Thailand’s Siam City Cement earnings slightly

Thailand’s Siam City Cement earnings slightly
Published: 15 August 2007

SCCC reported a 2Q07 net profit of Bt945mn, down 6.8% YoY and 17.1% QoQ. The results were 4% lower than the market expected due to lower-than-expected domestic sales volume. Its 1H07 net profit accounted for 47% of our full-year forecast. Note that the company announced an interim dividend payment for 1H07 of Bt6.50 per share. Sales dropped due to muted domestic demand outweighing the rise in export volume

Bank of Thailand figures show that Thai domestic cement sales declined to 6.6Mt in 2Q07, down 8% YoY and 13% QoQ, due to seasonal effect and slow residential property, commercial and government construction activities. Thai export cement sales were 4.79Mt, up 31% YoY and 25% QoQ, spurred by the rise in demand from Asia and Europe. Nevertheless, export sales in baht terms were negatively affected by the baht appreciation against the US dollar of 10% YoY and 3% QoQ to Bt34/US$1.

SCCC’s 2Q07 gross margin dropped to 29.2%, down 2.7ppts YoY and 5.4ppts QoQ. This was due to the fact that its deteriorated sales volume could not cover its fixed production cost. In terms of its variable costs (coal and electricity), it is expected to be stable in this quarter. The high spot coal price at US$59.8 per ton has been partly alleviated as SCCC has already fixed coal prices in long term contracts of 6 months to 1 year. Meanwhile, electricity cost (Ft) was reduced to 71.75 satang per unit, down 9% YoY and 4% QoQ.

Full-year domestic cement sales are expected to be flat as sales should accelerate in 2H07 as an improved Thai economy offsets the muted construction activity of 1H07. Meanwhile, export cement sales are expected to grow 3% YoY due to healthy demand in Asia and Europe.