SET Announcements

No. MD. 079/2005 May 13, 2005 Re: Management Discussion and Analysis For the Three Month Period Operating Results ended March 31, 2005 To: President The Stock Exchange of Thailand Management Discussion and Analysis For the Three Month Period Operating Results ended March 31, 2005 1. Report and Analysis of the Operating Results 1.1 Revenue 1.1.1 Services Income In Q1/2005, services income of the company was Baht 267.19 million, increasing by Baht 26.01 million or 10.78% compared to that of the last year. There are two major factors influent the services income which are volume of fuel serviced and the exchange rate. In Q1/2005, the company had volume of fuel serviced of 997.61 million litres, increasing 16.21 million litres or 1.65% from Q1/2004. The other important factor accounted for the movement of services income is the exchange rate. Thai Baht has been appreciated against US Dollar in Q1/2005 and negatively affected the services income since the service fees are charged in US Dollar based. Thai Baht appreciated against US Dollar from the average rate of Baht 39.31 per US Dollar in Q1/2004 to Baht 38.63 per US Dollar in Q1/2005 which accounted for 1.72% appreciation. Apart from the major factors described above, the Company has increased the service fee from US. Cent 2.34 per gallon to US. Cent 2.58 per gallon since November 2004 accounted for 10% increase. Therefore, the service fee charged in Q1/2005 was 10% higher than in Q1/2004. When combined with the increase in volume serviced of 1.65% and the Baht appreciation of 1.72%, the services income increased by 10.78%. 1.1.2 Rental Income The rental income of Q12005 was Baht 14.70 million which comprised of office and pipeline receiving system rental to Fuel Pipeline Transportation Limited (FPT) of Baht 14.32 million and land and utilities system rental to Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) of Baht 0.38 million. The rental income increased Baht 1.07 million or 7.82% from last year. The increase in rental income was due to the increase in pipeline receiving system rental to FPT of Baht 1.03 million which charged at a variable rate referenced to FPT's Jet A-1 transportation revenue, since FPT has raised the Jet A-1 transportation fee as well as the increase in volume of fuel transported of 5.95% from Q1 of last year. 1.1.3 Other Income Other income was Baht 8.72 million, mostly comprised of interest income from short term investment of Baht 0.44 million, interest income from FPT of Baht 1.19 million, principal repayment as specified in the repayment schedule of the third debt restructuring and principal prepayment received from FPT of approximately Baht 3.45 million. Besides, there was guarantee fee from TARCO of Baht 1.32 million. 1.2 Expenses 1.2.1 Cost of Services In Q1/2005, cost of services was Baht 85.69 million. Major items in cost of services are pipeline rental charge from Airports of Thailand PLC. (AOT) of Baht 10.54 million , land rental of Baht 4.65 million, maintenance expense of Baht 6.16 million, insurance expenses comprised of all risk insurance of Baht 2.30 million and third party legal liability insurance of Baht 3.96 million, depreciation of Baht 15.39 million, salary and overtime of Baht 23.64 million. Besides, there was retirement benefit recorded as cost of service of Baht 7.30 million. When comparing to Q1/2004, cost of services increased Baht 0.63 million or 0.74%. The main reason for such a small rise in cost of service was the refund of additional pipeline rental charge paid to AOT in Q4/2004 of approximately Baht 8.72 million which caused pipeline rental charge to reduce by Baht 7.69 million. In contrary, the company had some major increase expenses which were salary of Baht 1.26 million and overtime of Baht 1.48 million due to rapidly increase in number of low cost airline flights. The last major increase expense was the retirement benefit of Baht 5.68 million. Other than increasing expenses, there was an important decreasing expense which was depreciation expense of Baht 1.69 million. 1.2.2 Administrative Expenses Administrative expenses was Baht 41.47 million, comprised of salary of Baht 13.01 million, retirement benefit of Baht 2.05 million, depreciation of Baht 3.51 million and computer supplies of Baht 2.95 million. The Administrative expenses increased by Baht 8.95 million or 27.50% from Q1 of last year due to the increase in personnel expenses which were salary of Baht 2.97 million, retirement benefit of Baht 2.05 million, and depreciation of Baht 0.99 million. 1.2.3 Interest Expenses The Company had the interest expenses in Q1/2005 of Baht 9.40 million which was totally the interest from long term loan from KBANK of Baht 800 million. 1.3 Operating Results Net profit for the first quarter ended March 31, 2005 was Baht 116.08 million, increasing by Baht 8.74 million or 8.14% from Q1/2004 of Baht 107.34 million as a result of various factors as discussed above and the earning per share was Baht 0.34. 2. Report and Analysis of Financial Status 2.1 Assets As at March 31, 2005, the Company and its subsidiaries had total assets in the amount of Baht 5,528.28 million, increased by Baht 956.29 million or 20.92% from that of last year. The important details are as follows: 2.1.1 Cash and cash equivalent decreased from Baht 333.99 million at the end of 2004 to Baht 330.38 million as at Q1/2005 or decreasing by Baht 3.60 million. The details of important sources and uses of cash and short term investment are as follows: - The Company and its subsidiaries had cash flow from operations of Baht 302.38 million from net profit of Baht 116.08 million, depreciation of Baht 19.30 million, increase in other current assets of Baht 30.51 million, increase in amounts due from and advance to related parties of Baht 10.65 million, decrease in account payable of Baht 11.84 million, and increase in other current liabilities of Baht 217.93 million which mainly were account payable from construction of the Company and its subsidiaries. - Cash flow from investment was Baht 804.73 million comprised of investment in Depot of Baht 462.81 million, investment in Into-plane of Baht 43.97 million, investment in Hydrant of TARCO of Baht 192.12 million, investment in Pipeline transportation from Mukkasan to Suvarnabhumi Airport of JP-One of Baht 108.92 million, investment in short term investment by JP-One of Baht 120 million and the last payment of liability under agreement to purchase rights of claim of Baht 17.30 million. Besides, the Company and its subsidiaries had cash inflow from capital injection from minority shareholders of JP-One of Baht 75 million on January 21, 2005. - Cash flow from financing was Baht 498.74 million. The Company had increase in long term loan of Baht 500.53 million of which Baht 379 million was drown by BAFS to invest in Depot and Into-plane Projects whereas TARCO drew long term loan from US Dollar portion of USD 2.20 million and from THB portion of Baht 35 million causing increase in long term loan of Baht 121.53 million. 2.1.2 Property, leasehold improvement and equipment was Baht 3,845.37 million comprised of the Company's property, leasehold improvement and equipment of Baht 2,395.33 million and TARCO's and JP-One's work in progress of Baht 1,149.16 and 300.89 million, respectively. 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 768.01 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, 2005, the Company and its subsidiaries had total liabilities of Baht 3,295.84 million, increased Baht 765.91 million or 30.27% compared to that of the end of last year resulted in debt to equity ratio of 1.48 : 1 time. Liabilities comprised of major items as follows: 2.2.1 Other current liabilities of Baht 536.58 million which comprised of major items such as account payable of Baht 42.49 million, accrued corporate income tax of Baht 69.22 million and others of Baht 398.22 million which mainly were account payable from construction of the Company and its subsidiaries. 2.2.2 Retention was Baht 229.64 million, comprised of the Company's retention of Baht 140.92 million, TARCO's retention of Baht 74.19 million and JP-One's retention of Baht 14.53 million. 2.2.3 Long term loan from bank of Baht 2,429.76 million comprised of : - The first portion of Baht 800 million was long term loan from KBANK with 7 years time to maturity starting from 2004, interest rate of 3-month THBFIX + 0.90%, and 3 years grace period. The Company has already hedged the interest rate risk by entering into interest rate swap agreement with KBANK to swap the floating interest rate to fixed interest rate of 4.65% since October 4, 2004. - The second portion of Baht 1,055 million was long term loan from BBL with a total credit facilities of Baht 2,000 million used to finance Depot and Into- plane projects with 10 years time to maturity starting from 2004, interest rate of 3-month FDR +1.25% and 3 years grace period. - The remaining portion was TARCO's loan for construction of Hydrant of Baht 574.76 million from BBL with a total credit facilities of USD 8 million at the rate of Libor+1.75% and Baht 700 million at the rate of 3- month Fixed Deposit Rate +1.75%. The loan has 10 years time to maturity starting from 2002 and a grace period of 5 years. 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, 2005, shareholders' equity was Baht 2,232.44 million, increasing from last year by Baht 190.38 million due to the company's net profit of Q1/2005 of Baht 116.08 million and minority interest of Baht 75 million. 3. Major factors that may affect operating performance or financial status The Company has contingent liability from providing a bank guarantee to TARCO for a total loan of Baht 700 million and USD 8 million and interest as well as other expenses incurred by a lender to force TARCO to pay its liability. The liability will incur to the Company only for the remaining amount not covered by the liquidation of TARCO's property, when TARCO has defaulted the loan agreement and has been charged and forced to sell its property by auction. TARCO had net loss in Q1/2005 of Baht 3.04 million resulting from loss from exchange rate of Baht 1.50 million and administrative expenses of Baht 1.54 million. TARCO had retained loss as at Q1/ 2005 of Baht 23.60 million. At the end of Q1/2005, TARCO had liabilities in Thai Baht Currency of Baht 362 million and liabilities in US Dollar Currency of USD 5.42 million. TARCO had registered and paid up capital of Baht 530 million. The Company has an obligation to pay for unpaid capital of JP-One, a 50% subsidiary, of Baht 45 million within Q2/2005. JP-One had net loss in Q1/2005 of Baht 0.83 million resulting from interest income of Baht 0.72 million and administrative expenses of Baht 1.55 million. JP-One had retained loss as at Q1/2005 of Baht 5.85 million. As of March 31, 2005, JP-One had registered capital of Baht 600 million and paid up capital of Baht 510 million. Please be informed accordingly. Respectfully yours, (M.R. Supadis Diskul) Managing Director