MD & A
1. Explanation and Analysis of Financial status and Operating Results

In 2016, economic and political problems of many countries were still unsolvable. Notwithstanding, the economic and political policies announced by Mr. Donald Trump, new President of the United States caused unpredictable direction for the World’s economy. Moreover, the United Kingdom’s prospective withdrawal from the European Union following its referendum risks causing severe global economic effect. For Thailand, development projects have been on the bidding process in accordance with the Government’s plan which shows a good start to encourage the growth of domestic economy to achieve the Government’s target.

In 2017, the World’s economy were beyond the expectation of most analysts and has been expected to continually grow until 2018. Nevertheless, the trade protectionism announced by the US President Donald Trump, starting from abandoning the Trans-Pacific Strategic Economic Partnership Agreement (TPP) followed by announcing to walk away from North American Free Trade Agreement (NAFTA) has caused concern. In Thailand, construction of both public and private sectors in 2017 dropped, but highly expanded for state enterprise. It is expected that Thailand’s economy in 2018 will improve due to increase of the public sector investment in transportation. Private investment gradually improve as well.

2. Explanation on Financial Status and Operating Results

Summary of the Company’s financial status according to the Company’s Consolidated Financial Statement Ended December 31, 2017

As at 31 December 2017, the Company and its subsidiaries had total assets amounting to Baht 12,251.44 million, decreasing by Baht 325.33 million from December 31, 2016.

Significant changes in assets

  1. Temporary investment as at December 31, 2017, amounted to Baht 5.10 million, decreasing from December 31, 2016 by Baht 449.92 million since the Company sold investment unit in mutual fund to pay the investment in its subsidiaries and to use as working capital for its own construction projects.

  2. Accounts receivable and other debtors as at December 31, 2017, before allowance for doubtful accounts amounted to Bath 2,438.05 million, decreasing by Baht 174.01 million from December 31, 2016. In case payments are not made by the clients as it is specifically due, interest charges shall be applied to those late payments. Interest charges shall be conditionally calculated based on the due date and this standard shall be practically applied to all receivables, including receivables of related entities. Because of the current economic circumstances, the Company has conceded the interest charges to those receivables with trivial late payment, except those receivables which have been under litigation process for debt repayment. The Company recoded allowance for doubtful accounts for all those receivables with over-12-month overdue payment according to the Company’s rules and policies.

    Accounts receivable as at December 31, 2017 compared with those as at December 31, 2016

    (Unit : Million Baht)

    Description Doubtful Debt Total debt Within due Within-12-month past due Over-12-month past due
    Accounts receivable
    as at December 31, 2016
    1,257.68 2,586.21 536.00 711.35 1,338.86
    Accounts receivable
    as at December 31, 2017
    1,255.48 2,404.83 448.16 412.60 1,544.07
    Increase (Decrease) (2.20) (181.38) (87.84) (298.75) 205.21

  3. Unbilled revenue as at December 31, 2017 before allowance for doubtful accounts amounted to Baht 2,726.53 million, increasing form December 31, 2016 by Baht 318.74 million due to extension of construction period, change of construction model or addition/reduction of work scope from the main contract, which had to be amended in accordance with new agreement before the contractor could reimburse fee from the employer, of some projects. Therefore, number of works that have not been delivered to the employer increased higher than the previous year. Moreover, some projects speci¬fied a condition in the contract that the whole project must be completed before delivering works to the employers.

Significant changes in liabilities included

  1. Bank overdrafts and short-term loan from financial institutions as at December 31, 2017, were Baht 396.04 million, increasing by Baht 257.79 million from December 31, 2016 due to an increase of short-term loan from financial institutions.

  2. Accounts payable and other creditors as at December 31, 2017 amounted to Baht 1,811.02 million, increasing by Baht 110.59 million from December 31, 2016 due to an increase of materials purchase and hiring of sub-contractors.

    Normally, suppliers offer the Company a payment term of 30-60 days, but some of them, such as steel supplier offers payment by cash with special discount. Considering and comparing the conditions, the Company gets more advantages since it makes cost of construction drops. Moreover, it is in accordance with the Company’s policy to purchase some main materials to be sufficient for the entire project in advance to reduce price risk. If the Company has enough cash, the Company agrees to pay the supplier by cash.

    Details of accounts payable and other creditors are as follows:-

    (Unit : Million Baht)

    Description As at Dec 31, 2017 As at Dec 31, 2016 Increase (Decrease)
    Accounts payable – related and not related entities 1,511.95 1,507.22 4.73
    Advance from related and not related entities 36.02 34.50 1.52
    Other creditors – related and not related entities 116.10 58.83 57.27
    Accrued expense – related and not related entities 146.95 99.88 47.07
    Total accounts payable and other creditors 1,811.02 1,700.43 110.59

  3. Advance revenue for construction service as at December 31, 2017 amounted to Baht 1,315.87 million, decreasing from December 31, 2016 by Baht 582.95 million. The Company received in advance revenue for several projects from employers. The advance revenue has been gradually deducted from the value of works delivered in each period. The conditions applied as specified in the construction contract.
  1. Analysis of the operating performance of the year 2017 comparing to the year 2016 according to the consolidated financial statement
  2. Increase (Decrease)

    Description Year 2017 Year 2016 Amount Percent
    1.1 Revenue from construction service 8,356.43 million Baht 7,919.19 million Baht 437.24 million Baht 5.52
    1.2 Cost of construction service compared with revenue from construction service Percent 94.30 Percent 92.07 - 2.42
    1.3 Revenue from sales and services 919.07 million Baht 392.62 million Baht 528.45 million Baht 134.09
    1.4 Cost of sales and services compared with revenue from sales and services Percent 85.01 Percent 93.26 - (8.85)
    1.5 Sales expenses 103.61 million Baht 56.97 million Baht 46.64 million Baht 81.87
    1.6 Administrative expenses 497.34 million Baht 405.92 million Baht 91.42 million Baht 18.38
    1.7 Financial expenses 224.38 million Baht 196.43 million Baht 27.95 million Baht 14.23

  3. Operating Performance for the year 2017
  4. Description Year 2017 Year 2016
    Profit (Loss) of the year attributable to shareholder’ s equity according to the consolidated financial statement (202.81) million Baht 52.02 million Baht
    Profit (Loss) of the year according to the separate financial statement (22.01) million Baht 118.00 million Baht

  5. Management’s Analysis and Explanation

    For the operating performance as at the ended December 31, 2017, the Company and its subsidiaries had total revenue amounting to Baht 9,345.32 million divided into revenue from construction service of Baht 8,356.43 million, revenue from sales and services of Baht 919.07 million and other revenues of Baht 69.82 million. Compared to the year 2016, total revenues of the Company and its subsidiaries increased by 11.77 percent, mostly resulting from an increase of revenue from construction services of Baht 437.24 million, or 5.52 percent, and revenue from sales and services of Baht 526.46 million, or 134.09 percent.

    In the year 2017, the Company had net loss of the year attributable to shareholder’s equity amounting to Baht 202.81 million; while in 2016, the Company had net profit of the year attributable to shareholder’s equity amounting to Baht 52.02 million.

    The Company recognized share of profit from investment in associated companies and joint ventures in 2017 amounting to Baht 1.81 million, decreasing by Baht 21.52 million from the year 2016. In the year 2016, the Company recognized share of profit from such transaction amounting to Baht 23.34 million. Details are as follows:

    (Unit : Million Baht)

      Year 2017 Year 2016
    VSPN Property Company Limited (3.00) (0.72)
    C.I.N Estate Company Limited 2.61 27.09
    NWR-SBCC Joint Venture 2.20 (3.03)
    The Company, its directors, executives and all employees is committed to run the business to achieve the defined vision: “to be one of Thailand’s top five largest general construction contractors with international standards, stability, sustainability and responsibility to social and environment”. Even though, problems and difficulties, i.e. international and domestic economic situations and domestic political situation have still remained; they have been gradually solved. Construction projects of the Government aiming to develop the country have begun bidding according to the budget. Although, there are serious bidding competition between construction companies is drastic, the Company’s executives and all employees are committed to perform their duties at full capacity and do their best to ensure that the Company achieves its vision.
  1. Operating Performance for the Year 2017

    Construction Business
    1. Revenue from construction service increased a lot in 2017, Comparing to 2016, the construction revenue increased by Baht 437.24 million or 5.52 percent. The three largest construction projects contributing highest revenue in the year 2017 were:
      • A. Mae Moh Power Plant Units 4-7 Replacement Project in Lampang Province of the Electricity Generating Authority of Thailand of which the Company is the sub-contractor of Marubeni Corporation. Revenue in 2017 was Baht 1,099 million.
      • B. South Bangkok power plant replacement project, phase 1 of the Electricity Generating Authority of Thailand of which the Company is the sub-contractor of Marubeni Corporation (MC) jointly with Siemens AG and Siemens Limited. Revenue in 2017 was Baht 736 million.
      • C. The construction project of coastal harbor (Terminal A) with facilities of the Port Authority of Thailand. Revenue in 2017 was Baht 555 million.
    2. Compared with the year 2016, sales expenses of the year 2017 increased by Baht 46.64 million or 81.86 percent. Details of the 2017 sales expenses are as follows:

      (Unit : Million Baht)

      Sales expenses Year 2017 Year 2016
      Mana Patanakarn Company Limited 89.27 56.97
      Advance Prefab Company Limited 13.47 -0-
      Taste Maker Company Limited 0.87 -0-
      Total 103.61 56.97
      • A. In the year 2017, Mana Patanakarn Company Limited, conducting real estate development business, had expenses for sales promotion to boost up sales volume increasing from the year 2016 by Baht 9.96 million and had expenses for special business tax and local tax when transferring assets increasing from the year 2016 by Baht 15.09 million.
      • B. In the year 2017, Advance Prefab Company Limited, manufacturer of concrete products, had expenses for goods transportation of Baht 10.62 million and for advertising of Baht 2.85 million. No such payment in 2016.
    3. Administrative expenses in the year 2017 increased by Baht 91.42 million or 22.52 percent compared to the year of 2016. Details are as follows:

      (Unit : Million Baht)

      Administrative expenses Year 2017 Year 2016
      Nawarat Patanakarn Public Company Limited 332.98 316.91
      Mana Patanakarn Company Limited 49.20 28.50
      Advance Prefab Company Limited 69.75 31.17
      Utilities Business Alliance Company Limited 25.97 26.08
      Taste Maker Company Limited 11.76 -0-
      Other subsidiaries 7.68 3.26
      Total 497.34 405.92
      • A. In the year 2017, Mana Patanakarn Company Limited had expenses items more than the year 2016 as follows:
        1. Public service and utilities (Common expenses) for unsold houses and condominiums increased by Baht 3.70 million
        2. Amortization of sales office and decoration expenses increased by Baht 7.27 million
        3. 3. Wages and salary increased by Baht 5.08 million
      • B. In 2017, Advance Prefab Company Limited, manufacturer of concrete products, completed its plant construction and have started full-scale operation, causing the increase of administrative expenses by Baht 38.58 million from the year 2016.
      • C. Taste Maker Company Limited, conducting food business, was established in late 2016 and has started its business in 2017.
    4. Myanmar NWR Company Limited recorded deduction of prepaid administrative expenses during 2011 - 2015 amounting to Baht 48.39 million which appeared in the “Loss on amortization of assets”

    Concrete Business

    Compared with the year 2016, revenue from sales and services in the year 2017 increased by Baht 526.45 million, or 134.09 percent since Mana Patanakarn Company Limited, Real Estate Development Company, completed the construction of Aspen Condo Phase A and has gradually transferred the ownership to buyers. Comparing cost of sales and services in the year 2017 and 2016, cost of sales and services compared with revenue from sales and services decreased from 93.26 percent in 2016 to 85.01 percent in the year 2017. Gross profit margin from sales and services increased significantly, that is gross profit in the year 2017 amounted to Baht 137.78 million or 14.99 percent of the revenues from sales and services; while in the year 2016, it amounted to Baht 26.45 million or 6.74 percent

  2. Issuance and Offering of Baht 3,220.10 Million Debenture

    On August 21, 2015, the Company issued and offered 1,500,000 units of 3-year debenture at a par value of Baht 1,000 each, totaling Baht 1,500 million with maturity date of full redemption on August 21, 2018. The debenture bears interest at the rate of Baht 4.50 percent a year. The purposes of debenture issuance were for investment, loan repayment and using as working capital (NWR188A). The interest payment of NWR188A debenture in 2017 was Baht 67.5 million. On August 28, 2017, it was the due date of full redemption of Baht 1,500,000,000 debenture issued on August 28, 2014 (NWR178A). On the same day, the Company issued and offered 2,000,000 units of 3-year debenture at a par value of Baht 1,000 each, totaling Baht 2,000 million with maturity date of full redemption on August 28, 2020. The debenture bears interest at a rate of 4.50 percent a year. The purposes of debenture issuance were for investment, loan repayment and using as working capital. The debenture was sold at total amount of Baht 1,720.1 million (NWR208A). Total interest payment of NWR178A and NWR208A in 2017 were Baht 80.74 million.

  3. NWR-SBCC Joint Venture

    On March 28, 2017, the Central Bankruptcy Court issued a definitive custodial order to Saraburi Coal Co., Ltd. ("Saraburi"), a joint venture under NWR - SBCC Joint Venture Agreement with 50 percent shareholding proportion to carry out the excavation and transportation of soil and coal at the Mae Moh mine of the Electricity Generating Authority of Thailand in Lampang Province. The absolute custody ordered by the Central Bankruptcy Court was considered that Saraburi breach of the joint venture agreement. The Company exercised its rights under the Joint Venture Agreement to cancel the duty of Saraburi from the NWR-SBC Joint Venture (“Joint Venture").

    On May 8, 2017, the Company submitted a written letter to the official receiver of Saraburi to cancel the duty of Saraburi in the joint venture. As a results, roles, rights and duty of Saraburi according to the joint venture agreement ended and the Company has rights and duty according to contract to control and operate until the work is completed, scheduled in March 2018. The results of Saraburi’s lawsuit and the exercise of the Company’s rights did not change the Company’ shareholding ratio in the joint venture and did not affect the project operation with the Electricity Generating Authority of Thailand.