Bangchak Group first half records all-time high EBITDA of THB 9,000 million

Emphasis implementing social programs for the health and safety of employees and stakeholders, and building national immunity against COVID-19

Bangchak Group performance in the first half of 2021 recorded revenues in the amount of THB 85,006 million, and an all-time high EBITDA of THB 9,006 million, supported by an increase in oil consumption in the global market following the unwinding of lockdown measures in many countries. The continued severity of the situation in Thailand has prompted the Company to emphasize the health and safety of employees through various measures, such as the procurement of vaccines, and the implementation of social programs to support neighboring communities and stakeholders in the fight against the COVID-19 crisis.

Chaiwat Kovavisarach, President and Chief Executive Officer of Bangchak Corporation Public Company Limited stated with regards to Bangchak Group’s first half performance that the Company and its subsidiaries recorded revenue from sales and rendering of services in the amount of THB 85,006 million (+22% YoY), an all-time high EBITDA of THB 9,006 million (+737%, YoY), resulting in net profits to owners of the parent at THB 4,048 million (+162%, YoY) equivalent to earning per share of THB 2.80. The performance was supported by an increase in demand for oil consumption in the global market following the subsidence of COVID-19 outbreaks and the distribution of vaccines, the lifting of lockdown measures, and economic stimulus in economics around the world pushing up the price of crude oil and refined products in the global market.

The average price of Dubai Crude in the first half of 2021 was USD 63.62/BBL (+56%. YoY), which resulted in the Company recording an Inventory Gain of THB 3,773 million, and the Refinery Business recording a positive for Operating GRM. Moreover, share of profit from invested capital in associate company, OKEA totaled THB 371 million, which was the highest since investing in the Exploration and Petroleum Production business. The aforementioned supporting factors assisted the Marketing Business Group and Bio-based Product Business Group through the decline in domestic oil demand from the resurgence of the COVID-19 outbreak, especially with regards to Jet Fuel which remains low. As such, the Company transitioned towards becoming a Niche Products Refinery to provide new products to the market i.e. UCO (Unconverted Oil) that sales grow 2-fold from Q2/2020, Solvent, under the “BCP White Spirit 3040” name, and plans to launch numerous new products.

However, demand for oil in the second half may be pressured by the outbreak of the COVID-19 Delta variant that has worsen the situation in many countries, especially in Asia. The governments of different countries have once again impose stringent containment measures slowing economic recovery and the global economy. Lockdown measures to contain the outbreak has affected economic activity and demand for oil consumption in the country.

As for the performance in the second quarter of 2021, the Company and its subsidiaries recorded revenue from sales and rendering of service in the amount of THB 43,775 million (+6%, QoQ), Operating EBITDA of THB 3,059 million (+28% QoQ), EBITDA of THB 4,269 million (-10%, QoQ), Inventory Gain of THB 1,299 million, net profit attributable to owners of the parent at THB 1,765 million (-23%, QoQ), equivalent to earning per share of THB 1.21. Performance for each business unit are as follow.

1. Refinery and Oil Trading Business Group

• Performance declined from the previous quarter, but increased compared to the previous year. The quarter recorded an Inventory Gain of THB 1,171 million, decline from the previous quarter due to the price increase of crude oil relative to the previous quarter, whereas an inventory loss was recorded in Q2/2020.
• Operating GRM increased to USD 4.18/BBL due to the decrease in crude premium over Dated Brent. The crack spread of most products have increased following the increase in global demand of finished products. Moreover, the yield of high value products increased from Bangchak refinery resuming normal operations following turnaround maintenance in the first quarter, and as a result the average production rate in the quarter increased to 107 KBD or 89% utilization rate.
• Oil Trading business under BCPT Pte. Ltd. saw its crude oil and finished product transactions increased by 30% (QoQ), and an increase in gross profit, mainly from Diesel and low Sulphur fuel oil products, following the easing of lockdown measures in various countries.

2. Marketing Business Group

• Performance declined compared to the previous quarter, but increase from the previous year, mainly from lower rate of price increase, resulting in a lower Inventory Gain from the previous quarter.
• Increased marketing margin compared to the previous quarter from the lower cost of B100, and an effective cost management policy.
• This quarter saw global crude prices decrease steadily, but the Company implemented a cost management policy slightly reducing net marketing margin per unit.
• Total sales volume of the Marketing Business decreased relative to the previous quarter as a result of the third wave of the COVID-19 outbreak, but increased compared to the previous year from the more stringent measures to control the COVID-19 outbreak.
• The sales of Jet Fuel increased from the previous year from the resumption of some flights. Cumulative retail sales volume market share between January – June 2021 was at 15.9%, an increase from the previous year, with the Company able to retain its No. 2 market share (Department of Energy Business data). At the end of Q2/2021 there were 1,247 service stations, and PEA VOLTA charging stations operated at 27 Bangchak service stations across 17 provinces.
• Non-oil business expansion, with 711 Inthanin coffee shop branches at the end of Q2/2021, and the number of cups sold per day increased by 7% compared to the previous year. Sales via the Online Delivery Platform increased by 90% compared to the previous quarter. Inthanin also expanded its beverage business by acquiring the franchise rights to DAKASI pearl milk tea to be operated in Bangchak service stations across the country. There are currently 2 branches in operation, with plans to open an additional 10 branches within the year.

3. Power Plant Business Group by BCPG Public Company Limited

• Performance improved from the increase in electricity sales compared to both previous quarter and year, mainly from the increase in electricity sales in Lao PDR from high precipitation, with hydroelectric plants entering its high season. Furthermore, investments in 4 new Solar Power Plants (PPA 20 MW) resulted in the volume increase in electricity sold.
• Realized share of profit from investments in associated companies to the amount of THB 157 million, attributed to Wind Power Plant business in the Philippines THB 4 million, and Geothermal Power Plant business in Indonesian THB 153 million
• BCPG expanded its investments in Utility-Scale Energy Storage System business, or Vanadium Redox Flow by purchasing convertible bonds of VRB Energy Inc. worth USD 24 million to mitigate limitations from the fluctuation of electricity generation by renewables.

4. Bio-Based Products Business Group by BBGI Public Company Limited

• Performance declined compared to the previous quarter and year. The Biodiesel Business recorded a decrease in gross profit due to the cost of crude palm oil used in production during this quarter was unable to keep up with the decline in selling price of B100 products, as a consequence of palm product yields entering the market seasonally. Meanwhile, gross profit increased from the average selling price of B100 products increasing significantly. The B100 price (in accordance to announcement made by the Department of Energy Business) increased by 40% (YoY), due to the demand for Biodiesel in Q2/2020 declined as a result of the first wave of COVID-19 outbreak.
• The Ethanol Business recoded a decline in gross profit compared to the previous quarter and year, mainly from the cost of main raw material adjusting upward, due to declining sugar cane yields from severe draught, and the rise of domestic cassava price from the increasing export volume. Furthermore, the demand for consumption of industrial grade ethanol to produce alcohol gel declined. The selling price of industrial grade ethanol is higher than fuel grade.
• BBGI successfully issued its first corporate bond in the amount of THB 1,300 million, and was assigned a “BBB+” rating by Tris Rating Co., Ltd.
• BBGI imported Astaxanthin Ingredients which are High Valued Bio-Based Products, and has a high antioxidant quality; able to prevent wrinkles, rejuvenating the skin. The products were sold in Thailand on a Business-to-Business (B2B) basis with plans for Business to Customers (BSC) basis under the B Nature Plus brand.
• WIN Ingredients Co., Ltd. (WIN) which is a joint venture between BBGI and Manus Bio Inc. received the Food Recipe Registration Certificate (Orr. 18) for the sweetener substance, Neotame to be distributed in Thailand. In June 2021, the authorized dealers were appointed to sell the sweetener in 5 countries i.e. Thailand, Vietnam, Malaysia, Indonesia, and the Philippines.

5. Natural Resources Business Group

• Performance improved compared to the previous quarter and year due to realizing an increase in share of profit from invested capital in its associate company OKEA to the amount of THB 371 million, which is the highest since it began to invest in Petroleum Exploration and Production Business, as well as an increase in revenue due to the price of crude oil and natural gas increasing.
• The full reversal of the impairment related to the Yme asset under development. Due to the price of oil and natural gas making a more positive trend, and the reorganization of operations which resulted in the project recording improvement cash flow. As such, the Yme field will begin production as planned during 2H/2021 and will increase production for OKEA by 7,500 barrels per day. Over the first production year, production will increase 5,600 barrels per day which is higher than the first assessment of 4,900 barrels per day.
• OKEA has plans to develop the Hasselmus field, which will be the first field development project for OKEA as operator. Hasselmus will also be the first tie-back to the Draugen production platform and is planned to start-up production in Q4/2023

Amid the third wave of COVID-19 outbreak is still spreading in various countries, with higher degrees of severity than in the past – resulting in record numbers of new cases and deaths since the outbreak started. The Company group maintains emphasis on the safety and health of its employees, customers, and related parties. The company assisted in the procurement of COVID-19 vaccines, resulting in high percentage of employees vaccinated. Furthermore, utmost adherence to follow the preventive and containment measures of COVID-19 were taken i.e. the Bubble and Seal measure for key personnel crucial to the production process, in order to control risk and prevent cluster formation that may affect production. Also, the Work From Home measure (WFH) has be in effect since April, and establish quarantine center for employees at high risk of contracting COVID-19 to name a few. The company provided assistance through various agencies and prioritize care towards the community around the refinery i.e. sponsoring Bangchak cash cards to volunteer ambulance responders, procuring medical equipment, delivering medical masks, the Midori alcohol gels, and water to name a few.

In terms of business operation, the situation is being monitored closely in order to adequately adjust business plans. Also, strict cost controls were implemented to lower expenses and to efficiently utilizing the capital investment. This includes the management of working capital to conduct business in a continuous and smooth manner.