IRPC : Management Discussion and Analysis Yearly Ending 31 Dec 2020

IRPC Public Company Limited

Management Discussion and Analysis

Operating Results for Year 2020 and the Fourth Quarter of 2020

Net Sales

Executive Summary

Performance

Financial Positions

Other Factors

Management Discussion and Analysis (MD&A) IRPC Public Company Limited and its subsidiaries

Operating Results for Year 2020 and the Fourth Quarter of 2020 Executive Summary

	Unit				Quarter			Change			Year			YoY
			4Q20		4Q19	3Q20		YoY	QoQ			2020	2019
Crude Intake	Million bbl	18.12	17.51	17.95		3%	1%			70.35	72.00		(3%)
Sales[1]	Million Baht	46,693	55,757	43,330		(16%)	8%			174,463	239,315		(27%)
Net Sales [2]	Million Baht	40,661	50,337	37,671		(19%)	8%			152,319	216,577		(30%)

Market GIM	Million Baht
	USD/bbl [3]
Accounting GIM	Million Baht
	USD/bbl
EBITDA	Million Baht
Net Profit	Million Baht

6,144	3,605	4,937	70%	24%	19,414	19,555	(1%)
11.01	6.76	8.74	63%	26%	8.78	8.70	1%
7,507	4,341	8,707	73%	(14%)	17,825	20,169	(12%)
13.45	8.14	15.41	65%	(13%)	8.06	8.97	(10%)
3,781	543	5,843	n.a.	(35%)	4,692	5,940	(21%)
1,608	(513)	1,556	n.a.	3%	(6,152)	(1,174)	n.a.

Note: [1]	Sales includes (1) Petroleum Sales (2) Petrochemical Sales (3) Power and Utilities Sales
	(4) Sales of tank farm and port service, etc
[2]	Net Sales includes (1) Petroleum Sales (excluding excise tax) (2) Petrochemical Sales (3) Power and Utilities Sales
[3]	Market GIM per bbl : [(Market GIM / Crude Intake)/exchange rate]

The operating results in 2020 compared to those in 2019: In 2020, the Company

reported net sales of Baht 152,319 million, decreasing by 30%. This attributed to a 24% decrease in average selling price following crude oil price together with a 6% decrease in sales volume. The average crude intake was 192,000 barrels per day, down by 3%. This was resulted from the supply chain management to build resilience at the times of the coronavirus (COVID-19) pandemic. However, the utilization rate remained at the high

level.

Unit: MB

2020	30%			2019
31%					216,577 28%
152,319	71%
67%
2%					1%
		Petroleum		Petrochemical			Power & Utilities

The Market Gross Integrated Margin (Market GIM) was Baht 19,414 million (USD 8.78 per barrel), decreasing by 1% from last year as a sharp drop in petroleum products demand and spread according to the COVID-19 pandemic. Nevertheless, the petrochemical

2	Management Discussion and Analysis and Operating Results for Year 2020 and the Fourth Quarter of 2020

Executive Summary

Performance

Financial Positions

Other Factors

products spread that had dropped amid Trade war in 2019. It had recovered this year as a result of higher demand for medical, food packaging and home appliances products due to the change of consumer behavior.

The crude oil price in 2020 had collapsed. The Dubai price had continuously declined since the beginning of the year amid the COVID-19 pandemic as well as the crude oil price war between Saudi Arabia and Russia. The Dubai price had moved down to the lowest point at USD 13.55 per barrel in April. Then, it began improving during the second half of the year after the crude oil producers achieved production cut agreement in accordance with the crude oil demand. Furthermore, the development of the COVID-19 vaccine had progress in many countries. Hence, the Company had the net stock loss of Baht 1,589 million or USD 0.72 per barrel, including the stock loss of Baht 3,485 million offset with realized gain on oil hedging of Baht 1,734 million and the reversal of Lower of cost or market (LCM) of Baht 162 million. While there was net stock gain of Baht 614 million in 2019. The Accounting Gross Integrated Margin (Accounting GIM) was Baht 17,825 million or USD 8.06 per barrel, comparing with the 2019 Accounting GIM of Baht 20,169 million or USD 8.97 per barrel, decreased by Baht 2,344 million or 12%. However, other incomes were Baht 2,176 million, rising by 8%. The operating expenses were Baht 13,934 million, decreasing by 6%, mostly from the employee expense. As a result, the earning before interest, tax, depreciation and amortization (EBITDA) was amounting to Baht 4,692 million, dropped by 21%.

There were depreciation expenses amounting to Baht 8,952 million, increasing by 5%, mainly owing to the completion of the expansion and efficiency improvement projects such as the Catalyst Cooler project and Floating Solar project. There was loss on financial derivatives amounting to Baht 419 million against the gain on financial derivatives amounting to Baht 969 million, YoY. On the contrary, the net financial cost of Baht 1,847 million decreased by 3% owing to lower interest rate. There was loss on foreign exchange from US Dollar - borrowings of Baht 2 million while there was gain on foreign exchange of Baht 458 million in 2019. Besides, the Company recorded 2020 unrealized loss on oil hedging amounting to Baht 961 million in accordance with Thai Financial Reporting Standards No.9 Financial Instruments which effective on 1 January 2020. The Company recorded loss on impairment and disposal of fixed assets of Baht 535 million, mainly attributed to an impairment from the postponement of Maximum Aromatics project (Mars), when compared with 2019 gain on impairment and disposal of fixed assets of Baht 770 million, owing to the reversal impairment of land and investments as well as gain from the disposal of land at Ban Khai District, Rayong Province. There was gain on investments of Baht 339 million, down by 8%. The Company had the corporate income tax benefit of Baht 1,554 million, increasing by Baht 775 million from a decline in operating results. All previously mentioned resulting in the net loss of Baht 6,152 million in 2020 versus the net loss of Baht 1,174 million in 2019.

3	Management Discussion and Analysis and Operating Results for Year 2020 and the Fourth Quarter of 2020

Executive Summary

Performance

Financial Positions

Other Factors

The operating results in the fourth quarter of 2020 (4Q20) compared to those in the

third quarter of 2020 (3Q20): In 4Q20, the Company's net sales was Baht 40,661 million, increasing 8% from 3Q20, QoQ, including a 7% increase in average selling price following higher crude oil price and a 1% increase in sales volume. The average crude intake was 197,000 barrels per day, up by 1%. The Market GIM was Baht 6,144 million (USD 11.01 per barrel), rose by 24% due mainly to higher petrochemical products spread, particularly in medical, packaging and home appliances sectors, plus lower Crude Premium.

In 4Q20, the Company recorded the net stock gain of Baht 1,363 million or USD 2.44 per barrel, attributing to the stock gain of Baht 1,614 million while realized loss on oil hedging of Baht 251 million. The net stock gain declined by Baht 2,407 million when compared with the previous quarter of the net stock gain of Baht 3,770 million. These led the Company had the Accounting GIM of Baht 7,507 million or USD 13.45 per barrel, decreased by 14%. While the operating expenses of Baht 3,943 million increased by 26%, mainly from employee expense owing to non-recurring record for the early retirement program or 'NOAH' project (New Organization with Agile Human). These contributed to the EBITDA of Baht 3,781 million, decreased by 35%.

The Company recorded the depreciation amounting to Baht 2,241 million, being similar to those in last quarter. Plus, the net financial cost of Baht 472 million increased by 4%. However, there was gain on financial derivatives amounting to Baht 178 million against the loss on financial derivatives amounting to Baht 13 million in 3Q20. The gain on foreign exchange from US Dollar - borrowings of Baht 274 million was owing to the Thai Baht appreciation opposed to loss on foreign exchange of Baht 129 million in the prior quarter. Moreover, there was unrealized gain on oil hedging of Baht 807 million compared to unrealized loss on oil hedging of Baht 1,134 million in 3Q20. Nevertheless, the Company recorded loss on impairment and disposal of fixed assets of Baht 472 million, mainly from the postponement of Mars project. It rose by Baht 448 million from last quarter. While there was gain on investments of Baht 127 million, up by 34%. There was corporate income tax amounting to Baht 365 million. All mentioned above had led to the 4Q20 net profit of Baht 1,608 million, increased by 3% from the net profit of Baht 1,556 million in 3Q20.

The operating results in the fourth quarter of 2020 (4Q20) compared to those in the

fourth quarter of 2019 (4Q19): The Company's net sales was down by Baht 9,676 million or 19%, attributed to a 19% decrease in average selling price. The average crude intake was 197,000 barrels per day, increased by 3%. The Market GIM rose by Baht 2,539 million or 70% or increased by USD

4.25 per barrel as an increase in almost all petrochemical products spread. When compared with last year, the petrochemical products spread was pressured by the U.S.-China trade war. The net stock gain was up by Baht 627 million. These led to the higher of Accounting GIM by Baht 3,166 million or 73%,

4	Management Discussion and Analysis and Operating Results for Year 2020 and the Fourth Quarter of 2020