SCC: 1H05 earnings remaining solid

SCC: 1H05 earnings remaining solid
Published: 01 April 2005

Siam Cement (SCC)’s management expects domestic cement sales volume to expand more than 10 per cent YoY in 1Q05, while the company target sales growth for 2005 domestic cement to be around 8-10 per cent, against growth forecast of 10 per cent. In addition, SCC expects sales of ready-mixed concrete in 2005 to expand by 25 per cent YoY. SCC targeted export cement volume of 7Mt for 2005, up 16 per cent from 2004’s 6Mt.  

Average domestic cement prices stayed at Bt1,600 and Bt1,700 per ton in 1Q05, a slight drop from 4Q04. SCC has no plans to increase prices in the near term as there is no major increase in its cement production cost. In addition, it has a cost advantage over its competitors. However, if other cement producers start to raise their prices, SCC will follow. (Average) export prices should increase by 10 per cent to US$30/t. The main increase will be from bulk and bagged cement, while clinker prices increased marginally. SCC’s cement exports ratio is 50:50 for clinker and bulk & bagged.  

At its current price, SCC’s valuations become attractive with PE of 8.1x this year. Rising cement demand from public infrastructure projects, high petrochemical margins and a sharp reduction in interest cost should continue to support future strong earnings.