2015 Annual Report IRPC Public Company Limited LEAPING TO ERA OF TRANSFORMATION CONTENTS Leading Integrated Petrochemical Complex VISION in Asia by 2020 Message from the Chairman 04 MANAGEMENT ANALYSIS Key Performance 06 Financial Highlights 07 Message from the President 144 Irpc’s Key Milestones Of The Decade 08 Management Discussion and Analysis (MD&A) 146 Milestones and Awards and Recognition 2015 18 Market Overview and Industry Outlook 156 Performance Summary 2015 165 BOARD RESPONSIBILITY Human Resource Administration 182 Research and Development for Excellence 184 Board of Directors 28 IRPC Business Strategic Roadmap 188 Organization Structure 42 Operational Excellence Value Creation Executives 43 CORPORATE RESPONSIBILITY Report of the Audit Committee 60 Internal Controls 62 Sustainable management 192 High Performance Innovation & Creation Message from the Chairman, Nomination and 64 QSHE Management 197 Organization of New Business Remuneration Committee Corporate Social Responsibilities 207 MISSION Message from the Chairman, Risk Management 65 Investment in social enterprise 218 Committee Corporate Social Message from the Chairman, Corporate Governance 66 FINANCIAL STATEMENT Responsibility Committee Report of Board of Directors’s Responsibility 223 Corporate Governance Report 67 for Financial Reporting Auditor’s Report and Financial Statement 224 BUSINESS STRUCTURE Business Structure and Shareholding 97 Appendix Nature of Business 98 Compliance with Corporate Governance 299 Individual Product Lines’ Businesses 100 Compliance with Corporate Social Responsibilities 313 Integrated Refinery and Petrochemical Complex 106 Abbreviations and Technical Terms 314 Innovation Flow Chart Revenue Structure 108 ndividual Ownership esponsibility for Society Connected transactions 109 VALUES I R MANAGEMENT STRUCTURE Synergy Integrity & Ethics Management Structure 116 rust & Respect IRPC Information 138 Performance Excellence T 02 CONTENTS Leading Integrated Petrochemical Complex VISION in Asia by 2020 Message from the Chairman 04 MANAGEMENT ANALYSIS Key Performance 06 Financial Highlights 07 Message from the President 144 Irpc’s Key Milestones Of The Decade 08 Management Discussion and Analysis (MD&A) 146 Milestones and Awards and Recognition 2015 18 Market Overview and Industry Outlook 156 Performance Summary 2015 165 BOARD RESPONSIBILITY Human Resource Administration 182 Research and Development for Excellence 184 Board of Directors 28 IRPC Business Strategic Roadmap 188 Organization Structure 42 Operational Excellence Value Creation Executives 43 CORPORATE RESPONSIBILITY Report of the Audit Committee 60 Internal Controls 62 Sustainable management 192 High Performance Innovation & Creation Message from the Chairman, Nomination and 64 QSHE Management 197 Organization of New Business Remuneration Committee Corporate Social Responsibilities 207 MISSION Message from the Chairman, Risk Management 65 Investment in social enterprise 218 Committee Corporate Social Message from the Chairman, Corporate Governance 66 FINANCIAL STATEMENT Responsibility Committee Report of Board of Directors’s Responsibility 223 Corporate Governance Report 67 for Financial Reporting Auditor’s Report and Financial Statement 224 BUSINESS STRUCTURE Business Structure and Shareholding 97 Appendix Nature of Business 98 Compliance with Corporate Governance 299 Individual Product Lines’ Businesses 100 Compliance with Corporate Social Responsibilities 313 Integrated Refinery and Petrochemical Complex 106 Abbreviations and Technical Terms 314 Innovation Flow Chart Revenue Structure 108 ndividual Ownership esponsibility for Society Connected transactions 109 VALUES I R MANAGEMENT STRUCTURE Synergy Integrity & Ethics Management Structure 116 rust & Respect IRPC Information 138 Performance Excellence T 2015 Annual Report l IRPC Public Company Limited 03 MESSAGE FROM THE CHAIRMAN Dear Shareholders, A vision has been defined by the Board of Directors for IRPC Public Company Limited to be a Leading Integrated Petrochemical Complex in Asia by 2020 along with short-term and long-term plans to ensure that IRPC would be guided by the planned directions and plans to goal achievement. One might call 2015 a golden year for IRPC, with its performance recovery from last year, evident in Baht 17,033 million (a 10-year high) in EBITDA and Baht 9,402 million in net profit-a stark contrast with the loss of Baht 5.235 million in 2014. Accounting for this remarkable achievement were IRPC’s continued preparedness moves, accurate projections, and efficient endeavor in business conduct and management of its executives and staff under the supervision of the Board and its four committees. Mr. Tevin Vongvanich Chairman 04 The Board highly values business conduct with or innovation for the good of society. IRPC also responsibility to society, the environment, and communities values research and development (R&D) because it in line with IRPC’s philosophy of striking a balance believes that leapfrog growth must be R&D-based among its economy, society, and environment. As and can create significant value addition. Out of a result, this year saw IRPC maintain its DJSI (Dow these innovative concepts by the management sprang Jones Sustainability Indices) membership in the oil & successful undertakings like the DELTA Project, with gas category for a second successive year. excellence in operation, marketing, procurement, and By and large, an entity that is robust, renowned, and HR administration as its goals. The benefits reaped publicly trusted is one with high business capability, by the project this year totaled Baht 4,565 million. management governance, and social responsibility. The year 2016 sees IRPC extend its success to a The Board has supervised IRPC’s business for new EVEREST Project, which is going to be a stiffer efficiency based on good governance and has put challenge calling for ability, earnest commitment, such efforts into Board performance that it earned and participation of all employees. The Board fully certification as Board of the Year 2015 along with supports this project, which is bound to achieve its Audit Committee of the Year 2015, attested by the goals, thanks to IRPC’s collaboration with a leading Thai Institute of Directors (IOD) and evident in sound worldwide consultant. performance outcomes and extensive recognition. On behalf of the Board, may I express my appreciation to Shareholders can therefore rest assured that IRPC is all of you for your confidence, support, and cooperation conducting its business transparently and takes very with us IRPC over the years-the shareholders, customers, seriously internal control, anti-corruption, and risk business partners, government agencies, acedemicians, management with due regard for all stakeholders, in financial institutions, communities, mass media, NGOs, and addition to proper development in various aspects. our own executives and staff. Your perseverance has paid Incidentally IRPC has enforced a new set of values off handsomely this year. It is my conviction that from now called iSPIRIT, focusing on strengthening from within on, IRPC will grow stronger in business and organization for sustainable growth. health alike into a good corporate and global citizen with responsibility for society. IRPC’s capability is bound to The Board has also promoted IRPC’s status as a benefit and create value for shareholders, stakeholders, learning and creative organization, whether one talks and our nation. about operating innovation, business innovation, Mr. Tevin Vongvanich Chairman 2015 Annual Report l IRPC Public Company Limited 05 KEY PERFORMANCE (Unit : Million Baht) 2013 2014 2015 By Sales Revenue by Distribution 72% Protroleum Products 61% Financial Position Domestic 27% 39% Current Assets 63,772 44,142 35,984 Protrochemical Products Export Total Assts 162,608 1% 162,798 163,174 Others Current Liabilities 49,530 46,829 36,210 - Total Liabilities 87,081 94,894 87,296 - - Shareholder's Equity 75,527 67,904 75,878 Petroleum Petrochemical - Products Products Registered Capital 20,475 20,475 20,475 Paid-up Capital 20,434 10% 58% 20,434 20,434 Gasoline Olefins and Polyolefins 56% 13% Operating Performance Diesel Aromatic 7% 27% Sales 292,593 281,589 214,172 Fuel Oil Styrenics Net Sales (1) 282,649 272,968 199,595 15% 2% Lube Base Oil and Asphalt Polyol Cost of Goods Sold 287,695 287,930 197,913 12% Gross Profit (Loss) 4,897 (6,341) 16,258 Others EBITDA (2) 7,489 (1,402) 17,033 Net Profit (Loss) 826 (5,235) 9,402 Net Sales Unit: Million Baht Net Profit Unit: Million Baht Financial Ratio 300,000 282,649 12,000 EBITDA Margin 2.56% N/A 7.95% 272,968 9,402 250,000 9,000 Net Profit Margin 0.28% N/A 4.39% 200,000 199,595 6,000 150,000 3,000 Return on Assets 0.54% N/A 5.77% 826 100,000 0 Return on Equity 1.09% N/A 13.09% - 3,000 50,000 Current Ratio (time) 1.29 0.94 0.99 - 6,000 (5,235) 0 Net Debt to Equity (time) (3) 0.50 0.87 0.66 2013 2014 2015 2013 2014 2015 Dividend per share 0.10 0.08 (4) 0.22 Total Assets Unit: Million Baht Total Liabilities Unit: Million Baht Dividend payout 247% N/A 48% Book Value per share (baht) 3.69 3.32 3.71 200,000 200,000 Earning per share (baht) 0.04 (0.26) 0.46 162,608 162,798 163,174 150,000 150,000 Note : 100,000 100,000 (1) Net Sales excluded excise taxes 87,081 94,894 87,296 (2) EBITDA means Earnings before interest, taxes, depreciation and amortization 50,000 50,000 (3) Net Debt means interest bearing debt less cash and short-term investments (4) The Board of Directors of the Company’s meeting on 9 February