Thailand’s TPI Polene’s (TPIPL) 2H07 core earnings is expected to be stable from 1H07 as: i) Domestic cement sales in 2H07 should accelerate following the improved Thai economy, indicating higher earnings contribution to the company. ii) Its chemical earnings should soften due to higher ethylene prices resulting from the increased shutdown of global ethylene plants in 2H07. This implies a narrower LDPE-ethylene spread.  
 
The deadline for the refinancing of TPIPL’s existing restructured debt is at the end of this year. The company revealed that the process remains on track, and expects to be completed before the deadline.  
 
Nevertheless, if there were a delay, management is confident that it could extend the deadline from its existing creditors. This is based on its discipline in following the restructuring plan to reduce its debt from Bt52bn in 2001 to Bt8bn in June 2007.  
 
After the completion of refinancing, the company’s outlook will be brighter for the following reasons:  
 
i) Short-term benefits: Higher free cash flow from lower funding cost and extending debt repayment. After refinancing, TPIPL expects its cost of debt to fall to MLR+0.25% p.a. (7.25%) from the current MLR+1.5% p.a. (8.75%). Besides, expenses related to the restructuring processes (including legal fees, loan repayment extension fees) of around Bt200mn will disappear. Meanwhile, its debt repayment period will be extended seven years, implying more free cash flow for investment and dividend payments. 
 
ii) Long-term benefits: Investment in cement plant expansion. The company has completed infrastructure work on its cement plant expansion (Line 4), and after refinancing, TPIPL plans to seek funds from banks to further invest in equipment and machinery with an additional investment of Bt5.3-7.0bn. The new cement plant is expected to commence operations within 1.5-2 years after the investment, and its capacity will increase by 3.0-4.0mn tons p.a., up 30% from its existing capacity.  
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