TPI Polene reports weak operating conditions in 1Q24

The Bank of Thailand’s statistics on domestic cement sales show a negative trend since the pandemic, falling by 3.1 per cent in 2022 and 1.5 per cent in 2023. In addition, since November 2023 the trend has worsened and by March 2024 domestic cement sales had contracted 14.5 per cent YoY bringing the 1Q24 contraction to 10.6 per cent. 

The key reason for the major deterioration in demand is the delay in the approval/deployment of the FY23-24 budget affecting public sector works and creating a negative ripple effect in the whole construction sector, claims TPI Polene (TPIPL). The overall sluggish economy also affected demand for residential properties with household spending power capped by high leverage and general inflation.

In 2022-23 TPIPL’s domestic cement sales bucked the trend, posting growth. However, when the contraction hit a double digit rate, TPIPL started to get affected. Construction materials volume sales and value reported a double-digit drop too, falling by 20.7 per cent YoY.

EBITDA in the 1Q24 accounted for 22.2 per cent of the full-year guidance. While the short term economic outlook for Thailand is largely uncertain, the fact that the FY23-24 budget has already begun disbursement brings hope of a sequential improvement in construction activities. The pace could be faster-than-norm given the tight timeframe of implementation with budget discussions for the FY24-25 due to begin in a couple of months. 

TPIPL’s short term financial assets remains high at THB17.2bn (US$469.3m), translating into 47 per cent of sales generating capacity based on annualised 1Q24. Capex deployed in 1Q24, including advances of machinery, was THB1,960m, 31 per cent of the company's full year guidance.