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Price increases driving earnings
NAREERAT WIRIYAPONG
PATTAYA : SCG Chemicals, one of the leading petrochemical producers in the Asia-Pacific region, has revised up its projected sales revenue for 2008 by 25% to 150 billion baht even though it has cut ethylene cracker production to soften the impact of rising raw material costs.
Rising petrochemical prices, driven by jumping global oil prices, have driven sales growth, said Cholanat Yanaranop, president of SCG Chemicals. He added that it had raised the targeted revenue to 150 billion baht for 2008 from 120 billion projected early this year.
The group finished 2007 with turnover of 110 billon baht.
The profit margin, however, would be squeezed because of rising fuel and material costs, he acknowledged.
The chemical business of the Siam Cement Group (SCG) needed to cut its ethylene cracker plant output to 90% of the annual capacity of 900,000 tonnes a year.
The reduction has been forced after prices of naphtha, a feedstock of its petrochemical plant, had doubled in the second quarter from the same period in 2007, Mr Cholanat said.
''We, along with other peers in the Asian region, have cut production by 10% after product prices have been unable to increase to catch up with the rising cost of feedstock,'' he said.
''Every month, we have to shoulder higher costs to wait for the market prices of our ethylene products to rise to reflect the actual cost.''
To minimise the impact of soaring costs, Mr Cholanat said the company had focused on cost reductions and developing high value-added products to supply local and overseas markets.
The new wholly owned subsidiary SCG Performance Chemicals Co was set up early this month to produce and distribute high value-added products in four categories: wire and cable, rotomolding, polyethylene (PE) wax and oversized gas and water pipes.
The new product line is expected to generate 25 billion baht in sales by 2013, accounting for 30% of the total SCG Chemicals' turnover by then, he added.
SCG Performance Chemicals aims to earn revenue of 8.7 billion baht this year, 70% of which would come from exports. Its main markets are Oceania, Asia and Europe.
It would invest 1.5 billion baht in research and development to expand its high value-added products capacity in the next five years.
Rayong Olefins, another SCG subsidiary, would spend 1.3 billion baht over a five-year period starting this year to cut energy expenses by two billion baht from now until 2013.
Regarding overseas investment, Mr Cholanat said the company had postponed the high-density polyethylene (HDPE) project in Iran by one year to early 2009 due to delayed infrastructure development, including utilities and gas pipelines.
The company was expected to receive a licence for its $4-billion petrochemical complex in Vietnam this year to start construction in early 2009. The complex is scheduled to begin production of PVC-related products in 2011 and olefins in 2013.
SCG's petrochemical group has an investment budget of 24 billion baht for its ongoing projects in 2008, accounting for around 80% of the group's planned investment.
Siam Cement (SCC) shares closed yesterday on the Stock Exchange of Thailand at 189 baht, down one baht, in trade worth 173.9 million baht.
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