SCG mulls taking stakes in companies left with excess capacity

The crisis has led to a sharp fall in global demand, leaving several industrial firms with excess capacity, said president and CEO Kan Trakulhoon.

On the sidelines of a seminar titled "Mission: Impossible", he said a few companies in Asean countries had approached the group for equity participation.

"They are operating in industries that are our core businesses: petrochemicals, cement and paper," Kan said.

He said M&As would have better prospects during this crisis, because SCG had delayed all new investment projects.

As part of a five-year investment plan for the calendar years 2009-13, between Bt35 billion and Bt40 billion has been allocated for ongoing investments this year, including a paper mill in Vietnam and a waste-heat-generation scheme.

Another Bt10 billion has been earmarked to complete a petrochemical-expansion project next year.

"We've not yet set a budget for M&As," Kan said. "There is potential, given the excess capacity of all manufacturers. Before the crisis, few welcomed any moves for a joint venture, but now they're coming to us. And these acquisitions would save costs, as they're cheaper than investing in new projects."

Kan said at SCG, liquidity would be the main focus, because in a crisis a company with huge assets cannot survive without liquidity. SCG foresaw this crisis as early as December 2007 or January 2008 and asked for board approval to expand the size of its bond issue from Bt10 billion to Bt15 billion.

This April, when the Bt15 billion worth of bonds expires, SCG will also mobilise up to Bt20 billion, in order to ensure ample liquidity. This will help amidst the expected slump

this year of the company's export revenue, which accounts for a third of revenue of about Bt300 billion per annum.

SCG also moved to reduce its inventory in last year's fourth quarter, from a more normal Bt40 billion to Bt26 billion. Cash in hand consequently rose from Bt6.5 billion in the third quarter to Bt27 billion in the fourth.

To survive the crisis, the com-

pany will also push forward in-

vestment in research and deve-

lopment, in order to produce

more high-value products. The budget this year has been boosted

to Bt1 billion, from Bt70 million

five years ago.

High-value products now account for 19 per cent of manufacturing output, from 4.5 per cent four years ago. In terms of value, they accounted for Bt40 billion, from between Bt8 billion and Bt9 billion.

Earlier, Bloomberg also reported that the Bangkok-based CP Group, Asia's biggest animal-feed manufacturer, planned to buy 100 million shares in Chinese investment firm Shanghai AJ.

The purchase, representing an 11-per-cent stake, would be worth 588 million yuan (Bt3 billion) in a private placement.