• 
• 

Managing director Rachata Leelaprachakul yesterday said a shareholders' meeting had approved the issue of roughly 341 million new ordinary shares at a par value of Bt1. They will be offered to existing shareholders in a ratio of one new share for every old one at Bt1 apiece. If there are shares remaining from the rights offering, Thai-German will offer them to specific investors by private placement.

Siam City Bank, which is a major shareholder in the company with 20 per cent of shares, has not yet decided whether it will exercise its rights under the offering.

"We must increase the company's registered capital because we lack capital to expand our business," Rachata said. "At present, several clients in various industries, such as energy, food and paper, are enlarging their businesses, particularly ethanol producers. But we cannot supply them with stainless-steel pipe and sheet. We'll lose a great opportunity if we don't inject working capital to increase our production capacity," he said.

Thai-German has been overwhelmed by orders. Foreign orders alone in 2005 were for 32,000 tonnes of stainless-steel pipe, while the company was capable of producing only 1,500 tonnes. Last year, orders rose to 40,000 tonnes, but the company could supply only 3,000.

The company has been negotiating with prospective investors, both domestic and foreign, in a bid to find a strategic partner and talking to local banks about borrowing money. No deals have been concluded.

Thai-German hopes new working capital will be injected into the company by the end of next month. It plans to spend Bt91 million to increase its production capacity for both stainless-steel pipe and stainless-steel sheet from 10,000 tonnes a year to 15,000 tonnes. The remaining Bt250 million will be used as working capital and to buy raw materials.

Once its registered capital is increased, the company's debt-to-equity ratio will decrease from 13:1 to 3:1, and it believes its financial statement will be strong enough to allow it to borrow money from local banks, Rachata said.

"We need more money - roughly Bt500 million - from banks, in order to improve our production. Formerly, our debt-to-equity ratio was 13:1, and banks were unwilling to give us loans. But we're stronger now, and I expect local banks to approve loans for us this year," he said.

Thai-German will increase its production capacity in the fourth quarter and expects sales to increase significantly next year. It expects to generate a net profit next year too, after suffering a net loss of Bt19 million in this year's first quarter.

The company plans to begin producing stainless-steel pipe for use in ethanol plants next year. It is talking to a German producer in hopes of being able to transfer production know-how for the new product. If the deal is successful, Thai-German will begin its own production, but if not it will import the products for sale in Thailand.