SCC says high energy cost may reduce its profits this year

Siam City Cement Plc (SCCC), the country’s second largest cement maker, concedes that rising energy costs could cut profit growth this year.

"We are trying to keep our productivity up," said Chantana Sukumanont, senior executive vice-president. "However, the rising production cost mainly derived from the skyrocketing oil price increase, has made it difficult for us to sustain our profit growth at a high level."  

Ms Chantana said rising production costs had already caused a decline in profit growth during in the second quarter of this year.  

In the first quarter, SCCC posted a net profit of THB1.22bn, up from THB1.20bn in the same period of 2004. The company has still not released figures for the second quarter.   She said the company’s production costs had risen 15 per cent since oil prices started going up, and ending the diesel subsidy would add another three per cent.  

Still, the company expects satisfactory sales volumes this year. In the first half, the company sold 4.5Mt of cement domestically and it set a target to sell an additional 4Mt in the second half.  

Despite the rising energy costs, local cement producers did not expect to be able to raise market prices because of stiff price competition, said Ms Chantana.  "Some cement producers are even driving their sales volume by cutting ex-factory prices, resulting in the reduction of retail prices in the market," she said.  Currently, the ex-factory price for cement averages THB1,850/t, slightly lower than the THB1,900 average in the same period of last year.