Solid volumes with accelerating prices in Thailand

Solid volumes with accelerating prices in Thailand
Published: 09 May 2005

Domestic cement sales hit a post-crisis record at 3.1Mt (+22% YoY) in March. 1Q05 cement sales were strong at 8.4Mt, up 18% YoY and 22% QoQ. Strong cement sales are attributed to continued construction activity from residential and commercial sectors as well as infrastructure works, i.e. new airport, bridges and flyovers.  
Cement prices on an uptrend: The market survey indicates that cement price increases of Bt200/tonne for mixed cement and Bt240/tonne for bagged portland cement. This includes a Bt30/tonne increase in transportation in March after the diesel subsidy is lifted. Cement companies are currently achieving Bt1,500/tonne for mixed cement (+Bt150/tonne year-to- date) and Bt1850/tonne for bagged portland cement (+Bt190/tonne year-to-date). Cement producers also expect a further increase in prices this year.  
Siam City Cement (SCCC) will announce 1Q05 earnings within this week. The company is expected to post net income of Bt1.1bn, up 23% QoQ but down 7% YoY. 1Q05 earnings should account for 22% of full year estimate. Cement volume and cement prices are expected to pick up QoQ in 1Q05. However, cement prices are still weak compared with 1Q04. This explains a YoY decline in net profit.  
Both Siam Cement Co (SCC) and SCCC are preferred on the back of their strong operations. The risks to achieving share price objectives for SCC are the potential for intermittent cement price wars and the cyclical nature of its paper and chemical operations. Other risks to achieving share price objective are a potential temporary price war and the possibility of new cement plants