Airports of Thailand Public : Management Discussion and Analysis Quarter 1 Ending 31 Dec 2019

Ref. No. 2419

12 February 2020

Subject: Management Discussion and Analysis of Financial Statements

To: President,

The Stock Exchange of Thailand

Airports of Thailand Public Company Limited and its subsidiaries

Management discussion and analysis of financial statements for the three-month period ended

December 31st, 2019

Overall performance and significant events

The overall performance of the air traffic volume of Airports of Thailand Public Company Limited (AOT) during October 2019 - December 2019 slowed down comparing to the same period last year. This is because the number of domestic flights and passengers slightly decreased. While, the number of international flights and passengers increases, especially Chinese tourists that still be the main nationality travelling inbound and outbound for almost every airport of AOT. Even though the global and Thai economies have slowed down due to many negative factors e.g. the Thai baht appreciation, Hong Kong's protests, the trade war between the US and China and tensions in the Middle East. The decrease in number of domestic flights and passengers is due to the increase in fuel prices and excise taxes of 2017. This leads low-cost airlines turn to overseas routes rather than domestic ones. Also, Thai tourists prefer to travel abroad, especially during long holidays. To help counter this situation, the government is implementing short, medium and long-term tourism stimulus measures. There are eighteen measures to stimulate the economy and facilitate foreign tourists e.g. facilitating the visa process, expediting the E-Visa on arrival, allowing Chinese tourists to get the E-Visa, and improving safety regulations to reduce the number of tourist's casualty

In addition, AOT sets up a short-term project to stimulate the Thai aviation and tourism market of its six airports by granting a 50% discount automatically on the normal landing charge rate for international charter flights for passengers. This discount does not apply to special flights flying to AOT's Airport. The project works for five months, during December 1st, 2019 - April 30th, 2020. It is expected to increase the number of flights during non-congested times and promote aviation market of AOT to meet maximum utilisation. It also supports the government's policies

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aiming the tourism sector to work together to stimulate and expand tourism sector to benefit the overall economy and national income.

In the first quarter of FY 2020, the air traffic volume from the six airports under AOT was 224,371 flights, a 1.12% decrease comparing to the same period last year. It comprised 127,126 international flights and 97,245 domestic flights which came from the decrease in international flights. The total number of passengers was 36.72 million, a 3.19% increase comparing to the same period last year. It comprised 22.19 million international passengers and 14.53 million domestic passengers which came from the increase in international passengers.

During the first quarter of FY 2020, AOT generated net profit of Baht 7,334.72 million. It increased by Baht 959.09 million or 15.04% comparing to the same period last year. Total revenues increased by Baht 1,320.51 million, total expenses increased by Baht 165.81 million, and income tax expense increased by Baht 195.15 million.

1. Analysis of operations

1.1. Operating results for the three-month period ended December 31st, 2019 Unit: Million Baht

	Q1/2020	Q1/2019	Increase	% YoY
			(decrease)
Revenues from sales or services	16,104.68	15,396.44	708.24	4.60
AERONAUTICAL REVENUE	9,005.56	8,525.36	480.20	5.63
PORTION	56%	55%
NON-AERONAUTICAL REVENUE	7,099.12	6,871.08	228.04	3.32
PORTION	44%	45%
Other income	1,012.08	399.81	612.27	153.14
Total revenues	17,116.76	15,796.25	1,320.51	8.36
LessTotal expenses	7,929.62	7,763.81	165.81	2.14
Profit before income tax expense	9,187.14	8,032.44	1,154.70	14.38
LessIncome tax expense	1,838.46	1,643.31	195.15	11.88
Net profit for the period	7,348.68	6,389.13	959.55	15.02
Profit attributable to:
Owners of the parent	7,334.72	6,375.63	959.09	15.04
Non-controlling interests	13.96	13.50	0.46	3.41
Earnings per share (Baht)	0.51	0.45	0.06	13.33

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AOT's net profit for the three-month period ended December 31st, 2019 was Baht 7,334.72 million. It increased by Baht 959.09 million or 15.04% comparing to the same period last year. Revenues from sales or services increased by Baht 708.24 million or 4.60% as a result of an increase in aeronautical revenue of Baht 480.20 million or 5.63% and non-aeronautical revenue of Baht 228.04 million or 3.32% because of increasing in number of passengers. Other income increased by Baht 612.27 million or 153.14%. Total expenses increased by Baht 165.81 million or 2.14% which mainly from an increase in employee benefit expenses. Income tax expense increased by Baht 195.15 million or 11.88% which was in line with an increase in profit.

1.2. Aeronautical Revenue

Unit: Million Baht

	Q1/2020	Q1/2019	Increase	%YoY
			(decrease)
Landing and parking charges	1,911.01	1,912.14	(1.13)	(0.06)
Departure passenger service charges	6,879.17	6,396.21	482.96	7.55
Aircraft service charges	215.38	217.01	(1.63)	(0.75)
Total	9,005.56	8,525.36	480.20	5.63
Q1/2020		Q1/2019

A portion of aeronautical revenue in each type in the first quarter of FY 2020 was not significant changed from the same period last year. The majority of aeronautical revenue was departure passenger service charges.

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Aeronautical revenue of Baht 9,005.56 million increased by Baht 480.20 million or 5.63% comparing to the same period last year due to an increase in departure passenger service charges of Baht 482.96 million or 7.55%. This was because of an increase in the number of passengers in six airports 3.19% which mainly from an increase in passengers of low-cost airlines 3.70%. However, aircraft service charges and landing and parking charges slightly decreased by Baht 1.63 million and Baht 1.13 million, respectively.

1.3. Non-Aeronautical Revenue

Unit: Million Baht

	Q1/2020	Q1/2019	Increase	%YoY
			(decrease)
Office and state property rents	584.05	579.73	4.32	0.75
Service revenues	2,111.65	1,955.06	156.59	8.01
Concession revenues	4,403.42	4,336.29	67.13	1.55
Total	7,099.12	6,871.08	228.04	3.32
Q1/2020			Q1/2019

A portion of non-aeronautical revenue in each type in the first quarter of FY 2020 was not significant changed from the same period last year. The majority of non-aeronautical revenue was concession revenues.

Non-aeronautical revenue of Baht 7,099.12 million increased by Baht 228.04 million or 3.32% comparing to the same period last year due to an increase in service revenues of Baht 156.59 million or

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8.01% which mainly from ground service and advance passenger checking service. Concession revenues increased by Baht 67.13 million or 1.55%.

1.4. Other income

Unit: Million Baht

	Q1/2020	Q1/2019	Increase	%YoY
			(decrease)
Gain (Loss) on foreign exchange	1.67	(2.20)	3.87	175.91
Interest income	336.71	309.27	27.44	8.87
Gain on sales of assets	6.98	0.44	6.54	1,486.36
Others	666.72	92.30	574.42	622.34
Total	1,012.08	399.81	612.27	153.14

Other income was Baht 1,012.08 million. It increased by Baht 612.27 million or 153.14% comparing to the same period last year. This mainly from an increase in other income by Baht

574.42 million which mainly from the reversal of provision due to the Supreme Court dismissed AOT in the dispute over the space rental agreement at Transport Management Center in Suvarnabhumi Airport. Moreover, interest income increased by Baht 27.44 million.

1.5. Total expenses

Unit: Million Baht

	Q1/2020	Q1/2019	Increase	%YoY
			(decrease)
Employee benefit expenses	1,860.09	1,673.19	186.90	11.17
Utilities expenses	645.47	660.35	(14.88)	(2.25)
Outsourcing expenses	1,523.19	1,424.21	98.98	6.95
Repairs and maintenance	587.34	616.43	(29.09)	(4.72)
State property rental	1,096.26	983.00	113.26	11.52
Depreciation and amortisation expenses	1,379.19	1,430.72	(51.53)	(3.60)
Loss on impairment of assets	-	138.14	(138.14)	(100.00)
Other expenses	660.46	612.89	47.57	7.76
Financial costs	177.62	224.88	(47.26)	(21.02)
Total	7,929.62	7,763.81	165.81	2.14

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Total expenses were Baht 7,929.62 million. It increased by Baht 165.81 million or 2.14% comparing to the same period last year. The significant change came from the increase in employee benefit expenses by Baht 186.90 million. State property rental increased by Baht 113.26 million. However, loss on impairment of assets decreased by Baht 138.14 million. Other categories of expenses did not change significantly comparing to the same period last year.

2. Analysis of financial position

The financial position as at December 31st, 2019 of AOT is as follows:

Unit: Million Baht

	31 Dec 2019	30 Sep 2019	Increase	%
			(decrease)	change
Total assets	200,511.87	198,381.55	2,130.32	1.07
Total liabilities	38,655.54	43,842.92	(5,187.38)	(11.83)
Total equity	161,856.33	154,538.63	7,317.70	4.74

The material changes in assets, liabilities and equity as at December 31st, 2019 comparing to September 30th, 2019 are as follows:

2.1 Analysis of assets

Total assets as at December 31st, 2019 were Baht 200,511.87 million. They increased by Baht 2,130.32 million or 1.07% from September 30th, 2019 as detailed below.

Unit: Million Baht

	31 Dec 2019	30 Sep 2019	Increase	%
			(decrease)	change
Current assets	82,529.87	80,787.15	1,742.72	2.16
Investment	1,067.60	1,161.91	(94.31)	(8.12)
Property plant equipment and investment
properties	113,000.20	112,275.42	724.78	0.65
Other non-current assets	3,914.20	4,157.07	(242.87)	(5.84)
Total assets	200,511.87	198,381.55	2,130.32	1.07

Current assets of Baht 82,529.87 million increased by Baht 1,742.72 million or 2.16% due to an increase in short-term investments of Baht 947.14 million. Cash and cash equivalents increased by Baht 475.58 million. Trade accounts receivable increased by Baht 317.44 million which was increase in line with revenue. Other categories of current assets (i.e. other receivables, inventories and supplies including other current assets) did not change significantly comparing to last year.

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Investment of Baht 1,067.60 million decreased by Baht 94.31 million or 8.12% due to a decrease in available-for-sale investments by Baht 94.51 million from change in fair value.

Property plant equipment and investment properties of Baht 113,000.20 million increased by Baht 724.78 million or 0.65%. This was mainly from work in process: construction of the Suvarnabhumi Airport Development Project for midfield satellite building 1 (levels 2-4), South tunnel connection (sub system)

Other non-current assets of Baht 3,914.20 million decreased by Baht 242.87 million or 5.84% due to a decrease in advance payment of Baht 371.65 million and the value of cross currency swap contracts recognised as assets decreased by Baht 110.12 million. However, deferred tax assets increased by Baht 238.41 million.

2.2 Analysis of liabilities

Total liabilities as at December 31st, 2019 were Baht 38,655.54 million. They decreased by Baht 5,187.38 million or 11.83% from September 30th, 2019 as detailed below.

Unit: Million Baht

	31 Dec 2019	30 Sep 2019	Increase	%
			(decrease)	change
Current liabilities	21,967.15	26,182.04	(4,214.89)	(16.10)
Long-term loans	9,588.77	10,515.94	(927.17)	(8.82)
Other non-current liabilities	7,099.62	7,144.94	(45.32)	(0.63)
Total liabilities	38,655.54	43,842.92	(5,187.38)	(11.83)

Current liabilities of Baht 21,967.15 million decreased by Baht 4,214.89 million or 16.10% due to a decrease in work in processes payable of Baht 2,587.24 million. The significant change came from payment of construction of the Suvarnabhumi Airport Development Project for midfield satellite building 1 (levels B1, 1, 2-4 and G) including aprons and south tunnel connection (structural, main system and sub system work). Moreover, other current liabilities decreased by Baht 1,443.70 million. Other payable decreased by Baht 1,116.71 million and trade accounts payable decreased by Baht 784.16 million. On the other hand, income tax payable increased by Baht 1,804.91 million.

Long-term loans of Baht 9,588.77 million decreased by Baht 927.17 million or 8.82% due to a repayment of borrowing and the effect from foreign exchange rates.

Other non-current liabilities of Baht 7,099.62 million decreased by Baht 45.32 million or 0.63% due to a decrease in long term provision of Baht 524.45 million. The mainly came from reversal of unrealised provision. While, the value of cross currency swap contracts recognised as liabilities increased by Baht 233.19 million. The value of cross currency swap contracts recognised as

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liabilities because exchange rates in the forward contracts were higher than the closing rates. The increase was primarily due to the appreciation of Thai Baht against Japanese Yen. Moreover, retention increased by Baht 196.49 million.

2.3 Analysis of equity

The total equity as at December 31st, 2019 was Baht 161,856.33 million. It increased by Baht 7,317.70 million or 4.74% from total comprehensive income for the period of Baht 7,273.08 million. In addition, the subsidiary called for paid-up share capital from non-controlling interests of Baht 44.62 million.

3 Analysis of liquidity

As at December 31st, 2019, cash and cash equivalents were Baht 10,408.04 million. They increased by Baht 475.58 million from September 30th, 2019 as detailed below.

	Unit: Million Baht
	Q1/2020
Cash flows from operating activities	6,097.23
Cash flows from investing activities	(4,824.30)
Cash flows from financing activities	(797.35)
Net increase in cash and cash equivalents	475.58
Cash and cash equivalents at the beginning of the period	9,932.46
Cash and cash equivalents at the end of the period	10,408.04

The change in cash and cash equivalents for the three-month period ended December 31st, 2019 can be analysed as below;

Cash generated from operating activities of Baht 6,097.23 million. It resulted from an operation of the current period.

Cash used in investing activities of Baht 4,824.30 million. It resulted from investment in property plant and equipment of Baht 3,913.13 million. The majority was investment at the Suvarnabhumi Airport. Moreover, there is net cash paid for short-term investments of Baht 947.14 million.

Cash used in financing activities of Baht 797.35 million. It mainly resulted from the settlement of loans and interest of long-term loans of Baht 791.34 million.

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4 Ratio analysis

	Q1/2020	Q1/2019
Profitability ratio
Ratio of profit from operations to revenue from operations (%)	51.91	52.09
Return on equity (ROE) (%)	4.66	4.33
Return on total assets (ROA) (%)	3.68	3.39

	31 Dec 2019	30 Sep 2019
Financial structure and liability ratio
Debt to equity ratio (Time)	0.24	0.28
Liquidity ratio (Time)	3.76	3.09

Ratio of profit from operations to revenue from operations, return on equity and return on total assets did not change significantly comparing to the same period last year. For the financial structure, AOT was able to maintain its financial structure by having debt to equity ratio less than one time and liquidity ratio exceeding to three times.

5 Factors affecting future operation

AOT is a state enterprise that manages all six major airports in Thailand. These airports are considered as the important infrastructure to support the air traffic volume. AOT focuses on developing the airport infrastructure under its responsibility in order to support an increase number of flights and passengers in the future. AOT has continuously developed and upgraded all six airports so passengers will receive good services, including standardised infrastructure and sufficient facilities. These upgrades lead to more convenient and faster services at the airports. Currently, AOT has been purchasing and installing an automated people mover system for the Suvarnabhumi Airport Development Project. The system is expected to be available to passengers in accordance with operating plan.

Furthermore, AOT has revised the Suvarnabhumi Airport master plan, the project plan for the construction of the north expansion. AOT held a joint meeting with related departments and agreed that the Suvarnabhumi Airport master plan is a long-term plan that can be revised when the situation changes. AOT is ready to increase its role to enhance the capacity of the airport network in Thailand. AOT will prepare an operational plan and period to manage the airports under the responsibility of the Department of Airports. However, this plan will be presented to the Ministry of Transport and propose to the Cabinet for approval. AOT is committed to conduct business with

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prudence, under the principles of good governance, transparency, accountability and focusing on the safety of aircraft and airport users in accordance with international standards as well as promoting Thailand as a regional aviation hub.

Please be informed, accordingly.

Yours sincerely,

(Somboon Noinamkham)

Senior Executive Vice President (Accounting and Finance)

Authorised Person

Accounting Department

Tel. [phone]

Fax. [phone]