Siam City Cement targets regional expansion

In the last few weeks, Thailand's second-largest cement producer, Siam City Cement (SCCC), has made a significant series of acquisitions to expand its overseas cement portfolio, including its capture of Cemex Bangladesh, Holcim Lanka and a 65 per cent share of LafargeHolcim Vietnam. A stimulus for the increased acquisition plans came when Holcim sold its shares in the Thai cement producer in March 2015, enabling Singapore-based Jardine Cycle & Carriage to buy a 24.9 per cent share in SCCC.

Thailand has seen cement demand grow mainly through the government’s infrastructure projects with recent market reports and short-term forecasts indicating that more expansion can be expected as the government is envisaged to invest some THB2trn (US$57.4bn) in the country's infrastructure. However, growth is projected to be moderate as several large infrastructure projects remain uncertain and the recovery of private spending is not yet sustainable. But recent demand figures offer some positivity for the future. In 1H16 the Office of Industrial Economics recorded Thailand’s cement consumption at 18Mt, an increase of three per cent YoY. Furthermore, SCCC, forecasts in its 2015 annual report that cement consumption will rise by 3-4 per cent in full-year 2016 when compared with the previous year.

To expand its market share and ward off the consequences of recent capacity increases by domestic competitors, SCCC is streamlining production and seeking markets further afield. Following a reduction in operational costs, SCCC saw a net profit increase in 4Q15. For 2015 it reported total cement sales of THB24.26bn (US$698m), only slightly down on the THB24.64bn recorded in 2014.

SCCC had a solid performance in 1Q16 even if results were slightly lower than in 1Q15 on the back of intensifying competition and lower selling prices. The company reported net sales of THB8257m, compared to THB8420m in 1Q15, and net profits of THB1362m compared to THB1392m in 1Q15. In the 2Q16 net sales rose to THB16,043m and net profits reached THB2581m.

Increasing its domestic footprint
While SCCC operates just one integrated cement plant in Thailand, located in Saraburi, with six kiln lines and a cement capacity of 14.5Mta,  the company is continuing to invest in capacity in Thailand to improve its domestic market position.

Kiln Line No 6 underwent a new chlorine bypass upgrade last year at a cost of THB143m and the company embarked on a cement mill capacity expansion project. Kiln No 3 was also modified for incorporation of a waste heat recovery system.

Furthermore, in March 2016 SCCC made an agreement to acquire Cemex’s 0.8Mta cement plant in Saraburi. This transaction is understood to have been completed in May 2016 and the new company will now operate as Globe Cement Co Ltd.

Extending its overseas presence
Although the company has always been a strong cement exporter with Vietnam and Bangladesh among its final markets, it is now extending its overseas presence to Cambodia by building 1.5Mta of greenfield cement capacity under the name of Chip Mong INSEE Cement Corp in Kampot province. To establish the US$262m integrated cement works, SCCC entered into a joint venture with Chip Mong Group in December 2015. Upon completion in 2018, the project will operate as Chip Mong INSEE Cement Corp. SCCC has a 40 per cent share in the new company. CITIC Heavy Industries Co has been awarded the contract to build the cement plant which features a 5000tpd kiln.

The company has also raised its stake in the Bangladeshi and Sri Lankan cement markets. The newly-acquired Bangladesh operations of Cemex will now be known as Siam City (Bangladesh) Ltd. In Sri Lanka SCCC has also recently bought 98.95 per cent of the shares in Holcim (Lanka) Ltd for approximately US$400m and includes one integrated plant at Puttalam and a grinding plant in Galle.

The new investments, both domestic and overseas, are expected to enable SCCC to improve its competitiveness, both in the short- and the long term.