Message from the Chairman

In 2018, Prima Marine Public Company Limited and its subsidiaries highly succeeded in managing and adjusting its business strategies to mitigate the impact of external factors on floating storage unit (FSU) business by reducing the number of FSU to be line with falling customer demand and by outstandingly expanding its trading ship business.

As a result, in 2018, the company generated revenue of 4,479.7 million baht and net profit of 746.4 million baht which was close to the results in 2017. The company increased its share of revenue from trading ship business from 30 percent in 2017 to 42.4 percent in 2018, representing positive outcomes from its effective strategic alteration.

Due to the global oil price fluctuation throughout 2018 and the suspended demand for fuel oil from small refineries in China, the demand for and the rental rates of FSU substantially diminished. Nevertheless, with attentive management, the company was able to maintain its major customer base, mostly oil trading companies in Singapore. The company provided FSU service for fuel oil storing and mixing in Malaysia on four vessels and for crude oil storage for domestic customer on one vessel, totaling five vessels which was a decrease of two ships compared to 2017 but matched with customer demand. At the same time, the Board of Directors and executives jointly studied and determined new business directions for the company with a focus on expanding trading ship business, which continued to show outstanding growth, domestically to compensate for declining revenue from FSU business. Therefore, the company urged the negotiations and successfully acquired Big Sea Co.,Ltd., the country’s second largest maritime service provider of petroleum transport. The company successfully bought 70 percent of Big Sea Co., Ltd.’s share for 1.54 billion baht (which are cash payment 1.4 billion baht and obligation to pay 0.14 billion baht) in July 2018 and made an agreement to buy the remaining share at 10 percent annually for three years at agreed price which depends on Big Sea Co., Ltd.’s operating outcomes each year. The acquisition of Big Sea Co., Ltd. immediately increased Prima Marine’s petroleum transport fleet to 13 vessels, resulting in a larger domestic market share of petroleum transport from 32.9 percent in 2017 to 49.3 percent in 2018 which is expected to grow even more once the company has bought all the share of Big Sea Co., Ltd.

The local expansion of petroleum transport ship business was part of the company’s IPO plan in September 2017. The company set out to gradually expand its fleet and business which was expected to take a long period; as a result, its acquisition of Big Sea Co., Ltd. has efficiently helped accelerate its expansion plan. Aside from time saved for building ships and seeking personnel for ship management, the company has acquired more long-term customers who are multinational companies and domestic refineries. The company obtained sufficient capital for this investment from its 2017 IPO and received loans from financial institutions to support other expansions including the expansion of FSU business which the company believes will thrive again in the future.

The company continued its plan to build domestic petroleum transport vessels to replace vessels which have been worn out and close to replacement period to comply with international standards promised to customers and to meet growing customer demand. In 2018, the company built one vessel and expected to finish building six vessels in 2019, enabling the company to have 29 vessels at the end of 2019 with average lifetime of 12.4 years decreasing from 15.3 years in 2017. On top of this, the company bought an additional petrochemical transport vessel in 2018 as it realized opportunities to expand petrochemical export business of domestic refineries and petrochemical plants which are mostly the company’s customers. Our ship management department is responsible for preparing expert personnel to sufficiently manage vessels owned by the company.

In 2018, the company continued to focus on improving its administration, risk management, internal control, and personnel development to prepare for long-term business expansion. The company developed a plan to align the company’s work processes with Big Sea Co., Ltd.’s by jointly conducting a study to minimize the two companies’ weaknesses and increase the companies’ strengths for the organization’s greatest benefit. In terms of corporate governance, the company received “excellent corporate governance for listed company” recognition from the Thai Institute of Directors (IOD) even though it has been listed on the Stock Exchange of Thailand for only one year. This demonstrates the company’s good corporate governance principles, responsibilities to shareholders, and efficient, transparent, and accountable management. Apart from this, the company is recognized and trusted by domestic and international investors and was finally listed on the SET100 in June 2018.

In 2019, the market is expected to begin showing positive signs for the company’s business. It is predicted that FSU business will receive positive impact from the International Marine Organization (IMO)’s regime which requires companies to reduce sulfur in fuel oil used on board ships from 3.5 percent to 0.5 percent by weight beginning in 2020. This has given an opportunity for oil traders to mix low-sulfur fuel oil with high-sulfur fuel oil to create fuel oil which meets the IMO’s 0.5 percent standard. Floating storage vessels are suitable for the storing and mixing of the fuel oil since the vessels already have the required heating and mixing equipment for the process. Singapore’s regulations do not allow oil traders to store and mix oil on Singaporean shores like floating storage vessels. Moreover, a Malaysian oil refinery and asphalt company has asked for more of Prima Marine’s FSU to store crude oil for refinery similar to the ones in Thailand. At the same time, charges in trading ship business which were in the low for a long period began to rise towards the end of 2018. Since more old ships have been scrapped, the number of service ships has fallen. This benefits the company’s building of two Aframax ships which are expected to perform better in 2019. For domestic platform supply vessel business, there have been more service contracts from late 2018 to September 2019, and it is expected that demand for platform supply vessels in the Gulf of Thailand will show an upward trend after the Thai government signed production sharing contracts for the extraction and production of both the Erawan and Bongkot gas fields in February 2019.

Given positive business prospect, readiness of all executives and employees, financial strength, and flexibility of its business structure, the company is confident that it will be able to expand business and create shareholder’s value continuously and sustainably. In 2018 which was a challenging year for marine transport services, the company was able to cope with the challenges to successfully achieve satisfying profit as mentioned earlier. Therefore, I am delighted to tell our shareholders that the Board of Directors has decided to pay dividend of 0.14 baht per share or 91.6 percent of Prima Marine PCL's net profit.

As a final note, on behalf of the Prima Marine PCL’s Board of Directors, I would like to express our appreciation to all executives and employees who have worked very hard to implement our new strategies quickly and effectively. I would also like to extend our gratitude to all shareholders, customers, financial institutions, business allies, government agencies, sponsors, and stakeholders for your support which has led to the company’s success for the past years.

Mr. Bowon Vongsinudom
Chairman of the Board of Directors
Prima Marine Public Company Limited