Fitch Affirms Siam Cement at 'A(tha)'; Outlook Stable

Fitch Ratings (Thailand) Limited has affirmed The Siam Cement Public Company Ltd's (SCC) national long-term rating at 'A(tha)', its national short-term rating at 'F1(tha)' and its senior unsecured debentures at 'A(tha)'. The Outlook is Stable.

The ratings reflect SCC's well-diversified business which helps support cash flow generation, particularly during the difficult operating period of its chemical unit in the past two years, Fitch said in a statement. Likely strong cement and packaging paper sales should partly compensate for the slow recovery of chemical earnings in 2013. Over the medium term, earnings contribution from cement and building materials is likely to increase (2011:39 per cent) and help reduce the impact from the cyclical chemical business. The company should be able to maintain its number-one market share in cement and building materials in Thailand over the next five years, based on its strong market position and high barriers of entry.

Fitch expects SCC's EBITDA margin to improve in 2013 from the previous year, helped by expected improvement in chemical EBITDA margin in H213 and higher earnings contribution from the cement and building material businesses.

Yesterday Siam Cement said it will spend THB40-50bn (US$1.3-1.7m) this year on its cement, construction material and logistics businesses, as it expands its regional presence ahead of the Asean Economic Community's implementation planned for in 2015.

Aside from a warehouse in Myanmar, SCG is awaiting permission to invest in a cement plant in the neighbouring country, president and chief executive officer Kan Trakulhoon said at a press conference yesterday.

The company's businesses in Asean, excluding Thailand, posted sales revenues of THB31.2bn last year, up 39 per cent from the 2011 level. Asean now generates eight per cent of the group's sales.