SCG cuts down cement sales growth forecast to 7 per cent

Corporate January 31, 2014 00:00

By Watcharapong Thongrung
The Na

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Thailand's top industrial conglomerate Siam Cement Group said prolonged political instability could slash growth of its domestic cement sales to less than 5 per cent this year, compared with 9 per cent forecast previously.

Chief executive officer Kan Trakulhoon said that to compensate for slower domestic sales, it would have to increase cement exports by 1 million tonnes, to 4 million, the same figure as last year.
“Before the protests [began] late last year, we had forecast cement demand to grow by 9 per cent, and we revised it down to 7 per cent when we submitted a plan to our board of directors in December. But after it became obvious that a government could not be formed after the election, which would mean a delay of government investment projects, we now think cement demand may increase by less than 5 per cent this year,” he said. 
During recent years, government projects have usually accounted for 30 per cent of sales on average, while the residential sector took a 53-per-cent share and commercial and industrial projects 17 per cent. 
More exports will translate into lower profit margins, while production costs are expected to increase by 10 per cent because of the baht’s depreciation, which affects fuel prices. Nonetheless, Kan said local cement prices would be dictated by demand and supply and the market mechanism. 
Despite the lingering political turmoil, SCG does not plan to review its investment budget, set at about Bt50 billion annually. Nevertheless, there might be problems regarding investment-promotion approvals by the Board of Investment, which has to wait for the formation of a new government. 
Kan said SCG had kept its overall sales-growth target of 10 per cent for this year, since it expects prices of chemical products to go up and thus help offset lower cement sales. The group has also set a Bt4-billion budget for research and development investments this year, double last year’s.
SCG yesterday announced its unaudited consolidated financial statements for 2013, which showed sale revenues of Bt434.25 billion, an increase of 7 per cent, due to growth in all business units. Profit for the period registered Bt36.72 billion, an increase of 56 per cent, benefiting from the continued recovery of chemicals margins and higher domestic demand for cement products.
Last quarter, SCG recorded sales revenue of Bt104.41 billion, an increase of 5 per cent year on year, but down 8 per cent from the previous quarter. Profits for the period registered Bt8.21 billion, an increase of 19 per cent, but dropped 16 per cent from the previous quarter, because of the seasonal weakness in the cement and building-materials sector and the maintenance of a petrochemical plant.
As for SCG business in Asean markets outside Thailand, sales revenue in 2013 amounted to Bt38.93 billion, up 25 per cent from a year earlier, thanks to the acquisitions of businesses in Indonesia and Vietnam. 
“To maintain sustainable growth in Asean, SCG will continue to expand our investments,” Kan said. “For example, we will build, as planned, our first cement plants in Indonesia and Myanmar and expand the cement production capacity in Cambodia. 
“Our integrated petrochemicals complex in Vietnam has made a further movement with the ongoing process of subcontractor bids. Having appointed the financial advisers, we should be able to finalise our financial statements by year-end. Meanwhile, other business deals are on the table.” The company will continue to develop high-value-added products with allocated R&D budget of more than Bt4 billion this year. In 2013, SCG spent an R&D budget at Bt2.07 billion, which was close to the targeted plan and propelled sales volume of high-value-added products to 35 per cent of total sales last year.
The board of directors of SCG also approved a year-end 2013 dividend of Bt7 per share.