TPI Polene (TPIPL) is expected to announce a 2Q07 normalised profit of Bt397m, down 20% QoQ but up 64% YoY. Reasons for TPIPL’s YoY earnings growth, despite cement industry growth expected to slide 8%, are numerous. 1) TPIPL’s interest expenses are expected to fall to just Bt116mn, down 69% YoY, as TPIPL increased its capital last year to repay debt. 2) The petrochemical business is expected to see a strong second quarter due to the high LDPE - Ethylene spread of $333/t (up 45% QoQ, up 177% YoY). 3) The consolidation of the nitrate business has resulted in sales of around Bt160-200m per quarter and a high margin of 35-40%. The 2Q07 appreciation of the baht is expected to result in about a Bt150m foreign exchange gain. Including these extra gains, TPIPL is forecasted to post a net profit of Bt547m (EPS of Bt0.27), down 29% QoQ but up 60% YoY.
Debt under TPIPL’s master restructuring agreement (MRA), totalling some Bt9,282m, is expected to be refinanced in 3Q07. This should result in an interest rate reduction of 100 bps from the current high rate of 8%. After the refinancing, the company will withdraw from the MRA.