Tipco Asphalt profits plummet 99% due to delays

Tipco Asphalt Plc (Tasco), listed on the Stock Exchange of Thailand (SET), faced a challenging first quarter with reduced earnings and profits due to delays in state budget spending and low global asphalt prices. Despite this, the company remains optimistic about returning to normal growth levels within the year.

The company reported a significant revenue drop of 37%, falling to 5.76 billion baht from 9.17 billion baht compared to the previous year. Net profit also plummeted by 99% to 7.8 million baht, a stark contrast to the 1.12 billion baht profit recorded last year.

Managing Director Chaiwat Srivalwat attributed much of the financial downturn to the government’s delayed budget allocation for fiscal 2024, which began in October last year. The delay followed the General Election and the lengthy process of forming a new coalition government.

“The delay in state budget spending has significantly impacted our earnings, Additionally, asphalt prices were low in the Southeast Asian market between January and March, and demand from China decreased due to its economic slowdown.”

However, Chaiwat remains hopeful that conditions will improve soon. The new state budget is anticipated to be utilized by the fourth week of this month, following the approval of a 3.4-trillion-baht budget bill by the House of Representatives in March. This spending will enable Tasco to earn revenue from road repair projects contracted with highway officials.

For fiscal 2024, the state budget allocated for road repair and maintenance programmes has increased by 2.3%, amounting to 169 billion baht, up from 166 billion baht in the previous fiscal year.

Asphalt demand

On the international front, the reduced asphalt demand from China is expected to be balanced by new purchase agreements with Australia and New Zealand, which seek premium-grade asphalt. Additionally, Tasco has secured sales agreements for asphalt in the Indonesian market.

We anticipate that our asphalt sales in 2024 will be comparable to last year’s, at 1.2 million tonnes, Chaiwat noted. The volume remains modest due to the slowdown in the Asian market.

One of the challenges Tasco faces is the inability to procure inexpensive heavy crude oil from Venezuela, despite having placed a purchase order. This situation arose after the US Office of Foreign Assets Control issued General License No.44 (GL44) last October to ease sanctions related to petroleum exports from Venezuela. Unfortunately, GL44 is set to expire at the end of this month, limiting Tasco’s opportunity to reduce expenses.

As the company navigates these challenges, it holds a cautious yet hopeful outlook for the rest of the year, banking on the new state budget and international market agreements to drive growth and stabilise earnings, reported Bangkok Post.