Buy-back plan boosts Banpu despite fall in 1012 net profit

Firm to buy 5% of shares on market

Banpu witnessed a 4-per-cent jump in its stock price in the morning session after revealing a share-buyback plan yesterday.

The company has allocated Bt6.15 billion to purchase 13.56 million shares, or 5 per cent of total issued shares, on the market.

The share repurchase will run from March 15 to September 14 at a price that Asia Plus Securities estimates at Bt390, based on the 30-day average before the disclosure of the plan. On a discounted cash-flow basis, the securities house estimates 2013 book value at Bt492.48 per share with limited downside risk. The coal price should start to recover in the second half, as it is now near mining cost and discourages new supply.

"Through this announcement, the company sends a signal that its share price is below fundamentals and it is regaining investor confidence in the company's business outlook," it said.

By the end of trading, Banpu had advanced Bt14 to Bt392 despite a 54-per-cent plunge in net profit to Bt9.3 billion last year from Bt20 billion in the previous year.

Management attributed the 2012 decline to lower performance of its coal business and the extraordinary gain of Bt8.26 billion from an investment disposal in the previous year.

Operating profit also fell by 21 per cent, even though sales rose 4 per cent to Bt117.34 billion.

Sales from its Indonesian coal mine were higher, while the power business turned in a sound performance, providing a solid earnings base for the group.

Chief executive officer Chanin Vongkusolkit said sales last year grew by Bt4.93 billion to Bt117.33 billion. Coal accounted for 95 per cent, or Bt110.81 billion, and power and steam from the three combined heat and power plants in China for 5 per cent, or Bt5.68 billion. Indonesian operations contributed Bt77.23 billion, while its Australian mines generated Bt33.54 billion.

Sales last year were in line with the target, thanks to an increase of 10 per cent or 2.56 million tonnes to 27.20 million tonnes from Indonesian operations and an increase of 8 per cent in sales of power and steam.

Indonesian coal-sales volume was above plan, supported by midyear adjustments to the mine plan, efficient management of overburden handling cost and favourable weather conditions. This allowed for higher production than planned, especially for the Trubaindo and Jorong mines.

Total coal-sales volume was up 5 per cent to 41.57 million tonnes.

Sales from the Australian coal operations slipped slightly to 14.3 million tonnes, as the Mandalong mine faced two major longwall stoppages for planned equipment changeover.

The average selling price (ASP) dropped 3 per cent to US$85.72 per tonne as world coal prices weakened through the year because of an unfavourable market. The ASP of Indonesian operations softened 6 per cent to US$90.98 per tonne, while the ASP of Australian operations was 72.86 Australian dollars per tonne.

"The decline in ASP for 2012 followed weakening coal prices in the global market since the beginning of the year. This was due to higher production levels leading to supply exceeding demand, despite demand increasing," Chanin said.

"Coal demand is expected to continue to grow in 2013 especially from China, India and Japan. The growing coal demand will reduce the level of excess supply towards a balance by the middle of this year. This will help improve prices in the market."

Last year, Banpu's equity income leapt 48 per cent to Bt2.87 billion with a strong contribution from BLCP Power and China. Income from BLCP improved 21 per cent to Bt2.36 billion, while income from the coal business in China was Bt884 million, 47 times that of 2011.

The Hebi and Gaohe mines, which commenced commercial production in the third quarter, operated smoothly. Coal demand in the local market remained relatively firm throughout the year, Chanin said.