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FAQ

 

 

 FAQ  –  AGM 2019
Q :  This year’s GDP will fall from 4.1% to 3.8%. How will this affect The Company?
A :  Thailand’s economy has been up and down all the time. Since this is just a forecast figure, The Company cannot yet forecast any effect to us at the moment. Yet, having been through this experience before, as a manufacturer, we commit to manage our business to the best.
Q : What types of risk do you have based on the sustainability report?  What was the extent of damage considering that you had stopped working twice due to accident?

 

A : We place priority to risk management, as witnessed by the setting up of the Risk Management Committee, which convenes every six months to assess various risks including economic risk, risk from natural disasters and financial risk relating to the value of Thai Baht. Currently, we are buying forward contracts to implement the balancing aging method where foreign-denominated incomes are set off and balanced with expenses in foreign currencies. In addition, we also buy risk insurance amounting to 50% of the amount we have to pay.

Regarding accident that had stopped employees from working, actually, the accident involved minor injury of employees and our doctor decided to temporarily stop only injured employees from working.

Q :
  1. I heard that Japanese car manufacturers had planned to move their production base to other countries such as Indonesia and Vietnam. How will this move affect the company?
  2. Will car manufacturers lower their production capacity in Thailand in the future?
  3. How will future manufacturing of electric cars affect Thai Stanley Electric in terms of competition and market sharing?
A :  

  1. Actually, Japanese car manufacturers have already set up production base in various countries. Based on the forecast, there will be more economic expansion in Southeast Asia; that’s why they tend to increase investment to enhance their production base in the region including Thailand. Thai Stanley Group has already set up companies in these countries. However, from the perspective of infrastructure and supply chain, Thailand is considered having a great management capability to accommodate domestic production. We also plan to expand our investment especially within Asian countries to facilitate local production of auto parts destined to assemble overseas.

 

  1. The number of cars to be manufactured in the future by each car manufacturer will vary according to models. Besides, manufacturing methods are also different. For example, products can be manufactured locally as auto parts before being exported to assemble overseas. The fact that car manufacturers move their production base may either reduce their production capacity in Thailand, or, on the contrary, increase production capacity in certain car models. Nevertheless, most car manufacturers continue to regard Thailand as the production base for export purpose. Meanwhile, the manufacturing figure during the past year remained high. Therefore, overall speaking, the production in Thailand may increase subject however to certain factors such as economic changes.Moving the production base may sound negative for Thailand. As a matter of fact, it’s more the setting of a new production base to accommodate needs for automobile in each country. Like what happened in the past when cars were produced in Japan, automakers then invested in a new production base in Thailand thanks to the needs for automobiles and the fact that it was a cost-effective investment to use Thailand as a production base.
Q : At present, The Company  has only one committee aside from independent directors, namely, the Audit Committee. I wish to ask how the company has managed its risk and whether or not you have a plan to additionally set up the Risk Management Committee consisting of independent directors.
A : At present, we have internally set up the Risk Management Committee without the presence of independent directors yet. We will take your advice for further consideration. We believe that each business is exposed to different types and levels of risk. The management may handle the risk on its own if the risk remains under control. If not, it will seek help from competent persons.
Q :
  1. Referring to Clause 9, Page 51, of Notes to Financial Statements, Re: Net Inventories, it includes allowance for obsolete goods. The auditor stated on Page 18 of the auditor’s report that this had been booked on the basis of the management’s experience and past sales. To elaborate, products without movement for more than 12 months would be booked as 100% cost. In this regard, there was a transaction involving work in process, which amounted to Baht 5 million. This amount was higher than last year, which stood at Baht 2 million only. As a result, is it correct that this value was entirely booked as a cost of sales? Please explain.

     2. Notes to Financial Statements Page 78 Re: Contingent Liability refers to taxes Thai Stanley                    Electric was to pay Department of Revenue as a result of a tax litigation involving a                                    business the company had been granted an investment promotion where it subsequently                        booked the entire amount as liabilities. Will a similar incident like this happen again
in the future?

A : We filed a lawsuit against the Revenue Department. The litigation started around 10 years ago. We had complied with requirements of the relevant agencies but it was against Department of Revenue’s requirements, which were subsequently issued. Eventually, the Supreme Court dismissed our case, for which we acknowledged the order and all the expenses were booked.

At present, we are extremely cautious of a similar issue in this nature. Department of Revenue also adjusts the way it works by willing to do more consultation with us. We could not guarantee that this won’t happen again but we will take precaution and ensure the best accuracy we could.

Regarding inventories without movement for a year, we are quite conservative. That’s why our policy is to set aside an allowance, which is good for our financial statements because it makes the statements accurate. Discussion was also made with Sales Department before booking them as a cost of sales.

Meanwhile, work in process was higher because of the molding work in process, which sometimes may have had a higher cost than estimated as a result of the modification. We also booked it as a cost.

Q :  

  1. Please explain your investment in Vietnam Stanley Electric Co Ltd. Why did the auditor charge an auditing fee for auditing Vietnam Stanley Electric Co Ltd’s financial statements?
  2. Regarding Clause 25 of Notes to Financial Statements Re: Earnings Per Share (EPS), please explain a difference between profit from the financial statements in which the equity method is applied, which was Baht 25.81 per share, vs. profit from the Company’s only financial statements, which was Baht 23.38 per share.
A :       1. We have invested in 20% shares of Vietnam Stanley Electric Co Ltd.

2. Statements of Income reported the profit sharing from investments in an associate and a joint venture totaling Baht 316.18 million. Since this involved the booking of shared profit from Vietnam Stanley, we needed to have PricewaterhouseCoopers ABAS Ltd.,Vietnam audit Vietnam Stanley’s financial statements based on the Thai auditing standards. As a result, there was an auditing fee charged by PricewaterhouseCoopers ABAS Ltd., Vietnam.

Regarding the difference between the statements in which the equity method is applied vs. separate financial statements, since the statements in which the equity method is applied also booked profit from Vietnam’s business, the profit therefore was higher than that shown in the Company’s only financial statements.

Q :   1.Clause 9 of Notes to Financial Statements, Page 51, Re: Net Inventories, states that you had recorded Baht 6.65 million as allowance for obsolete and slow-moving inventories There was also a reversed allowance for obsolete and slow-moving inventories totaling Baht 9.19 million. I would like to ask the following regarding the reversed allowance

  • whether it’s involved finished goods or not;
  • which method was applied for the booking of the reversed allowance (destroying goods, selling them as scrap)?
  1. Which product was an allowance totaling Baht 6 million for? This was because last year, this allowance was only Baht 0.47 million but the reversed allowance was Baht 22.27 million. The amounts were so different.Baht 9 million reversed allowance came from product destruction. Meanwhile, Baht 6 million allowance was for booking the mold value.
A :  We prefer to be conservative. That’s why we always book goods that exist on the basis of their actual values.
Q : The allowance and the reversed allowance will likely take place every year because there will always be some work in process. Thai Stanley Electric should try to reduce this amount by managing production or coordinating with customers to keep this item minimum.

 

A :  Thank you very much for your advice. We will try to do our best.
Q : What was the payment method of Baht 200,000 auditing fee for Vietnam Stanley’s financial statements? How was the financial statements audited? Was it accepted by the Thai laws? I would appreciate if you can give an explanation.

 

A : Since Thai Stanley Electric is a listed company in the Stock Exchange of Thailand (SET) with investment in overseas companies, in this regard, PricewaterhouseCoopers ABAS Ltd, will draft auditing requirements before sending them to our branches in a relevant country to do the auditing. This is better than dispatching auditors from Thailand to do the auditing there. This practice is also generally accepted including by the Stock Exchange of Thailand . Meanwhile, PricewaterhouseCoopers ABAS Ltd, Thailand was the party who expressed the entire auditing opinion.
Q : Was there any observation made in the past? If not, the auditor could probably acknowledge the financial statements without having to charge the auditing fee.?

 

A : PricewaterhouseCoopers ABAS Ltd, had to audit the statements based on the Thai auditing standards, which is additional to what it normally did on the basis of the Vietnamese auditing standards. That’s why the fee had to be charged. Regarding the fee, PricewaterhouseCoopers ABAS Ltd,Thailand  directly charged Thai Stanley Electric without adding any extra cost.
Q :
  1. Where was the land you had bought located? What did you buy it for?
  2. Can you pay more dividend than what the current policy sets to pay no fewer than 30% of net profit?
A : This question is out of agenda Therefore, allowing shareholders to answer ,

  1. The land we bought is at the back of the company. The purpose is to expand our business. A new factory had been built since last year. This year, we will build a new lamp factory.
  2. Regarding the dividend policy of no fewer than 30% of net profit, this means we also need to pay more (if the policy is changed to a higher percentage of dividend payment). However, since we foresee new technological changes, we believe that now is the time to continue investing. Yet, when the right time comes, we will definitely consider the dividend policy.

Regarding the growth of the Asian market and changing technology, Thai Stanley Electric will focus more at lamps. LED lamps and new Technology will be increasingly used to add values to our products. That’s why we need to invest in new technological capacity. We will manage our business for growth in tandem with an ability to consistently pay dividend to shareholders.

Q :  

  1. Based on last year’s investment figure as shown in the video presentation and according to Clause 14 of Notes to Financial Statements, Page 60, which records the purchase of assets totaling Baht 2.845 billion, how much in terms of percentage will this investment increase your production capacity? When will your new factory completed? Which type of lamp will it produce?
  2. Clause 12 of Notes to Financial Statements, Page 55, Re: Investment in a Joint Venture, shows a difference resulting from the conversion of the 2018 financial statements totaling Baht 2.35 million or 10% of the year-end book value (Baht 22.71 million) vs. the conversion of the 2019 financial statements totaling Baht 1.14 million or 5.14% of the year-end book value (Baht 22.17 million). Does this indicate the currency depreciation?

In addition, Clause 11 of Notes to Financial Statements, Page 53 Re: Investment in an associate, shows a difference resulting from the conversion of the 2018 financial statements totaling Baht 103.74 million or 10% of the year-end book value (Baht 1,131.69 million) vs. the conversion of the 2019 financial statements totaling Baht 5.82 million or merely 0.43% of the year-end book value (Baht 1,357.93 million). Does these changes a result of currency changes?

A :  

All were a result of exchange rate changes concerning Laos Stanley and Vietnam Stanley Electric.

We have completed the construction of an expanded section of our Lamp 7 Factory. Right now, a new factory is under construction. There will be investments in new machinery. Thanks to both factories, our production capacity should increase from the current level by 30%. The products they will produce are lamps, which are our main products. As for details of the products i.e. which car models it will be for, we cannot answer this question because it’s customer’s confidential information.

However, the products will be for a new generation of automobile as well as replacement products for current models. This investment will allow us to not only accommodate new products but also produce lamps with increasing technologies, for example, products that will incorporate more LED in their components.

The new molding factory will start operating this year to accommodate future products where internal molds will be manufactured.

We will use customer information to support our additional investment in the future.