Thai conglomerate, TPI Polene (TPIPL), reported a 2Q11 net profit of THB1.7bn, +405% YoY and +67% QoQ. This is far above estimates by SCB Securities and a market consensus of THB1-1.1bn, mainly due to: 1) higher-than-expected core earnings from both cement and petrochemical units; 2) slightly higher-than-expected extra gains from the debt repurchase of Bt570mn (vs. SCB’s estimate of THB500mn).

Stripping out extra gains of THB590m (gains from debt repurchase of THB570mn and FX gains of THB20m), normalised profit was THB1.1bn, +310% YoY and +3.5% QoQ. Note that, despite low season QoQ, TPIPL’s 2Q11 core earnings still increased from last quarter, achieving a seven-year high.
Reasons behind earnings improvement.

Profits were pushed up by: 1) better earnings from the chemical unit upon wider chemical spread (+21% widening in LDPEethylene spread YoY), and a jump in proportion of high-margin EVA sales to 60% from 20%; 2) better earnings from the cement unit provided by the sustained local cement price (up more than 10% YoY) at a high level from 1Q11, with local cement demand relatively stable from last year.

2011F earnings upside. Its 1H11 core earnings accounted for 78% of full-year forecast and SCB thus see some upside to 2011 forecast. The positive factors to 3Q11 core earnings include local cement price sustained at a high level and stronger cement sales volume QoQ from seasonality.
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