SET Announcements

1600 / 065 / 2541 (Translation) September 25, 1998 The Stock Exchange of Thailand 62, Ratchadapisek Road, Klongtoey, Bangkok 10110 Attention:President, The Stock Exchange of Thailand Subject:Filing of the Revised Auditors' Report and Financial Statements for the 2nd Quarter. References:1.The Stock Exchange of Thailand's letter no. Bor. Jo. / Ror 371/2541, dated August 26, 1998. 2.The Company's letter no. 2000/019/2541, dated September 16, 1998. 3.The Stock Exchange of Thailand's letter no. Bor. Jo. / Ror 381/2541, dated September 22, 1998. According to the Company's Auditors' Report and Financial Statements for the 2nd Quarter ended June 30, 1998 was handed to SET on August 13, 1998. Then the company have been requested by SET to revise the financial statements following the auditor's comments in the auditors' report that "the company had capitalized foreign exchange gain on loan for financing construction of fixed assets instead of taking as revenues, accordingly, the company's net profit for the first half of the 1998 decreased Baht 84.01 million". (Reference 1) Consequent the above, the company clarified to SET that the company and the auditors had different opinions on the Accounting Standard of such capitalization (Reference 2), however with SET's recommendation that the company should report the foreign exchange gain and loss on loan associated with construction of fixed assets as the revenues or expenses, in the same period as the transaction incured of which is in accordance with The Accounting Standard No. 30 : Impact of changing foreign exchange rate (Reference 3), the company has accordingly revised the financial statements as recommended. And net profit of the company for the first half of 1998 was increased Baht 84.01 millions to Baht 116.85 millions. Please find herewith the Company's Revised Auditors' Report and Financial Statements for the 2nd Quarter ended June 30, 1998. Yours sincerely (Mr.Rabil Pornpatkul) Senior Manager, Corporate Planning Office Attachment : The Company's Revised Auditors' Report and Financial Statements for the 2nd Quarter ended June 30, 1998 Corporate Planning Office Tel : 301-2842 AUDITOR'S REPORT AND FINANCIAL STATEMENT THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED FOR THE SECOND QUARTER ENDED JUNE 30, 1998 TRANSLATION AUDITORS' REPORT TO THE SHAREHOLDERS OF THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED We have reviewed the balance sheets of The Bangchak Petroleum Public Company Limited as of June 30, 1998 and 1997 and the statements of income for the second quarter then ended in accordance with standards established by the Institute of Certified Accountants and Auditors of Thailand. A review of such interim financial statements consists principally of obtaining an understanding, by enquiries, of the system for preparation of the financial statements, making an analytical review of pertinent financial data and making enquiries of certain officials of the Company who have responsibility for financial and accounting matters. Our review is substantially less in scope than an audit in accordance with generally accepted auditing standards , the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Thus , we do not express such an opinion on the financial statements referred to above. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with the generally accepted accounting principles. (Sign) Nontaphon Nimsomboon ( Mr. Nontaphon Nimsomboon ) Auditor-General (Sign) Duangta Jantong ( Ms.Duangta Jantong ) Auditor-in-charge September 22, 1998 REVIEWED THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED BALANCE SHEETS AS OF JUNE 30,1998 AND 1997 1998 1997 Baht Baht ASSETS Current Assets Cash on hand and at banks 90,855,134 28,026,924 Short -term investments 267,895,675 8,370,095,181 Trade accounts and notes receivable - Net(Note 2) 2,222,931,856 2,573,483,629 Inventories 3,183,945,310 3,258,170,574 Other current assets Materials and supplies 455,159,784 559,292,145 Others 539,906,064 548,519,823 Total Current Assets 6,760,693,823 15,337,588,276 Investments and Loans to Related Parties(Note 3) 424,360,985 415,127,424 Property,Plant and Equipment-Net (Note 4) 18,729,517,840 12,870,517,942 Other Assets Deferred income tax (Note 9) 1,546,210,390 - Deferred charges 201,978,427 178,407,651 Long term investment - service station 213,493,011 272,325,731 Others 163,113,033 86,866,103 TOTAL ASSETS 28,039,367,509 29,160,833,127 The accompanying notes are an integral part of these statements. (Sign) Somchai Richupan (Sign) Sophon Suphapong (Mr.Somchai Richupan) (Mr.Sophon Suphapong) Chairman President REVIEWED THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED BALANCE SHEETS AS OF JUNE 30, 1998 AND 1997 1998 1997 Baht Baht LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Bank overdrafts and loans from financial institutions (Note 5) 1,995,244,042 11,711,098,014 Trade accounts payable 8,148,814,829 4,228,991,724 Current portion of long-term loan (Note 6) 362,012,450 219,640,000 Short-term loan from related parties 6,250,000 - Other current liabilities Accrued excise tax and oil stabilization fund 255,027,660 244,898,050 Accrued expenses 459,911,544 245,269,123 Others 349,129,561 190,668,247 Total Current Liabilities 11,576,390,086 16,840,565,158 Long - Term Loan (Note 6) 5,994,393,011 3,112,697,358 Other Liabilities Deferred Revenue 83,043,033 90,651,250 Others 38,102,176 17,411,868 Total Liabilities 17,691,928,306 20,061,325,634 Shareholders' Equity Share capital Authorized share capital Common stock 522,040,940 shares par value at Baht 10 per share 5,220,409,400 5,220,409,400 Issued and paid-up share capital Common stock 522,040,940 shares par value at Baht 10 per share 5,220,409,400 5,220,409,400 Paid - in capital Premium on share capital 2,007,950,671 2,007,950,671 Surplus on fixed assets revaluation (Note 4) 4,916,542,076 - Retained earnings Appropriated Legal reserve 547,594,555 547,594,555 Unappropriated (2,303,378,180) 1,386,977,917 Deferred losses from foreign exchange fluctuations prior to year 1996 (41,679,319) (63,425,050) Total Shareholders' Equity 10,347,439,203 9,099,507,493 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 28,039,367,509 29,160,833,127 The accompanying notes are an integral part of these statements. REVIEWED THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED STATEMENTS OF INCOME FOR THE SECOND QUARTER ENDED JUNE 30, 1998 AND 1997 SECOND QUARTER FOR SIX MONTH ENDING 30 JUN 1998 1997 1998 1997 Baht Baht Baht Baht Revenues Sales 8,952,945,401 8,918,734,073 18,853,432,232 17,695,810,806 Other income Interest income 35,124,271 277,219,001 99,376,530 472,973,957 Others 71,856,602 112,594,951 133,886,338 203,034,234 Total Revenues 9,059,926,274 9,308,548,025 19,086,695,100 18,371,818,997 Expenses Cost of sales 9,056,414,627 8,604,576,588 17,839,629,213 17,201,911,013 Administrative and selling expenses 288,079,456 259,420,021 556,048,073 504,202,037 Interest expenses 173,382,543 324,759,849 399,065,792 621,663,076 Directors' remuneration 118,800 1,046,750 250,200 1,211,750 Losses from foreign exchange fluctuations 80,610,601 61,397 126,022,281 15,379,725 Total Expenses 9,598,606,027 9,189,864,605 18,921,015,559 18,344,367,601 Profit (Loss) before income tax (538,679,753) 118,683,420 165,679,541 27,451,396 Income Tax (162,660,645) 4,753,327 48,832,017 4,753,327 Net Profit (Loss) (376,019,108) 113,930,093 116,847,524 22,698,069 Earnings Per Share Net Profit (Loss) (0.72) 0.22 0.22 0.04 The accompanying notes are an integral part of these statements. THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SECOND QUARTER ENDED JUN 30,1998 1. Summary of Significant Accounting Policies 1.1 The accounting transactions of the Company have been recorded on the accrual basis. 1.2 Allowance for Doubtful Accounts The allowance for doubtful accounts is set-up based on debts deemed uncollectable from debtors as judged from the current status of each account receivable. 1.3 Inventories Finished petroleum products are stated at the lower of cost or market, whichever is lower. The unit cost is determined by the weighted average of monthly production costs and the volume of each oil product and ex-refinery selling prices. Product inventories are priced on a first-in, first-out method. Crude oil is stated at the lower of cost or market, whichever is lower. The unit cost is determined by the weighted average cost and the volume of monthly purchased crude oil. Crude inventories are priced on a first-in, first-out method. 1.4 Materials and Supplies Materials and supplies are stated at cost determined by the moving average method. 1.5 Long-Term Investment 1.5.1 The investment equal to or over 20 % of the paid-up share capital is recorded on the equity method. 1.5.2 The investment less than 20 % of the paid-up share capital is recorded on the cost method. 1.6 Property, Plant and Equipment Property, plant, equipment and depreciation are carried at cost. Interest expenses which are related to fixed assets, are booked to the cost of assets. Depreciation is computed by the straight-line method at rates varying from 5% to 20% per annum based upon the estimated useful life of the assets. The company revises the value of its fixed assets should serious fluctuation in the economy occur which has direct effect on the assets.The surplus value from the revaluation is recorded under account "Surplus on fixed assets revaluation" in Shareholders' Equity, which is not available for dividend distribution. Depreciation on the increased value of the assets is deducted from the "Surplus on fixed assets revaluation". 1.7 Deferred Income Tax The company records the difference in the corporate income tax numbers, calculated on the basis of the company's financial statement and that of the Revenue Code, as "Deferred Income Tax" in the Balance Sheet. Amortization of this account is made as the income or expense booked is realized or used for tax credit when permitted under the Revenue Code. 1.8 Deferred Charges The prepaid land lease for service stations are amortized over the term of the land lease contract. Deferred charges related to the exchange of buildings between the company and Defence Energy Department,of the Ministry of Defence is amortized over a contracted term of 20 years. Other deferred charges are amortized within five years. 1.9 Foreign Currencies 1.9.1 Foreign currency transactions are converted into Baht at the exchange rate on the date the transactions incurred . The outstanding balance as of the ending period is translated into Baht using the exchange rate as announced by the Bank of Thailand. Differences from foreign exchange translations are booked the total amount as income or expense except for foreign exchange losses prior to year 1996, which are booked as deferred expense and amortized over the period of the loan. 1.9.2 Gains or losses resulting from the repayment during the year are recorded as income or expense. 1.10 Deferred Revenue Deferred revenue, the advance lease income of equipments and others, are amortized over the term of the contract. 1.11 Interest Expense Interest on loans which is related to the construction of fixed assets are booked to the cost of work in progress until projects are completed. Interest costs incurring after the project is completed , are booked to expense. 1.12 Earnings Per Share Earnings per share is calculated from the net profit (loss) divided by the weighted average of issued and paid-up share capital. 2. Trade Accounts and Notes Receivable - Net The Company has trade account receivables that have problems in repaying debts. The following is an age analysis of the outstanding amount of such debts. ( Million Baht ) over 3 - 6 months 7.88 over 6 - 12 months 11.79 over 12 months 40.09 Total 59.76 The Company has set up an allowance for doubtful receivables of Baht 53.62 Million. 3. Investments and Loans Total investments and loan to related parties of Baht 424.36 million consists of investments in related parties of Baht 200.73 million ( on cost method of Baht 163.00 million and on equity method of Baht 37.73 million ) and Tariff Prepayment of Baht 223.63 million. The details of which are as follows :- 3.1 Investments in related parties Company Type of Business Relationship Paid-up Share Investment Dividend share holding (Milion Baht) capital Ratio As of 30 June 1998 (Million (%) Cost Method Equity Method Baht) Associated company The Bangchak Retail Business Shareholding 1.00 49.00 - 18.65 - Green Net and Service Co.,Ltd. The Bangchak Transportation Shareholding 0.10 49.00 - 2.63 - Green Line and Service Co.,Ltd. Mongkhol Retail Business Shareholding 3.00 48.98 - 1.86 - Chaipattana and Service Co.,Ltd. TheBangchak Power Generation Shareholding 40.00 39.99 - 14.59 - Power Co.,Ltd. and Steam Production Related company FuelPipeline Transportation Shareholding 796.00 16.71 133.00 - - Transportation Ltd. Auchan Wholesale, Shareholding 300.00 10.00 30.00 - - Chiang Mai Retail Co.,Ltd. Business Total 163.00 37.73 - 3.2 Tariff Prepayment to Fuel Transportation Ltd. of Baht 223.63 million. The Company realized earnings from The Bangchak Green Net ,The Bangchak Green Line, Mongkhol Chaipattana and The Bangchak Power in the amounts of Baht 7.14 million ,Baht 0.34 million, Baht 0.25 million and Baht 1.35 million, respectively. These earnings are recorded under the equity method as stated above in note 1.5.1 4. Contingent Liabilities As of June 30 ,1998 the Company's contingent liabilities consisted of: 4.1 Obligations Bank guarantees issued by the banks on behalf of the Company at the amount of Baht 187.83 million. 4.2 Allegation The Ministry of Finance(the first defendant) was alleged in a land right transgression case (The claim for damages,which was filed with the civil court, amounts to Baht 1,055 million). The land in question ,which is located at the pier of the Refinery, was leased from the Ministry of Finance. The Company, as the lessee of land owned by the Ministry of Finance, was alleged as the fifth defendant along with the Ministry of Finance. According to the Company's Legal Office opinion,regardless as to the outcome of the case, the Company would not be liable for any losses associated with the above mentioned claim as it is protected under a lease agreement. The case is being appealed with the civil court. 5. Preparation to encounter the problem of the year AD 2000 that would affect business The Company has begun, since the first quarter of 1997 , to solve the problem associated with the year AD 2000. As of June 30 ,1998 , 65 % of the work has been completed. However, there are some risks that companies, with whom the company does business , may not be ready in time to adjust their system. In any case , the Company does not expect any major problem that would affect its business as a result of this.