INTEGRITY QUALITY SERVICE - Saha-Union Co., Ltd

SAHA-UNION
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the sale price of electricity as to the proportion of the higher cost, causing the business to suffer loss that could not be
rectified and further caused a lack of liquidity. The Company’s Board of Directors had a resolution to cease the operation,
resulting in a sharp decrease in the net asset value; therefore, the Company had to record the recognition of this loss in
the consolidated financial statements at the amount of Baht 225 million in 2011.
2.2 Fluctuation of Security Prices in Overseas Secondary Markets
As the Company has invested in marketable securities in overseas markets, the outstanding securities at the end of the
accounting period have to mark to market price, according to the accounting standard, the variance between of the costs
and the market prices at the end of the accounting period shall be acknowledged unrealized profit or loss on such date
in the income statements. Only if the securities are sold, such item will be reverse and acknowledge the actual profits (or
losses) from selling securities. It can be seen that the more fluctuated of the security prices in overseas secondary markets
are, the more recognition of such difference has accordingly; however, the Company has its policy to invest in the good
fundamental businesses; and proper returns are expected.
2.3 Foreign Currency Exchange Rates
As the Company and its subsidiaries have a high proportion of business transactions of import-export with foreign companies,
the Company has implemented the currency risk management by using the natural hedge method. For margins of more
foreign currency to be received from product sale than the amount to be paid, whether the Baht will increase or decrease
depends on the foreign exchange rate. If the Baht is strong against the foreign currencies, such currencies will be sold
into a less value in Baht. In 2011 the exchange rates were very fluctuating, and the Baht was rather strong when compared
to 2010, resulting in the money amount in Baht received from the exported products to devaluate.
2.4 Fluctuation of Raw Material Prices
The group companies operate the business in textile, which mainly uses cotton as the raw material. The world’s cotton
prices drastically fluctuated in 2011. Its market prices continuously rose since the end of 2010 until mid-2011, which started
to fall continuously. Therefore, cotton bought before mid-2011 had high prices, but market prices of finished goods at
the second half of the year were lower than their costs, resulting in impairment of remaining products, which affected the
operating results in 2011 and caused the Company to receive fewer dividends from those companies.
2.5 Marketing and Competition
Under the globalization of the current economy, businesses are competing more intensely with many emerging marketing
techniques. New entries come into the industry from both domestic and oversea, causing over supplies in the market when
compared to the demands; thus, the Company had to adjust its investment depend on the situation. Unworthy return of
investments or inappropriate businesses will be changed to the new ones. If any businesses can still be improved for a better
operation, the Company will give them a chance and follow up the operation to evaluate their business trend afterwards.
Other factors causing the lower profits were not the effects from external incidents.
3. PREVIOUS OPERATING RESULTS OF THE BUSINESS GROUP
3.1 Sales and Service Income
In 2011, the Company had its sales and service income amounted to Baht 8,755.41 million, decreasing by Baht 1,385.68
million when compared to Baht 10,141.09 million in 2010. This was mainly because incomes from Sriracha Branch of
the Company since 2011 amounted to Baht 1,200 million were not recorded as sales and services income, as disclosed
earlier at the end of 2010 that the type of business was changed from contract manufacturing of electronic components
to property and real estate rental services related to such production. Moreover, the Company slightly faced an indirect
effect from the massive flood in the 4th Quarter 4 in 2011, costing the sales of plastic and rubber fallen by Baht 180 million.
3.2 Other Incomes
In addition to the sales and services income mentioned above, the Company also had other incomes from investment business.
In 2011, the Company had other incomes amounted to Baht 1,133.95 million, decreasing by Baht 292.51 million when compared
to Baht 1,426.46 million in 2010, or 2.53% decrease when compared to total incomes. The main reasons are: