Explanation & Analysis of Financial Status and Performance
An Analysis of Performance
In 2005, the petrochemical industry, including PVC, was
in an up-trend pricing cycle. Domestic demand for PVC in
Thailand grew significantly due to continued strong demand
from the construction sector and an increase in government
infrastructure projects. At the same time, export demand
increased markedly. As a result, Vinythai turned in an outstanding
overall performance in what was an excellent year for the
Company. Targets for the year for both production and sales
were achieved despite slower economic growth resulting from
the effects of prolonged high oil prices, unrest in three
southern border provinces, recurrences of avian influenza,
rising interest rates and higher prices of raw materials and
other utilities. However, the Company adjusted its operating
plans and management strategy accordingly, thereby still
making it possible to achieve an excellent result for the year.
Analysis of Income
In 2005, the Company realized total revenues of Baht
9,446 million, of which Baht 8,438 million was derived from
Annual Report 2005
34
sales. The sales revenue increased by Baht 894 million or
11.9% over the previous year. This improvement was mainly
contributed by a 6% increase in sales volumes of PVC, coming
despite a slight decrease in the average selling price.
Meanwhile, the average selling price of Caustic Soda grew
sharply, by 64.4%, while volumes decreased slightly, by 1.7%.
As usual, domestic PVC and Caustic Soda prices followed the
trend of international markets. With its debottlenecking project
and full capacity utilization, Vinythai increased its production of
PVC by 3.2% in 2005, while production of Caustic Soda
increased 2.4% from the previous year.
Other income amounted to Baht 1,008 million, a significant
increase over 2004, mainly resulting from gains from the sale
of an investment in common stock of Thai Olefins Public
Company Limited (since renamed as PTT Chemical Public
Company Limited). The Company recorded a gain on the sale
of this investment of Baht 888 million and booked dividend
income of Baht 67 million.
PVC sales in 2005 represented 81.8% of total sales, while
Caustic Soda contributed 17.4%. Sixty-three percent of total
PVC revenue was derived from domestic sales while all the
Caustic Soda produced by Vinythai was sold locally.
Analysis of Costs and Expenses
(1) In 2005, the cost of sales amounted to Baht 6,173
million, an increase of Baht 810 million or 15.1%,
from the previous year. The major factors contributing
to the increased cost were higher sales volumes of
PVC compared to 2004 and an 8% increase in the
unit cost of ethylene. The price of ethylene was driven
up by high prices for both oil and gas in conjunction
with tight supply. Cost per unit of electricity, salt and
other utilities continued to increase significantly from
the previous year.
 (2) Selling and administrative expenses in 2005 amounted average ethylene and utilities prices increased sharply in 2005,
to Baht 707 million, an increase of Baht 73 million, or the Companyûs debottlenecking project, full capacity utilization
11.4%, from the previous year. The major changes and smooth production ensured that a satisfactory gross
from the previous year are as follows : margin of 26.8% was still achieved. The decrease in interest
- An increase in transportation + Baht 23 million expenses also contributed to a better performance. As a result
costs due to higher PVC of all this, the net profit margin for 2005 increased to 25.3%
sales volumes and increased in 2005, from 17.9% in 2004. As such, 2005 was an excellent
export quantities year for Vinythai - a year in which it achieved the highest
- An increase in consulting + Baht 17 million operating profit in its history, thanks to its improved
fees for financial and legal performance. Moreover, 2005 was the fourth consecutive
advisors year for the Company to be able to achieve better and better
- An increase in personnel + Baht 13 million performances.
costs
- An increase in doubtful + Baht 9 million An Analysis of Financial Status
debt expenses Analysis of Assets
- An increase in royalty + Baht 8 million As of 31 December 2005, Vinythai had total assets of Baht
expenses due to higher 15,435 million, an increase of Baht 3,008 million, or 24.2%,
sale revenues from 2004. Descriptions of the Companyûs significant assets
(3) Interest expenses in 2005 amounted to Baht 116 and explanations of any important changes are provided below :
million, a significant decrease of Baht 74 million, or (1) As of 31 December 2005, the Company held cash
39.2%, from 2004. Lower indebtedness due to the and cash equivalents amounting to Baht 2,842 million,
Companyûs consistent repayment of bonds contributed an increase of Baht 2,809 million over Baht 32 million
to the lower interest expenses despite an increase of held in 2004. This resulted from capital increase for
Baht 500 million in long-term loans for expansion expansion projects and sale of an investment in
available-for-sale securities.
projects. The Company will repay the remaining bonds
(2) Deposits reserved for servicing bonds increased by
as scheduled in August 2006.
around Baht 332 million. This increase was required
by resolution of the bondholdersû meeting of 22 March
Summary of Performance
Vinythai Public Company Limited

2005, in exchange of the consent for the Company to

Vinythai concluded 2005 with a remarkable net profit of
distribute a cash dividend from 2004 earnings in an
Baht 2,390 million, an increase of approximately 75.9% over
amount not exceeding Baht 332 million.
the 2004 figure of Baht 1,359 million. The higher net profit
(3) Account receivables were at Baht 1,616 million in
included gains from the sale of an investment in Thai Olefins
2005, an increase of Baht 270 million over Baht
Public Company Limited amounting to Baht 888 million, as
1,346 million in 2004. This increase was mainly due
described above. Net profit from operations, excluding the gain
to higher sales volumes of PVC and a significant
from the sale of that investment would be Baht 1,502 million, increase in average sales prices of caustic soda.
a 10.6% increase over 2004 net profit. This was achieved due Ongoing streamlining of the Companyûs credit control
to increased sales volumes of PVC coupled with a significant system helped to limit the outstanding account
increase in average selling prices of caustic soda. Although receivables.

35
 (4) Vinythaiûs net inventory at the end of 2005 amounted
to Baht 953 million, an increase of Baht 184 million,
from Baht 769 million in 2004. Major components of
the inventory comprised finished goods, raw materials
and spare parts. The price of finished goods and
principal raw materials rose significantly during 2005.
(5) In 2005, Vinythai increased its equity shareholding in
its main raw materials supplier, Pimai Salt Co., Ltd.
This was accomplished by purchasing additional shares
worth approximately Baht 194 million. At the end of
2005, the investment accounted for under equity
method recorded at Baht 378 million.
(6) All investment in available-for-sale securities in Thai
Olefins Public Company Limited, for which the fair
value at the end of 2004 was Baht 1,503 million, was
sold in 2005.
(7) Net property, plant and equipment at the end of 2005
were valued at Baht 8,587 million, an increase of Baht
677 million, or 8.6%, over 2004. This increase was
mostly due to the debottlenecking project as well as
projects to expand VCM, Chlorine and EDC plants
which have been underway since mid-2005.
Analysis of Liabilities
Vinythaiûs total liabilities at the end of 2005 amounted to
Baht 3,020 million, a decrease of Baht 718 million, or 19.2%,
from 2004. The major factor accounting for the change in
liabilities was the progressive reduction of outstanding bonds
as the Company has paid regularly Baht 1,362 million each
Annual Report 2005
36
year. The Company will pay the total remaining outstanding
bonds amounting to Baht 1,362 million as scheduled in August
2006. The Company also increased its liabilities in taking out a
Baht 500 million long-term loan for its expansion projects.
Analysis of Shareholdersû Equity
As of 31 December 2005, shareholdersû equity in the
Company amounted to Baht 12,415 million, an increase of Baht
3,726 million, or 42.9%, from Baht 8,689 million at the end of
2004. The major changes in shareholdersû equity were as follows :
ë Issued and fully-paid share capital increased by Baht
1,422 million as a result of an increase in paid-up capital.
ë Premium on ordinary shares amounting to Baht 1,304
million was recorded as a result of selling common
shares (par 6 Baht) to Thai Olefins Public Company
Limited at Baht 11.50 per share.
ë A reverse entry of Baht 1,055 million, an unrealized
gains on changes in the value of investment in available-
for-sale securities, was booked due to the sale of that
investment.
ë Net profit for the year 2005 amounted to Baht 2,390
million. Of this amount, the Company appropriated a
legal reserve of Baht 120 million. Thus, the remaining
unappropriated earnings for 2005 amounted to Baht
2,270 million.
ë The Company paid cash dividends amounting to Baht
332 million in respect of 2004 earnings.
An Analysis of Cash Flow
As of 31 December 2005, the Companyûs Cash Flow
Statement showed Baht 2,842 million in cash and cash
equivalents, compared to Baht 32 million at the same point in
2004. Sources and uses of funds were as follows :
(1) Net cash flow from operating activities increased by
Baht 113 million, from Baht 1,447 million in 2004, to
Baht 1,560 million in 2005, equivalent to an increase
of 7.8%.
(2) Net cash flow from investing activities in 2005 stood
at Baht 50 million, compared to net cash payment for
 investing activities of Baht 121 million in 2004. Major
changes were accounted for by cash flow from sale
of investments amounting to Baht 1,337 million and
the purchase of new fixed assets in 2005 to the value
of Baht 1,088, an increase of Baht 958 million from
the previous year was due to investment in the
debottlenecking project and expansion projects.
Additional investment in an associated company
amounted to Baht 194 million.
(3) Net cash flow from financing activities was Baht 1,199
million in 2005. Changes were accounted for by the
capital increase of Baht 2,726 million, proceeds of
Baht 500 million in long-term loans for the expansion
projects, bond repayment amounting to Baht 1,362
million, dividend payment of Baht 332 million, and an
increase in deposits reserved for servicing bonds of
around Baht 332 million.
Conclusion
The year 2005 was regarded as another golden year for
Vinythai due to its generally outstanding performance and its
achievement of the highest operating profit in the Companyûs
history. The Company achieved an outstanding outcome due to
its appropriate strategies and well-managed business plan. The
Company was self-sufficient in repaying its debentures with
cash generated by its operations. In addition, the sale of an
investment in available-for-sale securities, as previously
mentioned, also strengthened the Companyûs cash flow. The
excellent performance in 2005 led to a return on average equity
of 22.7%, against 16.8% in 2004, representing an increase of
5.9%. Return on average assets improved significantly to 17.2%
in 2005 from 11% in 2004. The Companyûs debt-to-equity
ratio also continued to improve from 0.43 in 2004 to 0.24 at
end 2005.
With global demand for PVC likely to continue to increase
and domestic demand for PVC in Thailand also projected to rise
as the government continues its program of mega-projects, the
Company expects to continue to perform well in 2006.
However, the performance may not be as good as in 2005, as
the Company will still be in an expansion phase for most of
the year. Nevertheless, once the expansion projects are
completed, the Company expects to continue recording
improved performances going forward, as manifested in
sustained profitability and business growth.
Future Projects
In 2005, the Company started to implement a project to
double VCM production capacity from 200,000 tons per annum
(tpa) to 400,000 tpa. In order to maintain fully-integrated
production, the Company has also expanded production
capacity of chlorine and Ethylene Di-Chloride (EDC), the major
feedstocks for VCM production. This will double Vinythaiûs
chlorine capacity from 120,000 tpa to 240,000 tpa and double
its EDC capacity from 160,000 tpa to 320,000 tpa. As a result
of this expansion, the total production capacity of caustic soda
will also double from 133,000 tpa to 266,000 tpa.
The total cost of the expansion projects is approximately
Baht 4,600 million. The Company commenced engineering,
procurement and construction in mid-2005. The expanded output
is expected to come on-stream at the end of 2006.
These higher volumes will help to meet the growing
demand from the local market while any excess product will be
exported. Being fully-integrated, the projects will enhance the
Companyûs cost effectiveness and competitiveness, thereby helping
to ensure sustainable long-term profitability.
Vinythai Public Company Limited
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