SCC announced a 4Q07 net profit of Bt5.8bn, up 23.5% YoY but down 23.5% QoQ. Stripping out extra gain, normalised profit was Bt5.7bn, down 2.3% YoY but up 1.6% QoQ. The results were 10-14% higher than expectation and market consensus due to i) higher-than-expected paper earnings following an adjustment to the selling price of paper and improved sales volume, ii) sale of assets of around Bt500m recorded in other income item.  
 
Cement EBITDA from operation was Bt2.2bn, down 15.5% YoY and 10.0% QoQ. The decline was attributable to sluggish domestic sales volume, poor margin from the cement export market, and rising energy costs.  
 
Analysts say SCC is likely to continue to report sluggish cement earnings for 2008 based on the expectation of flat demand for 2008 versus 2007 at 10.2Mt. The baht appreciation, high freight costs and weak US cement demand will probably lower its export sales volume to 7Mt in 2008 (down from 8.1Mt in 2007). SCC exports mostly clinker (at 70% of total export volume). The African market has become one its key destinations, accounting for 30% of total exports. SCC’s operating profits from the cement business declined from the year’s peak of Bt1.8bn in 1Q07 to just BtBt1.05bn in 4Q07.  
 
The domestic cement price increase (of Bt100-200/ton) should ease the impact from the surge in energy costs (+30% for coal costs alone from US$50/ton to US$65/ton). 
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