Performance 1Q07,The Impact of Changes in Accounting Policy

BackMay 15, 2007

-Translation-

RPC/HO-SET/ELICID-0012/07

May 15th, 2007

Subject : Company Performance for 1st Quarter 2007 and the Impact of Changes in Accounting Policy

To : President The Stock Exchange of Thailand

Rayong Purifier Public Company Limited and its subsidiaries would like to clarify the 62.1 % or 70.37 Million Baht decreased in the Net Profit after Tax in 1st Quarter 2007 (1Q07) compared to 1st Quarter 2006 (1Q06). The key factors that caused the decrease of Net Profit from 113.40 Million Baht in 1Q06 to 43.03 Million Baht in 1Q07 can be summarized as follows:

1.Gross Profit
The Gross Profit of the Company during 1Q07 was decreased by 87 Million Baht or 32% compared to the Gross Profit of 1Q06. The reasons for the decrease can be clarified as follows:

- Decline of the Kerosine Prices
The average Kerosine prices in Singapore which is the main component in Company's export products prices were 4.9% or 3.8 USD/Barrel decreased from average 75.83 USD/Barrel in 1Q06 to average 72.15 USD/Barrel in 1Q07.

- Thai Baht Appreciation
The average foreign exchange rate of Thai Baht against USD was 10% or 3.75 Baht/USD appreciated from 39.28 Baht/USD in 1Q06 to 35.53 Baht/USD in 1Q06. Like other refineries, the Company's Revenue and Refining Margin relates directly to USD, the Baht appreciation causes the decrease in revenue and refining margins in terms of Thai Baht.

- Decrease in Marketing Margin
Due to higher price competition in petroleum business during 1Q07 in both local and export markets, the marketing margin was decreased compared to the same period in 2006 when the supply was low.

2.Selling and Administrative Expenses
In 1Q07, the Consolidated Selling and Administrative Expenses was 122 Million Baht, 2 % or 2 Million Baht increased from 1Q06. Even though the Administrative Expenses of subsidiaries increased by 11 Million Baht, mainly from the newly opened Gas Stations and Pure Place Rangsit Klong 2 Project, the Administrative Expenses of the Company alone have decreased by 9 Million Baht resulting from effective cost control and efficiency improvements.

3.Interest Expense
The interest expense of the company in 1Q07 increased 5 Million Baht or 81% compared to 1Q06. The increase consist of 4 Million Baht from short term financing due to rising interest rate and higher Working Capital requirement, and 1 Million Baht from VTN-P Petrochemical Joint Venture, the subsidiary in Vietnam

4. The Impact of Changes in Accounting Policy towards Separated and Consolidated Financial Statements
To comply with Thailand Accounting Standard (TAS) No.44, starting quarter ended 31st March 2007, the Company has changed its Accounting Policy on Separated Financial Statements for Investments in Subsidiaries' from 'Equity Method' to 'Cost Method' as well as the related comparison figures. The Investments in Subsidiaries' recorded in Separated Financial Statements was restated using 'Historical Cost'. This adjustment causes the Net Income of the Separated Financial Statements to differ from that reported in the Consolidated Financial Statements. The Consolidated Financial Statements shows 43.03 Million Baht Net Profit for the quarter ended 31st March 2007, while the Separated Financial Statements shows Net Profit of 47.88 Million Baht. The Company would like to further clarify the impact as follows:

1)After restating, the Net Profit of the Separated Financial Statements for the quarter ended 31st March 2007 and 31st March 2006 increased by 4.9 Million Baht and decreased by 4.0 Million Baht respectively (increased Baht 0.01 per share and decreased Baht 0.01 per share, respectively). The Separated Financial Statements did not include any 'Share of gain&loss from Investment' which was of the Equity Method.

2)The restating effect on other items on the Separated Financial Statements for the quarter ended 31st March 2007 are Investments in Subsidiaries and Retained Earnings in the Balance Sheets which were decreased by 32.8 Million Baht. The cumulative effect of the change in Accounting Policy has been presented under the heading of Cumulative Effect of the Change in Accounting Policy for Investment in Separated Financial Statements under the Separated Statements of Changes in Shareholders' Equity.

However, this change in Accounting Policy affects only the Separated Financial Statements. It did not have any effect on the Consolidated Financial Statements or any business fundamentals.

As a result, the Company's Net Profit has decreased by 62.1% or 70.37 Million Baht in 1Q07 compared to 1Q06.

Please be so informed.

 

Sincerely Yours,

 

Mrs. Siraporn Krishnakan
Assistant to Managing Director

 

Investor Relations/Corporate Administration Office
Tel. 0-25158600
e-mail ir@rpcthai.com