News Column

Miner hangs hat on coal price rise

February 28, 2014

By Nop Tephaval, Bangkok Post, Thailand

Feb. 28--The SET-listed Banpu Plc, Asean's leading coal miner, expects this year's financial results to be on a par with last year's, with global coal prices forecast to improve in the latter half.

Somrudee Chaimongkol, Banpu's chief financial officer, told reporters at the Stock Exchange of Thailand that price improvement will benefit the company by 2015.

Coal is now quoted at US$77 a tonne, up from $74 earlier this year. The price is expected to reach $80 by year-end.

"Prices since the beginning of the year have shown signs of improvement, but they are likely to pick up in the second half," Ms Somrudee said yesterday.

"However, the price increase will benefit the company in the fourth quarter of 2014 or the first quarter of next year because of the six-month lag time."

The average price projected for 2014 is $70 a tonne, while Banpu's production cost is roughly $62 a tonne.

Banpu aims to produce 44.2 million tonnes of coal this year, similar to 2013's level, including 29.7 million tonnes from Indonesian mines and 14.5 million tonnes from Australia.

"The coal price is still the main factor affecting the company's profitability, but revenue from electricity generation will help the company's earnings as well," Ms Somrudee said, adding that Banpu has no plans to cut production this year.

2014 will see a significant reduction in exports from Australia as domestic demand improves. The Australian government plans to cap local coal production at 400 million tonnes this year to boost prices.

Last year, Banpu's net profit plunged by 62% to $103 million as coal prices tumbled amid unfavourable global conditions.

Sales revenue fell by 11% to $3.35 billion through sales of 42.8 million tonnes of coal, up by 1.2 million tonnes from the previous year. Banpu's average selling price fell by 15% to $72.40 a tonne.

Coal sales accounted for 93% of revenue, with the rest from sales of power and steam.

Ms Somrudee said the company plans to cut costs by an additional $4 a tonne at its Australian operations and by $5 a tonne at the Indonesian mines.

According to Bualuang Securities, coal prices have bottomed out and should recover in the second half as supply eases to lessen the gap with demand.

"Banpu's performance will remain under the pressure of unfavourable coal prices in the first half and should see a rebound in the latter half," the brokerage said in its latest report.

Shares of BANPU closed yesterday on the SET at 26 baht, up 75 satang, in trade worth 539 million baht.


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Source: Bangkok Post (Thailand)

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