Sunday, August 19, 2007

Banpu coal sales to stay flat this year

Lower mine output keeps lid on earnings


Banpu Plc, Thailand's largest coal miner, expects flat sales growth this year because of lower coal production, according to chief executive Chanin Vongkusolkit.

The company has revised down its coal production volume in 2007 to 20 million tonnes from an earlier estimate of 21 million, reflecting poor results at its mines in Indonesia in the first half and a significant drop in volume of its two mines in Thailand.

As a result, he said, Banpu expected revenue to be the same or slightly lower than last year's 33 billion baht.

However, rising coal prices in global markets would help the company offset lower volume.

According to Mr Chanin, the current spot price for coal is US$70.35 per tonne, up from $60 in the second quarter. Banpu has revised up its average selling price of coal this year to $39 per tonne from $38. He added that the average selling price in the second half would be about $40 per tonne.

The discrepancies reflect the fact that Banpu has long-term sales contracts for about 70% of its total output. Only 30% is sold at spot prices. Many contracts were based on last year's prices, which were lower than current spot prices.

Mr Chanin said heavy rain at the company's Trubaindo and Jorong mine sites in Indonesia had hurt production in the first half. ''However, the natural impact is seasonal so we won't expect it to happen in the second half of the year.''

Poor output from two mines in Thailand _ LP-2 in Lampang and CMMC in Phayao _ also would result in flat growth this year. Mr Chanin said the LP-2 would be closed this year and CMMC next year as Banpu's coal-mine concessions were expiring.

With no plan to operate new mines in Thailand, the company will focus on new investments in Indonesia and China in the future. It is also looking for a joint venture partner in India as well.

In the first half, Banpu produced 500,000 tonnes of coal from the two local mines, compared with 8.3 million combined from its Indominco-Bontang, Trubaindo and Jorong mines in Indonesia. It also extracted 1.59 million tonnes from its Hebi Zhong Tai Mining and Daning mines in China.

Banpu sold 9.2 million tonnes of coal from January to June, down 7% from 9.8 million in the same period last year. Japan, Taiwan and China are its key markets for mid- and high-grade coal, while Thailand, the Philippines, Indonesia and India are main consumers for its low- to mid-grade coal.

Banpu targeted to produce 10.3 million tonnes of coal from Indonesian mines and 3.01 million tonnes from its mines in China. Only 900,000 tonnes are expected to be manufactured in Thailand in the second half, said Mr Chanin.

Banpu expects to produce 20 million tonnes of coal in 2008, the same as this year, reflecting the ending of Thai operations. Revenue in 2008 is targeted at 36.3 billion baht.

Next year, 47% of its coal is already contracted and priced, while 17% is contracted but not priced yet. The remaining 36% would be sold at spot prices.

According to Mr Chanin, the unpriced product should be sold at more than $50 per tonne. Coal would contribute 40-50% of Banpu's overall income in 2008, while its power business would bring in the remainder.

The power business generated 4.33 billion baht in the first half. Of that, 2.58 billion baht came from BLCP, in which Banpu holds a 50% stake, while 1.75 billion came from power and steam businesses in China.

Banpu aims to list its unit in Indonesia, PT Indo Tambangraya Megah, on the Jakarta Stock Exchange (JSE) in October or November.

After the IPO, Banpu's holding in the Indonesian unit would be diluted to 80% from 95% now.

Banpu reported first-half net profit of 2.95 billion baht, up 90% from 1.4 billion baht in the same period last year, on sales of 14.61 billion baht, down 1% year-on-year from 14.78 billion baht.

Banpu shares closed yesterday on the SET at 252 baht, up two baht, in trade worth 683 million baht.

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