SCG Packaging Plc (SCGP), a Thai operator in the fully-integrated packaging chain in Southeast Asia, is concerned about the effects of geopolitical conflicts, especially in the Middle East, on energy prices, including oil and coal.
The company has increased its risk insurance and prepared measures to cope with the situation, which could affect businesses, said chief executive Wichan Jitpukdee
"We've decided to buy coal in advance to avoid price fluctuations in the future caused by the geopolitical conflicts. This is a factor we cannot control," he said.
The coal purchased in advance represents 50% of the company's total coal requirements.
SCGP will also use the advance purchase method for its consumption of oil.
The company is closely monitoring the impact of the Israel-Hamas war, the conflict between Iran and Israel as well as the tensions in the Red Sea.
"The Russian invasion of Ukraine caused a surge in global oil prices in 2022. Today, the world remains under the threat of emerging geopolitical conflicts. We must be prepared," said Mr Wichan.
SCGP expects its revenue to increase by 15% year-on-year, reaching 150 billion baht in 2024, driven by Vietnam's growth in demand for packaging and post-festival upticks in demand in Indonesia and Thailand following the Hari Raya Idul Fitri and Songkran holidays, respectively.
In the first quarter of 2024, revenue rose by 1% year-on-year to 33.9 billion baht due to better sales across the firm's integrated packaging and fibrous businesses.
Profit surged by 41% year-on-year, reaching 1.7 billion baht, partly due to efficiency improvements by adopting artificial intelligence in packaging paper production, which lowered operational costs.
SCGP intends to allocate an investment budget of 10 billion baht for mergers and partnerships in sectors with high growth potential, including consumer packaging, fibre packaging, healthcare-related businesses, and medical supplies and labware.
The packaging paper industry has seen a rise in demand in domestic and export markets, particularly from South Asian countries, while the fibrous business has experienced increased sales of foodservice packaging amid a recovery in tourism.
The company believes the overall packaging industry in Asean continues to steadily recover, propelled by favourable economic factors, manufacturing sector growth, improvement in exports and Thailand's thriving tourism.
Further signs of recovery are emerging for durable goods packaging such as apparel and footwear, thanks to decelerating global inflation.