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Business Overview

     
CEMENT – BUILDING MATERIALS BUSINESS
 

Amid the widespread transmission of COVID-19 compounded by the economic volatility in Thailand and overseas, Cement-Building Materials Business is quick to adjust and modify its business model to accommodate the changing lifestyles and consumer behaviors. The goal is to elevate the standards in construction and living solutions, encompassing products, services, solutions, and distribution channels to prospective customers. Cement-Building Materials Business is committed to conducting business in line with its vision to strengthen the ASEAN markets along with making swift adaptations to achieve sustainable growth alongside every society and community where Cement-Building Materials Business operates.

OPERATING RESULTS

Cement-Building Materials Business recorded revenue from sales of 171,720 Million Baht, down 7% from the previous year while EBITDA was at 21,591 Million Baht, up 3% from the previous year. Profit for the year totaled 6,422 Million Baht, an increase of 18% from last year as a result of an improvement in cost management.

Domestic demand for cement dropped from the previous year on the back of the COVID-19 outbreak while demand mainly came from the construction of large-scale infrastructure projects. In the meantime, demand for building materials in the country was also impacted by the stagnant purchasing power at household level. The impact of COVID-19 carried over to other markets in ASEAN, resulting in a contraction in the cement and building materials markets, particularly countries with a high number of COVID-19 cases and lockdown measures including Indonesia, Myanmar, and the Philippines.

However, the Cement-Building Materials Business adapted swiftly to cope with the changes in the market circumstances and consumer behaviors in the wake of the COVID-19 pandemic. Multiple efforts taken included enhancing operational efficiency, fostering good relationships with customers through various channels, and developing innovative products and services that accommodate customers’ evolving needs and align with the prevailing market conditions.

BUSINESS CHALLENGES

  • In 2020, the global business faced the swift and massive challenge of the COVID-19 pandemic. The lockdown measures implemented by authorities around the world to curb the spread of the COVID-19 brought much of the global economic activity to a halt, and Cement-Building Materials Business was no exception. The Business was pressured to prepare measures to ensure the maximum health safety of employees, trading partners, and customers while at the same time managing the business to ensure the least impacts.
  • The challenges also came from significant changes in the construction industry as well as the constantly-changing lifestyles, needs, and behaviors of consumers and changes in business environments, both locally and internationally, including technological disruption and growing environmental concerns that have driven public environmental preservation awareness. All these prompted Cement-Building Materials Business to adapt swiftly to accomplish the goals.

KEY ACHIEVEMENTS IN 2020

Cement-Building Materials Business turned threats into opportunities by leveraging and developing operational efficiency in many areas as follows:

  • For the short term, the focus was on ensuring the maximum safety of employees, trading partners, and customers during the spread of COVID-19 by implementing strict preventive measures in compliance with the government’s COVID-19 control measures in offices, manufacturing facilities, stores, and at construction sites. This ran concurrent with taking various efforts to minimize impacts such as cost control as well as capital planning and investment control in response to the situations; preparing for production and supply chain to reduce repercussions from the lockdown measures; and communicating effectively with all parties involved, resulting in no business disruption. On top of this was developing a broad array of products to answer every specific need of customers in addition to introducing more energy-saving and hygiene product offerings.
  • Over the longterm, the Cement-Building Materials Business adjusted its business model to align with changes in consumer behavior and lifestyle. Emphasis was placed on developing multiple value-added products and solutions that help solve problems and address the needs of consumers. The focus also extended to developing online distribution channels in response to customers’ significantly growing preference for online shopping, adjustment of shareholding structures, and mergers in the retail business to enhance Cement-Building Materials Business’ management efficiency on top of expanding business in the ASEAN region.

RESILIENCE TO RECOVER AND CHANGE TO EMERGE STRONGER

Business

  • Stressed the importance of communicating and working constantly with trading partners especially during the city lockdown. CPAC Construction Solution, for example, streamlined its supply chain, putting in place a backup plan and adjusting work processes at the construction site in conformance with the COVID-19 control measures to enable the construction to proceed with no disruption.
  • Streamlined the product portfolio to accommodate the emerging needs of consumers and the changing economic landscapes together with offering energy-saving home products and solutions to cater to the changing behaviors of consumers who spend more time at home, and hygiene products in the light of consumers’ enhanced focus on wellness.
  • Integrated products and services to fully address the demands of consumers such as integrated roofing solutions services, garden design, installation, and maintenance services, and sanitary wares and faucets repair.
  • Focused on expanding Active Omni-channel retail business. In Thailand, the number of franchise-based retail outlets has increased from 11 to 18 branches. Apart from teaming up with business partners to source new products that better accommodate the evolving needs of customers, diverse platforms for the online retail business such as nocnoc.com, SCGhome.com, and Q-Chang have been developed to enhance the capabilities to answer consumer needs. Added to this was enticing dealers to build an online presence to sell their products.
  • Enhanced production efficiency and reduced costs by adopting the Industry 4.0 design principles and working with business partners with expertise to implement cutting-edge technologies such as automation and image processing detection.
  • Utilized digital technologies in business operations. For example, SCG Logistics adopted Optimization/Robotic Process Automation (RPA) for B2B logistics customers to reduce costs and expand sales coverage while the B2C logistics service was able to enhance service efficiency and better meet customer demand, resulting in improved operating results, especially during the spread of COVID-19, and making a huge impression and going viral on social media.
  • Pushed more exports to new markets such as New Zealand and Australia, resulting in an increase of +70% and +47% in sales of cement products and iron ores and ferrous metal, respectively.

Human Resources

  • Shifted mindset to focus on agility and resilience to deal with the emerging uncertainties.
  • Supported employees in continued self-learning through online learning and focused on developing a new set of needed skills such as digital skills, data analytics, etc.
  • Implemented a hybrid workplace model to enable employees to work continually to deliver excellent quality products and services to customers.

Innovations

  • Expedited development of innovations that solve problems caused by the COVID-19 pandemic such as refractory bricks with virtually no water absorption that allow for longer storing of the bricks without compromising their properties, especially when international transport proved difficult.
  • Developed the back end operations across the entire process such as site inspection, design, preparation of sales quotations, payment, supply chain management, and construction control to allow the Business to offer more extensive service.
  • Developed modular swab unit innovations, using technologies from SCG HEIM and Living Solution. The units are designed to offer a pressure control and air flow quality system that is safe and clean as well as an airtightness system that prevents air from flowing in and out, lowering the risk of infection and ensuring the health safety among medical professionals.

SUSTAINABLE DEVELOPMENT IN BUSINESS OPERATIONS

Cement-Building Materials Business pledges to adopt the Circular Economy principles in business operations continually with the focus on the following three strategies:

  1. Designing green products & solutions. The number of products certified with the SCG Green Choice eco-label increased from 45 to 54, or 20% in 2020, accounting for sales of 45,348 Million Baht.
  2. Propelling the Circular Economy in Construction Industry (CECI) network. Emphasis was placed on exchanging knowledge and the practices of each business. CECI has established the vision, mission, and approaches to implementing the Circular Economy principles with the common goal of “Elevating the construction industry to achieve sustainable development by adopting the Circular Economy concept and maximizing resource efficiency to create a better quality of life and contribute to society.”
  3. Turning waste into value. Cement-Building Materials Business is committed to the goal of turning waste from each plant into value by reprocessing production waste into value-added raw materials. For example, agricultural waste is reprocessed into energy pellets for use as alternative fuels in cement kilns, reducing field burning and generating more income for farmers.

Cement-Building Materials Business Consolidated Financial Information

  2020 2019 2018 2017 2016
Information from Statements of Financial Position
Current assets 58,655 59,539 64,031 56,466 58,702
Assets 212,615 211,573 218,316 213,134 203,068
Liabilities 91,448 98,484 105,775 106,913 103,198
Shareholders' equity 121,167 113,089 112,541 106,221 99,870
Information from Income Statements*
Revenue from sales 171,720 184,690 182,952 175,255 170,944
Cost and expenses 167,483 180,886 178,012 169,431 163,956
Profit for the year ** 6,422 5,455 5,984 7,230 8,492
EBITDA *** 21,591 20,991 21,244 22,319 23,639

* The figures for year 2019 are reclassified and the business segment information for year 2018 and 2017 are restated.
** 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.