POSCO-Thainox Public Company Limitedinox.listedcompany.com/misc/financials/20130809... · POSCO-Thainox Public Company Limited Interim financial statements for the three-month and

POSCO-Thainox Public Company Limited

Interim financial statements for the three-month and six-month periods ended

30 June 2013 and

Independent auditor’s report on review of interim financial information

Independent Auditor’s Report on Review of Interim Financial Information To the Board of Directors of POSCO-Thainox Public Company Limited I have reviewed the accompanying statement of financial position in which the equity method is applied and separate statement of financial position of POSCO-Thainox Public Company Limited as at 30 June 2013; the related statements of comprehensive income for the three-month and six-month periods ended 30 June 2013; changes in equity and cash flows for the six-month period ended 30 June 2013; and condensed notes (“interim financial information”). Management is responsible for the preparation and presentation of this interim financial information in accordance with Thai Accounting Standard 34, “Interim Financial Reporting”. My responsibility is to express a conclusion on this interim financial information based on my review. Scope of Review I conducted my review in accordance with the Thai Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Thai Standards on Auditing and consequently does not enable me to obtain assurance that I would become aware of all significant matters that might be identified in an audit. Accordingly, I do not express an audit opinion.

Conclusion Based on my review, nothing has come to my attention that causes me to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with Thai Accounting Standard 34, “Interim Financial Reporting”.

2

Emphasis of Matter Without qualifying my conclusion, I draw attention to the followings: a) As disclosed in notes 3 to the interim financial statements describing the effect of the Company’s

adoption from 1 January 2013 of certain new accounting policies. The statement of financial position in which the equity method is applied and separate statement of financial position as at 31 December 2012, which are included as comparative information, are components of the audited financial statements in which the equity method is applied and separate statement of financial statements as at and for the year ended 31 December 2012 after making the adjustments described in notes 3. I have audited these adjustments and, based on my audit, in my opinion, such adjustments are appropriate and have been properly applied. Furthermore, the related statements of comprehensive income for the three-month and six-month periods ended 30 June 2012; changes in equity and cash flows for the six-month period ended 30 June 2012, which are included as comparative information, have also been adjusted as described in notes 3. I have reviewed these adjustments and, based on my review, nothing has come to my attention to indicate that such adjustments are not appropriate and properly applied.

b) As disclosed in note 4 to the interim financial statements, during the three-month and six-month periods

ended 30 June 2013, the Company (1) sold goods to related parties in the normal course of business totaling Baht 542 million and Baht 966 million, respectively, which represented 25 percent and 21 percent of the Company’s total sales, respectively. As at 30 June 2013, the outstanding trade accounts receivable from related parties amounted to Baht 349 million. (2) purchased raw materials from related companies in the normal course of business totaling Baht 1,519 million and Baht 3,740 million, respectively, which represented 71 percent and 83 percent of the Company’s total purchase of raw materials, respectively. As at 30 June 2013, the outstanding trade accounts payable to related parties amounted to Baht 2,189 million.

(Munchupa Singsuksawat) Certified Public Accountant Registration No. 6112 KPMG Phoomchai Audit Ltd. Bangkok 8 August 2013

POSCO-Thainox Public Company LimitedStatement of financial position

30 June 31 December 30 June 31 December

Assets Note 2013 2012 2013 2012

(Unaudited) (Restated) (Unaudited) (Restated)

Current assets

Cash and cash equivalents 146,789 1,292,965 146,789 1,292,965

Current investments 752,368 1,237,979 752,368 1,237,979

Trade accounts receivable 4, 5 1,375,252 1,525,296 1,375,252 1,525,296

Other receivable from Revenue Department - 60,293 - 60,293

Inventories 4,139,741 3,827,771 4,139,741 3,827,771

Other prepaid expenses 7,740 13,526 7,740 13,526

Input tax 189,903 213,576 189,903 213,576

Other current assets 86,646 2,621 86,646 2,621

Total current assets 6,698,439 8,174,027 6,698,439 8,174,027

which the equity method

Financial statements in

Separate

(in thousand Baht)

financial statements is applied

The accompanying notes are an integral part of these financial statements.

3

, , , , , , , ,

Non-current assets

Investment in associate 6 3,400 10,013 4,900 4,900

Other long-term investments 73,095 54,836 73,095 54,836

Investment properties - 58,273 - 58,273

Property, plant and equipment 7 6,320,177 6,465,138 6,320,177 6,465,138

Restricted deposits at financial institutions - 1,051 - 1,051

Other non-current assets 7,064 6,938 7,064 6,938

Total non-current assets 6,403,736 6,596,249 6,405,236 6,591,136

Total assets 13,102,175 14,770,276 13,103,675 14,765,163


3 The accompanying notes are an integral part of these financial statements.

3



Liabilities and equity Note 2013 2012 2013 2012


Current liabilities

Trade accounts payable and notes payable 4, 8 2,567,796 3,908,262 2,567,796 3,908,262

Other payables for purchase assets

to related parties 4 5,295 94,621 5,295 94,621

Current portion of long-term loans

from financial institutions 72,034 59,474 72,034 59,474

Accrued expenses 4 36,244 44,168 36,244 44,168

Deposit from customers 19,597 25,285 19,597 25,285

Retention payable 2,420 1,996 2,420 1,996

Other current liabilities 14,065 13,113 14,065 13,113

Separate which the equity method


(in thousand Baht)

financial statements is applied


4

Total current liabilities 2,717,451 4,146,919 2,717,451 4,146,919

Non-current liabilities

Long-term loans from financial institutions 70,952 119,329 70,952 119,329

Deferred tax liabilities 9 401,092 406,487 401,092 406,487

Employee benefit obligations 10 84,784 81,241 84,784 81,241

Total non-current liabilities 556,828 607,057 556,828 607,057

Total liabilities 3,274,279 4,753,976 3,274,279 4,753,976



4



Liabilities and equity (Continued) 2013 2012 2013 2012


Equity

Share capital:

Authorised share capital 7,795,709 7,795,709 7,795,709 7,795,709

Issued and paid-up share capital 7,795,709 7,795,709 7,795,709 7,795,709

Additional paid in capital:

Premium on ordinary shares 332,131 332,131 332,131 332,131

Retained earnings

Appropriated

Legal reserve 585,000 585,000 585,000 585,000

Deficit (188,797) (67,786) (187,297) (72,899)

is applied financial statements

(in thousand Baht)

Separate which the equity method



5

Other components of equity 1,303,853 1,371,246 1,303,853 1,371,246

Total equity 9,827,896 10,016,300 9,829,396 10,011,187

Total liabilities and equity 13,102,175 14,770,276 13,103,675 14,765,163



5


Note 2013 2012 2013 2012

(Restated) (Restated)

Income

Revenue from sale of goods 10 2,178,648 3,287,706 2,178,648 3,287,706

Interest income 8,888 17,316 8,888 17,316

Gain on disposal of assets 9 - 9 -

Net foreign exchange gain - 6,234 - 6,234

Other income 11,973 9,823 11,973 9,823

Total income 2,199,518 3,321,079 2,199,518 3,321,079

Expenses

Cost of sales of goods 3 2 192 850 2 949 452 2 192 850 2 949 452

Statement of comprehensive income (Unaudited)

Financial statement in

which the equity method Separate

is applied

30 June

(in thousand Baht)

financial statements

Three-month period ended Three-month period ended

30 June


6

Cost of sales of goods 3 2,192,850 2,949,452 2,192,850 2,949,452

Selling expenses 35,854 54,705 35,854 54,705

Administrative expenses 49,875 38,956 49,875 38,956

Net foreign exchange loss 149,548 - 149,548 -

Key management personnel compensation 16,459 22,309 16,459 22,309

Finance costs 3,219 5,545 3,219 5,545

Total expenses 2,447,805 3,070,967 2,447,805 3,070,967

Share of loss of equity-accounted investee

Associate (2,311) (1,365) - -

Total (2,311) (1,365) - -

Profit (loss) before income tax expense (250,598) 248,747 (248,287) 250,112

Income tax expense (7,647) (5,950) (7,647) (5,950)

Profit (loss) for the period (258,245) 242,797 (255,934) 244,162


6


6


Note 2013 2012 2013 2012


Other comprehensive income

Net change in fair value of available-for-sale

investments (20,084) 21,910 (20,084) 21,910

Revaluation of property, plant and equipment 7 (51,533) (51,533) (51,533) (51,533)

Income tax on other comprehensive income 9 17,835 5,924 17,835 5,924

Other comprehensive income for the period,

net of income tax (53,782) (23,699) (53,782) (23,699)

Total comprehensive income for the period (312,027) 219,098 (309,716) 220,463

Earning (loss) per share

(in thousand Baht)


Three-month period ended

30 June

Three-month period ended

30 June



is applied financial statements


7

Earning (loss) per share

Basic earnings (loss) per share (in Baht) 12 (0.033) 0.031 (0.033) 0.031


7


7

POSCO-Thainox Public Company LimitedStatement of comprehensive income (Unaudited)

Note 2013 2012 2013 2012


Income

Revenue from sale of goods 10 4,635,860 6,806,031 4,635,860 6,806,031

Interest income 20,027 33,410 20,027 33,410

Gain on disposal of assets 3,816 - 3,816 -

Net foreign exchange gain 12,722 82,274 12,722 82,274

Other income 14,876 15,345 14,876 15,345

Total income 4,687,301 6,937,060 4,687,301 6,937,060

Expenses

Cost of sales of goods 3 4 581 749 6 685 460 4 581 749 6 685 460



is applied

30 June

Separate


30 June

(in thousand Baht)

Six-month period ended Six-month period ended


8

Cost of sales of goods 3 4,581,749 6,685,460 4,581,749 6,685,460

Selling expenses 73,484 115,255 73,484 115,255

Administrative expenses 94,392 87,910 94,392 87,910

Key management personnel compensation 34,333 40,781 34,333 40,781

Finance costs 6,288 9,966 6,288 9,966

Total expenses 4,790,246 6,939,372 4,790,246 6,939,372

Share of loss of equity-accounted investee

Associate 6 (6,613) (1,717) - -

Total (6,613) (1,717) - -

Loss before income tax expense (109,558) (4,029) (102,945) (2,312)

Income tax expense (11,453) (11,964) (11,453) (11,964)

Loss for the period (121,011) (15,993) (114,398) (14,276)


8


8


Note 2013 2012 2013 2012


Other comprehensive income

Net change in fair value of available-for-sale

investments 18,259 21,910 18,259 21,910

Revaluation of property, plant and equipment 7 (102,500) (103,066) (102,500) (103,066)

Income tax on other comprehensive income 9 16,848 16,231 16,848 16,231

Other comprehensive income for the period,

net of income tax (67,393) (64,925) (67,393) (64,925)

Total comprehensive income for the period (188,404) (80,918) (181,791) (79,201)

Loss per share

(in thousand Baht)

is applied

Six-month period ended

30 June 30 June






Separate


9

Loss per share

Loss per share (in Baht) 12 (0.016) (0.002) (0.015) (0.002)


9


9

POSCO-Thainox Public Company LimitedStatement of changes in equity (Unaudited)

Fair value Total

Issued and changes in other

paid-up Legal Unappropriated available-for-sale Revaluation components Total

Note share capital Share premium reserve (Deficit) investment surplus of equity equity

Six-month period ended 30 June 2012

Balance at 1 January 2012 7,795,709 332,131 585,000 21,836 - 1,876,257 1,876,257 10,610,933

Impact of changes in accounting policies 3 - - - (48,804) - (368,413) (368,413) (417,217)

Balance at 1 January 2012 - restated 7,795,709 332,131 585,000 (26,968) - 1,507,844 1,507,844 10,193,716

Comprehensive income for the period

Loss - - - (15,993) - - - (15,993)

Other comprehensive income - - - - 17,528 (82,453) (64,925) (64,925)

Total comprehensive income for the period - - - (15,993) 17,528 (82,453) (64,925) (80,918)

Balance at 30 June 2012 7,795,709 332,131 585,000 (42,961) 17,528 1,425,391 1,442,919 10,112,798

Other components of equity

(in thousand Baht)

Retained earnings

Financial statement in which the equity method is applied


10


Fair value Total





Balance at 1 January 2013 7,795,709 332,131 585,000 4,438 36,517 1,668,992 1,705,509 10,422,787

Impact of changes in accounting policies 3 - - - (72,224) (7,303) (326,960) (334,263) (406,487)

Balance at 1 January 2013 - restated 7,795,709 332,131 585,000 (67,786) 29,214 1,342,032 1,371,246 10,016,300


Loss - - - (121,011) - - - (121,011)



Balance at 30 June 2013 7,795,709 332,131 585,000 (188,797) 43,821 1,260,032 1,303,853 9,827,896

(in thousand Baht)


Retained earnings Other components of equity


11


Fair value Total





Balance at 1 January 2012 7,795,709 332,131 585,000 8,912 - 1,876,257 1,876,257 10,598,009

Impact of changes in accounting policies 3 - - - (48,804) - (368,413) (368,413) (417,217)

Balance at 1 January 2012 - restated 7,795,709 332,131 585,000 (39,892) - 1,507,844 1,507,844 10,180,792


Loss - - - (14,276) - - - (14,276)



Balance at 30 June 2012 7,795,709 332,131 585,000 (54,168) 17,528 1,425,391 1,442,919 10,101,591

(in thousand Baht)

Retained earnings

Separate financial statements

Other components of equity


12


Fair value Total





Balance at 1 January 2013 7,795,709 332,131 585,000 (675) 36,517 1,668,992 1,705,509 10,417,674

Impact of changes in accounting policies 3 - - - (72,224) (7,303) (326,960) (334,263) (406,487)

Balance at 1 January 2013 - restated 7,795,709 332,131 585,000 (72,899) 29,214 1,342,032 1,371,246 10,011,187


Loss - - - (114,398) - - - (114,398)



Balance at 30 June 2013 7,795,709 332,131 585,000 (187,297) 43,821 1,260,032 1,303,853 9,829,396

(in thousand Baht)


Retained earnings Other components of equity


13

POSCO-Thainox Public Company LimitedStatements of cash flows (Unaudited)

Note 2013 2012 2013 2012


Cash flows from operating activities

Loss for the period (121,011) (15,993) (114,398) (14,276)

Adjustments for

Depreciation and amortisation 223,432 276,244 223,432 276,244

Loss (reversal) on decline in value of inventories 212 (269,445) 212 (269,445)

Reversal of impairment for spare parts (73,921) - (73,921) -

Amortisation and losses on write-off of spare parts 37,957 - 37,957 -

Unrealised (gain) loss on exchange 128,512 (57,446) 128,512 (57,446)

Reversal of allowance for doubtful accounts 5 (60) (60) (60) (60)

Amortisation of defered expenses 1,440 1,440 1,440 1,440

Employee benefit obligations 10 3,543 4,006 3,543 4,006

(Gain) loss on disposal of assets (3,816) 110 (3,816) 110

Gain on bad debt recovery - (3,100) - (3,100)

Finance costs 6,288 9,966 6,288 9,966

Interest income (20,027) (33,410) (20,027) (33,410)

Share of loss of associate 6 6,613 1,717 - -

Income tax expense 9 11,453 11,964 11,453 11,964

200,615 (74,007) 200,615 (74,007)

Changes in operating assets and liabilities

Trade accounts receivable 156,939 (533,045) 156,939 (533,045)

Other receivable from Revenue Department 60,293 (23,787) 60,293 (23,787)

Inventories (327,636) 1,155,651 (327,636) 1,155,651

Other prepaid expenses 5,786 7,960 5,786 7,960

Input tax 23,673 (97,203) 23,673 (97,203)

Other current assets (85,659) (28,005) (85,659) (28,005)

Other non-current assets (126) 883 (126) 883

Trade accounts payable and notes payable (1,475,882) (511,299) (1,475,882) (511,299)

Accrued expenses (7,945) (17,044) (7,945) (17,044)

Deposit from customers (5,688) 7,070 (5,688) 7,070

Retention payable 424 (5,621) 424 (5,621)

Other current liabilities 952 (585) 952 (585)

Net cash used in operating activities (1,454,254) (119,032) (1,454,254) (119,032)


(in thousand Baht)

30 June


30 June



is applied



14

POSCO-Thainox Public Company LimitedStatements of cash flows (Unaudited)

2013 2012 2013 2012


Cash flows from investing activities

Interest received 21,661 46,769 21,661 46,769

Current investments 485,611 (670,341) 485,611 (670,341)

Transaction costs from sale of investment property (3,211) - (3,211) -

Sale of investment properties 65,235 - 65,235 -

Purchase of property, plant and equipment (124,382) (19,077) (124,382) (19,077)

Sale of property, plant and equipment 188 2,731 188 2,731

Payment of payables on purchase of property,

plant and equipment (94,621) (6,956) (94,621) (6,956)

Restricted deposits at financial institutions 1,051 - 1,051 -

Net cash from (used in) investing activities 351,532 (646,874) 351,532 (646,874)

Cash flows from financing activities

Interest paid (6,267) (9,509) (6,267) (9,509)

Repayment of long-term loans from financial institutions (37,187) (36,514) (37,187) (36,514)

Net cash used in financing activities (43,454) (46,023) (43,454) (46,023)

Net decrease in cash and cash equivalents (1,146,176) (811,929) (1,146,176) (811,929)

Cash and cash equivalents at 1 January 1,292,965 2,406,183 1,292,965 2,406,183 Cash and cash equivalents at 30 June 146,789 1,594,254 146,789 1,594,254

Property, plant and equipment purchased during

the periods are detailed as follows:

Increase in property, plant and equipment 129,677 39,770 129,677 39,770

Less : payables on purchase of property, plant and equipment (5,295) (20,693) (5,295) (20,693)

Net purchase of property, plant and equipment paid by cash 124,382 19,077 124,382 19,077

30 June


(in thousand Baht)

Supplemental disclosures of cash flows information

30 June

is applied

Six-month period ended Six-month period ended




15

POSCO-Thainox Public Company Limited Notes to the interim financial statements For the three-month and six-month periods ended 30 June 2013 (Unaudited)

16

Note Contents 1 General information 2 Basis of preparation of the interim financial statements 3 Changes in accounting policies 4 Related parties 5 Trade accounts receivable 6 Investment in associate 7 Amortisation of the revaluation of property, plant and equipment 8 Trade accounts payable and notes payable 9 Deferred tax 10 Employee benefit obligations 11 Segment information 12 Basic earnings (loss) per share 13 Commitments with non-related parties 14 Events after the reporting period 15 Thai Financial Reporting Standards not yet adopted


17

These notes form an integral part of the interim financial statements. The interim financial statements issued for Thai regulatory reporting purposes are prepared in the Thai language. These English language financial statements have been prepared from the Thai language statutory financial statements, and were approved and authorised for issue by the Board of Directors on 8 August 2013.

1 General information POSCO-Thainox Public Company Limited, the “Company”, is incorporated in Thailand and has its registered head office and branch offices as follows; Head office : 31st floor Unit 3101-3, CRC Tower, All Seasons Place, 87/2 Wireless Road,

Lumpini, Pathumwan, Bangkok 10330, Thailand. Branch office 1 : 324 Moo 8, Highway 3191 Road, Tambol Mabkha, Nikom Pattana, Rayong

21180, Thailand. Branch office 2 : 700/453 Amata Nakorn Industrial Estate, Moo 7, Tambol Donhuaror, Amphur

Muang, Chonburi 20000, Thailand. The Company was listed on the Stock Exchange of Thailand in December 2004. The immediate parent company during the financial period was POSCO which is incorporated in South Korea. The principal activities of the Company are production and sales of cold-rolled stainless steel for use as raw material in the production of household appliances such as kitchenette, sinks, washing machines etc., including other industries.

2 Basis of preparation of the interim financial statements (a) Statement of compliance

The interim financial statements are prepared on a condensed basis in accordance with Thai Accounting Standard (“TAS”) No. 34 (revised 2009) Interim Financial Reporting; guidelines promulgated by the Federation of Accounting Professions (“FAP”); and applicable rules and regulations of the Thai Securities and Exchange Commission. The interim financial statements are prepared to provide an update on the financial statements for the year ended 31 December 2012. They do not include all of the financial information required for full annual financial statements but focus on new activities, events and circumstances to avoid repetition of information previously reported. Accordingly, these interim financial statements should be read in conjunction with the financial statements of the Company for the year ended 31 December 2012.


18

The FAP has issued the following new and revised Thai Financial Reporting Standards (“TFRS”) relevant to the Company’s operations and effective for accounting periods beginning on or after 1 January 2013:

TFRS Topic TAS 12 Income Taxes TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates TFRS 8 Operating Segments The adoption of these new and revised TFRS has resulted in changes in the Company’s accounting policies. The effects of these changes are disclosed in note 3. In addition to the above new and revised TFRS, as at 30 June 2013 the FAP had issued a number of new interpretations which are effective for financial statements beginning on or after 1 January 2014 and have not been adopted in the preparation of these interim financial statements. Those new interpretations that are relevant to the Company’s operations are disclosed in note 15. Except for the changes in accounting policy discussed in note 3, the accounting policies and methods of computation applied in these interim financial statements are consistent with those applied in the financial statements for the year ended 31 December 2012.

(b) Functional and presentation currency

The interim financial statements are presented in Thai Baht, which is the Company’s functional currency. All financial information presented in Thai Baht has been rounded in the notes to the financial statements to the nearest thousand unless otherwise stated.

(c) Use of estimates and judgements

The preparation of interim financial statements in conformity with TFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In preparing these interim financial statements, the significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended 31 December 2012. Changes principally derive from the adoption of new and revised TFRS from 1 January 2013.

3 Changes in accounting policies (a) Overview

From 1 January 2013, consequent to the adoption of new and revised TFRS and FAP Announcements as set out in note 2, the Company has changed its accounting policies in the following areas: • Accounting for income tax • Accounting for the effects of changes in foreign exchange rates • Presentation of information on operating segments

Details of the new accounting policies adopted by the Company are included in notes 3(b) to 3(d) below. Other new and revised TFRS did not have any impact on the accounting policies, financial position or performance of the Company.


19

(b) Accounting for income tax

The principal change introduced by TAS 12 Income Taxes is the requirement to account for deferred tax assets and liabilities in the financial statements. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised. The Company adopted TAS 12 with effect from 1 January 2013. The effects of the change are recognised retrospectively in the financial statements. The impact of the change on the financial statements is as follows:

Financial statement in which

the equity method is applied Separate

financial statements 30 June 31 December 1 January 30 June 31 December 1 January Statement of financial position as at 2013 2012 2012 2013 2012 2012 (in thousand Baht) Increase in deferred tax liabilities 401,092 406,487 417,217 401,092 406,487 417,217 Decrease in revaluation surplus 306,460 326,960 368,413 306,460 326,960 368,413 Decrease in fair value change in

available-for-sale investment 10,955 7,303 - 10,955 7,303 - Decrease in retained earnings 83,677 72,224 48,804 83,677 72,224 48,804


which the equity method is applied


Statement of comprehensive income for the three-month period ended 30 June

2013

2012

2013

2012

(in thousand Baht) Increase in income tax expense 7,647 5,950 7,647 5,950 Decrease in profit for the period 7,647 5,950 7,647 5,950 Decrease in basic earnings per share (in Baht) 0.0010 0.0008 0.0010 0.0008


20

Financial statement in which the equity

method is applied Separate

financial statements Statement of comprehensive income for

the six-month period ended 30 June

2013

2012

2013

2012 (in thousand Baht) Increase in income tax expense 11,453 11,964 11,453 11,964 Decrease in profit for the period 11,453 11,964 11,453 11,964 Decrease in basic earnings per share (in Baht) 0.0015 0.0015 0.0015 0.0015

(c) Accounting for the effects of changes in foreign exchange rates

From 1 January 2013, the Company has adopted TAS 21 (revised 2009) Accounting for the effects of changes in foreign exchange rates. The principal change introduced by TAS 21 is the introduction of the concept of functional currency, which is defined as the currency of the primary economic environment in which the entity operates. TAS 21 requires the entity to determine its functional currency and translate foreign currency items into its functional currency, reporting the effects of such translation in accordance with the provisions of TAS 21. Foreign currencies are defined by TAS 21 as all currencies other than the entity’s functional currency. Management has determined that the functional currency of the Company is Thai Baht and that the adoption of TAS 21 from 1 January 2013 has not had a significant impact on the Company’s reported assets, liabilities or retained earnings.

(d) Presentation of information on operating segments

From 1 January 2013, the Company has adopted TFRS 8 Operating Segments. The new policy for presentation of information on operating segments, together with information on the previous policy, is given below. The change in policy only impacts presentational aspects and has no impact on the Company’s reported assets, liabilities, results or earnings per share. TFRS 8 introduces the “management approach” to segment reporting. It requires a change in the presentation and disclosure of segment information based on the internal reports regularly reviewed by the Company’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to those segments. Previously the Company presented segment information in respect of its business and geographical segments in accordance with TAS 14 Segment Reporting. The change in basis of presentation and disclosure of segment information has had no significant effect on the segment information reported in the Company’s financial statements.


21

4 Related parties

For the purposes of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control or joint control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Relationships with key management and other related parties were as follows:

Name of entities

Country of incorporation/ nationalities

Nature of relationships

POSCO South Korea Parent company, 84.93% shareholding NS - Thainox Auto Co., Ltd. Thailand Associate, 49% shareholding, and

common management Daewoo Corporation International

Co., Ltd. South Korea Related company with the parent company

POSCO Asia Co., Ltd. Hong Kong Related company with the parent company POSCO ICT Co., Ltd. South Korea Related company with the parent company POSCO Vietnam Co., Ltd. Vietnam Related company with the parent company POSCO (Thailand) Co., Ltd. Thailand Related company with the parent company Nippon Steel & Sumikin Stainless

Steel Corporation Japan Direct minority shareholders and direct

shareholders of the associated company Nippon Steel Trading Ltd. Japan Related company with related company Nippon Steel Trading (Thailand)

Co., Ltd. Thailand Related company with related company

Sumitomo Corporation (Japan) Japan Related company with related company Sumitomo Corporation Thailand

Company Limited Thailand Related company with related company

Siam Lotus Co., Ltd. Thailand Related company with related company and minority shareholders of the associated company

Advance Asia Strategy Co., Ltd. Thailand Related company by common director Key management personnel Thailand Persons having authority and

responsibility for planning directing and controlling the activities of the entity, directly or indirectly, including and director (whether executive or otherwise) of the Company.


22

The pricing policies for particular types of transactions are explained further below: Transactions Pricing policies Sale of goods Market price Sale of scrap Market price Purchase of raw materials Market price Purchase of property, plant and equipment Mutual agreed rate Sales commission Mutual agreed rate Communication expense Mutual agreed rate Technical assistance expense Mutual agreed rate Management remuneration Approve from resolution of the annual general

meeting of shareholders, mutual agreed fee Significant transactions for the three-month and six-month periods ended 30 June 2013 and 2012 with related parties were as follows: Financial statement in



Three-month period ended 30 June 2013 2012 2013 2012 (in thousand Baht) Parent Sale of goods 84,268 105,079 84,268 105,079 Purchase of raw materials 245,766 - 245,766 - Associate Sale of goods 154,370 216,769 154,370 216,769 Key management personnel Key management personnel compensation 16,459 22,309 16,459 22,309

Other related parties Sales of goods 303,786 333,345 303,786 333,345 Sales of scrap - 13,251 - 13,251 Purchase of raw materials 1,273,313 1,838,544 1,273,313 1,838,544 Communication expense 8,183 305 8,183 305 Technical assistance expense 532 225 532 225 Consulting expense 64 - 64 -


23



Six-month period ended 30 June 2013 2012 2013 2012 (in thousand Baht) Parent Sale of goods 178,193 243,578 178,193 243,578 Purchase of raw materials 290,644 - 290,644 - Associate Sale of goods 282,411 343,869 282,411 343,869 Key management personnel Key management personnel compensation 34,333 40,781 34,333 40,781 Other related parties Sales of goods 505,374 914,536 505,374 914,536 Sales of scrap 7,464 34,738 7,464 34,738 Purchase of raw materials 3,449,573 5,207,762 3,449,573 5,207,762 Purchase of equipment - 20,030 - 20,030 Sales commission - 24 - 24 Communication expense 11,333 638 11,333 638 Technical assistance expense 852 860 852 860 Consulting expense 64 - 64 - Balances as at 30 June 2013 and 31 December 2012 with related parties were as follows:

Financial statements in which the equity method is applied

Separate

financial statements 30 June

2013 31 December 2012 30 June

2013 31 December 2012

(in thousand Baht) Trade accounts receivable - related parties Parent 33,509 18,058 33,509 18,058 Associate 165,272 145,279 165,272 145,279 Other related parties 149,790 64,501 149,790 64,501 Total 348,571 227,838 348,571 227,838


24


Separate



2013 31 December 2012

(in thousand Baht) Trade accounts payable - related parties Parent 272,116 127,587 272,116 127,587 Other related parties 1,916,497 3,066,572 1,916,497 3,066,572 Total 2,188,613 3,194,159 2,188,613 3,194,159


Separate



2013 31 December 2012

(in thousand Baht) Other payables to related parties Other related parties 5,745 94,900 5,745 94,900 Total 5,745 94,900 5,745 94,900 Significant agreements with related parties as at 30 June 2013 were as follows: Supply and distribution agreement The Company entered into the supply and distribution agreement dated 24 January 2007 with POSCO (the parent company), with important conditions as follows: Hot-rolled coils - The Company agreed to purchase up to 80 percent of its total annual purchase volume of hot bands,

excluding 409 L products and 200 series provided the price of hot rolled coils is favorable to the Company.

- The agreement shall have an initial term of 3 years, and shall be automatically renewed for

successive 3 year terms unless otherwise terminated by either party. Cold-rolled coils - The parent company will act as the distribution agent for the Company’s cold-rolled products, the

volume of which shall be determined on the basis of 40% of the total volume of the hot bands purchased from the parent company by the Company.

- The distribution agreement, which will cover customers in any markets outside of Thailand, shall

have an initial term of 3 years and shall be automatically renewed for successive 3 years terms unless otherwise terminated by either party.

- The export price of the cold-rolled products - every month the Company will notify the minimum

export price by grade, thickness and country.


25

5 Trade accounts receivable


Separate


Note 30 June


2013 31 December 2012

(in thousand Baht) Related parties 4 348,571 227,838 348,571 227,838 Other parties 1,030,492 1,301,329 1,030,492 1,301,329 Total 1,379,063 1,529,167 1,379,063 1,529,167 Less allowance for doubtful accounts (3,811) (3,871) (3,811) (3,871) Net 1,375,252 1,525,296 1,375,252 1,525,296




2013 2012 2013 2012

(in thousand Baht) Reversal of allowance for doubtful accounts for the three-month period ended 30 June (31) (30) (31) (30) Reversal of allowance for doubtful accounts for the six-month period ended 30 June (60) (60) (60) (60)


26

Aging analyses for trade accounts receivable were as follows:


Separate



2013 31 December 2012

(in thousand Baht) Related parties Within credit terms 234,761 197,378 234,761 197,378 Overdue :

Less than 3 months 108,802 30,460 108,802 30,460 6-12 months 5,008 - 5,008 -

348,571 227,838 348,571 227,838 Other parties Within credit terms 926,868 1,024,828 926,868 1,024,828 Overdue:

Less than 3 months 97,313 268,172 97,313 268,172 3-6 months - 3,520 - 3,520 6-12 months 1,035 938 1,035 938 Over 12 months 5,276 3,871 5,276 3,871

1,030,492 1,301,329 1,030,492 1,301,329 Less allowance for doubtful accounts (3,811) (3,871) (3,811) (3,871) 1,026,681 1,297,458 1,026,681 1,297,458 Net

1,375,252

1,525,296

1,375,252

1,525,296

The normal credit terms granted by the Company ranges from 7 days to 90 days.

6 Investment in associate



Six-month period ended 30 June 2013 2012 2013 2012 (in thousand Baht) Associate At 1 January 10,013 17,824 4,900 4,900 Share of loss of associate (6,613) (1,717) - - At 30 June 3,400 16,107 4,900 4,900 At 31 December 10,013 4,900

POSCO-Thainox Public Company Limited Notes to the interim financial statements For the six-month period ended 30 June 2013 (Unaudited)

27

Investment in associate as at 30 June 2013 and 31 December 2012 and dividend income from the investment for the six-month periods ended 30 June 2013 and 2012 were as follows:

Financial statements in which the equity method is applied/Separate financial statements

Type of business

Country of incorporation

Ownership Interest Paid-up capital Cost Equity

Dividend income for the six-month period ended

30 June 2013

31 December 2012

30 June 2013

31 December 2012

30 June 2013

31 December 2012

30 June 2013

31 December 2012

30 June 2013

30 June 2012

(%) (in thousand Baht) Associate NS-Thainox Auto Steel Co., Ltd manufacturing Thailand 49 49 10,000 10,000 4,900 4,900 3,400 10,013 - - Total 4,900 4,900 3,400 10,013 - - None of the Company’s equity-accounted investee is publicly listed and consequently do not have published price quotation.


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7 Amortisation of the revaluation of property, plant and equipment

In October 2006, the FAP issued Notification No. 25/2549 allowing entities which carry their assets at revalued amounts to calculate depreciation to be charged to the income statements based on the historical cost of the assets instead of on the revalued amounts. TAS 16 (Revised 2009) Property, Plant and Equipment, states that depreciation shall be recognised within profit or loss. During 2011, the FAP issued a notification allowing entries to continue the existing method for another period of 5 years or less. The Company has decided to follow this notification. However, had the depreciation charge been calculated based on the revalued amounts, net income and earnings per share attributable to equity owners of the Company would have been affected as follows: Financial statement in



2013 2012 2013 2012

(in thousand Baht) Three-month period ended 30 June Increase in amortisation 51,533 51,533 51,533 51,533 Decrease in profit for the periods (51,533) (51,533) (51,533) (51,533) Decrease in basic earnings per share

(Baht per shares) (0.01) (0.01) (0.01) (0.01) Six-month period ended 30 June

Increase in amortisation 102,500 103,066 102,500 103,066 Decrease in profit for the periods (102,500) (103,066) (102,500) (103,066) Decrease in basic earnings per share

(Baht per shares) (0.01) (0.01) (0.01) (0.01) 8 Trade accounts payable and notes payable


Separate


Note 30 June


2013 31 December 2012

(in thousand Baht) Related parties 4 2,188,613 3,194,159 2,188,613 3,194,159 Other parties 379,183 714,103 379,183 714,103 Total 2,567,796 3,908,262 2,567,796 3,908,262


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9 Deferred tax

Movements in total deferred tax liabilities during the six-month periods ended 30 June 2013 and 2012 were as follows:

Financial statement in which the equity method is applied (Charged)/ Credited to:

At 1 January 2013 Profit or loss

Other comprehensive

income At 30 June

2013 (in thousand Baht) Deferred tax liabilities Property, plant and equipment Revaluation 326,960 - (20,500) 306,460 Difference in useful life 72,224 11,453 - 83,677 Other long-term investments

Change in fair value 7,303 - 3,652 10,955 Total 406,487 11,453 (16,848) 401,092

Financial statement in which the equity method is applied (Charged)/ Credited to:


Other comprehensive

income At 30 June


Change in fair value - - 4,382 4,382 Total 417,217 11,964 (16,231) 412,950

Separate financial statements (Charged)/ Credited to:


Other comprehensive

income At 30 June


Change in fair value 7,303 - 3,652 10,955 Total 406,487 11,453 (16,848) 401,092


30

Separate financial statements (Charged)/ Credited to:


Other comprehensive

income At 30 June


Change in fair value - - 4,382 4,382 Total 417,217 11,964 (16,231) 412,950 Deferred tax assets arising from temporary differences and unused tax losses that have not been recognised in the financial statements were as follows:



30 June 2013 31 December

2012 30 June 2013 31 December

2012 (in thousand Baht) Accounts receivable 762 774 762 774 Inventories 22,471 4,452 22,471 4,452 Property plant and equipment 20,220 48,408 20,220 48,408 Intangible assets 7,028 9,428 7,028 9,428 Employee benefit obligations 16,957 16,248 16,957 16,248 Tax losses 445,014 415,902 445,014 415,902 Total 512,452 495,212 512,452 495,212

The tax losses expire in 2014 to 2016. The deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit against which the Company can utilise the benefits therefrom.

10 Employee benefit obligations



Separate


30 June


2013 31 December 2012

(in thousand Baht) Statement of financial position obligations for: Post-employment benefits 65,589 63,075 65,589 63,075 Other long-term employee benefits 19,195 18,166 19,195 18,166 Total 84,784 81,241 84,784 81,241


31


Separate

financial statements Three-month period ended 30 June 2013 2012 2013 2012 (in thousand Baht)

Statement of comprehensive income: Recognised in profit or loss:

Post-employment benefits 1,258 1,501 1,258 1,501 Other long-term employee benefits 523 502 523 502 1,781 2,003 1,781 2,003


Separate

financial statements Six-month period ended 30 June 2013 2012 2013 2012 (in thousand Baht)

Statement of comprehensive income: Recognised in profit or loss:

Post-employment benefits 2,515 3,001 2,515 3,001 Other long-term employee benefits 1,028 1,005 1,028 1,005 3,543 4,006 3,543 4,006

An unfunded plan based on Thai labour law

The Company operate defined benefit plans based on the requirement of Thai Labour Protection Act B.E. 2541 (1998) to provide retirement benefits to employees based on pensionable remuneration and length of service. The statement of financial position obligation was determined as follows: Financial statements in


Separate



2013 31 December 2012

(in thousand Baht) Present value of unfunded obligations 84,784 81,241 84,784 81,241 Statement of financial position obligation 84,784 81,241 84,784 81,241 Movement in the present value of the defined benefit obligations: Financial statements in


Separate

financial statements Six-month period ended 30 June 2013 2012 2013 2012 (in thousand Baht) Defined benefit obligations at 1 January 81,241 74,351 81,241 74,351 Current service costs and interest 3,543 4,006 3,543 4,006 Defined benefit obligations at 30 June 84,784 78,357 84,784 78,357


32

Expense recognised in profit or loss: Financial statements in


Separate

financial statements Three-month period ended 30 June 2013 2012 2013 2012

(in thousand Baht)

Current service costs 746 1,375 746 1,375 Interest on obligation 1,035 628 1,035 628 Total 1,781 2,003 1,781 2,003 Financial statements in


Separate

financial statements Six-month period ended 30 June 2013 2012 2013 2012

(in thousand Baht)

Current service costs 2,345 2,750 2,345 2,750 Interest on obligation 1,198 1,256 1,198 1,256 Total 3,543 4,006 3,543 4,006 The expense is recognised in the following line items in the statement of comprehensive income: Financial statement in


Separate

financial statements Three-month period ended 30 June 2013 2012 2013 2012 (in thousand Baht) Cost of sales 1,088 892 1,088 892 Administrative expenses 693 1,111 693 1,111 Total 1,781 2,003 1,781 2,003



Separate

financial statements Six-month period ended 30 June 2013 2012 2013 2012 (in thousand Baht)

Cost of sales 2,164 1,785 2,164 1,785 Administrative expenses 1,379 2,221 1,379 2,221 Total 3,543 4,006 3,543 4,006


33

Principal actuarial assumptions at the reporting date (expressed as weighted averages): Financial statements in


Separate



2013 31 December 2012

% Discount rate 4 4 4 4 Future salary increases 5 5 5 5 Assumptions regarding future mortality are based on published statistics and mortality tables.

11 Segment information

Segment information is based on the Company’s management and internal financial reporting structure which is regularly reviewed by the Company’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to those segments.




Three-month period ended 30 June 2013 2012 2013 2012 (Restated) (Restated) (in thousand Baht) Segment revenue Local 1,496,377 2,257,962 1,496,377 2,257,962 Export 682,271 1,029,744 682,271 1,029,744 Total 2,178,648 3,287,706 2,178,648 3,287,706 Segment results Local 21,739 114,182 21,739 114,182 Export (35,941) 224,072 (35,941) 224,072 Total (14,202) 338,254 (14,202) 338,254 Financial statement in



Six-month period ended 30 June 2013 2012 2013 2012 (Restated) (Restated) (in thousand Baht) Segment revenue Local 3,406,620 4,244,375 3,406,620 4,244,375 Export 1,229,240 2,561,656 1,229,240 2,561,656 Total 4,635,860 6,806,031 4,635,860 6,806,031 Segment results Local 145,803 68,909 145,803 68,909 Export (91,692) 51,662 (91,692) 51,662 Total 54,111 120,571 54,111 120,571

Management considers that the Company operates in a single line of business, namely the stainless steel in both local and export markets, and has, therefore, only one major business segment.


34

12 Basic earnings (loss) per share

The calculations of basic earnings (loss) per share for the three-month and six-month periods ended 30 June 2013 and 2012 were based on the profit (loss) for the periods attributable to ordinary shareholders of the Company and the number of ordinary shares outstanding during the periods as follows:


Separate

financial statements Three-month period ended 30 June 2013 2012 2013 2012

(Restated) (Restated) (in thousand Baht/thousand shares) Profit (loss) for the period attributable to

equity holders of the Company (258,245) 242,797 (255,934) 244,162 Number of ordinary shares outstanding 7,795,709 7,795,709 7,795,709 7,795,709 Basic earnings (loss) per share (in Baht) (0.033) 0.031 (0.033) 0.031


Separate

financial statements Six-month period ended 30 June 2013 2012 2013 2012

(Restated) (Restated) (in thousand Baht/thousand shares) Loss for the period attributable to equity

holders of the Company (121,011) (15,993) (114,398) (14,276) Number of ordinary shares outstanding 7,795,709 7,795,709 7,795,709 7,795,709 Basic loss per share (in Baht) (0.016) (0.002) (0.015) (0.002)

13 Commitments with non-related parties


Separate



2013 31 December 2012

(in thousand Baht) Capital commitments Contracted but not provided for: Buildings 18,700 18,700 18,700 18,700 Total 18,700 18,700 18,700 18,700

Non-cancellable operating lease commitments Within one year 4,797 8,796 4,797 8,796 After one year but within five years 1,123 494 1,123 494 Total 5,920 9,290 5,920 9,290 The Company had lease agreements with non-related parties covering office premises including facilities for periods of 3 years which will expire in 2014.


35

Financial statements in which the equity

method is applied

Separate



2013 31 December 2012

(in thousand Baht) Other commitments Bank guarantees 1,670 1,670 1,670 1,670 Purchase orders for goods and supplies

- THB 152,453 61,654 152,453 61,654 - USD 441,588 1,853 441,588 1,853 - EUR 43,016 4,430 43,016 4,430

Total 637,057 67,937 637,057 67,937 The Company had unused letters of credit for goods and supplies in USD as at 30 June 2013 of Baht 1,443 million. (31 December 2012: Baht 1,175 million) Significant agreements Reinstated agency agreement The Company had entered into an agreement with Arcelor Stainless International, a company incorporated under the laws of France, whereby the latter will provide exclusive representation to promote the sales of the Company’s products all over the world, excluding Japan and Thailand. In consideration thereof, the Company commits to pay commission at the rates specified in the agreement based on the free on board (FOB) value of the products. The agreement was effective on 19 March 2004 for an indefinite period of time. Either party may terminate the agreement at any time by giving a 1 year written advance notice to the other party. The Company is negotiating and finalizing the revised terms for a non-exclusive contract which is already being applied with mutual consent.

14 Events after the reporting period

At the Board of Directors meeting of the Company held on 8 August 2013, the Board of Directors approved to guarantee loans of other companies in the POSCO Group at the maximum amount of Baht 100 million.


36

15 Thai Financial Reporting Standards not yet adopted

The Company has not adopted the new interpretations that have been issued as of the reporting date but are not yet effective. Those new interpretations that are applicable to the Company, which become effective for annual financial periods beginning on or after 1 January 2014, are as follows:

TFRS Topic TFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities TFRIC 4 Determining whether an Arrangement contains a Lease TFRIC 5 Rights to Interests arising from Decommissioning, Restoration and

Environmental Rehabilitation Funds TFRIC 10 Interim Financial Reporting and Impairment

Management expects to adopt and apply these new interpretations in accordance with the FAP’s announcement and has made a preliminary assessment of the potential initial impact on the Company’s financial statements of these new interpretations and expects that there will be no material impact on the financial statements in the period of initial application.

Documents

POSCO-Thainox Public Company Limitedinox.listedcompany.com/misc/financials/20130809... · POSCO-Thainox Public Company Limited Interim financial statements for the three-month and