The Fourth Quarter Financial Results
Ref. No. COR:MS/EL07029e/ms
14 November 2007
Subject : The Fourth Quarter Financial Results
To : The President of the Stock Exchange of Thailand
Overview
Thoresen Thai Agencies Public Company Limited (the "Company" or "TTA") reported a consolidated net profit for the three-month period that ended on 30 September 2007 (the "2007Fourth Quarter") of Baht 1,159.16 million, which included an exchange gain of Baht 78.90million, and earnings per share of Baht 1.80.
During the three-month period that ended on 30 September 2006 (the "2006 Fourth Quarter"),TTA recorded a consolidated net profit of Baht 861.83 million, which included an exchange gain of Baht 160.82 million, and earnings per share of Baht 1.34.
Total operating revenues for the 2007 Fourth Quarter were Baht 5,703.31million, total operating expenses were Baht 3,990.68 million, and other expenses were Baht 644.36 million. The primary reasons for the significant increases in operating expenses include higher fuel prices, increased repair and maintenance costs, including dry-docking, and an accounting policy change for variable compensation. Previously, TTA expensed bonus payments in the quarter in which they were paid. TTA accrued a one-time variable compensation reserve in the 2007 Fourth Quarter to cover upcoming bonus payments that will be made from the results of the 2007 financial year.From the 2008 financial year onwards, variable compensation will be gradually accrued throughout the year to cover expected bonus payments.
Cash and cash equivalents increased by Baht 2,372.68 million from 1 October 2006 to 30 September 2007. The Company generated cash from operating activities and financing activities of Baht 6,832.15 million and Baht (99.07) million, respectively, and used Baht 4,349.78 million for investing activities.
The average time charter equivalent ("TC") rate, including net contributions from chartered-in tonnage, increased 57.90% from US$ 11,451 per vessel per day in the 2006 Fourth Quarter to US$ 18,082 per vessel per day in the 2007 Fourth Quarter, and available vessel days decreased 0.90% from 4,180 days in the 2006 Fourth Quarter to 4,140 vessel days in the 2007 Fourth Quarter.
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Thoresen Thai Agencies Public Company Limited
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The increase in the consolidated net profit was primarily due to high utilisation and strong freightor day rates in the dry bulk shipping and offshore services businesses, which were offset by a stronger Thai Baht currency (resulting in lower reported Thai Baht revenues) and lower than expected contributions in the drilling business.
Business Segment Analysis
The Dry Bulk Shipping Group showed good profitability, while the Shipping Services Group showed a small loss.
Dry Bulk Shipping Group: The Dry Bulk Shipping Group recorded a consolidated net profit of Baht 1,143.86 million, excluding exchange gains. The net profits of the Dry Bulk Shipping Group decreased 0.02% between the three-month period that ended on 30 June 2007 (the "2007 Third Quarter") and the 2007 Fourth Quarter. Excluding the variable compensation reserve, the net profits increased 10.50% between the 2007 Third Quarter and the 2007 Fourth Quarter.
The average TC rate, including net contributions from chartered-in tonnage, increased 9.20% from US$ 16,550 per vessel per day in the 2007 Third Quarter to US$ 18,082 per vessel per day in the 2007 Fourth Quarter.
Our total fleet cargo volume from 1 October 2006 to 30 September 2007 remained strong at 13.32 million revenue tons, which was lower than the 2006 financial year. We made a concerted effort to increase the yield on our voyages. Based on ongoing client discussions, we believe that strong demand from our core markets of China, Southeast Asia, India, and the Middle East will continue into 2008.
TTA had a total of 4,140 vessel days available in the 2007 Fourth Quarter, compared to 4,095 vessel days available in the 2007 Third Quarter. During the last couple of months, the Company has fixed out a few more vessels on time charter for periods up to two years. Vessel operating expenses increased 15.80% due to a higher number of chartered-in vessels during the 2007 Fourth Quarter.
The Dry Bulk Shipping Group placed 32.73% of our available capacity on time charters for the 2007 financial year and 21.01% of our available capacity on time charters for the 2008 financial year, which will provide earnings visibility.
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Thoresen Thai Agencies Public Company Limited
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The dry bulk shipping market continued its strong performance in the 2007 Fourth Quarter. The Baltic Supramax Index (as calculated by the Baltic Exchange Limited) exceeded US$ 58,000 per day during the 2007 Fourth Quarter and continued its high levels through the current quarter (US$ 71,551 per day as of 12 November 2007). Average daily earnings on a Supramax vessel were US$ 50,807 per day for the 2007 Fourth Quarter.
The dry bulk shipping market has experienced an increase in ton-miles. China is projected to imported 382.2 million tons of iron ore from January to December 2007, which is 17% higher than the twelve months of 2006.Furthermore, China became a net importer of steam coal, which means that neighbouring countries of China will have to source coal from areas with longer sailing distances, like Indonesia and Australia.
The increasing second hand values of modern dry bulk vessels has continued. The value of a five year old Supramax has risen to US$ 72 million as of 12 November 2007, which is an all-time high. Newbuild prices also continue to rise in spite of longer delivery times.
Shipping Services Group: The Shipping Services Group made a net loss contribution (after deducting minority interests) of Baht 3.50 million, excluding exchange losses, to TTA's financial results. Excluding the variable compensation reserve, the net profit contribution (after deducting minority interests) increased 2.03% between the 2007 Third Quarter and the 2007 Fourth Quarter. Thoresen Shipping FZE made the highest net contributions, followed by Fearnleys (Thailand) Ltd., which recorded higher income and profits due to the increasing number of vessel calls and cargo fixing.
Offshore Services Group: For the year that ended on 30 September 2007, the Offshore Servicesn Group recorded revenues from its core business of Baht 4,039.97 million, an increase of 42.50% from the 2006 financial year and made a net profit contribution to TTA's 2007 financial results that ended on 30 September 2007 of Baht 453.60 million, an increase of 16.20% from the 2006 financial year.
The higher net profit contribution was primarily a result of strong performance in our subsea engineering group, including higher day rates and higher utilisation of our subsea assets, which was partially offset by lower than expected contributions from our drilling group as a result of rig downtime and a stronger USD/THB exchange rate, which resulted in a decrease in revenues,since revenues are primarily paid in US Dollars but converted to Thai Baht for reporting purposes.
The drilling segment generated 30.0% and 16.9% of MMPCL's total revenues and operating profits, respectively.
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Thoresen Thai Agencies Public Company Limited
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During 2007, the drilling units, MTR-1 and MTR-2, had committed client contracts. Utilisation of MTR-1 for the year was 52.88%, which was the result of 191 off-hire days as a result of the crane boom repair and special periodic survey in the first quarter and accidental damage in the third quarter. The special survey is a requirement of Bureau Veritas and American Petroleum Institute, the rig's classification societies, and is undertaken every five years. Total accident-related asset write-offs and insurance deductibles amounted to US$ 2.25 million. MTR-1 was back in operation on 12 September 2007.
Utilisation of MTR-2 for the year was 79.18%. The rig worked continuously until the fourth quarter, at which point the rig commenced a period of downtime to meet certain technical specifications and undergo special periodic survey. It is expected that MTR-2 will be back in operation in mid-January 2008. This downtime is a result of delays in receiving certain long lead time items to upgrade the rig based on our client's pecifications and completion of the special periodic survey.
Subsea Engineering: The assets in subsea engineering segment had a 77% utilisation rate during the year, and generated 69.4% and 98.6% of MMPCL's revenues and operating profits, respectively. This strong performance was driven by rising day rates throughout the year, as well as higher utilisation across our fleet. These high utilisation rates are continuing in the first quarter 2008.
Remarks: After the financial year ends, the Singapore Exchange Securities Trading Ltd. ("SGX-ST") does not require fourth quarter results to be announced separately. MMPCL has chosen to release full-year results to the SGX-ST, and the full disclosure report is available at
Excluding foreign exchange gains and minority interests, the 2007 Fourth Quarter marked another strong quarter of consolidated net profits for TTA, which demonstrates the benefits of our ongoing diversification strategy and the strength of both the dry bulk shipping and offshore services markets.
Yours faithfully,
Thoresen Thai Agencies Public Company Limited
| --------------------------- (M.L. Chandchutha Chandratat) Managing Director | ---------------------- (Miss Nuch Kalyawongsa) Director, Group Finance/Accounting |