Thursday, May 21, 2009

Siam City Cement Plc (SCCC) expecting 10% sales decline

SCCC expecting 10% sales decline

Competition and slow demand to blame

Published: 22/05/2009 at 12:00 AM
Newspaper section: Business

Siam City Cement Plc (SCCC), the country's second largest cement maker, expects its revenue could decline by more than 10% this year from 21.7 billion baht last year as demand continues to slide while price competition heats up.

Managing director Philippe Arto said yesterday that sales volume was likely to fall in a range of 5-10% this year in line with the expected decline of local cement demand. But revenue is anticipated to drop more as pricing pressure is rising as energy prices fall.

"We are struggling to keep our profitability amid falling sales. However, profit would drop by a lesser extent than sales," he said.

The average price of cement is currently about 1,900 baht per tonne, compared with 2,000 baht last year, he added.

SCCC, 35% owned by Switzerland-based Holcim, declined 20% year-on-year in net profit in the first quarter on sales of 5.1 billion baht, down 10% from the same period of 2008.

The company plans to issue bonds worth 4 billion baht in June. Bank of Ayudhaya will be its lead underwriter, with details to be finalised in a few weeks. Mr Arto said the company had a healthy balance sheet but wanted funds available for future investments.

The company aims to maintain its 27% share in the domestic market even though demand is projected to decrease to 24.5 million tonnes in the best case from 25 million last year.

Export demand is also sliding. The company ships about 25% of its output to Asian countries.

The company has been investing 1.7 billion baht in a waste heat recovery system, which will save it 500 million baht yearly once the project starts operating next year.

A major concern, however, is a variable energy cost, he said, adding that coal and electricity accounted for 60% of SCC's total costs. "We hope to keep this cost reduction level for the year."

Executive vice-president Chantana Sukumanont said SCCC was awarded a contract to supply cement to the Red Line rail mass-transit project. It is also negotiating to supply cement to Ch. Karnchang Plc (CK), the lead contractor for the Purple Line.

CK, the country's second biggest construction firm, has won the first contract of the Purple Line, with bids expected for two other contracts later this year.

"The government should try to push more simple projects such as local roads or canals, instead of [focusing on] big projects" Ms Chantana said. "Small projects can be undertaken faster to stimulate the economy."

Kim Eng Securities forecasts SCCC's revenue will fall by 8% to 19.6 billion baht this year as net profit slides 4% to 3 billion baht.

SCCC shares closed yesterday on the SET at 162 baht, down 2.50 baht, in trade worth 15.55 million baht.

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