Management Discussion & Analysis

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Management Discussion and Analysis
For the Operating Results ended June 30, 2017
1. Report and Analysis of the Operating Results

For the second quarter of 2017, BAFS and its subsidiaries (“the Group”) had the amount of aviation fuel services volume at BKK and DMK of 1,357 million liters, with the growth rate increased by 0.5%(y-o-y) and the total flights increased by 2.4%(y-o-y) to 69,441 flights. While for the first six months of 2017, the growths of aviation fuel services volume and total flights of thus two main airports were 1.2% (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 second quarter of 2017 was increased by 7.2%(y-o-y) to 1,202 million liters and 10.1%(y-o-y) to 2,419 million liters from the first six months of 2016.

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

Total revenue of Q2/2017 of the Group was Bt880.2 million decreased by Bt1.3 million or 0.1% compared with Bt881.5 million of Q2/2016. While the services income was of Bt863.5 million increased by Bt4.2 million or 0.5%. The other income decreased by Bt5.5 million or 24.8% as a result of in Q2/2016 such income was recorded for interest received from damaged pipeline at Phayathai Skytrain Station at Bt4.3 million. The Group had a Net profit attributable to Equity holders of the Company of Bt231.2 million, an decrease of Bt6.3 million or 2.7% (y-o-y) from Bt237.5 million, representing a net profit margin of 26.3% which has an earnings per share of Bt0.36. Excluding these special item, the net profit will decreased by Bt2.9 million or 1.3% from Q2/2016.

The total revenue of the first six months of 2017 totaled to Bt1,829.8 million, a decrease of Bt43.6 million or 2.3% compared to total revenues in the same period of 2016 of Bt1,873.4 million. While the services income was of Bt1,794.3 million increased by Bt16.9 million or 1.0%. The other income was of Bt35.5 million which decreased by Bt60.5 million or 63.0% as a result of in the first six months of 2016 the other income was recorded for the received 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 Bt38.6 million, and the reversal of the provision of Bt29.4 million was due to the relocation of its pipeline at Bang Sue train Station. The Net profit attributable to the Equity of the Company of Bt536.8 million, decreased by Bt47.7 million or 8.2% from Bt584.5 million which representing earnings per share of Bt0.84 per share. And the Net profit margin in this period was 29.3%. However, when excluding these special items, the net profit will increased by Bt6.7 million or 1.3% from the first six months of 2016.

 

Table summarized the operating results of the Group

(unit : Bt million)
*Note : In Q1 and Q2 of 2016, the Group had other income from special items totaling approximately Bt68.0 million due to defective fuel pipeline compensation. And the reversal of provisions for dismantlement of the pipeline.
1.1 Revenue

For Q2/2017 and the first six months of 2017, total revenues of the Group were Bt880.2 million and Bt1,829.8 million which comprising of ;-

1.1.1 Services Income

Total services income in Q2/207 of the Group was Bt863.5million, an increase of Bt4.2 million or 0.5% (y-o-y). Because of the total aviation fuel services volume at BKK and DMK has grown by 0.5%(y-o-y) while the total multi-products of fuel volume of FPT has increased by 7.2% (y-o-y). For the total services income in the first six months of 2017 was Bt1,794.3 million, an increase of Bt16.9 million or 1.0%(y-o-y). Caused from the total aviation fuel services volume at BKK and DMK has grown by 1.2% (y-o-y) while the total multi-products of fuel volume of FPT has increased by 10.1% (y-o-y).

For the income proportion separating by business structure consisted of Aviation refueling services at 79% and Fuel pipeline transportation services at 21% respectively.


1.1.2 Other Income

In Q2/2017, the other income was Bt16.7 million, a decrease of Bt5.5 million or 24.8%(y-o-y). Since in Q2/2016, the company’s subsidiary received the interest income resulting from the compensation of the damaged pipeline of Bt4.3 million.

While, for the first six months of 2017, other income was Bt35.5 million, a decrease of Bt60.5 million or 63.0%(y-o-y) as a result of last year the Group recorded extraordinary items of approximately Bt68.0 million which were :-

  1. The company’s subsidiary received both principal and interest compensation according to the damaged in its fuel pipeline at Phayathai train station at the amount of Bt38.6 million and
  2. The Group had income from the reversal of the provision at Bt29.4 million from the company’s subsidiary relocated its fuel pipeline at Bang Sue train station.
1.2 Expenses

1.2.1 Cost of services

In Q2/2017, Cost of services was Bt408.9 million, an increase of Bt25.3 million or 6.6%(y-o-y) from Bt383.7 million. The Gross profit margin of the Group was 52.6% while the first six months of 2017, Cost of services of the Group amounted to Bt773.3 million, increasing by Bt43.2 million or 5.9%(y-o-y), mainly due to the increase of the maintenance costs, depreciation and amortization and Airport concession fee for Aviation refueling services business. The gross profit margin was at 56.9%.

1.2.2 Administrative Expenses

In Q2/2017, administrative expenses was Bt121.5million, decreasing by Bt15.9 million or 11.6%(y-o-y) from Bt137.4 million. While in the first six months of 2017, administrative expenses of the Group amounted to Bt257.3 million, a decrease of Bt12.0 million or 4.4%(y-o-y), mainly were the decreased in personnel expenses, 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 Bt349.8 million, a decrease of Bt10.6 million, or 2.9%(y-o-y). Representing operating margin before financial expenses and income taxes (EBIT margin) at 39.7% compared to 40.9% of Q2/2016. As a result, EBITDA was amounted to Bt489.0 million, a decrease of Bt7.1 million or 1.4%(y-o-y) with have an EBITDA margin of 55.6%, compared to 56.3% of Q2/2016.

While in the first six months of 2017, the profit from operations before finance costs and tax (EBIT) of Bt799.2 million, a decrease of Bt74.9 million or 8.6% (y-o-y), representing operating margin before finance costs and taxes (EBIT margin) at 43.7% compared to 46.7% in the same period of last year. And resulted in EBITDA of Bt1,074.5 million, a decrease of Bt63.0 million or 5.5% (y-o-y), equivalent to EBITDA margin at 58.7% compared to 60.7% of the same period of last year. However, when excluding the special items of last year, the EBITDA will increased by Bt5.0 million or 0.5% from the first six months of 2016.

1.2.3 Finance Costs

Financial expenses for Q2/2017 amounted to Bt38.6 million, a decrease of Bt3.5 million or 8.3% from Q2/2016. And the financial expenses in the first six months of 2017 was Bt77.7 million, an increase of Bt15.6 million or 25.1% compared to the same period of the previous year. As a result, the parent company has increased its borrowings to raise capital in FPT amounting to Bt2,250.0 million.

1.3 Operating Results

Net profit attributable to the Equity of the Company in Q2/2017 was amounted to Bt231.2 million, a decrease of Bt6.3 million or 2.7%(y-o-y) from Bt237.5 million, representing an Bt0.36 earnings per share. Which by approximately of 84% of the Net profit was derived from Aviation refueling services business and around 16% was derived from Fuel pipeline transportation business.

In the first six months of 2017, Net profit attributable to the Equity of the Company amounted to Bt536.8 million, declined by Bt47.7 million or 8.2% from the same period of last year with a Net profit of Bt584.5million. Representing a Net profit margin at 29.3% and earnings per share of Bt0.84 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 extra income, which occurred in the first six months of 2016, the amount of Bt68.0 million. The Group's net profit for the first six months of 2017 will increase by Bt6.7 million or 1.3%(y-o-y).

2. Report and Analysis of Financial Status
2.1 Assets

As at June 30, 2017 the Group had total assets in the amount of Bt11,999.6 million, decreased by Bt158.3 million or 1.3% from December 31, 2016. The important details of cash flow were as follows:

2.1.1Cash and cash equivalent of Bt2,530.6 million which cash flow summarized for the first six months of 2017 were below ;-

  • The Group’s net cash from operation was of Bt1,032.8 million, increased by Bt137.7 million or 15.4%
  • Cash for investment activities was of Bt1,739.3 million, increased by Bt1,559.1 million or 865.6% which mostly was the investment in expansion of the Northern Multi-Products Fuel Pipeline project
  • Net cash used for financing activities was of Bt911.1 million, increased by Bt2,175.4 million or 172.1%. As for the first six months of 2016, the Group had cash from long-term loans of Bt1,130 million and cash received from the sale of FPT's shares of Bt690.3 million.

2.1.2 Property, leasehold improvement and equipment as of June 30, 2017 was of Bt6,141.8 million, increased by Bt1,249.9 million or 25.5% from December 31, 2016. Most of the assets and work under construction in the Northern Pipeline Expansion Project of FPT and High Pressure Pipe Expansion Project of TARCO.

2.1.3 Project costs under concession agreements was of Bt1,724.7 million which comprise of Into-plane substation project of Bt104.8 million, Hydrant equipment of Bt1,095.0 million, Concession of a subsidiary of Bt492.6 million and Right to use leased land related to concession agreement of Bt32.3 million.

2.2 Liabilities

As of June 30, 2017, the Group had total liabilities of Bt4,711.6 million, decreased by Bt75.1 million or 1.6% from December 31, 2016. The total debts to total equity ratio was of 0.65:1 time and the Interest bearing debts to total equity ratio was of 0.45:1 time. The liabilities comprised of major items which are follows;-

2.2.1 Account payable and others account payable was of Bt248.3 million.

2.2.2 Long term loan from banks, which are due within one year, was of Bt484.4 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 Bt37.4 million respectively.

2.2.3 Long-term loans from banks were Bt2,760.8 million, decreased by Bt173.6 million from December 31, 2016 or 5.9%. These comprise of;-

BAFS

  • Long term loan from KBANK was of Bt22.2 million due on Aug 31, 2018 which was semi-annual, principal repayment: Baht 22.2 million/period (the last repayment will be made for remaining principal) at rate of THBFIX 6-month plus percent per annum of fixed rate and Company made an interest rate hedging agreement at the percent of fixed rate per annum.
  • Long term loan from BBL was of Bt83.0 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 Bt32.5 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 Bt75.0 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 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 Bt154.9 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 Bt143.2 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 Bt13.5 million.

2.2.5 The Employee benefit obligations was of Bt900.1 million according to Labor Protection Laws as TAS no.19 on employee benefits.

2.3 Shareholders' Equity

As at June 30, 2017, total shareholders’ equity was of Bt7,288.0 million, decreased from December 31, 2016 by Bt83.2 million or 1.1%. As a result, the book value per share Bt11.43 decreased from Bt11.56 per share as of 31 December 2016.