ข่าวแจ้งตลาดหลักทรัพย์

Management's Discussion and Analysis for Business Operations For the three-month period ended March 31, 2008 Business Overview for 2008 Oil Price Situation For the first quarter of 2008, world oil market was under a high volatile situation following the continuously increased of oil price since the fourth quarter of 2007. This situation was resulted from concerned over possible supply shortage due to tension in crude oil production and export countries, the resolution of OPEC's meeting on Mar 5, 2008 which confirmed not to increase oil production level and the yet to be solved conflict between Venezuela and the U.S. in Exxon Mobil issue. In addition, the continuous depreciation in the U.S. dollar caused more mobilization of funds to invest into commodities market in order to rebalance their portfolio. These factors encouraged oil prices in this quarter to be in an oppressively upward trend (average Dubai crude price for the first quarter of 2008 was 91.09 USD/BBL, 64.3% increased from the first quarter of 2007 which was 55.43 USD/BBL and 9.3% increased from the fourth quarter of 2007 which was 83.35 USD/BBL). This upwardly increased in oil price has caused most of refineries to realize more increase in inventory gain. Crude oil price had reached its new high record several times (reference crude price: WTI was reached new high at 125.96 USD/BBL on May 9, 2008). However, at this high level of oil price combining with the concern over economic recession in the U.S. may impact world GDP and consequently, the world oil demand growth will be slowdown. Refinery production For the first quarter, the Company had completed its scheduled turnaround exercise by shutdown Crude Distillation Unit (CDU) and related units for maintenance during January 25 - February 7, 2008. The Company also undertook a relevant tie-in of the existing plant's facilities with new cracking's facilities' with regard to the Product Quality Improvement project (PQI). During the turnaround period the Company also completed its modification/inspection of the existing plant with target to make plant ready to run at designed capacities without any interruption after PQI start-up and to extend the turnaround period to 24 months. After plant started up, the Company had successfully increased its crude run production to reach 125 KBD continuously. Currently, the plant is operated at the rate according to production plan. This successful operation has made first quarter average crude run production to reached 60.6 KBD as compared to plan at approximately 52 KBD. 1. Explanation and Analysis of the Operating Results for 1st quarter of 2008 compared with that of the year 2007 1st Quarter, 08 1st Quarter, 2007 Consolidated Company Consolidated Company Total Revenues, Million Baht 29,819 29,564 19,985 19,790 Net Profit (Loss), Million Baht 853 841 (42) (54) Gross Profit margin, % 5.30 4.95 2.18 1.67 Net Profit Margin, % 2.86 2.85 (0.21) (0.27) Earning Per Share, Baht/Share 0.76 0.75 (0.04) (0.05) 1.1 Net Profit/(Loss) Analysis 1) Regarding the business operations for the first quarter of 2008, the Company and its subsidiaries recorded net profit of Baht 853 million, which composed of the Company's profit of Baht 841 million and the subsidiaries' (Bangchak Green Net - BGN and Bangchak Bio Fuel - BBF) profit of Baht 8 million. The consolidated figures were adjusted by connected transactions of Baht +4 million. 2) The Company's EBITDA was Baht 1,559 million, increased from Baht 277 million of the same period of last year by Baht 1,282 million. Performance breakdown by business units are as follow: Table: Details of breakdown EBITDA (Million Baht) 1st Quarter,08 1st Quarter,07 Changing +/ - (A) (B) (A) - (B) EBITDA 1,559 277 +1,282 - Refinery 1,457 86 +1,371 - Marketing 102 191 -89 (Less) Inventory Gain (810) - -810 Plus Inventory Loss - 297 -297 Adjusted EBITDA 749 574 +175 - Refinery 647 383 +264 - Marketing 102 191 -89 - EBITDA of the Refinery Business was Baht 1,457 million, increased from Baht 86 million of the same period of last year. Total Gross Refining Margin for this quarter was 10.17 USD/BBL (included inventory gain due to crude oil price increased),higher than those of first quarter of last year which was at 2.05 USD/BBL. And the Company's crude run was at 60.6 KBD also higher than those of last year at 52.3 KBD. USD/BBL 1st Quarter 1st Quarter Changing GRM from 2008 2007 +/- Base GRM 5.15 3.39 +1.76 GRM Hedging 0.51 0.42 +0.09 Inventory Gain (Loss) 4.51 (1.76) +6.27 Total 10.17 2.05 +8.12 Base GRM for this quarter was increased by 1.76 USD/BBL since most of all products crack spreads over Dubai crude were improved from the same period of last year. Especially Gas oil/Dubai (GO/DB) crack spread was increased to 22.84 USD/BBL due to the demand rose from a late-season winter in Western countries and increased in demand from China for utilize during the coming Summer Olympic Game combining with an affect from refineries shutdown in Asia. This excessively increased in GO/DB spread has overwhelmed the impact of the wilder than usual negative spread of Fuel/Dubai. However, the Company has not got serious impact from this situation since most of the fuel oil production was exported at higher price than those exported in 2007 as a result of 2008 contract renewal. Products crack spread were shown below. USD/BBL 1st Quarter 1st Quarter Changing Products crack spread 2008 2007 +/- UNL95/DB 13.70 12.92 +0.78 IK/DB 23.13 16.72 +6.41 GO/DB 22.84 14.54 +8.30 FO/DB -17.10 -10.40 -6.70 TP/DB 4.80 7.68 -2.88 GRM hedging was decreased by 0.09 USD/BBL since the actual GRM crack spread was in line with the hedged spread that the Company had executed. The hedged position for this quarter was at 30% of average production level while the same period of last year was at 25%. Inventory gain for this quarter was equivalent to 4.51 USD/BBL since crude oil prices have continuously increased while those of last year crude oil prices were decreased and the company suffered inventory loss of 1.76 USD/BBL. Product prices were increased accordingly. - EBITDA of the Marketing Business was Baht 102 million, decreased from Baht 191 million of the same period of last year, since the reduction of Marketing Margins due to lagging effect of prices adjustment between ex-refinery prices and retail (ex- service station) prices. For this quarter which was in period of uptrend pricing, the retail oil prices were adjusted slower than their cost (ex-refinery price). Overall Marketing Margin (exclude lubricant margin) was at 28.2 satang per liter lower than those of last year which was at the level 36.9 satang per liter. However the Marketing Business sales volume was increased from 52.5 KBD to 53.8 KBD.Improvement of marketing business sales volume for this quarter mostly came from successful promotion of bio fuel. 1.2 Income Analysis 1) Revenues from sale and services of the Company and its subsidiaries for the first quarter of 2008 were Baht 29,819 million, composed of the Company's sale revenue of Baht 29,564 million and its subsidiary's (BGN) of Baht 4,610 million, adjusted by connected transaction of Baht 4,355 million. Major changes of the Company's revenues when comparing to that of last year were as follows: - Revenue from sales (both refinery business sales and marketing business sales) were Baht 29,564 million, higher than those of last year by Baht 9,774 million or 49.4%. The improvements came from 1) sale volumes increased by 13.4% and 2) average selling price in term of US dollar was increased by 59.7% even though the Thai Baht was appreciated against U.S. Dollar by another 8.9%(reference average T/T selling rate of 1Q2008 at 32.30 Baht/USD compared with 1Q2007 at 35.48 Baht/USD) for this quarter . However, this Baht appreciation had also reduced the cost of sales. - Interest income was decreased by Baht 40 million to Baht 24 million or 62.1% since the company has spent cash from PQI funds rising proceed yet to be utilized to pay the PQI contractor in accordance with their milestone achievement. - Gain from foreign exchange was Baht 285 million as compared to loss Baht 23 million of last year. Most of which came from gain of foreign exchange in U.S. Dollar account payables and gain of FX hedging on GRM as resulted from Baht appreciation against U.S. Dollar. 1.3 Expense Analysis 1) Total expenses of the Company and its subsidiaries mainly were cost of sale and services of Baht 28,239 million, which composed of the Company's cost of Baht 28,102 million and its subsidiary's (BGN) of Baht 4,468 million, adjusted by connected transaction of Baht 4,331 million. Major changes of the Company's expenses when comparing to that of last year were as follows: - Selling and administrative expenses were increased by Baht 85 million or 20.2% since crude/product transportation expenses have been increased following the diesel oil price increased. The SG&A also increased from higher export cost from higher volume of fuel oil sales to Chinese and Japanese refineries. - Directors' remuneration was increased from bonus payment to the Board of Director amounting Baht 9 million in accordance with 2007 performance. - Interest expense was Baht 139 million, decreased from those of last year by Baht 38 million or 21.4%, as the market rate was decreasing by 0.7% p.a. and average loan principle was decreased by Baht 1,358 million. 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 for the first quarter of 2008 in the consolidated financial statement and the Company only were 5.3% and 4.9% respectively, increased from 2.2% and 1.7% at the same period of last year. This higher gross profit margin came from better refining margin of refinery business as mentioned in item 1.1 section 2. The net profit margin then increased from -0.2% to 2.9% for the consolidated financial statement and increased from -0.3% to 2.8% for the Company only. 2. Explanation and Analysis of the Financial Position as of March 31, 2008 compared with December 31, 2007 2.1 Assets 1) At the end of first quarter 2008, total assets of the Company and its subsidiaries were Baht 46,879 million, which comprised of Baht 46,694 million of the Company's total assets and Baht 728 million of BGN's total assets as well as Baht 97 million of BBF's total assets, adjusted by connected transactions of Baht 640 million which was from account receivable of Baht 586 million. 2) At the end of the first quarter of 2008, the Company's total assets increased by Baht 1,846 million, comparing to the end of 2007. The major changes of assets were as follows: - Oil inventories were increased by Baht 3,384 million or 31.5%, due to increasing in oil price (average Dubai price in March 2008 was 96.63 USD/BBL increased by 12.4% while December last year was at 85.98 USD/BBL). Inventories volume was increased by 1.0 million barrel, providing for increasing in crude run level in April at 86 KBD. - Other current assets-others was increased by Baht 355 million mainly from VAT receivable which was increased by Baht 331 million since plant utilization was lower than normal operation during the schedule shutdown, resulting to the Company had to purchase the finished product for sale and therefore the VAT value has increased. - Investments in subsidiary were increase by Baht 49 million since the Company has invested in the new subsidiary, Bangchak Biofuel Company Limited (BBF). BBF is a joint venture between the Company and Universal Adsorbents & Chemicals Company Limited (UAC) in a proportion of 70:30 respectively. The new company will focus on construction, operation, production and sales of the new 300,000 liters per day bio-diesel plant with total project cost approximately Baht 1,018 million. The project is currently during construction and expects to be completed in the middle of 2009. This project is financed by project finance basis with D/E ratio of 2.3:1. 2.2 Liabilities 1) At the end of the first quarter of 2008, total liabilities of the Company and its subsidiaries were Baht 24,855 million, which comprised of Baht 24,753 million of the Company's total liabilities and Baht 688 million of BGN's total liabilities as well as Baht 5 million of BBF's total assets, adjusted by connected transactions of Baht 591 million which was from account payable of Baht 586 million. 2) At the end of the first quarter of 2008, the Company's total liabilities increased by Baht 1,104 million comparing to the end of 2007. The major changes of liabilities were as follow: - Trade accounts payable were increased by Baht 1,218 million or 13.6% due to crude oil purchasing was increased by 0.9 million barrel in March 2008 providing for increasing in crude run level in April at 86 KBD. - Liabilities on hedging contracts were decreased by Baht 487 million or 52.4% since the Company had paid the amount to hedging counterparties. 2.3 Shareholders' Equity 1) At the end of the first quarter of 2008, the consolidated total shareholders' equity of the Company were Baht 22,024 million, which comprised of Baht 21,941 million from the total shareholders' equity of the Company and Baht 40 million from BGN's as well as Baht 92 million from BBF's, adjusted by Baht 49 million connected transactions. 2) The Company's total shareholders' equity were increased by Baht 742 million comparing to the end of 2007, since the Company generated net profit of Baht 841 million for the first quarter of 2008 and amortized Baht 99 million of surplus on fixed assets revaluation. 3) As of March 31, 2008 the Company has financial instruments (CDDR, subordinated 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 2008 3.1 For this first quarter of 2008, the Company and its subsidiaries had beginning cash and cash equivalent of Baht 6,450 million. During the period, cash was decreased from various activities of Baht 3,610 million, of which Baht 1,833 million were used in operating activities, Baht 2,150 million were used in investing activities but Baht 373 million were received from financing activities. Cash and cash equivalent at the end of first quarter 2008 were Baht 2,840 million, which consisted of Baht 2,490 million of the Company and Baht 254 million of BGN as well as Baht 96 million of BBF. 3.2 The Company's beginning cash of the period was Baht 6,088 million and had utilized Baht 3,598 million in the following activities; 1) Net cash used in operating activities was Baht 1,838 million; -The Company received cash of Baht 1,407 million from operation before changes in operating assets and liabilities -The Company used cash of Baht 3,581 million in operating assets which consisted of increased in inventories of Baht 3,383 million and in other current assets of Baht 198 million. -Cash from operating liabilities were increased by Baht 506 million from increasing in trade accounts payable of Baht 1,206 million. However the Company has paid for other operating liabilities of Baht 700 million during the period. -The Company used cash for interest paid and corporate income tax amounting Baht 170 million. 2) Net cash used in investing activities was Baht 2,085 million; -Investment in fixed assets of Baht 1,936 million, of which Baht 1,748 million was PQI's. -Cash was used in other investments of Baht 149 million. 3) Net cash received from financing activities was Baht 325 million; -The Company drew Baht 410 million short-term loan from Krungthai Bank. -Baht 85 million of long-term loan was repaid to Krungthai Bank as per the amortization schedule. At the end of the first quarter of 2008 cash and cash equivalents was Baht 2,490 million which consisted of Baht 1,170 million appropriated for PQI project and Baht 1,320 million for operation. 4. 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. The 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 overall project progress as of March 2008 was 82.2%. The Company has closely supervised and made utmost cooperation with the contractor and the Company confident that the construction completion is achievable within 2008. 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 called Price Risk Management Committee (PRMC) which consists of top management executives to keep a close look on the situation and to give policy to perform risk management on the matter.