TTA announces first quarter FY2012 results

Back Feb 15, 2012

Bangkok, Thailand, 15 February 2012 -- Thoresen Thai Agencies Plc ("TTA") announced today net losses of THB 560 million and a loss per share of THB 0.79 in the first quarter of its fiscal year 2012 ("Q1 FY2012"), compared with net profits of THB 145 million and earnings per share of THB 0.21 in the same period last year.

THB 409 million of TTA's first quarter net losses arose from two extraordinary non-cash items in the Group Transport division. The first was a write-off of THB 209 million on arrangement and commitment fees for a dry bulk fleet expansion loan secured in 2007. TTA had only partially drawn down the loan when its availability period expired in November 2011, as prices of both new and second hand vessels had not fallen sufficiently to justify a major fleet expansion. An additional impairment charge of THB 199 million was recognised on a cancelled engine supply contract, a decision based on current market conditions, which point to the attractiveness of second-hand dry bulk vessels over new-builds in the short and medium term.

Consolidated revenues in Q1 FY2012 were THB 3,393 million, compared with THB 4,607 million in Q1 FY2011. The decrease largely resulted from a 55% fall in dry bulk shipping freight income, as the shipping business continued to operate in an environment of low freight rates and with a smaller fleet than during the same period last year. The Baltic Dry Index ("BDI") dropped a further 18% during the quarter. Despite a lower revenue base, the fundamentals of TTA's dry bulk shipping business are improving. Although Q1 FY2012 freight revenues were THB 826 million, 4% lower than Q4 FY2011, the dry bulk fleet modernisation strategy helped to achieve a positive EBIT of THB 23 million versus a negative EBIT of THB 70 million in Q4 FY2011.

Mermaid Maritime Public Company Limited ("Mermaid")'s offshore oil and gas services business recorded 3% year-on-year revenue growth and a 94% year-on-year increase in EBITDA. EBIT losses for the quarter were THB 37 million, a 65% improvement from the same period last year. The outlook for Q2 FY2012 remains positive compared with the same period last year on the strength of stable oil prices, increased global demand for offshore oil and gas services, and Mermaid's enhanced ability to capture opportunities outside of Asia, particularly in West Africa and the Middle East.

"Global dry bulk freight rates continued their decline during the period of 1 October - 31 December 2012, impacting all operators around the world - and Thoresen was no exception. The dry bulk shipping business made some tough business decisions over the last 12 months in a broad effort to strengthen its competitive position. As the fundamentals of the market pick up again, our revitalised commercial strategy and the cost reduction measures we have put in place will begin to make their mark," commented M.L. Chandchutha Chandratat, TTA's President & CEO.

"Mermaid continues to stay on course for a positive turnaround this year, and we are seeing sustained, strong contributions from Baconco, Petrolift and Baria Serece. We continue to take a positive, long-term view of the coal business as our mining interests in the Philippines and Indonesia target to produce at least one million tonnes of coal annually by 2015."

Group Transport
In anticipation of a prolonged period of low freight rates, the dry bulk shipping business downsized its fleet over the course of FY2011, from 27 to 15 vessels. While the fleet now has an average age of just 11.1 years, the lower number of vessels contributed to a drop in freight revenues during the quarter. The dry bulk shipping business is scheduled to take delivery of two new Supramax vessels in April and October 2012.

Meanwhile, Petrolift continued its steady performance, with 6% growth in profit contribution to TTA. Driven by a steady business model, Petrolift is expected to continue lessening Group Transport's exposure to the more volatile dry bulk shipping market.

Group Energy
Mermaid's total offshore services revenues grew marginally to THB 1,151 million in Q1 FY2012. Gross profits and EBITDA, however, grew at a faster pace than the previous year, with a nearly two-fold EBITDA margin improvement. For the subsea engineering group, FY2012 will likely see utilisation and margins remain stable, with demand expected to continue on track globally. The outlook for 2013 onwards is strong, as spending growth is expected to outpace fleet sizes.

Mermaid's drilling business shows positive momentum for FY2012. MTR-1 was recently awarded a 150-day accommodation barge contract and will start work in Indonesia in early April 2012. In addition, Mermaid has already entered discussions to extend its MTR-2 contract, which expires in April 2012.

In November 2011, TTA took a direct interest in SERI, its Philippines coal venture. The project experienced temporary issues in December and January, requiring SERI to transition production from the block currently being mined into a new area of the existing mine site. This shift, coupled with the development work needed to open the new block, has resulted in decreased monthly production levels of approximately 3,000 tonnes, with a forecast to return to 10,000 tonnes by mid-year. SERI's plans to develop an additional two to three mine sites over the next two years remain on track.

TTA's investment in Indonesian coal mining venture Qing Mei is currently in the exploratory phase, with a feasibility study expected in the next two to three months.

Group Infrastructure
Massive flooding in Thailand in the latter half of 2011 left many lives, homes, factories, and businesses devastated. On the back of highly focused flood prevention measures, UMS' Ayudhya plant escaped inundation and reported no damage to its plant or equipment. However, its operations were disrupted for about two months, which when combined with community protest issues in Samut Sakorn, meant that UMS was completely non-operational for over four weeks.

As a result, UMS' revenue fell by 32% year-on-year, on sales of 218,346 tonnes of coal, a 34% decrease compared to Q1 FY2011. Full operations resumed in Ayudhya in January 2012 and UMS expects the issues in Samut Sakorn to be resolved shortly.

Baconco registered sales growth of 9% to THB 805 million in Q1 FY2012, despite fertiliser sales volume decreasing by 10% to 46,256 tonnes. EBIT for Q1 FY2011 dropped 27% year-on-year to THB [47] million, as raw material prices continued to rise, resulting in a lower gross margin of 9% this quarter against 11% a year ago. Baconco's results should improve in the second half of FY2012, with additional income expected from its new warehouse facilities. Baria Serece continued to deliver strong results, providing THB 6 million of equity profit contribution to TTA.

M.L. Chandchutha states: "Operating performance was largely in line with our expectations, with weaker results in dry bulk shipping and UMS and a continued rebound at Mermaid. Going forward, we will look for improved results, in particular from dry bulk shipping, Mermaid, and UMS, during the second half of FY2012. We are already seeing some very initial indicators of a potential recovery in the dry bulk sector, which bodes well for our modern and efficient fleet. For Mermaid, we expect continued improvement as it emerges from the monsoon season with an increased geographic footprint, in particular for its subsea engineering business."

"Indeed, despite relatively weak results, operating cash flow improved significantly this quarter due to a focused strategy on improving working capital managementall across the group. As a result, we have ample cash to fund operations as we look towards more positive results in the remainder of FY2012," M.L. Chandchutha concluded.

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 from a dry bulk shipping operator began in 2005 with an investment in subsea engineering firm 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).