Clarification on Company Performance of 2006

BackFeb 26, 2007

Translation

RPC/HO-SET/ELICID -00004/07

February 23rd, 2007

Subject : Clarification on Company Performance of 2006

To : President The Stock Exchange of Thailand

Rayong Purifier Public Company Limited and its subsidiaries would like to clarify the 50.04 % or 183.70 Million Baht decrease in the Company s Net Profit after Tax in 2006 compared to 2005 The key factors that caused the decrease of Net Profit from 367.08 Million Baht in 2005 to 183.38 Million Baht in 2006 can be summarized as follows:-

1. Decrease in Gross Profit
In 2006 the Gross Profit of the Company has been decreased by 142.4 Million Baht or 17.5% compared to the Gross Profit of 2005 The decrease can be clarified as follows

- Fluctuation of World Oil Price
The world oil price has been drastically fluctuated in 2006 especially during the first half of 2006. Gas Oil price in Singapore market (standard Gas Oil reference price for Thailand) has been sharply increased from the average of 69 USD/BBL in January 2006, to the average peak of 86 USD/BBL in August 2006. However it was dramatically decreased and stable over the last Quarter of 2006, at the average of 70 USD/BBL. Therefore, the Company has 84 Million Baht of Inventory Loss in 2006 compared to 140 Million Baht of Inventory Gain in 2005.

- Increase in Cost of Sales due to Raw Material Quality
Cost of sales for this period was higher than normal because, in the third quarter of 2006, the supplier suddenly delivered raw materials with quality much differ from that specified in the agreement and what have always been supplied to the Company in the past. Therefore, the Company had additional cost for product improvement and other losses amounting to 136.45 Million Baht. Based on the negotiation with the supplier, the Company will receive the compensation of 52.7 Million Baht. The difference represents inventory loss as a result of continuous and substantial falls in the prices of inventories and raw materials (Inventory Loss). Since this loss was a result of global market conditions with neither the Company nor the supplier could avoid, the supplier requested that each part bear responsibility for its own share of the inventory loss. The company has already received 26 Million Baht and the rest will be settled in the future.

2. Selling and Administrative Expenses
In the 2006, the Selling and Administrative Expenses of the Company have increased 124.67 Million Baht or 38.2 % compared to 2005. This increase was comprised of about 12 Million Baht increase in Selling Expenses, 10 Million Baht from Depreciation and Amortization, 42 Million Baht from Administrative Expenses of the Company and 61 Million Baht from its subsidiaries, due to the increase of retail sales volume and the increasing number of Company s gas stations.

3. Interest Expense
The company has 41.7 Million Baht of Interest Expense, increased 20.9 Million Baht or 100% compared to 2005. It is because of the rising interest rate and, also, the higher short term financing requirement to increase Working Capital to handle the Oil Prices which were much higher than last year and, also, the increase of interest expense of VTN-P Petrochemical Joint Venture, subsidiary in Vietnam.

As a result, the company s net profit has decreased by 50.04% or 183.70 Million Baht in 2006 compared to 2005.

Please be so informed.

 

Sincerely Yours,

 

Ms. Siraporn Krishnakan
Assistant to Managing Director

 

Investor Relations / Corporate Administration Office
Tel. 0-25158671
e-mail ir@rpcthai.com