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 MESSAGE FROM BOARD OF DIRECTORS
In the year 2005, Thailand was still recovering from the biggest disaster in its history, the tidal wave, tsunami, which hit Thailand on late December 2004, wiping out many resorts, hotels, restaurants and along with one of Thailand ’s vital economy: Tourism is Thailand ’s main income, and 80% of which was washed away with the wave. Not only tsunami, but also Bird flu had also had a significant influence on the export trade. The oil prices also rose intensively in the previous year causing inflation 4 to 5 percent during the third and fourth quarter of 2005. Since Thailand depends on foreign countries for oil, high oil prices directly affects our lives. In other words, higher oil prices cause higher living cost, which reduce consumption on normal goods such as clothes, accessories, buildings and other amenities. In consequence, Bank of Thailand adjusted interest rates tremendously to deflate domestically and to prevent the money outflow from Thailand . The rise in interest rates, which Bank of Thailand issued, had a major effect on construction industry as people put their constructions on hold. With all the economic crisis and public nuisance in the three states in the southern provinces, Thailand ’s economy has been unrest. The recession of Thailand ’s economy also has the impact on the company. However, with our marketing strategy, our products are not concentrating in one or two regions of Thailand . We spread our products according to the demand of the market covering every part of the country. Most of our customers are retailers who purchase our products mainly for repairing, so the stoppage of major constructions has very little impact on us. The company is also continuously reducing the cost of production, which has been one of our objectives; therefore, the increase in transportation cost and higher price of natural gas has very limited to no effect on our net profit compared to the year before. Summary Of Operating Result in 2005 In the year 2005, construction materials and property markets are still on their positive trends. The number of requested area for construction permission increases 12 percent continuously from previous years. Major manufacturers increased their production approximately 15 million square meters per year. Dynasty Ceramic Public Company, the leader in mid to low end tile market, are holding 27 percent of local market share. The company has been increasing its production steadily. At present, the company is capable of producing 40 million square meters per year, yet we still expanding to a capacity of 3.8 million square meters per month from 3.3 square meters per month. The first phase of factory expansion project will be completed in March 2006 with a total investment of 400 million baht. The company is also planning to expand its capacity to 4.3 million square meters per month during the second half of the year 2006 with another 200 million baht investment. The second factory-expansion phase is to be completed by the end of year 2006. In October 2005, the company has made an acquisition of the three tiles distribution agent companies including Pick and Pay Company Limited, Muangthong Ceramic Company Limited, and World Wide Ceramic Company Limited. The total investment was approximately 17 million baht. The acquisition was made to expand the output capability of the company to support our higher production volume. All three companies that Dynasty Ceramic Public Company purchased already have 104 factory outlet stores located through out Thailand and they also have capability of opening more. Since the three companies are also our biggest account receivables with the ratio of 63 percent of the total receivable account, this made the company to be independent from relying largely on major customers. Net sales in 2005 were 4,255 million baht, which increased 14 percent from the previous year. The growth was according to the expansion of production capacity and the opening of factory outlet continuously through out the year; not to mention the increase in agencies in Bangkok and its outskirt. All of these have increased gross profit of the company and its partnership to 1,591 million baht, which is 37 percent, the same as the previous year. Due to a rigorous increase of 20 percent in the cost of natural gas, one of the main components in production process, the company has adjusted its selling prices 3 percent during April 2005 in order to support higher production cost. Therefore, the company yielded a net profit after tax of 749 million baht or equivalent to 1.84 baht per share compared to 1.66 baht per share in the previous year. The Board of Directors considered it appropriate to seek authorization from the Shareholders’ Meeting for the provision of 2005 annual dividends in the rate of 1.30 baht per share. Interim dividends were therefore paid for 3 quarters of 2005 at a total rate of 1.09 baht per share. For the remaining 4 th quarter, authorization was proposed for the payment of another dividend in the rate of 0.21 baht per share. The total dividend payout amount was 530.4million baht, or 71 percent of 2005 net profit. In the year 2006, the company is aware of the competition in ceramic tiles industry, which is expected to take place aggressively, both from local manufacturers and importers of tiles from China . However, most of Chinese’s tiles are porcelain tiles, which will not affect the company much in terms of quantity sold, and pricing strategy as the company can ensure customers of higher quality yet lower price of our product. The company also has a different distribution channel and a different targeted segment of customers from the importers. Even though the interest rate is, still increasing, but the rise in demand of mid-ended to low-ended construction buildings and materials are still on positive trend. The projected growth rate for 2006 that the company has set is approximately 20 percent from the expansion of 1 million square meters in production capacity and the increasing in numbers of factory outlet up to 200 outlets by the end of this year. In terms of market share, the company’s goal is to hold 35% to 36% of local market share. The decreasing in demand of land and property industry will only slightly affect the company since our main income is from repairing work. Finally, The Board of Directors wishes to praise our entire employee who’s has been kindly contributing their effort, skill and dedicating to reduce the production cost and create a wide range of distinguished products. Also wishes to thank the Company’s shareholders, customers, product and service partners, for their invaluable support of the Company’s business and witnessing the success of our plans.All the members of the Board of Directors stand united in the mission to exercise the utmost judgment and skill in managing the Company on its continued journey to prosperity. (Roongroj Saengsastra) President
BOARD OF DIRECTORS Standing from left: Mr. Sanchai Janejarat, Mr. Surasak Kosiyajinda, Mr. Chana Suthiwangcharoen, Mrs. Pawanya Kritchart, Mr. Suvit Samarnpanchai, Mr. Chaiyasith Viriyamettakul, General Lieutenant Phatcharavat Wongsuwan.
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