SET Announcements

1600 / 200 / 2003 November 21, 2003 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 September 30, 2003 Attachment : Management's Discussion and Analysis for Business Operations ending September 30, 2003 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 September 30, 2003 as attachment enclosed. Please be informed accordingly. Yours sincerely (Watcharapong Saisuk) Assistant Vice President Corporate Planning Office Corporate Planning Office Tel: 0-2335-4583 Management's Discussion and Analysis for Business Operations Ending September 30, 2003 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 unit was completed in the year 1999. 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 more than 1,000 of its service stations around the country, which comprise approximately 600 standard service stations and 500 community service stations. Business Overview In quarter 3/2003, the Company operated under the fluctuation of oil prices in the world market and continuous appreciation of Thai Baht against US dollar. However, gross refining margin was improved in accordance with the regional economics growth, which resulted to the increase in oil demand. For the domestic competition of oil industry, it was still intense, since the production capacity was higher than the demand, as well as, this quarter was the low season of traveling. This depressed the marketing margin in the low level. So The Company emphasized only on the highly profit markets, for example, the increase of sale volumes through the service stations by expanding Power D sales in Bangkok and Vicinity and other provinces, and consecutively having marketing campaigns, the increase of fuel oil sales in industry market, but decrease of its sales in Jobber market. The Company's financial status and business operations 1. Financial Ratios Q' 3/2003 Q' 3/2002 (Reviewed) (Reviewed) Liquidity Ratio Current Ratio Times 0.67 0.70 Quick Ratio Times 0.27 0.22 Cash Flow Liquidity Times 0.05 -0.04 Receivable Turnover Times 5.37 6.10 Collection Period Days 17.14 15.09 Inventory Turnover Times 2.36 2.55 Inventory Turnover Period Days 39.03 36.06 Account Payable Turnover Times 4.16 6.77 Payment Period Days 22.10 13.59 Cash Cycle Days 34.07 37.57 Profitability Ratio Gross Profit Margin % 3.43 5.49 Net Profit Margin % 0.79 -1.33 Return on Equity % 2.86 -7.37 Efficiency Ratio Return on Total Assets % 0.42 -0.71 Assets Turnover Times 0.53 0.53 Financial Policy Ratio Debt to Equity Times 6.43 9.07 In quarter 3/2003, the Company's liquidity was improved compared to the same period of last year, because the Company could generate the operating profit and its sale volumes also increased, especially the service station channels, which sell in cash basis. However, the Company still needs the financial restructuring, since most of the Company's debts will due during 2004- 2005. The Company expects the financial restructuring will be completed in early of 2004. 2. Explanation and Analysis of the Operating Results for Quarter 3/2003 compared with Quarter 3/2002 Statement of Income For the three months ended September 30, 2003 and 2002 Unit : Million Baht Quarter 3 2003 2002 Change Sales 14,869 13,980 +889 Other Incomes 235 23 +212 Total Revenues 15,104 14,002 +1,102 Cost of Sales -14,359 -13,213 -1,146 Selling & Administrative Expenses -316 -277 -39 Others Expenses -71 -320 +249 Interest Expenses -242 -383 +141 Total Expenses -14,988 -14,193 -795 Operating Profit (Loss) 116 -191 +307 Income Tax 4 4 - Net Profit (Loss) 120 -187 +307 2.1 Income Analysis In quarter 3/2003, the Company posted total revenue of Baht 15,104 million, increased by Baht 1,102 million or 7.9 percent compared with the same period of the previous year. The details are as follows: 1) Revenue from sales amounting Baht 14,869 million was higher than that of the same period of the previous year by Baht 889 million or 6.4 percent, which resulted from an average unit selling price increased by 4.6 percent, 9.82 to 9.39 baht per litre, and sale volume increased by 17.0 percent. 2) Other incomes amounting Baht 235 million were higher than those of the same period of the previous year by Baht 212 million due to the followings. - The Company posted a gain from the foreign exchange fluctuations by Baht 191 million, which resulted from the appreciation of Baht against US dollar by about 2.02 Baht/ USD, compared with the exchange rate at the end of June 2003. - The Company made hedging contracts of crude and product oil price selectively in order to reduce the adverse risk of oil price fluctuation. However, oil price was rapidly declined during mid of September 2003, so that the profit from this transaction was amount Baht 20 million. 2.2 Expense Analysis In quarter 3/2003, the Company's total expenses were Baht 14,988 million, increased by Baht 795 million or 5.6 percent, compared with the same quarter of the previous year. Total expenses comprised cost of sales 95.8 percent, selling and administrative expenses 2.1 percent, interest expenses 1.6 percent and other expenses 0.5 percent, which increased from the followings. 1) Cost of sales totaling Baht 14,359 million was higher than that of the same period of the previous year by Baht 1,146 million or 8.7 percent due to the increasing in oil price per unit by 7.0 percent and sale volume by 1.7 percent. 2) Selling and administrative expenses totaling Baht 316 million were higher than those of the same period of the previous year by Baht 39 million or 14.1 percent. This resulted from the outsourcing of oil distribution contractors in order to enhance the efficiency of oil delivery to customers, as well as, the sale volumes of Company also increased. 3) Interest expenses amounting Baht 242 million were lower than those of the same period of the previous year by Baht 141 million or 36.8 percent, since the Company made on refinancing of its domestic loans due, while the market interest rate reduced, resulting in the reduction of the Company's interest rate by 1.0 percent. Moreover, in quarter 3/2002, the Company incurred the prepayment fee of World Bank loans amounting Baht 92 million, but such prepayment enabled the Company to reduce the interest expenses about Baht 85 million per annum. 4) Other expenses amounting Baht 71 million were lower than those of the same period of the previous year by Baht 249 million, because in quarter 3/2002, the Company posted the loss from foreign exchange rate fluctuation by Baht 167 million, which resulted from the depreciation of Baht against US dollar from 41.67 Baht/USD at the end of June 2002 to 43.48 Baht/USD at the end of September 2002, as well as, the loss from hedging contracts of crude and product oil price by Baht 82 million. 2.3 Net Profit (Loss) Analysis In quarter 3/2003, The Company posted a net profit of Baht 120 million, which increased Baht 307 million compared with the same period of the previous year due mainly to the followings. 1) Gross Refining Margin, Oil Price, and Foreign Exchange Rate - In quarter 3/2003, gross refining margin excluding the effects of oil prices and foreign exchange fluctuations increased by 0.26 $/ BBL compared to the same period of 2002, from 1.00 $/BBL to 1.26 $/BBL. - During July- August 2003, the prices of crude oil and finished products in the world market increased by 2 $/BBL, on the contrary, Thai Baht against US dollar appreciated by 1.2 Baht/ USD on average. Such factors raised the profit of the Company from inventory value by Baht 230 million, but lower than that of the same period of last year by Baht 150 million. - Since Thai Baht against US dollar appreciated from 42.12 Baht/ USD at the end of June to 40.10 Baht/ USD at the end of September 2003, the Company posted the foreign exchange gain by Baht 191 million, which resulted from USD 35 million of the foreign loans and trade payable of crude oil. 2) Production and Sale In the quarter 3/2003, the production was 80 KBD, nearly the same level compared with the same period of the previous year. The Company emphasized on a highly profit market, making the average sale volume through the service stations, a highly marketing-margin channel, increased by 11.1 percent. This was the result of not only increasing diesel Power D in Bangkok and Vicinity and expanding to provinces but also consecutively having marketing campaign. However, the competition situation was still intense, so the Company was slower its sales in Jobber market. While the fuel oil sale volumes in the industry market were continuously increased by 5.2 percent, resulted from aggressive sale expansion in the high margin period, the sale volume of the transportation market was decreased by 12.6 percent due to declining jet sale resulting from SARS and low season of traveling. Feedstock sale volume was decreased by 5.8 percent because of the lower volumes of long residue for cracking sending to other refineries. 3. Explanation and Analysis of the Financial Position as of September 30, 2003 compared with December 31, 2002 3.1 Asset Analysis Balance Sheet As of September 30, 2003 and December 31, 2002 Unit : Million Baht As of 30 Sep 03 31 Dec 02 Change Assets Current Assets Cash and cash equivalents 1,762 1,374 +387 Trade accounts receivable, net 2,815 2,725 +90 Inventories 6,094 6,089 +5 Other current assets Materials and supplies, net 351 365 -14 Others 225 371 -146 Total Current Assets 11,246 10,924 +322 Investments for using the equity method 5 5 0 Other long-term investments - 1 -1 Tariff prepayment 177 183 -6 Property, plant and equipment, net 14,659 15,638 -978 Intangible assets 1,002 1,056 -54 Other non-current assets Investment - service station 631 634 -3 Deferred income tax 63 60 +3 Others 429 400 +28 Total assets 28,212 28,901 -689 As of September 30, 2003, total assets decreased by Baht 689 million compared with those at the end of year 2002. The significantly increased items are followings. 1) Cash and cash equivalent amounting Baht 1,762 million increased by Baht 387 million compared with those at the end of year 2002, prepared for paying crude in early October. 2) Trade accounts receivable amounting Baht 2,815 million increased by Baht 90 million. This mainly caused by increasing of sale volumes and average selling price of finished products. 3) Inventories amounting Baht 6,094 million increased by Baht 5 million, due to the increasing of its oil inventories by 18 million liters at a lower average price by 0.19 Baht/ liter in contrast. 3.2 Liability Analysis Balance Sheet As of September 30, 2003 and December 31, 2002 Unit : Million Baht As of 30 Sep 03 31 Dec 02 Change Liabilities and Shareholders' Equity Current Liabilities Bank overdrafts and 7,609 1,000 +6,609 short- term loans from FI Short-term loans 1,848 2,481 -633 Trade accounts payable 3,760 3,137 +623 Current portion of long-term loans 2,703 6,380 -3,677 Accrued excise tax and oil stabilization fund 160 144 +16 Accrued expenses / others 676 791 -115 Total Current Liabilities 16,756 13,933 +2,823 Long-term loans 7,270 9,973 -2,703 Other non current liabilities 392 409 -17 Total Liabilities 24,418 24,315 +103 Shareholders' Equity Issued and paid- up share capital 5,220 5,220 Premium on share capital - 2,008 -2,008 Surplus on fixed assets revaluation 4,758 5,178 -420 Retained earnings (Accumulated deficit) -6,184 -7,820 +1,636 Total Shareholders' Equity 3,795 4,586 -792 Total Liabilities and Shareholders'Equity 28,212 28,901 -689 As of September 30, 2003, total liabilities increased by Baht 103 million compared with those at the end of year 2002. The significantly increased items are followings. 1) Overdrafts and loans from financial institutions amounting Baht 7,609 million increased by Baht 6,609 million compared to the end of year 2002 because the Company had to repay the long-term loans that would reach the maturity in the first 9 months of year 2003. 2) Trade accounts payable amounting Baht 3,760 million increased by Baht 623 million compared with the same period of the previous year, resulting from crude paying 1 vessel in advance in December 2002 by USD 13 million. 3) Long-term loans amounting Baht 9,973 million decreased by Baht 6,380 million, since the Company made on refinancing with short-term loans from the financial institutions and paid back by some of its cash flow from operation during the period of the financial restructuring according to the resolution of the cabinet. 3.3 Shareholders' Equity Analysis 1) As of September 30, 2003, the shareholders' equity was decreased by Baht 792 million compared with the end of year 2002 because of the loss in the first 9 months by Baht 371 million and decreasing in the surplus on fixed assets revaluation by Baht 420 million. Those mainly result in the decreasing of shareholders' equity to Baht 3,795 million at the end of September 2003. 2) According to the resolutions of the extraordinary shareholder meeting on August 29, 2003, the Company recorded in the account as follows : - Decreased the Company's registered capital by canceling 250 million shares which have not been issued and sold, and the outstanding shares will be 522,040,940 shares. Such capital reduction was already registered at the Ministry of Commerce. - Compensated Baht 2,556 million of the Company's accumulated loss by transferring Baht 2,008 million of share premium and Baht 548 million of legal reserves. - Such meeting approved the decrease of the par value of the shares from 10 Baht per share to 1 Baht per share, in order to compensate the accumulated loss by Baht 4,698 million. This transaction will be recorded in the Company's account after registering at the Ministry of Commerce, and reduce the Company's accumulated loss to Baht 1,485 million. 4. Explanation and Analysis of the Statement of Cash Flows for Quarter 3/2003 compared with Quarter 3/2002 Statement of Cash Flows For 9 months ended September 30, 2003 and 2002 Unit : Million Baht 9 Months 2003 2002 Change Cash Flows from Operating Activities Net Profit (371) 461 -832 Depreciation / Amortization / Others 634 870 -237 Operating gain before change 262 1,331 -1,069 in operating asset/ lia. Operating assets (increase), decrease 11 (3,088) 3,099 Operating liabilities increase, (decrease) 556 1,306 -751 Net Cash Provided by (Used in) Operating Activities 829 (450) +1,279 Cash Flows from Investing Activities Purchase of PPE / Others (increase), decrease (169) (167) -2 Cash provided by selling assets Other non-current assets (increase), decrease 18 (124) +142 Net Cash Provided by (Used in)Investing Activities (151) (291) +140 Cash Flows from Financing Activities OD and Short-term loans increase, (decrease) 6,089 1,398 +4,691 Long-term loans increase, (decrease) (6,380) (2,934) -3,446 Net Cash Provided by (Used in) Financing Activities (291) (1,536) +1,245 Increase (Decrease) in Cash and Cash Equivalent 387 (2,277) +2,664 In the first 9 months of 2003, the Company's cash and cash equivalent increased by Baht 387 million, since the Company could generate the operating profit of Baht 262 million as well as its net operating liabilities also increased by Baht 567 million, resulting from the increase of trade accounts payable. On the other hand, the decreasing portion were the loans that reached the maturity Bath 291 million and the additional investment in the fixed assets/ other equipment and the other non-current asset totaling Baht 151 million.