MD & A

PERFORMANCE AND FINANCIAL POSITION

Business overall

Revenue from contracts with customers for the year 2022 amounted to 6,085.2 million baht, a decrease of 585.1 million baht or 8.8% from the same period last year.

Cost of sales and services for the year 2022 was 6,151.0 million baht, representing 101.1% as a percent of revenue. In the prior year the cost of sales and services was 97.7% of revenue.  The Group is adjusting its distribution strategy as well as reducing production costs and other expenses.

Gross profit for the year 2022 amounted to (65.8) million baht or (1.1%) of sales revenue.  During the same period last year, there was a gross profit of 2.31%. The company has negotiated to increase the selling price with customers.  

Selling expenses for the year 2022 amounted to 75.1 million baht, representing a rate of 1.24% compared to sales revenue. Increased from the same period of the previous year by 1.22% compared to revenue from sales, respectively. However, the Group has a policy to continuously manage selling expenses.

Administrative expenses for the year 2022 amounted to 485.8 million baht, representing a rate of 7.98 percent compared to sales revenue. An increase of 26.1% from the same period last year.

Financial expenses for the year 2022 amounted to 210.0 million baht, representing a rate of 3.45 percent, an increase of 26.1 million baht from the same period last year.

The company had a net loss for the year 2022 in the amount of (807.7) million baht, representing (13.3%) of sales revenue. The loss increased from the same period last year. representing (7.82%). The Group is in the process of changing strategies and operating models. Including various measures and management policies to be more effective.

Statement of Financial Position

  Total assets as of 31 December 2022 increased by Baht 330.4 million from 31 December 2021. This increase was due to a fixed assets revaluation.

Total liabilities as of 31 December 2022 decreased by Baht 79.3 million from 31 December 2021, due to changing the purchase conditions.

Total shareholders’ equity as of 31 December 2022 of Baht 911.3 million an increase from 31 December 2021 due to the revaluation of assets during the period.

The Group was unable to maintain interest-bearing debt to EBITDA plus extraordinary item and non-cash items ratio 5:1 and debt-to-equity ratio 2.75:1, as specified in the Credit Facility Agreement.

As disclosed in Note 1.2 to the consolidated financial statements, regarding the Group’s ability to continue its operations as a going concern, the Group has sustained operating losses for several consecutive years. The Group had a net a loss from operation in the consolidated statements of comprehensive income for the year ended 31 December 2022 of Baht 808 million (the Company only: Baht 682 million). As of 31 December 2022, the Group’s total current liabilities exceeded its total current assets by Baht 3,551 million (the Company only: Baht 3,905 million) and the Group had deficit of Baht 3,519 million (the Company only: Baht 2,603 million), which mainly became payable on demand since the Group was unable to maintain certain financial ratios as specified in the Credit Facility Agreement, as described in Note 18 to the consolidated financial statements.

Management approach

The Group’s management has implemented various plans, including negotiating with financial institutions to obtain additional working capital and planning to dispose of assets that are not core assets in its operations. In addition, the Group is considering adjusting the production and distribution strategies and reducing manufacturing costs and other expenses to increase the Group’s liquidity. Currently, these plans are still in progress.

Management approach long term

The Group is working on strategic plans and distribution plans, that will reduce production costs and other expenses.  In addition, the Group is working to accelerate the delivery of products to customers to generate additional revenue and profits for the company.


Liquidity and sufficiency of capital

Liquidity ratios

                On 31 December 2022, the Company had a similar liquidity ratio, 0.35 times, as the last year. The Company has made credit facility agreements with 2 financial institutions which are the same financial institutions that provide long-term loans which the Company has used financial services from both financial institutions for many years. Due to a good relationship and both financial institutions have well knowledge and understanding of the compressor industry.   Both financial institutions continue to support the Company in using credit as working capital for their continued business operations.

Average inventory turnover and average inventory period

                On 31 December 2022, the average inventory turnover of the Company is 4.51 times which worse than last year.  The average inventory period was 80 days. 

Gross Profit Margin

                On 31 December 2022, the gross profit margin of the Company is (1.08%) which worse than last year which was 2.31%.  This was due to continuously increasing cost of raw materials.

Net Profit Margin

                On 31 December 2022, the net profit margin of the Company is (13.17%) which was worse than last year at (7.81%). The Company is in the process of adjusting the strategy and future operating plans and looking for a new opportunity for additional funding sources.

Debt to Equity ratio

                On 31 December 2022, the debt-to-equity ratio of the Company is 6.74 times comparted to the last years which was 12.39 times. The Company has higher current liabilities compare to current assets at Bath 3,551 million (subsidiaries: Bath 3,905 million) and total accumulated loss at Bath 3,519 million (subsidiaries: Bath 2,603 million).

Credit Policy

                The Company manages the risk by adopting appropriate credit control policies and procedures and therefore does not expect to incur material financial losses. Outstanding trade receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit or other forms of credit insurance obtained from reputable banks and other financial institutions. In addition, the Company does not have high concentrations of credit risk since it has a large customer base.

                An impairment analysis is performed at each reporting date to measure expected credit losses. The provision rates are based on days past due for Company’s various customer segments with similar credit risks. The Company classifies customer segments by customer type and rating, and coverage by letters of credit and other forms of credit insurance. Letters of credit and other forms of credit insurance are considered an integral part of trade receivables and taken into account in the calculation of impairment. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if past due for more than 210 days and not subject to enforcement activity.

Allowance for diminution in inventory value

                The management needs to exercise judgment and make estimates determining the allowance for diminution in inventory value for the products that their net value is lower than the cost and obsolete or aging goods. This depends on a detailed analysis of the life cycle of the product, fluctuation of raw material prices, market competition, economic conditions, and industrial conditions. This may create a risk to the allowance for diminution in inventory value. Methods and assumptions used by management in determining the allowance for diminution in inventory are as follows:

           ·      Comparing the holding period and the movement of inventories to identify Company’ s products that indicate slower turnover

          ·      Analyzing the net amount proceeds received from the sales of goods after the date record in the financial statements with the cost of the inventories                  

          ·      Consider the actual loss from sales and write-off of inventories from the account incurred during the year compared with the allowance for diminution in the inventory value recorded at the end of the preceding year

Investments in subsidiaries

                The Company recorded an allowance for impairment of investments in subsidiaries amounting to Baht 1,613 million in the separate financial statements (More details described in the notes to the financial statements no. 12). The determination of the allowance for impairment of investments is a critical accounting estimate. Which management team has to use high discretion to forecasting the future performance of subsidiaries including determining the discount rate and important assumptions. This will cause a risk associated with the value of investments in subsidiaries.


Our website use cookies to distinguish users from other users, which helps us to provide you with a good experience on the website. And help us improve the website as well. The purpose of this policy is to provide you, as a service user and visiting the KULTHORN GROUP website, to obtain clear and accessible information about the cookies used by KULTHORN GROUP and the role they play in helping us provide your experience. the best job for you and the choices you have regarding your cookie settings. Cookie Policy