Siam Cement (SCC) is expected to book a huge inventory loss of Bt7,000mn following an inventory loss in the petrochemical unit of around Bt6,500mn, which is composed of a petrochemical consolidated inventory loss of around Bt3,500mn from falling ethylene prices, down $819/tonne to $540/tonne and lower propylene prices from $922/tonne to $460/tonne, while inventory was 1.1 months or around 110,000 tonnes, an inventory loss of PVC of around Bt500mn and an inventory loss in petrochemical equity income of Bt2,500mn. In addition, SCC will also book an inventory loss for other businesses paper and distribution of around Bt500mn.
SCC is forecasted to post normalised 4Q08 earnings of around Bt3,500-4,000mn, which is low when compared with previous quarters and last year (normalized profit of Bt5,700-6,000mn). Domestic cement demand has slumped by 18% in the past year. Petrochemical prices are down and demand has slumped, leaving SCC with a utilisation rate of 70-80%. Paper has been affected by contracting domestic and export demand and paper dumping. Overall, SCC will post a net loss of -Bt3,000mn for the quarter.