SCG announces Q2/2023 results demonstrating recovery and readiness amid volatile global economy through acceleration of four mega-trends – petrochemical complex in Vietnam, bio-based plastic from eucalyptus woodchips, rapidly growing clean energy business, and preparations for SCG decor's stock market entry.
SCG's Q2/2023 operating results reflect a resilient business recovery, achieved through swift adjustments to operational plans amid a slowdown in the ASEAN and Chinese economies. SCG is poised to capitalise on opportunities arising from the global market recovery by focusing on four strategic business initiatives that align with global mega-trends.
These initiatives include high-quality plastic resin production through the largest integrated petrochemical complex in Vietnam, catering to the regional market. Additionally, SCG is committed to developing bio-based plastic from eucalyptus woodchips, offering a biodegradable solution. Furthermore, the company is actively engaged in producing thermal media from clean energy, catering to carbon-reducing industries. Lastly, SCG Decor is strategically positioned to lead the ASEAN market in surface decoration materials and sanitary ware, with innovative products like the Smart Bathroom.
Roongrote Rangsiyopash, President & CEO of SCG, stated, "Amid slow recoveries in the global, Chinese, and ASEAN economies, SCG has swiftly adapted its operational plans by streamlining costs, transitioning to clean energy, and creating innovative products and services with high value-added (HVA) and eco-friendly characteristics. As a result, our Q2/2023 operating results have shown remarkable improvement compared to the previous quarter. SCG reported Revenue from Sales of 124,631 MB, Profit for the Period of 8,082 MB, and Profit excluding extra items of 5,216 MB, reflecting a 14% increase quarter-on-quarter, driven by higher sales volumes of polyolefin in SCGC and decreased energy costs.
Looking ahead, SCG is ready to capitalise on global market recovery by accelerating our four strategic business initiatives that address prominent mega-trends:
1.The largest integrated petrochemical complex in Vietnam, strategically positioned as a production base in the ASEAN region with immense potential, offering a full range of chemical innovations from upstream to downstream to cater to the global market with an established customer base.
2.Collaborating with global business leaders in sustainable advancements to further enhance green innovations in line with global market demand and ESG trends. This includes our 'Bio-based Plastic from eucalyptus woodchips' innovation, utilising advanced technology to produce raw materials for biodegradable Bio-PET plastic.
3.Investing in technology for thermal media capable of storing heat from clean energy and operating at temperatures above 1,000 degrees Celsius. This technology is a vital component of the Rondo Heat Battery, addressing the growth of the green industrial sector and contributing to Net Zero targets.
4.Preparing SCG Decor for its entry into the stock market, focusing on leading the ASEAN market in surface decoration materials and sanitary ware. Our innovative 'Smart Bathroom' product holds significant ASEAN market potential, projected to reach 78,000 MB by 2026."
SCG remains committed to its growth strategy, meeting evolving market demands and contributing to a sustainable and prosperous future.
Thammasak Sethaudom, Executive Vice President of SCG, remarked, "Amidst volatile energy prices, SCG has effectively managed energy costs. In the first six months of 2023, our domestic cement operations increased their use of alternative energy sources to 40%. Additionally, SCG Cleanergy, our comprehensive electricity trading service provider, has shown impressive growth, boasting a production capacity of 231 megawatts in Q2/2023. Our operational Smart Grid electrical network at the Saha-Union Group in Bangpakong stands out as a testament to our commitment to clean energy. Moreover, our partnership with Rondo Energy, a global clean energy startup from the United States, has enabled us to jointly produce thermal media capable of storing heat at temperatures exceeding 1,000 degrees Celsius. This technology plays a crucial role in the Rondo Heat Battery, storing solar energy as heat for industries worldwide, aligning with our Net Zero and ESG approach. Furthermore, our joint investment with Thai Beverage (ThaiBev) and Frasers Property in NocNoc, a Home and Living online marketplace, aims to expand our business in Thailand and ASEAN, with a GMV target of 5,000 MB by 2023."
Tanawong Areeratchakul, CEO and President of SCG Chemicals Public Company Limited (SCGC), shared, "SCGC's total sales have improved from the previous quarter, driven by increased sales volumes of polyolefins and favourable spreads of some chemical products. We are also making significant progress with the LSP petrochemical complex plant in Vietnam, currently undergoing testing in preparation for future commercial operations. Furthermore, we have joined forces with two global green plastics leaders, Avantium N.V. from the Netherlands and IHI from Japan, to construct a pilot plant that converts CO2 into eco-friendly petrochemical products, promoting the principles of a circular economy. This initiative will contribute to reducing carbon dioxide emissions into the atmosphere."
Nithi Patarachoke, President of Cement-Building Materials Business of SCG, acknowledged the impact of the ASEAN economic slowdown on total sales across core businesses, compounded by the exclusion of SCG Logistics' sales figures following its merger with JWD in the first quarter. However, he expressed optimism about the rebound in demand, particularly for innovative products and services that align with a new lifestyle focused on cost-effectiveness, convenience, safety, and environmental friendliness. With a population of over 560 million people in ASEAN, SCG is well-positioned to capitalise on opportunities, with SCG Decor's planned stock market entry aiming to be the number one player in ASEAN. The Smart Bathroom innovation holds significant ASEAN market potential, projected to reach 78,000 MB by 2026.
Wichan Jitpukdee, Chief Executive Officer of SCG Packaging Public Company Limited (SCGP), highlighted robust profit growth in Q2/2023, driven by an effective cost management strategy. SCGP is also investing in innovative solutions to meet consumer needs, including the development of bio-based plastic from eucalyptus woodchips in collaboration with Origin Materials. Successful completion of laboratory testing and production optimisation has led to the next stage, involving a pilot plant and selection of partners to further develop the technology. Additionally, SCGP is researching and developing biodegradable wooden foodservice packaging made from eucalyptus, in line with the trend of using eco-friendly packaging. This initiative adds value to eucalyptus wood and benefits all stakeholders, from planting to processing, contributing to sustainable income and environment.
Unreviewed Q2/2023 operating results of SCG show both challenges and positive developments. Revenue from Sales amounted to 124,631 MB, experiencing a 3% decline quarter-on-quarter. The Cement-Building Materials Business and SCGP witnessed a decrease in sales revenue, while SCGC recorded an increase in Revenue from Sales due to higher sales volume.
The company's Profit for the Period stood at 8,082 MB, reflecting a 51% drop quarter-on-quarter, mainly attributed to the one-time gain from fair value adjustment of investment in SCG Logistics in the previous quarter. However, Profit excluding extra items reached 5,216 MB, showing a 14% increase quarter-on-quarter, largely driven by seasonal dividend income from the investment business.
For the first half of 2023 (H1/2023), SCG reported Revenue from Sales of 253,379 MB, down 17% year-on-year due to softened demand in all business groups. Despite this, Profit for the Period increased by 31% year-on-year to 24,608 MB, primarily due to the one-time gain from fair value adjustment of investment. Profit excluding extra items was 9,786 MB, a decrease of 49% year-on-year.
SCG demonstrated a focus on high-value added products and services (HVA), with HVA's Revenue from Sales reaching 86,411 MB, accounting for 34% of total Revenue from Sales. Additionally, Revenue from Sales of environmentally friendly products, Green Choice, amounted to 137,258 MB, constituting 54% of total sales.
The company's revenue from operations outside of Thailand, together with export sales from Thailand, registered 108,672 MB, making up 43% of total Revenue from Sales. The total assets of SCG as of June 30, 2023, amounted to 942,018 MB, with 45% represented by assets in ASEAN (excluding Thailand).
The Q2/2023 and H1/2023 operating results by business units are as follows:
Chemicals Business (SCGC) recorded Q2/2023 Revenue from Sales of 48,755 MB, up 4% quarter-on-quarter, mainly due to the increased sales volume of polyolefins. Profit for the Period totalled 741 MB, a 45% decrease quarter-on-quarter due to lower product spread.
For H1/2023, Revenue from Sales of SCGC reached 95,560 MB, a dip of 30% year-on-year due to lower product prices. Profit for the Period was 2,097 MB, a 71% year-on-year decrease, largely because of the lower equity income from associates, combined with a decrease in sales volume and margins.
Cement-Building Materials Business recorded Q2/2023 Revenue from Sales of 46,432 MB, a decrease of 12% year-on-year due to the change in the status of SCG Logistics from subsidiary to associate company following the SCGJWD Logistics merger transaction in the previous quarter and the declining economic situation in the ASEAN region outside Thailand. Profit for the Period was 1,250 MB, a 35% year-on-year decrease, largely attributable to the regressive regional economic situation.
For H1/2023, Revenue from Sales of Cement-Building Materials Business reached 97,232 MB, a decrease of 6% year-on-year. Profit for the Period was 14,731 MB, a 10,320 MB year-on-year increase. A breakdown of the performance of each business segment is as follows:
• SCG Cement and Green Solutions recorded Q2/2023 Revenue from Sales of 21,340 MB, down 2% year-on-year. In H1/2023, Revenue from Sales was 44,178 MB, an increase of 1% year-on-year.
• SCG Smart Living recorded Q2/2023 Revenue from Sales of 6,247 MB, up 4% year-on-year. In the first half of 2023, Revenue from Sales was 12,956 MB, an increase of 8% year-on-year.
• SCG Distribution & Retail recorded Q2/2023 Revenue from Sales of 31,049 MB, down 8% year-on-year. In H1/2023, Revenue from Sales was 64,025 MB, a decrease of 3% year-on-year.
SCGP recorded Q2/2023 Revenue from Sales of 32,216 MB, a drop of 4% quarter-on-quarter primarily due to a decrease in sales volume of packaging paper, particularly impacted by holiday periods, especially in Indonesia. On the other hand, Revenue from Sales of performance and polymer packaging increased. Overall, Revenue from Sales decreased by 15% year-on-year mainly due to the global economic slowdown affecting domestic and export packaging demand, particularly durable goods and non-essential items. Profit for the Period registered 1,485 MB, a 20% year-on-year drop, mainly due to decreased sales prices of packaging paper and pulp. However, Profit for the Period increased by 22% quarter-on-quarter, mainly due to lower costs such as raw materials, freight, energy, and efficient cost management.
For H1/2023, Revenue from Sales of SCGP reached 65,945 MB, representing a 12% year-on-year decrease. This decrease is primarily due to a reduction in the volume and sales price of packaging paper during a period when the demand for packaging in the ASEAN region and export markets was slowing. Profit for the Period recorded 2,705 MB, down 23% year-on-year mainly due to a decrease in sales price, especially packaging paper, which is consistent with Revenue from Sales.
In addition, The Board of Directors of SCG has approved an H1/2023 interim dividend payment of 2.5 Baht per share (3,000 MB), which is payable on August 25, 2023, with the XD-date on August 9, 2023, and the record date on August 10, 2023.
"Apart from the global economic slowdown, Thailand must remain vigilant against the threat of El Niño-induced drought, which is expected to occur from August this year until the end of next year. However, the Hydro Informatics Institute (Public Organization) or HII anticipates heavy rainfall and potential flooding in some areas from August to October this year. All sectors are advised to prepare by storing as much water as possible and promoting conservative water use. This is because a severe El Niño is predicted next year, which may lead to water scarcity affecting all sectors, including agriculture, tourism, and industry," Mr. Roongrote concluded.