Page 21 - TYCONS - ANNUAL REPORT 2022

Tycoons Worldwide Group (Thailand) Plc.

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.

The steel industry still has to be closely monitored vis-a-vis global steel price,
which has been steadily rising since the end of 2020, Due to the Ukraine-Russia
war in February 2022 which affected the export of steel products between the two
countries, resulting in a further increase in short-term steel prices. Subsequently,
in order to curb inflation, the Federal Reserve launched a rapid and powerful
cycle of interest rate hikes, and steel prices were immediately suppressed and fell
back. Regarding the trend of steel prices in 2023, the development of the
Ukrainian-Russian War and the interest rate policy of the Federal Reserve are
variables that must be paid attention to.

3. Potential competitors

As the AEC, ASEAN Economic Community, has been setup by ASEAN on
st
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.

2.2 Financial risks

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 minorly in EUR. Therefore, the imports and exports in USD can
balance each other, resulting in a natural hedge. TYCN can also avoid the foreign
exchange risk by signing forward contracts to offset the net foreign exchange
position. TYCN group uses USD loans for working capital and long term
investment. Therefore, the interest rate should be carefully watched. TYCN can
choose interest rate exchange or repay USD loans by using THB loans to avoid
risks of foreign exchange rate and interest rate.

TYCN engages in derivatives trading based on actual need and according to
TYCN’s「Procedures of engagement in derivatives trading」. In addition to hedge
tools for foreign exchange rate and interest rate, TYCN also take actions such as:

(1) Set up foreign exchange rate monitor system to get real time information on
exchange rate.

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