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TTA announces third quarter results

Back Aug 15, 2013

Bangkok, Thailand, 15 August 2013 -- Thoresen Thai Agencies Public Company Limited ("TTA") announced net losses of THB 273 million and losses per share of THB 0.28 for the third quarter of its 2013 fiscal year that ended on 30 June 2013 compared with net losses of THB 2,351 million and losses per share of THB 3.32 during the same period last year.

Third quarter results were impacted by two extraordinary items, a THB 230 million provision on coal inventories at coal logistics operator Unique Mining Services Public Company Limited ("UMS") due to lower coal prices and THB 192 million in foreign exchange translation losses due to the weakening of the Thai Baht against the US Dollar. Eliminating these two extraordinary items, TTA would have reported a net profit of approximately THB 27 million.

Earnings before interest, taxes, depreciation and amortisation ("EBITDA") rose nearly six-fold quarter-on-quarter to THB 663 million, driven mainly by improved results for offshore oil and gas services provider Mermaid Maritime Public Company Limited ("Mermaid") and another strong quarter for Baconco Co., Ltd. ("Baconco"), TTA's wholly-owned fertiliser and warehouse business in Vietnam. Equity income for the quarter also rose from THB 34 million to THB 60 million compared to the previous year, on the back of increased contributions from Mermaid's associate company, Asia Offshore Drilling Limited ("AOD"), in addition to contributions from Petrolift Inc and Baria Serece Joint Stock Company.

Commented TTA Executive Vice Chairman Mr. Chalermchai Mahagitsiri, "While we continued to operate in a challenging environment within some of our core businesses, we were pleased to see Mermaid perform well in the third quarter, as it entered its high season and began to reap greater benefits from significant contracts with large oil and gas companies including Saudi Aramco. At the same time, Baconco continued its strong performance, with quarter-on-quarter growth across both its fertiliser and warehouse segments. For dry bulk operator Thoresen Shipping Singapore Pte Ltd ("Thoresen Shipping"), revenues and EBITDA edged up slightly from the previous quarter and while we continued to operate on a cash positive basis, the freight rate environment for the entire industry remained challenging throughout the quarter."

Group Transport
Following the seasonally weak January - March quarter, the index that tracks global freight rates, the Baltic Dry Index ("BDI"), rose 12% during TTA's third quarter, but remained at bottom-of-the-cycle levels, 13% lower than the same period last year. Thoresen Shipping operated an average of 27.7 vessels during the quarter, up from an average of 21.2 vessels during the same period last year, through increased chartering. The increased charter-in activity and the addition of newly acquired M.V. Thor Fearless resulted in a 22% year-on-year rise in Thoresen Shipping's revenues to THB 1,144 million.

Despite the challenging environment, Thoresen Shipping operated its fleet with a positive EBITDA of THB 119 million, up from THB 106 million in the previous quarter. Cost controls continue to be a key focus, with owner's expenses of USD 3,902 per day comparing favourably to an industry average of USD 4,500-4,600. Benefitting from a younger fleet and diligent on-board maintenance by its crew, Thoresen Shipping was able to drive a 7% decline in year-on-year dry-docking expenses.

Thoresen Shipping continues to explore opportunities to rebuild its fleet while asset prices remain relatively low. Outlook for the dry bulk industry remains weak, even though net fleet growth in 2013 is expected to slow to its lowest level in four years. On the back of increased steel-related trade, demand will likely begin to outstrip supply in 2014, signalling a rise in dry bulk freight rates in the second half of 2014.

Group Energy
The offshore services sector continues to benefit from increased oil and gas exploration activity. Mermaid's assets, particularly its subsea vessels, were better utilised throughout the third quarter, as the company rebounded from a negative EBITDA of THB 20 million in the second quarter to a positive EBITDA of THB 528 million. In line with increased demand, revenues climbed over 38% year-on-year and 73% quarter-on-quarter to THB 2,415 million.

Mermaid's performance was driven by more full service subsea engineering contracts at average day rates of USD 86,943, 28% higher than the same period a year ago. Meanwhile, Mermaid's drilling segment saw a year-on-year drop in revenues as a result of its tender assist drilling rig, MTR-2, being off hire due to special periodic survey ("SPS") for much of the quarter.

Mermaid's need to incur additional costs to service its subsea engineering contract with Saudi Aramco saw SG&A costs surge 68% year-on-year. At the same time, Mermaid recorded unrealised foreign exchange losses of THB 227 million during the quarter, as a result of the Thai Baht's weakness against the US Dollar, causing a negative translation impact.

Outlook for the offshore services sector remains strong. Mermaid's subsea engineering business is experiencing greater demand for offshore vessels and related services. The outlook for Mermaid's drilling business also remains positive with the demand-supply dynamics of the tender rig market looking favourable as underscored by strong day rates and utilisation.

Group Infrastructure

Group Infrastructure reported mixed results for the third quarter, with Baconco continuing to generate strong profits and cash flows. UMS, on the other hand, was finally allowed to resume operations at its Samut Sakorn plant late in the quarter, after nearly two years of government-mandated closure.

UMS' revenues of THB 417 million were 59% lower than a year ago, during which time UMS was forced to aggressively sell its 0-5 mm coal stockpile as one of the pre-conditions for the reopening of its Samut Sakorn plant. Compared to the previous quarter, revenues and sales volumes rose 2% and 9%, respectively, while EBITDA dipped to THB 5 million from THB 18 million as a result of increased transportation costs related to the situation at Samut Sakorn. Although the plant is now fully operational, UMS has not regained use of its port and is currently negotiating a solution with the provincial government. UMS recorded an additional THB 230 million allowance on its 0-5 mm coal inventories to reflect declining coal prices.

Baconco reported another strong quarter, contributing THB 90 million in EBITDA. Despite a 30% decline in revenues compared to its record quarter last year, Baconco's EBITDA saw only a marginal year-on-year decline of 7% as a result of lower raw material costs.

With 27,000 square meters of additional warehouse space opened in the previous quarter, Baconco's warehouse rental revenues doubled year-on-year, but still accounted for a relatively small part of Baconco's overall results. Capacity utilisation stood at close to 80% during the quarter. Over all, TTA and its associated companies in Vietnam operate 53,000 square meters of warehouse space with capacity for nearly 190,000 metric tonnes of cargo.

Outlook
M.L. Chandchutha Chandratat, TTA's President & CEO, stated, "TTA's results are driven primarily by Thoresen Shipping and Mermaid, which stand today at opposite ends of their respective industry cycles. While this is exactly the scenario we envisioned as part of our efforts to diversify, the other investments we have made have not yet reached the scale to fully offset a prolonged industry downturn in any one of these two core businesses."

Despite the challenges, we fully expect Thoresen Shipping to continue being a cash flow positive business and as the supply side of the industry begins to rationalise itself over the next year, we remain confident that both Thoresen Shipping and TTA will return to consistent profitability in due course. Prospects remain very strong for Mermaid, and we expect this business to continue operating in a robust market over at least the medium term. Baconco, meanwhile, will remain a consistent contributor. Looking at the fourth quarter and beyond, a key area of improvement for us will be UMS, where we will focus on regaining access to our Samut Sakorn port, developing a pelletisation solution for 0-5 mm coal, and exploring an entry into international coal trading, all with the aim of improving long-term profitability."

About TTA

Thoresen Thai Agencies Public Company Limited ("TTA") is a strategic investment holding company listed on the Stock Exchange of Thailand (TTA:TB). Its investment strategy is to grow through a balanced and diversified business portfolio of transport, energy, and infrastructure assets, both domestically and internationally. TTA's evolution away from a pure dry bulk shipping operator began in 1995 with an investment in Mermaid Maritime Public Company Limited, which has since been listed on the Singapore Stock Exchange (MMT:SP). Since then, TTA has acquired interests in fertiliser and logistics (Baconco Co., Ltd.), coal-related businesses (SKI Energy Resources Inc, Merton Group (Cyprus) Limited, and Unique Mining Services Public Company Limited), petroleum tankers (Petrolift, Inc), and a port in Southern Vietnam (Baria Joint Stock Company of Service for Import Export of Agro Forestry Products and Fertilizers). For more information, please visit www.thoresen.com