SCC says earnings to grow 5% this year

2006 net profit drops 9% on energy costs

BUSRIN TREERAPONGPICHIT

The Siam Cement Group (SCC), Thailand's largest industrial conglomerate, expects its earnings will grow by a modest 5% this year due to the smaller spreads in its petrochemical business, according to president Kan Trakulhoon.

He said the growth projection was optimistic due to the debottlenecking of its petrochemical production facilities, which could lead to higher production volume. In addition, the company is expanding its paper production capacity.

SCC remains confident in Thailand's economic fundamentals. The company expects gross domestic product to grow at least 4% this year.

In 2006, SCC reported an 18% sales increase to 258.17 billion baht. But its net profit dropped 9% from 2005 to 29.45 billion baht, due mainly to higher energy costs.

In the fourth quarter, SCC saw its net profit drop 8% year-on-year to 4.67 billion baht, the lowest amount in three years, despite a 25% jump in total sales to 62.59 billion baht.

This was due mainly to the loss of several hundred million baht from the joint-venture company Siam Mitsui PTA, and its more than one billion baht foreign-exchange loss in line with the stronger baht. In addition, domestic demand for cement and building materials proved sluggish.

The company also realised several non-occurring items during the year. It lost 3.4 billion baht from its Thai CRT asset impairment, while recording a gain of 2.2 billion baht from its divestment of Millennium Steel Plc and The Siam United Steel (1995).

Mr Kan said that the increase in sales last year was due to a better-than-expected margin of more than $600 per tonne for petrochemical products, beating the historical high of $500 in 2004.

The company sold 122.6 billion baht worth of petrochemicals last year, 43% more than in 2005.

For 2007, SCC expects to see a slight decline in margins.

Its paper business grew 6% to 42.6 billion baht last year. SCC expects slight growth of its pulp and paper business this year.

For its cement business, sales rose 6% to 44 billion baht because of increasing exports. But profits also went down 16% as a result of energy cost hikes and a drop in domestic demand.

The outlook for cement this year is stagnant in line with the flat consumption. The only bright spot is the government's new megaprojects, which would drive growth by 2% to 3% if they are launched as planned.

SCC is preparing to issue a new tranche of four-year debentures worth 15 billion baht to redeem its existing debentures worth six billion baht, which will expire in April. After the issuance of the new debentures, SCC's outstanding debt would stand at 130 billion baht, an increase from 105 billion baht last year, with an average interest rate of 5.1%.

SCC also announced a new plant investment by its affiliate Thai-MMA. The 10-billion-baht investment will increase capacity of methyl methacrylate (MMA) to 90,000 tonnes from 70,000 tonnes.

In addition, the company will soon open a 400-million baht lifestyle centre on Kaset-Navamin Road. The project, under SCG Distribution, is to display the group's innovative building products.

Total capital expenses this year will be more than 30 billion, the highest in its 10-year investment budget.

The company's board also approved a further dividend payment of 7.50 baht to shareholders, which will raise its dividend payment for 2006 to 15 baht per share, on par with its 2005 dividend.

SCC shares closed yesterday on the SET at 232 baht, down two baht, in trade worth 189 million baht.

General News
Bangkok Post
Thursday January 25, 2007