THAILAND: SCG doubles forecast, says worst is past

Siam Cement Group (SCG) has doubled this year's revenue growth forecast to 20% despite lingering concerns over high oil prices and a weak global economic outlook.

Thailand's top industrial conglomerate, which recently spent 6.5 billion baht to acquire a ceramics and distribution business in Indonesia, has also raised its five-year investment budget from 100 billion baht to as much as 150 billion through 2016.

Kan Trakulhoon, the president and chief executive, said yesterday that SCG's financial performance had already reached bottom, with its top revenue generator, the petrochemical business, expecting a recovery from next month onward in terms of spreads on decreasing new global supplies.

Second-quarter net profit edged up by 3% year-on-year to 7.49 billion baht, while sales revenue rose by 21% to 93.9 billion.

Nonetheless, on a quarterly basis, the company's profit fell by 19%, with sales growth relatively flat at 2%.

Mr Kan cited a decline in the petrochemical spread due to higher feedstock costs and inventory loss along with low seasonal volume in most businesses as key reasons for the second-quarter results.

SCG Chemicals, which accounts for half the group's total sales, saw its second-quarter net profit drop 19% year-on-year and 48% quarter-on-quarter to 2.49 billion baht on lower margin at both the subsidiary and associate levels, decreased sales volume and inventory loss as the chemicals industry is now in a trough, particularly the high-density polyethylene chain.

The group still reported strong first-half growth in net profit, by 18% year-on-year to 16.7 billion baht, on sales revenue of 186 billion baht, up by 28%.

Mr Kan said that thanks to the group's diversified business, SCG's financial results were sustained in the second quarter despite the petrochemical spread being as low as $400 a tonne.

Net profit from the cement business rose 34% year-on-year to 1.99 billion baht thanks mainly to good cost management.

In the second half, the petrochemical supply picture will improve, as small plants with annual capacity of 200,000 to 300,000 tonnes have begun shutting down on squeezed margins.

"Oil prices remain our main concern for second-half results, as Brent crude has remained high at more than $110 a barrel," said Mr Kan, adding that growing debt concerns in the US and Europe would put global product demand under pressure for the rest of the year.

But Asian economies, especially in Southeast Asia, remain sound, he said. "Luckily, SCG has already expanded substantially in Southeast Asia, with our asset value totalling 30 billion baht."

With the acquisition of Indonesian firms, SCG has become one of the largest ceramics manufacturers in the world, with annual capacity of 149 million square metres.

It will begin consolidating the 4-billion-baht revenue of the Indonesian units into the group in the third quarter.

SCG has mapped Indonesia, Vietnam and the Philippines as strategic countries in Asean, Mr Kan added.

Shares of Siam Cement (SCC) closed yesterday on the SET at 375 baht, unchanged, in trade worth 605 million baht.