Siam Cement seen posting weak Q4 on shutdowns

Siam Cement seen posting weak Q4 on shutdowns
Published: 20 January 2006

Siam Cement(SCC) is set to report a 26 per cent fall in fourth quarter earnings on Wednesday due mainly to petrochemical plant maintenance shutdowns and high fuel costs.  Risks of a downturn in the petrochemical business and lower product spreads due to weak global demand suggest SCC’s 2006 earnings would be much the same as last year, although earnings of the cement and paper businesses are set to grow. 
 
High energy costs would eat into profits of the cement and paper businesses, with cement’s EBITDA likely to fall 10 per cent and paper’s nearly flat, he said. 
 
Profits for 2006 were expected to ease 3.7 per cent to 32.8 billion baht from a year earlier and 2007 profits to dip 3.5 per cent to 31.7 billion baht, according to 14 analysts polled by Reuters Estimates.  "It should not be a growth story for SCC over the next two years, although we expect cement and paper businesses to help cushion the negative effect of a cyclical low of petrochemicals," analysts said. 
 
The construction projects, on which the government plans to spend 1.7 trillion baht over five years, would need about 11Mt of cement, or 2.2Mt per year, accounting for about eight per cent of domestic demand in 2004, industry data shows. SCC’s cement business was expected to grow eight per cent, or double projected GDP growth this year excluding government’s mega projects
 
Shares in SCC, with an expected EBITDA contribution for 2006 mainly from cement, trade at around 8.8 times forecast 2006 earnings, below domestic rival Siam City Cement’s 19.9 times, India’s Gujarat Ambuja’s 22.68 times and Indonesia’s Indocement’s 20.8 times. ($1=39.80 Baht) local analysts report.