TPI Polene (TPIPL) posted a sharp QoQ decline in normalised earnings for 3Q11 due to reduced sales and margin.
TPIPL booked a net profit of THB7.43bn for 3Q11. However, this was mainly due to the reversal of provisions for a fine of THB6.9bn. Note that the reversal of provisions is still uncertain as the case has not yet been finalised. Excluding this item, the company booked a normalised profit of THB533m, down 3% YoY and 50% QoQ.
The QoQ fall was attributable to: 1) a 7.8% decline in sales from low seasonal demand; and 2) a steep fall in its gross margin from 32.3% in 2Q11 to 23.9% mainly due to reduced cement and Low-density polyethylene (LDPE) margins. The lower cement margin was mainly due to a slight fall in local cement prices this quarter.
Fourth quarter 2011 is expected to be impacted by the flood crisis but cement demand and TPIPL’s earnings should improve after floodwaters recede in 1Q12. The government is expected to implement long term solutions to flood problems, a move that should boost demand for basic construction materials such as cement.