SCG pares revenue projection due to volatile oil, high baht
SET-listed Siam Cement (SCG) has downgraded its 2019 revenue projection to drop 8% because of weaknesses in its petrochemical business.
Roongrote Rangsiyopash, president and chief executive, said prices of petrochemical products have continued to decline even though SCG’s sales volume is stable.
Moreover, SCG suffers from many uncertainties in the global economy such as volatile pricing of global crude oil, the continuing US-China trade war and widespread political tension in the Middle East. The baht’s appreciation also contributed to the downgrade, said Mr Roongrote.
“In addition, there are new petrochemical facilities in China, increasing supply in the global market, which pulls down overall prices.”
As of September, SCG’s petrochemical business made up 41.1% of total revenue.
SCG reported sales in the third quarter of 110 billion baht, down by 10% from the same period last year, primarily because of lower chemical product prices.
Profit for the period totalled 6.2 billion baht, a drop of 35% from the same period last year, resulting from the dip in performance by SCG’s chemicals business thanks to lower product margins.
For the first nine months, SCG posted sales revenue of 332 billion baht, a drop of 8% from the same period last year. Profit for the period totalled 24.9 billion baht, a dip of 27% year-on-year.
The petrochemical business in the first nine months totalled 136 billion baht, a decrease of 19% year-on-year, attributed to lower product prices.
Profit for the period totalled 13.3 billion baht, a drop of 44% year-on-year, thanks to lower product margins.
SCG is not worried about the US suspending benefits under the Generalized System of Preferences for Thailand because SCG petrochemical exports to the US comprise less than 5% of overseas revenue.
SCG’s revenue from businesses outside of Thailand, including export sales in the first nine months, totalled at 135 billion baht, a dip of 12% year-on-year. Overseas revenue made up 41% of total revenue.
Yesterday, SCG submitted a letter to the Stock Exchange of Thailand stating that its board of directors approved a plan to offer newly issued ordinary shares in SCG Packaging (SCGP) as an IPO listing on the stock market.
IPO shares will not exceed 30% of SCGP’s paid-up capital after the capital is increased, whereby the proceeds will be used by SCGP for investment in business expansions domestically and internationally, as well as for the purposes of financial restructuring and the working capital of SCGP.
SCG will remain the majority shareholder of SCGP, owning at least 70% of the paid-up capital and SCGP will remain SCG’s subsidiary.
Mr Roongrote said SCG aims to accelerate capabilities in the packaging business and increase growth across Southeast Asia and other regions.
“Southeast Asia’s consumption rate and purchasing power for consumer goods, food and beverage and e-commerce products are expected to continue rising,” he said.
“Thailand, Indonesia, the Philippines and Vietnam are high-growth markets.”
In 2018, SCG’s packaging business in Southeast Asia was valued at US$50 billion.
Mr Roongrote said this transaction for SCGP is also expected to generate benefits and maximise value for SCG in the long run.