Performance for Q3/07,Impact of change in Accounting Policy

BackNov 12, 2007

-Translation-

RPC/HO-SET/ELICID - 00024/07

November 12th, 2007

Subject : Company Performance for 3rd Quarter 2007 and The Impact of change in Accounting Policy

To : President The Stock Exchange of Thailand

Rayong Purifier Public Company Limited and its subsidiaries would like to clarify the 266.67% or 111.69 Million Baht increase in Company s Net Profit in 3rd Quarter 2007 (3Q07) compared to 3rd Quarter 2006 (3Q06). The key factors that caused the increase from Net Loss of 41.88 Million Baht in 3Q06 to Net Profit of 69.81 Million Baht in 3Q07 can be summarized as follows:

1. Increase in Gross Profit
In 3Q07 the Gross Profit of the Company has been increased by 155 Million Baht or 303% compared to the same period in 2006. The increase can be clarified as follows:

- Decrease in Cost of Sales due to Normal Raw Materials Quality
The Cost of Sales in 3Q06 was higher than normal because 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. Therefore, the Company had to incur additional costs for product improvement and other related costs amounting up to approximately 136.45 Million Baht. The supplier agreed to compensate 52.7 Million Baht for these losses. During 3Q07,the supplier delivered normal quality Raw Materials, therefore, there was no product improvement costs.

- Increase in World Oil Price
There was 55 Million Baht of Inventory Gain in 3Q07 due to the increase of world oil price. Gas Oil price in Singapore market sharply and constantly increased more than 9 USD/BBL from the average of 82 USD/Barrel in June 2007 to the average of 91 USD/Barrel in September 2007. In the contrary, there was 105 Million Baht in Inventory Loss in 3Q06 from the 10 USD/Barrel decrease of Gas Oil price in Singapore market during that quarter.

2. Selling and Administrative Expenses
In the 3Q07 the Selling and Administrative Expenses of the Company was 20 Million Baht or 20% increased compared to 3Q06. This caused by the increase in Administrative Expenses of the Company and its subsidiaries, due to the increasing number of the Company's gas stations and it was the first commercial year of Pure Sammakorn Development Co., Ltd.

3. Interest Expense
The Interest Expense in 3Q07 was 5 Million Baht which was 9 Million Baht or 65% decreased from 3Q06. The decrease was from lower interest rate as well as lower requirements for Short Term Financing due to the increase of Company Cash Flow compared to the same period of last year.

4. Impact of Change in Accounting Policies towards Separated and Consolidated Financial Statements
To comply with Thailand Accounting Standard (TAS) No.44, for quarter ended 30th September 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. TheInvestments 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 69.81 Million Baht Net Profit for the quarter ended 30th September 2007 while the Separated Financial Statements shows Net Profit of 75.88 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 30th September 2007 and 30th September2006 increased by 6.1 Million Baht and the Net Loss increased 5.0 Million Baht respectively (increased 0.01 Baht per share and 0.01 Baht per share respectively). The Separated Financial Statements did not include and Share of gain from Investment which was of the Equity Method.

2) The restating effect on other items on the Separated Financial Statements for the quarter ended 30th September 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 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 and did not have any effect on the Consolidated Financial Statements or any business fundamentals.

As a result, the Company's Net Profit has increased by 266.67% or 111.69 Million Baht in 3Q07 compared to net Loss in 3Q06.

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