Energy costs trim Asia Cement growth

Energy costs trim Asia Cement growth
Published: 26 September 2005

Asia Cement Plc, Thailand’s fourth largest cement maker, estimates a slight decline in sales growth to seven per cent this year from 10 per cent last year, due mainly to the effect of higher energy prices, according to managing director Nopadol Ramyarupa. He said the company targeted sales this year of up to five billion baht and a net profit of at least one billion, compared with profit of 900 million baht last year.

Asia Cement, in which Bangkok Bank is a major shareholder, has noted a decline in domestic cement consumption this year compared with the past three years as a result of oil prices, which have hurt purchasing power. Mr Nopadol forecast that domestic cement consumption would be around 25.5Mt this year, the same as last year’s total. The figure is far below the 28Mt estimated by the industry’s top two players, Siam Cement and Siam City Cement.

’’Although demand for cement in the domestic market was quite strong over the past three years with double-digit annual growth, the current situation has been changed,’’ he said. Roberto Callieri, Asia Cement’s co-managing director, forecast 4-5 per cent growth in local demand next year.

Despite the uncertainty in the industry, Asia Cement is still planning to list on the Stock Exchange of Thailand, according to Mr Nopadol. However, he said there was no firm timetable since the company had no immediate plans for capacity expansion and thus no pressing need to raise funds.

He said the company would not commit to a capacity expansion project unless it obtained a new limestone concession to secure its raw material supplies. ’’Once we determine a capacity expansion investment, we will raise funds through the stock market.’’

Asia Cement has total capacity of seven million tonnes per year, including the two million tonnes from Jalaprathan Cement Plc with which it merged. The company’s total market share is 14 per cent. In 1999, the Italian-based Italcementi group bought a 50 per cent stake in Asia Cement from Bangkok Bank which currently holds the other 50 per cent in the company.

Mr Nopadol said the company continued to focus on the domestic market even though growth was slowing. He also complained that government price controls on cement were a hindrance at a time when producers’ operating costs had risen by 30 per cent. ’’We are trying to reduce our costs by using renewable fuels but that only reduces part of the increasing costs,’’ he said.

The Internal Trade Department recently rejected an application for an increase of local sales prices by 100 baht a tonne, requested by the cement industry club of the Federation of Thai Industries. Authorities said they did not want consumers to face additional cost burdens.

Retail prices of cement are currently 1500 to 1600 baht per tonne.

Asia Cement, meanwhile, is promoting new high-margin products in order to maintain its margin. It hopes to see its Lotus Special masonry cement capture a 15 per cent market share in the premium segment within two years. For the first year, it expects masonry cement sales of 200,000t, growing to 300,000t in the second year.