SCG bearish based on baht projections
Currency makes 6% growth target unlikely
SET-listed Siam Cement Group (SCG), Thailand's largest cement maker and industrial conglomerate, is concerned its revenue is unlikely to hit its growth target of 5-6% to 472-477 billion baht because of the baht's strength.
"The baht's strength versus the dollar is hurting the country's export sector," said Roongrote Rangsiyopash, president and chief executive.
"SCG's exports normally make up 40% of its total revenue, so this is a major risk for us."
On Wednesday SCG reported revenue in the first quarter grew by 2% year-on-year to 118 billion baht and net profit logged 12.4 billion baht, down sharply by 29% year-on-year.
The company said the baht rose by 10% versus the US dollar, compared to the same period last year.
Mr Roongrote said SCG uses currency hedging to manage volatility, hedging close to 50% of its export value in the first quarter.
"We hope the government is closely monitoring the currency," he said.
The company's performance suffered in the quarter from disappointing figures from subsidiaries in the chemical segment, attributed to a stronger baht and higher costs for raw materials.
Last year's relatively better performance could be attributed to non-recurring gains from the sale of investments, said Mr Roongrote.
SCG has a positive outlook for the government's infrastructure projects in Thailand, while Asean countries are set to beef up cement demand by 2-3% to 38.4 million tonnes in the region, he said.
Cement demand contracted 5% last year to 37.5 million tonnes.
SCG has prepared an investment budget of 60 billion baht in 2018, covering both domestic and overseas operations, including a budget for mergers and acquisitions.
In the first quarter, the company disbursed 9 billion baht of the total budget.
SCG reported revenue from sales in Asean secured 27 billion baht in the first quarter, a 4% rise and 23% of total revenue. Some 17% of total revenue was from sales of 20.1 billion baht from other regions.
The company continues to develop high-value-added (HVA) products and services, with a focus on enhanced collaboration with customers and leading institutions.
Sales of HVA products and services totalled 45.8 billion baht in the first quarter, a rise of 5%, accounting 39% of total revenue.
SCG has invested 1.21 billion baht in R&D and innovation, representing 1% of total revenue.
Its Long Son refinery petrochemical complex (LSP) in Vietnam, worth $US5.4 billion, will be delayed by 3-6 months from late last year because SCG and its Vietnamese partner have yet to conclude the terms of finance for the project. SCG wants to increase its share in the project and plans to spend 20 billion baht for an initial investment in 2018.
The company holds a 71% stake and Vietnam National Oil and Gas Group owns the rest.
For Indonesia, SCG has been talking to PT Chandra Asri Petrochemical Tbk (CAP), its partner in the petrochemical business since 2011. CAP is the largest vertically integrated petrochemical company in Indonesia.
SCG wants to invest more in CAP's petrochemical complexes and plans to increase its stake from 30.6%.
SCC shares closed Wednesday on the SET at 474 baht, down four baht, in trade worth 3.13 billion baht.