23 February 2010 The President The Stock Exchange of Thailand Dear Sir/Madam, Re: Management Discussion and Analysis on the fourth quarter 2009 and fiscal year 2009 financial performance Financial Performance Summary - 4Q09 and fiscal year 2009 Berli Jucker Public Company Limited ("BJC") is pleased to announce its 4Q09 and fiscal year 2009 earnings results. In 4Q09, sales were THB 6,175 million, representing an increase of 7.9% YoY and 12.8% QoQ. For fiscal year 2009, sales were THB 22,799 million, an increase of 2.5% from 2008. Operating profit in 4Q09 significantly improved to THB 691 million, showing an increase of 197.8% YoY and 40.4% QoQ while 2009 operating profit improved to THB 1,894 million, an increase of 10.8% YoY. Net profit for the quarter was THB 494 million, a significant increase of 222.9% YoY and 39.5% QoQ. BJC ended the fiscal year 2009 with net profit of THB 1,320 million, an increase of 5.1% from 2008. Sales breakdown is as follows: THB MM 4Q09 4Q08 %YoY 3Q09 %QoQ 2009 2008 %YoY Industrial 3,098 2,962 4.6 2,531 22.4 10,700 10,742 (0.4) Supply Chain Consumer 1,779 1,622 9.7 1,734 2.6 7,063 6,854 3.0 Supply Chain Healthcare 1,147 1,047 9.6 1,061 8.1 4,458 4,365 2.1 & Technical Supply Chain International 75 36 108.3 61 23.0 276 86 220.9 Business Group Information 76 54 40.7 87 (12.6) 303 196 54.6 Technology Total Sales 6,175 5,721 7.9 5,474 12.8 22,799 22,243 2.5 Other income 60 67 (10.4) 62 (3.2) 271 306 (11.4) Total 6,235 5,788 7.7 5,537 12.6 23,070 22,549 2.3 Revenue Operating 691 232 197.8 492 40.4 1,894 1,709 10.8 profit %margin 11.2 4.1 7.1 9.0 2.2 8.3 7.7 0.6 Net profit 494 153 222.9 354 39.5 1,320 1,256 5.1 %margin 8.0 2.7 5.3 6.5 1.5 5.8 5.6 0.2 Attributable to : Minority 54 32 68.8 19 184.2 58 173 (66.5) interest Equity 440 121 263.6 336 31.0 1,262 1,083 16.5 holders of the Company %margin 7.1 2.1 5.0 6.1 1.0 5.5 4.9 0.7 Note: 1) For the purpose of the Management Discussion and Analysis, the financial results of the Technical and Healthcare Supply Chains are jointly reported, consistent with historical reporting format. By the same token, the performance of the International Business Group is reported separately from the other supply chains. 2) %YoY and %QoQ changes for operating margin, net profit margin, and net profit margin attributable to equity holders of the Company denote the absolute changes YoY and QoQ respectively 3) The performance of 4Q08 and fiscal year 2008 reflected the restatement after acquiring 17% of the paid-up capital of T.C.C. Technology Company Limited (TCCT) on 8 July 2009 (BJC is currently holding 51% of the paid-up capital) Industrial Supply Chain THB MM 4Q09 4Q08 %YoY 3Q09 %QoQ 2009 2008 %YoY Sales 3,098 2,962 4.6 2,531 22.4 10,700 10,742 (0.4) Net profit 268 (32) nm 127 111.0 432 456 (5.3) %margin 8.7 (1.1) nm 5.0 3.6 4.0 4.2 (0.2) Note: %YoY and %QoQ changes for net profit margin denote the absolute changes YoY and QoQ respectively 4Q09 In 4Q09, the Industrial Supply Chain posted sales of THB 3,098 million, an increase of 4.6% YoY and 22.4% QoQ. An improvement YoY was due to the better performance of Aluminum Can and Galvanized Steel Structures businesses while an improvement QoQ was due to the better performance of Galvanized Steel Structures, Aluminum Can and Glass Packaging businesses. Net profit was THB 268 million, a recovery from 4Q08 and a significant increase of 111.0% QoQ. In 4Q09, net profit margin continued to improve to 8.7%, compared to negative in 4Q08 and 5.0% in 3Q09. An improvement YoY was due to the better performance of every business while an improvement QoQ was due to the better performance of the Glass Packaging, Aluminum Can and Galvanized Steel Structures businesses. The Glass Packaging business reported a slight decrease in sales YoY due to softer demand in the beverage segment. However, sales improved significantly QoQ across all segments. Net profit and net profit margin showed a recovery from the same period last year and increased QoQ due primarily to an increase in selling prices, lower energy and key raw material costs, such as soda ash and cullet. The production efficiency (good-to-melt) also improved both YoY and QoQ. 4Q09 was an exceptionally good quarter in 2009 for the Aluminum Can business as sales and net profit significantly improved both YoY and QoQ. The YoY sales increase was due to the higher volume sales while the QoQ sales increase was due to the seasonal effect. The profitability improvement YoY attributed to higher revenue from selling scrap aluminum due to higher aluminum scrap price and lower inventory impairment charges while the QoQ improvement was due to the reversal of the inventory impairment provision. For other businesses, sales of the Galvanized Steel Structures business increased both YoY and QoQ while net profit recovered YoY and improved QoQ. Sales of the Engineering Products & Services business decreased both YoY and QoQ while net profit recovered YoY but decreased QoQ. Fiscal year 2009 For fiscal year 2009, sales were THB 10,700 million, a slight decrease of 0.4% YoY. Net profit was THB 432 million, a decrease of 5.3% YoY. Net profit margin was 4.0%, a slight decrease from 4.2% in 2008. Sales of the Glass Packaging business slightly increased from 2008 despite the slowdown in market demand. Sales of the beverage segment has been impacted directly from the softening demand,however, sales of other segments including pharmaceutical and food segment increased from 2008. On the other hand, the profitability significantly improved from last year primarily attributed to the decrease in key raw material prices, especially soda ash, productivity improvement and increase in average selling price. In addition, in 2008, Thai Glass Industries Public Company Limited had loss from fuel oil hedging.In 2009, the business has increased the focus on developing new products and securing new customers such as new design of glass packaging for food product for a new international customer. Sales of the Aluminum Can business decreased slightly from 2008 while the profitability significantly decreased. During the first three quarters of 2009, the profit was negatively affected as a result of high aluminum price stock carried over from the previous year due to the forward aluminum purchase. However, the business has turned around in the last quarter as a result of an increase in demand, higher aluminum scrap prices, and reduction in high-cost inventory. The worldwide economic slowdown in 2009 made it a challenging year for the Galvanized Steel Structures business as the customers delayed the projects and fewer orders from international customers, which are one of the key sales contributors in the past. However, the business was still able to sustain sales and improved net profit from 2008. The Engineering Products & Services business also faced the negative impact from the economic slowdown since the majority of the business relies on the infrastructure demand. Consumer Supply Chain THB MM 4Q09 4Q08 %YoY 3Q09 %QoQ 2009 2008 %YoY Sales 1,779 1,622 9.7 1,734 2.6 7,063 6,854 3.0 Net profit 133 69 92.8 146 (8.9) 478 298 60.4 %margin 7.5 4.3 3.2 8.4 (1.0) 6.8 4.3 2.4 Note: %YoY and %QoQ changes for net profit margin denote the absolute changes YoY and QoQ respectively 4Q09 In 4Q09, the Consumer Supply Chain achieved sales of THB 1,779 million, an increase of 9.7% YoY and 2.6% QoQ. An increase YoY was attributed to every business particularly Personal Care business. Despite the fewer working days and fewer numbers of new product launched in the fourth quarter, the business still achieved an increase in sales from the previous quarter. Net profit was THB 133 million, a significant increase of 92.8% YoY but a decrease of 8.9% QoQ. The YoY increase was as a result of the improvement of every business, especially the outstanding improvement of the earnings of Tissue and Foods businesses. The decrease in net profit from the previous quarter was due to the poorer performance of Tissue and Personal Care businesses. Net profit margin was 7.5%, a significant increase from 4.3% in 4Q08 but a decrease from 8.4% in 3Q09. Sales of Foods business increased both YoY and QoQ from higher demand boosted up by the New Year and other holiday festivals and from the ongoing sales growth momentum of "Dozo Soseji" which was introduced in 3Q09. Sales of other owned brands such as "Party" and "Campus" also continued to post the strong performance both YoY and QoQ. Net profit improved significantly YoY since there was a potato supply shortage end of last year while the improvement QoQ was due to the strong performance of "Dozo" and "Campus" products as well as lower operating expenses. For the Tissue business, sales increased YoY and QoQ. The industry remained in the intense competition from the aggressive promotions and the growth of private brand. However, the net profit continued to grow exponentially YoY due to the successful cost control efforts, higher efficiency and productivity and a decrease in paper pulp price. Net profit decreased QoQ due to higher marketing and general & administrative expenses. Sales of the Personal Care continued to show the remarkable achievement YoY but decreased QoQ. Sales increase YoY was due to the ongoing engagement in branding, advertising and marketing activities of "Parrot brand", expanding consumer base of liquid soap. In addition, the business introduced new variance "Dermapon rose hip & chamomile", which received positive consumer response. Net profit improved YoY, but declined QoQ, which is in accordance with sales. In addition, the increase in the advertising and general & administrative expenses also resulted in the decrease in net profit QoQ. Logistics business reported a strong revenue improvement YoY, which mainly attributed to an increase in revenue from transportation services and warehouse services, while revenue was approximately the same as the previous quarter. The proportion of revenue from the external customers to the customers within the group company remained approximately the same both YoY and QoQ. Net profit continued to show a strong trend of improvement both YoY and QoQ. Fiscal year 2009 For fiscal year 2009, the Consumer Supply Chain posted sales of THB 7,063 million, an increase of 3.0% YoY, while achieved net profit of THB 478 million, a significant increase of 60.4% YoY. Net profit margin was 6.8%, a significant increase from 4.3% in 2008. In 2009, sales and net profit of Foods business decreased from 2008 due to slowdown economic condition and ongoing competition. However, the owned-brand products such as "Party" and "Campus" extruded snacks as well as the third-party-brand products such as "Kato" and "Droste" still showed the strong performance throughout the year. The highlighted new products introduced in 2009 included "Tasto Latino Color" and "Tasto Xtreme Wasabi" potato chips, "Dozo Soseji" rice cracker, and "Party Krongkrang" extruded snack. Tissue business reported a slight increase in sales from 2008. The negative economic conditions slowed down the consumer spending and resulted in ongoing aggressive competition through pricing and promotions. To cope with the challenging environment, Tissue business has continuously introduced new and unique products such as "Cellox Purify", "Melona Fun & Style" facial tissue and "Maxmo" roll towel as well as strengthened the existing brands such as "Zilk" through branding and marketing activities. In terms of profitability, in 4Q09 Tissue business achieved the highest profitability record due to successful cost saving programs, improving production efficiency, decreasing trend of paper pulp price, and improving raw material management. Similar to Tissue business, 2009 was an outstanding year for Personal Care business. "Parrot" soap has shown the outstanding performance from the beginning of 2009 and carried the positive momentum throughout the year due to successful brand building program and marketing activities. The business continued launching new products and variances including the new "Parrot Botanical Frangipani (violet)" and "Dermapon rose hip & chamomile" which received a strong consumer response. For Logistics business, revenue increased from 2008 mainly attributed to the higher revenue from the customs brokerage services, warehouse services for customers within the group company and transportation services for the external customers. The average warehouse utilization rate increased from 2008 for both Kingkaew National Distribution Centre and Kluay Nam Thai warehouses. Healthcare and Technical Supply Chain THB MM 4Q09 4Q08 %YoY 3Q09 %QoQ 2009 2008 %YoY Sales 1,147 1,047 9.6 1,061 8.1 4,458 4,365 2.1 Net profit 106 115 (7.8) 93 14.0 407 535 (23.9) %margin 9.2 11.0 (1.8) 8.8 0.5 9.1 12.3 (3.1) Note: %YoY and %QoQ changes for net profit margin denote the absolute changes YoY and QoQ respectively 4Q09 In 4Q09, the Healthcare and Technical Supply Chain reported sales of THB 1,147 million, an increase of 9.6% YoY and 8.1% QoQ. The Healthcare Supply Chain reported an increase in sales both YoY and QoQ while the Technical Supply Chain reported an increase in sales YoY but a decrease QoQ.Net profit was THB 106 million, a decrease of 7.8% YoY, due to a decline in net profit of the Technical Supply Chain, but an increase of 14.0% QoQ, due to an improvement of the Healthcare Supply Chain. For the Healthcare Supply Chain, an increase in sales YoY was due to the better performance of the Medical Product Division and the Medical Equipment Division while an increase in sales QoQ was due to the better performance of every business, especially the Medical Imaging Division. Net profit improved both YoY and QoQ particularly from Medical Product Division and the Medical Imaging Division from the significant order delivered in this quarter. For the Technical Supply Chain, sales of Graphics and Specialties businesses increased both YoY and QoQ while sales of Stationery business decreased both YoY and QoQ. The slowdown in sales of the Stationery products was due to the seasonal impact as the trade channels normally allocate the purchase to other festive products such as gift wraps and greeting cards. Net profit of Graphics and Stationery businesses decreased both YoY and QoQ while net profit of Specialties business increased YoY but decreased QoQ. Fiscal year 2009 For fiscal year 2009, sales were THB 4,458 million, an increase of 2.1% YoY due to the better performance of the Healthcare Supply Chain, while sales of the Technical Supply Chain experienced a slight decline. Net profit was THB 407 million, a decrease of 23.9% YoY due primarily to lower net profit of the Technical Supply Chain. For the Healthcare Supply Chain, sales improved for all businesses particularly the Medical Equipment Division. For net profit, the Medical Equipment Division and the Medical Imaging Division posted the outstanding earnings compared to 2008. However, net profit of the Medical Product Division showed a decline due to higher competition and lower sales in Erythropoietin products (red blood cell stimulating agent used for treating chronic kidney disease). In the challenging year of 2009, the Healthcare Supply Chain has increased the emphasis in searching of unique and high technology products, as well as strengthening customer relationship and training. The highlighted new products in 2009 included the endoscope, digital mammogram, and mobile x-ray equipments. In addition, in 2Q09 the business introduced the Da Vinci, a Robotic-assisted minimally invasive surgery system, which brought the business up to the next level for advancing technology offering. 2009 was a reasonable year for the Technical Supply Chain, as the business was able to sustain sales to be in line with the same level as last year. The business has been impacted by the economic slowdown as most products and services are related to the industrial demand, such as industrial ingredients and refrigerants, and consumer demand, such as stationery and graphic products. For the Specialties business, sales of food ingredients and Vietnam business increased YoY, while the net profit of bakery ingredients increased YoY. For Stationery business, the poorer performance in 2009 primarily attributed to the lower consumer spending, fewer trade orders, less export volume and cancelation of school tours as a result of the H1N1 epidemic. On the other hand, Graphics business reported a small increase in sales despite the shrinking of overall printing industry in the past year. Key Highlights of 4Q09 and fiscal year 2009 Income Statement THB MM 4Q09 4Q08 %YoY 3Q09 %QoQ 2009 2008 %YoY Sales & Service 6,175 5,721 7.9 5,474 12.8 22,799 22,243 2.5 Other income 60 67 (10.4) 62 (3.2) 271 306 (11.4) Total Revenues 6,235 5,788 7.7 5,537 12.6 23,070 22,549 2.3 Cost of 4,448 4,708 (5.5) 4,118 8.0 17,198 7,463 (1.5) goods sold Gross profit 1,727 1,013 70.5 1,357 27.3 5,601 4,780 17.2 Selling 1,096 848 29.2 927 18.2 3,979 3,377 17.8 & Administrative expenses Operating profit 691 232 197.8 492 40.4 1,894 1,709 10.8 Interests 50 62 (19.4) 52 (3.8) 222 230 (3.5) expense (income) Share of profits 18 12 50.0 8 125.0 64 85 (24.7) from investments Earnings 659 182 262.1 449 46.8 1,735 1,564 10.9 before tax Tax 165 30 450.0 94 75.5 415 309 34.3 Net profit 494 153 222.9 354 39.5 1,320 1,256 5.1 Attributable to : Minority interests 54 32 68.8 19 184.2 58 173 (66.5) Equity 440 121 263.6 336 31.0 1,262 1,083 16.5 holders of the Company EBITDA 1,049 562 86.7 863 21.6 3,290 3,018 9.0 Key Ratios (%) 4Q09 4Q08 %YoY 3Q09 %QoQ 2009 2008 %YoY Gross 28.0 17.7 10.3 24.8 3.2 24.6 21.5 3.1 profit margin SG&A as % 17.8 14.8 2.9 16.9 0.8 17.5 15.2 2.3 of sales Operating 11.2 4.1 7.1 9.0 2.2 8.3 7.7 0.6 profit margin Net profit 7.1 2.1 5.0 6.1 1.0 5.5 4.9 0.7 margin (attributable to equity holders of the Company) EBITDA margin 17.0 9.8 7.2 15.8 1.2 14.4 13.6 0.9 Note: %YoY and %QoQ changes for gross profit margin, SG&A of sales, operating profit margin, net profit margin, net profit margin attributable to equity holders of the Company and EBITDA margin denote the absolute changes YoY and QoQ respectively Sales BJC reported 4Q09 sales of THB 6,175 million, an increase of 7.9% YoY and 12.8% QoQ,attributed to an increase in sales of all supply chains. The Industrial Supply Chain remains a major revenue contribution, representing 50% of total sales, followed by Consumer Supply Chain, representing 29% of total sales. For fiscal year 2009, BJC reported sales of THB 22,799 million, an increase of 2.5% from fiscal year 2008. BJC was able to maintain sales of all supply chains despite the challenging environment in 2009. Gross Profit In 4Q09, gross profit was THB 1,727 million, posting a significant increase of 70.5% YoY and 27.3% QoQ. The improvement both YoY and QoQ was primarily attributed to the higher gross profit of the Industrial Supply Chain and the Consumer Supply Chain due to successful cost control efforts,improving productivity and more favorable raw material prices. 4Q09 Gross margin was 28.0%, showing a continuous improvement from 17.7% in 4Q08 and 24.8% in 3Q09. For fiscal year 2009, BJC reported gross profit of THB 5,601 million, an increase of 17.2% YoY,and gross profit margin of 24.6%, an increase from 21.5% in 2008. Selling and Administrative Expenses ("SG&A") Selling and administrative expenses in 4Q09 were THB 1,096 million, a significant increase of 29.2% YoY and 18.2% QoQ. The YoY increase primarily attributed to higher expenses of the Consumer Supply Chain especially advertising expenses and selling expenses, including distribution, and marketing expenses. For fiscal year 2009, the SG&A expenses were THB 3,979 million, an increase of 17.8% YoY. The higher SG&A was mainly due to an increase in selling expenses including distribution (+31.3% YoY),marketing (+20.9% YoY), (more)