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SCG announces its Operating Results for Q3 and 9M of 2018; Rolls out proactive preparation for trade war impact and uncertainty in the world economy.

Date : 24 October 2018


 

SCG’s Operating Results for Q3/2018 and the first 9 months of 2018 showed all-around increase in revenue, while profits drop due to rising raw materials and energy costs, global trade slowdown and asset impairments. SCG is well-aware of the impacts from the trade war and uncertainties from the global economy then launches 6 directions of proactive plan including broaden export opportunities in line with global market flows, managing energy costs, utilizing digital technology to boost manufacturing efficiency and reduce costs, developing innovation and High Value-Added Products & Services (HVA), enhancing working capital efficiency and reviewing its investment portfolio and investment costs, with the aim of maintaining the competiveness of its business.

Mr. Roongrote Rangsiyopash, President and CEO of SCG, disclosed the Company’s unaudited Operating Results for Q3/2018, with registered Revenue from Sales of 122,518 MB, an increase of 9% y-o-y and 2% q-o-q, due to growth in all business units. Meanwhile, Profit for the Period totaled 9,473 MB, a decrease of 20% y-o-y and 24% q-o-q, mainly from asset impairments charges of 1,670 MB in accordance with accounting standards and higher naphtha costs which surged with global oil prices. Without this impairment, SCG would have recorded 11,143 MB in Profit for the Period.

As for Operating Results for the first 9 months of 2018, SCG registered Revenue from Sales of 361,215 MB, an increase of 7% y-o-y, due to higher revenue from all business units. Profit for the Period totaled 34,281 MB, a decrease of 19% y-o-y, mainly from lower performance in Chemicals Business and assets impairments in Q3. Additionally, export revenue stood at 97,924 MB, an increase of 7% y-o-y and accounted for 27% of SCG’s consolidated Revenue from Sales.

For Q3/2018 Performance of SCG’s Businesses Outside of Thailand, SCG registered Revenue from Sales in ASEAN of 30,899 MB, which accounted for 25% of SCG’s total Revenue from Sales and represented an increase of 15% y-o-y. In the first 9 months of 2018, Revenue from Sales in ASEAN totaled 87,943 MB, which was 24% of total Revenue from Sales and 11% increase y-o-y. Furthermore, SCG recorded 18% of total Revenue from Sales or 64,322 MB from other regions outside of ASEAN.

The total assets of SCG, as of September 30, 2018, amounted to 592,399 MB, with 26% represented assets in ASEAN.

The Q3/2018 and the first 9 months of 2018 Operating Results by business unit are as follows:

  • Chemicals Business recorded Q3/2018 Revenue from Sales of 57,713 MB, an increase of 14% y-o-y and 1% q-o-q, owing to higher selling prices. Profit for the Period totaled 7,485 MB, a drop of 22% y-o-y and 8% q-o-q, due to higher costs of raw materials. In the first 9 months of 2018, Chemicals Business recorded Revenue from Sales of 167,633 MB, an increase of 9% y-o-y, owing to higher product prices. Profit for the Period totaled 23,751 MB, a drop of 25%y-o-y, due to higher costs of raw materials.
  • Cement-Building Materials Business recorded Q3/2018 Revenue from Sales of 46,105 MB, an increase of 4% y-o-y and 3% q-o-q, as a result of regional markets expansion. Profit for the Period before asset impairments totaled 1,585 MB. With the asset impairments factored in, Profit for the Period totaled 265 MB. In the first 9 months of 2018, Cement-Building Materials Business recorded Revenue from Sales of 137,224 MB, an increase of 4% y-o-y, owing to regional markets expansion. Profit for the Period totaled 4,426 MB, representing a decrease y-o-y.
  • Packaging Business recorded Q3/2018 Revenue from Sales of 22,199 MB, an increase of 7% y-o-y and 2% q-o-q, due to the higher selling prices in Packaging Chain and Pulp and Paper Chain. Profit for the Period stood at 1,717 MB, an increase of 128% y-o-y and 7% q-o-q, due to higher product prices and cost reduction. In the first 9 months of 2018, Packaging Business recorded Revenue from Sales of 65,972 MB, an increase of 10% y-o-y, owing to higher product prices and sales volume in Packaging Chain. Profit for the Period totaled 4,827 MB, an increase of 40% y-o-y.

Mr. Roongrote said “SCG’s Operating Results for Q3/2018 and the first 9 months of 2018 showed an increase in revenue in all business units due to improved overall market conditions, higher demand of cement and building materials from domestic and foreign investment projects by public and private sectors, consistent market demands in Chemicals and Packaging business, though the profit was dropped from higher raw materials and energy costs, together with global trade slowdown and asset impairments write-down.

SCG is well-aware of the trade war impact to the overall business and the uncertainty from the global economy, while at the same time recognizing the potential for new opportunities. Therefore, SCG has come up with 6 directions of proactive plan for this challenge which will be implemented at all levels to maintain and further boost the strength of its business. These directions are as follow.

  1. Broaden export opportunities in line with global market flows which have changed following the trade war, for example, exports to China and the US while the trade war is on-going. Apart from the long-term plan which aims at reinforcing domestic market bases, SCG also focuses on continually expanding its market bases to other regions. The Petrochemicals Complex Project in Vietnam (LSP), the latest key project, is progressing as planned, with engineering design, machinery and equipment procurement and site preparation for construction works commenced, after the signing of the loan agreement on August 6 with 6 leading financial institutions, both domestic and foreign. It is expected that commercial operation will begin in time for the first half of 2023. SCG is looking for new markets with potential and rapid growth in market value, for instance, the expansion of logistics business in China with the joint venture with Jusda Supply Chain Management International (JUSDA), a subsidiary of Foxconn, to provide delivery service for electronics goods in China, including enhancing the Supply Chain Solutions, the cross-border logistic between China and ASEAN, with advanced technology to track and control the transport system. The first stage will focus on services in southern China, boosting SCG’s strength, as well as preparing for the expansion of sourcing business and e-commerce business to export Thai products to China. Additionally, Fulfillment by SCG Logistics, the innovative End-to-End solutions offering both big-and small-scale storage warehouse, packaging and goods delivery services, provides connection and import and export services of Thai products to China, as well as other markets such as India.
  2. Energy costs management e.g. securing higher portions of the coal supply at competitive cost, has helped reduce SCG’s energy costs in the past 9 months by 400 MB (compared to SCG’s plan) and promoting the use of renewable energy in factories to reduce energy costs like installation of solar panels in SCG’s plants, with generation capacity of 38 megawatts, has lessened the need for third-party electricity by 170 MB/Year. In addition, more than 100 other energy projects for machinery upgrades, implementing Internet of Things (IoT) platform to improve energy efficiency, along with other renewable energy projects, which once completed, are expected to make savings of over 615 MB/Year, are also in the pipeline.
  3. Utilize digital technology for efficiency improvement to boost competitiveness and foster growth to keep up with today’s rapid changes. The latest is SCG’s partnership with Digital Ventures to implement blockchain in a comprehensive procurement platform with trade partners, as well as developing technology and innovation by SCG’s personnel, for example, the Robotic Process Automation system which will shorten the time required to perform work by SCG staff and ensure high efficiency. In addition, AddVentures, SCG’s Corporate Venture Capital (CVC), has invested more than 415 MB in startups.
  4. Develop innovation and HVA to improve customers’ quality of life and build a more sustainable growth for the business, by developing new researches to cater to 6 future trends e.g. Smart Building, Renewable Energy, AI and Big Data, with the latest collaboration with CAS Innovation Cooperation Center (Bangkok) (CAS ICCB) which has over 100 affiliated research institutions in China. Furthermore, in the first 9 months of 2018, SCG’s Revenue from Sales of HVA reached 139,380 MB, representing an increase of 7% y-o-y and accounting for 39% of total Revenue from Sales; spending on Innovation Research & Development totaled 3,535 MB or 1% of total Revenue from Sales, with the aim of raising it to 1.5-2% of total Revenue from Sales in the future. A drive to strengthen SCG’s services to fully serve consumer needs is also be in focused, partnering with Boonthavorn for a new retail business which is expected to launch in the first quarter of 2019. By jointing venture Moreover, SCG with passion to create better living for all customer lifestyles and generations in digital era is also planning to launch “SCG Home” with innovative products and services to comprehensively improve the better living of customers in all lifestyles and generations in digital era, covering Eldercare, Smart Living and Smart Care, as well as improving access channels for product and service innovations to offer a convenient and smooth connection between offline and online stores as well as SCG Home Buddy application. Customers will be able to get the first glimpse of this new experience at SCG HOME Pop-up Store in “Baanlaesuan Fair ’18”, which will be held from 26 Oct – 4 Nov 2018 at Challenger Hall, IMPACT Muang Thong Thani.
  5. Enhance working capital efficiency by maintaining working capital at a suitable level. At the end of Q3/2018, SCG’s working capital totaled 76,008 MB. and cash & cash under management totaled 52,614 MB. which relevance to business investment plan and uncertainty business environment
  6. Review Investment portfolio and investment costs to focus on projects which can lead to business opportunities energy saving projects e.g. floating solar farms development for solar-powered electricity generation, with the aim of becoming the first End-to-End solutions provider in Thailand in 2019, offering services from the stage of area design, installation to after sales service to both public and private potential customers.

“SCG is confident that we are able to strengthen our domestic and regional business by short-term strategy to enable us to timely adapt to the changing circumstances with the 6 directions of proactive plan outlined above, and the long-term strategy that has been built a sustainable growth for our business.” Mr. Roongrote concluded.

 
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