TTA Takes Hit From Bunker Swaps

Thoresen Thai Agencies Plc. (TTA) reported that its consolidated revenues decreased year-on-year by 11% and quarter-on-quarter by 21% to Baht 3,295.8 million and consolidated net losses of Baht 459.2 million in 1Q/2020 due to typically low season, the impact of COVID-19 pandemic, and the adoption of new accounting standard.

Shipping, Offshore Service, Agrochemical, and Investment Segments contributed 38%, 21%, 22% and 19% to the consolidated revenues, respectively. Gross profits amounted to Baht 448.5 million.

In addition, there was a loss on investment of Baht 195 million. TFRS 9 also caused an unrealized loss from change in fair value of derivatives of Baht 140.8 million in 1Q/2020, mainly from bunker swaps as the market price of bunker decreased significantly at quarter- end.

As at March 31, 2020, TTA had total assets of Baht 35,020.9 million, increasing by 5% or Baht 1,547.9 million from the end of 2019, mainly due to an increase in right-of-use assets booked in accordance with TFRS16 and positive foreign currency translation differences on assets.

TTA maintained a strong balance sheet with cash under management of Baht 6,565 million and low net interest-bearing debt to equity of 0.09 times.

Mr. Chalermchai Mahagitsiri, President and Chief Executive Officer of TTA, said: “Economic disruption brought about by the COVID-19pandemic has led to a slowdown of global trade. While our top priority has been to prevent the spread of COVID-19pandemic for the health and safety of our employees at the headquarters, on-boardships and at stores, we are working hard to preserve business continuity as well as we can despite all the current uncertainties.”

Meanwhile, Shipping Segment continued to outperform market; TCE rate outperformed net market TC rate by 25%. Agrochemical Segment had continued to be profitable. Offshore Service Segment, to date, confirmed that its order book has not been impacted by COVID-19. Additionally, the Pizza Hut business has been profitable for the third consecutive quarter.

For the outlook of shipping industry, there is potential for improved dry bulk trade trends in 2H2020 and into 2021, with a rebound of 5% tentatively projected next year, against fleet growth of 2%. However, there remains significant uncertainty over the demand outlook due to COVID-19.

While for offshore industry, Rystad Energy estimates a further 15% decrease in the drilling and exploration segments for 2020 and the cuts in field development spending will have a knock-on effect to oil field service providers.

Key Strategic Business Unit Performance

Shipping Segment: BDI averaged at 592 points during 1Q/2020, mainly from seasonal factors and the disruption from COVID-19 pandemic. The freight revenues of Shipping Segment were recorded at Baht 1,261.5 million in 1Q/2020, which decreased 26% year-on- year, mainly due to lower freight rate and decreasing service days for chartered-in vessels.

However, Thoresen Shipping maintained low vessel operating expenses (OPEX) of US$ 3,856 per day, and the owned fleet utilization rate has remained high at 100% in 1Q/2020. TCE rate was at US$ 7,817 per day which outperformed net Supramax TC rate of US$ 6,229 per day by 25% in 1Q/2020. Gross profits amounted to Baht 197.7 million. EBITDA was at Baht 11.5 million.

In conclusion, Shipping Segment reported net profits to TTA before unrealized gain/ (loss) from change in fair value of derivatives of Baht 16.9 million in 1Q/2020.

At quarter-end, Shipping Segment owned 21 Supramax vessels with an average size of 55,285 DWT and an average age of 12.96 years. No vessel was acquired or sold in 1Q/2020.

Offshore Service Segment: Brent crude oil averaged at US$ 51/bbl, and has been trading volatilely in the range of US$ 22-69/bbl in 1Q/2020. With the lockdowns enforced globally across numerous countries and territories to contain the virus, oil prices have plummeted. Offshore Service Segment’s revenues in 1Q/2020 were recorded at Baht 693.8 million, which decreased 15% year-on-year, mainly due to lower average day rate.

The average day rate decreased year-on-year because one vessel got a standby rate while waiting for the commencement of a rescheduled project as per the customer’s new schedule, and a chartered-in vessel to replace the vessel in drydocking got discounted day rate as per the contract.

Performing vessel utilization rate increased year-on-year from 60% to 85% from higher vessel working days. Gross loss amounted to Baht 112.6 million. EBITDA was negative at Baht 202.7 million.

Offshore Service Segment reported a net loss to TTA of Baht 184.1 million. Order book at quarter-end remained strong at US$ 193 million.

Agrochemical Segment: Agrochemical Segment’s sales revenue in 1Q/2020 amounted to Baht 696.3 million, which increased 28% year-on-year, mainly due to higher fertilizer sales volume. In low season 1Q/2020, there has been a severe drought and increased salinity in some main Mekong Delta provinces in Vietnam; consequently, domestic demand decreased, but was far outweighed by a significant increase in export demand due to an effort to intensify marketing and strong networking. Therefore, total fertilizer sales volume increased 60% year- on-year to 54.8 KTons. Gross profits (spread) increased 66% year-on-year to Baht 140.6 million. EBITDA significantly increased year-on-year from breakeven point to Baht 34.1 million.

As a result, Agrochemical Segment registered net profits to TTA of Baht 15.1 million, improving 191% year-on-year in 1Q/2020.

Besides fertilizer, Agrochemical Segment also provides factory area management services with a total area of 66,420 sqm. Approximate 15,000-sq.m. area was internally used for its storage while the remaining was fully utilized by external customers. Therefore, total income from factory area management services and other income decreased 12% year-on-year to Baht 14.7 million in 1Q/2020.

Investment Segment: TTA focuses on food and beverage, water, and logistic sectors.

Food & Beverage:
1. Pizza Hut is operated as a 70%owned subsidiary of TTA. It has continued to be profitable for the third consecutive quarter. As at 31 March 2020, there were 150 outlets nationwide. All new outlets were opened in the high traffic location in major provinces.
2. Taco Bell, the leading American restaurant chain serving a variety of Mexican inspired food, is operated as a 70% owned subsidiary of TTA. As at 31 March 2020, there were 6 outlets nationwide. All new outlets were opened in Bangkok Metropolitan Area.
• Water:
Asia Infrastructure Management (Thailand) Co., Ltd. (“AIM”), an 80.5% owned subsidiary of TTA, is the water contractor/service company. AIM also owns a concession to sell tap water in Luang Prabang, Laos, through a 66.7%-owned subsidiary.
Source: Thoresen Thai Agencies Plc.

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