THAILAND: Cement prices expected to climb further

After increasing prices three times for a total of 20% during the first seven months of the year, cement makers look set to keep doing so for the rest of the year due to an upward trend in commodity prices, according to Chonburi Concrete Product Plc (CCP).

All commodity prices tend to rise further even as oil prices are either stable or falling, noted CCP managing director Chakrit Theepakornsukkasame.

To maintain its gross margin, CCP will raise cement prices in line with costs, but Mr Chakrit declined to be specific about the extent of the increases.

As of the end of July, CCP had a total backlog of 2.3 billion baht - 1.5 billion baht from the government sector and 800 million baht from the private sector. This did not include the backlog of subsidiary Smart Concrete Co Ltd.

The SET-listed cement producer was confident of turning a profit by 2013 after the current backlog is realised over the next two years. Its backlog today is at a record high level since its establishment in 1983, outpacing the 2.1 billion baht worth of jobs in hand achieved five years ago.

With accumulated losses of 200 million baht, CCP projected revenue would grow by 15-20% this year as most of the backlog would be realised in the fourth quarter onward. For next year, CCP hopes its revenue would grow even further, at 25-30%.

CCP reported a consolidated first-half net profit of 14.02 million baht, against a net loss of 13.67 million baht in the same period last year, on sales of 1.1 billion baht, up 9% year-on-year.Second-quarter net profit was 5.5 million baht, an increase of 237.42%, on sales of 526.74 million baht, up 0.14%. Its gross margin in the quarter rose to 13.3% from 12% last year as CCP and its subsidiaries were able to raise product prices in line with market demand.

Its subsidiary Chonburi Kanyong focused on imported products and making its own high-margin products. Meanwhile, its lightweight concrete subsidiary Smart Concrete also recorded growth in sales.

"Demand has shifted to ready-mixed concrete due to the lack of labour," he said. "Revenue from Smart Concrete also rose due to the growth of lightweight concrete used in many projects today."

CCP's board has agreed to issue 155 million warrants with a three-year maturity to current shareholders at the ratio of two existing shares for one warrant.

As at the end of June 2011, its debt-to-equity ratio was 7.1 times, down from 7.4 times at the end of 2010. Bank debts stood at 717.75 million baht out of total liabilities of 1.9 billion baht.

A rise in the minimum wage to 300 baht a day would have no impact on CCP because it would raise cement prices and pass on the higher cost to customers.

CCP shares closed yesterday on the Stock Exchange of Thailand at 3.00 baht, up four satang, in trade worth 5.5 million baht.