SCG upbeat on investment outlook; Thai fundamentals remain attractive

SCG upbeat on investment outlook; Thai fundamentals remain attractive
19 December 2006

Siam Cement Group (SCG), the country’s largest industrial conglomerate, believes Thailand’s economic fundamentals remain attractive enough for foreign direct investment (FDI) next year despite a military-appointed interim government and the baht appreciation. 
"In my view, democracy is not a condition that prioritises where FDI will go, but stability and economic conditions are," said SCG president Kan Trakulhoon.
He pointed out that China was absolutely not a democracy, yet it had become the world’s largest FDI recipient, with India touted as the next big FDI destination.
Mr Kan conceded that the rapid baht appreciation had hurt export-oriented businesses, including SCG, which earns 35% of its total turnover from exports. 
"With every one-baht appreciation against the US dollar, our profit decreases by 500-600 million baht," he said. 
However, SCG was trying to balance its business portfolio to offset the lost revenue, he added. 
Mr Kan said the group’s total sales revenue this year would reach 250 billion baht, a 6.5% increase from that of last year, mainly driven by the petrochemical business.
"The revenue projection for next year is being scrutinised by our top executives. Although we are confident that the revenue will grow to a certain extent, the hindering factor is an expected slowdown of petrochemical prices in the market."
This year, the petrochemical business accounts for more than 30% of the group’s total sales. Including equity income from about 50 affiliates in which the group has investments, the petrochemical business contributes about 55% of the group’s net profit. 
Mr Kan said the petrochemical business would still look good next year, even though prices might decline slightly. 
Apart from the petrochemical business, the group expects that its paper and cement businesses will improve next year. The steady growth of mid-priced housing projects and reconstruction after severe floods this year will spur the growth of the cement and building-materials market next year. 
Meanwhile, the construction of new government-sponsored infrastructure projects, particularly rail systems, is not expected to begin until 2008. 
Mr Kan said SCG had continuously expanded the businesses in its three core areas of expertise - petrochemicals, cement, and paper - across Southeast Asia, aiming to become a leading regional player. 
Its ongoing investment expansion worth 90 billion baht includes upstream petrochemicals projects worth US$1.2 billion, downstream petrochemical projects worth $450m, a cement plant in Cambodia worth THB4bn, and various acquisitions of paper plants in Indonesia and the Philippines. 
Our Asean focus is based on the size of the market. The region has a combined population of 560 million, less than the 1.3 billion of China and one billion of India, but has higher GDP per capita," said Mr Kan. 
Asean’s GDP growth would be 5-6% this year, compared to about 10% for China, he added. 
Tax reductions under the Asean Free Trade Area agreement, to take full effect in 2015, will also benefit the group, which has expanded business across the region.
To make its presence clear in the region, the conglomerate has updated its name and symbol to use SCG as the common name for all of its business groups. 
Under the rebranding, its five core business groups are called SCG Chemicals, SCG Paper, SCG Cement, SCG Building Materials and SCG Distribution. 
Published under Cement News