Siam Cement to invest, but not in cement

Siam Cement, Thailand’s largest industrial conglomerate, plans to invest up to US$390m this year, but most of the money to be used for the acquisition of paper and petrochemical firms, Kan Trakulhoon, Siam Cement’s vice president for finance, told Dow Jones Newswires in an interview.

Kan, who is tipped to replace Siam Cement’s president Chumpol NaLamlieng after he retires around the end of 2005, said the company is equally interested in takeover opportunities or joint ventures with partners in Thailand and abroad.

Siam Cement targets a sales increase of around 10 per cent in 2005, given rising demand in its core products and higher prices thanks to the country’s strong economic growth. The Thai government has set a target for 2005 gross domestic product growth of 5.5-6.5 per cent. Kan said the company’s cement business this year will likely grow around 8-10 per cent, thanks to state-sponsored infrastructure projects. The government of Prime Minister Thaksin Shinawatra, which is expected to be re-elected at the Feb. 6 general election, has vowed to spend some THB1 trillion in major infrastructure works over the next five years.

The reconstruction of properties in southern provinces hit by last month’s tsunami disaster will also boost sales of the company’s cement and construction materials. But how much reconstruction will take place this year is still uncertain, Kan said.

Thailand’s cement consumption in 2004 is estimated at around 28Mt. The utilisation rate of the company’s cement plants stands at about 80 per cent of its total capacity at 23Mt. It targets to export nearly 7Mt of cement this year, up from around 6Mt in 2004.

"The cement business will continue to post growth in the high single digits over the next 2-3 years, due mainly to heavy construction activity. This will help us reach full production capacity over the same period," Kan said. Once cement production reaches full capacity, exports will be reduced to serve domestic demand instead.