SIAM CEMENT Group (SCG), Thailand's biggest maker of cement, construction materials and petrochemical products, yesterday said it would allocate Bt60 billion for capital expenditure (capex) this year.
Some Bt20 billion of this amount would be used in the development of a petrochemical complex in Vietnam.
Chaovalit Ekabut, SCG’s vice president for finance and investment and chief financial officer, said that the investment funds would be used to boost its manufacturing capacity at existing plants, as well as in those gained from potential acquisition deals.
“We plan to invest approximately Bt60 billion this year, of which the major investment of about Bt20 billion will be for the development of our petrochemical complex in Vietnam,” said Chaovalit.
He said that SCG had invested Bt46 billion last year, which came in lower that the target set by the group at the beginning of the year. This was due to a delay at the petrochemical complex in Vietnam by between three and six months.
Roongrote Rangsiyopash, president and chief executive offer of SCG, said: “We are negotiating with our partner in Vietnam for the construction of a petrochemical complex, sources of funding and other necessary issues related to the partnership itself. We would like to conclude such negotiations within the next two to three months.”
Roongrote said that once completed, the petrochemical complex in Vietnam would help increase the proportion of petrochemical business at SCG, which now stands at 50 per cent of total sales and three-quarters of profit.
Chaovalit said that SCG expected its petrochemical complex in Vietnam to start construction work within the first half of this year and that it would take about four and a half years until completion.
“Vietnam is a potential market with a huge population of 90 million. The people in Vietnam are young and enjoy high consumption. Vietnam is also a country that has strong economic growth," he said.
Chaovalit said that SCG is also negotiating with its partner in Indonesia, PT Chandra Asri Petrochemical Tbk (CAP), for an increase in its stake in the joint venture from the current 30 per cent.
SCG recently acquired a 68.3 per cent stake in Interpress Printers, a manufacturer of fast-food packaging in Malaysia with a market cap of 104.5 million Malaysian ringgit (Bt836 million). The acquisition will benefit SCG's development of fast-food packaging for the fast growing consumer demands in Asean.
SCG yesterday revealed its unaudited operating results for fiscal 2017. Registered revenue from sales increased by 6 per cet year on year to Bt450.9 billion, driven by higher chemicals prices.
The group's profit dropped to Bt55.04 billion, a fall of 2 per cent year on year, mainly due to strong competition in the cement and building materials businesses.
On a quarterly basis, revenue from sales in the fourth quarter of last year increased by 14 per cent year on year and 1 per cent quarter on quarter to Bt113.4 billion, driven by higher chemicals product prices.
Profit for the fourth quarter of last year reached Bt12.5 billion, an increase of 1 per cent year on year and 6 per cent quarter on quarter.
SCG's sales revenue in the Asean region was Bt106.5 billion, representing 24 per cent of the group's total sales revenue – an increase of 9 per cent year on year. Sales revenue in other regions came in at Bt80.08 billion, accounting for 17 per cent of the group's total sales revenue last year.
The total assets of SCG as of December 31 amounted to Bt573.4 billion, of which 24 per cent was represented by its assets in Asean.
Roongrote said that SCG's 2017 operating results are considered to be satisfactory, despite the impact of heightened competition in both the domestic and regional markets, the rising cost of raw materials and the strengthening baht.
“Thanks to increasing chemicals prices, the company's ability to adapt to changes in several aspects, and an expansion of the services and solutions business, such as logistics, that serves the needs of customers precisely and in a timely manner, SCG has successfully maintained its standards of business operations while also serving customers more efficiently,” he said.
“However, 2018 brings certain risks such as rising costs of raw materials for chemicals and packaging, higher energy costs, the strengthening Thai baht, as well as intense competition in the region - especially in the cement industry. To mitigate and prepare for these risks, SCG will focus on the development of new innovations and continue to expand its services and solutions businesses, and utilise automation and robotics technology to help maximise business efficiency.
“In addition, the company has established the 'Reskill Training Programme' to develop our employees' capabilities so that they are able to navigate the changes and serve the needs of customers as well as expand the business internationally in the future.”
He said that the group expected its sales revenue to increase by between 5 per cent and 6 per cent this year, driven by its petrochemical business.
"We expect a strong demand for petrochemical products in the market. The prices of petrochemical products will also increase further along with gains in the oil price,” Roongrote said.
“The growth will be in line with the group's increase in its manufacturing capacities as well as acquisitions of new businesses in the region and the growth of packaging business domestically.”