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Published on January 21, 2008

Siam Cement (SCC) will report poor fourth-quarter earnings from higher energy and raw-material costs and the stronger baht, brokerages said last week.

Kim Eng Securities (Thailand) predicts the Kingdom's largest industrial conglomerate will post a normalised fourth-quarter profit of Bt5.01 billion, down 11 per cent quarter on quarter but stable year on year.

The brokerage said the bleak financial results might underscore weakness in all of SCC's core businesses: petrochemicals, cement, building materials and paper.

Rising energy costs and the soaring baht will aggravate SCC's bottom line.

Each Bt1 appreciation against the US dollar will shave Bt700 million to Bt1 billion off of SCC's net profit.

"We estimate SCC will generate cash flow of between Bt42 billion and Bt45 billion. SCC should also continue to pay dividends of about Bt15 a share. However, if earnings are weaker than the level of Bt25 billion to Bt26 billion, there is the risk of a lower dividend, down to as little as Bt12 a share," the brokerage said.

SCC's earnings should this improve slightly this year, driven by a 12-per-cent increase in cement prices, which will compensate for higher energy costs, although domestic cement demand should remain flat, it said.

"We estimate that overall, SCC's sales will be Bt272.38 billion, up slightly 2 per cent, for an operating profit of Bt26 billion, also slightly up, by 3.5 per cent. These earnings are likely to be seen as very disappointing compared with operating profits of Bt30 billion to Bt33 billion over the past three years," the brokerage said.

Earnings per share will reach Bt24.66.

SCC is embarking on a four-year plan to invest Bt98.24 billion in petrochemical, cement, pulp and paper and building-material businesses, and this will start yielding growth in two years, it said.

Ayudhya Securities also sees SCC's fourth-quarter normalised profit slumping, by 11 per cent quarter on quarter and 14 per cent year on year to Bt5.02 billion.

The depressed earnings assume a weak business cycle for petrochemical, cement, pulp and paper and building materials, the securities house said.

SCC will still realise a fourth-quarter net loss of Bt325 million from its 50-per-cent-owned Siam Mitsui PTA subsidiary, but this will be offset by expected record-high earnings by 21-per-cent-owned PTT Chemical.

SCC will show a full-year normalised profit of Bt23.96 billion, down 23 per cent year on year, and a net profit of Bt29.61 billion, up 1 per cent on year.

The company may lower its full-year dividend to Bt15 a share, as it may need to reserve some cash for investment, the brokerage added.

The Nation