Lanna Resources, Thailand’s second-largest coal miner, said on Friday it expected net profit to be flat in 2010, held down by rising costs in its ethanol business, but there would be a big turnaround in 2011.

Output in its coal business would continue to rise next year but
soaring costs in the production of ethanol would keep the lid on
earnings, Srihasak Arirachkaran, head of business development and
marketing, told Reuters.

Lanna Resources has coal operation at home and overseas, with most of
its coal coming from Indonesia. It is Thailand’s second-biggest coal
miner after Banpu and runs its ethanol business through a non-listed
company.

“Looking at next year, one of our two businesses should be down,” Srihasak said in an interview, meaning ethanol.

“Having said that, though, our capacity on both sides will see a big jump in 2011, as will the bottom line,” he said.

Two analysts polled by earnings tracker Thomson Reuters I/B/E/S
forecast a 4.5 percent drop in 2010 net profit to 449 million baht
($13.5 million). They expect a profit of 470 million baht this year.

In 2008, the company reported a net profit of 471 million baht on sales of 7.5 billion baht.

Coal production would rise to 3.5 million tonnes in 2010 from a little
more than 2 million tonnes now, Srihasak said, forecasting its coal
would sell at an average $50 a tonne next year.

The company expected to invest $7.5 million over the next five years to
develop its existing mines and boost its coal output to 5-6 million
tonnes a year, he said, adding that would be funded through cash flow.

Lanna Resources, which opened a new coal mine in Indonesia in the third
quarter, expected to buy control of at least one coal mine there next
year, Srihasak said.

“We’re looking at the area of East Kalimantan or Sumatra island. The
way to do this could be to acquire most of the stakes and become an
operator,” he said.

Such an acquisition would boost its coal reserves, currently a little more than 35 million tonnes.

The company manages its ethanol business through a 75.8 percent holding in non-listed Thai Agro Energy Public Co Ltd.

Srihasak said that with falling margins in the business, along with a
delay in increasing production until perhaps 2011 when its second
ethanol plant should be completed, a listing of the ethanol firm would
be delayed.

“We’re not confident enough to bring Thai Agro to list next year as the
outlook for ethanol, when you look at it, isn’t so promising,” he said.

At midsession, Lanna Resources’ shares were up 1.2 percent at 16.40 baht in a market that was down down 0.1 percent.

Source: Reuters

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