Century Synthetic Fiber : Annual Report FY2022

CENTURY SYNTHETIC FIBER CORPORATION

ANNUAL REPORT FY2022

Hochiminh city, March 2023

TABLE OF CONTENTS

GENERAL INFORMATION ...................................................................................................................................... 4

Annual Report for year 2022 ................................................................................................................................ 4

Assurance of reliability and applied standards of the report ................................................................................ 4

Message from Chairperson ................................................................................................................................... 4

Message from Managing Director ........................................................................................................................ 5

Performance hightlights in 2022 .......................................................................................................................... 6

About the Company ............................................................................................................................................. 6

Key milestones ..................................................................................................................................................... 7

Industry and Business Areas ................................................................................................................................ 8

Value chain of textile industry ........................................................................................................................... 10

Business philosophy ........................................................................................................................................... 10

Business model ................................................................................................................................................... 14

Market position - Key growth drivers ................................................................................................................ 15

Organizational structure ..................................................................................................................................... 16

The subsidiary .................................................................................................................................................... 17

STRATEGIC DEVELOPMENTS ............................................................................................................................. 18

S.W.O.T analysis ................................................................................................................................................ 18

Overview of the garment and textile industry and polyester filament segment ................................................. 18

Aligning economic growth with sustainability ................................................................................................... 22

Opportunities and challenges that may impact the Company's business ........................................................... 23

Medium and long-term strategies toward 2025 .................................................................................................. 25

RISK MANAGEMENT ............................................................................................................................................. 26

Risk management objectives .............................................................................................................................. 26

Risk management system ................................................................................................................................... 27

Determination of Risk Materiality ..................................................................................................................... 28

Analysis and evaluation of critical risks ............................................................................................................. 29

Report of Internal audit ...................................................................................................................................... 33

REPORT OF BOARD OF MANAGEMENT OF THE COMPANY'S PERFORMANCE ...................................... 34

The Company's performance in 2022 ................................................................................................................ 34

Assessment of Company performance ............................................................................................................... 38

Performance forecast for the fiscal year 2023 .................................................................................................... 43

Explanation of the BOM to the audit firm's opinions ........................................................................................ 44

Human resource developments .......................................................................................................................... 44

REPORT ON ENVIRONMENT - SOCIAL IMPACTS ........................................................................................... 48

Sustainable development strategies .................................................................................................................... 48

Assessment of the BOM towards Environment - Labor - Social ....................................................................... 50

Responsibility to ensure the implementation of environmental policies ............................................................ 51

Environmental Impact Report ............................................................................................................................ 51

Green capital market .......................................................................................................................................... 58

IMPLEMENTATION OF INVESTMENT PROJECTS ............................................................................................ 59

Implementation of investment project of the Parent company ........................................................................... 59

Implementation of investment project of the Subsidiary .................................................................................... 59

STOCK OVERVIEW AND INVESTOR RELATION ............................................................................................. 59

Stock overview ................................................................................................................................................... 59

Reasons to invest STK ....................................................................................................................................... 60

Share and shareholder structure ......................................................................................................................... 60

Transactions between internal persons and related persons on shares of the Company ..................................... 61

Treasury stock trading ........................................................................................................................................ 62

Other stock trading ............................................................................................................................................. 62

History of chartered capital increase and change in owner's equity .................................................................. 62

Changes in owner's equity ................................................................................................................................. 63

Dividend policy .................................................................................................................................................. 64

Investor relation activities .................................................................................................................................. 64

REPORT ON CORPORATE GOVERNANCE ......................................................................................................... 65

Corporate Governance Principles ....................................................................................................................... 65

Corporate governance model .............................................................................................................................. 65

Changes in BOD's composition ......................................................................................................................... 65

Board of Directors of the Company ................................................................................................................... 66

Report of the BODs for year 2022 ..................................................................................................................... 67

Plans and Orientations of the BOD in 2023 ....................................................................................................... 76

Plan of enhancement in Corporate Governance in 2022 .................................................................................... 76

Plan to raise capital to finance investment projects ............................................................................................ 76

REPORT OF BOARD OF SUPERVISORS .............................................................................................................. 76

Composition of the BOS .................................................................................................................................... 76

Activities of the BOS ......................................................................................................................................... 77

Report on the BOS activities .............................................................................................................................. 77 PREVENTION OF INTEREST CONFLICT OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES

.................................................................................................................................................................................... 79

Prevention of conflict of interest ........................................................................................................................ 79

Significant transactions with related parties during the year .............................................................................. 80

Transactions of internal shareholders in 2022 .................................................................................................... 80

Transactions with other entities .......................................................................................................................... 80

Salary, remunerations and benefits of the BOD, BOS and BOM ...................................................................... 80

CONSOLIDATED AUDITED FINANCIAL STATEMENTS ................................................................................. 81

GENERAL INFORMATION

Annual Report for year 2022

The Annual Report of Century Synthetic Fiber Corporation for year 2022 provides a full range of financial and non-financial information related to environment, labor and society in the fiscal year 2022.

The report is issued in the electronic PDF format and publicly posted on the Company's Website at the linkwww.theky.vn. The report is written in Vietnamese and translated into English.

RISK MANAGEMENT, ADVERSITY OVERCOMING,

SUSTAINABLE DEVELOPMENT

To survive and thrive in a constantly changing and unpredictable world, it is not enough for a business to have endurance to withstand adversity, but to focus on risk management to prevent internal and external risks and mitigate the negative impact on its performance. Therefore, it is necessary to identify weaknesses and make improvement towards sustainable developments.

Assurance of reliability and standards applied in the report

•  Components of the Report

  •  Annual Report

  •  Corporate Governance Report

  •  Sustainable Development Report

  •  Audited Consolidated Financial Statements

  •  IFRS Audited Financial Statements

•  Scope of the Report

  The fiscal year is from January 1st, 2022 to December 31st, 2022

•  Applied standards

  •  Circular 96/2020/TT-BTC

  •  Vietnam accounting standards

  •  IFRS standards

  •  ASEAN corporate governance scorecards

  •  ISO standards

  •  GRS certificate, Oekotex-100.

•  Responsibility for ensuring the information to be accurate and trustworthy

  •  The financial data is consistent with the independent audited financial reports by E&Y Ltd.

  •  Data on global and Vietnam's industry comes from Customs departments of the relevant markets; published reports on macro economy-industry.

  •  Data of the Company's operations.

  •  BOD and BOS reports are in line with FY2022 Corporate Governance Report.

  •  Shareholder information is provided by Vietnam depository department.

Message from Chairperson

Dear esteemed shareholders and investors,

First of all, as the Chair Person of the Board of Directors of Century Synthetic Fiber Corporation ("STK"), on behalf of the Company I would like to extend our deep gratitude to our customers, partners, suppliers, staffs and shareholders for your continued supports to the Company's developments over the years.

It is my pleasure to share with you the Annual report for fiscal year 2022 of Century Synthetic Fiber Corporation. I hope that the report will provide useful information on STK's operation in the passing year as well as the Company's vision and business strategy in the coming years.

Difficulties followed difficulties in 2022. Demand for yarn after Covid 19 pandemic was just started to recover in Q1-2023 but then gradually declined in the following quarter as consumers in large markets such as US, EU cut spending under pressure of inflation and unemployment when economic downturn is looming. In that context, risk management, strengthening operation and enhancing competency is the main action plan that the Company's Board of Directors and Board of Management pursuit to remain our competitiveness in the market. Thanks to our reputation in development of premium products with special functionality, the Company still received orders for high-value-added products in the 2nd half of 2022. Therefore, the Company was able to fulfill 81% of annual revenue target and ~81% of annual profit target, equivalent to revenue of VND2,114 billion and net profit after tax of VND242 billion.

Hardship will continue in 2023 as the Russian - Ukraine war continues. However, we believe that with strong foundation being built by Century over the years, the Company will be able to quickly recover when the demand bounces back. With portfolio of eco-friendly products such as recycled yarn and dope dyed yarn, abilities to develop functionality yarn, quick delivery, excellence customer service and company's good reputation in harmonizing the interests of stakeholders (customers, partners, suppliers, employees, shareholders and the social community), the STK will achieve sustainable development in coming years.

With the entire STK staffs' exceptional efforts alongside the continued solid support from the shareholders and investors, I believed that STK will maintain the sustainable growth in the coming years.

CHAIRPERSON

DANG MY LINH

Message from Managing Director

Dear esteemed shareholders and investors,

Adversity remained for the yarn industry in 2022. Due to inflation and global economic downturn, fashion brands anticipated consumer demand would get weaker and hence restrained order placing to control inventory risks. As results, STK's sales volume in 2022 declined by 5% year-on-year. However, thank to high-value-added orders coupled with rising selling price, STK sales revenue increased 3.5% year-on-year and the Company's gross profit was maintained at the same level of 2021. As a dresult of operation streamlining and cost controlling, the Company could save operating costs to offset rising financial expenses. The year net profit after tax of VND242 billion was a result of the team's collective and continuous efforts. Continuing the company's sustainability journey, in 2022, recycled yarn accounted for 52% of total revenue, indirectly contributing to recycle of 1.04 billion of post-consumer-used bottles.

In order to effectively control internal as well as external risks, in 2022, the Company established internal audit system and engaged AFC to conduct internal audit for fiscal year 2022. Based on audit findings, the Company will strengthen production, financial management as well as sales management, setting strong foundation to implement sustainability strategies which focus on eco-friendly product offering such as recycled, dope dyed and high-value added yarn. The company has also been exploring new markets and acquiring new customers.