Siam Cement’s Profit Surges On Strength in Petrochemicals

Siam Cement’s Profit Surges On Strength in Petrochemicals
Published: 28 April 2005

Siam Cement PCL, Thailand’s dominant industrial conglomerate, said net profit for the first quarter rose 36 per cent to 10bn baht (US$253m) from 7.36bn baht a year earlier, mainly because of robust growth in petrochemicals income.

Consolidated per-share earnings rose to 8.33 baht from 6.13 baht in last year’s first quarter.

The petrochemical unit recorded a net profit of 4.89bn baht in the latest quarter, up from 3.23bn baht a year earlier.

The cement business also posted strong growth, while rising raw-materials costs in the pulp-and-paper division resulted in a slight decline in its contribution to consolidated earnings.

The cement division contributed 2.11bn baht in net profit during the quarter, up from 1.84bn baht a year ago, and pulp and paper earned a net profit of 1.09bn baht, down slightly from 1.16bn baht.

Despite the better-than-expected first-quarter performance, Siam Cement maintained its 2005 sales-growth target of 10 per cent, citing a possible economic slowdown in coming quarters, President Chumpol NaLamlieng said. Revenue in 2004 totaled 192.4bn baht.

"Higher oil prices and rising interest rates could affect the local economy and our business in certain divisions," Mr. Chumpol said.

Despite higher fuel costs, Siam Cement pledged to keep cement prices unchanged during the first half in a bid to help curb any negative effect on local consumption, Mr. Chumpol said. Any price increases from the second half onward will depend on energy costs, he said.

Analysts have said Siam Cement’s earnings may be hurt by a potential drop in petrochemical prices given its dependence on that business, which accounts for about 40% of its earnings before interest, tax, depreciation and amortization.

"I can assure you that the petrochemical business outlook will remain robust for the rest of the year," said Kan Trakulhoon, the company’s vice president for finance. He expects petrochemical prices to remain high until 2007 as many crackers in the Middle East have delayed plans to start operation of new plants. Meanwhile, new supply from China likely will be absorbed by the current excessive demand.

Siam Cement has set a 2005 investment budget of 10bn baht to 15bn baht, mostly for acquisition purposes.

The company is seeking to expand, considering a stake in an Indonesian petrochemical firm and a paper producer in Southeast Asia. The company’s main acquisition targets for the paper business are in the Philippines, Malaysia and Indonesia, Mr. Kan said, though he declined to name specific companies. Siam Cement has no acquisition plans for its cement business.