SET Announcements

No. MD.061/2004 May 14, 2004 Re:Management Discussion and Analysis For the Three Month Period Operating Results ended March 31, 2004 To:President The Stock Exchange of Thailand Management Discussion and Analysis For the Three Month Period Operating Results ended March 31, 2004 1.Report and Analysis of the Operating Results 1.1 Revenue 1.1.1 Services Income In Q1/2004, services income of the company was Baht 241.18 million, increasing by Baht 14.52 million or 6.41% compared to that of the same period last year. There are two major factors influent the services income which are volume of fuel serviced and the exchange rate. In Q1/2004, the company had volume of fuel serviced of 981.40 million litres, increasing 48.64 million litres or 5.21% from Q1/2003. The relatively high growth rate of fuel consumed indicated the recovery of global economy as well as travel and aviation industries after SARS crisis last year. The other important factor accounted for the movement of services income is the exchange rate. Thai Baht has been appreciated against US Dollar in Q1/2004 and negatively affected the services income since the service fees are charged in US Dollar based. The Baht appreciated against US Dollar from the average rate of Baht 42.73 per US Dollar in Q1/2003 to Baht 39.31 per US Dollar in Q1/2004 which accounted for 8.02% appreciation. The effect of the Baht appreciation, the increase of volume of fuel serviced of 5.21% and the increase in service fee of 10% in November 2003 resulted in the increase in services income of 6.41%. 1.1.2 Rental Income The rental income of Q1/2004 was Baht 13.63 million which comprised of office and pipeline receiving system rental to Fuel Pipeline Transportation Limited (FPT) of Baht 13.29 million and land and utilities system rental to Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) of Baht 0.34 million. The rental income increased Baht 2.33 million or 20.65% from the same period last year. The increase in rental income was due to the increase in pipeline receiving system rental to FPT of Baht 2.21 million which is a variable rate charged at the rate of 28% based on FPT's Jet A-1 transportation revenue according to FPT's higher transportation fee. 1.1.3 Other Income Other income was Baht 8.97 million, mostly comprised of interest income from short term investment of Baht 0.41 million, interest income from FPT of Baht 1.24 million, principal repayment received from FPT of approximately Baht 1.61 million as specified in the repayment schedule of the third debt restructuring and principal prepayment from FPT of approximately Baht 4.33 million. Besides, there was gain from exchange rate of TARCO of Baht 0.54 million recorded from the depreciation of the outstanding US Dollar loan. 1.2 Expenses 1.2.1 Cost of Services In Q1/2004, cost of services was Baht 85.06 million. Major items in cost of services are pipeline rental charge from Airports of Thailand PLC. (AOT) of Baht 18.23 million , land rental of Baht 4.78 million, maintenance expense of Baht 5.46 million, insurance expenses comprised of all risk insurance of Baht 2.61 million and third party legal liability insurance of Baht 3.63 million, depreciation of Baht 17.09 million and salary of Baht 17.51 million.When comparing to Q1/2003, cost of services increased Baht 2.07 million or 2.49%. The many factor contributing to the increase in cost of services was an increase in pipeline rental charge paid to AOT of approximately Baht 2.30 million from CPI adjustment. 1.2.2 Administrative Expenses Administrative expenses was Baht 32.53 million, comprised of salary of Baht 10.04 million, depreciation of Baht 2.52 million, computer services and supplies of Baht 2.32 million, interest expense from long term loan of Baht 1.74 million and interest expense from short term loan of Baht 2.30 million. The Administrative expenses increasing by Baht 6.34 million or 24.22% from the same period of last year due to the increase in salary of Baht 1.84 million and interest expense of Baht 4.04 million. 1.3 Operating Results Net profit for the first quarter ended March 31, 2004 was Baht 107.34 million, increasing by Baht 4.81 million or 4.69% from last year as a result of various factors as discussed above and the Company had an earning per share of Baht 0.32. 2.Report and Analysis of Financial Status 2.1 Assets As at March 31, 2004, the Company and its subsidiaries had total assets in the amount of Baht 3,538.54 million, increased by Baht 21.73 million or 0.62% from that of last year. The important details are as follows: 2.1.1 Cash and cash equivalent and short term investment decreased from Baht 438.24 million in 2003 to Baht 433.18 million in Q1/2004 or decreasing by Baht 5.06 million. The details of important sources and uses of cash and short term investment are as follows: Cash from operations Baht 194.53 million Investment in Depot Baht (66.15) million Advanced payment for Depot construction Baht (22.66) million Investment in hydrant of TARCO Baht (14.34) million Cash paid for liability under agreement Baht (17.30) million to purchase rights of claim Short term loan Baht (958.00) million Long term loan Baht 799.45 million Minority interest in JP-One Baht 75.00 million The increase in minority interest in JP-One Asset Company Limited (JP-One) which is BAFS' subsidiary company with 50% share holding proportion was a result of paid up capital of Baht 150 million or 25% of registered capital of Baht 600 million paid on March 22, 2004. The paid up capital of Baht 75 million was paid by the Company and the other Bht 75 million was paid by minority which was included in the Company's consolidated balance sheet. 2.1.2 Property, leasehold improvement and equipment was Baht 2,004.86 million comprised of the Company's property, leasehold improvement and equipment of Baht 1,226.36 million and TARCO's work in progress of Baht 778.45 million. 2.1.3 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 756.01 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 March 31, 2004, the Company and its subsidiaries had total liabilities of Baht 1,598.72 million, decreased Baht 160.33 million or 9.11% compared to that of last year resulted in debt to equity ratio of 0.82:1 time. Liabilities comprised of major items as follows: 2.2.1 Liability under agreement to purchase rights of claim due within 1 year of Baht 69.19 million. The Company recorded reserve for FPT guarantee of Baht 415.11 million as a liability in 2001 and later in 2002, the Company released the guarantee by purchasing the right of claim from FPT's creditors (group 2) and became a creditor of FPT for the whole amount. The Company recorded such a liability as "Liability under agreement to purchase rights of claim". The Company made the first payment of Baht 207.55 million on the contract signing date. The remaining of Baht 207.55 million would be paid in equal amount of Baht 17.30 million on a quarterly for 12 quarters starting from June 2002 to March 2005. 2.2.2 Other current liabilities of Baht 227.83 million which comprised of major items such as accrued corporate income tax of Baht 57.90 million and others of Baht 152.56 million. 2.2.3 Long term loan from bank of Baht 1,241.61 million. The first portion of Baht 800 million was long term loan from KBANK with 7 years time to maturity, interest rate of 3-month THBFIX + 0.90%, and 3 years grace period. The remaining portion was TARCO's loan for construction of Hydrant of Baht 441.61 million. Other than the above liabilities, there was also project finance of Baht 2,000 million from BBL used to finance Depot and Into-plane projects with 10 years time to maturity, interest rate of 3-month FDR +1.25% and 3 years grace period. The loan has already signed since March 19, 2004 and will be firstly drawn in May 2004. Upon the completion of the drawdown period, the Company's Debt to Equity Ratio will increase significantly. However, the Company has a policy to maintain D/E Ratio in the level of not more than 2:1 time to maintain financial flexibility and strength of financial status. Eventually, D/E Ratio will drop rapidly after the opening of Suvarnabhumi Airport. 2.3 Shareholders' Equity As at March 31, 2004, shareholders' equity was Baht 1,939.82 million, increasing from last year by Baht 182.06 million due to the company's net profit of Q1/2004 of Baht 107.34 million and minority interest in JP-One Asset of Baht 75 million. 3.Major factors that may affect operating performance or financial status The Company has contingent liability from providing a sponsor support to TARCO for a total loan of Baht 700 million and USD 8 million. The liability will incur to the Company when TARCO has financial difficulties and default to pay interest and principal to a lender in the amount that the lender consider to be sufficient for covering TARCO's obligation. TARCO had net loss in Q1/2004 of Baht 0.77 million resulting from gain from exchange rate of Baht 0.54 million and administrative expenses of Baht 1.32 million. TARCO had retained loss as at Q1/2004 of Baht 16.63 million. At the end of 2003, TARCO had liabilities in Thai Baht Currency of Baht 327 million and liabilities in US Dollar Currency of USD 2.898 million. Please be informed accordingly. Respectfully yours, (M.R. Supadis Diskul) Managing Director