Tata Steel Thailand Public : Questions to the Company during 15 June - 15 July 2022

ANNUAL GENERAL MEETING OF SHAREHOLDERS NO. 21

Questions to the Company

during June 15 - July 15, 2022

Question 1

According to the Russian-Ukrainian conflict, how is it expected to impact the cost, selling price and spread of the products? How is it expected to impact the revenue for sales both government projects, major private projects and retail? How does the Company have a mitigation plan to solve these situations in term of inventory planning, marketing?

Answer 1

Your company had no transactions with Ukraine and Russian companies. So there is no direct impact on the Company from the war. From start of the war and related actions like sanctions on Russia, oil, natural gas and commodity prices around the world have shot up. This has adversely impacted the energy cost which in turn affects manufacturing and transportation cost. Your Company is able to recover a significant part of that from the Customers thereby maintaining spread so far. At the same time, we have initiated many projects to control rising costs.

Rising inflation, increase in interest rates and geo-political issues pose headwinds in near future. Your company is focused on running a tight operations, with low inventory, maintaining close relationship with Customers and taking timely decisions in this uncertain environment. The cash situation remains healthy supported by adequate credit lines from financial institutions. We are trying to increase export volume to take advantage of weak Thai Baht.

Question 2

I would like the Managements to explain more regarding the auditor has recorded an opinion in the latest financial statements that the auditor may have conflicting opinions with Management's opinions on the details of the numbers in the financial statements causing the auditors to be concerned in examining such information or facts.

Answer 2

The auditor's opinion on page 155 of the Integrated Annual Report states that "my opinion on the consolidated and separate financial statements does not cover the other information and I will not express any form of assurance conclusion thereon." This statement implies that the auditor's opinion is on the financial statements including the notes thereon and does not cover the other information given in the Integrated Annual Report. This is a standard statement used in all audit reports. The auditor has expressed an unqualified opinion on the financial statements and does not have any adverse comment thereon.

Question 3

The increase in inventory is due to higher quantities or higher prices. How to manage and what is the risk from the higher inventory.

Answer 3

The inventory in Mar'22 end was higher by 986 Mn THB as compared to Mar'21 from the increased price of finished goods and metallic. In terms of volume, the quantity was lower at end- Mar'22 as compared to the previous year. In number of days' term, it was at 45 days at end- Mar'22 compared to 48 days end-Mar'21. The company continues to monitor working capital closely.

Question 4

Will the impairment of MBF be reduced to approximately 81 million baht annually until it's gone? If all of them are cut off, will they be sold as scrap at all?

Answer 4

The Mini Blast Furnace assets were mothballed since 2011 and the management decided to dispose the MBF machinery, equipment and its spare parts. The success has been limited with worldwide interruption from Covid in last 2.5 years and ageing machinery. The value of the MBF assets, classified as "Idle assets held-for-sale" in the balance sheet, reflects the expected realizable value of the assets evaluated by an independent external valuer. The valuation is done every year and any shortfall in the realizable value over the carrying value of the asset is recognized as impairment charge in the profit & loss account.

During the year ended 31 March 2022, the Company has recognized an impairment charge on MBF of 81 Mn THB (2021: 117 Mn THB).

Question 5

The cost of power after the solar rooftop system is installed in February 2022, how much the cost can be saved per quarter? Is it achieved to the plan that was initially estimated?

Answer 5

The company installed 1.4 MWp on factory rooftop 3 years ago. Another 11.8 MWp is expected to get completed by Oct'22. It got delayed by a few months due to shortage of electronic components worldwide. Expected saving from the combined system will be 25 Mn THB / year along with using green energy which is good for the society.

Question 6

What is difference of higher steel prices last year from the limitation of production and exports by China and this year from the Russian-Ukrainian conflict, both of them impact to the company same or difference.

Answer 6

Steel prices went down in 2020 from Covid related lockdowns around the world. The prices started improving in early 2021 from pent up demand as vaccinations started and lockdown restrictions were removed. Another reason was that many Governments provided stimulus package to support the economy post Covid.

As far as China is concerned, there is a major restructuring happening in steel industry there. Chinese Government has set a task to move to lower Co2 emission steel industry that will mostly service domestic industry. This is good news for steel industry as Chinese companies are expected not to dump steel in export markets. We have seen positive impact of this in 2021 terms of global steel prices. We have already shared our view on the impact of Russian-Ukrainian conflict in the first question.