SCG shrugs off cost rises

Siam Cement Group (SCG) expects its operating results to improve in 2010 when its new projects are scheduled to come on stream.

The production of several petrochemical products will double from that year, said SCG president and CEO, Kan Trakulhoon.

His forecast came after SCG posted an 18-per-cent annualised drop in second quarter net profit to Bt7.195 billion compared to the same period last year despite a one-off gain of Bt2.5 billion.

Excluding the non-recurring gain, SCG's normalised profit was down by only 3 per cent year-on- year due to higher costs for energy and raw materials, particularly chemicals. Of total earnings, 49 per cent was contributed by the company's petrochemical operations, 9 per cent from paper manufacturing, 21 per cent from cement and the rest from other sources.

"Yet, we still managed to meet our 2008 earnings growth target of 10 per cent," Kan said at a press conference yesterday.

He noted that SCG had invested Bt120 billion between 2004 and 2010 in all its business sectors. Of which roughly Bt60 billion went into developing its petrochemical business and the remainder was split between the company's other businesses.

Regarding petrochemical products, the company's new projects will begin commercial operations by the end of 2010. Ethylene production capacity will increase by 900,000 tonnes per year from 800,000 tonnes, while propylene production will triple from 400,000 tonnes per annum to 1.2 million tonnes. SCG will also increase production capacity of downstream products to 1.9 million tonnes per year from 800,000 tonnes now, he said.

"I believe that SCG's performance will recover over the next two years from the current downturn. However, I cannot forecast an increase of revenue and profit,"

Kan said, noting that this year, oil prices would be the key factor to how the company's businesses perform.

In the second quarter of this year, the petrochemical industry was the only sector suffering from a fall in earnings compared to gains in the same period last year. Higher chemical prices toward the year-end boosted the group's fourth-quarter sales to Bt80.26 billion, up 26 per cent year on year.

In the first half of this year, SCG's sales rose 23 per cent year on year to Bt158.86 billion, while earnings dropped 16 per cent to Bt14.31 billion.

Kan said cement demand would remain subdued in the second half due to the economic situation and political uncertainty.

SCG's subsidiary, Siam Fibre-Cement announced yesterday that it would invest Bt1 billion to expand the production of fibre-cement products, a substitute for natural wood, by 7.5-million square metres, to 107.5-million square metres. The new production facility is expected to begin commercial operations in the last quarter next year at the company's Ta Luang Plant, Saraburi.