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Message from the chairman

Dear Shareholders

In the preceding 2015, Hot Pot Public Company Limited, has been affected from slowdown of consumers' purchasing power and an increase in awareness of their spending resulting from gradual recovery of economic condition, drought, low prices of agricultural products, and ongoing high household debt. Meanwhile competition is more intense arising from store expansion and new brand launch of the existing entrepreneurs as well as market entry of newcomers, from both local and aboard. As a consequence, the Company arranged marketing activities and discount promotion to stimulate customer spending. Such marketing activities resulted in rising marketing expenses and higher ratio of cost of sales to revenue from sales but they could not boost sufficient sale volume. In 2014, the Company reported revenue from sales of Baht 2,132.71 million, compared to Baht 2,294.72 million in 2014, showing a decrease of 162.01 million or 7.06% y-o-y. Despite lower total expenses, the decrease proportion of expenses was less than that of revenue from sales since some costs were fixed and not variable according to sales. The Company, hence, had net loss of Baht 94.99 million, compared to net loss of Baht 54.45 million in 2014.

The Company's operation in 2015 could be summarized as follows;

  1. The Company cautiously considered and selected newly opened stores, located in only potential shopping centers. The Company opened 11 new stores, compared to 18 stores in 2014. New stores opened in 2015 consisted of 8 stores invested by the Company, 1 store invested by shopping center owner, and 2 stores separated from Hot Pot stores having large area and splitting into 2 stores under "Hot Pot" and "Signature" brands. Additionally, the Company reduced capital expenditure of new store expansion without affecting service quality. Investment amount per store of "Hot Pot" declined from Baht 7 -9 million to Baht 6 - 8 million and investment amount per store of "Signature" dropped from Baht 6 - 7 million to Baht 5 - 6 million
  2. The Company closed 12 outlets, compared to 27 outlets in 2014. Outlets closed in 2015 comprised 10 outlets which have operating loss and 2 outlets which their rental contracts were expired and the Company did not want to renew the contracts. As a result, at the end of 2015, the company operated 143 outlets, decreased from 144 outlets at the ending of the previous year. The active outlet consisted of 125 outlets of "Hot Pot", 10 outlets of "Daidomon" and 8 outlets of "Signature", locating in department stores, modern trades, and shopping malls in Bangkok Metropolitan Region and up-countries in the percentage proportion of 44:55.
  3. The Company continually improves and develops food menu to meet customers' demand including food festival such as Korean spicy soup and Asian food festival.
  4. The Company arranged marketing activities in various styles and in several festivals to stimulate customers to use the Company's service. Discount promotion was implemented in line with weak purchasing power. Brand presenter was appointed to communicate brand identity. Advertisement via television and online media were undertaken to build brand recognition. In-depth marketing research was implemented to study consumers' attitude toward "Hot Pot" brand, behavior and attitude affecting restaurant selection. The research result will be as guideline to improve and develop the Company's products and service, to establish brand management strategies as well as marketing strategies and finally to satisfy consumers' need effectively. The research report was completed at the end of year 2015 and the Company will consider and proceed as deem appropriate.

In 2016, economic situation is forecasted to be improved supported by government's spending and investment and tourism. However, economic growth will spread in limit groups and not expand to agricultural sector which still encounters with drought, low farm prices and high household debt. Consequently, household spending will be lessen affecting the Company's operating results. In addition, more intense competition, together with the continuous increase in raw material costs will have impact on the Company's performance. Therefore, the Company will closely monitor and evaluate the situations so that the business strategies and policies will be established properly and prudently for the optimum interests of the Company through the emphasis on building the stronger existing brands. New food with identity will be created and developed to fulfill customer's satisfaction. Service quality will be improved and developed to be standardized. Brand awareness will be built by advertisement via several media appropriately and ongoing arrangement of sales promotion and marketing activities directly to target customers. Additionally, the Company will focus on improving internal operation management to be more efficient including expense and cost management, human resource management, personnel potential development, and information technology system which provides data easily, quickly, accurately and can be analyzed for management purposes timely. For stores having operating loss, the Company will hurry to implement proper means by rebranding or modifying service styles or splitting store's excessive area into 2 stores or ceasing operation. Regarding expansion, the Company will more selectively consider opening new stores by only focusing on potential location. The Company also consider to expand business by selling franchise in both local and AEC countries, developing new restaurant brands as well as adding new channels for Suki sauce distribution.

Finally, on the behalf of the representative of the management and employees, we would like to express our sincere gratitude to all our stakeholders, shareholders, customers, financial institutions, business partners and business alliances to continuously cooperate and support operation of the Company and hope that we will always receive your strong support in the future. We also thank to executives and staffs who have exceedingly dedicated and collaborated to perform their duties. The Company assures to all of you that our operations shall be aimed in compliance with the principles for good corporate governance, adherence to business code of conduct and focus on corporate social responsibilities for sustainable and stable company growth creation henceforth.