SET Announcements

No. MD. 121/2003 November 5, 2003 Re:Management Discussion and Analysis For the Three Month Period Operating Results ended September 30, 2003 To:President The Stock Exchange of Thailand Management Discussion and Analysis For the Three Month Period Operating Results ended September 30, 2003 1.Report and Analysis of the Operating Results 1.1 Revenue 1.1.1 Services Income In Quarter 3 of 2003, services income of the company was Baht 198.01 million, increasing by Baht 14.94 million or 8.16% compared to that of the last quarter and decreasing Baht 12.10 million or 5.76% from the same period last year. For the nine-month period of 2003, the Company had services income of Baht 607.74 million, decreasing Baht 31.61 million or 4.94% from last year. The first major factor effecting services income is volume of fuel serviced. The company had volume of fuel serviced in quarter 3/2003 of 846.64 million litres, increasing from 761.51 million litres or 11.18% from quarter 2/2003 and decreasing from 868.90 million litres or 2.56% from the same period last year. Since there was still slightly effect from SARS in July causing the fuel serviced decreased 7% from last year. However, the effect has gradually reduced and finally ended in August. This explained the high increase in fuel serviced in Q3/2003 compared to that of the last quarter which was severely effected by SARS and the slightly decrease from the same period of last year. For the period of nine-month of 2003, the fuel serviced was 2,540.91 million litre compared to 2,625.17 million litre in 2002 or decreasing 3.21%. The number of flights serviced has also been back to normal level since August. The Company serviced a total of 24,717 flights at Donmuang Airport in Q3/2003, increasing from 21,846 flights in last quarter or increasing 13.14% and decreasing from 24,901 flights in the same period of last year or decreasing 0.74%. The total number of flights serviced for the period of nine-month of 2003 was 73,385 flights, decreasing 1.45% from 74,468 flights in the same period of last year. The other important factor accounted for the movement of services income would be the exchange rate. Thai Baht has been appreciated against US Dollar in this quarter and negatively affected the services revenue since the services fees are charged in US Dollar based. The Baht appreciated against US Dollar from the average rate of Baht 42.97 per US Dollar in quarter 3/2002 and Baht 42.72 per US Dollar in quarter 2/2003 to Baht 41.56 per US Dollar in quarter 3/2003 which accounted for 3.28% and 2.72% appreciation, respectively. 1.1.2 Rental Income The rental income of quarter 3/2003 was Baht 12.59 million which comprised of office and pipeline receiving system rental to Fuel Pipeline Transportation Limited (FPT) of Baht 12.20 million, land and utilities system rental to Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) of Baht 0.34 million and office rental to Thai Aviation Refueling Co., Ltd. (TARCO) of Baht 0.05 million. The rental income increased Baht 1.91 million or 17.94% from the last quarter and increased Baht 3.57 million or 39.52% from the same period last year. The increase in rental income was mainly due to the increase in pipeline receiving system rental to FPT because it is a variable rate referenced to FPT's Jet A-1 transportation revenue. For Q3/2003 FPT's volume of Jet A-1 fuel transported increased from the last quarter and help increase its transportation revenue as well. Besides, FPT has recently raised the Jet A-1 transportation fee from Baht 0.0691 per litre to Baht 0.0891 per litre since April 2003. 1.1.3 Other Income Other income was Baht 7.30 million, mostly comprised of interest income from short term investment of Baht 2.62 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 1.93 million. 1.2 Expenses 1.2.1 Cost of Services Major items in cost of services are pipeline rental charge, land rental, depreciation, insurance expenses and personnel expenses. For Q3/2003, cost of services was Baht 79.40 million, decreasing by Baht 2.27 million or 2.78% from the last quarter according to the cooperation of employees in the cost reduction program causing the overtime expense to reduce by Baht 1.98 million. When comparing to Q3/2002, cost of services decreased Baht 5.43 million or 6.40% since there was an increase in pipeline rental charge paid to Airports of Thailand PLC. (AOT) according to its additional investment in hydrant (phase 7) for the period from January 15 to end of June 2002 that was recorded in this period of approximately Baht 5.50 million. 1.2.2 Administrative Expenses Administrative expenses item in Q3/2003 was in line with that of the last quarter and also the same period of last year. Administrative expenses was Baht 32.21 million, increasing by Baht 0.34 million or 1.07% from the last quarter and decreasing approximately Baht 0.05 million or 0.15% from the same period last year. The major administrative expenses in Q3/2003 were personnel expenses, consulting fees, and depreciation expenses. 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 0.49 million as a result of loss on investment in TARCO for its operation during July to August 26, 2003 before the Company's additional acquisition of TARCO's shares to increase the investment in TARCO to 90%. TARCO had no income and incurred administrative expenses of Baht 1.10 million which resulted in net loss of Baht 1.10 million. 1.3 Operating Results Net profit for the third quarter ended September 30, 2003 was Baht 77.85 million, decreasing by Baht 0.11 million or 0.14% from the same period last year as a result of various factors as discussed above. The company had an earning per share of Baht 0.23. From the Company's operating results for the nine-month period ended September 30, 2003, the Company had net profit of Baht 248.43 million, increasing Baht 1.85 million or 0.75% from the same period last year, and had earning per share of Baht 0.73. 2.Report and Analysis of Financial Status 2.1 Assets As at September 30, 2003, the Company and its subsidiaries had total assets in the amount of Baht 3,276.35 million, increased by Baht 1,377.26 million or 72.52% from that of last quarter. The important details are as follows: 2.1.1 Cash and cash equivalent and short term investment decreased from Baht 815.97 million in quarter 2/2003 to Baht 600.13 million in quarter 3/2003 or decreasing by Baht 215.84 million. The details of important sources and uses of cash and short term investment are as follows: Cash from operations Baht 114.09 million Cash paid for Investment in TARCO Baht (836.07) million Investment in Depot Baht (193.23) million Investment in hydrant of TARCO Baht (36.51) million Cash paid for liability under agreement Baht (17.30) million to purchase rights of claim Short term loan Baht 850.00 million Dividend paymentBaht (95.20) million 2.1.2 Investments accounted for under equity method totally decreased Baht 167.74 million from last quarter after the Company has acquired TARCO's shares since August 2003 to finally hold 90% stake in TARCO. Therefore, the Company changed the accounting method from equity method to consolidation method. 2.1.3 Property, leasehold improvement and equipment was Baht 1,559.18 million comprised of the Company's property, leasehold improvement and equipment of Baht 812.41 million and TARCO's work in progress of Baht 746.77 million. 2.1.4 Goodwill was incurred from the acquisition of TARCO's shares at the price higher than its book value in August 2003. The goodwill was recorded at Baht 750.46 million and will be amortized along with the concession period for 30 years starting from the opening of Suvarnabhumi Airport. 2.2 Liabilities As at September 30, 2003, the Company and its subsidiary had total liabilities of Baht 1,589.11 million, increased Baht 1,361.45 million or 598.03% compared to that of last quarter which mainly resulted from an increase in short term loan for shares acquisition in TARCO of Baht 800 million and for advance payment for depot construction of Baht 50 million. Besides, there was a decrease in a liability under agreement to purchase rights of claim of Baht 17.30 million. Other than the above liabilities incurred by BAFS, there were also liabilities of TARCO consisted of long term loan of Baht 427.23 million and account payable for retention and construction of Baht 101.14 million. At the end of Q3/2003, the Company had debt to equity ratio of 0.94 times. 2.3 Shareholders' Equity As at September 30, 2003, shareholders' equity was Baht 1,687.24 million, increasing from last quarter by Baht 15.81 million due to the company's net profit of quarter 3/2003 of Baht 77.85 million and the interim dividend payment paid from the first half operation of 2003 of approximately Baht 95.20 million and minority interest of Baht 33.15 million. Please be informed accordingly. Respectfully yours, (M.R. Supadis Diskul) Managing Director