SET Announcements

No. MD. 077/2003 August 8, 2003 Re:Management Discussion and Analysis For the Three Month Period Operating Results ended June 30, 2003 To:President The Stock Exchange of Thailand Management Discussion and Analysis For the Three Month Period Operating Results ended June 30, 2003 1.Report and Analysis of the Operating Results 1.1 Revenue 1.1.1 Services Income In Quarter 2 of 2003, services income of the company was Baht 183.07 million, decreasing by Baht 43.60 million or 19.23% compared to that of the last quarter and decreasing Baht 25.72 million or 12.32% from the same period last year. The major factor contributing to the decrease in services income is volume of fuel serviced. The company had volume of fuel serviced in quarter 2/2003 of 761.51 million litres, decreasing from 932.76 million litres or 18.36% from quarter 1/2003 and decreasing from 867.15 million litres or 12.18% from the same period last year. The major reason explaining the significant decrease in fuel serviced was 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 businesses were severely effected. Many airlines cancelled flights from Thailand to those risky countries because there was dramatically decrease in the number of passengers for those routes. In quarter 2, 2003, flights to China, Hong kong and Singapore were reduced by approximately 57.54, 26.64 and 27.36, respectively, from the same period last year. The SARS epidemics caused a decrease in a number of flights from 24,770 flights in quarter 2/2002 and 26,822 flights in quarter 1, 2003 to 21,846 flights in quarter 2/2003 or decreased by 11.80% and 18.55%, respectively. However, the aviation business started to recover in July 2003. This could be evident from the reduction of the decreasing rate of fuel serviced in July compared to the same period of last year. The decreasing rate in July was 7.06% compared to 15.53% in April and 15.63% in May. 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 42.79 per US Dollar in quarter 2/2002 and Baht 43.19 per US Dollar in quarter 1/2003 to Baht 42.72 per US Dollar in quarter 2/2003 which accounted for 0.15% and 1.07% appreciation, respectively. 1.1.2 Rental Income The rental income of quarter 2/2003 was Baht 10.67 million which comprised of office and pipeline receiving system rental to Fuel Pipeline Transportation Limited (FPT) of Baht 10.33 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 0.63 million or 5.57% from the last quarter and reduced Baht 1.67 million or 13.55% 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 11.33 million, mostly comprised of interest income from short term investment of Baht 3.63 million, interest income from FPT of Baht 1.27 million, principal repayment received from FPT of approximately Baht 1.40 million as specified in the repayment schedule of the third debt restructuring and principal prepayment from FPT of approximately Baht 2.57 million. 1.2 Expenses 1.2.1 Cost of Services Cost of services was Baht 81.67 million, decreasing by Baht 1.33 million or 1.60% from the last quarter which was insignificant compared to the decrease in services income because major items of cost of services were fixed cost which did not vary by the volume of fuel serviced. Some of them were pipeline rental charge, land rental, depreciation, insurance expenses and personnel expenses. However, cost of services increased Baht 5.35 million or 7.02% 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 2.19 million divided into all risk insurance of Baht 1.67 million and third party liability insurance of Baht 0.52 million. 1.2.2 Administrative Expenses Administrative expenses was Baht 31.87 million, increasing by Baht 5.69 million or 6.85% from the last quarter due to the decrease in real estate taxes of Baht 5.13 million which was due in April of each year. However, administrative expenses decreased by Baht 7.29 million or 18.62% from the same period last year. The decrease in administrative expenses was due to an adoption of a cost reduction program in quarter 2/2003 to mitigate the effect of SARS on the company's performance. The major reduced expenses were PR expenses, donation and social contribution of Baht 6.2 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 0.66 million as a result of loss on investment in TARCO. TARCO had interest income of Baht 0.03 million and administrative expenses of Baht 1.48 million which resulted in net loss of Baht 1.45 million. 1.3 Operating Results Net profit for the second quarter ended June 30, 2003 was Baht 68.04 million, decreasing by Baht 10.20 million or 13.03% from the same period last year as a result of various factors as discussed above. The company had an earning per share of Baht 0.20. From the Company's operating results for the six-month period ended June 30, 2003, the Company had net profit of Baht 170.57 million, increasing Baht 1.96 million or 1.16% from the same period last year, and had earning per share of Baht 0.50. The Board of Directors' Meeting No.3/2003 held on August 8, 2003 resolved to pay interim dividend from the first half of 2003's performance at the rate of Baht 0.28 per share as specified in the Company's dividend policy to pay out the dividend of at least 50% of net profit. 2.Report and Analysis of Financial Status 2.1 Assets As at June 30, 2003, the Company and its subsidiary had total assets in the amount of Baht 1,899.09 million, decreased by Baht 84.03 million or 4.24% from that of last quarter. The important details are as follows: 2.1.1 Cash and cash equivalent decreased from Baht 228.19 million in quarter 1/2003 to Baht 39.97 million in quarter 2/2003. This was a result of using cash flow from operation in quarter 2/2003 to invest in short term investment of Baht 75 million, invest in dispensers of Baht 57.14 million and pay 2002 dividend for the last six-month performance of approximately Baht 85 million. Moreover, the company also invested in Depot Project at Suvarnabhumi Airport of approximately Baht 17.91 million and paid for liability under agreement to purchase rights of claim of Baht 17.30 million. From the investment plan, the Company will need a total investment fund of approximately Baht 3,800 million during 2003-2005 to invest in Depot and Into-Plane Projects at Suvarnabhumi Airport and to invest in an acquisition of TARCO's shares. The Board of Directors' Meeting No.3/2003 approved the Company's capital structure to raise a long term loan with a maximum of Baht 2,800 million. The loan will be divided into a project financing with a maximum of Baht 2,000 million and an average payback period of 7-9 years and the TARCO acquisition financing in terms of a debenture or any other financial instruments with a maximum of Baht 800 million and a maturity of no more than 10 years. 2.1.2 Investments accounted for under equity method was Baht 167.74 million, decreased by Baht 0.66 million from realization of TARCO's operating result under equity method. 2.2 Liabilities As at June 30, 2003, the Company and its subsidiary had total liabilities of Baht 227.66 million, decreased Baht 67.09 million or 22.76% compared to that of last quarter which mainly resulted from a decrease in other current liabilities of Baht 45.49 million comprising of corporate income tax payable of Baht 22.33 million, other account payable of Baht 14.36 million and others of Baht 8.80 million. Besides, there was 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 June 30, 2003, shareholders' equity was Baht 1,671.43 million, decreasing from last quarter of Baht 16.94 million due to the company's net profit of quarter 2/2003 of Baht 68.04 million and the dividend payment of approximately Baht 85 million. Please be informed accordingly. Respectfully yours, (M.R. Supadis Diskul) Managing Director