Positive earnings outlook for Siam Cement, Thailand

Siam Cement Plc (SCC) of Thailand is expected to post good earnings growth thanks in part to domestic demand for cement and building products remaining strong.

According to analysts at KGI Securities, SCC is likely to report a 1Q13 net profit of THB7.5bn, up 25.9 per cent YoY and 8.7 per cent QoQ thanks to a solid performance from the cement unit and clear signs of upturns for the chemical and paper units, which should help increase 1Q13 EBITDA margin to 11.4 per cent from 9.6 per cent in 1Q12.

Cement volumes seen rising

Looking specifically at its cement division, SCC has maintained its conservative growth target for local cement demand in 2013 at 5-10 per cent YoY YoY from 31Mt in 2012. However, KGI sees SCC's cement volume likely rising 10-15 per cent YoY in 1Q13 which is in line with the industry's YoY growth of 14 per cent during January-February, 2013. This is thanks to strong growth from all key sectors such as residential, government and commercial. Meanwhile, local cement price should increase slightly to THB1800-1850/t This should help sustain EBITDA margin at 24 per cent, compared to 24.3 per cent in 1Q12, notes KGI.

Bright outlook

KGI expects SCC’s good earnings momentum to continue, and maintain its 2013 net profit forecast of THB30.6bn, up 29.9 per cent YoY. Key supports are i) a significant improvement in chemical spread as shown in 1Q13 which implied that the trough in the chemical industry has already passed, and ii) good domestic consumption to continue and help underpin earnings growth for SCC's cement and paper units.

“We also see more earnings upside as the company continues to invest in ASEAN countries and some of its overseas investments start bearing fruit over the next few years,” KGI added.