SCCC fears sharp drop in 2007 profit, Thailand

SCCC fears sharp drop in 2007 profit, Thailand
Published: 03 November 2006

Siam City Cement Plc (SCCC), a local unit of Holcim, is pessimistic about its business outlook next year since infrastructure projects have stalled.  
"The best case could be zero growth in sales revenue," said Chantana Sukumanont, a company executive vice-president.  
Ms Chantana said the local cement industry had experienced hardship this year due to several negative factors, including political turmoil during the first three quarters, oil price hike, widespread flooding, and a cyclical downturn for the economy.  
Next year, she said, the absence of large infrastructure projects under the temporary government would be a major concern.  
"The way we see it, the new government centre in Bangkok, worth 13 billion baht on Chaeng Watthana Road, and its related facilities will be the only large project to be continued next year," she said.  
This year, the company benefited from the Suvarnabhumi Airport rail-link project and the new road to the airport.  
Ms Chantana said SCCC was confident it could meet a revenue target of 22 billion baht this year, equal to last year, despite the fact that the business situation was now tougher.  
She said, however, that the company was concerned about profit margin, which was expected to decline significantly, mainly due to rising energy costs.  
So far this year, the company has experienced a 30% increase in energy costs compared to last year.  
"What we have to do is find a way to reduce operating costs as much as possible," she said.  
To facilitate its cost-reduction programme, SCCC has conducted a plant audit to inspect all operating processes of its manufacturing plants to maximise efficiency and minimise operating costs.  
The scheme aims to keep its margin higher than that of competitors.  
Ms Chantana forecast domestic cement consumption to drop by 3-5 per cent this year from 28.1Mt last year, due to the aforementioned negative factors.  
"This year, unusual flooding caused us to pay compensation for our inventories damaged by flood, double compared to normal flooding in previous years. The company will have to pay compensation of up to six million baht this year," she said.  
The company had set a sales target of 12.5Mt this year. Of the total sales volume, 65% is domestic and 35% exported.