SCG upbeat on revenue outlook: Petrochemical value, paper prices on rise
Jul 06, 2010 (Bangkok Post - McClatchy-Tribune Information Services via COMTEX) --
Copyright (C) 2010, Bangkok Post, Thailand
Siam Cement Group is projecting better-than-expected revenue this year due to high volumes at its new startup petrochemical plants and the skyrocketing prices of paper, despite forecasts of weaker petrochemical prices in second half.
The country's largest industrial conglomerate has also been in talks to acquire more than one corrugated board plants in the Philippines with each plant costing about 700 million baht, said president and chief executive Kan Trakulhoon yesterday, declining to give further details.
The spread between naphtha and high-density polyethylene (HDPE) has narrowed from $600 a tonne in the first quarter to $400 at present because of new supplies from the Middle East and China. This will also make the price of the final products cheaper, Mr Kan said.
"We expect margins in our chemical operations to decline in the second half of this year, but revenue from this business will be higher than last year," he said.
Dimmer prospects in the chemicals business, now SCG's largest generator of revenue and profit, will be offset by the rising prices and production volumes in its paper unit which this year will have additional output from plants in Khon Kaen and Vietnam.
"Overall, our revenue will definitely beat the forecast of 10% growth this year, thanks mainly to increasing financial results in the paper business and our high-value added petrochemical products."
Mr Kan also said a new cracker, which the company began testing in the first half, would run at 70% of capacity. The plant can produce 1.7 million tonnes of ethylene and propylene a year. That will help lift both the sales volume and revenue from the group's chemical businesses.
"With the new cracker, we triple the size of high-margin petrochemical products," he said.
Siam Cement's first-quarter profit jumped 32% year-on-year to 6.86 billion baht. The company owns 67% of the new plant, with the remainder owned by Dow Chemical Co.
SCG's $4-billion petrochemical complex in Vietnam is being revived after the plan to build Vietnam's biggest petrochemical plant, announced in March 2008 was stalled by the global credit crisis, he said.
Details in terms of shareholder agreement, project configuration and financial arrangement will be completed within three to four months. Investment is set to begin next year.
The original agreement outlined that Vietnamese partners will hold 29% while SCG and other non-Vietnamese parties, including Thai Plastic and Chemicals, will jointly own 71%. Qatar Petroleum International recently became a new partner in the project.
The complex, in Vietnam's southern province of Ba Ria Vung Tau, is being built to meet rising demand for plastics. It will have annual capacity of 1.4 million tonnes of olefins.
Talks are also taking place on merger and acquisitions opportunities in Southeast Asia's building materials business as part of the group's strategy to become a market leader by 2015. The group currently plans to build a new cement plant in Indonesia and acquire a cement maker in Vietnam.
SCG's research and development will this year exceed one billion baht for the first time, up from 880 million baht last year.
Domestic sales account for 67% of SCG's revenue, with exports at 25 % and plants outside of Thailand contributing 8%.
Domestic sales will languish at less than half of their potential until the petrochemical plants in Map Ta Phut in Rayong province, which have been suspended by an Administrative Court ruling, are allowed to continue.
Shares of SCC closed yesterday on the Stock Exchange of Thailand at 261 baht, down one baht, in trade worth 193.14 million baht.
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