Annual Report 201
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T - Transparency, Ethics & Integrity R - Respect & Trust C - Commitment ISO 9001:2008 "To do it right and best from the beginning" ANNUAL REPORT 201 Certificate No. TH07/4254 Certificate No. TH07/4255 Vision To become an excellent contractor in design and construction of a total solution in energy and infrastructure industries with sustainable growth. Mission 1. To operate the construction business as an EPC contractor (Engineering, Procurement and Construction) for natural gas and crude oil pipeline projects, petrochemical plants and basic infrastructure. 2. To run the business under the corporate governance principle focusing on safety, environment, society and community for stable and sustainable growth. 3. To deliver works with quality with recognition of safety within defined timeframe for customers’ highest satisfaction. 4. To develop an investment in energy and petrochemical businesses. Annual Report 2016 1 Contents Message from Chairman of the Board of Directors 2 Report of the Audit Committee 4 Directors’ Responsibility Statement in Relation to the Financial Statements 6 Report of the Remuneration and Nomination Committee 7 Report of the Corporate Governance Committee 8 Report of the Risk Management Committee 9 The Board of Directors and Managements 10 1. Financial Highlights 25 2. Business Policy and Overview 27 3. Group Structure 33 4. Nature of Business 35 5. Risk Factors 49 6. General Information 53 7. Shareholding Structure 57 8. The Dividend Policy 58 9. Management Structure 59 10. Corporate Governance 71 11. Social Responsibility and Environment 104 12. Internal Audit Control and Risk Management 111 13. Connected Transactions 113 14. Management Discussion and Analysis 116 15. Financial Statements 124 2 TRC Construction Public Company Limited Message from the Chairman of the Board of Directors The year 2016 was a year of drastic change caused by a shareholder with 26.22 percent of the ownership interest in number of internal and external influential factors, unfavorably APOT as of the end of fiscal year 2016. Due to the urgency in bringing about the deterioration of economic progress to a the development of Potash Mining Project for which the mining large extent in Thailand. Such influential elements include, lease had already been granted since February 2015, APOT during for example, the volatility in global money markets, increased 2016 agreed to subcontract part of the project called Early Works, interest rates announced by Federal Reserve Bank, the world worth Baht 711 million, to the Company. It is anticipated that the oil still struggling at low price, a decline in domestic household contracts for remaining portions of this project will be finalized spending. This inevitably led to the stagnation of investment and signed within the 3rd quarter of 2017. in the industrial sector which encompasses, among others, With respect to the 2016 operating results, the Company’s both state-owned and privatized enterprises in the energy and construction service income slightly decreased by 4.71% from the petrochemical businesses. Several infrastructure projects run previous year to Baht 3,697.30 million, profit attribute to equity by the government have been suspended whereby the bidding holders Baht 290.76 million while its net profit was down 4.97%, schedules of many government projects were postponed and the gross profit margin and net profit margin was posted at 20.30% competition in the industrial sector, particularly the construction and 7.78% respectively. At end of 2016 the Company reported a service business, became significantly intense than years before. total backlog of 6 projects and the unrealized project income of The increasingly fierce competition in the construction business Baht 3,679.59 million. The completed projects ready for handing is proven by the presence of both medium-sized companies and over to clients in early 2017 include:- 1) the Provincial Gas construction conglomerates of Thai and non-Thai nationalities Transmission Pipeline Project to Nakorn Ratchasima of PTT Plc.; in the bidding of construction projects of all sizes, regardless of this project has been carried out by Sinopec-TRC Joint Venture, the contract value. TRC Construction Public Company Limited 2) Biodiesel Plant Project of Bangchak Biofuel Co., Ltd., and 3) (“Company”) has recognized the importance of, and undoubtedly New Incinerator Plant Project of Trans Thai-Malaysia (Thailand) paid significant attention to, the management of risks, as evidently Co., Ltd. If combining the remaining portion of Surface Processing seen by the Company’s decision to review and fine tune its and Facilities Project of APOT worth Baht 32,271 million, the business strategies in the face of price war. In early 2016, the total backlog will reach a record high of approximately Baht Company was granted by ASEAN Potash Chaiyaphum Public 36,050 million. In 2017 the Company sets out to participate in Company Limited (“APOT”) a “Letter of Award” for part of the the bidding of a large-scale gas pipeline project owned by PTT megaproject named the Potash Mining Construction Project in Plc. and other state-owned projects of transportation infrastructure Bamnet Narong District, Chaiyaphum Province. The awarded e.g. a double track project, electric rail project. The Company part of this project is called “Surface Processing and Facilities” definitely does not lose sight of the planned continued investment and worth approximately Baht 34,000 million. In late 2016 the in several more projects in the energy sector so as to accomplish Company’s subsidiary; TRC Investment Limited, invested Baht the Company’s long-term goal earlier set to continually develop 1,260 million in APOT shares, making the Company a major at least 4 business investment projects by the end of 2019. Annual Report 2016 3 It has been a great pride for the Company that last year the opportunity to submit proposals for making improvement to our stocks were selected by the Stock Exchange of Thailand to their hometown communities and the winning proposal will be put become part of the SET100 Index for the second half of 2016 into action with input and efforts from all employees. Activities and, just recently, become qualified for the calculation of sSET associated with the delivery of finished program at the location Index for the first half of 2017. Ever since 2001, the Company’s of the selected hometown will be joined by both executives and performance has been yearly assessed by the Purchasing and employees. In 2016 a new program called “Move for Change” was Material Management Division of PTT Public Company Limited kicked off, aiming at prompting our staff to realize the benefits of as a “Grade A” vendor for the ISO quality standards for every exercise and participate in the sports and workout programs that assessed item. In reviewing the Company’s 2016 Business Goals, the Company has specifically organized for employees, e.g. yaga, the Board of Directors remains strongly committed to achieving boxing, fitness class, football, badminton, table tennis, Zumba the total income of Baht 10,000 million and winning the National dancing, and Boxing Burn. In addition to the better health of our Total Quality Control Award by 2019. This year we have redefined staff, this program also helps establish and strengthen the rapport our corporate core values and subsequently released the official within the organization. version as follows. On behalf of the Company’s Board of Directors, I T - Transparency, Ethics & Integrity would like to express my sincere gratitude to all shareholders, R - Respect & Trust customers, vendors, financial institutions, the public and private C - Commitment sectors, business partners and the Company’s management and The Company places importance on the ongoing employees for the continued support and trust in our organization organizational improvement and development of personnel throughout the year. The Company is firmly determined to ensure capabilities; the Anti-Fraud and Corruption Policy was formally the continual and unfaltering business growth while still adhering issued and the existing Corporate Governance Policy was to the good corporate governance principles in the best interests revised. In addition to the focus on organization and personnel, of shareholders and stakeholders. the Company also stresses the importance of quality and safety in parallel with social and environmental care among employees and all groups of stakeholders. We encourage management and employees at all levels to participate in CSR and safety- related activities and have launched a number of CSR projects associated with educational, social, community and environmental development as well as continuously implemented the long-term (Mrs. Paichit Rattananon) CSR projects, i.e. blood donation and “Back to Hometown” Chairman of the Board of Directors program which was first initiated in 2013. With respect to Back to 22 February 2017 Hometown program, the Company’s employees have been given 4 TRC Construction Public Company Limited 2016 Report of the Audit Committee The Audit Committee of TRC Construction Public Company Limited consists of 3 independent directors who are qualified according to the regulations of the Stock Exchange of Thailand. The Audit Committee fully performed its duties pursuant to the Audit Committee Charter and as assigned by the Board of Directors with an aim to ensure that the Company’s business operations complied with good corporate governance principles. In 2016, the Audit Committee held a total of 4 meetings in which the members of the Committee have joined as follows: 1. Assoc. Prof. Aekkachai Nittayagasetwat, Ph.D., FRM., Chairman of the Committee 4/4 times 2. Mr. Arun Chirachavala, Audit Committee 4/4 times 3. Mrs. Puangthip Silpasart*, Audit Committee 2/3 times * On 27 January 2016 Pol.Gen. Jarumporn Suramanee resigned as an independent director and member of the Audit Committee and Mrs. Puangthip Silpasart has been appointed by the Board of Directors meeting as member of the Audit Committee effective on 24 February 2016.