AN PHAT PLASTIC (AAA): 2016 Q4 RESULTS AND BUSINESS PLAN FOR 2017 Q1

2016 Q4 FINANCIAL AND BUSINESS RESULTS

AN PHAT PLASTIC AND GREEN ENVIRONMENT JSC

(Security code: AAA)

      Dear Shareholders and Investors,

     An Phat Plastic and Green Environment JSC would like to announce ‘Report on 2016 Q4 Results and 2017 Q1 Plan’, details as follows:

I. 2016 Q4 results

     As the volume of orders in the fourth quarter is much higher than in previous quarters, the company concentrated on production planning to create effective quantity structure and intensified machinery maintenance to ensure production stability and optimum capacity. Therefore, the Company not only boosted output volume but still maintained quality of products and met delivery schedule as required by customers.

     According to estimates, the Company's sales volumes in the fourth quarter of 2016 reached 18,193 tons. Consolidated revenues were estimated at VND 622 billion. Consolidated profit after tax is expected to rise to VND 42 billion.

     Compared with the 2015 Q4 results, sales volume increased by 33.9% (from 13,597 tons), revenues increased by 35.2% (from VND 460 billion) and profit after tax rocketed with growth rate of 97.2% (from VND 21.3 billion).

     By the end of 2016, the Company has sold 61,987 tons of products, achieved consolidated sales of VND 2,100 billion, completing 100% of the 2016 revenue target (VND2,100 billion) and earned consolidated net profit of VND 143 billion, equivalent to 143% of the 2016 profit target (VND 100 billion).

II. 2016 Q4 company updates

1. Progress of Factory No.6 and No.7

     As a part of the ambitious investment projects of the Company, Factory No. 6A has currently installed the last machines in accordance with technical design specifications. The factory executives, technicians and workers monitored the installation of new machines and made necessary adjustment in order to timely complete production lines and officially put into operation in early 2017. The factory is supposed to contribute a significant share of revenue and profit for the company next year.

    Besides, the Factory No. 7 is going to start trial run within the first quarter of 2017.  The factory manufacture draw-string bags, draw-tape bags, etc to serve the US market. These new product lines require complex production technology but bring greater profit margin than traditional products.

     Constructed at the same time in this period is the Factory No. 6B specializing in high-price products. These products is required to comply with stringent hygiene standards in case of food bags, or demands sophisticated manufacturing techniques in case of fashion bags, zipper bag, etc. As a result, the construction of the Factory No. 6B takes longer time than other projects. The factory has finished workshop and warehouse systems and now the engineers are working with special items related to the production line. Machinery installation and test run will be conducted in the first quarter of 2017.

    Currently, the Company has received large orders for new products of these plants. Customers hold high expectation of new product development, so they provide us enthusiastic support and practical counsel in setting up production line to ensure that the products meet quality standards.

     Building new factories together with upgrading the existing plants is a persuasive evidence for the relentless progress of the Company. An Phat has demonstrated a broad vision with high motivation and willingness to accept new challenges and learn. We constantly renew ourselves with upgrade and development so as to meet growing market demand and assert our competitive advantage over peers for continuous and sustainable growth.

2. AAA is officially listed on HOSE

     On November 25th 2017, shares of An Phat Plastic and Green Environment was officially listed for the first trading session on the Hochiminh Stock Exchange (HOSE). Listing on HOSE marked the new chapter of AAA shares, which is predicted to bring about favorable opportunities for development.

     The first trading session of AAA on the HOSE recorded higher trading volumes than the average previous trading volume. Therefore, AAA hopes to attract more attention of professional investors, institutions and large investment funds, thereby ensuring interests of the Company and shareholders.

3. 2016 1st interim cash dividend

     Based on the positive business results in 2016 and pursuant to the approval of the Shareholders’ General Meeting, the Company paid out the first interim cash dividend of 2016 as a token of our gratitude for shareholders’ long-term commitment. Details of the 1st interim dividend of 2016 were approved as follows:

- Payment time: December 15th, 2016

- Payment method: in cash

- Payment rate: 10% (VND 1,000 per share)

- Source of payment: Profit after tax of the parent company in the Consolidated Interim Financial Statement dated June 30th, 2016

4. Issue more than 5 million shares for warrant holders and increase charter capital to approximately VND 570 billion

     In 2015, the Company issued 300,000 bonds with warrants (each warrant represents a right to buy 100 common shares of the Company) to raise capital for investment project Factory No. 6 under the Resolution No. 1101/2015/NQ-DHD of the Shareholders’ General Meeting dated November 4th, 2015. The Company also obtained commitments about the warrant exercise time from warrant holders. Accordingly, warrants would be exercised in two tranches, of which the first tranche of maximum 55,000 warrants would be exercised after one year from the issue date, and the remaining would be exercised after June of 2018.

     As for the first tranche, investors registered to exercise 50,650 warrants on December of 2016. Hence, the Company issued 5,065,000 new shares at exercise share price of VND11,500 for warrant holders. As a results, after the first share issuance for warrant holders, the charter capital of the Company rose to approximately VND 570 billion. The number of shares increased by less than 10% while profit growth rate is nearly 40% in 2017, thus, dilution ratio is not so significant and the Company can guarantee existing shareholders’ benefits.

5. Capital withdrawal from Vinh Plastics and Bags Joint Stock Company (VBC)

     For the sake of capital optimization, the Company will restructure passive investments, one of which is the investment in Vinh Plastics and Bags Joint Stock Company (VBC). Currently, the Company holds 966,582 shares of VBC, equivalent to ownership ratio of 32.22%. VBC possess considerable growth potentials and high profitability, however, recognizing prosperous investment opportunities in plastic packagings and CaCO3 additives industry, the Company is going to divest the investment in VBC to fund new projects.

6. Thakhek Plastic Limited Company dissolution and capital withdrawal for investing in the Factory No. 8

     In 2015, the General Shareholders’ Meeting passed downsizing plan of the investment project in Thakhek Plastic Ltd (located in the People's Democratic Republic of Laos) due to some objective obstacles of infrastructure development projects and cargo transportation in Laos. After the downsizing, the BoM has actively implemented the project under the direction of the Shareholders’ General Meeting, however, the problems have not been solved by the governments of Laos and Vietnam, and it is difficult to ensure the efficiency of investment. Therefore, after getting approval of the Shareholders’ General Meeting in form of written ballot, the Company currently implements the dissolution process of the Thakhek Plastic Limited Company to withdraw the total remaining capital of USD 2 million to invest in new projects.

     Concurrently approved by the Shareholders’ General Meeting is the project of Multilayer Packaging Factory. With regard to constantly increasing demand for this product line in both domestic and foreign market, the Company has proposed to construct Factory No.8 and has submitted application for investing license with the following general information:

- Project name: Multilayer packaging factory.

- Location: Nam Sach Town, Nam Sach District, Hai Duong Province.

- Area: 98,088 m2.

- Scope of project: 7,200 tons/year.

- Main target operation: Manufacturing multilayer packaging.

- Estimated investment capital: VND 500,646,482,000.

7. Customer visits

     Customers from the Europe, the USA, Australia, Japan, etc visited the company to discuss working strategy in the upcoming period, such as Dollar General, Mitsubishi Corporation, Sojitz, Itochu, and Hanwa. The customers had good impression on the production systems of the Company including factory cleanliness, friendly workers, and rapid and efficient factory improvement. They also had positive feedback on the quality of products such as film quality, material, and stamp. Besides, customers suggested viable solutions for the Company to improve production efficiency, product quality and cost control by some changes in production process, machinery maintenance, and customer clustering ...

     The majority of customers are importing PE bags from Chinese suppliers, but they will shift from China to Vietnam market if there are suitable suppliers. According to Japanese customers’ assessment, PE bags still play an important role in Japan, so the demand will grows stably. Visiting the factories of An Phat, customers witnessed rapid development not only in scale but also in quality, hence, they are assured to commit and raise the volume. In addition, customers also wanted to expand cooperation with the company in developing new products such as biodegradable bags and drawstring bags apart from traditional products due to growing market demand and consumer preference of superior products over traditional products.

 III. Business plan for Q1 2017

1. Production volume, sales and profit targets

     A lot of holidays including Tet holiday fall in the first two months of the first quarter 2017, so the first quarter usually gains the lowest production volume of the year because of the shortest working time. Based on assessment of market performance and production plan, the Company set targets for business in the first quarter of 2017 as follows:

- Production volumes: 17,800 tons

- Sales Revenue: VND 600 billion

- Profit after tax: VND 40 billion

2. Organize Annual General Meeting in 2017

     The Company plans to organize Annual General Meeting in the first quarter of 2017 to pass the reports of the Board of Management, General Director and the Supervisory Board on the company’s performance in 2016 as well as 2016 audited financial statements; and decide on  mission, orientation and business strategy for 2017. In term of business plan of 2017, the Board of Management will submit to the Shareholders’ General Meeting key issues such as:

- Revenue target: VND 2,900 billion

- Profit after tax target: VND 200 billion

- Estimated 2016 dividend payment rate: 20% (which includes 10% interim dividend in December of 2016)

- Expected dividend payment rate for 2017: 30%

3. Stabilize Factory No. 6 and Factory No. 7 operation

     In the future, beside ensuring stability and productivity of existing factories, the company will officially put Factory No.6 and Factory No.7 into operation. With experienced leaders, skillful workers and modern machinery system, Factory No. 6 will help to boost efficiency and product quality to improve profit margin for the whole company in 2017. The full operation of the two factories will double the production scale of the Company so that An Phat will become the largest plastic packagings manufacturer in Asia.

 IV. Stock price movements in Q4 2016

     In the fourth quarter, due to impact of price fluctuations in the period of transferring listing share to HOSE and investor sentiment about dilution after the issuance of new shares for the warrant exercise in December, the share price has declined and oscillated in the support range. However, the share price has strong growth momentum in the long term thanks to positive estimated business results and strategic capacity increase as well as market expansion.

             

Indicators

2016 Q4

2016 Q3

Increase/ Decrease

Average Trading Volume/ day (share/day)*

242,309

407,203

-40.49%

Net Foreign Purchases/ Sales (share)*

53,840

-1,377,220

 

Closing Price (VND)

22,400

30,700

-27.03%

*The transactions dated October 26th and 31th, 2016 between two SPVs of Deutsche Asset Management Pte Ltd and Duxton Asset Management Pte Ltd, Beira Limited and Kallang Limited, for restructuring are not included.

Regards!

- As above.                                                                                                       GENERAL DIRECTOR

- Office for record./.                                                                                                    (Signed)

 

                                                                                                                      NGUYEN LE TRUNG

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