Siam Cement Group (SCG), Thailand’s top industrial conglomerate, says its cement sales volumes this year remain on track to grow 5% over 2010 despite severe flooding but margins will be squeezed due to price reductions and rising fuel costs.
Pramote Techasupatkul, president of SCG Cement, said cement consumption had softened in the third quarter after falling short of the expected 5% growth in the first six months.
However, demand could pick up after floodwaters subside, especially in the final quarter when the government is expected to start some large-scale infrastructure projects.
But the recent price reduction of cement by THB5-10/50kg requested by the government will put pressure on the company’s margin. Meanwhile, energy costs, pushed mainly by strong coal prices, are increasing.
"The reduction in gasoline and diesel prices (following cuts in Oil Fund levies) has barely benefited us because we use the petrol very little, just for transport," said Mr Pramote, who is also the chairman of the Thai Cement Manufacturers Association.
KGI Securities said 13.9Mt were consumed in the first six months, up 3.4% YoY.
"But after moderate growth in cement use during the political transition, quick spending from the public side could increase cement demand in the second half," the brokerage said in a report.
This should result in full-year cement demand growth of at least 5% from 26.7Mt in 2010 to 28Mt this year, it said.