Siam Cement Group (SCG) has revised up its 2014 revenue forecast by 10 billion baht to 486 billion, but the baht's appreciation and rising raw material prices could hurt net profit.
President and chief executive Kan Trakulhoon expects a rebound in SCG's petrochemical business will help to account for flat growth in cement sales this year.
Kan Trakulhoon, president and chief executive of Thailand's top conglomerate, cited better-than-expected revenue in the second quarter and the company's push for exports as its factories run at full capacity.
SCG's key petrochemical business is also rebounding, with significant growth expected in the fourth quarter.
In the three months to June, sales rose by 17% year-on-year and 2% quarter-on-quarter to 125 billion baht thanks largely to increased chemical prices.
Net profit, however, was down 14% year-on-year but up 2% from the first quarter to 8.8 billion baht as higher seasonal dividends from subsidiaries boosted the quarter-on-quarter performances of all businesses.
For the six-month period, revenue grew by 14% year-on-year to 246 billion baht, but net profit decreased by 10% to 16.9 billion due partly to lower equity revenue from associated companies.
"We've recently upgraded our revenue forecast for all of 2014 by 10 billion baht from the original forecast of 476 billion. Nonetheless, concerns are now emerging as the baht continues to move upward, from 32 to the US dollar in the second quarter to 31.70 now," said Mr Kan.
"At the same time, rising costs of raw materials such as naphtha have squeezed the margin."
He said SCG now foreseeing domestic cement demand contracting by 2-3%, making full-year consumption showing flat growth from last year or 1% at best. In the second quarter, cement demand was flat compared with the forecast of 4-5%.
This year, cement exports are likely to be close to 5 million tonnes, up from 4 million tonnes last year, mainly to Myanmar and Cambodia.
Some 2.5 million tonnes were shipped abroad in the first half of this year.
Although the junta is pushing for development of high-speed trains, it would take up to 15 months for cement and building materials to be needed for the project.
SCG has so far maintained its five-year capital expenditure unchanged at 250 billion baht, half of it to be spent in Asean with four cement factories under development in Myanmar, Indonesia, Cambodia and Laos. This year it will spend 50 billion baht of it, with 22 billion already spent in the first half, Mr Kan said.
SCG shares (SCC) closed yesterday on the Stock Exchange of Thailand at 452 baht, down six baht, in trade worth 913 million baht.