Halcyon Technology : Management Discussion and Analysis Q2 Ending 30 Jun 2022 (6M)

บริษัท แฮลเซี่ยนเทคโนโลยี่จ ำกัด(มหำชน)

HALCYON TECHNOLOGY PUBLIC CO., LTD.

41 Moo 14 Bangchan Industrial Estate Soi 6, Serithai Road, Minburi, Bangkok 10510 Tel. [phone]e-mail: [e-mail]

No. CS-2565/008

15 August 2022

Subject: Management Discussion and Analysis for the Six-Month Period Ended 30 June 2022

To:	Directors and Managers
	The Stock Exchange of Thailand

Halcyon Technology PLC. ("the Company") and its subsidiaries had the operation results for the 6-month period ended 30 June 2022 with the following details:

unit: THB million	2022	2021	Change	Change
(THB mill.)	(%)
Revenue from Sales and Service	606.66	535.89	70.77	13.21%
Total Revenue	614.70	552.09	62.62	11.34%
Net Profit for the Year	85.11	87.72	-2.61	-2.97%
Net Profit for Shareholders of the Company	71.21	76.25	-5.04	-6.61%

Operating results for each business segment are shown below:

1. Manufacturing and Selling of Special Cutting Tools

unit: THB million	2022	2021		Change	Change
	(THB million)	(%)
Revenue from External Customers	319.25	298.44		20.81	6.97%
Net Profit for the Period	47.86	41.44		-1.11	-1.77%
2. Importing and Selling of Cutting Tools
unit: THB million	2022	2021		Change	Change
	(THB million)	(%)
Revenue from External Customers	261.87	219.16		42.71	19.49%
Net Profit for the Period	22.44	20.40		2.04	9.99%
3. Manufacturing and Selling of Tooling and Metal Fabrication
unit: THB million	2022	2021		Change	Change
	(THB million)	(%)
Revenue from External Customers	25.54	18.28		7.26	39.70%
Net Profit for the Period	0.93	4.47		-3.53	-79.08%

For the 6-month period ended 30 June 2022 (Q2/2022), the Company and its subsidiaries had a total revenue of 614.70 million baht, increasing 62.62 million baht, or 11.34% from the same period in 2021. Revenue from sales and service was 606.66 million baht, increasing 70.77 million baht, or 13.21% from the same period in 2021.

The Manufacturing and Selling of Special Cutting Tools segment had revenue from external customers of 319.25 million baht in six months of Q2/2022, increasing 20.81 million baht, or 6.97%, from the previous year. This segment includes sales from manufacturing companies of the Company, Halcyon Technology PLC. (mother company); the subsidiary in Vietnam, Halcyon Technology Vietnam

Co., Ltd. or "HV"; and the subsidiary in the US, Mastertech Diamond Products Company or "MDP". The revenue growth in this segment came from the revenue of subsidiaries MDP and HV, which had sales revenue increasing 35.96% and 36.34% from the previous year, respectively. Both of these manufacturing plants are in the process of continuous expansion of its production capacity in the past year. Meanwhile, the sales revenue from the mother company decreased 4.90% due to less production of target customers in the country. However, overall this segment had a drop in net profit from the same period last year due to MDP having a one-time income in Q1/2021 from US government support for the relief of the effects of COVID-19 of 8.55 million baht, which caused the net profit in the previous year to be higher than usual. If not including the mentioned one-time expense. the net profit for this segment would increase approximately 13.70% from the previous year.

The Importing and Selling of Cutting Tools segment had revenue from external customer of

261.87 million baht in six months of Q2/2022, increasing 42.71 million baht, or 19.49%, from the previous year. Revenue in this segment includes sales from 7 trading subsidiaries in Thailand and overseas, which had continuous growth due to the general recovery from the effects of COVID-19 in many countries.

The Manufacturing and Selling of Toolings and Metal Fabrications segment, which is solely from Halcyon Metal Co., Ltd. or "HM", had a revenue to external customers of 25.54 million baht in six months of Q2/2022, increasing 7.26 million baht, or 39.70% from the previous year. This segment has its main customer in the aerospace sector in the US, which was heavily affected by the COVID-19 pandemic. However, the company had continuously been recovering since early 2021, resulting in an increase in revenue in the past year. In 2022, this segment also had increased production costs resulting in decreased net profit from previous year. This is due to the increase of production and outsourcing volume after the reduction of working hours since 2020 and returning to normal capacity since Q2/2021 onwards. HM also received some employee transfers from the Company to support parts production and reduce costs for the Company.

Overall, in the six months of Q2/2022, the Company and its subsidiaries had a net profit of

85.11 million baht and net profit for the shareholders of the Company of 71.21 million baht. Net profit margins were 13.85% and 11.59% of the total revenue, respectively (compared to 15.89% and

13.81% in the previous year). Net profit margins for each business segment are shown below:

Net Profit Margin (to Total Revenue)	2021	2020
(adj.)
Manufacturing and Selling of Special Cutting Tools Segment	19.01%	20.15%
Importing and Selling of Cutting Tools Segment	8.51%	9.20%
Manufacturing and Selling of Tooling and Metal Fabrications Segment	3.57%	24.20%
Total	13.85%	15.89%

In Q2/2022, the Company and subsidiaries in the Special Cutting Tools segment has shown a decline in net profit margin from 20.15% to 19.01% of the total revenue. However, if the special onetime income of 8.55 million baht from government support was removed, the net profit margin for this segment had improved from the previous year due to the expansion of production capacity in the subsidiaries MDP and HV.

The Importing and Selling of Cutting Tools segment had a decrease in the net profit margin from 9.20% to 8.51% of the total revenue in Q2/2022. This is mainly due to the increase in tax expenses recoded of 2.71 million baht resulting from the increased revenue, while the gross profit margin remained similar to the previous year and there was no other significant increase in expense.

The Tooling and Metal Fabrications segment had a significant decreased in the net profit margin from 24.20% to 3.57% of the total revenue in Q2/2022. This is mainly due to the increased production costs from increasing working hours back to normal capacity, the increase outsourcing costs, as well as the transfer of employees from the Company as mentioned.

For 2022, the Company still maintains a target for revenue growth at approximately 10% from the previous year, by focusing on the growth from overseas subsidiaries, especially manufacturing companies in the US and Vietnam (MDP and HV), which are in the process of expanding their production capacities continuously from last year. Currently, MDP faces transportation delays for some equipment to be used in the new factory, resulting in the moving schedule to be postponed to the end of the year, while previously the Company expected the construction to be finished and be able to move in to the new factory by Q3/2022. However, overall, the Company expects to see a growth trend after the COVID-19 situation is starting to resolve, resulting in improving economy in the target countries of its customers both in Thailand and overseas.

Please be informed accordingly.

Sincerely Yours,

Mr. Soraj Sutanadhan

CEO