SET Announcements

No. MD.048/2003 May 7, 2003 Re:Management Discussion and Analysis For the Three Month Period Operating Results ended March 31, 2003 To:President The Stock Exchange of Thailand Management Discussion and Analysis For the Three Month Period Operating Results ended March 31, 2003 1.Report and Analysis of the Operating Results 1.1 Revenue 1.1.1 Services Income In Quarter 1 of 2003, services income of the company was Baht 226.67 million, decreasing by Baht 0.91 million or 0.40% compared to that of the last quarter but increasing Baht 6.2 million or 2.81% from the same period last year. The major factor contributed to changes in services income is volume of fuel serviced. The company had volume of fuel serviced in quarter 1/2003 of 932.76 million litres, increasing from 927.34 million litres or 0.60% from quarter 4/2002 and increasing from 888.11 million litres or 5.03% from the same period last year. According to the fact that the first quarter is in high season of an aviation business or in winter schedule starting from November to March of each year, the increase in volume of fuel serviced would not be significant compared to that of the last quarter which is also in high season. However, the increase in volume of fuel serviced compared to that of the same period last year indicated that there was a trend of growth in the aviation business and the economic recovery. The growth of the aviation business could be evident by the increase in a number of flights from 24,797 flights in quarter 1/2002 to 26,547 flights in quarter 4/2002 and 26,822 flights in quarter 1/2003 or increased by 7.06% and 8.17%, respectively, with the significant increase in the number of flights from traveling during New Year and Chinese New Year Holidays. However, the growth of the aviation business slowed down in quarter 2/2003 due to the spread of Severe Acute Respiratory Syndrome or SARS in many countries especially in Asian countries such as China, Singapore, Hong kong and Vietnam. Traveling and aviation business were severely effected. Many airlines cancelled flights to risky countries because there was no passenger for those routes. In April, flights to China, Hong kong and Singapore were reduced by approximately 40.82%, 15.85% and 30.27%, respectively, from the same period last year. For the effect on the company, if the epidemics can be controlled within 6 months, it is expected that the company will have a decrease in fuel serviced by approximately not more than 5%. However, if not, the damage will have to be further evaluated. The other important factor accounted for the movement of services income would be the exchange rate. The Baht appreciated against US Dollar from the average rate of Baht 43.61 per US Dollar in quarter 4/2002 to Baht 43.19 per US Dollar in quarter 1/2003 which accounted for 0.99% appreciation. This resulted in the decrease of services income of 0.40% despite the increase in volume serviced of 0.60% from last quarter. Moreover, the Baht appreciated by 2.11% from the same period last year with the average rate of Baht 44.12 per US Dollar. 1.1.2 Rental Income The rental income of quarter 1/2003 was Baht 11.30 million which comprised of office and pipeline receiving system rental to Fuel Pipeline Transportation Limited (FPT) of Baht 10.96 million,land and utilities system rental to Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) of Baht 0.30 million and office rental to Thai Aviation Refueling Co., Ltd. (TARCO) of Baht 0.05 million. The rental income reduced Baht 1.01 million or 8.18% from the last quarter and reduced Baht 1.05 million or 8.52% from the same period last year. The change in rental income was mainly due to the change in pipeline receiving system rental to FPT because it is a variable rate referenced to FPT's Jet A-1 transportation revenue which was slightly decrease from quarter 4/2002 to quarter 1/2003. 1.1.3 Other Income Other income was Baht 9.03 million, mostly comprised of interest income from short term investment of Baht 4.04 million, interest income from FPT of Baht 1.32 million, principal repayment received from FPT of approximately Baht 0.94 million as specified in the repayment schedule of the third debt restructuring and principal prepayment from FPT of approximately Baht 2.39 million. 1.2 Expenses 1.2.1 Cost of Services Cost of services was Baht 83 million, decreasing by Baht 20.24 million or 19.60% from the last quarter because in quarter 4 of each year, staff reward for services personnel will be recorded. However, cost of services increased Baht 4.86 million or 6.23% from that of the same period 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 3.13 million. In addition, there was an increase in insurance expense of Baht 2.33 million divided into all risk insurance of Baht 1.70 million and third party liability insurance of Baht 0.63 million. 1.2.2 Administrative Expenses Administrative expenses was Baht 26.18 million, decreasing by Baht 16.88 million or 39.20% from the last quarter due to the decrease in staff reward for non-service personnel of approximately Baht 11.63 million which will be recorded in quarter 4 of each year, legal fee of Baht 2.34 million and advertisement and public relations of Baht 1.96 million. Moreover, administrative expenses also decreased by Baht 12.81 million or 32.85% from the same period last year. The major factor leading to the decrease would be that there was no special expenses occurred in quarter 1 of 2003 such as management fee for purchasing rights of claim in FPT from creditors of Baht 6.60 million and advertising and public relations expenses for IPO which reduced the PR expenses of Baht 3.80 million. 1.2.3 Share of loss on investments accounted for under equity method Share of loss on investments accounted for under equity method was Baht 0.67 million as a result of loss on investment in TARCO. TARCO had no income whereas had administrative expenses of Baht 1.47 million which resulted in net loss of Baht 1.47 million. 1.3 Operating Results Net profit for the first quarter ended March 31, 2003 was Baht 102.53 million, increasing by Baht 12.16 million from the same period last year as a result of various factors as discussed above. Moreover, the company had a tax privilege which reduced income tax rate from 30% to 25% starting from 2003 to 2007. The company had an earning per share of Baht 0.30. 2.Report and Analysis of Financial Status 2.1 Assets As at March 31, 2003, the Company and its subsidiary had total assets in the amount of Baht 1,983.11 million, increased by Baht 80.09 million or 4.21% from that of last quarter. The important details are as follows: 2.1.1 Cash and cash equivalent decreased from Baht 281.46 million in 2002 to Baht 228.19 million in quarter 1/2003. This was a result of using cash flow from operation in quarter 1/2003 of Baht 132.38 million to invest in short term investment of Baht 145 million and invest in Depot Project at Suvarnabhumi Airport of approximately Baht 17.63 million and pay liability under agreement to purchase rights of claim of Baht 17.30 million. 2.1.2 Short term investment was Baht 701 million, rose Baht 145 million from investment in promissory notes of financial institutions which yielded higher return than bank deposit. 2.1.3 Investments accounted for under equity method was Baht 168.40 million, decreased by Baht 0.67 million from realization of TARCO's operating result under equity method. 2.2 Liabilities As at March 31, 2003, the Company and its subsidiary had total liabilities of Baht 294.74 million, decreased Baht 22.45 million or 7.08% compared to that of last year which mainly resulted from a decrease in a liability under agreement to purchase rights of claim of Baht 17.30 million. At present, the Company had no long term liabilities from any financial institutions. 2.3 Shareholders' Equity As at March 31, 2003, shareholders' equity was Baht 1,688.37 million, increasing from last year of Baht 102.54 million due to the company's net profit of quarter 1/2003 of Baht 102.53 million. Please be informed accordingly. Respectfully yours, (M.R. Supadis Diskul) Managing Director