Siam Makro Public Company Limited and Its Subsidiaries
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VISION To Be Number One Food Solution Provider For Professional Customers MISSION MultiM - formats Award Know theK differences ResponsibleR OfferO the best Expansion Team achievement Know and For the society Value & solution and invest in people respect the local and the world to customers differences CONTENT Financial Highlights 002 Message from the Chairman and Group Chief Executive Officer - Siam Makro 004 Corporate Governance Committee's Report 006 Nomination and Remuneration Committee's Report 008 Moving Far and Growing Strong 010 Growing Together in Hearts and in Minds 018 The Creative Journey to Sustainability 032 Human Resources and Organizational Development 044 Environmental, Occupational Health and Safety Management 053 2018 Key Milestones 057 Market Overview and Industry Outlook 062 Future Projects 065 Shareholding and Management Structure 068 Board of Directors and Executives 089 Corporate Risk Factors and Risk Management 108 Corporate Governance 113 Corporate Information 133 Audit Committee’s Report 144 Management’s Discussion and Analysis of Financial Position and 146 Operating Results Related Party Transactions 151 Report of the Board of Directors’ Responsibilities for Financial Statements 158 Financial Statements 159 Locations 243 002 Annual Report 2018 192,930 186,574 Total revenues 172,790 3.3% Over 2017 2016 2017 20182017 6,178 5,942 Net profit 5,413 Down3.8% 2017 2016 2017 20182560 62,065 58,976 Total assets 52,859 5.2%Over 2017 2016 25602017 2018 Siam Makro Public Company Limited 003 Financial Highlights As at 31 December Siam Makro Public Company Limited and its subsidiaries 2016 2017 2018 Financial Positions (Baht Million) Total assets 52,859 58,976 62,065 Total liabilities 37,118 40,965 42,808 Share capital 2,400 2,400 2,400 Shareholders' equity 15,741 18,011 19,257 Operating Performance (Baht Million) Sales 169,226 182,753 188,583 Total revenues 172,790 186,754 192,930 Gross profit 15,504 18,401 18,944 Net profit 5,413 6,178 5,942 Earnings per share (Baht) 1.13 1.29 1.24 Financial Ratios (%) Net profit margin 3.1 3.3 3.1 Debt to equity ** (times) 0.5 0.5 0.5 Return on equity 36.2 37.1 32.8 Return on total assets 10.7 11.0 9.7 Dividend payout ratio 75.4 74.6 77.5 Stock Data (Baht) Par value per share 0.50 0.50 0.50 Book value per share 3.28 3.66 3.90 Dividend per share 0.85 0.96 0.96* Remark : * Dividend per share includes the followings : 1) Interim dividend of Baht 0.40 per share was fully paid on September 5, 2018 2) Proposed final dividend of Baht 0.56 per share for shareholders' approval on April 23, 2019 bringing total dividend for 2018 to Baht 0.96 per share ** Interest bearing debt excluding liabilities under finance leases 004 Annual Report 2018 Message from the Chairman and Group Chief Executive Officer In 2018, the Company continues to move forward with our “Makro 4.0” strategy, all the while upholding our commitment to transparent business operations and the principles of good governance to ensure strong and secure growth. The Company remains dedicated to improving and modernizing the business in all dimensions. All of this progress has been driven by our 6 Strategic Goals to become a trusted partner and to sustainably enhance the lives of our stakeholders in all areas where we operate, in Thailand and overseas. In spite of the economic slowdown over the past year, as well as issues concerning low agricultural commodity prices, the Company was able to adapt quickly and was aided in this regard by our clarity of vision: to be number one food solution provider for professional customers. That means being number one in every aspect - providing quality products and services at great value and competitive prices - while retaining a customer - centric vision to serve all of our customers in retail, HoReCa (Hotel, Restaurant and Catering), services, and other professionals. Over the past year, the Company opened 7 new stores across Thailand and 2 stores in New Delhi, India, under the “LOTS Wholesale Solutions” brand. At the end of 2018, Makro’s stores in Thailand totaled 129, with 3 stores overseas. Our robust strategy also continues to guide the expansion of our food service business network under the Siam Food Services and the Indoguna brands across 6 countries and territories: Thailand, Vietnam, Singapore, Hong Kong, United Arab Emirates and Cambodia. In terms of 2018 performance, the Company’s total revenues amounted to Baht 192,930 million, an increase of 3.3% from the previous year. As a result of initial stage of international operation of Makro stores, our total net profit registered Baht 5,942 million, a reduction of 3.8% compared to 2017. During an age where digital technology is advancing across the board, impacting the behaviors of consumers and transforming the very nature of business, the Company has continued to modernize its organization through technology Mr. Arsa Sarasin integration. The Company leveraged Big Data to analyze its extensive customer Chairman base of more than 3 million customers, and to develop products and services that appropriately respond to their unique needs. This was particularly the case for our customers who represent the new generation of business owners. In the meantime, we progressed in the development of our online sales channel, MakroClick.com, which will enable us to connect online and offline services and thereby cater to a new group of customers who prefer purchasing products online. The Company also developed various services to enhance customers’ experiences, including by providing a delivery service and a pick - up service at Makro stores, which has been rolled out across our stores in Bangkok. In addition, the Company is developing a system to connect a variety of marketing channels, called OMNI - Channel Sales & Services system, for convenience of our customers to reach our products and services from anywhere at any time. Siam Makro Public Company Limited 005 Another challenge that the Company continues to face concerns human resources. The Company currently employs more than 16,000 staff, all representing diverse age groups and expectations. It is because of this that developing employee capabilities and work approaches that encourage all generations to work together seamlessly, under the “VICTORY - Makro 7 Values”, becomes imperative for our success. The Company thus prioritized the digitization of our human resources management to enhance working efficiencies, and the promotion of employee leadership skills through our “Grow our People for Growth” approach. The Company further promoted leadership skills through the Young Talent Project, which allows our young talent pool to grow sustainably alongside business expansion. Food quality and safety remains our top priority. This is especially vital given the government’s aspiration to become the “Kitchen of the World” and our growth in the food service business - particularly the expansion of our HoReCa customer base and increase in the proportion of fresh food products. The Company has in place a stringent quality control system for our food and raw materials. The system factors in the entire supply chain from supplier selection, product traceability using “Makro i-Trace”, including for premium products under the “Quality Pro” label, through to contamination testing by experts in our laboratories, which are up to international standard. These processes all ensure that Makro’s products are clean, safe, and of the highest quality. Looking at the Company’s progress on sustainable development, the projects we implemented align with the Company’s 6 Strategic Goals and cover economic, social, and environmental dimensions. These Goals all converge in support of the United Nations’ Sustainable Development Goals, specifically those concerning food security and enhancing well - being, and sustainable consumption and production. Moreover, the Company’s projects continuously delivered value to society and enhanced the livelihoods of business partners, customers, communities, and employees. Examples include the Good Deeds of 100 Makro Stores for 100 Communities project, the Makro Retailer Alliance (MRA), and other projects in support of the government’s Pracharat policy. On environmental issues, the Company campaigned to reduce plastic bag use and to encourage awareness amongst customers and employees on maximizing resource use - which is an extension of the Company’s no plastic bag policy that has been instated since the start of our operations. On behalf of Siam Makro Public Company Limited, the Board of Directors Mrs. Suchada Ithijarukul would like to extend our sincerest thanks and gratitude to all of the Group Chief Executive Officer -Siam Makro stakeholders who have supported Makro’s business over the past 29 years. We offer you our continued and unwavering commitment to delivering long - term value to our stakeholders in a fair manner; to balancing our business with responsibility to the society and environment, and to operating a business of integrity on the foundation of good governance for the sustainability of our society and country, now and in the future. 006 Annual Report 2018 Corporate Governance Committee Report The Board of Directors (“the Board”) established the Corporate Governance Committee (“the Committee”) to support the Board’s mission in enacting its corporate governance policy and various related guidelines to ensure that the Company is managed on the foundation of good governance principles, ethical standards, transparency and accountability. The Committee assumes an important role in monitoring and overseeing the Company’s business operations as well as in promoting and supporting the dissemination and embedding of ethical business values for employees at all levels, to ultimately foster a lasting culture of good governance throughout the organization. In 2018, the Company carried out various projects and activities according to plans approved by the Committee which were aimed at developing and enhancing the Company’s corporate governance standards.