CAO Singapore Gains Revival through Regroup

On May 15th, 2006 China Aviation Oil (CAO) Singapore Co., Ltd.
published its performance statement for the first quarter of
2006. The statement shows that the regroup of the company has
shown initial results. In the first quarter of 2006, the gross
profit made a growth of 69.5% and the net book profit reached
SGD342.2 million.
    It is released from China Aviation Oil Holding Company
(CAOHC) that the performance in the first quarter of 2006
reflects the results of the regroup. The company has introduced
new investors and reformed debts to a bearable level. The
attention is now focused on the business and reconstruction of
the company.

Two turning points

According to analysts, after the loss suffered by CAO Singapore
Co., Ltd., two turning points recently appeared in the
performance of the company. The first turning point happened on
March 1st, 2006. The company published its financial report for
2005 and the loss of over SGD800 million suffered in 2004 is
already reversed to profit. The second turning point was the
performance for the first quarter of 2006 recently published.
The profit made a growth of 69.5% over the first quarter of 2005.
   The company suffered a huge loss of SGD865 million in 2004
and SGD7.30 million in the first 9 months of 2005. The profit
in the fourth quarter of 2005, however, reached nearly SGD20
million and the loss was finally reversed to profit in 2005.
   According to analysts, the strong impetus of the business
mode helped the company to grow. The regroup remarkably changed
the balance sheet in the company. At the end of March 2006 the
debts reduced to SGD244.8 million and the earnings of
shareholders increased to SGD147.82 million.
    With the reduction of debts, there was a lump-sum revenue
income of SGD312.4 million in the account of the company. Besides,
owing to the depreciation of U.S dollars and the appreciation
of SGD, the company also gained SGD11.5 million in the first
quarter of 2006.
   Analysts say that these two growths in the performance after
the huge loss will have significant implications on the future
development of CAO Singapore Co., Ltd.

Three major factors

The sound financial performance of the company in the fourth
quarter of 2005 attributed to the following factors. The
purchase amount of aviation Oil reached 1.1 million tons. The
profit shared by the company in Pudong Aviation Oil Co., Ltd.
increased by 49.5% to reach SGD9.67 million. As the largest oil
company in Spain, CLH also paid a dividend of SGD8.06 million.
   The further improvement of the performance in the first
quarter of 2006 was the result of the following three major
factors. (a) The main business made a stable growth and the
purchase amount and the demand of aviation oil increased
drastically. (b) Revenues from oil investments promoted the
profit growth. (c) Gains from the conversion rate change helped
the reversion from loss to profit.
   The main business of the company also reaped satisfactory
profits in the first quarter of 2006. The purchase amount of
aviation oil reached 922 000 tons, an increase of 6.8% over the
same period of 2005. The commission from the aviation oil
purchase reached SGD5.30 million, an increase of 71%. Besides,
the company holds 33% equity in Pudong Aviation oil Co., Ltd.
The consumption of aviation oil in flights at Shanghai Pudong
Airport made a remarkable increase. The profit shared by the
company in the first quarter of 2006 reached SGD9.50 million,
an increase of 3.6% over the same period of 2005. The conversion
rate change also brought some gains to the company.
   In spite of the loss in derived transactions, the main
business of the company made a good performance and maintained
a stable profit-earning level. With the further reform to the
oil product market system and the growth of the aviation oil
consumption in the domestic market, the present profit-earning
level in the company will become a normal growth level.
   The satisfactory performance of CAO Singapore Co., Ltd. in
the first quarter of 2006 was resulted from the completion of
the regroup and also the aviation oil consumption growth in
domestic and international flights.

Two expectations

According to analysts, a very important strategy for CAO
Singapore Co., Ltd. is the introduction of two strategic
investors (BP and Arnada). CAOHC singed an investment agreement
with BP Asia Investment Co., Ltd. and Arnada on December 5th,
2005. (CCR2006, No. 2) It helped the revival of the company.
   Experts say that there are mainly two expectations about the
company. One is that the equity distribution of the company has
enabled the company to have an assured future. The other is that
with the reform to the aviation oil system and the oil price
linkage to the international market, the company engaged in the
storage and transportation of aviation oil can reap greater
profits.
   CAOHC and the two strategic investors will give greater
support to the company and the sound development of the main
business in the company will therefore be promoted. China will
increase the rate of the resource tax and offer subsidies to
downstream sectors including aviation companies. CAO Singapore
Co., Ltd. can therefore get a higher revenue stream. Besides,
the company has already acquired a considerable profit-earning
ability in aviation oil purchase.