Good afternoon. My name is Voranart, Investor Relations Manager. I would like to welcome you to SPRC analyst meeting for our 2024 performance. Before we begin, I would like to introduce the SPRC management team who are present in the meeting with me today. First , Robert Dobrik, our CEO.
Hello.
Nutsara Somkiatweera, Vice President, Finance and Accounting. Sakchai Thamsuruk, Vice President of Value Chain Optimization. Last one, Chaowasri Luengratanakorn, Vice President of Strategy, Policy and Development. Today meeting will combine with the first item, the key highlight presented by Rob, followed by the performance analysis by Sakchai and Nutsara.
Rob will then return to discuss about the strategy and outlook ahead, before we proceed the Q&A session. If you have any questions, please click on the right-hand button or send the question through the chat channels. As a reminder, this virtual meeting is being recorded. At this time, I will now turn the session over to our CEO, Rob, please go ahead.
Well, thank you. Actually to all our guests, thank you for joining us today. We are excited to represent our fourth quarter and our total 2024 performance with all of you, and a bit of an outlook of our view going forward. If we can just move to the next slide. Once again, we are just reinforcing our primary objective, the center of our universe, so to speak, is to really drive total shareholder return.
We really do that by maximizing earnings and cash flow, managing our debt to deliver superior shareholder return. You are always in a bit of a trade-off between trying to find the right balance between driving enterprise margins, cost efficiency, utilization of our assets and reliability of same, and then making targeted investments that create even more value for our shareholders.
These are a bit of a trade-off dynamic, but we are really challenging ourselves to make those right decisions at the right time to maximize value ultimately, both in near term and longer term for our shareholders. Our surrounding wheel really speaks to our key enablers around operational excellence, digital, and org capability, ultimately to drive competitive performance and sustainability.
We will talk to these various elements, but I just want to open up with just a very high level overview of our overarching strategies to drive maximum value. Next slide. This is just a bit of a highlight in terms of our performance through 2024. As noted, $189 million of EBITDA. Net profits of up to close to $60 million.
Our margins and our enterprise blip, how did we enhance our margin with our bottom line improvement program, through the course of the year? From a high level, at a refinery level, generally a solid year. We achieved roughly 97.4% availability. We were able to resume our SPM operation roughly mid-year, which enabled us to have much stronger margins through the second half of the year.
On the other side, not that we have a fuels marketing business that encompasses selling all our refinery products, but just to hone in perhaps on the subset of that in our Caltex, pretty excited about our year-on-year station volume growth at over 15%. We actually added over 96 stations to our portfolio, to our family.
We started to really start to embark on some non-fuel revenue and some partnerships to grow some non-fuel revenue, as well as grow volumes through our stations and create a better value experience for our varied customers. Some combination between those. We really tried to focus the organization on driving consolidated enterprise value. We are not about winning in this team or winning in that team or creating metrics here or there.
It is really around how do we drive value across the enterprise. Sometimes we have to make a trade-off that one business entity does not do as well as another, but ultimately, if that creates more value for the enterprise, that creates more value for our shareholders. If I can drill down on some of those key contributors of the 29 million consolidated, this is year one. This is our first year of integrated entity.
We are pretty pleased to have been able to generate almost 29 million in terms of incremental value. Next slide, please. This just breaks it down a little bit. Once again, how do we manage all these different pieces? Channel optimization, make sure that we are putting the right products into the right sales channels at the right prices.
We had a new supply agreements and EURO V to introduce this past year, and some of how we did that enabled us to create more value. Cost optimization is constantly looking for ways to make ourselves more efficient, managing our inventories or working capital to be as effective as we can.
Then those moments when we had some planned maintenance, it was actually a great example of how we worked across the enterprise to manage inventories, manage our sales, to really minimize the lost profit potential opportunity associated with taking some targeted maintenance activity down around our diesel hydro treating catalyst replacement.
This is a catalyst that gets consumed at a rate of X, especially as we are making EURO V . We have a periodic need to actually replace that catalyst, and the team did a great job really honing in on delivering that on a very timely manner and minimizing the impact to any sales. Then finally, just logistics.
We're constantly looking at ways to get more volume and value out of our existing assets, whether that be truck terminals, whether that be terminals in Songkhla and Surat Thani, just constantly looking for a way to deliver product to an ever-expanding customer base more efficiently and effectively. As a combination, working as one team, sharing information, making some decisions in a timely manner, the team was able to demonstrate creating over $29 million of incremental revenue and value.
So a really good start to creating our new integrated entity. Next slide. I just want to take a step back a little bit and I think we've done some look backs around our historic returns to our shareholders, especially things around our dividend reliability. We feel we can do better.
We step back as a collective entity in recent discussions with our board around how can we reset or perhaps reaffirm some key elements of our financial priorities. I think we started off with, first and foremost, recognizing we can do a better job delivering reliable dividends to our shareholders. I think what you'll see moving forward is us putting a priority on providing steady, reliable dividends to our shareholders.
Separately, how do we continue to maintain a strong balance sheet targeting, as I said, high return on investments? We're not about investing just for the sake of investing, but if we see opportunities with our strong balance sheet, we have the ability to go after opportunities, and the sales and marketing acquisition is a good example of that last year.
A couple of years ago, we saw an opportunity, saw a good price, we jumped into this opportunity, and have been able to do so at managing our debt to an acceptable level. Finally, really, dividends first, managing our debt, looking strategic investments. But thirdly, really looking to reward shareholders with any excess cash and retained earnings. As we continue to honor our dividend policy, try to make sure that we continue to reward our shareholders with any excess cash, in the form of special dividends or others.
Hopefully, we're recasting this a little bit and hopefully you'll see over the coming periods us really demonstrate this in a more earnest manner. Once again, to provide that steady, reliable dividend as a base element and then look to support that, enhance that with excess cash dividends or other opportunities to reward our shareholders. Now I'll just turn it over to Sakchai to perhaps deep dive a bit on some of the performance analysis. Sakchai?
Yeah. Thank you, Rob. Next slide, please. Okay. The performance of the Q4 for this year actually getting better. That is mainly because of the crude price actually started getting better. [Tie off forward] during the year, we started to see the crude price dip down in Q3, and actually started to get some recovery in Q4.
Yeah, fundamentally, actually, crude actually physically or fundamental of the crude is available or really a bit long in the market. As we know, I think in Q4, we started to see some of the sanction of the Iran and Russia actually coming back and started to tighten the supply a bit and make the market start to get some concern in terms of the supply and pushing up the price. So far, it is still probably under the same situation that we are in.
There are a lot of issue around the sentiment of the market from the political issue. You can see the same thing happen on the crude oil premium, actually happened in Q4 and probably in beginning of this year, that the crude oil premium actually come on the low side.
We put it in here, actually, is the movement of the crude that actually there is liquidity in the market and we use this mostly in our diet. The premium actually getting lower. Recently, we see some spike, but less we have. We see some spike. It happened because of there are probably some new come out try to tighten up the crude supply on the sanction. But, in general, I think we would expect a kind of a lower crude oil premium throughout the political 2025.
In term of the product crack in Q4 also, actually getting better throughout the seasonal. We can call Q4 is a kind of seasonal high demand actually started to pushing up the price a bit. Some of the positive news that we got over the period of Q4 up until now is actually the reduction of the China export actually help to support, in particular the market in this region.
As you know, I think gasoline a bit short, but when you include China, we are a bit long because of their export. But, on the other product, on diesel as well, when China export a lot, it actually started to flood the market. But, so far from mid of Q4 this year, we started to see less of the China export. Actually, if you look at the number, actually it is cut down by half.
That is really a good news, at least in the near term, that support the market and also Q4, Q1 actually is, we can see that is the high demand quarter for the year. In term of 2024 compared to 2023, the crack is getting lower because of the addition of supply, as we know.
We got the kind of a chunk of the refinery happened in West Africa, and in Middle East, actually adding to the capacity of the world. With the demand actually gradually increase, not up to the, what you call, the new capacity that add. So we started to see more product coming out to the market and pushing down the product crack, like lower compared to 2023. In term of the country consumption, I think for Thailand, it is quite bad.
And that in line with the economic growth, which is actually still, as we know, still on the low side. Hopefully, when we got a kind of the stimulate of the economy for Thailand, the demand of the country will be getting better.
Next slide. In term of our margin in Q4, as we know, we start to get on the left-hand side chart, I think you can see, if you look back into the historical SPRC always stay higher in term of our GRM over Singapore margin. And that because we got a kind of the optimization that we can make, both on the process, on the feed stock, and also on the product sale. We stay above Singapore. Then, over the period that we got SPM, we are kind of quite close to Singapore market, and then we start to get back again.
But we get the SPM resumption at middle of last year. So in term of the margin, as I said, I think together with the crack spread getting better and lower crude oil premium, we start to see a better margin in Q4. And also less of the stock loss because of the picking up on the Dubai price.
In term of the OpEx, this one is actually, if you look at the OpEx throughout the year, we control the OpEx very well to the level of about $2.2 per barrel in term of the OpEx. The slightly higher in Q4 of the OpEx is just kind of a timing, the phasing in of the spending that we have. But overall, we will be able to achieve throughout the year compared between, if you look at 2023 and 2024.
We start to see a trend down because we try to get better control of the cost and also, the key one that we did really good is increase or we improve the reliability of the refinery. So that help to reduce the maintenance cost. And as a result, we see a lower OpEx. Next slide. This one, I think Rob mentioned about the synergy of the two between the refinery and the marketing side.
The picture just telling you that when we look at the marketing, we talk a lot about retail. But if you look at the full range of the commercial, we are not really just retail. We still have other channel of sale. For gasoline and diesel, actually it represent around 61% of the production. When we market this product to our commercial, we got retail, which is approximately about third of our production.
And we also still have the C&I sales channel and also the bulk sale channel that we market to as well. So under the full range of the commercial, actually not just only the retail, we also have the other two sales channel that we can optimize and try to maximize the value to these three sales channels. For aviation, it represent about 10%-12% of the production.
I think we sell to our own sales channel and also we still left a portion to sell to the bulk. But as we grow up the capability of our sales channel, we expect to see more percentage of our own sales channel over the bulk sale in the near future. This just to let you know that this is how we optimize. When the production from the refinery come to the commercial team, yeah, it's not just only retail.
It's also other sales channel that we can optimize and we can manage, try to maximize value. In term of the bottom chart, it's talking about the thing that relate to the service station. On the left side, it's just the way to really gain more, what you call, return on investment on the service station is we try to maximize the volume, the sale per service station.
Try to really make the same store sale growth as much as we can, because that is the area that we don't need to spend more CapEx or anything, just maximize based on what we have. So last year we grow is really good. We got the same store sale increased significantly, about 15%. And you can see actually from the throughput per station actually reflect in the same direction.
I think in the past, our throughput per station is actually in the range of 40,000-50,000 L per month, per service station. But so far, if you look at the number that we are doing right now, it's between toward 275,000-280,000 L per station per month. Really impressive growth in term of the throughput per station that we did last year.
The number of station actually get increased as well, from 478 last year when we include the Pure Thai Energy Company Limited. 450 after we include Pure Thai Energy Company Limited in there. As you know, we acquired Pure Thai Energy Company Limited as part of our partner. We start to add another 78 service station, and right now, I think our total service station is about 527.
In term of the market share, we have been growing our market share from, I think, compared to a couple of year, we grow the market share from about 4%. Right now, up to about 5.4% so far. With the acquisition, with the synergy with Pure Thai Energy Company Limited of 78, I think Pure Thai Energy Company Limited come in in about Q4.
So just probably partially contribute to the number of the market share that you see today. I think once we come into full execution of Pure Thai Energy Company Limited service station, we expect to see probably grow to another 1% of market share on our company. I think that's it for me. Next for Nutsara .
Thank you . For our consolidated financial performance of SPRC, in quarter four of 2024, SPRC has consolidated EBITDA of $36 million, which better than prior quarter and also better than fourth quarter of 2023, which EBITDA in both periods are negative. Similarly, consolidated net profit for quarter four also improved from last quarter and same quarter of prior year. We reported $5 million in net profit for the quarter.
The improvement in EBITDA and net earning in quarter four was mainly from an increase in refining margin, as Rob and Sakchai reported earlier, and also a stock gain from the recovery of oil price in quarter four, comparing to the gain of quarter three. Total year EBITDA and net earning for total year also better than 2023.
This is from higher production volume, improved refining margin, which including the synergy capture, less freight cost from SPM resumption, and higher foreign exchange gain in last year. On the bottom left chart, SPRC sales volume in Q4 is slightly lower than Q3 due to less production from the HTU shutdown for the catalyst changing.
However, for total year sales volume still increased in relation to the higher crude intake and production in 2024, with the improvement in plant reliability. For the proportion of export sale in 2024, slightly lower than 2023, while volume of domestic sale increased after the integration with fuel business and also the increase in retail sales volume with the increase in the market share that Sakchai just reported out. Enterprise margin, which is a combination of all refinery and marketing business, increased quarter-on-quarter from higher refined fuel margin.
On yearly enterprise margin, the increase is from SPRC resumption, SPM resumption in July 2024, and also the synergy capture that we earned from the integration. For the financial position at the end of 2024, SPRC and subsidiary has total outstanding borrowing of $206 million, which significantly lower than prior year and has a very low net debt to equity ratio, which is at 0.23, down from 0.3 at the end of 2023. SPRC net IBD to EBITDA ratio is also low at 1.38, a decrease from prior year. This indicates that SPRC has a strong and healthy balance sheet with low interest cost and greater financial flexibility in term of the capital expenditure and also the return to shareholder.
Regarding the dividend, SPRC Board of Directors just approved the dividend payment of THB 0.15 per share for the year end performance. So after combining with the interim dividend of THB 0.25 per share, which pay earlier, total dividend for 2024 performance, total is 40 satang or THB 0.4 per share. This is the financial summary, and I pass back to Robert for strategy and looking ahead.
Thank you, Nutsara . Just maybe to build on your other comment on our debt. We actually were able to show a decline in debt levels whilst actually also acquiring the Chevron (Thailand) Limited fuels and marketing business through 2024. There's quite a few payments in that period, which are actually attributable to both additions in working capital and some closing costs, which we're able to absorb as well and still bring down our debt.
So it just gives us a sense of our ability to take actions on opportunities, but then continue to maintain a very strong balance sheet. Look, just looking forward from a refinery perspective, we're going to continue to really drive, maximize the value we extract out of our existing assets. Prepare ourselves for what is an every six-year shutdown at present shutdown.
Really targeting some very, very specific projects where we believe we can get some very high return, relatively low cost, high return in a very short time period type projects, as well as a variety of reliability enhancement and normal inspection requirements. We are really trying to streamline the size of that shutdown, but look to make sure that when we exit that period, we will be set to have another five to six years of reliable operation.
Continue to look for ways to grow our marketing of our products. We shared how we are continuing to grow the volume. We moved to various channels. We are excited about the opportunities in front of us, and we will continue to demonstrate selling wherever we can make the most value.
We have our historic customers, new customers, and new markets that we are testing in a variety of forms and fashions, and we will continue to do so as we move into 2025. We are looking to optimize product ultimate value. Sometimes that suggests that we do not run at maximum inlet rates because of the nature of the crudes that we are able to acquire, the prices we are able to acquire, and the products we are able to generate sometimes tell us that there is a better sweet spot out there for us.
We will continue to look for ways to run as optimally as we can, but it could be a condition where we look to optimize some downstream treating units being our limiting factor, but actually creating an environment where we create maximum value.
We are constantly looking at our crudes, and I think we are looking to make some continued adjustments in that space as we continue to move forward. We are excited about an opportunity where we can start to embrace on perhaps a new business, which is being part of a circular economy with regards to some pyrolysis oil reprocessing. We are looking at bringing in nominally recycling plastics into pyrolysis oil. Pyrolysis oil through our refinery back into the feeding the [inaudible] .
Really creating a circular economy and really entering this as a partnership with others. Fairly limited investment, proving concepts, showing that it can be done, and then looking to grow that business over time. I believe it is one of those areas where the economy of the world, our key stakeholders are collectively looking at us to do better and do more.
We are excited about that opportunity in 2025 as we move forward. On the commercial side, we are just going to continue to look for those optimal sales channels, like I say, and open up new markets that could be in other countries. Really try to understand where we can grow value. Sometimes it is delivering a product in a more efficient manner to existing customers.
Constantly looking, and this is where we are really working as one team and using everybody's ideas, whether you have been here with us for a week or whether you have been here for 30 years. Everybody has good ideas, and we try to make sure we leverage that full perspective to grow value for the company. We will continue to look for ways to make ourselves cost competitive from my opening comments around our performance wheel. We need to maintain some cost resiliency in our business.
It's a margin business. So anywhere we can drive costs out, just create that much more of a margin and ultimate value for our shareholders, who are constantly looking at ways to do things smarter, leverage technology, apply digital tech capabilities to make better and timely and more efficient, effective decisions. Then finally, just continue to grow the business with partners. NFR partners, Chao Doi is the one we described earlier.
But we're looking at opportunities to continue to expand on that partnership and then look to introduce other partners to really create a better customer experience and ultimately create more value to our shareholders through incremental sales through each of our stations. There's nothing like, if you can make more money by running through existing stations, we don't need to keep adding stations. We just create more value by leveraging the assets we already have.
And that's the cheapest and the most effective way for us to create value. So we'll continue to look for ways to do that through creating a better customer experience to reinforcing our technology advantage with Techron in terms of how that can outperform other options in the market. And ultimately, just once again, provide that full suite of information and marketing to where we can increase our retails where it makes sense to do so.
Next slide. So close off just to remind everybody, we're continue to do the right things. Be reliable, drive enterprise margin. Don't fixate on any one particular segment, but enterprise value. If we create enterprise value, even though one element is slightly diminished while the one gains, that's what we do.
And that's the advantage of having an integrated, and that was one of the key drivers why we acquired the fuels and marketing business, was to really expand our purview and value chain to where we can see and jump on value opportunities. Cost efficiency, as I said earlier, continue to be thoughtful. We attack everything from a minimum functional objectives mindset, which means spend the least amount of money to achieve the objective.
Don't keep adding complexity and cost to something where we could do for much cheaper. Then, once again, be smart. There's lots of things we can do. We can certainly invest in new opportunities, but if they don't really show the potential for return or they don't show some strategic potential over the longer term, sometimes the best investment you make is the one you walk away from.
So we're continuing to look at a whole portfolio of alternatives, and we're trying to understand where the market is allowing us to see some opportunities. And just like the prior years where we jumped into the fuels and marketing business, we'll look for others. And there's opportunities we see out there, and we'll look for ways to enter into various markets where it makes sense and it expands our capabilities in a way that makes us a more sustainable company moving forward.
So at the end of the day, one team with the right talent helping to drive and leverage our technology to produce affordable, reliable, and ever cleaner products to our customers. With that, I think I'll turn it back over to Voranart for- Oh, my other comment is really around our sustainability and our efforts to really be that community partner.
We spent a lot of time in our efforts in Map Ta Phut as a refinery in the Rayong area. A lot of effort to minimize our impact from an environmental impact on our communities. Be a partner in our social activities, both with regards to supporting both health, education, different commercial activities within the community, both funding-wise and also with our partnerships and efforts as a collective set of employees. That this is our community, and we want that community, from an environmental perspective, from a social perspective, to be the best that it can be.
Finally, from a governance perspective, how do we make sure that we are being that good corporate citizen, we are providing the right balance to our business, but then we are also creating the right aperture and opportunities to be the sustainable business, to create value for our shareholders, and be the right community partner for the long term.
We are trying to balance these three dimensions, and I believe we are making some great progress on all fronts. We are looking to continue to reinforce that through means of actually participating in some various assessments in the marketplace. With that, I will now turn it over to questions.
Thank you very much, Rob. This is the end of our prepared presentation, and we are ready to take your question. If you have a question, please click the Raise Hand button or send the question through the chat channel. Okay. There are some people already. Okay. For the first one, Khun Sumedh, please ask the question.
Yeah. Hi. Thank you so much for the presentation. This is Sumedh from JP Morgan. I just want to understand a few questions. Firstly, on your marketing business, the Caltex business. I just want to understand how you were able to increase throughput per store. That has been quite impressive. Is this industry growth or market share gain?
I just want to understand that. My second question is on your Caltex margins as well. I do not see the margins in the presentation, but is that included in the enterprise margin on page 12? I just want to understand that better. My third question is on the recently discussed energy law. We have not heard much about it, but is there any progress on that? I would love to hear about that. Thank you.
Let me take one of those at least anyways. Then maybe I'll turn it over to Sakchai to perhaps comment a little bit on the Caltex growth and margins. Hey, look, there's a lot of commentary from various ministers around how we can do this or that. And there's a noble endeavor, trying to minimize the. As we say, we're trying to be reliable, affordable, and ever cleaner, provide products to the market. So trying to be affordable, there's a variety of ways to do that.
Sometimes there's creative ways to try and encourage the various industries to provide affordable products. And we've made our case known through FTI and other forums that we believe a free market economy where folks actually pay commodity prices as they are, creates the right incentives and creates the right behaviors to lower use when prices are high and vice versa.
Be thoughtful around how you consume. When you try to control the economy through pricing, it can get quite challenged. So I think some of those concepts are certainly working their way through the system. There's a fairly, how can I phrase this? There's a fairly stepwise manner in which those things would have to be introduced, whether it be through a variety of cabinet steps and government approval, parliament steps, et cetera.
We'll continue to advocate for things that would enhance the industry, create the right environment for investment in Thailand, and hopefully we'll be successful in continuing to make that case to the various folks that are actually making some of these policy decisions in the future.
Let me turn it over to maybe Sakchai just to speak sort of at a high level around what's helping to drive some of the Caltex station on station, year on year growth through the stations we already have. Then separately, perhaps describe the margins, how it's concluded in our enterprise margins. So Khun Sakchai.
Yeah. Thank you, Khun Rob. I think in terms of the same store sale, we actually, as we talked before, I think it's really a primary focus for us, that we try to put a lot of focus and energy on. I think our sales team, sales and marketing team, put a lot of effort in terms of how we really look at the, what do you call it? The thing that the customer needs.
Try to really make that upfront to them to serve them better. And I think so far with the really intensive program that we put it in, together with the marketing campaign that we have, we'll be able to really articulate our plan better. So actually, we start to get more actually of the same store sale growth that we see growing throughout the year. I think that's probably the key one.
I think it mainly is the focus after we stay together as one team. I think the team really realized that the production of the refinery is really still a lot more that we still can market to this sale organization. So really a clear driver from the enterprise point of view, really give that message and also a kind of the enterprise mindset, enterprise decision to drive this thing to happen. So we put more resource into this area and try to really increase the same store sale.
In term of the marketing margin, I think even though we have not report the marketing margin, but what tell is just our marketing margin is in the range with the industry, with the peer. Because as you know, I think Thailand is probably, as you know, is semi-controlled, right? Of a kind of the necessarily primarily of the diesel. So our marketing margin is very similar to the peer.
Understand. Maybe just a quick follow.
Go ahead, sorry.
Yeah. Just a quick follow-up, right? If the margins are included in the enterprise margin, it does appear that the margin is quite thin. Could you please help us understand if that's the case or you have some different way of accounting? Also, regarding the marketing campaigns that you were mentioning, right? Is this something specific that you're trying to do? As in provide more discounts or provide some more loyalty points or is it just normal? Just want to understand better, the throughput increase, I know, better if the marketing campaigns are allowing for a lower profitability. Thank you.
Yeah. I think, let me clarify on the first one in term of the margin that you try to derive from our enterprise margin, and then probably some math around the refinery margin. I think that, as we told before, I think in term of the whole commercial, the margin that we report is for the whole commercial team, which is not include necessarily the retail business.
Actually, it include the bulk sale, it include the C&I, that we need to really anchor the volume to those sale channel as well. So I would say that a kind of a margin that you see that is probably the aggregate or the combined of the sales channel of the whole commercial. Yeah. But when I talk about the, or the question about the retail marketing margin, it's actually a different number.
As I said, I think it's probably in line with the thing that you can expect from the other, the marketing margin. Okay. So in general, you can tell, I think, in Thailand, we always talk about, yeah, THB 2 - THB 2.5 per liter in general. So that is a kind of a general marketing margin that we see.
In term of the same store sale, I think the marketing campaign, yeah, I think it's not necessarily purely the marketing campaign that we see. It's also a lot of thing that we tighten up in our service station. So we are actually, as we told, I think we put a lot of resource in there, try to make our station actually serve the need of the customer better, okay? Make it really to the need of the customer.
Also, we also put some of the NFR to the service station, really the purpose of that actually to attract the sale at the forecourt, which is the oil sale for to get better, okay? So that also part of how we boot up the same store sale. I think it's probably the NFR that we try to actually put the need of-- to serve the need of the customer.
At the end, I think we actually benefit from the forecourt, which is the oil selling, okay? Also try to put more resource into the service station to tighten up, okay, what do you call, the thing that we manage in the service station to make it really ready to service our customer. Also the marketing campaign. I think we try to really do a lot of the campaign throughout the year as well to promote our same volume for 2023.
Yeah. As you hinted as well, we do have our Star Card to try to build loyalty programs with our customers as well as continue to reinforce what we believe is a competitive advantage on our Techron additive that allows, frankly, better quality, better value for the same price in some instances in a controlled price environment.
Hopefully that combination is what's attracting more and more customers. High grading of our fleet, arguably, as we continue to bring in new stations, we are diminishing some of the lesser performing assets in our portfolio and then trying to maintain a high quality standard throughout all our fleet of stations. Hopefully that's starting to be felt and recognized in the marketplace, and we're excited about the opportunity to continue to grow on that ability moving forward.
Thank you.
Understand. Thank you.
Thanks. Mayank, please ask your question.
Yeah. Hello. Thank you for the presentation, Rob and team. Rob, I think the first question I would just direct to you. I think it is a question related to what you kind of emphasized quite a bit in the presentation around returns and free cash flow. Can you just give us a bit of a perspective of, is a targeted number in terms of ROCE that you are thinking about for this combined business now going forward in a controlled environment in Thailand that we are in?
Because even this year you are running with single-digit ROCEs. And when you think about CapEx, your CapEx for the turnaround for 2026, if you can just give us an idea. And what could be a sustainable CapEx now going forward, divided between refining and marketing? If you can just give us a bit of a perspective of how you are thinking about that, and how can SPRC return to double-digit ROCE, which it used to do pre-COVID.
Hey, look, I am going to call a friend, but I will add on. But maybe Nutsara , if you want to start, and I will join in.
Okay. In terms of the first one, in terms of the free cash flow, regarding the return on ROCE that you mentioned, whether it is going to be one or two digit. However, based on the It is difficult to forecast the margin, but we still believe that we would make the money and our capital employed should reach the sustainable level of maybe almost two digit.
In terms of the capital expenditure for this year and next year because of the turnaround, so we are going to incur some capital expenditure for the maintenance. But in normal year, together with the marketing business, it is going to be in the range of $30 million-$40 million. This is for normal business. But for turnaround, that would be more capital expenditure.
I think those projections are really around if we have opportunities. I think we talked about station on station growth and part of that has been actually high-grading who we brought in over the last few years, and really looking at where we see strong likelihood of performance and strong likelihood of the returns. So the team has actually been very targeted and trying to keep the hurdle rates quite high, not around growing station on station numbers.
It is around bringing everything in that we bring in. We want to see 15%-20% rate of returns, in that business. Similar in the refinery, we are really looking at a lot of our capital investments are what I characterize as really quick payout, short, not large expenditures and pretty high returns.
Part of it is because, the future, when you have to It is hard to bet on projects, especially multi-billion dollar projects, where you could be multi-years in the development, construction, eventual startup phase, to only find that the market has changed dramatically since when you started your project. So those are big challenges for anyone to invest in the current climate. So we don't really have any of those in our portfolio.
So we are actually what I would call reasonably capital light, going not only in the short term, a bit of anomaly in the next 12 months with the shutdown, but actually going out to our planned period. We are fairly capital light unless we see some opportunities. We will jump on opportunities if we see some value creative opportunities. We have got a great balance sheet, and we have already jumped on one, and we can jump on others.
Just to invest to meet metrics and various things, no. We are going to try to be very fiscally disciplined in terms of where we spend our money, how we spend our money, and ultimately drive ever-improving cash flow, in a pretty healthy margin environment we see going forward, to where we can generate a lot of cash and ultimately deliver a lot of dividends to our shareholders.
Okay, thank you. Next, Naphat, please ask your question.
Hi, thank you for the presentation. Let me first ask on the marketing business. I'd like to ask about the profit contribution of the 2.4, no, 2.2 billion in 2024 that we made. How much is coming from the marketing business?
Maybe, Nutsara, does that resonate with you, a number? Just maybe I ask you to maybe respond if you can.
I'm sorry, Naphat, can you repeat your question again?
Yes. I just want to ask about the profit contribution from the marketing business in 2024.
I'm sorry, what the-
Or maybe the value contribution. When we say integrated value capture, the $29 million that we've quoted, these are actually opportunities that likely wouldn't have surfaced unless we actually worked across a broader value chain. You could attribute that to this or to that or to something else, but at the end of the day, we challenge ourself to demonstrate how this integrated entity is creating more value than the pieces.
That's our best estimate as to how much incremental value we've created in a fairly challenging margin environment through the past year. It was just an okay margin year. We're excited about the opportunities in our portfolio to continue to demonstrate value capture on an enterprise-level basis, and ultimately that will drive ever-improving overall enterprise performance results. I'm not sure if that- Is that the question? Those were attributed to different areas of how we were creating value across different dimensions in 2024.
Okay.
Once again, you say, is it attributable to the market? Well, it may never have happened if we didn't have that integrated fuels and marketing business integrated. Once again, the retail, just as we outlined, is a small subset of that, but it's really around that opportunity to place volume in higher value sales channels to create new markets, to really work as one team to create better outcomes. It's interesting to see how that's really opened up the aperture for us to go after new value capture. We're going to continue to build on that going forward.
Maybe I put it another way. Because I remember that before we acquired the retail business from Chevron, they were making about THB 600 million-THB 700 million profit from the retail business. So I just want to check that once we take over those retail business, are we still making the same amount?
Could actually maybe you can allude to, but you talked about it. Our retail margins are comparable to others. It's a higher value sales channel than other types of sales channels. But once again, it's still just a finite volume that moves to this market. We're open to creating value through other sales channels and other means.
So that could be moving to new markets, moving to new countries, as well as placing volumes and ever-increasing volume as where we can in terms of our own retail network. But it only represents about 17% of our total refinery output. So I don't want to overstate. It's not a ridiculously high margin business, but it's better than some alternatives. But really the value prize is how we're actually opening up new markets, whether it be asphalt opportunities.
It's not a singular product, being able to sell more jet directly. It's really around us actually looking at ways to sell our products more holistically into the marketplace at their higher value channels. So retail is a segment, but there's a much broader picture in play.
Yeah , I think you are right. I think when we become consolidate of the two company, I think, yeah, we are not really focused in term of the earning on the separate entity. I think to me, if we were to look at the earning, I think the $29 million probably could more represent that kind of a margin that we see. But you can say that it probably some contribute from the retail business.
Or actually we could say majority is actually by helping the retail business or the commercial team stay together with the refinery. I am not sure if it can answer that. Yeah, it is not apple to apple because when we stay together as one team, actually, we bring more volume from the refinery to the commercial team to market it out.
That why, sometimes it is not really easy to really try to separate and telling the separate entity because we really combine the kind of decision making and the kind of optimization that we make on a combined basis. Actually, the benefit that actually can sit in either side, sometimes sitting in the refinery, sometimes sitting in the marketing side. But overall, I think the one that obviously fell out from the two team working together is actually at least the $29 million that we see.
My second question is on the total OpEx per barrel. Because I see that 2023 and 2024, we have about 2.7 and 2.6, just roughly about the same OpEx per barrel. But if we are going to include interest expense, so we might add up another, I do not know, maybe $0.80. And given we are going to have a planned shutdown in the first quarter 2026 and some of the costs that we might have to factor in during 2025. So if you can give us some guidance on the total OpEx per barrel for 2025, please.
Nutsara, maybe you can speak to that. I think the 2023/ 2024 comparisons attempting to be on an apples-to-apples basis, even though we did not have the commercial operation in 2023. But we have tried to apples-to-apples comparison, and I think we have maintained costs quite competitively, if not even gone down from 2024 over 2023. And that is on a combined OpEx basis. So as we look into the future, yeah, we will have a slightly higher cost this 2025 as a result of preparing for the shutdown in early 2026 and then early 2026. But I will let Nutsara maybe add some color to that. Nutsara?
Yes . Regarding the OpEx that we in the past we present based on the refinery OpEx. What we try to like to present right now because we are focusing on the enterprise value. What we are talking not only in term of the enterprise margin, we are also talking about the OpEx for the enterprise number. If you refer to previous year, our OpEx is like 2.2.
So together with refinery, we expect that our OpEx for the whole enterprise going to be like $3 comparing to the enterprise margin. We going to lead you to focus on the enterprise picture. In term of the total OpEx for both company, that's going to be around $3 or $3.2 a barrel. Regarding the turnaround that you mentioned, that going to incur in this year and next year.
We're starting to incur the expense starting from this year. The amount, because we split the turnaround to be three-year cycle, so the impact of the expense is not material as in the past because we spread the activity to be three years. In term of the magnitude of the expense is going to be maybe another $0.30 or $0.40 a barrel.
There was comment on the interest expense. Nutsara, maybe the I think our interest expense is much lower than what you were quoting.
Yes.
Obviously we don't have a, maybe compared to others, we have a much lower level of debt. Perhaps that's a number from some other company. Our interest bearing, our debt, our cost on interest is what per barrel?
In the past, we used to have like $1 million a month, so it's going to be like 0.20. We expect that because of lower borrowing, so that cost going to be lower. It depend on the margin that we can generate so we can pay our more debt. So that going to be lower than 0.15 that we forecast for this year. Including the depreciation that you just mentioned about 0.80.
Yeah.
But actually for refinery is around 1.2 and together with the marketing it going to be around 1.6, 1.7. So you can add up together for the OpEx and depreciation and interest together for the whole enterprise.
Yeah, I think going forward, I think some of those assets actually are coming to the end of their depreciated balances. So as we move into 2026 and beyond, actually, that actually takes a healthy we see some healthy changes and improvements in our depreciation levels. So just even creating more cash flow and earnings potential going beyond.
Okay. Thank you. Next will be the question in the chat. The first question is about the shutdown plan. Is there any shutdown plan in 2025? The second one is, why did the throughput in the first quarter drop from the previous quarter?
So-
There is actually no shutdown plan in 2025 so far. We don't have. In term of the throughput, the drop of the throughput of Q4 is because we take the time to change out the catalyst of the diesel catalyst during that time. The throughput actually is getting lower.
Thank you.
Yeah, thanks . I think as you kind of maybe alluded to, as a result of EURO V, there is more demands on the hydrotreating units, causing probably accelerated catalyst degradation or deterioration. Excuse me. That's why we're requiring ourselves and others to actually have to take these types of units down on a more frequent basis than historic.
You'll see that not only ourselves, but undoubtedly our peers in the same marketplace. But those are standard targeted maintenance activities. The team did a great job in the fourth quarter, as I mentioned to you earlier, limiting that duration of that shutdown to in a roughly 20-day period. Kept the rest of the refinery operating as normal.
They actually built up inventory on the back end and then were able to do so on the front end, sorry, and place volumes to where the market was fully satisfied and then were able to recover with fairly limited losses or lost profit opportunity. Partially because of how we managed and staged and executed, and working as one team. Separately, it was actually a relatively low margin environment when we did the exercise.
Part of that was planning it to be in a period where we anticipated some lower margins. So really limited the impact on overarching financials. But we'll undoubtedly have to do that on a nominal 3-year cycle moving forward. We don't anticipate needing to do that until the shutdown in 2026. No major planned outages in 2025. That said, there's always some level of maintenance on this or that unit, but no significant outages planned in 2025 until the shutdown in 2026.
Thank you. Due to that, we already almost run out of time. The question from Panuwat will be the last one. Panuwat, please ask your question.
Yes. Hi. Thank you for your presentation. I have two questions. First, can you provide some guidance for this year, in terms of the crude oil and market GRM? The second one is that, can you comment on the crude premium? Do you expect it to be high throughout the year?
Thank you for your question. That sounds like a great Sakchai question.
Okay. In terms of the GRM, I think, actually, we typically not really predict it, and it is not really easy to predict the GRM. But I think I can tell in terms of the general of the market, I think in this year compared to last year, the market fundamental is getting better this year compared to last year. And mainly because of the export from China actually getting lower significantly, specifically in both diesel and gasoline. I think that is the fundamental shift in terms of the supply, at least in this region. That should help us to really reduce the surplus in the market in this region. Yeah.
Other thing, I think start of this year, also, really cold weather really helped to, what do you call, lower down the inventory of the middle distillate for diesel, just according to. I think that is another good starting off from the refinery point of view, that we would expect to really see a strong track for this year because of the lower inventories start of the year, and lower actually export from China, at least from both diesel and gasoline.
Also in Thailand, I think if you look at the Thailand this year, we actually see the schedule of the refinery shut down every quarter throughout the year. That should help us to really place more value into the domestic market more, and also optimize the refinery in terms of the production, to make the product that the market need.
I would say, relatively, I would say the market actually should keep us more favorable this year compared to last year. Last year we see rising up around, I think around $5- $6 per barrel. In terms of the crude oil premium, I think it spike off in beginning of this year a bit. Even though last year, toward the end of this year, it is quite low. It spike off because of some of the sanction news happened from Russia and also from Iran. But after the fact come up, I think the, what do you call, the sentiment of the market actually override that kind of news. We start to see a coming off of the crude oil premium nowadays.
I would expect the crude oil premium will stay on the low side, because of the fundamental of the crude oil market actually got the availability in the market more than the demand. So it is a bit, in terms of the sentiment, actually, the supply is more than the demand sides. Not expecting crude oil premium to go really high. Just stay on the low side. In terms of the CDU, typically, we optimize the CDU, so we are not really target to match the CDU all the time.
We optimize the CDU to the crude slate that we can maximize the GRM or the enterprise value. From time to time, it depend on how the market give to us. But typically, we see the CDU throughput close to match. From time to time, we optimize the refinery just to really capture the benefit from the, what do you call, the optimization we can make around the feedstock that we picking and choose to run.
Yeah. Thanks, Sakchai. I think, like you say, there's sometimes the market allows us to repivot towards perhaps sweeter, lighter crudes. And whilst that may not allow us to get full utilization of our crude unit, we can make a lot of money in other ways. So really, we just focus on maximum value. We do a lot of scenario planning around what would create maximum value.
Okay. I think it's about the time. So we would like to thank you, everyone, for your time today. We appreciate your interest in SPRC and your participation in our meeting today. Thank you very much.
Voranart , before closing, I just want to reinforce a few key things, is hopefully we conveyed our focus on doing the right things to derive maximum total shareholder value. Once again, making the right decisions, being very cost-efficient, effective, growing margins where margins are opening themselves up to us, and then continuing to be really smart around investments. Just don't invest for investment's sake.
Don't be afraid to make bets when the returns are quite attractive. We continue to do those things. We're very confident in 2025/ 2026 and beyond. We will be very formidable in terms of the amount of free cash flow we can generate. And likewise, be in a position to continually reward our shareholders through this period. As I opened up with, and I'm reinforcing, we have actually taken quite a step back and have reprioritized perhaps our financial priorities.
We have made a statement in the current state in terms of what we are providing as a dividend in this period. We will look to hopefully reinforce what we mean by reliable dividend in the future periods. We really do want to emphasize is maintain that strong balance sheet, position ourselves to prioritize paying dividends, even as when conditions aren't healthiest from a margin environment.
That will look to be a priority for us moving forward. Hopefully, that gives you some confidence and our confidence in our go-forward outlook cash positions to where we could actually continue to reward our shareholders moving forward.
Okay. Thank you .
Okay. Thank you, everybody.
Okay. Thank you, everybody. We would like to thank you again for your attend our meeting today. Thank you very much.