Bloomberg News

Eastern Water to Boost Spending as Ford, GM Drive Demand

May 02, 2012

The Eastern Water Resources Development and Management Pcl is Thailand’s biggest private water seller. Photographer: Dario Pignatelli/Bloomberg

The Eastern Water Resources Development and Management Pcl is Thailand’s biggest private water seller. Photographer: Dario Pignatelli/Bloomberg

Eastern Water Resources Development and Management Pcl (EASTW), Thailand’s biggest private water seller, plans to raise capital spending 40 percent after demand from manufacturers grew at more than twice the pace it estimated.

Investment on water storage and pipelines will rise to about 3 billion baht ($97 million) this year from 2.1 billion baht in 2011, said Chief Executive Officer Praphant Asava-aree. Sales volume increased by 8 percent to 86 million cubic meters in the first quarter, compared with the company’s estimate of a 3 percent growth rate, he said.

“The company will accelerate the investments to expand water storage and transportation capacity to prevent a repeat of severe shortage,” Praphant said in an interview in Bangkok on April 30. “Manufacturers in the eastern region have had a strong recovery in their production” after last year’s floods.

Carmakers, petrochemical plants and power producers have raised output as domestic consumption and investments rebound following the country’s worst floods in almost 70 years. Eastern Water is also benefiting from an increase in industrial activity in eastern Rayong province, where General Motors Co. (GM:US) and Ford Motor Co. have plants, after some manufacturers partly shifted production there when their factories in Thailand’s central region were damaged by the flooding, said Praphant.

Bangkok-based Eastern Water, controlled by state-owned Provincial Waterworks Authority, sells most of its water to manufacturers in Rayong. The province, 200 kilometers (125 miles) east of Bangkok, is Thailand’s largest manufacturing hub.

Eastern Water rose as much as 6 percent to 8.90 baht, a record intraday price, and traded at 8.85 baht as of 12:27 p.m. in Bangkok. The shares have climbed 43 percent this year, compared with a 21 percent gain in the benchmark SET Index. (SET)

Car Sales Surge

The floods that ravaged the central region and Bangkok between September and November disrupted the supply chains of companies from Apple Inc. to Honda Motor Co. Car production rose 11 percent to a record 190,935 units in March from a year earlier, the Federation of Thai Industries said on April 19.

Profit this year will beat last year’s record because of an increase in water shipment and tariffs, said Praphant. The company in March raised water tariffs for manufacturers by an average 8 percent, taking advantage of higher demand, he said.

Net income for the year ended Dec. 31 rose 11 percent to 1.01 billion baht, the highest since the company listed on the stock market in 1997, according to data compiled by Bloomberg.

‘Biggest Beneficiaries’

“Eastern Water will be one of the biggest beneficiaries in a robust growth of industrial activity in the eastern region following the floods,” said Siam Tiyanont, an analyst at Phillip Securities (Thailand) Pcl in Bangkok. “With more relocation of plants by foreign manufacturers, Eastern Water will have to secure enough supply to meet with the further jump in the water demand.”

Eastern Water is also considering building a distillation plant to produce fresh water from sea water, said Praphant. The facility would reduce the company’s reliance on unpredictable monsoon rains as its main source, he said.

-- Editors: Garry Smith, Suresh Seshadri

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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