TTA Continues to report a Net Profit of Baht 99.16 Million in Q2/2009

Back May 19, 2009

Thoresen Thai Agencies Public Company Limited (TTA) achieved Baht 99.16 million of net earnings for the 2009 Second Quarter that ended on 31 March 2009 despite of decreased demand in dry bulk shipments and continuing global economic turmoil.

M.L. Chandchutha Chandratat, Managing Director of TTA, announced that "Our total operating revenues and net profits for the 2009 Second Quarter (1 January 2009 - 31 March 2009) amounted to Baht 4,304.90 million and Baht 99.16 million, respectively. 

The significant other income of Baht 131.02 million recognised during the 2009 Second Quarter is a gain on the repurchase and cancellation of TTA's convertible bonds.

"Cash and cash equivalents decreased by Baht 948.53 million during the 2009 Second Quarter. The Company generated cash of Baht 607.04 million in operating activities, and used Baht 936.86 million and Baht 695.50 million for investing and financing activities respectively. In this quarter, the Company sold two dry bulk vessels to third parties. The total cash received amounted to Baht 105.61 million.  

"The main reason for the drop in net earnings growth was the dry bulk freight rate's sharp downward trend. The Baltic Dry Index ("BDI") fell from 3,025 on 1 October 2008 to 1,615 on 31 March 2009, or a 46.61 percent decrease. Our total fleet cargo volume for the first half of the 2009 financial year was 6.053 million revenue tons, a 25.41% decrease from the equivalent period last year."

Although we are concerned about the shipping market over the course of 2009 due to the structural overcapacity and the weak global economic condition, we have seen that the BDI had slightly rebounded over the first three months of 2009. We expect the BDI to be stable at current rates until the end of the year. This is particularly being supported by global stimulus packages especially in China, whereby the Chinese authorities are stepping up their infrastructure projects, subsequently boosting the demand for steel imports. The other positive factors that assist in maintaining the BDI are the cancellation of new buildings and extended scrapping which further reducing the current over capacity.

Furthermore, advance bookings indicate that the drop in demand is leveling out. Despite all that, we believe the probability of a sustained economy recovery appears limited. In response to the drop in demand, we are strategically cutting capacity. We have sold four dry bulk vessels to third parties so far in the current financial year and reduced our chartered-in vessel days to 1,132 days, a 32.26% decrease from 2009 First Quarter. We expect to scrap more vessels in the coming months.

"For the 2009 Second Quarter, Mermaid Maritime Public Company Limited ("MMPLC") recorded a service income of Baht 
940.96 million, a 40.23% decrease from the 2009 First Quarter. MMPLC made a net loss contribution to TTA's 2009
Second Quarter of Baht 42.26 million, excluding exchange gains, a decrease of 123.48% from the 2009 First Quarter. 
" M.L. Chandchutha added.

The assets in the subsea engineering segment had a considerably low utilisation rate during the 2009 Second Quarter, and generated 37.56% of MMPLC's revenues.

However, the average day rate remained high. During similar periods of previous financial years, subsea engineering work has decreased due to the monsoon conditions. This low figure was compounded by the global financial crisis and a lack of decision making on the part of clients which appears to have normalised moving into March. On the upside, we are now returning to a more realistic and historical activity level with all our Diving Support Vessels ("DSV") now contracted. We are also experiencing a surge in requests for vessel availability and believe this will continue for the remainder of 2009.  The subsea sector is not seeing the same pressure on day rates and in some cases we are experiencing marginal day rate increases for the more technical vessels.

The drilling segment generated 59.97% of MMPLC's total revenues. The offshore tender rig market still remains reasonably buoyant although some small oil and gas companies have cancelled or postponed planned activity. However, we have not experienced any of our direct contracts coming under threat.

During this quarter, our tender rig MTR-1 is presently on a contract extension with Amerada Hess through the fourth quarter of this financial year (with some further extensions possible), working in Indonesia. Our other tender rig MTR-2 is presently on a contract with Chevron (Indonesia) through early 2010. Average utilisation of MTR-1 and MTR-2 for the quarter was 99.4%.

Our newbuild tender rig KM-1 is proceeding at Kencana's Lumut yard in Malaysia. We believe it will be delivered as per schedule in late 2009. This rig has been awarded a five-year primary term contract by Petronas with options at a potential contract value of approximately USD 235 million.

"Amidst the challenging economic environment, TTA remains profitable and generates positive operating cash flows. We have seen stabilisation and even some improvements in our core businesses" M.L. Chandchutha said.

TTA is a leader in the dry bulk shipping industry, providing liner and charter services, and is a major player in Southeast Asian offshore services through Mermaid.  TTA is amongst the top 50 companies listed on the Stock Exchange of Thailand with high liquidity.