Banpu Plc, one of Asean's largest coal miners, posted a sharp drop in net profit for the third quarter on declining coal prices, a trend expected to continue until early next year.
Net profit for the quarter was 2.26 billion baht, down 46% year-on-year and 17% from the previous quarter.
Sales revenue fell 5% to 29.22 billion year-on-year due mainly to lower coal prices. Of total sales revenue, 94% or 27.75 billion baht was coal sales, representing a 6% decline year-on-year. The balance came from power, stream and other businesses.
Chief executive Chanin Vongkusolkit said the lower profit was due to the weakening coal prices in Indonesia and Australia, particularly in export markets.
"The average coal selling price was US$79.74 per tonne, down 12% from the same period last year, due to the unfavourable global coal market," Mr Chanin said in a statement to the Stock Exchange of Thailand yesterday.
The average selling price of Indonesian coal mines fell $11.2 or 11% to $88.05 per tonne, while that of Australian coal mines edged down by 1% to A$68.56 per tonne, he added.
Banpu's coal sales volume also slid 1% to 10.85 million tonnes as Indonesian sales fell by 200,000 tonnes to 6.62 million tonnes during the quarter, while Australian sales rose by 130,000 tonnes to 4.23 million tonnes.
"Coal prices softened because of excess supply in the market, while coal demand also grew at a slower rate," noted Mr Chanin.
The prices weakened due to higher production and oversupply. However, demand growth this year has remained favourable at 7%, driven by high demand from major users such as China, India and Japan.
The growing demand will help sustain future coal prices, Mr Chanin said.
To cope with the price downturn, Banpu has lowered production costs, delayed some investment plans and cut expenditure.
The measures began to bear fruit in the third quarter. The Indonesian operation successfully lowered its production costs by 7% or $4 per tonne from the second quarter, while gross profit margin remained steady.
"Banpu will continue to focus on cost management to minimise the impacts from lower selling prices. Our goal is to maintain a strong net profit and financial position as well as our dividend payment capacity," he said.
Mr Chanin said Banpu expected to sell 7.4 million tonnes of Indonesian coal and 3.4 million tonnes of Australian coal in the fourth quarter.
"The prices should drop further from the third quarter because of excess supply," he said. "The prices are unlikely to recover until 2013."
Banpu, however, is confident revenue for 2012 will meet the 3% growth target. The company reported 87 billion baht of revenue in the first nine months.
Asia Plus Securities downgraded Banpu's earnings estimates for this year and next by 19% and 24%, respectively, to 9.56 billion and 10.4 billion, to reflect lowered coal prices.
Krungsri Securities said Banpu's financial results will remain under pressure for the rest of 2012 and next year.
Shares of Banpu closed yesterday on the SET at 381 baht, down three baht, in trade worth 274 million baht.