SET Announcements

No. MD.139/2005 November 11, 2005 Re: Management Discussion and Analysis For the Three Month Period Operating Results ended September 30, 2005 To: President The Stock Exchange of Thailand Management Discussion and Analysis For the Three Month Period Operating Results ended September 30, 2005 1.Report and Analysis of the Operating Results 1.1 Revenue 1.1.1 Services Income In Q3/2005, services income of the company was Baht 292.98 million, increasing by Baht 35.86 million or 13.95% compared to that of the last year. A major factor for the increase in services income was the increase in fuel serviced. The company had volume of fuel serviced of 1,021.42 million litres, increasing 33.75 million litres or 3.42% from Q3/2004. However, Thai Baht appreciated against USD from the average rate of Baht 41.46 per US Dollar in Q3/2004 to Bath 41.32 per US Dollar in Q3/2005 which accounted for 0.32% appreciation and negatively affected services income. 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 Q3/2005 was 10% higher than that in Q3/2004. When combined with the increase in volume serviced of 3.42% and the appreciation of THB of 0.32%, the services income increased by 13.95%. 1.1.2 Rental Income The rental income of Q3/2005 was Baht 10.74 million which comprised of office and pipeline receiving system rental to Fuel Pipeline Transportation Limited (FPT) of Baht 10.33 million and land and utilities system rental to Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) of Baht 0.41 million. The rental income decreased Baht 4.39 million or 29.02% from last year. The decrease in rental income was due to the decrease in pipeline receiving system rental to FPT of Baht 4.53 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 10.36 million, mostly comprised of interest income from short term investment of Baht 0.72 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 4.90 million. Besides, there was guarantee fee from Thai Aviation Refueling Co., Ltd. (TARCO) of Baht 1.92 million. 1.2 Expenses 1.2.1 Cost of Services In Q3/2005, cost of services was Baht 82.47 million, increased Baht 3.38 million or 4.27% from Q3/2004. 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 4.52 million, insurance expenses comprised of all risk insurance of Baht 2.23 million and third party legal liability insurance of Baht 4.04 million, depreciation of Baht 15.09 million, salary of Baht 18.68 million and overtime of Baht 2.31 million. 1.2.2 Administrative Expenses Administrative expenses was Baht 38.61 million, comprised of salary of Baht 13.30 million, real-estate tax expense of Baht 5.38 million, depreciation of Baht 3.69 million and computer supplies of Baht 2 million. The Administrative expenses decreased by Baht 18.26 million or 32.11% from Q3/2004 due to the decrease in retirement benefit of Baht 20.67 million, increase in real-estate tax expense of Baht 5.38 million due to the postpone of payment from May to July. 1.2.3 Interest Expenses The Company had the interest expenses in Q3/2005 of Baht 9.38 million which was totally the interest from long term loan from KBANK of Baht 800 million. 1.3 Operating Results Net profit for the third quarter ended September 30, 2005 was Baht 138.71 million, increasing by Baht 33.25 million or 31.52% from Q3/2004 of Baht 105.47 million (from adjusted financial statement which recorded lower retirement benefit in Q3/2004 of Baht 4.75 million) as a result of various factors as discussed above and the earning per share was Baht 0.33. From the Company's operating results for the ninth-month period ended September 30, 2005, the Company had net profit of Baht 346.25 million, increasing Baht 51.34 million or 17.41% from the same period last year, and had earning per share of Baht 0.91. 2.Report and Analysis of Financial Status 2.1 Assets As at September 30, 2005, the Company and its subsidiaries had total assets in the amount of Baht 6,333.36 million, increased by Baht 182.05 million or 2.96% from last quarter. The important details are as follows: 2.1.1 Cash and cash equivalent decreased from Baht 314.20 million at the end of Q2/2005 to Baht 278.01 million as at Q3/2005 or decreasing by Baht 36.19 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 142.26 million from net profit of Baht 138.71 million, depreciation of Baht 19.47 million, reversal of allowance for doubtful debt of Baht 4.90 million, decrease in reserve for employee's benefit of Baht 2.52 million, decrease in unrealized exchange loss of Baht 7.89 million, decrease in other current assets of Baht 20.70 million, decrease in trade account payable of Baht 6.18 million and decrease in other current liabilities of Baht 14.28 million which mainly were account payable from construction of the Company and its subsidiaries. - Cash flow from investment was Baht 503 million comprised of investment in Depot Project, Into-plane Project and other equipments of BAF of Baht 316.91 million, investment in Hydrant of TARCO of Baht 205.35 million, investment in Pipeline transportation from Mukkasan to Suvarnabhumi Airport of JP-One of Baht 106.64 million. The Company and its subsidiaries financed some of the investment from short term investment of Baht 120 million. - Cash flow from financing was Baht 324.57 million. The Company had increase in long term loan of Baht 430.77 million of which Baht 234 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 0.5 million and from THB portion of Baht 178 million causing increase in long term loan of Baht 196.77 million. Moreover, there was a dividend payout of Baht 106.25 million. 2.1.2 Property, leasehold improvement and equipment was Baht 4,931.91 million comprised of the Company's property, leasehold improvement and equipment of Baht 2,889.21 million and TARCO's and JP-One's work in progress of Baht 1,431.42 and 611.19 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 September 30, 2005, the Company and its subsidiaries had total liabilities of Baht 3,967.70 million, increased Baht 149.66 million or 3.92% compared to that of the end of Q2/2005 resulted in debt to equity ratio of 1.68 : 1 time. Liabilities comprised of major items as follows: 2.2.1 Other current liabilities of Baht 290.70 million which comprised of major items such as account payable of Baht 38.19 million and others of Baht 183.84 million which mainly were account payable from construction of the Company and its subsidiaries. 2.2.2 Retention was Baht 327.22 million, comprised of the Company's retention of Baht 183.45 million, TARCO's retention of Baht 99.54 million and JP-One's retention of Baht 44.25 million. 2.2.3 Long term loan from bank of Baht 3,245.91 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 1,602 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 843.91 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 September 30, 2005, shareholders' equity was Baht 2,365.67 million, increasing from last quarter by Baht 32.39 million due to the company's net profit of Q3/2005 of Baht 138.71 million the dividend payment for the first half of 2005 operation of Baht 106.25 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 profit in Q3/2005 of Baht 0.36 million resulting from exchange gain of Baht 1.80 million and administrative expenses of Baht 1.44 million. TARCO had retained loss as at Q3/ 2005 of Baht 36.61 million. At the end of Q3/2005, TARCO had liabilities in Thai Baht Currency of Baht 580 million and liabilities in US Dollar Currency of USD 6.42 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 Q3/2005 of Baht 0.25 million resulting from interest income of Baht 0.80 million and administrative expenses of Baht 1.05 million. JP-One had retained loss as at Q3/2005 of Baht 6.70 million. As of September 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