Khon Kaen Sugar Cuts Sales Growth Forecast to Zero

Feb. 11 (Bloomberg) -- Khon Kaen Sugar Industry Pcl, Thailand’s biggest publicly traded miller, cut its sales growth forecast to zero from 20 percent as the global recession caps prices and said it may book losses on two overseas plants.

“Our sales may be flat or slightly higher” in the year to October, President Chamroon Chinthammit said today in an interview in Bangkok, the Thai capital. “We are being realistic as the price is not as high as our expectation.”

The global recession has hurt commodity prices, including for food staples, amid concern that reduced consumer spending will erode demand. There may be a loss between 30 million baht ($856,000) and 40 million baht this year from Khon Kaen Sugar’s two mills in neighboring Laos and Cambodia, Chamroon said.

“The outlook for Khon Kaen Sugar is not so bright this year, said Touchcha Pattarasaengthai, an analyst at Trinity Securities Ltd. “Operations in Laos and Cambodia aren’t very good,” and may lose a total of 150 million baht, Touchcha estimated.

Khon Kaen Sugar, which has a market value of 9.8 billion baht, lost 58 percent over the past year compared with the SET Index’s 45 percent drop. Eight of the 10 analysts whose calls are tracked by Bloomberg advise investors to buy the shares, which traded unchanged today at 6.35 baht at 10:23 a.m.

Global Recession

Thailand, Southeast Asia’s second-biggest economy, may enter its first recession in a decade this quarter, according to the Finance Ministry. Recessions in the world’s largest economies will last for years, according to a forecast yesterday from BP Plc Chief Executive Officer Tony Hayward.

“We can’t say that the recession has no effect on us, although sugar is a food staple,” Chamroon said, without giving a 2009 profit forecast. Sugar and molasses accounted for 79 percent of Khon Kaen’s sales in the 12 months to last October.

The Laos and Cambodian plants may begin test runs in March instead of this month as originally planned, and have yet to start full production, Chamroon said. The delay was caused by regulatory issues, the company president said.

Raw-sugar futures on ICE Futures U.S. in New York have gained 6.6 percent over the past year, and traded yesterday at 13.5 cents a pound. The white-sugar contract on London’s Liffe exchange has advanced 9.7 percent and was at $391.10 a ton.

No growth in sales in the year to October 2009 would be Khon Kaen Sugar’s worst performance since 2005, when revenue shrank 5.7 percent, according to Bloomberg data. Last year, sales advanced 24 percent to 11.07 billion baht and profit rose 2.8 percent to 859.5 million baht.

Khon Kaen Sugar Assistant Vice President Chanachai Chutimavoraphand forecast in September that revenue may expand by a fifth this year. The gain would be driven “mainly by higher prices,” Chanachai said then, adding that some forward sales contracts had been agreed at about 13 cents a pound.

To contact the reporter on this story: Rattaphol Onsanit in Bangkok at ronsanit@bloomberg.net