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Khonburi Expects 50% Profit Gain as New Power Plant Starts

Khonburi Sugar Pcl, the worst performer among Thailand’s publicly traded food producers, forecast profit will increase as much as 50 percent in the next two years after its new power project comes on stream.

Net income is expected to remain little changed at about 800 million baht ($25 million) this year, Khonburi Director Issara Twiltermsup said today in an interview in Bangkok, where the company is based. The 1.7 billion baht, 35-megawatt power plant will start operations early 2014 and contribute as much as 400 million baht of profit annually, he said.

Khonburi and rival Khon Kaen Sugar Industry Pcl have boosted investments in power plants to use crushed cane stalks, called bagasse, as the main fuel for electricity generation. The revenue from power sales will help shield Khonburi’s earnings from the volatility in global sugar prices, Issara said.

“The power plant will be the most important driver for earnings growth because of the limitation in expanding sugar production,” Issara said. “Sugarcane bagasse is a no-cost fuel that can contribute substantial value.”

Khonburi slid 9.1 percent this year, the biggest decliner among 26-member SET Food & Beverage Index.

Profit in the first six months this year fell 17 percent to 550.4 million baht from a year earlier, the company said on Aug. 14. An increase in sugar output will boost net income next year by about 10 percent, he said.

Khonburi expects sugar production at its plant in Nakhon Ratchasima province, 200 kilometers (124 miles) northeast of Bangkok, will increase by 10 percent to about 300,000 metric tons in 2013, Issara said.

Khon Kaen Sugar, the bigger among the nation’s two publicly traded sugar mills, in May took a 2.15 billion baht loan from Kasikornbank Pcl to build power and sugar plants.

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