High costs sting but total sales surge 26%
NAREERAT WIRIYAPONG
The Siam Cement Group (SCG), Thailand's largest industrial conglomerate, reported an 18% fall of net profit year-on-year in the second quarter of the year on surging oil prices and production costs, president and chief executive Kan Trakulhoon said yesterday.
Mr Kan also foresees gloomy business until 2010 due to high costs and heavy investments.
Net profit fell to 7.195 billion baht in the second quarter, but total sales jumped 26% to 80.25 billion baht, thanks to higher petrochemical prices.
The decrease in net income was caused by higher energy and material costs, especially in the petrochemical business, and a high base _ a non-recurring after-tax gain of approximately 2.5 billion baht from divestment was booked in the second quarter of last year.
Without extraordinary items, SCG profits fell 3% year-on-year during the quarter, Mr Kan said.
The group's energy costs have surged by 30% this year to date, driven mainly by a 60-70% increase in coal prices, he added.
SCG Chemical saw net profit drop by 17% to 3.61 billion baht even as sales rose 25% to 38.98 billion baht. The paper business, on the contrary, recorded an 8% increase to 687 million baht, with sales rising 12% to 11.97 billion baht, thanks to higher product prices.
Net profit from cement rose 15% year-on-year to 1.5 billion baht due to higher export prices and energy-saving efforts, with sales up 16% year-on-year to 12 billion baht. The company shipped about four million tonnes of cement abroad.
Mr Kan said the export price of cement had soared to $39 per tonne in the third quarter, compared with $34 in the first quarter, prompting SCG to double its export volume to eight million tonnes by the end of this year.
For the six-month period, profit fell 16% to 14.3 billion baht while sales rose 23% to 158.85 billion baht. The appreciation of the baht by 8% or 2.8 baht against the US dollar in the first half of this year also adversely affected the earnings of SCG, which is a net exporter, Mr Kan said.
The group's three core businesses _ petrochemicals, cement and paper _ contributed 49%, 21% and 9%, respectively, to the total half-year profits, he added.
''Our businesses could have been better (in the past six months) had the political situation and oil prices been more favourable,'' said Mr Kan. ''Oil prices would remain high, putting pressure on our performance over the next two years.''
SCG plans to invest 90 billion baht from this year to 2010 as a part of its five-year investment plan of 120 billion baht starting in 2006. Of the total amount, over 60% would be spent in the petrochemical business.
Despite the gloomy outlook, Mr Kan said SCG would proceed with investments as planned including the multi-billion-dollar petrochemical complex in Vietnam.
The project was granted a licence from the Vietnamese government and the entire complex is scheduled to come online by 2013.
Surachai Pramuancharoenkit, an analyst from Kim Eng Securities (Thailand), said that SCG's earnings were better than the market's estimates of 6.4 billion baht, thanks to its cost-control efforts amid unfavourable conditions caused by skyrocketing oil prices and weak demand.
Kim Eng is likely to lift SCG's sales estimate from the current 278 billion baht, he said, adding the whole-year net profit was forecast at 24 billion baht.
However, SCG's performance would remain under pressure in the second half, especially the falling demand in the petrochemical business.
SCC shares closed yesterday at 180 baht, up five baht, in trade worth 131.5 million baht.
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NAREERAT WIRIYAPONG
The Siam Cement Group (SCG), Thailand's largest industrial conglomerate, reported an 18% fall of net profit year-on-year in the second quarter of the year on surging oil prices and production costs, president and chief executive Kan Trakulhoon said yesterday.
Mr Kan also foresees gloomy business until 2010 due to high costs and heavy investments.
Net profit fell to 7.195 billion baht in the second quarter, but total sales jumped 26% to 80.25 billion baht, thanks to higher petrochemical prices.
The decrease in net income was caused by higher energy and material costs, especially in the petrochemical business, and a high base _ a non-recurring after-tax gain of approximately 2.5 billion baht from divestment was booked in the second quarter of last year.
Without extraordinary items, SCG profits fell 3% year-on-year during the quarter, Mr Kan said.
The group's energy costs have surged by 30% this year to date, driven mainly by a 60-70% increase in coal prices, he added.
SCG Chemical saw net profit drop by 17% to 3.61 billion baht even as sales rose 25% to 38.98 billion baht. The paper business, on the contrary, recorded an 8% increase to 687 million baht, with sales rising 12% to 11.97 billion baht, thanks to higher product prices.
Net profit from cement rose 15% year-on-year to 1.5 billion baht due to higher export prices and energy-saving efforts, with sales up 16% year-on-year to 12 billion baht. The company shipped about four million tonnes of cement abroad.
Mr Kan said the export price of cement had soared to $39 per tonne in the third quarter, compared with $34 in the first quarter, prompting SCG to double its export volume to eight million tonnes by the end of this year.
For the six-month period, profit fell 16% to 14.3 billion baht while sales rose 23% to 158.85 billion baht. The appreciation of the baht by 8% or 2.8 baht against the US dollar in the first half of this year also adversely affected the earnings of SCG, which is a net exporter, Mr Kan said.
The group's three core businesses _ petrochemicals, cement and paper _ contributed 49%, 21% and 9%, respectively, to the total half-year profits, he added.
''Our businesses could have been better (in the past six months) had the political situation and oil prices been more favourable,'' said Mr Kan. ''Oil prices would remain high, putting pressure on our performance over the next two years.''
SCG plans to invest 90 billion baht from this year to 2010 as a part of its five-year investment plan of 120 billion baht starting in 2006. Of the total amount, over 60% would be spent in the petrochemical business.
Despite the gloomy outlook, Mr Kan said SCG would proceed with investments as planned including the multi-billion-dollar petrochemical complex in Vietnam.
The project was granted a licence from the Vietnamese government and the entire complex is scheduled to come online by 2013.
Surachai Pramuancharoenkit, an analyst from Kim Eng Securities (Thailand), said that SCG's earnings were better than the market's estimates of 6.4 billion baht, thanks to its cost-control efforts amid unfavourable conditions caused by skyrocketing oil prices and weak demand.
Kim Eng is likely to lift SCG's sales estimate from the current 278 billion baht, he said, adding the whole-year net profit was forecast at 24 billion baht.
However, SCG's performance would remain under pressure in the second half, especially the falling demand in the petrochemical business.
SCC shares closed yesterday at 180 baht, up five baht, in trade worth 131.5 million baht.
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