CONTENTS Message from the Chairman 02 PERFORMANCE SUMMARY Key Performance 04 & MANAGEMENT ANALYSIS Financial Highlights 05 Vision Mission Values 06 Message from the President 144 Milestones 12 Performance Summary 146 Awards of Success 2017 14 EVEREST Project 166 Human Resource Administration 168 BOARD RESPONSIBILITY Management Discussion and Analysis 171 Board of Directors 20 CORPORATE RESPONSIBILITY Organization Structure 34 Management Team 35 Corporate Social Responsibilities 186 Internal Control 47 Quality, Safety Occupational Health 205 Risk Management Committee 50 and Environmental Management (QSHE) Report of the Audit Committee 52 Sustainable Management Structure 213 Message from the Chairman, Nomination 54 and Remuneration Committee APPENDIX Message from the Chairman, 55 Corporate Governance Committee Corporate Governance Report of 216 Corporate Governance Report 56 Thai Listed Campanies (CGR) 2017 Compliance with Corporate Social 238 MANAGEMENT STRUCTURE Responsibilities Management Structure 80 IRPC Information 110 BUSINESS STRUCTURE Business Structure and Shareholding 116 Nature of Business 117 Integrated Refinery and Petrochemical 120 Complex Flow Chart Products 122 Market Overview and Industry Outlook 128 Nature of Business Operation 138 Connected Transaction 139 02 2017 Annual Report IRPC Public Company Limited Message from the Chairman Dear Shareholders, The Board of IRPC Public Company Limited has specified its vision to move IRPC to become “the Leading Integrated Petrochemical Complex in Asia by 2020.” The Board has also defined both short-term and long-term strategic plan to ensure that the organization will move to the established direction and plan and ultimately achieve its goals and objectives within time specified. 03 Last year marked another year of success for organization’s image and reputation regarding IRPC. IRPC’s business performance has continuously transparency to ultimately become the good corporate improved. In 2017, EBITDA was recorded at 20,420 citizen that is accepted and recognized by both million baht with the net profit of 11,354 million baht, domestic and international institutions. IRCP has an increase of 17 percent from 9,721 million baht in been awarded with NACC Integrity Award 2017, 2016. Such success is the result of the Everest presented by the Office of the National Anti- Project, a project based on a strategic plan to improve Corruption Commission for two consecutive years. performance efficiency, manufacturing procedure, In addition, the Board has realized the importance organizational management as well as fostering of business operation with responsibility towards corporate value and culture while simultaneously society, environment and community as indicated in developing the organization to be in the Top Quartile. the company’s philosophy on creating balance To achieve this objective, the cooperation of between economy, society and environment; thus, employees of entire organization together with in 2017, IRPC had been recertified its membership consultants from the leading companies worldwide of DJSI (Dow Jones Sustainability Indices) in oil and is needed. Such project started since 2015 and gas category for four consecutive years. The Board has realized that an overall achievement in 2017 was a cooperation of every related party, especially the management and employees of IRPC Last year marked another year of success and its subsidiaries who consistently dedicated their for IRPC. IRPC’s business performance has best effort and ability in leading the organization continuously improved. In 2017, EBITDA toward better goals in the future. On behalf of the was recorded at 20,420 million baht with Board of Directors, I would like to express my sincere the net profit of 11,354 million baht, gratitude to every stakeholder who have a strong faith an increase of 17 percent in 2016. and always provide us with considerable support. I would like to confirm that all of us at IRPC will continue to adhere to our vision and mission to render every shareholder with the highest benefits while ended in 2017 and incurred the profit of approximately striving to create value for business and society for 7,000 million baht in which IRPC plans to further its sustainable growth and development. growth by introducing new strategic plan under the name “GDP”. IRPC; therefore, will be equipped with strength, readiness and accurate prediction, rendering the company with more efficient business management and in conformity to directions specified by the Board. Apart from creating added value to its business, The Board of IRPC also perform its duty as specified in the new CG Code, revise, develop and improve the performance by emphasizing on the notion of “Board that makes a difference”. The Board has constantly valued the internal control, risk management, anti-corruption policy and bribery while stressing on the highest benefits of every group of shareholders and stakeholders on a fair and equitable basis and Mr.Tevin Vongvanich strives to foster their confidence to maintain the Chairman 04 2017 Annual Report IRPC Public Company Limited KEY PERFORMANCE NET SALES SALES DISTRIBUTION PETROLEUM PRODUCTS PETROCHEMICAL PRODUCTS (UNIT: MILLION BAHT) 197,594 197,594 135,125 59,728 PETROLEUM 68% DOMESTIC 57% DIESEL 58% OLEFINS AND 59% PRODUCTS POLYOLEFINS EXPORT GASOLINE 11% PETROCHEMICAL 43% AROMATICS 29% PRODUCTS 30% FUEL OIL 3% STYRENICS 11% 2% OTHERS LUBE BASE OIL 12% AND ASPHALT POLYOL 1% OTHERS 16% NET SALES NET PROFIT UNIT: MILLION BAHT UNIT: MILLION BAHT 300,000 15,000 11,354 199,595 197,594 9,721 200,000 168,349 10,000 9,402 100,000 5,000 0 0 2015 2016 2017 2015 2016 2017 TOTAL ASSETS TOTAL LIABILITIES UNIT: MILLION BAHT UNIT: MILLION BAHT 200,000 184,544 200,000 163,174 172,378 150,000 150,000 100,000 100,000 96,894 87,296 91,373 50,000 50,000 0 0 2015 2016 2017 2015 2016 2017 05 Financial Highlights 2015 2016 2017 Financial Position Current Assets 35,984 39,848 47,583 Total Assets 163,174 172,378 184,544 Current Liabilities 36,210 52,429 49,365 Total Liabilities 87,296 91,373 96,894 Shareholder's Equity 75,878 81,005 87,650 Registered Capital 20,475 20,475 20,475 Paid-up Capital 20,434 20,434 20,434 Operating Performance Sales(1) 214,172 185,041 214,101 Net Sales(2) 199,595 168,349 197,594 Cost of Goods Sold 197,913 164,900 192,946 Gross Profit (Loss) 16,258 20,140 21,155 EBITDA(3) 17,033 17,430 20,420 Net Profit (Loss) 9,402 9,721 11,354 Financial Ratio EBITDA Margin 7.95% 9.42% 9.54% Net Profit Margin 4.39% 5.25% 5.30% Return on Assets 5.77% 5.79% 6.36% Return on Equity 13.09% 12.41% 13.48% Current Ratio (time) 0.99 0.76 0.96 Net Debt to Equity (time)(4) 0.66 0.75 0.65 Dividend Payout 48% 48% 52% Dividend per Share (baht) 0.22 0.23 (5) 0.29 Book Value per Share (baht) 3.71 3.96 4.28 Earning per Share (baht) 0.46 0.48 0.56 Notes: (1) Sales includes Petroleum Sales, Petrochemical Sales, Power and Utilities Sales, Sales of storage tank and port service, etc (2) Net Sales includes Petroleum Sales (excluding excise tax), Petrochemical Sales, Power and Utilities Sales (3) EBITDA means Earnings before interest, taxes, depreciation and amortization (4) Net Debt means interest bearing debt less cash and short-term investments (5) The Board of Directors of the Company’s meeting on 13 February 2018, approved to propose a dividend payment for the operating results of 2017 at Baht 0.29 per share. However, the approval shall be proposed to the Annual Sharehoders' Meeting for the year 2018 for the further consideration and approval. EVEREST FOREVER 2020 EBITDA 29,029 MTHB 2019 HEIGHT 29,029 ft 2018 CAMP 4 (26,300 ft) 2017 CAMP 3 BASECAMP (23,500 ft) 2016 (17,500 ft) CAMP 2 (21,000 ft) CAMP 1 (19,500 ft) EVEREST FOREVER (E4E) EVEREST FOREVER 2020 EBITDA 29,029 MTHB 2019 HEIGHT 29,029 ft 2018 CAMP 4 (26,300 ft) 2017 CAMP 3 BASECAMP (23,500 ft) 2016 (17,500 ft) CAMP 2 (21,000 ft) CAMP 1 (19,500 ft) Armed with the “Leading Integrated Petrochemical Complex in Asia by 2020” vision, it is with determination that IRPC pursues growth. Leveraging EVEREST best practices, it forged management continuity under the “EVEREST Forever (E4E) Project” while expanding investment, growing capacities, tackling ASEAN markets, nurturing ties with business partners, and innovating high-value products. EVEREST FOREVER (E4E) CUSTOMER CENTRIC DIGITAL PLATFORM DIGITAL INTEGRATED SUPPLY CHAIN SMART OPERATION ERP TRANSFORMATION IRPC 4.0 IRPC 4.0 CUSTOMER CENTRIC DIGITAL PLATFORM DIGITAL INTEGRATED SUPPLY CHAIN SMART OPERATION ERP TRANSFORMATION IRPC 4.0 Striding into a futuristic era, IRPC executes a digital strategic plan under the “IRPC 4.0 Project” to apply state-of-the-art digital systems and technologies involving employees, business partners, and customers. Going forward, it’s all about streamlined and digitized operating processes, razor-sharp analysis, and more efficient IRPC production and services. 4.0 IRPC DNA INDIVIDUAL OWNERSHIP RESULT- ORIENTED CONTINUOUS IMPROVEMENT PROMISE DO THINGS AND DELIVER TOGETHER NO BIAS ACTIVELY SOLVE THE PROBLEM IRPC DNA-the corporate culture platform for “a new behavior, a new mindset” conducive to IRPC’s envisioned growth-accompanies refined HR administration, a resilient structure, recruitment of talented staff, inspired leadership, and instilling of new corporate values. IRPC DNA 12 2017 Annual Report IRPC Public Company Limited Milestones 1 2 3 4 January 1 • IRPC joined the opening ceremony with the Federal of Thai Industries and signed the cooperative agreement of the project in expanding the promotion of carbon footprint production of industrial organizations in its 6th stage. February • Fitch Ratings (Thailand) raised IRPC’s outlook from negative to stable while maintaining its credit rating at ‘A-(tha)’.