The Thai economy had a strong finish to 2017 with GDP growth rate of 3.8 % compared to 3.2% in 2016. There is a general consensus amongst analysts and commentators that similar or higher growth rates will continue into 2018 with the expected year on year growth rate to be of the order of 4% for the full year. Underpinning this growth rate is an expectation of a stronger global economy which in general should assist Thailand's exports and fuel growth in tourism. Economic growth is also expected as a result of much anticipated increased public expenditure on infrastructure projects and improved confidence in the economy. The latter is expected to result in inward investment particularly in key production sectors. Further confidence in continued growth comes from known and forecast retail and real estate investments, improved employment, some increase in average house-hold income and consequent general increase in domestic consumption. That said, some forecasters see risks to this growth due to a variety of factors including: reduced prices for some agricultural products offset by expected rises in others; a generally stagnant labour market and associated restrictions in skilled and unskilled labour; high household debt levels; the strength of the Baht relative to key currencies. A number of Government initiatives should assist in offsetting some of these risks to growth but external global economic and political factors could yet disrupt forecasted growth should these impact on consumption and growth in key export markets.
Despite the generally positive economic situation described above, the company financial performance in 2017 has been impacted by generally stagnant demand and competition for its products and in particular significant manufacturing cost pressure resulting from very high MMA price. Global imbalances in supply and demand of MMA have resulted in severe upward price pressure on this key raw material pressure and this has adversely impacted acrylic cast sheet margins. Whilst the market has accepted some increase in price of acrylic sheet products, fierce competition has limited the ability of the company to pass on cost increases and yet maintain volumes.
The company management has continued to spend significant effort to improve the Extrusion business performance by seeking additional sales volume and higher margin contribution from various new product development projects. These projects and anticipated volumes are needed to offset the lost profitable volume in ABS/HIPS sheet used in fridge applications. Loss of these volumes resulted from fridge manufacturers establishing in-house extrusion capability in recent years. Despite an anticipated loss of toll volume about 1 ktes for fridge applications in 2017, the company managed to sustain its extrusion sales at 3,927 tes compared to extrusion sales volume in 2016 of 3,146 tes.
As reported last year, and further to the above, to address the change in market demand that has resulted from continued competition and recent raw material price pressures, the Company management has continued with its product portfolio development programme. This has included in 2017 investments to modify the capability of the existing extrusion machines to expand the range of extruded polymer products able to be produced and further investments to improve and produce new cast acrylic products. The benefits of these investments and developments are expected to be realised during 2018.
Overall, the Company reported sales revenue in 2017 of Baht 1,148 million which was an increase over last year (Baht 1,047 million). Unfortunately, principally to significantly higher raw material costs and fierce price competition as described above, the company experienced a loss of Bht.52.0 million compared to last year’s profit before income tax of Baht. 87.0 million, The contribution margin expressed as a percentage of sales revenue for cast acrylic sheet has dropped significantly to 6.0% compared to 2016 when the rate was 21.0%.
In Q4 the Company completed the sale of land surplus to its requirements located at the Wellgrow Industrial Estate, thereafter, and following review and assessment of its financial position, it paid an interim dividend of Baht 0.50 per share in December 2017.
The Board of directors and management have continued to work to strengthen TPA's governance and internal control processes during 2017 as part of its Anti-Corruption Project. A notable milestone was submission and acceptance / approval thereof of the Company’s self-assessment under Thailand’s Private Sector Collective Action Coalition Against Corruption (CAC).
Looking ahead, the Company expects that the operating performance for the year 2018 will improve from 2017 as a result of its investments and product portfolio development programmes, anticipated reduction in key raw material prices and increased volumes resulting from general global-economy linked export growth, and demand stimulus from Public infrastructure and private-sector real estate investments for both cast and extruded products.
In conclusion, as I have outlined, 2017 has been a difficult year for the Company due to a number of factors but principally as a result of external raw material costs and continued reduced market demand. The Company's management, fully supported by its Board of Directors, is committed to reversing this decline in performance as far as practicable through the measures I have described.
On behalf of the Board of Directors, I would like to thank the Company’s shareholders, customers, and stakeholders for their support. Importantly, I would like to thank the Company's management and employees for all their efforts and hard work throughout the year to operate the plant reliably and safely and to minimise and mitigate as far as possible the market conditions and external factors that have affected the Company's performance.
Dr. Benjamin James Harris
Chairman of the Board of Directors