TPI Polene (TPIPL) is expected to announced 1Q07 normalised profit of Bt364mn, up 45% qoq and 126% yoy. Earnings growth will be driven by lower interest expenses that fell to just Bt112m, down 67% YoY as TPIPL increased capital last year in order to repay debt.
Note that accrued default interest payable is amortised at around Bt60-80mn per quarter. In addition the consolidation of the nitrate business with sales of around Bt200mn per quarter and a high margin of 35-38%, has also helped to support the bottom line. TPIPL sales are expected to reach Bt5,704mn, down 4% yoy, but up 8% qoq. Baht appreciation in 1Q07 is expected to result in a forex gain of about Bt150mn. When including extra gains, TPIPL is forecasted to post a net profit of Bt514mn (EPS of Bt0.25), down 10% qoq and 55% yoy as last year saw larger forex gains.
TPIPL’s Debt Repurchase Programme (DRP) is currently under review by the Supreme Court and a decision is expected this year. If TPIPL wins its case, the company will book gains of about Bt2,245mn or Bt1.11/share. In addition, debt under the master restructuring agreement (MRA) totals about Bt9,822mn and is expected to be refinanced this year. This should result in an interest rate reduction of 100 bps from the current high rate of 8%. Moreover, TPIPL’s outstanding debt principal (excluding loans under the DRP programme) fell to Bt10,129mn at the end of last year, down by more than half since the end of 2005. The sharp decline in outstanding debt is expected to result in interest expenses falling 30% to Bt754mn this year. This sharp decline in interest expenses, coupled with the debt repurchase gains, should help drive 2007 net profit.