Company Quick10K Filing
Asia Pacific Wire & Cable
20-F 2020-12-31 Filed 2021-04-29
20-F 2019-12-31 Filed 2020-04-29
20-F 2018-12-31 Filed 2019-04-29
20-F 2017-12-31 Filed 2018-04-30
20-F 2016-12-31 Filed 2017-05-01
20-F 2015-12-31 Filed 2016-05-02
20-F 2014-12-31 Filed 2015-04-30
20-F 2013-12-31 Filed 2014-05-01
20-F 2012-12-31 Filed 2013-04-30
20-F 2011-12-31 Filed 2012-04-30
20-F 2010-12-31 Filed 2011-05-13
20-F 2009-12-31 Filed 2010-05-14

APWC 20F Annual Report

Part I
Item 1: Identity of Directors, Senior Management and Advisers
Item 2: Offer Statistics and Expected Timetable
Item 3: Key Information
Item 4: Information on The Company
Item 4A: Unresolved Staff Comments
Item 6: Directors, Senior Management and Employees
Item 7: Major Shareholders and Related Party Transactions
Item 12: Description of Securities Other Than Equity Securities
Part II
Item 13: Defaults, Dividend Arrearages and Delinquencies
Item 14: Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15: Controls and Procedures
Item 16A: Audit Committee Financial Expert
Item 16B: Code of Ethics
Item 16C: Principal Accountant Fees and Services
Item 16D: Exemptions From The Listing Standards for The Audit Committees
Item 16E: Purchases of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F: Change in Registrant's Certifying Accountant
Part III
EX-2.1 apwc-ex21_7.htm
EX-4.2 apwc-ex42_728.htm
EX-12.1 apwc-ex121_6.htm
EX-12.2 apwc-ex122_8.htm
EX-13.1 apwc-ex131_9.htm
EX-13.2 apwc-ex132_10.htm

Asia Pacific Wire & Cable Earnings 2020-12-31

Balance SheetIncome StatementCash Flow

20-F 1 apwc-20f_20201231.htm 20-F apwc-20f_20201231.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-14542

ASIA PACIFIC WIRE & CABLE

CORPORATION LIMITED

(Exact name of Registrant as specified in its charter)

Bermuda

(Jurisdiction of incorporation or organization)

15/Fl. B, No. 77, Sec. 2

Dunhua South Road

Taipei, 106, Taiwan

Republic of China

(Address of principal executive offices)

 

Ivan Hsia

15/Fl. B, No. 77, Sec. 2

Dunhua South Road

Taipei, 106, Taiwan

Republic of China

Tel: +886-2-27122558

Email: ivan.hsia@apwcc.com

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

 Common Shares,

par value 0.01 per share

APWC

 NASDAQ Capital Market

 

 

 

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

 

 


Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

13,819,669 Common Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    

 Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated Filer Accelerated filer  Non-accelerated filer  Emerging growth company 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP 

International Financial Reporting Standards as issued by the International Accounting Standards Board 

Other 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

 Item 17 Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 Yes No 

 

 

 

 

 

 

 


 

CERTAIN DEFINITIONS AND CONVENTIONS

Asia Pacific Wire & Cable Corporation Limited (“APWC”), the registrant, together with its subsidiaries, is referred to herein as “the Company,” “we,” “our,” or “us” unless designated or identified otherwise.

Unless otherwise specified, all references in this Annual Report to “Thailand” are to the Kingdom of Thailand, all references to “Singapore” are to The Republic of Singapore, all references to “Taiwan” are to Taiwan, The Republic of China, all references to “China” or to the “PRC” are to The People’s Republic of China (for the purpose of this Annual Report, excluding Hong Kong and Macau), all references to “Australia” are to the Commonwealth of Australia and all references to the “United States” or “U.S.” are to the United States of America.

Most measurements in this Annual Report are given according to the metric system. Standard abbreviations of metric units (e.g., “mm” for millimeter) have been employed without definitions. All references in this Annual Report to “tons” are to metric tons, which are equivalent in weight to 2,204.6 pounds.

With respect to measurements relating to the manufacture of wire and cable products, references to “pkm” are to kilometers of twisted pairs of copper wires.

Dollar amounts in this Annual Report are expressed in thousands ($000), except where otherwise indicated or with respect to earnings per share.

Unless otherwise specified, all references in this Annual Report to “$,” “U.S. dollars”, “USD” or “US$” are to United States dollars, the legal tender currency of the United States; all references to “Bt,” “Thai Baht” or “Baht” are to Baht, the legal tender currency of Thailand; all references to “Sing$” or “S$” are to Singapore dollars, the legal tender currency of Singapore; all references to “A$” or “AU$” are to Australian dollars, the legal tender currency of Australia; and all references to “RMB” are to Chinese Renminbi, the legal tender currency of China.

All references to “outstanding” in respect of APWC’s Common Shares shall mean that such Common Shares have been issued by APWC and are not registered in APWC’s register of members as treasury shares.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current beliefs or expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” “believe”, “may”, “should”, “likely”, “seeks” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance.

 

 


Such statements are not promises or guarantees and are subject to a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include our ability to maintain and develop market share for our products; global, regional or national economic and financial conditions, the global drop in demand for and the pricing of commodities, including copper, our principal raw material, and their individual or collective impact on demand for our products and services; the introduction of competing products or technologies; the volatility of share prices on major securities exchanges throughout the world, our inability to successfully identify, consummate and integrate acquisitions; our potential exposure to liability claims; the uncertainty and volatility of the markets in which we operate; changes in laws or regulations applicable to the Company in the markets in which we conduct business; the availability and price of copper, our principal raw material; our ability to negotiate extensions of labor agreements on acceptable terms and to successfully deal with any labor disputes; our ability to service and meet all requirements under our debt, and to maintain adequate credit facilities and credit lines; in certain markets, our ability to compete effectively with state-owned enterprises (“SOEs”), which may receive governmental subsidies to enhance results or receive preferred vendor status in state controlled projects; our ability to make payments of interest and principal under our existing and future indebtedness; our ability to increase manufacturing capacity and productivity; the fact that we have operations outside the United States that may be materially and adversely affected by acts of terrorism, war and political and social unrest, or major hostilities; exposure to political and economic developments, crises, instability, terrorism, civil strife, expropriation and other risks of doing business in foreign markets; economic consequences arising from natural disasters and other similar catastrophes, such as floods, earthquakes, hurricanes and tsunamis; the fact that APWC is a holding company that depends for income upon distributions from operating subsidiaries, most of which are not wholly-owned and for which there may be restrictions on the timing and amount of distributions; price competition and other competitive pressures; the impact of climate change on our business and operations and on our customers; tax inefficiencies associated with our cross-border operations, including without limitation, limitations on our ability to utilize net losses within our group of companies for income tax purposes; fluctuations in currency, exchange and interest rates, operating results and the impact of technological changes and other factors that are discussed in this report and in our other filings made with the Securities and Exchange Commission (the “SEC” or the “Commission”).

In particular, these statements include, among other things, statements relating to:

 

our business strategy;

 

our prospects for future revenues and profits in the markets in which we operate;

 

the impact of political, legal or regulatory changes or developments in the markets in which we do business;

 

our dependence upon the level of business activity and investment by our customers for the generation of our sales revenue;

 

our reliance on our majority shareholder for research and development relating to our product lines

 

the fact that APWC’s common shares (the “Common Shares”) are traded on a national exchange in the United States and the relative liquidity or lack thereof, based upon the historical trading volume of our publicly-traded Common Shares;

 

our dependence on a limited number of suppliers for our raw materials and our vulnerability to fluctuations in the cost of our raw materials; and

 

the liquidity generally of our property and assets.

We undertake no obligation to update any forward-looking statements or other information contained in this Annual Report, whether as a result of new information, future events or otherwise, except as required by law. You are advised, however, to consult any additional disclosures we make in our filings with the SEC. Also note that we provide a cautionary discussion of risks and uncertainties under the “Risk Factors” section of this Annual Report. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed there could also adversely affect us.

 

 

 


 

Part I

Item 1:

Identity of Directors, Senior Management and Advisers

Not applicable

ITEM 2:

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable

Item 3:

Key Information

 

3.a.

Selected Consolidated Financial Data

The following selected consolidated financial data is derived from the consolidated financial statements of the Company for the years ended December 31, 2020, 2019, 2018, 2017, and 2016, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The selected data set forth below should be read in conjunction with, and is qualified in its entirety by, the discussion in “Item 5. Operating and Financial Review and Prospects” and the consolidated financial statements and the notes thereto referenced in “Item 18. Financial Statements.”

 

 

For the Year Ended December 31,

 

 

2020

 

2019 (3)

 

2018 (2)

 

2017

 

2016

 

 

(in US$ thousands, except for earnings per share)

 

Income Statement Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

313,564

 

$

338,160

 

$

425,940

 

$

425,215

 

$

384,565

 

Costs of sales

 

(279,686

)

 

(313,373

)

 

(389,692

)

 

(385,527

)

 

(352,957

)

Gross profit

 

33,878

 

 

24,787

 

 

36,248

 

 

39,688

 

 

31,608

 

Other operating income

 

814

 

 

385

 

 

805

 

 

5,084

 

 

5,441

 

Selling, general & administrative expenses

 

(27,006

)

 

(25,051

)

 

(26,924

)

 

(27,248

)

 

(26,325

)

Other operating expenses

 

(129

)

 

(770

)

 

(1,445

)

 

(909

)

 

(3,386

)

Operating profit/(loss)

 

7,557

 

 

(649

)

 

8,684

 

 

16,615

 

 

7,338

 

Finance costs

 

(744

)

 

(1,012

)

 

(1,378

)

 

(1,221

)

 

(1,147

)

Finance income

 

320

 

 

506

 

 

482

 

 

876

 

 

1,045

 

Share of loss of associates

 

(1

)

 

(3

)

 

(3

)

 

(3

)

 

(710

)

Impairment of investment in associates

 

 

 

 

 

 

 

 

 

(126

)

Loss on liquidation of a subsidiary

 

 

 

 

 

 

 

(261

)

 

 

Exchange (loss)/gain

 

(579

)

 

1,550

 

 

1,741

 

 

2,784

 

 

(38

)

Other income

 

1,173

 

 

717

 

 

1,817

 

 

214

 

 

267

 

Other expense

 

(1

)

 

(3

)

 

(11

)

 

(336

)

 

(94

)

Profit before taxes

 

7,725

 

 

1,106

 

 

11,332

 

 

18,668

 

 

6,535

 

Income taxes expense

 

(4,016

)

 

(2,057

)

 

(3,886

)

 

(5,140

)

 

(510

)

Profit/(Loss) for the year

$

3,709

 

$

(951

)

$

7,446

 

$

13,528

 

$

6,025

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity holders of APWC

$

(552

)

$

(1,632

)

$

2,928

 

$

8,720

 

$

2,853

 

Non-controlling interests

$

4,261

 

$

681

 

$

4,518

 

$

4,808

 

$

3,172

 

Earnings per share (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (loss)/profit for the year attributable to equity holders of the parent

$

(0.04

)

$

(0.12

)

$

0.21

 

$

0.63

 

$

0.21

 

 

 

5

 


 

 

As of December 31,

 

 

2020

 

2019 (3)

 

2018 (2)

 

2017

 

2016

 

 

(in US$ thousands)

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

52,237

 

$

53,673

 

$

60,778

 

$

46,093

 

$

48,231

 

Working capital

 

180,323

 

 

185,855

 

 

182,410

 

 

181,752

 

 

157,012

 

Total assets

 

338,119

 

 

298,911

 

 

305,798

 

 

334,843

 

 

293,596

 

Total debts

 

13,781

 

 

11,356

 

 

24,814

 

 

42,688

 

 

29,762

 

Net assets

 

234,875

 

 

228,435

 

 

221,816

 

 

222,826

 

 

197,175

 

Capital stock

 

138

 

 

138

 

 

138

 

 

138

 

 

138

 

Total APWC shareholders’ equity

 

157,860

 

 

153,854

 

 

150,028

 

 

153,328

 

 

135,950

 

(1)

The calculation of the earnings per share is based on 13,819,669 basic and diluted weighted Common Shares issued and outstanding for each of the years ended December 31, 2020, 2019, 2018, 2017, and 2016.

(2)

Includes the impact of the application of IFRS 9 and IFRS 15.

(3)

Includes the impact of the application of IFRS 16, as explained in Note 4.1(a) of our consolidated financial statements presented herewith.

 

Exchange Rate Information

Unless otherwise noted, for the convenience of the reader, translations of amounts from Baht, Singapore dollars, Renminbi and Australian dollars to U.S. dollars have been made at the respective noon buying rates in New York City for cable transfers in those currencies as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on December 31, 2020. The respective Noon Buying Rates on December 31, 2020 were US$ 1.00 = Bt 30.02; S$ 1.321; RMB 6.525; and A$ 1.297. The respective Noon Buying Rates on March 31, 2021, the latest practicable date before publication of this Annual Report, were US$ 1.00 = Bt 31.25; S$ 1.344; RMB 6.552 and A$ 1.314. No representation is made that the foreign currency amounts could have been or could be converted into U.S. dollars on these dates at these rates or at any other rates.

Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.

Thailand

The Thai Baht is convertible into foreign currencies and is subject to a managed float against a basket of foreign currencies, the most significant of which is the U.S. dollar. The composition of the basket for determining the value of the Baht is not made public by the Bank of Thailand. The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Thai Baht. No representation is made that the Baht or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Baht, as the case may be, at any particular rate or at all.

Year Ended December 31,

At Period End

 

Average(1)

 

High

 

Low

 

 

(Bt per $1.00)

 

2016

 

35.81

 

 

35.22

 

 

36.33

 

 

34.54

 

2017

 

32.56

 

 

33.75

 

 

35.89

 

 

32.49

 

2018

 

32.31

 

 

32.27

 

 

33.44

 

 

31.11

 

2019

 

29.75

 

 

30.89

 

 

32.26

 

 

29.75

 

2020

 

30.02

 

 

31.32

 

 

33.04

 

 

29.79

 

 

(1)

Average means the average of the Noon Buying Rates on the last day of each month during a year.

6

 


The high and low exchange rates for the six months preceding the date of this Annual Report were:

 

Month

High

 

Low

 

October 2020

 

31.56

 

 

31.02

 

November 2020

 

31.13

 

 

30.18

 

December 2020

 

30.27

 

 

29.79

 

January 2021

 

30.14

 

 

29.89

 

February 2021

 

30.46

 

 

29.86

 

March 2021

 

31.30

 

 

30.21

 

Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.

Singapore

The Singapore dollar is convertible into foreign currencies and floats against a trade-weighted basket of foreign currencies, the composition of which is not made public by Singapore’s central bank, the Monetary Authority of Singapore, but of which the U.S. dollar is a component. The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Singapore dollar. No representation is made that the Singapore dollar or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Singapore dollars, as the case may be, at any particular rate or at all.

 

Year Ended December 31,

At Period End

 

Average(1)

 

High

 

Low

 

 

(S$ per $1.00)

 

2016

 

1.447

 

 

1.382

 

 

1.452

 

 

1.337

 

2017

 

1.336

 

 

1.373

 

 

1.450

 

 

1.336

 

2018

 

1.362

 

 

1.350

 

 

1.384

 

 

1.304

 

2019

 

1.345

 

 

1.363

 

 

1.391

 

 

1.345

 

2020

 

1.321

 

 

1.337

 

 

1.461

 

 

1.321

 

(1)

Average means the average of the Noon Buying Rates on the last day of each month during a year.

The high and low exchange rates for the six months preceding the date of this Annual Report were:

 

Month

High

 

Low

 

October 2020

 

1.368

 

 

1.353

 

November 2020

 

1.366

 

 

1.340

 

December 2020

 

1.338

 

 

1.321

 

January 2021

 

1.329

 

 

1.318

 

February 2021

 

1.337

 

 

1.320

 

March 2021

 

1.350

 

 

1.329

 

Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.

7

 


China

The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign currencies, including the conversion rate limitations on capital transfers and through restrictions on foreign trade and other regulatory impediments to the free transferability of capital. The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Renminbi. No representation is made that the Renminbi or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all.

 

Year Ended December 31,

At Period End

 

Average(1)

 

High

 

Low

 

 

(RMB per $1.00)

 

2016

 

6.943

 

 

6.655

 

 

6.958

 

 

6.448

 

2017

 

6.506

 

 

6.735

 

 

6.958

 

 

6.477

 

2018

 

6.876

 

 

6.629

 

 

6.974

 

 

6.265

 

2019

 

6.962

 

 

6.901

 

 

7.179

 

 

6.682

 

2020

 

6.525

 

 

6.888

 

 

7.168

 

 

6.521

 

(1)

Average means the average of the Noon Buying Rates on the last day of each month during a year.

The high and low exchange rates for the six months preceding the date of this Annual Report were:

 

Month

High

 

Low

 

October 2020

 

6.790

 

 

6.650

 

November 2020

 

6.690

 

 

6.556

 

December 2020

 

6.571

 

 

6.521

 

January 2021

 

6.482

 

 

6.428

 

February 2021

 

6.487

 

 

6.434

 

March 2021

 

6.572

 

 

6.465

 

Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.

Australia

The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Australian dollar. No representation is made that the Australian dollar or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Australian dollars, as the case may be, at any particular rate or at all.

 

Year Ended December 31,

At Period End

 

Average(1)

 

High

 

Low

 

 

(A$ per $1.00)

 

2016

 

1.383

 

 

1.346

 

 

1.459

 

 

1.279

 

2017

 

1.280

 

 

1.301

 

 

1.383

 

 

1.239

 

2018

 

1.419

 

 

1.344

 

 

1.425

 

 

1.234

 

2019

 

1.423

 

 

1.438

 

 

1.493

 

 

1.373

 

2020

 

1.297

 

 

1.448

 

 

1.738

 

 

1.297

 

(1)

Average means the average of the Noon Buying Rates on the last day of each month during a year.

8

 


The high and low exchange rates for the six months preceding the date of this Annual Report were:

 

Month

High

 

Low

 

October 2020

 

1.427

 

 

1.382

 

November 2020

 

1.419

 

 

1.359

 

December 2020

 

1.360

 

 

1.297

 

January 2021

 

1.306

 

 

1.284

 

February 2021

 

1.318

 

 

1.257

 

March 2021

 

1.321

 

 

1.278

 

Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.

 

3.b.

Capitalization and Indebtedness

Not applicable

 

3.c.

Reasons for the Offer and Use of Proceeds

Not applicable.

 

3.d.

Risk Factors

You should carefully consider the following risks in connection with any investment in the Company, including any investment in the Common Shares. If any one of these risks or uncertainties occurs, our business, financial condition and results of operations could be materially and adversely affected. The risks and uncertainties described in this Annual Report on Form 20-F are not the only ones facing us. Additional risks and uncertainties that currently are not known to us or that we currently believe are not material also may adversely affect our business, financial condition and results of operations.

Risks Relating to Our Business

COVID-19 Could Have a Material Adverse Effect on Our Business, Financial Condition and Results of Operations

The outbreak of the Coronavirus Disease 2019 (“COVID-19”), which has been declared by the World Health Organization to be a “public health emergency of international concern,” has spread across the globe and is impacting worldwide economic activity and financial markets. We are facing significant adverse risks related to the spread of COVID-19, and the recent developments surrounding the global pandemic have had, and are expected to continue to have, significant adverse effects on our business, financial condition, results of operations, and cash flows. As a result, COVID-19 could have a material and adverse effect on our business, financial condition, and results of operations.

Our manufacturing and production have been affected by the outbreak of COVID-19. COVID-19 has affected and disrupted our operations and the operations of our suppliers, customers, and other business partners, including as a result of travel restrictions, business shutdowns, and other COVID-19 containment measures. A slowdown in economic activity as a result of COVID-19 has also resulted in, and could continue to result in, a reduction in demand for our products.

Due to the measures instituted in China in response to COVID-19, our China production facilities had been operating below normal production levels in the first half of 2020. Although our production in China has recovered, there can be no assurance that it will not decrease again as a result of COVID-19.

9

 


The Singapore government implemented a partial lockdown, also known as a circuit breaker, from April 7, 2020 to June 1, 2020. During this circuit breaker period, we were permitted to continue to operate with reduced on site staff, and approximately half of the employees of our Singapore operation worked from home while the remaining employees continued to work on-site. Although the Singapore government eased some of the circuit breaker measures after June 1, 2020, we cannot predict whether the Singapore government will again institute measures requiring businesses to close or reduce on-site staff, or if it will institute other measures in response to COVID-19 that could have a material adverse effect on our business, financial condition or results of operations. COVID-19 has had, and is expected to continue to have, a negative impact on our business in Singapore. In addition, COVID-19 has delayed the fulfillment of contracts with our customers, causing negative impacts on our cash flow and liquidity. If we are not able to expand or extend lines of credit from banks, we may negotiate business terms with our suppliers to meet our liquidity needs in Singapore, which could cause an increase in financing costs.

The impact of COVID-19 is constantly changing. Our operations in Thailand and Australia could be materially and adversely affected if an outbreak recurs in these regions. Although we are monitoring the situation, the extent to which COVID-19 impacts our business will depend on future developments, which are uncertain and unpredictable in nature.

We are facing increased operational challenges as we take measures to support and protect employee health and safety as a result of COVID-19. For example, in order to protect the employees from COVID-19, the Company has taken measures to protect its employees, including temperature checks before entering the workplace, mandatory mask-wearing, social distancing, and work from home. We have also implemented staggered work hours to lower the risk that our employees might get infected on public transportations if they commute during peak hours. In particular, our remote work arrangements, coupled with stay-at-home orders and quarantines, pose challenges to our employees and our IT systems, and the extension of remote work arrangements could increase operational risk, including cyber security and IT systems management risks, and impair our ability to manage our business. The increased operational challenges could have a material and adverse effect on our business, financial conditions, and results of operations.

COVID-19 has also adversely impacted the recoverability of certain of our assets and resulted in the recognition of impairment charges for the year ended December 31, 2020. COVID-19 is expected to continue to impact the recoverability of the Company’s assets and lead to further impairment charges in the future. In addition, COVID-19 is also expected to result in a decline in the price of copper, which has the effect of reducing the value of our inventory.

If COVID-19 continues to adversely affect our business operations and financial results, the probability of the occurrence of other risks described in this Annual Report could also increase. Further, COVID-19 may materially and adversely affect our business, operations and financial results in manners that are not presently known to us or that we currently do not anticipate.

Risks Relating to Copper

Copper is the principal raw material we use, accounting for a majority of the cost of sales. Our prevailing practice is to purchase copper at prices based on the average prevailing international spot market prices on the London Metal Exchange (the “LME”) for copper for the one month prior to purchase. The price of copper is affected by numerous factors beyond our control, including global economic and political conditions, supply and demand, inventory levels maintained by suppliers, actions of participants in the commodities markets and currency exchange rates. As with other costs of production, changes in the price of copper may affect the Company’s cost of sales. Whether this has a material impact on our operating margins and financial results depends primarily on the Company’s ability to adjust selling prices to its customers, such that increases and decreases in the price of copper are fully reflected in those selling prices and customers continue to place orders. Most of our sales of manufactured products reflect the cost of copper used to manufacture those products at the time the products are ordered. In the ordinary course of business we maintain inventories of raw materials and finished products reasonably necessary for the conduct of our business. These inventories typically reflect the cost of copper prevailing in the market at the time of purchase. A long-term decrease in the price of copper would require the Company to revalue its inventory at

10

 


periodic intervals to the then net realizable value, which could be below cost. Copper prices have been subject to considerable volatility, and it is not always possible to manage our copper purchases and inventory so as to neutralize the impact of copper price volatility. In addition, an excessive increase in the price of copper could result in fewer orders from customers and negatively impact the Company. Accordingly, significant volatility in copper prices could have a material adverse effect on our business, financial condition and results of operations.

Competition

The wire and cable industry in the Asia Pacific region is highly competitive, and if we fail to successfully invest in and maintain product development, productivity improvements and customer service and support, sales of our products could be materially adversely affected. Our competitors include a large number of independent domestic and foreign suppliers. Certain competitors in each of our markets have substantially greater manufacturing, sales, research and financial resources than we do. We and other wire and cable producers compete primarily on the basis of product quality and performance, reliability of supply, customer service, and price. To the extent that one or more of our competitors are more successful with respect to the primary competitive factors, our business could be materially adversely affected. In addition, the Company’s business could be materially adversely impacted if low margin wire and cable manufacturers in China enter into the markets where we operate. Certain of our products are made to common specifications and may be interchangeable with the products of certain of our competitors. Since customers could potentially substitute our products with those of our competitors, customer loyalty is an important pillar of our business’s competitive position.

In addition, in order to remain competitive in the industry, the Company must periodically make substantial investments in capital equipment to ensure that our production processes are and remain state-of-the-art. Capital expenditures are not always predictable, as they are often driven by customer requirements for enhanced products. We cannot guarantee we will have the available capital to make such capital expenditures when required, which could materially adversely affect our business, financial condition and results of operations.

Alternative Transmission Technologies

Our telecommunications cable business is subject to competition from other transmission technologies, principally wireless-based technologies. Wireless telecommunications businesses have sometimes made substantial inroads in early emerging markets where sufficient funding may not then be available to install the infrastructure necessary for market-wide fixed line telecommunications. In addition, the ease of use of wireless telecommunications may make that medium an attractive alternative in circumstances where access to fixed line telecommunications is limited. These technologies present significant competition in the markets in which we conduct or plan to conduct business and no assurance can be given that the future development and use of such alternative technologies will not materially adversely affect our business, financial condition and results of operations.

We Operate in Highly Concentrated Markets

Failure to properly execute customer projects in markets where a small number of customers are responsible for a large portion our sales could materially adversely impact our ability to obtain similar contracts from other customers in that market and may result in material financial penalties. In certain of our markets, sales of manufactured products are highly concentrated in large state-controlled entities or large private infrastructure developers. As those markets are often highly concentrated, the loss of individual customers in such markets could have a material adverse impact on our position in that market as a whole and could materially adversely affect our business, financial condition and results of operations.

 

11

 


 

PEWC May not Perform Its Obligations under the Composite Services Agreement

We engage in transactions in the ordinary course of business with PEWC, including the purchase of certain raw materials and the distribution of PEWC products in various countries in the Asia Pacific region. We and PEWC have entered into a composite services agreement dated November 7, 1996, as amended and supplemented (the “Composite Services Agreement”), which contains provisions that define our relationship and the conduct of our respective businesses. The Composite Services Agreement is renewable at our option and is currently in force. Under the Composite Services Agreement, PEWC has agreed to supply APWC with copper and provides research and development for our products. However, we are unable to ensure that PEWC will not in the future seek to limit, or be unable to perform in whole or in part, the business it conducts with the Company pursuant to the terms of the Composite Services Agreement. Any such limitation or inability to perform the Composite Services Agreement on PEWC’s part could have a material adverse effect on our business, financial condition and results of operations. (See “Item 10.C. Material Contracts” for a description of the Composite Services Agreement.)

Our Insurance Coverage Does Not Cover All of Our Business Risks

Our global operations are subject to many risks including errors and omissions, infrastructure disruptions such as large-scale outages or interruptions of service from utilities or telecommunications providers, supply chain interruptions, third-party liabilities and fires or natural disasters. The Company maintains insurance policies covering certain buildings, machinery and equipment against specified amounts of damage or loss caused by fire, flooding, other natural disasters and burglary and theft. The Company does not carry insurance for consequential loss arising from business interruptions or political disturbances and does not carry product liability insurance. In addition, the Company does not have business liability or disruption insurance for its operations in China and the Company does not have coverage for flood damage or business interruption for its operations in Thailand. Consequently, the amount of our insurance coverage may not be adequate to cover all potential claims or liabilities, and we may be forced to bear substantial costs resulting from the lack of adequate insurance. No assurance can be given that we will not incur losses beyond the limits or outside the scope of coverage of our insurance policies. Accordingly, we may be subject to an uninsured or under-insured loss in such situations. Any failure to maintain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition and results of operations.

Employees’ Unions

Some of APWC’s operating subsidiaries have a large number of employees that are members of employees’ unions. Failure to successfully negotiate and/or renew collective agreements, strikes, or other labor disputes could result in a disruption of our operations. Any such labor dispute could lead to a disruption of our operations, hindering our ability to serve our customers, and could have a material adverse effect on the Company and could materially adversely affect our business, financial condition and results of operations.

Employees and Personnel

If we fail to retain our key employees and attract qualified personnel, our business may be harmed. The loss of any of our executive officers or other key employees could have a material adverse effect on our business, financial condition and results of operations. The loss of executive officers or key employees could impair customer relationships and result in the loss of vital industry knowledge, expertise, and experience. There is also a risk of losing key employees to our competitors, which could pose a possible risk of the theft of trade secrets, with competitors then gaining valuable information about our manufacturing process. Increased costs associated with recruiting, motivating and retaining qualified personnel could have a negative impact on our profitability. The Company’s future success depends on its continued ability to attract and retain talented and qualified personnel.

 

12

 


 

Environmental Liabilities

We are subject to certain environmental protection laws and regulations governing our operations and the use, handling, disposal and remediation of hazardous substances used by us. We could incur environmental liability from our manufacturing activities in the event of a release or discharge by us of a hazardous substance. Under certain environmental laws, we could be held responsible for the remediation of any hazardous substance contamination at our facilities and at third party waste disposal sites and could also be held liable for any consequences arising out of human exposure to such substances or other environmental damage. There can be no assurance that the costs of complying with environmental, health and safety laws and requirements arising from our current operations, or the liabilities arising from past releases of, or exposure to, hazardous substances, will not result in future liabilities incurred, or expenditures payable, by us that would materially adversely affect our business, financial condition and results of operations.

Information Systems Failure or Cyber Security Breaches Could Have a Material Adverse Effect on Our Business, Financial Condition, and Results of Operations

APWC's subsidiaries each have their respective information systems to support the operation of such subsidiary. While APWC’s operating subsidiaries vary in the degree of reliance that they place on their information systems, any failure or interruption of these systems could materially adversely affect the Company’s business, financial condition and results of operations. Among other things, financial data may be corrupted and financial information may not be accurately reported or presented in a timely manner, which could impair the Company’s ability to timely file periodic or annual reports with the SEC or timely disseminate material information to shareholders.

Cyber security presents risks and threats to us because intense competition in the wire and cable sector renders the Company vulnerable to theft and copying of design specifications. While the Company relies upon its majority shareholder, PEWC, for much of its research and development, its products are designed precisely to meet customer specifications for the applications for which they are intended. Cyber security risks create the potential for a material adverse impact on the Company’s business, financial condition and result of operations due to, but not limited to, losing intellectual property, implementing reactive measures, managing litigation or investigations, addressing reputational harm, or losing a competitive advantage. To date, none of the cyber incidents identified have had a material adverse effect on our business. However, we do not have visibility into all unauthorized incursions and our systems may be experiencing ongoing incursions of which we are not aware. Mitigating these risks requires ongoing management oversight to ensure that sufficient controls and procedures are in place for appropriate persons to receive pertinent cyber security risk information to take appropriate action. We cannot offer any assurance that those controls and procedures will be sufficient to protect against cyber security risks and that our business, financial condition and results of operations will not be materially and adversely affected as a result of any such failure.

Increased reliance on information systems requires the implementation of information technology (“IT”) security measures to protect networks, computers, programs and data from attack, damage or unauthorized access and ensure the confidentiality, availability and integrity of Company data. The Company employs safeguards, both technological and contractual, in order to protect its proprietary interests and those of its customers and third-party licensors, including, without limitation, certain insurance against theft and risk of loss. However, we cannot guarantee that such safeguards will protect the Company from all types of IT and cyber security threats. If the Company’s IT and cyber security measures are compromised or otherwise fail to protect systems, networks and data, or if an event of force majeure occurs and the Company’s disaster recovery plan does not operating effectively, the Company’s business may be disrupted and stand to lose assets, reputation and business, and potentially face regulatory fines and litigation as well as the cost of remediation, which could materially adversely impact the Company’s business, financial condition and results of operations.

 

Risks Related to our Financial Activities

Restrictive covenants and default provisions in our existing debt agreements may materially restrict our operations as well as adversely affect our liquidity, business, financial condition and results of operations.

If our business units do not generate sufficient cash flows from operations, we may be unable to make required payments on our debt, including on debt secured by our or our subsidiaries’ assets. Any such failure to

13

 


make any such payment could have a material adverse effect on our liquidity, business, financial condition and results of operations.

In addition our debt agreements contain restrictive covenants and default provisions. Covenants in the agreements governing our existing debt, and debt we may incur in the future, may materially restrict our operations, including our ability to incur debt, pay dividends, make certain investments and payments, and encumber or dispose of assets. In addition, any global economic deterioration may cause us to incur significant net losses or force us to assume considerable liabilities. We cannot assure you that we will be able to remain in compliance with our financial covenants, which, as a result, may lead to a default. This may thereby restrict our ability to access unutilized credit facilities or the global capital markets to meet our liquidity needs. Furthermore, a default under any agreement by APWC or APWC’s subsidiaries may trigger cross-defaults under our other agreements. In the event of default, we may not be able to cure the default or obtain a waiver on a timely basis. An event of default under any agreement timely governing our existing or future debt, if not cured or waived, could have a material adverse effect on our liquidity, business, financial condition and results of operations. Please see Section 5.b. (“Liquidity and Capital Resources”) of this Annual Report and Note 27(c) of our consolidated financial statements referenced in Item 18 of this Annual Report for a further discussion of our secured and unsecured indebtedness, including with respect to the loan agreement pursuant to which APWC borrowed $6 million from PEWC (which loan is secured by a pledge of APWC’s 98.3% ownership interest in our subsidiary, Sigma Cable Company (Private) Limited).

 

We Face Uncertainties Relating to the Phasing Out of LIBOR

In July 2017, the U.K. Financial Conduct Authority, which regulates the London interbank offered rate (LIBOR), announced that it intends to phase out LIBOR by the end of 2021. Discontinuation of LIBOR and uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the amounts of interest we pay under our debt arrangements and materially adversely affect our business, financial condition and results of operations.

Risks Relating to Our Exposure to Foreign Exchange Fluctuations

Our principal operations and properties are located in the three regions that constitute our business segments, namely the North Asia, Thailand and Rest of the World (“ROW”) regions. Although our reporting currency is the U.S. dollar, the functional currency of our Thailand region, which accounted for 45.81% of sales in 2020, is the Thai Baht. The functional currencies of our ROW region, which accounted for 30.85% of sales in 2020, are the Australia dollar and the Singapore dollar. The functional currencies for our North Asia operations, which, in total accounted for 23.34% of sales in 2020, are divided into two groups: (i) PEWSC, whose functional currency is the Renminbi, and (ii) CCH HK, whose functional currency is the U.S. dollar. Accordingly, the functional currency accounts of these operations are all translated into U.S. dollars utilizing the reporting date exchange rate for balance sheet accounts, and an average exchange rate for the year for the income statement accounts, for reporting purposes. Any devaluation of the Baht, the Australian dollar, the Singapore dollar, or the Renminbi against the U.S. dollar would adversely affect our financial performance, as measured in U.S. dollars.

The Company conducts business in many foreign currencies and is subject to exchange rate risk on cash flows related to sales, expenses, financing and investment transactions. A substantial portion of our aggregate revenues is denominated in the following currencies: Renminbi, Baht, Australian dollars and Singapore dollars, while our purchases of raw materials and expenditures related to equipment upgrades are largely denominated in U.S. dollars. Any devaluation of the Baht, the Australian dollar, the Singapore dollar or the Renminbi against foreign currencies (such as the U.S. Dollar) would increase the effective cost of transactions denominated in such other foreign currencies. This would have an adverse impact on our operations and cash flows. Likewise, an increase in U.S. dollar borrowing costs and any increase in the strength of the U.S. dollar in foreign exchange markets (which could also increase borrowing rates) could materially adversely affect our business in the markets where we have operating plants (Thailand, China, Singapore and Australia). Consequently, adverse movements in exchange rates could have a material adverse effect on our business, financial condition and results of operations.

14

 


In addition, a portion of our investment properties and financial instruments are denominated in currencies other than the U.S. dollar. Accordingly, our investment results will be subject to possible currency rate fluctuations as well as the volatility of overseas capital markets. Our results of operations may be materially impacted by those fluctuations and volatility.

Impairment Charges

In prior years, we have on occasion recognized impairment charges on certain property, plant and equipment due to lack of profitability. An impairment charge may be incurred for various reasons including, but not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on our business or a material adverse change in any material relationships with our clients. If we recognize significant impairment charges, our results of operations may be materially adversely affected.

 

Risk Relating to the Regions in which We Operate

Risks Relating to Thailand

A substantial portion of our Thai operations consists of the manufacture of telecommunications and power cables and sales of those products for use in various construction and infrastructure projects in Thailand. The performance of the Company’s Thai operations is affected by the political and economic situation in Thailand. In recent years, the level of government involvement in infrastructure development has tended to track increases or contractions in Thailand’s gross domestic product and the Thai economy has been highly cyclical and volatile, depending for economic growth in substantial part on a number of government initiatives for economic expansion. Overall, the construction industry and infrastructure projects have slowed considerably, thereby affecting local sales, placing competitive pressure on prices and prompting the Company to rationalize Thai operations and actively seek overseas markets. Political tensions remain high in Thailand and political instability in Thailand tends to diminish governmental focus on infrastructure development projects, which can materially adversely impact the volume of sales to (and payment by) our customers who are engaged in large infrastructure projects and, consequently, materially adversely affect our business, financial condition and results of operations.

Our auditor’ China affiliate, like other independent registered public accounting firm operating in China, are not permitted to be subject to inspection by Public Company Accounting Oversight Board, and consequently investors are deprived of the benefits of such inspection.

Our auditor, the independent registered public accounting firm that issued the audit report included elsewhere in this annual report, as auditor of companies that are traded publicly in the United States and firm registered with the Public Company Accounting Oversight Board (United States), or PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor’s China affiliate is located in, and organized under the laws of, the PRC, which is a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities.

In December 2020, the United States enacted the Holding Foreign Companies Accountable Act (the “HFCAA”). The HFCAA requires that the SEC identify issuers that retain an auditor that has a branch or office that is located in a foreign jurisdiction and that the PCAOB determines it is unable to inspect or investigate completely because of a position taken by an authority in that foreign jurisdiction. Amongst other things, the HFCAA also requires the SEC to prohibit the securities of any issuer from being traded on any of the U.S. national securities exchanges, such as Nasdaq, or on the U.S. “over-the-counter” markets, if the auditor of the issuer’s financial statements is not subject to PCAOB inspections for three consecutive “non-inspection” years after the law became effective. 

15

 


On April 5, 2021, the SEC’s interim final rule to implement the disclosure and submission requirements of the HFCAA was published in the U.S. Federal Register, along with the SEC’s request for public comment on the interim final rule. Regarding how the term “retain” should be interpreted for purposes of determining whether an issuer has retained an auditor that has a branch or office that is located in a foreign jurisdiction and that the PCAOB determines it is unable to inspect or investigate completely because of a position taken by an authority in that foreign jurisdiction, the SEC noted in the interim final rule that the HFCAA does not define the term “retain”, and requested comment on how the term “retain” should be understood for purposes of the HFCAA.  

The auditor of our PRC-based subsidiaries is located in the PRC and that auditor is an affiliate of APWC’s Taiwan-based auditor that signs APWC’s audit report. Given the current question as to how “retain” should be understood for purposes of the HFCAA, we cannot assure you that we will not be identified by the SEC as an issuer that has retained an auditor that has a branch or office that is located in a foreign jurisdiction that the PCAOB determines it is unable to inspect or investigate completely because of a position taken by an authority in that foreign jurisdiction as a result of the fact that the auditor of our China affiliates is located in, and organized under the laws of, the PRC. In addition, there can be no assurance that, if we have a “non-inspection” year, we will be able to take remedial measures in response thereto. Given the foregoing, we cannot assure you that we will be able to maintain the listing of the Common Shares on Nasdaq or that you will be allowed to trade the Common Shares in the United States on the “over-the-counter” markets or otherwise. Should the Common Shares not be listed or tradeable in the United States, the value of the Common Shares could be materially affected.

This lack of PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our independent registered public accounting firm. As a result, we and investors in the Common Shares are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s China affiliate’s audit procedures or quality control procedures as compared to auditor outside of China that are subject to PCAOB inspections, which could cause investors and potential investors in the Common Shares to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

The PRC Legal System May Limit the Company’s Remedies

The PRC legal system is a civil law system based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the late 1970s, the PRC central government has promulgated a comprehensive system of laws, rules and regulations governing economic matters. However, China has not developed a fully integrated legal system. Recently enacted laws and regulations may not sufficiently cover all aspects of economic activities and the interpretation and enforcement of these laws and regulations involves uncertainties and can be inconsistent and unpredictable. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, the remedies and the legal protection we enjoy may be limited in the event of any claims or disputes with third parties. In addition, any litigation in China may be protracted and could result in substantial costs and diversion of resources and management attention. As the PRC legal system continues to evolve, we cannot predict if future developments in the PRC legal system could be detrimental to the Company and have a material adverse effect on its business, financial condition and results of operations.

Uncertainties Exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may affect the Company’s Corporate Governance

On January 1, 2020, the PRC Foreign Investment Law (the “Foreign Investment Law”) and the Regulations for Implementation of the Foreign Investment Law (the “Implementation Regulations”), came into effect and replaced the trio of prior laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law, and the Wholly Foreign-invested Enterprise Law, together with their implementation rules. Since the Foreign Investment Law and the Implementation

16

 


Regulations are relatively new, uncertainties still exist in relation to its interpretation and implementation. The Foreign Investment Law and the Implementation Regulations may affect our relevant corporate governance practices and increase our compliance costs. For instance, the Foreign Investment Law and the Implementation Regulations require that foreign-invested enterprises established before the Foreign Investment Law became effective have 5 years to complete the necessary adjustments to their organization form, governance structure and other required matters to comply with the PRC Company Law, the Partnership Enterprise Law and other laws. The PRC Company Law significantly differs from the Sino-foreign Equity Joint Venture Enterprise Law and the Sino-foreign Cooperative Joint Venture Enterprise Law. These differences include, but are not limited to, an enterprise’s highest authority, minimum number of directors, quorum, term of directors, voting mechanisms, profit distributions and equity transfer restrictions. According to the Implementation Regulations, the provisions regarding equity interest transfer and distribution of profits or remaining assets may remain the same as previously provided in the contracts among the joint venture parties of a foreign-invested enterprise. Uncertainties still exist with respect to the specific adjustments foreign-invested enterprises must make. The local branch of the State Administration for Market Regulation of the PRC (the “SAMR”) may, at its discretion, require our PRC subsidiaries to make necessary adjustments to their articles of association and other filing documents to comply with the PRC Company Law and the Partnership Enterprise Law, as applicable.

In addition, the Foreign Investment Law and the Implementation Regulations impose information reporting requirements on foreign investors and foreign-invested enterprises. Any foreign investors or foreign-invested enterprises found to be non-compliant with these reporting obligations may be subject to fines or administrative liabilities.

The Foreign Investment Law does not address intercompany loans or the registration of profits of foreign-invested enterprises. It is not known whether these matters will be addressed by additional laws or regulations promulgated pursuant to the Foreign Investment Law. The Foreign Investment Law and the Implementation Regulations could be interpreted and implemented in a manner that could have a material adverse effect on the Company’s business, financial condition and results of operations.

PRC Regulations of Loans to and Direct Investment in PRC Entities by Offshore Holding Companies may delay or prevent us from making Loans or additional Capital Contributions to our PRC Subsidiaries, which could materially adversely affect our ability to fund and expand our business

We conduct substantial business operations in China. We may make loans or capital contributions to our PRC subsidiaries. Loans or capital contributions by APWC or any of our offshore subsidiaries to our PRC subsidiaries, which are treated as foreign-invested enterprises under PRC law, may be subject to PRC regulations and/or foreign exchange loan registrations. Such loans to any of our PRC subsidiaries to finance their activities generally cannot exceed statutory limits and must be filed with the State Administration of Foreign Exchange (the “SAFE”). We may also decide to finance our PRC subsidiaries by means of capital contributions, in which case the PRC subsidiary is required to register the details of the capital contribution with the relevant governmental authorities in China.

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans or capital contributions by the Company to our PRC subsidiaries and conversion of such loans or capital contributions into RMB. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially adversely affect our ability to fund and expand our business, and could materially adversely affect or business, financial condition and results of operations.

Political or Social Instability, Including Tensions Between PRC and Taiwan, May Materially Adversely Affect the Company’s Business, Financial Condition, and Results of Operations

Political or social instability in China could also materially adversely affect our business operations or financial condition. Lack of political or social certainty exposes our operations to increased risk of adverse or

17

 


unpredictable actions by PRC government officials. For example, APWC’s principal office is located in Taipei, Taiwan, and any escalation in political tensions between the PRC and the government of Taiwan could materially adversely impact our ability to manage our operations in the PRC efficiently or without third party interference. The PRC government has long advocated a one-China policy with regard to the Republic of China. Any overtly aggressive actions by the PRC towards Taiwan could have a materially destabilizing impact on Taiwan generally, and on our business in particular, and could materially and adversely affect our business, financial condition and results of operations.

PRC State-Owned Enterprises (“SOEs”) May Have Competitive Advantages that We May Not Be Able to Overcome

Much of the PRC's manufacturing output is still conducted through SOEs, which are often subsidized by the government such that they are protected against the challenges of market forces confronting private enterprises. As a consequence, it can become untenable for private enterprises in competition with SOEs to conduct profitable operations when the SOEs are being subsidized by the government and may operate in a loss position for an extended period. The Company’s business, financial condition and results of operations may be materially adversely affected in the event it must compete with such SOEs.

Risks Related to the Common Shares and APWC

The Common Shares may be delisted from Nasdaq, which could affect their market price and liquidity.  If the Common Shares are delisted, investors may have difficulty disposing of their shares.

The Common Shares are currently listed on Nasdaq under the symbol “APWC” on the Capital Market tier. In order for the Common Shares to remain the listed on the Nasdaq Capital Market tier, we must continue to meet certain minimum financial and other requirements including, without limitation, maintaining a closing bid price for the Common Shares of at least $1.00 per share. Nasdaq’s rules provide for the delisting of the Common Shares if the closing bid price for the Common Shares falls below $1.00 per share for 30 consecutive business and we are unable to regain compliance with the applicable requirements in the time permitted by Nasdaq.

In addition to Nasdaq’s enumerated criteria for continued listing on the Capital Market tier, Nasdaq also has broad discretionary public interest authority that it can exercise to apply additional or more stringent criteria for the continued listing of the Common Shares, or suspend or delist securities even though the securities met all enumerated criteria for continued listing on Nasdaq. We cannot assure you that Nasdaq will not exercise such discretionary authority.

In accordance with the provisions of the Exchange Control Act 1972, as amended, and related regulations of Bermuda, the permission of the Bermuda Monetary Authority (the “BMA”) is required for all issuances and transfers of shares (which includes the Common Shares) of Bermuda companies to or from a non-resident of Bermuda for exchange control purposes, other than in cases where the BMA has granted a general permission. The BMA, in its notice to the public dated June 1, 2005, has granted a general permission for the issue and subsequent transfer of any securities of a Bermuda company from and/or to a non-resident of Bermuda for exchange control purposes for so long as any “Equity Securities” of the company (which include the Common Shares) are listed on an “Appointed Stock Exchange” (which would include Nasdaq). In granting the general permission the BMA accepts no responsibility for APWC’s financial soundness or the correctness of any of the statements made or opinions expressed herein. Consequently, if the Common Shares are delisted from Nasdaq, it will be necessary to obtain the prior permission of the BMA to transfer such Common Shares to any transferee, subject to any applicable general permissions issued by the BMA.

There can be no assurance that the Common Shares will remain listed on Nasdaq on any tier. Any delisting of the Common Shares could materially adversely affect their market price and liquidity. If the Common Shares are

18

 


delisted, APWC expects its Common Shares would be quoted on an over-the-counter market. If this were to occur, APWC’s shareholders could face significant material adverse consequences, including the need to receive permission from the BMA to transfer the Common Shares, limited availability of market quotations for the Common Shares and reduced liquidity for the trading of the Common Shares. In addition, APWC could experience a decreased ability to issue additional securities and obtain additional financing in the future.

As a foreign private issuer, APWC is exempt from a number of rules under the U.S. securities laws and is permitted to file less information with the SEC than a U.S. company.

APWC is a “foreign private issuer”, as defined in the SEC’s rules and regulations and, consequently, APWC is not subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, APWC is exempt from certain rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, APWC’s senior management and directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of APWC’s securities. Moreover, APWC is not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies, and is not required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act.  Accordingly, there is less publicly available information concerning the Company than there would be if APWC was a U.S. public company.

Future sales of APWC’s Securities may cause the prevailing market price of the Common Shares to decrease

There may be future sales or other dilution of APWC’s equity, which could materially adversely affect the market price of the Common Shares. APWC may, from time to time, issue equity securities, including Common Shares or securities that are convertible into or exchangeable for, or that represent the right to receive, Common Shares. The market price of the Common Shares could decline as a result of issuances of any such equity securities or any such securities that are convertible into or exchangeable for, or that represent the right to receive, Common Shares, or as a result of the perception that such issuances could occur.

The Market for the Common Shares May Not Be Liquid

Active, liquid trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors, compared to less active and less liquid markets. Thinly-traded securities equity can be more volatile than equity securities for which there is significant trading volume. In addition, APWC’s share price may be volatile and could be subject to fluctuations in response to various factors, most of which are beyond our control. Liquidity of a securities market is often a function of the volume of the underlying shares that are publicly held by unrelated parties. Approximately 75.5% of APWC’s issued and outstanding common shares are directly or beneficially owned by Pacific Electric Wire & Cable Co., Ltd. (“PEWC”), a Taiwanese company, which Common Shares are subject to restrictions on trading.  In addition, although the Common Shares currently remain traded on the Nasdaq Capital Market tier, the trading and demand for the Common Shares has been limited. As a consequence, shareholders may find that the value of their Common Shares and/or their ability to sell their Common Shares quickly or in substantial amounts may be materially adversely affected by the limited public trading market. In the future, the Common Shares may experience significant price fluctuations which could materially adversely affect the value of your ownership interest in APWC.

 

 

19

 


 

APWC May Not Be Able to Resume Paying a Dividend and Any Dividends Paid in the Future Could be Reduced or Eliminated

APWC did not pay dividends in 2019 or in 2020. There are a number of factors that can affect APWC’s ability to pay dividends and there is no guarantee that APWC will pay dividends in any given year or pay any specific amount of dividends. APWC may not be able, or may choose not to reinstate its dividend program and pay future dividends, and if reinstated any future dividend could again be eliminated or reduced. The declaration, amount and payment of future dividends are at the discretion of APWC’s board of directors (the “Board of Directors”) and will be dependent on the Company’s future operating results and the cash requirements of the Company’s business. In addition, APWC will not pay dividends in the event it is not allowed to do so under Bermuda law. Furthermore, since APWC is a holding company, nearly all of the assets shown on its consolidated balance sheet are held by its subsidiaries. Accordingly, APWC’s cash flow and its ability to pay dividends are dependent upon distributions from its subsidiaries. The reduction, suspension or elimination of dividends may negatively affect the market price of the Common Shares.

Holding Company Structure; Potential Restrictions on the Payment of Dividends

APWC is a holding company with no direct business operations other than its ownership of the capital stock of its subsidiaries and equity investees. APWC’s principal assets are the equity interests it directly or indirectly holds in its operating subsidiaries. As a holding company, APWC’s ability to pay dividends and meet its other obligations depends upon the amount of distributions, if any, received from its operating subsidiaries and other holdings and investments. APWC’s operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to APWC, including, but not limited to, as a result of restrictive covenants contained in loan agreements, restrictions on the conversion of local currency earnings into U.S. dollars or other currency, and other regulatory restrictions. For example, PRC legal restrictions permit payments of dividends by our business entities in the PRC only out of their retained earnings, if any, determined in accordance with relevant PRC accounting standards and regulations. Under PRC law, such entities are also required to set aside a portion of their net income each year to fund certain reserve funds. These reserves are not distributable as cash dividends. The foregoing restrictions may also affect APWC’s ability to fund operations of one subsidiary with dividends and other payments received from another subsidiary. Distributions may also be limited from time to time by reason of restrictions protective of the rights of minority shareholders of APWC’s subsidiaries and by reason of the current cash requirements of APWC’s operating subsidiaries.

Corporate Matters; Limited Recourse; Limited Enforceability

APWC is incorporated in and organized pursuant to the laws of Bermuda with its principal office located in Taiwan. All of APWC’s directors and officers reside outside the United States and the Company’s material assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon such persons or to realize judgements against them in courts of the United States predicated upon civil liabilities under the United States federal securities laws. Even if investors are successful in realizing judgments against such persons in courts of the United States, the laws of Taiwan may render such investors unable to enforce the judgment against the Company’s assets or the assets of APWC’s officers and directors. Also, investors may have difficulty in bringing an original action based upon the United States federal securities law against such persons in the Taiwan courts. Additionally, there is doubt as to the enforcement in Bermuda, in original actions or in actions for enforcement of judgments of United States courts, of liabilities predicated upon U.S. federal securities laws. As a result, shareholders may encounter more difficulties in enforcing their rights and protecting their interests in the face of actions taken by management, the Board of Directors or controlling shareholders than they would if APWC was organized under the laws of the United States or one of the states therein, or if the Company had material assets located within the United States, or some of the directors and officers resided within the United States.

20

 


Control of the Company Rests with Majority Shareholder; Controlled Company and Foreign Private Issuer Exemptions; Risks Related to PEWC

The Common Shares currently remain traded on Nasdaq. However, as APWC has a more than fifty percent (50%) shareholder, APWC relies upon a “controlled company exemption” to the requirement that a company have a board of directors comprised of a majority of independent directors in order to be listed on Nasdaq. At present, a majority of the board of directors of APWC is affiliated with PEWC. APWC also relies on Nasdaq’s allowance for foreign private issuers to follow home country practices in lieu of the requirement that listed companies have regularly scheduled meetings at which only independent directors are present (“executive sessions”). The independent directors of APWC meet periodically in executive session in their capacity as members of APWC’s Audit Committee of APWC’s Board of Directors without other directors present, but on occasion meet with APWC’s independent auditors present in such executive session, and on occasion meet with members of management present in order to understand more fully management’s analysis of the Company’s financial performance and compliance with relevant corporate governance requirements.

As APWC’s majority shareholder, PEWC has sufficient votes to control the outcome of any matter presented for a shareholder vote, including the election of each member of APWC’s Board of Directors. PEWC may vote its shares in APWC in the manner that it sees fit. In addition, subject to applicable securities laws, PEWC may sell, convey or encumber all or a portion of its ownership interest in APWC without regard to the best interests of APWC’s other shareholders except to the extent that it is prohibited from engaging in conduct oppressive to non-controlling interests under applicable law. The interests of PEWC may conflict with our interests or the interests of our other shareholders. As a result, PEWC may take actions with respect to us or our business that may not be in our or our other shareholders’ best interest.

Financial or corporate governance issues at PEWC may affect PEWC’s attention to and actions with respect to APWC, including with respect to its performance of its obligations under, or increase uncertainty regarding its ability to perform its obligations under, the Composite Services Agreement between PEWC and the Company. (See “Item 3.D. Risk Factors – PEWC may not perform its obligations under the Composite Services Agreement” and “Item 10.C. Material Contracts” for a description of the Composite Services Agreement.).

Potential Conflict of Certain Officers and Directors

APWC has three independent directors. The other six members of APWC’s Board of Directors are also directors or officers of, or otherwise affiliated with, PEWC, APWC’s majority shareholder. Certain of the Company’s officers are also affiliated with PEWC. In each case, they may be subject to potential conflicts of interest. In addition, certain of the Company’s officers and directors who are also officers and/or directors of PEWC may be subject to conflicts of interest in connection with, for example, pursuing corporate opportunities in which the Company and PEWC or one of its affiliates have competing interests, and in the performance by the Company and PEWC of their respective obligations under existing agreements, including the Composite Services Agreement. In addition, some of these persons devote time to the business and affairs of PEWC and its affiliates, which could reduce the amount of time available for overseeing or managing the Company’s business and affairs.

 

General Risk Factors

 

Any failure to achieve and maintain effective internal controls could have a material adverse effect on our reputation, business, financial conditions, and results of operations and the market price of the Common Shares.

 

Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to prevent fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a

21

 


cost-effective control system, misstatements due to error or fraud may occur and not be detected. As a result, even effective internal controls are able to provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. Any failure in our internal control could result in a material adverse effect on our business and a decline of investor confidence in the reliability of our financial statements, which could materially adversely affect the market price of the Common Shares.

International Trade Policies May Negatively Impact Our Business, Results of Operations and Financial Condition

Government policies on international trade and investment such as import quotas, tariffs, and capital controls, whether adopted by individual governments or addressed by regional trade blocs, can affect the demand for our products and services and those of our customers and impact the competitive position of our products or services or those of our customers. For example, the business of our customers in China may be adversely impacted by the continuing trade friction between the United States and China. We cannot predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, and our suppliers, which in turn could materially adversely impact our business, financial condition and results of operations.

International Business Risks

We are subject to risks specific to our international business operations, including: the risk of supply disruption; production disruption or other disruption arising from events of force majeure, such as severe weather and climatic events; the outbreak of highly infectious or communicable diseases such as COVID-19, Severe Acute Respiratory Syndrome, swine influenza or pandemics of a similar nature; the risk of potential conflict and further instability in the relationship between Taiwan and the PRC; risks related to national and international political instability, such as disruptions to business activities and investment arising out of political unrest and turmoil in Thailand; risks related to global economic turbulence and adverse economic developments in Asian markets; risks associated with possible interest rate increases, which could result in increases in the cost of borrowing and reduced liquidity for us and our customers; risks related to changes in governmental or private sector policies and priorities with respect to infrastructure investment and development; unpredictable consequences on the economic conditions in the U.S. and the rest of the world arising from terrorist attacks, and other military or security operations; unexpected changes in regulatory requirements or legal uncertainties regarding tax regimes; tariffs and other trade barriers, including current and future import and export restrictions; difficulties in staffing and managing international operations in countries such as Australia, Singapore, the PRC, Thailand and Taiwan; risks that changes in foreign currency exchange rates will make our products comparatively more expensive; limited ability to enforce agreements and other rights in foreign countries; changes in labor conditions; longer payment cycles and greater difficulty in collecting accounts receivable; burdens and costs of compliance with a variety of foreign laws; limitation on imports or exports and the possible expropriation of private enterprises; and reversal of the current policies (including favorable tax and lending policies) encouraging foreign investment or foreign trade by our host countries.

ITEM 4:

INFORMATION ON THE COMPANY

 

4.a.

History and Development of the Company

Asia Pacific Wire & Cable Corporation Limited was incorporated on September 19, 1996 as a Bermuda exempted company limited by shares and incorporated under the Bermuda Companies Act 1981, as amended (the “Companies Act”). The address of APWC’s principal office is Room B, 15th Floor, No. 77, Sec. 2, Dunhua South Road, Taipei, 106, Taiwan, and its telephone number is +886 2-2712-2558. Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711, is APWC’s agent for service of process in the United States.

22

 


Principal capital expenditures consisted of purchases of property, plant and equipment totaling $14.5 million in 2020, $5.4 million in 2019 and $4.4 million in 2018, mostly for the purchase of production machinery and equipment in Thailand.

In 2021, the Company anticipates its principal capital expenditures including the purchase of new equipment to expand production capacity in China and Thailand, and the construction of new factory buildings in Thailand. These expected capital expenditures in 2021 are approximately $2.5 million, which may be adjusted depending on market conditions. The Company intends to pay for these expenditures with funds generated from its operations.

The Company’s present plans include seeking to develop an alternative energy business in Taiwan by availing itself of new tax-driven development incentives provided by the Taiwan government for the expansion of “green” energy alternatives. This project remains at a development-stage and has not generated any revenues to date.

Our website is located at www.apwcc.com. The information contained or linked to on our website is not included in, or incorporated by reference into, this Annual Report on Form 20-F. Our filings with the SEC, including reports, proxy and information statements, and other information regarding us that is filed electronically with the SEC are available on the SEC’s websites at www.sec.gov.

 

4.b.

Business Overview

 

4.b.1.

Geographic Regions

APWC is a holding company that operates its business through operating subsidiaries, principally located in Thailand, China, Singapore and Australia.

The Company is principally engaged in the manufacture and distribution of telecommunications (primarily copper, but also fiber optic), power cable, and enameled wire products in the Asia Pacific region, primarily in Thailand, China, Singapore and Australia. The Company also provides project engineering services to certain customers.

The following chart sets forth the organizational structure as of December 31, 2020 of APWC and its principal operating subsidiaries, as well as the percentage of ownership interest and voting power in each case. The location of the headquarters of each company is indicated in parentheses under the company’s name (“T” for Thailand, “C” for China or Hong Kong, “S” for Singapore and “A” for Australia).

23

 


 

North Asia Region

During 2020, the Company’s principal operations in North Asia were conducted through four business entities – Shanghai Asia Pacific Electric Co., Ltd. (“Shanghai Yayang”), Crown Century Holdings Limited (“CCH HK”), Pacific Electric Wire and Cable (Shenzhen) (“PEWSC”), and Asia Pacific New Energy Corp. Ltd. (“APNEC”). The operating entities include Shanghai Yayang, formerly known as Shanghai Pacific Electric Co., Ltd., a subsidiary in Shanghai incorporated in June 1998 to manufacture enameled wires. The Company’s effective holding in Shanghai Yayang is 68.75%. Shanghai Yayang, which had previously produced enameled wires, ceased production by the end of October of 2019 and has been restructured as a trading company in Shanghai that supplies mainly transformer, motor and coil manufacturers in the eastern part of China.

The Company has an effective holding of 97.93% (including holdings through Siam Pacific) of the capital stock of CCH HK, a Hong Kong registered company, and its wholly-owned subsidiary company, PEWSC. PEWSC manufactures enameled wires for electric, video and audio products for the south China market.

Ningbo is currently a dormant entity. The Company continues to own the equity of Ningbo, which still holds its government-granted business license. The Company has disposed of all of the buildings and most of the equipment and the land use rights for the property where Ningbo’s operations had been situated. The principal machinery utilized at the Ningbo facility has either been sold or stored at other operating facilities of the Company.

The Company established a new entity, APNEC, in Taipei City on October 26, 2018 for new renewable energy business. APNEC seeks to develop an alternative energy business in Taiwan by availing itself of incentives provided by the Taiwan energy authority for the expansion of “green” energy alternatives. This project remains at a development-stage and has not generated any revenues to date.

24

 


Thailand Region

The Company’s Thai operations are conducted through Charoong Thai, Siam Pacific, Double D Cable Company Ltd. (“DD”) and Siam Fiber Optics Co. Ltd. (“Siam Fiber Optics”). Charoong Thai and Siam Pacific are the Company’s principal entities in Thailand.

Charoong Thai is a publicly-traded Thai corporation, the shares of which are listed on the Stock Exchange of Thailand (“SET”). It manufactures aluminum and copper electric wire, medium and high voltage power cables and telecommunications cables. It has subsidiaries and affiliates in the businesses of fiber optic cable manufacturing and telecommunication and network services. Charoong Thai was established in Thailand in 1967 as a limited public company. As of December 31, 2020, the Company effectively owned 50.93% of the issued and outstanding shares of Charoong Thai. The Company’s present intention is to maintain majority ownership of the voting securities of Charoong Thai. The board of directors of Charoong Thai may authorize the issuance of additional shares of common stock of Charoong Thai. The Company has preemptive rights to purchase its pro rata share of any additional authorized shares, less amounts reserved for Charoong Thai’s directors, officers or employees. In the event the board of Charoong Thai decides to cause it to issue additional shares, the Company may decide not to exercise the Company’s preemptive rights, in which case its interest may be diluted.

Siam Pacific was established in 1988 as a joint venture between PEWC and Italian-Thai Development Plc. Siam Pacific is now a 100%-owned subsidiary of Charoong Thai and focuses on the manufacture of telecommunications cables, and enameled wires.

Rest of the World (“ROW”) Region

The Company’s ROW region currently consists of its Singapore and Australian operations.

The Company’s Singapore operations are principally conducted through Sigma Cable Company (Private) Limited (“Sigma Cable”), an indirectly 98.3%-owned subsidiary of the Company. The Company believes that Sigma Cable is one of the major suppliers of power cable products in Singapore. Sigma Cable manufactures and sells a range of low voltage power cable products, used mainly in infrastructure projects and commercial and residential developments. Sigma Cable is the exclusive distributor in Singapore of medium and high voltage wire and cable products manufactured by PEWC. It is also the distributor for general wires manufactured by a third-party supplier.

Sigma Cable also has project engineering operations in Singapore to supply, deliver and install (referred to as “SDI”) primarily medium and high voltage cables to power transmission projects. While the Company currently obtains its supply of medium and high voltage power cables for its SDI operations from PEWC, other suppliers are also available if necessary.

Sigma Cable owns 100% of the capital stock of Epan Industries Pte. Ltd. (“Epan”) a Singaporean Company. Currently, Epan is acting as the distributor of Sigma Cable products and those of other third party suppliers.

The Company’s business in Australia is conducted by Australia Pacific Electric Cable Pty. Ltd. (“APEC”). The Company’s indirect ownership interest in APEC is 98.06%. APEC is located near Brisbane and is one of three major wire and cable manufacturers in Australia. APEC possesses a substantial marketing and distribution infrastructure with a network of sales offices and warehouses in the cities of Brisbane, Sydney, Melbourne and Perth.

25

 


 

4.b.2.

Products and Services

Across the Company’s three reporting segments, the Company engages in three principal business lines that consist of manufacturing and distributing wire and cable products and providing fabrication or project engineering services to certain customers. The Company manufactures and sells a wide variety of wire and cable products in primarily three general categories: telecommunications cables, power transmission cables, and enameled wires. The Company’s telecommunications and power cables are used in a range of infrastructure projects and in commercial and residential developments. The Company’s enameled wires are used in the manufacturing of components and sub-components of a number of household appliances and small machinery. In addition, the Company acts as a distributor of wire and cable products manufactured by PEWC and other third party suppliers in Singapore. The Company also offers SDI project engineering services of medium and high voltage cables for power transmission projects in Singapore.

Services

Fabrication

The Company performs fabrication services for its customers, converting raw materials to wire and cable products. Raw materials, such as copper, aluminum, polyvinyl chloride, polyethylene and optic fibers, are commodities traded on global markets with anticipated price fluctuations and currency risk. Given these risks, the Company provides fabrication services using customer-owned materials in order to limit exposure to these risks.

SDI Project Engineering Services

Given government and private sector infrastructure projects and residential and commercial buildings activity in Singapore, the Company anticipates modest demand for medium and high voltage power and for value added services in the power supply industry. To take advantage of these opportunities, the Company has developed an SDI project engineering capability. This SDI project engineering involves supply, delivery and installation of primarily medium and high voltage cables to power transmission projects in Singapore. In entering into a contract to supply, deliver and install cables for a power transmission project, the Company delivers medium and high voltage cables and enters into subcontracting agreements with local companies to install the cables as required by the project

Products

Copper rod is the base component for most of the Company’s products. The manufacturing processes for these products require that the rod be “drawn” and insulated. In the “drawing” process, copper rod is drawn through a series of dies to reduce the copper to a specific diameter. For certain applications, the drawn copper conductor is then plated with tin. Copper used in cables is covered with various insulating materials that are applied in an extrusion process. The insulated wires are then combined, or “cabled” to produce the desired electrical properties and transmission capabilities. Then, depending upon the cable, some form of protective cover is placed over the cabled wires. A summary of the manufacturing process used for the Company’s primary wire and cable products is set forth below.

Telecommunications Cable

The Company produces a wide range of bundled telecommunications cables for telephone and data transmissions with different capacities and insulations designed for use in various internal and external environments. The principal use of these cables is as access cables to connect buildings and residents to trunk cables. Telecommunications cables produced by the Company include copper-based and fiber optic cables.

26

 


Production of copper-based telecommunications cables begins by drawing a copper rod until it has reached the desired diameter, after which the drawn wires are subjected to a process called “annealing” in which the wires are heated in order to make the wires softer and more pliable. Utilizing an extrusion process, which involves the feeding, melting and pumping of a compound through a die to shape it in final form as it is applied to insulate the wire, the wires are then covered by a polyethylene (“PE”) or polyvinyl chloride (“PVC”) compound and foam skin, suitable for different installations and environmental conditions. In order to reduce the cross-talk between pairs of communication wires, the insulated wires are then “twinned” or twisted so that two insulated single wires are combined to create a color-coded twisted pair. The twisted pairs of wires are then “cabled” or “stranded” into units of 25 twisted pairs for combination with other 25 pair units to form cable of various widths and capacities. The appropriate number of units is cabled together after stranding to form a round cables core. Depending upon the planned environment, a petroleum jelly compound may then be added to fill the cable core to seal out moisture and water vapor. Aluminum or copper tape is used to “shield” the cables and, finally, the shielded cable core is covered by plastic outer sheathing. The Company manufactures telecommunications cables with capacities and sizes ranging from 25 to 3,000 pairs of 0.4 mm-diameter wires to 10 to 600 pairs of 0.9 mm-diameter wires.

Power Cable

The Company produces a range of armored and unarmored low voltage power transmission cables. Low voltage power cables, generally considered to be cable with a capacity of 1 to 3.3 kilovolts, are typically used to transmit electricity to and within commercial and residential buildings, as well as to outdoor installations such as street lights, traffic signals and other signs. Armored low-voltage power cables are usually used for public lighting and power transmission running to buildings and installed either above or below ground. Unarmored low voltage cables are mainly used as lighting and power supply cables inside and outside of buildings. The voltage capacity of the Company’s power cables ranges from 300 volts to 1 kilovolt.

Production of unarmored cables begins by drawing and annealing of copper rods. The drawn copper wires are then stranded or “bunched” into round or sector-shaped conductors in sizes ranging from 1.5 square millimeters to 1000 square millimeters. The copper conductors are then covered in an extrusion process with a plastic insulator such as PVC, after which 2-5 conductors are twisted into a circular cable core in a cabling process and covered by a plastic outer cover.

Unarmored cables are composed of one or more cores of copper wire, insulated by substances such as PVC. Armored cables are produced in the same manner and the same range of configurations as unarmored cables, but with the addition of an outer layer of galvanized steel or iron wires to protect the cables from damage.

Enameled Wire

The Company also produces several varieties of enameled wires. Enameled wires are copper wires varnished, in an enameling process, by insulating materials. The enameling process makes the wires more resistant to oil, heat, friction and fusion, and therefore suitable for use in machinery and components and sub-components of manufactured goods. The Company manufactures enameled wires in sizes that range from 0.02 mm to 4.00 mm in diameter, varnished by various types of petroleum insulation materials including polyvinyl formal, polyurethane wires and polyester. Enameled wire products are used in the assembly of a wide range of electrical products, including oil-filled transformers, refrigerator motors, telephones, radios, televisions, fan motors, air conditioner compressors and other electric appliances.

27

 


 

4.b.3.

Raw Materials

Copper is the principal raw material used by the Company for copper-based products. The Company typically purchases copper at prices based on the average prevailing international spot market prices on the LME for copper for the one month prior to purchase. The price of copper is influenced heavily by global supply and demand as well as speculative trading. As with other costs of production, changes in the price of copper can affect the Company’s cost of sales. Whether this has a material impact on the Company’s operating margins and financial results depends primarily on the Company’s ability to adjust selling prices to its customers, such that increases and decreases in the price of copper are reflected in those selling prices. Most sales of the Company’s manufactured products reflect copper prices prevailing at the time the products are ordered. A long-term decrease in the price of copper would require the Company to revalue the value of its inventory at periodic intervals to the then net realizable value, which could be below cost.

The Company purchases copper in the form of rods and cathodes. Copper cathodes are thin sheets of copper purified from copper ore. The Company has facilities where it can process its copper cathodes into copper rods in Thailand, and the Company also utilizes services from other business partners, including Thai Metal Processing Co., Ltd., to process its copper cathodes. Copper rods are drawn into copper wires for the production of telecommunications cables, power cables and enameled wires.

The Company imports both copper cathodes and copper rods in Thailand, with copper cathodes subjected to lower import duty than copper rods. The key suppliers are PT. Karya Sumiden Indonesia - Indonesia, Walsin Lihwa Corporation - Taiwan, Mitsubishi Corporation RtM International Ptd.- Singapore, Glencore International AG.-Switzerland, and Marubeni Corporation-Japan. The Company attempts to maintain approximately a three to five week supply of copper rods and cathodes for its Thai operations and approximately a two to four week supply in Singapore. PEWSC generally maintains one to two weeks of supply of copper rods and cathodes. APEC’s copper supply is generally maintained at one to two weeks of anticipated requirements. The Company has regularly signed one-year contracts with each of the copper suppliers, pursuant to which the Company agrees to purchase a set quantity of copper each month. Under the terms of such contracts, the price of copper is typically pegged to the monthly average of the spot price of copper on the LME for the delivery month (M-0), or 1 month before delivery month (M-1) plus a premium. The Company has not had and does not anticipate any material supply interruption or difficulty in obtaining a sufficient supply of copper rod or cathode. The Company anticipates that its copper suppliers will be capable of providing an adequate supply of copper to meet the Company’s requirements and the Company does not anticipate any change in relations with its copper suppliers in the near term.

The Company has historically purchased a substantial portion of its copper rods from PEWC. Under the Composite Services Agreement between the Company and PEWC, PEWC has agreed to supply to the Company on a priority basis with its copper rod requirements at prices at least as favorable as prices charged to other purchasers in the same markets purchasing similar quantities. However, the Company has diversified its copper purchases from among a number of preferred copper suppliers to ensure that the Company receives the most advantageous pricing on its copper purchases. The Company does not currently purchase copper rods from PEWC.  

 

Other raw materials used by the Company include aluminum, which is used as a conductor in power cables and petroleum-based insulation materials such as PE, PVC and jelly compounds for insulating covers on cables and varnishes on enameled wires; aluminum foils for sheathing of communication cables; and galvanized steel wires for the production of armored wires. The Company has not had and does not anticipate any difficulty in maintaining adequate supplies of these raw materials and expects to continue to be able to purchase such raw materials at prevailing market prices. Other than import tariffs in Thailand, the Company does not face any restriction or control on the purchase or import of its raw materials. The Company may freely choose its suppliers and negotiate the price and quantity of material with its suppliers. The Company formulates consumption plans for raw materials regularly and continually monitors market conditions in respect of the supply, price and quality of raw materials.

Inflation would increase the cost of raw materials and operating expenses for the Company. If inflation increases, the Company would try to maintain its operating margins by increasing the prices of its products.

28

 


 

4.b.4.

Quality Control

In order to maintain product quality, the Company has implemented a range of quality control procedures under the supervision of dedicated quality control staff. Quality control procedures are implemented from the raw material to the finished product stages at each of the Company’s major production facilities. Raw materials are inspected to ensure they meet the necessary level of quality before production begins. During the manufacturing process, quality control procedures are performed at several stages of production. Upon completion, finished goods are brought to quality control centers set up in the production facilities for inspection and testing of different electrical and physical properties.

Depending on the requirements of its customers, the Company has the capability to manufacture products to meet a variety of different quality and production standards. These include local standards and certifications, such as the Singapore Institute of Standards and Industrial Research Quality Mark and the Thailand Industrial Standard, as well as other standards, such as the National Electrical Manufacturers Association Standard, the British Standard, the Japan Industrial Standard and Underwriters Laboratories Inc. Standard.

All of the Company’s principal operating entities have attained International Standards Organization (“ISO”) 9001 certification for quality management and assurance standards in the manufacture of electric wires and cables and have maintained that certification for at least the last ten years. These certifications mean that these entities have in place quality assurance systems and the capability to consistently manufacture products of quality.

 

4.b.5.

Reporting Segments

The Company’s telecommunications cable and power cable products are primarily sold in the domestic markets of the countries where they are manufactured, whereas a portion of the enameled wires manufactured by the Company in Thailand are exported, primarily to customers throughout Southeast Asia. The following table sets forth the Company’s sales revenues for the periods indicated in its three reporting segments – North Asia region, Thailand region and ROW region for its three principal product lines, i.e., power, enameled and others together with their respective percentage share of total sales by reporting segment for such periods.

 

Year ended

December 31, 2020

North

Asia

 

Thailand

 

ROW

 

Total

segments Consolidated

 

 

US$’000

 

US$’000

 

US$’000

 

US$’000

 

Revenue from external customers

 

 

 

 

 

 

 

 

 

 

 

 

Power

 

 

 

48,851

 

 

78,779

 

 

127,630

 

Enamel

 

73,179

 

 

57,971

 

 

 

 

131,150

 

Fabrication

 

 

 

33,101

 

 

 

 

33,101

 

Others*

 

20

 

 

3,724

 

 

17,939

 

 

21,683

 

 

 

73,199

 

 

143,647

 

 

96,718

 

 

313,564

 

*include revenues from SDI service contracts (which amounted to US$15.6 million in 2020), and sale of other wires and cables products.

Year ended

December 31, 2019

North

Asia

 

Thailand

 

ROW

 

Total

segments Consolidated

 

 

US$’000

 

US$’000

 

US$’000

 

US$’000

 

Revenue from external customers

 

 

 

 

 

 

 

 

 

 

 

 

Power

 

 

 

49,493

 

 

78,686

 

 

128,179

 

Enamel

 

76,575

 

 

102,997

 

 

 

 

179,572

 

Others*

 

 

 

19,889

 

 

10,520

 

 

30,409

 

 

 

76,575

 

 

172,379

 

 

89,206

 

 

338,160

 

*include revenues from SDI service contracts (which amounted to US$7.6 million in 2019), fabrication service contracts, and sale of other wires and cables products.

 

29

 


 

Year ended

December 31, 2018

North

Asia

 

Thailand

 

ROW

 

Total

segments Consolidated

 

 

US$’000

 

US$’000

 

US$’000

 

US$’000

 

Revenue from external customers

 

 

 

 

 

 

 

 

 

 

 

 

Power

 

 

 

64,771

 

 

92,130

 

 

156,901

 

Enamel

 

103,647

 

 

114,247

 

 

 

 

217,894

 

Others*

 

 

 

34,406

 

 

16,739

 

 

51,145

 

 

 

103,647

 

 

213,424

 

 

108,869

 

 

425,940

 

* include revenues from SDI service contracts (which amounted to US$16.7 million in 2018), fabrication service contracts, and sale of other wires and cables products.

 

 

APWC’s operating subsidiaries are also responsible for sales planning, marketing strategy and customer liaison. The Company’s sales staff is knowledgeable about the Company’s products and also renders technical assistance, consulting services and repair and maintenance services to the Company’s customers. The Company does not conduct sales through independent sales agents on a commission basis but uses its own sales employees located at APWC’s operating subsidiaries.

As copper constitutes the most significant component of the Company’s wire and cable products, the price of the Company’s products depends primarily upon the price of copper. In order to minimize the impact of copper price fluctuations, the Company attempts to determine the prices of its products based on the prevailing market price of copper. The Company may be affected by significant fluctuations in the price of copper.

Payment methods for the Company’s products vary with markets and customers. The majority of sales by the Company requires payment within 90 days, but may vary depending on the customer and payment record. Sales pursuant to a successful project tender or sales to governmental or public utilities are conducted in accordance with the tender or other applicable regulations. In connection with the distribution of medium and high voltage power cables manufactured by PEWC, the Company is required to pay PEWC 90% of the cost of the products either within 30 days of receipt of the product or, in the case of SDI products, upon installation, with the remaining 10% in either case to be paid within one year. In connection with a purchase of copper rod, the Company is required to pay PEWC the cost of the copper rod within 30 days from obtaining the products from PEWC. For the export market, payment is usually made by prior delivery of an irrevocable letter of credit. Neither APWC nor its operating subsidiaries offers financing for purchases of the Company’s products. Company employees engaged in sales and marketing are paid a salary and may also receive a bonus based on performance.

Products are marketed under the respective names of the operating subsidiaries. For instance, products manufactured by Siam Pacific are marketed under the “Siam Pacific” trade name. Products manufactured by Sigma Cable are sold under the “Sigma Cable” brand.

North Asia

The Company produces and sells enameled wires in China. The Company’s principal China operations are conducted through China-based business entities. The Company generally sells enameled wires directly to manufacturers of electric motors for use in various consumer appliances.

Thailand

The Company produces and sells telecommunication cables, enameled wires and power cables in Thailand. Charoong Thai is one of the leading cable manufacturers in Thailand. Our distribution channels include both direct sales to government entities and private sector participants in the infrastructure sector, and sales to agents for governmental entities. Sales within the Thailand region are made directly by the sales department of the APWC’s operating subsidiaries in accordance with terms and pricing set by the local subsidiaries. The major customers of the Company include clients working with the government and its contractors.

30

 


ROW

The Company produces and sells low voltage power cables in Singapore and Australia. In addition, the Company sells a wide range of wire and cable products produced by third party suppliers and PEWC. The Company also offers SDI project engineering services for medium and high voltage power cables to power transmission projects in Singapore. SP Power Assets Ltd. has historically been the principal customer for the Company’s SDI services, accounting for nearly all of our SDI sales. Sales to SP Power Assets Ltd. are under a comprehensive contract, with purchase orders placed from time to time.

 

4.b.6.

Competition

The wire and cable industry in the Asia Pacific region is highly competitive. The Company’s competitors include a large number of independent domestic and foreign suppliers. Certain competitors in each of the Company’s markets have substantially greater manufacturing, sales, research and financial resources than the Company. The Company and other wire and cable producers primarily compete on the basis of product quality and performance, reliability of supply, customer service, and price.

North Asia

PEWSC manufactures enameled wires in the Shenzhen Special Economic Zone in Guangdong Province for electronic, video and audio products in the south China market. It supplies mainly to transformer, motor and coil manufacturers. It faces competition principally from overseas imports and local manufacturers.

Shanghai Yayang has been restructured as a trading company in Shanghai and it supplies mainly transformer, motor and coil manufacturers in the eastern part of China. It faces competition principally from overseas imports and manufacturers in China.

Thailand

The wire and cable industry in Thailand is highly competitive. In its various product lines, the Company competes with a total of approximately thirty local wire and cable manufacturers and, to a lesser extent, with foreign producers for sales in Thailand of telecommunications cables, power cables and enameled wires. The Company is one of the five largest producers in the Thai market. Governmental approval processes, tariffs and other import restrictions have limited competition in the Thailand market from foreign wire and cable producers. The Company also experiences significant competition from a number of smaller producers with regard to sales of enameled wire products.

ROW

Although the Company believes that Sigma Cable is one of the major suppliers of power cable products in Singapore, it is subject to significant competition from producers within the region. There are no tariff or other barriers against foreign competition in the local Singapore market, and potential competitors are free to enter the industry. Because of high capital costs, the Company does not presently anticipate that it is likely there will be new domestic entrants to the wire and cable industry in Singapore in the near future that would present material competition to the Company or be in a position to capture a material percentage of the Company's share of the market. However, the performance of Sigma Cable in 2020 was adversely impacted by increased intense competition from other manufacturers seeking to capture a greater share of the Singaporean market.

31

 


In addition to APEC, there are two major wire and cable producers with operations in Australia: Olex Cables (owned by Nexans) and Prysmian Cables, with factories in the States of Victoria and New South Wales, respectively. A significant portion of Australian market is serviced by two importers: (i) Electra Cables which reportedly imports cables from China factories; and (ii) World Wire Cables, which reportedly also sources cables from its Chinese partners to sell in Australian market. These companies are APEC’s principal competitors. APEC is the only power cable producer in the State of Queensland and therefore seeks to take advantage of its comparative proximity to Queensland-based customers in contrast to competitors that are required to transport their products into Queensland from other states in Australia. APEC has sales offices with warehousing facilities in Sydney, Melbourne, Brisbane, and Perth in order to attract and serve customers in those regions. APEC also has a distribution agreement with one of the regional suppliers with the goal of generating additional business for the Australia operations.

 

4.b.7.

Regional Considerations

The principal Asian markets in which we do business have displayed higher overall economic growth in recent years compared to the United States and a number of other more developed markets, subject to occasional episodes of economic and currency exchange volatility attributable to various factors including the increased risks of emerging market investment, actual or potential political instability, and pandemics.

North Asia

The Company’s North Asia operations are conducted principally in China. The economy of China differs from that of most developed free-market economies in a number of respects, including structure, degree of government involvement, level of development, growth rate, capital reinvestment, allocation of resources, rate of inflation, and balance of payments position. In recent years, the government of China has implemented economic reform measures which emphasize decentralization, expansion of consumption in the domestic market, residential and commercial real estate development, infrastructure development, utilization of market forces and the development of foreign investment projects.

Thailand

The volume of sales of the Company’s products in Thailand tends to correlate with the general level of economic activity in Thailand. As a result, the performance of the Company’s Thai operations depends in significant part on the general state of the Thai economy. Infrastructure development and related construction projects in Thailand depend significantly upon government sponsored initiatives. In recent years, the level of government involvement in infrastructure development has tended to track increases or contractions in Thailand’s gross domestic product. Overall, the construction industry and infrastructure projects have slowed considerably, thereby affecting local sales, placing competitive pressure on prices and prompting the Company to rationalize Thai operations and actively seek overseas export markets. Political instability in Thailand tends to diminish governmental focus on infrastructure development projects, which can adversely impact the volume of sales to our customers who are engaged in large infrastructure projects.

 

4.b.8.

Insurance

The Company maintains insurance policies covering certain buildings, machinery and equipment against specified amounts of damage or loss caused by fire, flooding, other natural disasters and burglary and theft. The Company does not carry insurance for consequential loss arising from business interruptions or political disturbances and does not carry product liability insurance. In addition, the Company does not have business liability or disruption insurance for its operations in China and the Company does not have coverage for flood damage or business interruption for its operations in Thailand. Consequently, the amount of our insurance coverage may not be adequate to cover all potential claims or liabilities, and we may be forced to bear substantial costs resulting from the lack of adequate insurance.  No assurance can be given that we will not incur losses beyond the limits or outside the scope of coverage of our insurance policies. Please see “Our Insurance Coverage Does Not Cover All of Our Business Risks” is Section 3.d. above for more information regarding insurance coverage risks.

32

 


 

4.b.9.

Environmental Regulations

The Company is subject to a variety of laws and regulations covering the storage, handling, emission and discharge of materials into the environment. The Company believes that all of its operations are in material compliance with all applicable environmental laws and regulations. The Company has not been subjected to any material legal, regulatory or other action alleging violations or breaches of environmental standards.

 

 

4.c.

Organizational Structure

Please refer to Business Overview in Item 4.B. above.

 

4.d.

Property, Plants and Equipment

The Company’s manufactured products are produced at facilities located on premises owned or leased by Siam Pacific, Charoong Thai, Sigma Cable, APEC, and PEWSC. The following is a summary of the Company’s material facilities and operations.

Siam Pacific owns a 7.45 acre production facility near Bangkok, Thailand, located on a 26.79 acre site that it also owns. Telecommunications cables and enameled wires are manufactured at this facility. The production facility constitutes a portion of certain property and assets which are pledged to financial institutions.

Charoong Thai owns a 34 acre production facility in Chachoengsao province, near Bangkok, Thailand, where telecommunications cables and power cables are manufactured. The production facility is located on a 65 acre site which Charoong Thai also owns. Neither the production facility nor the land is mortgaged.

Sigma Cable produces power cables on a 19,373 square meter site in Singapore leased from the Jurong Town Corporation (“JTC”) for 30 years from September 16, 2000 to September 16, 2030. JTC is a government-linked corporation and is Singapore’s largest industrial landlord. Building assets are pledged to United Overseas Bank.

APEC owns a 6,735 square meter power cable manufacturing facility on a 39,000 square meter land parcel in Brisbane, Australia. The manufacturing facility and land are secured over a bank loan facility of APEC.

Shanghai Yayang ceased production by end of October of 2019 and has been restructured as a trading company, located in an area of approximately 27,839 square meters of state-owned land in an industrial district in Fengxian, Shanghai. The land and buildings are pledged to Industrial and Commercial Bank of China as security for a $1.2 million bank loan.

PEWSC manufactures enameled wires in a facility on 36,000 square meters of state-owned land with a built-up area of 20,367 square meters in Long Gang, Shenzhen, China. A leasehold right of industrial land use for the land has been granted for 49 years. The land and building are pledged to Agricultural Bank of China as security for a $1.5 million bank loan.

Most of the Company’s facilities in Thailand, Singapore, Australia and China use production processes and equipment imported from Europe, the United States, Taiwan, or Japan.

The production capacity and extent of utilization of the Company’s facilities varies from time to time, and such information is considered to be commercially sensitive and proprietary information.

 

ITEM 4A:

UNRESOLVED STAFF COMMENTS

Not applicable

33

 


ITEM 5:

OPERATING AND FINANCIAL REVIEW AND PROSPECTS\

 

5.a.

Operating  Results

The following discussion should be read in conjunction with the information contained in our audited consolidated financial statements and notes thereto (the “Financial Statements”) referenced in Item 18 of this Annual Report.

5.a.1.Disclosures of Critical Accounting Policies

The critical accounting estimates and judgements and those that are most significant in connection with our financial statement policies are set out in Note 3.23 of our consolidated financial statements referenced in Item 18 of this Annual Report.

5.a.2.Selected Operating Data

Results are analyzed and reported along the lines of our three principal business segments, consisting of the North Asia region, the Thailand region, and the ROW region. Included in the summary table below are certain results within our three business segments with regard to net sales, operating profit, and operating profit margin for the periods covered. The following table sets forth selected summary data for the periods indicated (dollar ($) amounts in thousands of U.S. dollar).

 

5.a.3.

Operating Results

 

For the year ended December 31,

 

 

2020

 

2019

 

2018

 

 

(US$’000 except for percentages)

 

Net Sales:

 

 

 

 

 

 

 

 

 

North Asia region

$

73,199

 

$

76,575

 

$

103,647

 

Thailand region

 

143,647

 

 

172,379

 

 

213,424

 

ROW region

 

96,718

 

 

89,206

 

 

108,869

 

Total

$

313,564

 

$

338,160

 

$

425,940

 

Operating profit (loss):

 

 

 

 

 

 

 

 

 

North Asia region

$

3,087

 

$

1,237

 

$

5,234

 

Thailand region

 

11,250

 

 

3,042

 

 

9,539

 

ROW region

 

(4,492

)

 

(1,659

)

 

(2,306

)

Corporate expenses & adjustments

 

(2,288

)

 

(3,269

)

 

(3,783

)

Total operating profit (loss)

$

7,557

 

$

(649

)

$

8,684

 

Operating profit (loss) margin:

 

 

 

 

 

 

 

 

 

North Asia region

 

4.22

%

 

1.62

%

 

5.05

%

Thailand region

 

7.83

%

 

1.76

%

 

4.47

%

ROW region

 

(4.64

)%

 

(1.86

)%

 

(2.12

)%

APWC is approximately 75.5% beneficially owned and is controlled by PEWC, a Taiwanese company. The remaining approximately 24.5% of the issued and outstanding Common Shares are publicly-traded in the United States and listed on Nasdaq. Based upon a review of Schedule 13D and 13G filings made with the SEC by shareholders, and a review of the share register maintained by APWC’s transfer agents in Bermuda and the U.S., the Company is not aware of any shareholders resident in the jurisdictions where the Company has business operations. While the Company’s operations and results are impacted by economic, fiscal, monetary and political policies of the respective governments in the countries where the Company operates, that impact is not a function of APWC’s shareholder base.

34

 


 

5.a.3.1.

Year Ended December 31, 2020 Compared with Year Ended December 31, 2019

 

 

For the Year Ended

December 31,

 

 

 

 

 

 

 

 

2020

 

2019

 

Changes

 

Changes

 

 

US$’000

 

US$’000

 

US$’000

 

%

 

Income Statement Data:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

313,564

 

$

338,160

 

$

(24,596

)

 

(7.3

)

Costs of sales

 

(279,686

)

 

(313,373

)

 

33,687

 

 

10.7

 

Gross profit

 

33,878

 

 

24,787

 

 

9,091

 

 

36.7

 

Other operating income

 

814

 

 

385

 

 

429

 

 

111.4

 

Selling, general and administrative expenses

 

(27,006

)

 

(25,051

)

 

(1,955

)

 

(7.8

)

Other operating expenses

 

(129

)

 

(770

)

 

641

 

 

83.2

 

Operating profit /(loss)

 

7,557