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SCG trims investment outlays as trade war dampens mood

Oct 24. 2018
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SIAM Cement Group (SCG) has reduced its investment budget for the rest of this year and next year in the face of the global economic uncertainty arising from the trade war between China and the United States, the group's president and chief executive officer Roongrote Rangsiyopash said.

For this year, the investment budget has been cut from Bt50 billion to Bt45 billion. 

After the company spent Bt35 billion of this allocation in the first nine months of this year, it |will spend about Bt10 billion for |the remaining months, Roongrote said.

In 2019, the group will invest no more than Bt60 billion and that level may be reduced subject to the deliberations of the board and management, he said.

However, the group's investment in a petrochemical complex in Vietnam will be maintained, in line with the investment plan, with a budget of Bt20 billion in 2019, he said, adding that this came under a total investment budget of about Bt60 billion.

“We have had to revise down our investment plan after we saw the business uncertainties posed by the trade war between the USA and China,” Roongrote said. 

“This will have a negative impact on the global economy and our business, as most of our customers have delayed their purchase decisions due to China moving its export products from the USA market to other regions, including the Asia and Asean markets.

“This is directly impacting our business in the Asia and Asean markets.”

He acknowledged the potential for the group to increase its exports of chemical products, construction raw materials and packaging to China and the United States as the trade superpowers reduced the flow of imports from each other. 

But the value gained from such sales would not offset the impact of China’s increased exports to Asean and elsewhere in Asia and the dampened demand from SCG customers that are likely to spend less amid the concerns over the global economy.

Drop in net profit 

With the trade conflict under way for months already, SCG has announced total revenue of Bt122.5 billion for the third quarter of this year, up 9 per cent from the same quarter of last year. 

However, net profit of Bt9.47 dropped 20 per cent from the year-earlier quarter. The decline was due mainly to asset impairment charges of Bt1.67 billion in accordance with accounting standards and higher naphtha costs, which surged with rising global oil prices. Without this impairment, SCG would have recorded Bt1.14 billion in profit for the period. 

Up to 25 per cent of its total revenue in the third quarter of this year, or Bt30.89 billion, came from the Asean market; this marks a gain of 15 per cent from the same period of last year.

The group's total revenue for the first nine months of this year came to Bt361.21 billion, up 7 per cent from the same period of last year. But net profit of Bt34.28 billion dropped 19 per cent from the first nine months of last year. Up to 24 per cent of total revenue from January to September, or Bt87.94 billion, came from the Asean market. Some Bt64.32 billion, or 18 per cent, came from regions outside Asean.

“Our sales have continued to grow thanks to strong demand for petrochemicals, construction raw materials, and packaging, but our raw materials and energy costs are also rising as a result of the global economy’s moderate growth," he said.

However, the group is maintaining its projection for business growth of 7 per cent this year compared with last year. 

Roongrote said that, with the global economic uncertainties, the group was unable to estimate its net profit for the last quarter of this year.

Meanwhile, the group is trying to manage the costs for its raw materials and management, while improving its production capacity and finding new markets in order to maintain its sales revenue and net profit growth, Roongrote said.


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