BANGKOK (Reuters) - Khon Kaen Sugar Industry (KSL.BK), Thailand’s fourth largest sugar producer, expects revenue could grow as much as a fifth next year, fuelled by expansion and a bumper sugarcane crop in 2012/13, the company’s chief executive said on Monday.
Rising production and strong demand in Asia will help revenue surpass this year’s figure of 23 billion baht ($746.75 million), Chalush Chinthammit said, despite a fall in prices that he expected to be offset by a government subsidy.
“With rising sugarcane supply we expect more sugar to be sold next year and sale revenues would grow between 10 to 20 percent,” Chalush told Reuters in an interview.
“Our new factory in Loei province will begin operation in December, so our total sugar production from five factories will rise to 800,000 metric tons (881, 849 tons) per year, of which 70 percent is for export,” Chalush said. Loei is 520 km north of capital Bangkok.
The output figure represents an increase of 9.5 percent from the 730,000 metric tons of sugar Khon Kaen produced in the November 2011 to October 2012 crop.
World sugar prices have slipped from a 30-year high of 36.08 cents per lb hit in February 2011, largely on concerns over a weakening global economy, Chalush said. On Friday, ICE October raw sugar futures settled up 0.17 cent at 19.38 cents per lb. <SOF/L>
However, the fall in sugar prices would not prompt any crop-switching or a drop in sugar production in Thailand, the world’s second-biggest exporter of the sweetener.
“The government will definitely subsidize farmers anyway and that would help Thailand to maintain annual sugar production of 9.8 million to 10 million metric tons to serve strong demand,” Chalush said.
The Office of the Cane and Sugar Board, which oversees Thailand’s sugar industry, has estimated production in the year to October 2013 at slightly below a previous forecast of 10.2 million to 10.4 million metric tons.
Chalush said sugar production from factories in Laos and Cambodia, in which the company had invested a few years ago, would also rise to 30,000 metric tons next year, from 27,000 metric tons now, because of good crops.
“All of the production from Laos and Cambodia will be for export to Europe under the EBA import tariff privilege,” Chalush said.
The European Union’s EBA, or “Everything But Arms”, initiative permits imports without tariff from 49 poor countries, including Laos and Cambodia.
Khon Kaen Sugar Industry has also eyed the possibility of investing in Myanmar, attracted by its rich resources and fertile soil for growing sugarcane.
But the company will have to wait several years to see clearer investment policies and development in logistics and infrastructure before going in, Chalush said.
Besides its growing sugar business, Chalush said, the company planned to buy a well-known beverage producer to expand its business line and beef up revenues next year.
“The acquisition would worth 3 billion to 4 billion baht and I think the deal could be sealed by next year,” he said.
Khon Kaen shares closed Friday at 12.90 baht, for an increase of 0.8 percent on the week, broadly in line with Thailand's benchmark index .SETI.
($1=30.8000 Thai baht)
Editing by Clarence Fernandez