SCG to focus on Asean for investment
Amid the economic crisis in Europe and the sluggish Chinese and Indian economies, Siam Cement Group has to be careful where it chooses to invest. And that is why it is focusing its investment mainly in the Asean region, it says.
Kan Trakulhoon, president and chief executive officer, said that after visiting SCG’s business partners in France and Germany, he was confident that both these countries would survive the European economic crisis. Italy and Spain face greater difficulties. If Italy collapses, it will affect the world economy.
The European crisis will not affect SCG directly because the group’s exports to Europe represent only 1 per cent. However, the European slowdown over the last few years has affected the US$4.5-billion (Bt122-billion) petrochemical complex in Vietnam, with which SCG is involved. Funding from financial institutions has been delayed.
Kan said SCG paid more attention to the Chinese economy, which has recently slowed to 7 per cent annual growth. If growth in China’s gross domestic product falls below 6 per cent, it will affect the entire Asean region. As Chinese growth slows, its demand for products such as steel will also fall.
Steel is already cheap in China and if a large surplus develops, exports of steel to the still-growing Asean region should stimulate large infrastructure-type investments. Kan said a five-year Bt200-billion investment plan was still being considered by SCG’s board, and he indicated that more than half of that would be invested in the Asean region.
Apart from the petrochemical complex in Vietnam, there will be an investment in a cement plant in Myanmar with a capacity of 5,000 tonnes per day, as well as an accompanying power plant and logistics system, all close to Yangon. The total cost is estimated at Bt10 billion.
Myanmar President Thein Sein recently visited Thailand and confirmed that the project would be approved. SCG is ready to invest immediately.
The company also confirmed investment in another cement plant, also with a capacity of 5,000 tonnes per day, in Indonesia at a cost of Bt10 billion.
“SCG has an estimated Bt40 billion cash in hand that can be used to get the projects in both Myanmar and Indonesia going, as soon as the board of directors approve the plans. Regarding the petrochemical complex in Vietnam, it all depends on another shareholder being able to get his loan approved by a financial institution,” Kan said.
Currently, SCG exports total Bt56 billion per year, or 28 per cent of total sales. The Asean market takes the most at 39 per cent, with China including Hong Kong accounting for 18 per cent. Asean revenue, apart from Thailand, for the second quarter of this year was Bt8.82 billion, or 9 per cent of total revenue.
SCG posted Bt100.54 billion in revenue in the second quarter of this year, up 7 per cent year on year, thanks to the growth of related construction business. Net profit was Bt4.28 billion, down 43 per cent year on year. This was due to an inventory adjustment of chemical products that decreased by Bt2 billion because of oil-price fluctuations.
In the first half, SCG reported revenue of Bt203.425 billion, a 9-per-cent increase from the same period of 2011. Net profit amounted to Bt10.25 billion, down 39 per cent year on year.
The dividend for first-half operations is Bt4.5 per share.
