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Business Overview

       
Packaging Business
 

 

SCG Packaging underwent a name change from SCG Paper to SCG Packaging in 2015 to reflect the corporate strategy that greatly focuses on packaging and in alignment with the goal to further expand its business in ASEAN as evidenced by step into flexible packaging business over the past two years. Moreover, having positioned itself as a Total Packaging Solutions Provider, SCG Packaging is committed to developing and providing a full range of excellent quality packaging products and services to customers in an ongoing and sustainable manner.

Operating Results

In 2017, revenue from sales of SCG Packaging amounted to 81,455 Million Baht, up 9% compared to 2016 mainly due to higher sales volume and prices of packaging chain. EBITDA was 12,431 Million Baht, up 14% from the previous year, and profit for the year was 4,719 Million Baht, improving 32% from 2016.

Packaging chain: Total sales volume was up 8% compared to 2016 from capacity expansion in Vietnam and owing to increasing demand for packaging paper and corrugated containers, especially in ASEAN which grew 5% from the previous year.

Fibrous chain: Total sales volume of printing and writing paper fell 8% compared to 2016, due to a decline in export sales and a steady decline in domestic demand.

Business Challenges

  • Domestic demand for paper packaging and corrugated containers in 2017 continued to increase owing to higher-than-expected exports. Demand in ASEAN grew moderately in line with regional economic expansion and a growth in export-oriented manufacturing. Paper packaging and corrugated container manufacturers in the region continued to increase production capacity. With heightened competition, it is a challenge for manufacturers to increase organizational efficiency in order to meet the needs of customers and maintain a competitive edge sustainably.
  • In 2017, domestic demand for printing and writing paper declined mainly due to the growth of digital media, particularly in the areas of promotional materials and magazines. Meanwhile, imports of coated paper and copier paper increased year-on-year. The copier paper industry remained highly competitive due to severe price competition from Chinese and Indonesian manufacturers.

Organizational Efforts to Embrace Change

Business

  • Investment in rigid plastic packaging business by acquiring 75% stake in Conimex Co, Ltd., whose products includes plastic bottles, plastic tubes, caps and closures. The company’s market coverage includes both domestic and international manufacturers in cosmetics, personal care, consumer products and industrial liquids. The acquisition of Conimex illustrates SCG Packaging’s strong commitment in becoming a total packaging solutions provider in ASEAN and strengthening its presence in the premium packaging segment.
  • Acquired an 80% stake in PT Indocorr Packaging Cikarang, an Indonesian producer of high-quality corrugated containers for consumer products, with a combined capacity of 32,000 tons per year. Following this acquisition, SCG Packaging’s combined production capacity of corrugated containers increased to 1.04 million tons per year across the ASEAN region.
  • Expanded business portfolio in Display Packaging to serve the premium packaging market. This was achieved by acquiring a 75% stake in Precision Print Co, Ltd., a company specializing in the manufacturing and offset printing of folding cartons that are used in industries ranging from cosmetics to supplementary food. This investment will enhance SCG Packaging’s overall portfolio while further strengthening its position as a total packaging solution provider.

Human Resources

  • Preparing employees to be adaptable for the new business model through educational programs to enhance employee efficiency and cultivate the idea of using digital technology in order to effectively meet the needs of customers.
  • In order to support business expansion toward becoming a total packaging solutions provider, SCG Packaging has adjusted its organizational structure to be adaptable to serve the needs of customers more quickly and efficiently. The company has also promoted a corporate culture and leadership development program to groom leaders to step up to become role models.

Products and Innovation

  • Developed a digital platform (E-Store) for spare parts management, in which the software is used to track the amount of spare parts and inventory available among factories.
  • Developed flexible packaging for exported fruits and vegetables (OptiBreath©), expanded sales channels to modern trade retailers and developed integrated service solutions by offering design customization offerings for a variety of packaging.
  • Developed flexible packaging with twist-off caps for beverages and liquid refills (Spout Pouch) which offers more convenient experiences for customers owing to its upright design, and its attractive appearance.
  • Developed a flexible packaging which featured high tolerance for heat and pressure properties (Retort Pouch). The product is suitable for food that needs to be sterilized, and helps to maintain the quality of food for a longer period, allowing for convenience and reduce food preparation times.
  • Developed sales channel for food safe packaging, Fest. Through modern and traditional trade retailers located around the country. The company also offers packaging design customization services to help add value to customers’ products.
  • Co-developed acid-free packaging with the Queen Sirikit Museum of Textiles. The packages are made from special ingredients that prevent the infiltration of acid particles, thereby helping to safely preserve valuable items such as silk, antiques and important documents.
  • Developed corrugated packaging for several types of parcels and also offered integrated solutions, including design customization services, delivery and online ordering, helping to enhance convenience for customers who want to differentiate their packaging.
  • Developed honeycomb paper as a wood substitution for furniture industry. Honeycomb paper is lightweight yet strong, suitable for furniture production, as well as logistics industry.

Sustainable Development Business Operations

  • Reduced water usage in the manufacturing processes through rebalancing water usage, installing additional equipment and systems to reuse wastewater in other parts of the production process. These efforts have helped to reduce water usage by 1 million cubic meters per year.
  • Reused waste materials by installing a kiln to reduce lime mud, a waste material from pulp production. This process results in calcium carbonate, which can be used as raw material in pulp production. In addition, used materials from the furnace are being applied as a component in the production of bricks.
  • Improved the water treatment system by employing anaerobic wastewater treatment technology, providing treated water to farmers for agricultural purposes. Moreover, gas received from such systems is used as an alternative energy source.
  • Social and Environmental Responsibility
    • Continue the late King Bhumibol Adulyadej’s philosophy of sustainable water management by organizing an activity called “The Journey to Preserve Water.” The activity involved check dams building in the provinces of Nakhon Si Thammarat, Kanchanaburi and Khon Kaen, and transfer knowledge to communities to become more self-reliant.
    • Held a packaging design competition called “SCG Packaging x Wallpaper* The Challenge 2017”. The contest provided an opportunity for young designers to illustrate their potential in packaging design. The challenges were proposed by the two leading food manufacturers: Thai Theparos Food Products and Ampol Food Group. The contest also strengthened the relationship between the companies and packaging specialists.
    • Held the third Green Mart: We are Greeners campaign to support products made by communities surrounding the plants and create social enterprise networking by establishing a distribution channel for green manufacturers to sell their products. Total sales from the activity in 2017 were 1.28 Million Baht.


SCG Packaging Consolidated Financial Information (Million Baht)

  2017 2016 2015 2014 2013
Information from Statements of Financial Position
Current assets 29,317 24,574 24,295 22,969 21,782
Assets 91,312 85,369 83,218 73,987 65,169
Liabilities 35,661 32,617 34,892 29,150 26,133
Shareholders' equity 55,651 52,752 48,326 44,837 39,036
Information from Income Statements
Revenue from sales 81,455 74,542 70,907 64,614 59,135
Cost and expenses 76,539 70,469 66,838 60,368 54,731
Profit for the year * 4,719 3,565 3,463 3,448 3,587
EBITDA ** 12,431 10,884 10,831 9,718 9,473

* 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.