[The Nation] Industrial giant expects record year

Industrial giant expects record year
By Nalin Viboonchart
The Nation
Published on July 28, 2011

High prices for petrochemical, paper and recent acquisitions boost revenue.

Siam Cement Group, the country’s largest industrial conglomerate, this year looks set to post its highest revenue ever, having upped its growth target from 10 per cent to more than 20 per cent.

The revision has been made because of higher prices for petrochemicals and paper, as well as increased income from companies it acquired in June.

SCG last year booked record revenue of Bt334 billion. In the first half of this year, it generated Bt186 billion, 28 per cent higher than Bt146 billion in the same period last year.

The company posted net profit of Bt16.7 billion in the first six months, an increase of 18 per cent from Bt14.1 billion in the same period last year.

President and chief executive officer Kan Trakulhoon yesterday said the revenue growth of nearly 30 per cent in the first half was attributed to high petrochemical and paper prices.

The company expects revenue growth in the second half to be lower than in the first six months, however, because of the high base in the same period last year. It expects second-half revenue to grow by 20 per cent, resulting in full-year growth of more than 20 per cent, he said.

Besides, SCG has just completed two merger and acquisition (M&A) deals in ceramics and building-material distribution in Indonesia, with a combined value of Bt6.5 billion.

Chaovalit Ekabut, vice president for finance and investment and chief financial officer, said Keramika Indonesia Asosiasi (KIA), the ceramics company that SCG acquired, generated revenue of about Bt4 billion last year.

SCG, which holds 93 per cent in the company, will benefit from about Bt2 billion in income from KIA in the second half of the year.

KIA is still booking a loss, but SCG plans to return it to profit by the year’s end, he said.

Kan said that after the KIA deal, SCG, which is the world’s second-largest maker of ceramic building products, would have a production capacity of 149 million square metres, against 122 million square metres previously.

Although the group will maintain its position as the second-largest producer, overall capacity will be almost as large as the global market leader.

SCG is looking to increase its capacity as a result of other M&A deals in Indonesia and Vietnam, to become the world’s largest producer of ceramic building materials within the next two years, he added.

Kan said SCG expected the spread of high-density polyethylene to recover in the current quarter, after dipping to US$400 (Bt11,870) per tonne in the previous three months, which had resulted in a stock loss of Bt600 million for the company in that quarter.

The squeezed spread is forcing small crackers, which have a capacity of 200,000-300,000 tonnes per year, to shut their operations, resulting in an improving spread across the industry.

Meanwhile, SCG’s five-year investment budget for 2012-16 is likely to be as high as Bt150 billion, because of the aggressive strategy to seal more M&A deals in Asean, Kan said.

The company is looking to invest in cement, petrochemicals and building-material businesses, with the last of these having the highest potential. Target markets for such deals are Vietnam, Indonesia and the Philippines.

As regards the huge petrochemical-complex project in Vietnam, Kan said all shareholders in the project were now discussing an alternative method of funding by changing from project financing to corporate financing.

The first choice of project financing has become impossible because of the high costs involved, he said, adding that the project’s funding was expected to be finalised by the end of the year.

SCG reported consolidated sales of Bt93.87 billion in the second quarter, representing an increase of 21 per cent year on year and 2 per cent quarter on quarter.

It recorded a net profit of Bt7.49 billion, up by 3 per cent year on year but 19 per cent lower than in the first quarter.

http://www.nationmultimedia.com/2011/07/28/business/Industrial-giant-expects-record-year-30161314.html

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