Brighter 2010 for Thai PTT despite stalled Mab Ta Phut projects

22 February 2010 07:45  [Source: ICIS news]

By Nurluqman Suratman

SINGAPORE (ICIS news)--Thailand’s PTT group could see a healthy rise in its profits in 2010 as earnings from its new 1m tonne/year cracker and rising oil prices are expected to counter any losses arising from its stalled projects at Mab Ta Phut, analysts said on Monday.

The new cracker of its subsidary - PTT Chemical - would potentially boost sales volume this year by up to 50%, said Sutthichai Kumworachai, an analyst with Bangkok-based brokerage house KGI Securities.

The plant located at Thailand's petrochemical hub of Mab Ta Phut was running at around 60-70% after achieving on-spec production early this month, Kumworachai added.

“The initial start-up (capacity), even at around 70% now, would produce 700,000 tonnes yearly. It can be the factor that could drive earnings for the company this year,” he said.

However, PPT still has 18 PTT projects in Rayong province that are currently under court injunction on environmental grounds, including a Bht28bn ($845m) sixth gas-separation plant.

PTT originally had 25 projects among the 76 projects in Rayong projects halted by the Thai court in September last year. Seven of the company's projects have been cleared in December by the Supreme Court to proceed.

Most of PTT’s petitions asking the court to reverse its decisions had been rejected, said Lertchai Kochareonrattanakul, an analyst with Fitch Ratings in Bangkok.

The court would take a final decision in April on the fate of the stalled projects, he added.

Despite the setbacks in Mab Ta Phut, PTT saw a 15% rise in its group net profit to Bht59.6bn for fiscal 2009, although sales fell 21% to Bht1,586bn.

PTT Chemical, meanwhile, posted a 2009 net profit of Bht6.80bn  2009, down a hefty 42% from a year ago, partly caused by heavy declines in average crude prices compared to 2008 levels.

This year, the company may see its profits growing to Bht9-10bn despite a projected slowdown in margins from its polymers business, said Kumworachai of KGI Securities.

“We’ve seen a very strong spread in the first two months but it may come down soon and the average (in 2010) will be lower than last year,” he added.

PTT Aromatics and Refinery (PTTAR), on the other hand, posted a net profit of Bht9.16bn in 2009, compared with a net loss of Bht8.47bn in 2008.

Higher oil prices from improving fuel demand worldwide would also boost PTT’s bottomline, said Kochareonrattanakul of Fitch Ratings.

“Oil which was expected to be around $70 (51) last year, is likely to rebound this year, and would benefit the company’s exploration and production (E&P) business,” said Kochareonrattanakul.

The company’s E&P business constitutes nearly half of its total profits, he added.

Light sweet crude for March delivery was trading at above $80/bbl on Monday afternoon in Asia.

Oil demand was expected to increase gradually as a result of stimulus plans in many countries, PTT said in a statement to the Stock Exchange of Thailand.

The International Energy Agency had forecast a 1.6m bbl/day rise in global oil demand in 2010 to 86.5m bbl/day, driven mainly by demand from Asia.

Meanwhile, analysts said that PTT’s efforts to consolidate its four major subsidiaries - PTT Chemical, PTTAR, Integrated Refinery & Petrochemical Complex Public Co (IRPC) and Thai Oil - would not have any significant bearings to its financial situation this year.

“There would be no significant benefits in the short-term should they consolidate but in the medium-term – maybe in two years – we could see some synergy benefits,” said Kumworachai of KGI Securities.

PTT was expected to announce the next step in its consolidation efforts in April, he said, adding that PTT may take up to six months to consolidate.

PTTAR and IRPC were likely to be included in the company’s first phase of consolidation, said Kumworachai.

“We may see a new company in the market in November,” he added.

($1 = Bht33.16, $1 = €0.73)

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By: Nurluqman Suratman

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