SCG earmarks up to Bt40 bn for 2012 investment

These include the debottlenecking project at Chandra Asri Petrochemical (CAP), a new cement plant in Indonesia, and the acquisition of cement and building-material projects in Vietnam and Indonesia.

President and chief executive officer Kan Trakulhoon yesterday said the expected investment expenditure was higher than the company’s annual average of Bt30 billion, as SCG was looking at new acquisition projects in the region.

One definite investment this year is the acquisition of a 30.47-per-cent stake in Thai Plastic and Chemicals (TPC), the largest manufacturer of polyvinyl chloride in Southeast Asia, from CPB Equity, resulting in SCG holding 76.11 per cent of the company.

SCG will then have to conduct a tender offer for TPC’s remaining shares, for which |the cost may go as high as |Bt7 billion.

Kan said the other certain investment project this year was the establishment of a cement plant in Indonesia with a production capacity of 1.8 million tonnes per year.

The project will be finalised this year, with SCG currently seeking local partners.

The company also expects to conclude the merger and acquisition deal for a cement plant in Vietnam in the second half of the year, he said, besides which it will need to spend on the CAP debottlenecking project in Indonesia late in the year.

Last year, a number of cement operators in Vietnam offered SCG the chance to buy their plants, but none of the deals has yet been concluded. SCG is still pursuing its intention to acquire building-material plants in the region, focusing on Vietnam and Indonesia, and is also studying investing in a cement plant in Burma, he said.

SCG’s five-year investment budget during 2012-2016 remains Bt150 billion, Kan said, adding that its business assets in Asean stood at Bt46 billion, which is 12.5 per cent of overall company assets.

The company chief said SCG had recently invested in a cement-grinding plant in southern Vietnam to support production capacity of grey and white cement, and had also set up two aggregated-concrete plants in Ho Chi Minh City.

The Vietnamese acquisition will pave the way for SCG to market its cement brand in that country, benefiting its future cement business, he said.

"Vietnam’s cement industry is now in a state of oversupply, and it has had to export cement since 2010. If we can acquire cement plants in that country, we can use the operation for export," he added.

Kan said SCG targeted overall revenue this year of Bt400 billion. Cement volume this year is expected to grow by 5 per cent, while building-material business is anticipated to grow at least 10 per cent. Both segments are forecast to grow at similar rates to these for a few years.

Chaovalit Ekabut, SCG vice president for finance and investment and chief financial officer, said the investment in a cement plant in Indonesia would cost the company $120 per tonne, or about Bt7 billion for the total project. Most of the expenditure will commence next year.

SCG yesterday announced its fiscal-year 2011 results, posting increased revenue but lower profits, largely because of a major non-recurring gain from divestment in the previous |fiscal year.

Other factors contributing to difficult earnings in the fourth quarter of last year were a trough in chemical margins and flood disruptions. Sales of high-value-added products continued to grow, contributing 32 per cent of sales in the last fiscal year as SCG continues to place further effort on research and development with an allocated budget of Bt2 billion in the current fiscal year, the company said.

SCG and its subsidiaries posted Bt368.5 billion in its sales revenue in fiscal year 2011, up 22 per cent primarily thanks to higher product prices in all business units.

Profit for the year decreased 27 per cent to Bt27.2 billion, as there was a non-recurring gain of Bt9.9 billion from the divestment of non-core assets in the previous fiscal year.

SCG Chemicals reported sales revenue of Bt192 billion for the year, up 34 per cent as a result of higher volume and selling prices.

Profit amounted to Bt11.1 |billion, a decrease of 51 per cent due to the non-recurring divestment gain of Bt9.9 |billion.

SCG Cement reported sales revenue of Bt54.2 billion, an 11-per-cent increase, thanks to solid pricing in both the domestic and export markets.

Profit increased 21 per cent to Bt7.2 billion as a result of cost reduction and high value-added product development.