THAILAND: Siam Cement Conglomerate cuts cement demand forecast for 2015

Cement demand at Thailand's largest construction materials maker, Siam Cement Group, dropped year on year in the third quarter through September, reversing a pickup in the previous three months, as cement use in the residential and retail sectors fell on weak consumer confidence.

"I believe that cement demand would be plus next year," said Kan Trakulhoon, SCG president and CEO, at an earnings conference Wednesday. This year, however, demand looks flat, at around 40 million tons, he said, lowering the company's earlier forecast for a 3% rise. If the new outlook proves correct, it will be the second year in a row that demand for cement, which Kan sees as an important economic indicator, fails to expand. Cement and building materials are a core business for SCG, accounting for 40% of its revenue. Slumping demand dragged down the company's sales for the third quarter by 11%, year on year, to 110 billion baht ($3.2 billion).

Kan said he hopes the government's stimulus measures launched last month will start boosting demand "toward the end of the year." The measures include soft loans to low income earners, cash grants to villages for construction and repair work, and small government projects. Infrastructure projects in the pipeline will also help.

Despite the contraction in the top-line number, SCG is expected to book a record profit this year, thanks to lower crude oil prices. Lower input costs improved margins in the company's chemical business. Net profit rose 15% in the third quarter, year on year. For the nine months through September, profit climbed 37% to 33.951 billion baht, beating last year's full-year profit of 33.6 billion baht.

With the economic recovery at home slower than expected, SCG is pushing ahead with investments in neighboring countries, looking to capitalize on stronger demand outside Thailand. A new cement plant in Indonesia is to start commercial operations by the end of the year, while a second production line at its Cambodian cement plant is also in the works. Cement plants in Myanmar and Laos are to go online in 2016 and 2017, respectively.

To enhance Siam Cement's name recognition in these countries, and compete with global brands, the company recently changed the name of its Tra Chang brand, which it had been using in Thailand and Laos, to the better known SCG brand.