Siam City Cement Plc (SCCC), Thailand’s country’s second largest cement maker, expects its domestic sales volume this year to rise six per cent to over eight million tonnes, thanks to growth momentum in the residential construction sector. President Leo Mittelholzer said the company estimated domestic sales volume this year at 8.3Mt, a 6 per cent increase year-on-year, slightly above the estimated cement-consumption growth of five per cent.
Real estate, particularly residential projects targeting low-to medium-income earners, would be the main engine driving cement consumption this year while the high-end residential market has slowed down. "The potential in the property market will shift from high-priced units to lower market," he said. Total cement demand in the country is forecast to increase to around 30Mt from 28.1Mt last year. Mittelholzer said SCCC’s export volume of 5Mt last year exceeded the target by 1Mt, thanks to the robust growth in Vietnam and the Middle East. But since its priority is domestic demand, export sales are expected to decline slightly to 4Mt this year. The company has reportedly run at its full capacity of 14.5Mt since last year. Mittelholzer said SCCC’s main concern, as with other cement makers, was increasing energy costs, which forced it to work hard to maintain its margin.
The company last year reported revenue of 22.7 billion baht, an increase of 7.1 per cent from 21.2 billion in 2004. Its net profit declined slightly to 4.07 billion baht from 4.14 billion. The higher earnings in 2004 were due mainly to extraordinary income from the sale of its affiliate, Royal Porcelain. Excluding that item, net profit in 2004 was 3.9 billion baht. SCCC will focus on maintaining its margin by continuing its alternative-fuel programme to help reduce fuel costs, with a new US$10m investment in its waste management arm EcoSiam.
Local cement manufacturers still need approval from the Commerce Ministry to lift the sale price of cement, for which prices are controlled by the ministry. But to date, the ministry has rejected any proposal to move up the price. "So far, the gap between the discount price and the ceiling price is quite narrow at 150 baht per tonne from 450 baht normally," Mr Mittelholzer noted. Analysts believe the profit margins of all cement makers will improve slightly this year as they could no longer bear the cost burden.