To maintain its operating margin at a time of high energy prices, Siam City Cement Plc (SCCC), Thailand’s second largest cement maker, part-owned by Holcim, is putting more focus on high value-added products rather than relying on conventional types of cement, according to managing director, Leo Mittelhozer.
Increasing energy costs have shrunk the company’s profitability, while at the same time, tough competition has kept cement prices low. As a result, SCCC yesterday introduced a new mortar cement called Insee Mortar Max. The product is designed for specific applications and as a replacement for wood in floor laying, and aimed at raising its product margins.
"Domestic cement operators are struggling with low market prices due to fierce competition, we don’t want to be stuck in the situation like this, so we are seeking other opportunities," Mr Mittelholzer said yesterday. "Although the higher margin from the company’s new value-added products cannot compensate for the reduction in the overall margin derived from soaring production costs, it is the best way to go."
The company expects sales of its new mortar cement will be around 10,000t a month this year. Meanwhile SCCC’s subsidiary, Conwood Co, a wood replacement materials producer, has targeted sales growth of 60 per cent this year and aims to see an increase of its market share to 20 per cent from 14 per cent currently. Both products would generate average margins of 15 per cent.
SCCC is maintaining its sales target at 13.5 million tonnes of cement this year, of which 27 per cent will be shipped overseas. SCCC recorded 2.4 billion baht in first-half net profit, up 10% from 2.2 billion in the same period last year. Its sales rose 14 per cent to 11.4 billion baht.