SET Announcements

No. MD. 199 / 2007 November 14, 2007 Re: Management Discussion and Analysis For the Three Month Period Operating Results ended September 30, 2007 To: President The Stock Exchange of Thailand Management Discussion and Analysis For the Three Month Period Operating Results ended September 30, 2007 1. Report and Analysis of the Operating Results For the three months period ended September 30, 2007 the Company and subsidiaries have earned a consolidated net income of Baht 150.0 million as compared to net income of Baht 108.6 million earned during the same period in 2006 which is increasing by 38.1%. The main reasons for changes are as follows: 1.1 Revenue 1.1.1 Services Income In 3nd Quarter, 2007 total income of the consolidated financial statement of company's group was Baht 545.6 million, increasing by Baht 229.1 million or 72.4% compared to that of the last year. There are major factors influent the increasing in total income of company's group which are increasing in services income by 81.9% to Baht 533.9 million as consequence of increased in volume of fuel serviced by 9.6% (y-o-y) to 1,133.9 million litres and the increased in refueling fee at Suvarnabhumi Airport and Donmung Airport. Moreover, in this quarter, TARCO, JP-One and IPS had services income at Baht 146.6 million, Baht 21.3 million and Baht 1.0 million respectively. 1.1.2 Rental Income The rental income of the consolidated financial statement of company's group was Baht 7.4 million for this quarter, decreasing by Baht 0.9 million or 10.7% compared to the same period. Which main reason is sharply decreased in rental of pipeline receiving system of FPT despite the rental of pipeline receiving system from THAPPLINE was compensated but it's still very low when compared with the earlier. -1- 1.1.3 Other Income Other income of the consolidated financial statement of company's group was Baht 4.3 million, decreasing by Baht 10.4 million or 70.6% compared to the same period. Mostly comprised of interest income from FPT of Baht 1.1 million, interest income from short term investment of Baht 3.2 million, guarantee fee from TARCO and JP-One at rate of 1% of outstanding loan of Baht 3.0 million and principal repayment as specified in the repayment schedule of the third debt restructuring and principal prepayment received from FPT of Baht 4.1 million. Moreover that for this quarter, BAFS received dividend income from TARCO's operation at the amount of Baht 72.0 million. 1.2 Expenses 1.2.1 Cost of Services For the consolidated financial statement of company's group in 3nd quarter, 2007, cost of services was Baht 214.2 million, increasing by Baht 118.6 million or 124.0% compared to the same period. Major items which increased cost of services are a) increasing in refueling concession fee charged at Suvarnabhumi Airport from Airports of Thailand Plc. (AOT) at rate of Baht 0.06 per liter which would be varies by volume of fuel services of Baht 58.1 million b) increasing in depreciation at Suvarnabhumi Airport of Baht 42.0 million. Besides, there were cost of services of TARCO and JP-One of Baht 26.1 million and Baht 13.9 million respectively. Although, pipeline rental charged from AOT for this quarter decreasing by Baht 14.0 million. 1.2.2 Administrative Expenses Administrative expenses for the consolidated financial statement of company's group in 3nd quarter, 2007, was Baht 64.4 million, increasing by Baht 12.3 million or 23.6% compared to the same period.. Which are comprised of increasing in depreciation of Baht 4.9 million, increasing in real estate tax of Baht 2.4 million. Moreover, the administrative expenses of TARCO and JP-One of Baht 7.9 million and Baht 2.8 million respectively. 1.2.3 Interest Expenses The interest expenses for the consolidated financial statement of company's group in 3nd quarter, 2007 was Baht 42.2 million which increasing by Baht 32.6 million when compared to that of the last year. Mainly comprised of interest payment for long term loan of BAFS at amounted of Baht 26.0 million and interest payment for financial lease amounted to Baht 0.3 million. Besides that the interest expenses of long term loan and interest payment for financial lease of TARCO and JP-One are Baht 14.3 million and Baht 1.6 million respectively. -2- 1.3 Operating Results Net profit for the three months period ended September 30, 2007 of BAFS and subsidiaries was Baht 150.0 million which is equivalent an earning per share of Baht 0.29, increasing by Baht 41.4 million or 38.1% from the same period of last year of Baht 108.6 million as a result of various factors as mentioned. For the company only, net profit of the 3rd quarter was Baht 165.5 million compared with Baht 113.8 million of last year. Which the different in net profit in consolidated financial statement and net profit of company only is related from changing in accounting policies for the record of investment in company's group's subsidiaries to comply with the Accounting Standard no 44 (Revised 2007) "Consolidated Financial Statement and Accounting for investments in Subsidiaries". 2. Report and Analysis of Financial Status 2.1 Assets As at September 30, 2007 the Company's group had total assets in the amount of Baht 7,358.2 million, decreased by Baht 122.1 million or 1.6% from that of last quarter of 2007. The important details are as follows: 2.1.1 Cash, cash equivalent and short term investment of the Company's group is Baht 556.5 million. The details of important sources and uses of cash and short term investment are as follows: - The Company's group had cash flow from operations of Baht 208.2 million from consolidated net profit of 3nd Quarter, 2007 of Baht 150.0 million adjusted with cash inflow items such as depreciation and amortization of Baht 83.1 million, unrealized FX loss of Baht 1.1 million. And increased in account payable, others current asset and Goodwill amortization of Baht 4.7 million, Baht 13.7 million and Baht 6.5 million respectively. - Cash outflow items comprised of increased in account receivable of Baht 3.2 million and decreased in other current liabilities of Baht 51.5 million. - Cash flow used in investment was Baht 161.4 million mainly comprised of investment in property, leasehold improvement and equipment of Baht 177.5 million. However, prepaid for construction of this quarter decreased by Baht 12.4 million. Besides, loan to and long-term receivable from related company's group in this quarter decreased of Baht 4.1 million. - Cash flow used in financing was Baht 159.1 million which mainly was dividend payment for 1st half of 2007 operation at the amount of Baht 102.0 million and bank loan principle payment at the amount of Baht 50.8 million 2.1.2 Property, leasehold improvement and equipment was Baht 5,736.2 million comprised of BAFS's property, leasehold improvement and equipment of Baht 3,388.7 million and TARCO's and JP- One's of Baht 1,676.2 million and 678.2 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 768.0 million and will be amortized -3- along with the concession period for 30 years starting from the opening of Suvarnabhumi Airport. Up to September 30, 2007 the goodwill was Baht 742.2 million. 2.2 Liabilities As at September 30, 2007, the Company's group had total liabilities of Baht 4,403.5 million, decreased by Baht 170.6 million or 3.7% compared to that of last quarter resulted in debt to equity ratio of 1.49 : 1 time. Liabilities comprised of major items as follows: 2.2.1 Account payable of Baht 46.3 million which comprised of account payable - related company's group of Baht 38.4 million and account payable - others of Baht 7.8 million. 2.2.2 Portion of long term loan which to be paid of Baht 415.9 million which are comprised of long term loan which to be paid for the company of Baht 251.6 million, TARCO's long term loan which to be paid of Baht 146.3 million and JP-One's long term loan which to be paid of Baht 18 million. Besides that the financial lease which to be paid in one year was Baht 9.6 million. 2.2.3 Retention was Baht 108.3 million, comprised of the Company's retention of Baht 25.8 million, TARCO's retention of Baht 58.1 million and JP-One's retention of Baht 24.4 million. 2.2.4 Other current liabilities of Baht 105.3 million which comprised of major items such as accrued corporate income tax of Baht 35.4 million, other account payable of Baht 24.8 million and others of Baht 45.1 million. 2.2.5 Long term loan from bank of Baht 3,509.5 million decreased by Baht 81.4 million or 2.3% compared to last quarter which comprised of : - The first portion of Baht 558.7 million was long term loan from KBANK with restructured to 10 years and maturity in 2014 which is semiannual principle payment. The Company paid the first installment of Baht 88.9 million in February 2007 and paid the 2nd principle payment of Baht 50.8 million in August 2007. - The second portion of Baht 1,850.0 million was long term loan from BBL used to finance Depot and Into-plane projects with 10 years and maturity in 2014 which has interest rate of 3-month FDR +1.25%. - The third portion was TARCO's loan of Baht 998.8 million from BBL with a total credit amount of USD 6.8 million at the rate of Libor +1.75% and Baht 595.0 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. Moreover, TARCO had additional loan of Baht 170 million from BBL with the interest rate of MLR-2.50%. The interest rate will increase 0.25% every 6 month from contract date on May 2, 2006 until reach MLR-1.5%. -4- - The remaining portion was JP-One loan at amount of Baht 102 million from BBL with a total long term credit facility of Baht 120.0 million at the rate of MLR-2.50%. The interest rate will increase 0.25% every 6 month from contract date on December 1, 2005 until reach MLR-1%. A grace period is up to December 30, 2007 and the loan has approximately 7 years time to maturity. 2.3 Shareholders' Equity As at September 30, 2007, shareholders' equity of the Company's group was Baht 2,954.6 million, increasing from last quarter by Baht 48.4 million or 1.7%. 3. Major factors that may affect operating performance or financial status The Company's group has contingent liability from providing a bank guarantee to TARCO for a total loan of Baht 870.0 million and USD 8.0 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's group 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 the third quarter of 2007 of Baht 67.6 million which was net profit margin at 46.1%. Resulting from services income of Baht 146.6 million, cost of services and administrative expenses of Baht 26.1 million and Baht 7.9 million respectively. Moreover, the Company has contingent liability from providing a bank guarantee to JP-One for a proportion of 50% of outstanding amount from total long term loan. JP-One had net profit in the third quarter of 2007 of Baht 3.4 million which was net profit margin at 15.7%. Resulting from services income of Baht 21.3 million compared with cost of services and administrative expenses was of Baht 13.9 million and Baht 2.8 million respectively. Please be informed accordingly. Yours sincerely, (M.R. Supadis Diskul) Managing Director Legal and Securities Division Tel 02-565-3811-8 ext.373 -5-