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Business Overview

     
Chemicals Business
 

 

SCG Chemicals witnessed satisfactory operating results as the petrochemical industry has been experiencing an upswing since 2015. Increase in supply was lower than the growing demand in the market whilst most manufacturers managed to maintain their production at high capacity. The company has pledged to develop and increase sales of HVA products along with enhancing production efficiency and expanding business both domestically and internationally as planned.

Operating Results

  • In 2017, revenue from sales of SCG Chemicals totaled 206,280 Million Baht, increased 10% from the previous year due to an increase of products prices following an increase of crude oil prices together with an increase of sales volume. EBITDA were increased 6% to 64,461 Million Baht mainly from higher dividend from associated companies. Profit for the year remained stable at 42,007 Million Baht. Subsidiaries performance slightly dropped from higher naphtha cost and strong Thai Baht, despite gain on investment sales offset with improved equity income from associates.

Business Challenges

  • The price of naphtha, the main feedstock, increased 24% from the previous year following the increase of crude oil price due to OPEC and Non-OPEC production cut at the beginning of the year to rebalance the market and geopolitical uncertainties. However, polyethylene (PE) prices increased only slightly, resulting in a decrease of PE-naphtha gap. Polypropylene (PP) and PVC prices increased following the increase of feedstock prices, leading to wider margins of both PP and PVC.
  • Nevertheless, overall petrochemical industry experienced an upturn in 2017, which aligned with improved global economy, despite uncertainties of feedstock prices and additional supply of products from the United States. SCG Chemicals is equipped to handle these uncertainties by improving competitiveness through research and development on high value-added products. This effort, together with higher price of by-products from the use of naphtha as feedstock increased in the beginning of the year, resulted in satisfying operating result of SCG Chemicals.

Organizational Efforts to Embrace Change

Business Efforts

  • Increased stakes in Long Son Petrochemical Company Limited, the first petrochemical complex in Vietnam, from 46% to 71% with competitiveness of well integration from upstream to downstream and feedstock flexibility. The project includes an investment in infrastructure which supports the complex such as deep sea port, and other facilities. This project, which will serve the fast growing demand in Vietnam which reflected in 2017 GDP growth rate at the range of 6-7%, has got support from the Vietnamese government. However, this project is slightly delayed from plan due to newly issued laws and regulations.
  • Currently setting up Application Development Center for enhancing capability and expertise in developing innovative products from polyethylene and polypropylene. This will help solve the problems that manufacturers encounter with, and thereby help them to better meet the needs of end-consumers.
  • Piloted Innovation Management Process (IMP) with packaging for food & beverage business, in creating innovative products that better answer customer’s needs, eventually leading to more HVA products sales.

Human Resources

  • Continuously promoted employee’s capability building, designed job function and employee career path through Career Management system where employee can participate in individual growth planning to align with business direction, and developed well-rounded leaders, and specialists in each field.
  • Extended human capital development program to overseas operations for continuous and sustainable growth of the business. For example, the Competency Development Program in Indonesia, in which staffs have gained more knowledge on technology and management skill through hands-on working experience at Map Ta Phut plant in Rayong province. For Vietnamese staffs, SCG Chemicals has arranged employee skill development program by collaborating with leading educational institutions in both Vietnam and Thailand for the Long Son Petrochemical project.
  • Recruited experts from various countries, such as Norway, France, The United Kingdom, The United States of America, Japan, and Singapore to work with local and overseas employees, to increase employees’ capability, create diversity, and support existing and emerging businesses, in order to build sustainable growth for SCG Chemicals in both ASEAN and global scale.
  • Implemented 9 Life Saving Rules together with building safety culture within organization through “The LifesaverTM” campaign with an aim to encourage all employees to have safety awareness, and to take care of themselves and others. The campaign has also expanded to nearby communities in Rayong.

Products and Innovation

  • Developed new polymer production technology and came up with special grade of High-Density Polyethylene (HDPE) (New PE) with higher strength, enabling thinner finished products with similar durability, and no impact to current production process. This New PE can be used for various applications such as super thin film, new generation of pipe, and lightweight bottle cap. Super thin film will be in product testing process with customers in 2018 and then launched into the market.

Sustainable Development in Business Operations

  • Developed eco-friendly products, and services, with SCG eco-value certified products accounting to 56% of total sales.
  • Improving production process to be eco-friendly In 2017, Rayong Olefins Co., Ltd., a subsidiary of SCG Chemicals, was awarded Green Industry level 5: Green Network, the highest rating of Green Industry, by Ministry of Industry, and RIL Industrial Estate was certified Eco Excellence level from Industrial Estate Authority of Thailand (IEAT), recognized as the only estate in Thailand ever achieved such status.
  • Shared knowledge and supported surrounding communities for self-sustainability through various projects. For example, Fish Home Project by SCG Chemicals, together with communities in Chonburi and Rayong province, built 1,100 fish homes, has created protected area in 29 communities, and also helped increase income of community members from the increase of marine lives in the area. The Company has planned to expand the project by building 1,000 more of fish homes in Chanthaburi and Trat provinces to cover all eastern seaboard area.

SCG Chemicals Consolidated Financial Information (Million Baht)

  2017 2016 2015 2014 2013
Information from Statements of Financial Position
Current assets 45,183 49,463 45,769 47,070 51,321
Assets 193,183 193,465 185,583 183,884 192,063
Liabilities 49,257 64,321 79,818 99,133 109,273
Shareholders' equity 143,926 129,144 105,765 84,751 82,790
Information from Income Statement
Revenue from sales 206,280 188,163 200,433 248,118 209,997
Cost and expenses 169,512 147,209 170,433 237,386 202,921
Profit for the year * 42,007 42,084 28,488 12,461 11,292
EBITDA ** 64,461 60,731 42,900 26,142 20,342

* Profit for the year attributable to owners of the parent.
** Profit before finance costs, income tax expense, depreciation and amortization and includes dividends from associates.