr.Pisit Chiwaruangroch 2803 KPMG Phoomchai Audit Ltd.

(Apr 1, 2006 - Mar 31, 2007)

2003-04 to 2005-06 Mr. Vichien Thamtrakul 3183 KPMG Phoomchai Audit Ltd.

(Apr 1, 2003 - Mar 31, 2006)

Auditorûs reportFor all the past years, including the year ended on March 31st 2012, the Auditors have givenan unqualified opinion that the financial statements were fairly presented and prepared inaccordance with generally accepted accounting principles.

The Company had set up subsidiaries, namely Polyplex (Singapore) Pte. Ltd. (PSPL) inJuly 2004, Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi (PE) inSeptember 2004, Polyplex (Americas) Inc. in January 2006 and Polyplex Trading (Shenzhen)Co. Ltd in 2009. In 2011, two new subsidiaries were formed in the USA. An InvestmentHolding Company named Polyplex Americas Holding Inc. (PAH), and Polyplex USA LLC (PU),the Company under which the new PET Thin film line project is being implemented. PAHis 100% held by Polyplex (Thailand) Plc (PTL) and PU is 100% held by PAH. The financialstatements of last 3 years, for both Consolidated and Standalone, latest being the year endedon 31st March 2012, have been given for the purpose of comparison and for the appreciationof the change in revenues and profitability over the years.

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78Annual Report 2011-2012Polyplex (Thailand) Public Com

pany Limited

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Polyplex (Thailand) Public Company LimitedBalance Sheet

Unit : Baht 000ûs

Unconsolidated Consolidated2009/2010 2010/2011 2011/2012 2009/2010 2010/2011 2011/2012

April - March April -March April - March April - March April - March April - MarchAmount % Amount % Amount % Amount % Amount % Amount %

Assets

Current Assets

Cash and cash equivalents 108,797 1.80 42,042 0.58 29,641 0.47 711,418 8.02 1,231,009 10.32 1,532,173 13.22

Current investments - - 164,947 2.26 - - - - 164,947 1.38 - -

Accounts receivable 644,582 10.68 1,181,339 16.17 805,876 12.86 1,167,444 13.17 1,896,159 15.89 1,396,692 12.05

Amounts due from related party - - - - - - 60,646 0.68 221,816 1.86 - -

Inventories 411,888 6.83 470,777 6.45 564,604 9.01 1,116,293 12.59 1,732,304 14.52 1,623,792 14.01

Other current assets 42,876 0.71 132,752 1.82 81,238 1.30 105,000 1.18 212,333 1.78 411,744 3.55

Total Current Assets 1,208,144 20.02 1,991,857 27.27 1,481,359 23.64 3,160,801 45.74 5,458,568 45.74 4,964,401 42.82

Non-Current Assets

Investment in subsidiary 2,113,486 35.03 1,936,415 26.51 1,313,492 20.96 - - - - - -

Land, premises and equipment-net 2,629,228 43.58 3,115,042 42.65 3,118,711 49.77 5,618,255 63.36 5,979,206 50.11 6,268,572 54.07

Intangible assets-net - - - - - - 5,140 0.06 5,228 0.04 5,882 0.05

Other non current assets 82,499 1.37 260,825 3.57 353,089 5.63 82,547 0.93 489,899 4.11 353,966 3.05

Total Non-current Assets 4,825,213 79.98 5,312,282 72.73 4,785,292 76.36 5,705,943 54.26 6,474,333 54.26 6,628,420 57.18

Total Assets 6,033,356 100.00 7,304,139 100.00 6,266,650 100.00 8,866,744 100.00 11,932,901 100.00 11,592,820 100.00

79

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Polyplex (Thailand) Public Company LimitedBalance Sheet

Unit : Baht 000ûs



Liabilities & Shareholdersû EquityCurrent Liabilities

Accounts payable 510,356 8.46 821,531 11.25 602,327 9.61 854,975 9.64 1,290,564 10.82 1,092,932 9.43Dividend payable - - - - - - - - - - - -Long-term loans-due within one year 192,139 3.18 256,001 3.50 271,996 4.34 454,064 5.12 387,200 3.24 363,760 3.14Short-term loans from financial

institutions 50,000 0.83 - - 80,000 1.28 52,266 0.59 194,484 1.63 326,745 2.82Other current liabilities 80,276 1.33 106,458 1.46 79,215 1.26 135,878 1.53 189,958 1.59 189,509 1.63

Total current liabilities 832,771 13.80 1,183,990 16.21 1,033,538 16.49 1,497,184 16.89 2,062,206 17.28 1,972,946 17.02Non-current LiabilitiesLong-term loans-net of amount due

within one year 1,231,404 20.41 1,120,200 15.34 1,156,340 18.45 2,352,620 26.53 1,504,733 12.61 1,250,517 10.79Other non-current liabilities - - - - 6,052 0.10 4,456 0.05 3,258 0.03 9,768 0.08

Total Liabilities 2,064,175 34.21 2,304,191 31.55 2,195,930 35.04 3,854,260 29.92 3,570,197 29.92 3,233,231 27.89Shareholdersû EquityIssued & Paid-up Share CapitalPreferred shares - - - - - - - - - - - -Ordinary shares 800,000 13.26 800,000 10.95 800,000 12.77 800,000 9.02 800,000 6.70 800,000 6.90Premium on ordinary shares 1,370,460 22.71 1,370,460 18.76 1,370,460 21.87 1,370,460 15.46 1,370,460 11.48 1,370,460 11.82Translation adjustment - - - - - - (388,776) (4.38) (316,111) (2.65) (316,738) (2.73)Retained earnings (deficits) 1,798,721 29.81 2,829,489 38.74 1,900,261 30.32 3,211,091 36.21 6,481,976 54.32 6,479,285 55.89Total Shareholdersû Equity 3,969,181 65.79 4,999,949 68.45 4,070,721 64.96 4,992,775 69.86 8,336,325 69.86 8,333,007 71.88Minority Interest - - - - - - 19,709 0.22 26,380 0.22 26,583 0.23Total Liabilities and Shareholdersû

Equity 6,033,356 100.00 7,304,139 100.00 6,266,650 100.00 8,866,744 100.00 11,932,901 100.00 11,592,820 100.00

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pany Limited

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Polyplex (Thailand) Public Company LimitedStatement of Income and Retained Earnings

Unit : Baht 000ûs



Revenues

Net sales 3,174,656 95.18 4,980,737 97.38 4,560,647 93.92 7,125,366 97.61 11,183,174 98.79 10,143,111 98.82

Other revenues 85,376 2.56 58,745 1.15 295,316 6.08 111,323 1.53 106,586 0.94 120,697 1.18

Gain on foreign exchange 75,315 2.26 75,517 1.48 - - 62,832 0.86 30,410 0.27 - -

Total Revenues 3,335,347 100.00 5,115,000 100.00 4,855,962 100.00 7,299,520 100.00 11,320,169 100.00 10,263,808 100.00

Costs and Expenses

Cost of sales 2,546,428 76.35 3,104,616 60.70 3,831,385 78.90 5,394,355 73.90 6,502,517 57.44 7,831,563 76.30

Selling and administrative expenses 278,709 8.36 311,026 6.08 333,606 6.87 685,410 9.39 755,461 6.67 855,707 8.34

Loss of foreign exchange - - - - 221,776 4.57 - - - - 122,298 1.19

Management Benefit expenses 23,189 0.70 21,024 0.41 - - 49,084 0.67 48,531 0.43 - -

Total Expenses 2,848,326 85.40 3,436,667 67.19 4,386,767 90.34 6,128,849 83.96 7,306,510 64.54 8,809,568 85.83

Profit (loss) before interest expenses 487,021 14.60 1,678,333 32.81 469,195 9.66 1,170,671 16.04 4,013,659 35.46 1,454,239 14.17

Interest expenses (39,074) (1.17) (35,565) (0.70) (34,054) (0.70) (114,655) (1.57) (92,728) (0.82) (56,140) (0.55)

Income Tax - - - - - - (12,177) (0.17) (27,882) (0.25) (34,187) (0.33)

Net profit (loss) after income tax 447,947 13.43 1,642,767 32.12 435,142 8.96 1,043,839 14.30 3,893,049 34.39 1,363,912 13.29

Net loss of minority interest - - - - - - (4,453) (0.06) (10,164) (0.09) (2,235) (0.02)

Net profit (loss) 447,947 13.43 1,642,767 32.12 435,142 8.96 1,039,386 14.24 3,882,885 34.30 1,361,678 13.27

Earnings (losses) per share (Bt.) 0.56 - 2.05 - 0.54 - 1.30 - 4.85 - 1.70 -

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Polyplex (Thailand) Public Company LimitedCash Flow Statement

Unit : Baht 000ûs

Unconsolidated Consolidated

2009/2010 2010/2011 2011/2012 2009/2010 2010/2011 2011/2012

April-March April-March April-March April-March April-March April-March

Cash flow from operating activitiesNet profit (loss) 447,947 1,642,767 435,142 1,039,386 3,882,885 1,361,678Adjustment to reconcile net profit ofnet cash provided by operatingactivities

Depreciation and amortization 162,014 190,413 196,282 356,731 357,538 369,432Increase (decrease) allowance for

doubtful debts 667 (233) (25) 1,852 783 279Allowance for diminution in value

of inventories (reversal) 1,709 (17,289) 2,720 1,575 (17,289) 2,720Dividend income (4,489) (9,858) (217,596) - - -Interest Expense 37,309 33,934 33,003 104,658 76,002 45,078Income Tax expense - - - 12,177 27,882 34,187Gain on disposal of property,

plant and equipment (823) (402) - (668) (610) (2)Unrealized losses (gains) on

foreign exchange (100,555) (99,795) 20,508 (101,239) (97,579) 19,969Exchange loss on the redemption

of investment in subsidiary 29,561 37,407 253,268 - - 253,268Gains on sales of current

investments (1,841) (472) (3,538) (1,841) (472) (3,538)Net loss of minority interest - - - 4,453 10,164 2,235

Profit (Loss) from operation beforechanges in operating assets andliabilities 571,500 1,776,472 719,763 1,417,084 4,239,304 2,085,305

Decrease (Increase) in operatingassetsAccounts receivable 11,938 (528,037) 371,036 152,713 (723,653) 496,000Balance due from/to a related

company - - - (8,406) (161,170) -Inventories (99,879) (41,599) (96,548) (157,992) (598,525) 105,741Other current assets 4,717 (89,258) 51,514 (18,665) (105,941) 25,872Other non-current assets (978) 3,994 1,222 (890) 3,997 1,221

Increase (Decrease) in operatingliabilities

Accounts payable 132,242 156,367 (78,613) 296,808 281,323 (57,671)Other current liabilities 597 26,492 (27,381) (4,683) 38,614 5,727Income tax paid - - - (24,011) (14,624) (42,530)Other non- current liabilities - - 1,682 2,500 (1,199) 2,282

Cash flow provided from (used in)operating activities 620,135 1,304,431 942,676 1,654,457 2,958,128 2,621,946


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Polyplex (Thailand) Public Company LimitedCash Flow Statement

Unit : Baht 000ûs


2009/2010 2010/2011 2011/2012 2009/2010 2010/2011 2011/2012


Cash flow from operating activitiesDecrease (increase) in current

investments 350,541 (164,475) 168,485 350,541 (164,475) 168,485Dividend from subsidiary 4,489 9,858 217,596 - - -Increase in advance payment

for purchases of assets (7,528) (182,321) (93,486) (7,528) (411,349) 134,712Increase in Investment in subsidiary 265,735 139,665 369,655 - - -Increase (decrease) in accounts

payable for purchases of fixedassets 22,120 161,359 (145,631) 22,120 161,359 (145,631)

Purchases of property, plant andequipment (581,187) (676,237) (192,207) (617,742) (760,722) (824,058)

Increase in intangible assets - - - (58) (731) (1,433)Proceeds from sales of property,

plant and equipment 873 411 - 1,125 1,718 70,089Net cash used in investing activities 55,042 (711,739) 324,412 (251,543) (1,174,201) (597,837)Cash flow from financing activities

Interest Paid (44,004) (34,285) (40,538) (112,363) (74,766) (54,066)Increase (Decrease) in short term

loans from financial institutions 50,000 (50,000) 80,000 (51,828) 142,218 132,261Dividend Paid (692,000) (612,000) (1,360,000) (692,000) (612,000) (1,360,000)Dividend paid to minority

shareholders - - - (1,418) (278) (2,187)Increase/(decrease) in long-term

loans 102,058 36,838 41,049 (146,756) (778,852) (275,697)Cash provided from financing

activities (583,947) (659,447) (1,279,489) (1,004,365) (1,323,679) (1,559,689)Currency Translation changes - - - (119,668) 59,342 (163,256)

Increase in cash and cashequivalents 91,231 (66,755) (12,401) 278,881 519,590 301,164

Cash and cash equivalents at thebeginning of period (April 1) 17,566 108,797 42,042 432,538 711,418 1,231,009

Cash and Cash equivalents at theend of period (March 31) 108,797 42,042 29,641 711,418 1,231,009 1,532,173

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83

Polyplex (Thailand) Public Company LimitedFinancial Statement


2009/2010 2010/2011 2011/2012 2009/2010 2010/2011 2011/2012


Liquidity Ratios

Current ratio (time) 1.45 1.68 1.43 2.11 2.65 2.52Quick ratio (time) 0.90 1.17 0.81 1.25 1.60 1.48Cash flow current ratio (time) 0.71 1.29 0.85 1.14 1.66 1.30Receivable current ratio (time) 4.83 5.46 4.59 5.70 7.30 6.16Avg. debt collection period (day) 74.57 65.99 78.43 63.20 49.31 58.44Inventory turnover period (time) 110.69 88.87 97.18 19.00 15.68 14.37Avg. selling period (day) 3.25 4.05 3.70 18.94 22.96 25.05Payable current ratio (time) 6.41 5.73 6.27 8.18 6.86 7.18Loan repayment period (day) 56.18 62.78 57.40 44.02 52.50 50.14Cash cycle (day) 21.64 7.25 24.73 38.12 19.77 33.34Profitability RatiosGross profit margin (%) 19.79% 37.67% 15.99% 24.29% 41.85% 22.79%Operating profit margin (%) 11.01% 31.42% 8.68% 14.67% 35.10% 14.35%Other profit margin (%) 2.56% 1.15% 6.08% 1.53% 0.94% 1.18%Cash to profit margin (%) 108.47% 74.53% 123.80% 116.94% 69.25% 141.62%Net profit margin (%) 13.43% 32.12% 8.96% 14.24% 34.30% 13.27%Return on equity (%) 11.39% 36.63% 9.59% 21.63% 58.06% 16.29%Efficiency RatiosReturn on assets (%) 7.39% 24.63% 6.41% 11.71% 37.34% 11.58%Return on fixed assets (%) 25.23% 63.83% 20.26% 24.89% 73.13% 28.27%Asset turnover (time) 0.55 0.77 0.72 0.82 1.09 0.87Financial Policy RatiosDebt to equity ratio (time) 0.52 0.46 0.54 0.77 0.43 0.39Interest coverage ratio (time) 16.61 52.54 19.54 13.28 47.03 32.44Commitment coverage ratio

(cash basis) (time) 0.83 1.50 2.10 1.81 2.44 2.16Pay out ratio (%) 40% 40% 31% 40% 40% 31%


9.2 Explanation and analysis of operational performance and financial status9.2.1 Operational performance

PTL, a subsidiary of PCL, was incorporated on March 26, 2002 to engage in theproduction and distribution of PET film (Polyethylene Terephthalate Film or PolyesterFilm) mainly for export markets focusing on packaging, industrial and electricalsegments. The Company commenced operations from its first production line on April2, 2003 and the second production line on November 12 of the same year. TheCompanyûs factory is situated in Siam Eastern Industrial Park, Rayong on a land area of20 rai 22 sq. wah which was later expanded by another land area of 8 rai 28.9 sq.wah for implementation of the captive PET resin project. Another plot of land with anarea of 35 rai, 2 nang and 54.80 square wah was bought opposite to the factory,where The Companyûs Extrusion Coating project, the Cast Polypropylene Project andthe Silicone Coating project have been set up. The Blown PP project and the ExtrusionCoated Film line II projectsare also being set up on the same plot of land. The PETThick Film line, along with the new PET resin plant, project is being implemented inthe new plot of land purchased in 2010, adjacent to the existing factory in Rayong,with an area of 35 rai, 2 Nang and 66.5 square wah.

All our operational product lines in Thailand have the following certifications:● ISO 14001:2004 certification on Environment Management system● ISO 9001:2008 certification on Quality Management system● OHSAS 18001:2007 certification on Occupational Health and Safety Management

system● ISO 22000:2005 certification on Food Safety standards● TPM Excellence Award (Category A)

All our product lines in Turkey have the following certifications:● ISO 14001:2004 certification on Environment Management system● ISO 9001:2008 certification on Quality Management system● OHSAS 18001:2007 certification on Occupational Health and Safety Management

system● BRC/IoP - certification on Global Standard For Packaging and Packaging

Materials (For Plain and Metallized Film lines)

Polyplex group aims to become one of the world market leaders in PET film industry bycontinuously expanding its market share through regular expansions in capacity. TheThin PET film line in US would be adding another 31,000 MT per annum in theCompanyûs combined capacity. By venturing into the manufacture of related productssuch as BOPP film (In India) and CPP film (In Thailand), which are other Packagingsubstrates used by Converters, in addition to PET thin film, Polyplex is moving towardsestablishing itself as a Preferred packaging substrate provider as against just a PET thin

85

film supplier. Apart from this, in order to further diversify its product range, the group hasregularly been expanding into new value added products such as Silicone coated film(In India - 2007, Thailand - 2012), Extrusion coated films (In Thailand - 2008), increasingits Metallized film capacities in Turkey and Thailand in May 2008 and the Blown PP filmand Extrusion Coated Film (Line 2) projects which are under implementation in Thailand.The Company is also venturing into Thick PET film and is currently in the process ofsetting up this project in Thailand.

Polyplex group has set out clear business strategies:1) Focus on product development and technical services to penetrate high growth

and high margin markets,2) Cost leadership3) Boosting delivery efficiency through focus on distributed manufacturing and

logistics4) Diversifying the product portfolio to minimize the risk of cyclical impact of the PET

film industry, to increase stability of Earnings5) Customer satisfaction through supply of consistent quality products6) Judicious mix of On-shore, Off-shore and Near-shore strategy.

The demand-supply imbalance in the PET Thin film industry which resulted in a sharpincrease in the selling prices in year 2010, witnessed a correction in year 2011, with newcapacities coming into the market, especially in the Asian region and resulting in a morebalanced demand-supply situation. As a result, selling prices of polyester film droppedsharply. The industry also saw a sharp increase in the major raw material prices (PTA/MEG) due to Crude oil price surge. Due to the combined effect of reduced selling pricesand increased raw material costs, there was a sharp decline in value addition levels inFY 2011-12.

The highlights of the yearûs performance are as follows:

TOTAL REVENUESConsolidated:Sales Revenue:The consolidated sales revenue has decreased to Baht 10,143 million, (Baht 1,040million or 9.30% decline over previous year). Decrease in revenues is mainly on accountof a significant drop in selling prices of Polyester films, as compared to the extra ordinaryprice levels seen in previous year, due to the oversupply situation created by the newcapacities that were added in 2011. Additional sales volumes from the new SiliconeCoating line (which commenced commercial production in March 2012) and higherutilizations in the existing Extrusion Coated Film Line and CPP Film line in Thailand havehelped to partly offset the impact of lower selling prices of PET films.


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Table illustrating consolidated sales revenue from Exports and Domestic sales is as below:

2009-10 2010-11 2011-12Market

Bt. million % Bt. million % Bt. million %

Exports 5,965.27 83.72 9,611.07 85.94 8,495.31 83.75

Domestic sales 1,160.09 16.28 1,572.10 14.06 1,674.80 16.25

Total 7,125.36 100.00 11,183.17 100.00 10,143.11 100.00

Note: Sales made by the distribution company in the US/China has been consideredas Exports. Previous year figures have been regrouped accordingly.

The value additions [VA = Selling price - Raw Material Cost] during the year for PTL and PEare shown below. In comparison to the FY 2010-11 when the value addition levels witnessedan exceptional surge, the VAûs in FY 2011-12 got gradually corrected to normal levels.

Other Income:The other income has increased to Baht 120.69 million from Baht 106.59 million in theprevious year, mainly due to higher other income at Thailand on account of somecreditor balances written off and also higher income from miscellaneous sales.

Standalone:Sales Revenue:The Companyûs total sales revenue is mainly driven by Exports, with 75-80% of its totalsales revenue coming from exports.

Q1 2010-11

1.01

1.53

Q4 2010-11

2.16

2.79

Q2 2010-11

1.51

2.01

Q3 2010-11

2.44

3.08

Q1 2011-12

1.61

2.09

Q4 2011-12

0.67

1.22

Q2 2011-12

0.90

1.38

Q3 2011-12

0.83

1.33

Q1 2010-11

0.83

1.36

Q4 2010-11

2.00

2.38

Q2 2010-11

1.25

1.78

Q3 2010-11

1.97

2.41

Q1 2011-12

1.31

1.73

Q4 2011-12

0.54

1.08

Q2 2011-12

0.78

1.23

Q3 2011-12

0.66

1.22

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Table illustrating the Companyûs sales revenue from export and domestic sales is below:

2009-10 2010-11 2011-12Market

Bt. million % Bt. million % Bt. million %

Exports 2,496.48 78.64 3,950.99 79.33 3,640.71 79.83

Domestic sales 678.17 21.36 1,029.75 20.67 919.94 20.17

Total 3,174.65 100.00 4,980.74 100.00 4,560.65 100.00

In the financial year 2011-12, the Company achieved total sales revenues of Baht 4,561million, a decrease of Baht 420 million or 8.4% over the previous year. The decrease ismainly due to decrease in selling prices of polyester film due to oversupply situation,partly offset by higher sales volumes of other product lines as explained above

Other Income:The other income has increased to Baht 295.32 million from Baht 58.7 million, mainlydue to dividend income of Baht 217 million from the companyûs subsidiaries, whichincludes a maiden dividend of Baht 195 million from the Singapore subsidiary companyand also on account of some creditor balances written off.

TOTAL EXPENSESConsolidatedThe key elements of the Companyûs cost structure are raw materials, packing, electricity& fuel, depreciation, staff cost and selling & administrative expenses.

Cost of sales (COS) amounted to Baht 7,832 million as compared to Baht 6,551 millionof previous year, representing 88.9% of the total expenses, slightly lower than 89.7% ofthe previous year. Cost of sales includes mainly the raw material costs, packing costs,utilities, depreciation on building and machinery, staff costs etc. A broad break up ofCOS is given below:

Description 2011-12 2010-11 2009-10

Raw materials and consumables used (incl.change in inventory) 79.2% 78.2% 75.6%

Depreciation (in COS) 4.6% 5.1% 6.1%

Salaries, wages and other employee benefits (in COS) 5.5% 5.7% 5.4%

Utilities (Power/Natural Gas/ Chilled water etc) 6.2% 7.2% 8.7%

Others 4.5% 3.8% 4.2%

100.0% 100.0% 100.0%

The increase in the COS in absolute terms is Baht 1,281 million (or 19.6%), which ismainly on account of higher prices of PTA and MEG as well as other raw material usedby other product lines. Increase in the volume of CPP, Extrusion coated films alsocontributed to the higher COS in current year.

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The selling expenses amounted to Baht 581 million or 6.6% of total expenses ascompared with Baht 546 million or 7.5% in the previous year. It includes shipment costsfor the exported products, inland transportation charges, inland insurance on domesticsales, commission on sales, credit insurance charges and other selling expenses. Theincrease in selling expenses is mainly due to higher sale volumes this year and also dueto higher freight rates. As a % to total expenses, it is lower than previous year since totalexpenses have been higher this year due to the Exchange loss of Baht 122 million ascompared to an exchange gain of Baht 30 million last year.

The administrative expenses amounted to Baht 275 million or 3.1% of total expensesas compared with Baht 209 million or 2.9% in the previous year. The administrativeexpenses have been higher than the previous year due to overall increase in scale ofoperations due to new products in Thailand and also higher administrative expenses inthe subsidiaries.

The company recorded a total exchange loss of Baht 122 million as compared to anexchange gain of Baht 30 million in the previous year. The decrease is mainly due to thenet exchange loss at Thailand on account of Preference Share redemption of theSingapore subsidiary due to lower exchange rate prevailing on the redemption date, ascompared with the historical exchange rate, at which the investment was being carriedin the books. This loss was partly offset by some exchange gain from subsidiaries andalso exchange gain in Thailand on the USD denominated Accounts Receivables.

The finance charges have reduced from Baht 93 million to Baht 56 million, mainly dueto the repayments, including some prepayment of loans by the subsidiary in Turkey forbetter deployment of surplus funds.

StandaloneCost of sales (COS) amounted to Baht 3,831 million, representing 87.3% of the totalexpenses, higher than Baht 3,123 million or 90.9% of the previous year. The mainreason for the higher COS is higher production volumes as well as higher average rawmaterial prices during the year.

A broad breakup of the COS is given below:

Description 2011-12 2010-11 2009-10

Raw materials and consumables (incl.change in all inventory) 79.4% 78.3% 78.3%

Depreciation (in COS) 4.9% 5.8% 6.0%

Salaries, wages and other employee benefits (in COS) 6.4% 6.8% 5.8%

Utilities (Power/Natural Gas/ Chilled water etc) 7.5% 7.9% 8.7%

Others 1.8% 1.2% 1.2%

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The selling expenses amounted to Baht 263 million or 6 % of total expenses ascompared with Baht 260 million or 7.6% in the previous year. The increase in sellingexpenses is mainly due to higher sales volumes.

The administrative expenses amounted to Baht 70 million or 1.6% of total expenses,higher compared with Baht 54 million or 1.6% in the previous year. Higher administrativeexpenses are on account of increase in scale of operations.

The Company has recorded an Exchange loss of Baht 222 million, as compared to anexchange gain of Baht 76 million in the previous year. The loss is mainly due to theexchange loss on account of Preference Share redemption of the Singapore subsidiarydue to lower exchange rate prevailing on the redemption date, as compared with thehistoric exchange rate, at which the investment was being carried in books.

The finance charges have reduced from Baht 36 million to Baht 34 million, due torepayment of loans and also due to lower interest rates.

Profit margins - Gross Profit, Operating Profit and Net profit ratiosGross profit margin on a consolidated basis has been 22.8% as compared to 41.9% ofprevious year. On a standalone basis, The Company had a gross profit margin of 16.0%in 2011-12, which is lower than 37.7% in the previous year, mainly due to drop in thesales realization, coupled with increase in the raw material costs.

On a consolidated basis, the operating profit margin in the current year has decreasedfrom 35.1% to 14.4%. And on a standalone basis, it has decreased from 31.4% to 8.7%,mainly due reasons of lower average sales realization and higher raw material and othercosts during the year, as explained above.

Net profit margin on a consolidated basis has been 13.3%, as compared to 34.3% of theprevious year and on a standalone basis it has been 9.0% as compared to 32.1% ofprevious year.

9.2.2 Financial statusTOTAL ASSETSAs at 31st March 2012, The Companyûs consolidated total assets were Baht 11,593million, lower by 2.9% as compared to Baht 11,933 million in the previous year.

On a Standalone basis, the total assets as at 31st March 2012 were Baht 6,267 million,lower by about 14.2% compared to Baht 7,304 million of previous year.

The main components of Total Assets are Current assets, Fixed assets, Investments andother non-current assets. A brief summary of the movement in the various componentsof total assets is given below:


Accounts receivableThe Companyûs consolidated Net Accounts Receivables as of March 31, 2012 stood atBaht 1,397 million which is lower compared to Baht 1,896 million as of March 31, 2011or a decrease of 26.3%. The decrease in receivables is mainly due to the drop in sellingprices in current year.

The Companyûs Standalone Net Accounts Receivables as of 31st March, 2012 wereBaht 806 million, as against Baht 1,181 million in the previous year, or a decrease of31.8%. The decrease in receivables is mainly due to the significant decrease in sellingprices as explained above.

InventoriesOn a consolidated basis, the total inventories have reduced from 1,732 million to 1,624million, a decrease of Baht 108 million or 6.3%. On a standalone basis, there is anincrease from Baht 471 million to Baht 565 million or 19.9%. The decrease in inventorylevels is mainly due to lower stock of finished goods in Polyplex Americas Inc comparedto March 2011. On a standalone basis, the increase is mainly in raw material stock dueto higher inventory of polyester chips and also inventory of raw material for the newSilicone Coating Film line, and also some increase in work in process inventory.

Net Fixed AssetsConsolidated Net Fixed Assets (including capital work in progress -CWIP, Goodwill andOther Intangible Assets) have increased by Baht 290 million from Baht 5,984 million toBaht 6,274 million, due to the net impact of the following:● Increase due to additions to fixed assets - Baht 832 million, mainly on account of

the additions in the Silicone Coating Line which was capitalized in March 2012,and Capital work in progress relating to other projects under implementation inThailand and USA, apart from other normal CAPEX.

● Reduction on account of fixed assets disposed/written off during the year - Baht70 million (Gross book value, net of accumulated depreciation)

● Decrease on account of Translation adjustment - Baht 103 million (net oftranslation impact on accumulated depreciation), mainly due to translation ofsubsidiaries Net Fixed Assets, denominated in Euro, USD and RMB, into THBfor the purpose of consolidation.

● Decrease on account of depreciation charged during the year - Baht 369 million

The Company (standalone) Net Fixed Assets have increased by Baht 4 million, fromBaht 3,115 million to Baht 3,119 million, due to the net impact of the following:

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❍ Increase due to net addition to fixed assets - Baht 200 million mainly on accountof addition to Building/Machinery relating to the Silicone Coating project, capitalwork in progress relating to the PET Thick Film project, Blown PP and ExtrusionCoated Film projects and Normal CAPEX in existing plants

● Decrease on account of depreciation charged during the year - Baht 196 million

Investment in subsidiariesDuring the year, the Company redeemed USD 34.3 million worth Preference Shares ofPolyplex (Singapore) Pte Ltd (PSPL)

The Company invested USD 22.0 million in Equity shares of the new Company -Polyplex Americas Holding Inc (PAH), incorporated in the USA. PAH has further investedin another Company - Polyplex USA LLC (PU), under which the project for PET ThinFilm manufacture is being implemented.

Return on assetsOn a consolidated basis also, the return on assets has been 11.6% as compared to37.3% in the previous year, mainly due to decrease in profitability during the currentyear.

On a Standalone basis, the Companyûs return on assets has been 6.4% as compared to24.6% in the previous year, mainly due to decrease in profitability during the currentyear.

9.2.3 LiquidityCash flowFor the year 2011-12, the Company and its subsidiaries generated net cash fromoperating activities amounting to Baht 2,622 million and Baht 168 million fromredemption of liquid investments. Out of these, Baht 765 million (net of sales of fixedassets) was expended for purchase, including advances for machinery & equipment(mainly for the Silicone Coating project and other ongoing projects at Thailand and USA)and other fixed assets, Baht 54 million was paid as finance charges on the long termand short term borrowings and, Baht 143 million net outflow was on account of loanmovement (long term and short term bank borrowings). There was an outflow of Baht1,360 million on account of dividend paid by the Company for 2010-11 and Interimdividend for 2011-12 and Baht 2.2 million of dividend payout by PA to the minorityshareholders. The balance thereof, partly offset by reduction on account of translationadjustment of Baht 163 million, along with the opening balance of Baht 1,231 millionresulted in a net closing balance of Baht 1,532 million.


During the year 2011-12, the Company, on a standalone basis, had generated netcash from operating activities of Baht 943 million, Redemption of Preference Shareinvestment in Polyplex (Singapore) Pte Ltd - Baht 1,046 million, dividend from theSingapore/US subsidiaries of Baht 217 million, Baht 168 million from redemption ofliquid investments and Baht 121 million net inflow on account of loan movement (longterm and short term bank borrowings). Of these, Baht 676 million was invested in thenew subsidiary in the USA, Baht 431 million was used for purchase of fixed assets &other assets (mainly for the Silicone Coating Project and Thick PET Film line project),Baht 40 million was paid as finance charges on the Long/short term loans. Therewas an outflow of Baht 1,360 million on account of dividend for 2010-11 and Interimdividend for FY 2011-12. The deficit thereof together with the opening balance of Baht42 million resulted in a net closing balance of Baht 30 million.

Liquidity ratioIn 2011-12, consolidated current ratio was 2.52 and quick ratio was 1.48. The Companyûs(standalone) current ratio and quick ratio were 1.43 and 0.81 respectively. Consolidatedaverage debt collection period during 2011-12 was 58 days along with Account payablesperiod of 50 days and average selling period of 25 days, resulting in a cash cycle of 33days as against a cash cycle of 20 days of previous year. The average debt collectionperiod of The Company (standalone) during 2011-12 was 78 days along with Accountspayable period of 57 days and average selling period of 4 days resulting in cash cycleof 25 days as against a cash cycle of 7 days in previous year.

9.2.4 Sources of fundsSources of funds consist of long term and short term loans from financial institutionsand shareholdersû equity.

TOTAL LIABILITIESCurrent LiabilitiesAs at 31st March, 2012, consolidated current liabilities stood at Baht 1,973 million, adecrease of Baht 89 million from Baht 2,062 million in the previous year, mainly dueto the following:● Decrease in Trade and other payables by Baht 198 million, mainly due to

reduction in payables for Fixed assets due to payments made to the vendors ofSilicone Coating project in Thailand

● Increase in other liabilities by Baht 4 million ( mainly provision for expenses)

● Decrease in current portion of long term loans by Baht 23 million due toprepayment of loans by the subsidiary in Turkey

● Decrease in Income tax payable by Baht 5 million, mainly due to lower tax inthe subsidiary in the USA due to lower taxable profits this year.

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● The above decrease is partly offset by a net increase in short term borrowings -Baht 132 million, at Thailand and the subsidiary in US due to increase in workingcapital requirement

As at 31st March, 2012, The Companyûs Standalone current liabilities stood at Baht1,034 million, a decrease of Baht 150 million from Baht 1,184 million in the previousyear, mainly due to decrease in payables for Fixed assets (Baht 140 Million), Tradepayables (Baht 79 Million), and decrease in other current liabilities (Baht 27Million), partly offset by increase in Short term borrowings by Baht 80 million andincrease in current portion of loans (Baht 16 Million)

Term DebtsOn a consolidated basis, the term debt (net of current portion) has decreased by Baht254 million from Baht 1,505 million to Baht 1,251 million. The decrease in consolidateddebt is mainly on account of loan repayments, including prepayment of loans duringthe year by the subsidiary in Turkey (approx. Euro 5 Million) for better deploymentof surplus funds. This is partially offset by additional borrowings at Thailand for theSilicone Coating project and net exchange loss on loan restatements in Thailand.

The Companyûs term debt (net of current portion) has increased from Baht 1,120 millionto Baht 1,156 million due to additional borrowings at Thailand for the Silicone Coatingproject and also due to the exchange loss on the USD loan restatements, partly offsetby exchange gain on Euro loan restatement and also the loan repayments made duringthe year.

Leveraging & interest coverage ratioThe net debt equity ratio (debt only - short term and long term, including currentportion, after netting off cash & cash equivalents and current investments) of 0.01 ona consolidated basis and 0.34 for the Company standalone are quite comfortable.Debt equity ratio (for total debt, including current + non-current liabilities), is 0.39 ona consolidated basis and 0.54 for the Company standalone, which are also quitecomfortable.

The consolidated interest coverage ratio was 32.4 times as against 47 in previousyear. Decrease in the interest coverage ratio is mainly due to decrease in EBITDAduring the current year, as well as due to lower interest costs.

The Companyûs standalone interest coverage ratio was 19.5 times as against 52.5times in previous year. Decrease in interest coverage ratio is mainly on account ofdecrease in the EBITDA during the year.


CommitmentsAs at 31 March 2012, company had the following commitments and contingent liabilities:(a) The Company had commitments totaling Baht 221 million under various service

agreements. These agreements terminate between May 2012 and September 2016.(b) The Companyûs foreign exchange contracts outstanding at 31 March 2012 are

summarized below.

Bought Sold Contractual exchange rate

Foreign currency amount amount Bought Sold

(Million) (Million) (Baht per 1 foreign currency unit)

US dollar 1.62 18.98 Baht 30.4600 -32.0863 Baht 30.5146 -32.2094

per USD 1 per USD 1

Swiss franc 1.35 - Baht 31.6988 -40.9692

per CHF 1

Euro 0.68 2.53 Baht41.1600 - 41.6000 Baht 40.5600-41.7100

per EUR 1 per EUR 1

Japanese yen - 35.97 - Baht 0.3753 - 0.3756

per JPY 1

The Companyûs subsidiary in Turkey had the following forward exchange contractsoutstanding at 31st March, 2012:

Bought Amt Contractual Exchange RateYTL Buy 1,700,000 TL1.8220-1.8370 per USD1EUR Buy 1,000,000 USD1.3084 - 1.3085 per EUR1

(c) As at 31 March 2012, The Company and its subsidiaries had capital commitmentsof approximately Baht 2,082 million relating to the construction of building andacquisition of machinery and equipment for the upcoming projects. For theCompany Standalone, the capital commitments amounted to Baht 1,178 million.

(d) As at 31 March 2012, the Company is committed for rentals (under OperatingLease agreements) as follows:

Thousand BahtPayable within:1 years 4,7972 to 5 years 4,835

(e) The Company has given short term guarantees worth USD 20.0 million againstworking capital facilities of its subsidiaries. The Company has also given aguarantee of EUR 4.5 million for the long term loans taken by the Turkeysubsidiary.

95

Apart from above, as at 31 March 2012 there were outstanding bank guaranteesof approximately Baht 63.8 million and EUR 25.9 million issued by the banks onbehalf of the Company and its subsidiaries in respect of certain performancebonds as required in the normal course of business.

Shareholdersû equityThe Companyûs shareholdersû equity on a consolidated basis reduced marginally fromBaht 8,336 million to Baht 8,333 million, which is after accounting for dividend paymentof Baht 1,360 million by the Company (1,080 million relating to final dividend of FY2010-11 and Baht 280 million of Interim dividend for FY 2011-12). On a standalonebasis, the decrease in shareholder equity is Baht 929 million from Baht 5,000 million toBaht 4,071 million mainly due to dividend payout of Baht 1,360 during the year andadjustment of Baht 4 million for liability until March 2011 provided towards EmployeeBenefits, under the new accounting Standard (IAS 19) Employee Benefits. This reductionis partly offset by profits during the year of Baht 435 million.

Return on equityOn a consolidated basis, the Return on equity has been 16.3% as compared to 58.1%,in the previous year due to decrease in profitability. The ROE of the Company Standalonefor 2011-12 has been 9.6% as compared to 36.6% in previous year mainly due todecrease in profitability for the year.

The Company has a policy to pay dividend at 40% of consolidated net profits, taking intoaccount economic conditions, growth plans, future deployment opportunities, the Companyûsfinancial position and liquidity and subject to the approval by the shareholders. For theyear 2011-12, the Companyûs board has proposed a dividend of Baht 0.52 per share, outof which, Baht 0.35 per share has already been paid in August 2011 as Interim dividendand the balance of Baht 0.17 per share is payable in August 2012, subject to theapproval of shareholders in the Annual General meeting in July 2012. The lower than40% dividend payout ratio for current year is mainly to conserve funds for supporting theongoing expansions, envisaging a capital outlay of about 200 million USD at PTL and itsnew subsidiary in the USA.

9.3 Main factors which may affect the future operational performance and financialpositionIn comparison with the previous year, the FY 2011-12 was a more challenging year for thePolyester Film industry with new capacity additions coming on board and correcting thedemand supply imbalance witnessed in the previous year. As a result, selling prices declinedto normal levels as in the historic past (excluding FY 2010-11 which was extra ordinary). Theraw material prices also soared due to global crude oil price surge, thereby squeezing marginsof polyester film manufacturers across the globe.


The key challenges for the company in the coming year would be the following:- Raw material price volatility and any significant upward movement in prices, which the

company might not be able pass on completely to the end customers- Successful implementation of the Thick PET film line, Blown PP and Thermal Lamination

Line 2 in Thailand and the Thin PET film line in USA.- Impact of FX fluctuations on profits of the company. The company is exposed to 2 types

of risks, one on the operational profits as well as the restatement of the assets/ liabilitiesof the company on a standalone basis and secondly, on the conversion of the subsidiariesûP&L accounts, which are denominated in USD, Euro and RMB, into THB currency forthe purpose of consolidation.

However, The Company is confident of retaining its competitive edge due to various reasons:1. Benefit from its various projects, the past projects and the ones under implementation as

under:a. PTL and PE have both derived significant benefits from the captive PET resin

production to serve its raw material demand on costs, quality and security ofavailability. The main advantages of a captive resin plant are lower cost ofproduction because of efficiencies in raw material sourcing as also a lowerconversion cost besides ensuring timely availability of raw material for the filmplants. Easy availability of PTA and MEG would reduce the supply risk althoughcost of the same still remains a matter of concern for any PET film manufactureras it has a direct impact on the margins of every manufacturer. Captive productionof resin would also allow the company to develop new specialty film products.

b. Metallizer plants in Thailand and Turkey have helped improve the product mix.With the start up of the second Metallizer plants in Turkey and Thailand in May2008, the companyûs capacity to produce value added films and sell additionalvolumes to its existing as well as new customers has increased significantly. Thishas helped the Company to increase the share of specialty films in the overallsales portfolio.

c. The Extrusion coating plant in Thailand, which commenced operations in Aprilû08,has further helped the company to reduce their exposure to commodity grades offilm and increase the proportion of value added films and other specialty grades offilm. Owing to the successful operation of the first line and the shortage in capacityto meet the growing demand in Europe and USA, the Company has decided toinvest in a second line and is in the process of setting up this project in Thailand.

d. The CPP line which started in Thailand in March 2010 will help the company broadbase its product offerings to the converters and move towards becoming a completepackaging solution provider for its customers, rather than just a PET film supplier.

e. The Silicone Coating project which commenced commercial production in March2012 will further diversify the product portfolio of the company and add a highlyvalue added product in its portfolio.

97

f. The Thick PET film line, under implementation in Thailand will also help furtherdiversify the product portfolio and mitigate the risk associated with the cyclicalnature of the Thin PET film industry, as Thick PET film is a relatively more stableindustry.

2. Polyplex has been deriving benefits from the larger size and distributed manufacturingoperations across 3 existing locations (and the 4th manufacturing unit being set up inUSA) whereby it has qualified as a preferred global supplier with many multinational andlarge customers with global operations.

3. Polyplex has been able to establish itself as a reliable supplier of consistent qualityproducts

4. Polyplex had also invested significantly in distribution, through the acquisition of acompany in USA (Polyplex (Americas) Inc. (PA) and the investment in Polyplex (Trading)Shenzhen Co Ltd, China. The Investment in PA has lead to a better market penetrationand improved customer service for North American markets and it is evident from theincreasing sales volumes of PA. The Company is in the process of implementing a ThinPET film line project in the USA. With its extensive market reach in the North Americanregion, the Company remains confident that this decision, backed by its near shoringstrategy will enable it to service its customers in a more efficient manner.

9.4 Remuneration for auditor/s1. Audit fee

The Company paid audit fee as below:- A total of Baht - paid to the auditor/s for the past fiscal year; and- A total of Baht 2,175,000.00 paid to the accounting firm the auditor/s work

for, or the person or business related to the auditor/s and the accounting firm forthe past fiscal year.

2. Non-audit feeThe Company made payment for other services, i.e. examination of compliance withconditions of promotion certificates, and legal and tax advisory services, including BOIand tax audit services, as follows:- A total of Baht - paid to the auditor/s for the past fiscal year and Baht

- payable in the future for the service not yet fully done for the pastfiscal year; and

- A total of Baht 721,750 paid to the accounting firm the auditor/s work for, orthe person or business related to the auditor/s and the accounting firm forthe past fiscal year, and Baht 560,000 payable in the future for the servicenot yet fully done for the past fiscal year.


To the Shareholders of Polyplex (Thailand) Public Company Limited

I have audited the accompanying consolidated statements of financial position of Polyplex (Thailand)Public Company Limited and its subsidiaries as at 31 March 2012 and 2011, and the related consolidatedstatements of income, comprehensive income, changes in shareholdersû equity and cash flows for theyears then ended, and have also audited the separate financial statements of Polyplex (Thailand) PublicCompany Limited for the same periods. These financial statements are the responsibility of the Companyûsmanagement as to their correctness and the completeness of the presentation. My responsibility is to expressan opinion on these financial statements based on my audits. The consolidated financial statements asat 31 March 2012 and 2011 and for the years then ended include the financial statements of certainsubsidiaries which were audited by other auditors, whose reports have been furnished to me. My opinionon the consolidated financial statements, insofar as they relate to the amounts included for thesesubsidiaries, is based solely on the reports of those other auditors. These consolidated financial statementsreflect total assets of those subsidiaries as at 31 March 2012 and 2011 of approximately Baht 1,720.4million and Baht 1,156.1 million, respectively, total revenues for the years ended 31 March 2012 and2011 of approximately Baht 2,527.0 million and Baht 2,541.1 million, respectively, and profit for the yearsended 31 March 2012 and 2011 of approximately Baht 68.0 million and Baht 67.1 million, respectively.

I conducted my audits in accordance with generally accepted auditing standards. Those standardsrequire that I plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating theoverall financial statement presentation. I believe that my audits and the reports of the other auditorsreferred to in the previous paragraph provide a reasonable basis for my opinion.

In my opinion, based on my audits and the reports of the other auditors, the financial statements referredto above present fairly, in all material respects, the financial position of Polyplex (Thailand) PublicCompany Limited and its subsidiaries and of Polyplex (Thailand) Public Company Limited as at 31 March2012 and 2011, the results of their operations and cash flows for the years then ended in accordancewith generally accepted accounting principles.

Without qualifying my opinion on the aforementioned financial statements, I draw attention to Note 3 tothe financial statements. During the current year, the Company adopted a number of revised and newaccounting standards as issued by the Federation of Accounting Professions, and applied them in thepreparation and presentation of its financial statements.

Narong PuntawongCertified Public Accountant (Thailand) No. 3315

Ernst & Young Office LimitedBangkok: 18 May 2012

Report of Independent Auditor

99

Polyplex (Thailand) Public Company Limited and its subsidiaries

As at 31 March 2012 and 2011

Statements of financial position

The accompanying notes are an integral part of the financial statements.

(Unit: Baht)

Consolidated Separatefinancial statements financial statements

Note 2012 2011 2012 2011

Assets

Current assets

Cash and cash equivalents 8 1,532,172,762 1,231,008,609 29,641,023 42,041,807

Current investments - 164,946,931 - 164,946,931

Trade receivables 7, 9 1,396,691,807 1,896,159,409 805,875,522 1,181,339,397

Inventories 10 1,623,791,836 1,732,304,430 564,604,348 470,776,718

Other current assets

Advance payment for purchase

of goods 7 305,064,743 327,520,752 6,962,067 75,172,272

Others 106,679,672 106,628,352 74,275,686 57,579,905

Total current assets 4,964,400,820 5,458,568,483 1,481,358,646 1,991,857,030

Non-current assets

Investments in subsidiaries 11 - - 1,313,491,892 1,936,414,851

Property, plant and equipment 12 6,268,571,648 5,979,205,759 3,118,710,965 3,115,042,451

Goodwill 3,874,351 3,874,351 - -

Other intangible assets 13 2,007,443 1,353,643 - -

Other non-current assets

Advance payment for purchases of assets 345,315,837 480,027,593 344,484,861 250,998,855

Others 8,650,268 9,871,557 8,604,003 9,826,112

Total non-current assets 6,628,419,547 6,474,332,903 4,785,291,721 5,312,282,269

Total assets 11,592,820,367 11,932,901,386 6,266,650,367 7,304,139,299




Statements of financial position (continued)


(Unit: Baht)


Note 2012 2011 2012 2011

Liabilities and shareholdersû equity

Current liabilities

Short-term loans from financial

institutions 14 326,744,800 194,483,944 80,000,000 -

Trade and other payables 15 1,092,932,141 1,290,563,859 602,326,785 821,530,701

Current portion of long-term loans from

financial institutions 17 363,759,992 387,200,147 271,996,222 256,001,425

Income tax payable 20,891,111 25,767,349 - -

Other current liabilities 168,618,002 164,190,477 79,215,427 106,458,108

Total current liabilities 1,972,946,046 2,062,205,776 1,033,538,434 1,183,990,234

Non-current liabilities

Long-term loans from financial institutions,

net of current portion 17 1,250,516,899 1,504,733,243 1,156,339,503 1,120,200,422

Provision for long-term employee benefits 16 9,767,671 3,257,658 6,051,667 -

Total non-current liabilities 1,260,284,570 1,507,990,901 1,162,391,170 1,120,200,422

Total liabilities 3,233,230,616 3,570,196,677 2,195,929,604 2,304,190,656

101



Statements of financial position (continued)


(Unit: Baht)


Note 2012 2011 2012 2011

Shareholdersû equity

Share capital

Registered

960,000,000 ordinary shares

of Baht 1 each 960,000,000 960,000,000 960,000,000 960,000,000

Issued and fully paid up

800,000,000 ordinary shares

of Baht 1 each 800,000,000 800,000,000 800,000,000 800,000,000

Share premium 1,370,460,000 1,370,460,000 1,370,460,000 1,370,460,000

Retained earnings

Appropriated - statutory reserve 18 96,000,000 96,000,000 96,000,000 96,000,000

Unappropriated 6,383,284,536 6,385,976,165 1,804,260,763 2,733,488,643

Exchange differences on translation of

financial statements in foreign currency (316,737,834) (316,111,008) - -

Equity attributable to owners of the Company 8,333,006,702 8,336,325,157 4,070,720,763 4,999,948,643

Non-controlling interests of the subsidiary 26,583,049 26,379,552 - -

Total shareholdersû equity 8,359,589,751 8,362,704,709 4,070,720,763 4,999,948,643

Total liabilities and shareholdersû equity 11,592,820,367 11,932,901,386 6,266,650,367 7,304,139,299


(Unit: Baht)


Note 2012 2011 2012 2011

Revenues

Sales 21 10,143,110,995 11,183,173,844 4,560,646,524 4,980,737,003

Other income

Exchange gain - 30,409,607 - 75,517,202

Dividend income 11 - - 217,596,131 9,858,356

Others 120,696,524 106,585,826 77,719,578 48,887,092

Total revenues 10,263,807,519 11,320,169,277 4,855,962,233 5,114,999,653

Expenses

Cost of sales 7,831,562,679 6,551,048,934 3,831,384,958 3,122,520,851

Selling expenses 580,889,370 546,066,964 263,126,493 260,250,217

Administrative expenses 274,817,927 209,394,337 70,479,707 53,895,955

Exchange loss 11 122,298,108 - 221,775,751 -

Total expenses 8,809,568,084 7,306,510,235 4,386,766,909 3,436,667,023

Profit before finance cost and

corporate income tax 1,454,239,435 4,013,659,042 469,195,324 1,678,332,630

Finance cost (56,140,406) (92,727,935) (34,053,722) (35,565,397)

Profit before corporate income tax 1,398,099,029 3,920,931,107 435,141,602 1,642,767,233

Corporate income tax 20 (34,186,625) (27,882,009) - -

Profit for the year 1,363,912,404 3,893,049,098 435,141,602 1,642,767,233

Profit attributable to:

Equity holders of the Company 1,361,677,853 3,882,884,885 435,141,602 1,642,767,233

Non-controlling interests of the subsidiary 2,234,551 10,164,213

1,363,912,404 3,893,049,098

Basic earnings per share 22

Profit attributable to equity holders of the Company 1.70 4.85 0.54 2.05


For the years ended 31 March 2012 and 2011

Income statements


103



Statements of comprehensive income


(Unit: Baht)

Consolidated Separatefinancial statements financial statements2012 2011 2012 2011

Profit for the year 1,363,912,404 3,893,049,098 435,141,602 1,642,767,233

Other comprehensive income:

Exchange differences on translation of

financial statements in foreign currency (470,676) 69,449,896 - -

Other comprehensive income for the year (470,676) 69,449,896 - -

Total comprehensive income for the year 1,363,441,728 3,962,498,994 435,141,602 1,642,767,233

Total comprehensive income attributable to:

Equity holders of the Company 1,361,051,027 3,955,550,107 435,141,602 1,642,767,233

Non-controlling interests of the subsidiary 2,390,701 6,948,887

1,363,441,728 3,962,498,994


pany Limited



Statements of changes in shareholdersû equity


(Unit: Baht)

Consolidated financial statements

Equity attributable to the owners of the company

Retained earnings Exchangedefferences on Equity

translation of Total equity attributable toIssued and Appropriated - financial attributable non-controlling Totalfully paid-up Share statutory statements in to owners of interests of the shareholderûs

share capital premium reserve Unappropriated foreign currency the company subsidiaries equity

Balance as at 31 March 2010 800,000,000 1,370,460,000 96,000,000 3,115,091,280 (388,776,230) 4,992,775,050 19,708,757 5,012,483,807

Total comprehensive income for the year - - - 3,882,884,885 72,665,222 3,955,550,107 6,948,887 3,962,498,994

Dividend paid (Note 23) - - - (612,000,000) - (612,000,000) - (612,000,000)

Dividend paid by subsidiary - - - - - - (278,092) (278,092)



Cumulative effect of change in accounting

policy for employee benefits (Note 3) - - - (4,369,482) - (4,369,482) - (4,369,482)

Total comprehensive income for the year - - - 1,361,677,853 (626,826) 1,361,051,027 2,390,701 1,363,441,728

Dividend paid (Note 23) - - - (1,360,000,000) - (1,360,000,000) - (1,360,000,000)

Dividend paid by subsidiary - - - - - - (2,187,204) (2,187,204)


105



Statements of changes in shareholdersû equity (continued)


(Unit: Baht)

Separate financial statements

Retained earnings

Issued and Appropriated -

fully paid-up Share statutory

share capital premium reserve Unappropriated Total

Balance as at 31 March 2010 800,000,000 1,370,460,000 96,000,000 1,702,721,410 3,969,181,410

Total comprehensive income for the year - - - 1,642,767,233 1,642,767,233

Dividend paid (Note 23) - - - (612,000,000) (612,000,000)



Cumulative effect of change in accounting policy for employee benefits (Note 3) - - - (4,369,482) (4,369,482)

Total comprehensive income for the year - - - 435,141,602 435,141,602

Dividend paid (Note 23) - - - (1,360,000,000) (1,360,000,000)





Cash flow statements


(Unit: Baht)


Cash flows from operating activitiesProfit before tax 1,398,099,029 3,920,931,107 435,141,602 1,642,767,233Adjustments to reconcile profit before tax to net cash provided by (paid from) operating activities:

Depreciation and amortisation 369,431,898 357,538,292 196,282,069 190,412,784Doubtful debts (doubtful debts recovery) 279,485 782,822 (24,912) (232,677)Decrease (increase) of inventory to net

realisable value 2,719,948 (17,289,445) 2,719,948 (17,289,445)Gains on sales of current investments (3,538,306) (471,844) (3,538,306) (471,844)Gain on sales of property, plant and equipment (2,000) (609,888) - (401,758)Provision for long-term employee benefits 7,270,420 (1,198,803) 1,682,185 -Unrealised loss (gain) on exchange rate 19,968,774 (97,579,224) 20,508,036 (99,794,864)Exchange loss on the redemption of

investment in subsidiary 253,267,774 37,406,615 253,267,774 37,406,615Dividend income - - (217,596,131) (9,858,356)Interest expenses 45,078,053 76,002,321 33,002,697 33,933,956

Profit from operating activities before changesin operating assets and liabilities 2,092,575,075 4,275,511,953 721,444,962 1,776,471,644

Operating assets (increase) decreaseTrade and other receivables 495,999,770 (723,652,740) 371,036,374 (528,037,054)Inventories 105,740,733 (598,524,624) (96,547,579) (41,598,868)Other current assets 25,872,063 (267,111,292) 51,514,424 (89,258,294)Other non-current assets 1,221,289 3,997,342 1,222,109 3,994,228

Operating liabilities increase (decrease)Trade and other payables (57,671,241) 281,323,022 (78,613,381) 156,367,007Other current liabilities 5,726,528 38,614,107 (27,380,864) 26,492,324Payment of long-term employee benefits (4,988,344) - - -

Cash from operating activities 2,664,475,873 3,010,157,768 942,676,045 1,304,430,987Cash paid for corporate income tax (42,529,867) (14,623,514) - -

Net cash from operating activities 2,621,946,006 2,995,534,254 942,676,045 1,304,430,987

107



Cash flow statements (continued)


(Unit: Baht)


Cash flows from investing activitiesDecrease (increase) in current investments 168,485,237 (164,475,087) 168,485,237 (164,475,087)Increase in investments in subsidiary - - (675,954,680) -Cash received from the redemption of

investments in subsidiary - - 1,045,609,865 139,664,868Dividend received from subsidiary - - 217,596,131 9,858,356Decrease (increase) in advance payment

for purchases of assets 134,711,756 (411,349,277) (93,486,006) (182,320,540)Increase (decrease) in other payables

for purchases of fixed assets (145,630,991) 161,359,029 (145,630,991) 161,359,029Proceeds from sales of property,

plant and equipment 70,088,959 1,718,289 - 411,037Purchases of property, plant and equipment (824,057,986) (760,722,249) (192,207,407) (675,314,913)Increase in intangible assets (1,433,493) (731,215) - -Net cash from (used in) investing activities (597,836,518) (1,174,200,510) 324,412,149 (710,817,250)

Cash flows from financing activitiesIncrease (decrease) in short-term loans

from financial institutions 132,260,856 142,217,816 80,000,000 (50,000,000)Increase (decrease) in long-term loans from

financial institutions (275,697,230) (778,852,400) 41,049,022 36,837,506Cash paid for interest expenses (54,065,921) (74,766,192) (40,538,000) (35,206,545)Dividend payment (1,360,000,000) (612,000,000) (1,360,000,000) (612,000,000)Dividend paid to non-controlling interests (2,187,204) (278,092) - -Net cash used in financing activities (1,559,689,499) (1,323,678,868) (1,279,488,978) (660,369,039)Increase (decrease) in translation adjustment (163,255,836) 21,935,613 - -Net increase (decrease) in cash and

cash equivalents 301,164,153 519,590,489 (12,400,784) (66,755,302)Cash and cash equivalents at beginning of year 1,231,008,609 711,418,120 42,041,807 108,797,109Cash and cash equivalents at end of year 1,532,172,762 1,231,008,609 29,641,023 42,041,807




1. General informationPolyplex (Thailand) Public Company Limited (çThe Companyé) is a public company incorporated

and domiciled in Thailand. Its parent company is Polyplex Corporation Limited, which was

incorporated in India. The Company is principally engaged in the manufacture and distribution

of polyester films, metallized films, extrusion coated films, cast polypropylene films, silicone

coated films and PET resins. The registered addresses of the Companyûs head office and

factories are as follows:

Head office: 75/26 Ocean Tower II, 18th Floor, Soi Sukhumvit 19, Sukhumvit Road, Kwaeng

North Klongtoey, Khet Wattana, Bangkok.

Factory 1: Siam Eastern Industrial Park, 60/24 Moo 3, Tambol Mabyangporn, Amphur Pluakdaeng,

Rayong.

Factory 2: Siam Eastern Industrial Park, 60/91 Moo 3, Tambol Mabyangporn, Amphur Pluakdaeng,

Rayong.

2. Basis of preparation2.1 The financial statements have been prepared in accordance with accounting standards

enunciated under the Accounting Professions Act B.E. 2547 and their presentation has been

made in compliance with the stipulations of the Notification of the Department of Business

Development dated 28 September 2011, issued under the Accounting Act B.E. 2543.

The financial statements in Thai language are the official statutory financial statements

of the Company. The financial statements in English language have been translated

from the Thai language financial statements.

The financial statements have been prepared on a historical cost basis except where

otherwise disclosed in the accounting policies.

2.2 Basis of consolidation

a) The consolidated financial statements include the financial statements of the

Company (çthe Companyé) and the following subsidiary companies (çthe

subsidiariesé):

Notes to consolidated financial statements

109

Companyûs name Nature of business Country of Percentage of

incorporation shareholding

2012 2011

Percent Percent

Polyplex (Americas) Inc. Distribution of plastic film United States of America 80.24 80.24

Polyplex (Singapore) Pte. Ltd. Investment holding company Singapore 100.00 100.00

Polyplex America Holdings Inc. Investment holding company United States of America 100.00 -

Polyplex Europa Polyester Film Sanayi Ve Ticaret Manufacture and distribution Turkey 100.00 100.00

Anonim Sirketi (100% owned by Polyplex of polyester film and chips

(Singapore) Pte. Ltd.)

Polyplex Trading (Shenzhen) Co., Ltd. Distribution of plastic film The Peopleûs Republic 100.00 100.00

(100% owned by Polyplex (Singapore) Pte. Ltd.) of China

Polyplex USA LLC (100% owned by Manufacture and distribution United States 100.00 -

Polyplex America Holdings Inc.) of polyester film of America

b) Subsidiaries are fully consolidated, being the date on which the Company obtains

control, and continue to be consolidated until the date when such control ceases.

c) The financial statements of the subsidiaries are prepared using the same

significant accounting policies as the Company.

d) The assets and liabilities in the financial statements of overseas subsidiary

companies are translated to Baht using the exchange rate prevailing on the end

of reporting period, and revenues and expenses translated using monthly average

exchange rates. The resulting differences are shown under the caption of

çExchange differences on translation of financial statements in foreign currencyé

in the statements of changes in shareholdersû equity.

e) Material balances and transactions between the Company and its subsidiary

companies have been eliminated from the consolidated financial statements.

f) Non-controlling interests represent the portion of profit or loss and net assets of

the subsidiaries that are not held by the Company and are presented separately

in the consolidated profit or loss and within equity in the consolidated statement

of financial position.

2.3 The separate financial statements, which present investments in subsidiaries under the

cost method, have been prepared solely for the benefit of the public.

3. Adoption of new accounting standards during the yearDuring the current year, the Company adopted a number of revised and new accounting

standards, issued by the Federation of Accounting Professions, as listed below.

Accounting standards:

TAS 1 (revised 2009) Presentation of Financial Statements

TAS 2 (revised 2009) Inventories

TAS 7 (revised 2009) Statement of Cash Flows


TAS 8 (revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors

TAS 10 (revised 2009) Events after the Reporting Period

TAS 11 (revised 2009) Construction Contracts

TAS 16 (revised 2009) Property, Plant and Equipment

TAS 17 (revised 2009) Leases

TAS 18 (revised 2009) Revenue

TAS 19 Employee Benefits

TAS 23 (revised 2009) Borrowing Costs

TAS 24 (revised 2009) Related Party Disclosures

TAS 26 Accounting and Reporting by Retirement Benefit Plans

TAS 27 (revised 2009) Consolidated and Separate Financial Statements

TAS 28 (revised 2009) Investments in Associates

TAS 29 Financial Reporting in Hyperinflationary Economies

TAS 31 (revised 2009) Interests in Joint Ventures

TAS 33 (revised 2009) Earnings per Share

TAS 34 (revised 2009) Interim Financial Reporting

TAS 36 (revised 2009) Impairment of Assets

TAS 37 (revised 2009) Provisions, Contingent Liabilities and Contingent Assets

TAS 38 (revised 2009) Intangible Assets

TAS 40 (revised 2009) Investment Property

Financial reporting standards:

TFRS 2 Share-Based Payment

TFRS 3 (revised 2009) Business Combinations

TFRS 5 (revised 2009) Non-current Assets Held for Sale and Discontinued Operations

TFRS 6 Exploration for and Evaluation of Mineral Resources

Financial Reporting Standard Interpretations:

TFRIC 15 Agreements for the Construction of Real Estate

Accounting Standard Interpretations:

SIC 31 Revenue-Barter Transactions Involving Advertising Services

These accounting standards do not have any significant impact on the financial statements,

except for the following accounting standard:

TAS 19 Employee Benefits

This accounting standard requires employee benefits to be recognised as expense in the period

in which the service is performed by the employee. In particular, an entity has to evaluate and

make a provision for post-employment benefits or liabilities arising from other defined benefit

plans and other long-term employee benefits using actuarial techniques. The Company and its

subsidiaries previously accounted for such employee benefits when they were incurred.

111

The Company and its subsidiaries have changed this accounting policy in the current year and

recognise the liability in the transition period through an adjustment to the beginning balance of

retained earnings in the current year. The change has the effect of decreasing the profit of the

Company and its subsidiaries for the year ended 31 March 2012 by Baht 1.7 million, or Baht

0.002 per share (Separate financial statements: decreasing profit by Baht 1.7 million, or Baht

0.002 per share). The cumulative effect of the change in the accounting policy of Baht 4.4

million has been separately presented in the statements of changes in the shareholdersû equity.

4. New accounting standards not yet effectiveThe Federation of Accounting Professions issued the following new/revised accounting

standards that are effective for fiscal years beginning on or after 1 January 2013.

Accounting standards:

TAS 12 Income Taxes

TAS 20 (revised 2009) Accounting for Government Grants and Disclosure of Government

Assistance

TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates

Financial reporting standards:

TFRS 8 Operating Segments

Accounting Standard Interpretations:

SIC 10 Government Assistance - No Specific Relation to Operating Activities

SIC 21 Income Taxes - Recovery of Revalued Non-Depreciable Assets

SIC 25 Income Taxes - Changes in the Tax Status of an Entity or its

Shareholders

The Companyûs management believes that these accounting standards will not have any

significant impact on the financial statements for the year when they are initially applied, except

for the following accounting standard:

TAS 12 Income Taxes

This accounting standard requires an entity to identify temporary differences, which are

differences between the carrying amount of an asset or liability in the accounting records

and its tax base, and to recognise deferred tax assets and liabilities under the stipulated

guidelines.

At present, the management is evaluating the impact on the financial statements in the year

when this standard is adopted.


5. Significant accounting policies5.1 Revenue recognition

Sales of goods

Sales of goods are recognised when the significant risks and rewards of ownership of

the goods have passed to the buyer. Sales are the invoiced value, excluding value

added tax, of goods supplied after deducting discounts and allowances.

Interest income

Interest income is recognised on an accrual basis based on the effective interest rate.

Dividends

Dividends are recognised when the right to receive the dividends is established.

5.2 Cash and cash equivalents

Cash and cash equivalents consist of cash in hand and at banks, and all highly liquid

investments with an original maturity of three months or less and not subject to

withdrawal restrictions.

5.3 Trade receivables

Trade receivables are stated at the net realisable value. Allowance for doubtful accounts

is provided for the estimated losses that may be incurred in collection of receivables. The

allowance is generally based on collection experiences and analysis of debt aging.

5.4 Inventories

Finished goods and work in process are valued at the lower of cost (average method) and

net realisable value. Cost includes all production costs and attributable factory overheads.

Raw materials, spare parts and factory supplies are valued at the lower of cost (average

method) and net realisable value and are charged to production costs whenever consumed.

5.5 Investments

Investments in subsidiaries are accounted for in the separate financial statements using

the cost method.

The weighted average method is used for computation of the cost of investments.

In the event the Company reclassifies investments from one type to another, such

investments will be readjusted to their fair value as at the reclassification date. The

differences between the carrying amount of the investments and their fair value on the

date of reclassification are recorded in profit or loss or recorded as surplus (deficit) from

changes in the value of investments in shareholdersû equity, depending on the type of

investment that is reclassified.

113

5.6 Property, plant and equipment/Depreciation

Land is stated at cost. Buildings and equipment are stated at cost less accumulated

depreciation and allowance for loss on impairment of assets (if any).

Depreciation of buildings and building improvements, machinery and equipment is

calculated by reference to their costs on the straight-line basis. Depreciation of other

equipment is calculated on the sum of the year digits basis. The estimated useful lives

of plant and equipment are as follows:

Buildings and building improvements - 20, 50 years

Machinery and equipment - 4 - 20 years

Furniture, fixtures and office equipment - 3 - 10 years

Motor vehicles - 5 - 7 years

Depreciation is included in determining income.

No depreciation is provided on land, machinery in transit, and assets under installation

and construction.

5.7 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an

asset that necessarily takes a substantial period of time to get ready for its intended use

or sale are capitalised as part of the cost of the respective assets. All other borrowing

costs are expensed in the period they are incurred. Borrowing costs consist of interest

and other costs that an entity incurs in connection with the borrowing of funds.

5.8 Intangible assets

Intangible assets acquired through business combination are initially recognised at their

fair value on the date of business acquisition while intangible assets acquired in other

cases are recognised at cost. Following the initial recognition, the intangible assets are

carried at cost less any accumulated amortisation and any accumulated impairment losses.

Intangible assets with finite lives are amortised on a systematic basis over the economic

useful life and tested for impairment whenever there is an indication that the intangible

asset may be impaired. The amortisation period and the amortisation method of such

intangible assets are reviewed at least at each financial year end. The amortisation

expense is charged to profit or loss.

A summary of the intangible assets with finite useful lives is as follows:

Useful lives

Computer software 3 - 5 years


5.9 GoodwillGoodwill is initially recorded at cost, which equals to the excess of cost of business

combination over the fair value of the net assets acquired. If the fair value of the net

assets acquired exceeds the cost of business combination, the excess is immediately

recognised as gain in profit or loss.

Goodwill is carried at cost less any accumulated impairment losses. Goodwill is tested for

impairment annually and when circumstances indicate that the carrying value may be impaired.

5.10 Related party transactionsRelated parties comprise enterprises and individuals that control, or are controlled by,

the Company and its subsidiaries, whether directly or indirectly, or which are under

common control with the Company and its subsidiaries.

They also include associated companies and individuals which directly or indirectly own

a voting interest in the Company and its subsidiaries that gives them significant influence

over the Company and its subsidiaries, key management personnel, directors and

officers with authority in the planning and direction of the operations of the Company and

its subsidiaries.

5.11 Foreign currenciesTransactions in foreign currencies are translated into Baht at the exchange rate ruling at

the date of the transaction. Monetary assets and liabilities denominated in foreign currencies

are translated into Baht at the exchange rate ruling at the end of reporting period.

Gains and losses on exchange are included in determining income.

5.12 Impairment of assetsAt the end of each reporting period, the Company and its subsidiaries perform

impairment reviews in respect of the property, plant and equipment and other

intangible assets whenever events or changes in circumstances indicate that an asset

may be impaired. The Company and its subsidiaries also carry out annual impairment

reviews in respect of goodwill. An impairment loss is recognised when the recoverable

amount of an asset, which is the higher of the assetûs fair value less costs to sell and

its value in use, is less than the carrying amount.

An impairment loss is recognised in profit or loss.

5.13 Employee benefitsShort-term employee benefitsSalaries, wages, bonuses and contributions to the social security fund are recognised as

expenses when incurred.

115

Post-employment benefits and other long-term employee benefitsDefined contribution plansThe Company and its employees have jointly established a provident fund. The fund is monthly

contributed by employees and by the Company. The fundûs assets are held in a separate

trust fund and the Companyûs contributions are recognised as expenses when incurred.

Defined benefit plans and other long-term employee benefitsThe Company has obligations in respect of the severance payments it must make to

employees upon retirement under labor law and other employee benefit plans. The Company

treats these severance payment obligations as a defined benefit plan. In addition, the

Company provides other long-term employee benefit plan, namely long service awards.

The obligation under the defined benefit plan and other long-term employee benefit

plans is determined by a professionally qualified independent actuary based on actuarial

techniques, using the projected unit credit method.

For the first-time adoption of TAS 19 Employee Benefits, the Company elected to

recognise the transitional liability, which exceeds the liability that would have been

recognised at the same date under the previous accounting policy, through an

adjustment to the beginning balance of retained earnings in the current year.

5.14 ProvisionsProvisions are recognised when the Company and its subsidiaries have a present

obligation as a result of a past event, it is probable that an outflow of resources

embodying economic benefits will be required to settle the obligation, and a reliable

estimate can be made of the amount of the obligation.

5.15 Income taxIncome tax is provided in the accounts at the amount expected to be paid to the taxation

authorities, based on taxable profits determined in accordance with tax legislation.

6. Significant accounting judgements and estimatesThe preparation of financial statements in conformity with generally accepted accounting

principles at times requires management to make subjective judgements and estimates

regarding matters that are inherently uncertain. These judgements and estimates affect

reported amounts and disclosures; and actual results could differ from these estimates.

Significant judgements and estimates are as follows:

Allowance for doubtful accounts

In determining an allowance for doubtful accounts, the management needs to make judgement

and estimates based upon, among other things, past collection history, aging profile of

outstanding debts and the prevailing economic condition.


Property plant and equipment/Depreciation

In determining depreciation of plant and equipment, the management is required to make

estimates of the useful lives and residual values of the plant and equipment and to review

estimate useful lives and residual values when there are any changes.

In addition, the management is required to review property, plant and equipment for impairment

on a periodical basis and record impairment losses when it is determined that their recoverable

amount is lower than the carrying amount. This requires judgements regarding forecast of

future revenues and expenses relating to the assets subject to the review.

Post-employment benefits under defined benefit plans and other long-term employee

benefits

The obligation under the defined benefit plan and other long-term employee benefit plans is

determined based on actuarial techniques. Such determination is made based on various

assumptions, including discount rate, future salary increase rate, mortality rate and staff

turnover rate.

7. Related party transactionsDuring the years, the Company and its subsidiaries had significant business transactions with

related parties. Such transactions, which are summarised below, arose in the ordinary course

of business and were concluded on commercial terms and bases agreed upon between the

Company and those related parties.

(Unit: Million Baht)

Consolidated Separate Transferfinancial statements financial statements pricing policy

2012 2011 2012 2011

Transactions with subsidiaries

(eliminated from the consolidated financial statements)

Sales of goods - - 724.4 795.3 With reference to

market prices

Dividend income - - 217.6 9.9 As declared

Purchases of raw materials - - - 20.0 With reference to

market prices

Transactions with related companies

Purchases of raw materials 806.9 1,052.2 58.5 - With reference to

market prices

Other expenses 6.9 1.2 4.0 1.2 With reference to

market prices

As at 31 March 2012 and 2011, the balances of the accounts between the Company and

those related companies are as follows:

117

(Unit: Baht)Consolidated Separate

financial statements financial statements2012 2011 2012 2011

Trade receivables - related partiesSubsidiaries - - 220,340,827 378,803,344

Advance payment for purchases of goods - related partyParent company 218,210,589 221,816,318 - -

Trade payables - related partyParent company 13,504,100 - 13,504,100 -

Directors and managementûs remuneration

During the years ended 31 March 2012 and 2011, the Company and its subsidiaries had

employee benefit expenses payable to their directors and management as below.(Unit: Million Baht)


Short-term employee benefits 64.1 48.5 33.3 21.0Post-employment benefits 0.3 - - -Total 64.4 48.5 33.3 21.0

Guarantee obligations with related parties

The Company has outstanding guarantee obligations with its related parties, as described in

Note 26.4 to the financial statements.

8. Cash and cash equivalents(Unit: Baht)


Cash 2,153,536 2,191,193 715,836 1,066,700Bank deposits 1,530,019,226 1,228,817,416 28,925,187 40,975,107Total 1,532,172,762 1,231,008,609 29,641,023 42,041,807

As at 31 March 2012, bank deposits in saving accounts and fixed deposits carried interests

between 0.05 and 10.10 percent per annum (2011: between 0.05 and 3.90 percent per annum).

9. Trade receivablesThe balances of trade receivables as at 31 March 2012 and 2011, aged on the basis of due

dates, are summarised below.




Trade receivables - unrelated partiesNot yet due 1,334,327,849 1,843,558,451 565,916,431 778,672,433Past due

Up to 3 months 54,481,450 50,486,427 13,682,969 21,856,4963 - 6 months 8,704,432 1,354,090 5,935,295 1,246,683Over 6 months 2,754,781 4,140,736 1,161,726 1,947,079

Total 1,400,268,512 1,899,539,704 586,696,421 803,722,691Less: Allowance for

doubtful debts (3,576,705) (3,380,295) (1,161,726) (1,186,638)Net 1,396,691,807 1,896,159,409 585,534,695 802,536,053Trade receivables - related partiesNot yet due - - 220,340,827 378,803,344Total - - 220,340,827 378,803,344Total trade receivables - net 1,396,691,807 1,896,159,409 805,875,522 1,181,339,397

10. Inventories(Unit: Baht)

Consolidated financial statementsReduce cost to

Cost net realisable value Inventories - net2012 2011 2012 2011 2012 2011

Finished goods 528,826,911 568,546,262 (4,125,185) (3,480,840) 524,701,726 565,065,422Work in process 197,821,611 251,056,821 (2,127,516) - 195,694,095 251,056,821Raw materials 512,851,088 411,063,359 - - 512,851,088 411,063,359Spare parts and

factory supplies 179,795,586 153,712,573 - - 179,795,586 153,712,573Goods in transit 210,749,341 351,406,255 - - 210,749,341 351,406,255Total 1,630,044,537 1,735,785,270 (6,252,701) (3,480,840) 1,623,791,836 1,732,304,430

(Unit: Baht)Separate financial statements

Reduce cost toCost net realisable value Inventories - net

2012 2011 2012 2011 2012 2011Finished goods 34,479,873 46,165,994 (1,195,090) (602,658) 33,284,783 45,563,336Work in process 107,807,288 98,957,181 (2,127,516) - 105,679,772 98,957,181Raw materials 314,283,862 244,159,023 - - 314,283,862 244,159,023Spare parts and

factory supplies 93,999,960 73,171,260 - - 93,999,960 73,171,260Goods in transit 17,355,971 8,925,918 - - 17,355,971 8,925,918Total 567,926,954 471,379,376 (3,322,606) (602,658) 564,604,348 470,776,718

119

11. Investments in subsidiariesThese represent investments in ordinary shares and preference shares in the following

subsidiary companies:(Unit: Baht)

Separate financial statementsShareholding Dividend received for

Companyûs name Paid-up capital percentage Cost the year ended 31 March

2012 2011 2012 2011 2012 2011 2012 2011

Percent Percent

Ordinary shares

Polyplex (Singapore) EUR 0.8 EUR 0.8

Pte. Ltd. million million 100.00 100.00 41,440,000 41,440,000 191,316,375 -

Polyplex (Americas) Inc. USD 1.3 USD 1.3

million million 80.24 80.24 41,660,675 41,660,675 4,672,723 1,995,261

Polyplex America USD 22.0

Holdings Inc. million - 100.00 - 675,954,680 - - -

759,055,355 83,100,675 195,989,098 1,995,261

Preference shares

Polyplex (Singapore) EUR 8.4 EUR 34.5

Pte. Ltd. million million 100.00 100.00 414,580,537 1,713,458,176 3,192,273 -

Polyplex (Americas) Inc. USD 4.2 USD 4.2

million million 96.15 96.15 139,856,000 139,856,000 18,414,760 7,863,095

554,436,537 1,853,314,176 21,607,033 7,863,095

Total investments in subsidiaries 1,313,491,892 1,936,414,851 217,596,131 9,858,356

During the current year, the Company invested a total of USD 22.0 million, equivalent to

approximately Baht 676.0 million, in Polyplex America Holdings Inc., which is a holding

company that invested in Polyplex USA LLC.

During the current year, the Company received Baht 1,045.6 million from the redemption of

EUR 26.1 million of the preference shares of Polyplex (Singapore) Pte. Ltd. This redemption

resulted in loss on exchange rate amounting to Baht 253.3 million. As a result, as at 31 March

2012, the Company had investments in 39,100 preference shares of this company (2011:

161,600 shares). These preference shares are non-cumulative and non-participative preference

shares. The Company is entitled to receive dividend at a rate not to exceed 7% per annum, in

the year in which dividend is declared.

The preference shares of Polyplex (Americas) Inc. are non-cumulative and non-voting

preference shares.


pany Limited

12. Property, plant and equipment(Unit: Baht)

Consolidated financial statementsFurniture,

Buildings and Machinery fixtures and Assets underbuilding and office Motor installation and Machinery

Land improvements equipment equipment vehicles construction in transit Total

Cost

31 March 2010 181,918,443 1,018,668,130 5,698,519,177 81,208,219 34,319,250 17,191,792 - 7,031,825,011

Purchases 93,445,575 774,703 5,130,932 4,170,150 2,554,997 637,446,361 16,277,578 759,800,296

Disposals - - (1,118,997) (10,137,774) (3,572,895) - - (14,829,666)

Transfer in/(Transfer out) 47,130,627 5,109,627 33,182,729 2,232,544 557,688 (88,213,215) - -

Capitalised interest - - - - - 921,953 - 921,953

Translation adjustment 962,060 (7,423,318) (34,812,205) (547,626) (296,156) 89,398 - (42,027,847)

31 March 2011 323,456,705 1,017,129,142 5,700,901,636 76,925,513 33,562,884 567,436,289 16,277,578 7,735,689,747

Purchases 52,674,329 5,581,745 19,155,010 14,324,660 7,178,374 725,143,868 - 824,057,986

Disposals (70,020,978) - - (191,044) - - - (70,212,022)

Transfer in/(Transfer out) - 207,831,464 568,563,899 5,102,609 1,520,961 (766,741,355) (16,277,578) -

Capitalised interest - - - - - 7,743,176 - 7,743,176

Translation adjustment (2,973,024) (22,635,045) (111,697,117) (1,713,668) (522,835) 3,944,678 - (135,597,011)

31 March 2012 303,137,032 1,207,907,306 6,176,923,428 94,448,070 41,739,384 537,526,656 - 8,361,681,876

121

(Unit: Baht)

Consolidated financial statementsFurniture,



Accumulated depreciation

31 March 2010 - 102,599,181 1,238,394,014 50,759,852 21,816,818 - - 1,413,569,865

Depreciation for the year - 33,067,653 309,731,287 8,573,034 5,534,661 - - 356,906,635

Disposals - - (699,373) (10,063,454) (2,958,438) - - (13,721,265)

Translation adjustment - (26,404) 49,019 (126,370) (167,492) - - (271,247)

31 March 2011 - 135,640,430 1,547,474,947 49,143,062 24,225,549 - - 1,756,483,988


Disposals - - - (125,063) - - - (125,063)

Translation adjustment - (2,189,604) (28,361,332) (951,500) (468,091) - - (31,970,527)

31 March 2012 - 167,899,916 1,837,786,070 58,428,594 28,995,648 - - 2,093,110,228

Net book value

31 March 2011 323,456,705 881,488,712 4,153,426,689 27,782,451 9,337,335 567,436,289 16,277,578 5,979,205,759

31 March 2012 303,137,032 1,040,007,390 4,339,137,358 36,019,476 12,743,736 537,526,656 - 6,268,571,648

Depreciation for the year

2011 (Baht 331.8 million included in manufacturing cost, and the balance in selling and administrative expenses) 356,906,635



pany Limited

(Unit: Baht)

Separate financial statementsFurniture,



Cost

31 March 2010 103,181,652 436,107,857 2,875,843,071 38,948,240 18,599,396 17,071,933 - 3,489,752,149

Purchases 93,445,575 774,703 5,130,932 3,800,630 1,714,800 554,170,695 16,277,578 675,314,913

Disposals - - - (9,188,650) (2,155,929) - - (11,344,579)

Transfer in/(Transfer out) - 4,700,000 2,391,020 24,500 - (7,115,520) - -

Capitalised interest - - - - - 921,953 - 921,953

31 March 2011 196,627,227 441,582,560 2,883,365,023 33,584,720 18,158,267 565,049,061 16,277,578 4,154,644,436

Purchases - 5,581,744 19,155,012 13,220,280 4,660,596 149,589,775 - 192,207,407

Disposals - - - (29,000) - - - (29,000)

Transfer in/(Transfer out) - 206,396,453 522,466,748 - - (712,585,623) (16,277,578) -

Capitalised interest - - - - - 7,743,176 - 7,743,176

31 March 2012 196,627,227 653,560,757 3,424,986,783 46,776,000 22,818,863 9,796,389 - 4,354,566,019

123

(Unit: Baht)

Separate financial statementsFurniture,



Accumulated depreciation

31 March 2010 - 64,430,053 755,227,160 31,329,607 9,537,681 - - 860,524,501


Disposals - - - (9,179,371) (2,155,929) - - (11,335,300)

31 March 2011 - 86,453,536 915,275,498 26,251,234 11,621,717 - - 1,039,601,985


Disposals - - - (29,000) - - - (29,000)

31 March 2012 - 109,568,116 1,078,672,240 32,055,617 15,559,081 - - 1,235,855,054

Net book value

31 March 2011 196,627,227 355,129,024 1,968,089,525 7,333,486 6,536,550 565,049,061 16,277,578 3,115,042,451

31 March 2012 196,627,227 543,992,641 2,346,314,543 14,720,383 7,259,782 9,796,389 - 3,118,710,965

Depreciation for the year




As at 31 March 2012, certain equipment items of the Company and its subsidiaries have been

fully depreciated but are still in use. The gross carrying amount (before deducting accumulated

depreciation) of those assets amounted to approximately Baht 42.6 million (2011: Baht 33.6

million) (The Company only: Baht 20.3 million, 2011: Baht 14.3 million).

The Company and its subsidiaries have pledged their assets amounting to approximately Baht

2,128.7 million (2011: Baht 2,933.3 million) as collateral against credit facilities received from

financial institutions (The Company only: Baht 1,944.6 million, 2011: Baht 2,087.1 million).

13. Intangible assetsDetails of intangible assets (computer software) are as follows:

Baht

Cost

As at 31 March 2010 4,377,974

Purchases 731,215

Translation adjustment (25,388)

As at 31 March 2011 5,083,801

Purchases 1,433,493


As at 31 March 2012 6,285,020

Accumulated amortisation

As at 31 March 2010 3,111,874

Amortisation expenses for the year 631,657


As at 31 March 2011 3,730,158

Amortisation expenses for the year 710,068


As at 31 March 2012 4,277,577

Net book value

As at 31 March 2011 1,353,643

As at 31 March 2012 2,007,443

Amortisation expenses for the year

2011 631,657

2012 710,068

125

14. Short-term loans from financial institutions(Unit: Baht)

Interest rate Consolidated Separate(percent per financial statements financial statements

annum) 2012 2011 2012 2011

Short-term loans from bank LIBOR + 1.5% 246,744,800 194,483,944 - -Promissory note

(packing credit) 3.45% 80,000,000 - 80,000,000 -Total 326,744,800 194,483,944 80,000,000 -

Short-term loans from bank as at 31 March 2012 represent the US dollar loans of USD 8.0

million (2011: USD 6.4 million) obtained by a subsidiary company. These loans are guaranteed

by the Company.

15. Trade and other payables(Unit: Baht)


Trade payables - related party 13,504,100 - 13,504,100 -Trade payables - unrelated parties 1,018,140,212 1,088,573,615 527,534,856 619,540,457Other payables for purchases

of fixed assets 61,287,829 201,990,244 61,287,829 201,990,244Total trade and other payables 1,092,932,141 1,290,563,859 602,326,785 821,530,701

16. Provision for long-term employee benefitsProvision for long-term employee benefits as at 31 March 2012, which is compensations on

employeesû retirement, was as follows:(Unit: Baht)


Balance at beginning of year 3,257,658 -Cumulative effect of change in accounting policy

for employee benefits adjusted against beginningbalance of retained earnings (Note 3) 4,369,482 4,369,482

Current service cost 6,769,079 1,501,098Interest cost 501,341 181,087Benefits paid during the year (4,988,344) -Translation adjustment (141,545) -Balance at end of year 9,767,671 6,051,667

Long-term employee benefit expenses included in the profit or loss for the year ended 31

March 2012 amounted to Baht 7.3 million (The Company only: Baht 1.7 million).


Principal actuarial assumptions at the valuation date were as follows:


(% per annum) (% per annum) (% per annum) (% per annum)

Discount rate 4.2 and 10.0 4.2 and 10.0 4.2 4.2Future salary increase rate

(depending on age of employee) 3.0 - 8.0 3.0 - 8.0 3.0 - 8.0 3.0 - 8.0

17. Long-term loans from financial institutions(Unit: Baht)

Consolidated Separate

Loans Repayment schedule financial statements financial statements2012 2011 2012 2011

Floating rate loans Repayable as from

(Euribor + 0.6% April 2006

to 3.125%) to December 2017 349,311,853 774,374,084 163,370,687 269,134,871

Floating rate loans Repayable as from

(Libor + 1.5% October 2009

to 2.0%) to September 2016 1,115,104,962 922,875,871 1,115,104,962 922,875,871

Fixed rate loans Repayable as from April 2006

(3.83% to 5.54%) to July 2016 149,860,076 194,683,435 149,860,076 184,191,105

Total 1,614,276,891 1,891,933,390 1,428,335,725 1,376,201,847

Less: Current portion (363,759,992) (387,200,147) (271,996,222) (256,001,425)

Net 1,250,516,899 1,504,733,243 1,156,339,503 1,120,200,422

The Companyûs loan facilities are secured by the mortgage of land, premises and machinery

of the Company. The subsidiaryûs loan facilities are secured by the mortgage of its land and

premises and the pledge of its machinery, and are guaranteed by the Company as described

in Note 26.4 to the financial statements.

The loan agreements contain covenants that, among other things, require the Company and

its subsidiaries to maintain a certain debt to equity ratio and debt service coverage ratio, and

require a subsidiary to maintain a particular current ratio.

The Company entered into two interest rate swap agreements with a bank, under which the

Company agreed to swap a floating interest rate of LIBOR for a fixed interest rate of 2.61

percent per annum on principal of USD 4.16 million and to swap a floating interest rate of

LIBOR for a fixed interest rate of 3.54 percent per annum on principal of USD 2.29 million.

The swap agreements will mature on 31 July 2016.

127

18. Statutory reservePursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is

required to set aside to a statutory reserve at least 5 percent of its net profit after deducting

accumulated deficit brought forward (if any), until the reserve reaches 10 percent of the

registered capital. The statutory reserve is not available for dividend distribution.

19. Expenses by natureSignificant expenses by nature are as follows:



Salaries, wages and other

employee benefits 553,489,678 513,304,039 249,981,404 217,102,054

Depreciation and amortisation 369,431,898 357,538,292 196,282,069 190,412,784

Loss on diminutions in value

of inventories (Reversal) 2,719,948 (17,289,445) 2,719,948 (17,289,445)

Raw materials and

consumables used 5,688,151,904 4,545,330,391 3,040,289,714 2,453,210,489

Changes in inventories of finished

goods and work in process 92,954,561 (402,236,698) 2,836,014 (7,810,539)

20. Corporate income taxNo corporate income tax was payable for the years since the Company has been granted

promotional privileges under the Investment Promotion Act B.E. 2520 by the Board of

Investment and has tax loss brought forward in excess of profit from non-promoted operations

for the years.

Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi, a subsidiary and being a

manufacturing company which operates in a Free Trade Zone, is eligible to benefit from

corporate tax exemptions, until the end of the financial year of full membership of Turkey to the

European Union. However, this exemption is limited to the earnings related to the sale of

manufactured goods.

21. Promotional privilegesThe Company has received promotional privileges from the Board of Investment for the

manufacture of polyester films, metallized films, extrusion coated films, cast polypropylene

films, silicone coated films and PET resins. As a promoted company, the Company must

comply with certain conditions and restrictions provided for in the promotional certificates.


The Companyûs sales for the years ended 31 March 2012 and 2011 divided according to

promoted and non-promoted operations are set out below.(Unit: Baht)

Separate financial statementsPromoted operations Non-promoted operations Total2012 2011 2012 2011 2012 2011

Sales

Domestic sales 917,290,529 1,029,784,828 3,328,601 917,550 920,619,130 1,030,702,378

Export sales 3,619,290,171 3,948,639,016 20,737,223 1,395,609 3,640,027,394 3,950,034,625

Total sales 4,536,580,700 4,978,423,844 24,065,824 2,313,159 4,560,646,524 4,980,737,003

22. Basic earnings per shareBasic earnings per share is calculated by dividing profit for the year attributable to equity

holders of the Company (excluding other comprehensive income) by the weighted average

number of ordinary shares in issue during the year.

23. Dividends(Unit: Baht)

Dividend

Dividends Approved by Total dividends per share

Final dividends for 2010 Annual General Meeting of the

shareholders on 22 July 2010 140,000,000 0.175

Interim dividends for 2011 Board of Directorsû meeting on

28 October 2010 472,000,000 0.590

Total dividends for fiscal year 2011 612,000,000 0.765

Final dividends for 2011 Annual General Meeting of the

shareholders on 28 July 2011 1,080,000,000 1.350

Interim dividends for 2012 Board of Directorsû meeting

on 26 July 2011 280,000,000 0.350

Total dividends for fiscal year 2012 1,360,000,000 1.700

24. Segment informationThe Company and its subsidiariesû operations involve principally a single industry segment, the

manufacture and distribution of polyester films, metallized films, extrusion coated films, cast

polypropylene films and PET resins, and are carried on in two geographic areas in Thailand

and overseas countries, as operated by subsidiaries. The financial information of the Company

and its subsidiaries by geographical segment, for the years ended 31 March 2012 and 2011

are as follows:

129

(Unit: Million Baht)

Elimination of

inter-segment

Thailand Overseas countries revenues Consolidation

2012 2011 2012 2011 2012 2011 2012 2011

Sales to external customers 3,836.2 4,185.4 6,306.9 6,997.8 - - 10,143.1 11,183.2

Inter-segment sales 724.4 795.3 972.5 1,176.3 (1,696.9) (1,971.6) - -

Total sales 4,560.6 4,980.7 7,279.4 8,174.1 (1,696.9) (1,971.6) 10,143.1 11,183.2

Segment income 469.2 1,678.3 1,182.3 2,531.0 (197.3) (195.6) 1,454.2 4,013.7

Unallocated income and expenses:

Finance cost (56.1) (92.7)

Corporate income tax (34.2) (27.9)

Non-controlling interests of the subsidiary (2.2) (10.2)

Profit for the year 1,361.7 3,882.9


Property, plant and equipment 3,118.7 3,115.0 3,149.9 2,864.2 - - 6,268.6 5,979.2

Unallocated assets 5,324.2 5,953.7

Total assets 11,592.8 11,932.9

Transfer prices between segments are as set out in Note 7 to the financial statements.

25. Provident fundThe Company and its employees have jointly established a provident fund in accordance with

the Provident Fund Act B.E. 2530. Both employees and the Company contributed to the fund

monthly at the rates of 4 - 7 percent (2011: 4 percent) of basic salary. The fund, which is

managed by a licensed fund manager, will be paid to employees in accordance with the fund

rules. During the year ended 31 March 2012, the Company contributed Baht 3,663,926 (2011:

Baht 2,727,617) to the fund.

26. Commitments and contingent liabilities26.1 Capital commitments

As at 31 March 2012, the Company and its subsidiaries had capital commitments

of approximately Baht 2,081.8 million (2011: Baht 1,184.0 million), relating to the

construction of building and acquisition of machinery and equipment (The Company

only: Baht 1,178.1 million, 2011: Baht 547.3 million).

26.2 Operating lease commitments

The Company has entered into several lease agreements in respect of the lease of

office building space and equipment.


Future minimum rentals payable under these leases as at 31 March 2012 are as follows:

Thousand Baht

Payable:

in up to 1 year 4,797

in over 1 and up to 5 years 4,835

26.3 Service agreementsAs at 31 March 2012, the Company had commitments totaling Baht 221.0 million under

various service agreements (2011: Baht 6.1 million). These agreements expire between

May 2012 and September 2016.

26.4 GuaranteesThe Company has given short-term guarantees worth USD 20.0 million (2011: USD 20.0

million) against working capital facilities obtained by its subsidiary (Polyplex (Americas)

Inc.). In addition, the Company has given a guarantee of EUR 4.5 million (2011: EUR 6.7

million) for the long-term loans obtained by its subsidiary (Polyplex Europa Polyester

Film Sanayi Ve Ticaret Anonim Sirketi).

As at 31 March 2012, there were outstanding bank guarantees of approximately Baht

63.8 million and EUR 25.9 million (2011: Baht 43.8 million and EUR 9.9 million) issued

by the banks on behalf of the Company and its subsidiaries in respect of certain

performance bonds as required in the normal course of businesses (The Company only:

Baht 63.8 million, 2011: Baht 43.8 million).

27. Financial instruments27.1 Financial risk management

The Company and its subsidiariesû financial instruments, as defined under Thai Accounting

Standard No. 107 çFinancial Instruments: Disclosure and Presentationsé, principally

comprise cash and cash equivalents, trade and other receivables, investments, trade

and other payables, and short-term and long-term loans. The financial risks associated

with these financial instruments and how they are managed is described below.

Credit riskThe Company and its subsidiaries are exposed to credit risk primarily with respect

to trade receivables and other receivables. The Company and its subsidiaries manage

the risk by adopting appropriate credit control policies and procedures and considering

credit insurance contracts from time to time, and therefore do not expect to incur

material financial losses. In addition, the Company and its subsidiaries do not have

high concentration of credit risk since they have a large customer base. The maximum

exposure to credit risk is limited to the carrying amounts of receivables and other

receivables as stated in the statements of financial position.

131

Interest rate riskThe Company and its subsidiariesû exposure to interest rate risk relates primarily to its cash

at banks, bank overdrafts, and short-term and long-term borrowings. However, since most

of the Company and its subsidiariesû financial assets and liabilities bear floating interest

rates or fixed interest rates which are close to the market rate, the interest rate risk

is expected to be minimal. In addition, the Company considers interest rate swap

agreements from time to time so as to reduce exposure to the interest rate risk.

Significant financial assets and liabilities as at 31 March 2012 classified by type of

interest rates are summarised in the table below, with those financial assets and

liabilities that carry fixed interest rates further classified based on the maturity date, or

the repricing date if this occurs before the maturity date.

Consolidated financial statements

Fixed interest rates Floating Non-Within 1-5 Over 5 interest interest Interest1 year years years rate bearing Total rate

(Million Baht) (% p.a.)

Financial Assets

Cash and cash equivalents - - - 1,190.9 341.3 1,532.2 See Note 8

Trade receivables - - - - 1,396.7 1,396.7 -

- - - 1,190.9 1,738.0 2,928.9

Financial liabilities

Short-term loans from

financial institutions 80.0 - - 246.7 - 326.7 See Note 14

Trade and other payables - - - - 1,092.9 1,092.9 -

Long-term loans 37.7 112.2 - 1,464.4 - 1,614.3 See Note 17

117.7 112.2 - 1,711.1 1,092.9 3,033.9

Separate financial statements

Fixed interest rates Floating Non-Within 1-5 Over 5 interest interest Interest1 year years years rate bearing Total rate

(Million Baht) (% p.a.)

Financial Assets

Cash and cash equivalents - - - 27.5 2.1 29.6 See Note 8

Trade receivables - - - - 805.9 805.9 -

- - - 27.5 808.0 835.5

Financial liabilities

Short-term loans from

financial institutions 80.0 - - - - 80.0 See Note 14

Trade and other payables - - - - 602.3 602.3 -

Long-term loans 37.7 112.2 - 1,278.4 - 1,428.3 See Note 17

117.7 112.2 - 1,278.4 602.3 2,110.6


As at 31 March 2012, the Company had interest rate swap agreements with a bank to

swap floating interest rate to fixed interest rate, as described in Note 17 to the financial

statements.

Foreign currency risk

The Company and its subsidiariesû exposure to foreign currency risk arise mainly from

trading transactions that are denominated in foreign currencies. The Company and its

subsidiaries seek to reduce this risk by entering into forward exchange contracts when

it considers appropriate. Generally, the forward contracts mature within one year.

The Companyûs balances of financial assets and liabilities denominated in foreign

currencies as at 31 March 2012 are summarised below.

Financial Financial Average exchange rate

Foreign currency assets liabilities as at 31 March 2012(Million) (Million) (Baht per 1 foreign currency unit)

US dollar 13.78 41.88 30.8431Euro 3.01 4.28 41.1741

Japanese yen 35.93 2.42 0.3755Swiss franc - 2.70 34.1646

The Companyûs foreign exchange contracts outstanding at 31 March 2012 are

summarised below.

Bought Sold Contractual exchange rateForeign currency amount amount Bought Sold

(Million) (Million) (Baht per 1 foreign currency unit)

US dollar 1.62 18.98 Baht 30.4600 - Baht 30.5146 -32.0863 per USD 1 32.2094 per USD 1

Swiss franc 1.35 - Baht 31.6988 - -

40.9692 per CHF 1Euro 0.68 2.53 Baht 41.1600 - Baht 40.5600 -

41.6000 per EUR 1 41.7100 per EUR 1

Japanese yen - 35.97 - Baht 0.3753 -0.3756 per JPY 1

As at 31 March 2012, a subsidiary had forward foreign exchange contracts as follows:

Bought amount Contractual exchange rate

TL 1.70 million TL 1.8220 - 1.8370 per USD 1

EUR 1.00 million USD 1.3084 - 1.3085 per EUR 1

133

27.2 Fair values of financial instruments

Since the majority of the Company and its subsidiariesû financial instruments are

short-term in nature or bear floating interest rates, their fair value is not expected to

be materially different from the amounts presented in the statements of financial

position.

A fair value is the amount for which an asset can be exchanged or a liability settled

between knowledgeable, willing parties in an armûs length transaction. The fair value is

determined by reference to the market price of the financial instrument or by using an

appropriate valuation technique, depending on the nature of the instrument.

28. Capital managementThe primary objective of the Companyûs capital management is to ensure that it has

appropriate capital structure in order to support its business and maximise shareholder

value. As at 31 March 2012, the Groupûs debt-to-equity ratio was 0.39:1 (2011: 0.43:1) and

the Companyûs was 0.54:1 (2011: 0.46:1).

29. ReclassificationTo comply with the Notification of the Department of Business Development relating to the

financial statement presentation as described in Note 2 to the financial statements and as

the result of the adoption of revised and new accounting standards as described in Note 3

to the financial statements, certain amounts in the financial statements for the year ended

31 March 2011 have been reclassified to conform to the current yearûs classification, without

any effect to the previously reported profit or shareholdersû equity.

30. Approval of financial statementsThese financial statements were authorised for issue by the Companyûs authorised directors

on 18 May 2012.


pany Limited

Information of Director and Management of the Company as on 31.3.2012Relation % of

Working Experiences in the 5 preceding yearsName-Surname Position Age Education/Training among Shareholding(Years) family within

Period Position Company / Type of BusinessCompany

1 Mr.Manu Leopairote Board Chairman & 69 ë Bachelorûs degree Economics - - 2004-Present Board Chairman & Chairman Polyplex (Thailand) Plc.Audit Committee (Hons.), Thammasat University of the Audit CommitteeChairman ë Masterûs degree M.Sc. (Econ.), 1999-2004 Permanent Secretary, Ministry of Industry Ministry of Industry

University of Kentucky, USAë Ph.D in Business Administration 2002-2003 Chairman Asian Productivity Council, Japan(Honorary), Thammasat University 2003-Present Counselor of State The Council of State(Trade and

ë Certificate, Industrial Development, Industry)Nagoya, Japan 2005-2010 Chairman Neighboring Countries Economic

ë The National Defense College, Development AgencyClass 34 1994-2008 Chairman of the Executive TECHNONET ASIA, Singapore

ë Certificate, Thai Institute of BoardDirectors (IOD) 2002-2006 Chairman Small and Medium Enterprise- The Role of Chairman Program Development Bank of Thailand(RCM), Class 3/2001 2002-2004 Chairman PTT Public Co.,Ltd

- Directors Certification Program 2010 - Present Chairman ARIP Public Company Limited(DCP), Class 30/2003 2004 - Present Chairman Khon Kaen Sugar Industry Public

ë Decoration Company Limited- Knight Grand Cross (First Class) 2006 - Present Chairman Siam Steel International Publicof the Most Noble Order of the Company LimitedCrown of Thailand

- Knight Grand Cross (First Class)of the Most Exalted Order of theWhite Elephant

- Knight Grand Cordon (SpecialClass) of the Most Noble Orderof the Crown of Thailand

- Knight Grand Cordon (SpecialClass) of the Most ExaltedOrder of the White Elephant

135




2 Mr.Sanjiv Saraf Director & Vice 54 ë Bachelorûs degree - - 2006-Present Director Polyplex (Americas) Inc.

Chairman Agricultural Engineering, 2004 - Juneû08 Director Polyplex (Asia) Pte. Ltd.

Indian Institute of Technology, May, 2011 General Manager & CEO Polyplex (Asia) Pte. Ltd.

Kharagpur - Present

2004 - Marchû08 Director Polyplex (Singapore) Pte. Ltd.

2004 - Present Director & Chairman Polyplex Europa Polyester Film

Sanayi Ve Ticaret Anonim Sirketi,

Turkey

2002 - Julyû10 Managing Director Polyplex (Thailand) Plc.

Julyû10 - Present Vice - Chairman Polyplex (Thailand) Plc.

Mayû02 - Present Chairman Polyplex Corporation Ltd.

2011 - Present Director Polyplex America Holding Inc.

3 Mr.Pranay Kothari Director 53 ë Fellow Chartered Accountant - - 2006 - Present Director Polyplex (Americas) Inc.

- Institute of Chartered Accountants 2004 - Marchû08 Director Polyplex (Asia) Pte. Ltd.

of India 2004 - Decû12 Director Polyplex (Singapore) Pte. Ltd.

ë Associate Company Secretary 2004 - Present Director Polyplex Europa Polyester Film

- The Institute of Company Sanayi Ve Ticaret Anonim Sirketi,

Secretaries of India Turkey

2002 - Present Director Polyplex (Thailand) Plc.

1996 - Present Executive Director Polyplex Corporation Ltd.

2011 - Present Director Polyplex Resins Sanayi Ve Ticaret

Anonim Sirketi


pany Limited




4 Mr.Ranjit Singh Director 55 ë Bachelorûs degree - - July 2007 Executive director Polyplex Corporation Ltd.Mechanical Engineering, - PresentBirla Institute of Technology & 2004 - Marchû08 Director Polyplex (Asia) Pte. Ltd.Science, Pilani, India 2004 - Present Director Polyplex Europa Polyester Film

ë Masterûs degree MBA, India of Sanayi Ve Ticaret Anoim Sirketi,Institute of Management, TurkeyAhmedabad 2002 - Present Director Polyplex (Thailand) Plc.

2011 - Present Director Polyplex Resins Sanayi Ve TicaretAnonim Sirketi

5 Dr.Virabongsa Director & Audit 69 ë Bachelorûs degree - - 2004 - Present Director & Audit Committee Polyplex (Thailand) Plc.Ramangkura Committee member First Class Honors, B.A. in Political member

Science, Chulalongkorn University Nov. 2011 - Chairman Strategic Formulation Committee forë Masterûs Degree Economics, Present Reconstruction and FutureUniversity of Pennsylvania, U.S.A. Development (SCRF)

ë Ph.D.(Econonmics), 1994 - Present Chairman Bangkok Expressway Public Co., Ltd.University of Pennsylvania, U.S.A. 1995 - Present Chairman of the Double A (1991) Public Co., Ltd.

ë Doctor of Law (Honorary), Executive BoardWebster University, USA 2004 - Present Chairman Thai-Lao Association for Friendship

ë Decoration 2005 - Present Chairman Finansa Co., Ltd.- Knight Grand Cordon (Special 2006 - Present Chairman South East Asia Energy Co., Ltd.Class) of the most Exalted Order 2005 - Present Chairman Bang-Mod Hospital Co., Ltd.of the White Elephant 2000 - Present Chairman Nam Ngum 2 Power Company Limited

- Knight Grand Cordon (Special Present Director Thailand Development ResearchClass) of the most Noble Order Institute Foundationof the Crown of Thailand 2008 - Present Chairman of the Advisory King Power International Co., Ltd.

Board2004 - Present Advisory Chairman Areeya Property Public Co., Ltd.

137




6 Mr.Praphad Director 66 ë HND in Business Administration - - 2004 - Present Director Polyplex (Thailand) Plc.Phodhivorakhun from Sheffield College of Present Chairman of Board Kang Yong Electric Pcl.

Technology, Sheffield, England. of Directorsë Bachelorûs degree Political Science, Present Chairman of Board of Mitsubishi Electric Kang YongRamkhamhaeng University Directors Wattana Co., Ltd.

ë Post Graduate Degree, Present Chairman of Board of Siam City Leasing and Factoring Pcl.National Defense College Directorsof Thailand Present Chairman of Board of Yokohama Rubbers (Thailand) Co., Ltd.

ë Master Degree Directors- Business Administration (MBA), Present Chairman of Board of Kang Yongû Group of CompaniesPublic Administration (MPA) DirectorsRamkhamhaeng University Present President K. Y. Intertrade Co., Ltd.

- Honourary Doctorate Degree Present President Nitto Seiko (Thailand) Co., Ltd.in Business Administration Present Director Kulthorn Kirby Pcl.Rajabhat University of Lampang Present President Thai Refrigeration Components Co., Ltd.

Present Chairman of University Rajamangala University ofCouncil Technology Rattanakosin.

Present Member of the International Ritsumeikan Asia Pacific University,Advisory Committee Japan

7 Mr.Shiraz Erach Poonevala Director & Audit 48 ë Bachelor of Commerce - - 2004 - Present Director & Audit Comittee Polyplex (Thailand) Pcl.Committee Member Sydenham College of Commerce, member

India March 2008 - Director - Investment G.P. Group of Companies Limitedë Master of Commerce PresentSydenham College of Commerce, 2005 - March Senior Vice President Seamico Securities Plc.India 2008

ë Associate Chartered Accountant 2002 - 2005 Director Paragon Partners Co.,Ltd.Institute of Chartered Accountantsof India


pany Limited




8 Mr.Rohit Kumar Vashistha Managing Director 41 ë Bachelorûs degree in Metallargy, - - Mayû10 - Present Managing Director Polyplex (Thailand) Plc.

IT -BHU, India Mayû08 - Aprilû10 Director & Profit Center Head Polyplex (Thailand) Plc.

ë Masterûs degree Marû08 - Present Director Polyplex (Asia) Pte. Limited.

International business, Indian Mayû08 - Present Director Polyplex (Singapore) Pte. Limited.

Institute of Foreign Trade, India Juneû09 - Present Chairman Polyplex Trading (Shenzhen)

ë Directors Certification Program Company Limited

(DCP) Class 123/2009, IOD 2003 - 2008 Head - Sales & Marketing Polyplex (Thailand) Plc.

1996 - 2002 Head (International Trade) Tata Steel

9 Mr.Vinod Sureka Chief Financial 37 ë Bachelor of Commerce, - - August 2008 - Chief Financial Officer Polyplex (Thailand) Plc

Officer Calcutta University, INDIA, Present

ë Chartered Accountant, The Institute Juneû09 - Present Director Polyplex Trading (Shenzhen)

of Chartered Accountants of India Co. Limited.

(ICAI) Septû11 - Present Director Polyplex (Asia) Pte. Limited.

Decû11 - Present Director Polyplex (Singapore) Pte. Limited.

December 2001 - Finance Manager Indorama Iplik San. Ve. Tic. A.S.,

July 2008 Turkey

10 Mr.Manav Singh Business Head 37 ë BTech (Mech Engg.) - - July 2008 - Business Head - SARALAM Polyplex (Thailand) Plc

- SARALAM - Jamia Millia Islamia College Present

ë MBA International Business April 2005 - Marketing Manager Polyplex (Thailand) Plc

(Indian Institute of Foreign Trade) April 2008

139




11 Mr. Ashish Ghosh Head - Sales & 46 ë Bachelorûs / Masterûs Degree in - - November 2009 - Head - Sales & Marketing Polyplex (Thailand) Plc

Marketing Science - Jiwaji University, Present

Gwalior - INDIA December 1995 - AVP - Marketing SRF Limited -Manufacture of

ë Masterûs degree in Business November 2009 Polyester Film, Nylon Tyre Chord

Administration - BIT Ranchi, INDIA fabric, Engineering plastics

12 Mr. Chandrashekhar Head Operations 57 ë Bachelorûs Degree in Technology - - April 2011 - Head Operations Polyplex (Thailand) Plc

Kalvit (Chemical Engineering) - Present

Laxminarayan Institute of Oct 2007 - President JBF RAK LLC Ras AI Khaimah U.A.E.

Technology, Nagpur University March 2011

Feb 2004 - President JBF Industries Lt Mumbai

Oct 2007

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