CONSOLIDATED F/S Q2/1998

FINANCIAL STATEMENTS AND ACCOUNTANTS' REVIEW REPORT SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES SECOND QUARTER ENDED JUNE 30, 1998 AND 1997 Accountants Review Report To the Shareholders of Sino-Thai Engineering and Construction Public Company Limited: We have made a review of the consolidated balance sheets of Sino- Thai Engineering and Construction Public Company Limited and subsidiaries as at June 30, 1998 and 1997, and the related consolidated statements of income, changes in shareholders equity (deficit) and retained earnings (deficit) for the three-month periods and six-month periods then ended, and consolidated statements of cash flow for the three-month period and six-month period ended June 30, 1998, and the separate financial statements of Sino-Thai Engineering and Construction Public Company Limited for the same periods, in accordance with standards established by The Institute of Certified Accountants and Auditors of Thailand. A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical review procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an examination in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. The financial statements of Sino-Thai Construction Services Company Limited and Sino-Thai Resources Development Public Company Limited and Siam Dimension Stone Company Limited which are included in the consolidated financial statements for the three-month periods and six- month periods ended June 30, 1998 and 1997, of which the assets amounting to 13.72% and 13.78% of total assets respectively and revenues amounting to 4.65% and 10.59% of total revenues respectively had not been audited or reviewed by the auditors in accordance with standards established by The Institute of Certified Accountants and Auditors of Thailand. As described in Note 5 to the consolidated financial statements, the Company record investments in associated companies from the cost method to the equity method. The Companys share of profit (loss) from its investments in associated companies for the three-month periods and six- month periods ended June 30, 1998 and 1997 amounting to approximately Baht (5.86) million and Baht 8.13 million Baht (0.41) million and Baht 9.81 million respectively are based on the financial information obtained from the management of the associated companies, and in the separate financial statements the Company record investments in subsidiaries and associated companies from the cost method to the equity method. The Companys share of profit (loss) from its investments in subsidiaries and associated companies for the three-month periods and six-month periods ended June 30, 1998 and 1997 amounting to approximately Baht (10.58) million and Baht 36.39 million Baht (12.74) million and Baht 21.69 million respectively are based on the financial information obtained from the management of the subsidiaries and associated companies. As described in Note 1 to the financial statements, as at June 30, 1998, the Company s current liabilities exceeded current assets by approximately Baht 335.27 million. The company has default the loan contract due to the unability to maintain the financial ratio. Accordingly, the lender may has a right to call in debts immediately. At present, the Company is negotiating the restructure of its loans. The operations of the Company have been affected and will continue to be affected for the foreseeable future by the economic conditions in Thailand and the Asia Pacific Region in general. The ultimate effect that these uncertainties will have on stated values or reclassification of assets and liabilities at the balance sheet date cannot presently be determined. As described in Note 1 to the financial statements, the Company is undertaking negotiations with the lender to restructure the foreign currency long-term loan including the need to maintain the financial ratio. The lender has the right to call in debts immediately and, in accordance with generally accepted accounting principles, long-term loans amounting to approximately Baht 3,407.18 million should be reclassified to current liabilities in the balance sheet. As described in Note 7 to the financial statements, as at June 30, 1998, the Company has overdue accounts receivable amounting to approximately Baht 80.72 million. The Company has not set up provision for such accounts receivable. As described in Note 4 to the financial statements, in 1997 the Company did not record unrealized holding loss on non-current marketable securities which resulted in overstatement of total assets and shareholders equity in the amount of Baht 202.16 million each. As at June 30, 1997, total accumulated actual cost of part of the Companys construction contracts of which the budget costs amounted to Baht 564 million, exceed their budgeted costs and the Company cannot update its budgeted costs due to the additional construction works required and the final contracts price is under negotiation. Accordingly, we are unable to review such account. Except for the effects on the financial statements for 1998 and 1997 which might have been determined to be necessary as described in the third and fourth paragraphs and subject to the effects of any adjustments on the financial statements for 1998 which might have been determined to be necessary as described in the fifth paragraph and except for the effects on the financial statements for 1998 as described in the sixth and seventh paragraphs and except for the effects on the financial statements for 1997 as described in the eighth and ninth paragraphs ,we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. Nirand Lilamethwat Certified Public Accountant Peat Marwick Suthee Limited Bangkok, August 10, 1998 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT JUNE 30, 1998 AND 1997 (UNAUDITED) (Amounts in thousand Baht) CONSOLIDATED THE COMPANY ONLY ASSETS 1998 1997 1998 1997 CURRENT ASSETS Cash in hand and at banks (Note 6) 335,751 740,614 309,419 736,528 Short-term investment Notes receivable - financial institutes 41,621 435,000 - 400,000 Investment in listed securities 140,791 103,500 140,687 102,856 Accounts receivable - net (Note 7) 1,723,613 2,001,298 1,645,658 1,818,285 Due from related companies - net (Note 4) 132,610 80,065 119,425 79,814 Retentions receivable - net 214,030 265,899 210,167 262,506 Inventories 323,859 361,446 - - Construction contracts in progress - 289,433 - 289,433 Other current assets Advances to suppliers 58,465 31,210 58,465 31,210 Withholding corporate tax 70,811 73,802 70,811 73,802 Others 93,571 71,485 55,334 44,784 Total Current Assets 3,135,122 4,453,752 2,609,966 3,839,218 INVESTMENTS AND LOANS (Note 4) Related companies 521,681 500,523 814,756 883,085 Other companies 759,130 639,498 724,930 554,255 EXCESS OF COST OVER BOOK VALUE OF INVESTMENT (Note 2) 78,087 88,726 - - PROPERTY, PLANT AND EQUIPMENT - NET 1,846,443 1,848,260 1,479,511 1,476,750 OTHER ASSETS Loans and advances to directors and employees 26,300 33,963 17,795 28,364 Condominiums 110,746 150,631 110,746 150,631 Advance payments on condominiums 26,750 53,945 26,750 53,945 Withholding corporate tax 283,759 142,985 283,759 142,985 Others 49,089 117,124 40,023 52,180 Total Assets 6,837,107 8,029,407 6,108,236 7,181,413 _____________________ _____________________ Director Director See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT JUNE 30, 1998 AND 1997 (UNAUDITED) (Amounts in thousand Baht) CONSOLIDATED THE COMPANY ONLY LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) 1998 1997 1998 1997 CURRENT LIABILITIES Bank overdrafts and loans from financial institutes (Note 6) 1,171,498 1,132,436 969,631 962,313 Accounts payable 1,270,918 1,118,953 1,142,048 1,049,508 Due to related companies (Note 4) 15,445 22,040 22,543 21,799 Current portion of long-term loans (Note 8) 24,500 - - - Advance received on contracts 414,320 472,488 336,783 227,197 Other current liabilities Accrued expenses 58,631 37,847 58,631 37,847 Deferred value added tax 75,780 70,590 75,780 70,590 Provision for contingent cost 74,259 - 74,259 - Others 65,895 109,022 50,098 91,697 Total Current Liabilities 3,171,246 2,963,376 2,729,773 2,460,951 LONG-TERM LOANS (Note 8) 3,742,625 2,260,277 3,620,125 2,210,277 OTHER LIABILITIES Hire purchase creditors 76,073 99,421 76,073 99,421 Others 8,730 3,662 17,536 3,322 Total Liabilities 6,998,674 5,326,736 6,443,507 4,773,971 EXCESS OF BOOK VALUE OVER COST OF INVESTMENT (Note 2) 50,054 56,937 50,054 56,937 MINORITY INTERESTS 80,258 200,620 - - SHAREHOLDERS' EQUITY (DEFICIT) Share capital, Baht 10 par value Authorized shares capital Preference shares 7,000,000 shares 70,000 70,000 70,000 70,000 Ordinary shares 68,000,000 shares 680,000 680,000 680,000 680,000 Issued and fully paid Preference shares 7,000,000 shares 70,000 70,000 70,000 70,000 Ordinary shares 23,000,000 shares 230,000 230,000 230,000 230,000 Paid-in capital Premium on share capital 486,000 486,000 486,000 486,000 Surplus on revaluation - Parent company 834,565 834,565 834,565 834,565 - Subsidiaries 94,609 94,609 - - Retained earnings (Deficit) Appropriated - legal reserve 56,163 56,163 48,565 48,565 Unappropriated (1,915,568) 673,777 (1,907,970) 681,375 Loss on non-current marketable securities (147,648) - (146,485) - Total Shareholders' Equity (Deficit) (291,879) 2,445,114 (385,325) 2,350,505 Total Liabilities and Shareholders' Equity (Deficit) 6,837,107 8,029,407 6,108,236 7,181,413 _____________________ _____________________ Director Director See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) (Amounts in thousand Baht CONSOLIDATED THE COMPANY ONLY except earnings (loss) per share) 1998 1997 1998 1997 REVENUES Revenues from construction and sales 1,360,529 1,545,212 1,321,695 1,431,336 Other income Company's share of profit (loss) from its investments in subsidiaries and associated companies (5,863) (410) (10,584) (12,743) Gain (loss) on exchange rate (314,801) (10,519) (313,008) (10,519) Others 71,266 32,373 86,543 20,550 Total Revenues 1,111,131 1,566,656 1,084,646 1,428,624 EXPENSES Costs of construction and cost of sales 1,334,682 1,282,882 1,309,638 1,179,587 Selling and administrative expenses 110,246 130,527 116,461 96,194 Directors' remuneration 150 195 130 110 Interest expense 111,964 75,322 103,773 68,105 Total Expenses 1,557,042 1,488,926 1,530,002 1,343,996 Net income (loss) before minority interests and income tax (445,911) 77,730 (445,356) 84,628 Minority interests in subsidiaries' net (income) loss 555 4,574 - - Net income (loss) before income tax (445,356) 82,304 (445,356) 84,628 Income tax - 2,324 - - Net income (loss) (445,356) 84,628 (445,356) 84,628 Earnings (loss) per share (Baht) (14.85) 2.82 (14.85) 2.82 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) (Amounts in thousand Baht CONSOLIDATED THE COMPANY ONLY except earnings per share) 1998 1997 1998 1997 REVENUES Revenues from construction and sales 2,544,193 3,173,954 2,454,405 2,907,159 Other income Company's share of profit (loss) from its investments in subsidiaries and associated companies 8,132 9,816 36,390 21,691 Gain (loss) on exchange rate 482,892 (23,857) 446,949 (23,856) Others 121,667 122,345 104,138 46,597 Total Revenues 3,156,884 3,282,258 3,041,882 2,951,591 EXPENSES Costs of construction and cost of sales 2,416,436 2,663,121 2,347,408 2,433,174 Selling and administrative expenses 178,625 247,448 151,413 188,882 Directors' remuneration 320 2,305 240 2,220 Interest expense 212,060 165,422 193,461 152,336 Total Expenses 2,807,441 3,078,296 2,692,522 2,776,612 Net income before minority interests and income tax 349,443 203,962 349,360 174,979 Minority interests in subsidiaries' net (income) loss (83) (28,983) - - Net income before income tax 349,360 174,979 349,360 174,979 Income tax - - - - Net income 349,360 174,979 349,360 174,979 Earnings per share (Baht) 11.65 5.83 11.65 5.83 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) (Amounts in thousand Baht) CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Share capital Preference shares Beginning balance 70,000 70,000 70,000 70,000 Increase during period - - - - Decrease during period - - - - Ending balance 70,000 70,000 70,000 70,000 Ordinary shares Beginning balance 230,000 230,000 230,000 230,000 Increase during period - - - - Decrease during period - - - - Ending balance 230,000 230,000 230,000 230,000 Paid-in capital Premium on ordinary share Beginning balance 486,000 486,000 486,000 486,000 Increase during period - - - - Decrease during period - - - - Ending balance 486,000 486,000 486,000 486,000 Surplus on revaluation Beginning balance 929,174 929,174 834,565 834,565 Increase during period - - - - Decrease during period - - - - Ending balance 929,174 929,174 834,565 834,565 Retained earnings Appropriated - legal reserve Beginning balance 56,163 56,163 48,565 48,565 Increase during period - - - - Decrease during period - - - - Ending balance 56,163 56,163 48,565 48,565 Unappropriated Beginning balance (1,470,212) 589,149 (1,462,614) 596,747 Increase during period - 84,628 - 84,628 Decrease during period (445,356) - (445,356) - Ending balance (1,915,568) 673,777 (1,907,970) 681,375 Loss on non-current marketable securities Beginning balance (115,946) - (114,783) - Increase during period - - - - Decrease during period (31,702) - (31,702) - Ending balance (147,648) - (146,485) - Total Shareholders' Equity (Deficit) (291,879) 2,445,114 (385,325) 2,350,505 See notes to financial statements (More)