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Bafs Seeking to Reduce Foreign-Exchange Risk

Posted on: Tuesday, 30 August 2005, 00:00 CDT

Aug. 30--Bangkok Aviation Fuel Services (Bafs) is negotiating with major jet-fuel companies to change the currency of its service fees to baht from US dollars in order to reduce foreign-exchange risk, according to Chathaya Bandhaya, the company's finance and accounting manager.

"Normally our business transactions are managed in US dollar terms, but the unsteady exchange rate has frozen our performance result despite the fact that sales volume has reached the target," he said yesterday.

He said the timing for negotiations was appropriate as Bafs was in the process of negotiating new servicing contract conditions with airlines ahead of the commercial debut of the Suvarnabhumi international airport.

The company reported a net profit of 91.46 million baht in the second quarter of this year, up only 0.5 percent from the same period of last year.

In the first half, the company's average fuel sales volume grew by 2.08 percent to 11 million litres per day, with forecast fuel consumption growth this year of 3 percent.

Mr Chathaya said that in the second quarter, the company experienced a forex loss of 23.84 million baht, consisting of 11.89 million baht at subsidiary Thai Aviation Refuelling Co (Tarco) and an unrealised loss of 9.2 million baht from forward contracts.

But he said the company was expected to clear the forex loss by the end of 2005 after its forward contracts expire.

Bafs has taken out six-month-period forward contracts with financial institutions for $10.2 million at a fixed rate of 40.44 baht to the dollar, in a bid to help minimise the impact of the continuing weakening dollar on its services income.

It continues to maintain its target of 10 percent year-on-year sales growth to 1.16 billion baht, following a 10 percent increase in refuelling service fees to US$2.58 per gallon from $2.34 in the first half of this year.

It also expects to reach its target of 3 percent growth in jet fuel services volume, according to deputy managing director Pugdee Manaves.

He said the company foresaw more growth in jet fuel consumption, mainly driven by an expected upturn in tourism in the high season in the forth quarter.

He said the delay of Suvarnabhumi airport would also affect to the company's revenue as it had invested 4.6 million baht in the new facilities there.

Bafs shares closed unchanged yesterday on the SET at 8.75 baht.

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Source: Bangkok Post

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