TPIPL reported 2Q08 net profits of Bt74m, down 91.5% YoY and 92.2% QoQ. Stripping out Bt530m FX losses from its loans, 2Q08 normalised profits were Bt605m, down 20.3% YoY but up 8.8% QoQ. The YoY drop was due to the absence of tax refund like in 2Q07, while the QoQ improvement was from unusually low tax expenses. It was this tax issue that led to TPIPL’s results being above market consensus by 4%.
Key highlights for 2Q08 results:
Sales. 2Q08 sales were Bt6.6bn, up 11.7% YoY but down 5.4% QoQ. Soaring YoY number was backed by rising selling prices (cement price increased more than 20% YoY and chemical price (LDPE) jumped around 33% YoY). Meanwhile, the drop QoQ was from muted domestic cement demand from low seasonality in the second quarter.
Gross margin. 2Q08 gross margin was 25.3%, up 1.0ppts YoY and 0.3ppts QoQ, as its cement and chemical selling prices could be raised to catch up with the rise in cost.
After the Criminal Court found TPIPL guilty of violating SET regulations through stock manipulation and fined the company Bt6.9bn on December 2007, prosecutors planned to appoint enforcement officials to force TPIPL to pay the overdue fines within 30 days of the court verdict on the case. TPIPL’s internal cash flow (EBITDA of Bt4.0bn in 2008) will not be enough to pay the entire amount of fines so it will have to seek financing sources outsides. The failure to pay the fine could authorize the court to order TPIPL’s assets to be seized. Based on this overhang, TPIPL has not yet sought for new creditors to refinance its existing debt of Bt7.2bn. Hence, there is the possibility that its plan to exit rehabilitation would be delayed. This would raise market concerns if the company will get the approval from the court to postpone the deadline, now at the end of 2008.