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Published on July 27, 2007

The lower net profit could be ascribed to a decline in sales and service revenue with higher operating expenses, the company said yesterday in a filing with the Stock Exchange of Thailand.

The refiner's revenue from sales and services was Bt41.87 billion, down 10 per cent year on year, due to reduced production.

The quarterly operating expenses of US$1.11 (Bt37) per barrel were higher than the same period last year by $0.39. This was due to higher operating expenses whereas total intake decreased, resulting in a cost-per-barrel increase.

The increase in operating expenses is mainly from higher personnel and maintenance costs, and the baht's appreciation causing costs in US-dollar terms to rise.

However, the increase in accounting gross refining margin - by $0.75 per barrel in the same period last year to $11.36 - limited the decline.

The company's interest expenses for the second quarter this year were only $0.36 a barrel, substantially reduced from $0.56 in the same period a year ago, resulting from a reduction in outstanding loans following repayments using funds from an initial public offering and cash generated from operations.

The oil refiner's first-half net profit also dropped, by 10.42 per cent year on year.

The company added that its revenue from sales and service had fallen by 15 per cent from the first six months last year, as a result of lower reduction.

PTT, Rayong Refinery's major shareholder, earlier this week announced the planned amalgamation of the firm and Aromatics (Thailand) to form the largest refiner in Asean.

Tisco Securities has maintained its "overweight" recommendation on Rayong Refinery. It is reviewing a target price for the company and Aromatics following the consolidation announcement.

It views the consolidation as a win-win situation for the two units and the majority shareholder in both, PTT. Potential synergy from the deal could exceed market expectations. - The Nation