Banpu May Post Record Profit for Third Year in 2009

By Anuchit Nguyen

Sept. 26 (Bloomberg) -- Banpu Pcl, Thailand's biggest coal company, expects to sell more fuel at higher prices in the next 15 months, helping to drive profit to a record for the third straight year in 2009.

``Higher coal output and prices will keep the company's earnings growth strong next year,'' Chief Executive Officer Chanin Vongkusolkit said in an interview in Bangkok. ``Coal demand in the region will continue to rise because it is the cheapest alternative to oil.''

Power-station coal prices have doubled in a year and reached a record in July, driven by increased demand for alternative fuels after a surge in crude oil costs. Banpu has contracted to supply 40 percent of its output next year at higher prices, Chanin said.

``Banpu's coal contracts are being signed at much higher prices for next year without much resistance,'' said Avin Sony, an analyst at ABN Amro Securities Co. in Bangkok, who recommends that investors buy the stock. ``That leaves ample room for an earnings surprise in 2009.''

The biggest increase in production will come from Banpu's mines in China, where output is expected to rise to 3.5 million metric tons from 2 million tons this year, Chanin said yesterday. The company projects its 2008 sales at 20 million tons, he said.

Banpu has contracts to sell all coal from its mines in China, Indonesia and Thailand at an average price of about $70 a ton this year compared with $41 a ton in 2007, Chanin said.

Earnings Outlook

The mining company's net income more than doubled to a record 6.65 billion baht ($196 million) in 2007. Earnings climbed 48 percent to 4.37 billion baht in the first six months this year.

Profit may rise to 14.4 billion baht in 2009 from 9.52 billion baht in 2008, according to the median estimate of 20 analysts surveyed by Bloomberg.

The Thai company is considering investing in coal mines in South Africa to boost production, Chanin said. The company had earlier said it may invest in mines in India and Australia.

Banpu paid $420 million in June to buy the shares it doesn't already own in Asian American Coal Inc., which holds a 56 percent stake in Shanxi Asian American-Daning Energy Co. Shanxi Asian has been operating a mine in China's Shanxi province since 2006 with a 25-year concession. It has coal reserves of 88 million tons and produces 4 million tons a year.

Banpu's stock fell 1.2 percent to 330 baht as of 10:25 a.m. Bangkok time. The shares have dropped 18 percent this year compared with a 28 percent decline in Thailand's benchmark SET Index.

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net.