SET Announcements

No. MD. 115/2005 August 8, 2005 Re:Management Discussion and Analysis For the Three Month Period Operating Results ended June 30, 2005 To:President The Stock Exchange of Thailand Management Discussion and Analysis For the Three Month Period Operating Results ended June 30, 2005 1.Report and Analysis of the Operating Results 1.1 Revenue 1.1.1 Services Income In Q2/2005, services income of the company was Baht 277.75 million, increasing by Baht 32.02 million or 13.03% 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 Q2/2005, the company had volume of fuel serviced of 991.29 million litres, increasing 20.19 million litres or 2.08% from Q2/2004. The other important factor accounted for the movement of services income is the exchange rate since the service fees are charged in US Dollar based. However, Thai Baht stayed at the same average rate of Baht 40.44 per US Dollar in Q2/2005 compared to that of Q2/2004. So there is no impact from currency to services income from the same period last year. 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 Q2/2005 was 10% higher than in Q2/2004. When combined with the increase in volume serviced of 2.08%, the services income increased by 13.03%. 1.1.2 Rental Income The rental income of Q22005 was Baht 9.67 million which comprised of office and pipeline receiving system rental to Fuel Pipeline Transportation Limited (FPT) of Baht 9.29 million and land and utilities system rental to Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) of Baht 0.38 million.The rental income decreased Baht 3.46 million or 26.38% from last year. The decrease in rental income was due to the decrease in pipeline receiving system rental to FPT of Baht 3.53 million since BAFS reduced the rental rate from 28% to 21.5% of FPT's Jet A-1 transportation revenue from March 2005 due to relocation of 1 out of 3 tanks to install pipeline receiving facilities for rent to JP-One Asset Co., Ltd. (JP-One) at fuel depot at Suvarnabhumi Airport. 1.1.3 Other Income Other income was Baht 9.95 million, mostly comprised of interest income from short term investment of Baht 0.64 million, interest income from FPT of Baht 1.18 million, principal repayment as specified in the repayment schedule of the third debt restructuring and principal prepayment received from FPT of approximately Baht 5.06 million. Besides, there was guarantee fee from Thai Aviation Refueling Co., Ltd. (TARCO) of Baht 1.60 million. 1.2 Expenses 1.2.1 Cost of Services In Q2/2005, cost of services was Baht 91.96 million. Major items in cost of services are pipeline rental charge from Airports of Thailand PLC. (AOT) of Baht 18.69 million , land rental of Baht 4.65 million, maintenance expense of Baht 5.14 million, insurance expenses comprised of all risks insurance of Baht 2.34 million and third party legal liability insurance of Baht 4.10 million, depreciation of Baht 15.40 million, salary of Baht 18.73 million and overtime of Baht 5.16 million.Besides, there was retirement benefit recorded as cost of service of Baht 5.23 million. When comparing to Q2/2004, cost of services decreased Baht 1.07 million or 1.15%. The decrease in cost of services was a result of decrease in depreciation expense of Baht 1.39 million and the retirement benefit of Baht 4.40 million. However, there were some increased expenses such as pipeline rental charged of Baht 0.51 million, fuel for vehicles of Baht 0.47 million, maintenance of Baht 1.10 million, salary of Baht 1.71 million and overtime of Baht 0.63 million. 1.2.2 Administrative Expenses Administrative expenses was Baht 65.85 million, comprised of salary of Baht 13.25 million, exchange loss of Baht 11.95 million which mostly incurred from forward contract with financial institutions for the period of 6 months from June to November 2005 at the average rate of Baht 40.44 per US, totaling of USD 10.20 million, retirement benefit of Baht 4.12 million, depreciation of Baht 3.58 million and computer supplies of Baht 2.33 million. Moreover, there was an exchange loss of TARCO of Baht 11.89 million from existing offshore loan of USD 5.92 million as at Q2/2005. The Administrative expenses increased by Baht 18.82 million or 40.02% from Q2/2004 due to the increase in retirement benefit of Baht 1.81 million, exchange loss of Baht 13.09 million and exchange loss of TARCO of Baht 10.39 million. However, there wasa major decrease in real-estate tax expense of Baht 5.19 million due to the postpone of payment to July. 1.2.3 Interest Expenses The Company had the interest expenses in Q2/2005 of Baht 9.48 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 June 30, 2005 was Baht 91.46 million, increasing by Baht 0.44 million or 0.49% from Q2/2004 of Baht 91.02 million (from adjusted financial statement which recorded additional retirement benefit in Q2/2004 of Baht 8.97 million) as a result of various factors as discussed above and the earning per share was Baht 0.24. From the Company's operating results for the six-month period ended June 30, 2005, the Company had net profit of Baht 207.54 million, increasing Baht 0.21 million or 0.1% from the same period last year, and had earning per share of Baht 0.58. The Board of Directors' Meeting No.3/2005 held on August 8, 2005 resolved to pay interim dividend from the first half of 2005's performance at the rate of Baht 0.25 per share or totaling Baht 106.25 million 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, 2005, the Company and its subsidiaries had total assets in the amount of Baht 6,151.32 million, increased by Baht 623.03 million or 11.27% from last quarter. The important details are as follows: 2.1.1 Cash and cash equivalent decreased from Baht 330.38 million at the end of Q1/2005 to Baht 314.20 million as at Q2/2005 or decreasing by Baht 16.19 million.The details of important sources and uses of cash and short term investment are as follows: Net profit Baht 91.46 million Depreciation Baht 19.48 million Unrealized loss from exchange rate Baht 22.52 million Investment in Depot Baht (114.04) million Investment in Intoplane Baht (200.05) million Investment in hydrant of TARCO Baht (210.72) million Investment in pipeline of JP-One Baht (116.48) million Cash received from minority in subsidiary Baht 45.00 million Long term loan Baht 313.00 million Long term loan - TARCO Baht 59.35 million Dividend paid Baht (34.00) million 2.1.2 Property, leasehold improvement and equipment was Baht 4,544.23 million comprised of the Company's property, leasehold improvement and equipment of Baht 2,752.62 million and TARCO's and JP-One's work in progress of Baht 1,362.10 and 429.35 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 June 30, 2005, the Company and its subsidiaries had total liabilities of Baht 3,818.04 million, increased Baht 522.20 million or 15.84% compared to that of the end of Q1/2005 resulted in debt to equity ratio of 1.64 : 1 time. Liabilities comprised of major items as follows: 2.2.1 Other current liabilities of Baht 615.95 million which comprised of major items such as account payable of Baht 44.37 million, accrued corporate income tax of Baht 57.26 million and others of Baht 480.86 million which mainly were account payable from construction of the Company and its subsidiaries. 2.2.2 Retention was Baht 280.03 million, comprised of the Company's retention of Baht 173.13 million, TARCO's retention of Baht 80.33 million and JP-One's retention of Baht 26.57 million. 2.2.3 Long term loan from bank of Baht 2,815.14 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 at the interest rate of 4.65% and 3 years grace period. - The second portion of Baht 1,368 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 647.14 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. 2.3 Shareholders' Equity As at June 30, 2005, shareholders' equity was Baht 2,333.28 million, increasing from last quarter by Baht 100.84 million due to the company's net profit of Q2/2005 of Baht 91.46 million and increase in minority interest in subsidiaries of Baht 45 million. Moreover, the Company paid dividend for the second half of 2004 operation of Baht 119 million of which Baht 85 million was paid by common stock. Therefore, paid-up capital increased by Baht 85 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 Q2/2005 of Baht 13.36 million resulting from interest income of Baht 0.24 million, loss from exchange rate of Baht 11.89 million and administrative expenses of Baht 1.71 million.TARCO had retained loss as at Q2/ 2005 of Baht 36.97 million. At the end of Q2/2005, TARCO had liabilities in Thai Baht Currency of Baht 402 million and liabilities in US Dollar Currency of USD 5.92 million.TARCO had registered and paid up capital of Baht 530 million.The Company has an investment of 50% in JP-One worth Baht 300 million. JP-One had net loss in Q2/2005 of Baht 0.61 million resulting from interest income of Baht 0.93 million and administrative expenses of Baht 1.54 million. JP-One had retained loss as at Q2/2005 of Baht 6.45 million. As of June 30, 2005, JP-One had registered and paid-up capital of Baht 600 million. Please be informed accordingly. Respectfully yours, (M.R. Supadis Diskul) Managing Director