SAHAMITR PRESSURE CONTAINER PUBLIC COMPANY LIMITED
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003 (UNAUDITED BUT REVIEWED)
WITH COMPARATIVE INFORMATION FOR DECEMBER 31, 2003 (AUDITED)

1.	GENERAL INFORMATION

1.1	The Company

Sahamitr Pressure Container Public Company Limited is incorporated as a limited public company in Thailand and registered in the Stock Exchange of Thailand. Mr. Sutham Ekahitanond is the Company’s major shareholder. The Company is engaged in the manufacturing of LPG cylinders. The registered office addresses of the Company are located at 72/9 Moo 7, Soi Pulchaleoy, Bangkhunthien – Chaitalay Road, Samaedam, Bangkhunthien, Bangkok, Thailand and 290 Moo 3, Lampang – Chiang Mai Road, Tambol Thasobsao, Amphur Maetha, Lampoon Province, Thailand.

1.2	Basis of Interim Financial Statement Preparation

The interim financial statements are prepared in accordance with the Accounting Standard No. 41 “Interim Financial Reporting” promulgated by the Institute of Certified Accountants and Auditors of Thailand  and annoucements of the Stock Exchange of Thailand.

These interim financial statements are prepared to provide additional information to the financial statements for the year ended December 31, 2003 with the emphasis on the more current information about new activities, events, and situations and not a repetition of information previously reported. These interim financial statements should, therefore, be read in conjunction with the financial statements for the year ended December 31, 2003.

1.3	Effect from Economic Crisis

The operations of the Company have been affected by the country’s economic crisis and currency volatility in the Asia Pacific region that caused the Company to default the payments of its debts in the year 2000. In addition, during the years 1998 to 2000, the creditors of a related company filed court cases against a related company demanding for loan repayments totalling approximately Baht 1,797 million. Such liabilities are guaranteed by the Company and two Company’s directors. The Company, therefore, was named as a joint defendant in the lawsuit as a guarantor of the related company’s loans of approximately Baht           1,350 million. However, on December 24, 2002, the related company entered into a debt restructuring agreement with credit banks rescheduling the loan repayments up to the year 2011. The Company, as a loan guarantor, is obliged to provide cash advance to the related company for loan repayments should the related company not have enough cash, with a balance of obligation of Baht 1,312.3 million as at June 30, 2004 that The Office of the Securities and Exchange Commission (SEC) ordered the Company, under the letter dated April 23, 2004, to take up the possible damage (including the possible loss on non – collection of the portion jointly guaranteed by the Company’s directors) for such obligation in the accounts. The Company, therefore, took up such obligation by adjusting its financial statements for the year ended December 31, 2003. As a result of such adjustment, the Company has deficit of Baht 1,461.3 million and Baht 1,477.8 million as at June 30, 2004 and December 31, 2003, respectively, with capital deficiency of Baht 1,170.1 million and Baht  1,186.6 million, respectively. Eventhough the Company and its related company were successful in the negotiation for debts restructuring as discussed in Note 10 to the interim financial statements, the Company’s going concern is still significantly uncertain which is subject to a)  the ability of the related company to operate successfully in the future, to change its capital structure and to find new strategic partners, including its ability to comply with the conditions throughout the terms of its debt restructuring agreement to relieve the Company’s guarantee obligation, and b) the Company ability to operate successfully in the future and to comply with the conditions throughout the terms of the debt restructuring agreement. The accompanying interim financial statements do not include any adjustments relating to the recoverability of the carrying value and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2.	ACCOUNTING POLICIES

These interim financial statements have been prepared following the accounting policies covered by the Accounting Standards promulgated by the Institute of Certified Accountants and Auditors of Thailand. The Company prepared the interim financial statements for the six - month period ended June 30, 2004 with the same accounting policies used in the preparation of the annual financial statements for the year ended December 31, 2003.

3.	BASIC EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is determined by dividing the net income (loss) by the weighted average number of shares outstanding during the period (24,000,000 shares).

4.	TRANSACTIONS WITH RELATED PARTIES

The Company has certain transactions with related individual and companies. Related companies are related through common shareholding and/or directorship. Thus, the financial statements reflect the effects of these transaction, on the basis agreed upon between the Company and its related parties, which basis might be different from the basis used for transactions with unrelated parties.

Related parties 		Type of business 		Relationship	
					
Mr. Sutham Ekahitanond
Mrs. Supha Phromsaka Na Sakolnakhorn
Sahamitr Steel Co., Ltd.		-
-
Manufacturing and distributing steel		Shareholder and director
Shareholder and director
Same group of Shareholders and  management	

Significant balances with related parties from guarantee’s obligation of Sahamitr Steel Co., Ltd. as at June 30, 2004 and December 31, 2003 consist of:
	In Thousand Baht	
	June 30, 2004		December 31, 2003	
			
Receivables from directors under guarantee obligation of
   Sahamitr Steel Co., Ltd.			
- Mr. Sutham Ekahitanond	450,175		450,175	
- Mrs. Supha Phromsaka Na Sakolnakhorn	450,175		450,175	
Receivable under guarantee obligation of Sahamitr Steel Co., Ltd.	411,990		417,187	
Loans to Sahamitr Steel Co., Ltd. (non – interest bearing)	38,185		32,988	
Receivables from Sahamitr Steel Co., Ltd.	1,296		1,320	
Total	1,351,821		1,351,845	
Less: Allowance for doubtful accounts	(1,351,821)		(1,351,845)	
Net	-		-	

Receivable from directors under guarantee obligation and receivable under guarantee obligation and loans to Sahamitr Steel Co., Ltd. represent receivables and loans under the conditions of the debt restructuring agreement of Sahamitr Steel Co., Ltd., which were taken up in the books by the order of The Office of Securities and Exchange Commission (SEC) together with necessary allowance for doubtful accounts. Because of the significant doubt for the recoverabilities of receivables, the Company, therefore, set up an allowance for loss in its accounts of Baht 1,316.5 million in the year 2003 (Baht 31.8 million in the year 2002). This allowance was presented under “Provision for bad debt” in statements of income for the year ended December 31, 2003.

5.	CASH AND CASH EQUIVALENTS
	In Thousand Baht	
	June 30, 2004		December 31, 2003	
				
Cash 	200		200	
Foreign currency – equivalent to Baht 	936		904	
Saving accounts	74		531	
Current accounts	7,483		1,637	
Total	8,693		3,272	

6.	ACCOUNTS AND NOTES RECEIVABLE – TRADE

As at June 30, 2004 and December 31, 2003, the aged accounts and notes receivable – trade are as follows:
	In Thousand Baht	
	June 30, 2004		December 31, 2003	
				
Less than 3 months	267,359		139,118	
Overdue 3 months to 6 months	25		 3,337	
Overdue 6 months to 12 months	1,210		  250	
Overdue more than 12 months	4,001		3,706	
Total	272,595		146,411	

7.	INVENTORIES - NET
	In Thousand Baht	
	June 30, 2004		December 31, 2003	
				
Finished goods	55,306		29,230	
Work in process	25,813		24,374	
Raw materials and others	142,718		105,529	
Goods in transit	18,333		11,249	
Total	242,170		170,382	
Less: Allowance for obsolete inventories	(656)		        (656)	
Net	241,514		169,726	

8.	Loans to suppliers and interest receivable – net
	In Thousand Baht	
	June 30, 2004		December 31, 2003	
Loans to suppliers and interest receivable (interest at MLR and are collectible by monthly installments at varying amounts starting June 1, 2003 and January 1, 2004)	

37,203		

38,703	
Less: Portion due within one year	(3,900)		              (3,900)	
Net	33,303		34,803	

The above loans are for the suppliers to buy machine for the manufacturing of goods for sales to the Company.

9.	BANK OVERDRAFT AND LOAN FROM BANK 
	In Thousand Baht	
	June 30, 2004		December 31, 2003	
				
Bank overdraft	-		5,081	
Promissory note	225,564		24,780	
Liabilities under trust receipts	30,012		89,948	
Total	255,576		119,809	

As at June 30, 2004 and December 31, 2003, the Company had credit lines for bank overdraft and loan from bank totalling Baht 430 million and Baht 255 million, respectively. The loan bears interest at the rate of 6.50 % per annum. Bank overdraft and loan from bank are collateralized by the mortgage of the Company’s land, buildings and machinery thereon and assets not used in operations, by the pledge of the Company shares belonging to the Company’s shareholders, fixed deposit of Baht 5 million and additionally by the personal guarantees of certain Company’s shareholders and directors.

10.	LONG – TERM LOANS UNDER DEBT RESTRUCTURING

The Company entered into debt restructuring agreement dated June 29, 2001, with the first amendment dated October 2, 2001 and the second amendment dated December 24, 2002, with its creditors for the liabilities totalling Baht 820 million (including accrued interest expense up to May 31, 2001 of Baht 314.8 million). 

The outstanding balance of debts as at June 30, 2004 and December 31, 2003, under debt restructuring agreement and the new credit facilities and the repayment schedules are as follows:

	In Thousand Baht	
	June 30, 2004		December 31, 2003	
				
Tranche A, payable by 27 quarterly installments at the varying amounts starting from September 2001 (interest at Minimum Loan Rate with duration of payment commencing in June 2001)	147,932		158,880	
				
Tranche B, payable by 39 quarterly installments at the varying amounts starting from September 2001 (interest at Minimum Loan Rate with duration of payment  commencing in June 2001)	74,448		77,019	

				

				

	In Thousand Baht	
	June 30, 2004		December 31, 2003	
Tranche D, accrued interest expense which creditors will waive the claim for payment from the Company in accordance with the first amendment of debt restructuring agreement dated October 2, 2001, whereby the Company must comply with the conditions throughout the term of the debt restructuring agreement	151,668		158,236	
				
Tranche E, payable by 19 quarterly installments at the varying amounts starting from December 2002 (interest at Minimum Loan Rate plus 1% p.a. commencing December 2002)	66,879		76,280	
				
Total	440,927		470,415	
Less: Portion due within one year	(76,749)		(67,354)	
Net	364,178		403,061	

The above restructured debts and the new credit facilities totalling Baht 129.46 million are collateralized by mortgage of assets and the personal guarantees as disclosed in Note 9 to the interim financial statements. In addition, under the conditions in debt restructuring agreement, the Company has to comply with certain conditions and restrictions (i.e. non - creation of additional liability, maintenance of financial ratio, non - repayment of debt to shareholders or dividend payment, sale or transfer of the Company’s major assets), unless with the consent under special resolution of the creditors.

Under a condition of the debt restructuring agreements with local credit bank should the related company have inadequate cash flow, the Company will have to make cash loans to the related company to repay its loan principal in accordance with the repayment schedule under the debt restructuring agreement dated December 24, 2002. Such loans to the related company will be converted to share capital of the related company within 5 years from the date of the debt restructuring agreement of the Company (within July 1, 2006) unless with the written consent from creditors. Up to June 30, 2004 and December 31, 2003, the Company loans to such related company amounted to Baht 38.2 million and Baht 33.0 million, respectively. The management believes that the recoverability of such loans is very uncertain, hence, the Company provided full allowance for loss on such loans in its accounts.

As at June 30, 2004 and December 31, 2003, the outstanding balances of obligation under the guarantee of related company’s liabilities are as follows:

	In Thousand Baht	
	June 30, 2004		December 31, 2003	
				
Obligation under the guarantee of related company’s liabilities	1,312,339		1,317,537	
Less : Portion due within one year	(21,740)		(18,666)	
Obligation under the guarantee of related company’s 				
   liabilities - net	1,290,599		1,298,871	

11.	LIABILITIES UNDER FINANCIAL LEASES – NET

	In Thousand Baht	
	June 30, 2004		December 31, 2003	
				
Liabilities under financial leases	1,887		2,578	
Less : Portion due within one year	(919)		  (2,190)	
Liabilities under financial leases - net	968		     388	

12.	SEGMENT FINANCIAL INFORMATION

Segmental financial information for the three - month periods ended June 30, 2004 and 2003 are as follows:
	In Thousand Baht	
	2004		2003	
	Domestic		Foreign		Total		Domestic		Foreign		Total	
												
Net sales	221,570		300,761		522,331		88,222		206,656		294,878	
Cost of sales	(192,271)		(255,728)		(447,999)		(79,487)		(181,948)		(261,435)	
Gross Margin	29,299		45,033		74,332		8,735		24,708		33,443	
Other income					3,510						2,286	
Common expenses				(64,757)						(51,700)	
Interest expense				(4,244)						(2,268)	
Gain from debt repurchase				-	-					-	
Net Income (Loss)					8,841						(18,239)	

Segmental financial information for the six - month periods ended June 30, 2004 and 2003 are as follows:

	In Thousand Baht	
	2004		2003	
	Domestic		Foreign		Total		Domestic		Foreign		Total	
												
Net sales	474,291		486,515		960,806		198,505		516,854		715,359	
Cost of sales	(413,997)		(414,407)		(828,404)		(174,955)		(441,423)		(616,378)	
Gross Margin	60,294		72,108		132,402		23,550		75,431		98,981	
Other income					9,126						4,075	
Common expenses				(117,880)						(112,315)	
Interest expense				(7,149)						(3,840)	
Gain from debt repurchase				-	-					6,974	
Net Income (Loss)					16,499						(6,125)	
												
Property, plant and equipment – net		474,726						496,806	
Other assets					636,990						435,738	
Total Assets					1,111,716						932,544	
Gross margin of each segment for local an export sales derived from the deduction of related costs of sales, which was calculated by the weighted average standard cost of each product.

Other assets consist of cash and cash equivalents, accounts and notes receivable, inventories and other assets.

13.	CONTINGENT LIABILITIES AND COMMITMENT

a)	The Company fixed and savings deposits totalling Baht 3.0 million have been pledged as collaterals for letters of guarantee issued by a local bank to certain state enterprises. 

b)	Under the provision of the Customs Act, the Company can place bank letter of guarantee in lieu of cash payment for import duty on imported materials used in the production of products for                 re - export. Should the Company be unable to re-export its imported materials within the limited period, the Company shall be obliged to pay import duty on un - exported materials. The balance of the bank guarantees for this purpose is Baht 9.8 million. However, the Company does not expect any contingent liabilities for import tax related to the letters of guarantee as it believes that imported materials can all be exported in the prescribed period.

c)	As at June 30, 2004, the Company has contingent liabilities under bank and other guarantees for the importation of steel materials for the manufacturing of products for re – export and other matters arising in the ordinary course of business totalling Baht 9.7 million. The Company does not expect to incur material liabilities from each guarantee. 

d)	As at June 30, 2004, the Company has unused letter of credit of Baht 2.7 million.

e)	As at June 30, 2004, the Company has a land rental agreement with a shareholder covering a period of thirty (30) years. Under the terms of the agreement, the Company has to pay the annual rental of Baht 3.0 million.