Management Discussion & Analysis

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Management Discussion and Analysis
For the Operating Results ended September, 2017
1. Report and Analysis of the Operating Results

For the Q3/2017, BAFS and its subsidiaries (“the Group”) had the amount of aviation fuel services volume at BKK and DMK of 1,417 million liters, with the growth rate increased by 1.7%(y-o-y) and the total flights increased by 2.6%(y-o-y) to 71,649 flights. While for the nine months of 2017, the growth of aviation fuel services volume and total flights of thus two main airports were 1.4%(y-o-y) and 2.8%(y-o-y) respectively with consequences to the growth of tourism industry of Thailand.

Further, the total multi-products of fuel transportation volume of FPT in the Q3/2017 was declined by 1.5%(y-o-y) to 1,086 million liters but for the nine months of 2017 FPT’s volume increased by 6.2%(y-o-y) to 3,506 million liters from the nine months of 2016.

* Note : Total Flights was data of flights that serviced by BAFS only at BKK and DMK

Total revenue of Q3/2017 of the Group was Bt886.1 million decreased by Bt8.8 million or 1.0% compared with Bt894.9 million of Q3/2016. While the services income was of Bt875.5 million increased by Bt2.5 million or 0.3%(y-o-y). The other income decreased by Bt11.3 million or 51.6%(y-o-y) as a result of in Q3/2016 such income was recorded for interest received from damaged pipeline at Phayathai Skytrain Station at Bt4.3 million. Then the Group had a Net profit attributable to Equity holders of the Company of Bt271.8 million, a decrease of Bt22.8 million or 7.7%(y-o-y) from Bt294.6 million, representing a net profit margin of 30.7% which has an earnings per share of Bt0.43. Excluding these special item, the net profit will decreased by Bt19.4 million or 6.7% from Q3/2016.

The total revenue of the nine months of 2017 totaled to Bt2,716.0 million, a decrease of Bt52.3 million or 1.9% compared to total revenues in the same period of 2016 of Bt2,768.3 million. While the services income was of Bt2,669.8 million increased by Bt19.4 million or 0.7%(y-o-y). The other income was of Bt46.2 million which decreased by Bt71.7 million or 60.8%(y-o-y) as a result of in the nine months of 2016 the other income was recorded for the extra revenue of Bt72.2 million which were the compensation according to the judgment of the Supreme Court from a one company made damaged in FPT’s fuel pipeline at Phayathai train Station, both principal and interest of Bt42.8 million, and the reversal of the provision of Bt29.4 million was due to the relocation of FPT’s pipeline at Bang Sue train Station. The Net profit attributable to the Equity of the Company of Bt808.6 million, decreased by Bt70.5 million or 8.0% from Bt879.1 million which representing earnings per share of Bt1.27 per share. And the Net profit margin of this period was 29.8%. However, when excluding those special items, the net profit was decreased by Bt12.7 million or 1.5% from the nine months of 2016.

 

Table summarized the operating results of the Group

(unit : Bt million)
*Note: In the nine months of 2016, the Group had other income from special items totaling approximately Bt72.2 million due to defective fuel pipeline compensation. And the reversal of provisions for dismantlement of the pipeline.
1.1 Revenue

For Q3/2017 and the nine months of 2017, total revenues of the Group were Bt886.1 million and Bt2,716.0 million which comprising of ;-

1.1.1 Services Income

Total services income in Q3/207 of the Group was Bt875.5 million, an increase of Bt2.5 million or 0.3% (y-o-y). Because of the total aviation fuel services volume at BKK and DMK has grown by 1.7%(y-o-y) while the total multi-products of fuel volume of FPT has declined by 1.5%(y-o-y). For the total services income in the nine months of 2017 was Bt2,669.8 million, an increase of Bt19.4 million or 0.7%(y-o-y). Caused from the total aviation fuel services volume at BKK and DMK has grown by 1.4%(y-o-y) while the total multi-products of fuel volume of FPT has increased by 6.2%(y-o-y).

For the income proportion separating by business structure consisted of Aviation refueling services at 80% and Fuel pipeline transportation services at 20% respectively.


1.1.2 Other Income

In Q3/2017, the other income was Bt10.6 million, a decrease of Bt11.3 million or 51.3%(y-o-y). Since in Q3/2016, FPT received the interest income resulting from the compensation of the damaged pipeline of Bt4.3 million.

While, for the nine months of 2017, other income was Bt46.2million, a decrease of Bt71.7million or 60.8%(y-o-y) as a result of last year the Group recorded extraordinary items of approximately Bt72.2 million which were :-

  1. FPT received both principal and interest compensation according to the damaged in its fuel pipeline at Phayathai train station at the amount of Bt42.8 million and
  2. The Group had income from the reversal of the provision at Bt29.4 million from the relocation of FPT’s pipeline at Bang Sue train station.
1.2 Expenses

1.2.1 Cost of services

In Q3/2017, Cost of services was of Bt370.6 million, an increase of Bt15.4 million or 4.3%(y-o-y) from Bt355.2 million. The Gross profit margin of the Group was 57.7% while the nine months of 2017, Cost of services of the Group amounted to Bt1,143.9 million, increasing by Bt58.6 million or 5.4%(y-o-y), mainly due to the increase of the direct labor cost, depreciation and amortization, maintenance costs, and Airport concession fee for Aviation refueling services business. The gross profit margin was of 57.2%.

1.2.2 Administrative Expenses

In Q3/2017, administrative expenses was of Bt117.7 million, increasing by Bt0.6 million or 0.5%(y-o-y) from Bt117.1 million. While in the nine months of 2017, administrative expenses of the Group amounted to Bt375.1 million, a decrease of Bt11.3 million or 2.9%(y-o-y), mainly were the decreased in personnel expenses, the consulting fee, the expenditure on computers and equipment and general administrative expenses.

The Cost of services and Administrative expenses have increased rates higher than the increasing rate of the total revenue. As a result, profit from operations before finance costs and taxes (EBIT) amounted to Bt397.8 million, a decrease of Bt24.8 million, or 5.9%(y-o-y). Representing operating profit margin before financial expenses and income taxes (EBIT margin) was at 44.9% compared to 47.2% of Q3/2016. As a result, EBITDA was amounted to Bt539.3 million, a decrease of Bt21.5 million or 3.8%(y-o-y) with have an EBITDA margin of 60.9%, compared to 62.7% of Q3/2016.

While in the nine months of 2017, the profit from operations before finance costs and tax (EBIT) was of Bt1,197.0 million, a decrease of Bt99.6 million or 7.7%(y-o-y), representing operating profit margin before finance costs and taxes (EBIT margin) was at 44.1% compared to 46.8% of the same period of last year. And resulted in EBITDA of Bt1,613.8 million, a decrease of Bt84.4 million or 5.0%(y-o-y), equivalent to EBITDA margin at 59.4% compared to 61.3% of the same period of last year. However, when excluding those special items of last year, the EBITDA was decreased by Bt12.2 million or 0.8% from the nine months of 2016.

1.2.3 Finance Costs

Financial expenses for Q3/2017 amounted to Bt37.7 million, an increase of Bt7.9 million or 26.5% from Q3/2016. And the financial expenses in the nine months of 2017 was of Bt115.3 million, an increase of Bt23.4 million or 25.5% compared to the same period of the previous year. As a result, BAFS, the parent company has increased its borrowings to raise capital in FPT since Q2/2016.

1.3 Operating Results

Net profit attributable to the Equity of the Company in Q3/2017 was amounted to Bt271.8 million, a decrease of Bt22.8 million or 7.7%(y-o-y) from Bt294.6 million with a Net profit margin of 30.7%, representing an Bt0.43 earnings per share. Approximately of 86% of the Net profit was derived from Aviation refueling services business and around 14% was derived from Fuel pipeline transportation business.

In the nine months of 2017, Net profit attributable to the Equity of the Company amounted to Bt808.6 million, declined by Bt70.5 million or 8.0% from the same period of last year with had a Net profit of Bt879.1 million. Representing a Net profit margin of 29.8% and earnings per share of Bt1.27 per share, of which about 84% of the Net profit derived from the Aviation refueling services business and about 16% from the Fuel pipeline transportation business. However, when deducting the extra income of Bt72.2 million, which occurred in the nine months of 2016, the Net profit was declined by Bt12.7 million or 1.5%(y-o-y).

2. Report and Analysis of Financial Status
2.1 Assets

As at September 30, 2017 the Group had total assets in the amount of Bt11,963.5 million, decreased by Bt194.4 million or 1.4% from December 31, 2016. The important details of cash flow were as follows:

2.1.1 Cash and cash equivalent of Bt2,094.9 million which cash flow summarized for the nine months of 2017 were below ;-

  • The Group’s net cash from operation was of Bt1,442.8 million, increased by Bt200.0 million or 16.1%
  • Cash for investment activities was of Bt2,290.0 million, increased by Bt1,849.4 million or 419.7% which mostly was the investment in expansion of the Northern Multi-Products Fuel Pipeline project and the expansion of the High Pressure Aviation Fuel Pipeline project for BKK phase2 of TARCO
  • Net cash used for financing activities was of Bt1,206.2 million, increased by Bt2,165.6 million or 225.7%. As during the nine months of 2017, the Group repaid long-term loans of Bt376.7 million and paid dividend of Bt808.7 million to its shareholders

2.1.2 Property, leasehold improvement and equipment as of September 30, 2017 was of Bt6,619.4 million, increased by Bt1,727.5 million or 35.3% from December 31, 2016. Most of the assets are work under construction in the Northern Pipeline Expansion Project of FPT and the High Pressure Aviation Fuel Pipeline Expansion Project of TARCO

2.1.3 Project costs under concession agreements was of Bt1,700.3 million which comprise of Into-plane substation project of Bt102.0 million, Hydrant equipment of Bt1,080.6 million, Concession of a subsidiary of Bt486.2 million and Right to use leased land related to concession agreement of Bt31.5 million.

2.2 Liabilities

As of September 30, 2017, the Group had total liabilities of Bt4,539.1 million, decreased by Bt247.6 million or 5.2% from December 31, 2016. The total debts to total equity ratio was of 0.61:1 time and the Interest bearing debts to total equity ratio was of 0.42:1 time. The liabilities comprised of major items which are follows;-

2.2.1 Account payable and others account payable was of Bt230.7 million

2.2.2 Long term loan from banks, which are due within one year, was of Bt480.9 million which were belonged to BAFS at the amount of Bt337.0 million and belonged to TARCO and FPT at the amount of Bt110.0 million and Bt33.9 million respectively

2.2.3 Long-term loans from banks were Bt2,654.3 million, decreased by Bt280.1 million from December 31, 2016 or 9.5%. These comprise of;-

BAFS

  • Long term loan from BBL was of Bt41.1 million due on Dec 31, 2018 which was quarterly, principal repayment: Baht 41.9 million/period (the last repayment will be made for remaining principal) at rate of 3-month fixed deposit rate plus percent of fixed rate per annum
  • Long term loan from TBANK was of Bt26.3 million due on Nov 28, 2018 which was every 3 months, principal repayment: Baht 6.25 million/period (the last repayment will be made for remaining principal) at rate of MLR minus percent of fixed rate per annum
  • Long term loan from BBL was of Bt50.0 million due on Sep 30, 2019 which was quarterly, principal repayment: Baht 25.0 million/period (the last repayment will be made for remaining principal) at rate of MLR minus percent of fixed rate per annum
  • Long-term loans from TMB was of Bt2,250.0 million due on Apr 30, 2026 with 3 years grace period and quarterly, principal repayment: Baht 80.4 million/period (the last repayment will be made for remaining principal) at a fixed rate per annum

FPT

  • Long term loan from BBL was of Bt148.3 million for the investment in the 3 Diesel Fuel Tanks project at DMK depot. The loan will be due on May 31, 2024 which was monthly principal repayment at Baht 2.2 million at the rate of MLR minus percent of fixed rate per annum

TARCO

  • Long term loan from TMB was of Bt138.7 million, which TARCO had a loan agreement for Bt550 million to invest in the Hydrant pipeline system expansion project Phase II at BKK. TARCO has been granted a 3- year grace period. The loan will be due on Dec 31, 2021 which was quarterly principal repayment at Bt27.5 million at the rate of BIBOR 3-month plus percent of fixed rate per annum

2.2.4 Long-term debt of FPT under rehabilitation plan with Bangchak Petroleum Plc. was of Bt12.5 million.

2.2.5 The Employee benefit obligations was of Bt899.5 million according to Labor Protection Laws as TAS no.19 on employee benefits.

2.3 Shareholders' Equity

As at September 30, 2017, total shareholders’ equity was of Bt7,424.4 million, increased from December 31, 2016 by Bt53.2 million or 0.7%. As a result, the book value per share Bt11.65 increased from Bt11.56 per share as of 31 December 2016.