Vallop Rungkijvorasathien, managing director of Sino-Thai Engineering and Construction, gives a preview of his company’s earnings outlook during a meeting with brokerage firms and reporters yesterday.

Sino-Thai Engineering and Construction Plc has estimated it will show a net loss of at least Bt1.5 billion this year, largely due to losses from the Airport Rail Link project.

Even though the company's second-half earnings have tended to improve, the company's full-year earnings will remain in the red after it reported a net loss of Bt1.86 billion in the second quarter, managing director Vallop Rungkijvorasathien told reporters yesterday.

The significant increase in prices for construction materials and the slow progress on the Airport Rail Link project were blamed for the loss, he said.

The Airport Rail Link, the 28-kilometre-long link from Phya Thai to Suvarnabhumi Airport, has a project value of Bt12 billion, but its costs have increased to Bt13 billion.

"We have already lost about Bt1 billion from the project because raw-material prices and wages for workers, particularly engineers, have risen significantly. However, we have set aside provision for losses on the project to the tune of Bt900 million in the second quarter and that covers extra expenses in case the project is delayed for another year, although it does not take any fines into account," said Vallop.

Although the provision for loss has been set aside, the company might have to establish an addition reserve if project costs increase beyond 10 per cent, he said.

Vallop said completion of the Airport Rail Link - originally planned for November 2007 - could be delayed for one year because the construction process might not meet the schedule and the State Railway of Thailand has delivered only 85 per cent of the Makkasan-Phya Thai construction area.

"We have to speed up this project. A longer deferral means greater costs. If the project is delayed for one year, costs could increase by up to Bt240 million. At the moment we are not concerned about the fine but we are concerned about engineers' wages," he said.

Sino-Thai Engineering, however, has maintained its revenue this year at Bt14 billion to Bt15 billion, up from Bt13.21 billion last year.

"We don't expect to grow much in revenue this year but the growth will not be lower than it was last year. It will take time to heal the wounds and everything will improve next year," he said.

The company's backlog is Bt32.22 billion, which increases to Bt34 billion or Bt35 billion if projects for which the company has won bids, but contracts have not been signed, are taken into consideration.

He said the company would achieve its new construction project target of Bt20 billion this year because there are a number of bids still remaining.

"When bidding for new projects, the company will use the latest raw-material prices in its calculations," he said.