Weak cement demand to pressure 1Q07 earnings

Weak cement demand to pressure 1Q07 earnings
Published: 12 April 2007

Siam City Cement (SCCC) is expected to announce a 1Q07 profit of Bt950mn (EPS of Bt4.07), up 37% qoq but down 17% yoy. The yoy decline is due to the economic slowdown and a projected 3% yoy decline in cement demand. Also, cement exports will be hurt by the strong baht, with cement sales prices down slightly from the previous quarter. SCCC’s sales will reach Bt5,855mn, up 6% qoq but down 5% yoy. Lower energy costs (diesel oil and electricity) should help gross margins improve slightly to 30% from 29% in the previous quarter but this is a decline from the 33% achieved in 1Q06. 
 
SCCC management expects domestic cement demand and export volume this year to be flat at 7.6 mn tonnes and 5.3 mn tonnes, respectively. On the export side, India has just announced lifting import taxes on cement imports as domestic demand is higher than domestic supplies. India will be an export market for Thai cement in the future. Cement demand in 1H07 is expected to be hurt by the economic slowdown but pick up in the second half, aided by lower interest rates.