SET Announcements

No. MD.022/2003 28 February 2003 Re: Management Discussion and Analysis For the One Year Period Operating Results ended December 31, 2002 To: President The Stock Exchange of Thailand Management Discussion and Analysis For the One Year Period Operating Results ended December 31, 2002 1.Report and Analysis of the Operating Results 1.1 Revenue 1.1.1 Services Income In 2002, services income of the company was Baht 866.93 million, decreasing by Baht 15.48 million or 1.75% compared to that of the year 2001. The major factor accounted for the slightly decrease in services income would be the trivial increase in volume uplift which was 3,552.45 million litres, increasing only 58.14 million litres or 1.66% from last year. The reasons for such a small growth in volume uplift would be the reduction of flights from Qantas Airways and British Airways landed at Donmuang Airport starting from April 2002 and the effect of the terrorist attacks in South East Asia region during the year 2002. However, in quarter 4, the volume uplift achieved 927 million litres, increasing by 40 million litres or 4.52% from the same period of last year, signal a potential growth of uplift in the future. It proved that the effect of the terrorist attack has no more impact on the growth of an aviation business and it is expected that the growth of fuel uplift would be higher from the year 2002. However, it also depends on the effect of the war between U.S.A. and Iraq. The other important factor accounted for the movement of services income would be the exchange rate. Since the Baht appreciated against US Dollar from the average rate of Baht 44.88 per US Dollar in 2001 to Baht 43.37 per US Dollar in 2002 which accounted for 3.36% appreciation. This resulted in the decrease of services income of 1.75% despite the increase in uplift of 1.66% from last year. 1.1.2 Rental Income The rental income of 2002 was Baht 46.02 million which comprised of office and pipeline receiving system rental to Fuel Pipeline Transportation Limited (FPT) of Baht 44.71 million, land and utilities system rental to Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) of Baht 1.14 million and office rental to Thai Aviation Refueling Co., Ltd. (TARCO) of Baht 0.17 million. The rental income reduced Baht 3.33 million or 6.74% from last year. It was a result of a decrease in pipeline receiving system rental to FPT of Baht 4.61 million since a pipeline rental rate was changed from a fixed rate of approximately Baht 40.04 million per year in 2001 to a variable rate of 28% of FPT's Jet A-1 transportation revenue which was totaling Baht 35.43 million in 2002 in compliance with FPT's third debt restructuring. The revised rate has been effective since May 1, 2002. 1.1.3 Interest Income The company's interest income was Baht 23.88 million, comprised of interest income from FPT of Baht 4.39 million and interest income from short term investment of Baht 19.49 million. 1.1.4 Other Income Other income was Baht 19.57 million, mostly comprised of principal repayment received from FPT of approximately Baht 3.61 million as specified in the repayment schedule of the third debt restructuring and principal prepayment of approximately Baht 3.21 million. Beside the mentioned items, there was a reverse item of Baht 8.08 million from fine for building construction prior to permission being reduced from the Treasury Department. 1.2 Expenses 1.2.1 Cost of Services Cost of services was Baht 342.51 million, increasing by Baht 21.92 million or 6.84% from last year. A major factor leading to the increase in the cost of services was an increase in pipeline rental charge paid to Airports of Thailand PLC. (AOT) according to its additional investment in hydrant (phase 7) of Baht 12.12 million which started from January 15, 2002. In addition, there was an increase in insurance expense of Baht 11.60 million divided into All Risk Insurance of Baht 3.60 million and Third Party Liability Insurance of Baht 8.00 million. 1.2.2 Administrative Expenses Administrative expenses was Baht 153.49 million, increasing by Baht 12.17 million or 8.61% from last year due to the increase in advertising and public relations expenses for IPO of Baht 4.54 million and management fee for purchasing rights of claim in FPT from creditors of Baht 6.60 million. 1.2.3 Share of loss on investments accounted for under equity method Share of loss on investments accounted for under equity method increased from Baht 2.11 million in 2001 to Baht 4.01 million in 2002 as a result of loss on investment in TARCO. TARCO had interest income of Baht 0.17 million and administrative expense of Baht 9.08 million resulted in net loss of Baht 8.91 million. 1.3 Operating Results Net profit for the year ended December 31, 2002 was Baht 319.80 million, increasing by Baht 396.07 million from last year according to FPT guarantee of Baht 415.11 million. Exclude that special item, the company would have net profit of Baht 338.84 million in 2001 which would make the company's 2002 net profit reduced Baht 19.04 million or 5.62% as a result of various factors as discussed above. From the Company's operating results for the year ended December 31, 2002, the Company had net profit of Baht 319.80 milliom or earning per share of Baht 1.01 using weighted average number of shares. The company's Board of Directors' meeting on February 28, 2003 resolved to propose the Shareholders' Meeting to approve the dividend payment of Baht 0.25 per share to shareholders whose names appear on the share registration book on April 29, 2003 and to fix the dividend payment date to be May 16, 2003. Beside this dividend payment, BAFS paid interim dividend of Baht 0.25 per share on September 6, 2002. 2. Report and Analysis of Financial Status 2.1 Assets As at December 31, 2002, the Company and its subsidiary had total assets in the amount of Baht 1,903.03 million, increased by Baht 337.81 million or 21.58% from last year. The important details are as follows: 2.1.1 Cash and cash equivalent increased from Baht 183.83 million in 2001 to Baht 281.46 million in 2002. Beside cash flow from operation in 2002 of Baht 376.95 million, it was a result of IPO proceeds of approximately Baht 522.98 million, dividend payout from 2001 and the first half of 2002 performance of Baht 239.34 million, investment in Depot Project at Suvarnabhumi Airport of approximately Baht 236.85 million, investment in provincial airport of Baht 14.59 million and investment in purchasing of refuellers of Baht 37.40 million. Moreover, the company has paid liability under agreement to purchase rights of claim of Baht 259.44 million. 2.1.2 Investments accounted for under equity method was Baht 169.07 million, increased by Baht 15.99 million from capital injection in TARCO of Baht 20 million in the second quarter of 2002 and realization of TARCO's operating result under equity method. 2.2 Liabilities As at December 31, 2002, the Company and its subsidiary had total liabilities of Baht 317.20 million, decreased Baht 420.15 million compared to that of last year which resulted in debt to equity ratio of 0.2 to 1 time. The explanation would be that there was no proposed dividends payable in 2002 and no reserve for guarantee payable of Baht 415.11 million as well. However, there was still a liability under agreement to purchase rights of claim of Baht 155.67 million . At present, the Company had no long term liabilities from any financial institutions. 2.3 Shareholders' Equity As at December 31, 2002, shareholders' equity was Baht 1,585.83 million, increasing from last year of Baht 757.96 million due to the fact that the company had net profit of Baht 319.80 million, received the IPO proceeds of Baht 522.98 million and paid dividend from the first half of 2002 operation of Baht 85 million. Please be informed accordingly. Respectfully yours, (M.R. Supadis Diskul) Managing Director