chememan public company limited บริษัท เคมีแมน จํากัด...

CHEMEMAN PUBLIC COMPANY LIMITED

บริษทั เคมีแมน จาํกดั (มหาชน)

10th-11th Floor, Lake Rajada Office Complex 2

195/11-12 Rajadapisek Road, Klongtoey

Bangkok 10110 THAILAND

Tel : (662) 661-9734-8

Fax : (662) 260-9176

http://www.chememan.com

-Translation-

Date: 12 November 2018

Subject: Reporting on the Company’s Financial Performance for three-month and nine-month period ended 30 September 2018

To: President of the Stock Exchange of Thailand

Attachment: Management Discussion and Analysis for the three-month and nine-month period ended 30 September 2018

Chememan Public Company Limited (“the Company”) would like to report the financial performance

of the Company and its subsidiaries for the three-month and nine-month period ended 30 September 2018

which has been reviewed by the Certified Public Accountant. Net profit attributable to equity holders of the

Company for three-month period of Q3 2018 of Baht 20 million increased from Q3 2017 by Baht 2 million or 10.7%.

Net profit attributable to equity holders of the Company for the nine-month period of 2018 of Baht 115 million

increased from the nine-month period of 2017 by Baht 24 million or 26.6%. The detail of Management

Discussion and Analysis has been attached herewith.

Please kindly be informed accordingly.

Yours faithfully,

(Mr. Adisak Lowjun) Chief Executive Officer

CHEMEMAN PUBLIC COMPANY LIMITED

Management Discussion and Analysis

For the three-month and nine-month periods ended 30 September 2018

Chememan Public Company Limited

Management Discussion and Analysis for 3-month and 9-month periods ended 30 September 2018 Page 1/11

Business Overview

Lime1 and Limestones are being used in the process of manufacturing of various consumer products used

in everyday life. This creates the great opportunity for Chememan Public Company Limited (“CMAN) with

our own limestones quarry as main source of raw materials which is essential key to enable the continuous

production expansion.

CMAN’s main sources of revenue are from sales of 3 major products being (1) Quicklime, (2) Hydrated

Lime and (3) Limestones and ground limestone. The sales revenue in Q3 2018 amount 588 MB, decreased

by 9.2% QoQ due to seasonal fluctuations in sales volume. Meanwhile, the sales revenue increased 14.6%

YoY mainly due to the operational commencement of KK6 quicklime kiln since the beginning of Y2018.

CMAN reported EBITDA2 for Q3 2018 at 83 MB with net profit of 20 MB.

At end of Q3 2018, CMAN showed a strong financial position with total assets of 3,539 MB increasing

10.0%, total liabilities of 1,363 MB decreasing 31.7% and shareholders’ equity of 2,176 MB increasing

78.0% from Y2017, reducing the interest-bearing debt to equity ratio to 0.44x at end of Q3 2018 from 1.27x

at end of Y2017.

1 Lime represents Quicklime and Hydrated Lime 2 Earnings before interest, tax, depreciation and amortization



Operational Summary

Unit : million baht For 3-month periods ended For 9-mth period ended

30 September

2018

30 June

2018

30 September

2017

30 September

2018

30 September

2017

Sales Revenue (1) 588 647 513 1,831 1,620

Cost of Sales (not include depreciation & amortization) (351) (389) (292) (1,095) (899)

Transportation cost (106) (116) (94) (314) (302) Gross Profit (net transportation cost and depreciation & amortization) (2) 131 143 127 422 420 Gross Profit Margin (net transportation cost and depreciation & amortization) (%) 27.2% 26.8% 30.3% 27.8% 31.8%

Other income 6 9 6 12 13

Selling expenses (9) (8) (7) (25) (21)

Administrative expenses (40) (42) (53) (112) (153)

Gain (Loss) on exchange rate (5) 17 (2) 1 (2)

Share of loss from investment in joint ventures (1) (1) (0) (3) (0)

EBITDA 83 117 71 295 257

Adjust : (a) Gain (Loss) on exchange rate 5 (17) 2 (1) 2 Adjust : (b) Cost incurred by temporary shutdown of kiln for maintenance 6 0 1 6 1

Normalized EBITDA (3) 93 100 74 300 260

Normalized EBITDA Margin (%) 15.9% 15.4% 14.3% 16.4% 16.0%

Depreciation & Amortization (47) (48) (40) (137) (119)

Depreciation & Amortization – Cost of sales (43) (44) (37) (127) (111)

Depreciation & Amortization – Administrative expenses (4) (4) (3) (10) (8)

Finance costs (20) (11) (16) (49) (46)

Adjust : (c) Loan prepayment fee 11 0 0 11 0

Gain (Loss) on tax 4 (0) 3 7 (1)

Normalized Net Profit (3) 41 41 21 131 94

Normalized Net Profit margin (%) 7.0% 6.3% 4.1% 7.2% 5.8%

(a) Gain (Loss) on exchange rate (5) 17 (2) 1 (2) (b) Cost incurred by temporary shutdown of kiln for maintenance (6) (0) (1) (6) (1)

(c) Loan prepayment fee (11) 0 0 (11) 0

Net profit 20 58 18 115 91

Net Profit Margin (%) 3.3% 9.0% 3.4% 6.3% 5.6%

(1) Sales revenue = Revenue from sales of products and transportation cost (2) Gross Profit Margin (net transportation and depreciation & amortization) = Gross Profit / (Sales revenue – Transportation cost) (3) Net profit after adjustment of unusual transactions



Operational Results of Q3 2018 comparing with Q2 2018

In Q3 2018, CMAN generated 588 MB sales revenue, decreasing 59 MB or 9.2% QoQ primarily due to

seasonal fluctuations in sales volume despite the positive effect on export derived by Thai Baht depreciation

in Q3 2018 when compared to Q2 2018.

Gross Profit Margin (net transportation and depreciation & amortization) in Q3 2018 at 27.2% increased

gradually from Q2 2018 due to the lower production of quicklime at Prabuddhabaht Plant which is fueled

with natural gas – a higher-cost fuel than coal used by Kangkoi Plant as fuel.

CMAN reported Q3 2018 net profit from consolidated financial statements of 20 MB, decreased 38 MB from

previous quarter, with net profit margin of 3.3% and 9.0% respectively. Main reasons are (1) higher staff

costs from the adjustment in annual remuneration, (2) realizing one-time special expense relating to

refinancing and (3) Thai Baht appreciation at the end of Q3 2018 contributed to the loss on exchange rate

comparing to the gain on exchange rate at the end of Q2 2018.

Operational Results of Q3 2018 comparing with Q3 2017

In Q3 2018, CMAN’s sales revenue increased 75 MB or at 14.6% YoY, mainly from (1) quicklime production

capacity expansion at Kangkoi Plant by installing KK6 quicklime kiln which have been operated

commercially since beginning of Y2018 and (2) rise in export volume from 28% in Q3 2017 to 33% in Q3

2018 contributed by the growth in international marketing.

Gross profit margin (net transportation and depreciation & amortization) of 27.2% in Q3 2018 reduced from

Q3 2017, accounted by increasing transportation cost from rising export volume and the restatement of

certain staff costs from administrative expenses to cost of sales in Y2018.

CMAN’s consolidated net profit in Q3 2018 increased 2 MB when compared YoY, with net profit margin in

Q3 2018 and Q3 2017 at 3.3% and 3.4% respectively.

Operational Results of 9M 2018 comparing with 9M 2017

For 9M 2018, CMAN generated sales revenue of 1,831 MB, increasing by 211 MB or at 13% growth YoY

due to (1) quicklime production capacity expansion at Kangkoi Plant by installing KK6 quicklime kiln which

have been commercially operated since beginning of Y2018 and (2) higher exporting portion, from 32% in

9M 2017 to 36% in 9M 2018 contributed by the growth in international marketing.

Gross profit margin (net transportation and depreciation & amortization) for 9M 2018 at 27.8% decreased

from the same period last year as a result of (1) average export price of quicklime and hydrated Lime



reduced by the Thai Baht currency appreciation, (2) restatement of certain staff costs from administrative

expenses to cost of sales in Y2018 and (3) rising cost of fuel for production.

CMAN’s consolidated net profit rose 26.6% YoY to 115 MB in 9M 2018, with net profit margin for 9M 2018

and 9M 2017 equal to 6.3% and 5.6% respectively, resulting mainly from (1) warehouse rental cost declined

from construction of own warehouse in Kangkoi Plant, (2) depreciation expenses rose from investment in

construction of KK6 quicklime kiln and crushing plant at Kangkoi Plant and (3) reduction in tax expenses

following the increase in profit from business with BOI incentive after KK6 quicklime kiln has received the

investment promotion certificate.



Operational results classified by main products

CMAN’s main revenue comes from sales of 3 major products being (1) Quicklime, (2) Hydrated Lime and

(3) Limestones and Ground Limestone.

Quicklime

3-Month Period

Q3 2018 Quicklime sales revenue dropped 53 MB or 10.9% QoQ mainly due to the seasonal slowdown of

both domestic sales and export sales, as well as the temporary shutdown for maintenance of KK1 quicklime

kiln in accordance with scheduled maintenance plan. Meanwhile, Sales revenue increased 84 MB YoY at

23.5% growth rate as a result of increasing quicklime production from KK6 quicklime kiln which have been

commercially operated since the beginning of Y2018, coupled with the growth in international marketing.

Q3 2018 gross profit margin (net transportation) ascend to 18.2% from 16.8% in Q2 2018 due to the lower

quicklime production level at Prabuddhabaht Plant where natural gas is used as fuel (the cost of natural

gas is higher than coal which is being used by Kangkoi Plant as fuel). However, the gross profit margin

decreased from 19.8% in Q3 2017 following the restatement of certain staff costs from administrative

expense to cost of sales in Y2018.

30 September 2018 30 June 2018 30 September 2017 30 September 2018 30 September 2017

Sales Quantities (MT) 134,949 153,551 105,724 440,763 353,140

Domestic 48,474 58,656 55,320 186,810 189,907

Export 86,474 94,895 50,403 253,953 163,234

Sales Revenue (MB) 438 491 354 1,388 1,169

Domestic 134 159 147 506 503

Export 303 332 207 882 666

Cost of sales (295) (339) (235) (941) (752)

Transportation cost (76) (83) (61) (231) (199)

Gross Profit (net transportation) 66 69 58 216 219

Gross Profit Margin (net transportation) % 18.2% 16.8% 19.8% 18.7% 22.5%

QuicklimeFor 3-month period ended For 9-month period ended



9-Month Period

9M 2018 revenue from sales of quicklime increased by 219 MB or at 18.7% YoY, contributed mainly by

(1) the commercial operation of KK6 quicklime kiln at beginning of Y2018, added by (2) higher export

volume arising from the growth in international marketing.

Gross profit margin (net transportation) for 9M 2018 at 18.7% declined from 22.5% for 9M 2017 due to

(1) increasing cost of fuel for production, (2) higher volume of products purchased from other lime producers

for resale and (3) restatement of certain staff costs from administrative expenses to cost of sales in Y2018.

Hydrated Lime

3-Month Period

Q3 2018 revenue from sales of hydrated lime decreased 8.4% QoQ and 18.3% YoY mainly from the

decrease in international sales volume. However, gross profit margin (net transportation) rose to 29.6%

from 26.2% in Q2 2018 and 28.8% in Q3 2017, despite the restatement of certain staff costs from

administrative expense to cost of sales in Y2018.

9-Month Period

9M 2018 revenue from sales of hydrated lime softened by 1.7% YoY while the domestic sales portion for

9M 2018 increased to 34% from 25% in Y2017, with gross profit margin (net transportation) at 27.7%,

reduced slightly from 29.0% in 9M 2017 as a result of the restatement of certain staff costs from

administrative expenses to cost of sales in Y2018.



Domestic 8,924 8,604 5,521 27,350 17,224

Export 13,665 15,639 20,070 45,165 49,904

Sales Revenue (MB) 89 97 108 283 288

Domestic 28 27 18 86 55

Export 60 70 91 197 233

Cost of sales (56) (62) (64) (181) (170)




Hydrated LimeFor 3-month period ended For 9-month period ended



Limestones and Ground Limestone

3-Month Period

Q3 2018 revenue from sales of limestones and ground limestone expanded 4.2% QoQ and 22.1% YoY,

underpinned by the rise in domestic sales volume of limestones and ground limestone following the

commercial commencement of the crushing plant in Q2 2018.

Q3 2018 gross profit margin (net transportation) leveled at 11.8%, reduced QoQ and YoY from 20.3% in

Q3 2017 due to the decrease in export volume of limestones and ground limestone as well as the restatement

of certain staff costs from administrative expenses to cost of sales in 2018.

9-Month Period

9M 2018 revenue from sales of limestones softened 1.7% YoY, mainly from the decrease in export sales

volume caused by the reservation of limestones as raw materials in producing quicklime following the

capacity expansion of quicklime production, while the crushing plant was still under capacity expansion

process.

9M 2018 gross profit margin (net transportation) decreased to 14.1% from 20.6% in 9M 2017, as a result of

lower export sales volume of limestones and ground limestone, added by the restatement of certain staff

costs from administrative expenses to cost of sales in Y2018.



Domestic 147,513 126,758 123,439 365,179 379,983

Export 300 20,181 813 20,481 64,106

Sales Revenue (MB) 62 59 50 160 163

Domestic 60 50 49 149 140

Export 2 10 2 11 23

Cost of sales (37) (32) (29) (94) (87)




Limestones and

Ground Limestone

For 3-month period ended For 9-month period ended



Financial Positions

Unit : million baht As at

% Change 30 September 2018 31 December 2017

Cash & cash equivalents 80 46 75.6%

Trade and other receivables 372 391 -4.8%

Inventories 285 280 1.7%

Property, plant and equipment 2,389 2,256 5.9%

Ore reserve 103 108 -4.4%

Other assets 310 136 127.2%

Total Assets 3,539 3,217 10.0%

Trade and other payables 300 330 -9.1%

Interest-bearing debt 956 1,556 -38.5%

Other Liabilities 106 108 -1.8%

Total Liabilities 1,363 1,994 -31.7%

Equity attributable to owners of

the Company 2,171 1,217 78.3%

Non-controlling interests of the

subsidiary 5 5 -6.7%

Total shareholders’ equity 2,176 1,223 78.0%

Total Assets as at 30 September 2018 was at 3,539 MB increased by 322 MB from 3,217 MB at end of

Y2017, mainly due to

1) Property, plant and equipment and advance payment for construction of plant & machinery

increased by 233 MB from the investment in capacity expansion of quicklime kiln (KK6) which have

been completed and started production since the end of January 2018, together with the crushing

plant at Tubkwang (TK) quarry which have been completed since second quarter of Y2018.

Including as well, the quicklime kiln (KK4) and big silos for inventories storage which are still under

construction.

2) Investment in 2 joint ventures in India in accordance with the investment plan.

3) Cash and cash equivalents rose from the increase in operational cash flow.



Total Liabilities as at 30 September 2018 of 1,363 MB decreased by 631 MB from 1,994 MB at the end

of Y2017, primarily due to repayment of debt (short-term and long-term borrowings) by using cash inflows

from operating activities and cash proceeds from Initial Public Offering (IPO) in Q1 2018, causing the debt

to equity ratio to reduce to 0.63x at end of Q3 2018 from originally 1.63x at end of Y2017, and the interest

bearing debt to equity ratio reduced to 0.44x at end of Q3 2018 from 1.27x at end of Y2017.

Shareholders’ Equity as at 30 September 2018 increased 953 MB from 1,223 MB at end of Y2017 to

2,176 MB at end of Q3 2018 due to the issuance of ordinary shares through IPO in Q1 2018.

Liquidity and Cash Flow

Unit : Million Baht

For 9-month period ended

Change 30 September

2018

30 September

2017

Cash flows from operating activities 246 180 66

Cash flows from investing activities (446) (285) (161)

Cash flows from financing activities 237 129 108

Increase(Decrease) in translation adjustments (3) (2) (2)

Net increase in cash and cash equivalents 35 23 11

Cash and cash equivalents at beginning of period 46 43 3

Cash and cash equivalents at end of period 80 66 14

For the 9M 2018, CMAN generated an increase in cash flows of 11 MB from the same period last year,

resulting in ending cash and cash equivalents at the end of period equal to 80 MB.

Cash flows from operating activities CMAN’s net cash inflows from operating activities amount 246 MB,

increasing 66 MB from the same period last year, mainly contributed by (1) increasing profit from operating

activities before changes in operating assets and liabilities, (2) decrease in change in working capital and

(3) lower cash outflows for income tax payment.

Cash flows from investing activities CMAN’s net cash outflows from investing activities amount 446 MB,

increasing 161 MB from the same period last year, accounted primarily by (1) the investment in capacity

expansion of 2 quicklime kilns, crushing plant and big silos and (2) the increase in investment in 2 joint

ventures in India.



Cash flows from financing activities CMAN and subsidiaries generated net cash inflows from financing

activities amount 237 MB, with 108 MB increase from the same period last year, mainly from (1) net cash

received from IPO and (2) net cash outflow from refinancing with positive effect of reducing loan repayment

obligations when compared with previous financing structure.

Key Financial Ratios

Financial Ratios Unit

For 3-month perioded ended

30 September

2018

30 June

2018

30 September

2017

Liquidity ratio

Current ratio times 1.20x 1.43x 1.28x

Average Collection Period * days 41.55 48.07 36.07

Average Inventory Period * days 50.22 44.64 56.19

Average Payment Period * days 42.62 41.16 45.31

Profitability ratio

Gross Profit Margin % 32.94% 33.18% 35.92%

Net Profit Margin % 3.30% 8.85% 3.41%

Net Profit Margin (Normalized) % 6.94% 6.18% 4.01%

Return on Equity * % 7.89% 13.50% 12.17%

Return on Equity (Normalized) * % 9.07% 9.44% 12.45%

Financial Policy Ratio

Debt / Equity ratio times 0.63x 0.55x 1.51x

Interest-Bearing Debt / Equity ratio times 0.44x 0.39x 1.20x

*Remarks: The calculation of financial ratios refers to the SET’s manual guide, in which the figures derived from Income Statement

have been annualized by using the figure in existing quarter plus previous 3 consecutive quarters.



Business Outlook

CMAN plays a leader in lime and lime derivative chemical industry in Asia, with customers from various

industries in Asia, Australia and Africa. Under the vision of “CMAN group aims to be one of the top ten world

leaders in the industry of lime and lime derivative chemical products”, CMAN has continuously expanded

the business both locally and internationally along with organizational development.

CMAN continuously expanded the production capacity by started the construction of a new quicklime kiln

(KK4) at Kangkoi Plant, with installed capacity of 73,000 MT per year and expected commercial

commencement date at end of Y2018. Coupling by the construction of big silos with capacity of 12,000 MT

which enable the effective inventory storage management.

To increase the ability in serving market demand, CMAN has expanded the production to other countries,

by investing in 2 joint ventures in India – Siriman Chemicals and Easternbulk Lime Products, with investment

portion of 50%. The joint ventures’ mission is to build production plant to produce and sell lime and

limestones at Visakhapatnam and Tuticorin in India. The 2 joint ventures are under construction process

and will be commercially operated by 2019 as planned.

CMAN had successfully refinance debt in Q3 2018, resulting in the lower cost of funding in the future.

CMAN remains the dividend payment policy of not less than 40% of consolidated net profit after deduction

of corporate income tax and all cash reserves, in subjection to the future financial position and business plan.

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