Siam City Cement (SCCC) is expected to report a 2Q08 net profit of Bt942m, flat YoY but down 7.1% QoQ. The stable earnings YoY would be due to sluggish cement sales volume being offset by the increase in domestic and export cement selling prices. Meanwhile, the slight drop QoQ would be from a softer gross margin, following the seasonal decline in domestic cement demand during the rainy season.
2Q08 revenue of Bt5.7bn, flat YoY and QoQ, is anticipated. Its domestic cement sales volume is forecast to decline a slight 0.8% YoY due to mute local investment sentiment, and its export cement sales volume is likely to be slashed by around half of last year’s volume after closing its two kilns since the beginning of 2008.
Nevertheless, higher domestic and export cement selling prices of more than 20.0% YoY should offset the decline in cement sales volume, leading to flat revenue YoY. Meanwhile, 2Q08 domestic cement sales volume is expected to drop seasonally around 8.0% QoQ during the rainy season, but it would be offset by the increase in both domestic and export cement prices, leading to stable sales QoQ.
For the quarter, SCCC’s margin is expected to improve to 30.6%, up 1.5ppts YoY, thanks to the adjustment to cement selling prices. Meanwhile, its cement margin is expected to decline 1.2ppts QoQ due to seasonally lower sales volume. For the year, SCCC’s gross margin is expected to expand to 31.7%, improving from 28.2% in 2007, as it has already raised its selling price for cement by more than 20.0% YoY, entirely offsetting soaring fuel costs. Moreover, it recently asked the Ministry of Commerce to increase domestic cement prices another 8.0-10.0% on top of the previous price rise.