SET Announcements
Management's Discussion and Analysis for the year 2004
- Translation -
1000 / 053 / 2005
March 7, 2005
The Stock Exchange of Thailand
62, Ratchadapisek Road, Klongtoey
Bangkok 10110
Attention : President of The Stock Exchange of Thailand
Subject : Management's Discussion and Analysis for
Business Operations ending December 31, 2004
Attachment : Management's Discussion and Analysis
for Business Operations ending
December 31, 2004
As the Office of the Securities and Exchange
Commission has fostered listed companies in the Stock
Exchange of Thailand to conduct a Management's Discussion
and Analysis for Business Operations every quarter so as to
enable investors to better understand in the Company's
financial status and business operations- apart from the sole
financial data in financial statements, as well as to enable
investors to adequately access information for decision in a
security investment, which is in compliance with the adequate
information disclosure in the good corporate governance
program ;
The Bangchak Petroleum Public Company Limited
(BCP), a listed company in the Stock Exchange of Thailand,
has concentrated on transparent business operation
harmonious with the good corporate governance program.
Therefore, the Company would like to conduct and submit
Management's Discussion and Analysis for Business Operations
ending December 31, 2004 as attachment enclosed.
Please be informed accordingly.
Yours sincerely
(Patiparn Sukorndhaman)
Senior Executive Vice President
Corporate Planning and Investor Relation Office
Tel: 0-2335-4583
Management's Discussion and Analysis for Business
Operations Ending December 31, 2004
General Information
The Bangchak Petroleum Public Company Limited
(BCP) was founded in 1985 by the government of General
Prem Tinsulanonda, aimed to be managed in the same
manner as a private company as well as to be a Thai
owned oil company, which conducts its businesses for the
benefits of the Thai people and society.
At present, its businesses include retail and
wholesale sales of finished oil products and manage an oil
refinery with a capacity of 120,000 barrels per day, rebuilt
replacing the previous one. The latest crude distillation unit
was completed in 1994. The new refinery was designed to
produce the clean fuel with efficient energy consumption
and high production yield. Moreover, The Company has
expanded its market base through approximately 1,100 of
its service stations around the country, which comprise
approximately 600 standard service stations and 500
community service stations.
Business Overview in 2004
In 2004, the economy of the Asia pacific region
continuously grew, which enhanced the demand for oil
consumption and higher the gross refining margin,
especially the sharply increase in refined products
consumption of the petrochemical industry, consequently,
the refined product prices together with crude oil prices
increased throughout the year. Dubai crude oil price (the
reference crude oil in Middle-East) was up for 7.5 $/BBL in
average, in addition, Tapis crude oil price (the reference
crude oil in Far-East) was up for 11 $/BBL. Moreover, the
domestic competition tended to be released compared with
that in the year 2003, since Thai economy continuously
grew and the government also implemented price capped
mechanism to fix the retail oil prices, which resulted to the
lower price competitions in the service station market
significantly. Thus, the Company increased the capacity
utilization and sale volumes in all markets in order to serve
the higher demand for oil consumption; in addition, the
Company also increased the volumes of long residue fuel
oil sending to upgrade at other refineries in order to
increase the Company's revenues.
1.Explanation and Analysis of the Operating Results for the
year 2004 compared with the year 2003
1.1 Net Profit (Loss) Analysis
1) Regarding to the business operations in 2004,
net profit of the Company and its subsidiary
were Baht 2,636 million, which composed of
Baht 2,613 million of the Company's net profit
and Baht 26 million of its subsidiary's net profit,
The Bangchak Greennet, as well as, Baht 2
million of the connected-transaction for
adjustment.
2) The Company's EBITDA was Baht +4,089
million, increased from Baht 1,553 million of
last year EBITDA by Baht 2,536 million. Such
profit resulted from the following factors:
- EBITDA of the Refinery Business was Baht
3,456 million, increased from that of last
year at Baht 906 million, since the
Company had gross refining margin
(excluding inventory gain/ loss) of 1.75
$/BBL, increased from that of last year at
1.41 $/BBL. These resulted from the
increase in oil demand corresponding to
the economic recovery and the sharply
increase in refined products consumption of
the petrochemical industry, which affected
to the gasoline and diesel oil prices to
increase at the higher rate comparing to
crude oil prices. In addition, the Company
has continuously performed the operation
synergies with the other refineries in order
to increase value addition of products and
reduce cost. Moreover, the Company had
gains from the changes of oil price and
foreign exchange rate on crude and refined
product inventories (Inventory gains) by Baht
2,176 million, comparing to that of Baht 52
million in the year 2003, since oil prices had
continuously increased throughout the year.
Therefore, the Company's total gross
refining margin was 3.41 $/BBL, and the
Company also increased the refinery
utilization rate up to 90 KBD, which was
higher than that of last year at 74 KBD.
- EBITDA of Marketing Business was Baht
633 million, decreased from that of last
year at Baht 647 million, since marketing
margin, excluding Jet fuel, was Baht 0.43
per Liter, higher than that of last year at
Baht 0.39 per Liter. This resulted from the
Government's implementation of price
capped mechanism to fix the retail oil
prices and therefore there were lower price
competition in the market. However, the
Marketing business had recorded loss from
selling Jet fuel by Baht 37 million, since the
Jet fuel selling price formula is based on
the average price of previous month, while
the transferred price from Refining business
unit to Marketing business unit is based on
the current month. Therefore, during price
up trend period; there always be a loss
incurred for the marketing business.
However, the result will be in opposite way
if Jet fuel price is in a down trend period.
1.2 Income Analysis
Total revenues of the Company and its
subsidiary in 2004 were Baht 80,189 million, which
composed of the Company's revenues of Baht
79,207 million and its subsidiary's revenues of Baht
7,229 million, adjusted by connected transaction of
Baht 6,247 million. The major changes of revenues
are as follows:
1) Revenue from sales was Baht 78,902
million, higher than that of last year by
Baht 18,087 million, since total sale
volumes increased by 17.6%, and average
unit selling price increased by 14.8% (unit
selling price was 11.62 Baht/ liter
comparing to 10.12 Baht/ liter).
2) Gain from foreign exchange was Baht 128
million, lower than that of last year by
Baht 165, which composed of Baht 139
million of foreign exchange gain from
accounts receivable and Baht 12 million of
foreign exchange loss from others
transaction. These foreign exchange gain
and loss were the results of the
appreciation of Thai Baht from 39.7 Baht/USD
at end of 2003 to 39.2 Baht/USD
at end of 2004.
3) In 2004, the Company reversed loss from
impairment of assets by Baht 47 million.
Since the Company had recorded loss
from impairment of unutilized assets in
2003, a part of it was shut down service
stations, which were resumed the
operations in 2004. Therefore, the
Company has to reverse such loss from
impairment of assets to be revenue in
accordance with the accounting principle.
1.3 Expense Analysis
Total expenses of the Company and its
subsidiary in 2004 were Baht 76,768 million, which
composed of the Company's expenses of Baht
75,810 million and its subsidiary's expenses of Baht
7,203 million, adjusted by connected transaction of
Baht 6,244 million. The major changes of expenses
are as follows:
1) Cost of good sold amounted Baht 74,148
million, increased by Baht 15,439 million, since
total sale volumes increased to 116.6 KBD
from 103.4 KBD of last year, as well as, the
crude cost also continuously increased (Dubai
crude oil price increased by 7.5 $/BBL in 2004)
2) Selling and administrating expenses amounted
Baht 1,367 million, decreased by Baht 175
million, since the Company had incurred the
extra reserve for doubtful debts of Baht 233
million in 2003 as the Business and financial
restructuring plan. Therefore, the selling and
administrative expenses in 2003 were in the
abnormal high level. However, in case of
excluding such extra reserve for doubtful debts,
the selling and administrative expenses in 2004
would increase from that of last year by Baht 58
million, as the result of the higher of sale
volumes, but Baht 40 million of lower advertising
and promotion expenses.
3) Interest expense amounted Baht 787 million,
decreased by Baht 241 million due to the
financial restructuring program. Moreover, the
company also recorded lower interest income
of Baht 18 million, which decreased by Baht 17
million, since the Company received a working
capital line from bank as the financial
restructuring plan; therefore, the Company did
not have to hold a lot of cash on hand for
working capital purpose.
2.Explanation and Analysis of the Financial Position as of
December 31, 2004 compared with December 31, 2003
2.1 Assets
1) At the end of 2004, total assets of the
Company and its subsidiary were Baht 34,370
million, which composed of Baht 34,269 million
of the Company's total assets and Baht 540
million of its subsidiary's total assets, adjusted
by Baht 437 million of connected transactions
of 15 days credit term.
2) At the end of 2004, the Company's total assets
increased by Baht 5,738 million, comparing to
that at the end of 2003. The major changes of
assets are as follow:
- Cash and cash equivalent amounted Baht
1,894 million, decreased by Baht 1,455
million, since the Company had to pay
approximately USD 46 million or Baht
1,800 million of crude costs on January 6,
2004; therefore, the Company had to
reserve cash on hand for this purpose at
the end of 2003.
-Trade accounts receivable amounted Baht
3,621 million, increased by Baht 827
million, due to the increasing of sale
volumes and the higher selling prices of
refined products.
- Total inventories amounted Baht 9,947
million, increased by Baht 4,551 million,
since the Company increased the inventory
level by 244 million liters for supporting the
expansion of sales and refinery utilization.
In addition, the average prices of
inventories also increased by 2.83 Baht/ liter.
- The receivable from oil fund amounting
Baht 1,343 million was the receivable from
the implementation of the retail oil price
capped mechanism at the service station,
which normally has 45 days of credit term.
- Intangible assets amounted Baht 1,449
million, increased by Baht 476 million,
since the Company was allowed to extend
the lease period at the state property for
the refinery plant from 12 years to 30
years with the total leasehold fee of Baht
552 million as the business and financial
restructuring plan. (it was recorded in the
first quarter of 2004)
2.2 Liabilities
1) At the end of 2004, total liabilities of the
Company and its subsidiary were Baht 24,589
million, which composed of Baht 24,489 million
of the Company's total liabilities and Baht 537
million of its subsidiary's total liabilities,
adjusted by Baht 437 million of connected
transactions.
2) At the end of 2004, the Company's total
liabilities decreased by Baht 961 million,
comparing to that at the end of 2003. The
major changes of liabilities are as follow:
- At the end of 2004, total loans decreased
by Baht 4,443 million, since the Company
performed the financial restructuring by
issuing and offering of Baht 3,000 million
of newly ordinary shares in form of
depository receipt (CSDR), as well as,
Baht 4,000 million of the convertible
debenture in form of depository receipt
(CDDR), which were exercised to ordinary
shares by 97 million shares or Baht 1,389
million during the year 2004. Total loans at
the end of 2004 composed of the following:
o Short-term loan from Krungthai Bank
of Baht 2,000 million was the loan
for working capital purpose.
o Long-term loan of Baht 11,165 million
composed of Baht 2,611 million of CDDR
and Baht 7,800 million of long-term loans
from Krungthai Bank (total long-term loan
line was Baht 8,500 million), which will
due in 1 year by Baht 191 million.
In addition, the Company had Baht 2,510
million of bond and promissory note,
which will reach the maturity in 1 year
by Baht 1,565 million.
- Trade accounts payable amounted Baht
7,583 million, increased by Baht 3,154
million, due to the higher crude oil prices
(Dubai crude oil increased by 7.5 $/BBL)
and the extra extension of crude payment
schedule for 1 shipment.
2.3 Shareholders' Equity
1) At the end of 2004, total shareholders' equity
of the Company and its subsidiary were Baht
9,781 million, which composed of Baht 9,780
million of the Company's total shareholders'
equity and Baht 0.54 million of minority
shareholders (total shareholders' equity of its
subsidiary was Baht 3 million)
2) At the end of 2004, the Company's total
shareholders' equity was 9,780 million,
increased by Baht 6,699 million comparing to
that at the end of 2003, since the Company
could generate net profit of Baht 2,613 million
and issued and offered the newly ordinary
shares in form of depository receipt (CSDR) of
Baht 3,000 million, as well as, some parts of
depository receipts of convertible debenture
(CDDR) were exercised to the ordinary share
of 97 million shares or baht 1,389 million.
Therefore, the Company had recorded these
transactions as follow:
- Quarter 1
o Increased paid-up registered capital
from 522,040,940 shares at par 1
Baht/ share to 753,040,940 shares
at par 1 Baht/ share, totaling Baht
753,040,940. This resulted from the
issuing and offering of 231 newly
ordinary shares in form of depository
receipt (CSDR) on January 29,
2004. The Company had registered
this new capital at Ministry of
Commerce on February 3, 2004.
o Recorded the premium on shares of
12 Baht/ share from issuing and
offering of 231 newly ordinary
shares, totaling Baht 2,693,820,103.
- Quarter 2
o Transferred such premium on shares
of Baht 2,389,126,110 to
compensate all accumulated loss at
the end of 2003 by Baht
2,389,126,110 in accordance with
the resolution of the 2004 Annual
Shareholders' Meeting, held on April
29, 2004.
- Quarter 3
o Decreased the registered capital and
paid-up registered capital of
189,617,759 shares at par 1 Baht/
share, totaling Baht 189,617,759, on
July 6, 2004, which resulted from the
cancellation of the excess shares
from the security swap transactions.
These decreases of capital would be
equalized the number of shares held
by SiamDR Co., Ltd. to the number
of the CSDR issued and offered by
SiamDR Co., Ltd.
o Increased the registered capital of
24,000,000 shares on July 7, 2004,
in order to support the issuing and
offering of not exceeding 24 million
shares of warrant, due to the
Employee Stock Option Program, in
accordance with the resolution of the
2004 annual shareholders' meeting,
held on April 29, 2004.
o Increased the paid-up registered
capital of 28,108,385 shares at par 1
Baht/share, totaling Baht 28,108,385,
on July 8, 2004. This resulted from
the exercising of CDDR to ordinary
shares at the end of quarter 2.
- Quarter 4
o Increased the paid-up registered
capital of 69,038,969 shares at par 1
Baht/share, totaling Baht 69,027,969,
on October 7, 2004. This resulted
from the exercising of CDDR to
ordinary shares at the end of quarter3.
3. Explanation and Analysis of the Statement of Cash
Flows for the year 2004 compared with the year 2003
3.1 In 2004, the Company and its subsidiary had the
operating profits of Baht 3,245 million, which
composed of Baht 3,217 million of the Company's
operating profit and Baht 28 million of its
subsidiary's operating profit. In addition, the
Company and its subsidiary had cash and cash
equivalent at the beginning of period amounted
Baht 3,523 million, which composed of Baht 3,348
million of the Company's cash items and Baht 174
million of its subsidiary's cash items. Moreover,
the Company used those cash in the Company's
activities during the year by Baht 1,454 million
which a part of it was the account payable
between the Company and its subsidiary.
Therefore, the Company and its subsidiary used
cash during the year by Baht 1,310 million. Thus,
cash and cash equivalents at ending period of the
year 2004 were Baht 2,213 million which
composed of Baht 1,894 million of the Company
cash and cash equivalent and Baht 318 million of
its subsidiary's cash and cash equivalent.
3.2 The Company had the operating profit of Baht
3,217 million and cash items at the beginning of
period of Baht 3,348 million. These cash items
were used in the Company's activities as follows:
1) Net cash used in operating activities was Baht
3,937 million, due to the increase in values of
account receivable and oil inventories by Baht
5,353 million. Such increases resulted from the
increasing of crude run and sale volumes, as
well as, oil prices. In addition, the Company
also had the account receivable from oil fund of
Baht 1,343 million.
2) Net cash used in operating activities was Baht
602 million, due to the investments in fixed
assets and equipments, as well as, the
financial restructuring expenses.
3) Net cash used in financing activities was Baht
132 million, due to the repayment of loans
which reached maturity during the year 2004
by using excess cash flow from operation.
Thus, at the end of 2004, the Company had cash
and cash equivalents of Baht 1,894 million,
decreased by Baht 1,454 million comparing to that
the end of 2003.
4.Factors and major influences that may affect the
Company's performance or financial status in the future
For oil business, important factors that affect
the performance were the gross refining margin and
marketing margin, which were driven by the demand
for oil consumption correlating with the economic
growth. In 2004, the regional economy tends to report
a higher growth rate, in particular China, of which the
economic performance has been in a continued
expansion. The Thai economy is also expected to
expand further, which would result in a rise in the oil
demand for consumption also. The Company,
therefore, foresees that the regional and domestic oil
demand for consumption and production capacity
would be in balance in 2005-2006. This will result to
the significantly increase in gross refining margin and
marketing margin.
In addition, oil prices would still produce direct
impact on the operations of the Company. It is
probable that oil prices that have been on a rise since
the end of 2003 would decline in some period of 2005.
However, the Company foresees that crude oil prices
and refined product prices still remain at high level
due to the fact that the demand for oil consumption
still grow continuously. Therefore, such declines of oil
prices will be lower the value of oil inventories. In
order to deal with such situation, the responsible team
of the Company keeps a close watch on the situation
and is ready to perform risk management on the
matter.
Although oil prices would continuously
increase, the fuel oil price would increase at the lower
proportion than that of the crude oil and other refined
products; so that the Company's gross refining margin
was depressed at a certain level. However, the
Company could resolve a part of this effect by
sending its fuel oil to upgrade at other refineries.
However, it is necessary to the Company to attain the
long-term resolution for reducing the fuel oil production
in order to enhance the gross refining margin to the
same level as the industries' numbers. Therefore, the
Company currently has been studying feasibility of the
product quality improvement project, which will reduce
the fuel oil production yield to the nearly level as any
other local and foreign refineries, as well as,
improve the oil quality consistent with the new quality
standard issued by the government in the year 2011.
Furthermore, since the appreciation of Thai Baht
against US dollar has had the tendency to continue,
the Company's performance will get this effect as well,
due to the fact that the Company's revenues were
based on US dollar, as well as, the US dollar based
assets, oil inventories, also greater than US dollar
based liabilities, account payable. Therefore, the
appreciation of Thai Baht will cause to the decrease in
net assets. However, the Company believes that the
appreciation of Thai Baht will occur in such a short
period of time from the economy recession in the
United States. Furthermore, the Company also has
had the policy to adjust the proportion of assets and
liabilities in US dollar to the nearly level.