Siam Cement: 2Q10 earnings soft with 2011 growth strong

Siam Cement: 2Q10 earnings soft with 2011 growth strong
Published: 14 July 2010

Siam Cement (SCC) earnings for the second quarter will weaken to Bt5.6bn (EPS Bt4.67), down 18% QoQ and YoY below previous forecast of Bt5.7-5bn, according to analysts at Kim Eng Securities (Thailand).
This weakness in earnings will mainly come from petrochemicals hurt by a slump in PE - Naphtha spreads to US$479/t from US$601/t in the previous quarter and US$630/t in the previous year. In addition, the slump in Ethylene prices from US$1,265/t to US$1,090/tonne will result in an inventory loss. The new petrochemical plant started operating this month and will not generate much profit. Overall, a petrochemical profit of Bt1,469mn (-52% qoq, -55% YoY) is forecasted.
The second quarter is usually the low season for cement and building materials, however cement demand will still grow by 10-15%, while cement prices are down this quarter. A cement profit of Bt1707mn (-11% QoQ, +10% YoY) is forecasted.
Paper is expected to be the star performer with a strong profit of Bt1,109mn (+14% QoQ, +74% YoY) from new capacity and higher product prices.
In 2011, Kim Eng Securities will see gains from the heavy 4-5 years of SCC capex investment. The new capacities will add sales volume by more than 100% and will focus more on higher value added products. The cement business will be supported by a new waste heat generator, which will save around Bt1400-1500m per year in cost.
Source: Kim Eng Securities