Page 14 - Annual report eng 2019

Tycoons Worldwide Group (Thailand) Plc.

On March 8, 2018, Trump signed steel and aluminum tariffs that imposes 25% duty on
steel and 10% charge on aluminum, which took effect on Mar 23, 2018. TYCN's export
to U.S. is only 2.56% of its sales, therefore the tariff does not bother TYCN's export.
However, the long term influence of US-China trade war cannot be ignored. According
to WSA's forecast, global demand of steel will reach 1.8 billion tons in 2020, a 1.7%
growth from 2018. Although it is a growth, the growth rate is small than 2019 due to the
fact that trade war is likely to cause negative effect on steel demand.

Considering the obstacle of China’s steel product in US market, TYCN viewed it as a
good opportunity. Therefore, TYCN has adjusted its production line and added new
equipment in order to produce US standard screws and to take over China’s market share
in US.

3.1.2 Product and raw material price

TYCN’s major raw materials for downstream products are billets and wire rods.
Therefore, billet and wire rod prices play an important role when it comes to sales, cost,
and profit. TYCN’s raw materials are majorly from TY, and besides TY, are from China.
As the largest steel producing country, China’s policy on producing and selling steel
will directly affect global steel prices. TYCN’s raw material and product prices fluctuate
with global prices, further influencing the company’s revenue and profit. TY steel’s
billet has become TYCN’s stable source of raw material.

3.1.3 Potential competitors

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As the AEC, ASEAN Economic Community, has been setup by ASEAN on January 1 ,
2016, China, the U.S., Japan and other countries has launched new ASEAN strategies,
pledging that they will strengthen business relationship with the AEC, and the
investments in ASEAN has attracted more global attentions. Therefore, the impact of
China’s capacity-offshoring policy on Thailand and ASEAN’s steel industry deserves
watching.

3.1.4 Risk of high proportion of the sales transaction through the majority shareholder
TGE

Currently, TYCN’s largest customer for sales of merchandise, including wire rod and
annealed wire, is Tycoons Group Enterprise (TGE), TYCN’s indirect majority
shareholder via Tycoons Group International Co., Ltd.(TGI), (TGE holds a stake of up
to 100% in TGI and TYCN is a 73.40% owned subsidiary of TGI). TYCN’s sales to
TGE accounted for 7.03% of TYCN’s total sales in 2019. Although the proportion is
higher, the actual risk is still at a low level because TGE is TYCN’s agent in Taiwan
market and it has built a firm customer base.

3.2 Financial risks

3.2.1 Exchange rate and interest rate

TYCN’s raw materials are billet and wire rod. In 2019, 65% of them were from TY in
THB, while 35% were imported in USD. However, 28% of products were exported
mostly in USD and minority in EUR. Therefore, the imports and exports in USD can

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