ข่าวแจ้งตลาดหลักทรัพย์

3.Explanation and Analysis of the Statement of Cash Flows for the year 2006 3.1 For the year 2006, the Company and its subsidiary had beginning cash and cash equivalent of Baht 1,753 million. During the year, the Company received cash from various activities of Baht 952 million, of which Baht 2,387 million were received from operating activities, Baht 5,027 million were received from financing activities and Baht 6,462 million were used in investing activities. Cash and cash equivalent at the end of 2006 were Baht 2,705 million, which consisted of Baht 2,599 million of the Company and Baht 106 million of BGN. 3.2 The Company had net profit of Baht 239 million; added back non-cash items of Baht 841 million, the Company then had cash profit from operation of Baht 1,080 million together with cash at the beginning of period of Baht 1,561 million. The Company also had additional cash flow activities as follows; 1) Net cash received from working capital was Baht 1,347 million; * Inventories value were decreased by Baht 2,070 million, since the inventories volume decreased by 0.81 million barrel from 4.32 million barrel at the end of 2005 to 3.51 million barrel at the end of 2006. * Trade accounts receivable were decreased by Baht 911 million. * Trade accounts payable decreased by Baht 1,332 million from additional advance payments of oil purchase as well as decreased in purchase volume itself in December 2006. * Payment for 2005 corporate income tax of Baht 261 million. * Cash used in other operating assets and liabilities of Baht 41 million. 2) Net cash used in investing activities was Baht 6,416 million; * The Company invested into 3-14 months fixed deposit accounts. The outstanding investment amount as of December 31, 2006 was Baht 4,045 million consisted of Baht 3,816 million PQI amount and Baht 229 million debt service reserve for Krung Thai Bank. * Investment in fixed assets of Baht 2,292 million, of which Baht 2,066 million was PQI's. * Cash used in other investments were Baht 79 million. 3) Net cash from financing activities was Baht 5,027 million; * Proceeds from share capital increased as part of fund raising for PQI project of Baht 5,935 million and proceeds from convertible debentures issued to PTT of Baht 585 million. * The Company had made drawdown of Baht 38 million of PQI facilities. In 2006, the Company also paid Baht 525 million for long-term loan repayment to Krung Thai Bank, of which Baht 319 million was scheduled repayment and Baht 206 million was mandatory repayment as part of dividend restriction clause stipulated in the loan agreement. * Baht 800 million short-term loan was repaid to Krungthai Bank. As a result, short term loan outstanding as of December 31, 2006 was Baht 1,200 million. * In May 2006, the Company had paid dividend to common share holders of Baht 206 million The Company had increased in cash and cash equivalents by Baht 1,038 million comparing to the end of the year 2005. At the end of the year 2006 cash and cash equivalents was Baht 2,599 million which consisted of Baht 1,799 million for operation and Baht 800 million appropriated for PQI project. 4. Changing in accounting policy Regarding to changing in accounting policy for inventory cost valuation method from First In First Out (FIFO) method to Weighted Average method required the Company to adjust financial statements for the year 2005 as follow, Profit and loss for the year ended December 31, 2006 and 2005 2006 2005 (Million Baht) WA FIFO +/- WA FIFO +/- * Profit (loss) before tax 131 (404) +535 3,250 3,205 +45 * Income tax 107 268 -161 (292) (278) -14 * Net profit (loss) 239 (136) +375 2,958 2,927 +32 In addition to an adjustment of profit and loss statement for the year 2005 to reflect difference between FIFO method and Weighted Average method, the Company also made adjustment to the retained earning. The change in inventory valuation method had made retained earning at beginning of 2005 to be decreased by Baht 9 million, and after combined with the increase of adjusted profit of Baht 32 million, the retained earning of 2005 was increased by Baht 23 million. 5. Financial ratios analysis and the explanation for the year 2006 compared with that of the year 2005 Unit 2006 2006 2005 (Unaudited) (Audited) (revised) Liquidity Ratios Current Ratio Time 1.9 2.5 1.9 Quick Ratio Time 0.7 1.3 0.7 Receivable Turnover Time 29.5 24.8 Average Collection Period Day 12.4 14.7 Inventory Turnover Time 9.3 7.6 Inventory Turnover Period Day 39.3 47.8 Account Payable Turnover Time 18.9 12.2 Average Payment Period Day 19.3 29.9 Cash Cycle Day 32.4 32.6 Profitability Ratios Gross Profit Margin % 2.3 6.2 Net Profit Margin % 0.2 3.4 Return on Equity 1/ % 1.5 1.2 26.1 Efficiency Ratios Return on Total Assets 1/ % 0.6 0.5 8.6 Assets Turnover Time 2.6 2.5 Financial Policy Ratios Debt to Equity 1/ , 2/ Time 0.8 0.7 1.0 Remark: Calculation from consolidated financial statements 1/ Decreased significantly due to decreasing in net profit and increasing in shareholders' equity 2/ Calculation from Interest Bearing Debt The fluctuation in world oil price had made gross refining margin and marketing margin to be volatile, resulting to decrease in profitability ratio and return on asset when comparing with last year. This lower gross profit margin came from squeezed refining margin of refinery business which was heavily affected from inventory losses even though the marketing margin of marketing business had much improvement from last year as mentioned in item 1.1 2). Please be further noted that during the year 2006, the Company has raised fund for PQI project by issuing newly common shares, convertible debentures and entering into loan facilities agreement with banks; thus, some calculated financial ratios were included items of PQI. IF take PQI's items apart, current ratio will be 1.9 times, quick ratio will be 0.7 times, return on equity will be 1.5%, return on total assets will be 0.6% and debt to equity will be 0.8 times. 6. 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. Sending the Company's fuel oil to be upgraded at other refineries could partly reduce effect of this situation. However, 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 year 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 oil prices will still be major parameters effecting operating result of the Company. Oil price has been increased continuously since late 2003 until beginning of third quarter 2006. Now the situation has been relaxed and the oil price has gone down quite significantly. The Company believes that the oil prices, crude oil and refined oil prices, are in period of adjustment and the volatility of oil price still remain in 2007. In order to deal with such situation, the Company has appointed a specific department and form a special committee called Price Risk Management Committee (PRMC) which consist of top management executives to keep a close look on the situation and to give policy to perform risk management on the matter. Furthermore, 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.