INTEGRITY QUALITY SERVICE - Saha-Union Co., Ltd

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SAHA-UNION
3. FINANCIAL RISK has the matters as follows:
3.1 Risk of currency exchange loss of the group companies
The Company evaluated that the likelihood and
impact is rather high since the exchange rate of Thai
Baht against US dollars during the previous year
was very fluctuating, affecting the revenue paid in
foreign currencies to the group companies for the
exported and sold products when changing into the
Thai Baht. During the Baht appreciation, the value of
profit was lower in terms of Baht. The export volume
of the Company was quite substantial; thus, this type
of risk was an important factor. The Company had a
supporting measure by assigning the responsible
parties to follow up the situation and manage the
exchange rates by reporting to and consulting with the
Managing Director of each group company in order
to promtly decide on the situation. Each company
also report the effect of exchange rate, the amount of
debtors and creditors in other currencies to the main
company. Normally the group companies has a policy
to manage this risk by using the Natural Hedge method
and buying the Forward Contract from the bank as
appropriate with the situation. However, the companies
cannot make the exchange rate speculation for profit;
only speculation to protect risk is allowed. Moreover,
specialist trainers from the financial institution are
occasionally invited to give a lecture to the executives
and related officers in the group companies to improve
their skills, focusing on the vigilant management of
such risk.
3.2 Risk of devaluation of investment
The Company’s core business is invesment in many
businesses. There have been changes in economy,
politics, society, demand, supply, material prices,
energy prices, etc., affecting some types of business
invested by the Company. If the operating results of
the companies’ investment are negative, the share
values of the Company’s shareholders will be lower.
If the value is lower than the Company’s investment
capital, the result of investment devaluation must be
recorded. The Company estimated that the likelihood
and the impact were moderate. The Company has
measures to set up a system to evaluate business
investments by quarterly. The Company has assessed
on impairment of investments which already accounted
for in the notes to financial statements for the years
2011 No. 13, No.14.1, No.15 and No. 16.
4. Risk factor from external incidents is beyond
the Company’s control. Types of this risk significant to the
Company are such as:
4.1 The higher price of oil and energy in the world market
The factors of this type of risk are external, where the
Company cannot control. If this risk happens, it will
increase the raw material price, transportation price
and many other related costs such as fuel, electricity,
etc. While cost of production increases, the sale price
in the market is unable to increase proportionately to
the rising cost, resulting in a decrease in the gross
profit. The Company evaluated that the likelihood is
rather high, so it has a supporting measure by having
the procurement team with experience to plan the
procurement to be consistance with the quantity and
duration. Moreover, the Company has a measure to
save the energy or utilizing management practice to
reduce energy cost, such as, operation in full capacity
during the off-peak period.
4.2 Risk of high interest rate
Some group companies have a source of circulating
capital from loans; thus, if the market interest rate is
high, those companies will face a higher financial cost,
which is beyond the companies’ control. In 2011, the
interest rate rose as a result of inflation; however, in
overall picture for the Company and its subsidiaries,
the loan amount was not high. The Company evaluated
that the impact from this risk is low. The Company has
a policy to protect this type of risk by maintaining a
suitable proportion of loans and investment capitals
in order to maintain the returns on investment to be
higher than the companies’ financial cost.
4.3 Risk of the world’s changing economy
In 2011, the world’s economy was affected by the EU
economic problem and the tsunami in Japan during
the 2 nd quarter, causing the EU partners to postpone
the product delivery. The Japan’s shortage of raw
material in the automobile industry also caused a delay
of purchasing orders from the customers. However,
some businesses, namely the vacuum bottle business,
gained more orders due to an increase in orders from
oversea customers. Some products had a decreasing
sale volume due to the economic recession in foreign
countries, affecting the operating results of companies
investing both domestic and overseas. The Company
evaluated that the likelihood of this risk is high, but
the impact is moderate. The Company’s measure is