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Mixed bag, even for cement

The returns to shareholders of listed companies in the Building and Furnishing Materials sector were mixed over the past year and industry experts say that a full recovery is some years away.

Vincent Bichet, managing director of Siam City Cement, said the sector very much reflected the economy. In a recession, the sector would plunge ahead of other industries but, when the economy picked up, it would lag others in the pace of recovery.

As a result, demand for building and furnishing products was weak. Prospects for next year were not much brighter, Mr Bichet said, with demand, particularly for cement, likely to remain about the same as this year.

Siam City Cement has turned to the Internet to lift sales, with two-thirds of its domestic turnover now achieved through online contracts. The two companies most closely associated with the sector were in negative territory for one-year returns _ Siam Cement at -1.8% and Siam City Cement at -8.6%. Among all of the 23 firms in the sector, Vanachai Group, a fibre-board producer, led with a one-year return of 229.5%. It was followed by Asian Property Development, a niche homebuilder that has spun off its original precast concrete floor business, at 190%.

Sobson Ketsuwan, the president of Siam Cement Industry Co, the cement arm of the Siam Cement Group, said the property slump would continue next year, along with an oversupply of land in industrial estates. However, there would be new state spending on infrastructure.

Chakorn Warintraporn, the managing director of Royal Ceramic Industry Plc, said the prospects for selling fur nishing materials were directly related to the property market. However, low interest rates and government stimulus efforts had done little to clear the oversupply in some areas, though detached-home building was resuming.

Mr Chakorn said Royal Ceramic had achieved a positive turnaround this year after completing its debt restructuring programme in November last year, reducing its interest expenses to 100 million baht a year from several hundred million.

Despite the depressed market, some companies are doing well. For example, Asian Property Development (AP) reported a nine-month net profit of 161.4 million baht compared with a loss of 29.5 million a year earlier.

With strong bargaining power to buy land by pooling resources with Land & Houses Plc, through family ownership ties, AP has acquired prime sites at lower costs than those paid by rivals. As a result, it has been able to build houses and townhouses for sale at competitive prices and a higher profit margin.

The company succeeded by avoiding taking on large developers of mass-market housing and instead sought its own niche where houses were built to customers' specifications, executives said.

- Soonruth Bunyamanee