When Siam Cement (SCC) announces its 4Q06 earnings on Jan 24, the company’s results will be disappointing with a 22% QoQ drop in net profit to Bt5,918m.
The company will record impairment losses of Bt700-900m on its petrochemical inventory and a Bt2.7bn charge on CRT’s remaining assets (some of which will be partly offset by a Bt1,600m gain from the recent sale of a 14.5% stake in SUS).
Meanwhile, the cement, building materials and paper business have also been affected by the economic slowdown and flooding. Excluding these extra items, SCC is expected to produce still good normalised profit of Bt7,918m, driven by its strong petrochemical sector with high spreads between HDPE-naphtha and PP-naphtha of $724/tonne and $728/t, respectively.
SCC earnings will be maintained over the next two years with only a slight impact from the petrochemical downcycle. This year, the cement and paper businesses will grow in line with GDP growth of around 3-5%, while energy cost pressure has eased.
Although SCC plans to invest about Bt88bn over the next 4-5 years, they are expected to continue to generate a cash flow of about Bt40-45bn per year enabling SCC to maintain its policy of annual dividend of Bt15/share.