Healthy Q2 earnings likely for SCC

Siam Cement Plc is set to report healthy second-quarter earnings thanks to the higher petrochemical prices and rising demand for its cement and building materials business. “We expect earnings growth to be mainly driven by a) a stronger operation of the petrochemical business from higher prices of by-products, and b) interest savings from lower financing costs,” Jiraporn Bumrungchatudom, analyst at Phatra Securities, said. She has the highest earnings forecast of 7.085 billion baht for the second quarter.  The second and third quarters for Siam Cement are usually the low season as its building materials segment, which includes cement, ceramics and a host of other products, shows a sales decline due to the rainy season and a higher number of holidays.

“Net profit could be at least 7 billion baht, flat quarter-on-quarter and up 100 percent year-on-year; dividends from associated companies could push the profit numbers higher,” Maria Lapiz, analyst at Finansa Securities, said.  The cement unit, which contributes just over a third of the company’s earnings before interest, tax, depreciation and amortisation (Ebitda), is likely to see a seasonal slowdown during the second and third quarters.

“We expect the domestic sales volume to fall slightly from 2.6Mt in the first quarter to 2.5Mt in the second quarter, with the average domestic selling price to steady at 1800 baht a tonne,” Sansanee Srijamjuree, analyst at Tisco Securities, said, adding that she expects Ebitda in the cement unit to fall by 3.6 percent quarter-on-quarter, but to rise 23 percent year-on-year. During the second quarter, the cement unit’s Ebitda stood at 3.63 billion baht from the 10.51 billion baht for the entire group. The cement business’s Ebitda during the second quarter of 2003 stood at 2.85 billion baht, out of the 7.71 billion baht.

Looking forward, most analysts say that the driver for SCC’s earnings would be its cement unit as demand for its product increases in line with the government’s plans for spending on infrastructure. The government plans to spend an average of 400 billion baht a year over the next four years to build infrastructure projects, and, with idle capacity of around 50 percent, SCC is well poised to benefit from any such spending.