SCCC 4Q14 profit declines

SCCC 4Q14 profit declines
Published: 05 February 2015


Siam City Cement Co (SCCC) reported a decline 4Q14 profit after as its margin was further squeezed by higher power costs and a maintenance shutdown and weak domestic demand.

Thailand’s second-largest cement procure posted a 4Q14 normalized profit of only THB642m (US$19.7m), down 26.5 per cent YoY and 39.6 per cent QoQ. The results are attributed to 1) lower domestic demand, but volumes were partly mitigated by an increase in exports following the reopening of Kiln Line 1; 2) a fall in gross margins from 41.6 in 4Q13 and 43.9 per cent in 3Q14 to only 40.7 per cent from softer local cement prices, higher power costs per unit and 3) increased S&G expenses from 26.9 per cent and 25.7 per cent of sales in 4Q13 and 3Q14 to 29.5 per cent from maintenance costs.

Analysts at TISCO Securities commented: “In all, the results were much weaker than our expectation due to lower than expected gross margin and higher than estimated S&A expenses from plant maintenance during the quarter.”

Going forward, the research house expects SCCC’s earnings to improve this year driven by demand growth and a higher margin from lower energy costs following the recent plunge in oil prices.

It forecasts earnings to improve both YoY and QoQ due to expected demand growth YoY and high seasonal demand. However, to reflect weak 2H14 results, it has cut its 2015-16F earnings by 11 and 12 per cent after lowering assumptions for cement prices and gross margin but raising S&A expenses.

TISCO’s assumption for demand growth of five per cent per annum in 2015-17 driven by the government's infrastructure investment plan worth THB3trn for the next eight years. The revised forecasts suggests that SCCC's earnings should grow by 16, eight and six per cent in 2015-17F.