Loxley : Management Discussion and Analysis Yearly 2022

-Translation-

LOXLEY/CS/003/2023

28 February, 2023

Subject: Clarification of the changing of Net Profit in Consolidated Financial Statement exceeding 20% compared to the same period of the previous year of Loxley Public Company Limited for year ended 31 December, 2022

To: President

The Stock Exchange of Thailand

Loxley Public Company Limited ("the Company") has submitted the consolidated financial statements for the year ended 31 December, 2022 which is summarized as follows:

			Change
THB:Million	2022	2021	MB	%
Revenue from sale of goods and rendering of services	12,446	11,696	750	6%
Cost of sale of goods and rendering of services	(10,938)	(10,576)	362	3%
Gross profit	1,508	1,120	388	35%
Distribution costs and administrative expenses	(1,752)	(1,650)	102	6%
Other income and gain on fair value adjustment	236	242	(6)	(3%)
Profit (loss) from operating activities	(8)	(288)	280	97%
Reversal of impairment loss in accordance with TFRS9	83	662	(579)	(87%)
Share of profit of associates and joint ventures, net	311	501	(190)	(38%)
Finance costs/Income tax/ NCI	(298)	(357)	(59)	(16%)
Net profit	88	518	(430)	(83% )

According to the table presented above, the operating results for the year ended 31 December 2022, the Company had a revenue from sales and services of 12,446 million baht and a net profit of 88 million baht, which is a change of more than 20 % compared to the same period of the previous year. The Company would like to clarify the details for such change as follows:

Revenue from sale of goods and rendering of services

The revenue from sale of goods and rendering of services for the year ended 31 December, 2022 amounted to 12,446 million baht, an increase of 750 million baht or 6% from the previous year. Revenue from Trading business group was 4,755 million baht and revenue from Service

business group was 1,369 million baht which continued to grow from the previous year by 11% and 14%, respectively. Resulted from the relief of concerns about the COVID-19 pandemic and measures to open the country in the second half of the year. However, the revenue from Network Solution business group and Energy business group in various projects, amounted 3,070 million baht, decreased by 7% from the previous year as a result of labor shortages and delays in supply chain logistics. It is expected that the trend will gradually unravel in the future.

Profit (loss) from operating activities

Profit (loss) from operating activities for the year ended 31 December, 2022 resulted in a loss of 8 million baht, an improvement from the same period of last year that had a loss of 288 million baht. This was due to the fact that in 2021, the company recorded a provision for loss of project work in the Network Solutions business group with a state-owned enterprise in the amount of 566 million baht as a result of the COVID-19 pandemic outbreak and the government measures to halt its activities, resulting in additional costs during the operation. In 2022, the Company reviewed its expenses for hiring foreign personnel and experts which increased due the extended project duration and recorded an additional provision for loss of the project in the amount of 178 million baht. As of 31 December, 2022, the project has progressed by 95% and is expected to be completed in 2023.

In addition, if the normal operation results are considered without taking into account the estimated cost resulting from losses of the aforementioned project, in 2021 and 2022, the group of companies had profits from operating activities of 170 million baht and 278 million baht, respectively, or a decrease of approximately 39% compared to the previous year. This decrease mainly resulted from the decline in the Network Solutions and Energy business group, which decreased by 50 million baht and 39 million baht, respectively, which was due to the slowdown in construction-related projects and higher costs. These factors resulted in the delay of project delivery and revenue recognition. However, Special Project unit and Trading Business groups still had improved operating results over the past year.

Reversal of impairment loss in accordance with TFRS 9

Gain on reversal of impairment loss during the years 2022 and 2021 is a reimbursement received by the company which includes repayment of loans and accrued interest income and trade receivables from the associate in the amounts of 91 million baht and 771 million baht, respectively. This resulted from of the associate being compensated for damages according to the judgment of the Supreme Administrative Court.

Share of profit of associates and joint ventures - net

Share of profit of associates and joint ventures for the year ended 31 December, 2022 amounted to 311 million baht, a decrease from the previous year's share of profit of 501 million baht. The decrease mainly due to the decline of profit sharing of joint venture companies in coated steel business group which resulted from the fluctuation of hot-rolled steel prices as raw materials and the selling prices of coated steel products, leading to a decrease of gross profit margin as well as a demand of products. Additionally, it is expected that the market volatility will be temporary and will result in better cost management.

Net profit

The Company recorded a net profit of 88 million baht, a change from the previous year which had a net profit of 518 million baht. The factors for such changes were described as detailed above.

Please be informed accordingly.

Sincerely yours,

Loxley Public Company Limited

(Mrs. Manisara Janewithayapun)

Company Secretary