- By: NAREERAT WIRIYAPONG
- Published: 30/04/2009 at 12:00 AM
- Newspaper section: Business
Siam Cement Group expects its revenue for this year to be down 20-25% from 2008 after poor first-quarter results, which fell on sagging petrochemical and paper prices.
Kan: Company will definitely report profit
First-quarter net profit declined by 27% to 5.18 billion baht, after SCG's quarterly sales plunged by 30%, the company reported yesterday. This prompted Thailand's largest industrial conglomerate to revise down its 2009 revenue forecast to 20-25% below the 290 billion baht it posted last year, president and chief executive officer Kan Trakulhoon said.
"Earlier we thought this year's sales would decrease by 10% from 2008's performance. But given the first-quarter results, the company now estimates our fall would be in a range of 20-25%," he said. "However, we will definitely report some profit this year."
Net profit dropped from 7.1 billion baht in the same period in 2008, due to a sharp fall in petrochemical and paper-product prices. Net sales totalled 55.2 billion baht, down from 78.6 billion the previous year.
Earnings recovered to 8.66 billion baht from the quarter before, while sales were flat, he said.
"Our performance has significantly improved from the previous quarter, with a price recovery and higher margins in the petrochemical business."
SCG's petrochemical business returned a net profit of 2.47 billion baht after the company booked inventory losses in the last quarter of 2008. But earnings slipped by 1.39 billion baht, compared to the same period last year, after sales fell by 42% to 21.59 billion baht.
However, the quarterly results were well above the 3.71 billion baht median estimate of six analysts surveyed by Bloomberg News. Investors responded positively, pushing Siam Cement shares up 8.29%,to close yesterday at 117.50 baht, in trade worth 755.2 million baht.
The paper business, however, continued to decline year-on-year in the wake of the economic slowdown, he said.
SCG Paper's profits declined by 68% year-on-year to 239 million baht, while sales fell 21% year-on-year to 9.69 billion baht. The cement business, meanwhile, posted a 16% increase to 1.96 billion baht, but sales slid 3% from a year earlier to 12.37 billion baht on lower exports and domestic trade.
Mr Kan said an additional supply of 8 million tonnes of petrochemical output from India and Middle East would come onstream in the second quarter, dimming SCG's improving prospects in the latter half of the year.
"We target a significant upturn in the petrochemical business in 2010," he said.
In the paper sector, prices have decreased sharply to about US$300 per tonne from $470 in mid-2008, but the company believed that demand and prices would stabilise in this quarter, Mr Kan said.
The cement business, for which first-quarter demand fell 10% year-on-year, should benefit from the government's economic stimulus packages and infrastructure projects.
SCG had 36 billion baht in cash as of the end of March, indicating sound liquidity should the group seek to buy regional assets, Mr Kan said.
The group is reportedly in talks with US-based Dow Chemical, but Mr Kan declined to comment, saying the results would be announced in the third quarter.
Kim Eng Securities said that SCG's earnings were better than its previous estimates of 3.5 billion to 4 billon baht, thanks to increased petrochemical capacity utilisation, and cost reductions from the energy-saving waste heat generator projects.
Kim Eng said SCG should record a profit of about 17 billion baht this year.