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Message from the Board of Directors

2016 was the year that all Thais suffered the greatest loss after the announcement of the passing of H.M. King Bhumibol Adulyadej which came in a statement from the Bureau of The Royal Household on October 13, 2016. With eternal respect and gratitude for H.M. King Bhumibol Adulyadej's dedication and kindness to Thai people, SCG pledges to follow the Royal Footsteps in sustaining the development of our business for many years to come.

The Board of Directors, the Management, and SCG staff humbly offer our utmost respect and best wishes to His Majesty King Maha Vajiralongkorn Bodindradebayavarangkun. Long live His Majesty the King.

2016 marked the year of change for the global economy, triggered by a slew of significant political events and economic factors. Chief among them include Britain's vote to leave the European Union (Brexit), the presidential election results in the U.S., the Philippines and Myanmar, coupled with China's structural economic reform and fluctuating energy, coal and oil prices. Despite the continued change, ASEAN Economic Community (AEC) maintained their steady growth pace, propelled by government infrastructure investment as well as domestic consumption and trade between ASEAN nations.

In Thailand, the draft constitution was approved after the referendum vote in 2016, making the country's political roadmap and timeframe become clearer. As for the economic aspect, numerous economic and industrial reforms have been announced, contributing to enhanced competitiveness and future economic growth of the country.

SCG remained strategically focused on expanding its investment in ASEAN and continuously developing high value-added products and services (HVA) to address the needs of customers while embracing digital technology to streamline business efficiency and operations in order to enhance its business competitiveness and tackle social and economic challenges.

For 2016, SCG reported revenue from sales of 423,442 Million Baht, declining by 4% from the preceding year due largely to lower product prices. Nevertheless, profit for the year increased to 56,084 Million Baht, a sharp rise of 24% year-on-year in the time of upswing in the petrochemical industry and low energy costs, resulting in a higher profit margin. Having taken into the account of the Company's performance, its overall financial status, and global economic conditions, the Board of Directors has resolved to propose to the 2017 Annual General Meeting of Shareholders a dividend of 19.00 Baht per share for 2016, representing 41% of consolidated profit for the year. The full year dividends was divided into an interim dividend of 8.50 Baht per share and a final dividend of 10.50 Baht per share.

  Commitment to Growing Firmly alongside ASEAN  
 
     

SCG has continued to expand its investment in ASEAN in pursuit of becoming the region's sustainable business leader. Major investment projects include cement plants in Myanmar, integrated greenfield cement plant in the Lao People's Democratic Republic, the capacity expansion project at the kraft paper facilities in Vietnam, and debottleneck project at Chandra Asri petrochemical facilities in Indonesia.

While incorporating sustainable development in its business investment and expansion, SCG also places high importance on the concern for society, and the environment and is determined to uplift the quality of life for the community where it operates. Examples are the SCG Sharing the Dream project that provides scholarships to students in Vietnam, Myanmar, Lao PDR, Cambodia, Indonesia, and the Philippines, and the SCG Sharing a Brighter Vision project in Myanmar that offers free cataract surgery to local community.

The consolidated 2016 revenue from sales of SCG's ASEAN production facilities and Thai exports to ASEAN countries amounted to 97,669 Million Baht, (representing 23% of SCG's total revenue from sales), 2% decrease y-o-y as a result of the strong competition and decreased product prices. As of 31 December 2016, SCG's total assets in ASEAN, excluding Thailand, stands at 126,055 Million Baht or 23% of the company's total assets. The number of employees, excluding Thailand, stands at 17,225 or 32% of the total workforce.

 
     

  Achieving Sustainable Progress through Innovation  
 
     

The key contributing factor for SCG's enhanced competitiveness is an ongoing investment in research and development which has brought many competitive advantages. In 2016, sales of HVA totalling to 160,910 Million Baht, accounting for 38% of total revenue from sales, whereas sales of eco value products amounted to 170,501 Million Baht, representing 40% of total revenue from sales. In 2016, the company earmarked over 4,350 Million Baht budget for R&D, representing 1% of total revenue from sales. Currently, SCG's R&D team consists of 1,823 members, 108 of whom hold a doctoral degree.

In 2016, SCG's R&D efforts have driven a flurry of innovations that provide solutions to market demands. Chief among them are as follows:

SCG managed to build temporary public toilets around Sanam Luang to facilitate the needs of large crowds of mourners from across the country, coming to pay homage to His Majesty King Bhumibol Adulyadej at The Grand Palace, in only three days, employing innovative construction modules such as SCG Heim modular system and Smartboard ceiling & wall systems.

CIERRATM, the world's new functional material, was developed in collaboration with Oxford University. As a high performance material platform, CIERRATM is used in a wide array of HVA products. Initial applications include flame retardant polymers, barrier packaging and antimicrobial additives for consumer products.

As a total packaging solutions provider, SCG has developed a variety of excellent quality packaging products and services such as flexible packaging, an innovative packaging solution for food and consumer products that has seen a fast-growing demand, and "Fest", food safety packaging produced from clean and safe food grade paper. Added to this is the pop-up corrugated point of purchase display, using corrugated paper as the main material. Easy to assemble, the product allows for various shelf designs that can be reused. It also significantly saves storage space.

 
     

  Following the Royal Footsteps with Regard to "the principles of Sufficiciency Economy" and "Sustainable Water Management"  
 
     

To ensure sustainable business growth, SCG has long adopted the principles of Sufficiency Economy in its business operations, enabling the company to weather the economic crisis, grow steadily, and become a role model for other companies. SCG's commitment also extends to various water management efforts. Central to these are the organization of Thailand Sustainable Water Management Forum 2016 that engaged all sectors to help define approaches to sustainable water management. The SCG Conserving Water for Tomorrow project in which SCG has joined forces with the communities to construct over 70,000 check dams across Thailand according to the Royal Initiatives. The establishment of "Satanee Rak Nam"- a Community Learning Center that serves as a resource for learning about sustainability and "Sra Puang" - connected small and medium water reservoirs.

 
     

SCG is determined to conduct its business with adherence to the code of conduct, upholding the principles of good corporate governance to ensure development and providing sustainable future for all. We are also committed to business practices in accordance with the principles of Sufficiency Economy in order to achieve sustainable growth and contribute to the prosperity of ASEAN along with realizing SCG's Vision of becoming the region's sustainable business leader.

   
Chirayu Isarangkun Na Ayuthaya
Chairman
 
Roongrote Rangsiyopash
President & CEO