Siam Cement

Siam Cement Plc (SCC)

Slightly above estimate: SCC reported a 4Q11 net profit of Bt3.2bn (EPS Bt2.67), down by 81% YoY and 57% QoQ. Excluding non-recurring items, such as divestment gains, the reversal of tax credits and extra flooding expenses, core earnings would be Bt3.84bn, down by 43% YoY and 39% QoQ.
Results highlights: All businesses, except Cement, performed weaker YoY. Consolidated EBITDA from the operation declined by 25% YoY and 22% QoQ to Bt7.45bn, led by sharp falls in the performances of the Chemical and Building Materials divisions (see EBITDA breakdown, Figure 2).
- Strong cement demand in the south fully offset the effect of weaker demand in central Thailand during the Oct-Nov flooding. Domestic sales volume rose 7% YoY in 4Q11, making for 3% for FY11.  The net ex-factory price remained stable QoQ at 1,800-1,850/tonne but was higher than the Bt1,750/tonne posted for 4Q10.
- Weak demand for derivative products and global economic concerns meant very thin chemical spreads in 4Q11. So, although polyolefins sales volume increased by 16% YoY and 9% QoQ to 433K tonnes, due to an export push, Chemical EBITDA still declined by 41% YoY an 8% QoQ.
- Paper sales dropped 9% QoQ—volume dived during the flooding and Asian paper prices slipped—but were flat YoY, as Vietnamese volume rose.
SCC announced a final dividend of Bt7.5 (XD on April 5), making for an FY11 dividend of Bt12.5 (55% payout)
Outlook: All businesses should perform better in 1Q12, led by restocking demand for chemicals, post-flooding rebuilding and a recovery in demand for packaging paper and corrugated containers.
What’s changed? We have calibrated our model to be in line with actual operational trends. As such, we trimmed our FY12-13 earnings forecasts by 1% and 3% respectively.
Recommendation: SCC’s short-term performance might look unexciting, but it has a great long-term outlook. We regard it as one of the best long-term growth plays on the SET and recommend taking positions ahead of the super-cycle kicking in next year.