Message from Chairman

Mr. Rit Thirakomen
Chairman of the Board of Directors

In 2015, despite the Thai economy (GDP) expanded by 2.8 percent as compared to 0.9 percent in the previous year, the negative factors which have direct impact on the Company’s operations remained unchanged. The key negative factor was the weak purchasing power of consumers, owing largely to the persistent high household debt, severe drought, and low agricultural prices.
The weak purchasing power of consumers was clearly reflected by the fact that the overall instant noodle sales grew by only 0.4 percent year-on-year for the first 11 months of 2015 which was the second consecutive year of decline in sales growth following the marginal growth of just 1.0 percent in 2014. Before 2014, total market sales of instant noodles used to grow by 5.0 - 9.0 percent annually. Under the unfavorable environment of weak purchasing power of consumers, competition in the restaurant business became even more intense especially competing through greater spending on advertising and promotion as well as offering significant discounts. The use of such competing measures might, as a consequence, adversely affect the operating results if the targeted sales did not materialized as expected.
The operating result of the Company for the year 2015 was also adversely affected by the negative factors mentioned earlier. These factors were external factors and, thus, beyond the control of the Company. To mitigate such negative impact, the Company thus focused on measures aiming at stricter and closer control of, particularly, the controllable costs and expenses which had material impact on the operating result of the Company such as food costs and

employee expenses. In addition, the advertising and promotion budget including spending on various marketing campaigns to promote sales were also monitored closely in order to ensure that the expected result of the proposed spending on the advertising and promotion activities would be most likely to be achieved. The implementation of these measures proved to be fairly satisfactory as indicated by the fact that the Company’s revenue from sales and services amounted to Baht 14,478 million in 2015 representing a decrease of 0.1 percent year-on-year, while total revenue of the Company amounted to Baht 14,923 million in 2015 or down by 0.2 percent from the previous year largely as a result of the decrease in interest income. However, the Company’s consolidated net income for the year 2015 decreased from the previous year by 9.1 percent to Baht 1,856 million largely due to the increase in fixed expenses such as rents, depreciation and amortization.

For the purposes of sustaining its long-term growth, the Company continued to expand its branch network in 2015 despite the restaurant business having to face increasing risk due to the unfavorable factors and the more intense competition mentioned earlier. In 2015, the Company opened a total number of 41 new restaurant outlets consisting of 16 MK Sukiyaki restaurants, 12 Yayoi Japanese restaurants, 10 Teppanyaki style Japanese restaurants operated under “Miyazaki” brand, 1 Le Siam Thai restaurant, and 2 other restaurants under different brands. However, the Company closed 6 restaurant outlets in 2015 of which three were due to extended period of operating losses and it was assessed that the chance of turning them around to profitability was very small, while the other three closures were owing to other reasons. Thus, the number of restaurants in operations in Thailand at the end of December 31, 2015 totaled 592 consisting of 413 MK restaurants, 6 MK Gold restaurants, 140 Yayoi restaurants, 22 Miyazaki restaurants, 5 Thai restaurants under “Na Siam” and “Le Siam” brands and 6 other restaurants operated under different brands.

"In light of the Company’s operating result for the year 2015 which registered a consolidated net profit of Baht 1,856 million or Baht 2.04 per share, strong financial status, and high liquidity position, the Board of Directors has resolved to recommend to the 2016 Annual General Meeting of Shareholders to pay a final dividend of Baht 1.00 per share. As an interim dividend of Baht 0.90 per share was paid to shareholders on September 8, 2015, the total dividend for the year 2015 shall thus amount to Baht 1.90 per share representing a dividend payout ratio of 93 percent for the year."

Looking ahead into the year of the monkey of 2016, the Bank of Thailand and the Office of the National Economic and Social Development Board forecast that the Thai economy in 2016 will grow at 3.5 percent and 3.3 percent respectively driven largely by the government spending and investments in mega infrastructure projects, various economic stimulus measures, and the growth momentum of the tourism sector is expected to continue in 2016. Notwithstanding such economic growth forecasts, the persistent weak purchasing power of consumers remains a concern, owing to the high household debt, the extended severe drought, and the agricultural prices are expected to remain low as they continue being pressured by the world’s prolonged low commodity prices. Nevertheless, we are confident that the solid foundation supporting our business and the robust infrastructure we have built in the past years to sustain our long-term growth, together with the strong MK brand and the capable, experienced, dedicated and a strong commitment to succeed management team will be able to overcome the tougher challenges and steer the Company to attaining its objectives in 2016.

On behalf of the Board of Directors, I would like to take this opportunity to sincerely thank all our stakeholders including shareholders, customers, business partners and staff for their unfailing trust, confidence and support through the years. We look forward to your continual partnership with us as we embark on the journey to greater success together in the future.