ข่าวแจ้งตลาดหลักทรัพย์

Management's Discussion and Analysis for Business Operations For the three-month period ended March 31, 2007 Business Overview for 2007 For the first quarter of 2007, world oil market still be under a high volatile situation. Following the continuously decreased of the oil price since third quarter of 2006, the price had reached its bottom level at January 19, 2007 (Dubai crude was 48.88 USD/BBL, 13.7% decreased from 2006's year end closing). This situation was resulted from decreasing in demand due to an abnormal warmer than usual winter in the USA and Europe. However, oil price has started to adjust into upward direction since February. This reverse situation came from pressures concerning conflicts between Iran and western countries, political unrest in Nigeria coincidently with the gasoline demand increased as it is approaching the US's driving season and speculative effect from hedge funds. These encourage the oil price to be on an upward trend and remaining on high level (Dubai crude price as of March 31, 2007 was 63.09 USD/BBL, 11.4% increased from 2006's year end). However it was expected that crude oil demand may be decreased in this coming second quarter as many refineries will shut down their plants for routine maintenance. In addition, it is understood that there will be no further attempt of OPEC to cut oil production if crude oil price remain at appropriate level combining with an expectation that world GDP growth will be slowdown. These factors will encourage the crude oil price to be rather weak. In order to cope with the expected market situation, the Company has set an effective inventories control measure mainly to reduced inventory effects as will be resulted from future oil price reduction. 1. Explanation and Analysis of the Operating Results for 1st quarter of 2007 compared with that of the year 2006 1.1 Net Profit/(Loss) Analysis 1) Regarding the business operations for the first quarter of 2007, the Company and its subsidiary recorded net loss of Baht 42 million, which composed of the Company's loss of Baht 54 million and the subsidiary's (Bangchak Green Net Company Limited- BGN) profit of Baht 11 million. The consolidated figures were adjusted by connected transactions of Baht 1 million. 2) The Company's EBITDA was Baht 277 million, decreased from Baht 1,124 million of the same period of last year by Baht 847 million which different mostly came from inventory effects. The details are as following: * EBITDA of the Refinery Business was Baht 86 million, decreased from Baht 946 million of the same period of last year. Total Gross Refining Margin for this quarter was 1.54 USD/BBL (included inventory loss due to crude oil price decreased in average), lower than those of Q1 last year which was at 4.35 USD/BBL (included inventory gain) while the Company's crude run was at 52.3 KBD lower than those of last year at 66.5 KBD. USD/BBL 1st Quarter 1st Quarter Changing GRM from 2007 2006 +/- Base GRM 2.46 0.78 +1.68 Improvement Program 0.07 0.42 -0.35 Hedging 0.32 2.11 -1.79 Inventory Gain (Loss) (1.31) 1.04 -2.35 Total 1.54 4.35 -2.81 Gross Refining Margin (GRM) (excluding inventory effects) was 2.85 USD/BBL, lower than that of the same period of last year which was at 3.31 USD/BBL. However, the Base GRM for this quarter itself was 2.46 USD/BBL which is actually better than those of last year at 0.78 USD/BBL. Gain from improvement program was decreased by 0.35 USD/BBL as well as gain from oil hedging which was also decreased by 1.79 USD/BBL. The significantly reduction in gain from oil hedging was resulted by the hedged margin as quoted by the hedge counterparties for this year was significantly lower than those of last year. The company also entered into hedged position at only 25% of the average production level while last year the hedged position was at 56% level. The slim GRM for this quarter mostly came from inventory loss; the Company face inventory loss of 1.31 USD/BBL while face gain of 1.04 USD/BBL last year. However, if take out inventory impacts of Baht 297 million, this quarter adjusted EBITDA of Refinery Business will be Baht 383 million * EBITDA of the Marketing Business was Baht 191 million, increased from Baht 178 million of the same period of last year, since the Marketing Margin (exclude lubricant margin) was at 36.9 satang per liter lower than those of last year which was at the level 44.4 satang per liter. The marketing business sale volume was at 52.6 KBD decreased from 53.8 KBD of the same period of last year. Improvement of Marketing business EBITDA for this quarter mostly contributed by non oil income and lower expenses i.e. advertising expenses and service station maintenance expenses. Starting at the beginning of the year, the Marketing Margin was rebounded into high margin level, however, the world oil price was adjusted upward again in mid of February and as a result, the Marketing Margin has started to become squeezed. This was resulted from retail oil prices which were adjusted slower than their cost (ex-refinery price) during uptrend market situation. Slower growth in demand and more attractiveness of alternative fuels are factors which may cause lower Marketing Margin. * EBITDA breakdown by business in the table below. 1st Quarter,07 1st Quarter,06 Changing +/ - (Million Baht) (A) (B) (A) - (B) (reviewed) (Revised) * EBITDA 277 1,124 -847 - Refinery 86 946 -860 - Marketing 191 178 +13 * (Less) Inventory Gain - (267) +267 Plus Inventory Loss & 297 - +297 Write Down * Adjusted EBITDA 574 857 -283 - Refinery 383 679 -296 - Marketing 191 178 +13 1.2 Income Analysis Total revenues of the Company and its subsidiary for the first quarter of 2007 were Baht 20,207 million, composed of the Company's revenues of Baht 20,007 million and its subsidiary's (BGN) of Baht 2,898 million, adjusted by connected transaction of Baht 2,698 million which mostly were sale transactions from the Company to BGN. Major changes of the Company's revenues were as follows: 1) Revenue from sales (both refinery business sales and marketing business sales) were Baht 19,790 million, lower than those of last year by Baht 6,070 million or 23%, since the average selling price decreased by 8% (the average oil price was Baht 17.39 per liter in 2007 comparing to Baht 18.95 per liter in 2006 QoQ) and the sale volumes decreased by 17% partly from decreasing of crude run since limitation of FOVS sale volume. However the Company has already secured term agreement for export FOVS to China. As a result, the Company plans to increase plant utilization rate to 70 KBD+ in the second quarter and onwards. 2) Interest income was increased by Baht 55 million to Baht 64 million since the Company invested its excess cash (mostly PQI funds raising proceed raised at May 2006 and yet to be utilized) fixed deposit. As of March 31, 2007, the Company had Baht 4,429 million of fixed deposit at banks (classified by Baht 600 million in "Cash and Cash Equivalent" and Baht 3,829 million in "Short-term Investment"). Gain from oil hedging contract was Baht 71 million, decreased by Baht 470 million or 87%. The Company has established policy to mitigate risk from price fluctuation by entering into hedging contracts as appropriate. This quarter, the hedge level was 25% of production level compared with those of last year at 56%. The significantly reduction in gain from oil hedging was resulted by the hedged margin as quoted by the hedge counterparties for this year was significantly lower than those of last year. 1.3 Expense Analysis Total expenses of the Company and its subsidiary for this quarter were Baht 20,249 million, which composed of the Company's expenses of Baht 20,061 million and its subsidiary's (BGN) of Baht 2,887 million, adjusted by connected transaction of Baht 2,699 million, which mostly were cost of sales from the Company to BGN. Major changes of the Company's expenses were as follows: 1) Cost of sales were Baht 19,459 million, decreased by Baht 5,720 million or 23% from those of last year, since average crude price had been decreased (Dubai crude price decreased by 2.5 USD/Bbl or 4%) when comparing to the same period of last year and the sale volumes decreased by 17%. 2) Loss from foreign exchange was Baht 23 million (1st quarter of last year was gain of Baht 77 million), most of which came from Baht appreciated by 3% from end of 2006 impacted to US dollar of export account. 3) Interest expense was Baht 176 million, increased from those of last year by Baht 18 million, as the market rate was rising 0.9%. 4) The Company had income tax credits of Baht 26 million. This tax credits mostly came from net loss before tax in the first quarter as well as tax privileges of capital investment program in accordance with the Royal Decree No. 460 (in 2006, the company has paid Baht 82 million for the capital investment program, mainly PQI project). 1.4 Profitability Analysis Gross profit margin has been affected by world oil price fluctuation which had direct impact to both refining and marketing margin. Gross profit margin of the first quarter of 2007 was 1.7%, decreased from 2.6% of last year. This lower gross profit margin came from squeezed refining margin of refinery business which was heavily affected from inventory losses as mentioned in item 1.1 section 2. The net profit then decreased from 2.1% last year to -0.3% accordingly. 2. Explanation and Analysis of the Financial Position as of March 31, 2007 compared with December 31, 2006 2.1 Assets 1) At the end of first quarter 2007, total assets of the Company and its subsidiary were Baht 38,959 million, which comprised of Baht 38,905 million of the Company's total assets and Baht 470 million of BGN's total assets, adjusted by connected transactions of Baht 416 million which was from account receivable of Baht 412 million. 2) At the end of the first quarter of 2007, the Company's total assets increased by Baht 962 million, comparing to the end of 2006. The major changes of assets were as follows: * Cash and cash equivalents were increased by Baht 117 million to Baht 2,716 million as of March 31, 2007. This amount consisted of Baht 1,760 million cash from operation and Baht 956 million cash from PQI fund raising program yet to be utilized (details of cash and cash equivalents listed in Explanation and Analysis of the Statement of Cash Flows). * Trade account receivable as of March 31, 2007 was Baht 3,603 million increased by Baht 475 million or 15% since the Company increased sale through export channel, of which term of 30 days. * Other current assets-others was increased by Baht 174 million to Baht 803 million mainly from VAT receivable was increased by Baht 131 million. 2.2 Liabilities 1) At the end of the first quarter of 2007, total liabilities of the Company and its subsidiary were Baht 20,407 million, which comprised of Baht 20,322 million of the Company's total liabilities and Baht 497 million of BGN's total liabilities, adjusted by connected transactions of Baht 412 million. 2) At the end of the first quarter of 2007, the Company's total liabilities increased by Baht 1,071 million comparing to the end of 2006. The major changes of liabilities were as follow: * Trade accounts payable were Baht 6,621 million, increased by Baht 2,475 million comparing to the end of 2006, since at the end of 2006 the Company had made advance payments of oil purchase of Baht 1,725 million. In addition, oil purchase volume (term 30 days) increased by 0.40 million barrel in March 2007 comparing to December 2006. * Shot-term loan from Krungthai Bank was decreased by Baht 1,200 million. * Long-term loans included current portion were Baht 11,443 million, decreased by Baht 85 million comparing to the end of 2006. The details of long-term loans are as follow ; Million Baht Long-Term Loans Mar 31, 07 Dec 31, 06 Changing +/ - Loans from Krungthai Bank 7,699 7,784 -85 Loans from PQI lenders 38 38 - Convertible debentures (CDDR) 2,176 2,176 - Convertible debentures (CD-PTT) 585 585 - Debentures / Promissory notes 945 945 - Total 11,443 11,528 -85 Less : current portion of 1,285 1,285 - long-term loans Balance 10,158 10,243 -85 2.3 Shareholders' Equity 1) At the end of the first quarter of 2007, the consolidated total shareholder's equity of the Company were Baht 18,552 million, which comprised of Baht 18,583 million from the total shareholder's equity of the Company and Baht -27 million from BGN's, adjusted by Baht 4 million connected transactions. 2) The Company's total shareholder's equity were decreased by Baht 109 million comparing to that at the end of 2006, since the Company generated net loss of Baht 54 million for the first quarter of 2007 and had amortized Baht 55 million of surplus on fixed assets revaluation. 3) As of March 31, 2007 the Company has other instruments (CDDR, convertible debenture, warrant and ESOP) which holders can exercise their conversion right (subject to the terms and conditions of each instrument), if fully converted or exercised shall be equal to 287 million common shares or approximately 20.4% of total shares in fully dilution. 3. Explanation and Analysis of the Statement of Cash Flows for the first quarter of 2007 3.1 For this first quarter 2007, the Company and its subsidiary had beginning cash and cash equivalent of Baht 2,705 million. During the period, the Company received cash from various activities of Baht 152 million, of which Baht 1,389 million were received from operating activities, Baht 48 million were received from investing activities and Baht 1,285 million were used in financing activities. Cash and cash equivalent at the end of first quarter 2007 were Baht 2,857 million, which consisted of Baht 2,716 million of the Company and Baht 141 million of BGN. 3.2 The Company had net loss of Baht 54 million; added back non-cash items of Baht 219 million, the Company then had cash profit from operation of Baht 165 million together with cash at the beginning of period of Baht 2,599 million. The Company also had additional cash flow activities as follows; 1) Net cash received from working capital was Baht 1,189 million; * The Company used cash in operating assets of Baht 911 million which consisted of increased in Trade accounts receivable of Baht 434 million, in inventories value of Baht 302 million and in other current assets of Baht 175 million. * Cash from operating liabilities were increased by Baht 2,100 million from increased in trade accounts payable of Baht 2,471 and decreased in other operating liabilities of Baht 371 million. 2) Net cash received from investing activities was Baht 48 million; * Short term investment was decreased by Baht 216 million since the Company reclassified the less than 3 months fixed deposit from "short term investment" to cash equivalent. * Investment in fixed assets of Baht 121 million, of which Baht 76 million was PQI's. * Cash used in other investments were Baht 47 million. 3) Net cash used in financing activities was Baht 1,285 million; * Baht 1,200 million short-term loan was repaid to Krungthai Bank. * Baht 85 million long-term loan was repaid to Krungthai Bank as per the amortization schedule. The Company had increased in cash and cash equivalents by Baht 117 million comparing to the end of the year 2006. At the end of the first quarter of 2007 cash and cash equivalents was Baht 2,716 million which consisted of Baht 1,760 million for operation and Baht 956 million appropriated for PQI project. 4. Changing in accounting policy In the three-month period ended March 31, 2007, the Company changed its accounting policy regarding investment in a subsidiary so that separate financial statement, which formerly reported investment using the equity method, now reports using the cost method. This is to comply with TAS 44. hus the Company restated its financial statement by using the historical cost as the cost of the investment in a subsidiary of the separate financial statement. This adjustment caused the net income on the separate financial statement to differ permanent from that reported in the consolidated financial statement. The Company had made adjustment to retain earning at December 31, 2006 to be increased by Baht 0.49 million which equivalent to equity injections that the Company invested in Bangchak Green Net in order to reflect investing value by using the historical cost method. The cumulative effect of the accounting policy has been presented under the heading of "Cumulative effect of the change in accounting policy for investments in subsidiary" in the separate financial statements in the statement of changes in shareholders' equity. Million Baht Statement of income 1st Quarter 2007 1st Quarter 2006 (The Company Only) Cost Mtd. Equity Mtd. +/- Cost Mtd. Equity Mtd. +/- * Gain (loss) from - - - - (11) +11 investment in subsidiary Balance Sheet March 31, 2007 December 31, 2006 (The Company Only) Cost Mtd. Equity Mtd. +/- Cost Mtd. Equity Mtd. +/- * Investment in 0.49 - 0.49 0.49 - +0.49 subsidiary However, the change of accounting policy affects only the separate financial statement. It did not have any effect on the consolidated financial statements or business fundamentals. 5. Factors and major influences that may affect the Company's performance or financial status in the future Major factors affected the performance were the marketing margin and gross refining margin. For the marketing margin, since the oil prices were rapidly increased especially after the floating of gasoline and diesel price, the retail price could increase at a slower rate than the cost increased which depressed the marketing margin to be at a low level and this incident would slow down the demand for oil consumption; in other hand, if the oil prices were decreased, the marketing margin and oil consumption would increase as well. For the refining margin, as a simple refinery having a high proportion of fuel oil production and the fact that fuel oil price is always lower than crude price, the Company's gross refining margin was capped to a certain level depending on the fuel oil price for each period. Thus the Company has had necessity to attain the long-term resolution for reducing fuel oil production to enhance gross refining margin to be at the same level of the industry's. Therefore, the Company has adopted the Product Quality Improvement project (PQI) by installing the hydro-cracking unit and other associated units, which will reduce production of fuel oil to the near level of other local and foreign refineries and hence become a complex refinery. The Company expects that the project will be started up in the forth quarter of 2008 and will increase EBITDA from average Baht 2,000-4,000 million to approximately Baht 6,000 - 8,000 million after the project reach its completion subject to oil price at the period. Currently PQI project has started its construction, which total project cost (included contingency reserve) totaling Baht 15,369 million or equivalent to USD 378 million. The Company has appointed CTCI Overseas Corporation Limited and CTCI (Thailand) Co., Ltd. to be contractors of the PQI under fixed price, date certain and performance guaranteed arrangement. The Company has achieved its financial closure for sources of funds for the project since May 16, 2006. The project is now on the process of construction and overall progress at March 2007 is 20.9% compare to plan of 15.8%. The oil prices will still be major parameters effecting operating result of the Company. Furthermore, another factor which may have effect on the Company's performance is the foreign exchange fluctuation (mostly Baht and USD). The Company purchases oil on US dollar term and sell its product on US dollar related basis and records transactions as trade payable and trade receivable respectively. Since the Company has assets greater than liabilities, the appreciation of Thai Baht will cause the decrease in net assets and vise versa. However, the Company has had the policy to leveling differences of US dollar assets and liabilities whenever it becomes appropriate. In the mean time, the Company has partly mitigated this risk by utilizing some financial instruments. The Company has appointed a specific department and from a special committee (more)