SCG merges arms, plans $1.5-billion regional stakes

The group yesterday announced the restructuring of its business with the merger of its cement, building-materials and distribution arms into a new unit called SCG Cement-Building Materials.
SCG president and chief executive officer Kan Trakulhoon said the move was in line with the group’s strategy to expand its cement and building-material business into the region to cash in on the coming Asean Economic Community, as well as to promote its investment flexibility.
The regional investment includes a $400-million cement plant in Indonesia with annual capacity of 1.8 million tonnes. Construction is scheduled for completion by the end of 2015.
The group will also invest another $400 million in cement and power plants and logistics systems in Myanmar. That project is awaiting approval of the Myanmar government.
Both the Indonesia and Myanmar ventures are greenfield projects, including the sourcing of land and construction.
Another investment project is the second phase of construction of a cement plant in Cambodia. The plant will have annual capacity of 900,000 tonnes, and the value of the investment is between $170 million and $180 million. Construction will be finished by 2015.
Kan said SCG was also considering the second-phase expansions of its cement plants in Indonesia and Myanmar, worth about $600 million in total, after the first phases are completed. The expansion is aimed at serving domestic demand in the two countries, which increases by about 10 per cent annually on average.
Kan said the group’s cement and building-material businesses were considered to provide high-value-added products and services (HVA), which now account about 40 per cent of its portfolio and have a high potential for growth.
He added that such HVA business generated about Bt154 billion in combined revenues or 36 per cent of the group’s turnover last year. The HVA business also generated net profit of Bt13.1 billion last year, accounting half of the group’s total. The group expects the revenue contribution from HVA products to increase to more than 40 per cent in the next five years.
In a filing to the Stock Exchange of Thailand yesterday, SCG announced that its board of directors had approved a Bt2.4-billion investment to increase its HVA technological capability, while increasing the production capacity of LDPE (low-density polyethylene) by 60,000 tonnes per year to 152,000, with expected completion by 2016.
This investment in world-class technological capability allows for the production of coating-grade LDPE, used prevalently in high-quality packaging for the food industry (such as milk and fruit-juice cartons). It is considered an HVA product that has a high potential growth rate.
This transaction is exempt from the rule of information disclosure concerning the acquisition and disposition of assets of listed companies and is not a connected transaction.
Kan said the group recently had acquired an 85-per-cent stake, worth Bt7.2 billion, in Prime Group Joint Stock Company, a leading ceramics manufacturer in Vietnam. The move makes SCG one of the largest ceramics manufacturers in the world with annual combined capacity of 225 million square metres.