Retail operations back in the black

After shouldering losses from its retail business for three consecutive years, Bangchak Petroleum expects a profit lift this year due to the rise in marketing margins.

President Anusorn Sangnimnuan said a rapid drop in global oil prices had boosted the average marketing margin to Bt1.40 a litre this year, from Bt0.90 last year. As a result, Bangchak earned a profit of Bt616 million in this sector for the first nine months of the year.

The company reported Bt2.45 billion in consolidated net profit for the nine months, compared to Bt1.35 billion in the same period last year.

Anusorn said its market share had also increased, from 12 per cent in 2007 to 14 per cent this year.

The company has spent Bt15 billion on its Product Quality Improvement programme, to be completed early next year.

Following the completion of the PQI, the refinery will boost output from 70,000 barrels a day to around 100,000 barrels.

Although oil demand is forecast to drop next year due to the global economic slowdown, Bangchack plans to start its new refining capacity as scheduled by expanding exports of diesel to neighbouring countries.

The PQI will change its output structure by boosting the proportion of diesel from 35 per cent to 52 per cent and cut down the output of fuel oil from 33 per cent to 9 per cent. This improvement will also raise annual earnings before interest, tax, depreciation and amortisation from Bt2 billion-Bt4 billion to around Bt8 billion, based on the global oil price.

Anusorn said the gross refining margin next year would be lower than the average of US$4-$6 (Bt140-Bt210) per barrel this year. However, he is confident this will not strongly affect the company's operating result, as it has already hedged 40 per cent of its annual output at the satisfactory price of $70 per barrel.

Bangchak has allocated Bt600 million for its annual capital expenditure next year, plus Bt500 million more for improving its gasohol quality to Euro IV standard.

Furthermore, it is studying the establishment of a Bt3-billion ethanol plant, with the study to be finalised at the beginning of next year.

In the middle of this year, Bangchak decided to diversify into a potash-mining venture by acquiring 6.5 per cent of the shares from TMB Bank for Bt80 million. Major shareholders in this potash project - located in Chaiyaphum province -include the Finance Ministry and other Southeast Asian countries.

Anusorn said he saw a bright future and huge benefit from the potash industry in Thailand. If the Cabinet agrees to move the project forward, Bangchak plans to increase its ownership to 25 per cent.